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Profitability in English banking in the twentieth century

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  • CAPIE, FORREST
  • BILLINGS, MARK

Abstract

It is well-known that clearing banks in Britain did not publish their true profits until 1969. This article sets out to establish from sources in the banks’ archives reliable and consistent estimates of the true profits and profitability of the major English clearing banks during the period 1920–68. The methods used and problems encountered are explained, and the results discussed, together with possible sources of data outside the banks. The impact of inflation on rates of return is considered. The question of ‘smoothing’ of published profits by the banks is addressed. The results are discussed in the context of economic theory and the perceived cartel nature of banking and some comparisons made to estimates of profitability in the wider UK economy. Finally, some interesting questions raised by the results, and which require further study, are identified.

Suggested Citation

  • Capie, Forrest & Billings, Mark, 2001. "Profitability in English banking in the twentieth century," European Review of Economic History, Cambridge University Press, vol. 5(3), pages 367-401, December.
    • Handle: RePEc:cup:ereveh:v:5:y:2001:i:03:p:367-401_00
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    Citations

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    Cited by:

    1. Hortlund, Per, 2005. "The Long-Term Relationship between Capital and Earnings in Banking," SSE/EFI Working Paper Series in Economics and Finance 611, Stockholm School of Economics, revised 17 Nov 2005.
    2. Mark Billings & Forrest Capie, 2011. "Financial crisis, contagion, and the British banking system between the world wars," Business History, Taylor & Francis Journals, vol. 53(2), pages 193-215.
    3. Mark Billings & Forrest Capie, 2004. "The development of management accounting in UK clearing banks, 1920-70," Accounting History Review, Taylor & Francis Journals, vol. 14(3), pages 317-338.
    4. Luciano Amaral, 2013. "Imperfect but hard competition: the Portuguese banking sector in the Golden Age (1950-1973)," Nova SBE Working Paper Series wp575, Universidade Nova de Lisboa, Nova School of Business and Economics.
    5. Fabio Braggion & Lyndon Moore, 2013. "How insiders traded before rules," Business History, Taylor & Francis Journals, vol. 55(4), pages 565-584, June.
    6. Bholat, David & Lastra, Rosa & Markose, Sheri & Miglionico, Andrea & Sen, Kallol, 2016. "Non-performing loans: regulatory and accounting treatments of assets," Bank of England working papers 594, Bank of England.
    7. Hortlund, Per, 2005. "The Long-Term Relationship between Capital and Earnings in Banking: Sweden 1870–2001," Ratio Working Papers 63, The Ratio Institute.
    8. David Bholat & Rosa M. Lastra & Sheri M. Markose & Andrea Miglionico & Kallol Sen, 2018. "Non-performing loans at the dawn of IFRS 9: regulatory and accounting treatment of asset quality," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(1), pages 33-54, January.

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