Commercial banks rush to buy finance companies
Four commercial banks have taken over finance companies, and other banks are consulting with their shareholders about buying such firms to expand their consumer lending.
The four bank deals included Maritime Bank and Vinatex’s Finance Company, Techcombank and Vinachem’s Finance Company, MBBank and Song Da Finance Company and SHB Bank and Vinaconex-Viettel Finance Company.
Meanwhile, BIDV, one of the largest commercial banks, has submitted a plan to shareholders to obtain a finance company. Either BIDV would buy an existing finance company or shift its existing finance leasing company into a finance company.
VietinBank, also a large bank in which the State holds controlling stakes, is considering developing a part of PG Bank into PG Finance.
The other banks, ACB, Sacombank and NamA Bank, have submitted to shareholders a plan to establish finance companies of their own with chartered capital of VND500 billion.
Commercial banks’ interest in finance companies has never been this high.
An analyst said the banking sector, which has seen outstanding loans increasing modestly in recent years, now is trying to push up consumer credit. Taking over existing finance companies is a good solution for them to implement their plan.
However, he believes that the more important reason behind the banks’ taking over finance companies is that the State Bank (SBV) plans to tighten bank lending.
SBV some days ago opened a draft legal document for public opinion which said banks would not be allowed to provide credit without collateral and provide consumer credit, and that it could only be done by finance companies.
An SBV senior official said that the strict regulation aims to ease the risks on banks. It also aims to restructure weak finance institutions.
Also according to the official, it is foreseeable that more and more finance companies would be set up in the time to come as consumer credit develops.
Providing consumer credit was never an attractive business field to banks, especially the large banks which focused on wholesale banking. However, consumer credit now is more attractive to them because of high interest rates.
However, experts warned that consumer credit might not be as profitable as banks think.
“Finance companies now mostly provide subprime loans to customers who cannot satisfy the requirements to borrow low-cost capital from banks,” an analyst said.
“Though consumer credit promises high profits, it also promises high risks,” he said.
He also thinks that high interest rates charged by finance companies would keep borrowers away.
Meanwhile, BIDV, one of the largest commercial banks, has submitted a plan to shareholders to obtain a finance company. Either BIDV would buy an existing finance company or shift its existing finance leasing company into a finance company.
VietinBank, also a large bank in which the State holds controlling stakes, is considering developing a part of PG Bank into PG Finance.
The other banks, ACB, Sacombank and NamA Bank, have submitted to shareholders a plan to establish finance companies of their own with chartered capital of VND500 billion.
Commercial banks’ interest in finance companies has never been this high.
However, he believes that the more important reason behind the banks’ taking over finance companies is that the State Bank (SBV) plans to tighten bank lending.
SBV some days ago opened a draft legal document for public opinion which said banks would not be allowed to provide credit without collateral and provide consumer credit, and that it could only be done by finance companies.
An SBV senior official said that the strict regulation aims to ease the risks on banks. It also aims to restructure weak finance institutions.
Also according to the official, it is foreseeable that more and more finance companies would be set up in the time to come as consumer credit develops.
Providing consumer credit was never an attractive business field to banks, especially the large banks which focused on wholesale banking. However, consumer credit now is more attractive to them because of high interest rates.
However, experts warned that consumer credit might not be as profitable as banks think.
“Finance companies now mostly provide subprime loans to customers who cannot satisfy the requirements to borrow low-cost capital from banks,” an analyst said.
“Though consumer credit promises high profits, it also promises high risks,” he said.
He also thinks that high interest rates charged by finance companies would keep borrowers away.