Barclays Plc is planning to cut costs in response to its trading division's underperformance in Q3, which resulted in revenues of £3.08 billion ($3.8 billion), lower than the forecasted £3.24 billion. This underperformance led CEO C.S. Venkatakrishnan to acknowledge the investment bank's subpar results.
The bank's fixed income, currency, and commodity trading dropped by 26% year-on-year (YoY). In response to these challenges, Barclays revised its net interest margin outlook for this year to 3.05%-3.1%, attributing this adjustment to the diminishing benefits of higher interest rates and a competitive UK retail deposit market.
According to InvestingPro's real-time metrics, Barclays' adjusted market cap stands at $24,981.31 million, with a P/E ratio of 3.75. The bank's revenue for the last twelve months (LTM2023.Q2) was $29,842.65 million, indicating a slight growth of 0.42%. However, the quarterly revenue growth for FY2023.Q2 was down by -9.14%.
Barclays' shares fell 6.83% in early London trading, marking it as the FTSE 100 index's worst performer today. The bank is now considering strategies to reduce structural costs, with an investor update expected in February.
As part of its cost-cutting strategy, Barclays is streamlining its portfolio through a consumer-finance business sale in Germany, a potential merchant-acquiring business sale, and a deal that is nearing completion with AGL Credit Management.
InvestingPro Tips suggests that Barclays has raised its dividend for three consecutive years and is currently trading at a low P/E ratio relative to near-term earnings growth. This could be a point of interest for potential investors looking for value buys. For more insights like these, you can check out InvestingPro's Pro Pricing plan which includes numerous other tips.
Shore Capital analyst Gary Greenwood anticipates a short-term impact on Barclays' shares due to uncertainty around structural costs and pressure on the net interest margin.
In terms of other financial metrics for Q3, Barclays' UK business reported a total income of £1.9 billion, while its cards and payments business recorded £1.4 billion net revenue. The bank reported a CET1 ratio of 14%, a cost-to-income ratio of 63%, a return on tangible equity of 11%, credit impairment charges a fifth lower than expected at £433 million, and a pretax income of £1.9 billion. These figures indicate additional pressure on the UK margin.
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