Banks eye consumer finance


HCM CITY – Several banks are keen to establish consumer finance arms to grab a bigger share of a market that is expected to reach VNĐ1,000 trillion (US$4.38 billion) by 2020 and grow at 29 per cent annually.

At its annual general meeting last month Orient Commercial Bank tabled a plan to set up a finance company this year.

Trịnh Văn Tuấn, its chairman, was quoted by Đầu tư Chứng khoán (Securities Investment) newspaper as saying the bank’s consumer credit business is expanding rapidly and so it needs an independent company to streamline the business and improve risk management.

The lender plans to either establish a wholly-owned subsidiary with a charter capital of VNĐ500 billion ($22 million) or acquire at least 70 per cent in an existing finance company.

Asia Commercial Bank (ACB) too plans to set up a financial company with a charter capital of VNĐ500 billion.

News reports had suggested that ACB wanted to acquire the Post and Telecommunication Finance Company (PTFinance), but last February SeABank bought it for VNĐ710 billion.

After closing deals to buy finance companies, several banks have quickly looked for foreign strategic partners.

For instance, Techcombank sold Techcombank Finance Company, which it had acquired in 2015, to Korea’s Lotte Card for VNĐ1.7 trillion.

Prudential has reached agreement to sell Prudential Việt Nam Finance Company to Shinhan Card, a subsidiary of Korea’s Shinhan Financial Group, for nearly $151 million.

HDBank sold 49 per cent of its stake in HDFinance to Japan’s Credit Saison.

An executive at the Sài Gòn-Hà Nội Commercial Joint Stock Bank (SHB) told Securities Investment newspaper that after the bank was merged with Vinaconex-Viettel Finance JSC and established SHB Finance, whose main business is consumer credit, many companies from the EU, the US and Japan have shown interest in buying stakes in it.

The executive said SHB is considering some of the offers, explaining that having a foreign strategic partner would bring international management and sales experience.

Among consumer finance companies owned by lenders and not yet sold to foreign firms is VPBank’s FE Credit.

Last year FE Credit accounted for 51 per cent of the bank’s profit, the main reason why VPBank is in no rush to sell it to foreign companies.

Maritime Bank has also remained silent about looking for a foreign partner since acquiring Việt Nam Textile and Garment Finance Joint Stock Company in 2015.

The consumer finance market is expected to boom since consumers are now used to it and realised its convenience, experts said.

According to estimates by the National Financial Supervisory Commission, consumer lending surged 65 per cent last year, up from 50.2 per cent in 2016.

The ratio of consumer credit to total outstanding loans in the banking system was estimated at 18 per cent last year, up from 12.3 per cent in 2016.