Lloyds and Barclays face more questions

THE spotlight will be back on two of Britain’s biggest banks this week as underfire Barclays and statebacked Lloyds present halfyear results to investors eager for more positive news about the sector.

Barclays is enduring a leadership crisis after chief executive Bob Diamond stepped down in the wake of its £290m fine from UK and US regulators for fixing Libor – an interbank lending rate. Executive chairman Marcus Agius is also set to leave once a successor has been found.

Analysts expect Friday’s interim figures from Barclays will show underlying profits up 10pc to £4.1bn, news that will help assuage investors who have seen the shares plunge more than 20pc since news of the scandal broke. The higher figure, which will be driven by a stronger performance from its BarCap investment banking arm, could ease concerns held by credit ratings agencies Moody’s and Standard & Poor’s, which both placed Barclays on negative outlook.

Ian Gordon at Investec Securities is backing Barclays despite its recent problems, making it his top pick for the sector.

‘ Such expectations are underpinned by a strong, defensively positioned, retail and commercial business franchise, coupled with a BarCap business still capable of outperforming peers and, in the shorterterm, posting a resilient performance in the second quarter and beyond, notwithstanding deteriorating market conditions.’

Barclays, which employs 60,000 people in Britain, will be pressed for details of the compensation bill for the misselling of interest-rate swaps, another recent scandal. It has already paid out £1.3bn in compensation over payment protection insurance.

The shares finished at 159.25p on Friday.

Before Barclays reports, Lloyds Banking Group will present its half-year figures on Thursday having just reached a deal to sell 632 branches to the Co-operative for a cut-price £750m as part of a settlement with the EU over its government bailout.

The 40pc taxpayer-owned lender is making a loss on the sale but the disposal draws a line under a difficult phase, after the bank bought Halifax Bank of Scotland at the height of the global banking crisis.

Lloyds chief executive Antonio Horta-Osorio is set to face questions from analysts about its involvement in the Libor-fixing scandal.

Lloyds has admitted it is ‘assisting regulators’ with the Libor probe. If it is found to have participated in helping to fix the key interest rate which influences a raft of financial products, Lloyds could also be hit with heavy fines.

Horta- Osorio has also indicated that his targets could be hard to achieve.

Half- year profits are expected to be broadly flat at £1bn after a brighter picture after the first quarter.

Shares closed at 29.94p on Friday.