Vietnam Banking & Financial Services Report - Q3 2022 - Shared by WorldLine Technology

Vietnam Banking & Financial Services Report - Q3 2022 - Shared by WorldLine Technology

Key View 5

Banking Industry Risk Indicator 8

Banking Industry Risk Indicator Scores 11

SWOT 12

Banking & Financial Services SWOT 12

Banking 13

Banking Snapshot 13

Downside Risks To Financial Stability Remain Elevated In Vietnam 14

Forecast Tables 17

Competitive Landscape 19

Regulatory Environment 24

Insurance 25

Insurance Snapshot 25

Competitive Landscape 27

Regulatory Environment 31

Asset Management 32

Asset Management Snapshot 32

Competitive Landscape 33

Regulatory Environment 35

Stock Exchanges 36

Stock Exchanges Snapshot 36

Competitive Landscape 37

Regulatory Environment 39

Macroeconomic Overview 41

Vietnam To See Growth Accelerate In 2022 But Headwinds Are Rising 41

Macroeconomic Forecasts 45

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Household Income Forecasts 47

Vietnam Demographic Outlook 49

Banking & Financial Services Methodology 52

Banking Industry Risk Indicator Methodology 53

Key View

Key View: Vietnam's banking and financial services industry retains scope for growth over the long term, driven by economic

growth averaging around 6.0% per annum through to 2031, which will support rising incomes and expand the country's growing middle class The broadly stable Vietnam government is open to cooperating with the rest of the Asian region, a stance that will benefit the adoption of new technologies and best practice in the industry Once the effects of the Covid-19 pandemic have abated, the government is expected to begin reducing state ownership in the sector and move forward with the adoption of policies

already-to boost both private secalready-tor and foreign involvement in local capital markets.

Vietnam’s banking sector assets are not as concentrated as in some developing countries but the state has a large role in the sector.Although banks been slow to adopt Basel standards for capital adequacy, in recent years they have made strides in reducing non-performing loans and aligning loan growth with increases in deposits We also note that four banks, all of which are at least partlystate owned, continue to dominate Vietnam’s banking sector Digital services are gaining traction among the large proportion of thepopulation that is unbanked, and green lending is also on the rise

Vietnam's insurance market has enormous growth potential given the country's large population and a low rate of penetration

There are a number of structural factors in place that are supportive of continued rapid growth of the dominant life segment,

including a young population, urbanisation, an expanding middle class, the absence of a comprehensive social security system, highsavings rates among households that can afford to, and innovation by multinational life insurance companies who consider

Vietnam's market to be a growth opportunity The smaller non-life segment also maintains development prospects, although unlikethe life segment, the already competitive landscape is dominated by indigenous insurers, many of which have traditionally beenlinked with large SOEs We also note that the emergence of new insurtech platforms across both segments will make it easy for first-time customers to buy insurance and encourage innovations in the types of coverage that individuals and businesses can afford

Vietnam's asset management industry remains small, largely due to the lack of institutional investors that drive business in mostother countries In 2022, we estimate that the average disposable income of Vietnamese households stood at USD5,500, some waybelow the USD10,000, which is considered the point at which asset management services targeted at individuals becomes

attractive and viable By 2026, however, we currently forecast some 19.2% of households will surpass that USD10,000 mark, a viewthat provides strong potential for the expansion of the asset management sector in Vietnam

The development of Vietnam's stock market has entered a new phase The government is in the process of re-organising the

country's two exchanges under a single entity so that one exchange focuses on stocks and the other on bonds and other products.There is ongoing cooperation between Vietnam, Japan and ASEAN to help integrate Vietnam’s stock market into the broader Asianfinancial sector The Vietnamese stock market comprises two trading entities, and remains dominated by domestic investors

Foreign investment continues to be limited due to the relatively low liquidity of the markets, in addition to Vietnam's status as a

frontier rather than an emerging market In its economic restructuring plan for 2021-2025, the Ministry of Planning and Investmentset out goals for the stock market that are designed to make Vietnam’s stock exchanges competitive with those of other ASEANmembers

Upbeat Long-Term Outlook For Financial Services Amid Favourable Demographics

Vietnam - Working Age Population, 15-64, '000

e/f = Fitch Solutions estimate/forecast Source: UN, Fitch Solutions

Latest Trends And Developments

• We maintain our forecast for bank credit growth of 15.0% in 2022, driven by a rebound in economic growth However, nationalindebtedness continues to rise and the relatively under-capitalised banking sector remains vulnerable to an increase in non-performing loans The economic effects of the Russia-Ukraine conflict pose an additional downside risk

• The value of total insurance premiums written is forecast to rise by 13.0% in 2022, a slight uptick from our previous forecast

(12.9%) Growth is forecast to average just over 12.3% per annum through 2026 across in the life segment and 11.5% in the life lines

non-• The total value of assets under management (AuM) by fund management companies in Vietnam reached approximately

VND570.0trn (USD24.7bn) in 2021 This represents growth of 31% y-o-y The regulator reported that from 2015 to the end of

2021, AuM grew by an average of 15-25% per annum

• Buy trades made by foreign investors on both of Vietnam’s main stock exchanges totalled VND40.9bn in March 2022, while saleshit VND44.8bn, resulting in a net loss of VND3.9bn

FINANCIAL SERVICES FORECASTS (2020-2025)

Finance nominal GVA, USDbn 13.91 20.06 22.35 24.66 26.94 29.41 Finance USD nominal growth, % y-o-y -0.1 44.3 11.4 10.3 9.3 9.1 Finance nominal GVA, VNDbn 322,739.53 464,594.14 514,154.91 569,677.35 625,930.28 690,008.23 Finance VND nominal GVA growth, % y-o-y 0.6 44.0 10.7 10.8 9.9 10.2 Finance nominal GVA, % total GVA 5.73 6.29 6.29 6.32 6.33 6.33

e/f = Fitch Solutions estimate/forecast Source: National Statistics Office, Fitch Solutions

FINANCIAL SERVICES FORECASTS (VIETNAM 2026-2031)

Finance nominal GVA, USDbn 31.89 34.53 37.38 40.46 43.80 47.45 Finance USD nominal growth, % y-o-y 8.4 8.3 8.2 8.2 8.3 8.3 Finance nominal GVA, VNDbn 755,673.25 826,472.54 903,493.48 987,755.56 1,080,113.71 1,181,698.76 Finance VND nominal GVA growth, % y-o-y 9.5 9.4 9.3 9.3 9.4 9.4 Finance nominal GVA, % total GVA 6.32 6.30 6.27 6.24 6.22 6.19

f = Fitch Solutions forecast Source: National Statistics Office, Fitch Solutions

Banking Industry Risk Indicator

Banking Industry Risk Indicator

Note: Scores out of 100; higher scores imply lower risk Source: Fitch Solutions

Key View: Vietnam's Banking Industry Risk Indicator (BIRI) score in Q122 is 35.48, indicating moderately high banking sector risk

relative to the other markets we assess We rank each market out of 122, where first is lowest risk and 122nd is highest risk Vietnam

is in 88th position

BIRI Score Falling Steadily

Vietnam – BIRI Scores & Historical BIRI Average

Note: Scores out of 100; higher scores imply lower risk Source: Fitch Solutions

BIRI Overview: Vietnam’s BIRI score has been on a broad downward trend, falling from 38.05 in Q121 to 35.48 in Q122, implying

higher risks The market's scores for the International Linkages and Economic Volatility metrics are high, but its Government Financeand Financial Component scores remain low Vietnam ranks 88th of the 122 markets captured in our analysis

Financial: The Financial component score fell from 33.67 in Q121 to 30.09 in Q122, implying higher risk Its capital buffers have

been trending downwards, while underlying asset quality has been falling, despite headline non-performing loan figures holding up

Economic Volatility Has Led To Higher Risks

Vietnam - BIRI Component Scores

Note: Scores out of 100; higher scores imply lower risk Source: Fitch Solutions

Government Finance: Vietnam’s Government Finance score fell from 45.40 in Q121 to 41.92 in Q122, implying higher risk In

Q122, the Government Debt (% of GDP) component stood at 41.38%, up from 39.22% in Q121 Government Interest Payments (%

of revenue) also remained high at 10.09% in Q122 However, the Government Balance (% of GDP) component recorded a smallerdeficit of 7.32% in Q122, compared to 7.58% in Q121

Regulatory Quality & Environment: Vietnam’s Regulatory Quality & Environment score has generally been rising over the past

few years, with the score standing at 46.49 in Q122 The country's business environment has continued to improve due to

economic reforms adopted by Vietnamese authorities since 2016, which were aimed at making the market more attractive to

foreign direct investment

Living Standard: Vietnam's Living Standard component score rose to 54.17 in Q122 from 52.74 in Q121, implying lower risk.

Continued rises in this score are the result of strong economic growth in Vietnam, which raised GDP At PPP, USD Per Capita to 9,442

in Q122

International Linkages: Vietnam’s International Linkages component score fell to 68.52 in Q122 from 69.60 in Q121, implying

higher risk This was driven by a fall in the Current Account Balance (% of GDP) component, from 5.68% in Q121 to 2.95% in Q122.However, Gross External Debt (% of GDP) fell from 37.68% to 33.08% over the same period

Economic Volatility: The Economic Volatility score fell from 66.64 in Q121 to 62.39 in Q122, implying higher risk The fall reflects

rising volatility in both economic growth and inflation in the country

Banking Industry Risk Indicator Scores

ASIA-PACIFIC BANKING INDUSTRY RISK INDICATOR SCORES

BIRI Financial

Component

Government Finance Component

Living Standard Component

Regulatory Quality &

Environment Component

International Linkages Component

Economic Volatility

Singapore 95.43 65.95 61.85 100.00 100.00 85.19 57.14 Hong Kong, China 90.91 82.72 66.93 92.88 94.97 55.80 45.77 Taiwan, China 77.83 30.53 66.59 90.53 87.98 90.25 77.38 Australia 76.09 55.71 42.79 89.44 91.99 57.61 64.22 South Korea 74.25 51.05 58.60 87.18 80.69 56.89 74.19 Japan 71.47 53.19 36.59 84.82 87.26 54.83 71.71 Malaysia 69.77 76.78 36.84 77.05 73.33 65.63 44.17 New Zealand 60.45 26.98 50.65 85.99 92.28 41.66 66.63 Indonesia 54.10 66.40 35.57 61.73 51.64 55.62 65.83 Mainland China 52.42 47.20 49.39 68.63 54.16 64.39 62.66 Maldives 41.92 98.46 15.63 67.41 30.69 21.05 23.66 Thailand 41.07 42.09 40.46 68.74 53.70 46.10 48.97 Philippines 38.00 58.41 32.67 54.23 42.96 55.37 42.67 Vanuatu 36.65 66.99 54.64 35.12 23.45 60.22 58.18 Vietnam 35.48 30.09 41.92 54.17 46.49 68.52 62.39 Solomon Islands 34.16 96.62 52.09 25.72 11.88 46.40 37.40 India 33.81 57.99 18.87 49.80 46.98 56.13 37.41 Sri Lanka 30.71 52.09 0.00 63.61 40.34 43.99 50.35 Pakistan 29.04 67.46 16.90 42.53 23.90 51.40 51.95 Bangladesh 20.82 39.48 34.05 44.70 18.74 51.96 61.84 Fiji 20.63 55.66 16.63 55.54 36.64 19.37 27.54 Afghanistan 15.31 89.46 29.52 24.14 0.00 0.00 51.32 Cambodia 15.05 22.17 59.93 41.52 26.73 34.34 57.57

Note: May include territories, special administrative regions, provinces and autonomous regions Scores out of 100; higher scores imply lower risk Source: Fitch Solutions

Banking & Financial Services SWOT

SWOT Analysis

Strengths • Vietnam's economy is expected to post real GDP growth of around 6.0% per annum through to 2031, which

will allow income levels to steadily rise.

• The country has a large and growing population with a high savings rate and potential for faster income growth.

• The government is relatively stable and is open to foreign cooperation in integrating its financial services markets with the rest of Asia.

• The government has stated a willingness to speed up the process of privatising state-owned banks and other entities, which will provide additional domestic investment opportunities.

Weaknesses • Domestic banks continue to lag behind their foreign peers in terms of financial strength and the

technological curve and have been slow to implement Basel standards for capital adequacy.

• Many domestic non-life insurance companies are sub-scale and lack ready access to new capital.

• Most Vietnamese households do not have sufficient income to purchase non-essential insurance products.

• The country's two stock exchanges lack scale in a competitive region, and the continued lack of new initial public offerings limits their attractiveness.

Opportunities • There is significant potential for adopting cash-free payment systems and new mobile banking and

insurance technologies, which the State Bank of Vietnam is encouraging.

• Rising wealth may allow households to expand insurance cover and take advantage of financial planning activities.

• If executed, the government's divestment programme should support growth in the local capital market.

• Vietnam's government is gradually easing restrictions on foreign companies and appears more receptive to overseas investment and ownership.

Threats • There is limited private sector competition in the banking and non-life insurance sectors.

• Continued high levels of government debt could yet trigger a fiscal crisis, undermining confidence in the banking sector.

• Though foreign competition is needed, allowing ASEAN and EU banks to have more of a presence may threaten domestic development.

• Preferences for traditional investments such as gold and property could constrain the expansion of financial planning and asset management activities.

Banking Snapshot

Key View: Four banks, all of which are at least partly state owned, dominate Vietnam’s banking sector The smaller banks operating

in the country continue to struggle with scale, as evidenced by the number of announcements regarding banks issuing bonds and equity, or seeking foreign partnerships to increase their capital base Digital services are gaining traction among the large proportion

of the population that is unbanked and green lending is also on the rise.

Latest Trends and Developments

• The expected rebound in Vietnam's 2022 real GDP growth, forecast at 6.8% (down from our previous forecast of 8.0%) will

support annual bank loan growth of 15.0% However, loan growth in excess of nominal GDP growth (forecast at 10.4%) implies afurther increase in national indebtedness

• In May 2022, the State Bank of Vietnam (SBV) approved an application from the Asia Commercial Joint Stock Bank to

increase its charter capital The bank will increase its charter capital by the maximum amount of VND6.8bn through the issuance

of new shares

• In April 2022, the SBV approved the network development of the Joint Stock Commercial Bank for Foreign Trade of

Vietnam to establish five new branches in the country.

• In January 2022, a report from cloud banking platform Mambu revealed that in Vietnam, 70% and 54% of consumers have

made greater use of digital banking services because of the pandemic These numbers are higher than the global average (61%and 41% respectively) In November 2021, the deputy governor of the SBV remarked at a conference on smart banking thataround 95% of lenders in Vietnam have been pushing a digital transformation strategy

Consistent Long-Term Growth Ahead

Vietnam - Total Banking Assets (2020-2031)

e/f = Fitch Solutions estimate/forecast Source: IMF, Fitch Solutions

Downside Risks To Financial Stability Remain Elevated In Vietnam

• Nevertheless, a continued economic recovery bodes well for the performance of the banking sector this year

We at Fitch Solutions expect financial stability risks to stay elevated in Vietnam The country’s private sector debt burden

is very high compared to peers with similar levels of development, and has continued to rise over the last few years Moreover,

regulatory forbearance enacted during the pandemic has likely masked the true weakness of the banking sector We will get a

clearer picture of the health of Vietnamese banks in the coming months, but underlying asset quality has probably already

deteriorated significantly due to the severe economic slowdown triggered by the Delta variant of Covid-19 last year Finally, with lowcapitalisation levels, Vietnamese banks may not be able to withstand prolonged economic shocks On the positive side however, theoperating environment for Vietnamese banks should continue to improve over the coming quarters on the back of a robust

economic recovery

Vietnam & Cambodia Stand Out As Having Low Income Relative To Indebtedness

Top 20 Most Indebted Economies (2020) - Domestic Credit To Private Sector, % Of GDP (X-Axis) Versus GDP Per Capita, USD (Y-Axis)

Source: World Bank, Fitch Solutions

Vietnam’s private sector is extremely indebted, particularly so given its low level of GDP per capita which stood at around USD3,700

at the end of last year The latest figures from the World Bank show that domestic credit owed by the private sector amounted to147.7% of GDP in 2020, ranking 12th in the world and even above the UK which is about 14 times wealthier in GDP per capita terms

(see chart above) Moreover, the State Bank of Vietnam is aiming to boost credit growth further to 14.0% in 2022, from an actual

expansion of 13.6% in 2021 The central bank is likely to keep most other policy settings fairly accommodative too, which suggests

to us that credit will continue to expand at a faster pace than nominal GDP We forecast credit growth to accelerate to 15% in 2022,versus nominal GDP growth of 10.8%

We note that such high levels of indebtedness are a key risk to financial stability, especially with the global monetary environment

set to tighten over the coming quarters The Federal Reserve hiked its policy rates by 50bps on May 4 and, in our view, it will tightenpolicy further by 100bps, which would bring the Fed Funds rate to 2.00% by year end.

Loan Forbearance Obscures True Picture Of Asset Quality

At face value, asset quality among Vietnamese banks has been holding up well despite the economic disruption caused by the

pandemic The IMF estimates that Vietnam’s NPL ratio stood at 1.87% at end-June 2021, down slightly from 2.00% a year ago (see

chart below) This stability however is likely due to regulatory forbearance and strong credit growth In 2020, the authorities

introduced Circular 01, which allowed banks to not classify restructured loans as NPLs More recently, the government further

expanded debt rescheduling for customers in September 2021 under Circular 14 In particular, the SBV had allowed banks to

restructure debt incurred before 1 August 2021, instead of the initial cutoff date of June 10 2020 The deadline for debt repayment

has also been extended In all, regulatory forbearance on loan classifications are scheduled to only expire in June 2022.

According to the IMF, credit institutions in Vietnam have restructured or rescheduled approximately 3.9% of total outstanding loansbetween March and early-November 2020, while about 10.8% of outstanding loans had their interest payments exempted or

reduced The figures are likely to have been even higher in 2021, which was when the economy was hardest hit by the Delta strain

of Covid-19, culminating in an economic contraction of 6.2% y-o-y in Q321 Indeed, according to the State Bank of Vietnam,

although the bad debt ratio on banks’ balance sheet had been maintained at a low level of 1.9% in 2021, the off-balance sheet bad

debt ratio and unresolved debt sold to the Vietnam Asset Management Company is 3.4% In a more conservative scenario

where all restructured debt is included, the ratio rises to 7.3%

Headline NPL Ratio Has Continued To Trend Downwards Despite Pandemic

Vietnam - Non-Performing Loans To Total Gross Loans, %

Source: IMF, Fitch Solutions

Thin capitalisation levels among Vietnamese banks also leaves the banking system vulnerable to economic shocks and poses a major downside risk to financial stability As of June 2021, the banking sector’s regulatory capital to risk

weighted assets ratio stood at 11.0% (see chart below), slightly above the minimum regulatory capital adequacy requirement of 9%

prescribed under Circular 22 However, many banks have yet to adopt Basel II requirements, after the authorities extended the

timeline for adoption from 2020 previously to the start of 2023 currently This limits the comparability of reported capital adequacyratios (CARs) against those in other markets The latest numbers from the IMF suggest that only 18 out of 43 Vietnamese banks

(accounting for 60% of total banking system’s assets) met the capital standards required for Basel II adoption in 2019 As more

banks gradually adopt the more stringent Basel II standards – subsequently increasing the base of risk-weighted assets – we believethat reported CARs will continue to decline

Capital Adequacy Is Low And Trending Downwards

Vietnam - Regulatory Capital To Risk-Weighted Assets, %

Source: IMF, Fitch Solutions

Strong Growth Rebound Should Provide Respite For Banks

Nevertheless, the economy is still on the mend and we expect the operating environment for banks to improve in 2022 We thinkthat global economic headwinds from Russia’s invasion of Ukraine and Covid-related lockdowns in China will dent, but not scupperthe economic recovery Importantly, containment measures have been significantly loosened in recent months, and the country’sborders have fully reopened We expect a continued normalisation of economic activities over the coming quarters as the

population is now more resilient to the coronavirus As of March 22, more than 80% of the population were fully inoculated, andnearly half have received booster shots We continue to expect Vietnam’s economic growth to rebound to 6.8% in 2022, from amulti-decade long low of just 2.6% in 2021

Forecast Tables

ASSETS FORECASTS (VIETNAM 2020-2025)

Total assets, VNDmn 12,061,660,232 13,750,292,665 15,812,836,564 17,947,569,501 20,370,491,383 23,120,507,720 Total assets, USDmn 521,450 594,093 681,587 780,329 876,904 985,432 Total assets, % of GDP 191.7 163.7 170.0 174.7 180.5 185.7 Total assets, % y-o-y 12.1 14.0 15.0 13.5 13.5 13.5 Client loans, VNDmn 9,570,732,801 10,872,352,462 12,503,205,332 14,191,138,052 16,106,941,689 18,281,378,817 Client loans, USDmn 413,762 469,749 538,931 617,006 693,368 779,181 Client loans, % of GDP 152.1 129.5 134.4 138.1 142.7 146.9 Client loans, % y-o-y 12.2 13.6 15.0 13.5 13.5 13.5 Client loans, USD per capita 4,250 4,785 5,446 6,188 6,905 7,706 Client loans, % of total assets 79.3 79.1 79.1 79.1 79.1 79.1

Source: IMF, Fitch Solutions

ASSETS FORECASTS (VIETNAM 2026-2031)

Total assets, VNDmn 26,241,776,263 29,784,416,058 33,805,312,226 38,369,029,377 43,548,848,342 49,427,942,869 Total assets, USDmn 1,107,391 1,244,445 1,398,460 1,571,537 1,766,034 1,984,603 Total assets, % of GDP 192.0 198.4 205.1 211.9 219.0 226.3 Total assets, % y-o-y 13.5 13.5 13.5 13.5 13.5 13.5 Client loans, VNDmn 20,749,364,957 23,550,529,226 26,729,850,672 30,338,380,512 34,434,061,882 39,082,660,236 Client loans, USDmn 875,614 983,982 1,105,762 1,242,614 1,396,403 1,569,225 Client loans, % of GDP 151.8 156.9 162.2 167.6 173.2 178.9 Client loans, % y-o-y 13.5 13.5 13.5 13.5 13.5 13.5 Client loans, USD per capita 8,603 9,606 10,731 11,991 13,405 14,993 Client loans, % of total assets 79.1 79.1 79.1 79.1 79.1 79.1

Source: IMF, Fitch Solutions

LIABILITIES FORECASTS (VIETNAM 2020-2025)

Total liabilities and capital,

VNDmn 12,061,660,232 13,750,292,665 15,812,836,564 17,947,569,501 20,370,491,383 23,120,507,720Total liabilities and capital,

USDmn 521,450 594,093 681,587 780,329 876,904 985,432Total liabilities and capital, % of

GDP 191.7 163.7 170.0 174.7 180.5 185.7Total liabilities and capital, % y-

Client deposits, VNDmn 9,543,178,227 10,688,359,614 11,970,962,768 13,407,478,300 15,016,375,696 16,818,340,780 Client deposits, USDmn 412,570 461,799 515,989 582,933 646,421 716,824 Client deposits, % of GDP 151.6 127.3 128.7 130.5 133.0 135.1 Client deposits, % y-o-y 12.0 12.0 12.0 12.0 12.0 12.0

Indicator 2020 2021e 2022f 2023f 2024f 2025f

Client deposits, USD per capita 4,238 4,704 5,214 5,846 6,437 7,089 Client deposits, % of total

liabilities 79.1 77.7 75.7 74.7 73.7 72.7

Source: IMF, Fitch Solutions

LIABILITIES FORECASTS (VIETNAM 2026-2031)

Total liabilities and capital,

VNDmn 26,241,776,263 29,784,416,058 33,805,312,226 38,369,029,377 43,548,848,342 49,427,942,869Total liabilities and capital,

USDmn 1,107,391 1,244,445 1,398,460 1,571,537 1,766,034 1,984,603Total liabilities and capital, % of

GDP 192.0 198.4 205.1 211.9 219.0 226.3Total liabilities and capital, % y-

Client deposits, VNDmn 18,836,541,674 21,096,926,675 23,628,557,876 26,463,984,821 29,639,662,999 33,196,422,559 Client deposits, USDmn 794,893 881,466 977,467 1,083,924 1,201,976 1,332,884 Client deposits, % of GDP 137.8 140.6 143.3 146.2 149.1 152.0 Client deposits, % y-o-y 12.0 12.0 12.0 12.0 12.0 12.0 Client deposits, USD per capita 7,810 8,605 9,485 10,460 11,539 12,735 Client deposits, % of total

liabilities 71.8 70.8 69.9 69.0 68.1 67.2

Source: IMF, Fitch Solutions

KEY RATIOS FORECASTS (VIETNAM 2020-2031)

Indicator 2020 2021e 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f

Loan/deposit ratio 100.29 101.72 104.45 105.84 107.26 108.70 110.15 111.63 113.13 114.64 116.18 117.73 Loan/asset ratio 79.35 79.07 79.07 79.07 79.07 79.07 79.07 79.07 79.07 79.07 79.07 79.07

Source: IMF, Fitch Solutions

Competitive Landscape

The Vietnamese banking industry is made up of a variety of players, featuring relatively large state-owned and joint-stock

commercial banks to small, privately held banks The top 10 banks account for 60% of the sector's total assets, with the top fourbanks holding around 42% of the asset base

The State Bank of Vietnam (SBV), which oversees the banking sector, lists four state-owned commercial banks, 31 joint-stock

commercial banks, nine wholly foreign-owned banks, two policy banks and one cooperative bank

Latest Developments

• In May 2022, the State Bank of Vietnam (SBV) approved an application from the Asia Commercial Joint Stock Bank to

increase its charter capital The bank will increase its charter capital by the maximum amount of VND6.8bn through the issuance

of new shares

• In April 2022, the SBV approved the network development of the Joint Stock Commercial Bank for Foreign Trade of

Vietnam (Vietcombank) to establish five new branches in the country.

• In January 2022, US bank Citi announced the sale of its consumer banking franchises in four South East Asian countries,

including Vietnam, to UOB Group The agreement includes all related Citi staff and an estimated 5,000 consumer bank and

supporting employees are expected to transfer to UOB The deal is part of Citi’s wider exit from its consumer franchises in 13markets across Asia and Europe, Middle East and Africa

• In January 2022, US holding company Vemanti Group announced that it had signed a Letter of Intent with Vietnam Public

Joint-stock Commercial Bank to become one of the first small- and medium-sized enterprise neobanking solutions in

Vietnam This is a step towards an integrated bilateral formal partnership for the two groups following the announcement of amemorandum of understanding to create joint financial projects in Q321

• Vietnam Prosperity Joint Stock Commercial Bank (VPBank) completed the sale of its 49% stake in VPBank Finance

Company (FE Credit) to SMBC Consumer Finance, a wholly owned subsidiary of Japan-based Sumitomo Mitsui Financial

Group VPBank will retain a 50% stake in FE Credit, while the remaining 1% is held by another investor.

TOP 10 COMMERCIAL AND RETAIL BANKS BY TOTAL ASSETS, VNDMN (2021, 2022)

Total Assets Total Common

Joint Stock Commercial Bank for Investment and Development of

Vietnam 1,847,704,400 89,837,700 3/31/2022Vietnam Joint Stock Commercial Bank for Industry and Trade 1,663,730,200 98,296,400 3/31/2022 Vietnam Bank for Agriculture and Rural Development 1,622,749,649 76,520,621 6/30/2021 Joint Stock Commercial Bank For Foreign Trade of Vietnam 1,462,748,200 117,077,700 3/31/2022 Saigon Joint Stock Commercial Bank 703,155,353 22,535,321 12/31/2021 Military Commercial Joint Stock Bank 649,039,794 67,063,548 3/31/2022 Vietnam Prosperity Joint Stock Commercial Bank 563,923,685 95,202,019 3/31/2022 Asia Commercial Joint Stock Bank 528,636,400 48,203,300 3/31/2022 Saigon Thuong Tin Commercial Joint Stock Bank 521,117,100 34,261,300 12/31/2021 Saigon - Hanoi Commercial Joint Stock Bank 515,553,313 37,818,788 3/31/2022

Note: Data is latest available Source: Company reports, Fitch Solutions

The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) has retained the top spot as

measured by total assets, remaining above the other three largest of the top four banks in the country

BIDV was founded in 1957 as the Bank of Construction for Vietnam but changed its name in 1990 It is primarily state-owned lenderfollowing the government selling a stake in 2012 Beyond traditional banking, BIDV also provides services in insurance, securitiesand investments It operates 190 branches and 855 transaction offices nationwide, with a presence in six countries The customer

base of BIDV exceeds 7.7mn, representing over 8% of Vietnam's population In 2019, South Korea's KEB Hana acquired a 15%

stake in BIDV, making it the second largest shareholder

Edging in the second spot is the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) The bank was

established in 1988 after being separated from the SBV, which maintains a majority stake of around 65% The bank also has two

foreign shareholders, the Bank of Tokyo-Mitsubishi UFJ and International Finance Corporation, with the latter recently

reducing its stake from around 8% to 5%

Vietinbank has 155 branches and more than 950 transaction offices countrywide The bank is also expanding its international

presence, with branches in Frankfurt and Berlin (Germany), a representative office in Myanmar and a subsidiary in Laos It also has acorrespondent relationship with 1,000 banks in 90 countries worldwide

The Vietnam Bank for Agriculture and Rural Development (AgriBank) has moved into third position out of the country's top

four banks

Founded in 1988, AgriBank is Vietnam's only 100% state-owned commercial bank It offers insurance and brokerage services inaddition to banking It has a network of more than 2,300 branches and transaction offices across the country Agribank focuses onVietnam's agricultural and rural areas and has a branch in Cambodia The government plans to launch an initial public offering for

TOP 10 BANKS - ASSET QUALITY (2021, 2022)

Growth of Gross Loans (%) NPL Ratio (%)

Reserves for NPLs (% of NPLs)

NPL Charges (% of gross loans)

Date

Joint Stock Commercial Bank for Investment and

Development of Vietnam 4.7 1.0 259.2 2.2 3/31/2022Vietnam Joint Stock Commercial Bank for Industry

and Trade 8.8 1.3 197.3 1.5 3/31/2022Vietnam Bank for Agriculture and Rural

Development 1.6 2.0 133.5 2.1 6/30/2021Joint Stock Commercial Bank For Foreign Trade of

Vietnam 7.1 0.8 372.6 2.2 3/31/2022Saigon Joint Stock Commercial Bank 2.6 na na 2.0 12/31/2021 Military Commercial Joint Stock Bank 14.3 1.0 250.1 1.8 3/31/2022 Vietnam Prosperity Joint Stock Commercial Bank 5.4 4.8 63.6 3.8 3/31/2022 Asia Commercial Joint Stock Bank 5.0 0.8 187.8 0.0 3/31/2022 Saigon Thuong Tin Commercial Joint Stock Bank 14.0 1.5 118.6 0.4 12/31/2021 Saigon - Hanoi Commercial Joint Stock Bank 2.6 1.7 80.6 0.7 3/31/2022

Note: Data is latest available na = not available Source: Company reports, Fitch Solutions

the bank, converting it into a joint stock bank, but this has not yet occurred.

Vietcombank holds steady at in fourth position Established in 1963, is the oldest commercial bank for external affairs in Vietnam Itwas the first bank in the country to have a centralised capital management structure and was the first commercial bank in the

country to deal in foreign currencies Vietcombank has been listed on the Ho Chi Minh stock exchange since 2009, though the SBV

retains a 74.8% stake Japan's Mizuho Corporate Bank acquired a 15.0% holding in January 2012 and has maintained that share Singapore's GIC owns a 2.5% share.

The bank has more than 15,000 employees and over 550 branches and transaction offices across the country with a number ofsubsidiaries offering non-banking financial services Vietcombank has a banking subsidiary in Laos and several joint ventures Thebank has expanded its presence beyond the region, opening a branch in Australia and a representative office in the US

TOP 10 BANKS - EARNINGS AND PROFITABILITY (2021, 2022)

Net Interest Income (% of earning assets)

Expenses (%

of gross revenues)

Operating Profit (% of average assets)

Net Income (% of average equity)

Date

Joint Stock Commercial Bank for Investment and

Development of Vietnam 3.0 26.7 1.0 16.8 3/31/2022Vietnam Joint Stock Commercial Bank for Industry

and Trade 2.7 26.9 1.5 19.9 3/31/2022Vietnam Bank for Agriculture and Rural

Development 3.8 34.5 1.3 21.7 6/30/2021Joint Stock Commercial Bank For Foreign Trade of

Vietnam 3.6 27.0 2.8 28.3 3/31/2022Saigon Joint Stock Commercial Bank 2.0 39.3 0.2 5.7 12/31/2021 Military Commercial Joint Stock Bank 5.7 31.7 3.8 29.6 3/31/2022 Vietnam Prosperity Joint Stock Commercial Bank 8.0 16.7 8.1 39.8 3/31/2022 Asia Commercial Joint Stock Bank 4.5 39.9 3.2 28.6 3/31/2022 Saigon Thuong Tin Commercial Joint Stock Bank 2.7 56.5 0.8 10.9 12/31/2021 Saigon - Hanoi Commercial Joint Stock Bank 3.7 21.3 2.6 28.6 3/31/2022

Note: Data is latest available Source: Company reports, Fitch Solutions

Saigon Joint Stock Commercial Bank (SCB) was established in 1992 and is the country's fifth largest bank in terms of assets It

is much smaller than fourth-ranked Vietcombank, having just over 5% of the country’s total banking assets SCB focuses on retailand commercial banking services but also engages in asset management, gold trading, bond dealing and insurance, the latter via a

tie-up with Manulife Its network includes 50 branches and 189 transaction offices across the country and it has more than 7,700

employees SCB has two subsidiaries in hotel and travel services and another in credit information services

TOP 10 BANKS - CAPITAL AND LEVERAGE (2021, 2022)

Tangible Common Equity (% of tangible

Note: Data is latest available Source: Company reports, Fitch Solutions

The remaining five banks that make up the top 10 are: Military Commercial Joint Stock Bank, Vietnam Prosperity Joint

Stock Commercial Bank, Asia Commercial Joint Stock Bank, Saigon Thuong Tin Commercial Joint Stock Bank

and Saigon - Hanoi Commercial Joint Stock Bank.

They each hold total assets of VND650mn or less, a much smaller asset base than the top four banks

TOP 10 BANKS - FUNDING AND LIQUIDITY (2021, 2022)

Loans (% of customer deposits)

Interbank Assets (% of interbank liabilities)

Customer Deposits (% of total funding)

Date

Joint Stock Commercial Bank for Investment and

Development of Vietnam 101.5 184.3 81.2 3/31/2022Vietnam Joint Stock Commercial Bank for Industry and

Vietnam Bank for Agriculture and Rural Development 84.3 5,119.3 96.9 6/30/2021 Joint Stock Commercial Bank For Foreign Trade of Vietnam 87.2 258.0 89.7 3/31/2022 Saigon Joint Stock Commercial Bank 70.4 105.6 77.7 12/31/2021 Military Commercial Joint Stock Bank 106.5 119.6 70.9 3/31/2022 Vietnam Prosperity Joint Stock Commercial Bank 136.6 133.9 60.1 3/31/2022 Asia Commercial Joint Stock Bank 98.4 161.1 83.7 3/31/2022 Saigon Thuong Tin Commercial Joint Stock Bank 90.8 90.9 92.0 12/31/2021 Saigon - Hanoi Commercial Joint Stock Bank 111.4 85.0 71.7 3/31/2022

Note: Data is latest available Source: Company reports, Fitch Solutions

Regulatory Environment

The State Bank of Vietnam (SBV) is the central bank and oversees all banking and credit institutions in Vietnam The SBV is not awholly independent central bank, despite passage of the State Bank Law in 2010 that nominally expanded its independence Somekey areas of operation, such as the provision of liquidity support, monetary policy, the management of foreign currency reserves,foreign exchange rates and issuance of banking licenses, are subject to legislative approval or consultation

To provide support during the Covid-19 crisis, the SBV allowed banks to reschedule or reduce fees and interest rates to encouragepayment Customers were permitted to restructure repayments over 12 months and would not lose their debt classification statusprior to the restructuring agreement In September 2021, the central bank announced the following additional support measures:

• Financial institutions were allowed to reschedule debts incurred before August 1 2020, compared with June 10 2020 previously

• The date for debts with repayment obligations was extended to run through June 30 2022, instead of the prior deadline of

December 31 2020

• Repayment terms for customers were lengthened to June 20 2022 while the time limit for overdue debts incurred was extended

to include those incurred through September 7 2021

• Credit institutions and foreign bank branches were permitted to determine the level of fees and interest rates for debts incurredbefore August 1 2021 with repayment obligation between January 23 2020 and June 30 2022, and for customers unable to

repay debts due to the pandemic

In August 2018, the government issued its long-term plan for the industry, via the 'Development Strategy for the Banking Sector to

2025, with Orientations to 2030' The strategy includes plans to make the SBV more autonomous, independent and accountable,while also increasing the effectiveness of its supervision It also includes the gradual adoption of Basel II standards by local banks,the diversification of bank ownership structures, a goal to have several leading entities included among the top 100 banks in Asia(by assets) by 2025 In addition, there are plans to develop the micro-financing sub-sector and promoting the development of non-cash payments in Vietnam The strategy will be supported by the World Bank and Swiss government under the ‘Vietnam:

Strengthening Banking Sector Soundness and Development Project’

The primary legislation governing the banking sector is the 2010 Law on Credit Institutions, which was later amended in 2018 Thenewer amendments focused primarily on establishing a framework for the restructuring, rescue and liquidation of a credit

institution It also clamped down on cross-ownership of credit institutions More specific rules and requirements are predominatelyoutlined in government decrees or circulars

Insurance Snapshot

Key View: Vietnam's insurance market has enormous growth potential given the country's large population and a low rate of

penetration There are a number of structural factors in place that are supportive of continued rapid growth of the dominant life segment, including a young population, urbanisation, an expanding middle class, the absence of a comprehensive social security system, high savings rates among households that can afford to, and innovation by multinational life insurance companies who consider Vietnam's market to be a growth opportunity The smaller non-life segment also maintains development prospects,

although unlike the life segment, the already competitive landscape is dominated by indigenous insurers, many of which have

traditionally been linked with large SOEs We also note that the emergence of new insurtech platforms across both segments will make it easy for first-time customers to buy insurance and encourage innovations in the types of coverage that individuals and

businesses can afford.

Sustainable Rate Of Growth To Continue Over The Long Term

Vietnam - Insurance Premiums By Sector (2020-2031)

e/f = Fitch Solutions estimate/forecast Source: National sources, Fitch Solutions

Latest Trends And Developments

• We forecast total insurance premium growth to ease slightly to 13.0% in 2022 from 17.0% in 2021 Growth in the larger life

segment will marginally outpace that across Vietnam's non-life lines

• We expect life insurance premiums to rise from VND168.7trn in 2022 to VND267.0trn in 2026, at an average annual rate of

about 12.3%, up from the 11.3% previously forecast last quarter In US dollar terms, premiums will rise from USD7.47bn to

USD11.27bn over the same period, as Vietnam's economy continues its recovery and incomes increase

• We expect total non-life premiums to increase from VND77.2trn in 2022 to VND117.8trn in 2026 Average annual growth is

forecast to be 11.5%, which is slightly lower than the life market In US dollar terms, premiums will increase from USD3.42bn toUSD4.97bn

• The government’s new economic restructuring plan for 2021-2025 sets two key goals for the expansion of the country’s

insurance sector First, it aims for 15% of the population to be covered by life insurance by 2025 compared with around 11% in

2020 Second, premium revenue is targeted at 3.5% of GDP by 2025 – it is estimated to be about 3.3% in 2021

GROSS INSURANCE PREMIUMS WRITTEN (VIETNAM 2020-2025)

Total gross premiums written, VNDbn 185,960.00 217,551.79 245,932.88 276,827.34 309,235.25 346,104.32 Total gross premiums written, VND, % y-o-y 16.2 17.0 13.0 12.6 11.7 11.9 Gross life premiums written, VNDbn 129,291.00 149,177.44 168,732.78 190,495.29 213,539.78 239,671.21 Gross life premiums written, VND, % y-o-y 21.2 15.4 13.1 12.9 12.1 12.2 Gross non-life premiums written, VNDbn 56,669.00 68,374.35 77,200.10 86,332.05 95,695.46 106,433.11 Gross non-life premiums written, VND, % y-o-y 6.2 20.7 12.9 11.8 10.8 11.2

e/f = Fitch Solutions estimate/forecast Source: National sources, Fitch Solutions

GROSS INSURANCE PREMIUMS WRITTEN (VIETNAM 2026-2031)

Total gross premiums written, VNDbn 384,820.17 427,381.05 474,202.09 525,745.23 582,523.66 645,078.41 Total gross premiums written, VND, % y-o-y 11.2 11.1 11.0 10.9 10.8 10.7 Gross life premiums written, VNDbn 267,047.68 297,096.42 330,104.21 366,400.66 406,346.76 450,329.43 Gross life premiums written, VND, % y-o-y 11.4 11.3 11.1 11.0 10.9 10.8 Gross non-life premiums written, VNDbn 117,772.49 130,284.64 144,097.88 159,344.57 176,176.90 194,748.98 Gross non-life premiums written, VND, % y-o-y 10.7 10.6 10.6 10.6 10.6 10.5

f = Fitch Solutions forecast Source: National sources, Fitch Solutions

Competitive Landscape

The Ministry of Finance reported that as of December 2021, Vietnam's insurance market had 77 participants There were 31 non-lifeinsurers, 19 life insurers, two reinsurance businesses, 24 brokerages and one branch of a foreign non-life insurer

Latest Developments

• In April 2022, Military Insurance Corporation, in collaboration with its parent bank MB, announced that it will sell a 25% stake

to foreign investors in an attempt to boost its financial security and benefit from international expertise The insurer is looking forcredible foreign partners to boost its strategic development and IT advancement

• In March 2022, Saigon-Hanoi Insurance Corporation (BSH) posted stable growth, despite mounting difficulties during the

pandemic The company stated that it will promote digital business models and tech applications to optimise operational

processes and approaches, and to accompany customers on all platforms

• Also in March, the Tan Viet Securities Joint Stock Company (TVSI) completed its acquisition of FWD Group, forming a

complete financial ecosystem TVSI has many strategic partners in the financial industry, including Saigon Commercial Joint

Stock Bank, Bao Long Insurance Corporation and Tan Viet Fund Management Company.

• According to the Vietnam Insurance Review in March 2022, the outlook for Vietnam’s life insurance market is upbeat, driven byimproving digital competencies

• In February 2022, Liberty Insurance Vietnam, in partnership with APRIL International, launched its MyHEALTH global

healthcare insurance to both expatriates and Vietnamese nationals residing in Vietnam through their local agency salesforce

• The Ministry of Finance is reportedly considering divestments of Bảo Minh Insurance Corporation (BMI) and Vietnam

National Reinsurance Corporation (VNR) in Q122 Both companies are currently managed by the State Capital and

Investment Corporation According to the report, the value of state capital at par value at BMI at VNR are VND463.1bn

(USD20.4mn) and VND529bn (USD23.3mn) respectively

Life Insurance

Life insurance dominates Vietnam's insurance sector and is expected to account for 75.3% of the value of total underwriting in

2022 The sector achieved a favourable performance during the pandemic, with the total value of life premiums written increasing

by 21.2% in 2020 and 15.4% in 2021 In 2022, we expect strong growth of 13.1% followed by average annual growth of 12.3% perannum through to 2026

Other than Bảo Việt Life Insurance, which is the country's largest life insurer, the segment is dominated by multinational insurers.

The top five providers account for nearly 80% of the domestic market Partnering with banks to offer bancassurance products hasbeen a profitable strategy for the international firms and will very likely remain so With few Vietnamese companies in the top ranks

of the life market, the global players are likely to dominate the sector for the foreseeable future

Bảo Việt Life Insurance had a 21.7% market share in 2020 It is a former state monopoly and is Vietnam-owned The rest of the top

10 insurers are major global players Second placed Manulife is actively expanding its business, having agreed to a bancassurance deal with VietinBank as well as acquiring the Vietnamese business interests of Aviva at the end of 2020.

Both Prudential and Daiichi have partnerships with local banks to offer their products FWD, which is not among the top 10

insurers, has a 15-year tie-with Vietcombank, one of the country's big four banks.

Scope For Growth Amid Two Dominant Non-Life Lines

Vietnam - Non-Life Premiums Written By Sub-Sector, USDmn (2022f)

f = Fitch Solutions forecast Source: AVI, Fitch Solutions

Non-Life Insurance

Vietnam's non-life segment is about half the size of the life market In 2021, the growth in non-life premiums was a strong 20.7%,representing a marked improvement from just 6.2% in 2020 Following that rebound in 2021, we forecast growth in 2022 to

moderate to 12.9% and looking through to the end of 2026, we forecast an average annual increase in premiums of 11.5%

Regulatory changes being considered in the National Assembly will most likely expand compulsory cover in several non-life segments, lending upside potential to growth beyond 2023

sub-There are 32 insurers in the non-life segment and, unlike the life sector, it is dominated by local Vietnamese companies that haveclose links with state-owned enterprises and handle industrial risks for their parent companies Most of the non-life insurers lackscale, even though some are affiliates of regional and/or global insurers who view their Vietnamese operations in the context of a

TOP 10 LIFE INSURANCE COMPANIES BY GROSS PREMIUMS, USDMN

Bảo Việt 466.8 613.5 781.0 951.6 1,104.2 1,208.1 Prudential 516.1 616.9 724.7 850.9 963.4 1,083.3 Manulife 207.8 279.1 363.3 486.8 654.3 862.1 Daiichi 163.1 241.7 360.0 508.9 566.3 672.8 AIA 161.7 214.5 281.4 375.7 496.4 620.7 Chubb 76.6 94.6 116.0 133.6 152.9 179.3 Generali 35.3 60.7 87.4 101.4 116.0 162.6

MB Ageas 0.0 na 1.1 56.2 99.2 148.5 Hanwha 33.3 48.7 68.6 94.8 123.7 145.4 Aviva 19.6 32.4 43.4 64.5 96.6 132.2

na = not available Source: AVI, Fitch Solutions

larger entity The five largest companies account for 55% of non-life underwriting After the sixth largest insurer (MIC), the market is

very fragmented, with no company holding more than 5% market share

Bao Viet is a Vietnam-owned former state monopoly and has 17.3% of the non-life market It is also the largest provider of life

insurance in the country

Second placed PetroVietnam Insurance (PVI) has a 13.2% market share It is majority owned by PetroVietnam Germany’s

Talanx Group has a holding in PVI via HBI.

PTI (Post and Telecommunication Joint Stock Insurance Corporation) is Vietnam’s third largest non-life insurer with a 10.6% share It

was founded on August 1 1998 and has three major shareholders: South Korea-based Dongbu Insurance (37.32%), Vietnam

Post Corporation (22%) and Vndirect Securities Corporation (22%) PTI offers individual and business customers a range of

over 100 products within four main categories: motor vehicle, personal, property & engineer and marine

Bảo Minh Insurance was founded on November 28 1994 and provides a range of non-life coverage including health and

accident, motor vehicle, property and engineering, liability, marine, aviation and agriculture It has 7.7% of the non-life market

The last of the top five insurers is PJICO with a 6.3% share of the non-life market It is majority owned by Vietnamese industrial

group Petrolimex South Korea’s Samsung Fire and Marine Insurance holds a stake in the company.

Health and personal accident premiums along with motor vehicle insurance are currently the dominant forms of non-life insuranceand are expected to provide the most upside potential during our forecast period

In 2022, we expect motor vehicle insurance to account for about 34% of non-life premiums written, compared with over 40% forhealth/personal accident Rising incomes should support strong growth in vehicle sales for the foreseeable future, resulting in

average annual growth of 9.6% per annum through to 2026

Property insurance is the third largest non-life market at around 13% of non-life premiums written and is an area where amendedregulations might increase growth potential beginning in 2023 Coverage for fire and explosions is compulsory and provides a

springboard for the marketing of non-mandatory comprehensive policies Through to 2026, we forecast gains in this segment toaverage 6.9% per annum

Transport is another significant coverage line of the non-life market, accounting for about 7.4% of non-life premiums written TheCovid-19 pandemic constrained long-haul travel, leading to a 31.5% decline in premiums in this sector in 2020 After reboundingwith growth of 34.8% in 2021, we expect average annual growth of 9.1% per annum through 2026