IN recent months, Britain’s banks have taken a beating for ripping off customers with swingeing penalty charges. So, as the banking reporting season kicks off this week, how worried should investors be? At first glance, not much. The banks’ profits will take a £200m hit for settling claims or just 1% of the expected £21 billion total in the first half of this year, according to analysts at Credit Suisse.

But, as the investment bank notes, the key issue is whether this is a prelude to even bigger losses. The problem is that it is not clear who is claiming and how much, partly because banks have been settling out of court. Someone hit by thousands of pounds in charges has a big incentive to fight. If such customers account for much of the banks’ profits from penalty charges then the industry is in for a deluge of claims. So far, no one is saying.

There is a big prize for consumers. Banks led by Lloyds TSB, Royal Bank of Scotland and Barclays have allegedly made a hefty £5 billion in profits from penalty charges in the past six years. This is not just about history. Analysts reckon the consumer backlash could cost the banks between £1 billion and £1.5 billion in lost revenues from penalty charges this year. This sum could rise if, as expected, the Office of Fair Trading’s investigation concludes that fees should be capped.

Regulators are also probing the payment-protection-insurance market and mortgage exit fees. Many believe the next target will be mortgage-arrangement fees, exploited to offer cheaper headline rates.

Consumer anger on penalty fees may have waned, but with banks expected to report bumper profits, it will no doubt flare up. It’s time for the banks to do themselves and their shareholders a favour and confess to the scale of this problem.

Fenner

INVESTORS looking for exposure to the so-called commodities “super-cycle” normally don’t look much beyond mining companies such as BHP Billiton and Rio Tinto.

But there is another way in – buying shares in the companies that make the kit the miners use.

One such is Fenner, a Yorkshire-based engineer that makes the conveyor belts that carry ore and aggregates, and which has recently branched out into the specialist seals and hoses.

Fenner is quite small – it has a market value of £393m – but it is a world leader in its various niches, in particular the fire-resistant conveyor belts used deep underground. It also has a pretty comprehensive geographic spread, with manufacturing operations or sales and support offices in most of the major mining territories. Although it would be difficult for Fenner to increase its market share in those niches, the shortage of options – mining companies now have to wait 18 months to get replacement truck tyres – means conveyors might be used in more applications.

Fenner is now looking to repeat the conveyor success story with seals and hoses. It bought Wellington, a quoted manufacturer, in 2005 and has since doubled its profits.

It’s a solid investment story, but the only pause for thought might be the shares’ decent recent run. They are up 17.4% over the past three months, and have outperformed the FTSE All-Share by 16.1% over the same period. They closed last week at 248Äp.

grant.ringshaw@sunday-times.co.uk

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