US markets have posted strong numbers last few quarters. however increased lending in the subprime segment, has increased exposure to delinquencies leading to potential mass defaults

1. Latest Financial data indicates a strong growth story for the US
economy….
US Economy
pushing closer to
$17 Trillion
US Economy
forecasted as
fastest growing for
2017
Unemployment
rates are the
lowest in a
decade
However some trends are contradictory…. The data
seems to hide some anomalies
Read on to find out more….
Source: Financial times

2. Credit Availability
Subprime
Lending
Bank credit
up 44% while
GDP is up 21%,
since 2008
Subprime
credit card up by
15%,
Q4 ‘14 - Q4 ‘15
Consumer loans at an all time high Increase in Sub Prime Lending
Source : Board of Governors for Federal Reserve System, Transunion
For the last few quarters, financial institutions have reported
heavy growth in lending

3. Consumer Spend
Daily Self spending
increased to $101
highest in 9 years
US Economic
confidence up
+16 points
Consumer
Confidence
Consumer Spending Consumer Confidence
Source: Gallup daily
Market have reported an increase in consumer spending and
consumer confidence

4. Is the US economy moving
towards a deathly spiral….
The current forecast looks rosy but the signs beneath are
ominous !!

5. • The auto delinquency rate reached 1.44% to close 2016, a 13.4%
increase from 1.27% in Q4 2015. Auto delinquency is at its highest level
since the Q4 2009 reading of 1.59%.
• Subprime auto loan balances grew by 11% from 2015, according to
Experian.
Auto
Delinquencies
Credit Card
Delinquencies
• The average household with credit card debt has balances totaling
$16,061
• The CC delinquency rate reached 1.79% in Q4 2016, an increase
of 12.6% from 1.59% in Q4 2015
1
2
Growth fueled by easing of lending practices and originating from
sub-prime
Delinquencies are rising steadily across products….
Source: Financial times

6. Personal Loans
• The personal loan delinquency rate was 3.83% in Q4 2016, the
highest Q4 reading since Q4 2013 and up from 3.62% in Q4 2015.
• The average personal loan balance reached $7,640 in Q4 2016, up
from $7,360 in Q4 2015.
3
Mortgages
4
• The average mortgage balance reached a post-Recession high of
$194,415 in Q4 2016.
• The mortgage delinquency rate concluded 2016 at 2.28%, and has
now declined every quarter on a quarter-over-quarter basis since
Q3 2013.
Sub Prime crisis resulted in tightening of mortgage lending
norms and hence looks relatively insulated…
Source: Financial times

7. As portfolios mature, delinquency rates
are anticipated to outpace sourcing rates
triggering a potential collapse
Image credit : Financial times

8. Delinquencies are rising in the auto industry
Source: seeking alpha , bankregdata
Top players in the auto industry are bracing for the hit…
The bubble looks ready to burst..

9. Enable a customer to reach out on a channel
of his / her choice
Make it easy for customers to remember due
dates and make payments
Proactively engage with customers
Provide affordable plans
Incentivize good payment behaviorDelinquency
Prevention
Omni Channel
Engagement
A
B
Some concentrated efforts will go a long way in reducing
delinquencies

10. UNLESS ORGANIZATIONS TAKE URGENT MEASURES TO IMPROVE
PORTFOLIO QUALITY AND BRING IN IMPROVED LENDING
PRACTICES, THE DOWNWARD SPIRAL WILL CONTINUE TO GROW….
Conclusion….