FE Credit could file for IPO in third quarter next year

SSI Research recently revealed that FE Credit is allegedly preparing for its IPO. The process is expected to be completed in the third quarter of 2021. Notably, VPBank's Board of Directors initially forecast that a successful IPO could triple FE Credit's share price compared to the book value after the equitisation.

FE Credit, the biggest consumer finance player in Vietnam and a subsidiary of VPBank, is allegedly preparing for its initial public offering (IPO) in the third quarter of 2021. Photo: Kalidas Ghose, CEO and Vice Chairman of FE Credit.

"This transaction will help VPBank strengthen its balance sheet, thus better enhancing its operation” SSI commented.

Rumour has it that VPBank has recently been mulling over negotiating with an important partner in the sale of shares of FE Credit, which is expected to be completed in the next 5-6 months.

Regarding FE Credit, in the first nine months of 2020, the consumer finance firm achieved total outstanding loans of VND64 trillion ($2.783 billion), up 6.4 per cent compared to the end of 2019. Capital Adequacy Ratio (CAR) reached 17.4 per cent, up 1.8 per cent compared to the same period last year. Its cost-to-income ratio (CIR) reached 28.4 per cent, the lowest level in the last six quarters. As a result, the company recorded a pre-tax profit of nearly VND3.2 trillion ($139.13 million) as of September 2020.

On the flip side, one of the priority concerns for the firm is its non-performing loans (NPL) ratio. The lingering pandemic has negatively impacted the consumer finance sector in general and FE Credit in particular.

Accordingly, in the first nine months of the year, the NPL ratio of FE Credit also increased to 6.9 per cent according to Vietnamese Accounting Standards but remained at a controlled level. Along with that, the bad debt ratio is mainly in Groups 3 and 4 (groups of debts with low provisioning), according to SSI.

In the coming time, to complete its annual plan, FE Credit plans to lay its focus on promoting its investment portfolio to attract existing customers, as well as reduce risks from new customers. The company also optimises costs by accelerating the deployment of advanced technologies such as electronic signature and AI. Digital applications on both back-end and front-end services are also highlighted to deliver seamless, top-notch customer experience.

On the other hand, Vietnam's National Assembly has previously approved the newly-amended Law on Investment, with a ban on the controversial debt collection business. This, consequently, could affect the consumer finance sector, as a considerable amount of their customers are the unbanked, underbanked, and the lower-income, some experts warned.