Banks prioritise consumer lending

Last year Ho Chi Minh City-based HD Bank bought French-owned financial firm Societe Generale Viet Finance (SGVF).

After this first deal of a local bank acquiring a financial firm, many other banks such as Saigon-Hanoi Bank (SHB), Maritime Bank and Vietcombank have unveiled plans to either merge with or establish their own consumer credit businesses.

According to SHB’s management, the State Bank of Vietnam’s commitment to restructure financial firms provides worthwhile opportunities for banks to use these new connections to promote the consumer lending market.

SHB general director Nguyen Van Le said their prospective partner would be a financial entity modest in size but reporting healthy operations and with no bad debts.

It has been reported that their deal, currently under negotiation, was advocated by the bank’s major shareholders and would likely take place within this year.

Similarly, Maritime Bank’s management got shareholder approval to either found or buy a financial firm to foster their consumer lending more effectively.

It has been rumoured that the bank is likely to merge with Vietnam National Textile and Garment Group (Vinatex) Finance Company, but this possibility seems unlikely as Vinatex chairman Vu Duc Giang was quoted by the media as saying that the group would finalise divestment from non-core areas before year-end.

Discussing with VIR about the possibility, a Maritime Bank representative said that in the near term the bank would strive to finalise a merger with Mekong Development Bank, while founding or merging with a financial firm is not its top priority at this time. 

The alluring personal loan market has proved to be the main reason why banks are eager to acquire financial firms or establish specialised consumer credit companies.

In fact, many financial firms are operating very profitably in Vietnam.

For instance, last year Czech-invested PPF saw 84 per cent credit growth with €16 million in profits against its €11 million target.

This year the company envisages 80 per cent credit growth and 50 per cent growth in customer accounts.

SHB chairman Do Quang Hien said consumer lending was a profitable business that the bank wants to tap.

“Our plan for retail banking development to 2015 is under development and boosting consumer lending is one of our top priorities,” Hien said.

In reality, banks have been providing personal loans for years, but this business can hardly prosper on the back of strict lending requirements. Meanwhile, with relaxed lending mechanisms, financial firms could more easily attract customers despite much higher interest rates than banks.