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Credit Union Insights in the Auto, Mortgage, HELOC and Card Markets

Nidhi Verma
Blog Post08/30/2018
Business Customer Analytics
Banner image for Credit Union Trends in the Auto, Mortgage, HELOC and Card Markets

Credit unions are growing faster than their competitors across all major credit products. As the industry faces a softening in vehicle sales and mortgage refinances, credit unions continue to grow.

In particular, the average member balance for auto loans and HELOCs rose, while other financial institutions faced a decline in balances for these products. Credit union members are not only accessing credit, but also using their credit union products. Across all products, credit union members perform better than bank customers.

In a recent TransUnion webinar, I used insights from Prama to uncover the drivers of growth and performance for credit unions in the auto, mortgage, HELOC and card markets.

Credit union insights: The auto market

Since 2012, credit unions have deliberately grown their share of the auto finance market. As a result, auto balance growth for credit unions has surpassed industry growth rates. In Q1 2018, credit unions had 35% market share of auto balances, the largest share of any lender segment.

However, credit unions have the most conservative risk appetite of all financial institutions. While credit unions expanded their issuing to non-prime members between 2013 and 2015, they scaled back in 2016 and 2017. In the first quarter of 2018, only 22% of credit union loans were issued to non-prime members, compared to 24% for national banks and 31% for regional banks.

Credit unions also financed lower auto loan amounts for prime plus and super prime borrowers, but they competed aggressively on longer term loans when compared to their peers. On the credit risk front, credit union auto loans perform better, however, their recent vintage performance has deteriorated in line with their risk expansion since 2013.

To leverage insights derived from the entire credit database and measure pricing opportunities, risk performance trends, and to dive deeper into state and MSA-level credit trends, credit unions should use market intelligence solutions.

Credit union insights: The mortgage market

For most lenders, the prime and above risk tiers have driven recent growth in the mortgage market. Similarly, 75% of mortgage balances for credit unions are concentrated in the prime plus and super prime member groups.

With a continued focus on higher credit tiers for origination growth, credit union mortgage delinquency rates are improving on a vintage basis. In the webinar, I also shared some specific vintage performance trends by risk tier and state-level to highlight how we are observing deterioration on the west coast within specific states, potentially driven by recent natural disasters.

To continue the growth momentum and outperform peers, credit unions need dynamic market intelligence to understand regional trends against peers.

Credit union insights: The HELOC market

While access to HELOCs has grown in recent years – in line with growth in home equity – the majority of the market is declining due to balance pay-downs. In contrast with the rest of the market, credit unions have experienced a steady HELOC balance growth.

However, banks are originating higher average credit lines than credit unions across all risk tiers, even when controlled for risk and geography. Using this insight, credit unions can adjust their strategy to capture a higher share of the HELOC market.

Credit union insights: The card market

Card volumes are growing, and credit unions have maintained their share of originations. Over the past few years, credit unions have expanded access to non-prime consumers and raised credit lines within prime plus and super prime risk tiers. As a result, credit unions are competing effectively on line assignments across the risk spectrum.

The webinar also highlighted how credit unions’ portfolio-level delinquencies perform significantly better than other lenders, because they have a more mature portfolio and their cards outperform other issuers. However, recent vintages are performing worse for the credit union market because cardmembers within the same risk score band are performing worse than prior vintages.

Across the traditional credit products, credit unions have strong growth trends and often outperform other financial institutions. To maintain this momentum going into next year, credit unions have an opportunity to use market intelligence to drive their strategic plans and anticipate market changes by tapping these insights. For more credit union market insights, watch the on-demand webinar.

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