Vietnam commercial banking report q1 2015

BMI Industry ViewTable: Commercial Banking Sector Indicators Source: BMI; Central banks; Regulators Table: Commercial Banking Sector Key Ratios, October 2013 Source: BMI; Central bank

Q1 2015 www.businessmonitor.com

VIETNAM

COMMERCIAL BANKING REPORT

INCLUDES 5-YEAR FORECASTS TO 2018

Report Q1 2015

INCLUDES 5-YEAR FORECASTS TO 2018

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: November 2014

Business Monitor International

© 2014 Business Monitor International

All rights reserved

All information contained in this publication is

copyrighted in the name of Business Monitor

International, and as such no part of this

publication may be reproduced, repackaged,redistributed, resold in whole or in any part, or used

in any form or by any means graphic, electronic ormechanical, including photocopying, recording,taping, or by information storage or retrieval, or byany other means, without the express written consent

of the publisher

DISCLAIMER

BMI Industry View 7

Table: Commercial Banking Sector Indicators 7

Table: Commercial Banking Sector Key Ratios, October 2013 7

Table: Annual Growth Rate Projections 2013-2018 (%) 7

Table: Ranking Out Of 73 Countries Reviewed In 2014 8

Table: Commercial Banking Sector Indicators, 2011-2018 8

SWOT 9

Commercial Banking 9

Political 10

Economic 11

Business Environment 13

Industry Forecast 14

Industry Risk Reward Ratings 17

Asia Commercial Banking Risk/Reward Index 17

Table: Asia Commercial Banking Risk/Reward Index 18

Market Overview 19

Asia Commercial Banking Outlook 19

Table: Banks' Bond Portfolios, 2013 19

Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2014 19

Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn) 20

Table: Comparison of USD Per Capita Deposits, 2014 21

Economic Analysis 22

Table: Economic Activity (Vietnam 2009-2018) 28

Competitive Landscape 29

Market Structure 29

Protagonists 29

Table: Protagonists In Vietnam's Commercial Banking Sector 29

Definition Of The Commercial Banking Universe 29

List Of Banks 30

Table: Financial Institutions In Vietnam 30

Company Profile 32

Agribank 32

Table: Balance Sheet (VNDmn) 34

Table: Balance Sheet (USDmn) 34

Table: Key Ratios (%) 35

Bank for Foreign Trade of Vietnam (Vietcombank) 36

Table: Stock Market Indicator 38

Table: Balance Sheet (VNDmn) 38

Table: Balance Sheet (USDmn) 39

Table: Key Ratios (%) 39

Eximbank 40

Table: Stock Market Indicators 42

Table: Balance Sheet (VNDmn) 42

Table: Balance Sheet (USDmn) 43

Table: Key Ratios (%) 43

Sacombank 44

Table: Stock Market Indicators 46

Table: Balance Sheet (VNDmn) 46

Table: Balance Sheet (USDmn) 46

Table: Key Ratios (%) 47

VietinBank 48

Table: Stock Market Indicators 50

Table: Balance Sheet (VNDmn) 50

Table: Balance Sheet (USDmn) 51

Table: Key Ratios (%) 51

Regional Overview 52

Asia Overview 52

Political Concerns To Weigh? 57

Virtuous Cycle For Economic Growth 58

Global Industry Overview 59

Global Commercial Banking Outlook 59

Financial Sector Reform A Key Factor In Loan Growth 64

Demographic Forecast 68

Table: Population Headline Indicators (Vietnam 1990-2025) 69

Table: Key Population Ratios (Vietnam 1990-2025) 69

Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 70

Table: Population By Age Group (Vietnam 1990-2025) 70

Table: Population By Age Group % (Vietnam 1990-2025) 71

Methodology 73

Industry Forecast Methodology 73

Sector-Specific Methodology 74

Risk/Reward Index Methodology 75

Table: Commercial Banking Risk/Reward Index Indicators 76

Table: Weighting Of Indicators 77

BMI Industry View

Table: Commercial Banking Sector Indicators

Source: BMI; Central banks; Regulators

Table: Commercial Banking Sector Key Ratios, October 2013

Source: BMI; Central banks; Regulators

Table: Annual Growth Rate Projections 2013-2018 (%)

Source: BMI; Central banks; Regulators

Table: Ranking Out Of 73 Countries Reviewed In 2014

Source: BMI; Central banks; Regulators

Table: Commercial Banking Sector Indicators, 2011-2018

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 behind international standards and the lack of transparencyentails 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 country remains one of the most underbanked in the region, with significant

potential for adopting cash-free payment systems and new mobile bankingtechnologies

■ 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

■ Vietnam has been strengthening its trade and aid ties in a bid to increase exports anddiversify its export sector

Weaknesses ■ Vietnam still suffers from fiscal deficits, leaving the economy vulnerable to global

economic uncertainties The fiscal deficit is dominated by substantial spending onsocial 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 ■ Although inflation has subsided in 2014, complacency by the State Bank of Vietnam

on this front could result in a decline in investment

■ We see potential for political tensions with China could have a negative impact on theeconomy

SWOT Analysis - Continued

■ Any prolonged macroeconomic instability could prompt the authorities to put reforms

on hold 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 a corrupt country According to Transparency International's 2013Corruption Perceptions Index, Vietnam ranks 116 out 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

■ The dispute with China in Q214 in the South China Sea suggests the potential forrenewed political tensions going forward

Industry Forecast

BMI View: Vietnam's banking sector will strengthen over the coming years as the government continues

with its reform efforts That said, progress on this front will be slow, as the government faces headwinds while revamping the banking sector.

Ongoing banking reform efforts by the government should help to strengthen Vietnamese banks over thecoming years and underpin the country's steady economic growth recovery We forecast Vietnam's totalbanking assets as a share of GDP to expand at an annual average growth rate of 11.6% for the period from

2015 to 2019 Continued improvement in the sector would in turn allow local lenders to tap on the

underbanked local market for growth According to the latest available data from the World Bank, the

banking penetration rate in Vietnam stood at just 21.4% in 2011, among the lowest in the region The low rate reflects the lack of access to mainstream finance for the Vietnamese people, and we believe the ability

to reach out to them will bode well for banks' earnings outlook over the long term

Underbanked Market Presents Growth OpportunitiesSoutheast Asia - Respondents (Age 15+) With An Account At A Formal Financial Institution (2011), %

Source: World Bank, BMI

Positive Steps Taken To Address Weakness In Banks

The Vietnamese government has launched a slew of measures aimed at resolving the high level of bad debt

in the banking sector We believe this is a step in the right direction to provide banks with room for

restructuring and lower the risk of financial instability in the country In July 2013, the government

established an entity, known as Vietnam Asset Management Company (VAMC), to take sour loans offbanks' balance sheets through issuing bonds to local lenders in return for their troubled assets The

government also aims to accelerate state-owned enterprise (SOE) reform by targeting the privatisation of

432 state enterprises by end-2015, in the hope of reducing operational inefficiencies in these firms and theirneed to borrow to finance their deficits SOEs currently account for more than half the sector's bad debt

Easing Of Foreign Ownership Rules A Potential Game Changer

We also see a potential catalyst that can help to strengthen the banking sector There are currently plans toincrease the cap on foreign ownership of Vietnam's total banking assets from the current 30% to 49% Webelieve an easing of foreign ownership rules would attract more foreign direct investment (FDI) inflows tothe sector Given that pervasive weakness in bank asset quality has weighed on the sector's capital base,more FDI inflows would help to recapitalise local banks and strengthen their financial position This wouldgreatly complement efforts by the government to clean up bad debt from the banking sector We are slightlyoptimistic that a relaxation of the foreign ownership ceiling for banks will take place over the coming few

years, and are according a 55.0% probability for such a move by the Vietnamese government Our outlook

owes largely to the willingness of the government to increase the foreign ownership ceilings that strategic and strategic investors can invest in the banking sector In February 2014, the cap was raised from

non-10% to 15% for non-strategic investors, and for strategic investors, it was raised from 15% to 20%

Improving Financial Depth

Efforts by the government to improve financial depth in the country have also begun to bear fruit The value

of deposits by residents and businesses rose by 14.5% year-on-year (y-o-y) and 3.7% y-o-y, respectively, inAugust In turn, total deposits grew by 8.5% y-o-y We expect ongoing banking reform to result in moreVietnamese people gaining access to financial services over the coming years, which would bolster banks'bottom lines

Headwinds To Reform Efforts

While ongoing reform will help to strengthen the banking sector, this will likely be a gradual process Owing largely to the desire of the government to retain a controlling stake in key companies, SOE reform

will be slow A case in point was Vietnam Airlines' Initial Public Offering (IPO) which ended on November

14, 2014 The state-owned carrier offered only 49mn shares for sale in an auction, representing roughly a3.5% stake Essentially, the government still retains as much as 96.5% of shares Foreign investors wereunmoved by the share sale, as buying these shares will not allow them to exert their influence on the futuredirection of the company With the government retaining control of these key enterprises, it partiallyundermines the credibility of reform efforts

Additionally, the VAMC has not been able to accelerate its purchase of bad debt from local banks, as itfaces difficulty selling the debt thereafter The asset management company has reportedly managed tooffload less than 5% of the VND97trn bad debt it has purchased We believe a key reason for the poor salesrecord (or rather the lack of foreign buying interest for these assets) is the unattractive prices that these badloans are selling at The VAMC has been selling these troubled assets at unattractive prices to avoid

incurring losses, since it has bought them at inflated valuations in the first place Knowing that the

government wants to buy these troubled assets, local banks have seized the opportunity to price propertiesbacking these bad loans above market rates This has in turn pushed up the value of troubled loans

Industry Risk Reward Ratings

Asia Commercial Banking Risk/Reward Index

Commercial Banking Risk/Reward Index 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 Index (RRI), 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 Indices, 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 index 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 RRIs The first is that the IndustryRewards element is the most heavily weighted of the four elements, accounting for 42% (60% of 70%) ofthe overall Index 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 Index for a given market.

Table: Asia Commercial Banking Risk/Reward Index

Market Overview

Asia Commercial Banking Outlook

Table: Banks' Bond Portfolios, 2013

Source: Central banks, regulators, BMI **Only 2011 data available * Only 2012 data available.

Table: Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2014

Loan/Deposit

Comparison of Loan/Deposit & Loan/Asset & Loan/GDP ratios, 2014 - Continued

Loan/Deposit

Source: Central banks, regulators, BMI

Table: Comparison of Total Assets & Client Loans & Client Deposits (USDbn)

Comparison of Total Assets & Client Loans & Client Deposits (USDbn) - Continued

Source: Central banks, regulators, BMI

Table: Comparison of USD Per Capita Deposits, 2014

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

Economic Analysis

BMI View: We have downgraded Vietnam's growth forecast from 5.9% to 5.7% in 2014 on the back of

weaker-than-expected H114 growth numbers, combined with the risk of an economic backlash from China That said, we have maintained our forecast for growth to come in at 6.4% in 2015, and we continue to believe that the economy will be driven by growth supportive government policies, as well as a strong outlook for foreign investment and exports.

Real GDP growth came in at 5.3% year-on-year (y-o-y) in Q214, according to the General Statistics Office(GSO), bringing growth for the first half of the year to 5.2% y-o-y This marks an acceleration whencompared to the 4.9% registered in the first half of 2013, and chimes with our view that the economy willcontinue to accelerate into 2014 and 2015 Growth was predominantly driven by strength in the servicessector as well as the industry and construction sectors, which contributed 2.6 and 2.1 percentage pointsrespectively to growth Although we see strong growth ahead, we have revised down our growth forecastfor 2014 from 5.9% to 5.7% on the back of a slightly weaker than expected first half of the year, combined

with the potential for an economic backlash from the ongoing political dispute with China (see 'Political

Tensions Pose Downside Risks To Growth', June 10) That said, we have kept our 2015 real GDP growth

forecast unchanged at 6.4%

Slight Downgrade, But Powering AlongVietnam - Real GDP Growth, % chg y-o-y

Source: GSO, SBV

The Vietnamese government will continue to promote progrowth policies, by running a fiscal deficit albeit a declining one - maintaining a dovish stance with regard to monetary and exchange rate policy,restructuring many state owned enterprises (SOEs), promoting foreign direct investment and exports as well

-as attracting developmental-type aid For the first six months of the year, we estimate that the governmentposted a fiscal deficit of approximately 4.3% of GDP, with spending rising by 9.7% y-o-y At the sametime, the State Bank of Vietnam (SBV) has maintained a dovish bias since the beginning of the year, cuttingits refinancing rate by 50 basis points in March to 6.5% in an effort to spur lending Indeed, the SBVrecently also devalued the Vietnamese dong by 1% in June, in what we believe is a pre-emptive move toboost exports in the event of a slowdown driven by the ongoing political spat with China Given lowinflationary pressures, we would not be surprised to see either another cut to the refinancing rate, or anotheradjustment to the currency before year-end in the event of a slowdown in growth, although it is not our coreview Combined, both accommodative monetary and fiscal policy will continue to support growth over thecoming quarters

Services Powering AheadVietnam - Real GDP Growth By Category, % chg y-o-y & Share of GDP, %

Source: GSO

Manufacturing And Retailing To Help Support Growth

The industrial sector, which accounts for approximately 33% of the economy and includes manufacturing,mining, water management, and power generation accelerated by 6.1% y-o-y in June and 5.8% for the firsthalf of the year At 21% of GDP, manufacturing accounts for the lion's share, accelerating by a robust 7.8%y-o-y in H114, driven by textiles (21% y-o-y), leather goods (19.2%), and motored vehicles (22.9%), atrend we expect will remain in play given the continued strength in the country's domestic demand and

export markets Moreover, as we highlighted in previous articles (see Manufacturing To Remain Strong,

June 20), the manufacturing sector will continue to see strong growth, particularly as it moves up the valuechain into higher value sectors such as Information and Communications Technology (ICT) The retailsector expanded by 12.2% y-o-y in H114, with accommodation and catering services growing by 13.1% andtravel services by a whopping 20.5% over the period

Manufacturing To Remain StrongVietnam - Industrial Production, % chg y-o-y, 6mma

Source: Bloomberg

Exports Continue To Strengthen

Vietnam's export sector continues to be a driver of growth for the country, and we forecast this trend toremain in play over the coming months Exports for the first six months of the year expanded by a robust14.9% y-o-y, and saw the accumulated trade surplus rise to USD1.3bn in H114 Exports were primarilydriven by strong growth in textiles, telephones and footwear of 18.2%, 17.1% and 21.9%, respectively,which together account for approximately 35% of the total Moreover, we expect exports to continuedriving growth going forward given that the Vietnamese government has been making a concerted push tobuild diplomatic and trade ties with many countries and is negotiating several free trade agreements One ofthe most important ones is the Trans-Pacific Partnership (TPP), which could be signed by as early as 2015

Diversified & Picking UpVietnam - Exports By Category, % chg y-o-y & Share of Total

Source: GSO

Investment and Infrastructure Development To Drive Growth

The investment picture also remains very bullish in Vietnam as the country has been able to attract bothprivate investment as well as foreign aid, which will help underpin both short-and long-term growth Therewere a total of 656 investments in H114 with a total value of USD4.9bn, and although this figure marks a16.4% decline from last year, we do not believe that it highlights a lack of opportunities going forward Thelargest source of investment this year has been from South Korea at USD1.1bn, followed by Hong Kong(USD867mn), Singapore (USD559mn), Japan (USD438mn), and Indonesia (USD352mn).The Vietnamesegovernment continues to restructure many of their SOEs, and several companies, such as

Samsung, continue to be attracted to the country's lower labour costs, which suggests that foreign

investment will continue to flow to Vietnam Indeed, in July, Samsung received approval from the

government to build a USD1.0bn plant From a developmental perspective, the ASEAN Infrastructure Fund(AIF) approved a USD100mn loan for the power sector in May, and could provide another USD200mn inloans Moreover, the World Bank in June approved two credits worth USD500mn to support economicmanagement, reforms and infrastructure development in the northern region of the country

Investment To Remain A Driver of GrowthVietnam - Foreign Direct Investment By Source, USDmn

Source: GSO

Risks To Outlook: China, From Friend To Foe

Although we have already downgraded our growth forecast slightly for this year, we continue to monitorrisks from trade policy with China Although we do not believe that the political tensions between Hanoiand Beijing will result in military conflict, there are non-negligible risks of an economic backlash Indeed,the Chinese government has temporarily stopped Chinese state-owned companies from bidding for newcontracts in Vietnam, which could see investment flows decline substantially over the coming quarters,posing downside risks to Vietnam's growth outlook China accounted for 21.3% of foreign investment inVietnam in 2013, approximately 14.5% of Vietnam's exports, and about 27% of all visitors this year Assuch, a sustained economic backlash could have a more severe impact on Vietnam's growth outlook

Table: Economic Activity (Vietnam 2009-2018)

2009 2010 2011 2012 2013e 2014f 2015f 2016f 2017f 2018f

National Sources/BMI, e = Estimate, f = BMI Forecast

Competitive Landscape

Market Structure

Protagonists

Table: Protagonists In Vietnam's Commercial Banking Sector

Central bank: State Bank of Vietnam (SBV)

http://www.sbv.gov.vn/en/home

The SBV is the successor to the Vietnam National Bank, which was established by the government of North Vietnam in

1951 From 1975 to May 1990, the SBV was the banking system 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.vn/en/

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

Within Vietnam, VNBA currently has 53 members, including 39 commercial banks, 2 joint-venture banks,and 11 finance companies

List Of Banks

Table: Financial Institutions In Vietnam

COMMERCIAL BANKS

Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank)

Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank)

Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)

Vietnam Bank for Agriculture and Rural Development (Agribank)

Mekong Housing Bank (MHB)

JOINT STOCK BANKS

Asia Commercial Bank (ACB)

An Binh Commercial Joint-Stock Bank (ABBank)

Bao Viet Joint Stock Commercial Bank (BAOVIET Bank)

North Asia Commercial Joint-Stock Bank (BacA Bank)

Vietnam Prosperity Bank (VPBank)

Global Petro Commercial Joint-Stock Bank (GP Bank)

Great Asia Commercial Joint-Stock Bank (Dai A Bank)

Great Trust Bank (TrustBank)

Ocean Commercial Joint-Stock Bank (Ocean Bank)

DongA Commercial Joint-Stock Bank (DongA Bank)

South East Asia Bank (SeABank)

Viet Capital Commercial Joint-Stock Bank (Viet Capital Bank)

Maritime Commercial Joint-Stock Bank (Maritime Bank)

Technical and Commercial Joint-Stock Bank of Vietnam (Techcombank)

Kien Long Commercial Joint-Stock Bank (Kienlongbank)

Nam A Commercial Joint-Stock Bank (NamA Bank)

Nam Viet Commercial Joint-Stock Bank (Navibank)

Western Commercial Joint-Stock Bank (Western Bank)

Mekong Development Join-Stock Commercial Bank (MDBank)

Orient Commercial Joint-Stock Bank (OCB)

Southern Commercial Joint-Stock Bank (Southern Bank)

Hanoi Building Commercial Joint-Stock Bank (Habubank)

Ho Chi Minh City House Development Commercial Joint Stock Bank (HDBank)

Military Commercial Joint-Stock Bank (MB)

Vietnam International Commercial Joint-Stock Bank (VIB)

Sai Gon Commercial Joint-Stock Bank (SCB)

Financial Institutions In Vietnam - Continued

Saigon Bank for Industry and Trade (Saigonbank)

Sai Gon-Hanoi Commercial Joint-Stock Bank (SHB)

Sai Gon Thuong Tin Bank (Sacombank)

Vietnam-Asia Commercial Joint-Stock Bank (VietABank)

Petrolimex Commercial Joint-Stock Bank (PG Bank)

Vietnam Export-Import Commercial Joint-Stock Bank (Eximbank)

Tienphong Joint - Stock Commercial Bank (TienphongBank)

JOINT VENTURE BANKS

Vietnam-Russia Joint Venture Bank (VRB)

Viet-Thai Joint Venture Bank (Vinasiam Bank)

FINANCE COMPANY

Post and Telecommunication Finance Company (PTF)

Rubber Finance Company (RFC)

Vietnam Shipbuilding Finance Company (Vinashin Finance)

Textile Finance Company (TFC)

Handico Finance Joint-Stock Company (HAFIC)

Vietnam National Coal, Mineral Finance Company Limited (CMF)

Song Da Finance Joint-Stock Company ( SDFC)

PetroVietnam Finance Joint-Stock Corporation (PVFC)

Cement Finance Company (CFC)

Vinaconex - Viettel Finance Company (VVF)

Vietnam Chemical Finance Joint Stock Company (VCFC)

OTHER FINANCIAL INSTITUTIONS

Deposit Insurance of Vietnam (DIV)

Vietnam Development Bank (VDB)

Source: VNBA (January 2014), BMI

Company Profile

Agribank

SWOT Analysis

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

■ Massive branch network, especially in rural Vietnam

■ Improved rating from Fitch

■ Strong relationships with overseas lenders

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

■ NPL ratio continued on a downward trend (albeit under more control than in 2011)

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

■ Posted a rise in net profit after tax and operating profit in 2012

■ Undergoing three-year restructuring programme with the Vietnamese government

■ Government-backed IPO planned for before the end of 2015

■ Lending activity up by 8.2% in 2012

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

■ Vietnam now permits international investors to acquire larger stakes in lenders in thecountry

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 As of October 2013, the leading role of Agribank was confirmed by totalassets of VND671,846bn, total fund resource of VND593,648bn, and total equity ofVND29,605bn As of the same date, total outstanding loans stood at VND523,088bn.The bank's operating network in Vietnam consists of 2,400 branches and transactionoffices nationwide, staff by a personnel team of 40,000 Agribank also maintains foreignpartners, and has relationships with 1,033 banks in 92 countries and territories in theworld It is currently the country's largest bank by assets and extended its reach toCambodia in 2010 by opening its first overseas branch in the kingdom Agribank hascompleted a long-term financing agreement with the state oil company Petrovietnam toprovide financing at lower interest rates for the company to develop Vietnamese oilresources This could help Agribank establish more long-term relationships with majorbusinesses

Right after the revision in the Vietnam sovereign rating on January 23 2014, FitchRatings continued to make the same move with Agribank As announced on 24January, Fitch has affirmed the Long-Term Issuer Default Ratings (IDRs) on Agribank at

B with improved rating outlook from "stable" to "positive" Earlier, Fitch maintained a Brating with a stable outlook for Agribank in July 2013

Corporate

Highlights

As of the end of 2012 (latest available data) the bank's total loan portfolio was overVND480trn, increasing by 8.2% y-o-y; loans to agriculture and rural sector increased bymore than 13% and accounted for almost 70% of the total loan portfolio The businesssafety ratios were guaranteed, NPL ratio was put under control on a downward trendduring 2012 too

As of the end of 2012, the bank's net profit after tax was at VND2,479,398mn, up fromVND2,279,872mn in 2011 During the same time period, operating profit climbed fromVND3,308,670mn at the end of 2011 to VND3,378,927mn by December 31 2012

Nguyen Ngoc Bao said in early-February 2012 that the bank had agreed an extendedrestructuring plan with the Vietnamese government to be implemented over a period ofthree to four years As part of the revised strategy, Agribank will remain state-owned butplay a more prominent social policy role in support of the country's rural and agriculturalcommunities Central bank governor Nguyen Van Binh stipulated that between 75%and 80% of Agribank's annual lending should go to Vietnamese farmers in support ofthe country's key export crops, coffee and rice Bao also confirmed that the bank'scapital adequacy ratio (CAR) rose from 6.4% in 2010 to 8% in 2011 and estimated thatthe Agribank's CAR could reach 9% in 2012 with the aid of a capital injection from theState 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 USD960,000 from the bank, while city prosecutors charged four others in aUSD5.33mn scam Another executive was arrested in the city in October for allegedlystealing USD1mn In addition, in July 2012 a court in Binh Dinh Province handed a lifesentence to a teller for stealing nearly USD1mn

■ Status: State-Owned Commercial Bank

Table: Balance Sheet (VNDmn)

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

Table: Key Ratios (%)

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

■ Adequate capital ratios

■ Rise in both total loans and deposits during 2013

Weaknesses ■ Market capitalisation of the bank decreased during 2013 full-year

■ Lack of transparency

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

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

■ Improving capital position

Threats ■ Tighter monetary policy to tame economic growth

■ Vietnam will now permit international investors to acquire larger stakes in lenders inthe country

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 As of the 2013 year-end,the bank has 13,560 employees, around 400 branches/ transaction offices/

representative office/ affiliates both in Vietnam and abroad, including Head Office inHanoi, 1 Operation Center, 1 Training Center, 78 branches, over 300 transaction officesall over the country, 3 subsidiaries in Vietnam, 2 subsidiaries in other countries, 1

representative office in Singapore and 5 joint ventures In addition, Vietcombank hasalso developed an Autobank system with 1,835 ATMs and 32,178 Points of Salenationwide Bank's operations are supported by a network of more than 1,300correspondent banks in 100 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 (USD559.04mn) 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

VND267,863,4040 Similarly, total deposits rose to VND332,245,598mn fromVND285,381,722mn

The total risk based capital ratio of the bank stood at 14.8% as of the close of 2012(latest available data)

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

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

Share Price USD, %

Change,

Shares Outstanding

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 (USDmn)

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

Table: Key Ratios (%)

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