UK High Street Banks Lose £100bn in Savings as Online Lenders Gain Ground

Strategic Insights -

High street banks across the UK have seen a staggering £100bn in savings disappear as more customers switch to online lenders and building societies, a trend that experts warn will continue to put pressure on the banking sector. The traditional banks' market share in deposits has dropped from 84% in 2019 to 80% in 2024, with rival banks luring customers away with higher savings rates. This shift has led to a £3.7bn combined drop in total pre-tax profits last year, marking the first major downturn since the pandemic.

Key Takeaways:

  • High street banks in the UK have lost the equivalent of £100bn in savings due to customers switching to online lenders and building societies.
  • The traditional banks' market share in deposits dropped from 84% in 2019 to 80% in 2024, with rival banks gaining ground with higher savings rates.
  • The banking sector collectively suffered a £3.7bn combined drop in total pre-tax profits last year.
  • The sector's average return on equity (ROE) is expected to fall from 13% in 2023 to 8% by 2027, resulting in an estimated £11bn drop in annual profits.
  • Bank costs rose by 6% in 2024, which, combined with falling productivity among workers, could put bank profits under further pressure.
  • Experts warn that banks need to adapt to major changes in the sector, including increased competition and rising costs, and consider alternative methods to boost profits, such as embracing artificial intelligence.

Statistics:

  • £100bn: equivalent value of savings lost by high street banks
  • 84%: traditional banks' market share in deposits in 2019
  • 80%: traditional banks' market share in deposits in 2024
  • £3.7bn: combined drop in total pre-tax profits of the banking sector
  • 13%: average return on equity (ROE) of the banking sector in 2023
  • 8%: estimated average return on equity (ROE) by 2027
  • £11bn: estimated drop in annual profits due to declining ROE
  • 6%: increase in bank costs in 2024

Sources:

  • KPMG
  • Lloyds Banking Group
  • NatWest
  • HSBC
  • Barclays