Current affairs News

Banks wipe out 2012 profits

Banks wipe out 2012 profits

Five of the UK’s biggest banks – Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered – saw a 45p rise in core profits leading to a sum of £31.5 billion in 2012.

These profits were hit by regulatory fines and costs associated with Payment Protection Insurance (PPI), says a KPMG report.

Figures show the banks were hit by PPI costs of £7.4 billion, up from £5.7bn in 2011 and other fines and penalties from regulators of £4.7bn. Banks also took a £12.8bn hit for losses caused by the revaluation of their own debt.

According to the report, one of the reasons behind the banks’ improvement in profitability is a continuous fall in bad loan charges because of low interest rates. This has lead to better credit performance, enabling the majority of customers to pay their mortgages and reduce their credit exposures.

Also, increase in revenue was due to more positive sentiment surrounding the future of the Eurozone.

Commenting on the dire 2012 banking figures, Bill Michael, Head of Financial Services at KPMG, said at this juncture, “this is why it is so important for them to address cultural and ethical perceptions and issues. Restoring customer trust is critical.”

The report also acknowledges that, overall, the banking sector did made progress in 2012, strengthening their balance sheets by supporting businesses and providing economic assistance. However, core profits were eaten up by fines and charges leaving the banks down on 2011.

Aastha Gill

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