HBOS and RBS to reveal massive asset writedowns

The UK banks HBOS and Royal Bank of Scotland, which are to receive more than £30bn of taxpayers' money, are expected to unveil massive asset write-downs and warn this week that full-year profits are likely to come in below expectations.

HBOS is expected to update on trading today, while RBS is expected to deliver its interim management statement for its third quarter tomorrow, but they are both likely to deepen the gloom that has enveloped the banking sector since the credit crunch reared its ugly head last summer.

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HBOS is expected to say that the declining value of Treasury assets will lead it to write down an additional £5bn, which illustrates its need for capital.

It is expected that RBS will not publish a full-year profit estimate because of the continuing volatility in the global banking sector, when it updates on its third quarter and publishes the pros-pectus for its £20bn capital raising. RBS declined to comment.

Changes recently agreed by the Acc-ounting Standards Board may allow both banks to limit markdowns on their holdings of mortgage-backed securities and other forms of tradeable debt. Last week, Deutsche Bank used these changes to shift a substantial proportion of these assets on to a hold-to-maturity basis, substantially reducing the size of the writedowns it was forced to take against profits.

Yesterday, HBOS declined to comment on speculation that a former director has been approached by an unnamed foreign financial institution to help it put together a rival offer to derail Lloyds TSB's proposed takeover of HBOS. It is understood that the move by Jim Spowart, a former director at HBOS's Intelligent Finance online banking operation who left four years ago, and the unnamed bank is not being taken seriously.

On Friday, Lord Mandelson, the new Business Secretary, cleared the takeover of Lloyds TSB and HBOS.