Consumer credit market in Europe 2013 overview Crédit Agricole Consumer Finance published its annual survey of the consumer credit market in 28 European Union countries for seven years running. 9 July 2014 www.ca-consumerfinance.com presse@ca-cf.fr
Highlights In 2013, consumer loan outstandings declined in the European Union by 0.9% to 1,061 billion. In 2013 consumer loan outstandings increased in only 1 country of the Eurozone out of 4: Denmark, Lithuania, Luxembourg, Malta, the UK, Slovakia and Sweden. Three major trends: In Northern and Continental Europe: credit penetration rate fell slightly, but the sustained increase in consumption impacted loan outstandings positively (+2%). In Southern Europe: outstandings dropped (-7%) due to the poor visibility and lack of confidence of households, and to stagnating consumption. In Central and Eastern Europe: outstandings went down (-4%) despite the increase in consumption of households, who are clearing their debt. The penetration rate of consumer credit is higher than in Southern Europe though. Consumer credit in Europe appears as a mature market where there is no longer a catch-up effect: the gap widens between the British, Danish and Luxembourg markets, which are the most developed and the most dynamic, and the rest of the European Union. New buoyant markets just outside Europe: outstanding per inhabitant in Turkey and Russia ( 1,200) approach that of Spain or the Netherlands ( 1,500) and had a sustained growth in 2013 (+31% in Turkey and 26% in Russia). Page 2
5th year of decline for consumer credit in the EU End of December 2013, the amount of outstanding loan in the European Union amounted to 1,061 billion. Outstanding loans fell by 0.9% in 2013. The consumer credit market has tightened continuously in the European Union since 2008. Way of comparison, in 2013, the global consumer credit market grew by 6.8%. Outstanding consumer loans in the European Union, billions Currency translated at the average exchange rate of year 2013-3.5% The continued growth of unemployment rate (an average of 6% in 2008 up to 11% in 2013) and the difficulties of some banks in the Eurozone are the main rationale to explain the fall in loan outstandings. Beyond the downward trend, the average level of loan outstandings is relatively low in Europe. Indeed, the average loan outstanding per inhabitant rose in 2013 to 2,100 in the European Union and 5,900 in North America *. -0.6% -0.9% Sources: Central banks, Asterès. These data are likely to vary year on year * North America comprises the United States, Canada and Mexico Page 3
Overview Lower use of consumer credit in a uncertain economic climate Even though household final consumption in the European Union increased (in value) in 2010 (+3%), 2011 (+3%), 2012 (+1%) and 2013 (+2%), consumer credit contracted. Consumer credit penetration and unemployment rate in the European Union The ratio of consumer loan outstandings on household consumption has declined in the European Union over the past 4 years, from 17% in 2009 to 14% in 2013. This decline is due mainly to households in the Eurozone who are clearing their debt. The decrease in the consumer credit penetration rate is due first and foremost to lack of confidence and poor visibility on future income, as reflected by the difficulties in the employment market. The continued rise in the average unemployment rate in the European Union, from 9% in 2009 to 11% in 2013, is one of the main reasons for the lower recourse to credit. The data may vary from one year to the next due to revisions made by central banks and exchange rate fluctuations. Page 4
Focus by geographical area Only Northern Europe saw an increase Consumer credit in Europe in 2013 by geographical area The European consumer credit market is concentrated on the Northern and Continental European countries. With 617 billion of outstandings, this region represents 58% of outstandings for 41% of the total European Union population. In 2013, outstandings increased by 2% to reach almost 3,000 per inhabitant. The growth was due to an increase in household consumption (+6% in value), while the consumer credit penetration rate (ratio of outstandings to household final consumption) declined slightly from 17% to 16%. Outstandings in the Southern European countries (including France) decreased by 7% in the year to 363 billion (i.e. 34% of outstandings for 38% of the European population). The contraction was due to the decline in consumer credit penetration (from 13% to 12%) caused by a lower household consumption and a continued rise in unemployment. Central and Eastern Europe represent 8% of outstandings ( 81 billion) but 21% of the European population. In 2013, outstandings decreased by 4% despite an almost 2% increase in household consumption. The penetration rate therefore fell to 13% (from 14% in 2012) while the average unemployment rate settled at 11%. * The composition of the geographical areas is provided on page 10 Page 5
Top 5 European markets focused 76% of loan outstandings The largest European market for consumer credit is the United Kingdom, with 25% of loan outstandings ( 260 billion) in December 2013. The top 5 European markets United Kingdom, Germany, France, Spain and Italy account for 76% of loan outstandings ( 803 billion) but for 51% of the European population. France and Germany have experienced similar developments: an intermediate penetration rate of credit (13% in France and 15% in Germany) and a negative variation of the loan outstandings (-2% to -1% in France and Germany). The French market ranks third in the European Union, with an outstanding level of 146 billion. Poland, with an 31 billion outstandings in 2013, is the sixth European market and the first Central European market. 260 223 146 Consumer loan outstandings in the European Union ( billion) Currencies converted at the average exchange rate for 2013 107 68 31 28 25 22 21 20 18 13 13 13 12 11 10 5 4 2 2 2 2 1 1 1 United Kingdom Germany France Italy Spain Poland Greece Netherlands Austria Belgium Sweden Denmark Finland Roumania Ireland Portugal Hungary Czech Republic Slovakia Bulgaria Luxembourg Croatia Slovenia Cyprus Lithuania Estonia Latvia Page 6
Consumer Credit in Europe at end 2013 An important driver of the economic activity In the top five European markets, consumer credit is a major driver of economic activity. It enables households to finance home improvements and purchase consumer goods. Consumer loan outstandings represent a significant share of Gross Domestic Product (GDP) in the main European markets. In France, Italy and Spain, consumer loan outstandings represent about 7% of GDP. This figure rises to 14% for the United Kingdom. The ratio of consumer credit outstandings to household consumption, which is highly correlated to the contribution to GDP, is an important indicator of consumer credit penetration in those economies. Outstandings represented 21% of household consumption in the UK, 14.6% in Germany, 12.8% in France, 11.7% in Portugal, 11.6% in Italy and 11% in Spain. Page 7 Source: Asterès.
Consumer Credit in Europe in 2013 Marked differences between countries Outstandings are declining in the eurozone countries Seven European countries Denmark, Lithuania, Luxembourg, Malta, United Kingdom, Slovakia and Sweden reported an increase in their consumer loan outstandings in 2013. The United Kingdom stands apart from the other major European economies with 5% growth in outstandings. The two main factors driving this growth were an upturn in consumer spending (+2%) and a decline in unemployment. Greece, Spain, Portugal, Ireland and the Netherlands reported a sharp decrease in their outstandings in 2013. Cyprus reported the sharpest decrease (-34%) due mainly to restricted credit supply resulting from the restructurings following the Cypriot and Greek public finance crises. Variation in outstanding consumer credit in the European Union - between December 2012 and December 2013 20% 10% 0% -10% -20% -30% -40% 15% 5% 5% 4% 3% 1% 1% 0% 0% -1% -1% -1% -2% -3% -3% -4% -5%-6% -6% -6% -7% -8%-9%-10%-10%-11% -33% -34% Denmark Slovakia United Kingdom Sweden Luxembourg Malta Lithuania Bulgaria Czech Republic Germay Belgium Finland France Italy Estonia Austria Poland Hungary Greece Netherlands Roumania Spain Ireland Portugal Croatia Slovenia Latvia Cyprus Page 8
Consumer Credit in Europe in 2013 A mature market No catch-up effect in the European consumer credit market The three countries with the highest outstandings per inhabitant - United Kingdom ( 4,100), Luxembourg ( 3,700) and Denmark ( 3,300) - reported growth in outstandings. Conversely, loan outstandings contracted in countries where outstandings per inhabitant are weak. There was therefore no catch-up effect in Europe and the consumer credit market appears to have broadly reached maturity. Consumer credit markets are not converging towards a similar model. The gap is widening between the United Kingdom, Luxembourg and Denmark on the one hand and the rest of Europe on the other, due mainly to macroeconomic and regulatory differences between countries. Growth in outstandings per inhabitant in 2013 Outstanding per inhabitant - euros Page 9
Consumer Credit in Europe in 2013 New buoyant markets just outside Europe Turkey and Russia, two dynamic markets on Europe's borders Turkey and Russia, two emerging countries neighbouring the European Union, are catching up in the consumer credit market. Outstanding per inhabitant in Turkey and Russia ( 1,200) approach that of Spain or the Netherlands ( 1,500) and has sustained growth in 2013 (+31% for Turkey and +26% for Russia). Norway has the highest outstanding per inhabitant in continental Europe, at 5,800. Comparable to other Northern European countries, the Norwegian consumer credit market increased by 1% in 2013. The Swiss market followed similar trends to the Eurozone in 2013 with a contraction of 3% and outstanding per inhabitant of 3,300, comparable to Denmark or Luxembourg. Growth in outstandings per inhabitant in 2013 Our "geographical" review of the European continent reveals one key factor: the consumer credit market is not only contracting but is comparatively under-developed in the Eurozone and Eastern Europe. Both growth and outstanding per inhabitant are lower in eastern Europe than in Turkey and Russia and lower in the Eurozone than in the other developed European countries. Page 10 Outstandings per inhabitant
Methodology The primary data used in this report have been obtained from central banks and adjusted by economic research and consulting firm Asterès to provide a uniform base in terms of products and markets. The data in this report cover all credit operators, banks and specialist companies. Product data include overdrafts but not mortgages. Consumer credit outstandings in non-euro zone countries have been converted at the average exchange rate for 2013. Some figures (outstandings, changes, consumer credit penetration rates) may differ from previous reports for two reasons: revision of primary data by central banks; changes in the exchange rates used to convert outstandings in foreign currencies to euros. For the purposes of this survey, Europe has been divided into three broad geographical areas: Northern and Continental Europe Germany, Austria, Belgium, Denmark, Finland, Ireland, Luxembourg, Netherlands, United Kingdom, Sweden. Southern Europe Cyprus, Spain, France, Greece, Italy, Malta, Portugal. Central and Eastern Europe Bulgaria, Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Czech Republic, Romania, Slovakia, Slovenia. Page 11