Bank Profits Cover Up Bad Loan Debts
Everybody knows that the major high street banks in the UK have been going through a difficult time over the past couple of years or so, due to the effects of the credit crunch and lack of available funding on the wholesale money markets.
However, it seems that very few onlookers and consumers have any sympathy at all for the banking sector and most believe that the banks were responsible for the credit crunch in the first place, due to their irresponsible lending policies and offering large loans to individuals who would never be able to repay them and most consumers would agree that banks only have themselves to blame for their current mess.
This week, several banks have been announcing their six month profits for the first half of 2009 (or huge losses in the case of Northern Rock) and so far both Barclays bank and HSBC have announced pre tax profits of £3 billion and $5 billion respectively for the first six months of this year. However, these profits show a significant reduction on the figures for the same period last year and this is largely due to customers building up arrears and defaulting on their loans, as many have been unable to maintain the repayments in the face of the recession.
Barclays has seen its bad credit loan debts increase by 86 per cent over the course of the last twelve months and these loan debts have cost them £4.5 billion so far this year, although Barclays claims that the situation on customers’ loans is getting better. Similarly, HSBC has been forced to write off somewhere in the region of $3 billion worth of bad loan debts and although both banks have seen their share price increase this week, the bad debts on loans suffered by both organisations has left a large hole in their profits.
