2013 and beyond will be electrifying
Danny Waters is CEO of Enterprise Finance
There have been a couple of developments over the past 24 hours that could have a further impact on bank lending in the months and years ahead, specifically to SMEs and homeowners.
But again, both could provide even more opportunities for alternative finance providers, including bridging lenders, to continue to eat into the banks’ market share.
Firstly, we had George Osborne’s announcement yesterday that the ring-fence around the banks will be vigorously enforced, or, to put it more poetically, will be ‘electrified’.
Now irrespective of whether the banks deserve everything they’re getting, and most believe they do, the concern is that their fear of electrification — being split up to you and me — could see them go even further into their shells.
I think I can confidently say that nobody wants to see a return to the reckless casino banking that was the norm pre-crash but some are concerned that we’re running the risk of becoming overly conservative.
Anthony Brown, chief executive of the British Bankers’ Association, immediately responded that the news will “create uncertainty for investors, making it more difficult for banks to raise capital”.
You’d expect this kind of response from the BBA, of course, and some have rubbished it, but in the months ahead we’ll start to see whether it contains an element of truth.
The other development that could again have a material impact on bank lending, was the announcement by Barclays today that it is putting aside another £600m for mis-sold PPI, and also an extra £400m for its IHRP (interest rate hedging products).
I’m less focused on this particular provision by Barclays (although it’s mind-blowing) than the industry-wide mis-selling bill as a whole. It seems to be taking a lot out of the banks and that can only feed through into the enthusiasm with which they lend.
Right now, the banks are having to pay huge fines, struggle with capital adequacy requirements under Basel III and also play it safe to stop the Chancellor sending them to Old Sparky.
Against this uncertain banking sector, I fully expect specialist lenders and bridging loan companies to continue to outperform and grow during 2013 and beyond.