State-backed Lloyds and RBS poised to announce better figures

Britain's two major state-controlled banks, Lloyds Banking Group and Royal Bank of Scotland, are hoping to defuse any row over pay this week when they publish 2010 figures that will show clear signs of financial recovery. Bonuses for the two banks' top executives were announced at the time of the Project Merlin accord, so the banks hope the focus will be on their performance last year, when the low interest rate environment helped to ensure that their provisions for bad debts improved. RBS, 84% taxpayer controlled, is expected to have made a loss once again – estimated at £700m – but at a far lower level than last year's £3.6bn deficit. Lloyds, however, will present its first full year in the black since being bailed out by the taxpayer in 2008 after rescuing HBOS from collapse. The City is expecting Lloyds to reverse a £6.3bn loss in 2009 into £2bn of profits, largely as a result of a dramatic improvement in charges for bad debts, which will still stand at more than £4bn. Outgoing Lloyds chief executive Eric Daniels will present his last figures – and receive a £1.45m bonus – before handing the helm to António Horta-Osório, who has been hired from Santander. Horta-Osório is preparing to accelerate the sale of 600 branches that must be sold to appease EU regulators. That may also help the bank's case with Sir John Vickers's banking commission, which is looking at whether Lloyds should be broken up to increase competition on the high street. Meanwhile, at RBS, chief executive Stephen Hester is to receive a £2m bonus in shares which will be released in three years, while the bank's bonus pool has been set at £950m, down on £1.3bn a year ago. Cash bonuses, which are paid in March, will be capped at £2,000.