Q2 2013 www.businessmonitor.com VIETNAM COMMERCIAL BANKING REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 1758-454X Published by:Business Monitor International Vietnam Commercial Banking Report Q2 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: February 2013 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2013 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 2013 CONTENTS BMI Industry View Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At May 2012 Table: Annual Growth Rate Projections 2012-2017 (%) Table: Ranking Out Of 62 Countries Reviewed In 2013 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) SWOT Commercial Banking Business Environment 10 Economic 11 Political 12 Industry Forecast 13 Speeding Up Banking Reforms 14 Foreign Investors Could Remain Cautious 15 Industry Risk Reward Ratings 16 Asia Commercial Banking Risk/Reward Ratings 16 Table: Asia Commercial Banking Business Environment Ratings 17 Market Overview 18 Asia Commercial Banking Overview 18 Table: Banks' Bond Portfolios 2011 18 Table: Asia Commercial Banking Business Environment Ratings 19 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013 20 Table: Anticipated Developments in 2014 21 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) 22 Table: Comparison of US$ Per Capita Deposits (2013) 23 Table: Interbank Rates and Bond Yields 24 Economic Outlook 25 Ratings Downgrade Failed To Surprise Investors 26 Early Signs Of A Recovery 28 Threat Of Slower Growth Yet To Undermine Efforts For Reforms 28 Expenditure Breakdown 28 Table: Vietnam - Economic Activity 29 Competitive Landscape 30 Market Structure 30 Protagonists 30 Table: Protagonists In Vietnam's Commercial Banking Sector 30 © Business Monitor International Page Vietnam Commercial Banking Report Q2 2013 Definition Of The Commercial Banking Universe 30 List Of Banks 31 Table: Financial Institutions In Vietnam 31 Company Profile 34 Bank for Foreign Trade of Vietnam (Vietcombank) 34 Table: Stock Market Indicator 36 Table: Balance Sheet (VNDmn) 36 Table: Balance Sheet (US$mn) 36 Table: Key Ratios (%) 37 VietinBank 38 Table: Stock Market Indicators 40 Table: Balance Sheet (VNDmn) 40 Table: Balance Sheet (US$mn) 40 Table: Key Ratios (%) 41 Agribank 42 Table: Balance Sheet (VNDmn) 43 Table: Balance Sheet (US$mn) 44 Table: Key Ratios (%) 44 Asia Commercial Bank 45 Table: Stock Market Indicators 46 Table: Balance Sheet (VNDmn) 47 Table: Balance Sheet (US$mn) 47 Table: Key Ratios (%) 47 Eximbank 48 Table: Stock Market Indicators 50 Table: Balance Sheet (VNDmn) 50 Table: Balance Sheet (US$mn) 50 Table: Key Ratios (%) 51 Vietnam Technological and Commercial Joint-stock Bank (Techcombank) 52 Table: Balance Sheet (VNDmn) 53 Table: Balance Sheet (US$mn) 53 Table: Key Ratios (%) 54 Viet A Joint Stock Commercial Bank (Vietabank) 55 Housing Development Commercial Joint Stock Bank (HDBank) 57 Sacombank 59 Table: Stock Market Indicators 61 Table: Balance Sheet (VNDmn) 61 Table: Balance Sheet (US$mn) 61 Table: Key Ratios (%) 62 Regional Overview 63 Asia Overview Investment Banking Revenues Surge Malaysia Takes The Lead Thai Commercial Banks Targeting High-Growth Economies 63 64 65 66 Global Industry Overview 67 © Business Monitor International Page Vietnam Commercial Banking Report Q2 2013 Global Commercial Banking Overview 67 Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio 69 Demographic Forecast 71 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 72 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 73 Table: Vietnam's Key Population Ratios, 1990-2020 74 Table: Vietnam's Rural And Urban Population, 1990-2020 74 Methodology 75 Commercial Bank Business Environment Rating 76 Table: Commercial Banking Business Environment Indicators And Rationale 77 Weighting 78 Table: Weighting Of Indicators 78 © Business Monitor International Page Vietnam Commercial Banking Report Q2 2013 BMI Industry View Table: Levels (VNDbn) Other Liabilities and capital Capital Client deposits Other 223,644 264,078 3,117,942 494,104 2,241,245 382,593 2,835,610 355,354 354,837 3,545,801 569,584 2,668,471 307,746 7.8% 58.9% 34.4% 13.7% 15.3% 19.1% -19.6% Total assets Client loans Bond portfolio May 2011 3,117,942 2,630,220 May 2012 3,545,801 13.7% Date Change, % Source: BMI; Central banks; Regulators Table: Levels (US$bn) Other Liabilities and capital Capital Client deposits Other 10.89 12.85 151.76 24.05 109.09 18.62 135.87 17.03 17.00 169.90 27.29 127.86 14.75 6.1% 56.4% 32.3% 12.0% 13.5% 17.2% -20.8% Total assets Client loans Bond portfolio May 2011 151.76 128.02 May 2012 169.90 Change, % 12.0% Date Source: BMI; Central banks; Regulators Table: Levels At May 2012 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$ 79.97% n.a 1,072.13 1,433.70 Falling Falling n.a n.a 106.26% Falling Source: BMI; Central banks; Regulators © Business Monitor International Page Vietnam Commercial Banking Report Q2 2013 Table: Annual Growth Rate Projections 2012-2017 (%) Assets Loans Deposits Annual Growth Rate 11 CAGR 13 11 Ranking 15 22 35 Source: BMI; Central banks; Regulators Table: Ranking Out Of 62 Countries Reviewed In 2013 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 11 14 Local currency asset growth Local currency loan growth Local currency deposit growth 14 16 22 Source: BMI; Central banks; Regulators Table: Projected Levels (VNDbn) 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f Total assets 2,286,321 2,953,153 3,437,893 3,816,061 4,350,310 4,959,353 5,604,069 6,276,557 6,966,979 Client loans 1,869,260 2,475,540 2,829,890 3,084,580 3,454,730 3,869,297 4,294,920 4,724,412 5,149,609 Client deposits 1,680,717 2,209,896 2,483,357 2,706,859 2,977,545 3,245,524 3,505,166 3,750,528 3,975,560 e/f = estimate/forecast Source: BMI; Central banks; Regulators Table: Projected Levels (US$bn) 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f Total assets 123.73 151.46 163.44 181.41 209.15 241.16 275.66 312.27 348.35 Client loans 101.16 126.96 134.54 146.64 166.09 188.15 211.26 235.05 257.48 90.95 113.34 118.06 128.68 143.15 157.82 172.41 186.59 198.78 Client deposits e/f = estimate/forecast Source: BMI; Central banks; Regulators © Business Monitor International Page Vietnam Commercial Banking Report Q2 2013 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths Untapped potential ■ High savings rate of the Vietnamese people ■ Increasingly open to foreign banks since WTO accession in 2007 ■ Weaknesses ■ The role of state-owned banks is decreasing ■ Domestic banks lack capital and technology to sustain high credit and efficient growth ■ ■ Threats Small banks have a high exposure to real estate and stock market loans ■ The population is still underbanked ■ Opportunities The financial accounts of many banks are still opaque Income levels likely to rise strongly over the medium term ■ Macroeconomic instabilities threaten the credibility of the government and could potentially drive economic policy away from further liberalisation ■ The high level of government debt could crowd out the private sector and potentially trigger a fiscal crisis © Business Monitor International Page Vietnam Commercial Banking Report Q2 2013 Business Environment SWOT Analysis Strengths ■ Vietnam has a large, skilled and low-cost workforce, which 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 2012 Corruption Perceptions Index, Vietnam ranks 123rd out of 176 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 high-tech skills and know-how ■ Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector This is likely to 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 Page 10 Vietnam Commercial Banking Report Q2 2013 Malaysia Takes The Lead Malaysian banks have taken the lead in terms of leveraging on the investment banking boom, partly driven by the country's status as the largest issuer of Islamic banking assets in the region Malaysia is reportedly one of the key drivers responsible for the recent increase in investment banking fees, according to a report published by Dealogic Investment banking revenue in the country reached US$416mn between January and October in 2012, a year-to-date record and a 46% increase y-o-y Malaysia also commands a strong 36.7% share of total investment banking fees generated in South East Asia We expect Malaysian banks including Maybank Group and CIMB Group to continue to leverage on their strengths as the region's leading issuers of Islamic banking products and solutions Maybank Islamic, the Islamic banking arm of Maybank Group, is the largest Islamic bank in Asia having already established a strong presence in Singapore, Indonesia, Hong Kong and the Philippines Meanwhile, CIMB has been playing catch-up aggressively and is currently deriving around 10% of its earnings from its Islamic banking operations in Indonesia, Singapore and Brunei Given the competitive advantages that Malaysian banks hold in terms of technological capabilities, financial strength, risk management, and the country's deep economic links relative to the region, we expect Malaysian banks to maintain their lead over their regional counterparts at least over the medium term © Business Monitor International Page 65 Vietnam Commercial Banking Report Q2 2013 Foreign Loans Set To Pick Up In 2013 Thailand - Loans To Foreign Entities, % chg y-o-y Source: BMI, Bank of Thailand Thai Commercial Banks Targeting High-Growth Economies Banks in Thailand are adopting a slightly different strategy by expanding their networks in lower-income, high growth, and largely untapped countries in the region (such as Cambodia and Myanmar) Krungthai Bank and Siam Commercial Bank recently opened their first representative offices in Myanmar in 2012 and Kasikornbank has announced plans to open its first branch by February 2013 As the accompanying chart shows, loans issued by Thai commercial banks to foreign entities have enjoyed a spectacular boom in recent years, averaging expansion of 75.0% and 128.3% in 2011 and 2012, respectively Although we caution that aggressive expansion into countries such as Cambodia and Myanmar reflects a high-risk strategy for local banks, we believe that the potential for growth is much greater Furthermore, given that the Thai government has been actively promoting cross-border investment and trade between Thailand and these countries, we believe that demand for trade financing and investment banking services will pick up significantly over the coming years On the whole, we expect Thai banks to further accelerate efforts to expand their operations into the region, and this should contribute significantly to banking sector revenues in 2013 © Business Monitor International Page 66 Vietnam Commercial Banking Report Q2 2013 Global Industry Overview Global Commercial Banking Overview Implications Of Reforms To Basel III Liquidity Requirements BMI View: Global central bank heads agreed on January 2013 to loosen the Basel III liquidity requirements for major financial institutions This decision is positive for industry profitability, and modestly improves the near-term outlook for loan and asset growth The Governors and Heads of Supervision of the Basel III accords emerged from their meeting with changes to the existing liquidity arrangements that will significantly ease the burden on major banks worldwide To recap, Basel III is an improvement on the previous two iterations, as it lays out stricter definitions of high quality capital, and specifically, higher capital requirements and liquidity ratios This is in response to the 2008 financial crisis, which laid bare the potential for liquidity risk, as opposed to just the solvency risk that was focused upon in Basel I and II The so-called 'Liquidity Coverage Ratio' (LCR) is designed to allow banks to survive a 30-day funding crisis by relying on internal liquid assets, hence avoiding a Lehman-style meltdown The numerator of the ratio is 'high quality liquid assets', while the denominator is the 'net liquidity outflows' that banks would face when put under a stress situation over a 30-day period during a severe system-wide shock By the time this aspect of Basel III is fully implemented, the ratio must exceed 100% © Business Monitor International Page 67 Vietnam Commercial Banking Report Q2 2013 Bank Share Prices Responding Well To Basel III Amendments MSCI World Bank Equity Index Source: Bloomberg, BMI The changes agreed in January 2013 include a major redefinition of high quality liquid assets that would count towards banks' LCR For example, in the set of rules agreed in 2010, corporate debt needed to be rated AA- or higher to be considered high quality; now, securities can be rated as low as BBB-, the lowest investment grade rating Furthermore, banks can now use residential mortgage-backed securities and even some equities to meet the requirements (albeit they will count far less toward the liquidity requirements than government bonds, with 25-50% haircuts applied) Additionally, the timetable for the full introduction of the new liquidity requirements has been pushed back dramatically from the originally scheduled deadline of 2015 Banks will only have to hold 60% of the total buffer by 2015, rising by 10% per year to 2019 Meanwhile, the 'outflows' in the denominator of the LCR have been clarified, and many will be subject to less stringent conditions For example, the assumed outflow rate under a stress scenario for maturing secured funding transactions with central banks will be reduced to 0% from 25% The table below shows the main changes to the Basel III framework as agreed on January © Business Monitor International Page 68 Vietnam Commercial Banking Report Q2 2013 Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio Before Now Corporate debt rated AA- or higher (as Level asset) Corporate debt rated A+ to BBB- (with 50% haircut applied) No equity included Some equity (with 50% haircut applied) No Residential MBS included Residential MBS rated AA or higher (with 25% haircut applied) Timetable For Introduction of LCR 100% of buffer to be in place by January 2015 60% by January 2015; 10% added annually to 100% by January 2019 Inflows and Outflows Non-financial, non-operational corporate deposits outflow rate: 75% Now 40% Liquidity facilities to non-financial corporates outflow rate: 100% Now 30% Trade finance - no outflow rate guidance New guidance that low outflow rate (0-5%) expected to apply on trade finance Maturing secured funding transactions with central banks outflow rate: 25% Now 0% Definition of 'High Quality Assets' Source: Bank for International Settlements, BMI We interpret this agreement as having been taken for three pragmatic considerations First, the 2010 regulations were agreed upon before the European banking crisis, which helps explain why some of the asset requirements needed to be amended Banks in Europe, for example, would have been forced to purchase even greater quantities of their home governments' debt - only further extricating the banking sector into the sovereign crisis Second, the quantity and availability of 'risk-free' liquid assets may not have been sufficient to meet all of the requirements, so some expansion of the eligible assets is both desirable and, perhaps, necessary from a pragmatic standpoint Third, several of the world's major central bankers were faced with the dilemma of having reached the limit of conventional monetary easing, and are now resorting to easing regulations in an effort to open up lending channels The degree to which this will work in the short run is probably limited, given that the existing expansion of the monetary base in many countries and low central bank funding costs have not translated into lending However, it will remove some of the concern that the reluctance to lend has been a result of regulatory factors Indeed, the revised timetable for the new regulations will relieve the urgency to quickly build up liquid assets, particularly for European banks which have been under stress and unwilling and unable to lend Bank of England Governor Mervyn King, who announced the new measures on behalf of the committee, made this aspect of the revised © Business Monitor International Page 69 Vietnam Commercial Banking Report Q2 2013 legislation clear, arguing that the revisions 'will ensure that the new liquidity standard will in no way hinder the ability of the global banking system to finance a recovery' We have a few additional thoughts: ■ Easing the capital requirements will make banks more profitable because it will allow them to count higher-yielding assets toward the liquidity requirements This helps explain why bank share prices soared in the days immediately following the Basel announcement ■ By the end of 2011, 208 banks were short by EUR1.8trn (US$2.4trn) in LCR funding, according to the Basel committee By contrast, Bank of England Governor King said that the 'vast majority' of the world's biggest 200 banks that abide by the Basel regulations already comply with the new relaxed standards Many of those that not are presumably European banks that are still rebuilding their balance sheets ■ Some of the clarifications are sensible by almost any standard One is that 'countries with distressed banking systems will have complete flexibility in their application of the LCR until the distress has passed' To put this another way, having saved for a rainy day, banks will be allowed to use their savings to cope with a crisis without worrying about meeting capital ratios in the short run ■ Emerging market banking sectors stand to be a major beneficiary of the new requirements Regulators in major EM countries had complained that the supply of high quality assets, as defined in the 2010 agreement, was too limited, and that major EM banks would struggle in many cases to meet the requirements ■ While it is understandable that the Basel committee believe it wise to expand the definition of high quality liquid instruments, particularly given the European crisis, we have some concerns about the degree to which the rules have been watered down It is a bit of a stretch, for example, to believe that in a 2008-style crisis that even with a 25% haircut that MBS could provide ready liquidity for a bank that is in trouble This is especially the case since many banks in a single banking system could plausibly seek to use the same type of asset as collateral should it prove the most profitable (e.g using significant amounts of MBS to meet the liquidity requirements), and that asset could prove to be very difficult to unload in a time of crisis That said, we not expect this to be a major problem given that the new, lower-rated securities can only count toward a maximum of 15% of the total of high-quality liquid assets ■ The new rules will ease the flow of trade finance, by including a low outflow rate (0-5%) in the denominator of the LCR In other words, banks that engage heavily in trade finance will be able to hold a smaller liquidity buffer than they would have previously This will be positive for several EM commercial banking markets that have high components of trade finance in their operations The next item on the agenda for the Basel committee will be the Net Stable Funding Ratio, which aims to address another salient aspect of the 2008 financial crisis - banks' funding mismatch between short-term borrowing and long-term lending The idea is to require banks to hold a better match between long-term financing and long-term asset accumulation in order to avoid the type of rollover risk seen in the financial crisis Like the LCR, the NSFR regulations will be enforced as of 2019, however, the Basel committee will only produce the framework of rules at some point in the next two years © Business Monitor International Page 70 Vietnam Commercial Banking Report Q2 2013 Demographic Forecast 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 Page 71 Vietnam Commercial Banking Report Q2 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 Page 72 Vietnam Commercial Banking Report Q2 2013 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012 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 Page 73 Vietnam Commercial Banking Report Q2 2013 Table: Vietnam's Key Population Ratios, 1990-2020 1990 Active population, total, '000 2020f 71.2 60.5 49.7 42.1 40.9 40.6 41.6 30,790 29,679 27,609 26,006 26,031 26,717 28,321 58.4 62.3 66.8 70.4 71.0 71.1 70.6 43,218 49,079 55,552 61,842 63,699 65,725 68,034 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3 27,009 25,268 22,735 20,732 20,610 20,837 20,615 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3 3,330 Youth population, total, '000 2015f 25,529 Youth population, % of total working age 2012 38,243 2010 57.0 Active population, % of total 2005 28,859 Dependent population, total, '000 2000 75.5 Dependent ratio, % of total working age 1995 3,780 4,411 4,874 5,274 5,421 5,881 7,706 Pensionable population, % of total working age Pensionable population, '000 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 2012 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 Page 74 Vietnam Commercial Banking Report Q2 2013 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 non-government) 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 Page 75 Vietnam Commercial Banking Report Q2 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 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 Page 76 Vietnam Commercial Banking Report Q2 2013 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 Active population A proxy for wealth High-income states receive better scores than low-income states Those aged 16-64 in each state, as a % of total population A high proportion suggests that the market is comparatively more attractive Corporate tax A measure of the general fiscal drag on profits GDP volatility Standard deviation of growth over seven-year economic cycle A proxy for economic stability Risks to Realisation of Returns Banking market risks Regulatory framework and industry development Regulatory framework and competitive environment Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Subjective evaluation of the impact of the regulatory environment on the competitive landscape BMI's Country Risk Ratings (CRR) Short-term financial risk Rating from CRR, evaluating currency volatility Policy continuity Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy Legal framework Rating from CRR, to denote strength of legal institutions in each state Security of investment can be a key risk in some emerging markets Bureaucracy Rating from CRR to denote ease of conducting business in the state Source: BMI © Business Monitor International Page 77 Vietnam Commercial Banking Report Q2 2013 Weighting Given the number of indicators/datasets used, it would be inappropriate to give all sub-components 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 Page 78 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... International Page Vietnam Commercial Banking Report Q2 2013 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths Untapped potential ■ High savings rate of the Vietnamese people ■... Page 29 Vietnam Commercial Banking Report Q2 2013 Competitive Landscape Market Structure Protagonists Table: Protagonists In Vietnam'' s Commercial Banking Sector Central bank: State Bank of Vietnam. .. International Page 30 Vietnam Commercial Banking Report Q2 2013 List Of Banks Table: Financial Institutions In Vietnam State-owned Commercial Banks Vietnam Bank for Social Policies Vietnam Bank for