Recent Vintage Loans Perform Well Even as More Non-Prime Consumers Secured Credit in Second Half of 2021

Rhea-AI Summary

TransUnion's Q4 2021 Credit Industry Insights Report reveals robust growth in consumer credit performance across auto, credit card, personal loans, and mortgages. Notably, credit card originations surged 63% YoY, with 20.1 million new accounts, while non-prime originations grew significantly, especially in credit cards (75% YoY increase). Personal loan balances reached an all-time high of $167 billion. Despite a slight rise in delinquency rates, these remain below pre-pandemic levels, bolstering lender confidence as the economy recovers and credit demand normalizes.

Positive

• Credit card originations increased by 63% YoY, totaling 20.1 million accounts.
• Non-prime credit card originations rose by 75% YoY.
• Personal loan balances reached a record high of $167 billion.
• Delinquency rates remain below pre-pandemic levels, indicating consumer credit health.
• TransUnion Credit Industry Indicator improved 16 points YoY.

Negative

• Mortgage origination volumes declined by 13% YoY.
• Delinquency rates showed slight increases, potentially signaling risk.

Q4 2021 TransUnion Credit Industry Insights Report explores latest credit trends

CHICAGO, Feb. 02, 2022 (GLOBE NEWSWIRE) -- With consumer credit performance maintaining healthy levels across auto, credit card, personal loans and mortgages, lenders continued to ramp up new account origination growth in the non-prime segment of the market near the end of 2021. TransUnion’s (NYSE: TRU) newly released Q4 2021 Quarterly Credit Industry Insights Report (CIIR) also found that loans to non-prime borrowers increased while accounts originated during the pandemic in 2020 continued to perform as well or better when compared to loans from previous years.

The credit card market, in particular, saw a very high rate of new account growth in Q3 2021 (latest data available) with a record 20.1 million originations, 9.0 million of which were to non-prime consumers. Overall card originations in the quarter grew 63% year-over-year, while non-prime originations increased 75% YoY from the 5.1 million non-prime originations that occurred in Q3 2020. The non-prime risk range includes the subprime risk tier (defined as a VantageScore 4.0 range of 300-600) as well as the near prime risk tier (score range of 600-660).

“There was a great deal of uncertainty in the initial months of the pandemic, and many lenders opted to take a wait and see approach. Adding to the uncertainty was the jump in consumers in loan accommodation programs, and questions on how those consumers would perform once they exited those programs. Lending to below prime consumers was suppressed and financial institutions turned their focus to the prime areas of the market to help mitigate risk,” said Charlie Wise, senior vice president of research and consulting at TransUnion. “Toward the end of 2021, the majority of accommodation programs have expired and lenders have seen that consumers continue to perform well on their credit obligations. Lenders are eager to pursue growth, including expanding back into the non-prime consumer segment.”

Non-Prime* Originations Show Growth Across Credit Products in Q3 2021

Credit Product	Non-Prime Originations	QoQ Growth		YoY Growth
Credit Card	9.0 million	3.8	%	75.0	%
Personal Loans	3.5 million	18.7	%	46.9	%
Mortgage	303,000	8.4	%	17.6	%
Auto	2.4 million	-10.5	%	5.6	%

*Non-Prime: VantageScore 4.0 Risk Range of 300-660
Note: Originations are viewed one quarter in arrears to account for reporting lag for the Q4 2021 CIIR.

Supply issues have impacted sales volume in the auto industry and consequently, auto originations have stayed relatively flat. However, overall originations were buoyed by the below prime segment – which grew from 2.3 million in Q3 2020 to 2.4 million in Q3 2021. The mortgage industry, on the other hand, saw explosive growth throughout the pandemic with high levels of originations several quarters in a row due to the low interest rate environment. While non-prime consumers account for a fraction of all originations, the non-prime risk segment has also seen recent growth, with an increase of 17.6% YoY in Q3 2021, despite overall originations falling -12.6% in that same period.

Despite recent upticks in delinquencies in the most recent quarter, serious delinquency rates also remained near or below pre-pandemic levels in the wake of expired forbearance programs, which has continued to restore lender confidence. Borrower-level 60+ days past due (DPD) delinquencies for personal loans saw a seasonal uptick in Q4 2021 to 3.00%, but still remains well below the 3.48% observed in Q4 2019. The borrower-level 90+DPD for credit card reflects a similar trend and reached 1.48% in Q4 2021, but remains well below the 2.19% delinquency rate in Q4 2019.

TransUnion also looked at the 12-month performance of loans originated in 2020 compared to earlier years to better gauge consumer credit health. All credit products either outperformed or had similar performance compared to accounts opened in 2018 and 2019.

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/85b3077a-d104-408b-ba37-742d791308ca

“As the economy continues to recover and consumer credit health remains strong, lenders will likely continue to extend access to credit across the risk spectrum, including non-prime consumers, and origination volumes are expected to grow. Credit growth is also likely to be bolstered as consumers return to credit markets in the wake of government stimulus programs during the pandemic, which injected excess liquidity into the consumer wallets. As this excess liquidity wanes, we expect to see consumer credit demand return to more normal patterns,” added Wise.

For more information about the report, please register for the Q4 2021 Quarterly Credit Industry Insights Report Webinar. Read on for more specific insights about credit cards, personal loans, auto loans, mortgages, and the Credit Industry Indicator.

Credit Card Industry Sees Explosive Origination Growth

Q4 2021 CIIR Credit Card Summary
Originations in the credit card industry saw a dramatic rebound in growth in Q3 2021, increasing 63.5% YoY to a record 20.1 million new accounts. Growth was observed across all risk tiers, with the distribution showing 45% of originations coming from below prime consumers – the highest proportion of originations occurring in this segment of the market since 2010. This increase in origination volume helped drive the number of consumers with a credit card to a high of 196 million in Q4 2021. Many card issuers are expanding access to credit and using it as a growth strategy to offset consumers carrying lower balances. The average balance per consumer increased slightly to $5,127 in Q4 2021, up from $5,103 in Q4 2020 but still below the pre-pandemic average of $5,818.

Instant Analysis
“While card balances are showing a slight improvement compared to a year ago, average balances are still below what was observed pre-pandemic. Balance growth that has occurred has mostly come from super prime consumers and as such, card issuers are aligning their growth strategies with these behaviors by offering higher credit lines to these consumers. Card issuers are also tapping into new consumer risk segments to ramp up growth. Originations to non-prime consumers are increasing and consumer performance has remained stable, especially from a historical perspective. ”

• Paul Siegfried, senior vice president and credit card business leader at TransUnion
  
  

Q4 2021 Credit Card Trends

Credit Card Lending Metric	Q4 2021			Q4 2020			Q4 2019			Q4 2018
Number of Credit Cards	485.9 million			454.9 million			456.8 million			432.1 million
Borrower-Level Delinquency Rate (90+ DPD)		1.48%			1.30%			2.19%			1.94%
Average Debt Per Borrower		$5,127			$5,103			$5,818			$5,726
Prior Quarter Originations*	20.1 million			12.3 million			18.7 million			16.4 million
Average New Account Credit Lines*		$4,468			$3,820			$5,221			$5,260

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Personal Loan Balances Grow to an all-time High of $167 Billion

Q4 2021 CIIR Personal Loan Summary
The personal loan market has markedly rebounded since lenders pulled back during the early quarters of the pandemic. Origination volumes have returned to pre-pandemic levels with 5.1 million in Q3 2021, exceeding the 5.0 million loan originations in Q3 2019. The average new account balance grew by 23.8% YoY to $7,104 in Q3 2021. This growth helped drive personal loan balances to a total of $167 billion in Q4 2021 – an all-time high.

Instant Analysis
“The consumer lending market has returned to pre-pandemic levels, with balances even exceeding Q4 2019 numbers. Strong origination volumes, especially in below prime segments, coupled with material balance growth is an indication of lender confidence in consumer financial health. While the increase in subprime originations has led to a slight increase in delinquencies, they still remain well below pre-pandemic levels, and delinquencies by risk tier remain fairly stable.”

• Liz Pagel, senior vice president and consumer lending business leader at TransUnion
  
  

Q4 2021 Unsecured Personal Loan Trends

Personal Loan Metric

Q4 2021

Q4 2020

Q4 2019

Q4 2018

Total Balances

$167 billion

$145 billion

$157 billion

$136 billion

Number of Unsecured Personal Loans

22.8 million

21.2 million

23.3 million

21.1 million

Number of Consumers with Unsecured Personal Loans

19.9 million

19.3 million

20.8 million

19.1 million

Account-Level Delinquency Rate (90+ DPD)

1.78%

1.71%

2.31%

2.54%

Borrower-Level Delinquency Rate (60+ DPD)

3.00%

2.70%

3.48%

3.66%

Average Debt Per Borrower

$9,622

$8,795

$8,780

$8,240

Prior Quarter Originations*

5.1 million

3.5 million

5.0 million

4.6 million

Average Balance of New Unsecured Personal Loans*

$7,104

$5,739

$6,211

$6,153

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Inventory Challenges Impact Vehicle Sales

Q4 2021 IIR Auto Loan Summary
In light of reduced vehicle inventory and semi-conductor chip shortages, YoY origination rates remained flat in Q3 2021 at 7.3 million. As a result of low supply and high demand, vehicle affordability and pricing have been impacted, with the average balance of an auto loan (includes both new and used) growing to $26,976 – a 14% YoY increase over the same period last year. Average monthly payments have also been affected by the current environment and have increased from $459 in Q3 2019 prior to the pandemic to $531 in Q3 2021.

Instant Analysis
“Dealerships continue to face challenges around vehicle supply, and while originations held relatively flat in Q3 2021, uncertainty surrounding when inventory issues might be resolved continue to hang over the auto industry. We expect this, coupled with rising vehicle prices across both used and new vehicles, will impact auto sales through the remainder of 2022. Consumer performance, however, remains at healthy levels – especially as the majority of pandemic forbearance programs have expired.”

• Satyan Merchant, senior vice president and automotive business leader at TransUnion
  
  

Q4 2021 Auto Loan Trends

Auto Lending Metric	Q4 2021			Q4 2020			Q4 2019			Q4 2018
Number of Auto Loans	82.4 million			83.5 million			83.8 million			82.0 million
Borrower-Level Delinquency Rate (60+ DPD)		1.59%			1.57%			1.50%			1.45%
Prior Quarter Originations*	7.3 million			7.3 million			7.5 million			7.1 million
Average Monthly Payment**		$531			$473			$459			$443
Average Balance of New Auto Loans*		$26,976			$23,671			$22,223			$21,510
Average Debt Per Borrower		$21,210			$19,791			$19,183			$18,833

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
**Data from IHSM Catalyst, information is viewed one quarter in arrears.
Click here for additional auto industry metrics.

Mortgage Market Cools as Origination Volumes Shift from Refinance to Purchase

Q4 2021 CIIR Mortgage Loan Summary
Mortgage originations have started to slow from the peak levels seen in 2020, dropping -13% YoY to 3.4 million in Q3 2021. While this remains far above the pre-pandemic origination levels observed in Q3 2019 (2.3 million), rising interest rates have made it less attractive to secure a Rate and Term refinance. These refis saw a YoY decrease of -42%. In contrast Cash-out refi grew by 14% YoY, reflecting homeowners’ increase in home equity. Purchase volume remained flat. As such, purchase share of originations grew from 53% in Q2 2021 to 55% in Q3 2021. With consumer demand remaining high and home inventory remaining low, this dynamic has continued to increase home prices, with total mortgage balances reaching a record level of $10.7 trillion– up 9% YoY and the highest annual growth rate since before 2010.

Instant Analysis
“Due to the low interest rate environment earlier in 2021, much of the originations that have occurred in recent quarters came from Rate and Term refinancing. Many mortgage lenders were laser focused on processing that level of volume. With the pool of consumers who would benefit from a refinance shrinking and interest rates starting to rise, mortgage lenders will now look to implement diversified growth strategies. It is becoming more important for lenders to find borrowers that are both in the market for a home and that qualify for one. New consumer populations, such as the low-to-moderate income consumer segment, have been relatively untapped. Consumer demand for a home is still high and with more consumers eyeing home purchases, it can be a lucrative avenue for mortgage lenders to pursue in the year ahead.”

• Joe Mellman, senior vice president and mortgage business leader at TransUnion
  
  

Q4 2021 Mortgage Trends

Mortgage Lending Metric	Q4 2021			Q4 2020			Q4 2019			Q4 2018
Number of Mortgage Loans	51.2 million			50.7 million			50.3 million			49.5 million
Account-Level Delinquency Rate (90+ DPD)		0.59%			0.76%			1.05%			1.13%
Prior Quarter Originations*	3.4 million			3.9 million			2.3 million			1.6 million
Mortgage Origination* Distribution – Purchase		55%			48%			62%			78%
Mortgage Origination* Distribution – Refinance		45%			52%			38%			22%
Average Balance of New Mortgage Loans*		$312,801			$296,506			$286,913			$252,602

*Originations are viewed one quarter in arrears to account for reporting lag.

Despite Recent Dip, Credit Industry Indicator Shows Strong Performance

Q4 2021 CIIR Credit Industry Indicator Summary
The TransUnion Credit Industry Indicator (CII) increased by 16 points YoY, to 115, in Q4 2021, indicating the credit market has seen solid improvement over the past year. The CII, which was launched in 2021, offers a consolidated view of overall health and direction of the consumer credit market, looking at the components of consumer credit demand, supply, behavior and performance. Overall growth in the CII over the past year was driven by the strong growth in consumer credit demand and supply throughout 2021, continued growth in credit balances, and steady credit performance by consumers. At the same time, the CII experienced a drop in the most recent quarter compared to Q3 2021 when the CII hit 126, the highest level over the past decade. The CII typically drops in the fourth quarter each year due to seasonal factors; also contributing in Q4 2021 were the recent upticks in delinquency rates and the slowing of new auto loan and mortgage originations due to supply constraints and pricing pressures.

Instant Analysis
“The increase in the CII in Q4 2021 in comparison to the level a year earlier is a clear reflection of the recovery that the consumer credit market has seen since the depths of the pandemic. Consumer credit demand and supply, particularly for unsecured lending products like credit cards and personal loans, have rebounded in a big way, due to growing consumer confidence and to lenders making credit available across the risk spectrum. Consumers have access to credit, and they are using credit, which is the sign of a healthy market. As well, consumers are performing well on their credit obligations; despite the recent upticks in delinquencies in recent months, delinquency rates generally remain well below pre-pandemic levels for most products. We introduced the CII last year to provide a single metric to reflect the overall health of the consumer credit market, and the increase in the CII that we saw supports our view of a generally healthy and growing consumer credit market.”

• Charlie Wise, senior vice president of research and consulting at TransUnion
  

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/db53f811-5429-4f5a-bd05-3ecc0aa2c06e

Click here for more information on the Credit Industry Indicator.

For more information about the report, please register for the Q4 2021 Quarterly Credit Industry Insights Report Webinar.

About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good®.

A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.

http://www.transunion.com/business

Contact		Dave Blumberg
		TransUnion
E-mail		dblumberg@transunion.com
Telephone		312-972-6646

FAQ

What were the key findings of the Q4 2021 TransUnion report for stock TRU?

The report highlighted a 63% YoY increase in credit card originations and significant growth in non-prime borrowers.

How did personal loan balances perform according to the Q4 2021 report?

Personal loan balances reached an all-time high of $167 billion, reflecting strong market recovery.

What is the status of delinquency rates in Q4 2021 for TRU?

While there was a slight uptick in delinquency rates, they remain below pre-pandemic levels, suggesting ongoing consumer credit health.

What does the TransUnion Credit Industry Indicator signify for TRU in Q4 2021?

The Indicator rose by 16 points YoY, indicating a recovery and growth in the consumer credit market.