Barclays’ decision to expand its mortgage lending operations paid off very well and in no time they showed a surprise performance in the home market by the first half of this year. It witnessed a sharp rise in the new mortgage lending business from 6 per cent in 2007 to 26 per cent in the first half. The figures are amazing if we keep the very fact in mind that Barclays has been suffering losses in home loans. The mortgage lending figures improved in 2006 after it acquired the former building society Woolwich and merged it fully with Barclays.

Barclays was able to speed up its mortgage lending figures because of the credit crunch fallout. It happened at the moment when weaker competitors withdrew from the market or were not in a position for fresh investment in new business. Barclays has a record of investing in new businesses with low loans, claims Frits Seegers who heads the global retail and commercial banking. The latest mortgage business has a loan to value ratio of 51 per cent on new lending. Frit Seegers also states that Barclays had a 7 per cent of its £77bn loan book on a loan to value ratio of more than 80 per cent. There has also been a 7 per cent rise in riskier buy-to-let loans. The pre-tax profits of Barclays was up by 7 per cent to £690m mainly because of a grwoth in mortgages.

The pre-tax profit of Barclaycard, UK’s largest credit card provider also jumped to £388m up by 30 per cent because of its foreign expansions. Barclaycard now has a record of rejecting one in every two new applicants as credit card business experienced a steep increase in bad debts. Mr Seegers said that the decision to use stringent lending criteria has proved successful in business. Barclays latest acquisition of Goldfish is the reason behind bad debts that increased from £435m in 2007 to £477m in the first half. Even though there was a growth in customer assets, profts at Barclay’s commercial bank fell to £702m. UK business must be ready to face more bad debts if there is a recession, claims analyst Sandy Chen. An interesting fact stated by another analyst Bruno Paulson of Bernstein is that UK retail customers are yet to experience the impairments with both Barclaycard and UK retail suffering flat impairments. In South Africa and Spain bad debts have also risen as there has been a threefold increase in overall international provision to £294m. But some ray of hope can be gathered from Barclays emerging market trends. There will be a rise in profits by divisions run by Mr Seegers from outside the UK.

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