The end of the year is an opportunity for banks as well as finance companies to boost consumer lending. Accordingly, the competition to gain market share in this field is also heating up.
Nam A Commercial Joint Stock Bank (NamABank) has reduced lending interest rates by 0.5 1.5 percent per annum (for individual customers) and by 0.2 0.5 percent per annum (for corporate customers). Not only consumer loans with secured assets, NamABank also promotes unsecured consumer loans. Accordingly, individual may access consumer credit, home purchase and repair loans at NamABank at preferential interest rates at seven to eight percent per annum in the first period, then an amplitude of about three to 3.5 percent per annum is added.
Consumer loans at An Binh Commercial Joint Stock Bank (ABBank) are offered at seven percent per annum, fixed in the first six months of the loan. In addition to the preferential rate, simple procedures and flexible loan policies are also factors focused by ABBank to meet diverse consumer needs such as real estate loans, car loans, instalment business loans, and secured consumer loans. In addition, ABBank also has many other loan packages to meet different capital needs in during Tet season with interest rates from 8.2 to nine percent per annum, free early repayment, etc.
In fact, in the context of a competitive market, especially when there are many companies participating in the consumer credit segment, competing for market share is fierce.
On the other hand, banks’ credit growth in 2019 is limited by the credit growth rate assigned by the State Bank of Vietnam (SBV) for each bank at the beginning of the year. Thus, banks face difficulties in raising outstanding loans.
For example, at ABBank, the credit as of late November 2019 increased by 90 percent of the plan, reaching 55.221 trillion dong. ABBank’s outstanding credit for the whole year 2019 is estimated to be 10%, equal to the limit assigned from the beginning of the year.
For NamABank, with the strategy of promoting small loans in recent years, the bank often prioritises personal consumer loans. Currently, NamABank also offer free business loans, home loans, etc.
In order to gain market share in this segment, small-scaled banks not only have to compete with each other, but also face pressure from larger banks, especially those that own a finance company.
For example, Vietnam Prosperity Commercial Joint Stock Bank (VPBank) offers a credit programme which supports 80 percent of the borrowing value, with a maximum term of eight years. Customers can choose from one of the interest rates, including 6.9 percent per annum, fixed in the first three months; nine percent per annum, fixed in the first six months; 8.9 percent per annum, fixed in the first 12 months, etc. The disbursement time is quick, within four hours after the application is approved.
Kalidas Ghose, vice Chair of the Board of Members cum general directors of FE Credit, said that year 2019 is a favourable year for consumer credit segment. The technology around consumer finance platforms is changing rapidly, making it easier to approach customers. “Vietnamese consumers accept products from consumer finance companies faster than before, and this helps the profit of the segment grows better. I believe that this trend will continue to grow up in the near future,” said Kalidas Ghose.
Statistics of the SBV pointed out that the credit growth of the entire banking system in the first 11 months of 2019 reached more than 10%, similar to the credit growth of the first nine months of 2018, while the target was set at 14%. It means that there is still available room for growth. In HCM City, Nguyen Hoang Minh, deputy director of the SBV’s HCM City branch said that in the last 11 months, the credit growth of the city reached 12.4%. For consumer credit alone, the total outstanding credit of banks and finance companies in HCM City was 450 trillion dong by the end of October 2019.
In the period of 2016 2018, the average growth of consumer outstanding credit reached 36 percent per annum, and continued to rise sharply in the first three quarters of this year.
“The development of consumer credit has been helping people access official loans, contributing to curb “black credit” situation, but attention is needed to the risk of real estate loans hidden in consumer credit,” said Minh, adding that the bad debts in consumer lending by the end of October 2019 in HCM City reached 10.289 trillion dong, accounting for 2.28 percent of the total outstanding loans.
Dr Can Van Luc, financial and banking expert said that the current consumer credit system is quite diverse and has met more and more increasing demands of people. It is important to note that the borrower needs to understand the lender’s legal information before deciding to apply for a loan, carefully understand the interest rate terms and conditions and consider the ability to repay the loan.
According to Dr Luc, if customer has a reasonable spending plan and smart financial balance, consumer loan will be an effective option to meet the essential needs of the customer himself and his family.
