Public opinion over bank pay and energy prices will be tested this week when state-owned banks RBS and Lloyds and British Gas owner Centrica post figures for 2011.
State-backed Royal Bank of Scotland will revive fears that taxpayers will have to wait several years before recouping their multi-billion investment when it reports losses of up to £2 billion this week.
RBS, which is 83 per cent state owned after taking bailout assistance worth £45 billion at the height of the financial crisis, is understood to have made an underlying loss of between £1 billion and £2 billion.
However, the bank is forecast by analysts Nomura to report bottom-line pre-tax profits of £138 million in 2011, compared to a £239 million loss the previous year.
RBS has been at the centre of a row over bankers’ pay in recent weeks, which ultimately led to chief executive Stephen Hester waiving his £963,000 all-shares bonus.
The results will give the bank the opportunity to update on the progress it has made towards delivering a decent return to its shareholders - that is the taxpayer.
However, rival Barclays set the bar high for pay disclosure last week when it revealed the average bonus for each group employee, each investment banker and introduced a cap on the cash part of bonuses.
John-Paul Crutchley, analyst at UBS, said RBS has been one of the best performing European banks so far in 2012, as shares have risen nearly 40 per cent, adding around £8 billion of market value - and therefore £6.5 billion to the taxpayers’ investment.
He went on: “With the benefit of management clearly apparent, it seems surprising that the political establishment which, we think, should be aligned with a good investment outcome for RBS shareholders, is potentially putting this at risk by raising concerns over the chief executive’s remuneration.”
The bank has moved to strip down its investment arm Global Banking and Markets amid increased Government pressure to focus its operations on UK high street services.
GBM, which employs 18,900 worldwide, deals with a range of financial services such as debt advice, equity trading and mergers and acquisitions.
The restructuring will lead to around 3,500 job losses, on top of the 2,000 announced by the bank last summer.
The proposed changes include the sale or closure of its cash equities, equity capital markets and mergers and acquisitions businesses, which had income of around £220 million in the nine months to September and are currently unprofitable.
The City will be looking for an update on how much RBS thinks the reshaping of GBM is going to cost.
Robert Law, senior banks analyst at Nomura, said: “What these measures will cost is unclear and we believe it is likely to be substantial.”
Elsewhere, RBS will update on progress made with running down its bad debts - particularly in Ireland, where its Ulster bank has weighed on its performance.
Fellow part-nationalised bank Lloyds Banking Group has managed to avoid the bonus row so far - after boss Antonio Horta-Osorio waived his annual payout due to a leave of absence.
But like RBS, the 41 per cent state-owned bank is also going through a massive overhaul, which will include around 15,000 job cuts and the EU-enforced sale of 632 branches.
The bank has some way to go before delivering a decent return to the taxpayer as, at 33p, its share price is still nearly half the price tag of 63p a share paid by the Government for its stake.
Lloyds is expected to report a statutory loss of £4 billion for 2011, compared to a profit of £281 million the previous year. The bank took a big hit from the payment protection insurance mis-selling scandal, as well as write-downs on loans made by HBOS before the two banks merged.
The City will be looking for an update on how much this restructuring will cost the bank, which owns more than 2,000 branches in the UK, as well as any progress made on completing the sale of its branches to preferred bidder the Co-operative bank.
But Robert Law, senior banks analyst at Nomura, has predicted the so-called Project Verde sale will be a flop.
“The Project Verde disposal is likely to prove disappointing and involved a book value loss for Lloyds, as well as earnings dilution,” he said.
“Lloyds named the Co-operative bank as the preferred buyer last year, but has maintained work on an initial public offering as an option in case agreement is not concluded.”
However, he said the core high street businesses were “relatively strongly positioned, with healthy market shares”.
Mr Horta-Osorio, who returned to work last month after taking two months off due to severe sleep problems, said he acknowledged that his absence had had an impact both “inside and outside the bank, including for shareholders”.
Mr Horta-Osorio could have received a maximum of 225 per cent of his annual salary, which equates to a total of £2.4 million, but chose not to take the payment.
The mild weather in the final months of 2011 will see Centrica’s residential arm British Gas report its lowest profit in three years on Thursday.
The UK’s biggest gas supplier is expected to report a 25 per cent fall in profits to £550 million at its household energy business in 2011, as the mild weather allowed customers to turn down the central heating.
The previous year, it reported record profits of £742 million just months after hiking bills by 7 per cent.
Despite the profits fall in 2011, British Gas still made about £50 profit per household per year, which will reignite anger about the recent escalation in energy bills, which has forced some to choose between heating and eating.
British Gas will say the profits fall was caused by volatile wholesale energy prices, as it made a loss for five months after delaying the hike in gas and electricity prices by an average of 18% and 16% respectively until August 18.
It has since announced a 5% cut in electricity prices in January, which it claims makes it the cheapest mainstream supplier on the market.
Some of the fall in profits in supplying gas and electricity to households will be clawed back through a 10 per cent hike in profits through services such as boiler repairs to £264 million.
And the group is set to report record overall profits of £2.5 billion, up 4 per cent on the previous year as its upstream business smashes through the £1 billion barrier for the first time. The division is set to see a 38 per cent increase in profits £1.1 billion.
The company claims it has invested £1.80 for every £1 it has earned over the past five years.
The row over executive pay at budget airline easyJet will come to a head when Sir Stelios Haji-Ioannou, who founded the airline in 1995 and still speaks for 37.4 per cent of shares, urges other investors to vote down a plan that could award 10 executives shares worth £8 million over the next three years.
His cause ahead of Thursday’s annual meeting in Luton gained momentum when Pensions Investment Research Consultants (Pirc) advised its members to vote down the remuneration report, citing concerns over the level of complexity surrounding incentive arrangements and an “inadequacy of disclosure”.
Pirc also seemed to suggest that Sir Stelios’ ongoing feud with the board was partly responsible for high levels of pay. It added: “Executive pay is an inappropriate tool to mitigate the risk associated with having an active, controlling shareholder.”
The body advises investors with about £1.5 trillion in assets but it is not known how many of easyJet’s shares are owned by its members. The report needs 50 per cent of shareholders’ votes to be passed.
The support of Pirc came as welcome news to Sir Stelios after his campaign was dealt a blow when the company’s three biggest institutional shareholders - Standard Life, Sanderson Asset Management and M&G, whose holdings account for 17.5 per cent of the airline’s shares - said they would approve the pay plans.
Sir Stelios has even written to Prime Minister David Cameron accusing easyJet’s board of softening performance targets in order to make the share payout for executive directors more easily attainable.
But easyJet chairman Sir Michael Rake recently told investors there were “numerous inaccuracies” in Sir Stelios’s recent comments about the airline and accused the major shareholder of launching “increasingly personalised” attacks on individuals.
Two of the UK’s biggest housebuilders will reveal more strong trading over recent weeks as next month’s deadline for the end of a stamp duty holiday creates a rush of first time buyers.
Redrow and Barratt Developments are both expected to say that the spring selling season has been buoyant as new buyers rush to take advantage of an amnesty that ends on March 24 for homes worth between £125,000 and £250,000.
The Council of Mortgage Lenders recently said its members advanced 18,700 loans worth £2.3 billion to potential new homeowners in December, up 7 per cent and 10 per cent respectively on November.
The rush for homes has provided a welcome boost for the market at a time when mortgage lending has been subdued by weak demand and banks looking to reduce risk as the UK teeters on the brink of recession.
However, the housing market still faces fundamental problems as banks are demanding deposits of up to 20 per cent, leaving many potential first time buyers unable to climb onto the property ladder.
While most housebuilders have reported strong growth in recent months, there are fears of a slump when first time buyers are required to start paying stamp duty again.
However, they hope that the Government’s mortgage indemnity scheme, which sees it guarantee to underwrite losses on new build properties in England to help first time buyers borrow up to 95 per cent of the value of their home, will stimulate demand.
Redrow will say on Thursday that its turnaround has continued in recent weeks after it overhauled its range under the leadership of Steve Morgan, who three years ago returned to the company he founded in 1974 after it posted its worst ever set of results.
The owner of Wolverhampton Wanderers football club has returned the group to its roots by building more family homes under its New Heritage Collection, which has reduced its exposure to first time buyers and raised its average selling price.
The Flintshire-based company has also sold its unprofitable Scottish division and started one in London to reflect the strong demand for homes in the capital.
When it last updated the market, it said pre-tax profits rose to £25.3 million in the 12 months to June 30, compared to £700,000 the previous year, as average selling prices of private homes increased to £174,100 from £154,800.
The City expects the group to report a 65 per cent rise in pre-tax profits to £14 million in the six months to December 31, on revenues up 3 per cent to £223 million.
Barratt has also focused on building more family homes in the affluent South East, helping its average selling prices increase 4 per cent to £200,000 in the six months to December 31.
It is expected to say on Wednesday that its operating profits increased 40 per cent to £61 million as it benefits from buying cheaper land after the recession.
The group, which also trades as David Wilson and Ward Homes, returned to profit last year after being hit by the downturn in its market.
Bookmaker William Hill’s recent trading will be scrutinised for signs that the UK’s weak economy is starting to hurt its performance.
The group, which will update the market on Friday, has reported that revenues rose 6 per cent in 2011 as it benefits from strong growth in online gaming.
Operating profits are likely to be around £274 million, compared to £276.8 million in the previous year, which was boosted by the World Cup.
Margins also came under pressure in the final quarter of 2011 as punters got lucky with a number of high return bets on football games.
But while growth in 2011 has been strong, Simon Larkin, an analyst at Bank of America Merrill Lynch, fears it has tougher times ahead.
He thinks that over-the-counter revenues will come under pressure as the UK’s weak GDP growth and rising unemployment makes consumers feel like they are in a recession, while the growth in gaming through machines in its shops will slow.
Over-the-counter wagers, which grew by 3 per cent in 2011, will decline by 4 per cent in 2012/13, he predicts, despite receiving a boost from the Euro 2012 football championships, while machine revenues growth will slow from 6 per cent to 3 per cent.
He said: “When UK labour market conditions deteriorate, combined with falling consumer confidence, it is generally bad news for over-the-counter retail.”
However, its online division is expected to continue to report further strong growth.
In 2011 it delivered its second consecutive year of revenues growth in excess of 20 per cent, with a figure of 28 per cent. Operating profits in the division are expected to be 17 per cent stronger at around £106 million.
Rival Ladbrokes has already reported that over-the-counter betting was “resilient” in 2011, attracting wagers worth almost £2.5 billion, while gaming machines drew almost £10.5 billion from punters, an increase of 13.7 per cent on a year earlier.
It said profit per shop increased 6.9 per cent year-on-year and it posted overall operating profits of £193.5 million, broadly flat on a year earlier after its digital division was hampered by poor trading in poker.