All eyes turn to Lloyds and RBS

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Outgoing boss of Lloyds Banking Group Eric Daniels is due to make his last report for the group on Friday

The part-nationalised banks will take their turn in the spotlight next week as the City’s annual results season steps up a gear.

The recent 32% surge in annual profits at Barclays and healthy performance by French giant Societe Generale has raised hopes for taxpayer-backed Lloyds Banking Group and Royal Bank of Scotland ahead of their 2010 results.

While the part-nationalised players are not expected to come close to matching their performance, they are expected to reveal further steps in their recovery following the financial crisis.

The focus will be on trading as Lloyds and RBS revealed their bonus awards at the time of the Project Merlin deal with Chancellor George Osborne. Lloyds, which is 41% owned by the Government, confirmed that outgoing boss Eric Daniels will be offered a £1.45 million bonus.

The market will concentrate on how the banks have fared at the end of 2010 and the outlook for the year ahead and will be interested to see more details on exposures to the troubled Irish economy, as well as improvements on retail bad debts.

RBS is first out of the stalls on Thursday. Figures from the US players and Barclays are likely to have more of a bearing on the group than Lloyds as it has a sizeable investment banking division through its Global Banking & Markets arm.

But while a £4.4 billion investment banking haul helped Barclays report £6.1 billion in profits for 2010, RBS is not expected to claw its way out of the red. Analysts at Nomura expect RBS to report pre-tax losses of £613 million for 2010, although this is a marked improvement on the £1.93 billion loss seen in 2009.

For Lloyds, its report on Friday will represent a milestone as it is expected to mark the first annual profit since being bailed out amid the banking crisis. It said in December it expected bad debt losses of £4.3 billion in 2010 compared with the £1.6 billion reported in June. Despite this, the market is still pencilling in pre-tax profits of £2 billion – a marked improvement on the £6.3 billion loss in 2009.

Utility giant Centrica is set to provoke further public outrage over high energy bills on Thursday when it reports a 29% surge in annual profits. British Gas, Centrica’s residential arm, put up its prices by 7% in December last year, blaming mounting pressures from soaring wholesale prices.

But the company, which also runs gas exploration operations, recently said it expected to unveil operating profits ahead of analysts expectations of £2.2 billion for 2010, up from £1.86 billion in 2009.

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