Wing Lung aims to triple personal loans

Wing Lung Bank, a subsidiary of China Merchants Bank, says it wants to double or triple its personal unsecured loan portfolio to achieve better interest income returns.

It has lifted its debt-servicing ratio, the monthly repayment obligations of borrowers as a percentage of monthly income, to 70 per cent from 50 per cent previously, while industry rivals are using 50 per cent to 60 per cent as a benchmark. The higher the ratio, the more money a bank lends out, including all forms of debt, ranging from mortgages to credit card loans.

Banks' mortgage lending has been subdued following the government's introduction of several rounds of cooling measures targeting the property market. In order to maintain the size of their outstanding loan portfolios, banks are having to deploy the capital to other businesses.

"It is quite hard for increased unsecured lending volume to fill in the gap from the loss of mortgage lending," Wing Lung Bank's head of retail banking, assistant general manager Derek Chung, said at a conference yesterday.

The average size of a personal loan amounts to hundreds of thousands of dollars against millions in a mortgage loan. "However, it is positive to the bank in terms of return," he said.

Personal loans often have a higher interest rate than mortgage loans because they do not require collateral.