The UK Retail Banking Market Outlook: Competitive Advantage Through Customer Retention

Transcription

1 Brochure More information from The UK Retail Banking Market Outlook: Competitive Advantage Through Customer Retention Description: By market capitalization four of the five largest European banks are based in the UK; the UK retail banking market is buoyant with the consumer credit market producing a record year for mortgages and credit cards in Low interest rates have made borrowing inexpensive and forced lenders to look to other means to compete than simply price. Which products show most potential and how should they be delivered in order to acquire market share? What other lessons can be learned from this fiercely competitive market. The UK Retail Banking Market Outlook is a new management report that provides a comprehensive overview of the UK retail banking sector placed in a European context. The report analyses the market from an investor, institutional and consumer perspective to provide a complete understanding of the main issues the UK retail banking market. Key European market data is included to allow comparison of the top five UK banks with the size and growth of personal lending, mortgages, pay later cards, current and deposit accounts in France, Germany, Italy, Spain and the UK as a whole. Key issues addressed in this new management report - The implementation of 14 EU legislative measures in the UK before The effect of historically low interest rates on the major banking products - Competitive tactics in the personal lending market - The impact of the EC Consumer Directive on card issuers - The future strategies of the major European banks Key issues discussed in this report: - Competitive tactics in the personal lending market. Who are the new entrants and how are they entering the market? Can new entrants rely on price to compete? Which price acquisition strategy is proving most successful in present market conditions? - The EC Consumer Directive will affect all card issuers, with new constraints on marketing, pricing and contracts - The UK housing market boom and Bank of England base rates. How recent and future changes in Bank of England base rates affect the mortgage market - Consolidation in the UK deposits market. Does size create competitive advantage, or can new technology remove the barriers for new and smaller competitors? - Future strategies of the major European banking competitors. How have they developed in the past, where do they currently operate, what are their strengths and weaknesses and what can be expected in the future? This report answers the following questions: - How large are the personal lending, cards, mortgages and deposits market in UK? How have these markets grown over the last five years and how does this compare to Germany, France, Italy and Spain? - What are the key characteristics of the leading European retail banks? What operations do they have and where? What strategies lead them to their present position in the market?

2 - What were the main drivers of recent growth in the UK personal lending market? How will impending regulatory changes affect the profitability of this sector? - How have low interest rates influenced the UK mortgage market, and what affect will future changes have on the mortgage and other product markets? - Can profit be maintained in the UK deposits market in a climate of low interest rates? Which is the most cost effective route to market? Key findings of this report: - Changes to the UK Consumer Credit Act will affect all lenders not simply smaller and unscrupulous lenders - Reform of the rules of settlement (abolition of Rule of 78) will introduce a fairer and more accurate method of calculating redemption penalties, as the Department of Trade and Industry feels the present penalties charged are excessive - The key driver of the impressive growth in the UK unsecured loan market was the competition created by new entrants from the US and brand extenders from the UK - The UK housing boom was not only driven by low interest rates and low unemployment but also increased competition Contents: The UK Retail Banking Market Outlook Competitive advantage through customer retention Executive Summary 12 European retail banking comparison 12 Issues in personal lending 13 Issues in mortgages 14 Issues in plastic cards 15 Issues in deposit accounts 15 Chapter 1 Report Introduction 18 Report structure 18 European retail banking statistics 18 Issues in personal lending 18 Issues in mortgages 18 Issues in plastic cards 19 Issues in deposits 19 Chapter 2 European Retail Banking Comparison 22 Introduction 22 European current account and deposit account markets 23 Retail deposits 23 Total retail deposits for major Western European markets 23 Top five UK retail banks by total retail deposits 24 Current accounts 24 Total number of pay now cards in issue 25 Top five UK retail banks by pay now cards in issue 25 European pay later cards markets 26 European mortgage lending markets 27 European personal lending markets 27 Other European banking statistics 28 Market capitalisation of major European banks in selected regions 29 Total loans and advances to customers for leading European banks in selected regions 29 Competitor profiles 30 HBOS 30

3 Overview 30 Operations 31 Strengths 32 Weaknesses 33 Deutsche Bank 34 Overview 34 Operations 35 Credit Agricole 36 Overview 36 Operations 37 Dresdner Bank 38 Overview 38 Operations 39 Capitalia Group 40 Overview 40 Operations 41 Abbey 42 Overview 42 Operations 44 Negative press 45 Banco Popular Español 46 Overview 46 Chapter 3 Issues in Personal Lending 50 Summary 50 Introduction 50 Market overview 51 Total consumer credit gross advances and outstanding balances 52 Economic factors behind the growth 52 Consumer credit market 53 Consumer credit: outstanding balances 53 Consumer credit outstanding balances by product 54 Market share of outstanding balances in consumer credit by product 55 Consumer credit: gross advances 56 Market share of gross advances in consumer credit 56 Unsecured personal loans 57 Mortgage loans advanced for house purchase, remortgaging and further advances 57 Secured loans 59 Gross advances for secured and unsecured personal loans 59 Credit cards 59 Overdrafts 60 Motor finance 60 Value of private new car finance at the point of sale 61 Value of private used car finance at the point of sale 61 Retail finance: balances outstanding 62 Retail finance outstanding balances by product 63 Store cards 63 Instalment credit 63 Mail order credit 64 Retail finance: gross advances 64 Store cards 64 Instalment credit 65 Mail order credit 65 Overindebtedness 65 Regulatory issues in the consumer credit market 68 Consumer Credit Act 68 Summary boxes 69 Eradication of the use of the Rule of Lenders view of the Rule of 78 reform 71 Consumer Credit Directive 72 Conclusions 73 Competitors 73

4 Market share of leading lenders balances outstanding 74 Market share of leading lenders - gross advances 76 Pricing tactics 76 Unsecured personal loan rates for leading UK loan providers 77 The big four banks standard APRs for unsecured personal loans 79 Chapter 4 Issues in Mortgages 82 Summary 82 Introduction 83 Mortgage market size 83 Mortgages gross advances 83 Gross advances and market share by category 84 Remortgaging in recent years 85 First-time buyers in the mortgage market 86 Mortgage advances for first-time buyers and movers 86 Average advance for first-time buyers and movers 87 Average deposits required by a first-time buyer 87 Percentage of loans for house purchase accounting for first-time buyers 88 Average income multiples 88 Arrears and repossessions 90 Mortgages market drivers 91 Macroeconomic conditions 91 House prices 91 Falling interest rates 92 Housing supply 93 Variable and fixed rate mortgages 94 Competitors in the mortgage market 96 Gross advances 96 Top 10 competitors in the UK mortgage market 96 Top five competitors in the UK mortgage market gross market lending 97 Balances outstanding 97 Top 10 competitors in the UK mortgage market 98 Change in balances outstanding for top 10 lenders 99 Change in balances outstanding for top 10 lenders 99 Change in balances outstanding for top 10 lenders 100 The future 100 Forecasted gross advances to Additional forecasts 102 Nationwide s house price forecasts by region 103 Chapter 5 Issues in Plastic Cards 106 Summary 106 Introduction 106 Market overview 107 Market size 107 Balances outstanding 107 Essential UK payment card statistics 108 Market drivers 108 Drivers of the plastic card market 109 Market segmentation 109 Market infrastructure 111 ATM cash withdrawal numbers by card type 112 Number of PoS terminals and population per terminal 112 Transaction numbers at PoS terminals by card type 113 Plastic card fraud in the UK 113 Chip and PIN technology 114 Legislation - the EC Consumer Directive 114 Credit and charge cards 115 Essential credit and charge card statistics 115 Credit and charge card market drivers 117 Market segmentation 117

5 Credit and charge cards 117 ATM cash withdrawal values by card type 118 Gold and platinum cards 118 Affinity and co-branded cards 119 Business cards 120 Debit cards 121 Market issues 122 Private label cards 123 Essential private label card statistics 123 Private label card drivers 124 Competitors 125 Credit and charge card competitors 125 Scheme market shares 125 Visa and MasterCard 126 American Express and Diners Club 127 Credit card issuer market shares 127 Competitor market share by balances outstanding 129 Competitor developments 129 Debit card competitors 129 Scheme market shares 129 Conclusions 131 Future forecasts 132 Forecasted number of cards to Chapter 6 Issues in Deposit Accounts 136 Summary 136 Introduction 136 Deposits market 137 Bank versus building society personal deposits 137 Competitors 139 Interest rate pricing 142 Product guarantees to win customers 143 Chapter 7 Appendix 146 Definitions 146 Index 150 List of Figures Figure 1.1: Total retail deposits for major Western European markets, Figure 2.2: Total retail deposits for major Western European markets, Figure 3.3: Market share of outstanding balances in consumer credit by product, 2003e 55 Figure 4.4: Gross advances, Figure 4.5: Average income multiples, Figure 4.6: UK base rate, Figure 4.7: Top five competitors in the UK mortgage market as per gross mortgage lending as at end of year List of Tables Table 2.1: Total retail deposits for major Western European markets, Table 2.2: Top five UK retail banks by total retail deposits, Table 2.3: Total number of pay now cards in issue for major Western European markets, Table 2.4: Top five UK retail banks by pay now cards in issue 26 Table 2.5: Total number of pay later cards in issue for major Western European countries, Table 2.6: Retail mortgage lending balances outstanding for major Western Europe markets, Table 2.7: Consumer credit balances outstanding for major European countries, Table 2.8: Market capitalisation of major European banks in selected regions, Table 2.9: Total loans and advances to customers for leading European banks in selected regions, Table 3.10: Total consumer credit gross advances and outstanding balances, e 52 Table 3.11: Consumer credit outstanding balances by product, e 54 Table 3.12: Market share of outstanding balances in consumer credit by product, e55

6 Table 3.13: Consumer credit gross advances by product, e 56 Table 3.14: Market share of gross advances in consumer credit, e 57 Table 3.15: Mortgage loans advanced for house purchase, remortgaging and further advances, H1 58 Table 3.16: Gross advances for secured and unsecured personal loans, e 59 Table 3.17: Value of motor finance arranged at the point of sale for private new car purchases by product, e 61 Table 3.18: Value of motor finance arranged at the point of sale for private used car purchases by product, e 61 Table 3.19: Retail finance outstanding balances by product, e 63 Table 3.20: Retail finance gross advances by product, e 64 Table 3.21: Estimated unsecured personal loan balances outstanding by competitor for leading UK loan providers, Table 3.22: Estimated unsecured personal loan gross advances by competitor for leading UK loan providers, Table 3.23: Unsecured personal loan rates for leading UK loan providers, Oct-02 to Oct Table 3.24: Big four banks standard APRs for unsecured personal loans, Oct-01 to Oct Table 4.25: Gross advances and market share by category, Table 4.26: Average advance for first-time buyers and movers, Table 4.27: Percentage of loans for house purchase accounting for first-time buyers, August 2002 August Table 4.28: Income multiples for first-time buyers and movers, Table 4.29: Mortgages in arrears, Table 4.30: Growth in average house prices per region, Q to Q Table 4.31: UK base rate, Table 4.32: Top 10 competitors in the UK mortgage market as per gross mortgage lending as at end of year Table 4.33: Top 10 competitors in the UK mortgage market as per total mortgage balances outstanding as at end of year Table 4.34: Change in balances outstanding for top 10 lenders, Table 4.35: Forecasted gross advances, 2004f-2008f 101 Table 4.36: Nationwide s house price forecasts by region 103 Table 5.37: UK payment card statistics, Table 5.38: Drivers of the plastic card market, Table 5.39: Number of payment cards, number of transactions and transaction values, by card type, Table 5.40: ATM numbers by location and population per ATM, Table 5.41: ATM cash withdrawal numbers by card type, Table 5.42: Number of PoS terminals & population per terminal, Table 5.43: Transaction numbers at PoS terminals by card type, Table 5.44: Credit and charge card statistics, Table 5.45: Credit and charge card market drivers, Table 5.46: ATM cash withdrawal values by card type, Table 5.47: Gold and platinum card statistics, Table 5.48: Affinity and co-branded card statistics, Table 5.49: Business card statistics, Table 5.50: Debit card statistics, Table 5.51: Private label card statistics, Table 5.52: Private label card drivers, Table 5.53: Visa and MasterCard statistics, e 126 Table 5.54: American Express and Diners Club card numbers, e 127 Table 5.55: Card numbers by credit card issuer, e 128 Table 5.56: Issuer market share by card number, 1998e-2002e 128 Table 5.57: Competitor market share by balances outstanding, 2002e 129 Table 5.58: Debit card competitors by card numbers, Table 5.59: Transaction numbers and values by issuer, Table 5.60: Forecasted number of cards, 2003f- 2007f 133 Table 6.61: Total UK personal deposits by holding institution, e 137 Table 6.62: Weighted average interest rates on sight and time deposits offered to UK households versus base rates, January 2001 to February Table 6.63: UK personal deposit accounts balances by competitor, Table 6.64: Market share of UK personal deposit account balances,

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