Q3 2014 www.businessmonitor.com VIETNAM COMMERCIAL BANKING REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1758-454X Published by:Business Monitor International Vietnam Commercial Banking Report Q3 2014 INCLUDES 5-YEAR FORECASTS TO 2018 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: May 2014 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2014 Business Monitor International All rights reserved. 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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 Q3 2014 CONTENTS BMI Industry View . Table: Commercial Banking Sector Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Key Ratios, July 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Annual Growth Rate Projections 2013-2018 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Ranking Out Of 72 Countries Reviewed In 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table: Commercial Banking Sector Indicators, 2011-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SWOT Commercial Banking Political . 10 Economic . 11 Business Environment 12 Industry Forecast 13 Industry Risk Reward Ratings 18 Asia Commercial Banking Risk/Reward Ratings 18 Table: Asia Commercial Banking Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Market Overview . 20 Asia Commercial Banking Outlook . 20 Table: Banks' Bond Portfolios, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Table: Comparison of USD Per Capita Deposits, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Macroeconomic Forecasts . 22 Table: Vietnam - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Competitive Landscape 26 Market Structure . 26 Protagonists 26 Table: Protagonists In Vietnam's Commercial Banking Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Definition Of The Commercial Banking Universe . 26 List Of Banks . 27 Table: Financial Institutions In Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Company Profile 29 Agribank 29 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Asia Commercial Bank . 32 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 © Business Monitor International Page Vietnam Commercial Banking Report Q3 2014 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Bank for Foreign Trade of Vietnam (Vietcombank) 35 Table: Stock Market Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Eximbank . 39 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Housing Development Commercial Joint Stock Bank (HDBank) . 43 Sacombank . 45 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 VietinBank . 49 Table: Stock Market Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Table: Balance Sheet (VNDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Table: Balance Sheet (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Table: Key Ratios (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Regional Overview 53 Asia Overview . 53 Global Industry Overview 56 Global Commercial Banking Outlook 56 Regional Outlooks 56 Demographic Forecast . 63 Table: Vietnam's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Vietnam's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Table: Vietnam's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Methodology 67 Industry Forecast Methodology 67 Sector-Specific Methodology 68 Risk/Reward Ratings Methodology 69 Table: Commercial Banking Risk/Reward Rating Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 © Business Monitor International Page Vietnam Commercial Banking Report Q3 2014 BMI Industry View Table: Commercial Banking Sector Indicators Total assets Date Client loans Bond portfolio Liabilities and capital Other Capital Client deposits Other July 2012, VNDbn 3,567,430 2,861,000 336,215 370,215 3,567,430 575,090 2,732,308 260,032 July 2013, VNDbn 4,162,373 3,256,543 469,827 436,003 4,162,373 611,598 3,445,097 105,678 % change y-o-y 16.7% 13.8% 39.7% 17.8% 16.7% 6.3% 26.1% -59.4% July 2012, USDbn 170.9 137.1 16.1 17.7 170.9 27.6 130.9 12.5 July 2013, USDbn 196.6 153.8 22.2 20.6 196.6 28.9 162.7 5.0 15.0% 12.2% 37.7% 16.1% 15.0% 4.8% 24.3% -59.9% % change y-o-y Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Key Ratios, July 2013 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, USD Deposits per capita, USD 94.53% 78.24% 93.59% 1,903.4 1,781.8 Falling Rising Falling n.a. n.a. Source: BMI; Central banks; Regulators Table: Annual Growth Rate Projections 2013-2018 (%) Assets Loans Deposits Annual Growth Rate 11 CAGR 12 10 Ranking 21 29 45 Source: BMI; Central banks; Regulators © Business Monitor International Page Vietnam Commercial Banking Report Q3 2014 Table: Ranking Out Of 72 Countries Reviewed In 2014 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 17 18 Local currency asset growth Local currency loan growth Local currency deposit growth 19 21 26 Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Indicators, 2011-2018 2011 Total assets, VNDbn Total assets, USDbn Client loans, VNDbn Client loans, USDbn Client deposits, VNDbn Client deposits, USDbn 2012 2013e 2014f 2015f 2016f 2017f 2018f 3,437,893 3,917,557 4,466,015 5,091,257 5,753,121 6,443,495 7,152,280 7,939,030 163.4 188.0 212.7 247.6 283.0 320.6 359.4 403.0 2,829,890 3,077,700 3,447,024 3,860,667 4,285,340 4,713,874 5,138,123 5,600,554 134.5 147.7 164.1 187.7 210.8 234.5 258.2 284.3 2,483,357 3,080,455 3,388,501 3,693,466 3,988,943 4,268,169 4,524,259 4,795,715 118.1 147.8 161.4 179.6 196.2 212.3 227.3 243.4 e/f = estimate/forecast. Source: BMI; Central banks; Regulators © Business Monitor International Page Vietnam Commercial Banking Report Q3 2014 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths ■ Untapped market with potential for increased participation of foreign banks. ■ Large population with a high savings rate and potential for income growth. ■ The Vietnamese government aims to speed up the process of privatising state-owned banks, which will help modernise the industry. ■ State-owned banks will play a lesser role going forward, and the risks associated with state-directed lending will decrease over time. Weaknesses ■ Domestic banks continue to lag behind their foreign peers in terms of financial strength and the technological curve. ■ Accounting standards lag far behind international standards and the lack of transparency entails significant risks for foreign investors. ■ Small banks have an overwhelming exposure to real estate and individual loans, resulting in highly skewed and risky loan portfolios. Opportunities ■ The population is still underbanked, with significant potential for adopting cash-free payment systems and new mobile banking technologies. ■ Rising income levels and deepening capital markets could give rise to opportunities in more sophisticated financial products and growth for the local asset management industry. Threats ■ Track record of macroeconomic instability threatens the credibility of the government and could potentially drive economic policy away from further liberalisation. ■ The high level of government debt risks triggering a fiscal crisis, undermining confidence in the banking sector. © Business Monitor International Page Vietnam Commercial Banking Report Q3 2014 Political SWOT Analysis Strengths ■ The Communist Party of Vietnam remains committed to market-oriented reforms and we not expect major shifts in policy direction over the next five years. The oneparty system is generally conducive to short-term political stability. ■ Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. Weaknesses ■ Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. ■ There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent. Opportunities ■ The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. ■ Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system. Threats ■ Macroeconomic instabilities continue 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. ■ Relations with China have deteriorated over recent years 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 wide-scale environmental damage. © Business Monitor International Page 10 Vietnam Commercial Banking Report Q3 2014 Eurozone Deleveraging Continues Eurozone - Bank Assets, % chg y-o-y Source: BMI, ECB Emerging Asia: Asian banks have continued to leverage up since the global financial crisis, with total banking sector assets growing steadily across the board over the past five years. However, we believe that the positive cycle of low real interest rates, easy credit and rising property prices may be nearing an end. Over the past five years, low interest rates globally and also locally have helped fuel large increases in banking sector assets. On the whole, Asian banks continued to leverage up through the crisis, with total banking sector assets rising from 163% of GDP in 2008, to an estimated 182% at the end of 2013. Even in 2009, average assets as a share of GDP continued to climb steadily. Going forward, we believe that banking sector assets will struggle to maintain pace with GDP growth in many countries as real interest rates head higher and confidence in property markets begins to wane. © Business Monitor International Page 57 Vietnam Commercial Banking Report Q3 2014 Asian Banks Leveraging Up Asia - Banking Sector Assets-to-GDP, Rebased To 2008=100 Source: BMI, Regional Central Banks Emerging Europe: With the Ukraine crisis still unfolding, it is hard to assess its full impact on emerging Europe's banking sector, but the implications are clearly net negative. Many regional creditors have been paring back their Ukraine exposure in recent years due to concerns about the country's macroeconomic trajectory, but there are still many regional banks with significant direct and indirect links to the crisis. In addition to the Ukrainian and Russian banking sectors, lenders in Hungary, Serbia and the Baltic states (particularly Latvia) will also suffer. The Czech, Polish and Slovak banking sectors will remain relatively unscathed, reinforcing our view of Central European banking sector outperformance. © Business Monitor International Page 58 Vietnam Commercial Banking Report Q3 2014 Significant Proportion Of Assets In Troubled Economies Hungary - OTP Bank, Assets by Geographic Segment, % of Total Source: Bloomberg, BMI Latin America: Despite notable macroeconomic headwinds in the form of slowing growth in China and lower industrial metals prices, we continue to see relatively strong growth potential in Latin American commercial banking sectors over the medium-to-long term (see 'Long-Term Banking Sector Growth Potential Remains', January 21). We believe that the most significant room for expansion is in markets such as Colombia, Mexico, and to a lesser extent Peru, which continue to lag behind regional peers like Brazil and Chile in terms of banking sector penetration. Indeed, we expect that relatively strong real GDP growth, as well as reforms to increase banking sector competitiveness in the case of Mexico, will boost demand for and access to financial services in the coming years. As such, we see the greatest upside potential for these countries' scores in our Commercial Banking Risk/Reward Ratings, with Mexico likely to overtake Brazil in the next few years. © Business Monitor International Page 59 Vietnam Commercial Banking Report Q3 2014 Upside Potential For Mexico And Colombia Latin America - Commercial Banking Risk/Reward Ratings, Out Of 100 70 65 60 55 50 2009 2010 Brazil 2011 Chile Colombia 2012 2013 Mexico 2014 Peru Source: BMI Sub-Saharan Africa: Tightening global and domestic liquidity will drag on banking sector asset growth across several key markets in Sub-Saharan Africa in 2014. Deteriorating asset quality - particularly banks exposed to headwinds in the mining and construction sectors - is also becoming a salient issue. Despite these challenges, we maintain a positive view on SSA banks in general, given the region's buoyant economic growth prospects, vast unbanked population, and improving regulatory framework. © Business Monitor International Page 60 Vietnam Commercial Banking Report Q3 2014 Room For Growth Selected SSA Countries - Total Banking Sectors Assets To GDP % Source: National central banks, BMI forecasts. Middle East And North Africa: We hold a broadly positive outlook on banking sectors across the Middle East in 2014 and beyond, and expect a slight convergence in growth rates due to base effects. We maintain our view that the Gulf will be the outperformer in the region as growth will be buoyed by significant government spending, particularly on large-scale infrastructure projects, especially in Saudi Arabia and Qatar. Outside of the GCC, we forecast an uptick in credit growth in Egypt and Iran, due primarily to a decrease in political risks. © Business Monitor International Page 61 Vietnam Commercial Banking Report Q3 2014 GCC To Remain In Front Middle East - Banking Sector Credit Growth % chg y-o-y 30 25 20 15 10 2012 2013e 2014f Egypt Jordan United Arab Emirates 2015f Israel 2016f Saudi Arabia 2017f 2018f Qatar Source: BMI, Respective Central Bank. f = BMI forecasts © Business Monitor International Page 62 Vietnam Commercial Banking Report Q3 2014 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 2013, the change in the structure of the population between 2013 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. Population Pyramid 2013 (LHS) And 2013 Versus 2050 (RHS) Source: World Bank, UN, BMI © Business Monitor International Page 63 Vietnam Commercial Banking Report Q3 2014 Population Indicators Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050 Source: World Bank, UN, BMI Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2013e 2015f 2020f 68,910 76,020 80,888 84,948 89,047 91,680 93,387 97,057 0-4 years 9,315 9,323 7,128 6,898 7,229 7,152 7,012 6,575 5-9 years 8,606 9,212 9,253 7,023 6,791 7,052 7,181 6,968 10-14 years 7,857 8,541 9,162 9,117 6,899 6,619 6,757 7,147 15-19 years 7,359 7,788 8,492 9,050 9,011 7,686 6,866 6,726 20-24 years 6,644 7,222 7,673 8,333 8,874 9,148 8,936 6,802 25-29 years 6,006 6,470 7,065 7,471 8,112 8,528 8,772 8,837 30-34 years 5,138 5,890 6,352 6,910 7,286 7,703 8,022 8,680 35-39 years 3,888 5,065 5,803 6,242 6,763 7,011 7,208 7,940 40-44 years 2,463 3,826 4,994 5,719 6,147 6,472 6,685 7,127 45-49 years 2,017 2,409 3,753 4,935 5,648 5,894 6,054 6,589 50-54 years 1,968 1,959 2,346 3,700 4,855 5,306 5,521 5,926 55-59 years 2,046 1,891 1,885 2,237 3,542 4,278 4,677 5,330 60-64 years 1,669 1,934 1,790 1,734 2,068 2,795 3,352 4,444 65-69 years 1,412 1,522 1,771 1,610 1,562 1,673 1,906 3,104 70-74 years 1,028 1,216 1,322 1,530 1,399 1,360 1,379 1,695 Total © Business Monitor International Page 64 Vietnam Commercial Banking Report Q3 2014 Vietnam's Population By Age Group, 1990-2020 ('000) - Continued 1990 1995 2000 2005 2010 2013e 2015f 2020f 75-79 years 752 819 984 1,080 1,263 1,219 1,167 1,160 80-84 years 430 536 597 732 815 919 964 900 85-89 years 224 261 336 385 483 517 546 654 90-94 years 71 108 132 177 210 245 268 306 95-99 years 16 25 41 53 74 83 89 115 100+ years 12 17 21 24 30 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2013e 2015f 2020f 0-4 years 13.52 12.26 8.81 8.12 8.12 7.80 7.51 6.77 5-9 years 12.49 12.12 11.44 8.27 7.63 7.69 7.69 7.18 10-14 years 11.40 11.23 11.33 10.73 7.75 7.22 7.24 7.36 15-19 years 10.68 10.25 10.50 10.65 10.12 8.38 7.35 6.93 20-24 years 9.64 9.50 9.49 9.81 9.97 9.98 9.57 7.01 25-29 years 8.72 8.51 8.73 8.79 9.11 9.30 9.39 9.11 30-34 years 7.46 7.75 7.85 8.13 8.18 8.40 8.59 8.94 35-39 years 5.64 6.66 7.17 7.35 7.60 7.65 7.72 8.18 40-44 years 3.57 5.03 6.17 6.73 6.90 7.06 7.16 7.34 45-49 years 2.93 3.17 4.64 5.81 6.34 6.43 6.48 6.79 50-54 years 2.86 2.58 2.90 4.36 5.45 5.79 5.91 6.11 55-59 years 2.97 2.49 2.33 2.63 3.98 4.67 5.01 5.49 60-64 years 2.42 2.54 2.21 2.04 2.32 3.05 3.59 4.58 65-69 years 2.05 2.00 2.19 1.89 1.75 1.83 2.04 3.20 70-74 years 1.49 1.60 1.63 1.80 1.57 1.48 1.48 1.75 75-79 years 1.09 1.08 1.22 1.27 1.42 1.33 1.25 1.19 80-84 years 0.62 0.70 0.74 0.86 0.91 1.00 1.03 0.93 85-89 years 0.32 0.34 0.42 0.45 0.54 0.56 0.58 0.67 90-94 years 0.10 0.14 0.16 0.21 0.24 0.27 0.29 0.32 95-99 years 0.02 0.03 0.05 0.06 0.08 0.09 0.10 0.12 © Business Monitor International Page 65 Vietnam Commercial Banking Report Q3 2014 Vietnam's Population By Age Group, 1990-2020 (% of total) - Continued 100+ years 1990 1995 2000 2005 2010 2013e 2015f 2020f 0.00 0.00 0.01 0.01 0.02 0.02 0.03 0.03 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI Table: Vietnam's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 1990 1995 2000 2005 2010 2013e 75.8 71.0 61.3 50.8 42.9 41.4 2015f 2020f 41.3 41.9 29,712 31,567 30,734 28,617 26,741 26,860 27,293 28,655 Active population, % of total 56.9 Active population, total, '000 58.5 62.0 66.3 70.0 70.7 70.8 70.5 39,198 44,453 50,154 56,331 62,306 64,820 66,094 68,402 Youth population, % of total working age 65.8 Youth population, total, '000 60.9 50.9 40.9 33.6 32.1 31.7 30.2 25,778 27,076 25,544 23,038 20,918 20,822 20,950 20,690 Pensionable population, % of total working age Pensionable population, total, '000 10.0 10.1 10.3 9.9 9.3 9.3 9.6 11.6 3,934 4,491 5,190 5,579 5,823 6,037 6,343 7,965 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2013e 2015f 2020f Urban population, % of total 20.3 22.2 24.4 27.3 30.4 32.3 33.6 36.9 Rural population, % of total 79.7 77.8 75.6 72.7 69.6 67.7 66.4 63.1 Urban population, total, '000 13,958 16,867 19,716 23,175 27,064 29,632 31,384 35,771 Rural population, total, '000 54,952 59,153 61,172 61,773 61,983 62,048 62,003 61,286 e/f = BMI estimate/forecast. Source: World Bank, UN, BMI © Business Monitor International Page 66 Vietnam Commercial Banking Report Q3 2014 Methodology Industry Forecast Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a variable using more than the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. We mainly use OLS estimators, and in order to avoid relying on subjective views and encourage the use of objective views, we use a 'general-to-specific' method. BMI mainly uses a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact. Effective forecasting depends on appropriately selected regression models, BMI selects the best model according to various different criteria and tests, including but not exclusive to: ■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account; ■ Testing the directional movement and magnitude of coefficients; ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value); and ■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity. © Business Monitor International Page 67 Vietnam Commercial Banking Report Q3 2014 Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience, expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. Sector-Specific Methodology BMI's Commercial Banking Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets. The reports draw heavily on our extensive economic dataset, which includes up to 550 indicators per country, as well as our in depth view of each local market. We collate our commercial banking databank from official sources (including central banks and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only used as a backup. ■ The reports focus on total assets, client loans and client deposits. ■ Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country. They not incorporate the balance sheet of the central bank of the country in question. ■ Client loans are loans to non-bank clients. They include loans to public sector and state-owned enterprises. However, they generally not include loans to governments, government (or nongovernment) bonds held or loans to central banks. ■ Client deposits are deposits from the non-bank public. They generally include deposits from public sector and state-owned enterprises. However, they only include government deposits if these are significant. ■ We take into account capital items and bond portfolios. The former include shareholders funds, and subordinated debt that may be counted as capital. The latter includes government and non-government bonds. In quantifying the collective balance sheets of a particular country, we assume that three equations hold true: ■ Total assets = total liabilities and capital; ■ Total assets = client loans + bond portfolio + other assets; ■ Total liabilities and capital = capital items + client deposits + other liabilities. In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be reconciled with equation one. In practice, other assets and other liabilities are analogous to inter-bank transactions. In some cases, such transactions are generally with foreign banks. In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape, and we not include them in our figures. The US is the main exception to this. © Business Monitor International Page 68 Vietnam Commercial Banking Report Q3 2014 In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in another country. In some cases, client deposits include significant amounts that have been deposited by residents of another country. Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in Central and Eastern Europe. Risk/Reward Ratings Methodology BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of doing business and the industry-specific opportunities and limitations for potential investors in a given market. The RRR system divides into two distinct areas: Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. This is further broken down into two sub categories: ■ Industry Rewards. This is an industry-specific category that takes into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors. ■ Country Rewards. This is a country-specific category, and the score factors in favourable political and economic conditions for the industry. Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. This is further broken down into two sub categories: ■ Industry Risks. This is an industry-specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry, and the relative maturity of a market. ■ Industry Risks. This is a country-specific category in which political and economic instability, legislation and overall business environment are evaluated to provide an overall score. We take a weighted average, combining industry and country risks, or industry and country rewards. These two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking system for the risks and rewards of involvement in a specific industry in a particular country. For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall risk/reward rating a weighted average of the total score. Importantly, as most of the countries and territories evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This ensures that the rating draws on the latest information and data across our broad range of sources, and the expertise of our analysts. © Business Monitor International Page 69 Vietnam Commercial Banking Report Q3 2014 In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based. Table: Commercial Banking Risk/Reward Rating Indicators Indicator Rationale Industry Rewards Estimated total assets, 2013 Indication of overall sector attractiveness. Large markets are considered more attractive than small ones. Estimated growth in total assets, 2013-2017 Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score. Estimated growth in client loans, 2013-2017 Indication of the scope for expansion in profits through intermediation. Country Rewards GDP per capita A proxy for wealth. High-income states receive better scores than low-income states. Active population Those aged 16-64 in each state, as a % of total population. A high proportion suggests that the market is comparatively more attractive. Corporate tax A measure of the general fiscal drag on profits. GDP volatility Standard deviation of growth over seven-year economic cycle. A proxy for economic stability. Risks Industry risks Regulatory framework and industry development Subjective evaluation of de facto/de jure regulations on overall development of the banking sector. Regulatory framework and competitive environment Subjective evaluation of the impact of the regulatory environment on the competitive landscape. Country Risks Short-term financial risk Rating from BMI's Country Risk Ratings (CRR), evaluating currency volatility. Policy continuity Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy. Legal framework Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets. Bureaucracy Rating from CRR to denote ease of conducting business in the state. Source: BMI 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: © Business Monitor International Page 70 Vietnam Commercial Banking Report Q3 2014 Table: Weighting Of Indicators Component Rewards Weighting, % 70, of which Industry Rewards 60 Country Rewards 40 Risks 30, of which Industry Risks 40 Country Risks 60 Source: BMI © Business Monitor International Page 71 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... international cooperation Definition Of The Commercial Banking Universe Within Vietnam, VNBA currently has 53 members, including 39 commercial banks, 2 joint-venture banks, and 11 finance companies © Business Monitor International Page 26 Vietnam Commercial Banking Report Q3 2014 List Of Banks Table: Financial Institutions In Vietnam COMMERCIAL BANKS Vietnam Joint Stock Commercial Bank for Industry and Trade... Page 25 Vietnam Commercial Banking Report Q3 2014 Competitive Landscape Market Structure Protagonists Table: Protagonists In Vietnam' s Commercial Banking Sector Central bank: State Bank of Vietnam (SBV) http://www.sbv.gov.vn/en/home 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... years © Business Monitor International Page 17 Vietnam Commercial Banking Report Q3 2014 Industry Risk Reward Ratings Asia Commercial Banking Risk/Reward Ratings Commercial Banking Risk/Reward Rating Methodology Since Q108, we have described numerically the banking business environment for each of the countries analysed by BMI We do this through our Commercial Banking Industry Risk/Reward Rating (IRR),... House Development Commercial Joint Stock Bank (HDBank) Military Commercial Joint-Stock Bank (MB) Vietnam International Commercial Joint-Stock Bank (VIB) Sai Gon Commercial Joint-Stock Bank (SCB) © Business Monitor International Page 27 Vietnam Commercial Banking Report Q3 2014 Financial Institutions In Vietnam - Continued Saigon Bank for Industry and Trade (Saigonbank) Sai Gon-Hanoi Commercial Joint-Stock... Insurance of Vietnam (DIV) Vietnam Development Bank (VDB) Source: VNBA (January 2014) , BMI © Business Monitor International Page 28 Vietnam Commercial Banking Report Q3 2014 Company Profile Agribank SWOT Analysis Strengths Massive branch network, especially in rural Vietnam ■ Possible effects of the bursting of the asset price bubble ■ Opportunities Established as one of the largest state-owned commercial. .. regional growth over the coming quarters Accordingly, we still expect exports to expand at a moderate pace of 5.6% in 2014 © Business Monitor International Page 24 Vietnam Commercial Banking Report Q3 2014 Table: Vietnam - Economic Activity 2011 Nominal GDP, VNDbn 3 Nominal GDP, US$bn 3 2012 2013e 2014f 2015f 2016f 2017f 2018f 2,779,880.2 3,245,419.2 3,584,261.0 4,012,847.7 4,494,844.6 5,033,219.9 5,616,365.8... June 2014 to April 2015, which will provide banks more time before they have to recategorise debt under more rigorous standards Although this decision will temporarily slow the reform momentum, policymakers are moving in the right direction © Business Monitor International Page 14 Vietnam Commercial Banking Report Q3 2014 Profit Margins To Improve Vietnam - Profit Margins For Saigon Thuong Tin Commercial. . .Vietnam Commercial Banking Report Q3 2014 Economic SWOT Analysis 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 2012 ■ The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20.7% in 2012 Weaknesses ■ Vietnam still... Foreign Trade of Vietnam (Vietcombank) Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) Vietnam Bank for Agriculture and Rural Development (Agribank) Mekong Housing Bank (MHB) JOINT STOCK BANKS Asia Commercial Bank (ACB) An Binh Commercial Joint-Stock Bank (ABBank) Bao Viet Joint Stock Commercial Bank (BAOVIET Bank) North Asia Commercial Joint-Stock Bank (BacA Bank) Vietnam Prosperity... Bank of Vietnam (Techcombank) Kien Long Commercial Joint-Stock Bank (Kienlongbank) Nam A Commercial Joint-Stock Bank (NamA Bank) Nam Viet Commercial Joint-Stock Bank (Navibank) Western Commercial Joint-Stock Bank (Western Bank) Mekong Development Join-Stock Commercial Bank (MDBank) Orient Commercial Joint-Stock Bank (OCB) Southern Commercial Joint-Stock Bank (Southern Bank) Hanoi Building Commercial . Source: BMI; Central banks; Regulators Vietnam Commercial Banking Report Q3 2014 © Business Monitor International Page 8 SWOT Commercial Banking Vietnam Commercial Banking SWOT Strengths ■ Untapped. Q3 2014 www.businessmonitor.com VIETNAM COMMERCIAL BANKING REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1758-454X Published by:Business Monitor International Vietnam Commercial Banking Report. the banking sector, and hence growth over the coming years. Vietnam Commercial Banking Report Q3 2014 © Business Monitor International Page 17 Industry Risk Reward Ratings Asia Commercial Banking