Banks not in haste to establish financial firms

Home Credit is one of two financial leading players currently in consumer finance segment

At its recent annual general shareholders’ (AGM) meeting, state-owned Military Commercial Joint Stock Bank (MB Bank) set to achieve VND6.8 trillion ($302 million) in profit, with VND300 billion ($13.3 million) to come from its consumer finance firm Mcredit.

Leveraging the Japanese partner and existing network advantages, Mcredit aims to be named among the top three players in the consumer finance segment in Vietnam in the not-so-distant future, according to the bank’s general director Luu Trung Thai.

Currently, FE Credit and Home Credit are the two leading players in this segment, each with annual profit figures in the range of trillions of Vietnam dong. Last year, FE Credit counted VND4 trillion ($177.7 million) in profit.

Industry experts assumed that as Mcredit has mainly served military customers and businesses and its products and services show no particular distinction, it would be hard for the company to seize a larger market share.

Albeit Vietnam is currently home to 16 consumer finance firms, more than 80 per cent of the market share is in the hands of four major players, including FE Credit, Home Credit, HDSaison, and Prudential.

In addition, consumer finance firms are facing stiff competition from fintech firms which have been mushrooming recently, whereas local banks witnessed a phenomenal growth in retail.

According to Nguyen Xuan Hoe, deputy director of the Banking Strategy Institute, despite strong growth, financial companies currently only hold 1 per cent of the credit market. In the consumer credit segment, more than 90 per cent of the market is in the hands of commercial banks.

A recent survey by the National Financial Supervisory Commission also shows that the market share of financial firms has fallen from 9.3 in 2016 to just 7.6 per cent in late 2017.

As banks are racing to boost retail activities, focusing on individual lending, financial firms are risking dwindling market shares. This explains why many banks like SHB and Maritime Bank have yet to press their consumer finance firms into service, though the purchases have taken place a long time ago.

Last year, Techcombank even sold its member unit Techcom Finance to a foreign partner and confirmed not pursuing the high-risk, high-profit business segment.

CEO of privately-held TPBank, Nguyen Hung, told VIR that the bank commits to pushing up the retail segment to boost growth, without focusing on risky segments.

According to economist Can Van Luc, many banks are doing a smart job with retail and consumer finance without the need to establish or buy financial companies. It depends on each bank’s development strategy.