Q3 2015 Industry Insights Report U.S. Financial Services Nidhi Verma Director, Financial Services Research and Consulting TransUnion
TransUnion s Industry Insights Report is a quarterly overview summarizing trends within the consumer lending industry Data pulled from TransUnion s consumer credit database includes: Both account-level and consumer-level views of key metrics and trends TransUnion Industry Insights Report Quarterly overview of consumer credit trends released by TransUnion Financial Services THIRD QUARTER 2015 Data and trends for the national population overall, as well as breakdowns within consumer credit score risk tiers Analysis of consumer loan product types bankcard, private label card, auto, mortgage and home equity line of credit as well as aggregate views of all revolving and all non-revolving loans 2015 TransUnion LLC All Rights Reserved 2
The consumer perspective
Number of consumers (in millions) More consumers are gaining access to credit 185 Number of consumers with access to an open revolving line of credit 180 175 170 165 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 4
Average balance A steady decline has been observed for average revolving balances since 2010 attributed to declining HELOC access Average revolving balance per consumer (for consumers carrying a balance) Total average balance HELOC Bankcard Private label $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 1.2 1.1 1.0 0.9 0.8 0.7 Consumers with a balance (indexed to Q1 2010) 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 5
Average balance Stable debt levels are exhibited by consumers with a non-revolving balance $130,000 Average non-revolving balance per consumer (for consumers carrying a balance) $125,000 $120,000 $115,000 $110,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 6
Major lending products at a glance
Balance growth rate Outstanding balances indicate a growing credit market, except for HELOC Q3 2015 year-over-year balance growth 20% 15% 10% 5% 0% 0.8% 11.1% 4.9% 15.1% -5% Q3 2015 outstanding balance -4.1% Mortgage Auto Credit card HELOC Consumer loans $8.2 T $1,007 B $744 B $446 B $248 B 2015 TransUnion LLC All Rights Reserved 8
60+ days DQ rate Growth in balances is healthy and balanced, as indicated by low levels of delinquency 60+ days balance-level delinquency rates 12% Auto Mortgage HELOC Bankcard Retail Consumer loans 10% 8% 6% 4% 2% 0% Q3 2009 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 2015 TransUnion LLC All Rights Reserved 9
Credit card sector Controlled growth in balances led by more consumers and benefited by strong economic fundamentals
Originations (accounts in millions) Growth in new accounts entering the credit card market continues Quarterly bankcard and private label originations Bankcard Private label 15 10 5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 11
Total credit lines (in $ trillions) Consistent growth in originations is leading to higher aggregate credit lines and consumers with access to a bankcard Bankcard credit lines and consumers with access to credit $3.0 $2.8 $2.6 $2.4 $2.2 $2.0 Bankcard Credit Lines Bankcard Consumers Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 165 160 155 150 145 140 Total consumers (in millions) 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 12
Origination (accounts in millions) Prime and below risk tiers have been the focus of growth in bankcard originations Bankcard originations (accounts) by risk tier Q2 2010 Q2 2014 Q2 2015 14 12 10 8 6 4 2 0 Subprime Near Prime Prime Prime Plus Super Prime VantageScore 3.0 risk ranges Subprime = 300 600, Near Prime = 601 660, Prime = 661 720, Prime Plus = 721 780, Super Prime = 781+ 2015 TransUnion LLC All Rights Reserved 13
Average credit line indexed to Q1 2010 While non-prime volumes have grown significantly, average credit line for non-prime consumers has decreased 1.2 1.1 1.0 0.9 Average bankcard credit line (indexed to Q1 2010) Super prime Prime plus Prime Near prime Subprime 0.8 0.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 VantageScore 3.0 risk ranges Subprime = 300 600, Near Prime = 601 660, Prime = 661 720, Prime Plus = 721 780, Super Prime = 781+ 2015 TransUnion LLC All Rights Reserved 14
Utilization rate While credit lines have decreased, bankcard utilization has not changed within non-prime risk tiers Bankcard utilization by risk tier 90% 80% Q3 2010 Q3 2015 70% 60% 50% 40% 30% 20% 10% 0% Subprime Near Prime Prime Prime Plus Super Prime VantageScore 3.0 risk ranges Subprime = 300 600, Near Prime = 601 660, Prime = 661 720, Prime Plus = 721 780, Super Prime = 781+ 2015 TransUnion LLC All Rights Reserved 15
Outstanding balances (in $ billions) Higher consumer volumes offset slightly by lower average consumer balances are still creating a steady growth in balances Outstanding bankcard balances and average balance per consumer Year-over-year Total balances Average consumer balance $660 $5,700 $640 $5,600 $620 $5,500 $5,400 $600 $5,300 $580 $5,200 $560 $5,100 $540 $5,000 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 growth in balances -11.3% -3.9% -0.1% 0.4% 4.3% 4.7% Average consumer balance 2015 TransUnion LLC All Rights Reserved 16
Total credit lines (in $ trillions) Aggregate credit lines are aligned with the increasing number of consumers with an open private label card Private label card credit lines and consumers with access to credit $0.70 $0.65 $0.60 $0.55 $0.50 Total Credit Lines Total consumers Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 115 113 111 109 107 105 Total consumers (in millions) 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 17
Origination (accounts in millions) Similar to bankcard, new account growth has primarily come from non-prime risk tiers in the private label sector Private label originations (accounts) by risk tier Q2 2010 Q2 2014 Q2 2015 14 12 10 8 6 4 2 0 Subprime Near Prime Prime Prime Plus Super Prime VantageScore 3.0 risk ranges Subprime = 300 600, Near Prime = 601 660, Prime = 661 720, Prime Plus = 721 780, Super Prime = 781+ 2015 TransUnion LLC All Rights Reserved 18
Average credit line indexed to Q1 2010 Average credit lines are growing across all risk tiers 1.2 1.1 1.0 0.9 Average private label credit line (indexed to Q1 2010) Super prime Prime plus Prime Near prime Subprime 0.8 0.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 19
Utilization rate Private label card utilization trends have not changed since 2010 Bankcard utilization by risk tier 60% Q3 2010 Q3 2015 50% 40% 30% 20% 10% 0% Subprime Near Prime Prime Prime Plus Super Prime VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 20
Outstanding balances (in $ billions) Steady utilization and higher average credit lines per consumer, coupled with more consumers, has led to steady balance growth Outstanding private label balances and average balance per consumer Year-over-year Total balances Average consumer balance $120 $910 $100 $900 $890 $80 $880 $60 $870 $40 $860 $850 $20 $840 $- $830 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 growth in balances -9.7% -2.9% 3.6% -1.8% 11.7% 6.1% Average consumer balance 2015 TransUnion LLC All Rights Reserved 21
Auto sector More consumers with higher average loans and low levels of delinquency
Outstanding balances (in $ billions) Auto market reached $1 trillion in balances led by growing average auto balance and growth in consumers with an auto loan Outstanding auto balances and average consumer balance $1,200 Total balances Average consumer balance $19,000 $1,000 $800 $600 $400 $200 $- Number of consumers with an auto loan (millions) Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 60 60 62 65 70 74 $18,000 $17,000 $16,000 $15,000 $14,000 Average consumer balance $ 2015 TransUnion LLC All Rights Reserved 23
Originations (accounts in millions) Auto originations continued the momentum with 7% year-over-year growth Quarterly auto originations (loan and lease) 8 8 7 7 6 6 5 5 4 4 3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 24
Origination growth since Q2 2010 Non-prime risk tiers continue to drive tremendous growth in originations Auto originations (accounts) risk composition indexed to Q2 2010 2.2 2.0 1.8 1.6 2.0 1.8 Super prime Prime plus Prime Near prime Subprime 1.4 1.2 1.0 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 VantageScore 3.0 risk ranges Sub prime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 25
Average originating loan term (in months) Average term has been increasing for all risk tiers Average originating loan term 65 Super prime Prime plus Prime 60 Near prime Subprime Total 55 50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 26
Originating APR Originating APR on auto loans has decreased significantly for prime and above risk tiers Originating auto loan average APR by risk tier 16% 14% 12% 10% 8% 6% 4% 2% 0% Q2 2010 Q2 2015 Subprime Near Prime Prime Prime Plus Super Prime Total VantageScore 3.0 Risk Ranges Subprime: 300 600, near prime: 601 660, prime: 661 720, prime plus: 721 780, super prime: 781+ 2015 TransUnion LLC All Rights Reserved 27
Average new auto balance Average new loan amount for auto has continued to grow and surpassed $20,000 in Q2 2015 Average new auto balance (Q2 2010, Q2 2014 and Q2 2015) Q2 2010 Q2 2014 Q2 2015 $22,000 $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 Subprime Near Prime Prime Prime Plus Super Prime Total VantageScore 3.0 risk ranges Sub prime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 28
Monthly consumer payment on auto loan With reduced APRs and longer terms, monthly payments for consumers have decreased by an average of 7% $500 Monthly consumer payments on auto loan Q2 2010 Q2 2015 $450 $400 9% 10% 13% 7% $350 $300 Subprime Near Prime Prime Prime Plus Super Prime Total VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 29
Mortgage sector Balance growth and declining delinquencies
Originations (accounts in millions) Mortgage originations grew nearly 40% year-over-year, maintaining last quarter s positive trend 2.5 Quarterly mortgage originations 2.0 1.5 1.0 0.5 40% year-over-year origination growth in Q2 2015 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 31
Origination share Higher availability of credit for mortgage borrowers is evident with a shift in share of originations 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15.3% Mortgage originations (accounts) by risk tier VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 13.2% Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 37% 16.0% Super prime Prime plus Prime Near prime Subprime 2015 TransUnion LLC All Rights Reserved 32
Year-over-year growth New York-Northern New Jersey-Long Island, NY-NJ-PA Dallas-Fort Worth- Arlington, TX Chicago-Naperville- Joliet, IL-IN-WI Houston-Sugar Land-Baytown, TX Phoenix-Mesa- Scottsdale, AZ Los Angeles-Long Beach-Santa Ana, CA Miami-Fort Lauderdale- Pompano Beach, FL San Francisco- Oakland-Fremont, CA All MSAs experienced tremendous growth in average new mortgage loan Q2 2015 (year-over-year) growth rate in average new mortgage balance by MSA 16% 12% 8% 4% 0% CAGR versus Q2 2010 4% 6% 3% 7% 3% 4% 5% 5% 2015 TransUnion LLC All Rights Reserved 33
Outstanding balances (in $ trillions) Fueled by growth in account originations and higher new average balance, Q3 2015 mortgage balances grew a little less than 1% Outstanding mortgage balances and average consumer balance $9 $200,000 $8 $190,000 Average consumer balance $ $7 Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015 $180,000 2015 TransUnion LLC All Rights Reserved 34
HELOC sector Robust origination growth influenced by rising home equity trends
Originations (accounts in millions) Almost 300,000 borrowers entered this market with new loans, which is a level not observed since the end of the recession 0.35 Quarterly HELOC originations 0.30 0.25 0.20 0.15 0.10 14% year-over-year origination growth in Q2 2015 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 36
Originations share Market concentration for HELOC growth has been focused on prime borrowers for many years HELOC originations (accounts) by risk tier 100% 90% 80% 70% 60% Super prime Prime plus Prime Near prime Subprime 50% 40% 30% 20% 10% 96.2% 95.9% 0% Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 37
Indexed to Q1 2010 U.S. home equity has risen at a faster rate than the credit lines and balances in this market HELOC credit lines, balances and home equity levels (indexed to Q1 2010) 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 Credit lines $ Balances $ Home equity Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 1.7 0.8 0.7 Sources: TransUnion credit database *U.S. home equity data from Federal Reserve economic data households; owners equity in real estate 2015 TransUnion LLC All Rights Reserved 38
Average new credit line With rising home values, average new loans are increasing at a steady pace HELOC average new credit line and U.S. home equity* indexed to Q1 2010 Average new credit line U.S. Home equity $120,000 $110,000 $100,000 $90,000 $80,000 $70,000 $60,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 $13 $12 $11 $10 $9 $8 $7 $6 Home equity (in $ trillions) 2010 2011 2012 2013 2014 2015 Sources: TransUnion credit database *U.S. Home equity data from Federal Reserve economic data households; owners equity in real estate 2015 TransUnion LLC All Rights Reserved 39
Consumer loans What s old is new again
Originations (accounts in millions) Unsecured loan market has experienced tremendous growth in the past five years Quarterly consumer loan originations 4.0 Secured Unsecured 11% CAGR since Q2 2010 3.5 3.0 2.5 2.0 1.5 1.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 41
Originations share Unsecured loan origination distribution is dominated by non-prime consumers Unsecured loan originations (accounts) by risk tier 100% 90% 80% 70% 60% Super prime Prime plus Prime Near prime Subprime 50% 40% 30% 20% 10% 72% 67% 0% Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 42
Number of consumers While primarily driven by non-prime accounts, growth has been experienced within prime and higher risk tiers Consumers with an unsecured loan (indexed to Q1 2010) 1.4 Prime Nonprime 1.4 1.3 1.2 1.1 1.1 1.0 0.9 0.8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2010 2011 2012 2013 2014 2015 VantageScore 3.0 risk ranges Subprime = 300 600, near prime = 601 660, prime = 661 720, prime plus = 721 780, super prime = 781+ 2015 TransUnion LLC All Rights Reserved 43
Outstanding balances (in $ billions) Unsecured loans make up 33% of the consumer loan market and are driving the growth in this sector Outstanding consumer loans and average consumer balance Unsecured Secured Average unsecured loan Average secured loan $300 $20,000 $250 $200 $150 $100 $50 $- Year-over-year growth in balances Q3 2010 Q3 2011 Q3 2012 Q3 2013 Q3 2014 Q3 2015-12% -7% -1% 1% 8% 15% $15,000 $10,000 $5,000 $- Average consumer balance $ 2015 TransUnion LLC All Rights Reserved 44
60+ days DQ rate Secured loans have shown stable delinquency trends since 2010 and unsecured loans are now performing like secured loans 60+ days consumer-level delinquency rates 5% Unsecured Secured 4% 3% 2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 2015 2015 TransUnion LLC All Rights Reserved 45
Looking forward: Low delinquency levels and steady balance growth point to a stable credit market Credit card Auto Mortgage HELOC Consumer loans Consumer spending and stabilized delinquencies would enable a well-managed balance growth Strong economic fundamentals would support continued growth, but at a lower than historical rate Balance growth is expected with higher average loan amounts within all risk tiers Average new credit line growth and origination momentum expected to fuel balance growth Non-prime consumer demand and new finance company entrants would support continued growth 2015 TransUnion LLC All Rights Reserved 46
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