Banks make modest progress

The UK banks' first-quarter reporting season has got off to a modest yet solid start after Asian-focused Standard Chartered revealed a strong performance and Barclays and Lloyds reported at least reasonable figures - in contrast to the pair's 2011's disappointing full-year results.

Admittedly, Lloyds was hit by an unexpected further £375m hike in its payment protection insurance provision. But loan impairment charges fell 31 per cent in the quarter to £1.7bn and the core tier-one capital ratio reached a healthy 11 per cent. Progress is being made cleaning up the balance sheet by reducing non-core assets - which fell £12.4bn in the first quarter. "In the recent past, financial updates from Lloyds often sounded like a desperate plea for help - but no more," said banking analysts Ian Gordon and Arun Melmane of Investec Securities.

Barclays delivered a "very creditable" performance, too, according to Investec. Its impairment charge fell 16 per cent and core tier-one capital ratio remained largely unchanged at a decent enough 10.9 per cent. The bank is paying a 1p quarterly dividend as well - unlike Lloyds or RBS - and the UK retail operation saw adjusted pre-tax profit rise 16 per cent to £334m. But income at the investment banking business slipped 17 per cent, reflecting a weak performance in equity underwriting.

Standard Chartered's focus on solidly performing emerging markets, meanwhile, meant high single-digit income growth. And while loan impairments rose, that was merely in line with loan book growth. Standard's Asian rival, HSBC, may have less attractive news to report with its figures on 8 May. "An ongoing decline in net interest margin will continue to exert downward pressure on revenues," says Investec. Similarly, Investec isn't "wildly excited" about forthcoming figures from RBS - due on 4 May: "The stock will not be rebounding to the heady heights of 40p last seen in June 2011."

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