Q1 2011 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES 5-YEAR FORECASTS TO 2015 ISSN 1758-454X Published by Business Monitor International Ltd VIETNAM COMMERCIAL BANKING REPORT Q1 2011 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2015 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: January 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 Q1 2011 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 CONTENTS Executive Summary Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At August 2009 Table: Annual Growth Rate Projections 2010-2014 (%) Table: Ranking Out Of 59 Countries Reviewed In 2010 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) SWOT Analysis Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT Business Environment Outlook Commercial Banking Business Environment Ratings Table: Vietnam’s Commercial Banking Business Environment Rating Commercial Banking Business Environment Rating Methodology Table: Asia Commercial Banking Business Environment Ratings 10 Global Commercial Banking Outlook 12 Asia Banking Sector Outlook 18 Table: Banks' Bond Portfolios 20 Table: Asia Commercial Banking Business Environment Ratings 21 Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios 22 Table: Anticipated Developments In 2011 23 Table: Comparison Of Total Assets, Client Loans And Client Deposits, 2009-2010 (US$bn) 24 Table: Comparison Of Per Capita Deposits, 2010e (US$) 25 Table: Interbank Rates And Bond Yields, 2009-2010 26 Vietnam Banking Sector Outlook 27 Economic Outlook 30 Table: Vietnam Economic Activity, 2007-2015 31 Company Profiles 33 Vietcombank 33 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) 34 BIDV 35 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) 36 VietinBank 37 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 38 Agribank 39 Table: Balance Sheet (VNDmn, unless stated) 40 Table: Balance Sheet (US$mn, unless stated) 40 Table: Key Ratios (%) 40 MHB Bank 41 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 42 Habubank 43 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) 44 Eximbank 45 Table: Balance Sheet (VNDmn, unless stated) 46 Table: Balance Sheet (US$mn, unless stated) 46 Table: Key Ratios (%) 46 Sacombank 47 Table: Stock Market Indicators 48 Table: Balance Sheet (VNDmn, unless stated) 48 Table: Balance Sheet (US$mn, unless stated) 49 Table: Key Ratios (%) 49 Saigonbank 50 Table: Stock Market Indicators 50 Table: Balance Sheet (VNDmn, unless stated) 51 Table: Balance Sheet (US$mn, unless stated) 51 Table: Key Ratios (%) 51 SeABank 52 Table: Balance Sheet (VNDmn, unless stated) 53 Table: Balance Sheet (US$mn, unless stated) 53 Table: Key Ratios (%) 53 BMI Banking Sector Methodology 54 Commercial Bank Business Environment Rating 55 Table: Commercial Banking Business Environment Indicators And Rationale 56 Table: Weighting Of Indicators 57 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 Executive Summary Table: Levels (VNDbn) Total Assets Client Loans Bond Portfolio August 2008 1,659,548.7 1,259,980.0 149,816.7 August 2009 2,065,761.6 1,706,340.0 173,358.3 Date Change, % 24% 35% Client Deposits Other 249,752.0 1,659,548.7 217,173.0 1,205,967.7 236,408.0 186,063.3 2,065,761.6 286,547.0 1,594,992.6 184,222.0 Other 16% Liabilities& Capital -26% Capital 24% 32% 32% -22% Source: BMI, SBV Table: Levels (US$bn) Total Assets Client Loans Bond Portfolio August 2008 100.4 76.2 9.1 15.1 100.4 13.1 73.0 14.3 August 2009 116.0 95.8 9.7331 10.4 116.0 16.1 89.6 10.3 15% 26% 7% -31% 15% 22% 23% -28% Date Change, % Liabilities Other & Capital Client Capital Deposits Other Source: BMI, SBV Table: Levels At August 2009 Loan/Deposit Ratio Loan/Asset Ratio Loan/GDP Ratio GDP Per Capita, US$ Deposits Per Capita, US$ 82.60% 107.32% 1,058 1,030 Falling Rising 106.98% Rising Source: BMI, SBV Table: Annual Growth Rate Projections 2010-2014 (%) Assets Loans Deposits Annual Growth Rate 24 24 14 CAGR 25 25 13 1 15 Ranking Source: BMI, SBV © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 Table: Ranking Out Of 59 Countries Reviewed In 2010 Loan/Deposit Ratio Loan/Asset Ratio Loan/GDP Ratio 10 Local Currency Loan Growth Local Currency Deposit Growth 14 Local Currency Asset Growth Source: BMI, SBV Table: Projected Levels (VNDbn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f Total Assets 1410221.40 1747335.40 2411322.85 2893587.42 3472304.91 4236211.99 5252902.86 6566128.58 8273322.01 Client Loans 1067730.00 1339260.00 1848178.80 2217814.56 2661377.47 3246880.52 4026131.84 5032664.80 6341157.65 Client Deposits 1100392.90 1341142.80 1528902.79 1697082.10 1917702.77 2186181.16 2492246.52 2841161.04 3267335.19 e/f = BMI estimate/forecast Source: BMI, SBV Table: Projected Levels (US$bn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f 2015f Total Assets 88.04 99.96 130.56 148.39 173.62 211.81 269.38 345.59 447.21 Client Loans 66.66 76.62 100.07 113.73 133.07 162.34 206.47 264.88 342.77 Client Deposits 68.70 76.72 82.78 87.03 95.89 109.31 127.81 149.53 176.61 e/f = BMI estimate/forecast Source: BMI, SBV © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth Untapped potential The high savings rate of Vietnamese households Increasingly open to foreign banks since accession to the WTO in 2007 The role of state-owned banks is steadily decreasing Weaknesses Domestic banks lack the capital and technology to sustain high credit growth The financial accounts of many banks are still opaque High exposure to real estate and stock market loans among smaller banks Opportunities The population is still under-banked Income levels are likely to rise strongly over the medium term Threats The National Congress of the Communist Party of Vietnam in January 2011 could result in a shift of economic policy away from further liberalisation Vietnam Political SWOT Strengths The Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress The one-party system is generally conducive to short-term political stability Relations with the US are generally improving, 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 that 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 The slowdown in growth in 2009 and 2010 is 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-party-state will probably be unsustainable Relations with China have deteriorated in 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 widespread environmental damage © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 Vietnam Economic SWOT Strengths Vietnam has been one of the fastest growing economies in Asia in recent years, with GDP growth averaging 7.6% annually between 2000 and 2007 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 suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy continued to suffer in 2010 The fiscal picture is clouded by considerable ‘off the books’ spending The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus 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, despite 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 to rise 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 Vietnam Business Environment SWOT Strengths Vietnam has a large, skilled and low-cost workforce which has made the country attractive to foreign investors Vietnam’s proximity to China and South East Asia, and its good sea links, make 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 nd International’s 2010 Corruption Perceptions Index was 2.7, placing it in 22 place in the th Asia Pacific region and 116 overall 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 knowhow 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 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 2011 Business Environment Outlook Commercial Banking Business Environment Ratings Table: Vietnam’s Commercial Banking Business Environment Rating Limits of Potential Returns Total assets, 2010 Data Score, out of 10 Ratings score, out of 100 US$130.6mn Market Structure 63 Growth in total assets, 2010-2015 Growth in client loans, 2010-2015 GDP per capita, 2010 US$1,085.0 Tax 2.9 GDP volatility 0.6 10 Financial infrastructure 5.6 Regulatory framework and development 4.5 Regulatory framework and competitive landscape 5.0 Moody’s rating for local currency deposits 2.0 Long-term financial risk 4.8 Long-term external risk 3.3 Long-term policy continuity 7.0 Legal framework 3.7 Bureaucracy 3.9 Country Structure 53 Risks to Realisation of Returns Commercial banking business environment rating Market Risk 40 Country Risk 46 54 Source: BMI 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 this through our Commercial Banking Business Environment Rating (CBBER), a measure that ensures we capture the latest quantitative information available It also ensures consistency across all countries and between the inputs to the CBBER and the Insurance Business Environment Rating, which is likewise now a feature of our insurance reports Like the Business Environment Ratings calculated by BMI for all the other industries on which it reports, the CBBER takes into account the limits of potential returns and the risks to the realisation of those returns It is weighted 70% to the former and 30% to the latter © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 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 44 Vietnam Commercial Banking Report Q1 2011 Eximbank Strengths Valued by the major international banks that deal with it Emerged from 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 well below 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 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 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% 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 the credit supply The government intends to limit credit supply growth to 25% in FY10 This risks putting the brakes on banks’ growth, which for Eximbank was largely fuelled by an expansion in its loan portfolio However, the application of these 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 45 Vietnam Commercial Banking Report Q1 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 46 Vietnam Commercial Banking Report Q1 2011 Sacombank Strategic partnerships with ANZ and the IFC, plus recognition and various awards from Strengths 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 well below 100% The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system Lack of scale Sacombank is a fairly large bank in Vietnam but a small institution by Weaknesses international standards Potential direct and indirect problems from the bursting of the asset price bubble Potential for continuing growth from a low base Opportunities Leverage of strong position in SME sector Expansion into southern China and countries in the Association of Southeast Asian Nations Vulnerability to direct or indirect impact from the downturn in global trade Threats 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; 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 19% This trend is expected to continue as the Vietnamese economy continues to grow rapidly © Business Monitor International Ltd Page 47 Vietnam Commercial Banking Report Q1 2011 However, the success of Sacombank does partly depend on the outcome of increasing government concern over the supply of credit The government has announced its intention to limit the growth of credit to 25% 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 come under a certain amount of pressure given its focus on SMEs Website: www.sacombank.com.vn Company Data Status: Commercial joint stock bank Table: Stock Market Indicators 2005 2007 2008 2009 Dec 2010 15,043,772.00 29,139,732.00 Market Capitalisation, VND 2006 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 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 48 Vietnam Commercial Banking Report Q1 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 49 Vietnam Commercial Banking Report Q1 2011 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 was relatively high in 2009 by the standards of 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 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 y-o-y in FY09 It is expected that gross profits in FY10 will reach VND900bn However, this rapid growth will be hindered by the government’s concerns over credit supply growth The government aims to limit this to 25% to prevent broader economic difficulties Enforcing 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 program, identifying its own priorities So far, a major priority has been the development of online banking services, as highlighted by the recent decision to use SunGuard’s Ambit Online Banking to offer new online services to customers Saigonbank hopes moves such as these will ensure it is not left behind technologically by foreign-sponsored 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 50 Vietnam Commercial Banking Report Q1 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 51 Vietnam Commercial Banking Report Q1 2011 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 was relatively high by the standards of other banks in 2009 Did not meet FY09 gross profit target 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 the bank 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 include: minimum total assets of US$3.125bn; minimum total capital of US$500mn; at least 200 facilities open; 1mn customers; and 2,000 employees The speed of expansion can be also be seen in the performance of SeABank in FY09 Overall loan portfolio growth was 122% y-o-y, reaching a VND24.02trn Total assets grew by 136% y-o-y to VND30.8trn The likelihood of further rapid growth has been increased by the decision to increase the charter capital of SeABank by 36% to a total of VND4trn However, the bank’s rapid expansion has not been completely free of problems SeABank was one of the few Vietnamese financial institutions to fall short of its FY09 gross profit target, with profits growing by 8% y-o-y to VND479bn Company Data Website: www.seabank.com.vn Status: Commercial joint stock bank, subsidiary of Societe Generale © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q1 2011 Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 2,283,813 6,124,938 10,200,420 26,241,090 22,473,980 Loans & Mortgages 530,767 1,347,680 3,353,999 10,994,810 7,506,934 Total Deposits 499,021 2,312,406 3,511,683 10744180 8,587,008 Total Shareholders’ Equity 161,473 291,776 1,055,536 3,366,458 4,177,114 2,098.00 1,058.00 Total Assets Earnings per share (VND) Source: SeABank, Bloomberg Table: Balance Sheet (US$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 53 Vietnam Commercial Banking Report Q1 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: 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 54 Vietnam Commercial Banking Report Q1 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: 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 55 Vietnam Commercial Banking Report Q1 2011 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, 20102015 Indication of growth potential The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 20102015 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 56 Vietnam Commercial Banking Report Q1 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 57 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... of any information hereto contained Vietnam Commercial Banking Report Q1 2011 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2011 CONTENTS Executive Summary ... International Ltd Page 26 Vietnam Commercial Banking Report Q1 2011 Vietnam Banking Sector Outlook Foreign Banks Poised To Heat Up Competition In 2011 Competition in Vietnam? ??s banking industry looks... International Ltd Page Vietnam Commercial Banking Report Q1 2011 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth Untapped potential The high savings rate of Vietnamese households