Big banks making £700 a second

THE big banks are expected to share an £11 billion profits bonanza when they unveil results for the first six months of this year.

The huge sum - equal to a staggering £700 a second - is revealed at a time when the banks are under enormous political pressure for racking up 'excessive profits' in their personal and business operations.

The massive profits have been achieved despite the exposure to US corporate disasters such as Enron, the need to increase provisions for other bad loans and, in some cases, huge investments to strengthen their insurance subsidiaries.

The figures challenge the view that new regulations to limit the banks' 'excessive' moneymaking are having any immediate effect.

Barclays chief executive Matt Barrett enraged MPs and consumer groups earlier this year when he told a Parliamentary select committee that he 'doesn't know what excessive profits mean'.

Mortgage bank Northern Rock will kick off the results reporting season this week when it posts an 11% increase in profits to £156 million, according to analysts at Commerzbank.

But Royal Bank of Scotland, which owns NatWest, is expected to head the pack with a whopping £3.2 billion profit - an increase of 16.5% on the same period last year.

Lloyds TSB, which has been criticised over its call centres and is still struggling to find a European bank takeover target, will follow with more than £2.2 billion of profits.

Barclays, which is seeking a move further into the precarious world of investment banking, is set to report profits of more than £2 billion.

HSBC, owner of First Direct, will have profits of about £1.2 billion from its UK business out of overall revenues in Europe of nearly £1.7 billion. This is despite the fact that the bank took a substantial hit from the meltdown of the economy in Argentina, where it is heavily involved.

James Eden, head of the Commerzbank research team, said he believed bank profits were going just one way - up.

'I'm forecasting a five% growth for the bank sector as a whole this year,' he said. 'We are set for another record-breaking year in terms of lending volumes.'

Eden said the strength of consumer demand for mortgages and other loans meant the banks were having a field day. 'With such demand for lending, banks are not having to compete too aggressively on price,' he said.

But Stuart Cliffe of the National Association of Bank and Insurance Customers said: 'It's extraordinary that the banks can make this much in profits given the economic climate. Of course, they have to make profits, but they are becoming a leech on the economy. And customers haven't benefited from any of this.'