Vietnam commercial banking report q1 2013

Q1 2013 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES BMI'S FORECASTS ISSN 1758-454X Published by Business Monitor International Ltd VIETNAM COMMERCIAL BANKING REPORT Q1 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Report & Forecasts Series Published by: Business Monitor International Copy deadline: December 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7246 5162 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: www.businessmonitor.com © 2012 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 2013 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 CONTENTS Executive Summary Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At May 2012 Table: Annual Growth Rate Projections 2012-2017 (%) Table: Ranking Out Of 59 Countries Reviewed In 2013 Table: Projected Levels (VNDbn), 2010-2017 Table: Projected Levels (US$bn), 2010-2017 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 10 Table: Asia Commercial Banking Business Environment Ratings 12 Global Commercial Banking Outlook 13 Regional Outlooks 17 Headwinds Gather Despite Benign Figures 17 Asia Banking Sector Outlook 19 Table: Banks' Bond Portfolios 2011 19 Table: Asia Commercial Banking Business Environment Ratings 20 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios 21 Table: Anticipated Developments in 2013 22 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) 23 Table: Comparison of US$ Per Capita Deposits (2013) 24 Table: Interbank Rates and Bond Yields 25 Vietnam Banking Sector Outlook 26 Banking Sector: Assessing Crisis Potential 26 Economic Outlook 29 Table: Vietnam – Economic Activity, 2008-2016 31 Competitive Landscape 32 Market Structure 32 Protagonists 32 Table: Protagonists In Vietnam's Commercial Banking Sector 32 Definition Of The Commercial Banking Universe 32 List Of Banks 33 Table: Financial Institutions In Vietnam 33 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 Company Profiles 36 Bank for Foreign Trade of Vietnam (Vietcombank) 36 Table: Vietnam Stock Market Indicators, 2009-2012 37 Table: Vietnam Balance Sheet (US$mn), 2002-2010 37 Table: Vietnam Key Ratios (%), 2002-2010 37 VietinBank 38 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 39 Agribank 40 Table: Vietnam Balance Sheet (LCYmn), 2004-2009 41 Table: Vietnam Balance Sheet (US$mn), 2004-2009 41 Table: Vietnam Key Ratios (%), 2004-2009 41 Asia Commercial Bank 42 Table: Vietnam Stock Market Indicators, 2007-2012 43 Table: Vietnam Balance Sheet (LCYmn), 2004-2010 43 Table: Vietnam Balance Sheet (US$mn), 2004-2010 44 Table: Vietnam Key Ratios (%), 2004-2010 44 Eximbank - 45 Table: Balance Sheet (VNDmn, unless stated), 2005-2008 46 Table: Balance Sheet (US$mn, unless stated), 2005-2008 46 Table: Key Ratios (%), 2005-2008 46 Vietnam Technological and Commercial Joint-stock Bank (Techcombank) 47 Table: Vietnam Balance Sheet (LCYmn), 2002-2009 48 Table: Vietnam Balance Sheet (US$mn), 2002-2009 48 Table: Vietnam Key Ratios (%), 2002-2009 48 Viet A Joint Stock Commercial Bank (Vietabank) 49 Table: Vietnam Stock Market Indicators, 2009-2012 50 Table: Vietnam Balance Sheet (LCYmn), 2005-2010 50 Table: Vietnam Balance Sheet (US$mn), 2005-2010 50 Table: Vietnam Key Ratios (%), 2005-2010 51 Housing Development Commercial Joint Stock Bank (HDBank) 52 Sacombank 53 Table: Stock Market Indicators, 2007-2010 54 Table: Balance Sheet (VNDmn, unless stated), 2005-2009 54 Table: Balance Sheet (US$mn, unless stated), 2005-2009 55 Table: Key Ratios (%), 2005-2009 55 Demographic Outlook 56 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 57 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 58 Table: Vietnam's Key Population Ratios, 1990-2020 59 Table: Vietnam's Rural And Urban Population, 1990-2020 59 BMI Banking Sector Methodology 60 Table: Commercial Banking Risk/Reward Rating Indicators And Rationale 62 Table: Weighting Of Indicators 63 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 Executive Summary Table: Levels (VNDbn) Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other May 2011 3,117,942.0 2,630,220.0 223,644.0 264,078.0 3,117,942.0 494,104.0 2,241,245.1 382,592.9 May 2012 3,545,800.5 2,835,610.0 355,353.5 354,837.0 3,545,800.5 569,584.0 2,668,470.8 307,745.7 13.7% 8% 59% 34% 14% 15% 19% -20% Capital Client deposits Other Change, % Source: BMI; Central banks; Regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio May 2011 151.6 127.9 10.9 12.8 151.6 24.0 109.0 18.6 May 2012 170.3 136.2 17.1 17.0 170.3 27.4 128.1 14.8 Change, % 12% 6% 57% 33% 12% 14% 18% -21% Date Liabilities Other and capital Source: BMI; Central banks; Regulators Table: Levels At May 2012 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 79.97% n.a Falling GDP Per Capita, Deposits per capita, US$ US$ Falling 106.26% Falling 1,072 1,437 Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 Table: Annual Growth Rate Projections 2012-2017 (%) Assets Loans Deposits Annual Growth Rate 11 CAGR 13 11 Ranking 16 23 35 Source: BMI; Central banks; Regulators Table: Ranking Out Of 59 Countries Reviewed In 2013 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 14 Local currency loan growth Local currency deposit growth 16 22 12 Local currency asset growth 12 Source: BMI; Central banks; Regulators Table: Projected Levels (VNDbn), 2010-2017 2010 2011e 2012f 2013f 2014f 2015f 2016f 2017f Total assets 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 6,966,978.69 Client loans 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 5,149,609.05 Client deposits 2,209,896.20 2,483,357.20 2,706,859.35 2,977,545.28 3,245,524.36 3,505,166.31 3,750,527.95 3,975,559.63 e/f = estimate/forecast Source: BMI; Central banks; Regulators Table: Projected Levels (US$bn), 2010-2017 2010 2011e 2012f 2013f 2014f 2015f 2016f 2017f Total assets 151.46 163.44 181.41 209.15 241.16 275.66 312.27 348.35 Client loans 126.96 134.53 146.64 166.09 188.15 211.26 235.05 257.48 Client deposits 113.34 118.06 128.68 143.15 157.82 172.41 186.59 198.78 e/f = estimate/forecast Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth Untapped potential High savings rate of Vietnamese Weaknesses Domestic banks lack capital and technology to sustain high credit growth The financial accounts of many banks are still opaque Opportunities Population still underbanked Income levels likely to rise strongly over the medium term Threats Macroeconomic instabilities threatens the credibility of the government and could potentially economic policy away from further liberalisation Vietnam Political SWOT Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and we not expect major shifts in policy direction over the next five years The oneparty system is generally conducive to short-term political stability Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia Weaknesses Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent Opportunities The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials Vietnam has allowed legislators to become more vocal in criticising government policies This is opening up opportunities for more checks and balances within the one-party system Threats Macroeconomic instabilities in 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 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 over recent years due to Beijing's more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 Vietnam Economic SWOT Strengths 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 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 Weaknesses 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 The heavily-managed and weak currency reduces incentives to improve quality of exports, and also keeps import costs high, contributing to inflationary pressures Opportunities WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector Urbanisation will continue to be a long-term growth driver The UN forecasts the urban population rising from 29% of the population to more than 50% by the early 2040s Threats Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis Prolonged macroeconomic instability could prompt the authorities to put reforms on hold as they struggle to stabilise the economy © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 Vietnam Business Environment SWOT Strengths Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors Vietnam's location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond Weaknesses Vietnam's infrastructure is still weak Roads, railways and ports are inadequate to cope with the country's economic growth and links with the outside world Vietnam remains one of the world's most corrupt countries According to Transparency International's 2011 Corruption Perceptions Index, Vietnam ranks 112 out of 183 countries 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 hightech skills and know-how Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector This should offer foreign investors new entry points Threats Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern Labour unrest remains a lingering threat A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 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 Share Price, % change (eop) Change YTD (2011 only) Shares Outstanding (mn) na 1,671.44 2,022.97 Source: BMI 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 Earnings per share (EPS) 2009 2010 0.11 Source: BMI © Business Monitor International Ltd Page 50 Vietnam Commercial Banking Report Q1 2013 Table: Vietnam Key Ratios (%), 2005-2010 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 4.32 Total Risk Based Capital Ratio 4.14 6.41 6.37 2009 2010 4.94 8.02 Source: BMI © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q1 2013 Housing Development Commercial Joint Stock Bank (HDBank) Strengths The bank is completing its four-year modernisation plan in 2012 Earnings, interest income and assets all grew in 2010 Weaknesses Credit growth capped by central bank Limited profitability Lack of transparency Opportunities Further restructuring and expansion Threats Tighter monetary policy to tame economic growth Risk to asset quality on the back of difficult operating environment in 2012 Slowing credit growth 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 52 Vietnam Commercial Banking Report Q1 2013 Sacombank Strengths Strategic partnerships with Australia and New Zealand Banking Group and the International Finance Corporation, plus recognition and various awards from the government and trade press Emerged from the global financial crisis in a strong position By not recycling the rapid growth of deposits into new loans the bank has reduced its loan-to-deposit ratio to well below 100% The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system Weaknesses Lack of scale – Sacombank is a fairly large bank in Vietnam but a small institution by international standards Potential direct and indirect problems from the bursting of the asset price bubble Opportunities Potential for continuing growth from a low base Leverage of strong position in the SME lending sector Expansion into southern China and countries in the Association of Southeast Asian Nations Threats Vulnerability to direct or indirect impact from the downturn in global trade Vulnerable to government credit caps Company Overview Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992 It has been listed on the Ho Chi Minh City Stock Exchange since July 2006 Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the 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 © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q1 2013 year-on-year By the end of the year, outstanding loans were VND78.49trn, while credit growth was 1.4% The bank was also successful in reducing its bad debts, which fell by 50% in the year Meanwhile, the bank has partially offloaded its 10% stake in Sacombank Securities Joint Stock Co (SBS) At the end of 2011 Sacombank has paid up capital of VND15,200bn, of which chartered capital is VND10,740bn The bank has 405 transaction points located in 43 of the 63 provinces in Vietna, Laos and Cambodia Elsewhere, Sacombank and Credit Suisse Singapore have signed a MoU in order to strengthen their competitiveness in both markets Company Data Website: www.sacombank.com.vn Status:Commercial joint stock bank Table: Stock Market Indicators, 2007-2010 2007 2008 2009 Dec 2010 Market Capitalisation, VND 29,139,732.00 9,413,129.00 16,147,851.00 13,768,845.52 Market Capitalisation, US$ 1,819.30 538.42 873.85 706.17 Share Price, VND 37,657.61 12,165.42 19,921.63 15,000.00 Share Price, US$ 2.35 0.70 1.08 0.77 84.91 -70.39 54.93 Share Price, % change (eop) Change, year-to-date -14.67 Shares Outstanding (mn) 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) 624 758 1,846 1,235 4,459 Total Assets Loans & Mortgages Total Deposits Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q1 2013 Table: Balance Sheet (US$mn, unless stated), 2005-2009 2005 2006 2007 2008 2009 Total Assets 908.05 1,543.11 4,031.52 3,914.58 5,629.05 Loans & Mortgages 526.41 891.44 2,197.70 1,988.05 3,200.47 Total Deposits 657.57 1,090.66 2,761.56 2,638.50 3,274.87 Total Shareholders' Equity 118.59 178.77 458.87 443.78 583.20 0.04 0.05 0.11 0.08 0.25 2005 2006 2007 2008 2009 Return on Assets 2.40 3.13 1.44 1.94 Return on Equities 19.76 27.36 12.64 18.25 Earnings per share (US$) Source: Sacombank, Bloomberg Table: Key Ratios (%), 2005-2009 Loan/Deposit Ratio 80.49 82.12 79.98 75.89 98.58 Loan/Asset Ratio 58.29 58.10 54.79 51.15 57.35 Equity/Asset Ratio 13.06 11.59 11.38 11.34 10.14 Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q1 2013 Demographic Outlook Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail Vietnam's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split Source: World Bank, UN, BMI © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q1 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012f 2015f 2020f 67,102 74,008 78,758 83,161 87,848 89,730 92,443 96,355 0-4 years 9,340 9,212 7,002 6,776 7,186 7,186 7,026 6,529 5-9 years 8,685 9,193 9,124 6,921 6,703 6,885 7,143 6,982 10-14 years 7,504 8,604 9,142 9,038 6,844 6,539 6,668 7,104 15-19 years 7,127 7,408 8,535 9,064 8,963 8,161 6,806 6,628 20-24 years 6,492 7,003 7,305 8,420 8,954 9,115 8,892 6,745 25-29 years 5,893 6,361 6,879 7,167 8,284 8,602 8,862 8,803 30-34 years 4,884 5,779 6,250 6,765 7,058 7,475 8,202 8,779 35-39 years 3,965 4,794 5,688 6,163 6,677 6,770 6,991 8,131 40-44 years 2,420 3,884 4,710 5,614 6,086 6,304 6,609 6,925 45-49 years 2,039 2,358 3,802 4,653 5,548 5,761 6,012 6,536 50-54 years 1,933 1,968 2,287 3,739 4,580 4,936 5,449 5,914 55-59 years 1,946 1,843 1,887 2,201 3,617 4,001 4,446 5,305 60-64 years 1,544 1,822 1,737 1,767 2,076 2,573 3,455 4,268 65-69 years 1,283 1,391 1,659 1,582 1,621 1,649 1,927 3,233 70-74 years 919 1,084 1,194 1,439 1,389 1,384 1,438 1,729 1,127 1,305 1,559 1,852 2,264 2,388 2,516 2,743 Total 75+ years f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q1 2013 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012f 2015f 2020f 0-4 years 13.92 12.45 8.89 8.15 8.18 8.01 7.60 6.78 5-9 years 12.94 12.42 11.58 8.32 7.63 7.67 7.73 7.25 10-14 years 11.18 11.63 11.61 10.87 7.79 7.29 7.21 7.37 15-19 years 10.62 10.01 10.84 10.90 10.20 9.10 7.36 6.88 20-24 years 9.68 9.46 9.27 10.13 10.19 10.16 9.62 7.00 25-29 years 8.78 8.60 8.73 8.62 9.43 9.59 9.59 9.14 30-34 years 7.28 7.81 7.94 8.14 8.03 8.33 8.87 9.11 35-39 years 5.91 6.48 7.22 7.41 7.60 7.55 7.56 8.44 40-44 years 3.61 5.25 5.98 6.75 6.93 7.03 7.15 7.19 45-49 years 3.04 3.19 4.83 5.59 6.32 6.42 6.50 6.78 50-54 years 2.88 2.66 2.90 4.50 5.21 5.50 5.89 6.14 55-59 years 2.90 2.49 2.40 2.65 4.12 4.46 4.81 5.51 60-64 years 2.30 2.46 2.21 2.12 2.36 2.87 3.74 4.43 65-69 years 1.91 1.88 2.11 1.90 1.85 1.84 2.08 3.36 70-74 years 1.37 1.46 1.52 1.73 1.58 1.54 1.56 1.79 75+ years 1.68 1.76 1.98 2.23 2.58 2.66 2.72 2.85 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 58 Vietnam Commercial Banking Report Q1 2013 Table: Vietnam's Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6 Dependent population, total, '000 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321 Active population, % of total 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6 Active population, total, '000 38,243 43,218 49,079 55,552 61,842 63,699 65,725 68,034 Youth population, % of total working age 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3 Youth population, total, '000 25,529 27,009 25,268 22,735 20,732 20,610 20,837 20,615 Pensionable population, % of total working age 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3 Pensionable population, '000 3,330 3,780 4,411 4,874 5,274 5,421 5,881 7,706 Dependent ratio, % of total working age f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+ Source: World Bank, UN, BMI Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f Urban population, % of total 20.3 22.2 24.3 26.4 28.7 29.7 31.2 33.9 Rural population, % of total 79.7 77.8 75.7 73.6 71.3 70.3 68.8 66.1 Urban population, '000 13,438.6 16,201.6 18,865.4 21,940.1 25,212.5 26,649.9 28,842.1 32,664.4 Rural population, '000 52,761.4 56,778.4 58,770.0 61,166.2 62,635.9 63,080.4 63,600.5 63,690.7 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q1 2013 BMI Banking Sector Methodology BMI's Commercial Banking 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 60 Vietnam Commercial Banking Report Q1 2013 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 Risk/Reward Rating In producing our Commercial Banking Risk/Reward Rating (RRR), 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: Rewards: Evaluation of industry's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development Risks: 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 61 Vietnam Commercial Banking Report Q1 2013 Table: Commercial Banking Risk/Reward Rating Indicators And Rationale Rewards 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 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 Rating (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 62 Vietnam Commercial Banking Report Q1 2013 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 Rewards: Weighting, % 70, of which - Banking market structure 60 - Country Structure 40 Risks: 30, of which - Banking market risks 40 - Country Risk 60 Source: BMI © Business Monitor International Ltd Page 63 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... of any information hereto contained Vietnam Commercial Banking Report Q1 2013 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q1 2013 CONTENTS Executive Summary ... International Ltd Page Vietnam Commercial Banking Report Q1 2013 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth Untapped potential High savings rate of Vietnamese Weaknesses... Monitor International Ltd Page 25 Vietnam Commercial Banking Report Q1 2013 Vietnam Banking Sector Outlook Banking Sector: Assessing Crisis Potential BMI View: Vietnam'' s financial sector remains