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Hong Kong consumer finance companies may be on the brink  of a  price war to claw back the unsecured personal lending business which has been lost to their main  street retail rivals.

Leading the fight this week was consumer lender GE Capital, which launched an unsecured personal loan priced at an annual interest rate of just 1.44 per cent.

That compares with rates offered by retail banks that might range from about 4 per cent for top-credit customers, up to 15 per cent.

Chief executive Kasem Taechawatanathorn  said the loan product, launched in Thailand with the brand name QuikCash, targeted a new segment identified by GE Capital.

'We are confident that it will be very successful in Hong Kong, as our offerings tap into a new market segment that demands speed, application convenience and a greater flexibility that is combined with trustworthiness,' he said.

As one of 25 restricted licence banks (RLBs) operating in Hong Kong, GE Capital may engage in merchant banking and capital-market operations for corporate customers.

Personal banking services, however, are restricted to higher net worth individuals and it may only take time, call or notice deposits from the public in sums of $500,000 or above.

The minimum size of the loan it is now offering at 1.44 per cent is $400,000.

A sneak preview obtained by South China Morning Post of data compiled by KPMG and due to be released later this month shows that at the end of  this year gross customer advances on the books of all RLBs amounted to $75.732 billion - a 25 per cent decline from the $100.79 billion advances on their books in 2000.

Over the same period retail banks, the KPMG Banking Survey Report 2003 will show, increased their gross advances 13.5 per cent, from $1.47 trillion to $1.67 trillion.

'Loan growth has been in personal banking in recent years rather than corporate banking, and local licensed banks have been more active [than the RLBs], so their share of the business has increased,' KPMG banking partner Martin Wardle said.

Exacerbating the trend, he added, was the exodus of a number of RLBs and deposit taking companies after the Asian financial crisis of 1997-98, which reduced the number of competitors to full-licensed banks.

'But it has been the focus on personal banking by the retail banks, which have bigger branch networks and better distribution that has increased their dominance in the market,' he added.

This had left RLBs to look for niche opportunities in the personal lending market.

'Increasingly they will have to search for such opportunities and use their risk-management systems to price risk accordingly,' Mr Wardle said.

'There may be pockets of the market which at any point in time the licensed banks may not be focusing on, and there will be profitable opportunities for such niche players,' he said.



GE Capital offers 1.4pc personal loans