Q3 2012
www.businessmonitor.com
Vietnam
commercial Banking Report
INCLUDES BMI'S FORECASTS
ISSN 1758-454X
Published by Business Monitor International Ltd.
VIETNAM COMMERCIAL
BANKING REPORT Q3 2012
INCLUDES 5-YEAR FORECASTS TO 2016
Part of BMI’s Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: July 2012
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Vietnam Commercial Banking Report Q3 2012
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
CONTENTS
Executive Summary ......................................................................................................................................... 5
Table: Levels (VNDbn) .......................................................................................................................................................................................... 5
Table: Levels (US$bn) ........................................................................................................................................................................................... 5
Table: Levels At October 2011 .............................................................................................................................................................................. 5
Table: Annual Growth Rate Projections 2012-2016 (%) ....................................................................................................................................... 5
Table: Ranking Out Of 59 Countries Reviewed In 2011 ........................................................................................................................................ 6
Table: Projected Levels (VNDbn) .......................................................................................................................................................................... 6
Table: Projected Levels (US$bn) ........................................................................................................................................................................... 6
SWOT Analysis ................................................................................................................................................. 7
Vietnam Commercial Banking SWOT .................................................................................................................................................................... 7
Vietnam Political SWOT ........................................................................................................................................................................................ 8
Vietnam Economic SWOT ...................................................................................................................................................................................... 9
Vietnam Business Environment SWOT................................................................................................................................................................. 10
Business Environment Outlook .................................................................................................................... 11
Commercial Banking Business Environment Rating ................................................................................................................................................. 11
Table: Commercial Banking Business Environment Ratings ............................................................................................................................... 11
Commercial Banking Business Environment Rating Methodology ........................................................................................................................... 12
Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 13
Global Commercial Banking Outlook........................................................................................................... 14
Asia Outlooks ................................................................................................................................................. 22
Trade Finance Growth Set To Slow .......................................................................................................................................................................... 22
Asia Banking Sector Forecast Overview ..................................................................................................... 26
Table: Banks' Bond Portfolios 2011 .................................................................................................................................................................... 26
Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 27
Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios ............................................................................................................. 28
Table: Anticipated Developments in 2012 ........................................................................................................................................................... 29
Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) ................................................................................................. 30
Table: Comparison of US$ Per Capita Deposits (2011) ...................................................................................................................................... 31
Table: Interbank Rates and Bond Yields .............................................................................................................................................................. 32
Vietnam Specific Banking Sector Outlook .................................................................................................. 33
Assessing The Risks Behind Vietinbank's Debt Issue ................................................................................................................................................ 33
Economic Outlook .......................................................................................................................................... 37
Table: Vietnam – Economic Activity, 2011-2016 ................................................................................................................................................. 39
Competitive Landscape ................................................................................................................................. 40
Market Structure ....................................................................................................................................................................................................... 40
Protagonists......................................................................................................................................................................................................... 40
Table: Protagonists In Vietnam's Commercial Banking Sector ........................................................................................................................... 40
Definition Of The Commercial Banking Universe................................................................................................................................................ 40
List Of Banks ....................................................................................................................................................................................................... 41
Table: Financial Institutions In Vietnam ............................................................................................................................................................. 41
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Vietnam Commercial Banking Report Q3 2012
Company Profiles ........................................................................................................................................... 44
Bank for Foreign Trade of Vietnam (Vietcombank) ............................................................................................................................................. 44
Table: Vietnam Stock Market Indicators.............................................................................................................................................................. 45
Table: Vietnam Balance Sheet (US$mn) .............................................................................................................................................................. 45
Table: Vietnam Key Ratios (%)............................................................................................................................................................................ 45
VietinBank ........................................................................................................................................................................................................... 46
Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) ................................................................................................................................ 47
Agribank .............................................................................................................................................................................................................. 48
Table: Vietnam Balance Sheet (LCYmn) .............................................................................................................................................................. 49
Table: Vietnam Balance Sheet (US$mn) .............................................................................................................................................................. 49
Table: Vietnam Key Ratios (%)............................................................................................................................................................................ 49
Asia Commercial Bank ........................................................................................................................................................................................ 50
Table: Vietnam Stock Market Indicators.............................................................................................................................................................. 51
Table: Vietnam Balance Sheet (LCYmn) .............................................................................................................................................................. 51
Table: Vietnam Balance Sheet (US$mn) .............................................................................................................................................................. 51
Table: Vietnam Key Ratios (%)............................................................................................................................................................................ 52
Eximbank ............................................................................................................................................................................................................. 53
Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 54
Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 54
Table: Key Ratios (%).......................................................................................................................................................................................... 54
Vietnam Technological and Commercial Joint-stock Bank (Techcombank) ........................................................................................................ 55
Table: Vietnam Balance Sheet (LCYmn) .............................................................................................................................................................. 56
Table: Vietnam Balance Sheet (US$mn) .............................................................................................................................................................. 56
Table: Vietnam Key Ratios (%)............................................................................................................................................................................ 56
Viet A Joint Stock Commercial Bank (Vietabank) ................................................................................................................................................ 57
Table: Vietnam Stock Market Indicators.............................................................................................................................................................. 57
Table: Vietnam Balance Sheet (LCYmn) .............................................................................................................................................................. 58
Table: Vietnam Balance Sheet (US$mn) .............................................................................................................................................................. 58
Table: Vietnam Key Ratios (%)............................................................................................................................................................................ 59
Housing Development Commercial Joint Stock Bank (HDBank) ......................................................................................................................... 60
Sacombank ........................................................................................................................................................................................................... 61
Table: Stock Market Indicators............................................................................................................................................................................ 62
Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 62
Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 63
Table: Key Ratios (%).......................................................................................................................................................................................... 63
BMI Banking Sector Methodology ................................................................................................................ 64
Commercial Bank Business Environment Rating ...................................................................................... 66
Table: Commercial Banking Business Environment Indicators And Rationale.................................................................................................... 67
Table: Weighting Of Indicators ........................................................................................................................................................................... 68
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Executive Summary
Table: Levels (VNDbn)
Date
Client
Bond
loans portfolio
Total assets
Liabilities
Other and capital
Capital
Client
deposits
Other
October 2010
2,771,909.8 2,314,760.0 210,505.1 246,644.7 2,771,909.8 384,514.0 2,106,934.6 280,461.2
October 2011
3,264,325.0 2,717,010.0 256,893.0 290,422.0 3,264,325.0 533,828.0 2,412,745.0 317,752.0
Change, %
18%
17%
22%
18%
18%
39%
15%
13%
Source: BMI; Central banks; Regulators
Table: Levels (US$bn)
Total
assets
Client
loans
Bond
portfolio
Other
Liabilities
and capital
Capital
Client
deposits
Other
October 2010
142.2
118.7
10.8
12.6
142.2
19.7
108.1
14.4
October 2011
155.4
129.4
12.2301
13.8
155.4
25.4
114.9
15.1
9%
9%
13%
9%
9%
29%
6%
5%
Date
Change, %
Source: BMI; Central banks; Regulators
Table: Levels At October 2011
Loan/deposit ratio
Loan/asset ratio
Loan/GDP ratio
GDP Per Capita, US$
Deposits per capita, US$
83.23%
113.06%
1,072
1,296
Falling
Falling
Assets
Loans
Deposits
Annual Growth Rate
16
16
11
CAGR
20
19
13
3
3
15
112.61%
Rising
Source: BMI; Central banks; Regulators
Table: Annual Growth Rate Projections 2012-2016 (%)
Ranking
Source: BMI; Central banks; Regulators
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Ranking Out Of 59 Countries Reviewed In 2011
Loan/deposit ratio
Loan/asset ratio
Loan/GDP ratio
1
13
Local currency loan growth
Local currency deposit growth
3
8
10
Local currency asset
growth
3
Source: BMI; Central banks; Regulators
Table: Projected Levels (VNDbn)
2009
2010
2011e
2012f
2013f
2014f
2015f
2016f
Total assets
2,286,320.58 2,953,153.46 3,632,378.76 4,467,825.87 5,406,069.30 6,487,283.16 7,654,994.13 8,879,793.19
Client loans
1,869,260.00 2,475,540.00 3,020,158.80 3,684,593.74 4,458,358.42 5,350,030.10 6,313,035.52 7,323,121.21
Client deposits
1,680,716.80 2,209,896.20 2,651,875.44 3,076,175.51 3,506,840.08 3,962,729.29 4,438,256.81 4,926,465.06
e/f = estimate/forecast. Source: BMI; Central banks; Regulators
Table: Projected Levels (US$bn)
2008
2009
2010
2011e
2012f
2013f
2014f
2015f
2016f
Total assets
99.94
123.73
151.46
172.68
212.40
259.91
315.45
376.54
441.78
Client loans
76.60
101.16
126.96
143.58
175.16
214.34
260.15
310.53
364.33
Client deposits
76.71
90.95
113.34
126.07
146.24
168.60
192.69
218.31
245.10
e/f = estimate/forecast. Source: BMI; Central banks; Regulators
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
SWOT Analysis
Vietnam Commercial Banking SWOT
Strengths
Weaknesses
Opportunities
Threats
ƒ
Rapid growth.
ƒ
Untapped potential.
ƒ
High savings rate of Vietnamese.
ƒ
Domestic banks lack capital and technology to sustain high credit growth.
ƒ
The financial accounts of many banks are still opaque.
ƒ
The population is still underbanked.
ƒ
Income levels likely to rise strongly over the medium term.
ƒ
Macroeconomic instability threatens the credibility of the government and could
potentially move economic policy away from further liberalisation.
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Vietnam Commercial Banking Report Q3 2012
Vietnam Political SWOT
Strengths
Weaknesses
Opportunities
Threats
ƒ
The Communist Party of Vietnam remains committed to market-oriented reforms and
we do not expect major shifts in policy direction over the next five years. The one-party
system is generally conducive to short-term political stability.
ƒ
Relations with the US have witnessed a marked improvement, and Washington sees
Hanoi as a potential geopolitical ally in South East Asia.
ƒ
Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.
ƒ
There is increasing (albeit still limited) public dissatisfaction with the leadership's tight
control over political dissent.
ƒ
The government recognises the threat corruption poses to its legitimacy, and has
acted to clamp down on graft among party officials.
ƒ
Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within the oneparty system.
ƒ
Macroeconomic instabilities in 2012 are likely to weigh on public acceptance of the
one-party system, and street demonstrations to protest economic conditions could
develop into a full-on challenge of undemocratic rule.
ƒ
Although strong domestic control will ensure little change to Vietnam's political scene
in the next few years, over the longer term, the one-party-state will probably be
unsustainable.
ƒ
Relations with China have deteriorated over recent years due to Beijing's more
assertive stance over disputed islands in the South China Sea and domestic criticism
of a large Chinese investment into a bauxite mining project in the central highlands,
which could potentially cause wide-scale environmental damage.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Vietnam Economic SWOT
Strengths
Weaknesses
Opportunities
Threats
ƒ
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.
ƒ
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.
ƒ
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.
ƒ
The heavily-managed and weak currency reduces incentives to improve quality of
exports, and also keeps import costs high, contributing to inflationary pressures.
ƒ
WTO membership has given Vietnam access to both foreign markets and capital,
while making Vietnamese enterprises stronger through increased competition.
ƒ
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.
ƒ
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.
ƒ
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.
ƒ
Prolonged macroeconomic instability could prompt the authorities to put reforms on
hold as they struggle to stabilise the economy.
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Vietnam Commercial Banking Report Q3 2012
Vietnam Business Environment SWOT
Strengths
Weaknesses
Opportunities
Threats
ƒ
Vietnam has a large, skilled and low-cost workforce, that has made the country
attractive to foreign investors.
ƒ
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.
ƒ
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.
ƒ
Vietnam remains one of the world's most corrupt countries. According to Transparency
International's 2011 Corruption Perceptions Index, Vietnam ranks 112 out of 183
countries.
ƒ
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.
ƒ
Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry
points.
ƒ
Ongoing trade disputes with the US, and the general threat of American protectionism,
which will remain a concern.
ƒ
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.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Business Environment Outlook
Commercial Banking Business Environment Rating
Table: Commercial Banking Business Environment Ratings
Limits of potential returns
Data
Score; out of 10
Ratings score; out of 100
Total assets; end 2012, US$bn
172.7
6
Market Structure 70
Growth in total assets; 2012-2016, US$bn
229.4
7
Growth in client loans; 2012-2016, US$bn
189.2
8
1,509.0
3
Tax
2.9
3
GDP volatility
0.9
10
Financial infrastructure
5.6
6
Regulatory framework and development
2.0
2
Regulatory framework and competitive landscape
5.0
5
Moody's rating for local currency deposits
3.5
4
Long-term financial risk
4.6
5
Long-term external risk
3.3
3
Long-term policy continuity
7.0
7
Legal framework
3.7
4
Bureaucracy
3.9
4
Per-capita GDP; 2012, US$
Country Structure 55
Risks to realisation of returns
Commercial banking business environment rating
Market Risk 37
Country Risk 46
57
Source: BMI, National Sources
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Commercial Banking 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.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Asia Commercial Banking Business Environment Ratings
Limits of Potential
Returns
Risks to Potential
Returns
Overall
Market
Structure
Country
Structure
Market
Risks
Country
Risks
Rating
Ranking
Bangladesh
50.0
45.0
43.3
44.0
46.7
52
China
93.3
55.0
63.3
74.0
75.5
13
Hong Kong
76.7
92.5
73.3
84.0
82.0
6
India
83.3
57.5
60.0
56.0
68.4
28
Indonesia
76.7
65.0
80.0
52.0
69.4
26
Japan
33.3
77.5
66.7
80.0
58.1
37
Malaysia
73.3
80.0
83.3
80.0
77.6
10
Pakistan
40.0
50.0
53.3
42.0
44.8
55
Philippines
50.0
62.5
60.0
58.0
56.1
44
Singapore
53.3
95.0
96.7
90.0
76.8
11
Sri Lanka
20.0
55.0
33.3
46.0
36.1
58
South Korea
80.0
82.5
83.3
76.0
80.4
8
Taiwan
76.7
72.5
86.7
76.0
76.6
12
Thailand
63.3
65.0
86.7
74.0
68.5
27
Vietnam
70.0
55.0
36.7
46.0
57.5
40
United States
90.0
85.0
100.0
80.0
88.0
2
Scores out of 100, with 100 the highest. Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Global Commercial Banking Outlook
Global Credit Divergence
Despite major risks emanating from the European debt crisis (which we looked at closely in the Q1 2012
report in the article 'Europe On The Brink'), our overall global banking outlook remains relatively benign.
Of 62 banking sectors forecast by BMI, we are forecasting lending expansion in 52 in 2012, with the nine
non-growing or contracting sectors dominated by developed states/eurozone members (Australia, Austria,
Spain, Greece, Italy, Japan, and Slovenia), with Latvia (an EU member borderline developed state by
global banking standards) and Iran the only EM representatives. This is a microcosm of our global view
as a whole, which is that banking sectors in most developed states will continue to struggle amid
government austerity and household deleveraging, whereas by and large, emerging market banking
sectors will continue to expand.
Using comparable data from the IMF (which we use for our global credit aggregate series) going up to the
end of 2011, two trends stand out. Firstly, emerging market banking sectors are catching up rapidly to the
world's two biggest banking sectors, the US and the eurozone, in terms of lending growth. Since the
global financial crisis began in 2007, it is clear that the US and eurozone combined have lagged the rest
of the world in credit creation. In fact, while several emerging market economies continue to set new
domestic records for credit outstanding, the US plus the eurozone have gone basically nowhere for three
years, as the accompanying chart shows. In fact, credit in the US plus eurozone has fallen from an
estimated 54% of all global credit to around 46%, a downward trend which we see continuing in the years
ahead.
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Vietnam Commercial Banking Report Q3 2012
US And Eurozone Back In The Minority For Global Credit
Global Credit Aggregates (US$bn)
Source: IMF, BMI
Secondly, between the US and eurozone, we are more optimistic that the US is past the worst. There are
significant risks that despite ECB intervention, credit growth in the eurozone is likely to continue to
deteriorate. Of course, there is a great deal of differentiation between credit aggregates in different euro
area members, with troubled countries such as Ireland, Greece and Spain experiencing major credit
contractions, while France and Germany among others are still posting fairly strong numbers. But on the
whole, eurozone credit growth is negative and heading lower. Here is a chart of year-on-year consumer
credit growth in the US and eurozone. While this should be taken with the caveat that US consumer
lending includes government-subsidised student loans, the US appears to have turned the corner in overall
consumer credit, whereas we expect further stagnation in the eurozone.
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Vietnam Commercial Banking Report Q3 2012
US Consumer Lending Turning The Corner?
US v Eurozone Consumer Credit (% chg y-o-y)
Source: Eurostat, Federal Reserve, BMI
While US mortgage lending continues to be a sore point in the US economy as deleveraging continues, it
appears that the contraction has steadied at around -2% y-o-y. This should head higher in a few years'
time. In contrast, eurozone mortgage lending has been healthy by comparison, but is beginning to slow
rapidly (down from 5.0% y-o-y in early 2011 to 2.0% in Q411).
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Vietnam Commercial Banking Report Q3 2012
Both Could Be Negative Soon
US v Eurozone Mortgage Credit Outstanding (% chg y-o-y)
Source: Eurostat, Federal Reserve, BMI
Finally, looking at corporate debt growth as well, the US has the advantage. Interestingly, the data
indicate that European corporates are looking increasingly to debt instrument issuance as opposed to bank
lending for financing, which plays up the contrast between healthy corporate balance sheets and weak
banks.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
US Corporates Have The Edge
US v Eurozone Corporate Credit (% chg y-o-y)
Source: Eurostat, Federal Reserve, BMI
Our overarching view is that further weakness is ahead for European banks, while US financial
institutions are in better shape going forward. Overall global credit growth will continue to be driven by
non-eurozone and US institutions, however, led by emerging markets. That view comes with the caveat
that within EM, selectivity is key, and a further downturn in either the US or European banking systems
would reverberate globally.
Emerging Markets Regional Overviews
Emerging Asia: In 2012 we expect weaker earnings, hampered by foreign funding constraints, slower
credit growth, and higher non-performing loans. One corollary of the surge in credit growth seen in 2010
and 2011, and the inevitable slowdown in 2012, will be a resurgence in non-performing loans (NPLs).
Our core view is for a sharp slowdown in real GDP growth across the board this year, lead by a hard
landing in China and a slowdown in trade growth driven by a recession in the eurozone. These factors
alone are likely to lead to an uptick in NPLs. However, when we combine this with the impact of
weakening housing markets across the region and tighter availability of credit, the impact on NPLs is
likely to be exacerbated. We look for the likes of China, Hong Kong, and Australia to see a surge in bad
debts in 2012.
Emerging Europe: We maintain our wary view towards Central and Eastern European (CEE) banking
sectors on the back of continued macroeconomic and financial headwinds emanating from the eurozone
sovereign debt crisis. We also hold to our preference for the Czech Republic and Poland's banking sectors
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
on the grounds of stability and growth potential, respectively, while reaffirming our negative outlook for
the Hungarian and Ukrainian banking. We also caution that Southeastern European banking sectors are
showing some worrying risk indicators.
Things Could Get Much Worse
Hungary – Non-Performing Loan Data
Source: BMI, Magyar Nemzeti Bank
Latin America: We believe asset and loan growth will remain strong in 2012, driven by stable
fundamentals and the use of monetary stimulus in those markets where credit cycles are slowing. In
addition, we do not view the prevalence of European banks operating in the Latin American region as a
risk to regional banking sector stability. Indeed, those sectors which have greater foreign participation
tend to be the most attractive from a growth perspective, with any serious threats to sector stability
coming mainly from domestic factors.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Some Sectors Have Plenty Of Room To Catch Up
Latin America – Client Loans Per Capita, US$
Source: BMI, SBIF, BCB, SFC, CNBV
Sub-Saharan Africa: The outlook for the South African, Nigerian, Kenyan and Ghanaian banking
sectors is mixed. We see Nigeria and Ghana as having the strongest growth potential over the coming
year, while South Africa should see slow but stable expansion, and Kenya will likely struggle amid
various macroeconomic challenges.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Multi-Year Deleveraging For Some
MENA – Loan-to-GDP, %
Source: BMI, central banks
Middle East And North Africa: Financial institutions in Qatar and Oman are likely to outperform over
the coming quarters, with growth in the latter supported in large part through the long awaited
introduction of Islamic banking to the country. In contrast, risks to underlying stability remain
pronounced in Iran and Egypt, with banks in the former effectively frozen out of the international
financial system as a result of Western sanctions.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Asia Outlooks
Trade Finance Growth Set To Slow
BMI View: FX denominated loans have flourished across Asia over the past year as regional banks have
taken up the slack amid eurozone retrenchment and still-strong corporate demand. While this has been a
major boost to profits throughout the industry, the failure of FX deposits to keep up with loans has left a
worryingly large loan-to-deposit overhang. As such, funding costs are likely to rise, which will weigh on
margins, and there are growing risks in the event of a deterioration in US financial conditions. That said,
regional central banks are as flush as ever with US dollars, and swap lines are in place, meaning that a
collapse in trade financing is unlikely.
In our Q112 Asia Banking Sector report, we highlighted three risks to the outlook for Asian banks.
Foreign funding constraints, slowing credit growth, and rising non-performing loans (NPLs) continue to
cloud the outlook for Asian banking sector profits in 2012, and the performance of equities. So far, we
have started to see signs of a slowdown in credit growth on the whole. However, one area that continues
to show robust growth is trade financing. With European banks retrenching en masse amid sovereign
concerns within the eurozone, Asian banks have stepped in to fill the void left in the trade finance market
as corporates have looked to take advantage of low US dollar interest rates versus local currency rates. As
a result, FX loans have proliferated over the past year, resulting in strong profit growth, but also a
growing asset-liability mismatch.
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Vietnam Commercial Banking Report Q3 2012
Booming Growth Figures
Asia – FX Loan Growth Across Asia In 2011
Source: BMI, Regional Central Banks
Asia Eating Into Europe's Dominance
The trade finance market, estimated to be worth as much as US$10trn a year globally, and supporting in
excess of 80% of global trade, has traditionally been dominated by European banks, which up until
recently held a dominant market share. With European banks deleveraging and trying to improve their
capital adequacy ratios amid sovereign default concerns, Asian banks have been keen to pick up the slack,
given the relatively low risk nature of the industry and the strong growth in intra-Asian trade seen over
recent years.
According to Dealogic, three of the region's top five providers of trade finance by market share in Q112
were Asian. This compares with only one of the top five a year ago. Not only has strong trade growth
over recent years driven a trade finance boom, but they have been positively reinforcing each other. One
of the reasons global trade flows have held up relatively well despite the ongoing eurozone crisis is the
robustness of trade financing in Asia. In the 2008-09 global financial crisis, banking sector instability
caused a major pullback from the industry, generating a vicious cycle of deteriorating economic
conditions and banking sector stress. The willingness of Asian banks to step in to fill the void has been a
major supportive factor for regional trade and economic growth. While exports to the euozone have
softened in recent months, there has been no material deterioration in intra-Asian trade.
Dealogic data shows that Japanese banks have made a particularly strong leap into the sector, with
Mitsubishi UFJ Financial Group now ranking first in the region by market share with 16.6% of the
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Vietnam Commercial Banking Report Q3 2012
market in the first quarter, up from just 5.5% last year, while Sumitomo Mitsui Financial Group has
more than doubled its market share to 9.6%. Singaporean banks are also expanding rapidly in this area,
with DBS reporting that trade finance accounted for half of its loan growth last year.
Worryingly High Loan-to-Deposit Mismatch
As we mentioned in our previous banking sector report, however, this lending boom has meant that Asian
banks are now sitting on very high FX loans to deposit ratios. For the region as a whole we estimate the
total FX loans-to-deposit ratio is in excess of 100% as a result of double-digit FX loan growth in 2011.
This makes short-term funding, mainly in US dollars, crucial to keeping these loan levels elevated, and
here the risks are noteworthy. These concerns were recently highlighted by Moody's, which cautioned
about the growing asset-liability mismatch. In our view, we could see funding costs rise for Asian banks
given the growing dollar demand, particularly if we begin to see signs of credit stress develop in the US
banking sector. Indeed, with Asian banks using swap agreements with their US counterparts to fund
lending, a rise in swap spreads represents a major risk. This is likely to weigh on margins and also lead to
a slowdown in FX lending over the coming months. Furthermore, while we are bullish towards Asian FX
in the near term, we continue to see weakness across the region in H212, which would raise the local
currency value of borrowings, making it more difficult to meet loan repayments.
Large FX Loan Overhang
Asia – Loan-to-Deposit Ratios And FX Loan Growth
Source: BMI
On the whole, Asian external balance sheets are in good health, with most countries in the region holding
more international reserves then prior to the global financial crisis. As such, US dollars would be readily
available from central banks in the event that dollar funding dries up. The potential for a re-opening of the
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Vietnam Commercial Banking Report Q3 2012
swap lines between Asian central banks and the US Federal Reserve, which were established in the depths
of the financial crisis, also means that a large-scale freeze in lending is unlikely, notwithstanding the
potential for funding channels to become tighter as 2012 progresses.
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Vietnam Commercial Banking Report Q3 2012
Asia Banking Sector Forecast Overview
Table: Banks' Bond Portfolios 2011
Bond Portfolio, US$bn
Bond as % total assets
Year-on-year growth %
16.6
23.0
8.2
1,810.1
11.0
10.0
Hong Kong
350.0
19.8
3.4
India
282.8
22.3
8.4
14.9
4.6
-1.1
3,408.3
30.8
7.5
Malaysia*
68.2
14.0
15.7
Pakistan*
21.8
28.4
26.7
Philippines*
37.2
26.4
9.2
Singapore*
73.3
12.0
-1.1
2.2
12.8
22.2
South Korea*
266.1
17.4
14.0
Taiwan*
192.7
16.8
40.2
Thailand*
60.6
15.5
7.6
Vietnam*
10.5
6.9
28.4
450.5
3.6
-14.5
Bangladesh*
China
Indonesia*
Japan
Sri Lanka
United States
Source: Central banks, regulators, BMI, *Only 2010 data available
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Vietnam Commercial Banking Report Q3 2012
Table: Asia Commercial Banking Business Environment Ratings
Limits of Potential
Returns
Risks to Potential
Returns
Overall
Market
Structure
Country
Structure
Market
Risks
Country
Risks
Rating
Ranking
Bangladesh
50.0
45.0
43.3
44.0
46.7
52
China
93.3
55.0
63.3
74.0
75.5
13
Hong Kong
76.7
92.5
73.3
84.0
82.0
6
India
83.3
57.5
60.0
56.0
68.4
28
Indonesia
76.7
65.0
80.0
52.0
69.4
26
Japan
33.3
77.5
66.7
80.0
58.1
37
Malaysia
73.3
80.0
83.3
80.0
77.6
10
Pakistan
40.0
50.0
53.3
42.0
44.8
55
Philippines
50.0
62.5
60.0
58.0
56.1
44
Singapore
53.3
95.0
96.7
90.0
76.8
11
Sri Lanka
20.0
55.0
33.3
46.0
36.1
58
South Korea
80.0
82.5
83.3
76.0
80.4
8
Taiwan
76.7
72.5
86.7
76.0
76.6
12
Thailand
63.3
65.0
86.7
74.0
68.5
27
Vietnam
70.0
55.0
36.7
46.0
57.5
40
United States
90.0
85.0
100.0
80.0
88.0
2
Scores out of 100, with 100 the highest. Source: BMI
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Vietnam Commercial Banking Report Q3 2012
Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios
Loan
deposit
ratio %
Trend
Loan/
Asset
ratio %
Trend
Loan/
GDP
ratio %
Rank
Rank
Rank
Trend
Bangladesh
95.3
33
Falling
67.2
11
Falling
51.6
41
Rising
China
68.3
55
Falling
52.1
41
Falling
118.1
13
Falling
Hong Kong
66.9
57
Rising
37.0
58
Rising
263.9
2
Rising
India
75.7
49
Rising
58.6
37
Rising
46.4
46
Rising
Indonesia
80.0
44
Rising
60.1
31
Falling
29.7
53
Rising
Japan
70.6
52
Falling
49.8
46
Falling
90.4
21
Rising
Malaysia
78.8
47
Falling
58.1
36
Falling
120.4
10
Rising
Pakistan
68.6
60
Falling
50.4
50
Falling
22.2
57
Falling
Philippines
67.3
53
Rising
49.7
42
Rising
33.3
52
Rising
Singapore
91.4
38
Rising
49.0
47
Rising
125.5
11
Rising
Sri Lanka
80.7
48
Rising
61.1
26
Rising
29.1
54
Rising
113.6
18
Falling
70.6
9
Falling
99.0
16
Falling
74.2
50
Falling
60.2
29
Falling
152.2
6
Rising
Thailand
108.9
22
Rising
66.0
16
Rising
81.2
26
Rising
Vietnam
113.9
10
Rising
83.1
1
Falling
121.4
9
Falling
United States
111.1
20
Falling
75.1
4
Falling
62.9
33
Falling
South Korea
Taiwan
Source: Central banks, regulators, BMI
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Vietnam Commercial Banking Report Q3 2012
Table: Anticipated Developments in 2012
Trend
Loan Growth,
US$bn
Deposit
Growth,
US$bn
Residual,
US$bn
95.6
Rising
10.2
10.5
-0.3
China
68.3
Falling
461.4
675.0
-213.7
Hong Kong
66.9
Falling
19.2
28.7
-9.5
India
75.7
Falling
193.9
256.2
-62.3
Indonesia
82.0
Rising
54.4
58.7
-4.3
Japan
69.6
Falling
167.7
357.6
-189.8
Malaysia
78.4
Falling
27.8
37.3
-9.5
Pakistan
60.9
Falling
-1.4
6.8
-8.2
Philippines
69.2
Rising
4.2
3.1
1.1
Singapore
90.2
Falling
29.4
37.6
-8.2
Sri Lanka
78.4
Falling
0.4
1.1
-0.7
111.5
Falling
39.1
53.3
-14.2
75.2
Rising
21.7
15.7
6.1
Thailand
108.4
Falling
2.3
3.3
-1.0
Vietnam
119.8
Rising
31.6
20.2
11.4
United States
108.5
Falling
569.1
725.6
-156.6
Loan/Deposit
Ratio, %
Bangladesh
South Korea
Taiwan
NB Incorporates estimated economic data and projected banking data. Source: Central banks, regulators, BMI
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Vietnam Commercial Banking Report Q3 2012
Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn)
2011
2010
Total
Assets
Client
Loans
Client
Deposits
Total
Assets
Client
Loans
Client
Deposits
73.8
49.6
52.0
72.2
48.9
50.8
16,477.9
8,588.8
12,567.0
14,592.6
7,606.2
11,129.1
Hong Kong
1,769.2
654.1
977.4
1,581.2
543.9
882.8
India
1,267.6
742.3
980.7
1,275.6
725.8
1,005.0
404.7
243.2
304.1
322.1
196.7
260.5
11,067.4
5,506.2
7,800.1
10,039.1
5,149.0
7,142.4
Malaysia
541.2
314.2
398.8
485.7
286.1
361.0
Pakistan
87.1
43.9
61.4
76.8
46.0
56.7
Philippines
149.4
74.2
110.3
140.7
64.8
103.5
Singapore
662.4
324.3
354.7
609.0
251.5
338.0
Sri Lanka
27.4
16.7
20.7
23.1
13.1
17.6
South Korea
1,532.5
1,081.9
952.1
1,527.1
1,083.3
915.9
Taiwan
1,147.6
690.6
931.1
1,147.1
690.3
913.1
Thailand
411.5
271.4
249.3
391.1
247.8
245.3
Vietnam
172.7
143.6
126.1
151.5
127.0
113.3
12,622.7
9,484.3
8,537.0
11,884.0
9,256.1
7,971.5
Bangladesh
China
Indonesia
Japan
United States
Source: Central banks, regulators, BMI
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Vietnam Commercial Banking Report Q3 2012
Table: Comparison of US$ Per Capita Deposits (2011)
GDP Per Capita
Client Deposits,
per capita
Rich 20% Client
Deposits, per
capita
Poor 80% Client
Deposits, per
capita
734
330
1,383
86
5,260
6,374
37,303
2,331
34,728
91,839
548,918
34,307
India
1,503
598
3,160
197
Indonesia
3,492
1,004
5,020
314
46,440
43,528
246,648
15,416
Malaysia
9,357
10,887
55,273
3,455
Pakistan
1,130
248
1,390
87
Philippines
2,374
783
4,650
291
Singapore
49,828
62,513
273,451
17,091
Sri Lanka
2,812
795
3,940
246
South Korea
23,639
22,357
78,696
4,919
Taiwan
20,156
29,752
160,447
10,028
Thailand
5,046
3,961
14,554
910
Vietnam
1,357
1,617
5,679
355
48,190
30,293
109,070
6,817
Bangladesh
China
Hong Kong
Japan
United States
Source: Central banks, regulators, BMI
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Vietnam Commercial Banking Report Q3 2012
Table: Interbank Rates and Bond Yields
3 Month Interbank Rate %
Current Account % of
GDP, 2011f
Budget balance % of
GDP, 2011f
End Q1 2012
Bangladesh
0.9
-4.1
n/a
China
2.9
-1.9
1.50
Hong Kong
5.0
3.3
0.33
-3.5
-8.8
11.50
Indonesia
0.2
-1.7
4.10
Japan
2.1
-10.6
0.05
Malaysia
11.9
-5.1
3.18
Pakistan
0.1
-6.6
11.60
Philippines
2.6
-2.0
2.88
Singapore
22.1
1.5
0.19
Sri Lanka
-7.8
-6.9
10.50
South Korea
2.3
1.0
3.53
Taiwan
8.8
-3.0
0.84
Thailand
3.4
-3.1
3.02
Vietnam
-4.7
-2.6
12.50
United States
-3.1
-8.6
India
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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Vietnam Commercial Banking Report Q3 2012
Vietnam Specific Banking Sector Outlook
Assessing The Risks Behind Vietinbank's Debt Issue
BMI View: We believe that Vietinbank's successful debt issue could pave the way for more issuances by
other Vietnamese commercial banks over the coming years. Our assessment suggests that a relatively
high degree of leverage, which could amplify the risk of default, explains the 329 basis points premium on
the bank's bonds over sovereign bonds. However, we believe that concerns over a future default by CTG
are largely unjustified, presenting an attractive opportunity for investors.
The Vietnam Commercial Bank for Industry and Trade (CTG), also known as Vietinbank, has
successfully issued US$250mn worth of US dollar-denominated debt in the international market, with an
annual coupon rate of 8.25% maturing in 2017. Judging from the positive response by foreign investors in
taking up the first international debt issue by a Vietnamese financial institution, we believe that this could
pave the way for more issuances by other Vietnamese commercial banks over the coming years.
Most Profitable In The Group
Vietnam – Net Interest Margins, %
Source: BMI, Bloomberg
Improving Macroeconomic Fundamentals
Given that recent economic data coming from Vietnam is beginning to reflect our core view of a turning
point in the country's macroeconomic fundamentals, we believe that the Vietnamese debt market will
become increasingly attractive to foreign investors. Despite our bullish outlook on the economy, which
suggests that CTG's bonds presents a compelling opportunity for investors, we still believe that it is
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Vietnam Commercial Banking Report Q3 2012
worthwhile to assess the underlying risks associated with CTG's latest debt issue. Furthermore, our
conviction that the State Bank of Vietnam (SBV) will introduce another 200 basis points (bps) worth of
rate cuts by the end of the year, although this has largely been priced into bond yields, should generally be
positive for fixed-income assets.
From a bondholder's perspective, the risk of a potential default is the sole reason associated with the 329
basis points (bps) premium that CTG's newly issued bonds is currently yielding over its most comparable
Vietnamese government US dollar bond (at the time of writing, CTG's bonds were yielding 8.69%,
compared to 5.40% on sovereign bonds). Indeed, the mismanagement of state-owned enterprise (SOE)
Vietnam Shipbuilding Industry Group, which almost brought the company to the brink of bankruptcy
in 2010, has severely undermined investors' confidence. Not surprisingly, rating agency Moody's
Investors Service has assigned a B1 long-term rating on CTG's debt, categorising the issue as 'speculative'
and 'subject to high credit risk' while Standard and Poor's has assigned a B+ rating, implying 'significant
speculative characteristics'.
Quality Of Loans A Priority
Vietnam – Non-Performing Loans To Total Assets, %
Source: BMI, Bloomberg
Fears Of A Potential Default Overdone
Although we do acknowledge that the risk of default by Vietnamese commercial banks is certainly greater
in comparison to other emerging market commercial banks in South East Asia, we believe that concerns
over a future default by CTG may have been overpriced by the bond market, presenting attractive
opportunities for investors with a greater risk appetite. There are several reasons why we see concerns of
a future default by CTG as largely unjustified. Firstly, the Vietnamese government is financially capable
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Vietnam Commercial Banking Report Q3 2012
and very likely to intervene in the event of default concerns, especially given the relatively small size of
CTG's latest debt issue. Secondly, policymakers are fully aware that a gradual privatisation of stateowned banks through share issues (the SBV presently holds a 83% stake in CTG's equity) and efforts to
speed up development of the debt market, are essential to the Vietnamese government's long term
economic development goals. Therefore, the government has an incentive to ensure that foreign investors
who participated in the early stages of the banking sector's privatisation will do relatively well.
Higher Leverage Higher Risks
Vietnam – Average Assets To Average Equity Ratio
Source: BMI, Bloomberg
In A Better Shape Compared To Its Peers
CTG's fundamentals are also much better in comparison to its industry peers from a bondholder's
perspective. In terms of the quality of CTG's loan portfolio, non-performing loans (NPL) as a share of
total assets have remained relatively stable in recent years, averaging 0.6% since mid-2009. More
importantly, CTG's NPL ratios have remained relatively low in comparison to its peers (see chart). We
note that this is despite a rapid expansion in the company's loan portfolio, which grew by 25% in 2011
according to its 2011 annual report, while loans for the whole banking sector grew by around 13%.
Meanwhile, CTG is also the most profitable among its peers, enjoying a strong net interest margin (NIM)
of 5.3%. Looking at CTG's assets-to-equity ratio, however, we note that the bank is the most leveraged
among its peers with average total assets currently at 16.6 times the size of average total equity in 2011.
Our assessment suggests that a relatively high degree of leverage, which amplifies the risk of default,
explains the 329bps premium on CTG's bonds. However, we remain convinced that fears over the risk of
default are largely unjustified, thus providing a compelling opportunity for investors. A key risk to our
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Vietnam Commercial Banking Report Q3 2012
outlook would lie in a sudden pick up in NPLs should we see a larger-than-expected increase in
bankruptcies over the coming months, which could dent investor sentiment towards the health of the
company's fundamentals in the short term. Over the longer term, however, our bullish outlook on
Vietnam, which is supported by structural macroeconomic improvements in the country, means that we
are optimistic towards the performance of CTG's debt and we expect yields to fall over the coming years.
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Vietnam Commercial Banking Report Q3 2012
Economic Outlook
Deteriorating Economic Data Prompts Growth Downgrade
BMI View: Recent economic data suggest that the outlook for Vietnam's economic growth has
deteriorated significantly in recent months. Furthermore, the State Bank of Vietnam (SBV)'s indication
that it will normalise interest rates only by Q412 (we were expecting that the monetary easing cycle
would be fully completed by Q312), means that credit conditions will remain tight throughout the year.
Consequently, we have downgraded our real GDP growth forecast from 5.8% to 5.2% for 2012.
Recent data suggest that economic activity will continue to moderate over the coming quarters, presenting
significant downside risks to our already below consensus forecast of 5.8% for real GDP growth in 2012.
The State Bank of Vietnam (SBV)'s monetary easing cycle is also turning out to be less aggressive than
we have anticipated. SBV governor Nguyen Van Binh announced during a press conference on April 11
that the central bank is planning to cut its policy rate (refinancing rate) by 100 basis points (bps) every
quarter towards the end of the year. Although this is largely in line with our core view that the SBV will
normalise interest rates by introducing 400bps of rate cuts in 2012 (the SBV has already introduced
200bps worth of rate cuts since the beginning of the year), we were previously expecting that the
monetary easing cycle would be fully completed by Q312. Given the SBV's latest indication to gradually
unwind its tight monetary policy and to normalise interest rates only by Q412, we are revising down our
expectations for Vietnam's economic growth. We now expect real GDP growth to come in at a slightly
more subdued 5.2% for 2012 (down from our previous forecast of 5.8%).
Industrial Production And Manufacturing Sector Growth Slow
Looking at industrial production data, we note that there is conclusive evidence of a sustained slowdown
in production activity since the SBV introduced a wave of aggressive monetary policy measures aimed at
cooling the economy in 2011. Industrial production expanded at just 6.5% year-on-year (y-o-y) in March,
compared with an average 8.8% over the past six months and average 10.4% over the past 12 months.
The slowdown in industrial activity since the beginning of the year has also been confirmed by a
significant decline in manufacturing sector growth, which came in at a weak 4.9% y-o-y in Q112,
compared to 10.0% in Q411. We believe that this is partly due to cooling external demand for new
manufacturing orders, a trend that is also evident in neighbouring manufacturing export-oriented
economies such as Thailand and Malaysia. Given that the manufacturing sector makes up a significant
21.7% share of Vietnam's GDP and that tight credit conditions (average lending rates remain
exceptionally high at around 14-16%) will continue to be a major drag on manufacturing sector growth,
we believe that headline growth will come in significantly below Bloomberg consensus of 6.0%.
Outlook For Private Consumption Looking Weak
Turning to other economic indicators, we note that latest retail sales and domestic vehicle sales data
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Vietnam Commercial Banking Report Q3 2012
remain relatively weak. While retail sales grew at a 27-month low of 21.8% y-o-y in March, domestic
vehicle sales contracted for the sixth consecutive month at -21.4% y-o-y. These figures reinforce our view
that uncertainties over unemployment in the manufacturing sector and corporate earnings will prompt
households and businesses to cut back on spending and investment, resulting in overall weak domestic
demand growth over the coming months. We also note that according to figures published by the Ministry
of Planning and Investment (MPI), around 12,000 enterprises in Vietnam have either declared bankruptcy
or completely went out of business as of Q112. We expect this surge in bankruptcies to result in a higher
unemployment rate over the coming months, which should put further downside pressure on household
spending.
Corporate Tax Cut Unlikely To Boost Investment
In terms of our outlook on Gross Fixed Capital Formation (GFCF) growth, we believe that the
government's plan to slash corporate income tax by 30% for small- and medium-sized enterprises (SMEs)
is unlikely to have a significant impact on private sector investment. Given an abundant stock of spare
capacity due to the large number of bankruptcies in recent months and a much more moderate outlook for
economic growth ahead, we believe that large companies will delay investing in new projects over the
coming months. Furthermore, the government's newly announced tax cut will only apply to SMEs, which
tend to be more conservative towards expanding production during periods of economic uncertainties due
to their relatively weak balance sheets and cash flows in comparison to multi-national companies.
Accordingly, we expect GFCF growth to remain at a relatively subdued 5.0% in 2012.
Public Spending To Increase In Bid To Support Economy
There is increasing evidence that total public expenditure will exceed the government's allocated budget
this year. According to a statement published by the Ministry of Planning and Investment, the National
Assembly is expected to approve an additional VND4.5trn (US$0.2bn) in funds to be spent on five new
infrastructure projects including two bridges, a university dormitory and an oncology hospital. We note
that that this will add to a healthy pipeline of infrastructure projects that already in the construction phase
and are expected to be completed over the coming years. The government has also pledged to maintain
welfare subsidies in response to a challenging economic outlook in 2012. These factors suggest to us that
public spending will still grow at a robust pace of 5.6% this year, albeit lower in comparison with 5.9% in
2011. Nonetheless, this should provide some support for overall headline growth in 2012.
Still Expecting A Trade Deficit
The latest figures published by the General Statistics Office showed a mild trade surplus of US$0.4mn in
March, compared with an average monthly trade deficit of US$0.7mn in 2011. We expect trade import
growth to cool further in 2012 as Vietnamese manufacturers cut back on intermediate goods imports, in
line with our outlook for subdued production activity and moderating economic growth throughout the
year. However, we continue to see external demand remaining subdued in the months ahead and we
expect new exports orders to remain stagnant in 2012. This should in turn lead to an overall slowdown in
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
net exports. Accordingly, we see net exports growing at just 6.0% in 2012, significantly lower compared
with 16.9% in 2011.
Scope For Early Rate Cuts
Recent economic data reinforce our core view of a moderation in Vietnam's real GDP growth from 5.9%
in 2011 to 5.2% in 2012 and that inflationary pressure should continue to wane on the back of cooling
economic activity. The recent round of weak economic data should, however, give the SBV more scope
for early rate cuts in Q312 rather than taking its monetary easing cycle late into the final quarter.
Nonetheless, given that it will take around six to eight months for the effects of the SBV's monetary
policy to fully feed through to the economy, this means that we will only see a pickup in economic
activity in H113. Accordingly, we would consider revising our real GDP growth for 2013 upwards should
we see signs of a robust economic recovery taking place towards the end of the year. Over the longer
term, we remain bullish on Vietnam's attractive growth story and we believe that the government's
renewed focus on maintaining macroeconomic stability will be positive for investor confidence and
economic growth.
Table: Vietnam – Economic Activity, 2011-2016
2011e
2012f
2013f
2014f
2015f
2016f
Nominal GDP, VNDbn
2
2,487,631.9
2,847,455.0
3,192,260.2
3,609,813.5
4,068,807.3
4,588,126.0
Nominal GDP, US$bn
2
120.4
135.4
153.5
175.5
200.1
228.3
5.9
5.2
6.5
7.2
7.3
7.4
1,357
1,509
1,693
1,917
2,165
2,447
88.8
89.7
90.7
91.6
92.4
93.3
Industrial production
1,4
index, % y-o-y, ave
10.9
8.0
12.0
14.0
13.0
12.0
Unemployment, % of
4
labour force, eop
4.5
5.0
4.8
4.7
4.6
4.5
Real GDP growth, %
2
change y-o-y
GDP per capita, US$
Population, mn
e
2
3
f
1
2
Notes: BMI estimates. BMI forecasts. at 1994 prices; Sources: Asian Development Bank, General Statistics
3
4
Office. World Bank/UN/BMI; General Statistics Office.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
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 joint-venture banks have more than five branches.
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Vietnam Commercial Banking Report Q3 2012
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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Vietnam Commercial Banking Report Q3 2012
Table: Financial Institutions In Vietnam
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)
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Vietnam Commercial Banking Report Q3 2012
Table: Financial Institutions In Vietnam
JPMorgan Chase (US)
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
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Company Profiles
Bank for Foreign Trade of Vietnam (Vietcombank)
ƒ
Minority owner Mizuho has boosted bank's profile.
ƒ
One of the largest and longest established banks in Vietnam.
ƒ
Clear competence in external trade.
ƒ
Strong market position.
ƒ
Relatively limited earnings.
ƒ
Weak capital.
ƒ
Lack of transparency
Opportunities
ƒ
Stronger expansion to outpace growth at smaller, non-state rivals.
Threats
ƒ
Tighter monetary policy to tame economic growth.
ƒ
Risk to asset quality on the back of difficult operating environment in 2012.
Strengths
Weaknesses
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.
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$559.04mn) in January 2012, some months after the deal was revealed. The acquisition,
which advantageously gives Vietcombank a stronger foreign partner, involved the sale of
347.61mn shares.
Standard & Poor's, encouraged by the acquisition, argued that Mizuho Corporate Bank's
involvement strengthened Vietcombank's capital position. The agency upgraded its outlook on
the bank's long-term rating to 'stable' from 'negative' in January 2012.
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Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Stock Market Indicators
2009
2010
27-Feb-12
Market Capitalisation LCY
56,874,044.00
57,159,508.00
42,941,740.00
Market Capitalisation US$
3,077.77
2,931.56
2,041.64
Share Price LCY
32,383.58
29,017.86
21,800.00
Share Price US$
1.75
1.49
1.04
na
-15.08
na
Share Price, % change (eop)
Change YTD (2011 only)
-13.54
Shares Outstanding (mn)
1,756.26
1,969.80
1,969.80
Source: BMI
Table: Vietnam Balance Sheet (US$mn)
2002
2003
2004
Total Assets
5,291.58 97,320,504
7,698.66
8,589.06 10,398.11 12,390.40
na 13,826.28 15,770.65
Loans & Mortgages
1,902.16 39,629,760
3,222.64
3,834.90
4,219.14
6,089.27
na
7,413.61
Total Deposits
3,663.53 71,810,032
5,410.48
6,887.63
7,460.07
8,953.09
na
9,168.67 10,580.12
5,734,965
510.48
541.70
697.70
916.84
na
910.20
1,066.24
2002
2003
2004
2005
2006
2007
2008
2009
2010
Return on Assets
0.28
0.67
0.87
1.00
1.89
1.31
na
na
1.50
Return on Equities
6.62
11.77
13.83
15.67
29.42
18.64
na
na
22.55
Loan Deposit Ratio
51.92
55.19
60.67
55.68
56.56
68.01
na
83.59
85.71
Loan Asset Ratio
35.95
40.72
42.64
44.65
40.58
49.15
na
55.43
57.50
Equity Asset Ratio
5.40
5.89
6.63
6.16
6.66
7.36
na
6.54
6.72
Total Shareholders' Equity
285.56
2005
2006
2007
2008
2009
2010
8,776.53
Source: BMI
Table: Vietnam Key Ratios (%)
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
VietinBank
ƒ
Vietnam's largest partly private lender by assets.
ƒ
10% owned by the International Finance Corporation.
ƒ
2011 profit exceeded predictions.
Weaknesses
ƒ
Possible exposure to the effects of the bursting of the asset price bubble.
Opportunities
ƒ
VietinBank has a 20% market share in Vietnam in terms of total assets is too large to be
Strengths
ignored.
Threats
Company Overview
ƒ
Possible listing in the long term.
ƒ
Possible exposure to downturn in global trade.
ƒ
Predicted growth limited by state credit limits.
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, 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.
The bank's profit in 2011 exceeded forecasts, increasing by 76% y-o-y to VND8.11trn. Total
assets grew 25% y-o-y to VND460.4trn, and it aims to see assets increase by 20% in 2012. Nonperforming 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 gross profit in 2012 to around US$463mn.
Company Data
ƒ
Website: www.vietinbank.vn
ƒ
Status: State-owned commercial bank
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Key Statistics For VietinBank, 2005-2008 (VNDmn)
2005
2006
2007
2008
115,766,000
135,363,000
166,113,000
193,590,357
Loans & Mortgages
74,449,340
80,091,150
100,482,200
118,601,677
Total Deposits
84,387,020
99,683,410
112,692,800
121,634,466
4,999,839
5,607,022
10,646,530
12,336,159
Total Assets
Total Shareholders' Equity
Source: VietinBank 2008 annual report
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Agribank
ƒ
Established as one of the largest state-owned commercial banks.
ƒ
Massive branch network, especially in rural Vietnam.
Weaknesses
ƒ
Possible effects of the bursting of the asset price bubble.
Opportunities
ƒ
The size of Agribank's branch network means that it is an attractive partner for any other
Strengths
financial institutions looking to cross-sell products to the mass market in Vietnam.
Threats
Company Overview
ƒ
Possible listing in the long term.
ƒ
Perceived exposure to the downturn in global trade.
ƒ
Credit rationing by state will limit growth.
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.
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 state-owned 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 the bank's bad debts declined from 7% at the end of H111 to 6% by the end of
calendar year 2011, a rate that Bao suggested could drop to as little as 3% between 2015 and
2020, depending on the bank achieving strong credit growth.
Company Data
ƒ
Website: www.agribank.com.vn
ƒ
Status: State-owned commercial bank
ƒ
Contact: Tel: (+84-4) 8313694/7723248
© Business Monitor International Ltd
Page 48
Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Balance Sheet (LCYmn)
2004
2005
2006
2007
2008
2009
Total Assets
161,757,168
192,319,504
238,495,024
321,444,128
400,485,183
480,937,045
Loans & Mortgages
129,204,040
151,655,216
181,252,960
246,188,336
288,940,827
361,739,747
92,212,208
120,162,400
160,396,528
233,638,848
299,954,030
331,893,865
483,619
781,031
2,565,545
10,627,676
17,798,086
19,860,526
2004
2005
2006
2007
2008
2009
10,255.32
12,081.89
14,853.95
20,068.94
22,907.12
26,026.14
Loans & Mortgages
8,191.47
9,527.28
11,288.80
15,370.44
16,526.96
19,575.72
Total Deposits
5,846.21
7,548.84
9,989.82
14,586.93
17,156.90
17,960.60
30.66
49.07
159.79
663.53
1018.02
1074.76
2004
2005
2006
2007
2008
2009
Return on Assets
0.16
0.51
1.61
0.59
0.40
Return on Equities
45.88
66.17
69.38
15.14
9.64
0.41
1.08
3.25
4.40
4.00
Total Deposits
Total Shareholders'
Equity
Source: BMI
Table: Vietnam Balance Sheet (US$mn)
Total Assets
Total Shareholders'
Equity
Source: BMI
Table: Vietnam Key Ratios (%)
Equity Asset Ratio
0.30
Source: BMI
© Business Monitor International Ltd
Page 49
Vietnam Commercial Banking Report Q3 2012
Asia Commercial Bank
ƒ
Stronger profitability than some of its non-state peers.
ƒ
Launched US$2mn IBM datacentre to support expansion in 2011.
ƒ
Lack of transparency.
ƒ
Slowing credit growth.
Opportunities
ƒ
Stronger expansion to compete with state lenders.
Threats
ƒ
Tighter monetary policy to tame economic growth.
ƒ
Risk to asset quality on the back of difficult operating environment in 2012.
Strengths
Weaknesses
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 bank's net profit increased to VND1.86trn in the first nine months of 2011 against VND1.49trn
in the same period in the previous year. Net interest income jumped to VND4.57trn from
VND2.87trn.
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$2mn and is to help the bank better manage information and
customer records. IBM is helping ACB create an IT plan and will play a role in all facets of the
new centre, along with Vietnamese firm AICT.
President Nguyen Ming Triet singled out the bank for praise in early 2011, arguing that the bank's
professionalism and cautious lending practices would help the country become a regional
economic powerhouse.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Stock Market Indicators
2007
2008
2009
2010
27-Feb-12
Market Capitalisation LCY
41,493,748.00
17,637,414.00
29,067,754.00
24,473,174.00
20,348,014.00
Market Capitalisation US$
2,590.61
1,008.83
1,573.02
1,255.16
967.43
Share Price LCY
69,072.10
24,886.27
33,649.56
26,100.00
21,700.00
Share Price US$
4.31
1.42
1.82
1.34
1.03
Share Price, % change (eop)
na
-66.98
27.92
-26.49
na
Change YTD (2011 only)
na
na
na
na
-19.92
Shares Outstanding (mn)
600.73
708.72
863.84
937.70
937.70
Source: BMI
Table: Vietnam Balance Sheet (LCYmn)
Total Assets
Loans & Mortgages
Total Deposits
Total Shareholders' Equity
2004
2005
2006
15,416,674
24,272,864
6,672,410
2008
2009
2010
44,645,040
85,391,681 105,306,130
167,881,047
205,102,950
9,542,099
16,954,114
31,676,320
34,604,077
61,855,984
86,478,408
12,580,744
19,984,920
33,606,012
55,283,104
64,216,949
86,919,196
106,936,611
705,684
1,283,206
1,696,515
6,257,849
7,766,468
10,106,287
11,376,757
na
na
1,466.65
3,737.73
3,473.37
2,653.07
2,861.00
Earnings per share (EPS)
2007
Source: BMI
Table: Vietnam Balance Sheet (US$mn)
2004
2005
2006
2007
2008
2009
2010
Total Assets
977.41
1,524.87
2,780.58
5,331.32
6,023.34
9,084.96
10,519.18
Loans & Mortgages
423.03
599.45
1,055.94
1,977.67
1,979.30
3,347.37
4,435.25
Total Deposits
797.61
1,255.49
2,093.05
3,451.53
3,673.11
4,703.67
5,484.49
44.74
80.61
105.66
390.70
444.23
546.91
583.48
na
na
0.09
0.23
0.21
0.15
0.15
Total Shareholders' Equity
Earnings per share (EPS)
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Key Ratios (%)
2004
2005
2006
2007
2008
2009
2010
Return on Assets
na
1.51
1.47
2.71
2.32
1.61
1.25
Return on Equities
na
30.09
34.42
44.49
31.53
24.63
21.74
Loan Deposit Ratio
53.24
47.85
50.63
57.54
54.24
71.74
81.54
Loan Asset Ratio
43.45
39.40
38.11
37.25
33.08
37.14
42.51
Equity Asset Ratio
4.58
5.29
3.70
7.33
7.38
6.02
5.55
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Eximbank
Strengths
ƒ
Valued by the major international banks that deal with it.
ƒ
Emerged from the global financial crisis in a strong position.
ƒ
By not recycling the rapid growth of deposits into new loans, the bank has reduced its
loan-to-deposit ratio to well below 100% and is less dependent on borrowing from other
financial institutions.
ƒ
It appears to be reducing its vulnerability to a lack of liquidity within the banking system;
loans to other banks account for less than a quarter of its total assets. Funding from
other banks accounts for about 3% of the total.
Weaknesses
ƒ
Lack of scale. Eximbank is a fairly large bank in Vietnam but a small institution by
international standards.
ƒ
Potential for problems in the wake of the bursting of the asset price bubble.
Opportunities
ƒ
Potential for continuing growth from a low base.
Threats
ƒ
Vulnerability to direct or indirect impact from the downturn in global trade.
ƒ
Profit growth is particularly threatened by government loan policy.
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 64
branches and its head office is in Ho Chi Minh City.
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 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.
At the beginning of 2011, Eximbank reported total assets of VND131.1trn, including a net profit of
VND2.3trn, in part due to a 39% expansion of its consumer base. Total liabilities stood at
VND62.3trn, while total deposits were valued at VND70.7trn. 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$77.5mn from Australian group ANZ. It represented the first major divestment of Vietnamese
assets by an overseas bank.
Company Data
ƒ
Website: www.eximbank.com.vn/en
ƒ
Status: Commercial joint-stock bank
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Vietnam Commercial Banking Report Q3 2012
Table: Balance Sheet (VNDmn, unless stated)
2005
2006
2007
2008
11,369,230.0
18,323,770.0
33,710,420.0
48,624,110.0
Loans & Mortgages
6,427,689.0
10,161,270.0
18,378,610.0
21,232,200.0
Total Deposits
8,352,111.0
13,141,180.0
22,906,120.0
31,254,020.0
835,539.0
1,946,667.0
6,294,943.0
12,844,080.0
2,379.00
1,052.00
Total Assets
Total Shareholder Equity
Earnings Per Share, VND
Source: Eximbank, Bloomberg
Table: Balance Sheet (US$mn, unless stated)
2005
2006
2007
2008
Total Assets
714.3
1,141.2
2,104.7
2,781.2
Loans & Mortgages
403.8
632.9
1,147.5
1,214.4
Total Deposits
524.7
818.5
1,430.2
1,787.7
52.5
121.2
393.0
734.7
0.15
0.06
2006
2007
2008
Return on Assets
1.7
1.8
1.7
Return on Equities
18.6
11.2
7.4
Loan/Deposit Ratio
80.6
67.9
Loan/Asset Ratio
54.7
43.7
18.7
26.4
Total Shareholder Equity
Earnings Per Share, US$
Source: Eximbank, Bloomberg
Table: Key Ratios (%)
2005
Equity/Asset Ratio
7.3
10.6
Source: Eximbank, Bloomberg
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Vietnam Technological and Commercial Joint-stock Bank (Techcombank)
ƒ
Support from minority stakeholder HSBC.
ƒ
The bank has consistently expanded its branch network since its founding.
ƒ
Strong profitability.
ƒ
Sound capitalisation.
ƒ
Tight competition for deposits.
ƒ
The bank has some way to go in modernising processes and systems.
ƒ
Lack of transparency.
Opportunities
ƒ
The bank has strong scope for expansion over the long-term.
Threats
ƒ
Tighter monetary policy to tame economic growth.
ƒ
Risk to asset quality on the back of difficult operating environment in 2012.
ƒ
Slowing credit growth.
Strengths
Weaknesses
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). Techcombank had over 45,000 customers in 2010.
The bank generated a net profit of VND1.69trn (US$80.07mn) in the first nine months of 2011.The
bank had said in April 2011 that it expected profits for 2011 to increase by 46% y-o-y to
US$192mn. Meanwhile, the bank predicted 19.99% loan growth in response to a government
imposed cap of 20%. It said profit growth would come from the rapid expansion of its core
operations and ongoing improvement in asset quality, which is forecast to mean the bad debt ratio
drops from 2.3% in 2010 to 2.04% in 2011. Techcombank generated a net profit of VND2.07trn
(US$98.07mn) in 2010 against VND1.7trn (US$80.54mn) in the previous year. Net interest
income climbed to VND3.18trn (US$150.66mn) from VND2.5trn (US$118.44mn), while total
assets jumped to VND150.29trn (US$7.12bn) from VND92.58trn (US$4.39bn).
The bank signed a US$30mn loan agreement with Dutch development bank FMO in September
2011, in a deal designed to boost lending to both retail and small- and medium-sized enterprise
(SME) customers.
The bank, along with some of its rivals, came under fire by the central bank in late 2010 as it
began offering relatively high interest rates on deposits of over 17% in a bid to grab market share.
The State Bank of Vietnam argued that such rates were risky, potentially destabilising and
detrimental to profitability.
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Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Balance Sheet (LCYmn)
2002
2003
Total Assets
4,059,823
5,510,430
7,667,461 10,666,106 17,326,352 39,542,496 59,069,056 92,581,504
Loans & Mortgages
1,902,211
2,243,138
3,465,540
na
8,696,101 20,486,132 26,018,984 41,580,368
Total Deposits
1,849,251
2,619,620
4,600,097
6,195,072
9,566,043 24,476,576 39,617,724 62,347,400
Total Shareholders' Equity
135,846.9
208,875
515,107
1,009,405
1,761,687
3573,416
5,625,408
7,323,826
na
na
na
na
1,446.00
2,452.00
4,259.00
3,148.00
2002
2003
2004
2005
2006
2007
2008
2009
Total Assets
263.61
352.28
486.11
670.07
1,079.12
2,468.78
3,378.66
5,010.09
Loans & Mortgages
123.51
143.40
219.71
na
541.61
1,279.02
1,488.25
2,250.14
Total Deposits
120.07
167.47
291.64
389.19
595.79
1,528.16
2,266.07
3,373.96
Total Shareholders' Equity
8.82
13.35
32.66
63.41
109.72
223.10
321.76
396.33
Earnings per share (EPS)
na
na
na
na
0.09
0.15
0.26
0.18
2002
2003
2004
2005
2006
2007
2008
2009
Return on Assets
na
0.64
1.17
2.25
1.84
1.79
2.40
2.24
Return on Equities
na
17.66
21.34
27.05
18.54
19.13
25.72
26.26
Loan Deposit Ratio
na
na
75.34
na
na
na
na
na
Loan Asset Ratio
na
na
45.20
na
na
na
na
na
3.35
3.79
6.72
9.46
10.17
9.04
9.52
7.91
Earnings per share (EPS)
2004
2005
2006
2007
2008
2009
Source: BMI
Table: Vietnam Balance Sheet (US$mn)
Source: BMI
Table: Vietnam Key Ratios (%)
Equity Asset Ratio
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Viet A Joint Stock Commercial Bank (Vietabank)
ƒ
Investments surged in 2010.
ƒ
Capital strengthened in 2010.
ƒ
Lack of modernisation.
ƒ
Lack of transparency.
ƒ
Limited profitability.
Opportunities
ƒ
Further domestic expansion plans.
Threats
ƒ
Tighter monetary policy to tame economic growth.
ƒ
Risk to asset quality on the back of difficult operating environment in 2012.
ƒ
Slowing credit growth.
Strengths
Weaknesses
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.
Vietabank's pre-tax profit reached VND347bn (USS16.44mn) 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$28.52mn) for 2011, marking a 73.5% jump on the previous year.
Table: Vietnam Stock Market Indicators
2009
2010
27-Feb-12
Market Capitalisation LCY
33,196,270.00
34,896,268.00
35,806,608.00
Market Capitalisation US$
1,796.43
1,789.74
1,702.40
Share Price LCY
22,257.76
20,877.98
17,700.00
Share Price US$
1.20
1.07
0.84
na
-11.10
na
na
16.52
1,671.44
2,022.97
Share Price, % change (eop)
Change YTD (2011 only)
Shares Outstanding (mn)
na
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Balance Sheet (LCYmn)
2005
2006
2007
2008
115,765,968
135,363,026
166,112,976
193,590,357
367,712,191
Loans & Mortgages
74,449,344
80,091,149
100,482,232
118,601,677
231,434,907
Total Deposits
84,387,016
99,683,408
112,692,816
121,634,466
205,918,705
4,999,839
5,607,022
10,646,529
12,336,159
18,372,276
Total Assets
Total Shareholders' Equity
2009
Earnings per share (EPS)
2010
2,193.10
Source: BMI
Table: Vietnam Balance Sheet (US$mn)
2005
2006
2007
2008
Total Assets
7272.65
8430.68
10371.04
11073.06
18858.97
Loans & Mortgages
4677.05
4988.24
6273.47
6783.83
11869.67
Total Deposits
5301.36
6208.48
7035.83
6957.30
10561.02
314.10
349.22
664.70
705.61
942.27
Total Shareholders' Equity
Earnings per share (EPS)
2009
2010
0.11
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Table: Vietnam Key Ratios (%)
2005
2006
2007
2008
Return on Assets
0.48
0.76
1.00
Return on Equities
11.31
14.14
15.70
Loan Deposit Ratio
80.41
113.74
Loan Asset Ratio
59.21
63.69
Equity Asset Ratio
Total Risk Based Capital Ratio
4.32
4.14
6.41
6.37
2010
4.94
8.02
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Housing Development Commercial Joint Stock Bank (HDBank)
ƒ
The bank is completing its four-year modernisation plan in 2012.
ƒ
Earnings, interest income and assets all grew in 2010.
ƒ
Credit growth capped by central bank.
ƒ
Limited profitability.
ƒ
Lack of transparency.
Opportunities
ƒ
Further restructuring and expansion.
Threats
ƒ
Tighter monetary policy to tame economic growth.
ƒ
Risk to asset quality on the back of difficult operating environment in 2012.
ƒ
Slowing credit growth.
Strengths
Weaknesses
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
about 115 outlets across Vietnam as of September 2011.
HDBank posted a pre-tax profit of VND200bn (US$9.48mn) for the first four months of 2011,
marking a sharp 160% jump on the same period in the previous year. The bank's deposits also
shot up by 60% y-o-y over the period. Total credits increased by 4.8%, however, and the bank's
bad debt ratio stood at 1.36%. The bank said in April 2011 that it anticipates generating a pre-tax
profit of VND600bn (US$28.43mn) for the full year, marking a 70.94% climb on the previous year.
The bank saw its pre-tax profit jump to VND350.73bn (US$16.62mn) in 2010 against
VND254.91bn (US$12.08mn) in the previous year, while net profit increased to VND269.41bn
(US$12.76mn) from VND194.2bn (US$9.2mn). Net interest income strengthened significantly to
VND522.41bn (US$24.75mn) from VND234.71bn (US$11.12mn), while net fees and commission
income increased to VND153.51bn (US$7.27mn) from VND140.41bn (US$6.65mn). The bank's
total assets stood at VND34.39trn (US$1.63bn) by the end of the year against VND19.13trn
(US$906.31mn).
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.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Sacombank
Strengths
ƒ
Strategic partnerships with Australia and New Zealand Banking Group and the
International Finance Corporation, plus recognition and various awards from the
government and trade press.
ƒ
Emerged from the global financial crisis in a strong position.
ƒ
By not recycling the rapid growth of deposits into new loans the bank has reduced its
loan-to-deposit ratio to well below 100%.
ƒ
The bank also appears to be reducing its vulnerability to a lack of liquidity within the
banking system.
Weaknesses
ƒ
Lack of scale. Sacombank is a fairly large bank in Vietnam but a small institution by
international standards.
Opportunities
ƒ
Potential direct and indirect problems from the bursting of the asset price bubble.
ƒ
Potential for continuing growth from a low base.
ƒ
Leverage of strong position in the SME lending sector.
ƒ
Expansion into southern China and countries in the Association of Southeast Asian
Nations.
Threats
Company Overview
ƒ
Vulnerability to direct or indirect impact from the downturn in global trade.
ƒ
Vulnerable to government credit caps.
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.
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 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% year-on-year (y-o-y). In total, after-tax profit for 2011 stood at VND2.033trn, which was a
13% increase year-on-year. By the end of the year, outstanding loans were VND78.49trn, while
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
credit growth was 1.4%. The bank was also successful in reducing its bad debts, which fell by
50% in the year. 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. The bank has 405 transaction points
located in 43 of the 63 provinces in Vietna, Laos and Cambodia.
Elsewhere, Sacombank and Credit Suisse Singapore have signed a MoU in order to strengthen
their competitiveness in both markets.
Company Data
ƒ
Website: www.sacombank.com.vn
ƒ
Status: Commercial joint stock bank
Table: Stock Market Indicators
2005
Market Capitalisation, VND
2006
2007
15,043,772.00 29,139,732.00
Market Capitalisation, US$
2008
2009
Dec 2 2010
9,413,129.00 16,147,851.00 13,768,845.52
936.96
1,819.30
538.42
873.85
706.17
Share Price, VND
20,404.72
37,657.61
12,165.42
19,921.63
15,000.00
Share Price, US$
1.27
2.35
0.70
1.08
0.77
84.91
-70.39
54.93
Share Price, % change
(eop)
Change, year-to-date
Shares Outstanding (mn)
-14.67
485.18
737.27
773.81
746.14
810.57
Source: Sacombank, Bloomberg
Table: Balance Sheet (VNDmn, unless stated)
2005
2006
2007
2008
2009
1,445,4340
24,776,180
64,572,880
6,843,8570
104,019,100
8,379,335
14,312,890
35,200,580
34,757,120
59,141,490
10,467,160
17,511,580
44,231,940
46,128,820
60,516,270
Total Shareholders'
Equity
1,887,680
2,870,346
7,349,659
7,758,624
10,776,900
Earnings per share
(VND)
624.77
758.09
1,846.09
1,235.72
4,459.64
Total Assets
Loans & Mortgages
Total Deposits
Source: Sacombank, Bloomberg
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Vietnam Commercial Banking Report Q3 2012
Table: Balance Sheet (US$mn, unless stated)
2005
2006
2007
2008
2009
Total Assets
908.05
1,543.11
4,031.52
3,914.58
5,629.05
Loans & Mortgages
526.41
891.44
2,197.70
1,988.05
3,200.47
Total Deposits
657.57
1090.66
2,761.56
2,638.50
3,274.87
Total Shareholders'
Equity
118.59
178.77
458.87
443.78
583.20
0.04
0.05
0.11
0.08
0.25
2005
2006
2007
2008
2009
Return on Assets
2.40
3.13
1.44
1.94
Return on Equities
19.76
27.36
12.64
18.25
Earnings per share (US$)
Source: Sacombank, Bloomberg
Table: Key Ratios (%)
Loan/Deposit Ratio
80.49
82.12
79.98
75.89
98.58
Loan/Asset Ratio
58.29
58.10
54.79
51.15
57.35
Equity/Asset Ratio
13.06
11.59
11.38
11.34
10.14
Source: Sacombank, Bloomberg
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
BMI Banking Sector 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 nongovernment) 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:
ƒ
Total assets = total liabilities and capital.
ƒ
Total assets = client loans + bond portfolio + other assets.
ƒ
Total liabilities and capital = capital items + client deposits + other liabilities.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
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.
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
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:
ƒ
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.
ƒ
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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Vietnam Commercial Banking Report Q3 2012
Table: Commercial Banking Business Environment Indicators And Rationale
Limits of Potential Returns
Rationale
Banking market structure
Estimated total assets, 2012
Indication of overall sector attractiveness. Large markets are
considered more attractive than small ones
Estimated growth in total assets, 2012-2016
Indication of growth potential. The greater the likely absolute
growth in total assets, the higher the score
Estimated growth in client loans, 2012-2016
Indication of the scope for expansion in profits through
intermediation
Country structure
GDP per capita
A proxy for wealth. High-income states receive better scores
than low-income states
Active population
Those aged 16-64 in each state, as a % of total population.
A high proportion suggests that the market is comparatively
more attractive
Corporate tax
A measure of the general fiscal drag on profits
GDP volatility
Standard deviation of growth over seven-year economic
cycle. A proxy for economic stability
Risks to Realisation of Returns
Banking market risks
Regulatory framework and industry development
Subjective evaluation of de facto/de jure regulations on
overall development of the banking sector
Regulatory framework and competitive environment
Subjective evaluation of the impact of the regulatory
environment on the competitive landscape
BMI's Country Risk Ratings (CRR)
Short-term financial risk
Rating from CRR, evaluating currency volatility
Policy continuity
Rating from CRR, evaluating the risk of a sharp change in
the broad direction of government policy
Legal framework
Rating from CRR, to denote strength of legal institutions in
each state. Security of investment can be a key risk in some
emerging markets
Bureaucracy
Rating from CRR to denote ease of conducting business in
the state
Source: BMI
© Business Monitor International Ltd
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Vietnam Commercial Banking Report Q3 2012
Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight. Consequently, the following weights have been adopted.
Table: Weighting Of Indicators
Component
Weighting, %
Limits of Potential Returns, of which:
70, of which
- Banking market structure
60
- Country Structure
40
Risks to Realisation of Returns, of which:
30, of which
- Banking market risks
40
- Country Risk
60
Source: BMI
© Business Monitor International Ltd
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