High street banks lost £100bn in customer savings to rivals since 2019
The UK banking sector also suffered a £3.7 billion combined drop in total pre-tax profits last year, marking the first major downturn since the rebound seen in the wake of the pandemic, according to KPMG.
It warned that increasing competition, rising costs and a wave of consolidation will change the shape of the sector in the years ahead.
Peter Westlake, partner in KPMG UK's banking strategy team, said: 'The post-Covid profit boom is over.
'Banks are facing a lower-growth, higher-cost environment that demands transformation at pace.
'While we can expect profitability to broadly remain sound this year, the entire sector needs to show how they are preparing for challenges ahead.'
Bank costs increased by 6% in 2024, which together with falling productivity among workers, is set to put bank profits under pressure, according to the report.
It forecasts that the sector's average return on equity, which is a key performance measure for banks, could drop by more than a third from a peak of 13% in 2023 to 8% by 2027 – the equivalent of an £11 billion drop in annual profits.
KPMG's experts urged banks to overhaul their business models and embrace artificial intelligence (AI) to tackle the challenges.
'The winners will be those that move beyond tactical cost-cutting and proactively address oncoming market headwinds through business model transformation,' said Mr Westlake.
Any move to scrap so-called ring-fencing in the UK sector, which requires banks to separate their retail activities from investment banking, would also spur on further change, KPMG said.
Chancellor Rachel Reeves announced plans to reform the ring-fencing regime last month as part of wider measures to loosen regulation and boost growth.
Peter Rothwell, head of banking at KPMG UK, said: 'Evolving regulation, particularly the reform of ring-fencing, is set to reshape the competitive landscape.
'Raising thresholds could favour recent entrants, particularly well-capitalised US players, accelerating their push into the UK retail market and intensifying competition.'
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North Wales Chronicle
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South Wales Guardian
9 hours ago
- South Wales Guardian
Truss ‘carries quite a lot of blame' for Tory record, Badenoch claims
The current Tory leader said she was 'very focused on what the Conservatives are going to do now', after former prime minister Ms Truss accused her of 'repeating spurious narratives'. Speaking on a farm near Saffron Walden in her constituency, Mrs Badenoch also described herself as an 'Essex girl', and added that people from the county 'are grafters; they work hard'. The Leader of the Opposition faced questions about Ms Truss's claim that under the Conservatives, 'the economy was wrecked with profligate Covid spending by (Rishi) Sunak' and that 'the huge increase in immigration has been a disaster'. Mrs Badenoch told ITV Anglia: 'I know that, as a former prime minister and a former foreign secretary, (Ms Truss) carries quite a lot of that blame. 'The party's now under new leadership. 'I wasn't in charge during those 14 years; she was. 'That's a criticism she's probably levelling at herself.' The Tory leader also said she was 'telling the truth' about her party's record. 'I'm telling the truth that immigration was too high – that's why we have much tougher policies to fix immigration,' she continued. 'I am telling the truth that taxes were too high, that we were putting a lot of regulation on businesses, and what we're seeing is Labour making every single thing worse. 'They're doing that because they haven't learned many of the lessons that we learned. They haven't learned from our mistakes. They're making worse mistakes.' The Labour Government's mistakes include making 'no cut in spending at all – the books were not balanced', Mrs Badenoch claimed. 'We're spending more on welfare than we are on defence – that cannot continue,' she said. Mrs Badenoch had previously told The Telegraph that 'for all their mocking of Liz Truss, Keir Starmer and Rachel Reeves have not learnt the lessons of the mini-budget and are making even bigger mistakes'. Ms Truss, who spent 49 days in Number 10, hit back when she said that 'instead of serious thinking', Mrs Badenoch was 'repeating spurious narratives'. She continued: 'I suspect she is doing this to divert from the real failures of 14 years of Conservative government in which her supporters are particularly implicated. 'It was a fatal mistake not to repeal Labour legislation like the Human Rights Act because the modernisers wanted to be the 'heirs to Blair'. 'Huge damage was done to our liberties through draconian lockdowns and enforcement championed by Michael Gove and Dominic Cummings. 'The economy was wrecked with profligate Covid spending by Sunak. The huge increase in immigration has been a disaster.' Mrs Badenoch also took questions about her identity, after she told the Rosebud podcast: 'I have not renewed my Nigerian passport, I think, not since the early 2000s. 'I don't identify with it any more, most of my life has been in the UK and I've just never felt the need to.' The North West Essex MP told ITV Anglia: 'I am definitely an Essex girl, that is a fact.' A London Assembly member before she took her Commons seat in 2017, Mrs Badenoch said: 'I represent an Essex constituency, these are my people. 'I was a Londoner, but Essex people asked me to be their MP, and I want to make sure that I do them proud. And I love this part of the world. 'It's fantastic being here. It's a rural community, and I've been talking to the farmers here. I talked about how my grandfather was a farmer, it's very hard work. 'The people of Essex and East Anglia – they are grafters. 'They work hard, and I want to make sure that we do right by them.' Mrs Badenoch spent Tuesday morning at a farm in Little Walden, where she tried her hand at harvesting wheat using a Claas Lexion combine harvester. She told farmers: 'A lot of farming just feels like constant interference. 'Everything is interfered from the minute you wake up.' Examples of interference included 'chemicals and insecticide, people you're hiring, how much you've got to pay them', plus changes to 'employers' NI (national insurance), then somebody wants to put pylons on, there's compulsory purchase, it's impacting the cost of the land, if you want to add a new farm building, there's planning applications', she said. 'It's just endless constant Government saying, 'You can't do this, you can't do that, you can't move forwards'. 'And the burden in my view has now crossed the threshold.'
