IT’S OFFICIAL: BANK PROFITS ARE BACK
BRITAIN’S biggest banks will this week herald a return to the gilded banking days of old as they post bumper interim profits, despite the impact of their mounting bad debts.
Barclays is this morning expected to reveal a first-half pre-tax profit of £3.5bn, boosted by a stellar performance in its investment banking division, Barclays Capital, which acquired Lehman Brothers’ US operations last year. If the figures are as strong as expected, the bank may earmark a remuneration pot of £5bn for the first half, equivalent to a bonus package of around £250,000 per employee.
The week’s banking bonanza will also see strong half-year figures from HSBC, reporting today alongside Barclays, and from Standard Chartered tomorrow, which is expected to match last year’s results with a $2.5bn (£1.49bn) interim profit.
HSBC will post a $4.9bn profit, according to a Reuters poll of analysts, though some experts have forecast a small loss, allowing for a multi-billion dollar accounting hitch relating to the bank’s record £12.9bn rights issue back in March.
But the good cheer will be dampened by the impact of a dire performance from Lloyds Banking Group on Wednesday, as well as an estimated £700m loss at state-owned Northern Rock and increasing levels of bad debt on the sector’s balance sheets.
Analysts predict that Lloyds will report a £5.1bn first half loss after its disastrous takeover of HBOS, as well as up to £13bn of bad debt charges.
RBS, which is 70 per cent owned by the taxpayer, is on Friday expected to report profits of £1.2bn, driven by strong growth in its global banking and markets arm. Chief executive Stephen Hester will also update the market on the asset disposal programme announced in February.
RBS could see its impairment charge reach almost £8bn, while writedowns at HSBC could top $10bn. Barclays also expects its loan loss rate to increase further across all business lines over the remainder of the year.
“Although we expect first half results to be strong, we believe they will be driven largely by one-offs,” Panmure Gordon analyst Sandy Chen said in a recent sector note. “In line with our assumption that unemployment will increase significantly further…we also expect that impairment charges will continue to rise for all UK banks.”