Big banks to unveil £24 billion profits
Quote:The four – HSBC, Barclays, Lloyds and Standard Chartered – are on course to announce combined profits of £24.2 billion, up more than 10 per cent on the £21.5 billion they reported last year. The growth in profits, based on estimates from respected City investment bank Nomura, will demonstrate the strength of the financial services sector, one of the linchpins of the British economy.
Coming just a week after government statistics showed consumer confidence falling to a 19-year-low and after Britain's productivity decreased by 0.5 per cent in the last three months of 2010, the first fall since the recession, the profits will be seized upon as a sign that the economy remains relatively robust.
HSBC is expected to unveil the largest profit for the 2010 financial year, an estimated £13.5 billion, more than double 2009's £5.16 billion, while Standard Chartered's profits will be around £4.5 billion, up from £3.8 billion. Barclays is expected to report a profit of £5.1 billion, although this is smaller than its profit last year of £11.6 billion.
However, the state-backed banks will deliver considerably lower numbers. Lloyds, in which British taxpayers have a 42 per cent stake, is expected to produce a profit of around £1 billion, unchanged from the previous year's figure. Meanwhile RBS, in which taxpayers have an 84 per cent shareholding, is expected to unveil a £613 million loss, albeit considerably smaller than the £1.93 billion loss it reported in the 2009 financial year.
As The Sunday Telegraph disclosed earlier this month, Stephen Hester, RBS's chief executive, is on course to be paid a bonus of £2.44 million. Bank sources confirmed yesterday that the amount will be paid in shares, which he can cash in after three years.
News of the banks' pending profits will be met with different responses, but Andrew Tyrie MP, the chairman of the Treasury select committee, said that the banks should not be criticised purely for making a profit.
"Something has gone wrong if we are getting upset simply because banks are making money. That said, we must look at how they are making it and ensure it is on the basis of a properly competitive market," he said.
Meanwhile Lord Turner, chairman of the Financial Services Authority, warned the banks that the public still needed reassurance that the financial crisis of the past three years can never happen again.
Speaking from the World Economic Forum in Davos, the peer said: “I think the industry needs to recognise that society wants to be assured that the measures that have been taken are robust enough to prevent this terrible crisis ever happening again.”
He added that Britain has not completed its regulatory overhaul — designed to ensure such a crisis could not reoccur — and that suggestions that banks might move domicile offshore to avoid such changes were pure “fantasy”.
His tone was considerably more confrontational than that of George Osborne, the Chancellor, who on Friday called for an end to “banker bashing”.
The Chancellor is spearheading an attempted rapprochement between the Government and the banks, in which the lenders agree to a series of pledges in return for an understanding that further financial penalties will not be waged on the sector. The talks, known as Project Merlin, reached deadlock a week ago over the fact that senior executives were not willing to lend as much to businesses as the Government had hoped.
But following the Davos summit, at which several bank chiefs were present, the talks are expected to resume with the hope of reaching a deal before the banks begin reporting their profits.
Barclays is expected to unveil its figures on Feb 15, followed by the remaining four over the following two weeks.
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