) reported adjusted net income of £3,152 million ($4,927 million)
for 2013, down 42% from the prior year. The decrease was mainly
due to a slump in investment banking income.
Results were adversely impacted by fall in net operating income
and FICC revenues. However, these were partly offset by almost
flat operating expenses. However, the performances of all
segments except UK Retail and Banking Business, Europe Retail and
Banking Business, Investment Bank and Wealth and Investment
Management were impressive. Further, capital ratios remained
Performance in Detail
Net operating income was £25,084 million ($39,206 million), down
4% from the 2012 level.
Additionally, adjusted profit before tax declined 32% from the
year-ago period to £5,167 million ($8,076 million). The decrease
was mainly due to costs incurred to achieve Transform and a fall
in overall income.
However, statutory profit before tax improved substantially from
the comparable period last year to £2,838 million ($4,436
million), driven by lower credit charge.
Operating expenses (excluding UK bank levy and costs to achieve
Transform) totaled £18,180 million ($28,415 million), almost in
line with the prior year. Cost to income ratio was 71% against
63% in the prior-year period.
UK Retail and Banking Business:
Adjusted profit before tax came in at £1,195 million ($1,868
million), down 2% from the prior year. This excludes the
provision for Payment Protection Insurance (PPI) redress of £660
million ($1,032 million).
Europe Retail and Banking Business:
Loss before tax came in at £996 million ($1,557 million),
deteriorating significantly from last year. The segment incurred
a loss primarily due to costs arising from the endeavors to
achieve Transform and a rise in other net expense.
Africa Retail and Banking Business:
Profit before tax came was £404 million ($631 million), up 25%
year over year. The rise was driven by lower credit impairment
Adjusted profit before tax came in at £1,507 million ($2,355
million), increasing 2% from the year-ago period. The rise
was attributable to growth in the US and UK card portfolios.
Profit before tax fell 37% from the previous year to £2,523
million ($3,943 million). A 17% decline in fixed income, currency
and commodities income (FICC) was the primary reason for the
Adjusted profit before tax came in at £801 million ($1,252
million), up 74% from the prior year.
Wealth and Investment Management:
Adjusted loss before tax was £19 million ($30 million) compared
with profit before tax of £274 million ($434 million) in 2012.
The decline was due to costs incurred to achieve Transform and
customer remediation provision.
Head Office and Other Operations:
Adjusted loss before tax was £248 million ($388 million),
compared with adjusted profit before tax of £189 million ($300
Balance Sheet and Capital Ratios
Total assets as of Dec 31, 2013 came in at £1,312 billion ($2,163
billion), down 12% year over year. The fall was mainly due to
decrease in derivative assets, increase in forward interest rates
and exposure reduction initiatives with central clearing parties,
along with reduction in cash and balances at central banks.
As of Dec 31, 2013, Common Equity Tier (CET) 1 ratio was 9.3%, up
from 8.4% as of Sep 30, 2013. The company remains on track to
achieve CET target of 10.5% by 2015.
Total risk weighted assets fell 7% year over year to £436 billion
($719 billion) as of Dec 31, 2013.
Further, following the Prudential Regulation Authority (PRA)
review, Barclays intends to modify its capital plans in order to
meet the PRA leverage ratio target of 3% by Jun 2014. As of Dec
31, 2013, the company's PRA leverage ratio was nearly 3.0%.
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
innovation measures. Of the total expected costs of £2.7 billion
pertaining to Transform, £1,209 million ($1,890 million) has
already been incurred by the company.
Performance of Other Foreign Banks
HDFC Bank Ltd.
) reported fiscal third-quarter 2014 (ended Dec 31) net profit of
INR23.26 billion ($0.38 billion), up 25.1% from the prior-year
quarter. The increase in the top line was partially offset by
higher operating expenses. Moreover, deposit and loan balances as
well as credit quality showed improvement.
Impacted by huge litigation costs,
Deutsche Bank AG
) reported net loss of €965 million ($1.3 billion) in the fourth
quarter of 2013 as compared with a loss of €2.5 billion ($3.4
million) in the prior-year quarter. Lower revenues and higher
provision for credit losses were partially offset by decrease in
HSBC Holdings plc
) is scheduled to announce fourth quarter and full-year 2013
results on Feb 24.
We expect Barclays' diversified business model and sound
financial position to consistently contribute to its overall
growth in the future. Further, expense reduction initiatives and
the latest Leverage Plan are expected to raise investors'
confidence in the stock as well.
However, possible litigation headwinds arising from investigation
of regulatory authorities is a plausible concern. Further, 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 #2 (Buy).
BARCLAY PLC-ADR (BCS): Free Stock Analysis
DEUTSCHE BK AG (DB): Free Stock Analysis
HDFC BANK LTD (HDB): Free Stock Analysis
HSBC HOLDINGS (HSBC): Free Stock Analysis
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