Q3 2011 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 2011 INCLUDING INDUSTRY FORECASTS TO 2015 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: June 2011 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, 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. 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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 Q3 2011 INCLUDING INDUSTRY FORECASTS TO 2015 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: June 2011 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, 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 Q3 2011 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 CONTENTS Executive Summary . Table: Levels (VNDbn) Table: Levels (US$bn) . Table: Levels At August 2010 Table: Annual Growth Rate Projections 2011-2015 (%) . Table: Ranking Out Of 59 Countries Reviewed In 2011 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) . SWOT Analysis . Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT 10 Vietnam Business Environment SWOT . 11 Business Environment Outlook 12 Commercial Banking Business Environment Rating 12 Table: Commercial Banking Business Environment Ratings . 12 Commercial Banking Business Environment Rating Methodology 13 Table: Asia Commercial Banking Business Environment Ratings . 14 Global Commercial Banking Outlook . 15 Asia Banking Sector Outlook 19 Table: Banks’ Bond Portfolios . 24 Table: Asia Commercial Banking Business Environment Ratings . 25 Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios . 26 Table: Anticipated Developments In 2011 . 27 Table: Comparison Of Total Assets, Client Loans And Client Deposits , 2009-2010(US$bn) . 28 Table: Comparison Of Per Capita Deposits, 2010 (US$) 29 Table: Interbank Rates And Bond Yields . 30 Vietnam Banking Sector Outlook . 31 Economic Outlook 34 Table: Vietnam Economic Activity, 2008-2015 36 Company Profiles . 37 Vietcombank 37 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) . 38 BIDV 39 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) 40 VietinBank . 41 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 42 Agribank 43 Table: Balance Sheet (VNDmn, unless stated) . 44 Table: Balance Sheet (US$mn, unless stated) 44 Table: Key Ratios (%) 44 MHB Bank . 45 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 46 Habubank 47 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) . 48 Eximbank . 49 Table: Balance Sheet (VNDmn, unless stated) . 50 Table: Balance Sheet (US$mn, unless stated) 50 Table: Key Ratios (%) 50 Sacombank . 51 Table: Stock Market Indicators 52 Table: Balance Sheet (VNDmn, unless stated) . 52 Table: Balance Sheet (US$mn, unless stated) 53 Table: Key Ratios (%) 53 Saigonbank 54 Table: Stock Market Indicators 54 Table: Balance Sheet (VNDmn, unless stated) . 55 Table: Balance Sheet (US$mn, unless stated) 55 Table: Key Ratios (%) 55 SeABank . 56 Table: Balance Sheet (VNDmn, unless stated) . 56 Table: Balance Sheet (US$mn, unless stated) 57 Table: Key Ratios (%) 57 BMI Banking Sector Methodology 58 Commercial Bank Business Environment Rating 59 Table: Commercial Banking Business Environment Indicators And Rationale 60 Table: Weighting Of Indicators . 61 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 Executive Summary Table: Levels (VNDbn) Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other August 2009 2,065,761.6 1,706,340.0 173,358.3 186,063.3 2,065,761.6 286,547.0 1,594,992.6 184,222.0 August 2010 2,624,434.1 2,191,880.0 203,131.1 229,423.0 2,624,434.1 360,566.0 2,038,758.6 225,109.5 27% 28% 17% 23% 27% 26% 28% 22% Date Change, % Source: BMI, Central banks, Regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other August 2009 115.9 95.7 9.7 10.4 115.9 16.1 89.5 10.3 August 2010 134.7 112.5 10.4 11.8 134.7 18.5 104.6 11.5 16% 17% 7% 13% 16% 15% 17% 12% Date Change, % Source: BMI, Central banks, Regulators Table: Levels At August 2010 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$ 83.52% 118.16% 1,063 1,189 Rising Rising 107.51% Falling Source: BMI, Central banks, Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 Table: Annual Growth Rate Projections 2011-2015 (%) Assets Loans Deposits Annual Growth Rate 20 20 15 CAGR 20 20 14 14 Ranking Source: BMI, Central banks, Regulators 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 12 Local currency asset growth Source: BMI, Central banks, Regulators Table: Projected Levels (VNDbn) 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f Total assets 1,410,221.40 1,747,335.40 2,411,322.85 2,893,587.42 3,472,304.91 4,166,765.89 5,000,119.07 6,000,142.88 7,200,171.45 Client loans 1,067,730.00 1,339,260.00 1,848,178.80 2,217,814.56 2,661,377.47 3,193,652.97 3,832,383.56 4,598,860.27 5,518,632.33 Client deposits 1,100,392.90 1,341,142.80 1,528,902.79 1,697,082.10 1,917,702.77 2,186,181.16 2,492,246.52 2,841,161.04 3,267,335.19 f = forecast. Source: BMI, Central banks, Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 Table: Projected Levels (US$bn) 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f Total assets 88.05 99.94 130.56 148.40 168.15 201.78 248.76 307.70 378.96 Client loans 66.66 76.60 100.07 113.75 128.88 154.66 190.67 235.84 290.45 Client deposits 68.70 76.71 82.78 87.04 92.87 105.87 123.99 145.70 171.97 f = forecast. Source: BMI, Central banks, Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Weaknesses Opportunities Threats ƒ Rapid growth. ƒ Untapped potential. ƒ High savings rate of Vietnamese. ƒ Increasingly open to foreign banks since WTO accession in 2007. ƒ Role of state-owned banks steadily decreasing. ƒ Domestic banks lack capital and technology to sustain high credit growth. ƒ The financial accounts of many banks are still opaque. ƒ High exposure to real estate and stock market loans among smaller banks. ƒ Population still under-banked. ƒ Income levels likely to rise strongly over the medium term. ƒ Macroeconomic instabilities threaten the credibility of the government and could potentially turn economic policy away from further liberalisation. © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2011 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 46 Vietnam Commercial Banking Report Q3 2011 Habubank Strengths ƒ Emerged from 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 less than 100% and it is less dependent on borrowing from other financial institutions. Weaknesses ƒ Lack of scale. Habubank is a fairly large bank in Vietnam but a small institution by international standards. ƒ Potential problems in the wake of the bursting of the asset price bubble. ƒ Vulnerability to a drying up of liquidity within the banking system. Funding from, and loans to, other banks account for about one-third of total assets. Opportunities ƒ Potential for growth from a low base. Threats ƒ Growth limited by government lending policy. Company Overview Hanoi Building Bank (Habubank) was established in 1989 as the first commercial joint stock bank in Vietnam with the initial purpose of providing loans and services in housing and construction. With initial chartered capital of VND5bn, the bank was permitted to provide banking products and services for 99 years. The shareholder structure has been diversified, with the participation of individuals, state-owned enterprises and private enterprises. After more than 20 years, the bank now has chartered capital of VND2tn and an expanding branch network. The bank has been graded A for the last nine years and recognised as one of the safest, most efficient and stable banks by the State Bank of Vietnam. Habubank listed its shares on a central stock exchange in November 2010, ending over the counter trading. It expects this to boost the development of the bank and to encourage greater interest in the bank as an investment. Overall, 2009 was a successful year for Habubank. Gross profits for FY09 totalled VND505bn, exceeding the original target by 26%. The loan portfolio increased in value by 27% to VND13trn and overall deposits came to VND25.5trn, also growing by 27%. Despite this rapid expansion in credit, the NPL ratio is dropping, falling from 2.85% in FY08 to 2.24% in FY09. The bank expected growth of 30-50% in 2010. However, this was made difficult by the government's concerns over loose lending and overheating the Vietnamese economy. The government limited credit growth to 25% in FY10, making Habubank's 50% growth target much harder to achieve. Company Data ƒ Website: www.habubank.com.vn ƒ Status: Commercial joint-stock bank © Business Monitor International Ltd Page 47 Vietnam Commercial Banking Report Q3 2011 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) 2004 2005 2006 2007 Total Assets 3,728,305 5,524,791 11,685,320 23,518,680 Loans & Mortgages 2,340,832 3,330,218 5,983,267 9,285,862 Total Deposits 2,169,531 3,096,275 4,616,096 8,467,382 253,547 391,464 1,756,381 3,179,345 Total Shareholders’ Equity Source: Habubank financial statements © Business Monitor International Ltd Page 48 Vietnam Commercial Banking Report Q3 2011 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 less than 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 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 a growth in Eximbank's loan portfolio of 80.8% y-o-y 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 ƒ Website: www.eximbank.com.vn/en ƒ Status: Commercial joint-stock bank © Business Monitor International Ltd Page 49 Vietnam Commercial Banking Report Q3 2011 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 Equity 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 Page 50 Vietnam Commercial Banking Report Q3 2011 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 less than 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 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 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 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 whole. Sacombank posted FY09 gross profits of VND1.9trn, exceeding the predicted figure by © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q3 2011 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 ƒ Website: www.sacombank.com.vn ƒ Status: Commercial joint stock bank Table: Stock Market Indicators 2005 Market Capitalisation, VND 2006 2007 2008 15,043,772.00 29,139,732.00 9,413,129.00 Market Capitalisation, US$ 2009 Dec 2010 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 © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q3 2011 Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 2009 Total Assets 908.05 1,543.11 4,031.52 3,914.58 5,629.05 Loans & Mortgages 526.41 891.44 2,197.70 1,988.05 3,200.47 Total Deposits 657.57 1090.66 2,761.56 2,638.50 3,274.87 Total Shareholders’ Equity 118.59 178.77 458.87 443.78 583.20 0.04 0.05 0.11 0.08 0.25 Earnings per share (US$) Source: Sacombank, Bloomberg Table: Key Ratios (%) 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 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 53 Vietnam Commercial Banking Report Q3 2011 Saigonbank Strengths ƒ Record of strong growth over the medium term. Weaknesses ƒ Lack of scale. Saigonbank is a medium-sized bank in Vietnam but a small institution by international standards. ƒ Saigonbank's loan-to-deposit ratio has been relatively high compared to other banks. Opportunities ƒ Potential for continuing growth from a low base. Threats ƒ 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 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 Vietnamese 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 ƒ Website: www.saigonbank.com.vn ƒ 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 54 Vietnam Commercial Banking Report Q3 2011 Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 2009 Total Assets 3,188,300 4,290,929 6,240,308 10,184,650 11,205,360 11,875,920 Loans & Mortgages 2,611,141 3,527,109 4,811,056 7,300,613 7,844,450 9,600,247 Total Deposits 1,964,739 2,830,064 3,947,700 6,466,654 7,164,714 8,481,534 476,062 609,434 931,562 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$mn, unless stated) 2004 2005 2006 2007 2008 2009 Total Assets 202.14 269.56 388.66 635.86 640.93 642.67 Loans & Mortgages 165.55 221.58 299.64 455.80 448.69 519.52 Total Deposits 124.56 177.79 245.87 403.74 409.81 458.98 30.18 38.29 58.02 89.38 84.07 104.70 0.15 0.10 0.09 Total Shareholders’ Equity Earnings per share (US$) Source: Saigonbank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 2008 2009 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 14.93 14.20 14.93 14.06 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q3 2011 SeABank Strengths Weaknesses ƒ Record of strong growth over the medium term. ƒ Partnership with Societe Generale. ƒ Lack of scale. SeABank is a medium-sized bank in Vietnam but a small institution by international standards. ƒ SeABank's loan-to-deposit ratio has been relatively high compared to other banks. Opportunities ƒ Potential for continuing growth from a low base. Threats ƒ 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$500mn; at least 200 facilities open; 1mn customers; and 2,000 employees. The speed of expansion can be seen in the performance of SeABank in FY09. Overall loan portfolio growth was 122% y-o-y, reaching VND24.02trn. Total assets grew by 136% y-o-y to VND30.8trn. The likelihood of further rapid growth was increased by the decision to increase the charter capital of SeABank by 36% to a total of VND4trn. However, the bank's rapid expansion has not been completely free of problems. SeABank was one of the few Vietnamese financial institutions to fall short of its FY09 gross profit target, with profits growing by 8% y-o-y to VND479bn. Company Data ƒ Website: www.seabank.com.vn ƒ Status: Commercial joint stock bank, subsidiary of Societe Generale Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 2,283,813 6,124,938 10,200,420 26,241,090 22,473,980 Loans & Mortgages 530,767 1,347,680 3,353,999 10,994,810 7,506,934 Total Deposits 499,021 2,312,406 3,511,683 10744180 8,587,008 Total Shareholders’ Equity 161,473 291,776 1,055,536 3,366,458 4,177,114 2,098.00 1,058.00 Total Assets Earnings per share (VND) Source: SeABank, Bloomberg © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q3 2011 Table: Balance Sheet (US$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 57 Vietnam Commercial Banking Report Q3 2011 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: 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 Page 58 Vietnam Commercial Banking Report Q3 2011 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 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. © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q3 2011 Table: Commercial Banking Business Environment Indicators And Rationale Limits of Potential Returns Rationale Banking market structure Estimated total assets, end 2010 Indication of overall sector attractiveness. Large markets are considered more attractive than small ones Estimated growth in total assets, 20112015 Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 20112015 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 lowincome 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 Country risk From 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 60 Vietnam Commercial Banking Report Q3 2011 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 61 [...]... returns Commercial banking business environment rating Market Risk 40 Country Risk 46 56 Source: BMI © Business Monitor International Ltd Page 12 Vietnam Commercial Banking Report Q3 2011 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. .. These four banks are Vietnam Export Import Commercial Bank (EIB), Bank for Foreign Trade of Vietnam (VCB), Saigon Thuong Tin Commercial Bank (STB) and Vietnam Commercial Bank for Industry and Trade (CTG) Heavily Exposed Non-Performing Assets, % Source: Bloomberg, BMI © Business Monitor International Ltd Page 31 Vietnam Commercial Banking Report Q3 2011 Survival Of The Prudent The Vietnamese government... Vietnam Commercial Banking Report Q3 2011 Business Environment Outlook Commercial Banking Business Environment Rating Table: Commercial Banking Business Environment Ratings Limits of potential returns Total assets; end 2010 Data Score; out of 10 Ratings score; out of 100 US$148.4mn 6 Market Structure 67 Growth in total assets; 2011- 2015 7 Growth in client loans; 2011- 2015 7 Per-capita GDP; 2011 US$1,265.3... 80.0 68.0 63.8 31 Vietnam 66.7 52.5 40.0 46.0 55.8 40 US 90.0 85.0 100.0 76.0 87.3 2 Scores out of 100, with 100 the highest Source: BMI © Business Monitor International Ltd Page 14 Vietnam Commercial Banking Report Q3 2011 Global Commercial Banking Outlook Outlook Continues To Improve With Risks In line with generally improving world macroeconomic conditions, the outlook for the global banking sector... Taiwan 7.6 -3.4 0.48 Thailand 4.5 -3.0 1.41 Vietnam -6.2 -3.2 10.25 US -3.5 -9.5 0.35 India f = BMI forecast; na = not available Note: Incorporates actual financial markets data, estimated economic data and projected banking data Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 30 Vietnam Commercial Banking Report Q3 2011 Vietnam Banking Sector Outlook EIB To Outperform.. .Vietnam Commercial Banking Report Q3 2011 Vietnam Economic SWOT Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.2% annually between 2000 and 2010 The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004 Weaknesses Vietnam still... International Ltd Page 19 Vietnam Commercial Banking Report Q3 2011 Malaysian Underwriters Dominate Global – Top 10 Islamic Underwriters Jan-April 2011 By Total Deals, US$mn Source: Bloomberg In early 2011, the Malaysian government unveiled the Shari’a Governance Framework, which is designed to reduce legal uncertainty in shari’a-compliant financing activities The 2009 Central Banking Act also says the... their domestic banking sectors We estimate that shari’acompliant banking assets make up about 4% of the Pakistan’s financial assets In Bangladesh, a Daily Star report suggested that Islamic deposits account for more than 16% of the total in the banking sector © Business Monitor International Ltd Page 22 Vietnam Commercial Banking Report Q3 2011 The development of Islamic microfinance is a potential growth... 18.2 South Korea* 225.7 15.6 -7.1 Taiwan* 125.4 12.8 31.2 Thailand* 50.7 16.3 22.4 Vietnam* 8.6 6.6 -11.6 2,500.5 19.1 22.8 Bangladesh* China* Indonesia* Japan* US * = 2009 Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 24 Vietnam Commercial Banking Report Q3 2011 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns Risks to Potential... Thailand 4,630 3,374 14,088 881 Vietnam 1,153 1,287 3,940 246 47,308 23,814 121,699 7,606 Bangladesh China Hong Kong Japan US Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 29 Vietnam Commercial Banking Report Q3 2011 Table: Interbank Rates And Bond Yields 3-Month Interbank Rate, % Current Account, % of GDP, 2011f Budget Balance, % of GDP, 2011f 2010 Bangladesh 1.0 -4.9 . International Copy deadline: June 2011 Vietnam Commercial Banking Report Q3 2011 © Business Monitor International Ltd Page 2 Vietnam Commercial Banking Report Q3 2011 © Business Monitor. 3.9 4 Commercial banking business environment rating 56 Source: BMI Vietnam Commercial Banking Report Q3 2011 © Business Monitor International Ltd Page 13 Commercial Banking Business. BMI, Central banks, Regulators Vietnam Commercial Banking Report Q3 2011 © Business Monitor International Ltd Page 8 SWOT Analysis Vietnam Commercial Banking SWOT Strengths  Rapid