The Hong Kong Monetary Authority (HKMA) announced today (Monday) the results of its survey on credit card lending for the fourth quarter of 2002.
The delinquency ratio decreased further to 1.28% from 1.32% at the end of third quarter as a result of charge-offs made.
The amount charged off in the fourth quarter was HK$2.24 billion or 3.78% of average receivables during the quarter. Assuming the rate of charge-off is maintained for the next three quarters1 , the "annualised" ratio would be 13.45% compared with 14.55% in the previous quarter.
For the year as a whole, the charge-off ratio was 13.25%, compared with 5.46% in 2001.
Total receivables rose marginally by 0.1% after falling for three straight quarters. The total number of credit card accounts however continued to fall, by 3.0%, owing to a combination of factors including the effects of charge-offs, tightening of credit card issuance and lending policies, and termination of dormant accounts.
The rollover ratio, which reflects the proportion of customers using their credit card for "borrowing", decreased to 54.1%.
"Although the deterioration in the quality of the credit card portfolio appears to have stabilised in the fourth quarter, it is too early to conclude that the worst is over, given the uncertain economic environment and the unemployment situation. However, the agreement to share positive credit information commencing with effect from 1 April 2003 is a positive development." said Mr David Carse, Deputy Chief Executive of the HKMA.
For further enquiries, please contact:
Jasmin Fung, Manager (Press), at 2878 8246 or
Sylvia Yip, Manager (Press), at 2878 1687
Hong Kong Monetary Authority
17 February 2003
1 Excluding certain charge-offs which will not be repeated in subsequent quarters and which it would not therefore be appropriate to annualise.
Annex
Survey on Credit Card Lending
|
Q4 01 |
Q1 02 |
Q2 02 |
Q3 02 |
Q4 02 |
| Total number of accounts at period-end ('000) |
9,217 |
9,376 |
9,488 |
9,377 |
9,098 |
| Quarterly change (%) |
N/A |
+1.7 |
+1.2 |
-1.2 |
-3.0 |
| Yearly change (%) |
N/A |
+25.3 |
+19.8 |
+11.6 |
-1.3 |
|
| Total receivables at period-end (HK$ Mn) |
62,050 |
60,331 |
60,260 |
59,183 |
59,247 |
| Quarterly change (%) |
N/A |
-2.8 |
-0.1 |
-1.8 |
+0.1 |
| Yearly change (%) |
N/A |
+17.2 |
+10.5 |
+4.7 |
-4.5 |
|
| Average total receivables (HK$ Mn) 1 ( a ) |
59,277 |
61,190 |
60,295 |
59,722 |
59,215 |
|
| Delinquent amount > 90 days (HK$ Mn) |
796 |
1,147 |
1,045 |
779 |
756 |
|
| Delinquency ratio (%) |
1.28 |
1.90 |
1.73 |
1.32 |
1.28 |
|
| Charge-off amount (HK$ Mn)2 ( b ) |
1,268 |
1,384 |
2,055 |
2,359 |
2,237 |
|
| Charge-off ratios3 |
|
|
|
|
|
| - quarterly % ( c = b / a ) |
2.14 |
2.26 |
3.41 |
3.95 |
3.78 |
| - quarterly %, annualised |
8.55 |
9.04 |
13.63 |
14.554 |
13.454 |
| - quarterly %, annualised (adjusted)5 |
6.8 |
8.6 |
12.7 |
12.4 |
12.8 |
| - year-to-date %, annualised |
5.46 |
9.04 |
11.24 |
12.75 |
13.25 |
|
| Rollover amount (HK$ Mn) |
33,009 |
33,753 |
33,611 |
33,081 |
32,076 |
| Rollover ratio (%) |
53.2 |
55.9 |
55.8 |
55.9 |
54.1 |
Note:
- Average during period (calculated as [opening stock + closing stock]/2 )
- Flow during period
- Calculated as flow during period as percentage of average receivables during period
- Excluding certain charge-offs which will not be repeated in subsequent quarters and which it would not therefore be appropriate to annualise.
- 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
- 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.
- Credit card receivables in the survey refer to credit card receivables from individual credit cardholders.
- 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.
- 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.
- 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).
- 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.
- 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.
