Barclays expected to report a loss: Bad debt provisions of pounds 2.3bn to wipe out rise in operating profits

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THE FULL damage wrought by the recession last year on Barclays Bank, Britain's biggest clearer, will be revealed on Thursday when it is expected to announce losses of anything up to pounds 110m.

Analysts believe loan losses have risen so high that there is now no hope of the bank announcing even a small profit. It will be one of the worst performances in Barclays' 100-year history and among the poorest ever turned in by a leading clearing bank.

Barclays may also announce a cut in its dividend, although many in the stock market believe it will maintain last year's 21.15p payout.

The extent of the damage to the bank's profits and balance sheet is likely to revive shareholder worries over the quality of Barclays' top management and the strength of its internal credit controls.

Many of the senior managers who were responsible for the highly damaging lending policies of the late 1980s are still in top positions. Some of the problem loans, such as the pounds 440m lent to Imry, the collapsed property group, appear to have been subject to inadequate analysis and risk assessment.

'One reason they probably won't cut the dividend is because that would mean curtains for Andrew Buxton (the chairman),' said one City analyst. Shareholders already blame some of Barclays' poor performance on Mr Buxton himself. Following a boardroom row at the end of last year over the payout and his own position at the bank, Mr Buxton was forced to abandon the dual role of chairman and chief executive by giving up the second title.

Barclays has been battered by a tide of bad debts throughout 1992, particularly among a number of very large borrowers in the property sector, including Imry, Mountleigh, Olympia & York, Heron and Speyhawk.

In most cases, the bank turned out to be among the biggest lenders. Bad debt provisions are expected to have surged in the second half of the year, bringing the full-year total to around pounds 2.3bn. Barclays has made pounds 240m in provisions against Imry - a record amount for one loan.

The bank's real situation may, however, be worse than the figures show. Some analysts, including Julian Robins at BZW, believe Barclays is at least pounds 1bn short on bad debt provisions compared with other banks. If it increased its provisions to the level of its main competitors, it would be forced into massive loss.

Because of the bank's relatively low level of provisions, and because its dividend will be uncovered for the second year running, Mr Robins believes Barclays will be forced to cut the payout. Its profits may also fail to recover substantially in 1993 because of growing indications that business conditions are not improving significantly.

The huge bad debt provisions will cancel out a strong rise in the group's operating profit to more than pounds 2bn.

However, Barclays' capital is not yet under severe pressure, with core capital at around 5.3 per cent. For that reason, a rights issue is not expected and the shares closed on Friday at 424p.