Highly leveraged consumers will slowly return to borrowing
London, United Kingdom (PRWEB) February 22, 2013
The Non-Depository Finance Companies industry has been through a tumultuous period during the past five years. The mid-2000s were characterised by rapid growth driven by a credit boom until performance tumbled following the financial crisis. After appearing to be on the way to recovery during 2010-11, industry growth slowed again in 2011-12 as the eurozone debt crisis, high consumer debt and the dire economic climate hit credit demand and pushed up borrowing costs. According to IBISWorld industry analyst Iyman Uvais, “non-depository mortgage lenders are expected to encounter another challenging year in 2012-13, as credit growth remains weak, lending rates fall and wholesale borrowing costs remain high”. Payday loan providers will be the exception to the norm and grow rapidly.
Overall, industry revenue is forecast to grow by 1.8% in 2012-13, to £5.0 billion. During the five years through 2012-13, it is estimated that revenue contracted at a compound annual rate of 7.2%. Profit has exhibited great volatility over the period due to loan impairments, rising borrowing costs and ongoing fixed costs cutting into margins as revenue has fallen.
Over the next five years, the industry is expected to slowly recover. Early in the period, growth will be held back by the slow economic recovery, ongoing austerity measures, high levels of consumer debt, weak growth in disposable incomes and low levels of business investment. Payday loan providers are expected to remain the exception to this as the challenging economic conditions and relatively high unemployment are expected to lead many to turn to the segment's services to get them through until payday. Growth later in the period will be driven by demand for mortgages, as economic recovery spurs house buying.
Consumers are likely to forget the lessons learned during the downturn and take on high-interest, no-deposit loans. Uvais adds, “personal deleveraging during the next few years is expected to considerably reduce consumer debt levels and increasing the appetite for credit”. As a result, revenue is forecast to return to growth over the five years through 2017-18. Industry profitability is expected to continue to come under pressure but improve towards the end of the period as the housing and debt markets recover more convincingly.
The Non-Depository Finance Companies industry has a low level of market share concentration. Despite GE’s strong market share of 23.5%, the four largest players in the industry are estimated to account for less than 40% of total revenue.
For more information on the Non-Depository Finance Companies industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
This industry includes companies that lend money or otherwise grant credit but do not fund their lending through deposits as a bank or building society would. Instead, companies in this industry fund their lending activity by selling bonds and shares and selling loans on to other companies. Participants range from non-depository mortgage finance companies to pawnshops.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on many UK industries. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in London, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.co.uk or call (020) 3008 6568.