Bad debt leads to bank losses

Last week, Lloyds TSB announced that while it was on course to deliver a strong set of results for the half-year, that mounting consumer bad debt was still a big problem for UK banks.

“As indicated in our 2005 preliminary results in February, the expected further deterioration in the consumer lending environment in the first half of 2006 has arisen, although the rate of increase in retail impairment is expected to be slightly slower than the comparable increase in the first half of last year,” the bank said.

The problem of customers missing payments and failing to repay borrowed money on time was not increasing at the same rate of last year, the bank reported, when bad debt hit £905 million.

Lloyds predicted that consumer bad debt levels would be characterised by greater “general stability” in the second half of the year.