| Barclays has warned its investors it will take a hit of £2.15bn because of bad debts, despite achieving annual profits in excess of £7bn over 2006.
The impairment charge is even higher than last year’s charge of £1.57bn and comes despite action taken by the bank to introduce stricter credit controls. At Barclaycard, pre-tax profits have fallen by 40 per cent to £384m.
In its annual results released last month Barclays said the further rise in impairment charges was principally in the UK lending portfolios and blamed it on a rise in delinquent balances and increasing numbers of bankruptcies and Individual Voluntary Arrangements (IVAs).
The bank took action to tighten lending criteria and improve collection processes last year. It said the flow of new delinquencies has now reduced and levels of arrears balances for UK cards and loans declined in the second half of 2006.
"These trends cause us to believe that we passed the worst in Barclaycard UK impairment in the second half of 2006," said group chief executive John Varley.
The impairment charge marred an otherwise impressive set of results and, as Credit Today went to press, Lloyds TSB, HBOS, HSBC and Royal Bank of Scotland were also expected to flag up hefty bad debt charges.
|