The business of the bank is too much!

"Your Prize, 3% Flash Loan Interest Rate Coupon, has been credited to your account"; From May 1st to May 31st, 10 fixed-rate coupons will be sold every day, and the annual interest rate (simple interest) will be as low as 2.98%; The annual interest rate (simple interest) can be as low as 2.88% after using the coupon for Privilege customers...... In the context of intensified competition in the industry and the continuous downward movement of market interest rates, many banks have recently launched low-interest rate consumer loan products. The "Financial Times" reporter preliminarily combed and found that superimposed group buying, coupons and other activities, many banks' consumer loan interest rates have been lowered to the beginning of "3", and even the most preferential loan interest rates of some banks have dropped to below 3%. At the same time, it is also a routine operation to increase the quota.

In fact, it is not new for banks to cut interest rates on consumer loans. During the Spring Festival, "May Day", "Eleventh" and other holidays, many banks will launch preferential activities, and the minimum interest rate will be reduced to the prefix "2". However, the reporter learned in the interview that not all customers can get a loan interest rate pricing of less than 3%, and they need to meet customer qualifications and other conditions, and some banks also stipulate the optimal interest rate limit. The minimum annualized interest rate of a bank's consumer loan indicates that high-quality enterprises and institutions, housing loan customers, wealth management customers, etc. can apply online.

What are the main factors driving the continuous decline in consumer loan interest rates? Will it hit banks' already narrowing net interest margins? What are the risks of declining consumer loan interest rates for banks and consumers? Focusing on these issues, the Financial Times reporter interviewed a number of experts.

Consumer loan interest rates have entered the "2" era

With the continuous downward movement of the market interest rate, the interest rate of bank consumer loans has also fallen again and again.

In terms of large banks, Bank of China's personal online consumer loan product, Bank of China E Loan, has an annualized interest rate as low as 3.4% and a maximum amount of 200,000 yuan. From April to June, the interest rate of Bank of Communications Huimin Loan for new customers was as low as 3.24%.

The lower limit of consumer loan interest rates for banks such as joint-stock banks, urban commercial banks, and rural commercial banks is lower. For example, Ping An Bank's "white-collar new loan" consumer loan product has an annual interest rate (simple interest) of 3.96% to 9.72% for ordinary customers, and the annual interest rate (simple interest) of the product is as low as 2.88% after some "preferential customers" use the coupons, and the amount can reach 1 million yuan. From May 1st to May 31st, Bank of Ningbo's Ninglaihua consumer loan product launched a new customer seckill activity, issuing 10 2.98% fixed interest rate coupons (annualized interest rate/simple interest) from 16 o'clock every day, with a limit of 50,000 yuan and a limit of 6 periods.

Although the best product interest rate is a "limited edition" that only belongs to high-quality customers, it is an indisputable fact that consumer loan interest rates continue to fall. Liu Yinping, an analyst at the Rong 360 Digital Technology Research Institute, said that the recent downward trend of banks' online unsecured consumer loan interest rates is more obvious, although the interest rates of most products are still above 3%, but the continuous downward movement of the market interest rate center has opened up space for banks to reduce consumer loan interest rates.

Dong Ximiao, chief researcher of Zhaolian, told the Financial Times that due to factors such as the reduction of deposit interest rates, the cost of funds of banks has decreased, and there is a certain basis for reducing the interest rate of personal consumption loans. In order to expand their market share, some banks hope to attract more customers through lower interest rates, which is a kind of "small profit but quick turnover" promotional behavior.

"The consumer loan interest rate continues to decline, on the one hand, the policy guides the loan interest rate downward, boosts the consumer market, and benefits customers; On the other hand, the competition in the banking industry has intensified, and in order to get more new customers and retain old customers, banks have given more favorable pricing to some high-quality customers. Du Juan, a senior researcher at the Sushang Bank Research Institute, said in an interview with the Financial Times.

Is it possible that the already compressed consumer loan interest rate will continue to fall? In this regard, Liu Yinping said that under the policy trend of stable and declining comprehensive social financing costs, bank consumer loan interest rates have further downward conditions.

In the short term, it will have little impact on banks' net interest margins

At present, the high-yield characteristics of consumer loans are no longer prominent, but banks still regard consumer loans as the key direction of credit delivery. There are other business-level considerations behind the volume interest rate. According to the research report released by Guosheng Securities' financial research team, consumer loans can be used as an effective customer reach tool, although banks have sacrificed in loan yields, but from a medium and long-term perspective, they can attract traffic to other personal businesses such as wealth management, which is conducive to banks saving customer acquisition costs and accumulating high-quality customer base.

However, is it true that the lower the interest rate on consumer loans, the better? Some market views believe that at a time when the net interest margin of the banking industry is already narrowing, the downward trend of consumer loans will further impact the net interest margin.

In response to the pressure of narrowing the net interest margin faced by the banking industry, Du Juan said that the net interest margin of the banking industry is still in the downward range. While lending rates are falling, banks are also focusing on reducing the cost of debt, such as lowering deposit interest rates, removing smart notice deposits, and limiting the sale of high-interest large-denomination certificates of deposit. However, the deposit interest rate is more sticky than that of loans, and many factors need to be considered, such as customer retention, the term of existing deposits, and the bargaining power of large enterprise customers.

In the interview, experts said that consumer loans account for a limited proportion of the total credit scale, and the decline in interest rates has little impact on net interest margins. "The reduction in consumer loan interest rates has little impact on the asset quality of banks. Lowering interest rates only lowers prices, not lowers risk control standards. On the other hand, banks' ultra-low interest rate consumer loans are usually aimed at high-quality customer groups, so the risks are generally controllable. Dong Ximiao said that consumer loans do not account for a high proportion of total bank loans, and the impact on net interest margin is relatively small. In addition, the reduction of consumer loan interest rates and the acceleration of the pace of delivery usually have a positive impact on bank revenues.

Enhance differentiated competitiveness

Personal consumption loans are becoming an important growth point for banks' retail credit.

Li Qian, an analyst at the financial business department of Oriental Jincheng, said that the transformation of large retail has been the key work of banks in recent years, and with the gradual recovery of domestic consumer confidence and consumer demand, banks are actively promoting the development of consumer loan business. In addition, in the context of the sluggish increase in housing loans, some banks have made up for the decline in personal housing loans by expanding consumer loans, so as to maintain stable operating income and net profit.

In addition to price, what should banking institutions do to develop consumer loan business? Li Qian said that the integration of finance and scenarios is still accelerating, and differentiated competition in products and services has become the direction for banks to enhance their business competitiveness. Under the premise of controllable risks, banks can provide differentiated consumer loan products for different consumption scenarios, different customer groups, different loan terms, etc., to meet the needs of a wider range of groups and application scenarios. In terms of services, banks can focus on one-stop online services to simplify processes, improve efficiency, and carry out personalized and customized services for customers to meet their service demands in different scenarios.

"In addition to price, the core competitiveness of consumer loans also involves customer acquisition, product design, risk control, post-loan services and other capabilities." Du Juan said that choosing the right customer acquisition channel and building an efficient customer acquisition strategy is an important part of product success, which often affects the quality of customer groups, customer acquisition costs, etc., and then has an impact on the overall business quality and efficiency. Risk control is the top priority of the loan business, too high risk control threshold will affect customer experience and raise customer acquisition costs, and too low risk control access will have a negative impact on asset quality, and in many cases, different risk control strategies need to be designed according to different customer groups, different scenarios, different products, etc. The post-loan service involves a wider range of aspects, including quota management, pricing adjustment, post-loan risk warning, customer service, etc., which needs to be regularly updated in combination with customer data, and the establishment of strategy models and management capabilities in each link.

In addition, excessively low consumer loan interest rates may also lead to the illegal inflow of credit funds into the stock market and property market. In this regard, Dong Ximiao said that banks should strengthen the management of the use and flow of credit funds, and if borrowers fabricate the purpose of borrowing, provide false materials, defraud, and misappropriate loans for non-consumption purposes, banks should promptly recover and not renew loans, and upload the relevant information to the credit information system to increase the cost of violations of laws and regulations.

Source: Financial Times client

Reporter: Xu Beibei

Editor: Liu Nengjing

Email: [email protected]