Sector Preview | Vietnam Consumer Finance

When Crisis Hits:

Time to Pivot the Game

For Publication | Date of Issue: 4 April 2024

A Series of Publication by
Market Research and Consulting Division, FiinGroup
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 Vietnam Consumer Finance Market Summary

Vietnam's consumer finance market is set for a new growth cycle post-2023 economic challenges

Figure 1: Market size and YoY growth (%) by outstanding loans for • Consumer finance (CF) market players finished another challenging year, with the CF loan book
consumption purposes of commercial banks and FinCos of banks and finance companies (FinCos) inching up only 11.3% compared to 2022. Since the
onset of COVID-19, the market has encountered a setback amid economic slowdown and
3,000 32% adverse credit conditions, including subdued credit demand, rising delinquency rates and
VNtrn

tightened lending practices. The CAGR for the period 2019-2023 dropped to 15% compared to
18.9% 22% the 25% p.a. in comparison to the pre-pandemic period (2016-2019).
2,000 23.7%
12% • FinCos’ main clientele has suffered severely due to the downturn in labour-intensive sectors,
especially those linked to manufacturing and export. 2023 preliminary figures revealed that
1,000 11.33%
2% FinCos loan book size scaled down by over 9% year over year.
• Nonetheless, Vietnam's CF market boasts enduring growth prospects, with its penetration (excl.
0 -8% mortgage) of over 10% of GDP modestly trailing behind that of regional counterparts in the Asia
2019 2020 2021 2022 2023e Pacific. With the economy visibly recovering (See next page), 2024 is poised to reignite growth
momentum, fueled by enhanced household income, reviving purchasing power and driving
Active FinCos' CF Banks' CF Total Outstanding CF Loans YoY Growth credit demand.

Figure 02: Market size of active FinCos (VNDtrn) and YoY Growth Figure 03: Consumer lending excl mortgage as % of GDP in Vietnam and
neighboring countries, 2022
200 Active FinCos' CF YoY growth 40%
VNDtrn

60%
150
20% 40%

100 20%

0% 0%
50
-9.4%

0 -20%
2019 2020 2021 2022 2023
Source: FiinGroup, SBV statistics, EUI. Figure 1 including housing/mortgage loans

Financial Information • Business Information • Market Research • Credit Rating 2

Macroeconomic conditions
The revival of key labor-intensive sectors is expected to boost consumer finance through increased loan issuance
and improved borrower credit quality
Figure 04: YoY Growth of Total Retail Sales and Net Revenue Growth Figure 05: PMI of Vietnam compared to ASEAN
of listed consumer goods companies Vietnam ASEAN Threshold

60% YoY growth - Net revenue of listed consumer goods companies 55

YoY growth - Retail sales
45% 53
51.5
30%
51
8.25%
15%
49 49.9
0%
3.82%
-15% 47

-30% 45
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021 2022 2023

Figure 06: Vietnam’s trade balance

Import Export Trade Surplus (Deficit) Export:
34.53 34.01 +17.5% YoY
29.71 29.45 30.07 32.76 30.68 32.25 31.12 31.47
26.05 27.86 28.04 24.69 7.9
23.61 3.6 4.8
3.1 3.1 3.4
2.8 2.7 2.7 2.9
2.2 2.1 79.4 93.2
2.0
1.4 1.5 1.4
0.7
74.5 85.3

22.95

3M2023

3M2024
23.25 25.21 26.04 26.36 23.30
28.32 27.00 29.32 28.48 29.52 29.58 29.40 30.90 31.08
Import:
Aug-23

Sep-23
Jan-23

Jun-23

Jul-23

Jan-24
Feb-23

Mar-23

Feb-24

Mar-24
Nov-23

Dec-23
May-23
Apr-23

Oct-23 +14.4% YoY

Source: FiinGroup, Custom, GSO, S&P. Data on consumer goods companies is calculated from 365 listed companies in the industry. Q3-2023 revenue reached 236.4 trillion VND, equivalent to 16% of total retail sales of goods and
consumer service revenue for the same quarter.

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Consumer finance competitive landscape
The consumer finance landscape in Vietnam has evolved from a concentrated to a dynamic and diversified market.
Figure 07: Consumer finance market size YoY growth, 2018 – 9M2023
9M2023
FinCo A FinCo B
2018
FinCo C FinCo D

FinCo E FinCo F
28.6%
FinCo G FinCo H

50% + 51.3%
FinCo I FinCo K

FinCo L FinCo M
20% 14%
FinCo N FinCo O

FinCo Q FinCo K
VND99,952bn VND151,264bn
Source: FiinGroup

Competitive landscape Opportunity

Vietnam’s consumer finance market is becoming more fragmented due Amid post-COVID economic challenges,
to the emerge of new players adopting aggressive market acquisition Small and mid-sized FinCos have the
strategies. Younger finance companies (FinCos) are gaining opportunity to thrive as some leading
prominence through robust digitalization, well-crafted products through players entered a period of restructuring
extensive partnerships, effective niche customer acquisition strategy and revising business strategies

Financial Information • Business Information • Market Research • Credit Rating 4

Key challenges I Asset quality
However, FinCos' asset and earnings quality should be closely monitored amid economic uncertainties
Figure 08: Net interest income/Average loan balance of active FinCos The aftermath of slow economic growth post-Covid adversely impacted
finance companies (FinCos), resulting in their business performance
31% reaching its lowest point in 2023. Contributing factors include:

27% subdued credit appetite, leading to reduced interest income

among FinCos.
23%
Weakened borrower repayment capacity, resulting in
19% 17.1% FinCo’s high NPLs and elevated provisions for loan losses.

15%
2018 2019 2020 2021 2022 1Q2023 1H2023 9M2023
Challenges in debt recovery: The failure of some FinCos,
pawnshops, and unlicensed lenders to adhere to debt collection
Figure 09: NPL ratio of active FinCos regulations prompts scrutiny from local authorities, heightening
challenges in collection practices and causing adverse
16%
psychological effects on borrowers.
12%
FinCo’s net interest margin (NIM) significantly declined,
11.35% driven by sluggish credit income growth and debt recovery
8%

4% Encouraging signs emerge with:

✓ The downward trend of NPL ratio since September 2023
0% ✓ Leading FinCos managed to preserve NIM by concentrating
2018 2019 2020 2021 2022 1Q2023 1H2023 9M2023 efforts on safer customer segments (those with good credit
history and social insurance records)
Source: FiinGroup

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Key challenges I Profitability
The challenges facing FinCos offer opportunities for strategic partnerships and investment
Figure 10: Profit before tax of active FinCos (VNDbn)
In 9M2023, active FinCos saw pre-tax profits plunge
by VND 3,423 billion, continuing a downward trend
CHALLENGES
8,500 The difficult business situation
since the pandemic began in 2020. The decline is due
hampers FinCos' ability to
to reduced interest income and higher provisions for
raise capital & pursue
loan losses, reflecting deteriorating borrower quality.
business expansion.

5,500

The challenges facing FinCos create opportunities for foreign investors to

2,500
enter the Vietnamese consumer finance market through:

Equity investment Strategic partnership

-500 ✓ FinCos require additional funds to overcome
challenges and expand their operations,
especially those owned by local banks which
plan to divest from consumer finance and
focus on core services
-3,500
-3,423
FinCos are seeking resources for
restructuring and digital transformation to
stay competitive. Strategic partnerships
are expected to help extend customer
outreach, provide expertise, technology
and tailored financial packages crucial for
this transformation.

Source: FiinGroup

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Outlook for 2024
Despite challenges, Vietnam embraces a highly promising consumer finance market, driven by a low penetration
rate and favorable demographic factors

CREDIT GROWTH ASSET QUALITY

The beginning of 2024 signals the Anticipated enhancements in asset quality
initiation of a new stage in credit require caution amidst ongoing uncertainties.
growth, characterized by a more However, FinCos may need a minimum of 12-18
cautious approach compared to the months, contingent on loan portfolio statuses, to
achieve a healthy portfolio. Challenges include
Long-term prospects
pre-pandemic period. The
environment no longer favors macroeconomic uncertainties (e.g., global > Vietnam remains a highly promising
aggressive credit expansion, aiming demand, interest rates) and difficulties in market fueled by favourable
instead for a stable and robust Vietnam's debt recovery, which impact the asset demographic trends including a low
growth trajectory. quality outlook. penetration rate, a sizable
Notably, some leading FinCos are ➢ Investors should closely monitor financial underbanked population, and the rise
currently undergoing business company performance and influencing of a tech-savvy younger generation
restructuring, creating a favourable factors.. poised to become a key consumer
opportunity for other FinCos to demographic.
emerge in 2024. PROFITABILITY > Further progress in the financial
sector, particularly for FinCos, will be
Profitability is expected to slowly recover due to
fueled by government promotion of
decreased loan loss provisions and debt recovery
Net interest margin digital payments, expanding financial
efforts among FinCos. However, with significant
service utilization across Vietnam.
Is anticipated to experience a reductions in loan portfolio size and ongoing
gradual recovery among FinCos, challenges, substantial profit growth is unlikely in
attributed to the improvement in the upcoming year. Nonetheless, FinCos typically
credit growth and enhancements in introduce new products and initiatives later in the
Cost of Funds. year, which may improve profitability in 2025.

Financial Information • Business Information • Market Research • Credit Rating 7

Factors to consider when investing in Vietnam's Consumer Finance
Navigating FinCos’ challenges: Capitalizing on Strategic partnerships and investment opportunities

M&A is considered an

2. 3.
DUE DILIGENCE

1.
optional strategy when TRANSITION POST DEAL RISKS
entering the Vietnam It is essential for investors
consumer finance to grasp comprehensive PERIOD • Market risks, including macroeconomic
market due to the insights into the target Investors should be aware of shifts, regulatory changes, and competitive
company's value, u-curve effects in the transition pressures, are inherent in the Consumer
restriction of a new
strategy, business period; hence, crafting a well- Finance sector
licenses. Here are key
performance, and designed transition strategy is • Credit risks may manifest through
considerations: customer behaviours, economic
alignment with the essential for maximizing M&A
investor's vision and long- deal value, minimizing risks, downturns, and regulatory oversight.
term growth goals. and ensuring seamless • Operational risks might arise from the
integration. target company's business model

Key actions advised for investors during an M&A deal of a Vietnamese FinCo:

Pre-deal Deal valuation & negotiation Post deal

• Thorough market assessment to
have comprehensive knowledge on
opportunity & key risk of the market
• Thorough deal sourcing practices
and target screening
Due diligence for acquisition of FinCos should focus on:
• Assessing key growth assumption of the target company
• Identifying potential risks after the transaction
• Careful assessment of asset quality and valuation during
the transition period are key considerations that could
lead to the u-curve effect.
Brand health check, evaluating go-to-
market strategy, market risk, and credit
risk are crucial for smooth operations with
new shareholders and management

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Recent M&A activities
Foreign investors have continuously disrupted the consumer finance market with successful M&A transactions

Highlighted
Highlighted successful
successful M&A
acquisition
FiinGroup’s extensive support for investors

Feb 2024 In-depth market assessment

› Deal value: US$ 860 mn
› % stake: 100%
Preliminary target review

Oct 2023
› Deal value: US$ 170 mn Target screening & deal sourcing
› % stake: 100%

May 2023 Commercial due diligence

› Deal value: US$ 150 mn
› % stake: 100%

Merger filing support

Apr 2021
› Deal value: US$1,370 mn
› % stake: 49%

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How can we assist potential
investors in unlocking the
potential of the Vietnam
consumer finance market?

‹#›
Why Working with Us?
With a steadfast commitment to delivering insights and strategic solutions, we take pride in our unique value propositions to
support your investment plans
Data-Driven Approach
and Methodology
• Leveraging in-house database
consist of financial and non-financial
information of over 1.6 million
registered companies in Vietnam,
we commits to deliver evidence-
based deliverables that empower
our clients to stay ahead of the
curve.
• This ensures that our clients receive
data-backed and reliable
information that to have informed
decision, bring real values to our
clients’ investment and business
decisions
Proposal for Stavian Group
Insights from Local
Business Network
• With 15+ years of experience covering
key industries in Vietnam , we have
developed a long-standing relationship
and an extensive network of local
business, industry experts and
governance authorities.
• Our extensive network includes
partnerships with prestigious
information sources and government
agencies such as CIC, NFSC, and
GSO, as well as industry associations.
Leveraging our seasoned
professionals' deep-rooted
knowledge and understanding of local
markets, we offer foreign investors
comprehensive insights into Vietnam's
domestic market, providing a
significant competitive edge.
Expertise with Niche
Markets
• Our team of industry experts and
analysts possesses extensive
knowledge of niche markets,
allowing us to offer specialized
insights and recommendations to
clients worldwide. With our personnels
boasting international experience in
key economies, as well as
multinational corporations, we serve a
diverse global clientele spanning
Japan, South Korea, ASEAN, Europe,
and the US.
• With a proven track record of
success in navigating niche
markets, our team has the knowledge
and experience to help our clients
capitalize on untapped opportunities
and overcome challenges.
Day-One Support for
Investors
• One-stop shop for all your
needs, from market research,
deal sourcing, business due
diligence, market entry strategy
advisory, deal advisory
services, offering support
throughout the entire business
lifecycle.
• From pre-deal analysis and due
diligence to deal execution and
post-deal integration, we provide
comprehensive support to help
our clients navigate complex
transactions since Day-1 of the
client entering Vietnam market
and achieve their strategic
objectives
11
About FiinGroup | Service Offerings

FiinGroup is the leading provider of financial data, business information, market research and consulting, credit rating, and
other data-driven analytics services via Platform as a Service (PaaS), annual package, and on-call services in Vietnam

▪ FiinPro Platform ▪ Business Credit Report

▪ FiinTrade Platform Financial Business ▪ FiinGate Platform
▪ API Datafeed Information Information ▪ DataMart Solutions

▪ Issuer and Instrument

▪ Industry Report Credit Ratings
Market
▪ Customized Research Credit Ratings ▪ Credit Assessment and
▪ Commercial Due Diligence Research Due Diligence
▪ Market Entry Advisory ▪ Green Bond Verification
▪ Merger Filing Support

Financial Information • Business Information • Market Research • Credit Ratings 12

Service Offerings | Market Research & Consulting

1 Industry Report
On-the-shelf industry reports providing clients with comprehensive information and in-depth analysis about market Main Clients:
size, historical and forecasted growth, market share, market segmentation, competitive landscape, regulatory and
policy framework, key growth drivers and key development trends, key player in-depth analysis to help assess the ▪ Foreign and local corporate
market's attractiveness and growth potentials. clients
▪ Institutional investors
▪ Financial Institutions
2 Customized Market Research
Customized market study upon specific requirements by clients in addition to value-added services including Usage:
investment target sourcing, company visits, and/or business matching.
▪ Market potential assessment
▪ Business intelligence review
3 Commercial Due Diligence ▪ Investment target screening
In-depth analysis of target company’s market environment, competitive landscaping, its business attractiveness, ▪ Trade connection/Business
and market positioning in M&A transaction. Thorough assessments of business risks and their impacts on the Matching
target’s assumptions and business plans

4 Market Entry Advisory

Support of investors and/or entrepreneurs to explore investment or trading opportunities and develop optimal
market entry strategies (i.e. M&A, Joint Venture, Minority Equity Investments, Foreign Direct Investments, Trading
or any other partnership structure with local partners) with actionable recommendations for all stages in their
business journey in Vietnam.

5 Merger Filling Support

Comprehensive merger filing support services to clients throughout a merger process, focusing on economic
concentration and anti-competitive effect assessment.

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Market Research & Consulting / Track records in Consumer Finance Sectors

A leading Japanese A leading Korean

financial institution conglomerate

Client’s request Client’s request Client’s request

➢ Market Evaluation and market positioning of the
Target Company
Name of service
▪ In-depth market assessment
▪ Preliminary target review
FiinGroup’s deliverables
✓ In-depth review of the Target Company, including
corporate profiling, key product and service portfolio
and recent corporate development.
✓ Analysis of the consumer finance market in Vietnam
incl market size, market growth, and market
segmentation, competitive landscape, key market
trends & key growth drivers
✓ Review on the valuation on previous transactions in
the consumer finance sector.
Result
✓ On February 28, 2024, SCB X announced that The
Siam Commercial Bank Public Company Limited
has entered into a sale and purchase agreement to
acquire 100% stake of the Target Company. Please
refer to this Link for more details
➢ Market Entry Options and Investment Opportunities
in Vietnam Consumer Finance Sector
Name of service
▪ Target Screening & Deal Sourcing
▪ In-depth Market Assessment
FiinGroup’s deliverables
✓ Review the possibility of the new license application
from regulatory developments and policymakers’
perspectives.
✓ Review for the possibility of business alliance plus
strategic investment, including:
• In-depth analysis of the consumer finance sector
by finance companies (FinCos);
• In-depth analysis of the business operation 5
selected FinCos, and their financial and
operational performance
Result
✓ In October 2023, the Client successfully acquired
100% stakes in the Target company.
➢ Market study and consulting project on expansion
of consumer finance business, cash loan segment in
Vietnam
Name of service
▪ Customized Market Research
FiinGroup’s deliverables
✓ In-depth review of the consumer finance market
in general and cash loan segments
✓ Competitive landscape among cash loan incl.
market share, salesforce and distribution network,
financial performances, product strategy, etc..,
✓ Key trends in related sectors and emerging
trends of integrating consumer finance, etc.
✓ Recommendations for the company to expand its
consumer finance business in Vietnam, in terms
of product development, customer journey, sales
and marketing and distribution strategies,
improving customer quality.
Result
✓ After FiinGroup’s deliverables, the Client has
planned to adjust the acquisition and product
development strategies accordingly - a new APP for
cash loan products.

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Service Offerings | Market Research & Consulting
FiinGroup has been a trusted partner to various foreign investors, supporting them from the outset in entering and expanding
across key sectors in Vietnam
Service Offerings & Sector Coverage Client Portfolio
Japanese
Service Offerings
• Industry Report
• Customized Market Research • Market Entry Advisory Main Clients:
• • Merger Filling Support
Commercial Due Diligence ▪ Foreign and local corporate
A selection of sectors we cover: clients
Korean ▪ Institutional investors
Financial Services Construction & Construction Materials ▪ Financial Institutions
▪ Banking ▪ Cement Usage:
▪ Consumer Finance ▪ Additives and Concrete ▪ Market potential assessment
▪ Payment Services ▪ Admixtures ▪ Business intelligence review
▪ Leasing ▪ Steel & Other Metals ▪ Investment target screening
▪ Insurance ▪ Construction ▪ Trade connection/Business
Matching
Food & Beverages Healthcare
▪ Food Processing ▪ Hospital and Clinics
Local
▪ Food Services ▪ Medical Equipment
▪ Beverage ▪ Pharmaceuticals
Utilities Industrial Goods
▪ Water Supply ▪ Waste Treatment & Recycling
▪ Energy ▪ Flexible Packaging
Consumer Retail Logistics International
▪ ICT Retail ▪ Warehouse (incl. cold chain logistics)
▪ Fashion Retail ▪ Port Operation
▪ Convenience Store Information & Communication Technologies

▪ Health & Beauty Store Automobiles & Auto-Parts

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Contact us
Hai Khieu Head Office
Director, Head of Market Research and Consulting 10th Floor, Peakview Tower, 36 Hoang Cau Street,
T: +84 (024) 3562 6962 (ext.: 120) O Cho Dua Ward, Dong Da District, Hanoi, Vietnam
E: hai.khieu@fiingroup.vn Tel: +84 24 3562 6962

Oanh Tran Ho Chi Minh City Branch

Manager, Market Research & Consulting Unit 4621, Level 46, Bitexco Financial Tower, 2 Hai Trieu
T: +84 (024) 3562 6962 (ext. 105) Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam
E: oanh.trankieu@fiingroup.vn Tel: +84 28 3933 3586/ 85

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