Big banks' results set to boost UK financial sector

Two of Britain’s biggest banks, Barclays and Lloyds TSB, will this week offer a boost to the financial sector by declaring an increase in dividend payments, it was reported today.

The pay-outs will provide a signal that both banks feel they have emerged from the worst of the sub-prime crisis, the Sunday Times said.

In its results on Tuesday, Barclays will admit to write-offs from its exposure to the sub-prime crisis totalling £1.5bn (€2bn). But its pre-tax profits will still nearly match the record results from last year, which topped £7.1bn (€9.4bn).

As a result, the dividend will be lifted by 10% and chief executive John Varley will say the business is still performing well, despite the challenges in the second half of last year.

In particular, investment bank Barclays Capital has seen a surge in business from foreign exchange trading and equity derivatives.

The newspaper also reported that Lloyds TSB will announce a strong set of figures with analysts expecting pre-tax profits as high as £4.4bn (€5.8bn).

The spectre of write-offs among Britain’s big banks has led to steep falls in bank share prices in the past six months, with Barclays down 40% in value to £28bn (€37bn).

Bank of England Governor Mervyn King last week urged banks to come clean over the extent of their losses as uncertainty over their balance sheets causes the crisis to deepen further.

As well as a focus on further write-downs, analysts will be looking for any signs of deteriorating trends on consumer bad debts.