uSwitch.com comments on Barclays results

Barclays’ bumper profits announcement totalling £7.13 billion for the group (an increase of 35% since 2005) and overall write offs of £2 billion arrive amidst fears that the free banking era in the UK could soon come to an end.

Nick White, Director of Financial Services at independent price comparison and switching website uSwitch.com, comments: “Barclays UK Banking profits have increased by more than 17% in 2006 to £2.6 billion despite the fact that write offs in the retail banking division have increased by a staggering 39% in just one year to £209 million.

“The Barclaycard division has taken the biggest hit with pre- tax profits down by more than a third in the last year (40.3%) to £382 million (from £640 million in 2005). Given that Barclaycard’s total income has increased by 8.5%, it would appear that they have not been overly affected by the OFT’s clampdown on credit card fees. This is despite a fall in the number of Barclaycard UK customers from 11.2 million to 9.8 million – a clear indication that they have been successful in replacing this lost income. However, the scale of the bad debt issues can clearly be seen from the 36% increase in write offs which has hit their bottom line hard. This indicates that there is still a long way to go to resolve bad debts and the issue remains a real problem for the UK Banking industry.

“Both of Barclays bad debt write offs, for Barclaycard and their retail banking division, fully support our recent campaigns which highlighted the issue of irresponsible lending within both the credit card and personal loans market. Our research found that 89% of credit card applicants in the UK did not have to prove their income in the past year and £11.9 billion was advanced in personal loans without any income checks.

“Going forward, 2007 should be an interesting year for the banking industry with the impending OFT investigation into current account default charges. first direct’s and Citibank’s recent introduction of charges for current account customers could soon become the norm as opposed to the exception. A recent interview with Nationwide’s incoming Chief Executive Graham Beale focused on the end of free banking and by his own admission said: “In a way, I do believe fee-based banking is a fairer proposition” - fairer for who, it is not yet clear. With Barclays retail banking profits now up by 17% to £1.2 billion, any introduction of fees on standard current accounts will be a hard pill for consumers to swallow, given that the banking industry is one of the most profitable in the UK.

“More now than ever before, consumers should be keeping a very close eye on the small print and the correspondence they receive from their bank. With the impending OFT investigation into current account charges, banks will continue to claw back any lost revenue streams in anticipation of the outcome of the investigation. By voting with their feet, customers can make sure they are not being ripped off by underhanded revenue generating tactics which simply add to these profits."