SHB Finance secured Moody’s Stable outlook rating, persistent with international practice approach

SHB Finance was the first consumer finance firm in Vietnam to be assessed and rated by Moody’s in its very first year of operation

After an April decision to ponder downgrades in the Vietnamese financial system due to the impacts of COVID-19, international ratings agency Moody's has recently reconfirmed the long-term ratings and assessments of three finance companies and two banks in Vietnam, including FE Credit, Home Credit Vietnam (HCV), and SHB Finance.

Particularly for SHB Finance, Moody’s has maintained a stable B3 rating based on the expectation that solvency and liquidity risks will be mitigated for three major reasons.

First and foremost, the early reopening of Vietnam’s economy due to the successful control of the COVID-19 pandemic is a positive sign for the whole nation.

Secondly, Moody’s highly appreciated Vietnam’s stable financing conditions, which have been buoyed by ample liquidity following supportive domestic and global measures.

Last but not least, the ratings agency was convinced by the strong showing of SHB Finance in managing credit and liquidity risks amidst pandemic-induced disruptions.

According to Moody’s, SHB Finance’s funding and liquidity positions were stable during the review period, supported by ample international and domestic liquidity, which helped the company to roll over its existing funding and access new capital.

Furthermore, SHB Finance has diversified its funding sources and reduced funding costs, along with prudent risk management measures, such as tightening underwriting criteria to witness upbeat performance in the first half.

This went largely against the tide, as leading economists like Can Van Luc point to a surge in overdue loans threatening Vietnamese enterprises’ earnings and capital accretion momentum, especially in the young and volatile consumer finance industry.

Particularly, for the first half 2020, SHB Finance has nearly completed its revenue target (over 90 per cent), with total outstanding loan balance of 92 per cent, while bad debts were maintained at 5.97 per cent – a low level in today’s challenging market environment.

Up to 100 management personnel at SHB Finance’s mid-year business meeting in 2020

Immense potential

Besides solid growth fundamentals in the Vietnamese market, SHB Finance is tying the knot with several high-profile international investment funds to diversify its funding for business expansion.

On July 22, SHB Finance inked a loan agreement with Switzerland-headquartered management fund responsAbility Investment AG on a basis of trust, after qualifying all of the accompanying strict criteria.

The loan agreement with the $3.5 billion investment fund giant will offer great mutual benefits, where the Swiss fund could jump on the lucrative consumer finance bandwagon in Vietnam, and SHB Finance could enhance its operations to international standards. SHB Finance can also gain in size and trust from overseas funds as this co-operation can put the firm on the radar of world-class investors.

The capital injection from responsAbility Investment will enable SHB Finance to deliver top-notch services to clients, with a better cushion, ample liquidity resources, and a stable operation structure.

At the same time, SHB Finance signalled that it would need an additional $25-30 million in capital to diversify business channels as well as ensure sound financial sources with an affordable cost.

Do Quang Hien, chairman of SHB’s Board of Directors, shared that there is no shortage of interested foreign partners, saying, “We are in the middle of negotiations, and a successful tie-up deal in 2020 is very much on the cards.”

Dinh Quang Huy, CEO of SHB Finance speaking at the mid-year business meeting

Disruptions

While the pandemic has been a short-term dampener on consumer finance lending, the dynamic changes wrought by on-boarding fintech and other technological innovations keep the segment heavy with growth potential on longer timescales.

“Demand will continue to grow for products such e-wallets, AI-based alternative credit scoring products, and consumer lending, among others. So opportunities for consumer finance in Vietnam, especially for companies with good reputation like SHB Finance, are vast,” said Frederick Burke, partner at law firm Baker McKenzie told VIR in an interview.

Riding these waves, SHB Finance’s dedicated team of professionals has rolled out a number of high-tech services such as the upcoming e-Know-Your-Customers (e-KYC) to enhance customer experience.

“We are proud of having a team rich in experience in financial solutions and a solid banking background,” Dinh Quang Huy, CEO of SHB Finance told VIR. “With our comprehensive knowledge in the field, we believe we’re evolving in sync with the burgeoning demands of the consumer finance industry.”

As of now, the firm has successfully delivered its disruptive services to more than 180,000 customers across the country.

“To keep up with our ever-evolving quest, we are committed to make credit accessible to people to build a better Vietnam. Bringing fast, affordable and high-quality consumer finance services to clients is our top priority – as part of our customer-centric approach,” said Tran Thanh Nu Tuong Vy, deputy general director at SHB Finance.