Friday, October 19 2018

VietNamNews

Finance companies slow credit growth

Update: October, 01/2018 - 11:00
FE Credit’s credit growth rose by only 3.54 per cent in H1 2018. — Photo FE Credit
Viet Nam News

HÀ NỘI — Consumer finance companies have been cutting credit growth to focus more on tightening internal governance and selecting solvent customers to target a safer and healthier development.

Financial statements from major finance companies showed that credit growth had increased by only 4-5 per cent in the first half of this year, compared to double-digit growth in previous years, and even lower than in commercial banks.

At FE Credit, lending rose by only 3.54 per cent in H1 2018, even lower than the growth rate of 10.49 per cent of its parent company VP Bank.

Ho Chi Minh Securities Company attributed FE Credit’s credit growth slowdown mainly to the company’s change in lending structure. FE Credit has focused more on the traditional lending segment, which has lower risks, lower value and shorter terms, but higher competition.

The credit growth slowdown has caused profitability to reduce significantly.

FE Credit’s  profit rose by only 16 per cent to VNĐ1.58 trillion (US$67.23 million) in the first half of this year, accounting for only 36 per cent of VP Bank’s total profit, down significantly from 50 per cent in the previous year.

Nguyễn Đức Vinh, VP Bank’s general director, said that the bank was planning to keep the growth rate low and reduce its contribution to the bank’s consolidated profit.

According to experts, Việt Nam’s consumer finance market is still very attractive due to the large room for growth and high profitability, but players in the market have decided to focus more on sustained growth for fears of tightened management from State agencies and bad debt risks.

The general move to lower credit growth follows a series of scandals regarding debt collection, high interest rates or co-operation with cosmetics companies to ‘trap’ borrowers, which have damaged their reputations.

Finance companies are also concerned about increasing bad debts without improvement in risk governance. At FE Credit, the bad debt ratio rose significantly to reach 6.43 per cent of total outstanding loans by the end of June.

Nguyễn Đức Kiên, deputy chairman of the National Assembly’s Economic Committee, said that the slowdown was necessary to help finance companies develop and gain confidence from customers.

Banks themselves are also becoming more cautious with consumer lending. Techcombank has sold its financial company to foreign investors, saying that the bank didn’t have strategy to operate the risky business. For consumer loans, Techcombank only provides housing or car loans based on collateral. — VNS

 

 

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