ASSOFIN - CRIF - PROMETEIA CALCOLO RETAIL CREDIT SURVEY JUNE 2001 ISSUE NO.10 WITH DATA UPDATED TO 31 DECEMBER 2000
This Report has been made possible thanks to the co-operation of ASSOFIN - CRIF - PROMETEIA It was jointly authored by: Patrizia Bagnato Stefano Cosma (University of Modena) - Federica Orsini for PROMETEIA Davide Capuzzo - Ornella Castrignanò for CRIF Kirsten van Toorenburg for ASSOFIN REPORT SUPERVISORS: Umberto Filotto - Silvia Ghielmetti - Antonio Rigon Edited by: Barbara Castelli - Simona Rimondi Copyright 2000 ASSOFIN, CRIF, Prometeia Calcolo. No part of this report may be reproduced by any means including photocopying -,even for internal or didactic purposes, unless duly authorized.
CONTENTS INTRODUCTION TOPICS OF THE REPORT CHAPTER 1 THE MACROECONOMIC SCENARIO 1.1 Macroeconomic scenario, spending decisions and retail credit in Italy CHAPTER 2 ANALYTICAL OVERVIEW OF LENDING TO FAMILIES 2.1 Introduction 2.2 Short-term trends in the retail credit market 2.3 Breakdown of credit disbursed by banks according to product sector 2.4 Breakdown of credit disbursed by specialized financial institutions according to product sector 2.5 Analysis of the credit card market in Italy 2.6 Analysis of the family loan market CHAPTER 3 ASSESSMENT OF RISK BASED ON THE CRIF DATABANK 3.1 Introduction 3.2 Overall risk trends in the market 3.3 Market risk segment by segment 3.3.1 Delinquency indexes according to contract duration 3.3.2 Delinquency indexes for classes or generations of contracts, in consideration of the duration factor 3.3.3 Overdue contract indexes according to the amounts stipulated APPENDIX DEFINITION CRITERIA USED IN THE CHAPTER METHODOLOGICAL NOTE: PRODUCTION OF STATISTICAL DATA THROUGH THE CRIF DATABANK CHAPTER 4 EVOLUTION OF THE CONSUMER CREDIT MARKET 4.1 Introduction 4.2 Consumption trends by product sector 4.3 The national market 4.4 The regional market
CHAPTER 5 THE REVOLVING CREDIT CARD MARKET 5.1 Introduction 5.2 Use of payment instruments other than cash: trends in Italy and international comparison 5.3 Structural evolution of access channels and how charge cards are used 5.4 The debit card and revolving credit card market 5.5 Socioeconomic characteristics of revolving credit card holders QUESTIONNAIRE SENT TO SPECIALISED FINANCIAL INSTITUTIONS AND THE SAMPLE RESPONSE RATE FOR EACH QUESTION REGIONAL STATISTICS TERRITORIAL BREAKDOWN OF THE CONSUMER CREDIT MARKET Valle d Aosta Piemonte Lombardia Liguria Trentino Alto Adige Veneto Friuli Venezia Giulia Emilia Romagna Toscana Marche Umbria Lazio Molise Abruzzo Campania Basilicata Puglia Calabria Sicilia Sardegna
INTRODUCTION This issue of the Survey on retail credit will focus on the global market of lending to families. Starting from the previous report, the authors objective has been to broaden the analytical horizon of the Survey, by considering families as single-client entities with unique financial needs that must be satisfied through different, dynamically evolving means. In line with this approach, a new section on the market for forms of lending other than retail credit has been included in the chapter dedicated to analysing the overall trends in lending to families. As in its previous issues, the Survey is articulated in five chapters, each one dealing with different aspects of the family loan market. The first chapter describes the macroeconomic scenario on a worldwide level, mainly focusing on the most relevant variables and drivers of demand which are indispensable for delineating a reference context for analysing the trends in consumption and in the family loan market. The second chapter compares the dynamics of development that have characterised the market s main financial providers (banks and specialised financial institutions) with reference to: overall market performance; trends in individual forms of credit; breakdown of loans provided according to product sector 1 ; breakdown of lending (by banks) to families and trends in the loan market. The third chapter focuses on the topic of risk in the retail credit sector, in particular on the trends in global market risk over the last 24 months, by means of the risk indexes processed on the basis of information contained in the CRIF database. The fourth chapter illustrates the forecast scenario both for the consumption of durable goods - broken down into the main product sectors - and the consumer credit market, this one considered on a nationwide level and in terms of individual territories. A nationwide index of coverage regarding durable goods consumption has also been calculated for different product sectors. It provides an interesting indication as to the level of market saturation by historical banks and specialised intermediaries. The territorial forecasts, based on aggregate data for macro-areas, are specifically itemised in the regional statistics included at the end of the Survey. As previously mentioned, the fifth chapter is dedicated to the analysis of features relevant to revolving credit card holders. The most important aim of the analysis is to assess the level of maturity reached by the revolving credit market as well as the role and functions attributed to revolving credit cards. 1 In this issue as well, in an attempt to make the comparison between the world of historical banks and the world of specialised financial institutions more meaningful, the various product categories for which loans are required have been redefined. This creates a common language permitting an analysis of homogeneous sectors. The same product sectors represent the base of reference for the forecast of consumer trends shown in Chapter 4. 5
Territorial statistics have been included at the end of the Survey to provide as complete a picture as possible of the specific features relevant to the retail credit market in different regions and the relative standing of provinces within each region. These data - processed on a regional basis - concern the main variables that particularly characterise the retail credit market and its evolution over time. As usual, the Survey relies on: the CRIF Credit Bureau instalment credit database, as well as CRIF s expertise in processing data relative to credit risks and trends in this market; the information resources and forecasts from Prometeia, as regards macroeconomic and consumer credit market forecasts and data; the co-operation of ASSOFIN, Italian Association of Consumer and Real-Estate Credit, which is made up of and represents many financial operators in the consumer credit and real-estate loan sectors. 6
REPORT TOPICS The data gathered up to December 2000 basically confirm the forecasts published in the previous issue. The overall growth rate in this market was higher than 20%; a further acceleration could be observed in the bank sector (with a growth reaching nearly 15%), while specialised financial institutions continued to enjoy a strong uptrend. The increasing tendency of families to borrow money to finance their purchases may be explained by different factors, above all: the modest real unit cost of loans, the current changes regarding the behaviour of families, rising disposable incomes and, last but not least, the development of more effective marketing policies and tools by financial intermediaries. The forecasts for the current year point out a slight decrease in the growth of borrowing, already evident in the decreasing flow of new loans. Despite the slowdown, in 2001 total retail credit is still expected to grow, exceeding 95 trillion lire by the year s end. The trend described above fits into the context of a relative slowdown in economic growth. The downtrend in the consumption of durable goods (which however continue to grow at a faster rate than domestic consumption as a whole) is accompanied by a notable maintenance of confidence among families and by a cautious optimism with regard to the prospects of the job market. The forecasts also reflect expectations of a slight increase in the real cost of borrowing for families, though this cost will remain lower than in the years before 2000. A new uptrend has been forecast for 2003, due to predictions of a recovery in the consumption of durable goods as well as to a stabilisation of the real cost of borrowing. As regards the trend in the credit allocated by different financial operators, there has been no substantial change in the relative positioning assumed by historical banks 2 and specialised financial institutions at the end of 1999. A disparity still remains, also as a consequence of precise business development strategies planned according to group logic. In the current year, financial institutions will continue to grow at a rate of about 17% (compared to 24.6% at the end 2000) whereas in the two-year period 2002-2003 the annual growth rate is expected to settle at about 14%. The growth rate of 14.7% reported for historical banks in 2000 will drop to 10% in 2001 and then progressively decline to 8.4% in 2002. This trend will be reversed in 2003, when growth will rise to 9.3%. As far as the trends in individual forms of credit are concerned, the banking sector has experienced an increase in loans granted to employees and secured by the advance of one-fifth of their salary. Specialised financial institutions have likewise seen a fairly substantial increase here. Both categories of financial operators have witnessed an increase in the use of credit cards, though among banks the trend has slowed in comparison with last year s boom, as reflected by the more modest increase in the number of debit cards in circulation. The final part of the report is dedicated to the analysis of the characteristics of revolving credit card holders. In Italy, the use of revolving credit cards is greatly affected by people s tendency to be little accustomed to pay with cashless instruments. Nonetheless, the incidence of charge card transactions is increasing at a rate of 20%, though more slowly than previously. 2 This term refers to the aggregate of banks, deducting the values relative to specialised financial institutions that have subsequently transformed themselves into banks. 7
Signs of a positive trend are coming from the network of POS terminals, which increase the possibility of using revolving credit cards. Generally speaking, revolving credit cards are enjoying a steady uptrend; despite a reduction in the turnover rate of existing cards, the number of revolving credit cards in circulation showed an increase at the end of 2000. This was accompanied by a simultaneous decrease (of about two percent) in the use rate. An analysis of the socio-economic and demographic features of revolving credit card holders reveals that such a type of credit seems an essential tool to finance family consumption. This is shown by the research findings, which have pointed out a frequent concentration of revolving credit in the initial stages of a family s life, in situations marked by limited disposable income and the existence of a single breadwinner in the family (normally a subordinate employee), as well as very modest credit lines. ASSOFIN Via Marradi, 7-20123 Milano Tel. (02) 865437 Fax (02) 865727 CRIF Spa Via Lame, 15-40122 Bologna Tel. (051) 6431411 Fax (051) 221865 PROMETEIA CALCOLO SRL Via Marconi, 43-40122 Bologna Tel. (051) 6480911 Fax (051) 220753 8