Vietnam commercial banking report q2 2013

Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Returns Risks to Potential Returns Overall Market Structure Country Structure Market Risks Country Risks R

VIETNAM

COMMERCIAL BANKING REPORT

INCLUDES 5-YEAR FORECASTS TO 2017

ISSN 1758-454X

Published by:Business Monitor International

Report Q2 2013

INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: February 2013

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BMI Industry View 7

Table: Levels (VNDbn) 7

Table: Levels (US$bn) 7

Table: Levels At May 2012 7

Table: Annual Growth Rate Projections 2012-2017 (%) 8

Table: Ranking Out Of 62 Countries Reviewed In 2013 8

Table: Projected Levels (VNDbn) 8

Table: Projected Levels (US$bn) 8

SWOT 9

Commercial Banking 9

Business Environment 10

Economic 11

Political 12

Industry Forecast 13

Speeding Up Banking Reforms 14

Foreign Investors Could Remain Cautious 15

Industry Risk Reward Ratings 16

Asia Commercial Banking Risk/Reward Ratings 16

Table: Asia Commercial Banking Business Environment Ratings 17

Market Overview 18

Asia Commercial Banking Overview 18

Table: Banks' Bond Portfolios 2011 18

Table: Asia Commercial Banking Business Environment Ratings 19

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

Table: Anticipated Developments in 2014 21

Table: Comparison of Total Assets & Client Loans & Client Deposits (US$bn) 22

Table: Comparison of US$ Per Capita Deposits (2013) 23

Table: Interbank Rates and Bond Yields 24

Economic Outlook 25

Ratings Downgrade Failed To Surprise Investors 26

Early Signs Of A Recovery 28

Threat Of Slower Growth Yet To Undermine Efforts For Reforms 28

Expenditure Breakdown 28

Table: Vietnam - Economic Activity 29

Competitive Landscape 30

Market Structure 30

Protagonists 30

Table: Protagonists In Vietnam's Commercial Banking Sector 30

List Of Banks 31

Table: Financial Institutions In Vietnam 31

Company Profile 34

Bank for Foreign Trade of Vietnam (Vietcombank) 34

Table: Stock Market Indicator 36

Table: Balance Sheet (VNDmn) 36

Table: Balance Sheet (US$mn) 36

Table: Key Ratios (%) 37

VietinBank 38

Table: Stock Market Indicators 40

Table: Balance Sheet (VNDmn) 40

Table: Balance Sheet (US$mn) 40

Table: Key Ratios (%) 41

Agribank 42

Table: Balance Sheet (VNDmn) 43

Table: Balance Sheet (US$mn) 44

Table: Key Ratios (%) 44

Asia Commercial Bank 45

Table: Stock Market Indicators 46

Table: Balance Sheet (VNDmn) 47

Table: Balance Sheet (US$mn) 47

Table: Key Ratios (%) 47

Eximbank 48

Table: Stock Market Indicators 50

Table: Balance Sheet (VNDmn) 50

Table: Balance Sheet (US$mn) 50

Table: Key Ratios (%) 51

Vietnam Technological and Commercial Joint-stock Bank (Techcombank) 52

Table: Balance Sheet (VNDmn) 53

Table: Balance Sheet (US$mn) 53

Table: Key Ratios (%) 54

Viet A Joint Stock Commercial Bank (Vietabank) 55

Housing Development Commercial Joint Stock Bank (HDBank) 57

Sacombank 59

Table: Stock Market Indicators 61

Table: Balance Sheet (VNDmn) 61

Table: Balance Sheet (US$mn) 61

Table: Key Ratios (%) 62

Regional Overview 63

Asia Overview 63

Investment Banking Revenues Surge 64

Malaysia Takes The Lead 65

Thai Commercial Banks Targeting High-Growth Economies 66

Global Industry Overview 67

Table: Selected Highlights Of Changes To The Formulation of the Basel III Liquid Coverage Ratio 69

Demographic Forecast 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

Commercial Bank Business Environment Rating 76

Table: Commercial Banking Business Environment Indicators And Rationale 77

Weighting 78

Table: Weighting Of Indicators 78

BMI Industry View

Table: Levels (VNDbn)

Date assets Total loans Client portfolio Bond Other

Liabilities and capital Capital deposits Client Other

Source: BMI; Central banks; Regulators

Table: Levels (US$bn)

Date assets Total loans Client portfolio Bond Other

Liabilities and capital Capital deposits Client Other

Source: BMI; Central banks; Regulators

Table: Levels At May 2012

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

Source: BMI; Central banks; Regulators

Assets Loans Deposits

Source: BMI; Central banks; Regulators

Table: Ranking Out Of 62 Countries Reviewed In 2013

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

Source: BMI; Central banks; Regulators

Table: Projected Levels (VNDbn)

Total assets 2,286,321 2,953,153 3,437,893 3,816,061 4,350,310 4,959,353 5,604,069 6,276,557 6,966,979 Client loans 1,869,260 2,475,540 2,829,890 3,084,580 3,454,730 3,869,297 4,294,920 4,724,412 5,149,609 Client deposits 1,680,717 2,209,896 2,483,357 2,706,859 2,977,545 3,245,524 3,505,166 3,750,528 3,975,560

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

Table: Projected Levels (US$bn)

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

Commercial Banking

Vietnam Commercial Banking SWOT

Strengths ■ Untapped potential

■ High savings rate of the Vietnamese people

■ Increasingly open to foreign banks since WTO accession in 2007

■ The role of state-owned banks is decreasing

Weaknesses ■ Domestic banks lack capital and technology to sustain high credit and efficient

growth

■ The financial accounts of many banks are still opaque

■ Small banks have a high exposure to real estate and stock market loans

Opportunities ■ The population is still underbanked

■ Income levels likely to rise strongly over the medium term

Threats ■ Macroeconomic instabilities threaten the credibility of the government and could

potentially drive economic policy away from further liberalisation

■ The high level of government debt could crowd out the private sector and potentiallytrigger a fiscal crisis

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 123rdout 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 is likely to 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

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 2011

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

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

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

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

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

while making Vietnamese enterprises stronger through increased competition

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

■ Urbanisation will continue to be a long-term growth driver The UN forecasts 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

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 in 2012 are likely to weigh on public acceptance of the

one-party system, and street demonstrations to protest economic conditions coulddevelop 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

Industry Forecast

BMI View: Efforts by the State Bank of Vietnam (SBV) to recapitalise ailing banks and strengthen

regulatory oversight have helped to fend off a full-blown banking crisis for now We believe that investors are increasingly confident of the government's ability to contain the risk of a banking crisis while Vietnam's bullish long-term growth story remain intact.

Our long-held view that concerns over an impending collapse of Vietnam's banking system are largelyunwarranted and that the government is unlikely to require assistance from the International Monetary Fund

(IMF) to finance a bailout, is slowly being vindicated (see 'Keeping A Cautious Outlook Amid Rising NPLs',

September 17 2012) Efforts by the State Bank of Vietnam (SBV) to rapidly recapitalise ailing banks and

strengthen regulatory oversight of lending practices have helped to fend off a full-blown banking crisis fornow Meanwhile, average lending rates have fallen from around 20% in the beginning of 2012 to around14% at the time of writing, and we expect credit conditions to continue to improve over the coming months

Confidence Is Returning

Vietnam - Ho Chi Minh Stock Index (VNI)

Source: BMI, Bloomberg

chart), we believe that investors are increasingly confident of the government's ability to contain the risk of

a banking crisis while Vietnam's bullish long-term growth story remain intact Fitch Ratings

also reaffirmed Vietnam's long-term foreign and local currency debt ratings at 'B+' in January, citing the

country's strong growth potential, favourable environment for attracting foreign direct investment (FDI),and manageable external debt levels relative to the region From our perspective, progress on banking sectorreforms will continue to play a crucial role in further bolstering investor confidence going forward Thisshould in turn determine the strength of the economic recovery over the coming quarters (we forecast realGDP growth to accelerate from 5.0% in 2012 to 7.0% in 2013)

Credit Conditions To Pick Up In 2013

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

Source: BMI, State Bank of Vietnam

Speeding Up Banking Reforms

We are optimistic that the government will meet its target of restructuring ailing banks by the end of 2013,mainly through efforts to recapitalise banks with weak balance sheets and merging smaller banks that arestruggling to compete effectively The urgent need to restructure the banking sector and reinstate confidencehas also helped to speed up progress on free-market initiatives such as allowing for greater foreign

participation and privatising other state-owned enterprises (SOEs) According to a report published by The

banks or even larger stakes conditional upon an agreement to divest holdings at a later stage (presently,foreign companies are allowed to hold a maximum 20% stake as a single entity, or 30% with a partner)

A joint Financial Sector Assessment Program undertaken by the World Bank and IMF is scheduled to becompleted by the end of H113, and is expected to provide greater transparency regarding the actual level ofnon-performing loans (NPLs) across the banking sector Estimates provided by the SBV currently put NPLs

at close to 9.0% of total outstanding loans as of the end of 2012 and it is widely expected that the actualfigure could be significantly higher In any case, we believe that the assessment program will provide agood framework for the government to further improve transparency and accounting standards goingforward

Foreign Investors Could Remain Cautious

We expect this process of restructuring the banking sector to keep earnings depressed for the foreseeablefuture and we maintain a cautious outlook on the banking sector through 2013 We view FDI inflows intothe banking sector as a crucial element of the restructuring process and we highlight the downside risk thatforeign investors may avoid participating in large-scale privatisation of state-owned banks Given theuncertainties surrounding the true exposure of NPLs, we expect foreign investors to remain highly cautious

in taking up stakes in smaller state-owned banks However, as the economic recovery gathers pace andassuming that actual NPLs are in line with current expectations, we expect FDI inflows into the bankingsector to pick up gradually over the course of the year

Industry Risk Reward Ratings

Asia Commercial Banking Risk/Reward Ratings

Business Environment Rating Methodology

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

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

measure that ensures we capture the latest quantitative information available It also ensures consistencyacross all countries and between the inputs to the CBBER and the Insurance Business Environment Rating,which is likewise now a feature of our insurance reports Like the Business Environment Ratings calculated

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

returns and the risks to the realisation of those returns It is weighted 70% to the former and 30% to thelatter

The evaluation of the 'Limits of potential returns' includes market elements that are specific to the bankingindustry of the country in question and elements that relate to that country in general Within the 70% of theCBBER that takes into account the 'Limits of potential returns', the market elements have a 60% weightingand the country elements have a 40% weighting The evaluation of the 'Risks to realisation of returns' also

includes banking elements and country elements (specifically, BMI's assessment of long-term country risk).

However, within the 30% of the CBBER that take into account the risks, these elements are weighted 40%and 60%, respectively

Further details on how we calculate the CBBER are provided at the end of this report In general, though,three aspects need to be borne in mind in interpreting the CBBERs The first is that the market elements ofthe 'Limits of potential returns' are by far the most heavily weighted of the four elements They account for60% of 70% (or 42%) of the overall CBBER Second, if the market elements are significantly higher thanthe country elements of the 'Limits of potential returns', it usually implies that the banking sector is (very)large and/or developed relative to the general wealth, stability and financial infrastructure in the country.Conversely, if the market elements are significantly lower than the country elements, it usually means thatthe banking sector is small and/or underdeveloped relative to the general wealth, stability and financialinfrastructure in the country Third, within the 'Risks to the realisation of returns' category, the marketelements (i.e how regulations affect the development of the sector, how regulations affect competitionwithin it, and Moody's Investor Services' ratings for local currency deposits) can be markedly different from

BMI's long-term risk rating.

Table: Asia Commercial Banking Business Environment Ratings

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

Scores out of 100, with 100 the highest Source: BMI

Market Overview

Asia Commercial Banking Overview

Table: Banks' Bond Portfolios 2011

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

Source: Central banks, regulators, BMI

Table: Asia Commercial Banking Business Environment Ratings

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

Scores out of 100, with 100 the highest Source: BMI

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

Source: Central banks, regulators, BMI

Table: Anticipated Developments in 2014

Loan/Deposit Ratio, % Trend Loan Growth, US$bn Deposit Growth, US$bn Residual, US$bn

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

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

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

Source: Central banks, regulators, BMI

Table: Interbank Rates and Bond Yields

BMI View: Vietnam's economy remains on track for a robust recovery in 2013, and we view consensus

estimates on growth as being overly pessimistic The latest credit downgrade by rating agency Moody's Investors Service has failed to surprise the bond markets and we believe that this is because concerns over the build-up of bad debt in the banking sector have long been priced by investors Furthermore, latest economic indicators also support our view that economic conditions in Vietnam are improving and we are maintaining our view that real GDP growth will come in strong at 7.0% in 2013

Latest data published by the General Statistics Office (GSO) showed that Vietnam's real GDP growthaccelerated from 4.7% year-on-year (y-o-y) in Q212 to 5.4% in Q312, reinforcing our view that the

economy is poised for a robust recovery as we head into 2013 It is worthwhile to note, however, that thegeneral consensus remain deeply cautious towards the country's economic outlook According to the latestBloomberg survey consisting of 11 economists, the median forecast for Vietnam's real GDP growth for

2013 currently stands at 5.8% while the mean forecast averaged slightly higher at 6.2% This, in comparison

to our forecast for the Vietnamese economy to grow by a heady 7.0% in 2013, highlights the degree ofpessimism that the consensus presently holds - and what we view as an extreme in bearish macro sentiment

Rebound In Sight

Vietnam - Real GDP, VNDbn (LHS) & % chg y-o-y (RHS)

Source: BMI, General Statistics Office

Ratings Downgrade Failed To Surprise Investors

Interestingly, Vietnam's foreign and local currency debt ratings were downgraded on September 28 by

ratings agency Moody's Investors Service from B1 to B2, citing lower growth prospects and risks to the

state balance sheet from weakness in the banking system The latest downgrade places Vietnam's creditrating five notches below investment grade, on par with countries such as Egypt and Cambodia We see thedowngrade as coming somewhat behind the curve We have been warning of a surge in bankruptcies sincethe beginning of the year and the government has responded speedily by tightening supervision over thebanking sector and introducing reforms to merge ailing banks Furthermore, we believe that the worst casescenario of a banking crisis has already been contained

Muted Response To Credit Downgrade

Vietnam - Two-Year & 10-Year Government Bond Yields, % & Spread, bps

Source: BMI, Bloomberg

Indeed, judging from the muted response in the bond markets following the ratings downgrade, it appearsthat the risks of a potential bailout of ailing banks by the Vietnamese government have long been priced in

by investors As the accompanying chart shows, 10-year Vietnamese sovereign bond yields have remainedlargely stable within a narrow trading range of 10.25-10.50% in recent months Yields on two-year

sovereign bonds have begun to tick up in recent weeks, following a higher-than-expected reading on

September, after recording 13 consecutive monthly declines since August 2011) However, looking at thebroader trend for bond yields (where yields have fallen substantially from the peak of around 12.5-13.0% tocurrent levels of around 10.0%), we believe that the recent uptick in yields do not warrant cause for alarm.Early Signs Of A Recovery

Looking at more recent economic data, we point out that industrial production expanded by 9.7% y-o-y inSeptember, a significant increase from 4.4% in August and the fastest rate of expansion since February.Retail sales for the first nine months of the year also grew by a robust 17% y-o-y, suggesting to us thatdomestic demand is also starting to pick up These factors reinforce our view that economic conditions inVietnam are improving and the economy is on track for a swift recovery over the coming quarters

Accordingly, we are maintaining our view that real GDP growth will come in strong at 7.0% in 2013, and

we believe that signs of an improving economic outlook over the coming months will soon reignite bullishsentiment towards Vietnam's growth prospects

Threat Of Slower Growth Yet To Undermine Efforts For Reforms

Rapid credit growth and reckless lending practices among local banks have resulted in a build up of baddebt over the years, fuelling concerns among investors that reigniting economic growth will prove to be achallenging task in 2013 The economic slowdown in 2011 led by aggressive monetary tightening by theSBV, resulted in a surge in NPLs and prompted banks to aggressively cut down on lending to small-and-medium sized enterprises (SMEs) Growing evidence that real GDP growth could miss the government'starget of 6.0-6.5% in 2012 has so far failed to derail the SBV's efforts to push ahead reforms - an

encouraging sign that the government is willing to tolerate slower growth in return for macroeconomicstability

Over the longer term, we expect this restructuring of the banking sector alongside efforts to speed up theprivatisation of state-owned enterprises (SOE), to boost the quality of economic growth in Vietnam

Although these reforms are unlikely to witness a smooth process, we should nonetheless see a more

efficient banking system that would allow real GDP growth to average at a robust 7.1% over the nextdecade A more efficient credit system should also see consumer price inflation averaging a benign 5.3%over the same period

Expenditure Breakdown

Private Consumption: We expect private consumption to grow at a relatively subdued pace of 4.9% in

2012 before accelerating towards 5.6% in 2013 However, we note that the risk of a sustained collapse in

driven sectors Uncertainties over the outlook for employment could in turn prompt households to cut back

on spending

Gross Fixed Capital Formation: We foresee a significant pickup in private sector investment growth in

2013 We believe with lending rates will gradually ease over the coming months as the effect of recent ratecuts by the SBV begins to kick in Accordingly, we expect gross fixed capital formation growth to

accelerate from 4.3% in 2012 to 5.6% in 2013

Public Spending: We expect total public spending to remain relatively resilient in 2013, expanding at a

respectable pace of 5.4% However, there is limited room for the government to increase spending furtherdue 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

given that we expect external demand to remain sluggish as we head into H113 Despite recording anaverage monthly trade surplus of US$172mn since June 2012 (resulting in a year-to-date surplus of US

$77mn), we do not see the case for a substantial pickup in external demand in the near term Accordingly,

we expect exports to expand at a moderate pace of 6.5% in 2013

Table: Vietnam - Economic Activity

Nominal GDP,

VNDbn [2] 1,980,914.00 2,535,008.00 2,913,940.20 3,314,445.00 3,776,223.10 4,265,863.00 4,807,544.50 Nominal GDP, US

Notes: e BMI estimates f BMI forecasts 1 at 1994 prices Sources: 2 Asian Development Bank, General Statistics Office;

3 World Bank/UN/BMI; 4 General Statistics Office.

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 The other SOCBs also have large networks by local standards Agribank has 115; BIDV, 103; VBSP, 65; VDB, 62; and MDHDB, 32 Of the urban CJSBs, the organisations which have over 25 branches are:

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-venture banks have more than five branches

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

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)

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

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

among 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, Saigon Industrial and Commercial CJSB, Gia Dinh CJSB, Military CJSB, International Commercial CJSB, Oriental CJSB, Chohungvina Bank, Petroleum Insurance Company and Golden Insurance Company.

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

VND11.8trn (US$559.04mn) in January 2012, some months after the deal was revealed.The acquisition, which advantageously gives Vietcombank a stronger foreign partner,involved the sale 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

webmaster@vietcombank.com.vnhttp://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

2006 2007 2008 2009 2010 2011

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

SWOT Analysis

Strengths ■ Vietnam's largest partly private lender by assets

■ 10% owned by the International Finance Corporation

■ Strong branch network

■ Bad debt ration below 1.5% of loans

■ 2011 profit exceeded predictions

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

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

be ignored

■ Possible listing in the long term

■ Targeting lending growth of 20% y-o-y in 2012

■ 25% y-o-y increase in total assets in 2011

Threats ■ Possible exposure to downturn in global trade

■ Predicted growth limited by state credit limits

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

separated from the State Bank of Vietnam It became a state-owned corporation in

1993 As one of the four largest state-owned commercial banks in the country,VietinBank's total assets account for over 20% of the market share of the wholeVietnamese banking system VietinBank's capital resources have continued to increaseover the years and have been rising substantially since 1996, with annual averagegrowth of 20%

VietinBank has developed a retail and administration network across the country Thebank's network operates in 56 provinces and cities, with a focus on large cities such asHanoi (12 branches; two transaction centres), Ho Chi Minh City (17 branches; onetransaction centre); industrial zones; trading and economic parks; and denselypopulated areas VietinBank is an investor in other institutions such as Saigonbank,

Insurance Company.

VietinBank is 10% owned by the International Finance Corporation, which invested

US$307mn in the lender in 2011 This was the first strategic investment by a foreignorganisation in a Vietnamese state-owned bank Discussions over selling a 15% stake

to the Canada-based Bank of Nova Scotia are still ongoing as of January 2012,

despite plans to conclude the deal by the end of 2011

In December 2012, Japanese commercial bank Bank of Tokyo Mitsubishi UFJ

announced that it has acquired a 20% stake in VietinBank The deal was valued at US

$742mn The acquisition will enable Bank of Tokyo Mitsubishi UFJ to help Japanesecompanies operating in Vietnam, as well as expanding its commercial operations inSouth East Asia Bank of Tokyo Mitsubishi UFJ will also appoint two directors onto theboard of VietinBank

Corporate

Highlights

The bank's profit in 2011 exceeded forecasts, increasing by 76% y-o-y to VND8.11trn.Total assets grew 25% y-o-y in 2011 to VND460.4trn, compared with VND367.7trn ayear earlier, making VietinBank the 2nd ranking bank in Vietnam with regard to totalassets Non-performing loans for 2011 made up 0.74% of VietinBank's overall credit,and the bank revealed that it is targeting clipping bad debts to below 3% in 2012 Thebank is projecting a 20% y-o-y increase in lending activities in 2013

Company Address VietinBank - Vietnam Joint Stock Commercial Bank for Industry and Trade

108 Tran Hung DaoHanoi

Vietnam

Fax: (84) 439428693

http://www.vietinbank.vn

Company Data ■ Website: www.vietinbank.vn

• Status: State-Owned Commercial Bank