Noteworthy deals show consumer finance surge

Growth is expected in the country’s consumer finance sector

SCBX, a subsidiary of Thailand’s oldest bank and one of its leading financial institutions, in late February confirmed the acquisition of Home Credit Vietnam.

The transaction, valued at approximately $860 million, is poised to be finalised in the first half of 2025, pending regulatory approvals in Vietnam and Thailand.

Home Credit Vietnam, a subsidiary of the international investment group PPF, commenced its operations in 2009. In Vietnam, it established itself as a player in the consumer finance market, commanding the second-largest market share, accounting for approximately 14 per cent of the total market value.

Following a previous merger and acquisition deal exceeding $1 billion, where SMBCCF (under SMBC) took over 49 per cent of FE Credit from VPBank, the sale of Home Credit Vietnam to SCB X is now considered the second-largest transaction in the consumer finance industry.

At the time of VPBank’s capital sale in late 2021, FE Credit was valued at $2.8 billion, potentially netting VPBank nearly $1.4 billion from the transaction.

AEON Financial Service Co., Ltd. solidified this sentiment with their year-end acquisition of SeABank’s finance company, PTF, for $181.27 million.

Kenji Fujita, president and CEO of AEON Financial, said, “Vietnam’s young demographic and swift economic pace set it apart in the region.”

Fujita also outlined plans to expand personal lending and credit card issuance, committing to “contribute significantly to the Vietnamese finance market with our Asian experience”.

SeABank anticipates that the influx of funds will bolster technological investment, fostering product innovation and customer benefits.

Another noteworthy deal saw SHB divesting SHB Finance to Thailand’s Krungsri for an estimated $151.9 million. The 50 per cent equity transfer was completed in mid-2023, reflecting Krungsri’s position as part of the Japanese MUFG Group, which owns a 76.88 per cent stake.

In March 2023, UOB concluded the acquisition of Citigroup’s consumer banking division in Vietnam, including lending and wealth management services.

With such major deals, the financial services sector leapt to the forefront of merger and acquisition activity in 2023, showcasing the market’s robust growth.

The financial landscape further diversified as HD Saison sold a 49 per cent stake to Credit Saison Group; Shinsei Group took on Mcredit; Lotte Finance acquired Techcom Finance; and Prudential Vietnam Finance Company, now under Shinhan Card, was rebranded as Shinhan Vietnam Finance Company.

Experts forecast a vibrant 2024 for the sector, buoyed by key economic drivers like domestic consumption, public investment, and exports. Increased consumer lending is part of the strategy to stimulate domestic consumption.

However, the sector is not without its tribulations. Economist Dr. Can Van Luc underscored the imperative for a solid legal framework tailored for non-bank credit institutions. “To cultivate a sound and fair consumer finance market, precise laws dedicated to non-banking entities and improved standards for lending and debt recovery are essential,” he said.

Nguyen Quoc Hung, secretary-general of the Vietnam Banks Association, voiced concerns regarding consumer lending’s mounting challenges, specifically noting an uptick in deliberate loan defaults and the formation of “debt evasion” cohorts.

“We are encountering a distressing increase in non-performing loans as instances of deliberate non-repayment grow,” Hung explained. “This trend has necessitated financial institutions to tighten credit appraisals, which has introduced new complexities to the lending process.”

To navigate these hurdles, industry leaders advocate for integrated solutions to clear the path for this vital sector. Amid the immediate challenges, financial expert Huynh Trung Minh offered a broader perspective, suggesting that current issues are merely short-term obstacles, whereas the sector’s long-term potential is substantial.

“Despite the immediate headwinds, Vietnam’s consumer lending holds immense future growth potential,” said Minh. “The entry of Japanese and Thai partners into the Vietnamese market is expected to bring a wealth of management acumen and operational expertise, signifying the dawn of a more stable and sustainable era for consumer finance. The advent of international players introduces proven operational strategies to our market, promising greater stability ahead.”

Home Credit sets sights on Vietnamese consumer finance Despite the recent headwinds in the consumer finance market, Home Credit Vietnam still has its sights set on Vietnam. Pham Ngoc Khang, the company's CFO, spoke with VIR’s Thanh Van about his strategy to navigate amidst the turbulence.

Home Credit to sell Vietnam wing to SCB​ Home Credit Group announced on February 28 that it has signed a conditional framework agreement to sell its Home Credit Vietnam business to The Siam Commercial Bank Public Co., Ltd. (SCB), part of SCBX Public Co., Ltd. (SCBX).