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US banks' poor showing hits UK counterparts' recovery

By Peter Cripps

Published 20/07/2011

The banking sector has suffered another blow after two US financial giants reported worse than expected profits.

Investment bank Goldman Sachs earned $1.05bn (£653m) in its second quarter, which was more than twice the amount in the same period a year ago but less than analysts had expected.

And Bank of America posted losses of $8.8bn (£5.5bn) - the biggest quarterly loss in the lender's history. This compares with a profit of $3.1bn (£1.9bn) a year earlier.

The performance of the two banks sparked a further wobble in confidence among their counterparts in the UK.

Before the American banks reported, the UK's biggest banks had been enjoying a strong recovery in early trading after they took a hammering as a result of fresh fears about the eurozone debt crisis.

Barclays was particularly badly affected by the news about Goldman due to the importance of its BarCap investment arm.

Its shares had been up by 8p at noon but saw its gains reduced to 4.3p, leaving it at 211.9p.

Royal Bank of Scotland shares dropped slightly following the announcements from the US but it recovered to rise by 0.5p to 33.5p. And Lloyds Banking Group rose by 1.7p to 43.1p.

Goldman Sachs chief executive Lloyd Blankfein said: "Certain of our businesses had disappointing results as we reduced our market risk in response to attempting to manage fluctuations in prices and market liquidity."

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