Barclaycard hit by bad debts jump

The £1 trillion British consumer debt bubble returned to haunt Barclays today as the international banking group warned investors of rising problem debts at its credit card arm, Barclaycard, and increased loan repayment difficulties among individual customers.

In an otherwise extremely bullish trading update to the City, Barclays said that “very strong income growth” at Barclaycard in the first quarter was being offset by higher impairment charges, increased bad consumer debts and a greater investment in the business.

The bank said that - as a result of its booming operations elsewhere - income growth would be “significantly ahead of the current market consensus”. But it cautioned that so too would impairment charges and expenses.

Last year, impairment charges at Barclaycard jumped 44 per cent to £1.1 billion. The bank has since tightened its lending criteria to counter accusations it has been too lax.

The stock market values Barclays, Britain’s third-largest bank, at more than £38.5 billion.

Brokers expect Barclays to post full-year profits for this year of more than £6 billion as it continues to expand internationally, develop its debt-focused investment bank Barclays Capital and rejuvenates its retail bank in Britain.

Today John Varley, the chief executive, said profits growth in the first quarter had been “excellent”, with improvements taking hold at the underperforming retail bank and the international growth strategy paying off.

Barclays also said it would be hiring new staff for its wealth management operations, where income growth had been “very strong”.