Consumers aged 30-39 projected to be biggest drivers of credit demand
SAN JOSE, CA, Oct. 9, 2013 /CNW/ - Consumers' appetite for credit will continue to grow, according to the latest quarterly survey of U.S. and Canadian bank risk professionals. In the survey from FICO NYSE:FICO, a leading predictive analytics and decision management software company, 46 percent of respondents expect the amount of new credit requested by consumers to increase over the next six months, while just 16 percent expect it to decrease.
The survey, conducted for FICO by the Professional Risk Managers' International Association (PRMIA), also found that 46 percent of bankers in the survey expect requests for credit-line increases to go up, with 8 percent expecting such requests to go down. Regarding the use of consumer credit, 53 percent of lenders polled expect credit card balances to increase over the next six months, while 7 percent expect balances to decrease.
"The theme of the economic recovery seems to be 'slow and steady'," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Both consumer spending and income ticked up slightly during the summer. I'm sure that contributed to the feeling among our respondents that consumer borrowing is poised to increase. It remains to be seen if the government shutdown causes consumers to tighten their purse strings."
"The survey found that in Canada the willingness to acquire credit differs somewhat to that of our U.S. neighbour," said Cheryl Woodburn, senior director of FICO Canada. "Despite recent warnings from the federal government and the Bank of Canada regarding high household debt-to-income ratios, our survey shows that 54 per cent of the respondents believe Canadian consumers will request more credit in the next six months, compared to the North American average of 46 per cent."
Thirty-somethings to drive growth in lending
When asked about the anticipated growth in their lending portfolios, half of all respondents (50 percent) said that borrowers in the 30-39 age range will drive the most growth. Nearly a quarter of respondents (22 percent) expect borrowers aged 20-29 to be the largest source of growth. Eighteen percent of respondents felt that growth in their lending portfolios would be largest among borrowers aged 40 or older.
Credit supply to meet growing demand
Bankers also gave their projection for the anticipated supply of consumer credit for multiple types of loans. More than 70 percent of respondents expect supply to meet demand for new residential mortgages and small business loans. Over 80 percent of respondents expect supply to meet demand for mortgage refinancing, credit cards, auto loans, and student loans. There were no loan types for which respondents expect demand to exceed supply.
When it comes to risk, the concern centered on one loan type: student loans. Nearly half of respondents (49 percent) expect an increase in student loan delinquencies, while 15 percent expect a decrease. This is the eighth consecutive quarter in which there was significant concern about delinquencies on student loans.
Eleven percent of respondents expect the total number of consumer credit delinquencies to decrease, the lowest number on record. Sixty-two percent of respondents expect the total number of delinquencies to remain flat.
Bankers overwhelmingly (72 percent) believe interest rates will rise in the next six months. Less than one percent of respondents expect interest rates for consumer credit to decrease, the lowest level in the survey's three-year history.
A detailed report of FICO's quarterly survey is available at https://www.prmia.org/sites/default/files/references/PRMIAFICO3rdQuarterOct2013F.pdf. The survey included responses from 114 risk managers at banks throughout the U.S. and Canada in September 2013. FICO and PRMIA extend a special thanks to Columbia Business School's Center for Decision Sciences for its assistance in analyzing the survey results.
The Professional Risk Managers' International Association (PRMIA) is a higher standard for risk professionals, with 65 chapters and more than 90,000 members worldwide. A non-profit, member-led association, PRMIA is dedicated to defining and implementing the best practices of risk management through education, including the Professional Risk Manager (PRM) designation and Associate PRM certificate; webinar, online, classroom and in-house training; events; networking; and online resources. More information can be found at www.PRMIA.org.
FICO (NYSE: FICO) is a leading analytics software company, helping businesses in 80+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. The company's groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. Many of our products reach industry-wide adoption — such as the FICO® Score, the standard measure of consumer credit risk in the United States. FICO solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health. FICO: Make every decision count™. Learn more at www.fico.com.
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Statement Concerning Forward-Looking Information
Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company's Decision Management strategy and reengineering plan, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions, and other risks described from time to time in FICO's SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2012 and its last quarterly report on Form 10-Q for the period ended June 30, 2013. If any of these risks or uncertainties materializes, FICO's results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.
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Jean François Thibault
Kaiser Lachance Communications