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Largest lenders in 2013: the top 20

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Published: 23 September 2014 | Author: Bernard Clarke

Today, we publish data showing the most active mortgage lenders in 2013. In stark contrast to industry experience since the onset of the credit crunch, gross lending expanded significantly in 2013 from £145 billion in the preceding year to £176 billion, or by 21%. As always, however, there are marked differences in the individual lenders’ figures contributing towards this overall increase.

Perhaps the most striking change shown by today’s data is the shift in market concentration. In 2006, before the onset of the financial crisis, the six largest lenders accounted for 61% of total gross lending. But the exit of many smaller lenders in the years immediately following this – together with a number of firms affected by market consolidation – led to increasing dominance of the market by the six largest lenders. So, by 2009, those lenders undertook an estimated 86% of all lending.

Since then, however, we have seen a significant reversal of this trend. In 2013, the top six lenders saw a further sharp fall in their combined market share. Overall, these firms accounted for 72% of gross lending, down from 76% in 2012.

Chart One: Largest six lenders' share of gross lending

23.09.2014-chart one-largest six lenders share of gross lending

Source: Thedata Ltd
Note: For years before 2011, figures for Nationwide Building Society reported in our largest lenders’ table were on a financial year basis (year ending April). Market share figures in this chart are adjusted to reflect Nationwide’s estimated calendar-year lending.

Movements in market share have not, however, been in a universal direction among the largest six lenders. Lloyds Banking Group was once again the largest lender overall in 2013, as Table One shows. Despite the removal from its total of lending in 2013 undertaken by TSB Banking Group (now shown separately), it increased its lending by 35% to £35.5 billion during the year. As a result, its market share increased to 20.2%, up from 18% in 2012.

Table One: Largest mortgage lenders by gross lending

23.09.2014-table one-gross lending

Source: Thedata Ltd
Notes:
1. Most figures are shown on a calendar year basis. Where we are not able to obtain calendar year
figures we have used published results for the organisation's financial year which ended in the same year.
2. All CML member figures relate to calendar year except: Paragon Sep 13           
3. Where possible, gross lending figures are shown net of portfolios purchased.                   
4. Figures are rounded to the nearest £100 million and ranked on the same basis.                   
5. Wherever possible, figures are shown on a financial services group basis.                   
 Both figures and rankings for previous years have been adjusted to account for any mergers and
acquisitions occurring in the latest year.
6. Figures for the Royal Bank of Scotland do not include RBS group members Topaz Finance and Ulster Bank.
7. 2013 figures for Lloyds Banking Group exclude TSB.
8. 2012 figures for Barclays do not include the ING (Barlays Direct) portfolio, which was acquired in 2013.      

The second and third most active lenders in 2013, Nationwide Building Society and Santander, also gained market share. Lending by second-placed Nationwide grew by 27% to £26.9 billion, which increased its share of the new lending market from 14.6% to 15.3%. Meanwhile, Santander increased its lending by 25% to £18.3 billion, and its share of the market from 10% to 10.4%.  That expansion in activity saw Santander move up two places in this year’s list, from fifth to third.

The firms in positions four to six in the list (Barclays, HSBC Bank and The Royal Bank of Scotland respectively) all had a lower market share of new lending than in 2012, more than offsetting the gains made by firms in the top three places – hence the decline in market share of the top six overall. But, despite the contraction in market share by the six largest firms collectively, there was a strong increase in the total amount they advanced, from £110.5 billion to £126.4 billion.

Competition is growing across the market. Our figures show the rankings only down to the point at which there is "clear water" between them – that is, we cut off above the point at which lending volumes become so closely clustered that rankings become much less meaningful (bearing in mind that we round lending volumes to the nearest £100 million). This year, that gives us a list of the top 20 lenders, who, between them, accounted for 91.6% of total gross lending – down from 95% in 2012.

Beyond the top six

Outside the top six firms in our list, 11 lenders out of 14 showed an increase in lending in 2013. The largest change was recorded by Yorkshire Building Society, which increased advances from £4.6 billion in 2012 to £6.8 billion, or by 48%. This strong growth saw the society increase its market share by 0.7%, moving it up two places to seventh on the list. Other lenders outside the top six to show strong year-on-year growth included Skipton Building Society, Aldermore Mortgages and Kent Reliance – a healthy mix of long-established lenders and newer market entrants.

Collectively, the lenders ranked seventh to 20th advanced mortgages worth £34.9 billion, 26% more than the £27.6 billion they lent in 2012 (the total for 2012 includes no figure for TSB Banking Group, whose lending was then included in the total for Lloyds Banking Group). But, because of growth in overall activity last year, the market share for this group of lenders remained broadly unchanged (see Chart Two).

Chart Two: 7th - 20th largest lenders' share of gross lending

23.09.2014-chart two-7th-20th largest lenders' share of gross lending

Source: Thedata Ltd
Note: For years before 2011, figures for Nationwide Building Society reported in our largest lenders table were on a financial year basis (year ending April). Market share figures in this chart are adjusted to reflect Nationwide’s estimated calendar-year lending.

The share of lending advanced by smaller lenders has also been growing, bringing the benefits of a healthier and even more competitive mortgage market to consumers. In fact, activity by smaller lenders has now returned to levels of participation in the market last seen before the onset of the "credit crunch" (see Chart Three).

Chart Three: Lenders outside the top 20: share of gross lending

23.09.2014-chart three-lenders outside the top 20 share of gross lending

Source: Thedata Ltd
Note: For years before 2011, Nationwide Building Society figures reported in our largest lenders table were on a financial year basis (year ending April). Market share figures in this chart are adjusted to reflect Nationwide’s estimated calendar-year lending.

The restoration of former levels of activity by lenders outside the top 20 has been one of the most striking features of the market in the last couple of years. Lending by firms outside the top 20 collapsed to less than 1% of total market share in 2011. But since then there has been a strong recovery in activity by small lenders and their market share has soared to more than 8% (matching pre-crunch levels) in just two years.

Moreover, lenders’ interim results published so far this year broadly suggest even more improvement in the competitive landscape. This supports our view that smaller lenders continue to have both the appetite and capacity to bring diversity and choice to a market that, at its low point in 2009, became heavily concentrated in the hands of a few large firms.

The outstanding mortgage book

Looking at mortgage balances outstanding (see Table Two), it is no surprise that the six lenders at the top of the list are the same as those undertaking the most lending in 2013. There was, however, a small contraction in total balances outstanding for the top six, both in absolute terms (from £911.9 billion to £907.1 billion) and by market share (from 71.9% to 71.1%). Overall, the share of balances outstanding held by the 21 firms with the largest mortgage books increased slightly in 2013 (from 90.8% to 91.4%).

Table Two: Largest mortgage lenders by balances ourstanding

23.09.2014-table two-balances outstanding

Source: Thedata Ltd
Notes:
1. Most figures are shown on a calendar year basis.  Where we are not able
to obtain calendar year
figures we have used published results
for the organisation's financial year which ended in the same year.
2. All CML member figures relate to calendar year except: Paragon Sep 13           
3. Where possible, gross lending figures are shown net of portfolios purchased.                   
4. Figures are rounded to the nearest £100 million and ranked on the same basis.                  
5. Wherever possible, figures are shown on a financial services group basis. Both figures and rankings
for previous years have been adjusted to account
for any mergers and acquisitions occurring in the latest year.
6. Figures for the Royal Bank of Scotland do not include RBS group members Topaz Finance and Ulster Bank.
7
. 2013 figures for Lloyds Banking Group exclude TSB.
8. 2012 figures for Barclays do not include the ING (Barlays Direct) portfolio, which was acquired in 2013.                   

Conclusion

The data we have published today reinforces our view of a market that is continuing on a healthy trajectory, with our forecasts predicting that gross lending will rise by 18% to £208 billion this year and then to £220 billion (by 6%) in 2015. All current evidence suggests that lending activity will be spread across large and small lenders – with consumers continuing to benefit from choice and competition in the market.