TransUnion Q2 2019 Industry Insights Report

Challenging Macroeconomic Conditions Reflected in Hong Kong Consumer Credit Market

The normally resilient Hong Kong consumer credit market has been impacted by recent macroeconomic uncertainty, and although still growing, the rate of increase has slowed significantly.

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In Q2 2019, total outstanding balances reached a record high of $350 billion, representing growth of 2.9% year-over-year. However, this growth rate was a deceleration from the same period the year before, where in Q2 2018, total annual balance growth was 4.4% YoY. Outstanding balances of revolving accounts — which include bank credit cards, loans on cards and unsecured revolving accounts — grew 3.2% YoY in Q2 2019. This outpaced the 2.7% YoY growth rate of non-revolving accounts that include auto loans, unsecured personal loans and mortgages.

Importantly, balance level delinquencies remained stable across almost all major lending categories, with the exception of auto loans. Delinquency rates improved the most for unsecured revolving lines, with a reduction of 11 basis points (bps) to 0.43% YoY.

In originations, the only positive growth was seen in loans on cards — up 6.1% YoY in Q1 2019 (latest available data for originations). This indicates a shift in lender origination focus to existing customers, as this product is to current cardholders as a means to fully utilize the unused credit limits, rather than refinance outstanding credit card balances.

Q2 2019 Originations for Major Credit Products

Source: TransUnion Credit Data

Francis Lau

“The continued rise in the popularity of credit cards concurrent with a decline in mortgage originations is a good indicator of both consumer and lender sentiment, and a reflection of some uncertainty in the economic outlook. With unemployment rates at a 10-year low, and real wage growth increasing for 15 consecutive quarters, consumers remain confident in their near-term ability to spend and service their obligations, and continue to use their credit cards to facilitate their spending. However, the ongoing China-U.S. trade war and subdued Hong Kong GDP growth could be leading to longer-term uncertainty, with many consumers taking a more conservative view of the property market and associated mortgage borrowing.
The good news is consumers continue to perform very well on their credit obligations, with serious delinquency rates remaining low and largely unchanged for most lending products over the past year. This should give lenders reassurance that the retail credit market remains on solid footing”

Francis Lau, Director of Research and Consulting for TransUnion Hong Kong

(1)Originations are viewed one quarter in arrears to account for reporting lag.
(2)Serious delinquency rates are 90 or more days past due for credit cards and 60 or more days past due for all other credit products.
(3)Delinquency data at a balance level, except for mortgages which are at an account level because of the way data are collated.

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