Banks Profit From Customers to the Tune Of £112
Despite being heavily criticised by the Office of Fair Trading for excessive credit card charges, the UK’s ‘Big Five’ banks will make a £112 profit from their customers this year.
The profits will represent a 12% rise on last year’s figures. The rise will likely cause dismay and anger among UK consumers as the country struggles with record levels of personal debt.
The figures are a result of a study carried out by a leading banking software firm and show that profits per account holder will continue to rise despite unprecedented bad debts among individual customers. The UK’s largest banks have saw earnings being severely dented by bad debts and have written off £4bn worth of debt as more than 270 Britons go bust every day.
Group 1 Software, which provides services to the financial industry, based its figures on analysts’ estimates for bank earnings issued in the wake of their recent record half-year figures.
The research excludes earnings from investment banking and any revenues earned from retail customers.
The last few years have seen the ‘ Big Five’ – the Royal Bank of Scotland, HSBC, Barclays, Lloyds TSB and HBoS - increase profits from account holders. In 2005, the ‘Big Five’ made profits of £100 per customer, a rise of £82 on 2004. Other UK banks made an average profit of £75 per account holder.
The figures may add more pressure to already beleaguered banks who were heavily criticised in a report from the Office of Fair Trading, which stated that profits made from credit card charges were excessive. Another report dammed banks regarding payment protection insurance sold to customers who take out loans.
So how are banks still able to increase profits when the UK is currently seeing record numbers of individuals going bankrupt? Well, it isn’t just credit card charges and other penalty charges that contribute to a banks wealth. Slicker marketing and more sophisticated selling techniques also play their part.
Andrew Greenyer, vice- president of international marketing at Group 1, added: “ Overdraft penalty charges and late payment fees on credit cards contributed in part to the increase in profits per customer. However, much of the increase is attributed to vastly improved means of communicating with the customers, targeted mailing and better use of cross-selling.”
Alisdair Milton
22nd August 2006
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