FE Credit “the goose that lays golden eggs” of Vietnam Prosperity Commercial Joint Stock Bank (VPBank) for many years continued to be the hot topic at the bank’s 2019 Annual general Meeting (AGM) held in the afternoon of April 26th.
Year 2018 is considered a tough year for consumer finance lending activities as well as FE Credit. The growth of FE Credit in the whole year 2018 was about 18.9 percent with a granted growth limit of about 20 percent. The company’s profit did not meet the expectation.
However, talking with shareholders, VPBank’s general director affirmed that FE Credit remains the “important and effective business model” of the bank. Vinh added that despite meeting various difficulties when the credit growth of this segment declined, FE Credit still raised its market share from 53 percent to 55 percent and contributed about 44 percent to VPBank’s consolidated profit. The head of VPBank’s Executive Board still believed that FE Credit is the bank’s strength.
More than once, VPBank’s leader emphasized that the development trend of consumer finance in Vietnam “has not slowed down” as experts said, and it is even increasing. “Watching the market for the past seven to eight years, we found that the growth rate was fast in the first phase, when Vietnam had not had a market for consumer finance lending. After it boomed, the development may slow down but still in an uptrend,” said Vinh.
The State Bank of Vietnam (SBV) is also gathering comments on cash lending in financial companies’ operations. This may affect the revenue of FE Credit. Chair of VPBank’s Board of directors Ngo Chi Dung said that tightening consumer finance will greatly affect the nascent consumer finance field as well as the plan to fight black credit of the government.
Dung assured shareholders that the draft may be considered and tightening of cash loans is unlikely to be applied.
Agreeing with Dung, another shareholder also said that the tightening of consumer finance at this time is not appropriate and the management authority should not consider assigning credit growth limits for the operations of finance companies.
In addition to FE Credit, VPBank affirmed that it has many advantages from its parent bank’s operation. In 2019, the bank expects to increase pre-tax profit by three percent to 9.5 trillion dong. Explaining about this fairly modest profit plan, VPBank’s Chair said that this scenario was built in the context that the SBV wants to reduce the average credit growth of the banking sector to 12-15 percent and VPBank’s is assigned with a 12 percent credit growth room. In addition, the bank also considers year 2019 as a year to focus on developing quality instead of scale, and it will use a part of the retained profit to buy back bad debts sold to Vietnam Asset Management Company (VAMC).
Moreover, if excluding the extraordinary income from insurance premium in 2018, Dung said that the profit growth of the parent bank in 2019 is expected at 14 percent.
“However, as VPBank is approved to apply the Basel II standards ahead of schedule, the bank may be granted a higher credit growth limit by the SBV. Thanks to that, the actual profit of the bank may be higher than this expected level,” said Dung.
According to VPBank’s leader, the bank will not expand its workforce in 2019 and may strongly reduce the number of employees in some units. Therefore, the bank’s operating expenses will be controlled while profits will still ensure growth.
In 2019, VPBank targets to expand total assets by 16 percent to 373.649 trillion dong, mobilisation and issuance of valuable papers by 15 percent, and outstanding loans by 15 percent. The bank aims to control bad debts no more than three percent.
At the AGM, VPBank proposed to retain profits and not pay dividends this year. However, the bank plans to carry out an Employee Stock Ownership Plan (ESOP) in the second quarter of 2019. The total share issuance is expected to be 31 million shares with transfer restriction in three years, gradually releasing each year at a rate of respectively 30 percent after the first year, 35 percent after the second year, and 35 percent after the third year.
