Lloyds and Barclays half-year reports to turn spotlight on consumer debt
Household borrowing will be in sharp focus next week when lending giants Lloyds Banking Group and Barclays report following Bank of England warnings over ballooning consumer debt.
Half-year figures from the pair come after Bank governor Mark Carney warned lenders last month against "forgetting the lessons of the past" as he announced a lending crackdown.
The Bank raised fears over surging levels of unsecured consumer borrowing on credit cards and car finance, which is rising by more than 10% a year and outstripping incomes.
With Lloyds one of the biggest high street lenders, its results on Thursday will be eyed closely for signs of rising bad debts as economic growth stalls and inflation squeezes consumers.
But banking experts at Morgan Stanley are forecasting the group's losses on consumer debt to be lower than feared thanks in part to a robust jobs market in the wider economy.
Figures from Lloyds - seen as a bellwether of the economy - are expected to show half-year bottom-line profits rising 13% to £2.9 billion in its first set of results since being fully returned to private hands.
The final tranche of government shares was sold in May, marking a milestone for the group and ending nearly nine years as a part-nationalised bank.
But it has still struggled to shake off mistakes of the past, with yet more cash set aside for payment protection insurance (PPI) mis-selling in the first quarter and £100 million put by for victims of an HBOS fraud.
Lloyds missed its own self-imposed deadline at the end of June to make compensation offers for the HBOS fraud, announcing that at least £1.9 million would be paid initially to help cover bills and expenses.
The corrupt financiers were jailed earlier this year for the £245 million loans scam which destroyed several businesses, with v ictims including former Deal Or No Deal host Noel Edmonds, who has launched a £50 million-plus compensation claim against the lender.
It has also been an eventful first half for rival Barclays after the lender, its former chief executive and three top bankers were charged with conspiracy to commit fraud over a June 2008 investor cash-call.
The group, ex-boss John Varley, Roger Jenkins, Thomas Kalaris and Richard Boath, will all stand trial in 2019 over alleged side deals struck at the height of the financial crisis.
Its results come after a testing first half for chief executive Jes Staley, who is also facing a regulatory investigation into his own conduct after he attempted to identify a whistleblower.
But half-year profits are expected to give him some welcome respite, with analysts forecasting a 38% surge to £2.9 billion from £2.1 billion a year earlier.
The group more than doubled first-quarter p re-tax profit to £1.68 billion, although investors were disappointed by a 4% drop in income from its investment banking markets division.
PPI will remain in focus for Barclays, according to Morgan Stanley analysts, who believe the bank will set aside more to cover compensation as claims pick up ahead of the deadline.
Mr Staley has already said the bank was set to complete its swingeing overhaul in the first half after years of selling off unwanted assets to focus on UK and US operations.
It said in February it planned to close its so-called non-core bank on June 30, six months earlier than expected.
But challenges remain, with the group's forthcoming court trial likely to weigh on figures while it also continues to fight US authorities over allegations over its part in a mortgage bond mis-selling scandal.