Banks Rush To Provide Consumer Loans, Compete With Finance Companies

Consumer lending is an important business for banks

Consumer lending has become an increasingly important business for banks. In 2017, VP Bank reported revenue and profit growth rates of 45 percent and 55 percent, respectively, from consumer loans. 

FE Credit, the finance companies belonging to VP Bank, made up 51 percent of the bank’s total profit. Its outstanding loans in 2017 reached VND45 trillion, or 12 times higher than 2014, but only accounted for 25 percent of VP Bank’s outstanding loans.

As such, the outstanding loans of FE Credit alone accounted for 50 percent of total outstanding loans in the consumer finance market, three times higher than that of the second largest lender Home Credit with 16 percent. 

A representative of FE Credit said it now has more than 7 million clients, 7,000 partners and 11,000 sale points throughout the country. 

With such a large scale, VP Bank has been continuously seeking capital sources. It borrowed $50 million from Lion Asia, $100 million from Deutsche Bank and $100 million from Credit Suisse AG Singapore.

In 2015, HDBank sold 49 percent of HD Finance shares to Credit Saison, one of the largest Japanese consumer lenders.  HD Saison joint venture began stepping up lending.

Its strategy of targeting young consumers and focusing on short term lending has quickly brought achievements. 

The 2017 report showed that 41 percent of loans were disbursed to fund motorbike purchases, 24 percent to fund household-use appliances. 

More than 32 percent of loans were in cash and 2.5 percent were disbursed for other lending products. More than 45 percent of total loans were short term (less than 12 months).

With finance consumer loans of VND9.5 trillion, HD Saison now ranks third among the biggest consumer lenders, just behind FE Credit and Home Credit.

Other banks, encouraged by the big achievements gained by FE Credit and HD Saison, have jumped on the bandwagon. Mcredit of the Military Bank, which debuted in 2016, had consumer loans of VND2.242 trillion by the end of the first quarter of 2018, with more than 352,000 clients.

MB Shinsei, the joint venture of MB and Shinsei Bank, hopes that Mcredit will be among the top five finance consumer companies with total outstanding loans of VND5.9 trillion in 2018 and pre-tax profit of VND300 billion.

The 2018 shareholders’ meeting of the Saigon – Hanoi Bank (SHB) approved the plan to put SHB Finance Company into operation, commencing from July. 

OCB’s shareholders have also approved a plan to set up OCB Finance Company.

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Thanh Mai