FE Credit experiences 16.3 per cent drop in pre-tax profit as NPLs increase in 2020

FE Credit – the consumer finance arm of VPBank – is allegedly preparing for an IPO

In 2020, FE Credit's pre-tax profit is estimated to reach VND3.713 trillion ($161.43 million), down 16.3 per cent on-year, according to the latest report of VPBank – the firm's parent bank.

Meanwhile, its non-performing loans ratio increased from 6 per cent at the end of 2019 to 6.6 per cent as of December 2020. The consumer finance company contributed around 28.5 per cent to the bank’s consolidated pre-tax profit.

In the past year, FE Credit's disbursement value reached VND63 trillion ($2.74 billion), down 14 per cent on-year.

The rise in the NPL ratio has somewhat deteriorated asset quality. Meanwhile, Capital Adequacy Ratio (CAR) increased from 15.9 to 19.1 per cent on-year. Operating expenses were VND5.038 trillion ($219 million), down 11.5 per cent, while its cost-to-income (CIR) ratio decreased from 31.3 to 28.9 per cent.

Experts believe that market gyrations stemming from the COVID-19 pandemic have severely hampered consumer finance firms, as their customers were among the most vulnerable to the outbreak.

Previously, VPBank signalled its ambition to divest its interest in FE Credit.

Ngo Chi Dung, chairman of VPBank's Board of Directors, noted the bank has negotiated with many high-profile investors about the sale of a part of FE Credit's capital. The proceeds, if the deal is successful, are expected to boost VPBank's financial foundation, as well as help the bank to accelerate its activities in two potentially attractive segments (small- and medium-sized enterprises and retail financing).

On the other hand, VIR previously reported that FE Credit had been allegedly preparing for an initial public offering (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.

Currently, the Vietnamese market boasts 16 consumer finance companies, six of which are subsidiaries of major local lenders, including HD Saison of HDBank, SHB Finance of SHB, MCredit of MB, and Post and Telecommunication Finance Co., Ltd. (PTF) of SeABank. FE Credit is the largest consumer finance firm in Vietnam.