Foreign capital flows into consumer loans

The size of the consumer market has increased rapidly, attracting more foreign capital.

After receiving a loan worth $100 million from Credit Suisse AG, Fe Credit, a finance company of VP Bank, recently received another $100 million loan from Deutsche Bank.

Just within one year, Fe Credit borrowed $200 million from foreign financial institutions.

Analysts commented that foreign capital is now heading for Vietnam’s finance companies because the personal consumer lending market is heating up.

HD Saison earlier this year raised its charter capital from VND550 billion to VND800 billion.

A Japanese investor – Shinsei Group – acquired a 49 percent stake in the Military Bank’s finance company and renamed it Mcredit. It is unclear about the value of the deal, but Mcredit has charter capital of VND1 trillion, listed among the biggest finance companies.

Meanwhile, Lotte Card, a subsidiary of South Korean Lotte Group, is reported by South Korean media as having taken over TechcomFinance, set up by Techcombank, at the price of VND1.7 trillion.

Prior to that, Techcombank took over the VND600 billion finance company from Chemicals Group.

According to StoxPlus, the Vietnamese consumer lending market is estimated at $26.5 billion in 2017, an increase of 30 percent compared with the same period last year.

In 2016, consumption in the country accounted for 78 percent of GDP, according to Can Van Luc, a respected banker.

Fe Credit, now holding 50 percent of the consumer lending market share, wants more capital as consumption has increased.

One year ago, the board of management of VP Bank, planned to sell a 49 percent  stake to raise funds. However, it changed the plan.

In 2014, VP Bank bought a finance company from Vinacomin which had charter capital of VND1 trillion. In August 2017, the charter capital was raised from VND2.79 trillion to VND4.474 trillion.

The increase in charter capital will help improve the company’s CAGR which decreased from 11.08 percent in 2015 to 9.45 percent in mid-2017.

Pushing up lending will help bring big profits, but this will force Fe Credit to seek new capital sources.

Unlike banks, which can accept deposits from individual clients, finance companies can only mobilize capital from institutions.

According to Fe Credit, capital borrowed from the two foreign institutions is just a small part of the total capital it raises through different channels.

Regarding capital costs, Kalidas Ghose, deputy chair of Fe Credit, said the cost of the loans from the two foreign institutions is nearly the same as domestic loans.

He said the capital mobilization costs are very ‘competitive’ because of mortgaged assets and good business performance.

Kim Chi / VietnamNet