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Commercial Banking and Finance - UK - March 2016

Published By :

Mintel

Published Date : Mar 2016

Category :

Banking

No. of Pages : N/A

As banks continue to retrench from regions or sectors where they are unable to meet specific demand and re-valuate their operational strategies, they will need to rely on their personnel more and more to deliver evolving products and services.

Table of Content

Executive Summary

Market size
Figure 1: UK MFIs Sterling Deposits from UK Resident Businesses, by Quarter End, 2014-15, (£ Million Outstanding of Deposit Liabilities, Excluding Under Repo, Not Seasonally Adjusted)
Figure 2: MFI Sterling Deposits of UK Resident Non-Financial Businesses, by Industry Type, Top Eight, December 2015, (Share of Total)
Figure 3: UK MFIs’ Net Loans to Non-Financial Businesses, Q4 2013 - Q4 2015, by Size of Business, (£ Million, Not Seasonally Adjusted)
Market trends
Rates remain low for commercial lending
Figure 4: Average Interest Rate for UK MFI New Advances to PNFCs, at December 2011-15, (% Not Seasonally Adjusted)
Demand for credit from medium and large corporates still rising despite recent decline in availability
Figure 5: Availability of Corporate Credit to PNFCs in the Last Three Months, Q1 2010 - Q4 2015, by Business Size, (Net Percentage Balance)
Business confidence has remained positive since 2012 and has influenced demand in the market
Figure 6: Business Confidence Index, per Half-Year, 2005-2015, (Index Figure)
Ad spend declines for first time since 2012
Figure 7: Advertising Expenditure on Business Banking Services, by Advertiser, 2011-15, (% of Total Ad Spend)
Market factors
GDP growth slows in 2015, but remains positive
Large corporates taking greater share of private sector turnover
Profitability and business investment rising in the private sector
Continued struggles by mainstream lenders to provide finance to SMEs and legislative changes have piqued alternative lenders’ interest
FCA launches study into investment and corporate banking
Companies
Figure 8: Number of Banks and Building Societies Operating in the UK, 2013-15, (Number)
Figure 9: Profiled Companies’ Combined Income, 2010-2014, (£ Million)
Forecast
Global economic factors and EU referendum will influence deposit levels
Figure 10: Forecast UK MFIs Sterling Deposits from UK Resident Non-Financial Corporations, 2016-2020, (£ Billion at 2015 prices)
Increasing amount of regulatory measures threatening UK’s leading position
Changes to operating model are required as new banks push towards a more digitalised environment
What we think

Key Insights

Which factors will most affect market development?
Why is there a need for a new operating model in the industry?
How are market players adopting to new technology?

Introduction

Definitions
Methodology
Abbreviations
Market positioning
The supplier
The customer

UK Economy

Key points
Overview
Figure 11: UK GDP Quarterly Development, 2004-2015, (£ Billion)
Figure 12: Quarters after GDP Peak, 1979, 1990 and 2008, (Number of Quarters and GDP as % of Pre-Downturn Peak)
Inflation
Interest rates
House prices
Consumer spending
Manufacturing
Figure 13: UK Output, by Industry, 2008-2015, (Index: Q1 2008 = 100)
Business investment
Figure 14: UK GFCF 2003-2015, (£ Million)
Imports
Exports

Market Factors

Key points
GDP growth slows in 2015, but remains positive
Figure 15: GDP Growth Rate, 2012-15, (% Change on Previous Quarter)
Figure 16: GDP Growth Rate, 2012-2015, (% Change on Previous Quarter)
Large corporates take majority of private sector turnover
Figure 17: Business Population in the UK, Private Sector, by Company Size, 2013-15, (Number, £ Billion and Millions Employed)
Profitability and business investment rising in the private sector
Figure 18: UK PNFCs Net Rate of Return, Q1 2010 - Q3 2015, (% Return)
Figure 19: UK PNFCs Net Rate of Return, Q1 2010-Q3 2015, (% Return)
Figure 20: UK Total Business Investment, 2011 -15, (Chained Volume Measures and Not Seasonally-Adjusted, £ Billion and % Annual Change)
Figure 21: UK Total Business Investment, 2011-15, (Chained Volume Measures and Not Seasonally-Adjusted, £ Billion)
Continued struggles by mainstream lenders to provide finance to SMEs and legislative changes have piqued alternative lenders’ interest
Figure 22: Company Insolvencies in England and Wales, 2011-15, (Number and % Annual Change)
Figure 23: Company Insolvencies in England and Wales, 2011-15, (Number)
Reports of positive business confidence at odds with decline in M&A activity
Figure 24: Mergers and Acquisitions of UK Companies, 2010 -2015*, (Units)
Figure 25: Mergers and Acquisitions of UK Companies, 2010-2015*, (Units)
FCA launches study into investment and corporate banking

Commercial Banking Market

Key points
The wider banking industry was under pressure in 2015
Although there were some positive results from banks’ commercial business operations
Commercial deposits from financial businesses fall in line with marginal fall in economic growth in 2015
Figure 26: UK MFIs Sterling Deposits from UK Resident Businesses, 2014-15, (£ Million Outstanding of Deposit Liabilities, Excluding Under Repo, Not Seasonally Adjusted)
Figure 27: UK MFIs Sterling Deposits from UK Resident Businesses, by Quarter End, 2014-15, (£ Million Outstanding of Deposit Liabilities, Excluding Under Repo, Not Seasonally Adjusted)
Figure 28: Aggregate Balances of the MBBGs Deposits, 2012-14, (£ Billion)
Market segmentation
Professional, scientific and technical activities continue to account for largest share of NFB deposits
Figure 29: MFI Sterling Deposits of UK Resident Non-Financial Businesses, by Industry Type, December 2015, (Share of Total)
Figure 30: MFI Sterling Deposits of UK Resident Non-Financial Businesses, by Industry Type, Top Eight, December 2015, (Share of Total)
SME sector performing strongly in wider recovery
Figure 31: MBBG Deposits of Small and Medium-Sized Businesses, 2011-15, (£ Billion)
Figure 32: MBBG Deposits of Small and Medium-Sized Businesses, 2011-15, (£ Billion)

Commercial Borrowing

Key points
Net lending still requires improvement following mixed performance in 2015
Figure 33: UK MFIs’ Net Loans to Non-Financial Businesses, Q4 2013 - Q4 2015, by Size of Business, (£ Million, Not Seasonally Adjusted)
Figure 34: UK MFIs’ Net Loans to Non-Financial Businesses, Q4 2013 - Q4 2015, by Size of Business, (£ Million, Not Seasonally Adjusted)
The Funding for Lending scheme is now focused on small business finance
Rates remain low for commercial lending
Figure 35: Average Interest Rate for UK MFI New Advances to PNFCs, at December in 2011-2015, (% Not Seasonally Adjusted)
Figure 36: Average Interest Rate for UK MFI New Advances to PNFCs, at December 2011-15, (% Not Seasonally Adjusted)
Demand for credit from medium and large corporates still rising
Figure 37: Availability of Corporate Credit to PNFCs in the Last Three Months, Q1 2010 - Q4 2015, (Net Percentage Balance)
Figure 38: Availability of Corporate Credit to PNFCs in the Last Three Months, Q1 2010 - Q4 2015, by Business Size, (Net Percentage Balance)
Figure 39: Demand for Corporate Credit by PNFCs in the Last Three Months, Q1 2010 - Q4 2015, (Net Percentage Balance)
Figure 40: Demand for Corporate Credit to PNFCs in the Last Three Months, Q1 2010 - Q4 2015, by Business Size, (Net Percentage Balance)

Market Trends

Key points
Increasing competition leading to the development of a new service model
Commercial banking undergoing initial digitisation process
Challenger banks switching focus to business finance and loans
High take up for online business banking facilities
Figure 41: Use of Business Banking Features in the Last Three Months, March 2015
Business confidence has remained positive since 2012 and has influenced demand in the industry
Figure 42: Business Confidence Index, per Half-Year, 2005-2015, (Index Figure)
Figure 43: Business Confidence Index, per Half-Year, 2005-2015, (Index Figure)
Write offs on loans to non-financial companies have fallen since 2011
Figure 44: Write Offs of Loans to PNFCs from Banks and Building Societies, 2010-14, (£ Million, Not Seasonally Adjusted and % Annual Change)
Figure 45: Write Offs to Loans to PNFCs from Banks and Building Societies, 2010-15, (£ Million, Not Seasonally Adjusted)

Brand Communication and Promotion

Key points
Ad spend declines for first time since 2012
Figure 46: Advertising Expenditure on Business Banking Services, 2011-15, (£ 000)
Figure 47: Advertising Expenditure on Business Banking Services, 2011-15, (% of Total Ad Spend)
Lloyds maintains position as largest campaign spender
Figure 48: Advertising Expenditure on Business Banking Services, by Advertiser, 2011-2015, (£ 000)
Figure 49: Advertising Expenditure on Business Banking Services, by Advertiser, 2011-15, (% of Total Ad Spend)
Press dominates total advertising spend for business banking services
Figure 50: Advertising Expenditure on Business Banking Services, by Media Type, 2011-2015, (£ 000)
Figure 51: Advertising Expenditure on Business Banking Services, by Media Type, 2011-15, (% Share)

Industry Structure

Key points
Industry development
Challenger banks on the rise, but still can’t compete with existing major groups
The number of banks and building societies has remained largely unchanged since 2013
Figure 52: Number of Banks and Building Societies Operating in the UK, 2013-2015, (Number)
Figure 53: Number of Banks and Building Societies Operating in the UK, 2013-15, (Number)
Government scaling back its involvement in the banking sector
Figure 54: Cost to UK Government of Financial Interventions in Banking Sector, November 2015, (£ Billion)

Company Profiles

Aldermore Bank

Figure 55: Financial Analysis of Aldermore Bank plc, 2010-14, (£ Million)
Company strategy

Barclays PLC

Figure 56: Financial Analysis of Barclays plc, 2011-15, (£ Million)
Company strategy

Clydesdale Bank PLC

Figure 57: Financial Analysis of Clydesdale Bank plc, 201115, (£ Million)
Company strategy

Co-operative Bank

Figure 58: Financial Analysis of Co-operative Bank plc, 2010-14, (£ Million)
Company strategy

HSBC

Figure 59: Financial Analysis of HSBC Bank, 2010-14, (£ Million)
Company strategy

Lloyds Banking Group

Figure 60: Financial Analysis of Lloyds Banking Group, 2011-15, (£ Million)
Company strategy

Royal Bank of Scotland Group

Figure 61: Financial Analysis of RBS Group, 2011-15, (£ Million)
Company strategy

Santander UK PLC

Figure 62: Financial Analysis of Santander UK plc, 2011-15, (£ Million)
Company strategy
Figure 63: Profiled Companies’ Combined Income, 2010-2014, (£ Million)

Commercial Banking Forecast

Key points
Global economic factors and EU referendum will influence deposit levels
Figure 64: Forecast UK MFIs Sterling Deposits from UK Resident Non-Financial Corporations, 2016-2020, (£ Billion at 2015 prices, % Annual Change)
Figure 65: Forecast UK MFIs Sterling Deposits from UK Resident Non-Financial Corporations, 2016-2020, (£ Billion at 2015 prices)
Increasing amount of regulatory measures threatening UK’s leading position
Changes to operating model are required as new banks push towards a more digitalised environment

Further Sources and Contacts

Trade associations
Trade magazines
Trade exhibitions

List of Table

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