Finance

Barclays first quarter earnings, swings back to profit amid overhaul

Published

1 year ago

April 25, 2024

Business Finance News

Signage shines through a window reflecting Barclays head office in Canary Wharf, London, U.K.

Bloomberg | Getty Images

LONDON — Shares of Barclays rose 4% on Thursday after the bank reported first-quarter net income attributable to shareholders of £1.55 billion ($1.93 billion), beating expectations and returning the British lender to profit amid a major strategic overhaul.

Analysts polled by Reuters had expected net profit attributable to shareholders of £1.29 billion for the quarter, according to LSEG data.

The bank’s shares were up 4.1% by 9:50 a.m. London time.

Pre-tax profits, however, were down 12% to £2.28 billion from $2.6 billion a year earlier, as the bank braces to implement its extensive revamp plans.

Here are some other highlights:

First-quarter group revenue was £6.95 billion, down 4% from the same period last year.
Credit impairment charges were £513 million, compared with £524 million in the first quarter of 2023.
Common equity tier one (CET1) capital ratio, a measure of bank’s financial strength was 13.5%, down from 13.8% in the previous quarter.
Full-year return on tangible equity (RoTE) was 12.3%.
Quarterly total operating expenses were up 2% year-on-year at £4.2 billion.

Barclays reported a net loss of £111 million in the fourth quarter of 2023 due to an operational shake-up designed to reduce costs and improve efficiencies.

CEO C.S. Venkatakrishnan said the bank’s first-quarter results showed it was committed to implementing its overhaul plans, including via further investment in its U.K. consumer business and through its acquisition of Tesco Bank, which expected to complete in the fourth quarter of this year.

“We are focused on disciplined execution of the plan that we presented at our Investor Update on 20th February,” he said in a statement.

The revamp plans included a £900 million hit due to structural cost-cutting measures, which the bank said were expected to lead to gross cost savings of around £500 million in 2024, with an expected payback period of less than two years.

The overhaul saw the reorganization of the business into five operating divisions, separating the corporate and investment bank to form: Barclays U.K., Barclays U.K. Corporate Bank, Barclays Private Bank and Wealth Management, Barclays Investment Bank and Barclays U.S. Consumer Bank.

The bank also pledged to return £10 billion to shareholders between 2024 and 2026 through dividends and share buybacks.

Will Howlett, financials analyst at Quilter Cheviot, said in a Thursday note that the first-quarter results were a “promising start,” indicating that the bank is adhering to the financial roadmap outlined in its 2023 full-year results.

“With a solid start to the year, Barclays is poised to reshape its valuation narrative and deliver on its promises to shareholders,” Howlett said.

“The reiteration of profitability targets, aiming for a return on tangible equity (RoTE) of over 10% in 2024 and over 12% in 2026, reflects a consistency in Barclays’ ambitions despite previous setbacks.”

— CNBC’s Elliot Smith contributed to this report.

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Swiss government proposes tough new capital rules in major blow to UBS

Published

3 days ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”

The prospect of stringent Swiss capital rules and UBS’ extensive U.S. presence through its core global wealth management division comes as White House trade tariffs already weigh on the bank’s fortunes. In a dramatic twist, the bank lost its crown as continental Europe’s most valuable lender by market capitalization to Spanish giant Santander in mid-April.