Q2 2010 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES 5-YEAR FORECASTS TO 2014 ISSN 1758-454X Published by Business Monitor International Ltd VIETNAM COMMERCIAL BANKING REPORT Q2 2010 INCLUDING 5-YEAR INDUSTRY FORECASTS BY BMI Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Publication date: May 2010 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2010 Business Monitor International All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Commercial Banking Report Q2 2010 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 CONTENTS Executive Summary Table: Levels (VNDbn) Table: Levels (US$bn) Table: Levels At August 2009 Table: Annual Growth Rate Projections 2010-2014 (%) Table: Ranking Out Of 59 Countries Reviewed In 2010 Table: Projected Levels (VNDbn) Table: Projected Levels (US$bn) SWOT Analysis Vietnam Commercial Banking SWOT Vietnam Political SWOT Vietnam Economic SWOT Vietnam Business Environment SWOT 10 Business Environment Outlook 11 Commercial Banking Business Environment Rating 11 Table: Commercial Banking Business Environment Rating 11 Commercial Banking Business Environment Rating Methodology 12 Table: Asia Commercial Banking Business Environment Ratings 13 Global Commercial Banking Outlook 14 Asia Banking Sector Outlook 16 Five Themes For The Regional Banking Sector 16 Comparison Of Loan/Deposit & Loan/Asset & Loan/GDP Ratios 20 Anticipated Developments In 2010 21 Comparison Of Total Assets & Client Loans & Client Deposits (US$bn) 22 Comparison Of US$ Per Capita Deposits (Late 2009) 23 Interbank Rates & Bond Yields 24 Vietnam Banking Sector Outlook 25 Economic Outlook 28 Table: Vietnam Economic Activity, 2007-2014 30 Competitive Landscape 31 Protagonists 31 Table: Protagonists In Vietnam’s Commercial Banking Sector 31 Definition Of The Commercial Banking Universe 31 List Of Banks 32 Table: Financial Institutions In Vietnam (February 2010) 32 Company Profiles 35 Vietcombank 35 Table: Key Statistics For Vietcombank, 2004-2007 (VNDmn) 36 BIDV 37 VietinBank 39 Table: Key Statistics For VietinBank, 2005-2007 (VNDmn) 40 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 Agribank 41 Balance Sheet (VNDmn) 42 Balance Sheet (US$mn) 42 Key Ratios (%) 42 MHB Bank 43 Table: Key Statistics For MHB Bank, 2006-2007 (VNDmn) 44 Habubank 45 Balance Sheet (VNDmn, unless stated) 46 Balance Sheet (US$mn, unless stated) 46 Key Ratios (%) 46 Eximbank 47 Balance Sheet (VNDmn, unless stated) 48 Balance Sheet (US$mn, unless stated) 48 Key Ratios (%) 48 Sacombank 49 Stock Market Indicators 50 Balance Sheet (VNDmn, unless stated) 50 Balance Sheet (US$mn, unless stated) 51 Key Ratios (%) 51 Saigonbank 52 Balance Sheet (VNDmn) 53 Balance Sheet (US$mn) 53 Key Ratios (%) 53 SeABank 54 Balance Sheet (VNDmn, unless stated) 55 Balance Sheet (US$mn, unless stated) 55 Key Ratios (%) 55 BMI Banking Sector Methodology 56 Commercial Bank Business Environment Rating 57 Table: Commercial Banking Business Environment Indicators And Rationale 58 Table: Weighting Of Indicators 59 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 Executive Summary Table: Levels (VNDbn) Total assets Client loans Bond portfolio Other Liabilities & capital Capital Client deposits Other August 2008 1,659,548.7 1,259,980.0 149,816.7 249,752.0 1,659,548.7 217,173.0 1,205,967.7 236,408.0 August 2009 2,065,761.6 1,706,340.0 173,358.3 186,063.3 2,065,761.6 286,547.0 1,594,992.6 184,222.0 24 35 16 -26 24 32 32 -22 Date Change, % Source: BMI, central banks, regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio Other Liabilities & capital Capital Client deposits Other August 2008 100.4 76.2 9.1 15.1 100.4 13.1 73.0 14.3 August 2009 116.0 95.8 9.7 10.4 116.0 16.1 89.6 10.3 15% 26% 7% -31% 15% 22% 23% -28% Date Change, % Source: BMI, central banks, regulators Table: Levels At August 2009 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP per capita, US$ Deposits per capita, US$ 82.60% 107.32% 1,013 1,022 Falling Rising 106.98% Rising Source: BMI, central banks, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 Table: Annual Growth Rate Projections 2010-2014 (%) Assets Loans Deposits Annual Growth Rate 20 20 14 CAGR 21 24 13 1 12 Ranking Source: BMI, central banks, regulators Table: Ranking Out Of 59 Countries Reviewed In 2010 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 12 Local currency loan growth Local currency deposit growth 10 10 Local currency asset growth Source: BMI, central banks, regulators Table: Projected Levels (VNDbn) 2007 2008 2009e 2010f 2011f 2012f 2013f 2014f Total assets 1410221.40 1747335.40 2271536.02 2612266.42 3134719.71 3761663.65 4513996.38 5416795.65 Client loans 1067730.00 1339260.00 1848178.80 2254778.14 2705733.76 3246880.52 3896256.62 4675507.94 Client deposits 1100392.90 1341142.80 1528902.79 1697082.10 1917702.77 2186181.16 2492246.52 2841161.04 e/f = BMI estimate/forecast Source: BMI, central banks, regulators Table: Projected Levels (US$bn) 2007 2008 2009 2010 2011 2012 2013 2014 Total assets 88.04 99.96 122.99 133.96 156.74 188.08 231.49 285.09 Client loans 66.66 76.62 100.07 115.63 135.29 162.34 199.81 246.08 Client deposits 68.70 76.72 82.78 87.03 95.89 109.31 127.81 149.53 e/f = estimate/forecast Source: BMI, central banks, regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 SWOT Analysis Vietnam Commercial Banking SWOT High savings rate of Vietnamese consumers The Vietnamese commercial banking sector is open to foreign banks ! No overwhelming local majority in the market ! It is still an underdeveloped and opaque industry ! Still recovering from the bursting of the asset price bubble in early 2008 ! The Vietnamese population is under-banked ! Threats Untapped potential in the market ! Opportunities Rapid growth in the industry ! Weaknesses ! ! Strengths Income levels are likely to rise strongly over the medium term ! The impact of global economic downturn and financial crisis © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 Vietnam Political SWOT ! Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent ! The government recognises the threat that corruption poses to its legitimacy, and has acted to clamp down on graft among party officials Vietnam has allowed legislators to become more vocal in criticising government policies This is opening up opportunities for more checks and balances within the one-party system ! The slowdown in growth in 2009 and 2010 is likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocractic rule ! Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party-state will probably be unsustainable ! Threats Relations with the US are generally improving, and Washington sees Hanoi as a potential geopolitical ally in South East Asia ! Opportunities The Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress The one-party system is generally conducive to short-term political stability ! Weaknesses ! ! Strengths Relations with China have deteriorated over the past year due to Beijing’s more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause large environmental damage © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 Vietnam Economic SWOT ! Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy continues to suffer in 2010 The fiscal picture is clouded by considerable ‘off-the-books’ spending The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures ! WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector ! Urbanisation will continue to be a long-term growth driver The UN forecasts the urban population to rise from 29% of the population to more than 50% by the early 2040s ! Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis ! Threats The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004 ! Opportunities Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.6% annually between 2000 and 2007 ! Weaknesses ! ! Strengths Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2008 Total Assets 3,728,305.0 5,524,791.0 11,685,320.0 23,518,680.0 23,606,720.0 Loans & Mortgages 2,340,832.0 3,330,218.0 5,983,267.0 9,285,862.0 10,275,170.0 Total Deposits 2,169,531.0 3,096,275.0 4,616,096.0 8,467,382.0 11,081,950.0 253,547.0 391,464.0 1,756,381.0 3,179,345.0 2,992,761.0 2,229.00 1,243.00 Total Shareholder Equity Earnings per share, VND Source: Habubank, Bloomberg Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 2008 Total Assets 236.4 347.1 727.8 1,468.4 1,350.3 Loans & Mortgages 148.4 209.2 372.6 579.8 587.7 Total Deposits 137.6 194.5 287.5 528.7 633.9 16.1 24.6 109.4 198.5 171.2 0.14 0.08 Total Shareholder Equity Earnings per share, US$ Source: Habubank, Bloomberg Key Ratios (%) 2004 2005 2006 2007 2008 Return on Assets 1.6 2.2 2.1 1.5 Return on Equity 23.3 17.2 14.8 11.4 7.1 15.0 13.5 12.7 Equity Asset Ratio 6.8 Source: Habubank, Bloomberg © Business Monitor International Ltd Page 46 Vietnam Commercial Banking Report Q2 2010 Eximbank ! Valued by the major international banks who deal with it ! Emerged from global financial crisis in a strong position ! By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% and is less dependent on borrowing from other financial institutions ! The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system Loans to other banks account for less than a quarter of total assets Funding from other banks accounts for about 3% ! Lack of scale Eximbank is a fairly large bank in Vietnam but a small institution by international standards ! Potential problems in the wake of the bursting of the asset price bubble Opportunities ! Potential for continuing growth from a low base Threats ! Vulnerability to the direct and indirect impact from the downturn in global trade ! Profit growth particularly threatened by government policy Strengths Weaknesses Company Overview Vietnam Export Import Bank (Eximbank) was established in 1989 It is one of the largest CJSBs in terms of equity It has a nationwide network of 64 branches across the country and its head office located is in Ho Chi Minh City The Vietnamese financial sector has achieved strong growth over recent years but even so, Eximbank has performed far above trend for the sector, posting a growth in gross profits in FY09 of 60.6% y-o-y to VND1.14trn This increased profitability is accompanied by a growth in the bank’s loan portfolio of 80.8% y-o-y to a total value of VND38.38trn In comparison, overall loan portfolio growth for the sector as a whole was 27.7% The bank’s overall assets are up by 37% in FY09 to a total value of VND66trn This growth is threatened by government concerns over the credit supply The government is limiting credit supply growth to 25% in FY10 This risks putting the brakes on Eximbank’s rapid growth, which was largely fuelled by an expansion in its loan portfolio However, the application of these rules to Eximbank is likely to be less severe given its role in the important export sector, which the government is keen to promote and protect as much as possible from attempts aimed at preventing the economy overheating Company Data Website ! www.eximbank.com.vn/em Status ! Commercial joint-stock bank © Business Monitor International Ltd Page 47 Vietnam Commercial Banking Report Q2 2010 Balance Sheet (VNDmn, unless stated) 2005 2006 2007 2008 11,369,230.0 18,323,770.0 33,710,420.0 48,624,110.0 Loans & Mortgages 6,427,689.0 10,161,270.0 18,378,610.0 21,232,200.0 Total Deposits 8,352,111.0 13,141,180.0 22,906,120.0 31,254,020.0 835,539.0 1,946,667.0 6,294,943.0 12,844,080.0 2379.00 1052.00 Total Assets Total Shareholder Equity Earnings per share, VND Source: Eximbank, Bloomberg Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 2008 Total Assets 714.3 1,141.2 2,104.7 2,781.2 Loans & Mortgages 403.8 632.9 1,147.5 1,214.4 Total Deposits 524.7 818.5 1,430.2 1,787.7 52.5 121.2 393.0 734.7 0.15 0.06 2006 2007 2008 Return on Assets 1.7 1.8 1.7 Return on Equity 18.6 11.2 7.4 Loan Deposit Ratio 80.6 67.9 Loan Asset Ratio 54.7 43.7 18.7 26.4 Total Shareholder Equity Earnings per share, US$ Source: Eximbank, Bloomberg Key Ratios (%) 2004 Equity Asset Ratio 2005 7.3 10.6 Source: Eximbank, Bloomberg © Business Monitor International Ltd Page 48 Vietnam Commercial Banking Report Q2 2010 Sacombank The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system ! 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 ! Potential for continuing growth from a low base ! Leverage of strong position in the SME sector ! Expansion into south China and countries in the ASEAN ! Vulnerability to direct and indirect impact from the downturn in global trade ! Company Overview By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% ! Threats Emerged from the global financial crisis in a strong position ! Opportunities Strategic partnerships with ANZ and the IFC, plus recognition and awards from the government and the trade press ! Weaknesses ! ! Strengths Vulnerable to government credit caps Saigon Thuong Tin CJSB (Sacombank) was incorporated in 1992 It has been listed on the Ho Chi Minh City Stock Exchange since July 2006 Its foreign strategic partners include Australia’s ANZ Banking Group (a 10% shareholder), the International Finance Corporation (5.25%) and Dragon Financial Holdings (8.73%) Foreign shareholders collectively own 30% of the bank Its operational network includes 247 branches and transaction offices in 44 cities It also has a representative office in Nanning, south China and a branch in Laos In 2008, the bank was restructured as a financial holding company Its subsidiaries are: 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; Saigon Thuong Tin Real Estate JSC More than 50% of Sacombank’s loans are to SMEs, which the bank has targeted as its market In due course, Sacombank will look to help SMEs undertake IPOs These services have been combined, however, with increasing attempts to diversify income sources away from the credit business To a certain extent this has been successful, with funds from these sources standing at 25.5% of overall income in FY09 Sacombank has, in common with much of the Vietnamese financial sector, performed strongly over recent years This can largely be attributed to the success of the Vietnamese economy as a whole Sacombank posted FY09 gross profit of VND1.9trn This figure exceeded the predicted amount by 19% Overall, this trend is expected to continue as the Vietnamese economy continues to grow rapidly However, the success of Sacombank does partly depend on the outcome of increasing government concern over the supply of credit Already the government has announced its intention to limit the growth of credit to 25% While this would still allow for substantial growth © Business Monitor International Ltd Page 49 Vietnam Commercial Banking Report Q2 2010 across the Vietnamese financial sector, it would put a limit on growth for Sacombank and other institutions Sacombank will come under pressure given its focus on SMEs Company Data Website ! www.sacombank.com.vn Status ! Commercial joint-stock bank Stock Market Indicators 2005 2006 2007 2008 28-Sep-09 Market Capitalisation, VNDmn 15,043,772.0 29,139,732.0 9,413,129.0 21,880,408.0 Market Capitalisation ,US$mn 937.0 1,819.4 538.4 1,226.3 Share Price, VND 24,684.4 45,555.9 14,717.0 34,500.0 Share Price, US$ 1.5 2.8 0.8 1.9 84.9 -70.4 129.7 US$ Share Price, % change (eop) Change, % (2009 only) 134.4 Shares Outstanding, mn 401.1 609.4 639.6 616.8 616.8 Source: Sacombank, Bloomberg Balance Sheet (VNDmn, unless stated) 2005 2006 2007 2008 14,454,340.0 24,776,180.0 64,572,880.0 68,438,570.0 8,379,335.0 14,312,890.0 35,200,580.0 34,757,120.0 10,467,160.0 17,511,580.0 44,231,940.0 46,128,820.0 Total Shareholder Equity 1,887,680.0 2,870,346.0 7,349,659.0 7,758,624.0 Earnings per share, VND 755.80 917.09 2233.28 1494.90 Total Assets Loans & Mortgages Total Deposits Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 50 Vietnam Commercial Banking Report Q2 2010 Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 Total Assets 908.1 1,543.1 4,031.6 3,914.6 Loans & Mortgages 526.4 891.4 2,197.8 1,988.1 Total Deposits 657.6 1,090.7 2,761.6 2,638.5 Total Shareholder Equity 118.6 178.8 458.9 443.8 Earnings per share, US$ 0.05 0.06 0.14 0.09 2005 2006 2007 2008 Return on Assets 2.4 3.1 1.4 Return on Equity 19.8 27.4 12.6 Source: Sacombank, Bloomberg Key Ratios (%) Loan Deposit Ratio 80.5 82.2 80.0 75.9 Loan Asset Ratio 58.3 58.1 54.8 51.2 Equity Asset Ratio 13.1 11.6 11.4 11.3 Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 51 Vietnam Commercial Banking Report Q2 2010 Saigonbank Strengths ! Record of strong growth over the medium term Weaknesses ! Lack of scale Saigonbank is a medium-sized bank in Vietnam but a small institution by international standards ! Saigonbank's loan-to-deposit ratio was relatively high in 2009 by the standards of other banks Opportunities ! Potential for continuing growth from a low base Threats ! Vulnerability to impact –whether direct or indirect– from the downturn in global trade Company Overview Saigonbank for Industry and Trade (Saigonbank) was one of the first commercial joint-stock bank in Vietnam, established in 1987 with initial chartered capital of VND650mn and an operation duration of 50 years Saigonbank increased its chartered capital from VND650mn to VND1.02bn in 20 years as part of a growth-orientated policy Saigonbank, like much of the Vietnamese financial sector, has shown strong performance over recent years Most of this success can be attributed to the general success of the Vietnamese economy Saigonbank has posted strong profits, with profitability increasing y-o-y in FY09 It is expected that gross profits in FY10 will reach VND900bn However, this rapid growth will be hindered by the government's concerns over credit supply growth The government aims to limit this to 25% to prevent broader economic difficulties Enforcing such a policy will cap the potential profitability of Saigonbank in FY10 Unlike many Vietnamese banks, Saigonbank does not have a foreign strategic partner for its operations This has led it to develop a different kind of modernisation program, identifying its own priorities So far, a major priority has been the development of online banking services, as highlighted by the recent decision to use SunGuard's Ambit Online Banking to offer new online services to customers Saigonbank hopes moves such as these will ensure it is not left behind technologically by foreign-sponsored competitors Company Data Website ! http://www.saigonbank.com.vn/ Status ! Commercial joint-stock bank © Business Monitor International Ltd Page 52 Vietnam Commercial Banking Report Q2 2010 Balance Sheet (VNDmn) 2004 2005 2006 2007 2008 Total Assets 3,188,300.0 4,290,929.0 6,240,308.0 10,184,650.0 11,205,360.0 Loans & Mortgages 2,611,141.0 3,527,109.0 4,811,056.0 7,300,613.0 7,844,450.0 Total Deposits 1,964,739.0 2,830,064.0 3,947,700.0 6,466,654.0 7,164,714.0 476,062.0 609,434.0 931,562.0 1,431,610.0 1,469,766.0 2,432.00 1,581.00 Total Shareholder Equity Earnings per share (EPS, VND) Source: Saigonbank Bloomberg Balance Sheet (US$mn) 2004 2005 2006 2007 2008 Total Assets 202.1 269.6 388.7 635.9 640.9 Loans & Mortgages 165.6 221.6 299.6 455.8 448.7 Total Deposits 124.6 177.8 245.9 403.7 409.8 30.2 38.3 58.0 89.4 84.1 0.15 0.10 Total Shareholder Equity Earnings per share (EPS, US$) Source: Saigonbank Bloomberg Key Ratios (%) 2004 2005 2006 2007 2008 Return on Assets 2.1 2.3 2.1 1.5 Return on Equity 14.7 15.5 14.4 11.1 Loan Deposit Ratio 112.3 Loan Asset Ratio Equity Asset Ratio 71.3 14.9 14.2 14.9 14.1 13.1 Source: Saigonbank Bloomberg © Business Monitor International Ltd Page 53 Vietnam Commercial Banking Report Q2 2010 SeABank ! Clear record of strong growth over the medium term ! Partnership with Societe Generale ! Lack of scale SeABank is a medium-sized bank in Vietnam but a small institution by international standards ! SeABank’s loan-to-deposit ratio was relatively high by the standards of other banks ! Did not meet FY09 gross profit targets Opportunities ! Potential for continuing growth from a low base Threats ! Vulnerability to direct and indirect impact from the downturn in global trade Company Overview South East Asia Commercial Joint-Stock Bank (SeABank) was established in 1994 as one the Strengths Weaknesses first Vietnamese commercial CJSBs The bank aims to become one of the prime joint-stock banks in Vietnam The bank expanded its network to 126 branches by the end of 2009 This was largely possible due to its strategic partnership with Societe Generale, which owns 20% of the firm The bank’s targets for 2010 include minimum total assets of US$3.125bn, minimum total capital of US$500mn, at least 200 branches, 1mn customers and 2,000 employees This all amounts to a sizeable and rapid expansion programme following on from the rapidity of the expansion in the bank’s the performance in FY09 Overall loan portfolio growth was 122% y-o-y, to a total value of VND24.02trn Total assets increased by 136% to VND30.8trn The likelihood of further rapid growth is increased by the recent decision to increase the charter capital of SeABank Charter capital increased by 36% to a total of VND4trn in FY09 However, this rapid expansion has not been problem free SeABank is one of the few Vietnamese financial institutions to fall short of its FY09 gross profit targets, with profits growing by 8% over FY09 to VND479bn Company Data Website ! www.seabank.com.vn Status ! Commercial joint-stock bank © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q2 2010 Balance Sheet (VNDmn, unless stated) 2004 2005 2006 2007 2,283,813.0 6,124,938.0 10,200,420.0 26,241,090.0 Loans & Mortgages 530,767.4 1,347,680.0 3,353,999.0 10,994,810.0 Total Deposits 499,021.4 2,312,406.0 3,511,683.0 10,744,180.0 Total Shareholder Equity 161,472.8 291,775.6 1,055,536.0 3,366,458.0 Total Assets Earnings per share, VND 2,098.00 Source: SeABank, Bloomberg Balance Sheet (US$mn, unless stated) 2004 2005 2006 2007 144.8 384.8 635.3 1,638.4 Loans & Mortgages 33.7 84.7 208.9 686.5 Total Deposits 31.6 145.3 218.7 670.8 Total Shareholder Equity 10.2 18.3 65.7 210.2 Total Assets Earnings per share, US$ 0.13 Source: SeABank, Bloomberg Key Ratios (%) 2004 2005 2006 2007 Return on Assets 1.0 1.2 1.6 Return on Equity 17.7 14.6 13.5 4.8 10.3 12.8 Equity Asset Ratio 7.1 Source: SeABank, Bloomberg © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q2 2010 BMI Banking Sector 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 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 not incorporate the balance sheet of the central bank of the country in question Client loans are loans to non-bank clients They include loans to public sector and state-owned enterprises However, they generally not include loans to governments, government (or nongovernment) bonds held or loans to central banks Client deposits are deposits from the non-bank public They generally include deposits from public sector and state-owned enterprises However, they only include government deposits if these are significant We take into account capital items and bond portfolios The former include shareholders funds, and subordinated debt that may be counted as capital The latter includes government and non-government bonds In quantifying the collective balance sheets of a particular country, we assume that three equations hold true: ! Total assets = total liabilities and capital; ! Total assets = client loans + bond portfolio + other assets; ! Total liabilities and capital = capital items + client deposits + other liabilities © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q2 2010 In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be reconciled with equation one In practice, other assets and other liabilities are analogous to inter-bank transactions In some cases, such transactions are generally with foreign banks In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape, and we not include them in our figures The US is the main exception to this 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 © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q2 2010 Table: Commercial Banking Business Environment Indicators And Rationale Limits of potential returns Rationale Banking market structure Estimated total assets, end 2008 Indication of overall sector attractiveness Large markets are considered more attractive than small ones Estimated growth in total assets, 20082013 Indication of growth potential The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 20082013 Indication of the scope for expansion in profits through intermediation Country structure GDP per capita A proxy for wealth High-income states receive better scores than lowincome states Active population Those aged 16-64 in each state, as a % of total population A high proportion suggests that the market is comparatively more attractive Corporate tax A measure of the general fiscal drag on profits GDP volatility Standard deviation of growth over seven-year economic cycle A proxy for economic stability Risks to realisation of returns Banking market risks Regulatory framework and industry development Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Regulatory framework and competitive environment Subjective evaluation of the impact of the regulatory environment on the competitive landscape Country risk From BMI’s Country Risk Ratings (CRR) Short-term financial risk Rating from CRR, evaluating currency volatility Policy continuity Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy Legal framework Rating from CRR, to denote strength of legal institutions in each state Security of investment can be a key risk in some emerging markets Bureaucracy Rating from CRR to denote ease of conducting business in the state Source: BMI © Business Monitor International Ltd Page 58 Vietnam Commercial Banking Report Q2 2010 Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight Consequently, the following weights have been adopted Table: Weighting Of Indicators Component Limits of potential returns, of which: Weighting, % 70, of which - Banking market structure 60 - Country structure 40 Risks to realisation of returns, of which: 30, of which - Banking market risks 40 - Country risk 60 Source: BMI © Business Monitor International Ltd Page 59 Reproduced with permission of the copyright owner Further reproduction prohibited without permission ... International Ltd Page Vietnam Commercial Banking Report Q2 2010 SWOT Analysis Vietnam Commercial Banking SWOT High savings rate of Vietnamese consumers The Vietnamese commercial banking sector is... of any information hereto contained Vietnam Commercial Banking Report Q2 2010 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q2 2010 CONTENTS Executive Summary ... International Ltd Page 24 Vietnam Commercial Banking Report Q2 2010 Vietnam Banking Sector Outlook The expected tightening of monetary policy in 2010 will undoubtedly hurt the Vietnamese banking sector,