Barclays group set aside a total of £1.2bn last year for credit impairment charges, as the bank’s customers grappled with the rising cost of living.
The bank said this was as a result of a “deteriorating macroeconomic forecast”.
An impairment charge is a process used by businesses to write off worthless goodwill.
These are assets whose value drops or is lost completely, rendering them completely worthless.
Some in the industry said the move did not come as a surprise given the difficult economic conditions, fuelled by high inflation.
Mortgage brokers said it aligned with what they were seeing with clients with more struggling to pay bills.
Sofia Jones, managing director of mortgage brokerage Penny House, said towards the end of last year she saw a higher number of applicants with defaults on energy bills, mortgages and other loans or finance agreements.
“The immense strain on households is likely to feed through during 2023, especially as people come off ultra-low fixed rates, and the banks are preparing themselves accordingly,” Jones said.
Likewise, Riverside Mortgages founder, Lewis Shaw said the £1.2bn set aside by Barclays 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 [Bank of England’s] monetary policy committee took the right decisions, we could avoid forcing thousands of people into default,” Shaw said.
“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."
In its full year results for 2022, published today (February 15), the bank reported total income for Barclays UK increased by 11 per cent to £7.3bn.
Barclays UK benefited from the rising interest rate environment in the UK and delivered a profit before tax of £2.6bn, up from £2.5bn in 2021.
Commenting on the results, Barclays group chief executive, C. S. Venkatakrishnan said the bank performed “strongly” in 2022.
“Each business delivered income growth, with group income up 14 per cent.
“We are cautious about global economic conditions, but continue to see growth opportunities across our businesses through 2023."
Elsewhere, others were critical of the bank’s failure to make any further commitments on financing fossil fuel expansion.
Make My Money Matter, chief executive Tony Burdon noted that Barclay’s position on financing fossil fuel makes it an outlier among the UK’s largest high street banks.
“For years’, Barclays has been one of Europe’s worst offenders for fossil fuel finance– providing billions to companies at the forefront of oil and gas expansion. This is despite the environmental damage it causes, the economic risks it poses and the expectations of its customers who do not support the practice,” Burdon said.
He added: “By continuing on this path, Barclays is ignoring the science and disregarding its customers. Because any strategy which does not include restrictions on financing for new oil and gas represents a failure of leadership, ambition, and action. We expect this approach will lead to Barclays customers voting with their feet and moving to a bank which isn’t financing climate destruction.”
jane.matthews@ft.com
