Bad debt to put Barclays in red

BARCLAYS BANK, Britain's largest clearer, is heading for a pre-tax loss of at least pounds 100m this year and may be forced to slash its dividend, City analysts believe. It would be only the second annual loss reported by the bank in its 300-year history, writes Richard Thomson.

Barclays is expected to be hit hard by a sharp rise in bad debts in the second half of this year, particularly on the bank's large property loan book, brought on by the deepening recession. Credit Lyonnais, Laing and Kleinwort Benson Securities both cut their 1992 forecasts for Barclays from about pounds 200m profit to a loss of around pounds 100m.

Laing's argues that as well as new bad debts, the bank has made too few bad debt provisions in earlier years and would need to set aside an extra pounds 1bn to bring it up to the level of other clearing banks. Its capital ratios were also likely to weaken substantially by the year end.

The news that the City was downgrading its forecasts for the bank sent Barclays' share price tumbling by more than 20p to 317p on Friday. The shares were also weakened by reports that Moody's, the US credit rating agency, was considering cutting its rating for Barclays and National Westminster.

Analysts say that Barclays may cut its dividend by up to a third, saving up to pounds 100m on its payout to shareholders. Barclays considered a dividend cut earlier this year when it reported a pounds 30m loss at the interim stage but decided to hold the payout at 9.15p. It made bad debt provisions of pounds 1bn, with pounds 200m of the charge coming from just five large corporate customers.