Table of Contents
Overview
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- What you need to know
- Covered in this Report
Executive Summary
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- The market
- Commercial deposits continue to rise
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- Figure 1: UK MFIs sterling deposits from UK resident businesses, Q4 2016-Q4 2018, (£ million outstanding of deposit liabilities, excluding under repo, not seasonally adjusted)
- SME deposits rise but tough business environment has led to lower start-up numbers
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- Figure 2: MBBG deposits of small and medium-sized businesses, September, 2014-18, (£ billion)
- Net lending expected to have remained positive in 2018
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- Figure 3: UK MFIs’ net loans to non-financial businesses, Q4 2016-Q3 2018, by size of business, (£ million, not seasonally adjusted)
- Stable but low growth expected in deposit levels whilst the UK adjusts to post-Brexit environment
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- Figure 4: Forecast UK MFIs sterling deposits from UK resident non-financial corporations, 2019-23, (£ billion at 2018 prices, % annual change)
- Companies and brands
- What we think
Issues and Insights
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- Decline in demand for traditional banking services as customers indicate future preference towards challengers
- The facts
- The implications
- Industry to fund new alternative dispute resolution scheme
- The facts
- The implications
The Market – What You Need to Know
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- Commercial deposits continue to rise
- Stable but low growth expected in deposit levels whilst the UK adjusts to post-Brexit environment
Commercial Banking Market
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- Commercial deposits continue to rise
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- Figure 5: UK MFIs sterling deposits from UK resident businesses, December 2016-December 2018, (£ million outstanding of deposit liabilities, excluding under repo, not seasonally adjusted)
- Professional, scientific and technical activities increase leading share of total NFB deposits
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- Figure 6: MFI sterling deposits of UK resident non-financial businesses, by industry type, largest eight, December 2018, (% share of total)
- SME deposits rise but tough business environment has led to lower start-up numbers
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- Figure 7: MBBG deposits of small and medium-sized businesses, September, 2014-18, (£ billion)
- All major lenders pass the BoE’s 2018 stress test
Commercial Borrowing
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- Net lending expected to have remained positive in 2018
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- Figure 8: UK MFIs’ net loans to non-financial businesses, Q4 2016-Q4 2018, by size of business, (£ million, not seasonally adjusted)
- Commercial lending rates rise in 2018 to reverse the downward trend in 2017
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- Figure 9: Average interest rate for UK MFI new advances to PNFCs, at December in 2014-2018, (% not seasonally adjusted)
- Credit availability and demand falls in 2018
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- Figure 10: Availability of corporate credit to PNFCs in the past three months, Q4 2014-Q4 2018, by business size, (net percentage balance)
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- Figure 11: Demand for corporate credit by PNFCs in the past three months, Q4 2014-Q4 2018, by business size, (net percentage balance)
Commercial Banking Market Forecast
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- Stable, but low growth expected in deposit levels whilst the UK adjusts to post-Brexit environment
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- Figure 12: Forecast UK MFIs sterling deposits from UK resident non-financial corporations, 2019-23, (£ billion at 2018 prices, % annual change)
- Growth expected to slow in SME account balances alongside slower uptake of alternative finance
- Ongoing changes to the UK’s employment structure will benefit challengers
The Impact of the Economy
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- GDP growth rebounds in Q3 but challenges remain
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- Figure 13: GDP growth rate, Q3 2014-Q3 2018, (% change on previous quarter)
Market Trends
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- Online banking remains the banking service of choice...
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- Figure 14: Channels used to carry out various business banking activities, June 2018, (% of respondents)
- …whilst mobile banking is most popular among younger businesses
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- Figure 15: Use of mobile banking services when carrying out business activities, by age of business, June 2018, (% of respondents)
- Growing consumerisation of commercial banking is driving adoption of virtual payment methods
- Business confidence reaches a post-financial crisis low at the end of 2018 with uncertainty affecting demand for finance
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- Figure 16: Business confidence index, per half-year, Q2 2008-Q4 2018, (index figure)
- Write-offs on loans to non-financial companies fell to an eight-year low in 2017 but are expected to rebound in 2018
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- Figure 17: Write offs of loans to PNFCs from banks and building societies, 2013-18*, (£ million, not seasonally adjusted)
Market Drivers
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- The increasing likelihood of a no-deal Brexit fuels uncertainty and is encouraging banks to shift operations away from the UK
- Large corporates still account for majority of private sector turnover
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- Figure 18: Business population in the UK, private sector, by company size, 2014-18, (number, £ billion and millions employed)
- Business investment levels rise while profitability continues to stagnate in the private sector
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- Figure 19: UK PNFCs’ average net rate of return, 2014-18*, (% return)
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- Figure 20: UK total business investment, 2013 -17, (chained volume measures and not seasonally-adjusted, £ billion and % annual change)
- Company insolvencies rise again, leading to reduced opportunities for banking services
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- Figure 21: Company insolvencies in England and Wales, 2013-17, (number)
- Number of inward and domestic M&A deals falls in 2017, but the relatively low value of the pound continued to attract investors in 2018
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- Figure 22: Mergers and acquisitions of UK companies, 2013-17, (units)
- Small businesses should benefit from obligation for banks to publish info on service recommendations
- Although 85% of small businesses’ finances are ‘healthy’ or ‘ok’, many miss out on business opportunities due to a lack of funding
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- Figure 23: Current finance situation of the business, June 2016 vs June 2017 vs June 2018, (% of respondents)
Companies and Brands – What You Need to Know
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- Open Banking will lead to commercial banking changes
- Digital banking products launched to capitalise on growing customer demand
Industry Structure
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- Industry development
- Despite challenger banks’ expanding presence in the market, none yet have a significant market share
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- Figure 24: Market share for business bank accounts, June 2018, (%)
- Open Banking will lead to commercial banking changes
- The number of banks and building societies has remained fairly constant since 2014
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- Figure 25: Number of banks and building societies operating in the UK, 2014-18
Competitive Strategies
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- Digital banking products launched to capitalise on growing customer demand
- Several banks apply for funds from the RBS alternative remedies package
Company Profiles
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- Aldermore Bank
- Recent company activity
- Financial information
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- Figure 26: Financial analysis of Aldermore Bank plc, 2013-18*, (£ million)
- Barclays PLC
- Recent company activity
- Financial information
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- Figure 27: Financial analysis of Barclays plc, 2013-17, (£ million)
- Clydesdale Bank
- Recent company activity
- Financial information
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- Figure 28: Financial analysis of Clydesdale Bank plc, 2014-18, (£ million)
- Co-operative Bank
- Recent company activity
- Financial information
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- Figure 29: Financial analysis of Co-operative Bank plc, 2013-17, (£ million)
- HSBC Bank plc
- Recent company activity
- Financial information
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- Figure 30: Financial analysis of HSBC Bank, 2013-17, (£ million)
- Lloyds Banking Group
- Recent company activity
- Financial information
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- Figure 31: Financial analysis of Lloyds Banking group, 2013-17, (£ million)
- RBS Group
- Recent company activity
- Financial information
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- Figure 32: Financial analysis of RBS Group, 2013-17, (£ million)
- Santander UK plc
- Recent company activity
- Financial information
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- Figure 33: Financial analysis of Santander UK plc, 2013-17, (£ million)
Appendix – Data Sources, Abbreviations and Supporting Information
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- Abbreviations
- Methodology
Further Sources and Contacts
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- Trade associations
- National Association of Commercial Finance Brokers
- UK Finance
- Trade magazines
- Banking Technology/FinTech Futures
- Euromoney Institutional Investor
- The Banker
- Trade exhibitions
- NACFB Commercial Finance Expo 2019
- Credit Summit 2019
- FT Banking Summit
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