Q3 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 Q3 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: May 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. 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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 2013 CONTENTS BMI Industry View . Table: Commercial Banking Sector Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Key Ratios, September 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Annual Growth Rate Projections 2012-2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Ranking Out Of 62 Countries Reviewed In 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Indicators, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SWOT Commercial Banking Political . 10 Economic . 11 Business Environment 12 Industry Forecast 13 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 Outlook . 18 Table: Banks' Bond Portfolios, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Table: Comparison of US$ Per Capita Deposits, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Economic Outlook . 20 Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Competitive Landscape 25 Market Structure . 25 Protagonists 25 Table: Protagonists In Vietnam's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Definition Of The Commercial Banking Universe . 25 List Of Banks . 26 Table: Financial Institutions In Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Company Profile 29 Bank for Foreign Trade of Vietnam (Vietcombank) 29 Table: Stock Market Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 VietinBank . 33 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 © Business Monitor International Page Vietnam Commercial Banking Report Q3 2013 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Agribank 37 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Asia Commercial Bank . 40 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Eximbank . 43 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Housing Development Commercial Joint Stock Bank (HDBank) . 46 Sacombank . 48 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Regional Overview 52 Asia Overview . Financial Market Reforms A Crucial Element In Attracting FDI . Playing Catch-Up Regional Integration To Spur Expansion 52 53 54 55 Global Industry Overview 57 Global Commercial Banking Outlook 57 Emerging Market Regional Outlooks . 60 Demographic Forecast . 63 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Methodology 67 Table: Commercial Banking Risk/Reward Rating Indicators And Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 © Business Monitor International Page Vietnam Commercial Banking Report Q3 2013 BMI Industry View Table: Commercial Banking Sector Indicators Date Total assets Client loans Bond portfolio Other Liabilities and capital Client deposits Capital Other September 2011, VNDbn 3,211,099 2,688,670 249,530 272,899 3,211,099 517,722 2,436,825 256,552 September 2012, VNDbn 3,643,387 2,909,510 340,971 392,906 3,643,387 579,893 2,812,749 250,745 % change y-o-y 13.5% 8.2% 36.6% 44.0% 13.5% 12.0% 15.4% -2.3% September 2011, US$bn 154.2 129.1 12.0 13.1 154.2 24.9 117.0 12.3 September 2012, US$bn 174.6 139.4 16.3 18.8 174.6 27.8 134.8 12.0 % change y-o-y 13.3% 8.0% 36.4% 43.7% 13.3% 11.8% 15.2% -2.4% Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Key Ratios, September 2012 Loan/ deposit ratio Loan/ asset ratio Loan/ GDP ratio GDP Per Capita, US$ Deposits per Capita, US$ 103.44% 79.86% n.a. 1,072.1 1,506.3 Falling Falling Falling n.a. n.a. Source: BMI; Central banks; Regulators Table: Annual Growth Rate Projections 2012-2017 (%) Assets Loans Deposits Annual Growth Rate 11 CAGR 13 11 Ranking 16 23 34 Source: BMI; Central banks; Regulators © Business Monitor International Page Vietnam Commercial Banking Report Q3 2013 Table: Ranking Out Of 62 Countries Reviewed In 2013 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 17 Local currency asset growth Local currency loan growth Local currency deposit growth 15 18 23 Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Indicators, 2010-2017 2010 Total assets, VNDbn Total assets, US$bn Client loans, VNDbn Client loans, US$bn Client deposits, VNDbn Client deposits, US$bn 2011 2012e 2013f 2014f 2015f 2016f 2017f 2,953,153 3,437,893 3,816,061 4,350,310 4,959,353 5,604,069 6,276,557 6,966,979 151.5 163.4 183.1 208.1 241.2 275.7 312.3 348.3 2,475,540 2,829,890 3,084,580 3,454,730 3,869,297 4,294,920 4,724,412 5,149,609 127.0 134.5 148.0 165.3 188.1 211.3 235.0 257.5 2,209,896 2,483,357 2,706,859 2,977,545 3,245,524 3,505,166 3,750,528 3,975,560 113.3 118.1 129.9 142.5 157.8 172.4 186.6 198.8 e/f = estimate/forecast. Source: BMI; Central banks; Regulators © Business Monitor International Page Vietnam Commercial Banking Report Q3 2013 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths ■ Untapped market with potential for increased participation of foreign banks. ■ Large population with a high savings rate and potential for income growth. ■ The Vietnamese government aims to speed up the process of privatising state-owned banks, which will help modernise the industry. ■ State-owned banks will play a lesser role going forward, and the risks associated with state-directed lending will decrease over time. Weaknesses ■ Domestic banks continue to lag behind their foreign peers in terms of financial strength and the technological curve. ■ Accounting standards lag far behind international standards and the lack of transparency entails significant risks for foreign investors. ■ Small banks have an overwhelming exposure to real estate and individual loans, resulting in highly skewed and risky loan portfolios. Opportunities ■ The population is still underbanked, with significant potential for adopting cash-free payment systems and new mobile banking technologies. ■ Rising income levels and deepening capital markets could give rise to opportunities in more sophisticated financial products and growth for the local asset management industry. Threats ■ Track record of macroeconomic instability threatens the credibility of the government and could potentially drive economic policy away from further liberalisation. ■ The high level of government debt risks triggering a fiscal crisis, undermining confidence in the banking sector. © Business Monitor International Page Vietnam Commercial Banking Report Q3 2013 Political SWOT Analysis Strengths ■ The Communist Party of Vietnam remains committed to market-oriented reforms and we not expect major shifts in policy direction over the next five years. The oneparty system is generally conducive to short-term political stability. ■ Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. Weaknesses ■ Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. ■ There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent. Opportunities ■ The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. ■ Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system. Threats ■ Macroeconomic instabilities in 2012 are likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocractic rule. ■ Although strong domestic control will ensure little change to Vietnam's political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable. ■ Relations with China have deteriorated over recent years due to Beijing's more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage. © Business Monitor International Page 10 Vietnam Commercial Banking Report Q3 2013 2013 to promote cross-border investment, listing in multiple exchanges and reduce transaction costs and settlement risks for investors. Challenging Environment For Less-Developed ASEAN Members We believe that the influx of foreign capital inflows into ASEAN countries in recent years has played a significant role in spurring efforts by policymakers to speed up the integration of the region's financial markets and services. Although we acknowledge that the path towards the establishment of the AEC by 2015 will prove to be especially challenging for the local banking sector in less-developed countries such as Cambodia, Myanmar, Laos, and to a smaller extent Indonesia and the Philippines, we believe that these countries will nonetheless benefit from the increased FDI inflows into the region as a result of these aggressive reforms. Overall, we expect banks from Singapore, Thailand and Malaysia to perform relatively well compared to their regional peers largely as a result of their competitive advantage in terms of technology, scale, and financial strength. Meanwhile, we expect to see a period of consolidation for the banking sector in countries such as Vietnam, Philippines, and Indonesia, where we continue to see a large number of smaller-sized banks (ranging from 50-100 different banks in each of the three) that are increasingly struggling to compete effectively with foreign banks. © Business Monitor International Page 56 Vietnam Commercial Banking Report Q3 2013 Global Industry Overview Global Commercial Banking Outlook The global commercial banking sector has shown increasing signs of life in some parts of the world where it previously looked moribund - the United States in particular. With economic growth continuing at a modest pace, and monetary policy remaining loose for the foreseeable future, asset and loan growth should continue to pick up pace in most parts of the world. On the monetary policy front, the US Federal Reserve is expanding its balance sheet by US$85bn per month as part of its QE3 programme, and the Bank of Japan is embarking on a two-year plan to purchase JPY101trn (US$1trn) in assets. There are some very weak areas in the global banking market, primarily concentrated in the eurozone, where a multi-year deleveraging process is only in its early stages. We would not be surprised to see further easing from other major central banks, particularly the Bank of England, in the quarters to come. Total central bank assets as a proportion of global GDP is set to move to a new record high in 2013, toward the 30% of GDP mark, by our estimates. Monetary Easing Continues Global Central Bank Assets As % Of World GDP Source: BMI estimates © Business Monitor International Page 57 Vietnam Commercial Banking Report Q3 2013 While this easing is in response to weak economic growth, and as such is unlikely to lead to an explosion in credit growth, it will help underpin a slow healing process for lenders. In the US, this process is coming towards an end, whereas in Europe and in particular the periphery of the eurozone, there will be several years of pain yet to come. For Japan, the jury is still out, as the new monetary and fiscal policies could well lead to a near-term boom but a longer-term bust. Among emerging markets, the outlook is very much mixed. We remain wary of the recent upturn in Chinese credit growth, which we regard as unsustainable. However, other markets, particularly those of Latin America and Sub-Saharan Africa, remain ripe for further banking sector penetration and growth over the coming years, in our view. Accordingly, our five-year loan-to-GDP forecasts show a mixed outlook for commercial banking markets worldwide. While these projections are not directly comparable due to differing national statistical methodologies, and may not capture all credit dynamics in some countries as they cover commercial banking only, they point in the general direction that we would expect given our 5-year macroeconomic outlook. In 2013, we are forecasting commercial banking loan growth to contract in just four countries (within BMI's 63-country universe of coverage): Spain, Italy, Greece, and Hungary, three of which are in the eurozone periphery. Beyond this period though, we envisage lower loans-to-GDP ratios in 23 countries in 2017 than in 2012. Part of this deleveraging will be due to faster nominal GDP growth than loan growth, which is a reasonably healthy dynamic. For some countries, however, we believe that credit growth in recent years will prove unsustainable and eventually reverse. Generally, we foresee increasing levels of leverage in emerging markets, as shown in the right-hand side chart. But in developed states, further deleveraging is ahead, a shown by countries in the eurozone periphery and Australia. © Business Monitor International Page 58 Vietnam Commercial Banking Report Q3 2013 US On Top, Peripheral Eurozone And China Near The Bottom Percentage Point Change In Loans As % of GDP Between 2012 - 2017 Source: BMI Commercial Banking Forecasts The US and China stand out in these charts, and our outlook for each stands in stark contrast to the other. The US commercial banking sector is looking increasingly healthy, after several years of uncertainty and outright contraction. With household balance sheets recovering, though, we believe that we are reaching an inflection point in the deleveraging process, and are forecasting loan and asset growth to accelerate in 2013 and 2014. Meanwhile, in China, total credit (as defined by new total social financing) hit another record high in March 2013, taking total credit-to-GDP to 200%. We are not aware of any other country that has witnessed such a rapid rise in debt-to-GDP. With potential instability in the shadow banking system hanging over the economy. However, rising loan defaults pose a major deflationary force. By the latter stages of 2013, we expect to see corporate and loan defaults begin to rise, taking the steam out of inflationary pressures. Over the course of the coming five years, we anticipate a severe deleveraging in the Chinese banking sector as these distortions unwind. © Business Monitor International Page 59 Vietnam Commercial Banking Report Q3 2013 Emerging Market Regional Outlooks Latin America: We expect that the current divergence in the degree of banking sector penetration among major Latin American economies will continue over the medium term. Although we forecast the pace of asset growth to moderate in Chile and Brazil in the next few years due to slower economic activity, we expect that they will remain the most developed commercial banking sectors in the region, with the assetsto-GDP ratios well above 100%. Meanwhile, strong growth potential exists in Colombia, Mexico and, to a lesser extent, Peru over the medium term due to relatively low levels of banking sector penetration and growing domestic demand. Although we forecast Argentina and Venezuela to post some of the strongest growth rates over the forecast period (to 2017), high levels of economic and business environment risk mean that they remain relatively unattractive investment destinations. Divergence Will Remain Latin America - Total Banking Sector Assets, % GDP e/f = BMI estimate/forecast. Source: BMI, respective banking sector supervisors Emerging Asia: Ambitious plans aimed at speeding up the integration of financial markets and services in the region are likely to have deep and wide ranging implications for the banking sector. We expect increased intra-regional trade and cross-border investments to continue to provide the impetus for regional banks to expand their operations into neighbouring countries. Meanwhile, the competitive environment is © Business Monitor International Page 60 Vietnam Commercial Banking Report Q3 2013 expected to be especially challenging for banks in less-developed countries such as Cambodia, Myanmar, Laos and to a smaller extent, Indonesia and the Philippines, where we expect a period of consolidation in the banking sector. Emerging Europe: With the exclusion of Russia and Turkey, which are both still experiencing strong credit growth, lending among most Emerging Europe banking sectors is at best stagnating, and at worst in (or entering) contraction territory. In the wake of the recent Cypriot banking crisis, we assess if any Emerging European banking sectors are at risk of heading towards a Cyprus-style bailout. We rate two sectors - Hungary and Slovenia - as 'high risk', implying the country's banks are facing systemic challenges that may require state and/or external aid at some point in the next few years; four sectors - Latvia, Romania, Bulgaria and Croatia - as 'medium risk'; and three - Slovakia, Czech Republic and Poland - as low risk. Unstable Foundations For Slovenia and Hungary Emerging Europe - Loan-To-Deposit Ratios Source: BMI, respective central banks © Business Monitor International Page 61 Vietnam Commercial Banking Report Q3 2013 Sub-Saharan Africa: Banking sectors across the Sub-Saharan Africa region continue to perform well, reinforcing our positive view. In general, banks are reporting strong increases in asset growth and profitability, reflecting supportive underlying macroeconomic conditions, including robust real GDP growth and largely buoyant consumer and business confidence. Among the major countries that we cover, the outlook for the Ghanaian, Kenya, Nigerian and South African banking sectors is strong across the board. We forecast that Ghana, Kenya and Nigeria will all experience double-digit growth in assets and loans over the short-to-medium term, while South Africa should see slower but nevertheless robust expansion. Middle East And North Africa: Following several years of relatively robust expansion, top-line growth for the majority of GCC banks is set to slow in 2013 according to our baseline scenario. Heavy government spending throughout the region, particularly on large-scale infrastructure projects, will ensure lending opportunities remain buoyant. However, our core forecasts see asset growth picking up in year-on-year terms only in the UAE, where banks have now endured approximately three years of sub-par expansion. As the accompanying table shows, while total asset growth across the Saudi Arabian, Qatari and Omani banking sectors has remained firmly in double digits through 2012, the pace of expansion is undoubtedly slowing from a very high base. © Business Monitor International Page 62 Vietnam Commercial Banking Report Q3 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 63 Vietnam Commercial Banking Report Q3 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012e 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 64 Vietnam Commercial Banking Report Q3 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 65 Vietnam Commercial Banking Report Q3 2013 Table: Vietnam's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 Youth population, % of total working age Youth population, total, '000 1990 1995 2000 2005 2010 2012 2015f 2020f 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6 38,243 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 25,529 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 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 66 Vietnam Commercial Banking Report Q3 2013 Methodology BMI's Commercial Banking Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets. As such, the reports draw heavily on our extensive economic data set, which includes up to 550 indicators per country, as well as our in depth view of each local market. We collate our commercial banking databank from official sources (including central banks and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only used as a backup. All of the risk ratings and forecasts within this report are a result of BMI's own proprietary research and not in any circumstances include consensus or third party numbers. How Our Data Set Is Structured The reports focus on total assets, client loans and client deposits. Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country. They not incorporate the balance sheet of the central bank of the country in question. Client loans are loans to non-bank clients. They include loans to public sector and state-owned enterprises. However, they generally not include loans to governments, government (or 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 67 Vietnam Commercial Banking Report Q3 2013 In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be reconciled with equation one. In practice, other assets and other liabilities are analogous to inter-bank transactions. In some cases, such transactions are generally with foreign banks. In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape, and we not include them in our figures. The US is the main exception to this. In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in another country. In some cases, client deposits include significant amounts that have been deposited by residents of another country. Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in Central and Eastern Europe. Commercial Bank Risk/Reward Rating In producing our Commercial Banking Risk/Reward Rating (RRR), our approach has been threefold. First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation of profits in each state, thereby capturing the operational dangers facing companies operating in this industry globally. Second, we have, where possible, identified objective indicators that serve as proxies for issues/trends within the industry to ensure consistent evaluate across states. Finally, we have used BMI's proprietary Country Risk ratings in a nuanced manner to ensure that the ratings accurately capture broader issues that are relevant to the industry and which may either limit market attractiveness or imperil future returns. Overall, the ratings system, which integrates with all the other industry Business Environment Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Conceptually, the ratings system divides into two distinct areas: ■ Rewards: Evaluation of industry's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. ■ Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based. © Business Monitor International Page 68 Vietnam Commercial Banking Report Q3 2013 Table: Commercial Banking Risk/Reward Rating Indicators And Rationale Rewards Rationale Banking market structure Estimated total assets, 2013 Indication of overall sector attractiveness. Large markets are considered more attractive than small ones Estimated growth in total assets, 2013-2017 Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 2013-2017 Indication of the scope for expansion in profits through intermediation Country structure GDP per capita A proxy for wealth. High-income states receive better scores than low-income states Active population Those aged 16-64 in each state, as a % of total population. A high proportion suggests that the market is comparatively more attractive Corporate tax A measure of the general fiscal drag on profits GDP volatility Standard deviation of growth over seven-year economic cycle. A proxy for economic stability Risks Banking market risks Regulatory framework and industry development 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 Rating (CRR) Short-term financial risk Rating from CRR, evaluating currency volatility Policy continuity Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy Legal framework Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Bureaucracy Rating from CRR to denote ease of conducting business in the state Source: BMI 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 Page 69 Vietnam Commercial Banking Report Q3 2013 Table: Weighting Of Indicators Component Rewards: Weighting, % 70, of which - Banking market structure 60 - Country Structure 40 Risks: 30, of which - Banking market risks 40 - Country Risk 60 © Business Monitor International Page 70 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Tin Commercial Joint Stock Bank (Sacombank) Pacific Commercial Joint Stock Bank © Business Monitor International Page 26 Vietnam Commercial Banking Report Q3 2013 Financial Institutions In Vietnam - Continued TienPhong Commercial Joint Stock Bank Viet Nam Thuong Tin Commercial Joint Stock Bank Viet A Commercial Joint Stock Bank Vietnam Commercial Joint Stock Export-Import Bank Petrolimex Group Commercial. .. 25 Vietnam Commercial Banking Report Q3 2013 List Of Banks Table: Financial Institutions In Vietnam State-owned Commercial Banks Vietnam Bank for Social Policies Vietnam Bank for Industry and Trade (VietinBank) Vietnam Bank for Agricultural & Rural Development (Agribank) Mekong Delta Housing Development Bank Vietnam Development Bank Bank for Investment and Development of Vietnam Urban Joint-Stock Commercial. .. 24 Vietnam Commercial Banking Report Q3 2013 Competitive Landscape Market Structure Protagonists Table: Protagonists In Vietnam' s Commercial Banking Sector Central bank: State Bank of Vietnam (SBV) www.sbv.gov.vn/en/home The SBV is the successor to the Vietnam National Bank, which was established by the government of North Vietnam in 1951 From 1975 to May 1990, the SBV was the banking system of Vietnam. .. Bank Nam A Commercial Joint Stock Bank Vietnam Commercial Joint Stock Bank for Private Enterprise Bank for Foreign Trade of Vietnam Habubank Housing Development Commercial Joint Stock Bank Southern Commercial Joint Stock Bank Orient Commercial Joint Stock Bank Military Commercial Joint Stock Bank Vietnam International Commercial Joint Stock Bank Saigon Commercial Joint Stock Bank Saigon-Hanoi Commercial. .. ratings © Business Monitor International Page 15 Vietnam Commercial Banking Report Q3 2013 Industry Risk Reward Ratings Asia Commercial Banking Risk/Reward Ratings Business Environment Rating Methodology Since Q108, we have described numerically the banking business environment for each of the countries surveyed by BMI We do this through our Commercial Banking Business Environment Rating (CBBER), a measure... Banks An Binh Commercial Joint Stock Bank Bac A Commercial Joint Stock Bank Global Petro Commercial Joint Stock Bank Gia Dinh Commercial Joint Stock Bank Maritime Commercial Joint Stock Bank Kien Long Commercial Joint Stock Bank Vietnam Technological and Commercial Joint Stock Bank (Techcombank) LienViet Commercial Joint Stock Bank Western Rural Commercial Joint Stock Bank My Xuyen Nam Viet Commercial. .. © Business Monitor International Page 27 Vietnam Commercial Banking Report Q3 2013 Financial Institutions In Vietnam - Continued Korea Exchange Bank (South Korea ) Lao-Viet Bank (Laos) Chinatrust Commercial Bank (Taiwan) First Commercial Bank (Taiwan) Far East National Bank (US) Cathay United Bank (Taiwan) Sumitomo-Mitsui Banking Corporation (Japan) Hua Nan Commercial Bank (South Korea) Taipei Fubon... Trade of Vietnam) 198 Tran Quang Khai Hanoi Vietnam Description of Business: Leading commercial bank specialising project finance, trade finance, treasury, financial market and international banking services Phone: +84 (4) 825 1322 Fax: +84 (4) 826 9067 webmaster@vietcombank.com.vn http://www.vietcombank.com.vn © Business Monitor International Page 30 Vietnam Commercial Banking Report Q3 2013 Table:... 326.9 Vietnam 208.1 165.3 142.5 183.1 148.0 129.9 Bangladesh Indonesia Japan © Business Monitor International Page 19 Vietnam Commercial Banking Report Q3 2013 Comparison of Total Assets & Client Loans & Client Deposits (US$bn) - Continued 2013 United States 14,025.2 10,603.8 2012 10,212.0 13,231.3 10,003.5 9,283.6 Source: BMI, Central banks, regulators Table: Comparison of US$ Per Capita Deposits, 2013. .. 2013 Vietnam - M2 Money Supply, VNDbn (LHS) & % chg y-o-y (RHS) f = BMI forecast Source: BMI, State Bank of Vietnam We acknowledge that the risk of a potential surge in commodity prices in 2013 - especially food prices, which make up around 40% of the consumer price index basket - could turn out to be a wildcard for © Business Monitor International Page 22 Vietnam Commercial Banking Report Q3 2013 . Source: BMI; Central banks; Regulators Vietnam Commercial Banking Report Q3 2013 © Business Monitor International Page 8 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths ■ Untapped. Q3 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. 69 Table: Weighting Of Indicators 70 Vietnam Commercial Banking Report Q3 2013 © Business Monitor International Page 5 BMI Industry View Table: Commercial Banking Sector Indicators Date Total assets Client loans Bond portfolio