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Q1 2011

Vietnam

commercial Banking report

INCLUDES 5-YEAR FORECASTS TO 2015

iSSn 1758-454X

published by Business monitor international ltd.

VIETNAM COMMERCIAL BANKING REPORT Q1 2011

INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2015

Part of BMI's Industry Report & Forecasts Series

Published by: Business Monitor International Copy deadline: January 2011

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Vietnam Commercial Banking Report Q1 2011

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Vietnam Commercial Banking Report Q1 2011

CONTENTS

Executive Summary ......................................................................................................................................... 5

Table: Levels (VNDbn) .......................................................................................................................................................................................... 5 Table: Levels (US$bn) ........................................................................................................................................................................................... 5 Table: Levels At August 2009 ................................................................................................................................................................................ 5 Table: Annual Growth Rate Projections 2010-2014 (%) ....................................................................................................................................... 5 Table: Ranking Out Of 59 Countries Reviewed In 2010 ........................................................................................................................................ 6 Table: Projected Levels (VNDbn) .......................................................................................................................................................................... 6 Table: Projected Levels (US$bn) ........................................................................................................................................................................... 6

SWOT Analysis ................................................................................................................................................. 7

Vietnam Commercial Banking SWOT .................................................................................................................................................................... 7 Vietnam Political SWOT ........................................................................................................................................................................................ 7 Vietnam Economic SWOT ...................................................................................................................................................................................... 8 Vietnam Business Environment SWOT................................................................................................................................................................... 8

Business Environment Outlook ...................................................................................................................... 9

Commercial Banking Business Environment Ratings ............................................................................................................................................ 9 Table: Vietnam's Commercial Banking Business Environment Rating .................................................................................................................. 9 Commercial Banking Business Environment Rating Methodology ........................................................................................................................ 9 Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 10

Global Commercial Banking Outlook........................................................................................................... 12 Asia Banking Sector Outlook ........................................................................................................................ 18

Table: Banks' Bond Portfolios ............................................................................................................................................................................. 20 Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 21 Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios ........................................................................................................... 22 Table: Anticipated Developments In 2011 ........................................................................................................................................................... 23 Table: Comparison Of Total Assets, Client Loans And Client Deposits, 2009-2010 (US$bn) ............................................................................. 24 Table: Comparison Of Per Capita Deposits, 2010e (US$) .................................................................................................................................. 25 Table: Interbank Rates And Bond Yields, 2009-2010 .......................................................................................................................................... 26

Vietnam Banking Sector Outlook ................................................................................................................. 27 Economic Outlook .......................................................................................................................................... 30

Table: Vietnam Economic Activity, 2007-2015 .................................................................................................................................................... 31

Company Profiles ........................................................................................................................................... 33

Vietcombank ........................................................................................................................................................................................................ 33 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) ............................................................................................................................. 34 BIDV .................................................................................................................................................................................................................... 35 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) ........................................................................................................................................ 36 VietinBank ........................................................................................................................................................................................................... 37 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) ................................................................................................................................ 38 Agribank .............................................................................................................................................................................................................. 39 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 40 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 40 Table: Key Ratios (%).......................................................................................................................................................................................... 40 MHB Bank ........................................................................................................................................................................................................... 41

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Vietnam Commercial Banking Report Q1 2011

Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn)................................................................................................................................ 42 Habubank ............................................................................................................................................................................................................ 43 Table: Key Statistics For Habubank, 2004-2007 (VNDmn) ................................................................................................................................. 44 Eximbank ............................................................................................................................................................................................................. 45 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 46 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 46 Table: Key Ratios (%).......................................................................................................................................................................................... 46 Sacombank ........................................................................................................................................................................................................... 47 Table: Stock Market Indicators............................................................................................................................................................................ 48 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 48 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 49 Table: Key Ratios (%).......................................................................................................................................................................................... 49 Saigonbank .......................................................................................................................................................................................................... 50 Table: Stock Market Indicators............................................................................................................................................................................ 50 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 51 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 51 Table: Key Ratios (%).......................................................................................................................................................................................... 51 SeABank............................................................................................................................................................................................................... 52 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 53 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 53 Table: Key Ratios (%).......................................................................................................................................................................................... 53

BMI Banking Sector Methodology ................................................................................................................ 54

Commercial Bank Business Environment Rating ...................................................................................................................................................... 55 Table: Commercial Banking Business Environment Indicators And Rationale.................................................................................................... 56 Table: Weighting Of Indicators ........................................................................................................................................................................... 57

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Vietnam Commercial Banking Report Q1 2011

Executive Summary

Table: Levels (VNDbn)

Date August 2008 August 2009 Change, %

Total Assets

Client Loans

Bond Portfolio 149,816.7 173,358.3 16%

Other

Liabilities& Capital

Capital

Client Deposits

Other 236,408.0 184,222.0 -22%

1,659,548.7 1,259,980.0 2,065,761.6 1,706,340.0 24% 35%

249,752.0 1,659,548.7 186,063.3 2,065,761.6 -26% 24%

217,173.0 1,205,967.7 286,547.0 1,594,992.6 32% 32%

Source: BMI, SBV

Table: Levels (US$bn)

Date August 2008 August 2009 Change, %

Total Assets 100.4 116.0 15%

Client Loans 76.2 95.8 26%

Bond Portfolio 9.1 9.7331 7%

Liabilities Other & Capital 15.1 10.4 -31% 100.4 116.0 15%

Client Capital Deposits 13.1 16.1 22% 73.0 89.6 23%

Other 14.3 10.3 -28%

Source: BMI, SBV

Table: Levels At August 2009

Loan/Deposit Ratio 106.98% Rising

Loan/Asset Ratio 82.60% Falling

Loan/GDP Ratio 107.32% Rising

GDP Per Capita, US$ 1,058

Deposits Per Capita, US$ 1,030

Source: BMI, SBV

Table: Annual Growth Rate Projections 2010-2014 (%)

Assets Annual Growth Rate CAGR Ranking 24 25 1

Loans 24 25 1

Deposits 14 13 15

Source: BMI, SBV

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Table: Ranking Out Of 59 Countries Reviewed In 2010

Loan/Deposit Ratio 7 Local Currency Asset Growth 1

Loan/Asset Ratio 2 Local Currency Loan Growth 1

Loan/GDP Ratio 10 Local Currency Deposit Growth 14

Source: BMI, SBV

Table: Projected Levels (VNDbn)

2007 Total Assets Client Loans Client Deposits 1410221.40 1067730.00 1100392.90

2008 1747335.40 1339260.00 1341142.80

2009e 2411322.85 1848178.80 1528902.79

2010f 2893587.42 2217814.56 1697082.10

2011f 3472304.91 2661377.47 1917702.77

2012f 4236211.99 3246880.52 2186181.16

2013f 5252902.86 4026131.84 2492246.52

2014f 6566128.58 5032664.80 2841161.04

2015f 8273322.01 6341157.65 3267335.19

e/f = BMI estimate/forecast. Source: BMI, SBV

Table: Projected Levels (US$bn)

2007 Total Assets Client Loans Client Deposits 88.04 66.66 68.70

2008 99.96 76.62 76.72

2009e 130.56 100.07 82.78

2010f 148.39 113.73 87.03

2011f 173.62 133.07 95.89

2012f 211.81 162.34 109.31

2013f 269.38 206.47 127.81

2014f 345.59 264.88 149.53

2015f 447.21 342.77 176.61

e/f = BMI estimate/forecast. Source: BMI, SBV

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Vietnam Commercial Banking Report Q1 2011

SWOT Analysis

Vietnam Commercial Banking SWOT

Strengths

Rapid growth. Untapped potential. The high savings rate of Vietnamese households. Increasingly open to foreign banks since accession to the WTO in 2007. The role of state-owned banks is steadily decreasing.

Weaknesses

Domestic banks lack the capital and technology to sustain high credit growth. The financial accounts of many banks are still opaque. High exposure to real estate and stock market loans among smaller banks.

Opportunities

The population is still under-banked. Income levels are likely to rise strongly over the medium term.

Threats

The National Congress of the Communist Party of Vietnam in January 2011 could result in a shift of economic policy away from further liberalisation.

Vietnam Political SWOT

Strengths

The Communist Party government appears committed to market-oriented reforms, although specific economic policies will undoubtedly be discussed at the 2011 National Congress. The one-party system is generally conducive to short-term political stability. Relations with the US are generally improving, and Washington sees Hanoi 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 tight control over political dissent.

Opportunities

The government recognises the threat that 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 government policies. This is opening up opportunities for more checks and balances within the one-party system.

Threats

The slowdown in growth in 2009 and 2010 is likely 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 undemocratic 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 be unsustainable. Relations with China have deteriorated in recent years due to Beijing's more assertive 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 widespread environmental damage.

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Vietnam Commercial Banking Report Q1 2011

Vietnam Economic SWOT

Strengths

Vietnam has been one of the fastest growing economies in Asia in recent years, with GDP growth averaging 7.6% annually between 2000 and 2007. The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004.

Weaknesses

Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable as the global economy continued to suffer in 2010. The fiscal picture is clouded by considerable `off the books' spending. The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus 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, despite the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector. Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population to rise from 29% of the population to more than 50% by the early 2040s.

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 growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis. Prolonged macroeconomic instability could prompt the authorities to put reforms on hold, as they struggle to stabilise the economy.

Vietnam Business Environment SWOT

Strengths

Vietnam has a large, skilled and low-cost workforce which has made the country attractive to foreign investors. Vietnam's proximity to China and South East Asia, and its good sea links, make it a good base for foreign companies to export to the rest of Asia, and beyond.

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. Its score in Transparency nd International's 2010 Corruption Perceptions Index was 2.7, placing it in 22 place in the th Asia Pacific region and 116 overall.

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-tech skills and knowhow. Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector. This should offer foreign investors new entry points.

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. Failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period.

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Vietnam Commercial Banking Report Q1 2011

Business Environment Outlook

Commercial Banking Business Environment Ratings

Table: Vietnam's Commercial Banking Business Environment Rating

Limits of Potential Returns Total assets, 2010 Growth in total assets, 2010-2015 Growth in client loans, 2010-2015 GDP per capita, 2010 Tax GDP volatility Financial infrastructure Risks to Realisation of Returns Regulatory framework and development Regulatory framework and competitive landscape Moody's rating for local currency deposits Long-term financial risk Long-term external risk Long-term policy continuity Legal framework Bureaucracy Commercial banking business environment rating

Data US$130.6mn

Score, out of 10 6 6 7

Ratings score, out of 100 Market Structure 63

US$1,085.0 2.9 0.6 5.6

2 3 10 6

Country Structure 53

4.5 5.0 2.0 4.8 3.3 7.0 3.7 3.9

5 5 2 5 3 7 4 4 54

Market Risk 40

Country Risk 46

Source: BMI

Commercial Banking 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 consistency across 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 the latter.

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The evaluation of the Limits of Potential Returns includes market elements that are specific to the banking industry of the country in question and elements that relate to that country in general. Within the 70% of the CBBER that takes into account the `Limits of potential returns', the market elements have a 60% weighting and 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 of the Limits of Potential Returns are by far the most heavily weighted of the four elements. They account for 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher than the 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 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 to Realisation of Returns category, the market elements (ie: how regulations affect the development of the sector, how regulations affect competition within it, and Moody's Investors Service's 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 Market Structure Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore 43.3 93.3 73.3 83.3 73.3 30.0 70.0 33.3 50.0 66.7 Country Structure 45.0 55.0 90.0 55.0 62.5 75.0 80.0 47.5 60.0 90.0

Risks to Potential Returns Market Risks 30.0 56.7 70.0 53.3 76.7 63.3 76.7 56.7 56.7 96.7 Country Risks 42.0 76.0 84.0 56.0 42.0 80.0 80.0 40.0 50.0 88.0

Overall Rating 42.0 75.1 79.5 66.9 65.1 55.6 75.4 41.3 53.6 80.6 Ranking 52 13 9 24 29 38 12 55 43 7

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Table: Asia Commercial Banking Business Environment Ratings

Limits of Potential Returns Market Structure Sri Lanka South Korea Taiwan Thailand Vietnam US 20.0 76.7 70.0 56.7 63.3 90.0 Country Structure 55.0 85.0 70.0 65.0 52.5 85.0

Risks to Potential Returns Market Risks 36.7 76.7 83.3 80.0 40.0 100.0 Country Risks 44.0 68.0 74.0 68.0 46.0 78.0

Overall Rating 36.1 77.4 72.3 63.8 54.4 87.6 Ranking 56 10 17 31 41 2

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

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Global Commercial Banking Outlook

Emerging Markets Still Set To Outperform Our outlook for commercial banking in emerging markets remains broadly positive, with more robust economic growth and healthier banking systems than in most of their developed world counterparts. We emphasise that the key macroeconomic dynamics underpinning global banking in 2011 will continue to be deflation and deleveraging in much of the developed world, contrasting with inflation and lending growth in emerging markets. The implementation of quantitative easing policies by major central banks, notably the US Federal Reserve and the Bank of Japan, will result in the purchase of hundreds of billions of dollars worth of government securities in an effort to grease the wheels of lending. While we are not convinced that quantitative easing will have significant positive effects for economic growth, or even for lending, increasing central bank support will further reduce the potential for another systemic banking crisis, which fits with our core assumptions. However, it could fuel asset price inflation and tighter policy in emerging markets, which could eventually lead to a boom-and-bust cycle. Meanwhile, the introduction of a new Basel framework on banking regulation will also underpin confidence in banking stability, and does not greatly threaten lending growth, given banks' pre-emptive capital raising and the gradual schedule for Basel III implementation.

Regional Outlooks: Uneven Recovery Underway Below we present brief outlooks for regional banking sectors:

Developed states: We continue to expect underperformance by the developed world's banking sectors in terms of loan growth and profitability compared with emerging markets. This is due to our belowconsensus outlook for economic growth in developed states, the likelihood of retrenchment by both households and governments, and the potential for tighter sector regulation. In the US, loan growth will remain slow due to ongoing post-recession household deleveraging. A major concern for the eurozone heading into 2011 is the impact that government austerity measures will have on demand. Should governments cut too far at a time when consumer spending and investment is yet to sufficiently recover, growth could quickly stagnate. This would further dent the operating outlook for European banks and could mean more deterioration in asset quality as non-performing loans edge higher.

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Weak Outlook Europe ­ Banking Sector Asset Growth, % y-o-y

Source: BMI, central banks

Emerging Asia: After suffering only minor profit damage from the global financial crisis due to their strong capitalisation and less risky lending practices than in the US and Europe, Asian banks are now increasingly positioning for growth. The well capitalised nature of the region's banking sector is the main reason why banks are now in a position to expand their loan books and support domestic economic growth, and with the exception of Japan we continue to forecast solid equity-to-asset ratios preventing any major banking sector dislocation, even if property bubbles across the region continue to inflate and burst in 2011. Despite the limited crisis risks we remain concerned that profitability will take a significant hit once hot money inflows into Asia slow down.

Latin America: Thanks to prudential regulation and a lack of cross-border lending few banking sectors in Latin America face systemic risks, even with the wave of foreign capital entering the region. We believe that over the long-term time, Peru offers the greatest potential in the region for commercial banking sector expansion, followed by Mexico and Guatemala.

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Searching For Potential Latin America ­ Commercial Banking Sector Assets-to-GDP, %

Source: BMI, central banks, national financial regulators

Emerging Europe: Our outlook for the emerging Europe banking sector is mixed, reflecting the divergent growth trajectories that we forecast for the region. We have long highlighted Turkey and Poland as economic outperformers in the region, with domestic demand driving rapid economic convergence with Western peers. We highlight Hungary and Romania as two countries where the outlook for the banking industry is negatively affected by domestic economic conditions.

Middle East and North Africa: That a significant share of lending throughout MENA was directed towards the real estate and construction sectors, particularly in Bahrain and Kuwait, in the run-up to 2009 underscores our view that a return to pre-crisis asset and loan growth rates will be unlikely for the foreseeable future. While the outlook for lending to the real estate sector appears relatively weak, except in Saudi Arabia, we expect the infrastructure sector to play an increasingly important role in driving loan growth, particularly given the number large-scale projects in the pipeline. While a robust bounce in asset growth and profitability should not be expected in the short term, a recovery (within the Gulf Cooperation Council in particular) should begin to gain steam in H111 concomitant with publicly funded investment projects.

Sub-Saharan Africa: Sub-Saharan Africa's major banking sectors (South Africa, Nigeria, Ghana and Kenya) all survived the global financial crisis and are continuing to rebound from the various difficulties they experienced in 2009. Rebounding economic activity and improved liquidity are bolstering growth,

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and the most recent available data for the region show that the recovery in the banking sector is accelerating.

South Africa Lagging Africa ­ Banking Sector Asset Growth, % y-o-y

Source: South African Reserve Bank; Central Bank of Nigeria; Central Bank of Kenya

Basel III: Still Some Uncertainty The Basel Committee on Banking Supervision signed off its new capital requirements in September 2010, marking a regulatory regime shift from Basel II to Basel III. Overall, we believe that Basel III will make the global banking system more robust. However, some questions remain about the implementation and enforcement of the new regulations. The key revisions were:

The quality and size of capital ratios are to be strengthened. These will include a common equity (core) capital requirement of 4.5% of risk-adjusted assets plus a `conservation buffer' of 2.5% for a total requirement of 7.0% (compared with the 2.0% minimum under Basel II). Failure to meet the conservation buffer will lead to constraints on dividend payments and bonuses. The broader Tier 1 ratio requirement is being raised from 4.0% to 6.0% (8.5% including the conservation buffer).

Tier 1 equity capital is going to be redefined to exclude lower-quality assets, including deferred tax assets, while asset weightings will be less forgiving. All of this will toughen ratio requirements, meaning that some banks that meet current criteria will have to improve their capital levels to meet Basel III standards.

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The less quantifiable amendments include the creation of a `macroprudential overlay'. This includes mandating that banks build up buffers of a 0-2.5% of risk-adjusted assets in the upward part of the economic cycle that can be drawn upon in slowdowns. Furthermore, the Basel Committee are exploring measures to deal with the systemic risks caused by banks that are `too big to fail', which may include larger capital requirements and surcharges for big banks.

Raising The Bar Capital Requirements As % Of Risk-Weighted Assets

Source: Bank for International Settlements

Basel III is not going to make a major difference to BMI's short-term forecasts. For a start, the revisions are certainly more stringent but not as tough as they could have been, and banks (and markets) were slightly relieved at the announcement. Banks also have until 2019 to comply with the new regulations, meaning that implementation will be gradual and have a more limited effect on the short-term outlook. In addition, banks are generally already ahead of the game on capital raising. The new requirements will not require major levels of new equity issuance on aggregate, with most major banks easily meeting the broad Tier 1 criteria set out by Basel III. These are minimum standards and in the post-Lehman environment investors have looked for banks to build stronger capital bases anyway.

There are, however, unanswered questions about the new regulatory requirements that cloud the mediumterm outlook. The biggest questions for us is how the countercyclical measures will work and what further steps might be taken to rein in risks from `too big to fail' banks. As it stands, domestic authorities will have to decide whether the rate of economic activity exceeds the desirable, pre-set pace of growth for any particular country. We believe that since the criteria will boil down to country-specific regulations it will be difficult to reach consensus on this issue. Regulations that are too stringent for a specific country, particularly if the economic trajectory is not as expected, would force further capital raising or profit retention and could well lead to lower loan growth. It would certainly complicate the work of fiscal and monetary policymakers in participating countries as it would add another layer of countercyclicality to the economy, in addition to tighter or looser official policy.

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Other questions relate to the composition of capital. For example, the requirement for banks to hold sufficient cash and government paper to meet a liquidity coverage ratio and survive a 30-day market crisis may be difficult to meet for emerging market banks operating in countries without deep, liquid government bond markets. As such, the Basel Committee agreed that this requirement would be `observational' until 2015, but other questions remain. Even if these liquidity requirements are met, we question whether the perceived risk of government paper is line with the actual risk: what of sovereign bonds in `safe' countries that are, in BMI's view, at risk of restructuring or defaulting, including some in the eurozone such as Greece and Portugal?

Ultimately, Basel III's success will be determined by whether it improves the stability of the banking sector while not stifling innovation, profitability and lending. We believe it is an improvement on the previous framework but several questions still need to be answered.

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Asia Banking Sector Outlook

Banks Riding The Liquidity Wave With the developed world's central banks accelerating their monetary stimulus measures, the potential for a continued surge in hot money inflows into Asia is high. This poses major risks for local banking sectors, not only due to the formation of asset bubbles, but also in lending to the real economy as banks increase credit expansion across the region. There could be a spike in non-performing loans (NPLs) if easy monetary policy is forcefully reversed down the line, although the crisis risks are minimal.

Governments and central banks in Asia have kept their currencies artificially weak in recent years. This has attracted a surge in speculative inflows as investors believe these currencies will eventually have to be revalued. Because of the large current account surpluses across the region, most countries are exporting capital and capital controls are unlikely to stop the flood of money coming in. While South Korea sets limits on banks' exposure to foreign exchange derivatives, Indonesia has introduced measures such as a one-month minimum holding period on monetary instruments issued by the central bank and Thailand removed the tax exemption of foreign purchases of government bonds, such measures are unlikely to stem the tide. The solution would be for Asian central banks to allow their currencies to revalue to the extent that this would eliminate their current account surpluses, but we believe this is unlikely and even if it were to happen it could attract more destabilising inflows in the interim. Whatever path is chosen, it seems that Asian banks would be forced to absorb an increasing amount of liquidity. While this should help profit growth and keep economic activity buoyant, the risk of a rise in NPLs in future is growing.

Hot Money Pouring In Asia ­ Reserves At Asian Central Banks, US$bn

Source: BMI, central bank data

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Crisis Passes, Positioning For Growth After suffering only minor profit damage as a result of the global financial crisis due to strong capitalisation and less risky lending practices than in the US and Europe, Asia's banks are now increasingly positioning for growth. Hong Kong has been the most clear example, where unfettered currency inflows have allowed banks to increase lending, with credit growth coming in at 24.1% year-onyear (y-o-y) in August 2010, after being in deeply negative territory 12 months earlier. As it has the region's most tightly managed peg and one of the highest current account surpluses this stands to reason. We continue to caution, however, that burgeoning property prices could take a dip in 2011, undermining loan quality for a large chunk of the banking sector.

While Hong Kong is perhaps the clearest example, we are seeing a shift in tact across the board. In Singapore and Taiwan, also economies with huge fundamental upside pressure on their currencies, loan growth has risen substantially. After dropping into negative territory in late 2009, Singaporean loan growth has surged to almost 10% y-o-y in August 2010, and this is on top of continued overseas expansion. The Taiwanese banking sector's loan trajectory has shown a similar trend, supported by the recent improvement in relations with Beijing. Meanwhile, Thailand's loan-to-deposit ratio has ticked up amid a newfound appetite for domestic lending, while Malaysian banks have accelerated lending with support from widening interest margins and are increasingly expanding operations overseas.

Bubble Risks Grow It is no surprise that the economies that are most actively seeking to prevent currency appreciation (Hong Kong, China, Taiwan and Singapore) are experiencing the most significant upside pressure on local property prices as hot money inflows are channelled into this area. Central bank sterilisation measures have clearly been inadequate in preventing domestic currency weakness measures from feeding through to local monetary expansion. As long as the US dollar continues to weaken, property bubbles across Asia will continue to build, in our view.

Well Capitalised And Able To Withstand Potential Shocks The well capitalised nature of the region's banking sector was the main reason why banks are now in a position to expand their loan books and support domestic economic growth, and with the exception of Japan we continue to anticipate solid equity-to-asset ratios preventing any major banking sector dislocation, even if property bubbles across Asia continue to inflate and burst in 2011. Tier 1 capital is estimated to be above 10% across Asia, far in excess of the 6% figure agreed upon in the Basel III requirements. Even in China, where we believe that the government may have to stand behind some of the larger banks if the property bubble bursts and local governments threaten to default on loans, Tier 1 capital remains high compared to US and European banks, with Industrial and Commercial Bank of China, one of the world's largest bank by market value, boasting a common equity-to-assets ratio of roughly 10%. Despite the limited crisis risks, we remain concerned that profitability will take a significant hit once hot money inflows into Asia slow down.

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Vietnam Commercial Banking Report Q1 2011

Table: Banks' Bond Portfolios

Bond Portfolio, US$bn Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 15.7 1,358.8 303.0 258.0 14.4 2,286.6 52.6 21.5 31.9 67.9 2.2 225.7 125.4 50.7 10.3 2,500.5

Bond, % total assets 26.0 11.5 22.1 24.0 5.5 26.5 13.2 26.8 27.0 13.4 12.8 15.6 12.8 16.3 10.3 19.1

Year-on-Year growth, % 19.4 24.9 29.1 20.6 18.5 12.4 18.1 62.3 16.8 36.2 18.2 -7.1 31.2 22.4 6.7 22.8

Source: Central banks, regulators, BMI

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Vietnam Commercial Banking Report Q1 2011

Table: Asia Commercial Banking Business Environment Ratings

Limits of Potential Returns Market Structure Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 43.3 93.3 73.3 83.3 73.3 30.0 70.0 33.3 50.0 66.7 20.0 76.7 70.0 56.7 63.3 90.0 Country Structure 45.0 55.0 90.0 55.0 62.5 75.0 80.0 47.5 60.0 90.0 55.0 85.0 70.0 65.0 52.5 85.0

Risks to Potential Returns Market Risks 30.0 56.7 70.0 53.3 76.7 63.3 76.7 56.7 56.7 96.7 36.7 76.7 83.3 80.0 40.0 100.0 Country Risks 42.0 76.0 84.0 56.0 42.0 80.0 80.0 40.0 50.0 88.0 44.0 68.0 74.0 68.0 46.0 78.0

Overall Rating 42.0 75.1 79.5 66.9 65.1 55.6 75.4 41.3 53.6 80.6 36.1 77.4 72.3 63.8 54.4 87.6 Ranking 52 13 8 24 29 37 12 55 43 6 56 10 17 31 41 2

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

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Vietnam Commercial Banking Report Q1 2011

Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios

Loan/ Deposit Ratio, % Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 76.7 69.5 51.5 79.5 72.9 74.6 75.6 75.1 66.5 71.9 68.0 122.7 75.1 95.3 120.9 78.9

Rank 41 49 58 42 44 46 45 55 53 47 52 12 43 25 7 39

Trend Falling Rising Falling Falling Falling Falling Falling Falling Falling Falling Falling Falling Falling Falling Rising Falling

Loan/ Asset Ratio, % 64.7 52.6 30.8 62.3 58.9 53.2 57.0 49.7 50.1 39.8 51.0 70.6 59.8 64.4 76.6 55.6

Rank 13 38 57 15 27 37 30 44 40 51 36 7 24 14 2 31

Trend Falling Rising Rising Rising Falling Falling Rising Falling Rising Falling Falling Rising Falling Falling Falling Falling

Loan/ GDP Ratio, % 43.7 127.4 200.7 48.3 25.6 89.7 114.4 24.8 35.8 108.4 22.9 110.1 154.7 73.8 112.3 51.1

Rank 43 9 3 41 52 20 11 56 48 13 55 12 7 29 10 39

Trend Rising Rising Rising Rising Falling Rising Rising Falling Rising Rising Falling Falling Rising Falling Rising Falling

Source: Central banks, regulators, BMI

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Vietnam Commercial Banking Report Q1 2011

Table: Anticipated Developments In 2011

Loan/Deposit Ratio, % Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 78.7 69.5 55.7 77.5 80.8 75.7 75.0 72.7 64.7 74.2 66.8 117.3 75.0 93.5 138.8 80.1

Trend Rising Falling Rising Falling Rising Rising Falling Falling Falling Rising Falling Falling Falling Falling Rising Rising

Loan Growth, US$bn 14.2 1,172.0 43.4 185.6 72.1 -556.5 49.7 4.5 12.2 34.9 3.5 61.6 49.7 16.5 33.0 443.3

Deposit Growth, US$bn 16.7 1,685.3 16.6 261.1 68.8 -824.9 68.8 7.7 21.4 38.2 5.5 90.6 67.0 21.7 13.1 419.8

Residual, US$bn -2.5 -513.3 26.9 -75.6 3.3 268.5 -19.1 -3.2 -9.2 -3.3 -2.0 -29.0 -17.3 -5.2 19.9 23.5

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

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Vietnam Commercial Banking Report Q1 2011

Table: Comparison Of Total Assets, Client Loans And Client Deposits, 2009-2010 (US$bn)

2010e Total Assets Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 71.3 13,038.7 1,411.6 1,121.9 322.8 8,042.2 444.5 76.9 133.1 551.5 21.8 1,732.6 1,051.3 333.9 148.4 13,304.6 Client Loans 46.2 6,857.4 443.9 723.9 191.7 4,280.7 257.4 36.7 66.8 221.4 11.7 1,204.2 641.5 216.0 113.7 7,464.2 Client Deposits 58.7 9,860.9 820.3 926.0 249.9 5,653.9 337.2 55.7 98.5 299.9 17.2 986.0 825.0 225.4 87.0 9,411.3 Total Assets 60.4 11,853.4 1,370.6 1,073.3 259.8 8,614.6 398.3 79.9 117.9 505.0 19.5 1,450.9 980.8 311.1 130.6 13,108.0

2009 Client Loans 39.1 6,234.0 422.8 668.6 153.0 4,585.4 227.0 39.8 59.1 200.9 9.9 1,023.7 586.0 200.3 100.1 7,282.2 Client Deposits 51.0 8,964.5 820.4 840.8 209.9 6,146.3 300.1 51.3 88.7 279.6 14.6 834.3 780.2 210.1 82.8 9,226.8

e = BMI estimate. Source: Central banks, regulators, BMI

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Vietnam Commercial Banking Report Q1 2011

Table: Comparison Of Per Capita Deposits, 2010e (US$)

GDP Per Capita Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 604 4,239 32,025 1,332 2,905 39,457 8,009 1,024 1,856 39,198 2,383 22,068 17,912 4,350 1,085 48,295

Client Deposits Per Capita 281 5,124 63,044 618 825 33,606 9,220 211 713 43,075 571 24,638 27,611 3,170 1,287 24,101

Rich 20% Client Deposits Per Capita 1,427 29,475 466,016 3,163 4,299 177,545 48,316 1,286 4,208 233,315 3,358 80,699 142,057 13,234 3,940 121,549

Poor 80% Client Deposits Per Capita 89 1,842 29,126 198 269 11,097 3,020 80 263 14,582 210 5,044 8,879 827 246 7,597

e = BMI estimate. Source: Central banks, regulators, BMI

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Vietnam Commercial Banking Report Q1 2011

Table: Interbank Rates And Bond Yields, 2009-2010

3-Month Interbank Rate, % Current Account, % of GDP, 2010e Bangladesh China Hong Kong India Indonesia Japan Malaysia Pakistan Philippines Singapore Sri Lanka South Korea Taiwan Thailand Vietnam US 3.1 4.6 4.1 -3.2 2.4 4.3 15.4 -2.0 5.6 23.2 -2.2 3.4 7.3 4.3 -5.6 -3.1 Budget Balance, % of GDP, 2010e -5.1 -0.3 -2.4 -8.0 -1.0 -8.5 -5.8 -6.3 -3.7 0.5 -8.0 -3.9 -3.5 -1.5 -4.7 -8.8 H110 na 1.71 0.50 7.00 7.00 0.24 2.70 12.10 4.70 0.56 9.58 4.44 0.48 1.41 10.25 0.35 2009 na 1.71 0.21 4.25 6.60 0.28 2.08 12.20 5.29 0.69 9.62 5.06 0.26 1.40 10.37 0.36

e = BMI estimate. Note: Incorporates actual financial markets data, estimated economic data and projected banking data. Source: Central banks, regulators, BMI

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Vietnam Commercial Banking Report Q1 2011

Vietnam Banking Sector Outlook

Foreign Banks Poised To Heat Up Competition In 2011 Competition in Vietnam's banking industry looks set to intensify in 2011 as foreign banks prepare to penetrate a market that has traditionally been dominated by state-owned banks. We believe small-sized domestic banks will lack economies of scale to compete effectively with foreign banks, resulting in weaker profit margins and a shrinking market share. However, we remain optimistic that the participation of foreign banks will result in a transfer of technological and operational know-how, which will help to speed up the modernisation of Vietnam's banking sector over the coming years.

Vietnam is expected to honour its commitment to the WTO by opening up its banking sector to foreign competition by end-2010. We believe that competition in the banking industry will intensify, particularly in domestic retail banking services as foreign banks will be allowed to compete on a level playing field with domestic banks. As Vietnam's economy embarks on its next phase of growth, liberalisation of the financial sector with help to pave the way for better financial products and services to meet the needs of businesses over the coming years.

Getting In Position With the accession of Vietnam into the WTO in 2007, foreign banks have begun to shift their attention towards the country's potential for growth. From our perspective, the key factors that underlie the banking sector's attractiveness include a massive population of 88.4mn, rising incomes and a growing demand for personal financial services among the high- and medium-income groups. Traditionally, foreign banks in Vietnam have limited their operations to wholesale services and foreign clients. However, as Vietnam prepares to open up its banking industry, foreign banks are ramping up efforts to establish their presence in retail banking services (see chart). To put this in perspective, Citibank and Standard Chartered Bank officially launched their respective retail banking operations in Hanoi in October. These moves came shortly after HSBC opened its fifth branch in Vietnam. These developments highlight the optimism that foreign banks have for the banking sector.

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Vietnam Commercial Banking Report Q1 2011

Gaining In Presence Number Of Banks By Category

Source: State Bank Of Vietnam, BMI

An Edge Over The Competition According to the State Bank of Vietnam, domestic banks currently dominate approximately 90% of the retail market share in Vietnam. Although this represents a significant challenge for foreign banks to penetrate a heavily entrenched market, we note that foreign banks hold a significant technological advantage over their competitors. This suggests that foreign banks are capable of providing more efficient and sophisticated financial services or introducing new services that domestic state-owned banks have neglected due to their limitations on the technological front. The existence of technological gaps, which are to a certain extent a result of a state-controlled banking sector, could be a key reason behind the optimism of foreign banks.

Capitalising Small-To-Medium Domestic Banks The opening up of the banking industry will have a significant impact on small-to-medium sized domestic banks. Small Vietnamese banks that are undercapitalised could lack the economies of scale to compete effectively with foreign banks. In a bid to address the issue, the Vietnamese government imposed a minimum capital of VND3.0trn (US$0.15bn) on commercial banks by December 2010. The government's decision effectively resulted in a consolidation of the banking sector through a series of mergers and acquisitions and initial public offerings. Nonetheless, we believe that small domestic banks will fail to compete effectively against foreign banks without considerable economies of scale that larger domestic banks currently command. As such, we expect weaker profit margins for small domestic banks in 2011 as they struggle to defend their market share.

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Vietnam Commercial Banking Report Q1 2011

A More Competitive Banking Sector Despite our view that domestic banks will face increasing competition and weaker profit margins in 2011, we remain optimistic that the participation of foreign banks will benefit the banking industry over the longer term. The transfer of technological and operational know-how is expected to speed up the modernisation of Vietnam's banking sector and pave the way for more sophisticated financial services. This will in turn allow the banking sector to better support Vietnam's economic growth over the coming years.

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Vietnam Commercial Banking Report Q1 2011

Economic Outlook

Real GDP Growth Set To Exceed Government's Target Vietnam's real GDP growth came in at a better than expected 7.4% year-on-year (y-o-y) in Q310, supported by robust growth in the construction and manufacturing sectors. The latest figures remain in line with our view that private consumption and infrastructure investments would continue to drive economic growth. However, given that Q310 figures were above expectations, we are revising our real GDP estimate upwards to 6.7% for 2010. Our real GDP forecast for 2011 remains at 5.6% in anticipation of a slowdown in external demand.

Following strong real GDP growth of 6.2% in H110, Vietnam's Q310 real GDP growth figure was stronger than anticipated at 7.4% y-o-y. Figures released by the General Statistics Office showed that the construction and manufacturing sectors were the key drivers of growth in Q310. In light of the strong figures for Q310, we have revised our real GDP growth estimate for 2010 upwards from 6.3% to 6.7%. Following the release of Q310 figures, the government said that real GDP growth could potentially exceed its real GDP growth forecast of 6.5% for 2010. The government has said it will maintain its aggressive growth target of 7.0-7.5% for 2011. However, we believe that global economic headwinds coming into play in 2011 will have a negative impact on investor sentiment and exports.

Construction And Manufacturing Lead The Way Looking at the key sectors of the economy, growth in industry and services continued to accelerate while agriculture remains on downward trend. We have said previously that infrastructure investment would provide support for the construction sector and be a key driver of economic growth for Vietnam in 2010 and 2011 (see our online service, August 5 2010, `Consumption And Infrastructure Investment To Cushion External Weakness'). The latest figures show that the construction sector grew at a robust pace of 11.4% y-o-y in Q310. Given that Vietnam will require further infrastructure investment to support its economic growth, we believe that the construction sector will continue to outperform in 2011. There is also an increasing focus by the government towards developing the agricultural sector and promoting foreign investment in the high-tech agricultural sector. However, we do not expect the agricultural sector to contribute significantly to real GDP growth in the short-to-medium term.

The manufacturing sector also outperformed, achieving 9.4% y-o-y growth in Q310. Although Vietnam's manufacturing sector is largely structured towards exports, we see domestic demand as a potential source of growth for the industry as incomes continue to rise. Given that the manufacturing sector makes up 63.0% of industrial production, we would expect to a similar pick up in industrial production growth. Vietnam's industrial production registered a seventh month of consecutive year-onyear growth in September, growing by 12.4% y-o-y. Our long-held view that domestic demand will remain resilient in 2011 suggests that industrial production will remain robust going forward.

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Vietnam Commercial Banking Report Q1 2011

Retail Sales Point To Robust Private Consumption Despite a 10.8% month-on-month (m-o-m) drop in tourist arrivals from 430,000 visitors in August 2010 to 383,500 visitors in September, tourist arrivals remain significantly above historical levels. In light of strong growth figures coming out of Asia in mid-2010, we believe that visitors from Asian countries will continue to provide support for Vietnam's tourism sector. Despite the drop in tourist arrivals in September, retail sales figures remain robust, increasing by 2.4% m-o-m. We note that retail sales have traditionally been an accurate indicator of private consumption. Resilient retail sales figures in September suggest to us that private consumption remains robust. We believe strong private consumption will remain a key factor driving domestic demand.

Trade Balance To Remain In Deficit Despite declining by 11.0% m-o-m in September 2010, goods exports actually grew by 5.7% quarter-onquarter in Q310. Imports grew by a smaller 3.2% in Q310, resulting in a narrowing of the trade deficit from US$2.8bn in Q2 to US$2.4bn in Q3. Although the momentum for goods export growth remains strong, we expect imports to outpace exports in the coming quarters on the back of robust domestic demand. A steady increase in infrastructure investments over the coming quarters should lead to an increase in raw material and machinery imports. As such, we maintain our prediction for Vietnam's trade balance to remain in deficit at 7.4% of GDP in 2010 and 7.6% in 2011.

In line with our view that there will be a slowdown in global economic growth in 2011, we are sticking with our below-consensus forecast for real GDP growth to come in at 5.6% for the year. We note that this is significantly below the Vietnamese government's target of 7.0-7.5%. We believe the government's imbalanced economic policies, which narrowly focus on economic growth while ignoring the risks of inflation, will lead to an overheating economy. As such, we expect consumer price inflation to accelerate from the current rate of 8.8% to 11.5% in 2011. This suggests that the State Bank of Vietnam could be forced to hike interest rates aggressively to cool the economy. Combined with global economic headwinds that will lead to a slowdown in external demand, we forecast Vietnam's real GDP growth being capped in 2011.

Table: Vietnam Economic Activity, 2007-2015

2007 Nominal GDP, VNDbn 2 Nominal GDP, US$bn 2 Real GDP growth, % change y-o-y 2 GDP per capita, US$ 2 1143715.1 71.2 8.5 836

2008 1477717.1 89.9 6.2 1,043

2009 1645481.0 92.5 5.3 1,060

2010e 1908952.6 99.4 6.7 1,085

2011f 2246180.4 113.7 5.6 1,274

2012f 2535644.7 128.4 6.1 1,424

2013f 2869066.5 149.0 7.0 1,637

2014f 3231621.0 172.3 7.0 1,874

2015f 3623413.0 198.5 7.0 2,139

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Vietnam Commercial Banking Report Q1 2011

Table: Vietnam Economic Activity, 2007-2015

2007 Population, mn

3

2008 86.2

2009 87.3

2010e 88.4

2011f 89.3

2012f 90.2

2013f 91.1

2014f 92.0

2015f 92.8

85.2

Industrial production index, % y-o-y, ave 1,2 Unemployment, % of labour force, eop 2

16.8

13.6

6.7

15.0

10.0

15.0

16.0

17.0

16.0

4.6

5.0

5.5

5.5

5.0

4.5

4.0

4.0

4.0

e/f = BMI estimate/forecast. Note: 1 At 1994 prices. Source: 2 General Statistics Office, 3 World Bank/BMI

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Vietnam Commercial Banking Report Q1 2011

Company Profiles

Vietcombank

Strengths One of the largest and longest established banks in Vietnam. Clear competence in external trade. Weaknesses Possible exposure to the effects of the bursting of asset price bubble early in 2009. Lack of international strategic partner. Opportunities A beneficiary of the further development of Vietnam's banking sector from its low base. Potential listing in the medium-to-long term. Threats More exposed than most major Vietnamese banks to the downturn in global trade.

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 Vietnam and was the first bank in Vietnam to have a centralised capital management structure. It describes itself as an `interbank forex payment centre for over 100 domestic banks and foreign banks' branches operating in Vietnam' and was the first commercial bank in Vietnam to deal foreign currencies. 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 a number 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; the Petroleum Insurance Company and Golden Insurance Company. Vietcombank is a generally successful institution, achieving consistent profitability and good core performance. For FY09, profits came to VND4.46trn, which exceeded predictions by 31% and was to a large extent driven by the success of the Vietnamese economy as a whole. Vietcombank's loan portfolio grew by 25.9% year-on-year (y-o-y) in 2009, indicating a strong demand for credit in the region's second fastest growing economy. This growth was in line with the national credit growth target of 25%, but below overall national credit growth of 40%. Despite the potential for overheating in the Vietnamese economy, the bank reported surprisingly low levels of bad debts, with the NPL ratio at 2.54%. Furthermore, it expects this trend to be maintained, predicting that the bad debts will fluctuate around 2.4-2.9% in 2010. However, despite the bank's track record of exceeding targets, the central bank turned down Vietcombank's application to increase its charter capital. This decision, which prevents Vietcombank from expanding more, is understood to have been blocked because the bank has failed to find an international strategic partner.

Company Data

Website: www.vietcombank.com.vn/en Status: State-owned commercial bank, public listed company

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Vietnam Commercial Banking Report Q1 2011

Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 121,430,900 50,830,650 85,339,460 8,051,755

2005 136,720,600 61,043,980 109,637,200 8,622,770

2006 166,952,000 67,742,520 119,778,900 11,202,340

2007 197,363,405 97,631,494 141,589,093 13,612,099

2008 191,151,945 109,762,527 127,015,694 14,690,895

Source: Vietcombank

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Vietnam Commercial Banking Report Q1 2011

BIDV

Strengths One of the largest and longest established banks in Vietnam. Regarded as an attractive partner by foreign banks and multilateral development banks. Weaknesses Possible exposure to the effects of the bursting of the asset price bubble early in 2009. Corruption scandal. Opportunities Joint ventures. Potential listing in the future. Threats Significant exposure to downturn in global trade. Loan portfolio growth caps. Company Overview Originally established as the Bank for Construction of Vietnam in 1957, the Bank for Investment and Development of Vietnam (BIDV) took its current name in 1990. It was the first of the four large state-owned commercial banks to be corporatised. Until 1994, BIDV operated mainly as a state-directed development bank. However, it now operates as a universal commercial bank providing currency, credit, banking and non-banking services. It also acts as an agency funding projects with sources from domestic and international financial institutions. BIDV has aimed to diversify its loan portfolio, which focuses on five areas: traditional lending, including syndicated loans, trade finance and guarantees; leasing; underwriting bond issues and taking direct equity investments in companies; acting as a paying agent for overseas development agencies; and performing wholesale banking functions for the World Bank's rural finance projects. Joint ventures and affiliates of BIDV include: VID Public Bank (in conjunction with Public Bank of Malaysia), Lao-Viet Bank (with Banque pour le Commerce Exterieur du Lao) and BIDV-QBE Insurance (with Australian non-life insurer QBE). In 2010, BIDV Insurance Company made an initial public offering (IPO). This is part of a process by the company to prepare for the eventual acquisition of BIDV itself, as well as the firm's search for an international partner. The insurance arm has shown impressive performance in recent years, including 50% growth in FY09. BIDV has also performed well, which can be largely attributed to the success of the Vietnamese economy as a whole, particularly industries associated with trade, one of the bank's key areas of activity. The growth of BIDV and other banks' loan portfolios is to be capped at 25% in FY10. This government policy will put pressure on banks to rein in their growth. Credit rationing by the government and interest rate controls arguably paved the way for the corruption uncovered at BIDV. Deputy director Doan Tien Dung was arrested in early 2010 for alleged corruption. He was accused of receiving bribes in return for allocating finance to certain businesses. Website: www.bidv.com.vn/English Status: State-owned universal commercial bank

Company Data

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Vietnam Commercial Banking Report Q1 2011

Table: Key Statistics For BIDV, 2004-2006 (VNDmn)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 99,660 67,244 67,262 3,062

2005 117,976 79,383 85,747 3,150

2006 158,219 93,453 113,724 4,502

Source: BIDV 2006 annual report

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Vietnam Commercial Banking Report Q1 2011

VietinBank

Strengths One of the four largest state-owned commercial banks in Vietnam. Clearly a partner of choice for international institutions. Capable of sustaining growth in spite of the financial crisis. Weaknesses Opportunities Possible exposure to the effects of the bursting of the asset price bubble early in 2009. 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. 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 whole Vietnamese banking system. VietinBank's capital resources have kept increasing over the years and have been substantially rising since 1996, with annual average growth of 20%. VietinBank has developed a retail and administration network across the coun. The bank's network operates in 56 provinces and cities, with a focus on large cities such as Hanoi (12 branches; two transaction centres), Ho Chi Minh City (17 branches; one transaction centre); industrial zones; trading and economic parks; and densely populated areas. VietinBank is an investor in other institutions such as Saigonbank, Indovina Bank, Vietnam International Leasing Company and the VietinBank-Asia Insurance Company. VietinBank intends to sell 20% of the bank to foreign institutions, to develop international strategic partnerships and provide extra funds for the bank. The proposed partners are the Bank of Nova Scotia and the International Finance Corporation, each acquiring a 10% stake in VietinBank. This is expected to provide VietinBank with the foreign technical support necessary to continue its impressive recent performance. VietinBank's FY09 gross profit of VND3trn is expected to grow by a third to VND4tn in FY10. Its VND218trn loan portfolio is expected to grow by 30%. This is at odds with state credit policy. The government plans to limit credit growth in Vietnam to 25%. Any serious attempt to enforce this will limit growth by the banks, affecting profitability and general growth. Similarly, any increase in the NPL ratio will affect profitability, however for VietinBank this is 0.6%, which is below average for the Vietnamese financial sector.

Company Data

Website: www.vietinbank.vn Status: State-owned commercial bank

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Vietnam Commercial Banking Report Q1 2011

Table: Key Statistics For VietinBank, 2005-2008 (VNDmn)

2005 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 115,766,000 74,449,340 84,387,020 4,999,839

2006 135,363,000 80,091,150 99,683,410 5,607,022

2007 166,113,000 100,482,200 112,692,800 10,646,530

2008 193,590,357 118,601,677 121,634,466 12,336,159

Source: VietinBank 2008 annual report

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Vietnam Commercial Banking Report Q1 2011

Agribank

Strengths Established as one of the largest state-owned commercial banks. Massive branch network, especially in rural Vietnam. Weaknesses Opportunities Possible effects of the bursting of the asset price bubble in 2009. The size of Agribank's branch network means that it is an attractive partner for any other financial institutions looking to cross-sell products to the mass market in Vietnam. Possible listing in the long term. Threats Perceived exposure to the downturn in global trade. Credit rationing by state will limit growth.

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 in developing the agricultural and rural economy, as well as other fields of the Vietnamese economy. Agribank has over 35,000 staff and about 2,300 branches and transaction offices nationwide. Agribank, in common with much of the Vietnamese banking sector, has achieved excellent performance in the past few years. The gross profit for Agribank in FY09 stood at VND505bn, which exceeded the growth forecast by 56%. This performance is largely a reflection of Vietnam's strong overall economic performance. Business grew at about 25% y-o-y, with assets increasing in FY09 by 23.8% y-o-y and deposits by 27.59%. This deposit growth is a promising indicator as it allows for the possibility of increased lending without putting stress on the capitalisation of the bank. However, this will be frustrated by the limitation imposed on Agribank from the government, which said the bank's loan portfolio's growth is limited to 20% over FY10. This will be a significant limit on loan growth, which increased by 27% in FY09. If this is enforced by the government, it is expected that overall growth will trend towards the lower end of the 30-50% FY10 growth that is estimated. Agribank has completed a long-term financing agreement with the state oil company Petrovietnam to provide financing at lower interest rates for the company to develop Vietnamese oil resources. This could help Agribank establish more long-term relationships with major businesses.

Company Data

Website: www.agribank.com.vn Status: State-owned commercial bank Contact: Tel: (+84-4) 8313694/7723248

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Vietnam Commercial Banking Report Q1 2011

Table: Balance Sheet (VNDmn, unless stated)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholder Equity 161,757,200 129,204,000 92,212,210 483,619

2005 192,319,500 151,655,200 120,162,400 781,031

2006 238,495,000 181,253,000 160,396,500 2,565,545

2007 321,444,100 246,188,300 233,638,800 10,627,680

2008 400,485,200

299,954,000 17,798,090

Source: Agribank, Bloomberg

Table: Balance Sheet (US$mn, unless stated)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholder Equity 10,255.32 8,191.47 5,846.21 30.66

2005 12,081.89 9,527.28 7,548.84 49.07

2006 14,853.95 11,288.80 9,989.82 159.79

2007 20,068.94 15,370.44 14,586.93 663.53

2008 22,907.12 16,526.96 17,156.90 1,018.02

Source: Agribank, Bloomberg

Table: Key Ratios (%)

2004 Return On Assets Return On Equities Equity Asset Ratio 0.30

2005 0.16 45.88 0.41

2006 0.51 66.17 1.08

2007 1.61 69.38 3.25

2008 0.59 15.14 4.40

Source: Agribank, Bloomberg

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Vietnam Commercial Banking Report Q1 2011

MHB Bank

Strengths MHB continued to sustain rapid growth despite of the financial crisis. Focused on particular areas (eg: SMEs). Apparent restraint in lending in 2008, given that deposits rose faster than loans. Weaknesses Lack of scale. MHB is the seventh largest bank in Vietnam but a small institution by international standards. Rapid growth threatens increase in bad debts. Vulnerability to a drying up of liquidity within the banking system. MHB has been funding some of its growth through borrowing from other banks. Opportunities MHB can continue 2009's focus on rolling out a new core banking system, modernising the banks technology and working procedures. Potential listing in future. Threats Vulnerability to the direct or indirect impact from the downturn in global trade.

Company Overview

Mekong Housing Bank (MHB Bank) was established in 1997. It is the seventh largest bank in Vietnam in terms of total assets and branch network. It has 180 branches and sub-branches in 33 provinces and about 2,600 staff. MHB's core business includes the granting of loans to SMEs, individuals and households, especially asset-secured loans for construction companies to develop infrastructure for residential areas, particularly in the Mekong Delta. The bank is expanding its network as the government aims to promote home ownership and development in other areas of the country. The bank is no longer fully state-owned, after it made its first IPO to increase private involvement and provide access to new funding. The model has been successful, with a recent history of profits, although much of this can be attributed to the overall success of the Vietnamese economy. The government has become increasingly concerned with the growth of the credit supply in Vietnam and is trying to avoid the overheating of the economy at large. The determination of the government to avoid this led to the policy to limit credit supply growth to 25%. This risks putting a cap on MHB and other banks' growth, limiting the expansion of its loan portfolio and slowing profitability.

Company Data

Website: www.mhb.com.vn/en Status: State-owned commercial bank

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Vietnam Commercial Banking Report Q1 2011

Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn)

2006 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 18,734,297 9,976,585 5,005,864 na

2007 27,110,786 13,756,662 9,945,923 1,065,755

2008 35,162,410 15,947,869 12,028,555 1,119,843

na = not available. Source: MHB Bank 2008 annual report

© Business Monitor International Ltd

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Vietnam Commercial Banking Report Q1 2011

Habubank

Strengths Emerged from global financial crisis in a strong position. By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% and it is less dependent on borrowing from other financial institutions. Weaknesses Lack of scale. Habubank is a fairly large bank in Vietnam but a small institution by international standards. Potential problems in the wake of the bursting of the asset price bubble. Vulnerability to a drying up of liquidity within the banking system. Funding from, and loans to, other banks account for about one-third of total assets. Opportunities Threats Potential for growth from a low base. Growth limited by government lending policy.

Company Overview

Hanoi Building Bank (Habubank) was established in 1989 as the first commercial joint stock bank in Vietnam with the initial purpose of providing loans and services in housing and construction. With initial chartered capital of VND5bn, the bank was permitted to provide banking products and services for 99 years. The shareholder structure has been diversified, with the participation of individuals, state-owned enterprises and private enterprises. After more than 20 years, the bank now has chartered capital of VND2tn and an expanding branch network. The bank has been graded A for the last nine years and recognised as one of the safest, most efficient and stable banks by the State Bank of Vietnam. Habubank said it intends to list its shares on a central stock exchange in 2010, ending over the counter trading. It expects this to aid further development of the bank and to encourage greater interest in the bank as an investment. Overall, 2009 was a successful year for Habubank. Gross profits for FY09 totalled VND505bn, exceeding the original target by 26%. The loan portfolio increased in value by 27% to VND13tn and overall deposits came to VND25.5tn, also growing by 27%. Despite this rapid expansion in credit, the NPL ratio is dropping, falling from 2.85% in FY08 to 2.24% in FY09. The bank expects growth of 30-50% in 2010. However, this will be made difficult by the government's concerns over loose lending and overheating the Vietnamese economy. The government intends to insure that credit growth is limited to 25% in FY10. If this policy is implemented, then the growth possibilities for Habubank will be capped and its 50% growth target will be extremely hard to achieve.

Company Data

Website: www.habubank.com.vn Status: Commercial joint-stock bank

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Vietnam Commercial Banking Report Q1 2011

Table: Key Statistics For Habubank, 2004-2007 (VNDmn)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity 3,728,305 2,340,832 2,169,531 253,547

2005 5,524,791 3,330,218 3,096,275 391,464

2006 11,685,320 5,983,267 4,616,096 1,756,381

2007 23,518,680 9,285,862 8,467,382 3,179,345

Source: Habubank financial statements

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Vietnam Commercial Banking Report Q1 2011

Eximbank

Strengths Valued by the major international banks that deal with it. Emerged from global financial crisis in a strong position. By not recycling the rapid growth of deposits into new loans, the bank has reduced its loan-to-deposit ratio to well below 100% and is less dependent on borrowing from other financial institutions. It appears to be reducing its vulnerability to a lack of liquidity within the banking system; loans to other banks account for less than a quarter of its total assets. Funding from other banks accounts for about 3% of the total. Weaknesses Lack of scale. Eximbank is a fairly large bank in Vietnam but a small institution by international standards. Potential for problems in the wake of the bursting of the asset price bubble. Opportunities Threats Potential for continuing growth from a low base. Vulnerability to direct or indirect impact from the downturn in global trade. Profit growth is particularly threatened by government loan policy.

Company Overview

Vietnam Export-Import Bank (Eximbank), established in 1989, is one of country's the largest commercial joint stock banks in terms of owner's equity. It has a nationwide network of 64 branches and its head office is in Ho Chi Minh City. The Vietnamese financial sector has experienced strong growth in recent years, and still Eximbank has performed far above trend for the sector, posting growth in gross profits in FY09 of 60.6% y-o-y to reach VND1.14trn. This increased profitability was accompanied by a growth in Eximbank's loan portfolio of 80.8% y-o-y to a total value of VND38.38trn. Overall loan portfolio growth for the whole sector was 27.7% and overall assets were up by 37% to VND66trn. The bank's growth is threatened by government concerns over the credit supply. The government intends to limit credit supply growth to 25% in FY10. This risks putting the brakes on banks' growth, which for Eximbank was largely fuelled by an expansion in its loan portfolio. However, the application of these rules to Eximbank is likely to be less severe given its role in the export sector, which the government is keen to promote and protect as much as possible from restrictive measures aimed at preventing the economy from overheating.

Company Data

Website: www.eximbank.com.vn/en Status: Commercial joint-stock bank

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Vietnam Commercial Banking Report Q1 2011

Table: Balance Sheet (VNDmn, unless stated)

2005 Total Assets Loans & Mortgages Total Deposits Total Shareholder Equity Earnings Per Share, VND 11,369,230.0 6,427,689.0 8,352,111.0 835,539.0

2006 18,323,770.0 10,161,270.0 13,141,180.0 1,946,667.0

2007 33,710,420.0 18,378,610.0 22,906,120.0 6,294,943.0 2,379.00

2008 48,624,110.0 21,232,200.0 31,254,020.0 12,844,080.0 1,052.00

Source: Eximbank, Bloomberg

Table: Balance Sheet (US$mn, unless stated)

2005 Total Assets Loans & Mortgages Total Deposits Total Shareholder Equity Earnings Per Share, US$ 714.3 403.8 524.7 52.5

2006 1,141.2 632.9 818.5 121.2

2007 2,104.7 1,147.5 1,430.2 393.0 0.15

2008 2,781.2 1,214.4 1,787.7 734.7 0.06

Source: Eximbank, Bloomberg

Table: Key Ratios (%)

2005 Return On Assets Return On Equity Loan/Deposit Ratio Loan/Asset Ratio Equity/Asset Ratio 7.3

2006 1.7 18.6

2007 1.8 11.2 80.6 54.7

2008 1.7 7.4 67.9 43.7 26.4

10.6

18.7

Source: Eximbank, Bloomberg

© Business Monitor International Ltd

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Vietnam Commercial Banking Report Q1 2011

Sacombank

Strengths Strategic partnerships with ANZ and the IFC, plus recognition and various awards from the government and trade press. Emerged from the global financial crisis in a strong position. By not recycling the rapid growth of deposits into new loans the bank has reduced its loan-to-deposit ratio to well below 100%. The bank also appears to be reducing its vulnerability to a lack of liquidity within the banking system. Weaknesses Lack of scale. Sacombank is a fairly large bank in Vietnam but a small institution by international standards. Potential direct and indirect problems from the bursting of the asset price bubble. Opportunities Potential for continuing growth from a low base. Leverage of strong position in SME sector. Expansion into southern China and countries in the Association of Southeast Asian Nations. Threats Vulnerability to direct or indirect impact from the downturn in global trade. Vulnerable to government credit caps.

Company Overview

Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992. It has been listed on the Ho Chi Minh City Stock Exchange since July 2006. Its foreign strategic partners and shareholders include the Australia and New Zealand Banking Group (10% shareholder), the IFC (5.25%) and Dragon Financial Holdings (8.73%). Foreign shareholders collectively own 30% of the bank. Its network includes 247 branches and transaction offices in 44 cities. It also has a representative office in Nanning, southern China, and a branch in Laos. In 2008, the bank was restructured as a financial holding company. Its subsidiaries include: Sacombank Asset Management Company; Sacombank Remittance Express Company; Sacombank Leasing Company; Sacombank Securities Company; Sacombank Jewelry Company. Associated companies include: Viet Fund Management JSC; Saigon Thuong Tin Investment JSC; Tan Dinh Import and Export JSC; Toan Thin Phat Architecture Investment Construction Company; and Saigon Thuong Tin Real Estate JSC. More than 50% of Sacombank's loans are to SMEs, which the bank has targeted as its market. Sacombank intends to help SMEs undertake IPOs. These services have been combined with attempts by Sacombank to diversify income sources away from the credit business. To a certain extent this has been successful, with funds from these sources accounting for 25.5% of overall income. Sacombank has, in common with much of the Vietnamese financial sector, performed strongly in recent years. This can largely be attributed to the success of the Vietnamese economy as a whole. Sacombank posted FY09 gross profits of VND1.9trn, exceeding the predicted figure by 19%. This trend is expected to continue as the Vietnamese economy continues to grow rapidly.

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Vietnam Commercial Banking Report Q1 2011

However, the success of Sacombank does partly depend on the outcome of increasing government concern over the supply of credit. The government has announced its intention to limit the growth of credit to 25%. While this would still allow for substantial growth across the Vietnamese financial sector, it would place a limit on growth for Sacombank and other institutions. Sacombank will come under a certain amount of pressure given its focus on SMEs.

Company Data

Website: www.sacombank.com.vn Status: Commercial joint stock bank

Table: Stock Market Indicators

2005 Market Capitalisation, VND Market Capitalisation, US$ Share Price, VND Share Price, US$ Share Price, % change (eop) Change, year-to-date Shares Outstanding (mn) 485.18

2006

2007

2008 9,413,129.00 538.42 12,165.42 0.70 -70.39

2009 16,147,851.00 873.85 19,921.63 1.08 54.93

Dec 2 2010 13,768,845.52 706.17 15,000.00 0.77

15,043,772.00 29,139,732.00 936.96 20,404.72 1.27 1,819.30 37,657.61 2.35 84.91

-14.67 737.27 773.81 746.14 810.57

Source: Sacombank, Bloomberg

Table: Balance Sheet (VNDmn, unless stated)

2005 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 1,445,4340 8,379,335 10,467,160 1,887,680 624.77

2006 24,776,180 14,312,890 17,511,580 2,870,346 758.09

2007 64,572,880 35,200,580 44,231,940 7,349,659 1,846.09

2008 6,843,8570 34,757,120 46,128,820 7,758,624 1,235.72

2009 104,019,100 59,141,490 60,516,270 10,776,900 4,459.64

Source: Sacombank, Bloomberg

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Vietnam Commercial Banking Report Q1 2011

Table: Balance Sheet (US$mn, unless stated)

2005 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 908.05 526.41 657.57 118.59 0.04

2006 1,543.11 891.44 1090.66 178.77 0.05

2007 4,031.52 2,197.70 2,761.56 458.87 0.11

2008 3,914.58 1,988.05 2,638.50 443.78 0.08

2009 5,629.05 3,200.47 3,274.87 583.20 0.25

Source: Sacombank, Bloomberg

Table: Key Ratios (%)

2005 Return on Assets Return on Equities Loan/Deposit Ratio Loan/Asset Ratio Equity/Asset Ratio 80.49 58.29 13.06

2006 2.40 19.76 82.12 58.10 11.59

2007 3.13 27.36 79.98 54.79 11.38

2008 1.44 12.64 75.89 51.15 11.34

2009 1.94 18.25 98.58 57.35 10.14

Source: Sacombank, Bloomberg

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Vietnam Commercial Banking Report Q1 2011

Saigonbank

Strengths Weaknesses Record of strong growth over the medium term. Lack of scale. Saigonbank is a medium-sized bank in Vietnam but a small institution by international standards. Saigonbank's loan-to-deposit ratio was relatively high in 2009 by the standards of other banks. Opportunities Threats Potential for continuing growth from a low base. Vulnerability to impact, direct or indirect, from the downturn in global trade.

Company Overview

Saigonbank for Industry and Trade (Saigonbank) was one of the first commercial joint stock banks in Vietnam, established in 1987 with initial chartered capital of VND650mn and operation duration of 50 years. Saigonbank increased its chartered capital from VND650mn to VND1.02bn in 20 years as part of a growth-orientated policy. Saigonbank, like much of the Vietnamese financial sector, has shown strong performance over recent years. Most of this success can be attributed to the general success of the Vietnamese economy. Saigonbank has posted strong profits, with profitability increasing y-o-y in FY09. It is expected that gross profits in FY10 will reach VND900bn. However, this rapid growth will be hindered by the government's concerns over credit supply growth. The government aims to limit this to 25% to prevent broader economic difficulties. Enforcing such a policy will cap the potential profitability of Saigonbank in FY10. Unlike many Vietnamese banks, Saigonbank does not have a foreign strategic partner for its operations. This has led it to develop a different kind of modernisation program, identifying its own priorities. So far, a major priority has been the development of online banking services, as highlighted by the recent decision to use SunGuard's Ambit Online Banking to offer new online services to customers. Saigonbank hopes moves such as these will ensure it is not left behind technologically by foreign-sponsored competitors.

Company Data

Website: www.saigonbank.com.vn Status: Commercial joint stock bank

Table: Stock Market Indicators

2004 Shares Outstanding (mn)

2005

2006

2007 102.0

2008

9M09

Source: Saigonbank, Bloomberg

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Vietnam Commercial Banking Report Q1 2011

Table: Balance Sheet (VNDmn, unless stated)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 3,188,300 2,611,141 1,964,739 476,062

2005 4,290,929 3,527,109 2,830,064 609,434

2006 6,240,308 4,811,056 3,947,700 931,562

2007 10,184,650 7,300,613 6,466,654 1,431,610 2,432.00

2008 11,205,360 7,844,450 7,164,714 1,469,766 1,581.00

2009 11,875,920 9,600,247 8,481,534 1,934,750 1,572.00

Source: Saigonbank, Bloomberg

Table: Balance Sheet (US$mn, unless stated)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 202.14 165.55 124.56 30.18

2005 269.56 221.58 177.79 38.29

2006 388.66 299.64 245.87 58.02

2007 635.86 455.80 403.74 89.38 0.15

2008 640.93 448.69 409.81 84.07 0.10

2009 642.67 519.52 458.98 104.70 0.09

Source: Saigonbank, Bloomberg

Table: Key Ratios (%)

2004 Return on Assets Return on Equities Loan/Deposit Ratio Loan/Asset Ratio Equity/Asset Ratio 14.93

2005 2.14 14.74

2006 2.26 15.47

2007 2.08 14.43 112.32 71.32

2008 1.51 11.12

2009 1.82 12.34

14.20

14.93

14.06

13.12

16.29

Source: Saigonbank, Bloomberg

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Vietnam Commercial Banking Report Q1 2011

SeABank

Strengths Record of strong growth over the medium term. Partnership with Societe Generale. Weaknesses Lack of scale. SeABank is a medium-sized bank in Vietnam but a small institution by international standards. SeABank's loan-to-deposit ratio was relatively high by the standards of other banks in 2009. Did not meet FY09 gross profit target. Opportunities Threats Potential for continuing growth from a low base. Vulnerability to direct or indirect impact from the downturn in global trade.

Company Overview

South East Asia Commercial Joint Stock Bank (SeABank) was established in 1994. It aims to become one of the leading joint stock banks in Vietnam and has a programme to modernise the bank and achieve a sustainable competitive edge. After expansion in 2009, the bank has 126 branches and offices, most less than two years old. This programme is largely possible due to its strategic partnership with Societe Generale, which owns 20% of the firm. The bank's targets for 2010 include: minimum total assets of US$3.125bn; minimum total capital of US$500mn; at least 200 facilities open; 1mn customers; and 2,000 employees. The speed of expansion can be also be seen in the performance of SeABank in FY09. Overall loan portfolio growth was 122% y-o-y, reaching a VND24.02trn. Total assets grew by 136% y-o-y to VND30.8trn. The likelihood of further rapid growth has been increased by the decision to increase the charter capital of SeABank by 36% to a total of VND4trn. However, the bank's rapid expansion has not been completely free of problems. SeABank was one of the few Vietnamese financial institutions to fall short of its FY09 gross profit target, with profits growing by 8% y-o-y to VND479bn.

Company Data

Website: www.seabank.com.vn Status: Commercial joint stock bank, subsidiary of Societe Generale

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Vietnam Commercial Banking Report Q1 2011

Table: Balance Sheet (VNDmn, unless stated)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (VND) 2,283,813 530,767 499,021 161,473

2005 6,124,938 1,347,680 2,312,406 291,776

2006 10,200,420 3,353,999 3,511,683 1,055,536

2007 26,241,090 10,994,810 10744180 3,366,458 2,098.00

2008 22,473,980 7,506,934 8,587,008 4,177,114 1,058.00

Source: SeABank, Bloomberg

Table: Balance Sheet (US$mn, unless stated)

2004 Total Assets Loans & Mortgages Total Deposits Total Shareholders' Equity Earnings per share (US$) 144.79 33.65 31.64 10.24

2005 384.78 84.66 145.27 18.33

2006 635.30 208.89 218.71 65.74

2007 1,638.33 686.45 670.80 210.18 0.13

2008 1,285.48 429.38 491.16 238.92 0.06

Source: SeABank, Bloomberg

Table: Key Ratios (%)

2004 Return on Assets Return on Equities Equity/Asset Ratio 7.07

2005 0.95 17.70 4.76

2006 1.21 14.63 10.35

2007 1.64 13.52 12.83

2008 1.32 8.51 18.59

Source: SeABank, Bloomberg

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Vietnam Commercial Banking Report Q1 2011

BMI Banking Sector Methodology

BMI's Commercial Banking Forecast Report series is closely integrated with our analysis of country risk, macroeconomic trends and financial markets. As such, the reports draw heavily on our extensive economic data set, which includes up to 550 indicators per country, as well as our in depth view of each local market. We collate our commercial banking databank from official sources (including central banks and regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed. Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only used as a backup. All of the risk ratings and forecasts within this report are a result of BMI's own proprietary research and do not in any circumstances include consensus or third party numbers.

How Our Data Set Is Structured The reports focus on total assets, client loans and client deposits.

Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country. They do not incorporate the balance sheet of the central bank of the country in question.

Client loans are loans to non-bank clients. They include loans to public sector and state-owned enterprises. However, they generally do not include loans to governments, government (or nongovernment) bonds held or loans to central banks. Client deposits are deposits from the non-bank public. They generally include deposits from public sector and state-owned enterprises. However, they only include government deposits if these are significant.

We take into account capital items and bond portfolios. The former include shareholders funds, and subordinated debt that may be counted as capital. The latter includes government and non-government bonds.

In quantifying the collective balance sheets of a particular country, we assume that three equations hold true:

Total assets = total liabilities and capital;

Total assets = client loans + bond portfolio + other assets;

Total liabilities and capital = capital items + client deposits + other liabilities.

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Vietnam Commercial Banking Report Q1 2011

In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be reconciled with equation one. In practice, other assets and other liabilities are analogous to inter-bank transactions. In some cases, such transactions are generally with foreign banks.

In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape, and we do not include them in our figures. The US is the main exception to this.

In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in another country. In some cases, client deposits include significant amounts that have been deposited by residents of another country. Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the richer OECD countries and certain countries in Central and Eastern Europe.

Commercial Bank Business Environment Rating

In producing our Commercial Banking Business Environment Rating, our approach has been threefold. First, we have explicitly aimed to assess the market attractiveness and risks to the predictable realisation of profits in each state, thereby capturing the operational dangers facing companies operating in this industry globally. Second, we have, where possible, identified objective indicators that serve as proxies for issues/trends within the industry to ensure consistent evaluate across states. Finally, we have used BMI's proprietary Country Risk Ratings in a nuanced manner to ensure that the ratings accurately capture broader issues that are relevant to the industry and which may either limit market attractiveness or imperil future returns. Overall, the ratings system, which integrates with all the other industry Business Environment Ratings covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe.

Conceptually, the ratings system divides into two distinct areas:

Limits of Potential Returns: Evaluation of industry's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development.

Risks to Realisation of Returns: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period.

In constructing these ratings, the following indicators have been used. Almost all indicators are objectively based.

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Vietnam Commercial Banking Report Q1 2011

Table: Commercial Banking Business Environment Indicators And Rationale

Limits of Potential Returns Banking market structure Estimated total assets, 2010 Estimated growth in total assets, 20102015 Estimated growth in client loans, 20102015 Country Structure GDP per capita Active population Corporate tax GDP volatility Risks to Realisation of Returns Banking market risks Regulatory framework and industry development Regulatory framework and competitive environment Country risk From BMI's Country Risk Ratings (CRR) Short-term financial risk Policy continuity Legal framework Bureaucracy

Rationale

Indication of overall sector attractiveness. Large markets are considered more attractive than small ones Indication of growth potential. The greater the likely absolute growth in total assets, the higher the score Indication of the scope for expansion in profits through intermediation

A proxy for wealth. High-income states receive better scores than lowincome states Those aged 16-64 in each state, as a % of total population. A high proportion suggests that the market is comparatively more attractive A measure of the general fiscal drag on profits Standard deviation of growth over seven-year economic cycle. A proxy for economic stability

Subjective evaluation of de facto/de jure regulations on overall development of the banking sector Subjective evaluation of the impact of the regulatory environment on the competitive landscape

Rating from CRR, evaluating currency volatility Rating from CRR, evaluating the risk of a sharp change in the broad direction of government policy Rating from CRR, to denote strength of legal institutions in each state. Security of investment can be a key risk in some emerging markets Rating from CRR to denote ease of conducting business in the state

Source: BMI

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Vietnam Commercial Banking Report Q1 2011

Weighting: Given the number of indicators/datasets used, it would be inappropriate to give all subcomponents equal weight. Consequently, the following weights have been adopted.

Table: Weighting Of Indicators

Component Limits of Potential Returns, of which: ­ Banking market structure ­ Country Structure Risks to Realisation of Returns, of which: ­ Banking market risks ­ Country Risk

Weighting, % 70, of which 60 40 30, of which 40 60

Source: BMI

© Business Monitor International Ltd

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