Barclays has disclosed a £110 million loss linked to the collapse of Tricolor, a US subprime car lender accused of fraud – an event now seen as a major warning sign for the $3 trillion personal loan market.
The bank confirmed the impairment in its third-quarter results, which were otherwise in line with expectations, reporting a pre-tax profit of £2.1 billion – down 7% year-on-year but broadly in line with analyst forecasts.
CS Chairman Venkatakrishnan, known as Venkat, said Tricolor’s collapse was “not a surprise, the surprise was the fraud”, but admitted that “fraud is not an excuse for us”.
The lender disclosed total private credit exposure of £20 billion, about 6% of its £346 billion loan portfolio, with 70% of that exposure in the US.
Private lending — direct lending by nonbank institutions such as hedge funds and insurers — has exploded since the global financial crisis as stricter banking regulations pushed corporate lenders toward alternative financing. But the recent bankruptcies of Tricolor and First Brands have raised concerns about hidden risks in the fast-growing but opaque market.
Barclays said the majority of its loans had gone to “experienced managers with a strong track record” and rejected an approach to financing First Brands because its analysts “did not see sufficient support for the financial forecasts.”
Venkat told investors: “We run a very risk-controlled department here… but regulators should definitely look at this and ask all banks about their risks.”
His comments came after Bank of England Governor Andrew Bailey warned that “alarm bells” were ringing in private lending, calling it “a very open question” whether recent failures in the U.S. pointed to deeper structural risks.
Despite the impairment, Barclays shares rose 4.9% to P382 after the bank announced a £500 million share buyback and raised its return on equity target to over 11% for 2025.
Venkat said in the midst of a three-year turnaround plan, Barclays would move to regular quarterly buybacks and introduce new performance targets by 2028. Analysts at Bank of America said results were “good at underlying levels,” although its investment banking division underperformed in trading revenues.
Barclays also said it had increased provisions for claims for fraudulent motor finance claims from £90m to £325m in response to an £11bn consumer compensation scheme proposed by the Financial Conduct Authority (FCA).
The bank said the larger provision reflected “the increased likelihood of a greater number of cases falling within the scope” but criticized the FCA’s approach, saying it “fails to accurately consider the actual harm… and fails to achieve an appropriate result”.
Rivals such as Lloyds Banking Group and Close Brothers also raised concerns, warning that the regulatory framework could overstate the extent of potential misconduct.
The FCA’s redress scheme comes as the industry failed to disclose commission payments to car dealers who arrange vehicle finance – a problem that could affect up to 14 million contracts between 2007 and 2023.
While Barclays described remediation costs as “not a material financial issue”, the twin burdens of private credit exposures and regulatory controls are likely to remain investors’ biggest concerns in the coming months.
As the lines between traditional and alternative financing continue to blur in private markets, analysts say Tricolor’s collapse could prove to be an early stress test for banks’ exposure to the sector – and a catalyst for tighter oversight of shadow lending.
