Barclays and Lloyds Banking Group both warned today that bad debt write downs are set to soar over 2009, blaming poor economic conditions for the surprise rise in impairment charges.
In a trading statement for the three months to March 31, Barclays said impairment charges had increased by 79 per cent to £2.3 billion. However, it said strong growth from its investment bank, including the newly acquired Lehman Brothers in New York, resulted in a 15 per cent rise in first quarter profits to £1.19 billion, offsetting a 45 per cent fall in income from its retail and commercial lending arms.
Lloyds, which is now part-owned by the taxpayer, warned that falling commercial property values, the recession and rising unemployment meant it had seen "significant rise in impairment levels in its lending portfolios"
Eric Daniels, chief executive of Lloyds, said bad debt and corporate defaults by clients, particularly property developers who were former customers of HBOS, which it rescued last year following Government intervention, would be even worse during this year as a whole.
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It announced that corporate impairments for the year would be more than 50 per cent higher in 2009 than last year. In February, Lloyds shocked investors when it revealed that it would have to take a £10 billion hit from soured loans at HBOS.
However, Mr Daniels pointed out that much of the mounting bad debt would be taken on by the taxpayer after Lloyds' outline agreement last month to join the Government Asset Protection Scheme.
This will see Lloyds transfer £260 billion worth of its worst loans to the Government. Lloyds will only bear the first losses on these loans of up to £25 billion, with any further write downs being taken by the taxpayer.
Lloyds also warned that its insurance businesses Clerical Medical and Scottish Widows would take a £700 million hit in the quarter as the value of its corporate bond and equity investments collapsed.
Royal Bank of Scotland issues a trading update tomorrow, its first since unveiling a £28 billion loss, the biggest in British corporate history earlier this year.
Barclays chief executive John Varley said trading since in April had "been generally consistent with the overall trend for February and March after an exceptional January." But he also warned that the proportion of loans written down in the full year would be at the upper end of his earlier indicated range of 1.3 per cent to 1.5 per cent.
He reiterated his intention to pay a cash dividend in the first quarter of next year for the 2009 year but warned that it would be a far lower proportion of the bank's total profit than the 50 per cent the bank had been paying out during the boom years.
In a trading statement for the three months to March 31, Barclays said impairment charges had increased by 79 per cent to £2.3 billion. However, it said strong growth from its investment bank, including the newly acquired Lehman Brothers in New York, resulted in a 15 per cent rise in first quarter profits to £1.19 billion, offsetting a 45 per cent fall in income from its retail and commercial lending arms.
Lloyds, which is now part-owned by the taxpayer, warned that falling commercial property values, the recession and rising unemployment meant it had seen "significant rise in impairment levels in its lending portfolios"
Eric Daniels, chief executive of Lloyds, said bad debt and corporate defaults by clients, particularly property developers who were former customers of HBOS, which it rescued last year following Government intervention, would be even worse during this year as a whole.
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It announced that corporate impairments for the year would be more than 50 per cent higher in 2009 than last year. In February, Lloyds shocked investors when it revealed that it would have to take a £10 billion hit from soured loans at HBOS.
However, Mr Daniels pointed out that much of the mounting bad debt would be taken on by the taxpayer after Lloyds' outline agreement last month to join the Government Asset Protection Scheme.
This will see Lloyds transfer £260 billion worth of its worst loans to the Government. Lloyds will only bear the first losses on these loans of up to £25 billion, with any further write downs being taken by the taxpayer.
Lloyds also warned that its insurance businesses Clerical Medical and Scottish Widows would take a £700 million hit in the quarter as the value of its corporate bond and equity investments collapsed.
Royal Bank of Scotland issues a trading update tomorrow, its first since unveiling a £28 billion loss, the biggest in British corporate history earlier this year.
Barclays chief executive John Varley said trading since in April had "been generally consistent with the overall trend for February and March after an exceptional January." But he also warned that the proportion of loans written down in the full year would be at the upper end of his earlier indicated range of 1.3 per cent to 1.5 per cent.
He reiterated his intention to pay a cash dividend in the first quarter of next year for the 2009 year but warned that it would be a far lower proportion of the bank's total profit than the 50 per cent the bank had been paying out during the boom years.
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