Further job losses in the banking sector are on the way, a report said, after the eurozone debt crisis, compensation costs and higher taxes slashed the combined profits of the UK's five biggest banks.

Barclays, HSBC, Lloyds Banking Group, RBS and Standard Chartered made combined pre-tax statutory profits of £19.4 billion in 2011, down 13% on the previous year, professional services firm KPMG said in its UK Banks: Performance Benchmarking Report.

The costs associated with the payment protection insurance mis-selling scandal, which amounted to a combined £5.7 billion, and the £1.3 billion bank levy charge have held back the financial performance of banks, KPMG said.

The report also found that after aggressive cost cutting and restructuring, including the offloading of non-core businesses, retail banking fared better than investment banking where revenues declined sharply compared with last year.

Bill Michael, UK head of financial services at KPMG, said: "It was a tougher year than many expected and banks will need to continue working hard to turn things around.

"I expect we will see continued cost cutting which inevitably means further job losses and business models will be reviewed again to ensure banks are concentrating on their core strengths and the markets with the greatest potential."

The banks with larger exposure to Asian economies were the star performers, KPMG said, reinforcing how the UK and Europe are becoming difficult places for banks to do business.

HSBC, which has 49% of its business based in Asia and Latin America, and Standard Chartered, with 80% of its business in Asia and the Middle East, outperformed the more UK and US-focused banks.

As the amount of capital and liquidity required to write business in the UK becomes higher than in other jurisdictions, it is increasingly difficult for banks without an international focus to achieve the return on equity expected by investors, KPMG said.

Mr Michael said the cost of regulation is "starting to bite" and will not ease off, as work on implementing the Independent Commission on Banking recommendations heats up.