Bad debt fears over Big Four banks

WORRIES are mounting over British banks' growing bad debt mountain. The Big Four are being forced to write off hundreds of millions of pounds of loans to Argentina on top of their likely losses on lending to collapsed US energy group Enron, and to the troubled telecoms and airline industries.

UK clearers have lent large sums to Argentina, where the new interim government led by Adolfo Rodriguez Saa is attempting to launch an economic lifeboat including a new currency, the argentino.

HSBC, with £3.5bn of loans and 225 branches, has the biggest exposure to the strife-ridden country, which has been hit by riots and looting.

Lloyds TSB, with 40 branches in Argentina and £1.4bn of loans, has been in talks to sell its Latin American operations to HSBC for around £500m. Initially due to be signed off in mid-December, the sale has been held up by the crisis.

Barclays has reduced its exposure from £900m at the end of last year to £500m. Royal Bank of Scotland has virtually no direct exposure to Argentina but it has close links with Spain's BSCH, which has lent some £1.7bn to the Argentinian public sector and £4bn to individuals and companies.

Walter Pompliano, of ratings agency Standard & Poor's, said: 'So far, the UK banks can cope with Argentina, Enron and the rest, though we do expect lower profits. The real problems will come if the UK economy has a harder than expected landing next year.'

Concerns are focused on lending to individual customers, traditionally a low risk area. The Bankruptcy Advisory Service, which reports an 8% rise in personal bankruptcies this year, said many households are badly over indebted. It predicts a fivefold explosion in the numbers going bust in two years, taking the annual total to 150,000.