Focus on State-Backed Banks after Profits Fall
TAXPAYER-backed banks Lloyds and RBS will be in the spotlight during another busy few days for investors. Disappointing figures from Barclays showing a 9% drop in quarterly profits have set a gloomy tone ahead of first quarter results from Lloyds Banking Group and Royal Bank of Scotland on Thursday and Friday respectively.
Updates from the part-nationalised pair will provide the City with its first chance to quiz the banks on the impact of the recent Independent Commission on Banking (ICB) report. Lloyds was told the disposals already agreed with European regulators did not go far enough and is now facing the possibility of more branch sales.
RBS got off more lightly, with the ICB's interim report indicating it was heading towards plans to ringfence retail and investment banking operations rather than a full separation. But RBS warned at its recent annual shareholder meeting that there would be "inevitable" costs passed down to customers and shareholders from the ICB changes.
The banks are expected to remain fairly guarded over the potential impact, given that the ICB's final recommendations are not due until September, but analysts will be reading between the lines for clues - in particular on how much more Lloyds believes it will have to offload to meet its requirements.
Lloyds - 41% owned by the taxpayer - gives little financial detail in its first quarter updates. A year ago, it revealed it returned to profit for the first time since the financial crisis and remained in the black through 2010, reporting pre-tax profits of pounds 2. …