Barclays (BCS) Reports Net Loss In Q3, Provisions Surge

Barclays (LON:BARC) (NYSE:BCS) reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflects a decline from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) recorded in the year-ago quarter.

Shares of Barclays on the NYSE rose nearly 2.9% in pre-market trading. Nonetheless, full-day trading will provide a better picture.

Results were adversely impacted by a substantial rise in credit impairment charges. However, a decline in operating expenses along with higher revenues aided the company. Also, a strong balance sheet position aided its performance.

Revenues Improve, Costs Decline

Net operating income was £5.08 billion ($6.26 billion), up 4.2% from the prior-year quarter. The increase was due to higher net fee, commission and other income, and rise in net interest income.

Operating expenses (excluding litigation and conduct costs) totaled £3.29 billion ($4.06 billion), down 1.1% from the year-ago quarter.

Cost to income ratio was 88%, up from 67%.

Credit impairment charges and other provisions surged 81.5% to £461 million ($568.3 million). This primarily resulted from extra payment protection insurance (PPI) costs that the company witnessed in the quarter.

Pre-tax income was £246 million ($303.2 million), down 83.2% from the year-ago quarter.

Segmental Performance

Barclays U.K.: Loss before tax was £687 million ($846.9 million) against profit before tax of £740 million ($964.1 million) in the year-ago quarter. Decline in operating income and higher total operating expenses hurt the segment’s performance.

Barclays International: Profit before tax was £1.14 billion ($1.41 billion), up 33.8% from the prior-year quarter. The rise mainly resulted from improved performance in the corporate and investment bank division.

Head Office: Loss before tax was £204 million ($251.5 million), wider than loss of £129 million ($168.1 million) incurred in the prior-year quarter.

Balance Sheet and Capital Ratios Strong

Total assets as of Sep 30, 2019, were £1,290.4 billion ($1,585.8 billion), up 34.7 sequentially.

As of Sep 30, 2019, Common Equity Tier 1 ratio was 13.4%, up from 13.2% on Sep 30, 2018.

Total risk-weighted assets were £313.3 billion ($385 billion) as of Sep 30, 2019.

Outlook

The company continues to target return on tangible equity of more than 9% in 2019 and more than 10% in 2020.

Given the challenging operating backdrop, the company remains to track to keep operating expenses (excluding litigation and conduct charges) below £13.6 billion in 2019.

Management now expects CET1 ratio of 13.5% by 2019 end.

Our View

Given Barclays’ restructuring and business simplification efforts, its operating efficiency is expected to continue improving. However, pressure on revenue growth remains a major near-term concern. Moreover, uncertainty related to Brexit as well as slowdown in the global economy is expected to hurt its financials.

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

Earnings Release Dates of Other Foreign Banks

HSBC Holdings (NYSE:HSBC) is scheduled to announce results on Oct 28. While Deutsche Bank (NYSE:DB) is slated to release results on Oct 30, Itau Unibanco Holding S.A. (NYSE:ITUB) will report results on Nov 4.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>