BMI Vietnam Commercial Banking Report Q2 2013

Q2 2013
www.businessmonitor.com
VIETNAM
COMMERCIAL BANKING REPORT
INCLUDES 5-YEAR FORECASTS TO 2017
ISSN 1758-454X
Published by:Business Monitor International
Vietnam Commercial Banking Report Q2 2013

INCLUDES 5-YEAR FORECASTS TO 2017
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International Copy deadline: February 2013
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CONTENTS
BMI Industry View ............................................................................................................... 7
Table: Levels (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Table: Levels (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Table: Levels At May 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Table: Annual Growth Rate Projections 2012-2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Table: Ranking Out Of 62 Countries Reviewed In 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Table: Projected Levels (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Table: Projected Levels (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SWOT .................................................................................................................................... 9
Commercial Banking .................................................................................................................................. 9 Business Environment .............................................................................................................................. 10 Economic ............................................................................................................................................... 11
Industry Forecast .............................................................................................................. 13

Speeding Up Banking Reforms .................................................................................................................. 14 Foreign Investors Could Remain Cautious .................................................................................................. 15
Industry Risk Reward Ratings .......................................................................................... 16

Asia Commercial Banking Risk/Reward Ratings ............................................................................................ 16
Table: Asia Commercial Banking Business Environment Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Market Overview ............................................................................................................... 18

Asia Commercial Banking Overview ........................................................................................................... 18
Table: Banks' Bond Portfolios 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Table: Asia Commercial Banking Business Environment Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Table: Anticipated Developments in 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Table: Comparison of US$ Per Capita Deposits (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Table: Interbank Rates and Bond Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Economic Outlook ................................................................................................................................... 25 Ratings Downgrade Failed To Surprise Investors ......................................................................................... 26 Early Signs Of A Recovery ...................................................................................................................... . 28 Threat Of Slower Growth Yet To Undermine Efforts For Reforms .................................................................... 28 Expenditure Breakdown .......................................................................................................................... 28
Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Competitive Landscape .................................................................................................... 30

Market Structure ..................................................................................................................................... 30 Protagonists .......................................................................................................................................... 30
Table: Protagonists In Vietnam's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Business Monitor International
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Definition Of The Commercial Banking Universe ......................................................................................... 30 List Of Banks ......................................................................................................................................... 31

Table: Financial Institutions In Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Company Profile ................................................................................................................ 34

Bank for Foreign Trade of Vietnam (Vietcombank) ........................................................................................ 34
Table: Stock Market Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
VietinBank ............................................................................................................................................. 38
Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Agribank ............................................................................................................................................... . 42
Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Asia Commercial Bank ............................................................................................................................. 45

Eximbank ............................................................................................................................................... 48
Vietnam Technological and Commercial Joint-stock Bank (Techcombank) ......................................................... 52

Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Viet A Joint Stock Commercial Bank (Vietabank) ........................................................................................... 55 Housing Development Commercial Joint Stock Bank (HDBank) ....................................................................... 57 Sacombank ............................................................................................................................................. 59
Regional Overview ............................................................................................................ 63

Asia Overview .................................................................................................... ..................................... 63 Investment Banking Revenues Surge .......................................................................................................... 64 Malaysia Takes The Lead ........................................................................................................................ 65 Thai Commercial Banks Targeting High-Growth Economies .......................................................................... 66
Global Industry Overview .................................................................................................. 67
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Global Commercial Banking Overview ........................................................................................................ 67

Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Demographic Forecast ..................................................................................................... 71

Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Methodology ...................................................................................................................... 75
Commercial Bank Business Environment Rating ......................................................................................... 76
Table: Commercial Banking Business Environment Indicators And Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Weighting ............................................................................................................................................. 78
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
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BMI Industry View

Table: Levels (VNDbn)
Date May 2011 May 2012 Change, %
Total assets 3,117,942 3,545,801 13.7%
Client loans 2,630,220 2,835,610 7.8%
Bond portfolio 223,644 355,354 58.9%
Other 264,078 354,837 34.4%
Liabilities and capital 3,117,942 3,545,801 13.7%
Capital 494,104 569,584 15.3%
Client deposits 2,241,245 2,668,471 19.1%
Other 382,593 307,746 -19.6%
Source: BMI; Central banks; Regulators
Table: Levels (US$bn)
Date May 2011 May 2012 Change, %
Total assets 151.76 169.90 12.0%
Client loans 128.02 135.87 6.1%
Bond portfolio 10.89 17.03 56.4%
Other 12.85 17.00 32.3%
Liabilities and capital 151.76 169.90 12.0%
Capital 24.05 27.29 13.5%
Client deposits 109.09 127.86 17.2%
Other 18.62 14.75 -20.8%
Table: Levels At May 2012
Loan/deposit ratio 106.26% Falling
Loan/asset ratio 79.97% Falling
Loan/GDP ratio n.a. Falling
GDP Per Capita, US$ 1,072.13 n.a.
Deposits per capita, US$ 1,433.70 n.a.
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Table: Annual Growth Rate Projections 2012-2017 (%)
Assets Annual Growth Rate CAGR Ranking 11 13 15
Loans 9 11 22
Deposits 6 8 35
Table: Ranking Out Of 62 Countries Reviewed In 2013
Loan/deposit ratio 11 Local currency asset growth 14
Loan/asset ratio 2 Local currency loan growth 16
Loan/GDP ratio 14 Local currency deposit growth 22
Table: Projected Levels (VNDbn)
2009 Total assets Client loans Client deposits
2010
2011
2012e
2013f
2014f
2015f
2016f
2017f
2,286,321 2,953,153 3,437,893 3,816,061 4,350,310 4,959,353 5,604,069 6,276,557 6,966,979 1,869,260 2,475,540 2,829,890 3,084,580 3,454,730 3,869,297 4,294,920 4,724,412 5,149,609 1,680,717 2,209,896 2,483,357 2,706,859 2,977,545 3,245,524 3,505,166 3,750,528 3,975,560
e/f = estimate/forecast. Source: BMI; Central banks; Regulators
Table: Projected Levels (US$bn)
2009 Total assets Client loans Client deposits 123.73 101.16 90.95
2010 151.46 126.96 113.34
2011 163.44 134.54 118.06
2012e 181.41 146.64 128.68
2013f 209.15 166.09 143.15
2014f 241.16 188.15 157.82
2015f 275.66 211.26 172.41
2016f 312.27 235.05 186.59
2017f 348.35 257.48 198.78
e/f = estimate/forecast. Source: BMI; Central banks; Regulators
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SWOT
Commercial Banking
Vietnam Commercial Banking SWOT
Strengths
Untapped potential. High savings rate of the Vietnamese people. Increasingly open to foreign banks since WTO accession in 2007. The role of state-owned banks is decreasing. Domestic banks lack capital and technology to sustain high credit and efficient growth.
Weaknesses
The financial accounts of many banks are still opaque. Small banks have a high exposure to real estate and stock market loans. The population is still underbanked. Income levels likely to rise strongly over the medium term. Macroeconomic instabilities threaten the credibility of the government and could potentially drive economic policy away from further liberalisation.
Opportunities
Threats
The high level of government debt could crowd out the private sector and potentially trigger a fiscal crisis.
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Business Environment
SWOT Analysis
Strengths
Vietnam has a large, skilled and low-cost workforce, which has made the country attractive to foreign investors.
Vietnam's location - its proximity to China and South East Asia, and its good sea links - makes it a good base for foreign companies to export to the rest of Asia and beyond.
Weaknesses
Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to cope with the country's economic growth and links with the outside world.
Vietnam remains one of the world's most corrupt countries. According to Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123rd out of 176 countries.
Opportunities
Vietnam is increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech skills and know-how.
Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector. This is likely to offer foreign investors new entry points.
Threats
Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern.
Labour unrest remains a lingering threat. A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period.
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Economic
SWOT Analysis
Strengths
Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.1% annually between 2000 and 2011.
The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 14.0% in 2010.
Weaknesses
Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2012. The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw.
The heavily-managed and weak currency reduces incentives to improve quality of exports, and also keeps import costs high, contributing to inflationary pressures.
Opportunities
WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition.
The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector.
Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population rising from 29% of the population to more than 50% by the early 2040s.
Threats
Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis.
Prolonged macroeconomic instability could prompt the authorities to put reforms on hold as they struggle to stabilise the economy.
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Industry Forecast
BMI View: Efforts by the State Bank of Vietnam (SBV) to recapitalise ailing banks and strengthen regulatory oversight have helped to fend off a full-blown banking crisis for now. We believe that investors are increasingly confident of the government's ability to contain the risk of a banking crisis while Vietnam's bullish long-term growth story remain intact.
Our long-held view that concerns over an impending collapse of Vietnam's banking system are largely unwarranted and that the government is unlikely to require assistance from the International Monetary Fund (IMF) to finance a bailout, is slowly being vindicated ( see 'Keeping A Cautious Outlook Amid Rising NPLs', September 17 2012). Efforts by the State Bank of Vietnam (SBV) to rapidly recapitalise ailing banks and strengthen regulatory oversight of lending practices have helped to fend off a full-blown banking crisis for now. Meanwhile, average lending rates have fallen from around 20% in the beginning of 2012 to around 14% at the time of writing, and we expect credit conditions to continue to improve over the coming months.
Confidence Is Returning
Vietnam - Ho Chi Minh Stock Index (VNI)
Source: BMI, Bloomberg
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Using the benchmark Ho Chi Minh Stock Index (VNI) as a gauge for sentiment on the overall economy (see chart), we believe that investors are increasingly confident of the government's ability to contain the risk of a banking crisis while Vietnam's bullish long-term growth story remain intact. Fitch Ratings also reaffirmed Vietnam's long-term foreign and local currency debt ratings at 'B+' in January, citing the country's strong growth potential, favourable environment for attracting foreign direct investment (FDI), and manageable external debt levels relative to the region. From our perspective, progress on banking sector reforms will continue to play a crucial role in further bolstering investor confidence going forward. This should in turn determine the strength of the economic recovery over the coming quarters (we forecast real GDP growth to accelerate from 5.0% in 2012 to 7.0% in 2013).
Credit Conditions To Pick Up In 2013

Vietnam - Outstanding Credit, VNDbn (LHS) & % chg y-o-y (RHS)
Source: BMI, State Bank of Vietnam
Speeding Up Banking Reforms

We are optimistic that the government will meet its target of restructuring ailing banks by the end of 2013, mainly through efforts to recapitalise banks with weak balance sheets and merging smaller banks that are struggling to compete effectively. The urgent need to restructure the banking sector and reinstate confidence has also helped to speed up progress on free-market initiatives such as allowing for greater foreign participation and privatising other state-owned enterprises (SOEs). According to a report published by The
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Wall Street Journal, the government may soon allow foreign investors to hold a 49% stake in state-owned banks or even larger stakes conditional upon an agreement to divest holdings at a later stage (presently, foreign companies are allowed to hold a maximum 20% stake as a single entity, or 30% with a partner). A joint Financial Sector Assessment Program undertaken by the World Bank and IMF is scheduled to be completed by the end of H113, and is expected to provide greater transparency regarding the actual level of non-performing loans (NPLs) across the banking sector. Estimates provided by the SBV currently put NPLs at close to 9.0% of total outstanding loans as of the end of 2012 and it is widely expected that the actual figure could be significantly higher. In any case, we believe that the assessment program will provide a good framework for the government to further improve transparency and accounting standards going forward.
Foreign Investors Could Remain Cautious

We expect this process of restructuring the banking sector to keep earnings depressed for the foreseeable future and we maintain a cautious outlook on the banking sector through 2013. We view FDI inflows into the banking sector as a crucial element of the restructuring process and we highlight the downside risk that foreign investors may avoid participating in large-scale privatisation of state-owned banks. Given the uncertainties surrounding the true exposure of NPLs, we expect foreign investors to remain highly cautious in taking up stakes in smaller state-owned banks. However, as the economic recovery gathers pace and assuming that actual NPLs are in line with current expectations, we expect FDI inflows into the banking sector to pick up gradually over the course of the year.
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Industry Risk Reward Ratings

Asia Commercial Banking Risk/Reward Ratings
Business Environment Rating Methodology
Since Q108, we have described numerically the banking business environment for each of the countries surveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER), a measure that ensures we capture the latest quantitative information available. It also ensures consistency across all countries and between the inputs to the CBBER and the Insurance Business Environment Rating, which is likewise now a feature of our insurance reports. Like the Business Environment Ratings calculated by BMI for all the other industries on which it reports, the CBBER takes into account the limits of potential returns and the risks to the realisation of those returns. It is weighted 70% to the former and 30% to the latter.
The evaluation of the 'Limits of potential returns' includes market elements that are specific to the banking industry of the country in question and elements that relate to that country in general. Within the 70% of the CBBER that takes into account the 'Limits of potential returns', the market elements have a 60% weighting and the country elements have a 40% weighting. The evaluation of the 'Risks to realisation of returns' also includes banking elements and country elements (specifically, BMI's assessment of long-term country risk). However, within the 30% of the CBBER that take into account the risks, these elements are weighted 40% and 60%, respectively.
Further details on how we calculate the CBBER are provided at the end of this report. In general, though, three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elements of the 'Limits of potential returns' are by far the most heavily weighted of the four elements. They account for 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher than the country elements of the 'Limits of potential returns', it usually implies that the banking sector is (very) large and/or developed relative to the general wealth, stability and financial infrastructure in the country. Conversely, if the market elements are significantly lower than the country elements, it usually means that the banking sector is small and/or underdeveloped relative to the general wealth, stability and financial infrastructure in the country. Third, within the 'Risks to the realisation of returns' category, the market elements (i.e. how regulations affect the development of the sector, how regulations affect competition within it, and Moody's Investor Services' ratings for local currency deposits) can be markedly different from BMI's long-term risk rating.
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Table: Asia Commercial Banking Business Environment Ratings
Limits of Potential Returns Market Structure Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 50.0 93.3 80.0 83.3 76.7 33.3 73.3 43.3 50.0 66.7 23.3 80.0 76.7 66.7 60.0 93.3 Country Structure 45.0 57.5 92.5 57.5 65.0 77.5 80.0 50.0 62.5 95.0 55.0 85.0 72.5 65.0 55.0 85.0
Risks to Potential Returns Market Risks 43.3 63.3 73.3 60.0 80.0 66.7 83.3 53.3 60.0 96.7 33.3 83.3 86.7 86.7 36.7 100.0 Country Risks 44.0 74.0 78.0 54.0 52.0 80.0 80.0 42.0 58.0 90.0 46.0 76.0 76.0 74.0 48.0 80.0 Rating 46.7 76.2 82.3 68.0 69.4 58.1 77.6 46.2 56.1 82.4 37.5 81.1 76.6 69.9 53.6 89.4
Overall Ranking 55 14 7 30 27 36 10 57 41 6 59 8 13 22 47 2
Scores out of 100, with 100 the highest. Source: BMI
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Market Overview
Asia Commercial Banking Overview
Table: Banks' Bond Portfolios 2011
Bond Portfolio, US$bn Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 17.1 1,577.7 350.0 292.3 17.3 3,407.8 67.9 33.5 35.4 76.5 2.2 271.5 98.0 65.5 12.3 447.1
Bond as % total assets 23.0 8.7 19.8 25.2 4.3 30.8 12.5 38.5 23.7 11.6 12.8 17.0 8.4 15.9 7.5 3.6
Year-on-year growth % 19.3 -4.2 3.4 7.9 17.7 7.5 3.1 56.1 -4.3 5.5 22.2 4.6 -47.2 13.7 27.0 -15.1
Source: Central banks, regulators, BMI
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Table: Asia Commercial Banking Business Environment Ratings
Limits of Potential Returns Market Structure Country Structure Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 50.0 93.3 80.0 83.3 76.7 33.3 73.3 43.3 50.0 66.7 23.3 80.0 76.7 66.7 60.0 93.3 45.0 57.5 92.5 57.5 65.0 77.5 80.0 50.0 62.5 95.0 55.0 85.0 72.5 65.0 55.0 85.0
Risks to Potential Returns Market Risks 43.3 63.3 73.3 60.0 80.0 66.7 83.3 53.3 60.0 96.7 33.3 83.3 86.7 86.7 36.7 100.0 Country Risks 44.0 74.0 78.0 54.0 52.0 80.0 80.0 42.0 58.0 90.0 46.0 76.0 76.0 74.0 48.0 80.0
Overall Rating 46.7 76.2 82.3 68.0 69.4 58.1 77.6 46.2 56.1 82.4 37.5 81.1 76.6 69.9 53.6 89.4 Ranking 55 14 7 30 27 36 10 57 41 6 59 8 13 22 47 2
Scores out of 100, with 100 the highest. Source: BMI
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Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013
Loan deposit ratio % Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 92.6 74.9 67.5 77.1 83.0 69.3 77.7 59.8 76.9 92.0 79.7 114.4 80.7 106.9 116.0 107.1
Rank 36 50 57 49 42 54 47 60 52 30 44 12 46 23 14 20
Trend Falling Rising Rising Rising Rising Falling Falling Falling Rising Rising Falling Falling Rising Falling Rising Falling
Loan/Asset ratio % 67.1 50.8 37.3 66.1 61.7 47.9 58.6 41.3 56.8 52.3 60.4 72.0 63.8 64.8 79.4 77.0
Rank 14 43 58 15 23 45 36 49 41 42 31 10 25 20 2 6
Trend Falling Falling Rising Falling Rising Falling Rising Falling Rising Rising Falling Rising Rising Falling Falling Rising
Loan/GDP ratio % 54.6 124.6 260.5 52.5 35.2 92.4 124.9 20.5 36.8 135.0 30.1 103.7 163.9 81.9 102.8 64.8
Rank 40 10 2 44 54 19 11 58 52 8 55 15 5 23 14 34
Trend Rising Falling Falling Rising Rising Rising Rising Falling Rising Rising Rising Falling Rising Rising Falling Rising
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Table: Anticipated Developments in 2014
Loan/Deposit Ratio, % Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 91.4 74.2 68.2 75.8 84.4 69.0 77.3 59.3 77.6 95.8 79.2 112.5 82.8 106.9 119.2 108.1
Trend Falling Rising Rising Falling Rising Falling Falling Falling Rising Rising Falling Falling Rising Falling Rising Falling
Loan Growth, US$bn 32.2 2,148.5 131.4 545.8 167.4 297.5 178.6 5.7 36.4 132.8 6.5 224.0 212.3 68.4 53.6 1,959.9
Deposit Growth, US$bn 37.0 2,212.0 174.7 719.7 178.6 610.8 238.2 20.9 34.1 122.3 8.6 252.7 199.4 68.5 39.8 2,059.6
Residual, US$bn -4.8 -63.5 -43.3 -174.0 -11.2 -313.3 -59.6 -15.3 2.3 10.5 -2.1 -28.8 12.9 -0.1 13.9 -99.7
NB Incorporates estimated economic data and projected banking data. Source: Central banks, regulators, BMI
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Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn)
2013 Total Assets Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 104.6 21,482.9 1,949.0 1,617.1 532.3 12,246.5 747.2 107.8 181.0 766.0 33.3 1,710.1 1,316.4 493.2 209.1 13,995.5 Client Loans 70.2 10,912.7 727.3 1,068.3 328.5 5,869.7 437.8 44.6 102.7 401.0 20.1 1,231.7 840.1 319.5 166.1 10,772.4 Client Deposits 75.8 14,561.4 1,076.7 1,385.3 395.7 8,464.8 563.4 73.0 133.7 436.0 25.2 1,076.7 1,040.5 298.8 143.2 10,057.7 Total Assets 89.1 21,312.4 1,821.2 1,274.1 452.8 11,395.7 610.9 95.3 170.5 748.7 29.1 1,772.9 1,265.8 461.6 181.4 13,203.3
2012 Client Loans 59.8 10,621.8 673.3 841.7 284.2 5,569.0 357.9 42.8 91.2 399.6 17.6 1,276.9 788.8 297.6 146.6 10,020.9 Client Deposits 63.7 14,040.8 1,006.1 1,110.0 339.4 7,937.8 456.5 65.4 125.3 408.5 21.9 1,096.2 1,000.4 279.6 128.7 9,312.7
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Table: Comparison of US$ Per Capita Deposits (2013)
GDP Per Capita Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 823 6,544 38,384 1,596 3,817 50,260 10,966 1,222 2,860 56,049 3,129 24,358 21,773 5,613 1,782 52,233
Client Deposits, per capita 455 8,028 99,984 838 1,329 46,457 14,696 243 1,047 75,638 940 25,253 36,059 4,616 1,832 33,823
Rich 20% Client Deposits, per capita 1,965 42,848 592,065 4,346 6,403 267,991 75,660 1,594 5,450 329,000 4,721 88,296 178,643 17,266 6,316 126,315
Poor 80% Client Deposits, per capita 123 2,678 37,004 272 400 16,749 4,729 100 341 20,562 295 5,518 11,165 1,079 395 7,895
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Table: Interbank Rates and Bond Yields
3 Month Interbank Rate % Current Account % of GDP, 2013f Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam United States 1.5 2.4 2.4 -3.6 -2.1 0.8 7.7 -2.0 3.4 14.4 -5.7 2.2 7.0 2.2 0.0 -3.0 Budget balance % of GDP, 2013f -4.6 -1.7 4.9 -9.8 -2.5 -9.8 -5.4 -6.6 -2.1 1.4 -6.3 1.2 -2.7 -3.0 -5.0 -6.8 End Q3 2012 n/a 3.67 0.40 8.72 4.91 0.19 3.20 9.53 1.00 0.33 12.65 2.84 0.87 3.13 8.35 0.32
NB Incorporates actual financial markets data; estimated economic data and projected banking data. na=not available. Source: Central banks; regulators; BMI
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Economic Outlook
BMI View: Vietnam's economy remains on track for a robust recovery in 2013, and we view consensus estimates on growth as being overly pessimistic. The latest credit downgrade by rating agency Moody's Investors Service has failed to surprise the bond markets and we believe that this is because concerns over the build-up of bad debt in the banking sector have long been priced by investors. Furthermore, latest economic indicators also support our view that economic conditions in Vietnam are improving and we are maintaining our view that real GDP growth will come in strong at 7.0% in 2013.
Latest data published by the General Statistics Office (GSO) showed that Vietnam's real GDP growth accelerated from 4.7% year-on-year (y-o-y) in Q212 to 5.4% in Q312, reinforcing our view that the economy is poised for a robust recovery as we head into 2013. It is worthwhile to note, however, that the general consensus remain deeply cautious towards the country's economic outlook. According to the latest Bloomberg survey consisting of 11 economists, the median forecast for Vietnam's real GDP growth for 2013 currently stands at 5.8% while the mean forecast averaged slightly higher at 6.2%. This, in comparison to our forecast for the Vietnamese economy to grow by a heady 7.0% in 2013, highlights the degree of pessimism that the consensus presently holds - and what we view as an extreme in bearish macro sentiment.
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Rebound In Sight
Vietnam - Real GDP, VNDbn (LHS) & % chg y-o-y (RHS)
Source: BMI, General Statistics Office
Ratings Downgrade Failed To Surprise Investors

Interestingly, Vietnam's foreign and local currency debt ratings were downgraded on September 28 by ratings agency Moody's Investors Service from B1 to B2, citing lower growth prospects and risks to the state balance sheet from weakness in the banking system. The latest downgrade places Vietnam's credit rating five notches below investment grade, on par with countries such as Egypt and Cambodia. We see the downgrade as coming somewhat behind the curve. We have been warning of a surge in bankruptcies since the beginning of the year and the government has responded speedily by tightening supervision over the banking sector and introducing reforms to merge ailing banks. Furthermore, we believe that the worst case scenario of a banking crisis has already been contained.
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Muted Response To Credit Downgrade

Vietnam - Two-Year & 10-Year Government Bond Yields, % & Spread, bps
Source: BMI, Bloomberg
Indeed, judging from the muted response in the bond markets following the ratings downgrade, it appears that the risks of a potential bailout of ailing banks by the Vietnamese government have long been priced in by investors. As the accompanying chart shows, 10-year Vietnamese sovereign bond yields have remained largely stable within a narrow trading range of 10.25-10.50% in recent months. Yields on two-year sovereign bonds have begun to tick up in recent weeks, following a higher-than-expected reading on
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inflation in September (headline consumer price inflation accelerated from 5.0% y-o-y in August to 6.5% in September, after recording 13 consecutive monthly declines since August 2011). However, looking at the broader trend for bond yields (where yields have fallen substantially from the peak of around 12.5-13.0% to current levels of around 10.0%), we believe that the recent uptick in yields do not warrant cause for alarm.
Early Signs Of A Recovery

Looking at more recent economic data, we point out that industrial production expanded by 9.7% y-o-y in September, a significant increase from 4.4% in August and the fastest rate of expansion since February. Retail sales for the first nine months of the year also grew by a robust 17% y-o-y, suggesting to us that domestic demand is also starting to pick up. These factors reinforce our view that economic conditions in Vietnam are improving and the economy is on track for a swift recovery over the coming quarters. Accordingly, we are maintaining our view that real GDP growth will come in strong at 7.0% in 2013, and we believe that signs of an improving economic outlook over the coming months will soon reignite bullish sentiment towards Vietnam's growth prospects.
Threat Of Slower Growth Yet To Undermine Efforts For Reforms

Rapid credit growth and reckless lending practices among local banks have resulted in a build up of bad debt over the years, fuelling concerns among investors that reigniting economic growth will prove to be a challenging task in 2013. The economic slowdown in 2011 led by aggressive monetary tightening by the SBV, resulted in a surge in NPLs and prompted banks to aggressively cut down on lending to small-andmedium sized enterprises (SMEs). Growing evidence that real GDP growth could miss the government's target of 6.0-6.5% in 2012 has so far failed to derail the SBV's efforts to push ahead reforms - an encouraging sign that the government is willing to tolerate slower growth in return for macroeconomic stability. Over the longer term, we expect this restructuring of the banking sector alongside efforts to speed up the privatisation of state-owned enterprises (SOE), to boost the quality of economic growth in Vietnam. Although these reforms are unlikely to witness a smooth process, we should nonetheless see a more efficient banking system that would allow real GDP growth to average at a robust 7.1% over the next decade. A more efficient credit system should also see consumer price inflation averaging a benign 5.3% over the same period.
Expenditure Breakdown
Private Consumption: We expect private consumption to grow at a relatively subdued pace of 4.9% in 2012 before accelerating towards 5.6% in 2013. However, we note that the risk of a sustained collapse in
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exports and further bankruptcies among SMEs, could potentially lead to widespread job losses in exportdriven sectors. Uncertainties over the outlook for employment could in turn prompt households to cut back on spending.
Gross Fixed Capital Formation: We foresee a significant pickup in private sector investment growth in 2013. We believe with lending rates will gradually ease over the coming months as the effect of recent rate cuts by the SBV begins to kick in. Accordingly, we expect gross fixed capital formation growth to accelerate from 4.3% in 2012 to 5.6% in 2013.
Public Spending: We expect total public spending to remain relatively resilient in 2013, expanding at a respectable pace of 5.4%. However, there is limited room for the government to increase spending further due to concerns over the need to finance a potential bailout of ailing state-owned commercial banks.
Net Exports: Net exports remain the biggest downside risk to our outlook for the Vietnamese economy given that we expect external demand to remain sluggish as we head into H113. Despite recording an average monthly trade surplus of US$172mn since June 2012 (resulting in a year-to-date surplus of US $77mn), we do not see the case for a substantial pickup in external demand in the near term. Accordingly, we expect exports to expand at a moderate pace of 6.5% in 2013.
Table: Vietnam - Economic Activity
2010 Nominal GDP, VNDbn [2] Nominal GDP, US $bn [2] Real GDP growth, % change y-o-y [2] GDP per capita, US$ [2] Population, mn [3] Industrial production index, % y-o-y, ave [1,4] Unemployment, % of labour force, eop 4
2011
2012e
2013f
2014f
2015f
2016f
1,980,914.00 2,535,008.00 2,913,940.20 3,314,445.00 3,776,223.10 4,265,863.00 4,807,544.50 103.5 6.8 1,178 87.8 122.7 5.9 1,382 88.8 138.5 5.3 1,544 89.7 159.3 7.0 1,758 90.7 183.6 7.2 2,005 91.6 209.8 7.3 2,270 92.4 239.2 7.3 2,564 93.3
14.1 4.3
10.9 4.5
8.0 5.0
12.0 4.8
14.0 4.7
13.0 4.6
12.0 4.5
Notes: e BMI estimates. f BMI forecasts. 1 at 1994 prices. Sources: 2 Asian Development Bank, General Statistics Office; 3 World Bank/UN/BMI; 4 General Statistics Office.
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Competitive Landscape
Market Structure
Protagonists
Table: Protagonists In Vietnam's Commercial Banking Sector
Central bank: State Bank of Vietnam (SBV) www.sbv.gov.vn/en/home The SBV is the successor to the Vietnam National Bank, which was established by the government of North Vietnam in 1951. From 1975 to May 1990, the SBV was the banking system of Vietnam. The government then established the 'twotier' system that is still in place. The financial liberalisation at the beginning of the 1990s lead to the establishment of four large state-owned commercial banks: Agribank, BIDV, Incombank and Vietcombank. This period also included the establishment of commercial joint-stock banks, joint-venture banks, branches or representative offices of foreign banks, credit cooperatives, people's credit funds and finance companies. The SBV implements the state management of currency trading, credit, payment, foreign exchange and banking; is the only bank authorised to issues bank notes; and acts as the bank to the banks and the state. The central bank organises the management of monetary policy and ensuring a stable currency value is its main objective. Principal banking regulator: State Bank of Vietnam (SBV) www.sbv.gov.vn/en/home Among its other functions, the SBV is the regulator of the banking system. Banking trade association: Vietnam Bankers Association (VNBA) www.vnbaorg.info The VNBA was founded in 1994 and became a part of the ASEAN Bankers Association the following year, after Vietnam's accession to association. The functions of the VNBA are: to act as a link between the banks and the authorities, including dissemination of 'the policies, mechanisms and laws on banking operations' to its members; protecting the interests of the members; training and research; and expansion of international cooperation.
Definition Of The Commercial Banking Universe
The State Bank of Vietnam identifies six 'state-owned credit institutions' or 'state-owned commercial banks' (SOCBs), 38 urban commercial joint stock banks (CJSBs), 32 branches of foreign banks and five joint venture banks. There are also 17 finance companies and 54 representative offices of foreign banks. In terms of the numbers of branches, VietinBank is the largest organisation, with a presence at 138 locations. The other SOCBs also have large networks by local standards. Agribank has 115; BIDV, 103; VBSP, 65; VDB, 62; and MDHDB, 32. Of the urban CJSBs, the organisations which have over 25 branches are: Maritime CJSB (26); Techcombank (38); VIB (42); Sacombank (59); Vietcombank (59); Eximbank (35); Military Bank (36); ACB (54); Saigonbank (31); VP Bank (34); and EAB (28). None of the jointventure banks have more than five branches.
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List Of Banks
Table: Financial Institutions In Vietnam
State-owned Commercial Banks Vietnam Bank for Social Policies Vietnam Bank for Industry and Trade (VietinBank) Vietnam Bank for Agricultural & Rural Development (Agribank) Mekong Delta Housing Development Bank Vietnam Development Bank Bank for Investment and Development of Vietnam
Urban Joint-Stock Commercial Banks An Binh Commercial Joint Stock Bank Bac A Commercial Joint Stock Bank Global Petro Commercial Joint Stock Bank Gia Dinh Commercial Joint Stock Bank Maritime Commercial Joint Stock Bank Kien Long Commercial Joint Stock Bank Vietnam Technological and Commercial Joint Stock Bank (Techcombank) LienViet Commercial Joint Stock Bank Western Rural Commercial Joint Stock Bank My Xuyen Nam Viet Commercial Joint Stock Bank Nam A Commercial Joint Stock Bank Vietnam Commercial Joint Stock Bank for Private Enterprise Bank for Foreign Trade of Vietnam Habubank Housing Development Commercial Joint Stock Bank Southern Commercial Joint Stock Bank Orient Commercial Joint Stock Bank Military Commercial Joint Stock Bank Vietnam International Commercial Joint Stock Bank Saigon Commercial Joint Stock Bank Saigon-Hanoi Commercial Joint Stock Bank Saigon Bank for Industry and Trade Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) Pacific Commercial Joint Stock Bank
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Financial Institutions In Vietnam - Continued
TienPhong Commercial Joint Stock Bank Viet Nam Thuong Tin Commercial Joint Stock Bank Viet A Commercial Joint Stock Bank Vietnam Commercial Joint Stock Export-Import Bank Petrolimex Group Commercial Joint Stock Bank Asia Commercial Joint Stock Bank South East Commercial Joint Stock Bank (SeABank) Eastern Asia Commercial Joint Stock Bank Ocean Commercial Joint Stock Bank Great Trust Commercial Joint Stock Bank Great Asia Commercial Joint Stock Bank First Commercial Joint Stock Bank BaoViet Joint-Stock Commercial Bank
Foreign Bank Branches Natexis (France) Australia & New Zealand Banking Group (Australia) Calyon (France) Standard Chartered Bank (UK) Citibank (US) Chinfon Commercial Bank (Taiwan) Maybank (Malaysia) ABN AMRO Bank (Netherland) Bangkok Bank (Thailand) Mizuho Corporate Bank (Japan) BNP Paribas (France) Shinhan Bank (South Korea) HSBC (UK) United Overseas Bank (Singapore) Deutsche Bank (German) Bank of China (China) Bank of Tokyo-Mitsubishi UFJ (Japan) Mega International Commercial Bank (Taiwan) OCBC Bank (Singapore) Woori Bank (South Korea) JPMorgan Chase (US)
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Financial Institutions In Vietnam - Continued
Korea Exchange Bank (South Korea ) Lao-Viet Bank (Laos) Chinatrust Commercial Bank (Taiwan) First Commercial Bank (Taiwan) Far East National Bank (US) Cathay United Bank (Taiwan) Sumitomo-Mitsui Banking Corporation (Japan) Hua Nan Commercial Bank (South Korea) Taipei Fubon Bank (Taiwan) Commonwealth Bank (Australia) Industrial Bank of Korea (South Korea)
Joint Venture Banks Indovina Bank Shinhanvina Bank VID Public Bank VinaSiam Vietnam-Russia Bank
Source: SBV, September 2010
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Company Profile
Bank for Foreign Trade of Vietnam (Vietcombank)
Strengths
Minority owner Mizuho has boosted bank's profile. Largest correspondent network among Vietnamese banks. Clear competence in external trade. Strong market position. Sharp increase in total assets during 2011. Profit after tax declined during 2011.
Weaknesses
Lack of transparency. Opportunities
Stronger expansion to outpace growth at smaller, non-state rivals. 15% stake acquisition by Japan's Mizuho Corporate Bank. Strong increase in loans to customers during 2011.
Improving capital position. Threats
Tighter monetary policy to tame economic growth.
Risk to asset quality on the back of difficult operating environment in 2012.
Company Overview
Established in 1963 as a state-owned commercial bank, Vietcombank has paid-up capital of VND3,955bn. It is the oldest commercial bank for external affairs in Vietnam and was the first bank in the country to have a centralised capital management structure. It describes itself as an 'interbank forex payment centre for over 100 domestic banks and foreign banks' branches operating in Vietnam', and was the first commercial bank in the country to deal in foreign currencies. The bank's employees rose from 11,415 in 2010 to 12,565 as of the end of 2011.
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Vietcombank's operations have been supported by the largest correspondent network among Vietnamese banks with more than 1,300 correspondent financial institutions in over 90 countries and territories. Vietcombank has expanded from its original role as North Vietnam's foreign trade bank to become one of the country's largest universal banks. It is also an investor in a number of other financial institutions, including Vietnam Export Import CJSB, Saigon Industrial and Commercial CJSB, Gia Dinh CJSB, Military CJSB, International Commercial CJSB, Oriental CJSB, Chohungvina Bank, Petroleum Insurance Company and Golden Insurance Company. Japan's Mizuho Corporate Bank acquired a 15% stake in Vietcombank for a total of VND11.8trn (US$559.04mn) in January 2012, some months after the deal was revealed. The acquisition, which advantageously gives Vietcombank a stronger foreign partner, involved the sale of 347.61mn shares.
Corporate Highlights
Consolidated profit before tax reached VND5,697bn in 2011, up 2.3% y-o-y compared to the VND5,569bn recorded in 2010. Profit after tax was VND4,217bn, down marginally from VND4,303bn. Total assets, meanwhile, stood at VND366,722bn as of December 31 2011, representing a 19.2% y-o-y increase from VND307,621bn in 2010. This also exceeded the set target of a 15% increase set at the previous shareholders' General Meeting. Loans to customers came in at VND209,418bn as of the end of 2011, up 18.4% y-o-y from VND176,814bn as of December 31 2010. The NPL/Gross loans ratio of 2011 was 2.03%. (2.83) Standard & Poor's, encouraged by the acquisition, argued that Mizuho Corporate Bank's involvement strengthened Vietcombank's capital position. The agency upgraded its outlook on the bank's long-term rating to 'stable' from 'negative' in January 2012.
Company Address
Vietcombank (Bank For Foreign Trade of Vietnam) 198 Tran Quang Khai Hanoi Vietnam Description of Business: Leading commercial bank specialising project finance, trade finance, treasury, financial market and international banking services. Phone: +84 (4) 825 1322 Fax: +84 (4) 826 9067 webmaster@vietcombank.com.vn http://www.vietcombank.com.vn
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Table: Stock Market Indicator
2008 Market Capitalisation VND Market Capitalisation US$ Share Price VND Share Price US$ Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) 1,756 n.a. n.a. n.a. n.a.
2009 56,874,044 3,078 32,384 1.75
2010 57,159,508 2,932 29,018 1.49 -15.1
2011 42,941,740 2,042 21,800 1.04
24-Jan-13 63,033,744 3,028 27,200 1.31
-13.5 1,756 1,481 1,970 n.a.
30.7
Source: Bank of Foreign Trade of Vietnam (Vietcombank), Bloomberg
Table: Balance Sheet (VNDmn)
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 166,952,016 67,742,520 119,778,872 11,202,342 n.a.
2007 198,457,113 97,531,864 143,401,576 14,684,963 n.a.
2008 221,950,448 108,528,764 157,067,019 13,893,437 672
2009 255,495,883 136,996,006 169,427,776 16,819,641 2,233
2010 307,621,338 171,241,318 204,755,949 20,856,761 1,879
2011 366,722,279 204,089,479 227,016,854 28,781,930 1,789
Table: Balance Sheet (US$mn)
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 10,398 4,219 7,460 698 n.a.
2007 12,390 6,089 8,953 917 n.a.
2008 12,695 6,208 8,984 795 0.04
2009 13,826 7,414 9,169 910 0.13
2010 15,777 8,783 10,501 1,070 0.10
2011 17,436 9,703 10,793 1,368 0.09
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Table: Key Ratios (%)
2006 Return on Assets Return on Equities Loan Deposit Ratio Loan Asset Ratio Equity Asset Ratio 1.9 29.4 56.6 40.6 6.7
2007 1.3 18.6 68.0 49.1 7.4
2008 1.2 17.8 71.8 50.8 6.2
2009 1.6 25.7 83.6 55.4 6.5
2010 1.5 22.9 86.4 57.5 6.7
2011 1.2 17.0 92.2 57.1 7.8
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VietinBank
Strengths
Vietnam's largest partly private lender by assets. 10% owned by the International Finance Corporation. Strong branch network. Bad debt ration below 1.5% of loans. 2011 profit exceeded predictions. Possible exposure to the effects of the bursting of the asset price bubble. VietinBank has a 20% market share in Vietnam in terms of total assets is too large to be ignored.
Weaknesses Opportunities
Possible listing in the long term. Targeting lending growth of 20% y-o-y in 2012. 25% y-o-y increase in total assets in 2011. Possible exposure to downturn in global trade. Predicted growth limited by state credit limits.
Threats
Company Overview
The Bank for Industry and Trade (VietinBank) was established in 1988 when it was separated from the State Bank of Vietnam. It became a state-owned corporation in 1993. As one of the four largest state-owned commercial banks in the country, VietinBank's total assets account for over 20% of the market share of the whole Vietnamese banking system. VietinBank's capital resources have continued to increase over the years and have been rising substantially since 1996, with annual average growth of 20%. VietinBank has developed a retail and administration network across the country. The bank's network operates in 56 provinces and cities, with a focus on large cities such as Hanoi (12 branches; two transaction centres), Ho Chi Minh City (17 branches; one transaction centre); industrial zones; trading and economic parks; and densely populated areas. VietinBank is an investor in other institutions such as Saigonbank,
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Indovina Bank, Vietnam International Leasing Company and the VietinBank-Asia Insurance Company. VietinBank is 10% owned by the International Finance Corporation, which invested US$307mn in the lender in 2011. This was the first strategic investment by a foreign organisation in a Vietnamese state-owned bank. Discussions over selling a 15% stake to the Canada-based Bank of Nova Scotia are still ongoing as of January 2012, despite plans to conclude the deal by the end of 2011. In December 2012, Japanese commercial bank Bank of Tokyo Mitsubishi UFJ announced that it has acquired a 20% stake in VietinBank. The deal was valued at US $742mn. The acquisition will enable Bank of Tokyo Mitsubishi UFJ to help Japanese companies operating in Vietnam, as well as expanding its commercial operations in South East Asia. Bank of Tokyo Mitsubishi UFJ will also appoint two directors onto the board of VietinBank.
The bank's profit in 2011 exceeded forecasts, increasing by 76% y-o-y to VND8.11trn. Total assets grew 25% y-o-y in 2011 to VND460.4trn, compared with VND367.7trn a year earlier, making VietinBank the 2nd ranking bank in Vietnam with regard to total assets. Non-performing loans for 2011 made up 0.74% of VietinBank's overall credit, and the bank revealed that it is targeting clipping bad debts to below 3% in 2012. The bank is projecting a 20% y-o-y increase in lending activities in 2013.
Company Address
VietinBank - Vietnam Joint Stock Commercial Bank for Industry and Trade 108 Tran Hung Dao Hanoi Vietnam Fax: (84) 439428693 http://www.vietinbank.vn
Company Data
Website: www.vietinbank.vn Status: State-Owned Commercial Bank
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Table: Stock Market Indicators
2009 Market Capitalisation VND Market Capitalisation US$ Share Price VND Share Price US$ Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) 1,933 33,196,270 1,796 17,174 0.93
2010 34,896,268 1,790 16,110 0.83 -11.1
2011 35,806,608 1,702 13,657 0.65
24-Jan-13 54,270,320 2,607 20,700 0.99
16.5 2,166 2,622
46.4 n.a.
Source: Vietnam Bank for Industry and Trade (Vietinbank), Bloomberg
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 135,363,026 80,091,149 99,683,408 5,607,022 n.a.
2007 166,112,976 100,482,232 112,692,816 10,646,529 n.a.
2008 193,590,357 118,601,677 121,634,466 12,336,159 n.a.
2009 243,785,208 161,619,376 148,530,242 12,777,313 659
2010 367,730,655 231,434,054 205,918,705 18,402,459 1,456
2011 460,603,925 290,397,810 257,273,708 28,699,392 2,440
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 8,431 4,988 6,208 349 n.a.
2007 10,371 6,273 7,036 665 n.a.
2008 11,073 6,784 6,957 706 n.a.
2009 13,193 8,746 8,038 691 0.04
2010 18,860 11,870 10,561 944 0.08
2011 21,899 13,807 12,232 1,364 0.12
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2007 0.8 14.1 n.a. n.a. 6.4
2008 1.0 15.7 n.a. n.a. 6.4
2009 0.6 10.2 109.9 66.9 5.2
2010 1.1 22.3 113.7 63.7 4.9
2011 1.5 26.7 114.1 63.7 6.2
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Agribank
Strengths
Established as one of the largest state-owned commercial banks. Massive branch network, especially in rural Vietnam. Bad debt ratio reduced to around 4% in 2012. Possible effects of the bursting of the asset price bubble. Attractive partner for any other financial institutions looking to cross-sell products to the mass market in Vietnam.
Weaknesses Opportunities
Expanding footprint into Cambodia. Possible listing in the long term. Undergoing three-year restructuring programme with the Vietnamese government. Perceived exposure to the downturn in global trade. Credit rationing by state will limit growth. Series of embezzlement scandals have damaged the bank's reputation.
Threats
Company Overview
Established in 1988, the Vietnam Bank for Agriculture and Rural Development (Agribank) is a leading commercial bank and plays a decisive role in capital investment in developing the agricultural and rural economy, as well as other fields of the Vietnamese economy. Agribank has over 35,000 staff and about 2,300 branches and transaction offices nationwide. It is currently the country's largest bank by assets and extended its reach to Cambodia in 2010 by opening its first overseas branch in the kingdom. Agribank has completed a long-term financing agreement with the state oil company Petrovietnam to provide financing at lower interest rates for the company to develop Vietnamese oil resources. This could help Agribank establish more long-term relationships with major businesses.
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Chairman Nguyen Ngoc Bao said in early-February 2012 that the bank had agreed an extended restructuring plan with the Vietnamese government to be implemented over a period of three to four years. As part of the revised strategy, Agribank will remain stateowned but play a more prominent social policy role in support of the country's rural and agricultural communities. Central bank governor Nguyen Van Binh stipulated that between 75% and 80% of Agribank's annual lending should go to Vietnamese farmers in support of the country's key export crops, coffee and rice. Bao also confirmed that the bank's capital adequacy ratio (CAR) rose from 6.4% in 2010 to 8% in 2011 and estimated that the Agribank's CAR could reach 9% in 2012 with the aid of a capital injection from the State Bank of Vietnam to boost its charter capital by VND30trn. Meanwhile in December 2012, the bank announced that its bad debt ratio had reduced to around 4% from 6.1% at the beginning of the year. Bao has suggested that this ratio could drop to as little as 3% between 2015 and 2020, depending on the bank achieving strong credit growth. In January 2013, Vietnamese federal police said they had arrested former general director of the state-owned Agribank, Pham Thanh Tan, for "irresponsibility causing serious consequences." The news comes on the back of a series discoveries of massive embezzlements by senior employees, mostly to finance gambling habits. In November 2012, the Ho Chi Minh City police arrested three senior executives for stealing US$960,000 from the bank, while city prosecutors charged four others in a US $5.33mn scam. Another executive was arrested in the city in October for allegedly stealing US$1mn. In addition, in July 2012 a court in Binh Dinh Province handed a life sentence to a teller for stealing nearly US$1mn.
Company Data
Website: www.agribank.com.vn Status: State-owned commercial bank
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 238,495,024 181,252,960 160,396,528 2,565,545
2007 321,444,128 246,188,336 233,638,848 10,627,676
2008 400,485,183 288,940,827 299,954,030 17,798,086
2009 480,937,045 361,739,747 331,893,865 19,860,526
Source: Vietnam bank for Agriculture and Rural Development (Agribank), Bloomberg
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2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 14,854 11,289 9,990 160
2007 20,069 15,370 14,587 664
2008 22,907 16,527 17,157 1,018
2009 26,026 19,576 17,961 1,075
2006 Return on Assets Return on Equities Equity Asset Ratio 0.5 66.2 1.1
2007 1.6 69.4 3.3
2008 0.6 15.1 4.4
2009 0.4 9.6 4.0
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Asia Commercial Bank
Strengths
Asset growth. Launched US$2mn IBM datacentre to support expansion in 2011. Pre-tax profits rose during 2011 full-year. Lack of transparency.
Weaknesses
Slowing credit growth. Opportunities
Stronger expansion to compete with state lenders. Customer deposits and loans both achieved higher growth rates than industry average in 2011.
Threats
Tighter monetary policy to tame economic growth. Scandals involving bbank executives have damaged the bank's reputation. Risk to asset quality on the back of difficult operating environment in 2012.
Company Overview
Ho Chi Minh City-based Asia Commercial Bank (ABC) was founded in 1993 and expects its branches to expand three-fold to about 900 by 2015. The bank has ambitions to enter Vietnam's 'big four' banking circle in the next few years, which would make it the first non-state lender to do so. The bank said in late 2011 that it aims to rival the country's dominant state lenders by 2015, with assets jumping three-fold to VND900trn (US$42.9bn) from VND255trn. The resignation of a chairman and two executives at ACB in November 2012 fuelled fears that the beleaguered bank's crisis may indicate wider trouble in the country's banking system. Chairman Tran Xuan Gia and two deputies resigned on the back of company deposits being placed with another bank and approved by them. The news also added to mounting fears over the health of Vietnam's banking industry, first sparked by the arrest of one of ACB's founders. Police in Vietnam have confirmed that they are pushing ahead with charges brought against multimillionaire banking tycoon Nguyen Duc Kien, one of the founders of ACB.
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Kien was arrested on August 20 2012, charged with 'illegal business activities' and has been now accused of 'deliberate wrongdoing causing serious consequences' and fraud. The bank said in January 2011 that it was to build a new data centre in Ho Chi Minh City. The centre carried a cost of over US$2mn and is to help the bank better manage information and customer records. IBM is helping ACB create an IT plan and will play a role in all facets of the new centre, along with Vietnamese-firm AICT.
Consolidated profits before tax of ACB reached approximately VND4,203bn in 2011, higher than the bank's target, and an increase of 34% y-o-y from the pre-tax profit figure at the end of 2010. The size of the bank increased rapidly and stably in the year 2011. As of December 31 2011, total assets reached VND281,019bn, growing 37% y-oy in comparison with 2010. Of the entire increase in total assets, up to 63% was generated from the stable source of customer deposits. The amount of customer deposits at ACB reached VND185,637bn in 2011, up by 35% y-o-y at a time when average growth in the Vietnamese banking industry was 14.4%. ACB's deposit market share was estimated to be at 6.5%, an increase of nearly 1% y-o-y. Meanwhile, personal and business loans of the bank grew 18% y-o-y in 2011, roughly 1.5 times the industry average. As of December 31 2011, outstanding loans reached VND102,809bn, increasing ACB's lending market share by 0.2% to 4%. In short, ACB's customer deposits and loans both achieved higher growth rates than the industry average.
2006 Market Capitalisation VND Market Capitalisation US$ Share Price VND Share Price US$ Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) 336 n.a. n.a. n.a. n.a.
2007 41,493,748 2,591 69,072 4.31
2008 17,637,414 1,009 24,886 1.42 -67.0
2009 29,067,754 1,573 33,650 1.82 27.9
2010 24,473,174 1,255 26,100 1.34 -26.5
2011 20,348,014 967 21,700 1.03
24-Jan-13 15,471,992 743 16,500 0.79
-19.9 601 709 864 938 938
18.4 n.a.
Source: Asia Commercial Bank (ABC), Bloomberg
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2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 44,645,040 16,954,114 33,606,012 1,696,515 1,467
2007 85,391,681 31,676,320 55,283,104 6,257,849 3,738
2008 105,306,130 34,604,077 64,216,949 7,766,468 3,473
2009 167,881,047 61,855,984 86,919,196 10,106,287 2,653
2010 205,102,950 86,478,408 106,936,611 11,376,757 2,861
2011 281,019,319 101,822,720 142,218,091 11,959,092 3,280
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 2,781 1,056 2,093 106 0.09
2007 5,331 1,978 3,452 391 0.23
2008 6,023 1,979 3,673 444 0.21
2009 9,085 3,347 4,704 547 0.15
2010 10,519 4,435 5,484 583 0.15
2011 13,361 4,841 6,762 569 0.16
2007 2.7 44.5 57.5 37.3 7.3
2008 2.3 31.5 54.2 33.1 7.4
2009 1.6 24.6 71.7 37.1 6.0
2010 1.3 21.7 81.5 42.5 5.5
2011 1.3 27.5 72.3 36.6 4.3
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Eximbank
Strengths
Valued by the major international banks that deal with it. Emerged from the global financial crisis in a strong position. Has reduced its loan-to-deposit ratio to well below 100% and is less dependent on borrowing from other financial institutions.
Reducing its vulnerability to a lack of liquidity within the banking system. Credit quality of the bank is well controlled. Stable ratings outlook from S&P's. Lack of scale. Eximbank is a fairly large bank in Vietnam but a small institution by international standards.
Weaknesses
Potential for problems in the wake of the bursting of the asset price bubble. Potential for continuing growth from a low base. Acquisition of minority holding in Sacombank. Strong profits recorded in 2011. Vulnerability to direct or indirect impact from the downturn in global trade. Profit growth is particularly threatened by government loan policy.
Opportunities
Threats
Company Overview
Vietnam Export-Import Bank (Eximbank), established in 1989, is one of country's the largest commercial joint stock banks in terms of owner's equity. It has a nationwide network of 183 branches and transaction offices. Its head office is in Ho Chi Minh City. The bank's total number of employees stood at 5,430 as of the end of 2011, up from 4,472 a year earlier. The bank's growth is threatened by government concerns over the credit supply. The government limited credit supply growth to 25% in FY10. This has put the brakes on bank's growth, which for Eximbank is largely fuelled by an expansion in its loan portfolio. However, the application of such rules to Eximbank has been less severe
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given its role in the export sector, which the government is keen to promote and protect as much as possible from restrictive measures aimed at preventing the economy from overheating.
As of the end of 2011, Eximbank reported total assets of VND183.6trn, up by 40% y-o-y from VND131.1trn a year earlier. Within this profit before tax for 2011 reached VND4,056bn, up by 71% from VND2,378bn in 2010. Similarly net operating profit rose from VND2,643bn in 2010 to VND4,327bn by the end of 2011. By the end of 2011, the NPL ratio at Eximbank accounted for 1.61% of the total loan balance, lower than that of the whole banking industry. Eximbank has stated that between 2011-2015, it is implementing a five-year development plan in order to maintain growth while gradually increasing its shareholder dividends. In January 2012, Eximbank secured a 9.6% stake in fellow Vietnamese lender Sacombank for US$77.5mn from Australian group ANZ. It represented the first major divestment of Vietnamese assets by an overseas bank. The two banks, both based in Ho Chi Minh City, will seek approval for the plan from shareholders and government agencies for the deal. In November 2012, Standard & Poor's has assigned a 'B+' and a 'B' to Eximbank's long- and short-term issuer credit ratings, according to a press release. The agency said that its ratings outlook is stable, as the lender demonstrates an adequate business and risk position. The agency also described the bank's capital as weak, however, adding that its funding is average.
Company Data
Website: www.eximbank.com.vn/en Status: Commercial Joint-Stock Bank
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2009 Market Capitalisation VND Market Capitalisation US$ Share Price VND Share Price US$ Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) 1,236 21,029,446 1,138 17,094 0.93
2010 16,368,107 839 13,248 0.68 -26.5
2011 17,668,052 840 14,300 0.68
24-Jan-13 19,397,710 932 15,700 0.75
-5.2 1,236 1,236
30.1 n.a.
Source: Vietnam Export-Import Commercial Joint-Stock Bank (Eximbank), Bloomberg
2007 33,710,424 18,378,610 22,906,123 6,294,943 1,694
2008 48,247,821 20,855,907 30,877,730 12,844,077 749
2009 65,448,356 38,003,086 38,766,465 13,353,319 917
2010 131,110,882 61,717,617 70,703,663 13,510,740 1,468
2011 183,567,032 74,044,518 53,652,639 16,302,520 2,460
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 1,141 633 818 121 0.13
2007 2,105 1,147 1,430 393 0.11
2008 2,760 1,193 1,766 735 0.05
2009 3,542 2,057 2,098 723 0.05
2010 6,724 3,165 3,626 693 0.08
2011 8,728 3,520 2,551 775 0.12
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2006 Return on Assets Return on Equities Loan Deposit Ratio Loan Asset Ratio Equity Asset Ratio Total Risk Based Capital Ratio 1.7 18.6 77.7 55.7 10.6 n.a.
2007 1.8 11.2 80.6 54.7 18.7 n.a.
2008 1.7 7.4 68.8 44.0 26.6 n.a.
2009 2.0 8.6 99.0 58.6 20.4 n.a.
2010 1.8 13.5 88.2 47.6 10.3 17.8
2011 1.9 20.4 139.2 40.7 8.9 n.a.
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Vietnam Technological and Commercial Joint-stock Bank
Strengths
Support from minority stakeholder HSBC. The bank has consistently expanded its branch network since its founding. Strong profitability recorded in 2011. Sound capital adequacy ratio. Tight competition for deposits. The bank has some way to go in modernising processes and systems. Lack of transparency. The bank has strong scope for expansion over the long-term. Growth in total assets during 2011. Boost in lending in SME sector. Operating expenses increased 32% y-o-y in 2011.
Weaknesses
Opportunities
Threats
Company Overview
Hanoi-based Vietnam Technological and Commercial Joint-stock Bank, or Techcombank as it is more commonly known, began life in 1993 with its headquarters then in Ho Chi Minh. Within five years the bank had relocated its headquarters to the capital and established a handful of branches across Vietnam. London-based HSBC, which held smaller stakes in the bank in previous years, has held its current 20% shareholding in the lender since 2008 (where it remained as of early 2012). The bank has a network of 307 branches and 1,205 ATMs throughout the country, and a workforce of 8,335.
As of the end of 2011, the bank's assets totalled VND180,531bn, representing an increase of 20% y-o-y. As of the same date pre-tax profit came in at a record VND4,221bn, equivalent to an increase of 54% y-o-y from 2010. Operating income, meanwhile, increased by VND1,943bn, or 41% y-o-y, to reach VND6,662bn as of December 31 2011. This success was achieved due to growth in all business activities. Net Interest income increased continually by 66% y-o-y, reaching VND5,298bn in 2011.
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During 2011 operating expenses increased by VND511bn, or 32% y-o-y from 2010. Lending increased across a number of sectors in 2011, with an increased focus on exposure to better-rated counter parties and collateralised transactions. Loans to individual customers grew by VND3,837bn in 2011 to reach VND22,234bn, representing 35% of Techcombank's customer loans. The bank's capital adequacy ratio of 11.43% was significantly higher than the 9% minimum required by State Bank of Vietnam. The bank signed a US$30mn loan agreement with Dutch development bank FMO in September 2011, in a deal designed to boost lending to both retail and small- and medium-sized enterprise (SME) customers. The bank, along with some of its rivals, came under fire by the central bank in late 2010 as it began offering relatively high interest rates on deposits of over 17% in a bid to grab market share. The State Bank of Vietnam argued that such rates were risky, potentially destabilising and detrimental to profitability.
2007 39,542,496 20,486,132 24,476,576 3,573,416 2,452
2008 59,069,056 26,018,984 39,617,724 5,625,408 4,259
2009 92,581,504 41,580,368 62,347,400 7,323,826 3,148
2010 150,291,215 52,316,862 80,550,753 9,389,161 2,990
2011 180,531,163 62,562,406 88,647,779 12,515,802 2,902
Source: Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Bloomberg
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 1,079 542 596 110 0.09
2007 2,469 1,279 1,528 223 0.15
2008 3,379 1,488 2,266 322 0.26
2009 5,010 2,250 3,374 396 0.18
2010 7,708 2,683 4,131 482 0.16
2011 8,583 2,974 4,215 595 0.14
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2006 Return on Assets Return on Equities Loan Deposit Ratio Loan Asset Ratio Equity Asset Ratio 1.8 18.5 n.a. n.a. 10.2
2007 1.8 19.1 n.a. n.a. 9.0
2008 2.4 25.7 n.a. n.a. 9.5
2009 2.2 26.3 n.a. n.a. 7.9
2010 1.7 24.8 65.7 35.2 6.2
2011 1.9 28.8 71.6 35.1 6.9
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Viet A Joint Stock Commercial Bank (Vietabank)
Strengths
Expected profit increase for 2011. Capital base continues to strengthen. Lack of modernisation. Lack of transparency. Limited presence in Vietnam. Further domestic expansion plans. Plans to hike chartered capital to VND5trn. Tighter monetary policy to tame economic growth. Risk to asset quality on the back of difficult operating environment in 2012. Slowing credit growth.
Weaknesses
Opportunities
Threats
Company Overview
Ho Chi Minh City-based Viet A Joint Stock Commercial Bank (Vietabank) had 80 branches as of May 2011 and maintains a physical growth target of between 14 and 18 new branches annually.
In the lastest available data published, Vietabank's pre-tax profit reached VND347bn (US$16.44mn) in 2010, with return on assets and return on equity standing at 1.33% and 10.46% respectively. The bank's capital surged by 94% to VND2.94trn (US $139.29mn) by the end of 2010 on the same point in the previous year. Deposits also increased by 25% to VND13.47trn (US$638.16mn) by the end of the year, while total outstanding credit reached VND13.29trn (US$629.63mn) for the year. The majority of total credit extended during 2010 was made up by short-term loans at 58% of the total, with long-term loans accounting for the remainder. Meanwhile, the bank's total investments surged by as much as VND3.45trn (US$163.45mn) to VND3.93trn (US $186.19mn) in 2010. The bank said in November 2011 that it sought to generate a pre-tax profit of VND602bn (US$28.52mn) for 2011, marking a 73.5% jump on the previous year.
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In April 2012 it was reported that VietABank has purchases 3.52mn shares in southern bourse-listed Dat Xanh Real Estate Construction and Services Joint Stock Co (DXG). This was equivalent to a 11% holding in the firm. At the bank's AGM in May 2013, VietABank announced plans to hike chartered capital to VND5trn via issuing additional shares valued at VND1.902trn to offer for existing shareholders and domestic partners. With chartered capital of VND5trn, VietABank expects to reach total asset value of VND37trn, total outstanding loans of VND13.315trn, and after tax profit of VND410bn in 2011. The lender's capital adequacy ratio (CAR) would be higher than 9% and the bad debts ratio is expected at less than 3%.
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Housing Development Commercial Joint Stock Bank (HDBank)
Strengths
Recently completed its four-year modernisation plan in 2012. Strong rise in pre-tax profits during 2011. NPL ratio lower than industry average. Credit growth capped by central bank. Limited profitability. Lack of transparency. Further restructuring and expansion. Increase in total loans and deposits in 2011. Fast-expanding branch network. Tighter monetary policy to tame economic growth. Risk to asset quality on the back of difficult operating environment in 2012. Credit growth capped by central bank.
Weaknesses
Opportunities
Threats
Company Overview
Ho Chi Minh City-based Housing Development Commercial Joint Stock Bank (HDBank) was founded in 1990. One of the country's first commercial banks upon establishment, the lender had 120 branches and transaction offices across Vietnam as of the end of 2011, an increase of 25% y-o-y. The bank has more than 2,000 employees. HDBank has just completed the second phase of its restructuring project (2009 2012). This project included enhancing financial capacity, developing modern technology, building strong and professional human resources, providing a large spectrum of product packages to satisfy different demands of customers.
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As of December 31 2011, HDBank's pre-tax profit reached VND566bn, up by 61% y-oy from 2010. The bank's net profit, meanwhile, came in at VND427bn as of the same date. On a comparable basis of 2011 to 2010 financial performance, the bank's total assets increased by 31.2% (or VND10,636bn) to VND45,107bn. Meanwhile, total deposits increased by 30.1% y-o-y in 2011 and total loans increased by 18.1% from 2010. The bank's bad debt ratio as of December 31 2011 was 1.63%, which was lower than the industry average. The State Bank of Vietnam took action against the lender in November 2011, calling on one of its deputy directors to resign after HDBank broke the central bank's 14% cap on deposit rates. The central bank also capped HDBank's credit growth at 10% on an annual basis.
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Sacombank
Strengths
Strategic partnerships with Australia and New Zealand Banking Group and the International Finance Corporation.
Emerged from the global financial crisis in a strong position. Reduced its loan-to-deposit ratio to well below 100%. Reducing its vulnerability to a lack of liquidity within the banking system. Lack of scale - Sacombank is a fairly large bank in Vietnam but a small institution by international standards.
Weaknesses
Potential direct and indirect problems from the bursting of the asset price bubble. Potential for continuing growth from a low base. Strong increase in profits during 2011. Tie-up with Eximbank. Leverage of strong position in the SME lending sector. Expansion into southern China and countries in the Association of Southeast Asian Nations.
Opportunities
Threats
Vulnerability to direct or indirect impact from the downturn in global trade. Vulnerable to government credit caps. Total deposits declined during 2011.
Company Overview
Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992. It has been listed on the Ho Chi Minh City Stock Exchange since July 2006. Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the International Finance Corporation (IFC) (5.25%) and Dragon Financial Holdings (8.73%). Foreign shareholders collectively own 30% of the bank.
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The bank has 405 transaction points located in 43 of the 63 provinces in Vietna, Laos and Cambodia. In 2008, the bank was restructured as a financial holding company. Its subsidiaries include: Sacombank Asset Management Company; Sacombank Remittance Express Company; Sacombank Leasing Company; Sacombank Securities Company; Sacombank Jewelry Company. Associated companies include: Viet Fund Management JSC; Saigon Thuong Tin Investment JSC; Tan Dinh Import and Export JSC; Toan Thin Phat Architecture Investment Construction Company; and Saigon Thuong Tin Real Estate JSC. More than 50% of Sacombank's loans are to SMEs, which the bank has targeted as its market. Sacombank intends to help SMEs undertake initial public offerings (IPOs). These services have been combined with attempts by Sacombank to diversify income sources away from the credit business. To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income.
Sacombank generated net interest income of VND5.49trn for 2011, representing an increase of 71% y-o-y. In total, after-tax profit for 2011 stood at VND2.033trn, which was a 13% increase y-o-y. By the end of the year, outstanding loans were VND78.49trn, while credit growth was 1.4%. The bank was also successful in reducing its bad debts, which fell by 50% in the year. The bank's total outstanding loans by the end of 2011 were VND78.449trn, credit growth was only 1.4%, and the bad debts ratio was 0.56%, of which, irrecoverable debts were VND158bn - down 50% from the end of 2010. Total deposits as of the end of 2011 reached VND74.8trn, down by over VND4trn from 2010, of which, it was mainly term savings in gold and foreign currency. Meanwhile, the bank has partially offloaded its 10% stake in Sacombank Securities Joint Stock Co (SBS). At the end of 2011 Sacombank has paid up capital of VND15,200bn, of which chartered capital is VND10,740bn. Elsewhere, Sacombank and Credit Suisse Singapore have signed a MoU in order to strengthen their competitiveness in both markets. In October 2012, Sacombank signed a cooperation agreement with Manulife Vietnam one of the leading Life Insurance Company in Vietnam - in order to diversify products and services, and to improve customer service quality and the competence of both companies. In January 2012, fellow Vietnamese lender Eximbank secured a 9.6% stake in Sacombank for US$77.5mn from Australian group ANZ. It represented the first major divestment of Vietnamese assets by an overseas bank. The two banks, both based in Ho Chi Minh City, will seek approval for the plan from shareholders and government agencies for the deal.
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Company Data
Website: www.sacombank.com.vn Status: Commercial Joint Stock Bank
2006 Market Capitalisation VND Market Capitalisation US$ Share Price VND Share Price US$ Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) 771
2007
2008
2009
2010
2011
24-Jan-13
15,043,772 29,139,732 9,413,129 16,147,851 14,870,353 16,216,912 19,381,956 937 19,506 1.21 1,819 35,999 2.25 84.9 538 11,629 0.67 -70.4 874 19,044 1.03 54.9 763 15,486 0.79 -22.9 -19.8 809 781 848 960 978 47.0 n.a. 771 15,100 0.72 931 19,900 0.96
Source: Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Bloomberg
2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 24,776,182 14,312,894 17,511,580 2,870,346 725
2007 64,572,875 35,200,574 44,231,944 7,349,659 1,765
2008 68,438,569 34,757,119 46,128,820 7,758,624 1,181
2009 104,019,144 59,141,487 60,516,273 10,776,901 4,263
2010 152,386,936 81,664,200 100,467,290 14,694,975 2,079
2011 141,468,717 79,726,547 75,092,252 14,546,883 2,241
Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$)
1,543 891 1,091 179 0.05
4,032 2,198 2,762 459 0.11
3,915 1,988 2,638 444 0.07
5,629 3,200 3,275 583 0.24
7,816 4,188 5,153 754 0.11
6,726 3,791 3,570 692 0.11
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Return on Assets Return on Equities Loan Deposit Ratio Loan Asset Ratio Equity Asset Ratio Total Risk Based Capital Ratio
2.4 19.8 82.2 58.1 11.6 n.a.
3.1 27.4 80.0 54.8 11.4 n.a.
1.4 12.6 75.9 51.2 11.3 n.a.
1.9 18.3 98.6 57.4 10.1 n.a.
1.5 15.2 82.1 54.1 9.2 10.0
1.4 14.5 107.3 56.9 10.3 n.a.
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Regional Overview
Asia Overview
Assessing The Banking Boom In South East Asia
BMI View: We expect South East Asian banks to continue expanding aggressively into the region, on the back of a surge in mergers and acquisitions (M&A) activity in 2013. Malaysian banks have taken the lead in terms of leveraging on the investment banking boom, partly driven by the country's status as the largest issuer of Islamic banking assets in the region. Meanwhile, we expect Thai commercial banks to ramp up efforts to expand into countries such as Cambodia and Myanmar, driven by government efforts to promote cross-border investment and trade between Thailand and these countries.
In recent years, South East Asian banks have become increasingly aggressive in expanding their operations in the region, and we expect this phenomenon to continue in 2013. Member countries of the Association of Southeast Asian Nations (ASEAN) have pledged to gradually open up their banking sectors to allow for increased foreign competition, as part of a broader agreement towards establishing the ASEAN Economic Community (AEC) in 2015. Proponents of the AEC claim that by deepening economic links through financial integration, cross-border investments, and promoting free trade in the region, member countries will gain access to a wider market for their exports. Crucially, we expect increased economic integration to also boost demand for more sophisticated and innovative financial products and services going forward.
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Investment Banks See Boom In Underwriting Business

Malaysia - Composition Of Loan Portfolio By Purpose Of Loans, %
Source: BMI, Bank Negara Malaysia
Investment Banking Revenues Surge

We have already witnessed a significant increase in cross-border investment and intraregional mergers and acquisitions (M&A) in 2012. According to figures published by data provider Dealogic, investment banking fees in Southeast Asia have soared to the highest level on record for the first nine months of 2012. Looking ahead, we expect plans to further promote financial integration to open up more opportunities for the banking industry. For example, ASEAN countries have agreed to further integrate their capital markets by linking their stock exchanges to establish a common trading network for investors. The move is widely expected to boost liquidity and attract more foreign capital inflows into the region, rivalling fast-growing capital markets such as Hong Kong and China. We expect banks that have already established a strong investment banking presence in the region to benefit from the expected increase in M&A activity over the coming years.
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Malaysia Takes The Lead

Malaysian banks have taken the lead in terms of leveraging on the investment banking boom, partly driven by the country's status as the largest issuer of Islamic banking assets in the region. Malaysia is reportedly one of the key drivers responsible for the recent increase in investment banking fees, according to a report published by Dealogic. Investment banking revenue in the country reached US$416mn between January and October in 2012, a year-to-date record and a 46% increase y-o-y. Malaysia also commands a strong 36.7% share of total investment banking fees generated in South East Asia. We expect Malaysian banks including Maybank Group and CIMB Group to continue to leverage on their strengths as the region's leading issuers of Islamic banking products and solutions. Maybank Islamic, the Islamic banking arm of Maybank Group, is the largest Islamic bank in Asia having already established a strong presence in Singapore, Indonesia, Hong Kong and the Philippines. Meanwhile, CIMB has been playing catch-up aggressively and is currently deriving around 10% of its earnings from its Islamic banking operations in Indonesia, Singapore and Brunei. Given the competitive advantages that Malaysian banks hold in terms of technological capabilities, financial strength, risk management, and the country's deep economic links relative to the region, we expect Malaysian banks to maintain their lead over their regional counterparts at least over the medium term.
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Foreign Loans Set To Pick Up In 2013

Thailand - Loans To Foreign Entities, % chg y-o-y
Source: BMI, Bank of Thailand
Thai Commercial Banks Targeting High-Growth Economies

Banks in Thailand are adopting a slightly different strategy by expanding their networks in lower-income, high growth, and largely untapped countries in the region (such as Cambodia and Myanmar). Krungthai Bank and Siam Commercial Bank recently opened their first representative offices in Myanmar in 2012 and Kasikornbank has announced plans to open its first branch by February 2013. As the accompanying chart shows, loans issued by Thai commercial banks to foreign entities have enjoyed a spectacular boom in recent years, averaging expansion of 75.0% and 128.3% in 2011 and 2012, respectively.
Although we caution that aggressive expansion into countries such as Cambodia and Myanmar reflects a high-risk strategy for local banks, we believe that the potential for growth is much greater. Furthermore, given that the Thai government has been actively promoting cross-border investment and trade between Thailand and these countries, we believe that demand for trade financing and investment banking services will pick up significantly over the coming years. On the whole, we expect Thai banks to further accelerate efforts to expand their operations into the region, and this should contribute significantly to banking sector revenues in 2013.
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Global Industry Overview

Global Commercial Banking Overview
Implications Of Reforms To Basel III Liquidity Requirements
BMI View: Global central bank heads agreed on January 6 2013 to loosen the Basel III liquidity requirements for major financial institutions. This decision is positive for industry profitability, and modestly improves the near-term outlook for loan and asset growth.
The Governors and Heads of Supervision of the Basel III accords emerged from their meeting with changes to the existing liquidity arrangements that will significantly ease the burden on major banks worldwide. To recap, Basel III is an improvement on the previous two iterations, as it lays out stricter definitions of high quality capital, and specifically, higher capital requirements and liquidity ratios. This is in response to the 2008 financial crisis, which laid bare the potential for liquidity risk, as opposed to just the solvency risk that was focused upon in Basel I and II. The so-called 'Liquidity Coverage Ratio' (LCR) is designed to allow banks to survive a 30-day funding crisis by relying on internal liquid assets, hence avoiding a Lehman-style meltdown. The numerator of the ratio is 'high quality liquid assets', while the denominator is the 'net liquidity outflows' that banks would face when put under a stress situation over a 30-day period during a severe system-wide shock. By the time this aspect of Basel III is fully implemented, the ratio must exceed 100%.
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Bank Share Prices Responding Well To Basel III Amendments

MSCI World Bank Equity Index
Source: Bloomberg, BMI
The changes agreed in January 2013 include a major redefinition of high quality liquid assets that would count towards banks' LCR. For example, in the set of rules agreed in 2010, corporate debt needed to be rated AA- or higher to be considered high quality; now, securities can be rated as low as BBB-, the lowest investment grade rating. Furthermore, banks can now use residential mortgage-backed securities and even some equities to meet the requirements (albeit they will count far less toward the liquidity requirements than government bonds, with 25-50% haircuts applied). Additionally, the timetable for the full introduction of the new liquidity requirements has been pushed back dramatically from the originally scheduled deadline of 2015. Banks will only have to hold 60% of the total buffer by 2015, rising by 10% per year to 2019. Meanwhile, the 'outflows' in the denominator of the LCR have been clarified, and many will be subject to less stringent conditions. For example, the assumed outflow rate under a stress scenario for maturing secured funding transactions with central banks will be reduced to 0% from 25%. The table below shows the main changes to the Basel III framework as agreed on January 6.
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Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio
Before Definition of 'High Quality Assets' Corporate debt rated AA- or higher (as Level 2 asset) No equity included No Residential MBS included
Now Corporate debt rated A+ to BBB- (with 50% haircut applied) Some equity (with 50% haircut applied) Residential MBS rated AA or higher (with 25% haircut applied)
Timetable For Introduction of LCR
100% of buffer to be in place by 1 January 2015
60% by 1 January 2015; 10% added annually to 100% by 1 January 2019
Inflows and Outflows
Non-financial, non-operational corporate deposits outflow rate: 75% Liquidity facilities to non-financial corporates outflow rate: 100% Trade finance - no outflow rate guidance Maturing secured funding transactions with central banks outflow rate: 25%
Now 40% Now 30% New guidance that low outflow rate (0-5%) expected to apply on trade finance Now 0%
Source: Bank for International Settlements, BMI
We interpret this agreement as having been taken for three pragmatic considerations. First, the 2010 regulations were agreed upon before the European banking crisis, which helps explain why some of the asset requirements needed to be amended. Banks in Europe, for example, would have been forced to purchase even greater quantities of their home governments' debt - only further extricating the banking sector into the sovereign crisis. Second, the quantity and availability of 'risk-free' liquid assets may not have been sufficient to meet all of the requirements, so some expansion of the eligible assets is both desirable and, perhaps, necessary from a pragmatic standpoint. Third, several of the world's major central bankers were faced with the dilemma of having reached the limit of conventional monetary easing, and are now resorting to easing regulations in an effort to open up lending channels. The degree to which this will work in the short run is probably limited, given that the existing expansion of the monetary base in many countries and low central bank funding costs have not translated into lending. However, it will remove some of the concern that the reluctance to lend has been a result of regulatory factors. Indeed, the revised timetable for the new regulations will relieve the urgency to quickly build up liquid assets, particularly for European banks which have been under stress and unwilling and unable to lend. Bank of England Governor Mervyn King, who announced the new measures on behalf of the committee, made this aspect of the revised
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legislation clear, arguing that the revisions 'will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery'.
We have a few additional thoughts:
Easing the capital requirements will make banks more profitable because it will allow them to count higher-yielding assets toward the liquidity requirements. This helps explain why bank share prices soared in the days immediately following the Basel announcement. By the end of 2011, 208 banks were short by EUR1.8trn (US$2.4trn) in LCR funding, according to the Basel committee. By contrast, Bank of England Governor King said that the 'vast majority' of the world's biggest 200 banks that abide by the Basel regulations already comply with the new relaxed standards. Many of those that do not are presumably European banks that are still rebuilding their balance sheets. Some of the clarifications are sensible by almost any standard. One is that 'countries with distressed banking systems will have complete flexibility in their application of the LCR until the distress has passed'. To put this another way, having saved for a rainy day, banks will be allowed to use their savings to cope with a crisis without worrying about meeting capital ratios in the short run. Emerging market banking sectors stand to be a major beneficiary of the new requirements. Regulators in major EM countries had complained that the supply of high quality assets, as defined in the 2010 agreement, was too limited, and that major EM banks would struggle in many cases to meet the requirements. While it is understandable that the Basel committee believe it wise to expand the definition of high quality liquid instruments, particularly given the European crisis, we have some concerns about the degree to which the rules have been watered down. It is a bit of a stretch, for example, to believe that in a 2008-style crisis that even with a 25% haircut that MBS could provide ready liquidity for a bank that is in trouble. This is especially the case since many banks in a single banking system could plausibly seek to use the same type of asset as collateral should it prove the most profitable (e.g. using significant amounts of MBS to meet the liquidity requirements), and that asset could prove to be very difficult to unload in a time of crisis. That said, we do not expect this to be a major problem given that the new, lower-rated securities can only count toward a maximum of 15% of the total of high-quality liquid assets. The new rules will ease the flow of trade finance, by including a low outflow rate (0-5%) in the denominator of the LCR. In other words, banks that engage heavily in trade finance will be able to hold a smaller liquidity buffer than they would have previously. This will be positive for several EM commercial banking markets that have high components of trade finance in their operations.
The next item on the agenda for the Basel committee will be the Net Stable Funding Ratio, which aims to address another salient aspect of the 2008 financial crisis - banks' funding mismatch between short-term borrowing and long-term lending. The idea is to require banks to hold a better match between long-term financing and long-term asset accumulation in order to avoid the type of rollover risk seen in the financial crisis. Like the LCR, the NSFR regulations will be enforced as of 2019, however, the Basel committee will only produce the framework of rules at some point in the next two years.
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Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements.
The accompanying charts detail Vietnam's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split.
Source: World Bank, UN, BMI
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Table: Vietnam's Population By Age Group, 1990-2020 ('000)
1990 Total 0-4 years 5-9 years 10-14 years 15-19 years 20-24 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55-59 years 60-64 years 65-69 years 70-74 years 75+ years 67,102 9,340 8,685 7,504 7,127 6,492 5,893 4,884 3,965 2,420 2,039 1,933 1,946 1,544 1,283 919 1,127
1995 74,008 9,212 9,193 8,604 7,408 7,003 6,361 5,779 4,794 3,884 2,358 1,968 1,843 1,822 1,391 1,084 1,305
2000 78,758 7,002 9,124 9,142 8,535 7,305 6,879 6,250 5,688 4,710 3,802 2,287 1,887 1,737 1,659 1,194 1,559
2005 83,161 6,776 6,921 9,038 9,064 8,420 7,167 6,765 6,163 5,614 4,653 3,739 2,201 1,767 1,582 1,439 1,852
2010 87,848 7,186 6,703 6,844 8,963 8,954 8,284 7,058 6,677 6,086 5,548 4,580 3,617 2,076 1,621 1,389 2,264
2012f 89,730 7,186 6,885 6,539 8,161 9,115 8,602 7,475 6,770 6,304 5,761 4,936 4,001 2,573 1,649 1,384 2,388
2015f 92,443 7,026 7,143 6,668 6,806 8,892 8,862 8,202 6,991 6,609 6,012 5,449 4,446 3,455 1,927 1,438 2,516
2020f 96,355 6,529 6,982 7,104 6,628 6,745 8,803 8,779 8,131 6,925 6,536 5,914 5,305 4,268 3,233 1,729 2,743
f = BMI forecast. Source: World Bank, UN, BMI
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Table: Vietnam's Population By Age Group, 1990-2020 (% of total)
1990 0-4 years 5-9 years 10-14 years 15-19 years 20-24 years 25-29 years 30-34 years 35-39 years 40-44 years 45-49 years 50-54 years 55-59 years 60-64 years 65-69 years 70-74 years 75+ years 13.92 12.94 11.18 10.62 9.68 8.78 7.28 5.91 3.61 3.04 2.88 2.90 2.30 1.91 1.37 1.68
1995 12.45 12.42 11.63 10.01 9.46 8.60 7.81 6.48 5.25 3.19 2.66 2.49 2.46 1.88 1.46 1.76
2000 8.89 11.58 11.61 10.84 9.27 8.73 7.94 7.22 5.98 4.83 2.90 2.40 2.21 2.11 1.52 1.98
2005 8.15 8.32 10.87 10.90 10.13 8.62 8.14 7.41 6.75 5.59 4.50 2.65 2.12 1.90 1.73 2.23
2010 8.18 7.63 7.79 10.20 10.19 9.43 8.03 7.60 6.93 6.32 5.21 4.12 2.36 1.85 1.58 2.58
2012 8.01 7.67 7.29 9.10 10.16 9.59 8.33 7.55 7.03 6.42 5.50 4.46 2.87 1.84 1.54 2.66
2015f 7.60 7.73 7.21 7.36 9.62 9.59 8.87 7.56 7.15 6.50 5.89 4.81 3.74 2.08 1.56 2.72
2020f 6.78 7.25 7.37 6.88 7.00 9.14 9.11 8.44 7.19 6.78 6.14 5.51 4.43 3.36 1.79 2.85
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Table: Vietnam's Key Population Ratios, 1990-2020
1990 Dependent ratio, % of total working age 1 Dependent population, total, '000 Active population, % of total Active population, total, '000
3 4 5 2
1995 71.2 30,790 58.4 43,218 62.5 27,009 8.7 3,780
2000 60.5 29,679 62.3 49,079 51.5 25,268 9.0 4,411
2005 49.7 27,609 66.8 55,552 40.9 22,735 8.8 4,874
2010 42.1 26,006 70.4 61,842 33.5 20,732 8.5 5,274
2012 40.9 26,031 71.0 63,699 32.4 20,610 8.5 5,421
2015f 40.6 26,717 71.1 65,725 31.7 20,837 8.9 5,881
2020f 41.6 28,321 70.6 68,034 30.3 20,615 11.3 7,706
75.5 28,859 57.0 38,243 66.8 25,529 8.7 3,330
Youth population, % of total working age Youth population, total, '000

6
Pensionable population, % of total working age 7 Pensionable population, '000

8
f = BMI forecast; 1 0>15 plus 65+, as % of total working age population; 2 0>15 plus 65+; 3 15-64, as % of total population; 4 15-64; 5 0>15, % of total working age population; 6 0>15; 7 65+, % of total working age population; 8 65+. Source: World Bank, UN, BMI
Table: Vietnam's Rural And Urban Population, 1990-2020
1990 Urban population, % of total Rural population, % of total Urban population, '000 Rural population, '000 20.3 79.7 13,438.6 52,761.4
1995 22.2 77.8 16,201.6 56,778.4
2000 24.3 75.7 18,865.4 58,770.0
2005 26.4 73.6 21,940.1 61,166.2
2010 28.7 71.3 25,212.5 62,635.9
2012 29.7 70.3 26,649.9 63,080.4
2015f 31.2 68.8 28,842.1 63,600.5
2020f 33.9 66.1 32,664.4 63,690.7
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Methodology
BMI's Commercial Banking Forecast Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets. As such, the reports draw heavily on our extensive economic data set, which includes up to 550 indicators per country, as well as our in depth view of each local market. We collate our commercial banking databank from official sources (including central banks and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only used as a backup. All of the risk ratings and forecasts within this report are a result of BMI's own proprietary research and do not in any circumstances include consensus or third party numbers.
How Our Data Set Is Structured The reports focus on total assets, client loans and client deposits.
Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country. They do not incorporate the balance sheet of the central bank of the country in question.
Client loans are loans to non-bank clients. They include loans to public sector and state-owned enterprises. However, they generally do not include loans to governments, government (or non-government) bonds held or loans to central banks. Client deposits are deposits from the non-bank public. They generally include deposits from public sector and state-owned enterprises. However, they only include government deposits if these are significant.
We take into account capital items and bond portfolios. The former include shareholders funds, and subordinated debt that may be counted as capital. The latter includes government and non-government bonds.
In quantifying the collective balance sheets of a particular country, we assume that three equations hold true:
Total assets = total liabilities and capital. Total assets = client loans + bond portfolio + other assets. Total liabilities and capital = capital items + client deposits + other liabilities.
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In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be reconciled with equation one. In practice, other assets and other liabilities are analogous to inter-bank transactions. In some cases, such transactions are generally with foreign banks.
In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape, and we do not include them in our figures. The US is the main exception to this.
In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in another country. In some cases, client deposits include significant amounts that have been deposited by residents of another country. Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in Central and Eastern Europe.
Commercial Bank Business Environment Rating

In producing our Commercial Banking Business Environment Rating, our approach has been threefold. First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation of profits in each state, thereby capturing the operational dangers facing companies operating in this industry globally. Second, we have, where possible, identified objective indicators that serve as proxies for issues/ trends within the industry to ensure consistent evaluate across states. Finally, we have used BMI's proprietary Country Risk Ratings in a nuanced manner to ensure that the ratings accurately capture broader issues that are relevant to the industry and which may either limit market attractiveness or imperil future returns. Overall, the ratings system, which integrates with all the other industry Business Environment Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe.
Conceptually, the ratings system divides into two distinct areas:
Limits of Potential Returns: Evaluation of industry's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to Realisation of Returns: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period.
In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based.
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Table: Commercial Banking Business Environment Indicators And Rationale
Limits of Potential Returns Banking market structure Estimated total assets, 2012 Estimated growth in total assets, 2012-2016 Estimated growth in client loans, 2012-2016 Country structure GDP per capita
Rationale
Indication of overall sector attractiveness. Large markets are considered more attractive than small ones Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Indication of the scope for expansion in profits through intermediation
A proxy for wealth. High-income states receive better scores than low-income states Those aged 16-64 in each state, as a % of total population. A high proportion suggests that the market is comparatively more attractive A measure of the general fiscal drag on profits Standard deviation of growth over seven-year economic cycle. A proxy for economic stability
Active population Corporate tax GDP volatility Risks to Realisation of Returns Banking market risks Regulatory framework and industry development Regulatory framework and competitive environment BMI's Country Risk Ratings (CRR) Short-term financial risk Policy continuity
Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Subjective evaluation of the impact of the regulatory environment on the competitive landscape
Rating from CRR, evaluating currency volatility Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Rating from CRR to denote ease of conducting business in the state
Legal framework Bureaucracy
Source: BMI
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Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal weight. Consequently, the following weights have been adopted.
Table: Weighting Of Indicators
Component Limits of Potential Returns, of which: - Banking market structure - Country Structure Risks to Realisation of Returns, of which: - Banking market risks - Country Risk
Weighting, % 70, of which 60 40 30, of which 40 60
Source: BMI
Page 78

BMI Vietnam Commercial Banking Report Q2 2013

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Q2 2013

Vietnam Commercial Banking Report Q2 2013

Part of BMIs Industry Report & Forecasts Series

Vietnam Commercial Banking Report Q2 2013

Industry Forecast .............................................................................................................. 13

Industry Risk Reward Ratings .......................................................................................... 16

Market Overview ............................................................................................................... 18

Competitive Landscape .................................................................................................... 30

Business Monitor International

Vietnam Commercial Banking Report Q2 2013

Definition Of The Commercial Banking Universe ......................................................................................... 30 List Of Banks ......................................................................................................................................... 31

Company Profile ................................................................................................................ 34

Asia Commercial Bank ............................................................................................................................. 45

Vietnam Technological and Commercial Joint-stock Bank (Techcombank) ......................................................... 52

Regional Overview ............................................................................................................ 63

Global Industry Overview .................................................................................................. 67

Business Monitor International

Vietnam Commercial Banking Report Q2 2013

Global Commercial Banking Overview ........................................................................................................ 67

Demographic Forecast ..................................................................................................... 71

Business Monitor International

Vietnam Commercial Banking Report Q2 2013

BMI Industry View

Date May 2011 May 2012 Change, %

Total assets 3,117,942 3,545,801 13.7%

Client loans 2,630,220 2,835,610 7.8%

Bond portfolio 223,644 355,354 58.9%

Other 264,078 354,837 34.4%

Liabilities and capital 3,117,942 3,545,801 13.7%

Capital 494,104 569,584 15.3%

Client deposits 2,241,245 2,668,471 19.1%

Other 382,593 307,746 -19.6%

Source: BMI; Central banks; Regulators

Table: Levels (US$bn)

Date May 2011 May 2012 Change, %

Total assets 151.76 169.90 12.0%

Client loans 128.02 135.87 6.1%

Bond portfolio 10.89 17.03 56.4%

Other 12.85 17.00 32.3%

Liabilities and capital 151.76 169.90 12.0%

Capital 24.05 27.29 13.5%

Client deposits 109.09 127.86 17.2%

Other 18.62 14.75 -20.8%

Source: BMI; Central banks; Regulators

Table: Levels At May 2012

Loan/deposit ratio 106.26% Falling

Loan/asset ratio 79.97% Falling

Loan/GDP ratio n.a. Falling

GDP Per Capita, US$ 1,072.13 n.a.

Deposits per capita, US$ 1,433.70 n.a.

Source: BMI; Central banks; Regulators

Business Monitor International

Vietnam Commercial Banking Report Q2 2013

Table: Annual Growth Rate Projections 2012-2017 (%)

Assets Annual Growth Rate CAGR Ranking 11 13 15

Source: BMI; Central banks; Regulators

Table: Ranking Out Of 62 Countries Reviewed In 2013

Loan/deposit ratio 11 Local currency asset growth 14

Loan/asset ratio 2 Local currency loan growth 16

Loan/GDP ratio 14 Local currency deposit growth 22

Source: BMI; Central banks; Regulators

Table: Projected Levels (VNDbn)

2009 Total assets Client loans Client deposits