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