Lotte expands Vietnam ops

Lotte Card’s purchase of TechcomFinance from Techcombank is considered a move to expand in Vietnam and break into the $26.55-billion consumer finance market, which has been showing signs of rapid development.

Lotte buys into the rapidly developing consumer finance market

Joining a vibrant consumer finance market

TechcomFinance, formerly known as Vietnam Chemical Finance Joint Stock Company before the 2015 acquisition by Techcombank, carries a chartered capital of VND600 billion ($26.5 million).

According to the bank's report, in 2016, TechcomFinance earned VND33 billion ($1.5 million) in revenue and VND28 billion ($1.23 million) in pre-tax profit. It has focused on strengthening its operations, consolidating the system of policy documents, reporting system, and maintaining existing business activities.

Techcombank has recently confirmed the information that Lotte Card Co., the credit card unit of Lotte Group, is in negotiations with Techcombank to take over its entire holdings in TechcomFinance.

However, a representative of Techcombank refused to comment on this deal because the negotiations were on-going. Meanwhile, according to South Korean newswire The Investor, the two parties are in the final stages of talks to complete the deal. The deal’s value is expected to be VND1.7 trillion ($74.67 million).

If the deal is approved, Lotte Card will join Vietnam's vibrant consumer finance market with an annual growth of between 30-40 per cent while the credit card rate is still very low.

StoxPlus reports that the Vietnamese consumer finance market is the most attractive in the region, with high growth potential and profit margins.

At present, the sector is dominated by four companies, namely FE Credit (VPBank), Home Credit, HDSaison, and Prudential Finance. In 2016, Home Credit earned VND1.23 trillion ($54.03 million) in profit, FE Credit VND2 trillion ($87.8 million), and the two remaining companies earned hundreds of billions dongs in profit.

Along with Lotte Card, numerous domestic and foreign investors are actively seeking to enter the consumer finance market through the M&A deals.

Notably, after the takeover of ANZ Vietnam’s retail business, South Korean Shinhan Bank is planning to acquire a financial institution in Vietnam. This plan aims to expand its business in the Vietnamese retail banking sector.

In addition, two other Japanese investors are also negotiating to purchase 49 per cent of the stakes in two different Vietnamese financial institutions.

Military Bank has launched its consumer lending brand Mcredit, with the support of its Japanese counterpart, Shinsei Bank. At the end of last year, Shinsei Bank purchased a 49-per-cent stake in Mcredit, the consumer finance arm of Military Bank. Afterwards, MCredit was renamed MB Shinsei Consumer Finance Limited Liability Company.

Creating leverage for deep penetration

Entering Vietnam in 2007, Lotte Group now owns 12 subsidiaries operating in numerous sectors, including confectionary, fast food (the Lotteria brand), retail (Lotte Mart, Lotte Department Store), amusement (Lotte Cinema), real estate (Lotte Hotel & Resort), e-commerce (Lotte.vn), and information technology, among others.

Lotte Mart makes massive contributions to the group’s revenue. Notably, there are 13 Lotte Marts in operation in Vietnam. In the recent four years, Lotte Mart has seen an average growth of VND1 trillion ($43.9 million) per year and reached more than VND5.1 trillion ($224.03 million) in 2016. As of December 31, 2106, Lotte Mart had a chartered capital of VND3.9 trillion ($171.3 million).

Lotte Group planned to pour an additional $287.3 million into expanding the operations of Hanoi-based Lotte Mart and plans to open 60 stores by 2020.

Thus, with a large-scale operation network in numerous sectors, joining in the consumer finance market will help Lotte control payments in its systems as well as credit payments in Vietnam.

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By Ha Vy