Report to Investor
Research on Vietnam Banking Industry
Final Report January 2011 Strictly confidential
Table of contents
Part Content Page
1 2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 3 3.1 3.2
Vietnam Economy Overview Overview of Vietnam Banking industry
Overview of Banking sector SWOT Analysis Industry Performance Overview Major Player Regulations State ownership State Bank of Vietnams strategies Accounting Reporting System Development of Personal Finance Solvency & Liquidity Funding and Deposit Outlook Potential Target Banks for Investment Opportunities Final shortlist Details of each banks in shortlist
Part 2: Overview of Vietnam Banking Industry
Overview of Banking sector
Fierce competition from FBs and JVBs will force domestic banks to further improve technology, corporate governance and transparency.
Vietnam banking sector has been growing rapidly in term of the size and number of banks under the reformation plans of the Government. As of Dec 2010, total assets reported as VND 3,500 trillion (~ $ 175 billion). According to SBV, as of Sep 2011, there are 101 banks and foreign bank branches including 5 SOCBs, 38 JSBs (including PVF), 53 FBs and FBBs, and 5 JVBs.
Chart 1: Number of Banks in Vietnam
SOCBs are banks that owned in majority by the Government. SOCBs have the advantages of large capital size and experience in operation such as the networks, size of loan and technology and so on. JSBs are local banks, which have diversified shareholders and mostly focus on retail banking and lending to SMEs. Those banks operate more actively and expanding dramatically in recently years and gain the market share from SOCBs. FBs and JVBs have increased their strength into Vietnam Banking sector. Advantages of those banks are retail banking with high quality services and sophisticated products, for instance, HSBC, ANZ, Standard Chartered have been launched their branches and taken major steps in expanding their network. The limits on fund mobilization have been lifted sine the beginning of 2011, it will have new picture of market share.
Source: SBV Chart 2: Market share of the banking sector by deposit
Source: VCBS
Overview of Banking sector
Vietnams banking industry falls far behind other regional countries in terms of size, quality and transparency but ahead in terms of growth and potentials
In the region, Vietnam banking sector is fairly small in terms of total asset, charter capital and relatively to GDP. The habit of cash expense is popular. Percentage of people using banking products and services (estimated at 20% in 2011 from 10% in 2007) is quite low compared to other countries (up to 70% for developed countries). Number of ATMs and POS per 1 million people is low, only 116 ATMs compared to other countries (see the table 1 for more details) Majority of Bank branches and transaction offices is located mainly in the cities and urban areas (which only consists of about 29% population of Vietnam). Only AGRB and BIDV have the network in nationwide, others based most in Ha Noi city, Ho Chi Minh city and surrounding areas of head office.
Charter 3: Banking sector size of countries (2010) Source: Bloomberg
Thailand Population (million) GDP 2010 (bn USD) 67.4 318.7
Malaysia 27 237.8
Indonesia Philippines 228.2 706.6 90.3 199.6
Vietnam 86 104
Number of banks
Banks/ Population Banks/ GDP
32
0.47 0.10
31
1.15 0.13
121
0.53 0.17
938
10.39 4.70
101
1.17 0.97
Number of bank/ GDP or number of bank/ population of Vietnam is quite high compared to other countries such as Thailand, Malaysia and Indonesia. However, Vietnam banking sector is still very potential as of small size, poor products, low technology and so on, especially only a partial Vietnam citizen using banking services at the mean time. Small size of banking sector than Thailand, Malaysia and Indonesia (Chart 3: Banking sector size of countries)
Source: World Bank
Table 1: Number of ATMs and POS per millions people in some countries (2009)
ATM Belgium Canada France Germany Italia Japan Singapore UK US China Vietnam 1.442 1.799 832 968 922 1.09 413 1.041 1.336 160,8 116
POS 11.64 18.855 21.469 7.221 22.49 13.361 17.337 17.838 17.02 1.803,4 430
Source: BIS and various
Overview of Banking sector
Vietnams banking industry falls far behind other regional countries in terms of size, quality and transparency but ahead in terms of growth and potentials
Vietnam has maintained high credit and deposit growth during the period of 2000 2010. The average number was 32% and 29% for credit and deposit respectively. Compared to some countries, loan/ deposit ratio reached over 120% in 2010, the highest level in 8 compared countries. Loan/ GDP ratio was only lower than Taiwan (155%) and China (127%). Thus, Vietnam banking sector had created huge money supply for the economy. Much money was coming to real estate sector and securities trading, therefore, when the economy went down, icing status in real estate sector and bleak stock market, non performance loan has occurred and raising in the banks. Follow up the tighten monetary policy to control the inflation in 2011, many bank falls down into liquidity problem as of loan/ deposit is too high in the previous time.
Table 2: Comparison of Loan/ Deposit, Loan/Asset and Loan/GDP Ratios (2010)
Loan/Deposit ratio,% 76.7 69.5 72.9 75.6 66.5 75.1 95.3 99.5 Trend Falling Rising Falling Falling Falling Falling Falling Rising Loan/Asset ratio,% 64.7 52.6 58.9 57 50.1 59.8 64.4 76.6 Trend Falling Rising Falling Rising Rising Falling Falling Falling Loan/GDP ratio,% 43.7 127.4 25.6 114.4 35.8 154.7 73.8 112.3 Trend Rising Rising Falling Rising Rising Rising Falling Rising
Bangladesh China Indonesia Malaysia Philippines Taiwan Thailand Vietnam
Source: WB, BMI Ranking of Vietnams Global Competition Index versus some peers (2009)
43 47 Soundness of Banks 106 101 109 52 80 Availability of financial services 90 99 68
115
Ease of access to loans
84 108
125 129
80
95 Overall GCI 2010 54 101 0 Vietnam Indonesia 20 40 Malaysia 60 80 100 Thailand 120 140 113
Phillippines
Source: Various