Lloyds TSB said today it had increased the loan impairment charge this year to 21 per cent, setting aside £416 million in anticipation for bad debts.
After seeing an increase in the number of unsecured loans and credit cards it had issued in the first, Lloyds believes many consumers will not be able to pay for their loans.
This year the UK's mortgage and consumer markets have quieted as the economy slows and investors have started worrying about bad debts amid lower growth.
However Lloyds, Britain's largest unsecured lender, remains optimistic on its future, with chief executive Eric Daniels saying the company will perform well in the second half.
Mr Daniels said: "We have seen some softening and deterioration in the unsecured book but we are quite comfortable."
Lloyds TSB saw a seven per cent first half profit of £1.68 billion.
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