Japanese lender SMFG acquires 49 per cent in FE Credit in a $1.4 billion deal

SMFG acquires a 49 per cent stake in FE Credit

Vietnam Prosperity Joint Stock Bank (VPBank) yesterday announced that it had reached an agreement with Sumitomo Mitsui Financial Group (SMFG, the corporate group will collectively be referred to as SMBC Group) to sell 49 per cent of charter capital of $2.8 billion VPBank Finance Co., Ltd. (FE Credit). SMBC Consumer Finance Company (SMBCCF), a subsidiary wholly owned by SMFG, is the legal entity to purchase this stake.

Nikkei Asia reported the Japanese bank will invest more than $1.4 billion in FE Credit as early as October, making it an equity-method affiliate.

FE Credit is currently the leading consumer finance company in Vietnam with approximately 50 per cent of the market share, 20,000 points of sales nationwide, and more than 13,000 employees. Throughout its development, FE Credit is committed to accomplishing its mission of “satisfying the need of people of all strata to access formal credit to improve their livelihood”.

With its small-sized loans, FE Credit always pays special attention to serving low and medium-income customers – being the segment not prioritised by banks – in order to meet their financial needs and help reduce their dependence on “black credit”. So far, FE Credit has served about 11 million Vietnamese people with its unsecured lending and services.

Meanwhile, SMBC Group is one of the three biggest banking and financial groups in Japan, with total assets of over $2.1 trillion as of December 31, 2020. The group operates in retail banking, corporate banking, and investment banking worldwide, with its presence in over 40 countries. SMBCCF is the leading consumer finance company in Japan with more than 900 branches. In Asia, SMBCCF has established subsidiaries in Taiwan, Hong Kong, Thailand, and China.

With this transaction, FE Credit expects to receive support in terms of funding, corporate governance, and know-how in consumer finance in Asia from SMBC Group, especially from SMBCCF – the leading consumer finance company in Japan. Besides, VPBank will have at its disposal a significant amount of capital, thus enhancing the bank’s financial capability in pursuing new investment opportunities in the market.

As for SMBC Group, the investment in FE Credit is part of the group’s medium-term strategy in expanding its franchise in Asia. SMBC Group expects the investment will generate synergies in two ways: sharing its business know-how with and absorbing business know-how from its partners.