UK banks face more profit pressures

Comment on this story

London - Britain's banks face more pressure on profits, partly because of increasing regulation costs, and many will have to cut more jobs, according to a study by accountancy firm KPMG.

KPMG said work on implementing proposals by Britain's Independent Commission on Banking for lenders to boost capital ratios and protect retail banking arms from investment banking divisions would soon have an impact.

“The cost of regulation is starting to bite and this will not ease off anytime soon, especially as work on implementing the Independent Commission on Banking recommendations and recovery and resolution plans heats up,” said Bill Michael, UK head of financial services at KPMG.

“With interest rates at a historic low in the UK, banks continue to face intense pressure on liability margins with stiff competition for deposits to improve funding. Non-interest income has remained broadly flat compared with 2010,” he said.

“Against this backdrop, future profitability is a key concern for retail banks and I anticipate additional price increases for customers. Further job cuts are also inevitable.”

Britain's banking sector is dominated by the so-called “Big Four” of Barclays, HSBC and part state-owned lenders Lloyds and Royal Bank of Scotland .

Britain owns around 40 percent of Lloyds and 82 percent of RBS and after bailing them out during the 2008 credit crisis.

Lloyds and RBS both reported hefty losses for 2011 in February.

Pretax profit at Barclays fell 3 percent to 5.9-billion pounds ($9.4-billion), while HSBC made a profit of $21.9 billion - the largest by a Western bank for 2011 - as it benefited from growth in its Asian, Latin American and Middle Eastern markets. - Reuters

sign up

Comment Guidelines

  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

  5. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles. You are only required to verify your email address once to have full access to commenting on articles. For more information please read our comment guidelines