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Competitive Dynamics in the UK Personal Loan Market 2008

Published by: Datamonitor

Published: Jun. 12, 2008 - 161 Pages


Table of Contents


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


Abstract

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.



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