Lloyds Banking Group’s upbeat forecasts yesterday sent British bank shares soaring across the board.

Lloyds shares rose 11 per cent to 93.2p on its positive predictions, in spite of announcing a £4 billion loss in the six months after taking over HBOS. Shares in Royal Bank of Scotland (RBS), which is expected to announce tomorrow that it has started breaking even after a series of huge losses linked to bad debts and the purchase of ABN Amro in 2007, gained 2.07p to 48.7p.

Barclays, which unlike Lloyds and RBS has not been forced to accept government funding to stay afloat, closed up 2.4 per cent to 336.5p as traders became more optimistic about the future of banks and about the British economy. Standard Chartered’s share price rose 3.2 per cent to £13.70.

Several big British banks have had to issue profit warnings, raise more money from shareholders and the Government, as well as cut dividend payments in the past year, making them unattractive to investors. The banks are also preparing to put a combined £585 billion of bad debts into a government-backed asset protection scheme.

Optimism from Lloyds about mortgage customers’ ability to keep making their repayments after a series of interest-rate cuts by the Bank of England’s Monetary Policy Committee also helped the banks. Peter Dixon, economist at Commerzbank, said: “Banks are very much in focus and while the [Lloyds] numbers weren’t great, they could have been very much worse.”

On Monday HSBC and Barclays reported a combined profit of £6 billion. Neither of the banks received government backing. HSBC’s share price, which has performed better than RBS and Lloyds in the past 18 months, fell slightly yesterday to 627.2p.

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