Credit Card Lending Survey Results For First Quarter 2004

Press Releases

18 May 2004

Credit Card Lending Survey Results For First Quarter 2004

The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) the results of its survey on credit card lending for the first quarter of 2004.

The amount charged off in the first quarter decreased for the sixth consecutive quarter to HK$0.87 billion or 1.58% of average receivables during the quarter. The "annualised"1 ratio was 6.34% compared with 8.19% in the previous quarter, the lowest level since the third quarter of 2001.

The delinquency ratio also fell to a three-year low of 0.78% at end-March. Meanwhile, outstanding rescheduled card receivables within the card portfolio increased to HK$178 million, representing 0.33% of total receivables. Together, the delinquent and rescheduled ratio stood at 1.12%, down from 1.22% at end of 2003.

The total number of credit card accounts increased by 0.2%. Total receivables, however, decreased by 4.7% after rising by 4.3% in the previous quarter. The decrease reflects the receding effect of the payment of salary tax using credit cards as well as the transfer of some HK$168 million rescheduled receivables representing 0.3% of average receivables outside the credit card portfolio during the quarter.

The rollover amount, which reflects the amount of "borrowing" customers using their credit cards, fell for the eighth consecutive quarter to HK$27.0 billion.

"The improvement in the asset quality of the credit card portfolio is not unexpected in light of the improving economic and labour market conditions" commented Mr William Ryback, Deputy Chief Executive of the HKMA. "Banks' efforts in helping their customers reschedule their card receivables continued to be steady and appear to be paying off."

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
18 May 2004

1 This assumes the quarterly rate of charge-off is maintained for the next three quarters.

Annex

Survey on Credit Card Lending

  Q1 03 Q2 03 Q3 03 Q4 03 Q1 04
Total number of accounts at period-end ('000) 8,804 8,732 8,747 8,784 8,805
Quarterly change (%) -0.7 -0.8 +0.2 +0.4 +0.2
Yearly change (%) -4.7 -6.4 -4.7 -0.9 +0.0
Total receivables at period-end (HK$ Mn) 54,567 53,985 53,974 56,305 53,639
Quarterly change (%) -7.9 -1.1 -0.0 +4.3 -4.7
Yearly change (%) -9.6 -10.4 -8.8 -5.0 -1.7

 

Average total receivables (HK$ Mn) 1 ( a ) 56,907 54,276 53,980 55,140 54,972

 

Delinquent amount > 90 days (HK$ Mn) 685 688 662 519 421
Rescheduled card receivables (HK$ Mn)( b ) - - - 166 178

 

Delinquency ratio (%) 1.25 1.27 1.23 0.92 0.78
Rescheduled ratio (%) * ( c = b / a ) - - - 0.29 0.33

 

Charge-off amount (HK$ Mn)2 ( d ) 1,757 1,574 1,329 1,129 871
Charge-off ratios3
- quarterly % ( e = d / a ) 3.09 2.90 2.46 2.05 1.58
- quarterly %, annualised 11.824 11.60 9.85 8.19 6.34
- year-to-date %, annualised 12.35 11.77 10.98 10.02 6.34

 

Rollover amount (HK$ Mn) 30,391 29,019 28,764 27,759 26,996
Rollover ratio (%) 55.7 53.8 53.3 49.3 50.3

 

Note:

  1. Average during period (calculated as [opening stock + closing stock]/2 )
  2. Flow during period
  3. Calculated as flow during period as percentage of average receivables during period
  4. Excluding certain charge-offs which will not be repeated in subsequent quarters and which it would not therefore be appropriate to annualise. The year-to-date figures are not similarly adjusted.

 

Survey on the Banking Sector's Credit Card Lending

Notes to Press Release

  1. This survey covers authorized institutions (AIs) and some subsidiaries of AIs that are engaged in credit card business. It does not cover card issuers that are not AI-related.
  2. Credit card receivables in the survey refer to credit card receivables from individual credit cardholders.
  3. The delinquency ratio is measured by the total amount of credit card receivables overdue for more than 90 days and remaining unpaid at the last day of the reporting month as a percentage of total credit card receivables. Credit card receivables are classified as overdue when a payment is past due on the last day of the reporting month (see also Note 7 below). The delinquency ratio provides an early indication of the quality of the credit card portfolio.
  4. Charge-off amount refers to the total amount of credit card receivables written off the loan book during a period (irrespective of when a charge is made to the profit and loss account, which may be earlier if it is the institution's policy to create provisions at an earlier time than the amount is written off). Charge-off policies vary from institution to institution. Normally, an account will be written off when the receivable has been overdue for more than 180 days or when the ultimate repayment of the receivable is unlikely (e.g. the cardholder is bankrupt or cannot be located).

    The quarterly annualised ratio foreshadows the extent of charge-offs that would be experienced if the current quarter's charge-off ratio were to be sustained for the next three quarters. The year-to-date ratio tracks the actual charge-offs to date and is annualised for purposes of comparison.
  5. The delinquency and the charge-off ratios are complementary to each other. The former takes into account those credit card receivables that at the reporting date had been overdue for more than 90 days but had not yet been written off. It is therefore an indicator of future charge-offs. The latter captures those receivables that were written off during the specified period because they were seriously overdue (e.g. for more than 180 days) plus those written off earlier than 180 days because they were considered irrecoverable (e.g. because the borrower has gone into bankruptcy).
  6. The rescheduled ratio is measured by the amount of rescheduled receivables retained in the card portfolio which are not captured as delinquent at period-end as a percentage of total receivables. This ratio provides supplementary information on the quality of the credit card receivables.
  7. Rollover amount, representing "borrowing", is the amount within total receivables in respect of which the cardholder has not fully repaid the statement balance but has at least made the minimum amount of payment required by the authorized institution. It does not include amounts that are overdue. An account is overdue when the minimum payment is not made upon the due date.
  8. Rollover ratio refers to the percentage of total rollover amounts to total credit card receivables. While total receivables relate to the month-end position, total rollover amounts are based on balances recorded at the statement date.
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Last revision date : 18 May 2004