Each quarter we survey a couple hundred bank risk officers about their expectations for consumer (and small business) credit. As you might expect, there was a lot of pessimism throughout 2010. But in our Q1 2011 survey, we found a big change … bankers are becoming optimistic!
Most notably, respondents in the latest survey expected delinquencies on many types of credit products to decrease. By a margin of 36% to 28%, bankers expected credit card delinquencies to fall rather than rise over the next six months. The margin for auto loans was 37% to 24%. The margin for small business loans was 36% to 31%. This is the first time since we initiated the survey a year ago that we have seen more bankers expecting delinquency rates to decline rather increase.
The one area of pessimism that remains is the housing sector. Respondents believe mortgages and home equity lines will see an increase in delinquencies. While 18% of respondents expected mortgage delinquencies to decline over the next six months, 42% expected the number to rise. Similarly, 21% expected delinquencies to fall on home equity lines, while 40% expected delinquencies to increase.
In a sign that Americans still have an appetite for credit, 41% of survey participants expected credit card balances to increase over the next six months, while 24% expected balances to decrease. This result comes despite the fact that consumer indebtedness has dropped in 28 of the past 29 months.
You can get a full report of survey results at http://www.prmia.org/PRMIA-News/USConsumerCreditRiskqtr1.pdf.