Challenger banks continue to gain ground in Scottish market

A higher proportion of loans to businesses in Scotland are now being made by challenger banks compared with the UK as a whole.

Research from Avention, which analysed the growing influence of financial firms outside the ‘Big Five’ high street giants, also revealed that a third (32 per cent) of the UK’s business mortgages and charges in the first half of 2016 are also being provided by the industry’s up-and-coming lenders.

Avention, which monitors and analyses business information, named Metro Bank, Aldermore, AIB, Close Brothers, OneSavings Bank, Shawbrook Group and Secure Trust Bank as small banks now realising their ambitions for a significant market share.

The data gathered showed that challenger banks, which also included Glasgow-based Clydesdale Bank, which was classed as a larger example of the species, 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 34.4 per cent for the UK as a whole.

Across the UK, challenger banks held over 50.3 per cent of mortgages for utilities and energy companies and 46.2 per cent for healthcare, though challengers rarely issued bank loans to companies in the finance sector.

A further feature of the findings was a clear discrepancy found between north and south, with challenger bank loans constituting the majority of business in the northern parts of the UK.

A figure of 25.4 per cent of central London corporate loans issued by challenger banks contrasted with a corresponding figure north of the border of 46.5 per cent.

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.”