Table Of Contents
DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Lloyds Banking Group has the largest market share of new lending 2
Lloyds Banking Group has a dominant position in the market for unsecured personal loans 2
Gross advances in unsecured personal loans have declined since prior to 2005 3
Balances outstanding on unsecured personal loans fell in 2009 4
Although competitive pressure is weak, elements of competition remain in the market 5
Margins on unsecured personal loans remain high 6
Some of the best rates in the market are only available to existing customers 7
First Direct's and M&S Money's cashback offers set them aside from most other providers 9
Sainsbury's Finance and the Co-operative Bank are offering points on membership cards 9
Lenders are shying away from the mainstream market at the moment 9
Lender websites are reflecting a return to a greater degree of competition 10
Lending Wizard uses soft search techniques as a key way to attract customers 11
Peer-to-peer lending is being challenged by social networking lending 12
Advertising spend is increasing for the large lenders in the market 12
Advertising expenditure grew in 2009 for the largest providers although it remained down on 2007 levels 12
Direct mail remained the largest advertising channel for unsecured personal loans 13
Credit scoring conditions are beginning to improve 14
Competition is unlikely to improve significantly for another year 15
Renewed focus on face-to-face reflects lenders' focus on existing customers 15
Aggregator websites continue to play a role in unsecured personal lending 16
Aggregators are seen as a key channel for acquiring customers in the future 17
The branch maintains its place as an important area for face-to-face transactions 17
The popularity of the phone as a channel of arrangement is likely to have peaked 17
The intermediary channel is unpopular and is expected to remain this way as the market recovers 17
There are some key differences among the nature of custom picked up by each lender 18
Borrowers tend to take out loans for a longer period with RBS and Northern Rock 18
Borrowers are more likely to take out a small loan with NatWest and a large loan with Northern Rock 19
RBS has the largest customer base in social grades A to C1 20
NatWest and RBS have the largest proportion of business from under 35 year olds 21
Lenders face various hurdles such as regulation which are subduing competitive pressure 22
The level of write-offs in unsecured personal lending dropped below credit cards in Q1 2010 22
Competition is set to intensify in the PPI market 24
The Consumer Credit Directive could have a big impact on the market 25
The introduction of full or early repayments will result in quite a technical change for lenders 26
The OFT has decided not to cap interest payments on payday loans, which will avoid market distortions 26
APPENDIX 28
Supplementary data 28
Definitions 34
Balances outstanding 34
Bank of England base rate 34
CAGR 34
Gross advances 34
PPI 34
Methodology 35
Further reading 36
Ask the analyst 36
Datamonitor consulting 36
Disclaimer 36
List of Tables
Table 1: UK unsecured personal loan providers, June 2010 10
Table 2: Market share of gross lending (%), 2009 28
Table 3: Average gross advances per person, 2005-09 28
Table 4: Market share of balances outstanding for top ten (%), 2009 29
Table 5: Average APR, Bank of England base rate and three-month Libor, December 2006-June 2010 29
Table 6: Group advertising expenditure, 2008-09 29
Table 7: Channel of advertising, 2007-09 30
Table 8: Net percentage balances for the last quarter, Q3 2007-Q2 2010 30
Table 9: Channel of arrangement of unsecured personal loan 31
Table 10: Profile of lender by term of loan 31
Table 11: Profile of lender by size of loan 32
Table 12: Profile of lender by social grade 33
Table 13: Profile of lender by age group 33
Table 14: Write-offs for different credit products, Q1 2008-Q1 2010 34
List of Figures
Figure 1: Lloyds Banking Group originated almost one third of unsecured personal loans in 2009 3
Figure 2: The average size of an unsecured personal loan has dropped consistently since 2005 4
Figure 3: Lloyds Banking Group has the largest individual share of outstanding balances for the top 10 lenders 5
Figure 4: There remains a disconnect between the average rate on a loan compared with the base rate 7
Figure 5: The best rates are generally available to existing customers 8
Figure 6: There are some signs of competition on lender websites 11
Figure 7: Advertising expenditure went up in 2009 despite consolidation in the industry 13
Figure 8: Direct mail remains the most important advertising channel 14
Figure 9: Credit scoring conditions for total unsecured loan applications have improved in Q2 2010 15
Figure 10: The branch remains a key channel of arrangement, with aggregators claiming only a small share 16
Figure 11: RBS has the largest proportion of loans taken out for a five-year period 19
Figure 12: Borrowers are more likely to take out smaller loans with NatWest 20
Figure 13: Almost half of Santander/Abbey customers are social grade C1 21
Figure 14: NatWest and RBS have a larger proportion of the 18-24 age group 22
Figure 15: The level of write-offs has fallen at the overall level, with unsecured lending seeing the biggest drop in Q1 2010 24