Consumer loans with exorbitant interest rates

Profits at some consumer companies have rebounded strongly, and the projected recovery in consumer capital demand is expected to positively impact profits this year.

The Vietnamese consumer finance market continues to show strong appeal, with total outstanding loans for living expenses reaching 2.8 trillion VND.

Profits increased

Home Credit Vietnam, a wholly owned subsidiary of Home Credit, has just released its audited financial report for 2024 to the Hanoi Stock Exchange (HNX). The report shows that the company's total outstanding loans in 2024 increased by 12.4% compared to the previous year, thanks to increased lending to individual customers. The non-performing loan ratio decreased sharply to 1.76% by the end of 2024, down from 2.49% in 2023, and significantly lower than the average for other finance companies.

Notably, Home Credit Vietnam recorded after-tax profit of VND 1,290 billion, a 3.5-fold increase compared to 2023 (VND 375 billion), just one year after announcing its sale to the Bank of Thailand (SCB). The company stated that this result stemmed from the effectiveness of its flexible business strategy and risk management capabilities. The positive profit also reflects the recovery of the consumer finance market after a difficult period.

HDBank announced that in 2024, the bank achieved VND 16,730 billion in pre-tax profit, a 28.5% increase compared to 2023 and exceeding the shareholder target by 106%. Specifically in the consumer finance segment, its subsidiary HD Saison (in which HDBank holds a 50% controlling stake) continued to assert its leading market position in terms of profit, achieving VND 1,200 billion in pre-tax profit, a strong increase of 83.9% compared to 2023. This result once again demonstrates HD Saison's sustainable development strategy, ability to maintain high growth, and effective risk management.

Meanwhile, according to the audited 2024 report, FE Credit achieved a pre-tax profit of nearly VND 515 billion. This strong recovery after the restructuring period stems from increased credit volume, efforts to improve asset quality, optimize costs and risk management, and effective debt recovery. This is the result of a comprehensive restructuring process over two years (2023, 2024) and support from two major domestic and international financial institutions: VPBank and SMBC Consumer Finance Company (SMBC CF, part of Sumitomo Mitsui Financial Group).

Vietcap Securities Company highly appreciates the positive impact of FE Credit on the net interest margin (NIM) and asset quality of the consolidated bank. The consolidated bank's non-interest income also benefited from the finance company's recovery efforts.

According to the business performance report, EVNFinance's pre-tax profit for the fourth quarter of 2024 reached over 166 billion VND, and the cumulative profit for the whole year 2024 reached 703.7 billion VND.

Driving force for 2025

FE Credit's leadership stated that in 2025, the company aims to maintain its growth momentum and sustainable development. Simultaneously, the company will continue to optimize its business model, control credit risk, diversify its product portfolio, focus on digital transformation, and enhance customer experience across the board. SMBC, with its global vision and international financial management experience, continues to open up many opportunities for further advancement. With improved capital demand, VPBank anticipates that FE Credit's pre-tax profit will return to VND 3,000-4,000 billion from 2025 onwards.

A favorable environment for consumer credit.

In 2025, the government aims for GDP growth of 8% or higher, while the banking sector strives for credit growth of 16%. This will create a favorable environment for consumer credit as employment and income increase and people's purchasing power improves. Simultaneously, expansionary monetary and fiscal policies continue to strongly support consumer borrowing demand, creating significant opportunities.

The consumer finance market in Vietnam continues to show strong appeal, with total outstanding loans for consumer spending reaching VND 2.8 trillion, accounting for 20% of the total outstanding loans in the entire economy as of mid-year. Of this, commercial banks provide 94% and consumer finance companies contribute approximately 4.8%, with a total outstanding loan balance of VND 139,000 billion. Thus, consumer credit remains heavily dependent on the banking system, while finance companies, despite playing a crucial role in reaching this low-income customer group, face considerable challenges.

The consumer finance industry in Vietnam still has significant growth potential. According to a report by FiinGroup, Vietnam's consumer lending penetration rate remains relatively low compared to other countries in the Asia-Pacific region, signaling substantial growth potential. Looking ahead to 2025, the consumer finance sector as a whole is expected to accelerate its recovery as the macroeconomic environment improves and consumer demand and household incomes rise.

MBS Securities Company forecasts that consumer credit will flourish in 2025 due to economic recovery, with accelerated GDP growth and improved household income. These factors will strongly boost consumer finance demand. In addition, government support policies and reforms in the consumer finance sector will encourage borrowing. Specifically, for loans under 100 million VND, customers are not required to provide a detailed plan for using the funds.

According to financial analysts, despite its recovery, the consumer credit market still faces significant challenges. Misconduct from previous years has made customers highly wary of consumer credit, especially from finance companies. Expanding consumer credit to low-income customers or those with weak credit histories carries a high risk of bad debt, therefore caution is needed.

Source: https://baodautu.vn/tin-dung-tieu-dung-lai-khung-d264595.html