Barclays takes 110m hit from collapse of US subprime lender as private credit risks grow

"Barclays has revealed a £110 million loss tied to the collapse of Tricolor, a US subprime auto lender accused of fraud - an event now seen as a major warning sign for the $3 trillion private credit market. The bank confirmed the impairment in its third-quarter results, which otherwise met expectations, showing pre-tax profits of £2.1 billion - down 7% year-on-year but broadly in line with analyst forecasts."

"The lender disclosed total private credit exposure of £20 billion, around 6% of its £346 billion loan book, with 70% of that exposure in the US. Private credit - direct lending by non-bank institutions such as hedge funds and insurers - has exploded since the global financial crisis, as tougher banking regulations drove corporate borrowers toward alternative finance. But the recent bankruptcies of Tricolor and First Brands have sparked concerns about the hidden risks in the fast-growing but opaque market."

"Venkat told investors: "We run a very risk-controlled shop when it comes to this... but regulators should absolutely look at it and ask all banks about their exposures." His comments came after Andrew Bailey, Governor of the Bank of England, warned that "alarm bells" were ringing over private credit, calling it "a very open question" whether the recent US failures signalled deeper structural risks."

Barclays posted a £110 million impairment linked to the collapse of Tricolor, while reporting pre-tax profits of £2.1 billion, down 7% year-on-year but meeting forecasts. The bank holds £20 billion of private credit exposure, about 6% of its £346 billion loan book, with roughly 70% in the US. Private credit has expanded as non-bank lenders filled gaps left by regulated banks, raising concerns after Tricolor and First Brands bankruptcies exposed hidden risks and potential fraud. Barclays says most lending is with experienced managers, rejected First Brands on weak projections, and called for regulator scrutiny. Shares rose after a £500 million buyback and higher ROTE.

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