Latest results show an increase in mortgage originations and balances, while most other major consumer credit categories saw a reduction in originations or balances, or both • Delinquencies still at historically low levels despite increases in some categories • Consumers continue to grow balances on credit card products

Hong Kong March 2020:  The newly-released TransUnion (NYSE: TRU) Q4 2019 Industry Insights Report shows that the Hong Kong recession is having an impact on the consumer lending market. The only retail credit category to record an increase in both originations (a measure of new accounts opened) and outstanding balances was mortgages. All other major credit product categories recorded a decline in either originations or balances, or both, in the most recent quarter.

During Q4 2019, delinquencies for most products remained broadly stable or showed a slight increase year-on-year (YoY). The largest increases were in the unsecured personal loan and unsecured revolving line categories, which were up 9 basis points (bps) and 8 bps, respectively. Typically, these categories have a higher proportion of borrowers with below-prime* risk scores, and because these higher risk consumers are often more financially stretched to begin with, they can be more susceptible to external factors as well as changes in their personal finances.

The latest Industry Insights Report data also showed lenders continued to adopt a more conservative approach in originating new accounts, with a sharp fall in YoY originations in the most recent quarter for both credit cards (-4.3%) and loan on cards (-10.4%). However, at the same time both categories recorded increases in outstanding balances – up 2.7% YoY for credit cards and 14.1% for loan on cards. This increase in balances, especially for loan on cards, suggests consumers are continuing to use their existing card accounts despite the economic downturn.

Other than mortgages, the only other categories to record a YoY increase in originations were unsecured revolving lines (up 8.7%) and unsecured personal loans (up 5.0%). Despite this increase in new account originations, outstanding balances for both products fell over the past year – down 4.4% and 3.1%, respectively, YoY – due to lenders issuing smaller credit limits on new accounts. This may indicate that lenders have been managing their exposure in these product categories which typically have a higher-risk borrower base.

Source:  TransUnion Hong Kong