ROYAL Bank of Scotland and Lloyds Banking Group stood out among the big five UK-based players in their sector by achieving a rise in profitability last year, analysis by accountancy firm KPMG has concluded.

The five biggest UK banks achieved a 62 per cent or £7.9 billion hike in combined pre-tax profits to £20.6bn in 2014, from £12.7bn in the prior year, KPMG has calculated in its latest sector benchmarking report, 'A Paradox of Forces', published today.

This rise in combined profits was largely the result of RBS having booked a statutory operating profit before tax, which excludes results from discontinued operations, of £2.64bn for last year, compared with a loss of £8.85bn at this level in 2013. This 2014 profit figure for RBS excludes a £4bn write-down on US operation Citizens, which has been floated on the New York Stock Exchange.

Lloyds Banking Group, which owns Bank of Scotland and is, like RBS, backed by the UK taxpayer, achieved a rise in its bottom line pre-tax profits from £415m in 2013 to £1.76bn last year.

The KPMG report, which covers HSBC, Barclays, and Standard Chartered as well as RBS and Lloyds, also concluded that the UK banking sector "must urgently tackle a low return on equity".

Publishing its findings, KPMG says: "None of the banks surveyed achieved a return on equity of more than eight per cent, compared with an average 11.6 per cent in 2009.

"The report paints a picture of divergent performance across the banks as they begin to reshape their business plans. For example, profitability at the two state-backed banks continued to rise whereas it fell at the three global banks."

Contemplating the question of why it had been the state-backed banks which had improved profitability last year, a spokesman for KPMG said: "It was just a pure coincidence. We couldn't find any causality on that. They are so unique in any instance."