LONDON (Citywire) – Fund managers are keeping a watchful eye on their bank holdings following last week’s surprise interest rate rise, which was accompanied by news of a surge in home repossessionsand followed a wave of increases in lenders’ bad debt provisions.
The interim results season saw a string of banks report sharp increases in their provisions to bad debts alongside otherwise good profits. Barclays’ bad debts soared by 50 percent to 1.057 billion pounds in the first half of the year, while Lloyds TSB’s bad debt ‘impairment’ charge jumped 20 percent to 800 million pounds, attributed to a deterioration in unsecured lending on personal loans and credit cards. HBOS increased its bad debt provisions to 864 million pounds from 753 million pounds.
John Wood, manager of JOHCM UK Opportunities, who holds 8.5 percent of his fund in banks, is unconvinced by banks’ claims that the worst of the bad debt trend has now been seen. He said: “The increase in the bad debt provisions so far have all been to do with unsecured credit and in essence, that is a reflection of aggressive lending 12 to 18 months ago, mainly to younger people.”
