Co-op bank warns of UK consumer debt

LONDON, April 6 (Reuters) A UK bank on Thursday warned of an ''unprecedented'' level of consumer debt and a significant rise in bankruptcies, providing fresh evidence that Britons are increasingly borrowing beyond their means.

Co-operative Bank, which has 2.5 million customers, said credit problems among consumers forced its bad debt charge for the 53 weeks to January 14 to rise to 99.8 million pounds (4.8 million), up from 70.7 million in the previous year.

It said the problem was most notable for credit cards.

''The deterioration in the credit climate, at a time when unemployment and interest rates remain at historically low levels, appears to reflect the unprecedented level of consumer indebtedness and a significant rise in personal bankruptcies,'' the bank said in a statement.

Higher interest rates and utility bills have raised concerns that UK consumers are struggling to pay off debts, but recent annual results from big banks such as HSBC and Barclays indicated bad debts were under control.

''Consumer credit quality remains somewhat vulnerable given the extent of borrowing and some pressure on repayment capacity,'' Gordon Scott, analyst at credit ratings agency Fitch, said in a report on Thursday. ''But in the absence of sharply rising unemployment and interest rates the agency believes this to be manageable.'' Co-operative Bank, which includes the Smile Internet bank, reported a pretax profit of 96.5 million pounds for the year, down 17.8 million from a year ago. Its operating profit before impairment losses and membership dividend was 197.6 million, up 7 percent from a year earlier.

Co-operative Financial Services (CFS), which also includes the CIS insurance arm and has 7 million customers, reported a pretax profit of 135.7 million pounds for the 53 weeks to January 14, up 4 percent from the year before.

Part of the Co-operative Group, it does not do business with companies or organisations it regards as unethical.

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