shares pressured by risk-tendency statement
By Sarah Turner, MarketWatch
Last Update: 7:24 AM ET May 26, 2005
U.K. bank Barclays PLC warned Thursday that consumers weren't paying off their credit card debt.
Barclays said that, based on current trends, it now expects impairment losses for 2005 to be somewhat higher than in its last published risk-tendency statement.
The news pressured shares in Barclays which were last trading down 5.3% at 521 pence in a declining London market. "The trading statement has disappointed the market this morning," said analysts at bank Insinger de Beaufort. "This is due to higher-than-anticipated impairment charges and rising consumer bad debts at the Barclaycard consumer lending unit."
Merrill Lynch analysts noted that provisions are now expected to be ahead of the 1.4 billion risk tendency last published. "We believe that the market will react negatively to these figures due to disappointment both with the higher than anticipated impairment charges and a mix of earnings which continues to rely heavily (though not exclusively) on the performance of Barclays Capital for growth," said analysts at Credit Suisse First Boston.
Barclays said the slowdown across the U.K. consumer credit sector sparked a rise in potential credit-risk loans and a consequent increase in impairment losses.
The increase in delinquencies was most noticeable in credit cards, Barclays said. U.K. banking performed well in the first quarter and is making progress towards its 2005 productivity target, the bank said.
Barclays Finance Director Naguib Kheraj said that first-half cost growth is likely to be a little higher than income growth. But, "We're not expecting the same sort of acceleration in cost growth in the second half of this year as we had last year, so we're comfortable with our guidance for the full year," he added.
Barclays said it continues to target double-digit income growth for 2005, with expense growth seen broadly in line with income growth. On first-half profits, Kheraj said: "Whilst our underlying profit for the first half is likely to be similar to last year, we expect the headline performance in U.K. retail to be lower."
U.K. banking is on track to reduce its cost-to-income ratio by at least 2% this year, he said, adding: "We'll show some progress in the first half and we expect this to accelerate in the second half."