BRITAIN’S largest banks have paid 60 per cent of their profits since 2011 in fines and repayments to customers, according to a report by accountants KPMG.

Costs including repayments relating to Payment Protection Insurance and so-called interest rate hedging products cost banks £9.9bn last year.

It was a reduction of eight per cent from 2013, said KPMG.

The accountants analysed the results of Royal Bank of Scotland, Lloyds, HSBC, Barclays and Standard Chartered.

The total in penalties for the last four years was £38.7bn.

Banks have been repaying customers who didn’t want, ask for or understand PPI - an insurance against missing loan repayments. Their PPI bill is now £24.4bn, according to consumer group Which?.

Nine UK banks have reimbursed business customers to the tune of £1.8bn after selling them complex deals on interest rates they probably did not understand or were likely to cost more than a regular loan.

Another source of worry for banks will be their return on equity, a profitability measure showing how much money they make for investors, says the report. It is currently below their cost of capital - what investors demand for the risk in investing in banks.

But a stronger capital base after regulations forced them to raise money or keep profits means banks were in a healthier shape, it said.

HSBC, Royal Bank of Scotland, Swiss bank UBS and US banks JP Morgan Chase, Citibank and Bank of America were all fined a collective £2.6bn by UK and US regulators for their attempts to manipulate foreign exchange rates.