) is scheduled to report its second-quarter 2014 results tomorrow,
In the preceding quarter, this foreign bank delivered disappointing
results with a 7% year-over-year decline in net income; mainly due
to the slump in investment banking given the low level of client
activity. However, this was partially offset by a decrease in
Will Barclays be able to reverse the trend this time or once again
succumb to the tough industry backdrop? Let's see what factors
might have influenced the earnings.
Factors Influencing Q2 Results
Repositioning of business to withstand any further crises remained
the key trend among the non-U.S. banks this quarter, with Barclays
being one of them. The company plans to emphasize its retail
banking business, which is considered to be less risky and volatile
as compared with the investment banking operations. We believe this
approach will help overall revenue growth that has been muted for
the last several quarters.
Also, Barclays intends to slash around 14,000 jobs by the year end.
Apart from this, the company's cost saving plan - Transform - will
aid in lowering operating expenses further.
Nevertheless, the low interest rate environment persisting during
the quarter resulted in the central banks of most countries
prioritizing growth over inflation control. Hence, subdued interest
income growth should dampen Barclays' top line, with sluggish loan
growth adding to the pressure.
Further, Barclays has been embroiled in several lawsuits and
investigations. As a result, the company might have kept additional
reserve for litigation expenses, which would dampen the bottom line
to some extent.
Barclays currently carries a Zacks Rank #3 (Hold).
Other foreign banks that are expected to release results in the
coming days include Banco Bradesco S.A. (
), Banco Santander-Chile (
) and HSBC Holdings plc (
). While both Banco Bradesco and Banco Santander-Chile are
scheduled to report on Jul 31, HSBC will announce results on Aug
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