Barclays is bracing for a hit from bad loans as the economic outlook darkens, even after it posted a jump in profits.
The British lender more than tripled the amount it set aside for impairment charges to £381m in the third quarter, which it blamed on the “deteriorating macroeconomic forecast”.
Within its consumer lending business, the number of UK credit cardholders struggling to pay off their balance also tripled year-on-year to 1pc, although the bank said that figure remains “below historical levels.”
CS Venkatakrishnan, chief executive of Barclays who is also known as Venkat, said: “So far, we have not seen emerging signs of stress, although our September data shows a slight fall in consumer confidence. People have been prudent in the reduction of non-essential spending, such as clothing, and they have adjusted their household expenditure for large increases in energy bills.”
He added: “We are ready to provide support for customers and clients facing an uncertain economic environment and higher cost pressures.”
The warning came as Barclays reported pre-tax profits of £2bn in its latest quarter, up 6pc on last year. That was despite a £37m hit from an ongoing US trading blunder.
Last month, Barclays paid $361m (£327m) in fines to US regulators, after the UK bank illegally sold billions of pounds worth of securities to American investors.
Gurbir Grewal, director of the US Securities and Exchange Commission’s division of enforcement, said the scope of the misconduct “was simply staggering”.
Mr Venkatakrishnan pledged to learn from the bank’s past mistakes and to improve its internal controls.
Trading revenues rose 45pc as the bank cashed in on recent market volatility. However, investment banking fees fell 45pc as the economic slowdown kept deals on the sideline.
John Moore, a senior investment manager at RBC Brewin Dolphin, said that Barclays “delivered a strong set of results”, but warned that signs of stress were beginning to emerge.
He said: “There is a caution to today’s statement and little in the way of news in terms of returns for shareholders – perhaps in response to the recently mooted prospect of a windfall tax on banks.”
Banks are expected to post bumper profits from rising interest rates, including from reserves held on deposit overnight at the Bank of England, and from bigger net interest margins on loans, prompting calls for a so-called windfall tax on bank profits.
Chancellor Jeremy Hunt has spoken of “eye-wateringly difficult” decisions that will have to be made in order to plug a £40bn fiscal hole at the treasury, and has not ruled out the possibility.
Brewin Dolphin’s Moore added: “Looking ahead, the uncertain economic backdrop will likely put a brake on some of Barclays markets, particularly at its credit cards and investment banking divisions, with the outlook for corporate action – such as capital raises – more difficult.
“Despite previous errors still plaguing its results, Barclays remains the best positioned of the major UK banks with a more diversified income stream – but there are still challenges ahead.”
Credit: The Telegraph