U.K. banks that reported gains on their own debt when credit spreads widened during the first quarter could be forced to book reversals for the second quarter, when spreads tightened, analysts said Friday.

This means that the banks' second-quarter earnings could show huge declines to reflect the reversal of recent gains on the value of their own debt.

But analysts quickly pointed out that any impact on net-profit figures should be discounted because these reversals are only due to accounting procedures and have nothing to do with a bank's day-to-day operations.

The issue of reversing gains on own debt emerged after Swiss bank UBS AG (UBS) late Thursday highlighted it as one reason behind its forecast net loss in the second quarter. UBS said internal restructuring charges will also contribute to its loss.

Exane BNP Paribas analyst Ian Gordon said that UBS' warning "could have a read-across on HSBC and most other banks which mark the value of their debts to market."

"For HSBC and others, like Barclays, we may see reversals in the second quarter offsetting the widening in the first quarter. It could lead to a decrease in profits," Gordon said.

RBC Capital Markets said UBS' warning indicates that "the long period of uninterrupted gains that banks enjoyed as their credit deteriorated may be coming to an end."

In the first quarter, HSBC Holdings PLC (HBC), for example, booked a $6.6 billion gain on its own debt as credit spreads widened. This was up from a gain of $2.5 billion in the first quarter of last year.

Another analyst said that there is a chance that not all recent gains by banks will be wiped out. "The spreads have expanded massively in the past couple of years. The tightening started only recently, so that will wipe out only a part of the previous gains," he said.

The spread to the risk-free borrowing rate on bonds issued by many banks has tightened significantly since peaking in mid-March.

According to the widely watched iBoxx indexes of financial companies' debt, senior bond spreads peaked at around 3.2% but have recovered to just above 2%.

Spreads on more junior lower Tier 2 debt have tightened from around 9% to around 5.4%.

Credit spreads widen when markets are stressed and investors worry about higher default risk, driving the price of existing bonds, as a percentage of their face value, down.

When investors are more confident that they will get their money back, spreads tighten and bond prices rise.

Some banks have argued that they could buy their bonds back in the secondary market at a cheaper price than they had originally sold them for, making gains in the process. Some of these gains may be reversed as spreads tighten and prices recover.

Barclays PLC (BCS) said May 7 that it had a gain of GBP279 million on the revaluation of its own credit for the first quarter.

Royal Bank of Scotland PLC (RBS) similarly recorded a gain on the value of its own credit in the first quarter, which it said amounted to GBP1.28 billion.

A spokesman for HSBC said Friday that "the positive or negative impact in a particular reporting period will be determined by the movements in credit spreads." He pointed to the bank's statement May 11, which already noted that credit spreads have narrowed in April, reversing a "significant proportion" of its recent gains.

A Barclays spokesman Friday declined to comment on whether there was likely to be any reversal in its gains.

An RBS spokesman wasn't immediately available to comment on whether there was likely to be a reversal at the first half. Most U.K. banks report first-half earnings in early August.

Exane BNP Paribas' Gordon said any reversal shouldn't have much of an effect on particular banks in the immediate future. "We know that these gains could reverse over time. Whether it happens now or at a later date, it doesn't really matter."

Gordon said the reversals could hurt stated profits.

"But will it have any impact on regulatory capital? No," he said. "It provides a negative shock to the headline number but not to the underlying number. We only care about the underlying number, stripping out one-offs like own debt."

"Fair valuing of own debt doesn't create or destroy capital. It's just an accounting procedure you have to do once in a while," he said.

Gordon cited HSBC's presentations on the matter, saying that "HSBC has been very open and honest about this."

The other analyst said that "good analysts will know that you need to strip out the gains or losses on own debt. I wouldn't have taken them into account as profits last year, so I wouldn't take them into account as losses this year."

-By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com

(Marietta Cauchi contributed to this article.)