People's wallets are empty, financial 'bosses' are struggling with huge losses

Losses, sky-high debt

According to the Hanoi Stock Exchange (HNX), iWealth Investment Company Limited has just announced information on the financial situation of the company in the first 6 months of the year, with a loss after tax of more than 32 billion VND. Thereby, the company's equity as of the end of the second quarter of 2023 decreased by 33% compared to the beginning of the year to 66.3 billion USD.

iWealth Investment recorded poor financial health at the end of June 2023 with total debt more than 68 times higher than equity. This means that this business has a total debt of VND 4,540 billion.

This is a business with the highest debt/equity ratio among bond issuers.

Bond debt/equity ratio reached more than 11.3 times. The company had a total bond debt of VND 750 billion at mid-year. These are the 2 bond lots with codes HBDCB2124001 and HBDCB2124002 issued in 2021.

Both are "three no" bonds: non-convertible, no warrants, no collateral, and purchased entirely by a securities company and a credit institution.

Both iWealth bonds have a fairly high interest rate, around 9%. In April 2023, iWealth announced a change in the terms of the bond with the code HBDCB2124001. However, by August 22, iWealth had bought back all 300 billion VND of outstanding bonds of HBDCB2124001.

iWealth's bond buyback comes as many other companies are also buying back bonds early to reduce debt and improve financial metrics.

*Businesses face difficulties as consumer demand declines. (Photo: TN)*

For iWealth, high financial costs may also be the cause, while financial service support activities may not be easy when the banking system is also facing many difficulties, with the disease of "excess money". Overnight interest rates on the interbank market have recently been only about 0.14-0.16%/year, the lowest since the beginning of 2021. Credit growth is very low, reaching only 5.56% as of September 15.

iWealth Asset Investment is a business operating mainly in the field of financial service support. The predecessor is Hoa Binh Debt Trading Company Limited (HBDC), established in 2012 in Long An. By 2021, the company changed its name to iWealth Asset Investment and moved its headquarters to Hoan Kiem district, Hanoi.

Low demand, financial companies face difficulties

Also according to HNX, consumer finance giant Fe Credit reported a loss of nearly VND3,000 billion in the first 6 months of the year, instead of a profit of several thousand billion VND per year as before.

Shinhan Vietnam Finance Company Limited (Shinhan Finance) recorded a loss of VND246 billion in the first half of the year, in contrast to the after-tax profit of VND92 billion in the same period in 2022.

Many other financial companies also recorded less positive business results. Home Credit's after-tax profit was VND211 billion on total equity of nearly VND6,600 billion.

HDBank's HD Saison had a pre-tax profit of VND314 billion, down 48% compared to the same period in 2022. HD Saison's outstanding credit balance decreased by VND1,250 billion compared to the beginning of the year to VND15,590 billion.

MB Shinsei Finance Company Limited (MCredit) reported pre-tax profit in the first 6 months of the year decreased by 32% compared to the same period to 410 billion VND.

In the first half of the year, F88 Business JSC reported a record loss of VND368 billion, equivalent to an average loss of VND2 billion per day due to high risk costs even though the company is still in the process of expanding its network.

Over the past year, Vietnam’s consumer finance market has been sluggish, seemingly past its explosive growth period. People’s incomes have declined sharply along with the poor business performance of the business community.

Investment activities are also no longer easy. The real estate market is sluggish, stocks are volatile as listed companies face many difficulties. Many export enterprises have recorded a slowdown in overseas sales.

Most of the big retail companies in Vietnam are facing difficulties. The attractiveness of these businesses is also no longer great. Recently, the retail chain Mobile World (MWG) of Mr. Nguyen Duc Tai witnessed the longest period of "foreign room opening" in many years. Foreign investors are no longer competing to buy MWG shares.

The operations of this leading retail company are very unfavorable. Revenue from sales of electronics at the The Gioi Di Dong and Dien May Xanh chains has almost remained flat due to the impact of declining purchasing power.

In the past 6 quarters, MWG recorded a decrease in net profit compared to the previous quarter. Gross profit margin also continuously narrowed.

Demand in the consumer market is very low, while many customers of financial enterprises are facing difficulties, causing bad debt to increase sharply.

During the 2019-2021 period, many financial companies prospered as cash flow was pumped into the economy, consumer spending increased sharply. In 2022, F88 reported a record profit of VND200 billion with a very high capital efficiency of over 30%. Some financial companies reported profits of several thousand billion VND.

During the period of hot development, in addition to borrowing capital from banks, many enterprises have issued large amounts of bonds to serve the process of growth and expansion of business activities. When the market is difficult and the bond channel is in crisis, enterprises are reducing their dependence on this channel.

According to FiinRatings, the size of corporate bonds outstanding on the market has decreased sharply from a peak of VND1.5 million billion in mid-2022 to VND923 trillion at the end of August 2023.

Previously, at the end of March, the financial market was hot about the story of the draft amendment to the regulations on buying and selling corporate bonds at banks.

Accordingly, the State Bank has also considered tightening the purchase of corporate bonds by banks. In particular, the regulation will limit the entities that are issuers with leverage higher than 5 times from being allowed to buy corporate bonds by credit institutions.

In the market, many financial and real estate businesses have a debt/equity ratio exceeding 5 times, as in the case of iWealth Investment.

Corporate bond market: After the shock, is it time to rise? The bond market is less tense, although still gloomy, the confidence of individual investors has decreased a lot after the shocks. However, the potential of this market is huge, even bigger than the stock market.

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