Barclays (BCS) Q2 Earnings & Revenues Decline Y/Y, Costs Fall
Barclays’ BCS second-quarter 2020 net income attributable to ordinary equity holders of £90 million ($111.6 million) represents a decline of 91.3% from the prior-year quarter number.
Shares of Barclays lost almost 4.7% in pre-market trading. However, the full day’s trading session will likely depict a better picture.
Results were primarily hurt by a significant increase in credit impairment charges. Also, the company witnessed a decline in the top line. Nevertheless, lower operating expenses were a tailwind.
Revenues & Expenses Decline
Net operating income was £3.72 billion ($4.61 billion), down 26.6% year over year. The decline was mainly due to a fall in net interest income and higher credit impairment charges.
Operating expenses (excluding litigation and conduct costs) totaled £3.31 billion ($4.11 billion), down 5.5% from the year-ago quarter.
Cost to income ratio was 62%, down from 64% recorded a year ago.
Credit impairment charges increased significantly year over year to £1.62 billion ($2.01 billion).
Pre-tax income was £359 million ($445.3 million), down 76.6% from the year-ago quarter.
Quarterly Segmental Performance
Barclays U.K.: Loss before tax was £127 million ($157.5 million) against profit before tax recorded in the year-ago quarter. A fall in net operating income primarily hurt the segment’s performance.
Barclays International: Profit before tax was £807 million ($1 billion), down 34% year over year. The decline was mainly due to the dismal performance of the consumer, cards and payments division.
Head Office: Loss before tax was £321 million ($398.2 million), wider than the loss incurred in the prior-year quarter.
Strong Balance Sheet & Capital Ratios
Total assets as of Jun 30, 2020, were £1,385.1 billion ($1,707.3 billion), down 4.1% sequentially.
As of Jun 30, 2020, Common Equity Tier 1 ratio was 14.2%, up from 13.4% on Jun 30, 2019.
Total risk-weighted assets were £319 billion ($393.20 billion) as of Jun 30, 2020.
Barclays continues to target return on tangible equity of more than 10%.
Further, cost to income is projected to be less than 60%.
Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to improve in the quarters ahead. However, owing to a tough operating backdrop and the coronavirus outbreak-induced global economic slowdown, revenue growth is expected to continue to be hampered to some extent in the near term.
Barclays PLC Price, Consensus and EPS Surprise
Currently, Barclays carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Upcoming Releases of Other Foreign Banks
UBS Group AG UBS reported second-quarter 2020 net profit attributable to shareholders of $1.23 billion, down 11% from $1.39 billion in the prior-year quarter. The performance was impacted by a decline in net fee and commission income (down 4% year over year) along with a rise in expenses. However, higher net interest income (up 36%) was a tailwind.
ICICI Bank’s IBN first-quarter fiscal 2021 (ended Jun 30) net income was INR25.99 billion ($344 million), up 36% from INR19.08 billion ($253 million) in the prior-year period. The net income included coronavirus-related provisions of INR55.50 billion ($735 million). The results were driven by a rise in net interest income, growth in loans and deposits, and lower operating expenses. However, provisions surged, owing to the coronavirus outbreak-related concerns. Further, a decline in non-interest income was a headwind.
HSBC Holdings HSBC is expected to report quarterly results soon.
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