LONDON—April 10, 2012—FICO (NYSE:FICO), the leading provider of analytics and decision management technology, and Efma today announced further results of the fourth European Credit Risk Survey, indicating that consumers and small businesses’ struggle with credit payments will intensify over the next few months. In addition, bank profitability will be hurt by government austerity measures aimed at balancing national budgets.
The forecast for credit delinquencies was worse across all credit products than in FICO and Efma’s last survey, conducted in fall 2011. More than half of respondents now believe mortgage delinquencies will increase in the next six months, compared with 39 percent in the last survey. Credit cards presented the biggest expected deterioration for the next six months: 65 percent of risk managers see increased delinquency, compared with 41 percent in fall 2011, an increase of 58 percent.
Small business loans present a real concern, as 70 percent of risk managers foresee an increase in delinquencies. This is a sharp increase from FICO and Efma’s last survey, where 52 percent of risk managers predicted credit quality deterioration. In the UK, the percentage of respondents that see an increase in small business loan delinquencies for the next six months jumped from 33 percent in the last survey to 61 percent. In Span and Portugal, all respondents forecast an increase in delinquencies. The one bright spot was in Germany, Austria and Switzerland, where just 9 percent of respondents forecast an increase.
“The problems in credit repayments help explain banks’ conservative lending strategies,” said Gordon. “Bankers see these problems getting worse, given the risk of further recessions, and the credit challenges caused by unemployment. The small business picture is particularly worrying, because banks are under tremendous pressure to increase lending and stimulate economic growth, while the outlook for small business credit health is worse in nearly all European markets.”
The triple-threat toll of the economy, government austerity measures and banking regulation will continue to damage bank profitability, respondents said. 68 percent of respondents reported that government deficit reduction measures will reduce bank’s profitability. More than half of respondents said there will be an increase in bank consolidation this year. In addition, 55 percent of respondents said major banks will reduce their operations in Central and Eastern Europe, a trend that was just beginning to materialize in late 2011.
“Exposure in Central and Eastern Europe creates a need for the banks to hold more capital and, as capital is scarce, the normal reaction will be reduce exposure,” said Mike Gordon, FICO vice president for Europe, the Middle East and Africa. “However, credit demand in this region is still growing, and it can be more profitable for lenders to keep lending here, if they can cover the capital needs.”
Patrick Desmarès, secretary general of Efma, added: “With the fragility of the European credit market overall, lenders have a real opportunity to succeed in growing markets in Central and Eastern Europe. FICO and Efma believe that a proper capital management strategy can help banks maintain profitable activities that also contribute to the growth of Europe’s credit markets overall.”
A detailed report, including specific results for the UK, Germany/Austria/Switzerland and Spain/Portugal, is available online. Participants included credit-granting institutions ranging from local banks to global institutions. More than 100 representatives from 31 European countries and 79 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 December 31, 2011. 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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