The maximum amount is 5 million? Forcibly pulling consumer loans, banks are digging holes again

With China's economy picking up and income expectations stabilizing, a recovery in consumption can be expected. Correspondingly, personal consumption loans will also grow naturally, and we should have full confidence in this, and there is no need to pull out the seedlings and force them.

Written by丨Guan Buyu

"Promoting consumption" is undoubtedly the theme of boosting the economy this year. Consumption, as an important link in economic activities, should of course be given full attention.

However, the theme should not be deviated from either, as the over-stimulation of financial institutions by overestimating the potential of consumer credit will only be counterproductive.

01

At the beginning of the new year, the consumer loan war between banks is not lively.

According to a report by China Business Daily, various institutions have launched consumer loan marketing campaigns. The mainstream annual interest rate generally starts at 3%, and the interest rate of a few products once fell below 3%. Some institutions have also carried out "group buying" activities, for example, five employees of a whitelisted unit of a bank will handle consumer loan business together, and the interest rate will be further discounted.

The reality is more hot than the report.

Since the second quarter of last year, financial institutions have begun to focus on consumer loan business, and this action has also won the endorsement of some local governments.

For example, in April 2023, Hubei Province issued the "Notice on Better Serving Market Entities and Promoting the Continuation of Policies for Steady Economic Development", setting up a consumer loan of 50 billion yuan in Hubei and an initial arrangement of 30 billion yuan. According to the interest rate of 1.5%, the term of two years, and the maximum cumulative amount of 3,000 yuan, the financial discount will be given to the new single consumer loan of 10,000 yuan.

Diagram / Diagram Worm Creativity

The so-called "bank white list" group buying activity is even more exquisite. Those who can be on the "noble white list" are almost all iron rice bowl units with public prefixes, that is, administrative institutions and state-owned enterprises. A group of 5 or 10 people is just an entry-level operation, and the high-end bureau is a door-to-door loan delivery service tailored for the "whitelist" members as a whole.

What is even more excessive is that the repayment period of some personal credit businesses under the banner of "consumer loans" has been extended to 10 years, and the amount has increased to more than one million, far beyond the scope of normal consumer loans. According to the first financial report, some banks can also handle housing loans, and the amount can reach up to 5 million yuan after the "blessing" of real estate and other collateral.

Can the risk control standards of consumer credit manage this risk?

The interest rate on bank loans follows the market, and it is understandable that it should be lowered. However, we should be vigilant against the expansion of risk exposure caused by excessive marketing and disguised water release.

02

The level of risk control of personal consumption loan business has always been the shortcoming of traditional commercial banks in China, the most typical of which is credit card business.

Since last year, the non-performing rate of some banks' credit card business has increased, which has attracted great attention.

In "Demystifying the Distribution of Bank Credit: Where is the Most Invested and Where is the Most Non-performing?", the New Finance Research Center of Southern Weekly has done a special study on the quality of credit card loans of major banks in the first half of 2023. The clearest conclusion is that at the end of June 2023, credit cards have become the largest personal loan business in terms of non-performing loans.

Photo/Southern Weekly

According to the interim report of China Merchants Bank, the new non-performing loans generated by credit cards were 20.447 billion yuan, an increase of 2.399 billion yuan year-on-year, accounting for 2/3 of the bank's newly generated non-performing loans in the first half of the year.

As of the end of June 2023, the balance of non-performing loans (NPLs) of credit cards was RMB16.317 billion and the NPL rate was 3.94%, ranking among the top major commercial banks.

The credit card business is a very mature personal consumer credit business, and the risk control level of domestic commercial banks is no more than that. It is inevitable that consumer loans with more complex categories and higher credit lines will inevitably make people feel worried.

The so-called "white list" package purchase operation has made people see the extensive operation of commercial banks in the personal consumption loan business. Personal consumption loans focus on individuals, and risk control review should be implemented by the borrower himself. The packaging of the "iron rice bowl" identity is obviously suspected of being lazy.

In the past, the "iron rice bowl" identity of the consumer loan packaging operation, relying on the support of local government finance, now as many local governments reduce spending too tightly, banks also use the "white list" to give the green light, "lazy" is not enough to describe, can only be said to be "very stupid and naïve".

The anomalies in the banks' vigorous marketing of consumer loans raise the question of whether this move is to cooperate with the policy of boosting consumption, or to quench the thirst of institutions for the short-term interests of institutions.

03

In the first quarter of last year, there was a "prepayment wave" and "deposit tide", and the housing loans, which are the main towns of the personal loan business, are also not "competitive". In the past, commercial banks, which made a lot of money by eating interest rate differentials, are facing the dilemma of disappearing interest rate differentials or even inverting, and their lives are not easy.

In addition, the "turning of local government debt" into debt, turning the debt pressure of local governments into a long-term pressure of increasing non-performing assets of banks, commercial banks are under unprecedented operating pressure.

Deposits cannot be left uncollected, the interest rate on deposits cannot be reduced, and the debts that have been turned over must be digested; in order to avoid the deterioration of performance, banks can only find ways to expand the scale of loans. Extraordinary marketing consumer loans have become one of the few options, and the helplessness can be understood, but no matter how you understand it, you can't reduce the risk.

Diagram / Diagram Worm Creativity

The risk of personal consumption loans is not static, and if the income expectation is good, the ability and willingness to repay the loan will be strong. Otherwise, the risk increases.

Before economic expectations are sufficiently stabilized, forcibly expanding the scale of personal consumption loans is obviously bucking the trend. Although it is possible to temporarily optimize performance and beautify the "book" balance data, the effect of this kind of book whitewashing is very limited.

Surprise lending may also exacerbate cyclical backlash. After all, most consumer loans are "short-term debts", which are mainly for one and a half years, and only two or three years long. When the time comes, the loss will appear in the performance statement with principal and interest, and it will not be able to hide or hide, so how to deal with it at that time?

The debt pressure is transmitted to the most basic level of personal consumption loans, where will it be transmitted and who will be "transformed" at that time?

04

As we all know, even if it is necessary to take extraordinary measures to expand credit that is divorced from the macroeconomic situation, it is essentially an overdraft of the future, and the side effects are already very large. At present, the stock scale and growth rate of consumer loans are already at a high level, and there are no conditions for large-scale expansion.

According to a previous report released by the China Banking Association, as of the end of the second quarter of 2023, the scale of consumer loans of commercial banks maintained steady growth, and the balance of household consumer loans (excluding personal housing loans) in domestic and foreign currencies was 18.75 trillion yuan, a year-on-year increase of 12.4%, and the growth rate was 8.3 percentage points higher than that at the end of 2022.

According to this growth rate estimate, the scale of consumer loans will reach at least 20 trillion yuan by the end of 2023, and our housing loan balance in 2023 will only be around 40 trillion yuan. This means that consumer loans have reached or even exceeded more than half of the balance of housing loans, and how much room is there for personal debt to be stressed?

Diagram / Diagram Worm Creativity

The double-digit year-on-year growth rate is mainly a short-term phenomenon of "revenge" consumption, which is not sustainable. With a debt of more than 100,000 per capita and leverage, the "fulcrum" of the flesh really can't stand it.

However, some experts are optimistic.

They pointed out that the leverage ratio of Chinese residents is much lower than that of developed countries, and there is still room for improvement. Experts base their argument that in 2021, the leverage ratio of Chinese residents was 62%, while the leverage ratio of residents in developed countries is usually around 80%. The data may be fine, but the understanding is definitely biased.

China's per capita GDP and per capita income are still far from the level of developed countries. The basis for this comparison does not exist when incomes are not yet "developed," but leverage should be the first to be "developed." Not knowing what we did wrong gave the experts the illusion that we were "developed" and that we should find a personal reason.

Again, experts may overlook the fact that residents can afford to leverage very differently depending on their income expectations. There are three main components of residents' income expectations: salary income, asset income and social welfare security. These three expectations are stable, the motivation to spend money is strong, the confidence is sufficient, and there is nothing wrong with increasing leverage and borrowing money to consume first.

It seems that we are not "developed" enough now, right? Not to mention that compared with the developed countries, the gap between "today's me" and "the original me" is more than a dozen points. I don't know why experts didn't see such an obvious problem, and they had the illusion that "you can still leverage consumption".

Diagram / Diagram Worm Creativity

In short, with China's economy picking up and income expectations stabilizing, a recovery in consumption can be expected. Correspondingly, personal consumption loans will also grow naturally, and we should have full confidence in this, and there is no need to pull out the seedlings and force them.

The operational pressure on commercial banks can only be slowly dissipated when the economy returns to the growth track, and there is no better way.

In the final analysis, banks must rely on economic growth to release dividends, and the short-term behavior of individual customers will only cause the risk of getting out of control.

There are no shortcuts to economic development, ordinary people can't make money, and banks can't make money.