Forecast to continue losses in 2023
According to information on the Hanoi Stock Exchange (HNX), SMBC Vietnam Prosperity Bank Finance Company Limited (FE Credit) said that in 2022, the company had a loss after tax of VND 2,376 billion, while in 2021, it made a profit of VND 312.67 billion.
Equity in 2022 also decreased sharply by nearly 20% to VND 13,240 billion, along with negative profit after tax, bringing the return on equity (ROE) to negative 17.94%, while last year it was 1.98%.
FE Credit's capital adequacy ratio as prescribed by specialized laws will decrease from 17.79% to 16.16% in 2022.
Previously, in a newly published analysis report, VCBS Securities Company said that FE Credit recorded a loss of VND 3,121 billion in 2022, mainly due to the rapid increase in bad debt ratio.
Accordingly, FE Credit's bad debt ratio in the fourth quarter of 2022 reached 21.8% (compared to 14.1% at the end of 2021) and is currently the highest bad debt level in the consumer finance industry.
This securities company also predicts that 2023 will continue to be a difficult year for FE Credit as it continues to make losses, before returning to profit in 2024.
Sharing the same view, VNDirect Securities Company said that for the whole year of 2022, FE Credit recorded a pre-tax loss of VND3,000 billion. The reason is that unfavorable economic conditions have continued to negatively affect the low-income customer group, which is the main customer of FE Credit.
According to VNDirect, the difficulties are not over for FE Credit this year, especially in the first 6 months. The overall loan growth rate will slow down, but focusing on customers will be less risky.
VNDirect forecasts FE Credit's loan growth to reach 5% in 2023 and pre-tax loss of about VND700 billion.
“By 2024, it is expected that when economic conditions improve, FE Credit will achieve loan growth of about 8% and pre-tax profit of about VND 1,300 billion,” VNDirect's report stated.
From "the goose that lays the golden eggs" to losing the throne
According to Nguoi Dua Tin's research, FE Credit, formerly a consumer credit division under Vietnam Prosperity Joint Stock Commercial Bank (VPBank, HoSE: VPB), is currently the leading consumer finance company in Vietnam with a dominant market share.
This financial company used to be the "golden goose" of VPBank, contributing 40-50% of the parent bank's profits for many years. During its heyday, FE Credit reported a profit of more than VND3,700 billion.
Accordingly, in 2017, VPBank had revenue of more than 25,000 billion VND, an increase of 48% compared to 2016. After deducting taxes, this bank reported a net profit of more than 6,430 billion VND, the highest in history.
The majority of profit comes from FE Credit, accounting for about 51% of the total profit of the parent bank.
Specifically, FE Credit's customer lending segment accounted for 21 - 22% in 2017, with loan balance accounting for 23% of VPBank's total asset structure.
However, by 2018, although FE Credit recorded a large profit last year, VPBank's leaders were aware of the potential risks from the subsidiary but still made optimistic plans for the next 5-10 years, consumer finance is still the "golden goose" for the bank.
In recent years, FE Credit's performance has not been as good as before. In 2020, FE Credit's contribution ratio dropped to more than 28% partly due to poor results and also due to the strong acceleration of its parent bank VPBank.
By 2021, FE Credit reported a pre-tax profit of just over 600 billion VND, losing the "champion" position in profit that the company had maintained continuously for many years.
Notably, FE Credit has a very rapid rate of charter capital increase. Accordingly, when it was first established in 2015, the company increased its capital from VND 1,000 billion to VND 1,500 billion. The company continued to increase its capital to VND 2,790 billion in 2016 and VND 4,474 billion in 2017. Just 1 year later, FE Credit's charter capital continued to increase to VND 7,328 billion.
Notably, by the end of April 2021, FE Credit was valued at up to 2.8 billion USD in the deal in which VPBank sold 49% of its capital to Japan's Sumitomo Mitsui Financial Group (SMBC).
After selling capital to SMBC, FE Credit increased its charter capital from VND 7,328 billion to VND 10,928 billion.
Regarding VPBank, the bank may have earned nearly 1.4 billion USD from this capital sale to a top 3 financial banking group in Japan (with total assets of over 2,100 billion USD) .
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