UK banks get ready to report third quarter results, with forecasts of non-core dragging on profits at Barclays and pension problems predicted at Lloyds

 
Hayley Kirton
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Barclays bank headquarters in London
Barclays non-core units have dragged down its performance in previous quarters (Source: Getty)

All eyes will be on the banking sector this week, as big players get set to reveal their third quarter results.

Lloyds will be reporting on Wednesday, followed by Barclays on Thursday and Royal Bank of Scotland on Friday.

Analysts have predicted Barclays will announce profits before tax for the group of £1.3bn, compared with adjusted profit before tax of £1.4bn for its third quarter of 2015.

The banking giant is also forecast to reveal its non-core division is still dragging performance down, with a loss of £256m expected to be attributed to this part of its operations, compared with a profit of £1.6bn predicted in its core business.

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Barclays has been gradually ditching its non-core business for some time now, recently reaching agreements to sell its Egyptian bank, UK trust business and an Italian portfolio of salary secured loans. A loss from the non-core division is unlikely to cause panic among shareholders: the bank revealed a 21 per cent slump in its pre-tax profits in its recent half-year results, but shares shot up as investors twigged the bulk of the drop could be attributed to the non-core unit.

Meanwhile, analysts at Citi have predicted Lloyds could reveal its pension has swung into a deficit during its third quarter of the year, which could force the bank to take on a £1.2bn capital charge to compensate.

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Citi also predicted Lloyds would be pushed to bolster its provision to cover payouts for payment protection insurance (PPI) mis-selling, after the Financial Conduct Authority announced in August it was setting a deadline for complaints of June 2019, not spring of 2018 as had previously been proposed. The analysts predicted Lloyds could book a £1.5bn charge through its accounts this quarter to add to its provision, as well as a further £500m in final quarter of the year.

In RBS' results on Friday, many will be looking for some sort of indication as to what the bank is planning to do with Williams & Glyn, which the lender has been told to divest off before the end of 2017 as part of its state bailout deal.

It has been reported that Santander renewed its interest in snapping up the brand and its 300 branches over the summer but later pulled the offer because a suitable price could not be agreed on.

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Challenger bank Metro Bank will also be reporting on Wednesday, and the up-and-coming lender has previously indicated it is fast approaching profitability.

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