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Commercial Banking and Finance - UK - June 2015

EXECUTIVE SUMMARY
The market
Figure 1: UK MFIs sterling deposits from UK resident businesses, 2013-15
Deposits for non-financial businesses to continue upward trajectory
Figure 2: Forecast  UK MFIs sterling deposits from UK resident non-financial businesses, 2015-19
Market factors
Profitability and private sector business investment growing
Figure 3: UK PNFCs net rate of return, 2010-14
New authorisation process to boost challengers
Companies
Aldermore grows in strength following flotation
RBS Group braced for further costs
What we think
INTRODUCTION
Definitions
Methodology
Abbreviations
Market positioning
The supplier
The customer
KEY INSIGHTS
When are the significant conduct costs facing the banks likely to ease?
Will ring-fencing regulation affect services to commercial banking customers?
What is happening to margins in the commercial banking sector?
How are changes in the business population affecting the corporate banking business?
Are challenger banks a threat to providers of mid-market and corporate banking services?
UK ECONOMY
Overview
Inflation
Interest rates
Consumer spending
Manufacturing
Imports
Exports
MARKET FACTORS
Key points
Slowdown at the start of 2015
Figure 4: GDP growth rate, 2012-15
Large corporates taking greater share of private sector turnover
Figure 5: Business population in the UK, by company size, 2013-14
Profitability and business investment rising in the private sector
Figure 6: UK PNFCs net rate of return, 2010-14
Figure 7: UK total business investment, 2010-14
Steady decline in corporate insolvencies continues
Figure 8: Corporate insolvencies in the UK, 2010-14
Reports of climbing confidence at odds with decline in M&A activity
Figure 9: Acquisitions of UK companies, 2011–14
COMMERCIAL BANKING MARKET
Key points
The wider banking industry is under strain...
...though there are some positive indicators for commercial banking
Commercial deposits climb in line with economic recovery
Figure 10: UK MFIs sterling deposits from UK resident businesses, 2013-15
Figure 11: MBBG deposits from UK private non-financial corporations, 2010-14
COMMERCIAL BANKING SEGMENTATION
Key points
Retail and real estate deposits rising
Figure 12: MFI sterling deposits of UK resident non-financial businesses, by industry type, March 2015
SME sector performing strongly in wider recovery
Figure 13: MBBG deposits of small and medium-sized businesses, 2011-14
COMMERCIAL BORROWING
Key points
Net lending to large businesses increases at start of 2015...
Figure 14: Net loans to large, non-financial businesses by UK MFIs, 2013-15
...while Funding for Lending focus has shifted to small businesses
Rates remain flat while demand from the large corporate sector rises
Figure 15: Monthly average interest rate for UK MFI new advances to PNFCs, 2010-14
Figure 16: Availability of corporate credit to PNFCs in the last three months, 2010-14
Figure 17: Demand for corporate credit by PNFCs in the last three months, 2010-14
MARKET TRENDS
Key points
Product and service innovation limited but new service model on the horizon
Technology trials to benefit commercial banking customers
High take up for online business banking facilities
Figure 18: Use of business banking features in the last three months, March 2015
Impact of competition inquiry will depend on strength of regulatory will
BRAND COMMUNICATION AND PROMOTION
Key points
Ad spending lull follows surge over switching and brand reputation
Figure 19: Advertising expenditure on business banking services, 2010-15
Lloyds far out in front on campaign expenditure
Figure 20: Advertising expenditure on business banking services, by advertiser, 2014-15
Press advertising dominates channel spend
Figure 21: Advertising expenditure on business banking services, by media type, 2014-15
INDUSTRY STRUCTURE
Key points
Industry development
Challengers on the rise, but no match for major groups
New authorisation process beginning to take effect
Government scaling back involvement in banking sector
Figure 22: Cost to UK government of financial interventions in banking sector, February 2015
ALDERMORE BANK PLC
Recent company activity
Figure 23: Financial analysis of Aldermore Bank plc, 2010-14
BARCLAYS PLC
Recent company activity
Figure 24: Financial analysis of Barclays plc, 2010-14
CLYDESDALE BANK PLC
Recent company activity
Figure 25: Financial analysis of Clydesdale Bank plc, 2010-14
CO-OPERATIVE BANK
Recent company activity
Figure 26: Financial analysis of Co-operative Bank plc, 2009-13
HSBC
Recent company activity
Figure 27: Financial analysis of HSBC Bank, 2010-14
LLOYDS BANKING GROUP
Recent company activity
Figure 28: Financial analysis of Lloyds Banking Group, 2010-14
ROYAL BANK OF SCOTLAND GROUP
Recent company activity
Figure 29: Financial analysis of RBS Group, 2010-14
SANTANDER UK PLC
Recent company activity
Figure 30: Financial analysis of Santander UK plc, 2010-14
COMMERCIAL BANKING FORECAST
Key points
Growth dependent on wider economy’s performance
Figure 31: Forecast  UK MFIs sterling deposits from UK resident non-financial businesses, 2015-19
Costly ring-fencing requirements may raise fees and restrict credit
New banks are changing the operating model
FURTHER SOURCES AND CONTACTS
Trade associations
British Banking Association
Trade publications
The Banker
Euromoney Institutional Investor

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