Investors seek share signs as Lloyds leads bank reporting season

All eyes will be on Lloyds Banking Group this week as it kicks off the third-quarter reporting season for the UK's five big listed banks.

The continuing economic recovery is set to boost all the banks' domestic profits. However, those with large investment banking offshoots, such as Barclays and Royal Bank of Scotland, will be held back because of tough trading in financial markets.

The Treasury unloaded its first tranche of Lloyds shares last month raising £3.2bn for a 6 per cent stake at 75p a share.

They closed at 80.18p on Friday and investors will be looking for any signs that the next tranche – expected to be worth at least £7bn – is on its way.

Analysts expect underlying, pre-tax profit to have risen from £840m to almost £1.5bn as net interest margins continue to rise.

Shore Capital's Gary Greenwood believes the bank will not unveil its dividend policy yet, but predicts thay it will be 1.5p a share in 2014, the first pay-out in five years.

Royal Bank of Scotland's new chief executive, Ross McEwan, and finance director Nathan Bostock host their first set of results on Friday.

Mr McEwan's big set-piece review of the business is not due until February, but already he is having to address issues like breaking the bank up into its good and bad parts. There could be good news in that bad-debt provisions dip below £1bn on a quarterly basis for the first time in more than three years.

Barclays' figures on Friday are not likely to contain many surprises. Morgan Stanley is predicting operating profit down 21 per cent to £1.48bn.