Foreign investors seek to penetrate deeper into the market.

Báo Đầu tư•06/03/2024

Another multi-billion dollar M&A deal in the consumer finance sector: Foreign investors seek to penetrate deeper.

Amidst the difficulties faced by financial companies and the decline in aggregate demand leading to business losses, foreign investors are still seeking to penetrate deeper and rapidly expand their market share in consumer credit in Vietnam.

After 15 years of operation, Home Credit Vietnam has earned the trust of over 15 million customers.

Attracting billions of USD in foreign investment.

On February 28th, SCB Bank of Thailand officially confirmed the acquisition of 100% of Home Credit Vietnam's charter capital. The total value of the transaction is VND 20,973 billion (equivalent to USD 860 million). The transaction is expected to be completed in the first half of 2025, after approval from the relevant authorities in Vietnam and Thailand.

In a press release, Arthid Nanthawithaya, CEO of SCB X, stated: “This transaction marks the beginning of SCB X’s expansion into Vietnam, a country with a population of over 100 million people.”

Home Credit Vietnam, owned by the international investment group PPF, began operations in 2009. In Vietnam, Home Credit is one of the leading companies in the consumer finance sector, holding the second largest market share, accounting for approximately 14% of the total market value. Furthermore, the company has been particularly focused on promoting its digital leadership strategy in recent years.

“Home Credit Vietnam has grown rapidly to become a market leader since its inception 15 years ago. I congratulate my colleagues on successfully building a business trusted by over 15 million customers. This will be an exciting new beginning. We are preparing for the transition and I believe the company will become even more successful,” said Radek Pluhar, CEO of Home Credit Group.

Vietnam's consumer finance market still has significant growth potential. In 2024, the market is expected to improve, with domestic consumption, public investment, and exports continuing to be the main drivers of growth.

The acquisition of Home Credit Vietnam is by SCB (a subsidiary of SCB X) – the oldest bank in Thailand and one of the leading public banks, offering diverse financial services through a nationwide branch network across all segments, including wholesalers, small and medium-sized enterprises, and retail banking services. Therefore, this group promises to make a significant impact on Vietnam's consumer finance sector.

Thus, following the merger and acquisition (M&A) deal worth over $1 billion between SMBC Consumer Finance Company (SMBCCF) acquiring 49% of FE Credit's capital from VPBank , Home Credit Group's transfer of Home Credit Vietnam to SCB is considered the second largest transaction in the consumer finance sector to date. At the time of the sale in late 2021, FE Credit was valued at $2.8 billion, and VPBank could have earned nearly $1.4 billion from the transaction.

However, in the eyes of financial experts, the most valuable aspect here is not the large amount of capital raised, but the presence in the Vietnamese market of SMBCCF (a subsidiary of SMBC) - a leading consumer finance giant in Japan and Asia. SMBC is one of the three largest financial and banking groups in Japan, operating in 40 countries worldwide.

Vietnam is a key market.

Mr. Jun Ohta, CEO of SMBC Group, affirmed that Vietnam is one of the key markets. The transaction in which SMBCCF acquired 49% of FE Credit from VPBank is proof of foreign investors' confidence in Vietnam's growth potential.

In fact, not only the aforementioned deals, but also many previous foreign investors have poured capital into Vietnam's financial and consumer sectors.

The transaction involving the transfer of 100% of SeABank 's stake in Postal Finance Company Limited (PTF) to AEON Financial of Japan at the end of 2023 was valued at VND 4.3 trillion. The deal is expected to be beneficial for both parties. Mr. Kenji Fujita, Chairman and CEO of AEON Financial, noted that Vietnam has a young population and a rapid economic growth rate compared to other countries in the region. In addition to providing personal loans, PTF also plans to issue credit cards in the future. "We will contribute as much as possible to the Vietnamese financial market using the knowledge we have accumulated in Japan and other Asian countries," said Mr. Kenji.

Meanwhile, SeABank's leadership stated that the bank will have additional financial resources to invest in technology, creating better products and bringing more benefits to customers.

Another M&A deal involvedSHB selling 100% of its charter capital in SHB Finance to Krungsri of Thailand. The total value of the transaction is estimated at approximately VND 3,600 billion. SHB completed the transfer of 50% of its shares in SHB Finance to Krungsri in June 2023. Krungsri is a member of the MUFG Group (Japan), holding 76.88% of the capital.

Previously, in March 2023, UOB announced the completion of its acquisition of Citigroup's consumer banking business in Vietnam, including unsecured and secured lending portfolios, asset management businesses, and retail deposit banking. With each transaction valued at trillions of VND, the financial services sector rose to the top of M&A activity in 2023, creating a new bright spot for market growth.

HD Saison Co., Ltd. also sold 49% of its stake in Credit Saison Group; Shinsei Group holds 49% of Mcredit (MB) shares; Lotte Finance acquired 100% of Techcom Finance Co., Ltd.; Shinhan Card Co., Ltd., now renamed Shinhan Vietnam Finance, acquired 100% of the equity in Prudential Vietnam Finance Co., Ltd.… Currently, several banks intend to divest from consumer finance companies, such as MSB, which plans to sell 100% of its stake in Community Finance Co., Ltd. (FCCOM).

Over the past five years, consumer credit has grown strongly, with an average growth rate of approximately 20% per year. However, the size of outstanding consumer loans in Vietnam only accounts for about 27.17% of GDP, compared to the average of 60-70% of GDP in other Asian countries. Experts believe that the Vietnamese consumer finance market still has significant growth potential. In 2024, the market is expected to flourish because, according to experts, three factors – domestic consumption, public investment, and exports – continue to be the main drivers of growth. Domestic consumption is being encouraged through various stimulus measures, including expanding consumer credit.

“In the long term, there needs to be a separate law for non-bank credit institutions (finance companies). Besides that, standards for consumer lending and debt collection need to be further improved. Building a complete legal framework will help the consumer finance market develop healthily and fairly, creating confidence for investors,” commented Dr. Can Van Luc, a finance and banking expert.

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