In general, under the impact of the Covid-19 pandemic, finance companies are actively tightening their operations, consolidating lending models, controlling bad debts, etc. However, some companies have found opportunities from the new trend after the social distancing period.
FE Credit promotes credit card segment, continues Initial Public Offering (IPO) plan.
At the Annual general Meeting (AGM), general director of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) Nguyen Duc Vinh said that every year, FE Credit contributed about 44 percent to the consolidated profit, but this year the contribution may be lower.
Vinh also said that FE Credit, in the recent time, has considerably tightened its operations such as temporarily stopping growth, focusing on less-risky customers, increasing cross-selling to control risks. By the end of May 2020, FE Credit’s credit growth was just over one percent and the company continues its strict control in June with a growth rate of only one to two percent.
Previously, FE Credit’s general director Kalidas Ghose also assessed that the epidemic has negatively influenced Vietnam and the world in many aspects, and finance companies are no exception, causing the company’s lending to be significantly slower. However, with the orientation of controlling risks, FE Credit in the recent time has also sharply lowered the bad debt ratio from six percent in the same period of 2019 to 4.4 percent as at present a low figure in the consumer credit segment.
FE Credit’s leader also said that the company will continue to focus on good customers and increase risk control. However, he sees a new consumption trend of customers after the social distancing period. That is the increase of spending via credit cards. In the first quarter (Q1) of 2020, the spending via credit cards grew by 30 percent compared to the same period of last year, particularly spending on purchases of consumer goods and e-commerce transactions.
The IPO plan of FE Credit also draws attention of investors. According to Ngo Chi Dung, VPBank’s Chair, the bank has recently negotiated with many investors about selling a part of Fe Credit’s stake, and achieved positive results. Due to the epidemic, the negotiation process has been temporarily interrupted, but the bank’s BOD believes that this process will continue in the near future and the goal will be reached because FE Credit is very attractive in the financial industry.
Regarding the rate of the capital sale, VPBank’s Chair said that since it is a finance company which is different from banks, it can call for selling up to 49 percent of capital. The sale of capital at such high rate will help the bank receive financial cooperation, technology, management experience, etc. from the partner in order to bring about greater efficiency and a large capital source to scale up, boost retail lending and lending to Small and medium-sized enterprises (SMEs) the core segments of the parent bank.
HD Saison is planning IPO.
Similar to FE Credit, HD Saison one of the big consumer finance giants is also planning an IPO. Talking at the 2020 AGM of HCM City Development Commercial Joint Stock Bank (HDBank) on June 13th, the bank’s Standing vice Chairwoman Nguyen Thi Phuong Thao said that the bank is building a plan to transform HD Saison Finance Company Limited to a joint stock company and may carry out IPO of this company.
HD Saison’s charter capital is currently two trillion dong. In particular, HDBank holds 50 percent of the company’s charter capital, the partner Credit Saison from Japan owns 49%, and HCM City Securities Company (HSC) holds one percent.
As of December 31st 2019, HD Saison’s lending portfolio included 42 percent of motorbike loans, 25 percent of home appliance loans, 33 percent of cash loans, and 0.002 percent of loans for buying other new products such as online loans for buying Vietjet Air tickets.
For cash loans, unlike most other consumer finance companies in the market, HD Saison said that it follows a strict standard of risk management. Specifically, HD Saison only lends cash to existing customers with a proof of good credit history.
MCredit strengthens lending model, reduces workforce.
Vu Thi Hai Phuong, vice Chairwoman of the BOD of Military Commercial Joint Stock Bank (MBBank) cum chair of MCredit said that the finance company has recently developed in the direction of increasing market share so it is relatively hot. Therefore, MBBank’s BOD has required a comprehensive restructuring to bring MCredit to a new level which is suitable with the bank’s risk appetite. The company has also built a system towards a human consumption finance model.
Regarding bad debts, MCredit’s leader said that since finance company’s specific characteristic is unsecured business, the collection of debts and the existence of bad debts are present. Since in 2020, finance companies have gradually been lowering the proportion of cash loans, the risks will decline. MBBank has also strengthened its instalment lending model, bringing the proportion of instalment loans to 40-50%.
This year, MCredit will also consolidated its entire operation, improve the role of committees, strengthen regulations to have better governance, prioritise the construction of a modern system in order to create the competitiveness for the company. In addition, MCredit is implementing personnel restructuring, cutting more than 500 employees, etc. All of these factors will help reduce costs, improving operation efficiency.
In the first half of 2020, MCredit’s bad debts are estimated to be controlled below six percent, the debt drift ratio (typical characteristic of finance companies) is expected to be less than four percent, and the company’s profit is estimated at about 120 billion dong.
SHB FC is drawing attention of many investors.
At the AGM, shareholders of Saigon Hanoi Commercial Joint Stock Bank (SHB) has approved the plan to divest from SHB Finance Company (SHB FC). The deal is expected to bring a large capital surplus to the bank.
Chair of SHB’s BOD Do Quang Hien said that SHB FC was formerly known as Vinaconex-Viettel Finance Joint Stock Company. Before merging in SHB, it was a company with good health. With such good financial foundation, SHB has always ensured that SHB FC’s operation is in good status with good risk management. “This is a good time to divest to foreign strategic investors,” said Hien.
The benefit of the divestment, in addition to the significant capital surplus, is also to enhance SHB FC’s governance. SHB’s leader added that “We will also choose strategic investors to accompany, resonate and cooperate in the business strategies of both parties.”
Concerning the selling price, SHB’s Chair said that the bank will strive to have the best benefits for shareholders. The selling rate must follow the regulations of the SBV. However, he emphasized that it is necessary to choose a partner that can go along and resonate with SHB.
SHB’s Chair also revealed that the bank has a partner and negotiation is ongoing. He added that the deal can be completed in 2020 because many investors are interested in SHB.
According to SHB, in 2019, SHB’s FC direct sales channels covered more than 30 provinces and cities; and other sales channels are also diverse, such as online sales, facebook, fanpage, zalo, etc.
The outstanding credit of SHB FC in 2019 was 2.727 trillion dong, up by 284 percent compared to 2018. The company’s pre-tax profit was 106 billion dong, up by 856 percent compared to 2018. As of December 31st 2019, SHB’s FC had 1,855 employees, up by 706 people compared to 2018.
