Banks such as NatWest, Abbey National and Bank of Scotland, which have signed joint ventures with Tesco, Safeway and Sainsbury's respectively, could find that they have provided support for a powerful new group of competitors that could de-stabilise the sector by exerting pricing pressure.
The report adds that the introduction of well-branded new entrants could be dangerous, given the relatively weak brand names of the high-street banks.
Kleinwort's Simon Samuels who wrote the report says: "Long-term these supermarket link-ups are bad news for the banking industry. It is quite likely that the supermarkets will choose to go it alone if the idea works. All the banks will have gained is a fee for running the accounts."
The mechanism for supermarkets to oust the banks from their partnerships is already in place in some cases. A little known clause in Sainsbury's contract with Bank of Scotland enables the supermarket group forcibly to buy out the bank's stake after a certain period.
Bank of Scotland has already been jilted twice by joint venture partners in similar circumstances. It was the joint venture partner with Marks & Spencer when the high street giant first entered the financial services products. M&S later bought the bank out. When Bank of Scotland co-operated with the Halifax Building Society over the launch of a credit card it suffered a similar fate.
The report expressed concerns over NatWest's deal with Tesco as "it gives a new competitor a relatively easy entry into banking". The view among banking analysts is that NatWest agreed the deal because if felt that if NatWest did not do it, then someone else would, possibly an overseas group keen to gain a foothold in the UK market.
The report also includes forecasts for customers numbers and profits for the various supermarket banks. It says that around 10 per cent of Sainsbury's 12 million customers are likely to sign up for the Sainsbury's Bank when it is launched in the next two months. This would give the fledgling operation 1.2m accounts. Pre-tax profits could reach pounds 28.4m after three years.
Assuming a similar take-up from the other supermarkets, Safeway could have 550,000 customers and profits of pounds 13m from financial services. Tesco would have 1m account holders yielding profits of pounds 24m.
Tesco is already looking to extend the range of financial services with a branded credit card the next step. Other plans being considered are mortgages and personal lending.
It is understood that Abbey National is considering opening small "kiosk" banks in branches of Safeway. This would follow similar operations in America where Wells Fargo and ANZ have in-store branches.