Revealed: total cost of the great bank robbery... £7.2 billion

Banks could be forced to refund £7.2bn worth of illegal penalty fees they have levied from customers, according to City analysts, if regulators rule against the charges.

In the first authoritative study of the charges, banking analysts at Credit Suisse have calculated that high street banks rake in £1.2bn a year from penalty charges. The news will fuel a customer revolt that has taken the banking sector by storm.

Under consumer law, customers are entitled to claim retrospective refunds going back six years if banks are judged to have imposed illegitimate charges on their accounts. According to the Credit Suisse figures, the total repayment due to account holders will add up to £7.2bn if the maximum number of customers apply for refunds. The calculation is based on an analysis of bank revenue generated from penalty fees. Since The Independent started its campaign last week, more than 400,000 people have downloaded online guides to complain about bank charges, which are levied on services such as unauthorised overdrafts and bounced cheques. Thousands of customers have already won compensation from their banks, with awards ranging to £70 to thousands of pounds.

The Office of Fair Trading is investigating the charges, with a verdict expected within weeks. The OFT is expected to rule that the level of bank penalty charges, at between £30 and £40, is unjustified, which is certain to lead to compensation demands from tens of thousands more people.

Jonathan Pierce, an analyst at Credit Suisse, said: "A large-scale flood of claims for six years' worth of charges could mean a heavy provision for the sector, in our view. That would be even more problematic if those claims were supported by any negative OFT ruling."

Last year, the OFT ruled that charges for unauthorised borrowing on credit cards could amount to no more than £12. Applying the same figure to bank charges, would mean that charges have to be slashed by about two thirds.

Martin Lewis, creator of the moneysavingexpert.com campaigning website, urged consumers to make their claims before the OFT ruling. "We're in a situation right now where banks pay out in full if you push them hard enough. I would get your claim in now," Mr Lewis said.

He said that consumers downloading forms from his site were typically claiming refunds of more than £1,000. But, if the OFT decided that a fee of around a third of the current levels was justified, then banks would probably withhold a third of the claim.

Emma Bundey, personal finance campaigner at the consumers' association Which?, said customers were overwhelmingly likely to be successful in challenging the charges. She said that, under the law, the fees were only supposed to cover the banks' costs, not provide them with a profit. Experts have estimated that the cost to the banks is no more than £4.50.

"This mustn't be used as a profit stream. Banks have some costs, but how can they justify levying £35 when someone drifts a few pounds into the red?" said Ms Bundey.

Which? has gone further than Credit Suisse, suggesting that the banks actually make £4.7bn a year from the fees, although that calculation is based on an estimate that one in four bank customers incurs a penalty every year. If that is correct, it would expose the banks to claims totalling a colossal £28bn.

The British Bankers Association (BBA), which represents the banking industry, claimed that it did not know how much the sector made each year from the charges, despite the fact that it is providing detailed information to the OFT inquiry. Privately, many in the sector admit that charges provide around £1.5bn a year to the banks.

Brian Capon, a spokesman for the BBA, said: "We don't have a figure. It is not a figure we compile."

Separately, the Financial Services Authority (FSA), Britain's chief City regulator, has launched an inquiry into whether leading banks are properly investigating complaints about unauthorised borrowing charges.

While the FSA has no powers to rule on whether such fees are illegal, it has a statutory responsibility to police the way banks handle customer complaints. There has been increasing concern about the inconsistent way in which claims for refunds of unauthorised borrowing charges are treated. Some banks are refunding such claims immediately, while others only pay up once they have been challenged in the courts or through the Financial Ombudsman Service.

The furore over the charges comes in the middle of the banks' " reporting season" when they announce their multibillion profits to City investors ­ further adding to public resentment.

This week, HBOS, owner of Halifax and the country's biggest mortgage lender, is expected to report that profits last year jumped by 12 per cent to £5.4bn. That will be eclipsed by Royal Bank of Scotland, owner of NatWest and Churchill Insurance, which, is forecast to announce annual profits of £9.2bn.

Next week, it is predicted that HSBC will reveal profits for 2006 of £11.6bn. Last week, Barclays said that its profits had rocketed by 35 per cent to £7.1bn, while Lloyds TSB declared a 7 per cent rise in profits to £3.7bn. The industry's total profits will be close to £40bn.

A separate study published by Pitney Bowes Group 1 Software, has calculated that the five biggest banks made a profit of £112.20 per customer last year, an increase of 12 per cent on 2005.

And in another revelation, staff at HBOS were yesterday celebrating the profitability of their employer after the company announced that 50,000 of its workers will be sharing a windfall of £210m through an employee bonus scheme. The bonuses equate to an average payout of £2,440 for each worker.

What the banks say

* BARCLAYS

"If you look at a basket of retail banking services in the UK and compare the cost of them to the equivalent cost in Europe or America or Asia they are a lot cheaper."

* HSBC

"We do not believe the charging regime is illegal ... [refunds on charges incurred by unauthorised borrowing] is dealt with on a case-by-case basis, but if a customer is sufficiently aggrieved ... chances are that they'll get a refund."

* LLOYDS TSB

"We make it clear to our current-account customers that if they exceed their overdraft limit ..., requiring the bank to provide a new limit on their account, the bank will charge for this service as it involves an administrative process which has costs associated with it."

ROYAL BANK OF SCOTLAND

(owner of NatWest) "NatWest believes its charges are fair, reasonable and transparent and treats all claims on a case-by-case basis. There really is no need for a customer to get into an unarranged borrowing situation. We encourage customers to contact us to agree any borrowing in advance."

HALIFAX BANK OF SCOTLAND

"Customers have a responsibility to operate their accounts within the terms and conditions ... These state that if they have insufficient funds to meet payments or enter into overdrafts that have not been pre-arranged, then charges will be applied to their accounts."