To unlock the potential of the consumer finance market, nearly a decade ago, numerous finance companies were established, some of them were under banks. However, through the competition and screening, a large number of finance companies accepted to leave the game and the majority of the remaining units are operating in moderation. In the past few years, three finance companies have emerged and accounted for most of the market share, including FE Credit, Home Credit, and HD Saison. Among them, FE Credit a finance company under Vietnam Prosperity Commercial Joint Stock Bank (VPBank). After only seven years joining the market, the company has owned 55 percent of the consumer finance market share.
VPBank established FE Credit in 2010 on the basis of its Personal Consumer Credit Division. By July 2014, VPBank acquired Vietnam Coal and Mineral Finance One Member Liability Limited Company and changed its name to VPBank Finance One Member Liability Limited Company (VPBFC FE Credit) and gradually transferred the operation of the Personal Consumer Credit Division to the company. Year 2015 was the first year FE Credit operated entirely under VPBank’s subsidiary model. It is currently considered “the goose that lays golden eggs” for VPBank as it contributes about half of the bank’s profits. In 2016, FE Credit recorded over two trillion dong of pre-tax profit and in 2017 it contributed over 51 percent to VPBank’s total profit of 8.1 trillion dong.
According to leader of VPBank, to have more than 50 percent of market share, and revenue and profit growth as mentioned in the above, FE Credit has accepted high risk. While other competitors remained hesitant and cautious, VPBank, via this subsidiary, has attached niche markets such as home loans, car loans, credit cards and unsecured cash loans, etc.
HDSaison is also a familiar name to Vietnam’s finance market, especially in the last year years, after Hochiminh city Development Commercial Joint Stock Bank (HDBank) acquired SGVF Finance Company, sold 49 percent of stake of the finance company to a Japanese finance group and changed its name to HD Saison. Similar to FE Credit, HDSaison has maintained a strong growth in recent years and contributed a significant profit to the parent bank. Specifically, in the total profit attained in 2017 of HDBank which was over 2.4 trillion dong before tax, HDSaison contributed about 35 percent. HDBank expects that HD Saison will bring over one trillion dong of pre-tax in 2018.
HDSaison has been present in many motorbike and car sale points, mobile shops, and home appliances stores, etc. such as Mobile World, FPT Shop, Vien Thong A, Big Market, Big C, Honda, Yamaha, Piaggio and Nguyen Kim. In the coming time, HDSaison plans to continue to set up new distribution channels, including co-branded credit card products and online loan products to buy Vietjet Air tickets.
With this development strategy, the current position and good foundation, HDSaison is expected to bring better and more sustainable profit than its rivals. According to Hochiminh city Securities Company, in the past year, HDSaison contributed nearly 39 percent to HDBank’s consolidated profit. HDBank’s plan is not to overly boost HDSaison’s growth but still prioritise the bank’s activities, aiming for safety. As expected, in the next three years, HDSaison will maintain a contribution of 30-35 percent to the profit of parent bank. With an expected profit of over 3.9 trillion dong in 2018, HDSaison is clearly projected to bring up to trillion dong profit to HDBank.
On the consumer finance market, in addition to FE Credit and HDSaison, Home Credit a 100 percent foreign owned finance company is also a popular name. Home Credit started its operation in Vietnam in 2009. After nine years in operation, the company has built a network of nearly 9,000 service introduction points across 63 provinces and cities across the country. With over 11,000 employees, Home Credit is serving seven million customers with three main products: motorbike instalment loans, electronics and home appliance instalment loans, and cash loans.
Dmitry Mosolov, general director of Home Credit said that in the recent year, the company has been determined to meet the rapidly changing needs of the financial market. The change to a new brand name is an important part of the company’s transformation. “We believe in human interaction, which makes us different from our competitors”, said Dmitry. However, with such a strong rival like FE Credit, the market share of Home Credit is shrinking.
The rise of the three finance companies in the past few years also leads to the narrowing in market share of some other companies. Prudential Finance, after 10 years in operation in Vietnam, was sold to Shinhan Financial Group from South Korea for nearly 151 million USD.
In 2017, the revenue growth of consumer credit reached nearly 60 percent. As forecasted by some experts, in the next three years, the average growth of this field will be up to 29-30 percent per annum. From a size of nearly 600 trillion dong in late 2017, the consumer finance is projected to hit 1,000 trillion dong milestone in 2019. This projection is given based on the fact that the income of Vietnamese people is improving with rising number of middle and high-income people, which is forecasted to double in the next 15-20 years.
According to Nguyen Hoang Minh, deputy director of State Bank of Vietnam Hochiminh city, in 2012-2017 period, the outstanding consumer credit in the city grew at an average rate of 20-22 percent. If in 2012, only 4 percent of the total outstanding loans of the city was consumer credit, this number increased to 6 percent in 2015, 8 percent in 2016 and 12.2 percent in 2017.
Meanwhile, report of the National Financial Supervisory Commission showed that as of late November 2017, the total outstanding consumer credit was estimated to increase by 59 percent compared to late 2016. In particular, home purchase, leasing, and repairing loans, and loans for the transfer of land use rights to construct residential housing, etc. accounted for 52.9 percent (49.5 percent in late 2016); loans for buying home appliances accounted for 15.3 percent; and loans for buying transportation means accounted for 8.3 percent, etc.
The report also assessed that Vietnam’s consumer finance market still has great potential to exploit.
In fact, Vietnamese people, especially young ones, are borrowing more to serve their personal spending needs. Dang Thanh Hung, director of FE Credit Marketing centre said that since commercial banks often lend large amount of money and require secured assets while finance companies offer unsecured loans with quick disbursement procedures, many young people come to finance companies to satisfy their shopping and even travelling needs. Hung said that the high interest rates of finance companies from 20-60 percent is due to the large capital costs, as finance companies are not allowed to mobilise capital from the population and often have to borrow banks. The interest rates also proportional to the risks, while the lending procedures are simple.
Dr Can Van Luc, a banking expert also assessed that the proportion of consumer lending will increase because the population is young, the average income per capita is increasing, and the ratio of personal spending on GDP of Vietnam is also at a high level of about 67 percent.
The race to take over finance companies of banks seems to have not come to an end. Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) also plans to set up a consumer finance company after selling a part of the stake of its financial leasing company. Asia Commercial Joint Stock Bank and Orient Commercial Joint Stock Bank also have plan to acquire or establish new consumer finance company. Foreign investors also eyes Vietnam’s consumer finance market and surely, the mergers and acquisitions in this field will continue to be exciting in the near future.
Survey shows that Vietnam’s consumer finance channel is still in an early stage with 90-95 percent of customers experiencing personal financial services for the first time. Thus, the market needs more rookies to exploit this billion USD land and promises to bring more success to credit institutions in consumer lending.
