If Lloyds, undisputed king cost- cutter among the banks (even Bainies fawn in admiration), has so much trouble making money from the British retail market, what chance the likes of NatWest?
The other worrying pointer to results generally is the size of dealing losses at Lloyds. Sir Brian Pitman, chairman, warned that the bank's dealing loss of pounds 5m would appear 'modest' in comparison with other banks with much bigger securities and capital markets operations.
BZW, which made pounds 501m for Barclays last year, will be lucky to contribute half that this time round. BZW and NatWest Markets were as wrong-footed as everyone else by the rise in US interest rates earlier this year: 1993 was undoubtedly a once-in- a-decade year for securities dealing.
On the other side of the coin, there is clearly far more scope at both Barclays and NatWest for cutting bad debt provisions. This is a bit of a wild card, however. At Barclays, there is a new chief executive, Martin Taylor, and most new brooms like to indulge in deck-clearing exercises at the start. That hasn't stopped the likes of Lehmans recommending a switch from Lloyds shares into Barclays to take account of the latter's considerable scope for bad debt recovery.
The main lesson from Lloyds is the increasing competition in the high street for retail business. Combined with low interest rates, the effect is to drive margins on lending to ever lower levels. Demand for personal loans remains flat with fierce competition for whatever business is available.
Lloyds has ridden out the recession with its reputation as the best managed UK clearing bank intact. But its enviable reputation for cost-cutting has not been matched by any obvious ability to grow the main business. You can only cut costs for so long, and in a stagnant market, the Cheltenham & Gloucester deal looks less of an opportunity than an absolute necessity.
The deal will transform Lloyds, with almost half its business coming from retail, as opposed to about a third now. That will help to counter the persistent shrinkage in corporate lending.
C&G's new approach to winning approval for the Lloyds deal, details of which are due in mid-August, will be awaited with keen interest by Sir Brian and his colleagues. As for the rest of the banks, the next few weeks could be quite rocky.