US banks leave Britain's lenders behind But, that to one side, Wall Street has rediscovered its mojo, US economic growth is starting to look baked-in and the biggest economy in the world is beginning to look beyond the banks of the Hudson for opportunities. Here, we gaze at the fluff in our navels. While in America investment banking is seen as an essential part of operating a globally significant economy, in the UK we are becoming unhealthily obsessed with single geography retail banking and limited scale services to small and medium-sized businesses. Both of these are important, of course. But the danger is that in a decade's time we will have an overly fragmented domestic banking sector where up to eight major players are left scrapping to gain market share. The big five - HSBC, Barclays, RBS, Lloyds and Santander - will be joined by two over the next year as both RBS and Lloyds are obliged to sell branch networks as part of the bail-out deal agreed with the European Union. Customers will not be able to move on the high street without bumping into a bank branch. The results of two of our largest banks last week, Barclays and RBS, continue this nervous trend of sticking to what you know rather than take a risk with what you don't. Barclays chief executive Antony Jenkins announced a £5.8bn rights issue after the PRA demanded action to plug a £12.8bn capital shortfall. The "hole" was created by a louder insistence by the Bank of England that financial institutions hit a minimum 3pc leverage ratio. The bank also announced a £2bn provision for Payment Protection Insurance and swaps mis-selling and revealed that the Financial Conduct Authority had sent the bank its initial, negative, findings on the investigation into Barclays' 2008 fundraising from Qatari wealth funds. Barclays says it will robustly fight any claims against it. Almost missed among the flurry of coverage of dilutive rights issues and promises of jam tomorrow dividend increases, the bank's investment arm failed to impress the analysts. "Investment Bank also had a weak quarter vs US peers," wrote Ian Gordon of Investec in a note. FICC [Fixed Income, Currency and Commodities] -22pc Q2/Q2 was particularly poor, offset by strength in equities. £2bn of mis-selling top-ups was worse than expected and with the (inequitable) imposition of a June 2014 deadline to meet the PRA's new 3pc adjusted leverage ratio, there's a £5.8bn 1-for-4 rights. Obvious weakness today. Barclays Capital - the investment arm so doggedly built up by the former chief executive, Bob Diamond - is still 58pc of group revenues. If it is not punching its weight with the Americans then that must be of concern. Then came RBS, which announced on Friday that its new chief executive was to be Ross McEwan, an able Kiwi who has no experience of running an investment bank. That may cheer the Government, which would like to see RBS out of investment banking altogether. But for investors, who understand that banking for large corporations is difficult without any investment banking functions, the jury is still out. Here it is worth turning to a very striking blog post by the financial writer, William Wright. He has crunched the numbers on RBS's global banking and markets division (GBM) since 2009 and shown that profits in that year were £4.06bn for the first half. That contrasts with £400m for the first half of 2013. "You have to try very hard to make your pre-tax profits drop by 90pc over five years, particularly when the decline in the rest of the industry was just 21pc," Mr Wright said of his findings. Mr Hester has been pressurised to shrink the GBM balance sheet more quickly than he would like. He has also been unable - for political reasons - to offer the type of remuneration packages which would attract the brightest stars from America and Asia. The result has been a division that has struggled to use capital as lucratively as it would like - a key point made in the now famous presentation to the RBS board by the chairman of UKFI, Robin Budenberg, who questioned the point of an investment arm that was sub-optimal. A lot of this underperformance is down to the atmosphere created by the political posturing around RBS. Mr Hester is an investment banker of repute and given the right backing he would have been able to turn around the division and produce the type of performer the UK could have trumpeted. Unsurprisingly, a car won't go very quickly if the back-seat driver is always yanking on the handbrake. Why does all this matter? Many would argue that smaller retail banks focused almost wholly on the UK are a much better model for stability than large investment banks which by their very nature take risks in the markets. Indeed, look at Lloyds Banking Group's great success under Antonio Horta-Osorio who has rebuilt a deliberately boring vanilla retail bank. Lloyds has performed so well, it is at a stage now when the Government can start selling its stake, possibly as soon as the next 48 hours. But that is the point. We already have a Lloyds Bank. Trying to produce two more - Barclays and RBS - is not going to help the UK flourish in a global world. In a decade's time I can imagine us sitting and wondering why all the work needed to support growth for global corporations is being undertaken by US banks based in London. Rather than our own banks winning business around the world.