Anthony Hilton: Are banks’ images beyond salvation?

February is bank reporting season, and this week and next, banks big and small, household names and some you’ve barely heard of, will tell the world how they did in 2004. By the time they have finished, UK bank profits will be seen to have topped £30bn, the biggest ever.

As predictable as the profit is the outrage that will follow. There’s a tendency in the UK to begrudge firms their profits, but in banking the criticism is venomous. Nor is it likely to be mitigated by explaining to friendly journalists that the UK is a small part of their operations and that consumer lending is a small part of that. Their message is: banks may be profitable, but not at the expense of UK consumers.

What is interesting is why no one will believe them. People will look at the numbers and ask why, if the UK consumer is so irrelevant to banks’ prosperity, have they spent so much time closing branches, reorganising and taking costs out. Then they might note that a bank credit card is typically charging interest of 25 per cent or more at a time when interest rates as set by the Bank of England are under five per cent. If UK profits are of little consequence, maybe they could cut the rate or stop charging for ATM withdrawals.

But it underlines that the dismal reputation of banks in the UK is too deep-seated to be saved by a bit of PR. It is bound up with woeful customer service and can probably be restored only if the banks try to meet the expectations of every stakeholder. But that is hard work and less exciting than doing deals and buying competitors.

The banks will pay a price for this. Margaret Thatcher’s chancellor, Geoffrey Howe levied a windfall profits tax on banks 20 years ago. Some on the Labour benches say it is time for another trip to the well. It may take something like that to make bank chief executives take their image problem seriously and do something about it.

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