Credit Card Lending Survey Results For Fourth Quarter 2006

The Hong Kong Monetary Authority (HKMA) announced today (Thursday) the results of its survey on credit card lending for the fourth quarter of 2006. 

Total card receivables rose by 11.8% (or HK$7.6 billion) in the fourth quarter, despite a transfer of HK$110 million of rescheduled receivables (representing 0.2% of average receivables) outside the credit card portfolio during the quarter.  The increase was largely due to the payment of salary tax using credit cards and festive spending in December.  The total number of credit card accounts rose further by 0.8%.

The rollover amount, which reflects the amount of borrowing by customers using their credit cards, increased to HK$25.0 billion from HK$24.9 billion as at the end of September 2006.    

The charge-off amount increased in the fourth quarter to HK$0.54 billion or 0.78% of average receivables from HK$0.53 billion in the previous quarter.  The increase was mainly attributable to an increase in bankruptcy related charge-offs during the quarter, particularly in November.  However, the annualised¹ charge-off ratio dropped to 3.13% from 3.30% in the previous quarter due to the strong growth in total card receivables.

Notwithstanding an increase in the delinquent amount to HK$269 million at the end of December, the delinquency ratio declined to 0.37% due to the increase in total card receivables.  The amount of rescheduled receivables retained in the card portfolio decreased to HK$52 million or 0.07% of total receivables, from HK$55 million or 0.08% in the third quarter.  The combined delinquent and rescheduled ratio declined to 0.44% from 0.49% at the end of September.  

For further enquiries, please contact:
Ying-ying Cheng, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
15 February 2007

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

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.