F88 pawn shop chain loses 2 billion VND per day

In the first half of this year, F88 Trading Joint Stock Company's after-tax profit was in deficit of VND368 billion, an average loss of VND2 billion per day.

The latest semi-annual information disclosure table shows that F88's after-tax profit was negative by more than VND368 billion. Meanwhile, in the same period, this enterprise still made a profit of more than VND46 billion. The management board said the main reason was due to increased risk costs.

According to F88, the inspection of debt collection activities of financial enterprises, including this company, has affected customers' debt repayment psychology, forcing enterprises to tighten their risk appetite. At the same time, this enterprise has had to slow down the growth rate of the number of transaction offices.

In fact, recently, the investigation agencies in Ho Chi Minh City, Binh Duong, Bac Giang, Tien Giang, Can Tho, Lam Dong... simultaneously inspected the branches of F88. The investigation agency of Ho Chi Minh City alone prosecuted 10 defendants who were group leaders and employees, and discovered that 79 business locations of this pawn shop chain had violations of management of conditional business lines regarding security and order.

After the incident, F88 said it had procedures, regulations, and sanctions in debt collection activities, ensuring compliance with the law and not covering up for individuals who committed violations.

The business results of the largest pawn shop chain in the country are quite similar to many consumer lending units. In the first 6 months of the year, many financial companies' profits decreased, even suffering heavy losses from hundreds of billions to thousands of billions of VND. The above results occurred in the context of their main customer base falling into difficulties, leading to a rapid increase in bad debts. Debt collection is difficult because many people have reduced or lost income, combined with a high mentality of "defaulting" on debt.

Outside a transaction office of the F88 pawn shop chain. Photo: F88 — Outside a transaction office of the F88 pawn shop chain. Photo: *F88*

F88 Business Joint Stock Company was established in 2013, operating a chain of pawnshops of the same name. This is considered the largest and fastest growing personal financial service provider in Vietnam. The company currently has more than 800 branches nationwide, appearing in both rural communes and districts.

Since announcing information for 2019, F88 has continuously reported profits. During the period 2019-2021, this enterprise had a profit of tens of billions of VND each year. In 2022 alone, after-tax profit peaked at more than 200 billion VND with a return on equity (ROE) of 31.6% - higher than the banking industry average of 20.69% according to SSI data.

Along with the increase in profits, F88's liabilities have also multiplied continuously. From nearly VND 355 billion in 2019, liabilities have increased to nearly VND 3,600 billion in 2022, a 10-fold increase after 4 years.

In particular, capital mobilization through the bond channel is favored by this enterprise with more than 30 issuances. Outstanding debt of the bond channel peaked at more than VND 1,500 billion in 2021, accounting for 90% of the company's total debt and increasing 12 times compared to 2019.

Most of the bonds have matured or been bought back by F88. In the first half of the year alone, F88 paid VND1,250 billion in principal of maturing bonds. To date, the company has two more bonds, totaling more than VND120 billion, due on September 15 with an interest rate of 11-11.5% per year.

The company plans to issue additional private bonds in the last 6 months of the year to meet business needs. Previously, F88 raised 50 million USD (about 1,200 billion VND) with two main investors, the Vietnam-Oman Fund (VOI) and the Mekong Enterprise Fund IV (MEF IV).

Siddhartha

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