United Kingdom

Banks braced for £10bn hit as job losses shoot up

Britain's biggest banks could face losses of up to £10billion as customers are weaned off loan payment holidays, research has found.

Lenders have granted payment holidays on loans worth more than £250billion, according to an analysis by Barclays.

Many of the three-month holidays will come to an end this month just as lob losses mount up.

Fears are rising of a wave of defaults as customers lose their incomes at the very moment they are asked to start making repayments on mortgages

Fears are rising of a wave of defaults as customers lose their incomes at the very moment they are asked to start making repayments on mortgages, personal loans and credit cards again.

The research found banks had agreed to halt payments on 17 per cent of mortgages, 8 per cent of personal loans and 2 per cent of credit cards. Lenders have also granted a break on interest charges for 27million overdrafts.

The study estimated that if a quarter of the customers on mortgage payment holidays default, this will lead to losses of £7.5billion. UK banks face losses of £217million on credit cards and £2.2billion on personal loans when payment breaks end. The total across the three main types of debt would be £9.9billion.

As the country's largest lender, Lloyds is the most exposed to the economic fallout. It faces estimated losses of £1.7billion, £137million, £242million and £165million on mortgages, credit cards, personal loans and motor finance respectively if a quarter of customers default.

However, the Barclays analysts said Lloyds had the 'best prospects' of all the lenders due to the quality of its loan book.

Lloyds has the 'best prospects' of all the lenders due to the quality of its loan book, report says

Nationwide, RBS and HSBC stand to lose £1.1billion, £989billion and £742million, respectively. Virgin Money faces losses of £368million. 

Nationwide is particularly exposed to the housing market as the UK's second largest mortgage lender. The analysts said the number of defaults will ultimately depend on how many people lose their jobs. Banks have already set aside billions to prepare for loan write-offs.

Donald Kerr, head of the Co-op's business bank, said: 'I'm not as pessimistic as I was a few months ago, but it will be really tough for the banks over the next 12 months.'

James Reed, boss of recruitment site Reed.com, said new job advertisements were down 50 per cent year-on-year. He added: 'It's not as bad as it was. You can see more jobs in construction and there are a lot more accountancy jobs, marketing jobs and sales jobs.'

Reed said there are now 11 people chasing each job on his site, compared with seven before the crisis.

A Nationwide spokesman said: 'As a well-capitalised organisation, and as a mutual, it is important we provide support to members still in financial difficulty.'

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