Consumer Perspective: Industry Insights and Lending Dynamics Matt Fabian Director, Research & Industry Analysis
Agenda 1 Context A summary of economic trends 2 An overall perspective on the Canadian consumer credit market 3 Basic performance statistics across the major loan product types: originations, balances and delinquency Our philosophy Lenders are best served when they understand the entire consumer wallet. 2018 Trans Union of Canada, Inc. All Rights Reserved 2
Key Canadian economic trends: Steady fundamentals amid looming uncertainty
Canada s economy lost some momentum in the latter part of 2017, but remains quite solid Real GDP: Quarter-over-quarter growth rate (seasonally adjusted, annualized) 8% 6% 4% Forecast 2% 0% -2% Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-4% -6% -8% -10% Source: Statistics Canada, CANSIM Table 380-0064 Gross domestic product, Oxford Economics 2018 Trans Union of Canada, Inc. All Rights Reserved 4
Unemployment rate Unemployment is declining, but labor force participation remains persistently low Unemployment and labor force participation rate 10% 68.0 9% 8% 7% 6% 5% 4% 3% 2% 1% 67.5 67.0 66.5 66.0 65.5 65.0 64.5 Labor force participation rate (%) 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 64.0 Source: Oxford Economics 2018 Trans Union of Canada, Inc. All Rights Reserved 5
Unemployment rate The oil producing provinces are showing signs of positive momentum that is expected to drive improved credit results Unemployment rate, seasonally adjusted 10% Canada Exc. AB & SK Alberta Saskatchewan Oil Price (WTI) $160 9% 8% 7% 6% 5% 4% 3% 2% 1% $140 $120 $100 $80 $60 $40 $20 WTI crude oil price per barrel, in $U.S. 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $- Source: Statistics Canada, CANSIM, tables 282-0002 and 282-0022 2018 Trans Union of Canada, Inc. All Rights Reserved 6
Economic Policy Uncertainty Index (3 mo. MA) Canadian economic uncertainty around tariffs is equal to the time of the U.S. election 500 450 Canada Global Trump Election Tariffs 400 350 300 250 200 Oil Shock Brexit Eurozone Global Trade 150 100 50 0 2014 2015 2016 2017 2018 Source: Baker, Bloom, Davis, www.policyuncertainty.com 2018 Trans Union of Canada, Inc. All Rights Reserved 7
The impact of tariffs is generally small. Until it extends to the auto sector % Employment by Census Division 20% + 10% - 19% 2% - 9% Mining Metal Manufact g. Auto Manufact g. ~5% shift in unemployment ~ 40 bps increase in delinquency (Ontario) Source: Statistics Canada, 2016 Census of Population, Statistics Canada Catalogue no. 98-400-X2016292 2018 Trans Union of Canada, Inc. All Rights Reserved 8
Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 As a result of the economy s strength, the Bank of Canada has removed some of the stimulus 4.5% 4.0% 3.5% 3.0% Bank of Canada target overnight rate 2.5% Forecast 1 2.0% 1.5% 1.0% 0.5% 0.0% Source: actual rate history Bank of Canada 1) Oxford Economics, RBC Economics, BMO Economics 2018 Trans Union of Canada, Inc. All Rights Reserved 9
Our payment shock study found that consumers will generally remain resilient against future increases 28.5 million credit active consumers 9.3 million consumers are potentially exposed to a payment shock Up to 425K consumers will experience a payment shock with an incremental 50 bp increase Of the those consumer affected, <100K will have a payment shock of more than $50 per month Source: 2018 TransUnion Canada Payment Shock Study 2018 Trans Union of Canada, Inc. All Rights Reserved 10
An overview of consumer credit health
Although household debt continues to increase, the burden of servicing it has declined as a share of income % of Total household disposable income Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 16% Household debt-service ratios (%), 2000-2018 14% Principal + interest 12% 10% 8% Interest only 6% 4% 2% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Statistics Canada, 2018, CANSIM table 380-0073 2018 Trans Union of Canada, Inc. All Rights Reserved 12
Average non-mortgage consumer balance Average consumer debt rose by 4.5% year-over-year. However, average delinquency declined over the same period by 4.9%. $30,000 Average non-mortgage consumer debt balances and serious delinquency rate 6.0% $29,500 $29,000 $28,500 $28,000 $27,500 $27,000 $26,500 5.5% 5.0% 4.5% Delinquency rate (90+ DPD) $26,000 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 4.0% 2018 Trans Union of Canada, Inc. All Rights Reserved 13
Consumer score distribution has remained generally consistent over time with some expansion in super prime Consumer risk score distribution of credit-active consumers 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 34% 16% 16% 22% 12% 35% 16% 15% 21% 13% 37% 37% 36% 37% 16% 16% 15% 15% 15% 16% 16% 15% 20% 21% 21% 20% 12% 12% 12% 12% Q2 2016 Q2 2017 Q2 2018 Risk tiers Super prime Prime plus Prime Near prime Subprime Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 14
Risk Tier Last Year Q2 2017 91% of Canadian consumers remained in the same risk tier or improved Risk Tier this Year Q2 2018 Subprime Near Prime Prime Prime Plus Super Prime Subprime 71.8% 25.1% 2.5% 0.5% 0.1% Near Prime 12.9% 59.5% 19.5% 6.2% 1.9% Prime 2.1% 21.0% 41.3% 26.0% 9.6% Prime Plus 0.5% 6.4% 15.7% 46.2% 31.2% Super Prime 0.1% 1.5% 3.4% 9.3% 85.7% Worse Same Better 2018 Trans Union of Canada, Inc. All Rights Reserved 15
Origination growth rate Continued momentum in the auto finance sector has fueled origination volume. Other lending products are down Q1 2018 origination growth* (year-over-year) 6% 4% 2% 0% 5.6% 1.7% 4.2% -2% -4% -5.6% -3.4% -6% Q1 2018 origination volumes (M) 1,361 193 281 724 175 * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 16
Consumer credit balances continue to grow as the economy has expanded Q2 2018 year-over-year balance growth 13.8% 5.1% 6.0% 0.6% 4.7% Q2 2018 Outstanding balance Bankcard Auto loan Line of credit Installment $99 B $61 B $264 B $154 B Mortgage $1,241 B 2018 Trans Union of Canada, Inc. All Rights Reserved 17
National delinquency rates have been stable Consumer-level delinquency rates 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Credit Card Auto Line of Credit Installment Mortgage 14 bps -5 bps -12 bps -11 bps -8 bps Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Note: 90+ DPD for Cards, and 60+ DPD for other product types 2018 Trans Union of Canada, Inc. All Rights Reserved 18
Overall consumer non-mortgage delinquency shows regional variation, however, Nationally the rate is stable at 5.43% (-28 bp from prior year) 5.33% -24 bps 6.88% 32 5.38% 5 6.41% 9 6.46% 35 5.97% 32 5.15% 43 4.24% 9 8.37% 47 5.74% 21 6.87% 7 2018 Trans Union of Canada, Inc. All Rights Reserved 19
To summarize consumer credit health: Positive dynamics Generally stable credit health Higher use of credit Stable levels of delinquency Things to consider Impact of rising interest rates, Household debt stress and payment shock dynamics Future direction of Canada s economy and impact on key credit drivers (Regional shifts, NAFTA/Tariffs) Housing market s response to new mortgage rules This is a well-functioning market with no immediate causes for concern. However, as always, there are dynamics and segments that merit scrutiny. 2018 Trans Union of Canada, Inc. All Rights Reserved 20
Credit card sector The card market grew as originations rebounded slightly, and outstandings growth continued. Delinquency rates remain controlled with continued bifurcation between oil and non-oil provinces.
NUMBER OF ACCOUNTS The number of active cards remains relatively stable with a recent trend of upward growth 44,500,000 Number of active cards 44,000,000 43,500,000 43,000,000 Q2-16 Q2 17 = -0.9% Q2-17 Q2 18 = 0.8% 42,500,000 42,000,000 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 22
NUMBER OF NEW ACCOUNTS Bankcard originations grew over previous year, but remain below historical levels 1,800,000 1,600,000 Quarterly bankcard originations* 1,400,000 1,200,000 + 5.6% 1,000,000 800,000 600,000 400,000 200,000 - Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 * Origination volumes reported 1 quarter in arrears QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 23
NUMBER OF NEW ACCOUNTS Origination volumes increased across all risk tiers mitigating concerns of a down market shift Number of new bankcard accounts, by risk tier 400,000 350,000 300,000 5.4% Q1 2017 Q1 2018 4.1% 5.6% 250,000 3.9% 200,000 150,000 12.3% 100,000 50,000 - Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 24
AVG. CREDIT LINES IN DOLLARS Newly originated limits increased over 10% from prior year as lenders appear to be more aggressive to offset acquisition volume Average Credit Line of New Bankcards 5,200 5,100 5,000 4,900 4,800 4,700 4,600 4,500 4,400 4,300 4,200 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 25
BALANCES IN $ BILLIONS Balance expansion continues in the Canadian card market as total assets grew 5.2% from previous year and approach a $100B milestone Total Balance of all Bankcards $100 $98 $96 $94 $92 5.2% $90 $88 $86 $84 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 26
BALANCES IN $ BILLIONS Despite the drop in the number of card accounts, average balances have increased across all segments Year-over-year change in bankcard balances by risk tier Q2 2017 Q2 2018 $40 $35 4.4% $30 $25 $20 3.7% 5.1% 6.6% $15 6.9% $10 $5 $0 Subprime Near Prime Prime Prime Plus Super Prime CV RISK TIER Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 27
Delinquency Rate Dollar weighted delinquency rates remain manageable, however the size of real balance at risk are increasing 4.7% Bankcard balance-level delinquencies (90+ DPD) $4.5 4.6% 4.5% 4.4% 4.3% 4.2% $4.4 $4.3 $4.2 $4.1 $4. 0 $3.9 $3.8 $3.7 Balance at Risk ($B) 4.1% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 $3.6 2018 Trans Union of Canada, Inc. All Rights Reserved 28
Unit Delinquency Rates (90+ DPD) The energy provinces are still lagging the rest of Canada despite overall economic recovery in these regions 3% Bankcard 90+ DPD Unit delinquency rates $80 3% $70 2% 2% $60 $50 $40 $30 WTI crude oil ($US) 1% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Non-Oil Producing Provinces Oil Producing Provinces Oil Price $20 2018 Trans Union of Canada, Inc. All Rights Reserved 29
Real estate lending sector The impact of new mortgage rules combined with rising rates has cooled the market, but regional disparities continue
Canada s mortgage landscape has seen significant change Market Pressure OSFI Capital Requirements Qualifying Rules New Stress Test Interest Rate Hikes 2 years of low rates 75 bp point climb in 7 months BC / ON Fair housing Foreign buyer tax 2018 Trans Union of Canada, Inc. All Rights Reserved 31
NUMBER OF NEW ACCOUNTS The combination of regulatory changes and interest rate increases have slowed the housing and mortgage market 350,000 Quarterly mortgage originations* 300,000 250,000 200,000 150,000 Q1-16 Q1 17 = -10.5% Q1-17 Q1 18 = -3.4% 100,000 50,000 - Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 QUARTER * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 32
NUMBER OF NEW ACCOUNTS Super Prime was the only risk tier with positive growth, further reinforcing the impact of new rules and higher rates Quarterly mortgage originations by risk tier* 80,000 70,000 60,000 Q1 2017 Q1 2018 4.4% 50,000 40,000 30,000 20,000-9.6% -8.9% -5.8% 10,000 - -15.5% Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 33
AVG. BALANCE IN DOLLARS New mortgage balance growth has also slowed as a result of new rules and higher cost of borrowing Average Balance of New Mortgage Loans* 300,000 290,000 280,000 270,000 Q1-16 Q1 17 = 7.8% Q1-17 Q1 18 = 0.5% 260,000 250,000 240,000 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 QUARTER * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 34
YOY change new mortgage volume New rules and affordability have slowed new mortgage origination significantly in Ontario, while B.C. mortgage rates increased Y-O-Y mortgage originations by Province (Q1 17 to Q1 18) 12% PEI 10% 8% 6% 4% 2% BC SK QC 0% -2% -4% -6% -8% -10% NS MB AB NB NL ON Canada -3.4% 2018 Trans Union of Canada, Inc. All Rights Reserved 35
YOY change new mortgage volume New growth markets are emerging while a combination of regulatory rules has softened demand in Toronto Y-O-Y mortgage originations by Major Market (Q4 16 to Q4 17) 10% Ottawa 5% Halifax Montreal Quebec City 0% -5% Vancouver Saskatoon Hamilton Winnipeg Edmonton Canada -3.4% -10% Calgary -15% -20% Toronto 2018 Trans Union of Canada, Inc. All Rights Reserved 36
BALANCES IN $ BILLIONS Mortgage balance growth was driven by the better than Prime risk tiers, with an erosion in below Prime lending Quarterly mortgage loans balance by risk tier $700 $600 Q2 2017 Q2 2018 10.0% $500 $400 $300 $200-2.1% 0.1% 2.8% $100-7.2% $0 Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 37
% OF DOLLARS PAST DUE Despite market volatility, mortgage risk remains well managed Dollar Delinquency Rates on All Mortgage Loans Accounts 0.7% 30+ DPD 60+ DPD 90+ DPD 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% Y-O-Y Change -5 bps -3 bps -2 bps 0.0% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 38
Auto lending sector Torrid pace to the auto sector is slowing. Prices and balances remained generally stable
NUMBER OF NEW ACCOUNTS Auto lending originations cooling after a year of torrid sales Quarterly Captive Auto Originations 300,000 250,000 200,000 150,000 1.7% 100,000 50,000 - Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 40
NUMBER OF NEW ACCOUNTS Distribution of new account risk remained constant, with some expansion in Subprime Origination volume of new auto loans, by Risk Tier* 70,000 Q1 2017 Q1 2018 1.0% 60,000 50,000 1.4% 40,000 30,000 8.8% -0.3% -0.6% 20,000 10,000 - Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 41
Average auto loan balance at origination The average amount being financed remains relatively stable and aligned to vehicle price movement New auto loan balances* vs. CPI Personal vehicles $30,500 $30,000 $29,500 $29,000 $28,500 $28,000 $27,500 $27,000 $26,500 $26,000 $25,500 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 104 102 100 98 96 94 92 90 88 86 Consumer Price Index (2002 = 100) Purchase and leasing of passenger vehicles * Origination volumes reported 1 quarter in arrears Statistics Canada. Table 326-0020 - Consumer Price Index, monthly, Purchase and leasing of passenger vehicles 2018 Trans Union of Canada, Inc. All Rights Reserved 42
AVG. BALANCE IN DOLLARS Larger auto balances skew toward higher risk Average Balance of all Auto Loans, by Risk Tier Q2 2017 Q2 2018 $21,500 $21,000 $20,500 $20,000 $19,500 $19,000 $18,500 $18,000 $17,500 $17,000 $16,500 3.5% 2.7% 1.0% 1.4% -0.1% Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 43
% OF DOLLARS PAST DUE Overall, delinquency rates have remained stable within the auto sector, despite increased overall consumer debt rate Auto loans and leases balance delinquency rates 1.6% 30+ DPD 60+ DPD 90+ DPD 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 44
Unit Delinquency Rates (60 DPD) The auto delinquency story also reflects differences between energy and non-energy provinces Auto loans and leases 60 DPD Unit delinquency rates 4.0% 3.5% $80 $70 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% $60 $50 $40 $30 $20 $10 WTI crude oil ($US) 0.0% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Oil Producing Provinces Non-Oil Producing Provinces Oil Price $- 2018 Trans Union of Canada, Inc. All Rights Reserved 45
Line of credit sector Overall LOC volumes and balances remain flat, however certain markets are driving larger balances and utilization potentially from secured home lines
NUMBER OF NEW ACCOUNTS Line of credit originations fell slightly from Q1 2017 and have been largely flat over the past two years LOC quarterly originations* 400,000 350,000 300,000 250,000-5.6% 200,000 150,000 100,000 50,000 - Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 QUARTER * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 47
AVG. BALANCE IN DOLLARS Average LOC balances have increased driven partially by HELOC activity Average balance of all lines of credit 37,500 37,000 1.7% 36,500 36,000 35,500 35,000 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 48
AVG. BALANCE IN DOLLARS LOC balance growth is bifurcated between Subprime and Super Prime risk tiers Average Balance of All Line of Credit, by Risk Tier $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Q2 2017 Q2 2018 2.1% 0.7% 1.0% 0.4% 1.7% Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 49
% OF DOLLARS PAST DUE Overall, delinquency rates remained very low within the LOC sector, despite increased overall consumer debt rate Auto loans and leases balance delinquency rates 1.6% 30+ DPD 60+ DPD 90+ DPD 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 50
Installment loan sector Overall installment growth is steady with some shift toward Subprime volume.
NUMBER OF NEW ACCOUNTS Installment loan originations have seen consistent growth with 4.2% YOY increase in Q1 2018 900,000 800,000 Total number of new installment loans Q1 2018* 700,000 600,000 500,000 +4.2% 400,000 300,000 200,000 100,000 - Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 QUARTER * Origination volumes reported 1 quarter in arrears 2018 Trans Union of Canada, Inc. All Rights Reserved 52
NUMBER OF NEW ACCOUNTS New installment loan growth occurred in Prime and below tiers, fueled partly by growth in alternative lending Number of new installment loan accounts by risk tier* Q1 2017 Q1 2018 250,000 6.0% 200,000 150,000 15.4% 1.5% -0.3% -1.8% 100,000 50,000 - Subprime Near Prime Prime Prime Plus Super Prime BORROWER CV RISK TIER * Origination volumes reported 1 quarter in arrears Credit Vision risk score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759; Prime plus = 760-799; Super prime = 800+ 2018 Trans Union of Canada, Inc. All Rights Reserved 53
AVG. BALANCE IN DOLLARS Average balance of installment loans has continued to grow over the past two years Average balance of all installment loans $22,500 $22,000 $21,500 $21,000 $20,500 +6.9% $20,000 $19,500 $19,000 $18,500 $18,000 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 54
% OF DOLLARS PAST DUE Overall, delinquency rates remained flat within the Installment sector, despite increased overall consumer debt rate Installment loan balance delinquency rates 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 30+ DPD 60+ DPD 90+ DPD Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 QUARTER 2018 Trans Union of Canada, Inc. All Rights Reserved 55
Summary
To summarize our perspective on the consumer credit market: Auto loan balances continue to rise Pace of vehicle sales has softened impacting originations Auto Some expansion in underwriting to higher-risk tiers Drop in originations may be due to softening market Rising home values drive mortgage balance growth and increased home equity presents an opportunity for HELOC growth Real Estate Mortgage delinquencies remain low Bankcard origination are growing again, but below previous levels, balance growth is strong Some growth in limits suggests issuers are driving balance growth despite low originations Credit Card Delinquency remains stable, however the balance at risk is growing which may impact future origination Growth in access and demand Higher focus on lower-risk 5tiers Manageable and consistent levels of delinquencies Personal Loans 2018 Trans Union of Canada, Inc. All Rights Reserved 57
Looking forward: Be aware of these opportunities and risk factors 1 2 3 4 Some signs of relief in oil Provinces may provide renewed opportunities, however these trends are early and delinquency levels are still above the national average. Additional headwinds including economic fallout from 2016/17 wildfires, continued home price increases in major markets and potential changes to NAFTA may slow growth and affect certain regions more dramatically The risk mix shift between prime and non-prime consumers should be monitored. There may be areas of revenue opportunity. As consumers continue to engage digitally, there may be some short term channel friction (and opportunity) in origination volumes. Multi-channel engagement and frictionless onboarding may be a competitive advantage Interest rate increases and economic uncertainty are projected to continue into 2019. Are you well prepared to cope with a payment shock? 2018 Trans Union of Canada, Inc. All Rights Reserved 58