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Commercial Banking and Finance - UK - February 2019

“With regulation and new entrants disrupting the commercial banking sector, mainstream banks must decide the role they want to play heading forward. Banking players that succeed will put the retention of their client interface and providing higher levels of client value through customised and tailored services at the top of their objectives.”
– Lewis Cone, Senior B2B Analyst

This Report looks at the following areas:

  • Decline in demand for traditional banking services as customers indicate future preference towards challengers
  • Industry to fund new alternative dispute resolution scheme

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
      • Executive Summary

          • The market
            • Commercial deposits continue to rise
              • 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
              • Figure 2: MBBG deposits of small and medium-sized businesses, September, 2014-18, (£ billion)
            • Net lending expected to have remained positive in 2018
              • 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
              • 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

                • 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

                            • Commercial deposits continue to rise
                              • Stable but low growth expected in deposit levels whilst the UK adjusts to post-Brexit environment
                              • Commercial Banking Market

                                • Commercial deposits continue to rise
                                  • 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
                                  • 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
                                    • 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

                                      • Net lending expected to have remained positive in 2018
                                        • 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
                                        • 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
                                        • Figure 10: Availability of corporate credit to PNFCs in the past three months, Q4 2014-Q4 2018, by business size, (net percentage balance)
                                        • 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

                                      • Stable, but low growth expected in deposit levels whilst the UK adjusts to post-Brexit environment
                                          • 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

                                            • GDP growth rebounds in Q3 but challenges remain
                                              • Figure 13: GDP growth rate, Q3 2014-Q3 2018, (% change on previous quarter)
                                          • Market Trends

                                              • Online banking remains the banking service of choice...
                                                • Figure 14: Channels used to carry out various business banking activities, June 2018, (% of respondents)
                                              • …whilst mobile banking is most popular among younger businesses
                                                • 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
                                                  • 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
                                                  • Figure 17: Write offs of loans to PNFCs from banks and building societies, 2013-18*, (£ million, not seasonally adjusted)
                                              • Market Drivers

                                                • 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
                                                    • 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
                                                    • Figure 19: UK PNFCs’ average net rate of return, 2014-18*, (% return)
                                                    • 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
                                                      • 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
                                                      • 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
                                                        • 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

                                                      • Open Banking will lead to commercial banking changes
                                                        • Digital banking products launched to capitalise on growing customer demand
                                                        • Industry Structure

                                                          • Industry development
                                                            • Despite challenger banks’ expanding presence in the market, none yet have a significant market share
                                                                • 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
                                                                    • Figure 25: Number of banks and building societies operating in the UK, 2014-18
                                                                • Competitive Strategies

                                                                  • Digital banking products launched to capitalise on growing customer demand
                                                                    • Several banks apply for funds from the RBS alternative remedies package
                                                                    • Company Profiles

                                                                      • Aldermore Bank
                                                                        • Recent company activity
                                                                          • Financial information
                                                                            • Figure 26: Financial analysis of Aldermore Bank plc, 2013-18*, (£ million)
                                                                          • Barclays PLC
                                                                            • Recent company activity
                                                                              • Financial information
                                                                                • Figure 27: Financial analysis of Barclays plc, 2013-17, (£ million)
                                                                              • Clydesdale Bank
                                                                                • Recent company activity
                                                                                  • Financial information
                                                                                    • Figure 28: Financial analysis of Clydesdale Bank plc, 2014-18, (£ million)
                                                                                  • Co-operative Bank
                                                                                    • Recent company activity
                                                                                      • Financial information
                                                                                        • Figure 29: Financial analysis of Co-operative Bank plc, 2013-17, (£ million)
                                                                                      • HSBC Bank plc
                                                                                        • Recent company activity
                                                                                          • Financial information
                                                                                            • Figure 30: Financial analysis of HSBC Bank, 2013-17, (£ million)
                                                                                          • Lloyds Banking Group
                                                                                            • Recent company activity
                                                                                              • Financial information
                                                                                                • Figure 31: Financial analysis of Lloyds Banking group, 2013-17, (£ million)
                                                                                              • RBS Group
                                                                                                • Recent company activity
                                                                                                  • Financial information
                                                                                                    • Figure 32: Financial analysis of RBS Group, 2013-17, (£ million)
                                                                                                  • Santander UK plc
                                                                                                    • Recent company activity
                                                                                                      • Financial information
                                                                                                        • Figure 33: Financial analysis of Santander UK plc, 2013-17, (£ million)
                                                                                                    • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                        • Abbreviations
                                                                                                          • Methodology
                                                                                                          • Further Sources and Contacts

                                                                                                            • 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

                                                                                                                                Commercial Banking and Finance - UK - February 2019

                                                                                                                                US $1,272.90 (Excl.Tax)