FICO: Credit Problems Will Get Worse in Europe
FICO (NYSE: FICO), the leading provider of analytics and decision management technology, and Efma today announced the results of the third European Credit Risk Survey. The survey, which queried credit risk management professionals in September on their outlook for the next six months, reverses the optimism from the last survey in spring 2011, with risk managers now predicting higher delinquencies across mortgages, auto loans and other credit products.
The survey shows:
- Four times as many credit risk managers expect a worsening of delinquencies for small business loans, current accounts and credit cards than expect delinquencies to improve. For mortgages and auto loans, three times the number of respondents predict deterioration in delinquencies as predict improvement.
- Credit risk managers have improved their processes to address the conditions of the last three years. Yet more than 40 percent of respondents say that Eurozone economic problems and unemployment will have more than a modest impact on their portfolios.
- The credit gap for consumers and small businesses persists and is worst where delinquency predictions are worst.
- Consumers are not focused on using credit. Instead, 84 percent of respondents agree or strongly agree that consumers are trying to save more, and 71 percent agree or strongly agree that borrowers are more reluctant to seek or use credit.
Delinquencies expected to rise across the board
While there was an increase in optimism from the survey conducted in spring 2011, credit risk managers now expect that more consumers will have trouble making payments on a variety of loan types. Four times as many respondents predict increased delinquency on overdrafts as predict improvement, and the ratio is similar for small business loans and credit cards. For auto and mortgage, the ratio is better but is still 3:1 in favor of increased delinquencies. Only 12-14 percent of responses indicate an expectation for decreasing delinquency on any surveyed product.
"These results are fully in line with the economic drama playing out across Europe," said Mike Gordon, vice president and general manager for FICO in Europe, the Middle East and Africa. "Mounting economic problems and uncertainty about the adequacy of public and private sector responses are contributing to a darkening picture of credit performance over the next few months. We think lenders that focus on strengthening relationships with good customers will fare best here."Continued on the next page