LONDON (ShareCast) - (ShareCast News) - UK's big banks are at a nadir in their fortunes and yet to enjoy a sustained uplift in their business, albeit with fundamentals beginning to turn north, says the Financial Times' Lex column.
Mortgage, credit card and personal lending all turned a corner in 2014, and in 2015 both Lloyds Banking Group and Barclays booked pre-tax net profits on retail banking of about 1.1% of assets.

"Returns a decade earlier were 50 basis points higher," the column noted. On £300bn of assets each, a sortie back to such heady returns would produce £3bn more profit for just these two banks.

Yesterday, the UK government confirmed it plans a retail sale of its remaining 9.2% shareholding in bailed-out Lloyds, returning the shares to the private sector between 2016 and 2017.

Of the UK's big-four banks, only Lloyds had beaten the FTSE 100 index since 2012. Royal Bank of Scotland, HSBC and Barclays all lagged by 30%-50%.

"There are plenty of reasons why profit and competitiveness may decouple," said Lex.

"A lack of competition can breed inefficiency, so shareholders never see the profits," it said, pointing at middlemen (such as overpaid staff) scooping out the benefits instead.

Moreover, externally imposed constraints, such as capital requirements or more compliance spending, could also weigh on returns. It is true that the big-four banks are also continuing to pare bad debts and misconduct fines, these often dating back some years.

Against this backcloth, the Competition and Markets Authority (CMA) claimed to have multiple grounds for its umpteenth banking investigation in recent years - market concentration, bad service and customer neglect.

Yesterday, the CMA proposed banks cap unauthorised overdraft fees and be required to join a price-comparison website. Its proposals - after a 19-month probe, and ignoring calls for a break-up - drew flak from consumer groups and posed questions for investors.

"Shouldn't a highly consolidated industry that serves customers poorly be rewarding shareholders handsomely?" queried Lex. "UK banking is evidence against."

Lex further contended that all of this threw the smallness of the CMA's available remedies into relief.

"Apart from self-determined caps on overdraft charges, most depend on bank customers shedding their habitual torpor and shopping around, in response to yet more information and apps," said Lex, noting the presence of competition for challenger banks non-bank forms of payment.

"Yesterday's collective shrug from both complainants and the markets is easy to understand."

Meantime, Premier Foods is struggling to justify its rebuff of a 65p-a-share takeover tilt from US outfit McCormick after the Mr Kipling owner booked another set of lacklustre full-year results, said The Daily Telegraph's Questor column.

The argument that any offer "substantially undervalues the company and its prospects" was used so often as to be essentially meaningless, Questor said, contending that while it was true there could be some value in Premier, the questions of to whom it accrued was a good deal more opaque.

Premier's chief executive, Gavin Darby, believed he was justified in rebuffing the McCormick offer, given his recently restructured charge was now on the track to recovery.

The target for sales growth this year and the next had been bumped up to 2%-4%, apparently to prove a point, said Questor, which has a Sell rating on the stock and noted previous attempts to drive 3% sales growth in Premier's largest eight brands was quit in 2014.

The question for investors was whether or not they might have been better served by accepting the 65p-a-share cash rather than holding on at 40p for the long-awaited recovery, which would have to be achieved against food-price deflation and market distaste for high-sugar processed foods.

"The offer may not come again as Premier Foods has now effectively swallowed a poison pill by signing a relationship agreement with Japan's Nissin Foods." Nissin has taken a 19.9% stake in the company and the right to appoint a non-executive director to the board," Questor observed.

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