Surprise in the recent report on StoxPlus’s consumer lending market is the expansion of new names in the market. Not only Mcredit of Military Commercial Joint Stock Bank (MB), Mirae Asset, a Korean financial institution that has been operating for a long time in Vietnam, is also active.
Mergers and Acquisitions (M&A) continues to be strong
Recently, consumer lending brand Shinhan Finance officially launched, after Shinhan Group (South Korea) acquired the consumer lending segment of Prudential Insurance Company in early 2018. In addition to Shinhan, the market is also waiting for a new consumer finance brand from another chaebol, Lotte Group, after the acquisition of Vietnam Technological and Commercial Joint-Stock Bank (Techcombank)’s consumer finance company in 2018.
Not only Korean investors, Japanese investors also seem to be very interested in the consumer lending market in Vietnam. Besides familiar names like Saison (invested in HCM City Development Joint Stock Commercial Bank (HDBank)) or Shinsei (invested in MB), recently, the leader of Aeon Group (Japan) also shared its commitment to invest $5 billion in the near future, in which there was no hidden ambition to buy a consumer finance company.
In February, Srisawad (Thailand) said it was willing to spend 523 billion dong to buy ALC I financial leasing company from Vietnam Bank for Agriculture and Rural Development (Agribank), transforming its operation model to consumer lending. However, the negotiation from June 2016 until now has not been successful. Not only foreign institutions, domestic companies also took advantage of the brand launch after the previous M&A deals. For example, last year the market saw many new brands such as VietCredit, EasyCredit, SHB Finance. In addition, there are still many companies that have not yet promoted as a consumer lending company of Vietnam Maritime JointStock Commercial Bank (MSB), or Southeast Asia Commercial Joint Stock Bank (SeABank).
Meanwhile, banks still see this as an extremely attractive segment. At TPBank’s general Meeting of Shareholders recently, Do Minh Phu, Chair of Tien Phong Commercial Joint Stock Bank (TPBank), said that the Bank was currently negotiating to buy a finance company and could finish the deal in 2019.
It can be seen that M&A activities in the near future will still be strong. Accordingly, companies with consumer lending licenses will be targeted for acquisitions, including domestic and foreign partners. By the end of 2018, there were 16 financial companies reported by the State Bank of Vietnam (SBV). Consumer lending business is doing well in the context that Vietnamese people have more and more consumer demand, even though the bad debt risk is large but the profit ratio is high.
The market not only has lending financial companies but also many other groups, including pawn shops and fintech companies with the online loan model. Current statistics showed that there were about 40 Peer-to-peer lending companies (p2p lending).
Market size of consumer loans in Vietnam continues to expand. According to SBV’s statistics, consumption proportion in Vietnam’s GDP continued to grow strongly. In the 2013-2014 period, the average growth rate was about 15 percent, by 2015-2017 it was 61.3 percent, in 2018 it was 29.3 percent. This number was much higher than the credit growth of the banking system.
Meanwhile, StoxPlus statistic showed that the consumer lending market size was estimated at $42 billion. However, last year, the market grew slowly compared to previous years. Although financial companies still grow significantly, market share has changed as the number of companies has increased, especially market leaders such as FE Credit, HD Saison or Home Credit.
For FE Credit, although leading the market, the growth rate slowed. Accordingly, FE Credit’s outstanding loan reached 52.119 trillion dong, an increase of 19 percent compared to the previous year. Not only the market share adjusted, the market is also gradually improving its legal basis. Currently, the management agency is seeking opinions for a new management circular with many criteria for the consumer lending market, such as tightening cash lending activities (direct disbursement of no more than 30 percent of total outstanding loans), controlling interest rate and ensuring transparency and improving debt handling and trading activities.
The management agency is currently doing quite well on the consumer lending market. A survey conducted by SBV in seven localities recently showed that the demand for consumer loans was very large, but informal credit activities were still growing strongly in the past time, and interest rate of financial companies was still high, up to 60-80 percent.
In fact, management agencies still target financial companies as a tool to limit informal credit. However, if new regulations are passed, many financial companies may have to adjust their lending activities to both product strategy and debt collection process. Many financial companies start to create new products in many different segments. Typically, HD Saison loaned to buy air tickets when combined with VietJet Air.
It can be seen that the race to gain market share will be even more fierce when leading international corporations jump in. These investors not only have strong capital, but also follow the ecosystem, putting pressure on domestic businesses, including commercial banks in the race for consumer loans.
