Banks set for big profits

February 22, 2007

UK banks are set to announce that their profits have risen substantially over the last year. Despite bad debts, banks have still managed to make a huge profit and Barclays alone are celebrating a £7 billion profit within the last year.

Profits are set to rise further in 2007 as banks are now getting tougher on their lending. People will be thoroughly checked and loans will be given out on a less frequent basis in the hope to cut further bad debts. Bad debts do lose banks a lot of money each year and if they can get the problem under control then their profit levels will once again rise.

Barclaycard is the biggest credit card lender within the UK and last year they had to write off £1.57 billion of bad debt. That figure was up by a record 44% from the year before. However with the new stricter lending policy they have managed to turn away 50% of the credit card applications which people have requested.

Whilst Barclays may be celebrating a £7 billion profit, HSBC are set to do even better with £11.5 billion profits expected. The Royal Bank of Scotland is said to have profits of £9.1 billion and TSB are set to rake in £3.6 billion.

Overall banks are still making massive amounts of money and it is only set to rise in 2007 as bad debts start becoming more controllable. However, with credit cards making up a lot of banks current profits, if Barclays continue to turn away 50% of their applicants then they aren’t likely to make as much profit through cards as they were doing. Despite bad debts, banks get a lot of their profit form the charges that are incurred on the credit card debts as well as through overdrafts and other relevant charges. So only time will tell if their profit levels will continue to rise after cutting bad debt.