Survey: Auto Loans Most Stable Asset Category
Auto finance is the safest bet in consumer credit for the second half of 2013, according to a survey of bank executives conducted by the Professional Risk Managers International Association and FICO.
The study is a quarterly survey of executives within the financial services industry. Compared with credit cards, mortgage loans, and small business loans, auto loans were deemed — by far — to be the least risky asset class for the next six months. Only 15% of those surveyed indicated that auto loans were the riskiest investment, followed by mortgage loans (23%), small business loans (26%), and credit cards (36%).
Among those surveyed, 28% expect that delinquency rates for auto loans will decline during the remainder of 2013, down from 32% in the first quarter, and compared with 25% in the second quarter of 2012.
While delinquency rates are expected to decrease, interest rates are expected to remain the same or decrease. More than three-quarters of respondents indicated that one of those two scenarios will likely occur going forward.
Interestingly, about 50% of those surveyed said that loan application volume across all categories of consumer credit will increase, while 50% expect the approval rate for those applications to increase, as well.
Among spending initiatives at financial institutions, big data is the highest priority, with nearly half of the respondents indicating making purchases in that area. Big data beat out mobile (26%), cloud (15%), and social (11%).
“This is the first time since we initiated the survey in 2010 that expectations for the growth of credit demand did not exceed expectations for the growth of credit supply,” said Andrew Jennings, chief analytics officer at FICO and head of FICO Labs, in a release. “This shows the strength of the U.S. economic recovery, and is in sharp contrast to what we see in Europe.” A survey of European bankers, due out this week, shows that twice as many U.K. lenders think the amount of credit requested will rise, compared with those who think the availability of credit will do so, he added.
