An Overview of Banks in the UK

The big five UK banks (by assets) are:

1) HSBC.
2) RBS Group (which includes Royal Bank of Scotland, and NatWest)
3) Barclays
4) HBOS (which is comprised of Halifax, and Bank of Scotland)
5) Lloyds TSB

There have been a number of important trends in the UK banking industry. These include:

1. Consolidation:
Barclays and RBS are currently engaged in a battle to purchase large European bank, ABN Amro. If Barclays win, they will become the 2nd largest bank in the UK. The RBS bid is a joint bid with two other banks and, if successful, would be another success story following the successful acquisition and integration of NatWest.

2. Emergence of online banks
The growth of online banks has not been as spectacular as many had initially predicted, but banks such as Egg, Cahoot, Smile, and IF do occupy a niche place in the market. Some of them are owned by larger banks – e.g. IF is part of the HBOS Group.

3. Emergence of supermarket banks
Companies like Tesco and Sainbury have launched banking services, and like the Internet banks they now occupy a nice place in the market.

4. Decline of building societies
Building societies are mutual organisations, which means they are owned by their members and don’t have to pay out dividends to shareholders. They used to occupy a large place in the UK banking landscape. However, many of them (including Halifax) have demutalised and become banks.

5. Emergence of multi channel banking
Most of the main players now offer a multi channel customer proposition. i.e. you can transact via branch, telephone, or Internet. Additionally mobile phone banking services are starting to emerge.

6. Diversification
The days when banks made the bulk of their profits from their Retail customer base are long gone. Banks are increasingly likely to own railway companies, airlines, and other miscellaneous companies. This diversifaction helps them to increase profits (and returns to shareholders) and also protects against the vagaries of cyclical economic performance.

7. Charges controversy
A lot of recent attention has been on the legality of bank charges. Lloyds TSB recently won a court case that their charges were legal. It is an issue though that still has a long way to run.

Banks are never the most popular of organisations but it should be remembered that they offer a very wide range of valued services to personal, business, and corporate customers. They are also major employers and sources of revenue for the many companies who supply them with services.