The survey of senior banking executives found that almost 90% are confident when it comes to overall business growth in the first quarter, supported by a buoyant outlook on expected profitability (84%).

While a majority (75%) reported a positive outlook for the UK economy for the first quarter, more than half (55%) cited inflationary pressures as their biggest challenge in Q1. This was followed by interest rates (49%) and cost pressures (31%).

Peter Rothwell, head of banking at KPMG UK, said: “The positive tone on Q1 performance comes off the back of a strong 2023 for bank profits. But the sector may have reached a short-term profitability peak and while earnings are expected to remain broadly healthy in 2024, they are forecast to be lower than last year.

“While any delays to rate cuts should provide some support to net interest income, the weak UK economy will likely hinder growth. Results could reflect how higher rates and the continued cost of living challenges are impacting credit quality, which has proven resilient thus far.

“Given the challenging environment, we can expect a continued focus on costs throughout 2024, while recent consolidation in the sector could continue.

“It will also be interesting to see the extent to which earnings have enjoyed a boost from investment banking and trading operations, in line with the first quarter results of their US counterparts.”