Britain's Lloyds Banking Group is set to unveil a 5 billion pound ($8.3 billion) loss as bad debts soar and its four UK rivals will also show the strain when they report half-year results next week.
Investment bank revenue for all the banks is expected to be buoyant after a strong recovery in capital markets activity this year, but losses on mortgages and commercial loans will weigh on the retail parts of the businesses, analysts predict.
Retail-focused Lloyds is expected to sink to a pretax loss of 5.1 billion pounds for the six months to the end of June, compared with a restated 2.8 billion pound profit a year ago, according to the average of six analysts polled by Reuters.
The scale of bad loans will the key focus, and the bank's first-half impairment charge could hit 11.1 billion pounds, more than four times a year ago, according to analysts at Keefe, Bruyette & Woods.
Lloyds, which bought ailing rival HBOS last September and weeks later surrendered a 43 percent stake to the government in return for a 17 billion pound bailout, may also provide a progress report on efforts to absorb HBOS, a process that is expected to include disposals.
HSBC, Europe's biggest bank, should post a first-half profit of $4.9 billion on Monday, according to the average of 11 analysts polled by Reuters.
That would be half of its profit a year ago as bad loan losses are expected to swell to $14.9 billion for the six months, according to the average of 10 estimates.
HSBC's North American arm is likely to post a $5.2 billion loss as loan impairments rise to $4.5 billion for the second quarter from $4 billion in the first quarter, Nomura estimated.
HSBC's results will be distorted by a number of one-off items, however.
The near $5 billion profit forecast strips out a $4.7 billion loss in income related to accounting rules on currency moves affecting its rights issue. But it does include an expected $2 billion reversal on the fair value of its own debt and a $1 billion writedown on toxic assets.
BARCAP BOON
Barclays is likely to be one of Europe's winners from buoyant capital markets and should post a first-half profit of just over 3.5 billion pounds, according to the average of seven analysts, up 29 percent from a year ago.
Barclays Capital's profits may top 2 billion pounds as writedowns on toxic assets decline and it benefits from last year's acquisition of Lehman Brothers in the United States and strong debt, currency and commodities revenues.
Higher bad debts in its retail and commercial banking will eat into group profits and it will also see big distortions — including an 800 million pound gain on debt it bought back, writedowns of over 2 billion pounds, and about a 500 million pound reversal on its own debt, according to analysts.
Its great rival Royal Bank of Scotland, 70 percent owned by the state, is expected to post a pretax profit of 1.2 billion pounds compared with a loss of 691 million pounds a year ago, according to the average of four analyst forecasts collected by Reuters.
The bank's anticipated return to profitability reflects one-off gains on disposals and bond buybacks as well as a strong sales performance from its GBM investment banking unit.
Both RBS and Lloyds are expected to provide an update on talks with the government over how much they must pay to join a scheme under which the taxpayer will absorb a proportion of any further losses on risky credit assets they hold.
Analysts say the final terms of the so-called asset protection scheme, which will cover 325 billion pounds of RBS' assets and 260 billion of Lloyds', will have a critical influence on the banks' future bad debt exposure.
Standard Chartered is expected to report first-half earnings dipped 4 percent from a year ago to just under $2.5 billion, according to the average of five analysts' forecasts.
The Asia-focused bank reported record levels of income and profit in the first five months of this year, thanks to "a very strong performance" in wholesale banking, but income dropped in consumer banking, where bad debts have risen.
The following are forecasts for first-half results, based on the average forecast from analysts polled by Reuters. Full-year results are based on Reuters Estimates average. Losses are in parentheses. In pounds unless indicated: BARCLAYS: Results due Monday 0700 BST, based on 7 forecasts H1 2009 PRETAX YEAR AGO RANGE FY 2009 PRETAX
3,540 2,754 3,071-4,099 5,960
HSBC: Results due Monday 0915 BST, based on 11 forecasts H1 2009 PRETAX YEAR AGO RANGE FY 2009 PRETAX
$4,900 $10,247 $3,360-6,321 $9,157 STANCHART: Results due Tuesday 0930 BST, based on 5 forecasts H1 2009 PRETAX YEAR AGO RANGE FY 2009 PRETAX
$2,490 $2,586 $2,247-2,624 $4,250
LLOYDS: Results due Wednesday 0700 BST, based on 6 forecasts H1 2009 PRETAX YEAR AGO RANGE FY 2009 PRETAX
(5,100) 2,775 (6,147-2,881) (8,100) RBS: Results due Friday 0700 BST, based on 4 forecasts H1 2009 PRETAX YEAR AGO RANGE FY 2009 PRETAX
1,210 (691) (2,122)-4,614 (4,300)
