Foreign capital hunts for finance companies through M&A

27-Nov-2020 Intellasia | Bao Dau tu | 6:02 AM Print This Post

The wave of mergers and acquisitions (M&A) of finance companies has been interrupted due to the Covid-19 pandemic. However, with good growth potential and high profitability, finance companies are still optimistic in finding M&A partners.

Tran Thi Bao Ngoc, director of Investment Banking Department at VPS Securities Company said that foreign investors still tend to pay attention to Vietnam’s banking industry, especially consumer finance.

At this year’s season for annual general meeting, numerous banks announced the plans to sell their consumer finance companies to foreign partners such as Vietnam Prosperity Commercial Joint Stock Bank (VPBank, divesting capital in FE Credit), Saigon Hanoi Commercial Joint Stock Bank (SHB, divesting capital in SHB Finance), Maritime Commercial Joint Stock Bank (MSB, divesting capital in FCCOM). All finance companies under the above mentioned banks have been asked to buy by many foreign investors. However, most deals are on hold due to the epidemic.

Chair of the Board of directors (BOD) of VPBank said that the negotiation is slowing down due to the pandemic, but the process will continue in the near future, because FE Credit is the most attractive company in consumer finance field.

It is known that in the three deals mentioned in the above, MSB has basically agreed with Hyundai Card Company Limited to transfer a part of its finance company (FCCOM)’s charter capital. Nevertheless, until now, the transfer document of MSB has not been approved by the State Bank of Vietnam (SBV).

In addition to the interest of foreign investors, the M&A of finance companies also has potential surprises due to the attention of many domestic partners. In recent time, many domestic banks have repeatedly revealed the plan to “hunt” and acquire consumer finance companies, such as Tien Phong Commercial Joint Stock Bank (TPBank), Asia Commercial Joint Stock Bank (ACB), Orient Commercial Joint Stock Bank (OCB), etc.

Leader of TPBank said that the bank has completed the documents and procedures with the SBV and the negotiation with the partner to restructure a finance company which is under the special control of the SBV. This plan is slower than expected due to some changes in the regulations of the SBV and other relevant agencies.

According to Vu Le Trung (VINAF Law Firm), this company has welcomed many large corporations interested in buying stake of finance companies in Vietnam. Trung believed that in the near future, the M&A in finance companies will be more exciting than in the banking industry due to the less strict conditions set by the government.

The market is unlikely to be active again before 2021.

The Covid-19 outbreak has caused the asset quality of consumer finance companies to decline, and the business results of many companies to fall sharply. Meanwhile, many strategic partners on negotiation process have encountered difficulties and must balance their cash flows. Nevertheless, experts said that these disadvantages only make the M&A of finance companies to slow down one beat and will soon become active again.

Representative of FE Credit said that the company expected the share offering to be completed in 2021. Although the business results in 2020 decline companies to 2019 due to the epidemic, FE Credit still keeps the targeted selling price set before the epidemic outbreak, by believing in the market potential as well as the company’s advantages.

Many financial experts also agreed that it is unlikely that banks will accept to sell finance companies at cheap prices to speed up the deals. Currently, applying for a license to set up a consumer finance company is very difficult. Therefore, to join this market, investors can only go through M&A. Thus, consumer finance remains a lucrative pie that many banks store as “savings”, and they will only sell when the market price is favourable.

In the current context, according to experts, instead of selling cheaply, banks will focus on strengthening risk management, restructuring operation and customer segments, restructuring product list, etc. of finance companies to wait for the opportunity to sell when the market flourishes.

Talking to reporter of Bao Dau Tu, Dr Nguyen Tri Hieu said that the M&A in consumer finance segment is most likely to heat up again, but the speed depends on the recovery of the economy.

The recent report of FiinGroup also mentioned that in 2020, the consumer finance market for the first time in a decade recorded single-digit growth. “However, with great potential, the market is still very attractive to domestic and foreign investors,” FiinGroup’s report stated.

 

Category: Finance, Vietnam

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