Selling on financial industry: What are the banks calculating?

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The profitability of consumer finance companies in Vietnam is quite good.

"Wave" of selling capital

At the recent General Meeting of Shareholders, the Board of Directors (BOD) of SHB Bank presented to shareholders about the divestment of SHB FC Financial Company to foreign strategic investors. The BOD of SHB will proactively decide the maximum ownership ratio of foreign investors according to the proposal to establish the Company approved by the State Bank.

Do Quang Hien, Chairman of SHB's BOD, said that SHB is in the process of selecting and negotiating in the spirit of the best interests of the bank and shareholders, expected to be successful this year.

Earlier, the leader of MSB Bank also announced that there were negotiations ongoing to transfer a part of the charter capital of FCCOM Financial Company to Hyundai Card Co., Ltd. Since the end of 2019, MSB has submitted documents to the State Bank to approve the transfer of shares in accordance with regulations and is awaiting appraisal.

The BOD of VietinBank also approved the transfer of 49% of the capital of VietinBank Leasing Financial Company to Mitsubishi UFJ Lease & Finance (Japan) and 1% of the capital to a domestic investor.

There are even financial companies that are doing well, making great contributions to the consolidated profits of the parent bank, but also being sold by the parent bank.

That is the case of FE Credit Consumer Finance Company, which accounts for more than 50% of market share in the market, bringing more than 44% of profits to VPBank.

Mr. Ngo Chi Dung, Chairman of VPBank'sBOD, said that the BOD is still in negotiations to sell shares to investors. FE Credit is an attractive consumer finance company in the Vietnamese market, so the bank will select investors to be most effective.

Vietnam currently has 16 financial companies, including six companies with 100% foreign capital. Before 2020, many domestic financial companies either sold off shares or completely transferred to foreign partners. For example, since 2016, BIDV sold 49% of BIDV Financial Leasing Company to Sumitomo Mitsui, forming BIDV - SuMi TRUST Financial Leasing Company. Srisawad Corporation of Thailand has proposed to join in restructuring and owning all capital of Agribank Financial Leasing Company I (ALC I).

For the long-term strategy?

Speaking about the cause of the sale of capital at a financial company, Hien said that when divesting capital at SHB FC, besides the benefit of capital surplus for SHB, it also helps improve the management capacity, technology and brand. In particular, SHB will select foreign partners, so it has a resonance and companion for long-term business strategy.

Sharing the same view, VPBank's leaders also shared that FE Credit is a financial company so it can call for selling capital up to 49%, but if so, the benefits of the parent banks may be reduced. However, when a partner accounts for 49%, Ngo Chi Dung expects this will bring financial, technology, executive management experience. Moreover, this source of money will help the parent bank increase its capital, helping focus more on retail and small and medium businesses.

Financial - banking expert, Dr. Can Van Luc assessed that the potential for developing Vietnam's consumer finance market is still very high, profitability on equity (ROE) of consumer finance companies is quite good, in 2019, it will be 15 -25%, much higher than commercial banks.

Therefore, many foreign investors want to jump in, especially investors from Japan and South Korea. Experts also said that the divestment in the financial companies of banks is actually just selling off capital to increase financial strength, helping to expand their scale, while the banks still hold most stocks to control operations. Therefore, the sale of capital to have more strategic partners, to together "go the long way" will be a more favorable development direction for banks.

In fact, the operation of domestic financial companies is developing in two ways, on the one hand, it is of great help to provide capital for people, businesses, and on the other hand, in some companies there is a development of phase difference, causing many "luxuriant groves" in public opinion. The Department of Competition and Consumer Protection (Ministry of Industry and Trade) said that it has received many complaints related to consumer lending activities of some financial companies. Therefore, the sale of capital in financial companies is also expected to reorganize operations based on experience in developed markets from foreign partners.