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Competitive Dynamics in the UK Personal Loan Market 2008

http://www.companiesandmarkets.com/Summary-Market-Report/competitive-dynamics-in-the-uk-personal-loan-market-2008-45735.asp

Report Summary

Introduction

The UK unsecured personal loan sector has continued to contract in 2007 and more lenders are now focusing on good quality customers rather than volume. Moreover, the advent of the credit crunch has led to fewer players in this sector and to significant increases in personal loan interest rates, as well as a marked change in customer acquisition strategies.

Scope

  • Provides market shares in balances outstanding and gross advances for major unsecured loan providers.
  • Provides advertising spend for top personal loan providers.
  • Discusses the key competitive changes in the market over the last twelve months.


    • Highlights

    Many lenders have intentionally been reducing their market share as they shift their focus to good quality lending and reject more customers, as opposed to losing share naturally.

    From a total of 57 unsecured personal loan providers in May 2007, this number has fallen to just 46 in May 2008, representing a contraction of 19% in the number of unsecured personal loan providers.

    While rising bad debts was the trigger for a shift away from mass customer acquisition, the credit crunch has further contributed to this trend.

    Reasons to Purchase

  • Gain insight into the performance of your competitors.
  • Learn how the market is changing and evaluate any opportunities for your business arising from these changes.
  • Learn how your competitors are adapting their strategies in a changing market.

    • Table of Contents

    1
    CATALYST 1
    SUMMARY 1
    ANALYSIS 2
    A contracting market in 2007 saw major personal loan providers reach lower lending levels 2
    Major lenders' new personal loan business levels in 2007 were below 2006 levels 2
    Many of the major personal loan providers also experienced a contraction in balances outstanding in 2007 4
    Competitive intensity in the UK personal loan market has eased somewhat 6
    There are significantly fewer players now operating in this sector 6
    Most lenders are focusing on their own customer database to sell personal loans 7
    The credit crunch is forcing lenders to review their lending strategies 8
    Advertising spend has declined in 2007, as a result of more focus on cross-selling 8
    The credit crunch is making the personal loan market less price sensitive 10
    Personal loan providers have increased their rate significantly in the space of a year 11
    Going forward, bad debt and PPI issues remain a threat to lenders' profitability 13
    Bad debt still remains an issue for lenders, although lenders seem to have learnt from their recent experience 13
    Nonetheless, overindebtedness continues to remain a concern 14
    The future of the PPI sector is still undecided 16
    Personal loan providers' profitability will be adversely affected 17
    APPENDIX 19
    Supplementary data 19
    Definitions 22
    Balances outstanding 22
    Bank of England base rate 22
    CAGR 23
    Gross advances 23
    PPI 23
    Methodology 23
    Further reading 23
    Ask the analyst 23
    Datamonitor consulting 23
    Disclaimer 24
    List of Tables
    Table 1: Unsecured personal loan gross lending for major competitors, 2005-07 3
    Table 2: Unsecured personal loan balances outstanding and market share for major competitors, 2006-07 5
    Table 3: List of unsecured personal loan providers in the UK as per Moneyfacts May 2008 7
    Table 4: Typical interest rates of major providers on a £5,000 unsecured personal loan 11
    Table 5: Pricing structure for a sample of personal loan providers 13
    Table 6: Gross lending market shares for major unsecured personal loan providers, 2005-07 19
    Table 7: Advertising spend on personal loans for major providers, 2006-07 20
    Table 8: Monthly interest rates on unsecured personal loans 21
    Table 9: UK banks' and building societies' write-offs on consumer lending 22
    Table 10: PPI gross written premium by product line, 2006 22
    List of Figures
    Figure 1: With the exception of Alliance & Leicester, all major lenders witnessed a fall in business level in 2007 2
    Figure 2: All major providers witnessed a fall in market share of personal loan balances outstanding over 2007 4
    Figure 3: All major personal loan providers have cut back on advertising spend over 2007 9
    Figure 4: Interest rates on unsecured personal loans have risen again in the last couple of months despite a cut in the base rate 10
    Figure 5: Barclaycard and Alliance & Leicester are in Moneyfacts' Best Buys table, May 2008 12
    Figure 6: Write-offs on unsecured lending other than credit cards fell slightly in 2007 15
    Figure 7: The average unsecured consumer debt per UK adult increased further in 2007 16
    Figure 8: Lloyds TSB and RBS Group stand to lose the most with the CC's investigation of the PPI sector 18