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Banks claw back: RBS, Barclays, Lloyds

Friday, July 25, 2014 - 02:25

RBS caps a week of negative news for the banking sector by delighting investors with a surprise announcement of forecast-beating profit numbers. But litigation issues remain centre-stage for Lloyds and Barclays. David Pollard reports.

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What a week for Europe's banks - again. Lloyds, Barclays, Credit Suisse and UBS all making headlines for litigation - and the huge liabilities attached. Finally, though, some positive news. Royal Bank of Scotland made a pre-tax profit of one billion pounds in the second quarter. Chief Executive Ross McEwan says the mostly state-owned bank is getting back in shape - but it's a long road. SOUNDBITE (English) ROSS MCEWAN, CEO, RBS: ''We've got a lot of work to do on this business and I cannot, nor can any of my staff, get complacent about two quarters of pretty good results.'' The numbers were far better than analysts expected - so good the bank released them a week early. It says a better economy means it can write back losses that had been booked on bad loans - so reducing expected impairment charges. The news took markets off guard - shares initially shooting up 15 percent. Possibly an overreaction, says Dominic Elliot of Reuters Breakingviews. SOUNDBITE (English) DOMINIC ELLIOT, COLUMNIST, REUTERS BREAKINGVIEWS: ''We think maybe that could be a little bit overdone given there some more bad news likely to be coming down the road.'' And indeed, RBS upped its set-aside to compensate customers for mis-selling PPI and interest rate swaps by quarter of a billion pounds. Nor do litigation concerns go away for Lloyds. But it has confirmed it's close to settling with regulators over allegations of Libor fixing. The settlement's believed to be in the region 300 million pounds. Mike Ingram of BGC Partners. SOUNDBITE (English) MIKE INGRAM, MARKET ANALYST, BGC PARTNERS: ''It's very much expected. Analysts still remain very, very keen on Lloyds. They're still raising their earnings forecast. And just to put this prospective fine into context, the net profit of Lloyds this year is probably going to be something like £5.1 billion.'' Barclays is taking the battle to the litigators. It's filed for the New York authorities to dismiss a lawsuit over its 'dark pool' trading activities. But does it make sense to fight back against ever-more powerful regulators? SOUNDBITE (English) MIKE INGRAM, MARKET ANALYST, BGC PARTNERS: ''Markets generally like certainty, and I suspect that given the choice between, you know, Barclays perhaps taking a hit over its dark pool activity or dragging the situation out through the courts and through various regulators over a protracted period, they'd clearly go for the former.'' The lawsuit against Barclays alleges it lied to trading clients. The UK bank says the complaint contains 'fatal flaws' - and that no customers were misled.

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Banks claw back: RBS, Barclays, Lloyds

Friday, July 25, 2014 - 02:25