Q4 2010 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES 5-YEAR FORECASTS TO 2014 ISSN 1758-454X Published by Business Monitor International Ltd. VIETNAM COMMERCIAL BANKING REPORT Q4 2010 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2014 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: September 2010 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2010 Business Monitor International. All rights reserved. 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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 Q4 2010 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2014 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: September 2010 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2010 Business Monitor International. All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Commercial Banking Report Q4 2010 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 CONTENTS Executive Summary . Table: Levels (VNDbn) Table: Levels (US$bn) . Table: Levels At August 2009 Table: Annual Growth Rate Projections 2010-2014 (%) . Table: Ranking Out Of 59 Countries Reviewed In 2010 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) . SWOT Analysis . Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT . Vietnam Business Environment SWOT 10 Business Environment Outlook 11 Commercial Banking Business Environment Ratings 11 Table: Vietnam Commercial Banking Business Environment Rating . 11 Commercial Banking Business Environment Rating Methodology 11 Table: Asia Commercial Banking Business Environment Ratings . 13 Global Commercial Banking Outlook . 14 Asia Banking Sector Outlook 19 Table: Banks’ Bond Portfolios . 24 Table: Asia Commercial Banking Business Environment Ratings . 25 Table: Comparison Of Loan/Deposit, Loan/Asset & Loan/GDP Ratios 26 Table: Anticipated Developments In 2010 . 27 Table: Comparison Of Total Assets, Client Loans & Client Deposits, 2008-2009 (US$bn) . 28 Table: Comparison Of Per Capita Deposits, 2010 (US$) 29 Table: Interbank Rates & Bond Yields . 30 Vietnam Banking Sector Outlook . 31 Economic Outlook 34 Table: Vietnam Economic Activity, 2007-2014 35 Competitive Landscape . 36 Market Structure . 36 Protagonists . 36 Table: Protagonists In Vietnam’s Commercial Banking Sector . 36 Definition Of The Commercial Banking Universe 36 List Of Banks . 37 Table: Financial Institutions In Vietnam . 37 Company Profiles . 40 Vietcombank 40 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) . 41 BIDV 42 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) 43 VietinBank . 44 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 45 Agribank 46 Table: Balance Sheet (VNDmn, unless stated) . 47 Table: Balance Sheet (US$mn, unless stated) 47 Table: Key Ratios (%) 47 MHB Bank . 48 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 49 Habubank 50 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) . 51 Eximbank . 52 Table: Balance Sheet (VNDmn, unless stated) . 53 Table: Balance Sheet (US$mn, unless stated) 53 Table: Key Ratios (%) 53 Sacombank . 54 Table: Stock Market Indicators 55 Table: Balance Sheet (VNDmn, unless stated) . 55 Table: Balance Sheet (US$mn, unless stated) 56 Table: Key Ratios (%) 56 Saigonbank 57 Table: Stock Market Indicators 57 Table: Balance Sheet (VNDmn, unless stated) . 58 Table: Balance Sheet (US$mn, unless stated) 58 Table: Key Ratios (%) 58 SeABank . 59 Table: Balance Sheet (VNDmn, unless stated) . 59 Table: Balance Sheet (US$mn, unless stated) 60 Table: Key Ratios (%) 60 BMI Banking Sector Methodology 61 Commercial Bank Business Environment Rating . 62 Table: Commercial Banking Business Environment Indicators And Rationale 63 Table: Weighting Of Indicators . 64 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 Executive Summary Table: Levels (VNDbn) Total Assets Client Loans Bond Portfolio August 2008 1,659,548.7 1,259,980.0 149,816.7 August 2009 2,065,761.6 1,706,340.0 173,358.3 Date Change, % 24% 35% Client Deposits Other 249,752.0 1,659,548.7 217,173.0 1,205,967.7 236,408.0 186,063.3 2,065,761.6 286,547.0 1,594,992.6 184,222.0 Other 16% Liabilities& Capital -26% Capital 24% 32% 32% -22% Source: BMI, SBV, regulators Table: Levels (US$bn) Date Total Assets Client Bond Loans Portfolio Liabilities Other & Capital Client Capital Deposits Other August 2008 100.4 76.2 9.1 15.1 100.4 13.1 73.0 14.3 August 2009 116.0 95.8 9.7331 10.4 116.0 16.1 89.6 10.3 15% 26% 7% -31% 15% 22% 23% -28% Change, % Source: BMI, SBV, regulators Table: Levels At August 2009 Loan/Deposit Ratio Loan/Asset Ratio Loan/GDP Ratio GDP Per Capita, US$ Deposits Per Capita, US$ 82.60% 107.32% 1,058 1,030 Falling Rising 106.98% Rising Source: BMI, SBV, regulators Table: Annual Growth Rate Projections 2010-2014 (%) Assets Loans Deposits Annual Growth Rate 24 24 14 CAGR 25 25 13 14 Ranking Source: BMI, SBV, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 Table: Ranking Out Of 59 Countries Reviewed In 2010 Loan/Deposit Ratio Loan/Asset Ratio Loan/GDP Ratio 10 Local Currency Loan Growth Local Currency Deposit Growth 13 Local Currency Asset Growth Source: BMI, SBV, regulators Table: Projected Levels (VNDbn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f Total Assets 1,410,221.40 1,747,335.40 2,411,322.85 2,893,587.42 3,472,304.91 4,236,211.99 5,252,902.86 6,566,128.58 Client Loans 1,067,730.00 1,339,260.00 1,848,178.80 2,217,814.56 2,661,377.47 3,246,880.52 4,026,131.84 5,032,664.80 Client Deposits 1,100,392.90 1,341,142.80 1,528,902.79 1,697,082.10 1,917,702.77 2,186,181.16 2,492,246.52 2,841,161.04 e/f = BMI estimate/forecast. Source: BMI, SBV, regulators Table: Projected Levels (US$bn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f Total Assets 88.04 99.96 130.56 148.39 173.62 211.81 269.38 345.59 Client Loans 66.66 76.62 100.07 113.73 133.07 162.34 206.47 264.88 Client Deposits 68.70 76.72 82.78 87.03 95.89 109.31 127.81 149.53 e/f = BMI estimate/forecast. Source: BMI, SBV, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Weaknesses Opportunities Threats ! Rapid growth. ! Untapped potential. ! The high savings rate of Vietnamese households. ! Increasingly open to foreign banks since accession to the WTO in 2007. ! The role of state-owned banks is steadily decreasing. ! Domestic banks lack the capital and technology to sustain high credit growth. ! The financial accounts of many banks are still opaque. ! High exposure to real estate and stock market loans among smaller banks. ! The population is still under-banked. ! Income levels are likely to rise strongly over the medium term. ! The National Congress of the Communist Party of Vietnam in January 2011 could result in a shift of economic policy away from further liberalisation. © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 Vietnam Political SWOT Strengths Weaknesses Opportunities Threats ! The Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress. The one-party system is generally conducive to short-term political stability. ! Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. ! Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. ! There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent. ! The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. ! Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system. ! The slowdown in growth in 2009 and 2010 is likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could develop into a full-on challenge of 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 the past year due to Beijing’s more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause large environmental damage. © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2010 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 2006 2007 2008 18,734,297 27,110,786 35,162,410 Loans & Mortgages 9,976,585 13,756,662 15,947,869 Total Deposits 5,005,864 9,945,923 12,028,555 na 1,065,755 1,119,843 Total Assets Total Shareholders’ Equity na = not available. Source: MHB Bank 2008 annual report © Business Monitor International Ltd Page 49 Vietnam Commercial Banking Report Q4 2010 Habubank Strengths ! Emerged from global financial crisis in a strong position. ! By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% and it is less dependent on borrowing from other financial institutions. Weaknesses ! Lack of scale. Habubank is a fairly large bank in Vietnam but a small institution by international standards. ! Potential problems in the wake of the bursting of the asset price bubble. ! Vulnerability to a drying up of liquidity within the banking system. Funding from, and loans to, other banks account for about one-third of total assets. Opportunities ! Potential for growth from a low base. Threats ! Growth limited by government lending policy. Company Overview Hanoi Building Bank (Habubank) was established in 1989 as the first commercial joint stock bank in Vietnam with the initial purpose of providing loans and services in housing and construction. With initial chartered capital of VND5bn, the bank was permitted to provide banking products and services for 99 years. The shareholder structure has been diversified, with the participation of individuals, state-owned enterprises and private enterprises. After more than 20 years, the bank now has chartered capital of VND2tn and an expanding branch network. The bank has been graded A for the last nine years and recognised as one of the safest, most efficient and stable banks by the State Bank of Vietnam. Habubank said it intends to list its shares on a central stock exchange in 2010, ending over the counter trading. It expects this to aid further development of the bank and to encourage greater interest in the bank as an investment. Overall, 2009 was a successful year for Habubank. Gross profits for FY09 totalled VND505bn, exceeding the original target by 26%. The loan portfolio increased in value by 27% to VND13tn and overall deposits came to VND25.5tn, also growing by 27%. Despite this rapid expansion in credit, the NPL ratio is dropping, falling from 2.85% in FY08 to 2.24% in FY09. The bank expects growth of 30-50% in 2010. However, this will be made difficult by the government’s concerns over loose lending and overheating the Vietnamese economy. The government intends to insure that credit growth is limited to 25% in FY10. If this policy is implemented, then the growth possibilities for Habubank will be capped and its 50% growth target will be extremely hard to achieve. Company Data ! Website: www.habubank.com.vn ! Status: Commercial joint-stock bank © Business Monitor International Ltd Page 50 Vietnam Commercial Banking Report Q4 2010 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) 2004 2005 2006 2007 Total Assets 3,728,305 5,524,791 11,685,320 23,518,680 Loans & Mortgages 2,340,832 3,330,218 5,983,267 9,285,862 Total Deposits 2,169,531 3,096,275 4,616,096 8,467,382 253,547 391,464 1,756,381 3,179,345 Total Shareholders’ Equity Source: Habubank financial statements © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q4 2010 Eximbank Strengths ! Valued by the major international banks that deal with it. ! Emerged from global financial crisis in a strong position. ! By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% and is less dependent on borrowing from other financial institutions. ! It appears to be reducing its vulnerability to a lack of liquidity within the banking system; loans to other banks account for less than a quarter of its total assets. Funding from other banks accounts for about 3% of the total. Weaknesses ! Lack of scale. Eximbank is a fairly large bank in Vietnam but a small institution by international standards. ! Potential for problems in the wake of the bursting of the asset price bubble. Opportunities ! Potential for continuing growth from a low base. Threats ! Vulnerability to direct or indirect impact from the downturn in global trade. ! Profit growth is particularly threatened by government loan policy. Company Overview Vietnam Export-Import Bank (Eximbank), established in 1989, is one of country’s the largest commercial joint stock banks in terms of owner’s equity. It has a nationwide network of 64 branches and its head office is in Ho Chi Minh City. The Vietnamese financial sector has experienced strong growth in recent years, and still Eximbank has performed far above trend for the sector, posting growth in gross profits in FY09 of 60.6% y-o-y to reach VND1.14trn. This increased profitability was accompanied by a growth in Eximbank’s loan portfolio of 80.8% y-o-y to a total value of VND38.38trn. Overall loan portfolio growth for the whole sector was 27.7% and overall assets were up by 37% to VND66trn. The bank’s growth is threatened by government concerns over the credit supply. The government intends to limit credit supply growth to 25% in FY10. This risks putting the brakes on banks’ growth, which for Eximbank was largely fuelled by an expansion in its loan portfolio. However, the application of these rules to Eximbank is likely to be less severe given its role in the export sector, which the government is keen to promote and protect as much as possible from restrictive measures aimed at preventing the economy from overheating. Company Data ! Website: www.eximbank.com.vn/en ! Status: Commercial joint-stock bank © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q4 2010 Table: Balance Sheet (VNDmn, unless stated) 2005 2006 2007 2008 11,369,230.0 18,323,770.0 33,710,420.0 48,624,110.0 Loans & Mortgages 6,427,689.0 10,161,270.0 18,378,610.0 21,232,200.0 Total Deposits 8,352,111.0 13,141,180.0 22,906,120.0 31,254,020.0 835,539.0 1,946,667.0 6,294,943.0 12,844,080.0 2,379.00 1,052.00 Total Assets Total Shareholder Equity Earnings Per Share, VND Source: Eximbank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 Total Assets 714.3 1,141.2 2,104.7 2,781.2 Loans & Mortgages 403.8 632.9 1,147.5 1,214.4 Total Deposits 524.7 818.5 1,430.2 1,787.7 52.5 121.2 393.0 734.7 0.15 0.06 2006 2007 2008 Return On Assets 1.7 1.8 1.7 Return On Equity 18.6 11.2 7.4 Loan/Deposit Ratio 80.6 67.9 Loan/Asset Ratio 54.7 43.7 18.7 26.4 Total Shareholder Equity Earnings Per Share, US$ Source: Eximbank, Bloomberg Table: Key Ratios (%) 2005 Equity/Asset Ratio 7.3 10.6 Source: Eximbank, Bloomberg © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q4 2010 Sacombank Strengths ! Strategic partnerships with ANZ and the IFC, plus recognition and various awards from the government and trade press. ! Emerged from the global financial crisis in a strong position. ! By not recycling the rapid growth of deposits into new loans the bank has reduced its loan-to-deposit ratio to well below 100%. ! The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system. Weaknesses ! Lack of scale. Sacombank is a fairly large bank in Vietnam but a small institution by international standards. Opportunities ! Potential direct and indirect problems from the bursting of the asset price bubble. ! Potential for continuing growth from a low base. ! Leverage of strong position in SME sector. ! Expansion into southern China and countries in the Association of Southeast Asian Nations. Threats Company Overview ! Vulnerability to direct or indirect impact from the downturn in global trade. ! Vulnerable to government credit caps. Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992. It has been listed on the Ho Chi Minh City Stock Exchange since July 2006. Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the IFC (5.25%) and Dragon Financial Holdings (8.73%). Foreign shareholders collectively own 30% of the bank. Its network includes 247 branches and transaction offices in 44 cities. It also has a representative office in Nanning, southern China, and a branch in Laos. In 2008, the bank was restructured as a financial holding company. Its subsidiaries include: Sacombank Asset Management Company; Sacombank Remittance Express Company; Sacombank Leasing Company; Sacombank Securities Company; Sacombank Jewelry Company. Associated companies include: Viet Fund Management JSC; Saigon Thuong Tin Investment JSC; Tan Dinh Import and Export JSC; Toan Thin Phat Architecture Investment Construction Company; and Saigon Thuong Tin Real Estate JSC. More than 50% of Sacombank’s loans are to SMEs, which the bank has targeted as its market. Sacombank intends to help SMEs undertake IPOs. These services have been combined with attempts by Sacombank to diversify income sources away from the credit business. To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income. Sacombank has, in common with much of the Vietnamese financial sector, performed strongly in recent years. This can largely be attributed to the success of the Vietnamese economy as a whole. Sacombank posted FY09 gross profits of VND1.9trn, exceeding the predicted figure by 19%. This trend is expected to continue as the Vietnamese economy continues to grow rapidly. © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q4 2010 However, the success of Sacombank does partly depend on the outcome of increasing government concern over the supply of credit. The government has announced its intention to limit the growth of credit to 25%. While this would still allow for substantial growth across the Vietnamese financial sector, it would place a limit on growth for Sacombank and other institutions. Sacombank will come under a certain amount of pressure given its focus on SMEs. Company Data ! Website: www.sacombank.com.vn ! Status: Commercial joint stock bank Table: Stock Market Indicators 2005 2006 2007 2008 Sept 2009 Market Capitalisation, VNDmn 15,043,772.0 29,139,732.0 9,413,129.0 21,880,408.0 Market Capitalisation, US$mn 937.0 1,819.4 538.4 1,226.3 Share Price, VND 24,684.4 45,555.9 14,717.0 34,500.0 Share Price, US$ 1.5 2.8 0.8 1.9 84.9 -70.4 129.7 US$ Share Price, % change (eop) Change, % (2009 only) Shares Outstanding, mn 134.4 401.1 609.4 639.6 616.8 616.8 Source: Sacombank, Bloomberg Table: Balance Sheet (VNDmn, unless stated) Total Assets Loans & Mortgages Total Deposits Total Shareholder Equity 2005 2006 2007 2008 14,454,340.0 24,776,180.0 64,572,880.0 68,438,570.0 8,379,335.0 14,312,890.0 35,200,580.0 34,757,120.0 10,467,160.0 17,511,580.0 44,231,940.0 46,128,820.0 1,887,680.0 2,870,346.0 7,349,659.0 7,758,624.0 755.80 917.09 2,233.28 1,494.90 Earnings Per Share, VND Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q4 2010 Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 Total Assets 908.1 1,543.1 4,031.6 3,914.6 Loans & Mortgages 526.4 891.4 2,197.8 1,988.1 Total Deposits 657.6 1,090.7 2,761.6 2,638.5 Total Shareholder Equity 118.6 178.8 458.9 443.8 Earnings Per Share, US$ 0.05 0.06 0.14 0.09 2005 2006 2007 2008 Return On Assets 2.4 3.1 1.4 Return on Equity 19.8 27.4 12.6 Source: Sacombank, Bloomberg Table: Key Ratios (%) Loan/Deposit Ratio 80.5 82.2 80.0 75.9 Loan/Asset Ratio 58.3 58.1 54.8 51.2 Equity/Asset Ratio 13.1 11.6 11.4 11.3 Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q4 2010 Saigonbank Strengths ! Record of strong growth over the medium term. Weaknesses ! Lack of scale. Saigonbank is a medium-sized bank in Vietnam but a small institution by international standards. ! Saigonbank’s loan-to-deposit ratio was relatively high in 2009 by the standards of other banks. Opportunities ! Potential for continuing growth from a low base. Threats ! Vulnerability to impact, direct or indirect, from the downturn in global trade. Company Overview Saigonbank for Industry and Trade (Saigonbank) was one of the first commercial joint stock banks in Vietnam, established in 1987 with initial chartered capital of VND650mn and operation duration of 50 years. Saigonbank increased its chartered capital from VND650mn to VND1.02bn in 20 years as part of a growth-orientated policy. Saigonbank, like much of the Vietnamese financial sector, has shown strong performance over recent years. Most of this success can be attributed to the general success of the Vietnamese economy. Saigonbank has posted strong profits, with profitability increasing y-o-y in FY09. It is expected that gross profits in FY10 will reach VND900bn. However, this rapid growth will be hindered by the government’s concerns over credit supply growth. The government aims to limit this to 25% to prevent broader economic difficulties. Enforcing such a policy will cap the potential profitability of Saigonbank in FY10. Unlike many Vietnamese banks, Saigonbank does not have a foreign strategic partner for its operations. This has led it to develop a different kind of modernisation program, identifying its own priorities. So far, a major priority has been the development of online banking services, as highlighted by the recent decision to use SunGuard’s Ambit Online Banking to offer new online services to customers. Saigonbank hopes moves such as these will ensure it is not left behind technologically by foreign-sponsored competitors. Company Data ! Website: www.saigonbank.com.vn ! Status: Commercial joint stock bank Table: Stock Market Indicators 2004 Shares Outstanding (mn) 2005 2006 2007 2008 9M09 102.0 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q4 2010 Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 Total Assets 3,188,300.0 4,290,929.0 6,240,308.0 10,184,650.0 11,205,360.0 Loans & Mortgages 2,611,141.0 3,527,109.0 4,811,056.0 7,300,613.0 7,844,450.0 Total Deposits 1,964,739.0 2,830,064.0 3,947,700.0 6,466,654.0 7,164,714.0 476,062.0 609,434.0 931,562.0 1,431,610.0 1,469,766.0 2,432.00 1,581.00 Total Shareholder Equity Earnings Per Share, VND Source: Saigonbank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 2008 Total Assets 202.1 269.6 388.7 635.9 640.9 Loans & Mortgages 165.6 221.6 299.6 455.8 448.7 Total Deposits 124.6 177.8 245.9 403.7 409.8 30.2 38.3 58.0 89.4 84.1 0.15 0.10 Total Shareholder Equity Earnings Per Share, US$ Source: Saigonbank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 2008 Return On Assets 2.1 2.3 2.1 1.5 Return On Equity 14.7 15.5 14.4 11.1 Loan/Deposit Ratio 112.3 Loan/Asset Ratio Equity/Asset Ratio 71.3 14.9 14.2 14.9 14.1 13.1 Source: Saigonbank, Bloomberg © Business Monitor International Ltd Page 58 Vietnam Commercial Banking Report Q4 2010 SeABank Strengths Weaknesses ! Record of strong growth over the medium term. ! Partnership with Societe Generale. ! Lack of scale. SeABank is a medium-sized bank in Vietnam but a small institution by international standards. ! SeABank’s loan-to-deposit ratio was relatively high by the standards of other banks in 2009. ! Did not meet FY09 gross profit target. Opportunities ! Potential for continuing growth from a low base. Threats ! Vulnerability to direct or indirect impact from the downturn in global trade. Company Overview South East Asia Commercial Joint Stock Bank (SeABank) was established in 1994. It aims to become one of the leading joint stock banks in Vietnam and has a programme to modernise the bank and achieve a sustainable competitive edge. After expansion in 2009, the bank has 126 branches and offices, most less than two years old. This programme is largely possible due to its strategic partnership with Societe Generale, which owns 20% of the firm. The bank’s targets for 2010 include: minimum total assets of US$3.125bn; minimum total capital of US$500mn; at least 200 facilities open; 1mn customers; and 2,000 employees. The speed of expansion can be also be seen in the performance of SeABank in FY09. Overall loan portfolio growth was 122% y-o-y, reaching a VND24.02trn. Total assets grew by 136% y-o-y to VND30.8trn. The likelihood of further rapid growth has been increased by the decision to increase the charter capital of SeABank by 36% to a total of VND4trn. However, the bank’s rapid expansion has not been completely free of problems. SeABank was one of the few Vietnamese financial institutions to fall short of its FY09 gross profit target, with profits growing by 8% y-o-y to VND479bn. Company Data ! Website: www.seabank.com.vn ! Status: Commercial joint stock bank, subsidiary of Societe Generale Table: Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2,283,813.0 6,124,938.0 10,200,420.0 26,241,090.0 Loans & Mortgages 530,767.4 1,347,680.0 3,353,999.0 10,994,810.0 Total Deposits 499,021.4 2,312,406.0 3,511,683.0 10,744,180.0 Total Shareholder Equity 161,472.8 291,775.6 1,055,536.0 3,366,458.0 Total Assets Earnings Per Share, VND 2,098.00 Source: SeABank, Bloomberg © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q4 2010 Table: Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 144.8 384.8 635.3 1,638.4 Loans & Mortgages 33.7 84.7 208.9 686.5 Total Deposits 31.6 145.3 218.7 670.8 Total Shareholder Equity 10.2 18.3 65.7 210.2 Total Assets Earnings Per Share, US$ 0.13 Source: SeABank, Bloomberg Table: Key Ratios (%) 2004 2005 2006 2007 Return On Assets 1.0 1.2 1.6 Return On Equity 17.7 14.6 13.5 4.8 10.3 12.8 Equity/Asset Ratio 7.1 Source: SeABank, Bloomberg © Business Monitor International Ltd Page 60 Vietnam Commercial Banking Report Q4 2010 BMI Banking Sector Methodology BMI’s Commercial Banking Forecast Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets. As such, the reports draw heavily on our extensive economic data set, which includes up to 550 indicators per country, as well as our in depth view of each local market. We collate our commercial banking databank from official sources (including central banks and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only used as a backup. All of the risk ratings and forecasts within this report are a result of BMI’s own proprietary research and not in any circumstances include consensus or third party numbers. How Our Data Set Is Structured The reports focus on total assets, client loans and client deposits. Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country. They not incorporate the balance sheet of the central bank of the country in question. Client loans are loans to non-bank clients. They include loans to public sector and state-owned enterprises. However, they generally not include loans to governments, government (or nongovernment) bonds held or loans to central banks. Client deposits are deposits from the non-bank public. They generally include deposits from public sector and state-owned enterprises. However, they only include government deposits if these are significant. We take into account capital items and bond portfolios. The former include shareholders funds, and subordinated debt that may be counted as capital. The latter includes government and non-government bonds. In quantifying the collective balance sheets of a particular country, we assume that three equations hold true: ! Total assets = total liabilities and capital; ! Total assets = client loans + bond portfolio + other assets; ! Total liabilities and capital = capital items + client deposits + other liabilities. © Business Monitor International Ltd Page 61 Vietnam Commercial Banking Report Q4 2010 In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be reconciled with equation one. In practice, other assets and other liabilities are analogous to interbank transactions. In some cases, such transactions are generally with foreign banks. In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape, and we not include them in our figures. The US is the main exception to this. In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in another country. In some cases, client deposits include significant amounts that have been deposited by residents of another country. Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in Central and Eastern Europe. Commercial Bank Business Environment Rating In producing our Commercial Banking Business Environment Rating, our approach has been threefold. First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation of profits in each state, thereby capturing the operational dangers facing companies operating in this industry globally. Second, we have, where possible, identified objective indicators that serve as proxies for issues/trends within the industry to ensure consistent evaluate across states. Finally, we have used BMI’s proprietary Country Risk Ratings in a nuanced manner to ensure that the ratings accurately capture broader issues that are relevant to the industry and which may either limit market attractiveness or imperil future returns. Overall, the ratings system, which integrates with all the other industry Business Environment Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Conceptually, the ratings system divides into two distinct areas: ! Limits of potential returns: Evaluation of industry’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. ! Risks to realisation of returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based. © Business Monitor International Ltd Page 62 Vietnam Commercial Banking Report Q4 2010 Table: Commercial Banking Business Environment Indicators And Rationale Limits of Potential Returns Rationale Banking market structure Estimated total assets, end 2009 Estimated growth in total assets, 2009-2014 Indication of overall sector attractiveness. Large markets are considered more attractive than small ones Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 2009-2014 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 Those aged 16-64 in each state, as a % of total population. A high proportion suggests that the market is comparatively more attractive Active population Corporate tax A measure of the general fiscal drag on profits GDP volatility Standard deviation of growth over seven-year economic cycle. A proxy for economic stability Risks to Realisation of Returns Banking market risks Regulatory framework and industry development Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Regulatory framework and competitive environment Subjective evaluation of the impact of the regulatory environment on the competitive landscape BMI’s Country Risk Ratings (CRR) Short-term financial risk Rating from CRR, evaluating currency volatility Policy continuity Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy Legal framework Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Bureaucracy Rating from CRR to denote ease of conducting business in the state Source: BMI Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight. Consequently, the following weights have been adopted. © Business Monitor International Ltd Page 63 Vietnam Commercial Banking Report Q4 2010 Table: Weighting Of Indicators Component Limits of Potential Returns, of which: Weighting, % 70, of which – Banking market structure 60 – Country Structure 40 Risks to Realisation of Returns, of which: 30, of which – Banking market risks 40 – Country Risk 60 Source: BMI © Business Monitor International Ltd Page 64 [...]... lingering threat A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Ltd Page 10 Vietnam Commercial Banking Report Q4 2010 Business Environment Outlook Commercial Banking Business Environment Ratings Table: Vietnam Commercial Banking Business Environment Rating Limits of Potential Returns Total assets,... 1.41 1.40 Vietnam -9.8 -7.1 10.25 10.37 US -2.9 -10.2 0.35 0.36 India f = BMI forecast; na = not available Note: Incorporates actual financial markets data, estimated economic data and projected banking data Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 30 Vietnam Commercial Banking Report Q4 2010 Vietnam Banking Sector Outlook Weak Credit Growth To Depress Banking. .. forecast to experience GDP growth several percentage points higher in 2010 than it was in 2009, which will boost incomes and in turn enable an increase in deposits and greater take-up of banking services © Business Monitor International Ltd Page 18 Vietnam Commercial Banking Report Q4 2010 Asia Banking Sector Outlook Bullish Extremes In Banking Valuations While Asia’s economic and financial sector fundamentals... of a new systematic banking © Business Monitor International Ltd Page 14 Vietnam Commercial Banking Report Q4 2010 crisis in the US are low, we also doubt that financial institutions will return to the levels they reached precrisis for the foreseeable future Stress Test Methodology Summary In Europe, the results of the much EU – Banking Sector Stress Test Key Facts anticipated EU banking sector stress.. .Vietnam Commercial Banking Report Q4 2010 Vietnam Business Environment SWOT ! Vietnam s infrastructure is still weak Roads, railways and ports are inadequate to cope with the country’s economic growth and links with the outside world Vietnam remains one of the world’s most corrupt countries Its score in Transparency... 2.2 12.8 18.2 South Korea 225.7 15.6 -7.1 Taiwan 125.4 12.8 31.2 Thailand 50.7 16.3 22.4 Vietnam 10.3 10.3 6.7 2,500.5 19.1 22.8 Bangladesh China Indonesia Japan US Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 24 Vietnam Commercial Banking Report Q4 2010 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns Risks to Potential Returns... Thailand 4,350 3,170 13,234 827 Vietnam 1,085 1,287 3,940 246 48,295 24,101 121,549 7,597 Bangladesh China Hong Kong Japan US Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 29 Vietnam Commercial Banking Report Q4 2010 Table: Interbank Rates & Bond Yields 3-Month Interbank Rate % Current Account, % of GDP, 2010f Budget Balance, % of GDP, 2010f H110 2009 Bangladesh 2.7... 76.7 68.0 77.4 10 Taiwan 70.0 70.0 83.3 74.0 72.3 17 Thailand 56.7 65.0 80.0 68.0 63.8 31 Vietnam 63.3 52.5 40.0 46.0 54.4 41 US 90.0 85.0 100.0 78.0 87.6 2 Scores out of 100, with 100 the highest Source: BMI © Business Monitor International Ltd Page 13 Vietnam Commercial Banking Report Q4 2010 Global Commercial Banking Outlook Post-Crisis Era Begins To Take Shape With a number of new regulations being... out this view at the start of 2010 Australia And New Zealand: Crisis Risks Underplayed Another development we believe is worth noting is the relatively high valuations of Australia and New Zealand (see our online service, June 17 2010, ‘Financial Crisis Down Under’), given our concern that © Business Monitor International Ltd Page 22 Vietnam Commercial Banking Report Q4 2010 the crisis risks in both... Moody’s Investors Service’s ratings for local currency deposits) can be markedly different from BMI’s long-term risk rating © Business Monitor International Ltd Page 12 Vietnam Commercial Banking Report Q4 2010 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns Risks to Potential Returns Overall Market Structure Country Structure Market Risks Country Risks Rating . Copy deadline: September 2010 Vietnam Commercial Banking Report Q4 2010 © Business Monitor International Ltd Page 2 Vietnam Commercial Banking Report Q4 2010 © Business Monitor. estimate/forecast. Source: BMI, SBV, regulators Vietnam Commercial Banking Report Q4 2010 © Business Monitor International Ltd Page 7 SWOT Analysis Vietnam Commercial Banking SWOT Strengths ! Rapid. Vietnam Commercial Banking Report Q4 2010 © Business Monitor International Ltd Page 9 Vietnam Economic SWOT Strengths ! Vietnam has been one of the fastest