Barclays Q1 23 – 27/04 – Barclays shares briefly hit their lowest levels in over 2 years earlier this year on the back of the turmoil in the banking sector during the month of March, although their Q4 and full-year numbers had already started to undermine the gains seen since the start of the year.
Notwithstanding the losses incurred in H1 due to over issuance of debt securities have dragged on its performance, the miss on its Q4 numbers saw the shares slide sharply. For Q4, pre-tax profits came in short of expectations as did revenues. Q4 attributable profit came in at £1bn, pushing full-year group attributable profit to £5bn. The corporate and investment bank saw a 2% decline in Q4 revenues to £2.57bn with a disappointing performance across the board. Operating expenses over the year came in as expected at £16.7bn, up from £14.66bn in 2021, with £1.6bn of that related to litigation and conduct charges. Credit impairment charges were £1.2bn, with another £700m set aside in Q4. The dividend was increased to 7.25p from 6p, with the bank pledging a buyback of £500m. Barclays CEO Venkat expressed caution over global economic conditions but was optimistic about the outlook. Nonetheless, the turbulence seen in Q1 is likely to see a weaker performance from its international bank which is already struggling to generate a decent return on equity.
NatWest Group Q1 23 – 28/04 – when NatWest reported its full-year results back in February the shares were trading just below their highest levels since May 2018, as concerns over a sharp slowdown in the UK economy receded.
The shares have retreated a touch since then touching 3-month lows in March, largely due to concerns over whether the strong performance seen in 2022 can be repeated in 2023, while the recent uncertainty around the European banking sector and the fallout over Credit Suisse didn't help. In Q4, profits rose to an impressive £1.26bn, a big increase on the £187m in Q3, taking full-year profits to £3.34bn, up from £2.95bn a year ago. Total impairments for the year rose to £337m, which given the uncertain outlook comes across as sensible financial contingency planning. The higher interest rate environment saw net interest margin increase from 2.99% in Q3 to 3.2% in Q4, bringing NIM year-to-date up to 2.85% from 2.30% a year ago. The bank proposed a final dividend of 10p as well as a share buyback program of £800m in the first half of 2023, taking the total amount paid to shareholders £5.1bn, or 53p per share, which is good news for the UK government which still holds a 48% stake in the bank. On the outlook, the bank was cautious with the bank saying it expects to generate full-year income of £14.8bn, and a full-year NIM of 3.2%, based on a base rate of 4%. The current base rate is already above this at 4.25% and could well go higher next month to 4.5%, potentially pushing NIM higher. Impairments are expected to remain in line with previous forecasts.
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Microsoft Q3 23 – 25/04 – when Microsoft reported in Q2 their numbers were by and large positive despite some weak areas, however, the downbeat guidance initially saw the shares come under pressure as the penny started to drop that the next few quarters are likely to be challenging for even the most competitive businesses.
Q2 revenues came in at $52.7bn, with cloud revenue rising 22% to $27.1bn, driven by growth in AI and Intelligent Cloud. Net income fell to $16.43bn from $18.77bn primarily due to a $1.2bn charge as a result of the decision to cut 10,000 jobs and revise its hardware line-up. On the downside, Personal Computing revenue fell 19% to $14.2bn, with OEM revenue falling 39%. Since then, the shares have rebounded to just shy of the highs seen last August. Microsoft said the next few quarters were likely to see a further slowdown in growth, even in strong areas like Azure, and that new business was already becoming more difficult. They also said that existing customers were asking for its help to make cost savings around their existing services. Microsoft also said subscriptions were also likely to slow, and that revenues would remain flat in Q3, at between $50.5bn and $51.5bn, with further weakness in personal computing expected, at around $12bn, while being offset with continued strength in Azure. We may find out more detail about the challenges facing the Activision deal. Profits are expected to come in at $2.23c a share.
