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Lloyds kicks off sector updates amid High Court case

The lending sector will take centre stage next week as Lloyds Banking Group, Barclays and Royal Bank of Scotland report third quarter figures.


London skyline

London skyline

London skyline

Lloyds Banking Group is expected to unveil a rise in profits next week as it kicks off a trio of third quarter results in the sector, as a high-profile court case against the lender continues.

A consensus of City analysts forecast the lender will book a £1.6 billion pre-tax profit, nearly double last year’s figure of £811 million, which was dragged down by payment protection insurance (PPI) provisions.

Underlying profit for the period is expected to nudge up from £1.9 billion to £2 billion.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “We’re not expecting any surprises from Lloyds this quarter.

“Steady income growth should continue, which combined with a market-leading cost-to-income ratio has kept underlying profits moving forwards in recent years.”

But its trading update comes as the bank and former bosses face accusations in court from shareholders that they were “mugged” during the takeover of Halifax Bank of Scotland in 2008.

A group of more than 5,800 former Lloyds TSB shareholders are suing Lloyds, former chairman Sir Victor Blank, ex-chief executive Eric Daniels, former chief financial officer Tim Tookey, one-time director of retail banking Helen Weir, and ex-director of wholesale banking George Truett Tate.

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Lloyds Banking Group

Lloyds Banking Group

PA Wire/PA Images

Lloyds Banking Group

Lloyds is vigorously denying these claims, but the case is likely to see former bosses appear in court to give evidence.

Meanwhile, its update will be scrutinised for signs of a rise in bad loans as warnings ramp up over ballooning levels of personal debt.

It will also be eyed closely for any further cash put aside for the PPI mis-selling scandal after it took another £1.05 billion hit in its first half.

Mr Hyett added: “There are a couple of banana skins out there which could trip the bank up.

“Foremost among these is an unexpected rise in bad loans. That’s more of a worry now the group has a larger position in the notoriously volatile credit card sector.

“Conduct costs, such as PPI redress, are another potential sore point. Investors will be hoping for a clean slate.”

Lloyds is not the only player under pressure over past actions, with rival Royal Bank of Scotland (RBS) reporting its figures on Friday amid an ongoing furore over a leaked report by the City Watchdog into the bank’s mistreatment of small business customers.

The Financial Conduct Authority (FCA) has agreed to MP demands for an independent legal adviser to be appointed to scrutinise a report into the bank’s controversial Global Restructuring Group, although affected customers are still pushing for full publication.

RBS, which is still 72% owned by the taxpayer, moved back into the black for the first time since 2014 at the half-year stage.

And its shares have been rising steadily in recent weeks on the back of analyst upgrades predicting higher earnings over the year.

Credit Suisse recently upped its 2017 earnings outlook by 15% for RBS, but warned that outstanding fines over mortgage securities mis-selling in the US could be higher than expected.

Barclays reports on Thursday, with investors looking for an improvement after it plunged to a half-year loss after booking extra compensation costs and a £2.5 billion hit from the sale of its Africa arm.

The sell-down of Barclays Africa Group drove the lender to an attributable loss of £1.2 billion over the six-month period.

As with its high street rivals Lloyds and RBS, Barclays will also be quizzed on its bad debt levels and thoughts on the economy, with the first interest rate rise in a decade predicted as soon as November.