Retail banks face significant challenge

The recent round of UK banking results shows that despite a rebound in 2010, retail banking faces "significant challenges" in the next three years, according to a new report.

KPMG's latest banking report said "future growth in profitability is a key concern for the sector" with little new mortgage lending and increased competition forcing lower margins.

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." In response, he said, banks would look to bring in additional charges, target rich individuals and drive down costs and inefficiencies. The report scrutinised the performance of the big five UK-listed banks: Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered.