UK banks take a wrong turn down the high street
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UK banks take a wrong turn down the high street

The biggest retailers will regret having been blind to opportunities in emerging Europe.

As Royal Bank of Scotland, Barclays and HBOS seek new funds from investors with varying degrees of desperation, it’s tempting to ask with regard to UK banks – where did it all go wrong?

UK retail banking has traditionally been a profitable but lazy business. Banks have made easy money by charging borrowers high interest rates while giving little or nothing to current account holders. Meanwhile customers have traditionally been inert, partly because they don’t believe they will get any better service by switching to another provider.

This laziness means that UK banks have long been laggards in terms of increasing the number of products they sell to each customer. In countries such as France the largest banks would expect to sell at least five products on average to each of their customers. In the UK, retail bank chiefs would do cartwheels down the high street if they could reach an average of two.

But the UK remains highly competitive and heavily banked, with six major high street operators and a host of smaller, but sizeable, competitors.

To increase profitability against this backdrop, most UK banks adopted the same approach – to increase leverage, and to go further and further into sub-prime.

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