Posted: Thu Dec 14, 2006 2:32 pm
Here are key recent comments from Britain's biggest five banks on charges for bad debts this year and the outlook for 2007.
HSBC
Group bad debt charge in H1 was $3.89 billion, up 19 percent from a year earlier. UK retail bad debt charge rose 36 percent to 361 million pounds.
Loan impairment charges for Q3 were "modestly up" on both a year ago and the previous quarter, it said last week. The trend of rising UK bankruptcies and individual voluntary arrangements (IVAs) "looks unlikely to abate in the medium term".
HSBC Chief Executive Michael Geoghegan: "The reality is there are people out there encouraging people to file for bankruptcy or restructuring.
"I think it's something that the industry and government need to look at -- is this the right type of law to what it set out to achieve?
"When you have an industry encouraging people to (file for bankruptcy), and you haven't got a history of how to manage credit scores around that, one is very much in a position where you have to work through this social approach that people are taking to their debt liabilities."
ROYAL BANK OF SCOTLAND
Group impairment charge rose 5 percent to 887 million pounds in H1. Retail markets charge rose 19 percent to 680 million.
It said last week it was comfortable with analysts' expectations that the impairment charge for retail markets would slow to about 14 percent for the full year.
Chief Executive Fred Goodwin: "If things stay the way they are I think the end (peak in bad debts) is in sight, but we're not there yet.
"Customers have drawn their horns in a bit, which is confirmed by the strong growth we've seen in the amount people are saving. The consumer has shifted emphasis.
"We're not seeing anything in unsecured credit losses that is out of line with what we expected at the time we wrote the business.
"We're not seeing a cause for complaint about IVAs ... I can't say we're seeing widespread abuse."
Guy Whittaker, finance director: "The rate of increase is slowing and this issue is increasingly one that we think of as being behind us."
BARCLAYS
Group impairment charge rose 50 percent to 1.057 billion pounds in H1. Barclaycard charge rose 37 percent to 696 million.
Barclays said last week the rate of growth in Barclaycard's bad debts continued the trend of H1, but the flow of new arrears had stabilised.
Naguib Kheraj, finance director, said the outlook remained challenging and it was too early to call a turn in the impairment cycle.
HBOS
The bank said on Thursday it expects impairments in 2006 to come in below the 1.9 billion pounds forecast by analysts, which would have been a 19 percent rise from 1.6 billion in 2005. Its impairments rose 15 percent in the first half to 864 million.
Phil Hodkinson, finance director, said growth in bad debts on unsecured personal loans had moderated in the second half, but was still rising. He said there was uncertainty about the impact of rising insolvencies.
Hodkinson: "This is still a rising level of impairment and therefore we're still some way off the peak... we hold the view that it will be the second half of next year at the earliest before we see a peak."
LLOYDS TSB
H1 bad debt impairment charge jumped 20 percent from a year ago to 800 million pounds, including a 16 percent rise in the UK retail arm to 632 million.
Lloyds said on Monday that retail bad debts in H2 would be no higher than in H1.
Helen Weir, finance director, said: "There has been a slowdown in consumer demand, they are pacing their demand. We have also done quite a lot to tighten lending criteria ... we probably caught the cycle a little earlier than others."
"We would expect, as we go through 2007, to see some light at the end of the tunnel," Weir said, adding that impairments should not significantly rise but the impact of rising IVAs would be the key factor.
Source: Reuters
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5
HSBC
Group bad debt charge in H1 was $3.89 billion, up 19 percent from a year earlier. UK retail bad debt charge rose 36 percent to 361 million pounds.
Loan impairment charges for Q3 were "modestly up" on both a year ago and the previous quarter, it said last week. The trend of rising UK bankruptcies and individual voluntary arrangements (IVAs) "looks unlikely to abate in the medium term".
HSBC Chief Executive Michael Geoghegan: "The reality is there are people out there encouraging people to file for bankruptcy or restructuring.
"I think it's something that the industry and government need to look at -- is this the right type of law to what it set out to achieve?
"When you have an industry encouraging people to (file for bankruptcy), and you haven't got a history of how to manage credit scores around that, one is very much in a position where you have to work through this social approach that people are taking to their debt liabilities."
ROYAL BANK OF SCOTLAND
Group impairment charge rose 5 percent to 887 million pounds in H1. Retail markets charge rose 19 percent to 680 million.
It said last week it was comfortable with analysts' expectations that the impairment charge for retail markets would slow to about 14 percent for the full year.
Chief Executive Fred Goodwin: "If things stay the way they are I think the end (peak in bad debts) is in sight, but we're not there yet.
"Customers have drawn their horns in a bit, which is confirmed by the strong growth we've seen in the amount people are saving. The consumer has shifted emphasis.
"We're not seeing anything in unsecured credit losses that is out of line with what we expected at the time we wrote the business.
"We're not seeing a cause for complaint about IVAs ... I can't say we're seeing widespread abuse."
Guy Whittaker, finance director: "The rate of increase is slowing and this issue is increasingly one that we think of as being behind us."
BARCLAYS
Group impairment charge rose 50 percent to 1.057 billion pounds in H1. Barclaycard charge rose 37 percent to 696 million.
Barclays said last week the rate of growth in Barclaycard's bad debts continued the trend of H1, but the flow of new arrears had stabilised.
Naguib Kheraj, finance director, said the outlook remained challenging and it was too early to call a turn in the impairment cycle.
HBOS
The bank said on Thursday it expects impairments in 2006 to come in below the 1.9 billion pounds forecast by analysts, which would have been a 19 percent rise from 1.6 billion in 2005. Its impairments rose 15 percent in the first half to 864 million.
Phil Hodkinson, finance director, said growth in bad debts on unsecured personal loans had moderated in the second half, but was still rising. He said there was uncertainty about the impact of rising insolvencies.
Hodkinson: "This is still a rising level of impairment and therefore we're still some way off the peak... we hold the view that it will be the second half of next year at the earliest before we see a peak."
LLOYDS TSB
H1 bad debt impairment charge jumped 20 percent from a year ago to 800 million pounds, including a 16 percent rise in the UK retail arm to 632 million.
Lloyds said on Monday that retail bad debts in H2 would be no higher than in H1.
Helen Weir, finance director, said: "There has been a slowdown in consumer demand, they are pacing their demand. We have also done quite a lot to tighten lending criteria ... we probably caught the cycle a little earlier than others."
"We would expect, as we go through 2007, to see some light at the end of the tunnel," Weir said, adding that impairments should not significantly rise but the impact of rising IVAs would be the key factor.
Source: Reuters
Please post any news stories about IVAs here:
http://www.iva.co.uk/forum/default.asp?CAT_ID=5