Banks Worldwide Writing Off More Debt for 2007

The numbers for U.S. financial institutions were generally bleak in the fourth quarter as the subprime mortgage sickness infected credit card, auto and other loans, causing lenders nationwide to write off billions in bad debt.

Similar returns have been spreading internationally as banks in Australia and the United Kingdom released quarterly returns.

Two of the UK’s top five banks have reported mixed numbers for 2007. Lloyds TSB Friday reported profits dropped to $7.9 billion in 2007 from $8.4 billion in 2006. It wrote off $551 million in bad loans in 2007, up from $394 million in 2006.

Last week, Barclays said its 2007 net profits were $8.7 billion, down from nearly $9 billion in 2006. Net write-downs for 2007 were $3.2 billion. However, pretax profit on the Barclaycard credit card unit rose 18 percent to $1.1 billion, due to lower delinquencies and charge offs.

The three remaining top five – Bank of Scotland, Royal Bank of Scotland, and HSBC – are due to report this week.

ANZ Banking Group, Australia’s third largest bank, reported a $360 million provision for bad debt, primarily due to a $200 exposure to ACA Capital Holdings, a U.S. insurer that lost $1.7 billion in 2007’s third quarter from its subprime-housing related collateralized debt obligations.

However, ANZ’s leader said the Australian banking sector was doing pretty well compared with its rivals in the U.S. and the U.K.

“I would recommend you visit London and New York … just to see the effect of what is really happening here,” The Canberra Times quotes CEO Mike Smith. “This is a financial services bloodbath. The Australian banking system is in remarkably good shape in comparison.”