Banks Most Profitable Businesses Says Research

Banks made greater profits per customer than any other major business sector last year, research by Group 1 Software has revealed.

Per-customer profits leapt to £75 in 2005, 13 per cent up on the 2004 figure of £66.20, with much of the gains coming from penalty fees on credit cards and current accounts.

The profits outstripped those made by the utilities industry (£59.10), retailers, (£50.90), mobile phones (£39.40) and insurers (£35.10).

The research has been released as UK banks are due to post their first-half figures, with HSBC revealing profits up 18 per cent and HBOS up 17 per cent.

The study is certain to re-ignite rows over penalty fees, with banks threatening to withdraw free banking facilities if they are forced to cut the punitive charges.

Banking analyst James Hamilton of West LB said that the figures could be misleading with much profit coming from investment while high street gains were being squeezed.

“In fact margins are being compressed in UK customer banking,” Mr West told the BBC.

“Business has declined at things like Barclaycard – we’ve got to wait for Barclays’ results, but I suspect business will be down again,” he added.

Banks were recently forced to cut the penalty fees they levy on credit cards after the Office of Fair Trading threatened legal action.

They said that they would have to do so at the expense of best rates, however.

This article © Moneyexpert Ltd.

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