In the first quarter, the performance of credit consumers continued to deteriorate, as seen in serious delinquency rates at the balance level, the rates at which consumers move from one delinquency category to the next (rollover), and the performance of harvests (behavior of a credit in different periods of time after it is granted).
Delinquency rates of 60 days past due or more increased for major credit products, indicating that payment challenges persist.
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Free investment installment loans continued to show the greatest year-on-year deterioration of 357 basis points (bps), followed by microcredits and vehicle loans, with a year-on-year increase of 283 bps and 262 bps, respectively.
While refinancing rates remained relatively stable relative to the first quarter of 2023, they continued to deteriorate in the first quarter of 2024 compared to the first quarter of 2022, particularly for the current and early delinquency segments, the TransUnion report says.
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For example, in the financial services sector, the refinancing rate for the 30-59 day delinquency category was 63.9% between January and February 2024, compared to 55.1% between January 2022 and February 2022. For credit cards, the refinancing rate for the 30-59 day delinquency category was 65.8% between January 2024 and February 2024, compared to 56.0% between January and February 2024. February 2022. Similar increases were observed in free investment installment loans and microcredits, according to the report.
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Harvests (behavior of a loan in different periods of time after it has been granted) continued to show deterioration, with greater delinquencies six months after origination in the most recent harvests, compared to those a year earlier, for all risk levels. In particular, For ‘prime’ consumers at origination, 6.5% of all credit card accounts originated in the second quarter of 2023 were 60 days or more delinquent at six months, compared to 5.9% of those originating in the second quarter of 2022.
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Like credit cards, the harvests of free investment installment loans continued to show a deterioration year on year: 12.7% of all accounts originated by ‘prime’ consumers in The second quarter of 2023 had a delinquency of 60 days or more after six months, compared to 8.4% of those originated in the second quarter of 2022 within the ‘prime’ segment.
“This significant deterioration in delinquencies is explained, in part, by the increase in consumer debt, driven by a higher cost of living and indebtedness, which has led to an increase in monthly payment obligations”said Virginia Olivella, Senior Director of Research and Consulting at TransUnion Colombia. “The increase in consumer debt has put pressure on the disposable income of Colombians, affecting their ability to meet their payment commitments and has been a constant concern since 2022.”
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The Colombian credit market also experienced a higher rate of bad debts (cancelled debts), reaching 9.3% of the total portfolio at the end of 2023, compared to 7.5% at the end of 2022 and 7.3% at the end of 2022. % during the same period in 2021.
The combination of higher refinancing rates, as well as increased portfolio and crop delinquencies, is reflected in consumer sentiment according to TransUnion’s Consumer Pulse survey. In the first quarter of 2024, one-third (33%) of consumers surveyed said they expect to be unable to pay all of their current bills and credit, up from 30% in the previous quarter and 31% in the same quarter in 2023.
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The report notes that in a challenging current environment, in line with performance concerns, access to credit in the form of new credit continued to decline in Colombia in most credit products, except in the case of new housing loans. , which grew 34.7% year-on-year, driven by the revival of government subsidies for low-income housing. For most credit products, the first quarter of 2024 marked the fifth consecutive quarter of annual declines in new credit.
The number of Colombians with at least one credit product in the financial sector also decreased year-on-year in the first quarter of 2024 for most credit products, with vehicle loans and free investment installment loans showing the largest decreases of 4.3% and 3.8%, year-on-year, respectively.
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In an environment where consumer finances are under pressure and lenders are adopting conservative risk strategies, lower risk originations continued to increase their share of total originations. Originations at these risk levels represented 53% of the total in the first quarter of 2023, increasing to 56% in the first quarter of 2024.
TransUnion Colombia’s Consumer Pulse for the first quarter of 2024 also revealed that almost half of consumers surveyed (49%) had planned to apply for credit in the next quarter but decided not to. Of those, 44% said the cost of credit was too high, 23% said they would seek financing from an alternative source, and 20% believed their application would be rejected due to their current income or employment status.
HOLMAN RODRÍGUEZ MARTÍNEZ
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