Consumer credit demand was at its strongest since the global financial crisis during the March quarter. Credit data provider Veda Group Ltd (ASX:VED) said that credit demand in terms of volume of credit cards and demand for personal loans was the strongest since June 2008, more than 3% higher than one year earlier. Low interest rates continue to power the recovery in the housing market, keeping mortgage demand at double-digit growth rates.
Australian companies set to benefit from the increase in demand for consumer credit include ASX listed debt collection companies Collection House Limited (ASX: CLH) and Credit Corp Group Limited (ASX: CCP). Both companies have delivered impressive results in recent times and at their current price offer further upside for investors. An increase in credit growth and consumer debt will help drive earnings. Further, Credit Corp has a strong and growing consumer lending business. At current prices, both companies appear cheap.
The big four banks, especially Commonwealth Bank of Australia (ASX: CBA) are obvious beneficiaries of increased consumer credit demand. The Commonwealth Bank has managed to grow earnings during recent years despite subdued credit growth. The recent surge in credit will likely result in further revenue growth for the bank, in particular due to its strong focus on residential mortgages as mortgage approvals expand at doubt-digit rates.
Online property advertising giant REA Group Limited (ASX:REA), the operator of realestate.com.au will benefit from the increasing demand for residential mortgages and a recovery in the housing market as more consumers search for property on its websites.
Foolish takeaway
A surge in consumer credit is good news for the Australian economy and Australian companies. The four companies outlined above are poised to benefit as their earnings are highly leveraged to credit growth.
