Credit Card Lending Survey Results For Second Quarter 2005

The Hong Kong Monetary Authority (HKMA) announced today (Wednesday) the results of its survey on credit card lending for the second quarter of 2005.

The charge-off amount was little changed in the second quarter, at HK$0.47 billion or 0.82% of average receivables compared with HK$0.46 billion or 0.80% in the previous quarter. The annualised¹ charge-off ratio increased marginally to 3.27% from 3.18% in the previous quarter.

By contrast, the delinquency ratio declined to 0.40% at end-June. This is the lowest level recorded since the start of the credit card survey in 1996. The amount of rescheduled receivables also decreased, to HK$65 million or 0.11% of total receivables, from HK$68 million or 0.12% at end-March. Together, the delinquent and rescheduled ratio declined to 0.52% at end-June from 0.57% at end-March.

Total card receivables increased by 0.3% (or HK$0.2 billion), having fallen by 4.1% in the previous quarter notwithstanding a transfer of HK$82.5 million of rescheduled receivables (representing 0.1% of average receivables) outside the credit card portfolio during the quarter. The total number of credit card accounts rose further by 1.7%.

The rollover amount, which reflects the amount of borrowing by customers using their credit cards, decreased to HK$24.3 billion from HK$24.8 billion as at end-March 2005.

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
10 August 2005

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

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

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.