2022 is a difficult year for the consumer finance segment. After the pandemic, the global political economy turned negative, amplifying the impact on the credit performance of both the lender and the borrower. Facing such difficulties, finding all possible directions to survive and adapt to the change in the socio-economic situation is the common opinion of the leaders of these units.

Photo: FE CREDIT

Multidimensional pressure on business plan

Negative impacts in the past two years have spread to all economic sectors and are reflected in the 2022 business results of most financial companies. A representative of FE CREDIT said that the demand for installment loans decreased significantly in the 2020-2022 period, affecting the disbursement results. In addition, promotions and plans to develop payment acceptance networks have been delayed by the Covid-19 pandemic.

The change of policy on the extension and restructuring of debt groups also affects the company's provision. In the two years of complicated developments, the company has exempted and reduced loan interest for about 180,000 customers, with accumulated interest and fees of nearly VND 215 billion, which partly makes the business "offside" with revenue and profit plans at the end of 2022.

Currently, the deposit interest rate in the market is continuing to increase while the company is only allowed to mobilize from corporate deposits, so the cost of capital tends to increase, thereby affecting the company's net interest income. In addition, FE CREDIT is under great pressure from debt collection activities because some actors take advantage of people's unawareness to purposely refuse to pay back the debts to State-Bank-licensed financial companies, challenging the company's debt collection activities.

Although the business plan suffered, in the fourth quarter of 2022, the company disbursed a preferential consumer loan package of VND 10,000 billion for millions of workers in industrial parks. With an interest rate reduced to 50% compared to the rate for ordinary customers, the package made a positive impact on social security and refinanced the economy. This shows that the business is willing to sacrifice a significant part of its revenue and profit to support workers to contribute to economic recovery.

Strive to "keep the balance" for growth

Unusual circumstances require extraordinary solutions for businesses to recover. This depends on how well the business keeps the balance for growth in the challenge.

In mid-2022, Moody's highly valued FE CREDIT's prospects in the near future and expected that in 2023, the company's asset quality and profitability would recover to pre-pandemic levels. In addition, the merger of SMBC Consumer Finance Company is expected to help the company reduce credit risk from loans and maintain a stable credit profile over the next 12 to 18 months. This is the basis for FE CREDIT to maintain a good financial structure to overcome the current challenging period.

With a plan to recover and regain growth momentum, FE CREDIT has determined that the key task is to evaluate and review underperforming customer segments and thereby remove them from the portfolio. To be specific, in the segment of low- and medium-income customers, which accounts for the majority of the portfolio, the company will suspend disbursement approval for customers with bad credit history or no social insurance. In addition, it will focus on building a "good bank" file (customers with good credit history and social insurance).

With the launch of the UBank application, FE CREDIT is gradually completing a comprehensive digital platform for the mass segment in Vietnam.

The company will also launch initiatives from sales and debt collection to risk management to reduce risk costs and create momentum for long-term growth. Over the next three years, FE CREDIT looks to become the largest and most profitable NEOBank in the ASEAN region by transforming its digital banking platform into a super app.

In 2023, it is forecasted that the economic difficulties have not been completely eliminated and the market still suffers uncertainties. However, a healthy financial structure and initiative for a sustainable growth strategy can be a "fulcrum" for FE CREDIT to overcome existing challenges and bring stable benefits in the long run.

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