Security Bank buys 25% of Home Credit Philippines

Security Bank [SECB 86.80 ?1.5%; 43% avgVol] [link] entered into an agreement to buy a 25% stake in Home Credit Philippines (HCP) from Mitsubishi UFJ Financial Group (MUFG). SECB will pay P11 billion for the stake in HCP, which it describes as “the country’s premier consumer financing company”. The company frames the move as “strategic” and related to “enhancing its consumer finance capabilities and expanding its market presence.” MUFG bought a 20% stake in SECB back in 2016; SECB is an affiliate of MUFG. HCP has over 11 million customers and offers a range of financial products like point-of-sale loans (like for cars or large household items), cash loans, revolving credit, and insurance.

MB BOTTOM-LINE:  Everyone wants a slice of consumer lending. It’s the holy grail of banking. It has higher margins (higher rate spreads, better income from fees and penalties) than commercial lending and has cross-selling potential that can dovetail other banking product lines like accounts, insurance, credit cards, and other financial services. Sure, there’s potentially more risk in consumer lending, but it wouldn’t be the holy grail if there wasn’t a need to race the Nazis to find the right cup and avoid speedrunning life and instantly dying of old age if the wrong cup is selected. I don’t have a lot of knowledge about HCP, so it’s not clear to me yet whether this transaction is one that is potentially transformative for SECB, or if it’s just a way for SECB’s affiliate to get a little exit liquidity for its position.

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