Changing Climate in the Consumer Lending Marketplace: What We’re Seeing and Hearing
CEO, Epic Research
Three Things We’re Hearing
Possible good news coming?
Asset quality trends are misleading
Credit card growth has stalled
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Possible Good News Coming?
The number of consumers with modified payments has risen since late March
Lender profitability and future loan growth is dependent on consumers’ ability to resume paying their bills
Epic fielded a survey earlier this week, which showed potentially positive news for the post-forbearance period:
This positive news could be tempered by the fact that those receiving unemployment benefits were 21% more likely to be making payments, and those benefits will soon end.
Asset Quality Trends Continue to Mislead
As discussed in previous newsletters, asset quality numbers do not yet reflect the unprecedented rise in unemployment, largely due to economic stimulus and unemployment payments, along with widespread forbearance programs provided by lenders
This trend will change over the next few months as supplemental payments and forbearance programs end
Credit Card Issuer Growth Has Stalled
May month-end reporting reflects the trends of positive delinquency and loss rates shown above, however year-over-year growth rates have stalled:
Capital One reported a 3% decline in card loans
Discover was down 2.2%
And transactor-heavy American Express declined 13.3%
Lower growth rates will be further tested if loss-impaired profitability causes further reductions in new customer acquisition
As the summer approaches, will growth return?
Or will CEOs return to the failed strategy of cutting marketing and hiring too many collectors?
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