Credit Card Lending Survey Results For Fourth Quarter 2003

The Hong Kong Monetary Authority (HKMA) announced today (Wednesday) the results of its survey on credit card lending for the fourth quarter of 2003.

The amount charged off in the fourth quarter decreased for the fifth consecutive quarter to HK$1.13 billion or 2.05% of average receivables during the quarter. The "annualised"¹ ratio was 8.19% compared with 9.85% in the previous quarter, and the lowest since the fourth quarter of 2001.

The delinquency ratio fell below 1% at end-December, to 0.92% compared with 1.23% at end-September. Outstanding rescheduled card receivables amounted to HK$166 million or 0.3% of total receivables within the card portfolio. Together, the delinquent and rescheduled ratio stood at 1.22% at end-December.

The total number of credit card accounts rose by 0.4%. Despite the transfer of some HK$169 million rescheduled receivables representing 0.3% of average receivables outside the credit card portfolio during the quarter, total receivables increased by 4.3% in the fourth quarter, having fallen in the first three quarters of the year. The increase can be attributed to a combination of increased spending during the festive month of December and the payment of salary tax using credit card.

The rollover amount, which reflects the amount of "borrowing" customers using their credit cards, fell for the seventh consecutive quarter to HK$27.8 billion from HK$28.8 billion as at end-September 2003.

"Debt rescheduling arrangements together with the lower trends in bankruptcy and unemployment continued to be the driving factors behind the improvement in the charge-off and delinquency situations in the card portfolio," commented Mr William Ryback, Deputy Chief Executive of the HKMA. "Despite this positive development, banks should remain watchful and be prudent on credit limits and the issue of new cards."

For further enquiries, please contact:

Kevin Ip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
18 February 2004

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

Annex

Survey on Credit Card Lending

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.

^* This line is newly introduced.

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.