View more on these topics

Diversification drives bank profits, says KPMG

Profit growth in wholesale, wealth management, investment banking and international banking markets have been key factors in the growth of UK banks, KPMGs UK financial institutions performance survey reveals.

The survey compares the annual results of HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays.

Pre-tax profits increased by 20.3% year-on-year ending December 2006 at 26,276m.

Profits ranged from 11% at Lloyds TSB to 35% at Barclays, while total assets were up 9.8% to 2,802.8bn.

Barclays earns over half its profits overseas, while for RBS it is 46% and HBOS earns 15% of its profits from abroad.

In the retail banking market there have been improvements, although margins have modestly declined in mortgages and asset quality has fared well as house prices continue to increase.

Margins have continued to decline somewhat compared with the previous year, as a result of a number of factors in the retail sector, such as strong growth in finer margin products like mortgages and savings as well as a lower demand for unsecured lending.

However, the more diversified banks have been able to more than compensate from their wholesale or international operations.

The cost to income ratio fell by 1.5% from December 2005.

In terms of asset quality, wholesale banking and secured retail banking performed well, although provisions for unsecured lending have increased significantly but with a moderation during the second half of 2006.

HBOS had the best credit performance overall, up by only 9% on 2005.

David Sayer, head of retail banking at KPMG, says: Whilst we are still awaiting the HSBC numbers, the other banks have delivered an impressive set of figures so far.

They have demonstrated the diversification of our banks and their ability to withstand difficulties in particular sectors.


Connect joins Rooftop panel

Rooftop Mortgages has added Sussex-based packager Connect Mortgage Group to its distribution panel.

Stand up to lenders’ divisive tactics

The tactic of divide and rule has been used to devastating effect throughout the annals of social, economic and commercial history. Presently, lenders in the mortgage market are employing it to take advantage of brokers in a bid to have their cake and eat it.

Countrywide board recommends Apollo takeover

The board of Countrywide has agreed the 1bn takeover proposition made by private equity firm Apollo Funds. In an announcement on the London Stock Exchange, the estate agency confirmed that it has reached an agreement on the terms of a recommended offer by Castle BidCo, the company incorporated on behalf of Apollo for the purpose […]

PMS offers TMB range

Premier Mortgage Service is offering a range of exclusive products from The Mortgage Business.The offerings include two fixed-rate options from TMB’s Self 85 range, both fixed until May 31 2009, with rates of 5.49% and 5.69%. Both products also have a cash incentive of £500, plus a refund of the valuation fee, up to £490.Other […]

How we’re challenging challenger banks

The bridging market has enjoyed an excellent couple of years and, as a result, has seen a succession of new lenders enter the market. That competition has forced all of us to look carefully at how we price bridging loans. Over the past few months we have spent a lot of time on adjusting the […]


News and expert analysis straight to your inbox

Sign up