2019 Origination Projections
Full year 2018 origination data is now in for the large swathes of the non-bank lending sector that report origination volume* allowing us to compute totals for 2018, and to make some new estimates for 2019.
As in previous years, our forecasts are purely quantitative, i.e. they are projections rather than forecasts. We make a projection for each originator based on the average growth rate observed over the previous two years. Because seasonality has a significant part to play, we then identify the average quarterly deviation over the prior three years, and apply that to each quarter. In essence this is an extrapolation with an adjustment for seasonality. As with any extrapolation, any deviation from the trend, for example as caused by a change in the macro environment, will throw the estimates out.
Before considering any change to the macro picture, e.g. that thing that starts with a B and ends with an EXIT, there is already a warning sign that our extrapolations may prove optimistic. This is because Q4, which has historically been very strong, ended rather meekly in 2018. Our seasonal adjustment will capture that, but only with a diluted impact, as part of the average of a three year look back.
Methodology and Brexit caveats not withstanding we project a figure of £7.27bn of new lending in 2019, which equates to a 20% increase on the 2018 total of £6.1bn.
By segment invoice funding is expected to lead the way, largely reflecting the very strong growth delivered by MarketInvoice over the year. Whilst the originator founded by Anil Stocker and Ilya Kondrashov displayed some significant volatility through each quarter of 2018, including a steadier close to the year, the announcement of a recently closed funding round, and confirmation of new bank partnerships, should allow that strong growth rate to be maintained. Meanwhile, over at the other end of the SME space, 2018 has seen Funding Circle dominate the headlines with its successful September IPO, and the growth rates in SME term loans look set to be sustained at a similar rate to last year.
Steadier growth is expected in consumer, which is in line with recent surveys of the UK banking sector. Interestingly banks also reported weak demand for credit in real estate lending so it will be interesting to see if the real estate sector of the non-bank lending market can buck that trend as per our estimates