Moody's Corporation · NYSE:MCO
Moody's — The Year Ahead: Fintech & Student Lending Webinar (March 2021)
24 slides from Moody's's conference presentation, Mar 9, 2021
Slide 1: The Year Ahead: An Update on Fintech & Student Lending
The Year Ahead: An Update on Fintech & Student Lending Robby Holditch, Director March 2021 Cris deRitis, Deputy Chief Economist David Fieldhouse, Director John Toohig, Head of Whole Loan Trading, Raymond James
Slide 2: FinTech
1 FinTech
Slide 3: Personal Loan Lenders Weathered the Recession
Personal Loan Lenders Weathered the Recession 60-day delinquency rate, % of $, YoY diff, 3-mo MA 1.0 0.5 0.0 -0.5 -1.0 Term: <=6 Term: 7-12 Term: 13-24 Term: 25-59 Term: 60+ -1.5 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Sources: CreditForecast.com, Moody’s Analytics 3
Slide 4: Loan Standards Tight
Loan Standards Tight %, YoY balance difference, consumer installment 25 Subprime Near Prime Prime 20 15 10 5 0 -5 -10 -15 -20 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Sources: CreditForecast.com, Moody’s Analytics 4
Slide 5: Credit Score Inflation Masks Risk
Credit Score Inflation Masks Risk Avg Equifax risk score and % of accounts 30+ days past due 715 4.0 % accounts 30+ days delinq, 12-mo MA (R) 710 Avg Equifax risk score (L) 3.5 705 3.0 700 2.5 695 690 2.0 685 1.5 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Sources: CreditForecast.com, Moody’s Analy
Slide 6: Unsecured Debt During A Pandemic
Unsecured Debt During A Pandemic Average Unsecured Balance, Real 2020 $ 3,300 3,100 2,900 2,700 2,500 2,300 2,100 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Sources: CreditForecast.com, Moody’s Analytics 6
Slide 7: Regional Markets Differ
Regional Markets Differ Consumer Installment Balance, YoY % Change 0.12 - 11.93 -1.96 - 0.12 -11.52 - -1.96 Sources: CreditForecast.com, Moody’s Analytics 7
Slide 8: Fintech Seeks Risk/Opportunity With Younger Borrowers
Fintech Seeks Risk/Opportunity With Younger Borrowers Total delinquency rate, % of $, <35 years old 9 Bankcard 8 Consumer Installment, 3yr+ 7 6 5 4 3 2 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Sources: CreditForecast.com, Moody’s Analytics 8
Slide 9: Student Lending
2 Student Lending
Slide 10: Student Lending Update 2021Q1
Student Lending Update 2021Q1 » Forbearance levels remain steady. Delinquencies low and stable. » The Biden administration extended payment deferral to 30 September 2021 » Does not cover private student loans (PSL) or Federal Family Education Loan Program (FFELP) student loans » Proposed higher educ
Slide 11: One Nation Under Student Debt
One Nation Under Student Debt 2020$ tril 1.8 1.6 Private* Perkins 1.4 FFELP 1.2 Direct 1.0 0.8 0.6 0.4 0.2 0.0 08 10 12 14 16 18 20 Sources: Department of Education, Moody’s Analytics *estimated 11
Slide 12: Student Loan Delinquencies Are Low…For Now
Student Loan Delinquencies Are Low…For Now Delinquent loans, % of total balances 18 16 Mortgage 14 Student Auto 12 Credit Card 10 8 6 4 2 0 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Sources: Equifax, Moody’s Analytics 12
Slide 13: Most Student Loan Borrowers Owe Less Than $40,000
Most Student Loan Borrowers Owe Less Than $40,000 Millions of borrowers by amount owed in $ ths and age of borrower >$200 24 or younger >$100-200 25 to 34 Amount owed, $ ths >$80-100 35 to 49 >$60-80 50 to 61 >$40-60 62 and Older >$20-40 >$10-20 34 mil borrowers >$5-10 (75%) ≤$5 0.0 2.0 4.0 6.0 8.0
Slide 14: Debt Distribution Is Highly Skewed
Debt Distribution Is Highly Skewed 100% 90% Top 10% of borrowers account for ~45% of total debt 80% Cumulative pct of debt 70% 60% 50% Bottom 50% of borrowers account 40% for ~10% of total debt 30% 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Cumulative pct of borrowers Sources: Department
Slide 15: Proposal: $10K Grants + Cap Govt Loans at $60K + Reforms
Proposal: $10K Grants + Cap Govt Loans at $60K + Reforms Outstanding balance by amount owed, $ bil Number of borrowers by amount owed, mil $200K+ $200K+ $100K to 200K $100K to 200K $80K to 100K $80K to 100K $60K to 80K $60K to 80K $40K to 60K $40K to 60K 40% of 50% of $20K to 40K balances $20K to 40
Slide 16: Underlying Issue: College Completion Rates
Underlying Issue: College Completion Rates Pct of student entering college receiving Bachelor’s degree… 65 60 55 50 45 40 35 ...within 4 years 30 ...within 5 years 25 ...within 6 years 20 96 00 02 03 04 05 06 07 08 09 10 11 12 Starting Year Sources: Department of Education, Moody’s Analytics 16
Slide 17: Contact Us
Contact Us: Cris DeRitis Deputy Chief Economist Moody’s Analytics Cristian.deRitis@moodys.com David Fieldhouse Director Moody’s Analytics David.Fieldhouse@moodys.com Robby Holditch Director Moody’s Analytics Robby.Holditch@moodys.com John Toohig Head of Whole Loan Trading Raymond James John.Toohig@R
Slide 18: Contact Us: Economics & Business Analytics Offices
Contact Us: Economics & Business Analytics Offices West Chester, EBA-HQ London Prague Singapore +1.610.235.5299 +44.20.7772.5454 +420.22.422.2929 +65.6511.4400 121 North Walnut Street, Suite 500 One Canada Square Washingtonova 17 6 Shenton Way West Chester PA 19380 Canary Wharf 110 00 Prague 1 #14-0
Slide 19: © 2021 Moody's Corporation disclaimer
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liabilit
Slide 20: Appendix
A Appendix
Slide 21: Enrollment Trends Sideways…
Enrollment Trends Sideways… Students, mil 9 8 Undergraduate (Male) Undergraduate (Female) 7 Graduate (Male) 6 Graduate (Female) 5 4 3 2 1 0 70 75 80 85 90 95 00 05 10 15 20 Sources: Department of Education, National Student Clearinghouse, Moody’s Analytics 21
Slide 22: …And Smaller Generations Are Coming
…And Smaller Generations Are Coming Population estimate by single age cohort for 2019, mil 6 5 4 3 2 1 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Sources: Census Bureau, Moody’s Analytics 22
Slide 23: Borrowing Is Rising Faster Than Tuition
Borrowing Is Rising Faster Than Tuition Year over year growth, % 20 18 Tuition and fees Student Debt Outstanding, 12-mo MA 16 14 12 10 8 6 4 2 0 10 11 12 13 14 15 16 17 18 19 20 Sources: BLS, Equifax, Moody’s Analytics 23
Slide 24: A College Education Still Pays
A College Education Still Pays Average household income by education level of householder, $ ths 250 High School Bachelor's Master's Professional 200 150 100 50 0 1991 1996 2001 2006 2011 2016 Sources: Census Bureau, Moody’s Analytics 24
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