Q3 2015 www.bmiresearch.com VIETNAM COMMERCIAL BANKING REPORT INCLUDES 5-YEAR FORECASTS TO 2019 ISSN 1758-454X Published by:BMI Research Vietnam Commercial Banking Report Q3 2015 INCLUDES 5-YEAR FORECASTS TO 2019 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: May 2015 BMI Research 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@bmiresearch.com Web: http://www.bmiresearch.com © 2015 Business Monitor International Ltd All rights reserved. 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All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Commercial Banking Report Q3 2015 CONTENTS BMI Industry View . Table: Commercial Banking Sector Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Key Ratios, October 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Annual Growth Rate Projections 2014-2019 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Ranking Out Of 73 Countries Reviewed In 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Indicators, 2012-2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SWOT Commercial Banking Political . 10 Economic . 11 Operational Risk . 13 Industry Forecast 15 Economic Analysis . 15 Industry Risk Reward Ratings 18 Asia Commercial Banking Risk/Reward Index . 18 Table: Asia Commercial Banking Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Market Overview . 20 Asia Commercial Banking Outlook . 20 Table: Banks' Bond Portfolios, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Table: Comparison Of Loan/Deposit & Loan/Asset & Loan/GDP Ratios, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Table: Comparison Of USD Per Capita Deposits, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Economic Analysis . 23 Table: Economic Activity (Vietnam 2010-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Competitive Landscape 27 Market Structure . 27 Protagonists 27 Table: Protagonists In Vietnam's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Definition Of The Commercial Banking Universe . 27 List Of Banks . 28 Table: Financial Institutions In Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Company Profile 30 Agribank 30 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Bank for Foreign Trade of Vietnam (Vietcombank) 33 Table: Stock Market Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2015 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Eximbank . 37 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Sacombank . 41 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 VietinBank . 45 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Regional Overview 49 Asia Overview . 49 Global Industry Overview 52 Global Commercial Banking Outlook 52 US And Eurozone Banking Outlook . 52 Emerging Market Regional Outlooks . 53 Demographic Forecast . 57 Table: Population Headline Indicators (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Table: Key Population Ratios (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Table: Population By Age Group (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Table: Population By Age Group % (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Methodology 62 Industry Forecast Methodology 62 Sector-Specific Methodology 63 Risk/Reward Ratings Methodology 64 Table: Commercial Banking Risk/Reward Rating Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2015 BMI Industry View Table: Commercial Banking Sector Indicators Total assets Date Client loans Bond portfolio Liabilities and capital Other Capital Client deposits Other October 2012, VNDbn 3,688,076 2,938,250 355,697 394,129 3,688,076 583,666 2,861,204 243,206 October 2013, VNDbn 4,257,985 3,309,020 502,944 446,021 4,257,985 636,710 3,580,465 40,810 % change y-o-y 15.5% 12.6% 41.4% 13.2% 15.5% 9.1% 25.1% -83.2% October 2012, USDbn 176.9 140.9 17.1 18.9 176.9 28.0 137.2 11.7 October 2013, USDbn 201.8 156.8 23.8 21.1 201.8 30.2 169.7 1.9 14.1% 11.3% 39.7% 11.8% 14.1% 7.8% 23.7% -83.4% % change y-o-y Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Key Ratios, October 2013 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, USD Deposits per capita, USD 92.42% 77.71% 93.8% 2,007.2 1,853.9 Falling Falling Falling na na na = not available. Source: BMI; Central banks; Regulators Table: Annual Growth Rate Projections 2014-2019 (%) Assets Loans Deposits Annual Growth Rate 10 CAGR 11 Ranking 22 29 44 Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2015 Table: Ranking Out Of 73 Countries Reviewed In 2015 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 16 17 Local currency asset growth Local currency loan growth Local currency deposit growth 19 25 29 Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Indicators, 2012-2019 2012 Total assets, VNDbn Total assets, USDbn Client loans, VNDbn Client loans, USDbn Client deposits, VNDbn Client deposits, USDbn 2013 2014e 2015f 2016f 2017f 2018f 2019f 3,917,557 4,466,015 5,091,257 5,753,121 6,443,495 7,152,280 7,939,030 8,759,397 188.0 211.7 238.0 267.0 301.8 338.2 379.0 422.1 3,077,700 3,447,024 3,860,667 4,285,340 4,713,874 5,138,123 5,600,554 6,067,267 147.7 163.4 180.5 198.9 220.8 242.9 267.3 292.4 3,080,455 3,388,501 3,693,466 3,988,943 4,268,169 4,524,259 4,795,715 5,051,486 147.8 160.6 172.7 185.1 199.9 213.9 228.9 243.4 e/f = estimate/forecast. Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2015 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 gradually 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 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 country remains one of the most under-banked in the region, 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 Ltd Page Vietnam Commercial Banking Report Q3 2015 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 ■ Although strong domestic control will ensure little change to Vietnam's political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable. ■ Relations with China have deteriorated over recent years due to Beijing's more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage. © Business Monitor International Ltd Page 10 Vietnam Commercial Banking Report Q3 2015 Global Industry Overview Global Commercial Banking Outlook The global outlook for commercial banking remains mixed. Our key theme of developed market macroeconomic outperformance versus emerging markets (EMs) is broadly playing out in individual national banking sectors, as reflected by asset and loan growth. The eurozone and US commercial banking sectors are finally achieving some semblance of lift-off following a difficult period, and we expect loan and asset growth in both sectors in 2015 following five years of deleveraging. The challenges facing banking sectors in emerging markets are widely varied, with some sectors in Central and Eastern Europe potentially impacted by populist government policies, and some African banks restrained by domestic macroeconomic factors. The tightening of US monetary policy will also impact EM banking sectors to varying degrees, with Asia's banks appearing to be in better shape than their Latin American counterparts for weathering a more challenging external environment. US And Eurozone Banking Outlook Both the US and eurozone banking sectors appear to have decisively turned the corner from a prolonged period of weakness. Due to structural reforms and regulatory changes, the US banking sector is now the strongest it has been since the financial crisis of 2008-2009, and we expect that accelerating headline GDP growth will support continued asset expansion over the coming years. We forecast that asset growth will reach 6.5% in both 2015 and 2016, in line with historical averages. Banks will increasingly rebalance their assets towards client loans, as the demand for credit is set to expand in the coming quarters, and nonperforming loan ratios have fallen precipitously since the height of the crisis. The US Federal Reserve (Fed) concluded its annual 'stress-test' review of the banking system in March, and the results support our view that the banking sector is much better positioned to absorb exogenous shocks than it has been in recent years. © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q3 2015 Rising Confidence Should Bolster Eurozone Credit Expansion Eurozone - ECB Lending Survey And Total Loan Growth Source: Macrobond, ECB, BMI With economic and financial conditions improving in the eurozone, we have raised our loan growth forecast for 2015 to 4.0% from 2.0% previously, following three consecutive annual contractions. This accords with our country-by-country eurozone loan and asset growth forecasts, as we forecast a return to loan growth in major banking sectors in 2015 including those of France, Germany, Italy and Spain. The upturn in economic fortunes and credit growth in the eurozone have gone, and are likely to go, hand-in-hand. Emerging Market Regional Outlooks Emerging Asia: With the Fed looking to hike rates later in 2015 for the first time in almost a decade, there is a great deal of uncertainty over the impact on Asia. However, we believe that on the whole, banks across Asia are in solid shape to withstand any sudden rise in US borrowing costs. With most of the region boasting strong net creditor positions, higher US dollar borrowing costs and currency depreciation pose little threat to most economies. Indonesia has perhaps the most precarious external balance sheet, with net external liabilities of almost 45% of GDP, but the stabilisation of the current account deficit, helped by a narrowing of the fiscal deficit, should ensure that a repeat of 2013 does not occur. A similar trend has been seen in South Korea. Korea was among the hardest hit in 2008 from the global financial crisis, but the 2013 © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q3 2015 event barely impacted the domestic banking sector owing to the country's strong current account surplus and the much lower level of short-term external debt in the banking sector. Latin America: Banking sector asset growth will slow in most major Latin American economies in the coming years, although a two-tiered outlook will emerge. A weaker external environment will pose significant headwinds to banking sector expansion in Colombia and Brazil, while strengthening private consumption and low banking sector penetration will see Mexico and Peru buck the trend. We also identify Chile as a market that will see an uptick in asset and loan growth in the coming quarters, as improved terms of trade and loose monetary policy bolster private consumption and drive stronger demand for credit. Argentina and Venezuela will have very high inflation-fuelled asset growth but no major movements in assets as a percentage of GDP. We have a modestly stronger outlook on the Argentine banking sector in the period following the October 2015 presidential election. Stronger Growth Ahead In Mexico And Peru Latin America - Average Annual Asset Growth 2010-2014 (LHS) & 2015-2019 (RHS), % chg Note: 2015-2019 figures = BMI forecasts; Source: Respective central banks and national statistical agencies Emerging Europe: Central and Eastern European banking sectors have in recent years been a high-risk target for populist government policies. However, while we are seeing some indications that the © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q3 2015 environment in typically high policy risk countries such as Hungary could be on the cusp of improving, risks are growing for historical outperformers such as Poland and Turkey. In Poland, political interference in the banking sector will become a rising risk in 2015, as the combination of a looming parliamentary election and a growing financial burden on Swiss franc borrowers draw the authorities into action. In Turkey, we forecast another year of below average growth for banking sector assets, driven in part by elevated political risks in the run-up to crucial general elections in June. Still A Lot Of Untapped Potential Across The MENA Region MENA - Commercial Banks' Asset Growth (Size of Bubble Represents Size Of Total Assets In 2014) Source: BMI, National Authorities Middle East and North Africa (MENA): Commercial banks across the MENA region are generally set to continue growing at a healthy pace over 2015, with rates of asset and credit expansion remaining on par with the levels recorded since the financial crisis. Lenders in the energy-exporting Gulf economies will arguably face a more difficult operating environment than in recent years, as lower oil prices and (in some countries) more stringent regulatory requirements put pressure on balance sheet growth. Yet conversely, the outlook for financial institutions outside of the Gulf is improving. Stronger economic prospects are set to bolster lending activity in Egypt and Jordan, while Iranian banks will benefit from the gradual easing of international sanctions despite a still-tepid macroeconomic backdrop. © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q3 2015 Out On Its Own Kenya, Nigeria And South Africa - Real GDP Growth, % y-o-y* e/f= BMI estimate/ forecasts. Source: National statistics, UN, BMI. Sub-Saharan Africa: We believe that Kenya's banking sector will increasingly put those of regional peers South Africa and Nigeria in the shade from a growth perspective. Whereas in Kenya we expect a bright domestic economic outlook, growing financial inclusion and ripe regional expansion opportunities to continue to propel demand for financial services, we believe, in contrast, that Nigerian and South African banks will find operating conditions tough over the next two-to-three years. The latter two markets will feel the weight of challenging domestic economic environments which, through varying channels, will constrain asset growth and dent profitability. Banks in Nigeria and South Africa will look to support bottom lines through non-interest income, while banks in South Africa will look to grow their regional presence. © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q3 2015 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 essential to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail the population pyramid for 2015, the change in the structure of the population between 2015 and 2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split and life expectancy. Population (1990-2050) 150 100 50 2050f 2045f 2040f 2035f 2030f 2025f 2020f 2015f 2010 2005 2000 1990 Vietnam - Population, mn f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q3 2015 Vietnam Population Pyramid 2015 (LHS) & 2015 Versus 2050 (RHS) Source: World Bank, UN, BMI Table: Population Headline Indicators (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f 68,909 80,887 84,947 89,047 93,386 97,057 99,811 na 1.1 0.9 1.0 0.9 0.7 0.5 Population, total, male, '000 33,892 39,827 41,830 43,970 46,158 47,980 49,302 Population, total, female, '000 35,017 41,060 43,117 45,077 47,228 49,076 50,508 Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98 Population, total, '000 Population, % y-o-y na = not available; f = BMI forecast. Source: World Bank, UN, BMI Table: Key Population Ratios (Vietnam 1990-2025) Active population, total, '000 Active population, % of total population Dependent population, total, '000 Dependent ratio, % of total working age © Business Monitor International Ltd 1990 2000 2005 2010 2015f 2020f 2025f 39,197 50,153 56,330 62,305 66,093 68,401 70,001 56.9 62.0 66.3 70.0 70.8 70.5 70.1 29,712 30,733 28,617 26,741 27,292 28,655 29,810 75.8 61.3 50.8 42.9 41.3 41.9 42.6 Page 58 Vietnam Commercial Banking Report Q3 2015 Key Population Ratios (Vietnam 1990-2025) - Continued Youth population, total, '000 1990 2000 2005 2010 2015f 2020f 2025f 25,778 25,543 23,038 20,918 20,950 20,690 19,395 65.8 50.9 40.9 33.6 31.7 30.2 27.7 3,934 5,190 5,578 5,823 6,342 7,964 10,414 10.0 10.3 9.9 9.3 9.6 11.6 14.9 Youth population, % of total working age Pensionable population, '000 Pensionable population, % of total working age f = BMI forecast. Source: World Bank, UN, BMI Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 1990 Urban population, '000 2020f 2025f 13,957.7 19,715.6 23,174.6 27,064.2 31,383.5 35,771.3 40,027.3 Urban population, % of total Rural population, '000 2000 20.3 24.4 2005 27.3 2010 30.4 2015f 33.6 36.9 40.1 54,952.2 61,172.3 61,773.2 61,983.2 62,003.1 61,285.7 59,783.9 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.1 59.9 Life expectancy at birth, male, years 66.1 69.0 69.9 70.7 71.7 72.7 73.7 Life expectancy at birth, female, years 75.1 78.5 79.6 80.2 80.7 81.2 81.7 Life expectancy at birth, average, years 70.6 73.8 74.8 75.5 76.2 77.0 77.8 f = BMI forecast. Source: World Bank, UN, BMI Table: Population By Age Group (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, total, '000 9,314 7,127 6,897 7,228 7,012 6,574 5,922 Population, 5-9 yrs, total, '000 8,606 9,253 7,023 6,790 7,180 6,968 6,535 Population, 10-14 yrs, total, '000 7,856 9,162 9,117 6,898 6,757 7,147 6,936 Population, 15-19 yrs, total, '000 7,359 8,492 9,050 9,011 6,865 6,725 7,116 Population, 20-24 yrs, total, '000 6,644 7,672 8,332 8,873 8,936 6,802 6,664 Population, 25-29 yrs, total, '000 6,005 7,065 7,470 8,111 8,772 8,837 6,717 Population, 30-34 yrs, total, '000 5,138 6,351 6,909 7,285 8,021 8,680 8,747 Population, 35-39 yrs, total, '000 3,888 5,803 6,241 6,763 7,207 7,939 8,596 Population, 40-44 yrs, total, '000 2,462 4,994 5,719 6,147 6,684 7,127 7,856 Population, 45-49 yrs, total, '000 2,016 3,753 4,935 5,647 6,054 6,588 7,031 © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q3 2015 Population By Age Group (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 50-54 yrs, total, '000 1,968 2,345 3,699 4,855 5,521 5,926 6,457 Population, 55-59 yrs, total, '000 2,045 1,885 2,237 3,541 4,677 5,330 5,733 Population, 60-64 yrs, total, '000 1,668 1,790 1,734 2,068 3,352 4,443 5,079 Population, 65-69 yrs, total, '000 1,411 1,770 1,609 1,562 1,906 3,104 4,134 Population, 70-74 yrs, total, '000 1,027 1,322 1,530 1,399 1,379 1,695 2,776 Population, 75-79 yrs, total, '000 752 984 1,080 1,263 1,166 1,159 1,437 Population, 80-84 yrs, total, '000 429 596 731 814 964 900 903 Population, 85-89 yrs, total, '000 223 336 385 482 545 653 617 Population, 90-94 yrs, total, '000 71 132 177 209 267 306 372 Population, 95-99 yrs, total, '000 15 40 52 74 89 115 133 Population, 100+ yrs, total, '000 11 16 23 30 38 f = BMI forecast. Source: World Bank, UN, BMI Table: Population By Age Group % (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, % total 13.52 8.81 8.12 8.12 7.51 6.77 5.93 Population, 5-9 yrs, % total 12.49 11.44 8.27 7.63 7.69 7.18 6.55 Population, 10-14 yrs, % total 11.40 11.33 10.73 7.75 7.24 7.36 6.95 Population, 15-19 yrs, % total 10.68 10.50 10.65 10.12 7.35 6.93 7.13 Population, 20-24 yrs, % total 9.64 9.49 9.81 9.97 9.57 7.01 6.68 Population, 25-29 yrs, % total 8.72 8.73 8.79 9.11 9.39 9.11 6.73 Population, 30-34 yrs, % total 7.46 7.85 8.13 8.18 8.59 8.94 8.76 Population, 35-39 yrs, % total 5.64 7.17 7.35 7.60 7.72 8.18 8.61 Population, 40-44 yrs, % total 3.57 6.17 6.73 6.90 7.16 7.34 7.87 Population, 45-49 yrs, % total 2.93 4.64 5.81 6.34 6.48 6.79 7.04 Population, 50-54 yrs, % total 2.86 2.90 4.36 5.45 5.91 6.11 6.47 Population, 55-59 yrs, % total 2.97 2.33 2.63 3.98 5.01 5.49 5.74 Population, 60-64 yrs, % total 2.42 2.21 2.04 2.32 3.59 4.58 5.09 Population, 65-69 yrs, % total 2.05 2.19 1.90 1.75 2.04 3.20 4.14 Population, 70-74 yrs, % total 1.49 1.63 1.80 1.57 1.48 1.75 2.78 Population, 75-79 yrs, % total 1.09 1.22 1.27 1.42 1.25 1.20 1.44 Population, 80-84 yrs, % total 0.62 0.74 0.86 0.92 1.03 0.93 0.91 © Business Monitor International Ltd Page 60 Vietnam Commercial Banking Report Q3 2015 Population By Age Group % (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 85-89 yrs, % total 0.32 0.42 0.45 0.54 0.58 0.67 0.62 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.29 0.32 0.37 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.10 0.12 0.13 Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 61 Vietnam Commercial Banking Report Q3 2015 Methodology Industry Forecast Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a variable using more than the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. We mainly use OLS estimators, and in order to avoid relying on subjective views and encourage the use of objective views, we use a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact. Effective forecasting depends on appropriately selected regression models, BMI selects the best model according to various different criteria and tests, including but not exclusive to: ■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account; ■ Testing the directional movement and magnitude of coefficients; ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); and ■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity. © Business Monitor International Ltd Page 62 Vietnam Commercial Banking Report Q3 2015 Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience, expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Sector-Specific Methodology BMI's Commercial Banking Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets. The reports draw heavily on our extensive economic dataset, 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. ■ 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. 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. © Business Monitor International Ltd Page 63 Vietnam Commercial Banking Report Q3 2015 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. Risk/Reward Ratings Methodology BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market. The RRR system divides into two distinct areas: Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. This is further broken down into two sub categories: ■ Industry Rewards. This is an industry-specific category that takes into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors. ■ Country Rewards. This is a country-specific category, and the score factors in favourable political and economic conditions for the industry. 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. This is further broken down into two sub categories: ■ Industry Risks. This is an industry-specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry, and the relative maturity of a market. ■ Industry Risks. This is a country-specific category in which political and economic instability, legislation and overall business environment are evaluated to provide an overall score. We take a weighted average, combining industry and country risks, or industry and country rewards. These two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular country. For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall risk/reward rating a weighted average of the total score. Importantly, as most of the countries and territories evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This ensures that the rating draws on the latest information and data across our broad range of sources, and the expertise of our analysts. © Business Monitor International Ltd Page 64 Vietnam Commercial Banking Report Q3 2015 In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based. Table: Commercial Banking Risk/Reward Rating Indicators Rationale Industry Rewards 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 Rewards 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 Industry 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 Risks Short-term financial risk Rating from BMI's Country Risk Ratings (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 65 Vietnam Commercial Banking Report Q3 2015 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 Rewards Weighting, % 70, of which Industry Rewards 60 Country Rewards 40 Risks 30, of which Industry Risks 40 Country Risks 60 Source: BMI © Business Monitor International Ltd Page 66 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Definition Of The Commercial Banking Universe Within Vietnam, VNBA currently has 54 members, including 39 commercial banks, two joint venture banks, 11 finance companies and two other financial institutions © Business Monitor International Ltd Page 27 Vietnam Commercial Banking Report Q3 2015 List Of Banks Table: Financial Institutions In Vietnam COMMERCIAL BANKS Vietnam Joint Stock Commercial Bank for... Monitor International Ltd Page 26 Vietnam Commercial Banking Report Q3 2015 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 State Bank of Vietnam (SBV) is the successor to the Vietnam National Bank, which was established by the government of North Vietnam in 1951 From 1975 to... © Business Monitor International Ltd Page 17 Vietnam Commercial Banking Report Q3 2015 Industry Risk Reward Ratings Asia Commercial Banking Risk/Reward Index Commercial Banking Risk/Reward Index Methodology Since Q108, we have described numerically the banking business environment for each of the countries analysed by BMI We do this through our Commercial Banking Industry Risk/Reward Index (RRI), a... House Development Commercial Joint Stock Bank (HDBank) Military Commercial Joint-Stock Bank (MB) Vietnam International Commercial Joint-Stock Bank (VIB) Sai Gon Commercial Joint-Stock Bank (SCB) © Business Monitor International Ltd Page 28 Vietnam Commercial Banking Report Q3 2015 Financial Institutions In Vietnam - Continued Saigon Bank for Industry and Trade (Saigonbank) Sai Gon-Hanoi Commercial Joint-Stock... Stock Company (VCFC) OTHER FINANCIAL INSTITUTIONS Deposit Insurance of Vietnam (DIV) Vietnam Development Bank (VDB) Source: VNBA (February 2015) , BMI © Business Monitor International Ltd Page 29 Vietnam Commercial Banking Report Q3 2015 Company Profile Agribank SWOT Analysis Strengths Massive branch network, especially in rural Vietnam ■ Improved rating from Fitch in November 2014 ■ Strong relationships... state-owned commercial bank, Vietcombank is the oldest commercial bank for external affairs in Vietnam and was the first bank in the country to have a centralised capital management structure It describes itself as an 'interbank forex payment centre for over 100 domestic banks and foreign banks' branches © Business Monitor International Ltd Page 33 Vietnam Commercial Banking Report Q3 2015 operating in Vietnam' ,... January 2012 Company Address Vietcombank (Bank For Foreign Trade of Vietnam) 198 Tran Quang Khai Hanoi Vietnam © Business Monitor International Ltd Page 34 Vietnam Commercial Banking Report Q3 2015 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 Email:... Foreign Trade of Vietnam (Vietcombank) Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) Vietnam Bank for Agriculture and Rural Development (Agribank) Mekong Housing Bank (MHB) JOINT STOCK BANKS Asia Commercial Bank (ACB) An Binh Commercial Joint-Stock Bank (ABBank) Bao Viet Joint Stock Commercial Bank (BAOVIET Bank) North Asia Commercial Joint-Stock Bank (BacA Bank) Vietnam Prosperity... Bank of Vietnam (Techcombank) Kien Long Commercial Joint-Stock Bank (Kienlongbank) Nam A Commercial Joint-Stock Bank (NamA Bank) Nam Viet Commercial Joint-Stock Bank (Navibank) Western Commercial Joint-Stock Bank (Western Bank) Mekong Development Join-Stock Commercial Bank (MDBank) Orient Commercial Joint-Stock Bank (OCB) Southern Commercial Joint-Stock Bank (Southern Bank) Hanoi Building Commercial. . .Vietnam Commercial Banking Report Q3 2015 Economic SWOT Analysis Strengths ■ Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 6.6% annually between 2000 and 2013 ■ The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 17.2% in 2012 ■ Vietnam has been . Q3 2015 www.bmiresearch.com VIETNAM COMMERCIAL BANKING REPORT INCLUDES 5-YEAR FORECASTS TO 2019 ISSN 1758-454X Published by:BMI Research Vietnam Commercial Banking Report Q3 2015 INCLUDES. BMI; Central banks; Regulators Vietnam Commercial Banking Report Q3 2015 © Business Monitor International Ltd Page 8 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths ■ Untapped. investor interest. Vietnam Commercial Banking Report Q3 2015 © Business Monitor International Ltd Page 17 Industry Risk Reward Ratings Asia Commercial Banking Risk/Reward Index Commercial Banking Risk/Reward