Barclays warns of cuts as Covid pushes bad debt charges to £4.3bn

Barclays has warned of potential cost cuts as the economic fallout from the Covid-19 pandemic pushed its total bad debt provisions to £4.3bn.

The lender has put aside another £608m to help cover a potential surge in customer defaults. It came as Barclays beat profit forecasts for the third quarter of 2020.

While this latest increase was less than the £1bn forecasted by analysts, it brings Barclays’ total credit impairment charges to £4.3bn for the nine months to September. Earlier this year, a spokesperson for the bank confirmed that Barclays could be forced to put aside up to £4.5bn to cover bad debts.

Barclays said impairment charges for the second half of 2020 would be “materially below” the levels recorded in the first half of the year and that costs would be broadly flat.

However, the UK bank warned of further cost cuts ahead: “The group will be evaluating actions to reduce structural costs, which could result in additional charges, the timing and size of which remain to be determined.”

Barclays reported £1.1bn in pre-tax profits for the three months to September, easily beating analyst forecasts of £507m.

It was also three times the £246m reported during the same period last year, when Barclays was forced to take a £1.4bn charge linked to the payment protection insurance mis-selling claims.

The bank’s net interest margin – which measures the difference between what it earns from loans and pays for deposits – remained steady at 2.51% . However, the Bank of England has warned banks to prepare for negative interest rates, having already slashed rates to record lows of 0.1% in March.

Barclays cautioned that there would be further “income headwinds” in the UK, where it expects low interest rates to continue into 2021.

Barclays is the first major UK bank to report third-quarter earnings, with HSBC, Lloyds and NatWest Group to follow next week.

Shares in Barclays rose almost 4% in early trading, to the top of the FTSE 100.

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