United Kingdom

Road to recovery? What the future holds for UK banks 

The UK Banks Performance Benchmarking Report explores the key trends in the first half results of the big five UK headquartered banks – Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered.


KPMG responds to UK banks half year results

Bill: While it’s great that the most recent results are in the black, and certain things are improving, the real issue is actually the shape of these business models going forward. We've got huge regulatory uncertainty. The leverage ratio, capital liquidity, is going to continue to put enormous pressure on banks to deleverage.

David: I think these results demonstrate that UK banking potentially has a good future. I don’t think we’re going to go back to a new normal which is like the old normal. I think the relatively easy high returns on equity are going to be hard to get back. Just by doing what people did five years ago won’t work. They have got to re-invent a new model.

Suvro: My immediate reaction to the half year results is it’s quite good. The gap between the statutory profits and the underlying profits have come down. Impairment trends are down, lending is up, especially mortgage volumes, showing some signs of recovery, so that’s all good.

Giles: The first thing to observe is that all the banks are back in the black, which has to be good news. Now, that’s partly driven by a downward trend on impairments, which I think reflects the low interest rate environment. We have now got some certainty from the Bank of England, that they think that will continue on, probably for the next two to three years. So there is further opportunity for people who potentially were under pressure, to sort themselves out, and make sure that those debts are re-paid.

I think the second slightly more worrying thing, is the absolute level of provisions for litigation, and other regulatory issues, mis-selling, etc. That is now a very significant part of the accumulated cost base of the banks in the UK.

David: I think the bank that wins over the next five years is the one that really cracks using new technology to produce greater customer intimacy. The ability to have a real one to one conversation with customers with full knowledge of their circumstances and data. So you avoid the mis-selling scandals because you’re selling them products which are appropriate and which really meet their needs.

Bill: I think it’s vital for the UK economy, for banks to be allowed to re-enter the top table of economic discussion and debate and we will not get consistent, continued, sustained economic growth, without the financial sector being at the top table of discussion.

So only when it’s fully rehabilitated, will they be able to re-enter that table. I think only then, we’ll be able to actually come up with a much more coherent strategy, in terms of where the future of economic growth lies for the United Kingdom.

We are witnessing a sector that is going through rehabilitation. The banks are working very hard to change what they do and how they do it and the future is looking a little brighter, but is still heavily tinged with uncertainties and threats. 


All five major UK banks recorded a profit in the first half of the year, for the first time since 2010.  Combined profits of some £17.5bn, modest lending growth and falling impairments all show that the banking sector is, at last, starting to get back on track after the financial crisis.  However, the industry emerging is very different to how it was before the crisis started and is adjusting to a future in which bank business models are “unlikely ever to be the same again”.

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Bill Michael

EMA Head of Financial Services

KPMG in the UK

020 7311 5292

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