24th Oct 2023 13:47
(Alliance News) - Barclays PLC got the banking sector earnings season off to a tepid start, with a guidance cut in its UK arm standing out in a mixed batch of results.
Barclays shares slumped 7.0% to 133.90 pence each in London on Tuesday afternoon.
For the quarter that ended September 30, total income rose 5.2% on-year to GBP6.26 billion from GBP5.95 billion a year prior.
Total income fell short of the GBP6.29 billion company-compiled consensus.
Barclays reported pretax profit of GBP1.89 billion for the quarter, down 4.3% on-year from GBP1.97 billion. However, it beat the company-compiled market consensus of GBP1.77 billion.
Hurting profit, credit impairment charges were increased by 14% to GBP433 million from GBP381 million a year earlier.
Looking ahead, Barclays backed its annual return on tangible equity forecast of "greater than 10%".
However, it trimmed UK net interest margin guidance. It now expects this to land around "3.05% to 3.10% in 2023".
"Guidance is sensitive to the level and mix of deposit balances and further changes in expectations for interest rates," it added.
It had previously predicted a UK net interest margin of "less than 3.20% with a current view of around 3.15%".
UBS noted the new net interest margin guidance implies a fourth-quarter outturn of 2.86% at the mid-point, which would be down 18 basis points quarter-on-quarter from 3.04%. Barclays said its UK NIM fell 18 basis on-quarter during the three months to September 30.
UBS also noted the prospect of a restructuring.
"We expect a focus today on scoping restructuring charges, BUK NIM trajectory through FY24 and whether investors should expect a meaningful change to RWA growth and mix plans.
Barclays said it is "evaluating actions to reduce structural costs to help drive future returns". It expects to book "material additional charges in Q423".
Analysts at UBS added: "We expect a focus today on scoping restructuring charges, BUK NIM trajectory through FY24 and whether investors should expect a meaningful change to RWA growth and mix plans."
Sentiment towards the banking sector ahead of the results was somewhat, Brewin Dolphin analyst John Moore noted.
"Sentiment has generally soured, on the back of US regional banks struggling with lower than expected net interest margins and issues such as the well-publicised problems of Metro Bank. Market conditions have also not been great for Barclays' investment banking division, with deal activity relatively low. That said, its other banking operations are largely resilient – particularly its consumer and credit card business – and, with capital to invest, Barclays could be a beneficiary as some of its smaller peers struggle in the current environment," Moore added.
Barclays did not declare any new shareholder distributions.
"Barclays is committed to maintaining a balance between a strong capital position, delivering total cash returns to shareholders and investment in the business. Barclays pays a progressive ordinary dividend, taking into account these objectives and the earnings outlook of the group. The board will also continue to supplement the ordinary dividend as appropriate, including with share buybacks," it said.
Barclays also on Tuesday said it completed the GBP750 million share buyback it had announced in July. It bought 493.6 million shares in total at an average price of 151.94p.
By Eric Cunha, Alliance News news editor
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