Consumer finance companies remain attractive acquisition targets

Monday, Dec 14, 2020 07:54

At its annual general meeting this year, VPBank, the parent company, announced plans to sell stakes in FE Credit to foreign investors. — Photo

A spokesperson for FE Credit Consumer Finance Company said the Covid-19 pandemic had somewhat affected the company’s business but the price of its stock would not change thanks to its advantages and the market’s great potential.

He said the deal would be completed in 2021.

At its annual general meeting this year, VPBank, the parent company, announced plans to sell stakes in FE Credit to foreign investors.

It is still in negotiations with them and believes it will identify a sound investor since FE Credit is one of the most attractive consumer finance companies in the Vietnamese market.

Analysts said the pandemic might delay finance companies’ stock deals but would not force their prices down.

They said the Vietnamese consumer finance market had enormous potential but since licences to establish a company were very difficult to get, buying stakes in existing companies or acquiring an ailing institution is the best option for investors.

Viet Nam currently has 16 finance companies, including six fully foreign owned ones.

The profitability of most consumer finance companies is high.

Finance and financial leasing companies had the highest rates of return on assets and return on equity in 2019 of 3.02 per cent and 13.83 per cent, or 15-25 per cent higher than banks’ rates.

Because of this, foreign investors, especially from Japan and South Korea, are keen to enter this market.

In a statement to its investors, South Korean credit issuer Hyundai Card said Viet Nam is one of the world’s fastest growing markets. Its market for personal loans is currently growing at an annual rate of 60 per cent, with the number of credit card holders surging 27 per cent in 2019 to 7.4 million.

Opportunities for investors

Since the beginning of this year many banks have said they are looking to sell stakes in their finance companies to foreign or domestic investors.

SHB has decided to offload stakes in SHB Finance Company to strategic foreign partners.

The management of Maritime Joint Stock Commercial Bank announced it was taking the necessary steps for selling a 50 per cent stake in its subsidiary, consumer finance firm FCCOM, to Hyundai Card.

It submitted the proposal to the State Bank of Viet Nam for approval in late 2019.

Vietinbank approved a plan to sell 49 per cent of Vietinbank Leasing Company Limited to Japan’s Mitsubishi UFJ Lease & Finance Co. Ltd, and 1 per cent to a domestic investor.

It also plans to convert the leasing company’s legal status to a limited liability company with two or more members from the current single-member limited liability company.

Interestingly, many Vietnamese investors including banks are keen on acquiring consumer finance firms.

At its 2019 annual general meeting, Tien Phong Commercial Joint Stock Bank (TPBank) laid out a proposal to acquire a 100 per cent stake in a finance company, saying it would enable the bank to achieve its targets.

The Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Asia Commercial Joint Stock Bank (ACB), Orient Commercial Joint Stock Bank (OCB), and others too are keen to enter the market.

Analysts said the Covid-19 outbreak had delayed things, but normal consumer finance M&A activities would resume soon since these companies are always attractive targets.

It then begs the question: Why are many banks seeking to sell stakes in their finance companies?

One of the main reasons is that these deals offer them access to funds, according to experts.

Besides, professional and experienced foreign investors with established names help improve management and technology of the companies they acquire, and build their brand names.

The SHB management concurred with this saying the funds foreign partners bring, their experience and management ability, modern and professional distribution channels, and advanced technologies could help SHBFC grow its consumer loan market share.

SHB owns 100 per cent of SHBFC, which has charter capital of VND1 trillion (US$42.6 million).

HCM City real estate market set to recover: HoREA

The Ho Chi Minh City Real Estate Association (HoREA) has forecast a strong recovery by the city property market starting around the Lunar New year early next year.

It said in the period from January to October this year the property market, like many other sectors, was badly affected by the Covid-19 pandemic.

But it has been recovering significantly in recent times, with increasing supply, especially in the high-end segment.

HoREA expects the recovery to be underpinned by the country’s success in controlling the outbreak, new policies enshrined in the 2020 Investment Law and amendments to the Construction Law and Housing and Property Trading laws due to take effect in the new year.

Over the longer term it expects the market to boom thanks to the city’s major urban development projects.

They include the project to build a “city within a city” (tentatively called Thu Duc City) in the eastern part by merging districts 2, 9 and Thu Duc. It is meant to be an innovation hub based on a digital knowledge-based economy.

There is also a proposal to develop the rural district of Can Gio into an ecological and coastal urban area.

The creation of Thu Duc City is expected to provide a strong push to the real estate market.

The city has already got approval from the Government to convert 26,000 hectares of farmlands into industrial, commercial and residential lands.— VNS

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