Banks accused of fleecing customers

High-street banks are set to announce record profits of about £25 billion.

This is a 25 per cent increase on last year and represents earnings of around £800 per second.

The news is sure to prompt a furious backlash from customers.

Consumer groups condemned the figure as "absolutely astounding" and said in many cases the profits were being wrung from vulnerable people crippled by debt.

Eddie Weatherill, chief executive of the Independent Banking Advisory Service, said: "This is just blatant profiteering at any cost. The banks' shareholders must be jumping with joy but the customers certainly won't be.

"The Government needs to step in to stop the banks fleecing their customers while at the same time driving many of them to misery."

The forecast profits have raised new questions as to whether banks are "ripping-off" their customers with excessive charges and miserly interest rates of as low as 0.1 per cent on current-account balances.

Liberal Democrat Treasury spokesman, Dr Vincent Cable, said: "These profits are grossly excessive in relation to the risks that the banks take and the service they provide.

"It is now three years since the Government published the Cruickshank Report into the banking industry. It said that the banks were earning excess profits as a result of their control of the clearing system.

"In practice, this means that all borrowers are paying more than they should do and all depositors are getting less."

The bumper bank-reporting season kicks off today with figures from the former building society Northern Rock. But it gets into its real stride when the banking "big beasts" announce their results to the City next month.

The biggest single pre-tax profit is expected to come from HSBC with around £7.4 billion, followed by Royal Bank of Scotland, owner of the NatWest (£6.3 billion); Barclays (£3.9billion); Bank of Scotland, which owns the Halifax (£3.9 billion); and Lloyds TSB (£3.4 billion).

Analysts said the banks' finances had been boosted by their UK customers' insatiable appetite for debt, which is expected to pass the £1 trillion mark this year. They had also enjoyed a benign economy with little of the turmoil that scarred the financial markets between 2000 and 2002.

However, there was a warning today that the " complacent" big five lenders risked customers "voting with their feet" if they did not improve their service.

In a worrying trend for the banks, a report said that the number of customers planning to move their accounts to a rival has doubled in the past two years.

The report, from market researcher Mintel, said that 13 per cent of British bank account holders are considering switching, up from seven per cent in 2002.

Historically, the British have been reluctant to move because of the inconvenience involved.

However, changes to the official Banking Code introduced last year mean that it is now much easier as the banks are obliged to shift details of standing orders and direct debits to the new account.

Even so, almost two-thirds of bank customers have never moved their account.

The Consumers Association also urged unhappy customers to take their business elsewhere.

Rebecca Fearnley, principal researcher at Which magazine, said: "It's time the big banks got their act together - they need to pay higher rates and give a better service.

"People should take advantage of the better deals on offer now."