Coronavirus (COVID-19) Sector Impact: Retail banking – the UK

The coronavirus (SARS-CoV-2) outbreak, dubbed COVID-19, is first and foremost a human tragedy, affecting millions of people globally. The contagious coronavirus, which broke out at the close of 2019, has led to a medical emergency across the world, with the World Health Organization officially declaring the novel coronavirus a pandemic on March 11, 2020.

Fears surrounding the impact of COVID-19 have already significantly impacted the global economy, with key markets across the world losing 20-50% of their value year-to-date. Many economists and institutions have cut their forecasts, with consensus global GDP growth currently at 2.6% for 2020 and many experts predicting the potential onset of recessionary environments.

A similar trend is expected in the UK as well, as economic growth in the UK is expected to register a dip in the first quarter of 2020 and will decelerate further if this disease is not controlled at the earliest. The decline will have an adverse impact on all sectors including banking and payments.

The UK is among the most affected countries with total confirmed cases of 288,834 and a death toll rising to 40,680.

This report focuses on the impact of the coronavirus outbreak on the economy and the retail banking industry in the UK. Based on our proprietary datasets, the snap shot provides a detailed comparison between pre-COVID-19 forecasts and revised forecasts of total mortgage, consumer, credit card loan balances as well as deposit balances in terms of value and growth rates. It also offers information on measures taken by the government to combat coronavirus.

Scope

– Given COVID-19-related uncertainty and the impact of the ongoing lockdown, the effect on household spending and the wider economy has been significant.

– The UK government’s guarantees for SMEs and corporates will support borrowers' viability and hence banks' asset quality. However, earnings challenges will still intensify for the banks due to weaker business volumes and rising loan impairment charges.

– The uncertain economic outlook will weigh on near-term bank performance, and if the subsequent economic recovery is weak, it would likely be reflected in depressed profitability and weak asset quality, especially for those with weaker risk buffers heading into this crisis. That said, the UK’s banking sector has built up sufficient buffers over time, and most banks can absorb additional credit-loss costs without eroding their capital buffers significantly, despite a more challenging operating environment.

– For most banks, the severity of losses will depend greatly on whether government measures can preserve businesses threatened with bankruptcy and help people re-enter the workforce.

Reasons to buy

– Make strategic decisions using top-level revised forecast data on the UK retail lending and deposit industry.

– Understand the key market trends, challenges, and opportunities in the UK retail lending and deposit industry.

– Receive a comprehensive insight into the total consumer loans in the UK, including mortgages, personal and credit card loans as well as retail deposits balances.

Table of Contents

Table of Contents

COVID-19 Update

Impact Assessment

Retail Deposits

Total Consumer Loans

Mortgage Loans

Credit Card Loans

Other Consumer Loans

COVID-19 Impact: Job Analysis

Appendix

Supplementary Data

Definitions

Methodology

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