Q3 2012 www.businessmonitor.com Vietnam commercial Banking Report INCLUDES BMI'S FORECASTS ISSN 1758-454X Published by Business Monitor International Ltd. VIETNAM COMMERCIAL BANKING REPORT Q3 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI’s Report & Forecasts Series Published by: Business Monitor International Copy deadline: July 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: www.businessmonitor.com © 2012 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 2012 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2012 CONTENTS Executive Summary . Table: Levels (VNDbn) Table: Levels (US$bn) . Table: Levels At October 2011 Table: Annual Growth Rate Projections 2012-2016 (%) . Table: Ranking Out Of 59 Countries Reviewed In 2011 Table: Projected Levels (VNDbn) Table: Projected Levels (US$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 Ratings . 11 Commercial Banking Business Environment Rating Methodology . 12 Table: Asia Commercial Banking Business Environment Ratings . 13 Global Commercial Banking Outlook . 14 Asia Outlooks . 22 Trade Finance Growth Set To Slow 22 Asia Banking Sector Forecast Overview . 26 Table: Banks' Bond Portfolios 2011 26 Table: Asia Commercial Banking Business Environment Ratings . 27 Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios . 28 Table: Anticipated Developments in 2012 . 29 Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) . 30 Table: Comparison of US$ Per Capita Deposits (2011) 31 Table: Interbank Rates and Bond Yields 32 Vietnam Specific Banking Sector Outlook 33 Assessing The Risks Behind Vietinbank's Debt Issue 33 Economic Outlook 37 Table: Vietnam – Economic Activity, 2011-2016 . 39 Competitive Landscape . 40 Market Structure . 40 Protagonists . 40 Table: Protagonists In Vietnam's Commercial Banking Sector . 40 Definition Of The Commercial Banking Universe 40 List Of Banks . 41 Table: Financial Institutions In Vietnam . 41 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2012 Company Profiles . 44 Bank for Foreign Trade of Vietnam (Vietcombank) . 44 Table: Vietnam Stock Market Indicators 45 Table: Vietnam Balance Sheet (US$mn) 45 Table: Vietnam Key Ratios (%) 45 VietinBank . 46 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) 47 Agribank 48 Table: Vietnam Balance Sheet (LCYmn) 49 Table: Vietnam Balance Sheet (US$mn) 49 Table: Vietnam Key Ratios (%) 49 Asia Commercial Bank 50 Table: Vietnam Stock Market Indicators 51 Table: Vietnam Balance Sheet (LCYmn) 51 Table: Vietnam Balance Sheet (US$mn) 51 Table: Vietnam Key Ratios (%) 52 Eximbank . 53 Table: Balance Sheet (VNDmn, unless stated) . 54 Table: Balance Sheet (US$mn, unless stated) 54 Table: Key Ratios (%) 54 Vietnam Technological and Commercial Joint-stock Bank (Techcombank) 55 Table: Vietnam Balance Sheet (LCYmn) 56 Table: Vietnam Balance Sheet (US$mn) 56 Table: Vietnam Key Ratios (%) 56 Viet A Joint Stock Commercial Bank (Vietabank) 57 Table: Vietnam Stock Market Indicators 57 Table: Vietnam Balance Sheet (LCYmn) 58 Table: Vietnam Balance Sheet (US$mn) 58 Table: Vietnam Key Ratios (%) 59 Housing Development Commercial Joint Stock Bank (HDBank) . 60 Sacombank . 61 Table: Stock Market Indicators 62 Table: Balance Sheet (VNDmn, unless stated) . 62 Table: Balance Sheet (US$mn, unless stated) 63 Table: Key Ratios (%) 63 BMI Banking Sector Methodology 64 Commercial Bank Business Environment Rating 66 Table: Commercial Banking Business Environment Indicators And Rationale 67 Table: Weighting Of Indicators . 68 © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2012 Executive Summary Table: Levels (VNDbn) Date Client Bond loans portfolio Total assets Liabilities Other and capital Capital Client deposits Other October 2010 2,771,909.8 2,314,760.0 210,505.1 246,644.7 2,771,909.8 384,514.0 2,106,934.6 280,461.2 October 2011 3,264,325.0 2,717,010.0 256,893.0 290,422.0 3,264,325.0 533,828.0 2,412,745.0 317,752.0 Change, % 18% 17% 22% 18% 18% 39% 15% 13% Source: BMI; Central banks; Regulators Table: Levels (US$bn) Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits Other October 2010 142.2 118.7 10.8 12.6 142.2 19.7 108.1 14.4 October 2011 155.4 129.4 12.2301 13.8 155.4 25.4 114.9 15.1 9% 9% 13% 9% 9% 29% 6% 5% Date Change, % Source: BMI; Central banks; Regulators Table: Levels At October 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$ 83.23% 113.06% 1,072 1,296 Falling Falling Assets Loans Deposits Annual Growth Rate 16 16 11 CAGR 20 19 13 15 112.61% Rising Source: BMI; Central banks; Regulators Table: Annual Growth Rate Projections 2012-2016 (%) Ranking Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2012 Table: Ranking Out Of 59 Countries Reviewed In 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 13 Local currency loan growth Local currency deposit growth 10 Local currency asset growth Source: BMI; Central banks; Regulators Table: Projected Levels (VNDbn) 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f Total assets 2,286,320.58 2,953,153.46 3,632,378.76 4,467,825.87 5,406,069.30 6,487,283.16 7,654,994.13 8,879,793.19 Client loans 1,869,260.00 2,475,540.00 3,020,158.80 3,684,593.74 4,458,358.42 5,350,030.10 6,313,035.52 7,323,121.21 Client deposits 1,680,716.80 2,209,896.20 2,651,875.44 3,076,175.51 3,506,840.08 3,962,729.29 4,438,256.81 4,926,465.06 e/f = estimate/forecast. Source: BMI; Central banks; Regulators Table: Projected Levels (US$bn) 2008 2009 2010 2011e 2012f 2013f 2014f 2015f 2016f Total assets 99.94 123.73 151.46 172.68 212.40 259.91 315.45 376.54 441.78 Client loans 76.60 101.16 126.96 143.58 175.16 214.34 260.15 310.53 364.33 Client deposits 76.71 90.95 113.34 126.07 146.24 168.60 192.69 218.31 245.10 e/f = estimate/forecast. Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2012 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Weaknesses Opportunities Threats ƒ Rapid growth. ƒ Untapped potential. ƒ High savings rate of Vietnamese. ƒ Domestic banks lack capital and technology to sustain high credit growth. ƒ The financial accounts of many banks are still opaque. ƒ The population is still underbanked. ƒ Income levels likely to rise strongly over the medium term. ƒ Macroeconomic instability threatens the credibility of the government and could potentially move economic policy away from further liberalisation. © Business Monitor International Ltd Page Vietnam Commercial Banking Report Q3 2012 Vietnam Political SWOT Strengths Weaknesses Opportunities Threats ƒ 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 one-party system is generally conducive to short-term political stability. ƒ Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. ƒ Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. ƒ There is increasing (albeit still limited) public dissatisfaction with the leadership's tight control over political dissent. ƒ The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. ƒ Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the oneparty system. ƒ Macroeconomic instabilities in 2012 are 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 undemocratic rule. ƒ 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. ƒ 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 Ltd Page Vietnam Commercial Banking Report Q3 2012 Vietnam Economic SWOT Strengths Weaknesses Opportunities Threats ƒ Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.1% annually between 2000 and 2011. ƒ The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 14.0% in 2010. ƒ Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2012. The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw. ƒ The heavily-managed and weak currency reduces incentives to improve quality of exports, and also keeps import costs high, contributing to inflationary pressures. ƒ WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. ƒ 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. ƒ Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population rising from 29% of the population to more than 50% by the early 2040s. ƒ 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. ƒ 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 Q3 2012 Table: 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 2,379.00 1,052.00 Total Assets Total Shareholder Equity Earnings Per Share, VND Source: Eximbank, Bloomberg Table: Balance Sheet (US$mn, unless stated) 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 Equities 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 Table: Key Ratios (%) 2005 Equity/Asset Ratio 7.3 10.6 Source: Eximbank, Bloomberg © Business Monitor International Ltd Page 54 Vietnam Commercial Banking Report Q3 2012 Vietnam Technological and Commercial Joint-stock Bank (Techcombank) ƒ Support from minority stakeholder HSBC. ƒ The bank has consistently expanded its branch network since its founding. ƒ Strong profitability. ƒ Sound capitalisation. ƒ Tight competition for deposits. ƒ The bank has some way to go in modernising processes and systems. ƒ Lack of transparency. Opportunities ƒ The bank has strong scope for expansion over the long-term. Threats ƒ Tighter monetary policy to tame economic growth. ƒ Risk to asset quality on the back of difficult operating environment in 2012. ƒ Slowing credit growth. Strengths Weaknesses Company Overview Hanoi-based Vietnam Technological and Commercial Joint-stock Bank, or Techcombank as it is more commonly known, began life in 1993 with its headquarters then in Ho Chi Minh. Within five years the bank had relocated its headquarters to the capital and established a handful of branches across Vietnam. London-based HSBC, which held smaller stakes in the bank in previous years, has held its current 20% shareholding in the lender since 2008 (where it remained as of early 2012). Techcombank had over 45,000 customers in 2010. The bank generated a net profit of VND1.69trn (US$80.07mn) in the first nine months of 2011.The bank had said in April 2011 that it expected profits for 2011 to increase by 46% y-o-y to US$192mn. Meanwhile, the bank predicted 19.99% loan growth in response to a government imposed cap of 20%. It said profit growth would come from the rapid expansion of its core operations and ongoing improvement in asset quality, which is forecast to mean the bad debt ratio drops from 2.3% in 2010 to 2.04% in 2011. Techcombank generated a net profit of VND2.07trn (US$98.07mn) in 2010 against VND1.7trn (US$80.54mn) in the previous year. Net interest income climbed to VND3.18trn (US$150.66mn) from VND2.5trn (US$118.44mn), while total assets jumped to VND150.29trn (US$7.12bn) from VND92.58trn (US$4.39bn). The bank signed a US$30mn loan agreement with Dutch development bank FMO in September 2011, in a deal designed to boost lending to both retail and small- and medium-sized enterprise (SME) customers. The bank, along with some of its rivals, came under fire by the central bank in late 2010 as it began offering relatively high interest rates on deposits of over 17% in a bid to grab market share. The State Bank of Vietnam argued that such rates were risky, potentially destabilising and detrimental to profitability. © Business Monitor International Ltd Page 55 Vietnam Commercial Banking Report Q3 2012 Table: Vietnam Balance Sheet (LCYmn) 2002 2003 Total Assets 4,059,823 5,510,430 7,667,461 10,666,106 17,326,352 39,542,496 59,069,056 92,581,504 Loans & Mortgages 1,902,211 2,243,138 3,465,540 na 8,696,101 20,486,132 26,018,984 41,580,368 Total Deposits 1,849,251 2,619,620 4,600,097 6,195,072 9,566,043 24,476,576 39,617,724 62,347,400 Total Shareholders' Equity 135,846.9 208,875 515,107 1,009,405 1,761,687 3573,416 5,625,408 7,323,826 na na na na 1,446.00 2,452.00 4,259.00 3,148.00 2002 2003 2004 2005 2006 2007 2008 2009 Total Assets 263.61 352.28 486.11 670.07 1,079.12 2,468.78 3,378.66 5,010.09 Loans & Mortgages 123.51 143.40 219.71 na 541.61 1,279.02 1,488.25 2,250.14 Total Deposits 120.07 167.47 291.64 389.19 595.79 1,528.16 2,266.07 3,373.96 Total Shareholders' Equity 8.82 13.35 32.66 63.41 109.72 223.10 321.76 396.33 Earnings per share (EPS) na na na na 0.09 0.15 0.26 0.18 2002 2003 2004 2005 2006 2007 2008 2009 Return on Assets na 0.64 1.17 2.25 1.84 1.79 2.40 2.24 Return on Equities na 17.66 21.34 27.05 18.54 19.13 25.72 26.26 Loan Deposit Ratio na na 75.34 na na na na na Loan Asset Ratio na na 45.20 na na na na na 3.35 3.79 6.72 9.46 10.17 9.04 9.52 7.91 Earnings per share (EPS) 2004 2005 2006 2007 2008 2009 Source: BMI Table: Vietnam Balance Sheet (US$mn) Source: BMI Table: Vietnam Key Ratios (%) Equity Asset Ratio Source: BMI © Business Monitor International Ltd Page 56 Vietnam Commercial Banking Report Q3 2012 Viet A Joint Stock Commercial Bank (Vietabank) ƒ Investments surged in 2010. ƒ Capital strengthened in 2010. ƒ Lack of modernisation. ƒ Lack of transparency. ƒ Limited profitability. Opportunities ƒ Further domestic expansion plans. Threats ƒ Tighter monetary policy to tame economic growth. ƒ Risk to asset quality on the back of difficult operating environment in 2012. ƒ Slowing credit growth. Strengths Weaknesses Company Overview Ho Chi Minh City-based Viet A Joint Stock Commercial Bank (Vietabank) had 80 branches as of May 2011 and maintains a physical growth target of between 14 and 18 new branches annually. Vietabank's pre-tax profit reached VND347bn (USS16.44mn) in 2010, with return on assets and return on equity standing at 1.33% and 10.46% respectively. The bank's capital surged by 94% to VND2.94trn (US$139.29mn) by the end of 2010 on the same point in the previous year. Deposits also increased by 25% to VND13.47trn (US$638.16mn) by the end of the year, while total outstanding credit reached VND13.29trn (US$629.63mn) for the year. The majority of total credit extended during 2010 was made up by short-term loans at 58% of the total, with long-term loans accounting for the remainder. Meanwhile, the bank's total investments surged by as much as VND3.45trn (US$163.45mn) to VND3.93trn (US$186.19mn) in 2010. The bank said in November 2011 that it sought to generate a pre-tax profit of VND602bn (US$28.52mn) for 2011, marking a 73.5% jump on the previous year. Table: Vietnam Stock Market Indicators 2009 2010 27-Feb-12 Market Capitalisation LCY 33,196,270.00 34,896,268.00 35,806,608.00 Market Capitalisation US$ 1,796.43 1,789.74 1,702.40 Share Price LCY 22,257.76 20,877.98 17,700.00 Share Price US$ 1.20 1.07 0.84 na -11.10 na na 16.52 1,671.44 2,022.97 Share Price, % change (eop) Change YTD (2011 only) Shares Outstanding (mn) na Source: BMI © Business Monitor International Ltd Page 57 Vietnam Commercial Banking Report Q3 2012 Table: Vietnam Balance Sheet (LCYmn) 2005 2006 2007 2008 115,765,968 135,363,026 166,112,976 193,590,357 367,712,191 Loans & Mortgages 74,449,344 80,091,149 100,482,232 118,601,677 231,434,907 Total Deposits 84,387,016 99,683,408 112,692,816 121,634,466 205,918,705 4,999,839 5,607,022 10,646,529 12,336,159 18,372,276 Total Assets Total Shareholders' Equity 2009 Earnings per share (EPS) 2010 2,193.10 Source: BMI Table: Vietnam Balance Sheet (US$mn) 2005 2006 2007 2008 Total Assets 7272.65 8430.68 10371.04 11073.06 18858.97 Loans & Mortgages 4677.05 4988.24 6273.47 6783.83 11869.67 Total Deposits 5301.36 6208.48 7035.83 6957.30 10561.02 314.10 349.22 664.70 705.61 942.27 Total Shareholders' Equity Earnings per share (EPS) 2009 2010 0.11 Source: BMI © Business Monitor International Ltd Page 58 Vietnam Commercial Banking Report Q3 2012 Table: Vietnam Key Ratios (%) 2005 2006 2007 2008 Return on Assets 0.48 0.76 1.00 Return on Equities 11.31 14.14 15.70 Loan Deposit Ratio 80.41 113.74 Loan Asset Ratio 59.21 63.69 Equity Asset Ratio Total Risk Based Capital Ratio 4.32 4.14 6.41 6.37 2010 4.94 8.02 Source: BMI © Business Monitor International Ltd Page 59 Vietnam Commercial Banking Report Q3 2012 Housing Development Commercial Joint Stock Bank (HDBank) ƒ The bank is completing its four-year modernisation plan in 2012. ƒ Earnings, interest income and assets all grew in 2010. ƒ Credit growth capped by central bank. ƒ Limited profitability. ƒ Lack of transparency. Opportunities ƒ Further restructuring and expansion. Threats ƒ Tighter monetary policy to tame economic growth. ƒ Risk to asset quality on the back of difficult operating environment in 2012. ƒ Slowing credit growth. Strengths Weaknesses Company Overview Ho Chi Minh City-based Housing Development Commercial Joint Stock Bank (HDBank) was founded in 1990. One of the country's first commercial banks upon establishment, the lender had about 115 outlets across Vietnam as of September 2011. HDBank posted a pre-tax profit of VND200bn (US$9.48mn) for the first four months of 2011, marking a sharp 160% jump on the same period in the previous year. The bank's deposits also shot up by 60% y-o-y over the period. Total credits increased by 4.8%, however, and the bank's bad debt ratio stood at 1.36%. The bank said in April 2011 that it anticipates generating a pre-tax profit of VND600bn (US$28.43mn) for the full year, marking a 70.94% climb on the previous year. The bank saw its pre-tax profit jump to VND350.73bn (US$16.62mn) in 2010 against VND254.91bn (US$12.08mn) in the previous year, while net profit increased to VND269.41bn (US$12.76mn) from VND194.2bn (US$9.2mn). Net interest income strengthened significantly to VND522.41bn (US$24.75mn) from VND234.71bn (US$11.12mn), while net fees and commission income increased to VND153.51bn (US$7.27mn) from VND140.41bn (US$6.65mn). The bank's total assets stood at VND34.39trn (US$1.63bn) by the end of the year against VND19.13trn (US$906.31mn). The State Bank of Vietnam took action against the lender in November 2011, calling on one of its deputy directors to resign after HDBank broke the central bank's 14% cap on deposit rates. The central bank also capped HDBank's credit growth at 10% on an annual basis. © Business Monitor International Ltd Page 60 Vietnam Commercial Banking Report Q3 2012 Sacombank Strengths ƒ Strategic partnerships with Australia and New Zealand Banking Group and the International Finance Corporation, plus recognition and various awards from the government and trade press. ƒ Emerged from the global financial crisis in a strong position. ƒ By not recycling the rapid growth of deposits into new loans the bank has reduced its loan-to-deposit ratio to well below 100%. ƒ The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system. Weaknesses ƒ Lack of scale. Sacombank is a fairly large bank in Vietnam but a small institution by international standards. Opportunities ƒ Potential direct and indirect problems from the bursting of the asset price bubble. ƒ Potential for continuing growth from a low base. ƒ Leverage of strong position in the SME lending sector. ƒ Expansion into southern China and countries in the Association of Southeast Asian Nations. Threats Company Overview ƒ Vulnerability to direct or indirect impact from the downturn in global trade. ƒ Vulnerable to government credit caps. Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992. It has been listed on the Ho Chi Minh City Stock Exchange since July 2006. Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the International Finance Corporation (IFC) (5.25%) and Dragon Financial Holdings (8.73%). Foreign shareholders collectively own 30% of the bank. In 2008, the bank was restructured as a financial holding company. Its subsidiaries include: Sacombank Asset Management Company; Sacombank Remittance Express Company; Sacombank Leasing Company; Sacombank Securities Company; Sacombank Jewelry Company. Associated companies include: Viet Fund Management JSC; Saigon Thuong Tin Investment JSC; Tan Dinh Import and Export JSC; Toan Thin Phat Architecture Investment Construction Company; and Saigon Thuong Tin Real Estate JSC. More than 50% of Sacombank's loans are to SMEs, which the bank has targeted as its market. Sacombank intends to help SMEs undertake IPOs. These services have been combined with attempts by Sacombank to diversify income sources away from the credit business. To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income. Sacombank generated net interest income of VND5.49trn for 2011, representing an increase of 71% year-on-year (y-o-y). In total, after-tax profit for 2011 stood at VND2.033trn, which was a 13% increase year-on-year. By the end of the year, outstanding loans were VND78.49trn, while © Business Monitor International Ltd Page 61 Vietnam Commercial Banking Report Q3 2012 credit growth was 1.4%. The bank was also successful in reducing its bad debts, which fell by 50% in the year. Meanwhile, the bank has partially offloaded its 10% stake in Sacombank Securities Joint Stock Co (SBS). At the end of 2011 Sacombank has paid up capital of VND15,200bn, of which chartered capital is VND10,740bn. The bank has 405 transaction points located in 43 of the 63 provinces in Vietna, Laos and Cambodia. Elsewhere, Sacombank and Credit Suisse Singapore have signed a MoU in order to strengthen their competitiveness in both markets. Company Data ƒ Website: www.sacombank.com.vn ƒ Status: Commercial joint stock bank Table: Stock Market Indicators 2005 Market Capitalisation, VND 2006 2007 15,043,772.00 29,139,732.00 Market Capitalisation, US$ 2008 2009 Dec 2010 9,413,129.00 16,147,851.00 13,768,845.52 936.96 1,819.30 538.42 873.85 706.17 Share Price, VND 20,404.72 37,657.61 12,165.42 19,921.63 15,000.00 Share Price, US$ 1.27 2.35 0.70 1.08 0.77 84.91 -70.39 54.93 Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) -14.67 485.18 737.27 773.81 746.14 810.57 Source: Sacombank, Bloomberg Table: Balance Sheet (VNDmn, unless stated) 2005 2006 2007 2008 2009 1,445,4340 24,776,180 64,572,880 6,843,8570 104,019,100 8,379,335 14,312,890 35,200,580 34,757,120 59,141,490 10,467,160 17,511,580 44,231,940 46,128,820 60,516,270 Total Shareholders' Equity 1,887,680 2,870,346 7,349,659 7,758,624 10,776,900 Earnings per share (VND) 624.77 758.09 1,846.09 1,235.72 4,459.64 Total Assets Loans & Mortgages Total Deposits Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 62 Vietnam Commercial Banking Report Q3 2012 Table: Balance Sheet (US$mn, unless stated) 2005 2006 2007 2008 2009 Total Assets 908.05 1,543.11 4,031.52 3,914.58 5,629.05 Loans & Mortgages 526.41 891.44 2,197.70 1,988.05 3,200.47 Total Deposits 657.57 1090.66 2,761.56 2,638.50 3,274.87 Total Shareholders' Equity 118.59 178.77 458.87 443.78 583.20 0.04 0.05 0.11 0.08 0.25 2005 2006 2007 2008 2009 Return on Assets 2.40 3.13 1.44 1.94 Return on Equities 19.76 27.36 12.64 18.25 Earnings per share (US$) Source: Sacombank, Bloomberg Table: Key Ratios (%) Loan/Deposit Ratio 80.49 82.12 79.98 75.89 98.58 Loan/Asset Ratio 58.29 58.10 54.79 51.15 57.35 Equity/Asset Ratio 13.06 11.59 11.38 11.34 10.14 Source: Sacombank, Bloomberg © Business Monitor International Ltd Page 63 Vietnam Commercial Banking Report Q3 2012 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: ƒ Total assets = total liabilities and capital. ƒ Total assets = client loans + bond portfolio + other assets. ƒ Total liabilities and capital = capital items + client deposits + other liabilities. © Business Monitor International Ltd Page 64 Vietnam Commercial Banking Report Q3 2012 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. © Business Monitor International Ltd Page 65 Vietnam Commercial Banking Report Q3 2012 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: ƒ 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. ƒ 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 66 Vietnam Commercial Banking Report Q3 2012 Table: Commercial Banking Business Environment Indicators And Rationale Limits of Potential Returns Rationale Banking market structure Estimated total assets, 2012 Indication of overall sector attractiveness. Large markets are considered more attractive than small ones Estimated growth in total assets, 2012-2016 Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Estimated growth in client loans, 2012-2016 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 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 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 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 67 Vietnam Commercial Banking Report Q3 2012 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 Weighting, % Limits of Potential Returns, of which: 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 68 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Page 10 Vietnam Commercial Banking Report Q3 2012 Business Environment Outlook Commercial Banking Business Environment Rating Table: Commercial Banking Business Environment Ratings Limits of potential returns Data Score; out of 10 Ratings score; out of 100 Total assets; end 2012, US$bn 172.7 6 Market Structure 70 Growth in total assets; 2012- 2016, US$bn 229.4 7 Growth in client loans; 2012- 2016, US$bn... 4 Per-capita GDP; 2012, US$ Country Structure 55 Risks to realisation of returns Commercial banking business environment rating Market Risk 37 Country Risk 46 57 Source: BMI, National Sources © Business Monitor International Ltd Page 11 Vietnam Commercial Banking Report Q3 2012 Commercial Banking Business Environment Rating Methodology Since Q108, we have described numerically the banking business environment... 24 Vietnam Commercial Banking Report Q3 2012 swap lines between Asian central banks and the US Federal Reserve, which were established in the depths of the financial crisis, also means that a large-scale freeze in lending is unlikely, notwithstanding the potential for funding channels to become tighter as 2012 progresses © Business Monitor International Ltd Page 25 Vietnam Commercial Banking Report Q3. .. 74.0 68.5 27 Vietnam 70.0 55.0 36.7 46.0 57.5 40 United States 90.0 85.0 100.0 80.0 88.0 2 Scores out of 100, with 100 the highest Source: BMI © Business Monitor International Ltd Page 13 Vietnam Commercial Banking Report Q3 2012 Global Commercial Banking Outlook Global Credit Divergence Despite major risks emanating from the European debt crisis (which we looked at closely in the Q1 2012 report in the.. .Vietnam Commercial Banking Report Q3 2012 Vietnam Business Environment SWOT Strengths Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors Vietnam' s location – its proximity to China and South East Asia, and its good sea links – makes it a good base for foreign companies to export to the rest of Asia, and beyond Weaknesses Vietnam' s... Taiwan 8.8 -3.0 0.84 Thailand 3.4 -3.1 3.02 Vietnam -4.7 -2.6 12.50 United States -3.1 -8.6 India NB Incorporates actual financial markets data; estimated economic data and projected banking data na=not available Source: Central banks; regulators; BMI © Business Monitor International Ltd Page 32 Vietnam Commercial Banking Report Q3 2012 Vietnam Specific Banking Sector Outlook Assessing The Risks Behind... 266.1 17.4 14.0 Taiwan* 192.7 16.8 40.2 Thailand* 60.6 15.5 7.6 Vietnam* 10.5 6.9 28.4 450.5 3.6 -14.5 Bangladesh* China Indonesia* Japan Sri Lanka United States Source: Central banks, regulators, BMI, *Only 2010 data available © Business Monitor International Ltd Page 26 Vietnam Commercial Banking Report Q3 2012 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns... debts in 2012 Emerging Europe: We maintain our wary view towards Central and Eastern European (CEE) banking sectors on the back of continued macroeconomic and financial headwinds emanating from the eurozone sovereign debt crisis We also hold to our preference for the Czech Republic and Poland's banking sectors © Business Monitor International Ltd Page 18 Vietnam Commercial Banking Report Q3 2012 on... Thailand 108.9 22 Rising 66.0 16 Rising 81.2 26 Rising Vietnam 113.9 10 Rising 83.1 1 Falling 121.4 9 Falling United States 111.1 20 Falling 75.1 4 Falling 62.9 33 Falling South Korea Taiwan Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 28 Vietnam Commercial Banking Report Q3 2012 Table: Anticipated Developments in 2012 Trend Loan Growth, US$bn Deposit Growth, US$bn... 6.1 Thailand 108.4 Falling 2.3 3.3 -1.0 Vietnam 119.8 Rising 31.6 20.2 11.4 United States 108.5 Falling 569.1 725.6 -156.6 Loan/Deposit Ratio, % Bangladesh South Korea Taiwan NB Incorporates estimated economic data and projected banking data Source: Central banks, regulators, BMI © Business Monitor International Ltd Page 29 Vietnam Commercial Banking Report Q3 2012 Table: Comparison of Total Assets . International Copy deadline: July 2012 Vietnam Commercial Banking Report Q3 2012 © Business Monitor International Ltd Page 2 Vietnam Commercial Banking Report Q3 2012 © Business Monitor. In Vietnam& apos;s Commercial Banking Sector 40 Definition Of The Commercial Banking Universe 40 List Of Banks 41 Table: Financial Institutions In Vietnam 41 Vietnam Commercial Banking Report. BMI; Central banks; Regulators Vietnam Commercial Banking Report Q3 2012 © Business Monitor International Ltd Page 7 SWOT Analysis Vietnam Commercial Banking SWOT Strengths  Rapid