According to the Hanoi Stock Exchange (HNX), iWealth Investment Co Ltd has released its 2023 financial report, showing a loss of VND193 billion after taking a profit of VND98.6 billion in the year before.

The big loss in 2023 led to a sharp fall in stockholder equity to minus VND94.8 billion.

The company’s liabilities also increased sharply, three times higher by the end of 2023 compared with the year before, reaching VND7.4 trillion, though it cleared bond debts in 2023.

iWealth reported its bad financial situation in late June 2023. This is the company with the highest ratio of debt to equity among companies issuing bonds in the stock market.

It issued two batches of bonds in 2021 with three ‘nos’ – non-convertible, no warrants, no collateral. The bonds were sold to a securities company and a commercial bank, under the arrangement of Techcombank Securities (TCBS).

By August 2023, iWealth had bought back all VND300 billion worth of bonds in circulation.

Operating in the field of financial support service, iWealth’s predecessor was Hoa Binh Debt Trading Company (HBDC), established in 2012 in Long An. Its name was changed to iWealth in early 2021 and its headquarters moved to Hoan Kiem district in Hanoi.

Many other finance companies have also reported sharp falls in profits in 2023 and sharp increases in bad debts.

Mirae Asset Vietnam, a South Korean invested consumer finance company, a subsidiary of Mirae Asset, has reported a loss of VND963 billion for 2023. Meanwhile, it made a profit of VND127 billion the year before.

FE Credit, Home Credit, Shinhan Finance and Mcredit all have reported either profit decreases or losses in 2023.

Of these, Shinhan Finance, a subsidiary of Shinhan Card from South Korea, even reported a big loss of VND462 billion, resulting in a decrease of the capital adequacy ratio from 26 percent earlier this year to 21.4 percent. This is a record high loss of the company since the day it joined the Vietnamese consumer finance market.

Meanwhile, SMBC-FE Credit has reported a loss of VND2.965 trillion last year, higher than the loss of VND2.376 trillion in 2022, and Mcredit reported a 75 percent decrease in losses compared with 2022 to VND240 billion. 

Home Credit Vietnam witnessed its profit slide by 70 percent in 2023 compared with one year before to VND375 billion. The finance company has been bought by a Thai bank.

Low demand puts finance companies at risk

Analysts say that the big losses incurred by finance companies were foreseeable as the national economy was in difficulty last year and workers’ incomes fell.

According to Fiingroup, finance companies have suffered in labor-intensive industries, such as manufacturing and export.

The General Statistics Office (GSO) reported that the unemployment rate of youth in 2023 was 7.63 percent.

The labor market situation seemed to get better in the second half of 2023, following a bad first half. 

According to the Ministry of Planning and Investment, more than half million workers lost their jobs or had their number of working hours reduced in the first five months of the year, mostly in Industrial Zones and Export Processing Zones.

The situation could also be seen in the financial reports of many large enterprises such as Vinhomes, The Gioi Di Dong, Novaland, CenLand and Dat Xanh. 

Many businesses had to lay off workers as the real estate market continued to be quiet and the retail industry witnessed revenue decreases amid weak demand.

Analysts say that 2023 was a tough year for finance companies, because of negative impacts from the frozen real estate market, the bond market crisis, and the Covid-19 pandemic. 

The costs that finance companies have to pay are always high, with millions of small loans. They always set high interest rates, which lead to a low proportion of debt payers.

Nguyen Tri Hieu, a respected finance and banking expert, said finance companies have recorded big losses or profit decreases because of the increase in bad debt ratios, which forced them to make provisioning against risks.

Most finance companies provided unsecured loans, and borrowers were laborers who were impacted by the weakened economy. Many loans have been unrecoverable as clients have fallen into insolvency.

Manh Ha