Yahoo Finance Impairments top £500 million at Barclays as consumers turn to credit cards to cover essentials
Credit impairments at Barclays have almost quadrupled to top £500 million in fresh signs more and more consumers are getting into deeper credit card debt amid cost-of-living pressures.
The impairment charges rose to £524 million for the first three months of 2023, up from £141 million a year earlier. Barclays said the increase was as a result of “higher US cards balances” and “the continuing normalisation anticipated in US cards delinquencies.”
Those impairments were moderate by historic standards and remain below the peak of over £1 billion hit just after the beginning of the first coronavirus lockdown in March 2020, with the bank reassuring investors it had only seen a “limited observed deterioration” of its lending book.
Richard Hunter, Head of Markets at interactive investor, said: “Unsurprisingly perhaps, the only words of caution relate to the US presence, from where the recent banking turmoil emanated,” adding the impairments “are provisions, not actual losses, and a prudent approach to an economy which could be approaching a recession is understandable.”
Barclays delivered first-quarter pre-tax profits of £2.6 billion, up 16% on last year, while income rose 11% to £7.2 billion. Personal banking income in the UK rose 23% to £1.3 billion, largely driven by higher interest rates, while cost inflation help push operating expenses up 9% to £1.1 billion. Shares rose 4.5% to 161p.
CEO C. S. Venkatakrishnan, who recently returned to the helm of the bank after a battle with blood cancer, said: “All three businesses have performed well with high quality income growth and double-digit returns.
“The momentum across the group allows us to maintain a robust capital position, deliver attractive returns to shareholders, and support our customers and clients through an uncertain economic environment.”
It comes as data released today by the Office for National Statistics showed the use of credit cards to pay for essentials like food and utilities jumped more than 10% in a year in signs Brits are turning to debt to cover the soaring cost of their shopping baskets. Four of the highest ten days of credit card spending on essentials occurred in the first three weeks of April, the data shows.
