Banks vie over consumer loans towards year-end

Many banks have recently geared up preparations to attract customers into this lucrative sector. VPBank launched its own credit firm called FE Credit four years ago.

“We are currently attracting 70,000 customers everyday seeking personal loans,” said deputy CEO of VPBank Kalidas Ghose. VPBank reported credit growth of 34.8 per cent in the first three quarters of this year.

Vietnam International Bank (VIB) has just introduced a $93.6 million loan package at a preferential interest rate of 0.68 per cent. According to Rahn Wood, head of retail banking at VIB, mortgages account for 40 per cent of the bank’s personal loans.

Meanwhile, Sacombank has reported that 50 per cent of their outstanding loan balance in 2014 came from individual lending.

Regarding the surge in personal loan packages, banking and finance expert Nguyen Chi Hieu said, “This upward trend will continue to the end of 2014. Banks will try to lure customers with low interest rates, especially for mortgage and real estate loans.”

Experts noted that the end of the year until the Tet holiday is always the most popular time for personal loans, as Vietnamese people require money for home repair, shopping and car purchases. Dr. Le Tham Duong, head of the business management faculty at Ho Chi Minh University of Banking, said that recent macroeconomic recovery has spurred credit growth over the past two months.

Another significant factor has been the low inflation rate, together with bank’s efforts to diversify their service offerings and open new branches. The shift to spending money instead of saving is another significant factor.

At this year’s ASEAN Banker Forum, Cao Van Luc, senior executive vice president at the Bank for Investment and Development of Vietnam (BIDV) said that 75 per cent of the Vietnamese population did not yet have a bank account. Moreover, personal loans only make up 5 per cent of total loans, which means huge growth potential.

Echoing this view, Duong Duc Hung, head of retail banking at ANZ Vietnam said, “This is the 14^th most populated country in the world and 50 per cent of the population is under 35 years old. Furthermore, Vietnam’s growing middle class is in great need of loans to finance homes and cars. This will certainly spark growth in the personal loans market.”

Ghose predicted that consumer credit will grow by 20 to 30 per cent over the next few years, especially a time the real estate market is showing signs of recovery. This increase is hoped to contribute to the banking sector’s 15 per cent overall credit growth target for this year.

Experts at the ASEAN Banker Forum said that to attract more customers in the long run, commercial banks needed to improve their technologies, hire quality employees, diversify channels and focus on risk management.