Challenger bank lending higher in Scotland than across UK as a whole

Lending to businesses by challenger banks is stronger in Scotland than in the UK as a whole, research has found

Clydesdale Bank boosted lending to SMEs in the nine months, up four per cent on the year before

By Scott Wright/ Herald Scotland

The conclusion emerged in an analysis of challenger bank activity in the UK, which identified Aldermore and Clydesdale Bank, part of CYBG, as the most active of providers of finance to companies by challengers in Scotland.

The analysis, by business insight specialist Avention, found that challenger banks accounted for more than 45 per cent of business mortgages and charges (a security given by a company for a loan) provided to companies in Scotland at the end of April. That compared with a figure of around one-third (34.4 per cent) for all UK corporate bank debt at the same time. Of this figure, the overwhelming majority, 32 per cent, came from smaller challenger banks such as Metro Bank, Aldermore, AIB, Close Brothers, OneSavings Bank, Shawbrook Group and Secure Trust Bank.

The research, under which Clydesdale, TSB and Virgin Money are classified as larger challengers, highlighted the strong presence of challengers in the north of Scotland, compared with elsewhere in the UK. While the analysis found that 25.4 per cent of central London corporate bank debt was issued by challenger banks, the figure was significantly higher in northern Scotland, at 46.5 per cent.

Avention said its research highlights a clear discrepancy between north and south, with challenger bank loan figures dominating the northern parts of the UK. The lowest percentage of corporate debt held by challenger banks is in London, the report found.

The analyst did not provide actual figures on the amount of corporate lending made by challenger banks over the period.

A spokeswoman noted that Aldermore, whose operation in Scotland is based largely on invoice finance, and Clydesdale, whose parent group CYBG floated on the stock market earlier this year, were the most active players among challenger banks lending to businesses north of the Border.

And she said companies in construction services and real estate operations were the top two sectors for challenger bank lending in Scotland over the period. Across the UK as whole, the utilities and energy and healthcare sectors received the highest proportion of mortgages and charges from challenger banks, at 50.3 per cent and 46.2 per cent.

Companies in the finance sector were the least likely to receive a corporate loan from a challenger over the period, the research found. Avention declined to comment when asked to reflect on the factors behind the presence challenger banks now have in the corporate lending market.

In a statement Paul Charmatz, senior vice president of Avention’s international business, said: “Avention’s data shows the significant market share that challenger banks enjoy when it comes to corporate lending, particularly the smaller challengers.

“Avention will continue to monitor this data and re-analyse it in six months’ time. It will be interesting to see if our market insights continue to point to the success of challenger banks in the UK – and whether the same regional and sector trends are evident.”

CYBG did not comment on the research but pointed to its third-quarter trading update announced in July, in which it said that it had booked £1.5 billion of new SME loans and facilities in the nine months to June 30, up four per cent on the same period the year before.

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