Many risk managers across Europe expect an improvement in credit card and auto-loan performance in the next six months, with much less optimism for mortgage and small-business loans, recently released survey data suggest.
Creditors ranging from local banks to global institutions took part in the survey of credit trends, which FICO and the European Financial Marketing Association conducted in November and December. The goal of the survey, which will be conducted quarterly, is to offer a view of potential growth opportunities and challenges facing consumer credit grantors.
Risk managers from 32 countries responded to the inaugural survey. They predict an increase in the demand for credit but less growth in the supply of credit, largely because of regulatory burdens such as the capital requirements of Basel III. That demand-supply equation suggests a “credit gap” will occur much like what is taken place in the U.S.
Approximately 47% of respondents expect credit card delinquencies to worsen in the next six months, which the survey report says is not surprising given the mixed acceptance of credit cards across Europe and the historical susceptibility of credit card delinquencies to interest rate variations.
"One might assume that the 20% of responders who expect reductions in card delinquencies may be looking at a return to spending by better-quality credit consumers, or a withdrawal from usage by certain card issuers after rates increases. It is also possible that card issuers expect a return to higher utilization that would not necessarily eliminate delinquent balances but which could reduce the delinquency rate based on higher balances...," according to the report.
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