) reported net operating income of £5,757 million ($9,243
million) for fourth quarter 2012 (ended Dec 2012). This reflects
a decline of 4.8% on a sequential basis.
BARCLAY PLC-ADR (BCS): Free Stock Analysis
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Huge statutory losses were the primary reason behind the poor
quarterly performance, partly offset by marginally lower
operating expenses. However, performances of few segments -
Wealth and Investment Management and Africa Retail and Banking
Business - were credible. Further, capital ratios were strong in
For 2012, net operating income was £25,447 million ($40,326
million), up 3% year over year.
Performance in Detail
Adjusted profit before tax plunged 36.7% on a sequential basis to
£1,094 million ($1,756 million). The fall was mainly driven by
lower levels of net operating income, partially offset by higher
However, statutory loss after tax in the reported quarter stood
at £466 million ($748 million) compared with £47 million ($1,949
million) in the last quarter. The upsurge was mainly attributable
to adjustments for provisions for interest rate hedging products
redress and Payment Protection Insurance (PPI) redress as well as
Operating expenses (excluding UK bank levy) for the quarter
totaled £4,362 million ($7,004 million), marginally down 0.5%
from the prior quarter. Cost to income ratio stood at 93% as
against 87% in the previous quarter.
UK Retail and Banking Business:
Adjusted profit before tax for the quarter came in at £326
million ($523 million), down 18.5% from the prior quarter. As of
Dec 31, 2012, loans and advances to customers were £128.2 billion
($207 billion), up 5.8% year over year. Likewise, customer
deposits grew 3.8% to £116.0 billion ($187 billion).
Europe Retail and Banking Business:
Loss before tax for the quarter came in at £88 million ($141
million), up 49.2% from the last quarter. As of Dec 31, 2012,
loans and advances to customers came in at £40.0 billion ($65
billion), down 8.3% from the year-ago period. Yet, customer
deposits increased 7.3% to £17.6 billion ($28 billion).
Africa Retail and Banking Business:
Profit before tax for the quarter came in at £138 million ($222
million), increasing significantly from the previous quarter.
Loans and advances to customers stood at £31.7 billion ($51
billion) as of Dec 31, 2012, down 7.8% year over year. Similarly,
customer deposits dipped 2.7% to £22.0 billion ($36 billion).
Adjusted profit before tax for the quarter came in at £356
million ($572 million), down 10.3% from the last quarter. As of
Dec 31, 2012, loans and advances to customers were £32.9 billion
($53 billion), climbing 9.3% year over year. Customer deposits
jumped substantially to £2.8 billion ($5 billion).
Adjusted profit before tax decreased 8.4% sequentially to £858
million ($1,378 million). As of Dec 31, 2012, loans and advances
to customers were £145.0 billion ($234 billion), plummeting 8.6%
year over year. Customer deposits also declined 8.3% to £76.2
billion ($123 billion).
Adjusted profit before tax for the quarter came in at £107
million ($172 million), declining 9.2% from the previous quarter.
Loans and advances to customers stood at £62.9 billion ($102
billion) as of Dec 31, 2012, down 6.0% year over year. However,
customer deposits surged 14.0% to £97.1 billion ($157 billion).
Wealth and Investment Management:
Profit before tax for the quarter came in at £115 million ($185
million), surging 45.5% from the prior quarter. As of Dec 31,
2012, loans and advances to customers stood at £21.2 billion ($34
billion), rising 12.8% from the year-ago period. Moreover,
customer deposits surged 15.7% to £53.8 billion ($87 billion).
Head Office and Other Operations:
Adjusted loss before tax deteriorated significantly on a
sequential basis to £718 million ($1,153 million).
Balance Sheet and Capital Ratios
Total assets as of Dec 31, 2012 came in at £1,490 billion ($2,407
billion), down 4.7% from £1,563 billion ($2,415 billion) as of
Dec 31, 2011. Total shareholders' equity came in at £63 billion
($102 billion), declining 3.4% year over year.
As of Dec 31, 2012, core tier 1 ratio stood at 10.9% as against
11.0% as of Dec 31, 2011. Total risk weighted assets came in at
£387 billion ($599 billion), down 1.0% year over year.
Concurrent with the earnings release, Barclays announced the
results of its strategic review. The company seeks to lower
workforce by approximately 3,700 by the end of this year. This is
anticipated to lead to one time restructuring expense of about
£500 million in the first quarter of 2013.
Further, Barclays intends to reduce its total operating expenses
by £1.7 billion to £16.8 billion in 2015. This will enable the
company to achieve cost to income ratio in the mid- 50s in 2015.
Moreover from 2014, the company is targeting a dividend payout
ratio of 30% in the years to come.
Going forward, we expect Barclays' diversified business model and
sound financial position to keep contributing to its overall
growth in the future. Further, steady capital deployment
activities will continue to reinforce investors' confidence in
The possible litigation headwinds, arising from investigation of
regulatory authorities, draw our concern. We are also concerned
about the increasing competition, volatility in the global
economy and effects of the deepening Euro-Zone crisis.
Barclays currently retain a Zacks Rank #4 (Sell). However, among
other foreign banks,
Bank of Montreal
Shinhan Financial Group Company Limited
BBVA Banco Franc
) carry a Zacks Rank #1 (Strong Buy) and are worth