AQN Industry Leader Risk Survey

AQN recently surveyed our network of consumer lending executives to see how they expected non-residential lending risk to evolve over the next 12 months (Q3 2020 to Q3 2021). At first glance, the responses appear gloomy, with 95.5% of respondents expecting risk to increase in the coming year. Upon closer inspection, most respondents expect consumer risk will merely return to prior levels (Increase of <20%). Even an increase of 20% or more may not be a cause for alarm as the same metric trended at more than double current levels during the great recession.

We should also note that we sent this survey in late November when subsequent government stimulus looked more uncertain, and vaccines were still awaiting final approval from the FDA. With these developments in mind, a return to prior norms — at least regarding consumer lending risk — seems more reasonable.

Moreover, this data aligns with many of the conversations we are having with our clients. While few expect risk to remain artificially low in the long term, most realized that the depth of economic recession forecasted back in March may not fully materialize. As loss forecasts ease back in the direction of pre-pandemic levels, our clients are taking that excess capital and searching for ways to grow their customer base with novel products, programs, and strategies.