Shareholders of UK banks looking for a result

31st Jul 2009 18:06

The banking sector has been one of the top five performers since the market rally started on 9 March, and next week's results from the major players are expected to add weight to the view that the worst may be behind them.Barclays and HSBC get the ball rolling on Monday. Both companies have avoided government hand-outs during the banking crisis and both are expected to post better results than their part-nationalised counterparts.Barclays should have received a boost from a vibrant performance from its capital markets division, Barclays Capital (BarCap), in the second quarter, a period in which capital markets recovered strongly. Expectations are that BarCap will contribute some £2bn to profits of around £3.5bn for Barclays, as the situation regarding write-downs of toxic assets improves. Since Barclays sold off its fund management arm, Barclays Global Investors, BarCap has become its jewel in the crown, especially since the company picked up the remnants of Lehman Brothers for a song last year. Asia-focused bank HSBC, vying with Royal Dutch Shell for the title of Britain's biggest company by market value, is expected to report an interim profit of around $4.9bn, or £2.9bn, although that figure could be subject to any number of exceptional charges, including a $15bn hit for bad loans.Fellow Asia-focused bank Standard Chartered is forecast to announce interim earnings of around $2.5bn, Last month the bank said it had enjoyed record income and operating profit before tax in the first five months of this year. A record first quarter was followed by a "good" April and "even stronger" May, leaving income so far this year "well ahead" of 2008. Singapore, Middle East and South Asia (MESA), Hong Kong and Korea did particularly well, but some of this success has been offset by weakness in consumer banking where income remains under pressure due to "liability margin compression and the impact of muted wealth management sales".Part-nationalised bank Lloyds Banking Group will receive less of a lift from the revival in capital markets, focused as it is on the retail market. The bank is tipped to announce a loss of just over £5bn, with provisions for bad loans once again responsible for the bank's negative performance. Much of the bad loan burden has been inherited from its acquisition of mortgage lender HBOS, and investors will be hoping for detailed information on how soon the promised synergies from its ill-fated merger will start to feed through to the bottom line.Fellow part-nationalised bank Royal Bank of Scotland (RBS) is expected to return to profitability with a pre-tax profit of around £1.2bn, helped by gains from asset sales and buy-backs of its bonds.Both Lloyds and RBS could provide updates on how talks are progressing with the government over participation in the asset protection scheme.