Page last updated at 10:17 GMT, Friday, 7 August 2009 11:17 UK

Bank results round-up

Canary Wharf
This week's results should shed light on whether banks are recovering

Exactly two years after the credit crisis first shook the banking world, UK banks are back in the spotlight this week, after reporting profits for the first half of the year.

They were a mixed bag, with some reporting dramatic returns to profits and some announcing large write-offs of bad loans.

Lloyds said its bad debts would improve from this point, while RBS said they would remain high.

Here are the highlights of a busy week of banking.

Graphic of bank profits

BARCLAYS

Barclays logo
Barclays has not taken any money from the government during the crisis

The first of the UK's big five to publish results, Barclays reported pre-tax profits of £2.98bn, up 8% on the £2.75bn it made in the first six months of 2008.

However, analysts had predicted a higher figure of £3.6bn.

Like US banks that have recently reported impressive earnings, the trading operations of investment banking division, Barclays Capital (Barcap) - including the collapsed former Lehman Brothers US business it bought last year - have benefited from high levels of activity.

Profits at Barcap doubled to more than £1bn.

But profits at its UK retail banking division fell 61% to £268m, from £690m a year ago.

The bank raised £7bn from investors in Qatar and Abu Dhabi last year after turning down financial help from the UK government during the economic crisis.

It has also has chosen not to participate in the Treasury's asset protection scheme, which insures against losses arising from toxic assets.

Richard Hunter, head of UK equities at Hargreaves Lansdown, says Barclays' decision to "go it alone" without government aid has served it well.

"Investors are beginning to appreciate the progress Barclays has made and the consensus is that the shares are a cautious buy," he says.

HSBC

HSBC logo
HSBC is the world's third-largest bank by market value

Banking group HSBC reported pre-tax profits of $5bn (£2.98bn) in the first six months of 2009.

This was about half what it made in the same period a year earlier.

Rising bad debts in the US, Europe and Asia forced it to write-off $13.9bn - largely from its US consumer lending businesses.

But it saw a record investment banking profits of $6.3bn during the first half of the year.

BBC business editor Robert Peston said its profits were a story of "resilience in the face of extraordinary losses on loans".

The bank raised £12.5bn from shareholders through a rights issue earlier this year, after saying that it would not require capital support from the UK Treasury even if economic conditions in the UK or the US were to worsen.

HSBC has kept its ranking as the world's third-largest bank by market value after emerging from the global credit freeze healthier than UK competitors Royal Bank of Scotland and Lloyds, both of which had to be bailed out by the government.

NORTHERN ROCK

Northern Rock sign
Northern Rock was nationalised in 2008

Losses at nationalised bank Northern Rock have grown by 24% amid mounting losses on its mortgage loans.

Losses at the bank totalled £724.2m in the first six months of 2009, compared with £585.4m in the first half of 2008.

The Newcastle-based lender said that 3.92% of its mortgage loans were more than three months in arrears, well above the national average of 2.39%.

The first bank to seek emergency aid, it was nationalised in February 2008, and owes the government £10.9bn.

It had to be bailed out by taxpayers in 2007, when its model of borrowing short-term funds from wholesale markets to lend to mortgage borrowers was hit by the credit crunch.

LLOYDS BANKING GROUP

Lloyds Banking Group head office
The UK government owns 43% of Lloyds Banking Group

Lloyds Banking Group says it made a loss in the first half of the year, due to mounting bad debts at HBOS, which it took over on 16 January.

The group made a loss of £4bn in the first six months of 2009 after taking a huge charge on assets that are worth less than previously thought.

The 43% state-owned bank took a charge of £13.4bn for such write-downs, 80% of which came from HBOS.

But it added that the write-downs had now probably peaked.

Due to accounting technicalities, Lloyds actually made a pre-tax profit of £6bn for the period.

But the group said that as a result of the takeover of HBOS, that figure is "of limited benefit".

ROYAL BANK OF SCOTLAND

RBS logo
The UK government owns a 70% stake in RBS

Royal Bank of Scotland Group, which is 70%-owned by taxpayers, has reported a pre-tax profit of £15m for the first six months of the year.

The statement from RBS was downbeat, highlighting the £1bn loss after paying tax and dividends to the government and describing the results as "poor".

The investment banking division fared well, making about a £5bn profit, while high street banking had a harder time.

RBS also said it had written off £7.5bn of assets such as bad debts.

Unlike Lloyds Banking Group earlier in the week, RBS did not say that would be the peak of the write-offs, with RBS chief executive Stephen Hester saying in a statement that they are "set to stay high for a while".

But Mr Hester later told the BBC he was confident of leading the turnaround at RBS.

"We are now confident we can rebuild RBS," he said, undertaking to make sure taxpayers make a profit on their investments in the bank within five years.

He also warned that "overall results may not substantially improve until 2011 and full recovery will take time".



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