Vietnam consumer finance firms post earnings recovery in H1 following 2023 slowdown

Corporate earnings of consumer finance businesses in Vietnam in the first half of the year showed a significant recovery, following a slowdown last year.

F88 Business JSC (F88), a top consumer finance company in Vietnam, posted a net profit of VND89.05 billion ($3.61 million) in H1, or VND486 million ($19,700) a day on average.

This was an improvement from a loss of VND368 billion ($14.92 million) in H1/2023 and VND528.85 billion in the whole of last year.

The company attributed its positive results to a focus on higher-quality loans, stricter risk controls, and better loan collection methods.

Additionally, F88 restructured its sales team by upscaling direct sales staff and reducing mid-level management staff. These changes helped boost labor productivity and reduce costs.

Similarly, following the challenges of 2023, VPBank Finance Company Limited (FE Credit) returned to profitability in Q2/2024 after consecutive losses caused by declining asset quality.

According to KB Securities, its pre-tax profit reached VND145 billion ($5.9 million) in Q2, a significant improvement from the VND853 billion ($34.73 million) loss in Q1.

The firm attributed its recovery to restructuring and overhauling its system. By adopting a more cautious lending approach, targeting low-risk customers, and optimizing operating costs, the company saw improvements in loan quality quarter by quarter.

This year, FE Credit aims for VND1.2 trillion ($48.86 million) in profit, a substantial turnaround compared to the loss of VND3 trillion ($122,14 million) last year. The company focuses on optimizing its business model, strengthening risk controls, enhancing the customer experience, and promoting digital transformation to broaden its customer base. It is also promoting cooperation with retail chains to cater to different customers.

Other local consumer finance firms also posted possitive business results in H1. Home Credit Vietnam reported that its H1 net profit reached VND474 billion ($19.4 million), 2.2 times higher than in the same period last year. Its return on equity (ROE) increased to 6.77% from the same period last year.

Similarly, Shinhan Vietnam Finance Company Limited saw its loss decline from VND246 billion ($10 million) in H1/2023 to VND95 billion ($3.87 million) in H1/2024. Mirae Asset Finance Company (Vietnam) also witnessed its loss decrease from VND392 billion ($15.96 million) to VND347 billion ($14.13 million).

Although experiencing a slowdown in 2023 due to Covid-19, global economic downturn, and high interest rates caused by inflation, Vietnam’s consumer finance market holds significant room for development, experts say.

According to FiinGroup, consumer credit is currently just over 10% of GDP in Vietnam, much lower than in other countries and territories, such as South Korea (40%) and Hong Kong (20%).

The economic recovery prospects this year are expected to propel the revival of the consumer finance sector, driven by expanded purchasing power, increased credit demand, and improved household income. After 2023, consumer lending companies have been cautious in disbursement, aiming for sustainable growth.

Additionally, the State Bank of Vietnam (SBV), or the central bank, has proposed key solutions to combat loan sharks for a more healthy and sustainable consumer finance market.

Measures include reviewing and improving the legal framework governing lending activities to meet practical requirements; tightening management, inspection, and supervision of consumer lending; bettering mechanisms and policies for digital transformation, among others.