As of the end of June 2020, the company – the largest consumer finance firm in Vietnam by market share – reported ending net receivables (ENR) amounting to VND60.2 trillion ($2.6 billion), a modest 3.3 per cent increase compared to same period last year.
Its pre-tax profit in the first half, however, jumped 13 per cent compared to same period last year, touching VND2.4 trillion ($104.35 million), with VND1.5 trillion ($65.2 million) coming from the second quarter.
This result was made possible by the company’s ability to optimise costs, resulting in better cost-to-income ratio (CIR), increasing collection efficiency, and enhancing risk mitigation tools during the first half.
The non-performing loan ratio being unchanged from the similar period in 2019 attested to a firm control on risk. The results, therefore, exceeded the management’s expectations at the beginning of this year.
Firm grip on cost and funding
During the first half, FE Credit has been scaling up efforts to optimise costs via speeding up technology implementation such as e-signature and AI in tele-sales.
|As of date, the company has successfully offered assistance to over 182,000 customers, showing the continuation of the company’s commitment to support the community in need. |
The application of e-KYC (Know Your Customer) is being adopted, helping to accelerate the company’s sales approval process. These efforts are part of the digitalisation endeavours that the company has been driving in the past years and it has certainly proved its effectiveness during a time of need.
At the same time, the company’s management has succeeded in maintaining healthy funding despite the tough environment. Its capital adequacy ratio (CAR) remained above the banking requirement at 22 per cent and funding sources were well diversified and ample, as evidenced by the lower cost of funds (COF) reported for the second quarter of 2020. These efforts were recognised by Moody’s, a global certification firm, in its assessment note confirming stable outlook for FE Credit.
A shift in portfolio mix
Even before the emergence of the COVID-19 pandemic, the company has actively made a shift in its portfolio mix to better target existing customers and shift away from new, more risky ones. This action addresses the urgent needs when time calls for a better risk portfolio as well as to achieve the target stated in Circular 18 by 2019 issued by the central bank (SBV). As a result, the company saw improvements in asset quality this quarter with reduced rollover rate.
Credit card continues to be growth engine with growth of 30 per cent in ENR compared to the same time last year. During social distancing, FE Credit saw a surge in credit card usage, especially for grocery and online shopping. Total customers with active credit card accounted for 24 per cent at the end of June 2020, up 5 per cent from the June 2019 figure.
Moody’s confirmed stable long-term outlook for FE Credit
Another piece of good news is that on July 22, 2020, Moody’s confirmed the long-term rating assessment for FE Credit as stable at B1. This reiterated stable outlook concludes Moody’s review for downgrade initiated on April 7, 2020 of five financial institutions. The announcement certainly came as a solid confirmation for the company management’s efforts throughout the first half of 2020.
Along with this, Moody’s recognised that the company was able to mitigate the solvency and liquidity risks that the agency was originally concerned about; with successful efforts in stabilising financing conditions, proved by ample liquidity from both foreign and domestic sources.
The company also proved its capability in managing credit and liquidity risks as well as possible disruptions during the virus outbreak. The result is a lower COF during the last six months.
In conclusion, the ratings agency noted that FE Credit has shown prudent risk management, such as tightening underwriting criteria against the backdrop of slowing economic growth. This confirmation serves as icing on the cake for the company after all its hard work.
In light of COVID-19 and its aftermath, FE Credit has launched since March 2020 programmes to support genuinely distressed customers by offering to restructure their loans and defer loan payments as well as waive late payment penalties. As of date, the company has successfully offered assistance to over 182,000 customers, about 5 per cent of its active customers, with total loan eligible of VND4 trillion ($173.9 million), showing the continuation of the company’s commitment to support the community in need.