Experian Quarterly Business Credit Review Q2 2013

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In this presentation, Joel Pruis from Experian's Global Consulting Practice is joined by Nathan Kelly and Cristian deRitis of Moody's Analytics to discuss key findings in the most recent Experian/Moody’s Small Business Credit Index report for Q2 2013 and exploring regional small business credit trends from the Experian Metro Business Pulse.

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Experian Quarterly Business Credit Review Q2 2013

  1. 1. 1©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2013 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. Quarterly Business Credit Review Presented by Joel Pruis
  2. 2. 2©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Small Business Credit Index Increase of 2.8 points and highest reading since inception!
  3. 3. 3©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. National Perspective Experian Metro Business Pulse Q1 2013 Q2 2013 Change Delinquency 15.26% 13.43% 1.83% Days Beyond Terms 7.69 5.71 1.98 Bankruptcy Rate 1.03% 0.99% 0.04% Fewer businesses paying late + Faster payments = More Money faster for Creditors! Source: Experian Metro Business Pulse
  4. 4. 4©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Performance by Industry Industry Delinquency Days Beyond Terms Bankruptcy Rate Top Health Services 8.36% 3.98 0.68% Hospitality 9.08% 5.31 1.55% Forestry 11.16% 3.79 1.03% Mining 11.37% 5.00 1.92% Education Services 11.68% 4.47 0.69% Bottom Manufacturing 16.04% 6.59 1.93% Transportation 19.59% 8.24 2.09% Communications 19.71% 8.17 1.65% Finance 20.13% 10.01 1.29% Construction 22.90% 11.94 2.41% Source: Experian Metro Business Pulse
  5. 5. 5©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Small Business Credit Quality Source: Experian Metro Business Pulse
  6. 6. 6©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bankruptcy Rate Days Beyond Terms Delinquency Top & Worst by Geography Top 0.92% - 5.05% Worst 20.11% - 44.72% Top 3.79 – 12.18 Worst 7.78 – 10.58 Worst 0.43% - 0.71% Top 0.77% - 1.57% Source: Experian Metro Business Pulse
  7. 7. 7©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Top/Bottom 10 - Delinquency Source: Experian Metro Business Pulse
  8. 8. 8©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Top/Bottom 10 – Days Beyond Terms Source: Experian Metro Business Pulse
  9. 9. 9©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Top/Bottom 10 – Bankruptcy Rate Source: Experian Metro Business Pulse
  10. 10. 10©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Small businesses are improving their credit profile  Performance differs: ► By Industry ● Health Services vs. Construction ► By Geography ● Delinquencies vs. Bankruptcy Rates What Does This Mean To You?
  11. 11. 11©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Decision strategies must adjust to: ► Attract new customers ► Retain existing customers  Credit Performance must be monitored by: ► Geography ► Industry ► Other? Key Take-Away’s:
  12. 12. 12©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2013 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. Macro Outlook: The Right Pieces Are Falling Into Place Cristian deRitis Moody’s Analytics
  13. 13. 13©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 05 06 07 08 09 10 11 12 13F 14F 15F GDP Growth Remains Lackluster… Source: Moody’s Analytics Real GDP growth, %
  14. 14. 14©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0 10 20 30 40 50 60 80 85 90 95 00 05 10 Interest coverage ratio Quick ratio Corporate Balance Sheets Are Strong Nonfinancial corporate businesses Sources: Federal Reserve, Moody’s Analytics
  15. 15. 15©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 6.25 6.75 7.25 7.75 8.25 8.75 9.25 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 Core Capital Ratio (L) Return on Assets (R ) Banks are Well Capitalized and More Willing to Lend Commercial banks Source: FDIC
  16. 16. 16©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Household Debt Service Ratios Near Record Lows 15.0 15.5 16.0 16.5 17.0 17.5 18.0 18.5 19.0 10.0 10.5 11.0 11.5 12.0 12.5 13.0 13.5 14.0 14.5 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Debt service (L) Financial obligations (R) % of disposable income Sources: Federal Reserve, BEA, Moody’s Analytics
  17. 17. 17©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Home Equity Is Being Restored And… Case-Shiller Index, average annual growth, %, 2013-2016 Sources: CoreLogic, Moody’s Analytics U.S. = 5.9 ≥7.1 5.1 to 7 3.1 to 5 ≤3.0
  18. 18. 18©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Trend Housing Construction Is Steadily Improving… Sources: Census, Moody’s Analytics Single-family and multifamily starts, mil
  19. 19. 19©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. 122,000 124,000 126,000 128,000 130,000 6,000 6,500 7,000 7,500 8,000 8,500 9,000 9,500 '05 '06 '07 '08 '09 '10 '11 '12 '13 Housing-Related (L) Non Housing-Related (R ) …Supporting More Jobs and Small Businesses Source: Wall Street Journal, Moody’s Analytics Thousands of jobs
  20. 20. 20©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2013 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. HOT TOPIC: The Regional Divide
  21. 21. 21©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. The Regional Divide Source: Experian/Moody’s Small Business Credit Index Q2 2013
  22. 22. 22©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Leaders vs. Laggards Delinquency Source: Experian Metro Business Pulse
  23. 23. 23©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Leaders vs. Laggards Days Beyond Terms Source: Experian Metro Business Pulse
  24. 24. 24©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Leaders vs. Laggards Bankruptcy Rate Source: Experian Metro Business Pulse
  25. 25. 25©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. ©2013 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. Is the Sun Rising in the West and Setting in the East? Why the regional divide may be a long-term phenomenon. Nathan Kelley Moody’s Analytics
  26. 26. 26©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Regional Jobs Recoveries Diverge Noticeably 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 11 12 13 Northeast Midwest South West Sources: BLS, Moody’s Analytics Payroll employment, % change yr ago, 3-mo moving avg
  27. 27. 27©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Wages are growing. ► This is leading shoppers out to spend. ► The support to revenues is helping small companies stay current on debt.  The mix of jobs in major Mountain West cities has been concentrated in higher paying professions.  Housing-related industries are in better financial shape, making them a safer bet for lenders. What Does This Mean To You?
  28. 28. 28©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Residents Heading to Where the Jobs Are % change in population, 2012 0.54% to 1.38% -0.09% to 0.54% 1.38% to 2.17% Sources: Census Bureau, Moody’s Analytics U.S.=0.96%
  29. 29. 29©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. West is the Clear Winner for Price Gains 0.0% to 4.0% Prices falling 4.0% to 14.3% Sources: FHFA, Moody’s Analytics FHFA home price index, % change yr ago U.S.=4.0%
  30. 30. 30©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Business Creation Concentrated in the West Establishment births, % change yr ago, 4-qtr MA, 2012Q4 -5.5% to 2.6% -16.8% to -5.5% 2.6% to 24.1% Sources: BLS: Business Employment Dynamics Survey, Moody’s Analytics
  31. 31. 31©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Foreclosures a Big Problem for FL, IL, and NV Sources: RealtyTrac, Moody’s Analytics -6.72 to 6.72 6.72 to 29.95 -10.60 to -6.72 Foreclosed properties per 1,000 households, diff from U.S., Aug 2013
  32. 32. 32©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. Migration to the South and West Will Continue 0.54% to 1.19% -0.13% to 0.54% 1.19% to 2.90% Source: Moody’s Analytics forecast Annualized % change in population, avg from 2013 to 2018
  33. 33. 33©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. 33©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. Essential insight serving global financial markets www.moodysanalytics.com
  34. 34. 34©2013 Experian Information Solutions, Inc. All rights reserved. Experian Public. 34©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. www.experian.com/b2b www.experian.com/b2b

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