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On February 28, 2024, Home Credit Group announced the signing of a conditional framework agreement to transfer 100% of its stake in Home Credit Vietnam Financial Company (“Home Credit Vietnam”) to the buyer, The Siam Commercial Bank Public Company Limited (“SCB”), a member of SCBX Public Company Limited (“SCBX”).
The transfer agreement is valued at around 800 million euros and the transfer process is expected to be completed in the first half of 2025, subject to approval by the relevant authorities in Vietnam and Thailand. The actual transfer value will be determined at the time of completion of the transaction.
With 800 million euros, equivalent to nearly 22,000 billion dong, this is the second largest M&A deal in Vietnam’s financial company, following the acquisition of 49% stake in FE Credit by SMBC worth $1.37 billion in 2021.
The valuation is three times the equity of Home Credit and much higher than the market capitalization of many banks in Vietnam such as Nam A Bank (17,500 billion dong), Bac A Bank (11,200 billion dong), ABBank (8,700 billion dong), PGBank (6,200 billion dong), NCB (6,200 billion dong), … which shows SCBX’s high expectations for the potential development of this consumer finance “giant”.
On the SCBX side, this is the parent company of SCB – the fourth largest bank in Thailand in terms of asset size and one of the leading financial technology groups in the Golden Temple country.
What makes Home Credit attractive?
As one of the earliest foreign-invested financial companies in Vietnam, Home Credit Vietnam Financial Company Limited has been operating since 2008 with an initial charter capital of 550 billion dong.
By September 2022, the charter capital of this financial company had increased sharply from 550 billion dong to 2,050 billion dong. All of Home Credit’s capital contributions are owned by PPF Group – a group led by the late Czech billionaire Petr Kellner family.
A 2018 analysis report by Fiin Rating classified Home Credit into the “cautious” consumer finance companies group for consistently maintaining profitability ratios on total assets, return on equity and net profit margins at high levels, while the bad debt ratio is lower than the general average (about 4% in 2018). Home Credit’s bad debt figures were not disclosed by the company or other organizations later.
According to the official website of Home Credit Vietnam, the company has about 6,000 employees and serves 12 million customers. The company’s services include providing cash loans as well as installment loans for buying motorcycles and consumer goods. The company’s wide-ranging coverage includes 9,000 stores throughout Vietnam.
Not backed by domestic parent banks (FE Credit – VPBank, HD Saison – HDBank, Mcredit – MB), Home Credit does not have the advantages of customer systems in the ecosystem and preferential loan capital. However, according to some market research units, Home Credit Vietnam still ranks second in the consumer lending market share in Vietnam, second only to FE Credit thanks to its long-term experience in this business field.
In the context of fierce competition among financial companies in the period from 2018 to 2021, Home Credit’s after-tax profit has continuously declined from the peak of 1,636 billion dong achieved in 2017. In four years, Home Credit’s profit has dropped to only 550 billion dong in 2021.
However, Home Credit’s profit unexpectedly surged in 2022 to 1,189 billion dong, more than double that of 2021.
In the first 6 months of 2023, the company’s after-tax profit reached over 211 billion dong, corresponding to a return on equity (ROE) of 3.22% for the first half of the year. Prior to that, Home Credit’s ROE in 2021 and 2022 was 10.6% and 18.64% respectively.
As of the end of June 2023, Home Credit has a charter capital of 6,571.5 billion dong, up 3% compared to the beginning of the year; the debt-to-equity ratio is 277% (debt of about 18,203 billion dong), a significant decrease compared to the 404% at the beginning of the year; bond debts amount to over 1,117 billion dong. Home Credit’s total assets as of June 30, 2023 reached nearly 24,775 billion dong.
Among the financial indicators of the Company, the capital adequacy ratio is 24.6% (regulation is above 9%), the liquidity reserve ratio is 8.4% (legal requirement is above 1%); the ability to pay within 30 days is 90.37% (legal requirement is above 20%); the short and long-term loan funding ratio is 13.55% (regulation is below 90%).
Thus, Home Credit currently has a relatively high profitability ratio in the financial industry, along with safety indicators far exceeding regulatory requirements. This may be an important basis for SCBX to give a valuation of nearly 22,000 billion dong for this financial company.
