) reported adjusted net income of £1,760 million ($2,911 million)
for first half of 2014, down 14% from the prior-year period. The
fall was primarily due to slump in investment banking income as the
company continued to face tough trading conditions leading to lower
Results were adversely impacted by a fall in net operating income,
reflecting lower fixed income, currency and commodities (FICC)
income. However, this was partly offset by lower operating
Notably, the performances of all segments except Investment Bank
and Africa Banking were impressive. Capital ratios too remained
Half Yearly Performance
Adjusted net operating income was £12,246 million ($20,257
million), down 9% year over year.
Additionally, adjusted profit before tax fell 7% from the year-ago
period to £3,349 million ($5,540 million). The decrease was mainly
due to a reduction in Investment Bank income, partially offset by
improvements in Personal and Corporate Banking, and Barclaycard.
Notably, statutory profit before tax rose 49% from the year-ago
comparable period to £2,501 million ($4,137 million).
Operating expenses (excluding litigation and conduct charges and
Transform-related costs) totaled £8,172 million ($13,518 million),
down 9% year over year. Cost to income ratio was 67% against 65% in
the prior-year period.
Segment Details on Half Yearly Basis
Personal and Corporate Banking
: Profit before tax came in at £1,468 million ($2,428 million), up
23% from the prior-year period. The rise was attributable to growth
in net operating income, lower operating expenses and a fall in
: Profit before tax came in at £764 million ($1,264 million),
increasing 24% from the year-ago period. The rise was driven
by continued net lending growth and improved efficiency.
: Profit before tax came in at £484 million ($801 million), down
12% from the prior year. The fall largely reflected lower net
: Profit before tax dropped 46% from the year-ago period to £1,058
million ($1,750 million). A 78% decline in net investment income
was the primary reason behind the fall.
Head Office and Other Operations
: Profit before tax was £66 million ($109 million), compared with
loss before tax of £47 million ($73 million) in the prior-year
: Loss before tax was £491 million ($812 million), improving from a
loss of £673 million ($1,039 million) in the year-ago period.
Balance Sheet and Capital Ratios
Total assets as of Jun 30, 2014 came in at £1,315 billion ($2,239
billion), down 2% from Dec 31, 2013 level. As of Jun 30, 2014,
Common Equity Tier (CET) 1 ratio was 9.9%, up from 9.1% as of Dec
31, 2013. The company remains on track to achieve the CET target of
10.5% by 2015.
Total risk-weighted assets fell £31billion from the beginning of
the year to £411 billion ($700 billion) as of Jun 30, 2014. The
decline was mainly caused by Investment Bank and Barclays Non Core
Further, the Prudential Regulation Authority (PRA) leverage ratio
was 3.4% as of Jun 30, 2014.
Updates on 'Transform' Program
In 2013, Barclays announced a strategic cost management program -
Transform - targeted at lowering net operating expense by £1.7
billion to reach £16.8 billion by 2015. The initiative is being
executed and managed through rightsizing, industrialization and
Of the total expected cost of £2.7 billion pertaining to Transform,
£1.2 billion ($1,890 million) has already been incurred by Barclays
in 2013. £494 million ($817 million) was further incurred by the
company in the first six months of 2014.
We expect Barclays' diversified business model and sound financial
position to consistently support its overall future growth.
Moreover, its expense-reduction initiatives as well as
restructuring plans are expected to raise investors' confidence in
However, possible litigation headwind arising from investigations
by regulatory authorities is a plausible concern. In addition, slow
revenue growth, tepid economic recovery and a stringent regulatory
landscape will continue to weigh on the company's performance in
the near term.
Barclays currently carries a Zacks Rank #3 (Hold).
Performance of Other Foreign Banks
The Royal Bank of Scotland Group plc's (
) first-half 2014 profit from continuing operations came in at
£1.92 billion ($3.20 billion), rising more than twofold from £696
million ($1,074.9 million) in the prior-year comparable period.
Results were driven by lower loan impairment losses, higher net
interest income and reduced operating expenses. However, lower
non-interest income was on the downside.
UBS AG (
) reported second-quarter 2014 net income attributable to
shareholders of CHF 792 million ($890.8 million), comparing
favorably with the prior-year quarter earnings of CHF 690 million
($731.8 million). Results were attributable to prudent expense
Impacted by a disappointing top-line performance, Deutsche Bank AG
) reported net income of €238 million ($326.4 million) in the
second quarter of 2014, down from €335 million ($437.4 million) in
the prior-year quarter. However, decreased expenses, lower
provision for credit losses and a strong capital position were the
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