Asset Quality
Consumer Loans
Consumer loans are credit extended to individuals for personal, household, and family purposes: credit cards, auto loans, and other personal loans. They carry higher yields but also higher and faster-moving loss rates than commercial credit.
How is Consumer Loans calculated?
Schedule RC-C reports consumer credit by type. These loans are typically smaller, more numerous, and unsecured or thinly secured, so their losses react quickly to unemployment and household stress.
Why does Consumer Loans matter?
Consumer lending diversifies revenue and earns high yields, but card and unsecured losses rise fast in a downturn and lead the credit cycle. A large consumer book (especially credit cards) makes earnings sensitive to the health of the household sector.
How do you interpret Consumer Loans?
Read consumer loans as a share of the book and watch delinquency closely. Consumer credit losses move earlier and more sharply than commercial losses, so a rising consumer share raises both the yield and the cyclicality of the portfolio.
What do Consumer Loans levels indicate?
| Range | Label | Interpretation |
|---|---|---|
| Small / secured | Strong | Limited or well-secured consumer exposure. |
| Moderate | Adequate | Typical consumer-lending share. |
| Card/unsecured-heavy | Watch | Higher-yield but faster-loss exposure. |
| Concentrated consumer | Concern | Earnings highly sensitive to household credit stress. |
Worked example
Frequently asked
What types of loans count as consumer loans?
Loans to individuals for household and personal use: credit cards and other revolving credit, automobile loans, and other personal installment loans. Residential mortgages are reported separately under real estate.
Why do consumer loans have higher loss rates?
Consumer loans, especially credit cards, are often unsecured and tied to individual income and employment. Losses rise quickly when unemployment climbs, making them more cyclical and front-loaded than most commercial credit.
Sources
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