High street banks lose £100bn in deposits

British lenders report a significant decline in deposit market share as competition increases.

High street banks face £100bn deposit loss due to online banking rise

High street banks in the UK have seen a staggering loss of £100bn in deposits as clients migrate to online banks and building societies. KPMG's analysis reveals that traditional banks are losing ground to challengers offering better savings rates. The share of deposits held by established banks declined from 84% in 2019 to 80% in 2024. Additionally, the banking sector recorded a £3.7bn drop in pre-tax profits last year, marking a notable downturn since the pandemic recovery. KPMG forecasts a decline in return on equity from 13% in 2023 to around 8% by 2027, resulting in an £11bn profit loss annually. Amid these changes, banking organizations must adapt to survive a challenging financial landscape.

The shift away from high street banks reflects a broader trend in consumer behavior as people seek better returns on their savings. This shift is not merely an economic response but also a reaction to perceptions of banks as slow to adapt. The resultant pressures on profit margins and calls for government intervention raise critical questions about the future of the banking sector. If established banks do not innovate and improve their savings offers, they may find their customer base eroding further, risking their long-term viability in an incredibly competitive market.

Highlights

As competition intensifies, traditional banks must rethink their strategies to retain customers.