Barclays sets aside £1.2bn for customer defaults – Mortgage Strategy
Barclays full-year profits were knocked after it set aside £1.2bn in impairment charges to cope with potential customer defaults in its 2022 results.
The bank says the charge reflects “macroeconomic deterioration” over the past year, and compares with £653m it released from its cash cushion a year ago as conditions appeared to improve after pandemic restrictions were lifted.
Loans and advances to customers fell 2% to £205.1bn, as £4.1bn of mortgage growth to 162.2bn was more than offset by an £8.5bn slide in business banking balances.
Overall, the bank’s profits suffered a 14.6% drop in pre-tax profits to £7bn last year, compared to a year ago. This falls below analyst expectations of £7.2bn.
Home Me mortgage adviser Gaurav Shukla, says: ” Some customers have seen their payments double in the past couple of months and there will be more.
“It won’t just be mortgages that are affected but other credit commitments as there is so much less disposable income.
“It’s not all bad as mortgage rates are reducing for longer term borrowing, so we may not see as many defaults as first predicted.”
Riverside Mortgages founder Lewis Shaw adds: “Barclays setting aside large tranches of capital to cover possible losses should be a shot across the bows for the policymakers in Threadneedle Street.
“Inflation has peaked, we’ve narrowly dodged recession and it feels as though, if the Monetary Policy Committee took the right decisions, we could avoid forcing thousands of people into default.
“We’ve already started to see an increase in unsecured late payments, which eventually bleeds up to the mortgage.
“It begins with car finance then credit cards, personal loans, and finally it shows up in mortgage arrears as most people will do everything they can to keep their home.
“This is the time to wake up and smell the coffee. Mortgage arrears are a lender’s kryptonite. So, if downsizing is the best way to get finances on track then get on with it sooner rather than later and don’t bury your head in the sand.”
Barclays also says that its £2.3bn acquisition of specialist lender Kensington Mortgages last June has gained regulatory approval, with the transaction now expected to complete in the first quarter of this year.