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ANALYSIS OF UK COMPANY LONG-TERM DEBT AND CHARGES REVEALS STRONG CHALLENGER BANK LENDING

Avention, maker of OneSource® Solutions for smarter business insights, today publishes its findings from an analysis of the mortgages and charges entries of over 5 million UK companies on its database, which was carried out to assess the strength of challenger bank lending across the UK.

The research comes as increasing numbers of new challengers continue to enter the market, seeking to loosen the stranglehold of the Big Five banks. Despite an uncertain period for the challenger banks in the wake of Brexit, Shawbrook, Metro Bank and Virgin Money all reported strong first-half results in July 2016.

Highlights of the initial analysis are as follows:

  • 4% of all UK business mortgages and charges are with challenger banks
  • 32% of loans are issued by smaller challenger banks
  • Percentage of corporate debt with challenger banks is lower in London than any other region in the UK
  • Corporate lending from challenger banks more dominant in Scotland and the North of England than in the South
  • Businesses in the Utility & Energy and Healthcare sectors are embracing challenger banks, while the Finance sector remains more reticent

Findings showed that as at the end of April 2016, more than a third (34.4%) of UK corporate bank debt was with challenger banks. The vast majority, 32%, was with those classed as smaller challenger banks, such as Metro Bank, Aldermore, AIB, Close Brothers, OneSavings Bank, Shawbrook Group and Secure Trust Bank.

The regional figures reveal some stark contrasts, with 25.4% of central London corporate bank debt issued by challenger banks, compared to 46.5% in Northern Scotland. The data also reveals a clear discrepancy between North and South, with challenger bank corporate loan figures having dominance in the northern parts of the United Kingdom.

The sectors that have the highest proportion of mortgages and charges with challenger banks are in Utilities & Energy and Healthcare – 50.3% and 46.2% respectively. According to Avention’s research, challenger banks are least likely to provide corporate bank loans to companies in the Finance sector.

Paul Charmatz, Senior Vice President of Avention’s International business, commented:“Avention’s data shows the significant market share that challenger banks enjoy when it comes to corporate lending, particularly the smaller challengers. Avention will continue to monitor this data and re-analyse it in 6 months’ time. It will be interesting to see if our market insights continue to point to the success of challenger banks in the UK – and whether the same regional and sector trends are evident.”

Avention used KMPG’s definition of challenger banks, which distinguishes between smaller challengers, such as Metro Bank and Aldermore, and larger challengers, such as TSB and Virgin Money. A mortgage or charge is defined as the security a company gives for a loan.