Analysis By Robert Peston Business editor, BBC News

Are customers being ripped off by profitable banks?

The reaction of many of us when we hear about banks' record profits is to bristle.

Memories of queuing an age for the counter or cheques taking days to clear become even more irksome.

And then there's the thought that if they are making so much money, it must be because we're being overcharged.

Well, this is a fallacy.

Rate of return

The absolute size of banks' profits - or that of any company - is irrelevant.

Whether a bank makes �10bn or �10m in a year says nothing about whether it is making too little money or too much money - or about whether we are being overcharged.

What matters is the rate of return that the banks earn and whether there is effective competition in the industry.

The rate of return is the profits generated as a percentage of their capital.

It may sound like a difficult concept, but it isn't.

Think about it as the equivalent of what we earn when we put our money in a savings account or into shares.

Unreasonable reluctance

The rate of return earned by the big British banks does look pretty good compared, for example, with many of the continental European banks.

So does that prove that we're being ripped off?

A rainy day for the banks could bring bad news to pension savers

Well, not necessarily.

The UK banking market is more competitive than those of France, Germany, Spain or Italy.

If UK banks earn a better rate of return than their peers in those countries, it probably means UK banks are more efficient - which is a good thing.

Now I am not arguing that competition in the UK is intense enough.

It is now easier than ever for us to switch banks with a minimum of hassle, but surprisingly few of us do this.

The banks take advantage of our inertia - of our reluctance to seek out the keenest deals for banking services.

The same is true in telecoms and gas.

BT and British Gas derive huge benefits from the millions of individuals who can't be bothered to seek out cheaper providers of their services, or are simply fearful of change.

But if they are making profits from our inertia, who is to blame?

Is it BT, British Gas and the banks?

Or is it us and our unreasonable reluctance to switch banks or telecoms provider or gas supplier?

Cheers to profits

All that said, there is a very good reason why fat profits from the big banks may actually be a reason to celebrate.

Here's why.

The six biggest UK banks are worth about �300bn - equivalent to a fifth of the value of all UK companies listed on the London Stock Exchange.

What that means is that they represent about a fifth of all British shares held by our pension funds and they pay about a quarter of all dividends injected by British companies into these pension funds.

So when the banks do well, millions of people benefit - in the sense that the pensions that we receive or expect to receive are better underpinned.

To put it more starkly, if the banks made zero profits and paid no dividends, there would be even bigger holes in pension funds than those that yawn today.

Now to be clear - I am not an apologist for the banks.

They can be arrogant.

Their service can stink.

And they can be negligent in lending too much to the wrong people or to inappropriate businesses.

But it is nonsensical to kick them just because their profits run into billions.