Q4 2015 Industry Insights Report
Financial Services
Nidhi Verma
Director, Research and Consulting
TransUnion
TransUnion’s Industry Insights Report is a quarterly overview
summarizing trends within the consumer lending industry
Data pulled from TransUnion’s consumer credit database
includes:
• Both account-level and consumer-level views of key
metrics and trends
TransUnion Industry Insights Report
Quarterly overview of consumer credit trends
released by TransUnion Financial Services
FOURTH QUARTER 2015
• Data and trends for the national population overall, as well
as breakdowns within consumer credit score risk tiers
• Analysis of consumer loan product types—bankcard,
private label card, auto, mortgage, home equity line of
credit and personal loans—as well as aggregate views
of all revolving and all non-revolving loans
© 2016 TransUnion LLC All Rights Reserved | 2
The consumer perspective
More consumers are gaining access to credit—bankcard being the
primary driver for growth
Number of consumers with access to revolving line of credit
200
Total Revolving Access
HELOC
Private Label
1.6
Bankcard
Number of consumers
(in millions)
190
1.4
1.3
180
1.2
1.1
170
1.0
0.9
160
0.8
0.7
150
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
Q4
Consumers per line of business
(indexed to Q1 2010)
1.5
0.6
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 4
A steady decline has been observed for average revolving balances
since 2010—attributed to declining HELOC participation
Average revolving balance per consumer (for consumers carrying a balance)
Average revolving balance
HELOC
Bankcard
Private label
$15,000
1.2
$14,000
1.1
$13,000
1.0
$12,000
0.9
$11,000
0.8
$10,000
0.7
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4 Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4 Q1
Q2
Q3
Consumers with a balance (indexed to
Q1 2010)
Total average balance
Q4
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 5
Stable trends are observed in average non-revolving balances due
to steady levels of mortgage debt
Average non-revolving balance per consumer (for consumers carrying a balance)
Non-Revolving Balances
Mortgage
Auto
Personal Loans
1.4
$125,000
1.2
$120,000
1.0
$115,000
0.8
$110,000
0.6
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4 Q1
Q2
Q3
2012
Q4 Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4 Q1
Q2
Q3
Average balance per consumer
indexed to Q1 2010
Average non-revolving balance
$130,000
Q4
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 6
At the end of 2015, the average consumer’s wallet showed a higher
composition of auto loans
Average credit wallet distribution (excludes student loan debt)
100%
Distribution of average credit
wallet by product
90%
80%
6.3%
8.8%
9.6%
70%
Personal loan
60%
Credit card
50%
40%
HELOC
79.3%
77.5%
76.5%
Auto
Mortgage
30%
20%
10%
0%
Q4 2010
Q4 2014
Q4 2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 7
Subprime participation has increased in every sector except for real
estate lending
Percentage of subprime consumers that had an outstanding balance
Q4 2010
Q4 2015
Subprime consumer participation
by lending product
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Auto
Bankcard
Private label
HELOC
Personal loan
Mortgage
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 8
While consumer-level delinquency rates are low, a slight increase
was observed in credit card and auto in Q4 2015
Serious delinquency rates (60+ for all except 90+ for credit cards)
Percentage of consumers with a
serious delinquency
Auto
Mortgage
Bankcard
Private Label
HELOC
Personal Loans
8%
7%
6%
5%
4%
3%
2%
1%
0%
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
Q4
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 9
Major lending products at a
glance
2015 ended with strong balance growth for auto, credit card and
personal loan market
Q4 2015 year-over-year balance growth
Balance growth rate
15%
12.2%
11.5%
10%
5.2%
5%
0.2%
0%
-5%
Q4 2015
outstanding
balance
-4.4%
Mortgage
Auto
Credit card
HELOC
Consumer loans
$8.2 T
$1,027 B
$776 B
$445 B
$270 B
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 11
Low level of delinquencies continued, however slight increases
were experienced in the credit card and auto sector
Balance-level delinquency rates (60+ for all except 90+ for credit cards)
Auto
Mortgage
HELOC
Bankcard
Private label
Consumer loans
Balance-level DQ rate
12%
10%
8%
6%
4%
2%
0%
Q4 2009
Q4 2010
Q4 2011
Q4 2012
Q4 2013
Q4 2014
Q4 2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 12
Delinquencies are growing faster in states that depend on the
energy sector
Delinquency rate
year-over-year change
Year-over-year balance level delinquency change—Q4 2015
20%
Energy States
US Average
15%
15%
10%
13%
6%
7%
5%
1%
0%
-5%
-1%
-2%
-10%
-9%
-15%
-12%
-20%
-25%
-30%
-28%
Energy states include Louisiana, North Dakota, Oklahoma, South Dakota, Texas, West Virginia and Wyoming
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 13
Credit card sector
Strongest year of balance growth observed since 2008
Origination volumes hit a level last observed in Q3 2008. Private
label card originations have remained steady since 2014.
Quarterly bankcard and private label originations
Bankcard
Private Label
Originations
(accounts in millions)
15
10
5
Q1
Q2
Q3
2010
Year-over-year
growth in originations
Q4
Q1
Q2
Q3
2011
25% 9%
Q4
Q1
Q2
Q3
2012
-2% 21%
Q4
Q1
Q2
Q3
2013
11% -4%
Q4
Q1
Q2
Q3
2014
20% -1%
Q4
Q1
Q2
Q3
2015
7% 1%
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 15
Growth has been focused on prime and below tiers for bankcard;
subprime originations doubled since 2014
Bankcard originations (accounts) by risk tier
Originations (accounts in millions)
Q3 2010
Q3 2014
Q3 2015
14
12
10
8
6
4
2
0
Subprime
Near Prime
Prime
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Prime Plus
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 16
Non-prime consumers demonstrated a higher balance active rate
during 2015 holiday season
Bankcard balance active rates by risk tier
Q4 2010
Q4 2015
100%
Balance active rates
90%
80%
70%
60%
50%
40%
Subprime
Near Prime
Prime
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Prime Plus
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 17
Higher consumer access and strong personal spending trends in
the past year led to balances reaching close to Q4 2009 levels
Outstanding bankcard balances and average balance per consumer
Average consumer balance
$680
$6,200
$660
$6,000
$640
$5,800
$620
$5,600
$600
$5,400
$580
$5,200
$560
$5,000
$540
$4,800
Q4 2009
Year-over-year
growth in balances
Q4 2010
-10.0%
Q4 2011
-0.8%
Q4 2012
-0.5%
Q4 2013
0.5%
Q4 2014
5.3%
Average consumer balance
Outstanding balances
(in $ billions)
Total balances
Q4 2015
5.3%
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 18
Similar to bankcard, new account growth has primarily come from
non-prime risk tiers in the private label sector
Private label originations (accounts) by risk tier
Origination (accounts in millions)
Q3 2010
Q3 2014
Q3 2015
14
12
10
8
6
4
2
0
Subprime
Near Prime
Prime
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Prime Plus
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 19
Subprime consumers used private label cards more actively in 2015
Private label balance active rates by risk tier
Q4 2010
Q4 2015
Balance active rates
100%
80%
60%
40%
20%
Subprime
Near Prime
Prime
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Prime Plus
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 20
Private label balances have increased markedly as consumer
access and average consumer balance has grown
Outstanding private label balances and average balance per consumer
Total balances
Average consumer balance
$120
$920
Outstanding balances
(in $ billions)
$880
$860
$100
$840
$820
$800
Average consumer balance
$900
$780
$80
$760
Q4 2009
Year-over-year
growth in balances
Q4 2010
-8.0%
Q4 2011
0.4%
Q4 2012
2.6%
Q4 2013
6.0%
Q4 2014
Q1 2015
3.9%
Q4 2015
4.7%
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 21
Auto sector
Higher participation and average new loan
growth fueling growth for this sector
Average consumer balance reached $18,000 mark; 75 million
consumers now have an auto loan in the U.S.
Outstanding auto balances and average consumer balance
Total balances
Average consumer balance
$19,000
$1,000
$18,000
$800
$17,000
$600
$16,000
$400
$15,000
$200
$-
Number of
consumers with an
auto loan (millions)
Average consumer
balance $
Outstanding balances
(in $ billions)
$1,200
$14,000
Q4 2010
Q4 2011
Q4 2012
Q4 2013
Q4 2014
Q4 2015
60
60
63
66
70
75
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 23
Auto originations sustained previous momentum with 8% yearover-year growth; lease share of the market continued to grow
Quarterly auto originations (loan and lease)
15%
Originations
(accounts in millions)
Total
Auto Lease
14%
7
13%
12%
6
11%
10%
5
9%
8%
4
7%
3
6%
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Percentage of lease originations
8
Q3
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 24
Growth in new accounts was fueled by all risk tiers in Q3 2015; 2015
versus 2010 volumes show a robust growth in non-prime consumer share
Auto originations (accounts) by risk tier
Origination (accounts in millions)
Q3 2010
Q3 2014
Q3 2015
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Subprime
Near Prime
Prime
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Prime Plus
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 25
The average new auto loan balance has increased across all
risk tiers
Average new auto loan
Q3 2013
Q3 2014
Q3 2015
Average new auto loan balance
$22,000
$21,000
$20,000
$19,000
$18,000
$17,000
$16,000
$15,000
Subprime
Near Prime
Prime
VantageScore © 3.0 risk ranges
Subprime= 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Prime Plus
Super Prime
Total
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 26
An average new auto loan is increasing at a higher rate than new
and used car values
Average new auto balance and car
values since Q1 2010
Average new auto loan balance and car values indexed to Q1 2010
1.2
Average new loan
New and used car values
1.1
1.0
0.9
0.8
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
Q4
Q1
2012
Source: New and used card values from U.S. Bureau of Labor Statistics 2016
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
© 2016 TransUnion LLC All Rights Reserved | 27
While average new consumer loan has increased, originating terms
are getting longer
Auto originating terms (months) by risk tier
Average Originating Term (Months)
Q3 2010
Q3 2015
72
70
68
66
64
62
60
58
56
Subprime
Near Prime
Prime
Prime Plus
VantageScore © 3.0 risk ranges
Subprime = 300–600, Near Prime = 601–660, Prime = 661–720, Prime Plus = 721–780, Super Prime = 781+
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 28
Pricing for new auto loans has decreased for all risk tiers, but more
drastically for higher credit tiers
Auto originating APR by risk tier
Q3 2010
Q3 2015
Average originating APR
20%
18%
16%
18%
14%
14%
12%
12%
11%
10%
8%
8%
7%
6%
7%
5%
4%
4%
3%
2%
0%
Subprime
Near Prime
Prime
Prime Plus
VantageScore © 3.0 risk ranges
Subprime = 300–600, Near Prime = 601–660, Prime = 661–720, Prime Plus = 721–780, Super Prime = 781+
Super Prime
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 29
As a result of longer terms and lower APRs, the average new
consumer loan has increased 4-5%, while the average payment has
increased only 2%
Average monthly consumer payment (for auto loan originations)
Q3 2013
Q3 2014
Q3 2015
Average new monthly payment
$420
$400
$380
$360
$340
$320
$300
Subprime
Near Prime
Prime
Prime Plus
Super Prime
Total
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
© 2016 TransUnion LLC All Rights Reserved | 30
Real estate lending sector
Improving delinquencies but slow recovery on
balance growth
Q3 2015 originations observed a slower momentum but still grew by
double-digits from a year-over-year perspective
Quarterly mortgage originations
2.5
Originations
(accounts in millions)
2.0
1.5
1.0
22% year-over-year origination
growth in Q3 2015
0.5
0.0
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 32
Originations grew at the same rate across all risk tiers—a trend not
observed since pre-recession
Year-over-year change in originations
Year-over-year growth in originations
80%
60%
Super prime
Prime plus
40%
Prime
Near prime
20%
Subprime
Total
0%
-20%
-40%
-60%
Q3 2010
Q3 2012
Q3 2013
Q3 2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 33
Average new mortgage balance reached its highest level since
post-recession and is following average home value trends
Average new mortgage loan
1.10
$215,270
1.05
$210,000
1.00
$200,000
0.95
$190,000
$180,000
Home value indexed to
Q3 2009
Average new mortgage loan
$220,000
0.90
Q3 2009
Q3 2010
Q3 2011
Q3 2012
Q3 2013
Q3 2014
Q3 2015
New loan data source: TransUnion consumer credit database
Home value data source: Zillow
© 2016 TransUnion LLC All Rights Reserved | 34
Fueled by growth in account originations and higher new average
balance, Q4 2015 mortgage balances increased slightly
$9
$200,000
$8
$190,000
$7
$180,000
Q4 2009
Q4 2010
Q4 2011
Q4 2012
Q4 2013
Q4 2014
Average consumer
balance $
Outstanding balances
(in $ trillions)
Outstanding mortgage balances and average consumer balance
Q4 2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 35
More than 300,000 borrowers entered the HELOC market, which is a
level not observed since the end of the recession
Quarterly HELOC originations
0.35
Originations
(accounts in millions)
0.30
0.25
0.20
11% year-over-year
origination growth in
Q3 2015
0.15
0.10
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 36
With rising home values, average new credit lines are increasing
HELOC average new credit line and U.S. home equity*—indexed to Q1 2010
Average new credit line
U.S. home equity
Average new credit line
$13
$12
$110,000
$11
$10
$100,000
$9
$8
$90,000
$7
$80,000
Home equity (in $ trillions)
$120,000
$6
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4 Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4 Q1
Q2
Q3
2015
Sources: TransUnion credit database
*U.S. Home equity data from Federal Reserve economic data
households; owners’ equity in real estate
© 2016 TransUnion LLC All Rights Reserved | 37
Personal loans (unsecured)
Fastest growing loan portfolio with new entrants
and consumer demand across the spectrum
Unsecured loan market has experienced tremendous growth
Quarterly consumer loan originations
Unsecured
12% CAGR since
Q3 2010
Originations
(accounts in millions)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 39
Unsecured loan origination distribution has been primarily
dominated by non-prime consumers
Unsecured loan originations (accounts) by risk tier
100%
90%
Super prime
16%
Originations share
80%
Prime plus
19%
70%
Prime
Near prime
60%
Subprime
50%
71%
40%
66%
30%
20%
10%
0%
Q3 2010
Q3 2011
Q3 2012
Q3 2013
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Q3 2014
Q3 2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 40
While origination volumes have been concentrated in non-prime consumers,
rate of growth has been higher within prime and higher risk tiers
Consumers with an unsecured loan (indexed to Q1 2010)
Prime
Non-prime
Number of consumers
1.4
1.4
1.3
1.2
1.1
1.1
1.0
0.9
0.8
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
Q4
Q1
2012
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Q2
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 41
As higher credit tiers enter this market, average balances are
increasing
Average unsecured consumer balance
Total
Non-prime
Prime and above
Average consumer balance
$8,000
$7,500
$7,000
$6,500
$6,000
$5,500
$5,000
$4,500
$4,000
$3,500
$3,000
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
Q4
Q1
Q2
2012
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Q3
2013
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
Q4
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 42
Despite aggressive growth in balances, delinquencies have
decreased significantly for unsecured personal loans since 2010
60 and 90 days past due balance-level delinquencies
60 Days Past Due
90 Days Past Due
5%
% of balances past due
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
Q2
Q3
2012
Q4
Q1
Q2
Q3
2013
VantageScore © 3.0 risk ranges
Subprime = 300–600, near prime = 601–660, prime = 661–720, prime plus = 721–780, super prime = 781+
Q4
Q1
Q2
Q3
2014
Q4
Q1
Q2
Q3
Q4
2015
Source: TransUnion consumer credit database
© 2016 TransUnion LLC All Rights Reserved | 43
Year in review: 2015 has proven to be a “new normal” in many
ways for the credit market
Credit card
• Consumer spending growth enabled balance growth.
Stable delinquencies created healthy and wellmanaged growth for issuers.
Auto
• Strong economic fundamentals supported continued
growth across all risk tiers. The market reached a
record level of outstanding balances.
Mortgage
• Balance growth was generated with higher average
loan amounts within all risk tiers. Balance-level
delinquencies reached as low as 2.4%.
HELOC
Personal loans
• Average new credit line growth and origination
momentum have not yet offset balance depletion from
end-of-draw impact.
• Non-prime consumer demand and new finance
company entrants supported record-level growth.
© 2016 TransUnion LLC All Rights Reserved | 44
Looking forward: 2016 will be a year of change—the core dynamic
of consumer lending market
Opportunities
• Strong outlook on consumer spending would enable card
balance growth
• Labor market health would continue to support auto loan growth
but at a lower-than-historical rate
• Recovering home equity would support optimism around
HELOC growth
• Mortgage delinquencies are expected to hit a “normal level”—a
subpar 2% range—in late 2016
Risks
• As subprime share has grown in the auto finance market,
recent vintages on auto loans have been performing at a higher
rate of delinquency.
• Slow recovery in the housing market and interest rate volatility
may impact mortgage market growth
• Early indications of oil slump impact may be experienced with a
rise in delinquencies in specific geographic regions
• Market share shifts are expected as new entrants supply credit
to meet specific consumer demands
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