UK challenger banks are strengthening their balance sheets and rapidly increasing their lending while traditional banks reduce the size of their operations as a result of regulation, according to a KPMG report. The report analysed the results of Virgin Money, Metro Bank and Tesco Bank and showed that they grew faster than the UK’s five biggest banks in 2014.
All of the challenger banks are becoming more cost efficient as they grow, but it is the small challengers who are driving the growth and securing greater returns. If this trend continues it poses an interesting question as to whether the Big Five banks can continue to compete in the long term.
Whilst this is good news for businesses, there are voices that consider this progress insufficient and that the whole banking sector needs to be substantially overhauled.