Econ
M&A in consumer finance on the rise
Mergers and acquisitions (M&A) in Vietnam’s domestic consumer finance sector will continuously heat up in the short term with the participation of both foreign and domestic players, buoyed by the market’s strong growth of 30-35 percent annually.
At a recent annual general meeting, Orient Commercial Joint Stock Bank (OCB) approved a plan to either acquire a finance company or establish OCB finance company with a charter capital of VND500 billion (US$22 million) in 2018.
Vietcombank is also expected to set up a consumer finance arm after selling a part of stake in its Finance Leasing Company.
SeABank has recently acquired Post and Telecommunication Finance Company Ltd (PTF), the finance arm, of Vietnam Posts and Telecommunications Group at a cost of more than VND500 billion ($22 million).
Earlier, Techcombank reportedly sold its stake in the finance subsidiary TechcomFinance to South Korean credit firm Lotte Card, a member of Lotte Group, for 87.5 billion won or VND1.73 trillion (US$76.9 million).
The deal has allowed Lotte Card to issue credit cards, provide installment financing services and consumer finance in Vietnam, and target the local consumer finance sector, which skyrocketed by 65 percent last year.
MCredit – the financial arm of the Military Commercial Joint Stock Bank (MBBank) – also changed its name to MB Shinsei Consumer Finance Co Ltd, a step that helped MBBank completed selling a 49 percent stake in MB Shinsei Consumer Finance to the Japanese bank Shinsei.
High growth predicted
Vietnam currently has 18 consumer finance companies, of which 6 are wholly foreign-owned companies.
According to Viet Dragon Securities Company, FE Credit is the biggest lender which holds 48.4 percent of market share, followed by Home Credit with 15.7 percent, HS Saison 12.3 percent and Prudential Finance 8.1 percent. All the companies see annual two-digit growth rates.
VPBank General Director Nguyen Duc Vinh said that the consumer credit segment was one of the bank’s two main income sources in the past five years. The bank this year plans a profit target of VND10.8 trillion ($475.77 million), of which a half will come from its consumer finance company FE Credit.
Data from the National Financial Supervisory Commission showed that Vietnam’s total outstanding consumer credit reached roughly VND1.1 quadrillion ($48.25 billion) last year, a surge of 65 percent year-on-year and 4.8 times higher than that in 2012. This growth rate reportedly outshined the country’s total outstanding loans, which was recorded at 18.17 per cent last year. With such growth, consumer credit accounted for some 18 percent of total credit in 2017, up 12.3 percent year-on-year.
According to analysts, the consumer finance business still has room to grow and the participation of both domestic and foreign companies will help boost the sector’s influence on the Vietnamese economy.
Can Van Luc, chief economist of Bank for Investment and Development of Vietnam (BIDV), said that consumer finance would help people afford their needs and manage their finances better.
It would further develop the sector of individual consumer spending - which accounted 67-68 per cent of Vietnam’s gross domestic product (GDP) – having a positive impact on the country’s socio-economic development and stabilizing the financial market, Luc said.
However, the competition in Vietnam’s consumer finance industry will get fiercer as more players enter the country, reducing market shares and comparative advantages of those already present in the market, according to FE Credit.
In addition, Viet Dragon Securities Company also said that the high growth rate of consumer credit will be associated with increased risks on bad debts.
FE Credit is expected to help VPBank earn more than VND5 trillion this year.
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SeABank has recently acquired Post and Telecommunication Finance Company Ltd (PTF), the finance arm, of Vietnam Posts and Telecommunications Group at a cost of more than VND500 billion ($22 million).
Earlier, Techcombank reportedly sold its stake in the finance subsidiary TechcomFinance to South Korean credit firm Lotte Card, a member of Lotte Group, for 87.5 billion won or VND1.73 trillion (US$76.9 million).
The deal has allowed Lotte Card to issue credit cards, provide installment financing services and consumer finance in Vietnam, and target the local consumer finance sector, which skyrocketed by 65 percent last year.
MCredit – the financial arm of the Military Commercial Joint Stock Bank (MBBank) – also changed its name to MB Shinsei Consumer Finance Co Ltd, a step that helped MBBank completed selling a 49 percent stake in MB Shinsei Consumer Finance to the Japanese bank Shinsei.
High growth predicted
Vietnam currently has 18 consumer finance companies, of which 6 are wholly foreign-owned companies.
According to Viet Dragon Securities Company, FE Credit is the biggest lender which holds 48.4 percent of market share, followed by Home Credit with 15.7 percent, HS Saison 12.3 percent and Prudential Finance 8.1 percent. All the companies see annual two-digit growth rates.
VPBank General Director Nguyen Duc Vinh said that the consumer credit segment was one of the bank’s two main income sources in the past five years. The bank this year plans a profit target of VND10.8 trillion ($475.77 million), of which a half will come from its consumer finance company FE Credit.
Data from the National Financial Supervisory Commission showed that Vietnam’s total outstanding consumer credit reached roughly VND1.1 quadrillion ($48.25 billion) last year, a surge of 65 percent year-on-year and 4.8 times higher than that in 2012. This growth rate reportedly outshined the country’s total outstanding loans, which was recorded at 18.17 per cent last year. With such growth, consumer credit accounted for some 18 percent of total credit in 2017, up 12.3 percent year-on-year.
According to analysts, the consumer finance business still has room to grow and the participation of both domestic and foreign companies will help boost the sector’s influence on the Vietnamese economy.
Can Van Luc, chief economist of Bank for Investment and Development of Vietnam (BIDV), said that consumer finance would help people afford their needs and manage their finances better.
It would further develop the sector of individual consumer spending - which accounted 67-68 per cent of Vietnam’s gross domestic product (GDP) – having a positive impact on the country’s socio-economic development and stabilizing the financial market, Luc said.
However, the competition in Vietnam’s consumer finance industry will get fiercer as more players enter the country, reducing market shares and comparative advantages of those already present in the market, according to FE Credit.
In addition, Viet Dragon Securities Company also said that the high growth rate of consumer credit will be associated with increased risks on bad debts.
