Investors in UK banks may have had their fingers burnt over the past six months, but those who last week positioned themselves to benefit from any softening of the Independent Commission on Banking's proposals on regulation could be sitting on returns of over 20%.

In a note yesterday morning, UBS analysts John-Paul Crutchley and Alastair Ryan said that while UK banks were in better shape than their European peers, they had underperformed as a result of "concerns about embedding poor regulation which will have the impact of imposing a permanent cost on UK banks".