News round up: Citi, Lloyds, Royal Bank of Scotland, Mortgage payments, China, Sterling and Euro collapse.

Lloyds Banking Group plc (LON:LLOY) and Royal Bank of Scotland Group plc (LON:RBS), could see their profits slashed following a downgrade of their credit ratings by Moody's. Profits at Lloyds are forecast to fall 16pc next year, while RBS's earnings will drop 8pc, as the banks face higher funding costs, as a result of their downgrades by Moody's, Citigroup Inc (NYSE:C) said.

Lloyds is currently rated A1 by Moody's but is expected to be downgraded by two notches to A3. Citigroup said the lender would as a result have to put up a further £24bn of assets against its secured borrowings, to compensate for the increase in its perceived riskiness. RBS is currently rated A2 by Moody's, but is also set to see its rating cut to A3, meaning that like Lloyds it will have to set aside billions of pounds in new collateral just to hang on to its existing funding.

Moody's will begin its downgrades in early May, with Italian lenders first in the firing line, to be followed by banks in all of Europe's major economies, including Germany and France, writes the Telegraph.

Mortgage payments

More than one million homeowners will see their mortgage payments jump by hundreds of pounds a year from today as lenders, including two state-backed banks, raise borrowing costs. Borrowers with other banks and building societies face similar increases in the months ahead, experts have warned, with the Eurozone crisis and lenders’ funding problems driving up the cost of home loans.

The squeeze on family finances has raised fears of a new wave of home repossessions. From today, seven lenders including Halifax, Co-operative, Yorkshire and Natwest are increasing rates for existing customers by up to 0.5 percentage points, adding about £55 a month to a typical £200,000 mortgage, The Times reports.

China

China has announced plans to cut import tariffs just days before US Treasury Secretary Timothy Geithner arrives in Beijng for the latest round of talks between the two superpowers. Duties will be reduced on an array of imports, including energy products and some consumer goods, China's State Council said on Monday, without giving more details. The White House is pushing Beijing to cut tariffs and reverse a currency policy that many in the US believe hands Chinese manufacturers an unfair advantage.

The State Council also ordered the country's local governments to "appropriately enlarge" the import of consumer goods. Government departments and local administrations in China must "adjust their focus on encouraging exports and limiting imports and place equal emphasis on both", the State Council said, according to The Telegraph.

Sterling

Sterling climbed to its highest level against the euro in almost two years on Monday as concerns grew in the financial markets about the deepening crisis in the single currency. A pound at one stage bought more than €1.23 on the foreign exchanges – making foreign holidays cheaper but UK exports to the single-currency zone more expensive.

Fears that "austerity fatigue" is setting in among voters were heightened after figures were released showing that Spain – the country thought to be next in line for a bailout – has slid back into recession. The pound was also stronger against the US dollar, where last week's weaker-than-expected growth figures for the first three months of 2012 were followed by a closely watched barometer of business in Chicago, The Guardian says.

Euro collapse

David Cameron raised the spectre of the collapse of the euro and years more economic turmoil yesterday as he confronted his deepest political crisis since entering Downing Street. The Prime Minister warned the debt crisis across the Continent was not even halfway through, blaming the EU's woes for Britain's double dip recession.

With support for the Conservatives at its lowest ebb since 2004, just days before crucial London mayoral and local council elections, Mr Cameron promised to 'strain every sinew' to prompt economic growth, The Daily Mail reports.