The week ahead: The Old Lady raises her rates as the big banks raise the roof

The banks will be hitting the headlines again this week, but none more than the Bank of England. On Wednesday and Thursday, the Old Lady's wise sages will gather to deliver their monthly verdict on interest rates.

The banks will be hitting the headlines again this week, but none more than the Bank of England. On Wednesday and Thursday, the Old Lady's wise sages will gather to deliver their monthly verdict on interest rates.

Economists are agreed that a quarter-point increase is virtually a done deal, although this didn't stop the National Institute of Economic and Social Research from arguing for a half-point rise instead to bring consumer spending and house price inflation under control. Whatever the Bank settles for, the consensus is that this is a case of by how much, not if, rates will rise.

HSBC, headed by Sir John Bond, will lead this week's banks in reporting results. It is one of the few UK-based banks not believed to be considering making a counter-offer for Abbey National, which has recommended a £8.3bn bid from Spanish bank Santander Central Hispano.

Analysts will be looking to see how well its US consumer credit business, Household, which it bought last year, is faring. Shareholders have been concerned about the group's rising bad debt book; this is largely due to Household, which makes high-interest loans to customers judged to be at risk of defaulting. There could also be more details about HSBC's talks with China's Bank of Communication. HSBC is considering buying a 20 per cent stake.

Royal Bank of Scotland needs to prove it has not overpaid for its recent acquisitions, Churchill Insurance and the Irish mortgage lender First Active, by showing it can make savings by merging the businesses. Analysts at stockbroker Williams de Broë say the bank can deliver over £200m a year in administrative savings once Churchill is fully integrated.

Barclays, which reports on Thursday, remains "a large grey cloud that drizzles cash", say Williams de Broë analysts, quoting former chief executive Martin Taylor.

Despite the recent reorganisation, there is concern that rising costs are eating into profits. Much of Barclays' recent revenue growth has come from its fixed-income operations, but Morgan Stanley says this will drop off in the second half as fixed income markets cool.

It's a big week for the insurers too. Commerzbank expects market leader Aviva, owner of Norwich Union, to announce pre-tax profits of just over £1bn on Wednesday, bucking the trend of the beleaguered life insurance industry. Friends Provident, which reports results on Thursday, isn't doing quite so well, but has its hands full merging its fund management business Isis with rival F&S; together they will manage investments worth £120bn.

Other companies reporting include Ryanair, whose first-quarter results are out on Tuesday. Among other things, analysts are looking forward to more details about its novel plan to stop carrying bags in the hold.

On Thursday, water regulator Ofwat will announce how much water companies will be able to charge customers over the next five years.

Ofwat cannot win. If the regulator announces big cuts, there will be the usual gnashing of teeth from companies pleading poverty. But if the regulator allows companies to raise prices to pay for the estimated £22bn of improvements needed on the water and sewage network, consumer groups will cry "fat cats" once again.

The next day shareholders will want know what engineering group GKN intends to do with the £1bn from the sale of its half share in helicopter maker AgustaWestland. GKN will say that reducing debt, share buybacks, acquisitions and a lump sum investment in its pension fund are under consideration.

On the other side of the Atlantic, the biggest piece of non-corporate news will be US employment figures for July, which come out on Friday. After far weaker than expected figures for June, when employment increased by only 112,000, Barclays economists expect new job figures of 233,000 in July. Any disappointment, it warns, and the recent dip in global equity markets because of concerns about the sustainability of the global economic recovery could be prolonged.

CALENDAR

Tomorrow

Tuesday 3

US: Results: (i) Martha Stewart Living Omnimedia; (Q3) Qwest, Tyco.

Wednesday 4

US: Results: (Q1) Tommy Hilfiger

Thursday 5

US: Results: (f) Sara Lee; (i) Alcan, Time Warner.

Friday 6