Has consumer lending "hit rock bottom"?

In Fiingroup's latest update on the consumer finance market, experts noted that Vietnam's consumer finance market has faced its most challenging year in the past decade due to slow economic growth and an unfavorable credit business environment.

At the end of 2023, the total outstanding loan balance of consumer finance companies narrowed by more than 9% compared to the previous year amidst weak credit demand, declining credit quality of borrowers, and an increase in the non-performing loan ratio, forcing credit institutions to tighten lending conditions.

From growth of nearly 30% in 2019, consumer credit growth fluctuated before declining by 9.1% in 2023 – considered the most difficult year in about a decade. Company earnings plummeted, and profits also turned negative, with many companies reporting losses of thousands of billions of dong after a period of "golden egg production".

Customer demand for consumer loans is projected to recover better in the second half of the year.

The average non-performing loan ratio of finance companies increased from around 3% to approximately 11% in 2023.

Nevertheless, at this point, Vietnam's consumer finance market is projected to have bottomed out and is preparing for a new growth cycle, albeit one that remains challenging. The potential for recovery is driven by a strong rebound in consumer loan demand in the second half of 2024.

"In the short term, the recovery path will be supported by positive signs from the macroeconomic environment, including the recovery of manufacturing and exports, which is expected to improve credit quality and credit demand from workers, unskilled laborers, and those with low to middle incomes," Fiingroup experts said.

Notably, following a series of mergers and acquisitions in the market, with changes in ownership of financial companies, the market will continue to witness stronger participation from foreign investors, along with a trend of some domestic banks divesting from their consumer finance branches.

According to reporters, a series of ownership changes have taken place in the consumer finance market recently. Home Credit Group transferred 100% of its stake in Home Credit Vietnam to The Siam Commercial Bank Public Company Limited (SCB) of Thailand; SeABank sold its entire stake in Postal Finance Company (PTF) to AEON Financial Service Co., Ltd (Japan); and SHB transferred 50% of the charter capital of SHB Finance Company to Krungsri Bank of Thailand.

Previously, VPBank also transferred 49% of FE Credit's charter capital to a subsidiary of SMBC Group (Japan)...

Source: https://nld.com.vn/cho-vay-tieu-dung-da-thoat-day-196240701165243473.htm