Breaking up banks not the answer, says Lloyds chief

"This is an enormously competitive market and I am not sure that dividing banks further would give a better outcome," Eric Daniels told parliament's Treasury Select Committee.

"Concentration does not lead to lack of competition," said Daniels, who is leaving the bank next year.

As part of an inquiry into competition within UK retail banking, smaller rival Tesco Bank accused bigger banks of sharing some data.

Tesco Bank said in a written submission to the committee that "the established banks routinely share current account data...through a closed user group."

RBS's head of UK retail Brian Hartzer denied that: "As far as I'm aware there is no sharing of credit data amongst the big banks, other than via the credit bureaus who make that data available to people."

RBS chief executive Stephen Hester told the lawmakers he agreed with Mr Hartzer's comments.

Lloyds is the leading provider of retail banking products in Britain with a near 30 per cent share of current accounts and mortgages following its takeover of HBOS during the depths of the financial crisis.

An independent commission has been studying competition in the sector and there is a threat it will order Lloyds to be broken up when it reports late next year.

"That is a hypothetical question ... it is very premature to judge an outcome," Daniels said when asked about that threat.

The government owns 41 per cent of Lloyds after pumping in billions of pounds to save it and HBOS during the financial crisis.

The government is currently sitting on a paper loss of over 8bn on its stakes in RBS and Lloyds, excluding fees paid as part of the bailout, after briefly sitting on a profit when the shares rose earlier this year.

Executives said the timing of the government's sale of stakes was an issue for Financial Investments, the body that holds the stakes, but Mr Hester said the start of the sale process of the RBS stake would be a positive "symbol of recovery" for both his bank and the economy.

Daniels said he had not held talks with the UK government over bonuses for this year, but said payouts at his bank were lower than rivals as it was mainly a commercial bank.

The executives defended their banks against accusations they overcharge customers, particularly in terms of high interest charged on overdrafts.

Mr Hartzer said overdrafts were unprofitable after taking account of the cost of capital, while Lloyds said the product was profitable but it was a "very low return product".