Barclays disappoints with warning of rising bad debt provisions

Barclays, Britain's fourth-largest bank, spooked investors yesterday by warning that costs and bad-debt provisions continued to rise this year.

The bank said its start to the year had been solid, but its trading statement ahead of half-year results in August did not impress the City, which has rated the bank as one of the best in the sector in the past year. One analyst said: "Barclays hasn't done anything wrong, but it is beginning to look overvalued as it is not going to be able to exceed expectations this time."

The bank, which also sawbad debt provisions grow last year, said costs grew moderately in the first quarter and bad debt provisions increased, "reflecting the generally more difficult business environment".

It said the pattern of defaults was mixed, with provisions for bad and doubtful debts less than expected in business banking but worse than expected at Barclays Capital. The bank said that despite the defaults, Barclays Capital, its investment banking offshoot, produced strong growth in a tough environment for private client and investment banking services.

Barclays reiterated its aim to achieve targeted cost savings of £1.15bn in the four years ending 2003. It also said it remained on track to deliver on its promises to double shareholder value in four years. Barclays' shares fell 27p, or 4.4 per cent, to 593p.

Separately, Northern Rock, Britain's 10th biggest mortgage lender, said it expected profit growth this year in the "mid teens" resulting from a 50 per cent increase in net lending in the first five months of 2002.

The bank said it was "comfortable" with forecasts that predict a 2002 pre-tax profit of £321m, compared with £276.5m in 2001.

Adam Applegarth, chief executive of Northern Rock, said Northern Rock is "in line" with its target of new net mortgage lending of at least twice its 3.8 per cent market share at the end of 2001.