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Credit Card Lending Survey Results For Third Quarter 2002

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) the results of its survey on credit card lending for the third quarter of 2002. In summary, while the reported figure for charge-offs showed an increase, there are indications that the underlying trend might have stabilised in the third quarter.

The third quarter saw a further decline in the delinquency ratio to 1.32%, from 1.73% as at the end of second quarter. The decline was largely due to institutions making charge-offs in relation to personal bankruptcies earlier.

The amount charged off in the third quarter was HK$2.36 billion or 3.95% of average receivables during the quarter. Assuming the rate of charge-off is maintained for the next three quarters1 , the "annualised" ratio would be 14.55% compared with 13.63% in the previous quarter.

However, the rate of charge-off continues to be affected by the impact of accounting policy changes, making it difficult to determine the underlying trend. If the accounting changes had not been made, it is estimated that the "annualised" charge-off ratio would have been 12.4% of average receivables in the third quarter, slightly below the 12.7% in the previous quarter. This suggests that the underlying trend might have stabilised.

Total receivables fell for the third consecutive quarter, by 1.8%. The total number of credit card accounts also fell, by 1.2%. This reflects the impact of charge-offs, tightening of credit card issuance and lending policies as well as restructuring of card receivables (i.e. into personal loans) by some institutions.

The rollover ratio, which reflects the proportion of customers using their credit card for "borrowing", remained stable at 55.9%.

"The underlying trend of charge-offs after adjusting for accounting changes appeared to show signs of stabilisation in the third quarter, in line with the trend in bankruptcy petitions which has been a dominant factor influencing the level of charge-offs. The quality of the credit card portfolio will continue to be dependent on the economic situation and unemployment trends" said Mr David Carse, Deputy Chief Executive of the HKMA.

For further enquiries, please contact:
Sylvia Yip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
21 November 2002

1. Excluding certain charge-offs in the third quarter which will not be repeated in subsequent quarters and which it would not therefore be appropriate to annualise.


Survey on Credit Card Lending

  Old survey groupExpanded survey group
  Q3 01Q4 01Q1 02Q2 02Q3 02
Total number of accounts at period-end ('000) 8,400 9,217 9,376 9,488 9,377
Quarterly change (%) +6.0 N/A +1.7 +1.2 -1.2
Yearly change (%) +26.1 N/A +25.3 +19.8 +11.6
Total receivables at period-end (HK$ Mn) 56,505 62,050 60,331 60,260 59,183
Quarterly change (%) +3.6 N/A -2.8 -0.1 -1.8
Yearly change (%) +20.5 N/A +17.2 +10.5 +4.7
Average total receivables (HK$ Mn) 1 ( a ) 55,513 59,277 61,190 60,295 59,722
Delinquent amount > 90 days (HK$ Mn) 637 796 1,147 1,045 779
Delinquency ratio (%) 1.13 1.28 1.90 1.73 1.32
Charge-off amount (HK$ Mn)2 ( b ) 741 1,268 1,384 2,055 2,359
Charge-off ratios3          
- quarterly % ( c = b / a ) 1.34 2.14 2.26 3.41 3.95
- quarterly %, annualised 5.34 8.55 9.04 13.63 14.554
- quarterly %, annualised (adjusted)5 5.3 6.8 8.6 12.7 12.4
- year-to-date %, annualised 4.52 5.46 9.04 11.24 12.75
Rollover amount (HK$ Mn) 31,159 33,009 33,753 33,611 33,081
Rollover ratio (%) 55.1 53.2 55.9 55.8 55.9



  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 in the third quarter which will not be repeated in subsequent quarters and which it would not therefore be appropriate to annualise.
  5. Ratios are adjusted to remove the effects of all accounting policy changes to track the underlying trend in card quality.


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 6 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. 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.
  7. 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.
Last revision date: 1 August 2011
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