Consumer finance

Black credits, such as from loan sharks, could be reduced significantly by promoting consumer finance, photo Le Toan

SSI Research has cited information from VPBank’s Board of Management that the due diligence process for FE Credit sale has been conducted. FE Credit, Vietnam’s largest consumer finance firm, is in negotiation with its potential partners, though the discussion progress is somewhat interrupted due to the pandemic.

However, VPBank expects the negotiation to be completed in the second quarter of 2021. If the two sides cannot reach a mutual agreement, VPBank would consider an initial public offering (IPO) for FE Credit by the end of this year.

Based on the two scenarios, SSI’s analysis team gave some assessment on the impact of the sale of FE Credit on VPBank’s consolidated financial statements. If VPBank sells a 49-per-cent-stake in FE Credit at a valuation of around four times compared to the book value, the bank can record an after-tax profit of VND21 trillion ($913 million).

According to Vietnamese accounting standards, if VPBank’s control over FE Credit is maintained by holding 51 per cent of stakes, profit from the above capital sale will not be recognised as revenue. Instead, it will be directly recognised in the retained earnings on the bank’s balance sheet.

With an additional $913 million in capital, VPBank will reduce the dependence on customer deposits, thereby reducing the average cost of capital. After the deal is completed, VPBank’s consolidated pre-tax profit is estimated to increase by VND800 billion ($34.8 million) compared to the scenario where there is no capital sale at FE Credit.

In 2020, FE Credit’s pre-tax profwas estimated to reach VND3.713 trillion ($161.43 million), down 16.3 per cent on-year, according to the latest report by VPBank.

Meanwhile, HD Saison – the consumer finance arm of HDBank and Japan’s Credit Saison – was previously greenlit to switch from a limited liability to a joint-stock company format. The firm is reportedly preparing for an upcoming IPO.

Last December, Credit Saison signalled its intention to expand its investment in Southeast Asia, especially Vietnam and Indonesia, with an initial commitment of around $9.6 million for local lenders. Credit Saison will finance such projects as lending to low-income borrowers and microenterprises in a practice known as impact investing.

Elsewhere, SHB Finance is actively promoting the non-cash payment economy by co-operating with MasterCard. By partnering with SHB Finance, MasterCard wants to provide the most up-to-date digitalised user experiences to customers. Simultaneously, the company would bolster access to modest-income earners. Do Quang Hien, chairman of SHB’s Board, also revealed that the consumer finance company is in the middle of negotiations with a foreign partner.

Hoang The Hung, deputy general director of Electricity Finance JSC, said that the company’s consumer loan disbursement balance in the past year reached VND1 trillion ($23 million), which failed to meet its target. The major reason lies in its strict loan disbursement to facilitate a better risk management mechanism.

Elsewhere, foreign-invested consumer finance companies are laying focus on diversifying disbursement loans approaches. New products introduced over the past year are presenting alternative options for a wider swath of both Vietnamese and foreign customers.

For example, Lotte Finance introduces credit cards in cooperation with other foreign banks such as NHB and KB. The firm also boasts several loans such as for cars and learning English with Jaxtina English Center.

Mirae Asset Finance, on the other hand, decided to follow through on a broad diversification strategy. The South Korean company offers cash and electronics loan for education and beauty purposes. The loan package for beauty purposes would capitalise on clients who want to undergo plastic surgery.

Home Credit, meanwhile, is creating new ways for the consumer finance industry by bolstering its insurance business to help customers alleviate the risks of permanent disability or death.

According to the State Bank of Vietnam (SBV), by the end of 2020, the scale of Vietnam’s consumer finance market came to around VND1.8 quadrillion (over $77.25 billion), accounting for over 20 per cent of outstanding loans in the economy, up 7.4 per cent compared to the end of 2019.

Dao Minh Tu, Deputy Governor of the SBV, emphasised in a conference in last month that promoting consumer finance and simplifying procedures for loan applications would be placed as top priority to abolish black credit.

In recent years, the SBV and credit institutions in localities have been coordinating with the Ministry of Public Security and local authorities in implementing drastic measures to limit black credit. The SBV will continue improving the awareness of locals about credit policies, loan packages, and procedures for loan applications so that people could easily access bank loans.

Meanwhile, the central bank will study and soon complete legal documents to deploy mobile money services in Vietnam while making loans from microfinance institutions easily accessible to citizens and then gradually limit black credit.

During his three years as CEO, Dinh Quang Huy has lead SHB Finance to reach several notable achievements

Saigon-Hanoi Commercial Joint Stock Bank (SHB), the owner of SHB Finance, will appoint a new Board member and CEO in due time.

Talking with VIR about the move, Dinh Quang Huy was quite satisfied with what SHB Finance has achieved in his three years at the helm, with the support of the management team and nearly 4,000 employees.

The move after almost six years of growing the consumer finance business is part of his professional drive. Before joining SHB Finance, Huy had more than two years as CEO of MB Shinsei Finance Company (Mcredit), from the set-up phase to full scale operation.

With a broad range of consumer finance loans for low- to medium-income customers, SHB Finance is regarded as a trusted service provider of basic financial needs for Vietnamese customers.

During his three-year in the office, SHB Finance has been progressing with notable achievements such as becoming the first finance company rated by Moody’s at a B3 Stable outlook right in its first year of operation; mobilising a considerable amount of unsecured funds from institutional investors, including the prestigious ResponsAbility Investment Fund from Switzerland with strict standards; as well as signing a partnership agreement with Mastercard to issue international credit cards.

By the end of 2020, the network of SHB Finance has covered 40 key provinces and cities, serving nearly 700,000 customers. Pre-tax profit was VND70 billion ($3.04 million), with balance at the end of the period being VND3.689 trillion ($160.3 million), with bad debts under tight control and stable business results.

SHB Finance provides quick and convenient consumer loans for people with low and middle income

Throughout a challenging 2020, SHB Finance has proven its capacity and position when recognised by reputable rating agencies and institutional investors. With a broad range of consumer finance loans for low- to medium-income customers, SHB Finance is regarded as a trusted service provider of basic financial needs for Vietnamese customers.

The Hanoitimes – Vietnam’s effective containment of Covid-19 is seen as a major factor to boost retail sales during final months of the year.

Total retail sales of consumer goods and services in Vietnam reached an estimated VND5,059.8 trillion (US$219.53 billion) in 2020, up 2.6% against last year, according to the General Statistics Office (GSO).

Vietnam’s consumer spending rises despite Covid-19. Photo: Pham Hung.

“Such growth is the lowest during the past 10 years, but remains a positive result for Vietnam as the country continues to pursue the dual target of both containing the pandemic and boosting economic recovery,” stated the GSO in its monthly-report.

While the Covid-19 pandemic has caused severe impacts on the global economy, the fact that Vietnam has effectively contained the pandemic is seen as a major factor to boost retail sales during final months of the year, noted the GSO.

In the fourth quarter, revenue from retail sales and services stood at VND1,387.6 trillion (US$60.2 billion), up 6.4% quarter-on-quarter and 8% year-on-year.

On breaking down, retail sales of goods in 2020 gained around VND3,996.9 trillion (US$172.76 billion), accounting for 79% of the total and increasing by 6.8% over the similar period last year.

The Hanoitimes – The economy will continue to face uncertainties in 2021, which requires a cautious and flexible approach in price management.

Vietnam’s consumer price index (CPI), the main gauge of inflation, is forecast to stay below the 4% target in 2021 as the global and local economies continue to recover from the Covid-19 crisis.

Customers at Big C super market. Photo: Thu Huong.

“In 2020, the Government’s timely support helped ensure a positive economic growth at 2.91% year-on-year,” said Director of the Academic of Finance Nguyen Trong Co at a conference jointly held by the Ministry of Finance’s Price Management Department and the Academy of Finance on January 5.

The average CPI in 2020 expanded by 3.23% year-on-year, significantly lower than the 4%-target set by the National Assembly, while inflation grew by 2.31%.

“Despite major challenges from Covid-19, African Swine Fever and natural disaster, 2020 continued to be a successful year for the Government with both positive economic growth and inflation under control,” Economist Ngo Tri Long said.

Mr. Long attributed the finance ministry’s efforts in setting up short- and long-term scenarios for price management in 2020, as well as the effective cooperation between various agencies in stabilizing market prices, to the Government’s success in keeping a low inflation.

In 2021, Mr. Long said the existing uncertainties will require a cautious and flexible approach in price management.

“Fiscal and monetary policies are instrumental to contain the inflation and continue supporting people and businesses affected by the pandemic,” stated Mr. Long.

Director of the Institute of Economics-Finance (IEF) Nguyen Ba Minh expected prices of input materials in international markets to increase once the pandemic is fully contained.

“The complicated situation of the pandemic and natural disasters will continue to impact production and the balance of supply-demand in the local market,” he added.

IEF’s Vice Director Nguyen Duc Do said Covid-19 vaccines and the recovery of global and domestic economies are factors that will lead to an increase in inflation.

“However, given the CPI expansion of a modest level of 0.19% in last December and the economy, which is expected to be on track of recovery in 2021, the inflation would not be high,” stated Mr. Do.

According to Mr. Do, in case of strong volatility of petroleum and food prices similar to that of 2019, the inflation would continue to stay below 3%.