Lloyds and RBS results to further highlight differing fortunes
The contrasting fortunes of taxpayer-backed lenders Lloyds Banking Group and Royal Bank of Scotland (RBS) will return to the fore next week when the pair post quarterly figures, while Barclays also reports following recent scandals.
Lloyds will post its figures on Thursday as it edges ever-closer to being fully returned to private hands, with the Government stake being cut to below 2% earlier this month and the City expecting the holding to be sold off in its entirety by June.
The lender enjoyed a robust 2016, posting its highest annual profits for a decade , with bottom-line profits more than doubling to £4.24 billion from £1.64 billion in 2015.
Analysts at UBS expect Lloyds to have enjoyed a solid start to the new year, forecasting pre-tax profits to have nearly doubled once again in the first quarter, to £1.21 billion from £654 million a year earlier.
But the vast improvement is largely due to the absence of last year's hefty £790 million charge from its controversial move to buy back expensive bonds from investors.
On an underlying basis, UBS is pencilling in a 6% fall in quarterly profits to £1.94 billion.
Lloyds has also recently announced an extra £350 million to cover mis-sold payment protection insurance (PPI) claims, which will come off its first-quarter bottom line, while earlier this month it put aside £100 million to cover compensation for victims of fraud at the hands of former HBOS staff.
UBS said the wider economy's prospects will be of key interest for Lloyds, given its role as a major mortgage lender, adding that another focus will be succession planning for boss Antonio Horta-Osorio.
Speculation is mounting in the City that the Portuguese banker will look to leave Lloyds once the Government sells out, with the chief executive role at HSBC tipped as a possible next move.
Part-nationalised rival RBS follows with its results on Friday, in the wake of Chancellor Philip Hammond's stark admission that the Government is prepared to sell its stake at a loss to the public purse.
The Government bought its 72% stake in the bank for £45 billion in 2008, at £5.02 a share, as part of a bailout at the height of the financial crisis.
But shares in the troubled lender are now trading at less than half that price.
Cost-cutting is therefore expected to remain a key theme at RBS and progress on the seemingly never-ending restructuring to slim down its balance sheet.
Its first-quarter figures may provide some respite to embattled boss Ross McEwan, with most analysts expecting underlying profits to more than double to £942 million, up from £440 million a year earlier.
Results will likely be flattered by a strong quarter for its private banking arm and personal and business banking division.
The group is also hoping for a reprieve from the European Commission, which is mulling over a plan to spare RBS being forced to sell off 300 Williams & Glyn branches in return for state aid.
There are fears, though, the alternative £750 million plan to boost competition in the banking market may end up costing RBS more, while it is still yet to agree a potentially mammoth settlement with US authorities over mortgage-backed security mis-selling.
Rival Barclays also updates on first quarter trading on Friday, with its figures coming after the group has once again fallen foul of UK banking regulations.
The Financial Conduct Authority (FCA) and Prudential Regulation Authority announced earlier this month that c hief executive Jes Staley will be probed and have his pay docked over governance failings that saw him attempt to identify a whistleblower.
It comes as a separate criminal investigation by the Serious Fraud Office into the bank's 2008 emergency fundraising nears a conclusion.
It is understood the FCA has also reopened its probe into the deal and is reviewing new evidence that could prompt it to reconsider a £50 million fine against the banking giant four years ago.
First-quarter figures will offer some light relief to Mr Staley, with analysts forecasting pre-tax profits for the core business to nudge up to £1.9 billion against £1.7 billion a year earlier.
Like its Wall Street counterparts, Barclays is set to have had a decent start to the year for investment banking returns, with UBS pencilling in a 20% hike in profits from the division.