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Barclays (BCS) Incurs Loss in Q4, Records $1.25B Tax Charges

BarclaysBCS incurred fourth-quarter 2017 net loss attributable to ordinary equity holders of £1.3 billion ($1.8 billion). Results included £0.9 billion ($1.25 billion) charges pertaining to the U.S. tax reforms. Net income attributable to ordinary equity holders was £99 million ($131.4 million) in the prior-year quarter.

In the pre-market trading , Barclays' shares gained almost 5% on the NYSE, as investors cheered the restoration of dividend payments which was earlier slashed. The actual picture will emerge after the full day's trading session, once investors and analysts go through the core results.

Increase in revenues, lower expenses and decline in credit impairment charges were more than offset by a fall in net interest income, lower trading income and muted underwriting fees.

Revenues Rise, Costs Fall

Net operating income was £4.45 billion ($6.18 billion), up 2.5% year over year. The rise was mainly driven by higher net fee, commission and other income.

Operating expenses (excluding U.K. bank levy and litigation and conduct) totaled £3.62 billion ($5.03 billion), declining 5% from the year-ago quarter.

Cost to income ratio was 87%, unchanged from the prior-year quarter.

Credit impairment charges decreased 12% from the prior-year quarter to £573 million ($795.7 million).

Pre-tax earnings of £93 million ($129.1 million) decreased 72% from the year-ago quarter.

Dismal Segment Performance

Barclays U.K.: Profit before tax came in at £452 million ($627.7 million), down 22% from the year-ago quarter. Rise in litigation related costs and impairment charges were the primary reasons for the segment's dismal performance.

Barclays International: Profit before tax came in at £6 million ($8.3 million), falling significantly from £373 million ($495.2 million) in the prior-year quarter. The decline was mainly due to dismal performance by corporate and investment bank division.

Head Office: Loss before tax was £365 million ($506.8 million), deteriorating from profit before tax of £162 million ($215.1 million) in the prior-year period.

Strong Balance Sheet and Capital Ratios

Total assets as of Dec 31, 2017 came in at £1,133.2 billion ($1,528.8 billion), down 1% sequentially. As of Dec 31, 2017, Common Equity Tier 1 ratio was 13.3%, up from 12.4% on Dec 31, 2016.

Total risk-weighted assets were £313 billion ($422.3 billion) as of Dec 31, 2017.

Outlook

The company targets to achieve return on tangible equity (ROTE) of greater than 9% in 2019 and more than 10% in 2020.

Management expects operating expenses (excluding litigation and conduct charges) to be in the range of £13.6-£13.9 billion in 2019.

The company intends to announce dividend of 6.5 pence per share (subject to regulatory approvals) in 2018.

Our View

Pressure on revenues is mainly due to Barclays' declining market share in global trading business. 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

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

Performance of Other Foreign Banks

Deutsche Bank AG DB incurred net loss of €2.2 billion ($2.6 billion) in fourth-quarter 2017 compared with net loss of €1.9 billion ($2.3 billion) in the year-ago quarter. The results were affected by non-cash charge of €1.4 billion resulting from a valuation adjustment on its deferred tax assets due to the tax reform.

UBS Group AG UBS reported fourth-quarter 2017 net profit attributable to shareholders of CHF 955 million ($967.7 million) on an adjusted basis, up 25.2% from the prior-year quarter. Including deferred tax expenses, net loss attributable to shareholders came in at CHF 2.2 billion ($2.23 billion) against net income of $636 million recorded in the prior-year quarter.

HSBC Holdings plc HSBC reported fourth-quarter 2017 results wherein it incurred net loss attributable to shareholders of $274 million, which improved from a loss of $4.4 billion in the year-ago quarter. Results included an one-time charge of $1.3 billion related to the U.S. tax reforms and several other non-recurring items.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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