The most profitable banks in the UK

The top ten, as measured by return on capital, includes a number of investment and private banks, including HSBC Trust Co (UK) Ltd (1), Cater Allen Ltd (3), Barclays Bank Trust Co Ltd (4), and Lloyds Bank Private Banking Ltd (5). However, right up there with the best of them is Vanquis Bank Ltd, the bank that helps "people repair bad credit," which comes in at number two.

Vanquis Bank Ltd - one of the best performing banks in the UK

It may lend at rates that some might consider usurious, but I don't expect the shareholders are complaining. Vanquis Bank Ltd has, at 9.99%, the highest return on assets percentage of any of the UK banks; when it comes to return on capital, it is second only to Barclays Bank Trust Co.

Only 3 banks consistently profitable over the part 4 years

British Arab Commercial Bank Plc tops the latest Pre-Pax Profit Growth Table due to a leap back to the sort of figure that we would expect (£13,555,000 for 2012) against a relatively low base of £209,000 for 2011. Both Adam & Co Plc and United National Bank Ltd record growth of over 1000% for much the same reason.

It is therefore useful to look at the average for the last four years.

Although, once again, the growth for British Arab Commercial Bank Plc of 6385% for 2012 compared to 2011 has put it at the top of the 4 year average table, for two of the comparative years there has been a fall in profit.

There are only three banks that have shown an increase in profit each year over the past four years. they are
Vanquis Bank Ltd, ABC International Bank Plc and Standard Chartered Bank.

Most consistently profitable bank

Measured over the last 4 years there is only one bank that has increased pre-tax profit year on year.

It is:

Standard Chartered Bank. £4,109,000,000 to £6,769,000,000

Over the last 3 years there are six:

Ahli United Bank (UK) Plc. £3,675,000 to £50,881,000
Sainsbury's Bank Plc. £5,900,000 to £39,700,000
Vanquis Bank Ltd. £8,994,000 to £44,700,000
Zenith Bank (UK) Ltd. £1,999,421 to £5,104,963
Close Brothers Ltd. £53,300,000 to £140,200,000
ABC International Bank Plc. £9,886,000 to £20,547,000.

Vanquis Bank storming up the tables

With a return on capital of 43.70%, Vanquis Bank Ltd is positioned 4th in this table. Return on assets figure of 9.19% places it second. With a pre-tax profit growth of 91.85% it is positioned 13th; 25th in asset growth and 17th in capital growth. (Not surprising, therefore, that its highest paid director received £1,700,000 putting them 12th in that table). Lucky parent, Provident Financial Plc; unlucky Vanquis customers who pay a "representative 39.9% APR at present", a cash advance fee of 3% (minimum £3 - making taking out a tenner a 30% cost), and foreign currency transaction charge of 2.99%.

74.75% interest rate

Vanquis Bank Ltd (Chairman: Mr Crook) is offering credit cards with an interest rate of 59.9% and cash transactions with an annual rate of 74.75%.

Is this a record for a UK regulated bank?

The Worst Four UK Banks

There are only four UK banks that have been loss-making for each of their last 6 accounting periods. They are The Charity Bank Ltd (total pre-tax losses of £4.1 million), Islamic Bank of Britain Plc (total pre-tax losses of £28.4 million), Wesleyan Bank Ltd (total pre-tax losses of £2.1 million), and Vanquis Bank Ltd (total pre-tax losses for the 5 accounting periods since inception a whopping £51.6 million).

Vanquis Bank Ltd is owned by Provident Financial Plc. It has yet, in its 5 year history, to make a profit. Vanquis makes its money by providing the credit-unworthy with a credit card which charges an interest rate of 39.9%. Let's call that 40%. Those that use the card to take out cash pay a 49.9% interest rate. That's to say 50%. In the last year (to 31.12.07) it had to write off over £21 million. Its Directors' Report is a lesson in avoiding the question. Under "Principal Risks and Uncertainties" its Company Secretary writes, "...the company's directors believe that a discussion of the group's risks would not be appropriate..." Under "Key Performance Indicators" he writes, "...the company's directors believe that analysis using key performance indicators for the company is not necessary or appropriate..." Vanquis' chairman is, appropriately enough, a Mr Crook.

Pre-Tax Profit Table

Ten banks made losses of in excess of £10,000,000. They are (together with their excuses):
147th: MediCapital Bank Plc -£11,892,000 31.12.07
"Results reflect the extensive investment the bank has made in its systems and people with operating expenses totalling £12,409,000. Personnel expenses continues to be our most significant cost with employee numbers almost doubling to 67 as we continue to build our team to its full complement in preparation for 2008 and onwards."
148th: Ivobank Ltd -£12,307,577 30.6.07
"...currently working towards a launch in Q1 2008. At the end of the period, the company had recruited all the staff required to launch the bank and was testing the systems required to run the bank."
149th: Europe Arab Bank Plc -£14,396,855 (converted from Euros) 31.12.06
"The losses attributable to the three strategic business units for 2006, were Euro8.2m. The majority of the Euro15.2m of additional losses were incurred as part of the restructuring project and the purchase of 13-15 Moorgate in London."
150th: London Scottish Bank Plc -£16,440,000 31.10.07
"The Group recorded a loss before tax and goodwill impairment from continuing operations of £5.6million. The Group's loss before tax from continuing operations was £18.1million. Strong performances were recorded by: the Robinson Way debt collection division with profits up 57% to £13.9m, mortgages and secured lending with profits up 20% to £3.3m, and factoring with profits up 17% to £2.5m. These strong performances were offset by: another disappointing performance from the Broking division with a loss of £2.9m, and Unsecured Consumer Credit which recorded a loss of £22.4m."
151st: Vanquis Bank Ltd -£17,337,000 31.12.06
"While losses were incurred in the period, the business is currently in a "start-up" phase and in this context the directors are satisfied with the current financial position of the company and future prospects."
152nd: Liverpool Victoria Banking Services Ltd -£19,973,000 31.12.06
"The 2006 year saw a continuation of the highly competitive marketplace for both Personal Loans and Credit Cards. This was again combined with an ongoing high incidence of customer default, which impacted across the industry as a whole, particularly as a result of increases in individual voluntary arrangements and bankruptcies. Against this background the Bank traded at a loss in 2006."
153rd: HFC Bank Ltd -£75,383,000 31.12.06
"Loss before tax increased by £22.4m or 42% compared with 2005. Excluding the card business (reported as discontinued operations), loss before tax increased by 197 per cent driven by lower customer balances and a deterioration in the credit environment, offset by lower expenses."
154th: Royal Bank of Canada Europe Ltd -£81,638,000 31.10.07
"[A] severe disruption in the financial markets contributed to substantial writedowns of securities held and negatively impacted the effectiveness of hedging strategies in the Company's Financial Products business resulting in a full year pre-tax loss for that business of £131million." Increased staff costs (of £18.5m) were also blamed.
155th: Egg Banking Plc -£154,500,000 31.12.06
"...one element [of the loss] was the impact of a marked deterioration in industry wide consumer behaviour. This has resulted in a reduction of net borrowing on cards as consumers reduce their spending and borrowing. In addition bad debt experience is worse than expected, particularly in relation to personal loans."
156th: Northern Rock Plc -£167,600,000 31.12.07