BMI VN Banking Report Q3_2012

8/10/2019 BMI VN Banking Report Q3_2012

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Q3 2012www.businessmonitor.com

COMMERCIAL BANKING REPORT

ISSN 1758-454X

Published by Business Monitor International Ltd.

VIETNAM

INCLUDES BMI'S FORECASTS


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Business Monitor International

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VIETNAM COMMERCIALBANKING REPORT Q3 2012INCLUDES 5-YEAR FORECASTS TO 2016

Part of BMIs Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: July 2012


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Vietnam Commercial Banking Report Q3 2012

Business Monitor International Ltd Page 2


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CONTENTS

Executive Summary ......................................................................................................................................... 5

Table: Levels (VNDbn) .......................................................................................................................................................................................... 5

Table: Levels (US$bn) ........................................................................................................................................................................................... 5

Table: Levels At October 2011 .............................................................................................................................................................................. 5

Table: Annual Growth Rate Projections 2012-2016 (%) ....................................................................................................................................... 5

Table: Ranking Out Of 59 Countries Reviewed In 2011 ........................................................................................................................................ 6

Table: Projected Levels (VNDbn) .......................................................................................................................................................................... 6

Table: Projected Levels (US$bn) ........................................................................................................................................................................... 6

SWOT Analysis ................................................................................................................................................. 7

Vietnam Commercial Banking SWOT .................................................................................................................................................................... 7

Vietnam Political SWOT ........................................................................................................................................................................................ 8

Vietnam Economic SWOT ...................................................................................................................................................................................... 9

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


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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



Asia Commercial Bank ....................... ............. .............. ............. ............. ............. ............. ............ ............. ............. ............. ............. ............. ..... 50




Table: Vietnam Key Ratios (%)............................................................................................................................................................................ 52Eximbank ............. ............. ............. ............. ............. ............ ............. ............. ............. ............. ............. ............. ............. ............ ............. ............ 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




Viet A Joint Stock Commercial Bank (Vietabank) ................................................................................................................................................ 57





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


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Executive Summary

Table: Levels (VNDbn)

Date Total assetsClientloans

Bondportfolio Other

Liabilitiesand capital Capital

Clientdeposits 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)

DateTotal

assetsClientloans

Bondportfolio Other

Liabilitiesand capital Capital

Clientdeposits 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

Change, % 9% 9% 13% 9% 9% 29% 6% 5%


Table: Levels At October 2011

Loan/deposit ratio Loan/asset ratio Loan/GDP ratio GDP Per Capita, US$ Deposits per capita, US$

112.61% 83.23% 113.06% 1,072 1,296

Rising Falling Falling


Table: Annual Growth Rate Projections 2012-2016 (%)

Assets Loans Deposits

Annual Growth Rate 16 16 11

CAGR 20 19 13

Ranking 3 3 15



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Table: Ranking Out Of 59 Countries Reviewed In 2011

Loan/deposit ratio Loan/asset ratio Loan/GDP ratio

10 1 13

Local currency assetgrowth Local currency loan growth Local currency deposit growth

3 3 8


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


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Vietnam Political SWOT

Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and

we do not expect major shifts in policy direction over the next five years. The one-partysystem is generally conducive to short-term political stability.

Relations with the US have witnessed a marked improvement, and Washington seesHanoi as a potential geopolitical ally in South East Asia.

Weaknesses Corruption among government officials poses a major threat to the legitimacy of theruling Communist Party.

There is increasing (albeit still limited) public dissatisfaction with the leadership's tightcontrol over political dissent.

Opportunities The government recognises the threat corruption poses to its legitimacy, and hasacted to clamp down on graft among party officials.

Vietnam has allowed legislators to become more vocal in criticising governmentpolicies. This is opening up opportunities for more checks and balances within the one-party system.

Threats Macroeconomic instabilities in 2012 are likely to weigh on public acceptance of theone-party system, and street demonstrations to protest economic conditions coulddevelop into a full-on challenge of undemocratic 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 beunsustainable.

Relations with China have deteriorated over recent years due to Beijing's moreassertive stance over disputed islands in the South China Sea and domestic criticismof a large Chinese investment into a bauxite mining project in the central highlands,which could potentially cause wide-scale environmental damage.


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Vietnam Economic SWOT

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

GDP growth averaging 7.1% annually between 2000 and 2011.

The economic boom has lifted many Vietnamese out of poverty, with the officialpoverty rate in the country falling from 58% in 1993 to 14.0% in 2010.

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

the economy vulnerable to global economic uncertainties in 2012. The fiscal deficit isdominated by substantial spending on social subsidies that could be difficult towithdraw.

The heavily-managed and weak currency reduces incentives to improve quality ofexports, and also keeps import costs high, contributing to inflationary pressures.

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

while making Vietnamese enterprises stronger through increased competition.

The government will in spite of the current macroeconomic woes, continue to moveforward with market reforms, including privatisation of state-owned enterprises, andliberalising the banking sector.

Urbanisation will continue to be a long-term growth driver. The UN forecasts the urbanpopulation rising from 29% of the population to more than 50% by the early 2040s.

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

upbeat view of Vietnam. If the government focuses too much on stimulating growthand fails to root out inflationary pressure, it risks prolonging macroeconomic instability,which could lead to a potential crisis.

Prolonged macroeconomic instability could prompt the authorities to put reforms onhold as they struggle to stabilise the economy.


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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, andbeyond.

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

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

Vietnam remains one of the world's most corrupt countries. According to TransparencyInternational's 2011 Corruption Perceptions Index, Vietnam ranks 112 out of 183countries.

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

Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-techskills and know-how.

Vietnam is pressing ahead with the privatisation of state-owned enterprises and theliberalisation of the banking sector. This should offer foreign investors new entrypoints.

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

which will remain a concern.

Labour unrest remains a lingering threat. A failure by the authorities to boost skillslevels could leave Vietnam a second-rate economy for an indefinite period.


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Commercial Banking Business Environment Rating Methodology

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

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

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

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

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

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

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

30% to the latter.

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

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

70% of the CBBER that takes into account the 'Limits of potential returns', the market elements have a

60% weighting and the country elements have a 40% weighting. The evaluation of the 'Risks to

realisation of returns' also includes banking elements and country elements (specifically, BMI's

assessment of long-term country risk). However, within the 30% of the CBBER that take into account the

risks, these elements are weighted 40% and 60%, respectively.

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

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

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

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

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

(very) large and/or developed relative to the general wealth, stability and financial infrastructure in the

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

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

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

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

competition within it, and Moody's Investor Services' ratings for local currency deposits) can be markedlydifferent from BMI's long-term risk rating.


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Table: Asia Commercial Banking Business Environment Ratings

Limits of Potential

Returns

Risks to Potential

Returns Overall

MarketStructure

CountryStructure

MarketRisks

CountryRisks Rating Ranking

Bangladesh 50.0 45.0 43.3 44.0 46.7 52

China 93.3 55.0 63.3 74.0 75.5 13

Hong Kong 76.7 92.5 73.3 84.0 82.0 6

India 83.3 57.5 60.0 56.0 68.4 28

Indonesia 76.7 65.0 80.0 52.0 69.4 26

Japan 33.3 77.5 66.7 80.0 58.1 37

Malaysia 73.3 80.0 83.3 80.0 77.6 10

Pakistan 40.0 50.0 53.3 42.0 44.8 55

Philippines 50.0 62.5 60.0 58.0 56.1 44

Singapore 53.3 95.0 96.7 90.0 76.8 11

Sri Lanka 20.0 55.0 33.3 46.0 36.1 58

South Korea 80.0 82.5 83.3 76.0 80.4 8

Taiwan 76.7 72.5 86.7 76.0 76.6 12

Thailand 63.3 65.0 86.7 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


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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 article 'Europe On The Brink'), our overall global banking outlook remains relatively benign.

Of 62 banking sectors forecast by BMI, we are forecasting lending expansion in 52 in 2012, with the nine

non-growing or contracting sectors dominated by developed states/eurozone members (Australia, Austria,

Spain, Greece, Italy, Japan, and Slovenia), with Latvia (an EU member borderline developed state by

global banking standards) and Iran the only EM representatives. This is a microcosm of our global view

as a whole, which is that banking sectors in most developed states will continue to struggle amid

government austerity and household deleveraging, whereas by and large, emerging market banking

sectors will continue to expand.

Using comparable data from the IMF (which we use for our global credit aggregate series) going up to the

end of 2011, two trends stand out. Firstly, emerging market banking sectors are catching up rapidly to the

world's two biggest banking sectors, the US and the eurozone, in terms of lending growth. Since the

global financial crisis began in 2007, it is clear that the US and eurozone combined have lagged the rest

of the world in credit creation. In fact, while several emerging market economies continue to set new

domestic records for credit outstanding, the US plus the eurozone have gone basically nowhere for three

years, as the accompanying chart shows. In fact, credit in the US plus eurozone has fallen from an

estimated 54% of all global credit to around 46%, a downward trend which we see continuing in the years

ahead.


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US And Eurozone Back In The Minority For Global Credit

Global Credit Aggregates (US$bn)

Source: IMF, BMI

Secondly, between the US and eurozone, we are more optimistic that the US is past the worst. There are

significant risks that despite ECB intervention, credit growth in the eurozone is likely to continue to

deteriorate. Of course, there is a great deal of differentiation between credit aggregates in different euro

area members, with troubled countries such as Ireland, Greece and Spain experiencing major credit

contractions, while France and Germany among others are still posting fairly strong numbers. But on the

whole, eurozone credit growth is negative and heading lower. Here is a chart of year-on-year consumer

credit growth in the US and eurozone. While this should be taken with the caveat that US consumer

lending includes government-subsidised student loans, the US appears to have turned the corner in overall

consumer credit, whereas we expect further stagnation in the eurozone.


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US Consumer Lending Turning The Corner?

US v Eurozone Consumer Credit (% chg y-o-y)

Source: Eurostat, Federal Reserve, BMI

While US mortgage lending continues to be a sore point in the US economy as deleveraging continues, it

appears that the contraction has steadied at around -2% y-o-y. This should head higher in a few years'

time. In contrast, eurozone mortgage lending has been healthy by comparison, but is beginning to slow

rapidly (down from 5.0% y-o-y in early 2011 to 2.0% in Q411).


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Both Could Be Negative Soon

US v Eurozone Mortgage Credit Outstanding (% chg y-o-y)


Finally, looking at corporate debt growth as well, the US has the advantage. Interestingly, the data

indicate that European corporates are looking increasingly to debt instrument issuance as opposed to bank

lending for financing, which plays up the contrast between healthy corporate balance sheets and weak

banks.


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US Corporates Have The Edge

US v Eurozone Corporate Credit (% chg y-o-y)


Our overarching view is that further weakness is ahead for European banks, while US financial

institutions are in better shape going forward. Overall global credit growth will continue to be driven by

non-eurozone and US institutions, however, led by emerging markets. That view comes with the caveat

that within EM, selectivity is key, and a further downturn in either the US or European banking systems

would reverberate globally.

Emerging Markets Regional Overviews

Emerging Asia: In 2012 we expect weaker earnings, hampered by foreign funding constraints, slower

credit growth, and higher non-performing loans. One corollary of the surge in credit growth seen in 2010

and 2011, and the inevitable slowdown in 2012, will be a resurgence in non-performing loans (NPLs).

Our core view is for a sharp slowdown in real GDP growth across the board this year, lead by a hard

landing in China and a slowdown in trade growth driven by a recession in the eurozone. These factors

alone are likely to lead to an uptick in NPLs. However, when we combine this with the impact of

weakening housing markets across the region and tighter availability of credit, the impact on NPLs is

likely to be exacerbated. We look for the likes of China, Hong Kong, and Australia to see a surge in bad

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


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on the grounds of stability and growth potential, respectively, while reaffirming our negative outlook for

the Hungarian and Ukrainian banking. We also caution that Southeastern European banking sectors are

showing some worrying risk indicators.

Things Could Get Much Worse

Hungary Non-Performing Loan Data

Source: BMI, Magyar Nemzeti Bank

Latin America:We believe asset and loan growth will remain strong in 2012, driven by stable

fundamentals and the use of monetary stimulus in those markets where credit cycles are slowing. In

addition, we do not view the prevalence of European banks operating in the Latin American region as a

risk to regional banking sector stability. Indeed, those sectors which have greater foreign participation

tend to be the most attractive from a growth perspective, with any serious threats to sector stability

coming mainly from domestic factors.


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Some Sectors Have Plenty Of Room To Catch Up

Latin America Client Loans Per Capita, US$

Source: BMI, SBIF, BCB, SFC, CNBV

Sub-Saharan Africa:The outlook for the South African, Nigerian, Kenyan and Ghanaian banking

sectors is mixed. We see Nigeria and Ghana as having the strongest growth potential over the comingyear, while South Africa should see slow but stable expansion, and Kenya will likely struggle amid

various macroeconomic challenges.


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Multi-Year Deleveraging For Some

MENA Loan-to-GDP, %

Source: BMI, central banks

Middle East And North Africa:Financial institutions in Qatar and Oman are likely to outperform over

the coming quarters, with growth in the latter supported in large part through the long awaited

introduction of Islamic banking to the country. In contrast, risks to underlying stability remain

pronounced in Iran and Egypt, with banks in the former effectively frozen out of the international

financial system as a result of Western sanctions.


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Asia Outlooks

Trade Finance Growth Set To Slow

BMI View:FX denominated loans have flourished across Asia over the past year as regional banks have

taken up the slack amid eurozone retrenchment and still-strong corporate demand. While this has been a

major boost to profits throughout the industry, the failure of FX deposits to keep up with loans has left a

worryingly large loan-to-deposit overhang. As such, funding costs are likely to rise, which will weigh on

margins, and there are growing risks in the event of a deterioration in US financial conditions. That said,

regional central banks are as flush as ever with US dollars, and swap lines are in place, meaning that a

collapse in trade financing is unlikely.

In our Q112 Asia Banking Sector report, we highlighted three risks to the outlook for Asian banks.

Foreign funding constraints, slowing credit growth, and rising non-performing loans (NPLs) continue to

cloud the outlook for Asian banking sector profits in 2012, and the performance of equities. So far, we

have started to see signs of a slowdown in credit growth on the whole. However, one area that continues

to show robust growth is trade financing. With European banks retrenching en masse amid sovereign

concerns within the eurozone, Asian banks have stepped in to fill the void left in the trade finance market

as corporates have looked to take advantage of low US dollar interest rates versus local currency rates. As

a result, FX loans have proliferated over the past year, resulting in strong profit growth, but also a

growing asset-liability mismatch.


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Booming Growth Figures

Asia FX Loan Growth Across Asia In 2011

Source: BMI, Regional Central Banks

Asia Eating Into Europe's Dominance

The trade finance market, estimated to be worth as much as US$10trn a year globally, and supporting in

excess of 80% of global trade, has traditionally been dominated by European banks, which up until

recently held a dominant market share. With European banks deleveraging and trying to improve their

capital adequacy ratios amid sovereign default concerns, Asian banks have been keen to pick up the slack,

given the relatively low risk nature of the industry and the strong growth in intra-Asian trade seen over

recent years.

According to Dealogic, three of the region's top five providers of trade finance by market share in Q112

were Asian. This compares with only one of the top five a year ago. Not only has strong trade growth

over recent years driven a trade finance boom, but they have been positively reinforcing each other. One

of the reasons global trade flows have held up relatively well despite the ongoing eurozone crisis is the

robustness of trade financing in Asia. In the 2008-09 global financial crisis, banking sector instability

caused a major pullback from the industry, generating a vicious cycle of deteriorating economic

conditions and banking sector stress. The willingness of Asian banks to step in to fill the void has been a

major supportive factor for regional trade and economic growth. While exports to the euozone have

softened in recent months, there has been no material deterioration in intra-Asian trade.

Dealogic data shows that Japanese banks have made a particularly strong leap into the sector, with

Mitsubishi UFJ Financial Groupnow ranking first in the region by market share with 16.6% of the


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market in the first quarter, up from just 5.5% last year, while Sumitomo Mitsui Financial Grouphas

more than doubled its market share to 9.6%. Singaporean banks are also expanding rapidly in this area,

with DBSreporting that trade finance accounted for half of its loan growth last year.

Worryingly High Loan-to-Deposit Mismatch

As we mentioned in our previous banking sector report, however, this lending boom has meant that Asian

banks are now sitting on very high FX loans to deposit ratios. For the region as a whole we estimate the

total FX loans-to-deposit ratio is in excess of 100% as a result of double-digit FX loan growth in 2011.

This makes short-term funding, mainly in US dollars, crucial to keeping these loan levels elevated, and

here the risks are noteworthy. These concerns were recently highlighted by Moody's, which cautioned

about the growing asset-liability mismatch. In our view, we could see funding costs rise for Asian banks

given the growing dollar demand, particularly if we begin to see signs of credit stress develop in the US

banking sector. Indeed, with Asian banks using swap agreements with their US counterparts to fund

lending, a rise in swap spreads represents a major risk. This is likely to weigh on margins and also lead to

a slowdown in FX lending over the coming months. Furthermore, while we are bullish towards Asian FX

in the near term, we continue to see weakness across the region in H212, which would raise the local

currency value of borrowings, making it more difficult to meet loan repayments.

Large FX Loan Overhang

Asia Loan-to-Deposit Ratios And FX Loan Growth

Source: BMI

On the whole, Asian external balance sheets are in good health, with most countries in the region holding

more international reserves then prior to the global financial crisis. As such, US dollars would be readily

available from central banks in the event that dollar funding dries up. The potential for a re-opening of the


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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.


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Table: Asia Commercial Banking Business Environment Ratings

Limits of Potential

Returns

Risks to Potential

Returns Overall

MarketStructure

CountryStructure

MarketRisks

CountryRisks Rating Ranking

Bangladesh 50.0 45.0 43.3 44.0 46.7 52

China 93.3 55.0 63.3 74.0 75.5 13

Hong Kong 76.7 92.5 73.3 84.0 82.0 6

India 83.3 57.5 60.0 56.0 68.4 28

Indonesia 76.7 65.0 80.0 52.0 69.4 26

Japan 33.3 77.5 66.7 80.0 58.1 37

Malaysia 73.3 80.0 83.3 80.0 77.6 10

Pakistan 40.0 50.0 53.3 42.0 44.8 55

Philippines 50.0 62.5 60.0 58.0 56.1 44

Singapore 53.3 95.0 96.7 90.0 76.8 11

Sri Lanka 20.0 55.0 33.3 46.0 36.1 58

South Korea 80.0 82.5 83.3 76.0 80.4 8

Taiwan 76.7 72.5 86.7 76.0 76.6 12

Thailand 63.3 65.0 86.7 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


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

Loan

depositratio % Rank Trend

Loan/

Assetratio % Rank Trend

Loan/

GDPratio % Rank Trend

Bangladesh 95.3 33 Falling 67.2 11 Falling 51.6 41 Rising

China 68.3 55 Falling 52.1 41 Falling 118.1 13 Falling

Hong Kong 66.9 57 Rising 37.0 58 Rising 263.9 2 Rising

India 75.7 49 Rising 58.6 37 Rising 46.4 46 Rising

Indonesia 80.0 44 Rising 60.1 31 Falling 29.7 53 Rising

Japan 70.6 52 Falling 49.8 46 Falling 90.4 21 Rising

Malaysia 78.8 47 Falling 58.1 36 Falling 120.4 10 Rising

Pakistan 68.6 60 Falling 50.4 50 Falling 22.2 57 Falling

Philippines 67.3 53 Rising 49.7 42 Rising 33.3 52 Rising

Singapore 91.4 38 Rising 49.0 47 Rising 125.5 11 Rising

Sri Lanka 80.7 48 Rising 61.1 26 Rising 29.1 54 Rising

South Korea 113.6 18 Falling 70.6 9 Falling 99.0 16 Falling

Taiwan 74.2 50 Falling 60.2 29 Falling 152.2 6 Rising

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

Source: Central banks, regulators, BMI


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Table: Anticipated Developments in 2012

Loan/DepositRatio, % Trend Loan Growth,US$bn

Deposit

Growth,US$bn Residual,US$bn

Bangladesh 95.6 Rising 10.2 10.5 -0.3

China 68.3 Falling 461.4 675.0 -213.7

Hong Kong 66.9 Falling 19.2 28.7 -9.5

India 75.7 Falling 193.9 256.2 -62.3

Indonesia 82.0 Rising 54.4 58.7 -4.3

Japan 69.6 Falling 167.7 357.6 -189.8

Malaysia 78.4 Falling 27.8 37.3 -9.5

Pakistan 60.9 Falling -1.4 6.8 -8.2

Philippines 69.2 Rising 4.2 3.1 1.1

Singapore 90.2 Falling 29.4 37.6 -8.2

Sri Lanka 78.4 Falling 0.4 1.1 -0.7

South Korea 111.5 Falling 39.1 53.3 -14.2

Taiwan 75.2 Rising 21.7 15.7 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

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


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

2011 2010

TotalAssets

ClientLoans

ClientDeposits

TotalAssets

ClientLoans

ClientDeposits

Bangladesh 73.8 49.6 52.0 72.2 48.9 50.8

China 16,477.9 8,588.8 12,567.0 14,592.6 7,606.2 11,129.1

Hong Kong 1,769.2 654.1 977.4 1,581.2 543.9 882.8

India 1,267.6 742.3 980.7 1,275.6 725.8 1,005.0

Indonesia 404.7 243.2 304.1 322.1 196.7 260.5

Japan 11,067.4 5,506.2 7,800.1 10,039.1 5,149.0 7,142.4

Malaysia 541.2 314.2 398.8 485.7 286.1 361.0

Pakistan 87.1 43.9 61.4 76.8 46.0 56.7

Philippines 149.4 74.2 110.3 140.7 64.8 103.5

Singapore 662.4 324.3 354.7 609.0 251.5 338.0

Sri Lanka 27.4 16.7 20.7 23.1 13.1 17.6

South Korea 1,532.5 1,081.9 952.1 1,527.1 1,083.3 915.9

Taiwan 1,147.6 690.6 931.1 1,147.1 690.3 913.1

Thailand 411.5 271.4 249.3 391.1 247.8 245.3

Vietnam 172.7 143.6 126.1 151.5 127.0 113.3

United States 12,622.7 9,484.3 8,537.0 11,884.0 9,256.1 7,971.5



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Table: Comparison of US$ Per Capita Deposits (2011)

GDP Per Capita Client Deposits,per capita

Rich 20% Client

Deposits, percapita

Poor 80% Client

Deposits, percapita

Bangladesh 734 330 1,383 86

China 5,260 6,374 37,303 2,331

Hong Kong 34,728 91,839 548,918 34,307

India 1,503 598 3,160 197

Indonesia 3,492 1,004 5,020 314

Japan 46,440 43,528 246,648 15,416

Malaysia 9,357 10,887 55,273 3,455

Pakistan 1,130 248 1,390 87

Philippines 2,374 783 4,650 291

Singapore 49,828 62,513 273,451 17,091

Sri Lanka 2,812 795 3,940 246

South Korea 23,639 22,357 78,696 4,919

Taiwan 20,156 29,752 160,447 10,028

Thailand 5,046 3,961 14,554 910

Vietnam 1,357 1,617 5,679 355

United States 48,190 30,293 109,070 6,817



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Table: Interbank Rates and Bond Yields

3 Month Interbank Rate %

Current Account % ofGDP, 2011f

Budget balance % ofGDP, 2011f End Q1 2012

Bangladesh 0.9 -4.1 n/a

China 2.9 -1.9 1.50

Hong Kong 5.0 3.3 0.33

India -3.5 -8.8 11.50

Indonesia 0.2 -1.7 4.10

Japan 2.1 -10.6 0.05

Malaysia 11.9 -5.1 3.18

Pakistan 0.1 -6.6 11.60

Philippines 2.6 -2.0 2.88

Singapore 22.1 1.5 0.19

Sri Lanka -7.8 -6.9 10.50

South Korea 2.3 1.0 3.53

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

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


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Vietnam Specific Banking Sector Outlook

Assessing The Risks Behind Vietinbank's Debt Issue

BMI View:We believe that Vietinbank's successful debt issue could pave the way for more issuances by

other Vietnamese commercial banks over the coming years. Our assessment suggests that a relatively

high degree of leverage, which could amplify the risk of default, explains the 329 basis points premium on

the bank's bonds over sovereign bonds. However, we believe that concerns over a future default by CTG

are largely unjustified, presenting an attractive opportunity for investors.

The Vietnam Commercial Bank for Industry and Trade(CTG), also known as Vietinbank, has

successfully issued US$250mn worth of US dollar-denominated debt in the international market, with an

annual coupon rate of 8.25% maturing in 2017. Judging from the positive response by foreign investors in

taking up the first international debt issue by a Vietnamese financial institution, we believe that this could

pave the way for more issuances by other Vietnamese commercial banks over the coming years.

Most Profitable In The Group

Vietnam Net Interest Margins, %

Source: BMI, Bloomberg

Improving Macroeconomic Fundamentals

Given that recent economic data coming from Vietnam is beginning to reflect our core view of a turning

point in the country's macroeconomic fundamentals, we believe that the Vietnamese debt market will

become increasingly attractive to foreign investors. Despite our bullish outlook on the economy, which

suggests that CTG's bonds presents a compelling opportunity for investors, we still believe that it is


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worthwhile to assess the underlying risks associated with CTG's latest debt issue. Furthermore, our

conviction that the State Bank of Vietnam (SBV) will introduce another 200 basis points (bps) worth of

rate cuts by the end of the year, although this has largely been priced into bond yields, should generally be

positive for fixed-income assets.

From a bondholder's perspective, the risk of a potential default is the sole reason associated with the 329

basis points (bps) premium that CTG's newly issued bonds is currently yielding over its most comparable

Vietnamese government US dollar bond (at the time of writing, CTG's bonds were yielding 8.69%,

compared to 5.40% on sovereign bonds). Indeed, the mismanagement of state-owned enterprise (SOE)

Vietnam Shipbuilding Industry Group, which almost brought the company to the brink of bankruptcy

in 2010, has severely undermined investors' confidence. Not surprisingly, rating agencyMoody's

Investors Servicehas assigned a B1 long-term rating on CTG's debt, categorising the issue as 'speculative'

and 'subject to high credit risk' while Standard and Poor'shas assigned a B+ rating, implying 'significant

speculative characteristics'.

Quality Of Loans A Priority

Vietnam Non-Performing Loans To Total Assets, %


Fears Of A Potential Default Overdone

Although we do acknowledge that the risk of default by Vietnamese commercial banks is certainly greater

in comparison to other emerging market commercial banks in South East Asia, we believe that concerns

over a future default by CTG may have been overpriced by the bond market, presenting attractive

opportunities for investors with a greater risk appetite. There are several reasons why we see concerns of

a future default by CTG as largely unjustified. Firstly, the Vietnamese government is financially capable


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and very likely to intervene in the event of default concerns, especially given the relatively small size of

CTG's latest debt issue. Secondly, policymakers are fully aware that a gradual privatisation of state-

owned banks through share issues (the SBV presently holds a 83% stake in CTG's equity) and efforts to

speed up development of the debt market, are essential to the Vietnamese government's long term

economic development goals. Therefore, the government has an incentive to ensure that foreign investors

who participated in the early stages of the banking sector's privatisation will do relatively well.

Higher Leverage Higher Risks

Vietnam Average Assets To Average Equity Ratio


In A Better Shape Compared To Its Peers

CTG's fundamentals are also much better in comparison to its industry peers from a bondholder's

perspective. In terms of the quality of CTG's loan portfolio, non-performing loans (NPL) as a share of

total assets have remained relatively stable in recent years, averaging 0.6% since mid-2009. More

importantly, CTG's NPL ratios have remained relatively low in comparison to its peers (see chart). We

note that this is despite a rapid expansion in the company's loan portfolio, which grew by 25% in 2011

according to its 2011 annual report, while loans for the whole banking sector grew by around 13%.

Meanwhile, CTG is also the most profitable among its peers, enjoying a strong net interest margin (NIM)

of 5.3%. Looking at CTG's assets-to-equity ratio, however, we note that the bank is the most leveraged

among its peers with average total assets currently at 16.6 times the size of average total equity in 2011.

Our assessment suggests that a relatively high degree of leverage, which amplifies the risk of default,

explains the 329bps premium on CTG's bonds. However, we remain convinced that fears over the risk of

default are largely unjustified, thus providing a compelling opportunity for investors. A key risk to our


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outlook would lie in a sudden pick up in NPLs should we see a larger-than-expected increase in

bankruptcies over the coming months, which could dent investor sentiment towards the health of the

company's fundamentals in the short term. Over the longer term, however, our bullish outlook on

Vietnam, which is supported by structural macroeconomic improvements in the country, means that we

are optimistic towards the performance of CTG's debt and we expect yields to fall over the coming years.


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Economic Outlook

Deteriorating Economic Data Prompts Growth Downgrade

BMI View:Recent economic data suggest that the outlook for Vietnam's economic growth has

deteriorated significantly in recent months. Furthermore, the State Bank of Vietnam (SBV)'s indication

that it will normalise interest rates only by Q412 (we were expecting that the monetary easing cycle

would be fully completed by Q312), means that credit conditions will remain tight throughout the year.

Consequently, we have downgraded our real GDP growth forecast from 5.8% to 5.2% for 2012.

Recent data suggest that economic activity will continue to moderate over the coming quarters, presenting

significant downside risks to our already below consensus forecast of 5.8% for real GDP growth in 2012.

The State Bank of Vietnam (SBV)'s monetary easing cycle is also turning out to be less aggressive than

we have anticipated. SBV governor Nguyen Van Binh announced during a press conference on April 11

that the central bank is planning to cut its policy rate (refinancing rate) by 100 basis points (bps) every

quarter towards the end of the year. Although this is largely in line with our core view that the SBV will

normalise interest rates by introducing 400bps of rate cuts in 2012 (the SBV has already introduced

200bps worth of rate cuts since the beginning of the year), we were previously expecting that the

monetary easing cycle would be fully completed by Q312. Given the SBV's latest indication to gradually

unwind its tight monetary policy and to normalise interest rates only by Q412, we are revising down our

expectations for Vietnam's economic growth. We now expect real GDP growth to come in at a slightly

more subdued 5.2% for 2012 (down from our previous forecast of 5.8%).

Industrial Production And Manufacturing Sector Growth Slow

Looking at industrial production data, we note that there is conclusive evidence of a sustained slowdown

in production activity since the SBV introduced a wave of aggressive monetary policy measures aimed at

cooling the economy in 2011. Industrial production expanded at just 6.5% year-on-year (y-o-y) in March,

compared with an average 8.8% over the past six months and average 10.4% over the past 12 months.

The slowdown in industrial activity since the beginning of the year has also been confirmed by a

significant decline in manufacturing sector growth, which came in at a weak 4.9% y-o-y in Q112,

compared to 10.0% in Q411. We believe that this is partly due to cooling external demand for new

manufacturing orders, a trend that is also evident in neighbouring manufacturing export-oriented

economies such as Thailand and Malaysia. Given that the manufacturing sector makes up a significant

21.7% share of Vietnam's GDP and that tight credit conditions (average lending rates remain

exceptionally high at around 14-16%) will continue to be a major drag on manufacturing sector growth,

we believe that headline growth will come in significantly below Bloomberg consensus of 6.0%.

Outlook For Private Consumption Looking Weak

Turning to other economic indicators, we note that latest retail sales and domestic vehicle sales data


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remain relatively weak. While retail sales grew at a 27-month low of 21.8% y-o-y in March, domestic

vehicle sales contracted for the sixth consecutive month at -21.4% y-o-y. These figures reinforce our view

that uncertainties over unemployment in the manufacturing sector and corporate earnings will prompt

households and businesses to cut back on spending and investment, resulting in overall weak domestic

demand growth over the coming months. We also note that according to figures published by the Ministry

of Planning and Investment (MPI), around 12,000 enterprises in Vietnam have either declared bankruptcy

or completely went out of business as of Q112. We expect this surge in bankruptcies to result in a higher

unemployment rate over the coming months, which should put further downside pressure on household

spending.

Corporate Tax Cut Unlikely To Boost Investment

In terms of our outlook on Gross Fixed Capital Formation (GFCF) growth, we believe that the

government's plan to slash corporate income tax by 30% for small- and medium-sized enterprises (SMEs)

is unlikely to have a significant impact on private sector investment. Given an abundant stock of spare

capacity due to the large number of bankruptcies in recent months and a much more moderate outlook for

economic growth ahead, we believe that large companies will delay investing in new projects over the

coming months. Furthermore, the government's newly announced tax cut will only apply to SMEs, which

tend to be more conservative towards expanding production during periods of economic uncertainties due

to their relatively weak balance sheets and cash flows in comparison to multi-national companies.

Accordingly, we expect GFCF growth to remain at a relatively subdued 5.0% in 2012.

Public Spending To Increase In Bid To Support Economy

There is increasing evidence that total public expenditure will exceed the government's allocated budget

this year. According to a statement published by the Ministry of Planning and Investment, the National

Assembly is expected to approve an additional VND4.5trn (US$0.2bn) in funds to be spent on five new

infrastructure projects including two bridges, a university dormitory and an oncology hospital. We note

that that this will add to a healthy pipeline of infrastructure projects that already in the construction phase

and are expected to be completed over the coming years. The government has also pledged to maintain

welfare subsidies in response to a challenging economic outlook in 2012. These factors suggest to us that

public spending will still grow at a robust pace of 5.6% this year, albeit lower in comparison with 5.9% in2011. Nonetheless, this should provide some support for overall headline growth in 2012.

Still Expecting A Trade Deficit

The latest figures published by the General Statistics Office showed a mild trade surplus of US$0.4mn in

March, compared with an average monthly trade deficit of US$0.7mn in 2011. We expect trade import

growth to cool further in 2012 as Vietnamese manufacturers cut back on intermediate goods imports, in

line with our outlook for subdued production activity and moderating economic growth throughout the

year. However, we continue to see external demand remaining subdued in the months ahead and we

expect new exports orders to remain stagnant in 2012. This should in turn lead to an overall slowdown in


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net exports. Accordingly, we see net exports growing at just 6.0% in 2012, significantly lower compared

with 16.9% in 2011.

Scope For Early Rate Cuts

Recent economic data reinforce our core view of a moderation in Vietnam's real GDP growth from 5.9%

in 2011 to 5.2% in 2012 and that inflationary pressure should continue to wane on the back of cooling

economic activity. The recent round of weak economic data should, however, give the SBV more scope

for early rate cuts in Q312 rather than taking its monetary easing cycle late into the final quarter.

Nonetheless, given that it will take around six to eight months for the effects of the SBV's monetary

policy to fully feed through to the economy, this means that we will only see a pickup in economic

activity in H113. Accordingly, we would consider revising our real GDP growth for 2013 upwards should

we see signs of a robust economic recovery taking place towards the end of the year. Over the longer

term, we remain bullish on Vietnam's attractive growth story and we believe that the government's

renewed focus on maintaining macroeconomic stability will be positive for investor confidence and

economic growth.

Table: Vietnam Economic Activity, 2011-2016

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

Nominal GDP, VNDbn2 2,487,631.9 2,847,455.0 3,192,260.2 3,609,813.5 4,068,807.3 4,588,126.0

Nominal GDP, US$bn2

120.4 135.4 153.5 175.5 200.1 228.3Real GDP growth, %change y-o-y

2 5.9 5.2 6.5 7.2 7.3 7.4

GDP per capita, US$2 1,357 1,509 1,693 1,917 2,165 2,447

Population, mn3 88.8 89.7 90.7 91.6 92.4 93.3

Industrial productionindex, % y-o-y, ave

1,4 10.9 8.0 12.0 14.0 13.0 12.0

Unemployment, % oflabour force, eop

4 4.5 5.0 4.8 4.7 4.6 4.5

Notes: eBMI estimates. fBMI forecasts. 1at 1994 prices; Sources: 2Asian Development Bank, General StatisticsOffice.

3World Bank/UN/BMI;

4General Statistics Office.


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Competitive Landscape

Market Structure

Protagonists

Table: Protagonists In Vietnam's Commercial Banking Sector

Central bank: State Bank of Vietnam (SBV)

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 in1951. From 1975 to May 1990, the SBV was the banking system of Vietnam. The government then established the 'two-tier' system that is still in place. The financial liberalisation at the beginning of the 1990s lead to the establishment of fourlarge state-owned commercial banks: Agribank, BIDV, Incombank and Vietcombank. This period also included the

establishment of commercial joint-stock banks, joint-venture banks, branches or representative offices of foreign banks,credit cooperatives, people's credit funds and finance companies.

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

Principal banking regulator: State Bank of Vietnam (SBV)

www.sbv.gov.vn/en/home

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

Banking trade association: Vietnam Bankers Association (VNBA)

www.vnbaorg.info

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

Definition Of The Commercial Banking Universe

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

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

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

In terms of the numbers of branches, VietinBank is the largest organisation, with a presence at 138

locations. The other SOCBs also have large networks by local standards. Agribank has 115; BIDV,

103; VBSP, 65; VDB, 62; and MDHDB, 32. Of the urban CJSBs, the organisations which have over 25

branches are: MaritimeCJSB (26); Techcombank(38); VIB(42); Sacombank (59); Vietcombank

(59); Eximbank(35); Military Bank(36); ACB(54); Saigonbank (31); VP Bank (34); and EAB(28).

None of the joint-venture banks have more than five branches.


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List Of Banks

Table: Financial Institutions In Vietnam

State-owned Commercial Banks

Vietnam Bank for Social Policies

Vietnam Bank for Industry and Trade (VietinBank)

Vietnam Bank for Agricultural & Rural Development (Agribank)

Mekong Delta Housing Development Bank

Vietnam Development Bank

Bank for Investment and Development of Vietnam

Urban Joint-Stock Commercial Banks

An Binh Commercial Joint Stock BankBac A Commercial Joint Stock Bank

Global Petro Commercial Joint Stock Bank

Gia Dinh Commercial Joint Stock Bank

Maritime Commercial Joint Stock Bank

Kien Long Commercial Joint Stock Bank

Vietnam Technological and Commercial Joint Stock Bank (Techcombank)

LienViet Commercial Joint Stock Bank

Western Rural Commercial Joint Stock BankMy Xuyen

Nam Viet Commercial Joint Stock Bank

Nam A Commercial Joint Stock Bank

Vietnam Commercial Joint Stock Bank for Private Enterprise

Bank for Foreign Trade of Vietnam

Habubank

Housing Development Commercial Joint Stock Bank

Southern Commercial Joint Stock BankOrient Commercial Joint Stock Bank

Military Commercial Joint Stock Bank

Vietnam International Commercial Joint Stock Bank

Saigon Commercial Joint Stock Bank

Saigon-Hanoi Commercial Joint Stock Bank

Saigon Bank for Industry and Trade

Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank)

Pacific Commercial Joint Stock Bank


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TienPhong Commercial Joint Stock Bank

Viet Nam Thuong Tin Commercial Joint Stock Bank

Viet A Commercial Joint Stock Bank

Vietnam Commercial Joint Stock Export-Import Bank

Petrolimex Group Commercial Joint Stock Bank

Asia Commercial Joint Stock Bank

South East Commercial Joint Stock Bank (SeABank)

Eastern Asia Commercial Joint Stock Bank

Ocean Commercial Joint Stock Bank

Great Trust Commercial Joint Stock Bank

Great Asia Commercial Joint Stock Bank

First Commercial Joint Stock Bank

BaoViet Joint-Stock Commercial Bank

Foreign Bank Branches

Natexis (France)

Australia & New Zealand Banking Group (Australia)

Calyon (France)

Standard Chartered Bank (UK)

Citibank (US)

Chinfon Commercial Bank (Taiwan)

Maybank (Malaysia)

ABN AMRO Bank (Netherland)

Bangkok Bank (Thailand)

Mizuho Corporate Bank (Japan)

BNP Paribas (France)

Shinhan Bank (South Korea)

HSBC (UK)

United Overseas Bank (Singapore)

Deutsche Bank (German)

Bank of China (China)

Bank of Tokyo-Mitsubishi UFJ (Japan)

Mega International Commercial Bank (Taiwan)

OCBC Bank (Singapore)

Woori Bank (South Korea)


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JPMorgan Chase (US)

Korea Exchange Bank (South Korea )

Lao-Viet Bank (Laos)

Chinatrust Commercial Bank (Taiwan)

First Commercial Bank (Taiwan)

Far East National Bank (US)

Cathay United Bank (Taiwan)

Sumitomo-Mitsui Banking Corporation (Japan)

Hua Nan Commercial Bank (South Korea)

Taipei Fubon Bank (Taiwan)

Commonwealth Bank (Australia)

Industrial Bank of Korea (South Korea)

Joint Venture Banks

Indovina Bank

Shinhanvina Bank

VID Public Bank

VinaSiam

Vietnam-Russia Bank

Source: SBV, September 2010


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Company Profiles

Bank for Foreign Trade of Vietnam (Vietcombank)

Strengths Minority owner Mizuho has boosted bank's profile.

One of the largest and longest established banks in Vietnam.

Clear competence in external trade.

Strong market position.

Weaknesses Relatively limited earnings.

Weak capital.

Lack of transparency

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

Threats Tighter monetary policy to tame economic growth.

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

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

VND3,955bn. It is the oldest commercial bank for external affairs in Vietnam and was the first

bank in the country to have a centralised capital management structure. It describes itself as an

'interbank forex payment centre for over 100 domestic banks and foreign banks' branches

operating in Vietnam', and was the first commercial bank in the country to deal in foreigncurrencies.

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

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

financial institutions, including Vietnam Export Import CJSB, Saigon Industrial and Commercial

CJSB, Gia Dinh CJSB, Military CJSB, International Commercial CJSB, Oriental CJSB,

Chohungvina Bank, Petroleum Insurance Company and Golden Insurance Company.

Japan's Mizuho Corporate Bank acquired a 15% stake in Vietcombank for a total of VND11.8trn

(US$559.04mn) in January 2012, some months after the deal was revealed. The acquisition,

which advantageously gives Vietcombank a stronger foreign partner, involved the sale of347.61mn shares.

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

involvement strengthened Vietcombank's capital position. The agency upgraded its outlook on

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


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Table: Vietnam Stock Market Indicators

2009 2010 27-Feb-12

Market Capitalisation LCY 56,874,044.00 57,159,508.00 42,941,740.00

Market Capitalisation US$ 3,077.77 2,931.56 2,041.64

Share Price LCY 32,383.58 29,017.86 21,800.00

Share Price US$ 1.75 1.49 1.04

Share Price, % change (eop) na -15.08 na

Change YTD (2011 only) -13.54

Shares Outstanding (mn) 1,756.26 1,969.80 1,969.80

Source: BMI

Table: Vietnam Balance Sheet (US$mn)

2002 2003 2004 2005 2006 2007 2008 2009 2010

Total Assets 5,291.58 97,320,504 7,698.66 8,589.06 10,398.11 12,390.40 na 13,826.28 15,770.65

Loans & Mortgages 1,902.16 39,629,760 3,222.64 3,834.90 4,219.14 6,089.27 na 7,413.61 8,776.53

Total Deposits 3,663.53 71,810,032 5,410.48 6,887.63 7,460.07 8,953.09 na 9,168.67 10,580.12

Total Shareholders' Equity 285.56 5,734,965 510.48 541.70 697.70 916.84 na 910.20 1,066.24

Source: BMI

Table: Vietnam Key Ratios (%)

2002 2003 2004 2005 2006 2007 2008 2009 2010

Return on Assets 0.28 0.67 0.87 1.00 1.89 1.31 na na 1.50Return on Equities 6.62 11.77 13.83 15.67 29.42 18.64 na na 22.55

Loan Deposit Ratio 51.92 55.19 60.67 55.68 56.56 68.01 na 83.59 85.71

Loan Asset Ratio 35.95 40.72 42.64 44.65 40.58 49.15 na 55.43 57.50

Equity Asset Ratio 5.40 5.89 6.63 6.16 6.66 7.36 na 6.54 6.72

Source: BMI


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VietinBank

Strengths Vietnam's largest partly private lender by assets.

10% owned by the International Finance Corporation.

2011 profit exceeded predictions.

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

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

ignored.

Possible listing in the long term.

Threats Possible exposure to downturn in global trade.

Predicted growth limited by state credit limits.

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

from the State Bank of Vietnam. It became a state-owned corporation in 1993. As one of the four

largest state-owned commercial banks in the country, VietinBank's total assets account for over

20% of the market share of the whole Vietnamese banking system. VietinBank's capital resources

have continued to increase over the years and have been rising substantially since 1996, with

annual average growth of 20%.

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

network operates in 56 provinces and cities, with a focus on large cities such as Hanoi (12

branches; two transaction centres), Ho Chi Minh City (17 branches; one transaction centre);industrial zones; trading and economic parks; and densely populated areas. VietinBank is an

investor in other institutions such as Saigonbank, Indovina Bank, Vietnam International Leasing

Company and the VietinBank-Asia Insurance Company.

VietinBank is 10% owned by the International Finance Corporation, which invested US$307mn in

the lender in 2011. This was the first strategic investment by a foreign organisation in a

Vietnamese state-owned bank. Discussions over selling a 15% stake to the Canada-based Bank

of Nova Scotia are still ongoing as of January 2012, despite plans to conclude the deal by the end

of 2011.

The bank's profit in 2011 exceeded forecasts, increasing by 76% y-o-y to VND8.11trn. Totalassets grew 25% y-o-y to VND460.4trn, and it aims to see assets increase by 20% in 2012. Non-

performing loans for 2011 made up 0.74% of VietinBank's overall credit, and the bank revealed

that it is targeting clipping bad debts to below 3% in 2012.

The bank is projecting a 20% y-o-y increase in gross profit in 2012 to around US$463mn.

Company Data Website:www.vietinbank.vn

Status:State-owned commercial bank


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Table: Key Statistics For VietinBank, 2005-2008 (VNDmn)

2005 2006 2007 2008

Total Assets 115,766,000 135,363,000 166,113,000 193,590,357

Loans & Mortgages 74,449,340 80,091,150 100,482,200 118,601,677

Total Deposits 84,387,020 99,683,410 112,692,800 121,634,466

Total Shareholders' Equity 4,999,839 5,607,022 10,646,530 12,336,159

Source: VietinBank 2008 annual report


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Agribank

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

Massive branch network, especially in rural Vietnam.

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

Opportunities The size of Agribank's branch network means that it is an attractive partner for any other

financial institutions looking to cross-sell products to the mass market in Vietnam.

Possible listing in the long term.

Threats Perceived exposure to the downturn in global trade.

Credit rationing by state will limit growth.

Company Overview Established in 1988, the Vietnam Bank for Agriculture and Rural Development (Agribank) is aleading commercial bank and plays a decisive role in capital investment in developing the

agricultural and rural economy, as well as other fields of the Vietnamese economy. Agribank has

over 35,000 staff and about 2,300 branches and transaction offices nationwide. It is currently the

country's largest bank by assets and extended its reach to Cambodia in 2010 by opening its first

overseas branch in the kingdom.

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

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

oil resources. This could help Agribank establish more long-term relationships with major

businesses.

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

restructuring plan with the Vietnamese government to be implemented over a period of three to

four years. As part of the revised strategy, Agribank will remain state-owned but play a more

prominent social policy role in support of the country's rural and agricultural communities. Central

bank governor Nguyen Van Binh stipulated that between 75% and 80% of Agribank's annual

lending should go to Vietnamese farmers in support of the country's key export crops, coffee and

rice. Bao also confirmed that the bank's capital adequacy ratio (CAR) rose from 6.4% in 2010 to

8% in 2011 and estimated that the Agribank's CAR could reach 9% in 2012 with the aid of a

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

Meanwhile the bank's bad debts declined from 7% at the end of H111 to 6% by the end ofcalendar year 2011, a rate that Bao suggested could drop to as little as 3% between 2015 and

2020, depending on the bank achieving strong credit growth.

Company Data Website: www.agribank.com.vn

Status: State-owned commercial bank

Contact: Tel: (+84-4) 8313694/7723248


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Table: Vietnam Balance Sheet (LCYmn)

2004 2005 2006 2007 2008 2009

Total Assets 161,757,168 192,319,504 238,495,024 321,444,128 400,485,183 480,937,045

Loans & Mortgages 129,204,040 151,655,216 181,252,960 246,188,336 288,940,827 361,739,747

Total Deposits 92,212,208 120,162,400 160,396,528 233,638,848 299,954,030 331,893,865

Total Shareholders'Equity 483,619 781,031 2,565,545 10,627,676 17,798,086 19,860,526

Source: BMI

Table: Vietnam Balance Sheet (US$mn)

2004 2005 2006 2007 2008 2009

Total Assets 10,255.32 12,081.89 14,853.95 20,068.94 22,907.12 26,026.14

Loans & Mortgages 8,191.47 9,527.28 11,288.80 15,370.44 16,526.96 19,575.72

Total Deposits 5,846.21 7,548.84 9,989.82 14,586.93 17,156.90 17,960.60

Total Shareholders'Equity 30.66 49.07 159.79 663.53 1018.02 1074.76

Source: BMI

Table: Vietnam Key Ratios (%)

2004 2005 2006 2007 2008 2009

Return on Assets 0.16 0.51 1.61 0.59 0.40

Return on Equities 45.88 66.17 69.38 15.14 9.64

Equity Asset Ratio 0.30 0.41 1.08 3.25 4.40 4.00

Source: BMI


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Asia Commercial Bank

Strengths Stronger profitability than some of its non-state peers.

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

Weaknesses Lack of transparency.

Slowing credit growth.

Opportunities Stronger expansion to compete with state lenders.

Threats Tighter monetary policy to tame economic growth.

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

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

branches to expand three-fold to about 900 by 2015. The bank has ambitions to enter Vietnam's'big four' banking circle in the next few years, which would make it the first non-state lender to do

so. The bank said in late 2011 that it aims to rival the country's dominant state lenders by 2015,

with assets jumping three-fold to VND900trn (US$42.9bn) from VND255trn.

The bank's net profit increased to VND1.86trn in the first nine months of 2011 against VND1.49trn

in the same period

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BMI VN Banking Report Q3_2012

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