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* D.Bank, UBS, StanChart, Lloyds to report Q3 earnings
* Mixed economic backdrop, regulatory concerns to weigh
* UK's Lloyds to buck trend with sharp profit rise
By Matt Scuffham and Steve Slater
LONDON, Oct 29 (Reuters) - Grim investment bank revenues, amixed economic backdrop and increasing regulatory and legalconcerns are set to weigh on results from three of Europe'sbiggest banks on Tuesday.
But Britain's biggest domestic lender Lloyds Banking Group will buck the trend by reporting a sharp rise inthird-quarter profit, benefiting from the improving health ofthe UK economy.
European banks are set to echo the grim performance shown byWall Street's big banks in fixed income, where revenues - whichaccount for about half of total investment bank income - weredown about 15 percent on average from a year ago.
Banks in Europe could fare even worse, analysts said, adownturn that could intensify scrutiny on how far Deutsche Bank and UBS are shrinking and realigning theirinvestment banking arms.
Deutsche Bank is expected to say its third-quarter pretaxprofit fell 43 percent to 642 million euros ($886 million), aReuters poll showed.
The Frankfurt-based lender warned investors in Septemberthat investment banking revenue would be significantly lower inthe third-quarter, blaming a slowdown in sales and trading ofdebt products. It normally derives about 55 percent of itsinvestment bank revenue from fixed income, currencies andcommodities.
Deutsche has also warned it will have to set aside moremoney to deal with litigation. Unlike rivals Barclays and UBS, it has not yet reached a settlement over allegations itwas involved in a scam to manipulate global benchmark inter-banklending rates. [ID: nL5N0IF31K]
UBS is seen swinging to a third-quarter net profit of 537million Swiss francs ($600.6 million), a Reuters poll showed,from a year-ago loss of more than 2.1 billion that reflected a3.1 billion franc restructuring charge, as well as 863 millionfrancs in charges on the value of its own debt.
Booking the loss last October it also announced a three-yearplan to cut 10,000 investment bank staff by withdrawing fromlarge parts of fixed income.
IMPROVED MARGIN
The move means UBS will focus almost exclusively on cateringto wealthy clients at its private bank, but investors are stilllooking for proof of the Swiss bank's progress.
Lloyds, 33 percent owned by the UK government and focused onlending to the domestic economy, is expected to reportthird-quarter underlying pretax profit of 1.5 billion pounds, upfrom 831 million the year before, according to a Reuters poll.
The performance reflects an improved net interest margin -the difference between the rate it offers to savers and the rateit charges borrowers - and a decline in customers being unableto pay back loans.
Shares in Lloyds have risen by 69 percent this year to anear four-year high, enabling the government to start offloadingthe shares it picked up through a 20.5 billion pound bailout ofthe bank during the 2008 financial crisis.
Lloyds is in talks with Britain's financial regulator aboutthe possibility of restarting dividend payments next year. Ithas been selling assets and slimming its international businessto strengthen its capital position and is targeting a core Tier1 ratio, taking into account new Basle III capital rules, ofabove 10 percent by the end of the year.
The bank may, however, have to increase the funds it has setaside to compensate customers mis-sold loan insurance andcomplex interest-rate hedging products. It already expects topay out 7.3 billion to customers wrongly sold payment protectioninsurance (PPI), the most of any bank.
Meanwhile a trading update from Standard Chartered is expected to reflect a weak third quarter due to difficultinvestment banking activity, slowing loan growth and asignificant currency drag, as weak Indian and Indonesiancurrencies translate into lower reported U.S. dollar earnings.
Its shares have been hit by concerns about a slowdown inAsia derailing its decade-long growth and are down 3 percentthis year, one of the worst performing bank stocks in Europe.
The bank has said it expects to deliver a 2013 operatingprofit of about $7.9 billion, up 15 percent from last year.
