Barclays has become the latest UK bank to warn over the impact of the cost of living crisis, saying that its customers were already facing “harder conditions” as a result of surging inflation.
It came as the bank put aside an extra £141m to cover potential defaults on its loans in the first quarter, nearly three times the amount put aside during the same period in 2021, but lower than the £299m that analysts had forecast.
While Barclays said it was still facing “low delinquencies” so far, it acknowledged uncertainty over the long-term impacts of the war in Ukraine, which contributed to a 7% rise in UK inflation last month.
“The ongoing geopolitical situation could put further pressure on already high levels of inflation, which may weigh on corporate profitability and consumer affordability levels,” the bank said, adding that a fresh surge in Covid infection rates could result in further labour shortages and supply chain disruption.
“We will support them through this difficult period wherever we can, and support the wider economy,” he added.
The bank said it still expected loan loss charges to stay below pre-pandemic levels, partly due to the fact that many customers had spent the Covid crisis paying off their debts.
Overall, Barclays reported a 7% increase in pre-tax profits in the first three months of the year to £2.3bn, easily beating average analyst estimates which had forecast a 45% slump in profits to £1.3bn.
Profits would have been even higher had Barclays not put aside more than £500m to cover legal costs related to the over-selling of American financial products. The chief executive told journalists that the scandal was “entirely avoidable” and that he was “deeply disappointed”, given it has raised concerns about Barclays’ internal controls.
The blunder has also forced the bank to delay its share buyback programme, thoughBarclays said it remained committed to handing more money to shareholders “as soon as practicable”.
Source: The Guardian