An increase in profits of 45% for the UK’s major banks was wiped out by more than £20bn ($30.3bn) of regulatory fines and compensation payments, according to a report by London-headquartered accountants KPMG.
KPMG’s Bank Performance Benchmarking Report said that the combined profits for HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered were £31.5bn.
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The banks were hit by PPI costs of £7.4bn, up from £5.7bn in 2011, and other fines of £4.7bn.
The banks also took a £12.8bn accounting hit for losses caused by the revaluation of their own debt.
According to the report, increased profitability was due to better credit performance, or fewer bad loans, and stronger results from investment banking divisions, helped by more positive sentiment surrounding the future of the eurozone.
Bill Michael, EMA head of financial services at KPMG, said: "Banks had a better performance year in 2012 but their improved core profits were eaten up by fines and other exceptional items, leaving them down on 2011.
"In terms of their reputations, 2012 was a dire year. This is why it is so important for them to address cultural and ethical perceptions and issues. Restoring customer trust is critical."
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