Q4 2011 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES BMI'S FORECASTS ISSN 1758-454X Published by Business Monitor International Ltd. VIETNAM COMMERCIAL BANKING REPORT Q4 2011 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2015 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: September 2011 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2011 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 2011 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2011 CONTENTS Executive Summary . Table: Levels (VNDbn) Table: Levels (US$bn) . Table: Levels At August 2010 Table: Annual Growth Rate Projections 2011-2015 (%) . Table: Ranking Out Of 59 Countries Reviewed In 2011 Table: Projected Levels (VNDbn) Table: Projected Levels (US$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’s Commercial Banking Business Environment Rating 11 Commercial Banking Business Environment Rating Methodology 12 Table: Asia Commercial Banking Business Environment Ratings . 13 Global Commercial Banking Outlook . 14 Asia Banking Sector Outlook 18 Table: Banks’ Bond Portfolios . 30 Table: Asia Commercial Banking Business Environment Ratings . 31 Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios . 32 Table: Anticipated Developments In 2011 . 33 Table: Comparison Of Total Assets, Client Loans And Client Deposits, 2009-2010 (US$bn) . 34 Table: Comparison Of Per Capita Deposits, 2010 (US$) 35 Table: Interbank Rates And Bond Yields, 2010-2011 36 Vietnam Banking Sector Outlook . 37 Economic Outlook 40 Table: Vietnam Economic Activity, 2008-2015 42 Company Profiles . 43 Vietcombank 43 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) . 44 BIDV 45 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) 46 VietinBank . 47 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 48 Agribank 49 Table: Balance Sheet, 2004-2008 (VNDmn) 50 Table: Balance Sheet, 2004-2008 (US$mn) . 50 Table: Key Ratios, 2004-2008 (%) . 50 MHB Bank . 51 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2011 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn) 52 Habubank 53 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) . 54 Eximbank Bank 55 Table: Balance Sheet (VNDmn, unless stated) . 56 Table: Balance Sheet (US$mn, unless stated) 56 Table: Key Ratios (%) 56 Sacombank . 57 Table: Stock Market Indicators 58 Table: Balance Sheet (VNDmn, unless stated) . 58 Table: Balance Sheet (US$mn, unless stated) 59 Table: Key Ratios (%) 59 Saigonbank 60 Table: Stock Market Indicators 60 Table: Balance Sheet (VNDmn, unless stated) . 61 Table: Balance Sheet (US$mn, unless stated) 61 Table: Key Ratios (%) 61 SeABank . 62 Table: Balance Sheet (VNDmn, unless stated) . 62 Table: Balance Sheet (US$mn, unless stated) 63 Table: Key Ratios (%) 63 BMI Banking Sector Methodology 64 Commercial Bank Business Environment Rating . 65 Table: Commercial Banking Business Environment Indicators And Rationale 66 Table: Weighting Of Indicators . 67 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2011 Executive Summary Table: Levels (VNDbn) Total assets Client loans Bond portfolio Other Liabilities & capital Capital Client deposits Other August 2009 2,065,761.6 1,706,340.0 173,358.3 186,063.3 2,065,761.6 286,547.0 1,594,992.6 184,222.0 August 2010 2,624,434.1 2,191,880.0 203,131.1 229,423.0 2,624,434.1 360,566.0 2,038,758.6 225,109.5 27% 28% 17% 23% 27% 26% 28% 22% Date Change, % Source: BMI; Central banks; Regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio Other Liabilities & capital Capital Client deposits Other August 2009 115.9 95.7 9.7 10.4 115.9 16.1 89.5 10.3 August 2010 134.7 112.5 10.4 11.8 134.7 18.5 104.6 11.5 16% 17% 7% 13% 16% 15% 17% 12% Date Change, % Source: BMI; Central banks; Regulators Table: Levels At August 2010 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP per capita, US$ Deposits per capita, US$ 83.52% 118.16% 1,063 1,189 Rising Rising 107.51% Falling Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2011 Table: Annual Growth Rate Projections 2011-2015 (%) Assets Loans Deposits Annual Growth Rate 20 20 15 CAGR 20 20 14 14 Ranking Source: BMI Table: Ranking Out Of 59 Countries Reviewed In 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 10 Local currency loan growth Local currency deposit growth 16 Local currency asset growth Source: BMI Table: Projected Levels (VNDbn) 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f Total assets 1410221.40 1747335.40 2411322.85 2893587.42 3472304.91 4166765.89 5000119.07 6000142.88 7200171.45 Client loans 1067730.00 1339260.00 1848178.80 2217814.56 2661377.47 3193652.97 3832383.56 4598860.27 5518632.33 Client deposits 1100392.90 1341142.80 1528902.79 1697082.10 1917702.77 2186181.16 2492246.52 2841161.04 3267335.19 f = BMI forecast. Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2011 Table: Projected Levels (US$bn) 2007 2008 2009 2010 2011f 2012f 2013f 2014f 2015f Total assets 88.05 99.94 130.56 148.40 168.15 201.78 248.76 307.70 378.96 Client loans 66.66 76.60 100.07 113.75 128.88 154.66 190.67 235.84 290.45 Client deposits 68.70 76.71 82.78 87.04 92.87 105.87 123.99 145.70 171.97 f = BMI forecast. Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2011 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Weaknesses Opportunities Threats Rapid growth. Untapped potential. Domestic banks lack capital and technology to sustain high credit growth. The financial accounts of many banks are still opaque. Population still under-banked. Income levels likely to rise strongly over the medium term. Macroeconomic instabilities threaten the credibility of the government and could potentially economic policy away from further liberalisation. Vietnam Political SWOT Strengths Weaknesses Opportunities Threats 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. 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. Macroeconomic instabilities in 2010 and 2011 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 undemocratic rule. Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable. 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 Vietnam Commercial Banking Report Q4 2011 Vietnam Economic SWOT Strengths Weaknesses Opportunities Threats Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.2% annually between 2000 and 2010. The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004. Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2011. The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw. The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures. WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector. Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population to rise from 29% of the population to more than 50% by the early 2040s. Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis. Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy. © Business Monitor International Ltd Page [...]... Vietnam Commercial Banking Report Q4 2011 Business Environment Outlook Commercial Banking Business Environment Ratings Table: Vietnam s Commercial Banking Business Environment Rating Limits of potential returns Total assets; end 2010 Data Score; out of 10 Ratings score; out of 100 US$148.4mn 6 Market Structure 67 Growth in total assets; 2011- 2015 7 Growth in client loans; 2011- 2015 7 Per-capita GDP; 2011. .. returns Commercial banking business environment rating Market Risk 40 Country Risk 46 56 Source: BMI © Business Monitor International Ltd Page 11 Vietnam Commercial Banking Report Q4 2011 Commercial Banking 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. .. 56.7 65.0 80.0 68.0 63.8 29 Vietnam 66.7 52.5 40.0 46.0 55.8 40 US 90.0 85.0 100.0 74.0 86.9 2 Scores out of 100, with 100 the highest Source: BMI © Business Monitor International Ltd Page 13 Vietnam Commercial Banking Report Q4 2011 Global Commercial Banking Outlook A Crucial Point For Global Banks The global banking sector is at a potential turning point Concerns over banking system solvency are.. .Vietnam Commercial Banking Report Q4 2011 Vietnam Business Environment SWOT Strengths Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors Vietnam s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond Weaknesses Vietnam s... 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 * 8.6 6.6 -11.6 440.4 3.7 Bangladesh * China * Indonesia * Japan * US * = 2009 Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 30 Vietnam Commercial Banking Report Q4 2011 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns Risks to Potential... holdings being rated below AAA © Business Monitor International Ltd Page 14 Vietnam Commercial Banking Report Q4 2011 Set To Stall? Eurozone – Total Loans To Non-MFIs Excluding General Government, EURbn Source: BMI Emerging Europe: Overall, a continued recovery in growth remains our core scenario for emerging European commercial banking sectors The return of access to international capital markets, positive... Europe picking up steam However, we caution that significant risks to banking sector stability persist We highlight Turkey, Ukraine and south eastern Europe as particularly vulnerable to negative shocks © Business Monitor International Ltd Page 15 Vietnam Commercial Banking Report Q4 2011 Three-Speed Emerging Europe Emerging Europe – Banking Sector Client Loan Growth Source: BMI, central banks Emerging... activity and improved liquidity are bolstering banking sector growth © Business Monitor International Ltd Page 17 Vietnam Commercial Banking Report Q4 2011 Asia Banking Sector Outlook Assessing the Contagion Risks of the European and US Crises With European and US economies facing fiscal crises, banking sector instability and serious downside growth risks, Asia is heavily exposed through a number of linkages... International Ltd Page 22 Vietnam Commercial Banking Report Q4 2011 underestimate actual trade links between Europe and Asia given the indirect trade routes via China and other processing hubs through which assembled products are shipped from Asia to the EU Singapore, Hong Kong And Vietnam Most Exposed Asia – Exports To Europe Source: BMI, central banks Pakistan, China, India, the Philippines and Vietnam all export... competition within it and Moody’s ratings for local currency deposits) can be markedly different from BMI’s longterm risk rating © Business Monitor International Ltd Page 12 Vietnam Commercial Banking Report Q4 2011 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 2011 Vietnam Commercial Banking Report Q4 2011 © Business Monitor International Ltd Page 2 Vietnam Commercial Banking Report Q4 2011 © Business Monitor. 4 Commercial banking business environment rating 56 Source: BMI Vietnam Commercial Banking Report Q4 2011 © Business Monitor International Ltd Page 12 Commercial Banking. BMI; Central banks; Regulators Vietnam Commercial Banking Report Q4 2011 © Business Monitor International Ltd Page 8 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid