Major banks' profits double

Profits made by the major banks have doubled during the past year but the groups still face significant challenges going forward, a report indicated today.





The big five banks - Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered - made combined pre-tax statutory profits of £22.2 billion in 2010, up from £11.3 billion in 2009, according to accountants KPMG.



The increase was driven by a dramatic drop in impairment charges across all five banks, with these falling by more than £20 billion during the 12 months.



There was also a marked increase in the margins on their existing mortgage book at some of the banks.



But despite the improvement, KPMG warned that income growth had been "lacklustre", adding that there was likely to be little new mortgage lending going forward due to the subdued state of the housing market.



At the same time, competition among the major banks for people remortgaging suggested that margins were likely to fall, rather than rise.



The group also warned that as the Government's austerity measures took hold, the number of people defaulting on their mortgage, which has so far remained low, could rise.



Banks could also be left with a "very significant" compensation bill if they lose the current judicial review on the sale of controversial payment protection insurance.



David Sayer, global head of retail banking at KPMG, said: "In the current economic environment profitability on mortgages looks likely to fall and it is difficult to see what will take its place.



"Looking ahead we expect to see a price war for deposits break out across Europe, as banks seek to repay liquidity to central banks.



"With the margins on savings fast disappearing, some UK deposit takers will come under real pressure."



He added that to counter these profitability pressures, banks were likely to look to implement a number of measures, such as introducing additional bank charges, targeting so-called mass affluent and high net worth individuals and trying to cut their costs.



Earnings from the groups' investment banking divisions returned to more normal levels during 2010, following the highs seen in 2009.



The group said that although earnings in this sector showed a "marked slowdown" during the second half of 2010, the current year had got off to a good start, and expectations were that 2011 would be either the same or better than 2010.



KPMG said regulation was set to continue as a "key theme" for banks for sometime yet, as the sector waits for the findings of the Independent Commission on Banking.

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

Iran is shifting from pariah to possible future policeman of the Gulf

Robert Fisk on our crisis with Iran
The young are the new poor: A third of young people pushed into poverty

The young are the new poor

Sharp increase in the number of under-25s living in poverty
Greens on the march: ‘We could be on the edge of something very big’

Greens on the march

‘We could be on the edge of something very big’
Revealed: the case against Bill Cosby - through the stories of his accusers

Revealed: the case against Bill Cosby

Through the stories of his accusers
Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

The Meaning of Mongol

Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible