SME lending to deliver highest margin growth for banks

According to Interim Partners’ survey of interim executives working in the banking sector, more than a third (35%) predict that lending to SMEs will see the fastest growing margins over the next 12 months – more than any other type of lending.
 
Interims are senior executives working at or just below board-level who are recruited on a short term basis.
 
Interim Partners says that the dramatic reduction in lending to SMEs that has taken place since the start of the credit crunch has led to a shortage of credit in the small business lending market and healthy margins.
 
With the strengthening economy encouraging more SMEs to increase borrowing, it is thought that shortage of supply could mean healthy margins, if demand outpaces supply.

Interim Partners points out that although 16% predict that residential mortgage lending will see rapid margin growth - a much higher proportion (30%) believe this type of lending will in fact see the fastest falling margins. As extra capacity continues to be added to this area the concern is that margins will continue to fall.
 
It adds that lending to larger businesses (along with commercial mortgage lending) are expected to see the weakest margin growth, with just 8% saying these two areas would see the fastest margin growth.
 
Angela Hickmore, Partner at Interim Partners, comments:

“Clearly banking executives expect that margins within SME lending will be best protected.”
 
“We are certainly seeing more interest in this area from new challenger banks that are freer than the bigger banks to cherry-pick the more attractive parts of the market.”
 
She adds, “If interest rates do increase within the next 12 months, this could boost lending margins across the board.”
 
“Banks have worked hard to rebuild their balance sheets. But senior executives in this market feel it is now time for a shift in emphasis to loosen the purse strings a bit more and provide the increased finance to sustain the recovery.”