Higher Spending in Final Quarter of 2017 Spurs on Hong Kong Consumer Credit Market

March 6, 2018 by TransUnion

TransUnion’s latest Hong Kong Industry Insights Report highlights emerging trends

Hong Kong, March 6, 2018 – Low levels of credit risk in Hong Kong continued during the final quarter of 2017, alongside especially strong consumer spending. The results were unveiled today as part of TransUnion’s (NYSE: TRU) newly released Q4 2017 Industry Insights Report.

TransUnion’s report found that after a year of sub-inflation growth, credit card balances rose nearly 5% in the last quarter, helping spur year-over-year growth of 2.3%— back above inflation1. The rise was likely due to increased retail spending in the fourth quarter, which grew 5.7% between Q4 2017 and Q4 2016 according to figures from the Census and Statistics Department.

“The Hong Kong consumer credit market continues to be solid and is buoyed by a strong macro economy,” said Brendan le Grange, director of research and consulting for TransUnion Hong Kong. “Unemployment is at 10 year lows, wages are up for the 10th  consecutive quarter, GDP growth remains strong, and now retail spending is up as well. The growth of credit card balances in the fourth quarter is significant because Hong Kong had previously experienced eight consecutive quarters in which year-over-year balance growth came in below inflation.”

                                Credit Card Data Point to Strong Performance

Credit Card VariablesQ4 2017Year-over-Year Changes
Number of Accounts18.8 million2.1%
Outstanding Balance29.7 billion2.3%
Total Credit Lines1.164 trillion6.2%
Consumer-Level Delinquency Rate (90+ DPD)0.07%-2 bps

Much of the growth in the credit card industry is being driven by the Millennial generation (born between 1980 and 1994).  As of Q4 2017, Millennials held a 25% share of the 18.8 million credit card accounts, up from 24% in Q4 2016. Outstanding balances for Millennials grew by 14.0% during 2017, significantly higher than the 2.3% mark for the overall population.

Instalment Loan Balance Increases Led by Millennial Interest in the Product

As the second most popular credit product in Hong Kong, with 625,200 such accounts, unsecured instalment loans continue to be favored by younger generations. The Millennial share of all instalment loan originations increased to 35% in the third quarter of 2017 (the most recent quarter for which data are available), up from 32% two years earlier. Over that same time, the share of originations by both Generation X (born between 1965 and 1979) and Baby Boomers (born between 1946 and 1964) declined. At the end of 2017, Millennials held 26.3% of total instalment loan balances, ahead of Baby Boomers whose balances have declined over the past several years.

TransUnion found that unsecured instalment loan balances per consumer climbed to $258,100 at the conclusion of 2017. With the help of spill-over tax loan demand, instalment loan balances ended Q4 2017 3.0% higher year-over-year and 1.2% higher quarter-over-quarter. “Despite the strong fourth quarter growth for credit card balances, instalment loan balances saw much stronger percentage growth for the full year.

Demand for this loan type remains fairly strong, driven largely by strong interest from Millennial borrowers,” said le Grange.

Origination volumes rose for instalment loans, up 1.7% year-over-year between Q3 2016 and Q3 2017 and 8.3% from Q2 to Q3 2017. The total value of new loan balances booked was down, though, as average new loan values dropped, most significantly in the super prime  risk tier but across risk tiers as well. This is a reversal of the trend observed earlier in 2017, where origination volumes were falling alongside rising loan values

Delinquencies and Account Volume Muted, Though Millennials Driving Growth

Consumers continued to perform well on their credit, as delinquency rates during 2017 remained very low for all credit products. Serious account-level delinquency rates for credit cards and mortgages dropped 2 basis points each, to 0.12% and 0.05% respectively. The serious delinquency rate for unsecured personal loans declined 7 basis points, to 0.85%, while auto loans only increased 1 basis point to 0.12%.

As delinquencies remained low, account growth rates have been somewhat muted, with certain sectors experiencing more growth than others. Much of the growth that is occurring is happening due to Millennials

Millennial Impact on Hong Kong Consumer Credit Accounts

Credit ProductOverall Percentage Account Growth(Q4 2016 to Q4 2017)Account Growth(Q4 2016 to Q4 2017)
Auto Loans-2.1%4.2%
Credit Cards-2.1%5.8%
Mortgage Loans8.4%20.2%
Unsecured Instalment Loans-4.0%0.5%

“There are primarily positive signs in the Hong Kong consumer credit market. Nevertheless, with many products showing signs of saturation, lenders will need to focus on building innovative products to win over existing balances from their competitors,” said le Grange. “As well, they must find ways to continue to appeal to Millennial borrowers, who will be the source of balance growth for the next few years.”


Note:Transunion does not calculate our own inflation rate estimate, but relies on data from the Census and Statistics Department by Dec 2017

  1. https://www.censtatd.gov.hk/hkstat/sub/so60.jsp


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