Barclays PLC Third Quarter 2024 Results

Barclays PLC (BARC.L) announced robust third-quarter results in its latest earnings call, maintaining a strong trajectory towards its three-year strategic targets. Group Chief Executive C.S. Venkatakrishnan and Group Finance Director Anna Cross led the discussion, outlining the bank's financial performance and strategic initiatives.

Financial Highlights

With a return on tangible equity (RoTE) of 12.3% for the quarter and a year-to-date figure of 11.5%, Barclays showcased a solid capital position and operational efficiency. Total income for the quarter stood at £6.5 billion, contributing to a year-to-date income of £19.8 billion. The bank's cost-to-income ratio was reported at 61%, and a CET1 ratio of 13.8% highlighted its strong capital reserves.

Key Takeaways

• Barclays' Q3 RoTE reached 12.3%, with a year-to-date RoTE of 11.5%.
• Q3 total income was £6.5 billion, contributing to a year-to-date total of £19.8 billion.
• The bank reported a cost-to-income ratio of 61% and a CET1 ratio of 13.8%.
• Profit before tax for Q3 increased by 18% to £2.2 billion.
• The bank is on track to achieve £1 billion in gross cost savings by year-end, with £700 million already realized.
• Barclays U.K. reported a Q3 RoTE of 23.4%, with an updated NII guidance of approximately £6.5 billion for 2024.
• The acquisition of Tesco Bank is expected to finalize on November 1, 2024, enhancing unsecured lending channels.
• The investment bank and U.S. Consumer Bank also reported improved RoTEs of 8.8% and 10.9%, respectively.

Company Outlook

• Barclays anticipates exceeding £11 billion in net interest income for the year.
• The bank expects a lower overall impairment charge for 2024 compared to 2023, targeting a loan loss rate of around 400 basis points.
• The U.K. Corporate Bank extended client lending facilities by £1.2 billion.
• Wealth Management's Q3 RoTE was 29%, supported by an increase in client assets.
• Regulatory changes under Basel 3.1 are expected to impact RWAs by £19 billion to £26 billion, with implementation set for January 1, 2026.

Bearish Highlights

• Stress in the U.K. customer base was acknowledged, with guidance maintained for the U.S. Consumer Bank impairment charge.
• Increased write-offs are expected in the U.S. Consumer Bank for 2024, although 30 and 90-day delinquencies remain stable.
• The U.K. balance sheet may initially contract, but gross lending is expected to grow.

Bullish Highlights

• Barclays U.K. has seen an increase in gross lending activity, especially in mortgages and card acquisitions.
• The bank has added around 800,000 new Barclay Card customers this year.
• The acquisition of Tesco Bank is estimated to contribute approximately 50 basis points to the group's statutory RoTE in 2024.

Misses

• There was no specific guidance provided for the underlying group center numbers post the exit of various mortgage and German card books for 2025 and 2026.

Q&A Highlights

• Chris Cant inquired about the financial outlook for 2025 and 2026, with Angela Cross acknowledging volatility but deferring specific guidance.
• Edward Firth questioned U.K. interest rate sensitivity and U.S. margins, with Cross confirming that interest rate sensitivity is minimal due to timing effects and lag in pricing adjustments.
• Guy Stebbings asked about capital management and product margins in the U.K., with Cross reiterating the bank's commitment to capital distribution and addressing the impact of interest rate cuts.

Barclays continues to navigate the changing economic landscape with a disciplined approach to operational efficiency and growth. The bank's strategic focus on stabilizing deposits, encouraging lending trends, and integrating acquisitions like Tesco Bank positions it well for future performance. With a strong capital position and a commitment to meeting its outlined targets, Barclays remains a key player in the financial industry.

InvestingPro Insights

Barclays PLC's robust financial performance, as highlighted in the earnings call, is further supported by key metrics from InvestingPro. The bank's market capitalization stands at $46.55 billion, reflecting its significant presence in the financial sector.

One of the most striking InvestingPro data points is Barclays' price-to-book ratio of 0.5 for the last twelve months as of Q2 2024. This low ratio suggests that the stock may be undervalued relative to its book value, potentially aligning with the bank's strong capital position mentioned in the earnings call.

The bank's P/E ratio of 7.84 (adjusted for the last twelve months as of Q2 2024) indicates that investors are paying a relatively low price for each dollar of earnings. This could be seen as attractive, especially considering the bank's reported 18% increase in profit before tax for Q3.

An InvestingPro Tip notes that Barclays has maintained dividend payments for 27 consecutive years, underscoring its commitment to shareholder returns. This aligns with the bank's strong capital position and its focus on capital distribution mentioned in the Q&A session.

Another relevant InvestingPro Tip highlights that Barclays' stock price has significantly outperformed the S&P 500 in the past year. This is reflected in the impressive 99.43% one-year price total return as of the latest data, which corroborates the bank's positive trajectory towards its strategic targets.

For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Barclays PLC, providing a deeper understanding of the company's financial health and market position.