SHB to get strategic partners on board at consumer finance arm

SHB is planning to divest part of its consumer finance arm to foreign strategic partners

SHBank Finance Co., Ltd. (SHB Finance) currently has a charter capital of VND1 trillion ($43.48 million), 100 per cent owned by SHB. The company was previously known as Vinaconex Viettel Finance JSC.

In 2019, the company sold financial packages to 460,000 customers and acquired VND107 billion ($4.65 million) in profit. By the end of last year, its total assets were estimated at VND3.3 trillion ($143.48 million), 2.75 times higher than the figure of 2018.

Previously, a number of foreign partners expressed their intention to co-operate with SHB to enhance the operations of the consumer finance company. SHB expects that with the experience, management capacity, and large distribution system, as well as modern technology of these interested investors, SHB Finance will be able increase its market share. Furthermore, SHB hopes to acquire substantial funds from this divestment.

In May 2019, SHB Finance issued certificates of deposits for its fourth tranche as part of its book-building process. This issuance attracted prestigious institutional investors, including one domestic investment fund and one securities company.

At present, FE Credit, Home Credit, and SHB Finance are dominating the consumer finance market in Vietnam. However, Moody's Investors Service has put the three companies on review for downgrade in the long-term ratings.

According to Moody’s, the rapid and widening spread of the COVID-19 outbreak, deteriorating global economic outlook, falling oil prices, and declining asset values are creating a severe and extensive credit shock across many sectors, regions, and markets. The consumer finance industry in Vietnam is vulnerable to disruptions, given its risky borrower profile and heavy reliance on wholesale funding.

Moody's expects that a deterioration in SHB Finance's credit profile will only have a modest impact on its parent, SHB, as the subsidiary accounted for just 1 per cent of the consolidated total assets at the end of June 2019.