Mumbai: The Indian unit of Barclays Plc., the third biggest UK bank by assets, is facing pressure from increasing bad debt that’s pushed up the British bank’s impairment charges for 2008.
Barclays said on Monday its profit for 2008 fell 14% to £6 billion (Rs37,560 crore) from the previous year excluding gains from acquisitions.
Profit for the bank’s global retail and commercial banking (GRCB) operations from emerging markets increased 34% to 134 million pounds for the year ended 31 December, driven by a 91% rise in income from retail expansion in India and entry into new markets.
Impairment charges, however, jumped four fold to £166 million because of higher assets and delinquencies, particularly in India, and increased wholesale impairment in Africa, the bank said in a statement. The earnings statement did not give any specific data for its India operations.
Other foreign banks including Citibank N.A., Standard Chartered Bank and Hongkong and Shanghai Banking Corp. have had to curtail their consumer banking operations in India in the recent past because of rising delinquencies.
Citigroup Inc., the parent of Citibank N.A., posted a loss of $8.29 billion for 2008 on account of rising write-downs and credit losses. The US bank faced increased credit costs in Asia, primarily driven by deterioration in the credit environment in India. The credit loss ratio increased 66 basis points to 1.48%.
One basis point is a hundredth of a percentage point.
Barclays said its risk tendency at GRCB emerging markets increased by £210 million to £350 million as on 31 December. Risk tendency measures estimated levels of credit losses from the bank’s overall loan portfiolio.
“The risk tendency increased on account of weakening credit conditions across the majority of regions, a change in the risk profile following a broadening of the product offering through new product launches and new market entry in India and UAE (United Arab Emirates), and asset growth,” it said.
Barclays also increased its capital allocation for emerging markets by £650 million to £1.1 billion, reflecting broad-based retail and wholesale asset growth across the business, especially in India, UAE and new markets in Russia and Pakistan.
Samir Bhatia, managing director of Barclays India, had earlier told Mint, “Over the past two years the bank has invested over £240 million in setting up the GRCB business. These include significant investments in Barclays Global Retail and Commercial Bank and investments in its non-banking financial company, Barclays Investments and Loans India Ltd, which operates through 119 branches across 49 locations in India.”
The Barclays group has so far infused $98.5 million in Barclays Investments to fund the company’s growth plans and add branches.