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Saturday, July 21, 2012

UK Bank Scandals as profits rise, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Barclay

UK Bank Scandals as profits rise, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Barclay : Britain's biggest banks will disclose rising profits over the next two weeks even as the industry’s reputation falls further.

But the big four banks – HSBC, Lloyds Banking Group, Royal Bank of Scotland and Barclays – are set to resist disclosing the scale of fines and claims against them arising from the scandals of recent weeks.

Lloyds Banking Group will kick off the bank reporting season on Thursday and is expected to report underlying half-year profits of £1.3 billion, against £1.1 billion for the same period last year.

Barclays will publish interim results on Friday, with analysts estimating profits of £3.8 billion, a marginal rise on £3.7 billion last year.

HSBC is expected to reveal headline profits of £8.7 billion next week, against £7.4 billion the previous year while RBS’s headline loss will fall from £800 million last year to £300 million in this year’s interim numbers, due on August 3.
Ian Gordon, a banking analyst at Investec, said: ‘There has been a general improvement in the banks’ cost base and on bad debts, just about offseting revenue declines.’

Banks that have yet to be fined over their roles in fixing Libor – the London interbank lending rate – could tuck away small provisions in advance of any fines, analysts said.

Barclays put aside £100 million in its first quarter for legal issues before it was fined £230 million in America and £59 million by the Financial Services Authority for its role in fixing Libor.

HSBC is awaiting news of a fine from American regulators for money laundering after being accused by a US Senate committee of laundering cash for ‘drug kingpins and rogue states’. Because the timing is uncertain and it is unclear how any fine, which some estimate could be as high as $1 billion (£650 million), would be calculated, HSBC will say little on the issue.

Barclays meanwhile is unlikely to reveal any provisions for civil cases in relation to its admission of Libor-fixing. It is likely to insist that claimants will be unable to prove losses.

RBS, Lloyds and HSBC are all believed to be under investigation as part of an inquiry being conducted by regulators across the world into the fixing of Libor.
The big four were also involved in mis-selling ‘swap’ contracts – deals to fix interest rates – to small and medium-sized firms for whom they were not suitable.

The arrangements were supposed to protect them against fluctuating interest rate rises, but when rates fell, many found themselves locked into expensive contracts.

The FSA recently agreed a compensation scheme. However, civil actions over mis-sold interest rate swaps to British businesses are not expected to feature in the provisions because the banks regard the likely fallout as insignifican

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