BMI Vietnam Commercial Banking Report Q2 2013

Q2 2013

www.businessmonitor.com

VIETNAM COMMERCIAL BANKING REPORT

INCLUDES 5-YEAR FORECASTS TO 2017

ISSN 1758-454X Published by:Business Monitor International

http://www.businessmonitor.com/

Vietnam Commercial Banking

Report Q2 2013

INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: February 2013

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Vietnam Commercial Banking Report Q2 2013

CONTENTS

BMI Industry View ............................................................................................................... 7

Table: Levels (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Table: Levels (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Table: Levels At May 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Table: Annual Growth Rate Projections 2012-2017 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Table: Ranking Out Of 62 Countries Reviewed In 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Table: Projected Levels (VNDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Table: Projected Levels (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SWOT .................................................................................................................................... 9

Commercial Banking .................................................................................................................................. 9

Business Environment .............................................................................................................................. 10

Economic ............................................................................................................................................... 11

Industry Forecast .............................................................................................................. 13

Speeding Up Banking Reforms .................................................................................................................. 14

Foreign Investors Could Remain Cautious .................................................................................................. 15

Industry Risk Reward Ratings .......................................................................................... 16

Asia Commercial Banking Risk/Reward Ratings ............................................................................................ 16

Table: Asia Commercial Banking Business Environment Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Market Overview ............................................................................................................... 18

Asia Commercial Banking Overview ........................................................................................................... 18

Table: Banks' Bond Portfolios 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Table: Asia Commercial Banking Business Environment Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Table: Anticipated Developments in 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Table: Comparison of US$ Per Capita Deposits (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Table: Interbank Rates and Bond Yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Economic Outlook ................................................................................................................................... 25

Ratings Downgrade Failed To Surprise Investors ......................................................................................... 26

Early Signs Of A Recovery ...................................................................................................................... . 28

Threat Of Slower Growth Yet To Undermine Efforts For Reforms .................................................................... 28

Expenditure Breakdown .......................................................................................................................... 28

Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Competitive Landscape .................................................................................................... 30

Market Structure ..................................................................................................................................... 30

Protagonists .......................................................................................................................................... 30

Table: Protagonists In Vietnam's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

© Business Monitor International Page 4


Definition Of The Commercial Banking Universe ......................................................................................... 30

List Of Banks ......................................................................................................................................... 31

Table: Financial Institutions In Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Company Profile ................................................................................................................ 34

Bank for Foreign Trade of Vietnam (Vietcombank) ........................................................................................ 34

Table: Stock Market Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table: Balance Sheet (US$mn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

VietinBank ............................................................................................................................................. 38

Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40



Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Agribank ............................................................................................................................................... . 42



Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Asia Commercial Bank ............................................................................................................................. 45




Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Eximbank ............................................................................................................................................... 48




Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Vietnam Technological and Commercial Joint-stock Bank (Techcombank) ......................................................... 52



Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Viet A Joint Stock Commercial Bank (Vietabank) ........................................................................................... 55

Housing Development Commercial Joint Stock Bank (HDBank) ....................................................................... 57

Sacombank ............................................................................................................................................. 59




Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Regional Overview ............................................................................................................ 63

Asia Overview .................................................................................................... ..................................... 63

Investment Banking Revenues Surge .......................................................................................................... 64

Malaysia Takes The Lead ........................................................................................................................ 65

Thai Commercial Banks Targeting High-Growth Economies .......................................................................... 66

Global Industry Overview .................................................................................................. 67



Global Commercial Banking Overview ........................................................................................................ 67

Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Demographic Forecast ..................................................................................................... 71

Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Methodology ...................................................................................................................... 75

Commercial Bank Business Environment Rating ......................................................................................... 76

Table: Commercial Banking Business Environment Indicators And Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Weighting ............................................................................................................................................. 78

Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78



BMI Industry View

Liabilities and

capital

3,117,942

Total assets

3,117,942

Client loans

2,630,220

Bond portfolio

223,644

Client deposits

2,241,245

Date

May 2011

Other

264,078

Capital

494,104

Other

382,593

Change, % 13.7% 7.8% 58.9% 34.4% 13.7% 15.3% 19.1% -19.6%

Source: BMI; Central banks; Regulators

Liabilities and

capital

151.76

Total assets

151.76

Client loans

128.02

Bond portfolio

10.89

Client deposits

109.09

Date

May 2011

Other

12.85

Capital

24.05

Other

18.62

Change, % 12.0% 6.1% 56.4% 32.3% 12.0% 13.5% 17.2% -20.8%


Loan/deposit ratio

106.26%

Loan/asset ratio

79.97%

Loan/GDP ratio

n.a.

GDP Per Capita, US$

1,072.13

Deposits per capita, US$

1,433.70



Falling Falling Falling n.a. n.a.

Table: Levels At May 2012

May 2012 169.90 135.87 17.03 17.00 169.90 27.29 127.86 14.75

Table: Levels (US$bn)

May 2012 3,545,801 2,835,610 355,354 354,837 3,545,801 569,584 2,668,471 307,746

Table: Levels (VNDbn)


Assets

11

Loans

9

Deposits

6 Annual Growth Rate

Ranking 15 22 35


Loan/deposit ratio

11

Loan/asset ratio

2

Loan/GDP ratio

14

14 16 22


2009

2,286,321

2010

2,953,153

2011

3,437,893

2012e

3,816,061

2013f

4,350,310

2014f

4,959,353

2015f

5,604,069

2016f

6,276,557

2017f

6,966,979 Total assets

Client deposits 1,680,717 2,209,896 2,483,357 2,706,859 2,977,545 3,245,524 3,505,166 3,750,528 3,975,560

e/f = estimate/forecast. Source: BMI; Central banks; Regulators

2009

123.73

2010

151.46

2011

163.44

2012e

181.41

2013f

209.15

2014f

241.16

2015f

275.66

2016f

312.27

2017f

348.35 Total assets

Client deposits 90.95 113.34 118.06 128.68 143.15 157.82 172.41 186.59 198.78

e/f = estimate/forecast. Source: BMI; Central banks; Regulators


Client loans 101.16 126.96 134.54 146.64 166.09 188.15 211.26 235.05 257.48

Table: Projected Levels (US$bn)

Client loans 1,869,260 2,475,540 2,829,890 3,084,580 3,454,730 3,869,297 4,294,920 4,724,412 5,149,609

Table: Projected Levels (VNDbn)

Local currency asset growth Local currency loan growth Local currency deposit growth

Table: Ranking Out Of 62 Countries Reviewed In 2013

CAGR 13 11 8

Table: Annual Growth Rate Projections 2012-2017 (%)


SWOT

Commercial Banking

Strengths Untapped potential. ■

High savings rate of the Vietnamese people. ■

Increasingly open to foreign banks since WTO accession in 2007. ■

The role of state-owned banks is decreasing. ■

Weaknesses Domestic banks lack capital and technology to sustain high credit and efficient

growth.

■

The financial accounts of many banks are still opaque. ■

Small banks have a high exposure to real estate and stock market loans. ■

Opportunities The population is still underbanked. ■

Income levels likely to rise strongly over the medium term. ■

Threats Macroeconomic instabilities threaten the credibility of the government and could

potentially drive economic policy away from further liberalisation.

■

The high level of government debt could crowd out the private sector and potentially

trigger a fiscal crisis.

■


Vietnam Commercial Banking SWOT


Business Environment

Strengths Vietnam has a large, skilled and low-cost workforce, which has made the country

attractive to foreign investors.

■

Vietnam's location - its proximity to China and South East Asia, and its good sea links

- makes it a good base for foreign companies to export to the rest of Asia and

beyond.

■

Weaknesses Vietnam's infrastructure is still weak. Roads, railways and ports are inadequate to

cope with the country's economic growth and links with the outside world.

■

Vietnam remains one of the world's most corrupt countries. According to

Transparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123rd

out of 176 countries.

■

Opportunities Vietnam is increasingly attracting investment from key Asian economies, such as

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech

skills and know-how.

■

Vietnam is pressing ahead with the privatisation of state-owned enterprises and the

liberalisation of the banking sector. This is likely to offer foreign investors new entry

points.

■

Threats Ongoing trade disputes with the US, and the general threat of American

protectionism, which will remain a concern.

■

Labour unrest remains a lingering threat. A failure by the authorities to boost skills

levels could leave Vietnam a second-rate economy for an indefinite period.

■


SWOT Analysis


Economic

Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with

GDP growth averaging 7.1% annually between 2000 and 2011.

■

The economic boom has lifted many Vietnamese out of poverty, with the official

poverty rate in the country falling from 58% in 1993 to 14.0% in 2010.

■

Weaknesses Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving

the economy vulnerable to global economic uncertainties in 2012. The fiscal deficit is

dominated by substantial spending on social subsidies that could be difficult to

withdraw.

■

The heavily-managed and weak currency reduces incentives to improve quality of

exports, and also keeps import costs high, contributing to inflationary pressures.

■

Opportunities WTO membership has given Vietnam access to both foreign markets and capital,

while making Vietnamese enterprises stronger through increased competition.

■

The government will in spite of the current macroeconomic woes, continue to move

forward with market reforms, including privatisation of state-owned enterprises, and

liberalising the banking sector.

■

Urbanisation will continue to be a long-term growth driver. The UN forecasts the

urban population rising from 29% of the population to more than 50% by the early

2040s.

■

Threats Inflation and deficit concerns have caused some investors to re-assess their hitherto

upbeat view of Vietnam. If the government focuses too much on stimulating growth

and fails to root out inflationary pressure, it risks prolonging macroeconomic

instability, which could lead to a potential crisis.

■

Prolonged macroeconomic instability could prompt the authorities to put reforms on

hold as they struggle to stabilise the economy.

■


SWOT Analysis


Industry Forecast

BMI View: Efforts by the State Bank of Vietnam (SBV) to recapitalise ailing banks and strengthen

regulatory oversight have helped to fend off a full-blown banking crisis for now. We believe that investors

are increasingly confident of the government's ability to contain the risk of a banking crisis while Vietnam's

bullish long-term growth story remain intact.

Our long-held view that concerns over an impending collapse of Vietnam's banking system are largely

unwarranted and that the government is unlikely to require assistance from the International Monetary Fund

(IMF) to finance a bailout, is slowly being vindicated (see 'Keeping A Cautious Outlook Amid Rising NPLs',

September 17 2012). Efforts by the State Bank of Vietnam (SBV) to rapidly recapitalise ailing banks and

strengthen regulatory oversight of lending practices have helped to fend off a full-blown banking crisis for

now. Meanwhile, average lending rates have fallen from around 20% in the beginning of 2012 to around

14% at the time of writing, and we expect credit conditions to continue to improve over the coming months.

Confidence Is Returning

Vietnam - Ho Chi Minh Stock Index (VNI)

Source: BMI, Bloomberg



Using the benchmark Ho Chi Minh Stock Index (VNI) as a gauge for sentiment on the overall economy (see

chart), we believe that investors are increasingly confident of the government's ability to contain the risk of

a banking crisis while Vietnam's bullish long-term growth story remain intact. Fitch Ratings

also reaffirmed Vietnam's long-term foreign and local currency debt ratings at 'B+' in January, citing the

country's strong growth potential, favourable environment for attracting foreign direct investment (FDI),

and manageable external debt levels relative to the region. From our perspective, progress on banking sector

reforms will continue to play a crucial role in further bolstering investor confidence going forward. This

should in turn determine the strength of the economic recovery over the coming quarters (we forecast real

GDP growth to accelerate from 5.0% in 2012 to 7.0% in 2013).

Credit Conditions To Pick Up In 2013

Vietnam - Outstanding Credit, VNDbn (LHS) & % chg y-o-y (RHS)

Source: BMI, State Bank of Vietnam

Speeding Up Banking Reforms

We are optimistic that the government will meet its target of restructuring ailing banks by the end of 2013,

mainly through efforts to recapitalise banks with weak balance sheets and merging smaller banks that are

struggling to compete effectively. The urgent need to restructure the banking sector and reinstate confidence

has also helped to speed up progress on free-market initiatives such as allowing for greater foreign

participation and privatising other state-owned enterprises (SOEs). According to a report published by The



Wall Street Journal, the government may soon allow foreign investors to hold a 49% stake in state-owned

banks or even larger stakes conditional upon an agreement to divest holdings at a later stage (presently,

foreign companies are allowed to hold a maximum 20% stake as a single entity, or 30% with a partner).

A joint Financial Sector Assessment Program undertaken by the World Bank and IMF is scheduled to be

completed by the end of H113, and is expected to provide greater transparency regarding the actual level of

non-performing loans (NPLs) across the banking sector. Estimates provided by the SBV currently put NPLs

at close to 9.0% of total outstanding loans as of the end of 2012 and it is widely expected that the actual

figure could be significantly higher. In any case, we believe that the assessment program will provide a

good framework for the government to further improve transparency and accounting standards going

forward.

Foreign Investors Could Remain Cautious

We expect this process of restructuring the banking sector to keep earnings depressed for the foreseeable

future and we maintain a cautious outlook on the banking sector through 2013. We view FDI inflows into

the banking sector as a crucial element of the restructuring process and we highlight the downside risk that

foreign investors may avoid participating in large-scale privatisation of state-owned banks. Given the

uncertainties surrounding the true exposure of NPLs, we expect foreign investors to remain highly cautious

in taking up stakes in smaller state-owned banks. However, as the economic recovery gathers pace and

assuming that actual NPLs are in line with current expectations, we expect FDI inflows into the banking

sector to pick up gradually over the course of the year.



Industry Risk Reward Ratings

Asia Commercial Banking Risk/Reward Ratings

Business Environment Rating Methodology

Since Q108, we have described numerically the banking business environment for each of the countries

surveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER), a

measure that ensures we capture the latest quantitative information available. It also ensures consistency

across all countries and between the inputs to the CBBER and the Insurance Business Environment Rating,

which is likewise now a feature of our insurance reports. Like the Business Environment Ratings calculated

by BMI for all the other industries on which it reports, the CBBER takes into account the limits of potential

returns and the risks to the realisation of those returns. It is weighted 70% to the former and 30% to the

latter.

The evaluation of the 'Limits of potential returns' includes market elements that are specific to the banking

industry of the country in question and elements that relate to that country in general. Within the 70% of the

CBBER that takes into account the 'Limits of potential returns', the market elements have a 60% weighting

and the country elements have a 40% weighting. The evaluation of the 'Risks to realisation of returns' also

includes banking elements and country elements (specifically, BMI's assessment of long-term country risk).

However, within the 30% of the CBBER that take into account the risks, these elements are weighted 40%

and 60%, respectively.

Further details on how we calculate the CBBER are provided at the end of this report. In general, though,

three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elements of

the 'Limits of potential returns' are by far the most heavily weighted of the four elements. They account for

60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher than

the country elements of the 'Limits of potential returns', it usually implies that the banking sector is (very)

large and/or developed relative to the general wealth, stability and financial infrastructure in the country.

Conversely, if the market elements are significantly lower than the country elements, it usually means that

the banking sector is small and/or underdeveloped relative to the general wealth, stability and financial

infrastructure in the country. Third, within the 'Risks to the realisation of returns' category, the market

elements (i.e. how regulations affect the development of the sector, how regulations affect competition

within it, and Moody's Investor Services' ratings for local currency deposits) can be markedly different from

BMI's long-term risk rating.



Limits of Potential Returns Risks to Potential Returns Overall

Market Structure Country Structure Market Risks Country Risks Rating Ranking

China 93.3 57.5 63.3 74.0 76.2 14

India 83.3 57.5 60.0 54.0 68.0 30

Japan 33.3 77.5 66.7 80.0 58.1 36

Pakistan 43.3 50.0 53.3 42.0 46.2 57

Singapore 66.7 95.0 96.7 90.0 82.4 6

South Korea 80.0 85.0 83.3 76.0 81.1 8

Thailand 66.7 65.0 86.7 74.0 69.9 22

United States 93.3 85.0 100.0 80.0 89.4 2

Scores out of 100, with 100 the highest. Source: BMI


Vietnam 60.0 55.0 36.7 48.0 53.6 47

Taiwan 76.7 72.5 86.7 76.0 76.6 13

Sri Lanka 23.3 55.0 33.3 46.0 37.5 59

Philippines 50.0 62.5 60.0 58.0 56.1 41

Malaysia 73.3 80.0 83.3 80.0 77.6 10

Indonesia 76.7 65.0 80.0 52.0 69.4 27

Hong Kong 80.0 92.5 73.3 78.0 82.3 7

Bangladesh 50.0 45.0 43.3 44.0 46.7 55

Table: Asia Commercial Banking Business Environment Ratings


Market Overview

Asia Commercial Banking Overview

Bond Portfolio, US$bn Bond as % total assets Year-on-year growth %

Bangladesh 17.1 23.0 19.3

Hong Kong 350.0 19.8 3.4

Indonesia 17.3 4.3 17.7

Malaysia 67.9 12.5 3.1

Philippines 35.4 23.7 -4.3

Sri Lanka 2.2 12.8 22.2

Taiwan 98.0 8.4 -47.2

Vietnam 12.3 7.5 27.0

Source: Central banks, regulators, BMI


United States 447.1 3.6 -15.1

Thailand 65.5 15.9 13.7

South Korea 271.5 17.0 4.6

Singapore 76.5 11.6 5.5

Pakistan 33.5 38.5 56.1

Japan 3,407.8 30.8 7.5

India 292.3 25.2 7.9

China 1,577.7 8.7 -4.2

Table: Banks' Bond Portfolios 2011


Limits of Potential Returns Risks to Potential Returns Overall

Market Structure Country Structure Market Risks Country Risks Rating Ranking

China 93.3 57.5 63.3 74.0 76.2 14

India 83.3 57.5 60.0 54.0 68.0 30

Japan 33.3 77.5 66.7 80.0 58.1 36

Pakistan 43.3 50.0 53.3 42.0 46.2 57

Singapore 66.7 95.0 96.7 90.0 82.4 6

South Korea 80.0 85.0 83.3 76.0 81.1 8

Thailand 66.7 65.0 86.7 74.0 69.9 22

United States 93.3 85.0 100.0 80.0 89.4 2

Scores out of 100, with 100 the highest. Source: BMI


Vietnam 60.0 55.0 36.7 48.0 53.6 47

Taiwan 76.7 72.5 86.7 76.0 76.6 13

Sri Lanka 23.3 55.0 33.3 46.0 37.5 59

Philippines 50.0 62.5 60.0 58.0 56.1 41

Malaysia 73.3 80.0 83.3 80.0 77.6 10

Indonesia 76.7 65.0 80.0 52.0 69.4 27

Hong Kong 80.0 92.5 73.3 78.0 82.3 7

Bangladesh 50.0 45.0 43.3 44.0 46.7 55

Table: Asia Commercial Banking Business Environment Ratings


Loan deposit ratio %

92.6

Loan/Asset ratio %

67.1

Loan/GDP ratio %

54.6

Rank

36

Trend

Falling

Rank

14

Trend

Falling

Rank

40

Trend

Rising Bangladesh

Hong Kong 67.5 57 Rising 37.3 58 Rising 260.5 2 Falling

Indonesia 83.0 42 Rising 61.7 23 Rising 35.2 54 Rising

Malaysia 77.7 47 Falling 58.6 36 Rising 124.9 11 Rising

Philippines 76.9 52 Rising 56.8 41 Rising 36.8 52 Rising

Sri Lanka 79.7 44 Falling 60.4 31 Falling 30.1 55 Rising

Taiwan 80.7 46 Rising 63.8 25 Rising 163.9 5 Rising

Vietnam 116.0 14 Rising 79.4 2 Falling 102.8 14 Falling



United States 107.1 20 Falling 77.0 6 Rising 64.8 34 Rising

Thailand 106.9 23 Falling 64.8 20 Falling 81.9 23 Rising

South Korea 114.4 12 Falling 72.0 10 Rising 103.7 15 Falling

Singapore 92.0 30 Rising 52.3 42 Rising 135.0 8 Rising

Pakistan 59.8 60 Falling 41.3 49 Falling 20.5 58 Falling

Japan 69.3 54 Falling 47.9 45 Falling 92.4 19 Rising

India 77.1 49 Rising 66.1 15 Falling 52.5 44 Rising

China 74.9 50 Rising 50.8 43 Falling 124.6 10 Falling

Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013


Loan/Deposit Ratio, %

Loan Growth, US$bn

Deposit Growth, US$bn

Residual, US$bn Trend

Bangladesh 91.4 Falling 32.2 37.0 -4.8

Hong Kong 68.2 Rising 131.4 174.7 -43.3

Indonesia 84.4 Rising 167.4 178.6 -11.2

Malaysia 77.3 Falling 178.6 238.2 -59.6

Philippines 77.6 Rising 36.4 34.1 2.3

Sri Lanka 79.2 Falling 6.5 8.6 -2.1

Taiwan 82.8 Rising 212.3 199.4 12.9

Vietnam 119.2 Rising 53.6 39.8 13.9

NB Incorporates estimated economic data and projected banking data. Source: Central banks, regulators, BMI


United States 108.1 Falling 1,959.9 2,059.6 -99.7

Thailand 106.9 Falling 68.4 68.5 -0.1

South Korea 112.5 Falling 224.0 252.7 -28.8

Singapore 95.8 Rising 132.8 122.3 10.5

Pakistan 59.3 Falling 5.7 20.9 -15.3

Japan 69.0 Falling 297.5 610.8 -313.3

India 75.8 Falling 545.8 719.7 -174.0

China 74.2 Rising 2,148.5 2,212.0 -63.5

Table: Anticipated Developments in 2014


2013

Client Loans

2012

Client Loans Total Assets Client Deposits Total Assets Client Deposits

China 21,482.9 10,912.7 14,561.4 21,312.4 10,621.8 14,040.8

India 1,617.1 1,068.3 1,385.3 1,274.1 841.7 1,110.0

Japan 12,246.5 5,869.7 8,464.8 11,395.7 5,569.0 7,937.8

Pakistan 107.8 44.6 73.0 95.3 42.8 65.4

Singapore 766.0 401.0 436.0 748.7 399.6 408.5

South Korea 1,710.1 1,231.7 1,076.7 1,772.9 1,276.9 1,096.2

Thailand 493.2 319.5 298.8 461.6 297.6 279.6

United States 13,995.5 10,772.4 10,057.7 13,203.3 10,020.9 9,312.7



Vietnam 209.1 166.1 143.2 181.4 146.6 128.7

Taiwan 1,316.4 840.1 1,040.5 1,265.8 788.8 1,000.4

Sri Lanka 33.3 20.1 25.2 29.1 17.6 21.9

Philippines 181.0 102.7 133.7 170.5 91.2 125.3

Malaysia 747.2 437.8 563.4 610.9 357.9 456.5

Indonesia 532.3 328.5 395.7 452.8 284.2 339.4

Hong Kong 1,949.0 727.3 1,076.7 1,821.2 673.3 1,006.1

Bangladesh 104.6 70.2 75.8 89.1 59.8 63.7

Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn)


Client Deposits, per capita

455

Rich 20% Client Deposits, per capita

1,965

Poor 80% Client Deposits, per capita

123

GDP Per Capita

823 Bangladesh

Hong Kong 38,384 99,984 592,065 37,004

Indonesia 3,817 1,329 6,403 400

Malaysia 10,966 14,696 75,660 4,729

Philippines 2,860 1,047 5,450 341

Sri Lanka 3,129 940 4,721 295

Taiwan 21,773 36,059 178,643 11,165

Vietnam 1,782 1,832 6,316 395



United States 52,233 33,823 126,315 7,895

Thailand 5,613 4,616 17,266 1,079

South Korea 24,358 25,253 88,296 5,518

Singapore 56,049 75,638 329,000 20,562

Pakistan 1,222 243 1,594 100

Japan 50,260 46,457 267,991 16,749

India 1,596 838 4,346 272

China 6,544 8,028 42,848 2,678

Table: Comparison of US$ Per Capita Deposits (2013)


3 Month Interbank Rate %

Current Account % of GDP, 2013f

Budget balance % of GDP, 2013f

End Q3 2012

China 2.4 -1.7 3.67

India -3.6 -9.8 8.72

Japan 0.8 -9.8 0.19

Pakistan -2.0 -6.6 9.53

Singapore 14.4 1.4 0.33

South Korea 2.2 1.2 2.84

Thailand 2.2 -3.0 3.13

United States -3.0 -6.8 0.32

NB Incorporates actual financial markets data; estimated economic data and projected banking data. na=not available. Source: Central banks; regulators; BMI


Vietnam 0.0 -5.0 8.35

Taiwan 7.0 -2.7 0.87

Sri Lanka -5.7 -6.3 12.65

Philippines 3.4 -2.1 1.00

Malaysia 7.7 -5.4 3.20

Indonesia -2.1 -2.5 4.91

Hong Kong 2.4 4.9 0.40

Bangladesh 1.5 -4.6 n/a

Table: Interbank Rates and Bond Yields


Economic Outlook

BMI View: Vietnam's economy remains on track for a robust recovery in 2013, and we view consensus

estimates on growth as being overly pessimistic. The latest credit downgrade by rating agency Moody's

Investors Service has failed to surprise the bond markets and we believe that this is because concerns over

the build-up of bad debt in the banking sector have long been priced by investors. Furthermore, latest

economic indicators also support our view that economic conditions in Vietnam are improving and we are

maintaining our view that real GDP growth will come in strong at 7.0% in 2013.

Latest data published by the General Statistics Office (GSO) showed that Vietnam's real GDP growth

accelerated from 4.7% year-on-year (y-o-y) in Q212 to 5.4% in Q312, reinforcing our view that the

economy is poised for a robust recovery as we head into 2013. It is worthwhile to note, however, that the

general consensus remain deeply cautious towards the country's economic outlook. According to the latest

Bloomberg survey consisting of 11 economists, the median forecast for Vietnam's real GDP growth for

2013 currently stands at 5.8% while the mean forecast averaged slightly higher at 6.2%. This, in comparison

to our forecast for the Vietnamese economy to grow by a heady 7.0% in 2013, highlights the degree of

pessimism that the consensus presently holds - and what we view as an extreme in bearish macro sentiment.



Rebound In Sight

Vietnam - Real GDP, VNDbn (LHS) & % chg y-o-y (RHS)

Source: BMI, General Statistics Office

Ratings Downgrade Failed To Surprise Investors

Interestingly, Vietnam's foreign and local currency debt ratings were downgraded on September 28 by

ratings agency Moody's Investors Service from B1 to B2, citing lower growth prospects and risks to the

state balance sheet from weakness in the banking system. The latest downgrade places Vietnam's credit

rating five notches below investment grade, on par with countries such as Egypt and Cambodia. We see the

downgrade as coming somewhat behind the curve. We have been warning of a surge in bankruptcies since

the beginning of the year and the government has responded speedily by tightening supervision over the

banking sector and introducing reforms to merge ailing banks. Furthermore, we believe that the worst case

scenario of a banking crisis has already been contained.



Muted Response To Credit Downgrade

Vietnam - Two-Year & 10-Year Government Bond Yields, % & Spread, bps

Source: BMI, Bloomberg

Indeed, judging from the muted response in the bond markets following the ratings downgrade, it appears

that the risks of a potential bailout of ailing banks by the Vietnamese government have long been priced in

by investors. As the accompanying chart shows, 10-year Vietnamese sovereign bond yields have remained

largely stable within a narrow trading range of 10.25-10.50% in recent months. Yields on two-year

sovereign bonds have begun to tick up in recent weeks, following a higher-than-expected reading on



inflation in September (headline consumer price inflation accelerated from 5.0% y-o-y in August to 6.5% in

September, after recording 13 consecutive monthly declines since August 2011). However, looking at the

broader trend for bond yields (where yields have fallen substantially from the peak of around 12.5-13.0% to

current levels of around 10.0%), we believe that the recent uptick in yields do not warrant cause for alarm.

Early Signs Of A Recovery

Looking at more recent economic data, we point out that industrial production expanded by 9.7% y-o-y in

September, a significant increase from 4.4% in August and the fastest rate of expansion since February.

Retail sales for the first nine months of the year also grew by a robust 17% y-o-y, suggesting to us that

domestic demand is also starting to pick up. These factors reinforce our view that economic conditions in

Vietnam are improving and the economy is on track for a swift recovery over the coming quarters.

Accordingly, we are maintaining our view that real GDP growth will come in strong at 7.0% in 2013, and

we believe that signs of an improving economic outlook over the coming months will soon reignite bullish

sentiment towards Vietnam's growth prospects.

Threat Of Slower Growth Yet To Undermine Efforts For Reforms

Rapid credit growth and reckless lending practices among local banks have resulted in a build up of bad

debt over the years, fuelling concerns among investors that reigniting economic growth will prove to be a

challenging task in 2013. The economic slowdown in 2011 led by aggressive monetary tightening by the

SBV, resulted in a surge in NPLs and prompted banks to aggressively cut down on lending to small-and-

medium sized enterprises (SMEs). Growing evidence that real GDP growth could miss the government's

target of 6.0-6.5% in 2012 has so far failed to derail the SBV's efforts to push ahead reforms - an

encouraging sign that the government is willing to tolerate slower growth in return for macroeconomic

stability.

Over the longer term, we expect this restructuring of the banking sector alongside efforts to speed up the

privatisation of state-owned enterprises (SOE), to boost the quality of economic growth in Vietnam.

Although these reforms are unlikely to witness a smooth process, we should nonetheless see a more

efficient banking system that would allow real GDP growth to average at a robust 7.1% over the next

decade. A more efficient credit system should also see consumer price inflation averaging a benign 5.3%

over the same period.

Expenditure Breakdown

Private Consumption: We expect private consumption to grow at a relatively subdued pace of 4.9% in

2012 before accelerating towards 5.6% in 2013. However, we note that the risk of a sustained collapse in



exports and further bankruptcies among SMEs, could potentially lead to widespread job losses in export-

driven sectors. Uncertainties over the outlook for employment could in turn prompt households to cut back

on spending.

Gross Fixed Capital Formation: We foresee a significant pickup in private sector investment growth in

2013. We believe with lending rates will gradually ease over the coming months as the effect of recent rate

cuts by the SBV begins to kick in. Accordingly, we expect gross fixed capital formation growth to

accelerate from 4.3% in 2012 to 5.6% in 2013.

Public Spending: We expect total public spending to remain relatively resilient in 2013, expanding at a

respectable pace of 5.4%. However, there is limited room for the government to increase spending further

due to concerns over the need to finance a potential bailout of ailing state-owned commercial banks.

Net Exports: Net exports remain the biggest downside risk to our outlook for the Vietnamese economy

given that we expect external demand to remain sluggish as we head into H113. Despite recording an

average monthly trade surplus of US$172mn since June 2012 (resulting in a year-to-date surplus of US

$77mn), we do not see the case for a substantial pickup in external demand in the near term. Accordingly,

we expect exports to expand at a moderate pace of 6.5% in 2013.

2010 2011 2012e 2013f 2014f 2015f 2016f

Nominal GDP, VNDbn [2] 1,980,914.00 2,535,008.00 2,913,940.20 3,314,445.00 3,776,223.10 4,265,863.00 4,807,544.50

$bn [2] 103.5 122.7 138.5 159.3 183.6 209.8 239.2

Real GDP growth, % change y-o-y [2] 6.8 5.9 5.3 7.0 7.2 7.3 7.3

Population, mn [3] 87.8 88.8 89.7 90.7 91.6 92.4 93.3

Unemployment, % of labour force, eop 4 4.3 4.5 5.0 4.8 4.7 4.6 4.5

Notes: e BMI estimates. f BMI forecasts. 1 at 1994 prices. Sources: 2 Asian Development Bank, General Statistics Office; 3 World Bank/UN/BMI; 4 General Statistics Office.


Industrial production index, % y-o-y, ave [1,4] 14.1 10.9 8.0 12.0 14.0 13.0 12.0

GDP per capita, US$ [2] 1,178 1,382 1,544 1,758 2,005 2,270 2,564

Nominal GDP, US

Table: Vietnam - Economic Activity


Competitive Landscape

Market Structure

Protagonists

Central bank: State Bank of Vietnam (SBV)

www.sbv.gov.vn/en/home

The SBV implements the state management of currency trading, credit, payment, foreign exchange and banking; is the only bank authorised to issues bank notes; and acts as the bank to the banks and the state. The central bank organises the management of monetary policy and ensuring a stable currency value is its main objective.

www.sbv.gov.vn/en/home

Banking trade association: Vietnam Bankers Association (VNBA)

The VNBA was founded in 1994 and became a part of the ASEAN Bankers Association the following year, after Vietnam's accession to association. The functions of the VNBA are: to act as a link between the banks and the authorities, including dissemination of 'the policies, mechanisms and laws on banking operations' to its members; protecting the interests of the members; training and research; and expansion of international cooperation.

Definition Of The Commercial Banking Universe

The State Bank of Vietnam identifies six 'state-owned credit institutions' or 'state-owned commercial banks'

(SOCBs), 38 urban commercial joint stock banks (CJSBs), 32 branches of foreign banks and five joint

venture banks. There are also 17 finance companies and 54 representative offices of foreign banks. In terms

of the numbers of branches, VietinBank is the largest organisation, with a presence at 138 locations. The

other SOCBs also have large networks by local standards. Agribank has 115; BIDV, 103; VBSP, 65; VDB,

62; and MDHDB, 32. Of the urban CJSBs, the organisations which have over 25 branches are:

Maritime CJSB (26); Techcombank (38); VIB (42); Sacombank (59); Vietcombank (59); Eximbank

(35); Military Bank (36); ACB (54); Saigonbank (31); VP Bank (34); and EAB (28). None of the joint-

venture banks have more than five branches.


www.vnbaorg.info

Among its other functions, the SBV is the regulator of the banking system.

Principal banking regulator: State Bank of Vietnam (SBV)

The SBV is the successor to the Vietnam National Bank, which was established by the government of North Vietnam in 1951. From 1975 to May 1990, the SBV was the banking system of Vietnam. The government then established the 'two- tier' system that is still in place. The financial liberalisation at the beginning of the 1990s lead to the establishment of four large state-owned commercial banks: Agribank, BIDV, Incombank and Vietcombank. This period also included the establishment of commercial joint-stock banks, joint-venture banks, branches or representative offices of foreign banks, credit cooperatives, people's credit funds and finance companies.

Table: Protagonists In Vietnam's Commercial Banking Sector

http://www.sbv.gov.vn/en/home

http://www.sbv.gov.vn/en/home

http://www.vnbaorg.info/


List Of Banks

State-owned Commercial Banks

Vietnam Bank for Industry and Trade (VietinBank)

Mekong Delta Housing Development Bank

Bank for Investment and Development of Vietnam

Urban Joint-Stock Commercial Banks

Bac A Commercial Joint Stock Bank

Gia Dinh Commercial Joint Stock Bank

Kien Long Commercial Joint Stock Bank

LienViet Commercial Joint Stock Bank

My Xuyen

Nam A Commercial Joint Stock Bank

Bank for Foreign Trade of Vietnam

Housing Development Commercial Joint Stock Bank

Orient Commercial Joint Stock Bank

Vietnam International Commercial Joint Stock Bank

Saigon-Hanoi Commercial Joint Stock Bank

Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank)


Pacific Commercial Joint Stock Bank

Saigon Bank for Industry and Trade

Saigon Commercial Joint Stock Bank

Military Commercial Joint Stock Bank

Southern Commercial Joint Stock Bank

Habubank

Vietnam Commercial Joint Stock Bank for Private Enterprise

Nam Viet Commercial Joint Stock Bank

Western Rural Commercial Joint Stock Bank

Vietnam Technological and Commercial Joint Stock Bank (Techcombank)

Maritime Commercial Joint Stock Bank

Global Petro Commercial Joint Stock Bank

An Binh Commercial Joint Stock Bank

Vietnam Development Bank

Vietnam Bank for Agricultural & Rural Development (Agribank)

Vietnam Bank for Social Policies

Table: Financial Institutions In Vietnam


TienPhong Commercial Joint Stock Bank

Viet A Commercial Joint Stock Bank

Petrolimex Group Commercial Joint Stock Bank

South East Commercial Joint Stock Bank (SeABank)

Ocean Commercial Joint Stock Bank

Great Asia Commercial Joint Stock Bank

BaoViet Joint-Stock Commercial Bank

Foreign Bank Branches

Australia & New Zealand Banking Group (Australia)

Standard Chartered Bank (UK)

Chinfon Commercial Bank (Taiwan)

ABN AMRO Bank (Netherland)

Mizuho Corporate Bank (Japan)

Shinhan Bank (South Korea)

United Overseas Bank (Singapore)

Bank of China (China)

Mega International Commercial Bank (Taiwan)

Woori Bank (South Korea)


JPMorgan Chase (US)

OCBC Bank (Singapore)

Bank of Tokyo-Mitsubishi UFJ (Japan)

Deutsche Bank (German)

HSBC (UK)

BNP Paribas (France)

Bangkok Bank (Thailand)

Maybank (Malaysia)

Citibank (US)

Calyon (France)

Natexis (France)

First Commercial Joint Stock Bank

Great Trust Commercial Joint Stock Bank

Eastern Asia Commercial Joint Stock Bank

Asia Commercial Joint Stock Bank

Vietnam Commercial Joint Stock Export-Import Bank

Viet Nam Thuong Tin Commercial Joint Stock Bank

Financial Institutions In Vietnam - Continued


Korea Exchange Bank (South Korea )

Chinatrust Commercial Bank (Taiwan)

Far East National Bank (US)

Sumitomo-Mitsui Banking Corporation (Japan)

Taipei Fubon Bank (Taiwan)

Industrial Bank of Korea (South Korea)

Joint Venture Banks

Shinhanvina Bank

VinaSiam

Source: SBV, September 2010


Vietnam-Russia Bank

VID Public Bank

Indovina Bank

Commonwealth Bank (Australia)

Hua Nan Commercial Bank (South Korea)

Cathay United Bank (Taiwan)

First Commercial Bank (Taiwan)

Lao-Viet Bank (Laos)

Financial Institutions In Vietnam - Continued


Company Profile

Strengths Minority owner Mizuho has boosted bank's profile. ■

Largest correspondent network among Vietnamese banks. ■

Clear competence in external trade. ■

Strong market position. ■

Sharp increase in total assets during 2011. ■

Weaknesses Profit after tax declined during 2011. ■

• Lack of transparency.

Opportunities Stronger expansion to outpace growth at smaller, non-state rivals. ■

15% stake acquisition by Japan's Mizuho Corporate Bank. ■

Strong increase in loans to customers during 2011. ■

• Improving capital position.

Threats Tighter monetary policy to tame economic growth. ■

• Risk to asset quality on the back of difficult operating environment in 2012.

Company Overview Established in 1963 as a state-owned commercial bank, Vietcombank has paid-up

capital of VND3,955bn. It is the oldest commercial bank for external affairs in Vietnam

and was the first bank in the country to have a centralised capital management

structure. It describes itself as an 'interbank forex payment centre for over 100

domestic banks and foreign banks' branches operating in Vietnam', and was the first

commercial bank in the country to deal in foreign currencies. The bank's employees

rose from 11,415 in 2010 to 12,565 as of the end of 2011.


Bank for Foreign Trade of Vietnam (Vietcombank)


Vietcombank's operations have been supported by the largest correspondent network

among Vietnamese banks with more than 1,300 correspondent financial institutions in

over 90 countries and territories.

Vietcombank has expanded from its original role as North Vietnam's foreign trade bank

to become one of the country's largest universal banks. It is also an investor in a

number of other financial institutions, including Vietnam Export Import CJSB, Saigon

Industrial and Commercial CJSB, Gia Dinh CJSB, Military CJSB, International

Commercial CJSB, Oriental CJSB, Chohungvina Bank, Petroleum Insurance

Company and Golden Insurance Company.

Japan's Mizuho Corporate Bank acquired a 15% stake in Vietcombank for a total of

VND11.8trn (US$559.04mn) in January 2012, some months after the deal was revealed.

The acquisition, which advantageously gives Vietcombank a stronger foreign partner,

involved the sale of 347.61mn shares.

Corporate

Highlights

Consolidated profit before tax reached VND5,697bn in 2011, up 2.3% y-o-y compared

to the VND5,569bn recorded in 2010. Profit after tax was VND4,217bn, down marginally

from VND4,303bn. Total assets, meanwhile, stood at VND366,722bn as of December

31 2011, representing a 19.2% y-o-y increase from VND307,621bn in 2010. This also

exceeded the set target of a 15% increase set at the previous shareholders' General

Meeting.

Loans to customers came in at VND209,418bn as of the end of 2011, up 18.4% y-o-y

from VND176,814bn as of December 31 2010. The NPL/Gross loans ratio of 2011 was

2.03%. (2.83)

Standard & Poor's, encouraged by the acquisition, argued that Mizuho Corporate

Bank's involvement strengthened Vietcombank's capital position. The agency upgraded

its outlook on the bank's long-term rating to 'stable' from 'negative' in January 2012.

Company Address Vietcombank (Bank For Foreign Trade of Vietnam)

198 Tran Quang Khai

Hanoi

Vietnam

Description of Business: Leading commercial bank specialising project finance, trade

finance, treasury, financial market and international banking services.

Phone: +84 (4) 825 1322

Fax: +84 (4) 826 9067

[email protected]

http://www.vietcombank.com.vn


mailto:[email protected]

http://www.vietcombank.com.vn/


2008

n.a.

2009

56,874,044

2010

57,159,508

2011

42,941,740

24-Jan-13

63,033,744 Market Capitalisation VND

Share Price VND n.a. 32,384 29,018 21,800 27,200

Share Price, % change (eop) -15.1

Shares Outstanding (mn) 1,756 1,756 1,481 1,970 n.a.

Source: Bank of Foreign Trade of Vietnam (Vietcombank), Bloomberg

2006

166,952,016

2007

198,457,113

2008

221,950,448

2009

255,495,883

2010

307,621,338

2011

366,722,279 Total Assets

Total Deposits 119,778,872 143,401,576 157,067,019 169,427,776 204,755,949 227,016,854

Earnings per share (VND) n.a. n.a. 672 2,233 1,879 1,789


2006 2007 2008 2009 2010 2011

Total Assets 10,398 12,390 12,695 13,826 15,777 17,436

Total Deposits 7,460 8,953 8,984 9,169 10,501 10,793

Earnings per share (US$) n.a. n.a. 0.04 0.13 0.10 0.09



Total Shareholders' Equity 698 917 795 910 1,070 1,368

Loans & Mortgages 4,219 6,089 6,208 7,414 8,783 9,703

Table: Balance Sheet (US$mn)

Total Shareholders' Equity 11,202,342 14,684,963 13,893,437 16,819,641 20,856,761 28,781,930

Loans & Mortgages 67,742,520 97,531,864 108,528,764 136,996,006 171,241,318 204,089,479

Table: Balance Sheet (VNDmn)

Change, year-to-date -13.5 30.7

Share Price US$ n.a. 1.75 1.49 1.04 1.31

Market Capitalisation US$ n.a. 3,078 2,932 2,042 3,028

Table: Stock Market Indicator


2006 2007 2008 2009 2010 2011

Return on Assets 1.9 1.3 1.2 1.6 1.5 1.2

Loan Deposit Ratio 56.6 68.0 71.8 83.6 86.4 92.2

Equity Asset Ratio 6.7 7.4 6.2 6.5 6.7 7.8



Loan Asset Ratio 40.6 49.1 50.8 55.4 57.5 57.1

Return on Equities 29.4 18.6 17.8 25.7 22.9 17.0

Table: Key Ratios (%)


Strengths Vietnam's largest partly private lender by assets. ■

10% owned by the International Finance Corporation. ■

Strong branch network. ■

Bad debt ration below 1.5% of loans. ■

2011 profit exceeded predictions. ■

Weaknesses Possible exposure to the effects of the bursting of the asset price bubble. ■

Opportunities VietinBank has a 20% market share in Vietnam in terms of total assets is too large to

be ignored.

■

Possible listing in the long term. ■

Targeting lending growth of 20% y-o-y in 2012. ■

25% y-o-y increase in total assets in 2011. ■

Threats Possible exposure to downturn in global trade. ■

Predicted growth limited by state credit limits. ■

Company Overview The Bank for Industry and Trade (VietinBank) was established in 1988 when it was

separated from the State Bank of Vietnam. It became a state-owned corporation in

1993. As one of the four largest state-owned commercial banks in the country,

VietinBank's total assets account for over 20% of the market share of the whole

Vietnamese banking system. VietinBank's capital resources have continued to increase

over the years and have been rising substantially since 1996, with annual average

growth of 20%.

VietinBank has developed a retail and administration network across the country. The

bank's network operates in 56 provinces and cities, with a focus on large cities such as

Hanoi (12 branches; two transaction centres), Ho Chi Minh City (17 branches; one

transaction centre); industrial zones; trading and economic parks; and densely

populated areas. VietinBank is an investor in other institutions such as Saigonbank,


VietinBank


Indovina Bank, Vietnam International Leasing Company and the VietinBank-Asia

Insurance Company.

VietinBank is 10% owned by the International Finance Corporation, which invested

US$307mn in the lender in 2011. This was the first strategic investment by a foreign

organisation in a Vietnamese state-owned bank. Discussions over selling a 15% stake

to the Canada-based Bank of Nova Scotia are still ongoing as of January 2012,

despite plans to conclude the deal by the end of 2011.

In December 2012, Japanese commercial bank Bank of Tokyo Mitsubishi UFJ

announced that it has acquired a 20% stake in VietinBank. The deal was valued at US

$742mn. The acquisition will enable Bank of Tokyo Mitsubishi UFJ to help Japanese

companies operating in Vietnam, as well as expanding its commercial operations in

South East Asia. Bank of Tokyo Mitsubishi UFJ will also appoint two directors onto the

board of VietinBank.

Corporate

Highlights

The bank's profit in 2011 exceeded forecasts, increasing by 76% y-o-y to VND8.11trn.

Total assets grew 25% y-o-y in 2011 to VND460.4trn, compared with VND367.7trn a

year earlier, making VietinBank the 2nd ranking bank in Vietnam with regard to total

assets. Non-performing loans for 2011 made up 0.74% of VietinBank's overall credit,

and the bank revealed that it is targeting clipping bad debts to below 3% in 2012. The

bank is projecting a 20% y-o-y increase in lending activities in 2013.

Company Address VietinBank - Vietnam Joint Stock Commercial Bank for Industry and Trade

108 Tran Hung Dao

Hanoi

Vietnam

Fax: (84) 439428693

http://www.vietinbank.vn

Website: www.vietinbank.vn Company Data ■

• Status: State-Owned Commercial Bank


http://www.vietinbank.vn/

http://www.vietinbank.vn/


2009

33,196,270

2010

34,896,268

2011

35,806,608

24-Jan-13


Share Price VND 17,174 16,110 13,657 20,700


Shares Outstanding (mn) 1,933 2,166 2,622 n.a.

Source: Vietnam Bank for Industry and Trade (Vietinbank), Bloomberg

2006 2007 2008 2009 2010 2011

Total Assets 135,363,026 166,112,976 193,590,357 243,785,208 367,730,655 460,603,925

Total Deposits 99,683,408 112,692,816 121,634,466 148,530,242 205,918,705 257,273,708

Earnings per share (VND) n.a. n.a. n.a. 659 1,456 2,440


2006

8,431

2007

10,371

2008

11,073

2009

13,193

2010

18,860

2011

21,899 Total Assets

Total Deposits 6,208 7,036 6,957 8,038 10,561 12,232

Earnings per share (US$) n.a. n.a. n.a. 0.04 0.08 0.12



Total Shareholders' Equity 349 665 706 691 944 1,364

Loans & Mortgages 4,988 6,273 6,784 8,746 11,870 13,807



Loans & Mortgages 80,091,149 100,482,232 118,601,677 161,619,376 231,434,054 290,397,810


Change, year-to-date 16.5 46.4

Share Price US$ 0.93 0.83 0.65 0.99

Market Capitalisation US$ 1,796 1,790 1,702 2,607

Table: Stock Market Indicators


2006 2007 2008 2009 2010 2011

Return on Assets 0.5 0.8 1.0 0.6 1.1 1.5

Loan Deposit Ratio 80.4 n.a. n.a. 109.9 113.7 114.1




Loan Asset Ratio 59.2 n.a. n.a. 66.9 63.7 63.7




Strengths Established as one of the largest state-owned commercial banks. ■

Massive branch network, especially in rural Vietnam. ■

Bad debt ratio reduced to around 4% in 2012. ■

Weaknesses Possible effects of the bursting of the asset price bubble. ■

Opportunities Attractive partner for any other financial institutions looking to cross-sell products to

the mass market in Vietnam.

■

Expanding footprint into Cambodia. ■

Possible listing in the long term. ■

Undergoing three-year restructuring programme with the Vietnamese government. ■

Threats Perceived exposure to the downturn in global trade. ■

Credit rationing by state will limit growth. ■

Series of embezzlement scandals have damaged the bank's reputation. ■

Company Overview Established in 1988, the Vietnam Bank for Agriculture and Rural Development

(Agribank) is a leading commercial bank and plays a decisive role in capital investment

in developing the agricultural and rural economy, as well as other fields of the

Vietnamese economy. Agribank has over 35,000 staff and about 2,300 branches and

transaction offices nationwide. It is currently the country's largest bank by assets and

extended its reach to Cambodia in 2010 by opening its first overseas branch in the

kingdom.

Agribank has completed a long-term financing agreement with the state oil company

Petrovietnam to provide financing at lower interest rates for the company to develop

Vietnamese oil resources. This could help Agribank establish more long-term

relationships with major businesses.


Agribank


Corporate

Highlights

Chairman Nguyen Ngoc Bao said in early-February 2012 that the bank had agreed an

extended restructuring plan with the Vietnamese government to be implemented over a

period of three to four years. As part of the revised strategy, Agribank will remain state-

owned but play a more prominent social policy role in support of the country's rural and

agricultural communities. Central bank governor Nguyen Van Binh stipulated that

between 75% and 80% of Agribank's annual lending should go to Vietnamese farmers

in support of the country's key export crops, coffee and rice. Bao also confirmed that

the bank's capital adequacy ratio (CAR) rose from 6.4% in 2010 to 8% in 2011 and

estimated that the Agribank's CAR could reach 9% in 2012 with the aid of a capital

injection from the State Bank of Vietnam to boost its charter capital by VND30trn.

Meanwhile in December 2012, the bank announced that its bad debt ratio had reduced

to around 4% from 6.1% at the beginning of the year. Bao has suggested that this ratio

could drop to as little as 3% between 2015 and 2020, depending on the bank achieving

strong credit growth.

In January 2013, Vietnamese federal police said they had arrested former general

director of the state-owned Agribank, Pham Thanh Tan, for "irresponsibility causing

serious consequences." The news comes on the back of a series discoveries of

massive embezzlements by senior employees, mostly to finance gambling habits. In

November 2012, the Ho Chi Minh City police arrested three senior executives for

stealing US$960,000 from the bank, while city prosecutors charged four others in a US

$5.33mn scam. Another executive was arrested in the city in October for allegedly

stealing US$1mn. In addition, in July 2012 a court in Binh Dinh Province handed a life

sentence to a teller for stealing nearly US$1mn.

Website: www.agribank.com.vn

Status: State-owned commercial bank

Company Data ■

■

2006 2007 2008 2009

Total Assets 238,495,024 321,444,128 400,485,183 480,937,045

Total Deposits 160,396,528 233,638,848 299,954,030 331,893,865

2,565,545 10,627,676 17,798,086 19,860,526 Equity

Source: Vietnam bank for Agriculture and Rural Development (Agribank), Bloomberg


Total Shareholders'

Loans & Mortgages 181,252,960 246,188,336 288,940,827 361,739,747


http://www.agribank.com.vn/


2006 2007 2008 2009

Total Assets 14,854 20,069 22,907 26,026

Total Deposits 9,990 14,587 17,157 17,961

160 664 1,018 1,075 Equity


2006

0.5

2007

1.6

2008

0.6

2009

0.4 Return on Assets

Equity Asset Ratio 1.1 3.3 4.4 4.0



Return on Equities 66.2 69.4 15.1 9.6


Total Shareholders'

Loans & Mortgages 11,289 15,370 16,527 19,576



Strengths Asset growth. ■

Launched US$2mn IBM datacentre to support expansion in 2011. ■

Pre-tax profits rose during 2011 full-year. ■

Weaknesses Lack of transparency. ■

• Slowing credit growth.

Opportunities Stronger expansion to compete with state lenders. ■

Customer deposits and loans both achieved higher growth rates than industry

average in 2011.

■


Scandals involving bbank executives have damaged the bank's reputation. ■

Risk to asset quality on the back of difficult operating environment in 2012. ■

Company Overview Ho Chi Minh City-based Asia Commercial Bank (ABC) was founded in 1993 and

expects its branches to expand three-fold to about 900 by 2015. The bank has

ambitions to enter Vietnam's 'big four' banking circle in the next few years, which would

make it the first non-state lender to do so. The bank said in late 2011 that it aims to rival

the country's dominant state lenders by 2015, with assets jumping three-fold to

VND900trn (US$42.9bn) from VND255trn.

The resignation of a chairman and two executives at ACB in November 2012 fuelled

fears that the beleaguered bank's crisis may indicate wider trouble in the country's

banking system. Chairman Tran Xuan Gia and two deputies resigned on the back of

company deposits being placed with another bank and approved by them. The news

also added to mounting fears over the health of Vietnam's banking industry, first

sparked by the arrest of one of ACB's founders.

Police in Vietnam have confirmed that they are pushing ahead with charges brought

against multimillionaire banking tycoon Nguyen Duc Kien, one of the founders of ACB.


Asia Commercial Bank


Kien was arrested on August 20 2012, charged with 'illegal business activities' and has

been now accused of 'deliberate wrongdoing causing serious consequences' and fraud.

The bank said in January 2011 that it was to build a new data centre in Ho Chi Minh

City. The centre carried a cost of over US$2mn and is to help the bank better manage

information and customer records. IBM is helping ACB create an IT plan and will play a

role in all facets of the new centre, along with Vietnamese-firm AICT.

Corporate

Highlights

Consolidated profits before tax of ACB reached approximately VND4,203bn in 2011,

higher than the bank's target, and an increase of 34% y-o-y from the pre-tax profit

figure at the end of 2010. The size of the bank increased rapidly and stably in the year

2011. As of December 31 2011, total assets reached VND281,019bn, growing 37% y-o-

y in comparison with 2010.

Of the entire increase in total assets, up to 63% was generated from the stable source

of customer deposits. The amount of customer deposits at ACB reached VND185,637bn

in 2011, up by 35% y-o-y at a time when average growth in the Vietnamese banking

industry was 14.4%. ACB's deposit market share was estimated to be at 6.5%, an

increase of nearly 1% y-o-y. Meanwhile, personal and business loans of the bank grew

18% y-o-y in 2011, roughly 1.5 times the industry average. As of December 31 2011,

outstanding loans reached VND102,809bn, increasing ACB's lending market share by

0.2% to 4%. In short, ACB's customer deposits and loans both achieved higher growth

rates than the industry average.

2006

n.a.

2007

41,493,748

2008

17,637,414

2009

29,067,754

2010

24,473,174

2011

20,348,014

24-Jan-13


Share Price VND n.a. 69,072 24,886 33,650 26,100 21,700 16,500

Share Price, % change (eop) -67.0 27.9 -26.5

Shares Outstanding (mn) 336 601 709 864 938 938 n.a.

Source: Asia Commercial Bank (ABC), Bloomberg



Share Price US$ n.a. 4.31 1.42 1.82 1.34 1.03 0.79

Market Capitalisation US$ n.a. 2,591 1,009 1,573 1,255 967 743



2006 2007 2008 2009 2010 2011

Total Assets 44,645,040 85,391,681 105,306,130 167,881,047 205,102,950 281,019,319

Total Deposits 33,606,012 55,283,104 64,216,949 86,919,196 106,936,611 142,218,091

Earnings per share (VND) 1,467 3,738 3,473 2,653 2,861 3,280


2006

2,781

2007

5,331

2008

6,023

2009

9,085

2010

10,519

2011

13,361 Total Assets

Total Deposits 2,093 3,452 3,673 4,704 5,484 6,762

Earnings per share (US$) 0.09 0.23 0.21 0.15 0.15 0.16


2006

1.5

2007

2.7

2008

2.3

2009

1.6

2010

1.3

2011

1.3 Return on Assets





Loan Asset Ratio 38.1 37.3 33.1 37.1 42.5 36.6



Total Shareholders' Equity 106 391 444 547 583 569

Loans & Mortgages 1,056 1,978 1,979 3,347 4,435 4,841



Loans & Mortgages 16,954,114 31,676,320 34,604,077 61,855,984 86,478,408 101,822,720



Strengths Valued by the major international banks that deal with it. ■

Emerged from the global financial crisis in a strong position. ■

Has reduced its loan-to-deposit ratio to well below 100% and is less dependent on

borrowing from other financial institutions.

■

Reducing its vulnerability to a lack of liquidity within the banking system. ■

Credit quality of the bank is well controlled. ■

Stable ratings outlook from S&P's. ■

Weaknesses Lack of scale. Eximbank is a fairly large bank in Vietnam but a small institution by

international standards.

■

Potential for problems in the wake of the bursting of the asset price bubble. ■

Opportunities Potential for continuing growth from a low base. ■

Acquisition of minority holding in Sacombank. ■

Strong profits recorded in 2011. ■

Threats Vulnerability to direct or indirect impact from the downturn in global trade. ■

Profit growth is particularly threatened by government loan policy. ■

Company Overview Vietnam Export-Import Bank (Eximbank), established in 1989, is one of country's the

largest commercial joint stock banks in terms of owner's equity. It has a nationwide

network of 183 branches and transaction offices. Its head office is in Ho Chi Minh City.

The bank's total number of employees stood at 5,430 as of the end of 2011, up from

4,472 a year earlier.

The bank's growth is threatened by government concerns over the credit supply. The

government limited credit supply growth to 25% in FY10. This has put the brakes on

bank's growth, which for Eximbank is largely fuelled by an expansion in its loan

portfolio. However, the application of such rules to Eximbank has been less severe


Eximbank


given its role in the export sector, which the government is keen to promote and protect

as much as possible from restrictive measures aimed at preventing the economy from

overheating.

Corporate

Highlights

As of the end of 2011, Eximbank reported total assets of VND183.6trn, up by 40% y-o-y

from VND131.1trn a year earlier. Within this profit before tax for 2011 reached

VND4,056bn, up by 71% from VND2,378bn in 2010. Similarly net operating profit rose

from VND2,643bn in 2010 to VND4,327bn by the end of 2011. By the end of 2011, the

NPL ratio at Eximbank accounted for 1.61% of the total loan balance, lower than that of

the whole banking industry.

Eximbank has stated that between 2011-2015, it is implementing a five-year

development plan in order to maintain growth while gradually increasing its shareholder

dividends.

In January 2012, Eximbank secured a 9.6% stake in fellow Vietnamese lender

Sacombank for US$77.5mn from Australian group ANZ. It represented the first major

divestment of Vietnamese assets by an overseas bank. The two banks, both based in

Ho Chi Minh City, will seek approval for the plan from shareholders and government

agencies for the deal.

In November 2012, Standard & Poor's has assigned a 'B+' and a 'B' to Eximbank's

long- and short-term issuer credit ratings, according to a press release. The agency

said that its ratings outlook is stable, as the lender demonstrates an adequate business

and risk position. The agency also described the bank's capital as weak, however,

adding that its funding is average.

Website: www.eximbank.com.vn/en

Status: Commercial Joint-Stock Bank

Company Data ■

■


http://www.eximbank.com.vn/en


2009

21,029,446

2010

16,368,107

2011

17,668,052

24-Jan-13


Share Price VND 17,094 13,248 14,300 15,700


Shares Outstanding (mn) 1,236 1,236 1,236 n.a.

Source: Vietnam Export-Import Commercial Joint-Stock Bank (Eximbank), Bloomberg

2006 2007 2008 2009 2010 2011

Total Assets 18,323,772 33,710,424 48,247,821 65,448,356 131,110,882 183,567,032

Total Deposits 13,141,175 22,906,123 30,877,730 38,766,465 70,703,663 53,652,639

Earnings per share (VND) 2,045 1,694 749 917 1,468 2,460


2006

1,141

2007

2,105

2008

2,760

2009

3,542

2010

6,724

2011

8,728 Total Assets

Total Deposits 818 1,430 1,766 2,098 3,626 2,551





Loans & Mortgages 633 1,147 1,193 2,057 3,165 3,520



Loans & Mortgages 10,161,268 18,378,610 20,855,907 38,003,086 61,717,617 74,044,518



Share Price US$ 0.93 0.68 0.68 0.75

Market Capitalisation US$ 1,138 839 840 932



2006 2007 2008 2009 2010 2011

Return on Assets 1.7 1.8 1.7 2.0 1.8 1.9





Total Risk Based Capital Ratio n.a. n.a. n.a. n.a. 17.8 n.a.

Loan Asset Ratio 55.7 54.7 44.0 58.6 47.6 40.7




Strengths Support from minority stakeholder HSBC. ■

The bank has consistently expanded its branch network since its founding. ■

Strong profitability recorded in 2011. ■

Sound capital adequacy ratio. ■

Weaknesses Tight competition for deposits. ■

The bank has some way to go in modernising processes and systems. ■

Lack of transparency. ■

Opportunities The bank has strong scope for expansion over the long-term. ■

Growth in total assets during 2011. ■

Boost in lending in SME sector. ■

Threats Operating expenses increased 32% y-o-y in 2011. ■

Company Overview Hanoi-based Vietnam Technological and Commercial Joint-stock Bank, or

Techcombank as it is more commonly known, began life in 1993 with its headquarters

then in Ho Chi Minh. Within five years the bank had relocated its headquarters to the

capital and established a handful of branches across Vietnam. London-based HSBC,

which held smaller stakes in the bank in previous years, has held its current 20%

shareholding in the lender since 2008 (where it remained as of early 2012). The bank

has a network of 307 branches and 1,205 ATMs throughout the country, and a

workforce of 8,335.

Corporate

Highlights

As of the end of 2011, the bank's assets totalled VND180,531bn, representing an

increase of 20% y-o-y. As of the same date pre-tax profit came in at a record

VND4,221bn, equivalent to an increase of 54% y-o-y from 2010. Operating income,

meanwhile, increased by VND1,943bn, or 41% y-o-y, to reach VND6,662bn as of

December 31 2011. This success was achieved due to growth in all business activities.

Net Interest income increased continually by 66% y-o-y, reaching VND5,298bn in 2011.


Vietnam Technological and Commercial Joint-stock Bank


During 2011 operating expenses increased by VND511bn, or 32% y-o-y from 2010.

Lending increased across a number of sectors in 2011, with an increased focus on

exposure to better-rated counter parties and collateralised transactions. Loans to

individual customers grew by VND3,837bn in 2011 to reach VND22,234bn, representing

35% of Techcombank's customer loans.

The bank's capital adequacy ratio of 11.43% was significantly higher than the 9%

minimum required by State Bank of Vietnam.

The bank signed a US$30mn loan agreement with Dutch development bank FMO in

September 2011, in a deal designed to boost lending to both retail and small- and

medium-sized enterprise (SME) customers.

The bank, along with some of its rivals, came under fire by the central bank in late 2010

as it began offering relatively high interest rates on deposits of over 17% in a bid to

grab market share. The State Bank of Vietnam argued that such rates were risky,

potentially destabilising and detrimental to profitability.

2006 2007 2008 2009 2010 2011

Total Assets 17,326,352 39,542,496 59,069,056 92,581,504 150,291,215 180,531,163

Total Deposits 9,566,043 24,476,576 39,617,724 62,347,400 80,550,753 88,647,779

Earnings per share (VND) 1,446 2,452 4,259 3,148 2,990 2,902

Source: Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Bloomberg

2006 2007 2008 2009 2010 2011

Total Assets 1,079 2,469 3,379 5,010 7,708 8,583

Total Deposits 596 1,528 2,266 3,374 4,131 4,215





Loans & Mortgages 542 1,279 1,488 2,250 2,683 2,974



Loans & Mortgages 8,696,101 20,486,132 26,018,984 41,580,368 52,316,862 62,562,406



2006 2007 2008 2009 2010 2011

Return on Assets 1.8 1.8 2.4 2.2 1.7 1.9

Loan Deposit Ratio n.a. n.a. n.a. n.a. 65.7 71.6




Loan Asset Ratio n.a. n.a. n.a. n.a. 35.2 35.1




Strengths Expected profit increase for 2011. ■

Capital base continues to strengthen. ■

Weaknesses Lack of modernisation. ■


Limited presence in Vietnam. ■

Opportunities Further domestic expansion plans. ■

Plans to hike chartered capital to VND5trn. ■



Slowing credit growth. ■

Company Overview Ho Chi Minh City-based Viet A Joint Stock Commercial Bank (Vietabank) had 80

branches as of May 2011 and maintains a physical growth target of between 14 and 18

new branches annually.

Corporate

Highlights

In the lastest available data published, Vietabank's pre-tax profit reached VND347bn

(US$16.44mn) in 2010, with return on assets and return on equity standing at 1.33%

and 10.46% respectively. The bank's capital surged by 94% to VND2.94trn (US

$139.29mn) by the end of 2010 on the same point in the previous year. Deposits also

increased by 25% to VND13.47trn (US$638.16mn) by the end of the year, while total

outstanding credit reached VND13.29trn (US$629.63mn) for the year. The majority of

total credit extended during 2010 was made up by short-term loans at 58% of the total,

with long-term loans accounting for the remainder. Meanwhile, the bank's total

investments surged by as much as VND3.45trn (US$163.45mn) to VND3.93trn (US

$186.19mn) in 2010.

The bank said in November 2011 that it sought to generate a pre-tax profit of

VND602bn (US$28.52mn) for 2011, marking a 73.5% jump on the previous year.


Viet A Joint Stock Commercial Bank (Vietabank)


In April 2012 it was reported that VietABank has purchases 3.52mn shares in southern

bourse-listed Dat Xanh Real Estate Construction and Services Joint Stock Co

(DXG). This was equivalent to a 11% holding in the firm.

At the bank's AGM in May 2013, VietABank announced plans to hike chartered capital

to VND5trn via issuing additional shares valued at VND1.902trn to offer for existing

shareholders and domestic partners. With chartered capital of VND5trn, VietABank

expects to reach total asset value of VND37trn, total outstanding loans of

VND13.315trn, and after tax profit of VND410bn in 2011. The lender's capital adequacy

ratio (CAR) would be higher than 9% and the bad debts ratio is expected at less than

3%.



Strengths Recently completed its four-year modernisation plan in 2012. ■

Strong rise in pre-tax profits during 2011. ■

NPL ratio lower than industry average. ■

Weaknesses Credit growth capped by central bank. ■

Limited profitability. ■


Opportunities Further restructuring and expansion. ■

Increase in total loans and deposits in 2011. ■

Fast-expanding branch network. ■



Credit growth capped by central bank. ■

Company Overview Ho Chi Minh City-based Housing Development Commercial Joint Stock Bank

(HDBank) was founded in 1990. One of the country's first commercial banks upon

establishment, the lender had 120 branches and transaction offices across Vietnam as

of the end of 2011, an increase of 25% y-o-y. The bank has more than 2,000

employees.

HDBank has just completed the second phase of its restructuring project (2009 -

2012). This project included enhancing financial capacity, developing modern

technology, building strong and professional human resources, providing a large

spectrum of product packages to satisfy different demands of customers.


Housing Development Commercial Joint Stock Bank (HDBank)


Corporate

Highlights

As of December 31 2011, HDBank's pre-tax profit reached VND566bn, up by 61% y-o-

y from 2010. The bank's net profit, meanwhile, came in at VND427bn as of the same

date. On a comparable basis of 2011 to 2010 financial performance, the bank's total

assets increased by 31.2% (or VND10,636bn) to VND45,107bn. Meanwhile, total

deposits increased by 30.1% y-o-y in 2011 and total loans increased by 18.1% from

2010.

The bank's bad debt ratio as of December 31 2011 was 1.63%, which was lower than

the industry average.

The State Bank of Vietnam took action against the lender in November 2011, calling on

one of its deputy directors to resign after HDBank broke the central bank's 14% cap on

deposit rates. The central bank also capped HDBank's credit growth at 10% on an

annual basis.



Strengths Strategic partnerships with Australia and New Zealand Banking Group and the

International Finance Corporation.

■

Emerged from the global financial crisis in a strong position. ■

Reduced its loan-to-deposit ratio to well below 100%. ■

Reducing its vulnerability to a lack of liquidity within the banking system. ■

Weaknesses Lack of scale - Sacombank is a fairly large bank in Vietnam but a small institution by

international standards.

■

Potential direct and indirect problems from the bursting of the asset price bubble. ■

Opportunities Potential for continuing growth from a low base. ■

Strong increase in profits during 2011. ■

Tie-up with Eximbank. ■

Leverage of strong position in the SME lending sector. ■

Expansion into southern China and countries in the Association of Southeast Asian

Nations.

■

Threats Vulnerability to direct or indirect impact from the downturn in global trade. ■

Vulnerable to government credit caps. ■

Total deposits declined during 2011. ■

Company Overview Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992. It has been

listed on the Ho Chi Minh City Stock Exchange since July 2006. Its foreign strategic

partners and shareholders include the Australia and New Zealand Banking Group

(10% shareholder), the International Finance Corporation (IFC) (5.25%) and Dragon

Financial Holdings (8.73%). Foreign shareholders collectively own 30% of the bank.


Sacombank


The bank has 405 transaction points located in 43 of the 63 provinces in Vietna, Laos

and Cambodia.

In 2008, the bank was restructured as a financial holding company. Its subsidiaries

include: Sacombank Asset Management Company; Sacombank Remittance

Express Company; Sacombank Leasing Company; Sacombank Securities

Company; Sacombank Jewelry Company. Associated companies include: Viet Fund

Management JSC; Saigon Thuong Tin Investment JSC; Tan Dinh Import and

Export JSC; Toan Thin Phat Architecture Investment Construction Company; and

Saigon Thuong Tin Real Estate JSC.

More than 50% of Sacombank's loans are to SMEs, which the bank has targeted as its

market. Sacombank intends to help SMEs undertake initial public offerings (IPOs).

These services have been combined with attempts by Sacombank to diversify income

sources away from the credit business. To a certain extent this has been successful,

with funds from these sources accounting for 25.5% of overall income.

Corporate

Highlights

Sacombank generated net interest income of VND5.49trn for 2011, representing an

increase of 71% y-o-y. In total, after-tax profit for 2011 stood at VND2.033trn, which

was a 13% increase y-o-y. By the end of the year, outstanding loans were VND78.49trn,

while credit growth was 1.4%. The bank was also successful in reducing its bad debts,

which fell by 50% in the year. The bank's total outstanding loans by the end of 2011

were VND78.449trn, credit growth was only 1.4%, and the bad debts ratio was 0.56%,

of which, irrecoverable debts were VND158bn - down 50% from the end of 2010.

Total deposits as of the end of 2011 reached VND74.8trn, down by over VND4trn from

2010, of which, it was mainly term savings in gold and foreign currency. Meanwhile, the

bank has partially offloaded its 10% stake in Sacombank Securities Joint Stock Co

(SBS). At the end of 2011 Sacombank has paid up capital of VND15,200bn, of which

chartered capital is VND10,740bn.

Elsewhere, Sacombank and Credit Suisse Singapore have signed a MoU in order to

strengthen their competitiveness in both markets.

In October 2012, Sacombank signed a cooperation agreement with Manulife Vietnam -

one of the leading Life Insurance Company in Vietnam - in order to diversify products

and services, and to improve customer service quality and the competence of both

companies.

In January 2012, fellow Vietnamese lender Eximbank secured a 9.6% stake in

Sacombank for US$77.5mn from Australian group ANZ. It represented the first major

divestment of Vietnamese assets by an overseas bank. The two banks, both based in

Ho Chi Minh City, will seek approval for the plan from shareholders and government

agencies for the deal.



Website: www.sacombank.com.vn

Status: Commercial Joint Stock Bank

Company Data ■

■

2006

15,043,772

2007

29,139,732

2008

9,413,129

2009

16,147,851

2010

14,870,353

2011

16,216,912

24-Jan-13


Share Price VND 19,506 35,999 11,629 19,044 15,486 15,100 19,900

Share Price, % change (eop) 84.9 -70.4 54.9 -22.9

Shares Outstanding (mn) 771 809 781 848 960 978 n.a.

Source: Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank), Bloomberg

2006 2007 2008 2009 2010 2011

Total Assets 24,776,182 64,572,875 68,438,569 104,019,144 152,386,936 141,468,717

Total Deposits 17,511,580 44,231,944 46,128,820 60,516,273 100,467,290 75,092,252

Earnings per share (VND) 725 1,765 1,181 4,263 2,079 2,241


Total Assets

Loans & Mortgages

1,543

891

4,032

2,198

3,915

1,988

5,629

3,200

7,816

4,188

6,726

3,791





Total Deposits 1,091 2,762 2,638 3,275 5,153 3,570



Loans & Mortgages 14,312,894 35,200,574 34,757,119 59,141,487 81,664,200 79,726,547



Share Price US$ 1.21 2.25 0.67 1.03 0.79 0.72 0.96

Market Capitalisation US$ 937 1,819 538 874 763 771 931


http://www.sacombank.com.vn/


Return on Assets

Return on Equities

2.4

19.8

3.1

27.4

1.4

12.6

1.9

18.3

1.5

15.2

1.4

14.5

Loan Asset Ratio 58.1 54.8 51.2 57.4 54.1 56.9

Total Risk Based Capital Ratio n.a. n.a. n.a. n.a. 10.0 n.a.







Regional Overview

Asia Overview

Assessing The Banking Boom In South East Asia

BMI View: We expect South East Asian banks to continue expanding aggressively into the region, on the

back of a surge in mergers and acquisitions (M&A) activity in 2013. Malaysian banks have taken the lead

in terms of leveraging on the investment banking boom, partly driven by the country's status as the largest

issuer of Islamic banking assets in the region. Meanwhile, we expect Thai commercial banks to ramp up

efforts to expand into countries such as Cambodia and Myanmar, driven by government efforts to promote

cross-border investment and trade between Thailand and these countries.

In recent years, South East Asian banks have become increasingly aggressive in expanding their operations

in the region, and we expect this phenomenon to continue in 2013. Member countries of the Association of

Southeast Asian Nations (ASEAN) have pledged to gradually open up their banking sectors to allow for

increased foreign competition, as part of a broader agreement towards establishing the ASEAN Economic

Community (AEC) in 2015. Proponents of the AEC claim that by deepening economic links through

financial integration, cross-border investments, and promoting free trade in the region, member countries

will gain access to a wider market for their exports. Crucially, we expect increased economic integration to

also boost demand for more sophisticated and innovative financial products and services going forward.



Investment Banks See Boom In Underwriting Business

Malaysia - Composition Of Loan Portfolio By Purpose Of Loans, %

Source: BMI, Bank Negara Malaysia

Investment Banking Revenues Surge

We have already witnessed a significant increase in cross-border investment and intraregional mergers and

acquisitions (M&A) in 2012. According to figures published by data provider Dealogic, investment banking

fees in Southeast Asia have soared to the highest level on record for the first nine months of 2012. Looking

ahead, we expect plans to further promote financial integration to open up more opportunities for the

banking industry. For example, ASEAN countries have agreed to further integrate their capital markets by

linking their stock exchanges to establish a common trading network for investors. The move is widely

expected to boost liquidity and attract more foreign capital inflows into the region, rivalling fast-growing

capital markets such as Hong Kong and China. We expect banks that have already established a strong

investment banking presence in the region to benefit from the expected increase in M&A activity over the

coming years.



Malaysia Takes The Lead

Malaysian banks have taken the lead in terms of leveraging on the investment banking boom, partly driven

by the country's status as the largest issuer of Islamic banking assets in the region. Malaysia is reportedly

one of the key drivers responsible for the recent increase in investment banking fees, according to a report

published by Dealogic. Investment banking revenue in the country reached US$416mn between January

and October in 2012, a year-to-date record and a 46% increase y-o-y. Malaysia also commands a strong

36.7% share of total investment banking fees generated in South East Asia.

We expect Malaysian banks including Maybank Group and CIMB Group to continue to leverage on their

strengths as the region's leading issuers of Islamic banking products and solutions. Maybank Islamic, the

Islamic banking arm of Maybank Group, is the largest Islamic bank in Asia having already established a

strong presence in Singapore, Indonesia, Hong Kong and the Philippines. Meanwhile, CIMB has been

playing catch-up aggressively and is currently deriving around 10% of its earnings from its Islamic banking

operations in Indonesia, Singapore and Brunei. Given the competitive advantages that Malaysian banks hold

in terms of technological capabilities, financial strength, risk management, and the country's deep economic

links relative to the region, we expect Malaysian banks to maintain their lead over their regional

counterparts at least over the medium term.



Foreign Loans Set To Pick Up In 2013

Thailand - Loans To Foreign Entities, % chg y-o-y

Source: BMI, Bank of Thailand

Thai Commercial Banks Targeting High-Growth Economies

Banks in Thailand are adopting a slightly different strategy by expanding their networks in lower-income,

high growth, and largely untapped countries in the region (such as Cambodia and Myanmar). Krungthai

Bank and Siam Commercial Bank recently opened their first representative offices in Myanmar in 2012

and Kasikornbank has announced plans to open its first branch by February 2013. As the accompanying

chart shows, loans issued by Thai commercial banks to foreign entities have enjoyed a spectacular boom in

recent years, averaging expansion of 75.0% and 128.3% in 2011 and 2012, respectively.

Although we caution that aggressive expansion into countries such as Cambodia and Myanmar reflects a

high-risk strategy for local banks, we believe that the potential for growth is much greater. Furthermore,

given that the Thai government has been actively promoting cross-border investment and trade between

Thailand and these countries, we believe that demand for trade financing and investment banking services

will pick up significantly over the coming years. On the whole, we expect Thai banks to further accelerate

efforts to expand their operations into the region, and this should contribute significantly to banking sector

revenues in 2013.



Global Industry Overview

Global Commercial Banking Overview

Implications Of Reforms To Basel III Liquidity Requirements

BMI View: Global central bank heads agreed on January 6 2013 to loosen the Basel III liquidity

requirements for major financial institutions. This decision is positive for industry profitability, and

modestly improves the near-term outlook for loan and asset growth.

The Governors and Heads of Supervision of the Basel III accords emerged from their meeting with changes

to the existing liquidity arrangements that will significantly ease the burden on major banks worldwide. To

recap, Basel III is an improvement on the previous two iterations, as it lays out stricter definitions of high

quality capital, and specifically, higher capital requirements and liquidity ratios. This is in response to the

2008 financial crisis, which laid bare the potential for liquidity risk, as opposed to just the solvency risk that

was focused upon in Basel I and II. The so-called 'Liquidity Coverage Ratio' (LCR) is designed to allow

banks to survive a 30-day funding crisis by relying on internal liquid assets, hence avoiding a Lehman-style

meltdown. The numerator of the ratio is 'high quality liquid assets', while the denominator is the 'net

liquidity outflows' that banks would face when put under a stress situation over a 30-day period during a

severe system-wide shock. By the time this aspect of Basel III is fully implemented, the ratio must exceed

100%.



Bank Share Prices Responding Well To Basel III Amendments

MSCI World Bank Equity Index

Source: Bloomberg, BMI

The changes agreed in January 2013 include a major redefinition of high quality liquid assets that would

count towards banks' LCR. For example, in the set of rules agreed in 2010, corporate debt needed to be rated

AA- or higher to be considered high quality; now, securities can be rated as low as BBB-, the lowest

investment grade rating. Furthermore, banks can now use residential mortgage-backed securities and even

some equities to meet the requirements (albeit they will count far less toward the liquidity requirements than

government bonds, with 25-50% haircuts applied). Additionally, the timetable for the full introduction of

the new liquidity requirements has been pushed back dramatically from the originally scheduled deadline of

2015. Banks will only have to hold 60% of the total buffer by 2015, rising by 10% per year to 2019.

Meanwhile, the 'outflows' in the denominator of the LCR have been clarified, and many will be subject to

less stringent conditions. For example, the assumed outflow rate under a stress scenario for maturing

secured funding transactions with central banks will be reduced to 0% from 25%. The table below shows

the main changes to the Basel III framework as agreed on January 6.



Before

Corporate debt rated AA- or higher (as Level 2 asset)

Now

Corporate debt rated A+ to BBB- (with 50% haircut applied)

Definition of 'High Quality Assets'

Residential MBS rated AA or higher (with 25% haircut applied) No Residential MBS included

Timetable For Introduction of LCR

100% of buffer to be in place by 1 January 2015

60% by 1 January 2015; 10% added annually to 100% by 1 January 2019

Non-financial, non-operational corporate deposits outflow rate: 75% Inflows and Outflows Now 40%

New guidance that low outflow rate (0-5%) expected to apply on trade finance Trade finance - no outflow rate guidance

Source: Bank for International Settlements, BMI

We interpret this agreement as having been taken for three pragmatic considerations. First, the 2010

regulations were agreed upon before the European banking crisis, which helps explain why some of the

asset requirements needed to be amended. Banks in Europe, for example, would have been forced to

purchase even greater quantities of their home governments' debt - only further extricating the banking

sector into the sovereign crisis. Second, the quantity and availability of 'risk-free' liquid assets may not have

been sufficient to meet all of the requirements, so some expansion of the eligible assets is both desirable

and, perhaps, necessary from a pragmatic standpoint. Third, several of the world's major central bankers

were faced with the dilemma of having reached the limit of conventional monetary easing, and are now

resorting to easing regulations in an effort to open up lending channels. The degree to which this will work

in the short run is probably limited, given that the existing expansion of the monetary base in many

countries and low central bank funding costs have not translated into lending. However, it will remove some

of the concern that the reluctance to lend has been a result of regulatory factors. Indeed, the revised

timetable for the new regulations will relieve the urgency to quickly build up liquid assets, particularly for

European banks which have been under stress and unwilling and unable to lend. Bank of England Governor

Mervyn King, who announced the new measures on behalf of the committee, made this aspect of the revised


Maturing secured funding transactions with central banks outflow rate: 25% Now 0%

Liquidity facilities to non-financial corporates outflow rate: 100% Now 30%

No equity included Some equity (with 50% haircut applied)

Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio


legislation clear, arguing that the revisions 'will ensure that the new liquidity standard will in no way hinder

the ability of the global banking system to finance a recovery'.

We have a few additional thoughts:

Easing the capital requirements will make banks more profitable because it will allow them to count

higher-yielding assets toward the liquidity requirements. This helps explain why bank share prices soared

in the days immediately following the Basel announcement.

■

By the end of 2011, 208 banks were short by EUR1.8trn (US$2.4trn) in LCR funding, according to the

Basel committee. By contrast, Bank of England Governor King said that the 'vast majority' of the world's

biggest 200 banks that abide by the Basel regulations already comply with the new relaxed standards.

Many of those that do not are presumably European banks that are still rebuilding their balance sheets.

■

Some of the clarifications are sensible by almost any standard. One is that 'countries with distressed

banking systems will have complete flexibility in their application of the LCR until the distress has

passed'. To put this another way, having saved for a rainy day, banks will be allowed to use their savings

to cope with a crisis without worrying about meeting capital ratios in the short run.

■

Emerging market banking sectors stand to be a major beneficiary of the new requirements. Regulators in

major EM countries had complained that the supply of high quality assets, as defined in the 2010

agreement, was too limited, and that major EM banks would struggle in many cases to meet the

requirements.

■

While it is understandable that the Basel committee believe it wise to expand the definition of high

quality liquid instruments, particularly given the European crisis, we have some concerns about the

degree to which the rules have been watered down. It is a bit of a stretch, for example, to believe that in a

2008-style crisis that even with a 25% haircut that MBS could provide ready liquidity for a bank that is in

trouble. This is especially the case since many banks in a single banking system could plausibly seek to

use the same type of asset as collateral should it prove the most profitable (e.g. using significant amounts

of MBS to meet the liquidity requirements), and that asset could prove to be very difficult to unload in a

time of crisis. That said, we do not expect this to be a major problem given that the new, lower-rated

securities can only count toward a maximum of 15% of the total of high-quality liquid assets.

■

The new rules will ease the flow of trade finance, by including a low outflow rate (0-5%) in the

denominator of the LCR. In other words, banks that engage heavily in trade finance will be able to hold a

smaller liquidity buffer than they would have previously. This will be positive for several EM

commercial banking markets that have high components of trade finance in their operations.

■

The next item on the agenda for the Basel committee will be the Net Stable Funding Ratio, which aims to

address another salient aspect of the 2008 financial crisis - banks' funding mismatch between short-term

borrowing and long-term lending. The idea is to require banks to hold a better match between long-term

financing and long-term asset accumulation in order to avoid the type of rollover risk seen in the financial

crisis. Like the LCR, the NSFR regulations will be enforced as of 2019, however, the Basel committee will

only produce the framework of rules at some point in the next two years.



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 key to understanding issues ranging from future population trends to productivity

growth and government spending requirements.

The accompanying charts detail Vietnam's population pyramid for 2011, the change in the structure of the

population between 2011 and 2050 and the total population between 1990 and 2050, as well as life

expectancy. The tables show key datapoints from all of these charts, in addition to important metrics

including the dependency ratio and the urban/rural split.

Source: World Bank, UN, BMI



1990 1995 2000 2005 2010 2012f 2015f 2020f

Total 67,102 74,008 78,758 83,161 87,848 89,730 92,443 96,355

5-9 years 8,685 9,193 9,124 6,921 6,703 6,885 7,143 6,982

15-19 years 7,127 7,408 8,535 9,064 8,963 8,161 6,806 6,628

25-29 years 5,893 6,361 6,879 7,167 8,284 8,602 8,862 8,803

35-39 years 3,965 4,794 5,688 6,163 6,677 6,770 6,991 8,131

45-49 years 2,039 2,358 3,802 4,653 5,548 5,761 6,012 6,536

55-59 years 1,946 1,843 1,887 2,201 3,617 4,001 4,446 5,305

65-69 years 1,283 1,391 1,659 1,582 1,621 1,649 1,927 3,233

75+ years 1,127 1,305 1,559 1,852 2,264 2,388 2,516 2,743

f = BMI forecast. Source: World Bank, UN, BMI


70-74 years 919 1,084 1,194 1,439 1,389 1,384 1,438 1,729

60-64 years 1,544 1,822 1,737 1,767 2,076 2,573 3,455 4,268

50-54 years 1,933 1,968 2,287 3,739 4,580 4,936 5,449 5,914

40-44 years 2,420 3,884 4,710 5,614 6,086 6,304 6,609 6,925

30-34 years 4,884 5,779 6,250 6,765 7,058 7,475 8,202 8,779

20-24 years 6,492 7,003 7,305 8,420 8,954 9,115 8,892 6,745

10-14 years 7,504 8,604 9,142 9,038 6,844 6,539 6,668 7,104

0-4 years 9,340 9,212 7,002 6,776 7,186 7,186 7,026 6,529

Table: Vietnam's Population By Age Group, 1990-2020 ('000)


1990 1995 2000 2005 2010 2012 2015f 2020f

0-4 years 13.92 12.45 8.89 8.15 8.18 8.01 7.60 6.78

10-14 years 11.18 11.63 11.61 10.87 7.79 7.29 7.21 7.37

20-24 years 9.68 9.46 9.27 10.13 10.19 10.16 9.62 7.00

30-34 years 7.28 7.81 7.94 8.14 8.03 8.33 8.87 9.11

40-44 years 3.61 5.25 5.98 6.75 6.93 7.03 7.15 7.19

50-54 years 2.88 2.66 2.90 4.50 5.21 5.50 5.89 6.14

60-64 years 2.30 2.46 2.21 2.12 2.36 2.87 3.74 4.43

70-74 years 1.37 1.46 1.52 1.73 1.58 1.54 1.56 1.79



75+ years 1.68 1.76 1.98 2.23 2.58 2.66 2.72 2.85

65-69 years 1.91 1.88 2.11 1.90 1.85 1.84 2.08 3.36

55-59 years 2.90 2.49 2.40 2.65 4.12 4.46 4.81 5.51

45-49 years 3.04 3.19 4.83 5.59 6.32 6.42 6.50 6.78

35-39 years 5.91 6.48 7.22 7.41 7.60 7.55 7.56 8.44

25-29 years 8.78 8.60 8.73 8.62 9.43 9.59 9.59 9.14

15-19 years 10.62 10.01 10.84 10.90 10.20 9.10 7.36 6.88

5-9 years 12.94 12.42 11.58 8.32 7.63 7.67 7.73 7.25

Table: Vietnam's Population By Age Group, 1990-2020 (% of total)


1990 1995 2000 2005 2010 2012 2015f 2020f

Dependent ratio, % of total working age 1 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6

Active population, % of total 3 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6

Youth population, % of total working age 5 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3

Pensionable population, % of total working age 7 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3

f = BMI forecast; 1 0>15 plus 65+, as % of total working age population; 2 0>15 plus 65+; 3 15-64, as % of total population; 4 15-64; 5 0>15, % of total working age population; 6 0>15; 7 65+, % of total working age population; 8 65+. Source: World Bank, UN, BMI

1990 1995 2000 2005 2010 2012 2015f 2020f

Urban population, % of total 20.3 22.2 24.3 26.4 28.7 29.7 31.2 33.9

Urban population, '000 13,438.6 16,201.6 18,865.4 21,940.1 25,212.5 26,649.9 28,842.1 32,664.4



Rural population, '000 52,761.4 56,778.4 58,770.0 61,166.2 62,635.9 63,080.4 63,600.5 63,690.7

Rural population, % of total 79.7 77.8 75.7 73.6 71.3 70.3 68.8 66.1

Table: Vietnam's Rural And Urban Population, 1990-2020

Pensionable population, '000 8 3,330 3,780 4,411 4,874 5,274 5,421 5,881 7,706

Youth population, total, '000 6 25,529 27,009 25,268 22,735 20,732 20,610 20,837 20,615

Active population, total, '000 4 38,243 43,218 49,079 55,552 61,842 63,699 65,725 68,034

Dependent population, total, '000 2 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321

Table: Vietnam's Key Population Ratios, 1990-2020


Methodology

BMI's Commercial Banking Forecast Report series is closely integrated with our analysis of country risk,

macroeconomic trends and financial markets. As such, the reports draw heavily on our extensive economic

data set, which includes up to 550 indicators per country, as well as our in depth view of each local market.

We collate our commercial banking databank from official sources (including central banks and regulators)

wherever possible, and only fall back on secondary sources where all attempts to secure primary data have

failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or

trade association data only used as a backup. All of the risk ratings and forecasts within this report are a

result of BMI's own proprietary research and do not in any circumstances include consensus or third party

numbers.

How Our Data Set Is Structured The reports focus on total assets, client loans and client deposits.

Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular

country. They do 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 do not include loans to governments, government (or non-government) 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 do not include them in our figures. The US is the main exception to this.

In some cases, total assets and client loans include significant amounts that are owned or that have been lent

to customers in another country. In some cases, client deposits include significant amounts that have been

deposited by residents of another country. Such cross-border business is particularly important in major

financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in

Central and Eastern Europe.

Commercial Bank Business Environment Rating

In producing our Commercial Banking Business Environment Rating, our approach has been threefold.

First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation of

profits in each state, thereby capturing the operational dangers facing companies operating in this industry

globally. Second, we have, where possible, identified objective indicators that serve as proxies for issues/

trends within the industry to ensure consistent evaluate across states. Finally, we have used BMI's

proprietary Country Risk Ratings in a nuanced manner to ensure that the ratings accurately capture broader

issues that are relevant to the industry and which may either limit market attractiveness or imperil future

returns. Overall, the ratings system, which integrates with all the other industry Business Environment

Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the

globe.

Conceptually, the ratings system divides into two distinct areas:

Limits of Potential Returns: Evaluation of industry's size and growth potential in each state, and also

broader industry/state characteristics that may inhibit its development.

■

Risks to Realisation of Returns: Evaluation of industry-specific dangers and those emanating from the

state's political/economic profile that call into question the likelihood of anticipated returns being realised

over the assessed time period.

■

In constructing these ratings, the following indicators have been used. Almost all indicators are objectively

based.



Limits of Potential Returns Rationale

Banking market structure

Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Estimated growth in total assets, 2012-2016

Country structure

Those aged 16-64 in each state, as a % of total population. A high proportion suggests that the market is comparatively

more attractive Active population

Standard deviation of growth over seven-year economic cycle. A proxy for economic stability GDP volatility

Banking market risks

Subjective evaluation of the impact of the regulatory environment on the competitive landscape Regulatory framework and competitive environment

Short-term financial risk Rating from CRR, evaluating currency volatility

Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some

emerging markets Legal framework

Source: BMI


Rating from CRR to denote ease of conducting business in the Bureaucracy state

Rating from CRR, evaluating the risk of a sharp change in the Policy continuity broad direction of government policy

BMI's Country Risk Ratings (CRR)

Subjective evaluation of de facto/de jure regulations on overall Regulatory framework and industry development development of the banking sector

Risks to Realisation of Returns

Corporate tax A measure of the general fiscal drag on profits

A proxy for wealth. High-income states receive better scores GDP per capita than low-income states

Indication of the scope for expansion in profits through Estimated growth in client loans, 2012-2016 intermediation

Indication of overall sector attractiveness. Large markets are Estimated total assets, 2012 considered more attractive than small ones

Table: Commercial Banking Business Environment Indicators And Rationale


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.

Component

Limits of Potential Returns, of which:

Weighting, %

70, of which

- Country Structure 40

- Banking market risks 40

Source: BMI


- Country Risk 60

Risks to Realisation of Returns, of which: 30, of which

- Banking market structure 60

Table: Weighting Of Indicators

BMI Vietnam Commercial Banking Report Q2 2013

Documents

Transcript of BMI Vietnam Commercial Banking Report Q2 2013