Britain's top banks back in black but 'dangers remain'
Big five return to profitability but KPMG warns growth won't match pre-2008 levels
FOR the first time since 2010 all five of Britain's major banks recorded a profit in the first half of the year. But their margins may never again reach the levels they enjoyed before the financial crisis, warn consultants KPMG.
In a survey KPMG found the combined profits of Britain's five biggest banks - HSBC, Barclays, Standard Chartered, RBS and Lloyds Banking Group - stood at £16.5bn for the six months to 30 June. An increase in lending and a fall in debt write-offs, including compensation for the payment protection insurance scandal, have helped the banking industry "get back on track".
The banks' lending was up by £5bn, or 0.8 per cent, in the first six months of the year while savings deposits increased by six per cent, or £135bn, the BBC reports.
However, KPMG warned that although the banking industry shows signs of recovery, profits are unlikely ever to regain their pre-2008 heights. Bill Michael, EMA head of financial services at KPMG, said: "While it is great that the most recent bank results are in the black, there remains real uncertainty on the shape of their business models in the future."
The top five banks' overall equity return remains below ten per cent, roughly half of 2005 levels and lower than the 15-20 per cent a company needs to generate to be considered "doing well".
The growth of regulatory requirements, such as banks being forced to hold more capital against their lending, and increased caution in the industry means banks are now financially safer but can only make more modest returns in future.
KPMG also warned that although banks are now more secure against market crunches, economic shocks to Britain's banking system are still a concern. However, future threats are likely to come in the form of cyber-assaults or massive systems outages, like those suffered by Royal Bank of Scotland and NatWest customers last year. ·