Q1 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 Q1 2012 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2016 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: December 2011 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2011 Business Monitor International All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Commercial Banking Report Q1 2012 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 CONTENTS Executive Summary Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At March 2011 Table: Annual Growth Rate Projections 2011-2015 (%) Table: Ranking Out Of 59 Countries Reviewed In 2011 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) SWOT Analysis Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT Business Environment Outlook 10 Commercial Banking Business Environment Ratings 10 Table: Vietnam’s Commercial Banking Business Environment Rating 10 Commercial Banking Business Environment Rating Methodology 11 Table: Asia Commercial Banking Business Environment Ratings 12 Global Commercial Banking Outlook 13 Asia Banking Sector Outlook 22 Table: Banks’ Bond Portfolios 28 Table: Asia Commercial Banking Business Environment Ratings 29 Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios 30 Table: Anticipated Developments In 2012 31 Table: Comparison Of Total Assets, Client Loans And Client Deposits (US$bn) 32 Table: Comparison Of Per Capita Deposits, 2011f (US$) 33 Table: Interbank Rates And Bond Yields 34 Vietnam Banking Sector Outlook 35 Economic Outlook 39 Table: Vietnam Economic Activity, 2011-2016 41 Company Profiles 42 Vietcombank 42 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) 43 BIDV 44 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) 45 VietinBank 46 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 47 Agribank 48 Table: Balance Sheet, 2004-2008 (VNDmn) 49 Table: Balance Sheet, 2004-2008 (US$mn) 49 Table: Key Ratios, 2004-2008 (%) 49 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 MHB Bank 50 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 51 Eximbank 52 Table: Balance Sheet (VNDmn, unless stated), 2005-2008 53 Table: Balance Sheet (US$mn, unless stated), 2005-2008 53 Table: Key Ratios (%),2005-2008 53 Sacombank 54 Table: Stock Market Indicators, 2005-2009 55 Table: Balance Sheet (VNDmn, unless stated), 2005-2009 55 Table: Balance Sheet (US$mn, unless stated), 2005-2009 56 Table: Key Ratios (%),2005-2009 56 Saigonbank 57 Table: Stock Market Indicators 57 Table: Balance Sheet (VNDmn, unless stated) 58 Table: Balance Sheet (US$mn, unless stated) 58 Table: Key Ratios (%) 58 SeABank 59 Table: Balance Sheet (VNDmn, unless stated) 60 Table: Balance Sheet (US$mn, unless stated) 60 Table: Key Ratios (%) 60 BMI Banking Sector Methodology 61 Commercial Bank Business Environment Ratings 62 Table: Commercial Banking Business Environment Indicators And Rationale 63 Table: Weighting Of Indicators 64 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 Executive Summary Table: Levels (VNDbn) Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other March 2010 2,342,752.9 1,935,790.0 159,117.9 247,845.0 2,342,752.9 336,053.0 1,771,242.5 235,457.4 March 2011 3,092,978.4 2,584,860.0 225,505.0 282,613.4 3,092,978.4 479,064.0 2,220,589.1 393,325.3 32% 34% 42% 14% 32% 43% 25% 67% Date Change, % Source: BMI; Central banks; Regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other March 2010 122.8 101.4 8.3 13.0 122.8 17.6 92.8 12.3 March 2011 148.0 123.7 10.7923 13.5 148.0 22.9 106.3 18.8 21% 22% 29% 4% 21% 30% 15% 53% Date Change, % Source: BMI; Central banks; Regulators Table: Levels At March 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$ 83.57% 124.04% 1,068 1,206 Rising Falling 116.40% Rising Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 Table: Annual Growth Rate Projections 2011-2015 (%) Assets Loans Deposits Annual Growth Rate 20 20 14 CAGR 21 21 14 13 Ranking Source: BMI; Central banks; Regulator Table: Ranking Out Of 59 Countries Reviewed In 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 10 Local currency loan growth Local currency deposit growth Local currency asset growth Source: BMI; Central banks; Regulators Table: Projected Levels (VNDbn) 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f Total assets 1,747,335 2,286,351 2,953,153 3,720,973 4,614,007 5,536,808 6,644,170 7,973,004 9,567,605 Client loans 1,339,260 1,869,260 2,475,540 3,119,180 3,867,784 4,641,340 5,569,608 6,683,530 8,020,236 Client deposits 1,341,143 1,680,717 2,209,896 2,651,875 3,076,175 3,506,840 3,997,798 4,557,489 5,195,538 f = BMI forecast Source: BMI; Central banks; Regulators Table: Projected Levels (US$bn) 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f Total assets 99.94 123.79 151.46 180.19 223.44 275.46 340.73 419.63 517.17 Client loans 76.60 101.21 126.96 151.05 187.30 230.91 285.62 351.76 433.53 Client deposits 76.71 91.00 113.34 128.42 148.97 174.47 205.02 239.87 280.84 f = BMI forecast Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth Untapped potential Weaknesses Domestic banks lack capital and technology to sustain high credit growth The financial accounts of many banks are still opaque Opportunities Population still under-banked Income levels likely to rise strongly over the medium term Threats Macroeconomic instabilities threaten the credibility of the government and could potentially drive economic policy away from further liberalisation Vietnam Political SWOT Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and we not expect major shifts in policy direction over the next five years The one-party system is generally conducive to short-term political stability Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia Weaknesses Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent Opportunities The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials Vietnam has allowed legislators to become more vocal in criticising government policies This is opening up opportunities for more checks and balances within the one-party system Threats Macroeconomic instabilities in 2010 and 2011 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 Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-partystate will probably be unsustainable 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 Page Vietnam Commercial Banking Report Q1 2012 Vietnam Economic SWOT Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.2% annually between 2000 and 2010 The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 12.0% in 2009 Weaknesses Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2011 The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also keeps import costs high, contributing to inflationary pressures Opportunities WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector Urbanisation will continue to be a long-term growth driver The UN forecasts the urban population rising from 29% of the population to more than 50% by the early 2040s Threats Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis Prolonged macroeconomic instability could prompt the authorities to put reforms on hold as they struggle to stabilise the economy © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 Vietnam Business Environment SWOT Strengths Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors Vietnam’s location - its proximity to China and South East Asia, and its good sea links - makes it a good base for foreign companies to export to the rest of Asia, and beyond Weaknesses Vietnam’s infrastructure is still weak Roads, railways and ports are inadequate to cope with the country’s economic growth and links with the outside world Vietnam remains one of the world’s most corrupt countries Its score in Transparency International’s 2010 Corruption Perceptions Index was 2.7, placing it in 22nd in the Asia-Pacific region Opportunities Vietnam is increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan This offers the possibility of the transfer of high-tech skills and know-how Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector This should offer foreign investors new entry points Threats Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern Labour unrest remains a lingering threat A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 2006 2007 2008 18,734,297 27,110,786 35,162,410 Loans & Mortgages 9,976,585 13,756,662 15,947,869 Total Deposits 5,005,864 9,945,923 12,028,555 na 1,065,755 1,119,843 Total Assets Total Shareholders’ Equity na = not available Source: MHB Bank 2008 annual report © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q1 2012 Eximbank Strengths Valued by the major international banks that deal with it Emerged from the global financial crisis in a strong position By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to less than 100% and is less dependent on borrowing from other financial institutions 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 Lack of scale Eximbank is a fairly large bank in Vietnam but a small institution by international standards Potential for problems in the wake of the bursting of the asset price bubble Opportunities Potential for continuing growth from a low base Threats Vulnerability to direct or indirect impact from the downturn in global trade Profit growth is particularly threatened by government loan policy Company Overview Vietnam Export-Import Bank (Eximbank), established in 1989, is one of the country’s largest commercial joint stock banks in terms of owners’ equity It has a nationwide network of 64 branches and its head office is in Ho Chi Minh City The Vietnamese financial sector has experienced strong growth in recent years, and still Eximbank has performed far above trend for the sector, posting growth in gross profits in FY09 of 60.6% year-on-year (y-o-y) to reach VND1.14trn This increased profitability was accompanied by an 80.8% y-o-y growth in Eximbank’s loan portfolio to a total value of VND38.38trn Overall loan portfolio growth for the whole sector was 27.7% and overall assets were up by 37% to VND66trn The bank’s growth is threatened by government concerns over credit supply The government limited credit supply growth to 25% in FY10 This risks putting the brakes on banks’ growth, which for Eximbank is largely fuelled by an expansion in its loan portfolio However, the application of such rules to Eximbank is likely to be 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 Company Data Website: www.eximbank.com.vn/en Status: Commercial joint-stock bank © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q1 2012 Table: Balance Sheet (VNDmn, unless stated), 2005-2008 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), 2005-2008 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 (%),2005-2008 2005 Equity/Asset Ratio 7.3 10.6 Source: Eximbank, Bloomberg © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q1 2012 Sacombank Strengths 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 Emerged from the global financial crisis in a strong position By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to less than 100% The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system Weaknesses Lack of scale Sacombank is a fairly large bank in Vietnam but a small institution by international standards Potential direct and indirect problems from the bursting of the asset price bubble Opportunities Potential for continuing growth from a low base Leverage of strong position in the SME lending sector Expansion into southern China and countries in the Association of Southeast Asian Nations Threats Vulnerability to direct or indirect impact from the downturn in global trade Vulnerable to government credit caps Company Overview Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992 It has been listed on the Ho Chi Minh City Stock Exchange since July 2006 Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the IFC (5.25%) and Dragon Financial Holdings (8.73%) Foreign shareholders collectively own 30% of the bank Its network includes 247 branches and transaction offices in 44 cities It also has a representative office in Nanning, southern China, and a branch in Laos 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, and 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 small- and medium-sized enterprises (SMEs), which the bank has targeted as its market It intends to help SMEs undertake initial public offerings (IPOs) These services have been combined with attempts by Sacombank to diversify income sources away from the credit business To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income Sacombank has, in common with much of the Vietnamese financial sector, performed strongly in recent years This can largely be attributed to the success of the Vietnamese economy as a © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q1 2012 whole Sacombank posted FY09 gross profits of VND1.9trn, exceeding the predicted figure by 19% This trend is expected to continue as the Vietnamese economy continues to grow rapidly However, the success of Sacombank does partly depend on the outcome of increasing government concern over the supply of credit The government limited the growth of credit to 25% in FY10 While this would still allow for substantial growth across the Vietnamese financial sector, it would place a limit on growth for Sacombank and other institutions Sacombank will be under a certain amount of pressure, given its focus on SMEs Company Data Website: www.sacombank.com.vn Status: Commercial joint stock bank Table: Stock Market Indicators, 2005-2009 2005 2006 2007 2008 2009 Dec 2010 15,043,772.00 29,139,732.00 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 Market Capitalisation, VND Market Capitalisation, US$ 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), 2005-2009 2005 2006 2007 2008 2009 14,454,340 24,776,180 64,572,880 68,438,570 104,019,100 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 © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q1 2012 Table: Balance Sheet (US$mn, unless stated), 2005-2009 2005 2006 2007 2008 2009 Total Assets 908.05 1,543.11 4,031.52 3,914.58 5,629.05 Loans & Mortgages 526.41 891.44 2,197.70 1,988.05 3,200.47 Total Deposits 657.57 1090.66 2,761.56 2,638.50 3,274.87 Total Shareholders’ Equity 118.59 178.77 458.87 443.78 583.20 0.04 0.05 0.11 0.08 0.25 2005 2006 2007 2008 2009 Return on Assets 2.40 3.13 1.44 1.94 Return on Equities 19.76 27.36 12.64 18.25 Earnings per share (US$) Source: Sacombank, Bloomberg Table: Key Ratios (%),2005-2009 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 Page 56 Vietnam Commercial Banking Report Q1 2012 Saigonbank Strengths Record of strong growth over the medium term Weaknesses Lack of scale Saigonbank is a medium-sized bank in Vietnam but a small institution by international standards Saigonbank’s loan-to-deposit ratio has been relatively high compared to other banks Opportunities Potential for continuing growth from a low base Threats Vulnerability to impact, direct or indirect, from the downturn in global trade Company Overview Saigonbank for Industry and Trade (Saigonbank) was one of the first commercial joint stock banks in Vietnam, established in 1987 with initial chartered capital of VND650mn and an operation duration of 50 years Saigonbank increased its chartered capital from VND650mn to VND1.02bn in 20 years as part of a growth-orientated policy Saigonbank, like much of the Vietnamese financial sector, has shown strong performance over recent years Most of this success can be attributed to the general success of the economy Saigonbank has posted strong profits, with profitability increasing year-on-year in FY09 It was expected that gross profits in FY10 would reach VND900bn However, this rapid growth will be hindered by the government’s concerns over credit supply growth The government limited this to 25% to prevent broader economic difficulties Such a policy will cap the potential profitability of Saigonbank in FY10 Unlike many Vietnamese banks, Saigonbank does not have a foreign strategic partner for its operations This has led it to develop a different kind of modernisation programme, identifying its own priorities A major priority has been the development of internet banking services, as highlighted by the decision to use SunGuard’s Ambit Online Banking to offer new online services to customers Saigonbank hopes moves like these will ensure it is not left behind by foreignsponsored competitors Company Data Website: www.saigonbank.com.vn Status: Commercial joint stock bank Table: Stock Market Indicators 2004 Shares Outstanding (mn) 2005 2006 2007 2008 9M09 102.0 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q1 2012 Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 Total Assets 4,290,929 6,240,308 10,184,650 11,205,360 11,875,920 Loans & Mortgages 3,527,109 4,811,056 7,300,613 7,844,450 9,600,247 Total Deposits 2,830,064 3,947,700 6,466,654 7,164,714 8,481,534 609,434 931,562 1,431,610 1,469,766 1,934,750 2,432.00 1,581.00 1,572.00 Total Shareholders’ Equity Earnings per share (VND) Source: Saigonbank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 2008 Total Assets 269.56 388.66 635.86 640.93 642.67 Loans & Mortgages 221.58 299.64 455.80 448.69 519.52 Total Deposits 177.79 245.87 403.74 409.81 458.98 38.29 58.02 89.38 84.07 104.70 0.15 0.10 0.09 Total Shareholders’ Equity Earnings per share (US$) Source: Saigonbank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 2008 Return on Assets 2.14 2.26 2.08 1.51 1.82 Return on Equities 14.74 15.47 14.43 11.12 12.34 13.12 16.29 Loan/Deposit Ratio 112.32 Loan/Asset Ratio Equity/Asset Ratio 71.32 14.20 14.93 14.06 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 58 Vietnam Commercial Banking Report Q1 2012 SeABank Strengths Record of strong growth over the medium term Partnership with Societe Generale Weaknesses Lack of scale SeABank is a medium-sized bank in Vietnam but a small institution by international standards SeABank’s loan-to-deposit ratio has been relatively high compared with other banks Opportunities Potential for continuing growth from a low base Threats Vulnerability to direct or indirect impact from the downturn in global trade Company Overview South East Asia Commercial Joint Stock Bank (SeABank) was established in 1994 It aims to become one of the leading joint stock banks in Vietnam and has a programme to modernise and achieve a sustainable competitive edge After expansion in 2009, the bank has 126 branches and offices, most less than two years old This programme is largely possible due to its strategic partnership with Societe Generale, which owns 20% of the firm The bank’s targets for 2010 included: minimum total assets of US$3.125bn, minimum total capital of US$500mn, at least 200 facilities open, 1mn customers, and 2,000 employees The speed of expansion can be seen in the performance of SeABank in FY09 Overall loan portfolio growth was 122% year-on-year (y-o-y), reaching VND24.02trn Total assets grew by 136% y-o-y to VND30.8trn The likelihood of further rapid growth was increased by the decision to increase the charter capital of SeABank by 36% to a total of VND4trn However, the bank’s rapid expansion has not been completely free of problems SeABank was one of the few Vietnamese financial institutions to fall short of its FY09 gross profit target, with profits growing by 8% y-o-y to VND479bn Company Data Website www.seabank.com.vn Status Commercial joint stock bank, subsidiary of Societe Generale © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q1 2012 Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 2,283,813 6,124,938 10,200,420 26,241,090 22,473,980 Loans & Mortgages 530,767 1,347,680 3,353,999 10,994,810 7,506,934 Total Deposits 499,021 2,312,406 3,511,683 10,744,180 8,587,008 Total Shareholders’ Equity 161,473 291,776 1,055,536 3,366,458 4,177,114 2,098.00 1,058.00 Total Assets Earnings per share (VND) Source: SeABank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 2008 144.79 384.78 635.30 1,638.33 1,285.48 Loans & Mortgages 33.65 84.66 208.89 686.45 429.38 Total Deposits 31.64 145.27 218.71 670.80 491.16 Total Shareholders’ Equity 10.24 18.33 65.74 210.18 238.92 0.13 0.06 Total Assets Earnings per share (US$) Source: SeABank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 2008 Return on Assets 0.95 1.21 1.64 1.32 Return on Equities 17.70 14.63 13.52 8.51 4.76 10.35 12.83 18.59 Equity/Asset Ratio 7.07 Source: SeABank, Bloomberg © Business Monitor International Ltd Page 60 Vietnam Commercial Banking Report Q1 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 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 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 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: Total assets = total liabilities and capital Total assets = client loans + bond portfolio + other assets Total liabilities and capital = capital items + client deposits + other liabilities © Business Monitor International Ltd Page 61 Vietnam Commercial Banking Report Q1 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 not include them in our figures The US is the main exception to this In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in another country In some cases, client deposits include significant amounts that have been deposited by residents of another country Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in Central and Eastern Europe Commercial Bank Business Environment Ratings In producing our Commercial Banking Business Environment Rating, our approach has been threefold First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation of profits in each state, thereby capturing the operational dangers facing companies operating in this industry globally Second, we have, where possible, identified objective indicators that serve as proxies for issues/trends within the industry to ensure consistent evaluate across states Finally, we have used BMI’s proprietary Country Risk Ratings in a nuanced manner to ensure that the ratings accurately capture broader issues that are relevant to the industry and which may either limit market attractiveness or imperil future returns Overall, the ratings system, which integrates with all the other industry Business Environment Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe Conceptually, the ratings system divides into two distinct areas: Limits of Potential Returns: Evaluation of industry’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development Risks to Realisation of Returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period In constructing these ratings, the following indicators have been used Almost all indicators are objectively based © Business Monitor International Ltd Page 62 Vietnam Commercial Banking Report Q1 2012 Table: Commercial Banking Business Environment Indicators And Rationale Limits of Potential Returns Rationale Banking market structure Estimated total assets, 2010 Indication of overall sector attractiveness Large markets are considered more attractive than small ones Estimated growth in total assets, 2011-2016 Indication of growth potential The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 2011-2016 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 Regulatory framework and competitive environment Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Subjective evaluation of the impact of the regulatory environment on the competitive landscape 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 Page 63 Vietnam Commercial Banking Report Q1 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 Limits of Potential Returns, of which: Weighting, % 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 Page 64 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... of any information hereto contained Vietnam Commercial Banking Report Q1 2012 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 CONTENTS Executive Summary ... 20 Vietnam Commercial Banking Report Q1 2012 Qatar Leading The Way GCC – Loan Growth, % yoy Source: BMI/central banks © Business Monitor International Ltd Page 21 Vietnam Commercial Banking Report. .. leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2012 Business Environment Outlook Commercial Banking