Q4 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 Q4 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI’s Report & Forecasts Series Published by: Business Monitor International Copy deadline: September 2012 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: www.businessmonitor.com © 2012 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 Q4 2012 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2012 CONTENTS Executive Summary . Table: Levels (VNDbn) Table: Levels (US$bn) . Table: Levels At February 2012 Table: Annual Growth Rate Projections 2012-2016 (%) . Table: Ranking Out Of 59 Countries Reviewed In 2011 Table: Projected Levels (VNDbn), 2009-2016 . Table: Projected Levels (US$bn), 2009-2016 SWOT Analysis . Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT . Business Environment Outlook 10 Commercial Banking Business Environment Rating . 10 Table: Commercial Banking Business Environment Ratings . 10 Commercial Banking Business Environment Rating Methodology . 11 Table: Asia Commercial Banking Business Environment Ratings . 12 Global Commercial Banking Outlook . 13 Regional Outlooks 20 Banking Slowdown Has Further To Run . 20 Asia Banking Sector Outlook 23 Table: Banks' Bond Portfolios 2011 23 Table: Asia Commercial Banking Business Environment Ratings . 24 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios . 25 Table: Anticipated Developments in 2012 . 26 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) . 27 Table: Comparison of US$ Per Capita Deposits (2011) 28 Table: Interbank Rates and Bond Yields 29 Vietnam Specific Banking Sector Outlook 30 Economic Outlook 33 Table: Vietnam – Economic Activity, 2011-2016 . 35 Competitive Landscape . 36 Market Structure . 36 Protagonists . 36 Table: Protagonists In Vietnam's Commercial Banking Sector . 36 Definition Of The Commercial Banking Universe 36 List Of Banks . 37 Table: Financial Institutions In Vietnam . 37 Company Profiles . 40 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2012 Bank for Foreign Trade of Vietnam (Vietcombank) . 40 Table: Vietnam Stock Market Indicators, 2009-2012 . 41 Table: Vietnam Balance Sheet (US$mn), 2002-2010 . 41 Table: Vietnam Key Ratios (%), 2002-2010 . 41 VietinBank . 42 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 43 Agribank 44 Table: Vietnam Balance Sheet (LCYmn), 2004-2009 . 45 Table: Vietnam Balance Sheet (US$mn), 2004-2009 . 45 Table: Vietnam Key Ratios (%), 2004-2009 . 45 Asia Commercial Bank 46 Table: Vietnam Stock Market Indicators, 2007-2012 . 46 Table: Vietnam Balance Sheet (LCYmn), 2004-2010 . 47 Table: Vietnam Balance Sheet (US$mn), 2004-2010 . 47 Table: Vietnam Key Ratios (%), 2004-2010 .s loan-to-deposit ratio has been relatively high compared to other banks. Potential direct and indirect problems from the bursting of the asset price bubble. . Opportunities ƒ Potential for continuing growth from a low base. Threats ƒ Vulnerability to impact, direct or indirect, from the downturn in global trade. 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 60 Vietnam Commercial Banking Report Q4 2011 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$) Source: Saigonbank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 2008 Return on Assets 2.14 2.26 2.08 1.51 1.82 Return on Equities 14.74 15.47 14.43 11.12 12.34 13.12 16.29 Loan/Deposit Ratio 112.32 Loan/Asset Ratio Equity/Asset Ratio 71.32 14.93 14.20 14.93 14.06 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 61 Vietnam Commercial Banking Report Q4 2011 SeABank Strengths Weaknesses ƒ Record of strong growth over the medium term. ƒ Partnership with Societe Generale. ƒ Lack of scale. SeABank is a medium-sized bank in Vietnam but a small institution by international standards. ƒ SeABank’s loan-to-deposit ratio has been relatively high compared with other banks. Opportunities ƒ Potential for continuing growth from a low base. Threats ƒ Vulnerability to direct or indirect impact from the downturn in global trade. Overview South East Asia Commercial Joint Stock Bank (SeABank) was established in 1994. It aims to become one of the leading joint stock banks in Vietnam and has a programme to modernise and achieve a sustainable competitive edge. After expansion in 2009, the bank has 126 branches and offices, mo . 60 Table: Weighting Of Indicators . 61 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2012 Executive Summary Table: Levels (VNDbn) Client loans Bond portfolio Liabilities Other and capital February 2011 3,074,964.3 2,556,170.0 239,061.1 February 2012 3,388,150.0 2,772,420.0 278,421.0 Date Change, % Total assets 10% 8% Client deposits Other 279,733.2 3,074,964.3 459,951.0 2,226,212.5 388,800.8 337,309.0 3,388,150.0 560,003.0 2,483,817.0 344,330.0 16% 21% Capital 10% 22% 12% -11% Source: BMI, central banks, regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio February 2011 147.3 122.4 11.5 13.4 147.3 22.0 106.6 18.6 February 2012 162.6 133.1 13.3 16.2 162.6 26.9 119.2 16.5 10% 9% 17% 21% 10% 22% 12% -11% Date Change, % Liabilities Other and capital Client Capital deposits Other Source: BMI, central banks, regulators Table: Levels At February 2012 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$ 81.83% 108.82% 1,072 1,340 Rising Falling 111.62% Falling Source: BMI, central banks, regulators Table: Annual Growth Rate Projections 2012-2016 (%) Assets Loans Deposits Annual Growth Rate 12 10 CAGR 13 11 Ranking 15 22 32 Source: BMI, central banks, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2012 Table: Ranking Out Of 59 Countries Reviewed In 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 13 Local currency loan growth Local currency deposit growth 27 27 14 Local currency asset growth 20 Source: BMI, central banks, regulators Table: Projected Levels (VNDbn), 2009-2016 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f Total assets 2,286,320.58 2,953,153.46 3,437,893.00 3,816,061.23 4,350,309.80 4,959,353.17 5,604,069.09 6,276,557.38 Client loans 1,869,260.00 2,475,540.00 2,829,890.00 3,084,580.10 3,454,729.71 3,869,297.28 4,294,919.98 4,724,411.98 Client deposits 1,680,716.80 2,209,896.20 2,483,357.00 2,706,859.13 2,977,545.04 3,245,524.10 3,505,166.02 3,750,527.65 e/f = estimate/forecast. Source: BMI, central banks, regulators Table: Projected Levels (US$bn), 2009-2016 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f Total assets 123.73 151.46 163.44 181.41 209.15 241.16 275.66 312.27 Client loans 101.16 126.96 134.53 146.64 166.09 188.15 211.26 235.05 90.95 113.34 118.06 128.68 143.15 157.82 172.41 186.59 Client deposits e/f = estimate/forecast. Source: BMI, central banks, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 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 Population still underbanked. ƒ Income levels likely to rise strongly over the medium term. ƒ Macroeconomic instabilities threatens the credibility of the government and could potentially drive economic policy away from further liberalisation. Vietnam Political SWOT Strengths Weaknesses Opportunities Threats ƒ 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 oneparty 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 one-party 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 undemocractic 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 Page Vietnam Commercial Banking Report Q4 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. © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 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 hightech 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 Page Vietnam Commercial Banking Report Q4 2012 Table: Vietnam Balance Sheet (LCYmn), 2004-2010 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 2008 2009 2010 Earnings per share (EPS) 2007 Source: BMI Table: Vietnam Balance Sheet (US$mn), 2004-2010 2004 2005 2006 Total Assets 977.4091 1,524.868953 2,780.58296 Loans & Mortgages 423.0273 599.4533861 1,055.936348 1,977.668727 1,979.298576 3,347.366416 4,435.245051 Total Deposits 797.6126 1,255.491896 2,093.050075 3,451.526753 3,673.108105 4,703.674225 5,484.491281 Total Shareholders' Equity Earnings per share (EPS) 2007 5,331.31554 6,023.344392 9,084.963851 10,519.17889 44.74 80.61351929 105.6623692 390.7004433 444.2297089 546.9065967 583.4832803 na na 0.09 0.23 0.21 0.15 0.15 2006 2007 2008 2009 2010 Source: BMI Table: Vietnam Key Ratios (%), 2004-2010 2004 2005 Return on Assets na 1.507707144 1.466753835 2.706609312 2.318518486 1.611498771 1.251953981 Return on Equities na 30.08723459 34.41571596 44.48507274 Loan Deposit Ratio Loan Asset Ratio Equity Asset Ratio 31.5264123 24.63194958 21.7361562 53.24357 47.85069943 50.62909577 57.54173463 54.24222194 71.74246987 81.53905775 43.4493 39.39759231 38.11043735 37.25287596 33.07756158 37.14414409 42.51284782 4.577408 5.2865867 3.704749733 7.328405913 7.375133812 6.019909442 5.546851959 Source: BMI © Business Monitor International Ltd Page 47 Vietnam Commercial Banking Report Q4 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$77.5mn from Australian group ANZ. It represented the first major divestment of Vietnamese assets by an overseas bank. Company Data ƒ Website: www.eximbank.com.vn/en ƒ Status: Commercial joint-stock bank © Business Monitor International Ltd Page 48 Vietnam Commercial Banking Report Q4 2012 Table: Balance Sheet (VNDmn, unless stated), 2005-2008 2005 2006 2007 2008 11,369,230.0 18,323,770.0 33,710,420.0 48,624,110.0 Loans & Mortgages 6,427,689.0 10,161,270.0 18,378,610.0 21,232,200.0 Total Deposits 8,352,111.0 13,141,180.0 22,906,120.0 31,254,020.0 835,539.0 1,946,667.0 6,294,943.0 12,844,080.0 2,379.00 1,052.00 Total Assets Total Shareholder Equity Earnings Per Share, VND Source: Eximbank, Bloomberg Table: Balance Sheet (US$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 49 Vietnam Commercial Banking Report Q4 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$30mn loan agreement with Dutch development bank FMO in September 2011, in a deal designed to boost lending to both retail and small- and medium-sized enterprise (SME) customers. The bank, along with some of its rivals, came under fire by the central bank in late 2010 as it began offering relatively high interest rates on deposits of over 17% in a bid to grab market share. The State Bank of Vietnam argued that such rates were risky, potentially destabilising and detrimental to profitability. © Business Monitor International Ltd Page 50 Vietnam Commercial Banking Report Q4 2012 Table: Vietnam Balance Sheet (LCYmn), 2002-2009 2002 2003 Total Assets 4,059,823 5,510,430 7,667,461 10,666,106 17,326,352 39,542,496 59,069,056 92,581,504 Loans & Mortgages 1,902,211 2,243,138 3,465,540 na 8,696,101 20,486,132 26,018,984 41,580,368 Total Deposits 1,849,251 2,619,620 4,600,097 6,195,072 9,566,043 24,476,576 39,617,724 62,347,400 Total Shareholders' Equity 135,846.9 208,875 515,107 1,009,405 1,761,687 3573,416 5,625,408 7,323,826 na na na na 1,446.00 2,452.00 4,259.00 3,148.00 2003 2004 2005 2006 2007 2008 2009 Earnings per share (EPS) 2004 2005 2006 2007 2008 2009 Source: BMI Table: Vietnam Balance Sheet (US$mn), 2002-2009 2002 Total Assets 263.6077 352.2842 Loans & Mortgages 123.5121 143.4048 219.7134 Total Deposits 120.0734 167.4735 291.6438 389.1866 595.7924 1,528.162 2,266.071 Total Shareholders' Equity 8.820652 13.35347 32.65752 Earnings per share (EPS) na 486.113 670.0657 1,079.12 2,468.783 3,378.657 5,010.093 na 541.6107 1,279.024 1,488.245 2,250.142 3,373.96 63.4128 109.7214 223.1015 321.7645 396.3324 na na na 0.09 0.15 0.26 0.18 2003 2004 2005 2006 2007 2008 2009 Source: BMI Table: Vietnam Key Ratios (%), 2002-2009 2002 Return on Assets na 0.636096 1.172175 2.248946 1.835537 1.794951 2.399482 2.242219 Return on Equities na 17.65945 21.33589 27.04551 18.54186 19.13305 25.72248 26.25899 Loan Deposit Ratio na na 75.33624 na na na na na Loan Asset Ratio na na 45.19801 na na na na na Equity Asset Ratio 3.346128 3.790539 6.718091 9.463669 10.16767 9.0369 9.523443 7.910679 Source: BMI © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q4 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$28.52mn) for 2011, marking a 73.5% jump on the previous year. Table: Vietnam Stock Market Indicators, 2009-2012 2009 2010 27-Feb-12 Market Capitalisation LCY 33,196,270.00 34,896,268.00 35,806,608.00 Market Capitalisation US$ 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 Page 52 Vietnam Commercial Banking Report Q4 2012 Table: Vietnam Balance Sheet (LCYmn), 2005-2010 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), 2005-2010 2005 2006 2007 2008 Total Assets 7,272.65 8,430.68 10,371.04 11,073.06 18,858.97 Loans & Mortgages 4,677.05 4,988.24 6,273.47 6,783.83 11,869.67 Total Deposits 5,301.36 6,208.48 7,035.83 6,957.30 10,561.02 314.10 349.22 664.70 705.61 942.27 Total Shareholders' Equity 2009 Earnings per share (EPS) 2010 0.11 Source: BMI 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 2009 2010 4.94 8.02 Source: BMI © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q4 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 Page 54 Vietnam Commercial Banking Report Q4 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 initial public offerings (IPOs). These services have been combined with attempts by Sacombank to diversify income sources away from the credit business. To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income. Sacombank generated net interest income of VND5.49trn for 2011, representing an increase of 71% y-o-y. In total, after-tax profit for 2011 stood at VND2.033trn, which was a 13% increase year-on-year. By the end of the year, outstanding loans were VND78.49trn, while credit growth © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q4 2012 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, 2005-2010 2005 2006 2007 2008 2009 Dec 2010 Market Capitalisation, VND 15,043,772.00 29,139,732.00 9,413,129.00 16,147,851.00 13,768,845.52 Market Capitalisation, US$ 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), 2005-2009 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 56 Vietnam Commercial Banking Report Q4 2012 Table: Balance Sheet (US$mn, unless stated), 2005-2009 2005 2006 2007 2008 2009 Total Assets 908.05 1,543.11 4,031.52 3,914.58 5,629.05 Loans & Mortgages 526.41 891.44 2,197.70 1,988.05 3,200.47 Total Deposits 657.57 1,090.66 2,761.56 2,638.50 3,274.87 Total Shareholders' Equity 118.59 178.77 458.87 443.78 583.20 0.04 0.05 0.11 0.08 0.25 Earnings per share (US$) Source: Sacombank, Bloomberg Table: Key Ratios (%), 2005-2009 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 57 Vietnam Commercial Banking Report Q4 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: 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 Q4 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 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 Q4 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 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 60 Vietnam Commercial Banking Report Q4 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 61 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... factors Meanwhile, we see South Africa's banking sector continuing along a path of steady recovery © Business Monitor International Ltd Page 18 Vietnam Commercial Banking Report Q4 2012 Slowly Moving Up Africa – Total Loans, % chg y-o-y Source: BMI, Central Banks © Business Monitor International Ltd Page 19 Vietnam Commercial Banking Report Q4 2012 Regional Outlooks Banking Slowdown Has Further To Run BMI.. .Vietnam Commercial Banking Report Q4 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$bn 163.4 6 Market Structure 60 Growth in total assets; 2012- 2016, US$bn 130.9 6 Growth in client loans; 2012- 2016,... 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 53 Source: BMI, National Sources © Business Monitor International Ltd Page 10 Vietnam Commercial Banking Report Q4 2012 Commercial Banking Business Environment Rating Methodology Since Q108, we have described numerically the banking business environment... -2.5 3.02 Vietnam 0.0 -5.1 12.50 -2.7 -7.5 United States NB Incorporates actual financial markets data; estimated economic data and projected banking data na=not available Source: Central banks; regulators; BMI © Business Monitor International Ltd Page 29 Vietnam Commercial Banking Report Q4 2012 Vietnam Specific Banking Sector Outlook BMI View: In light of the mounting pressure to prepare the banking. .. 5,046 3,961 14,554 910 Vietnam 1,357 1,515 5,318 332 48,190 30,212 108,610 6,788 Bangladesh China Hong Kong Japan United States Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 28 Vietnam Commercial Banking Report Q4 2012 Table: Interbank Rates and Bond Yields 3 Month Interbank Rate % Current Account % of GDP, 2012f Budget balance % of GDP, 2012f End Q1 2012 Bangladesh 1.4... 76.7 70.0 86.7 76.0 75.9 12 Thailand 66.7 65.0 86.7 74.0 69.9 25 Vietnam 60.0 55.0 36.7 46.0 53.3 46 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 Page 12 Vietnam Commercial Banking Report Q4 2012 Global Commercial Banking Outlook Our core view remains that banking sectors in most developed states will continue to struggle... the banking sectors' weaknesses, and we believe that such efforts should play a significant role in boosting Vietnam' s competitiveness and economic growth over the longer term © Business Monitor International Ltd Page 32 Vietnam Commercial Banking Report Q4 2012 Economic Outlook Real GDP Growth Set To Pick Up In 2013 BMI View: Vietnam' s real GDP growth is expected to remain subdued at 5.3% in 2012, ... Lanka 2.2 12.8 22.2 269.8 17.0 4.6 Taiwan 97.9 8.4 -47.2 Thailand 65.5 15.9 13.7 Vietnam 12.3 7.5 27.0 447.1 3.6 -15.1 Bangladesh China Indonesia Japan South Korea United States Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 23 Vietnam Commercial Banking Report Q4 2012 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns Risks to Potential... 7.0 Thailand 106.4 Falling 12.7 17.6 -4.9 Vietnam 114.0 Falling 12.1 10.6 1.5 United States 110.2 Falling 567.5 595.1 -27.5 Loan/Deposit Ratio, % Bangladesh South Korea Taiwan NB Incorporates estimated economic data and projected banking data Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 26 Vietnam Commercial Banking Report Q4 2012 Table: Comparison of Total Assets &... has seen equity markets established in Laos and Cambodia, setting the stage for more investment activity in these countries © Business Monitor International Ltd Page 21 Vietnam Commercial Banking Report Q4 2012 Vietnam In A Boom Phase Vietnam – Ho Chi Minh Equity Index & Trading Volume Source: BMI, Volume One area in which the region is gaining ground is trade finance As we wrote about previously (see . Copy deadline: September 2012 Vietnam Commercial Banking Report Q4 2012 © Business Monitor International Ltd Page 2 Vietnam Commercial Banking Report Q4 2012 © Business Monitor. 57 BMI Banking Sector Methodology 58 Table: Commercial Banking Business Environment Indicators And Rationale 60 Table: Weighting Of Indicators 61 Vietnam Commercial Banking Report Q4 2012 . BMI, central banks, regulators Vietnam Commercial Banking Report Q4 2012 © Business Monitor International Ltd Page 7 SWOT Analysis Vietnam Commercial Banking SWOT Strengths  Rapid