"None of us can really predict the economic recovery," says Jes Staley, the chief executive of Barclays.
"We’re all keeping an eye on what happens when the government programs wind down."Quite so. Forecasting the future has never felt more like guesswork.The full force of coronavirus has yet to be felt but a storm of defaults is coming.
In the months ahead, Barclays now expects that up to £3.7 billion of the loans it has made won’t be repaid - around £2.4 billion due to the economic impact of the virus.
The "impairment charges" that Barclays has taken mean its UK bank posted a pre-tax profit of £68m between January and June.
That’s down 94% on the same period last year but it counts as something of an achievement.
The bank has managed to make money and lend it during the sharpest recession in living memory.So far, Barclays is displaying a resilience it lacked during the financial crisis when the bank almost fell into the arms of the taxpayer.Of course, the main reason the banking system isn't under very severe strain is the government has taken on a large portion of risk.Barclays is keen to trumpet the part it has played in the emergency response - supporting £21 billion of taxpayer help for companies and households.The bank has written £7.7 billion of Bounce Back loans to small business.
Barclays won’t say how much of this it expects to be repaid back, the Office for Budget Responsibility (OBR) estimates default rates could be as high as 40%.
The government is on the hook for all of it.Barclays says 121, 000 homeowners and 157, 000 credit card holders have taken repayment holidays. Encouragingly, some have already restarted their direct debits as they have returned to work but not all of these stories will have a happy ending.No one knows what happens next, but Barclays' assumptions about what is most likely will feel a little optimistic.The bank's "baseline scenario" sees a sluggish recovery, with the UK economy only returning to it pre-crisis size at the end of 2022.
The same scenario has the unemployment rate peaking at 8% - that's more upbeat than the OBR's most upbeat "upside" scenario, which has 10% pencilled in.If the number of people out of work climbs at pace when furlough support is withdrawn, Barclays will find itself dealing with far more bad debt than it currently envisages.