Consumer credit hardly accelerates in 2021

27-Feb-2021 Intellasia | Dau tu Chung khoan | 5:02 AM Print This Post

After the “golden period” with a compound growth rate of about 35 percent per year, the Vietnam’s consumer finance market slowed down in 2020 and is forecasted to be difficult to accelerate in 2021 due to the impact of the Covid-19 epidemic.

Consumer demand decreasing

Talking to Dau tu Chung khoan, Hong Oanh (Bien Hoa, Dong Nai) said that before the epidemic outbreak, whenever she needed a new phone, she did not hesitate to go to Mobile World to buy immediately with a zero percent interest rate instalment loan which was offered by many finance companies such as ACS, Home Credit, FE Credit, etc.

However, since the Covid-19 epidemic occurred, Oanh no longer thinks of borrowing instalment loans even though she has the needs to buy household appliances because her income has been affected.

Being in the same situation, Trinh Huy (HCM City) a customer who is currently borrowing an instalment loans from a bank to buy a car, with the remaining principal debt of about 500 million dong, plans to borrow from his relatives to pay off the loan to reduce pressure to pay interest. In the case of not having enough money for repaying, he will sell his car and switch to motorbike.

In fact, difficult cases like Oanh and Huy are not rare. Since the Covid-19 outbreak, all economic activities have been affected, causing the income of workers to decline, thereby limiting the consumer demand of people. Meanwhile, the capital providers such as banks and finance companies also have to be more careful in choosing customers for granting loans.

Regarding this issue, Nguyen Canh Vinh, Acting general director of Export Import Commercial Joint Stock Bank (Eximbank), talked to Dau tu Chung khoan that since the epidemic outbreak in the beginning of 2020, seeing that the difficult situation would last long and business customers would be considerably affected, Eximbank has strictly controlled credit activities, especially real estate credit.

In addition, the decrease of the natural demand (due to the reduction in the level of risk-taking to expand the business of customers and also the reduction in the consumer credit demand, etc.) has affected the group of 15 20 customers with high arising demand, leading to a 10.2 percent decrease in Eximbank’s outstanding loans with trading elements (seasonal factor, taking advantage of market opportunities, high risk high profit, etc.) in 2020. As a result, the bank’s credit growth in the whole year was negative 11%. However, according to Vinh, the credit demand of this customer group will soon recover when the market is favourable again.

In 2020, although the Covid-19 epidemic negatively affected the global economy in general and Vietnam in particular, Eximbank has made preparations and efforts to transform in order to adapt to the new context, well control bad debt risks, and ensure stable and long-term growth,” said Vinh. He added that in the near future, Eximbank will continue to promote restructuring, maintain credit approval in a tight direction and not loosen the amount of loans.

In Orient Commercial Joint Stock Bank (OCB), general director of the bank Nguyen Dinh Tu said that the outstanding consumer credit of the bank in 2020 recorded low growth rate and only accounted for about 3.3 percent of the total outstanding credit, partly due to the bank’s restructuring of the individual consumer loans. In the current complicated situation of the Covid-19 epidemic, OCB will continue to tightly control loan quality and carefully select consumer credit borrowers to limit the risk of bad debts.

Consumer credit hardly speeds up.

In fact, consumer credit segment is being promoted by banks and finance companies with many preferential credit packages, but the demand is not high because consumers have to limit their spending.

In the market, it can be seen that there are very high-value loan packages. For example, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) has launched a 50 trillion-dong package with preferential interest rate of seven percent per annum in the first six months, plus an amplitude of 0.5 two percent per annum after the preferential period, to customers borrowing home loans, car loans, and personal consumer loans in the early 2021.

Many other banks such as Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), Asia Commercial Joint Stock Bank (ACB), Vietnam International Commercial Joint Stock Bank (VIB), Nam A Commercial Joint Stock Bank (NamABank), Viet Capital Commercial Joint Stock Bank (VietCapitalBank), HCM City Development Commercial Joint Stock Bank (HDBank), etc. have also offered incentives to individual customers when they need capital. Nevertheless, it is not necessarily that banks promote individual consumer loans due to the difficulty of credit growth, according to Tung, the reason is simply that consumer credit is growing slowly and it needs to be pushed up. On the other hand, before lending, banks have also cautiously chosen the customers as this is a high-risk credit segment.

Nguyen Hoang Minh, deputy director of the State Bank of Vietnam (SBV) HCM City branch, also said that the consumer credit growth was not strong last year, but the bad debts in this area showed signs of increasing, including the consumer loans of finance companies.

In fact, the consumer credit in finance companies is often higher than banks’, partly due to the easy lending procedures, and the bad debt ratio in consumer lending is not limited at less than three percent as at banks. Notably, in the context when the disease has affected income, it is difficult to avoid consumer bad debt rise.

A senior leading of a finance company admitted that the bad debt ratio of his company in 2020 increased to eight percent. However, he explained that this level is not high in consumer credit.

Hoang The Hung, deputy general director of EVN Finance, said that the company’s outstanding disbursed loans in 2020 reached one trillion dong, not completing the target. The main reason is the active adjustment of disbursement plan, especially in the second and third quarters of 2020 to strictly control the risk of bad debts. The disbursement target this is three trillion dong if the epidemic is controlled and consumer credit demand increases again.

According to the recently announced business performance report of Vietnam Prosperity Commercial Joint Stock Bank (VPBank), the pre-tax profit in the whole year 2020 of FE Credit was 3.713 trillion dong, down by 16.3 percent compared to 2019, but still contributed 28.5 percent into the bank’s consolidated pre-tax profit.

In 2020, the disbursement of FE Credit was 63 trillion dong, down by about 14%. As of December 31st 2020, the total outstanding credit grew by 8.9 percent to 66 trillion dong, in which the outstanding loans of new customers accounted for 37%. Regarding asset quality, the company’s bad debt ratio increased from six percent as of late 2019 to 6.6 percent in the end of 2020, but the Capital Adequacy Ratio (CAR) rose from 15.9 percent to 19.1%. according to FE Credit, despite growing slowly in the past time, the Vietnam’s consumer credit market is still very potential with a population of nearly 100 million people and the middle-class growing rapidly.

In fact, in the context of epidemic, many customers are insolvent and finance companies have to make efforts to restructure the loans, and reduce interests for customers. FE Credit’s representative said that the company has exempted interests for more than 250,000 existing customers, divided payments for customers with financial difficulties, accepted to postpone the payment in three months, at the same time considered cutting late payment fees for customers affected by the epidemic.

It can be seen that the demand for shopping is constantly increasing when the socio-economic life is increasingly developing. A part of the population, especially young people, are increasingly looking for consumer loan services. Grasping this trend, finance companies have continuously implemented programmes to boost consumer credit demand, applied quick disbursement, simple procedures and commitment on approval time, etc. That has created favourable conditions for customers to easy access loans. However, the consumer credit market in 2021 is said to be difficult to accelerate due to the unpredictable development of the Covid-19 epidemic, although the lending interest rates are on a downward trend.


Category: Finance, Vietnam

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