The UK government is showing a paper profit on its 41% stake in high street banking giant Lloyds and should have further cause for celebration when the bank unveils profits for the first half of the year on Wednesday.Expectations are for Lloyds to declare pre-tax profits in excess of £800m, a sharp contrast to the £4bn in losses seen at the interim stage last year, when it took impairment charges of £13.4bn for bad loans.As was the case with sector peer HSBC, however, the bank may come under pressure to bump up its lending targets. Chancellor of the exchequer, George Osborne, has already said that the banking industry has an "economic obligation" to lend to businesses and home buyers. Chief executive officer Victor Daniels may use the return to profit as an opportunity to score a few points against critics of Lloyds' decision to take over HBOS, a merger that some pundits argue was made under duress applied by the Labour government.Daniels has previously argued that over the long term the combination of Lloyds and HBOS would give the combined entity a blockbusting market share in the UK; Banco Santander's acquisition of 318 branches offloaded by Royal Bank of Scotland, announced on Tuesday, may also lend support to Daniels's view that consolidation is the way to go in the UK market.That has not stopped rumours spreading that Daniels's time at the top of Lloyds is running out, with reports stating the bank has employed a head-hunter to find a successor to Daniels. A spokesman for the bank denied that there is any process underway to replace Daniels.The interim management statement from Lloyds at the tail end of April bodes well for the interim results in the view of broker Charles Stanley. "The benign state of the economy has led to a better than expected impairment experience which in turn means that the group has been profitable in Q1 2010 [first quarter 2010], somewhat earlier than expected. The references to the margin, costs and synergies in Q1 were re-assuring and we will be looking to see whether this has remained the case in Q2 2010," the broker said.Elsewhere in the banking sector Standard Chartered is also set to post half-year results. The Asia-focused bank has already indicated in a pre-close trading statement that it is "tracking towards" another strong first half performance.Income in the first half of 2010 is expected to be of a similar level to the first half of last year but a healthy improvement on the final six months of 2009."We will have to keep an eye on the impact of the recent increase in competition among Asian banks for deposits which has hurt the margin to see whether this is transitory or something more permanent," suggests Charles Stanley. Sticking with the financial sector, Legal & General (L&G) is another reporting on its first half performance.Panmure Gordon is forecasting European Embedded Value (EEV) operating profit of £572m for L&G, which it says is towards the top of the range of market forecasts.The broker is in line with consensus with its International Financial Reporting Standards (IFRS) operating profit forecast of £394m, and is predicting a hefty hike in the interim dividend to 1.4p."We think that cash generation, dividend outlook and any comments concerning possible 2010 year end reserve releases will be the key issues," the broker said. "We are forecasting net cash generation at £321m (H1 [first half] 2009: £302m) following Q1 [first quarter] 2010 cash generation at £179m (Q1 2009: £136m)," Panmure Gordon said, adding that an uplift to the previous net cash generation guidance of £600m for 2010 could be on the cards. "In addition, we will look to see if there is any steer on the dividend outlook and possible signs of a release of corporate default reserves that stand at £1.5bn. We view a reserve release at H1 as unlikely but think that there is a possibility at 2010 year end results assuming no material deterioration in the bond portfolio," the broker said.Outside of the financial sector, fashion retailer Next gives a sales update covering the 26 weeks to the end of July. "Helpful weather in June underlies our forecast, along with a strong performance in clothing from peer M&S [Marks & Spencer] in Q1 [first quarter] and strong CBI [Confederation of British Industry] retail sales results for end June - early July," says Panmure Gordon.The broker is predicting retail sales for the first half will be up 3.5% year on year though like for like sales growth is tipped to be minimal."We expect Directory sales +6.0%, above the guidance range of 2.0% to 5.0%. Next's current collection looks on trend, it is increasing its exposure to a younger and/or more fashion conscious customer, it is a true multichannel retailer and has a management team which is committed to returning capital to shareholders," enthuses the broker.Pharmaceuticals company Shire issues a trading update at noon. Nomura Securities is predicting second quarter earnings per share (EPS) of 30.8 cents versus consensus of 29..8 cents. It thinks Adderall XR sales will total $69m while Elaprase sales are tipped to hit $104m."We estimate total revenues at $825m (+31.0% y-o-y [year-on-year], 2Q09A [actual figures for second quarter 2009]: US$630m) vs consensus $802m," the broker said.The service sector purchasing managers' index is expected to have been on an upward trend in July. Forecasting unit I H S Global Insight is predicting the index will edge up to 54.5 after slipping to a 10-month low of 54.4 in June. INTERIMS4imprint Group, Allied Irish Banks, Arbuthnot Banking Group, Bank Pekao GDS (Reg S), Cookson Group, GlobeOp Financial Services, Legal & General Group, Lloyds Banking Group, LSL Property Services, Nicholls, Premier Foods, Shire Plc, Standard Chartered, StatPro Group, Wolfson Microelectronics, Yamana Gold IncINTERIM EX-DIVIDEND DATEBG Group, Bluehone AIM VCT 2, Dialight, Edinburgh UK Tracker Trust, Independent Inv Trust, Invesco English & International Trust, Maven Income and Growth VCT 3, Porvair, RAB Capital, Rank Group, Reckitt Benckiser Group, Reed Elsevier, St James's PlaceQUARTERLY EX-DIVIDEND DATEQuorum Oil and Gas Technology Fund Ltd., Royal Dutch Shell 'A', Royal Dutch Shell 'B'INTERNATIONAL ECONOMIC ANNOUNCEMENTSCrude Oil Inventories (US) (15:30)ISM Non-Manufacturing (US) (15:00)ISM Services (US) (15:00)MBA Mortgage Applications (US) (12:00)PMI Composite (EU) (09:00)PMI Services (EU) (09:00)PMI Services (GER) (08:55)Retail Sales (EU) (10:00)Q2Shire Plc, Wolfson Microelectronics, Yamana Gold IncGMSEquity Partnership Income Shares, Octopus Phoenix VCT, Octopus Second AIM VCTFINALSMaxima HoldingsIMSSCarpetright, Marston'sEGMSEpic Securities ZDP Shares, Equity Partnership Income Shares, Octopus AIM VCTAGMSGas Turbine Efficiency, Petro Matad, Strategic Natural Resources, Workplace SystemsTRADING ANNOUNCEMENTSAntofagasta, NextUK ECONOMIC ANNOUNCEMENTSBRC Shop Price Index (00:01)Official Reserves (09:30)PMI Composite (09:30)PMI Services (09:30)FINAL DIVIDEND PAYMENT DATEAshley (Laura) Holding, Bond International Software, Homeserve, Octopus Protected VCT 1, Record, Vedanta ResourcesFINAL EX-DIVIDEND DATEAberdeen New Dawn Inv Trust, Carclo, Clyde Process Solutions, Cohort, Creston, Latham (James), RPC Group, SABMiller, SSL International, Sutton HarbourQ1British Land Co
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