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Barclays (BCS) Reports Net Loss in Q4, Revenues Decline

Zacks Equity Research

Barclays BCS reported fourth-quarter 2018 net loss attributable to ordinary equity holders of £76 million ($97.8 million). This reflects improvement from net loss attributable to ordinary equity holders of £1.29 billion ($1.66 billion) recorded in the prior-year quarter.

Results were hurt by a decline in net operating income, mainly due to higher credit impairment charges. Moreover, rise in expenses acted as a headwind. However, balance sheet position remained strong.

Revenues Decline, Costs Rise

Net operating income was £4.43 billion ($5.70 billion), down marginally from £4.45 billion ($6.01 billion) recorded in the prior-year quarter. The decline was due to higher credit impairment charges and other provisions.

Operating expenses (excluding U.K. bank levy, GMP charge, and litigation and conduct costs) totaled £3.62 billion ($4.66 billion), increasing marginally from the year-ago quarter.

Cost to income ratio was 81%, down from 87% in the prior-year quarter.

Credit impairment charges increased 12.2% from the prior-year quarter to £643 million ($827.2 million).

Pre-tax income was £374 million ($481.1 million), up from £93 million ($125.6 million) in the year-ago quarter.

Segmental Performance

Barclays U.K.: Profit before tax was £390 million ($501.7 million), declining from £452 million ($610.6 million) in the year-ago quarter. Lower net operating income, partly offset by lower operating expenses hurt the segment’s performance.

Barclays International: Profit before tax was £215 million ($276.6 million), up significantly from £6 million ($8.1 million) recorded in the prior-year quarter. The rise was mainly driven by improved performance in corporate and investment bank division.

Head Office: Loss before tax was £231 million ($297.2 million), improving from loss of £365 million ($493.1 million) in the prior-year period.

Balance Sheet and Capital Ratios

Total assets as of Dec 31, 2018, were £1,133.3 billion ($1,438.2 billion), down 3.2% sequentially.

As of Dec 31, 2018, Common Equity Tier 1 ratio was 13.2%, down from 13.3% on Dec 31, 2017.

Total risk-weighted assets were £311.9 billion ($395.8 billion) as of Dec 31, 2018.

Outlook

The company targets to achieve return on tangible equity of greater than 9% in 2019 and more than 10% in 2020. Operating expenses (excluding litigation and conduct charges) are expected to be £13.6-£13.9 billion in 2019.

Our View

Barclays continues to face pressure on revenues due to low interest rates across the globe. Nonetheless, its efforts to restructure and simplify its operations by divesting non-core businesses are commendable.

Barclays PLC Price, Consensus and EPS Surprise
 

Barclays PLC Price, Consensus and EPS Surprise | Barclays PLC Quote


Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Foreign Banks

HSBC Holdings HSBC recorded fourth-quarter 2018 pre-tax profit of $3.3 billion, up 41.3% year over year. The increase was due to rise in revenues.

Canadian Imperial Bank of Commerce CM and The Toronto-Dominion Bank TD are expected to report results on Feb 28.

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