Banks 'set for more job losses'
Further job losses in the banking sector are on the way, a report said today, after the eurozone debt crisis, compensation costs and higher taxes slashed the combined profits of the UK's five biggest banks.
Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered made combined pre-tax statutory profits of £19.4 billion in 2011, down 13% on the previous year, professional services firm KPMG said in its UK Banks: Performance Benchmarking Report.
The costs associated with the payment protection insurance mis-selling scandal, which amounted to a combined £5.7 billion, and the £1.3 billion bank levy charge have held back bank's financial performance, KPMG said.
The report also found that after aggressive cost cutting and restructuring, including the offloading of non-core businesses, retail banking fared better than investment banking where revenues declined sharply compared with last year.
Bill Michael, UK head of financial services at KPMG, said: "It was a tougher year than many expected and banks will need to continue working hard to turn things around.
"I expect we will see continued cost costing which inevitably means further job losses and business models will be reviewed again to ensure banks are concentrating on their core strengths and the markets with the greatest potential."
The banks with larger exposure to Asian economies were the star performers, KPMG said, reinforcing how the UK and Europe are becoming difficult places for banks to do business.
HSBC, which has 49% of its business based in Asia and Latin America, and Standard Chartered, with 80% of its business in Asia and the Middle East, outperformed the more UK and US-focused banks.
As the amount of capital and liquidity required to write business in the UK becomes higher than in other jurisdictions, it is increasingly difficult for banks without an international focus to achieve the return on equity expected by investors, KPMG said.
Mr Michael said the cost of regulation is "starting to bite" and will not ease off, as work on implementing the Independent Commission on Banking recommendations heats up.
He went on: "All in all, banking in this country requires major changes in business models and remuneration levels for staff to meet the increased capital requirements."
The investment banking sector had "a year to forget", KPMG said, as the eurozone crisis and subdued market activity made life hard.
However, 2012 has also started well and some mild optimism has returned.
Emergency landing at Heathrow sparks further controversy over London airport capacity
Unrest may spread across Europe, warns Red Cross chief
French government seeks to ban extreme right-wing group
BNP and EDL accused of attempt to fuel racial hatred after Woolwich terror attack
You want to get an Eton scholarship? All you need to do is answer four (not so simple) questions
- 1 What, let gays get married? We must be bonkers
- 2 Rocky Horror star Tim Curry 'suffers major stroke'
- 3 Exclusive: How MI5 blackmails British Muslims
- 4 Lord of the Sings: Sir Christopher Lee, 91, to release heavy metal album
- 5 Exclusive: Woolwich killings suspect Michael Adebolajo was inspired by cleric banned from UK after urging followers to behead enemies of Islam
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.