Booming UK banks braced for bonus row

Britain's banks are braced for another row over bonuses and lending levels as taxpayer-owned Royal Bank of Scotland, Lloyds Banking Group and Northern Rock finally bounce back into the black this week.

With HSBC, Standard Chartered and Barclays also set to publish first-half results, Britain's banks are are expected to report more than £8bn in profits in the next few days.

The main focus will be on the taxpayer-owned banks. On Wed-nesday, Lloyds' chief executive, Eric Daniels, is expected to reveal profits of as much as £1bn, bolstering his once-precarious position following the group's controversial takeover of HBOS in 2008. After a two-year run of savage losses, analysts are forecasting pre-tax profits of up to £200m from RBS on Friday. Northern Rock, which reports tomorrow, is also expected to report a profit.

Such strong improvement will raise questions about when the Government can start to sell down the massive stakes acquired at the height of the banking crisis. It will also reignite concerns over lending levels. RBS is expected to say that it is on course to meet government targets for £50bn of lending to businesses. But small and medium-sized companies across the country continue to complain of difficulty accessing finance. And rising profitability may also translate into bigger bonuses, further fuelling controversy.

George Osborne, the Chancellor, said at the weekend that banks should use their new-found financial strength to boost lending, rather than pay either bonuses or dividends. His comments echoed earlier calls from Vince Cable, the Business Secretary, for bonus cash to be used for lending to small businesses.