Barclays and Lloyds half-year reports turn spotlight on consumer debt

Photo: Dominic Lipinski/PA Wire

Photo: Dominic Lipinski/PA Wire - Credit: PA

Household borrowing will be in sharp focus this week when lending giants Lloyds Banking Group and Barclays report following Bank of England warnings over ballooning consumer debt.

Photo: David Cheskin/PA Wire

Photo: David Cheskin/PA Wire - Credit: PA

Half-year figures from the pair come after Bank governor Mark Carney warned lenders last month against “forgetting the lessons of the past” as he announced a lending crackdown.

The Bank raised fears over surging levels of unsecured consumer borrowing on credit cards and car finance, which is rising by more than 10% a year and outstripping incomes.

With Lloyds one of the biggest high street lenders, its results on Thursday will be eyed closely for signs of rising bad debts as economic growth stalls and inflation squeezes consumers.

But banking experts at Morgan Stanley are forecasting the group’s losses on consumer debt to be lower than feared thanks in part to a robust jobs market in the wider economy.

Photo: Clara Molden/PA Wire

Photo: Clara Molden/PA Wire - Credit: PA

Figures from Lloyds - seen as a bellwether of the economy - are expected to show half-year bottom-line profits rising 13% to £2.9 billion in its first set of results since being fully returned to private hands.

The final tranche of government shares was sold in May, marking a milestone for the group and ending nearly nine years as a part-nationalised bank.

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Barclays results are due on Friday and will come after a testing first half for chief executive Jes Staley, who is facing a regulatory investigation into his conduct after he attempted to identify a whistleblower.

But half-year profits are expected to give him some welcome respite, with analysts forecasting a 38% surge to £2.9 billion from £2.1 billion a year earlier.

The group more than doubled first-quarter pre-tax profit to £1.68 billion, although investors were disappointed by a 4% drop in income from its investment banking markets division.

PPI mis-selling will remain in focus for Barclays, according to Morgan Stanley analysts, who believe the bank will set aside more to cover compensation as claims pick up ahead of the deadline.

In addition, Mr Staley has said the bank was set to complete its swingeing overhaul in the first half after years of selling off unwanted assets to focus on UK and US operations.