Banks still enjoying record profits despite high bad debt levels

According to recent data released by the banking industry, many of the UK's major banks are continuing to enjoy record profits despite reports that they have suffered record levels of bad debt over the past year.

The latest high street bank to report huge profits is the fifth largest bank in the UK, Lloyds TSB, which confirmed that it had seen an eight percent rise in profits, which have soared from £3.45 billion to £3.71 billion. This is despite the fact that the banks has reported a twenty percent rise in bad debts over the past year, claiming that bad debts have risen to over one and a half billion – around a quarter of a billion pounds more than in 2005.

Barclays has seen a similar rise in profits in the same circumstances, and recently reported an increase of thirty five percent in profits, taking it to £7.14 billion. Other major banks are still preparing their figures, which are likely to be released in the coming week. However, the trend seems to be that despite the fact that consumers are struggling to repay debts and seeking IVAs and bankruptcies, which leaves many banks with a number of bad debts, the banks are still making huge profits in other areas.

A Lloyds TSB spokesperson stated that the latter half of last year saw lower losses than the first half. The Chief Executive of the banking group stated: 'The rate of growth in unsecured retail lending impairment charge in 2007 is expected to be significantly lower than in 2006.'

It is expected that the top five UK banks, which include Barclays and Lloyds, will enjoy combined profits of over forty billion once all figures have been released and collated. These figures could see further controversy arise over banks charging extortionate penalties and fees, as well as many banks getting rid of free banking.

Tom Smith
03.03.07