Bank debt woes ease as loan losses fall; Barclays and HSBC stay upbeat.

Byline: HOLLY WILLIAMS 

BARCLAYS and HSBC gave hope that consumer debt woes were starting to ease as the banking giants reported sharp quarter-onquarter falls in loan losses.

Third-quarter figures from the UK's two top banks yesterday revealed a hike in underlying profits so far this year thanks to strong investment banking performances and an improving picture for bad debt charges.

Barclays said a recovering global economy would likely see impairment charges for the year come in lower than first forecast, while HSBC's bad debts fell to their lowest level for more than a year.

The news highlighted the widening gulf between the two banks and their part-nationalised counterparts Royal Bank of Scotland and Lloyds Banking Group.

Barclays and HSBC have avoided turning to the Government for state aid and are seeing swift recoveries from the financial meltdown.

HSBC said the worst of the global economic crisis was over as it reported underlying third quarter profits "significantly ahead" of a year earlier.

Michael Geoghegan, group chief executive of HSBC, said "the biggest jolt has now passed", although he warned it was "too early to claim victory".

Barclays reported pounds 4.54bn in profits for the first nine months of the year - down by nearly a fifth against a year earlier.

But the group said the result more than doubled on an underlying basis as it had enjoyed "consistent profitability" so far in 2009. Third quarter pre-tax profits came in at pounds 1.56bn.

Barclays said its Barclays Capital operation, beefed up in the wake of its takeover of parts of bankrupt US rival Lehman Brothers, helped drive a 26% leap in income to pounds 23.8bn in the first nine months of 2009 - more than for the whole of 2008.

And HSBC said its global banking and markets arm was enjoying a record year.

HSBC has been hit hard by impairment charges and was the first of the banks to flag up the start of the credit crunch, given its huge exposure to sub-prime mortgage borrowers in the US.

The group's bad debts rose by 39% to pounds 8.4bn in the first half and it has been slashing costs to counter market pressures - only last week announcing another 1,700 job cuts in the UK.

But its statement signalled that impairments were coming down in nearly all markets Barclays warned there may be a slight pick-up in bad debt charges in the fourth quarter on top of pounds 6.2bn already taken this year, although it believes impairments will now peak sooner than first thought, at the end of 2009 or first quarter in 2010.

BILL GLEESON: PAGE 8

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HSBC says the rise in bad debts has peaked