Risk managers at North American banks foresee a greater demand for credit leading to increased balances, and increased risk for credit issuers.
In FICO’s quarterly survey of the Professional Risk Managers’ International Association (PRMIA), 44% of managers surveyed redicted an increase in credit card delinquencies over the next six months. If that happens, it could push total consumer loan delinquencies to the highest they’ve been since the final quarter of 2011.
Sixty-five percent of those polled see balances on credit cards increasing in the next six months. In the four years that FICO and PRMIA have conducted this study that is the highest percentage of risk managers who said balances would increase.
They also predict more people will apply for new lines of credit. Sixty-one percent of risk managers said in the next six months we’ll see an increase in the amount of new credit line requests by consumers.
Delinquencies not necessarily bad news
The increase in requests for credit, along with more delinquencies, is not necessarily bad news for the economy. When the economy is in recession, lenders are less likely to extend credit to high-risk borrowers, according to FICO. Now that banks are loosening up their standards and giving credit more freely, delinquencies can be expected to rise.
Small business credit holds steady
When it comes to small business owners managing credit, risk managers don’t expect significant changes in the near future.
When asked how the amount of credit requested by small businesses would evolve over the next six months, 94% of risk managers believed it would either remain steady or increase. Eighty-four percent said the amount of credit actually extended to small businesses would also be steady, or possibly increase. Seventy-four percent expected the amount to meet demand.
The complete survey results an be found here. It was conducted in February 2014 and included responses from 229 bank risk managers.