CATALYST 1
SUMMARY 1
ANALYSIS 2
Unsecured personal lending levels contracted in 2008 as the market remained tough 2
The unsecured personal lending market had five larger players and a fringe of smaller players in 2008 2
Lloyds Banking Group was the market leader in terms of balances outstanding 3
Competitive pressures remain low as loan providers direct their focus internally 4
The number of unsecured personal lenders has declined further over the last year 4
Financial institutions are adopting a prudent approach to their lending policy 6
For the largest lenders in particular, cross-selling to existing customers is a favored practice, used in order to avoid taking on more risk 7
The average interest rate for a £5,000 loan has increased despite the plummeting base rates 7
Advertising expenditure has also dropped as a result of the credit crunch 8
Innovation in the UK personal lending market remains fairly minimal 9
High levels of bad debt and the new PPI ruling are hurdles that lenders need to overcome 10
Bad debt levels remain high but are now at a manageable level 10
The level of impairments has increased, which may in part come as a result of borrowers prioritizing secured debt repayment 11
The ban on the selling of single premium PPI will lead to lenders finding other ways to recoup their outlay 12
The current market conditions are impacting on the dynamics of other players in the market 13
Aggregators have been an important player in the market but they are losing their influence under current market conditions 13
Consumers trust online price comparison sites more than banks and building societies 14
Nevertheless, the internal focus of most loan providers may serve to cull the number of aggregators in the market 15
The payday loan industry has taken advantage of the current market conditions 15
APPENDIX 17
Supplementary data 17
Definitions 19
Balances outstanding 19
Bank of England base rate 19
CAGR 19
Gross advances 19
PPI 19
Methodology 19
Further reading 20
Ask the analyst 20
Datamonitor consulting 20
Disclaimer 20
List of Tables
Table 1: Unsecured personal lenders in the UK, Moneyfacts June 2009 6
Table 2: Advertising spend for major providers, 2007-08 17
Table 3: Comparison of monthly interest rates on a £5,000 loan compared with the Bank of England base rate 17
Table 4: Write-offs on consumer lending from UK banks and building societies 18
Table 5: Average unsecured personal lending gross advances per person (over 18) 18
Table 6: Extent to which consumers trust financial services companies 18
List of Figures
Figure 1: The newly formed Lloyds Banking Group had a market leading share of the gross advances in 2008 3
Figure 2: Lloyds Banking Group has the largest share of balances outstanding 4
Figure 3: Personal lending interest rates have increased significantly since June 2008 despite sharp cuts in the Bank of England's base rate 8
Figure 4: Across most banking groups, advertising expenditure shrank between 2007 and 2008 9
Figure 5: A fall in the level of write-offs in other unsecured lending counteracted the increase in write-offs for credit cards and secured loans 11
Figure 6: Despite strong performance in the credit card market, total unsecured lending dropped continuously between 2004 and 2008 12
Figure 7: Moneysupermarket.com lists all loans providers, but it does not link to products where the provider has not paid a fee 14
Figure 8: Online price comparison sites are more trusted than building societies and banks 15
Figure 9: The Wonga website emphasizes the convenience of the product 16