LONDON—July 17, 2012—FICO (NYSE:FICO), the leading provider of analytics and decision management technology, and Efma today announced the results of the fifth European Credit Risk Survey, which show a rocky road ahead for the region’s banks. In the survey, which queried credit risk management professionals in May and June, 71% of respondents predicted increased staffing cuts in the banking sector, with nearly half of all respondents predicting a strong increase. 90% of respondents forecast a rise in banking consolidation in Europe’s strongest economies, vs. 72% in the weakest economies.
Bankers said tight credit will continue across Europe, and the results showed the widest “credit gap” between credit supply and demand for small businesses since the survey began in early 2011. 37 percent of respondents expected small businesses to request more credit, but just 16% believed banks will expand the credit available. In addition, 88% of respondents said that more small businesses would seek alternative sources for borrowing, and that more consumers will turn to microlending to meet their borrowing needs.
“Our survey shows the strain in the European banking system, with projections for cuts and consolidation,” said Mike Gordon, general manager for FICO in Europe, the Middle East and Africa. “Bankers see little relief for tight credit markets, which are leading governments to consider stimulus measures such as the UK’s Funding for Lending program. In addition, bank bailouts and other controversies continue to make the headlines, which may help to explain why bankers believe more of their customers will seek credit through alternative channels.”
Despite these negative projections, the forecast for credit delinquencies is less harsh than in the last survey, conducted in early 2012. One trouble spot remains in mortgage delinquencies, which 55 percent of respondents expected to continue rising, compared to 53% at the beginning of the year. In addition, UK bankers projected an increase in the forecast for auto loan delinquencies: In the last survey, 75 percent felt they would stay the same, whereas now 60 percent see an increase coming. “The sentiment in the UK contrasts strongly with our latest US risk managers survey, which showed that banks were confident enough about auto lending to expand loans to subprime borrowers,” said Gordon.
In a sign that banks are looking for new ways to manage risk, 95 percent of respondents said that banks will increase their use of macro-economic data in credit risk decisions. More than 50 percent of respondents strongly agreed with this statement.
“Many risk managers see the need for analytics that indicate how changes in the economy impact borrowers’ credit risk,” Gordon said. “This improves not just risk management but also capital management, two areas retail banks are focused on due to the continued challenges in the European economy.”
“Credit cards and overdrafts have become essential tools for survival for consumers throughout Europe,” added Patrick Desmarès, secretary general of Efma. In these difficult times, risk managers can differentiate themselves and protect their customer base by reviewing the way they manage credit-driven relationships. Creating customer-friendly environments in collections, using effective communication, credit counselling and limit management, will help customers through difficult times and could lead to fewer defaults and greater loyalty.”
A detailed report, including specific results for the UK/Ireland, Germany/Austria/Switzerland and Spain/Portugal, is available online at http://www.efma.com/ressources/studies/2012/1-OKP4X_E_study.pdf. Participants included credit-granting institutions ranging from local banks to global institutions. More than 100 representatives from 29 European countries and 86 companies responded to this survey.
FICO (NYSE:FICO), formerly known as Fair Isaac, delivers superior predictive analytics solutions that drive smarter decisions. The company’s groundbreaking use of mathematics to predict consumer behavior has transformed entire industries and revolutionized the way risk is managed and products are marketed. FICO’s innovative solutions include the industry-leading solutions for measuring credit risk, managing credit accounts, identifying and minimizing the impact of fraud, and customizing consumer offers with pinpoint accuracy. Most of the world’s top banks, as well as leading insurers, retailers, pharmaceutical companies and government agencies, rely on FICO solutions to accelerate growth, control risk, boost profits and meet regulatory and competitive demands.
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Efma, a not-for-profit association formed in 1971 by bankers and insurers, specialises in retail financial marketing and distribution. Today, more than 3,000 brands in 130 countries are Efma members, including over 80% of Europe’s largest retail financial institutions.
Efma offers the retail financial service community exclusive access to a multitude of resources, databases, studies, articles, news feeds and publications. Efma also provides numerous networking opportunities through work groups, online communities and international meetings.
For more information: www.efma.com
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Except for historical information contained herein, the statements contained in this news release that relate to FICO or its business are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the success of the Company’s Decision Management strategy and reengineering plan, the maintenance of its existing relationships and ability to create new relationships with customers and key alliance partners, its ability to continue to develop new and enhanced products and services, its ability to recruit and retain key technical and managerial personnel, competition, regulatory changes applicable to the use of consumer credit and other data, the failure to realize the anticipated benefits of any acquisitions, continuing material adverse developments in global economic conditions, and other risks described from time to time in FICO’s SEC reports, including its Annual Report on Form 10-K for the year ended September 30, 2011 and its last quarterly report on Form 10-Q for the period ended March 31, 2012. If any of these risks or uncertainties materializes, FICO’s results could differ materially from its expectations. FICO disclaims any intent or obligation to update these forward-looking statements.
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