8/2/2019 Bank Sector Update
1/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 1
26 January 2011
Vietnam banking sector INDUSTRY UPDATE
Has the storm passed?
In 2010, the banking sector lost 18% as a consequence of new issuances,
dilution issues and new regulatory changes while the VNIndex was down
2%. With new regulations becoming effective, large commercial banks with
adequate capital and hence lower cost of capital, better asset-liability
management and lower operating cost will see higher growth opportunities
and profitability than peers.
- Small capital base, high loan-to-deposit (LDR) ratios and possibility ofhigher non-performing loans (NPL) in the banking system are key
investment risks. In 2011, ten small banks still need to raise at least
VND12,000 billion (~USD600 million) to meet the minimum capital requirement
of VND3,000 billion at year end. High LDR rate with large reliance on borrowings
from other credit institution coupled with high credit growth compared to deposit
growth lead to imbalances in the source of funds. Besides, loans to big state-
owned enterprises such as Vinashin may create higher NPL in the banking
system, which can deteriorate the bottom line.
- New regulations are good catalysts for fundamental improvement in the
banking system in long run. Decree 141 on minimum chartered capital of
VND3,000 billion and Circular 13 relating to sources of capital mobilisation,
capital adequacy ratio, risk-weighted ratio for securities and property loans willlead to many changes in commercial banks operation as they should manage to
raise their capital base and restructure their assets. Given the growing recovery
pace of the economy, improved personal income and increasing number of small
and medium enterprises (SMEs), commercial banks have great potential for
retail banking services and financial services for SMEs.
- We believe it is now a good time to accumulate banking stocks, especially
the top-tier commercial banks with good market share and strong capital
base. Valuations of banking stocks have become increasingly attractive,
currently trading at an average 2010PE of 9.9x and average 1.8x PB, lower than
the general market valuations. Compared to regional peers, the Vietnamese
banking sector posted high ROE of 18% and ROA of 1.5% cf. 15.8% and 1.3%ROA.
We like ACB, STB and EIB as (i) these are the pioneer banks in retail banking
services in Vietnam with good brand name (ii) restructuring period will be good
opportunities for large banks with strong capital base to obtain distressed assets
and gain higher market share in the future (iii) attractive valuation ratios and
ability to improve the bottom line. We also see positive catalysts for capital gain
in the share prices of VCB and CTG as they are the top two largest banks in
Vietnam with sizeable available foreign room.
BANKING
Key indicators
No. of listed banks 8
Total market cap (VND bn) 157,877
Market cap (USD mn) 7,518
%/ total market cap 21.1
Average P/E 2010F (x) 9.9
Average P/B 2010F (x) 1.8
ROA (%) 1.5
ROE (%) 18.0
Key banks ACB EIB VCB
Outstanding shares (mn) 938 1,056 1,759
Foreign room (%) 30% 30% 2.9%
EPS (VND) 2,520 1,642 2,303
EPS growth (%) -20% 28% -29%
P/E (x) 9.6 9.2 14.9
P/B (x) 1.9 1.1 3.2
ROE (%) 22% 13% 23%
ROA (%) 1.2% 1.8% 1.3%
Price performance 3M 6M 12M
Absolute % 13% 3% -10%
Relative % 3% 3% -11%
-30%
-20%
-10%
0%
10%
20%
Jan-1
0
Feb-1
0
Mar-10
Apr-10
May-1
0
Jun-1
0
Jul-10
Aug-1
0
Sep-1
0
Oct-10
Nov-1
0
Dec-1
0
VNINDEX .VNBANK
Hoa Hoang, [email protected]
T: +84 8 39153588 ext 146
See important disclosure at the end
8/2/2019 Bank Sector Update
2/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 2
26 January 2011 Vietnam banking sector update
Why the banking sector?
Maintained good profit growth even during the financial crisis
The past two years were challenging time for the global banking sector. However, Vietnam banks have
managed to avoid the direct impact of the global financial crisis registering average profit growth of
26% in 2008 and 47% in 2009.
Figure 1: Profit after tax growth (% YoY)
Source: VCSC summary
During the first 3Q2010, though faced with a number of regulatory changes, the average net income
growth of the larger banks remained above 23%.
Low cost-to-income ratios
Vietnams average cost-to-income ratio is around 40%, substantially lower than the regional peers,
and above only China and Singapore. With low cost-to-income ratios, Vietnamese banks have been
able to improve their bottom line and increase their profitability ratios.
Figure 2: Vietnams banks maintain a good cost to income ratio
Cost to incomeVietnam banks costs are quite low compared to
regional peers
Source: VCSC summary, The Asian Banker
5%
57% 54%45%
-32%
26%
57%59%
0%
75%
47%
7%
42%38%
-3%
30%23%
-40%
-20%
0%
20%
40%
60%
80%
100%
VCB CTG EIB ACB STB Average
2008 2009 3Q2010
0%
10%
20%
30%
40%
50%
60%
70%
2008 2009 3Q2010
0%
20%
40%
60%
80%
100%
8/2/2019 Bank Sector Update
3/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 3
26 January 2011 Vietnam banking sector update
Effective ratios
Low capital base and good cost management enable Vietnamese banks to earn higher profit ratios.
Except for EIB which increased its charter capital rapidly in 2007, other banks all have double-digit
ROEs.
Figure 3: and high efficiency thanks to low capital base
ROE ROA
Source: VCSC summary
Capability to improve efficiency ratios thanks to potential development of retail banking
services and financial services for SMEs
In 2010, Vietnams GDP broke through the USD100billion mark with GDP per capita at nearly
USD1,200 doubling over the last 5 years. The countrys young population combined with improved
personal income will lead to higher demand for retail banking services. Vietnams demographic should
underpin growth in payment services, credit cards and personal financing services.
Figure 4: Vietnam posted a high GDP growth over the past 10 years...
GDP per capita is double within 5 years Vietnam GDP was over USD100bn in 2010
Source: CEIC, GSO
In addition, the private sector played a key role in the Vietnam economic development during the past
10 years with a CAGR of 24%. In 2008, the private sector investment accounted for c. 41% of the total
investment, significantly higher than the state contribution of 29%. Though the government stimulus
0%
5%
10%
15%
20%
25%
30%
VCB
CTG
EIB
ACB
STB
Average
2008 ROE 2009 ROE
0.0%
1.0%
2.0%
3.0%
VCB
CTG
EIB
ACB
STB
Average
2008 ROA 2009 ROA
-
200
400
600
800
1,000
1,200
1,400USD
0
1
2
3
4
5
6
78
9
0
20
40
60
80
100
120
Nominal GDP (RHS)
GDP growth (LHS)USD bn % yoy
8/2/2019 Bank Sector Update
4/17
www.vcsc.com.vn | VCSC
26 January 2011 Vietna
following the globincreasing numb
lending, trade fina
Figure 5: ... and rap
Total i
Source: VCSC sum
Attractive valuati
As a consequenc
while the sector
VNIndex was do
gaining 17% durin
Figure 6: Banking
Source: Bloomberg,
59 60 57
23 23 25
18 18 17
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
State
-30%
-20%
-10%
0%
10%
20%
banking sector updat
l financial crisis did increase state sector stimulus inr of small and medium enterprises (SMEs) will dri
ncing and international payment services.
id growth of the private sector
vestment by sectorPrivate sector poste
ary
ons
e of new issuances and dilution issues, investors shi
reatly underperformed the market. In 2010, the ban
n 2%. However, the sector has seen signs of re
g that month.
ector was underperformed in 2010 and only recovered i
VCSC summary
53 48 47 46 4329 35
38
31 38 38 38 41
4139 36
16 14 15 16 1630 26 26
r ivate Foreign Invested
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2000
2001
2002
VND bn
an-
Feb-1
0
Ma
r-10
Ap
r-10
May-1
0
Jun-1
0
Ju
l-10
Aug-1
0
Sep-1
0
Oc
t-10
VNINDEX .VNBANK
Viet Capital Securities | 4
009 and 2010, we believe theve the demand for corporate
a CAGR of 24% over the past10 years
ied away from banking stocks
ing sector lost 18% while the
overy since December 2010
the last month of 2010
2003
2004
2005
2006
2007
2008
2009
2010
Nov-1
0
Dec-1
0
Jan-1
1
8/2/2019 Bank Sector Update
5/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 5
26 January 2011 Vietnam banking sector update
Valuations of banking stocks have become increasingly attractive, currently trading at an average 8.9xPER and average 1.6x PB, lower than the market valuations and regional peers. For large commercial
banks such as ACB, STB and EIB, these banks have been trading at a large discount compared to
their peers in domestic markets as these are highly liquid stocks and no available room for foreign
investors (currently at 30% of charter capital).
Figure 7: Banking sector was also underperformed in 2010 in terms of PE and PB
PE PB
Source: Bloomberg, VCSC summary
Compared to regional peers, the Vietnamese banking sector posted higher ROE of 18% and ROA of
1.5% cf. 15.7% ROE and 1.3% ROA.Figure 8: Vietnams banks are quite small compared to regional peers but have better efficiency ratios
CountryMarket cap(USD mn)
Total Assets(USD mn)
P/E
(x)
P/B
(x)
ROE LF
(%)
ROA LF
(%)
China (5 securities) 7,572 83,981 10.62 1.91 19.71 1.05
Thailand (10 securities) 4,765 31,726 18.00 1.79 13.44 1.24
Malaysia (10 securities) 4,164 26,634 12.43 1.81 16.08 1.16
Indonesia (18 securities) 4,256 12,351 22.06 2.87 17.80 1.78
India (36 securities) 2,062 23,012 12.39 1.59 16.17 0.91
Philippines (12 securities) 1,358 7,603 12.35 1.60 13.45 1.73
Vietnam (8 securities) 1,145 7,775 8.89 1.61 18.01 1.56
Pakistan (14 securities) 587 4,546 11.56 1.29 13.12 1.11
Sri Lanka (6 securities) 453 1,590 23.21 2.88 14.13 1.45
Average 2,929 22,135 14.61 1.93 15.77 1.33
Source: Bloomberg, 26 January 2011
We believe it is now a good time to accumulate banking stocks, especially the large bank with good
market share and strong capital base. We like ACB, STB and EIB as (i) these are the pioneer banks in
retail banking services in Vietnam with good brand name (ii) restructuring period will be goodopportunities for large banks with strong capital base to obtain distressed assets and gain higher
market share in the future (iii) attractive valuation ratios and ability to improve the bottom line. We also
-
2.0
4.0
6.0
8.010.0
12.0
14.0
01-1
0
02-1
0
03-1
0
04-1
0
05-1
0
06-1
0
07-1
0
08-1
0
09-1
0
10-1
0
11-1
0
12-1
0
PE -VNindex
PE - ACB
PE - STB
0.0
0.5
1.0
1.5
2.0
2.5
3.0
04-1
0
05-1
0
05-1
0
06-1
0
07-1
0
07-1
0
08-1
0
09-1
0
09-1
0
10-1
0
11-1
0
11-1
0
12-1
0
PB- VNIndex
PB-EIB
PB-STB
8/2/2019 Bank Sector Update
6/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 6
26 January 2011 Vietnam banking sector update
see good catalyst for capital gain in the share prices of VCB and CTG as they are the two largestbanks in Vietnam with sizeable available foreign room.
Figure 10: Comparison between listed banks
Unit: VND bn VCB CTG ACB STB EIB SHB
Current Outstanding Shares (mn) 1,759 1,517 938 918 1,056 349
Share Price as 26/1/2011 (VND000) 34.3 23.5 24.4 15.8 15.2 11.2
Charter Capital 2010 17,588 15,172 9,377 9,179 10,560 3,493
Increase in 2010 charter cap 45% 35% 20% 37% 20% 75%
Current Market Capitalization 60,325 35,655 22,879 14,503 16,051 3,912
Current Free float (%) 9.3% 10.8% 100% 100% 100% 100%
Current Foreign ownership (%) 2.9% 1.0% 30% 30% 30% 1.5%
EPS 2010F 2,303 2,224 2,520 1,990 1,642 1,402
EPS growth -29% -3% -11% -20% 28% -10%
ROE 2010F 23% 23% 22% 16% 13% 18%
ROA 2010F 1.3% 0.9% 1.2% 1.3% 1.8% 1.2%
PB 2010F 3.2 2.2 2.0 1.1 1.1 1.3
PE 2010F 14.9 10.6 9.7 7.9 9.3 8.0
Source: VCSC summary, 26 Jan 2011
Structural changes improve long-term fundamentals of
the sector
The State Bank of Vietnam implemented a number of new rules in 2010 that will affect the operations
of commercial banks going forward.
Figure 9: New banking regulations applicable to commercial banks in 2010
No. Legal document Content Effective date
1 Decree No. 141/2006/ND-CP
dated 22 November 2006
Minimum chartered capital of VND3,000bn
(~USD150mn) by end of 2010
2 Circular No. 15/2009/TT-NHNN
dated 10 August 2009
Requires commercial banks to use up to
30%, instead of 40%, of the short-term
deposit for medium and long-term loans
1 Jan 2010
3 Letter No. 369/TB-VPCP dated
30 December 2009
Bans banks from trading gold 31 Mar 2010
4 Circular No. 07/2010/TT-NHNN
dated 26 February 2010 andCircular 12/2010/TT-NHNN
dated 14 April 2010
Allows commercial banks to negotiate
lending rates on short-term and long-termloans
14 Apr 2010
8/2/2019 Bank Sector Update
7/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 7
26 January 2011 Vietnam banking sector update
No. Legal document Content Effective date
5 Circular No. 13/2010/TT-NHNN
dated 20 May 2010
Stipulates prudential ratios in operations
for credit institutions
1 Oct 2010
6 Circular No. 19/2010/TT-NHNN
dated 27 September 2010
Adjusts some articles in Circular 13,
especially the components of total
deposits
1 Oct 2010
7 Circular No. 22/2010/TT-NHNN
dated 29 October 2010
Restricts gold lending to specific gold-
related entities
29 Oct 2010
8 Law No. 47/2010/QH12 on
credit institutions
Regulates the operations of credit
institutions
1 Jan 2011
Source: VCSC summary
Circular 13 and the 2010 Law on Credit Institutions will bring about fundamental improvements as
commercial banks will have to make appropriate changes in their operations and development
strategies.
Effects of Decree 141
Decree No. 141/2006/ND-CP, issued on 22 November 2006, required all commercial banks to have a
minimum chartered capital of VND3,000bn (c. USD150mn) by the end of 2010.
At the beginning of 2010, there were 22 commercial banks with a chartered capital below the
VND3,000bn threshold and the sector, as whole, would need at least VND33,000bn to meet the
minimum capital requirement. Concurrently, the larger commercial banks had plans to increase their
capital base to meet the new CAR requirements. As a result, fear of oversupply of bank stocks led to a
sluggish performance in the sector for the whole of 2010.
Until December 2010, there were 10 small commercial banks that were unable to raise the charter
capital to VND3,000 billion. During 2010, these banks can only attract VND3,507 billion, approximately
one fourth of total capital demand. As such, these banks will need to raise at least VND12,000 billion
(~USD600 million) in 2011 to meet the minimum capital requirement of VND3,000 billion at the end of
2011.
However, on 14 December 2010, the SBV extended the deadline until the end of 2011. The deferment
has lessened the immediate capital need allowing the sector to recover to attractive levels, laying the
foundation for a successful capital raise in 2011.
Figure 11: Banks with charter capital of less than VND3,000 billion at the end of 2010
Bank name
Charter capital
@ 31/12/2009
Charter capital
@ 31/12/2010
Increase during
2010
Unable to raise
capital in 2010
1 OCB 2,000 2,635 635 465
2 Western Bank 2,000 2,000 - 1,000
3 Nam A 2,000 2,000 - 1,000
4 Viet A 1,515 2,087 572 913
5 Kien Long 1,000 2,000 1,000 1,000
6 Gia Dinh 1,000 2,000 1,000 1,000
8/2/2019 Bank Sector Update
8/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 8
26 January 2011 Vietnam banking sector update
Bank name
Charter capital
@ 31/12/2009
Charter capital
@ 31/12/2010
Increase during
2010
Unable to raise
capital in 2010
7 SG Cong thuong 1,500 1,800 300 1,200
8 Bao Viet 1,500 1,500 - 1,500
9 VN Thuong tin 1,000 1,000 - 2,000
10 Petrolimex 1,000 1,000 - 2,000
Total 14,515 18,022 3,507 12,078
Source: Banks website, SBV, VCSC summary
Impact of Circular 13
Circular 13 implements a set of important obligations for the banking sector:
- The CAR is raised from 8% to 9%.
- The loans-to-total-deposits ratio is not allowed to exceed 80%.
- The risk weight ratio for securities and property loans is 250% (previously 100%).
- Investments in other credit institutions and subsidiaries in the form of capital contribution or
purchase of shares are excluded from Tier 1 capital.
- Total investment in subsidiaries and affiliates must not exceed 25% of the credit institutions
charter capital and reserve funds.
- Total capital contribution and financial investments in all enterprises, investment funds,
investment projects or other credit institutions and in affiliated companies must not exceed
40% of credit institutions charter capital and reserve funds.
- Credit institutions are banned from lending to affiliated securities trading businesses or from
providing unsecured loans for securities investment and trading. Total outstanding loans for
securities investments and trading must not exceed 20% of the banks charter capital.
With these requirements, many of the commercial banks will have to restructure their assets and
operations, which may lead to higher cost of fund and lower net interest margin.
Enhancing financial capability
Currently, among the 40 commercial banks, only ten have a charter capital of over VND5,000 billion,
of which only VCB, CTG and EIB have a charter capital above VND10,000 billion (excluding the two
largest state-owned commercial banks BIDV and Agribank).
The average chartered capital of the Vietnam banking system is VND3,666 billion (~USD183 million),
much lower than those of regional peers. As the average capital base of the banking system is still
low, the capital raising story of the banking system not only created a great pressure on the local
market in 2010 but may last through 2-3 years afterwards.
For 10 small banks with chartered capital below VND3,000 billion, they will need to fulfil their capital
raising plan in 2011. Also, such large bank as CTG also has plan to increase its chartered capital from
VND15,172 billion to c. VND30,000 billion in 2011.
8/2/2019 Bank Sector Update
9/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 9
26 January 2011 Vietnam banking sector update
Expanding sources of capital mobilisation
Prior to Circular 22, banks were allowed to convert gold deposits into Vietnam Dong equivalent for
lending. However, as this regulation was removed, banks have to attract more VND deposits, mainly
short-term deposits to ensure the balance between deposits and loans.
We should continue to see banks divesting their positions in other credit institutions and non-core
businesses to enhance their owners equity because these are excluded from Tier 1s capital. VCB
recently sold a portion of its ownership in EIB and PVD.
Issuing long-term bonds
As banks are allowed to include bonds of over 5-year term into their Tier 2 capital, many banks plan to
issue longer-term bonds with or without conversion terms. This should allow banks to enhance their
asset-liability management, reducing their liquidity risk. Both ACB and Techcombank issuedVND3,000bn 10-year bonds to enhance their capital base.
Reducing loans to securities and real estate sectors and increasing focus on consumer
lending
Banks normally charge higher interest rates for securities and real estate lending. However, these
loans now have a higher risk weight ratio of 250%, which will impact the cost of funding and lower the
interest income.
Expanding sources of capital mobilisation will raise banks cost of capital. Meanwhile, reducing loans
to fields that can afford high lending interest rate such as securities, real estate loans lessen banks
interest income. Consequently, we believe banks will increase their focus on consumer loans, which
can charge higher interest rates and are subject to a lower risk weight ratio.
The 2010 law on credit institutions
The law on credit institutions stipulates that commercial banks must establish or acquire subsidiaries/
associates to carry out the following business operations: underwriting, securities brokerage, financial
leasing and insurance. Meanwhile, under Circular 13, investments in other credit institutions and
affiliated companies in the form of capital contribution or purchase of shares are excluded from Tier 1
capital.
Under the new law, only commercial banks are allowed to provide such banking services as capital
mobilisation, lending and settlement services for organizations and individuals. Non-banking
institutions, such as financial leasing companies, are prohibited from receiving deposits fromindividuals and provide payment services via clients bank accounts. Accordingly, finance companies
such as PVF will face difficulties in expanding their operations as they can only serve organizations
and not extend to retail clients. We believe the retail segment will become increasingly important for
commercial banks. Credit institutions are banned from lending:
- to securities brokers that the credit institutions hold control.
- if secured assets are stocks of the credit institution or its subsidiaries.
- to make capital contributions to another credit institution if secured assets are stocks of the
credit institution receiving the contributed capital.
In addition, under the new banking law, banks must comply with the following requirements:
- Total outstanding loans to a subsidiary/associate that the credit institution holds control are
not allowed to exceed 10% of the credit institutions equity and 20% of the credit institutions
equity is the limit for total outstanding loans to allsubsidiaries and associates.
8/2/2019 Bank Sector Update
10/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 10
26 January 2011 Vietnam banking sector update
- Total outstanding loans to a client are not allowed to exceed 15% of the credit institutionsequity and total outstanding loans to a client and related person should not exceed 25% of
the credit institutions equity.
Key investment risks
Many banks in Vietnam have a small capital base compared to total assets
At the end of 2009, according to The Asian Banker, average total assets of the top 10 largest banks in
Vietnam was USD8,363 million or USD6,694 million if the state-owned bank - Agribank is excluded.
The small size of Vietnam banks puts individual banks under pressure to increase their capital base
and ensure comfortable capital adequacy ratios. As the CAR is not available and vary from countries
to countries, we use equity/asset ratio to compare between banks in Vietnam and in the region.
Figure 12: Top 10 largest banks in Vietnam in term of assets and its regional peers
Unit: USD mn Assets Net profit Equity ROE (%) Equity/Asset (%)
Agribank 23,384 196 751 26.1 3.2
Vietcombank (*) 15,050 232 903 25.7 6.0
Vietinbank (*) 13,193 140 711 19.7 5.4
ACB (*) 9,085 119 502 23.7 5.5
STB (*) 5,629 90 517 17.4 9.2Military Bank 3,734 64 342 18.7 9.2
EIB (*) 3,542 61 735 8.3 20.7
TCB 3,495 69 280 24.6 8.0
Maritime bank 3,457 42 152 27.6 4.4
VIB 3,065 25 147 17.0 4.8
Average top 10 banks in:
Vietnam 8,363 104 504 20.9 7.6
Philippines 9,039 84 902 10.8 10.0
Indonesia 17,878 312 1,580 17.2 8.6
Thailand 25,936 265 2,389 9.9 9.4
Malaysia 35,923 338 2,850 14.1 7.5
India 83,289 726 5,058 17.0 5.9
China 749,372 6,925 35,122 20.4 4.6
Source: The Asian Banker (*) listed banks in Vietnam
Even large banks such as VCB or CTG had an equity-to-total-asset ratio of less than 8% in 3Q2010.
As such, the minimum CAR of 9% as required by Circular 13 from 1 October 2010, may be difficult to
attain for many of the banks in the country.
8/2/2019 Bank Sector Update
11/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 11
26 January 2011 Vietnam banking sector update
Figure 13: 3Q2010 Equity/Total asset (%)
Source: VCSC summary
High LDR ratios
At the end of the third quarter of 2010, four of the five banks in our coverage list had loans-to-deposits
ratios of over 80%. Circular 19 expands the total deposit base when calculating LDR ratios, leaving
some buffer for the banking system. Sources of capital that banks can use for lending include:
Non-term and term deposits from individuals.
Term deposits from organizations including those from other credit institutions.
25% of non-term deposits from economic institutions (excluding those from credit
institutions). This means the larger banks will benefit from the large balance of non-term
deposits of Vietnams State Treasury of c. VND52,000 billion, in which c. VND20,000 billion
are at the four largest banks Agribank, BIDV, VCB and CTG.
Loans from domestic organizations and other credit institutions with terms of three months or
more.
Capital mobilized through issuing valuable papers.
Figure 14: High loan to deposit ratio with large reliance on borrowings from other credit institutions
LDRBorrowings from other credit institutions/Total
deposits
Source: VCSC summary
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
VCB CTG EIB ACB STB
CAR=9%
0%
50%
100%
150%
VCB CTG EIB ACB STB
2008 2009 3Q2010
0%
10%
20%
30%
VCB CTG EIB ACB STB
2008 2009 3Q2010
8/2/2019 Bank Sector Update
12/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 12
26 January 2011 Vietnam banking sector update
Higher liquidity risks
Credit growth in Vietnam has historically been much higher than customer deposits growth, extending
the spread between short-term deposits for longer-term loans. For the whole banking system, since
2007 credit growth has remained above deposit growth.
Figure 15: Credit growth is always much higher than deposit growth
The whole banking system 2009 deposit and credit growth of selected banks
Source: SBV, VCSC summary
Possibility of higher NPL ratios
Although, average NPL remained at c. 2.5% in 2010, actual NPL in the banking system may be higher
as some banks may not make full provisions for big state-owned enterprises (SOEs) loans. Vinashin is
now in restructuring total outstanding loans of VND86,000 billion, of which c. VND26,000bn is in the
banking system. These loans have not been included in the current NPL of the banking system.
According to SBVs estimate, NPL could rise to 3.2% if they take into account Vinashins debt.
32%
37%48%
23% 27%
42%
25%
54%
25%
40%
29%
0%
10%
20%
30%
40%
50%
60%
2004 2005 2006 2007 2008 2009 2010
Deposit growth Credit growth
0%
20%
40%
60%
80%
100%
VCB CTG EIB ACB STB
Deposit growth Credit growth
8/2/2019 Bank Sector Update
13/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 13
26 January 2011 Vietnam banking sector update
Appendix 1: Comparison of listed banks
COMPARABLE (VND bn) VCB CTG ACB STB EIB SHB
Current Outstanding Shares (mn) 1,759 1,517 938 918 1,056 349
Share Price 26/01/2011 (VND000) 34.3 23.5 24.4 15.8 15.2 11.2
Charter Capital 2009 12,100 11,252 7,814 6,700 8,800 2,000
Charter Capital 2010 17,588 15,172 9,377 9,179 10,560 3,493
Increase in 2010 charter cap 45% 35% 20% 37% 20% 75%
Current Market Capitalization 60,325 35,655 22,879 14,503 16,051 3,912
Current Free float (%) 9.3% 10.8% 100% 100% 100% 100%
Current Foreign ownership (%) 2.9% 1.0% 30% 30% 30% 1.5%
Profit before tax
2009 A 5,004 3,373 2,838 2,175 1,533 415
2010 F 5,400 4,500 3,150 2,436 2,312 653
2010 earnings growth F 8% 33% 11% 12% 51% 57%
Profit after tax (PAT)
2009 A 3,945 2,573 2,201 1,671 1,132 311
2010 F 4,050 3,375 2,363 1,827 1,734 490
Total loans (before provision)
2009 A 141,621 163,170 62,358 59,657 38,381 12,829
2010 F 171,361 233,333 96,000 80,000 60,642 16,677
Total Deposit (*)
2009 A 207,542 177,034 108,992 85,632 41,294 24,615
2010 F 259,428 256,699 163,488 119,885 67,000 32,000Total assets
2009 A 256,053 243,785 167,881 104,019 65,488 27,439
2010 F 307,264 368,115 201,457 137,305 94,958 40,000
Credit growth (%)
2009 A 27% 35% 81% 70% 81% 49%
2010 F 21% 43% 54% 34% 58% 30%
Deposit growth (%)
2009 A 32% 27% 35% 37% 26% 34%
2010 F 25% 45% 50% 40% 43% 30%
Asset growth (%)
2009 A15% 24% 63% 44% 37% 90%
2010 F 20% 51% 20% 32% 45% 46%
Loan/Deposit rate (%)
2009 A 68% 92% 57% 70% 93% 52%
2010 F 66% 91% 59% 67% 91% 52%
Equity/Total asset (%)
2009 A 7% 5% 6% 10% 20% 9%
2010 F 6% 5% 6% 9% 15% 7%
EPS 2010F 2,303 2,224 2,520 1,990 1,642 1,402
EPS growth -29% -3% -11% -20% 28% -10%
ROA 2010F 1.3% 0.9% 1.2% 1.3% 1.8% 1.2%
ROE 2010F 23% 23% 22% 16% 13% 18%
PB 2010F 3.2 2.2 2.0 1.1 1.1 1.3
PE 2010F 14.9 10.6 9.7 7.9 9.3 8.0
* Total deposit includes customer deposit and other credit institutions deposit.
8/2/2019 Bank Sector Update
14/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 14
26 January 2011 Vietnam banking sector update
Appendix 2: Charter capital increase of commercial banks in Vietnam
Charter capital (VND bn)Not yet issued in
2010Bank name 12/31/2009 12/31/2010 Increase
1 VCB HOSE 13,224 17,588 4,364
2 CTG HOSE 11,253 15,172 3,919
3 EIB HOSE 8,800 10,560 1,760
4 ACB HNX 7,814 9,377 1,563
5 STB HOSE 6,700 9,179 2,479
6 SHB HNX 2,000 3,498 1,498
7 NVB HNX 1,000 3,304 2,304
8 HBB HNX 3,000 3,000 - 1,050
Total listed banks 20,514 28,357 7,843
9 TCB OTC 5,400 6,932 1,532
10 MB OTC 5,300 6,700 1,400
11 Dong Nam A OTC 5,068 5,334 266
12 Maritime Bank OTC 3,000 5,000 2,000
13 Dong A OTC 3,400 4,500 1,100
14 SCB OTC 3,653 4,185 532
15 VIB OTC 3,000 4,000 1,000
16 ABB OTC 3,482 3,830 348
17 Lien Viet OTC 3,650 3,650 - 1,510
18 Tin Nghia OTC 3,399 3,399 -
19 VP Bank OTC 2,117 4,000 1,883
20 Southern Bank OTC 2,568 3,049 481
21 Ocean Bank OTC 2,000 3,500 1,500 1,500
22 Dai tin OTC 2,000 3,000 1,000
23 Tien Phong OTC 2,000 3,000 1,000
24 Bac A OTC 2,120 3,000 880
25 GP Bank OTC 2,000 3,018 1,018
26 HDB OTC 1,550 3,000 1,450
27 Mekong housing OTC 1,000 3,000 2,000
28 Dai A OTC 1,000 3,100 2,100
29 De Nhat OTC 1,000 3,000 2,000
30 Gia Dinh OTC 1,000 2,000 1,000
31 OCB OTC 2,000 2,635 635 465
32 Western Bank OTC 2,000 2,000 - 1,000
33 Viet A OTC 1,515 2,087 572 913
34 Kien Long OTC 1,000 2,000 1,000
35 Nam A OTC 2,000 2,000 - 1,000
36 Saigon Cong thuong OTC 1,500 1,800 300 1,200
8/2/2019 Bank Sector Update
15/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 15
26 January 2011 Vietnam banking sector update
37 Bao Viet OTC 1,500 1,500 - 1,500
38 VN thuong tin OTC 1,000 1,000 - 2,000
39 Petrolimex OTC 1,000 1,000 - 2,000
Total OTC banks 73,222 100,219 26,997
Total Banks 93,737 128,576 34,840
8/2/2019 Bank Sector Update
16/17
www.vcsc.com.vn | VCSC Viet Capital Securities | 16
26 January 2011 Vietnam banking sector update
Analyst CertificationI, Hoa Hoang, hereby certify that the views expressed in this report accurately reflect my personal views about the
subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed in this report. The equity research analysts responsible
for the preparation of this report receive compensation based upon various factors, including the quality and
accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from,
among other business units, Institutional Equities and Investment Banking.
VCSCs Rating System and Valuation Methodology
Absolute performance, long term (fundamental) rating key: The recommendation is based on implied
absolute upside/downside for the stock from the target price, defined as (target price current price)/current price,
and is not related to market performance. This structure applies from 1 November 2010.
Equity rating key DefinitionBUY If the target price is 20% higher than the market price
ADD If the target price is 10-20% higher than the market price
HOLD If the target price is 10% below or 10% above the market price
REDUCE If the target price is 10-20% lower than the market price
SELL If the target price is 20% lower than the market price
NOT RATED The company is or may be covered by the Research Department but no rating or
target price is assigned either voluntarily or to comply with applicable regulation
and/or firm policies in certain circumstances, including when VCSC is acting in an
advisory capacity in a merger or strategic transaction involving the company.
RATING SUSPENDED The investment rating and target price for this stock have been suspended as there
is not a sufficient fundamental basis for determining an investment rating or target.
The previous investment rating and target price, if any, are no longer in effect for
this stock.
Unless otherwise specified, these performance parameters only reflect capital appreciation and are set with a 12-
month horizon. It is possible that future price volatility may cause temporary mismatch between upside/downside
for a stock based on market price and the formal recommendation, thus these performance parameters should be
interpreted flexibly.
Target price: In most cases, the target price will equal the analyst's assessment of the current fair value of the
stock. The target price is the level the stock should currently trade at if the market were to accept the analyst's view
of the stock, provided the necessary catalysts were in place to effect this change in perception within the
performance horizon. However, if the analyst doesn't think the market will reassess the stock over the specified
time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases,
therefore, our recommendation is an assessment of the mismatch between current market price and our
assessment of current fair value.
Valuation Methodology: To derive the target price, the analyst may use different valuation methods, including,
but not limited to, discounted free cash-flow and comparative analysis. The selection of methods depends on the
industry, the company, the nature of the stock and other circumstances. Company valuations are based on a single
or a combination of one of the following valuation methods: 1) Multiple-based models (P/E, P/cash flow, EV/sales,
EV/EBIT, EV/EBITA, EV/EBITDA), peer-group comparisons, and historical valuation approaches; 2) Discount
models (DCF, DVMA, DDM); 3) Break-up value approaches or asset-based evaluation methods; and 4)
Economic profit approaches (Residual Income, EVA). Valuation models are dependent on macroeconomic
factors, such as GDP growth, interest rates, exchange rates, raw materials, on other assumptions about the
economy, as well as risks inherent to the company under review. Furthermore, market sentiment may affect the
valuation of companies. Valuations are also based on expectations that might change rapidly and without notice,
depending on developments specific to individual industries.
Risks: Past performance is not necessarily indicative of future results. Foreign currency rates of exchange may
adversely affect the value, price or income of any security or related instrument mentioned in this report. For
investment advice, trade execution or other enquiries, clients should contact their local sales representative.
8/2/2019 Bank Sector Update
17/17
26 January 2011 Vietnam banking sector update
Contacts
Head office
67 Ham Nghi, District 1, HCMC
+84 8 3914 3588
Hanoi branch
18 Ngo Quyen St, Hoan Kiem District, Hanoi
+84 4 6262 6999
Transaction office
136 Ham Nghi, District 1, HCMC
+84 8 3914 3588
Transaction office
236 - 238 Nguyen Cong Tru, District 1, HCMC
+84 8 3914 3588
Research
Head of Research
Marc Djandji, M.Sc., CFA, ext 116
Research Team
+84 8 3914 3588
Manager, Hoang Thi Hoa, ext 146 Analyst, Vu Thanh Tu, ext 105
Senior Economist, Doan Thi Thu Hoai, ext 139 Analyst, Hoang Huong Giang, ext 142
Senior Analyst, Truong Vinh An, ext 143 Analyst, Nguyen Thi Ngoc Lan, ext 147
Senior Analyst, Dinh Thi Nhu Hoa, ext 140
Senior Analyst, Pham Cam Tu, ext 120
Institutional Sales & Brokerage
Foreign Sales
Michel Tosto
+84 8 3914 3588, ext 102
Vietnamese Sales
Nguyen Quoc Dung
+84 8 3914 3588, ext 136
Retail Sales & Brokerage
Ho Chi Minh City
Chau Thien Truc Quynh+84 8 3914 3588, ext 222
Hanoi
Le Duc Cuong+84 4 6262 6999, ext 333
DisclaimerCopyright 2010 Viet Capital Securities Company. All rights reserved. This report has been prepared on the basis of
information believed to be reliable at the time of publication. VCSC makes no representation or warranty regarding
the completeness and accuracy of such information. Opinions, estimates and projection expressed in this report
represent the current views of the author at the date of publication only. They do not necessarily reflect the opinions
of VCSC and are subject to change without notice. This report is provided, for information purposes only, to
institutional investor and retail clients of VCSC, and does not constitute an offer or solicitation to buy or sell any
securities discussed herein in any jurisdiction. Investors must make their investment decisions based upon
independent advice subject to their particular financial situation and investment objectives. This report may not be
copied, reproduced, published or redistributed by any person for any purpose without the written permission of an
authorized representative of VCSC. Please cite sources when quoting.
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]Top Related