Consumer lenders post low profits amid tightened spending

By Quynh Trang September 4, 2023 | 05:32 am PT

Consumer lenders struggled in the first half this year, with many experiencing plunging profits or even posting losses as people tightened spending amid economic challenges.

Market leader FE Credit posted a loss of nearly VND3 trillion ($125 million) in the first six months, similar to the loss it recorded in the second half last year.

This means in the four quarters ending June the company has posted an accumulated loss of around VND6 trillion.

FE Credit’s equity has plunged over 35% during the period to VND10.25 trillion.

A company representative said earlier that the consumer loan industry has been suffering a challenging year due to economic recession and rising inflation.

Many workers in the average- and low-income rage, which are their typical customers, have lost their jobs.

Analysts at Vietcombank Securities have said that FE Credit has higher risk than the industry average due to its fast expansion.

Shinhan Finance, a unit of the South Korea financial group, posted a loss of nearly VND250 billion against a profit of VND90 billion in the same period last year.

Home Credit Vietnam saw its post-tax profit plunge 80% year-on-year to VND211 billion.

MB Shinsei (Mcredit), a venture between Vietnamese lender MB and Japan’s SBI Shinsei, saw post-tax profit drop 30% year-on-year to VND328 billion.

The decline in profits at consumer lenders came as debt collection become difficult when many borrowers could not repay their loans after losing their jobs and facing other financial difficulties such as inflation.

A recent survey by professional service provider PwC Vietnam found that 62% of consumers said they would cut expenses, especially in luxury categories such as tourism and electronics, amid economic challenges.

Recent police busts of illegal activities at debt collection companies also posed challenges to the industry, as many of these companies give small loans that would not result in profits should they bring the matter to court.

A representative of a consumer lender, who asked to not be identified, said that his company has reduced its credit to preserve its capital as bad debt rises.

VPBank leaders expect FE Credit's performance to improve in the last two quarters this year as the economy shows positive signs of recovery.

There are 16 consumer lenders approved by the State Bank of Vietnam with total outstanding loans of over VND220 trillion, accounting for 1.87% of the country’s total as of last year.