20140513-Vietnam-Consumer_Finance_2014_Demo_20140811143029

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Published on: 1 April 2014

Vietnam Consumer Finance Market 2014

@ 2014 StoxPlus Corporation.

All rights reserved. All information contained in this publication is copyrighted in the name of StoxPlus, and as such no part of this publication may be

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Date of report: 20 April 2014

Type of Services: Standard Report

Part of StoxPlus‟s Market Research Report Series for Vietnam www.stoxresearch.com

http://images.google.com/imgres?q=sk+telecom&hl=en&biw=1362&bih=568&gbv=2&tbm=isch&tbnid=vvYSLzVcDsGWRM:&imgrefurl=http://www.intomobile.com/2009/04/15/sk-telecom-has-22-billion-prepared-for-growth/&docid=0tU_UGmh72RqQM&imgurl=http://images.intomobile.com/wp-content/uploads/2009/04/08-sk_telecom.jpg&w=303&h=124&ei=nPFfT9HpMu6ZiQfI3ZzjBw&zoom=1

2

Table of Contents

Research Team

Thuan Nguyen FCCA

Head of Research

[email protected]

+84 98 380 0000

Harry Tran CFA

Senior Analyst

[email protected]

+44 7515971532 (UK)

Lan Nguyen

Associate

[email protected]

+84 96 494 6760

Trang Truong

Data Manager

[email protected]

+84 98 342 2985

Executive Summary 4 – 5

1 Major Economic Context 6 – 28

1.1 Macroeconomic context 6 – 9

1.2 Banking sector context 10 – 12

1.3 Non-bank sector context 13 – 17

1.4 Major policy changes 18 – 21

1.5 Bank & non-bank consolidation 22 - 25

1.6 Analysis of foreign interests in Vietnam 26 – 28

2 Consumer Finance Market 29 - 62

2.1 Sector Structure 29 – 31

2.2 Market Size and Growth 32 – 40

2.3 Competition Dynamics 41 – 52

2.4 Market Concentration 53 – 54

2.5 Informal Finance Activities 55 – 58

2.6 Global Perspective on CF 59 - 64

Content Page

mailto:[email protected]




3

Table of Contents

Research Team

Thuan Nguyen FCCA

Head of Research

[email protected]

+84 98 380 0000

Harry Tran CFA

Senior Analyst

[email protected]

+44 7515971532 (UK)

Lan Nguyen

Associate

[email protected]

+84 96 494 6760

Trang Truong

Data Manager

[email protected]

+84 98 342 2985

3 Key Players Analysis 65 – 75

3.1 Non-Bank licensed Players 65 – 72

3.2 Bank-licensed Players 73 – 75

4 Market Potentials and Challenges 76 – 88

4.1 Key Growth Drivers 76 – 81

4.2 Main Product Trends 82 – 85

4.3 Main Challenges 86 – 88

Appendices 89 - 105

Appendix 1: Vietnam Retail Banking Capacity Matrix 90 – 91

Appendix 2: Key Financial Data of Finance Companies 92

Appendix 3: Regulations related to CF business 93 – 95

Appendix 4: Profiles of Local Finance Companies 96 – 98

About StoxPlus 99 - 105

Content Page





4

Executive Summary

Vietnam Consumer Finance Report 2014 is the second issue published by StoxPlus covering this segment. Our first issue was

released in 2013, covering consumer finance (“CF”) market data up to 31/12/2011. Our 2013 report was the first in-depth

sector research for consumer finance in Vietnam.

What’s new in this Issue? In this 2014 version, we not only update the data in up to 31/12/2013, but also includes

many new insightful analysis that we have accumulated over the last few years on this sector. Taking into account

feedbacks from our clients on the Issue 1, in addition to the comprehensive analysis of the market itself, the Issue 2

covers a section on macroeconomic context and policy development that having significant impacts on the CF

business. We also analyze how the bank and non-bank consolidation ongoing will likely create changes in the

landscape of CF market in Vietnam in the next few years. Another improvement in this issue is that we also indicated

certain market trends relating to motorcycles, used cars and electronic devices and other driving factors.

The landscape of CF market in Vietnam would be fundamentally changed in the next few years for a number of

reasons:

– More banks are switching to a retail and consumer-oriented strategy to increase growth. Since 2010, banks

suffered from a high ratio of non-performing loans due to the economic and financial crisis. Credit growth picked

up only modestly in real terms, mostly concentrated in export-oriented and agricultural sectors, despite a

significant decline in lending rates. It is because of decreasing credit demand from corporate and businesses. Both

ROA and ROE of the Vietnamese local banking system in 2012 decreased in comparison to 2011. ROA fell by over

27% from 2011 to 2012, while ROE fell by 33%. In this context, many banks such as VP Bank or HD Bank are now

aggressively switching into consumer finance as way to improve their bottom lines in a consolidated basis and fuel

their growth sustainably.

– We witness a continued soaring foreign interest in Vietnam CF market. From 2005 (before Vietnam joined WTO)

to 2010, the interest of foreign financial institutions in Vietnam banking sector had been very high, focusing on

equity investment and collaboration with commercial banks. However, in reality many such collaborations failed

to meet the expectations. Foreign financial institutions exit from banks, but non-banks including CF are of a very

strong interest. The type of strategic investment seemed to be out of favor. There are two approaches that

foreign investors would like to take: (i) owning a controlling stake or (ii) acquiring CF/ retail banking business of a

non-bank or commercial bank.

5

Executive Summary (continued)

CF market size is still small, estimated at US$8.8bn as at 31/12/2013, increasing by 15% compared to 2012. The

consumer loan includes housing loans (mortgages and housing improvements), vehicle loans (automobile and motorcycle

loans), home appliance and kitchen wares, credit cards, overdraft etc pas per the definition under Decree 81 by the State

Bank of Vietnam. This total CF loan book accounts for 5.2% of total country loan book and 5.4% of the country 2013 GDP.

CF products are becoming more diverse. Main consumer finance products are still motorbike loans and mobile phone

loans; however, we notice a trend that CF companies are aggressively expanding their POS network to provide CF services

for electronic devices, home appliances and kitchen devices. Besides providing credit to purchase merchandise, CF

companies are also exploring introducing more technologically advanced products, such as payroll-linked CF such as

MobiVi – an e-wallet licensed company.

CF is expected to continue its fast-growing trajectory due to important growth triggers. CF market had modest growth

in 2012, but expanded rapidly in 2013 with more potential for growth in the coming years. Reasons for this forecast

include: growing middle class and affluent population, young population with a “borrowing-to-buy” culture, and soaring

interest for foreign players to get into CF business.

However, there are several key issues that existing CF players and that new CF comers need to consider in the

Vietnam context and practice:

– The economy is still in the recovering process. Consumers, especially in Hanoi area, are still worried about their

short-term financial conditions. This is a challenge for existing CF players because it is unlikely that consumers will

open their pocket for purchase in the near future.

– Collection and payment methods are still a big challenge, not only for foreign newcomers, but also for current

players. Even leading CF companies have very high NPL rate (which we have estimated to be 25-30%). Hence, any CF

companies need to invest in and build an effective team of collection to manage NPL. The most common method of

payment is still bank transfer. Payment via post office system and direct debits are working at some players.

– There is yet a standardized credit scoring model in Vietnam. Many credit decisions are based on relationship lending

with proprietary information. The level of credit scoring model sophistication varies from bank to bank.

– Most importantly, major regulations and policies will have a fundamental impact on the CF landscape. M&A regulation

between foreign financial institutions and local ones is recently loosened, due to a high number of weak credit

institutions. Prime Minister now increase the foreign capital limit cap to “more than 30%”, and can even allow foreign

players to take the control stake at weak credit institutions. This new development provides a gateway for foreign

players to get into the CF business in Vietnam by acquiring a weak credit institution (most likely a local bank or

finance company), and then turn it into a CF-focused business. In the past, this approach has been taken by Fullerton

Holdings when they acquired Mekong Development Bank and gradually turned the bank into a CF-focused business. We

expect more foreign investors would be interested in taking this market entry route.

6

Contents

Section 1: Major economic context

Macroeconomic context

Banking sector context

Non-bank sector context

Major policy changes

Bank & non-bank consolidation

Analysis of foreign interests in Vietnam

7



Vietnam economy posted strong performance until 2007. Adverse

spill-over impacts from export markets occurred from late 2007.

• From the late of 1990s till 2007, except for a short period during the

Asian financial crisis, Vietnam economy posted a good performance.

At the same time, asset bubbles started building up especially in real

estate and stock markets from the early 2000s. The bubble burst in

2007 when the Vietnam Government tried to cool off the overheating

economy and then Vietnam suffered adverse spill-over impacts. Since

then Vietnamese policy makers faced constantly a difficult dilemma

of trade-off between growth and macro economic stability.

• In an effort to protect the economic growth, a major stimulus

program totalling about VND160 trillion (approximately US$8bn) or

about of 10% of the nominal gross domestic product (“GDP”), was

introduced under the form of interest-subsidised short term loans to

qualified companies in various sectors in late 2009. The stimulus

package helped economic growth rebound to 6.5% in 2010.

• Nevertheless, the price of growth appeared to be much higher than

what Vietnam‟s government had expected. As soon as the stimulus

package was implemented, Vietnam faced serious macroeconomic

instability issues. Inflation returned to double-digit area and reached

11.8% in 2010 and then 18.1% in 2011. Vietnam currency (VND) came

under devaluation pressure. After intervention efforts to preserve the

parity between VND and USD, Vietnam‟s foreign currency reserve was

reportedly felt to below the safety threshold of 12 import weeks.

• The government unveiled a broad, "three pillar" economic reform

program in early 2012. identified three central policy themes for the

next 5-10 years: (1) rationalization of public spending and

improvement of public investment efficiency, (2) reform of state-

owned enterprise sector and (3) overhaul of the banking and financial

sector.

The story of Vietnam economic growth: a background recap

Source: StoxPlus from General Statistics Office of Vietnam

402 441 558

731

1,070 1,224

1,596

1,960 6.8% 7.1%

7.8% 8.2% 8.5%

5.3%

6.8%

5.9%

5.0%

5.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

0

500

1,000

1,500

2,000

2,500

US

$ p

er

Capital

GDP per capita GDP Growth

Figure 1: Vietnam GDP per capita and GDP growth

After a rough few years, Vietnam’s economy seems to be slowly recovering

• After two years of implementation, the economy has started to show some

signs of stabilization. Among the country‟s biggest successes in 2013 was the

fact that inflation was brought under control, down to 6.0%, becoming the

lowest rate. The country‟s GDP saw an increase of 5.42% in 2013. While not

as high as neighboring countries, the news of Vietnam‟s GDP growth is met

with optimism, especially when the consumer price index (“CPI”) is taken

into account.

• However, according to our view, low CPI does not necessarily reflect

well-controlled inflation, but rather tightened spending of consumers

amid employment uncertainty and little-improved incomes. This could

has hamper the high growing consumer finance business in Vietnam.

8

Vietnam economy is still in the recovering process with some signs of slowing growth in early 2014.

-0.6% 0.8%

4.0% 3.0%

9.7% 8.7%

6.6%

12.8%

19.9%

6.5%

11.8%

18.1%

9.2%

6.0%

-5%

0%

5%

10%

15%

20%

25%

Figure 2: Vietnam CPI

Source: StoxPlus from General Statistics Office of Vietnam

Monetary policies play a central role in bolstering the economy

• In the last two years, State Bank of Vietnam (SBV) has focused its

policy on taming the inflation rate to single digit. The country‟s

monetary policy had stopped the “stampeding horse” of inflation.

The second success was stabilizing the exchange rate between the

Vietnamese Dong and foreign currencies while increasing the foreign

currency reserves. The third was to cut the interest rate, which has

been a difficult task for Vietnam for a long time.

• Due to the falling rate of inflation, SBV is able to cut the benchmark

interest rate. It helps lower the annual lending rate to 12.5% while

deposit rate stands at 6.0%.

The economic outlook for Vietnam is not completely optimistic

• The government has announced that its economic restructuring plans

will continue into 2014, and issued a bullish set of economic targets

for the new year. Specifically the government has stated that it

wants to achieve: a GDP growth rate of 5.8%, CPI growth rate of 7%,

poverty reduction to 1.7-2%, and 1.6mil new jobs.

• Even though these goals are considered aggressive, StoxPlus thinks

that Vietnam economy is still in the recovering process. For an

emerging market economy, GDP growth rate of less than 6% is not an

impressive number. Moreover, even though controlled inflation is

considered beneficial for growth, it could also be a sign of low

investment and consumption.

• Particularly in the first 3 months of 2014, CPI experienced the

lowest increase in 13 years and far lower than the same period the

average CPI in the previous 12 years (3.26%): 0.69% in January, 0.55%

in February, and in March fell 0.44%. These factors have led to

forecast from the public about the ability of CPI and economic

growth deflation (still growing but at an even slower rate than

previous years).



9

This page is intentionally removed for demo purposes

Despite the economic crisis, Vietnamese consumers have enjoyed an increasing income in the period of

2008-2013, subsequently fueling retail sales.



10








Contents

11

Banks suffered from a high ratio of non-performing loans, making it difficult for banks to spur credit

growth

NPL reported by banks under local accounting standards never higher

than 5%. SBV’s Supervisory Authority once reported a 8.6% NPL in mid

2012.

• More than 70% of the country loan book (appr. US$130bn) is for corporate

lending. The prolonged economic crisis since 2010 made the loan book

quickly deteriorated and the NPL problem become worse and significantly

impacted the banking sector. Skyrocketed inflation increased the cost of

borrowing for businesses, Meanwhile, sluggish economic activities and

mis-management at many borrowers made it difficult for businesses to

repay the loans, making them go bad.

• According to the SBV, the ratio of non-performing loans (NPL) in late 2010

was 2.16 %, in 2011 was 3.1 %, and reached a peak in Sept 2012 at 4.93%.

However, the actual bad debt problem is much more severe than the

number reported. In late 2012, SBV organized a special Supervisory

Authority to assess the bad debt situation of local banks. This group

reported a much higher NPL ratio of 8.6% (or VND220,000 billions of NPL).

In March 2014, the international credit agency Moody‟s reported a

“negative” outlook for the banking system of Vietnam, and a NPL

estimate of 15%. According to our review of International Financial

Reporting Standards (“IFRS”) against the local standards and

regulations (“VAS”) for several banks and non-banks, it is our finding

that NPL categorized under IFRS, which is more conservative, is

usually 4 times higher than VAS. This would imply a NPL ratio of

around 15% in an approximation basis.

• SBV introduced many aggressive policies to manage the bad debt situation

in 2013. In addition to the forced restructuring, an important milestone

was the introduction of Viet Nam Asset Management Company (VAMC) in

July 9, 2013. However, the operation of VAMC still very limited and its

efficiency is questionable by many experts.

Figure 5: Vietnam Local Banks’ NPL ratio (reported by banks under VAS)

2.90% 3.20%

3.00%

2.00%

3.50%

2.20%

2.60%

3.40%

4.08% 3.79%

Source: StoxPlus from State Bank of Vietnam

3.79%

8.60%

15%

SBV (31/12/2013) SBV's Supervisory Authority in2012 (31/3/2012)

Moody's (2/2014)

Figure 6: Vietnam NPL ratio by different expert views

Source: SBV, Moody’s, StoxPlus’s Analysis



12

Corporate lending is very competitive and not really profitable. Commercial banks are looking for new

opportunities to increase lending, especially to consumers.




13








Contents

14

A number of local finance companies have been established from 1998 under non-banking licenses.

However, these firms have been serving their parent groups activities. Only few provide lending to

individuals.




15

SOEs are forced to withdraw from non-core investment activities, and local finance companies are likely

to be shaken off.




16

Foreign participation by Prudential Finance and PPF Vietnam in 2007 has indicated a strong signal for

development of consumer finance sector in Vietnam.




17

Currently, 6 foreign finance companies are very active, and see significant growth in the period of

2011-2013.




18








Contents

19



Circular 02 will likely increase the NPL rate and collateral requirements of commercial banks and CF

companies.


20



Loosened M&A regulation between foreign financial institutions and local ones: Prime Minister will decide

who can become the strategic investor and even take the control stake at weak credit institutions


21

Dec-09 Dec-10 Jun-11 Dec-11 Jun-12

VNDbn VNDbn VNDbn VNDbn VNDbn

Securities Loans

33,968

54,679

20,746

34,800

15,000

Real Estate Loans

202,084

247,554

220,787

249,534

218,887

Consumer Loans

128,610

160,693

155,883

131,556

92,422

364,662

462,925

397,417

415,890

326,310

% over Total Country

Loans 19.5% 18.7% 16.9% 15.0% 11.3%

• Consumer loans used to be discouraged by the Government:

Consumer loans in Vietnam are classified into so called “non-production

loans” which is currently discouraging by the Government. As part of

credit tightening policy, the preferential areas for credit allocating

include agricultural, export oriented enterprises and manufacturing

companies.

• Non-production loans as at 31/12/2010 amounted to VND462,925bn (USD

23.7bn), representing 18.7% of total country loan book. However, the

ratio was extraordinary high at many small banks.

• In an instruction on March 1st 2011, the SBV asked all commercial banks

to reduce the non-production loans to below 22% by 30 June 2011 and

below 16% by 31 Dec 2011. This instruction made the overall non-

production loan ratio fell to 15% in overall by year end 2011 and

significantly declined to 11.3% by 30 June 2012.

• Why consumer loans had a sharp decrease: As part of the non-

production loans, consumer loans in Vietnam experienced a sharp

decline over periods from June 2011 when SBV issued the instruction to

all banks to reduce the non-production loans. In fact, the majority of

retail loans of banks are related to housing and real estate investment.

Taking Techcombank, a leading local retail bank, as an example, 77.7%

of their USD1.1bn retail loan book as at 31/12/2011 was mortgages for

new house purchase.

• Items related to CF were later removed from the restriction: On

04/10/2012, the Governor of the State Bank of Vietnam (SBV) issued

Document No. 2056/NHNN-CSTT excluding two groups of loans from the

previous non-production loans restrictions, including loans related to

consumer real estate financing, consumer financing for everyday life

purposes (vehicles and home appliances), for education purposes, and

medical purposes.

Source: StoxPlus from State Bank Of Vietnam

Figure 12: Breakdown of Non-production Loans in Vietnam

Consumer finance was previously discouraged by the Government as part of the non-production loan

strategy. However, the Government has now removed the restrictions for CF related lending.



• Implications for CF business: This change in the definition of non-

production loans can change banks’ CF strategy. Previously, banks were

reluctant to expand consumer finance as they were discouraged by the

Government. Now, some banks such as Sacombank re-categorized CF-

related lending under encouraged lending section, and reported an

impressive growth for CF (compared to the general loan decrease for

non-production loans). Banks are now free from the restrictions to

promote CF business.

22








Contents

23


Bank & Non-bank consolidation

Banking consolidation has been experiencing a busier schedule than ever in Vietnam and that

might change the consumer finance landscape fundamentally


24



M&A can have impact on the CF market landscape in several ways


25

A case study: How did Fullerton Financial Holdings transform Mekong

Development Bank into a consumer finance focused business?




26







Foreign interests in Vietnam CF

Contents

27

Foreign financial institutions exit from banks but non-banks including CF are of a very strong interests


Foreign interests in Vietnam CF sector


28

There are 4 options for foreign investors to consider when getting into Vietnam CF business


Foreign interests in Vietnam CF sector


29

Section 2: Consumer Finance Market

Sector Structure

Market Size and Growth

Competition Dynamics

Market Concentration

Informal Financing Activities

Global Perspective on CF

Contents

30

In addition to the 6 foreign consumer finance companies, only foreign banks and a few private local

commercial banks are active in this business.

There are 40 domestic commercial banks (including the 5 SOCBs), 5 foreign wholly-owned banks, 12 local finance companies, 16 finance leasing

companies and 6 foreign consumer finance companies and thousands of pawnshops currently operating in Vietnam. In addition to the 6 foreign

consumer finance players, the most active groups in consumer finance business are 100% foreign banks and a few local joint stock commercial banks

(“JSCBs”).

Figure 13: Major Participants in Consumer Finance Markets in Vietnam

Section 2: Consumer finance market

Sector Structure


31

The most popular consumer finance products in Vietnam currently are motorbikes loans and mobile

phones loans.


Sector Structure


32


Sector Structure






Contents

33

The size of consumer loans in Vietnam is estimated at VND188 trillion (US$8.88bn) as of 31/3/2013. It

is upside trend but volatile with the economy performance and related monetary policies


Market size and growth


34

Market sizing analysis: more detailed write-ups




35

Consumer lending has been increasing rapidly, especially among pure CF model.




36

Figure 18: Breakdown of Vietnam Consumer Loans, as of 31/12/2013

Source: StoxPlus from SBV

Housing loans account for 38% of Vietnam consumer loans. Home appliances and furniture loans

account for 31%, while transportation vehicle loans account for 12% (as of 31/12/2013)




37

Housing loans percentage in total consumer loans decreased in 2013 compared to 2012, while other

types of consumer loans such as home appliances and furniture went up.

Source: StoxPlus from SBV




38

Some JSCBs significantly increased their consumer loan portfolio in 2013. The most notable is VP Bank.

Others might potentially have an interest in CF business.

• Most JSCBs increased their consumer loans quickly in 2013 (except for

VIB who had a decrease of 10%, and Techcombank whom we did not

have consumer loans data for 2013).

• However, even though these banks provide loans for consumers to

purchase goods and services, they still require collaterals (e.g. a valued

asset, or a savings account with the bank). This is different from a pure

CF model that is simple and convenient, and does not require any

collaterals for the loans.

Section 1: Consumer Finance Market Overview

Market size, growth and segmentation

Figure 20: Top 10 JSCBS with the largest consumer loans in 2013 (VNDbn)

• Among these banks, only VP Bank is known to have a CF business (under

the brand of FE Credit). In 2013, VP Bank increased its loan book

rapidly. VP Bank‟s consumer loans grew 126% in 2013 compared to

2012, from VND4,180bn to VND9,427bn. Transportation vehicle loans

account for the majority (65%) of VP Bank‟s consumer loans. Home

appliances and furniture loans account for 4%. Other extended CF loans

(housing loans, credit card loans) account for another 30% of the total

consumer loans of VP Banks. It is our observation that currently VP

Bank is the only bank that has a pure CF business model among JSCBs.

Source: SBV, StoxPlus

0%

57% 47%

126%

75%

43%

75%

-10%

333%

19%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

0

2000

4000

6000

8000

10000

12000

14000

16000

Techcombank Sacombank Eximbank VP Bank ACB Military Bank DongA Bank VIB GP Bank Vietbank

2012 2013 Growth rate

VP Bank is the only bank with a

pure CF model via the sub-brand FE

Credit. It is also among the largest

and fastest growing JSCBs.

39

The size of CF companies are still very small. However, the leading player PPF is growing quickly in

2013.




40

ACS Trading Co. is a trade finance company providing installment services for consumer durables. It

also has seen an impressive growth rate and quickly expanded the business.




41


Sector Structure






Contents

42

Summary of Competition Dynamics




43

Summary of Competition Dynamics (cont’d)

• Marketing strategy: Some CF companies are very aggressive with their

marketing efforts to gain market share and establish a brand name in this

sector, such as PPF, HD Finance, and VP Bank / FE Credit. Some focus on

their niche areas to differentiate (such as Prudential Finance with their

Upper Mass / white-collar professional strategy, or ACS with their Lower

Mass / student-focused strategy). A few, such as Toyota Financial

Services, are positioned as a value-added service for their core business,

hence they do not focus on marketing for CF services per se.

• HD Finance / HD Bank is taking the advantage of the CF banking model to

increase the convenience for customers with their value-added banking

services. They also use CF as a sales channel to cross-sell other banking

products.

• Financials: In 2012, consumer finance companies still reported attractive

performance results (ROE > 10%) while banking sector is experiencing a

tough time.



44

There are three main groups of competitors: commercial banks and foreign finance companies, and ACS

Trading Co.

JSCBs Pure CF companies ACS Trading Co.

Products Housing loans, new car loans, credit

cards

Motorbikes, automobiles, mobiles & tablets,

laptops, other electronic devices (home

appliances, kitchen devices), cash loans

Installment sale of consumer durables,

such as personal computers, home

appliances and furniture

Interest rates Low interest rates: 10-15%/year High interest rates: 20-70%/year High interest rates: 20-70%/year

Average loan

size

Much bigger loan size (hundreds of

millions and billions VND)

Small size loans (VND 2.5 million – 150 million) Small size loans

Sales Channels Walk-in branches Independent retailers, sale agents, telesales,

cross-selling with other products

Independent retailers, sale agents

Application

process

Long and complicated to assess

credit ability. May take weeks and

months. Requires ID and other basic

documents, as well as proof of

collaterals

Quick and convenient. Can take up to 30 minutes

to a few hours to process. Only requires ID and

some basic documents (proof of employment /

income, utilities bills, family register)

Quick and convenient. Can take up to

30 minutes to a few hours to process.

Only requires ID and some basic

documents (proof of employment /

income, utilities bills, family register)

Collection /

Repayment

Including pre-collection, early collections, late

and field collection. Intensive SMS/calling/letter

methods are used, starting from very early pre-

collection stage to learn and keep customers in

current bucket. Will proceed to “legal call” as a

last resort.


Competition Dynamics – Groups of Competitors

45

Mass consumers are the target market of CF companies.


Competition Dynamics – Target Market

Figure 22: Vietnam Income Groups 2011


46

Main CF Products offered by Key Players Foreign Finance Companies


Competition Dynamics - Products


47

Main CF Products offered by Key Players: selected JSCBs




48

Motorbikes

• Motorbike loans are the most popular consumer finance products in Vietnam

and the market is very competitive with active participation from foreign

consumer finance companies (e.g. PPF, JACCS, HD Finance). The reason is

because automobiles and motorbikes are more standardized, more reliable

collaterals than other products.

• However, motorbikes mortgage loans still require huge cost for finance

companies to supervise since Vietnam is the heaven of motorbikes and there

are millions of motorbikes in circulation. People can buy autos or motorbike

with famous brand names such as Honda, Yamaha, Toyota. Usually, buyers

go to retail outlets of Honda, Toyota or to dealers (e.g. Hong Duc Honda,

Toyota Giai Phong, Savico) to look for their favorite vehicles.

• Banks and finance companies cooperate directly with these dealers to

finance the loans. The buyers can borrow up to 70% value of the vehicles and

repay within 9 to 24 months with the vehicles acting as the collaterals. Thus,

the buyers can only take a copy of the certificates of registration, banks and

finance companies keep the original certificates until maturity date.

Automobiles

• Auto loan in Vietnam is insignificant compared to the total auto sales. There

are 25 thousand units sold by Toyota Motor Vietnam in 2012 but only 3.17%

financed by TFSVN.

• Beside of TFSVN, there are several banks that also provide auto loans, such

as Vietcombank, Techcombank, Vietnam International Bank, Military Bank,

Ocean Bank, HSBC, Sacombank, VPBank, etc with lending rate ranging from

10 to 20% per annum. Due to the market condition as well as customer

demand, it seems that banks do not promote auto loan operation.

• Although the number of cars financed by banks is unknown, in our view, auto

loan operation in Vietnam is underdeveloped.

Motorbikes are still the major CF merchandise. Automobile lending is traditionally dominated by

commercial banks, and Toyota Financial is the only player targeting this product.



No. CF Company Automobile lending situation

1 • PPF is a market leader in providing

motorbike financing. 65% of PPF loan book is

for motorbikes.

2 • Similar to PPF Vietnam, HDFinance also has a

strong focus on motorbike installment loans,

providing loans for Honda, SYM, and Yamaha

motorbikes.

3 • JACCS Vietnam has only cooperated with

Honda Vietnam to provide installment loans

for Honda motorbikes, capturing over 60%

motorbike CF market share of Ho Chi Minh

City, Southeast and Southwest provinces.

4 • FE Credit became a leader in motorbike loan

market with 45% market share in 2012.

• In 2013, its network expanded to more than

2,000 motorbike POS.

5 • Auto loan in Vietnam is insignificant

compared to the total auto sales. There are

25 thousand units sold by Toyota Motor

Vietnam in 2012 but only 3.17% financed by

TFSVN.

49

Sales and collection network will be vital to CF success.


Competition Dynamics – Sales and Collection


50

Marketing strategy of key players clearly demonstrate their strategic focus.


Competition Dynamics – Marketing Strategy


51

Marketing strategy of key players clearly demonstrate their strategic focus.


Competition Dynamics – Marketing Strategy


52

Consumer finance companies still reported attractive performance results while banking sector is

experiencing a tough time.


Competition Dynamics – Financials


53


Sector Structure




Informal Finance Activities


Contents

54

48%

43%

4%

4% 1%

State-owned commercialbanks

JSCBs

Finance Companies

Foreign banks

People's Credit Fund

Commercial banks (both private and state-owned) account for the majority (91%) of total consumer

loans as of 31/12/2013

Figure 26: Outstanding loan as of 31/12/2013

All together, local commercial banks (both JSCBs and

state-owned commercial banks) account for the

majority (91%) of total consumer loans. This is

understandable since their portfolio consists mainly of

high-value items, such as housing loans and

automobile loans.

Finance companies only account for a small

portion of the total consumer loans (only 4%).

Other credit institutions (including 100%

owned foreign banks, people’s credit funds,

and microfinance) make up the other 5% of

the market.

Five state-owned commercial banks account for nearly

half of the total consumer loans (48%), of which

Agribank contributes as much as 60%, BIDV 22%,

Vietcombank 12% Vietinbank 5%, and Mekong Housing

Bank 1%.

Figure 25: Breakdown of Vietnam Consumer Loans by players as of 31/12/2013

71

128

45

215

19

0

50

100

150

200

250

HD Finance PrudentialVietnamFinance

ToyotaFinancial

PPF VietnamFinance

JACCSInternational

VietnamFinance

Mirae AssetFinance

US$m

n

Source: StoxPlus from SBV via NFSC


Market concentration

55


Sector Structure






Contents

56

Informal lending operations are very active in consumer finance sector in Vietnam




57

Pawnshops are a popular source of credit for a wide range of consumers, due to their simple and

convenient process. The interest rate for pawnshop lending is regulated at 110% per years.

• Segment Structure: Pawnshops can be found everywhere, on every

street of major cities in Vietnam. It is unclear how this segment is

structured, but there exists large players (chains of pawnshops under

the same owners), as well as small individual pawnshops. As of

1/6/2013, there are 2,729 pawn shops in Hanoi, including 76

businesses and 2,653 individual / household businesses.

• Pawnshops are scattered, but they also locate in clusters. In Hanoi,

for example, there are three streets that are considered the major

areas for pawnshop activities: Dang Dung Street, Lang Street, and

Nhon Intersection.

• Products: Pawnshops have a long history of providing credit, the

majority of which is secured cash loans directly to customers. What is

special about pawn shops is that they accept all types of assets for

collateral, from ID cards to tangible assets such as motorbikes, cars,

houses, etc.

• Collaterals are valued based on the assessment of “credit officers” at

pawnshops. Customers can borrow up to 70% the value of their

collaterals.

• The interest rate for pawnshops lending is regulated by Law at a

maximum rate of 0.03% per day, or 110% per year. The pawnshop

insiders often times refer to the rule that it takes 11 months 2 days

for a loan to accumulate interest equal to the original principle. Most

pawnshops apply this maximum interest rate on all of their loans.

• Target market: A wide range of consumers consider pawnshops as a

source of credit, from students to working professionals to business

owners. Many pawnshop consumers would not be considered for credit

from traditional banks. Many others, such as the business owners, can

attain credit elsewhere, but the process would be too complicated and

time-consuming to be cost-effective.

• These consumers appreciate credit services from pawnshops as they are

very quick, simple, and convenient. To get a loan from the bank could

take 3-5 months for a good credit consumers, given the credit

assessment and asset valuation process. Pawnshops to the contrary can

do such procedures in a few hours.

• Sales channel: Pawnshops usually use word-of-mouth for sales channel.

Since pawnshops are very popular with the same interest from shop to

shop, consumers can even just stop by a random store to get credit

without much advertisement.

• Collection: Pawnshops are very strict with their collection policy. If

needed, they are willing to use “black market” methods such as

threatening or using gangs to get the loans collected. Based on the

collateral, pawnshops can liquidate assets to get the full, or part,

amount of money owned.



58

Pawnshops are a popular source of credit for a wide range of consumers, due to their simple and

convenient process. The interest rate for pawnshop lending is regulated at 110% per years (cont’d).

• Licensing: There is a license that pawnshops have to apply and be

approved before being operated. Pawnshop‟s owners have to submit

a licensing application to the Police of the Ward that they are

operating in. Pawnshops are usually registered under the Household

business entity, as they want to take the lowest level of

responsibility and avoid some business taxes.

• The Business registration certificate for pawnshops is approved with

conditions, meaning that the Ward Police has to certify that the

owners have the ability to operate a pawnshop business, have a

physical address for the office, and have sufficient financial means

to provide credit to consumers.

• The process to apply for a pawnshop Business registration certificate

varies. There are even services to help pawnshop owners get the

license in a timely manner, which may mean 5 to 7 business days.

• Regulation: The regulation governing pawnshop activities is stated in

Joint Circular of the State Bank - 02/TT/LB dated 10/05/1995 (later

changed in 1997, 1999, and 2003) to guide business activities of

pawnshops.

• The Circular clearly stated permitted activities, responsibilities of

the borrowers, responsibilities of pawnshops, borrowing contract,

interest rates, procedures to apply for a certification of eligibility to

do pawnshop business, as well as many other details related to the

operations of pawnshops.



59


Sector Structure






Contents

60

CF companies are negatively portrayed on local media due to high interest rates and ambiguous

lending terms.




61

Consumer finance is very popular in emerging markets, both from the perspectives of consumers as

well as policy makers

We are grateful to receive the

global insights and inputs from:

Mr. Krisztián Orbán

Managing Partner, Oriens

Ex-McKinsey consultant for 6

years

Ex-Deputy CEO of Eastern

Europe‟s third largest listed

chemical group

MBA from MIT Sloan, MA in

Law and Diplomacy from the

Fletcher School




62

In developed market like Japan, consumer lending is mostly channeled through the use of credit cards.

CF companies used to be more popular, but now they were cleaned out due to Government regulation.



Ms. Yoko Ogimoto

Senior Consultant, Nomura

Research Institute

17 years of experience at

Nomura Research Institute

Previously worked at Mizuho

Financial Group

MBA from University of

Washington




63

In developed market like Japan, consumer lending is mostly channeled through the use of credit cards.

CF companies used to be more popular, but now they were cleaned out due to Government regulation

(cont’d)



Ms. Yoko Ogimoto

Senior Consultant, Nomura

Research Institute

17 years of experience at

Nomura Research Institute

Previously worked at Mizuho

Financial Group

MBA from University of

Washington




64

Brazil: A successful case of CF regulation

• Consumer finance is huge in Brazil, and Brazil National Bank has

introduced very effective solutions to increase competition and

transparency among the merchants, CF providers, and consumers.

• Growing middle class: Brazil‟s middle class now represents 52% of the

population, up from roughly 30% fifteen years ago. In the past five years

nearly 30 million people have joined the ranks of the middle class. Many

of these consumers were previously employed in the informal sector and

transacted mostly in cash, but are now joining the financial system. For

the first time, they have access to bank accounts, credit cards and

other forms of consumer finance.

• Booming consumer credit: Credit in Brazil has been growing very

rapidly in recent years. Consumer credit, albeit decelerating slightly

during 2011 with an annual growth rate of 20.7% compared to 22.4%

during 2010, continues to expand at a strong rate (data from IMF).

Consumer indebtedness (as a percentage of disposable income) has

steadily increased and currently exceeds 40% of income - according to

Brazil Central Bank estimates.

• Increased transparency: Brazil‟s PCR, Cadastro Positivo, was

established in 1998 by the central bank, but focuses only on credit

information of large commercial loans. To reduce check fraud, the

Sociedade de Proteção ao Crédito (SPC) keeps an up-to-date database

of individuals whose checks have bounced twice. This information is

shared with banks, credit institutions, and companies that accept post-

dated checks.

Tighter financial policies: Since mid-2010 through mid-2011, the

central bank hiked policy rates. In addition, in response to the rapid

increase of certain types of consumer loans and loosening lending

standards (such as lack of down payment or excessive loan tenors),

the central bank tightened macroprudential measures in specific

lending products since late 2010.In December 2010, the central bank

announced an increase of the minimum payment for credit card bills

(effective in June 2011) and increased capital requirements for long

term consumer loans (Annex 2). In April 2011, the IOF on consumer

credit operations was increased to 3% (previously 1.5%).



65

Section 3: Key Players Analysis

Non-Bank licensed Players

Bank-licensed Players

Contents

66

PPF Vietnam: 65% of its loan book is motorbike loans

Section 3: Key players analysis

Non-Bank licensed players


67

Prudential Finance: “walk-in” model with cash loans and mainly focusing on

white-colour workers




68

SGVF has been acquired by HDBank in October 2013 and renamed to

HDFinance




69

Toyota Finance: Its small loan book (3.17% of total sales) indicates that auto loan market is

relatively underdeveloped




70

JAACS – Cooperating with Honda Vietnam providing motorbike loans.




71

Mirae Asset: focus on cash loan for employee, especially teachers and hospital employee




72

ACS Vietnam: a trade finance business model focusing on consumer durables




73

Section 3: Key Players Analysis

Non-Bank licensed Players

Bank-licensed Players

Contents

74

Individual loans accounted for 51% total loan book as at 31/12/2012


Bank-licensed players


75


Bank-licensed players


76

Section 4: Market Potentials and Challenges

Key Growth Drivers

Main Product Trends

Main Challenges

Contents

77

Vietnam has the fastest growing middle income and affluent (MAC) population compared to other

countries in the region

• Vietnam„s urban population is shifting from a pyramid income

demographic to a diamond demographic, indicating a growing

base of middle income urban group - a wealthier, more savvy

consumer base.

• According to BCG report in 2013, Vietnam is forecasted to have

the fastest growing MAC population compared to other countries

in the region. The MAC population in Vietnam is defined to be

from Emerging to Affluent, with a monthly income cutoff from

$190. This segmentation corresponds to StoxPlus‟ previous

analysis of the Mass and Affluent population. BCB forecasts the

annual MAC growth rate is 12.9% for Vietnam, 8.4% for Myanmar

and Indonesia, and 4.2% for Thailand.

• Moreover, this new wealth is well-distributed. Income in rural

areas is actually growing faster in in urban areas, growing at

18.5% between 2002 and 2010, compared to 16.6% in urban areas.

• Today, a company can reach one-half of the MAC

population by serving Ho Chi Minh City and Hanoi

provinces.

• However, by 2020, a company needs to have a presence

in nearly as twice many locations as it does today to

reach comparable coverage (data and forecast from

BCG).

• Implications for CF: This trend indicates a growing demand for

consumption from consumers. This MAC population will be the

key driver for CF growth.

0%

20%

40%

60%

80%

100%

2012 2020 2012 2020 2012 2020 2012 2020

Vietnam Myanmar Indonesia Thailand

Poor Aspirant Emerging Established Affluent

Figure 28: Middle income and Affluent Population of Vietnam and Neighboring

Countries – 2012 and forecast for 2020

Source: StoxPlus from Boston Consulting Group

Section 4: Market potentials and Challenges

Key Growth Drivers

3.4 3.4 3.4

3.7 3.7

3.9 3.5

3.4 3.2

3.0 2.9

2.1 1.5

1.0 0.9

0.8 0.6

0.5

0 1 2 3 4 5

0 - 4

10 - 14

20 - 24

30 - 34

40 - 44

50 - 54

60 - 64

70 - 74

80 - 84

Female

3.8 3.7 3.6

3.9 3.8 3.8

3.5 3.4 3.2 3.0

2.6 1.9

1.2 0.7 0.7 0.5 0.4 0.2

0246

Male

Age Group Population (in million) Population (in million)

Vietnam - 2012

Figure 29: Vietnam Population Structure 2012

Source: StoxPlus from GSO

78

There is a potential for CF companies to expand their merchandise financing schemes beyond

motorcycles.


Key Growth Drivers


79

Vietnamese consumers are transitioning from traditional shoppers to modern shoppers, preferring to

shop at modern retail malls. This creates an effective sales channel for CF products.

• Changing consumers’ behaviors: Vietnam‟s urban consumers

continue to shift their shopping from traditional to modern channels,

where they can find a better range of products at more competitive

prices, in particular through larger pack sizes and promotions, while

enjoying a safe and convenient shopping experience.

• The Lifestyle Survey conducted by Kantar Worldpanel reveals that

70% of urban families like to buy all their groceries in one shop.

Shoppers nowadays are seeking for convenience factor – they

purchase less frequently (less daily shopping) yet put more in their

shopping basket each trip.

• This “bulk buying” trend has provided favorable opportunities for

modern channels to flourish in Vietnam.

• Booming modern retail stores: Vietnam‟s retail market had 21

wholly foreign invested businesses which had rapidly expanded their

market share. In addition, modern retail channels, including

hypermarkets, supermarkets, and small self-service stores, accounted

for only 18% of the market, leaving big opportunities for businesses.

• Vietnam has targeted to increase the percentage of modern retail

channels to 45% by 2020. By the end of last year, the country had 130

commercial centers, 700 supermarkets, and more than 1,000 self-

service stores.

• Implications for CF business: This change in consumer’s behaviors

present an opportunity for CF companies, as retailers play a very

important role as an effective sales channel for CF products.

• Retails would also be interested in financing schemes provided by CF

companies to boost consumptions. CF companies have a potential to

build new partnerships as more retailers will enter into the Vietnam

market.

13 17 18

63 62 62

13 12 12

11 8 9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2006 2010 2012

Modern trade Street shops Market Others

Figure 31: Vietnam Retail Structure by Types of Providers

Source: StoxPlus from Kantar World Panel

2008 2012

Value share in Hyper-

Supermarket 1.00% 3.70%

Penetration

(% households) 9.60% 37.70%

Source: StoxPlus from Kantar World Panel


Key Growth Drivers

80


Key Growth Drivers

There is a potential for foreign players to get in Vietnam CF market due to several reasons.


81

There is a potential for foreign players to get in Vietnam CF market due to several reasons (cont’d).


Key Growth Drivers

82


Key Growth Drivers

Main Product Trends

Main Challenges

Contents

83

Motorbike loans

• As of July 2012, there were 35.2mn registered motorbikes in circulation.

Motorbike market has grown with a two-digit rate over the last 10 years

but started to stall in 2011, with the growth rate of only 8%. In 2012, the

situation was even more negative, with a growth rate of only 4.5%, the

slowest growth rate since 2000.

• The key players in providing motorbike loans are VP Bank / FE Credit,

PPF and JACCS. But these companies still account for a small piece in

the overall pie of motorbike market. Motorbike loans book of JACCS is

equivalent to only 0.19% of total value of the motorbike market, PPF is

1.7%.

• The advantage of motorbike lending services provided by these finance

companies is their simple and quick procedures, with borrowing amount

up to 80% value of the motorbike. However, the lending rate is usually

much higher than the interest lending rate offered by banks, ranging

from 20% to 40% per annum along with several extra fees. These are the

main factors that influence the decision of motorbike buyers and confine

the growth of motorbike loans market.

Auto loans

• There were nearly 2mn registered autos in circulation as at 31/12/2012.

Over last 10 years, auto market of Vietnam has grown with the average

annual rate of 18%. Especially in 2009, the number of autos in circulation

had grown 67% compared to 2008. However, from 2011 to 2015,

automobiles also saw a modest growth rate of only 4.4%.

• The number of autos purchase financed by banks is tiny compared to

total auto sales. While Toyota Motor Vietnam is the leader in autos

market with total sales of 17,000 units in 2011, Toyota Financial Services

Vietnam (TFSVN) only financed 3% of the total sales.

Motorbike and automobile loans are still undeveloped compared to the huge motorbike and automobile

market.

Source: StoxPlus from Vietnam Automobile Manufacturers Association

310 330 420 470

546 610 640

787

950

1,587 1,700

1,868 1,951

7 8

10 12

14

16

19 21

23

25

31

34 35

0

5

10

15

20

25

30

35

40

0

500

1000

1500

2000

2500

2000 2002 2004 2006 2008 2010 Jul-12

Au

to-M

illi

on

s

Mo

or

- T

ho

us

an

ds

Auto Motorcycle

Figure 33: Number of automobiles and motorcycles in circulation


Main Product Trends

84

There are still a lot of potential for consumer finance to provide credit beyond motorcycles, such as

with cell phones, home appliances, and education loans.


Main Product Trends


85

Housing

• There are two kinds of housing loans, i.e. loans for purchasing house

without the land use right (assets on land) and housing loans with asset

together with land ownership. House buyers can borrow up to 70% value

of the house and repay within a long period (often more than 10 years).

The house/asset ownership or land use right certificate are often used as

a collateral for the loan (in some case, other valuable assets are needed

to be supplementary collateral). Borrowers have to certify their ability

to repay by monthly income, saving book, gold, etc. For example,

Techcombank (a leading bank in housing loans) offers loan amount from

USD5,000 to USD500,000 with duration from 1 to 25 years. Meanwhile,

PVFC (a leading finance company in housing loans) has the maximum

duration of 20 years.

Credit cards

• There were over 1.59 million credit cards, both international and

domestic in circulation as at the end of 2012. Cards are produced based

on two main technologies: magnetic-stripe and chip.

• Credit cards only account for 2.5% of the total number of cards in

Vietnam. Most consumers prefer debit cards to credit cards as they carry

no mortgage or minimal income requirements and their fees are much

lower than those of credit cards. In terms of government supports, debit

cards continued to win out in 2013. The State Bank of Vietnam

continued to impose restrictions on credit card growth. Moreover, the

hassle of having to top-up directly at the issuing bank made it impossible

for pre-paid cards to compete with debit cards.

• Store cards: Store cards development in Vietnam are still in the infancy

stage. As store cards work like credit cards, many retailers are still

reluctant to issue this type of card due to the small size of the niche

category of credit cards.

Housing and credit cards segment are dominated by commercial banks. There are potentials for pure

CF players to expand in these areas.

Source: StoxPlus from Vietnam Bank Card Association

30%

22%

0%

15%

8%

6%

6%

4%

3%

2%

4% Vietcombank

VietinBank

Techcombank

Sacombank

BIDV

Asia Commercial Bank

Eximbank

VIBBank

Agribank

MBBank

Others

Figure 34: International Credit Card market share by Revenue 2012


Main Product Trends

• Besides, as the majority of consumers still prefer cash to cards for purchase

on most occasions, retailers have not seen any major value-added points

store cards could bring to their stores.

• Store cards could be an effective sale channel for CF business, as they are

the link between credit providers, retailer, and consumers. There is an

opportunity for CF players to expand their credit offering through credit

cards, especially store cards. ACS Trading Co. is exploring this channel.

They announced in 2013 that they are exploring the credit card business in

Vietnam.

86


Key Growth Drivers

Main Product Trends

Main Challenges

Contents

87

The economy is still in the recovering process. Consumers are still worried about their short-term

financial conditions.


Challenges and Key Considerations


88

There are also operation challenges that players need to consider carefully before getting into the CF

business.


Challenges and Key Considerations


89

Appendices

Appendix 1: Vietnam Retail Banking Capacity Matrix

Appendix 2: Key Financial Data of Finance Companies

Appendix 3: Regulations related to CF business

Appendix 4: Profiles of Local Finance Companies

Appendix 5: About StoxPlus and StoxResearch

Contents

90

Ticker Name Exchange Total Assets Total Loans Charter Capital Retail Loan %/Total Loans

VNDbn 2012 2012 2012 2012 2012

CTG VietinBank HOSE 503,530.3 333,356.1 26,217.5 49,819.6 14.9%

BID BIDV HOSE 484,784.6 339,923.7 23,011.7 47,437.4 14.0%

ACB Asia Commercial Bank HNX 176,307.6 102,814.8 9,377.0 44,348.8 43.1%

STB Sacombank HOSE 152,118.5 96,334.4 10,739.7 33,453.5 34.7%

VCB Vietcombank HOSE 414,488.3 241,167.3 23,174.2 28,783.7 11.9%

TCB Techcombank OTC 179,933.6 68,261.4 8,848.1 27,748.4 40.7%

EIB Eximbank HOSE 170,156.0 74,922.3 12,355.2 26,468.2 35.3%

VPB VPBank OTC 102,576.3 36,903.3 5,770.0 17,740.9 48.1%

SHB SH Bank HNX 116,537.6 56,939.7 8,865.8 15,937.1 28.0%

MHBB MHB Bank OTC 37,979.9 24,650.7 3,439.9 14,000.0 56.8%

EAB DongA Bank OTC 69,278.2 50,650.1 5,000.0 13,103.6 25.9%

PNB Southern Bank OTC 75,269.6 43,633.6 4,000.0 11,975.7 27.4%

MBB MBBank HOSE 175,610.0 74,478.6 10,000.0 9,263.8 12.4%

HDB HDBank OTC 52,782.8 21,147.8 5,000.0 8,719.0 41.2%

GDB Viet Capital Bank OTC 20,670.4 7,781.8 3,000.0 3,122.9 40.1%

NVB National Citizen Bank HNX 21,585.2 12,885.7 3,010.2 3,115.8 24.2%

PGB PG Bank OTC 19,250.9 13,787.4 3,000.0 2,688.4 19.5%

DCB OceanBank OTC 64,462.1 26,240.1 4,000.0 2,482.3 9.5%

NAB Nam A Bank OTC 16,008.2 6,848.1 3,000.0 1,843.8 26.9%

MSB MaritimeBank OTC 109,923.4 28,943.6 8,000.0 1,515.0 5.2%


91

Ticker Name Exchange Total Assets Total Loans Charter Capital Retail Loan %/Total Loans

VNDbn 2012 2012 2012 2012 2012

BVB Bao Viet Bank OTC 13,283.0 6,748.2 3,000.0 990.0

14.7%

ABB An Binh Bank OTC 46,013.7 18,755.8 4,200.0 - -

AGRB Agribank OTC - - - - -

DAB DaiA Bank OTC 17,910.2 9,158.9 3,100.0 - -

GB GP Bank OTC 18,165.4 6,745.8 3,018.0 - -

KLB Kien Long Bank OTC 18,581.0 9,683.5 3,000.0 - -

LVB LienViet Post Bank OTC 66,412.7 22,991.7 6,460.0 - -

MDB Mekong Development Bank OTC 8,597.0 3,717.0 3,750.0 - -

NASB North Asia Bank OTC 33,738.3 22,323.1 3,000.0 - -

OCB ORICOMBANK OTC 27,424.1 17,238.8 3,234.0 - -

PVF PVcomBank OTC 88,170.9 39,725.0 6,000.0 - -

SCB Saigon Commercial Bank OTC 149,205.6 88,154.9 10,583.8 - -

SEAB SeaBank OTC 75,066.7 16,694.4 5,334.7 - -

SGB Saigon bank for industry and trade OTC 14,852.5 10,860.9 3,080.0 - -

TB Vietnam Construction Bank OTC 15,553.4 13,315.7 3,000.0 - -

TPB Tien Phong Bank OTC 15,120.4 6,083.0 5,550.0 - -

VAB Viet A Bank OTC 24,608.6 12,890.2 3,098.0 - -

VIB VIBBank OTC 65,023.4 33,887.2 4,250.0 - -

VNDB Vietnam Development Bank OTC - - - - -

VTTB VietBank OTC - - - - -


92

Appendix 2: Key Financial Data of Finance Companies


93

Generally, finance companies and consumer finance companies are classified

as “credit institutions”. As such, these non-bank licensed companies need to

comply with all regulations applicable to a credit institution in terms of

licensing, permitted activities, capital adequacy and other prudential ratios,

minimum capital and interest rate regulations:

Fund mobilization:

Finance companies are only permitted to accept deposits from organizations

with duration of one year and above. Consumer finance companies such as

PPF, HD Finance and Prudential Finance are not allowed to accept deposits

from any type of customers.

• Pursuant to the Law on Credit Institutions and Decree 81/2008/ND-CP,

finance companies are not allowed to accept either short-term deposits

(duration of less than 1 year) or any deposits from individuals. They are

permitted to accept only deposits from organizations with minimum

duration of 12 months. This regulation causes a big problem to finance

companies in fund mobilisation. Currently, deposit yield curve in Vietnam

is flat i.e. there are no significant difference between for a 1-month

interest rate and a 12-month interest rate. A customer would prefer a

shorter term for the same interest rate and this makes non-bank companies

could not mobilize funds.

• Consumer finance specialized companies, such as PPF Vietnam, Prudential

Finance and Société Generale Viet Finance, are not allowed to accept any

deposits. As such, in addition to their paid-in charter capital, these

consumer finance companies have to borrow from other credit institutions

via interbank markets.

For example, to finance total assets of VND3,975bn (USD189mn) as at

31/12/2011, PPF Vietnam had to source its funding from commercial banks

in Vietnam, including from interbank markets, amounting to USD133mn.

Regulations for consumer finance business is generally more stringent than for commercial banks.

• Unlike other finance companies, which are prohibited from acceptance

of short-term deposits, in fact, PVFC has mobilized shot-term capital

via short-term deposits for the past few years. As of 31/12/2011, PVFC

had USD423.1mn of total short-term deposits with duration ranging

from 1 to 12 months. Thus, we doubt that PVFC has somewhat a

special license compared to other finance companies.

• Another way to mobilize short-term capital is using entrusted fund

contracts, which is not subject to restrictions on duration and currently

applied by PVFC and some other finance companies. Entrusted funds

investment service offered by finance companies is the business

where a finance company receive funds from its customers and offer a

pre-determined investment yield just like interest rate in deposits. In

fact, PVFC’s deposit contracts and entrusted fund management

contracts are the same in most conditions and terms.

• We are confirmed that so far PVFC does not mobilize fund from

individuals. All mobilized deposits and entrusted funds are from

organizations.

PetroVietnam Finance Corporation

(“PVFC”) - a special finance company


94

Interest rate regulations:

• Until 31 January 2002, credit activities in Vietnam are subject to lending rate

caps in accordance with the Decision 242 issued by the SBV. Maximum lending

rates were determined on base rate plus a percentage range, which were 0.3%

per month for short-term loans and 0.5% per month for medium and long term

loans.

• From 1 February 2002, lending interest rates are under negotiable regime in

accordance with the Decision 546/2002/QĐ-NHNN dated 30 May 2002. That

means lending rates are agreed upon between credit institutions (including

finance companies) and their customers.

• However, from 16 May 2008, pursuant to Decision 16/2008/QD-NHNN, lending

rates are still under negotiable regime but must not be higher than 150% of the

base rates advised by SBV on a monthly basis. This made many finance

companies including PPF Vietnam, Prudential Finance in difficulties to amend

their system to cope with the new regulation, according to SBV in a conference

in consumer finance in October 2008.

• The cap rate set forth in Decision 16/2008/QD-NHNN has raised many

difficulties for banks and finance companies since it does not reflect the

market rate in current situation of the economy. In the latest response to solve

this problem, the SBV has issued Circular 12/2010/NHNN dated 14 April 2010,

allowing the lending rates to be negotiable between credit institutions and

their customers. The use of base rate as the reference rate is not compulsory

up to now.

Permitted activities

• Except mobilizing capital from deposits and through-account

payment services, a finance company is permitted to do most

activities as a commercial banks, e.g. cash loan, mortgage loan.

There is no restriction on lending activities of a finance companies.

• However, some other activities are strictly subject to SBV‟s

approval, including: deployment of POS, issuance of credit cards and

factoring. A finance company is allowed to issue credit cards only if

it is stated in the company‟s license otherwise the company has to

submit for approval from the SBV and update its license accordingly.

• In conclusion, although the above activities are permitted, they

must be set forth in and in accordance with the license, which is

issued by the SBV. In other words, a finance company is not allowed

to do an activity if it is not stated in the company‟s license, even

this activity is permitted under law. For example, according to PPF‟s

license, the company is permitted to operate within the HCM area

only. However, after getting approval from the SBV to deploy POS,

PPF has been aggressively introduce its POS not only throughout HCM

city but in nearby provinces and received warning from the SBV last

year.

Regulations for consumer finance business is generally more stringent than for commercial banks

(cont’d).


95

Regulations on microfinance organizations (“MFO”)

• Microfinance was introduced in Vietnam from 1980s under the form of saving-credit projects. In

the first period of 1980s, microfinance was closely related to small-farmer economy. The next

10 years from 1990 to 2000 witnessed the rapid expansion with respects to both values and

types. Microfinance expands to other activities beyond production like education, healthcare,

housing, etc. From 2000 to present, microfinance in Vietnam has developed in depth with strong

support from the government.

• Decision 28-2005/ND-CP dated 9 March 2005 and Decision 165/2007/ND-CP dated 15 November

2007 are Government‟s Decisions providing regulations on establishment, organization and

operation of MFO. These two Decisions marked the appearance of a legal framework for

microfinance activities. Decision 2195/2011/QD-TTg dated 06 December 2012 demonstrates the

Prime Minister's approval on designing and developing the microfinance system in Vietnam up to

2020. Organizations including SBV, Ministry of Finance, Ministry of Planning and Investment are

responsible for building an appropriate mechanism for microfinance activities.

• There are three types of organizations operating in microfinance area in Vietnam including

official (e.g. Agribank, Vietnam Bank for Social Policies), semiofficial (e.g. NGOs like Oxfam GB,

CRS) and unofficial (e.g. Rotating savings and credits association - ROSCA like Women's Unions).

People can borrow from such organizations on purpose of production. Money cannot be used for

consumption or investment in real estate. Some key players in microfinance sector are C.E.P

Vietnam, T.Y.M, and M7 Group.

Regulations for consumer finance business is generally more stringent than for commercial banks

(cont’d).


96

# Company Owners/Partners

Retail Loan

31/12/2012 Highlights

1

Vietnam Textile

and Garment

Finance

VINATEX USD2.9mn

• Established in 1998 as a 100% owned subsidiary by Vinatex, TFC has been privatised in

2010 with charter capital of VND500bn. Its principal is to mobilize deposits (from 13

months) and provide corporate lending and consumer finance services.

• TFC has total assets of VND1,488bn and total loan book of VND440bn as at 31/12/2012.

TVFC has 58 employees working at head office in Hanoi and HCMC branch.

• TFC earned total revenue of VND248bn and VND58.5bn in 2011. Its reported NPL ratio is

at 0.67% as at 31/12/2011.

• ( Some data are not updated for 2012)

2

Rubber Finance

VN RUBBER

GROUP Very small

• Established in 1998 as a 100% owned subsidiary by Vietnam Rubber Group. RFC has

charter capital of VND699bn. RFC has 164 employees working at offices in Hanoi , HCMC

and 8 transaction points and 1 branch.

• RFC has total assets of VND2,679bn and total loan book of VND2,894bn as at

31/12/2012. RFC earned total revenue of VND760.8bn in 2012.

• RFC also involves in managing loans from the trusted fund sponsored by Agence

Française de Développement (AFD) for natural rubber enterprises in Vietnam

3

Post and

Telecommunication

Finance

VNPT None

• Established in 1999 as a 100% owned subsidiary by VNPT. PTF has charter capital of

VND128bn. PTF does not involve in retail lending at all. Its total assets of VND395bn and

total loan book of VND67bn as at 31/12/2012.

• PTF‟s principal activities are securities investments in various companies including

member companies within VNPT by its own capital and funds managed for its clients.

4

Vinashin Finance

Vinashin None

• Vinashin Finance has total charter capital of VND1,623bn but it was default upon the

court case Vinashin. Vinashin Finance involved heavily in receiving the USD700mn

sovereign bond guaranteed by the Government and then accused of misusing the fund.

Total assets of Vinashin Finance amounted to VND3,839bn and total loan book of

VND5,113bn as at 31/12/2012 which mainly represents on-lending Vinashin‟s members

and uncollectible now.


97


Retail Loan


5

Handico Finance

HANDICO

USD25.5mn

• Handico Finance (Hafic) was a State-owned Company established in 2005 and equitized in 2008. It

operates as a financial intermediary and arranges funds for Hadinco.

• Hafic provides consumer finance services including auto loans, housing loans as well as corporate

loans but mainly financing for Hadinco projects.

• Hafic has total assets of VND2,761bn (USD131.5mn) and total loan book of VND709bn

(USD33.8mn).

• It reported total revenue of VND474bn and net profit of VND47bn as at 31/12/2012.

6

Mineral and Coal

Finance

VINACOMIN None

• Mineral and Coal Finance (CMF) was established in 2007 as a 100% owned subsidiary by Vinacomin.

CMF has charter capital of VND1,227bn, total assets of VND2,622bn and total loan book of

VND2,093bn.

• It reported total revenue of VND233.9bn and net profit of VND65.8bn as at 31/12/2012.

• CMF runs under the corporate banking model with 60 employees. CMF firstly focused merely on

raising fund and lending activities but now it has expanded onto foreign exchange and investment

service.

7

Song Da Finance

SONGDA HOLDING None

• Song Da Finance was established in 2008 with three founding shareholders include: Song Da

Holding, Military Commercial JSB and Bao Minh Insurance Corporation. Song Da Finance has

VND766bn chartered capital.

• Song Da Finance has total assets of VND2,438bn and total loan book of VND141bn of which

individual loan of VND0.1bn as at 31/12/2012.



98


Retail Loan


8

EVN Finance

EVN None

• Established in 2008 with charter capital of VND2,500bn (EVN 40%, An Binh Bank 8.4%, REE

corporation 1.8% and others). EVN Finance has 136 employees.

• EVN Finance‟ lending activities deployed in the orientation of concentrating on serving EVN and

its member units as the strategic customers. EVN Finance granted direct loans, parallel under

the form of entrusted loan, capital contribution co-sponsor.

• EVN Finance has total assets of VND19,188bn and total loan book of VND3,230bn.


9

Cement Finance

VICEM

USD0.81mn

• Cement Finance was established in 2008 with three leading: Vietnam Cement Industry

Corporation (Vicem), Vietnam Steel Corporation (Vnsteel) and The Bank for Foreign Trade of

Vietnam (Vietcombank). Cement Finance has VND650.7bn chartered capital and 63 employees.

• Cement Finance has total assets of VND1,765bn and total loan book of VND604bn as at

31/12/2012.


10

Vietnam Chemical

Finance

VINACHEM USD1.39mn

• Established in 2008 with charter capital of VND600bn. Vietnam Chemical Finance has 48

employees working at offices in Hanoi.

• Vietnam Chemical Finance has total assets of VND2,042bn and total loan book of VND793bn. It

reported total revenue of VND258.2bn and net profit of VND92.8bn as at 31/12/2012.

11

Vinaconex-Viettel

Finance

VINACONEX +

VIETTEL None

• Established in 2009 with the founding shareholders include: Vinaconex Corporation, Viettel

group, BIDV Insurance Corporation and other. Vinaconex-Viettel Finance (VVF) has VND1,126bn

chartered capital and 50 employees.

• VVF has total assets of VND3,615bn and total loan book of VND714bn at 31/12/2012.


99

About StoxPlus and Research Capability Statements

Contents

100

• Pioneer in data feed services

to financial sector in Vietnam

• A sustainable client portfolio

including top 10 brokerage

firms, financial websites such

as Forbes Vietnam

• Financial IT solutions: financial

website solutions for financial

sector and Investor Relations

web for corporate sector

• An in-house built analytic

platform for institutional

investors and sophisticated

investors

• A team of seasoned

professionals delivering market

research, company research

and market entry services

• Clients include Fortune 500

company

StoxPlus Corporation

Information Services

Stock Analytic Tools

Research Services

StoxPlus is proud to be the largest provider of reliable and up-

to-date market and business data in Vietnam

About StoxPlus

101

Our Research division has been established as an

independent research house in Vietnam to provide local

insights to our clients at quality standards of the World‟s

prestige advisory firms.

Our research team with a team of 5 experienced analysts

and researchers with CFA Charterholders, ACCA Chartered

Accountants and MBAs with extensive experience in

investment, banking, corporate finance and technology

with well respected firms in the United Kingdom, Australia

and Vietnam.

Our research services consists of

Standard research reports (ready for sales via our

website www.stoxresearch.com ); and

Customisable services based on specific

requirements

Our team covers all key sectors of Vietnam including

Financials, Logistics, Healthcare, Homebuilding, etc

Our research clients are mostly foreign institutional

investors and industry players who are penetrating into

Vietnam.

Selection of our Regular Research Clients:

We are the first independent research house focusing on

Vietnam market

About StoxPlus

Our legal partner

http://www.stoxresearch.com/

http://www.knowledgeco.jp/index.html

102

• Our team of experts cover all key sectors of Vietnam. The collection of standard sector reports is ready

for sales via our website: www.stoxresearch.com

• If you have any questions ,our analysts will be more than willing to answer your questions on the sectors

that we cover

We provide sector research reports for all key industries…

About StoxPlus

http://www.stoxresearch.com/

103

Vietnam Market Intelligence

• Market understandings

• Market sizing & segmentation

• Market dynamics

• Industry analysis

• Customer segmentation

• Value chain analysis

• Regulatory and policy framework

• Key player profiles

Business Intelligence

• Key account profiling

• Competition analysis

• Commercial partner seeking

• Management background check

• Financial and operational due diligence

Market Entry Advisory

• Market assessment

• Market entry strategy defining

• Site location analysis

• Product and pricing strategy

• PPP/Joint ventures/M&A/licensing

• Vendors, outsourcers and distributors

search

Our research services include:

Industries we regularly cover:

Financial Sector

• Vietnamese banking

• Retail banking and home

credit

• Insurance

• Brokerage

• Asset management

Healthcare Sector

• Hospital operation

• Drugs

• Medical devices

• Laboratory/medical testing

• Diagnostic imaging

Construction & others

• Home builders

• Cement and concrete

• Construction materials

• Infrastructure i.e. ports

• Real estates

• Natural rubbers

Consumerism

• Beers

• Soft drinks

• Alcoholic

• Pharmaceutical

• Education

...as well as comprehensive analysis and local insights

customized for your Vietnam market entry solutions

About StoxPlus

104

StoxPlus has been engaged in many assignments covering a

wide range of industries

International

World Bank

Banking

Background research services

for housing price, land price,

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data inputs for FSAP

Korea

SK Group

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Research on 10 key sectors of

Vietnam and SOE IPOs to

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Japan

Maruhan Corporation

Banking

Market Research for Banking

sector in Vietnam and insightful

analysis of shortlisted players

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Daiwa Can

Flexible Packaging

Market screening of top 10

largest players in carton

packaging companies in Hanoi

and HCMC under M&A

transaction considerations

Japan

Japan Economic Research Inc.

Home Builders

Market research on Vietnamese

home builders and assessing

key trends. Profile of key players

in HCMC, Hanoi and the Central

of Vietnam

Korea

SK Group

Healthcare

Market research on Vietnam

hospital operation businesses

and diagnostic service

segment: help client fully

understand the market and

defined entry options

Japan

Japan Knowledge Incorporation

Consumer Finance

Vietnam Consumer Finance

Market Report and Define Entry

Options for a Japanese

Financial Institution

Singapore

Happiness International

Hospital

Hospital & Clinics

Market research of imaging

diagnosis market in HCMC

and in-depth analysis of

selected players

About StoxPlus

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‹#›

If you need further assistance, contact us at:

Thuan Nguyen

CEO & Head of Research +84 (0) 35626962 (ext. 111)

+84 (0) 98398 0000

[email protected]

Hanoi Office

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Hanoi, Vietnam

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20140513-Vietnam-Consumer_Finance_2014_Demo_20140811143029

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