Banks al­lot £20bn for bad loans but may need dou­ble

The Daily Telegraph - Business - - Business - By Lucy Bur­ton

THE coun­try’s largest banks have taken a coro­n­avirus hit of al­most £20bn so far this year, how­ever an­a­lysts warned that an­other £25bn of losses could be on the hori­zon as job cuts and busi­ness clo­sures mount around the world.

Ian Gor­don, a banks an­a­lyst at In­vestec, said that ma­jor UK play­ers have al­ready set aside around £18bn to cover toxic loans amid surg­ing un­em­ploy­ment and a huge cash crunch for busi­nesses dur­ing lock­down.

He warned that fig­ure could swell to £45bn by 2022 as firms strug­gle to re­cover.

Al­lied Ir­ish Banks took a €1.2bn (£1.1bn) charge for soured coro­n­avirus loans yes­ter­day, round­ing off a gloomy earn­ings sea­son from the Bri­tish Isles’ banks as lenders re­vised their eco­nomic out­looks and re­vealed num­bers that were worse than feared.

HSBC this week in­creased its bad debt pro­vi­sion to $6.9bn (£5.3bn) and warned that loan losses for 2020 could hit $13bn, just days af­ter Lloyds and NatWest Group fell into the red af­ter set­ting aside a re­spec­tive £3.8bn and £2.9bn.

Mean­while Bar­clays’ pro­vi­sions for bad loans hit £3.7bn, while Asi­afo­cused

Stan­dard Char­tered fac­tored in £1.2bn and San­tander UK’s Span­ish owner sank to its first loss in 160 years fol­low­ing a €12bn (£11bn) Covid hit, which in­cludes a €6bn write-off on the value of its UK re­tail bank­ing oper­a­tions.

Smaller lenders in­clud­ing Metro Bank and Vir­gin Money have also put aside mil­lions of pounds as a re­sult of the pan­demic and warned that hard times are ahead.

Vir­gin’s to­tal pot for credit loss pro­vi­sions has in­creased to £584m, while Metro bosses were forced to set aside £112m to cover the ex­pected costs of loans go­ing sour.

Metro’s econ­o­mists ex­pect prop­erty prices to drop 14.6pc this year and 4.9pc the next be­fore stag­ing a re­cov­ery, with un­em­ploy­ment climb­ing as high as 8.4pc. The lender – fight­ing to re­vive its for­tunes fol­low­ing a loans scan­dal last year – fell £241m into the red for the six months to June.

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