Sumitomo Mitsui facing challenges in Vietnam: CEO

By Tri Duc
Thu, May 23, 2024 | 4:40 pm GMT+7

Vietnam is only one of the countries where Sumitomo Mitsui Financial Group (SMFG) is currently facing challenges, said SMFG CEO Toru Nakashima at the group's performance review for fiscal year 2023, ending March 2024.

The executive was referring to two companies in Vietnam, VPBank and FE Credit, where the Japanese giant is holding a 15% stake and 49% stake, respectively.

VPBank and SMBC officially forged partnership in October 2023. Photo courtesy of the government's news portal.

VPBank and SMBC officially forged partnership in October 2023. Photo courtesy of the government's news portal.

VPBank

VPBank, a major private lender listed on the Ho Chi Minh Stock Exchange as VPB, recorded a net profit of JPY51.8 billion ($330.5 million) on a gross operating profit of JPY303.4 billion in 2023, down 45.3% and 6.3% year-on-year, respectively.

SMFG, holding a 15% stake in the Vietnamese bank, said wholesale and retail accounted for the biggest portion of VPBank’s loans with 42.7% and 47.1%, respectively. Loans to small- and medium-sized enterprises (SMEs) made up 10.1%, the Japanese giant added.

To accelerate VPBank’s growth, SMFG highlighted supporting direct investments from foreign corporates, enhancing retail and SME activities, expanding VPBank's ecosystem, and developing businesses through data analysis and digitalization.

FE Credit

FE Credit recorded a net loss of JPY18 billion ($114.8 million) in 2023, following a net loss of JPY13.3 billion in 2022 and a net profit of JPY0.6 billion ($3.83 million) in 2021. Its gross operating profit inched down 4.6% year-on-year to JPY81 billion ($516.8 million).

Reviewing consumer lending firm FE Credit, in which the Japanese giant holds a 49% stake, Nakashima said the challenges are due to a downturn in Vietnam's macroeconomy. This downturn was primarily caused by impacts of the Covid-19 pandemic and sluggish exports resulting from the stagnation of the Chinese economy.

There was a “particularly delayed recovery” in consumer spending among the mass market, which is FE Credit's main customer segment, the executive added.

SMFG expects FE Credit to recover soon with the turnaround of the local economy. “Currently, we are finally seeing signs that a recovery in the macro environment can be expected,” said Nakashima.

“With the continued demographic bonus, there is ample potential for medium- to long-term growth. As the largest consumer finance company in the local market, FE Credit has significant growth potential once it recovers,” he added.

SMFG noted solutions for FE Credit, including enhanced management under a new CEO, tightening credit standards, and expanding its base of quality customers.

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