Barclays shares took a hit as the bank announced that its credit card division is facing problems due to non-repayment of loans. Britain's biggest credit card lender also said that rising bad debts were a cause for concern.
In the backdrop of this news, Barclays shares fell by 4.2 percent to 530 pence at 0707 GMT. This made Barclays the biggest faller in the benchmark FTSE 100 index. In the early hours of trading shares of HBOS, Lloyds TSB and Royal Bank of Scotland also fell.
Barclays issued a statement saying, "Based on current trends, Barclays now expects impairment losses for 2005 to be somewhat higher than the last published risk tendency." The reasons for the bad performance were thought to be rising interest rates coupled with a downward trend in the housing sector, "Impairment losses rose significantly, reflecting increased delinquent balances and severity rates in the UK cards business and changes in recognition methodology. The impact of higher impairment losses, combined with the continued investment in the business, more than offset the improved income performance," the bank said.
A spokesman for the bank was more forthcoming, "This is not like the 1990s, when there was very high interest rates and unemployment. Consumers are just being affected by things like higher taxes and utility bills and are deciding how to prioritise their spending. Other parts of the economy are still growing and most forecasters expect that the next move in interest rates from the Bank of England could be down," he commented.
Meanwhile, official figures show that the consumer debt has surpassed £1,000bn. Added to this is the fact that the markets have been a little cool lately. Barclays issued a statement for the stock markets, which said, "The slowdown across the consumer credit sector resulted in a rise in potential credit risk loans and consequent increase in impairment losses. The increase in delinquencies was most noticeable in credit cards, with a significantly smaller impact in consumer loans and mortgages."
Despite these setbacks, the bank has managed to deliver "good profit growth in the first quarter of 2005". Barclays is the first UK bank to update the market on trading this year ahead of first-half results. These figures have led to increasing concern among the investors that bad debts could make a substantial debt i profits.
Posted
on : Sat, 28 May 2005 18:35 GMT | Banking News
By : Anne Philips
|
