Poor service drives customers to keep the spouse and change banks

They used to take our business for granted, but now account holders are deserting them in their droves

The myth of customer loyalty to high-street banks has been exploded by a study for accountants Deloitte, which has found that nearly half of all customers have changed accounts and nearly one-third have been tempted to switch.

However, it is poor service - not attractive rates - that is the major reason for switching. This would indicate that all the competition to offer better and better interest rates - Barclays last week launched an account giving a 10 per cent return - may not be havinge the effect that the banks had hoped.

On the eve of results announcements for the UK's big four high-street institutions, Deloitte expects competition to increase as the major banks react to assaults on the market by HBOS and Santander, the Spanish owner of Abbey.

Research conducted last month by polling group YouGov for Deloitte shows the belief no longer holds that customers are more likely to change their spouses than their bank accounts.

In a study of more than 2,100 customers, YouGov found that 45 per cent of them had switched either their account or another financial product from one bank to another. Another 29 per cent said they had thought of changing. In the crucial ABC1 demographic sector of top earners, 49 per cent had changed banks and 31 per cent had thought about it.

When asked what prompted a change, poor service was the main reason, mentioned by 48 per cent of customers. Only a fifth pointed to better rates and just 5 per cent cited lack of convenience or the local branch closing. This would indicate that the big banks could carry on their programme of shutting branches so long as they were able to maintain service by using telephony, the internet or other methods.

Nick Sandall, the head of retail banking at Deloitte, said that competition will continue to intensify even though the "cake has not got any bigger".

He added that the banks have to work harder to be more customer friendly. This means reacting to what people want - such as call centres operated locally rather than in India.

"As the world changes towards a lower-cost environment, the banks that are able to offer the better service will be the ones that have lower cost-income ratios," said Mr Sandall.

This ratio will command plenty of attention in the bank reporting season, which moves into top gear next week, with Barclays on Tuesday and Lloyds TSB on Friday.

Ian Gordon, banking analyst at Dresdner Kleinwort Wasserstein, predicts that Barclays will show the worst cost-income ratio of all the big banks, standing at 58.3 per cent for last year. It parted company with its head of retail, Roger Davis, a few months ago.

Lloyds TSB and Royal Bank of Scotland will show cost-income ratios in the UK of around 53 per cent, while HBOS, which is making inroads into the traditional big four's territory, will have a ratio of 44.7 per cent. At HSBC, the figure is impossible to calculate from the statistics that the bank releases.

Royal Bank of Scotland, which owns NatWest, has been able to keep its cost-income ratio down despite refusing to embark on a major branch closure programme, and allowing customers to call their local branches rather than a call centre.

HBOS's low costs indicate that it is well positioned to continue its success in winning business from the big four as new chief executive Andy Hornby, a former retailer, takes charge.

And with Santander, which has a reputation for low-cost operations, starting to ramp up its offer after taking over Abbey, the fight for the British bank account can only become more aggressive.