Equifax Reports Historically Low Credit Card Delinquencies Amid Strong Q2 Performance

Equifax released its second quarter earnings report on Wednesday (July 20), announcing a “strong” earnings performance despite mortgage interest rates trending upwards since April.

In terms of headline numbers, the U.S. consumer credit reporting agency said a slight increase in Q2 revenue to $1.318 billion against a mortgage market estimated down nearly 40%.

“Our updated guidance is for U.S. mortgage originations to be down about 37% for the year and about 20% in the second half,” company CEO Mark W. Begor told investors on a call, adding that a weaker white-collar hiring market is also expected to further weaken for the remainder of the year, impacting Workforce Solutions’ talent and onboarding business.

When it comes to delinquencies, the company reported that despite average credit card and personal loan balances being back above pandemic levels, delinquencies remain low due to falling inflation and historically low levels of unemployment.

“With consumers working and still leveraging … stimulus and savings, delinquencies are still at historic low levels and close to 2019 pre-pandemic levels. Subprime DQs are the only areas of stress that we’re seeing,” Begor noted.

Begor further anticipated a modest increase on average credit scores as the student loan freeze is removed and affected consumers resume making payments in October.

In another Q2 highlight, the company announced that it had received shareholder approval in June to merge with Brazil’s second-largest credit bureau, Boa Vista Serviços (BVS), giving it access to the fast-growing Latin American market with a total addressable market of over $2 billion.

“Equifax will be able to provide BVS with access to expansive Equifax international capabilities, our cloud-native data, products, decisioning, and analytic technology for the rapid development of new products and services and expansion into new verticals like identity and fraud in Brazil,” Begor said of the transaction, which is expected to close in early August.

Equifax has been an investor in BVS since 2011 and is expecting BVS to deliver about $160 million in run-rate revenue in the first year after the merger, the Q2 report noted.

Cloud and AI Investments Pay Off

Despite the challenges of the U.S. mortgage and hiring markets, the credit agency said it “executed well” against its $200 million cloud and spending reduction program announced in February, and is expecting additional cloud spending reductions of $10 million in the second half of the year.

“We’re seeing broader opportunities to improve our efficiencies as we get further into the cloud. It’s the real backbone of these cost efficiencies and margin expansions […] and it’s really driven by our ability to get closer to completion of our cloud investment,” Begor said on the call.

The company also plans to continue to leverage artificial intelligence (AI), including to deliver better performing scores and models as well as to improve its call centers and operating center services.

“We believe that artificial intelligence is fundamentally changing Equifax’s business capabilities and is becoming table stakes for data analytics companies to manage increasingly large, diverse, and complex datasets within a highly regulated data environment,” Begor remarked.