'Big five' banks double profits in past year
Profits made by the major banks have doubled during the past year but the groups still face significant challenges going forward, a new report shows.
The big five banks - Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered - made combined pre-tax statutory profits of £22.2bn in 2010, up from £11.3bn in 2009, according to accountants KPMG.
The increase was driven by a drop in impairment charges across all five banks, with these falling by more than £20bn during the 12 months. There was also an increase in the margins on their existing mortgage book at some of the banks.
But despite the improvement, KPMG warned that income growth had been "lacklustre", and there was likely to be little new mortgage lending going forward due to the subdued state of the housing market.
At the same time, competition among the major banks for people remortgaging suggested that margins were likely to fall, rather than rise.
The group also warned that the number of people defaulting on their mortgage, which has so far remained low, could rise.
David Sayer, head of retail banking at KPMG, said: "Profitability on mortgages looks likely to fall and it is difficult to see what will take its place."