BRITAIN’S biggest banks are poised to reveal more eye-watering profits as the banking results season gets under way next week.
City analysts have predicted combined profits of around £24bn from four banking giants – HSBC, Barclays, Lloyds and Standard Chartered – while Royal Bank of Scotland is expected to post a narrowed loss.
The expected haul, up more than 10% on last year, will be seen as a signal that the banking sector is back on track after the global financial crisis.
Barclays kicks the season off on Tuesday a week after Chancellor George Osborne revealed details of a highly anticipated deal between the Government and leading UK banks to curb bonuses and boost small business lending.
But while the City is bound to be keen to see how much Barclays’ new chief executive Bob Diamond pockets for his bonus, the focus is likely to move away from pay packets and on to profits as the season rolls out.
Mr Diamond, who recently told a Treasury Select Committee the period for “remorse and apology” for banks needed to be over, is expected to be awarded a bonus of more than £9m.
This would dwarf the bonus awarded to Stephen Hester at RBS and Eric Daniels at Lloyds, who have been awarded £2m and £1.45m in shares respectively.
Mr Diamond will be delivering his first full-year results after taking on the top role from predecessor John Varley at the beginning of the year.
Barclays is expected to report pre-tax profits of £5.1bn for 2010, which would mark a decline on the £11.6bn earned in 2009.
Barclays Capital, the investment banking arm formerly headed by Mr Diamond, is central to the group’s performance – estimating it contributes towards 60% of the bank’s profits.
Robert Law, a banking analyst at Nomura, said: “With a new chief executive in place, there is heightened expectation of potential strategy changes and his comments will be an important driver for shares.”
Over the following two weeks, HSBC is expected to unveil the largest profit for the 2010 financial year, an estimated £13.5bn, more than double 2009’s £5.16bn, while Standard Chartered’s profits will be around £4.5bn, up from £3.8bn.
The state-backed banks are expected to deliver considerably lower numbers. Lloyds, in which British taxpayers have a 42% stake, is expected to produce a profit of around £1bn, unchanged from the previous year’s figure.
Meanwhile, RBS, in which taxpayers have an 83% shareholding, is expected to unveil a £613m loss, albeit considerably smaller than the £1.93bn loss in the 2009 financial year.
Richard Hunter, head of equities at Hargreaves Lansdown, said: “Those companies with strong exposure to investment banking may mirror the difficulties of their US counterparts, who found trading difficult in the last three months of 2010 as the market remained volatile.”
He added: “Elsewhere, those banks with an exposure to emerging markets, and Asia specifically, should have benefited from the continued exhilarating growth in those regions. HSBC and Standard Chartered could have something positive to report.”