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Commercial Banking and Finance - UK - June 2015

“Banks’ results from 2014 showed that strengthening economic conditions during the first part of the year  helped reduce impairment charges and boost profitability”
Ben Harris, B2B Analyst

This report looks at the following areas:

  • 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?

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Table of contents

  1. 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

                                                                                                                              Companies Covered

                                                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                                                              Commercial Banking and Finance - UK - June 2015

                                                                                                                              US $1,288.43 (Excl.Tax)