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Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
Vision 2014: Macroeconomic and Market Trends US and Global Perspectives
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Vision 2014: Macroeconomic and Market Trends US and Global Perspectives

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Review what’s new regarding consumer credit trends and the economy, nationally and internationally. We’ll share overall metrics, current credit health and the results of a recent payment hierarchy …

Review what’s new regarding consumer credit trends and the economy, nationally and internationally. We’ll share overall metrics, current credit health and the results of a recent payment hierarchy trend analysis.

Published in: Economy & Finance, Technology
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  • 1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Macroeconomic and market trends – U.S. and global perspectives Mark Fleming CoreLogic Marc Gaudart Experian #vision2014 Michele Raneri Experian
  • 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. We can finally exhale…
  • 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. …but we need to still be vigilant
  • 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Global consumer credit map Consumer credit outstanding and growth Source: Sofinco consumer credit world wide 2011 and 2012 $3.4 Trillion $404 Billion $132 Billion $1.8 Trillion $2.4 Trillion $121Billion -1% +5.5% +13.5% +14.9% +7.7% +2.6%
  • 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. U.S. Euro area Central & Eastern Europe What’s going on today in the U.S., Europe and Brazil Summary GDP Growth (%) Unemployment (%) 1.9 Brazil 2013 2014 forecast 2013 2014 forecast Latin America Developed Asia Pacific Developing Asia (ex. China & India) China India Russia -0.4 2.8 UK 1.0 1.7 2.4 2.5 2.8 1.5 2.0 2.3 2.3 2.6 3.0 ?? ?? 6.5 6.7 6.5 6.7 4.4 5.4 Source: IMF - World Economic Outlook Projections, Consensus Economics, Focus Economics. The Economist 7.4 6.5 12.1 12.0 7.6 6.9 4.8 5.7 4.1 4.1 5.75.5 8-14 4.8-11 1.8-6 3-6 9.9
  • 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. U.S. economic and credit trends Michele Raneri Experian Vice President, Analytics
  • 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Consumer confidence improving year-over-year 0 20 40 60 80 100 120 140 160 3Q77 4Q78 1Q80 2Q81 3Q82 4Q83 1Q85 2Q86 3Q87 4Q88 1Q90 2Q91 3Q92 4Q93 1Q95 2Q96 3Q97 4Q98 1Q00 2Q01 3Q02 4Q03 1Q05 2Q06 3Q07 4Q08 1Q10 2Q11 3Q12 4Q13 Consumer confidence index = Recession YoY: +20.4 pts Peak 3Q 2000 Low 1Q 2009
  • 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Unemployment rates forecast to come down Source: Bureau of Labor Statistics January 2014, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, December 2013 0% 2% 4% 6% 8% 10% 12% 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Unemployment rate FOMC forecast Oct 2009 10.0% Apr 2000 3.8% Dec 1982 10.8%
  • 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. U.S. jobs gained or lost -1,000 -500 0 500 1,000 1,500 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 1-Month Net Change (thousands) Source: Bureau of Labor Statistics January 2014
  • 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. U.S. jobs gained or lost 0% 2% 4% 6% 8% 10% 12% -1,000 -800 -600 -400 -200 0 200 400 600 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 1-Month Net Change (thousands) Unemployment rate Source: Bureau of Labor Statistics January 2014
  • 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Unemployment change by state Percent change in unemployment rate from October 2009 to March 2014
  • 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Drought covers large portion of western U.S. Source: NOAA / National Weather Service, Author: David Miskus, NOAA/NAWS/NCEP/CPC Abnormally Dry Exceptional Drought
  • 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Drivers of gasoline prices Source: U.S. Energy Information Administration U.S. gas price (regular all formulations) $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
  • 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bankcard originations $0 $20 $40 $60 $80 $100 $120 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 $65.8 BN
  • 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Distribution of bankcard loan originations By VantageScore® band 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2007 2008 2009 2010 2011 2012 2013 A B C D F
  • 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Average VantageScore® Bankcard inquiries and originations Spread between inquiries and originations 61 32 34 52 60 49 54 70 85 66 61 67 86 58 51 67 57 45 54 59 52 46 46 54 48 44 41 600 650 700 750 800 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Bankcard inquiries Originations
  • 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bankcard late stage delinquency rates 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 60-89 DPD 90-180 DPD Percent balances
  • 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bankcard delinquency rates By state Best/worst five states* 4Q13 national bankcard 60-89 DPD rate 0.56% 1. Wyoming 0.32% 2. North Dakota 0.33% 3. Alaska 0.34% 4. Vermont 0.43% 5. Montana 0.44% … 47. Arkansas 0.66% 48. Nevada 0.66% 49. Alabama 0.67% 50. Mississippi 0.71% 51. Arizona 0.73% *Includes District of Columbia Source: Experian IntelliViewSM 4Q09 HighLow 0.70%0.43% 4Q13
  • 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Retail originations $0 $5 $10 $15 $20 $25 $30 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 $20.59 B
  • 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Distribution of retail loan originations By VantageScore® band 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2007 2008 2009 2010 2011 2012 2013 A B C D F
  • 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Retail late stage delinquency rates 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 60-89 DPD 90-180 DPD Percent balances
  • 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Retail delinquency rates By state Best/worst five states* 4Q13 national retail 60-89 DPD rate 1.01% 1. North Dakota 0.55% 2. Nebraska 0.64% 3. Iowa 0.70% 4. Wisconsin 0.79% 5. Minnesota 0.80% … 47. Vermont 1.18% 48. Alabama 1.18% 49. Arizona 1.19% 50. New Mexico 1.29% 51. Arkansas 1.34% *Includes District of Columbia Source: Experian IntelliViewSM 4Q09 HighLow 1.23%0.76% 4Q13
  • 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Mortgage trends Mark Fleming CoreLogic Chief Economist
  • 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Constrained Only In Specific Dimensions 0 20 40 60 80 100 120 140 160 180 200 Credit Score Less Than 620 LTV Share 90 And Above DTI Share 40 And Above Low & No Doc Share Arm Share Purchase Share Normal Current Maximum Source: CoreLogic, October 2013 © 2013 CoreLogic, Inc. All rights reserved Mortgage Underwriting, Loan Type, and Purpose Measured as a Percentage of "Normal" In Which Dimension Is Credit Constrained
  • 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Equity Isn’t Constrained- A Good Thing Given Few Have It LTV Cohort Origination Share, First Lien Purchase Only Source: CoreLogic September 2013 0% 10% 20% 30% 40% 50% 60% Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 75%+ - 80% 80%+ - 85% 85%+ - 90% 90%+ - 95% 95%+ - 100%
  • 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Creditworthiness Is Key- Low Credit Score Lending Non-Existent 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Up to 619 620 to 639 640 to 699 700 to 779 780+ Source: CoreLogic October 2013 ©2013 CoreLogic, Inc. All rights Credit Score Cohort Origination Share, First Lien Purchase Only
  • 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Rising Rates Push Borrowers out of the Money and Reduce Future Turnover Share of Total Mortgages Source: CoreLogic October 2013 0% 5% 10% 15% 20% 25% 30% 35% 40% < 4.00% 4.00 <- 4.50% 4.50 <- 5.00% 5.00 <- 5.50% 5.50 <- 6.00% 6.00 <- 6.50% 6.50 <- 7.00% > 7.00% Current Interest Rate on Active Mortgages Underwriting Constrained High Rate Borrower, 10+%
  • 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Shadow Inventory- Continued Improvement 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Serious Delinquency Shadow Inventory FCL Shadow Inventory REO Shadow Inventory Source: CoreLogic October 2013 In Thousands, Not Seasonally Adjusted
  • 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Future Homeowners are Only Just Recovering Household Formation Rate- YOY Growth Rate Source: Census 2012 -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Less than 25 years 25 to 35 years 35 to 55 years 55 years and over
  • 30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Institutional Investors are Participating but by Different Sale Types Institutional Investor Share of Purchases Source: CoreLogic, September 2013 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% New Construction REO Resale Short Sale
  • 31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Have Down Payment, Will Travel… Source: CoreLogic Q3 2013 Insufficient Equity (80+ LTV) Share 10% 15% 20% 25% 30% 35% 40% 45% 50% NV FL MS OH AZ GA NE IL TN LA AR OK NH MD MI SC CO AL WI NC VA NM RI KY DE IA MO MN NJ WA UT WV AK ID OR KS CT CA PA IN MA WY DC TX ME MT NY Insufficient Equity (80+ LTV)
  • 32. 32©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Fire Burn and Caldron Bubble? Impressive Year-Over-Year Growth as of December 2013 Data, yet Month-Over-Month is Indicating no Growth Source: CoreLogic HPI, HPI Forecast December 2013 HPI YOY %Chg -20% -15% -10% -5% 0% 5% 10% 15% 20% Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Including Distressed Excluding Distressed
  • 33. 33©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon Ownership Status Matters for Affordability 50 70 90 110 130 150 170 190 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 First-Time Homebuyer Existing Homeowner Affordability Index First-Time Homebuyer and Existing Homeowner Affordability Source: CoreLogic October 2013 © 2014 CoreLogic, Inc. All rights reserved.
  • 34. 34©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon House Price Undervaluation Expected to Persist Source: CoreLogic January 2014 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00 © 2013 CoreLogic, Inc. All rights reserved Actual Prices Relative to Fundamental Prices (%)-Population Weighted Composite of top 50 Markets
  • 35. 35©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2014 CoreLogic, Inc. All rights reserved. Private & Confidential@corelogicecon What Do You See- The Many Dimensions of Housing Success 0 50 100 150 200 250 300 350 400 Total Sales HPI, YOY %Chg Seriously Delinquent Rate Foreclosure Rate Negative Equity Share Housing Starts Normal Current Source: Source: IHS, CoreLogic December 2013
  • 36. 36©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. UK economic and credit trends Marc Gaudart Experian Global Head of Consulting
  • 37. 37©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Secured and unsecured new lending per month £ billions 32.0 13.5 10.1 17.6 16.6 17.1 0 5 10 15 20 25 30 35 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Secured Unsecured In the UK, new lending volumes have reached pre-crisis levels for unsecured consumer lending; securing lending is growing again, but still below pre-crisis level
  • 38. 38©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bank of England write-off rates Percentage Source: Bank of England 1.86 4.29 5.19 2.40 0.79 2.61 9.21 11.12 2.30 0 2 4 6 8 10 12 2002Q4 2003Q2 2003Q4 2004Q2 2004Q4 2005Q2 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 Credit Cards Personal Loans Write-off rates for unsecured lending have improved significantly in the last two years…
  • 39. 39©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bank of England quarterly mortgage write-off rates Percentage 0.11 0.03 0.08 0.02 0.01 0.09 0.04 0.00 0.02 0.04 0.06 0.08 0.10 0.12 1993Q4 1994Q4 1995Q4 1996Q4 1997Q4 1998Q4 1999Q4 2000Q4 2001Q4 2002Q4 2003Q4 2004Q4 2005Q4 2006Q4 2007Q4 2008Q4 2009Q4 2010Q4 2011Q4 2012Q4 … and so have write-off rates for secured lending, but still not back to pre-crisis levels Source: Bank of England
  • 40. 40©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Example 1: Spain Sources: INE (Spanish National Statistics Agency), Bank of Spain (Central Bank), Experian Global consulting Practice Six years after the start of the crisis, mortgage books are still very fragile, despite a significant tightening of lending criteria  Better use of data and analytics  Deployment of state-of-the-art collections platforms  Involvement of large branch networks in collections activities  Change of approach to using external debt collection agencies  Sale of assets to investment funds Spanish banks have overhauled their collections practices, including: 03 04 05 06 07 08 09 10 11 12 13 New mortgage lending by year, € (billions) 05 06 07 08 09 10 11 12 13 Mortgage delinquency rate, % 0.37 2.84 2.38 5.08 96 122 157 188 184 117 77 71 46 28 20
  • 41. 41©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Example 2: Russia 04 05 06 07 08 09 10 11 12 13 Russia consumer lending 2004-2013, RUB (billions) 1,200 9,400 +25% CAGR 04 05 06 07 08 09 10 11 12 13 12 420 +49% CAGR Russia 90+ DPD volumes 2004-2013, RUB (billions) Sources: Central Bank of Russia, Experian Global consulting Practice Delinquency levels outpacing growth in volumes, a sense of déjà vu?
  • 42. 42©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Example 3: Turkey Sources: Turkish Banking Regulation and Supervision Agency; Experian Global Consulting Practice Government caps credit card limits and rate  Credit limit across all cards cannot exceed four times monthly salary  Revolving is forbidden for certain merchant category transactions, such as food, jewelry, fuel, telecoms, etc.  Monthly repayment must be higher than 30% of balance for balances below TL15,000 and 35% of balances for balances above TL15,000 2013-2014 regulations 02 03 04 05 06 07 08 09 10 11 12 13 4.3 83.8 +31% CAGR Turkish credit card lending 2002-2013, TL (billions)
  • 43. 43©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Example 4: UK “As a regulator we look at the way financial organisations treat their customers, and the way they behave towards them. By regulating conduct we mean that we regulate the way these organisations behave towards the consumer, for example, making sure they give enough information about the product they are selling.” The FCA was created in the UK on April 1, 2013: The six outcomes to treating customers fairly: 1: Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture. 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly. 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale. 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances. 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect. 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint. Source: FCA website; Experian Global Consulting Practice Creation of the Financial Conduct Authority: A new paradigm for banking is emerging A deeper, more detailed understanding of customer circumstances is critical to fair lending, and is now required by regulator. Data and analytics-driven decisioning is fundamental.
  • 44. 44©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Example 5: UK Source: UK Finance & Leasing Association; Experian Global consulting Practice Robust and good quality growth in auto finance industry Understanding purpose of loan and providing good point- of-sale customer experience can drive good lending. Data and analytics decisioning is key What’s going on: 2011 2012 2013 UK Motor Finance New Lending, ₤ (billions) 50% 50% 56% 44% 58% 42% 13.7 16.7 20.8 New Used  Growth in auto finance lending in the UK has largely been driven by captive auto lenders, supporting new car sales  Quality of lending has been significantly better than any other form of lending except mortgages during the period  This has driven car registration numbers growth in the UK, significantly larger than European Union average  Captive lenders have captured a sound, growing market, that traditional banks have not focused on Implications:
  • 45. 45©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Example 6: Philippines Sources: Banko, Globe, BPI websites; Experian Micro Analytics An origination credit scoring system that includes:  Airtime top-up patterns (for example, do you top-up large amounts once a month or small amounts every other day?);  Voice and SMS usage;  Mobile Money utilization (cash in/out, transfers, utility payment, etc.)  Information gathered directly from the borrower (for example income, marital status, etc.);  Information available externally (for example, where available, from a credit bureau); An automated customer management system to send alerts to borrowers to remind them of a due payment, to increase or decrease dynamically exposure to good / bad borrowers, to streamline the management of overdue payments. A credit risk agent management system to dynamically rank agents by the quality of the clients they have introduced to the bank and to calculate and disburse risk adjusted commissions. In addition the system alerts agents when some of their introduced clients are late to allow early collections actions. An enhanced mobile interface for the end clients that allows them to manage their credit product and review for example when the installment is due, make anticipated payments, request additional credit lines, etc., all managed in an automated and real time fashion. How to manage credit risk on mobile loans: Banks and telecoms working together – a terrific ground for smart decision analytics Example partnership: Globe: 38M subscribers Bank of Philippines Islands: 6M customers Products:  Send money  Pay bills  Savings  Insurance  Loans  Buy load
  • 46. 46©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 2. Growth in delinquency levels outplacing growth in volumes; a sense of déjà vu? 1. Six years after the start of crisis, mortgage books are still very fragile What should we be ready for? Six examples from around the world that are or will be relevant everywhere 3. Government caps credit card limits and rate 4. Creation of the Financial Conduct Authority: a new paradigm for banking is clearly emerging 5. Robust and good quality growth in auto finance, one of few lending products doing really well for borrowers and lenders 6. Banks and telecoms working together – a terrific ground for smart decision analytics Philippines UK UK Turkey Russia Spain
  • 47. 47©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. In conclusion… Image source: wilcomarine services.co.nz
  • 48. 48©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: Marc.Gaudart@experian.com Michele.Raneri@experian.com | #MLRaneri Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  • 49. 49©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.

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