Fresh blow for banks over US totals

The banking sector suffered another blow today after two of the US's financial giants reported worse than expected profits.

Investment bank Goldman Sachs earned 1.05 billion US dollars (£653 million) in its second quarter, which was more than twice the amount in the same period a year ago but less than analysts had expected.

And Bank of America posted losses of 8.8 billion US dollars (£5.5 billion) - the biggest quarterly loss in the lender's history - as a result of its 8.5 billion US dollar (£5.3 billion) settlement with mortgage-bond investors. This compares with a profit of 3.1 billion US dollars (£1.9 billion) a year earlier.

The performance of two of the US's biggest banks sparked a further wobble in confidence among their counterparts in the UK.

Before the American banks reported, the UK's biggest banks had been enjoying a strong recovery in early trading after they took a hammering yesterday as a result of fresh fears about the eurozone debt crisis.

Barclays was particularly badly affected by the news about Goldman due to the importance of its BarCap investment arm. Its shares had been up by 8p at noon but saw its gains reduced to 4.3p, leaving it at 211.9p.

Royal Bank of Scotland shares dropped slightly following the announcements from the US but it recovered to rise by 0.5p to 33.5p. And Lloyds Banking Group rose by 1.7p to 43.1p.