The year 2004 was a record-breaking one in terms of lending volume. But low margins, the dominance of refinancings and intense lending competition are the factors still making it difficult for banks to generate sufficient returns in the loan market. Banks without a certain critical mass on their balance sheets are finding it harder to compete with those where the profitability of relationships is underpinned by structured products and wider ‘soft’ business such as the provision of registrar and cash management services. There has been whispering about the end of the ‘credit boom’ but what will happen for the remainder of 2005 is difficult to predict.
