FiinResearch - CONSUMER FINANCE IN VIETNAM: FIRST-HALF 2022 REVIEW

FiinResearch is pleased to present Vietnam Consumer Finance Report-1H2022 Review. We have updated this report with emphasis on an in-depth analysis of market share and financial performance amongst key players, the development of each product segment, prominent trends as well as new market entrants’ movements. The impact of COVID-19, key players’ reactions, and an update on the sector's regulatory framework are also covered in the report.

Key findings in the report:

The consumer finance market has suffered severe setbacks with the pandemic from approaching new-to-bank customers to collecting debts from existing customers. The country's economy has transitioned to a new normal, and commercial and service activities have almost entirely resumed, boosting consumer credit demand. FinCos were generally on the mend and ramping operations by late 2021 but had not yet fully regained their pre-pandemic growth momentum. FinCos portfolio is driven by unsecured loans and low-income customers and hurt more in the pandemic, hence takes longer time to recover fully.

Going forward, the CF market is poised for a strong recovery by the end of 2022 thanks to the peak season effects and extension of credit growth quota for some banks and FinCos as announced by SBV by early September.

Loan book growth

1H2022 period of growth set the CF portfolio of both banks and FinCos on a path to recovery. The resumption is backed by solid consumer credit demand that bounced back since October last year when business operations and service activities turned normal. 

Market share

COVID is a game changer that drove the competition fierce than ever before. 1H2022 also saw some distribution of market share of companies in the top 4 and Mcredit keeps threatening the top 2 with spectacular growth regardless of COVID headwinds. Small FinCos also get the point to recoup quickly after the pandemic. Easy Credit attained 3-digit growth, offers loans via ViettelPost app with fully online journey. PTFinance also promises growth potential in the time to come by putting more efforts into digitalization.

Product composition

Cash loan share has been narrowed down in the loan portfolio of major FinCos due to their initiatives in compliance with Circular 18/2019. CF players have taken initiatives to increase the proportion of loans with indirect disbursements (CDL, 2WL, credit cards, etc.). Vehicle loans and consumer durable loans acquired 1.1ppt and 0.3ppt of market share in 6 months driven by both supportive demand and supply sides.

Liquidity and funding

Banks and FinCos are facing increasing costs of funding due to the liquidity crunch on most of funding channels. In market I, for the first time in many years, Credit growth outstripped the growth of customer deposit growth by 2.6 times for the fact that credit institutions accelerated lending to capture huge demand since business operations and consumer spending has recovered. Meanwhile, in the second the interbank rate climbed to a 10-year record high following a series of SBV interventions to control VND liquidity to stabilize the foreign exchange rate and inflation amid the escalation of USD in the international market.

Earnings quality and profitability

Sector average NIM of active FinCos slightly reverted in response to the improvement of interest income growth in the proportion of loan growth, especially from some players such as Home Credit, Mcredit and HD Saison. However, FinCos are facing rising funding cost due to a liquidity shortage in the banking system as addressed earlier, which might negatively impact on interest margin from the second half of the year

Asset quality

FinCos’ NPL ratios remained at high level as of June 2022. As the pandemic and its effects continued to cascade through 2022, many consumers have never faced unemployment and reduced income which challenged their affordability for debt repayment. Going forward, asset quality of FinCos is expected to get better in the coming time along with strong credit growth and recovered debt repayment capacity of borrowers.

Key development trends

The CF sector has been widely voiced with some key developments that drive the market in the upcoming time:

• Buy now, pay later is poised to thrive as a new customer acquisition & retention channel
• Pawnshops' activities flourished posing fierce competition to mainstream CF providers
• M&A may heat up again with potential targets

You can explore more detail on our full report HERE

Should you have any questions, please contact our Client Advisor at +84 (24) 3562 6962/ +84 (28) 3933 3586 or research.support@fiingroup.vn