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Consumer Perspective: Industry Insights
and Lending Dynamics
Matt Fabian
Director, Research & Industry Analysis
| 2© 2018 Trans Union of Canada, Inc. All Rights Reserved | 2
Agenda
Context – A summary of economic trends
An overall perspective on the Canadian consumer credit market
Basic performance statistics across the major loan product types: originations, balances and delinquency
1
2
Our philosophy
Lenders are best served when they understand the entire consumer wallet.
3
Key Canadian economic trends:
Steady fundamentals amid looming uncertainty
| 4© 2018 Trans Union of Canada, Inc. All Rights Reserved | 4
Canada’s economy lost some momentum in the latter
part of 2017, but remains quite solid
Real GDP: Quarter-over-quarter growth rate (seasonally adjusted, annualized)
Source: Statistics Canada, CANSIM Table 380-0064 Gross domestic product, Oxford Economics
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Forecast
| 5© 2018 Trans Union of Canada, Inc. All Rights Reserved | 5
Unemployment is declining, but labor force
participation remains persistently low
Unemployment and labor force participation rate
Un
em
plo
ym
en
t ra
teL
ab
or fo
rce p
artic
ipatio
n ra
te (%
)
Source: Oxford Economics
64.0
64.5
65.0
65.5
66.0
66.5
67.0
67.5
68.0
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
| 6© 2018 Trans Union of Canada, Inc. All Rights Reserved | 6
The oil producing provinces are showing signs of positive
momentum that is expected to drive improved credit results
Unemployment rate, seasonally adjusted
Source: Statistics Canada, CANSIM, tables 282-0002 and 282-0022
$-
$20
$40
$60
$80
$100
$120
$140
$160
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Canada Exc. AB & SK Alberta Saskatchewan Oil Price (WTI)
Un
em
plo
ym
en
t ra
te
WT
I cru
de
oil p
rice
pe
r ba
rrel, in
$U
.S.
| 7© 2018 Trans Union of Canada, Inc. All Rights Reserved | 7
Canadian economic uncertainty around tariffs is equal
to the time of the U.S. election
Source: Baker, Bloom, Davis, www.PolicyUncertainty.com
0
50
100
150
200
250
300
350
400
450
500
2014 2015 2016 2017 2018
Global
TradeEurozone
Tariffs
Brexit
Oil
Shock
Trump
Election
Ec
on
om
ic P
oli
cy U
nc
ert
ain
ty I
nd
ex
(3
mo
. M
A)
CanadaGlobal
| 8© 2018 Trans Union of Canada, Inc. All Rights Reserved | 8
The impact of tariffs is…generally…small. Until it
extends to the auto sector
Source: Statistics Canada, 2016 Census of Population, Statistics Canada Catalogue no. 98-400-X2016292
~5% shift in unemployment
~ 40 bps increase in delinquency
(Ontario)
Auto
Manufact’g.Mining
20% +
10% - 19%
2% - 9%
% Employment by Census DivisionMetal
Manufact’g.
| 9© 2018 Trans Union of Canada, Inc. All Rights Reserved | 9
As a result of the economy’s strength, the Bank of
Canada has removed some of the stimulus
Bank of Canada target overnight rate
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Ja
n-0
8
Apr-
08
Ju
l-0
8
Oct-
08
Ja
n-0
9
Apr-
09
Ju
l-0
9
Oct-
09
Ja
n-1
0
Apr-
10
Ju
l-1
0
Oct-
10
Ja
n-1
1
Apr-
11
Ju
l-1
1
Oct-
11
Ja
n-1
2
Apr-
12
Ju
l-1
2
Oct-
12
Ja
n-1
3
Apr-
13
Ju
l-1
3
Oct-
13
Ja
n-1
4
Apr-
14
Ju
l-1
4
Oct-
14
Ja
n-1
5
Apr-
15
Ju
l-1
5
Oct-
15
Ja
n-1
6
Apr-
16
Ju
l-1
6
Oct-
16
Ja
n-1
7
Apr-
17
Ju
l-1
7
Oct-
17
Ja
n-1
8
Apr-
18
Ju
l-1
8
Oct-
18
Ja
n-1
9
Apr-
19
Ju
l-1
9
Oct-
19
Ja
n-2
0
Forecast1
Source: actual rate history Bank of Canada 1) Oxford Economics, RBC Economics, BMO Economics
| 10© 2018 Trans Union of Canada, Inc. All Rights Reserved | 10
Source: 2018 TransUnion Canada Payment Shock Study
Our payment shock study found that consumers will
generally remain resilient against future increases
Up to 425K consumers will experience a payment shock with an incremental 50 bp increase
9.3 million consumers are potentially exposed to a payment shock
28.5 million credit active consumers
Of the those consumer affected, <100K will have a payment shock of more than $50 per month
An overview of consumer credit health
| 12© 2018 Trans Union of Canada, Inc. All Rights Reserved | 12
Although household debt continues to increase, the
burden of servicing it has declined as a share of income
Household debt-service ratios (%), 2000-2018
Interest only
Principal +
interest
% o
f Tota
l household
dis
posable
incom
e
Source: Statistics Canada, 2018, CANSIM table 380-0073
0%
2%
4%
6%
8%
10%
12%
14%
16%Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
| 13© 2018 Trans Union of Canada, Inc. All Rights Reserved | 13
Average consumer debt rose by 4.5% year-over-year. However,
average delinquency declined over the same period by 4.9%.A
vera
ge n
on
-mort
gage c
onsum
er
bala
nce
Delin
quency ra
te (9
0+
DP
D)
Average non-mortgage consumer debt balances and serious delinquency rate
Source: TransUnion Canada consumer credit database
4.0%
4.5%
5.0%
5.5%
6.0%
$26,000
$26,500
$27,000
$27,500
$28,000
$28,500
$29,000
$29,500
$30,000
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
| 14© 2018 Trans Union of Canada, Inc. All Rights Reserved | 14
Consumer score distribution has remained generally
consistent over time with some expansion in super prime
Consumer risk score distribution of credit-active consumers
Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
Risk tiers
Super prime
Prime plus
Prime
Near prime
Subprime
37%
16%
15%
20%
12%
35%
16%
15%
21%
13%
34%
16%
16%
22%
12%
Q2 2016 Q2 2017 Q2 2018
12% 12% 12%
21% 21% 20%
16% 16% 15%
16% 15% 15%
37% 36% 37%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Source: TransUnion Canada consumer credit database
| 15© 2018 Trans Union of Canada, Inc. All Rights Reserved | 15
91% of Canadian consumers remained in the same
risk tier or improved
Risk Tier this Year – Q2 2018
Subprime Near Prime Prime Prime Plus Super Prime
Ris
k T
ier
La
st
Ye
ar
–
Q2
20
17
Subprime 71.8% 25.1% 2.5% 0.5% 0.1%
Near Prime 12.9% 59.5% 19.5% 6.2% 1.9%
Prime 2.1% 21.0% 41.3% 26.0% 9.6%
Prime Plus 0.5% 6.4% 15.7% 46.2% 31.2%
Super Prime 0.1% 1.5% 3.4% 9.3% 85.7%
Same BetterWorseSource: TransUnion Canada consumer credit database
| 16© 2018 Trans Union of Canada, Inc. All Rights Reserved | 16
Continued momentum in the auto finance sector has fueled
origination volume. Other lending products are down
Q1 2018 origination growth* (year-over-year)
Ori
gin
ati
on
gro
wth
rate
Q1 2018
origination
volumes (M)
1,361 193 281 724 175
* Origination volumes reported 1 quarter in arrears
5.6%
1.7%
-5.6%
4.2%
-3.4%
-6%
-4%
-2%
0%
2%
4%
6%
Source: TransUnion Canada consumer credit database
| 17© 2018 Trans Union of Canada, Inc. All Rights Reserved | 17
Consumer credit balances continue to grow as the
economy has expanded
Q2 2018 year-over-year balance growth
Source: TransUnion Canada consumer credit database
$264 B
Q2 2018
Outstanding
balance
Bankcard Auto loan Line of credit Installment
$99 B $61 B $154 B
Mortgage
$1,241 B
5.1% 6.0%0.6%
13.8%
4.7%
| 18© 2018 Trans Union of Canada, Inc. All Rights Reserved | 18
National delinquency rates have been stable
Consumer-level delinquency rates
Source: TransUnion Canada consumer credit databaseNote: 90+ DPD for Cards, and 60+ DPD for other product types
-5 bps
14 bps
-12 bps
-11 bps
-8 bps
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Credit Card Auto Line of Credit Installment Mortgage
| 19© 2018 Trans Union of Canada, Inc. All Rights Reserved | 19
5.38%
5 6.41%
96.46%
35
5.97%
325.15%
43
4.24%
9
6.88%
32
6.87%
7
8.37%
47
5.74%
21
Overall consumer non-mortgage delinquency shows regional variation,
however, Nationally the rate is stable at 5.43% (-28 bp from prior year)
5.33%
-24 bps
Source: TransUnion Canada consumer credit database
| 20© 2018 Trans Union of Canada, Inc. All Rights Reserved | 20
To summarize consumer credit health:
Positive dynamics
Generally stable credit health
Higher use of credit
Stable levels of delinquency
Things to consider
Impact of rising interest rates, Household debt
stress and payment shock dynamics
Future direction of Canada’s economy and
impact on key credit drivers (Regional shifts,
NAFTA/Tariffs)
Housing market’s response to new
mortgage rules
This is a well-functioning market with no immediate causes for concern.
However, as always, there are dynamics and segments that merit scrutiny.
Credit card sector
The card market grew as originations rebounded slightly, and outstandings
growth continued. Delinquency rates remain controlled with continued
bifurcation between oil and non-oil provinces.
| 22© 2018 Trans Union of Canada, Inc. All Rights Reserved | 22
The number of active cards remains relatively stable
with a recent trend of upward growth
Number of active cards
Source: TransUnion Canada consumer credit database
42,000,000
42,500,000
43,000,000
43,500,000
44,000,000
44,500,000
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
NU
MB
ER
OF
AC
CO
UN
TS
QUARTER
Q2-16 – Q2’17 = -0.9%
Q2-17 – Q2’18 = 0.8%
| 23© 2018 Trans Union of Canada, Inc. All Rights Reserved | 23
Bankcard originations grew over previous year, but
remain below historical levels
Source: TransUnion Canada consumer credit database
Quarterly bankcard originations*
* Origination volumes reported 1 quarter in arrears
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
QUARTER
+ 5.6%
| 24© 2018 Trans Union of Canada, Inc. All Rights Reserved | 24
Origination volumes increased across all risk tiers
mitigating concerns of a down market shift
Number of new bankcard accounts, by risk tier
Source: TransUnion Canada consumer credit databaseCredit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Subprime Near Prime Prime Prime Plus Super Prime
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
BORROWER CV RISK TIER
Q1 2017 Q1 2018
12.3%
5.4%
4.1%
3.9%
5.6%
| 25© 2018 Trans Union of Canada, Inc. All Rights Reserved | 25
Newly originated limits increased over 10% from prior year as
lenders appear to be more aggressive to offset acquisition volume
Average Credit Line of New Bankcards
4,200
4,300
4,400
4,500
4,600
4,700
4,800
4,900
5,000
5,100
5,200
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018AV
G.
CR
ED
IT L
INE
S I
N D
OL
LA
RS
QUARTER
Source: TransUnion Canada consumer credit database
| 26© 2018 Trans Union of Canada, Inc. All Rights Reserved | 26
Balance expansion continues in the Canadian card market as total
assets grew 5.2% from previous year and approach a $100B milestone
Total Balance of all Bankcards
Source: TransUnion Canada consumer credit database
$84
$86
$88
$90
$92
$94
$96
$98
$100
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
BA
LA
NC
ES
IN
$ B
ILL
ION
S
QUARTER
5.2%
| 27© 2018 Trans Union of Canada, Inc. All Rights Reserved | 27
Despite the drop in the number of card accounts,
average balances have increased across all segments
Year-over-year change in bankcard balances by risk tier
Source: TransUnion Canada consumer credit databaseCredit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
$0
$5
$10
$15
$20
$25
$30
$35
$40
Subprime Near Prime Prime Prime Plus Super Prime
BA
LA
NC
ES
IN
$ B
ILL
ION
S
CV RISK TIER
Q2 2017 Q2 2018
5.1%
4.4%
3.7%
6.6%
6.9%
| 28© 2018 Trans Union of Canada, Inc. All Rights Reserved | 28
Dollar weighted delinquency rates remain manageable,
however the size of real balance at risk are increasing
Bankcard balance-level delinquencies (90+ DPD)
Source: TransUnion Canada consumer credit database
$3.6
$3.7
$3.8
$3.9
$4.
$4.1
$4.2
$4.3
$4.4
$4.5
4.1%
4.2%
4.3%
4.4%
4.5%
4.6%
4.7%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
0
Deli
nq
uen
cy R
ate
Bala
nce a
t Ris
k ($
B)
| 29© 2018 Trans Union of Canada, Inc. All Rights Reserved | 29
The energy provinces are still lagging the rest of Canada
despite overall economic recovery in these regions
Bankcard 90+ DPD Unit delinquency rates
Source: TransUnion Canada consumer credit database
WT
I cru
de o
il ($U
S)
Unit D
elin
quency R
ate
s (
90+
DP
D)
$20
$30
$40
$50
$60
$70
$80
1%
2%
2%
3%
3%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Non-Oil Producing Provinces Oil Producing Provinces Oil Price
Real estate lending sector
The impact of new mortgage rules combined with rising rates
has cooled the market, but regional disparities continue
| 31© 2018 Trans Union of Canada, Inc. All Rights Reserved | 31
Canada’s mortgage landscape has seen significant change
OSFI
• Capital Requirements
• Qualifying Rules
• New Stress Test
BC / ON
• Fair housing
• Foreign buyer tax
Interest Rate Hikes• 2 years of low rates
• 75 bp point climb in 7
months
Market Pressure
| 32© 2018 Trans Union of Canada, Inc. All Rights Reserved | 32
The combination of regulatory changes and interest rate
increases have slowed the housing and mortgage market
Source: TransUnion Canada consumer credit database
Quarterly mortgage originations*
* Origination volumes reported 1 quarter in arrears
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018NU
MB
ER
OF
NE
W A
CC
OU
NT
S
QUARTER
Q1-16 – Q1’17 = -10.5%
Q1-17 – Q1’18 = -3.4%
| 33© 2018 Trans Union of Canada, Inc. All Rights Reserved | 33
Super Prime was the only risk tier with positive growth,
further reinforcing the impact of new rules and higher rates
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Subprime Near Prime Prime Prime Plus Super Prime
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
BORROWER CV RISK TIER
Q1 2017 Q1 2018
Quarterly mortgage originations by risk tier*
* Origination volumes reported 1 quarter in arrears
-8.9%
-9.6%
-15.5%
4.4%
-5.8%
Source: TransUnion Canada consumer credit database
| 34© 2018 Trans Union of Canada, Inc. All Rights Reserved | 34
New mortgage balance growth has also slowed as a
result of new rules and higher cost of borrowing
Average Balance of New Mortgage Loans*
* Origination volumes reported 1 quarter in arrears
240,000
250,000
260,000
270,000
280,000
290,000
300,000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
AV
G.
BA
LA
NC
E I
N D
OL
LA
RS
QUARTER
Q1-16 – Q1’17 = 7.8%
Q1-17 – Q1’18 = 0.5%
Source: TransUnion Canada consumer credit database
| 35© 2018 Trans Union of Canada, Inc. All Rights Reserved | 35
New rules and affordability have slowed new mortgage origination
significantly in Ontario, while B.C. mortgage rates increased
Y-O-Y mortgage originations by Province (Q1’17 to Q1’18)
Source: TransUnion Canada consumer credit database
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
BC
ABMB
QC
PEI
NS
NL
NB
ON
SK
Canada
-3.4%
YO
Y c
han
ge n
ew
mo
rtg
ag
e v
olu
me
| 36© 2018 Trans Union of Canada, Inc. All Rights Reserved | 36
New growth markets are emerging while a combination of
regulatory rules has softened demand in Toronto
Y-O-Y mortgage originations by Major Market (Q4’16 to Q4’17)
Canada
-3.4%
Source: TransUnion Canada consumer credit database
-20%
-15%
-10%
-5%
0%
5%
10%
Vancouver
Hamilton
Winnipeg
Saskatoon
Ottawa
Quebec
City
Calgary
Montreal
Toronto
Edmonton
Halifax
YO
Y c
han
ge n
ew
mo
rtg
ag
e v
olu
me
| 37© 2018 Trans Union of Canada, Inc. All Rights Reserved | 37
Mortgage balance growth was driven by the better than
Prime risk tiers, with an erosion in below Prime lending
Quarterly mortgage loans balance by risk tier
$0
$100
$200
$300
$400
$500
$600
$700
Subprime Near Prime Prime Prime Plus Super Prime
BA
LA
NC
ES
IN
$ B
ILL
ION
S
BORROWER CV RISK TIER
Q2 2017 Q2 2018
Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
0.1%-2.1%
-7.2%
10.0%
2.8%
Source: TransUnion Canada consumer credit database
| 38© 2018 Trans Union of Canada, Inc. All Rights Reserved | 38
Despite market volatility, mortgage risk remains well
managed
Dollar Delinquency Rates on All Mortgage Loans Accounts
-5 bps
-2 bps
-3 bps
Y-O-Y
Change
Source: TransUnion Canada consumer credit database
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
% O
F D
OL
LA
RS
PA
ST
DU
E
QUARTER
30+ DPD 60+ DPD 90+ DPD
Torrid pace to the auto sector is slowing. Prices and balances remained
generally stable
Auto lending sector
| 40© 2018 Trans Union of Canada, Inc. All Rights Reserved | 40
Auto lending originations cooling after a year of torrid
sales
Source: TransUnion Canada consumer credit database
Quarterly Captive Auto Originations
-
50,000
100,000
150,000
200,000
250,000
300,000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
QUARTER
1.7%
| 41© 2018 Trans Union of Canada, Inc. All Rights Reserved | 41
Distribution of new account risk remained constant, with
some expansion in Subprime
Origination volume of new auto loans, by Risk Tier*
Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
* Origination volumes reported 1 quarter in arrears
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Subprime Near Prime Prime Prime Plus Super Prime
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
BORROWER CV RISK TIER
Q1 2017 Q1 2018
-0.6%-0.3%
1.4%
8.8%
1.0%
Source: TransUnion Canada consumer credit database
| 42© 2018 Trans Union of Canada, Inc. All Rights Reserved | 42
The average amount being financed remains relatively
stable and aligned to vehicle price movement
Statistics Canada. Table 326-0020 - Consumer Price Index, monthly, Purchase and leasing of
passenger vehicles
New auto loan balances* vs. CPI – Personal vehicles
* Origination volumes reported 1 quarter in arrears Source: TransUnion Canada consumer credit database
86
88
90
92
94
96
98
100
102
104
$25,500
$26,000
$26,500
$27,000
$27,500
$28,000
$28,500
$29,000
$29,500
$30,000
$30,500
Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Co
ns
um
er P
rice
Ind
ex
(20
02
= 1
00
)
Pu
rch
as
e a
nd
lea
sin
g o
f pa
ss
en
ge
r ve
hic
les
Ave
rag
e a
uto
lo
an
ba
lan
ce
at
ori
gin
ati
on
| 43© 2018 Trans Union of Canada, Inc. All Rights Reserved | 43
Larger auto balances skew toward higher risk
Average Balance of all Auto Loans, by Risk Tier
Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-
759; Prime plus = 760-799; Super prime = 800+
$16,500
$17,000
$17,500
$18,000
$18,500
$19,000
$19,500
$20,000
$20,500
$21,000
$21,500
Subprime Near Prime Prime Prime Plus Super Prime
AV
G.
BA
LA
NC
E I
N D
OL
LA
RS
BORROWER CV RISK TIER
Q2 2017 Q2 2018
1.4%
1.0%
3.5%
2.7%
-0.1%
Source: TransUnion Canada consumer credit database
| 44© 2018 Trans Union of Canada, Inc. All Rights Reserved | 44
Overall, delinquency rates have remained stable within the
auto sector, despite increased overall consumer debt rate
Auto loans and leases balance delinquency rates
Source: TransUnion Canada consumer credit database
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
% O
F D
OL
LA
RS
PA
ST
DU
E
QUARTER
30+ DPD 60+ DPD 90+ DPD
| 45© 2018 Trans Union of Canada, Inc. All Rights Reserved | 45
The auto delinquency story also reflects differences
between energy and non-energy provinces
Auto loans and leases 60 DPD Unit delinquency rates
Source: TransUnion Canada consumer credit database
WT
I cru
de o
il ($U
S)
Unit D
elin
quency R
ate
s (
60 D
PD
)
$-
$10
$20
$30
$40
$50
$60
$70
$80
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
Oil Producing Provinces Non-Oil Producing Provinces Oil Price
Overall LOC volumes and balances remain flat, however certain
markets are driving larger balances and utilization potentially from
secured home lines
Line of credit sector
| 47© 2018 Trans Union of Canada, Inc. All Rights Reserved | 47
Line of credit originations fell slightly from Q1 2017 and
have been largely flat over the past two years
Source: TransUnion Canada consumer credit database
LOC quarterly originations*
* Origination volumes reported 1 quarter in arrears
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
QUARTER
-5.6%
| 48© 2018 Trans Union of Canada, Inc. All Rights Reserved | 48
Average LOC balances have increased driven partially
by HELOC activity
Average balance of all lines of credit
Source: TransUnion Canada consumer credit database
35,000
35,500
36,000
36,500
37,000
37,500
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
AV
G.
BA
LA
NC
E I
N D
OL
LA
RS
QUARTER
1.7%
| 49© 2018 Trans Union of Canada, Inc. All Rights Reserved | 49
LOC balance growth is bifurcated between Subprime and
Super Prime risk tiers
Average Balance of All Line of Credit, by Risk Tier
Source: TransUnion Canada consumer credit databaseCredit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
Subprime Near Prime Prime Prime Plus Super Prime
AV
G.
BA
LA
NC
E I
N D
OL
LA
RS
BORROWER CV RISK TIER
Q2 2017 Q2 2018
2.1%
0.7%1.0%
0.4%1.7%
| 50© 2018 Trans Union of Canada, Inc. All Rights Reserved | 50
Overall, delinquency rates remained very low within the LOC
sector, despite increased overall consumer debt rate
Auto loans and leases balance delinquency rates
Source: TransUnion Canada consumer credit database
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
% O
F D
OL
LA
RS
PA
ST
DU
E
QUARTER
30+ DPD 60+ DPD 90+ DPD
Installment loan sector
Overall installment growth is steady with some shift toward Subprime
volume.
| 52© 2018 Trans Union of Canada, Inc. All Rights Reserved | 52
Installment loan originations have seen consistent
growth with 4.2% YOY increase in Q1 2018
Total number of new installment loans Q1 2018*
Source: TransUnion Canada consumer credit database * Origination volumes reported 1 quarter in arrears
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
NU
MB
ER
OF
NE
W A
CC
OU
NT
S
QUARTER
+4.2%
| 53© 2018 Trans Union of Canada, Inc. All Rights Reserved | 53
New installment loan growth occurred in Prime and below
tiers, fueled partly by growth in alternative lending
Number of new installment loan accounts by risk tier*
Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
* Origination volumes reported 1 quarter in arrears
-
50,000
100,000
150,000
200,000
250,000
Subprime Near Prime Prime Prime Plus Super PrimeNU
MB
ER
OF
NE
W A
CC
OU
NT
S
BORROWER CV RISK TIER
Q1 2017 Q1 2018
-1.8%
-0.3%1.5%
6.0%
15.4%
Source: TransUnion Canada consumer credit database
| 54© 2018 Trans Union of Canada, Inc. All Rights Reserved | 54
Average balance of installment loans has continued to grow
over the past two years
Average balance of all installment loans
$18,000
$18,500
$19,000
$19,500
$20,000
$20,500
$21,000
$21,500
$22,000
$22,500
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
AV
G.
BA
LA
NC
E I
N D
OL
LA
RS
QUARTER
+6.9%
Source: TransUnion Canada consumer credit database
| 55© 2018 Trans Union of Canada, Inc. All Rights Reserved | 55
Overall, delinquency rates remained flat within the
Installment sector, despite increased overall consumer debt rate
Installment loan balance delinquency rates
Source: TransUnion Canada consumer credit database
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018
% O
F D
OL
LA
RS
PA
ST
DU
E
QUARTER
30+ DPD 60+ DPD 90+ DPD
Summary
| 57© 2018 Trans Union of Canada, Inc. All Rights Reserved | 57
Credit Card
Real EstateAuto
To summarize our perspective on the consumer credit
market:
• Auto loan balances continue to rise
• Pace of vehicle sales has softened impacting
originations
• Some expansion in underwriting to higher-risk tiers
• Drop in originations may be due to softening market
• Rising home values drive mortgage balance growth
and increased home equity presents an opportunity
for HELOC growth
• Mortgage delinquencies remain low
Personal Loans
5
• Growth in access and demand
• Higher focus on lower-risk tiers
• Manageable and consistent levels of delinquencies
• Bankcard origination are growing again, but below
previous levels, balance growth is strong
• Some growth in limits suggests issuers are driving
balance growth despite low originations
• Delinquency remains stable, however the balance at
risk is growing which may impact future origination
| 58© 2018 Trans Union of Canada, Inc. All Rights Reserved | 58
Looking forward: Be aware of these opportunities and risk
factors
1
2
3
4
Some signs of relief in oil Provinces may provide renewed opportunities, however these
trends are early and delinquency levels are still above the national average. Additional
headwinds including economic fallout from 2016/17 wildfires, continued home price
increases in major markets and potential changes to NAFTA may slow growth and affect
certain regions more dramatically
The risk mix shift between prime and non-prime consumers should be monitored. There
may be areas of revenue opportunity.
As consumers continue to engage digitally, there may be some short term channel friction
(and opportunity) in origination volumes. Multi-channel engagement and frictionless
onboarding may be a competitive advantage
Interest rate increases and economic uncertainty are projected to continue into 2019. Are
you well prepared to cope with a payment shock?