MINNEAPOLIS—April 3, 2012—FICO’s quarterly survey of bank risk professionals found a reversal in the sentiment of U.S. lenders, as expectations for loan repayments and credit availability were more upbeat in the first quarter of 2012 than they had been during the previous quarter. The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), found fewer lenders expecting a rise in delinquencies on home loans, car loans, and small business loans than at any time since FICO launched its survey in early 2010.
Optimism appears to be growing
In the latest survey, the number of respondents expecting mortgage delinquencies to rise during the next six months was 12 percentage points lower than last quarter – dropping from 47 to 35 percent. The survey found 28 percent of respondents expected delinquencies on small business loans to increase, which is 11 percentage points lower than last quarter. And 20 percent of respondents expected delinquencies on car loans to increase, 13 percentage points lower than last quarter.
With regard to credit cards, 32 percent of respondents expected delinquencies to increase. That is an improvement of seven percentage points over last quarter and it is the lowest figure since the second quarter of 2011.
“As unemployment falls, even modestly, and four years of deleveraging begin to pay dividends, bankers are allowing themselves to feel some optimism,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Of course, we’re not out of the woods. Foreclosures continue to put pressure on home prices, and jobs are coming back slowly. But we seem to be headed in the right direction. If we can avoid major bumps in the road, such as a spillover effect from the Eurozone crisis, we should continue to see delinquencies drop.”
One area that remains a cause for concern is student lending, with 51 percent of respondents expecting delinquencies to rise. That is 16 percentage points lower than last quarter, but it is still the second-highest level recorded since FICO initiated its survey.
Credit gap seen closing
When asked about the availability of credit for specific loan types over the next six months, the majority of respondents expected supply to meet or exceed demand for all loan types except mortgages. For car loans, 77 percent of respondents expected credit supply to satisfy demand. Regarding credit cards, 71 percent of respondents expected the supply to satisfy consumer demand. The optimism wasn’t as high for small business and student loans -- 52 percent of respondents expected credit supply to satisfy demand for small business loans, and 58 percent of those polled expected supply to meet or exceed demand for student loans.
“These results are consistent with the general sentiment that delinquencies will be less of a problem over the next six months,” said Jennings. “As lending risk – both perceived and real – declines, the natural reaction by lenders is to loosen the purse strings and extend more credit. This should be welcome news to consumers and businesses alike, because increased access to credit is a key driver of economic growth.”
However, the credit gap persists in housing. With lenders unsure about the real estate sector, 56 percent of respondents believed credit supply would not meet demand for residential mortgages.
A detailed report of FICO’s quarterly survey results is available at http://www.prmia.org/PRMIA-News/Fico-1stQuarterApr2012a.pdf. The survey included responses from 263 risk managers at banks throughout the U.S. in February 2012. FICO and PRMIA extend a special thanks to Columbia Business School’s Center for Decision Sciences for its assistance in analyzing the survey results.
The Professional Risk Managers’ International Association (PRMIA) is a higher standard for risk professionals, with 65 chapters and more than 80,000 members worldwide. A non-profit, member-led association, PRMIA is dedicated to defining and implementing the best practices of risk management through education, including the Professional Risk Manager (PRM) designation and Associate PRM certificate; webinar, online, classroom and in-house training; events; networking; and online resources. More information can be found at www.PRMIA.org.
FICO (NYSE:FICO) 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 FICO® Score — the standard measure of consumer credit risk in the United States — along with industry-leading solutions for 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. FICO also helps millions of individuals manage their personal credit health through www.myFICO.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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