How the banks make £341 every second from YOU

They hike loan cost, refuse insurance claims and cut your savings rates...

BRITAIN’S largest banks made £10.7 billion from their High Street customers last year — despite being hit by record fines for investment mis-selling and receiving millions of complaints. JAMES CONEY and RUTH LYTHE reveal how the banks had another bumper year thanks to your custom.

CUSTOMERS EQUAL CASH

DESPITE what they insist, the biggest banks raked in ever greater amounts from their High Street customers last year.

The big five — HSBC, Lloyds Banking Group, Rbs/natwest, Santander and Barclays — groaned in their results about the fact their profits had been dented by the eye-watering sums they have been forced to set aside for mis-selling payment protection insurance (PPI) to millions of customers.

But strip out the compensation they have had to pay for fleecing borrowers and the banks made £10.7 billion from their day-today High Street business.

Anyone with a loan, insurance, current or savings account with these big banks helped them to this profit, which is the equivalent of £341 a second. And the biggest beneficiaries are bailed-out RBS/NATWest and Lloyds Banking Group — which includes Halifax and Bank of Scotland — who received £65.5 billion in taxpayers’ money to keep them afloat.

Lloyds reported it made £300 million less last year than in 2010 from its High Street customers. But had it not been forced to pay out £3.2 million for PPI mis-selling, the bank could have shown increased profits from savers and borrowers.

Rbs/natwest made £1.9 billion profit from customers — £530 million more than in 2010. Add in the £850 million it paid on PPI claims and its total UK retail profit would increase further. Only Santander and Lloyds made less overall from customers in 2011 than in 2010.

Despite these surging profits, banks behave as badly as ever.

Since the start of 2011, HSBC has been fined £10.5 million for mis- selling investments to the elderly and Barclays was fined £7.7 million and ordered to pay £60 million in compensation to careful savers who lost money in its investments — both record punishments at the time.

Rbs/natwest was fined £2.2 million for covering up customer complaints when asked by the City watchdog, the Financial Services Authority.

On top of this, the bank was recently told off for misleading adverts that claimed the bank would not close branches when they were the last in town.

Santander was third in Money Mail’s Wooden Spoon award after readers voted it among the worst companies in the UK for customer service.

And it has been fined for failing to properly explain compensation rules to customers who took out risky investment bonds.

Figures out this week show there were 106,193 complaints to the independent Financial Ombudsman Service between July and December last year.

TWEAKING YOUR RATES

KEY to bolstering their profits is fiddling with interest rates for savers and borrowers. Banks can make millions by increasing the gap between what they pay out to savers in interest and what they charge to mortgage borrowers and credit card customers.

These little tweaks can seem only a small amount, but multiplied over millions of customers they can mean fat profits.

For example, in 2010 the average difference at RBS between what it paid savers and what it charged borrowers was 3.91 pc. In 2011 it was 3.92 pc, but even this small amount helped the bank generate extra interest of £194 million.

Likewise, at Barclays the gulf between savings and borrowing rates made the bank an extra £248 million last year. However, it has not been an easy year for banks to milk their customers.

Building societies have been desperate for funds in the past 12 months so have been producing some top- paying savings accounts.

This has meant banks have been forced to increase their rates.

On one hand, this draws in more customers, who in a year or two can be dropped to a rate paying almost nothing. This makes them very profitable.

But in the short term it means profits take a hit. If, on top of this, you don’t have the best mortgage deals, it can hurt your bottom line. This is what has happened at Lloyds Banking Group.

Demands for it to have more deposits from customers and take fewer risks with loans to homeowners meant the income it pulled in from interest plunged by £1.4 billion.

Some of the bank’s brands have consistently fought to be at the top of the savings Best Buys tables, with Cheltenham & Gloucester in particular offering good cash Isa deals.

As a result, the amount of savers’ cash it holds increased by 6 pc. But where they lose money in one area, banks find ways to make it back in others.

CLAIMS REJECTED

BANKS have taken a huge blow from mis-selling payment protection insurance. After a two-year battle, they lost a legal ruling and are having to pay billions in compensation.

But they never learn their lesson, and banks are increasingly trying to find new ways to replace the money lost in this scandal. As a result, the Financial Services Authority is believed to be monitoring the sale of other types of insurance where premiums are cheap. But there is evidence banks have found another way to prop up insurance profits — by paying out fewer claims.

Lloyds’s profits from insurance soared by £85 million. Payouts on claims slumped by a staggering 37 pc — from £542 million in 2010 to just £343 million.

Last month, we revealed how Lloyds had left 60,000 pet owners without vital cover for their