Barclays (BCS) Q4 Earnings Down on Higher Costs, Revenues Up

Zacks Equity Research

Wed, Feb 15, 2023, 4:32 AM 3 min read

Barclays BCS reported fourth-quarter 2022 net income attributable to ordinary equity holders of £1.04 billion ($1.22 billion), down 4% from the prior-year quarter.

Shates of BCS on NYSE tanked 9.7% in pre-market trading on weak quarterly performance.

Barclays’ quarterly results were adversely impacted by higher expenses. Also, the company recorded a substantial year-over-year rise in credit impairment charges. On the other hand, an increase in revenues acted as a tailwind.

Revenues Improve, Expenses Rise

Total income was £5.8 billion ($6.81 billion), up 12% year over year.

Operating expenses (excluding litigation and conduct costs, and UK bank levy) totaled £3.75 billion ($4.4 billion), up 7%.

The cost-to-income ratio was 69%, down from 73% a year ago.

In the reported quarter, Barclays recorded credit impairment charges of £498 million ($584.5 million) against credit impairment releases in the year-ago quarter.

Pre-tax income was £1.31 billion ($1.54 billion), down 8% year over year.

Segment Performance Mixed

Barclays UK: Profit before tax was £667 million ($782.8 million), up 30% from the year-ago quarter. The rise was driven by higher total income.

Barclays International: Profit before tax was £796 million ($934.2 million), down 28% year over year. The fall was due to the weak performance of the corporate and investment bank division.

Head Office: Loss before tax was £153 million ($179.6 million), narrower than the loss incurred in the prior-year quarter.

Balance Sheet & Capital Ratios Strong

Total assets as of Dec 31, 2022, were £1,513.7 billion ($1,830 billion), down 12% from the prior-quarter end.

Total risk-weighted assets decreased 4% from the prior quarter to £336.5 billion ($460.8 billion) as of Dec 31, 2022.

As of Dec 31, 2022, the Common Equity Tier 1 (CET1) ratio was 13.9%, down from 15.1% as of Dec 31, 2021.

2023 Guidance

Management expects the loan loss rate to be in the 50-60 basis points range.

Over the medium term, the CET1 ratio is expected to be 13-14%.

Barclays expects to deliver a return on tangible equity of more than 10% and a cost-to-income ratio of low 60%.

Our View

Given Barclays’ restructuring and business-simplification efforts, its operating efficiency is expected to improve in the quarters ahead. However, given the tough operating backdrop, revenue growth might get hampered in the near term.