Q3 2010 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES 5-YEAR FORECASTS TO 2014 ISSN 1758-454X Published by Business Monitor International Ltd VIETNAM COMMERCIAL BANKING REPORT Q3 2010 INCLUDING 5-YEAR INDUSTRY FORECASTS BY TO 2014 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: June 2010 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2010 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 Q3 2010 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 CONTENTS Executive Summary Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At August 2009 Table: Annual Growth Rate Projections 2010-2014 (%) Table: Ranking Out Of 59 Countries Reviewed In 2010 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) SWOT Analysis Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT 10 Business Environment Outlook 11 Commercial Banking Business Environment Ratings 11 Table: Vietnam Commercial Banking Business Environment Rating 11 Commercial Banking Business Environment Rating Methodology 12 Table: Asia Commercial Banking Business Environment Ratings 13 Global Commercial Banking Outlook 14 Asia Banking Sector Outlook 17 Table: Comparison Of Loan/Deposit, Loan/Asset & Loan/GDP Ratios 20 Table: Anticipated Developments In 2010 21 Table: Comparison Of Total Assets, Client Loans & Client Deposits (US$bn) 22 Table: Comparison Of US$ Per Capita Deposits (Late 2009) 23 Table: Interbank Rates & Bond Yields 24 Vietnam Banking Sector Outlook 25 Economic Outlook 28 Table: Vietnam Economic Activity, 2007-2014 29 Competitive Landscape 30 Market Structure 30 Protagonists 30 Table: Protagonists In Vietnam’s Commercial Banking Sector 30 Definition of the Commercial Banking Universe 30 List of Banks 31 Table: Financial Institutions In Vietnam (February 2010) 31 Company Profiles 34 Vietcombank 34 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) 35 BIDV 36 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) 37 VietinBank 38 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 39 Agribank 40 Table: Balance Sheet (VNDmn, unless stated) 41 Table: Balance Sheet (US$mn, unless stated) 41 Table: Key Ratios (%) 41 MHB Bank 42 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 43 Habubank 44 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) 45 Eximbank 46 Table: Balance Sheet (VNDmn, unless stated) 47 Table: Balance Sheet (US$mn, unless stated) 47 Table: Key Ratios (%) 47 Sacombank 48 Table: Stock Market Indicators 49 Table: Balance Sheet (VNDmn, unless stated) 49 Table: Balance Sheet (US$mn, unless stated) 50 Table: Key Ratios (%) 50 Saigonbank 51 Table: Stock Market Indicators 52 Table: Balance Sheet (VNDmn, unless stated) 52 Table: Balance Sheet (US$mn, unless stated) 52 Table: Key Ratios (%) 53 SeABank 54 Table: Balance Sheet (VNDmn, unless stated) 55 Table: Balance Sheet (US$mn, unless stated) 55 Table: Key Ratios (%) 55 BMI Banking Sector Methodology 56 Commercial Bank Business Environment Rating 57 Table: Commercial Banking Business Environment Indicators And Rationale 58 Table: Weighting Of Indicators 59 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 Executive Summary Table: Levels (VNDbn) Total Assets Client Loans Bond Portfolio Other Liabilities & Capital Capital Client Deposits Other August 2008 1,659,549 1,259,980 149,817 249,752 1,659,549 217,173 1,205,966 236,408 August 2009 2,065,762 1,706,340 173,358 186,063 2,065,762 286,547 1,594,993 184,222 24% 35% 16% -26% 24% 32% 32% -22% Total Assets Client Loans Bond Portfolio Other Liabilities & Capital Capital Client Deposits Other August 2008 100.4 76.2 9.1 15.1 100.4 13.1 73.0 14.3 August 2009 116.0 95.8 9.7 10.4 116.0 16.1 89.6 10.3 15% 26% 7% -31% 15% 22% 23% -28% Date Change, % Source: BMI, SBV, regulators Table: Levels (US$bn) Date Change, % Source: BMI, SBV, regulators Table: Levels At August 2009 Loan/Deposit Ratio Loan/Asset Ratio Loan/GDP Ratio GDP Per Capita, US$ Deposits Per Capita, US$ 82.60% 107.32% 1,013 1,022 Falling Rising 106.98% Rising Source: BMI, SBV, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 Table: Annual Growth Rate Projections 2010-2014 (%) Assets Loans Deposits Annual Growth Rate 20 21 14 CAGR 22 27 13 1 14 Ranking Source: BMI, SBV, regulators Table: Ranking Out Of 59 Countries Reviewed In 2010 Loan/Deposit Ratio Loan/Asset Ratio Loan/GDP Ratio 10 Local Currency Loan Growth Local Currency Deposit Growth 14 11 Local Currency Asset Growth Source: BMI, SBV, regulators Table: Projected Levels (VNDbn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f Total Assets 1,410,221 1,747,335 2,271,536 2,771,274 3,325,529 3,9906,34 4,788,761 5,746,514 Client Loans 1,067,730 1,339,260 1,848,178 2,347,187 2,933,986 3,608,800 4,366,648 5,239,978 Client Deposits 1,100,393 1,341,143 1,528,903 1,697,082 1,917,703 2,186,181 2,492,247 2,841,161 e/f = BMI estimate/forecast Source: BMI, SBV, regulators Table: Projected Levels (US$bn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f Total Assets 88.04 99.96 122.99 142.12 166.28 199.53 245.58 302.45 Client Loans 66.66 76.62 100.07 120.37 146.70 180.44 223.93 275.79 Client Deposits 68.70 76.72 82.78 87.03 95.89 109.31 127.81 149.53 e/f = BMI estimate/forecast Source: BMI, SBV, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 SWOT Analysis Vietnam Commercial Banking SWOT High savings rate of Vietnamese households Increasingly open to foreign banks since WTO accession in 2007 ! The role of state-owned banks is steadily decreasing ! Domestic banks lack the capital and technology to sustain high credit growth ! The financial accounts of many banks are still opaque ! High exposure to real estate and stock market loans among smaller banks ! The population is still under-banked ! Threats Untapped potential ! Opportunities Rapid growth ! Weaknesses ! ! Strengths Income levels are likely to rise strongly over the medium term ! The 11th National Congress of Communist Party of Vietnam in January 2011 could result in a shift of economic policy away from further liberalisation © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 Vietnam Political SWOT ! 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 ! The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials Vietnam has allowed legislators to become more vocal in criticising government policies This is opening up opportunities for more checks and balances within the one-party system ! The slowdown in growth in 2009 and 2010 is likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocratic rule ! Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable ! Threats Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia ! Opportunities The Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress The one-party system is generally conducive to short-term political stability ! Weaknesses ! ! Strengths Relations with China have deteriorated over the past year 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 widescale environmental damage © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 Vietnam Economic SWOT ! Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy continues to suffer in 2010 The fiscal picture is clouded by considerable ‘off-the-books’ spending The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures ! 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 to rise from 29% of the population to more than 50% by the early 2040s ! 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 ! Threats The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004 ! Opportunities Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.6% annually between 2000 and 2007 ! Weaknesses ! ! Strengths 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 Q3 2010 Eximbank ! Valued by the major international banks that deal with it ! Emerged from global financial crisis in a strong position ! By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% and is less dependent on borrowing from other financial institutions ! It appears to be reducing its vulnerability to a lack of liquidity within the banking system; loans to other banks account for less than a quarter of its total assets Funding from other banks accounts for about 3% ! 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 Strengths Weaknesses Company Overview The Vietnam Export-Import Bank (Eximbank), established in 1989, is one of the largest commercial joint stock banks in terms of owner's equity It has a nationwide network of 64 branches and its head office is in Ho Chi Minh City The Vietnamese financial sector has experienced strong growth in recent years, and still Eximbank has performed far above trend for the sector, posting growth in gross profits in FY09 of 60.6% y-o-y to reach VND1.14trn This increased profitability was accompanied by a growth in Eximbank's loan portfolio of 80.8% y-o-y to a total value of VND38.38trn Overall loan portfolio growth for the whole sector was 27.7% and overall assets were up by 37% to VND66trn The bank's growth is threatened by government concerns over the credit supply The government has intends to limit credit supply growth to 25% in FY10 This risks putting the brakes on banks' growth, which for Eximbank was largely fuelled by an expansion in its loan portfolio However, the application of these rules to Eximbank is likely to be less severe given its role in the export sector, which the government is keen to promote and protect as much as possible from restrictive measures aimed at preventing the economy from overheating Company Data Website ! www.eximbank.com.vn/em Status ! Commercial joint-stock bank © Business Monitor International Ltd Page 46 Vietnam Commercial Banking Report Q3 2010 Table: Balance Sheet (VNDmn, unless stated) 2005 2006 2007 2008 11,369,230.0 18,323,770.0 33,710,420.0 48,624,110.0 Loans & Mortgages 6,427,689.0 10,161,270.0 18,378,610.0 21,232,200.0 Total Deposits 8,352,111.0 13,141,180.0 22,906,120.0 31,254,020.0 835,539.0 1,946,667.0 6,294,943.0 12,844,080.0 2,379.00 1,052.00 Total Assets Total Shareholder Equity Earnings Per Share, VND Source: Eximbank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 Total Assets 714.3 1,141.2 2,104.7 2,781.2 Loans & Mortgages 403.8 632.9 1,147.5 1,214.4 Total Deposits 524.7 818.5 1,430.2 1,787.7 52.5 121.2 393.0 734.7 0.15 0.06 2006 2007 2008 Return On Assets 1.7 1.8 1.7 Return On Equity 18.6 11.2 7.4 Loan/Deposit Ratio 80.6 67.9 Loan/Asset Ratio 54.7 43.7 18.7 26.4 Total Shareholder Equity Earnings Per Share, US$ Source: Eximbank, Bloomberg Table: Key Ratios (%) 2005 Equity/Asset Ratio 7.3 10.6 Source: Eximbank, Bloomberg © Business Monitor International Ltd Page 47 Vietnam Commercial Banking Report Q3 2010 Sacombank The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system ! Lack of scale Sacombank is a fairly large bank in Vietnam but a small institution by international standards Potential direct and indirect problems from the bursting of the asset price bubble ! Potential for continuing growth from a low base ! Leverage of strong position in SME sector ! Expansion into southern China and other countries in the ASEAN ! Vulnerability to direct or indirect impact from the downturn in global trade ! Company Overview By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% ! Threats Emerged from the global financial crisis in a strong position ! Opportunities Strategic partnerships with ANZ and the IFC, plus recognition and various awards from the government and trade press ! Weaknesses ! ! Strengths Vulnerable to government credit caps Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992 It has been listed on the Ho Chi Minh City Stock Exchange since July 2006 Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the IFC (5.25%) and Dragon Financial Holdings (8.73%) Foreign shareholders collectively own 30% of the bank Its network includes 247 branches and transaction offices in 44 cities It also has a representative office in Nanning, in southern China, and a branch in Laos In 2008, the bank was restructured as a financial holding company Its subsidiaries include: Sacombank Asset Management Company; Sacombank Remittance Express Company; Sacombank Leasing Company; Sacombank Securities Company; Sacombank Jewelry Company Associated companies include: Viet Fund Management JSC; Saigon Thuong Tin Investment JSC; Tan Dinh Import and Export JSC; Toan Thin Phat Architecture Investment Construction Company; Saigon Thuong Tin Real Estate JSC More than 50% of Sacombank's loans are to SMEs, which the bank has targeted as its market Sacombank intends to help SMEs undertake IPOs These services have been combined with attempts by Sacombank to diversify income sources away from the credit business To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income Sacombank has, in common with much of the Vietnamese financial sector, performed strongly in recent years This can largely be attributed to the success of the Vietnamese economy as a whole Sacombank posted FY09 gross profits of VND1.9trn, exceeding the predicted figure by 19% This trend is expected to continue as the Vietnamese economy continues to grow rapidly However, the success of Sacombank does partly depend on the outcome of increasing government concern over the supply of credit The government has announced its intention to © Business Monitor International Ltd Page 48 Vietnam Commercial Banking Report Q3 2010 limit the growth of credit to 25% While this would still allow for substantial growth across the Vietnamese financial sector, it would place a limit on growth for Sacombank and other institutions Sacombank will come under a certain amount of pressure given its focus on SMEs Company Data Website ! www.sacombank.com.vn Status ! Commercial joint-stock bank Table: Stock Market Indicators 2005 2006 2007 2008 9M09 Market Capitalisation, VNDmn 15,043,772.0 29,139,732.0 9,413,129.0 21,880,408.0 Market Capitalisation, US$mn 937.0 1,819.4 538.4 1,226.3 Share Price, VND 24,684.4 45,555.9 14,717.0 34,500.0 Share Price, US$ 1.5 2.8 0.8 1.9 84.9 -70.4 129.7 US$ Share Price, % change (eop) Change, % (2009 only) 134.4 Shares Outstanding, mn 401.1 609.4 639.6 616.8 616.8 Source: Sacombank, Bloomberg Table: Balance Sheet (VNDmn, unless stated) 2005 Total Assets Loans & Mortgages Total Deposits Total Shareholder Equity 2006 2007 2008 14,454,340.0 24,776,180.0 64,572,880.0 68,438,570.0 8,379,335.0 14,312,890.0 35,200,580.0 34,757,120.0 10,467,160.0 17,511,580.0 44,231,940.0 46,128,820.0 1,887,680.0 2,870,346.0 7,349,659.0 7,758,624.0 755.80 917.09 2,233.28 1,494.90 Earnings Per Share, VND Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 49 Vietnam Commercial Banking Report Q3 2010 Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 Total Assets 908.1 1,543.1 4,031.6 3,914.6 Loans & Mortgages 526.4 891.4 2,197.8 1,988.1 Total Deposits 657.6 1,090.7 2,761.6 2,638.5 Total Shareholder Equity 118.6 178.8 458.9 443.8 Earnings Per Share, US$ 0.05 0.06 0.14 0.09 2005 2006 2007 2008 Return On Assets 2.4 3.1 1.4 Return on Equity 19.8 27.4 12.6 Source: Sacombank, Bloomberg Table: Key Ratios (%) Loan/Deposit Ratio 80.5 82.2 80.0 75.9 Loan/Asset Ratio 58.3 58.1 54.8 51.2 Equity/Asset Ratio 13.1 11.6 11.4 11.3 Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 50 Vietnam Commercial Banking Report Q3 2010 Saigonbank Strengths ! Record of strong growth over the medium term Weaknesses ! Lack of scale Saigonbank is a medium-sized bank in Vietnam but a small institution by international standards ! Saigonbank's loan-to-deposit ratio was relatively high in 2009 by the standards of other banks Opportunities ! Potential for continuing growth from a low base Threats ! Vulnerability to impact, direct or indirect, from the downturn in global trade Company Overview Saigonbank for Industry and Trade (Saigonbank) was one of the first commercial joint-stock banks in Vietnam, established in 1987 with initial chartered capital of VND650mn and operation duration of 50 years Saigonbank increased its chartered capital from VND650mn to VND1.02bn in 20 years as part of a growth-orientated policy Saigonbank, like much of the Vietnamese financial sector, has shown strong performance over recent years Most of this success can be attributed to the general success of the Vietnamese economy Saigonbank has posted strong profits, with profitability increasing y-o-y in FY09 It is expected that gross profits in FY10 will reach VND900bn However, this rapid growth will be hindered by the government's concerns over credit supply growth The government aims to limit this to 25% to prevent broader economic difficulties Enforcing such a policy will cap the potential profitability of Saigonbank in FY10 Unlike many Vietnamese banks, Saigonbank does not have a foreign strategic partner for its operations This has led it to develop a different kind of modernisation program, identifying its own priorities So far, a major priority has been the development of online banking services, as highlighted by the recent decision to use SunGuard's Ambit Online Banking to offer new online services to customers Saigonbank hopes moves such as these will ensure it is not left behind technologically by foreign-sponsored competitors Company Data Website ! www.saigonbank.com.vn Status ! Commercial joint-stock bank © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q3 2010 Table: Stock Market Indicators 2004 2005 2006 2007 Shares Outstanding (mn) 2008 9M09 102.0 Source: Saigonbank, Bloomberg Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 Total Assets 3,188,300.0 4,290,929.0 6,240,308.0 10,184,650.0 11,205,360.0 Loans & Mortgages 2,611,141.0 3,527,109.0 4,811,056.0 7,300,613.0 7,844,450.0 Total Deposits 1,964,739.0 2,830,064.0 3,947,700.0 6,466,654.0 7,164,714.0 476,062.0 609,434.0 931,562.0 1,431,610.0 1,469,766.0 2,432.00 1,581.00 Total Shareholder Equity Earnings Per Share, VND Source: Saigonbank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 2008 Total Assets 202.1 269.6 388.7 635.9 640.9 Loans & Mortgages 165.6 221.6 299.6 455.8 448.7 Total Deposits 124.6 177.8 245.9 403.7 409.8 30.2 38.3 58.0 89.4 84.1 0.15 0.10 Total Shareholder Equity Earnings Per Share, US$ Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q3 2010 Table: Key Ratios (%) 2004 2005 2006 2007 2008 Return On Assets 2.1 2.3 2.1 1.5 Return On Equity 14.7 15.5 14.4 11.1 Loan/Deposit Ratio 112.3 Loan/Asset Ratio Equity/Asset Ratio 71.3 14.9 14.2 14.9 14.1 13.1 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q3 2010 SeABank ! Record of strong growth over the medium term ! Partnership with Societe Generale ! Lack of scale SeABank is a medium-sized bank in Vietnam but a small institution by international standards ! SeABank's loan-to-deposit ratio was relatively high by the standards of other banks in 2009 ! Did not meet gross profit target Opportunities ! Potential for continuing growth from a low base Threats ! Vulnerability to direct or indirect impact from the downturn in global trade Company Overview South East Asia Commercial Joint-Stock Bank (SeABank) was established in 1994 It aims to Strengths Weaknesses become one of the leading joint stock banks in Vietnam and has a programme to modernise the bank and achieve a sustainable competitive edge After expansion in 2009, the bank has 126 branches, most less than two years old This programme is largely possible due to its strategic partnership with Societe Generale, which owns 20% of the firm Targets for 2010 include: minimum total assets of US$3.125bn; minimum total capital of US$500mn; at least 200 branches open; 1mn customers; and 2,000 employees The speed of expansion can be also be seen in the performance of SeABank in FY09 Overall loan portfolio growth was 122% y-o-y, reaching a VND24.02trn Total assets grew by 136% y-o-y to VND30.8trn The likelihood of further rapid growth has been increased by the decision to increase the charter capital of SeABank by 36% to a total of VND4trn However, the bank's rapid expansion has not been problem free SeABank was one of the few Vietnamese financial institutions to fall short of its FY09 gross profit target, with profits growing by 8% y-o-y to VND479bn Company Data Website ! www.seabank.com.vn Status ! Commercial joint-stock bank © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q3 2010 Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2,283,813.0 6,124,938.0 10,200,420.0 26,241,090.0 Loans & Mortgages 530,767.4 1,347,680.0 3,353,999.0 10,994,810.0 Total Deposits 499,021.4 2,312,406.0 3,511,683.0 10,744,180.0 Total Shareholder Equity 161,472.8 291,775.6 1,055,536.0 3,366,458.0 Total Assets Earnings Per Share, VND 2,098.00 Source: SeABank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 144.8 384.8 635.3 1,638.4 Loans & Mortgages 33.7 84.7 208.9 686.5 Total Deposits 31.6 145.3 218.7 670.8 Total Shareholder Equity 10.2 18.3 65.7 210.2 Total Assets Earnings Per Share, US$ 0.13 Source: SeABank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 Return On Assets 1.0 1.2 1.6 Return On Equity 17.7 14.6 13.5 4.8 10.3 12.8 Equity Asset Ratio 7.1 Source: SeABank, Bloomberg © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q3 2010 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 56 Vietnam Commercial Banking Report Q3 2010 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 57 Vietnam Commercial Banking Report Q3 2010 Table: Commercial Banking Business Environment Indicators And Rationale Limits of Potential Returns Rationale Banking market structure Estimated total assets, end 2008 Indication of overall sector attractiveness Large markets are considered more attractive than small ones Estimated growth in total assets, 20082013 Indication of growth potential The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 20082013 Indication of the scope for expansion in profits through intermediation Country structure GDP per capita A proxy for wealth High-income states receive better scores than lowincome states Active population Those aged 16-64 in each state, as a % of total population A high proportion suggests that the market is comparatively more attractive Corporate tax A measure of the general fiscal drag on profits GDP volatility Standard deviation of growth over seven-year economic cycle A proxy for economic stability Risks to Realisation of Returns Banking market risks Regulatory framework and industry development Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Regulatory framework and competitive environment Subjective evaluation of the impact of the regulatory environment on the competitive landscape Country Risk from BMI’s Country Risk Ratings 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 58 Vietnam Commercial Banking Report Q3 2010 Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight Consequently, the following weights have been adopted Table: Weighting Of Indicators Component Limits of potential returns, of which: Weighting, % 70, of which – Banking market structure 60 – Country structure 40 Risks to realisation of returns, of which: 30, of which – Banking market risks 40 – Country risk 60 Source: BMI © Business Monitor International Ltd Page 59 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... of any information hereto contained Vietnam Commercial Banking Report Q3 2010 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2010 CONTENTS Executive Summary ... Ltd Page 24 Vietnam Commercial Banking Report Q3 2010 Vietnam Banking Sector Outlook Further Banking Expansion Expected We expect the Vietnamese banking sector to continue to expand in 2010 and... Page 30 Vietnam Commercial Banking Report Q3 2010 List of Banks Table: Financial Institutions In Vietnam (February 2010) State-owned Commercial Banks Vietnam Bank for Social Policies Vietnam