Consumer Lending

Deteriorating asset quality concentrated in real estate loan portfolios continued to take a toll on the earnings performance of many insured institutions in first quarter 2008. Higher loss provisions were the primary reason that industry earnings for the quarter totaled only $19.3 billion, compared to $35.6 billion a year earlier. FDIC-insured commercial banks and savings institutions set aside $37.1 billion in loan-loss provisions during the quarter, more than four times the $9.2 billion set aside in first quarter 2007. Provisions absorbed 24 percent of the industry’s net operating revenue (net interest income plus total oninterest income) in the quarter, compared to only 6 percent in the first quarter of 2007. The average return on assets (ROA) was 0.59 percent, falling from 1.20 percent in first quarter 2007. The first quarter’s ROA is the second-lowest since fourth quarter 1991.

Full QBP

The U.S. mortgage lending industry totaled $10.5 trillion in loans outstanding at the end of 2007.

Over the last 3 years, the mortgage debt outstanding grew at a 10.3% compound annual growth rate. However, the growth rate has gradually been declining. Annualized growth of mortgage debt was 13.1% in 2005, 11.1% in 2006, and 6.6% in 2007.

There are over 50,000 mortgage brokers in the United States, originating over 50% of mortgage loans. Thousands of banks originate home loans and home equity lines of credit. However, the mortgage lending industry is largely dominated by Fannie Mae and Freddie Mac, with Fannie Mae having $2.8 trillion in mortgage debt held or securitized at the end of 2007 and Freddie Mac having $2.1 trillion (or 23.8% and 17.8% of the total mortgage debt outstanding, respectively).

$2.4 trillion in new single-family mortgages were originated in 2007, down from $3.0 trillion in 2006 and $3.1 trillion in 2005. Total originations by the mortgage lending industry may drop below $2 trillion in 2008 due to slowing economic growth, falling home prices, and the continuing credit crunch which has resulted in more stringent approval criteria for mortgage applications than in recent years.

Approximately 21% of mortgage originations in recent years were subprime mortgages, up significantly from 9% of total originations from 1996 through 2004.

This post uses data from various government publications, the Mortgage Bankers Association, Moody’s, and the National Association of Mortgage Brokers.

The analysis on the size of the consumer lending industry has been updated.

Consumer credit rose $15.3 billion in March to $2.56 trillion, an increase of 7.2% (annualized).

Credit cards and other revolving debt rose $6.3 billion, while installment debt rose $9 billion from the prior month.

Consumer credit release

The consumer lending calendar has been updated to show the dates of events and important news releases for the rest of 2008.

The LIBOR and fed funds rate forecasts have been updated.

The Federal Reserve announced today that total consumer credit increased $5.1 billion in February, an annualized rate of 2.4%. Revolving credit (such as credit cards) increased $4.7 billion, or 5.9% (annualized) from January. Non-revolving credit (such as auto loans) increased $0.5 billion, or 0.4% (annualized).

Consumer Credit Release

Total consumer credit (non-mortgage) rose $6.9 billion in January, up an annualized 3.3% from December. Revolving credit rose $5.6 billion (7.0% annualized), while non-revolving credit rose $1.5 billion (1.1% annualized). Consumer credit release.

The new Quarterly Banking Profile has been released. Excerpt:

FDIC-insured commercial banks and savings institutions reported net income of $105.5 billion in 2007, a decline of $39.8 billion (27.4 percent) from the record $145.2 billion that the industry earned in 2006. Fourth-quarter earnings declined to $5.8 billion, a 16-year low. Insured institutions set aside a record $31.3 billion in loan-loss provisions in the fourth quarter, as troubled loans continued to rise. The noncurrent loan rate rose to 1.39 percent at year end, the highest level in more than five years.

View the QBP

Consumer credit grew at an annualized 2.1% rate in December, or $4.5 billion. Revolving credit rose $2.1 billion, or 2.7% (annualized), while non-revolving credit rose $2.4 billion, or 1.8% (annualized).

Consumer Credit Release