By Elena Vardon
Barclays is gearing up to unveil its fourth-quarter 2023 results and host its first capital markets day in more than a decade to provide investors with updates on its financial targets and strategic direction.
Pretax Profit Expectations
PRETAX PROFIT: Analysts anticipate that the U.K. bank will report a pretax profit of 238 million pounds ($299.9 million) for the three months ending Dec. 31. This marks a significant decline from the GBP1.31 billion recorded in the same period the previous year and the GBP1.885 billion in the third quarter. The projected decrease is attributed to "material additional charges" stemming from structural cost action charges outlined in October. The consensus estimate suggests these charges will result in a GBP825 million impact, primarily related to headcount reductions in the back office, as well as property and infrastructure optimization.
Total Income Projections
TOTAL INCOME: The fourth-quarter total income for the FTSE 100 lender is expected to reach GBP5.76 billion, based on analyst consensus. This figure reflects a slight dip from GBP5.80 billion in the corresponding quarter of 2022 and GBP6.26 billion in the previous quarter.
Market Performance
Barclays shares on the London Stock Exchange are currently trading around 149 pence, showing a 14% decline in value over the last year.
Key Points to Monitor
WHAT TO WATCH:
- Investors are likely to focus on the income generated by the international division's corporate and investment bank (CIB), projected at GBP2.67 billion as per consensus. This figure compares to GBP2.58 billion from the previous year's final quarter and signals a potential slowdown from the GBP3.08 billion reported in the third quarter. Analysts will closely analyze these numbers to glean insights into early trends expected in 2024.
Barclays UK Net Interest Margin Focus
The net interest margin for Barclays UK will be in focus as the bank adjusts its 2023 guidance to a margin of 3.05% to 3.10%, down from the previous estimate of around 3.15%. Analysts are eager to see the implications of this change on deposit costs and mortgage margins, particularly as rates are anticipated to decrease. The mid-point of the guidance suggests a fourth-quarter average of about 2.86%, according to UBS.
Operating Expenses and Impairments
The consensus projects total operating expenses of GBP4.91 billion for the fourth quarter, inclusive of GBP825 million from structural cost actions. There is a keen interest in understanding the payback period for these expenses and their net effect on the cost base. In terms of impairments, consensus anticipates a GBP629 million credit impairment charge for potential bad loans. Some analysts also expect a provision for customer redress related to the bank's legacy motor finance business.
Balance-Sheet Strength and Capital Distribution
The bank's common equity Tier 1 ratio, a critical measure of balance-sheet strength, is anticipated to be 13.9% at the end of the period, slightly lower than the previous quarter's 14%. Barclays aims for a CET1 ratio between 13% and 14% in the medium term. Shareholders are looking forward to Barclays' plans for cash distributions, including a GBP890 million share buyback announcement and a final dividend of 5.8 pence per share. Analysts are eager for updates on the bank's capital-returns policy and concrete targets in its upcoming strategy update.
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