British Banks Should Brace for Wave of Credit-Card Defaults, Goldman Says -- Financial News
October 22 2020 - 10:16AM
Dow Jones News
By Emily Nicolle
Of Financial News
Banks with large credit-card businesses will soon experience "a
marked deterioration" as millions of Brits stop receiving furlough
payments from the end of this month, according to Goldman
Sachs.
Credit-card providers such as Lloyds Banking Group PLC have
enjoyed four consecutive months of declining default rates,
analysts for the U.S. investment bank wrote in a note Thursday.
"In line with our economists' forecast of a sharp increase in
unemployment over the coming months, however, we see the benign
credit-card asset quality as temporary and would expect to see a
marked deterioration when payment holidays and various
government-support measures roll off," the analysts wrote.
Data from the U.K.'s biggest credit-card issuers, collated by
Goldman, showed that the total number of credit cards with missed
payments continued to decline in September and remained below
pre-pandemic levels. The number of cards with outstanding payments
of up to 89 days, however, rose by 20 to 30 basis points in the two
months to the end of September.
Goldman's research excluded Barclays PLC as it has yet to
release data for September. The number of Lloyds credit cards with
outstanding payments up to 89 days old increased by 20 basis points
month on month.
Analysts said the drop in cards with missed payments over the
summer was driven by the "extensive usage of payment holidays."
Furlough payments to workers, protection from eviction for renters,
and mortgage holidays all come to an end this month.
Chancellor Rishi Sunak updates Parliament on Oct. 22 about
further support for jobs for people living in areas under the
tier-two Covid-19 restrictions.
Local leaders whose areas have been designated "high" or "very
high," such as London and Manchester, have criticized the
government for not providing sufficient support to affected
individuals and businesses.
Website: www.fnlondon.com
(END) Dow Jones Newswires
October 22, 2020 10:01 ET (14:01 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Barclays (LSE:BARC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Barclays (LSE:BARC)
Historical Stock Chart
From Sep 2023 to Sep 2024