Barclays has reported a 37% rise in first half profits to GBP3.6 billion as retail banking delivered a strong performance for the UK-based lender, despite a 14% drop in profits at credit card business Barclaycard.
A continued rise in impairment charges in the UK dented earnings in the bank’s unsecured lending portfolio, with profit at the credit card division falling to GBP297 million. Impairment charges rose 50% on loans and advances to more than GBP1 billion, driven by a continued increase in arrears.
Barclays said: In the UK, consumers faced continued pressure on household cash flows. High debt levels and changing social attitudes to bankruptcy and debt default contributed to increased impairment charges.
The bank added that despite a tightening of underwriting standards, the value of debt in arrears rose because of an increase in the average value of debt per customer. Defaults on unsecured loans also increased but at a slower rate than seen in cards.
Group chief executive John Varley said: We expect retail credit conditions in the UK to remain challenging in the second half of 2006 as impairment trends continue to be affected by the rise in average balances and the growth in personal bankruptcies.
There are, however, signs of stabilization of the new flow into delinquency in our main credit card portfolio as the measures taken in the past 18 months have had a positive impact on the credit quality of new business and the management of existing exposures.