Vietnam commercial banking report q1 2014

BMI Industry ViewTable: Commercial Banking Sector Indicators Date assets Total Client loans portfolio Bond Other Liabilities and capital Capital deposits Client Other Source: BMI; Centr

Q1 2014 www.businessmonitor.com

VIETNAM

COMMERCIAL BANKING REPORT

INCLUDES 5-YEAR FORECASTS TO 2017

Report Q1 2014

INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: November 2013

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DISCLAIMER

BMI Industry View 7

Table: Commercial Banking Sector Indicators 7

Table: Commercial Banking Sector Key Ratios, February 2013 7

Table: Annual Growth Rate Projections 2012-2017 (%) 7

Table: Ranking Out Of 70 Countries Reviewed In 2013 8

Table: Commercial Banking Sector Indicators, 2010-2017 8

SWOT 9

Commercial Banking 9

Political 10

Economic 11

Business Environment 12

Industry Forecast 13

Industry Risk Reward Ratings 18

Asia Commercial Banking Risk/Reward Ratings 18

Table: Asia Commercial Banking Risk/Reward Ratings 19

Market Overview 20

Asia Commercial Banking Outlook 20

Table: Banks' Bond Portfolios, 2012 20

Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013 20

Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) 21

Table: Comparison of US$ Per Capita Deposits, 2013 22

Economic Analysis 22

Table: Vietnam - Economic Activity 26

Competitive Landscape 27

Market Structure 27

Protagonists 27

Table: Protagonists In Vietnam's Commercial Banking Sector 27

Definition Of The Commercial Banking Universe 27

List Of Banks 28

Table: Financial Institutions In Vietnam 28

Company Profile 31

Agribank 31

Table: Balance Sheet (VNDmn) 32

Table: Balance Sheet (US$mn) 33

Table: Key Ratios (%) 33

Asia Commercial Bank 34

Table: Stock Market Indicators 35

Table: Balance Sheet (VNDmn) 36

Table: Balance Sheet (US$mn) 36

Table: Key Ratios (%) 36

Bank for Foreign Trade of Vietnam (Vietcombank) 37

Table: Stock Market Indicator 39

Table: Balance Sheet (VNDmn) 39

Table: Balance Sheet (US$mn) 39

Table: Key Ratios (%) 40

Eximbank 41

Table: Stock Market Indicators 42

Table: Balance Sheet (VNDmn) 43

Table: Balance Sheet (US$mn) 43

Table: Key Ratios (%) 43

Housing Development Commercial Joint Stock Bank (HDBank) 44

Sacombank 46

Table: Stock Market Indicators 48

Table: Balance Sheet (VNDmn) 48

Table: Balance Sheet (US$mn) 49

Table: Key Ratios (%) 49

VietinBank 50

Table: Stock Market Indicators 52

Table: Balance Sheet (VNDmn) 52

Table: Balance Sheet (US$mn) 52

Table: Key Ratios (%) 53

Regional Overview 54

Asia Overview 54

China 54

India 55

Indonesia 56

Philippines 57

Vietnam 58

Singapore 59

South Korea 60

Global Industry Overview 62

Global Commercial Banking Outlook 62

Demographic Forecast 71

Demographic Outlook 71

Table: Vietnam's Population By Age Group, 1990-2020 ('000) 72

Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 73

Table: Vietnam's Key Population Ratios, 1990-2020 74

Table: Vietnam's Rural And Urban Population, 1990-2020 74

Methodology 75

Industry Forecast Methodology 75

Sector Specific Methodology 76

Risk/Reward Ratings Methodology 77

Sector Specific Methodology 78

Table: Commercial Banking Risk/Reward Rating Indicators 78

Weighting 79

Table: Weighting Of Indicators 79

BMI Industry View

Table: Commercial Banking Sector Indicators

Date assets Total Client loans portfolio Bond Other

Liabilities and capital Capital deposits Client Other

Source: BMI; Central banks; Regulators

Table: Commercial Banking Sector Key Ratios, February 2013

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

Source: BMI; Central banks; Regulators

Table: Annual Growth Rate Projections 2012-2017 (%)

Source: BMI; Central banks; Regulators

Table: Ranking Out Of 70 Countries Reviewed In 2013

Local currency asset growth Local currency loan growth Local currency deposit growth

Source: BMI; Central banks; Regulators

Table: Commercial Banking Sector Indicators, 2010-2017

e/f = estimate/forecast Source: BMI; Central banks; Regulators

Commercial Banking

Vietnam Commercial Banking SWOT

Strengths ■ Untapped market with potential for increased participation of foreign banks

■ Large population with a high savings rate and potential for income growth

■ The Vietnamese government aims to speed up the process of privatising state-ownedbanks, which will help modernise the industry

■ State-owned banks will play a lesser role going forward, and the risks associated withstate-directed lending will decrease over time

Weaknesses ■ Domestic banks continue to lag behind their foreign peers in terms of financial

strength and the technological curve

■ Accounting standards lag far behind international standards and the lack oftransparency entails significant risks for foreign investors

■ Small banks have an overwhelming exposure to real estate and individual loans,resulting in highly skewed and risky loan portfolios

Opportunities ■ The population is still underbanked, with significant potential for adopting cash-free

payment systems and new mobile banking technologies

■ Rising income levels and deepening capital markets could give rise to opportunities inmore sophisticated financial products and growth for the local asset managementindustry

Threats ■ Track record of macroeconomic instability threatens the credibility of the government

and could potentially drive economic policy away from further liberalisation

■ The high level of government debt risks triggering a fiscal crisis, underminingconfidence in the banking sector

SWOT Analysis

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 party system is generally conducive to short-term political stability

one-■ 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 the

ruling 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 has

acted 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 theone-party system

Threats ■ Macroeconomic instabilities continue to weigh on public acceptance of the one-party

system, and street demonstrations to protest economic conditions could develop into

a full-on challenge of undemocractic rule

■ Although strong domestic control will ensure little change to Vietnam's political scene

in the next few years, over the longer term, the one-party-state will probably 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 criticism

of a large Chinese investment into a bauxite mining project in the central highlands,which could potentially cause wide-scale environmental damage

SWOT Analysis

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

GDP growth averaging 7.1% annually between 2000 and 2012

■ The economic boom has lifted many Vietnamese out of poverty, with the officialpoverty rate in the country falling from 58% in 1993 to 20.7% in 2012

Weaknesses ■ Vietnam still suffers from substantial trade and fiscal deficits, leaving the economy

vulnerable to global economic uncertainties The fiscal deficit is dominated bysubstantial spending on social subsidies that could be difficult to withdraw

■ 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 and the upcoming ASEAN AEC in 2015 should give Vietnam

greater access to both foreign markets and capital, while making Vietnameseenterprises 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 theurban population rising from 29% of the population to more than 50% by the early2040s

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 macroeconomicinstability, 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

Business Environment

SWOT Analysis

Strengths ■ Vietnam has a large, skilled and low-cost workforce, which 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 toTransparency International's 2012 Corruption Perceptions Index, Vietnam ranks 123out of 176 countries

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

Industry Forecast

BMI View: Government efforts to liberalise the banking sector by allowing for more foreign competition

are likely to result in intense competition over the coming years We expect foreign banks to gain market share steadily while local small-to-medium sized banks are likely to undergo rapid consolidation over this period We believe that foreign banks that have already established a strong foothold in Vietnam are in strong position to emerge as key dominant players within the banking sector towards the final stages of the restructuring process.

The Vietnamese government's push to liberalise the banking sector is set to present significant challengesfor local banks as competition intensifies over the coming years We believe that foreign banks, whichtypically are more technologically advanced and are financially stronger than local banks will gain marketshare steadily over the next five years Meanwhile, we expect to see rapid consolidation among local small-to-medium sized banks over this period This is in line with the State Bank of Vietnam (SBV)'s

restructuring plan (introduced in 2011) to consolidate the banking sector and reduce the number of smalland financially-weak credit institutions that are struggling to compete effectively

First-Mover Advantage

Vietnam - Number Of Banks By Category

Source: BMI, State Bank Of Vietnam

Rising Number Of Foreign Banks

According to figures published by the SBV, there were a total of 39 local banks at the end of 2012, five of

which are state-owned and the remaining 34 being joint-stock banks (see chart) Over the years, we have

witnessed a steady increase in the number of foreign bank branches being established in Vietnam, and weexpect this trend to accelerate Although the range of services that foreign banks are currently providing arelimited (mainly the provision of banking services and financial solutions for multi-national companies), webelieve that further regulatory reforms will eventually open up new markets for foreign banks Indeed, theVietnamese government is considering plans to ramp up efforts to liberalise the retail market by allowingforeign banks to provide more sophisticated financial products and banking services over the coming years

Ample Room For Improvement

Vietnam - Components Of Financial Market Development Index (2012-2013)

Source: BMI, World Economic Forum

Rapid Consolidation Among Local Banks

We highlight that the retail market remains largely untapped and we believe that foreign banks with agenuine competitive advantage over the smaller local banks are likely to be successful at penetrating thismarket and taking a sizeable market share within a short period of time This is likely to force some of thesmall ailing banks to exit the market altogether or to be merged with a larger bank, which is in line with ourview that the banking sector will undergo rapid consolidation over the coming years The Vietnamesegovernment is also supportive of a speedy restructuring of the banking sector by allowing for more foreigncompetition, and has announced plans to reduce the total number of local banks to 15-17 by 2015

Although we expect this structural transformation to result in an increasingly volatile business environmentand lead to intense competition, we view it as a necessary evolutionary process that will ultimately shapeVietnam's banking sector into a more robust and highly competitive industry relative to the region

Moreover, given that local banks that are laden with bad-debt remain reluctant to extent loans to businesses,

allowing foreign banks with stronger balance sheets to enter the market is a logical solution to complementgovernment efforts to revive credit growth and the economy.

Positioning For The Recovery

Vietnam - Outstanding Credit, VNDbn (LHS) & % chg y-o-y (RHS)

Source: BMI, State Bank of Vietnam

The Emerging Winners

Over the years, establishing joint ventures with local banks have been the preferred strategy for foreignbanks seeking to penetrate the Vietnamese market However, given that many local banks that have a well-established market share have already entered into some form of a partnership agreement or joint venturewith a foreign bank, new foreign entrants are likely to face intense competition and increasingly

overwhelming barriers to entry Indeed, we believe that foreign banks that have undertaken an enormousamount of risk by expanding aggressively into Vietnam (despite the turbulent economic conditions in recentyears) will be heavily rewarded as a result of their first mover advantage As of the end of 2012, there were

only five fully foreign-owned banks - HSBC, Standard Chartered Bank, Shinhan Bank, ANZ and

Citibank Thus, despite the threat of more foreign competition, we believe that the abovementioned banks

are likely to emerge as the key dominant players within the banking sector towards the final stages of therestructuring process.

Industry Risk Reward Ratings

Asia Commercial Banking Risk/Reward Ratings

Commercial Banking Risk/Reward Rating Methodology

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

analysed by BMI We do this through our Commercial Banking Industry Risk/Reward Rating (IRR), a

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

across all countries Like all of BMI's Industry Risk/Reward Ratings, its takes into account the Rewards on

offer within the banking sector in a given country, but also the Risks to investors being able to realise thoseopportunities The overall Rating is weighted 70% towards Rewards and 30% towards Risks

Within the Rewards category, we look at factors that are specific to the banking industry (accounting for60% of the score within this category), and elements that relate to that country in general (accounting for40% of the weighting) These include, but are not limited to, total assets, asset and loan growth, GDP andtaxation Likewise on the Risks side, we look at industry-specific Risks (weighted 40% of the Risks total)and country-specific Risks (weighted 60%) These include, but are not limited to, the regulatory frameworkand environment, the competitive environment, financial risk, legal risk and policy continuity

In general three aspects need to be borne in mind when interpreting the IRRs The first is that the IndustryRewards element is the most heavily weighted of the four elements, accounting for 42% (60% of 70%) ofthe overall Rating Second, if the Industry Rewards score is significantly higher than the Country Rewardsscore, within the Rewards category, 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, ifthe industry score is significantly lower, 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 category, the industry-specific elements (i.e how regulations affect the development of thesector, how regulations affect competition within it, and Moody's Investor Services' ratings for local

currency deposits) can be markedly different from BMI's long-term Country Risk rating for a given market.

Table: Asia Commercial Banking Risk/Reward Ratings

Limits of Potential Returns Risks to Potential Returns Overall Market Structure Country Structure Market Risks Country Risks Rating Ranking

Market Overview

Asia Commercial Banking Outlook

Table: Banks' Bond Portfolios, 2012

Bond Portfolio, US$bn Bond as % total assets Year-on-year growth %

Source: Central banks, regulators, BMI *Only 2011 data available

Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013

Loan/Deposit

ratio % Rank Trend Loan/Asset ratio % Rank Trend Loan/GDP ratio % Rank Trend

Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2013 - Continued

Loan/Deposit

ratio % Rank Trend Loan/Asset ratio % Rank Trend Loan/GDP ratio % Rank Trend

Source: Central banks, regulators, BMI

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

Comparison of Total Assets & Client Loans & Client Deposits (US$bn) - Continued

Source: Central banks, regulators, BMI

Table: Comparison of US$ Per Capita Deposits, 2013

GDP Per Capita Client Deposits, per capita Deposits, per capita Rich 20% Client Deposits, per capita Poor 80% Client

BMI View: Although we expect the Vietnamese economy to record yet another quarter of sub-par growth in

Q413, we are beginning to see potential for upside surprises to domestic demand over the coming quarters Recent data on foreign direct investment inflows, remittances, passenger car sales, and property market launches, suggests to us that domestic demand is on a nascent recovery, setting the stage for stronger 2014 growth

The general consensus is expecting the Vietnamese economy to suffer yet another quarter of sub-par growthmainly due to subdued external demand and the lack of progress on banking sector reforms This is closely

in line with our view that real GDP growth will come in at just 5.3% in 2013, a slight improvement from5.2% in 2012 Looking ahead to 2014, however, evidence of improving macroeconomic fundamentals inVietnam (especially with regards to the outlook for domestic demand) suggests to us the balance of risks toour growth forecast of 6.0% is gradually tilting towards the upside

Robust Remittances Could Boost Domestic Demand

Vietnam - Unrequited Transfers, US$mn

Source: BMI, Asian Development Bank

Remittances: According to estimates published by the World Bank, the Vietnamese economy is on track to

record a bumper year for remittance inflows The country is expected to receive US$10.6bn in remittancesfrom Vietnamese citizens working abroad, a robust 6.5% increase from 2012 Crucially, we believe thatremittance inflows will remain strong over the coming quarters as macroeconomic conditions in Vietnamcontinue to improve Growing confidence in the stability of the Vietnamese dong should also help toencourage Vietnamese workers abroad, to a certain extent, to remit a larger share of their earnings backhome We believe that this will help to boost domestic demand while providing support for the currency

Foreign Direct Investment: Total foreign direct investment (FDI) inflows are also set to surpass the

government's full-year target of US$13bn, after data released by the Ministry of Planning and Investmentshowed that inflows surged by 19.5% year-on-year (y-o-y) growth over the first eight months of the year.The strong reading chimes with our view that the country's solid long-term growth story should continue toattract foreign investors over the coming years

Automobile Sales: We are witnessing signs of a robust recovery in automobile sales, a sign that pent-up

domestic demand is beginning to rebound According to the Vietnam Automobile Manufacturers

Association (VAMA), September vehicle sales of its members surged by 20.6% year-on-year (y-o-y),

exceeding our already bullish forecast of 12.5% for the year (see 'Bullish On CV Sales In The Medium To

Long Term', October 14 2013).

Developers Eyeing Property Market Rebound

Vietnam - Real Estate Index

Source: BMI, Blooomberg

Property Market: Meanwhile, we see increasing evidence that the Vietnamese property market may have

bottomed out (see 'Early Signs Of A Recovery, But No Property Market Boom In Sight', August 14 2013).

According to a quarterly report published by real estate agency CBRE Vietnam, the number of new

launches surged by 12% y-o-y in Q313 Anecdotal evidence from the local media suggests to us thatdemand for real estate following the sharp decline in prices since 2011 may be recovering To be sure, wemaintain our view that we are unlikely to see a property market boom given the healthy pipeline of newunits that will come online in 2014 Nonetheless, we acknowledge that consumer confidence is recoveringand we could potentially see some upside surprises to domestic demand in 2014.

Expenditure Breakdown

Private Consumption: We expect private consumption to grow at a relatively resilient pace of 5.0% in

2014 However, we note that the risk of further bankruptcies among SMEs could potentially lead to

widespread job losses, especially in export-driven sectors Uncertainties over the outlook for employmentcould, in turn, prompt households to cut back on spending

Gross Fixed Capital Formation: We foresee a pickup in private sector investment growth in 2014, partly

led by increased foreign direct investment inflows We believe lending rates will gradually ease over thecoming months as the effect of recent rate cuts by the SBV begins to kick in We are also seeing evidencethat credit conditions are improving Accordingly, we expect gross fixed capital formation growth toaccelerate slightly from 4.1% in 2013 to 4.8% in 2014

Public Spending: We expect total public spending to remain relatively resilient in 2014, expanding at a

respectable pace of 6.1% However, there is limited room for the government to increase spending furtherowing to concerns over the need to finance a potential bailout of ailing state-owned commercial banks

Net Exports: Net exports remain the biggest downside risk to our outlook for the Vietnamese economy,

although we expect external demand to pick up in 2014 Vietnam's trade account has fallen back intodeficits in recent months, but we see the case for a substantial pickup in external demand on the back of arebound in regional growth over the coming quarters Accordingly, we still expect exports to expand at amoderate pace of 5.9% in 2014

Table: Vietnam - Economic Activity

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 in

1951 From 1975 to May 1990, the SBV was the banking system of Vietnam The government then established the tier' system that is still in place The financial liberalisation at the beginning of the 1990s lead to the establishment of four large 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.

'two-The SBV implements the state management of currency trading, credit, payment, foreign exchange and banking; is the only bank authorised to issues bank notes; and acts as the bank to the banks and the state The central bank organises the 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, after

Vietnam's accession to association The functions of the VNBA are: to act as a link between the banks and the

authorities, 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 jointventure 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 Theother 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:

Maritime CJSB (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-venturebanks have more than five branches

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 Bank

Bac 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 Bank

My 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 Bank

Orient 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

Financial Institutions In Vietnam - Continued

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

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)

JPMorgan Chase (US)

Financial Institutions In Vietnam - Continued

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

Company Profile

Agribank

SWOT Analysis

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

■ Massive branch network, especially in rural Vietnam

■ Bad debt ratio reduced to around 4% in 2012

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

Opportunities ■ Attractive partner for any other financial institutions looking to cross-sell products to

the mass market in Vietnam

■ Expanding footprint into Cambodia

■ Possible listing in the long term

■ Undergoing three-year restructuring programme with the Vietnamese government

Threats ■ Perceived exposure to the downturn in global trade

■ Credit rationing by state will limit growth

■ Series of embezzlement scandals have damaged the bank's reputation

Company Overview Established in 1988, the Vietnam Bank for Agriculture and Rural Development (Agribank)

is a leading commercial bank and plays a decisive role in capital investment indeveloping the agricultural and rural economy, as well as other fields of the Vietnameseeconomy Agribank has over 35,000 staff and about 2,300 branches and transactionoffices nationwide It is currently the country's largest bank by assets and extended itsreach 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 companyPetrovietnam to provide financing at lower interest rates for the company to developVietnamese oil resources This could help Agribank establish more long-termrelationships with major businesses

Highlights

Chairman Nguyen Ngoc Bao said in early-February 2012 that the bank had agreed anextended restructuring plan with the Vietnamese government to be implemented over aperiod 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 andagricultural communities Central bank governor Nguyen Van Binh stipulated thatbetween 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 thatthe bank's capital adequacy ratio (CAR) rose from 6.4% in 2010 to 8% in 2011 andestimated that the Agribank's CAR could reach 9% in 2012 with the aid of a capitalinjection from the State Bank of Vietnam to boost its charter capital by VND30trn.Meanwhile in December 2012, the bank announced that its bad debt ratio had reduced

to around 4% from 6.1% at the beginning of the year Bao has suggested that this ratiocould drop to as little as 3% between 2015 and 2020, depending on the bank achievingstrong credit growth

In January 2013, Vietnamese federal police said they had arrested former generaldirector of the state-owned Agribank, Pham Thanh Tan, for "irresponsibility causingserious consequences." The news comes on the back of a series discoveries ofmassive embezzlements by senior employees, mostly to finance gambling habits InNovember 2012, the Ho Chi Minh City police arrested three senior executives forstealing US$960,000 from the bank, while city prosecutors charged four others in a US

$5.33mn scam Another executive was arrested in the city in October for allegedlystealing US$1mn In addition, in July 2012 a court in Binh Dinh Province handed a lifesentence to a teller for stealing nearly US$1mn

Company Data ■ Website: www.agribank.com.vn

■ Status: State-owned commercial bank

Table: Balance Sheet (VNDmn)

Source: Vietnam bank for Agriculture and Rural Development (Agribank), Bloomberg

Table: Balance Sheet (US$mn)

Source: Vietnam bank for Agriculture and Rural Development (Agribank), Bloomberg

Table: Key Ratios (%)

Source: Vietnam bank for Agriculture and Rural Development (Agribank), Bloomberg

Asia Commercial Bank

SWOT Analysis

Strengths ■ Asset growth

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

■ Pre-tax profits rose during 2011 full-year

Weaknesses ■ Lack of transparency

■ Slowing credit growth

Opportunities ■ Stronger expansion to compete with state lenders

■ Customer deposits and loans both achieved higher growth rates than industryaverage in 2011

Threats ■ Tighter monetary policy to tame economic growth

■ Scandals involving bbank executives have damaged the bank's reputation

■ 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 hasambitions to enter Vietnam's 'big four' banking circle in the next few years, which wouldmake it the first non-state lender to do so The bank said in late 2011 that it aims to rivalthe country's dominant state lenders by 2015, with assets jumping three-fold to

VND900trn (US$42.9bn) from VND255trn

The resignation of a chairman and two executives at ACB in November 2012 fuelledfears that the beleaguered bank's crisis may indicate wider trouble in the country'sbanking system Chairman Tran Xuan Gia and two deputies resigned on the back ofcompany deposits being placed with another bank and approved by them The newsalso added to mounting fears over the health of Vietnam's banking industry, firstsparked by the arrest of one of ACB's founders

Police in Vietnam have confirmed that they are pushing ahead with charges broughtagainst multimillionaire banking tycoon Nguyen Duc Kien, one of the founders of ACB

Kien was arrested on August 20 2012, charged with 'illegal business activities' and hasbeen now accused of 'deliberate wrongdoing causing serious consequences' and fraud.The bank said in January 2011 that it was to build a new data centre in Ho Chi MinhCity The centre carried a cost of over US$2mn and is to help the bank better manageinformation and customer records IBM is helping ACB create an IT plan and will play arole in all facets of the new centre, along with Vietnamese-firm AICT.

Corporate

Highlights

Consolidated profits before tax of ACB reached approximately VND4,203bn in 2011,higher than the bank's target, and an increase of 34% y-o-y from the pre-tax profitfigure at the end of 2010 The size of the bank increased rapidly and stably in the year

2011 As of December 31 2011, total assets reached VND281,019bn, growing 37%

y-o-y in comparison with 2010

Of the entire increase in total assets, up to 63% was generated from the stable source

of customer deposits The amount of customer deposits at ACB reachedVND185,637bn in 2011, up by 35% y-o-y at a time when average growth in theVietnamese banking industry was 14.4% ACB's deposit market share was estimated to

be at 6.5%, an increase of nearly 1% y-o-y Meanwhile, personal and business loans ofthe bank grew 18% y-o-y in 2011, roughly 1.5 times the industry average As of

December 31 2011, outstanding loans reached VND102,809bn, increasing ACB'slending market share by 0.2% to 4% In short, ACB's customer deposits and loans bothachieved higher growth rates than the industry average

Table: Stock Market Indicators

Market Capitalisation VND 41,493,748 17,637,414 29,067,754 24,473,174 20,348,014 15,471,992 14,731,935

Share Price US$, % change

Source: Asia Commercial Bank (ABC), Bloomberg

Table: Balance Sheet (VNDmn)

Source: Asia Commercial Bank (ABC), Bloomberg

Table: Balance Sheet (US$mn)

Source: Asia Commercial Bank (ABC), Bloomberg

Table: Key Ratios (%)

Source: Asia Commercial Bank (ABC), Bloomberg

Bank for Foreign Trade of Vietnam (Vietcombank)

SWOT Analysis

Strengths ■ Minority owner Mizuho has boosted bank's profile

■ Largest correspondent network among Vietnamese banks

■ Clear competence in external trade

■ Strong market position

■ Sharp increase in total assets during 2011

Weaknesses ■ Profit after tax declined during 2011

■ Lack of transparency

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

■ 15% stake acquisition by Japan's Mizuho Corporate Bank

■ Strong increase in loans to customers during 2011

■ Improving capital position

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 Vietnamand was the first bank in the country to have a centralised capital managementstructure It describes itself as an 'interbank forex payment centre for over 100domestic banks and foreign banks' branches operating in Vietnam', and was the firstcommercial bank in the country to deal in foreign currencies The bank's employeesrose from 11,415 in 2010 to 12,565 as of the end of 2011

Vietcombank's operations have been supported by the largest correspondent networkamong Vietnamese banks with more than 1,300 correspondent financial institutions inover 90 countries and territories

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 anumber of other financial institutions, including Vietnam Export Import CJSB, SaigonIndustrial and Commercial CJSB, Gia Dinh CJSB, Military CJSB, InternationalCommercial CJSB, Oriental CJSB, Chohungvina Bank, Petroleum Insurance Companyand Golden Insurance Company

Japan's Mizuho Corporate Bank acquired a 15% stake in Vietcombank for a total ofVND11.8trn (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 of 347.61mn shares

Corporate

Highlights

Consolidated profit before tax reached VND5,697bn in 2011, up 2.3% y-o-y compared

to the VND5,569bn recorded in 2010 Profit after tax was VND4,217bn, down marginallyfrom VND4,303bn Total assets, meanwhile, stood at VND366,722bn as of December

31 2011, representing a 19.2% y-o-y increase from VND307,621bn in 2010 This alsoexceeded the set target of a 15% increase set at the previous shareholders' GeneralMeeting

Loans to customers came in at VND209,418bn as of the end of 2011, up 18.4% y-o-yfrom VND176,814bn as of December 31 2010 The NPL/Gross loans ratio of 2011 was2.03% (2.83)

Standard & Poor's, encouraged by the acquisition, argued that Mizuho CorporateBank's involvement strengthened Vietcombank's capital position The agency upgradedits outlook on the bank's long-term rating to 'stable' from 'negative' in January 2012

Company Address Vietcombank (Bank For Foreign Trade of Vietnam)

198 Tran Quang KhaiHanoi

Vietnam

Description of Business: Leading commercial bank specialising project finance, trade

finance, treasury, financial market and international banking services

Phone: +84 (4) 825 1322 Fax: +84 (4) 826 9067 Email: webmaster@vietcombank.com.vn

http://www.vietcombank.com.vn

Table: Stock Market Indicator

Source: Bank of Foreign Trade of Vietnam (Vietcombank), Bloomberg

Table: Balance Sheet (VNDmn)

Source: Bank of Foreign Trade of Vietnam (Vietcombank), Bloomberg

Table: Balance Sheet (US$mn)

Source: Bank of Foreign Trade of Vietnam (Vietcombank), Bloomberg

Table: Key Ratios (%)

Source: Bank of Foreign Trade of Vietnam (Vietcombank), Bloomberg