59
Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian Director, Research & Industry Analysis

Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

  • Upload
    others

  • View
    3

  • Download
    0

Embed Size (px)

Citation preview

Page 1: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

Consumer Perspective: Industry Insights

and Lending Dynamics

Matt Fabian

Director, Research & Industry Analysis

Page 2: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 3: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

Key Canadian economic trends:

Steady fundamentals amid looming uncertainty

Page 4: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 5: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 6: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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.

Page 7: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 8: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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.

Page 9: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 10: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 11: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

An overview of consumer credit health

Page 12: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 13: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 14: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 15: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 16: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 17: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 18: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 19: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 20: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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.

Page 21: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

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.

Page 22: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 23: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 24: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 25: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 26: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 27: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 28: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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)

Page 29: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 30: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

Real estate lending sector

The impact of new mortgage rules combined with rising rates

has cooled the market, but regional disparities continue

Page 31: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 32: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 33: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 34: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 35: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 36: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 37: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 38: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 39: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

Torrid pace to the auto sector is slowing. Prices and balances remained

generally stable

Auto lending sector

Page 40: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 41: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 42: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 43: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 44: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 45: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 46: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

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

Page 47: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 48: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 49: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 50: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 51: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

Installment loan sector

Overall installment growth is steady with some shift toward Subprime

volume.

Page 52: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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%

Page 53: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 54: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 55: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 56: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

Summary

Page 57: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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

Page 58: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian

| 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?

Page 59: Consumer Perspective: Industry Insights and Lending Dynamics - Credit Report, Credit … · 2018-09-13 · Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian