British banks\' profits wiped out on past mistakes

Britain\'s major banks\' increased profits last year were wiped out by a mixture of regulatory fines and customer redress provisions, said a report by KPMG released on Monday.KPMG said Britain\'s major banks recorded a 45-percent rise in core profits in 2012 to a combined sum of 31.5 billion pounds (about 48 billion U.S. dollars), but the increase was wiped out by a mixture of regulatory fines, customer redress provisions and the accounting consequences of improved creditworthiness.KPMG listed two main factors for the improvement in core performance from the banks, namely better credit performance and stronger investment banking results.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,\" he said.He said British banks had strengthened their balance sheets and made strides to bolster their capital, adding that \"they are becoming better able to carry out their essential function of providing support to businesses and promoting economic growth.\"However, the necessary changes to address conduct and behavioral failings will have a significant cost.Michael held that there was a gathering storm of structural and other regulatory changes heading the banks\' way, such as ring-fence electrification in Britain, global derivatives market reform and the EU\'s plan for a financial transaction tax and cap on bankers\' bonuses.All these would call for considerable management time and effort for banks, the KPMG report said.