* RBS to show first profit in 18 months
* Share price far off break even for state bailout
* Still seen coming up short on capital needs
* BNP Paribas suffers from euro troubles, French stagnation
LONDON/PARIS, May 3 Royal Bank of Scotland
is expected to report its first quarterly profit in 18
months on Friday, the fruit of efforts to focus on bread and
butter lending and shed the high risk assets that led to its
public bailout in 2008.
The outlook for European banks as a whole remains shaky,
with France's biggest bank BNP Paribas expected to
post a slump in earnings in its own results on Friday.
RBS is seen showing a pretax profit of 800 million pounds
($1.2 billion) but unlike another bailed out bank, Lloyds, its
share price is still far below what it was when the last UK
government pumped 45 billion pounds into the bank in 2008.
Analysts say the recovery from a 1.4 billion pound loss in
the first quarter a year ago will show the bank benefitting from
reduced losses on bad loans and a decline in the cost of
compensating customers for mis-sold loan insurance.
Chief Executive Stephen Hester has overseen the shedding of
around 900 billion pounds in assets and is focusing on lending
to British households and small businesses. But he still has
major hurdles to overcome.
Britain's financial regulator said in March UK banks must
raise 25 billion pounds of extra capital by the end of the year
to absorb any future losses on loans. Although the regulator has
not yet given specific guidance to individual banks, analysts
expect the biggest shortfall to be at RBS.
RBS must also ask European regulators to extend an end-2013
deadline it set for the bank to sell 315 branches as a condition
of receiving state aid. A deal to sell the branches to Santander
collapsed and RBS is now targeting a stock market
flotation in 2014.
Fellow UK lender Lloyds, also the subject of a
public rescue, on Tuesday reported a jump in first-quarter
profit, sending shares to a near two-year high and close to the
price at which the state could break even if it sold its stake.
But the euro zone's troubles and poor growth across Europe
continues to weigh on the financial sector. BNP has
been hit by the stagnation of the French economy and renewed
concerns over the government debt with which most banks are
still loaded after new shocks from Cyprus and Italy.
French banks are mulling staff cuts and branch closures at
their retail networks as fee income dries up.
Analysts on average forecast BNP's net income to fall to
1.53 billion euros ($2.02 billion), compared with 2.87 billion a
year earlier, according to Thomson Reuters I/B/E/S data.
BNP may give more details on its drive to cut costs and grow
in non-euro markets to help rebuild investor confidence. Its
shares are down 0.7 percent year-to-date, worse than a 5.1
percent gain for the STOXX Europe 600 banks index but
better than rival Societe Generale's 2.6 percent drop.
The bank's shareholder structure is also in focus after
sovereign shareholders Belgium and Luxembourg said they were
open to selling equity stakes held in the bank.