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Contrast in recovery at Lloyds and RBS

THE recovery fortunes of part-nationalised banks Lloyds and RBS will be examined in a coming busy week for City updates.

On Thursday, Lloyds will deliver its first update since the Government cut its stake to 25% by selling £4.2 billion of shares last month.

The stock was sold to institutions, with a further multi-billion pound public sale expected later in the year.

Share value, which peaked at more than 80p earlier this year, has been falling since the latest placing, when shares sold for 75.5p.

Nomura analysts have raised the target price to 89p and said Lloyds was on track to be the highest-yielding UK bank with a strong capital position.

Morgan Stanley analysts expect first-quarter results to show growth in core loans, a slight improvement in margin and underlying profits up 24% to £1.8bn.

In contrast, RBS publishes a first-quarter update on Friday after annual results earlier this year showing a loss of £8.2 billion.

Morgan Stanley analysts expect operating profits of £900 million for the first quarter, up slightly on last year, set against restructuring charges of £500m.

Meanwhile, Argos owner Home Retail Group reports full-year results on Wednesday after a buoyant trading update last month.

The group told investors to expect profits to March 1 to be ahead of market projections of £111m.

Keith Bowman, equity analyst at stockbrokers Hargreaves Lansdown, said: "Home Retail remains well placed in terms of capturing the unfolding recovery."

Costa and Premier Inn owner Whitbread is expected to show a 12% rise in earnings after strong trading.

Analysts on average expect annual pre-tax profits to rise to £397.9 million.

But Panmure Gordon analysts say Premier Inn and the group's restaurants continue to under-perform.

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