VYSOKÁ ŠKOLA POLYTECHNICKÁ JIHLAVA Obor Finance a Řízení

VYSOKÁ ŠKOLA POLYTECHNICKÁ JIHLAVA

Obor Finance a řízení

International Comparison of Bank Charges Associated with the Current Account Bachelor thesis

Autor: Oksana Serednycká

Vedoucí práce: Ing. Petr Jiříček

Jihlava 2012

Annotation

The bachelor thesis analyzes the topic of the banking system of the United Kingdom of Great Britain and Northern Ireland. The theoretical part describes the structure of the British financial system. Created profiles of the most important banking institutions in the UK and a brief analysis of commercial banking in the UK and in the Czech Republic are also included in the theoretical part. The basic data used for the analysis and comparison of financial statements and charges relating to the current account of selected banks, were collected from their official website and also on my own questionnaire. The analysis and comparison of individual financial statements and charges were performed using the data obtained. Opinions and client satisfaction were identified using questionnaires.

Keywords

Banking system, current account, bank charges, profit and loss statement, balance sheet

Především chci poděkovat Ing. Petru Jiříčkovi za odborné vedení pří zpracování bakalářské práce. Mé poděkování také patří Mgr. Martině Benešové, Ph.D., která mi ochotně radila ohledně jazykové stránky mé práce. V neposlední řadě bych ráda poděkovala své rodině a přátelům za jejich podporu.

Prohlašuji, že předložená bakalářská práce je původní a zpracoval/a jsem ji samostatně. Prohlašuji, že citace použitých pramenů je úplná, že jsem v práci neporušil/a autorská práva (ve smyslu zákona č. 121/2000 Sb., o právu autorském, o právech souvisejících s právem autorským a o změně některých zákonů, v platném znění, dále též „AZ“).

Souhlasím s umístěním bakalářské práce v knihovně VŠPJ a s jejím užitím k výuce nebo k vlastní vnitřní potřebě VŠPJ .

Byl/a jsem seznámen/a s tím, že na mou bakalářskou práci se plně vztahuje AZ, zejména § 60 (školní dílo).

Beru na vědomí, že VŠPJ má právo na uzavření licenční smlouvy o užití mé bakalářské práce a prohlašuji, že s o u h l a s í m s případným užitím mé bakalářské práce (prodej, zapůjčení apod.).

Jsem si vědom/a toho, že užít své bakalářské práce či poskytnout licenci k jejímu využití mohu jen se souhlasem VŠPJ, která má právo ode mne požadovat přiměřený příspěvek na úhradu nákladů, vynaložených vysokou školou na vytvoření díla (až do jejich skutečné výše), z výdělku dosaženého v souvislosti s užitím díla či poskytnutím licence.

V Jihlavě dne

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Podpis

Content Introduction ...... 8 1 Theoretical part ...... 10 1.1 The Banking Systems ...... 10 1.2 The British Banking System ...... 10 1.2.1 The Bank of England ...... 12 1.2.2 Commercial Banking in the UK ...... 13 Commercial Banks ...... 13 Building Societies ...... 13 Insurance Companies ...... 14 Pension Funds ...... 15 Trust Units ...... 15 Investment Trusts (Investment Companies) ...... 16 1.3 Profiles of British Commercial Banks ...... 16 1.3.1 HSBC Holding plc ...... 16 Progress on Strategy ...... 17 Economic Outlook ...... 17 1.3.2 Lloyds Banking Group plc ...... 18 1.3.3 Royal Bank of Scotland group plc ...... 20 1.3.4 Barclays plc ...... 22 1.4 The Analysis of Financial Sectors ...... 23 1.4.1 Development of Financial Sector in Czech Republic ...... 23 1.4.2 Developments in UK Banks and Other Financial Institutions ...... 25 2 Practical part ...... 26 2.1 Comparison of Barclays plc and Komerční banka, a.s...... 26 2.1.1 Barclays plc ...... 26 2.1.2 Komerční banka, a.s...... 29 2.1.3 Comparison of Bank Charges ...... 39 KB Price List for Individuals ...... 39 Barclays Bank Charges ...... 42 2.1.4 Comparison of Bank Charges of Barclays and Komerční banka ...... 43 2.1.5 Comparison of Income from Fees to Total Income in CZ and UK ...... 44 Barclays plc ...... 44 Komerční banka, a.s...... 46 2.2 Results of Primary Research ...... 48 2.2.1 Profile of Respondents ...... 48 2.2.2 Representation of Individual Banks ...... 50

2.2.3 Bank Monthly Charges for Working of Current Account ...... 51 2.2.4 Opinion about Appropriateness of Banks Charges in Current Account ... 52 2.2.5 The Way how Clients Mostly Operate Their Current Account ...... 53 2.2.6 Satisfaction with Supply of Current Account ...... 53 2.2.7 Satisfaction with Bank’s Charges Policy ...... 54 2.2.8 Willingness to Exchanging Bank in Case of Charging Inappropriate Charges 55 Conclusion ...... 57 Bibliography ...... 59 List of Tables ...... 61 List of Figures ...... 62 List of Annexes ...... 63 Czech Questionnaire ...... 64 British Questionnaire ...... 65

Introduction

The structure and strategy of banks in each country varies according to the local culture. What remains is the same objective, which is to satisfy customers and to retain their loyalty. Banks try to offer a wide range of services for all of their specific clients. The author of this thesis has therefore decided to compare the structure of the two pre- selected banks and the fees associated with a current bank account with a bank that provides its services on the Czech banking market and banks that offer their services on the banking market in the UK. To perform a high quality thesis, the author entered the following three main objectives: 1. To compare the financial statements of selected banks, namely income statement, balance sheet and cash flow. 2. To analyse and compare the fees for a current bank account with two selected banks. 3. All work is concluded with a questionnaire to assess the overall satisfaction rating of clients of British and Czech banks. Primary and secondary data will be used to evaluate this thesis. Official websites of banks that provide services in the Czech Republic and in the UK will be a tool for obtaining secondary data. Own calculations and the comparison of financial statements will be the primary source for evaluating the thesis. Questionnaires are another primary source; the questionnaires were filled in by correspondents interviewed in the UK and the Czech Republic. The thesis should outline the differences in the financial statements which are associated with the activities of banks and different accounting fees associated to current account. This thesis consists of two main parts. In the first part, which will be mainly theoretical, the financial system will be described. Created profiles of the most important banking institutions in the UK and a brief analysis of commercial banking in the UK and the Czech Republic are an integral part of the theoretical part. The author using secondary data obtained from official websites of banks performs the analysis and the subsequent comparison of selected financial statements of the Czech and British banks in the analytical part. The comparison of fees associated with the use of the current bank account will also be performed. The work will be finished with a questionnaire survey; the overall satisfaction and attitude of customers to their bank and

8 the services that banks provide result from questionnaires. Individual respondents’ views will be demonstrated in relevant charts and tables. In the conclusion, the author evaluated the results.

1 Theoretical part

1.1 The Banking Systems

The banking systems in the country can be defined as the sum of all banking institutions and relationships between them. Banking institutions are institutions that are mandated to carry out banking operations. Many banks provide a range of services that can’t be seen directly at the bank services. Functions and functioning of the banking system is determined by the existing economic system in the country. Other relevant factors that affect the functioning of the banking system is a system of mutual relationships between banks and underdeveloped financial markets, monetary stability, currency convertibility, participation in international organizations, type of banking activities and some other factors. [1] In most countries with market economy is a two-tier banking system. The first tier consists of a central bank. The second tier consists of other „commercial“banks. Types of organization of the banking system are The banking system can be organized according to different principles. The basic aspect of the banking system breakdown can be considered: 1. Division of the banking system by macroeconomic and microeconomic functions, or by the existence of a central bank with all the macroeconomic features and tools in the banking system. 2. Differentiation depending on the extent of banking systems of individual banks authorized to perform banking transactions. [2]

1.2 The British Banking System

The British banking system is also two-tier as in the Czech Republic and is the subject of regulation performed by the central bank - bank of England. All institutions that accept deposits have to apply for a banking licence uder the Act of 1987, called Banking Act. The second tier consists of commercial banks, building societies, insurance companies, pensionfunds, trust and unit investment trusts. [3] The banking sector in Britain is traditionally most segmented. According to recent data, around 450 institutions own banking licence; they are divided into seven sections, sometimes according to the function, sometimes by the nationality of owners.

According to the function there is the biggest difference between retail banks, commercial banks (merchant), other UK commercial banks and credit companies (discount houses). The group of retail banks provide loans and deposits to households, private individuals or retailers. Different payment systems and money transfer mechanisms are also a large part of banking operations in this category. They also offer a wide range of financial services, sales and purchase of foreign currency, insurance through the opening up of personal pension funds, investment trusts or services to an enforcement nature. British commercial banks have a long history, the beginnings of their activities fall within the funding period of discovery and subsequent overseas trade. The range of their activities is similar wide - from accepting deposits and providing loans for advice on alternative forms of financing, risk strategies or transactions in the new financial market instruments (new securities issues). British banks are banks that provide a wide range of banking services, but usually in some way limited. Some of them have become the financial houses, thein activities are in the purchase and leasing of firm’s equipment, lending for retail and more. Commercial loan companies are very specialized. They trade with other banks. They are also the first source of assets for other banking sector. All of these groups, of course, accept deposits and provide loans. The banking system in the UK is regulated by the central institution of the Bank of England by law Banking Act of 1987. By law, each institution receiving deposits (except for building societies) to apply for a banking license to the failure of the rules may be removed. Banking Act stimulates the following rules: 1. The bank must demonstrate that its directors are fit and proper persons according to specified requirements. 2. The bank council established that banks must report regularly of their activities. Also, bank auditors and accounting officers are required to provide the Board information that is normally part of the private bank-client relationship. 3. The last rule allows the Bank of England to veto the acquisition of individual shares in the bank, which exceeded 15%. [2]

1.2.1 The Bank of England

The Bank of England is the central bank of the United Kingdom. Sometimes known as the Old Lady of Threadneedle Street, it was established in 1694 as a private bank by London merchant in order to lend money to the state and to deal with the national debt. The Bank Act of 1946 gave the government statutory autority over the Bank of England. The Court (equivalent to a board of directors) of the Bank of England is made up of the governor and two deputy governors, who are appointed for five-year terms, and sixteen non-executive directors, who are appointed for three-year terms. Standing at the centre of the United Kingdom financial system, the Bank is committed to promiting and maintaining monetary and financial stability as its contribution to a healthy economy. The Bank’s roles and functions have evolved and changed over its three-hundred years history. As well as providing banking services to its customers, the Bank of England managers the UK’s foreign exchange and gold reserves. The Bank has two core purposes – monetary stability and financial stability. The Bank is perhaps most visible to the general public through its banknotes and, more recently, its interest rate decisions. The Bank has had a monopoly on the issue of banknotes in England and Wales since the early 20th century. But it is only since 1997 that the Bank has had statutory responsibility for setting the UK’s official interest rate. [8] Interest rate decisions are taken by the Bank’s Monetary Policy Committee. The MPC has to judge what interest rate is necessary to meet a target for overall inflation in the economy. The inflation target is set by the Chancellor of the Exchequer. The Bank implements its interest rate decisions through its financial market operations. The Bank has close links with financial markets and institutions. This contact informs a great deal of its work, including its financial stability role and the collation and publication of monetary and banking statistics. [7] Because the United Kingdom is not a member of the European Monetary Union, the Bank of England makes its monetary policy decisions independently from the European Central Bank. The decision to set interest rates resides in the Monetary Policy Committee, made up of the governor, two deputy governors, two members appointed by the governor after consultation with the chancellor (normally central bank officials), plus four outsider economic experts appointed by the chancellor. The

12 inflation target for the Bank of England is set by the Chancellor of the Exchequer, so the bank of England is also less goal-independent. [4]

1.2.2 Commercial Banking in the UK

Commercial Banks

Commercial banks are divided into retail banks and commercial banks, which are known as merchant banks. Retail banks mainly provide loans and deposits of households, private individuals and retailers. The principal activities are operating cheque current accounts, receiving deposits, taking in and paying out notes and coin, and making loans. Additional services include trustee and executor facilities, the supply of foreign currency, the purchase and sale of securities, insurance, a credit-card system, and personal pensions. They also compete with the finance houses and merchant banks by providing venture cupital and with building societies by providing mortages. The main banks with national networks of branches in the UK are the so-called Big Four (the Royal Bank of Scotland group, including NatWest; Barclays, including Woolwich; Lloyds banking group, and HSBC). They are also known as joint-stock banks, retail banks, or High-Street banks. [4]

Building Societies

History, function and regulation of building societies is different from banks.Traditionally, a financial institution that accepts deposits, upon which it pays interest, and makes loans for house purchase house improvement secured by mortgages. They developed from the Friendly Society movement in the late 17th century and were non-profitmaking with mutual status. These institutions can be found in the UK, Australia, South Africa, Ireland, and New Zeland. In the USA savings and loan associations are broadly similar organizations. In the UK, since the Building Societies Act 1986 they have been able to widen the range of services they offer; this has enabled them to compete with the High-Street banks in many areas. They offer cheque accounts, which pay interest on all credit balances, cash cards, credit cards, loans, money transmission, foreign exchange, personal financial plannings services (shares, insurance, pensions, etc.), estate agency,

13 and valuation and conveyacing services. The distinction between banks and building societies is fast disappearing: indeed, many building societies have obtained the sanction of their members to become public limited companies. They then become profit-making banks, owned by their shareholders, instead of non-profitmaking societies owned by their subscribing members. These changes have led to the merger of many building societies to provide a national network that can compete with the Big Four banks. Moreover, the competition provided by the building societies has forced the banks into offering free banking services, paying interest on current accounts, and Saturday opening. A similar change has taken place in all the other countries that have building societies. The UK building societies are now regulated by the Financial Services Autority. [3]

Insurance Companies

People insure because they prefer lower levels of income, knowing that they are protected against the possibility of sudden catastrophic events, than higher income, knowing that it can affect accident, illness, etc. This is the basis of all insurance, which can be divided into two basic groups. There are long-term or life incureance and basic insurance. Insurance Companies Act, a law on insurance in the UK, was founded in 1982, and distributes basic insurance and life insurance to 17 or 7 classes. The UK market offers life insurance in various forms. One can even insure against death at a given time and if the client survives, the insurance company will not pay any money. Department of Trade and Industry grants licenses for the operation of insurance and also oversees and monitors the behavior of the company’s solvency. The size of insurance companies that provide long-term insurance is markedly greater than the one of insurance company providing basic insurance. This fact caused the fact that insurance companies providing long-term insurance can use free resources for further investment and, thereby, increase their profits. [5] In accordance with British legislation on insurance, companies must have insurance to operate the authorization granted by the Department of Trade and Industry, which also oversees the behavior of companies, especially their solvency. If necessary, it has the power to intervene in several ways: to request a change in investment strategy, to extension of existing policies or introducing new ones. Given that some insurance

14 products have the character of saving, insurance companies are subject to partly finance law by the Financial Services Act, 1986. The biggest difference between the insurance companies providing basic insurance and long-term insurance is its size. If we compare all types of financial institutions, long- term insurance companies are the largest investors of securities of all types, particularly corporate interests. [5]

Pension Funds

In developed countries, people expect that their employer provides pension. This has in practice many forms. Basic pensions are two of types: the first represents the financing on a "pay-as-you-go" (PAYG), and the other on the basis of funds. In the case of PAYG, pensions are paid to those currently employed after they retire. For current employees it may seem that they saved money for their own retirement, which is obviously apparent. The problem is a change in the structure - employed and pensioners. State pensions are usually paid as the PAYG type, rainfall described as national insurance contributions and have the character of direct taxation. The state pension is, then, paid as other social benefits, the total taxes. State and private pension contributions invested to give as high a return as possible to provide the funds from which pensions are paid. In the UK, pension funds managed by individual organizations work closely with insurance companies and investment trusts, being together the institiutional investors that have a dominant influence on many securities traded on the London Stock Exchange. An enormous amount of money is accumulated by these pension funds, which grow by weekly and monthly contributions; real estate and works of art are often purchased for investment by pension founds in addition to stock-exchange securities. Nominal value of pension funds has increased in the UK in recent years by 14%. It is the consequence of increasing the value of related assets. [3]

Trust Units

Investing money in a wide range of assets that were acquired by the fund from individuals and companies was the reason of establishing trusts. Each of these institutions is managed by two entities: a management company and a trustee of the

Trust, known as the curator. The trustee is generálky a representative of specialized banks. [3]

Investment Trusts (Investment Companies)

Company invests the funds provided by shareholders in a wide variety of securities. It makes its profits from the income and capital gains provided by these securities. The investments made are usually restricted to securities quoted on a stock exchange, but some will invest in unlisted companies. The advantages for shareholders are much the same as those with unit the trusts, it is spreading the risk of investment and making use of professional managers. Investment trusts, which are not generally trusts in the usual sense, but private or public limited companies, differ from unit trusts in that in the former the investors buy units in the fund but are not shareholders. Some investment trusts aim at high capital growth (growth shares), others for high income (income shares). The profit of an investment trust is subjected to corporation tax at the full rate; the lower rates of tax applied to trading companies are not available. They are also subject to special provisions in relation to dividends. Investment trusts are, in essence, companies whose business is holding securities. Investment trusts are, therefore, subject to the Companies Act and Stock Exchange Act if they have a business license. [6]

1.3 Profiles of British Commercial Banks

1.3.1 HSBC Holding plc

HSBC Holdings is a public limited company incorporated in England and Wales. HSBC was born from one small idea – a local bank serving local needs. In March 1865 HSBC opened its doors for business in Hong Kong and today it welcomes customers across the globe as the world’s local bank. HSBC is one of the largest banking and financial service organisations in the world. HSBC’s international network comprises around 7,200 offices in over 80 countries and territories. Headquartered are in London, the HSBC group operates in five regions: Europe; Hong Kong; the rest of Asia and Pacific; (including) the Middle East and Africa; North America; and South America.

The entities which form the HSBC Group provide a comprehensive range of financial services to personal, commercial, corporate, institutional investment, and private banking clients. To promote the Group more easily as a whole, HSBC was established as a uniform, international brand name in 1999. [9]

Progress on Strategy

HSBC’s global network covers the majority of world trade and capital flows, and provides access to faster-growing economies as well as to the mature economies where wealth is stored. HSBC is making progress in all the three areas below: • Firstly, as a result of their portfolio review and application of a five-filter framework, they announced a number of closures and disposals. • Secondly, they are targeting US$2.5 - 3.5bn of sustainable cost savings by 2013. Since the start of 2011, they have begun operational restructurings in Latin America, the US, the UK, France and the Middle East, which will reduce headcount by around 5,000. They launched a programme to reduce the costs of their head office and global support functions. • Thirdly, they continued to position the business for growth. They increased revenues in target markets and made progress in wealth management, where they saw higher investment income, especially in Asia, and funds under management in Global Asset Management reached a record high at the end of the period. [10]

Economic Outlook

HSBC remain positive on the outlook for emerging markets. They expect a soft landing in China and believe Hong Kong is well-equipped to mitigate overheating pressures. They expect continued growth in the rest of Asia-Pacific and Latin America and take comfort from the focus of the authorities on managing inflationary pressures. In the developed world, growth in the US and Europe is likely to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity. In the UK, they remain concerned that regulatory actions being contemplated and the ongoing regulatory uncertainty will constrain the supply of credit to the real economy and contribute to sub-par economic growth. [10]

1.3.2 Lloyds Banking Group plc

Lloyds Bank was founded as the private bank of Taylors & Lloyds in Birmingham on June 1765. For nearly 100 years it prospered from a single Birmingham office.

Changes in legislation and a need for increased capital led the firm to convert to the joint-stock status in 1865. This resulted in an explosion of growth and the first of many takeovers. [11]

In the 1880s Lloyds turned its attention to London. In 1884 it absorbed the Lombard Street bank of Barnetts, Hoares, Hanbury & Lloyd. This marked the beginning of the bank’s association with the famous black horse; Barnetts, Hoares & Co. has inherited the symbol, which had originally been used by a Lombard Street goldsmith as early as 1677. The first half of the 20th century saw the bank’s expansion overseas, including continental Europe, South America and India. Cheltenham & Gloucester Building Society joined the group in 1995. Lloyds Bank and TSB Group plc merged in 1995 to form Lloyds TSB. The new group took over Scottish Widows in 2000. [11]

Lloyds TSB Group plc was renamed Lloyds Banking Group plc on 19 January 2009, following the acquisition of HBOS plc. This makes it the largest retail bank in the UK with strong positions in a number of sectors. One in three people bank with it.

Our goal is to be the best financial services provider in the UK. We believe this means we must build a leadership position not on the basis of scale but on the foundations of reputation and recommendation.

While the short term outlook for all financial services companies in the UK and around the globe is challenging, we believe that the acquisition of HBOS will be a success and provides us with many opportunities. The creation of Lloyds Banking Group comes with a big responsibility.

Serving over thirty million people means they have a clear role to play in society; through helping their customers every day.

It is multiple brands, which means that can serve customers in terms of pricing and positioning to cover and attract more of the market. Lloyds TSB and Halifax are main brands in England and Wales, and Bank of Scotland is the main brand in Scotland. [11]

Figure 1 The Regional Picture Business Confidence Strongest again in London, while Wales Recorded the biggest Improvement Source: www.lloydsbankinggroup.com

The net balance for sales in the past six months was the strongest in the West Midlands and South Midlands. In contrast, sales were the weakest in Scotland, the North West and Yorkshire. The North West, Yorkshire and East Midlands were the only regions where the net sales balance fell compared with the previous survey.

Figure 2 Business Confidences Source: www.lloydsbankinggroup.com

London remained the strongest region in terms of our measure of overall business confidence, which tracks total sales, orders and profits expectations in the next six

19 months. Wales saw a remarkable turnaround with the second highest business confidence level, compared with the weakest in the last survey, boosted by strong sales and orders. The regions with the weakest confidence were the North East & Cumbria and North West. [12]

1.3.3 Royal Bank of Scotland group plc

One of the principal companies of Lloyds Banking Group, Bank of Scotland was founded by an Act of the Scottish Parliament on 17th July 1695, making it the first bank to be established in Scotland, and one of the first in the UK. Over the course of its 300 year history, the Bank acquired many constituent companies. [13]

The Bank was set up primarily to help develop Scotland’s trades, mainly with England and the Low Countries. It began its business in February 1696 with working capital of £120,000 Scots (£10,000 Sterling). The 172 original shareholders (including 36 based in London) came mainly from Scotland’s political and merchant elite. What they required was a banking system which would offer long-term credit and security for merchants and landowners alike.

In 1696, Bank of Scotland became the first bank in Europe to successfully issue paper currency an invaluable service given the unreliability of Scots coinage at that time. These first notes were issued in denominations of £5, £10, £50 and £100 - the first £1 note didn’t appear until 1704. The Bank’s right to issue notes has been maintained to the present day.

During the latter half of the 18th and early 19th centuries there were significant changes to Scotland’s banking system. The focus of economic development shifted to Glasgow and to the west. One development was the rise of large-scale joint stock banks with significant numbers of shareholders. These provided much more serious competition for Bank of Scotland, particularly as most of the newcomers also had large branch networks. [14]

In 1857 the Western Bank collapsed. Bank of Scotland, along with the other major Scottish banks, stepped in to maintain confidence in the Scottish banking system and ensured that holders of the Bank’s notes were paid.

The early years of the 20th century brought new business to the Bank. Companies such as British Aluminium and Barr and Stroud (manufacturers of optical range finders for the British Navy) sought sophisticated finance from the Bank, on a scale previously unknown.

The outbreak of war meant the Bank had to refocus its policies on national need. The inter-war years proved difficult too, and it was only after the Second World War that the economic climate improved. The 1950s sparked a series of mergers and acquisitions right across the financial sector. Bank of Scotland began this phase of its development by merging with the Glasgow based Union Bank of Scotland in 1955. Three years later it expanded into consumer credit with the acquisition of North West Securities (later Capital Bank). Then in 1971, it merged with the British Linen Bank.

The 1950s also heralded the age of computerisation. This was to revolutionise the face of British banking and again Bank of Scotland was at the forefront. In 1959 it became the first UK bank to install a computer for processing its accounts centrally. Then in 1986 the Bank again led the way with the introduction of HOBS (Home and Office Banking Services) an early application of internet technology. This service enabled customers to access their accounts directly on a television screen, via a Prestel telephone network. [14]

Bank of Scotland was also swift to appreciate the massive potential of North Sea Oil. By the early 1970s it had set up its own specialist Oil Division, financed exploration of the Forties Field and played a leading role in establishing the International Oil and Energy Bank. In 1975 Bank of Scotland opened its first overseas office in Houston, Texas. Branches followed in other US states; Moscow; Hong Kong; and Singapore. Inroads were made subsequently into Australasia, with the purchase of Countrywide in New Zealand in 1987 and the Bank of Western Australia (BankWest) in 1995.

Then, in 2001 Bank of Scotland merged with the Halifax to form HBOS plc. On 19 January 2009, HBOS plc was acquired by Lloyds TSB and the new entity was named Lloyds Banking Group plc. The acquisition created the largest retail bank in the UK. [14]

1.3.4 Barclays plc

Barclays is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays UK Retail and Business Banking is a leading UK high street bank, providing current accounts, savings products and Woolwich-branded mortgages. UK Retail and Business Banking also provides unsecured loans, protection products and general banking products, as well as banking and money transmission services to small and medium-sized businesses. UK retail and business banking have more than 1,600 branches across the UK, and provides more than 11.7 million current accounts, 15 million savings accounts and 925,000 mortgages to UK customers. [17] John Freame and Thomas Gould start trading as goldsmith bankers in Lombard Street, in the City of London in 1690. Freame and Gould move to premises bearing the sign of the Black Spread Eagle at Lombard Street, London. At the time, signs were commonly used to mark buildings instead of numbers, as most people were unable to read. James Barclay, John Freame’s son-in-law, becomes a partner in the business. The company joins 19 other private banking businesses to form Barclay & Company Limited, with 182 branches and deposits of £26m in 1896. In 1902 the business obtains listing on the London Stock Exchange. In 1917 Barclay & Company Limited becomes Barclays Bank Limited. The business amalgamates with the London Provincial and South Western Bank to become one of the UK’s ‘big five’ banks in 1918. Barclays Bank (Dominion Colonial and Overseas - DCO) is established in 1925 by the merger of the Colonial Bank, the Anglo Egyptian Bank and the National Bank of South Africa. This goes on to add businesses across Africa, the Middle East and the West Indies. From 1945-1948 Barclays offers refresher courses for staff returning from war service, and a Staff Training School is established in Wimbledon, London. In 1977 Barclays is the first UK bank to introduce Personal Bankers to some of its branches under a pilot scheme. The following year the programme is extended nationwide. Barclays Bank Ltd becomes Barclays Bank PLC in 1982 and in 1985 Barclays UK and Barclays International are merged to form Barclays PLC. Barclays Business Centres were opened across the UK in 1988 – the country’s largest business banking network.

Barclays was estimated to be the most valuable brand in the UK in 1999, worth more than £5.3bn. 2006 was a benchmark year in which 50 per cent of Barclays profits are made outside the UK. In 2008 Barclays was the first bank in the UK to give its Local Business customers access to an online service that checks supplier credit ratings. Barclays announces its 2008 Full Year Results, reporting profit before tax of £6.1bn. In 2010 Barclays announces its 2009 Full Year Results, reporting profit before tax of £11.6bn and 2010 Full Year Results, reporting profit before tax of £6.1bn. In 2011 Barclays announces that it has purchased MBNA Europe Bank Limited’s small business credit card portfolio in the UK, consisting of approximately 60,000 accounts with approximately £130m of outstanding balances. Barclays agrees to acquire Egg’s UK credit card assets, consisting of approximately 1.15 million credit card accounts with approximately £2.3bn of gross receivables last year. [15] The draw of the 12 plate series and the launch of new models got consumers onto the forecourts and spending. On the back of increasingly positive economic data, consumer confidence appears to be edging back, and has ensured that the first quarter of the year has set 2012 off to a promising start, in spite of the challenging climate. [16]

1.4 The Analysis of Financial Sectors

1.4.1 Development of Financial Sector in Czech Republic

The relatively good economic situation was reflected also in the financial sector. The banking sector has sufficient capital and remains highly profitable, but the available credit risk indicators are only partially showing a turnaround in the credit cycle. Insurance companies and pension funds have solid capitalisation and the collective investment funds sector is still recording an in flow of clients. Other financial corporations engaged in lending keep losing their market share. Risks to the financial sector are similar as in the previous year. They include a return of recession associated with the collapse of some large debtors, losses from securities holdings in the event of renewed financialmarket turmoil. The gradual economic recovery of 2010 had a positive effect on the domestic financial sector. After stagnating for a year the total assets of the financial sector returned to growth, which – together with the, very low annual nominal GDP growth helped to

23 increase the depth of financial intermediation, which reached 156% of GDP at the end of 2010. [18]

Figure 3 Change in Assets of Individual Financial Sector Segments Source: www.czb.cz

The global financial crisis and its effects in the Czech Republic in the form of recession affected the assets of the individual segments of the financial sector to different degrees. Financial corporations engaged in lending recorded a sharp fall in the market share compared to the pre-crisis period. The other fi nancial sector segments were supported by a recovery of the real economy, a gradual rise in lending and a recovery in the fi nancial markets. This had a particularly large effect on collective investment funds, whose total assets increase compared to the pre-crisis fi gures, although these funds had experienced a substantial outfl ow of clients and signifi cant losses on invested assets in 2008 and 2009. [18]

Figure 4 Change in Assets of Individual Financial Sector Segments Source: www.czb.cz

1.4.2 Developments in UK Banks and Other Financial Institutions

The major UK banks have reported annual results for 2010. The total assets from the major UK banks fell slightly, dropping by 0.5% to £7.4trillion (around 500% of UK GDP). This fall in assets was driven by reductions in the stock of loans to households (down 5%) and non-financial companies (down 4%), and lower holdings of non- government debt securities (down 20%). UK banks in aggregate maintained their stock of loans to households worldwide and modestly increased lending to corporates in 2010. In contrast, there were increases in major UK banks’ loans to other financial institutions and in their derivative assets. This reversed the pattern in 2009, and would tend to increase interconnectedness in the financial system. Their holdings of government debt also increased, in part reflecting banks’ increased demand for liquid assets for regulatory purposes. [19]

Figure 5 The Major UK banks’ Total Assets Source: www.bankofengland.co.uk

(a) Chart uses September balance sheet data for National Australia Bank. (b) Includes loans to governments. Where government debt securities are not disclosed all debt securities are allocated to ‘other debt securities’.

2 Practical part

2.1 Comparison of Barclays plc and Komerční banka, a.s.

The British bank Barclays plc and the Czech bank Komerční banka, a.s. will be analyzed in the practical part of this work. Income statements, balance sheets and bank charges of both banks will be compared. These two banks were selected because of their similar stucture and the segment of their services.

2.1.1 Barclays plc

Tab 1 Consolidated Income Statement

Continuing Operations As of 31-12-11 As of 31-12-10 £m £m Net interest income 12,201 12,523 Net fee and commission income 8,622 8,871 Net trading income 7,660 8,078 Net investment income 2,305 1,477 Net premiums from insurance contracts 1,076 1,137 Other income 1,169 118 Total income 33,033 32,204 Net claims and benefits incurred on insurance contracts (741) (764) Total income net of insurance claims 32,292 31,440 Credit impairment charges and other provisions (3,802) (5,672) Impairment of investment in Black Rock, Inc. (1,800) - Net operating income 26,690 25,768 Staff costs (11,407) (11,916) Administration and general expense (6,356) (6,585) Depreciation of propertz, plant and equipment (673) (790) Amortisation of intangible assets (419) (437) Operating expenses excluding provision for PPI redress, goodwill impairment and UK bank levy (18,855) (19,728) Provision for PPI redress (1,000) - Goodwill impairment (597) (243) UK bank levy (325) - Operating expenses (20,777) (19,971) Share of post-tax results of associates and joint ventures 60 58 (Loss)/profit on disposal of subsidiaries, associates and joint ventures (94) 81 Gain on acquisitions - 129 Profit before tax 5,879 6,065 Tax (1,928) (1,516) Profit after tax 3,951 4,549 Attributable to: Equity holders of the parent 3,007 3,564 Non-controlling interests 944 985 Profit after tax 3,951 4,549 Source: www.group.barclays.com

Profit before tax of £5,879million decreased by 3% on 2010. Adjusted income declined by 8% to £28,512million, principally reflecting a decrease in income at Barclays Capital. Credit impairment charges decreased by 33% to £3,802million, reflecting significant improvements across all businesses. In addition, impairment of £1,800million was taken against investment in BlackRock, Inc. Adjusted operating expenses, which exclude the £1billion provision for PPI redress and £597million (2010: £243million) goodwill impairment, were down £548million to £19,180million. Excluding the UK bank levy of £325million introduced in 2011, operating expenses were down 4% to £18,855million, which included £408million (2010: £330million) of restructuring charges. Despite cost savings, the adjusted cost: income ratio increased to 67% (2010: 64%), reflecting lower income, increased restructuring charges and the UK bank levy. At Barclays Capital the cost: net operating income ratio was 71% (2010: 65%) and the compensation: income ratio was 47% (2010: 43%), reflecting lower income in difficult conditions. The effective tax rate increased to 32.8% (2010: 25.0%).

Tab 2 Condened Consolidated Balance Sheet

As of 31- As of 31- Assets 12-11 £m 12-10 £m Cash and balances at central banks 106,894 97,63 Items in the course of collection from other banks 1,812 1,384 Trading portfolio assets 152,183 168,867 Financial assets designated at fair value 36,949 41,485 Derivative financial instruments 538,964 420,319 Loans and advances to banks 47,446 37,799 Loans and advances to customers 431,934 427,924 Reverse repurchase agreements and other similar secured lending 153,665 205,772 Available for sale financial investments 68,491 65,110 Current and deferred tax assets 3,384 2,713 Prepayments, accrued income and other assets 4,563 5,143 Investments in associates and joint ventures 427 518 Goodwill and intangible assets 7,846 8,697 Property, plant and equipment 7,166 6,140 Retirement benefit assets 1,803 126 Total assets 1,563,527 1,489,645 Source: www.group.barclays.com

Total assets increased to £1,564billion (2010: £1,490billion), principally due to an increase in the fair value of gross interest rate derivative assets as major forward curves decreased.

The Group’s loan to deposit ratio continued to improve to 118% (2010: 124%). Adjusted gross leverage remained stable at 20times and moved within a month end range of 20times to 23times. Excluding the liquidity pool, adjusted gross leverage remained flat at 17times.

Tab 3 Condensed Consolidated Balance Sheet

As of 31- As of 31- Liabilities 12-11 £m 12-10 £m Deposits from banks 91,116 77,975 Items in the course of collection due to other banks 969 1,321 Customer assounts 366,032 345,788 Repurchase agreements and other similar secured borrowing 207,292 225,534 Trading portfolio liabilities 45,887 72,693 Financial liabilities designated at fair value 87,997 97,729 Derivative financial instruments 527,910 405,516 Debt securities in issue 129,736 156,623 Accruals, deferred income and other liabilities 12,580 13,233 Current and deferrend tax liabilities 2,092 1,160 Subordinated liabilities 24,870 28,499 Provisions 1,529 947 Retirement benefit liabilities 321 365 Total liabilities 1,498,331 1,427,383 Shareholders’ Equity Shareholders’ equity excuding non-controlling interests 55,589 50,858 Non-controlling interests 9,607 11,404 Total shareholders’ equity 65,196 62,262 Total liabilities and shareholders’ equity 1,563,527 1,489,645 Source: www.group.barclays.com

Total shareholders’ equity (including non-controlling interests) at 31 December 2011 was £65.2billion (2010: £62.3billion). Excluding non-controlling interests, shareholders’ equity increased £4.7billion to £55.6bn, driven by profit after tax of £3.0billion and positive available for sale and cash flow hedge reserve movements offset with negative currency translation and dividends paid.

Tab 4 Condensed Consolidated Cash Flow Statements

As of 31- As of 31-12- Continuing Operations 12-11 £m 10 £m Profit before tax 5,879 6,065 Adjustment for non-cash items 8,193 971 changes in operating assets and liabilities 16,693 13,108 Corporate income tax paid (1,686) (1,458) Net cash from operating activities 29,079 18,686 Net cash from investing activities (1,912) (5,627) Net cash from financing activities (5,961) 159 Effect of exchange rates on cash and cash equivalents (2,933) 3,842 Net inclease in cash and cash equivalents 18,273 17,060 Cash and cash equivalents at beginning of the period 131,400 114,340 Cash and cash equivalents at end of the period 149,673 131,400 Source: www.group.barclays.com

Cash and cash equivalents at end the period 2011 increased £18,273 million to £149,673million. Net cash from operating activities increased £10,393 millions to £29,079 million, the main reason is because of increasing adjustment for non-cash items £7,222 million to £8,193 million. Changes in operating assets and liabilities also increased to £16,693 million. Net cash fro investing activities in 2010 was £5,627 million and in 2011 decrease to £1,921 million while net cash from financing activities in 2010 was positive item £159 million and in 2011 increased to £5,961 million. The condensed consolidated cash flow statement of Barclays is not so detailed like the cash flow of Komerční banka.

2.1.2 Komerční banka, a.s.

Komerční banka, a.s. (hereinafter also “KB” or the “Bank”) is the parent company of KB Group (hereinafter also the “Group”) and is also a member of the Société Générale Group. KB ranks among the leading banking institutions in the Czech Republic, as well as in Central and Eastern Europe. KB is a universal bank providing a wide range of services in retail, corporate and investment banking. Member companies of Komerční banka Group provide additional specialised financial services – such as pension fund and building society schemes, factoring, consumer lending and insurance – accessible through KB’s branch network, its direct banking channels, and the subsidiaries’ own sales networks. KB also provides services through its branch in Slovakia

The Bank’s almost 1.59 million clients can access its banking services through 395 branches and 677 ATMs across the Czech Republic, as well as via internet, telephone and mobile phone banking channels. The Bank’s branch network includes 20 specialised business centres designed for medium enterprises and municipalities, as well as 4 centres dedicated to large corporations. The average number of employees in KB Group was 8,619 in 2010. As of the end of 2010, KB’s long-term credit ratings stood at A1 in both foreign and domestic currency terms from Moody’s Investors Service, A from Standard & Poor’s, and A from Fitch Ratings. Penzijní fond KB held a national scale rating of Aa1.cz from Moody’s Investors Service, which is the highest possible rating for a pension fund in the Czech Republic. History Komerční banka was established in 1990 as a state institution, and in 1992 it was transformed into a joint-stock company. KB’s shares have been listed on the Prague Stock Exchange, as well as in the RM-System, since its inception. Global depository receipts (GDRs) representing KB shares have been traded on the London Stock Exchange since 1995. In 2001, the state’s 60% holding in Komerční banka was purchased by Société Générale. Following privatisation, KB began to develop its activities for individual customers and entrepreneurs significantly, in addition to building on its traditionally strong position in the enterprises and municipalities market. Part of the development of retail activities was its purchase of the remaining 60% of shares in Modrá pyramida in 2006. Thereby, Komerční banka attained full control over the Czech Republic’s third largest building society. Effective as of 31 December 2010, KB was combined in a cross-border merger with Komerční banka Bratislava. As the successor bank, KB assumed all assets and liabilities of its former subsidiary and continues operations in Slovakia through a branch. Société Générale Group Komerční banka has been an important part of Société Générale Group’s international retail banking since October 2001. Société Générale Group is one of the largest financial services groups in the euro zone. The year 2010 was the first post-crisis year for the global as well as the Czech economy. While in 2009 the world economy as a whole had registered a seldom-seen decline of 0.7%, in 2010 it grew by 4.9%.

Figure 6 The Number of Clients Source: www.kb.cz

The volume of cash deposits carried out by clients across the Bank’s cash counters was CZK 380.3 billion (a decline of 5.8% compared to 2009). The total volume of withdrawals over the counter and via ATM reached CZK 314.7 billion (an increase of 3.8%). The total number of cash withdrawals over the counter and via ATM in 2010 was CZK 28.9 million, representing a year-on-year decline of 2.7%. Withdrawals from ATMs account for 90.7% of all cash withdrawals at KB.

Figure 7 Cash Transactions in 2010 Source: www.kb.cz

KB Group reduced its operating expenses by CZK 579 million. The total volume of loans provided by the Group increased by 3.5 percents. Net profit rose by 2010 CZK 2.3 billion. The cost of risk decreased by 39 percent.

Tab 5 Consolidated Income Statements and Statement of Comprehensive Income after Continuing Operations reclassifiction

As of 31-12- As of 31-12- 10 (CZKm) 09 (CZKm) Interest income and similar income 34,549 37,255 Interest expense and similar expense (13,205) (16,098) Income from dividends 87 85 Net interest income and similar income 21,431 21,242 Net fee and commission income 8,038 7,839 Net profit on financial operations 3,098 3,024 Other income 95 90 Net operating income 32,662 32,195 Personnel expenses (6,076) (6,434) General administrative expenses (5,242) (5,619) Depreciation, impairment and disposal of assets (1,624) (1,468) Total operating expenses (12,924) (13,521) Profit before allowances/provision for a loan and investment losses, other risk and income taxes 19,942 18,674 Allowances for loan losses (3,115) (5,005) Allowances for impairment of securities 8 6 Provisions for other risk espenses 7 (85) Cost of risk (3,100) (5,084) Income from share of associated companies 75 24 Profit attributable fo exclusion of companies from consolidation 0 0 Share of profit of pension scheme beneficiaries (620) (65) Profit before Income taxes 16,075 13,549 Income taxes (2,665) (2,445) Net profit for the period 13,410 11,094 Profit attributable to the Group’ equity holders 13,330 11,007 Profit attributable to the Non-controlling owners 80 87 Earnings per share/diluted earnings per share (in CZK) 353.30 292.30 Source: www.kb.cz

Net Interest Income In spite of the low interest rate environment and increased statutory contribution to the Deposit Insurance Fund, net interest income grew by a slight 0.9% to CZK 21,431 million. Net interest income from loans increased by 6.1%. Net interest income from deposits decreased by 3.2%. Increased statutory contribution to the Deposit Insurance Fund influenced this item negatively by CZK 120 million compared to 2009. On the other hand, this item was underpinned by increased volumes of current accounts with higher spreads. Net interest income from investment banking grew by 9.2%. The

32 average net interest margin for the whole of 2010 remained at 3.3%. Net Fees and Commissions Income from net fees and commissions were higher by 2.5% year on year, totalling CZK 8,038 million. Transaction fees decreased by 1.0% due to continuing pressure on pricing and despite the solid growth of income from use of payment cards. Maintenance fees declined by 5.4% as a result of continuing price erosion and of a slight decline in the number of accounts.

Net Profit from Financial Operations Net profit from financial operations increased by 2.4% to CZK 3,098 million, which was a positive result given the high comparative base from the first half of 2009. Net profit from foreign exchange operations totalled CZK 2,317 million, which represents a decrease of 16.1%. From this, net fees and provisions for foreign currency payments and conversions declined by 6.0% to CZK 1,370 million. Net profit from commodity derivative operations fell by 5.9% to CZK 16 million. Net profit from interest rate derivative operations reached a profit of CZK 350 million compared to the loss of CZK 192 million in 2009.

Other Income Other income grew by 5.6% to CZK 95 million.

Net Banking Income Total net banking income for 2010 increased by 1.5% from 2009 to reach CZK 32,662 million. All the major components of income contributed to that growth.

Operating Costs Komerční banka’s operating efficiency was boosted further by optimisation and rigorous control of operating costs. In addition, the Bank recorded for 2010 extraordinary savings in the area of personnel costs. Total reported operating costs declined by 4.3% year on year to CZK 12,942 million. Personnel costs were reduced by 5.6% to CZK 6,076 million, while the average number of employees decreased by 2.2% to 8,619. General administrative expenses were cut by 6.7% to CZK 5,242 million.

Gross Operating Income Gross operating income rose in 2010 by 5.6% to CZK 19,720 million.

Cost of Risk A reduction in the cost of risk, by 39.0% to CZK 3,100 million, was enabled by improving risk management standards continously as well as by the gradual improvement in the Czech Republic’s macroeconomic situation. Net creation of provisions for loan losses amounted to CZK 3,115 million, a figure 37.7% less than the CZK 5,005 million as of the end of 2009. The creation of provisions for impairment of securities grew from CZK 6 million in 2009 to CZK 8 million in 2010.

Profit before Taxes Consolidated profit before income taxes grew by 18.6% year on year to CZK 16,075 million.

Income Taxes Income taxes rose by 8.6% to CZK 2,665 million.

Net Profit KB Group’s net profit for 2010 reached CZK 13,410 million, which is 20.9% higher than in the previous year. From this amount, CZK 80 million was attributed to the minority interest holders and the profit attributable to the Bank’s shareholders was CZK 13,330 million (up 21.1% year on year).

Tab 6 Balance Sheet

after (CZKm) reclassifiction Assets 31-12-2010 31-12-2009 Cash and current balances with central banks 13,689 16,271 Financial assets at fair value through profit or loss 34,003 24,442 Positive fair value of hedging financial derivative transactions 11,854 9,590 Financial assets available for sale 116,445 114,067 Assets held for sale 34 245 Amounts due from banks 112,180 131,271 Loans and advances to customers 384,593 372,303 Investments held to maturitz 6,712 6,785 Income taxes receivable 44 32 Deferred tax assets 12 0 Prepazments, accrued income and other assets 3,395 4,461 Investments in associates 674 605 Intangible assets 3,756 3,723 Tangible assets 7,072 7,729 Goodwill 3,551 3,551 Total assets 698,014 695,075

Liabilities Amounts due to central banks 1 2 Financial liabilities at fair value through profit or loss 13,673 12,273 Negative fair value of hedging financial derivative transactions 7,224 6,539 Amounts due to banks 29,074 18,739 Amounts due to customers 538,051 551,809 Securities issued 17,471 18,172 Income taxes payable 94 104 Deferred tax liability 1,086 756 Accrualsand other liabilities 8,245 9,890 Provisions 1,056 1,998 Subordinated debt 6,001 6,001 Total liabilities 621,936 626,283 Shareholders’ equity Share capital 19,005 19,005 Share premium and reserves 55,774 48,568 Non-controlling equity 1,229 1,219 Total shareholders’ equity 76,078 68,792 Total liabilities and shreholders’ equity 698,014 695,075 Source: www.kb.cz

Assets and Amounts Due from Banks Amounts due from banks declined 14.5% to CZK 112.2 billion. The largest component of this item is represented by loans provided to central banks as part of reverse repo operations, which diminished by 25.4% to CZK 71.0 billion. Financial Assets at Fair

Value through Profit or Loss Financial assets at fair value through profit or loss increased by 39.1% to CZK 34.0 billion.

Loans and Advances to Customers Total net loans and advances expanded by 3.3% to CZK 384.6 billion. The gross amount of client loans and advances grew by 3.5% to CZK 399.7 billion. Of the total amount of loans, credits to individua clients comprised 47%, increasing by 6.9% from the previous year. Year-on-year growth in the volume of mortgages to individuals reached 9.0%, bringing the total to CZK 109.3 billion. New sales of mortgages in 2010 increased by 14.5% in comparison with the previous year. The Group’s business loans reached CZK 211.0 billion, which represents an increase of 2.3%.

Securities Available for Sale The portfolio of securities available for sale expanded by 2.1% to CZK 116.4 billion. The major part of this portfolio consists of debt securities issued by the state and financial institutions. The book value of shares and participation securities in the portfolio totalled just CZK 0.7 billion.

Investments Held to Maturity The volume of securities in the held to maturity portfolio decreased by 1.1% to CZK 6.7 billion. That entire portfolio consists of bonds. The net book value of tangible fixed assets diminished by 8.5% to CZK 7.1 billion, and intangible fixed assets grewp by a slight 0.9% to CZK 3.8 billion.

Goodwill Goodwill, which primarily derives from the acquisition of Modrá Pyramida, remained at the same level of CZK 3.6 billion.

Liabilities and Shareholders’ Equity Total liabilities declined by 0.7% to CZK 621.9 billion. In 2010, amounts due to banks increased by 55.1% to CZK 29.1 billion. The consolidated volume of deposits totalled CZK 538.1 billion, which is 2.5% lower compared to the end of 2009. Deposits from individuals at the Bank were stable at CZK 153.7 billion. Deposits of business clients at KB and KB Bratislava declined 4.8% to CZK 281.1 billion. Volumes on current

36 accounts rose by 1.3% to CZK 300.5 billion. On the other hand, term and saving deposits decreased by 2.8% to CZK 186.5 billion.

Securities Issued The volume of debt securities issued decreased by 4.1% to CZK 17.4 billion. The majority of this item is comprised of mortgage bonds issued during 2005–2007.

Provisions Provisions declined by 47.1% to CZK 1.1 billion. This line item does not include provisions for loan losses, which are reflected at the item “Loans and advances to customers”. It includes provisions for contractual commitments and provisions for other credit commitments, comprising provisions for off balance sheet commitments and provisions for undrawn loan facilities.

Shareholders’ Equity KB Group’s shareholders’ equity rose by 10.6% to CZK 76.1 billion. The growth was driven primarily by retained earnings from 2009, higher generation of net profit in 2010. On the other hand, revaluation of the portfolio of securities available for sale had a negative value of CZK 1.2 billion. KB also paid out the dividend of CZK 6.5 billion in the second quarter of 2010. KB’s share capital remained stable at CZK 19.0 billion. In contrast, revaluation of securities available for sale decreased by 35.3% in the same period from CZK 3.4 billion to CZK 2.2 billion.

Tab 7 Consolidated Cash Flow Statement after reclassification As of 31Dec As of 31 Dec (CZKm) 2010 2009 Cash flows from operating activities interest recipts 30,065 34,032 Interest payments (12,892) (15,485) Commission and fee receipts 9,907 9,675 Commission and fee payments (1,672) (1,798) Net income from financial fransactions 4,460 3,060 Other income receipts 911 108 Cash payments to employees and suppliers, and other payments (11,443) (12,427) Operating cash flow before change in operating assets and operating liabilities 19,336 17,165 Due from banks 15,917 14,911 Financial assets at fair value through profit or loss (9,823) 19,517 Loans and advances to customers (16,574) (13,717) Other assets 195 1,749 Total (increase)/decrease in operating assets (10,285) 22,460 Amounts due to banks 8,215 10,845 Financial liabilities at fair value through profit or loss 1,637 (7,827) Amounts due to customers (14,414) (2,612) Other liabilities (1,826) (1,948) Total increase /(decrease) in operating liabilities (6,338) (1,542) Net cash flow from iperating activities before taxes 2,663 38,083 Income taxes paid (2,471) (2,437) Net cash flows from operating activities 192 35,646 Cash flows from investing activities Dividends received 87 85 Purchase of investments held to maturity (287) (1,609) Maturity of investments held to maturity 596 388 Purchase of financial assets available for sale (15,939) (24,665) Sale and maturity of financial assets available for sale 16,246 11,270 Purchase of tangible and intangible assets (1,382) (1,594) Sale of tangible adn intangible assets 634 389 Sale of investments in subsidiaries and associates 2 0 Net cash flow from investing activities (43) (15,736) Cash flow from financing activities Paid dividends (6,435) (6,786) Securities issued 2,023 3,224 Securities reddemed (2,018) (10,448) Net cash flow from financing activities (6,430) (10,448) Net increase/(decrease) in cash and cash equivalents (6,281) 5,900 Cash and cash equivalents at beginning of year 16,315 10,415 Cash and cash equivalents at the end of year 10,034 16,315 Source: www.kb.cz

2.1.3 Comparison of Bank Charges

KB Price List for Individuals

Tab 8 Packages and Current Accounts

MůjÚčet and G2.2 Packages in MojeOdměny Koncept Price of the G2.2 (15-25 G2.2 (26- Legend: service when MůjÚčet years old 30 years - not included in package not included in incl.) old) included in package package ۷ Monthly fee CZK 68 free of charge CZK 68 - Maximum bonus within MojeOdměny koncept CZK 34 - CZK 68 - free of Final amount of the monthly fee CZK34 - charge - CZK current account maintenance ۷ ۷ ۷ CZK50/monthly Monthly e-statement of account ۷ ۷ ۷ free of charge Incoming payments ۷ ۷ ۷ CZK 5 Supplementary charge for item processed by interbank payment system ۷ ۷ ۷ CZK 2 Internet banking MojeBanka (incl. Monthly e-statement of CZK account) ۷ ۷ ۷ 39/monthly CZK Telephone banking Expresní linka KB ۷ ۷ ۷ 39/monthly CZK Mobile banking Mobilni banka ۷ ۷ ۷ 19/monthly Embossed payment card with travel insurance ۷ ۷ ۷ CZK 490/year Direct debit payment (incl. SIPO) and placing standing orders for free of - charge payment in teh first 3 months ۷ ۷ ۷ following account opening are allowed Source: www.sazebnik-kb.cz

When you apply for current account in Komerční banka, there are all fees you have to pay. If you apply for MůjÚčet, your monthy fees with maximum bonus are CZK 34. With current account G2.2 there are no monthly fees you would have to pay.

Tab 9 Components of MůjÚčet Package Components to MůjÚčet package Package of transactions (all outgoing carried out via internet CZK CZK CZK - of mobil banking) 39/monthly 39/19monthly 39/monthly Conclusion of authorized account - ۷ - unsecured standard overdraft free of charge e-Card CZK 65 CZK65 CZK 65 CZK 65/yearly Electronic payment card CZK 200 CZK 200 CZK 200 CZK 200/yearly Another embossed payment card with travel insurance CZK 490 CZK 490 CZK 490 CZK 490/yearly Gold Card CZK 2990 CZK 2990 CZK 2990 CZK 2990/yearly Monthly statement of account in mail form CZK 20 CZK 20 CZK 20 CZK 20/monthly Merlin insurace CZK 276 CZK 276 CZK 276 CZK 276/yearly Source: www.sazebnik-kb.cz

These components can be used with your current account. For example Package of transactions (all outgoing transactions are carried out via internet or mobil banking) is charged CZK 39 monthly. Tab 10 Book Entries Book entries MojeBanka CZK 6 CZK 6 CZK 6 CZK 6 MojePlatba CZK 6 CZK 6 CZK 6 CZK 6 Mobilni banka KB CZK 6 CZK 6 CZK 6 CZK 6 Expresní linka KB CZK 14 CZK 14 CZK 14 CZK 14 In branch (paper form) CZK 29 CZK 29 CZK 29 CZK 29 Book entry from a client’s standing payment order CZK 6 CZK 6 CZK 6 CZK 6 Book entry from a client’s standing order to automatic transfer CZK 6 CZK 6 CZK 6 CZK 6 Outgoing collection CZK 6 CZK 6 CZK 6 CZK 6 Source: www.sazebnik-kb.cz

These services are booked to you, if you use it with your current account. For example for a book entry from a client’s standing payment order you have to pay CZK 6. Tab 11 Another Current Account Another current account Other current account in CZK or foreign currency CZK 29 CZK 29 CZK 29 CZK 50/monthly 1 account in EUR/USD with - - electronic payment card CZK 19 CZK 19 Source: www.sazebnik-kb.cz

Clients can apply for a foreign currency account from CZK 29 monthly.

Tab 12 Cards Cards Embossed Card, Embossed Debit cards Card G2 MůjÚčet, G2.2, G2 above standard, Extra account, Package Premium account, Top offer Annual fee for card CZK 490 MojeKarta - card with personal design CZK 99/49 yearly Debit card payments at merchants Free of charge Cash withdrawal from KB ATM CZK 5 / free of charge Cash withdrawal at the demostic vendor’s cash desk - Cash back Free of charge Cash withdrawal from ATM of other domestic banks CZK 35 Balance inquiry in KB ATM CZK 2.50 Balance inquiry in ATM of other domestic banks CZK 10 1%, min. CZK 100, for Embossed card G2 one Cash withdrawal from ATM abroad withdrawal for free Cash withdrawal at domestic counter or at counter abroad - Cash Advance 1%, min. CZK 100 Sending of one credit card transaction statement by mail CZK 5 Sending of one credit card transaction in electronic form Free of charge Travel insurance to embossed cards ۷ Stoplisting Free of charge Change of PIN in KB ATMs CZK 50 Sending payment card PIN by post Free of charge Sending payment card PIN to a branch CZK 100 Repeated sending to PIN to payment card CZK 200 Express issue of a payment card with PIN inluding courier services (payment card and PIN are sent CZK 1,500 + cost for courier separately) service Issuing of a duplicate/ including of card substitute after stoplisting CZK 200 Emergency Card Replacement (issuing of a surrogate debit card without PIN abroad after its loss, pilferage of credit card, etc.) CZK 4,000 Enabling/desabling the debit card for online payments Free of charge Source: www.sazebnik-kb.cz

You get card with your current account, with for example your personal design for CZK 99 yearly for embossed card. When you would like to change your PIN in KB ATMs, you can do it for CZK 50 and you can have the payment card PIN sent by post for free.

Barclays Bank Charges

Tab 13 Bank Charges

Mounthly account fees How much Type of Account Barclays Bank Account Free Current Account Plus £6.50 Additions Active £15 First Additions £6.50 Additions £13.50 Additions Plus £16 Premier Life £17.50 Premier Current Account £10 Other services you may need from time to time Barclays Direct Presentation service £20 Same day transfer of money in the UK using the CHARPS system £25 Banker’s draft £15 Stopped cheque £12.50 Copy statements (per request, per account) £5 Replacement of additional PINsentry card reader (for Online Banking) £6 Barclaysafe – Standard service (for documents £3 per month, plus contained in wallets only) £10 per access Barclaysafe – Premium service (for valuable and other £10 per quarted, plus items stored in boxes) £5 per access Barclaysafe – Large box storage supplements £10 one-off fee Barclays Text Alerts Service Free Cash Card Account Payments into your account Free Issue of Cash Card Free Paying by Direct Debit/standing order Free Online Banking Free Telephone Banking Free Regular paper of e-statements Free Text Alerts with free Near Limit Alert text messages Free Cash withdrawal from UK cash machines Free Cash withdrawals over the counter at barclays in the UK Free cash withdrawals from UK post offices Free Issue of bank statements Free Source: www.barclays.co.uk

With Barclays bank account you have to pay monthly account fees from zero to £17.50. You can also use other services you may need trom time to time for example you can copy your statements per £5. With Barclays account you have most of services free of charge for example payments into your account or online banking.

2.1.4 Comparison of Bank Charges of Barclays and Komerční banka

Tab 14 Comparison of Bank Charges in Czech Bank and in UK Bank

Monthly account fees How much Type of Account Barclays Bank Account Free Barclays Current Account Plus £6.50 Premier Current Account £10 MůjÚčet CZK34 Komerční G2.2 (15-25 years old incl.) free of charge banka G2.2 (26-30 years old) free of charge

Other services Payments into your account Free Issue of Cash Card Free Paying by Direct Debit/standing order Free Online Banking Free Barclays Telephone Banking Free Regular paper of e-statements Free Text Alerts with free Near Limit Alert text messages Free Issue of bank statements Free Annual fee for card CZK 490 MojeKarta - card with personal design CZK 99/49 yearly Komerční Sending of one credit card transaction statement by CZK 5 banka mail Sending of one credit card transaction in electronic Free of charge form Source: www. Barclays.co.uk

There are charges which you have to pay if you apply for a current account in Barclays bank or Komerční banka in Table 14 and 15. Monthly account fees: in Barclay Bank the account is for free, the current account plus for £6.50, the premier current account for £10 and in Komerční banka MůjÚčet CZK 34, G2.2 (15-25 years old incl.) free of charge and G2.2 (26-30 years old) free of charge.

Other services in Barclays are all free of charge. There are payments into your account, issue of cash card, paying by direct debit/standing order, online banking, telephone banking, regular paper of e-statements, text alerts with free near limit alerst text messages and issue of bank statements. You have to pay for other services in Komerční banka. The annual fee for the credit card is CZK 490, MojeKarta – a card with the

43 personal design CZK 99/49 yearly, sending a credit card transaction statement by mail CZK 5 or sending a credit card transaction in an electronic form is free of charge.

Tab 15 Comparison of Bank Charges in a Czech Bank and in a UK Bank

ATM services Cash withdrawal from UK cash machines Free Cash withdrawals over the counter at barclays in the Barclays UK Free cash withdrawals from UK post offices Free Cash withdrawal from KB ATM CZK 5 / free of charge Cash withdrawal at the demostic vendor’s cash desk - Free of charge Cash back Cash withdrawal from ATM of other domestic banks CZK 35 1%, min. CZK 100, Komerční for Embossed card G2 Cash withdrawal from ATM abroad banka one withdrawal for free Cash withdrawal at domestic counter or at counter 1%, min. CZK 100 abroad - Cash Advance Balance inquiry in KB ATM CZK 2.50 Balance inquiry in ATM of other domestic banks CZK 10 Source: www.barclays.co.uk

ATM services in Barclays bank are all free of charges; in Komerční banka you have to pay CZK 5 for a cash withdrawal from KB ATM, CZK 35 for a cash withdrawal from ATM of other domestic banks or CZK 10 for a balance inquiry in ATM or other domestic banks.

2.1.5 Comparison of Income from Fees to Total Income in CZ and UK

Barclays plc

Total income of Barclays in 2010 was £32,204 million. It consists of the net interest income of £12,523 million, the net fee and commission income of £8,871 million, the net trading income of £8,078 million, the net investment income of £1,477 millon, the net premium from insurance contracts of £1,137 million and other income of £0,118 million. The net fee and commission income was £8,871 million it is 27.55% of the total income.

The total income of Barclays in 2011 was £33,033 million. It consists of net interest income of £12,201million, the net fee and commission income of £8,622 million, the

44 net trading income of £7,660 million, the net investment income of £2,305 million, the net premium from insurance contract of £1,076 million and other income of £1,169million. The net fee and commission income was £8,622 million, it is 26.10% of total income.

Tab 16 Comparison of Incomes

As of 31- As of 31- Continuing Operations 12-11 £m 12-10 £m

Net interest income 12,201 12,523 Net fee and commission income 8,622 8,871 Net trading income 7,660 8,078 Net investment income 2,305 1,477 Other income 1,169 0,118 Net premium from insurance contracts 1,076 1,137 Total income 33,033 32,204 Source: Table 1

2010 35 30 32,204 25 20 15 10 12,523 5 8,871 8,078 1,477 0,118 1,137 0 Net interest Net fee and Net trading Net Other Net premiumTotal income income commission income investment income from 38.98% income 25.08% income 0.37% insurance 27.55% 4.59% contracts 3.53%

Figure 8 Comparison of Incomes Source: Table 16

2011 35 30 33,033 25 20 15 10 12,201 5 8,622 7,66 2,305 1,169 1,076 0 Net interest Net fee and Net trading Net Other Net premiumTotal income income commission income investment income from 36.94% income 23.19% income 3.54% insurance 26.10% 6.98% contracts 3.26%

Figure 9 Comparison of Incomes Source: Table 16

Komerční banka, a.s.

The net operating income of Komerční banka in 2009 was CZK 32,195 million. It consists of the net interest income and similar income of CZK 21,242 million, the net fee and commission income of CZK 7,839 million, the net profit on financial operations of CZK 3,024 and other income of CZK 0,090 million. The net fee and commission income was CZK 7,839 million, it is 24.35% of the net operating income.

The net operating income in 2010 was CZK 32,662 million. It consists of the net interest income and similar income of CZK 21,431 million, the net fee and commission income of CZK 8,038 million, the net profit on financial operations of CZK 3,098 million and other income CZK of 0,095 million. The net fee and commission income was CZK 8,038 million it is 24.61% of the net operating income.

Tab 17 Comparison of Incomes

(CZKm) As of 31- As of 31- 12-10 12-09 Net interest income and similar income 21,431 21,242 Net fee and commission income 8,038 7,839 Net profit on financial operations 3,098 3,024 Other income 0,095 0,090 Net operating icome 32,662 32,195 Source: Table 5

2009 35

30 32,195 25 20 21,242 15 10 5 7,839 3,024 0,090 0 Net interest Net fee and Net profit on Other income Net operating income and commission financial 0.28% icome similar income income 24.35% operations 9,39 65.98%

Figure 10 Comparison of Incomes Source: Table 17

2010 35 30 32,662 25 20 21,431 15 10 5 8,038 3,098 0,095 0 Net interest Net fee and Net profit on Other income Net operating income and commission financial 0.29% icome similar income income 24.61% operations 65.61% 9.49%

Figure 11 Comparison of Incomes Source: Table 17

The net fee and commission income in Barclays is higher than the one in Komerční banka. It is because of higher monthly fees and higher fees for other services you may need from time to time. Most of the services of Barcalys accounts can be used are free of charge, but you have to pay high fees for monthly using of an account. In Komerční banka, there are most fees you have to pay to operate with with your account, but it is not so much as in Barclays bank.

2.2 Results of Primary Research

The results of primary research will be published in this section. The author obtained the results by using questionnaires. Respondents from Great Britain and from the Czech Republic responded to questions put to them by the author in electronic forms or questionnaires.

2.2.1 Profile of Respondents

Tab 18 Gender of Respondents Male Female Total

173 206 359 Source: Questionnaire

173 Male

206 Female

Figure 12 Gender of Respondents Source: Questionnaire

Tab 19 Place of Residence United Kingdom 103 Czech Republic 251 Other 25 Total 379 Source: Questionnaire

103

United Kingdom Czech Republic Other

251

Figure 13 Place of Residence Source: Questionnaire

Tab 20 Age of respondents Less than 20 62 21 - 30 262 31 - 40 31 41 - 50 6 More than 51 18 Total 379 Source: Questionnaire

300 262 250

200

150

100 62 50 31 18 6 0 Less than 20 21 - 30 31 - 40 41 - 50 More than 51

Figure 14 Age of Respondents Source: Questionnaire

2.2.2 Representation of Individual Banks

Česká spořitelna has the largest representation of Czech banks in the total number of 65 respondents, while Raiffeisenbank has the smallest number of respondents the total of only 9 representatives. The British bank HSBC has a privileged position with the number of 50 respondents, Barclays is right behind it with 45 respondents and Lloyds TSB with 40 respondents, Royal Bank of Scotland recorded the lowest number of respondents with the total of only 10 respondents. (See Table 19 and Chart8) Tab 21 Representation of Banks

Number of Bank representatives HSBC 50 Barclays 45 Lloyds Banking group 40 Royal Bank of Scotland 10 Česká spořítelna 65 Komerční banka 55 ČSOB 32 GE Money Bank 28 Volksbank 15 Raiffeisenbank 9 Other 30 Total 379 Source: Questionnaire

HSBC 13.19% 9 15 30 50 Barclays 11.87%

28 45 Lloyds TSB 10.55%

32 Royal Bank of Scotland 40 2.64% Česká spořítelna 17.15% 55 10 65 Komerční banka 14.51%

Figure 15 Representation of Banks Source: Questionnaire

2.2.3 Bank Monthly Charges for Working of Current Account

81.25% clients of British banks answered that they pay less than £5 monthly for their current account and 18.75% pay £6 - £15 monthly.

£0 - £5 £6 - £15

130

Figure 16 Bank Charges for Using a Current Account in UK Source: Questionnaire

66.66% clients of Czech banks answered that they pay CZK0 – CZK 50 monthly for their current account, 18.26% clients pay CZK51 – CZK100 monthly, 10.05% clients pay CZK101 – CZK150 and 5.02% clients pay more than CZK151.

11 22

CZK0 - CZK50 CZK51 - CZK100 40 CZK101 - CZK150 More than CZK151 146

Figure 17 Bank Charges for Using a Current Account in CZ Source: Questionnaire

2.2.4 Opinion about Appropriateness of Banks Charges in Current Account

43.75% of British citizens answered that charges for a current account are appropriate and 56.25% answered that charges for a current account are inappropriate.

70 Inappropriate 56.25% Appropriate 43.75% 90

Figure 18 Opinion of British Citizens Source:Questionnaire

77.63% of Czech citizens responded that charges for a current account are inappropriate and 22.63% responded that charges are appropriate.

Inappropriate 77.63% Appropriate 22.63%

170

Figure 19 Opinion of Czech Citizens Source: Questionnaire

2.2.5 The Way how Clients Mostly Operate Their Current Account

The most common way clients operate their current account is the Internet, phone/mobile with privileged position.of 69.65%.

300 264 250

200

150

100 67 50 34 14 0 Internet, Cash machine Personally in the Other phone/mobile bank

Figure 20 How Clients Mostly Operate their Current Account Source: Questionnaire

2.2.6 Satisfaction with Supply of Current Account

Satisfaction with the supply of current accounts in the United Kingdom is 81.25%.

Satisfied 81.25% Unsatisfied 18.75%

130

Figure 21 Satisfaction with Supply of Current Accounts in the UK Source: Questionnaire

Satisfaction with the supply of current accounts in the Czech republic is only 44.29%.

97 Satisfied 44.29% Unsatisfied 55.71% 122

Figure 22 Sarisfaction with Supply of Current Accounts in the CZ Source: Questionnaire

2.2.7 Satisfaction with Bank’s Charges Policy

The satisfaction with bank’s charges policy in the United Kingdom is actually 82.5%.

Satisfied 82.5% Unsatisfied 17.5%

132

Figure 23 Satisfaction with Bank’s Charges Policy in the UK Source: Questionnaire

The satisfaction with bank’s charges in the Czech Republic is only 6.85%. It is a very small number compared to the satisfaction in the United Kingdom.

Satisfied 6.85% Unsatisfied 93.15%

204

Figure 24 Satisfaction with Bank’s Charges Policy in the CZ Source: Questionnaire

2.2.8 Willingness to Exchanging Bank in Case of Charging Inappropriate Charges

More than 61% of British clients are willing to exchange their bank in case of charging inappropriate charges.

I agree 61.25% I rather agree 13.75% I do not know 25% 22 98

Figure 25 Willingness to Exchange Bank in the UK Source: Questionnaire

More than 56% of Czech clients are willing to exchange their bank in case of charging inappropriate charges. Only 2.74% are not willing to exchange their bank in this case.

4 6 22

I agree 56.62% I rather agree 28.77% I do not know 10.05% 63 124 I rather disagree 1.83% I disagree 2.74%

Figure 26 Willingness to Exchange Bank in the CZ Source: Questionnaire

Conclusion

The main objective of this work was to compare the financial statements of selected banks, to analyze and to compare of charges for a current bank account of two pre- selected banks, Barclays and Komerční banka. Another objective was to evaluate the questionnaires, which assessed the overall satisfaction rating of clients of British and Czech banks. All of these objectives were met. The theoretical part dealt with describing the British financial system and the profiles of banks which I chose for this bachelor thesis were also introduced. British financial sector is very diverse the main institutions are briefly described. This section outlines the differences between the two banking sectors in the size of assets and in the amount of services provided. There is a brief analysis of the Czech and the UK banking system at the end of this part. The analytical part was divided into three parts and consisted mainly of a primary and secondary research. The secondary research was conducted through the official web site of two selected banks; the analysis of the financial statements of banks and comparison were made subsequently. Another secondary research task was to determine the exact detail of each of the two predetermined charging banks. The charge varies in individual banks, but it may be noted that the British bank does not charge any fees for routine services associated with a current bank account compared to the Czech bank, which is often incomprehensible for charging fees for specific services. Using electronic and written forms of the questionnaires, the overall satisfaction rating of clients of British and Czech banks was evaluated. The questionnaire also found respondents’ views on the issues regarding the charging policy, the adequacy of the fees and the way to operate a bank account. According to respondents’ views we can see that the clients of Czech banks are less satisfied with the local banks compared to British clients, who are usually very satisfied. The main reason is the large number of different fees that Czechs have to pay for the transaction on their account. Most Czech clients do not agree with the fee policy in the Czech Republic. When comparing the individual financial statements of banks, large differences were found both in the structure and mainly in the shares of an individual income to the total income of banks. British banks have a high income from fees and commissions. These are not usual fees for services associated with a normal bank account, as in the Czech

Republic. Structures of an individual income to the total income of both banks are illustrated in tables and charts. The fee structure associated with a current bank account in the Czech Republic and the UK is very different. The fee policy is particularly different; while in the UK they are not charged for any normal use of a current bank account, in the Czech Republic many of these fees are up and some of them do not make sense indeed. It speaks about the satisfaction of clients, which was found out by questionnaires. Clients of Czech and British banks responded to the questionnaire. Most Czech clients are not at all satisfied with fee policy of their banks, while customers of British banks are much happier. Most Czech clients think that the fees on a current bank account are inappropriate. It is well known that people in the Czech Republic are dissatisfied with the approach of local banks. We can only hope that the new banks operating in our market will change the position of the existing banks. No new bank on the Czech banking market is strong to influence the behavior of other banks and to improve the fee policy. Today, it is clearly preferable to have a current bank account opened with a bank that provides its products and services in the British Isles than with a bank that provides its products and services in the Czech Republic. Pressure from clients is large. In the future it is almost certain that the conditions on the Czech banking market will have to change. As the Czech Republic wants to constantly bring the standards of the European Union, Czech commercial banks will have to change their charges and services to be on the European level.

Bibliography

[1] POLOUČEK, Stanislav. Bankovnictví. 1. vyd. Praha : C. H. Beck, 2006. ISBN 80-7179-462-7. [2] DRDLA, Miloš. Evropská integrace a bankovnictví. Vyd. 1. Praha: Computer Press, 1999, 133 s. ISBN 80-722-6211-4. [3] RAIS, Karel. Evropská integrace a bankovnictví. 1. vyd. Praha : Computer Press, 1999. ISBN 80-7226-211-4. [4] BRINDLEY, Barry. A dictionary of finance and banking. 4th ed. New York: Oxford University Press, 2008, 471 s. ISBN 978-019-9229-741. [5] HOWELLS, P. G. A., BAIN, K. The Economics of Money, Banking and Finance. 3th ed. Essex : Pearson Education Limited, 2000. ISBN 02-0161-9067. [6] Fabozzi, F. Foundations of financial markets and institutions. 3th ed. Upper Saddle River, N.J. : Pearson Education Limited, 2002. ISBN 013-1227-343. [7] BUCKLE, M., THOMPSON, K., JOHN, L. The UK Financial system : theory and practice. 4th ed. Manchester : Manchester University Press, 2004. ISBN 97- 8071-906-7723 Lis of Web Sources [8] Bank of England [online]. 2010 [cit. 2012-04-25]. Available: http://www.bankofengland.co.uk/about/Pages/default.aspx [9] HSBC [online]. 2011 [cit. 2012-04-25]. Available: http://www.hsbc.com/1/2/about/history [10] HSBC [online]. 9 November 2011 [cit. 2012-04-25]. Available: http://www.hsbc.com/1/PA_esf-ca-app- content/content/assets/investor_relations/111109_interim_management_statement.pd [11] Lloyds banking group [online]. 2010 [cit. 2012-04-25]. Available: http://www.lloydsbankinggroup.com/about_us/company_heritage.asp [12] Lloyds banking group [online]. July 2011 [cit. 2012-04-25]. Available: http://www.lloydsbankinggroup.com/media/pdfs/Financial_Inclusion_Report.pd [13] Lloyds banking group [online]. 2009 [cit. 2012-04-25]. Available: http://www.lloydsbankinggroup.com/about_us/company_heritage/Timeline/1801_1850 .asp [14] Bank of Scotland [online]. 2010 [cit. 2012-04-25]. Available: http://www.lloydsbankinggroup.com/about_us/company_heritage/BOS_Heritage/bank _of_scotland.asp

[15] Barclays [online]. 2011 [cit. 2012-04-25]. Available: http://group.barclays.com/About-us/Our-history [16] Newsroom [online]. April 2012 [cit. 2012-04-25]. Available: http://www.newsroom.barclays.com/Press-releases/SMMT-Statistics-Barclays- comment-8b4.aspx [17] Barclays [online]. 2011 [cit. 2012-04-25]. Available: http://group.barclays.com/About-us/Barclays-at-a-glance/Key- facts/Editorial/1225802914657.html [18] Financial stability report [online]. 2012 [cit. 2012-04-20]. Available: http://www.cnb.cz/miranda2/export/sites/www.cnb.cz/en/financial_stability/fs_reports/f sr_2010-2011/fsr_2010-2011.pdf [19] Financial Stability Report [online]. June 2011 [cit. 2012-04-20]. Available: http://www.bankofengland.co.uk/publications/Documents/fsr/2011/fsrfull1106.pdf

List of Tables

Tab 1 Consolidated Income Statement ...... 26 Tab 2 Condened Consolidated Balance Sheet ...... 27 Tab 3 Condensed Consolidated Balance Sheet ...... 28 Tab 4 Condensed Consolidated Cash Flow Statements ...... 29 Tab 5 Consolidated Income Statements and Statement of Comprehensive Income ...... 32 Tab 6 Balance Sheet ...... 35 Tab 7 Consolidated Cash Flow Statement ...... 38 Tab 8 Packages and Current Accounts ...... 39 Tab 9 Components of MůjÚčet Package ...... 40 Tab 10 Book Entries ...... 40 Tab 11 Another Current Account ...... 40 Tab 12 Cards ...... 41 Tab 13 Bank Charges ...... 42 Tab 14 Comparison of Bank Charges in Czech Bank and in UK Bank...... 43 Tab 15 Comparison of Bank Charges in a Czech Bank and in a UK Bank...... 44 Tab 16 Comparison of Incomes ...... 45 Tab 17 Comparison of Incomes ...... 46 Tab 18 Gender of Respondents ...... 48 Tab 19 Place of Residence ...... 48 Tab 20 Age of respondents ...... 49 Tab 21 Representation of Banks ...... 50

List of Figures

Figure 1 The Regional Picture Business Confidence Strongest again in London, while Wales Recorded the biggest Improvement ...... 19 Figure 2 Business Confidences ...... 19 Figure 3 Change in Assets of Individual Financial Sector Segments ...... 24 Figure 4 Change in Assets of Individual Financial Sector Segments ...... 24 Figure 5 The Major UK banks’ Total Assets ...... 25 Figure 6 The Number of Clients ...... 31 Figure 7 Cash Transactions in 2010 ...... 31 Figure 8 Comparison of Incomes ...... 45 Figure 9 Comparison of Incomes ...... 46 Figure 10 Comparison of Incomes ...... 47 Figure 11 Comparison of Incomes ...... 47 Figure 12 Gender of Respondents ...... 48 Figure 13 Place of Residence ...... 49 Figure 14 Age of Respondents ...... 49 Figure 15 Representation of Banks ...... 50 Figure 16 Bank Charges for Using a Current Account in UK...... 51 Figure 17 Bank Charges for Using a Current Account in CZ ...... 51 Figure 18 Opinion of British Citizens ...... 52 Figure 19 Opinion of Czech Citizens ...... 52 Figure 20 How Clients Mostly Operate their Current Account ...... 53 Figure 21 Satisfaction with Supply of Current Accounts in the UK ...... 53 Figure 22 Sarisfaction with Supply of Current Accounts in the CZ ...... 54 Figure 23 Satisfaction with Bank’s Charges Policy in the UK ...... 54 Figure 24 Satisfaction with Bank’s Charges Policy in the CZ ...... 55 Figure 25 Willingness to Exchange Bank in the UK ...... 55 Figure 26 Willingness to Exchange Bank in the CZ ...... 56

List of Annexes

Annex 1 Czech Questionnaire

Annex 2 British Questionnaire

Czech Questionnaire

Porovnání názorů a spokojenosti klientů ohledně běžného bankovního účtu v České republice a ve Velké Británii Jsem studentkou posledního ročníku bakalářského studijního programu na Vysoké škole polytechnické v Jihlavě. Tento dotazník je doplňující části k mojí bakalářské práci a jeho cílem je porovnat názory a spokojenost klientů s běžným bankovním účtem v bance, která poskytuje své služby v České republice a ve Velké Británii. Výsledky tohoto dotazníku budou použity pouze pro studijní účely. Děkuji Vám za vyplněním tohoto dotazníku. 1. Pohlaví: o Muž o Žena 2. Místo bydliště o Česká republika o Velká Británie o Ostatní 3. Věk: o Do 20 let o 21 - 30 o 31 - 40 o 41 - 50 o 51 a více 4. V jaké bance máte svůj běžný bankovní účet? o Komerční banka o ČSOB o Česká spořitelna o Raiffeisenbank o GE Money Bank o Volksbank o Jiná, prosím specifikujte…………. 5. Myslíte si, že je adekvátní aby si banky účtovali poplatky za vedení běžného účtu? o Ano o Ne 6. Jakým způsobem obsluhujete svůj běžný účet? o Osobně v bance o Pomocí internetu o Pomocí telefonu o Bankomat o Jinak, prosím specifikujte…………. 7. Jste spokojen s nabídkou běžných účtů na českém trhu? o Ano o Ne 8. Jste spokojený/á s poplatkovou politikou bank v ČR? o Ano o Ne 9. Byly byste ochotni změnit banku z důvodu účtování nepřiměřených poplatků? o Určitě ano o Ochotný 64

o Možná o Neochotný o Je mi to jedno

British Questionnaire

Comparison of opinions and client satisfaction of current accounts in UK and CZ I am currently studying at the College of Polytechnics Jihlava and for my final Bachelor dissertation I am researching and comparing opinion and satisfaction of clients of current bank accounts in banks which are operating in United Kingdom and Czech Republic. Results of this questionnaire will be used for study purpose. Thank you very much for our time spending on filling in a questionnaire. 1. Gender: o Male o Female 2. Nationality: o Czech o British o Other 3. Age: o Less than 20 o 21 - 30 o 31 - 40 o 41 – 50 o More than 51 4. Which bank do you have your current account in? o Lloyds o TSB o HSBC o Royal Bank of Scotland o Barclays o Other, please specify…………. 5. Do you think that it is appropriate to charge charges on you current account? o Appropriate o Inappropriate 6. How do you mostly operate your current account? o Personally in the bank o Internet Phone/mobile o Cash-machine o Other, please specify…………. 7. Have you been satisfied with supply of current accounts in the Britain? o Very dissatisfied o Very satisfied 8. Are you satisfied with bank’s charges policy in UK? o Dissatisfied o Satisfied 9. Would you be willing to change your bank in case of charging inappropriate charges? o Yes, definitely o Willing

65 o May be o Unwilling o I do not mind