Foreign investors seek to penetrate further

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

In the context of financial companies facing many difficulties, the decline in aggregate demand causing business losses, foreign investors are still looking for ways to penetrate deeply and quickly expand their consumer credit market share in Vietnam.

After 15 years of operation, Home Credit Vietnam is trusted by more than 15 million customers.

Attracting billions of dollars of foreign capital

On February 28, Thailand's SCB X Bank officially confirmed the acquisition of 100% of Home Credit Vietnam's charter capital. The total value of the transaction is VND20,973 billion (equivalent to USD860 million). The above transaction is expected to be completed in the first half of 2025, after being approved by competent authorities of Vietnam and Thailand.

In a statement, Mr. Arthid Nanthawithaya, CEO of SCB X said: “This transaction marks the beginning of SCB X's expansion into Vietnam, a country with a population of more than 100 million people.”

Home Credit Vietnam is owned by the international investment group PPF, and has been operating since 2009. In Vietnam, Home Credit is one of the leading companies in the consumer finance sector, holding the second largest market share, accounting for about 14% of the total market value. In addition, the Company has 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 would like to congratulate my colleagues on successfully building a business that is trusted by more than 15 million customers. This will be an exciting new beginning. We are preparing for the transition and I am confident that the Company will be even more successful,” said Mr. Radek Pluhar, CEO of Home Credit Group.

Vietnam's consumer finance market still has a lot of potential for development. In 2024, the market is expected to flourish, with three factors: domestic consumption, public investment, and exports continuing to be the main drivers of growth.

The acquirer of Home Credit Vietnam is SCB (under SCB X) - the oldest bank in Thailand and one of the leading public banks, providing diversified financial services through a nationwide branch network in all segments, including wholesalers, small and medium enterprises, and retail banking services. Therefore, this group promises to penetrate deeply into the Vietnamese consumer finance sector.

Thus, after the merger and acquisition (M&A) deal of more than 1 billion USD between SMBC Consumer Finance Company (SMBCCF) receiving the transfer of 49% of capital at FE Credit from VPBank, the transfer of Home Credit Vietnam by Home Credit Group to SCB X is considered the second largest deal in the consumer finance sector to date. At the time of capital sale at the end of 2021, FE Credit was valued at up to 2.8 billion USD and VPBank could earn nearly 1.4 billion USD from this deal.

However, in the eyes of financial experts, the most valuable thing here is not the large amount of capital collected, but the appearance in the Vietnamese market of SMBCCF (under SMBC) - the 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 of SMBCCF receiving the transfer of 49% of capital at FE Credit from VPBank is a testament to foreign investors' confidence in Vietnam's growth potential.

In fact, not only the above deals, but before that, many foreign investors poured capital into Vietnam's financial and consumer sectors.

The amount of VND 4,300 billion is the value of the transaction to transfer 100% of SeABank's capital contribution at Post and Telecommunication Finance Company Limited (PTF) to Japan's AEON Financial Company at the end of 2023. The deal is expected to bring efficiency to both parties. Mr. Kenji Fujita, Chairman and General Director of AEON Financial, assessed that Vietnam is a country with a young population and a fast 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 with the knowledge we have accumulated in Japan and other Asian countries," said Mr. Kenji.

Meanwhile, SeABank's leaders said that the Bank will have more financial resources to invest in technology, create better products, and bring more benefits to customers.

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

Previously, in March 2023, UOB announced that it had completed the acquisition of Citigroup's consumer banking business in Vietnam, including unsecured and secured loan portfolios, asset management businesses and retail deposit banking. With each transaction value reaching thousands of billions of VND, the financial services industry group was pulled to the top of M&A activities in 2023, creating a new bright spot for market growth.

HD Saison Company Limited also sold 49% of its capital belonging to Credit Saison Group; Shinsei Group holds 49% of Mcredit (MB) shares; Lotte Finance Company bought 100% of Techcom Finance Company Limited (Techcom Finance); The acquisition of 100% of equity in Prudential Vietnam Finance Company Limited by Shinhan Card Company Limited, now renamed Shinhan Vietnam Finance Company... Currently, some banks intend to divest capital in consumer finance companies such as MSB planning to sell 100% of capital in Community Finance Company Limited (FCCOM).

In the past 5 years, consumer credit has grown strongly, with an average growth rate of about 20%/year. However, the scale of outstanding consumer loans in Vietnam only accounts for about 27.17% of GDP compared to the average rate of 60-70% of GDP in countries in the Asian region. Experts say that the Vietnamese consumer finance market still has a lot of potential for development. In 2024, the market is expected to flourish because, according to experts, three factors: domestic consumption, public investment, and export continue to be the main drivers of growth. In particular, domestic consumption is being encouraged to be promoted through many solutions to stimulate consumption, including solutions to expand consumer credit.

“In the long term, there needs to be separate laws for non-bank credit institutions (finance companies). In addition, it is necessary to further improve standards for consumer lending and debt collection activities. Building a complete legal corridor will help the consumer finance market develop healthily and fairly, creating trust for investors,” said Dr. Can Van Luc, a finance and banking expert.

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