City's key lenders launch new loan packages to lift profit as tax season gets underway

The tax season is here, and Hong Kong banks are on the hard-sell trail.

Major local lenders are gearing themselves up for a bigger slice of the tax-loan cake with an assortment of new financial products on offer.

But, for some borrowers, the loans will not be destined for the taxmen - they'll go into personal investments.

A real-estate company executive, surnamed Chung, who earns more than HK$50,000 a month, said he's in the queue for a tax loan of between HK$50,000 and HK$100,000, to be used entirely for snapping up blue-chip stocks.

"Given the interest rates of tax loans are hovering around only 1 to 2 percent, it's cheap to borrow money to invest in blue chips. The Hang Seng Index is currently trading at nine times the price-to-earnings ratio, which is at a very low level. Contrary to what most people may think, this is the time for us to take the plunge in the stock market," Chung told China Daily.

"Even if US interest rates were to rise next month, the pace of the hikes would not be great. I've already taken US rate hikes into account before applying for a tax loan," he said confidently.

Chung is among many of the city's affluent bank customers capitalizing on low-interest tax loans to invest elsewhere or to meet other financial needs.

Standard Chartered Bank (Hong Kong) Ltd on Thursday unveiled a tax-loan package with an annualized percentage rate (APR) of as low as 1.65 percent for its new "Priority Banking" clients.

For new "Personal Banking Privileged Plan" clients and other selected customers, the APR will vary from 1.86 percent to 3.99 percent, depending on the loan amount.

Tax loans will be capped at HK$2 million, or nine times the applicant's monthly salary, whichever is lower.

In addition, if clients can prove that other lenders in the city can offer tax loans with an APR lower than 1.65 percent, they will be entitled to Standard Chartered's newly launched "Lower Cost Guarantee". The bank will offer a 10-percent discount in the APR for a tax loan drawn from another bank.

"We launch this tax loan product because it aligns with the group's business strategy of attracting more high-end and more affluent customers. Depending on clients' financial needs, we can provide other financial products, such as credit cards, mortgages, insurance and wealth management for our tax loan customers," said Ryan Fung Yuk-lung, head of retail products at Standard Chartered.

Fung said the bank is striving to achieve a growth rate of 20 percent among tax-loan customers and in the tax-loan business under the new program.

The composite interest rate for Hong Kong banks in September stood at 0.26 percent which reflects banks' weighted funding cost for both deposits and interbank funds during the month, according to Hong Kong Monetary Authority (HKMA) data.

Along with the traditional low default ratio of tax loans, Standard Chartered said it's confident the new program can make money for the bank although it promises an APR of 1.65 percent and a "Lower Cost Guarantee".

Retail banks' bad-debt charge as a percentage of their average total assets rose to 0.07 percent in June from 0.06 percent in March this year. Their net interest margin edged down to 1.32 percent from 1.33 percent over the same period, according to the HKMA's Half-Yearly Monetary and Financial Stability Report issued in September this year.

oswald@chinadailyhk.com

As the tax season kicks off, major banks in the city are gearing themselves up for a bigger slice of the tax-loan cake with an assortment of new financial products on offer. Roy Liu / China Daily

(HK Edition 11/06/2015 page8)