Britain’s largest banks have slashed lending to consumers and businesses by £364.7bn in the past five years, according to a KPMG report.
The study found that lending at Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered dipped 14% to £2.33 trillion at the end of the first half of 2014, with customer lending accounting for £309bn of the decrease.
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According to the report, the banks posted a combined profit before tax of £15.2bn in the first half of 2014, a gain of £18.3bn.
The report also revealed the impact the huge cost of customer remediation has had on the banks’ return on equity, with returns reduced by £31bn as a result of remediation since 2011.
However the latest results suggested some easing as remediation charge reduced by 44% to £2.4bn year-on-year.
However, the return on equity still needs to rise above the real cost of capital, which currently stands at 12%, the report said.
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By GlobalDataRichard McCarthy, UK head of banking at KPMG said, "Our report shows that banks are now at an inflection point. The vital next step is to look forward to generate real business growth, as opposed to driving with the rear-view mirror.
"We have to remember that banking requires risk-taking. Yet in the rush to clean-up the past, both banks and regulators have lost sight of this. The reduction in lending to customers since 2009 is testament to this risk aversion. We are however seeing bank leadership teams beginning to take positive steps to seize the opportunity to achieve sustainable growth and this is encouraging."
