FE Credit and SMBC Acquisition Case Studies

FE Credit and SMBC Acquisition

1. Strategic Acquisition Analysis of FE Credit Valuation in a sale transaction to SMBC

2. Company involved 01 Why? 02 Financing Valuation? 03 Agenda

3. $ $ $ $ Company involved $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

4. Company involved Vietnam Prosperity Joint Stock Commercial Bank Company Overview : VPBank is one of the largest private banks in Vietnam. Established in 1993, VPBank has achieved steady development throughout its history. Services and Products : VPBank offers a wide range of financial services, including: Insurance : Providing insurance products to customers. Personal Services : Catering to individual banking needs. Loans : Offering various loan products, such as consumer loans and business loans. E- Banking : Facilitating digital banking services. Scale and Reach : VPBank operates across various sectors, including retail banking, corporate banking, and consumer finance. The bank has a strong presence in Vietnam, serving both businesses and individuals. With a focus on innovation and customer-centric solutions, VPBank continues to play a significant role in the Vietnamese financial landscape.

5. Company involved Sumitomo Mitsui Banking Corporation Company Overview: SMBC is a core member of Sumitomo Mitsui Financial Group (SMFG) , a Tokyo-based bank holding company. SMFG is ranked among the largest 25 banks globally by assets under management. Services and Expertise : SMBC offers a broad range of financial services centered on banking. Beyond traditional banking, SMBC is also engaged in leasing, securities, credit cards, investment, mortgage securitization, venture capital, and other credit-related businesses . Their experts combine industry insights with technology to streamline day-to-day operations and achieve financial goals while mitigating risk. SMBC’s collaborative approach and determination to deliver outstanding service have been pivotal to their success. Global Presence: SMBC operates internationally , with a strong presence in the Americas, Asia-Pacific, and Europe. Their journey is steeped in history and innovation, contributing to building a sustainable future . SMBC’s experts have industry experience and a deep understanding of world markets, economies, and regulations, providing valuable perspectives for clients.

6. Company involved VPBank Finance Company Limited (FE Credit) Company Overview: FE Credit, originally the Consumer Finance Division of Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), successfully transitioned to an independent company named VPBank Finance Company Limited (FE CREDIT) in February 2015. FE Credit specializes in consumer loans, credit cards, and motorcycle financing . Scale and Market Position: FE Credit controls over 50% of Vietnam’s consumer lending market. The company boasts a nationwide network of over 21,000 points of sale and employs more than 16,000 people . FE Credit actively contributes to eliminating black credit , improving the lives of blue-collar workers, and promoting the consumer finance economy.

7. Key Milestones 2010 201 5 2018 2021 2023 Started as Consumer Lending Division of Vietnam Prosperity (VP) Bank. Launched the 1st Product: Motorcycle Loan Beginning Spinned off as separate Business Entity under the name FE Credit . Achieved 2,000,000 customers mark Separate Entity Acquired 10,000,000 customers. 9,000 partners, 13,000 POS. 50% Vietnam’s consumer lending market share $ 365M from partner investment Expanding Valued at $ 2.8B (April ‘21) Raised capital from VND 7,328B to VND 10,928B after SMBC CF acquired 49% of its stake for ~ $ 1.4B Re-registered as VPBANK SMBC FINANCE COMPANY LIMITED Acquisition Maintain market leading position Sustainable development: Environmental and Social Responsibility In Mar 2023, SMBC purchased 15% of the parent VPBank stake, a deal valued at $ 1.5B The Road Ahead

8. 2. WHY DEAL ?

9. SMBC Before FeCredit SMBC activities in Vietnam Before the FE Credit deal: Petrovietnam (PSI): Spent 134 billion VNĐ for 14,9% of PSI Banking industry: In 2008, SMBC became Eximbank's strategic shareholder after spending $225 million to acquire 15% of shares. Bao Viet Holdings (BVH) : Holds 22,09% of BVH’s stakes in 201 (~$179 millions) Every stock that SMBC bought average at 96.000 vnđ, while the BVH stock price range from 66.000 to 73.000 VNĐ Real estates, thermal power and many other industries.

10. Why SMBC want FeCredit from VPbank? Entering New Markets: By shifting from traditional banking (Eximbank) to consumer finance (FE Credit), SMBC is diversifying into new financial sectors. Risk Reduction: Diversifying its portfolio with FE Credit helps SMBC mitigate risks by not relying on a single market or sector. Leveraging Vietnam's Market: Investing in FE Credit, a leader in Vietnam's consumer finance sector, demonstrates SMBC's strategy to capitalize on emerging market opportunities. Building Competitive Edge: This move not only ensures financial stability but also enhances SMBC's competitive position in a rapidly growing market.

11. Why VPBank sell 49% of its stake in FE Credit to SMBC? Enhancing Financial Capacity: The sale brought in nearly 1.4 billion USD, significantly boosting VPBank's financial strength. Diversification Strategy: Selling a portion of FE Credit enabled VPBank to expand its business activities into other promising segments, diversifying its investment portfolio.

12. Rationale for the deal 1 2 3 4 5 6 Through this deal, it opens the door for VPBank to access 200,000 corporate customers of SMBC globally, including many of Foreign Direct Investment (FDI) customers in Vietnam Access to Large Corporate Customer Base VPBank and FECredit can leverage SMBC’s international experience in governance, technology and risk management. Leverage of International Experience As a global financial services institution, this deal helped SMBC set a deep footprint in the Vietnam market, one of the fastest growing economies in ASEAN region. Global Expansion As a country of 97-Million and relatively young population, the consumer lending is a highly potential market when more Vietnamese citizens are becoming better-off and have demand for financial services. Growth Engine Offer a unique opportunity to capitalize on the changing economic conditions and consumer behaviours Post Covid-19 Recovery

13. Value of this Acquisition for FE? Enhanced Financial Resources: Access to additional capital from SMBC, which could be used for expansion, innovation, and improving operational efficiencies. Strategic Expertise: Benefit from SMBC's vast experience and expertise in the consumer finance sector, particularly from a global perspective. Market Expansion Opportunities: Leveraging SMBC's international presence and reputation to potentially explore and expand into new markets. Operational and Technological Advancements: Possibility to adopt advanced technologies and best practices in consumer finance from SMBC, enhancing service quality and operational effectiveness. Brand and Reputation Boost: Association with one of Japan's largest financial groups could enhance FE Credit's brand value and trust among customers and investors.

14. Risks and challenges 1 2 3 4 The global and regional interest rate could impact both consumer borrowing, thus, affect FE Credit’s performance. Interest Rate Environment Changes in regulatory policy between countries could affect the profitability or the feasibility of the operation. Regulatory Risks The success of the acquisition would partly depends on how well SMFG can adapt to the local credit environment. Credit Risk Management It is crucial for two entities to integrate culturally and operationally. Since Japanese and Vietnamese cultures are quite different. Cultural and Operational Integration Investors in both SMFG and VPBank should be watching the deal closely, as it could affect stock performance based on the perceived benefits of the acquisition. Investors

15. 3. Financing Valuation BEFORE AFTER

16. Financial Statement Indicator 2017 2018 2019 2020 2021 2022 Total Assets (Million VND) 50,108,201 60,164,774 70,645,605 73,390,391 77,798,385 N/A Charter Capital (Million VND) 4,464,000 7,328,000 7,328,000 7,328,000 10,928,000 10,928,000 Total Equity (Million VND) 8,425,790 11,729,492 12,519,643 15,489,473 15,802,149 13,240,933 Total Debt/Total Equity (%) 4.94 4.13 4.84 3.74 3.92 4.78 Total Bond Debt/Total Equity (%) 3.99 14.53 25.31 18.13 Net Profit (Million VND) 3,358,389 3,294,334 3,590,335 2,969,830 312,676 -2,376,040 Net Profit/Total Equity (ROE) (%) 49.71 32.67 28.68 19.17 1.98 -17.94 CAR (%) 13.40 16.61 16.31 19.14 17.79 16.16 Notes: At the time of 49% acquisition, FE Credit was valued at $2.8 B = ~VND 64,932,857 Million Before selling stake to SMBC (pre-2021): Running on positive profit After selling stake to SMBC (2021-): Profit declined and down to loss in 2022. Next slide for P/B and P/E with comparable transactions.

17. Comparable ​​Transactions * Note: Price to loan book is based on total loan book of FE Credit on 31 March 2021

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