Major Metro Areas Spur on Strong Canadian Credit Performance in Q1 2017

Consumers in major Canadian markets outside of oil-rich provinces led the nation’s strong credit performance in the first quarter of 2017, according to TransUnion’s (NYSE: TRU) latest Canada Industry Insights Report.

Canada’s average consumer non-mortgage debt levels rose nearly 2% in the last year to conclude Q1 2017 at $21,696. Conversely, the 90+ day non-mortgage account delinquency rate dropped to 2.72%, down nearly 1.5% from one year prior. Much of the annual delinquency declines were observed around major cities in Ontario and Quebec, including Toronto (down 7.55%), Montreal (down 2.51%) and Ottawa (down 2.37%).

“The consumer credit market in Canada is expanding, and is doing so in a healthy manner,” said Matt Fabian, director of research and consulting for TransUnion Canada. “More consumers are gaining access to credit, and credit limits have been increasing at a strong rate during the last two years. At the same time, serious delinquency rates have remained relatively low. It’s especially encouraging to see some major Canadian markets lead the way in delinquency declines and credit growth, as it bodes well for Canada’s overall economic activity.”

Consumer Credit Performance of Major Canadian Metro Areas

TransUnion’s report also found that Canadian access to and use of credit continues to expand. Non-mortgage balances and limits grew 1.6% and 2.3% respectively in Q1 2017.

Looking deeper into specific areas of growth, the number of consumers carrying a balance on a credit card rose to 20.4 million as of Q1 2017. This is a 3.5% increase from the 19.7 million tally as of Q1 2015. Subprime consumers have participated in this expansion, with the number of subprime consumers with access to a card growing nearly 14% from 2.1 million in Q1 2015 to 2.5 million in Q1 2017. Meanwhile, trends in more recent quarters have shown a shift back to higher card access growth in prime and better risk tiers as lenders continue to balance their portfolio risk.

While TransUnion has observed a credit expansion, borrowers continue to perform relatively well on their accounts. Serious non-mortgage account delinquency rates fell 1.5% in Q1 2017 from the prior year. Meanwhile, serious delinquency rates for subprime borrowers dropped 9.4% in the last two years.

“While delinquency rates for subprime borrowers generally are much higher than other risk groups, it’s a positive sign to see delinquencies decline even as more consumers in this risk group gain access to credit,” said Fabian. “It appears that we are at a point where lenders feel they can take on more risk, which benefits consumers who are seeking credit.”

Inside Auto Lending: Auto Loan Market Continues to Expand

Auto lending continued to be one of the fastest growing segments in the Canadian consumer credit marketplace during Q1 2017. Average balances rose 2.75% in the last year to $18,783 in Q1 2017. At the same time, serious delinquency rates (accounts 60 days or more past due) remained essentially flat in Q1 2017 (1.70%) compared to Q1 2016 (1.67%).

“Despite an extended period of growth, auto loans continue to perform extremely well. More prime and above consumers are originating auto accounts and at higher amounts, while delinquency rates remain at historically low levels,” said Fabian.

On a yearly basis, originations grew by just over 6% in the last quarter of 2016. Originations are viewed one quarter in arrears to account for reporting lag. As originations increased, the percentage of lower-risk consumers originating auto loans expanded over the past year.

In Q4 2015, non-prime (the combination of subprime and near prime) consumers accounted for 37% of originations. In Q4 2016, the share of non-prime originations decreased slightly to 35%. Originations in the prime plus and super prime tiers grew at 10.4% and 12.2%, respectively, over that time period.

The average amount financed for newly originated auto loans increased by 3.2% in Q4 2016. All risk tiers saw yearly increases in average new account balances, with the highest percentage growth observed in super prime (4.9%) and prime (4.8%) consumer risk tiers. This reverses a trend observed the prior year; in 2015 TransUnion observed the greatest growth in average amount financed among subprime and near prime consumers.

“Auto delinquency rates remain at nicely controlled levels. The fact that delinquencies have not materially increased over the past year despite the higher growth by below-prime consumers seen in 2015 is especially encouraging—consumers across the risk spectrum are taking care of their auto loans.” said Fabian.

More information about the Q1 2017 TransUnion Canada Industry Insights Report can be found here. Among the details are more information about auto, installment and lines of credit balance and delinquency rates.

About TransUnion Canada Industry Insights Report

TransUnion’s Canada Industry Insights Report is an in-depth, full population-based solution that provides statistical information every quarter from TransUnion’s national consumer credit database, aggregated across virtually every active credit file on record. Each file contains hundreds of credit variables that illustrate consumer credit usage and performance. By leveraging the Industry Insights Report, institutions across a variety of industries can analyze market dynamics over an entire business cycle, helping to understand consumer behaviour over time and across different geographic locations throughout Canada. Businesses can access more details about and subscribe to the Industry Insights Report at http://www.transunioninsights.ca/IIR/.

About TransUnion (NYSE: TRU)Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion reaches consumers and businesses in more than 30 countries around the world on five continents. Based in Burlington, Ontario, TransUnion provides local service and support throughout Canada. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide. We call this Information for Good. Visit www.transunion.ca to learn more.