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COMMERCIAL BANKING AND FINANCE - UK - MARCH 2017

Published By :

Mintel

Published Date : Apr 2017

Category :

Banking

No. of Pages : N/A

The UK’s decision to leave the European Union in June 2016 has created an environment of uncertainty for small business owners, which is likely to continue for the foreseeable future while exit negotiations take place. ‘Brexit’, as well as low interest rates and potentially weaker economic growth going forward, is expected to weigh on UK-focused banks.

Table of Content

EXECUTIVE SUMMARY
Market Size
Figure 1: UK MFIs Sterling Deposits from UK Resident Businesses, by Quarter End, 2015-16
Figure 2: MFI Sterling Deposits of UK Resident Non-Financial Businesses, by Industry Type, Top Eight, January 2017
Figure 3: UK MFIs’ Net Loans to Non-Financial Businesses, Q4 2014 - Q4 2016, by Size of Business
Market Trends
Emergence of ‘fintech’ driving change in industry operations
Downward trend in business confidence reflects general uncertainty
Commercial lending rates experience further decline
Figure 4: Average Interest Rate for UK MFI New Advances to PNFCs, at January 2013-17
Demand and availability of credit fell in 2016 with no signs of change ahead in 2017
Figure 5: Demand for Corporate Credit to PNFCs in the Last Three Months, Q1 2011 - Q4 2016, by Business Size
Market Factors
‘Brexit’ could lead to massive industry overhaul
Business investment levels continue to rise while profitability stagnates in the private sector
Highest number of inward and domestic M&A deals since 2011, with a small number of very high-value deals also setting a record deal value high
Companies
Figure 6: Profiled Companies’ Combined Income, 2012-2016*
Forecast
Slower growth in deposit levels expected due to increased uncertainty
Figure 7: Forecast UK MFIs Sterling Deposits from UK Resident Non-Financial Corporations, 2017-2021
Gaps in SME banking service provision still offer vast opportunities
What We Think

KEY INSIGHTS
How is ‘Brexit’ going to influence market development?
Have major commercial banks started to embrace technological change?
What does the future hold for the industry?

INTRODUCTION
Definitions
Methodology
Abbreviations

MARKET POSITIONING
The supplier
The customer

UK ECONOMY
Key Points
Overview
Figure 8: UK GDP, 2006-2016
Figure 9: UK Output, by Industry, 2008-2016
Figure 10: Quarters after GDP Peak, 1979, 1990 and 2008
Inflation
Interest rates
House prices
Figure 11: UK House Price changes, 2006-2016
Consumer spending
Manufacturing
Figure 12: UK Manufacturing, 2014-17
Business investment
Figure 13: UK GFCF 2005-16
Imports
Exports

MARKET FACTORS
Key Points
‘Brexit’ could lead to massive industry overhaul
Annual GDP growth rises in 2016, but challenges await
Figure 14: GDP Growth Rate, 2013-16, (% Change on Previous Quarter)
Figure 15: GDP Growth Rate, 2013-2016
Smaller number of large corporates account for majority of private sector turnover
Figure 16: Business Population in the UK, Private Sector, by Company Size, 2013-16
Business investment levels continue to rise while profitability stagnates in the private sector
Figure 17: UK PNFCs Net Rate of Return, Q1 2011 - Q3 2016
Figure 18: UK PNFCs Net Rate of Return, Q1 2011 - Q3 2016
Figure 19: UK Total Business Investment, 2012 -16
Figure 20: UK Total Business Investment, 2012-16*
FLS provides greater lending to SMEs but cloudy outlook, as shown by greater insolvencies, remains on the horizon
Figure 21: Company Insolvencies in England and Wales, 2012-16
Figure 22: Company Insolvencies in England and Wales, 2012-16
Figure 23: Mergers and Acquisitions of UK Companies, 2012 -2016
Figure 24: Mergers and Acquisitions of UK Companies, 2012-2016
FCA publishes findings from a study into investment and corporate banking

COMMERCIAL BANKING MARKET
Key Points
Annual bank stress test reveals concern over industry robustness
The banking industry shows initial signs of strain ahead of the challenges 2017 will pose...
 but banks’ commercial operations remain largely buoyant
Figure 25: UK MFIs Sterling Deposits from UK Resident Businesses, January 2015-17
Figure 26: UK MFIs Sterling Deposits from UK Resident Businesses, by Quarter End, 2015-16
Professional, scientific and technical activities maintains its largest share of NFB deposits
Figure 27: MFI Sterling Deposits of UK Resident Non-Financial Businesses, by Industry Type, January 2017
Figure 28: MFI Sterling Deposits of UK Resident Non-Financial Businesses, by Industry Type, Top Eight, January 2017
SME sector continuing to perform strongly
Figure 29: MBBG Deposits of Small and Medium-Sized Businesses, December, 2012-16
Figure 30: MBBG Deposits of Small and Medium-Sized Businesses, December, 2012-16

COMMERCIAL BORROWING
Key Points
Net lending remained positive in 2016...
Figure 31: UK MFIs’ Net Loans to Non-Financial Businesses, Q4 2014 - Q4 2016, by Size of Business
Figure 32: UK MFIs’ Net Loans to Non-Financial Businesses, Q4 2014 - Q4 2016, by Size of Business
Funding for Lending scheme extended to 2018
Commercial lending rates experience further decline
Figure 33: Average Interest Rate for UK MFI New Advances to PNFCs, at January in 2013-2017
Figure 34: Average Interest Rate for UK MFI New Advances to PNFCs, at January in 2013-17
Demand and availability of credit fell in 2016 with no signs of change ahead in 2017
Figure 35: Availability of Corporate Credit to PNFCs in the Last Three Months, Q1 2011 - Q4 2016, by Business Size
Figure 36: Availability of Corporate Credit to PNFCs in the Last Three Months, Q1 2011 - Q4 2016, by Business Size
Figure 37: Demand for Corporate Credit by PNFCs in the Last Three Months, Q1 2011 - Q4 2016, by Business Size,
Figure 38: Demand for Corporate Credit to PNFCs in the Last Three Months, Q1 2011 - Q4 2016, by Business Size

MARKET TRENDS
Key Points
Emergence of ‘fintech’ driving change in industry operation
Online business banking frequently used by customers
Figure 39: Use of Business Banking Features in the Last Three Months, June 2016
Downward trend in business confidence reflects general uncertainty
Figure 40: Business Confidence Index, per Half-Year, 2006-2016
Figure 41: Business Confidence Index, per Half-Year, 2006-2016
Write offs on loans to non-financial companies fall to seven-year low
Figure 42: Write Offs of Loans to PNFCs from Banks and Building Societies, 2012-16
Figure 43: Write Offs of Loans to PNFCs from Banks and Building Societies, 2012-16

BRAND COMMUNICATION AND PROMOTION
Key Points
Ad spend rises for the first time in three years
Figure 44: Advertising Expenditure on Business Banking Services, 2012-16
Figure 45: Advertising Expenditure on Business Banking Services, 2012 and 2016
Barclays reclaims position as largest campaign spender
Figure 46: Advertising Expenditure on Business Banking Services, by Advertiser, 2012-2016
Figure 47: Advertising Expenditure on Business Banking Services, by Advertiser, 2012 and 2016
Digital advertising overtakes press as main recipient of advertising expenditure
Figure 48: Advertising Expenditure on Business Banking Services, by Media Type, 2012-2016
Figure 49: Advertising Expenditure on Business Banking Services, by Media Type, 2012 and 2016

INDUSTRY STRUCTURE
Key Points
Industry Development
Higher number of challenger banks entering the market, but still yet to offer significant threat to the dominant banking groups
The number of banks and building societies has remained largely unchanged since 2013
Figure 50: Number of Banks and Building Societies Operating in the UK, 2013-2016
Figure 51: Number of Banks and Building Societies Operating in the UK, 2013-16
Government continues to scale back its involvement in the banking sector
Figure 52: Cost to UK Government of Financial Interventions in Banking Sector, at 30 September 2016
RBS
Lloyds

COMPANY PROFILES
ALDERMORE BANK

Figure 53: Financial Analysis of Aldermore Bank plc, 2012-16
Company Strategy

BARCLAYS PLC
Figure 54: Financial Analysis of Barclays plc, 2012-16
Company Strategy

CLYDESDALE BANK PLC
Figure 55: Financial Analysis of Clydesdale Bank plc, 201216
Company Strategy

CO-OPERATIVE BANK
Figure 56: Financial Analysis of Co-operative Bank plc, 2011-15
Company Strategy
HSBC
Figure 57: Financial Analysis of HSBC Bank, 2011-15
Company Strategy

LLOYDS BANKING GROUP
Figure 58: Financial Analysis of Lloyds Banking Group, 2011-15, (£ Million)
Company Strategy

ROYAL BANK OF SCOTLAND GROUP
Figure 59: Financial Analysis of RBS Group, 2012-16, (£ Million)
Company Strategy

SANTANDER UK PLC
Figure 60: Financial Analysis of Santander UK plc, 2012-16
Company Strategy
Figure 61: Profiled Companies’ Combined Income, 2012-2016*, (£ Million)

COMMERCIAL BANKING FORECAST
Key Points
Ongoing developments in Brexit negotiations will impact market development
Slower growth in deposit levels expected due to level of uncertainty
Figure 62: Forecast UK MFIs Sterling Deposits from UK Resident Non-Financial Corporations, 2017-2021
Figure 63: Forecast UK MFIs Sterling Deposits from UK Resident Non-Financial Corporations, 2017-2021
Increasing presence of tech-driven challengers will drive a change in the banking operating model
Gaps in SME banking service provision still offer vast opportunities

FURTHER SOURCES AND CONTACTS
Trade Associations
Trade Magazines
Trade Exhibitions

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