Q4 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 Q4 2015 INCLUDES 5-YEAR FORECASTS TO 2019 Part of BMI’s Industry Report & Forecasts Series Published by: BMI Research Copy deadline: August 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. All information contained in this publication is copyrighted in the name of Business Monitor International Ltd, 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 Ltd 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 Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Vietnam Commercial Banking Report Q4 2015 CONTENTS BMI Industry View . Table: Commercial Banking Sector Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Key Ratios, December 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Annual Growth Rate Projections 2014-2019 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Ranking Out Of 75 Countries Reviewed In 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Indicators, 2012-2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SWOT Commercial Banking Political . 10 Economic . 11 Operational Risk . 13 Industry Forecast 15 Industry Risk Reward Ratings 20 Asia Commercial Banking Risk/Reward Index . 20 Table: Asia Commercial Banking Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Market Overview . 22 Asia Commercial Banking Outlook . 22 Table: Banks' Bond Portfolios, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Table: Comparison Of Loan/Deposit & Loan/Asset & Loan/GDP Ratios, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Table: Comparison Of USD Per Capita Deposits, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Economic Analysis . 25 Table: Economic Activity (Vietnam 2010-2019) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Competitive Landscape 31 Market Structure . 31 Protagonists 31 Table: Protagonists In Vietnam's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Definition Of The Commercial Banking Universe . 31 List Of Banks . 32 Table: Financial Institutions In Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Company Profile 34 Agribank 34 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Bank for Foreign Trade of Vietnam (Vietcombank) 38 Table: Stock Market Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2015 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Eximbank . 42 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Sacombank . 46 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 VietinBank . 50 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Regional Overview 54 Asia Overview . 54 Global Industry Overview 58 Global Commercial Banking Outlook 58 Demographic Forecast . 64 Table: Population Headline Indicators (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Key Population Ratios (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: Population By Age Group (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: Population By Age Group % (Vietnam 1990-2025) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Methodology 69 Industry Forecast Methodology 69 Sector-Specific Methodology 70 Risk/Reward Index Methodology . 71 Table: Commercial Banking Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2015 BMI Industry View Table: Commercial Banking Sector Indicators Total assets Client loans Date Bond portfolio Other Liabilities and capital Capital Client deposits Other December 2013, VNDbn 4,498,816 3,469,680 531,489 497,647 4,498,816 632,536 3,786,435 79,845 December 2014, VNDbn 5,209,740 3,949,680 746,862 513,198 5,209,740 651,877 4,482,998 74,865 15.8% 13.8% 40.5% 3.1% 15.8% 3.1% 18.4% -6.2% December 2013, USDbn 213.3 164.5 25.2 23.6 213.3 30.0 179.5 3.8 December 2014, USDbn 243.6 184.7 34.9 24.0 243.6 30.5 209.6 3.5 14.2% 12.3% 38.6% 1.7% 14.2% 1.6% 16.8% -7.5% % change y-o-y % change y-o-y Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Key Ratios, December 2014 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, USD Deposits per capita, USD 88.10% 75.81% 100.3% 2,134.0 2,264.8 Rising Rising Rising n.a. n.a. 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 28 44 Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 2015 Table: Ranking Out Of 75 Countries Reviewed In 2015 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 14 16 Local currency asset growth Local currency loan growth Local currency deposit growth 18 23 31 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 2014 2015f 2016f 2017f 2018f 2019f 3,917,557 4,498,816 5,209,740 5,887,006 6,593,447 7,318,726 8,123,786 8,963,244 188 213 244 273 309 346 388 432 3,077,700 3,469,680 3,949,680 4,384,145 4,822,559 5,256,590 5,729,683 6,207,156 148 164 185 203 226 249 273 299 3,080,455 3,388,501 3,693,466 3,988,943 4,268,169 4,524,259 4,795,715 5,051,486 148 161 173 185 200 214 229 243 e/f = estimate/forecast. Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q4 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 Q4 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 coming years. The one-party 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. © Business Monitor International Ltd Page 10 Vietnam Commercial Banking Report Q4 2015 US Household Borrowing To Pick Back Up US - Household Debt Service, % Of Total Disposable Income Source: Federal Reserve, BMI Emerging Asia: All eyes in emerging Asia are on the impact of the stock market collapse in China in June and July. Our long-held view is that a significant decline in Chinese stock prices from severely overvalued levels would not necessarily have considerable bearing on the real economy, due in large part to the fact that the bull run had not been driven by economic fundamentals in the first place. While the People's Bank of China has stepped in with increasingly aggressive monetary easing in an attempt to spur lending growth, we have yet to see the effects of this feed through into the real economy. Likewise, we believe that high debt levels and a continuing correction in national residential property prices will cap demand for new credit, limiting the PBoC's stimulus efforts. Latin America: We foresee broad stability in Latin America's commercial banking sector over the next several years, although a weaker external environment is increasing the risks to the sector's health. Most significantly, labour market weakness in Brazil and Colombia is likely to drive further deterioration in asset quality in the coming quarters. In addition, an environment of slower growth and lower commodity prices has resulted in a broad deterioration of sovereign credentials across the region's major markets, reducing government's ability to support the banking sector. Nevertheless, with capital buffers having increased by © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q4 2015 and large since the global financial crisis, capital ratios remaining broadly stable and solid regulatory frameworks in place, we anticipate broad stability. NPLs Will Tick Higher In Brazil And Colombia Latin America - Non-Performing Loans, % total Source: Respective banking sector regulators Emerging Europe: Banks in emerging Europe now have a brighter outlook, having weathered a challenging period of weak loan growth and poor asset quality. On the whole, the worst is now behind the sector. With several notable exceptions, the economic outlook is improving across the region, and most banking sectors will be able to tap into this. The main exceptions to this are Russia and Ukraine, where the economic environment will be highly challenging, and in countries like Slovenia where high levels of banking and corporate sector leverage will prevent loan growth rising in tandem with the economic recovery. © Business Monitor International Ltd Page 60 Vietnam Commercial Banking Report Q4 2015 Gradual Convergence Ahead Loan Growth, % chg y-o-y 20 10 -10 -20 2015f 2016f 2017f Poland - Client loans, % y-o-y Russia - Client loans, % y-o-y Ukraine - Client loans, % y-o-y Turkey - Client loans, % y-o-y Romania - Client loans, % y-o-y Latvia - Client loans, % y-o-y Czech Republic - Client loans, % y-o-y Slovenia - Client loans, % y-o-y Hungary - Client loans, % y-o-y f = BMI forecast. Source: National Sources, BMI Middle East And North Africa: The removal of sanctions on Iran, and in particular on its banking sector, opens up an array of opportunities for the region's banks. Naturally, the primary beneficiary will be Iranian banks. While we expect a notable improvement in their outlook, the lifting of sanctions will not presage a boom. For the rest of the region, Omani, and in particular UAE banks, are well placed to benefit from increased trade with the country. © Business Monitor International Ltd Page 61 Vietnam Commercial Banking Report Q4 2015 Slight Improvement On Sanctions Rollback Iran - Inflation, Nominal Deposit Growth & Loan Growth 40 30 20 10 2013 2014 2015f 2016f 2017f 2018f 2019f Iran - Client loans, % y-o-y Iran - Client deposits, % y-o-y Iran - Consumer price inflation, % y-o-y, ave f = BMI forecast. Source: National sources, BMI Sub-Saharan Africa: The proliferation of mobile financial services (MFS) in Sub-Saharan Africa has spurred significant technological innovation and brought millions of low-income people into the formal financial system in a relatively short space of time. If harnessed properly we believe MFS has the potential to accelerate financial sector development and further transform economies. Kenya will continue to lead the way and much of East Africa will follow in its slipstream; Nigeria - despite its vast potential - will continue to be held back. © Business Monitor International Ltd Page 62 Vietnam Commercial Banking Report Q4 2015 Shallow Capital Markets Reflect Vast Untapped Potential In SSA Selected SSA Countries - Commercial Bank Deposits (LHS) & Loans (RHS), % GDP BMI forecast, 2015. Source: Central banks, BMI © Business Monitor International Ltd Page 63 Vietnam Commercial Banking Report Q4 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 64 Vietnam Commercial Banking Report Q4 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 65 Vietnam Commercial Banking Report Q4 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 66 Vietnam Commercial Banking Report Q4 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 67 Vietnam Commercial Banking Report Q4 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 68 Vietnam Commercial Banking Report Q4 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 69 Vietnam Commercial Banking Report Q4 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 70 Vietnam Commercial Banking Report Q4 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 Index Methodology BMI's Risk/Reward Index (RRI) provides 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 RRI system is divided into two distinct areas: Rewards: Evaluation of a 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 Index, 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 index score 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 score is revised on a quarterly basis. This ensures that the score draws on the latest information and data across our broad range of sources, and the expertise of our analysts. © Business Monitor International Ltd Page 71 Vietnam Commercial Banking Report Q4 2015 In constructing these index scores, the following indicators have been used. Almost all indicators are objectively based. Table: Commercial Banking Risk/Reward Index Indicators Rationale Industry Rewards Estimated total assets, 2015 Indication of overall sector attractiveness. Large markets are considered more attractive than small ones. Estimated growth in total assets, 2015-2019 Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score. Estimated growth in client loans, 2015-2019 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 72 Vietnam Commercial Banking Report Q4 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 73 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 31 Vietnam Commercial Banking Report Q4 2015 List Of Banks Table: Financial Institutions In Vietnam COMMERCIAL BANKS Vietnam Joint Stock Commercial Bank for... Monitor International Ltd Page 30 Vietnam Commercial Banking Report Q4 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 19 Vietnam Commercial Banking Report Q4 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 32 Vietnam Commercial Banking Report Q4 2015 Financial Institutions In Vietnam - Continued Saigon Bank for Industry and Trade (Saigonbank) Sai Gon-Hanoi Commercial Joint-Stock... expect the Vietnamese banking sector to get healthier over the coming years amid continued robust economic growth, but banking improvements will likely come at a gradual pace © Business Monitor International Ltd Page 15 Vietnam Commercial Banking Report Q4 2015 Decelerating Vietnam - 'Finance, Banking And Insurance' Growth In Real Terms, % Source: BMI, GSO Financial Reform An Antidote For The Banking. .. Vietnam Commercial Banking Report Q4 2015 SWOT Analysis - Continued • Vietnam' s reliance on imported oil poses risks in the form of energy and fuel shortages • Corruption and inefficiency in the legal system • Anti-Chinese violence, as seen in May 2014, could be a harbinger of wider political and social unrest © Business Monitor International Ltd Page 14 Vietnam Commercial Banking Report Q4 2015 Industry... lend support to the Vietnamese dong The confluence of these factors will restore and shore up investor confidence, enhancing Vietnam' s attractiveness as a place to invest and do business in © Business Monitor International Ltd Page 28 Vietnam Commercial Banking Report Q4 2015 Improving Macroeconomic Fundamentals To Lend Support Vietnam - Exchange Rate, VND/USD Source: Bloomberg, BMI Vietnam' s Rising Stature... 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 33 Vietnam Commercial Banking Report Q4 2015 Company Profile Agribank SWOT Analysis Strengths Massive branch network, especially in rural Vietnam ■ Improved rating from Fitch in November 2014 ■ Strong relationships... strengthening the banking sector and ensuring that inflation remains manageable over the coming years Owing to a solid start to the year, which has undoubtedly reinforced our bullish view of the Vietnamese economy, we maintain our forecast for the country's real GDP growth to accelerate to 6.4% in 2015 from 6.0% in 2014 © Business Monitor International Ltd Page 25 Vietnam Commercial Banking Report Q4 2015 Strong... 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 . Q4 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 Q4 2015 INCLUDES. BMI; Central banks; Regulators Vietnam Commercial Banking Report Q4 2015 © Business Monitor International Ltd Page 8 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths ■ Untapped. but banking improvements will likely come at a gradual pace. Vietnam Commercial Banking Report Q4 2015 © Business Monitor International Ltd Page 15 Decelerating Vietnam - 'Finance, Banking