One on One with Equifax CEO Richard Smith
Thursday, October 25, 2007
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SUSIE GHARIB: Shares of Equifax were down today, a day ahead of the Atlanta-based company's big meeting in New York with Wall Street analysts. The stock of the largest U.S. credit reporting company has dropped about 20 percent since this summer's credit crisis. Earlier today I met with Equifax CEO Richard Smith and asked him what's the message he wants to deliver to investors tomorrow?
RICHARD SMITH, CHAIRMAN & CEO, EQUIFAX: We're a 108-year-old company, a company that has thrived in many different economic cycles. We've got a different economic environment today in the U.S. and we're here to tell the story that we will be successful in this economic environment, as well.
GHARIB: Mr. Smith, your company is at the forefront of what's going on in the credit market. Are you seeing any signs or are you seeing any data that is signaling that things are getting better or are they getting worse?
SMITH: No, I wouldn't say they're getting any better, but if you really look at the credit trends today, you get (INAUDIBLE) details because it's a tale of many different stories. For example, in the sub-prime housing market, it's really seven states. The vast majority of all sub- prime issues are isolated to those seven states. If you move beyond that and look at the other credit trends for prime model, prime bank card, prime home equity, prime mortgage, we have great stability.
GHARIB: What changes are you seeing in bank lending practices and their expectations of credit worthiness?
SMITH: They're getting far tighter in their standards, number one. Number two, they're doing less acquisition of new customers and three, they're doing more cross-selling of various products to existing customers. The number of loans being underwritten today, especially in the mortgage market, is far less today than it was six months ago.
GHARIB: What impact is this slowdown in mortgage lending having on your business?
SMITH: First of all, put in perspective, that the U.S. market is only 50 percent of our total. Within that 50 percent, mortgage is a small piece. So specifically our business has performed extremely well in the third quarter versus the Street's expectations. Secondly, this crisis provides us an opportunity to create new products to solve future problems for our customers.
GHARIB: How are other parts of your business doing, like credit checks for credit cards or auto loans, things like that?
SMITH: Strong, strong. Again, international business around the world, which is a growing part of our business, was up double-digits. Latin America was strong. UK was strong. Our direct to consumer products to help educate you and provide you identity theft products was up 19 to 20 percent this last quarter. Commercial, our direct to commercial lending business, our credit business, was up over 40 percent. We're a diverse company when it comes to earnings streams and we can weather a downtown on a credit cycle like we're seeing now in the U.S.
GHARIB: Since the sub-prime crisis, are you seeing consumers changing their credit habits?
SMITH: I think if you go back to that August time frame when this credit crisis really hit, it was nervousness on both sides, the credit grantors, as well as the consumers. There's no doubt about it. (INAUDIBLE) it's a short-term shift. Over time when it becomes excess capacity, excess liquidity in the marketplace and the lenders decide to loan money at cheap rates to individuals and this pain becomes a distant memory, they will revert back to the problems that got us here today.
GHARIB: What about delinquencies and defaults? Are you seeing an increase there?
SMITH: It is isolated only to sub-prime, sub-prime auto, sub-prime mortgage, sub-prime home equity. Everything else, delinquencies are running flat. One last point that's pretty important, we have a world class tool, very unique to this industry. It's called the Equifax bankruptcy navigator. We take a population of the credit active citizens in the U.S. We predict their likelihood to go bankrupt in the next 24 months based upon the (INAUDIBLE) and the good news is, even though there's been a slight downtown the last three or four months, it is relatively flat and at historical levels, which is good.
GHARIB: Mr. Smith, thank you very much.
SMITH: Thank you, Susie.
