More than a third of corporate debt is now with challenger banks, but London firms yet to be convinced
Challenger banks are giving the incumbent players a run for their money, as figures out today show over a third (34 per cent) of UK business mortgages and charges are now issued by the smaller, newer lenders.
In particular, 32 per cent of corporate debt is handled by what Avention, which carried out the research, classifies as smaller challengers, including Metro Bank and Aldermore.
Utilities and energy companies have seen the light when it comes to challengers, with half (50 per cent) in the sector with outstanding mortgages and charges holding them with such lenders.
Meanwhile, those in the finance sector were least likely to turn to a smaller lender, with a mere 15 per cent of those with such outstanding loans having them with challengers.
The challengers are also yet to totally win over the London market. Just a quarter (25 per cent) of corporate debt in central London is handled by challenger banks, compared with just under half (47 per cent) in northern Scotland.
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"Avention's data shows the significant market share that challenger banks enjoy when it comes to corporate lending, particularly the smaller challengers," said Paul Charmatz, senior vice president of Avention's International business.
Avention plans to crunch the numbers again in six month's 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," added Charmatz.
Shares in challenger banks plummeted in the immediate aftermath of Brexit, particularly after the Bank of England issued a report noting the smaller lenders might struggle more than their larger counterparts, given that they were less shielded from downturns in the commercial property sector.
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Many of the smaller banks were also quick to express their disappointment with a recent Competition and Markets Authority report into retail banking, slamming the report for failing to address red tape which arguably creates an uneven playing field for the industry.
However, recent wobbles have been undetectable in the challenger's half-year results. Aldermore, for example, announced profits before tax had increased by 50 per cent, while OneSavings Bank's shares soared after it revealed statutory pre-tax profits had climbed from £46.6m to £100m.