Vietnam commercial banking report q2 2012

Q2 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 Q2 2012 INCLUDES 5-YEAR INDUSTRY FORECASTS TO 2016 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 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: http://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 Q2 2012 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 CONTENTS Executive Summary Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At March 2011 Table: Annual Growth Rate Projections 2012-2016 (%) Table: Ranking Out Of 59 Countries Reviewed In 2011 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) SWOT Analysis Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT 10 Vietnam Business Environment SWOT 11 Business Environment Outlook 12 Commercial Banking Business Environment Ratings 12 Table: Commercial Banking Business Environment Ratings 12 Commercial Banking Business Environment Rating Methodology 12 Table: Asia Commercial Banking Business Environment Ratings 14 Global Commercial Banking Outlook 15 Asia Banking Sector Outlook 20 Three Threats To Asia's Banks In 2012 20 Asia Banking Sector Forecast Overview 25 Table: Banks' Bond Portfolios 25 Table: Asia Commercial Banking Business Environment Ratings 26 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios 27 Table: Anticipated Developments in 2012 28 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) 29 Table: Comparison of US$ Per Capita Deposits (2011) 30 Table: Interbank Rates and Bond Yields 31 Vietnam Banking Sector Outlook 32 Banking Sector Reforms Positive For The Economy 32 Economic Outlook 35 Table: Vietnam – Economic Activity 37 Company Profiles 38 Bank for Foreign Trade of Vietnam (Vietcombank) 38 Table: Vietnam Stock Market Indicators 39 Table: Vietnam Balance Sheet (US$mn) 39 Table: Vietnam Key Ratios (%) 39 VietinBank 40 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 41 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 Agribank 42 Table: Vietnam Balance Sheet (LCYmn) 43 Table: Vietnam Balance Sheet (US$mn) 43 Table: Vietnam Key Ratios (%) 43 Asia Commercial Bank 44 Table: Vietnam Stock Market Indicators 45 Table: Vietnam Balance Sheet (LCYmn) 45 Table: Vietnam Balance Sheet (US$mn) 46 Table: Vietnam Key Ratios (%) 46 Eximbank 47 Table: Balance Sheet (VNDmn, unless stated) 48 Table: Balance Sheet (US$mn, unless stated) 48 Table: Key Ratios (%) 48 Vietnam Technological and Commercial Joint-stock Bank (Techcombank) 49 Table: Vietnam Balance Sheet (LCYmn) 50 Table: Vietnam Balance Sheet (US$mn) 50 Table: Vietnam Key Ratios (%) 50 Viet A Joint Stock Commercial Bank (Vietabank) 51 Table: Vietnam Stock Market Indicators 51 Table: Vietnam Balance Sheet (LCYmn) 52 Table: Vietnam Balance Sheet (US$mn) 52 Table: Vietnam Key Ratios (%) 52 Housing Development Commercial Joint Stock Bank (HDBank) 53 Sacombank 54 Table: Stock Market Indicators 55 Table: Balance Sheet (VNDmn, unless stated) 55 Table: Balance Sheet (US$mn, unless stated) 56 Table: Key Ratios (%) 56 BMI Banking Sector Methodology 57 Table: Commercial Banking Business Environment Indicators And Rationale 59 Table: Weighting Of Indicators 60 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 Executive Summary Table: Levels (VNDbn) Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other March 2010 2,342,752.9 1,935,790.0 159,117.9 247,845.0 2,342,752.9 336,053.0 1,771,242.5 235,457.4 March 2011 3,092,978.4 2,584,860.0 225,505.0 282,613.4 3,092,978.4 479,064.0 2,220,589.1 393,325.3 32% 34% 42% 14% 32% 43% 25% 67% Date Change, % Source: BMI; Central banks; Regulators Table: Levels (US$bn) Other Liabilities and capital Capital Client deposits Other 8.3 13.0 122.8 17.6 92.8 12.3 123.7 10.7923 13.5 148.0 22.9 106.3 18.8 22% 29% 4% 21% 30% 15% 53% Total assets Client loans Bond portfolio March 2010 122.8 101.4 March 2011 148.0 Change, % 21% Date Source: BMI; Central banks; Regulators Table: Levels At March 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$ 83.57% 122.63% 1,068 1,206 Rising Falling 116.40% Rising Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 Table: Annual Growth Rate Projections 2012-2016 (%) Assets Loans Deposits Annual Growth Rate 20 20 14 CAGR 21 21 14 3 15 Ranking Source: BMI; Central banks; Regulators Table: Ranking Out Of 59 Countries Reviewed In 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 11 Local currency loan growth Local currency deposit growth Local currency asset growth Source: BMI; Central banks; Regulators Table: Projected Levels (VNDbn) 2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f Total assets 1,747,335 2,286,321 2,953,154 3,720,973 4,614,007 5,536,808 6,644,170 7,973,004 9,567,605 Client loans 1,339,260 1,869,260 2,475,540 3,119,180 3,867,784 4,641,341 5,569,609 6,683,530 8,020,236 Client deposits 1,341,143 1,680,717 2,209,896 2,651,876 3,076,176 3,506,840 3,997,798 4,557,489 5,195,538 e/f = estimate/forecast Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 Table: Projected Levels (US$bn) 2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f Total assets 99.94 123.73 151.46 176.89 229.55 283.94 349.69 421.85 508.92 Client loans 76.60 101.16 126.96 148.29 192.43 238.02 293.14 353.63 426.61 Client deposits 76.71 90.95 113.34 126.07 153.04 179.84 210.41 241.14 276.36 e/f = estimate/forecast Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth in the sector has been seen in recent years, and this is unlikely to slow significantly over our forecast period Untapped potential means there is room to grow; the market is nowhere near saturation High savings rate among Vietnam residents Weaknesses Domestic banks lack both the capital and technology to sustain high credit growth The financial accounts of many banks are still opaque Opportunities The Vietnamese population is underbanked, offering an opening to commercial banks Income levels are likely to rise strongly over the medium term Threats Macroeconomic instabilities threatens the credibility of the government and could potentially bring economic policy away from further liberalisation © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 Vietnam Political SWOT Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and we not expect major shifts in policy direction over the next five years The one-party system is generally conducive to short-term political stability Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia Weaknesses Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent Opportunities The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials Vietnam has allowed legislators to become more vocal in criticising government policies This is opening up opportunities for more checks and balances within the oneparty 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 Q2 2012 Eximbank Strengths Valued by the major international banks that deal with it Emerged from the global financial crisis in a strong position By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to 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 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 and 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$77.5mn from Australian group ANZ It represented the first major divestment of Vietnamese assets by an overseas bank One worry is the bank's exposure to industrial lending, the sector it is most exposed to, making up 16% of its portfolio This is particularly concerning given CBC's focus on the ready-made garments sector While the bank is relatively well diversified, the future for that sector is bleak as Sri Lanka's privileged access to European markets was suspended as a result of a diplomatic dispute between the EU and Sri Lanka over the latter's human rights record © Business Monitor International Ltd Page 47 Vietnam Commercial Banking Report Q2 2012 Company Data Website: www.eximbank.com.vn/en Status: Commercial joint-stock bank Table: Balance Sheet (VNDmn, unless stated) 2005 2006 2007 2008 11,369,230.0 18,323,770.0 33,710,420.0 48,624,110.0 Loans & Mortgages 6,427,689.0 10,161,270.0 18,378,610.0 21,232, 200.0 Total Deposits 8,352,111.0 13,141,180.0 22,906,120.0 31,254,020.0 835,539.0 1,946,667.0 6,294,943.0 12,844,080.0 2,379.00 1,052.00 Total Assets Total Shareholder Equity Earnings Per Share, VND Source: Eximbank, Bloomberg Table: Balance Sheet (US$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 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 Equity/Asset Ratio 7.3 10.6 Source: Eximbank, Bloomberg © Business Monitor International Ltd Page 48 Vietnam Commercial Banking Report Q2 2012 Vietnam Technological and Commercial Joint-stock Bank (Techcombank) Strengths Support from minority stakeholder HSBC The bank has consistently expanded its branch network since its founding Strong profitability Sound capitalisation Weaknesses Tight competition for deposits The bank has some way to go in modernising processes and systems Lack of transparency Opportunities The bank has strong scope for expansion over the long-term Threats Tighter monetary policy to tame economic growth Risk to asset quality on the back of difficult operating environment in 2012 Slowing credit growth 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$30mn loan agreement with Dutch development bank FMO in September 2011, in a deal designed to boost lending to both retail and small- and medium-sized enterprise (SME) customers The bank, along with some of its rivals, came under fire by the central bank in late 2010 as it began offering relatively high interest rates on deposits of over 17% in a bid to grab market share The State Bank of Vietnam argued that such rates were risky, potentially destabilising and detrimental to profitability © Business Monitor International Ltd Page 49 Vietnam Commercial Banking Report Q2 2012 Table: Vietnam Balance Sheet (LCYmn) 2002 2003 2004 2005 2006 2007 2008 2009 Total Assets 4,059,823 5,510,430 7,667,461 10,666,106 17,326,352 39,542,496 59,069,056 92,581,504 Loans & Mortgages 1,902,211 2,243,138 3,465,540 na 8,696,101 20,486,132 26,018,984 41,580,368 Total Deposits 1,849,251 2,619,620 4,600,097 6,195,072 9,566,043 24,476,576 39,617,724 62,347,400 Total Shareholde rs' Equity 135,846.9 208,875 515,107 1,009,405 1,761,687 3573,416 5,625,408 7,323,826 na na na na 1,446.00 2,452.00 4,259.00 3,148.00 Earnings per share (EPS) Source: BMI Table: Vietnam Balance Sheet (US$mn) 2002 2003 2004 2005 2006 2007 2008 2009 Total Assets 263.6077 352.2842 486.113 670.0657 1,079.12 2,468.783 3,378.657 5,010.093 Loans & Mortgages 123.5121 143.4048 219.7134 na 541.6107 1,279.024 1,488.245 2,250.142 Total Deposits 120.0734 167.4735 291.6438 389.1866 595.7924 1,528.162 2,266.071 3,373.96 Total Shareholders' Equity 8.820652 13.35347 32.65752 63.4128 109.7214 223.1015 321.7645 396.3324 Earnings per share (EPS) na na na na 0.09 0.15 0.26 0.18 Source: BMI Table: Vietnam Key Ratios (%) 2002 2003 2004 2005 2006 2007 2008 2009 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 3.346128 3.790539 6.718091 9.463669 10.16767 9.0369 9.523443 7.910679 Equity Asset Ratio Source: BMI © Business Monitor International Ltd Page 50 Vietnam Commercial Banking Report Q2 2012 Viet A Joint Stock Commercial Bank (Vietabank) Strengths Investments surged in 2010 Capital strengthened in 2010 Weaknesses Lack of modernisation Lack of transparency Limited profitability Opportunities Further domestic expansion plans Threats Tighter monetary policy to tame economic growth Risk to asset quality on the back of difficult operating environment in 2012 Slowing credit growth 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$28.52mn) for 2011, marking a 73.5% jump on the previous year Table: Vietnam Stock Market Indicators 2009 2010 27-Feb-12 Market Capitalisation LCY 33,196,270.00 34,896,268.00 35,806,608.00 Market Capitalisation US$ 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 51 Vietnam Commercial Banking Report Q2 2012 Table: Vietnam Balance Sheet (LCYmn) 2005 2006 2007 2008 2010 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 Earnings per share (EPS) 2,193.10 Source: BMI Table: Vietnam Balance Sheet (US$mn) 2005 2006 2007 2008 2010 Total Assets 7272.65 8430.68 10371.04 11073.06 18858.97 Loans & Mortgages 4677.05 4988.24 6273.47 6783.83 11869.67 Total Deposits 5301.36 6208.48 7035.83 6957.30 10561.02 314.10 349.22 664.70 705.61 942.27 Total Shareholders' Equity Earnings per share (EPS) 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 2010 4.94 8.02 Source: BMI © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q2 2012 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 53 Vietnam Commercial Banking Report Q2 2012 Sacombank Strengths Strategic partnerships with Australia and New Zealand Banking Group and the International Finance Corporation, plus recognition and various awards from the government and trade press Emerged from the global financial crisis in a strong position By not recycling the rapid growth of deposits into new loans the bank has reduced its loanto-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 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 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% year-on-year (y-o-y) In total, after-tax profit for 2011 stood at VND2.033trn, which was a © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q2 2012 13% increase 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 Securitites 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 banks 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 2005 2006 2007 2008 2009 Dec 2010 Market Capitalisation, VND 15,043,772.0 29,139,732.0 9,413,129.00 16,147,851.0 13,768,845.5 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 55 Vietnam Commercial Banking Report Q2 2012 Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 2009 Total Assets 908.05 1,543.11 4,031.52 3,914.58 5,629.05 Loans & Mortgages 526.41 891.44 2,197.70 1,988.05 3, 200.47 Total Deposits 657.57 1090.66 2,761.56 2,638.50 3,274.87 Total Shareholders' Equity 118.59 178.77 458.87 443.78 583.20 0.04 0.05 0.11 0.08 0.25 2005 2006 2007 2008 2009 Return on Assets 2.40 3.13 1.44 1.94 Return on Equities 19.76 27.36 12.64 18.25 Earnings per share (US$) Source: Sacombank, Bloomberg Table: Key Ratios (%) Loan/Deposit Ratio 80.49 82.12 79.98 75.89 98.58 Loan/Asset Ratio 58.29 58.10 54.79 51.15 57.35 Equity/Asset Ratio 13.06 11.59 11.38 11.34 10.14 Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q2 2012 BMI Banking Sector Methodology BMI's Commercial Banking Forecast Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets As such, the reports draw heavily on our extensive economic data set, which includes up to 550 indicators per country, as well as our in depth view of each local market We collate our commercial banking databank from official sources (including central banks and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only used as a backup All of the risk ratings and forecasts within this report are a result of BMI's own proprietary research and not in any circumstances include consensus or third party numbers How Our Data Set Is Structured The reports focus on total assets, client loans and client deposits Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country They not incorporate the balance sheet of the central bank of the country in question Client loans are loans to non-bank clients They include loans to public sector and state-owned enterprises However, they generally not include loans to governments, government (or nongovernment) bonds held or loans to central banks Client deposits are deposits from the non-bank public They generally include deposits from public sector and state-owned enterprises However, they only include government deposits if these are significant We take into account capital items and bond portfolios The former include shareholders funds, and subordinated debt that may be counted as capital The latter includes government and non-government bonds In quantifying the collective balance sheets of a particular country, we assume that three equations hold true: Total assets = total liabilities and capital Total assets = client loans + bond portfolio + other assets Total liabilities and capital = capital items + client deposits + other liabilities © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q2 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: 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 58 Vietnam Commercial Banking Report Q2 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 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 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 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 © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q2 2012 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 60 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... of any information hereto contained Vietnam Commercial Banking Report Q2 2012 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2012 CONTENTS Executive Summary ... 23 Vietnam Commercial Banking Report Q2 2012 Right On Resistance Asia – Bloomberg Asia Banking Index Source: BMI © Business Monitor International Ltd Page 24 Vietnam Commercial Banking Report Q2. .. International Ltd Page 31 Vietnam Commercial Banking Report Q2 2012 Vietnam Banking Sector Outlook Banking Sector Reforms Positive For The Economy BMI View: The State Bank of Vietnam has introduced