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July 14h 2008

Banking Sector Report


February 2011
September 2009

Vietnams banks - challenges remain but finally we see some value

Vietnams top 16 banks are trading at an average forward PE of 8.89 and


PB of 1.28.

HSC forecasts top line growth in total operating income of 20.8% in FY2011
and 18.4% in FY2012.

This will be driven by growth in net interest income which we estimate ac-
counted for 76.1% of total operating income in FY2010.

We further forecast deposits and loans for the top 16 banks to grow both
grow by 19% this year.

However EPS is forecast to decline 7% in FY2011 and then grow 7% in


FY2012 on heavy dilution due to capital raising in FY2010.

The banking sector is in transition with growth slowing but also more con-
centrated in a handful of top private banks.

Systemic risk is being tackled by a host of new regulations and higher capi-
tal requirements.

Non-performing loans are a valid concern going forward but we forecast


declared NPLs are likely to rise only gradually to 3.8% by FY2012.

Consolidation will take place but will occur gradually over the rest of the
Fiachra Mac Cana
Head of Research decade.
fiachra.maccana@hsc.com.vn

Nguyen Thi Tam Hanh On fundamental grounds we like EIB; TCB; MB; STB and ACB that order
Banking Analyst amongst the JSCBs.
hanh.ntt@hsc.com.vn

Nguyen Thi Thuy Linh However we appreciate its difficult for foreigners to buy most of these banks
Banking Analyst
linh.ntt@hsc.com.vn due to the foreign ownership ratio.

However we note the foreign room in STB is 6 million shares while MB will
HCMC Securities Corporation
Level 5 & 6 AB Tower, list this year.
76 Le Lai St., District 1, HCMC
T: (+84 8) 3823 3299
F: (+84 8) 3823 3301 Then amongst the state owned banks we favour CTG and among smaller
banks we like HBB.
Hanoi office
6 Le Thanh Tong St.,
Hoan Kiem Dist, Ha Noi
T: (+84 4) 3933 4693
F: (+84 4) 3933 4822
E: info@hsc.com.vn

www.hsc.com.vn

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Executive summary

The banking sector has entered into an important transi- stake to the IFC. The IFC has been instrumental in help-
tion phase. On the one hand bank stocks have been out ing both ACB and STB develop over the last decade
of favour for three years and are currently very cheap on and they may be able to repeat the trick with CTG. VCB
either a PE or PB basis. However forward sector top line in contrast which was the doyen of state owned banks
growth is likely to slow down somewhat and with dilution has become bogged down in ownership issues with the
and a new NPL cycle forward EPS growth will be thin for government and needs to find its way out of the maze.
the next two years. The stronger banks have emerged
from the pack and will gain market share even as the A tougher regulatory regime being put in place since last
rest of the sector consolidates. HSC believes that all of year has put stricter limits in place for capital; operating
the bad news has already been priced into the sector ratios and promised to being the long awaited consoli-
and that now is a good time to start slowly accumulat- dation process. There are too many banks in Vietnam
ing bank shares. But gradually as we dont expect real and this is illustrated by the average NIMs which at an
outperformance to begin until FY2012 onwards. estimated 3.4% in FY2010 are well below other devel-
oping markets which enjoy NIMs of 5-6%.
The banking sector has been out of favour for several
years now. Having peaked along with the market back The implementation of Circular 13 (and amended by cir-
in FY2007 bank stocks have dropped sharply and now cular 19) raised the CAR to 9% and set a loan to deposit
trade at an aggregate weighted FY2011 PE of 9.08xs ration of just 80% for banks. HSC estimates that the
and PB of 1.29xs (top 14 banks listed or on the OTC LDR was around 90-95% at the end of last year. Then
market). And therefore the sector is cheaper than it has with Decree 141 the minimum capital threshold was
ever been and appears to represent good medium term set at VND3 trillion and while it was delayed at the last
value at current levels. minute many smaller banks had already moved to raise
their capital. All this meant that we saw a huge amount
Bank penetration is still low in Vietnam and the sector of capital raising in the sector in the 2-H FY2010. And
has enjoyed 5 year deposit and loan CAGRs of 28% much if the dilutory effect of this will fall into FY2011.
and 28.9% respectively, Thats quite impressive and has Therefore only a handful of the top 16 banks we looked
been driven by rapid network expansion on the part of at will see EPS growth this year. But from FY2012 bot-
the largest banks with an estimated 6,467 branches op- tom line growth will resume again.
erated y the top 16 banks at the end of last year. As a
result net interest income has surged and in turn has The regulatory revolution in FY2010 has led to higher
enabled total operating income to expand rapidly. Over lending rates and appeared to raise funding costs also.
time the private sector joint stock commercial banks But with the delay in decree 141 smaller banks have
(JSCBs) have taken market share away from the state been given another 12 months to survive into the next
owned commercial banks (SOCBs) and now account for round, Therefore it would appear that the long awaited
about 40% of the total market. consolidation in the sector will be delayed further.
.
Now that first phase of development where the entire However while the pace of that transition appears slow to
banking sector enjoyed spectacular growth rates over the casual eye much is happening beneath the surface.
the past five years is now coming to an end. Therefore The old model adapted after the clean-up of the NPL
was can say that the Vietnamese banking industry is an crisis from FY2002-2003 has seen a rapid expansion in
industry in transition. And forward growth in our opinion the banking industry. The number of branches has ex-
will be restricted to those banks that have built a solid ploded and the footprint of the industry in the economy
franchise will continue to show double digit top and bot- has grown exponentially. A strong private banking sec-
tom growth. A small group of four or five private sec- tor has grown up alongside the state owned banks and
tor banks such as EIB; TCB; STB; ACB and MB have now commands almost 40% of the lending and deposit
emerged from the pack and will be the main challengers markets.
to the state owned banks going forward. A handful of
other banks such as MSB or HBB may emerge as strong However this model has reached the end of its useful
regional banks but we think the process of deciding the life and is no longer fit for purpose. Overexpansion of
leading group of banks has already been completed. both the monetary base and credit growth has led to
some nasty macro-economic side effects such as high
Then amongst the state owned banks CTG has made inflation and currency depreciation. Indeed a mini credit
faster progress in recent years in terms of transforming bubble risks an increase in nonperforming loans (NPLs)
itself into a more commercial bank and recently sold a over the next few years. And with the closing of the gold

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

trading floors and tightening restrictions on new branch tant to pay banking fees however and therefore this seg-
opening the rapid expansion of recent years is now ment is likely to expand with net interest income going
coming to an end. forward but not faster than it. Wealth advisory is a new
product in this segment but for the time being it appears
HSC believes that non-performing loans will increase to amount to bancassurance and slightly more exotic
gradually over the next few years but its important to savings products.
recognise that there is and will continue to be a gap be-
tween actual and declared NPLs. No bank will want to Trading and investment securities segments which
show a number over 3% which triggers special attention catches three smaller earnings segments are also un-
and effective loss of operational independence from the likely to spring many surprises over the forecast period.
SBV. Therefore we see the earnings risk from higher We see a drift away from trading securities to holding
declared NPLs as being reasonably contained. And we either more government bonds or making more invest-
also note that while actual NPLs amongst the SOCBs ments in affiliates. The stock market has been a disap-
are likely fairly higher most larger private sector banks pointment for the last few years and its no surprise that
are fairly well run and have avoided many of the NPL banks have dumped most of their stock portfolios.
pitfalls their state owned cousins were unable to avoid.
Non-performing loans are a big concern for many ob-
We are also likely to see more restrictions on interbank servers. However as we explain we think most banks
lending and a renewed push into expanding retail bank- will strive hard to keep this under 3% which is the trigger
ing on the part of many banks. In terms of products the point for SBV intervention. Therefore while actual NPLs
tricky regulatory process has made it difficult for banks will rise especially as the state owned sector undergoes
to differentiate their product offerings. And the lack of painful restructuring most banks will try to keep declared
access to long term capital makes it hard to expand sta- NPLs under control. State owned banks however may
ple retail products such as mortgages or car loans into a have little choice but to write off some large scale loans.
mass market offering. Credit cards have enjoyed rather Meanwhile the private sector has managed to avoid
mixed success with fears of fraud curtailing expansion. over-lending to SOEs and it must be said in generally in
However we have seen a move to offering unsecured much better shape.
loans to salaried workers which is surely a growth area
once proper credit risks have been put into place. When we were interviewing bankers in preparation for
this report we asked how consolidation in the sector
Indeed the introduction of negotiable rates has been a might come about. More specifically we asked them
major breakthrough for banks in that it allows them both whether they would be interested in acquiring smaller
to service higher risk segments as they are now allowed banks if they came on the market. By and large there
to properly price in credit risk. And it also allows them was much skepticism about M&A from both large and
to enter new segments where the risk is still not fully smaller banks with the larger banks very aware of the
understand by charging higher than average rates ini- headaches that accompany bank mergers worldwide.
tially until the default ratios become clear. Going forward Therefore we dont doubt that reducing the numbers of
we see net interest income as keeping it position as the banks in the system will be the challenge of the decade
core of all bank earnings. But we do not expect NIMs to for the SBV. Even so it has happened in many other
rise for the next two years and with branch expansion regional countries and is a necessary step to strengthen
slowing also the growth in sector interest income will the sector and both improve NIMs while reducing sys-
slow somewhat over the next two years. temic risk.

Therefore it is either those banks who have ample capi- The sector is at an interesting cross roads then. And
tal on hand to continue to expand their networks such as while overall growth will slow slightly we see tremen-
EIB, TCB & MB or those banks who intend to focus on dous opportunity in some individual counters. And with
lifting profitability per branch such as STB that will stand valuations so low the timing is good. We are aware of
out more over the next two years. the difficulties in getting real exposure to the sector due
to the limitations imposed by the OTC market; poor li-
This lack of a product differentiation has also been mir- quidity or full foreign ownership limits. But there are
rored in the failure of banks to expand their fee earning ways around this as we point out in the next section of
businesses as fast as they hoped, Indeed the closure of the report. Therefore we would weigh the banking sec-
the gold trading floors dealt a large blow to fee income tor at market weight over the medium to long term and
at some major private sector banks last year. However advise investors to gradually increase their exposure to
some banks such as STB; MB and HBB have devel- the sector. However we believe the real outperformance
oped strong securities subsidiaries which contribute to of the sector will likely not begin until next year.
this segment. The Vietnamese consumer is still reluc-

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Price equity ratio for top 16 banks
Type Short name Net profits Net profits for shareholders Average outstanding share Earnings per share Current Trailing Forward P/E
price P/E
FY2010e FY2011F FY2012F FY2010e FY2011F FY2012F FY2010e FY2011F FY2012F EPS 2010 EPS 2011 EPS 2012 2011F 2012F

www.hsc.com.vn
SOCB VBARD 2,624,554 3,056,798 3,751,620 30,937,992 33,180,078 35,382,884 N/A

SOCB BIDV 2,943,396 3,235,296 3,330,279 23,367,507 24,367,256 26,711,686 N/A

SOCB CTG 3,308,323 3,285,306 3,757,466 2,646,658 2,628,245 3,005,973 1,215,495,293 1,517,229,121 1,517,229,121 2,177 1,732 1,981 23,700 10.9 13.7 12.0

SOCB VCB 4,086,613 5,139,174 6,011,593 3,882,283 4,882,215 5,711,013 1,299,119,335 1,758,754,031 1,758,754,031 2,988 2,776 3,247 33,300 11.1 12.0 10.3

JSCB ACB 2,326,458 2,705,603 3,135,689 2,233,400 2,597,379 3,010,261 806,721,114 1,031,466,190 1,237,759,461 2,768 2,518 2,432 22,000 7.9 8.7 9.0

JSCB STB 1,522,577 1,683,773 1,853,520 1,370,319 1,515,396 1,668,168 793,060,568 917,922,960 917,922,960 1,728 1,651 1,817 14,400 8.3 8.7 7.9

JSCB EIB 1,715,950 2,180,761 2,634,203 1,681,631 2,137,146 2,581,519 1,056,009,600 1,056,009,600 1,056,009,600 1,592 2,024 2,445 14,700 9.2 7.3 6.0

JSCB TCB 1,955,064 2,321,373 2,792,148 1,896,412 2,251,731 2,708,384 689,217,922 689,217,922 689,217,922 2,752 3,267 3,930 20,220 7.3 6.2 5.1

JSCB MB 1,513,887 1,684,974 2,069,735 1,211,110 1,347,979 1,655,788 541,506,849 780,410,959 990,327,869 2,237 1,727 1,672 20,590 9.2 11.9 12.3

JSCB EAB 483,212 478,454 492,457 430,058 425,824 438,287 351,753,425 450,000,000 450,000,000 1,223 946 974 10,700 8.8 11.3 11.0

JSCB MSB 1,135,620 1,403,613 1,538,134 1,022,058 1,263,252 1,384,321 333,333,333 534,808,219 638,150,685 3,066 2,362 2,169 11,900 3.9 5.0 5.5

JSCB VIB 491,752 488,391 492,787 467,164 463,971 468,148 345,205,479 400,000,000 400,000,000 1,353 1,160 1,170 14,700 10.9 12.7 12.6

JSCB SHB 481,496 565,884 685,070 457,421 537,590 650,817 307,238,028 424,751,900 424,751,900 1,489 1,266 1,532 10,200 6.9 8.1 6.7

JSCB SCB 163,819 278,644 278,834 147,437 250,779 250,951 368,059,922 418,500,000 418,500,000 401 599 600 7,980 19.9 13.3 13.3

JSCB HBB 480,308 491,547 518,729 470,702 481,716 508,354 300,000,000 336,246,575 431,852,055 1,569 1,433 1,177 9,900 6.3 6.9 8.4

JSCB SEABank 507,943 480,539 479,932 457,149 432,485 431,939 513,489,048 533,465,600 533,465,600 890 811 810 8,000 9.0 9.9 9.9

Unweighted sector 1,608,811 1,842,508 2,113,887 4,542,456 4,922,690 5,410,531 637,157,851 774,913,077 818,852,943 1,874 1,734 1,854 8.47 9.16 8.56
average

Weighted sector average 8.32 8.89 8.03

Source: HSC
September
February 2011
July 14h 2008

2009

Page 4

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Valuations are cheap albeit with some caveats

Vietnamese banks currently trade at a forward FY2011 Recommendations


PE multiple between 5xs and 14.9xs and a forward
PB between 0.7xs and 2.3xs. The weighted average HSC bank scoring model
forward PE and PB is 9.08xs and 1.29xs respectively.
Valuations have dropped over the past four years; when Cheap is one thing. Good value is altogether another. To
we last wrote a banking report in FY2006 (doesnt time tell the difference between the two we decided to build
fly) while we were working in a different company the a scoring model using different indicators to build a pic-
forward PE of the listed banks averaged 29xs according ture of how the banks measured up against each other.
to our then estimates. For each indicator we simply market them from 1 to 16.
And in this model therefore a low score is good and a
Over the last three years bank shares have underper- high score not so good. This is a tricky process and of
formed the VN index while growth has remained strong. course there will always be one or two measures left out
Of course last year dilution was a big factor but in gener- that people will wish we had included. So the result is
al share price drops have outpaced the decline in EPS. of course imperfect but we hope its offers some useful
For example ACB has fallen by 76.4% from its adjusted pointers.
FY2007 peak of VND92,009 a shares while STB has lost
69.4% from its adjusted FY2007 peak of VND47,044 a And therefore to the quantitative valuation and growth
share. Over the same period the VN index has lost 58% measures we talked about above we have also added
from its high of 1155.68. some qualitative measures in an attempt to bring out the
quality banks amongst the pack. So our scoring model
This has transformed the sector from being one of the which has three broad sections; quantitative; qualitative
most expensive in the market to one of the cheapest and valuations. These quantitative measures focus on
especially on a PB basis. Out of the 14 banks, we see CAGR over the past five years for loans; deposits, net
that 5 are trading below trailing book value (and 6 below interest income and total income. This tells you who is
forward book value). And indeed if we treat ACB, CTG growing but of course is heavily biased towards smaller
and VCB as outliers then all the other banks trade at a banks who can easily grow at very high rates.
historical PB between 0.7-1.4xs which is very cheap.
Therefore we added some other quality control indicators
Forward EPS growth potential hurt by dilution in this section such as net interest margins (NIMs);cost
to income ratios (CIR) and provisions to help bring for-
Because of the capital raising exercise in towards the ward those banks that have also managed costs well.
end of last year of the top 16 banks (actually top 14 as
two are not equitised yet) HSC forecasts 11 will see EPS However we also wanted to add some purely qualitative
declines this year. While we see decent net profit growth measures as well. These are subjective of course but
the bulk of the dilution effect is carried over into FY2011 frankly thats the value added that analyst are supposed
as fund raising mostly took place in the 2-H of the year to provide. Otherwise a computer could have written this
(this skews the average outstanding shares and means report. For this we choose management; credit risk man-
that this number will increase faster this year). Only agement, knowledge transfer and brand recognition as
three banks; EIB; TCB and SCB are forecasted to see identified by the banking team. We wanted to differenti-
EPS growth this year. In fact weighted average EPS is ate between foreign stake holdings and pure knowledge
expected to decrease in FY2011 by 8% to VND2,167 a transfer because we see that two of the best banks in
share. Vietnam; ACB and STB have by and large developed
by accepting technological and operational knowledge
Then in FY2012 we see weighted average EPS growing transfer from their foreign shareholders (often the IFC
by 12% to VND2,418 a share. In FY2012 we forecast plays a key role here) while maintaining complete op-
that 8 out of 14 banks will see EPS growth led by SHB, erational and strategic independence.
EIB and TCB. Over the two years combined the best
EPS growth is forecasted by us to be led by EIB, then Lastly we added some valuation and forward growth in-
TCB followed by SCB. To be honest this dilution prob- dicators to capture both value and forward growth. As
lem is likely to dog banks for some time and indeed if a result of this exercise we identified what we hope are
the SBV talked about plans to lift the minimum capital the best banks in Vietnam from the stand point of good
threshold again a few years hence comes into fruition value in the fullest sense of the word.
then looking at forward EPS growth potential across the
whole sector may be rather moot.

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Top 16 bank scoring model
Quantitative measures Qualitative measures Valuation and forward measures

Type Short Deposit Loan Branch Operat- Net NIM 4 year CIR Provi- Man- Credit Knowl- Brand New FY2010e FY2009 FY2011 FY2011 FY2010- Total

www.hsc.com.vn
name growth growth neto- ing interest aver- sion age- risk edge recogni- product net profit CAR P/B P/E FY2012 score
CAGR CAGR work income income age fee as a % ment control transfer tion innova- margin EPS
FY2010 CAGR CAGR income of net from tion growth
as % of income over-
total op- seas
erating
income

SOCB VBARD 13 16 1 16 16 8 16 14 16 16 16 15 8 16 16 16 16 16 16 251

SOCB BIDV 14 13 3 14 14 9 9 10 15 12 15 11 3 15 14 10 15 15 15 211

SOCB CTG 15 15 2 13 13 2 16 16 13 8 11 10 2 10 12 14 13 14 7 199

SOCB VCB 16 14 4 15 15 7 8 2 14 11 6 7 1 6 8 13 14 9 4 170

JSCB ACB 11 5 6 7 7 12 4 8 1 3 1 4 4 9 4 8 12 7 9 113

JSCB STB 7 4 5 10 9 10 3 11 2 4 4 3 5 4 10 5 7 6 5 109

JSCB EIB 10 8 9 6 4 1 14 4 12 1 1 2 7 1 2 1 8 4 1 95

JSCB TCB 4 3 7 4 5 2 2 6 6 6 12 1 6 8 7 9 10 1 2 99

JSCB MB 5 6 11 5 8 13 5 5 10 2 3 6 9 2 3 3 11 7 13 114

JSCB EAB 12 11 8 12 12 6 1 12 8 10 9 12 13 11 13 6 2 10 11 168

JSCB MSB 3 2 10 2 2 11 10 7 9 9 8 8 11 5 5 11 2 2 14 117

JSCB VIB 6 9 11 8 11 16 10 15 3 7 5 9 15 12 11 12 9 12 10 181

JSCB SHB 1 1 13 1 1 4 16 9 5 15 14 16 16 14 9 2 2 5 6 144

JSCB SCB 2 10 14 9 6 14 6 13 11 14 13 13 12 13 15 14 1 13 3 193

JSCB HBB 8 12 16 11 9 15 6 3 7 5 7 5 10 3 6 4 2 3 12 132

JSCB SEA- 9 7 15 3 3 5 10 1 4 13 10 14 14 13 1 14 2 11 8 149


Bank

Source: xxx
September
February 2011
July 14h 2008

2009

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

As a result of our exercise we recommend the fol- of that is due to SBS, its successful securities subsid-
lowing banks; EIB; TCB; STB & ACB. iary. The bank is also easily investable for both foreign
and locals given its high liquidity and open room for for-
Amongst the larger private sector banks we favour EIB; eigners. However transparency is still fairly low as are
TCB; MB and STB in that order. We also find that ACB provisioning levels. On a PB basis STB looks extremely
at the operational level is an excellent bank but is still cheap at current levels.
rather expensive compared to the others. Please re-
member that this is on the basis of fundamentals rather ACB is our fourth favourite pick and perhaps a year ago
than investability. We will discuss what investors can re- might have come top of our list. ACB has the largest
alistically buy in the next section. market share in the private sector for deposits and loans.
However the closure of the gold trading floors took away
EIB is our top sector pick as it has managed to grow fast a huge chunk of its business and the bank is likely to
whilst still maintaining a very high CAR. This enables it take several years to recover its former poise. We note
to enjoy low funding costs and a high NIM whilst offering though that it still enjoys many noteworthy strengths
very competitive lending rates. Management is strong including the highest private sector average deposits
while the network distribution is several years behind per branch; low LDR and a very good and professional
the leading pack they are catching up fast. And given the management team. Its securities subsidiary has made
close correlation between branch expansion and lend- little headway in recent years and deposit growth rates
ing growth (and hence expansion in net interest income) has fallen behind peers (which may reflect its large size
this suggests that their growth rates will be far above the more than anything). The bank also has a rather low
sector average over the next few years. We also highly NIM according to our estimates. Having said that its
appraise management capability; cost control and credit credit risk management is the best in the industry and
risk management. In fact we put EIBs high provisioning its low provisioning reflects that. And with a still decent
levels down to prudence. Not surprisingly the bank is contribution from other areas other than loans the bank
forecast by us to enjoy the highest sector growth in EPS boast a good net profit margin. But PB valuations are
over the next two years. too high still in our opinion compared to peers and this
makes it hard for us to place it higher on the list.
TCB is our second favourite pick. Boasting very fast de-
posit and loan growth over the past five years the bank MB is our fifth favourite pick. Not yet listed the bank also
has also seen net interest income grow very rapidly. And enjoys decent growth potential and strong manage-
with the second highest NIM in the sector the bank en- ment. However NIMs are quite low at the moment while
joys fairly funding costs and is quite competitive. It has its branch network is very small. Historically the bank
also diversified successfully and enjoys strong fee in- has enjoyed low funding costs and a very stable deposi-
come flows. And after EIB the bank is forecast by us to tor base. And to look at it another way this also means
enjoy the second fastest EPS growth over the next two they have plenty of scope to expand and also improve
years. Its close relationship with HSBC has benefitted margins going forward. The banking group has some
the bank in many ways including technology and knowl- very strong subsidiaries including a top three brokerage
edge transfer. They also have a reputation for new prod- firm. However transparency could be improved and they
uct introduction in areas such as wealth management. also need to focus on expanding their network which
However credit management remains a major problem may hurt CIR going forward.
and perhaps overall management structures could be
strengthened. They also have little presence in the se- Amongst the state owned banks we think that CTG is
curities industry. And we feel that there is also some am- the best pick at the moment despite its heavy SOE ex-
biguity about its longer term position and relationship vis posure. Having brought in the IFC as a shareholder it
a vis HSBC. has advanced much further along the path to towards
becoming a fully commercial banks than any of its peers.
STB is our third favourite pick and has built the larg- They are talking to the Bank of Nova Scotia too but so
est private sector network and has grown into the sec- far apparently an MOU has yet to be signed. We are
ond largest JSCB by market share. Unlike other banks very mindful of its NPL issues given its high exposure to
which are still building their networks STB seems ready SOEs but sense that these may not come to a head for
to slow down network expansion and focus instead on several years yet. Meanwhile reasonable growth plus
raising profitability. This means that CIR should stabilise the likelihood that its weight in the VN index will expand
and perhaps even fall medium to long term. The bank dramatically before the end of this year should be suf-
has a very strong position in the southern market; is op- ficient to keep it in the investors eye.
erationally very strong and has diversified its earnings
base successfully away from net interest income. Much

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Price to book for top 16 banks
Type Short Chartered capital Shareholders equity BVPS Current price Forward P/B
name
FY2010e FY2011F FY2012F FY2010e FY2011F FY2012F FY2010e FY2011F FY2012F Current P/B 2011F 2012F

www.hsc.com.vn
SOCB VBARD 21,483,171 21,483,171 21,483,171 30,937,992 33,180,078 35,382,884
SOCB BIDV 14,092,868 14,092,868 14,092,868 23,367,507 24,367,256 26,711,686
SOCB CTG 15,172,291 15,172,291 15,172,291 17,559,192 19,302,185 21,470,121 11,573 12,722 14,151 23,700 2.0 1.9 1.7
SOCB VCB 17,587,540 17,587,540 17,587,540 23,786,888 26,729,747 29,733,130 13,525 15,198 16,906 33,300 2.5 2.2 2.0
JSCB ACB 9,376,965 11,252,359 13,502,830 11,387,188 15,202,792 18,218,481 12,144 13,511 13,492 22,000 1.8 1.6 1.6
JSCB STB 9,179,230 9,179,230 9,179,230 13,650,644 13,797,003 14,113,109 14,871 15,031 15,375 14,400 1.0 1.0 0.9
JSCB EIB 10,560,069 10,560,069 10,560,069 14,424,811 14,669,560 15,861,625 13,660 13,892 15,020 14,700 1.1 1.1 1.0
JSCB TCB 6,932,183 6,932,183 6,932,183 9,170,787 9,709,114 10,578,610 13,229 14,006 15,260 20,220 1.5 1.4 1.3
JSCB MB 7,300,000 9,300,000 11,500,000 8,531,524 10,376,785 13,029,759 11,687 11,158 11,330 20,590 1.8 1.8 1.8
JSCB EAB 4,500,000 4,500,000 4,500,000 5,447,735 5,193,774 5,473,399 12,106 11,542 12,163 10,700 0.9 0.9 0.9
JSCB MSB 5,000,000 6,050,000 7,050,000 6,314,037 7,968,394 9,668,838 12,628 13,171 13,715 11,900 0.9 0.9 0.9
JSCB VIB 4,000,000 4,000,000 4,000,000 4,627,601 5,070,456 5,510,526 11,569 12,676 13,776 14,700 1.3 1.2 1.1
JSCB SHB 3,497,519 4,997,519 4,997,519 3,944,841 6,334,372 6,928,550 11,279 12,675 13,864 10,200 0.9 0.8 0.7
JSCB SCB 4,185,000 4,185,000 4,185,000 4,633,731 4,925,178 5,194,695 11,072 11,769 12,413 7,980 0.7 0.7 0.6
JSCB HBB 3,000,000 4,050,000 4,860,000 3,709,238 4,881,811 5,804,923 12,364 12,054 11,944 9,900 0.8 0.8 0.8
JSCB SEABank 5,334,656 5,334,656 5,334,656 5,716,656 6,127,716 6,543,986 10,716 11,487 12,267 8,000 0.7 0.7 0.7
Unweighted sector average 8,825,093 9,292,305 11,700,648 12,989,764 14,389,020 12,316 12,921 13,691 1.29 1.23 1.16
Weighted sector average 1.29 1.28 1.14
Source: HSCs forecast
September
February 2011
July 14h 2008

2009

Page 8

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Amongst smaller banks we like MSB and HBB. MSB What you can actually buy.
is a fast growing and ambitious bank but now needs to
build a professional platform to manage its growth and Alas what you should buy and what you can buy are
strengthen operational and credit risk controls. Mean- not always the same in the Vietnamese market. Three
while HBBs relationship with Deutsche has enabled it obstacles to buying what you want; being listed on the
to take enormous strides in that direction in recent years OTC; low liquidity and for some investors; foreign room.
and also develop some innovative products and servic- And the foreign room issue affects more than foreign-
es. However NPLs are a concern due to legacy debts. ers. Local investors much prefer to buy shares where
the foreign room is open knowing that this gives them a
These above chosen banks all to some extent possess better chance to push up the share price of more liquid
the positive attributes in our new banking model emerg- issues.
es section including superior access to new capital; de-
cent growth potential; cost control; strong credit risk and EIBs foreign room is also full. So foreigners would have
good management. And despite the highly fragmented to wait and try to build a block which could take a month
nature of the Vietnamese banking sector the winners or two. TCB can only be bought on the OTC market
have already been largely decided. Regular observers which excludes foreigners (from buying banks unless
of the banking sector will not be surprised by the result you get special permission) and anyway where it is very
and may question why we had to write over two hundred illiquid. You can buy Massan Group (MSN) which 20%
pages in order to in order to conclude the blindingly ob- of TCB but that is quite expensive. And TCB does not
vious. have any plans to list.

In our defense we wanted to provide perhaps the first STB however has 6 million shares in foreign room avail-
in-depth empirical study of the banking sector and at- able and is also very liquid. ACB like EIB, is tricky as
tempt at the same time to answer the eternal why?. As once again the foreign room is full. MB is on the OTC
to whether or not we have succeeded we leave that up too currently but luckily it does have plans to list this
to the readers own judgment. year. The state owned list banks CTG and VCB are both
quite liquid and easy to buy. As so is HBB which listed
late last year and SHB. So thats what you can buy at
the moment. Not terribly satisfactory but then this is a
developing market.

www.hsc.com.vn Page 9

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Themes

The banking sector is in transition. The old grow-as-you- Meanwhile the excess of credit in the system is likely to
please model has had its day and left behind the legacy lead to high NPLs going forward although to what extent
of too many banks; too rapid growth and a high level of declared NPLs will rise is another question. Much de-
credit in the economy. pends on the type of workout the government imposes
on the SOEs over the next few years. And while this
Now with a regulatory overhaul taking shape and slow- problem is mainly focussed on the SOCBs the JSCBs
ing credit growth expected over the next few years its a will not escape unscathed.
good time to take stock of where we are.
Other systemic risks in the system such as interbank re-
HSC believes that we will see a gradual consolidation in lationship remain fairly high and warrant a watchful eye.
the sector couple with a much wider variance in forward Meanwhile foreigners have steadily expanded their foot-
growth rates. Banks with stong franchises and access to print in the banking market however they are unlikely to
capital will continue to grow and will gain market share emerge as serious competition over the next decade.
at the exepnse of their peers.
The sector therefore faces several challenges over the
Other smaller banks without sufficient access to new next few years but at current valuations banks do look
capital will gradually stagnate and eventually may find awfully cheap and we would recommend gradual accu-
themselves as M&A candidates. mulation over the next six to twelve months and look for
relative outperformance from FY2012 onwards.

www.hsc.com.vn Page 10

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Top 16 bank snaphot - 5 year CAGRs and forward growth estimates


FY2009 FY2010 estimate FY2011 estimate FY2011 estimate FY2010 y/y FY2011 y/y FY2012 y/y FY2005-2010 5
(VNDbillion) (VNDbillion) (VNDbillion) (VNDbillion) % change % change % change year CAGR
Lending 1,242,162,900 1,534,837,524 1,830,782,300 2,174,666,594 23.6% 19.3% 18.8% 28.0%
Deposit 1,286,596,874 1,616,556,655 1,928,536,313 2,287,463,486 25.6% 19.3% 18.6% 27.5%
New branches 5,731 6,467 7,038 7,733 12.8% 8.8% 9.9% 13.4%
Net interest income 50,641,807 66,722,278 79,636,487 92,176,610 31.8% 19.4% 15.7%
Net profit 22,697,598 25,939,113 29,738,065 34,132,893 14.3% 14.6% 14.8%
Source: FY2009 is actual; FY2010 and FY2011 is HSCs forecast

The old banking model falters


Banks have been growing aggressively since FY2005. intervening years it has been as low as 67.9% (FY2007)
Deposits for the top 16 banks have grown at a five year but with the forex and equity markets quiescent and the
CAGR of 28% while loans have grown at a CAGR of shutdown of the gold trading floors last year banks are
28.9%, fuelled by a CAGR of 13.4% in new branches. still searching for a sustainable multi income stream
The SBV has been generous in allowing banks to ex- earnings model.
pand as they were keen to replace the largely cash
economy with a strong banking sector. As a result banks Fee and commission income did grow rapidly espe-
have steadily expanded their footprint and the number cially in FY2009 as an income stream especially for
of branches (top 16 banks) grew from 3,442 in FY2005 the top 5 private sector banks over the last few years.
to 7,733 expected by the end of last year. The three main sources of fee income was as follows;
fees charged on lending in lieu of negotiated loans at
However this rapid expansion has created some strains. the time that the lending ceiling was still in place; gold
Credit as a % of GDP seems to have topped 118.6% by trading related fees and then stock trading commissions
the end of FY2010. And a rapid expansion in credit has from brokerage subsidiaries. However in FY2010 all
led to a stubborn inflation problem and steady deprecia- three key sources have either disappeared of suffered
tion in the VND (18.2% in the last 16 months alone). Fur- reverses; negotiated lending has obviated the need to
thermore many of the state owned enterprises (SOEs) charge fees; gold trading floors have been shut down
now find themselves overburdened with debt that some and the stock market has traded in a range for more
of them are finding hard to service let alone repay. than a year. So banks have been thrown back on their
core interest income again.
And the number of banks has expanded to cover a total
of banks in Viet Nam. 43 Local, 48 foreign branches and The authorities for several years past have talked seri-
5 JV banks. As we noted in a report several years ago ously of consolidating an overcrowded sector. However
there are too many banks in Vietnam and this makes it plans were postponed several times waiting for an ideal
hard especially for the private sector banks to grow to a time. The last few years has seen its share of troubles;
sufficient size to challenge the inrush of foreign banks FY2008 saw a tight squeeze in monetary policy to con-
expected over the next. Another issue is the relative trol runaway inflation then in FY2009 the global finan-
high cost of funding with deposit rates at 12-14% as too cial crash caused the authorities to delay again. Only
many banks compete for a limited pot of deposits. And in FY2010 did the central bank begun in earnest to
as a result net interest margins are quite thin averaging consolidate the sector. Their methodology has been a
an estimated 3.29% in FY2010 for the top 16 banks. regulatory revolution with the stated purpose of reduc-
ing systemic risk in the industry. Those smaller banks
And attempts to move the earnings model beyond over- unable to keep up with the rapid evolution in banking
reliance on interest income has had mixed success. For regulations will be forced to consolidate or merge with
the top 16 banks back in FY2005 aggregated net inter- other stronger banks over the next few years.
est income accounted for 80% of total income. And by
FY2010 this is expected to account for 76.1% of total
income. Not much change there then. Of course in the

www.hsc.com.vn Page 11

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

The regulatory revolution for banks


Key announced and planned regulatory changes for banks
Tougher lending restrictions for banks
New CAR, solvency ratios and LDR requirements - Circular 19
Minimum share capital threshold lifted - Decree No: 141/2006/ND-CP issued on the 22nd November 2006. Next stage implementation delayed
until December 2011
New branch capital requirements (draft circular not yet enacted)
New rules on non performing loan (NPL) classification awaited
New rules curtailing use of gold deposits and lending - Circular No. 22/2010/TT-NHNN issued on October 29th 2010. The Circular is effective on
the same day
New rules on use if interbank market awaited
Source: SBV

The regulatory revolution

The SBV has struggled with the questions of consolida- These new regulations issued so far covers areas as
tion and reduction of systemic risk for several years al- diverse as; (1) prudential ratios for operating a bank;
ready. A conversation we had with a senior official back capital adequacy ratios (CAR) and risk weighting of as-
in FY2006 made it clear to us that the central bankers sets; loan to deposit ratios (LDR) and solvency ratios (2)
have pondered this issue for quite some time. They have minimum capital thresholds (delayed for a year); restric-
adopted a multipronged approach by tackling each area tions on use of interbank lending; negotiated lending;
covered by banking regulation separately. However by minimum capital requirements for new branches in ur-
doing it at over a short space of time this has the ef- ban areas; restrictions on the raising and usage of gold
fect of creating a regulatory revolution that will forever deposits. And we also expect a new circular covering
change the shape of the Vietnamese banking industry. the classification of bad debts.

In terms of timing much of what has been happening And even the delay of the implementation of Decree
emanates from the new Law on the SBV which was 141 by 12 months does not derail the move towards
passed in the previous National Assembly (NA) in Q2 consolidation. This decree which set the minimum capi-
FY2010 and effective from this year. Laws in Vietnam tal threshold of VND3 trillion of all banks by the end of
lay the broad framework to be filled in by directives and FY2010 will now be implemented by the end of FY2011.
circulars which address the particulars of regulation 10 banks were falling short and the SBV isnt ready to
covering each article in the new law. So the plethora of cope with this yet. Therefore the delay was perhaps in-
new circulars covering many areas of the banking in- evitable. But there wont be another one.
dustry was spurred by passage of the new legislation.
However the rapidity with which the circulars have been But really it is the cumulative effect of so many regula-
published one by one since then suggests the SBV was tory changes within a very short time that can effectively
well prepared and has a sense of purpose about it. be called a revolution. Banks are scrambling to comply
with a host of rules that require them to (1) raise more
This sense of urgency comes from several factors; the capital (2) raise more deposits and (3) lend more care-
need to consolidate the banking industry early in the fully. Of course the effect of all of this is to stack the
independent life of the central bank; the drive interna- deck in favour of larger banks with more diverse busi-
tionally to reduce systemic risk in the banking industry ness models; stronger franchises and lower average
following the global financial crisis of FY2008 and the cost of capital.
sense that such reform has been delayed too long al-
ready. This suits the SBV just fine as it serves its goal of con-
solidating the industry and weeding out the weaker play-
The new regulatory environment has still come as a ers over the next few years. But as with everything while
shock to many banks. Hence the fairly prolonged tussle the changes themselves have been introduced quite
over the implementation of Circular 13 (amended as suddenly the consequences will be felt over a longer
C19) over the last summer as banks attempted to have time period. The central bank is not trying to create a
the measures watered down or delayed. The final vic- crisis but rather kick start a fundamental change. And
tory by the SBV was an important milestone and sug- with the death of the old carefree banking model we are
gests that for the time being there is not stopping the about to see the emergence of a new banking model.
revolution.

www.hsc.com.vn Page 12

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Too many banks in Vietnam - HSC's forecast for consolidation


FY2010 FY2012e FY2015e FY2020e FY2025e FY2030e FY2035e
Banks 45 40 36 32 26 28 30
Foreign Bank 53 55 57 59 60 65 70
JV banks 6 6 6 5 4 4 5
Total 104 101 99 96 90 97 105

Implementation of Decree 141 at end FY2011 should begin consolidation process. It will not be delayed any longer
Over time smaller banks will find it tougher to access capital markets; These banks will be absorbed by other larger banks -
Source - FY2010 numbers are actual and the rest are HSCs forecasts

Consolidation will begin but not until FY2012 at the earliest

With the delayed implementation of Decree No: than 30% of the assets of am SOE can be in non-core
141/2006/ND-CP issued on the 22nd November 2006, assets. And the SBV has requested detailed informa-
governing the minimum capital threshold for banks the tion from banks concerning any SOE shareholders. For
SBV is taking some tentative steps towards consolidat- instance we have seen in the media that Nam Viet Bank
ing the sector. The minimum capital requirement has (Navibank) has had some issues raising new money be-
been reset at VND3 trillion by year-end FY2011 (from cause Vietnam Textile and Garment Group (Vinatex), a
FY2010) and still means that the 10 banks with capi- big shareholder of the bank, did not want to maintain
tal of less than that at the end of last year will have to its current ownership ratio. Many other smaller banks
formulate; gain approval for and then implement capital found themselves in the same boat.
raising plans to bring them to or above that limit.
As a result banks have resorted to looking for new pri-
The SBV has also hinted they will raise the minimum vate sector shareholders in an attempt to circumvent
threshold further to VND5 trillion and then to VND10 tril- this problem. Hence the long delay between approval
lion although these are not formalised targets and have and execution. Those that dont meet the new deadline
uncertain timetables. Forcing banks to go the market- will not be able to apply for new branch licenses effec-
place to raise new money is a classic application of the tively freezing their forward growth momentum. And if
Darwinian laws of natural selection. Those banks that unable to make new loans or expand they will have to
retain the confidence of their shareholders will no doubt start looking for M&A partners. But we are as yet unsure
be able to continue in business. Or have the luck to at- what the SBV has in mind in terms of the consolidation
tract shareholders with deep pockets. And those without timetable from FY2012. We suspect their top priority will
will not keep their independence long. be those banks that have failed to submit a workable
plan as a first phase consolidation. And once they are
Most banks found the first two steps quite easy; namely out of the way turn their focus to those banks unable to
formulating a plan and gaining SBV approval. However attract new capital and consolidate those in the second
where they fell short was in raising the money itself. phase.
Some banks were approved as far back as June but by
the end of the year only just over half had successfully Who are those banks? The answer lies in looking at
completed their fund raising plans. The rest now have their current ownership structure. If we look at the list
been given 12 months grace. And as one banker told of top shareholders of existing smaller banks we see
us that these banks can use FY2011 to raise the money a host of familiar names. These fall into three broad
or arrange friendly takeovers because if they cant meet groups; banks with an SOCBs or large JSCBs as key
the new deadline any consolidation from FY2012 will be shareholder; banks with an SOEs or listed private sector
far less cordial. corporations as key shareholder and those banks con-
trolled by a private family group or individual.
The difficulties in raising money has thrown into stark
relief the difficulties facing smaller banks if they want to In our opinion banks in the first two groups are likely to
continue to survive as independent entities going for- retain their independence for now and operate as part
ward. One critical issue is that state owned enterprises of a cluster with a close relationship to their mother in-
who are prominent shareholders in at least 15 out of stitution. However banks in the third group look more
the top 37 private sector banks may not all be permit- vulnerable and may be among those to be consolidated
ted to invest in the new round of capital raising. This in the first or second phase.
comes back the regulation which states that not more

www.hsc.com.vn Page 13

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Looking beyond with the initiative from the government Whatever challenges lie ahead the die has been cast.
to reduce the footprint of SOEs in non-core activities The credibility of the SBV is at stake and this means that
some of their shareholdings in banks may come to mar- there cannot be any further delays. And that can only be
ket also over the next few years. That could well mark a good thing. Some smaller banks will disappear as they
the third consolidation phase as SOE assets pass into are taken over by their larger competitors. However this
the private sector. One challenge facing the government process will take a decade or more in our opinion. But
is not to overdo things. There is after all a limit to the we believe that finally what will emerge is a stronger and
potential owners of banks in Vietnam. And some form of more profitable sector.
cross shareholding structure appears to be inevitable.
If new regulations restrict the ownership too much then
the whole banking sector will find it hard to attract suf-
ficient capital. And relying too much on foreigners is not
the answer.

www.hsc.com.vn Page 14

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Foreign bank snapshot


Type FY2010e FY2015e FY2020e
Foreign banks with full domestic licence 5 8 10
Foreign banks operating as foreign branches 48 50 55
Foreign banks with stakes in local banks 11 12 13
Foreign bank current market share (lending) 10% 12% 12%
Source: FY2010 is actual, and the rest are HSCs forecast

Foreigners at the gates

Foreigners currently own stakes in 11 Vietnamese Bank is in negotiation. Meanwhile VIB Bank sold a 15%
banks. In addition 5 foreign banks have received ap- stake to Commonwealth Bank of Australia, and is hop-
proval to set up as 100% foreign owned local banks. ing this will increase to 20% in FY2011. And Mekong
A total of 48 have foreign branches or representative Housing Bank recently announced that it has appar-
offices in Vietnam. Then there are 5 JVs between local ently found a strategic partner to sell 20-30% of its addi-
and foreign banks. Foreign banks have multiple strate- tional chartered capital issuance. The bank has already
gies when it comes to Vietnam (1) take a stake in a local increase its chartered capital from one trillion dong to
bank and look to expand it (2) go it alone by setting up three trillion dong. Then Trust Bank also revealed it has
a wholly owned but local subsidiary known as a Wholly found a suitable foreign partner.
Foreign-Owned Bank (WFOB) (3) remain as a foreign
bank (4) A combination of the first two. These strategic partnerships offer foreign banks part
ownership of a distribution platform in Vietnam in ex-
The larger foreign players such as HSBC, Standard change for product and process technology transfer.
Chartered and ANZ have followed (4) while other large There are three possible levels in this relationship be-
players such as Deutsche Bank have mainly focused tween a local and foreign bank.
on (1) or in the case of Citigroup looking to follow (2).
Of course this may require a little clarification as all At the most basic level over a period of years we have
amongst the big five above have an active corporate or seen improvements in risk management; balance sheet
wholesale presence servicing mainly foreign corporates liquidity; credit policy; corporate government of local
or JVs. So we are mainly concerned here with their retail banks following the arrival of a foreign strategic partner.
or SME footprint. Even so strategies are still evolving This is as far as most banks have gotten to.
and even the foreign banks themselves dont know what
the most likely end-game is yet. Then at the more intermediate levels we have also
observed the introduction of new product and process
In fact Citibank announced its intention to open a 100% technologies such as core banking segmental software;
foreign bank branch by submitting its application and credit control; cash management; forex management;
hopes to receive a license next year. So far only five investment banking and wealth advisory. In some cases
banks, namely HSBC, SCB, ANZ, Shinhan Bank Viet- this has helped to boost income streams especially in
nam and Hong Leong Bank have received such a li- areas such as fees & commissions. And at least can be
cense. said to have improved efficiencies. Banks such as ACB
and Habubank are found in this category.
At the moment only Techcombank (TCB) has an indi-
vidual foreign bank owning a 20% stake; then 7 banks At the advanced level we find a transfer of personnel
has a foreign shareholder with a 15% stake and then from the foreign bank on multi-year contracts to fill key
3 banks have an individual foreign shareholder with a posts such as in treasury; wealth advisory & credit.
10% stake. Recently the SBV has received a number of These are typically two year secondments and can be
applications from foreign banks to increase their stake as high as departmental co-head levels. This traffic
to 20% and these applications are currently pending. might also involve staff from the local bank going over-
seas for extended training on specific functions or prod-
In FY2010 several banks either announced they had ucts. This is hands-on product and process technology
found new strategic partners or saw existing partners transfer and ensures the bank can get the full benefit
increase their stake. Vietinbank found two potential for- of the relationship at the cultural level based on day to
eign strategic partners, the International Finance Cor- day exchange. At this point only Techcombank has an
poration IFC has signed up and Canadian Nova Scotia advanced relationship with its foreign strategic partner
in our opinion.

www.hsc.com.vn Page 15

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Foreign bank in Vietnam - breakdown of interests


Name Ticker Website
Foreign banks with full domestic licence
1 HSBC HSBC http://www.hsbc.com.vn
2 ANZ Bank Australia And Newzealand Bank http://www.hsbc.com.vn
3 Standard Chartered Standard Chartered Bank (Vietnam) Limited, http://www.standardchartered.com/vn/
Standard Chartered
4 Shinhan Vit Nam Bank Limited - SHBVN http://www.shinhanvina.com.vn/
5 Hong Leong Vit Nam Hong Leong Bank Vietnam Limited - HLBVN http://www.hlb.com.my/vn
Foreign banks operating as foreign branches only (There are 43 so we include some of the important ones only)
1 Deutsche Bank Vit Nam
2 Ngn hng Citibank Vit Nam Citibank http://www.citibank.com.vn/
3 Ngn hng u t v Pht trin Campuchia BIDC
4 Ngn hng Doanh Nghip v u T Crdit Ca-CIB http://www.ca-cib.com/global-pres-
Agricole ence/vietnam.htm
5 Sumitomo Mitsui Bank
6 Commonwealth Bank
7 Tokyo-Mitsubishi UFJ
Foreign banks with stake in local bank Local bank they bought a stake in Current stake
1 ANZ Bank Sacombank 10%
2 HSBC Techcombank 20%
3 Standard Chartered Asia Commercial Bank 15%
4 Commonwealth Bank Vietnam International Bank 15%
5 Sumitomo Mitsui Bank Eximbank 15%
6 Deutsche Bank Vit Nam Habubank 15%
7 May Bank ABBank 10%
8 BNP Paribas Oricombank 15%
9 United Overseas Bank Southern Bank 15%
10 Bank of Nova Scotia Vietinbank 10%
11 Societe Generale Seabank 15%
Joint venture between foreign and local banks
1 Ngn hng Indovina IVB http://www.indovinabank.com.vn/
2 Ngn hng Vit - Nga VRB http://www.vrbank.com.vn/
3 Ngn hng ShinhanVina SVB http://www.shinhanvina.com.vn/
4 VID Public Bank VID PB http://vidpublicbank.com.vn/
5 Ngn hng Vit - Thi VSB http://vsb.com.vn/
6 First Commercial Bank
Source: SBV

www.hsc.com.vn Page 16

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Of course any strategic partnership carries with it cer- At the same time the WTO rules will allow for a more
tain tensions as the long term goals of each partner level playing field. Indeed as of January 1st last year un-
may differ. For example HSBC, whilst committed to its der the WTO rules, all banks, local or foreign are now
relationship with Techcombank (TCB) is simultaneously subject to the same regulations regarding the amount of
pursuing its own strategy as one of the largest foreign loans they can provide. And branches of foreign banks
banks in Vietnam with a fully localised operation and in Vietnam can now attract unlimited dong-denominated
expanding branch network. deposits, which were previously regulated based on
their capital.
HSBC first received in-principle approval for local incor-
poration in Vietnam in March 2008, and set up a Wholly HSC believes that those local banks who acquire the
Foreign-Owned Bank (WFOB) in Vietnam that Septem- right foreign partner will have an inestimable advantage
ber. HSBC became the first foreign bank to begin opera- over their domestic rivals without having to sacrifice
tions as a fully locally-incorporated bank from 1st Janu- any real measure of operational control. Indeed with
ary 2009. Since then ANZ and Standard Chartered have the current limit for a single foreign strategic stake of-
followed suit. In HSBCs case they may well argue for ficially set at 15% and unlikely in our opinion to go above
the time being that they compete in different segments 30% anytime soon this gives the local banks plenty of
with TCB and hence are not on a collision course but room to maneuver. Access to foreign capital is not the
five years from now that argument may no longer hold main advantage although as in the case of EIB it always
up. comes in handy. Rather its the knowledge transfer that
holds the key as this is critical in both improving internal
Of course in the meantime by engaging so closely with efficiencies and also raising the percentage of income
Techcombank, HSBC has learnt an awful lot about the coming from fees & commissions.
typical Vietnamese banking customer and their wants.
After all trial and error in terms of launching new prod- In terms of retail and SME banking business going for-
ucts through its local partner carries relatively low risks ward; developing a mass market mortgage, car loans,
for the foreign bank. credit card and unsecured personal lending business
will be the next big thing so to speak. And whichever
Going forward more foreign banks are expected to use foreign/local bank pairing that can position themselves
(4) or the twin track approach. And with the capital re- well in those market segments will emerge as the win-
quirements for opening new branches now informally ners over the rest of this decade and beyond.
set at VND200 billion per branch in HCMC & Hanoi (al-
beit so far in just a draft regulation ) its unlikely any One of the most important questions to be raised re-
foreign bank will have a 20-30 branch network by the cently is the likelihood and possible timing of raising the
end of this decade. In practice then HSC believes that foreign ownership ratio from 30% to 49%. The USTA
foreign banks will try to cherry pick business using a signed back in 2001 has this as one of its commitments
fairly small network (perhaps 5-6 branches); focusing on with a deadline of December 2010. Now of course un-
higher value added fee services rather than extensive like the WTO agreement; the commitments made in
lending. And then over time they will no doubt try to in- the USTA are a bilateral affair and therefore carry less
crease their stake in the domestic partner bank as the weight. However, in any talks with the US partner going
law allows. forward on developing relations further these unsettled
issues will recur.
So for at least the next 5-10 years we dont see foreign
banks emerging as a major competitive threat to local This matters because at the time of going to press; ACB,
banks across the bulk of their business lines. Banking & EIB were full-up in terms of foreign ownership. Indeed
regulations have been carefully constructed in such a both ACB has been so for several years although blocks
way as to allow foreign banks to set up shop but its not do became available several times a year.
going to be easy for them to expand beyond that. And
by strictly controlling the licensing of new branches the
SBV is ensuring its stays that way. This is not unfair and
indeed in no country that we know of are foreign banks
allowed to predominate.

www.hsc.com.vn Page 17

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Top 16 banks NPL

4.00%

3.50%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%

FY2010e
FY2006

FY2007

FY2008

FY2009

FY2011f

FY2012f
Source: HSC

NPL set to rise from next year

In FY2009 the declared amount of non-performing cluding Vinashin. All of these suggest that NPLs will be
loans (NPLs) in the system remained very low at 2.4%. under upward pressure over the next few years but we
And there has not been much increase in the declared also note that so far there has been little movement.
amount in the past 12 months. According to the most
recent SBV report on the subject, NPL loans include And we should measure that against the fact that the
loans of group 3 (sub-standard loans), loans of group SBV has set a 3% NPL ceiling for banks if they want to
4 (doubtful loans) and loans of group 5 (loss loans or avoid special supervision. In practice this means that
unrecoverable loans). banks will be extremely anxious to keep declared NPLs
below the 3% level for as long as they can.
And as of November FY2010 NPLs were apparently al-
most unchanged at 2.42% or to VND51.08 trillion ($2.6 The mathematical power of the second factor should not
billion). NPLs go in 5-7 year cycles in Vietnam with the be underestimated. Its easy to grow your way out of
previous peaks seen in FY2002-2003 as the clean-up a rising NPL ratio simply by boosting underlying loan
after the Asian crisis reached its peak in Vietnam. growth. And credit for the top 16 banks grew at a CAGR
of 28% over the past five years. However HSC is pre-
To begin with its important to understand that declared dicting credit growth going forward may drop to a CAGR
and actual NPLs dont necessarily amount to the same of just 20% or so over the next three years. And this
thing. The methodology behind NPL calculation remains slowdown in credit growth rates will work a bit like the
fairly traditional and there are a whole range of options falling tide and exacerbate the underlying expansion in
open to any bank that wants to be conservative in de- NPL ratios.
claring its bad debts. Furthermore even in more sophis-
ticated regulatory regimes banks still manage to evade Banks will gradually rue the consequences of the last
admitting the full number. The author worked as a head few years of over-rapid lending growth. We define it
of equity research in Japan in the 90s and witnessed as over rapid because it was way in excess of nominal
the Japanese bad debt crisis up close and believe me GDP growth over the same period.
there are a thousand tricks. So with that health warning
in mind let us proceed. Under Decision No. 493, debts are classified into five
groups. The first two groups are regarded as normal
HSC believes that the next up-cycle in NPLs will be driv- loans. As mentioned above the 3rd to the 5th group con-
en by a convergence of three important factors (1) The stitute problem loans. Of these, 3rd-group debts are
gradual switch to qualitative credit scoring backed by subprime debts, 4th-group debts are seen as doubtful
pending new SBV regulations (2) a slowdown in lending debts and 5th group debts which may be unrecover-
growth will expose poor lending practices of the last past able. These three groups collectively make up the NPL
years (3) cleaning up the overleveraged SOE sector in- number. When looking at the NPL number we need to

www.hsc.com.vn Page 18

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Decision 493 - formula for calculating bank provisioning for bad debts
R = max {0, (A-C)} x r
R= specific amount for loss reserve
A = the value of the asset (i.e., the loan)
C = the value of the collateral (after being discounted by such percentage as set forth in
Decision 493 for each type of collateral)
r = ratio for loss provisioning
Source: SBV

look at the overall number and then the % of the total Of course we have no idea when or over what time pe-
which is in the 5th group. riod Vinashin debts might be written down. But we un-
derstand that so far this process has not begun and the
Signs of a growing NPL problem are starting to ap- earliest we might expect it to begin would be at the end
pear. Vinashins near failure is the clearest sign of this. of this year. And even then its likely the process would
But what is the scale of this? Moodys estimated that be extended over several years in order to spread the
Vinashin accounted for about 3% of the loan book. Our pain over several business years. This will of course
rough calculation puts it slightly lower at 2.5%. The key hurt the earnings of the banks in question.
dividing line is between the secured and unsecured por-
tions. The sovereign debt and foreign loan syndicate The SBV has apparently prepared a new draft directive
are covered by either explicit (sovereign debt) or implicit to replace the existing directive on NPLs already. How-
loan guarantees (Credit Suisse syndicate). ever so far the draft has not been approved for release
which suggests the matter is being approached careful-
Then the domestic debt is covered by a range of col- ly. The central bank clearly is under pressure from inter-
lateral from what we understand. Much of it is project national bodies to bring Vietnams treatment of NPLs in
specific and in many cases the ship itself would be the line with international norms. However they would prefer
collateral. Ships go up and down in value depending on to wait for a quiet point in the cycle to do this but in our
their age and where we are in the demand cycle. These view this moment has already passed.
completed ships would be up to several years old. And
demand is just starting to improve slowly from the slump Indeed one clue as what might be heading down the line
in FY2008 but of course is a pale shadow of what it was came from the SBV itself which announced in December
in FY2006-2007. that Non-performing loans (NPL) at foreign credit institu-
tions had risen 60% from end-2009 to VND2.75 trillion
We conservatively assume that banks over a period of by late October FY2010. This amounts to just 0.4% of
years will realize 40% of the value of their Vinashin debt. total loans by foreign banks and of course is very low as
This is frankly guesswork and based what happened in foreign institutions lend to only blue chip corporates. But
other Asian countries. And also on the assumption that its the rate of growth thats important and translated to
the group is being restructured and wont go bankrupt. the overall banking system it suggests that actual NPLs
Assuming that to be the case we have guesstimated could rise quite rapidly over the next year or so if al-
that banks might face a loss of VND32,409 billion. lowed to. However declared NPLs are a different story
and we have estimated a fairly gradual rise in declared
Given that they need to provision 0.75% of their total NPLs given what we think is the most likely scenario.
loan book as a general provision at the end of each year
the additional required provision if they were to write this
off in one go would be VND15,909 (US$880 million). For
comparison sake this would come to about 64.5% of
the HSC FY2010 net profit forecast for the Top16 banks
only of VND24,699. Serious but of spread over several
years, hardly fatal.

www.hsc.com.vn Page 19

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Widening spreads as negotiable rates take over

10.00%
Spread between lending rate and benchmark yield
8.00% Spread between deposits rate and benchmark yield

6.00%

4.00%

2.00%

0.00%

-2.00%

-4.00%
Jun -08

Jun -09

Jun -10
Feb-09

Feb-10
Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08

Dec-08

Aug-09

Dec-09

Aug-10

Dec-10
Source: SBV

Market set interest rates - dawn of the new age of negotiable interest rates

FY2010 saw the liberalization of the interest rate regime rates and increasing or reducing the daily offerings it
with the introduction of negotiable rates across the board sends a host of signals to the market every day.
for both loans and deposits. This was a rolling process
that began in the summer of FY2009 with the final steps This acts to set rates in the interbank market. And also
being taken in Q2 FY2010. The ceiling for deposit rates indirectly sets bonds yields. Vietnamese bonds are gen-
which effectively determined lending rates were formally erally held by banks and are used as collateral for OMO
abolished (although ceilings have been re-imposed on a operations. By increasing offered size the SBV can
temporary and voluntary basis on two occasions since invite more bids from banks and by satisfying more of
then). And instead the level interest rates are now de- their funding requirements with cheaper funding bring
termined by the market through guidance in the OMO down interbank rates. And by the same token by ac-
using variances in offered size and funding rates in the cepting more bonds as collateral thereby generate more
daily operations. demand for bonds from banks which in turn serves to
reduce bond yields. This is turn sends a clear signal that
Normally SBV funding rates should be higher than those the SBV is being more accommodative and generally is
available in the interbank and retail deposit market. followed by lower deposit and interest rates. Or by doing
However in Vietnam funding rates until recently were the reverse as it is doing currently it can send out the
set below both. This created a distortion in the market opposite signal.
through a large arbitrage gap between the OMO rate
and the interbank rate. The IMF has been critical of this That in laymans terms is how monetary policy operates.
for some time and indeed we note that in December And then the SBV also has the option to change the
the SBV moved to close that gap and funding rates are reserves ratios; raise or lower the refinancing rate or the
currently at or above the overnight rate in the interbank almost defunct prime rate if wants to send a very unam-
market. biguous signal to the markets.

The old fixed regime of prime rate plus deposit ceiling The second key change was allowing banks to nego-
has faded into the background but has not been formal- tiate their own rates with both borrowers and deposi-
ly abolished and indeed echoes of it can still be found tors. This allows them to quantify and price in credit risk;
especially in times of stress. The new system is more thereby charging different rates for different customers
subtle but not having been well explained by the authori- according to their risk profile. This is a new departure in
ties is also not well understood outside Vietnam. So the Vietnam whereas hitherto, rates varied little from cus-
SBV has as its disposal the usual monetary policy tool tomer to customer and banks were reduced to charging
kit; OMO funding rates & discount windows; reserve ra- under the table fees to achieve the same result.
tios and the prime rate itself. But it currently prefers to
use daily open markets operations through the 7 day; 14 Interest rates still generally track the benchmark 2 year
day and 21 day windows to guide rates. By opening and bond yield but since the summer the premium of both
closing these windows; raising or reducing the funding deposit and lending rates over the bond yield has in-

www.hsc.com.vn Page 20

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

creased from 50-200 bps before to an enormous range One other factor at play here is the effect of C13 on inter-
between 300-700 bps currently. This is partly an anomaly est rates. With banks now obliged to keep a higher per-
or overshooting which is related to the current monetary centage of their deposits in cash or near cash to meet the
adjustment. However this is only partly to blame and we 80% LDR and new solvency ratio requirements there is
believe that even as things settle down the premium be- less money available for lending purposes. And to keep
tween deposit and lending rates on the one hand and margins steady that lending pool has to earn higher re-
the benchmark bond yield on the other hand will still be turns now that funding costs have risen substantially.
200-350 bps. This is seen as one of the main causes of the surge in
lending rates in Q4. And recently we heard some talk
And that reflects the effect of negotiable rates as banks of suspending the LDR rule to help bring down lending
are now willing to take on more risk and charge higher rates in Q2 FY2011 but this is unlikely for now.
prices for it.

www.hsc.com.vn Page 21

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

FY2010 bank capital raising Total capital at year- Total capital at year- Total planned capital at Total planned raising Total actually raised Success
end FY2009 end FY2010 year-end FY2010 ratio

SOCBs 45,951,572,244,725 71,335,870,964,725 77,004,056,964,725 31,052,484,720,000 25,384,298,720,000 81.7%

Large - sized banks 42,733,904,000,000 52,333,102,416,559 53,843,102,416,559 11,109,198,416,559 9,599,198,416,559 86.4%

Mid-sized banks 22,316,941,000,000 27,566,512,000,000 29,414,000,000,000 7,097,059,000,000 5,249,571,000,000 74.0%

Banks' FY2009 chartered capital between VND1,000- 23,386,236,370,000 42,513,941,790,000 47,422,048,590,000 24,035,812,220,000 19,127,705,420,000 79.6%
2,000 billion (*)

Banks' FY2009 chartered capital at VND1,000 billion (*) 9,000,000,000,000 20,100,000,000,000 27,600,000,000,000 18,600,000,000,000 11,100,000,000,000 59.7%

Grand Total 143,388,653,614,725 213,849,427,171,284 235,283,207,971,284 91,894,554,356,559 70,460,773,556,559 76.7%

US$ grand total 6,828,031,125 10,183,306,056 11,203,962,284 4,375,931,160 3,355,274,931 76.7%

Top 16 banks only 101,654,905,244,725 141,201,492,381,284 146,869,678,381,284 45,214,773,136,559 39,546,587,136,559 87.5%

Top 16 banks only US$ 4,840,709,774 6,723,880,590 6,993,794,209 2,153,084,435 1,883,170,816 87.5%

Capital raising to meet minimum VND3 trillion threshold 34,786,236,370,000 66,613,941,790,000 79,022,048,590,000 44,235,812,220,000 31,827,705,420,000 72.0%

Capital raising to meet 9% CAR rule or normal business 108,602,417,244,725 147,235,485,381,284 156,261,159,381,284 47,658,742,136,559 38,633,068,136,559 81.1%
needs

Source: Banks, HSC

Banks make huge capital calls

FY2010 will be remembered as the year where banks Unlike conventional capital raising which is done for
made huge capital calls. All banks, large and small have the purpose of business expansion this is mandated or
come to the market with their begging bowls. Banks regulated capital raising and takes little heed of mar-
made firm plans to raise a total of VND91,894 billion ket conditions. It was a case of just getting it done.
or US$4.37 billion in FY2010 through a combination of So we saw two types of capital raising.
equity; convertible bonds and straight bonds. And they
managed to raise 76.7% of this by the end of the year or Firstly smaller banks raised VND31,828 billion or 72% of
a total of VND70,461 billion or US$3.35 billion. The mo- plan to hit their minimum threshold. Then larger banks in-
tive was to boost chartered capital in order to meet the cluding all the state owned behemoths raised VND38,633
minimum capital threshold of VND3 trillion (albeit now billion or 81.1% of plan to boost their CAR to the 9% lev-
delayed) plus the CAR requirement of 9% (under cir- el. The latter financing was more complex and frequently
cular 19). Very few banks started the year passing both involves up to four tranches or rounds of capital raising.
of these criteria (some were even unaware they might
have to). Hence the urgent need for cash. So far as mentioned 10 banks had to delay all their
capital raising plans into this year (VND8.8 trillion or

Banks with less than VND3 trillion in capital at end FY2010


Name Chartered capital as of 31 Amount to be raised to hit $USmillion
Dec 2010 (VNDbillion) VND3 trillion threshold
Viet A Bank VAB 2,937 63 3
Orient Commercial Bank OCB 2,635 365 19
Bac A Bank BAB 2,120 880 45
Westernbank WTB 2,000 1,000 51
Gia Dinh Bank GDB 2,000 1,000 51
Bao Viet Bank BaoVietbank 1,500 1,500 77
My Xuyen Bank MXB 1,000 2,000 103
Ocean bank OceanB 2,000 1,000 51
Navibank NVB 2,000 1,000 51
PG Bank PGB 1,000 2,000 103
Total 8,808 452
Note: There are 8 banks which have chartered capital lower VND3.000bil officially as of now. Among of them, Viet A, OCB
finished selling new shares for raising chartered capital to VND3000bil but they announced officially that their chartered capital
just nearly VND300bil. Bao Viet Bank also issued new shares then they cancel and give money back to their shareholders
There are 3 banks (Ocean Bank, Navibank and PG Bank) issued new shares for raising capital to VND3000bil in 2010 but we
dont have final confirmation if they issued successfully or not yet

www.hsc.com.vn Page 22

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

so) although some others did not complete all that they And in a flurry of last minute activity many banks made
had planned to do. Large banks naturally faced the it. The delay in the implementation of decree 141 by
least difficulty in raising new money. But many smaller one year was still needed though as it turns out. And
banks who thought they had until December 31st to raise some capital calls will extend into FY2011 although at
money also managed to get their hands in it somehow. a much slower pace. By and large the top 16 banks
Evren so investors are starting to price risk and coming we have focused on in this report have all successfully
to the conclusion that many of these smaller players are implemented their capital raising plans (One; EIB didnt
not worth supporting longer term. have any plan to raise new money in FY2010 and just
issued bonus shares and two other banks completed
And the authorities did do their best to rig the game their plans in January). And then the 10 smaller banks
to some extent. A little history lesson. Many of these have survived to fight another day.
smaller banks emerged a few years ago at a time SOEs
were flush with cash and looking for an interesting in-
vestment. Banks were irresistible and SOEs poured in
money to buy stakes. Of course with the implementa-
tion of the 30% rule (non-core assets cannot account for
more than 30% of an SOEs balance sheet) these state
owned strategic shareholders are not allowed to pony
up for this latest and most critical capital call. Which left
their charges in a seemingly tough spot.

www.hsc.com.vn Page 23

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Current bank and sovereign ratings by international rating agencies
Ticker ISSUER LONG TERM RATING ISSUER RATING OUTLOOK BANK MEASUREMENTS

Moody'S FITCH JCR FITCH S&P Moody'S FITCH S&P Moody'S S&P Moody'S FITCH R&I FITCH

www.hsc.com.vn
Corp vvv Select Com- Moody's Fitch LT JCR Local Fitch ST Lo- S&P ST Lo- Moody's Fitch LT Local S&P LT Moody's S&P Moody's Fitch R&I's Individual Sup- Foreign Local Foreign Local Bank
pany's Name vvv LT Rat- Local Currency cal Currency cal Currency Local Cur Currency Local Cur- Foreign Rating Outlook Outlook Rating Rating port LT Bank LT Bank Cur ST Cur Financial
ing Currency Long Issuer De- Issuer Credit Issuer Issuer Default rency Is- Cur Issuer Outlook Rating Rating Outlook Rating Depos- Depos- Debt ST Strength
Debt Term Debt fault Rating Rating Rating Rating suer Credit Rating its its Debt
Rating Rating Rating

VM Socialist Republic B1 B+ B B+ BB B1 NEG NEG STABLE


of Vietnam

ACB Asia Commercial B2 Ba3 B1 STA- D/E 5 B2 Ba3 NP NP D-


Bank BLE

EIB Eximbank

CTG Vietinbank D/E 4

STB Sacombank D- 5

SHB Saigon Hanoi Bank STA- B2 B2 NP NP E+


BLE

VCB Vietcombank BB- B B D/E 4

Source: Bloomberg
September
February 2011
July 14h 2008

2009

Page 24

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
History of bank and sovereign ratings by international rating agencies
TICKER NAME OUTLOOK LONG-TERM DEBT RATING LONG-TERM ISSUER RATING

CREDIT AGENCIES FITCH S&P Moody'S FITCH S&P Moody's FITCH S&P Moody's FITCH S&P Moody'S

www.hsc.com.vn
Fitch S&P Moody's Fitch S&P's Moody's Fitch LT S&P LT Moody's Fitch LT S&P LT Moody's
Outlook Rating Outlook Local Local Local Local Local LT Local Foreign Foreign Foreign
Rating Out- Rating Cur- Currency Currency Currency Currency Currency Cur- Currency Currency
look rency LT Debt LT Debt Issuer Issuer Issuer rency Issuer Issuer
LT Debt Rating Rating Default Default Deafult Issuer Rating Rating
Rating Rating Rating Rating Rating

VM SOCIALIST REPUB- Jul- STABLE Dec- NEG Dec-10 NEG Jul- B+ Dec- BB- Dec-10 B1 Jul-10 B+ Dec-10 BB- Dec- B1
LIC OF VIETNAM 10 10 10 10 10

Jun- BB- Sep- BB+ Mar-07 Ba3 Jun-09 BB- Sep-06 BB+ Mar- Ba3
09 06 07

Jun- BB May- BB Jun-02 BB May-02 BB


02 02

ACB ASIA COMMERCIAL Dec-10 STABLE Dec-10 B2 Dec- Ba3 Dec- B1


BANK 10 10

Aug- Ba2 Nov- Ba2


09 07

Nov- Ba1
07

EIB VIETNAM EXPORT- n/a n/a n/a


IMPORT COMMER

CTG VIETTIN BANK n/a n/a n/a n/a

SBS SACOMBANK n/a n/a n/a n/a

STB SAIGON THUONG


TIN COMMERCIAL

SHB SAIGON HANOI Dec-10 STABLE Dec- B2 Dec- B2


JOINT STOCK 10 10
BANK

Aug- Ba3 Aug- Ba3


10 10

VCB JSC BANK FOR Dec- NEG Dec-10 BB- Dec- BB-
FOREIGN TRADE 10 10

Feb-07 BB- Feb- BB


07

Jul-06 NR

Nov-02 Bpi

Source: Bloomberg
September
February 2011
July 14h 2008

2009

Page 25

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
History of bank and sovereign ratings by international rating agencies (cont.)
TICKER NAME SHORT-TERM RATINGS EXTRA RATINGS

CREDIT AGENCIES Moody'S FITCH S&P Moody's Moody's Moody's Moody's Moody's FITCH FITCH

www.hsc.com.vn
Moody's Lo- Fitch ST S&P ST Local Local Foreign Local Foreign Bank Fi- Fitch's Fitch's
cal Currency Local Cur- Currency Is- Currency Curren- LT Bank LT Bank nancial Indi- Sup-
Issuer Rating rency Issuer suer Rating ST Debt cy ST Depos- Deposits Strength vidual port
Rating Debt its Rating Rating

ACB ASIA COMMERCIAL Nov-07 NP Nov-07 NP Dec-10 Ba3 Dec-10 B2 Dec-10 D- Aug-10 D/E Oct-01 5
BANK

Aug-09 Ba2 Nov-07 B1 Nov-07 D Oct-03 D

Nov-07 Ba1 Oct-01 DS

EIB VIETNAM EXPORT- n/a n/a


IMPORT COMMER

CTG VIETTIN BANK Mar-10 D/E Jul-03 4

Jun-05 E

SBS SACOMBANK n/a n/a Jan-11 D/E Jan-11 5

STB SAIGON THUONG Jan-05 D- 5


TIN COMMERCIAL

SHB SAIGON HANOI Dec-10 B2 Aug-10 NP Aug-10 NP Dec-10 B2 Dec-10 B2 Dec-10 E+ Dec-10 E+ Jul-03 4
JOINT STOCK
BANK

Aug-10 Ba3 Aug-10 Ba3 Aug-10 B1 Aug-10 D- Aug-10 D-

VCB JSC BANK FOR Feb-07 B Aug-10 D/E Jul-01 4


FOREIGN TRADE

May-07 D

Jun-05 D/E

Oct-01 D/Es

Note: Current ratings are in black and historical ratings in grey


Source: Bloomberg
September
February 2011
July 14h 2008

2009

Page 26

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

International rating agencies downgrade banks and sovereign rating

International rating agencies including Fitch and Moodys At the same time Moodys also downgraded Moodys the
have in the past few months downgraded their ratings ratings for foreign currency deposits of six commercial
on those Vietnamese banks they cover. This move has banks to B2 from B1, with a negative outlook. And it also
come as a consequence of the more negative outlook lowered by one to two notches the Baseline Credit As-
for the sovereign rating. Moodys recently cited a host sessments and the associated Bank Financial Strength
of macroeconomic concerns centering on Vietnams low Ratings (BFSRs) of all six banks.
currency reserve and the consequent heightened risk
of a balance of payments crisis as their main reason. These banks comprise Asia Commercial Bank (ACB),
And then the risk of a debt default of Vinashin US$ debt state-run Bank for Investment and Development of Viet-
exposure to the Credit Suisse led syndicate also had a nam (BIDV), Military Bank (MB), Saigon-Hanoi Bank
bearing on the decision. These concerns naturally car- (SHB), Techcombank (TCB), and Vietnam International
ried into the individual bank ratings. Bank (VIB).

Its interesting for us to note that most Vietnamese banks The accompanying statement tied the sovereign and in-
still get identical ratings from the respective agencies dividual bank downgrades giving as its reasons these
despite what is clearly an enormous difference in their include the heightened risk of a balance of payments
respective risk profiles. The rating agencies clearly look crisis, the depreciation pressure felt on the Vietnamese
at sovereign risk only and dont put much effort into what dong, and the unconvincing policy responses to these
is happening at the individual bank level. issues. On top of that they noted that the net foreign
asset position of some banks had deteriorated.
In addition the protracted problems at Vinashin have
raised the spectre of a default. And as a result funding And of course given the negative outlook for the sov-
costs in foreign currencies for all banks will increase. ereign rating and uncertainty surrounding Vinashins
This is unfortunate as several banks we talked to were debt repayment prospects further cycle of downgrades
hoping to issue senior US$ denominated subordinated in FY2011 cannot be rules out. One important comfort
debt over the next year or so. But with international is that these agencies tend to be reactive and lagging
banks now sour on Vietnamese debt of all descriptions indicators at least as far as share price performance is
this fund raising will be hard going concerned.

Moody Investors Service Inc. on December 15th FY2010


lowered Vietnams long-term foreign-currency rating to
B1 from Ba3, citing the risk of a balance of payments
crisis and a decline in foreign reserves as inflation
quickens and the nations currency weakens. Moodys
also highlighted debt distress at state- owned Vinashin
which was then in negotiation to delay the first principle
repayment for its US$ denominated loan which was ex-
tended by a Credit Suisse led syndicate.

www.hsc.com.vn Page 27

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Valuations now look reasonable but is it too early to pile in?

The top 16 banks are currently valued at an aggre- Therefore we would weight the sector at market weight
gated weighted FY2010 forward PE of 8.89xs and PB and recommend investors gradually add to positions this
of 1.28xs as of mid Febraury 2011. Over the last five year. However given the tough macroeconomic outlook
years this is almost as cheap as they have ever been and the currency problems there is no particular hurry
and reflects the very high level of uncertainty in the sec- to pile into banks and we dont expect outperformance
tor. With their current business model sputtering; facing this year.
a tough regulatory environment; a rising NPL cycle and
making enormous capital calls currently here are good
reasons to be down on banks.

However we believe that much of the bad news is priced


in at these levels. And the current consolidation is creat-
ing the leading banks of tomorrow. Smaller less com-
petitive banks will disappear and the stronger banks will
be able to win market share and improve margins from
FY2012 onwards.

www.hsc.com.vn Page 28

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

A new banking model emerges


4. Committed foreign strategic partner We have
A new banking model is emerging driven by the new counted a total of 11 Vietnamese banks with a for-
regulatory landscape. And those banks best equipped eign partner controlling at least a 10%. Like any
to execute it will be the winners of the future. We have relationship; these partnerships come in all shapes
developed a basic five point model that best captures ranging from the casual to the committed. However
the attributes of a new bank in our opinion; a partnership that involves the steady transfer of
product and process technology over several years
1. Access to capital - The first requirement is access will give the recipient bank a real competitive edge.
to multiple sources of capital; that means access to We see this already with banks like TCB & HBB. To
both debt & equity markets; and foreign & domestic be fair we have to admit that both ACB & STB have
sources of capital. A bank must be able to raise new developed with more limited input from their foreign
equity; place a straight or convertible bond in the partners so this rule is not an absolute one. But it
domestic capital markets and have access to stable can help to get there quicker.
foreign strategic and financial partners.
5. Qualitative credit-scoring for loans Banks are
2. Established and growing network to fuel depos- transitioning to a more sophisticated approach to
it and credit growth The second requirement is classify loans. To help them in some cases foreign
being able to grow the branch network faster than strategic banks have helped them with software
peers in order to sustain deposit growth. Branch li- modules but in many cases also banks have de-
censes are not being handed out like confetti any- veloped their own models. These models are now
more. According to a current draft, in order to win in the testing phase but in some cases have been
approval a bank may have to allocate up to VND200 approved by the SBV already and are in daily use.
billion in capital per full branch in future (although
they can open a transaction office instead) and
must also meet all C19 requirements such as the
three solvency ratios and also the CAR and LDR
thresholds. In other words banks balance sheets
need to be kept in good working order.

3. Ability to develop multiple earnings streams -


The old banking model was characterised by oppor-
tunistic shifts in the weight of various non-interest
earnings streams based on shifting trading patterns
in the gold, forex and equity market. Indeed net in-
terest income is the only stable source of income
as well as the largest. The new model will focus
on developing sustainable and multiple sources of
non-interest income based on offering value added
fee services. Once the investment banking; mort-
gage and credit card businesses take-off properly
in Vietnam a sustainable fee earning business can
be created. Meanwhile there is no magic bullet here
and it will take time to rebuild the fee & commission
business from the body blow delivered by the clo-
sure of the gold trading floors.

www.hsc.com.vn Page 29

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Current market overview

Bank balance sheets

Bank balance sheets have expanded dramatically over Over the next few 10 pages or so we will look at all of the
the last years. This has been driven by network expan- main components of the balance sheet on both sides
sion which has in turn boosted deposits and loans and and discuss how they have grown over the last five
total assets. years and where they are headed in the next two.

HSC estimates that total assets for the top 16 banks


rose at a CAGR of 29% over the past five years. And
we forecast it will increase by 15% in FY2011 and then
16% in FY2012.

www.hsc.com.vn Page 30

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Bank credit in Vietnam Credit growth y/y


2,400,000 500,000 60%

2,200,000 50%
450,000
Total Credit
2,000,000 40%
Credit in VND 400,000
1,800,000 30%
Credit in Foreign Currencies
1,600,000 350,000 20%

1,400,000 10%
300,000 Total Credit y/y
1,200,000 0%
Credit in VND y/y
250,000
1,000,000 -10% Credit in Foreign Currencies y/y

800,000 200,000
-20%

Apr-09

Oct-09

Apr-10

Oct-10
Aug-09
Sep-09

Nov -09
Dec-09

Aug-10
Sep-10

Nov -10
Dec-10
Jan -09

Jun -09

Jan -10

Jun -10
Jul -09

Jul -10
May-09

May-10
Feb-09
Mar-09

Feb-10
Mar-10
Nov -08

Nov -09

Nov -10
Jan -08

Jun -08

Jan -09

Jun -09

Jan -10

Jun -10
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Feb-08
Mar-08

Feb-09
Mar-09

Feb-10
Mar-10
Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08
Sep-08

Dec-08

Aug-09
Sep-09

Dec-09

Aug-10
Sep-10

Dec-10

Source: SBV Source: SBV

Bank credit is still growing quite fast

Bank credit growth passed through a period of very FY2005-2010 total credit growth has been phenom-
strong growth for several years before hopefully re- enal at 244% for top 16 banks.
verting to the long term average this year. In fact credit
growth has grown at almost double the rate of nomi- Credit growth for the top 16 banks in the sector has grown
nal GDP growth for the entire decade. As a result bank at a CAGR of 28.9% over the period FY2005-2010. This
credit as a % of GDP is estimated by us to have hit amounts to cumulative growth of 244% over that period
118.6% in FY2010 and about 122% this year which is with the strongest growth totaling 803% or a CAGR of
a very high number for a developing economy. And the 55.3% seen in the private sector. Over the same period
starting point a decade ago was just 35% of GDP. the public sector banks loan book has grown by 175%
or a CAGR of 22.5%. This is heady growth and for some
Between FY2001-FY2006, credit expanded at a CAGR individual private sector banks such as SHB we have
of 25% however this suddenly accelerated to a CAGR seen CAGRs as high as 164% (and this is for FY2006-
of 38-39% between FY2007-2009 before falling back to 2010 only).
29.8% in FY2010 based on SBV latest published num-
bers. Much of this was due to the extraordinary 57% Amongst the top group of private sector banks; TCB has
growth in FY2007 when the authorities appeared to lose grown credit at a n impressive CAGR of 57.9%; followed
control of monetary policy. And then the FY2009 number by STB and ACB. Amongst the top 12 private sector
of 38% was also far above the norm (albeit more under- banks the slowest credit growth CAGRs belong to EAB
standable given the economic climate). Even in FY2010 & HBB.
credit still grew at a pace of 29.8% y/y well above the
official 25% target. Credit growth is generally driven by deposit growth plus
of course the willingness to lend money rather than
Looking at growth between FY2005-2010 for the top 18 process it through the interbank market or spend it on
banks we see that the state owned banks accounted for bonds. Loans however carry the highest returns usually
just over 73% of the cumulative lending over that period although the risk is also commensurate. But now that
while private sector banks account for the balance of negotiable lending rates have been introduced across
27% or so. And in FY2010 lending share is expected to the board both risk and return can be matched and mea-
come in at 68% for the State owned commercial banks sured.
(SOCBs) and then 38% for the Joint stock commercial
banks (JSCBs). Going forward HSC forecasts that credit growth for the
top 16 banks will be 19.3% in FY2011 and then 18.8%
This has changed dramatically since FY2005 with pri- in FY2012. Amongst the top banks HSC is forecasting
vate sector banks gaining market share. However we the strongest growth will come from MSB; HBB and
note that since last year the state owned sector has re- then ACB & EIB. On the other end of the scale we fore-
duced the market share loss by 1-2% or so. cast that SCB and then EAB & VBARD see the slowest
growth in credit.

www.hsc.com.vn Page 31

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Bank credit growth m/m Foreign currency loans as % of total


25.0%
8.0%
24.0%
6.0%

23.0%
4.0%

2.0% 22.0%

0.0% 21.0%

-2.0% 20.0%

-4.0% 19.0%

-6.0%
18.0%
Series1 Series2 Series3
-8.0%
17.0%
-10.0%
16.0%
Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08
Sep-08

Nov -08
Dec-08

Aug-09
Sep-09

Nov -09
Dec-09

Aug-10
Sep-10

Nov -10
Dec-10
Jun -08

Jan -09

Jun -09

Jan -10

Jun -10
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Feb-08
Mar-08

Feb-09
Mar-09

Feb-10
Mar-10

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08
Sep-08

Nov -08
Dec-08

Aug-09
Sep-09

Nov -09
Dec-09

Aug-10
Sep-10

Nov -10
Dec-10
Jan -08

Jun -08

Jan -09

Jun -09

Jan -10

Jun -10
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Feb-08
Mar-08

Feb-09
Mar-09

Feb-10
Mar-10
Source: SBV Source: Media

FY2010 credit growth slowed in Q4 but has been The SBV was too indulgent of this trend for much of the
mostly dollar based. year as they were anxious to see credit growth hit the
25% target. Which as we all know now we achieved with
As for last year we note that overall bank credit growth lots of room to spare. Only late on did they wake up to
reached 29.8% (adjusted number at end December) two unpleasant macroeconomic side effects; (1) a mis-
driven by foreign currency lending growth of just over match between dollar loans and deposits appeared last
48% while VND lending lagged behind at just over 27%. August whereby dollar loans exceeded dollar deposits
The relative attractiveness of borrowing in US$ at a rate (2) the maturity of short term dollar lending resulted in
of 4-6% as opposed to borrowing in VND at a rate of extra demand for the greenback especially as the carry
14-15% drove the lending market all last year. Of course trade unwound.
US$ lending is supposed to be restricted to import/ex-
port companies but we suspect that this rule has not Indeed in order to solve the first problem they created
been observed too strictly. More recently US$ rates the second one. Banks had to jack up dollar deposit
have moved higher thus partly closing this door. rates to cover their liabilities which of course spurred
dollar demand even further and in one swoop killed of
Dollar lending was quite sluggish in FY2009 and indeed the carry trade.
foreign currency lending as a % of the total loan book
fell to 17% by December FY2009. However the dollar Therefore not for the first time managing a multi cur-
loan emerged as the trade of FY2010 early on and by rency credit policy has proved to be big headache for
the end of December FY2010 dollar loans accounted for the authorities. But does the current level of credit in
roughly 21.5% which is slightly above the long term av- the system amount to a mini- credit bubble? To examine
erage. We suspect that some of the dollar lending espe- that question we need to look at total credit in the sys-
cially in the 1-H ended up as a carry trade with borrow- tem and not just bank credit.
ers exchanging the dollars for dong and placing them on
dong deposit to capture the difference. That worked well
as long as the dong was holding steady but has become
a bad trade since July.

www.hsc.com.vn Page 32

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Credit vs nominal GDP Gap between nominal GDP and M2


3,000,000 130%
3,500,000 35.0%
120%
30.0%
2,500,000 Total credit 3,000,000
110% Nominal GDP
25.0%
Nominal GDP 100%
2,000,000 2,500,000 M2 growth 20.0%
Credit as a % of nominal GDP 90%
15.0%
2,000,000
1,500,000 80%
10.0%
70% 1,500,000
1,000,000 5.0%
60%
1,000,000 0.0%
50%
500,000 -5.0%
40% 500,000
-10.0%
- 30%
- -15.0%

2011F
2010e
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e
2001

2002

2003

2004

2005

2006

2007

2008

2009

2011f
Source: GSO Source: GSO

Are we witnessing a mini credit bubble in Vietnam?

What is a sustainable total credit growth level for the And neither is the Vietnamese consumer, few of whom
Vietnamese economy? Or any economy for that matter? have access to credit cards or consumer loans. Indeed
This is an open debate although orthodox economics the irony is that on the whole corporate and individual
argue that over time the rate of long term credit growth indebtedness is not high in Vietnam. Most private sec-
cannot diverge too far above the rate of nominal GDP tor companies have a hard time accessing credit over
growth without causing a credit bubble. The problem is the last decade much of which is available only at high
that in practice for most economies credit growth is usu- prices. Anyway lets look at some more numbers.
ally above or below nominal GDP growth but rarely the
same. And in a developing economy such as Vietnam Total credit to GDP at 154% is fairly high by interna-
credit growth rates are usually well above nominal GDP. tional standards but not critical.
And that has been the case in Vietnam for over a decade
with credit growth about double nominal GDP growth for To look at the state of overall credit in Vietnam we have
the past 10 years. That can continue for several years to take a broader view and include government debt and
without creating a bubble but the problem now is that corporates bonds as well as traditional bank credit. And
at 154% of GDP at end 2009 we were already fast we looked at the regional comparisons with the help
approaching a level of absolute credit in the economy of some data provided by our friends over at Goldman
which is unsustainable in our opinion. Sachs.

How have we got here? Government policy since WTO By this standard when we add (1) Government debt (2)
entry has emphasized liquidity in an attempt to grow lo- Corporate loans (3) Corporate bonds and (4) Consumer
cal champions in the economy as fast as possible be- loans then total credit as % of GDP comes to 154% as
fore market opening. To this end they adoption a cheap of the end of FY2009. This was 3-4% lower than China
money policy centered on the availability of abundant but 15% higher than Taiwans levels for example and far
and cheap credit; much of which was funneled into the above developing peers such as Indonesia and India at
larger State Owned Enterprises (SOE). These SOEs 37% and 98% respectively.
expanded their balance sheets quite dramatically be-
tween FY2007-2009 and some; like Vinashin now find By component Vietnams government debt levels at
themselves in trouble. The problem is that although they 44.5% of GDP at end FY2009 (although it now appar-
bought a lot of assets; profitability and productivity lev- ently stands about 56%) looked fairly comparable to
els did not follow suit. India at 41% for example although much higher than
Korea, Indonesia and Taiwan. Then corporate loans at
So with the emergence of problems at Vinashin what 73% of GDP came in fifth spot out of the 11 countries
we are witnessing perhaps are the early signs of a surveyed. And amounted to VND1,203 trillion at the end
mini-credit bubble bursting. We say mini-credit bubble of FY2009 or US$60.12 billion. Corporate loan levels
because the extent of the problem does not cover the which include both private sector and also SOE loans
entire economy. The private sector which is mostly ser- are much higher than for the two comparable econo-
viced by private sector banks is not highly leveraged. mies India and Indonesia and a little higher even than

www.hsc.com.vn Page 33

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Credit as a % of GDP by component in 2009

% of total GDP

www.hsc.com.vn
300% Government debts Comsumer loans/household loans Corporate loans** Corporate bonds*

Note: China government debts have been adjusted for bank loans to local infrastructure projects using low end estimate at
c.22% GDP; * India corporate debt data exclude corporate bonds data (NA)
** UK and USA corporate loans data are corporate debt, includings corporate bonds.
250% * UK and USA corporate bonds data are financial sector debt data.

71%
48%
140%
200%

50%
0%
150%

14%
95% 57% 50%
58% 45%
32%
47%
72% 16%
100% 62%
19% 31%

52%

50% 78% 105% 87%


77% 67%
57% 73%
68% 46% 10%
41%
12%

12% 0% 12% 15% 2% 13%


10% 9% 7% 4%
0% 2%
USA 2009 Janpan March 09 Singapore 2009 Taiwan 2009 Hong Kong 2009 China 2009 Korea 2009 Thailand 2009 India 2009 Indonesia 2009 Vietnam 2009
September
February 2011
July 14h 2008

2009

Source - Goldman Sachs; HSC

Page 34

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Thailand (to be fair we have not looked at Philippines or lack of transparency in itself is pretty revealing. There-
Malaysia). Then consumer loans/household loans ac- fore with those heavy health warnings above we can
counted for 31% of GDP while the corporate bond mar- proceed.
ket is in its infancy in Vietnam.
Breaking down total credit by component is a tough
Therefore in conclusion the concern as far as Vietnam job due to incomplete data sets.
goes lies with the high level of corporate loans in the
economy relative to its development stage. To drill down We have approached this problem from several angles.
a little bit further it would be ideal to divide corporate Firstly the IMF and SBV publish annual and monthly
loans into three main components; private sector listed numbers on bank credit (also included credit extended
companies; SOE and then SME/unlisted large private by finance companies including PVFC). The IMF further
company debt to get an idea of where the main burden subdivides this into SOE and non-SOE lending. Then
lies. We have no numbers on the last category but luck- we have done a bottom up exercise of calculating the
ily we have data on the other two so we can imply it. bank debt for all listed companies as of end FY2009
which believe me was quite a tedious exercise. The
Corporate debt is where the problem lies buts its IMF number for SOE lending was updated only to Sep-
hard to define public and private. tember 2009 so we took that number as the year-end
number. Therefore it is an underestimation of the actual
We took a look at bank credit and corporate bonds to see picture as of that time.
what the relative share of the public and private sectors
were. Before FY2008 there wasnt much of a corporate Lets start with banks credit. At the end of FY2009 bank
bond market so historically the bank numbers alone told credit amounted to VND1,736.6 trillion or US$86.3 bil-
the whole story. However, since then a vibrant corporate lion. This came to 105% of nominal GDP for last year. To
bond market has emerged and as of the end of FY2009 this we added corporate bonds to come to a tyotal figure
its size totaled VND71.06 trillion (US$3.55 billion. In VND1,807 trillion.
time this market will both deepen and broaden but at
the moment as corporate bonds are rarely traded if ever Then according to the IMF as of September FY2009
in the secondary market. Therefore corporate bonds are SOE debt amounted to VND529.4 trillion (US$26.47 bil-
better treated as being akin to syndicate lending. lion) or 29.5% of the total for bank credit (we have taken
this number as the year-end number as we mentioned).
Then we have divided the both actual lending and cor- SOE debt as measured by the IMF numbers increased
porate bond lending into their respective SOE and pri- at a CAGR of 28.9% over the seven years to FY2009
vate sector components. Some of this requires a clear or slightly lower than overall credit growth at 29.3%.
a definition. For example should VNM, PVD and VCB Moodys for its part has estimated SOE debt at between
all majority government owned but also listed on the 25-40% of the total. In truth then both these numbers
stock market be treated as an SOE or a private sector are guesstimates.
company? In fact once privatised any listed company
regardless of who owns the majority stake is treated as Then lets take out at listed company debt. According to
private sector. our bottom up approach as of end of FY2009 listed com-
panies has a total debt of VND173.4 trillion or US$8.89
Of course the overriding problem is that with the rife billion. This was up 47% y/y and amounts to exactly
use of nominee company structures and multiple sub- 9.6% of total debt. This debt also included straight and
sidiaries in Vietnam its virtually impossible in reality to convertible bonds. Now we understand that consumer
know who is lending exactly how much and to whom. loans also accounted for about 9.6% or VND173.9 tril-
A subsidiary of an SOE set up using nominee names lion of the total as at the end of FY2009.
looks just like any other private sector company to the
casual observer. So much of what looks like private sec- This implies that the balance of 51.5% or VND859.89
tor lending by private sector banks may in fact be ending trillion (US$44 billion) was down to SME/large unliste
up in SOE coffers. private companies. However as mentioned above in
practice we suspect this (1) understates the SOE com-
So our attempt to isolate and identify actual SOE indebt- ponent as we are unable to track loans made to their
edness may in fact be doomed from the start and cer- nominee subsidiaries of which we know there are prob-
tainly will tend to understate it in our opinion. Therefore ably several hundred (2) overstates the lending to SMEs
this exercise is mainly useful in identifying the broad alone for the same reason. However other than noting it
trends and can in no way be seen as an accurate sur- there is little we can do to fine-tune the data.
vey of whats going on. However we would note that this

www.hsc.com.vn Page 35

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Selected banks credit growth
Type Short Credit growth (VNDmillion) Cumula- CAGR Share of Current
name tive lending market
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F lending increase share for

www.hsc.com.vn
FY2005- FY2005- FY2010e
10e 10e

SOCB VBARD 159,449,126 288,940,827 361,739,747 423,235,504 490,953,185 569,505,694 16.9% 32.6% 16.9% 25.2% 17.0% 16.0% 16.0% 165% 21.6% 23.9% 27.6%
186,348,408 247,092,136

SOCB BIDV 82,716,549 97,201,778 156,870,045 200,999,434 242,204,318 283,379,052 331,553,491 17.5% 32.8% 21.5% 28.1% 20.5% 17.0% 17.0% 193% 24.0% 14.5% 15.8%
129,079,351

SOCB CTG 74,449,345 80,142,030 118,601,864 161,619,376 202,115,735 238,568,525 274,045,206 7.6% 25.4% 18.0% 36.3% 25.1% 18.0% 14.9% 171% 22.1% 11.6% 13.2%
100,482,233

SOCB VCB 59,701,251 66,250,888 95,528,548 108,617,623 136,996,006 168,983,871 199,693,645 234,667,994 11.0% 44.2% 13.7% 26.1% 23.3% 18.2% 17.5% 183% 23.1% 9.9% 11.0%

Total SOCB 376,316,271 673,030,359 861,354,563 1,212,594,407 14.3% 33.1% 17.6% 28.0% 20.3% 17.0% 16.3% 175% 22.5% 59.8% 67.5%
429,943,104 572,182,268 1,036,539,428 1,409,772,385

JSCB ACB 9,360,692 16,958,212 31,676,320 34,604,077 61,855,984 85,419,139 110,499,011 141,831,005 81.2% 86.8% 9.2% 78.8% 38.1% 29.4% 28.4% 813% 55.6% 6.9% 5.6%

JSCB STB 8,379,335 14,312,895 35,200,574 34,757,119 59,141,487 79,613,082 96,643,921 115,824,946 70.8% 145.9% -1.3% 70.2% 34.6% 21.4% 19.8% 850% 56.9% 6.5% 5.2%

JSCB EIB 6,427,689 10,164,975 18,378,610 20,855,907 38,003,086 51,835,839 67,089,748 87,216,672 58.1% 80.8% 13.5% 82.2% 36.4% 29.4% 30.0% 706% 51.8% 4.1% 3.4%

JSCB TCB 5,293,062 8,696,101 19,841,131 26,018,985 41,580,370 51,909,777 62,368,402 73,372,744 64.3% 128.2% 31.1% 59.8% 24.8% 20.1% 17.6% 881% 57.9% 4.2% 3.4%

JSCB MB 4,218,138 5,836,049 11,468,799 15,493,509 29,140,759 37,289,038 49,216,312 64,956,776 38.4% 96.5% 35.1% 88.1% 28.0% 32.0% 32.0% 784% 54.6% 3.0% 2.4%

JSCB EAB 5,947,768 7,956,945 17,793,644 25,303,892 34,010,811 39,495,571 45,817,760 53,151,944 33.8% 123.6% 42.2% 34.4% 16.1% 16.0% 16.0% 564% 46.0% 3.0% 2.6%

JSCB MSB 2,316,693 2,851,489 6,493,389 11,124,146 23,698,496 37,124,846 50,025,784 67,461,428 23.1% 127.7% 71.3% 113.0% 56.7% 34.8% 34.9% 1502% 74.2% 3.2% 2.4%

JSCB VIB 5,255,206 9,058,234 16,611,779 19,587,856 27,103,139 39,982,993 46,583,259 54,223,629 72.4% 83.4% 17.9% 38.4% 47.5% 16.5% 16.4% 661% 50.1% 3.1% 2.6%

JSCB SHB - 491,516 4,175,420 6,227,158 12,701,664 23,922,038 29,745,847 37,163,655 72.4% 83.4% 49.1% 104.0% 88.3% 24.3% 24.9% 4767% 164.1% 2.2% 1.6%

JSCB SCB 3,343,271 8,395,448 19,397,780 23,100,712 30,969,115 24,140,078 24,183,409 25,396,617 151.1% 131.1% 19.1% 34.1% -22.1% 0.2% 5.0% 622% 48.5% 1.9% 1.6%

JSCB HBB 3,293,681 5,915,744 9,285,862 10,275,166 13,138,567 15,710,463 20,876,198 27,755,905 79.6% 57.0% 10.7% 27.9% 19.6% 32.9% 33.0% 377% 36.7% 1.1% 1.0%

JSCB SEA- 1,347,680 3,353,999 10,994,812 7,506,934 9,464,859 11,855,230 15,138,242 16,538,887 148.9% 227.8% -31.7% 26.1% 25.3% 27.7% 9.3% 780% 54.5% 1.0% 0.8%
Bank

Total 55,183,215 93,991,608 234,855,461 380,808,337 498,298,095 618,187,894 764,894,209 70.3% 114.2% 16.7% 62.1% 30.9% 24.1% 23.7% 803% 55.3% 39.2% 32.5%
JSCB 201,318,120

Total 431,499,486 907,885,820 1,830,782,300 21.4% 47.6% 17.4% 36.8% 23.6% 19.3% 18.8% 256% 28.9% 99.0%
523,934,712 773,500,388 1,242,162,900 1,534,837,524 2,174,666,594

- - - - - -

SCB share of 87% 82% 74% 74% 69% 68% 66% 65%
lending

JSCB share of 13% 18% 26% 26% 31% 32% 34% 35%
lending

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 36

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Lending of top 16 banks Lending of top SOCBs

2,500,000,000 600,000,000

VBARD
500,000,000
2,000,000,000
Total SOCB BIDV
Total JSCB 400,000,000
1,500,000,000 CTG
Total
300,000,000
VCB
1,000,000,000
200,000,000

500,000,000 100,000,000

- -

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

Source: Media Source: Media

Forward view on credit lower growth rates but more sustainable

HSC forecasts that the CAGR for credit growth over the We see four drivers behind slower credit growth going
next three years will be 20% which marks a significant forward (1) more independent central bank cracks down
slowdown on the growth levels we have gotten used to on credit growth to stabilise the currency (2) tighter bank
over the past decade. The SBV has itself set an ad- regulatory environment to reduce systemic risk and
justed target of 18-20% for FY2011 but looking beyond tackle reckless lending practices (3) banks themselves
that we see credit growth will continue to slow down as become risk adverse as NPLs rise (4) growing role of
the sector matures. Greater independence on the part foreign strategic investors in terms of introducing best
of the central bank; tighter regulations and a more cau- practices and improving internal controls.
tious approach from banks. This caution is the aftermath
of over-rapid credit expansion; tighter scrutiny & better Of all of these we see a growing NPL problem acting as
internal controls courtesy of banks strategic partners. a healthy corrective for banks who have adopted loose
credit controls and lax standards on NPL reporting up
In other words the forces acting to reduce credit growth till now. Currently we are at the bottom of the NPL cycle
will be both top down in the form of regulation and macro with reported system NPLs in FY2010 coming to about
pressures and bottom up in the form of more risk adver- 2.5%, almost unchanged y/y. This is likely to expand
sity and better controls on the part of banks themselves. somewhat from FY2011 as new stricter calculation rules
And it is this convergence of factors that will slow down are introduced system wide. And the unwinding of the
the credit expansion and bring it close to nominal GDP excess of the past few years begins.
growth levels in future.
With more power the SBV is likely to tighten the
screws on credit growth from this year
Lending of top JSCBs
No-one is more painfully aware of the likely legacy of
160,000,000 loose monetary policy than the SBV itself as they have
140,000,000 to deal with the consequences of the last five years of
120,000,000 ACB over fast expansion in the monetary base and high en-
100,000,000 STB suing credit growth. Vietnams macroeconomic prob-
80,000,000 EIB lems such as high levels of depreciation; higher than
60,000,000
TCB regional inflation levels and high levels of systemic risk
40,000,000
in the banking sector can all be traced back to the same
common cause.
20,000,000

-
To be fair to the SBV monetary policy has been a al-
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

phabet soup cooked by several interested players up


till now. Indeed the SBV itself has often been relegated
to the role of frustrated bystander when key decisions
Source: Media
were being made. So their role has been more about

www.hsc.com.vn Page 37

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Selected banks credit growth as % of balance sheet


FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011f FY2012f
1 SOCB VBARD 79% 76% 76% 72% 75% 77% 78% 79%
2 SOCB BIDV 68% 60% 63% 64% 68% 67% 69% 69%
3 SOCB CTG 64% 59% 60% 61% 66% 63% 67% 66%
4 SOCB VCB 44% 40% 48% 49% 54% 55% 58% 60%
Total SOCB 65% 61% 64% 63% 67% 67% 70% 70%
5 JSCB ACB 39% 38% 37% 33% 37% 44% 49% 53%
6 JSCB STB 58% 58% 55% 51% 57% 64% 67% 68%
7 JSCB EIB 57% 55% 55% 43% 58% 56% 57% 59%
8 JSCB TCB 50% 50% 50% 44% 45% 41% 42% 42%
9 JSCB MB 51% 43% 39% 35% 42% 38% 39% 40%
10 JSCB EAB 70% 66% 65% 73% 80% 79% 79% 79%
11 JSCB MSB 53% 33% 37% 34% 37% 35% 40% 42%
12 JSCB VIB 59% 55% 42% 56% 48% 56% 56% 56%
13 JSCB SHB 37% 34% 43% 46% 53% 52% 53%
11 JSCB SCB 83% 77% 75% 60% 57% 45% 44% 44%
15 JSCB HBB 60% 51% 39% 44% 45% 42% 42% 41%
16 JSCB SEABank 22% 33% 42% 34% 31% 42% 41% 41%
Total JSCB 52% 49% 47% 45% 47% 49% 51% 52%
Total 63% 58% 59% 57% 60% 60% 62% 62%
Source: Banks, HSC

execution of a policies sometimes decided against their The timing of all this is crucial. We have witnessed a
best advice. All this may be about to change. too-rapid expansion of the monetary base over the past
five years with a CAGR for M2 of 30.3% compared to a
The New Law on SBV passed in the previous National CAGR for nominal GDP of just 17.8%. As a result the
Assembly session has taken effect this year. We will currency has lost value steadily and this has led to a
discuss this further elsewhere but suffice to say that in run-down in reserves. Indeed in a recent interview, SBV
future a monetary policy decided in conjunction with a representatives announced the current foreign reserves
more sympathetic National Assembly rather than the can cover just 9 import weeks, declining from 14 import
Government Office as is done currently is likely to be a weeks in FY2009. Time for change.
more conservative one than up till now.
As mentioned, the bank-loan to GDP ratio (includes
And indeed regardless of the changing dynamics of loans by finance companies also) was around 118.6%
policy making the room for maneuver on forward credit in FY2010 and is heading for 122% of GDP at the end
growth is very narrow in a world where Vietnamese cur- of this year. And we further estimate the banking sector
rency reserves are running at 8/9 weeks import cover currently has a loan to deposit ratio of 90-95% which the
and where outside Vietnam there is open talk of global SBV wants to reduce to 80%.
currency and debt crisis. The heady monetary expansion
of past years is being punished by the currency markets All of this points to an excessive liquidity in the system
already. The pressure of events leaves little choice but which needs to be tackled. What may be surprising is
to adopt a more sustainable policy going forward. the fact that we have not seen an asset bubble in the
economy commensurate with the liquidity gap. However
And apart introducing stricter solvency rations; an 80% we suspect that a lot of the excess liquidity has been
LDR ceiling through the implementation of C19 the SBV transferred into dollar or gold in the form of internal capi-
is going further to tackle reckless lending through tough- tal flight. That would explain the huge errors and omis-
er regulation in terms of the (1) tighter definition of credit sion balance we have run for the last several years.
which will from now include both debt paper and guar-
antees (2) stricter classification of what constitutes bad
debt replacing decree 493.

www.hsc.com.vn Page 38

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

In fact some of the above ratios are at a sensitive They also offer both credit and debit cards for custom-
threshold which makes the economy more susceptible ers. Banks increasingly are offering overdraft facilities
to external shocks. And the external environment at the for regular customers who pass certain criteria. Going
moment is proving very proficient at delivering shocks. forward products such as mortgages, credit cards and
Therefore, in our opinion the SBV needs to tilt the bal- car loans probably have the greatest potential in terms
ance between GDP growth and FX stabilization firmly in of growth rates and margins.
the direction of the latter over the next year or so. Re-
ducing the gap between nominal GDP and M2 should However we are seeing some innovations such as in-
be a key economic policy to avoid the risk of a crisis creasing offerings of an overdraft facility for both indi-
later on. And that means lower credit growth also. And viduals and corporates which has become fairly com-
at least sticking to the targets recently announced. monplace since FY2009.

Credit products are expanding but the product suite For example recently Dai A Bank offered an overdraft
is still in its infancy product for both corporates and individuals. In the case
of individuals they offer 3 months salary up to a maxi-
Most banks offer standard products divided into both mum of VND100 million for 12 months for those with a
corporate and retail segments. However if we compare minimum VND5 million salary. And then for corporates
the retail product suite of a typical local bank with its they are offering up to VND2 billion unsecured or up to
equivalent in HK or Singapore we would note that stan- VND10 billion secured loans. This offers more flexibility
dard products over there such as mortgages; car loans; than normal fixed loans and operates in fact more like a
credit cards and unsecured loans are still new products renewable credit facility.
in Vietnam. Its a similar story on the corporate side with
loan syndication or derivative products still either un- As the quality of credit information improves banks are
available or in the early stages of development. more able to quantify credit risk and now with negotia-
ble lending rates they are able to price that risk. And
In the retail segments popular loans include products being able to both quantify and price credit risk banks
such as car & motorbike loans; home improvement are now moving more and more into unsecured lend-
loans and personal loans both secured and unsecured. ing products. Currently these unsecured products are
Mortgages are also offered but only in some cases. offered to private clients and can amount to between
They also offer loans backed by securities for margin 10-20 months salary.
trading purposes. Typically the collateral offered is real
estate although securities of fixed assets such as a car They carry higher lending rates than secured products
or motorbike can also be accepted. and as such fatter margins provided that the risk is prop-
erly priced.

www.hsc.com.vn Page 39

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Bank deposits in Vietnam Deposit growth y/y


2,800,000 600,000 50.0%
Total Deposits y/y
2,600,000 Total Deposits 45.0%
Deposits in VND y/y
500,000
2,400,000 Deposits in VND 40.0%
Deposits in Foreign Currencies y/y
Deposits in Foreign Currencies 35.0%
2,200,000 400,000
30.0%
2,000,000
300,000 25.0%
1,800,000
20.0%
1,600,000 200,000
15.0%
1,400,000 10.0%
100,000
1,200,000 5.0%

1,000,000 0
0.0%

Apr-09

Oct-09

Apr-10

Oct-10
Aug-09
Sep-09

Nov -09
Dec-09

Aug-10
Sep-10

Nov -10
Dec-10
Jan -09

Jun -09

Jan -10

Jun -10
Jul -09

Jul -10
May-09

May-10
Feb-09
Mar-09

Feb-10
Mar-10
Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08
Sep-08

Nov -08
Dec-08

Aug-09
Sep-09

Nov -09
Dec-09

Aug-10
Sep-10

Nov -10
Dec-10
Jan -08

Jun -08

Jan -09

Jun -09

Jan -10

Jun -10
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Feb-08
Mar-08

Feb-09
Mar-09

Feb-10
Mar-10

Source: Media Source: Media

Deposits remain the engine of growth

Deposits are the engine of a banks growth. The faster has created another problem. Overexpansion by a lot
they can grow deposits the faster they can grow cred- of undercapitalized smaller bank has increased sys-
it. They can tap interbank funds but recently SBV has temic risk in the financial sector. So now the SBV has
encouraged banks to raise interbank funds equal to no turned its attention to sector consolidation. This means
more than 20% of customer deposits. This message that going forward only those banks with strong balance
was conveyed after C13 was put into effect. Therefore sheets will be allowed to open new branches. This is
unlike previously, banks cannot now expand simply by likely to lead to less branch openings going forward and
borrowing more on the interbank market. Deposits are slower deposit growth for the sector. However with far
not the cheapest form of raising money and indeed de- less banks around those few banks who can grow their
posit rates have stayed stubbornly above 12% for more capital should be able to sustain current network and
than a year and are currently far higher. deposit growth for the foreseeable future.

Indeed in the last month or two declared deposit rates Deposit growth high
have surged to an average of 14.5% in our most recent
survey. This are just for quoted rates and the weight- During FY2004-2006, the deposit growth was higher
ed average deposit (which includes negotiable rates) than the loan growth however this relationship was re-
would be 150-200 basis points at least higher than this. versed in FY2007-2010. Over the past five years includ-
And recently many banks have been offering top rates ing FY2010, bank deposits for selected banks (top 16
of 17% or more for special saving programs although banks) have grown at a CAGR of 28% (this compares
the SBV has been vigilant in trying to police these. to a CAGR of 28.9% for lending remember). Breaking
that down, we see that SOCB deposits have grown at a
But with many depositors quick to move their accounts CAGR of 20.1% while JSCB deposits have grown at a
to gain even small differentials in deposit yields banks CAGR of 53.4% since FY2005.
are forced to stay very competitive in order to retain cus-
tomers. Given the paucity of the product suite and the Amongst the top private sector banks TCB saw the fast-
dearth of long term products such as mortgages that est growth in deposits with a CAGR of 68.4%; followed
can keep customers locked in we have noticed that the by MB and then STB. Surprisingly ACB lagged slightly
Vietnamese banking public is quite fickle. This plays behind since FY2005. Despite this ACB has the largest
an important part in raising funding costs as too many JSCB sector share of the deposit market with 6.9%, fol-
banks compete for a finite pool of deposits. lowed by STB with 5.1%. Of course some smaller banks
have seen stronger growth such as MSB with a CAGR
Expanding the branch network is the easiest way to 69.9% and SCB with a very impressive 90.8% CAGR.
grow deposits and network expansion has been rela-
tively easy over the last five years. This because one of Looking forward we forecast that deposits growth in the
the SBVs top priorities was to expand the formal bank- whole system will come to 19.3% in FY2011 and 18.6%
ing system and reduce the weight of the informal cash in FY2012. Breaking this down we see SOCBs growing
economy. That has been largely achieved but perhaps by 16.2% & 16.6% respectively over the next two year

www.hsc.com.vn Page 40

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Selected banks customer deposit growth
Type Short Customer deposit growth (VNDmillion) Cumula- CAGR Share of Current
name tive FY2005- deposit market
FY2005 FY2006 FY2007 FY2008 FY 2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F deposit 2010 increase share for
FY2005- FY2005- FY2010e

www.hsc.com.vn
10e 10e

SOCB VBARD 119,732,347 158,159,599 230,001,067 299,954,030 331,893,865 384,996,883 446,596,385 518,051,806 32.1% 45.4% 30.4% 10.6% 16.0% 16.0% 16.0% 222% 26.3% 23.2% 23.8%

SOCB BIDV 85,746,724 106,495,878 135,335,702 163,396,947 187,280,394 220,990,865 258,559,312 302,514,395 24.2% 27.1% 20.7% 14.6% 18.0% 17.0% 17.0% 158% 20.8% 11.8% 13.7%

SOCB CTG 84,387,013 91,505,860 125,093,587 148,530,242 181,206,895 213,824,136 248,035,998 8.4% 23.2% 11.0% 18.7% 22.0% 18.0% 16.0% 115% 16.5% 8.5% 11.2%
112,692,813

SOCB VCB 108,313,175 119,778,871 141,589,093 157,067,019 169,071,562 207,958,021 237,072,144 267,891,523 10.6% 18.2% 10.9% 7.6% 23.0% 14.0% 13.0% 92% 13.9% 8.7% 12.9%

Total SOCB 398,179,259 475,940,208 745,511,583 836,776,063 995,152,665 1,156,051,977 1,336,493,722 19.5% 30.2% 20.3% 12.2% 18.9% 16.2% 15.6% 150% 20.1% 52.1% 61.6%
deposits 619,618,675

JSCB ACB 19,984,920 29,394,703 55,283,104 64,216,949 86,919,196 112,125,763 140,157,204 175,196,504 47.1% 88.1% 16.2% 35.4% 29.0% 25.0% 25.0% 461% 41.2% 8.0% 6.9%

JSCB STB 10,467,158 17,511,580 44,231,944 46,128,820 60,516,273 81,696,969 98,036,362 117,643,635 67.3% 152.6% 4.3% 31.2% 35.0% 20.0% 20.0% 681% 50.8% 6.2% 5.1%

JSCB EIB 8,352,111 13,141,175 22,906,123 30,877,730 38,766,464 51,171,732 67,546,687 89,161,627 57.3% 74.3% 34.8% 25.5% 32.0% 32.0% 32.0% 513% 43.7% 3.7% 3.2%

JSCB TCB 6,195,072 9,566,043 24,476,576 39,617,723 62,468,930 83,857,253 100,628,704 120,754,444 54.4% 155.9% 61.9% 57.7% 34.2% 20.0% 20.0% 1254% 68.4% 6.8% 5.2%

JSCB MB 6,069,812 10,312,619 17,784,837 27,162,881 39,978,447 59,967,671 79,157,325 104,487,669 69.9% 72.5% 52.7% 47.2% 50.0% 32.0% 32.0% 888% 58.1% 4.7% 3.7%

JSCB EAB 6,513,795 9,271,350 14,329,311 23,010,437 27,973,540 33,568,248 40,953,263 49,143,915 42.3% 54.6% 60.6% 21.6% 20.0% 22.0% 20.0% 415% 38.8% 2.4% 2.1%

JSCB MSB 3,333,608 3,785,316 7,368,648 14,111,556 30,053,287 47,183,661 63,697,942 81,806,473 13.6% 94.7% 91.5% 113.0% 57.0% 35.0% 28.4% 1315% 69.9% 3.8% 2.9%

JSCB VIB 5,268,617 9,813,515 17,686,761 23,905,294 32,364,898 48,547,347 56,800,396 66,456,463 72.4% 83.4% 35.2% 35.4% 50.0% 17.0% 17.0% 821% 55.9% 3.8% 3.0%

JSCB SHB 368,001 2,804,869 9,508,142 14,672,147 26,340,931 32,898,377 41,242,951 72.4% 83.4% 54.3% 54.3% 79.5% 24.9% 25.4% 7058% 134.9% 2.3% 1.6%

JSCB SCB 1,616,524 3,575,631 15,970,543 22,969,094 30,113,315 40,833,092 42,874,747 45,018,484 121.2% 346.6% 43.8% 31.1% 35.6% 5.0% 5.0% 2426% 90.8% 3.4% 2.5%

JSCB HBB 3,096,275 4,484,804 8,467,382 11,081,949 13,648,467 21,543,224 28,760,205 38,894,138 44.8% 88.8% 30.9% 23.2% 57.8% 33.5% 35.2% 596% 47.4% 1.6% 1.3%

JSCB SEA- 2,312,406 3,511,683 10,744,179 8,587,008 12,345,847 14,568,099 20,973,125 21,163,460 51.9% 206.0% -20.1% 43.8% 18.0% 44.0% 0.9% 530% 44.5% 1.1% 0.9%
Bank

Total JSCB 73,210,299 114,736,420 242,054,277 321,177,583 449,820,811 621,403,990 772,484,335 950,969,763 56.7% 111.0% 32.7% 40.1% 38.1% 24.3% 23.1% 749% 53.4% 46.8% 38.4%
deposits

Total deposits 471,389,558 590,676,628 861,672,952 1,066,689,166 1,286,596,874 1,616,556,655 1,928,536,313 2,287,463,486 25.3% 45.9% 23.8% 20.6% 25.6% 19.3% 18.6% 243% 28.0% 98.9%

SOCB share of 84% 81% 72% 70% 65% 62% 60% 58%
deposits

JSCB share of 16% 19% 28% 30% 35% 38% 40% 42%
deposits

Source - Banks, HSC


September
February 2011
July 14h 2008

2009

Page 41

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Branch network
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F
1 SOCB VBARD 2000 2000 2100 2200 2300 2300 2300 2300
2 SOCB BIDV 254 297 331 383 420 603 754 942
3 SOCB CTG 712 714 760 786 949 1124 1236 1360
4 SOCB VCB 123 146 205 273 322 368 418 468
Total SCOB 3,089 3,157 3,396 3,642 3,991 4,395 4,708 5,070
5 JSCB ACB 61 84 111 192 237 267 307 347
6 JSCB STB 128 163 211 247 309 355 405 455
7 JSCB EIB 23 32 65 111 149 180 220 260
8 JSCB TCB 50 73 128 167 200 240 280 320
9 JSCB MB 25 38 65 90 108 140 175 210
10 JSCB EAB 44 69 106 148 173 203 233 263
11 JSCB MSB 7 20 40 89 120 160 190 220
12 JSCB VIB 63 83 107 116 140 155 170
13 JSCB SHB 30 33 95 122 152.5 191
11 JSCB SCB 26 40 51 112 112 112 112
15 JSCB HBB 21 30 39 49 68
16 JSCB SEABank 15 30 42 70 72 85 100 115
Total JSCB 353 619 951 1,344 1,740 2,072 2,330 2,663
Total 3,442 3,776 4,347 4,986 5,731 6,467 7,038 7,733
Source - Banks, HSC

while we forecast that JSCBs will see deposit growth of with foreign competition coupled with the desire to get
24.3% & 23.1% respectively over the same period. The as much of the countrys cash pile tucked away in the
top banks by deposit growth this year as forecast by banking system where at least it can be managed and
HSC will be EIB; MB and MSB amongst the larger banks monitored. From that point of view the disadvantages
and then Seabank and HBB amongst the smaller ones. of allowing banks to expand rapidly; the risk of a mini
credit bubble and too many branches chasing too little
Deposit growth depends on two things; attractive prod- business seem secondary.
ucts and network expansion. Any bank with a solid brand
name that offers competitive rates, flexible products and Private sector banks in particular expanded their branch
that has expanded their branch network steadily over network. EIB and MB expanded their branch network
the last few years would have been able to grow their by a CAGR of 51% & 41% respectively over the period.
deposits rapidly. Penetration in terms of branch net- This helped them reach new depositors and keep over-
works and product reach was quite limited 5 years ago all deposit growth rates high.
even in urban areas.
However, about a year ago the SBV began reining in the
Offering more competitive deposit rates has been the breath neck expansion in branches which had spread
key drivers for deposit growth at banks such as TCB; to smaller banks with doubtful capacity to manage such
MB and MSB. However a good reputation or strong growth. In Q1 FY2010, SBV drafted a new Circular of
franchise such as that enjoyed by ACB. EIB and STB banks network expansion. The draft requires banks
can work just as well. (1) to increase the incremental capital to VND200 bil-
lion from VND100 billion for each new branch in Hanoi
Driven by rapid branch network expansion from and HCMC; (2) to increase the incremental capital to
FY2005-2010 VND100 billion from VND50 billion for opening branch-
es in secondary cities and the provinces.
As mentioned from FY2005-10 the number of branches
increased by a CAGR of 13%. The SBV was quite gen- Although this draft hasnt been put into effect yet, we
erous in issuing permits for new branches and the in- understand that in practice applications to open new
cremental capital requirements were not onerous. The branches have been increasingly subject to the ideas
SBVs relaxed stance was understandable in the context behind this draft for most of the last year.
of growing the domestic banking sector quickly to cope

www.hsc.com.vn Page 42

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Selected banks deposit growth as % of balance sheet


FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011f FY2012f
1 SOCB VBARD 59% 64% 70% 75% 69% 70% 71% 71%
2 SOCB BIDV 71% 66% 66% 66% 63% 61% 63% 63%
3 SOCB CTG 73% 68% 68% 65% 61% 57% 60% 60%
4 SOCB VCB 79% 72% 72% 71% 66% 68% 68% 68%
Total SOCB 69% 67% 69% 70% 66% 65% 66% 67%
5 JSCB ACB 82% 66% 65% 61% 52% 58% 63% 65%
6 JSCB STB 72% 71% 68% 67% 58% 66% 68% 69%
7 JSCB EIB 73% 72% 68% 64% 59% 55% 58% 60%
8 JSCB TCB 58% 55% 62% 67% 68% 66% 68% 69%
9 JSCB MB 74% 76% 60% 61% 58% 60% 62% 64%
10 JSCB EAB 76% 77% 52% 66% 66% 68% 71% 73%
11 JSCB MSB 76% 44% 42% 43% 47% 45% 51% 51%
12 JSCB VIB 59% 59% 45% 69% 57% 69% 69% 69%
13 JSCB SHB 28% 23% 66% 53% 59% 58% 59%
11 JSCB SCB 40% 33% 62% 60% 55% 77% 78% 78%
15 JSCB HBB 56% 38% 36% 47% 47% 57% 58% 58%
16 JSCB SEABank 38% 34% 41% 39% 40% 52% 57% 52%
Total JSCB 69% 60% 57% 61% 56% 61% 63% 64%
Total 69% 66% 65% 67% 62% 63% 65% 66%
Source - Banks, HSC

Relationship between branch network and deposit which suggests that their active branch opening strat-
growth is fairly complex egy is still quite efficient. It also suggests that as a sec-
tor the Vietnamese banking sector has not exhausted its
It would be easy to assume that deposit growth and organic growth capability.
branch network expansion are closely correlated and in
an ideal world they would be. Banks such as ACB, VCB, Then in contrast if we look at other banks such as SCB
STB, TCB, MB & TCB have all grown their networks and Seabank we can see the average level of deposit
steadily over the years whilst maintaining a consistent per branch has been flat or in decline suggesting their
relationship between deposit growth and the number of expansion policy is either inefficient or faltering. There
new branches. can be several reasons for this; poor choice of loca-
tions; lack of qualified staff or poor product selection.
Then others like VBARD, BIDV, CTG and HBB have fol- But clearly in these cases a banks competitive strength
lowed a completely different strategy. They have grown is waning and by continuing to open new branches they
their branch networks very slowly and deposit growth has are simply adding additional fixed cost without benefit-
also been correspondingly slower. This suggests than in ting the banks bottom line much. In terms of average
the Vietnamese market deposit growth and branch net- deposit VCB ranks highest (we exclude BIDV as an out-
work expansion as fairly closely tied together. lier), followed by ACB and then MB.

The efficiency of opening new branches can be mainly Overall ACB emerges from this exercise with the most
measured by two ratios; average deposit per branch efficient performance in terms of network expansion and
and the incremental growth rate of deposits per new deposit growth. And while STB has maintained a deposit
branch. This assumes of course that new deposits growth CAGR which at 50.8% is even higher than ACBs
can only come from opening new branches which is of CAGR of 41.2%, ACB enjoys a vastly superior average
course over-simplistic. However in a broad way it mea- deposit base per branch. This is a tremendous achieve-
sures the usefulness of an active new branch opening ment at first glance as it allows ACB to grow deposits
strategy. And if we apply this to the top six banks by as fast as STB without incurring the high fixed costs of
network growth (as mentioned above) we can see that building the largest distribution network.
these banks have kept average deposit per branch ris-
ing steadily (with the exception of VCB) over the years,

www.hsc.com.vn Page 43

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Branch network capital requirements


Current method Notes
VND100bn x N1 + VND50bn x N2 < C The current regulation is fairly generous and has allowed rapid expansion
Whereas N1: Number of branches in Hanoi and HCMC
N2: Number of branches in other provinces and cities
C: chartered capital
Proposed new method
VND200bn x N1 + VND100bn x N2 +C1 +C2 < C This is basically doubling the amount of capital required to open any branch
However this draft has been know for some time but has yet to be applied
Whereas N1: Number of branches in Hanoi and HCMC At the moment we thing the SBV is using the draft for general guidance only
N2: Number of branches in other provinces and cities And there is a ongoing debate as to whether this is in fact needed or not
C: chartered capital
C1: Capital contribution and equity investment
C2: capital provided to functional units.
Source: SBV

Branch versus sub-branch the art of branch ex- now can easily circumvent them anyway by opening sub
pansion branches freely. And others argue that capital restric-
tions are anyway unnecessary given that credit deci-
A sub branch or transaction office may seem like the sions are often managed centrally at the HQ.
poor mans branch office but its becoming an increas-
ingly popular option for banks. In the amended law on However things are not as clear-cut as that. Typically
credit institutions lays out two main categories for trans- a sub-branch has far lower credit limits than a branch
action offices; branch level no 1 (full branch) and branch but can still OK some loans. Of course medium to large
level no 2 (a sub branch). We believe the effect of the sized loans can only be signed off by a central by a
new law is to narrow the differences between branches credit committee but in practice branch managers and
and sub-branches in terms of how they operate. And even sub branch managers are left with some discretion
therefore this has made the opening of sub-branches up to strictly defined limits. These limits vary widely by
more popular as a cheaper option for banks who want bank but for example we understand a sub branch man-
to expand their reach. ager in ACB can authorise lending of up to VND100 mil-
lion while at VCB for example its a much larger VND500
The advantage to opening a sub-branch rather than million. Most banks would be somewhere between these
a full branch lies in the fact that there are currently no two limits.
capital requirements for sub-branches.
Therefore based on this we believe that some form
The old regulations set the tone for the dramatic expan- of capital restrictions for new branches should stay in
sion in branch network over the past five years. This place to provide a buffer against reckless lending at
is significant because of the close connection between branch level.
branch expansion, deposit and finally credit growth. And
recognizing this at the end of FY2009, SBV first issued New rules may tie future network expansion to bal-
a letter freezing approvals and then in FY2010, SBV ance sheet strength
relaxed this slightly by issuing another letter restricting
approvals in Hanoi and HCMC only. Therefore for the purpose of this report we assume that
to qualify for a new branch license you must comply with
The new draft proposals were also released in FY2010. the capital requirement per branch and also of course
However, its believed the SBV is unlikely to issue this are compliant with all other relevant regulations such as
document for the time being. Rather they seem to focus the solvency ratios and the CAR & LDR thresholds as
on preparing circulars covering other topics to flesh the standard. Furthermore you may have to make a case
implementation of the new credit and SBV laws. And why opening a new branch in a given neighbourhood
significantly the function of bank networks is not direct- would not crowd it out so to speak.
ly mentioned in the new credit laws itself. Some have
speculated that the capital requirements on network This effectively ties future expansion and therefore fu-
opening might even be cancelled altogether as banks ture deposit growth to a banks ability to raise new capi-

www.hsc.com.vn Page 44

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Current regulations on type of branches allowed


The current prevailing regulation is Decision No. 13/2008/QD-NHNN on network of banks. A branch network can include the following main types
of offices; Operation center; branch; representative office; transaction office and ATM.
1. Operation center (OC): Each bank is allowed to open 1 OC, located in the same city or province as its headquarters. An OC can conduct
business under authorization of the bank and carries its own seal.
2. Branch: Can conduct business under authorization of the bank and carries its own seal.
3. Transaction offices must come under an OC or branches and carries their own seals. No capital limit to open. Transaction offices are not
allowed to do the following:
- Provide credit to one client of VND2 billion or more, except when fully collateralized by cash, gold, financial papers issued by the bank,
Government bonds or Treasury bonds.
- International payment services, except for remittance payments.
New law on credit institutions touches on branch networks only briefly
Two types of branches
1. Full branch - branch no 1
1 Sub-branch - branch no 2
But no details on functions or restrictions beyond the draft circular which has not been implemented
Source: SBV

tal and will be one key tool in the consolidation process. Deposit breakdown and main products
Its a very fair way if you like of allowing the market to
decide who deserves to expand and who does not. In The quality and competitiveness of the deposit product
recent years the smaller banks have been growing the offering determines how good or sticky a bank is in
fastest and this phase has now clearly come to an end. terms of holding on to and growing its deposits. Deposit
Indeed we note elsewhere that many of these smaller growth consists of two factors; the rate of growth in new
banks are truly struggling to raise capital to hit the mini- transactions points or offices and the rate of growth at
mum capital threshold. And while the draft circular has existing branches. Rather like a retail chain which looks
not been formally enacted yet its clear that many of at total and same store sales to measure growth. The
those smaller banks will not be allowed to expand their latter is driven mainly by the quality of the deposit prod-
branch network unless they can overcome the capital uct, franchise strength and how competitive the offered
issue. Therefore we are at a critical turning point. rates are.

The effect of this of course will be to push the growth Banks offer a full range of deposit products encompass-
story back towards larger private sector banks and even ing both demand and term deposits which can range
the SOCBs. And closely tie both network and deposit from overnight to ten years or more. These cover three
growth to the ability to attract shareholder capital main customer types; retail, corporate and institutions.
The larger banks generally can raise deposits at lower
Flexible and attractive products a must interest rates given their perceived security. While small-
er banks must pay a risk premium to customers in order
All bankers readily admit that Vietnamese depositors to keep their money. The government only guarantees
are very fickle. Customers will happily cross the street deposits up to a level of VND50 million.
for a couple of basis points and take their accounts with
them. The non-sticky nature of Vietnamese depositors Demand, term and certificates of deposits
is partly a reflection on the lack of other services banks
currently provide to customers. If all you have to offer is A demand deposit is defined as an account from which
a competitive deposit rate then you have to work very deposited funds can be withdrawn at any time without
hard to keep your customers. any notice to the depository institution. Demand depos-
its typically carry low rates. And a term deposit (mainly
With a limited palette to work from banks have tried to for corporates) is defined as a product where the funds
come up with imaginative variations on the basic depos- are locked in until they mature at the end of the term.
it account in order to attract and keep customers from
trotting off to the bank down the street. And as a result of allowing accessibility demand depos-
its usually carry a much lower interest rate that is usually
not more than 30% of the term deposit rate.

www.hsc.com.vn Page 45

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Total top 16 deposits Top SOCB deposit growth


600,000,000
2,500,000,000
Total SOCB deposits
500,000,000
2,000,000,000 Total JSCB deposits VBARD
Total deposits 400,000,000 BIDV
1,500,000,000 CTG
300,000,000
VCB
1,000,000,000
200,000,000

500,000,000
100,000,000

- FY 2010F -

FY 2011F

FY 2012F
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010F

FY 2011F

FY 2012F
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
Source: Banks financial statement Source: Banks financial statement

However when funds are short banks can often hike de- These can be either in VND; US$ or gold. For example
mand deposit rates to as high as 70-80% of term deposit recently OCB has issued a gold denominated CD avail-
rates in order to raise money quickly. Indeed looking at able from January-March 2011 hoping to raise 20,000
the gap between demand and term deposit rates is an taels of gold. The coupon and principle are both paid at
easy way to evaluate the quality of the financial institu- maturity and in this case the interest rate paid ranges
tion itself. The wider the gap, the better the bank. from 1.1-1.5% depending to the tenors which is from
two-months all the way out to 11 months. However un-
Term deposits carry a fixed term and are offered to cor- like hybrid accounts the depositor cannot withdraw the
porate customers. When corporates deposit money in a funds before maturity. Interestingly CDs can be pledged
bank they usually have a fixed schedule to withdraw that as collateral for loans.
money later. The bank can then negotiate to keep some
of this money for mutually agreed fixed terms at higher Then of course in exchange for keeping the money on
interest rates until it is required by the corporate. Term deposit for a fixed term, banks will of course grant high-
deposits are generally short-term in nature with maturi- er interest rates than they do for demand deposits. If a
ties ranging anywhere from a month to a few years. The bank needs money for more that 12 months is can issue
money can only be withdrawn after the term has ended a bond, usually 2-4 years but can be for as long as 10
or by giving a predetermined number of days notice. years.

Then a savings deposit product is usually offered to pri- The difference between demand and term deposits
vate customers ranging from 3-6 months and carrying is being blurred
a competitive rate. This is the main component of most
banks effective deposit base. With competition for deposits high banks have had to
be innovative in their thinking and recent offerings are
Most banks also offer certificates of Deposit or CDs hybrid products which carry characteristics of both de-
which bears some broad similarities to term deposit but mand and term deposit accounts. Two examples both
in this case are mostly offered to either retail or insti- pioneered by Habubank are;
tutional customers. In terms of features however CDs
have more in common with savings accounts, although 1. Flexible accounts - Depositors can withdraw the
like term deposits, CDs have a specific, fixed term (In deposit before maturity, but have to withdraw all at
Vietnam this is usually three to six months but can be up once. Instead of paying the demand deposit rate,
to twelve months), and carry a fixed interest rate. HBB pays clients with the relevant rate of the actual
deposit period.
CD must be held until maturity, at which time the money
is withdrawn together with the accrued interest. Before 2. 3G accounts Similar to Flexi accounts but de-
offering a CD to retail customers a bank must obtain positors can partly withdraw the deposit before the
SBV permission but in the case of an institutional offer- date.
ing it is sufficient to inform the SBV after the transaction
has taken place.

www.hsc.com.vn Page 46

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Top SJCB deposits Top banks average deposits per branch


200,000,000 1,000,000
ACB
180,000,000 900,000
MB
160,000,000 800,000
VCB
140,000,000 ACB 700,000
TCB
120,000,000 TCB 600,000
100,000,000 STB 500,000
80,000,000 MB 400,000
60,000,000 300,000
40,000,000 200,000
20,000,000 100,000
- FY 2010F -

FY 2011F

FY 2012F
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F
Source: Banks financial statement Source: Banks financial statement

Having said that product innovation is still quite slow in sheets at the end of FY2010 is expected to be just 0.6%.
Vietnam due to the complex regulatory environment as Looking forward we expect this percentage to stay fairly
every new product launch must get prior approval. And stable for both types of banks but longer term it will de-
the more innovative the product, the longer the approval cline as these programs are discontinued.
process.
State Treasury deposits
Trusted funds
Unlike the old regulations, the State Treasury deposited
The Vietnamese government; international financial in- money at the central bank or in state owned commer-
stitutions such as the World Bank; IFC and ADB and cial banks. However under the new regulations these
some sovereign institutions offer low interest loan type deposits can only be held by the central bank. There-
aid programs to sectors of the Vietnamese economy fore currently these deposits were withdrawn from the
which are then operated by SOCBs. These programs SOCBs and re-deposited in the central bank by the end
are financed by low interest deposits called trusted of last year.
funds. For example in order to offer low interest loans to
help the agricultural sector an institution might deposit This has created a hole for deposits at SOCBs. In fact
money in Agribank for example attracting nominal inter- the SBV last August estimated State Treasury deposits
est rates. at commercial banks at VND56 trillion dong (US$2.87
billion), up by VND8 trillion dong from the beginning of
There are two main types (1) where the bank takes the FY2010. This was spread amongst the largest SOCBs
credit risk (2) where the sponsor takes the risk. In the especially VBARD, VCB and BIDV. To put this into per-
first case normal rules apply but in the second case spective we estimate that the four large SOCBs have
banks are simply intermediates. Most programs follow total deposits of VND1,363 trillion in deposits (this in-
the first case. cludes all deposits plus trusted funds; CDs & bonds)
and therefore State Treasury deposits would amount to
One example of a trust fund program is the Rural Fi- less than 4% of the total. Enough to make a dent, but
nance Development project, in which a bank receives not critical in our opinion.
low-cost funds to give commercial loans to clients meet-
ing the projects criteria. As of FY2010 trusted funds This number tends to be quite volatile throughout the
are expected to account for 3.7% (down from 5.7% in year and can decrease suddenly as debt repayments
FY2009) of SOCBs aggregate balance sheets which is become due or project disbursements are made. As a
down from a peak of 6.6% in FY2007. In fact trusted result removing this from the deposit base altogether is
funds do still make up a significant part of the overall a prudent act. For example in a speech during the sum-
deposit base for some banks such as CTG and BIDV. mer the SBV governor noted that during the FY2010 Tet
festival, when the Treasury made a sudden withdrawal
Private sector banks can also participate in these pro- of VND20 trillion, commercial banks faced short term
grams but their weight is usually quite small. The total liquidity issues.
expected weight of Trust funds as a % of JSCB balance

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Selected banks interbank positions
Selected banks interbank positions Cumulative
Type Short name Interbank positions in VNDmillion increase CAGR
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011f FY2012f FY2006 FY2007 FY2008 FY2009 FY2010e FY2011e FY2012e FY2005-10e

www.hsc.com.vn
1 SOCB VBARD Deposits in banks 6,275,797 13,602,228 12,139,625 14,285,230 21,333,607 34,586,721 38,737,127 43,385,583 116.7% -10.8% 17.7% 49.3% 62.1% 12.0% 12.0% 591.3% 40.7%
Deposits from banks 20,964,257 18,356,474 17,815,726 17,724,840 44,591,578 41,800,641 47,344,016 52,657,291 -12.4% -2.9% -0.5% 151.6% -6.3% 13.3% 11.2% 151.2% 14.8%
Total net (14,688,460) (4,754,246) (5,676,101) (3,439,610) (23,257,971) (7,213,920) (8,606,888) (9,271,709) -67.6% 19.4% -39.4% 576.2% -69.0% 19.3% 7.7% -36.9% -13.3%
2 SOCB BIDV Deposits in banks 17,648,290 22,739,128 25,933,731 29,619,733 40,197,496 39,822,115 35,839,903 38,702,019 28.8% 14.0% 14.2% 35.7% -0.9% -10.0% 8.0% 119.3% 17.7%
Deposits from banks 1,759,969 2,674,664 7,886,844 8,763,812 14,542,803 22,849,045 28,478,730 37,204,455 52.0% 194.9% 11.1% 65.9% 57.1% 24.6% 30.6% 2013.9% 67.0%
Total net 15,888,321 20,064,464 18,046,887 20,855,921 25,654,693 16,973,070 7,361,173 1,497,564 26.3% -10.1% 15.6% 23.0% -33.8% -56.6% -79.7% -90.6% 1.3%
3 SOCB CTG Deposits in banks 14,384,495 26,229,341 12,841,040 18,273,849 24,045,152 40,118,706 27,050,829 37,013,743 82.3% -51.0% 42.3% 31.6% 66.8% -32.6% 36.8% 157.3% 22.8%
Deposits from banks 4,756,672 4,923,742 5,428,856 8,824,710 15,012,157 17,364,402 25,552,445 34,201,712 3.5% 10.3% 62.6% 70.1% 15.7% 47.2% 33.8% 619.0% 29.6%
Total net 9,627,823 21,305,599 7,412,184 9,449,139 9,032,995 22,754,304 1,498,384 2,812,031 121.3% -65.2% 27.5% -4.4% 151.9% -93.4% 87.7% -70.8% 18.8%
4 SOCB VCB Deposits in banks 42,383,516 52,234,769 39,180,461 30,367,772 47,456,662 57,210,126 61,396,434 62,314,854 23.2% -25.0% -22.5% 56.3% 20.6% 7.3% 1.5% 47.0% 6.2%
Deposits from banks 1,725,962 6,615,605 17,939,810 26,447,065 38,835,517 46,851,819 54,365,042 62,294,781 283.3% 171.2% 47.4% 46.8% 20.6% 16.0% 14.6% 3509.3% 93.5%
Total net 40,657,554 45,619,164 21,240,651 3,920,707 8,621,145 10,358,307 7,031,392 20,073 12.2% -53.4% -81.5% 119.9% 20.2% -32.1% -99.7% -100.0% -23.9%
Total SOCB Deposits in banks 80,692,098 114,805,466 90,094,857 92,546,584 133,032,917 171,737,667 163,024,293 181,416,198 42.3% -21.5% 2.7% 43.7% 29.1% -5.1% 11.3% 124.8% 16.3%
Deposits from banks 29,206,860 32,570,485 49,071,236 61,760,427 112,982,055 128,865,906 155,740,233 186,358,239 11.5% 50.7% 25.9% 82.9% 14.1% 20.9% 19.7% 538.1% 34.6%
Total net 51,485,238 82,234,981 41,023,621 30,786,157 20,050,862 42,871,761 7,284,060 (4,942,040) 59.7% -50.1% -25.0% -34.9% 113.8% -83.0% -167.8% -109.6% -3.6%
5 JSCB ACB Deposits in banks 6,535,305 16,401,829 29,164,968 26,187,911 36,698,304 29,706,347 28,318,140 28,318,140 151.0% 77.8% -10.2% 40.1% -19.1% -4.7% 0.0% 333.3% 35.4%
Deposits from banks 1,123,576 3,249,941 6,994,030 9,901,891 10,449,828 17,764,708 14,257,339 14,931,256 189.2% 115.2% 41.6% 5.5% 70.0% -19.7% 4.7% 1228.9% 73.7%
Total net 5,411,729 13,151,888 22,170,938 16,286,020 26,248,476 11,941,640 14,060,801 13,386,884 143.0% 68.6% -26.5% 61.2% -54.5% 17.7% -4.8% 147.4% 17.2%
6 JSCB STB Deposits in banks 1,447,211 2,019,529 4,656,456 7,047,583 15,200,238 13,318,129 10,654,503 11,910,025 39.5% 130.6% 51.4% 115.7% -12.4% -20.0% 11.8% 723.0% 55.9%
Deposits from banks 502,400 815,473 4,508,977 4,488,353 2,739,164 5,204,413 6,037,223 6,942,807 62.3% 452.9% -0.5% -39.0% 90.0% 16.0% 15.0% 1281.9% 59.6%
Total net 944,811 1,204,056 147,479 2,559,230 12,461,074 8,113,716 4,617,280 4,967,218 27.4% -87.8% 1635.3% 386.9% -34.9% -43.1% 7.6% 425.7% 53.7%
7 JSCB EIB Deposits in banks 2,468,026 2,535,139 4,746,967 9,491,316 6,976,109 14,255,432 17,819,291 22,781,835 2.7% 87.2% 99.9% -26.5% 104.3% 25.0% 27.8% 823.1% 42.0%
Deposits from banks 1,571,645 2,128,517 1,214,024 1,565,108 2,527,655 15,175,557 20,473,476 25,589,438 35.4% -43.0% 28.9% 61.5% 500.4% 34.9% 25.0% 1528.2% 57.4%
Total net 896,381 406,622 3,532,943 7,926,208 4,448,454 (920,125) (2,654,185) (2,807,603) -54.6% 768.9% 124.4% -43.9% -120.7% 188.5% 5.8% -413.2% -200.5%
8 JSCB TCB Deposits in banks 2,632,576 4,458,308 9,303,685 15,647,089 26,252,269 29,421,228 38,516,081 44,293,494 69.4% 108.7% 68.2% 67.8% 12.1% 30.9% 15.0% 1582.5% 62.1%
Deposits from banks 150,102 57,883 8,458,903 8,970,269 10,346,086 16,082,804 16,082,804 19,498,278 -61.4% 14513.8% 6.0% 15.3% 55.4% 0.0% 21.2% 12890.0% 154.7%
Total net 2,482,474 4,400,425 844,782 6,676,820 15,906,183 13,338,425 22,433,278 24,795,216 77.3% -80.8% 690.4% 138.2% -16.1% 68.2% 10.5% 898.8% 40.0%
9 JSCB MB Deposits in banks 2,951,282 5,724,716 14,014,064 16,010,231 24,062,971 39,533,297 47,618,333 58,948,836 94.0% 144.8% 14.2% 50.3% 64.3% 20.5% 23.8% 1897.4% 68.0%
Deposits from banks 1,049,186 1,171,230 4,992,934 8,531,866 11,696,905 19,430,663 26,341,570 35,625,253 11.6% 326.3% 70.9% 37.1% 66.1% 35.6% 35.2% 3295.5% 79.3%
Total net 1,902,096 4,553,486 9,021,130 7,478,365 12,366,066 20,102,634 21,276,763 23,323,584 139.4% 98.1% -17.1% 65.4% 62.6% 5.8% 9.6% 1126.2% 60.3%
10 JSCB EAB Deposits in banks 752,964 1,231,688 3,013,261 2,764,121 939,034 1,266,534 1,960,204 2,673,011 63.6% 144.6% -8.3% -66.0% 34.9% 54.8% 36.4% 255.0% 11.0%
Deposits from banks 622,900 621,085 6,070,574 3,611,521 4,767,739 4,003,531 3,541,534 3,143,988 -0.3% 877.4% -40.5% 32.0% -16.0% -11.5% -11.2% 404.7% 45.1%
Total net 130,064 610,603 (3,057,313) (847,400) (3,828,705) (2,736,997) (1,581,329) (470,978) 369.5% -600.7% -72.3% 351.8% -28.5% -42.2% -70.2% -462.1% -283.9%
11 JSCB MSB Deposits in banks 1,521,482 4,344,146 8,209,257 15,755,248 25,210,364 43,107,502 45,729,381 57,012,285 185.5% 89.0% 91.9% 60.0% 71.0% 6.1% 24.7% 3647.2% 95.2%
Deposits from banks 576,370 3,492,545 7,820,734 14,603,271 23,832,614 32,414,439 27,219,167 34,547,438 506.0% 123.9% 86.7% 63.2% 36.0% -16.0% 26.9% 5894.0% 123.9%
Total net 945,112 851,601 388,523 1,151,977 1,377,750 10,693,062 18,510,214 22,464,847 -9.9% -54.4% 196.5% 19.6% 676.1% 73.1% 21.4% 2277.0% 62.5%
12 JSCB VIB Deposits in banks 2,209,059 3,249,317 12,846,626 7,472,500 17,416,619 16,020,625 18,423,718 21,187,276 47.1% 295.4% -41.8% 133.1% -8.0% 15.0% 15.0% 859.1% 48.6%
Deposits from banks 2,852,872 5,045,454 12,018,720 7,890,365 18,591,680 14,564,204 17,039,906 19,936,507 76.9% 138.2% -34.3% 135.6% -21.7% 17.0% 17.0% 598.8% 38.5%
Total net (643,813) (1,796,137) 827,906 (417,865) (1,175,061) 1,456,420 1,383,812 1,250,769 179.0% -146.1% -150.5% 181.2% -223.9% -5.0% -9.6% -294.3% -217.7%
13 JSCB SHB Deposits in banks 664,096 5,383,351 2,945,975 6,357,324 7,628,789 9,535,986 11,820,219 710.6% -45.3% 115.8% 20.0% 25.0% 24.0% 1679.9%
Deposits from banks 402,000 7,091,785 2,235,084 9,943,404 9,943,404 11,918,488 14,472,056 1664.1% -68.5% 344.9% 0.0% 19.9% 21.4% 3500.0%
Total net - 262,096 (1,708,434) 710,891 (3,586,080) (2,314,615) (2,382,502) (2,651,837) -751.8% -141.6% -604.4% -35.5% 2.9% 11.3% -1111.8%
11 JSCB SCB Deposits in banks 208,796 1,202,299 3,255,201 4,671,306 4,399,322 6,876,998 7,358,388 7,873,475 475.8% 170.7% 43.5% -5.8% 56.3% 7.0% 7.0% 3670.9% 101.2%
Deposits from banks 2,012,333 5,299,081 5,323,749 7,775,638 11,958,013 2,974,103 3,182,290 3,405,050 163.3% 0.5% 46.1% 53.8% -75.1% 7.0% 7.0% 69.2% 8.1%
Total net (1,803,537) (4,096,782) (2,068,548) (3,104,332) (7,558,691) 3,902,896 4,176,098 4,468,425 127.2% -49.5% 50.1% 143.5% -151.6% 7.0% 7.0% -347.8% -216.7%
15 JSCB HBB Deposits in banks 1,109,794 3,603,660 10,894,263 8,675,515 8,619,783 12,916,448 18,088,298 25,947,793 224.7% 202.3% -20.4% -0.6% 49.8% 40.0% 43.5% 2238.1% 63.4%
Deposits from banks 1,462,272 4,857,999 10,805,535 8,324,362 7,573,385 7,130,546 10,249,992 14,675,657 232.2% 122.4% -23.0% -9.0% -5.8% 43.7% 43.2% 903.6% 37.3%
Total net (352,478) (1,254,339) 88,728 351,153 1,046,398 5,785,902 7,838,306 11,272,137 255.9% -107.1% 295.8% 198.0% 452.9% 35.5% 43.8% -3298.0% -275.0%
16 JSCB SEABank Deposits in banks 2,658,972 3,317,688 8,584,977 9,159,686 14,382,900 8,262,614 11,115,137 13,338,164 24.8% 158.8% 6.7% 57.0% -42.6% 34.5% 20.0% 401.6% 25.5%
Deposits from banks 2,735,388 4,834,294 9,805,315 8,142,897 12,297,482 7,284,050 9,022,736 10,987,960 76.7% 102.8% -17.0% 51.0% -40.8% 23.9% 21.8% 301.7% 21.6%
Total net (76,415) (1,516,605) (1,220,338) 1,016,789 2,085,418 978,564 2,092,401 2,350,204 1884.7% -19.5% -183.3% 105.1% -53.1% 113.8% 12.3% -3175.6% -266.5%
Total JSCB Deposits in banks 24,495,467 48,752,416 114,073,075 125,828,481 186,515,237 222,313,943 255,137,461 306,104,553 99.0% 134.0% 10.3% 48.2% 19.2% 14.8% 20.0% 1149.6% 55.4%
Deposits from banks 14,659,044 31,975,503 85,105,280 86,040,625 126,723,955 151,972,421 165,366,524 203,755,687 118.1% 166.2% 1.1% 47.3% 19.9% 8.8% 23.2% 1290.0% 59.6%
Total net 9,836,423 16,776,914 28,967,795 39,787,856 59,791,282 70,341,522 89,770,937 102,348,867 70.6% 72.7% 37.4% 50.3% 17.6% 27.6% 14.0% 940.5% 48.2%
Total Deposits in banks 105,187,565 163,557,882 204,167,932 218,375,065 319,548,154 394,051,610 418,161,754 487,520,752 55.5% 24.8% 7.0% 46.3% 23.3% 6.1% 16.6% 363.5% 30.2%
Deposits from banks 43,865,904 64,545,988 134,176,516 147,801,052 239,706,010 280,838,327 321,106,757 390,113,925 47.1% 107.9% 10.2% 62.2% 17.2% 14.3% 21.5% 789.3% 45.0%
Total net (RHS) 61,321,661 99,011,895 69,991,416 70,574,013 79,842,144 113,213,283 97,054,997 97,406,826 61.5% -29.3% 0.8% 13.1% 41.8% -14.3% 0.4% 58.8% 13.0%
Total in US$million Deposits in banks 5,394 8,388 10,470 11,199 16,387 20,208 21,444 25,001 55.5% 24.8% 7.0% 46.3% 23.3% 6.1% 16.6% 363.5% 30.2%
Deposits from banks 2,250 3,310 6,881 7,580 12,293 14,402 16,467 20,006 47.1% 107.9% 10.2% 62.2% 17.2% 14.3% 21.5% 789.3% 45.0%
Total net 3,145 5,078 3,589 3,619 4,094 5,806 4,977 4,995 61.5% -29.3% 0.8% 13.1% 41.8% -14.3% 0.4% 58.8% 13.0%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 48

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July 14h 2008

February 2011
September 2009

Net interbank positions Net interbank positions as % of balance sheets


600,000,000 120,000,000 14.0%

Deposits in banks 12.0% Total SOCB net as % of BS


500,000,000 110,000,000

Deposits from banks 10.0% Total JSCB net as % of BS


400,000,000 100,000,000
Total net (RHS) 8.0% Total net as % of BS

300,000,000 90,000,000 6.0%

4.0%
200,000,000 80,000,000
2.0%
100,000,000 70,000,000
0.0%

- 60,000,000 -2.0%
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011f

FY2012f
FY2010e

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011f

FY2012f
FY2010e
Source: HSC compiles Source: HSC compiles

Interbank market

As of the end of FY2009 the top 16 banks had 15.4% rates in the OMO and interbank rates of the same tenor.
of their balance sheets in the form of deposits to other But on IMF advice the SBV raised the funding rates and
banks and then 11.5% in the form of deposits from other closed this gap in December 2010. This change will ef-
banks. This made a positive 400 bps net deposit posi- fect the interbank market from now making it less attrac-
tion. These numbers however disguise a huge variance tive for banks to lend through it.
between individual banks some of whom are active
lenders; others are active borrowers and some are both Larger banks have quotas for each medium or small
at the same time. size banks depending on the perceived risk at any time.
Then these smaller banks either borrow money for their
For FY2010 HSC forecasts that the top 16 banks total own businesses purposes or in some cases simply re-
deposits in other banks will stay at 15.4% of the aggre- lend this money on to even smaller banks. And herein
gate balance sheets while deposits from other banks lies the risk as it can form a chain linking the largest
will also drop to 11% to make for a positive 440 bps net most well funded bank to the very smallest in a series
deposit position. This is ahead of the expected tighten- of related transactions where neither is aware the other
ing in regulations by the SBV which will make it harder lies at each end of the chain. Systemic banking risk in
for banks to make heavy use of the interbank market in one of its purest form.
future.
Despite these risks interbank activity in Vietnam has not
And indeed in the past few years Vietnamese banks hitherto been heavily regulated and this has allowed the
have been heavy users of the interbank market; both to level of risk stay fairly high over the years.
borrow money and lend money to. This can be tracked
on their balance sheets by looking at the line item De- Even so net deposits in the interbank system for the top
posits with other financial institutions on the asset side 16 banks have dropped from 9% of the balance sheet
and then the line item Deposits from Banks on the li- in FY2005 to an estimated 4.4% now. Actual borrow-
ability side. In general larger banks are net lenders to ing from other banks has increased from 6.4% to 11%
the interbank and smaller banks tend to be net borrow- while lending to other banks has stayed absolutely flat
ers. The SBV is looking to introduce new rules to limit 15.4%. This is not as bad as it sounds. Interbank lend-
interbank activity but the timetable is unclear. Some in- ing is a zero sum game. For each bank lender there is
terbank borrowing or lending for the purposes of provid- another bank borrower at the other end. So what all of
ing working capital or bridge short term funding needs these numbers mean is that the top 16 banks are lend-
is of course perfectly normal and occurs in all banking ing more to each other than before and therefore less to
systems. smaller banks. Therefore system-wide risk has indeed
fallen somewhat over the last five years.
Larger banks who have big bond portfolios can bor-
row money through the OMO and then re-lend in the However at the individual bank level the risk remains
interbank market. In FY2010 they took advantage of the unacceptably high in our opinion. For example of the 16
large spreads or arbitrage that existed between funding top banks we note that as of the end of FY2009 a total

www.hsc.com.vn Page 49

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July 14h 2008

February 2011
September 2009

Selected banks interbank positions as % of balance sheet


Selected banks interbank positions as % of balance sheet
Type Short name
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011f FY2012f
1 SOCB VBARD Deposits in other banks as % of BS 3.1% 5.5% 3.7% 3.6% 4.4% 6.3% 6.2% 6.0%
Deposits from other banks as % of BS 10.4% 7.4% 5.4% 4.4% 9.3% 7.6% 7.5% 7.3%
Total net as % of BS -7.3% -1.9% -1.7% -0.9% -4.8% -1.3% -1.4% -1.3%
2 SOCB BIDV Deposits in other banks as % of BS 14.5% 14.1% 12.7% 12.0% 13.6% 11.0% 8.7% 8.1%
Deposits from other banks as % of BS 1.4% 1.7% 3.9% 3.6% 4.9% 6.3% 6.9% 7.8%
Total net as % of BS 13.1% 12.4% 8.8% 8.5% 8.7% 4.7% 1.8% 0.3%
3 SOCB CTG Deposits in other banks as % of BS 12.4% 19.4% 7.7% 9.4% 9.9% 12.6% 7.6% 8.9%
Deposits from other banks as % of BS 4.1% 3.6% 3.3% 4.6% 6.2% 5.4% 7.2% 8.3%
Total net as % of BS 8.3% 15.7% 4.5% 4.9% 3.7% 7.1% 0.4% 0.7%
4 SOCB VCB Deposits in other banks as % of BS 31.1% 31.3% 19.9% 13.7% 18.6% 18.8% 17.7% 15.9%
Deposits from other banks as % of BS 1.3% 4.0% 9.1% 11.9% 15.2% 15.4% 15.7% 15.9%
Total net as % of BS 29.8% 27.3% 10.8% 1.8% 3.4% 3.4% 2.0% 0.0%
Total SOCB Deposits in as % of BS 14.0% 16.2% 10.1% 8.7% 10.4% 11.2% 9.3% 9.0%
Deposits from as % of BS 5.1% 4.6% 5.5% 5.8% 8.8% 8.4% 8.9% 9.3%
Total SOCB net as % of BS 8.9% 11.6% 4.6% 2.9% 1.6% 2.8% 0.4% -0.2%
5 JSCB ACB Deposits in other banks as % of BS 26.9% 36.7% 34.2% 24.9% 21.9% 15.4% 12.6% 10.6%
Deposits from other banks as % of BS 4.6% 7.3% 8.2% 9.4% 6.2% 9.2% 6.4% 5.6%
Total net as % of BS 22.3% 29.5% 26.0% 15.5% 15.6% 6.2% 6.3% 5.0%
6 JSCB STB Deposits in other banks as % of BS 10.0% 8.2% 7.2% 10.3% 14.6% 10.7% 7.4% 7.0%
Deposits from other banks as % of BS 3.5% 3.3% 7.0% 6.6% 2.6% 4.2% 4.2% 4.1%
Total net as % of BS 6.5% 4.9% 0.2% 3.7% 12.0% 6.5% 3.2% 2.9%
7 JSCB EIB Deposits in other banks as % of BS 21.7% 13.8% 14.1% 19.7% 10.6% 15.4% 15.2% 15.3%
Deposits from other banks as % of BS 13.8% 11.6% 3.6% 3.2% 3.8% 16.4% 17.5% 17.2%
Total net as % of BS 7.9% 2.2% 10.5% 16.4% 6.7% -1.0% -2.3% -1.9%
8 JSCB TCB Deposits in other banks as % of BS 24.7% 25.7% 23.5% 26.5% 28.4% 23.3% 26.2% 25.3%
Deposits from other banks as % of BS 1.4% 0.3% 21.4% 15.2% 11.2% 12.7% 10.9% 11.2%
Total net as % of BS 23.3% 25.4% 2.1% 11.3% 17.2% 10.6% 15.2% 14.2%
9 JSCB MB Deposits in other banks as % of BS 35.9% 42.1% 47.3% 36.1% 34.9% 39.8% 37.5% 36.0%
Deposits from other banks as % of BS 12.8% 8.6% 16.9% 19.2% 17.0% 19.6% 20.7% 21.7%
Total net as % of BS 23.2% 33.5% 30.5% 16.9% 17.9% 20.2% 16.8% 14.2%
10 JSCB EAB Deposits in other banks as % of BS 8.8% 10.2% 11.0% 8.0% 2.2% 2.5% 3.4% 4.0%
Deposits from other banks as % of BS 7.3% 5.2% 22.2% 10.4% 11.2% 8.1% 6.1% 4.7%
Total net as % of BS 1.5% 5.1% -11.2% -2.4% -9.0% -5.5% -2.7% -0.7%
11 JSCB MSB Deposits in other banks as % of BS 34.7% 51.0% 46.7% 48.3% 39.5% 40.8% 36.6% 35.5%
Deposits from other banks as % of BS 14.2% 7.3% 34.6% 11.1% 7.5% 3.8% 2.8% 2.0%
Total net as % of BS 20.5% 43.7% 12.2% 37.2% 32.0% 37.0% 33.8% 33.5%
12 JSCB VIB Deposits in other banks as % of BS 24.6% 19.7% 32.7% 21.5% 30.8% 22.6% 22.3% 22.0%
Deposits from other banks as % of BS 31.8% 30.5% 30.6% 22.7% 32.8% 20.6% 20.7% 20.7%
Total net as % of BS -7.2% -10.9% 2.1% -1.2% -2.1% 2.1% 1.7% 1.3%
13 JSCB SHB Deposits in other banks as % of BS 50.2% 43.5% 20.5% 23.1% 17.0% 16.8% 16.9%
Deposits from other banks as % of BS 30.4% 57.3% 15.5% 36.2% 22.2% 20.9% 20.7%
Total net as % of BS 0.0% 19.8% -13.8% 4.9% -13.1% -5.2% -4.2% -3.8%
11 JSCB SCB Deposits in other banks as % of BS 5.2% 11.0% 12.5% 12.1% 8.1% 12.9% 13.5% 13.7%
Deposits from other banks as % of BS 49.9% 48.5% 20.5% 20.1% 21.9% 5.6% 5.8% 5.9%
Total net as % of BS -44.7% -37.5% -8.0% -8.0% -13.9% 7.3% 7.6% 7.8%
15 JSCB HBB Deposits in other banks as % of BS 20.1% 30.8% 46.3% 36.8% 29.5% 34.3% 36.4% 38.8%
Deposits from other banks as % of BS 26.5% 41.6% 45.9% 35.3% 25.9% 19.0% 20.6% 21.9%
Total net as % of BS -6.4% -10.7% 0.4% 1.5% 3.6% 15.4% 15.8% 16.8%
16 JSCB SEABank Deposits in other banks as % of BS 43.4% 32.5% 32.7% 41.1% 47.0% 29.3% 30.1% 32.9%
Deposits from other banks as % of BS 44.7% 47.4% 37.4% 36.6% 40.2% 25.8% 24.5% 27.1%
Total net as % of BS -1.2% -14.9% -4.7% 4.6% 6.8% 3.5% 5.7% 5.8%
Total JSCB Deposits in other banks as % of BS 23.0% 25.7% 26.8% 23.9% 23.2% 21.7% 20.9% 20.6%
Deposits from other banks as % of BS 13.8% 16.8% 20.0% 16.3% 15.8% 14.8% 13.5% 13.7%

Total JSCB net as % of BS 9.2% 8.8% 6.8% 7.6% 7.4% 6.9% 7.3% 6.9%

Total Deposits in other banks as % of BS 15.4% 18.2% 15.5% 13.7% 15.4% 15.4% 14.1% 14.0%
Deposits from other banks as % of BS 6.4% 7.2% 10.2% 9.3% 11.5% 11.0% 10.8% 11.2%
Total net as % of BS 9.0% 11.0% 5.3% 4.4% 3.8% 4.4% 3.3% 2.8%
Source: Banks, HSC

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July 14h 2008

February 2011
September 2009

Top lenders to interbank market as % of BS Top net borrowers from interbank market
50.0%
25.0%

40.0% 20.0%

30.0% 15.0%
VBARD
10.0%
20.0% SHB
5.0%
ACB MB EAB
10.0% 0.0%
MSB HBB
0.0% -5.0%

-10.0%
-10.0%
-15.0%
-20.0%
-20.0%
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011f

FY2012f
FY2010e

FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2010e

FY2011f

FY2012f
Source: Banks financial statements Source: Banks financial statements

of 14 banks had over 10% balance sheet exposure ei- has a deleterious effect on SBV policy. At times when
ther on the asset or liability side to the interbank market. they would like to crack down on liquidity by raising fund-
A total of 8 banks had over a 20% exposure on either ing rates they are forced to keep rates lower than they
side. And indeed 5 of those namely; MSB; VIB; SHB; would like in our opinion to keep interbank funding stable.
HBB and Seabank had over 20% of their balance sheet
exposed on both the asset and liability side at the same So why do banks rely so much on the interbank market?
time. Of these the worst offender was Seabank which in Depending on where we are in the interest rate cycle
FY2009 lent 47% of their assets and funded 40.2% of interbank funding can either be a cheap or expensive
their liabilities through the interbank market. This was form of finance. In the last two years however it has be-
expected to come down sharply in FY2010 however. come a relatively cheap form of finance compared to
deposits. Traditionally the state owned banks funded
These five banks appear to be borrowing from larger the interbank market but in recent years that role is in-
banks and then re-lending to smaller ones in order to creasingly played by some of the top private banks. By
take advantage of the spread between both positions order of the amount of deposits placed in other banks at
as part of their net interest income. Most of the time this the end of FY2009 the most active lenders were; VCB,
can work provided of course funding in the interbank BIDV; ACB; TCB and MSB.
doesnt suddenly dry up. However once or twice a year
it invariably does and then we see spikes in the inter- These banks give the highest priority to those smaller
bank rates. This can create windfall profit opportunities banks with which they have a close relationship, includ-
for those banks that are heavy net lenders and equally ing equity participation. For example ACB has a close
cause havoc for banks that are either net borrowers or relationship with Viet Bank and Kien Long bank while
exposed on both sides. EIB has a good relationship with Viet A Bank. And then
VCB has its one cluster of relationship banks. They op-
And five banks; VBARD amongst the SOCBs and then erate a quota system for interbank lending (similar to
SHB; SCB; VIB and EAB all had a net lending exposure their commercial credit lines) and its probably fair to
to the interbank market in FY2009. In other words they suppose that relationship banks get a higher quota.
had borrowed more from it than they had lent to it at the
year-end last year. SHB and VIB appear on both lists. Then looking also in absolute terms the most active bor-
Going forward banks which run a persistent and large rowers were Agribank (VBARD); VCB; MSB; VIB and
net lending exposure to the interbank market will pres- CTG. It may surprise some to see three state owned
ent a higher credit and liquidity risk. This is especially banks in this category but to be fair of these only VBARD
true given the volatility in interbank rates seen over the has a net lending position. And they are still the larg-
course of the average year. est institutions by size so perhaps its not that unusual.
However it does show that the role of the state owned
We have just seen such as spike in the last month where banks as providers of funds to the interbank market has
overnight rates briefly pushed over 20% for a day or two grown far more complex over the last few years. In fact
forcing the SBV to add perhaps more liquidity than it their increasing reliance on the interbank market as
intended to. The overdependence of some banks on the borrowers is perhaps one of most worrying aspects for
interbank market creates a weakness in the system and regulators no doubt.

www.hsc.com.vn Page 51

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July 14h 2008

February 2011
September 2009

Given the tighter regulations pending we think the role This may affect their future growth but in our opinion is
of the interbank will diminish as a funding source over very necessary to reduce the level of systemic risk in
the next few years. Going forward we understand that the system. We note that in Europe those banks that
the draft regulation for interbank activities proposes to depended on interbank lending the most were the most
limit borrowing for each bank to 3xs their equity. And this vulnerable in testing times. And as we know if one bank
will present a major challenge to the existing business faces funding difficulty the contagion risk can be quite
model of banks such as Seabank; SHB; MSB; HBB and serious for the whole system.
VIB who depend quite heavily on interbank lending on
both sides of their balance sheets. To maintain growth
they will have to switch over to more expensive funding
options such as deposits going forward.

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Selected banks SBV positions
Selected banks SBV positions Cumulative
Type Short name SBV positions in VNDmillion increase CAGR
FY2005- FY2005-

www.hsc.com.vn
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011e FY2012e FY2006 FY2007 FY2008 FY2009 FY 2010e FY2011e FY2012e 10e 2010
1 SOCB VBARD Bank;s deposits in SBV 11,052,395 14,428,361 17,628,701 28,433,901 34,162,741 30,055,214 29,444,274 32,977,587 30.5% 22.2% 61.3% 20.1% -12.0% -2.0% 12.0% 166% 22.1%
SBV deposits in the bank 22,983,736 21,150,840 25,984,841 28,796,131 44,744,803 39,886,975 38,473,905 43,327,772 -8.0% 22.9% 10.8% 55.4% -10.9% -3.5% 12.6% 67% 11.7%
Total net (11,931,341) (6,722,479) (8,356,140) (362,230) (10,582,062) (9,831,761) (9,029,631) (10,350,185) -43.7% 24.3% -95.7% 2821.4% -7.1% -8.2% 14.6% -24% -3.8%
2 SOCB BIDV Bank;s deposits in SBV 4,576,418 17,688,318 8,758,166 12,620,934 5,679,704 17,529,445 20,158,861 22,981,102 286.5% -50.5% 44.1% -55.0% 208.6% 15.0% 14.0% 340% 30.8%
SBV deposits in the bank 16,256,296 16,781,239 18,229,032 16,985,613 22,931,067 23,402,058 26,884,088 30,541,076 3.2% 8.6% -6.8% 35.0% 2.1% 14.9% 13.6% 65% 7.6%
Total net (11,679,878) 907,079 (9,470,866) (4,364,679) (17,251,363) (5,872,613) (6,725,228) (7,559,974) -107.8% -1144.1% -53.9% 295.2% -66.0% 14.5% 12.4% -42% -12.8%
3 SOCB CTG Bank;s deposits in SBV 8,020,515 5,620,312 8,496,135 6,010,724 5,368,942 6,509,752 7,829,934 9,221,351 -29.9% 51.2% -29.3% -10.7% 21.2% 20.3% 17.8% -2% -4.1%
SBV deposits in the bank 265,239 491,363 712,745 769,677 13,718,689 34,296,723 35,325,624 36,385,393 85.3% 45.1% 8.0% 1682.4% 150.0% 3.0% 3.0% 13218% 164.4%
Total net 7,755,276 5,128,949 7,783,390 5,241,047 (8,349,747) (27,786,970) (27,495,690) (27,164,042) -33.9% 51.8% -32.7% -259.3% 232.8% -1.0% -1.2% -455% -229.1%
4 SOCB VCB Bank;s deposits in SBV 6,336,385 11,848,460 11,662,669 30,561,417 25,174,674 19,787,158 22,229,043 25,563,400 87.0% -1.6% 162.0% -17.6% -21.4% 12.3% 15.0% 251% 25.6%
SBV deposits in the bank 12,003,108 22,346,396 12,685,256 9,515,633 22,578,400 16,081,420 17,367,933 18,757,368 86.2% -43.2% -25.0% 137.3% -28.8% 8.0% 8.0% 45% 6.0%
Total net (5,666,723) (10,497,936) (1,022,587) 21,045,784 2,596,274 3,705,738 4,861,110 6,806,032 85.3% -90.3% -2158.1% -87.7% 42.7% 31.2% 40.0% -186% -191.9%
Total SOCB Bank;s deposits in SBV 29,985,713 49,585,451 46,545,671 77,626,976 70,386,061 73,881,569 79,662,112 90,743,440 65.4% -6.1% 66.8% -9.3% 5.0% 7.8% 13.9% 166% 19.8%
SBV deposits in the bank 51,508,379 60,769,838 57,611,874 56,067,054 103,972,959 113,667,175 118,051,551 129,011,609 18.0% -5.2% -2.7% 85.4% 9.3% 3.9% 9.3% 129% 17.2%
Total net (21,522,666) (11,184,387) (11,066,203) 21,559,922 (33,586,898) (39,785,606) (38,389,439) (38,268,169) -48.0% -1.1% -294.8% -255.8% 18.5% -3.5% -0.3% 78% 13.1%
5 JSCB ACB Bank;s deposits in SBV 988,784 1,562,926 5,144,737 2,121,155 1,741,755 5,606,288 7,007,860 8,759,825 58.1% 229.2% -58.8% -17.9% 221.9% 25.0% 25.0% 609% 41.5%
SBV deposits in the bank 967,312 941,286 654,630 - 10,256,943 7,000,000 7,000,000 7,000,000 -2.7% -30.5% -31.8% 0.0% 0.0% 624% 48.6%
Total net 21,472 621,640 4,490,107 2,121,155 (8,515,188) (1,393,712) 7,860 1,759,825 2795.1% 622.3% -52.8% -501.4% -83.6% -100.6% 22289.1% -63% -330.4%
6 JSCB STB Bank;s deposits in SBV 408,685 993,590 3,878,785 3,224,539 2,633,963 4,901,818 5,882,182 7,058,618 143.1% 290.4% -16.9% -18.3% 86.1% 20.0% 20.0% 1339% 64.4%
SBV deposits in the bank 170,370 107,000 750,177 52,161 3,614,333 - - - -37.2% 601.1%
Total net 238,315 886,590 3,128,608 3,172,378 (980,370) 4,901,818 5,882,182 7,058,618 272.0% 252.9% 1.4% -130.9% -600.0% 20.0% 20.0% 2368% 83.1%
7 JSCB EIB Bank;s deposits in SBV 105,646 374,378 825,202 3,438,736 2,115,265 3,070,304 4,052,801 5,349,698 254.4% 120.4% 316.7% -38.5% 45.1% 32.0% 32.0% 3736% 96.2%
SBV deposits in the bank 329,248 433,582 28,059 26,954 1,611,076 0 - - 31.7% -93.5%
Total net (223,602) (59,204) 797,143 3,411,782 504,189 3,070,304 4,052,801 5,349,698 -73.5% -1446.4% 328.0% -85.2% 509.0% 32.0% 32.0% -1913% -268.9%
8 JSCB TCB Bank;s deposits in SBV 326,114 409,281 1,298,682 2,296,574 2,719,744 12,578,588 7,044,009 8,452,811 25.5% 217.3% 76.8% 18.4% 362.5% -44.0% 20.0% 2060% 107.6%
SBV deposits in the bank 2,903,954 5,070,852 301,993 - 3,932,348 4,000,000 5,000,000 5,000,000 74.6% -94.0% 1.7% 25.0% 0.0% 72% 6.6%
Total net (2,577,840) (4,661,571) 996,689 2,296,574 (1,212,604) 8,578,588 2,044,009 3,452,811 80.8% -121.4% 130.4% -152.8% -807.5% -76.2% 68.9% -179% -227.2%
9 JSCB MB Bank;s deposits in SBV 118,460 307,699 191,318 515,139 1,427,595 1,204,492 1,626,064 2,195,186 159.7% -37.8% 169.3% 177.1% -15.6% 35.0% 35.0% 1273% 59.0%
SBV deposits in the bank 226,701 30,000 68,547 - 4,708,749 4,850,011 4,995,512 5,145,377 -86.8% 128.5% 3.0% 3.0% 3.0% 2104% 84.5%
Total net (108,241) 277,699 122,771 515,139 (3,281,155) (3,645,520) (3,369,448) (2,950,191) -356.6% -55.8% 319.6% -736.9% 11.1% -7.6% -12.4% 3013% 102.1%
10 JSCB EAB Bank;s deposits in SBV 408,186 486,526 1,930,541 770,624 1,230,380 1,678,412 2,047,663 2,457,196 19.2% 296.8% -60.1% 59.7% 36.4% 22.0% 20.0% 402% 32.7%
SBV deposits in the bank 0 0 0 0 19 0 0 0
Total net 408,186 486,526 1,930,541 770,624 1,230,361 1,678,412 2,047,663 2,457,196 19.2% 296.8% -60.1% 59.7% 36.4% 22.0% 20.0% 402% 32.7%
11 JSCB MSB Bank;s deposits in SBV 152,870 64,676 278,445 499,996 793,789 1,531,166 1,760,335 2,233,902 -57.7% 330.5% 79.6% 58.8% 92.9% 15.0% 26.9% 1052% 58.5%
SBV deposits in the bank 28,323 25,974 32,339 22,491 29,243 32,167 35,384 37,153 -8.3% 24.5% -30.5% 30.0% 10.0% 10.0% 5.0% 25% 2.6%
Total net 124,546 38,701 246,106 477,505 764,546 1,498,998 1,724,951 2,196,749 -68.9% 535.9% 94.0% 60.1% 96.1% 15.1% 27.4% 1285% 64.5%
12 JSCB VIB Bank;s deposits in SBV 263,134 561,462 1,211,629 1,138,214 937,968 937,968 1,097,423 1,283,984 113.4% 115.8% -6.1% -17.6% 0.0% 17.0% 17.0% 317% 28.9%
SBV deposits in the bank - 66,657 - - - - -
Total net 263,134 494,805 1,211,629 1,138,214 937,968 937,968 1,097,423 1,283,984 88.0% 144.9% -6.1% -17.6% 0.0% 17.0% 17.0% 317% 28.9%
13 JSCB SHB Bank;s deposits in SBV 18,870 204,852 216,117 920,132 1,196,172 1,966,683 1,869,018 985.6% 5.5% 325.8% 30.0% 64.4% -5.0% 10322% 182.2%
SBV deposits in the bank 0 0 0 0
Total net - 18,870 204,852 216,117 920,132 1,196,172 1,966,683 1,869,018 985.6% 5.5% 325.8% 30.0% 64.4% -5.0% 10322% 182.2%
11 JSCB SCB Bank;s deposits in SBV 131,347 239,842 173,563 568,930 835,504 1,587,000 1,698,090 1,816,956 82.6% -27.6% 227.8% 46.9% 89.9% 7.0% 7.0% 1193% 64.6%
SBV deposits in the bank 0 60,721 58,996 0 3,000,000 - - -
Total net 131,347 179,121 114,567 568,930 (2,164,496) 1,587,000 1,698,090 1,816,956 36.4% -36.0% 396.6% -480.5% -173.3% 7.0% 7.0% 1193% 64.6%
15 JSCB HBB Bank;s deposits in SBV 56,782 131,298 37,763 87,271 237,563 298,891 406,636 558,403 131.2% -71.2% 131.1% 172.2% 25.8% 36.0% 37.3% 616% 39.4%
SBV deposits in the bank 343,838 193,271 307,434 - 2,441,814 2,563,905 2,692,100 2,826,705 -43.8% 59.1% 5.0% 5.0% 5.0% 683% 49.5%
Total net (287,056) (61,973) (269,671) 87,271 (2,204,251) (2,265,014) (2,285,464) (2,268,302) -78.4% 335.1% -132.4% -2625.8% 2.8% 0.9% -0.8% 696% 51.2%
16 JSCB SEABank Bank;s deposits in SBV 73,895 214,772 511,669 112,914 1,493,565 1,493,565 2,717,600 1,975,240 190.6% 138.2% -77.9% 1222.7% 0.0% 82.0% -27.3% 3578% 82.4%
SBV deposits in the bank 70,090
Total net 3,805 214,772 511,669 112,914 1,493,565 1,493,565 2,717,600 1,975,240 5543.7% 138.2% -77.9% 1222.7% 0.0% 82.0% -27.3% 71313% 230.2%
Total JSCB Bank;s deposits in SBV 3,033,903 5,365,319 15,687,186 14,990,209 17,087,223 36,084,663 37,307,345 44,010,837 76.8% 192.4% -4.4% 14.0% 111.2% 3.4% 18.0% 1130% 64.1%
SBV deposits in the bank 5,039,836 6,929,343 2,202,175 101,606 29,594,525 18,446,083 19,722,996 20,009,235 37.5% -68.2% -95.4% 29026.7% -37.7% 6.9% 1.5% 291% 29.6%
Total net (2,005,933) (1,564,024) 13,485,011 14,888,602 (12,507,303) 17,638,580 17,584,349 24,001,602 -22.0% -962.2% 10.4% -184.0% -241.0% -0.3% 36.5% -977% -254.5%
Total Bank deposits in SBV 33,019,616 54,950,770 62,232,857 92,617,185 87,473,284 109,966,232 116,969,457 134,754,277 66.4% 13.3% 48.8% -5.6% 25.7% 6.4% 15.2% 254% 27.2%
SBV deposits in the bank 56,548,215 67,699,181 59,814,049 56,168,660 133,567,484 132,113,258 137,774,547 149,020,845 19.7% -11.6% -6.1% 137.8% -1.1% 4.3% 8.2% 144% 18.5%
September

Total net (RHS) (23,528,599) (12,748,411) 2,418,808 36,448,524 (46,094,201) (22,147,026) (20,805,090) (14,266,568) -45.8% -119.0% 1406.9% -226.5% -52.0% -6.1% -31.4% -12% -1.2%
Total in US$ million Bank;s deposits in SBV 1,693 2,818 3,191 4,750 4,486 5,639 5,998 6,910
February 2011
July 14h 2008

SBV deposits in the bank 2,900 3,472 3,067 2,880 6,850 6,775 7,065 7,642
2009

Total net (1,207) (654) 124 1,869 (2,364) (1,136) (1,067) (732)

Source: Banks, HSC

Page 53

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

SBV net deposits in banks SBV net positions as % of balance sheet


160,000,000 Bank deposits in SBV 50,000,000 4.00%
40,000,000 3.00%
140,000,000 SBV deposits in the bank
30,000,000
2.00%
120,000,000 Total net (RHS) 20,000,000
1.00%
100,000,000 10,000,000
- 0.00%
80,000,000
(10,000,000) -1.00%
60,000,000 (20,000,000)
-2.00%
40,000,000 (30,000,000)
-3.00% SOCB total net as % of BS
(40,000,000)
20,000,000 -4.00% JSCB total net as % of BS
(50,000,000)
- (60,000,000) -5.00% Total net as % of BS
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011e

FY2012e

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011e

FY2012e
Source: Bank financial statements, HSC calculation Source: Bank financial statements, HSC calculation

SBV deposits and loans

Looking at our master balance sheet for the top 16 banks We note that these balances have almost trebled since
we note that as of the end of FY2009, they had deposits FY2005 reflecting the frenetic pace of growth in the
of VND87,473 billion (US$4.49 billion) in the SBV; down whole banking sector.
5.6% y/y. Of this the SOCBs had the bulk or VND70,386
billion (down 9.3% y/y. Then the JSCBs kept deposits These deposits appear on the balance sheet in two
of VND17,087 billion or up 14% y/y. For FY2010 HSC places; as the line item Balances with State bank on
is forecasting that these overall deposits at the SBV will the asset side of the balance sheet and then in the line
rise by 25.7% to VND109,966 billion driven mainly by a item Deposits & Loans from SBV on the liability side of
111.2% increase in deposits from JSCBs. the balance sheet.

And then in FY2009 the SBV placed deposits & loans SBV deposits play a marginal role for most smaller and
of VND133,567 billion (US$6.85 billion) with banks up medium banks. They consist of the compulsory reserves
137.8% y/y. This can be broken down as follows; for that the law requires them to deposit in the central bank
SOCBs deposits rose 85.4% to VND103,992 while for and little else. And in turn the SBV rarely deposits money
JSCBs the deposit balance went from VND101 billion to with them. However for the larger private sector banks
VND29,594 billion. Then in FY2010 HSC is forecasting and most especially the state owned banks the role of
the overall balance drops marginally to VND132,113. the SBV deposits is very important and goes way be-
yond legal requirements.
As a result the net balance went from positive in FY2008
to negative in FY2009 and we believe will turn positive For example for Agribank (VBARD) the SBV deposit
again by the end of this year. In general bank deposits at is a key funding resource. And at the end of FY2009;
the SBV grows with the overall loan balance assuming Agribank in fact accounted for 38% of all bank deposits
there is no change in reserve requirements. at the SBV and then 33% of all SBV money deposited
amongst the top 16 banks.
Then the surge of SBV deposits placed with banks in
FY2009 was related to subsidised lending scheme in- Bank deposits at the SBV then consist mainly of com-
augurated in that year but over the next few years we pulsory reserves as denominated in proportion to the
think this will normalise. Traditionally the SBV has kept currency of the underlying deposit base. A compulsory
deposits in all the SOCBs but much smaller balances in reserve is a sum of money that a credit institution must
even the larger JSCBs. And of course it stands ready to deposit at the State Bank by law to provide a reserve
lend money to smaller banks when required. against over-lending. The SBV pays interest on these
deposits and from time to time will adjust both the in-
This category also includes deposits from the State terest rate paid and the reserve ratio amount itself as
Treasury which often accounted for 20-25% of the to- part of its monetary policy tool-kit. And being Vietnam
tal placed on demand deposit. The SBV loans come of course we have a separate reserve ratio and interest
through the OMO. rate for both the VND and the US$.

www.hsc.com.vn Page 54

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Under Decision No 74/Q-NHNN 18/1/2010 and De- However the very fact that the FY2010 credit growth tar-
cision No 379/Q-NHNN 24/2/2009, which took effect get overshot the official target by almost 500 bps (29.8%
from 01/02/2010 shows the current reserve require- against a target of 25%) suggests that reserve require-
ments are as of the table below. Recently there has ments may be more actively used in future as a way to
been some speculation that reserve requirements might cool down credit growth when needed. Indeed if these
be raised again as a way to control credit growth but this requirements had been lifted during last summer it might
has been officially denied. have headed off the current spike in inflation.

And lifting the reserve requirement for say US$ only


would help to cool down dollar lending and encourage
VND lending instead.

www.hsc.com.vn Page 55

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Selected banks SBV positions as % of balance sheet


Selected banks SBV positions as % of balance sheet
Type Short name
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011e FY2012e
1 SOCB VBARD SBV deposits as % of BS 5.47% 5.85% 5.39% 7.10% 7.10% 5.46% 4.68% 4.55%
Deposits from SBV as % of BS 11.38% 8.58% 7.95% 7.19% 9.30% 7.24% 6.11% 5.98%
Total net as % of BS -5.91% -2.73% -2.56% -0.09% -2.20% -1.78% -1.43% -1.43%
2 SOCB BIDV SBV deposits as % of BS 3.8% 11.0% 4.3% 5.1% 1.9% 4.8% 4.9% 4.8%
Deposits from SBV as % of BS 13.4% 10.4% 8.9% 6.9% 7.7% 6.5% 6.5% 6.4%
Total net as % of BS -9.62% 0.56% -4.63% -1.77% -5.82% -1.62% -1.63% -1.58%
3 SOCB CTG SBV deposits as % of BS 6.9% 4.1% 5.1% 3.1% 2.2% 2.0% 2.2% 2.2%
Deposits from SBV as % of BS 0.2% 0.4% 0.4% 0.4% 5.6% 10.7% 9.9% 8.8%
Total net as % of BS 6.70% 3.79% 4.69% 2.71% -3.43% -8.70% -7.73% -6.57%
4 SOCB VCB SBV deposits as % of BS 4.6% 7.1% 5.9% 13.8% 9.9% 6.5% 6.4% 6.5%
Deposits from SBV as % of BS 8.8% 13.4% 6.4% 4.3% 8.8% 5.3% 5.0% 4.8%
Total net as % of BS -4.15% -6.29% -0.52% 9.48% 1.02% 1.22% 1.40% 1.74%
Total SOCB SBV deposits as % of BS 5.21% 6.98% 5.20% 7.30% 5.51% 4.81% 4.57% 4.52%
Deposits from SBV as % of BS 8.95% 8.56% 6.44% 5.28% 8.14% 7.39% 6.77% 6.43%
SOCB total net as % of BS -3.74% -1.57% -1.24% 2.03% -2.63% -2.59% -2.20% -1.91%
5 JSCB ACB SBV deposits as % of BS 4.07% 3.50% 6.02% 2.01% 1.04% 2.91% 3.13% 3.27%
Deposits from SBV as % of BS 3.99% 2.11% 0.77% 0.00% 6.11% 3.63% 3.12% 2.61%
Total net as % of BS 0.09% 1.39% 5.26% 2.01% -5.07% -0.72% 0.00% 0.66%
6 JSCB STB SBV deposits as % of BS 2.83% 4.01% 6.01% 4.71% 2.53% 3.95% 4.08% 4.15%
Deposits from SBV as % of BS 1.18% 0.43% 1.16% 0.08% 3.47% 0.00% 0.00% 0.00%
Total net as % of BS 1.65% 3.58% 4.85% 4.64% -0.94% 3.95% 4.08% 4.15%
7 JSCB EIB SBV deposits as % of BS 0.93% 2.04% 2.45% 7.13% 3.20% 3.32% 3.46% 3.60%
Deposits from SBV as % of BS 2.90% 2.37% 0.08% 0.06% 2.44% 0.00% 0.00% 0.00%
Total net as % of BS -1.97% -0.32% 2.36% 7.07% 0.76% 3.32% 3.46% 3.60%
8 JSCB TCB SBV deposits as % of BS 3.06% 2.36% 3.28% 3.89% 2.94% 9.95% 4.78% 4.83%
Deposits from SBV as % of BS 27.23% 29.27% 0.76% 0.00% 4.25% 3.17% 3.40% 2.86%
Total net as % of BS -24.17% -26.90% 2.52% 3.89% -1.31% 6.79% 1.39% 1.97%
9 JSCB MB SBV deposits as % of BS 1.44% 2.26% 0.65% 1.16% 2.07% 1.21% 1.28% 1.34%
Deposits from SBV as % of BS 2.76% 0.22% 0.23% 0.00% 6.82% 4.88% 3.93% 3.14%
Total net as % of BS -1.32% 2.04% 0.41% 1.16% -4.75% -3.67% -2.65% -1.80%
10 JSCB EAB SBV deposits as % of BS 4.79% 4.04% 7.05% 2.22% 2.89% 3.38% 3.54% 3.64%
Deposits from SBV as % of BS 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total net as % of BS 4.79% 4.04% 7.05% 2.22% 2.89% 3.38% 3.54% 3.64%
11 JSCB MSB SBV deposits as % of BS 3.49% 0.76% 1.58% 1.53% 1.24% 1.45% 1.41% 1.39%
Deposits from SBV as % of BS 0.65% 0.30% 0.18% 0.07% 0.05% 0.03% 0.03% 0.02%
Total net as % of BS 2.84% 0.45% 1.40% 1.46% 1.20% 1.42% 1.38% 1.37%
12 JSCB VIB SBV deposits as % of BS 2.93% 3.40% 3.08% 3.28% 1.66% 1.32% 1.33% 1.34%
Deposits from SBV as % of BS 0.00% 0.40% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total net as % of BS 2.93% 2.99% 3.08% 3.28% 1.66% 1.32% 1.33% 1.34%
13 JSCB SHB SBV deposits as % of BS 1.4% 1.7% 1.5% 3.3% 2.7% 3.5% 2.7%
Deposits from SBV as % of BS 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total net as % of BS 0.00% 1.43% 1.66% 1.50% 3.35% 2.67% 3.46% 2.68%
11 JSCB SCB SBV deposits as % of BS 3.26% 2.19% 0.67% 1.47% 1.53% 2.99% 3.11% 3.16%
Deposits from SBV as % of BS 0.00% 0.56% 0.23% 0.00% 5.51% 0.00% 0.00% 0.00%
Total net as % of BS 3.26% 1.64% 0.44% 1.47% -3.97% 2.99% 3.11% 3.16%
15 JSCB HBB SBV deposits as % of BS 1.03% 1.12% 0.16% 0.37% 0.81% 0.79% 0.82% 0.83%
Deposits from SBV as % of BS 6.22% 1.65% 1.31% 0.00% 8.35% 6.81% 5.42% 4.22%
Total net as % of BS -5.20% -0.53% -1.15% 0.37% -7.54% -6.02% -4.60% -3.39%
16 JSCB SEABank SBV deposits as % of BS 1.21% 2.11% 1.95% 0.51% 4.88% 5.29% 7.37% 4.87%
Deposits from SBV as % of BS 1.14% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Total net as % of BS 0.06% 2.11% 1.95% 0.51% 4.88% 5.29% 7.37% 4.87%
Total JSCB SBV deposits as % of BS 2.85% 2.83% 3.69% 2.85% 2.12% 3.52% 3.05% 2.96%
Deposits from SBV as % of BS 4.73% 3.65% 0.52% 0.02% 3.68% 1.80% 1.61% 1.35%
JSCB total net as % of BS -1.88% -0.82% 3.17% 2.83% -1.56% 1.72% 1.44% 1.62%
Total SBV deposits as % of BS 4.84% 6.11% 4.71% 5.83% 4.20% 4.29% 3.94% 3.86%
Deposits from SBV as % of BS 8.29% 7.52% 4.53% 3.53% 6.42% 5.16% 4.64% 4.27%
Total net as % of BS -3.45% -1.42% 0.18% 2.29% -2.22% -0.86% -0.70% -0.41%
Source: Bank financial statements, HSC calculation

www.hsc.com.vn Page 56

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Selected banks investment positions
Se le cte d bank s inve s tm e nt pos itions
Cumulative
Type Short nam e Inve s tm e nt pos itions in VNDm illion increase CAGR
FY2005- FY2005-
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011e FY2012e FY2006 FY2007 FY2008 FY2009 FY2010e FY2011e FY2012e 10e 2010

www.hsc.com.vn
1 SOCB VBARD Net Securities - Held f or trading 15,898,311 - 89,401 51,966 219,821 241,739 270,747 303,237 -100% -42% 323% 10% 12% 12% -98% -57%
Investment securities - 19,931,658 32,972,471 42,646,385 33,674,737 36,947,195 41,380,858 46,346,561 65% 29% -21% 10% 12% 12%
Long term investments 298,116 409,104 678,777 962,463 797,921 877,480 982,777 1,100,710 37% 66% 42% -17% 10% 12% 12% 269% 24%
Total 16,196,427 20,340,762 33,740,649 43,660,814 34,692,479 38,066,413 42,634,383 47,750,509 26% 66% 29% -21% 10% 12% 12% 195% 19%
2 SOCB BIDV Net Securities - Held f or trading 14,305 45,152 781,686 2,025,149 948,629 1,485,828 1,778,577 2,150,652 216% 1631% 159% -53% 57% 20% 21% 14934% 153%
Investment securities 12,096,857 15,055,520 27,811,804 31,394,906 31,477,251 38,427,197 45,381,064 53,588,844 24% 85% 13% 0% 22% 18% 18% 343% 26%
Long term investments 518,187 800,231 2,251,228 2,778,618 3,228,124 2,956,283 3,189,975 3,458,721 54% 181% 23% 16% -8% 8% 8% 567% 42%
Total 12,629,349 15,900,903 30,844,718 36,198,673 35,654,004 42,869,307 50,349,616 59,198,216 26% 94% 17% -2% 20% 17% 18% 369% 28%
3 SOCB CTG Net Securities - Held f or trading - 867,393 739,381 (22,776) 299,033 737,102 833,482 920,176 -15% -103% -1413% 146% 13% 10%
Investment securities 14,059,580 17,329,218 37,404,891 41,801,145 38,977,048 56,406,854 63,782,337 70,416,644 23% 116% 12% -7% 45% 13% 10% 401% 32%
Long term investments 329,137 510,211 684,138 930,500 1,463,756 1,683,234 1,903,326 2,101,300 55% 34% 36% 57% 15% 13% 10% 538% 39%
Total 14,388,717 18,706,822 38,828,410 42,708,869 40,739,837 58,827,190 66,519,144 73,438,120 30% 108% 10% -5% 44% 13% 10% 410% 33%
4 SOCB VCB Net Securities - Held f or trading - - 1,575,290 309,043 5,768 165,964 174,263 182,976 -80% -98% 2777% 5% 5%
Investment securities 23,279,354 31,116,572 41,158,733 41,567,126 32,634,887 43,031,073 45,182,627 47,441,758 34% 32% 1% -21% 32% 5% 5% 104% 13%
Long term investments 642,941 964,687 1,899,703 3,048,870 3,637,730 3,964,863 4,163,106 4,371,261 50% 97% 60% 19% 9% 5% 5% 580% 44%
Total 23,922,295 32,081,259 44,633,726 44,925,039 36,278,385 47,161,901 49,519,996 51,995,995 34% 39% 1% -19% 30% 5% 5% 117% 15%
Total SOCB Net Securities - Held f or trading 15,912,616 912,545 3,185,758 2,363,382 1,473,251 2,630,633 3,057,069 3,557,041 -94% 249% -26% -38% 79% 16% 16% -78% -30%
Investment securities 49,435,791 83,432,968 139,347,899 157,409,562 136,763,923 174,812,318 195,726,886 217,793,807 69% 67% 13% -13% 28% 12% 11% 341% 29%
Long term investments 1,788,381 2,684,233 5,513,846 7,720,451 9,127,531 9,481,859 10,239,183 11,031,992 50% 105% 40% 18% 4% 8% 8% 517% 40%
Total SOCB investment position 67,136,788 87,029,746 148,047,503 167,493,395 147,364,705 186,924,811 209,023,139 232,382,840 30% 70% 13% -12% 27% 12% 11% 246% 23%
5 JSCB ACB Net Securities - Held f or trading 39,218 640,195 501,293 226,429 638,874 749,743 877,242 1,023,866 1532% -22% -55% 182% 17% 17% 17% 2511% 80%
Investment securities 4,823,767 4,228,621 9,132,829 24,441,506 32,166,926 49,208,701 55,335,761 63,670,527 -12% 116% 168% 32% 53% 12% 15% 1220% 59%
Long term investments 136,716 443,458 762,469 1,178,132 1,197,348 1,928,357 2,220,760 2,557,024 224% 72% 55% 2% 61% 15% 15% 1770% 70%
Total 4,999,701 5,312,274 10,396,591 25,846,067 34,003,148 51,886,800 58,433,763 67,251,418 6% 96% 149% 32% 53% 13% 15% 1245% 60%
6 JSCB STB Net Securities - Held f or trading 96,602 263,631 4,142,069 370,105 849,962 994,063 1,159,778 1,350,351 173% 1471% -91% 130% 17% 17% 16% 1298% 59%
Investment securities 1,514,919 2,065,024 9,173,801 8,969,574 9,912,430 11,404,622 13,120,644 14,444,371 36% 344% -2% 11% 15% 15% 10% 853% 50%
Long term investments 316,988 780,577 1,495,608 1,254,261 603,061 697,754 802,417 922,780 146% 92% -16% -52% 16% 15% 15% 191% 17%
Total 1,928,509 3,109,232 14,811,478 10,593,940 11,365,453 13,096,439 15,082,839 16,717,502 61% 376% -28% 7% 15% 15% 11% 767% 47%
7 JSCB EIB Net Securities - Held f or trading - - 7,580 - 98,824 296,472 494,120 790,592 200% 67% 60% #DIV/0!
Investment securities 1,103,084 1,587,239 6,076,844 7,518,367 8,401,391 14,242,090 16,404,168 18,096,343 44% 283% 24% 12% 70% 15% 10% 1541% 67%
Long term investments 39,866 92,493 690,538 765,151 766,468 919,762 1,103,714 1,324,457 132% 647% 11% 0% 20% 20% 20% 3222% 87%
Total 1,142,950 1,679,732 6,774,962 8,283,518 9,266,682 15,458,324 18,002,002 20,211,392 47% 303% 22% 12% 67% 16% 12% 1668% 68%
8 JSCB TCB Net Securities - Held f or trading 1,942,620 2,876,804 - - 96,631 - - - 48% -100% -100%
Investment securities - - 7,487,172 11,418,819 13,608,323 20,134,520 26,126,021 33,887,403 53% 19% 48% 30% 30%
Long term investments 11,838 30,783 36,930 66,425 475,008 689,077 826,892 992,271 160% 20% 80% 615% 45% 20% 20% 8282% 125%
Total 1,954,458 2,907,587 7,524,102 11,485,244 14,179,962 20,823,597 26,952,913 34,879,674 49% 159% 53% 23% 47% 29% 29% 1685% 61%
9 JSCB MB Net Securities - Held f or trading - 331,364 290,547 150,175 618,513 606,698 813,604 1,077,155 -12% -48% 312% -2% 34% 32%
Investment securities 477,933 668,454 1,675,726 8,477,960 9,674,240 14,858,242 19,925,431 26,379,868 40% 151% 406% 14% 54% 34% 32% 5420% 99%
Long term investments 123,302 232,444 925,953 1,180,427 891,469 1,718,845 2,305,033 3,051,701 89% 298% 27% -24% 93% 34% 32% 2375% 69%
Total 601,235 1,232,262 2,892,226 9,808,562 11,184,222 17,183,786 23,044,068 30,508,724 105% 135% 239% 14% 54% 34% 32% 4974% 96%
10 JSCB EAB Net Securities - Held f or trading - - 343,418 243,934 386,730 429,580 476,716 528,565 -29% 59% 11% 11% 11%
Investment securities 114,082 462,117 291,997 135,801 359,201 404,554 373,270 420,347 305% -37% -53% 165% 13% -8% 13% 268% 29%
Long term investments 64,910 53,510 639,187 820,758 711,110 782,221 860,443 946,487 -18% 1095% 28% -13% 10% 10% 10% 1358% 65%
Total 178,992 515,627 1,274,602 1,200,493 1,457,041 1,616,356 1,710,429 1,895,399 188% 147% -6% 21% 11% 6% 11% 959% 55%
11 JSCB MSB Net Securities - Held f or trading - - - - 67,876 60,060 67,937 84,846 -12% 13% 25%
Investment securities 193,165 1,016,355 2,169,236 3,921,402 11,092,973 19,684,520 22,266,157 27,808,024 426% 113% 81% 183% 77% 13% 25% 14296% 152%
Long term investments - 12,200 29,710 79,368 218,112 392,740 444,248 554,818 144% 167% 175% 80% 13% 25%
Total 193,165 1,028,555 2,198,946 4,000,770 11,378,961 20,137,320 22,778,342 28,447,687 432% 114% 82% 184% 77% 13% 25% 14627% 153%
12 JSCB VIB Net Securities - Held f or trading 627,684 - - - - -
Investment securities - 2,587,467 6,748,219 4,818,934 8,818,224 11,021,841 12,895,554 15,087,798 161% -29% 83% 25% 17% 17%
Long term investments 87,045 30,056 143,806 216,425 290,684 319,752 374,110 437,709 -65% 378% 50% 34% 10% 17% 17% 403% 30%
Total 714,729 2,617,523 6,892,025 5,035,359 9,108,908 11,341,593 13,269,664 15,525,507 266% 163% -27% 81% 25% 17% 17% 2072% 74%
13 JSCB SHB Net Securities - Held f or trading - 9,186 480,531 16,500 130,000 162,500 203,125 5131% -97% 688% 25% 25% 2111% 142%
Investment securities - 3,066 382,521 1,955,500 4,865,643 5,741,460 7,176,823 8,971,029 12378% 411% 149% 18% 25% 25% 2245% 147%
Long term investments - - 382,600 748,159 269,799 337,249 421,561 526,951 96% -64% 25% 25% 25% 38% -4%
Total - 3,066 774,307 3,184,190 5,151,942 6,208,708 7,760,884 9,701,105 25159% 311% 62% 21% 25% 25% 1153% 100%
11 JSCB SCB Net Securities - Held f or trading - - 61,008 852 354 344 368 393 -99% -58% -3% 7% 7%
Investment securities 33,271 316,382 886,321 4,181,835 8,723,719 9,521,998 10,188,537 10,901,735 851% 180% 372% 109% 9% 7% 7% 32666% 210%
Long term investments 28,675 39,075 57,325 700,906 736,402 740,600 792,442 847,913 36% 47% 1123% 5% 1% 7% 7% 2857% 92%
Total 61,946 355,457 1,004,654 4,883,593 9,460,475 10,262,941 10,981,347 11,750,041 474% 183% 386% 94% 8% 7% 7% 18868% 178%
15 JSCB HBB Net Securities - Held f or trading - 5,343 68,324 23,103 899,409 557,814 656,537 808,881 1179% -66% 3793% -38% 18% 23%
Investment securities 858,634 1,559,234 2,411,833 3,532,726 5,268,166 6,593,690 7,760,659 9,561,452 82% 55% 46% 49% 25% 18% 23% 1014% 50%
Long term investments 31,690 129,515 267,975 302,337 180,625 403,497 474,909 585,107 309% 107% 13% -40% 123% 18% 23% 1746% 66%
Total 890,324 1,694,092 2,748,132 3,858,166 6,348,200 7,555,000 8,892,105 10,955,441 90% 62% 40% 65% 19% 18% 23% 1131% 53%
16 JSCB SEABank Net Securities - Held f or trading - 263,488 759,111 724,985 491,027 662,886 762,319 876,667 188% -4% -32% 35% 15% 15%
Investment securities 1,218,342 2,040,000 3,968,000 2,340,000 2,292,000 2,635,800 3,031,170 3,485,846 67% 95% -41% -2% 15% 15% 15% 186% 17%
Long term investments 22,000 27,500 44,900 156,002 182,902 237,773 273,438 314,454 25% 63% 247% 17% 30% 15% 15% 1329% 61%
Total 1,240,342 2,330,988 4,772,011 3,220,987 2,965,929 3,536,459 4,066,928 4,676,967 88% 105% -33% -8% 19% 15% 15% 277% 23%
Total JSCB Net Securities - Held f or trading 2,706,124 4,380,825 6,182,536 2,220,114 4,164,700 4,487,660 5,471,121 6,744,441 62% 41% -64% 88% 8% 22% 23% 149% 11%
Investment securities 10,337,197 16,533,958 50,404,499 81,712,424 115,183,236 165,452,037 194,604,195 232,714,744 60% 205% 62% 41% 44% 18% 20% 2151% 74%
Long term investments 863,030 1,871,611 5,477,001 7,468,351 6,522,988 9,167,626 10,899,968 13,061,673 117% 193% 36% -13% 41% 19% 20% 1413% 60%
Total JSCB investment position 13,906,351 22,786,394 62,064,036 91,400,889 125,870,923 179,107,324 210,975,285 252,520,858 64% 172% 47% 38% 42% 18% 20% 1716% 67%
Total Net Securities - Held f or trading 18,618,740 5,293,370 9,368,294 4,583,496 5,637,951 7,118,293 8,528,191 10,301,483 -72% 77% -51% 23% 26% 20% 21% -45% -17%
Investment securities 59,772,988 99,966,926 189,752,398 239,121,986 251,947,159 340,264,356 390,331,082 450,508,551 67% 90% 26% 5% 35% 15% 15% 654% 42%
Long term investments 2,651,411 4,555,844 10,990,847 15,188,802 15,650,519 18,649,485 21,139,152 24,093,665 72% 141% 38% 3% 19% 13% 14% 809% 48%
September

Total investment position 81,043,139 109,816,140 210,111,539 258,894,284 273,235,628 366,032,134 419,998,424 484,903,698 36% 91% 23% 6% 34% 15% 15% 498% 35%
US$ million Net Securities - Held f or trading 955 271 480 235 289 365 437 528
February 2011

Investment securities 3,065 5,127 9,731 12,263 12,920 17,449 20,017 23,103
July 14h 2008

2009

Long term investments 136 234 564 779 803 956 1,084 1,236
Total 4,156 5,632 10,775 13,277 14,012 18,771 21,538 24,867

Source: Banks, HSC

Page 57

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Banks total securities position Net securities investment as % of BS


600,000,000 18.0%

17.0%
500,000,000 Total SOCB investment position
16.0%

400,000,000 Total JSCB investment position


15.0%

Total investment position


300,000,000 14.0%

13.0%
200,000,000 Total SOCB net investment as % of BS

12.0%
Total JSCB net investment as % of BS
100,000,000
11.0%
Total net investment as % of BS
- 10.0%

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011e

FY2012e
FY2010e

FY2011e

FY2012e
FY2005

FY2006

FY2007

FY2008

FY2009

Source: Bank financial statements, HSC calculation Source: Bank financial statements, HSC calculation

Trading securities; investment securities and long term investments

Banks have invested actively in the stock and bond Between them these last two categories account for
markets over the past five years. There are three main only 8% of total securities. Trading or net securities and
categories appearing in the balance sheet; Trading or long term investments can both attract provision losses
net securities, investment securities and long term in- but in the case of the latter this is quite unusual.
vestments. Investment securities are by far the largest
of these categories and accounted for 92% of the total in Since FY2008 the trend has been to (1) sell-off short
FY2010. We have simply called all three categories se- term equity holdings where possible (2) increase bond
curities which is not an official category on the balance holdings especially in FY2010 and (3) increase the ex-
sheet but we chose to lump them together for easier posure to long term investments in equity. This trend is
analysis. partly driven by the losses on equity positions incurred
during FY2008 and again in FY2010 plus the new regu-
And as a % of the aggregate balance sheet of the top 16 latory environment for banks which is pushing them to
banks, securities has fluctuated from 11.9% in FY2005 increase cash & cash equivalent holdings (read bonds)
to a peak of 16.3% in FY2008 before falling back some- to improve liquidity.
what since. In FY2009 it accounted for 13.1% of the ag-
gregate balance sheet and in FY2010 HSC estimates it The vast bulk of all bank securities are held in govern-
will account for 14.3% of the balance sheet. ment bonds. Government bond holdings are seen as
near cash and fulfill several functions; they can be used
The largest category; Investment securities can be sub- as collateral in the OMO; can also be used in interbank
divided into two main categories; securities available repurchase agreements to get short term cash; or they
for sale and held to maturity. These categories include can easily be liquidated in daily market transactions.
both the bond & equity positions held by any bank but And given the daily reporting of solvency ratios banks
its mostly of not all held in bonds. A bond position held to have been steadily increasing their exposure to bonds
maturity does not incur a provision loss even of the prin- in recent years.
cipal value falls below par but if for sale then it must be
marked to market at the end of the year. The majority of One bank treasurer recently told us that for prudence
bond positions are held to maturity however. Then as for sake, all banks should currently hold between 10-15%
equities they can usually be divided into short and long of their balance sheets in government bonds. The
term investments. higher the ratio of bond holdings, the safer the bank is
in terms of its liquidity risks. Of course there is often a
Trading or net securities are mainly used to describe tussle between bank treasurers and the credit depart-
trading positions (usually in equities) while long term ment as each look to increase their share of the balance
investments mostly include equity investments in sub- sheet cake.
sidiaries and affiliates. This includes investments in as-
sociates (20-50% ownership); OTC investments (less We dont have the breakdown between bonds and eq-
than 20% ownership) and other long term investment uities so for the sake of simplicity we assume that the
in equities. bulk of all three categories (which we collectively have

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July 14h 2008

February 2011
September 2009

called net securities) are held in bonds which in fact is with just 3.4% followed by Seabank with 9.7% and STB
close to the truth. with 10.9%. This suggests that HBB and ACB carry very
low relative liquidity risks.
As of FY2009 JSCBs had 15.6% of their balance sheet
held in securities and for FY2010 HSC is forecasting Going forward all banks are likely to want to increase
this will increase to 17.5%. And we see that SOCBs had their weight in bonds and the regulations in this regard
11.5% of their balance sheet in securities in FY2009 while will only get stricter in our opinion. One effect of this will
we forecasts this will increase to 12.2%% in FY2010. be to reduce the percentage of assets available for use
Amongst the private sector banks in FY2009 HBB had in lending activities which in turn will have the effect of
the highest percentage at 21.7% followed by ACB with lowering the LDR ratio over time.
20.3% in FY2009. At the other end EAB had the lowest

www.hsc.com.vn Page 59

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Selected banks investment positions as % of balance sheet
Investment positions in VNDmillion
Type Short name

www.hsc.com.vn
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011e FY2012e
SOCB VBARD Total net investment as % of BS 8.0% 8.3% 10.3% 10.9% 7.2% 6.9% 6.8% 6.6%
SOCB BIDV Total net investment as % of BS 10.4% 9.9% 15.1% 14.7% 12.0% 11.8% 12.2% 12.4%
SOCB CTG Total net investment as % of BS 12.4% 13.8% 23.4% 22.1% 16.7% 18.4% 18.7% 17.8%
SOCB VCB Total net investment as % of BS 17.5% 19.2% 22.6% 20.2% 14.2% 15.5% 14.3% 13.3%
Total SOCB Total SOCB net investment as % of BS 11.7% 12.3% 16.5% 15.8% 11.5% 12.2% 12.0% 11.6%
JSCB ACB Total net investment as % of BS 20.6% 11.9% 12.2% 24.5% 20.3% 26.9% 26.1% 25.1%
JSCB STB Total net investment as % of BS 13.3% 12.5% 22.9% 15.5% 10.9% 10.5% 10.5% 9.8%
JSCB EIB Total net investment as % of BS 10.1% 9.2% 20.1% 17.2% 14.0% 16.7% 15.4% 13.6%
JSCB TCB Total net investment as % of BS 18.3% 16.8% 19.0% 19.4% 15.3% 16.5% 18.3% 20.0%
JSCB MB Total net investment as % of BS 7.3% 9.1% 9.8% 22.1% 16.2% 17.3% 18.1% 18.6%
JSCB EAB Total net investment as % of BS 2.1% 4.3% 4.7% 3.5% 3.4% 3.3% 3.0% 2.8%
JSCB MSB Total net investment as % of BS 4.4% 12.1% 12.5% 12.3% 17.8% 19.1% 18.2% 17.7%
JSCB VIB Total net investment as % of BS 8.0% 15.8% 17.5% 14.5% 16.1% 16.0% 16.1% 16.2%
JSCB SHB Total net investment as % of BS 0.2% 6.3% 22.1% 18.8% 13.8% 13.6% 13.9%
JSCB SCB Total net investment as % of BS 1.5% 3.3% 3.9% 12.7% 17.4% 19.3% 20.1% 20.4%
JSCB HBB Total net investment as % of BS 16.1% 14.5% 11.7% 16.3% 21.7% 20.1% 17.9% 16.4%
JSCB SEABank Total net investment as % of BS 20.3% 22.9% 18.2% 14.5% 9.7% 12.5% 11.0% 11.5%
Total JSCB Total JSCB net investment as % of BS 13.1% 12.0% 14.6% 17.4% 15.6% 17.5% 17.3% 17.0%
Total Total net investment as % of BS 11.9% 12.2% 15.9% 16.3% 13.1% 14.3% 14.2% 13.9%
Source: Banks, HSC
September
February 2011
July 14h 2008

2009

Page 60

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Heavy users of the interbank market as % of balance sheet
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011f FY2012f

www.hsc.com.vn
EIB Loans to interbank 22% 14% 14% 20% 11% 15% 15% 15%
Borrowed from interbank 14% 12% 4% 3% 4% 16% 17% 17%
Total combined lending & borrowing as % of BS 36% 25% 18% 23% 14% 32% 33% 33%
VIB Loans to interbank 25% 20% 33% 22% 31% 23% 22% 22%
Borrowed from interbank 32% 31% 31% 23% 33% 21% 21% 21%
Total combined lending & borrowing as % of BS 56% 50% 63% 44% 64% 43% 43% 43%
TCB Loans to interbank 25% 26% 24% 26% 28% 23% 26% 25%
Borrowed from interbank 1% 0% 21% 15% 11% 13% 11% 11%
Total combined lending & borrowing as % of BS 26% 26% 45% 42% 40% 36% 37% 36%
MSB Loans to interbank 35% 51% 47% 48% 39% 41% 37% 35%
Borrowed from interbank 14% 7% 35% 11% 7% 4% 3% 2%
Total combined lending & borrowing as % of BS 49% 58% 81% 59% 47% 45% 39% 37%
SHB Loans to interbank 50% 44% 20% 23% 17% 17% 17%
Borrowed from interbank 30% 57% 16% 36% 22% 21% 21%
Total combined lending & borrowing as % of BS 0% 81% 101% 36% 59% 39% 38% 38%
HBB Loans to interbank 20% 31% 46% 37% 29% 34% 36% 39%
Borrowed from interbank 26% 42% 46% 35% 26% 19% 21% 22%
Total combined lending & borrowing as % of BS 47% 72% 92% 72% 55% 53% 57% 61%
SeaBank Loans to interbank 43% 33% 33% 41% 47% 29% 30% 33%
Borrowed from interbank 45% 47% 37% 37% 40% 26% 24% 27%
Total combined lending & borrowing as % of BS 88% 80% 70% 78% 87% 55% 55% 60%
Source: Banks, HSC
September
February 2011
July 14h 2008

2009

Page 61

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Derivatives

We note that two banks have a derivative exposure on STB: STB hasnt announced their consolidated balance
their balance as of end FY2010. While the audited num- sheet so it is difficult to evaluate their total position in
ber is not yet known we see that both ACB and STB gold and US$. However if we look at their unconsoli-
had substantial derivative positions related to the gold dated balance sheet, the bank had a balanced position
market. These date back to the time when both banks in both gold and US$ at end-FY2010. Even so the bank
were active in gold trading for themselves and on behalf had a category of other assets in gold of VND1,429 bil-
of customers and have taken some time to unwind. lion at end-FY2010, declining from VND2,948 billion at
end Q3 FY2010. Therefore, the bank has apparently re-
ACB: ACB has already announced its un-audited con- duced this a lot in Q4 FY2010.
solidated balance sheet at end-FY2010. The bank had
a balanced position in US$; however, the gold position Because we havent got their full year consolidated bal-
amounted to a net short of VND-8,773 billion at end- ance sheet yet, we can only look at their consolidated
FY2010. The bank was short of physical gold but they balance sheet at end-Q3 FY2010. And while STB had a
apparently also bought derivatives to hedge this posi- balanced gold position at the un-consolidated level their
tion. If they included their off-balance sheet positions, consolidated net gold position was VND-2,540 billion. In
the gold position would be balanced in our opinion. our opinion, the bank entrusted gold to their subsidiaries
Therefore in this case even as the gold price moves and booked this as other assets in gold on their consoli-
higher, this position wont hurt them. dated balance sheet. However as other assets in gold
declined in Q4 FY2010, we suspect the consolidated
For reference in FY2009, the US$ position was gold position also improved in Q4 FY2010.
VND2,536 billion while they had a balanced gold po-
sition. However, other assets amounted to VND11,440
billion while other liabilities totaled VND3,669 billion. We
understand these two categories were customer posi-
tions related to the gold trading center. The situation has
improved as the bank reduced other assets in gold to
VND1,048 billion at end FY2010 down from VND11,440
billion.

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July 14h 2008

February 2011
September 2009

LDR and CAR

The C13 decree sets out that LDR for each bank must So in our tables overleaf we can only look backwards to
be equal to or less than 80% while the CAR must be the FY2009 numbers for both LDR and CAR. In FY2009
at least 9% as of October 1st FY2010. We do not have we understand the banking system LDR came to 99%
the actual figures for either by bank as of end FY2010 and for FY2010 we estimate is has fallen back to close
yet. Neither calculation is straightforward and require to 90% by the end of the year. LDR is calculated as
multi variable formulas to figure out (see the regulation credit less equity available for lending divided by depos-
section later on for these formulas). And these require its. And as we all know according to the C13 regulation
detailed and updated balance sheet in order to figure the ceiling has been set at 80% for all banks. Larger
them out accurately. We could take a decent stab at it banks in general would have no problem meeting this
but prefer not to given that there is a certain sensitivity criteria but many small banks have traditionally main-
attached to the numbers now. tained a ratio over 100% and used the interbank market
to cover their needs.

www.hsc.com.vn Page 63

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

LDR for banks as of FY2009


Chartered capital as Total assets Equity for lending Demand deposit Total deposit Loans LDR
of now
(1) (2) (3) (4) (5) (8)=(5-2)/(4)

State owned banks

SOCB VBARD 21,483,171 470,000,000

SOCB BIDV 10,502,900 296,432,087 12,106,942 44,686,209 217,326,157 206,401,908 89.4%

SOCB CTG 14,403,805 243,785,208 7,810,792 31,504,499 163,975,823 163,170,485 94.7%

SOCB MHB 3,000,000 40,097,711 673,703 1,832,367 29,387,803 20,136,341 66.2%

SOCB VCB 13,223,820 255,495,883 11,567,343 38,616,284 148,972,761 141,621,126 87.3%

Private sector banks

Large - sized banks

JSCB ACB 7,814,138 167,881,047

JSCB SEABank (*) 5,068,000 30,596,995 5,102,903 2,819,816 21,823,513 9,625,900 20.7%

JSCB TCB 6,932,000 92,581,504 6,557,257 7,934,989 65,038,217 42,092,767 54.6%

JSCB MLB 5,300,000 69,008,288 5,373,562 18,062,949 38,843,270 29,587,941 62.3%

JSCB STB 9,045,477 104,019,144 7,450,934 8,498,791 79,431,139 59,657,004 65.7%

JSCB EIB 8,800,000 52,095,037 11,591,076 6,617,525 43,934,306 38,381,855 61.0%

JSCB LVB ** 3,650,000 17,366,930 5,423,254

Mid-sized banks

JSCB EAB 3,400,000 38,319,879 3,047,538 4,475,149 33,265,917 34,355,544 94.1%

JSCB ABB 3,482,512 26,518,084 3,646,553 9,013,000 14,455,792 12,882,962 63.9%

JSCB HBB 3,000,000 29,240,379 2,863,379 862,152 21,782,594 13,358,406 48.2%

JSCB SCB 3,635,000 54,492,474 2,562,149 2,372,126 40,361,735 31,310,489 71.2%

JSCB PCB 3,399,000 15,940,139 3,445,254 903,342 11,037,541 9,644,746 56.2%

JSCB VIB 4,000,000 56,638,942 2,407,773 4,164,920 49,268,998 27,352,682 50.6%

JSCB MSB 3,000,000 63,882,044 3,076,773 3,867,448 52,746,450 23,871,616 39.4%

Banks' chartered capital in VND2,000 billion - VND1,000 billion

JSCB PNB 2,568,132 35,473,136 2,013,354 1,876,886 30,347,527 19,785,791 58.6%

JSCB BAB 2,120,000 NA

JSCB VPB 2,117,470 27,543,006 2,175,970 2,121,979 15,059,859 15,813,269 90.6%

JSCB SHB 3,500,000 27,469,197 1,293,619 4,267,802 21,412,715 12,828,748 53.9%

JSCB OCB 2,000,000 12,686,213 1,935,090 949,591 9,331,339 10,216,975 88.8%

JSCB RKB 2,000,000 8,527,732 1,028 468 5,931 5,214 70.6%

JSCB OCEANB 2,000,000 33,784,958 1,657,442 16,127,066 18,401,162 10,188,901 46.4%

JSCB GPB 2,000,000 17,319,049 1,843,575 1,057,127 8,118,074 5,986,296 51.0%

JSCB TPB ** 1,750,000 10,728,532 1,528,482 544,383 7,582,013 3,192,582 21.9%

JSCB VAB 1,631,834 15,816,725 1,259,962 530,023 10,963,722 12,041,504 98.3%

JSCB HDB 1,550,000 19,127,427 1,475,276 1,444,544 15,926,116 8,230,884 42.4%

JSCB Bao Viet Bank ** 1,500,000 7,269,755 1,515,520 452,248 3,687,861 2,255,569 20.1%

JSCB SGB 1,500,000 11,875,915 1,306,473 1,103,528 8,459,347 9,600,247 98.0%

JSCB NAB 2,000,000 10,938,109 731,646 839,733 8,801,629 5,012,921 48.6%

Banks' chartered capitals of VND1,000 billion

JSCB DAB 1,000,000

JSCB FCB 1,000,000

JSCB GDB 1,000,000 3,329,942 978,895 88,857 1,994,651 2,314,882 67.0%

JSCB KLB 2,000,000

JSCB NVB 1,000,000 18,689,953 732,487 1,592,609 13,495,700 9,864,203 67.7%

JSCB WTB 1,000,000 10,314,177 1,013,986 530,885 8,566,903 1,791,247 9.1%

JSCB VIETB 1,000,000

JSCB PGB 1,000,000 10,418,510 963,865 887,426 6,870,098 6,267,026 77.2%

JSCB MXB 1,000,000

Note: FY2009 figures; HSC estimates were based on banks financial reports
Source: Banks, HSC

www.hsc.com.vn Page 64

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

CAR FY2009 for selected banks


CAR (*) Tier 1 capital Tier 2 captial ROAA ROAE EPS 2009 BVPS

State owned banks

SOCB VBARD NA NA NA NA NA NA NA

SOCB BIDV 9.53% 16,042,541 5,252,452 1.04% 18.12% NA NA

SOCB CTG 8.06% 10,531,749 318,605 1.04% 18.33% 1,748 11,005

SOCB MHB N/A 1,015,332 36,289 4.78% 0.14% N/A NA

SOCB VCB 8.11% 12,966,964 631,538 1.45% 22.66% 2,871 13,421

Private sector banks

Large - sized banks

JSCB ACB 9.70% 7,353,844 710,036 1.61% 24.63% 2,951 12,872

JSCB SEABank (*) N/A 5,439,888 1.74% 9.67% 1,006 10,815

JSCB TCB 9.60% 5,194,972 382,530 2.24% 26.28% 3,553 13,347

JSCB MLB 12.00% 5,432,454 772,821 1.55% 15.56% 2,090 13,071

JSCB STB 11.40% 7,884,007 474,100 1.94% 18.03% 2,377 14,432

JSCB EIB 26.87% 12,408,601 244,084 2.00% 8.54% 1,274 15,276

JSCB LVB ** NA NA NA 4.30% 14.26% 1,480

Mid-sized banks

JSCB EAB 10.64% 3,237,124 139,722 1.52% 15.23% 1,254 11,711

JSCB ABB NA 4,080,709 20,000 1.56% 7.38% 1,101

JSCB HBB 15.00% 3,146,114 86,840 1.53% 12.92% 1,435 10,840

JSCB SCB 11.50% 4,024,655 84,446 0.64% 8.08% 919 11,559

JSCB PCB 50.20% 3,390,664 4,062 2.30% 9.50% 1,616 10,640

JSCB VIB 8.67% 2,905,919 NA 1.00% 17.68% 2,032 12,417

JSCB MSB 8.93% 3,175,282 143,014 1.53% 27.25% 4,635 11,845

Banks' chartered capital in VND2,000 billion - VND1,000 billion

JSCB PNB NA 1,367,430 50,059 1.40% 9.30% 1,256 11,431

JSCB BAB NA NA NA NA NA NA NA

JSCB VPB NA 193,367 - 1.24% 11.71% 1,355 0

JSCB SHB NA 2,036,421 65,039 1.52% 13.60% 1,592 0

JSCB OCB 28.71% 2,007,296 46,074 1.81% 10.51% 1,396 0

JSCB RKB NA 1,505,796 4,000 0.79% 4.27% 430 0

JSCB OCEANB 9.59% 2,134,403 36,148 0.95% 13.65% 1,358 0

JSCB GPB NA 2,129,950 - 1.00% 8.18% 1,283 10,650

JSCB TPB ** NA 1,481,991 5,051 1.95% 9.64% 1,166 13,105

JSCB VAB NA 1,643,298 54,934 1.61% 13.31% 1,542 0

JSCB HDB NA 1,401,010 30,353 1.35% 10.64% 1,253 0

JSCB Bao Viet Bank ** NA 1,420,673 - NA NA 421 0

JSCB SGB 15.87% 1,569,301 74,884 1.82% 12.34% 1,572 0

JSCB NAB NA 1,262,837 10,000 0.67% 4.29% 449 0

Banks' chartered capitals of VND1,000 billion

JSCB DAB NA NA NA NA NA NA NA

JSCB FCB NA NA NA NA NA NA NA

JSCB GDB Na 1,043,983.00 8,000.00 1.6% 5.1% 546 11,068

JSCB KLB NA NA NA NA NA NA NA

JSCB NVB 8.87% 1,010,000.00 10,000.00 1.0% 12.7% 1,424 11,660

JSCB WTB 23.12% 1,007,230.00 26,175.00 1.84% 10.68% 1,207 0

JSCB VIETB NA NA NA NA NA NA NA

JSCB PGB NA 0.94 - 2.11% 16.51% NA NA

JSCB MXB NA NA NA NA NA NA NA

Note: FY2009 figures; HSC estimates were based on banks financial reports; (*) Banks figures
Source: Banks, HSC

www.hsc.com.vn Page 65

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

FY2010 bank capital raising


Total capital at year- Total capital at year- Total planned capital at Total planned raising Total actually raised Success
end FY2009 end FY2010 year-end FY2010 ratio

SOCBs 45,951,572,244,725 71,335,870,964,725 77,004,056,964,725 31,052,484,720,000 25,384,298,720,000 81.7%

Large - sized banks 42,733,904,000,000 52,333,102,416,559 53,843,102,416,559 11,109,198,416,559 9,599,198,416,559 86.4%

Mid-sized banks 22,316,941,000,000 27,566,512,000,000 29,414,000,000,000 7,097,059,000,000 5,249,571,000,000 74.0%

Banks' FY2009 chartered capital between VND1,000- 23,386,236,370,000 42,513,941,790,000 47,422,048,590,000 24,035,812,220,000 19,127,705,420,000 79.6%
2,000 billion (*)

Banks' FY2009 chartered capital at VND1,000 billion (*) 9,000,000,000,000 20,100,000,000,000 27,600,000,000,000 18,600,000,000,000 11,100,000,000,000 59.7%

Grand Total 143,388,653,614,725 213,849,427,171,284 235,283,207,971,284 91,894,554,356,559 70,460,773,556,559 76.7%

US$ grand total 6,828,031,125 10,183,306,056 11,203,962,284 4,375,931,160 3,355,274,931 76.7%

Top 16 banks only 101,654,905,244,725 141,201,492,381,284 146,869,678,381,284 45,214,773,136,559 39,546,587,136,559 87.5%

Top 16 banks only US$ 4,840,709,774 6,723,880,590 6,993,794,209 2,153,084,435 1,883,170,816 87.5%

Capital raising to meet minimum VND3 trillion threshold 34,786,236,370,000 66,613,941,790,000 79,022,048,590,000 44,235,812,220,000 31,827,705,420,000 72.0%

Capital raising to meet 9% CAR rule or normal business 108,602,417,244,725 147,235,485,381,284 156,261,159,381,284 47,658,742,136,559 38,633,068,136,559 81.1%
needs

Source: Banks, HSC

Shareholders equity

As of FY2009 our top 16 banks had shareholders eq- Most of our banks in the top 16 list have to worry more
uity of VND141,337 billion. And we forecast this rose by about Circular 13 given that their shareholders equity
33.3% to VND188,410 billion by the end of FY2010. And already exceed the VND3 trillion level anyway. The only
then by FY2012 we forecast this will rise a further 22% exception was Saigon Hanoi Bank which successfully
to VND230,224 billion. Between FY2005-2010 share- increased its capital to VND3.5 billion in June FY2010.
holders equity has risen at a CAGR of 37.9%. And at the
end of FY2010 it will amount to 7.4% of the aggregate Of our other top 15 banks, 14 made plans to raise their
balance sheet (having fluctuated in a range of 5.5% and chartered capital last year. In total the top 16 banks
7.4% over the last five years). hoped to raise a total of VND45,214 billion in chartered
capital and successfully raised a total of VND39,546 tril-
Shareholders equity consists of seven separate catego- lion or 87.5%. The only exception was EIB which has
ries; chartered capital, capital surplus, treasury shares, sufficient capital to keep going until the end of this year in
funds, FX revaluation, asset revaluation and retained our opinion (they did increase chartered capital however
profits. Of these chartered capital is by far the most im- through a 20% bonus issue funded by their capital pre-
portant and by the end of FY2010 is expected to ac- mium). Therefore at the end of FY2010 chartered capi-
count for 5.8% of the aggregate balance sheet. This is tal for the top 16 banks actually rose from VND101,655
followed by retained profits with an expected 0.8%. billion to VND141,201 billion or by 38.9% y/y.

Raising chartered capital through either share issuance Unlike many smaller banks these larger banks have
or more recently through the issuance of convertible been fairly successful in raising their targeted amount.
bonds has been the main driver behind the increase in This holds the key to future survival as those banks that
overall shareholders equity. Indeed chartered capital are unable to tap funds; either domestic or foreign will
has risen at a CAGR of 42.2% between FY2005-2010. be consolidated.
This has been necessary to keep pace with the increase
in credit & asset growth over the same period. Ironically as things stands it appears the regulator is be-
ing tougher on stronger banks than on the weaker ones
But keeping pace with growth has not been the only rea- (by allowing a 12 month delay in decree 143 while keep-
son to raise capital. Last year banks have found them- ing C13 unchanged).
selves forced to raise a substantial amount of capital due
to regulatory changes driven by a Circular 13 require- Going forward we forecast that the top 16 banks will
ment which raised the minimum CAR from 8% to 9% raise chartered capital by a further 9.7% to VND154,937
and then Decree 143 which set a deadline of December billion by FY2012. And their success in doing holds the
31st for raising a minimum amount of VND3 trillion in key to how long they can continue in this game. Pro-
shareholders equity. And while the latter was extended vided the market allows you to raise more capital you
for 12 months, this happened only very recently. can thrive.

www.hsc.com.vn Page 66

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Top 16 capital raising plans and execution
Chartered Capital Additional chartared Total increase of chartered capital as end 2010 Actual chartered Target chartered capi- Note Planned chartered Status Chartered capital as of
FY2009 capital in FY2010 as capital as of 31 Dec tal of end FY2010 capital but not raised 21 Jan 2011
their plans Right issue Bonus share/dividend FY2010 as of end FY2010

www.hsc.com.vn
shares

State owned banks

Agribank SOCB VBARD 11,283,171,000,000 10,200,000,000,000 10,200,000,000,000 21,483,171,000,000 21,483,171,000,000 Done on March 2010

BIDV SOCB BIDV 10,498,568,444,725 3,594,300,000,000 3,594,300,000,000 14,092,868,444,725 14,092,868,444,725 Done on March 2010

Vietinbank SOCB CTG 11,252,972,800,000 7,327,504,410,000 3,159,318,410,000 760,000,000,000 15,172,291,210,000 19,340,477,210,000 Approved by SBV. Done stage 1 on Sep 2010

3,159,318,410,000 - Stage 1: Right issue on 06 Sep 2010

760,000,000,000 76 mil bonus shares on 06 Sep 2010

1,685,867,000,000 - Stage 2: 2011

2,482,319,000,000 - Stage 3: 2011

Vietcombank SOCB VCB 12,100,860,000,000 5,486,680,310,000 1,122,960,000,000 17,587,540,310,000 17,587,540,310,000 Right issue

4,363,720,310,000 1,122,960,000,000 - Stage 1: Done on 30 May 2010.

- Stage 2: Done on 16 Dec 2010.

Total SOCB 45,135,572,244,725 68,335,870,964,725 72,504,056,964,725

Asia Commercial JSCB ACB 7,814,138,000,000 1,562,827,060,000 1,562,827,060,000 9,376,965,060,000 9,376,965,060,000 - Done: Right issue on 26 Nov 2010. Done 9,376,965,060,000
bank

Sacombank JSCB STB 6,700,353,000,000 1,473,823,656,559 1,339,816,596,559 1,005,052,950,000 9,179,229,606,559 9,179,229,606,559 - Dividend 15% (100.505.295 shares). Done in Done 9,179,229,606,559
July 2010. Right issue 10:2 (134.007.060 shares).
Done in July 2010

134,007,060,000 - Right issue 10:2 (134.007.060 shares). Done Done


in July 2010

Eximbank JSCB EIB 8,800,080,000,000 1,759,988,750,000 10,560,068,750,000 10,560,068,750,000 - Planning to issue VND1,760 billion of capital by Done 10,560,068,750,000
giving bonus shares to shareholders. Done on
8 Oct 2010

Techcombank JSCB TCB 5,400,788,000,000 1,531,395,000,000 6,932,183,000,000 6,932,183,000,000 - 153.176.700 dividend and bonus shares. Done Done 6,932,183,000,000
in Sep 2010

Militarybank JSCB MB 5,300,000,000,000 1,400,000,000,000 1,400,000,000,000 7,300,000,000,000 7,300,000,000,000 - Planning to increase capital by VND2,000 billion Done 7,300,000,000,000
by issuing new shares to current shareholders,
staff and current strategic partners (VND1400bil:
right issue, VND600bil: bonus shares). Done in
Oct 2010

600,000,000,000 Done in Dec 2010 Done

Dong A Bank JSCB EAB 3,400,000,000,000 2,600,000,000,000 1,100,000,000,000 4,500,000,000,000 6,000,000,000,000 - Planning to raise capital by VND2,600 billion by 4,500,000,000,000
issuing new shares of VND1,100 billion to current
shareholders and VND1,500 billion of private
placements. Done VND1100bil in Oct 2010

1,500,000,000,000 Plan: 2011 1,500,000,000,000 Approved by SBV

Vietnam Interna- JSCB VIB 2,400,000,000,000 1,600,000,000,000 1,000,000,000,000 4,000,000,000,000 4,000,000,000,000 Right issue 100mil shares. Done in July 2010 Done 4,000,000,000,000
tional Bank

600,000,000,000 Right issue 60mil shares. Done in Jan 2010 Done

Maritime Bank JSCB MSB 3,000,000,000,000 1,760,000,000,000 1,760,000,000,000 240,000,000,000 5,000,000,000,000 5,000,000,000,000 Planning to raise capital by VND2,000 billion by Done 5,000,000,000,000
bonus share of VND240 billion and newly issue
shares of VND1,760 billion. Done in Oct 2010

Saigon Com- JSCB SCB 3,635,429,000,000 549,571,000,000 4,185,000,000,000 4,185,000,000,000 Issue bonus shares: Done on 27 Dec 2010 4,185,000,000,000
mercial Bank

Habubank JSCB HBB 3,000,000,000,000 3,000,000,000,000 3,000,000,000,000 Done 3,000,000,000,000

Saigon-Hanoi JSCB SHB 2,000,000,000,000 1,497,519,000,000 1,497,519,000,000 3,497,519,000,000 3,497,519,000,000 Inrease to VND 3,500 billion of which issuing Done 3,497,519,000,000
Bank VND1,000 billion for current shareholders, VND350
billion for strategic investors, VND150 billion for
staff. Done in June 2010

SeaBank JSCB SEA- 5,068,545,000,000 266,111,000,000 266,111,000,000 5,334,656,000,000 5,334,656,000,000 - Right issue 26.611.055 shares. Done in Oct Done 5,334,656,000,000
Bank 2010
(*)

Total JSCB 56,519,333,000,000 33,100,579,436,559 72,865,621,416,559 74,365,621,416,559


September

Total 101,654,905,244,725 141,201,492,381,284 146,869,678,381,284


February 2011
July 14h 2008

Source: Banks, HSC


2009

Page 67

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Net foreign assets

Rating agencies such as Moodys in their recent down- And the seasonal effect also pays an important role. If
grade of Vietnamese banks cited a deteriorating net for- large import companies (and clients of any given bank)
eign asset position as one of the reasons for their con- are inactive in buying the US$ amount for international
cerns. In the past, larger banks have generally carried settlement, the aggregated net foreign exchange posi-
large positive net foreign asset positions. However in the tion in the banking system will look relatively positive.
last 12 months in particular this has dropped steadily. But alternatively as happens at the end of a month or
more especially towards the end of a year if these im-
If banks dramatically increase the amount of US$ lend- port companies are actively bidding for US$ to meet im-
ing as they did in FY2010 but fund it all internally through minent payment, the banking systems net foreign ex-
existing US$ holdings then the net foreign asset position change position will be worse than normal.
wont change. However if they sell US$ to importers or
other entities or repay US$ loans to foreign banks then In addition most US$ loans have a maturity of 3-12
this position will deteriorate unless they raise new de- months while on average US$ deposits have a shorter
posits to recoup. duration hence maturity mismatches are a constant fact
of life.
Net foreign assets = Total foreign assets total foreign
liabilities. All told however the net foreign exchange position has
indeed been deteriorating in the last year given the
This is commonly known as the foreign exchange po- heavy use of US$ credit. One way to measure this is to
sition. This position can obviously be either positive or look at the average deposit rates for US$ in the banking
negative and changes daily. Its also heavily influenced system. When these rise sharply as they did in Q3 it re-
by seasonal factors However the SBV closely monitors flects a deteriorating net balance. And now that this has
this net position using the following regulations (1) the appeared on rating agencies radar screens both banks
foreign exchange position must stay within a range of and the SBV will have to pay more careful attention to it
+/-30% total shareholders equity; (2) the gold position going forward.
must stay within a range of +/-20% of total shareholders
equity. (3) SBV commits to sell US$ for international set- Indeed some senior advisors attached to the govern-
tlement purposes for any key imported goods if a bank ment has gone so far as to advocate the discontinuance
has a negative net foreign exchange positions of -5% of of US$ lending given the risks to the system. In practice
their shareholders equity or more. this suggestion is a loaded gun. The US dollar is deeply
embedded in the banking system accounting as it does
And in the general course of business banks can apply for just over 21% of total deposits and total lending but
to the SBV to sell them foreign exchange for internation- its also a potentially destabilizing factor.
al settlement of key imports as laid out in regulations.
Therefore an outright ban would clearly not work how-
However because of these same regulations, banks ever reducing its weight in the system is a good idea
with a positive foreign exchange positions cant apply to over time. Of course the easiest way to do that would
the SBV window to buy US$ for their clients. be to restore more value and credibility to the VN dong.
An appreciating Vietnamese currency would have little
Indeed in order to overcome this regulation and take difficulty in dethroning the greenback. But that is a long
advantage of the SBV windows, some banks with a net term proposition. Meanwhile the net foreign exchange
positive foreign exchange positions might be tempted to position in the system bears watching.
sell some of their US$ under a repo or informal under-
standing to a reliable partner in order to appear to have
a net negative position and qualify for the SBV window.

Given that this is available at the official rate this is a


very cheap alternative to the interbank market. Those
banks might then buy these UD$ back later at an agreed
rate. Of course we have no way of knowing if this goes
on or how often. And for this reason foreign exchange
positions have to be interpreted with great caution. They
are snapshots and subject to great variation and volatil-
ity.

www.hsc.com.vn Page 68

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Selected banks net interest income
Net interest income growth (VNDmillion) Cumulative fee CAGR Share of net Current mar-
& comssion interest in- ket share for
Type Short FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F income come increase FY2010e

www.hsc.com.vn
name FY2005-10 FY2005-10

SOCB VBARD 6,936,825 9,013,985 11,892,975 14,441,392 11,489,841 14,659,142 17,312,258 19,743,725 29.9% 31.9% 21.4% -20.4% 27.6% 18.1% 14.0% 111% 16.1%

SOCB BIDV 2,929,368 3,350,841 4,856,449 6,236,108 6,974,392 9,015,932 10,410,659 11,806,276 14.4% 44.9% 28.4% 11.8% 29.3% 15.5% 13.4% 208% 25.2%

SOCB CTG 3,286,651 3,545,205 4,683,390 7,189,429 7,932,263 10,283,460 11,900,930 7.9% 32.1% 53.5% 10.3% 29.6% 15.7% 11.6% 213% 25.6% 14.7% 15.4%
13,276,181

SOCB VCB 3,310,117 3,884,298 3,995,192 6,623,636 6,498,666 7,951,417 9,658,702 11,193,584 17.3% 2.9% 65.8% -1.9% 22.4% 21.5% 15.9% 140% 19.2% 9.7% 11.9%

Total SOCB net 16,462,961 19,794,329 25,428,006 34,490,565 32,895,162 41,909,950 49,282,549 56,019,766 20.2% 28.5% 35.6% -4.6% 27.4% 17.6% 13.7% 155% 20.5% 53.3% 62.8%
interest income

JSCB ACB 514,265 820,572 1,311,106 2,728,257 2,800,528 4,280,494 5,257,504 6,301,853 59.6% 59.8% 108.1% 2.6% 52.8% 22.8% 19.9% 732% 52.8% 7.9% 6.4%

JSCB STB 435,009 680,366 1,151,872 1,146,668 2,302,935 3,304,461 3,769,757 4,438,906 56.4% 69.3% -0.5% 100.8% 43.5% 14.1% 17.8% 660% 50.0% 6.0% 5.0%

JSCB EIB 215,872 351,550 684,629 1,319,712 1,975,307 2,903,879 3,837,227 4,652,273 62.9% 94.7% 92.8% 49.7% 47.0% 32.1% 21.2% 1245% 68.2% 5.6% 4.4%

JSCB TCB 351,266 457,447 925,274 1,760,743 2,451,119 3,677,108 4,394,560 5,436,272 30.2% 102.3% 90.3% 39.2% 50.0% 19.5% 23.7% 947% 59.9% 7.0% 5.5%

JSCB MB 239,917 396,109 633,317 1,420,712 1,838,068 1,962,272 2,876,536 3,673,353 65.1% 59.9% 124.3% 29.4% 6.8% 46.6% 27.7% 718% 52.2% 3.6% 2.9%

JSCB EAB 207,885 271,606 510,901 881,840 1,106,832 1,278,331 1,418,778 1,563,885 30.7% 88.1% 72.6% 25.5% 15.5% 11.0% 10.2% 515% 43.8% 2.2% 1.9%

JSCB MSB 113,450 209,054 354,049 726,312 1,278,449 2,349,428 2,948,889 3,378,502 84.3% 69.4% 105.1% 76.0% 83.8% 25.5% 14.6% 1971% 83.3% 4.7% 3.5%

JSCB VIB 190,315 1,672,683 709,182 818,774 1,135,168 1,255,662 1,437,285 1,639,940 72.4% 83.4% 15.5% 38.6% 10.6% 14.5% 14.1% 560% 45.8% 2.2% 1.9%

JSCB SHB 27,002 89,462 1,160,800 645,441 1,131,733 1,471,253 1,805,124 72.4% 83.4% -44.4% -44.4% 75.3% 30.0% 22.7% 4091% 111.1% 2.3% 1.7%

JSCB SCB 106,087 254,985 443,678 1,017,846 832,718 1,065,341 1,051,534 1,075,625 140.4% 74.0% 129.4% -18.2% 27.9% -1.3% 2.3% 904% 58.6% 2.0% 1.6%

JSCB HBB 97,406 221,827 622,955 760,826 658,594 740,816 922,530 1,093,711 127.7% 180.8% 22.1% -13.4% 12.5% 24.5% 18.6% 661% 50.0% 1.3% 1.1%

JSCB SEA- 63,026 176,147 469,015 645,550 721,486 862,803 968,086 1,097,400 179.5% 166.3% 37.6% 11.8% 19.6% 12.2% 13.4% 1269% 68.8% 1.7% 1.3%
Bank

Total JSCB net 2,534,498 5,539,347 7,905,440 14,388,040 17,746,645 24,812,328 30,353,939 36,156,844 118.6% 42.7% 82.0% 23.3% 39.8% 22.3% 19.1% 879% 57.8% 44.9% 37.2%
interest income

Total 18,997,459 25,333,676 33,333,446 48,878,605 50,641,807 66,722,278 79,636,487 92,176,610 33.4% 31.6% 46.6% 3.6% 31.8% 19.4% 15.7% 251% 28.6% 98.3%

SOCB share 87% 78% 76% 71% 65% 63% 62% 61%

JSCB share 13% 22% 24% 29% 35% 37%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 69

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July 14h 2008

February 2011
September 2009

Top 16 net interest income Net interest income as a % of total income


85.0% Total SOCB net interest income as % of total
100,000,000
Total SOCB net interest income
90,000,000 Total JSCB net interest income as % of total
Total JSCB net interest income
80,000,000 80.0%
Total net interest income as % of total income
Total
70,000,000
60,000,000 75.0%
50,000,000
40,000,000 70.0%
30,000,000
20,000,000 65.0%
10,000,000
-
60.0%

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F
Source: Banks financial statements Source: Banks financial statements

The banking sectors income statement

Banks still make most of their income from net interest Banks have always generated the bulk of their earn-
income which accounts for about 75% of total income. ings from net interest income. Of course the proportion
On other words, plain vanilla bank lending to both cor- of net interest income to total income is a very volatile
porates and retail customers. Then fees & commission number. Non-interest income segment returns fluctuate
accounts for another 10% or so which is up from 6.5% depending on conditions in the forex; equity and up till
five years ago. The balance comes from trading or in- FY2010, the gold markets. So while net interest income
vestment income from the forex; stock and bond mar- has grown steadily over the past five years other income
kets which by nature tends to fluctuate fairly wildly. segments have ebbed and flowed.

Core business growth by segments in search of a Net interest income is driven by credit growth and of
better fuel source. course net interest margins (NIM). Credit growth has
been strong and steady while NIM has fluctuated. How-
FY2009 marked the peak of the old way of doing bank- ever within that NIM for private sector banks has im-
ing business. That model depended on breath neck proved somewhat while that for the state owned banks
branch network expansion; rapid credit growth and non- has been in decline especially over the past two years.
interest income driven by charging fees or by directly And going forward we expect NIM to be under some
speculating in the gold; forex and equity markets. It was pressure for the next year or two.
fun while it lasted but the regulators have had enough.
While negotiable lending will boost investment yields;
And FY2010-2011 will be seen as the transition period lower levels of liquidity means much higher funding
towards a new banking model for Vietnam. We are just costs and the net effect is likely to drive margins lower.
completing year one of this transition process marked However looking beyond that, margins should recover
by a collapse in non-interest income streams and a re- as consolidation progresses and the number of banks
turn of net interest income to center stage. competing for scarce capital is reduced by natural at-
trition.

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July 14h 2008

February 2011
September 2009

Interest income as % of total income


Net interest income growth (VNDbillion)
Type Short name
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F
SOCB VBARD 85.1% 82.2% 75.1% 73.9% 67.1% 73.6% 75.7% 77.5%
SOCB BIDV 71.5% 70.7% 62.2% 82.4% 67.9% 74.8% 74.3% 73.1%
SOCB CTG 86.3% 77.5% 72.0% 82.7% 81.9% 85.7% 86.9% 85.3%
SOCB VCB 77.2% 73.5% 69.1% 74.4% 70.0% 74.4% 75.1% 75.4%
Total SOCB net interest 80.9% 77.4% 70.8% 77.1% 71.0% 76.6% 77.7% 77.8%
income as % of total
JSCB ACB 75.0% 71.9% 43.4% 64.4% 56.7% 75.1% 76.1% 77.1%
JSCB STB 73.7% 64.0% 47.2% 46.7% 56.2% 74.8% 71.6% 71.2%
JSCB EIB 60.3% 59.6% 67.3% 69.8% 76.7% 81.2% 82.3% 81.8%
JSCB TCB 80.7% 74.8% 76.1% 53.5% 64.1% 72.9% 74.0% 75.9%
JSCB MB 80.0% 69.2% 60.1% 86.7% 69.3% 58.1% 70.1% 72.4%
JSCB EAB 70.2% 63.0% 59.9% 59.6% 66.5% 71.2% 71.2% 69.4%
JSCB MSB 70.0% 89.1% 81.2% 90.5% 76.3% 85.7% 86.5% 86.7%
JSCB VIB 91.2% 91.6% 80.2% 90.0% 71.2% 72.6% 73.2% 73.3%
JSCB SHB 89.5% 34.1% 78.6% 74.9% 83.3% 83.3% 83.0%
JSCB SCB 86.8% 85.5% 66.6% 82.9% 78.1% 108.9% 84.1% 81.9%
JSCB HBB 55.0% 57.2% 84.4% 89.5% 73.0% 61.8% 66.4% 69.2%
JSCB SEABank 82.0% 89.9% 84.9% 137.1% 76.0% 81.9% 82.2% 82.2%
Total JSCB net interest 74.3% 75.0% 60.2% 69.4% 66.2% 75.3% 76.2% 76.7%
income as % of total
Total net interest income 80.0% 76.9% 67.9% 74.7% 69.2% 76.1% 77.1% 77.3%
as % of total income
Source: Banks, HSC

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Selected net interest margins
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F NIM
SOCB VBARD 3.82% 4.49% 4.65% 4.53% 3.02% 3.22% 3.25% 3.21% 0.67% 0.15% -0.12% -1.52% 0.20% 0.03% -0.04% 3.77%

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SOCB BIDV 2.60% 2.71% 3.06% 3.11% 2.84% 3.04% 3.04% 2.99% 0.10% 0.35% 0.05% -0.27% 0.20% 0.00% -0.04% 2.93%
SOCB CTG 3.20% 3.12% 3.40% 4.36% 3.93% 4.05% 3.89% 3.73% -0.08% 0.28% 0.96% -0.43% 0.12% -0.16% -0.15% 3.71%
SOCB VCB 2.64% 2.83% 2.45% 3.70% 3.27% 3.28% 3.37% 3.46% 0.19% -0.38% 1.25% -0.43% 0.01% 0.09% 0.09% 3.12%
Total SCOB net 3.07% 3.29% 3.39% 3.93% 3.26% 3.40% 3.39% 3.35% 0.22% 0.10% 0.54% -0.66% 0.13% -0.01% -0.04% 3.38%
interest margins
JSCB ACB 2.48% 2.81% 2.45% 3.54% 2.60% 2.92% 2.94% 2.95% 0.33% -0.36% 1.09% -0.94% 0.31% 0.03% 0.00% 2.84%
JSCB STB 3.84% 3.74% 2.21% 2.27% 2.74% 3.17% 3.13% 3.13% -0.10% -1.53% 0.06% 0.47% 0.43% -0.04% -0.01% 3.03%
JSCB EIB 2.16% 2.90% 3.17% 4.05% 4.42% 4.36% 4.24% 4.07% 0.74% 0.27% 0.88% 0.37% -0.06% -0.12% -0.17% 3.67%
JSCB TCB 3.56% 3.54% 3.58% 4.03% 3.69% 4.05% 3.89% 3.95% -0.02% 0.03% 0.46% -0.34% 0.36% -0.16% 0.06% 3.79%
JSCB MB 3.14% 3.98% 3.21% 4.25% 3.61% 2.57% 2.78% 2.77% 0.85% -0.77% 1.03% -0.63% -1.05% 0.22% -0.01% 3.29%
JSCB EAB 3.10% 3.37% 3.32% 3.57% 3.51% 3.37% 3.20% 3.02% 0.27% -0.05% 0.25% -0.06% -0.14% -0.17% -0.18% 3.31%
JSCB MSB 2.82% 3.42% 2.82% 3.05% 2.83% 2.95% 2.71% 2.51% 0.60% -0.59% 0.23% -0.22% 0.12% -0.23% -0.21% 2.89%
JSCB VIB 2.55% 2.96% 2.78% 2.41% 2.66% 2.09% 1.98% 1.95% 0.41% -0.19% -0.37% 0.26% -0.58% -0.10% -0.04% 2.42%
JSCB SHB 0 2.33% 1.61% 1.78% 3.63% 3.70% 3.51% 3.46% -0.72% 0.16% 1.86% 0.06% -0.18% -0.06% 2.50%
JSCB SCB 2.99% 3.79% 2.65% 3.67% 2.19% 2.52% 2.56% 2.50% 0.80% -1.13% 1.02% -1.48% 0.33% 0.04% -0.05% 2.86%
JSCB HBB 1.85% 2.72% 3.70% 3.38% 2.62% 2.33% 2.22% 2.22% 0.86% 0.99% -0.32% -0.76% -0.29% -0.11% 0.00% 2.63%
JSCB SEA- 1.21% 2.53% 2.91% 3.03% 3.20% 3.53% 3.58% 3.50% 1.32% 0.38% 0.13% 0.16% 0.33% 0.05% -0.07% 2.94%
Bank
Total JSCB net 2.76% 3.17% 2.87% 3.25% 3.14% 3.13% 3.06% 3.00% 0.41% -0.31% 0.38% -0.11% -0.01% -0.07% -0.06% 3.05%
interest margins
Total 2.91% 3.23% 3.13% 3.59% 3.20% 3.26% 3.22% 3.18% 0.32% -0.10% 0.46% -0.39% 0.06% -0.04% -0.05% 3.22%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 72

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July 14h 2008

February 2011
September 2009

Top 16 banks net interest income growth rates Top JSCB net interest income
140.0% 7,000,000
Total SOCB net interest income
120.0% Total JSCB net interest income 6,000,000

100.0% Total
5,000,000 ACB TCB
80.0%
EIB STB
4,000,000
60.0%
3,000,000
40.0%

20.0% 2,000,000

0.0% 1,000,000

-20.0% -
FY 2011F

FY 2012F
FY 2010e
FY 2006

FY 2007

FY 2008

FY2009

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F
Source: Banks financial statements, HSC calculation Source: Banks financial statements

Net Interest income

For the top 16 banks net interest income grew at a makes sense of course and suggests that credit growth
CAGR of 28.6% over the five year period between is the main driver of interest income while interest rates
FY2005-2010. And by segment net interest income for differentials, and income from bonds & deposits at other
the SOCBs grew at a CAGR of 20.5% while the CAGR banks are a secondary factor. Until Q2 this year inter-
of JSCBs grew at a zippy pace of 57.8%. This is of est rates were set and non-negotiable and therefore
course is very consistent with credit growth trends for varied little from bank to bank (the differentials came in
both segments over the same period. the fees being charged rather than the underlying inter-
est rate on the principal). And banks typically maintain
In FY2010 we estimate net interest income for the top just enough bonds to meet solvency requirements and
16 banks increased by 31.8% to VND66,722 billion. In provide collateral for OMO activities. So the growth in
FY2009 it rose just 3.6% y/y to VND50,641. This was- interest income has until now been primarily driven by
driven primarily by strong credit growth this year and an the amount of credit extended by each bank.
improvement in NIM after the introduction of negotiable
lending and the dropping out of the subsidised lending In general we can argue that from now we will see more
effect. Then in FY2011 & FY2012 we forecast that it will differentiation. This is because negotiable rates are now
rise by 19.4% and 15.7% respectively. allowed for all classes of loans and banks can in theory
charge what the market will bear. And those banks that
Net interest is a hybrid income stream which includes can get away with charging progressively higher rates
both net interest on loans, interest on deposits at other will enjoy superior growth in non-interest income (above
banks and also net interest on bonds. We dont have simple credit growth rates that is). But we cannot take
a direct breakdown between the three streams but can this argument too far as in the very competitive environ-
imply it to some extent by looking at the bond holdings ment of the Vietnamese banking industry banks dare
at the beginning and end of each financial year. not charge to much of a premium relative to peers for
fear of losing business.
Looking at the larger JSCBs we see that with MSB pro-
duced the highest CAGR at 83.3%. This was followed So looking forward over the next five years the easi-
by EIB with a CAGR of 68%; then TCB with 59.9% and est way to expand net interest income will still be by
ACB with 52.8%. Then amongst the smaller JSCBs we increasing available credit. And the ability to do that in
see SHB with a CAGR of 111% followed by Seabank turn depends on steady deposit growth which is mainly
with a CAGR of 68.8%. As for the SOCBs CTG saw the determined by network expansion. Some banks will be
fastest growth with a CAGR of 25.6% followed by BIDV able to juice that growth up by offering better products or
with a CAGR 25.2%. more services. Or may be able to charge slightly higher
rates. But the primary driver of interest income growth
To explain the differing growth rates we juxtaposed will remain unchanged it comes down to network ex-
credit growth CAGR with net interest income CAGRs pansion.
and we can note that on the whole credit growth and in-
terest income growth track each other very closely. This

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July 14h 2008

February 2011
September 2009

Net interest margin JSCB vs SOCB net interest margins


3.70% 4.10%
Total SCOB net interest margins
3.90%
3.50% Total JSCB net interest margins
3.70%
3.30%
3.50%
3.10% 3.30%

2.90% 3.10%

2.90%
2.70%
2.70%
2.50%
2.50%
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
Source: Banks financial statements, HSC calculation Source: Banks financial statements, HSC calculation

Only in the case of two banks; EIB and HBB has interest By definition a net interest margin is the net yield on all
income CAGR far exceeded credit CAGR. This is su- interest bearing assets. It is calculated by subtracting
perficially interesting as the differentials are quite large. interest expenses from interest income and dividing the
However on closer examination we see that this is due result by average earning assets (any interest bearing
to a sharp increase in their interest income following a asset in other words). Therefore in simple terms it is the
huge capital increase thus lowering funding costs. This weighted average rate of return of capital deployed for
can also be partly explained also by a accompanying interest earnings minus the weighted average cost of
rapid growth in their deposits placed at other banks. funds (although strictly speaking this only applies when
total interest bearing assets are equal to total interest
EIB received new capital from their domestic and for- bearing liabilities).
eign strategic partners in FY2007 and FY2008, thus in-
creasing their equity base from VND1,946 billion at end The cost of funds includes the cost from all capital
FY2006 to VND6,294 billion at end FY2007 and then to sources. These are all deposits including certificates of
VND12,844 billion at end-FY008. The injection of new deposit; interbank loans and capital raised from straight
capital partly drove net interest income. And in the case bonds and convertible bonds . And then on the income
of HBB we can see a similar story as Deustche Bank side it includes interest received on earning assets such
injected capital into the bank back in FY2007. as loans, government and corporate bonds (where the
primary return is interest payments) and deposits at
Net interest margins other banks.

For the top 16 banks net interest margins (NIM) at the SOCBS often receive funds from the government to
end of FY2010 are expected to come to 3.26%, up 10 lend to targeted sectors or for certain programs. These
bps y/y. That compares to a five year average NIM of carry a very low cost of funds and have the effect of
3.27%. Net interest margins have ranged between lows boosting NIMs for certain banks (CTG). This should be
of 2.91% in FY2005 to the high of 3.59% in FY2008 and borne in mind.
then dropped in FY2009. In FY2011 we forecast that
aggregate NIM for the top 16 banks will come to 3.22% Banks that can either command a higher interest yield
and then 3.18% in FY2012. on their earning assets or enjoy a lower cost of funds will
also be able to enjoy higher NIMs. This can mean tak-
Between SOCBs and JSCBs net interest margins vary ing higher risk perhaps by devoting more of the balance
with FY2010 margins for SOCBs estimated by HSC at sheet to higher yielding but higher risk corporate bonds
3.40% while for JSCBs the number is lower at 3.13%. for example. Or lending more for securities or real estate
In general the state owned sector has access to lower lending which generally command higher interest rates.
funding costs due to deposits from the State Treasury
and SOEs. The SOCB NIM premium has ranged from Top JSCB net interest income
11 bps to 67 bps over the last five years and going for- FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F

ward we estimate it will come to 35 bps or so. JSCB 2.76% 3.17% 2.87% 3.25% 3.14% 3.13% 3.06% 3.00%

SOCB 3.07% 3.29% 3.39% 3.93% 3.26% 3.40% 3.39% 3.35%

Gap 0.31% 0.11% 0.52% 0.67% 0.12% 0.27% 0.32% 0.35%

Source: Bank financial statements, HSC calculation

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July 14h 2008

February 2011
September 2009

Banks with highest NIMs Top JSCB net interest income


5.00% 4.00%

4.50% HBB SCB


3.50%
4.00% MSB VIB

3.50% 3.00%

3.00%
EIB TCB
2.50%
2.50%
CTG SEABank
2.00%
2.00%
1.50%

1.00% 1.50%

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

Source: Banks financial statements Source: Banks financial statements

Of course on the other hand a higher NIM could just as with the huge injection of liquidity under the state spon-
easily come from a lower cost of funding. As we note sored subsidised interest rate program coming into ef-
state owned banks have traditionally had large scale fect in FY2009 average NIMs for the SOCBs fell sharply
deposits from the government or large state owned down to 3.28%. And we also note that VBARD which
corporations parked in their vaults at lower than mar- enjoyed the highest NIMs of all five years ago has seen
ket deposit rates. Or another way to achieve the same this drop steadily.
is to increase equity capital either through issuing new
shares or launching a convertible bond. Inviting in stra- In general JSCBs enjoy wider margins now than five
tegic partners to buy a chunk of equity at a premium is years ago in contrast to the state owned sector. This
perhaps the easiest way of all of reducing your cost of is partly due to their better capitalization nowadays as
funding and can boost NIM for several years thereafter. strategic partners; mostly foreign banks have bought
It also carries the lowest risk. But it also of course re- stakes one by one. And then larger private sector banks
duces your ROE. can enjoy some economies of scale and have far more
and relatively cheap funding options especially with the
Therefore when evaluating banks with higher NIMs the introduction of convertible bonds two years back. These
trick is knowing where it comes from; does it come from are often issued with low or sometimes zero coupons
higher risk interest bearing assets or lower than peer which of course boost NIMs.
funding costs. If the latter and its sustainable then the
bank is definitely on to a good thing. Of course taking Smaller private sector banks generally carry lower mar-
higher risk to earn better yields is not always a bad thing gins because their cost of funds is higher. They use the
provided that risk is well managed. interbank market more which is the most volatile source
of funding. And while currently interbank rates are lower
Amongst Vietnamese banks; the bank with the current than deposit rates it has often been the opposite. They
highest NIM is EIB with an expected FY2010 NIM of also have to offer higher deposit rates to attract deposi-
4.36% followed by TCB & CTG. Over the past five years tors. And dont have access to the same capital sources
the bank with the highest average NIM was TCB with an as their larger peers such as raising money from bonds,
level of 3.79% followed by the VBARD and then CTG. especially convertible bonds.
On the other hand banks like VIB and HBB are esti-
mated to have had quite low NIMs of 2.09% and 2,33% Then some banks have particular advantages. As noted
respectively in FY2010. EIB has received several large capital injections en-
abling them to reduce their funding cost and boost NIM
But there have been some fluctuations along the way. since FY2008. Then Military Bank (MB) has access to
For example back in FY2008 average NIMs amongst low cost deposit which gives them a sustainable advan-
the SOCBs soared to 3.93%. This was driven by both tage and the highest average NIM amongst private sec-
CTG and VCB and was due to their respective IPOs tor banks over the past five years.
which brought in some very low cost funding. However

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July 14h 2008

February 2011
September 2009

The future model for interest income growth bias HSC expects average NIMs to drop a bit next year. We
towards better run banks feel the benefits of a full year of negotiated lending will
be more than outweighed by tighter liquidity in the sys-
The credit engine which generates interest income for tem which will drive up funding costs. And while deposit
banks will splutter this year as tougher requirements rates are likely to head higher it may be hard to push up
for new branch openings plus lower M2 growth targets lending rates much higher as many customers already
threaten the fuel source deposit growth. Given the seem at the limits of their tolerance. Truth is with so
guidance to not use too much interbank funding to drive many banks, individual; banks dont have enough pric-
credit this means ; ing power vis a vis borrowers.

credit growth = deposit growth plus share capital Of course some banks do but in general we see that
growth. NIMs in Vietnam are far lower than in other developing
countries.
Thats one of the most important formulas in banking.
So the ability of banks to increase credit depends heav- In addition we remind you that HSC forecasts credit
ily on the number of new branches they are allowed to growth this year will come to 20% compared to 29.8%
open every year. And given the new draft regulations or in FY2010. With reserves running low and inflation
in place, that in turn depends on getting access to new prospects uncertain the newly independent SBV has
capital sources as each new branch application requires to pay more attention to currency stability than growth
an incremental capital contribution. this year. And with lower credit growth coupled with a
slight decline in NIM will come lower growth in interest
The future belongs to those banks with the best access income.
to capital can increase branch numbers; boost deposit
growth and keep the credit engine well supplied with However those banks that have raised a lot of capital in
fuel to generate superior net interest income growth. FY2010 can buck the trend as they will be able to fund
And the odds are being stacked heavily in favour of the higher than peer credit growth. But NIMs are expected
larger banks especially those who can issue corporate to decline across the board due to the effects of C13 as
or convertible bonds. This is consistent with the SBVs lower LDR and stricter solvency ratios reduces the inter-
long standing policy of bank consolidation but until re- est earnings assets for all banks. This also means fund-
cently the measures necessary for implementation had ing costs will continue to increase. This state of affairs
not been activated. will continue until bank consolidation gets under way.

www.hsc.com.vn Page 76

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Top 16 fee & commission income by type Top JSCB fee & commission income
14,000,000 1,400,000

12,000,000 1,200,000
Total SOCB STB TCB
10,000,000 1,000,000
Total JSCB ACB MB
8,000,000 800,000
Grand total
6,000,000 600,000

4,000,000 400,000

2,000,000 200,000

- FY 2010e -
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
Source: Banks financial statements, HSC calculation Source: Banks financial statements

Fee and commission revenue

In FY2010 fee & commission income is expected to and large the strongest private sector banks. In absolute
amount to about 10.3% of total income for our top 16 terms STB has the highest fee & commission to total
banks up from 6.5% back in FY2005. And it has grown sales ratio followed by TCB and then MSB.
at an average CAGR of 40% over the past five years.
Traditionally Vietnamese banks have seen meager re- Of these banks MB and STB also enjoyed the highest
turns here as the banking sector does not have a fee fee income CAGR over the last five years.This is due
paying culture. Even so a number of banks are clearly to strong fee income contribution from their securities
making some progress in creating a valid fee income subsidiaries Thang Long Securities and Sacombank
stream. Securities which are the first and fourth largest brokers
respectively.
In FY2010 we estimate that fee & commission income
for the top 16 banks increased by 18.4% to VND9,064 ACB falls somewhat behind here as their brokerage
billion having surged 33.3% in FY2009 to VND7,656 bil- subsidiary; ACBS is not as strong as peers. However
lion. Then in FY2011 and FY2012 for the 16 listed banks growth would have been much higher had it not been
we forecast that fee & commission income will increase for the loss of the gold trading business since the be-
by 20.4% and 20.1% respectively. ginning of FY2010 which has seriously damaged their
fee earning prowess. STB and EIB have also suffered
So what are fees? Fee & commission revenue covers somewhat from the same problem but the effect on ACB
banking service fees; brokerage commissions; credit seems to be far more substantial.
card fees, asset management fees & a host of other
charges and is the most important single source of risk Neither TCB nor EAB have much of a securities pres-
free recurring earnings for a bank. Securities and credit ence but rather tend to charge higher service fees than
card fees are self explanatory but banking service fees peers for many normal banking services and therefore
covers a multitude of fees such as settlement fees for have always enjoyed good earnings streams from fees &
domestic and international account transfers, guarantee commissions. Indeed we should note that the EABs fee
fees, consultancy fees, bancassurance fees, fees from income business enjoyed a far more substantial share
discounting activities, forex dealing fees and credit fees of total income back in FY2005 and has been in relative
etc. If a bank does it they will charge a fee for it. One decline ever since. This would appear to be because
thing it does not include however is ATM fees which has growth in their important remittance business has failed
been rejected by the authorities; three times. to keep up with growth in the rest of their operations
as competition for remittances has intensified over the
If we look at the selected bank fee & commission table years. And then HBB has a strong investment banking
we see that 10 banks will enjoy fee & commission of business being active in the primary bond market.
more than 10% of total income in FY2010 namely; STB;
TCB; MSB; TCB; BIDV; EAB; SCB; VIB; HBB and lastly And of course all the above banks are active to a greater
ACB. These banks consistently earn higher than peer or lesser extent in other fee earning businesses such
fee income for a variety of reasons but they are also by as credit cards; wealth advisory and bancassurance or

www.hsc.com.vn Page 77

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Selected banks fee & commission income (net figures)
Fee & commission (VND million) Cumula- CAGR
tive fee &
Type FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F FY2006 FY2007 FY2008 F2009 FY2010e FY2011F FY2012F

www.hsc.com.vn
comssion
income
FY2005-
10

SOCB VBARD 228,328 368,981 495,431 852,676 708,059 1,056,234 1,273,195 1,464,175 61.6% 34.3% 72.1% -17.0% 49.2% 20.5% 15.0% 363% 35.8%

SOCB BIDV 246,598 392,994 624,190 1,002,888 1,404,126 1,783,363 2,263,051 2,817,784 59.4% 58.8% 60.7% 40.0% 27.0% 26.9% 24.5% 623% 48.5%

SOCB CTG 206,578 272,684 334,747 437,985 649,213 975,276 1,267,859 1,648,217 32.0% 22.8% 30.8% 48.2% 50.2% 30.0% 30.0% 372% 36.4%

SOCB VCB 447,559 548,252 600,302 790,887 989,213 1,123,177 1,257,958 1,408,913 22.5% 9.5% 31.7% 25.1% 13.5% 12.0% 12.0% 151% 20.2%

Total SOCB 1,129,063 1,582,911 2,054,670 3,084,436 3,750,611 4,938,050 6,062,063 7,339,089 40.2% 29.8% 50.1% 21.6% 31.7% 22.8% 21.1% 337% 34.3%

JSCB ACB 97,208 148,335 271,215 606,508 869,636 616,723 721,566 844,232 52.6% 82.8% 123.6% 43.4% -29.1% 17.0% 17.0% 534% 44.7%

JSCB STB 71,026 119,665 193,398 562,349 1,036,192 880,046 975,299 1,159,197 68.5% 61.6% 190.8% 84.3% -15.1% 10.8% 18.9% 1139% 65.4%

JSCB EIB 25,374 44,100 72,169 109,487 211,181 283,023 371,183 494,738 73.8% 63.6% 51.7% 92.9% 34.0% 31.1% 33.3% 1015% 62.0%

JSCB TCB 66,846 101,476 176,936 482,877 612,210 798,887 977,027 1,150,030 51.8% 74.4% 172.9% 26.8% 30.5% 22.3% 17.7% 1095% 64.2%

JSCB MB 22,107 75,460 191,715 191,208 380,694 503,733 554,106 609,517 241.3% 154.1% -0.3% 99.1% 32.3% 10.0% 10.0% 2179% 86.9%

JSCB EAB 76,264 90,293 157,925 151,392 219,712 252,669 321,915 409,384 18.4% 74.9% -4.1% 45.1% 15.0% 27.4% 27.2% 231% 27.1%

JSCB MSB 13,954 14,549 41,121 59,300 122,742 136,774 153,201 168,521 4.3% 182.6% 44.2% 107.0% 11.4% 12.0% 10.0% 880% 57.9%

JSCB VIB 19,313 64,498 68,171 109,170 156,265 204,396 243,775 290,142 234.0% 5.7% 60.1% 43.1% 30.8% 19.3% 19.0% 958% 60.3%

JSCB SHB (107) 967 7,412 60,082 90,123 117,160 152,308 -1005.2% 666.1% 710.6% 50.0% 30.0% 30.0%

JSCB SCB 1,988 29,585 136,238 148,920 38,448 121,877 126,752 136,366 1388.2% 360.5% 9.3% -74.2% 217.0% 4.0% 7.6% 6031% 127.8%

JSCB HBB 15,627 33,503 86,038 122,284 109,301 138,223 175,622 223,224 114.4% 156.8% 42.1% -10.6% 26.5% 27.1% 27.1% 785% 54.6%

JSCB SEABank 2,577 8,236 6,692 107,649 89,188 100,258 116,261 134,741 219.6% -18.7% 1508.6% -17.1% 12.4% 16.0% 15.9% 3791% 108.0%

Total JSCB 412,284 729,593 1,402,585 2,658,556 3,905,651 4,126,732 4,853,867 5,772,402 77.0% 92.2% 89.5% 46.9% 5.7% 17.6% 18.9% 901% 58.5%

Grand total 1,541,347 2,312,504 3,457,255 5,742,992 7,656,262 9,064,782 10,915,930 13,111,491 50.0% 49.5% 66.1% 33.3% 18.4% 20.4% 20.1% 488% 42.5%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 78

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Top SOCB fee & commission income Fastest growing fee & commission income by bank
3,000,000
180.0%
160.0%
2,500,000
BIDV CTG 140.0% EIB CTG

2,000,000 VBARD VCB 120.0% HBB BIDV


100.0%
1,500,000 80.0%
60.0%
1,000,000
40.0%
20.0%
500,000
0.0%
- -20.0%

FY 2011F

FY 2012F
FY 2010e
FY 2006

FY 2007

FY 2008

FY2009
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

Source: Banks financial statements FY 2012F Source: Banks financial statements, HSC calculation

even something more straightforward such as remit- actual lending rates (higher principal lending rates ef-
tances (EABs strength). Amongst the larger private fectively replaced the unofficial fees being charged by
sector banks that we like only EIB lags behind in fee banks).
earnings with an expected 7.5% of its income coming
from fees in FY2010. It has of course suffered a little Even so the result shows the relative fragility of the fee
from the loss of its gold trading business but in general income structure which has been built up rather pains-
it also lacks a key driver of fee income such as securi- takingly by banks since FY2005. And given that this
ties or credit cards. At the same time the bank tends to comes at the time when the era of fast growth in credit
charge low fees on banking business as it seeks to win is coming to and end it could not come at a worse time.
market share from competitors.
Over the next few years, banks will need to migrate to
Two state owned banks; BIDV and VCB also have sig- a more sustainable fee and commission income model
nificant earnings streams from fee & commissions. Of based primarily on recurring fee earning growth seg-
the two BIDV has by far the more substantial with about ments such as credit cards, wealth advisory manage-
14.8% of its FY2010 earnings from this source com- ment and mortgages. These are not new areas per se
pared to 10.5% expected for VCB. but have seen limited growth in Vietnam for a variety of
reasons.
There is a fundamental belief that banks should reduce
their dependence on interest income and increase fee Credit cards have been disappointing so far
income in order to de-risk their operations. And while in
theory this is sound banking the problem is that the type Credit cards have failed to take off as quickly as ex-
of fee income generated by banks so far has been tran- pected due to viable concerns over fraud coupled with
sient and might even be described as opportunistic. the paucity of credit information. Then wealth advisory
suffers from lack of actual investment product such as
We are thinking here of the additional top-up fees mutual funds. The authorities have been quite slow to
charged on lending in FY2009 and various gold trading regulate such new products and in Vietnam if it isnt
fee income streams which expanded rapidly over the regulated then it isnt legal. However we are just getting
same period. In fact FY2009 marked the high point for around to allowing open-ended funds in Vietnam which
fee & commission income at an average 11.4% and last may give the wealth advisory business a starting boost.
year was expected and drop back to around 10.6% or
so. Then the mortgage market has been stillborn as banks
have only limited access to long term finance. The failure
This was due to the closing down of the gold trading of the MOF to issue out the yield curve much beyond 5
floors and the move to negotiable lending which caused years (with only occasional issuances at 10 years which
a collapse in two key fee earnings income segments si- accounts for only 9.4% of all outstanding bonds) has
multaneously. This demise of the gold trading business meant that the private sector cannot issue there either.
hurt a trio of large private sector banks such as ACB, And indeed apart from that the bond market itself at just
STB and to a lesser extent EIB. The move to negotiable 10% of GDP is still far too small to support substantial
lending hurt everybody but to be fair this was regulatory private sector issuance.
driven and was immediately offset by the increase in

www.hsc.com.vn Page 79

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Selected banks fee & commission income (as % of total income) (Unit:VNDbn)
Type FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F
SOCB VBARD 2.8% 3.4% 3.1% 4.4% 4.1% 5.3% 5.6% 5.7%
SOCB BIDV 6.0% 8.3% 8.0% 13.2% 13.7% 14.8% 16.2% 17.4%
SOCB CTG 5.4% 6.0% 5.1% 5.0% 6.7% 8.1% 9.3% 10.6%
SOCB VCB 10.4% 10.4% 10.4% 8.9% 10.7% 10.5% 9.8% 9.5%
Total SOCB 5.5% 6.2% 5.7% 6.9% 8.1% 9.0% 9.6% 10.2%
JSCB ACB 14.2% 13.0% 9.0% 14.3% 17.6% 10.8% 10.5% 10.3%
JSCB STB 12.0% 11.3% 7.9% 22.9% 25.3% 19.9% 18.5% 18.6%
JSCB EIB 7.1% 7.5% 7.1% 5.8% 8.2% 7.9% 8.0% 8.7%
JSCB TCB 15.4% 16.6% 14.6% 14.7% 16.0% 15.8% 16.4% 16.0%
JSCB MB 7.4% 13.2% 18.2% 11.7% 14.3% 14.9% 13.5% 12.0%
JSCB EAB 25.7% 20.9% 18.5% 10.2% 13.2% 14.1% 16.2% 18.2%
JSCB MSB 8.6% 6.2% 9.4% 7.4% 7.3% 5.0% 4.5% 4.3%
JSCB VIB 9.3% 3.5% 7.7% 12.0% 9.8% 11.8% 12.4% 13.0%
JSCB SHB 0.4% 0.5% 7.0% 6.6% 6.6% 7.0%
JSCB SCB 1.6% 9.9% 20.4% 12.1% 3.6% 12.5% 10.1% 10.4%
JSCB HBB 8.8% 8.6% 11.7% 14.4% 12.1% 11.5% 12.6% 14.1%
JSCB SEABank 3.4% 4.2% 1.2% 22.9% 9.4% 9.5% 9.9% 10.1%
Total JSCB 12.1% 9.9% 10.7% 12.8% 14.6% 12.5% 12.2% 12.2%
Grand total 6.5% 7.0% 7.0% 8.8% 10.5% 10.3% 10.6% 11.0%
Source: Banks, HSC

And this has stymied the development of a mass mort- But here surprisingly perhaps EIB and now ACB fall a
gage market in Vietnam which would bring affordable little short. If the mighty ACB faces one urgent task it is
housing to the middle classes and a whole new class of the rebuilding of its fee income segment over the next
fee income to banks. few years.

Going forward however it is the fee & commission in- As for the SOEs both BIDV and VCB have shown prom-
come segment that will drive growth once organic growth ise here leaving CTG with some catching up to do.
in deposits driven by branch expansion starts to slow And given the latters strength in the lending business
around the middle of this decade. And it is those banks it should be able to catch-up over the next few years
with a well diversified fee product range that will benefit should it wish to. However that may require rebuilding
the most. Of course amongst the private sector bank its securities unit which has been drifting recently.
they are the usual suspects such as STB, TCB and MB.

www.hsc.com.vn Page 80

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Top 16 bank gains on trading & investment as % of total Banks with large in trading & investments as % of total
income income

25.0% 40.0%
35.0%
Total SOCB 30.0% VCB EAB
20.0%
Total JSCB 25.0% EIB HBB

15.0% Grand total 20.0%


15.0%
10.0% 10.0%
5.0%
5.0% 0.0%
-5.0%
0.0% -10.0%

FY 2011F

FY 2012F
2011F

2012F
FY2010e

FY2010e
FY2005

FY2006

FY2007

FY2008

FY2009

FY2005

FY2006

FY2007

FY2008

FY2009
FY

FY

Source: Banks financial statements, HSC calculation Source: Banks financial statements, HSC calculation

Gains from trading & investments

Over the past years overall gains from trading and in- The first is self explanatory while the difference between
vestments has grown at a CAGR of 16.8% over the past the latter two can be summarized best as short term vs.
five years and is expected to reach VND4,000 billion in long term investment. What they all have in common is
FY2010 down by 38.5% y/y. This would account for about a volatile nature as they ebb and flow in response to the
4.6% of total income in FY2010 and as a percentage of trading cycle of the forex and stock markets.
total income has fallen from 7.7% since FY2005.
Over the past five years as mentioned overall gains from
Looking forward we forecast that gains from trading & trading and investments has grown at a CAGR of 16.8%
investment for the top 16 banks will grow by 40.1% in reaching a peak in FY2009. Here we had the benefit
FY2011 and then by 15.8% in FY2012. Of all income of a sustained stock market recovery which contributed
segments only other income is harder to predict as to both in terms of provisions reversals and also actual
forecast this accurately one would need to know how stock market gains. For accounting purposes equity
the currency; stock and bond markets will trade for each loss provisions and the reversal of equity loss provision
of the next four years. Therefore in the absence of a are booked in their respective categories of equity trad-
time travel machine please treat these numbers as a ing or equity investment according to where they were
very rough guide and only based on our particular point incurred.
of view.
One important point to note is that interest income from
While Interest income and fees & commissions follow holding a bond is not included here as this comes under
the general economic cycle and have a certain predict- interest income. However usually capital gains from the
able rhythm, in contrast gains from trading & investment sale of a bond would in fact come under either the cat-
follows the forex and stock market cycles respectively egory of securities trading (if the bond is held for short
and tend to be far more volatile in nature. It would be un- term trading purposes) or more likely securities invest-
heard of to have a negative number in interest income ment (as bonds are generally held to maturity). Not all
but to show red ink in gains from trading and investment banks follow this rule however.
is certainly possible (or more likely in one of the three
sub-segments). Therefore this division represents the Forex trading follows a clear pattern
largest swing factor for bank earnings.
In terms of forex gains a fluctuating or volatile market
Gains from trading and investments is a broad segment makes for the best trading conditions for banks. Provided
that we have aggregated for the purpose of brevity. On they are able to manage their risk its exactly the trading
bank P&Ls it actually appears as three distinct catego- conditions that banks like the most. Booking forex gains
ries; (1) gains on forex trading; (2) Securities trading is also often the result of a trade-off between charging
- income from trading securities categorized as trad- higher fees or simply trading the gain and banks follow
ing securities; (3) Securities investment - income from their own path.
trading securities categorized as investment securities.

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Gains on trading and investment
Type Short % y/y change Trading & CAGR
name investment
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F cumula-

www.hsc.com.vn
tive income
FY2005-10
SOCB VBARD 625,265 439,755 120,618 216,890 90,104 160,000 210,000 210,000 -29.7% -72.6% 79.8% -58.5% 77.6% 31.3% 0.0% -74.4% -23.9%

SOCB BIDV 644,302 329,238 299,477 (48,225) 1,043,539 617,732 679,505 770,431 -48.9% -9.0% -116.1% -2263.9% -40.8% 10.0% 13.4% -4.1% -0.8%

SOCB CTG 81,135 82,767 (7,287) 267,259 193,288 223,785 390,922 491,010 2.0% -108.8% -3767.6% -27.7% 15.8% 74.7% 25.6% 175.8% 22.5%

SOCB VCB 242,291 482,927 374,683 549,152 1,274,482 1,352,511 1,635,813 1,884,472 99.3% -22.4% 46.6% 132.1% 6.1% 20.9% 15.2% 458.2% 41.0%

Total SOCB 1,592,993 1,334,687 787,491 985,076 2,601,413 2,354,028 2,916,240 3,355,914 -16.2% -41.0% 25.1% 164.1% -9.5% 23.9% 15.1% 47.8% 8.1%

JSCB ACB 17,266 120,791 1,396,922 695,076 994,691 532,772 600,905 673,445 599.6% 1056.5% -50.2% 43.1% -46.4% 12.8% 12.1% 2985.7% 98.6%

JSCB STB 44,949 147,603 909,287 508,644 742,822 (17,500) 300,000 422,500 228.4% 516.0% -44.1% 46.0% -102.4% -1814.3% 40.8% -138.9% -182.8%

JSCB EIB 108,628 116,675 196,532 462,503 248,098 104,606 241,527 293,833 7.4% 68.4% 135.3% -46.4% -57.8% 130.9% 21.7% -3.7% -0.8%

JSCB TCB 2,421 8,215 106,344 952,895 567,292 250,000 250,000 250,000 239.3% 1194.5% 796.0% -40.5% -55.9% 0.0% 0.0% 10226.3% 152.8%

JSCB MB 7,813 40,701 104,191 (66,307) 141,071 110,664 281,737 362,123 420.9% 156.0% -163.6% -312.8% -21.6% 154.6% 28.5% 1316.4% 69.9%

JSCB EAB 6,563 46,653 109,176 346,037 332,098 172,495 246,119 273,287 134.0% 217.0% -4.0% -48.1% 42.7% 11.0%

JSCB MSB 2,142 8,130 7,487 1,637 144,352 161,430 151,572 178,670 279.6% -7.9% -78.1% 8718.1% 11.8% -6.1% 17.9% 7437.2% 137.4%

JSCB VIB - 40,651 94,356 (8,913) 189,656 205,623 215,000 234,500 132.1% -109.4% -2227.9% 8.4% 4.6% 9.1% 405.8%

JSCB SHB - 5 16,186 11,855 127,787 87,000 113,100 141,830 -26.8% 977.9% -31.9% 30.0% 25.4%

JSCB SCB 207 11,751 79,679 21,798 182,264 (241,000) 40,000 60,000 5576.8% 578.1% -72.6% 736.2% -232.2% -116.6% 50.0% -116525.1% -510.4%

JSCB HBB 62,043 123,480 11,792 (49,559) 98,650 199,769 166,396 151,829 99.0% -90.5% -520.3% -299.1% 102.5% -16.7% -8.8% 222.0% 26.3%

JSCB SEABank (6,742) 11,457 28,945 (300,134) 130,973 80,794 80,615 90,615 -269.9% 152.6% -1136.9% -143.6% -38.3% -0.2% 12.4% -1298.4% -264.3%

Total JSCB 245,290 676,111 3,060,897 2,575,532 3,899,754 1,646,654 2,686,972 3,132,632 175.6% 352.7% -15.9% 51.4% -57.8% 63.2% 16.6% 571.3% 46.3%

Grand total 1,838,283 2,010,798 3,848,388 3,560,608 6,501,167 4,000,682 5,603,211 6,488,546 9.4% 91.4% -7.5% 82.6% -38.5% 40.1% 15.8% 117.6% 16.8%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 82

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Gains from forex lines by type Gaisn/loss on securities trading & investment
5,000,000 5,000,000
Total SOCB
4,500,000
4,000,000 Total JSCB
4,000,000 Total SOCB
Total JSCB 3,000,000 Grand total
3,500,000
3,000,000 Grand total
2,000,000
2,500,000
2,000,000 1,000,000

1,500,000 -
1,000,000
(1,000,000)
500,000
- (2,000,000)

FY2010e

FY 2011F

FY 2012F
FY2005

FY2006

FY2007

FY2008

FY2009
FY 2011F

FY 2012F
FY2005

FY2006

FY2007

FY2008

FY2009

FY2010F

Source: Banks financial statements Source: Banks financial statements

Forex gains rose at a CAGR of 12.2% over the last five It grew at a CAGR of 22.3% between FY2005 and
years and in FY2010 are estimated to have reached FY2010 and peaked at VND3,809 billion in FY2009.
VND1,906 billion down 29.2% y/y. For FY2011 and However in FY2010 we estimate this income stream
FY2012 we forecast forex trading gains will gain 56.1% will fell 45% to VND2,094. And for FY2011 and FY2012
and 14.9% respectively As you can see growth here we speculatively estimate that will grow by 25.4% and
does not follow a purely linear trajectory. 16.8% respectively. This stream tracks stock market per-
formance fairly closely and in fact equity trading and in-
Indeed back in FY2008 gains from forex trading hit a vestments turns out to be even more volatile than forex.
level of VND4,706 billion which is their five year peak. The reason is quite simple; in the forex market you can
And since then has declined for the past two financial bet on either direction whereas in the stock market you
years. However it would be wrong to see this as purely can still bet on only one direction.
a cyclical phenomenon. We see two factors at play (1)
macroeconomic trading flows which follow a secular And by the nature of prop desks even with stop losses
growth trend and create demand for forex from corpo- in place they tend to show red ink when the market falls.
rates (2) currency volatility which follows a more cyclical The equity market is not deep or liquid enough for large
pattern and creates trading opportunities for bank trea- portfolios so many banks have experienced difficulties
sury desks in the currency. in exiting positions. This is especially true of OTC posi-
tions but luckily from an accounting perspective these
Trading flows have increased sharply over the past five do not have to be marked to market. But listed posi-
years (combined imports and exports have risen 20-30% tions is a different story and in FY2008 most banks were
each year between FY2005-2010) and this has given showing hefty provisions.
rise to a surge on forex trading on the past of banks.
And indeed given that the VND has also depreciated Over time banks have increased their exposure to lon-
steadily over the same period it has been fairly easy to ger term investment streams and tried to reduce pure
place bets and profit on these. trading activity having learned the lessons of FY2008.
Going forward we think gains from trading & investment
Stock market trading has been more unpredictable will continue to grow albeit not in a linear fashion. How-
however ever trading flows will continue to grow in double digit
terms while the stock market is certain to bounce back
Income from trading and investment securities includes at some stage.
both income from trading securities & income from In-
vestment securities. Trading as might be expected is HSC believes we are due for a reasonable year in the
the gain from buying and selling short term positions. market in fact (we are brokers after all). And the trend
Investment securities from long term equity investment from trading towards more strategic investment will con-
as mentioned are gains on associate investment (where tinue at least until we find ourselves in a long term bull
the holding is 20-50%) and OTC investments where the market when no doubt banks will once again be tempted
holding is less than 20% to take a punt.

www.hsc.com.vn Page 83

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Gains/loss from FX lines
Type Short % y/y change Cumula-
name tive income CAGR
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2005-10

www.hsc.com.vn
SOCB VBARD 625,265 127,608 67,384 238,846 (68,582) 100,000 100,000 100,000 -79.6% -47.2% 254.5% -128.7% -245.8% 0.0% 0.0%

SOCB BIDV 44,224 107,725 139,647 790,779 208,866 417,732 459,505 528,431 143.6% 29.6% 466.3% -73.6% 100.0% 10.0% 15.0% 844.6% 56.7%

SOCB CTG 43,116 60,002 64,087 290,046 59,278 77,061 100,180 130,234 39.2% 6.8% 352.6% -79.6% 30.0% 30.0% 30.0% 78.7% 12.3%

SOCB VCB 192,780 274,052 354,348 952,911 918,309 872,394 1,003,253 1,153,740 42.2% 29.3% 168.9% -3.6% -5.0% 15.0% 15.0% 352.5% 35.2%

Total SOCB 905,385 569,387 625,466 2,272,582 1,117,871 1,467,187 1,662,938 1,912,405 -37.1% 9.8% 263.3% -50.8% 31.2% 13.3% 15.0% 62.1% 10.1%

JSCB ACB 14,640 23,514 155,140 678,852 422,336 392,772 439,905 488,295 60.6% 559.8% 337.6% -37.8% -7.0% 12.0% 11.0% 2582.9% 93.1%

JSCB STB 25,417 4,178 100,815 510,041 314,108 (370,000) 150,000 172,500 -83.6% 2313.0% 405.9% -38.4% -217.8% -140.5% 15.0% -1555.7% -270.9%

JSCB EIB 108,628 75,453 139,257 634,105 134,606 134,606 161,527 193,833 -30.5% 84.6% 355.3% -78.8% 0.0% 20.0% 20.0% 23.9% 4.4%

JSCB TCB 1,872 7,491 24,583 21,793 48,089 100,000 100,000 100,000 300.2% 228.2% -11.3% 120.7% 107.9% 0.0% 0.0% 5241.9% 121.6%

JSCB MB 3,154 6,591 21,124 101,403 (72,766) 15,750 16,538 17,365 109.0% 220.5% 380.0% -171.8% -121.6% 5.0% 5.0% 399.4% 37.9%

JSCB EAB 6,563 28,977 16,285 333,365 262,492 157,495 181,119 208,287 341.5% -43.8% 1947.1% -21.3% -40.0% 15.0% 15.0% 2299.7% 88.8%

JSCB MSB 2,137 6,114 6,989 10,354 87,768 35,000 36,750 38,588 186.2% 14.3% 48.1% 747.7% -60.1% 5.0% 5.0% 1538.1% 74.9%

JSCB VIB (3,490) 13,714 69,389 122,213 50,000 65,000 84,500 -493.0% 406.0% 76.1% -59.1% 30.0% 30.0%

JSCB SHB 5 2,467 26,023 52,487 35,000 45,500 59,150 49756.1% 954.7% 101.7% -33.3% 30.0% 30.0%

JSCB SCB 207 (149) 2,499 57,306 139,215 (181,000) 40,000 60,000 -172.0% -1777.2% 2193.2% 142.9% -230.0% -122.1% 50.0% -87539.6% -487.6%

JSCB HBB 3,556 1,367 2,718 7,639 32,192 38,630 46,356 55,628 -61.6% 98.8% 181.1% 321.4% 20.0% 20.0% 20.0% 986.3% 61.1%

JSCB SEABank - (12,986) 1,421 (16,899) 30,615 30,615 30,615 30,615 -110.9% -1289.2% -281.2% 0.0% 0.0% 0.0%

Total JSCB 166,174 137,065 487,012 2,433,371 1,573,355 438,869 1,313,311 1,508,760 -17.5% 255.3% 399.7% -35.3% -72.1% 199.2% 14.9% 164.1% 21.4%

Grand total 1,071,559 706,452 1,112,478 4,705,953 2,691,226 1,906,056 2,976,249 3,421,165 -34.1% 57.5% 323.0% -42.8% -29.2% 56.1% 14.9% 77.9% 12.2%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Gain/loss from securities trading and securities investment
Type Short % y/y change Cumula- CAGR
name tive income
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F

www.hsc.com.vn
FY2005-10e

SOCB VBARD - 312,147 53,234 (21,956) 158,686 60,000 110,000 110,000 -82.9% -141.2% -822.7% -62.2% 83.3% 0.0%

SOCB BIDV 600,078 221,513 159,830 (839,004) 834,673 200,000 220,000 242,000 -63.1% -27.8% -624.9% -199.5% -76.0% 10.0% 10.0% -66.7% -19.7%

SOCB CTG 38,019 22,765 (71,374) (22,787) 134,010 146,724 290,742 360,777 -40.1% -413.5% -68.1% -688.1% 9.5% 98.2% 24.1% 285.9% 31.0%

SOCB VCB 49,511 208,875 20,335 (403,759) 356,173 480,117 632,560 730,732 321.9% -90.3% -2085.5% -188.2% 34.8% 31.8% 15.5% 869.7% 57.5%

Total SOCB 687,608 765,300 162,025 (1,287,506) 1,483,542 886,841 1,253,302 1,443,508 11.3% -78.8% -894.6% -215.2% -40.2% 41.3% 15.2% 29.0% 5.2%

JSCB ACB 2,626 97,277 1,241,782 16,224 572,355 140,000 161,000 185,150 3604.4% 1176.5% -98.7% 3427.8% -75.5% 15.0% 15.0% 5231.3% 121.5%

JSCB STB 19,532 143,425 808,472 (1,397) 428,714 352,500 150,000 250,000 634.3% 463.7% -100.2% -30788.2% -17.8% -57.4% 66.7% 1704.7% 78.4%

JSCB EIB - 41,222 57,275 (171,602) 113,492 (30,000) 80,000 100,000 38.9% -399.6% -166.1% -126.4% -366.7% 25.0% -172.8%

JSCB TCB 549 724 81,761 931,102 519,203 150,000 150,000 150,000 31.9% 11193.0% 1038.8% -44.2% -71.1% 0.0% 0.0% 27222.4% 207.1%

JSCB MB 4,659 34,110 83,067 (167,710) 213,837 94,914 265,199 344,759 632.1% 143.5% -301.9% -227.5% -55.6% 179.4% 30.0% 1937.2% 82.7%

JSCB EAB - 17,676 92,891 12,672 69,606 15,000 65,000 65,000 425.5% -86.4% 449.3% -78.5% 333.3% 0.0% -15.1%

JSCB MSB 5 2,016 498 (8,717) 56,584 126,430 114,822 140,082 39030.4% -75.3% -1850.4% -749.1% 123.4% -9.2% 22.0% 2453903.5% 655.0%

JSCB VIB - 44,141 80,642 (78,302) 67,443 155,623 150,000 150,000 82.7% -197.1% -186.1% 130.7% -3.6% 0.0% 252.6%

JSCB SHB - - 13,719 (14,168) 75,300 52,000 67,600 82,680 -203.3% -631.5% -30.9% 30.0% 22.3%

JSCB SCB - 11,900 77,180 (35,508) 43,049 (60,000) - - 548.6% -146.0% -221.2% -239.4% -100.0% -604.2%

JSCB HBB 58,487 122,113 9,074 (57,198) 66,458 161,139 120,040 96,202 108.8% -92.6% -730.4% -216.2% 142.5% -25.5% -19.9% 175.5% 22.5%

JSCB SEABank (6,742) 24,443 27,524 (283,235) 100,358 50,179 50,000 60,000 12.6% -1129.1% -135.4% -50.0% -0.4% 20.0%

Total JSCB 79,116 539,047 2,573,885 142,161 2,326,399 1,207,785 1,373,661 1,623,872 581.3% 377.5% -94.5% 1536.5% -48.1% 13.7% 18.2% 1426.6% 72.5%

Grand total 766,724 1,304,347 2,735,910 (1,145,345) 3,809,941 2,094,625 2,626,963 3,067,381 70.1% 109.8% -141.9% 432.6% -45.0% 25.4% 16.8% 173.2% 22.3%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 85

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Income from Investment securities
Type Short % y/y change Cumulative CAGR
name income
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2005-

www.hsc.com.vn
10e
SOCB VBARD 312,147 53,234 36,183 149,368 50,000 100,000 100,000 -82.9% -32.0% 312.8% -66.5% 100.0% 0.0% -84.0% -36.7%

SOCB BIDV 600,078 221,513 49,059 113,031 100,000 110,000 121,000 -63.1% -77.9% -100.0% -11.5% 10.0% 10.0% -83.3% -30.1%

SOCB CTG 38,019 - - 14,246 129,731 202,380 252,975 -100.0% 810.6% 56.0% 25.0% 241.2% 27.8%

SOCB VCB 49,511 208,875 20,335 (78,215) 172,876 233,770 312,309 384,860 321.9% -90.3% -484.6% -321.0% 35.2% 33.6% 23.2% 372.2% 36.4%

Total SOCB 687,608 742,535 122,628 (42,032) 449,521 513,501 724,689 858,836 8.0% -83.5% -134.3% -1169.5% 14.2% 41.1% 18.5% -25.3% -5.7%

JSCB ACB 2,626 65,757 896,792 46,291 551,718 100,000 115,000 132,250 2404.1% 1263.8% -94.8% 1091.8% -81.9% 15.0% 15.0% 3708.1% 107.1%

JSCB STB 135,954 208,599 (88,253) 412,690 392,500 100,000 150,000 53.4% -142.3% -567.6% -4.9% -74.5% 50.0% 188.7% 30.4%

JSCB EIB - 41,222 57,190 (167,439) 153,327 (30,000) 80,000 100,000 38.7% -392.8% -191.6% -119.6% -366.7% 25.0% -172.8%

JSCB TCB 372,165 150,000 150,000 150,000 -59.7% 0.0% 0.0%

JSCB MB 4,659 34,110 83,067 (167,710) 213,837 94,914 265,199 344,759 632.1% 143.5% -301.9% -227.5% -55.6% 179.4% 30.0% 1937.2% 82.7%

JSCB EAB 0 0 (0) 0 64,690 10,000 60,000 60,000 -84.5% 500.0% 0.0%

JSCB MSB 5 2,016 498 (8,717) 64,292 126,430 114,822 140,082 39030.4% -75.3% -1850.4% -837.5% 96.7% -9.2% 22.0% 2453903.5% 655.0%

JSCB VIB

JSCB SHB 0 43,361 40,000 52,000 62,400 -7.8% 30.0% 20.0%

JSCB SCB 0 11,900 69,305 0 4,428 - - - 482.4% -100.0%

JSCB HBB 58,487 122,113 9,074 1,676 51,299 161,139 120,040 96,202 108.8% -92.6% -81.5% 2960.8% 214.1% -25.5% -19.9% 175.5% 22.5%

JSCB SEABank (6,742) 24,443 27,524 (283,235) 100,358 50,179 50,000 60,000 -462.5% 12.6% -1129.1% -135.4% -50.0% -0.4% 20.0% -844.3% -249.4%

Total JSCB 548 315,402 1,342,975 (669,063) 1,980,866 934,023 987,021 1,199,491 57436.4% 325.8% -149.8% -396.1% -52.8% 5.7% 21.5% 170287.1% 342.9%

Grand total 688,156 1,057,937 1,465,603 (711,095) 2,430,387 1,447,524 1,711,710 2,058,327 53.7% 38.5% -148.5% -441.8% -40.4% 18.3% 20.2% 110.3% 16.0%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Gains on trading and investment as % of total income


Type FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F
SOCB VBARD 7.7% 4.0% 0.8% 1.1% 0.5% 0.8% 0.9% 0.8%
SOCB BIDV 15.7% 6.9% 3.8% -0.6% 10.2% 5.1% 4.8% 4.8%
SOCB CTG 2.1% 1.8% -0.1% 3.1% 2.0% 1.9% 2.9% 3.2%
SOCB VCB 5.7% 9.1% 6.5% 6.2% 13.7% 12.7% 12.7% 12.7%
Total SOCB 7.8% 5.2% 2.2% 2.2% 5.6% 4.3% 4.6% 4.7%
JSCB ACB 2.5% 10.6% 46.2% 16.4% 20.2% 9.3% 8.7% 8.2%
JSCB STB 7.6% 13.9% 37.2% 20.7% 18.1% -0.4% 5.7% 6.8%
JSCB EIB 30.4% 19.8% 19.3% 24.4% 9.6% 2.9% 5.2% 5.2%
JSCB TCB 0.6% 1.3% 8.7% 29.0% 14.8% 5.0% 4.2% 3.5%
JSCB MB 2.6% 7.1% 9.9% -4.0% 5.3% 3.3% 6.9% 7.1%
JSCB EAB 2.2% 10.8% 12.8% 23.4% 20.0% 9.6% 12.4% 12.1%
JSCB MSB 1.3% 3.5% 1.7% 0.2% 8.6% 5.9% 4.4% 4.6%
JSCB VIB 0.0% 2.2% 10.7% -1.0% 11.9% 11.9% 11.0% 10.5%
JSCB SHB 6.2% 0.8% 14.8% 6.4% 6.4% 6.5%
JSCB SCB 0.2% 3.9% 12.0% 1.8% 17.1% -24.6% 3.2% 4.6%
JSCB HBB 35.0% 31.8% 1.6% -5.8% 10.9% 16.7% 12.0% 9.6%
JSCB SEABank -8.8% 5.8% 5.2% -63.8% 13.8% 7.7% 6.8% 6.8%
Total JSCB 7.2% 9.2% 23.3% 12.4% 14.6% 5.0% 6.7% 6.6%
Grand total 7.7% 6.1% 7.8% 5.4% 8.9% 4.6% 5.4% 5.4%
Source: Banks, HSC

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July 14h 2008

February 2011
September 2009

Other income as % of total income Banks with large other income as % of total income
25.0% 30.0%
Total SOCB other income as % of total

20.0% Total JSCB other income as % of total 25.0% VBARD


MB
Total other income as % of total income 20.0% HBB
15.0%

15.0%
10.0%
10.0%

5.0%
5.0%

0.0% 0.0%
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
Source: Banks financial statements, HSC calculation Source: Banks financial statements, HSC calculation

Other income

Other income as the name implies is anything that For the top 16 banks this has ranged from 5.3% of total
doesnt fit neatly into the other income categories. Its operating income in FY2005 to 15.7% of total operat-
usually non-recurring in nature; very volatile and its na- ing income in FY2007 coincidentally when the stock
ture is constantly changing depending on where we are market was active. For FY2010 we forecast it will reach
in the business cycle. Other operating income typically just 7.2% of total operating income then falling to 5.6%
includes the reversal of provisions and recovery of bad in FY2011 and 4.9% in FY2012. Other income doesnt
debt written-off, rental income from offices leased out play a major role in the operating income of most banks.
and fixed assets liquidation. In general this segment is However there are exceptions such as VBARD where in
almost impossible to forecast and we use historical av- FY2010 it is estimated to have accounted for 20.1% of
erages to get a handle on it. income followed by MB and HBB both with 9.2%.

However with the exception of these three banks most


other banks have derived very little income from this
segment over the last three years.

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Other income
Type Short % y/y change
name

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FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F
SOCB VBARD 360,707 1,133,285 3,284,702 4,008,180 4,772,916 4,000,000 4,021,933 4,021,933 214.2% 189.8% 22.0% 19.1% -16.2% 0.5% 0.0%

SOCB BIDV 253,549 633,803 1,977,437 260,500 610,941 427,659 427,659 491,808 150.0% 212.0% -86.8% 134.5% -30.0% 0.0% 15.0%

SOCB CTG 230,691 606,275 1,406,835 664,479 804,164 500,000 68,520 82,224 162.8% 132.0% -52.8% 21.0% -37.8% -86.3% 20.0%

SOCB VCB 270,856 313,899 572,236 264,806 128,006 140,807 154,887 170,376 15.9% 82.3% -53.7% -51.7% 10.0% 10.0% 10.0%

Total SOCB 1,115,803 2,687,262 7,241,210 5,197,965 6,316,027 5,068,465 4,672,999 4,766,340 140.8% 169.5% -28.2% 21.5% -19.8% -7.8% 2.0%

JSCB ACB 25,766 15,597 4,926 37,356 155,189 100,000 120,000 120,000 -39.5% -68.4% 658.3% 315.4% -35.6% 20.0% 0.0%

JSCB STB 23,798 10,590 3,536 116,209 (73,011) 130,000 80,000 80,000 -55.5% -66.6% 3186.5% -162.8% -278.1% -38.5% 0.0%

JSCB EIB 5,924 76,661 41,536 31,283 30,475 150,000 65,000 80,000 1194.1% -45.8% -24.7% -2.6% 392.2% -56.7% 23.1%

JSCB TCB 14,552 44,221 4,462 14,199 156,203 200,000 150,000 150,000 203.9% -89.9% 218.2% 1000.1% 28.0% -25.0% 0.0%

JSCB MB 30,155 54,817 90,842 38,514 255,294 309,778 325,267 341,530 81.8% 65.7% -57.6% 562.9% 21.3% 5.0% 5.0%

JSCB EAB 1,368 16,232 60,235 112,712 3,787 91,520 4,000 4,000 1086.5% 271.1% 87.1% -96.6% 2316.7% -95.6% 0.0%

JSCB MSB 31,923 1,834 33,054 8,650 87,130 34,852 87,130 87,130 -94.3% 1702.3% -73.8% 907.3% -60.0% 150.0% 0.0%

JSCB VIB (1,047) 42,021 (4,853) (19,427) 102,244 50,000 50,000 50,000 -4113.5% -111.5% 300.3% -626.3% -51.1% 0.0% 0.0%

JSCB SHB 3,270 137,722 294,755 11,746 40,000 52,000 62,400 4111.1% 114.0% -96.0% 240.5% 30.0% 20.0%

JSCB SCB 13,960 1,013 6,338 34,332 12,053 30,000 30,000 40,000 -92.7% 525.7% 441.7% -64.9% 148.9% 0.0% 33.3%

JSCB HBB 550 8,037 4,356 5,295 26,637 109,956 109,933 89,900 1361.3% -45.8% 21.6% 403.1% 312.8% 0.0% -18.2%

JSCB SEABank 10 7 22 17,695 4,665 6,998 10,000 10,000 -31.7% 217.1% 81637.3% -73.6% 50.0% 42.9% 0.0%

Total JSCB 146,959 274,300 382,176 691,573 772,412 1,253,103 1,083,330 1,114,960 86.7% 39.3% 81.0% 11.7% 62.2% -13.5% 2.9%

Grand total 1,262,762 2,961,562 7,623,386 5,889,538 7,088,439 6,321,568 5,756,329 5,881,300 134.5% 157.4% -22.7% 20.4% -10.8% -8.9% 2.2%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 89

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Other income as % of total income


Type Short name FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F
SOCB VBARD 4.4% 10.3% 20.7% 20.5% 27.9% 20.1% 17.6% 15.8%
SOCB BIDV 6.2% 13.4% 25.3% 3.4% 6.0% 3.5% 3.1% 3.0%
SOCB CTG 6.1% 13.3% 21.6% 7.6% 8.3% 4.2% 0.5% 0.5%
SOCB VCB 6.3% 5.9% 9.9% 3.0% 1.4% 1.3% 1.2% 1.1%
Total SOCB other income 5.5% 10.5% 20.1% 11.6% 13.6% 9.3% 7.4% 6.6%
as % of total
JSCB ACB 3.8% 1.4% 0.2% 0.9% 3.1% 1.8% 1.7% 1.5%
JSCB STB 4.0% 1.0% 0.1% 4.7% -1.8% 2.9% 1.5% 1.3%
JSCB EIB 1.7% 13.0% 4.1% 1.7% 1.2% 4.2% 1.4% 1.4%
JSCB TCB 3.3% 7.2% 0.4% 0.4% 4.1% 4.0% 2.5% 2.1%
JSCB MB 10.1% 9.6% 8.6% 2.4% 9.6% 9.2% 7.9% 6.7%
JSCB EAB 0.5% 3.8% 7.1% 7.6% 0.2% 5.1% 0.2% 0.2%
JSCB MSB 19.7% 0.8% 7.6% 1.1% 5.2% 1.3% 2.6% 2.2%
JSCB VIB -0.5% 2.3% -0.5% -2.1% 6.4% 2.9% 2.5% 2.2%
JSCB SHB 10.8% 52.5% 19.9% 1.4% 2.9% 2.9% 2.9%
JSCB SCB 11.4% 0.3% 1.0% 2.8% 1.1% 3.1% 2.4% 3.0%
JSCB HBB 0.3% 2.1% 0.6% 0.6% 3.0% 9.2% 7.9% 5.7%
JSCB SEABank 0.0% 0.0% 0.0% 3.8% 0.5% 0.7% 0.8% 0.7%
Total JSCB other income 4.3% 3.7% 2.9% 3.3% 2.9% 3.8% 2.7% 2.4%
as % of total
Total other income as % 5.3% 9.0% 15.5% 9.0% 9.7% 7.2% 5.6% 4.9%
of total income
Source: Banks, HSC

www.hsc.com.vn Page 90

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July 14h 2008

February 2011
September 2009

Top 16 operating income by type Top 16 operating income y/y growth rates
140,000,000 140.0%
Total SOCB operating income
120,000,000 120.0%
Total JSCB operating income
Total SOCB operating income
100,000,000 100.0%
Total operating income
Total JSCB operating income
80,000,000 80.0%
Total operating income
60,000,000 60.0%

40,000,000 40.0%

20,000,000 20.0%

- FY 2010e 0.0%
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

FY 2010e
FY 2006

FY 2007

FY 2008

FY 2011F

FY 2012F
FY2009
Source: Banks financial statements Source: Banks financial statements, HSC calculation

Total operating income

Combining the income from the above four seg- However we forecast that banks such as EIB will see
ments we estimate that FY2010 total aggregate op- FY2011 & FY2012 growth of 30.4% and 22% respec-
erating income for the top 16 banks rose by 19.8% to tively y/y; followed by MB with 21.6% and 23.6% re-
VND87,643 billion. And we forecast is will rise by 17.8% spectively y/y. These banks lag somewhat behind the
to VND103,262 billion in FY2011 and then rising further big private sector trio of ACB, STB and TCB in terms
by 15.4% to VND119,181 in FY2012. In FY2010 we es- of branch network and therefore still have some catch-
timate that SOCBs accounted for 62% of this falling to ing up to do. And with lower funding costs and access
60% by FY2012. to abundant capital sources they should post superior
growth over the next few years.
The 4 SOCBs still dominate with ACB, the largest pri-
vate sector bank earning just over half of what the small- Amongst the smaller banks we forecast SHB will grow
est SOCB, Vietcombank (VCB) is estimated to have operating income by 30% and 23.3% y/y in FY2011 and
earned in FY2010. However the gap is closing steadily FY2012 respectively followed by HBB with 15.9% and
as back in FY2005 VCB earned 6 times more operat- 13.6% growth respectively.
ing income than ACB. Amongst the larger private sector
banks; TCB has seen the fastest growth with a CAGR And amongst the SOCBs we see VCB growing the fast-
of 63.2% over the past five years to FY2010 followed est and forecast total operating income growth of 20.4%
by MB and then EIB. Going forward as growth in the and 15.4% y/y respectively in FY2011 and FY2012.
banking sector slows somewhat we expect aggregate
operating income growth will also slow somewhat.

SOCB vs JSCB share of operating income Banks with fastest operating icnoem growth
90%
SOCB share JSCB share 150.0%
80%
EIB MB
70%
100.0% SHB TCB
60%

50%
50.0%
40%

30%
0.0%
20%

10%

0% -50.0%
FY 2010e
FY 2006

FY 2007

FY 2008

FY 2011F

FY 2012F
FY2009
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

Source: Banks financial statements, HSC calculation Source: Banks financial statements, HSC calculation

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
Selected banks overall operating incomes (Unit: VNDmn)
Type Short FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F Cumulative CAGR Share of Current
name overall overall income market
incomes increase share for

www.hsc.com.vn
FY2005-10e FY2005-10e FY2010e

SOCB VBARD 8,154,930 10,971,313 15,838,790 19,540,805 17,128,356 19,925,376 22,862,108 25,484,554 34.5% 44.4% 23.4% -12.3% 16.3% 14.7% 11.5% 144.3% 19.6% 18.4% 22.7%

SOCB BIDV 4,098,343 4,740,071 7,810,904 7,570,430 10,266,996 12,056,461 14,012,287 16,148,104 15.7% 64.8% -3.1% 35.6% 17.4% 16.2% 15.2% 194.2% 24.1% 12.5% 13.8%

SOCB CTG 3,808,236 4,571,569 6,505,959 8,694,251 9,680,349 12,005,005 13,694,501 15,562,313 20.0% 42.3% 33.6% 11.3% 24.0% 14.1% 13.6% 215.2% 25.8% 12.8% 13.7%

SOCB VCB 4,285,369 5,281,403 5,784,913 8,902,516 9,286,804 10,691,085 12,867,486 14,849,497 23.2% 9.5% 53.9% 4.3% 15.1% 20.4% 15.4% 149.5% 20.1% 10.0% 12.2%

Total SOCB operat- 20,346,878 25,564,356 35,940,566 44,708,002 46,362,505 54,677,926 63,436,383 72,044,468 25.6% 40.6% 24.4% 3.7% 17.9% 16.0% 13.6% 168.7% 21.9% 53.7% 62.4%
ing income

JSCB ACB 685,283 1,141,948 3,020,822 4,239,476 4,935,070 5,702,521 6,904,332 8,176,841 66.6% 164.5% 40.3% 16.4% 15.6% 21.1% 18.4% 732.1% 52.8% 7.9% 6.5%

JSCB STB 590,227 1,062,495 2,441,583 2,453,959 4,096,127 4,416,307 5,263,562 6,238,128 80.0% 129.8% 0.5% 66.9% 7.8% 19.2% 18.5% 648.2% 49.6% 6.0% 5.0%

JSCB EIB 357,720 590,000 1,016,602 1,892,046 2,575,929 3,575,510 4,661,596 5,688,269 64.9% 72.3% 86.1% 36.1% 38.8% 30.4% 22.0% 899.5% 58.5% 5.0% 4.1%

JSCB TCB 435,085 611,359 1,216,008 3,290,296 3,823,355 5,041,872 5,941,665 7,166,960 40.5% 98.9% 170.6% 16.2% 31.9% 17.8% 20.6% 1058.8% 63.2% 7.2% 5.8%

JSCB MB 299,992 572,689 1,054,432 1,638,084 2,653,511 3,375,411 4,106,075 5,076,047 90.9% 84.1% 55.4% 62.0% 27.2% 21.6% 23.6% 1025.2% 62.3% 4.8% 3.9%

JSCB EAB 296,227 431,449 853,022 1,479,071 1,663,581 1,796,515 1,992,312 2,252,056 45.6% 97.7% 73.4% 12.5% 8.0% 10.9% 13.0% 506.5% 43.4% 2.3% 2.0%

JSCB MSB 162,113 234,523 436,215 802,906 1,675,155 2,739,953 3,409,753 3,896,957 44.7% 86.0% 84.1% 108.6% 63.6% 24.4% 14.3% 1590.1% 76.0% 4.0% 3.1%

JSCB VIB 208,581 1,826,126 884,228 909,999 1,593,264 1,728,591 1,962,844 2,236,401 72.4% 83.4% 2.9% 75.1% 8.5% 13.6% 13.9% 728.7% 52.6% 2.4% 2.0%

JSCB SHB 30,170 262,338 1,477,777 861,992 1,357,856 1,765,212 2,175,702 72.4% 83.4% -41.7% -41.7% 57.5% 30.0% 23.3% 2.1% 1.5%

JSCB SCB 122,242 298,150 666,491 1,227,311 1,066,526 978,218 1,250,286 1,313,992 143.9% 123.5% 84.1% -13.1% -8.3% 27.8% 5.1% 700.2% 51.6% 1.3% 1.1%

JSCB HBB 177,153 387,903 737,941 849,795 902,372 1,199,431 1,390,375 1,579,893 119.0% 90.2% 15.2% 6.2% 32.9% 15.9% 13.6% 577.1% 46.6% 1.6% 1.4%

JSCB SEABank 76,836 195,846 552,333 470,760 949,027 1,053,568 1,177,962 1,335,756 154.9% 182.0% -14.8% 101.6% 11.0% 11.8% 13.4% 1271.2% 68.8% 1.5% 1.2%

Total JSCB operat- 3,411,459 7,382,658 13,142,014 20,731,480 26,795,909 32,965,752 39,825,974 47,137,000 116.4% 78.0% 57.7% 29.3% 23.0% 20.8% 18.4% 866.3% 57.4% 44.7% 37.6%
ing income

Total operating 23,758,337 32,947,014 49,082,580 65,439,482 73,158,414 87,643,678 103,262,357 119,181,468 38.7% 49.0% 33.3% 11.8% 19.8% 17.8% 15.4% 268.9% 29.8% 98.4%
income

SOCB share 86% 78% 73% 68% 63% 62% 61% 60%

JSCB share 14% 22% 27% 32% 37% 38% 39% 40%

Source - Banks, HSC


September
February 2011
July 14h 2008

2009

Page 92

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July 14h 2008

February 2011
September 2009

Top 16 banks cost to income ratio by type Banks with the lowest cost to income ratio
55.00%
48.00%
EIB TCB
50.00% Total SCOB CIR 43.00%
SEABank MB
Total JSCB CIR
38.00%
45.00% Total
33.00%
40.00%
28.00%
35.00%
23.00%

30.00%
18.00%
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011F

FY2012F

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY2011F

FY2012F
Source: Banks financial statements, HSC calculation Source: Banks financial statements, HSC calculation

Cost to income ratio

The cost to income ratio is the key measure for as- SOCBs are expected to have a aggregate cost to in-
sessing the efficiency of a banks operations. Generally come ratio of 51.4% this year having fluctuated between
speaking a banks cost to income ration should be below that and 38% over the past five years. And last year
50%. For the top 16 banks the cost to income ratio has this ratio was already 49.5%. Looking at individual state
fluctuated between 36.7% and 46.5% over the past five owned banks CTG has the highest cost to income ratio
years which is a fairly wide spread. And the latter num- at a whopping 62% expected this year (up from 55.9%
ber is the forecast for FY2010 suggesting that banks last year); followed by Agribank at 57% which has been
cost base have never been higher than now. consistently high. BIDV is reasonable at 44.4% while
VCB is very low at 37.9%. All these are the expected
The cost to income ratio is calculated by dividing to- FY2010 number. The inefficiency of Agribank should
tal administration expenses by net operating income. surprise no-one but CTG is partly privatized already and
Therefore it includes most of the operating costs of the needs to address this problem urgently if it is to boost
bank such as salaries & associated cost; rent; fixed margins.
asset depreciation and marketing costs. It does not of
course include direct funding costs. Amongst the JSCBs the fluctuation of the aggregate cost
to income ratio has been between 33% and 39.4%. For
Over the last five years administration expenses have FY2010 we expect it to come in at 38.5% (compared to
grown at a CAGR of 30.8% compared to a CAGR of 36.7% last year). Looking at individual banks the bank
28.5% for net operating income. And the divergence in with the lowest expected cost to income ratio in FY2010
growth rates has been consistent over the past three is Seabank with 28.1% followed by TCB with 30.1%.
years. The increase in costs has been concurrent with At the other end we have VIB expected at 54.4%; STB
network expansion suggesting that growing deposits at 51.75% and then EAB at 47.5%. Over the past five
through adding new branches is a more expensive way years the highest cost to income ratio in the private sec-
of funding growth. However with regulations cracking tor was recorded by VIB at 66.6% followed by SCB with
down in alternatives such as interbank funding banks 62.6%.
have little choice.
The banks with the most consistent and low cost to in-
We dont have a breakdown for all banks but we do come ratios over the past five years include MB; EIB;
know that rising personnel costs are one of the key fac- MSB and HBB. While amongst the SOCBs that acco-
tors here. With skilled staff in shortage banks resort to lade goes to VCB. Clearly then the private sector runs its
salary inflation to entice away qualified staff from com- affairs far more efficiently than the public sector banks.
petitors to allow them to increase staff numbers. This And given that they are a lot smaller and with fixed costs
is implied by the fairly low CAGR of 13.4% for network in this sector quite high (due to capital investment) the
expansion over the past five years. Which strongly sug- disparity is even greater.
gests that it is average staff cost per branch that has
grown exponentially.

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Cost income ratio for top 16 banks
Type Short FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F Average CIR
name

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SOCB VBARD 57.11% 47.61% 42.68% 47.80% 55.13% 54.50% 54.62% 56.35% -9.50% -4.93% 5.13% 7.33% -0.63% 1.30% 2.97% 50.80%

SOCB BIDV 32.35% 34.47% 30.53% 45.54% 44.18% 43.27% 42.81% 42.72% 2.12% -3.94% 15.01% -1.36% 0.17% 0.85% 1.06% 38.57%

SOCB CTG 47.02% 46.84% 42.52% 57.02% 55.94% 52.58% 58.33% 59.09% -0.18% -4.32% 14.51% -1.08% -2.49% 5.77% 0.49% 50.46%

SOCB VCB 22.56% 22.98% 30.39% 30.26% 37.62% 37.30% 37.29% 37.44% 0.41% 7.41% -0.13% 7.36% 0.26% 0.28% 0.37% 30.28%

Total SCOB CIR 42.96% 39.95% 38.03% 45.72% 49.37% 48.24% 49.30% 49.99% -3.01% -1.91% 7.69% 3.65% -0.44% 1.96% 1.44% 44.16%

JSCB ACB 42.16% 40.49% 26.64% 37.53% 36.67% 39.30% 39.66% 40.08% -1.67% -13.86% 10.89% -0.86% 2.12% 0.06% 0.12% 37.05%

JSCB STB 44.10% 38.43% 30.36% 51.75% 40.01% 46.15% 47.92% 48.61% -5.68% -8.07% 21.39% -11.74% 6.15% 1.77% 0.68% 41.80%

JSCB EIB 32.73% 31.30% 34.79% 31.85% 35.21% 30.95% 29.20% 29.43% -1.43% 3.48% -2.93% 3.36% -3.39% -0.62% 0.50% 32.95%

JSCB TCB 33.70% 41.21% 34.98% 27.67% 31.27% 29.35% 30.88% 31.75% 7.51% -6.23% -7.31% 3.60% 0.84% 3.60% 1.71% 33.49%

JSCB MB 24.97% 31.03% 34.23% 33.91% 29.55% 31.41% 32.36% 32.77% 6.06% 3.20% -0.32% -4.36% 2.63% -0.71% -0.03% 30.98%

JSCB EAB 47.52% 45.44% 40.89% 38.25% 43.82% 46.66% 48.98% 50.25% -2.09% -4.54% -2.65% 5.57% 2.84% 2.31% 1.27% 43.76%

JSCB MSB 37.29% 35.58% 31.70% 36.32% 30.39% 36.76% 38.10% 39.72% -1.71% -3.88% 4.61% -5.93% 6.44% -1.32% 1.84% 34.69%

JSCB VIB 54.33% 39.12% 43.88% 66.60% 54.39% 54.39% 55.09% 55.60% -42.70% 32.25% 22.73% -12.21% 0.00% 0.69% 0.51% 47.54%

JSCB SHB 0.00% 53.43% 28.05% 12.89% 39.46% 45.66% 42.15% 41.26% 53.43% -25.38% -15.16% 26.57% 6.20% -3.51% -0.89% 29.92%

JSCB SCB 47.01% 39.81% 62.58% 38.02% 42.68% 47.00% 42.29% 45.07% -7.20% 22.77% -24.55% 4.66% 4.32% -4.71% 2.78% 46.18%

JSCB HBB 33.46% 28.06% 26.05% 30.48% 37.67% 35.14% 37.53% 41.02% -5.40% -2.00% 4.43% 7.18% -2.53% 2.39% 3.49% 31.81%

JSCB SEABank 34.09% 26.62% 18.81% 42.33% 28.09% 28.09% 29.57% 30.63% -7.48% -7.80% 23.52% -14.24% 0.00% 1.48% 1.06% 29.67%

Total JSCB CIR 39.44% 30.78% 33.08% 36.22% 36.73% 37.95% 38.38% 39.02% -8.65% 2.30% 3.13% 0.51% 1.93% 0.41% 0.68% 35.82%

Total 42.45% 37.89% 36.71% 42.71% 44.74% 44.37% 45.09% 45.65% -4.56% -1.19% 6.00% 2.03% 0.40% 1.22% 0.96% 41.61%

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 94

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

So whats the reason?

The clue lies with the number of branches. Agribank will


have an expected 2300 branches by end FY2010 while
CTG is expected to have 1124 branches. This compares
with 368 expected for VCB and 267 over at ACB. And
then STB with 355 branches also has carries a high cost
burden. However that still doesnt explain why a VIB or
SCB have high costs as neither has that large a network
relative to their size. Indeed their average deposit per
branch is unremarkable; neither very high nor very low.

www.hsc.com.vn Page 95

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July 14h 2008

February 2011
September 2009

Provision as a % of total operating income Banks with high provisions as a % of operating income
0.0%
0.0%
-5.0%
-10.0%
-10.0%

-15.0% -20.0%
-20.0%
-30.0%
-25.0%

-30.0% Total SOCB -40.0%


VBARD BIDV
-35.0% Total JSCB
-50.0%
-40.0% TCB SCB
Total
-45.0% -60.0%

FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
FY 2011F

FY 2012F
FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

Source: HSC compiles Source: HSC compiles

Provisions

The top 16 banks have booked provisions between Amongst the individual banks we see that the levels
38.2% of total operating income in FY2005 and 14.5% in of provisioning for VBARD & BIDV amongst the state
FY2009. And we estimate that they will book provisions owned banks and then TCB & SCB amongst private
of 17% of total operating income in FY2010. Then going sector banks have tended to be higher than the averag-
forward HSC forecasts this will rise gently to 17.4% in es. This of course is directly related to their lending poli-
FY2011 and 17.2% in FY2012. There is a wide variance cies and for VBARD especially is simply a professional
between provisioning amongst the SOCBs and JSCBs. hazard given the mission to provide loans to small scale
For SOCBs provisions have ranged between 42.5% farmers nationwide. TCB and SCB has been amongst
of total operating profit in FY2005 to a low of 17.7% in the most aggressive banks in terms of expanding their
FY2009. And for this year we estimate this will rise to loan book and higher provisioning is the cost they have
20.5% before rising further to 20.9% next year and then been happy to pay for that so far.
stabilising at 20.1% in FY2012.
Under SBV regulations all banks must keep a general
Then for JSCBs historically the number has ranged be- provision equal to 0.75% of the value of their loanbook.
tween 12.5% of total operating profit in FY2005 to 9% in And then banks must make separate and specific pro-
FY2009 with a number of 11.1% expected for FY2010. visions which are closely related to the percentage of
And HSC forecasts this will rise to 11.9% and 12.7% their loans held in each of groups 2-5. These specific
in FY2011 and FY2012 respectively. Compared to the provisions must of course be signed off by their auditors
JSCBs which have reported fairly stable provisioning in the year-end accounts. The practice of making spe-
over the last 5 years that of SOCBs have been quite cific provisions in Q4 has emerged as the regulations
volatile. And indeed if our numbers went back further we only require this to appear in the year-end accounts.
understand the provisioning levels for the state owned Therefore bank half year and quarterly earnings (where
banks would have been even higher. they are published) generally understate provisions and
hence overstate profitability.
Our forecasts for the SOCBs are very lowballed because
we believe that provisioning levels is not something the The story for the general provision is a little different De-
state owned banks decide by themselves but rather is cree 493 marked the first attempt by the SBV to force
something decided in discussion with relevant govern- banks to apply general and specific provisions and in
ment agencies. practice during FY2008-2010 banks have gradually ap-
plied a full 0.75% general provision for loan groups 1-4.
Therefore our number does not at this stage assume However the regulation also requires the banks to apply
any large scale write-ups for Vinashin simply because the general provision on a monthly basis.
we have no idea when and if this might happen. At the
moment the restructuring is in the early stages and it Then with listed companies published biannual accounts
would be premature to assume any particular level of and unlisted companies annual accounts at best only an
provisioning. However readers should bear that in mind annual review of the loan book is possible. So accurate
when looking at the numbers as they could change signif- provisioning is therefore likely to conducted only once
icantly going forward depending on how things pan out. a year.

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July 14h 2008

February 2011
September 2009

Provisions
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F
SOCB VBARD (3,106,993) (4,499,879) (6,782,200) (7,410,685) (4,891,641) (5,500,000) (6,361,509) (6,361,509)
SOCB BIDV (2,031,687) (1,993,491) (3,397,837) (1,754,080) (2,012,282) (3,013,370) (4,098,020) (5,220,877)
SOCB CTG (1,492,506) (1,600,256) (2,353,568) (1,299,993) (507,900) (1,344,760) (1,424,470) (1,451,324)
SOCB VCB (2,025,876) (1,190,825) (1,294,405) (2,883,937) (788,513) (1,367,470) (1,364,373) (1,453,465)
Total SOCB (8,657,062) (9,284,451) (13,828,010) (13,348,695) (8,200,336) (11,225,599) (13,248,370) (14,487,175)
JSCB ACB (5,992) (40,597) (89,357) (87,993) (287,444) (359,478) (558,712) (718,629)
JSCB STB (23,449) (42,902) (118,387) (74,097) (282,429) (347,953) (495,981) (734,495)
JSCB EIB (212,078) (46,736) (34,126) (320,144) (136,085) (290,965) (392,784) (501,806)
JSCB TCB (2,395) (2,884) (80,887) (763,930) (481,485) (955,404) (1,011,655) (1,168,886)
JSCB MB (76,469) (125,463) (84,561) (221,763) (364,382) (322,658) (403,714) (497,633)
JSCB EAB (17,001) (24,618) (50,516) (210,192) (146,848) (313,903) (378,575) (463,726)
JSCB MSB -56,681 (41,644) (58,060) (74,303) (160,720) (237,823) (262,013) (326,151)
JSCB VIB (107,637) (70,572) (73,476) (112,351) (126,296) (215,213) (315,432)
JSCB SHB (4,254) (12,518) (17,891) (104,669) (110,000) (266,700) (373,380)
JSCB SCB (18,086) (27,027) (33,923) (114,215) (203,917) (300,000) (350,000) (350,000)
JSCB HBB (14,783) (31,025) (84,923) (110,315) (57,626) (184,061) (218,418) (247,197)
JSCB SEABank (5) (6,843) (39,658) (33,283) (82,122) (94,440) (186,992) (280,488)
Total JSCB (426,939) (501,630) (757,488) (2,101,602) (2,420,078) (3,642,982) (4,740,756) (5,977,823)
Grand total (9,084,001) (9,786,081) (14,585,498) (15,450,297) (10,620,414) (14,868,582) (17,989,127) (20,464,998)
Source: Banks, HSC

Provision as % of total operating income


FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F
SOCB VBARD -38.1% -41.0% -42.8% -37.9% -28.6% -27.6% -27.8% -25.0%
SOCB BIDV -49.6% -42.1% -43.5% -23.2% -19.6% -25.0% -29.2% -32.3%
SOCB CTG -39.2% -35.0% -36.2% -15.0% -5.2% -11.2% -10.4% -9.3%
SOCB VCB -47.3% -22.5% -22.4% -32.4% -8.5% -12.8% -10.6% -9.8%
Total SOCB -42.5% -36.3% -38.5% -29.9% -17.7% -20.5% -20.9% -20.1%
JSCB ACB -0.9% -3.6% -3.0% -2.1% -5.8% -6.3% -8.1% -8.8%
JSCB STB -4.0% -4.0% -4.8% -3.0% -6.9% -7.9% -9.4% -11.8%
JSCB EIB -59.3% -7.9% -3.4% -16.9% -5.3% -8.1% -8.4% -8.8%
JSCB TCB -0.6% -0.5% -6.7% -23.2% -12.6% -18.9% -17.0% -16.3%
JSCB MB -25.5% -21.9% -8.0% -13.5% -13.7% -9.6% -9.8% -9.8%
JSCB EAB -5.7% -5.7% -5.9% -14.2% -8.8% -17.5% -19.0% -20.6%
JSCB MSB -35.0% -17.8% -13.3% -9.3% -9.6% -8.7% -7.7% -8.4%
JSCB VIB 0.0% -5.9% -8.0% -8.1% -7.1% -7.3% -11.0% -14.1%
JSCB SHB -14.1% -4.8% -1.2% -12.1% -8.1% -15.1% -17.2%
JSCB SCB -14.8% -9.1% -5.1% -9.3% -19.1% -30.7% -28.0% -26.6%
JSCB HBB -8.3% -8.0% -11.5% -13.0% -6.4% -15.3% -15.7% -15.6%
JSCB SEABank 0.0% -3.5% -7.2% -7.1% -8.7% -9.0% -15.9% -21.0%
Total JSCB -12.5% -6.8% -5.8% -10.1% -9.0% -11.1% -11.9% -12.7%
Grand total -38.2% -29.7% -29.7% -23.6% -14.5% -17.0% -17.4% -17.2%
Source: Banks, HSC

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July 14h 2008

February 2011
September 2009

Highest net profit margin banks Lowest net profit margin banks
45.0%
50.0%

40.0% VBARD
45.0%
EAB
35.0%
40.0% BIDV

30.0% SCB
35.0%

25.0%
30.0%
EIB MB
25.0% 20.0%

20.0% VCB MSB 15.0%

15.0% 10.0%

10.0% 5.0%

5.0% 0.0%
FY 2010e

FY 2011F

FY 2012F
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009

FY 2010e
FY 2005

FY 2006

FY 2007

FY 2008

FY 2009
FY 2011F

FY 2012F
Source: HSC compiles Source: HSC compiles

Net profit and margins

Net profit for the top 16 banks has grown substantially of this is due to a sharp fall in provisioning coupled with
at a CAGR of 50.6% over the past five years and is es- lower funding costs. Margins for the overall banking sys-
timated by us to come to VND25,740 billion this year, tem have more than doubled in five years as provision-
up 14% y/y. And for FY2011 and FY2012 we forecast ing has fallen. In FY2011 we see two contrary trends;
it will growth to VND29,480 billion and VND33,833 bil- a large equity injection lowering funding costs (but not
lion respectively, up 15% y/y in both years. As for the enough to counteract rising labour costs) but then on
SOCBs they have seen net profit grow at a CAGR of the other hand the likelihood of somewhat higher provi-
43.9% while the JSCBs have seen their net profits grow sioning. Netting these out, margins will fall very slightly
at a CAGR of exactly 60%. The SOCBs share of net according to our models.
profits has dropped from 63.3% in FY2005 to an esti-
mated 50.4% in FY2010. Therefore in the current cycle we think that net margins
peaked already in FY2009 but whether or not they fall
Looking at net margins they have ranged from 14% in going forward is likely to be determined mainly by the
FY2005 to 30.8% in FY2009 and are estimated by us to level of future provisioning by the SOCBs. In contrast
dip slightly to 29.4% in FY2010. Then looking forward we believe that margins for private sector banks will fall
we estimate that net margins will fall in FY2011 to 28.4% only slightly. Their provisioning will increase and we also
and then flat in FY2012 at 28.5%. The contrast between forecast CIRs will rise slightly.
margins for JSCBs and SOCBs is quite dramatic and
in FY2010 is estimated by us at 38.8% and 23.7% re- However with very little capital raising expected in
spectively. FY2011 the impact of dilution should peak this year.
Which means that even with slightly falling net margins
By bank EIB boasts the highest net margins which are we should see a recovery in EPS growth from FY2012.
estimated by us at 48% in FY2010; followed by MB with And that is the key point. Banks earnings are compli-
44.9% and then MSB at 41.4%. ACB held the crown cated equations but we can summarize the two year
but has seen margins fall sharply from a peak of 58% forward earnings outlook as follows.
in FY2007 to an estimated 40.8% in FY2010. STB has
suffered a similar fate and in both cases the loss of the Deposit and lending growth will slow from now as net-
lucrative gold business is the culprit. At the other end of work expansion has likely peaked. Net interest margins
the scale the lowest net margins belong to VBARD with will dip very slightly but we should see continued double
an estimated 13.2% in FY2010; followed by SCB with digit growth in all key earning segments. Cost to income
16.7% and then BIDV with 24.4%. All based on HSC ratio will rise a little and NPLs will rise gradually driv-
estimates. Net margins simply put is determined by a en by cyclical and secular trends as will provisioning.
combination of the cost to income ratio and provisions. Therefore we do believe that net profit margins have
likely peaked in the current cycle.
A bank like EIB which enjoys a low CIR and manages its
provisioning effectively has been able to boost margins But after the huge capital injection in FY2010 the dilution
over the last five years from a lowly 5.9% to 48%. Much effect will peak this year and will drop out next year.

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July 14h 2008

February 2011
September 2009

The two main risks to our scenario would be higher than


expected provisioning in the SOCBs or a spike in fund-
ing costs leading to lower than expected NIMs. Beyond
that a currency crisis would also do great damage to
banking sector earnings.

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Net profit for selected banks (Unit: VNDmn)
% y/y change Other
Short cumulative
Type CARG
name FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F income

www.hsc.com.vn
FY2005-10
SOCB VBARD 290,087 901,491 1,656,408 2,124,004 1,776,302 2,624,554 3,056,798 3,751,620 211% 84% 28% -16% 48% 16% 23% 805% 55.3%

SOCB BIDV 559,993 1,001,713 1,531,416 1,997,305 2,930,532 2,943,396 3,235,296 3,330,279 79% 53% 30% 47% 0% 10% 3% 426% 39.4%

SOCB CTG 423,093 602,800 1,006,721 1,804,546 2,862,879 3,308,323 3,285,306 3,757,466 42% 67% 79% 59% 16% -1% 14% 682% 50.9%

SOCB VCB 825,223 1,860,374 2,038,876 2,520,214 3,921,356 4,086,613 5,139,174 6,011,593 125% 10% 24% 56% 4% 26% 17% 395% 37.7%

Total SOCB net 2,098,396 4,366,378 6,233,421 8,446,069 11,491,069 14,716,574 16,850,958 108% 43% 35% 36% 13% 14% 15% 518% 43.9%
profit 12,962,886

JSCB ACB 299,201 457,284 1,760,008 2,210,682 2,201,204 2,326,458 2,705,603 3,135,689 53% 285% 26% 0% 6% 16% 16% 678% 50.7%

JSCB STB 232,088 470,128 1,397,897 954,753 1,670,559 1,522,577 1,683,773 1,853,520 103% 197% -32% 75% -9% 11% 10% 556% 45.7%

JSCB EIB 21,101 258,469 463,417 711,013 1,144,422 1,715,950 2,180,761 2,634,203 1125% 79% 53% 61% 50% 27% 21% 8032% 141.0%

JSCB TCB 206,156 256,906 510,384 1,183,083 1,618,780 1,955,064 2,321,373 2,792,148 25% 99% 132% 37% 21% 19% 20% 848% 56.8%

JSCB MB 109,045 218,922 493,533 689,042 1,094,721 1,513,887 1,684,974 2,069,735 101% 125% 40% 59% 38% 11% 23% 1288% 69.2%

JSCB EAB 100,842 159,951 331,873 538,737 587,648 483,212 478,454 492,457 59% 107% 62% 9% -18% -1% 3% 379% 36.8%

JSCB MSB 32,569 79,068 172,846 316,650 772,886 1,135,620 1,403,613 1,538,134 143% 119% 83% 144% 47% 24% 10% 3387% 103.5%

JSCB VIB 69,281 168,712 308,822 168,844 463,216 491,752 488,391 492,787 144% 83% -45% 174% 6% -1% 1% 610% 48.0%

JSCB SHB 7,054 126,889 294,760 320,405 481,496 565,884 685,070 1699% 132% 9% 50% 18% 21% 6726% 187.4%

JSCB SCB 33,295 109,890 163,283 463,890 298,821 163,819 278,644 278,834 230% 49% 184% -36% -45% 70% 0% 392% 37.5%

JSCB HBB 75,190 185,193 365,632 352,167 407,547 480,308 491,547 518,729 146% 97% -4% 16% 18% 2% 6% 539% 44.9%

JSCB SEA- 40,103 98,551 298,964 172,960 459,800 507,943 480,539 479,932 146% 203% -42% 166% 10% -5% 0% 1167% 66.2%
Bank

Total JSCB net 1,218,871 2,470,127 6,393,548 8,056,581 11,040,009 12,778,088 14,763,555 16,971,241 103% 159% 26% 37% 16% 16% 15% 948% 60.0%
profit

Grand total net 3,317,267 6,836,505 12,626,969 16,502,650 22,531,077 25,740,974 29,480,129 33,822,198 106% 85% 31% 37% 14% 15% 15% 676% 50.6%
profit

% net profit by 63.3% 63.9% 49.4% 51.2% 51.0% 50.4% 49.9% 49.8%
SOCB

% net profit by 36.7% 36.1% 50.6% 48.8% 49.0% 49.6% 50.1% 50.2%
JSCB

Source: Banks, HSC


September
February 2011
July 14h 2008

2009

Page 100

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July 14h 2008

February 2011
September 2009

Net profit margin (Unit: VNDbn)


Type Short name FY2005 FY2006 FY2007 FY2008 FY2009 FY2010F FY2011F FY2012F
SOCB VBARD 3.6% 8.2% 10.5% 10.9% 10.4% 13.2% 13.4% 14.7%
SOCB BIDV 13.7% 21.1% 19.6% 26.4% 28.5% 24.4% 23.1% 20.6%
SOCB CTG 11.1% 13.2% 15.5% 20.8% 29.6% 27.6% 24.0% 24.1%
SOCB VCB 19.3% 35.2% 35.2% 28.3% 42.2% 38.2% 39.9% 40.5%
Total SOCB net profit margin 10.3% 17.1% 17.3% 18.9% 24.8% 23.7% 23.2% 23.4%
JSCB ACB 43.7% 40.0% 58.3% 52.1% 44.6% 40.8% 39.2% 38.3%
JSCB STB 39.3% 44.2% 57.3% 38.9% 40.8% 34.5% 32.0% 29.7%
JSCB EIB 5.9% 43.8% 45.6% 37.6% 44.4% 48.0% 46.8% 46.3%
JSCB TCB 47.4% 42.0% 42.0% 36.0% 42.3% 38.8% 39.1% 39.0%
JSCB MB 36.3% 38.2% 46.8% 42.1% 41.3% 44.9% 41.0% 40.8%
JSCB EAB 34.0% 37.1% 38.9% 36.4% 35.3% 26.9% 24.0% 21.9%
JSCB MSB 20.1% 33.7% 39.6% 39.4% 46.1% 41.4% 41.2% 39.5%
JSCB VIB 33.2% 9.2% 34.9% 18.6% 29.1% 28.4% 24.9% 22.0%
JSCB SHB 23.4% 48.4% 19.9% 37.2% 35.5% 32.1% 31.5%
JSCB SCB 27.2% 36.9% 24.5% 37.8% 28.0% 16.7% 22.3% 21.2%
JSCB HBB 42.4% 47.7% 49.5% 41.4% 45.2% 40.0% 35.4% 32.8%
JSCB SEABank 52.2% 50.3% 54.1% 36.7% 48.4% 48.2% 40.8% 35.9%
Total JSCB net profit margin 35.7% 33.5% 48.6% 38.9% 41.2% 38.8% 37.1% 36.0%
Total net profit margin 14.0% 20.8% 25.7% 25.2% 30.8% 29.4% 28.5% 28.4%
Source: Banks, HSC

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July 14h 2008

February 2011
September 2009

Listed bank results and snaphot 1-H FY2010


Total assets Equity for Corporate Total deposit Loans LDR CAR (*) Tier 1 Tier 2 ROAA ROAE
(as of 30 lending demand capital captial
June 2010) deposit
SOCB
1 CTG 294,637,802 11,462,092 27,199,613 192,288,073 187,091,562 91.8% 15.00% 3,425,920 62,575
2 VCB 247,568,368 12,056,512 51,280,864 155,785,956 152,909,690 91.1% 8.9% 3,931,116 145,519
JSCB
1 ACB 176,999,825 6,660,167 7,932,698 112,524,411 72,392,900 60.7% 9.00% 6,065,414 710,036 1.2% 20.2%
2 STB 119,670,810 6,490,934 8,897,799 88,756,631 74,205,217 77.9% 9.60% 8,173,858 474,100 1.35% 14%
3 EIB 73,693,795 11,582,901 3,808,273 52,700,818 42,952,793 66.8% 21.00% 12,464,796 244,084 2% 10%
4 HBB 29,580,762 3,099,417 1,089,784 23,229,832 15,500,044 58.9% 8.06% 11,484,457 336,102
5 MSB 82,124,804 3,633,769 5,430,387 59,389,676 26,269,050 41.7% 8.11% 13,590,697 652,991

Note: FY2009 fugures; HSC estimates were based on banks financial reports; (*) Banks figures
Source: Banks, HSC

1-H FY2010 performance

We have received published half yearly income state- Then total operating income fell 2.7% y/y to VNBD18,126
ment & balance sheet numbers only for the 6 listed billion. However a sharp 35.5% y/y increase in provi-
banks (VCB, CTG, ACB, STB, EIB and HBB) as the un- sions to VND1,458 billion coupled with a slightly higher
listed banks report half year numbers only to the SBV. average tax rate pushed net profit down by 23.2% y/y
And looking at the aggregate numbers we see that total to VND6,166.
operating income fell 2.7% to VND18,126 billion yielding
a 23% drop in net profits to VND6,155 billion. Looking at the results by individual banks (remember
this is only the 6 listed banks we are talking about) we
Of the four main income segments; net interest income noted a very wide variance for example in net interest
rose by 7.8% to VND14,229 driven by steady if unspec- income growth in the 1-H FY2010. Net interest income
tacular growth in 1-H credit. Then net fee & commission is the key driver of bank income (accounting for 78.5%
income rose by 5.4% to VND2,193 billion. This number of total 1-H operating income) and ranged from a 34.5%
tracks credit growth usually. However trading & invest- y/y decrease for VCB to an 86.5% y/y increase for ACB.
ment income which is composed of three sub-segments
fell sharply; forex income was down 85.8% to VND0.236 VCBs decline is of course related to the dropping out of
billion; income from trading securities was down 45% the subsidised lending program from the numbers while
to VND0.16 billion while income from securities invest- in ACBs case continued credit growth expansion fuelled
ment was off 51.2% to VND0.268 billion. And other in- by network expansion with growth in NIM as negotiated
come fell 15.1% to VND0.465 billion although dividends lending categories were widened lay behind the strong
surged 106% to VND0.570 billion. performance.

The decline in the stock market coupled with a flat-lining


currency market pushed trading income streams lower
while the anemic growth in 1-H credit was insufficient
to cover the short fall. Fee & commission income was
affected by the move to negotiated lending which belied
the need to charge extra fees plus sluggish commission
revenues from brokerage subsidiaries. Of course the y/y
comparison with the 1-H FY2009 was especially harsh
as all income streams were firing at that time. And we
note that into the 2-H this comparison got much easier.

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July 14h 2008

February 2011
September 2009

FY2010 full year numbers

We have estimated both income statements and bal- Many of the same forces driving the 1-H performance
ance sheets for each of the top 16 banks for the full for those banks that published results will be at play
year FY2010. We have full earnings models for the fol- for the full year. Except that growth in net interest in-
lowing banks (VCB; CTG; BIDV, ACB; STB; TCB, MB, come accelerated dramatically from Q3 as credit growth
EIB, EAB and HBB) and then for the rest we have put surged.
together some rough estimates. In the case of Agribank
and some of the smaller banks these are very rough We note that expenses ranging from interest expenses
indeed due to lack of disclosure about their operations. to administration expenses are grew faster than income
Therefore in those cases please treat our numbers with last year. This can be traced to a rapid growth in net-
due caution. works and higher associated funding costs. Opening
new branches is one of the most expensive ways to in-
We are also aware that in recent weeks many banks crease funds available for lending and other activities.
have published earnings fragments especially for net or We estimate aggregate profit before provision therefore
pretax profits for FY2010 and even included some rough grew 20.6% to VND48,758.
targets for FY2011. These numbers look quite different
to ours in some cases being in fact invariably higher. We We then expect the provision loss to have risen by 40%
note only one thing. to VND14,868 billion having dropped by 31% y/y last
year. Assuming an average tax rate of 24% we are left
These are unaudited numbers and in other jurisdictions with net profit forecast of VND25,939 billion up 14.3%
companies might be heavily fined for releasing such y/y. Last year this bottom line rose 37.4%. In FY2010
unapproved numbers prematurely. In FY2010 several most income lines with the exception of the most impor-
banks were forced by auditors to restate 1-H numbers tant; net interest income have fallen short or declined.
but it appears they have learnt little. The key difference Then with expenses rising faster and provisions rising
usually concerns provisioning levels and treatment of net profit growth is growing more slowly but still looks
forex losses. So we would rather await the audited re- quite decent.
sults and then compare. Meanwhile we will stick to our
own forecasts. Despite a difficult year results this year look better than
expected mainly on strong growth in net interest income
For FY2010 HSC has forecast that net operating income which supported results almost all the way to the bottom
will rise 19.8% y/y to VND87,643 billion. This follows a line. However with such heavy dilution due to the enor-
13.4% y/y increase in FY2009 to VND73,043 billion. mous sums of new capital raised EPS growth in FY2010
Driven by an estimated 31.8% y/y increase in net inter- was still expected to be negative for most banks.
est income and a 18.4% increase in net fees & com-
missions. Interest expenses are expected to grow faster Although we note that with so much capital raised at the
than interest income while the opposite is expected to end of the year a lot of this dilution effect will actually
hold for fee & commission income. fall into FY2011 (given that we use weighted average
outstanding shares to calculate EPS).
Then we estimate a sharp drop in trading and invest-
ment income. This consists of three categories and we
estimate a 29.2% y/y decline in net forex gains; a 63.4%
y/y drop in income from trading securities and 35.2% y/y
drop in income from investment securities. And then we
expect other income to tumble 10.8% y/y.

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July 14h 2008

February 2011
September 2009

Top 16 banks NPL ratios Banks with highest expected NPLs


Average NPL ratios of SOCBs
5.0% 10.0%
4.5% Average NPL ratios of JSCBs 9.0%
4.0% Average NPL ratio 8.0%
3.5% VBARD BIDV
7.0%
3.0% 6.0% SEABank SCB
2.5% 5.0%
2.0% 4.0%
1.5% 3.0%
1.0% 2.0%
0.5%
1.0%
0.0%
0.0%
FY 2010e
FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

FY 2011F

FY 2012F
FY 2010e
FY 2006

FY 2007

FY 2008

FY 2009
Source: Banks financial statements, HSC calculation Source: Banks financial statements, HSC calculation

Issues and concerns

This section discusses some issues of special interest lem as exemplified by Vinashin will start to be written-off
to the overall development of the banking system over gradually (3) a long overdue cyclical increase in NPLs
the next few years. Here we discuss the possibility of an given the huge increase in lending over the past five
uptick in the NPL cycle which has alarmed many foreign years.
commentators. We also look at the current turmoil in the
currency market. And then on a more positive note we However despite this we do not expect to see either a
take a closer look at the regulatory revolution which has sudden or sharp rise in declared NPLs. The level of de-
been taking place over the last 12 months or so and how clared NPLs is still to a large extent governed by how
this will develop going forward. much banks themselves wish to disclose and we see
nothing in the regulatory environment that will change
By and large we see these issues as short to medium that much over the next few years. Vietnam may be
term negatives but also long term positives for banks. moving gradually towards a fuller disclosure of bad
The reason for the long term positive is that they should debts but this is an evolutionary process and will occur
in different ways spur the consolidation process we have over many years.
talked of before.
So those looking for a sharp rise in declared NPLs in
However while the regulatory changes in FY2010 were the next cycle are likely to be disappointed. The underly-
seen as abrupt and indeed wrenching in some instanc- ing levels of bad debts are therefore certainly far higher
es we hope change can be more evolutionary going for- than the declared levels although this is mainly due to
ward. Or at least if the authorities have learnt anything issues with state owned commercial bank loans to cer-
from last year it is that gradual implementation is always tain SOEs. In contrast most of the larger JSCBs keep
preferable in such a fragile environment. Of course this a firm handle on their lending and declared and actual
can lead to complacency or a stand-off. Banks are in NPLs are by and large similar but still not the same.
general still masters in their own houses. And the regu-
latory authorities grip on the sector is still fitful. The reason for this gap is partly regulatory. If any banks
declared NPL ratio exceeds 3%, they start to encounter
The coming NPL up-cycle major regulatory hurdles in their business operation in
areas such as network expansion & new business en-
Over the past three years, the aggregate NPL ratio in try. Furthermore the SBV will send a team into the bank
the banking sector was well contained between 2.18% to begin special supervision. Effectively a 3% or higher
- 2.5%. We view non performing loans as being at the NPL will cost the bank its operational independence.
bottom of their cycle but we believe that they will from For this reason, banks will always try to do everything
now enter a new up-cycle which will see NPLs rise fair- possible to keep their NPL ratio lower than 3%.
ly steadily over the next few years. This will be driven
by three main factors (1) new regulation which will set And indeed to ensure that provision losses dont take a
stricter loan classification plus the gradual application large bite out of their pretax targets, banks try to man-
of a qualitative scoring method (2) The SOE debt prob- age their NPL ratio to a level between 2-3% which is

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Top 16 banks Non-Performing loans
Type Short name FY2005 FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F FY2006 FY2007 FY2008 FY2009 FY2010e FY2011F FY2012F
SOCB VBARD 1.9% 2.5% 2.7% 2.6% 4.0% 5.0% 5.0% 0.6% 0.2% -0.1% 1.4% 1.0% 0.0%

www.hsc.com.vn
SOCB BIDV 9.5% 4.0% 2.7% 2.8% 5.1% 5.1% 5.1% -5.5% -1.3% 0.1% 2.3% 0.0% 0.0%
SOCB CTG 3.9% 2.6% 5.8% 0.6% 3.0% 3.1% 3.2% -1.3% 3.2% -5.2% 2.4% 0.1% 0.2%
SOCB VCB 3.4% 2.7% 3.3% 4.6% 2.5% 3.6% 3.4% 3.4% -0.8% 0.6% 1.3% -2.1% 1.1% -0.1% -0.1%
Average NPL ratios of SOCBs na 4.1% 3.0% 3.6% 2.3% 4.0% 4.4% 4.4% -1.1% 0.6% -1.3% 1.7% 0.4% 0.0%
JSCB ACB 0.3% 0.2% 0.1% 0.9% 0.4% 1.0% 1.5% 1.5% -0.1% -0.1% 0.8% -0.5% 0.6% 0.5% 0.0%
JSCB STB 0.6% 0.7% 0.2% 0.2% 0.6% 1.3% 2.6% 2.6% 0.2% -0.5% 0.0% 0.4% 0.6% 1.3% 0.0%
JSCB EIB 1.1% 0.8% 0.9% 4.7% 1.8% 2.7% 2.7% 2.7% -0.3% 0.0% 3.8% -2.9% 0.9% 0.0% 0.0%
JSCB TCB 0.3% 0.2% 1.4% 2.5% 1.1% 2.1% 2.0% 2.1% -0.1% 1.2% 1.1% -1.4% 0.9% -0.1% 0.1%
JSCB MB 2.8% 1.0% 1.8% 1.7% 3.0% 3.0% 3.0% -1.8% 0.8% -0.2% 1.3% 0.0% 0.0%
JSCB EAB 0.5% 0.8% 0.6% 1.3% 2.5% 2.5% 2.5% 0.3% -0.2% 0.7% 1.2% 0.0% 0.0%
JSCB MSB 1.5% 0.6% 3.0% 3.1% 3.0% 0.0% 1.5% -0.9% 2.4% 0.1% -0.1%
JSCB VIB 1.5% 1.2% 1.8% 1.3% 1.5% 3.0% 3.0% -0.3% 0.6% -0.6% 0.2% 1.5% 0.0%
JSCB SHB 2.0% 2.0% 1.9% 2.8% 2.8% 3.0% 3.0% 0.0% -0.1% 0.9% 0.0% 0.2% 0.0%
JSCB SCB 2.3% 0.3% 0.6% 1.2% 6.0% 6.0% 6.0% -2.0% 0.2% 0.6% 4.8% 0.0% 0.0%
JSCB HBB 1.1% 1.0% 2.5% 3.3% 2.3% 3.3% 2.9% 2.5% -0.2% 1.5% 0.8% -1.0% 1.0% -0.4% -0.4%
JSCB SEABank 2.5% 2.5% 2.5% 2.5% 2.5% 4.0% 4.0% 0.0% 0.0% 0.0% 0.0% 1.5% 0.0%
Average NPL ratios of JSCBs na 1.0% 0.8% 1.6% 1.2% 2.2% 2.6% 2.6% -0.2% 0.8% -0.4% 1.0% 0.4% 0.0%
Average NPL ratio na 3.6% 2.4% 3.0% 1.9% 3.4% 3.8% 3.8% -1.1% 0.6% -1.1% 1.5% 0.4% 0.0%

Source - Banks, HSC


September
February 2011
July 14h 2008

2009

Page 105

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July 14h 2008

February 2011
September 2009

seen as the Goldilocks zone for provisioning; not too low The purpose of decision 493 was to move to a hybrid
to be seen as unrealistic and also not too high to hurt classification system involving both qualitative and
performance. quantitative scoring to reveal a combined recommend-
ed provision for each outstanding debt.
Then we know that estimated interest income can be
estimated only on group 1 loans and if loans are reclas- Specifically according to the existing decision, loans can
sified out of group 1 banks can no longer count on this be classified according to two criteria (1)credit score of
income stream when estimating net interest income. the borrower (the qualitative scoring methodology) (2)
Which is another reason why banks are slow to move a whether or not borrowers have overdue loans and how
loan into groups 2-5. long loans are overdue (quantitative scoring methodol-
ogy).
This can lead to a large gap between declared and as-
sumed NPLs. And this gap which of course can only Some banks have gone through the trial period already
be measured subjectively from the outside could easily and have received SBV approval to apply the new credit
become a credibility gap unless the authorities manage scoring method alongside their current loan classifica-
it judiciously. tion methodology. This as far as we know include VCB,
ACB, BIDV, HBB and MB. And then several more banks
We are still awaiting the announcement of a new De- are still in the trial period.
cree to replace Decision No. 493 (which took effect back
in May 2005) for loan classification. This was originally As banks test new hybrid credit scoring system we note
expected to be issued and put into effect by Q4 FY2010 on average NPLs have been seen to rise by a factor of
but has been delayed. Apparently the draft form is still two from prior levels. And if the increases seen in the
being worked on. Even so the terms of decision no 493 testing phase are followed once the systems are intro-
have not been fully implemented so far as that only a duced in practice then NPLs might be expected to dou-
few banks have actually switched to using qualitative ble. But of course that may be expecting too much and
credit scoring system to rate borrowers and their loans we think concern over this lies behind the very gradual
in addition to the existing quantitative method. introduction of this new methodology.

However we should assume higher NPLs as a % of total


loans over time as more and more banks move closer to
the international standard of accounting for bad debts.

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July 14h 2008

February 2011
September 2009

Decision 493 - how loans are currently classified in Vietnam

Decision 493 which was published in August 2005 is the Minimum allowance for credit losses under current Viet-
current regulation governing loan classification in Viet- namese regulations
nam for credit institutions for the purpose of loss pro-
Class Category Specific provision % General provision %
visioning. In this respect loss reserves are treated as
1 Current 0% 0.75%
operating expenses. The decision sets out two levels of
provisioning; a general provision amounting to 0.75% of 2 Special mention 5% 0.75%
the value of the entire loan book from category 1 through 3 Substandard 20% 0.75%
4 of a 5 point scale. And a specific provision on individual 4 Doubtful 50% 0.75%
loans. The latter is calculated using the same five point 5 Loss 100% 0%
quantitative scale which classifies debt from as follows Source: SBV

Category 1 - pass loans. Where both principal and the


interest are being paid in a timely manner. In decision 493 this qualitative scale simply mirrors the
quantitative scale but this time focusing on the borrow-
Category 2 - special mention loans. Debts that are over- ers ability to repay.
due less than 90 days and all rescheduled debts.
Category 1 - pass. Where the borrower is expected to
Category 3 - sub-standard loans. Debts that are over- repay both principal and interest in a timely fashion.
due between 90 and 180 days and rescheduled debts
that are overdue by less than 90 days. Category 2 - special mention. Where the borrower is
paying both principal and interest in full but there exists
Category 4 - doubtful loans. Debts that are overdue be- signs of decreased payment ability.
tween 181 and 360 days and rescheduled debts that are
overdue by 90 to 180 days. Category 3 - substandard. Timely repayment of princi-
pal and interest is not likely and assumes some loss of
Category 5 - loss loans. Debts that are overdue over principal.
360 days and rescheduled debts overdue more than
180 days. Category 4 - doubtful. Where loss of principal is deemed
highly probable.
Then accordingly banks must make specific provisions
depending on which category a loan falls under ranging Category 5 - loss. Uncollectible debts
from 5% for a category 2 to 100% for a category 5 loan.
These categories are supposed to work alongside the
In conjunction with this quantitative methodology the de- quantitative measures mentioned above and provide
cision introduced for the first time a qualitative approach better forecasting capability for banks. In fact credit in-
that allows banks to assess and grade the borrower as stitutions were given 5 years to phase in Decision 493
well as the loan itself. The quantitative approach alone suggesting that all credit institutions except SOCBs
has long been seen as insufficient as it fails to answer were meant to be fully compliant by August 2010.
the question of how capable or likely a borrower is to
repay a loan but simply focuses on whether they are in However clearly this is not yet the case. And qualita-
fact repaying or not. The qualitative approach is more tive measures remain the exception although more and
predictive and enables banks to provision further in ad- more banks are testing a credit scoring system.
vance of a default event.

Selected quotes from Moody's weekly credit outlook report 29th November 2010
For some Vietnamese banks, especially the state-owned commercial banks (SOCBs), Vinashins debt is their largest debt concentration.
We estimate that these banks could have exposures as high as 3% of their individual loan portfolios. Most of these exposures have not yet been
written off and are still categorized as performing and/or special-mention loans.
If there are long-term delays in debt repayment and a lack of government support, banks will be forced to restructure their loans to Vinashin, or
eventually write off their exposures to the group, potentially eroding their capital.
Vinashin had VND87 trillion ($4.4 billion) debt outstanding at the end of June 2010, and accounted for 4.5% of the countrys gross domestic product
in 2009
We estimate the banking sector to have between 25%-40% of loan exposure to the SOE sector, with joint-stock banks being exposed to a lesser extent"
Source: Moodys weekly credit report

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July 14h 2008

February 2011
September 2009

Vietnam Loan Classification guidelines

Under Decision 493, banks have been required since 2005 to classify their loans into 5 categories reflecting anticipated
credit risk based on payment arrears and qualitative factors evaluated on a case-by-case basis for each loan. The cat-
egories of loans and the criteria for each category are as follows:

Class Category Classification


I Current Undue loans that credit institutions assess that both the principal and the interest will be collected in full when
the due date is reached.
Maximum limit: 1 year for medium and long term loans
Maximum limit: 3 months for short term loans
II Special Mention Loan which are overdue less than 90 days.
Rescheduled loans which are not yet due according to the rescheduled repayment period.
Customer has more than 1 loan with a credit institution and any of those loans is classified into a higher risk
group, classification will be assigned accordingly.
Where credit institution has sufficient evidence to believe that the customers ability of repayment has deterio-
rated, classification will be assigned accordingly.
III Substandard Loans which are overdue from 90 days to 180 days.
Rescheduled loans which are overdue less than 90 days according to the rescheduled repayment period.
Customer has more than 1 loan with a credit institution and any of those loans is classified into a higher risk
group, classification will be assigned accordingly.
Where credit institution has sufficient evidence to believe that the customers ability of repayment has deterio-
rated, classification will be assigned accordingly.
IV Doubtful Loans which are overdue from 181 days to 360 days.
Rescheduled loans which are overdue from 90 days to 180 days according to the rescheduled repayment
period.
Customer has more than 1 loan with a credit institution and any of those loans is classified into a higher risk
group, classification will be assigned accordingly.
Where credit institution has sufficient evidence to believe that the customers ability of repayment has deterio-
rated, classification will be assigned accordingly.
V Loss Loan which are overdue more than 360 days.
Blocked loans awaiting for settlement from the Government.
Rescheduled loans which are overdue more than 180 days.
Customer has more than 1 loan with a credit institution and any of those loans is classified into a higher risk
group, classification will be assigned accordingly.
Where credit institution has sufficient evidence to believe that the customers ability of repayment has deterio-
rated, classification will be assigned accordingly.

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July 14h 2008

February 2011
September 2009

The new draft circular will introduce a more considered qualitative approach

SBV has been for some time drafting a new circular to 2. Much depends on credit officer caliber - Non-fi-
replace Decision 493, the key decision which currently nancial criteria will be given a weighting of 65% and
governs loan classification in Vietnam. According to then their credit history or financial circumstance will
what we know about the draft of this new circular, go- account for the balance of 35%. This credit rating
ing forward loan classification will be governed by two grades will depend very heavily on credit officers
factors. Firstly, loans will be graded according to the who are in charge of deciding and then inputting
ratings generated by each banks internal credit rating credit scores and data into the system. And their
system. This is largely a qualitative measure developed subjective views could inflate or deflate credit scor-
and evolved over the period of the relationship between ing grades. A lot depends on the ability and integrity
bank and borrower. And secondly, the purely quantita- of the credit officers.
tive approach in other words how long a given loan or
loans are overdue. And then given the combined results 3. Risk of overriding the system - Talking with some
loans will be classified, and due provisions made for any senior bankers we can understand their current
loan loss. credit rating philosophy better: If using a credit rat-
ing scoring system generates a low score for a par-
This new draft will also require banks to take some mea- ticular customer but the borrower either has a good
sures to improve credit management and asset quality repayment record or an established relationship,
such as: (1) A centralised credit rating and credit man- the senior officers may be tempted to override or
agement system operated from the Head Office; (2) Up- game the system and adjust the rating score man-
dating borrowers data at least once a year; (3) Issuing ually. This is a question of maintaining discipline or
guidelines for credit management and loan approval that institutionalization the scoring system which is usu-
are in-line with the credit rating system. In other words; ally the mark of a good bank.
walk the talk.
4. Applying the system may double NPLs and
Amongst the 16 banks, most banks are still in the test- cause some headaches - Many banks are cur-
ing phase of their credit scoring system. As mentioned rently in the testing phase of their credit rating sys-
those who have put the system into effect include VCB, tem. And in many cases test results shows that the
ACB, BIDV, HBB & MB. However we are not sure weth- resulting NPL is more than twice as much as under
er or not banks such as Agribank, Seabank, EAB and the current quantitative classification. For example
SCB have created or launched any system yet or not. several years ago, BIDVs NPL ratio rose sharply by
three times) after the bank started applying a twin
The main difference with the decision 493 approach to track credit rating system. At the time, BIDVs sys-
qualitative scoring would be a number based approach tem was based on a combination of both their own
(which ironically amounts to a more quantitative driven credit history statistics and a Ernst &Youngs credit
approach within the qualitative methodology). database. The enterprise credit history contained in
the Ernst &Young database is quite comprehensive
To begin with every bank must submit their system to and caused the overall NPL ratio to shoot. Recently
the SBV for approval. The SBV will then verify whether
or not the system is consistent with the SBVs defined
guidelines. Then if it passes the SBV will approve it and Banks with lowest expected NPLs
banks can then apply the system. So far so good. And 3.0%
larger banks appear to be ready to apply the new twin
track credit rating system. However there is a risk the 2.5% ACB
TCB
new scoring grades may be too subjective for the fol- STB
2.0%
lowing reasons. EAB
1.5%

1. History cant help with new segments - Each


1.0%
bank will base their credit history statistics and spe-
cific scores for financial ratios and non-financial 0.5%
criteria on their existing customer base. Therefore
if they enter a new customer segment or expand 0.0%
FY 2010e
FY 2006

FY 2007

FY 2008

FY 2009

FY 2011F

FY 2012F

in higher risk categories the existing criteria may


prove insufficient.
Source: Bank financial statements, HSC calculation

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July 14h 2008

February 2011
September 2009

New credit scoring model weights 4. And in terms of allocating the overall weight for each
Ratio/criterion Weighting non-financial criterion and ratio, SBV stipulates this
as in the table above.
1 Financial ratios 35%
2 Non-financial ratios including 5 sub criterion 65%
5. The bank must send each borrowers score (bor-
Management ability 3% rowers rating grades) to SBV on a monthly basis.
Corporate governance 10% If a borrower receives loans from several different
Relationship with the bank 33% banks and these banks rate the same borrower
Sector structure 5% differently the SBV will use the lowest grade sub-
Borrower's particular features 14%
mitted. The other banks must subsequently adjust
their rating grades to this level. And equally if sev-
Total 100%
eral banks participate in a syndicated loan, the low-
Source: SBV
est rating grade will be used. This would be a very
powerful tool for the SBV in future to bring all banks
Ernst &Young signed an agreement to work with the towards a common credit scoring standard and ef-
SBV on this very issue. However if banks merely fectively punish outlier banks. Of course it will only
use their own credit history to generate scores for work for the larger borrowers who would tend to use
financial ratios and non-financial criteria the impact more than one bank. However in the case of certain
on NPL ratios may be less severe. And the tempta- SOEs we wonder how this might work out in prac-
tion for banks to simply avoid any outside help in tice.
constructing credit histories is clear.
Of course this draft has not been finalized and we have
Building the credit scoring system no firm date on when it may be applied. The SBV is
reluctant to move quickly in this matters having perhaps
The draft decree will require banks to build an internal realized that the rapid change of regulatory reform in
credit rating system to rate loans into groups: AAA, AA, FY2010 has caused some dislocation to the system.
A, BBB, BB, B, C and D. The system will be built on the Changes to the way NPLs are calculated can only lead
following foundations: to a surge in bad loans in the system and the central
banks instincts would be to avoid this at the moment.
1. The loan portfolio is first classified by broad sectors, However they face persistent pressure from the outside
loan sizes and types of businesses. in the form of the IMF and the Basle committee to en-
sure that Vietnam does not fall too far behind the inter-
2. The borrower base is then classified into 26-35 dif- national standard.
ferent sub-segments. Each sub-segment includes
enterprises in the same sector, similar size and type Hence the on NPL regulation the approach is likely to be
of business. Within each sub-segment or borrower evolutionary with stricter standards emerging on a bank
group, the bank then constructs parameters to de- by bank basis over a number of years (say 3-5 years be-
fine each group of borrowers. fore this is applied system wide). Early adopters should
be seen as stronger banks with the last to move be-
3. SBV then stipulates a set of financial ratios and ing the weakest of the bunch. One major reason for this
non-financial criteria that banks must apply in con- caution is concern over the curious case of Vinashin.
structing the credit rating system. Then using their
own customer credit history and current financial
condition, each bank then systematically inputs the
information to generate scores for specific ratio and
criteria. For example, if a customers current ratio
is in the region of 1.2-1.4 this will generate a high
score for liquidity. Each ratio and criteria is then
scored accordingly.

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Possible Vinashin workout and expected banking sector losses
Vinashin debt breakdown US$billion Exchnage rate VNDbillion Notes

www.hsc.com.vn
Total Vinashin debt 4.42 19,500 86,190 We have not accounted for the current unofficial rate above VND21,000
Foreign loan syndicate (*) 0.60 19,500 11,700 First principal payment was due 20th December FY2010
US$ bond portion (*) 0.75 19,500 14,625 Traded in Singapore. Government assumes responsibility
Natixis debt (US$) (*) 0.30 19,500 5,850 Relatively little is known about this but government seems to assume responsibility
for it
Vinashin's domestic debt balance (includes VND bond) 2.77 19,500 54,015 We get this simply by deducting the known foreign debt from the total.
VND bond (6 tranches from FY2006-07) 0.43 19,500 8,300 Issued to domestic banks in six tranches. Bonds are not provisioned against in the
general provision. We assume 40% recovery here also.
Domestic commercial debt (10 banks) 2.34 19,500 45,715 Domestic debt less domestic bond
Total bank loan book (as of November 2010) 2,200,000 This is based on the SBV numbers
Vinashin debt as % of total loan book 2.46%
Assume a 40% recovery rate 1.11 21,606 The 40% is a guesstimate taken from past averages in other countries with NPL
problems such as Korea
Expected loss for banks (debt and bondholders) 1.66 32,409 The debt less 40% recovery
Less current General provision of 0.75% 0.85 16,500 This is the regulatory general provision for the whole banking system
Most likely case required additional provision (as- 0.82 15,909 This assumes general provision is used to cover part of the debt and that even the
sumes 40% recovery) bonds get 40% recovery rate
Worst case required provision (assumes no recovery) 1.92 37,515 This assumes zero recovery but that the general provision will cover part of the debt
Source: SBV
- Vinashin has equity of VND4,689 billion at end 2009 They can use to prepay their debt.
- Beside (*), Vinashin may have loans with other foreign banks but they havent disclusured.
- The debt of VND86,190 billion doesnt include the interest expense.
Larger private banks in HCMC hvae little exposure to Vinashin.
September
February 2011
July 14h 2008

2009

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July 14h 2008

February 2011
September 2009

Breaking down the Vinashin problem

Signs of a growing NPL problem are starting to appear. VND500 billion dong in September 2006,
Vinashins near failure is the clearest sign of this. But
what is the scale of this? Moodys estimated that Vinash- VND300 billion dong in November 2006 with a cou-
in accounted for about 3% of the loan book. Our rough pon rate of 9.6% pa,
calculation puts it slightly lower at 2.5% (see table on
page 111). The key dividing line is between the secured VND500 billion worth of five-year bonds in January
and unsecured portions. The foreign bond and foreign 2007 at 10.5% pa,
loan syndicate are covered by either explicit (bond is-
sue) or perhaps by implicit loan guarantees (the Credit VND1,000 billion worth of 10-year bonds on Janu-
Suisse syndicate may belong in this category). ary 18, 2007 with the coupon rate of 10.5% pa,

To recap the Vinashin group has 150 member companies VND6,000 billion in the fifth and sixth tranche is-
with 71,000 employees, including the parent company, sues.
35 state entities, 33 state one member limited compa-
nies, 70 joint stock companies, seven training schools Then in Vietnam we understand that Vinashin borrowed
and five associated firms and joint ventures. The total money from ten big commercial banks, most of which
known debts incurred by Vinashin have reached VND86 are state-owned banks. The key point here again is se-
trillion and the interest payment the group has to pay an- cured versus unsecured debt. The government takes
nually has reached VND10 trillion. The problem is those the view apparently that domestic bond and commercial
nearly 200 subsidiaries in non-core businesses like real debt is a matter between banks and Vinashin. Although
estate, construction, tourism, and industrial parks. they are helping to provide a framework for restructuring
they do not assume responsibility for any of this debt.
We know that the structure of Vinashin debt is as fol-
lows. Firstly they have $750 million Government debt We have assumed a 40% recovery rate. We also as-
(the Government issued international bonds and then sume the general provision for the whole banking sys-
lent them to Vinashin) and then $600 million Vinashin tem is available for this (as we dont have a full list of the
borrowed from foreign sources in the form of commer- ten banks its hard to be more precise than this). As for
cial loans. The $600 million loan, with Credit Suisse the bond portion it doesnt carry any provision at all but
as sole book runner, was signed in FY2007 and had a we assume a 40% recovery rate for now.
3.5-year grace period which ended on December 20th
2010. The facility repays in equal installments every six The domestic debt is covered by a range of collateral
months thereafter until maturity in June 2015. This loan from what we understand. Much of it is project specific
paid a top-level all-in of 154 basis points in general syn- and therefore the underlying asset, in many cases a ship
dication via a margin of 150 basis points over Libor. is the collateral. Ships go up and down in value depend-
ing on their age and where we are in the demand cycle.
That pricing was considered generous at the time com- These completed ships would be up to several years
pared to the Vietnam sovereign CDS levels, which old. And demand is just starting to improve slowly from
were trading at 65 basis point. We have also heard that the slump in FY2008 but of course is a pale shadow of
Vinashin US$ debt was being offered on the market at what it was in FY2006-2007.
67% of par, although traders have been bidding in the
low 60s. The first principal payment was not met clearly The Credit Suisse deadline was missed as we all know
and the Vinashin group asked for a delay. It appears that and they company has been locked in negotiation with
Vinashin simply doesnt have the money. The syndicate the syndicate for a rescheduling of the debt. The 90 day
rejects this for now. We suspect that a new schedule will grace period will be up towards the end of March and
be made and perhaps another state owned entity may they must make a decision before then.
help out in the end.
We believe some arrangement will be worked out sim-
We also know that French bank Natixis is owed US$300 ply because a delayed payment schedule is a far bet-
million. The government is currently negotiating this ter option for the syndicate than declaring an event of
debt directly with the bank. Apart from that, Vinashin default. And we see some progress being made in the
Group also received capital from six domestic bond is- Vinashin restructuring in terms of delivering ships and
sues (corporate bonds) amounting to VND8,300 billion collecting receivables. This should enable them to free
dong as follows. up some cash flow and perhaps service that part of the
debt at least by the end of this year.

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July 14h 2008

February 2011
September 2009

But what about the domestic debt holders? In general Now of course this is just one possible scenario based
the SOCBs and some private banks based in Hanoi hold on our experience of past Asian debt crises. And given
the bulk of this. There is also the matter of guarantees of that the restructuring would likely take place over sev-
which very little is known. So really at this stage all we eral years therefore the provisioning and hence impact
can do is a bit of guesswork. on the bottom line would also be spread over several
years. This has tended to be what happened elsewhere
We conservatively assume that banks can realise 40% in Asia.
of the value of their Vinashin debt. This is frankly guess-
work and based on the fact that the group is being re- All banks whether state owned or the larger private
structured and wont go bankrupt. We also assume the banks are likely to have had at least some exposure to
general provision for the whole banking system is avail- the Vinashin debt problem. After all not only did Vinash-
able for this (as we dont have a full list of the ten banks in borrow money from individual banks they also issues
its hard to be more precise than this). the VND8,300 billion bond which many private banks
are believed to have bought into. Some of these banks
Then as for the bond portion it doesnt carry any provi- are believed to have subsequently sold on their posi-
sion at all but we assume a 40% recovery rate for now. tions and therefore might well be free of any exposure
currently. Even so they are still probably the exception
to the rule.

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July 14h 2008

February 2011
September 2009

Cyclical increase in NPLs inevitable

Over the past 5 years credit growth has grown at an Inevitably higher interest rates lead to higher delinquen-
average CAGR of 28.9% as we mentioned. And indeed cy rates. Plus we feel NPLs have been rather artificially
in FY2009, loan growth was way above that at 37.7% suppressed in FY2009 due to the subsidy and high loan
y/y. And yet most banks plan to announce a flat NPL growth rates so a normalisation looks inevitable. And on
ratio in FY2010 compared to FY2009. HSC remains a top of this the gradual adoption of qualitative credit scor-
little skeptical of these pre-audited results and still fore- ing is bound to push more loans into categories 2-5 and
cast and increase in top 16 NPLs from 1.9% to 3.4%. thereby increase the level of specific provisioning.
However we think NPLs were already suppressed in
FY2009 for two main reasons (1) the effect of fast credit Finally cleaning up the SOE debt mountain is another
growth pushed down NPLs as a % of total loans (2) major factor although we suspect this will happen over
subsidised interest rates in FY2009 enabled most bor- the course of a decade or more given its scale. Given
rowers to comfortable pay interest on time. all this we forecast the top 16 bank declared NPLs will
increase to 3.8% by FY 2011.
The former has been discussed above but the latter is
also an important factor. And then in FY2010 we think Estimating declared NPLs is a lottery frankly. On top of
banks have moved very cautiously to discover bad debt the lack of transparency as to the true nature of bad
as they had their hands full raising new capital and cop- debt in the system we have to add another layer which
ing with new rules. But auditors are unlikely to go along is the willingness of banks to discover what they might
with this completely in our opinion. have. In other words even if you had perfect knowledge
as to how much a bank is holding in bad debts the only
In FY2009 the average lending rates was in the range of thing you can be sure of is that will not be the number
11-12.5% pa of which the Government subsidized 2.6- they disclose.
2.7%. Actually then borrowers only paid about 8.3-9.6%.
However last year, lending rates soared in Q1 and then No surprise really. Therefore these numbers should
once again in Q4. And according to our rough calcu- be taken more as a trend indicator and a statement of
lations borrowers had to pay average interest rates of where we are in terms of the maturity of the system rath-
14-16% over the course of FY2010. That means aver- er than an accurate reflection of the true underlying level
age interest expenses must have surged 65-70% y/y in of delinquent debts.
FY2010 than in FY2009 with the same loan amount.

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July 14h 2008

February 2011
September 2009

VND US$ exchange rate and band


23,000

Upper ceiling Lower ceiling


22,000

Unofficial market rate Interbank rate


21,000

20,000

19,000

18,000

17,000

16,000

15,000
10/2/08
11/2/08
12/2/08

10/2/09
11/2/09
12/2/09

10/2/10
11/2/10
12/2/10
1/2/08
2/2/08
3/2/08
4/2/08
5/2/08
6/2/08
7/2/08
8/2/08
9/2/08

1/2/09
2/2/09
3/2/09
4/2/09
5/2/09
6/2/09
7/2/09
8/2/09
9/2/09

1/2/10
2/2/10
3/2/10
4/2/10
5/2/10
6/2/10
7/2/10
8/2/10
9/2/10

1/2/11
2/2/11
Source: Gathered by HSC from various sources

The sliding currency - can it be stopped in time?

The VND has lost 26% of its value in the OTC market large capital flow out of dong and we think this can be
since the beginning of FY2009 and in recent months this seen in the high errors and omissions numbers over the
slide has appeared to accelerate. There are two rea- past two years in the balance of payments.
sons behind this in our opinion;
This has lead to a steady loss of confidence in the VND
1. M2 growth excessive since FY2005 - the large which has also not been helped by SBV policies which
gap between nominal GDP CAGR and M2 money often seemed impenetrable and hard to interpret. With
CAGR since FY2005 has created excess dong li- this drop in confidence the capital flows in the economy
quidity and served to debase the value of the cur- have tipped more and more against the VND. We can see
rency relative to US dollar and gold. It has also led evidence for this in the creeping dollarization of recent
to high inflation and we suspect also fueled capital years with more loans and deposits being made in US$.
flight and is at least partly to blame for the ongoing
trade deficit. More recently we have seen the opening of a huge
gap between the official ceiling and the OTC forex rate
2. Surge in gold prices - The acceleration in the which a recent 7.2% devaluation (or 9.3% if you look at
dongs decline in recent months can be traced to the the reference price only) has failed to close. Post de-
surge in gold prices which on a logarithmic return valuation the OTC rate simply slumped further and now
basis has been shown by us to have a fairly high trades at around VND22.200 or so (as of February 21st)
correlation with the OTC forex rate for the VND. which amounts to a 5.5% premium over the adjusted
Whereas in the past the dong moved relative to the ceiling rate.
US$; now the comparative is being made directly
with gold. And as the OTC rate moves in relation to Speculators who have piled into dollars in recent months
gold so the other forex rates (interbank and official are making the following bet; that the central bank will
rate) follow after a time lag of several months. The be unable to rein in the OTC market having insufficient
occurs because the SBV lacks the reserves to pin liquidity to defend the currency at current levels and
the interbank and official rates at any particular level not being prepared to take the harsh macroeconomic
for any period of time. measures needed to restore value to the currency. Their
gamble is that the SBV will take a middle course and
Excess liquidity has to end up somewhere. And while the that as a result the policy of gradual depreciation will
high M2 growth did briefly lead to a bubble in the stock continue over the medium term. HSC still believes how-
market in FY2007 and real estate during FY2007-2008 ever that the SBV holds enough cares to win provided
over the past few years we suspect that much of the ex- they are prepared to play those cards.
cess liquidity has been converted into US$ and gold; a
form of internal capital flight and thus greatly exacerbat- One of the important casualties of past policy has been
ing the underlying problem. It creates an additional and the steady decline in the currency reserves held by

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July 14h 2008

February 2011
September 2009

Premium of unofficial /interbank forex rates over official band limit

20%

Premium of black market rate over the upper band ceiling

Premium of interbank rate over the upper band ceiling


15%

10%

5%

0%

-5%
Nov -08

Nov -09

Nov -10
Jun -08

Jan -09

Jun -09

Jan -10

Jun -10

Jan -11
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Feb-09
Mar-09

Feb-10
Mar-10

Feb-11
Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08
Sep-08

Dec-08

Aug-09
Sep-09

Dec-09

Aug-10
Sep-10

Dec-10
Source: Reuters & HSC collections

the SBV. From a high of US$23 billion as recently as 23% to as low as 18% and the PM stated that M2 growth
FY2008 they have dropped to a current level that we will drop to 15% or so. This would bring it roughly in line
roughly estimate at US$13.9 billion or so. How do we with nominal GDP growth thus effectively closing the li-
estimate this? Well we know that back in December the quidity gap.
IMF said Vietnams reserves was just 1.8 months (7.2
weeks) of prospective imports as of the end of Septem- This change is the kind of policy change that is required
ber but would not give an exact figure. And we further to change the direction of the economy. And has been
understand that the IMF calculation is always based on endorsed by the Prime Minister. However it would need
one year forward estimated imports (in this case their several months to take effect. And we recall that in the
FY2011 estimates) rather than the current number. So past SBV targets have mainly been observed in the
assuming FY2011 imports rise by 20% (HSC forecast) or breach and therefore only in hindsight will we be able
so we end up with FY2011 import forecast of US$100.8 to judge whether it was met or not. Therefore the more
billion and working backwards we then end up with a senior government figures that endorse these adjusted
reserve figure of US$13.95 billion (taking 7.2 weeks as targets the better in order to give them more weight in
our divisor). the eyes of the markets.

This is a rough estimate of course but defensible based If the SBV doesnt pull this off and close the gap between
on what we know. International agencies and the Na- the upper official ceiling at VND20,885 and the current
tional Assembly have advised minimum coverage of 10- OTC rate of VND22,200 over the next few weeks there
12 weeks of imports. This is an important point as the is a serious risk that the market will judge that the SBV
NA would appear to be suggesting that reserves need to has started to lose control of the OTC rate. The premi-
be rebuilt back up to that level over the next few years. um between the official ceiling and the OTC rate first ap-
The implications of rebuilding currency reserves would peared back at the end of September FY2010 and had
also require a fundamental change in policy. grown to a level of 7% just over a month later. And since
then it has remained stubbornly high and even after the
And HSC also strongly believes that a fundamental pol- recent devaluation it still stands at 5.5%.
icy change is required. Vietnam simply no longer has
sufficient currency reserves to continue with the current Correlation to domestic gold prices is high
policy of excessive monetary base expansion and must
adopt a new policy of restricting M2 growth in line with We ran a regression analysis to discover more about the
nominal GDP growth in order to stabilise reserves and relationship between domestic gold prices and the OTC
restore some value to the dong. In our view there is no forex rate since February 2009. Looking at logarithmic
other way if we want to avoid a steady escalation of the returns for both forex with a one day lag and contempo-
current problems. rary gold we found a positive relationship with a confi-
dence level of 95% (in statistical terms the t-statistics of
And indeed in recent days the SBV Governor has sug- those two coefficients were greater than 1.96 or at the
gested that credit growth targets for FY2011 be cut from 95% confidence levels). This is high and suggests that

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July 14h 2008

February 2011
September 2009

investors follow gold price movements closely before Currently about 21.5% of all loans are dollar based and
deciding what to do in the OTC forex market. And that where companies borrow in dollars but receive their
must be a big worry for the SBV. cash in VND their ability to repay will be affected by
the 13% slide in the dong on the OTC market since last
In fact in order to stop the slide the SBV has to quickly September. This normally should lead to an increases
restore value to the VND and then try to dilute the con- in NPL groups 2-5 and higher provisioning by banks at
nection between the OTC forex rate and gold. This cor- the end of the year.
relation has clearly developed over time and as we have
argued above will be difficult to break without a radical With the increasing dollarization in the economy there
and clear directional change in monetary policy. Indeed is more call on US$ loans and we also find corporations
with the view that international gold prices may well in- trying to match that with US$ revenues with mixed suc-
crease in value over the short to medium term (judging cess although this is strictly illegal. However such prac-
by the current political instability in the Middle East) then tices are not unusual in the real estate and hospitality
this suggests that the VND may weaken further unless sectors for example.
strong remedial action is taken.
On the other hand banks have in the past been able
Of course the measures that have to be taken will reduce to enjoy large trading gains due to forex movements
the amount of dong liquidity in the system and also have in times of currency instability. They have ample dollar
implications for growth. You might argue that simply re- flows through remittances also at the moment and can
ducing M2 growth targets towards nominal GDP growth charge higher fees for withdrawals. However an escala-
levels should not hurt growth that much as you are sim- tion of the current dong slide would be uniformly bad for
ply mopping up excess liquidity but of course real life banks hence we keep our fingers crossed that the gov-
is not as neat as that. Therefore we can expect 50-100 ernment brings to OTC market under control soon.
bps or so to be trimmed off GDP growth in FY2011 and
for corporate earnings to be somewhat affected also.

Implications for banks of a sliding currency and the


policy response

There are several implications for banks as a result of


the current dong slide. An increase in loan impairments;
heightened credit and counterparty risks especially
through the interbank market relationships are all valid
concerns. However as long as Vietnam can avoid losing
control of the OTC market all these are containable.

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July 14h 2008

February 2011
September 2009

Revolution in the regulatory environment


Current lending restrictions for banks
1 Banks are prohibited to give loans to members of BOD, BOM and Board of supervision.
2 Banks are prohibited lending to fathers, mothers, wives, husbands and children of members of their BOD, BOM and Board of supervision.
3 Banks are prohibited to give loans without due collateral to:
a. Companies in which people belonging to category (1) and (2) own more than 10%
b. Founders of banks.
c. Shareholders who own a stake of over 5% of the banks chartered capital
New CAR, solvency ratios and LDR requirements - Circular 19
1 CAR - Capital adequacy ratio of not less than 9%
Risk weighting for real estate and stock lending raised from 100% to 250% for CAR calculation purposes
Removes the general provision from shareholders' equity to calculate CAR.
Deducts capital allocated for subsidiaries chartered capitals from parent shareholder's equity for purpose of CAR calculation
2 Solvency ratio - Banks must keep cash or cash equivalent equal to 15% of their total liabilities every day
3 LDR - Loan to deposit ratio of not more than 80%
Minimum share capital threshold lifted - Decree No: 141/2006/ND-CP issued on the 22nd November 2006
All SOCBs, JSCBs and JV banks and 100% foreign invested banks will all need to have a minimum capital of VND3 trillion by 31st December
2011
Implementation of current stage delayed by 12 months
New branch capital requirements (draft circular not yet enacted)
1 Branches in Hanoi or HCMC must have VND200 billion in capital (up from VND100 billion previously)
2 Branches in secondary cities and rural areas must have VND100 billion in capital (up from VND50 billion previously)
New rules on Non performing loan classification awaited
Draft prepared emphasizing a qualitative approach focusing on specific indicators
New rules curtailing use of gold deposits and lending - Circular No. 22/2010/TT-NHNN issued on October 29th 2010. The Circular is effective on
the same day
1 Deposits in gold: banks are permitted to raise gold deposits through CDs only. And must get SBV approval.
2 Lending in gold: banks are only permitted to off loans in gold for jewelry companies. Banks are not permitted to give loans to make gold bul-
lion.
3 Banks are not permitted to convert gold into dong loans. Outstanding loans must be wound up not later than June 30th 2011.
New rules on use of interbank market awaited
Source: SBV

The regulatory revolution in FY2010

FY2010 was a watershed year for the banking sector. It Then Circular No 22/2010/TT regulates gold deposit
marks the boundary line between the development stage lines and the gold lending business. And finally Circular
of the banking system and the consolidation phase. In No 21/2010/TT- NHNN regulates the reporting of statis-
order reduce systemic risk in the system and weed out tics by all credit institutions in order to standardise re-
weaker banks the SBV has launched a veritable regula- ports and ensure timely submission of numbers.
tory revolution covering almost every aspect of banking.
At the heart of this revolution lies an amended law; a The development stage which started perhaps after the
circular and a decree namely; the new Law on Credit Asian Crisis was marked by a issuance of banking li-
Institutions Circular 13 (amended by Circular 19) and censes to a bewildering number of banks; aggressive
then Decree No. 141/2006/ND-CP. expansion in assets, loan-books, branches and staff
and a regulatory environment that has at times strug-
Then on 26th of January 2011 the government issued gled to keep up with events. In consequence in Vietnam
Decree No 10/2011/ND-CP amending Decree 141. This we currently have;
sets out the new capital thresholds for each kind of cred-
it institutions and states that any institution that fails to Too many banks - Vietnam now has too many
meet the threshold will be unable to seek licences for banks. This leads to low margins; poor competitive-
network expansion. ness in terms of products and services offered and

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July 14h 2008

February 2011
September 2009

greater levels of credit and systemic risk. The over- reverse direction temporarily to avoid causing a li-
all system is only as strong as its weakest player quidity crisis for small weaker banks. Policy is there-
and this has given rise for concern on the part of the fore hamstrung by too much consideration over its
State Bank of Vietnam for many years already. impact on the weakest players. Therefore monetary
policy is often diluted at the point of impact and lim-
Too much competition for deposits we have ited in its market effect. And that also means it has
seen to spikes in deposit rates this year alone well to be applied for longer in order to have the desired
above the recent norms. There is an established re- effect.
lationship between the benchmark yield for the two
year bond and deposit rates. However the premium Thats what the regulatory revolution needs to remedy.
between deposit rates and the benchmark yield has And therefore see the newly issued or planned decrees
widened this year has more than doubled this year and circulars which set out new guidelines for key areas
to over 12% as a result of stiff competition for depos- such as the CAR; minimum capital threshold; minimum
its. And despite the caps on VND deposit rates im- capital level per branch; LDR ceiling; restrict interbank
posed from time to time banks have simply resorted activity; govern listing and new capital raising; set new
to raising dollar deposits instead. This contributes loan classification methodology as having a much great-
to the increasing dollarization of the banking system er impact on the banking system that the amendments
and is bad for currency stability. to the two laws.

Too thin margins for a developing banking sec- The laws recently passed are general in tone and rath-
tor - Average NIMs have ranged between 3.1% and er short on details. This is nothing new and as always
3.9% over the past five years. This is similar to al- the relevant authority has to issue a series of decrees
ready developed countries and fall below the 4-6% and documents to fill in the regulatory meat on the legal
seen in many other developing markets. Too many bones. And so in contrast the two new decrees are very
players means credit risk is not adequately priced detailed and lay out specific instructions for banks to fol-
into margins. And this makes is difficult for banks low with deadlines attached. In other words laws simply
to provision properly against doubtful or bad debts set the framework for regulators to write the playbook.
without compromising profitability.
The new laws extend the SBVs mandate and gives the
Too little transparency with so many banks in the power to intervene in any credit institution in future in the
system; issues like cross shareholdings and cross event of a crisis. It also specifically makes the central
lending are not yet well understood. Without know- bank responsible for fighting inflation and guiding the
ing what the exact linkages are the actual level of currency into calmer waters. While the most immediate
systemic risk in the system is almost impossible to effect of C13 and the older decree 141 has been to force
calculate. The SBV still struggles to provide defini- banks to raise a lot of capital and also pushed up fund-
tive data on matters like credit growth and exposure ing costs. But longer term will reduce the risks in the
to high risk segments. Data is often either frequently system.
revised or is simply unavailable. International rat-
ing agencies are therefore unable to distinguish Before summarizing the laws and decrees we would first
between well run banks and the rest. And there- like to examine their enormous impact on bank capital
fore their published ratings follow a convoy system raising in FY2010.
where systemic risks are the only risks being prop-
erly measured. This lack of information also creates But before we proceed a quick note on how things
a vacuum that is filled by rumour and speculation. work;
And in a crisis that could prove quite dangerous.
A new law is approved by the National Assembly
Too much concern for the weaker players leads
to policy constraints - every time the SBV squeez- A new decree is issued centrally by the government
es liquidity to control inflation we see a spike in in-
terbank lending rates forcing the central bank to A new circular is issued by the SBV itself

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July 14h 2008

February 2011
September 2009

Selected banks CAR at end 1-H FY2010


Total as- Equity for Corporate Total Loans * LDR * CAR * Tier 1 Tier 2 Risk Amount that is being
sets * lending * demand deposit * capital * capital * adjusted raised to increase
deposit * asset * capital to hit the new
CAR target (9%)
1 CTG 294,638 11,462 27,200 192,288 187,092 91.3% 8.5% 3,426 63 41,235 223
2 VCB 247,568 12,057 51,281 155,786 152,910 90.4% 8.5% 3,931 146 48,244 265
3 MSB 82,125 3,634 5,430 59,390 26,269 38.1% 8.1% 13,591 653 175,631 1,563
4 ACB 177,000 6,660 7,933 112,524 72,393 58.4% 9.0% 6,065 710 75,283 -
5 STB 119,671 6,491 8,898 88,757 74,205 76.3% 9.6% 8,174 474 90,083 -
6 EIB 73,694 11,583 3,808 52,701 42,953 59.5% 21.0% 12,465 244 60,518 -
7 HBB 29,581 3,099 1,090 23,230 15,500 53.4% 13.1% 11,484 336 90,371 -
Total 2,051
Source: Banks financial statements

Bank regulations and capital raising

FY2010 will be remembered as the year when banks to raise more capital. Unlike the minimum capital raising
raised a ton of new capital. The drive to increase char- plans by smaller banks these plans were well executed
tered capital was mandated by a series of regulations and largely completed by year-end. HSC has calculat-
including Decree 141 (since delayed) and Circular ed that in order to raise the minimum CAR and also for
13/19. This meant there were two additional reasons for normal business expansion purposes banks planned
banks to raise capital in addition to the normal expan- to raise a total of VND47,658 billion or US$2.27 billion.
sion driven capital raising which is an annual event for And in fact managed to raise a total of VND38,633 bil-
some. In total in FY2010 banks planned to raise a to- lion or VND1.84 billion. Thats a success ratio of 81.1%
tal of VND91,894 billion or US$4.37 billion. Then in fact or higher than for the smaller banks.
they managed to raise a total of VND70,460 billion or
US$3.35 billion. Which amounts to a 76.7% success ra- No matter how you look at it many banks managed to
tio. Given the size involved and the fairly tough environ- increase their chartered capital as required. Some might
ment thats a fairly remarkable success ratio. To break it argue that the means by which the capital was raised in
down further we have divided the capital raising accord- some cases bears closer examination. But then at the
ing to the reason why; same time several small banks have argued to us that
the entire capital raising exercise to hit the VND3 trillion
Minimum capital threshold increased to VND3 tril- threshold was hardly necessary in the first place.
lion but finally delayed to FY2011 year-end - As of Q2
FY2010 almost half of the banks; a total of 22 banks had Either way the captial raising was more successful than
chartered capital of less than VND3,000 billion. These we thought possible although the ten laggard banks will
banks alone planned to increase capital by VND44,135 have to hit their targets this year. Which suggests that
billion or US$2.1 billion by end-FY2010 to meet the new there is a lot more spare capital in the system than many
threshold. That deadline was extended but only at the suspected. The SBV no doubt is pleased that most
last minute. And by the end of December 31st despite the banks have make it but no doubt also hope that a few
herculean task a total of VND31,872 billion or US$1.5 will not make the cut in FY2011.
billion had been raised. Thats a success ratio of 72%.
10 banks still stood below the VND3 trillion threshold ac- But of course that is not the end of the tale. As we note
cording to our estimated numbers. These banks needed Decree No 10 issued on January 26th offers a years ex-
to raise VND8,800 trillion and have delayed their capital tension to Decree 141. There has been some discussion
raising until FY2011. about raising the threshold further in future although this
has run into some very heavy resistance and at the mo-
Banks needed to have a CAR of 9% from October 1st ment remains stillborn.
FY2010 A higher CAR requirement was a key plank of
the famous C13 which was finally slightly amended by However if we know our central bank this discussion will
C19. This ruling mainly affects the large banks and as a be revived as the authorities will want to take a second
result the SOCBs and larger JSCBs all announced plans run at reducing the number of players in the system.

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Top 16 capital raising in FY2010 by month
Unit: VND- Jan Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 2011 Total plan for Total raised % success
billion FY2010 so far rate

www.hsc.com.vn
Agribank 10,200 10,200 10,200 100%
BIDV 3,594 3,594 3,594 100%
VCB 1,123 4,364 5,487 5,487 100%
CTG 3,159 4,168 7,328 3,159 43%
SOCB 0 0 13,794 0 1,123 0 0 0 3,159 0 0 8,532 26,608 22,440 84%
total
ACB 1,563 1,563 1,563 100%
STB 1,474 1,474 1,474 100%
EIB
TCB
MB 1,400 1,400 1,400 100%
EAB 1,100 1,500 2,600 1,100 42%
VIB 600 1,000 1,600 1,600 100%
MSB 1,760 1,760 1,760 100%
SCB
HBB
SHB 1,498 1,498 1,498 100%
SEABank 266 266 266 100%
JSCB total 600 0 0 0 0 1,498 1,474 0 1,000 4,526 1,563 1,500 12,160 10,660 88%
Total 600 0 13,794 0 1,123 1,498 1,474 0 4,159 4,526 1,563 10,032 38,769 33,101 85%
Note: This is the capital raising by right issue (excluding bonus and dividend shares)
Source: Banks, HSC
September
February 2011
July 14h 2008

2009

Page 121

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July 14h 2008

February 2011
September 2009

Amended Law on Credit institutions

Interest rate: Credit institutions will be formally allowed specifically in this legislation. Vietnams financial market
to apply negotiable interest rates; However, SBV has is still small and there is a practical limit to the number
the right to impose a framework and limit on fees and in- of different institutions that could be bank shareholders.
terest rates if market conditions demand it. This is pretty Therefore by expending one institutions shareholding
much where we are at the moment and simply formal- to 15%, the government is acknowledging this issue.
izes the current market situation. In practice the SBV will
guide market rates through the OMO window and use The new law prohibits usage of a banks shares as col-
administrative guidance on fees as a secondary control lateral to borrow money in order to finance a capital con-
mechanism. Some have complained about the lack of tribution for the same bank. Recently, SBV is drafting a
transparency now that the prime rate regime has effec- document to guide JSCBs who want to list their shares
tively been abandoned but of course the SBV cannot on the stock market. The draft requires banks to fulfill
adopt a new benchmark interest rate until the law allows some basic criteria before listing (1) JSCBS have their
them to do so. chartered capitals equal to the minimum level accord-
ing to the current regulation. (2) The CAR, LDR and all
Securities loans: Banks/credit institutions are allowed other ratios must reach the norms that apply to a bank-
to lend to brokers or individuals for the purposes of buy- ing business.
ing securities. However its left to the SBV to set the
credit line limit which is currently set at 20% of a banks Amended Law on SBV
equity. Currently banks are not permitted to lend directly
to their securities subsidiaries but of course cross lend- The amended 2010 Law on the SBV consists of 7 chap-
ing or indirect lending is possible. And banks are also ters and 66 articles, of which 26 new articles were add-
allowed to buy CBs issued by brokers instead. ed, 38 articles were revised, 5 articles were unchanged
and 4 articles of the old law were removed. The law
Corporate bonds: if banks/credit institutions buy cor- which took effect January 1st FY2011, includes a num-
porate bonds from enterprises, banks/credit institutions ber of new provisions relating to the legal status and
they must include these amounts as part of the overall operations of the SBV. It also provides for the functions,
credit lines offered to clients. This helps SBV to man- powers and organization of bank inspections and over-
age the total risk exposure to each corporate borrower sight under the SBV.
and overall sector exposure. Before now if some clients
hit the ceiling for bank credit lines, banks/credit institu- Simply put it augments the powers and duties of the
tions could have increased their exposure to these cli- SBV and gives it an explicit and primary role in both set-
ents by buying corporate bonds they might issue. This ting monetary policy and banking regulation. The new
increases systemic risk and could negatively affect the law however does not provide for legal independence of
development of the corporate bond market. At the mo- the SBV but rather places it somewhere between goal
ment CBs are seen as syndicated loans and there is independence and operational independence. It is how-
very little secondary market trading. Therefore this is a ever a stepping stone towards the former and amounts
case of closing a current legal loophole as the previous to a considerable increase in its room to manoeuvre.
exposure to any one individual client was not being ef-
fectively controlled. The most significant change from the previous law was
the abolition of the prime interest rate structure. Under
Ownership structure between banks and other cred- the new law, SBV will announce interbank and other
it institutions: The law allows banks/credit institutions rates to manage monetary policy. The role of the prime
and their subsidiaries to buy shares in other financial rate has been eliminated as not reflecting the current
institutions provided this complies with SBVs own regu- supply-demand relationship in the market and was seen
lations. At the moment many banks do own shares in as too interventionist.
smaller banks so this was a pragmatic decision.
The amended law also no longer requires commercial
Shareholders: Institutions can own a maximum 15% banks to maintain a compulsory reserve ratio of 20% of
(in the case of another domestic bank its 11%) of a total deposits. Instead, the SBV is granted the power to
banks chartered capital; And a private individual can set the compulsory reserve rate at its discretion. So far
own a maximum 5% of a banks chartered capital. As it has not used this power actively being more comfort-
for foreign bank holdings the government is given final able for now to use the OMO window and funding rates
discretion to set the limit but for practical purposes we to guide monetary policy.
can say the 15% limit applies although this is not stated

www.hsc.com.vn Page 122

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July 14h 2008

February 2011
September 2009

Then SBV has been given the right to invest and buy However whether this also translates into a more in-
shares in other credit institutions and serve as the rep- fluential policy making role in order to prevent a crisis
resentative of State capital in credit institutions. It is also developing in the first place is a tougher question to an-
given the right to use its legal capital for the establish- swer.
ment of enterprises to carry out the functions and obli-
gations of the State Bank as assigned by a decision of Specifically we are referring to the setting of monetary
the Prime Minister. policy which has resulted in a structural problem in the
economy due to excess liquidity and internal capital
The process of transferring over bank shares from the flight. The language of the law does make the SBV re-
SCIC to the SBV will take some time apparently. In par- sponsible both for stabilising the currency and fighting
ticular we look at the case of VCB where ownership is inflation. But whether or not the authority that goes along
still in limbo between the two institutions. Once complet- with these responsibilities will be willingly conceded by
ed it should strengthen the supervisory control the SBV the government or not only time will tell.
exercise over the SOCBs who in the past have been
wont to act a little too independently at times.

The thrust of the legislation is fairly broad and will be


fleshed out in subsequent decisions and circulars are
is the normal practice. Therefore it is a little premature
to say just by how much the SBVs powers will be en-
hanced. However the key point is that the scope of inter-
vention and discretionary powers of the SBV have been
greatly increased thereby giving it considerable clout in
the event of a crisis.

www.hsc.com.vn Page 123

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Decree 141 capital threshold - delayed for 12 months but still very potent

This decree sets minimum capital thresholds for banks. Simply put the current system cannot cope with pro-
The latest minimum of VND3 trillion for all banks was cessing that number of institutions at the same time.
supposed to come into effect on December 31st FY2010. However from now its important for the SBV to stick to
However the SBV bowed to pressure from the banking the new deadline like glue and not let that slide as well.
sector to delay the implementation of Decree 141 for And to have procedures in place to deal with the conse-
twelve months until December 31st 2011. quences when banks fail to meet the new deadline.

Given the passage of the new SBV law in Q2 FY2010 This decree is still the prime vehicle being used by the
and the publication of Decree 141 way back in FY2006 SBV to winnow out weaker banks by raising the mini-
nobody can complain of a lack of notice concerning mum capital threshold for all banks in several stages.
this deadline. However smaller banks were struggling And while the latest stage has now been delayed the
to raise the money given that in many cases their key implications still hold.
shareholders include state owned enterprises who are
no longer flush with cash. And SOEs are anyway con- To recap banks were asked to submit plans by the end
strained by regulations barring them from holding over of June and then following approval to complete the
30% of their assets in non-core businesses. process by the end of the year. The SBV set in place
procedures to try and ensure that the new capital was
One might argue that the regulation was designed so real money and not simply money being shuffled back
that some banks would fall at this hurdle and therefore and forth.
trigger the necessary banking sector consolidation. And
that by extending the deadline they simply increase the Indeed the current regulations and pipeline regula-
likelihood that most banks will survive and so delay the tions gave clear signals SBV were going to supervise
necessary consolidation by another few years. the capital increase closely. Raising capital will now
become tougher. The following set of constraints is the
However on the other hand with so many banks trying reason why;
to raise capital at the same time they could argue that
failure to raise enough money at the moment was not Banks are now forbidden to use their own shares as
necessarily a sign that the bank was short of possible collateral to borrow money to raise new capital.
investors but simply a reflection of the fact that too much
money was being raised from too few sources at the State owned enterprises are forbidden to have more
same time. And while the SBV no doubt would observe than 30% of their assets outside their core business.
that four years is a long time to get this done, in the cur- Given that many of them have stakes in the smaller
rent environment the banks themselves probably held banks and that their balance sheets are at the limit
more political cards in their hands. already this ruled then out as contributors to the cur-
rent round of capital increases.
Then there is also the fact that with the SBV behind on
publishing the necessary circulars to flesh out the new Banks are now forbidden to own stakes in each
SBV law and new law on credit institutions they are not other exceeding 11% unless special permission is
yet ready to deal with the consequences of bank consol- given by the SBV.
idation. The basic legal framework for the SBV to take
over a failing bank is in place but the detailed rules have Previously, every legal entity and individual could
not yet been published. And what the SBV wants to do make a 20% and 10% capital contribution respec-
the case of a bank thats doing just fine but cannot hit tively to a bank. Under the new laws, these limits
the capital threshold is also a bit unclear. have been lowered to 15% and 5% respectively.

Therefore, the prospect of just under a dozen banks fail- Given these constraints and tough market condition, it
ing to hit the threshold at the same time must have seen wasnt easy for smaller banks to find new strategic part-
quite daunting to the authorities. Without a playbook ners during 2-H FY2010 for their capital increase. And
things would have been tough. And with the number as for existing shareholders; only private sector share-
of banks involved the whole process would have been holders could be approached. And with SBV supervising
well nigh impossible to handle without something going cross lending and cross shareholding more tightly some
wrong. banks simply failed to raise enough chartered capital.

www.hsc.com.vn Page 124

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July 14h 2008

February 2011
September 2009

Circular 13 reducing the loan to deposit ratio towards international norms

Circular13 is the centerpiece of the SBVs new super- cludes the capital allocated for subsidiaries chartered
visory regime as it zeroes in on every banks balance capitals from shareholder's equity for the purpose of
sheet and regulates its contents. This regulations cover CAR calculation. Supplements more conditions for con-
CAR; credit limits ; total exposure to a borrower and its vertible bonds/long term bonds in order to be eligible
related clients; solvency rations; limits to capital contri- for inclusion as Tier 2 capital for the purpose of CAR
bution and share purchase and LDR. Setting precise calculation. Calculates the parent CAR for the bank's fi-
limits for all of them its a powerful regulatory tool. Effec- nancial position only and then separately calculates the
tive since October 1st FY2011; it will be the workhorse consolidated CAR based on the consolidated financial
of the SBVs supervisory function for years to come. position.

When first drafted and introduced it caused a storm Loans to deposits ratio must be no greater than
amongst banks who expected a lighter touch. After 80% - Deposits mainly include (1) private customers
much discussion over the summer some minor changes deposits; (2) corporate term deposits; (3) interbank
were made to the definitions of credit (guarantees were term deposits; (4) certificates of deposits. Loans
excluded) and deposits (30% of demand deposits were mainly include (1) loans to private clients & cor-
included; while State Treasury deposits were also al- porate clients. See full definition on the next page.
lowed until the end of FY2010). However the SBV stood Deposits from State Treasury will be excluded from
firm on the essentials and what emerged was a water- total deposits from January 1st FY2011 to calculate
shed in bank regulation. the LDR. This will hurt SOCBS. 30% of demand de-
posits can be included to calculate the LDR. This
To achieve it the SBV had to stare down the powerful has affected both JSCBs and SOCBs. One way
banking lobby and their protectors and in so doing took around this is to launch a hybrid deposit product.
some initial steps to identify and perhaps reduce sys- One that offers a fixed term and higher deposit rates
temic risks to the system. Below are the key require- like a term deposit, But can still be withdrawn almost
ments for circular 19: like a demand deposit. Or alternatively banks can
of course turn demand deposits into term deposits
Banks CAR is required to hit 9%, increasing from by getting clients to sign new paperwork. And one
8% - with this, banks will use lower financial lever- important loophole is using deposits by other banks
age than before. Most larger banks had a CAR of which can be included in overall deposits. By simply
at least 8% even before this regulation was brought redefining existing payment deposits made by other
in and with capital raising now complete we are not banks and turning these into term deposits (simply
aware of any bank in the top 16 that still falls below writing a new contract) this has helped things along
9%. quite a bit.

Risk weightings for CAR tightened - The calculation Solvency ratios reported regularly - solvency ra-
for CAR is as follows. tios have to be reported daily and not weekly as be-
fore. These include keeping in reserve 15% of total
CAR = (Tier 1 capital + Tier 2 capital)/total weighted risk liabilities in the form of cash, G-bonds or deposits
assets. from financial institutions. And also ensuring that li-
abilities due within 7 days can be met by a combi-
Risk weights range between 0% and 250%. For ex- nation of cash and receivables due within 7 days.
ample, cash and VGBs have a weight of 0% because These to be reported by every bank to the SBV at
these assets are free risk. However, real estate busi- the end of each day. These ratios are what banks
ness loans, securities loans and loans to securities are finding toughest of all to meet (daily reporting as
companies have the weight of 250%. And for the time we well know is a tough discipline) but then again
being so do corporate bonds apparently. This new regu- nobody dares to suggest they be relaxed. With this
lation will encourage banks to allocate funds for these regulation, banks have to hold 5% in cash, 5% as
three types of clients sparingly. Which means banks will net interbank lending/deposits and another 5%
charge them higher lending rates than before. in VGBs. This leaves them with just 85% of their
combined deposits; CDs & bonds plus sharehold-
Removes the general provision from Tier 2 capital for ers equity to lend out. If any bank violates any part
the purpose of calculating CAR. The bank must report of the above regulations, they wont be allowed to
both consolidated and unconsolidated CAR. Also ex- increase their loan books, expand their network,

www.hsc.com.vn Page 125

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July 14h 2008

February 2011
September 2009

list their shares, raise new capital or enter into new We believe the banking system will be allowed to evolve
businesses. Furthermore it carries hidden costs. towards compliance with C13 over the next year or so.
For example Decree 19 requires banks to invest The SBV simply does not have the inspection capabil-
more heavily in IT system so banks can calculate ity to check everything at once. And so far the central
key ratios for daily reporting. bank has been happy to take the daily & weekly reports
submitted by each bank at face value. Having put banks
The SBV has also hinted that some of the key ratios will through a fairly traumatic experience last year they
be tightened further perhaps after Q1 FY2011. Having perhaps feel some breathing space is required before
set a new standard it will be relatively easier to raise the proper enforcement should begin.
bar over time.
And to our best knowledge so far no SBV inspections
Below are some key definitions for LDR calculation; teams have been dispatched to see if what banks are
reporting is a full and fair account of the reality on the
Deposits - defined as private client demand depos- ground. The SBV is surely fully aware that a gap likely
its; private client savings deposits; corporate term exists in many cases between reported and actual num-
deposits; financial institutions' term deposits; bor- bers. Clearly it is only by double checking the numbers
rowing funds from foreign financial institutions; CDs they receive that the SBV can ensure growing compli-
and bonds. And demand deposits from financial in- ance with the new rules.
stitutions and corporates can only be included at a
weight of 25% for LDR ratio calculation. But the authorities are also pragmatic enough to know
that closing this gap will take time and multiple inspec-
Credit - defined as any kind of loans but does not in- tions on its part. And while the process of policing the
clude guarantees. This is a major change between new rules has yet to begin we suspect it will start in ear-
the original C13 and the amendments in C19. . nest from Q2 onwards. Then banks that fall short will
be issued with improvement reports and a continuous
Rule change is one thing, compliance is another failure to show improvements over time will have more
serious consequences. Call it rolling compliance if you
Changing the rules is the easy part. Enforcing the new like but it fits well with the style of doing things here. The
rules is harder. Especially with so many banks to check important thing is that we get there in the end without
at one time. In a sense the SBV now finds itself bur- too much disturbance.
ied under a mountain of statistics generated by the new
requirements. And checking those numbers will be no
easy task.

www.hsc.com.vn Page 126

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July 14h 2008

February 2011
September 2009

The evolving role of the SBV as a new governor prepares to take office

With the new law on SBV now being implemented the as we can remember. Hitting credit growth targets is so
role of the central bank as the sole regulator of the bank- fundamental to effective execution of monetary policy
ing sector has been set in stone. And their primary po- that we hope the new governor gives it due attention.
sition in deciding and executing monetary policy has Nobody minds a few basis points difference but a cou-
been strengthened although this does not yet in practice ple of hundred basis points every year suggests a rather
amount to full independence in our opinion. casual attitude towards policy execution.

Even so with the central bank now agreeing annual Control of interest rates through the OMO has been
monetary policy targets with the National Assembly their quite effective in our opinion although they are still ex-
relative independence has certainly been enhanced. Es- perimenting with issues such as how the reserve ratio
pecially, when it comes to choosing the necessary mon- fits into everything. For the moment they seem to rely
etary tools to reach the agreed targets. We expect the mostly on the daily open market operations amounts
NA will more jealously guard their prerogatives and that and funding rates to control market rates. And that has
the influence of advisory bodies attached to the Govern- worked well enough as a glance at current lending rates
ment Office may be reduced somewhat over time. Once will tell you.
again much depends on the personality and influence
of the next governor in carving out a more independent The recent 7.3% depreciation is an attempt to tackle the
role for the bank in practice. 7-10% premium between the official ceiling and the un-
official market which was allowed to continue for several
It now looks fairly clear that we will have a new SBV months. In our opinion going forward the SBV needs to
governor in a few months. While this has not yet been take an even more active management role in its own
officially announced the fact that the a senior official of currency regime. But we do appreciate that its options
the SBV has been elected on to the Central Commit- are limited given that HSC roughly estimates that re-
tee is a clear sign that something is afoot. And in media serves are currently about 7.2 weeks of import cover or
circles this seems to be accepted already. US$13.9 billion at the end of FY2010 but at the same
time leaving such a huge gap open over several months
Nguyen Van Binh has been deputy governor for some threatens the entire pegged currency regime. Therefore
time and is well regarded in monetary circles as hav- special circumstances aside we hope they can regain
ing both the requisite experience and also the neces- more control over the forex markets.
sary communication skills with the world of government
which should enable him to articulate the SBV case in Beyond that the most important medium term issue is
policy making circles. His priority if selected will be price M2 growth. Closing the gap between M2 growth and
and currency stability and given that ratification wont nominal GDP growth lies at the root of the currency and
occur until the May session of the National Assembly price stability policy. Having left a high level of excess
the handover will not occur for some time yet. liquidity in the economy year after year only reduces the
value of the dong versus everything and leads directly to
In our opinion his main challenge will be to increase the inflation and currency depreciation. Again the gap does
level of professionalizing within the SBV further espe- not have to be closed completely but the 500-800 basis
cially with regards to statistic gathering and analysis. point gap of the past five years is not sustainable in our
It would appear that once again in FY2010 that credit opinion.
growth far exceeded official targets and that the SBV
itself had to publish several different estimates for In the area of banking regulation it would seem that the
FY2010 credit growth. Premature number disclosure is SBV is not wholly satisfied with the way that new regula-
endemic throughout the government and indeed corpo- tions have been implemented. The introduction of C13
rate Vietnam but it looks very bad when the central bank last year turned messy when banks who were initially
revises its own numbers for a key monetary policy indi- silent started to voice their objections as we came closer
cator several times. Better to wait and be sure and then to the implementation date. This forced the SBV to make
publish the right number one time. some minor concessions but left some dissatisfaction
on both sides with the process of consultation.
Of course the underlying problem is the way that the
credit target itself was overshot rather spectacularly From the SBV side there was some bafflement that
which gives the impression that the SBV is not in control banks when originally consulted did not voice any opin-
of the banking sector at least as far as credit growth ions or major objections to C13 and only later did such
is concerned. And this has happened every year as far opposition emerge. Banks for their part felt the imple-

www.hsc.com.vn Page 127

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July 14h 2008

February 2011
September 2009

mentation process should perhaps have been more Instead banks adopt the classical passive aggressive
gradual. On the whole we sympathise more with the approach by saying little and then doing even less when
SBV in this matter. We understand that in consultation faced with regulations they dont like. Or they try to go
meetings with the SBV (which are always held before around the central bank by appealing directly to others
drafts are finalised) bankers often say little and this is in government. This is not healthy and simply prolongs
usually interpreted by the central bank as acquiescence the process of consolidating the sector.
or agreement.
Therefore a key medium term challenge for the new gov-
It appears that bankers may be nervous of having an ernor in our opinion is to improve the quality and depth
open discussion with an institution on which they rely of the dialogue between the central bank and commer-
for supervision and licensing. But then that is what cial bankers so that in future there can be a genuine
back channels are for and we are rather amazed that two way exchange of views. Perhaps a more informal
in the case of key banking regulations the necessary approach where views can be gathered without jeop-
conversations between both sides seems not to have ardizing an individual banks relationship with the SBV
occurred. would help.

www.hsc.com.vn Page 128

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

July 14h 2011


February
January 2008
September 2009

Deposit vs interest vs benchmark yield Average interest rate spread


21% 23.00% 8.00%
Lendign rates Lending rate

Deposit rates 21.00%


19% Deposit rate 7.00%
Benchmark yield 19.00%
17% Average interest spread
17.00% 6.00%

15% 15.00%
5.00%
13.00%
13%
11.00% 4.00%
11%
9.00%
3.00%
9% 7.00%

5.00% 2.00%
7%

Sep-08

Nov -08

Sep-09

Nov -09

Sep-10

Nov -10
Jan -09

Jan -10

Jan -11
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Mar-08

Mar-09

Mar-10
Nov -08

Nov -09

Nov -10
Jun -08

Jan -09

Jun -09

Jan -10

Jun -10

Jan -11
Jul -08

Jul -09

Jul -10
May-09

May-10
Feb-09
Mar-09

Feb-10
Mar-10
Oct-08

Apr-09

Oct-09

Apr-10

Oct-10
Aug-08
Sep-08

Dec-08

Aug-09
Sep-09

Dec-09

Aug-10
Sep-10

Dec-10
Source: Bloomberg, Banks website, media Source: Bloomberg, Banks website, media

Operating environment

Interest rates - recent trends and FY2011 outlook Therefore the overshooting in average market lending
rates is happening independently of the more cautious
How times change. The authorities were complaining bond market movement and seems also to be some-
last month that average interest rates had jumped up what contrary to the SBVs wishes. They have imposed
too quickly in response to a much milder movement in a more restrictive monetary regime since November but
bonds yields and average deposit rates. And indeed given the lack of depth and maturity these changes in
they had a point. Average lending rates (the dark blue policy are all too often accompanied by wild swings in
line on top) have jumped 462 bps compared to a 190 interest rates. For example we have seen two spikes in
bps move in average deposit rates and a 129 bps move the overnight rate on the interbank market in the past
in benchmark bond yields. This has pushed up posted month as smaller banks scrambled for funding at a time
average lending rates to about 18.5% as of the middle when the OMO was more restrictive and the State Trea-
of February. In fact if you add in fees effective nominal sury was apparently withdrawing funds from the state
interest rates are likely 50-100 bps higher than this for owned banks. However the SBV moved fairly quickly to
the private sector. dissolve this by adding more liquidity.

And with y/y inflation now surging and having raised the However the spike in lending rates is tougher to deal with
funding rate from 11-12% and the refinancing rate from as it springs from embedded seasonal factors combined
9-11% recently they have virtually conceded that inter- with a reluctance of banks to lend for the time being.
est rates in fact must rise even further in order to stabi- Banks often find it difficult to refuse loans for existing
lise the currency and consumer prices. So lending rates customers and raising rates enables them to achieve
may rise yet further over the short term. the same result without offending anyone.

Banks are clearly reluctant to lend for the last month The SBV will have to continue to keep monetary policy
or so and they often signal this by pushing up lending very restrictive for the time being until the currency has
rates in excess of what market conditions require. Of been brought under control. Indeed interest rates and
course we have to be a little but careful here because CPI cannot be said to have peaked until the premium
following the agreement by the VBA which to control de- between the OTC forex rate and the official ceiling has
posit rates at 14%; clearly published average deposit been reduced. And tthe SBV came to the game a lot
rates are being suppressed somewhat. However in re- later this year despite the fact that the problem is a lot
cent weeks this agreement has looked under increasing worse than it was in FY2009-10.
strain and may not hold much longer. And anyway this
can be measured also simply by looking at benchmark 2 One obvious result of having very high lending rates is
year bond yields. Nobody is suppressing the bond mar- that the net average interest spread (not to be confused
129
ket and yet lending rates have risen more than twice as with net interest margins) has soared to levels which we
fast as the benchmark yield. havent seen since May 2008 in fact. This was good news
for Q4 bank earnings and likely enabled them to come
closer to their earnings targets despite a tough year.

www.hsc.com.vn Page 129

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July 14h 2008

February 2011
September 2009

Of course once its clear that inflation has peaked HSC Gap between 2 year bond yield and deposit rates
believes that average lending rates will come down but
25.0%
only slowly and perhaps just by 150-200 bps by April/
May FY2011. Beyond that we see average interest 20.0%
Gap between 2 year bond yield and deposit rates
rates between 16-17% for the rest of the year although 15.0%

we cannot rule out another seasonal spike at year-end 10.0%

FY2011. Of course for that to happen the SBV would 5.0%

have to be satisfied that inflation has been licked and 0.0%

that they become more accommodative in the OMO. -5.0%


The signs to look for would of course be a more gen- -10.0%
erous OMO; a higher bid to offer ratio; a possible re- -15.0%
duction in the funding rates and a guided move to bring -20.0%
overnight rates down.

10/1/08

12/1/08

10/1/09

12/1/09

10/1/10

12/1/10
6/1/08

8/1/08

2/1/09

4/1/09

6/1/09

8/1/09

2/1/10

4/1/10

6/1/10

8/1/10
If we see any combination of these then banks wont
Source: Bloomberg, Banks website
be shy to take the hint and lending rates could come
down after that. However we have to view this also in they struggle to contain outliers but the general trend is
the broader context of the likelihood of a more restrictive very positive as it allows banks more freedom to con-
medium term monetary policy than what we have seen duct business at commercial rates.
in the past five years. We will discuss this in more detail
further down. Deposit and credit growth - FY2010 and the outlook
for FY2011
Traditionally deposit and lending rates have taken their
cues from the benchmark bond. However in FY2010 FY2010 saw slower deposit & credit growth than the ex-
some strange things happened. Firstly we noted about traordinary growth we saw in FY2009 but nonetheless
eight months ago that the relationship between bond the numbers were still very high. The era of aggressive
yields and deposit rates had broken down with deposit branch network expansion may be coming to a close but
rates staying stubbornly high even as bond yields fell if so it went out with a bang. And driven by this deposit
over the summer. As you can see from the chart deposit growth was very strong last year in both VND and US$.
rates shot up to a 10-15% premium over benchmark This in turned fueled higher than expected credit growth
yields whereas historically this premium ranged from such that once again we overshot the target.
+/-5%.
However we think FY2011 growth rates will be lower as
The reason was the strong demand for deposits from tough rules force banks to think twice before opening a
banks something which has continued until now. We new branch. Hence HSC forecast credit growth of 20%
saw this as something of an anomaly driven by the de- and deposit growth of 23% in FY2011; supported by M2
mands set by the new regulatory environment. We were growth of 16%.
wrong. And while it looks like the two have reconnected
the premium between the two has stabilised at a much Deposit will grow more slowly this year
higher range between 10-15% in recent months.
Total deposits in the banking system rose by about 35%
But then, just as the connection between the benchmark in FY2010 with growth of 43% seen in US$ deposits
yield and deposit rates was restored then lending rates while VND deposits rose by 33.1%. Deposit growth
broke loose and also spiked far above the benchmark tends to be very choppy and depends on deposit rate
yield as we noted above. And initially we also saw as movements (plus the differentials between VND and
another anomaly driven by seasonal factors. US$ rates of course) coupled with branch openings by
bank.
But what is clear is that both deposit and lending rates
seem set to stay at least 200-300 bps higher than the Its interesting to note the surge in US$ deposits in Q4
benchmark yield whereas over the past few year gap as US$ rates began to rise and then with the loss of con-
was normally 100 bps or less. This is nothing to be fidence in the dong a large amount of money shifted into
alarmed at but simply the natural consequence of the in- dollars. That sudden movement can clearly be seen in
troduction of negotiated interest rates. A maturing bank- the graph above. Part of the reason for the Q4 surge in
ing system is seeing a wider spread of rates as credit dollar deposits was the need for banks to improve their
and systemic risk is being better priced in. This new re- net foreign currency position having lend a lot of US$ in
gime is of course giving the SBV a few headaches as the 1-H of FY2011.

www.hsc.com.vn Page 130

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Average interest rate spread Credit growth y/y


3,000,000.00 600,000.00
60%
Total Deposits
2,500,000.00 500,000.00 50%
Deposits in VND
40%
Deposits in Foreign Currencies (RHS)
2,000,000.00 400,000.00
30%

1,500,000.00 300,000.00 20%

10% Total Credit y/y


1,000,000.00 200,000.00

0% VND Credit y/y

500,000.00 100,000.00 Foreign currency Credit y/y


-10%

- - -20%

Nov -09

Nov -10
Jan -09

Jun -09

Jan -10

Jun -10
Jul-09

Jul-10
May-09

May-10
Feb-09

Mar-09

Feb-10

Mar-10
Apr-09

Oct-09

Apr-10

Oct-10
Aug-09

Sep-09

Dec-09

Aug-10

Sep-10
Sep-08

Nov -08

Sep-09

Nov -09

Sep-10

Nov -10
Jan -08

Jan -09

Jan -10
Jul-08

Jul-09

Jul-10
May-08

May-09

May-10
Mar-08

Mar-09

Mar-10

Source: Banks website Source: SBV

Therefore in FY2010 the key months for deposit growth reached growth rates of about 49% y/y. Meanwhile dong
occurred from August-October; a period that coincided lending grew at a more sedate 23% while overall lending
also with higher US dollar rates and a falling VND. Until is estimated to have increased by around 27.5% or so.
then deposit growth especially in US$ had fallen behind
credit growth. And indeed its hard not to see a strong Despite the FY2010 surge in dollar lending it still ac-
connection between these events and to assume that counts for just 21.5% or so of total credit which is close
deposit and credit growth in FY2010 had more than its to its long term average. This is because in FY2009 dol-
usual macro impact. lar loans were very scarce indeed even as total credit
jumped sharply. And at the beginning of FY2010 dollar
For FY2011 HSCs outlook for deposit growth suggests loans accounted for just 17.9% of the total.
that we will see much slower growth. With the new
tougher regulatory environment its not easy for banks So in a sense FY2010 was a catch-up year for dollar
to expand their branch network at the same pace as lending. However it has to be admitted that this has also
seen in FY2010. And indeed not necessarily profitable caused major macroeconomic dislocation with the de-
to do so either. STB which has the largest private sector mand for dollar in the system causing a shift out of dong
network has told us they would rather focus on improv- and into dollar assets which reached alarming propor-
ing the bottom line than adding more branches. There is tions in the 2-H FY2010.
a sense then that FY2010 was the last year of frenetic
branch opening before a more mature growth rates sets In FY2011 we see the adjusted official 20% credit growth
in. And as the number of planned new branches slows target as reasonable provided they stick to it this time. In
then we will also see a slowdown in deposit growth. HSCs view house average annual credit growth of 20%
for credit from now on would be the best way to ensure
Another point to mention is that US$ deposit growth is GDP growth targets of 7% or so can be met whilst still
also likely to slow this year. That is closely tied to cur- trying to move away from our dreary nine month mon-
rency sentiment and to our hope that the dong/US$ rate etary cycle. Higher than 20% credit growth would mark
will stabilise around VND21,500-22,000 for much of this a continuation of the current policy mix of two fast mon-
year there is less incentive for depositors to keep their etary expansion with the ensuing spikes in inflation and
money in US$. steady currency depreciation.

Credit growth target of 20% for FY2011 looks more With branch expansion slowing down and high growth
reasonable if they stick to it. rates for credit less sustainable given the maturing
banking market this may be happening naturally anyway
In fact the SBVs track record in guiding credit growth to- even without any active change in government think-
wards its set targets is not impressive. Quite apart from ing. From now on higher than average credit growth
the fact the official targets themselves often move about will be the preserve only of those banks with access to
a bit during the year. capital that can fund new growth without compromising
their solvency ratios. In other words only well managed
FY2010 was the year of US$ credits. As you can see banks will continue to grow at double digit rates from
from this chart foreign currency lending in FY2010 FY2012 onwards.

www.hsc.com.vn Page 131

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

CPI and bond yields - the key drivers behind future since December and after a few months time-lag this
interest rates trends should help to decelerate consumer prices also.

If the CPI outlook determines interest rates then the And then the currency factor. After stabilising around
bond market acts as the winged messenger. And cur- VND21,000 for a month the OTC market rate has
rent bond yields while not yet conclusively pointing to a dropped abruptly above VND22,000 following the re-
topping out in yields do strongly suggest that barring a cent 7.3% devaluation. Stabilising this rate and bringing
further sharp increase in m/m CPI the current inflation- it back from a 6% premium over the new adjusted ceil-
ary environment has already been largely priced in to ing rate towards a more acceptable 2% or so premium
bond yields. And that also means that market interest remains the governments top priority. The post-deval-
rates; either deposit or lending rates will not be raised uation environment has proven tougher than expected
much further in the currency cycle. given the correlation of the OTC rate with gold which
has been running again of late. We also note however
CPI up cycle tenacity has surprised us a little this that there was an unusually high level of speculation
time in the OTC rate during January and that this is proving
trickier than usual to dislodge.
The tenacity of CPI in recent months has surprised us a
little. Perhaps like the SBV we expected a repeat of last Even so we assume that the SBV is serious about tack-
years seasonal uptick. But this time it has turned out to ling this problem and that from March/April the currency
be a lot more complicated. We see it as being driven by will have calmed down and the premium reduced to
three main factors (1) excessively loose monetary policy more manageable levels.
(2) a weak currency (3) rising soft and hard commodity
prices. The first two factors are closely interrelated and Looking at CPI another way we note that much of the
explained by too high M2 growth relative to GDP. This increase has been due to the surge in the key food &
creates an oversupply of dong and weakens the cur- foodstuffs indices. This contributed almost 60% of the
rency (not least through internal capital flight) as well as total CPI increase as food, restaurant and beverage
pushing up prices. And the latter can be explained by prices surge. Food is dominated by rice prices and will
a combination of poor global weather (short term) and start to come down from now with Tet over.
geo-political and macroeconomic instability (medium to
long term). Of course then there is the broader surge in soft com-
modities to contend with. This is partly influenced by
Even so HSC has argued for some time that the current higher gold and crude oil prices but poor weather due to
inflationary cycle is driven primarily by short term factors the El Nino effect has played a larger role. Food crops
and do not necessarily point to higher inflation from now throughout the world from wheat to coffee to rice have
on. The GSO previously announced that 4.6% of the been ravaged driving prices upward. This effect lasts
11.71% rise in FY2010 CPI was due to monetary factors until the next crop and then usually starts to dissipate.
(in other words M2 growth). So the recent announce-
ment that M2 growth wont exceed 16% is good news. In In addition Middle East wave of spring revolutions has
practice M2 and credit growth have both been slowing affected both oil and gold this in turn has affected both
petrol and electricity prices.

CPI - m/m and y/y trend Money supply vs currency


22,000
30.0% 5.00% 2,500,000
CPI y/y 21,000
25.0% 4.00% 2,300,000
CPI m/m 20,000
2,100,000
20.0% 3.00% 19,000
1,900,000
15.0% 2.00% 18,000
1,700,000

1,500,000 17,000
10.0% 1.00%

1,300,000 16,000
5.0% 0.00% M2 growth
1,100,000 15,000
VND / US$ black market mid rate
0.0% -1.00%
900,000 14,000
Jan -07

Jan -08

Jan -09

Jan -10

Jan -11
Jul-07

Jul-08

Jul-09

Jul-10

Jul-11
Apr-07

Oct-07

Apr-08

Oct-08

Apr-09

Oct-09

Apr-10

Oct-10

Apr-11

Oct-11

Nov -07

Nov -08

Nov -09

Nov -10
Jan -07

Jan -08

Jan -09

Jan -10

Jan -11
Jul-07

Jul-08

Jul-09

Jul-10
May-07

May-08

May-09

May-10
Mar-07

Mar-08

Mar-09

Mar-10
Sep-07

Sep-08

Sep-09

Sep-10

Source: GSO Source: SBV

www.hsc.com.vn Page 132

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

A note on electricity prices Actually, 3 price surveys conducted every month by the
GSO on the 5, 15, and 25th of that month. However,
New electricity price tariff proposals were submitted for the CPI calculated for each month uses 3 surveys: the
the governments consideration and the PM finally ap- one on the 25th of the previous month and 2 others on
proved a 15.2% effective from March 2011. This will be 5th and 15th of the following month. The pressure to in-
reflected in March CPI numbers and add 3.5% m/m to crease petrol price was very high and should normally
the total. have been done in early February but the decision to
increase petrol price was delayed until after February
Related parties had suggested many different options: 15th to avoid having the impact included in the February
the Ministry of Finance suggested an increase of 11% CPI.
due to concern for high inflation, the Ministry of Trade
and Industry who controls EVN suggested 18%, EVN We now believe that CPI will stay above 1% m/m un-
themselves suggested 32% as they are concerned about til May and recently revised up our CPI forecast for
their inability to bring sufficient new capacity on stream, FY2011 from 11.45% to 14.2%. Our model currently
while the Vietnam Energy Association of EVN, PV, and predicts monthly CPI of 1.8% m/m in March and then
TKV are key members suggested 50% increase. 0.9% in April.

The government had little choice but to opt for a fairly Once the latent pressures are out of the way and of the
hefty increase given (1) it is forecasted that in 2011 we currency stabilises then that should be it. We are not
will be short of at least 3.75 billion kWh (about 3.75% suggesting food prices will fall sharply but simply that
of the countrys annual demand) so we will have to rely they will stop rising sharply. That alone is sufficient for
more on imported electricity from China and Laos which our CPI scenario.
is not that cheap anyway; (2) The hydrographic forecast
for FY2011 is not that optimistic for hydropower plants However gold prices is clearly a fly in this ointment and
which means we will have to rely more on thermal pow- we have proven that OTC forex rates have a close cor-
er plants from coal, oil and gas which is more costly; (3) relation with gold prices at the moment. That needs to
coal prices, oil prices and also gas prices for thermal be broken.
power plants will all increase during FY2011. We are
not sure about the increase level of each of these input Policy makers have been doing their level best to help
but we understand that COSG of an oil-burned kWh is this process along by (1) increasing the funding rate and
already higher than EVNs current selling prices. refinancing rates (2) taking a stricter line on liquidity in
the OMO since Tet (3) various temporary administrative
In March 2010, electricity selling prices increased 6.8% measures to cool down the currency.
to the average of VND1,037/kWh driven by a 35% in-
crease in the price of coal at that time. The measures taken so far seem to us to be sufficient to
counteract what is to us a mostly cyclical phenomenon.
A note on petrol prices But from a medium term perspective we need to move
away from these short cycles of boom and bust. Rath-
Then following a series of meetings the relevant authori- er like a crash diet; when monetary policy in Vietnam
ties agreed to allow the benchmark A92 petrol price to becomes too restrictive the reaction eventually cause
increase 2900 VND/lit. a swing too far in the opposite direction. What is most
needed in our opinion is successively smaller swings in
This marks a 17.6% increase from the current price of the policy pendulum to induce a longer and less volatile
VND16,400/lit. And affects petrol products sold mainly cycle.
by Petrolimex especially A92, A95 and diesel. Currently
they are losing over VND2,000 per litre on A92 and this Of course its too early to judge the results of measures
would simply cover that loss. This of course is covered already taken as CPI growth m/m still looks very frisky.
by the government under the price stabilization fund but So we go back to that messenger of inflation; the bond
that fund has been running low and action has been market. And here we see looking at the graph below that
pending for a month. the average yield curve has started to move up again
having stabilised over the last month. This reflects re-
And according to our model we estimate this would add newed concern over inflation.
another 0.5% or so to monthly CPI. And will also show
up in the March CPI number. But if the latent pricing pressure is eased in the March
CPI number as we expect then would venture that the
yield curve is close to topping out. This suggests also

www.hsc.com.vn Page 133

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Average Yield Curve vs. Movements in bps ber and January the SBV injected VND2.79 trillion and
13% 70.0
VND57.6 trillion respectively into the OMO (a total of
Average yield curve Change in basis points 60.0 VND60.4 trillion) to cope with the seasonal demand and
12%
50.0 enabling banks to get through the peak season. This
12% 40.0 was a record amount for the Tet period and up 41% y/y
30.0 compared to the total VND42.71 trillion inject during De-
11%
20.0
cember & January of FY2009. And then in February so
11%
10.0
far they have withdrawn VND69 trillion.
0.0
10% -10.0

-20.0
All of this suggests a very loose stance for much of
10%
-30.0
FY2010 followed by a sharp reversal this month once
9% -40.0 we came back from Tet. And even as late as January
this year we saw a huge net injection which compares
10/18/10

11/10/10

11/23/10
3/19/10

4/16/10

4/29/10

5/14/10

5/28/10

6/11/10

6/25/10

7/23/10

8/20/10

9/17/10

10/1/10

12/7/10

1/28/11

2/14/11
4/2/10

7/9/10

8/6/10

9/1/10

1/7/11
to the small net withdrawal last January (and remember
Source: Bloomberg and HSC calculation Tet was later last year). And therefore the ensuing with-
drawal of money this month has also been very aggres-
sive. As well it might frankly.
that interest rates are peaking and will gradually ease
perhaps beginning as soon as April. SBV policy turns 180 degrees to restore stability.

However we concede that this trend may not be clearly To cope with the consequences of their own actions the
apparent until well into March. Compared to our previ- SBV has been forced to change policy dramatically by
ous outlook this amount to a delay of a month or six 180 degrees over the past few months. And as often
weeks or so. According to our CPI outlook, we expect happens they moved far too slowly to begin with. How-
the m/m trend to slow dramatically from April onwards. ever starting in January FY2011 they began to realize
And in that scenario interest rates will follow suit. the urgency of the situation and once the Party Con-
gress was over they monetary policy has been incre-
OMO has become the SBVs monetary weapon of mentally tightened. However by then the currency was
choice falling sharply and consumer prices were spiking.

With the abandonment of the fixed prime rate and de- Funding rate has been raised by 325 bps over two
posit rate ceiling mechanism and its replacement by a and a half months
system of market determined rates the SBV now uses
the daily open market operations (OMO) to guide market At the end of November in the first signs of a tighten-
rates. This is a very effective tool given that the top 30 ing the SBV closed the 14 day discount window in the
banks use the OMO to meet a significant portion of their open market operations (OMO). This left only the 7 day
daily liquidity requirements. And with bonds required as window operational. Then starting in December they in-
collateral in exchange for borrowing SBV funds the cen- creased the funding rate at the 7 day window by 325
tral bank can also effectively control not only interbank bps from 8.75% to 12% in a series of five consecutive
rates but bond market yields also. moves. Indeed the latest move on February 21st raised
it a further 100 bps to 12%.
The generous liquidity stance adopted by the SBV last
year had several reasons behind it; (1) the need to cre- In the absence of a functioning principal interest rate
ate enough liquidity to absorb the VND75 trillion in bond (such as the prime rate) the funding rate in the OMO
issues so far this year (2) pressure from the government which is the rough equivalent of the Fed fund rate has
to reduce interest rates (3) the need to provide sufficient assumed the role of the principal interest rate in the
liquidity to help absorb any shocks to the system during market in terms of determining all other market rates.
the lead up to the implementation of C13 and (4) en-
sure the 25% credit growth target for FY2010 was easily The funding rate determines the cost of money for all
achieved. banks who use the OMO and in turn this governs the
broader interbank lending market rates. And then by
OMO was overly generous for too long controlling the amount of money they inject or withdraw
from the OMO every day the SBV also can guide bond
In FY2010 the SBV injected money into the system yields up or down (Bonds are used as collateral for all
every month from May to December. The net amount OMO activities).
over that period came to VND73.2 trillion. In Decem-

www.hsc.com.vn Page 134

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

Raising the funding rate clearly closed the arbitrage most of the crisis are the consequence of previous
window that gave some banks windfall profits in Q2 & policy responses. We return to the pendulum theory. A
Q3 FY2010 and created a lot of artificial demand in the tardy response tends to be a more dramatic one and
OMO. And by pushing it above the average bond yield this eventually leads to a equally strong reaction in the
while withdrawing a record amount of money from the opposite direction.
OMO recently they are signaling that bond yields will go
higher over the short term most likely. Hence the New Law on SBV by allowing the central
bank to choose the appropriate monetary policy to meet
A note on the refinancing rate GDP and inflation targets agreed with the National As-
sembly. The NAs role is thereby strengthened while the
The SBV recently also raised the refinancing rate from SBV itself is allowed more discretion. The big question
9% to 11%. The refinancing rate is the window of last remains whether in practice this will lead a more strate-
resort for those banks having some liquidity difficulties. gic approach.
However we also suspect that the SOCBs are also fre-
quent visitors as they can get cheap money from this At the end of the day much depends on the personal-
window without attracting any attention. And we have ity of the governor and their relationship with both the
heard persistent rumours of a lot of refinancing activity Government Office and the National Assembly. Now
at this window over the last few days involving some however the tools and legal framework is available for a
state owned banks. Now perhaps that this operation has governor to assert more independence and use the Na-
been completed the SBV is choosing to raise the rate. tional Assembly as the primary forum to approve policy
direction. Or at least use it to counteract the influence
At the refinancing window the tenors on offer are lon- exerted by the GO through the various advisory bodies
ger than at the OMO window and its not necessary to such as the National Monetary Advisory Council.
give up bonds as collateral. This window is used by the
weakest private sector banks and also by state owned However experience in other countries teaches that in-
banks (who also use the OMO). There is very little dis- dependence of central bank is usually hard worn over
closure frankly at what exactly goes on at this window several decades and that legal backing is only the first
and we suspect this window may be a key back channel step. Creating new precedents and thereby breaking ex-
for money to go between the SBV and the state owned isting habits requires strength of will exerted over many
banks. years. And those precedents must be stress-tested to
ensure they dont break. So our hopes are not high for
This serves two purposes (1) brings the refinancing rate a revolution in monetary policy but rather we hope for
back into line with the funding rate in the OMO (2) sends an evolution. And while more modest this would also be
a psychological message to the market that they are more sustainable.
tightening monetary policy further. Its part of a series
of measures begun last November to ratchet up rates. More importantly than the new law are the economic
However if this results in a lifting of the concessionary facts of life on the ground. One of the main costs of the
rates enjoyed by the SOEs from the state owned banks current policy is a steady running down or reserves. And
then it could be very significant indeed. And this view not because of the trade deficit. That is a red herring.
would be supported by the rumours of frenetic activity
at this window over the past few days before the rate
Open Market Operations, Monthly Net Injection 2009-11
was lifted.
Billions VND

Will SBV independence make a difference or not? 68,000

48,000
Current monetary policy is not only decided by commit-
28,000
tee it is as committee decisions often go largely reac-
tive and event driven. It has suffered from the fact that 8,000

it takes time to convince some committee members of -12,000


what is obvious to others. Hence changes in policy to
-32,000
head of inflationary headwinds tend to be made late in
the day leading to unnecessarily violent and short lived -52,000

monetary cycles. -72,000


Nov -09

Nov -10
Jun -09

Jan -10

Jun -10

Jan -11
Jul -09

Jul -10
May-10
Feb-10

Mar-10

Feb-11
Oct-09

Apr-10

Oct-10
Aug-09

Sep-09

Dec-09

Aug-10

Sep-10

Dec-10

Crisis management rather than strategic planning


seems to be paramount. Which is all right except that Source: Reuters and HSC Calculations

www.hsc.com.vn Page 135

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

February 2011
September 2009

The capital and current account are both actually in sur- Gap between nominal GDP and M2
plus and have been for several years now. So why the
deficit? The real damage is done in the errors and omis- Nominal GDP
sions which is the last line in the IMF BOP statement 3,500,000 35.0%
M2 growth 30.0%
where the current and capital accounts are reconciled 3,000,000
25.0%
with the change in currency reserves. Any unexplained 2,500,000
liquiidy gap (M2 - Nominal GDP
20.0%
item is dumped in the errors and omission line item. 15.0%
2,000,000
10.0%
The best explanation is that the errors and omission rep- 1,500,000
5.0%
resents capital flight from dong into US$ and perhaps 1,000,000 0.0%

more importantly gold. And this mostly occurs onshore 500,000


-5.0%

given that exchange into both alternatives is readily -10.0%


- -15.0%
available on almost every street corner. Of course this

2010e
2001

2002

2003

2004

2005

2006

2007

2008

2009

2011f
can only be allowed to continue as long as Vietnam has
the reserves to pay for it. Once reserves are used up the
policy is no more. And a currency crisis could ensue. Or Source: GSO, SBV, HSC
an extended period of stagflation. No doubt the authori-
ties are well aware of where we might be headed.

And therefore it is this reality and not the New Law on


SBV which must in the end turn monetary policy away
from the rocks.

Hence HSC in its medium view assumes that the SBV


will narrow the gap between M2 growth and nominal
GDP which has caused so much bother in recent years.
Indeed they have already begun to do so.

www.hsc.com.vn Page 136

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

Appendix 1
February 2011
September 2009

Defining loans and deposits

LDR = Total loans/Total deposits Because the demand deposits of corporate clients arent
used to calculate the total deposits for LDR calculation,
Total loans: Loans to private clients, corporate clients banks transfer the demand deposits into one-day term
and financial institutions. deposits. The one day term deposits is term deposits
that can be used to calculate LDR. Borrowing money
Total deposits: (1) Demand deposits and savings de- on the inter-bank is reported as term deposits receiving
posits of private clients. from other banks instead of interbank-loans. The inter-
bank loans are not used to calculate while the term de-
(2) Term deposits of corporate clients, credit institutions posit from other banks are used to calculate the LDR.
and foreign branches (State Treasury deposits are ex-
cluded). With these treatments of banks, there is a few banks
having the LDR higher than 80%. Banks borrowing more
(3) Borrowing amount from institutions and foreign cred- funds on the interbank show a low LDR. When issuing
it institution (borrowing amount from State Treasury and the regulation, SBV hasnt thought about this problem.
other local credit institutions/banks is excluded). However, they has realized this matter already. I still
doesnt really know the way SBV will react to this prob-
(4) Certificates of deposits. lem.

www.hsc.com.vn Page 137

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

Appendix 3
February 2011
September 2009

SBV guidance on deposit rates

Twice in FY2010 the SBV issued documents setting Three preferential segments (exporters, SMEs and bor-
caps on deposit rates despite having allowed negoti- rowers in the agricultural sector) were to receive loans
ated deposit and lending rates since Q2 FY2010. This at a rate of 12% until the end of FY2010.
illustrates the policy contradictions that still govern the
way that the SBV conducts monetary policy; on the one 2. And then in December 15th FY2010 the SBV re-
hand a medium to long term policy designed to bring quested local banks to offer interest rates for dong
Vietnamese monetary policy in line with international deposits not higher than 14% per annum.
norms punctuated by short term policies that harkens
back its controlled past. They instructed banks that the maximum deposit inter-
est rate, including bonus rate, would have to be adjusted
The former represents the goals of the SBV which is to to a level not exceeding 14%. Commercial banks have
put in place a more sophisticated and transparent set to publicly announce interest rates for deposits at their
of policies to guide the economy. The latter represents headquarters, exchanges, branches, and transaction
political reality where sensitivities towards high interest offices across the country, the central bank said.
rates run strong.
The request followed a proposal made by the Vietnam
1. SBV in late Q2 issued Document No. 5065/NHNN- Banks Association at a meeting on Dec 14, where over
CSTT which requires banks to reduce their VND 50 commercial banks reached a consensus to cut in-
deposit rates. This type of document is very familiar terest rates on dong deposits to a maximum 14% per
to local banks and is an administrative guidance to annum.
try to enforce the recent VNBA agreement amongst
banks. SBV branches will supervise the ruling and This follows a ruckus between the SBV and Techcom-
apply necessary punishment to any bank that vio- bank. On Dec 13, the HCM City branch of the SBV, or-
lates this agreement. dered Techcombank to sack the branch director of Tech-
combank Phu My Hung branch for continuing to offer
According to the document the timetable to reduce VND deposits at a high rate despite being instructed not to.
deposit rates was as follows: The SBV said the general director of Techcombank had
instructed all branches on Dec 8 to suspend the cam-
From July 5th 2009, rates were to be reduced to paign to mobilize deposits at interest rate of 17%. But
11%. that the Phu My Hung branch continued to offer a rate
of 16.8%.
From August 2009, these rates were to be reduced
to 10.5%.

From September 2009, these rates were to be re-


duced to 10%.

Banks are not permitted to use any bonus program


for their deposit lines.

www.hsc.com.vn Page 138

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
SOCBs & JSCBs Master Sheet y/y CAGR

BALANCE SHEET (VNDmn) 2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 11,829,736 19,983,528 26,659,955 42,735,287 46,545,930 61,639,826 69,564,774 79,673,449 68.9% 33.4% 60.3% 8.9% 32.4% 12.9% 14.5% 39.1%

www.hsc.com.vn
2 Balances with State bank 33,019,616 54,950,770 62,232,857 92,617,185 87,473,284 109,966,232 116,969,457 134,754,277 66.4% 13.3% 48.8% -5.6% 25.7% 6.4% 15.2% 27.2%

3 Deposits with other financial institutions 105,187,565 163,557,882 204,167,932 218,375,065 319,548,154 394,051,610 418,161,754 487,520,752 55.5% 24.8% 7.0% 46.3% 23.3% 6.1% 16.6% 30.2%

4 Net Securities - Held for trading 18,618,740 5,293,370 9,368,294 4,583,496 5,637,951 7,118,293 8,528,191 10,301,483 -71.6% 77.0% -51.1% 23.0% 26.3% 19.8% 20.8% -17.5%

5 Derivatives 0 15,762 46,786 104,570 747,299 112,544 126,050 141,177 196.8% 123.5% 614.6% -84.9% 12.0% 12.0% -100.0%

6 Net loans and advances to clients 431,499,486 523,934,712 773,500,388 907,885,820 1,242,162,900 1,534,837,524 1,830,782,300 2,174,666,594 21.4% 47.6% 17.4% 36.8% 23.6% 19.3% 18.8% 28.9%

7 Investment securities 59,772,988 99,966,926 189,752,398 239,121,986 251,947,159 340,264,356 390,331,082 450,508,551 67.2% 89.8% 26.0% 5.4% 35.1% 14.7% 15.4% 41.6%

8 Long term investments 2,651,411 4,555,844 10,990,847 15,188,802 15,650,519 18,649,485 21,139,152 24,093,665 71.8% 141.2% 38.2% 3.0% 19.2% 13.3% 14.0% 47.7%

9 Fixed assets 8,048,458 8,974,098 10,851,591 16,032,399 20,412,024 22,534,180 25,611,614 29,062,077 11.5% 20.9% 47.7% 27.3% 10.4% 13.7% 13.5% 22.9%

10 Other assets 11,437,571 18,832,562 32,471,011 52,358,604 90,837,602 73,273,463 85,903,617 101,138,258 64.7% 72.4% 61.2% 73.5% -19.3% 17.2% 17.7% 45.0%

Total Assets 682,065,571 900,065,454 1,320,042,060 1,589,003,214 2,080,962,821 2,562,447,514 2,967,117,991 3,491,860,282 32% 47% 20% 31% 23% 16% 18% 30%
EARNINGS MODEL OF 10 BANKS

1 Deposits & Loans from SBV 56,548,215 67,699,181 59,814,049 56,168,660 133,567,484 132,113,258 137,774,547 149,020,845 19.7% -11.6% -6.1% 137.8% -1.1% 4.3% 8.2% 18.5%

2 Deposits from Banks 43,865,904 64,545,988 134,176,516 147,801,052 239,706,010 280,838,327 321,106,757 390,113,925 47.1% 107.9% 10.2% 62.2% 17.2% 14.3% 21.5% 45.0%

3 Customer deposits 471,389,558 590,676,628 861,672,952 1,066,689,166 1,286,596,874 1,616,556,655 1,928,536,313 2,287,463,486 25.3% 45.9% 23.8% 20.6% 25.6% 19.3% 18.6% 28.0%

4 Trusted funds 12,889,756 39,771,242 60,880,094 59,296,332 77,497,901 62,854,074 68,462,956 74,637,761 208.5% 53.1% -2.6% 30.7% -18.9% 8.9% 9.0% 37.3%

5 Liabilities from derivatives 0 32,276 55,292 34,426 772,182 95,925 108,603 123,630 71.3% -37.7% 2143.0% -87.6% 13.2% 13.8% -100.0%

6 Bonds & Certificates of deposits 28,264,720 46,340,424 59,888,865 71,112,124 119,524,810 184,048,800 204,903,380 237,663,914 64.0% 29.2% 18.7% 68.1% 54.0% 11.3% 16.0% 45.5%

7 Other liabilities 31,264,627 38,939,230 45,765,673 71,784,236 80,202,098 97,202,264 96,528,530 120,437,656 24.5% 17.5% 56.9% 11.7% 21.2% -0.7% 24.8% 25.5%

8 Shareholders' equity and other funds 37,770,557 51,942,863 97,115,820 115,576,269 141,337,373 187,210,373 207,836,223 230,224,321 37.5% 87.0% 19.0% 22.3% 32.5% 11.0% 10.8% 37.7%

Chartered capital 24,321,006 30,690,662 59,291,377 82,661,066 101,654,905 141,201,492 148,676,886 154,937,358 26.2% 93.2% 39.4% 23.0% 38.9% 5.3% 4.2% 42.2%

Share premium 238,211 1,700,304 9,479,080 8,535,361 6,643,819 4,708,743 4,421,463 4,434,375 613.8% 457.5% -10.0% -22.2% -29.1% -6.1% 0.3% 81.6%

Treasury shares 0 0 0 (440,331) (117,816) (64,498) (75,898) (82,467) -73.2% -45.3% 17.7% 8.7% -100.0%

Funds 11,730,192 15,238,352 20,109,146 17,642,113 19,286,021 21,274,805 26,339,423 32,360,315 29.9% 32.0% -12.3% 9.3% 10.3% 23.8% 22.9% 12.6%

FX revaluation 147,653 232,855 183,123 265,249 502,957 319,547 330,907 343,275 57.7% -21.4% 44.8% 89.6% -36.5% 3.6% 3.7% -100.0%

Asset revaluation 0 0 9,756 48,987 24,032 37,711 41,172 45,048 402.1% -50.9% 56.9% 9.2% 9.4% -100.0%

Retained profits 1,333,495 4,080,690 8,043,338 6,863,824 13,343,454 19,732,572 28,102,269 38,186,417 206.0% 97.1% -14.7% 94.4% 47.9% 42.4% 35.9% 71.4%

9 Minor shareholders' interests 72,234 117,622 672,798 540,948 1,758,090 1,527,837 1,860,682 2,174,743 62.8% 472.0% -19.6% 225.0% -13.1% 21.8% 16.9% 84.1%

Liabilities and Equities 682,065,571 900,065,454 1,320,042,060 1,589,003,214 2,080,962,821 2,562,447,513 2,967,117,991 3,491,860,281 32.0% 46.7% 20.4% 31.0% 23.1% 15.8% 17.7% 30.3%

Source: Company financial statements and HSC forecasts


September
January 2011
July 14h 2008

2009

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y
CAGR
2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 45,185,282 64,300,349 92,184,613 158,819,424 151,794,736 206,362,276 251,963,498 291,591,177 42.3% 43.4% 72.3% -4.4% 35.9% 22.1% 15.7% 35.5%

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2 Interest expenses (26,187,823) (38,966,673) (58,851,167) (109,940,819) (101,152,929) (139,639,998) (172,327,010) (199,414,567) 48.8% 51.0% 86.8% -8.0% 38.0% 23.4% 15.7% 39.8%

3 Net interest income 18,997,459 25,333,676 33,333,446 48,878,605 50,641,807 66,722,278 79,636,487 92,176,610 33.4% 31.6% 46.6% 3.6% 31.8% 19.4% 15.7% 28.6%

4 Fee and commission income 2,003,354 2,826,357 4,517,631 7,555,571 10,795,545 12,265,093 14,588,060 17,367,312 41.1% 59.8% 67.2% 42.9% 13.6% 18.9% 19.1% 43.7%

5 Fee and commission expenses (481,320) (513,853) (1,060,375) (1,812,579) (3,139,283) (3,200,311) (3,672,130) (4,255,822) 6.8% 106.4% 70.9% 73.2% 1.9% 14.7% 15.9% 46.1%

6 Net fee and commission income 1,541,347 2,312,504 3,457,255 5,742,992 7,656,262 9,064,782 10,915,930 13,111,491 50.0% 49.5% 66.1% 33.3% 18.4% 20.4% 20.1% 42.5%

7 Foreign exchange gains - net 1,071,559 706,452 1,112,478 4,705,953 2,691,226 1,906,056 2,976,249 3,421,165 -34.1% 57.5% 323.0% -42.8% -29.2% 56.1% 14.9% 12.2%

8 Income from trading securities 20,081 124,297 1,261,233 (435,926) 1,328,255 485,963 795,213 912,853 519.0% 914.7% -134.6% -404.7% -63.4% 63.6% 14.8% 89.1%

9 Income from Investment securities 746,643 1,180,050 1,474,677 (709,419) 2,481,686 1,608,662 1,831,750 2,154,528 58.0% 25.0% -148.1% -449.8% -35.2% 13.9% 17.6% 16.6%

10 Other income 1,262,762 2,961,562 7,623,386 5,889,538 7,088,439 6,321,568 5,756,329 5,881,300 134.5% 157.4% -22.7% 20.4% -10.8% -8.9% 2.2% 38.0%

11 Equity income 118,487 328,473 820,105 1,367,740 1,270,740 1,534,368 1,350,399 1,523,521 177.2% 149.7% 66.8% -7.1% 20.7% -12.0% 12.8% 66.9%

12 Total operating income 23,758,337 32,947,014 49,082,580 65,439,482 73,158,414 87,643,678 103,262,357 119,181,468 38.7% 49.0% 33.3% 11.8% 19.8% 17.8% 15.4% 29.8%
EARNINGS MODEL OF 10 BANKS

13 Administration expenses (10,085,738) (12,484,470) (18,016,477) (27,949,454) (32,729,853) (38,884,481) (46,559,227) (54,406,498) 23.8% 44.3% 55.1% 17.1% 18.8% 19.7% 16.9% 31.0%

14 Profit before loan loss provision 13,672,599 20,462,544 31,066,103 37,490,028 40,428,561 48,759,197 56,703,130 64,774,970 49.7% 51.8% 20.7% 7.8% 20.6% 16.3% 14.2% 29.0%

15 Provision loss (9,084,001) (9,786,081) (14,585,498) (15,450,297) (10,620,414) (14,868,582) (17,989,127) (20,464,998) 7.7% 49.0% 5.9% -31.3% 40.0% 21.0% 13.8% 10.4%

16 Profit before tax 4,589,800 10,676,463 16,480,605 22,039,731 29,808,147 34,000,615 38,714,004 44,309,972 132.6% 54.4% 33.7% 35.2% 14.1% 13.9% 14.5% 49.3%

17 Income tax (1,272,533) (2,556,348) (3,856,692) (4,609,160) (7,110,549) (8,061,502) (8,975,938) (10,177,079) 100.9% 50.9% 19.5% 54.3% 13.4% 11.3% 13.4% 44.7%

18 Net profit 3,317,267 8,120,115 12,623,913 17,430,571 22,697,598 25,939,113 29,738,065 34,132,893 144.8% 55.5% 38.1% 30.2% 14.3% 14.6% 14.8% 50.9%

19 Minority interest 0 0 1,149 (27,921) (166,521) (198,139) (257,936) (310,695) -2530.0% 496.4% 19.0% 30.2% 20.5%

20 Net profit for their shareholders 3,317,267 8,120,115 12,625,062 17,402,650 22,531,077 25,740,974 29,480,129 33,822,198 144.8% 55.5% 37.8% 29.5% 14.2% 14.5% 14.7% 50.6%

(*) include assets under construction and leasing


(**) not include long-term investments
Source: Company financial statements and HSC forecasts
September
February 2011
July 14h 2008

2009

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
KEY RATIO y/y
CAGR
2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

I Number of branches and sub-branches 3,442 3,776 4,347 4,986 5,731 6,467 7,038 7,733 9.7% 15.1% 14.7% 14.9% 12.8% 8.8% 9.9% 8.8%

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II Financial leverage

1 Equity/Total Assets 5.5% 5.8% 7.4% 7.3% 6.8% 7.3% 7.0% 6.6% 4.2% 27.5% -1.1% -6.6% 7.6% -4.1% -5.9% -4.1%

2 Equity multiplier = TA/Equity 18.1 17.3 13.6 13.7 14.7 13.7 14.3 15.2 -4.0% -21.6% 1.1% 7.1% -7.0% 4.3% 6.2% 4.3%

III Asset quality

1 NPL 3-5 na 3.6% 2.4% 3.0% 1.9% 3.4% 3.8% 3.8% -31.7% 25.6% -36.8% 77.3% 11.2% -0.5% 11.2%

2 Loan loss reserve coverage na 29.5% 65.7% 66.9% 91.6% 48.9% 43.2% 43.3% 122.9% 1.9% 36.8% -46.6% -11.7% 0.3% -11.7%

IV Liquidity

1 Loans/customer deposits 91.5% 88.7% 89.8% 85.1% 96.5% 94.9% 94.9% 95.1% -3.1% 1.2% -5.2% 13.4% -1.7% 0.0% 0.1% 0.0%

2 Loans/(customer deposits + CDs + 84.2% 77.4% 78.7% 75.8% 83.7% 82.4% 83.1% 83.6% -8.0% 1.7% -3.7% 10.4% -1.6% 0.9% 0.6% 0.9%
entrusted funds)

3 Loans/Total assets 63.3% 58.2% 58.6% 57.1% 59.7% 59.9% 61.7% 62.3% -8.0% 0.7% -2.5% 4.5% 0.3% 3.0% 0.9% 3.0%

4 Interbank funds (borrowing+deposits)/equity 1.2 1.2 1.4 1.3 1.7 1.5 1.5 1.7 7.0% 11.2% -7.4% 32.6% -11.5% 3.0% 9.7% 3.0%
EARNINGS MODEL OF 10 BANKS

5 (Interbank funds +CDS +bonds)/equity 1.9 2.1 2.0 1.9 2.5 2.5 2.5 2.7 11.8% -6.4% -5.2% 34.2% -2.3% 1.9% 7.7% 1.9%

6 Interbank funds/total deposits 7.9% 8.7% 12.0% 11.0% 13.9% 13.1% 12.7% 13.0% 10.4% 38.0% -8.5% 26.6% -5.8% -2.8% 2.5% -2.8%

7 Net interbank position/total assets 9.0% 11.0% 5.3% 4.4% 3.8% 4.4% 3.3% 2.8% 22.4% -51.8% -16.2% -13.6% 15.2% -26.0% -14.7% -26.0%

V Profitability & Efficiency

1 ROAA 0.5% 1.0% 1.1% 1.2% 1.2% 1.1% 1.1% 1.0% 111.1% 10.8% 5.2% 2.6% -9.7% -3.8% -1.8% -3.8%

2 ROAE 8.8% 18.1% 16.9% 16.4% 17.5% 15.7% 14.9% 15.4% 106.1% -6.4% -3.4% 7.2% -10.7% -4.8% 3.5% -4.8%

3 Net Interest Margin (NI/AEA) 3.1% 3.6% 3.4% 3.9% 3.2% 3.3% 3.3% 3.2% 16.6% -5.8% 13.5% -17.4% 3.0% -0.7% -1.5% -0.7%

4 Operating Exp/ AEA 1.6% 1.8% 1.8% 2.2% 2.1% 1.9% 1.9% 1.9% 8.3% 3.3% 20.1% -6.6% -7.2% -0.4% -0.6% -0.4%

5 Net Interest income/total operating income 80.0% 76.9% 67.9% 74.7% 69.2% 76.1% 77.1% 77.3% -3.8% -11.7% 10.0% -7.3% 10.0% 1.3% 0.3% 1.3%

6 Cost to income ratio 42.5% 37.9% 36.7% 42.7% 44.7% 44.4% 45.1% 45.7% -10.7% -3.1% 16.4% 4.7% -0.8% 1.6% 1.2% 1.6%

7 Net profit/total operating income 14.0% 24.6% 25.7% 26.6% 31.0% 29.6% 28.8% 28.6% 76.5% 4.4% 3.6% 16.5% -4.6% -2.7% -0.6% -2.7%

VI Growth Ratios (y/y)

1 Asset growth 32.0% 46.7% 20.4% 31.0% 23.1% 15.8% 17.7% 46.0% -56.3% 52.0% -25.3% -31.7% 12.0% -31.7%

2 Loans growth 21.4% 47.6% 17.4% 36.8% 23.6% 19.3% 18.8% 122.4% -63.5% 111.9% -36.0% -18.2% -2.6% -18.2%

3 Deposit growth 25.3% 45.9% 23.8% 20.6% 25.6% 19.3% 18.6% 81.3% -48.1% -13.4% 24.4% -24.7% -3.6% -24.7%

4 Growth in total deposits and CDS 27.5% 44.7% 23.5% 23.6% 28.1% 18.5% 18.4% 62.5% -47.5% 0.5% 19.0% -34.1% -0.7% -34.1%

5 Capital growth 37.5% 87.0% 19.0% 22.3% 32.5% 11.0% 10.8% 131.8% -78.1% 17.3% 45.6% -66.1% -2.2% -66.1%

6 Profit growth 144.8% 55.5% 37.8% 29.5% 14.2% 14.5% 14.7% -61.7% -31.8% -22.1% -51.7% 2.0% 1.4% 2.0%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 141

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

EARNINGS MODEL OF 10 BANKS


February 2011
September 2009

JSCB Master Sheet - BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.7% 2.2% 2.0% 2.7% 2.2% 2.4% 2.3% 2.3%
2 Balances with State bank 4.8% 6.1% 4.7% 5.8% 4.2% 4.3% 3.9% 3.9%
3 Deposits with other financial institutions 15.4% 18.2% 15.5% 13.7% 15.4% 15.4% 14.1% 14.0%
4 Net Securities - Held for trading 2.7% 0.6% 0.7% 0.3% 0.3% 0.3% 0.3% 0.3%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 63.3% 58.2% 58.6% 57.1% 59.7% 59.9% 61.7% 62.3%
7 Investment securities 8.8% 11.1% 14.4% 15.0% 12.1% 13.3% 13.2% 12.9%
8 Long term investments 0.4% 0.5% 0.8% 1.0% 0.8% 0.7% 0.7% 0.7%
9 Fixed assets 1.2% 1.0% 0.8% 1.0% 1.0% 0.9% 0.9% 0.8%
10 Other assets 1.7% 2.1% 2.5% 3.3% 4.4% 2.9% 2.9% 2.9%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 8.3% 7.5% 4.5% 3.5% 6.4% 5.2% 4.6% 4.3%
2 Deposits from Banks 6.4% 7.2% 10.2% 9.3% 11.5% 11.0% 10.8% 11.2%
3 Customer deposits 69.1% 65.6% 65.3% 67.1% 61.8% 63.1% 65.0% 65.5%
4 Trusted funds 1.9% 4.4% 4.6% 3.7% 3.7% 2.5% 2.3% 2.1%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 4.1% 5.1% 4.5% 4.5% 5.7% 7.2% 6.9% 6.8%
7 Other liabilities 4.6% 4.3% 3.5% 4.5% 3.9% 3.8% 3.3% 3.4%
8 Shareholders' equity and other funds 5.5% 5.8% 7.4% 7.3% 6.8% 7.3% 7.0% 6.6%
Chartered capital 3.6% 3.4% 4.5% 5.2% 4.9% 5.5% 5.0% 4.4%
Share premium 0.0% 0.2% 0.7% 0.5% 0.3% 0.2% 0.1% 0.1%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 1.7% 1.7% 1.5% 1.1% 0.9% 0.8% 0.9% 0.9%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.2% 0.5% 0.6% 0.4% 0.6% 0.8% 0.9% 1.1%
9 Minor shareholders' interests 0.0% 0.0% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010 2011F 2012F
Deposits in other banks as % of balance sheet 15.4% 18.2% 15.5% 13.7% 15.4% 15.4% 14.1% 14.0%
Deposits from other banks as % of balance sheet 6.4% 7.2% 10.2% 9.3% 11.5% 11.0% 10.8% 11.2%
Net position 9.0% 11.0% 5.3% 4.4% 3.8% 4.4% 3.3% 2.8%
SBV positions
Deposits in SBV as % of balance sheet 4.8% 6.1% 4.7% 5.8% 4.2% 4.3% 3.9% 3.9%
Deposits from SBV as % of balance sheet 8.3% 7.5% 4.5% 3.5% 6.4% 5.2% 4.6% 4.3%
Net position -3.4% -1.4% 0.2% 2.3% -2.2% -0.9% -0.7% -0.4%
Source: Company financial statements and HSC forecasts

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
BALANCE SHEET (VNDMillion) SOCB Master Sheet y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 7,229,071 9,817,466 12,735,945 15,302,943 16,860,497 28,615,564 32,624,098 36,961,239 35.8% 29.7% 20.2% 10.2% 69.7% 14.0% 13.3%

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2 Balances with State bank 29,985,713 49,585,451 46,545,671 77,626,976 70,386,061 73,881,569 79,662,112 90,743,440 65.4% -6.1% 66.8% -9.3% 5.0% 7.8% 13.9%

3 Deposits with other financial institutions 80,692,098 114,805,466 90,094,857 92,546,584 133,032,917 171,737,667 163,024,293 181,416,198 42.3% -21.5% 2.7% 43.7% 29.1% -5.1% 11.3%

4 Net Securities - Held for trading 15,912,616 912,545 3,185,758 2,363,382 1,473,251 2,630,633 3,057,069 3,557,041 -94.3% 249.1% -25.8% -37.7% 78.6% 16.2% 16.4%

5 Derivatives 0 0 31,902 4,151 75,228 112,544 126,049 141,175 -87.0% 1712.3% 49.6% 12.0% 12.0%

6 Net loans and advances to clients 376,316,271 429,943,104 572,182,268 673,030,359 861,354,563 1,036,539,428 1,212,594,407 1,409,772,385 14.3% 33.1% 17.6% 28.0% 20.3% 17.0% 16.3%

7 Investment securities 49,435,791 83,432,968 139,347,899 157,409,562 136,763,923 174,812,318 195,726,886 217,793,807 68.8% 67.0% 13.0% -13.1% 27.8% 12.0% 11.3%

8 Long term investments 1,788,381 2,684,233 5,513,846 7,720,451 9,127,531 9,481,859 10,239,183 11,031,992 50.1% 105.4% 40.0% 18.2% 3.9% 8.0% 7.7%

9 Fixed assets 6,094,336 5,883,133 6,562,788 8,879,028 11,562,496 12,362,140 13,641,964 15,087,417 -3.5% 11.6% 35.3% 30.2% 6.9% 10.4% 10.6%
SOCB EARNINGS MODEL

10 Other assets 8,089,668 13,081,966 18,683,453 27,801,489 36,013,757 27,282,316 33,557,506 40,812,011 61.7% 42.8% 48.8% 29.5% -24.2% 23.0% 21.6%

Total Assets 575,543,945 710,146,332 894,884,387 1,062,684,925 1,276,650,225 1,537,456,040 1,744,253,567 2,007,316,706 23.4% 26.0% 18.8% 20.1% 20.4% 13.5% 15.1%

1 Deposits & Loans from SBV 51,508,379 60,769,838 57,611,874 56,067,054 103,972,959 113,667,175 118,051,551 129,011,609 18.0% -5.2% -2.7% 85.4% 9.3% 3.9% 9.3%

2 Deposits from Banks 29,206,860 32,570,485 49,071,236 61,760,427 112,982,055 128,865,906 155,740,233 186,358,239 11.5% 50.7% 25.9% 82.9% 14.1% 20.9% 19.7%

3 Customer deposits 398,179,259 475,940,208 619,618,675 745,511,583 836,776,063 995,152,665 1,156,051,977 1,336,493,722 19.5% 30.2% 20.3% 12.2% 18.9% 16.2% 15.6%

4 Trusted funds 11,917,691 38,378,369 58,677,443 55,903,319 72,441,429 56,537,199 61,568,927 67,072,563 222.0% 52.9% -4.7% 29.6% -22.0% 8.9% 8.9%

5 Liabilities from derivatives 0 602 0 0 644,807 0 0 0

6 Bonds & Certificates of deposits 27,307,580 35,767,463 32,680,500 31,539,904 38,664,747 79,167,427 88,125,843 101,851,158 31.0% -8.6% -3.5% 22.6% 104.8% 11.3% 15.6%

7 Other liabilities 27,797,510 31,948,418 25,110,222 54,235,072 44,071,354 67,675,918 60,301,654 72,288,730 14.9% -21.4% 116.0% -18.7% 53.6% -10.9% 19.9%

8 Shareholders' equity and other funds 29,554,432 34,695,855 51,511,984 57,379,207 66,176,298 95,651,580 103,579,266 113,297,821 17.4% 48.5% 11.4% 15.3% 44.5% 8.3% 9.4%

Chartered capital 18,322,294 18,563,631 30,640,588 39,498,180 45,135,572 68,335,871 68,335,871 68,335,871 1.3% 65.1% 28.9% 14.3% 51.4% 0.0% 0.0%

Share premium 0 441,421 190,753 290,229 0 26,503 26,503 26,503 -56.8% 52.1%

Treasury shares 0 0 0 (6,723) 0 45,160 45,160 45,160

Funds 10,774,548 13,545,273 17,938,610 14,303,152 15,219,715 15,569,067 18,907,995 22,625,915 25.7% 32.4% -20.3% 6.4% 2.3% 21.4% 19.7%

FX revaluation 147,653 232,855 181,552 263,318 501,026 393,920 410,487 428,424 57.7% -22.0% 45.0% 90.3% -21.4% 4.2% 4.4%

Asset revaluation 0 0 9,756 48,987 24,032 37,711 41,172 45,048 -50.9% 56.9% 9.2% 9.4%

Retained profits 309,937 1,912,675 2,550,725 2,982,064 5,295,953 11,243,347 15,812,078 21,790,900 517.1% 33.4% 16.9% 77.6% 112.3% 40.6% 37.8%

9 Minor shareholders' interests 72,234 75,094 602,453 288,359 920,513 738,171 834,116 942,863 4.0% 702.3% -52.1% 219.2% -19.8% 13.0% 13.0%

Liabilities and Equities 575,543,945 710,146,332 894,884,387 1,062,684,925 1,276,650,225 1,537,456,040 1,744,253,568 2,007,316,706 23% 26% 19% 20% 20% 13% 15%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 143

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 38,254,694 52,376,105 68,479,138 105,458,252 98,658,739 119,353,184 141,327,425 158,647,287 36.9% 30.7% 54.0% -6.4% 21.0% 18.4% 12.3%

www.hsc.com.vn
2 Interest expenses (21,791,733) (32,581,776) (43,051,132) (70,967,687) (65,763,577) (77,443,234) (92,044,876) (102,627,521) 49.5% 32.1% 64.8% -7.3% 17.8% 18.9% 11.5%

3 Net interest income 16,462,961 19,794,329 25,428,006 34,490,565 32,895,162 41,909,950 49,282,549 56,019,766 20.2% 28.5% 35.6% -4.6% 27.4% 17.6% 13.7%

4 Fee and commission income 1,490,607 1,960,414 2,790,316 4,401,556 6,044,137 7,280,931 8,748,798 10,452,782 31.5% 42.3% 57.7% 37.3% 20.5% 20.2% 19.5%

5 Fee and commission expenses (361,544) (377,503) (735,646) (1,317,120) (2,293,526) (2,342,881) (2,686,735) (3,113,693) 4.4% 94.9% 79.0% 74.1% 2.2% 14.7% 15.9%

6 Net fee and commission income 1,129,063 1,582,911 2,054,670 3,084,436 3,750,611 4,938,050 6,062,063 7,339,089 40.2% 29.8% 50.1% 21.6% 31.7% 22.8% 21.1%

7 Foreign exchange gains - net 905,385 569,387 625,466 2,272,582 1,117,871 1,467,187 1,662,938 1,912,405 -37.1% 9.8% 263.3% -50.8% 31.2% 13.3% 15.0%

8 Income from trading securities 0 22,765 39,397 (1,245,474) 1,034,021 373,340 528,613 584,673 -3261.3% -183.0% -63.9% 41.6% 10.6%

9 Income from Investment securities 687,608 742,535 122,628 (42,032) 449,521 513,501 724,689 858,836 8.0% -83.5% -134.3% -1169.5% 14.2% 41.1% 18.5%
SOCB EARNINGS MODEL

10 Other income 1,115,803 2,687,262 7,241,210 5,197,965 6,316,027 5,068,465 4,672,999 4,766,340 140.8% 169.5% -28.2% 21.5% -19.8% -7.8% 2.0%

11 Equity income 46,058 165,167 429,189 949,960 799,292 407,433 502,533 563,360 258.6% 159.9% 121.3% -15.9% -49.0% 23.3% 12.1%

12 Total operating income 20,346,878 25,564,356 35,940,566 44,708,002 46,362,505 54,677,926 63,436,383 72,044,468 26% 41% 24% 4% 18% 16% 14%

13 Administration expenses (8,740,387) (10,211,949) (13,668,781) (20,441,059) (22,888,282) (26,375,624) (31,273,604) (36,015,865) 16.8% 33.9% 49.5% 12.0% 15.2% 18.6% 15.2%

14 Profit before loan loss provision 11,606,491 15,352,407 22,271,785 24,266,943 23,474,223 28,302,302 32,162,779 36,028,603 32.3% 45.1% 9.0% -3.3% 20.6% 13.6% 12.0%

15 Provision loss (8,657,062) (9,284,451) (13,828,010) (13,348,695) (8,200,336) (11,225,599) (13,248,370) (14,487,175) 7.2% 48.9% -3.5% -38.6% 36.9% 18.0% 9.4%

16 Profit before tax 2,949,429 6,067,956 8,443,775 10,918,248 15,273,887 17,076,703 18,914,408 21,541,428 105.7% 39.2% 29.3% 39.9% 11.8% 10.8% 13.9%

17 Income tax (851,033) (1,701,578) (2,210,191) (2,451,421) (3,695,304) (4,025,874) (4,081,918) (4,548,499) 99.9% 29.9% 10.9% 50.7% 8.9% 1.4% 11.4%

18 Net profit 2,098,396 4,366,378 6,233,584 8,466,827 11,578,583 13,050,829 14,832,491 16,992,929 108.1% 42.8% 35.8% 36.8% 12.7% 13.7% 14.6%

19 Minority interest 0 0 (2,070) (20,758) (87,515) (87,943) (115,916) (141,971) 902.8% 321.6% 0.5% 31.8% 22.5%

20 Net profit for their shareholders 2,098,396 4,366,378 6,231,514 8,446,069 11,491,069 12,962,886 14,716,574 16,850,958 108.1% 42.7% 35.5% 36.1% 12.8% 13.5% 14.5%

(*) include assets under construction and leasing


(**) not include long-term investments
Source: Company financial statements and HSC forecasts
September
February 2011
July 14h 2008

2009

Page 144

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

SOCB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 3,089 3,157 3,396 3,642 3,991 4,395 4,708 5,070
II Financial leverage
1 Equity/Total Assets 5.1% 4.9% 5.8% 5.4% 5.2% 6.2% 5.9% 5.6%
2 Equity multiplier = TA/Equity 19.5 20.5 17.4 18.5 19.3 16.1 16.8 17.7
III Asset quality
1 NPL 3-5 na 4.1% 3.0% 3.6% 2.3% 4.0% 4.4% 4.4%
2 Loan loss reserve coverage na 29% 66% 67% 92% 48% 43% 42%
IV Liquidity
1 Loans/customer deposits 95% 90% 92% 90% 103% 104% 105% 105%
2 Loans/(customer deposits + CDs + entrusted 86% 78% 80% 81% 91% 92% 93% 94%
funds)
3 Loans/Total assets 65% 61% 64% 63% 67% 67% 70% 70%
4 Interbank funds (borrowing+deposits)/equity 1.0 0.9 1.0 1.1 1.7 1.3 1.5 1.6
5 (Interbank funds +CDS +bonds)/equity 1.9 2.0 1.6 1.6 2.3 2.2 2.4 2.5
6 Interbank funds/total deposits 6% 6% 6% 7% 11% 10% 11% 11%
7 Net interbank position/total assets 9% 12% 5% 3% 2% 3% 0% 0%
V Profitability & Efficiency
1 ROAA 0.4% 0.7% 0.8% 0.9% 1.0% 0.9% 0.9% 0.9%
2 ROAE 7.1% 13.6% 14.5% 15.5% 18.6% 16.0% 14.8% 15.5%
3 Net interest margin (NI/AEA) 3.2% 3.4% 3.6% 4.0% 3.2% 3.4% 3.4% 3.3%
4 Operating Exp/ AEA 1.7% 1.8% 1.9% 2.4% 2.2% 2.1% 2.1% 2.1%
5 Net Interest income/total operating income 80.9% 77.4% 70.8% 77.1% 71.0% 76.6% 77.7% 77.8%
6 Cost to income ratio 43.0% 39.9% 38.0% 45.7% 49.4% 48.2% 49.3% 50.0%
7 Net profit/total operating income 10.3% 17.1% 17.3% 18.9% 25.0% 23.9% 23.4% 23.6%
VI Growth Ratios
1 Asset growth Na 23% 26% 19% 20% 20% 13% 15%
2 Loans growth Na 14% 33% 18% 28% 20% 17% 16%
3 Deposit growth Na 20% 30% 20% 12% 19% 16% 16%
4 Growth in total deposits and CDS Na 20% 27% 19% 13% 23% 16% 16%
5 Capital growth Na 17% 48% 11% 15% 45% 8% 9%
6 Profit growth Na 108% 43% 36% 36% 13% 14% 15%
Source: Company financial statements and HSC forecasts

www.hsc.com.vn Page 145

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

SOCB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.3% 1.4% 1.4% 1.4% 1.3% 1.9% 1.9% 1.8%
2 Balances with State bank 5.2% 7.0% 5.2% 7.3% 5.5% 4.8% 4.6% 4.5%
3 Deposits with other financial institutions 14.0% 16.2% 10.1% 8.7% 10.4% 11.2% 9.3% 9.0%
4 Net Securities - Held for trading 2.8% 0.1% 0.4% 0.2% 0.1% 0.2% 0.2% 0.2%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 65.4% 60.5% 63.9% 63.3% 67.5% 67.4% 69.5% 70.2%
7 Investment securities 8.6% 11.7% 15.6% 14.8% 10.7% 11.4% 11.2% 10.8%
8 Long term investments 0.3% 0.4% 0.6% 0.7% 0.7% 0.6% 0.6% 0.5%
9 Fixed assets 1.1% 0.8% 0.7% 0.8% 0.9% 0.8% 0.8% 0.8%
10 Other assets 1.4% 1.8% 2.1% 2.6% 2.8% 1.8% 1.9% 2.0%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 8.9% 8.6% 6.4% 5.3% 8.1% 7.4% 6.8% 6.4%
2 Deposits from Banks 5.1% 4.6% 5.5% 5.8% 8.8% 8.4% 8.9% 9.3%
3 Customer deposits 69.2% 67.0% 69.2% 70.2% 65.5% 64.7% 66.3% 66.6%
4 Trusted funds 2.1% 5.4% 6.6% 5.3% 5.7% 3.7% 3.5% 3.3%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 4.7% 5.0% 3.7% 3.0% 3.0% 5.1% 5.1% 5.1%
7 Other liabilities 4.8% 4.5% 2.8% 5.1% 3.5% 4.4% 3.5% 3.6%
8 Shareholders' equity and other funds 5.1% 4.9% 5.8% 5.4% 5.2% 6.2% 5.9% 5.6%
Chartered capital 3.2% 2.6% 3.4% 3.7% 3.5% 4.4% 3.9% 3.4%
Share premium 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 1.9% 1.9% 2.0% 1.3% 1.2% 1.0% 1.1% 1.1%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.1% 0.3% 0.3% 0.3% 0.4% 0.7% 0.9% 1.1%
9 Minor shareholders' interests 0.0% 0.0% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 14.0% 16.2% 10.1% 8.7% 10.4% 11.2% 9.3% 9.0%
Deposits from other banks as % of balance sheet 5.1% 4.6% 5.5% 5.8% 8.8% 8.4% 8.9% 9.3%
Net position 8.9% 11.6% 4.6% 2.9% 1.6% 2.8% 0.4% -0.2%
SBV positions
Deposits in SBV as % of balance sheet 1.3% 1.4% 1.4% 1.4% 1.3% 1.9% 1.9% 1.8%
Deposits from SBV as % of balance sheet 8.9% 8.6% 6.4% 5.3% 8.1% 7.4% 6.8% 6.4%
Net position -7.7% -7.2% -5.0% -3.8% -6.8% -5.5% -4.9% -4.6%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 2,861,458 4,579,435 5,812,128 7,536,845 7,295,514 10,429,810 11,681,387 13,083,153 60.0% 26.9% 29.7% -3.2% 43.0% 12.0% 12.0%

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2 Balances with State bank 11,052,395 14,428,361 17,628,701 28,433,901 34,162,741 30,055,214 29,444,274 32,977,587 30.5% 22.2% 61.3% 20.1% -12.0% -2.0% 12.0%

3 Deposits with other financial institutions 6,275,797 13,602,228 12,139,625 14,285,230 21,333,607 34,586,721 38,737,127 43,385,583 116.7% -10.8% 17.7% 49.3% 62.1% 12.0% 12.0%

4 Net Securities - Held for trading 15,898,311 - 89,401 51,966 219,821 241,739 270,747 303,237 -100.0% -41.9% 323.0% 10.0% 12.0% 12.0%

5 Derivatives - 594 112,544 126,049 141,175 -100.0% 12.0% 12.0%

6 Net loans and advances to clients 186,348,408 247,092,136 288,940,827 361,739,747 423,235,504 490,953,185 569,505,694 16.9% 32.6% 16.9% 25.2% 17.0% 16.0% 16.0%
159,449,126

7 Investment securities - 19,931,658 32,972,471 42,646,385 33,674,737 36,947,195 41,380,858 46,346,561 65.4% 29.3% -21.0% 9.7% 12.0% 12.0%

8 Long term investments 298,116 409,104 678,777 962,463 797,921 877,480 982,777 1,100,710 37.2% 65.9% 41.8% -17.1% 10.0% 12.0% 12.0%
AGR EARNINGS MODEL

9 Fixed assets 2,553,176 2,023,064 2,546,211 3,938,566 4,455,442 4,891,284 5,478,238 6,135,627 -20.8% 25.9% 54.7% 13.1% 9.8% 12.0% 12.0%

10 Other assets 3,529,856 5,207,611 7,937,412 13,688,406 17,257,515 9,493,307 10,632,504 11,908,405 47.5% 52.4% 72.5% 26.1% -45.0% 12.0% 12.0%

Total Assets 201,918,235 246,529,869 326,896,862 400,485,183 480,937,045 550,870,797 629,687,147 724,887,732 22.1% 32.6% 22.5% 20.1% 14.5% 14.3% 15.1%

1 Deposits & Loans from SBV 22,983,736 21,150,840 25,984,841 28,796,131 44,744,803 39,886,975 38,473,905 43,327,772 -8.0% 22.9% 10.8% 55.4% -10.9% -3.5% 12.6%

2 Deposits from Banks 20,964,257 18,356,474 17,815,726 17,724,840 44,591,578 41,800,641 47,344,016 52,657,291 -12.4% -2.9% -0.5% 151.6% -6.3% 13.3% 11.2%

3 Customer deposits 158,159,599 230,001,067 299,954,030 331,893,865 384,996,883 446,596,385 518,051,806 32.1% 45.4% 30.4% 10.6% 16.0% 16.0% 16.0%
119,732,347

4 Trusted funds 8,273,498 9,765,456 11,718,547 13,124,773 14,699,746 -100.0% 20.0% 12.0% 12.0%

5 Liabilities from derivatives 139,958 - - -

6 Bonds & Certificates of deposits 8,110,889 17,312,729 19,265,660 10,967,197 13,675,611 23,048,611 30,269,103 37,585,479 113.5% 11.3% -43.1% 24.7% 68.5% 31.3% 24.2%

7 Other liabilities 20,519,175 21,170,603 10,036,664 25,244,899 16,265,248 17,876,881 20,022,106 22,424,759 3.2% -52.6% 151.5% -35.6% 9.9% 12.0% 12.0%

8 Shareholders' equity and other funds 9,607,831 10,379,624 15,342,903 17,613,122 19,254,557 30,937,992 33,180,078 35,382,884 8.0% 47.8% 14.8% 9.3% 60.7% 7.2% 6.6%

Chartered capital 6,566,682 6,513,450 10,543,461 10,924,334 11,283,171 21,483,171 21,483,171 21,483,171 -0.8% 61.9% 3.6% 3.3% 90.4% 0.0% 0.0%

Share premium 441,421 190,753 290,229 - - - -56.8% 52.1% -100.0%

Treasury shares (6,723) - - - -100.0%

Funds 3,041,149 2,393,662 3,936,610 5,506,940 7,340,779 7,599,813 7,993,496 8,380,009 -21.3% 64.5% 39.9% 33.3% 3.5% 5.2% 4.8%

FX revaluation 26,448 26,631 33,122 53,855 64,626 72,381 81,067 0.7% 24.4% 62.6% 20.0% 12.0% 12.0%

Asset revaluation 40,114 24,032 28,838 32,299 36,175 -40.1% 20.0% 12.0% 12.0%

Retained profits 1,004,643 645,448 825,106 552,720 1,761,544 3,598,732 5,402,462 -35.8% 27.8% -33.0% 218.7% 104.3% 50.1%

9 Minor shareholders' interests 176,503 184,964 605,969 604,268 676,780 757,994 4.8% 198.8% -0.3% 12.0% 12.0%

Liabilities and Equities 201,918,235 246,529,869 326,896,862 400,485,183 480,937,045 550,870,797 629,687,147 724,887,732 22.1% 32.6% 22.5% 20.1% 14.5% 14.3% 15.1%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 147

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 16,222,274 22,181,740 29,030,838 45,021,387 43,246,817 48,003,967 52,324,324 57,556,756 36.7% 30.9% 55.1% -3.9% 11.0% 9.0% 10.0%

www.hsc.com.vn
2 Interest expenses (9,285,449) (13,167,755) (17,137,863) (30,579,995) (31,756,976) (33,344,825) (35,012,066) (37,813,031) 41.8% 30.2% 78.4% 3.8% 5.0% 5.0% 8.0%

3 Net interest income 6,936,825 9,013,985 11,892,975 14,441,392 11,489,841 14,659,142 17,312,258 19,743,725 29.9% 31.9% 21.4% -20.4% 27.6% 18.1% 14.0%

4 Fee and commission income 302,043 411,298 711,271 1,412,881 1,855,632 2,226,758 2,560,772 2,944,888 36.2% 72.9% 98.6% 31.3% 20.0% 15.0% 15.0%

5 Fee and commission expenses (73,715) (42,317) (215,840) (560,205) (1,147,573) (1,170,524) (1,287,577) (1,480,713) -42.6% 410.1% 159.5% 104.8% 2.0% 10.0% 15.0%

6 Net fee and commission income 228,328 368,981 495,431 852,676 708,059 1,056,234 1,273,195 1,464,175 61.6% 34.3% 72.1% -17.0% 49.2% 20.5% 15.0%

7 Foreign exchange gains - net 625,265 127,608 67,384 238,846 (68,582) 100,000 100,000 100,000 -79.6% -47.2% 254.5% -128.7% -245.8% 0.0% 0.0%

8 Income from trading securities - - (58,139) 9,318 10,000 10,000 10,000 -116.0% 7.3% 0.0% 0.0%
AGR EARNINGS MODEL

9 Income from Investment securities 312,147 53,234 36,183 149,368 50,000 100,000 100,000 -82.9% -32.0% 312.8% -66.5% 100.0% 0.0%

10 Other income 360,707 1,133,285 3,284,702 4,008,180 4,772,916 4,000,000 4,021,933 4,021,933 214.2% 189.8% 22.0% 19.1% -16.2% 0.5% 0.0%

11 Equity income 3,805 15,307 45,064 21,667 67,436 50,000 44,722 44,722 302.3% 194.4% -51.9% 211.2% -25.9% -10.6% 0.0%

12 Total operating income 8,154,930 10,971,313 15,838,790 19,540,805 17,128,356 19,925,376 22,862,108 25,484,554 34.5% 44.4% 23.4% -12.3% 16.3% 14.7% 11.5%

13 Administration expenses (4,657,124) (5,222,982) (6,759,783) (9,341,353) (9,442,873) (10,859,304) (12,488,200) (14,361,429) 12.2% 29.4% 38.2% 1.1% 15.0% 15.0% 15.0%

14 Profit before loan loss provision 3,497,806 5,748,331 9,079,007 10,199,452 7,685,483 9,066,072 10,373,909 11,123,125 64.3% 57.9% 12.3% -24.6% 18.0% 14.4% 7.2%

15 Provision loss (3,106,993) (4,499,879) (6,782,200) (7,410,685) (4,891,641) (5,500,000) (6,361,509) (6,361,509) 44.8% 50.7% 9.3% -34.0% 12.4% 15.7% 0.0%

16 Profit before tax 390,813 1,248,452 2,296,807 2,788,767 2,793,842 3,566,072 4,012,400 4,761,616 219.4% 84.0% 21.4% 0.2% 27.6% 12.5% 18.7%

17 Income tax (100,726) (346,961) (640,236) (660,345) (964,162) (891,518) (883,090) (928,782) 244.5% 84.5% 3.1% 46.0% -7.5% -0.9% 5.2%

18 Net profit 290,087 901,491 1,656,571 2,128,422 1,829,680 2,674,554 3,129,310 3,832,834 210.8% 83.8% 28.5% -14.0% 46.2% 17.0% 22.5%

19 Minority interest - - (163) (4,418) (53,378) (50,000) (72,512) (81,214) 2610.4% 1108.2% -6.3% 45.0% 12.0%

20 Net profit for their shareholders 290,087 901,491 1,656,408 2,124,004 1,776,302 2,624,554 3,056,798 3,751,620 210.8% 83.7% 28.2% -16.4% 47.8% 16.5% 22.7%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 148

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

AGR EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 2,000 2,000 2,100 2,200 2,300 2,300 2,300 2,300
II Financial leverage
1 Equity/Total Assets 4.8% 4.2% 4.7% 4.4% 4.0% 5.6% 5.3% 4.9%
2 Equity multiplier = TA/Equity 21.0 23.8 21.3 22.7 25.0 17.8 19.0 20.5
III Asset quality
1 NPL 3-5 Na 1.9% 2.5% 2.7% 2.6% 4.0% 5.0% 5.0%
2 Loan loss reserve coverage Na 60% 73% 71% 66% 46% 35% 34%
IV Liquidity
1 Loans/customer deposits 133% 118% 107% 96% 109% 110% 110% 110%
2 Loans/(customer deposits + CDs + entrusted 125% 106% 96% 93% 102% 101% 100% 100%
funds)
3 Loans/Total assets 79% 76% 76% 72% 75% 77% 78% 79%
4 Interbank funds (borrowing+deposits)/equity 2.2 1.8 1.2 1.0 2.3 1.4 1.4 1.5
5 (Interbank funds +CDS +bonds)/equity 3.0 3.4 2.4 1.6 3.0 2.1 2.3 2.6
6 Interbank funds/total deposits 14% 9% 6% 5% 11% 9% 9% 8%
7 Net interbank position/total assets -7% -2% -2% -1% -5% -1% -1% -1%
V Profitability & Efficiency
1 ROAA 0.1% 0.4% 0.6% 0.6% 0.4% 0.5% 0.5% 0.6%
2 ROAE 3.0% 9.0% 12.9% 12.9% 9.6% 10.5% 9.5% 10.9%
3 Net interest margin (NI/AEA) 3.8% 4.5% 4.6% 4.5% 3.0% 3.2% 3.2% 3.2%
4 Operating Exp/ AEA 2.6% 2.6% 2.6% 2.9% 2.5% 2.4% 2.3% 2.3%
5 Net Interest income/total operating income 85.1% 82.2% 75.1% 73.9% 67.1% 73.6% 75.7% 77.5%
6 Cost to income ratio 57.1% 47.6% 42.7% 47.8% 55.1% 54.5% 54.6% 56.4%
7 Net profit/total operating income 3.6% 8.2% 10.5% 10.9% 10.7% 13.4% 13.7% 15.0%
VI Growth Ratios
1 Asset growth Na 22% 33% 23% 20% 15% 14% 15%
2 Loans growth Na 17% 33% 17% 25% 17% 16% 16%
3 Deposit growth Na 32% 45% 30% 11% 16% 16% 16%
4 Growth in total deposits and CDS Na 37% 42% 25% 11% 18% 17% 17%
5 Capital growth Na 8% 48% 15% 9% 61% 7% 7%
6 Profit growth Na 211% 84% 28% -16% 48% 16% 23%
Source: Company financial statements and HSC forecasts

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July 14h 2008

AGR EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.4% 1.9% 1.8% 1.9% 1.5% 1.9% 1.9% 1.8%
2 Balances with State bank 5.5% 5.9% 5.4% 7.1% 7.1% 5.5% 4.7% 4.5%
3 Deposits with other financial institutions 3.1% 5.5% 3.7% 3.6% 4.4% 6.3% 6.2% 6.0%
4 Net Securities - Held for trading 7.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 79.0% 75.6% 75.6% 72.1% 75.2% 76.8% 78.0% 78.6%
7 Investment securities 0.0% 8.1% 10.1% 10.6% 7.0% 6.7% 6.6% 6.4%
8 Long term investments 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
9 Fixed assets 1.3% 0.8% 0.8% 1.0% 0.9% 0.9% 0.9% 0.8%
10 Other assets 1.7% 2.1% 2.4% 3.4% 3.6% 1.7% 1.7% 1.6%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 11.4% 8.6% 7.9% 7.2% 9.3% 7.2% 6.1% 6.0%
2 Deposits from Banks 10.4% 7.4% 5.4% 4.4% 9.3% 7.6% 7.5% 7.3%
3 Customer deposits 59.3% 64.2% 70.4% 74.9% 69.0% 69.9% 70.9% 71.5%
4 Trusted funds 0.0% 0.0% 2.5% 0.0% 2.0% 2.1% 2.1% 2.0%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 4.0% 7.0% 5.9% 2.7% 2.8% 4.2% 4.8% 5.2%
7 Other liabilities 10.2% 8.6% 3.1% 6.3% 3.4% 3.2% 3.2% 3.1%
8 Shareholders' equity and other funds 4.8% 4.2% 4.7% 4.4% 4.0% 5.6% 5.3% 4.9%
Chartered capital 3.3% 2.6% 3.2% 2.7% 2.3% 3.9% 3.4% 3.0%
Share premium 0.0% 0.2% 0.1% 0.1% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 1.5% 1.0% 1.2% 1.4% 1.5% 1.4% 1.3% 1.2%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.0% 0.4% 0.2% 0.2% 0.1% 0.3% 0.6% 0.7%
9 Minor shareholders' interests 0.0% 0.0% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 3.1% 5.5% 3.7% 3.6% 4.4% 6.3% 6.2% 6.0%
Deposits from other banks as % of balance sheet 10.4% 7.4% 5.4% 4.4% 9.3% 7.6% 7.5% 7.3%
Net position -7.3% -1.9% -1.7% -0.9% -4.8% -1.3% -1.4% -1.3%
SBV positions
Deposits in SBV as % of balance sheet 1.4% 1.9% 1.8% 1.9% 1.5% 1.9% 1.9% 1.8%
Deposits from SBV as % of balance sheet 11.4% 8.6% 7.9% 7.2% 9.3% 7.2% 6.1% 6.0%
Net position -10.0% -6.7% -6.2% -5.3% -7.8% -5.3% -4.3% -4.2%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 1,184,082 1,383,221 1,975,966 2,303,873 2,875,773 9,860,313 11,339,360 12,926,870 16.8% 42.9% 16.6% 24.8% 242.9% 15.0% 14.0%

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2 Balances with State bank 4,576,418 17,688,318 8,758,166 12,620,934 5,679,704 17,529,445 20,158,861 22,981,102 286.5% -50.5% 44.1% -55.0% 208.6% 15.0% 14.0%

3 Deposits with other financial institutions 17,648,290 22,739,128 25,933,731 29,619,733 40,197,496 39,822,115 35,839,903 38,702,019 28.8% 14.0% 14.2% 35.7% -0.9% -10.0% 8.0%

4 Net Securities - Held for trading 14,305 45,152 781,686 2,025,149 948,629 1,485,828 1,778,577 2,150,652 215.6% 1631.2% 159.1% -53.2% 56.6% 19.7% 20.9%

5 Derivatives 0 0 31,644 3,557 - - - -88.8% -100.0%

6 Net loans and advances to clients 82,716,549 97,201,778 129,079,351 156,870,045 200,999,434 242,204,318 283,379,052 331,553,491 17.5% 32.8% 21.5% 28.1% 20.5% 17.0% 17.0%

7 Investment securities 12,096,857 15,055,520 27,811,804 31,394,906 31,477,251 38,427,197 45,381,064 53,588,844 24.5% 84.7% 12.9% 0.3% 22.1% 18.1% 18.1%

8 Long term investments 518,187 800,231 2,251,228 2,778,618 3,228,124 2,956,283 3,189,975 3,458,721 54.4% 181.3% 23.4% 16.2% -8.4% 7.9% 8.4%

9 Fixed assets 1,041,115 1,556,201 1,753,224 2,008,805 2,304,264 2,241,634.08 2,419,372.64 2,585,002 49.5% 12.7% 14.6% 14.7% -74.6% 5.9% 5.5%
BIDV EARNINGS MODEL

10 Other assets 1,607,525 4,753,535 6,134,349 6,894,058 8,721,413 7,721,345 8,647,906 9,685,655 195.7% 29.0% 12.4% 26.5% -11.5% 13.8% 15.9%

Total Assets 121,403,328 161,223,084 204,511,149 246,519,678 296,432,088 362,248,477 412,134,070 477,632,355 32.8% 26.8% 20.5% 20.2% 22.2% 13.8% 15.9%

1 Deposits & Loans from SBV 16,256,296 16,781,239 18,229,032 16,985,613 22,931,067 23,402,058 26,884,088 30,541,076 3.2% 8.6% -6.8% 35.0% 2.1% 14.9% 13.6%

2 Deposits from Banks 1,759,969 2,674,664 7,886,844 8,763,812 14,542,803 22,849,045 28,478,730 37,204,455 52.0% 194.9% 11.1% 65.9% 57.1% 24.6% 30.6%

3 Customer deposits 85,746,724 106,495,878 135,335,702 163,396,947 187,280,394 220,990,865 258,559,312 302,514,395 24.2% 27.1% 20.7% 14.6% 18.0% 17.0% 17.0%

4 Trusted funds 8,142,448 13,011,948 18,088,670 15,130,369 28,150,952 16,643,406 18,307,746 20,138,521 59.8% 39.0% -16.4% 86.1% -40.9% 10.0% 10.0%

5 Liabilities from derivatives 0 602 0 0 202,915 - - -

6 Bonds & Certificates of deposits 0 10,276,360 6,521,758 17,650,692 16,017,821 44,168,773 44,168,773 48,585,650 -36.5% 170.6% -9.3% 175.7% 0.0% 10.0%

7 Other liabilities 2,967,030 4,431,035 6,472,740 11,108,232 9,666,806 10,826,823 11,368,164 11,936,572 49.3% 46.1% 71.6% -13.0% 12.0% 5.0% 5.0%

8 Shareholders' equity and other funds 6,530,861 7,551,358 11,634,793 13,484,013 17,639,330 23,367,507 24,367,256 26,711,686 15.6% 54.1% 15.9% 30.8% 32.5% 4.3% 9.6%

Chartered capital 3,970,997 4,077,401 7,699,147 8,755,818 10,498,568 14,092,868 14,092,868 14,092,868 2.7% 88.8% 13.7% 19.9% 34.2% 0.0% 0.0%

Share premium 0 0 0 0 - - - -

Treasury shares

Funds 2,444,901 2,826,702 2,622,078 3,685,661 6,117,270 5,600,871 6,684,148 7,882,849 15.6% -7.2% 40.6% 66.0% -98.6% 0.0% 0.0%

FX revaluation 54,897 55,181 84,329 220,598 84,329 84,329 84,329 0.5% 52.8% 161.6% 1527.1% -2.3% 32.7%

Asset revaluation

Retained profits 114,963 592,358 1,258,387 958,205 802,894 3,589,439 3,505,911 4,651,639 415.3% 112.4% -23.9% -16.2% 45017.8% 13.8% 15.9%

9 Minor shareholders' interests 0 0 341,610 0 0 0 0

Liabilities and Equities 121,403,328 161,223,084 204,511,149 246,519,678 296,432,088 362,248,477 412,134,070 477,632,355 32.8% 26.8% 20.5% 20.2% 22.2% 13.8% 15.9%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 151

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 7,608,382 10,921,070 15,436,384 22,139,155 21,209,756 29,719,169 37,764,270 42,452,386 43.5% 41.3% 43.4% -4.2% 40.1% 27.1% 12.4%

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2 Interest expense (4,679,014) (7,570,229) (10,579,935) (15,903,047) (14,235,364) (20,703,237) (27,353,611) (30,646,110) 61.8% 39.8% 50.3% -10.5% 45.4% 32.1% 12.0%

3 Net interest income 2,929,368 3,350,841 4,856,449 6,236,108 6,974,392 9,015,932 10,410,659 11,806,276 14.4% 44.9% 28.4% 11.8% 29.3% 15.5% 13.4%

4 Fee and commission income 300,927 476,171 791,396 1,260,454 1,968,238 2,460,298 3,075,372 3,751,954 58.2% 66.2% 59.3% 56.2% 25.0% 25.0% 22.0%

5 Fee and commission expense (54,329) (83,177) (167,206) (257,566) (564,112) (676,934) (812,321) (934,169) 53.1% 101.0% 54.0% 119.0% 20.0% 20.0% 15.0%

6 Net fee and commission income 246,598 392,994 624,190 1,002,888 1,404,126 1,783,363 2,263,051 2,817,784 59.4% 58.8% 60.7% 40.0% 27.0% 26.9% 24.5%

7 Foreign exchange gain - net 44,224 107,725 139,647 790,779 208,866 417,732 459,505 528,431 143.6% 29.6% 466.3% -73.6% 100.0% 10.0% 15.0%

8 Income from trading securities 0 0 110,771 (839,004) 721,642 100,000 110,000 121,000 -857.4% -186.0% -86.1% 10.0% 10.0%

9 Income from investment securities 600,078 221,513 49,059 113,031 100,000 110,000 121,000 -63.1% -77.9% -11.5% 10.0% 10.0%
BIDV EARNINGS MODEL

10 Other income 253,549 633,803 1,977,437 260,500 610,941 427,659 427,659 491,808 150.0% 212.0% -86.8% 134.5% -30.0% 0.0% 15.0%

11 Equity income 24,526 33,195 53,351 119,159 233,998 211,775 231,414 261,806 35.3% 60.7% 123.3% 96.4% -9.5% 9.3% 13.1%

12 Total operating income 4,098,343 4,740,071 7,810,904 7,570,430 10,266,996 12,056,461 14,012,287 16,148,104 15.7% 64.8% -3.1% 35.6% 17.4% 16.2% 15.2%

13 Administration expense (1,325,777) (1,634,088) (2,384,821) (3,447,832) (4,536,214) (5,216,646) (5,999,143) (6,899,014) 23.3% 45.9% 44.6% 31.6% 15.0% 15.0% 15.0%

14 Pre-provision profits 2,772,566 3,105,983 5,426,083 4,122,598 5,730,782 6,839,815 8,013,144 9,249,090 12.0% 74.7% -24.0% 39.0% 19.4% 17.2% 15.4%

15 Provision loss (2,031,687) (1,993,491) (3,397,837) (1,754,080) (2,012,282) (3,013,370) (4,098,020) (5,220,877) -1.9% 70.4% -48.4% 14.7% 49.7% 36.0% 27.4%

16 Profit before tax 740,879 1,112,492 2,028,246 2,368,518 3,718,500 3,826,445 3,915,125 4,028,213 50.2% 82.3% 16.8% 57.0% 2.9% 2.3% 2.9%

17 Income tax (180,886) (110,779) (496,830) (371,213) (787,968) (883,049) (679,828) (697,934) -38.8% 348.5% -25.3% 112.3% 12.1% -23.0% 2.7%

18 Net profit 559,993 1,001,713 1,531,416 1,997,305 2,930,532 2,943,396 3,235,296 3,330,279 78.9% 52.9% 30.4% 46.7% 0.4% 9.9% 2.9%

19 Minority interests 0 0 (1,907)

20 Net profit for their shareholders 559,993 1,001,713 1,529,509 1,997,305 2,930,532 2,943,396 3,235,296 3,330,279 78.9% 52.7% 30.6% 46.7% 0.4% 9.9% 2.9%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 152

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

BIDV EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 254 297 331 383 420 603 754 942
II Financial leverage
1 Equity/Total Assets 5.4% 4.7% 5.7% 5.5% 6.0% 6.5% 5.9% 5.6%
2 Equity multiplier = TA/Equity 18.6 21.4 17.6 18.3 16.8 15.5 16.9 17.9
III Asset quality
1 NPL ratio groups 3-5 na 9.50% 3.98% 2.71% 2.82% 5.10% 5.10% 5.10%
2 Loan loss reserve coverage na 15% 55% 94% 93% 40% 40% 39%
IV Liquidity
1 Loans to deposits 96% 91% 95% 96% 107% 110% 110% 110%
2 Loans to deposits (including CDS + entrusted 88% 75% 81% 80% 87% 86% 88% 89%
funds)
3 Loans/total assets 68% 60% 63% 64% 68% 67% 69% 69%
4 Interbank funds (borrowing+deposits)/equity 0.3 0.4 0.7 0.6 0.8 1.0 1.2 1.4
5 (Interbank funds +CDS +bonds)/equity 0.3 1.7 1.2 2.0 1.7 2.9 3.0 3.2
6 Interbank funds/total deposits 2% 2% 5% 4% 6% 8% 8% 9%
7 Net interbank position/total assets 13% 12% 9% 8% 9% 5% 2% 0%
V Profitability & Efficiency
1 ROAA 0.5% 0.7% 0.8% 0.9% 1.1% 0.9% 0.8% 0.7%
2 ROAE 8.6% 14.2% 15.9% 15.9% 18.8% 14.4% 13.6% 13.0%
3 NIM 2.6% 2.7% 3.1% 3.1% 2.8% 3.0% 3.0% 3.0%
4 Operating Exp/ AEA 1.2% 1.3% 1.5% 1.7% 1.8% 1.8% 1.8% 1.7%
5 Net Interest income/total operating income 71.5% 70.7% 62.2% 82.4% 67.9% 74.8% 74.3% 73.1%
6 Cost to income ratio 32.3% 34.5% 30.5% 45.5% 44.2% 43.3% 42.8% 42.7%
7 Net profit/total operating income 13.7% 21.1% 19.6% 26.4% 28.5% 24.4% 23.1% 20.6%
VI Growth Ratios
1 Asset growth Na 33% 27% 21% 20% 22% 14% 16%
2 Loan growth Na 18% 33% 22% 28% 21% 17% 17%
3 Deposit growth Na 24% 27% 21% 15% 18% 17% 17%
4 Growth of (deposits +CDS) Na 36% 21% 28% 12% 30% 14% 16%
5 Capital growth Na 16% 54% 16% 31% 32% 4% 10%
6 Net profit growth Na 79% 53% 31% 47% 0% 10% 3%
Source: Company financial statements and HSC forecasts

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July 14h 2008

BIDV EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1% 1% 1% 1% 1% 3% 3% 3%
2 Balances with State bank 4% 11% 4% 5% 2% 5% 5% 5%
3 Deposits with other financial institutions 15% 14% 13% 12% 14% 11% 9% 8%
4 Net Securities - Held for trading 0% 0% 0% 1% 0% 0% 0% 0%
5 Derivatives 0% 0% 0% 0% 0% 0% 0% 0%
6 Net loans and advances to clients 68% 60% 63% 64% 68% 67% 69% 69%
7 Investment securities 10% 9% 14% 13% 11% 11% 11% 11%
8 Long term investments 0% 0% 1% 1% 1% 1% 1% 1%
9 Fixed assets 1% 1% 1% 1% 1% 1% 1% 1%
10 Other assets 1% 3% 3% 3% 3% 2% 2% 2%
Total Assets 100% 100% 100% 100% 100% 100% 100% 100%

1 Deposits & Loans from SBV 13% 10% 9% 7% 8% 6% 7% 6%


2 Deposits from Banks 1% 2% 4% 4% 5% 6% 7% 8%
3 Customer deposits 71% 66% 66% 66% 63% 61% 63% 63%
4 Trusted funds 7% 8% 9% 6% 9% 5% 4% 4%
5 Liabilities from derivatives 0% 0% 0% 0% 0% 0% 0% 0%
6 Bonds & Certificates of deposits 0% 6% 3% 7% 5% 12% 11% 10%
7 Other liabilities 2% 3% 3% 5% 3% 3% 3% 2%
8 Shareholders' equity and other funds 5% 5% 6% 5% 6% 6% 6% 6%
Chartered capital 3% 3% 4% 4% 4% 4% 3% 3%
Share premium 0% 0% 0% 0% 0% 0% 0% 0%
Treasury shares 0% 0% 0% 0% 0% 0% 0% 0%
Funds 2% 2% 1% 1% 2% 2% 2% 2%
FX revaluation 0% 0% 0% 0% 0% 0% 0% 0%
Asset revaluation 0% 0% 0% 0% 0% 0% 0% 0%
Retained profits 0% 0% 1% 0% 0% 1% 1% 1%
9 Minor shareholders' interests 0% 0% 0% 0% 0% 0% 0% 0%
Liabilities and Equities 100% 100% 100% 100% 100% 100% 100% 100%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 14.5% 14.1% 12.7% 12.0% 13.6% 11.0% 8.7% 8.1%
Deposits from other banks as % of balance sheet 1.4% 1.7% 3.9% 3.6% 4.9% 6.3% 6.9% 7.8%
Net position 13.1% 12.4% 8.8% 8.5% 8.7% 4.7% 1.8% 0.3%
SBV positions
Deposits in SBV as % of balance sheet 1.0% 0.9% 1.0% 0.9% 1.0% 2.7% 2.8% 2.7%
Deposits from SBV as % of balance sheet 13.4% 10.4% 8.9% 6.9% 7.7% 6.5% 6.5% 6.4%
Net position -12.4% -9.6% -7.9% -6.0% -6.8% -3.7% -3.8% -3.7%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 1,177,131 1,436,603 1,743,604 1,980,016 2,204,060 2,808,707 3,314,274 3,844,558 22.0% 21.4% 13.6% 11.3% 27.4% 18.0% 16.0%

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2 Balances with State bank 8,020,515 5,620,312 8,496,135 6,010,724 5,368,942 6,509,752 7,829,934 9,221,351 -29.9% 51.2% -29.3% -10.7% 21.2% 20.3% 17.8%

3 Deposits with other financial institutions 14,384,495 26,229,341 12,841,040 18,273,849 24,045,152 40,118,706 27,050,829 37,013,743 82.3% -51.0% 42.3% 31.6% 66.8% -32.6% 36.8%

4 Net Securities - Held for trading 0 867,393 739,381 (22,776) 299,033 737,102 833,482 920,176 -14.8% -103.1% -1412.9% 146.5% 13.1% 10.4%

5 Derivatives 258 75,228

6 Net loans and advances to clients 74,449,345 80,142,030 100,482,233 118,601,864 161,619,376 202,115,735 238,568,525 274,045,206 7.6% 25.4% 18.0% 36.3% 25.1% 18.0% 14.9%

7 Investment securities 14,059,580 17,329,218 37,404,891 41,801,145 38,977,048 56,406,854 63,782,337 70,416,644 23.3% 115.8% 11.8% -6.8% 44.7% 13.1% 10.4%

8 Long term investments 329,137 510,211 684,138 930,500 1,463,756 1,683,234 1,903,326 2,101,300 55.0% 34.1% 36.0% 57.3% 15.0% 13.1% 10.4%
CTG EARNINGS MODEL

9 Fixed assets 1,405,515 1,157,037 1,214,196 1,570,571 3,297,530 3,650,099 4,077,913 4,597,119 -17.7% 4.9% 29.4% 110.0% 10.7% 11.7% 12.7%

10 Other assets 1,940,252 2,150,375 2,507,095 4,444,651 6,435,083 5,396,999 8,263,621 11,535,747 10.8% 16.6% 77.3% 44.8% -16.1% 53.1% 39.6%

Total Assets 135,442,520 166,112,971 193,590,544 243,785,208 319,427,188 355,624,241 413,695,844 17.0% 22.6% 16.5% 25.9% 31.0% 11.3% 16.3%
115,765,970

1 Deposits & Loans from SBV 265,239 491,363 712,745 769,677 13,718,689 34,296,723 35,325,624 36,385,393 85.3% 45.1% 8.0% 150.0% 3.0% 3.0%

2 Deposits from Banks 4,756,672 4,923,742 5,428,856 8,824,710 15,012,157 17,364,402 25,552,445 34,201,712 3.5% 10.3% 62.6% 70.1% 15.7% 47.2% 33.8%

3 Customer deposits 84,387,013 91,505,860 112,692,813 125,093,587 148,530,242 181,206,895 213,824,136 248,035,998 8.4% 23.2% 11.0% 18.7% 22.0% 18.0% 16.0%

4 Trusted funds 0 21,525,679 28,952,892 40,217,706 34,525,002 27,620,002 29,553,402 31,622,140 34.5% 38.9% -14.2% -20.0% 7.0% 7.0%

5 Liabilities from derivatives - - 220,091

6 Bonds & Certificates of deposits 19,196,691 8,178,374 3,672,024 - 8,585,257 10,130,603 11,650,194 13,397,723 -55.1% -100.0% 18.0% 15.0% 15.0%

7 Other liabilities 2,160,516 3,179,877 4,007,112 6,348,621 10,416,457 31,249,371 20,416,256 28,582,758 47.2% 26.0% 58.4% 64.1% 200.0% -34.7% 40.0%

8 Shareholders' equity and other funds 4,999,839 5,637,625 10,646,529 12,336,243 12,572,078 17,559,192 19,302,185 21,470,121 12.8% 88.8% 15.9% 1.9% 39.7% 9.9% 11.2%

Chartered capital 3,505,488 3,616,043 7,608,643 7,717,168 11,252,973 15,172,291 15,172,291 15,172,291 3.2% 110.4% 1.4% 45.8% 34.8% 0.0% 0.0%

Share premium 26,503 26,503 26,503 0.0% 0.0%

Treasury shares -

Funds 1,389,978 1,902,892 2,845,824 4,434,777 424,094 646,257 1,385,451 2,230,881 36.9% 49.6% 55.8% -90.4% 52.4% 114.4% 61.0%

FX revaluation 57,433 61,139 58,735 68,735 68,735 68,735

Asset revaluation - - -

Retained profits 46,940 57,551 192,062 184,298 836,276 1,645,406 2,649,204 3,971,711 22.6% 233.7% -4.0% 353.8% 96.8% 61.0% 49.9%

9 Minor shareholders' interests - - 205,235

Liabilities and Equities 115,765,970 135,442,520 166,112,971 193,590,544 243,785,208 319,427,188 355,624,241 413,695,844 17.0% 22.6% 16.5% 25.9% 31.0% 11.3% 16.3%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 8,079,782 10,116,365 12,769,280 21,062,887 18,908,608 23,934,044 29,163,057 33,357,578 25.2% 26.2% 64.9% -10.2% 26.6% 21.8% 14.4%

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2 Interest expenses (4,793,131) (6,571,160) (8,085,890) (13,873,458) (10,976,345) (13,650,584) (17,262,128) (20,081,397) 37.1% 23.1% 71.6% -20.9% 24.4% 26.5% 16.3%

3 Net interest income 3,286,651 3,545,205 4,683,390 7,189,429 7,932,263 10,283,460 11,900,930 13,276,181 7.9% 32.1% 53.5% 10.3% 29.6% 15.7% 11.6%

4 Fee and commission income 264,832 349,447 437,656 588,190 847,864 1,152,852 1,498,708 1,948,321 32.0% 25.2% 34.4% 44.1% 36.0% 30.0% 30.0%

5 Fee and commission expenses (58,254) (76,763) (102,909) (150,205) (198,651) (177,576) (230,849) (300,104) 31.8% 34.1% 46.0% 32.3% -10.6% 30.0% 30.0%

6 Net fee and commission income 206,578 272,684 334,747 437,985 649,213 975,276 1,267,859 1,648,217 32.0% 22.8% 30.8% 48.2% 50.2% 30.0% 30.0%

7 Foreign exchange gain - net 43,116 60,002 64,087 290,046 59,278 77,061 100,180 130,234 39.2% 6.8% 352.6% -79.6% 30.0% 30.0% 30.0%

8 Income from trading securities 22,765 (71,374) (22,787) 119,764 16,993 88,362 107,801 -413.5% -68.1% -625.6% -85.8%
CTG EARNINGS MODEL

9 Income from securities investment 38,019 - - 14,246 129,731 202,380 252,975 810.6% 56.0% 25.0%

10 Other income 230,691 606,275 1,406,835 664,479 804,164 500,000 68,520 82,224 162.8% 132.0% -52.8% 21.0% -37.8% -86.3% 20.0%

11 Equity income 3,181 64,638 88,274 135,099 101,421 22,484 66,271 64,681 36.6% 53.0% -24.9% -77.8% 194.7% -2.4%

12 Total operating income 3,808,236 4,571,569 6,505,959 8,694,251 9,680,349 12,005,005 13,694,501 15,562,313 20.0% 42.3% 33.6% 11.3% 24.0% 14.1% 13.6%

13 Administration expenses (1,790,546) (2,141,322) (2,766,027) (4,957,755) (5,415,278) (6,311,913) (7,987,351) (9,195,734) 19.6% 29.2% 79.2% 9.2% 16.6% 26.5% 15.1%

14 Profit before provision loss for credit 2,017,690 2,430,247 3,739,932 3,736,496 4,265,071 5,693,092 5,707,151 6,366,579 20.4% 53.9% -0.1% 14.1% 33.5% 0.2% 11.6%

15 Provision loss (1,492,506) (1,600,256) (2,353,568) (1,299,993) (507,900) (1,344,760) (1,424,470) (1,451,324) 7.2% 47.1% -44.8% -60.9% 164.8% 5.9% 1.9%

16 Profit before tax 525,184 829,991 1,386,364 2,436,503 3,757,171 4,348,332 4,282,681 4,915,255 58.0% 67.0% 75.7% 54.2% 15.7% -1.5% 14.8%

17 Income tax (102,091) (227,191) (379,643) (631,957) (883,553) (1,027,804) (982,282) (1,128,175) 122.5% 67.1% 66.5% 39.8% 16.3% -4.4% 14.9%

18 Net profit 423,093 602,800 1,006,721 1,804,546 2,873,618 3,320,528 3,300,399 3,787,080 42.5% 67.0% 79.2% 59.2% 15.6% -0.6% 14.7%

19 Minority interests 0 0 - - (10,739) (12,205) (15,093) (29,614) 13.7% 23.7% 96.2%

20 Net profit for their shareholders 423,093 602,800 1,006,721 1,804,546 2,862,879 3,308,323 3,285,306 3,757,466 42.5% 67.0% 79.2% 58.6% 15.6% -0.7% 14.4%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 156

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

CTG EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 712 714 760 786 949 1124 1236 1360
II Financial leverage
1 Equity/Total Assets 4.3% 4.2% 6.4% 6.4% 5.2% 5.5% 5.4% 5.2%
2 Equity multiplier = TA/Equity 23.2 24.0 15.6 15.7 19.4 18.2 18.4 19.3
III Asset quality
1 NPL 3-5 na 3.93% 2.63% 5.82% 0.61% 2.98% 3.08% 3.25%
2 Loan loss reserve coverage na 0% 63% 31% 155% 30% 28% 30%
IV Liquidity
1 Loan to customer deposit ratio 88% 88% 89% 95% 109% 112% 112% 110%
2 Loans/(customer deposits + CD) 72% 66% 69% 72% 84% 92% 94% 94%
3 Loans/Toal assets 64% 59% 60% 61% 66% 63% 67% 66%
4 Interbank funds (borrowing+deposits)/equity 1.0 0.9 0.5 0.7 1.2 1.0 1.3 1.6
5 (Interbank funds +CDS +bonds)/equity 4.8 2.3 0.9 0.7 1.9 1.6 1.9 2.2
6 Interbank funds/total deposits 4% 4% 4% 5% 7% 7% 9% 10%
7 Net interbank position/total assets 8% 16% 4% 5% 4% 7% 0% 1%
V Profitability & Efficiency
1 ROAA 0.4% 0.5% 0.7% 1.0% 1.3% 1.2% 1.0% 1.0%
2 ROAE 8.5% 11.3% 12.4% 15.7% 23.0% 22.0% 17.8% 18.4%
3 Net interest margin (NI/AEA) 3.2% 3.1% 3.4% 4.4% 3.9% 4.1% 3.9% 3.7%
4 Operating Exp/ AEA 1.7% 1.9% 2.0% 3.0% 2.7% 2.5% 2.6% 2.6%
5 Net Interest income/total operating income 86.3% 77.5% 72.0% 82.7% 81.9% 85.7% 86.9% 85.3%
6 Cost to income ratio 47.0% 46.8% 42.5% 57.0% 55.9% 52.6% 58.3% 59.1%
7 Net profit/total operating income 11.1% 13.2% 15.5% 20.8% 29.7% 27.7% 24.1% 24.3%
VI Growth Ratios
1 Asset growth Na 17% 23% 17% 26% 31% 11% 16%
2 Loans growth Na 8% 25% 18% 36% 25% 18% 15%
3 Deposit growth Na 8% 23% 11% 19% 22% 18% 16%
4 Growth in total deposits and CDS Na -4% 17% 8% 26% 22% 18% 16%
5 Capital growth Na 13% 89% 16% 2% 40% 10% 11%
6 Profit growth Na 42% 67% 79% 59% 16% -1% 14%

Source: Company financial statements and HSC forecasts

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July 14h 2008

CTG EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1% 1% 1% 1% 1% 1% 1% 1%
2 Balances with State bank 7% 4% 5% 3% 2% 2% 2% 2%
3 Deposits with other financial institutions 12% 19% 8% 9% 10% 13% 8% 9%
4 Net Securities - Held for trading 0% 1% 0% 0% 0% 0% 0% 0%
5 Derivatives 0% 0% 0% 0% 0% 0% 0% 0%
6 Net loans and advances to clients 64% 59% 60% 61% 66% 63% 67% 66%
7 Investment securities 12% 13% 23% 22% 16% 18% 18% 17%
8 Long term investments 0% 0% 0% 0% 1% 1% 1% 1%
9 Fixed assets 1% 1% 1% 1% 1% 1% 1% 1%
10 Other assets 2% 2% 2% 2% 3% 2% 2% 3%
Total Assets 100% 100% 100% 100% 100% 100% 100% 100%

1 Deposits & Loans from SBV 0% 0% 0% 0% 6% 11% 10% 9%


2 Deposits from Banks 4% 4% 3% 5% 6% 5% 7% 8%
3 Customer deposits 73% 68% 68% 65% 61% 57% 60% 60%
4 Trusted funds 0% 16% 17% 21% 14% 9% 8% 8%
5 Liabilities from derivatives 0% 0% 0% 0% 0% 0% 0% 0%
6 Bonds & Certificates of deposits 17% 6% 2% 0% 4% 3% 3% 3%
7 Other liabilities 2% 2% 2% 3% 4% 10% 6% 7%
8 Shareholders' equity and other funds 4% 4% 6% 6% 5% 5% 5% 5%
Chartered capital 3% 3% 5% 4% 5% 5% 4% 4%
Share premium 0% 0% 0% 0% 0% 0% 0% 0%
Treasury shares 0% 0% 0% 0% 0% 0% 0% 0%
Funds 1% 1% 2% 2% 0% 0% 0% 1%
FX revaluation 0% 0% 0% 0% 0% 0% 0% 0%
Asset revaluation 0% 0% 0% 0% 0% 0% 0% 0%
Retained profits 0% 0% 0% 0% 0% 1% 1% 1%
9 Minor shareholders' interests 0% 0% 0% 0% 0% 0% 0% 0%
Liabilities and Equities 100% 100% 100% 100% 100% 100% 100% 100%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 12.4% 19.4% 7.7% 9.4% 9.9% 12.6% 7.6% 8.9%
Deposits from other banks as % of balance sheet 4.1% 3.6% 3.3% 4.6% 6.2% 5.4% 7.2% 8.3%
Net position 8.3% 15.7% 4.5% 4.9% 3.7% 7.1% 0.4% 0.7%
SBV positions
Deposits in SBV as % of balance sheet 1.0% 1.1% 1.0% 1.0% 0.9% 0.9% 0.9% 0.9%
Deposits from SBV as % of balance sheet 0.2% 0.4% 0.4% 0.4% 5.6% 10.7% 9.9% 8.8%
Net position 0.8% 0.7% 0.6% 0.6% -4.7% -9.9% -9.0% -7.9%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VND Million) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 2,006,400 2,418,207 3,204,247 3,482,209 4,485,150 5,516,735 6,289,077 7,106,657 20.5% 32.5% 8.7% 28.8% 23.0% 14.0% 13.0%

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2 Balances with State bank 6,336,385 11,848,460 11,662,669 30,561,417 25,174,674 19,787,158 22,229,043 25,563,400 87.0% -1.6% 162.0% -17.6% -21.4% 12.3% 15.0%

3 Deposits with other financial institutions 42,383,516 52,234,769 39,180,461 30,367,772 47,456,662 57,210,126 61,396,434 62,314,854 23.2% -25.0% -22.5% 56.3% 20.6% 7.3% 1.5%

4 Net Securities - Held for trading 0 0 1,575,290 309,043 5,768 165,964 174,263 182,976 -80.4% -98.1% 2777.3% 5.0% 5.0%

5 Derivatives

6 Net loans and advances to clients 59,701,251 66,250,888 95,528,548 108,617,623 136,996,006 168,983,871 199,693,645 234,667,994 11.0% 44.2% 13.7% 26.1% 23.3% 18.2% 17.5%

7 Investment securities 23,279,354 31,116,572 41,158,733 41,567,126 32,634,887 43,031,073 45,182,627 47,441,758 33.7% 32.3% 1.0% -21.5% 31.9% 5.0% 5.0%

8 Long term investments 642,941 964,687 1,899,703 3,048,870 3,637,730 3,964,863 4,163,106 4,371,261 50.0% 96.9% 60.5% 19.3% 9.0% 5.0% 5.0%
VCB EARNINGS MODEL

9 Fixed assets 1,094,530 1,146,831 1,049,157 1,361,086 1,505,260 1,579,123 1,666,440 1,769,669 4.8% -8.5% 29.7% 10.6% 4.9% 5.5% 6.2%

10 Other assets 1,012,035 970,445 2,104,597 2,774,374 3,599,746 4,670,665 6,013,474 7,682,204 -4.1% 116.9% 31.8% 29.7% 29.7% 28.7% 27.7%

Total Assets 166,950,859 197,363,405 222,089,520 255,495,884 304,909,578 346,808,109 391,100,774 22.3% 18.2% 12.5% 15.0% 19.3% 13.7% 12.8%
136,456,412

1 Deposits & Loans from SBV 12,003,108 22,346,396 12,685,256 9,515,633 22,578,400 16,081,420 17,367,933 18,757,368 86.2% -43.2% -25.0% 137.3% -28.8% 8.0% 8.0%

2 Deposits from Banks 1,725,962 6,615,605 17,939,810 26,447,065 38,835,517 46,851,819 54,365,042 62,294,781 283.3% 171.2% 47.4% 46.8% 20.6% 16.0% 14.6%

3 Customer deposits 108,313,175 119,778,871 141,589,093 157,067,019 169,071,562 207,958,021 237,072,144 267,891,523 10.6% 18.2% 10.9% 7.6% 23.0% 14.0% 13.0%

4 Trusted funds 3,775,243 3,840,742 3,362,383 555,244 19 555,244 583,006 612,157 1.7% -12.5% -83.5% -100.0% 2922236.8% 5.0% 5.0%

5 Liabilities from derivatives 81,843 -100.0%

6 Bonds & Certificates of deposits 0 0 3,221,058 2,922,015 386,058 1,819,440 2,037,773 2,282,306 -9.3% -86.8% 371.3% 12.0% 12.0%

7 Other liabilities 2,150,789 3,166,903 4,593,706 11,533,320 7,722,843 7,722,844 8,495,128 9,344,641 47.2% 45.1% 151.1% -33.0% 0.0% 10.0% 10.0%

8 Shareholders' equity and other funds 8,415,901 11,127,248 13,887,759 13,945,829 16,710,333 23,786,888 26,729,747 29,733,130 32.2% 24.8% 0.4% 19.8% 42.3% 12.4% 11.2%

Chartered capital 4,279,127 4,356,737 4,789,337 12,100,860 12,100,860 17,587,540 17,587,540 17,587,540 1.8% 9.9% 152.7% 0.0% 45.3% 0.0% 0.0%

Share premium - - -

Treasury shares 45,160 45,160 45,160 0.0% 0.0%

Funds 3,898,520 6,422,017 8,534,098 675,774 1,337,572 1,722,126 2,844,901 4,132,176 64.7% 32.9% -92.1% 97.9% 28.8% 65.2% 45.2%

FX revaluation 90,220 90,371 99,740 145,867 167,838 176,230 185,041 194,293 0.2% 10.4% 46.2% 15.1% 5.0% 5.0% 5.0%

Asset revaluation 9,756 8,873 8,873 8,873 8,873 -9.1% -100.0% 0.0% 0.0%

Retained profits 148,034 258,123 454,828 1,014,455 3,104,063 4,246,959 6,058,231 7,765,088 74.4% 76.2% 123.0% 206.0% 36.8% 42.6% 28.2%

9 Minor shareholders' interests 72,234 75,094 84,340 103,395 109,309 133,902 157,335 184,869 4.0% 12.3% 22.6% 5.7% 22.5% 17.5% 17.5%

Liabilities and Equities 136,456,412 166,950,859 197,363,405 222,089,520 255,495,884 304,909,578 346,808,109 391,100,774 22.3% 18.2% 12.5% 15.0% 19.3% 13.7% 12.8%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 6,344,256 9,156,930 11,242,636 17,234,823 15,293,558 17,696,004 22,075,773 25,280,567 44.3% 22.8% 53.3% -11.3% 15.7% 24.8% 14.5%

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2 Interest expenses (3,034,139) (5,272,632) (7,247,444) (10,611,187) (8,794,892) (9,744,587) (12,417,071) (14,086,983) 73.8% 37.5% 46.4% -17.1% 10.8% 27.4% 13.4%

3 Net interest income 3,310,117 3,884,298 3,995,192 6,623,636 6,498,666 7,951,417 9,658,702 11,193,584 17.3% 2.9% 65.8% -1.9% 22.4% 21.5% 15.9%

4 Fee and commission income 622,805 723,498 849,993 1,140,031 1,372,403 1,441,023 1,613,946 1,807,619 16.2% 17.5% 34.1% 20.4% 5.0% 12.0% 12.0%

5 Fee and commission expenses (175,246) (175,246) (249,691) (349,144) (383,190) (317,846) (355,988) (398,706) 0.0% 42.5% 39.8% 9.8% -17.1% 12.0% 12.0%

6 Net fee and commission income 447,559 548,252 600,302 790,887 989,213 1,123,177 1,257,958 1,408,913 22.5% 9.5% 31.7% 25.1% 13.5% 12.0% 12.0%

7 Foreign exchange gain - net 192,780 274,052 354,348 952,911 918,309 872,394 1,003,253 1,153,740 42.2% 29.3% 168.9% -3.6% -5.0% 15.0% 15.0%

8 Income from trading securities (325,544) 183,297 246,347 320,252 345,872 -156.3% 34.4% 30.0% 8.0%
VCB EARNINGS MODEL

9 Income from securities investment 49,511 208,875 20,335 (78,215) 172,876 233,770 312,309 384,860 321.9% -90.3% -484.6% -321.0% 35.2% 33.6% 23.2%

10 Other income 270,856 313,899 572,236 264,806 128,006 140,807 154,887 170,376 15.9% 82.3% -53.7% -51.7% 10.0% 10.0% 10.0%

11 Equity income 14,546 52,027 242,500 674,035 396,437 123,174 160,126 192,151 257.7% 366.1% 178.0% -41.2% -68.9% 30.0% 20.0%

12 Total operating income 4,285,369 5,281,403 5,784,913 8,902,516 9,286,804 10,691,085 12,867,486 14,849,497 23.2% 9.5% 53.9% 4.3% 15.1% 20.4% 15.4%

13 Administration expenses (966,940) (1,213,557) (1,758,150) (2,694,119) (3,493,917) (3,987,761) (4,798,911) (5,559,688) 25.5% 44.9% 53.2% 29.7% 14.1% 20.3% 15.9%

14 Profit before provision loss for credit 3,318,429 4,067,846 4,026,763 6,208,397 5,792,887 6,703,323 8,068,575 9,289,809 22.6% -1.0% 54.2% -6.7% 15.7% 20.4% 15.1%

15 Provision loss (2,025,876) (1,190,825) (1,294,405) (2,883,937) (788,513) (1,367,470) (1,364,373) (1,453,465) -41.2% 8.7% 122.8% -72.7% 73.4% -0.2% 6.5%

16 Profit before tax 1,292,553 2,877,021 2,732,358 3,324,460 5,004,374 5,335,854 6,704,203 7,836,344 122.6% -5.0% 21.7% 50.5% 6.6% 25.6% 16.9%

17 Income tax (467,330) (1,016,647) (693,482) (787,906) (1,059,621) (1,223,503) (1,536,717) (1,793,608) 117.5% -31.8% 13.6% 34.5% 15.5% 25.6% 16.7%

18 Net profit 825,223 1,860,374 2,038,876 2,536,554 3,944,753 4,112,351 5,167,486 6,042,736 125.4% 9.6% 24.4% 55.5% 4.2% 25.7% 16.9%

19 Minority interests 0 0 0 (16,340) (23,398) (25,738) (28,312) (31,143) 43.2% 10.0% 10.0% 10.0%

20 Net profit for their shareholders 825,223 1,860,374 2,038,876 2,520,214 3,921,356 4,086,613 5,139,174 6,011,593 125.4% 9.6% 23.6% 55.6% 4.2% 25.8% 17.0%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 160

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

VCB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 123 146 205 273 322 368 418 468
II Capital Adequacy Ratio
1 Equity/Total Assets 6.2% 6.7% 7.0% 6.3% 6.5% 7.8% 7.7% 7.6%
2 Equity multiplier = TA/Equity 16.2 15.0 14.2 15.9 15.3 12.8 13.0 13.2
III Asset quality
1 NPL 3-5 3.44% 2.66% 3.29% 4.61% 2.47% 3.56% 3.42% 3.36%
2 Loan loss reserve coverage 64% 83% 65% 80% 132% 84% 83% 82%
IV Liquidity
1 Loan to customer deposit ratio 55% 55% 67% 69% 81% 81% 84% 88%
2 Loans/(customer deposits + CD) 53% 54% 64% 68% 81% 80% 83% 87%
3 Loans/Total assets 44% 40% 48% 49% 54% 55% 58% 60%
4 Interbank funds (borrowing+deposits)/equity 0.2 0.6 1.3 1.9 2.3 2.0 2.0 2.1
5 (Interbank funds +CDS +bonds)/equity 0.2 0.6 1.5 2.1 2.3 2.0 2.1 2.2
6 Interbank funds/total deposits 5% 11% 14% 19% 18% 18% 19%
7 Net interbank position/total assets 27% 11% 2% 3% 3% 2% 0%
V Profitability & Efficiency
1 ROAA 0.6% 1.2% 1.1% 1.2% 1.6% 1.5% 1.6% 1.6%
2 ROAE 9.8% 19.0% 16.3% 18.1% 25.6% 20.2% 20.3% 21.3%
3 Net interest margin (NI/AEA) 2.6% 2.8% 2.4% 3.7% 3.3% 3.3% 3.4% 3.5%
4 Operating Exp/ AEA 0.8% 0.9% 1.1% 1.5% 1.8% 1.6% 1.7% 1.7%
5 Net Interest income/total operating income 77.2% 73.5% 69.1% 74.4% 70.0% 74.4% 75.1% 75.4%
6 Cost to income ratio 22.6% 23.0% 30.4% 30.3% 37.6% 37.3% 37.3% 37.4%
7 Net profit/total operating income 19.3% 35.2% 35.2% 28.5% 42.5% 38.5% 40.2% 40.7%
VI Growth Ratios
1 Asset growth Na 22% 18% 13% 15% 19% 14% 13%
2 Loans growth Na 11% 44% 14% 26% 23% 18% 18%
3 Deposit growth Na 11% 18% 11% 8% 23% 14% 13%
4 Growth in total deposits and CDS Na 11% 21% 10% 6% 24% 14% 13%
5 Capital growth Na 32% 25% 0% 20% 42% 12% 11%
6 Profit growth Na 125% 10% 24% 56% 4% 26% 17%
Source: Company financial statements and HSC forecasts

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July 14h 2008

VCB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.5% 1.4% 1.6% 1.6% 1.8% 1.8% 1.8% 1.8%
2 Balances with State bank 4.6% 7.1% 5.9% 13.8% 9.9% 6.5% 6.4% 6.5%
3 Deposits with other financial institutions 31.1% 31.3% 19.9% 13.7% 18.6% 18.8% 17.7% 15.9%
4 Net Securities - Held for trading 0.0% 0.0% 0.8% 0.1% 0.0% 0.1% 0.1% 0.0%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 43.8% 39.7% 48.4% 48.9% 53.6% 55.4% 57.6% 60.0%
7 Investment securities 17.1% 18.6% 20.9% 18.7% 12.8% 14.1% 13.0% 12.1%
8 Long term investments 0.5% 0.6% 1.0% 1.4% 1.4% 1.3% 1.2% 1.1%
9 Fixed assets 0.8% 0.7% 0.5% 0.6% 0.6% 0.5% 0.5% 0.5%
10 Other assets 0.7% 0.6% 1.1% 1.2% 1.4% 1.5% 1.7% 2.0%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 8.8% 13.4% 6.4% 4.3% 8.8% 5.3% 5.0% 4.8%
2 Deposits from Banks 1.3% 4.0% 9.1% 11.9% 15.2% 15.4% 15.7% 15.9%
3 Customer deposits 79.4% 71.7% 71.7% 70.7% 66.2% 68.2% 68.4% 68.5%
4 Trusted funds 2.8% 2.3% 1.7% 0.3% 0.0% 0.2% 0.2% 0.2%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 0.0% 1.6% 1.3% 0.2% 0.6% 0.6% 0.6%
7 Other liabilities 1.6% 1.9% 2.3% 5.2% 3.0% 2.5% 2.4% 2.4%
8 Shareholders' equity and other funds 6.2% 6.7% 7.0% 6.3% 6.5% 7.8% 7.7% 7.6%
Chartered capital 3.1% 2.6% 2.4% 5.4% 4.7% 5.8% 5.1% 4.5%
Share premium 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 2.9% 3.8% 4.3% 0.3% 0.5% 0.6% 0.8% 1.1%
FX revaluation 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.1% 0.2% 0.2% 0.5% 1.2% 1.4% 1.7% 2.0%
9 Minor shareholders' interests 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 31.1% 31.3% 19.9% 13.7% 18.6% 18.8% 17.7% 15.9%
Deposits from other banks as % of balance sheet 1.3% 4.0% 9.1% 11.9% 15.2% 15.4% 15.7% 15.9%
Net position 29.8% 27.3% 10.8% 1.8% 3.4% 3.4% 2.0% 0.0%
SBV positions
Deposits in SBV as % of balance sheet 1.5% 1.4% 1.6% 1.6% 1.8% 1.8% 1.8% 1.8%
Deposits from SBV as % of balance sheet 8.8% 13.4% 6.4% 4.3% 8.8% 5.3% 5.0% 4.8%
Net position -7.3% -11.9% -4.8% -2.7% -7.1% -3.5% -3.2% -3.0%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 4,600,665 10,166,062 13,924,010 27,432,344 29,685,433 33,024,262 36,940,677 42,712,210 121.0% 37.0% 97.0% 8.2% 11.2% 11.9% 15.6%

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2 Balances with State bank 3,033,903 5,365,319 15,687,186 14,990,209 17,087,223 36,084,663 37,307,345 44,010,837 76.8% 192.4% -4.4% 14.0% 111.2% 3.4% 18.0%

3 Deposits with other financial institutions 24,495,467 48,752,416 114,073,075 125,828,481 186,515,237 222,313,943 255,137,461 306,104,553 99.0% 134.0% 10.3% 48.2% 19.2% 14.8% 20.0%

4 Net Securities - Held for trading 2,706,124 4,380,825 6,182,536 2,220,114 4,164,700 4,487,660 5,471,121 6,744,441 61.9% 41.1% -64.1% 87.6% 7.8% 21.9% 23.3%

5 Derivatives 0 15,762 14,884 100,419 672,071 0 1 2 -5.6% 574.7% 569.3% -100.0% 100.0%

6 Net loans and advances to clients 55,183,215 93,991,608 201,318,120 234,855,461 380,808,337 498,298,095 618,187,894 764,894,209 70.3% 114.2% 16.7% 62.1% 30.9% 24.1% 23.7%

7 Investment securities 10,337,197 16,533,958 50,404,499 81,712,424 115,183,236 165,452,037 194,604,195 232,714,744 59.9% 204.9% 62.1% 41.0% 43.6% 17.6% 19.6%

8 Long term investments 863,030 1,871,611 5,477,001 7,468,351 6,522,988 9,167,626 10,899,968 13,061,673 116.9% 192.6% 36.4% -12.7% 40.5% 18.9% 19.8%

9 Fixed assets 1,954,122 3,090,965 4,288,803 7,153,371 8,849,528 10,172,040 11,969,650 13,974,660 58.2% 38.8% 66.8% 23.7% 14.9% 17.7% 16.8%
JSCB EARNINGS MODEL

10 Other assets 3,347,903 5,750,596 13,787,558 24,557,115 54,823,845 45,991,147 52,346,111 60,326,247 71.8% 139.8% 78.1% 123.3% -16.1% 13.8% 15.2%

Total Assets 106,521,626 189,919,122 425,157,673 526,318,289 804,312,597 1,024,991,474 1,222,864,423 1,484,543,576 78.3% 123.9% 23.8% 52.8% 27.4% 19.3% 21.4%

1 Deposits & Loans from SBV 5,039,836 6,929,343 2,202,175 101,606 29,594,525 18,446,083 19,722,996 20,009,235 37.5% -68.2% -95.4% 29026.7% -37.7% 6.9% 1.5%

2 Deposits from Banks 14,659,044 31,975,503 85,105,280 86,040,625 126,723,955 151,972,421 165,366,524 203,755,687 118.1% 166.2% 1.1% 47.3% 19.9% 8.8% 23.2%

3 Customer deposits 73,210,299 114,736,420 242,054,277 321,177,583 449,820,811 621,403,990 772,484,335 950,969,763 56.7% 111.0% 32.7% 40.1% 38.1% 24.3% 23.1%

4 Trusted funds 972,065 1,392,873 2,202,651 3,393,013 5,056,472 6,316,875 6,894,029 7,565,198 43.3% 58.1% 54.0% 49.0% 24.9% 9.1% 9.7%

5 Liabilities from derivatives 0 31,674 55,292 34,426 127,375 95,925 108,603 123,630 74.6% -37.7% 270.0% -24.7% 13.2% 13.8%

6 Bonds & Certificates of deposits 957,140 10,572,961 27,208,365 39,572,220 80,860,063 104,881,373 116,777,537 135,812,756 1004.6% 157.3% 45.4% 104.3% 29.7% 11.3% 16.3%

7 Other liabilities 3,467,117 6,990,812 20,655,451 17,549,164 36,130,744 29,526,345 36,226,876 48,148,926 101.6% 195.5% -15.0% 105.9% -18.3% 22.7% 32.9%

8 Shareholders' equity and other funds 8,216,125 17,247,008 45,603,836 58,197,062 75,161,074 91,558,794 104,256,957 116,926,500 109.9% 164.4% 27.6% 29.1% 21.8% 13.9% 12.2%

Chartered capital 5,998,712 12,127,031 28,650,789 43,162,886 56,519,333 72,865,621 80,341,015 86,601,487 102.2% 136.3% 50.7% 30.9% 28.9% 10.3% 7.8%

Share premium 238,211 1,258,883 9,288,327 8,245,132 6,643,819 4,682,240 4,394,960 4,407,872 428.5% 637.8% -11.2% -19.4% -29.5% -6.1% 0.3%

Treasury shares 0 0 0 (433,608) (117,816) (109,658) (121,058) (127,627) -72.8% -6.9% 10.4% 5.4%

Funds 955,644 1,693,079 2,170,536 3,338,961 4,066,306 5,705,738 7,431,428 9,734,401 77.2% 28.2% 53.8% 21.8% 40.3% 30.2% 31.0%

FX revaluation 0 0 1,571 1,931 1,931 -74,373 -79,579 -85,150 22.9% 0.0% -3951.5% 7.0% 7.0%

Asset revaluation 0 0 0 0 0 0 0 0

Retained profits 1,023,558 2,168,015 5,492,613 3,881,760 8,047,501 8,489,225 12,290,191 16,395,517 111.8% 153.3% -29.3% 107.3% 5.5% 44.8% 33.4%

9 Minor shareholders' interests 0 42,528 70,345 252,589 837,577 789,667 1,026,567 1,231,880 65.4% 259.1% 231.6% -5.7% 30.0% 20.0%

Liabilities and Equities 106,521,626 189,919,122 425,157,673 526,318,289 804,312,597 1,024,991,474 1,222,864,424 1,484,543,575 78.3% 123.9% 23.8% 52.8% 27.4% 19.3% 21.4%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 6,930,588 11,924,244 23,705,475 53,361,172 53,135,997 87,009,093 110,636,073 132,943,891 72.1% 98.8% 125.1% -0.4% 63.7% 27.2% 20.2%

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2 Interest expenses (4,396,090) (6,384,897) (15,800,035) (38,973,132) (35,389,352) (62,196,765) (80,282,134) (96,787,046) 45.2% 147.5% 146.7% -9.2% 75.7% 29.1% 20.6%

3 Net interest income 2,534,498 5,539,347 7,905,440 14,388,040 17,746,645 24,812,328 30,353,939 36,156,844 118.6% 42.7% 82.0% 23.3% 39.8% 22.3% 19.1%

4 Fee and commission income 512,747 865,943 1,727,315 3,154,015 4,751,408 4,984,161 5,839,262 6,914,531 68.9% 99.5% 82.6% 50.6% 4.9% 17.2% 18.4%

5 Fee and commission expenses (119,776) (136,350) (324,729) (495,459) (845,757) (857,429) (985,395) (1,142,129) 13.8% 138.2% 52.6% 70.7% 1.4% 14.9% 15.9%

6 Net fee and commission income 412,284 729,593 1,402,585 2,658,556 3,905,651 4,126,732 4,853,867 5,772,402 77.0% 92.2% 89.5% 46.9% 5.7% 17.6% 18.9%

7 Foreign exchange gains - net 166,174 137,065 487,012 2,433,371 1,573,355 438,869 1,313,311 1,508,760 -17.5% 255.3% 399.7% -35.3% -72.1% 199.2% 14.9%

8 Income from trading securities 20,081 101,532 1,221,836 809,548 294,234 112,623 266,600 328,180 405.6% 1103.4% -33.7% -63.7% -61.7% 136.7% 23.1%

9 Income from Investment securities 59,035 437,515 1,352,049 (667,387) 2,032,165 1,095,162 1,107,061 1,295,692 641.1% 209.0% -149.4% -404.5% -46.1% 1.1% 17.0%
JSCB EARNINGS MODEL

10 Other income 146,959 274,300 382,176 691,573 772,412 1,253,103 1,083,330 1,114,960 86.7% 39.3% 81.0% 11.7% 62.2% -13.5% 2.9%

11 Equity income 72,429 163,306 390,916 417,780 471,448 1,126,935 847,866 960,162 125.5% 139.4% 6.9% 12.8% 139.0% -24.8% 13.2%

12 Total operating income 3,411,459 7,382,658 13,142,014 20,731,480 26,795,909 32,965,752 39,825,974 47,137,000 116.4% 78.0% 57.7% 29.3% 23.0% 20.8% 18.4%

13 Administration expenses (1,345,351) (2,272,521) (4,347,696) (7,508,395) (9,841,571) (12,508,857) (15,285,623) (18,390,633) 68.9% 91.3% 72.7% 31.1% 27.1% 22.2% 20.3%

14 Profit before loan loss provision 2,066,108 5,110,137 8,794,318 13,223,085 16,954,338 20,456,895 24,540,351 28,746,368 147.3% 72.1% 50.4% 28.2% 20.7% 20.0% 17.1%

15 Provision loss (426,939) (501,630) (757,488) (2,101,602) (2,420,078) (3,642,982) (4,740,756) (5,977,823) 17.5% 51.0% 177.4% 15.2% 50.5% 30.1% 26.1%

16 Profit before tax 1,640,371 4,608,507 8,036,830 11,121,483 14,534,260 16,923,912 19,799,595 22,768,544 180.9% 74.4% 38.4% 30.7% 16.4% 17.0% 15.0%

17 Income tax (421,500) (854,770) (1,646,501) (2,157,739) (3,415,245) (4,035,628) (4,894,020) (5,628,580) 102.8% 92.6% 31.0% 58.3% 18.2% 21.3% 15.0%

18 Net profit 1,218,871 3,753,737 6,390,329 8,963,744 11,119,015 12,888,284 14,905,575 17,139,965 208.0% 70.2% 40.3% 24.0% 15.9% 15.7% 15.0%

19 Minority interest 0 0 3,219 -7,163 -79,006 -110,196 -142,020 -168,724 Na Na -322.5% 1003.0% 39.5% 28.9% 18.8%

20 Net profit for their shareholders 1,218,871 3,753,737 6,393,548 8,956,581 11,040,009 12,778,088 14,763,555 16,971,241 208.0% 70.3% 40.1% 23.3% 15.7% 15.5% 15.0%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 164

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

JSCB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 353 619 951 1,344 1,740 2,072 2,330 2,663
II Capital Adequacy Ratio
1 Equity/Total Assets 7.7% 9.1% 10.7% 11.1% 9.3% 8.9% 8.5% 7.9%
2 Equity multiplier = TA/Equity 13.0 11.0 9.3 9.0 10.7 11.2 11.7 12.7
III Asset quality
1 NPL 3-5 na 0.98% 0.83% 1.60% 1.18% 2.22% 2.64% 2.61%
2 Loan loss reserve coverage na 42% 60% 66% 89% 50% 45% 48%
IV Liquidity
1 Loan to customer deposit ratio 75% 82% 83% 73% 85% 80% 80% 80%
2 Loans/(customer deposits + CD) 73% 74% 74% 64% 71% 68% 69% 70%
3 Loans/Total assets 52% 49% 47% 45% 47% 49% 51% 52%
4 Interbank funds (borrowing+deposits)/equity 1.8 1.9 1.9 1.5 1.7 1.7 1.6 1.7
5 (Interbank funds +CDS +bonds)/equity 1.9 2.5 2.5 2.2 2.8 2.8 2.7 2.9
6 Interbank funds/total deposits 16% 20% 24% 19% 19% 17% 16% 16%
7 Net interbank position/total assets 9% 9% 7% 8% 7% 7% 7% 7%
V Profitability & Efficiency
1 ROAA 1.1% 2.5% 2.1% 1.9% 1.7% 1.4% 1.3% 1.3%
2 ROAE 14.8% 29.5% 20.3% 17.3% 16.6% 15.3% 15.1% 15.3%
3 Net interest margin (NI/AEA) 2.8% 4.4% 3.0% 3.6% 3.2% 3.2% 3.1% 3.1%
4 Operating Exp/ AEA 1.5% 1.8% 1.6% 1.9% 1.8% 1.6% 1.6% 1.6%
5 Net Interest income/total operating income 74.3% 75.0% 60.2% 69.4% 66.2% 75.3% 76.2% 76.7%
6 Cost to income ratio 39.4% 30.8% 33.1% 36.2% 36.7% 37.9% 38.4% 39.0%
7 Net profit/total operating income 35.7% 50.8% 48.6% 43.2% 41.5% 39.1% 37.4% 36.4%
VI Growth Ratios
1 Asset growth 78% 124% 24% 53% 27% 19% 21%
2 Loans growth 70% 114% 17% 62% 31% 24% 24%
3 Deposit growth 57% 111% 33% 40% 38% 24% 23%
4 Growth in total deposits and CDS 69% 115% 34% 47% 37% 22% 22%
5 Capital growth 110% 164% 28% 29% 22% 14% 12%
6 Profit growth 208% 70% 40% 23% 16% 16% 15%
Source: Company financial statements and HSC forecasts

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July 14h 2008

JSCB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 4.3% 5.4% 3.3% 5.2% 3.7% 3.2% 3.0% 2.9%
2 Balances with State bank 2.8% 2.8% 3.7% 2.8% 2.1% 3.5% 3.1% 3.0%
3 Deposits with other financial institutions 23.0% 25.7% 26.8% 23.9% 23.2% 21.7% 20.9% 20.6%
4 Net Securities - Held for trading 2.5% 2.3% 1.5% 0.4% 0.5% 0.4% 0.4% 0.5%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 51.8% 49.5% 47.4% 44.6% 47.3% 48.6% 50.6% 51.5%
7 Investment securities 9.7% 8.7% 11.9% 15.5% 14.3% 16.1% 15.9% 15.7%
8 Long term investments 0.8% 1.0% 1.3% 1.4% 0.8% 0.9% 0.9% 0.9%
9 Fixed assets 1.8% 1.6% 1.0% 1.4% 1.1% 1.0% 1.0% 0.9%
10 Other assets 3.1% 3.0% 3.2% 4.7% 6.8% 4.5% 4.3% 4.1%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 4.7% 3.6% 0.5% 0.0% 3.7% 1.8% 1.6% 1.3%
2 Deposits from Banks 13.8% 16.8% 20.0% 16.3% 15.8% 14.8% 13.5% 13.7%
3 Customer deposits 68.7% 60.4% 56.9% 61.0% 55.9% 60.6% 63.2% 64.1%
4 Trusted funds 0.9% 0.7% 0.5% 0.6% 0.6% 0.6% 0.6% 0.5%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.9% 5.6% 6.4% 7.5% 10.1% 10.2% 9.5% 9.1%
7 Other liabilities 3.3% 3.7% 4.9% 3.3% 4.5% 2.9% 3.0% 3.2%
8 Shareholders' equity and other funds 7.7% 9.1% 10.7% 11.1% 9.3% 8.9% 8.5% 7.9%
Chartered capital 5.6% 6.4% 6.7% 8.2% 7.0% 7.1% 6.6% 5.8%
Share premium 0.2% 0.7% 2.2% 1.6% 0.8% 0.5% 0.4% 0.3%
Treasury shares 0.0% 0.0% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0%
Funds 0.9% 0.9% 0.5% 0.6% 0.5% 0.6% 0.6% 0.7%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.0% 1.1% 1.3% 0.7% 1.0% 0.8% 1.0% 1.1%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 23.0% 25.7% 26.8% 23.9% 23.2% 21.7% 20.9% 20.6%
Deposits from other banks as % of balance sheet 13.8% 16.8% 20.0% 16.3% 15.8% 14.8% 13.5% 13.7%
Net position 9.2% 8.8% 6.8% 7.6% 7.4% 6.9% 7.3% 6.9%
SBV positions
Deposits in SBV as % of balance sheet 4.3% 5.4% 3.3% 5.2% 3.7% 3.2% 3.0% 2.9%
Deposits from SBV as % of balance sheet 4.7% 3.6% 0.5% 0.0% 3.7% 1.8% 1.6% 1.3%
Net position -0.4% 1.7% 2.8% 5.2% 0.0% 1.4% 1.4% 1.5%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 1,532,492 2,284,848 4,926,850 9,308,613 6,757,572 10,091,319 8,409,432 8,759,825 49.1% 115.6% 88.9% -27.4% 49.3% -16.7% 4.2%

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2 Balances with State bank 988,784 1,562,926 5,144,737 2,121,155 1,741,755 5,606,288 7,007,860 8,759,825 58.1% 229.2% -58.8% -17.9% 221.9% 25.0% 25.0%

3 Deposits with other financial institutions 6,535,305 16,401,829 29,164,968 26,187,911 36,698,304 29,706,347 28,318,140 28,318,140 151.0% 77.8% -10.2% 40.1% -19.1% -4.7% 0.0%

4 Net Securities - Held for trading 39,218 640,195 501,293 226,429 638,874 749,743 877,242 1,023,866 1532.4% -21.7% -54.8% 182.2% 17.4% 17.0% 16.7%

5 Derivatives - 1,057 9,973 38,247 - 843.5% 283.5% -100.0%

6 Net loans and advances to clients 9,360,692 16,958,212 31,676,320 34,604,077 61,855,984 85,419,139 110,499,011 141,831,005 81.2% 86.8% 9.2% 78.8% 38.1% 29.4% 28.4%

7 Investment securities 4,823,767 4,228,621 9,132,829 24,441,506 32,166,926 49,208,701 55,335,761 63,670,527 -12.3% 116.0% 167.6% 31.6% 53.0% 12.5% 15.1%

8 Long term investments 136,716 443,458 762,469 1,178,132 1,197,348 1,928,357 2,220,760 2,557,024 224.4% 71.9% 54.5% 1.6% 61.1% 15.2% 15.1%
ACB EARNINGS MODEL

9 Fixed assets 494,478 591,573 554,747 789,034 872,634 988,753 1,111,029 1,277,089 19.6% -6.2% 42.2% 10.6% 13.3% 12.4% 14.9%

10 Other assets 361,412 1,537,475 3,517,495 6,411,026 25,951,650 9,083,078 10,445,539 11,490,093 325.4% 128.8% 82.3% 304.8% -65.0% 15.0% 10.0%

Total Assets 24,272,864 44,650,194 85,391,681 105,306,130 167,881,047 192,781,723 224,224,775 267,687,396 84.0% 91.2% 23.3% 59.4% 14.8% 16.3% 19.4%

1 Deposits & Loans from SBV 967,312 941,286 654,630 - 10,256,943 7,000,000 7,000,000 7,000,000 -2.7% -30.5% -100.0% -31.8% 0.0% 0.0%

2 Deposits from Banks 1,123,576 3,249,941 6,994,030 9,901,891 10,449,828 17,764,708 14,257,339 14,931,256 189.2% 115.2% 41.6% 5.5% 70.0% -19.7% 4.7%

3 Customer deposits 19,984,920 29,394,703 55,283,104 64,216,949 86,919,196 112,125,763 140,157,204 175,196,504 47.1% 88.1% 16.2% 35.4% 29.0% 25.0% 25.0%

4 Trusted funds 265,428 288,532 322,512 298,865 270,304 270,304 270,304 270,304 8.7% 11.8% -7.3% -9.6% 0.0% 0.0% 0.0%

5 Liabilities from derivatives 23,351 - - - -100.0%

6 Bonds & Certificates of deposits 0 5,861,379 11,688,796 16,755,825 26,582,588 37,215,623 40,937,186 45,030,904 99.4% 43.3% 58.6% 40.0% 10.0% 10.0%

7 Other liabilities 648,422 3,217,838 4,190,760 6,366,132 23,272,550 7,018,138 6,399,951 7,039,946 396.3% 30.2% 51.9% 265.6% -69.8% -8.8% 10.0%

8 Shareholders' equity and other funds 1,283,206 1,653,987 6,257,849 7,766,468 10,106,287 11,387,188 15,202,792 18,218,481 28.9% 278.3% 24.1% 30.1% 12.7% 33.5% 19.8%

Chartered capital 948,316 1,100,047 2,630,060 6,355,813 7,814,138 9,376,965 11,252,359 13,502,830 16.0% 139.1% 141.7% 22.9% 20.0% 20.0% 20.0%

Share premium 1,704,197 - - -

Treasury shares

Funds 138,973 187,727 487,840 713,555 952,949 1,326,628 1,764,220 2,255,680 35.1% 159.9% 46.3% 33.5% 39.2% 33.0% 27.9%

FX revaluation

Asset revaluation

Retained profits 195,917 366,213 1,435,752 697,100 1,339,200 683,596 2,186,213 2,459,971 86.9% 292.1% -51.4% 92.1% -49.0% 219.8% 12.5%

Minor shareholders' interests 42,528 -

9 Liabilities and Equities 24,272,864 44,650,194 85,391,681 105,306,130 167,881,047 192,781,723 224,224,775 267,687,396 84.0% 91.2% 23.3% 59.4% 14.8% 16.3% 19.4%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 1,354,980 2,490,616 4,538,134 10,497,846 9,613,889 18,058,515 22,407,026 26,659,548 83.8% 82.2% 131.3% -8.4% 87.8% 24.1% 19.0%

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2 Interest expenses (840,715) (1,670,044) (3,227,028) (7,769,589) (6,813,361) (13,778,020) (17,149,522) (20,357,695) 98.6% 93.2% 140.8% -12.3% 102.2% 24.5% 18.7%

3 Net interest income 514,265 820,572 1,311,106 2,728,257 2,800,528 4,280,494 5,257,504 6,301,853 59.6% 59.8% 108.1% 2.6% 52.8% 22.8% 19.9%

4 Fee and commission income 112,807 172,980 342,592 680,301 987,982 740,987 866,954 1,014,336 53.3% 98.1% 98.6% 45.2% -25.0% 17.0% 17.0%

5 Fee and commission expenses (15,599) (24,645) (71,377) (73,793) (118,346) (124,263) (145,388) (170,104) 58.0% 189.6% 3.4% 60.4% 5.0% 17.0% 17.0%

6 Net fee and commission income 97,208 148,335 271,215 606,508 869,636 616,723 721,566 844,232 52.6% 82.8% 123.6% 43.4% -29.1% 17.0% 17.0%

7 Foreign exchange gains - net 14,640 23,514 155,140 678,852 422,336 392,772 439,905 488,295 60.6% 559.8% 337.6% -37.8% -7.0% 12.0% 11.0%

8 Income from trading securities - 31,520 344,990 (30,067) 20,637 40,000 46,000 52,900 994.5% -108.7% -168.6% 93.8% 15.0% 15.0%
ACB EARNINGS MODEL

9 Income from Investment securities 2,626 65,757 896,792 46,291 551,718 100,000 115,000 132,250 2404.1% 1263.8% -94.8% 1091.8% -81.9% 15.0% 15.0%

10 Other income 25,766 15,597 4,926 37,356 155,189 100,000 120,000 120,000 -39.5% -68.4% 658.3% 315.4% -35.6% 20.0% 0.0%

11 Equity income 30,778 36,653 36,653 172,279 115,026 172,531 204,357 237,310 19.1% 0.0% 370.0% -33.2% 50.0% 18.4% 16.1%

12 Total operating income 685,283 1,141,948 3,020,822 4,239,476 4,935,070 5,702,521 6,904,332 8,176,841 66.6% 164.5% 40.3% 16.4% 15.6% 21.1% 18.4%

13 Administration expenses (288,942) (462,424) (804,650) (1,590,903) (1,809,462) (2,241,099) (2,738,149) (3,277,293) 60.0% 74.0% 97.7% 13.7% 23.9% 22.2% 19.7%

14 Profit before loan loss provision 396,341 679,524 2,216,172 2,648,573 3,125,608 3,461,422 4,166,183 4,899,547 71.4% 226.1% 19.5% 18.0% 10.7% 20.4% 17.6%

15 Provision loss (5,992) (40,597) (89,357) (87,993) (287,444) (359,478) (558,712) (718,629) 577.5% 120.1% -1.5% 226.7% 25.1% 55.4% 28.6%

16 Profit before tax 391,550 638,927 2,126,815 2,560,580 2,838,164 3,101,944 3,607,471 4,180,918 63.2% 232.9% 20.4% 10.8% 9.3% 16.3% 15.9%

17 Income tax (92,349) (181,643) (366,807) (349,898) (636,960) (775,486) (901,868) (1,045,230) 96.7% 101.9% -4.6% 82.0% 21.7% 16.3% 15.9%

18 Net profit 299,201 457,284 1,760,008 2,210,682 2,201,204 2,326,458 2,705,603 3,135,689 52.8% 284.9% 25.6% -0.4% 5.7% 16.3% 15.9%

19 Minority interests

20 Net profit for their shareholders 299,201 457,284 1,760,008 2,210,682 2,201,204 2,326,458 2,705,603 3,135,689 52.8% 284.9% 25.6% -0.4% 5.7% 16.3% 15.9%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 168

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

ACB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 61 84 111 192 237 267 307 347
II Financial leverage
1 Equity/Total Assets 5.3% 3.7% 7.3% 7.4% 6.0% 5.9% 6.8% 6.8%
2 Equity multiplier = TA/Equity 18.9 27.0 13.6 13.6 16.6 16.9 14.7 14.7
III Asset quality
1 NPL ratio 3-5 0.3% 0.20% 0.08% 0.9% 0.4% 1.0% 1.5% 1.5%
2 Loan loss reserve coverage 74% 168% 506% 74% 196% 92% 60% 60%
IV Liquidity
1 Loans/customer deposit 47% 58% 57% 54% 71% 76% 79% 81%
2 Loans/(customer deposit + CD+ entrusted 46% 48% 47% 43% 54% 57% 61% 64%
funds)
3 Loans/Toal assets 39% 38% 37% 33% 37% 44% 49% 53%
4 Interbank funds (borrowing+deposits)/equity 0.9 2.0 1.1 1.3 1.0 1.6 0.9 0.8
5 (Interbank funds +CDS +bonds)/equity 0.9 5.5 3.0 3.4 3.7 4.8 3.6 3.3
6 Interbank funds/total deposits 5% 8% 9% 11% 8% 11% 7% 6%
7 Net interbank position/total assets 22% 29% 26% 15% 16% 6% 6% 5%
V Profitability & Efficiency
1 ROAA 1.2% 1.3% 2.7% 2.3% 1.6% 1.3% 1.3% 1.3%
2 ROAE 23.3% 31.1% 44.5% 31.5% 24.6% 21.6% 20.4% 18.8%
3 Net interest margin 2.5% 2.8% 2.5% 3.5% 2.6% 2.9% 2.9% 2.9%
4 Non-interest expenses over AEA 1.4% 1.6% 1.5% 2.1% 1.7% 1.5% 1.5% 1.5%
5 Net interest income/total operating income 75.0% 71.9% 43.4% 64.4% 56.7% 75.1% 76.1% 77.1%
6 Cost to income ratio 42.2% 40.5% 26.6% 37.5% 36.7% 39.3% 39.7% 40.1%
7 Net profit/total operating income 43.7% 40.0% 58.3% 52.1% 44.6% 40.8% 39.2% 38.3%
VI Growth Ratios
1 Asset growth Na 84% 91% 23% 59% 15% 16% 19%
2 Loan growth Na 81% 87% 9% 79% 38% 29% 28%
3 Customer deposit growth Na 47% 88% 16% 35% 29% 25% 25%
4 The growth of customer deposits and CDS Na 76% 90% 21% 40% 32% 21% 22%
5 Equity growth Na 29% 278% 24% 30% 13% 34% 20%
6 Net profit growth Na 53% 285% 26% 0% 6% 16% 16%
Source: Company financial statements and HSC forecasts

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July 14h 2008

ACB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 6.3% 5.1% 5.8% 8.8% 4.0% 5.2% 3.8% 3.3%
2 Balances with State bank 4.1% 3.5% 6.0% 2.0% 1.0% 2.9% 3.1% 3.3%
3 Deposits with other financial institutions 26.9% 36.7% 34.2% 24.9% 21.9% 15.4% 12.6% 10.6%
4 Net Securities - Held for trading 0.2% 1.4% 0.6% 0.2% 0.4% 0.4% 0.4% 0.4%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 38.6% 38.0% 37.1% 32.9% 36.8% 44.3% 49.3% 53.0%
7 Investment securities 19.9% 9.5% 10.7% 23.2% 19.2% 25.5% 24.7% 23.8%
8 Long term investments 0.6% 1.0% 0.9% 1.1% 0.7% 1.0% 1.0% 1.0%
9 Fixed assets 2.0% 1.3% 0.6% 0.7% 0.5% 0.5% 0.5% 0.5%
10 Other assets 1.5% 3.4% 4.1% 6.1% 15.5% 4.7% 4.7% 4.3%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 4.0% 2.1% 0.8% 0.0% 6.1% 3.6% 3.1% 2.6%
2 Deposits from Banks 4.6% 7.3% 8.2% 9.4% 6.2% 9.2% 6.4% 5.6%
3 Customer deposits 82.3% 65.8% 64.7% 61.0% 51.8% 58.2% 62.5% 65.4%
4 Trusted funds 1.1% 0.6% 0.4% 0.3% 0.2% 0.1% 0.1% 0.1%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 13.1% 13.7% 15.9% 15.8% 19.3% 18.3% 16.8%
7 Other liabilities 2.7% 7.2% 4.9% 6.0% 13.9% 3.6% 2.9% 2.6%
8 Shareholders' equity and other funds 5.3% 3.7% 7.3% 7.4% 6.0% 5.9% 6.8% 6.8%
Chartered capital 3.9% 2.5% 3.1% 6.0% 4.7% 4.9% 5.0% 5.0%
Share premium 0.0% 0.0% 2.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.7% 0.8% 0.8%
Funds 0.6% 0.4% 0.6% 0.7% 0.6% 0.0% 0.0% 0.0%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 1.0% 1.0% 0.9%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.8% 0.8% 1.7% 0.7% 0.8% 0.4% 1.0% 0.9%
9 Minor shareholders' interests 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 27% 37% 34% 25% 22% 15% 13% 11%
Deposits from other banks as % of balance sheet 5% 7% 8% 9% 6% 9% 6% 6%
Net position 22% 29% 26% 15% 16% 6% 6% 5%
SBV positions
Deposits in SBV as % of balance sheet 6% 5% 6% 9% 4% 5% 4% 3%
Deposits from SBV as % of balance sheet 4% 2% 1% 0% 6% 4% 3% 3%
Net position 2% 3% 5% 9% -2% 2% 1% 1%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VND Million) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 1,370,108 2,827,452 3,335,063 8,458,614 8,701,909 5,718,788 6,862,545 8,235,054 106.4% 18.0% 153.6% 2.9% -34.3% 20.0% 20.0%

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2 Balances with State bank 408,685 993,590 3,878,785 3,224,539 2,633,963 4,901,818 5,882,182 7,058,618 143.1% 290.4% -16.9% -18.3% 86.1% 20.0% 20.0%

3 Deposits with other financial institutions 1,447,211 2,019,529 4,656,456 7,047,583 15,200,238 13,318,129 10,654,503 11,910,025 39.5% 130.6% 51.4% 115.7% -12.4% -20.0% 11.8%

4 Net Securities - Held for trading 96,602 263,631 4,142,069 370,105 849,962 994,063 1,159,778 1,350,351 172.9% 1471.2% -91.1% 129.7% 17.0% 16.7% 16.4%

5 Derivatives - - 4,911 6,928 609,445 - - - 41.1% 8696.8%

6 Net loans and advances to clients 8,379,335 14,312,895 35,200,574 34,757,119 59,141,487 79,613,082 96,643,921 115,824,946 70.8% 145.9% -1.3% 70.2% 34.6% 21.4% 19.8%

7 Investment securities 1,514,919 2,065,024 9,173,801 8,969,574 9,912,430 11,404,622 13,120,644 14,444,371 36.3% 344.2% -2.2% 10.5% 15.1% 15.0% 10.1%

8 Long term investments 316,988 780,577 1,495,608 1,254,261 603,061 697,754 802,417 922,780 146.2% 91.6% -16.1% -51.9% 15.7% 15.0% 15.0%
STB EARNINGS MODEL

9 Fixed assets 621,522 958,805 1,019,813 1,696,288 2,480,890 2,862,639 3,277,783 3,717,289 54.3% 6.4% 66.3% 46.3% -36.8% 12.8% 11.1%

10 Other assets 298,968 554,680 1,665,795 2,653,558 3,885,759 4,662,911 5,595,493 6,714,592 85.5% 200.3% 59.3% 46.4% 3095.6% 16.0% 18.2%

Total Assets 14,454,338 24,776,183 64,572,875 68,438,569 104,019,144 124,173,805 143,999,267 170,178,027 71.4% 160.6% 6.0% 52.0% 19.4% 16.0% 18.2%

1 Deposits & Loans from SBV 170,370 107,000 750,177 52,161 3,614,333 - - - -37.2% 601.1% -93.0% 6829.2%

2 Deposits from Banks 502,400 815,473 4,508,977 4,488,353 2,739,164 5,204,413 6,037,223 6,942,807 62.3% 452.9% -0.5% -39.0% 90.0% 16.0% 15.0%

3 Customer deposits 10,467,158 17,511,580 44,231,944 46,128,820 60,516,273 81,696,969 98,036,362 117,643,635 67.3% 152.6% 4.3% 31.2% 35.0% 20.0% 20.0%

4 Trusted funds 163,630 374,668 1,003,293 1,014,462 1,975,237 1,975,237 2,172,761 2,390,037 129.0% 167.8% 1.1% 94.7% 0.0% 10.0% 10.0%

5 Liabilities from derivatives

6 Bonds & Certificates of deposits 956,546 2,529,299 5,197,380 7,659,063 22,377,476 19,020,855 20,542,523 24,651,028 164.4% 105.5% 47.4% 192.2% -88.3% 30.0% 30.0%

7 Other liabilities 306,554 567,817 1,531,445 1,337,085 2,019,760 2,625,688 3,413,394 4,437,413 85.2% 169.7% -12.7% 51.1% 575.9% 1.1% 2.3%

8 Shareholders' equity and other funds 1,887,680 2,870,346 7,349,659 7,758,625 10,546,760 13,650,644 13,797,003 14,113,109 52.1% 156.1% 5.6% 35.9% -13.0% 0.0% 0.0%

Chartered capital 1,250,948 2,089,413 4,448,814 5,115,831 6,700,353 9,179,230 9,179,230 9,179,230 67.0% 112.9% 15.0% 31.0% -75.5% 0.0% 0.0%

Share premium 158,365 1,212,723 1,212,723 1,376,877 1,644,891 1,644,891 1,644,891 665.8% 0.0% 13.5% -100.0% -100.0% -100.0%

Treasury shares (351,923) - - -

Funds 457,844 186,422 453,593 797,654 1,005,593 1,218,726 1,471,419 1,765,770 -59.3% 143.3% 75.9% 26.1% -100.0% -100.0% -100.0%

FX revaluation - - -

Asset revaluation

Retained profits 178,888 436,146 1,234,529 984,340 1,463,937 1,607,798 1,501,463 1,523,218 143.8% 183.1% -20.3% 48.7% 8382.2% 16.0% 18.2%

9 Minor shareholders' interests 230,141

Liabilities and Equities 14,454,338 24,776,183 64,572,875 68,438,569 104,019,144 124,173,805 143,999,267 170,178,027 71.4% 160.6% 6.0% 52.0% 19.4% 16.0% 18.2%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 171

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 1,032,922 1,669,505 3,383,002 7,161,082 7,137,799 11,906,708 14,189,831 16,591,781 61.6% 102.6% 111.7% -0.3% 66.8% 19.2% 16.9%

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2 Interest expense (597,913) (989,139) (2,231,130) (6,014,414) (4,834,864) (8,602,247) (10,420,074) (12,152,875) 65.4% 125.6% 169.6% -19.6% 77.9% 21.1% 16.6%

3 Net interest income 435,009 680,366 1,151,872 1,146,668 2,302,935 3,304,461 3,769,757 4,438,906 56.4% 69.3% -0.5% 100.8% 43.5% 14.1% 17.8%

4 Fee and commission income 100,467 146,212 291,083 672,016 1,246,301 1,121,671 1,233,838 1,443,590 45.5% 99.1% 130.9% 85.5% -10.0% 10.0% 17.0%

5 Fee and commission expense (29,441) (26,547) (97,685) (109,667) (210,109) (241,625) (258,539) (284,393) -9.8% 268.0% 12.3% 91.6% 15.0% 7.0% 10.0%

6 Net fee and commission income 71,026 119,665 193,398 562,349 1,036,192 880,046 975,299 1,159,197 68.5% 61.6% 190.8% 84.3% -15.1% 10.8% 18.9%

7 Foreign exchange gains - net 25,417 4,178 100,815 510,041 314,108 (370,000) 150,000 172,500 -83.6% 2313.0% 405.9% -38.4% -217.8% -140.5% 15.0%

8 Income from trading securities 19,532 7,471 599,873 86,856 16,024 -40,000 50,000 100,000 -61.7% 7929.4% -85.5% -81.6% -349.6% -225.0% 100.0%
STB EARNINGS MODEL

9 Income from investment securities 135,954 208,599 (88,253) 412,690 392,500 100,000 150,000 53.4% -142.3% -567.6% -4.9% -74.5% 50.0%

10 Other income 23,798 10,590 3,536 116,209 (73,011) 130,000 80,000 80,000 -55.5% -66.6% 3186.5% -162.8% -278.1% -38.5% 0.0%

11 Equity income 15,445 104,271 183,490 120,089 87,189 119,300 138,506 137,524 575.1% 76.0% -34.6% -27.4% 36.8% 16.1% -0.7%

12 Total operating income 590,227 1,062,495 2,441,583 2,453,959 4,096,127 4,416,307 5,263,562 6,238,128 80.0% 129.8% 0.5% 66.9% 7.8% 19.2% 18.5%

13 Operating expenses (260,307) (408,265) (741,225) (1,269,935) (1,638,759) (2,038,251) (2,522,550) (3,032,273) 56.8% 81.6% 71.3% 29.0% 24.4% 23.8% 20.2%

14 Pre-provision profits 329,920 654,230 1,700,358 1,184,024 2,457,368 2,378,056 2,741,012 3,205,855 98.3% 159.9% -30.4% 107.5% -3.2% 15.3% 17.0%

15 Provision loss for impaired exposure (23,449) (42,902) (118,387) (74,097) (282,429) (347,953) (495,981) (734,495) 83.0% 175.9% -37.4% 281.2% 23.2% 42.5% 48.1%

16 Profit before tax 306,471 611,328 1,581,971 1,109,927 2,174,939 2,030,102 2,245,031 2,471,360 99.5% 158.8% -29.8% 96.0% -6.7% 10.6% 10.1%

17 Income tax (74,383) (141,200) (184,074) (155,174) (504,380) (507,526) (561,258) (617,840) 89.8% 30.4% -15.7% 225.0% 0.6% 10.6% 10.1%

18 Net profit 232,088 470,128 1,397,897 954,753 1,670,559 1,522,577 1,683,773 1,853,520 102.6% 197.3% -31.7% 75.0% -8.9% 10.6% 10.1%

19 Minority interests - - - -

20 Net profit for their shareholders 232,088 470,128 1,397,897 954,753 1,670,559 1,522,577 1,683,773 1,853,520 102.6% 197.3% -31.7% 75.0% -8.9% 10.6% 10.1%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 172

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

STB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 128 163 211 247 309 355 405 455
II Financial leverage
1 Equity/Total Assets 13.1% 12.1% 11.4% 11.4% 10.6% 10.6% 10.2% 8.9%
2 Equity multiplier = TA/Equity 7.7 8.2 8.7 8.8 9.4 9.4 9.8 11.3
III Asset quality
1 NPL 3-5 0.6% 0.72% 0.24% 0.2% 0.6% 1.25% 2.55% 2.55%
2 Loan loss reserve coverage 99% 79% 209% 297% 134% 72% 35% 40%
IV Liquidity
1 Loan to customer deposit ratio 80% 82% 80% 75% 73% 97% 97% 97%
2 Loans/(customer deposits + CD +entrusted 72% 70% 70% 63% 70% 92% 93% 93%
funds)
3 Loans/Toal assets 58% 58% 55% 51% 57% 64% 67% 68%
4 Interbank funds (borrowing+deposits)/equity 0.3 0.3 0.6 0.6 0.3 0.6 0.7 0.8
5 (Interbank funds +CDS +bonds)/equity 0.8 1.2 1.3 1.6 2.4 0.9 1.0 1.2
6 Interbank funds/total deposits 4% 4% 8% 8% 3% 6% 6% 5%
7 Net interbank position/total assets 7% 5% 0% 4% 12% 7% 3% 3%
V Profitability & Efficiency
1 ROAA 1.61% 2.40% 3.13% 1.44% 1.94% 1.33% 1.26% 1.18%
2 ROAE 12.29% 19.76% 27.36% 12.64% 18.25% 15.44% 18.34% 20.19%
3 Net interest margin (NI/AEA) 3.84% 3.74% 2.21% 2.27% 2.74% 3.17% 3.13% 3.13%
4 Operating Exp/ AEA 2.30% 2.76% 2.11% 2.47% 2.43% 2.16% 2.25% 2.31%
5 Net Interest income/total operating income 73.70% 64.03% 47.18% 46.73% 56.22% 74.82% 71.62% 71.16%
6 Cost to income ratio 44.10% 38.43% 30.36% 51.75% 40.01% 46.15% 47.92% 48.61%
7 Net profit/total operating income 39.32% 44.25% 57.25% 38.91% 40.78% 34.48% 31.99% 29.71%
VI Growth Ratios
1 Asset growth Na 71.4% 160.6% 6.0% 52.0% 19.4% 16.0% 18.2%
2 Loans growth Na 70.8% 145.8% -1.0% 70.4% 34.7% 21.4% 20.0%
3 Deposit growth Na 67.3% 152.6% 4.3% 31.2% 35.0% 20.0% 20.0%
4 Growth in total deposits and CDS Na 75.4% 146.6% 8.8% 54.1% 1.7% 20.3% 20.3%
5 Capital growth Na 52.1% 156.1% 5.6% 35.9% -13.0% 0.0% 0.0%
6 Profit growth Na 102.6% 197.3% -31.7% 75.0% -8.9% 10.6% 10.1%

Source: Company financial statements and HSC forecasts

www.hsc.com.vn Page 173

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

STB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 9.5% 11.4% 5.2% 12.4% 8.4% 4.6% 4.8% 4.8%
2 Balances with State bank 2.8% 4.0% 6.0% 4.7% 2.5% 3.9% 4.1% 4.1%
3 Deposits with other financial institutions 10.0% 8.2% 7.2% 10.3% 14.6% 10.7% 7.4% 7.0%
4 Net Securities - Held for trading 0.7% 1.1% 6.4% 0.5% 0.8% 0.8% 0.8% 0.8%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.6% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 58.0% 57.8% 54.5% 50.8% 56.9% 64.1% 67.1% 68.1%
7 Investment securities 10.5% 8.3% 14.2% 13.1% 9.5% 9.2% 9.1% 8.5%
8 Long term investments 2.2% 3.2% 2.3% 1.8% 0.6% 0.6% 0.6% 0.5%
9 Fixed assets 4.3% 3.9% 1.6% 2.5% 2.4% 2.3% 2.3% 2.2%
10 Other assets 2.1% 2.2% 2.6% 3.9% 3.7% 3.8% 3.9% 3.9%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 1.2% 0.4% 1.2% 0.1% 3.5% 0.0% 0.0% 0.0%
2 Deposits from Banks 3.5% 3.3% 7.0% 6.6% 2.6% 4.2% 4.2% 4.1%
3 Customer deposits 72.4% 70.7% 68.5% 67.4% 58.2% 65.8% 68.1% 69.1%
4 Trusted funds 1.1% 1.5% 1.6% 1.5% 1.9% 1.6% 1.5% 1.4%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 6.6% 10.2% 8.0% 11.2% 21.5% 15.3% 14.3% 14.5%
7 Other liabilities 2.1% 2.3% 2.4% 2.0% 1.9% 2.1% 2.4% 2.6%
8 Shareholders' equity and other funds 13.1% 11.6% 11.4% 11.3% 10.1% 11.0% 9.6% 8.3%
Chartered capital 8.7% 8.4% 6.9% 7.5% 6.4% 7.4% 6.4% 5.4%
Share premium 0.0% 0.6% 1.9% 1.8% 1.3% 1.3% 1.1% 1.0%
Treasury shares 0.0% 0.0% 0.0% -0.5% 0.0% 0.0% 0.0% 0.0%
Funds 3.2% 0.8% 0.7% 1.2% 1.0% 1.0% 1.0% 1.0%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.2% 1.8% 1.9% 1.4% 1.4% 1.3% 1.0% 0.9%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 10.0% 8.2% 7.2% 10.3% 14.6% 10.7% 7.4% 7.0%
Deposits from other banks as % of balance sheet 3.5% 3.3% 7.0% 6.6% 2.6% 4.2% 4.2% 4.1%
Net position 6.5% 4.9% 0.2% 3.7% 12.0% 6.5% 3.2% 2.9%
SBV positions
Deposits in SBV as % of balance sheet 9.5% 11.4% 5.2% 12.4% 8.4% 4.6% 4.8% 4.8%
Deposits from SBV as % of balance sheet 1.2% 0.4% 1.2% 0.1% 3.5% 0.0% 0.0% 0.0%
Net position 8.3% 11.0% 4.0% 12.3% 4.9% 4.6% 4.8% 4.8%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 645,391 2,898,007 1,850,102 4,455,588 6,838,617 4,093,739 5,403,735 7,132,930 349.0% -36.2% 140.8% 53.5% -40.1% 32.0% 32.0%

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2 Balances with State bank 105,646 374,378 825,202 3,438,736 2,115,265 3,070,304 4,052,801 5,349,698 254.4% 120.4% 316.7% -38.5% 45.1% 32.0% 32.0%

3 Deposits with other financial institutions 2,468,026 2,535,139 4,746,967 9,491,316 6,976,109 14,255,432 17,819,291 22,781,835 2.7% 87.2% 99.9% -26.5% 104.3% 25.0% 27.8%

4 Net Securities - Held for trading 0 0 7,580 0 98,824 296,472 494,120 790,592 -100.0% 200.0% 66.7% 60.0%

5 Derivatives - 14,477 0 53,235 4,122 - 1 2 -100.0% -92.3% -100.0% 100.0%

6 Net loans and advances to clients 6,427,689 10,164,975 18,378,610 20,855,907 38,003,086 51,835,839 67,089,748 87,216,672 58.1% 80.8% 13.5% 82.2% 36.4% 29.4% 30.0%

7 Investment securities 1,103,084 1,587,239 6,076,844 7,518,367 8,401,391 14,242,090 16,404,168 18,096,343 43.9% 282.9% 23.7% 11.7% 69.5% 15.2% 10.3%

8 Long term investments 39,866 92,493 690,538 765,151 766,468 919,762 1,103,714 1,324,457 132.0% 646.6% 10.8% 0.2% 20.0% 20.0% 20.0%
EIB EARNINGS MODEL

9 Fixed assets 159,126 224,994 530,138 716,157 937,559 1,217,053 1,540,829 1,922,787 41.4% 135.6% 35.1% 30.9% -41.5% 18.6% 19.2%

10 Other assets 420,405 435,777 604,443 953,364 1,887,814 2,454,158 3,190,406 4,147,527 3.7% 38.7% 57.7% 98.0% 4793.7% 26.8% 27.0%

Total Assets 11,369,233 18,327,479 33,710,424 48,247,821 66,029,254 92,384,849 117,098,812 148,762,844 61.2% 83.9% 43.1% 36.9% 39.9% 26.8% 27.0%

1 Deposits & Loans from SBV 329,248 433,582 28,059 26,954 1,611,076 0 - - 31.7% -93.5% -3.9% 5877.1% -100.0%

2 Deposits from Banks 1,571,645 2,128,517 1,214,024 1,565,108 2,527,655 15,175,557 20,473,476 25,589,438 35.4% -43.0% 28.9% 61.5% 500.4% 34.9% 25.0%

3 Customer deposits 8,352,111 13,141,175 22,906,123 30,877,730 38,766,464 51,171,732 67,546,687 89,161,627 57.3% 74.3% 34.8% 25.5% 32.0% 32.0% 32.0%

4 Trusted funds 56,072 40,170 25,255 13,170 6,376 200,736 200,736 200,736 -28.4% -37.1% -47.9% -51.6% 3048.4% 0.0% 0.0%

5 Liabilities from derivatives - 0 3,393 0 0 0 - - -100.0%

6 Bonds & Certificates of deposits - 326,339 8,445 1,453,200 8,223,028 10,278,785 12,848,481 16,317,571 -97.4% 17107.8% 465.9% 25.0% 25.0% 27.0%

7 Other liabilities 224,618 311,029 3,230,182 1,467,582 944,356 1,133,227 1,359,873 1,631,847 38.5% 938.5% -54.6% -35.7% 20.0% 20.0% 20.0%

8 Shareholders' equity and other funds 835,539 1,946,667 6,294,943 12,844,077 13,950,299 14,424,811 14,669,560 15,861,625 133.0% 223.4% 104.0% 8.6% 3.4% 1.7% 8.1%

Chartered capital 700,000 1,212,371 2,800,000 7,219,999 8,800,080 10,560,069 10,560,069 10,560,069 73.2% 131.0% 157.9% 21.9% 20.0% 0.0% 0.0%

Share premium 2,974,462 5,291,552 3,711,471 1,949,935 1,949,935 1,949,935 77.9% -29.9% -47.5% 0.0% 0.0%

Treasury shares

Funds 121,186 532,805 122,443 228,129 236,503 536,803 316,210 471,053 339.7% -77.0% 86.3% 3.7% 127.0% -41.1% 49.0%

FX revaluation 0 0 - - -

Asset revaluation

Retained profits 14,353 201,491 398,038 104,397 1,202,245 1,378,004 1,843,346 2,880,568 1303.8% 97.5% -73.8% 1051.6% 14.6% 33.8% 56.3%

9 Minor shareholders' interests - 0 0 0

Liabilities and Equities 11,369,233 18,327,479 33,710,424 48,247,821 66,029,254 92,384,849 117,098,812 148,762,844 61.2% 83.9% 43.1% 36.9% 39.9% 26.8% 27.0%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 175

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 657,710 983,397 1,753,670 4,196,594 4,344,177 7,654,290 10,534,294 13,306,174 49.5% 78.3% 139.3% 3.5% 76.2% 37.6% 26.3%

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2 Interest expenses (441,838) (631,847) (1,069,041) (2,876,882) (2,368,870) (4,750,411) (6,697,067) (8,653,901) 43.0% 69.2% 169.1% -17.7% 100.5% 41.0% 29.2%

3 Net interest income 215,872 351,550 684,629 1,319,712 1,975,307 2,903,879 3,837,227 4,652,273 62.9% 94.7% 92.8% 49.7% 47.0% 32.1% 21.2%

4 Fee and commission income 55,758 75,780 101,932 154,175 267,762 348,091 452,518 588,273 35.9% 34.5% 51.3% 73.7% 30.0% 30.0% 30.0%

5 Fee and commission expenses (30,384) (31,680) (29,763) (44,688) (56,581) (65,068) (81,335) (93,535) 4.3% -6.1% 50.1% 26.6% 15.0% 25.0% 15.0%

6 Net fee and commission income 25,374 44,100 72,169 109,487 211,181 283,023 371,183 494,738 73.8% 63.6% 51.7% 92.9% 34.0% 31.1% 33.3%

7 Foreign exchange gain - net 108,628 75,453 139,257 634,105 134,606 134,606 161,527 193,833 -30.5% 84.6% 355.3% -78.8% 0.0% 20.0% 20.0%

8 Income from trading securities - 0 85 (4,163) (39,835) 0 0 0 -4997.6% 856.9%


EIB EARNINGS MODEL

9 Income from securities investment - 41,222 57,190 (167,439) 153,327 (30,000) 80,000 100,000 38.7% -392.8% -191.6% -119.6% -366.7% 25.0%

10 Other income 5,924 76,661 41,536 31,283 30,475 150,000 65,000 80,000 1194.1% -45.8% -24.7% -2.6% 392.2% -56.7% 23.1%

11 Equity income 1,922 1,014 21,736 (30,938) 110,869 134,002 146,659 167,426 -47.2% 2043.6% -242.3% -458.4% 20.9% 9.4% 14.2%

12 Total operating income 357,720 590,000 1,016,602 1,892,046 2,575,929 3,575,510 4,661,596 5,688,269 64.9% 72.3% 86.1% 36.1% 38.8% 30.4% 22.0%

13 Administration expenses (117,085) (184,677) (353,629) (602,671) (907,058) (1,106,611) (1,361,131) (1,674,191) 57.7% 91.5% 70.4% 50.5% 22.0% 23.0% 23.0%

14 Pre-provision profit 240,635 405,323 662,973 1,289,375 1,668,871 2,468,899 3,300,465 4,014,077 68.4% 63.6% 94.5% 29.4% 47.9% 33.7% 21.6%

15 Provision loss (212,078) (46,736) (34,126) (320,144) (136,085) (290,965) (392,784) (501,806) -78.0% -27.0% 838.1% -57.5% 113.8% 35.0% 27.8%

16 Profit before tax 28,557 358,587 628,847 969,231 1,532,786 2,287,934 2,907,681 3,512,271 1155.7% 75.4% 54.1% 58.1% 49.3% 27.1% 20.8%

17 Income tax (7,456) (100,118) (165,430) (258,218) (388,364) (571,983) (726,920) (878,068) 1242.8% 65.2% 56.1% 50.4% 47.3% 27.1% 20.8%

18 Net profit 21,101 258,469 463,417 711,013 1,144,422 1,715,950 2,180,761 2,634,203 1124.9% 79.3% 53.4% 61.0% 49.9% 27.1% 20.8%

19 Minority interests - - - - - - - -

20 Net profit for their shareholders 21,101 258,469 463,417 711,013 1,144,422 1,715,950 2,180,761 2,634,203 1124.9% 79.3% 53.4% 61.0% 49.9% 27.1% 20.8%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 176

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

EIB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 23 32 65 111 149 180 220 260
II Financial leverage
1 Equity/Total Assets 7.3% 10.6% 18.7% 26.6% 21.1% 15.6% 12.5% 10.7%
2 Equity multiplier = TA/Equity 13.6 9.4 5.4 3.8 4.7 6.4 8.0 9.4
III Asset quality
1 NPL 3-5 1.12% 0.85% 0.88% 4.71% 1.80% 2.71% 2.71% 2.71%
2 Loan loss reserve coverage 8% 49% 46% 38% 55% 34% 35% 35%
IV Liquidity
1 Loan to customer deposit ratio 77% 77% 80% 68% 98% 101% 99% 98%
2 Loans/(customer deposits + CD) 76% 75% 80% 64% 81% 84% 83% 83%
3 Loans/Total assets 57% 55% 55% 43% 58% 56% 57% 59%
4 Interbank funds (borrowing+deposits)/equity 1.9 1.1 0.2 0.1 0.2 1.1 1.4 1.6
5 (Interbank funds +CDS +bonds)/equity 1.9 1.3 0.2 0.2 0.8 1.8 2.3 2.6
6 Interbank funds/total deposits 16% 14% 5% 5% 5% 20% 20% 19%
7 Net interbank position/total assets 8% 2% 10% 16% 7% -1% -2% -2%
V Profitability & Efficiency
1 ROAA 0.2% 1.7% 1.8% 1.7% 2.0% 2.2% 2.1% 2.0%
2 ROAE 2.5% 18.6% 11.2% 7.4% 8.5% 12.1% 15.0% 17.3%
3 Net interest margin (NI/AEA) 2.2% 2.9% 3.2% 4.1% 4.4% 4.4% 4.2% 4.1%
4 Operating Exp/ AEA 1.2% 1.5% 1.6% 1.8% 2.0% 1.7% 1.5% 1.5%
5 Net Interest income/total operating income 60.3% 59.6% 67.3% 69.8% 76.7% 81.2% 82.3% 81.8%
6 Cost to income ratio 32.7% 31.3% 34.8% 31.9% 35.2% 30.9% 29.2% 29.4%
7 Net profit/total operating income 5.9% 43.8% 45.6% 37.6% 44.4% 48.0% 46.8% 46.3%
VI Growth Ratios
1 Asset growth Na 61% 84% 43% 37% 40% 27% 27%
2 Loans growth Na 58% 81% 13% 82% 36% 29% 30%
3 Deposit growth Na 57% 74% 35% 26% 32% 32% 32%
4 Growth in total deposits and CDS Na 61% 70% 41% 45% 31% 31% 31%
5 Capital growth Na 133% 223% 104% 9% 3% 2% 8%
6 Profit growth Na 1125% 79% 53% 61% 50% 27% 21%
Source: Company financial statements and HSC forecasts

www.hsc.com.vn Page 177

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

EIB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 5.7% 15.8% 5.5% 9.2% 10.4% 4.4% 4.6% 4.8%
2 Balances with State bank 0.9% 2.0% 2.4% 7.1% 3.2% 3.3% 3.5% 3.6%
3 Deposits with other financial institutions 21.7% 13.8% 14.1% 19.7% 10.6% 15.4% 15.2% 15.3%
4 Net Securities - Held for trading 0.0% 0.0% 0.0% 0.0% 0.1% 0.3% 0.4% 0.5%
5 Derivatives 0.0% 0.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 56.5% 55.5% 54.5% 43.2% 57.6% 56.1% 57.3% 58.6%
7 Investment securities 9.7% 8.7% 18.0% 15.6% 12.7% 15.4% 14.0% 12.2%
8 Long term investments 0.4% 0.5% 2.0% 1.6% 1.2% 1.0% 0.9% 0.9%
9 Fixed assets 1.4% 1.2% 1.6% 1.5% 1.4% 1.3% 1.3% 1.3%
10 Other assets 3.7% 2.4% 1.8% 2.0% 2.9% 2.7% 2.7% 2.8%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 2.9% 2.4% 0.1% 0.1% 2.4% 0.0% 0.0% 0.0%
2 Deposits from Banks 13.8% 11.6% 3.6% 3.2% 3.8% 16.4% 17.5% 17.2%
3 Customer deposits 73.5% 71.7% 67.9% 64.0% 58.7% 55.4% 57.7% 59.9%
4 Trusted funds 0.5% 0.2% 0.1% 0.0% 0.0% 0.2% 0.2% 0.1%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 1.8% 0.0% 3.0% 12.5% 11.1% 11.0% 11.0%
7 Other liabilities 2.0% 1.7% 9.6% 3.0% 1.4% 1.2% 1.2% 1.1%
8 Shareholders' equity and other funds 7.3% 10.6% 18.7% 26.6% 21.1% 15.6% 12.5% 10.7%
Chartered capital 6.2% 6.6% 8.3% 15.0% 13.3% 11.4% 9.0% 7.1%
Share premium 0.0% 0.0% 8.8% 11.0% 5.6% 2.1% 1.7% 1.3%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 1.1% 2.9% 0.4% 0.5% 0.4% 1.5% 1.6% 1.9%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 100.0% 100.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.1% 1.1% 1.2% 0.2% 1.8% 1.5% 1.6% 1.9%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 21.7% 13.8% 14.1% 19.7% 10.6% 15.4% 15.2% 15.3%
Deposits from other banks as % of balance sheet 13.8% 11.6% 3.6% 3.2% 3.8% 16.4% 17.5% 17.2%
Net position 7.9% 2.2% 10.5% 16.4% 6.7% -1.0% -2.3% -1.9%
SBV positions
Deposits in SBV as % of balance sheet 5.7% 15.8% 5.5% 9.2% 10.4% 4.4% 4.6% 4.8%
Deposits from SBV as % of balance sheet 2.9% 2.4% 0.1% 0.1% 2.4% 0.0% 0.0% 0.0%
Net position 2.8% 13.4% 5.4% 9.2% 7.9% 4.4% 4.6% 4.8%
Source: Company financial statements and HSC forecasts

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 162,311 203,940 496,173 1,565,968 1,973,000 5,031,435 6,037,722 7,245,267 25.6% 143.3% 215.6% 26.0% 155.0% 20.0% 20.0%

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2 Balances with State bank 326,114 409,281 1,298,682 2,296,574 2,719,744 12,578,588 7,044,009 8,452,811 25.5% 217.3% 76.8% 18.4% 362.5% -44.0% 20.0%

3 Deposits with other financial institutions 2,632,576 4,458,308 9,303,685 15,647,089 26,252,269 29,421,228 38,516,081 44,293,494 69.4% 108.7% 68.2% 67.8% 12.1% 30.9% 15.0%

4 Net Securities - Held for trading 1,942,620 2,876,804 - - 96,631 - - - 48.1% -100.0% -100.0%

5 Derivatives 46,512 - - - -100.0%

6 Net loans and advances to clients 5,293,062 8,696,101 19,841,131 26,018,985 41,580,370 51,909,777 62,368,402 73,372,744 64.3% 128.2% 31.1% 59.8% 24.8% 20.1% 17.6%

7 Investment securities - - 7,487,172 11,418,819 13,608,323 20,134,520 26,126,021 33,887,403 52.5% 19.2% 48.0% 29.8% 29.7%

8 Long term investments 11,838 30,783 36,930 66,425 475,008 689,077 826,892 992,271 160.0% 20.0% 79.9% 615.1% 45.1% 20.0% 20.0%
TCB EARNINGS MODEL

9 Fixed assets 148,652 338,301 436,970 576,665 696,494 884,065 1,189,060 1,445,669 127.6% 29.2% 32.0% 20.8% 26.9% 34.5% 21.6%

10 Other assets 148,933 312,835 641,753 1,478,530 5,086,079 5,711,985 5,140,787 5,140,787 110.1% 105.1% 130.4% 244.0% 12.3% -10.0% 0.0%

Total Assets 10,666,106 17,326,353 39,542,496 59,069,055 92,534,430 126,360,677 147,248,974 174,830,445 62.4% 128.2% 49.4% 56.7% 36.6% 16.5% 18.7%

1 Deposits & Loans from SBV 2,903,954 5,070,852 301,993 - 3,932,348 4,000,000 5,000,000 5,000,000 74.6% -94.0% -100.0% 1.7% 25.0% 0.0%

2 Deposits from Banks 150,102 57,883 8,458,903 8,970,269 10,346,086 16,082,804 16,082,804 19,498,278 -61.4% 14513.8% 6.0% 15.3% 55.4% 0.0% 21.2%

3 Customer deposits 6,195,072 9,566,043 24,476,576 39,617,723 62,468,930 83,857,253 100,628,704 120,754,444 54.4% 155.9% 61.9% 57.7% 34.2% 20.0% 20.0%

4 Trusted funds 110,877 277,307 161,170 231,961 1,704,225 1,632,826 1,632,826 1,632,826 150.1% -41.9% 43.9% 634.7% -4.2% 0.0% 0.0%

5 Liabilities from derivatives - - -

6 Bonds & Certificates of deposits 192,242 1,750,715 2,761,793 5,036,565 9,065,818 10,878,981 13,054,778 810.7% 57.8% 82.4% 80.0% 20.0% 20.0%

7 Other liabilities 296,696 400,339 819,723 1,861,901 1,813,693 2,551,189 3,316,546 4,311,509 34.9% 104.8% 127.1% -2.6% 40.7% 30.0% 30.0%

8 Shareholders' equity and other funds 1,009,405 1,761,687 3,573,416 5,625,408 7,232,583 9,170,787 9,709,114 10,578,610 74.5% 102.8% 57.4% 28.6% 26.8% 5.9% 9.0%

Chartered capital 617,660 1,500,000 2,521,308 3,642,015 5,400,788 6,932,183 6,932,183 6,932,183 142.9% 68.1% 44.4% 48.3% 28.4% 0.0% 0.0%

Share premium 213,606 4,313 477,150 1,063,773 -98.0% 10963.1% 122.9% -100.0%

Treasury shares - - -

Funds 50,343 86,253 146,322 283,177 456,827 872505.8542 1298387.236 1681170.241 71.3% 69.6% 93.5% 61.3% 91.0% 48.8% 29.5%

FX revaluation - - -

Asset revaluation

Retained profits 127,796 171,121 428,636 636,443 1,374,968 1,366,099 1,478,544 1,965,256 33.9% 150.5% 48.5% 116.0% -0.6% 8.2% 32.9%

9 Minor shareholders' interests - - -

Liabilities and Equities 10,666,106 17,326,353 39,542,496 59,069,055 92,534,430 126,360,677 147,248,974 174,830,444 62.4% 128.2% 49.4% 56.7% 36.6% 16.5% 18.7%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 179

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 790,227 1,207,503 2,326,002 6,218,777 6,842,348 13,177,187 16,387,660 19,644,454 52.8% 92.6% 167.4% 10.0% 92.6% 24.4% 19.9%

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2 Interest expenses (438,961) (750,056) (1,400,728) (4,458,034) (4,391,229) (9,500,079) (11,993,101) 70.9% 86.7% 218.3% -1.5% 116.3% 26.2% 18.5%
(14,208,182)

3 Net interest income 351,266 457,447 925,274 1,760,743 2,451,119 3,677,108 4,394,560 5,436,272 30.2% 102.3% 90.3% 39.2% 50.0% 19.5% 23.7%

4 Fee and commission income 90,061 132,987 206,958 543,270 740,427 918,129 1,120,117 1,321,738 47.7% 55.6% 162.5% 36.3% 24.0% 22.0% 18.0%

5 Fee and commission expenses (23,215) (31,511) (30,022) (60,393) (128,217) (119,242) (143,090) (171,708) 35.7% -4.7% 101.2% 112.3% -7.0% 20.0% 20.0%

6 Net fee and commission income 66,846 101,476 176,936 482,877 612,210 798,887 977,027 1,150,030 51.8% 74.4% 172.9% 26.8% 30.5% 22.3% 17.7%

7 Foreign exchange gains - net 1,872 7,491 24,583 21,793 48,089 100,000 100,000 100,000 300.2% 228.2% -11.3% 120.7% 107.9% 0.0% 0.0%

8 Income from trading securities 549 724 81,761 931,102 147,038 - - - 31.9% 11193.0% 1038.8% -84.2% -100.0%
TCB EARNINGS MODEL

9 Income from Investment securities 372,165 150,000 150,000 150,000 -59.7% 0.0% 0.0%

10 Other income 14,552 44,221 4,462 14,199 156,203 200,000 150,000 150,000 203.9% -89.9% 218.2% 1000.1% 28.0% -25.0% 0.0%

11 Equity income 2,992 79,582 36,531 115,877 170,078 180,658 2559.8% -54.1% 217.2% 46.8% 6.2%

12 Total operating income 435,085 611,359 1,216,008 3,290,296 3,823,355 5,041,872 5,941,665 7,166,960 40.5% 98.9% 170.6% 16.2% 31.9% 17.8% 20.6%

13 Administration expenses (146,623) (251,953) -425,381 (910,511) (1,195,673) (1,479,715) (1,834,847) (2,275,210) 71.8% 68.8% 114.0% 31.3% 23.8% 24.0% 24.0%

14 Profit before loan loss provision 288,462 359,406 790,627 2,379,785 2,627,682 3,562,157 4,106,818 4,891,751 24.6% 120.0% 201.0% 10.4% 35.6% 15.3% 19.1%

15 Provision loss (2,395) (2,884) (80,887) (763,930) (481,485) (955,404) (1,011,655) (1,168,886) 20.4% 2704.7% 844.4% -37.0% 98.4% 5.9% 15.5%

16 Profit before tax 286,067 356,522 709,740 1,615,855 2,146,197 2,606,752 3,095,163 3,722,865 24.6% 99.1% 127.7% 32.8% 21.5% 18.7% 20.3%

17 Income tax (79,911) (99,616) (199,356) (432,772) (527,417) (651,688) (773,791) (930,716) 24.7% 100.1% 117.1% 21.9% 23.6% 18.7% 20.3%

18 Net profit 206,156 256,906 510,384 1,183,083 1,618,780 1,955,064 2,321,373 2,792,148 24.6% 98.7% 131.8% 36.8% 20.8% 18.7% 20.3%

19 Minority interest - -

20 Net profit for their shareholders 206,156 256,906 510,384 1,183,083 1,618,780 1,955,064 2,321,373 2,792,148 24.6% 98.7% 131.8% 36.8% 20.8% 18.7% 20.3%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 180

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

TCB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 50 73 128 167 200 240 280 320
II Financial leverage
1 Equity/Total Assets 9.5% 10.2% 9.0% 9.5% 7.8% 7.3% 6.6% 6.1%
2 Equity multiplier = TA/Equity 10.6 9.8 11.1 10.5 12.8 13.8 15.2 16.5
III Asset quality
1 NPL 3-5 0.30% 0.20% 1.39% 2.52% 1.14% 2.1% 2.0% 2.1%
2 Loan loss reserve coverage Na Na Na Na 107% 64% 61% 57%
IV Liquidity
1 Loan to customer deposit ratio 85% 91% 81% 66% 67% 62% 62% 61%
2 Loans/(customer deposits + CD) 84% 87% 75% 61% 60% 55% 55% 54%
3 Loans/Toal assets 50% 50% 50% 44% 45% 41% 42% 42%
4 Interbank funds (borrowing+deposits)/equity 0.1 0.0 2.4 1.6 1.4 1.8 1.7 1.8
5 (Interbank funds +CDS +bonds)/equity 0.1 0.1 2.9 2.1 2.1 2.7 2.8 3.1
6 Interbank funds/total deposits 2% 1% 24% 17% 13% 15% 12% 13%
7 Net interbank position/total assets 23% 25% 2% 11% 17% 11% 15% 14%
V Profitability & Efficiency
1 ROAA 1.9% 1.8% 1.8% 2.4% 2.1% 1.8% 1.7% 1.7%
2 ROAE 20.4% 18.5% 19.1% 25.7% 25.2% 23.8% 24.6% 27.5%
3 Net interest margin (NI/AEA) 3.6% 3.5% 3.6% 4.0% 3.7% 4.0% 3.9% 3.9%
4 Operating Exp/ AEA 1.5% 2.0% 1.6% 2.1% 1.8% 1.6% 1.6% 1.7%
5 Net Interest income/total operating income 80.7% 74.8% 76.1% 53.5% 64.1% 72.9% 74.0% 75.9%
6 Cost to income ratio 33.7% 41.2% 35.0% 27.7% 31.3% 29.3% 30.9% 31.7%
7 Net profit/total operating income 47.4% 42.0% 42.0% 36.0% 42.3% 38.8% 39.1% 39.0%
VI Growth Ratios
1 Asset growth na 62.4% 128.2% 49.4% 56.7% 36.6% 16.5% 18.7%
2 Loans growth na 64.3% 128.2% 31.1% 59.8% 24.8% 20.1% 17.6%
3 Deposit growth na 54.4% 155.9% 61.9% 57.7% 34.2% 20.0% 20.0%
4 Growth in total deposits and CDS na 57.5% 168.8% 61.6% 59.3% 37.7% 20.0% 20.0%
5 Capital growth na 74.5% 102.8% 57.4% 28.6% 26.8% 5.9% 9.0%
6 Profit growth na 24.6% 98.7% 131.8% 36.8% 20.8% 18.7% 20.3%
Source: Company financial statements and HSC forecasts

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Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

TCB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.5% 1.2% 1.3% 2.7% 2.1% 4.0% 4.1% 4.1%
2 Balances with State bank 3.1% 2.4% 3.3% 3.9% 2.9% 10.0% 4.8% 4.8%
3 Deposits with other financial institutions 24.7% 25.7% 23.5% 26.5% 28.4% 23.3% 26.2% 25.3%
4 Net Securities - Held for trading 18.2% 16.6% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 49.6% 50.2% 50.2% 44.0% 44.9% 41.1% 42.4% 42.0%
7 Investment securities 0.0% 0.0% 18.9% 19.3% 14.7% 15.9% 17.7% 19.4%
8 Long term investments 0.1% 0.2% 0.1% 0.1% 0.5% 0.5% 0.6% 0.6%
9 Fixed assets 1.4% 2.0% 1.1% 1.0% 0.8% 0.7% 0.8% 0.8%
10 Other assets 1.4% 1.8% 1.6% 2.5% 5.5% 4.5% 3.5% 2.9%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 27.2% 29.3% 0.8% 0.0% 4.2% 3.2% 3.4% 2.9%
2 Deposits from Banks 1.4% 0.3% 21.4% 15.2% 11.2% 12.7% 10.9% 11.2%
3 Customer deposits 58.1% 55.2% 61.9% 67.1% 67.5% 66.4% 68.3% 69.1%
4 Trusted funds 1.0% 1.6% 0.4% 0.4% 1.8% 1.3% 1.1% 0.9%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 1.1% 4.4% 4.7% 5.4% 7.2% 7.4% 7.5%
7 Other liabilities 2.8% 2.3% 2.1% 3.2% 2.0% 2.0% 2.3% 2.5%
8 Shareholders' equity and other funds 9.5% 10.2% 9.0% 9.5% 7.8% 7.3% 6.6% 6.1%
Chartered capital 5.8% 8.7% 6.4% 6.2% 5.8% 5.5% 4.7% 4.0%
Share premium 2.0% 0.0% 1.2% 1.8% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 100.0% 0.0% 0.0%
Funds 0.5% 0.5% 0.4% 0.5% 0.5% 0.7% 0.9% 1.0%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.2% 1.0% 1.1% 1.1% 1.5% 1.1% 1.0% 1.1%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 24.7% 25.7% 23.5% 26.5% 28.4% 23.3% 26.2% 25.3%
Deposits from other banks as % of balance sheet 1.4% 0.3% 21.4% 15.2% 11.2% 12.7% 10.9% 11.2%
Net position 23.3% 25.4% 2.1% 11.3% 17.2% 10.6% 15.2% 14.2%
SBV positions
Deposits in SBV as % of balance sheet 1.5% 1.2% 1.3% 2.7% 2.1% 4.0% 4.1% 4.1%
Deposits from SBV as % of balance sheet 27.2% 29.3% 0.8% 0.0% 4.2% 3.2% 3.4% 2.9%
Net position -25.7% -28.1% 0.5% 2.7% -2.1% 0.8% 0.7% 1.3%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 89,390 157,321 352,321 411,633 541,132 925,390 1,221,515 1,612,399 76.0% 124.0% 16.8% 31.5% 71.0% 32.0% 32.0%

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2 Balances with State bank 118,460 307,699 191,318 515,139 1,427,595 1,204,492 1,626,064 2,195,186 159.7% -37.8% 169.3% 177.1% -15.6% 35.0% 35.0%

3 Deposits with other financial institutions 2,951,282 5,724,716 14,014,064 16,010,231 24,062,971 39,533,297 47,618,333 58,948,836 94.0% 144.8% 14.2% 50.3% 64.3% 20.5% 23.8%

4 Net Securities - Held for trading - 331,364 290,547 150,175 618,513 606,698 813,604 1,077,155 -12.3% -48.3% 311.9% -1.9% 34.1% 32.4%

5 Derivatives

6 Net loans and advances to clients 4,218,138 5,836,049 11,468,799 15,493,509 29,140,759 37,289,038 49,216,312 64,956,776 38.4% 96.5% 35.1% 88.1% 28.0% 32.0% 32.0%

7 Investment securities 477,933 668,454 1,675,726 8,477,960 9,674,240 14,858,242 19,925,431 26,379,868 39.9% 150.7% 405.9% 14.1% 53.6% 34.1% 32.4%

8 Long term investments 123,302 232,444 925,953 1,180,427 891,469 1,718,845 2,305,033 3,051,701 88.5% 298.4% 27.5% -24.5% 92.8% 34.1% 32.4%
MB EARNINGS MODEL

9 Fixed assets 107,508 167,867 234,445 629,394 623,041 671,721 733,850 812,848 56.1% 39.7% 168.5% -1.0% 7.8% 9.2% 10.8%

10 Other assets 128,920 185,405 470,409 1,477,638 2,028,569 2,510,147 3,514,205 4,919,887 43.8% 153.7% 214.1% 37.3% 23.7% 40.0% 40.0%

Total Assets 8,214,933 13,611,319 29,623,582 44,346,106 69,008,288 99,317,870 126,974,347 163,954,657 65.7% 117.6% 49.7% 55.6% 43.9% 27.8% 29.1%

1 Deposits & Loans from SBV 226,701 30,000 68,547 - 4,708,749 4,850,011 4,995,512 5,145,377 -86.8% 128.5% -100.0% 3.0% 3.0% 3.0%

2 Deposits from Banks 1,049,186 1,171,230 4,992,934 8,531,866 11,696,905 19,430,663 26,341,570 35,625,253 11.6% 326.3% 70.9% 37.1% 66.1% 35.6% 35.2%

3 Customer deposits 6,069,812 10,312,619 17,784,837 27,162,881 39,978,447 59,967,671 79,157,325 104,487,669 69.9% 72.5% 52.7% 47.2% 50.0% 32.0% 32.0%

4 Trusted funds 82,013 88,568 290,126 834,361 474,629 507,853 543,403 581,441 8.0% 227.6% 187.6% -43.1% 7.0% 7.0% 7.0%

5 Liabilities from derivatives - -

6 Bonds & Certificates of deposits 0 220,000 2,020,000 2,137,326 2,420,537 2,783,618 1,830,635 880,473 818.2% 5.8% 13.3% 15.0% -34.2% -51.9%

7 Other liabilities 150,623 407,990 917,272 1,003,019 2,233,513 2,456,864 2,702,551 2,972,806 170.9% 124.8% 9.3% 122.7% 10.0% 10.0% 10.0%

8 Shareholders' equity and other funds 636,598 1,380,912 3,479,521 4,424,064 6,888,072 8,531,524 10,376,785 13,029,759 116.9% 152.0% 27.1% 55.7% 23.9% 21.6% 25.6%

Chartered capital 450,000 1,045,200 2,000,000 3,400,000 5,300,000 7,300,000 9,300,000 11,500,000 132.3% 91.4% 70.0% 55.9% 37.7% 27.4% 23.7%

Share premium 23,975 57,596 306,421 30,200 869,685 290,350 40,350 40,350 140.2% 432.0% -90.1% 2779.8% -66.6% -86.1% 0.0%

Treasury shares 3,201 3,201 3,201 0.0% 0.0%

Funds 57,273 82,262 635,368 705,098 321,080 458,454 676,058 939,058 43.6% 672.4% 11.0% -54.5% 42.8% 47.5% 38.9%

FX revaluation - - -

Asset revaluation - - -

Retained profits 105,350 195,854 537,732 288,766 397,307 479,519 357,177 547,150 85.9% 174.6% -46.3% 37.6% 20.7% -25.5% 53.2%

9 Minor shareholders' interests - - 70,345 252,589 607,436 789,667 1,026,567 1,231,880 259.1% 140.5% 30.0% 30.0% 20.0%

Liabilities and Equities 8,214,933 13,611,319 29,623,582 44,346,106 69,008,288 99,317,870 126,974,347 163,954,657 65.7% 117.6% 49.7% 55.6% 43.9% 27.8% 29.1%

Source: Company financial statements and HSC forecasts


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July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 476,461 895,370 1,581,122 3,679,299 4,050,421 4,325,042 8,211,234 10,344,523 87.9% 76.6% 132.7% 10.1% 6.8% 89.9% 26.0%

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2 Interest expenses (236,544) (499,261) (947,805) (2,258,587) (2,212,353) (2,362,770) (5,334,698) (6,671,171) 111.1% 89.8% 138.3% -2.0% 6.8% 125.8% 25.1%

3 Net interest income 239,917 396,109 633,317 1,420,712 1,838,068 1,962,272 2,876,536 3,673,353 65.1% 59.9% 124.3% 29.4% 6.8% 46.6% 27.7%

4 Fee and commission income 27,955 82,958 204,905 261,986 524,981 577,479 635,227 698,750 196.8% 147.0% 27.9% 100.4% 10.0% 10.0% 10.0%

5 Fee and commission expenses -5,848 (7,498) (13,190) (70,778) (144,287) (73,746) (81,121) (89,233) 28.2% 75.9% 436.6% 103.9% -48.9% 10.0% 10.0%

6 Net fee and commission income 22,107 75,460 191,715 191,208 380,694 503,733 554,106 609,517 241.3% 154.1% -0.3% 99.1% 32.3% 10.0% 10.0%

7 Foreign exchange gain - net 3,154 6,591 21,124 101,403 (72,766) 15,750 16,538 17,365 109.0% 220.5% 380.0% -171.8% -121.6% 5.0% 5.0%

8 Income from trading securities


MB EARNINGS MODEL

9 Income from securities investment 4,659 34,110 83,067 (167,710) 213,837 94,914 265,199 344,759 632.1% 143.5% -301.9% -227.5% -55.6% 179.4% 30.0%

10 Other income 30,155 54,817 90,842 38,514 255,294 309,778 325,267 341,530 81.8% 65.7% -57.6% 562.9% 21.3% 5.0% 5.0%

11 Equity income 0 5,602 34,367 53,957 38,384 488,965 68,429 89,524 513.5% 57.0% -28.9% 1173.9% -86.0% 30.8%

12 Total operating income 299,992 572,689 1,054,432 1,638,084 2,653,511 3,375,411 4,106,075 5,076,047 90.9% 84.1% 55.4% 62.0% 27.2% 21.6% 23.6%

13 Administration expenses (74,908) (177,695) (360,885) (555,438) (784,059) (1,060,281) (1,328,812) (1,663,276) 137.2% 103.1% 53.9% 41.2% 35.2% 25.3% 25.2%

14 Profit before provision loss for credit 225,084 394,994 693,547 1,082,646 1,869,452 2,315,130 2,777,262 3,412,771 75.5% 75.6% 56.1% 72.7% 23.8% 20.0% 22.9%

15 Provision loss (76,469) (125,463) (84,561) (221,763) (364,382) (322,658) (403,714) (497,633) 64.1% -32.6% 162.3% 64.3% -11.5% 25.1% 23.3%

16 Profit before tax 148,615 269,531 608,986 860,883 1,505,070 1,992,472 2,373,549 2,915,138 81.4% 125.9% 41.4% 74.8% 32.4% 19.1% 22.8%

17 Income tax (39,570) (50,609) (116,378) (164,678) (331,343) (375,877) (555,055) (685,178) 27.9% 130.0% 41.5% 101.2% 13.4% 47.7% 23.4%

18 Net profit 109,045 218,922 492,608 696,205 1,173,727 1,616,595 1,818,494 2,229,960 100.8% 125.0% 41.3% 68.6% 37.7% 12.5% 22.6%

19 Minority interests 925 (7,163) (79,006) (102,708) (133,520) (160,224) -874.4% 1003.0% 30.0% 30.0% 20.0%

20 Net profit for their shareholders 109,045 218,922 493,533 689,042 1,094,721 1,513,887 1,684,974 2,069,735 100.8% 125.4% 39.6% 58.9% 38.3% 11.3% 22.8%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 184

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

MB EARNINGS MODEL
February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 25 38 65 90 108 140 175 210
II Financial leverage
1 Equity/Total Assets 7.7% 10.1% 11.7% 10.0% 10.0% 8.6% 8.2% 7.9%
2 Equity multiplier = TA/Equity 12.9 9.9 8.5 10.0 10.0 11.6 12.2 12.6
III Asset quality
1 NPL 3-5 Na 2.78% 1.01% 1.83% 1.68% 2.99% 3.01% 3.05%
2 Loan loss reserve coverage Na Na 122% 86% 90% 52% 52% 51%
IV Liquidity
1 Loan to customer deposit ratio 69% 57% 64% 57% 73% 62% 62% 62%
2 Loans/(customer deposits + CD) 69% 55% 57% 51% 68% 59% 60% 61%
3 Loans/Total assets 51% 43% 39% 35% 42% 38% 39% 40%
4 Interbank funds (borrowing+deposits)/equity 1.6 0.8 1.4 1.9 1.7 2.3 2.5 2.7
5 (Interbank funds +CDS +bonds)/equity 1.6 1.0 2.0 2.4 2.0 2.6 2.7 2.8
6 Interbank funds/total deposits 15% 10% 20% 22% 21% 23% 24% 25%
7 Net interbank position/total assets 23% 33% 30% 17% 18% 20% 17% 14%
V Profitability & Efficiency
1 ROAA 1.3% 2.0% 2.3% 1.9% 1.9% 1.8% 1.5% 1.4%
2 ROAE 17.1% 21.7% 20.3% 17.4% 19.4% 19.6% 17.8% 17.7%
3 Net interest margin (NI/AEA) 3.1% 4.0% 3.2% 4.2% 3.6% 2.6% 2.8% 2.8%
4 Operating Exp/ AEA 1.0% 1.8% 1.8% 1.7% 1.5% 1.4% 1.3% 1.3%
5 Net Interest income/total operating income 80.0% 69.2% 60.1% 86.7% 69.3% 58.1% 70.1% 72.4%
6 Cost to income ratio 25.0% 31.0% 34.2% 33.9% 29.5% 31.4% 32.4% 32.8%
7 Net profit/total operating income 36.3% 38.2% 46.7% 42.5% 44.2% 47.9% 44.3% 43.9%
VI Growth Ratios
1 Asset growth Na 66% 118% 50% 56% 44% 28% 29%
2 Loans growth Na 38% 97% 35% 88% 28% 32% 32%
3 Deposit growth Na 70% 72% 53% 47% 50% 32% 32%
4 Growth in total deposits and CDS Na 74% 88% 48% 45% 48% 29% 30%
5 Capital growth Na 117% 152% 27% 56% 24% 22% 26%
6 Profit growth Na 101% 125% 40% 59% 38% 11% 23%
Source: Company financial statements and HSC forecasts

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July 14h 2008

MB EARNINGS MODEL
February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.1% 1.2% 1.2% 0.9% 0.8% 0.9% 1.0% 1.0%
2 Balances with State bank 1.4% 2.3% 0.6% 1.2% 2.1% 1.2% 1.3% 1.3%
3 Deposits with other financial institutions 35.9% 42.1% 47.3% 36.1% 34.9% 39.8% 37.5% 36.0%
4 Net Securities - Held for trading 0.0% 2.4% 1.0% 0.3% 0.9% 0.6% 0.6% 0.7%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 51.3% 42.9% 38.7% 34.9% 42.2% 37.5% 38.8% 39.6%
7 Investment securities 5.8% 4.9% 5.7% 19.1% 14.0% 15.0% 15.7% 16.1%
8 Long term investments 1.5% 1.7% 3.1% 2.7% 1.3% 1.7% 1.8% 1.9%
9 Fixed assets 1.3% 1.2% 0.8% 1.4% 0.9% 0.7% 0.6% 0.5%
10 Other assets 1.6% 1.4% 1.6% 3.3% 2.9% 2.5% 2.8% 3.0%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 2.8% 0.2% 0.2% 0.0% 6.8% 4.9% 3.9% 3.1%
2 Deposits from Banks 12.8% 8.6% 16.9% 19.2% 17.0% 19.6% 20.7% 21.7%
3 Customer deposits 73.9% 75.8% 60.0% 61.3% 57.9% 60.4% 62.3% 63.7%
4 Trusted funds 1.0% 0.7% 1.0% 1.9% 0.7% 0.5% 0.4% 0.4%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 1.6% 6.8% 4.8% 3.5% 2.8% 1.4% 0.5%
7 Other liabilities 1.8% 3.0% 3.1% 2.3% 3.2% 2.5% 2.1% 1.8%
8 Shareholders' equity and other funds 7.7% 10.1% 11.7% 10.0% 10.0% 8.6% 8.2% 7.9%
Chartered capital 5.5% 7.7% 6.8% 7.7% 7.7% 7.4% 7.3% 7.0%
Share premium 0.3% 0.4% 1.0% 0.1% 1.3% 0.3% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 0.7% 0.6% 2.1% 1.6% 0.5% 0.5% 0.5% 0.6%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.3% 1.4% 1.8% 0.7% 0.6% 0.5% 0.3% 0.3%
9 Minor shareholders' interests 0.0% 0.0% 0.2% 0.6% 0.9% 0.8% 0.8% 0.8%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 35.9% 42.1% 47.3% 36.1% 34.9% 39.8% 37.5% 36.0%
Deposits from other banks as % of balance sheet 12.8% 8.6% 16.9% 19.2% 17.0% 19.6% 20.7% 21.7%
Net position 23.2% 33.5% 30.5% 16.9% 17.9% 20.2% 16.8% 14.2%
SBV positions
Deposits in SBV as % of balance sheet 1.1% 1.2% 1.2% 0.9% 0.8% 0.9% 1.0% 1.0%
Deposits from SBV as % of balance sheet 2.8% 0.2% 0.2% 0.0% 6.8% 4.9% 3.9% 3.1%
Net position -1.7% 0.9% 1.0% 0.9% -6.0% -4.0% -3.0% -2.2%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 531,010 1,121,209 1,956,522 2,036,886 2,615,111 3,021,142 3,276,261 3,931,513 111.1% 74.5% 4.1% 28.4% 15.5% 8.4% 20.0%

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2 Balances with State bank 408,186 486,526 1,930,541 770,624 1,230,380 1,678,412 2,047,663 2,457,196 19.2% 296.8% -60.1% 59.7% 36.4% 22.0% 20.0%

3 Deposits with other financial institutions 752,964 1,231,688 3,013,261 2,764,121 939,034 1,266,534 1,960,204 2,673,011 63.6% 144.6% -8.3% -66.0% 34.9% 54.8% 36.4%

4 Net Securities - Held for trading 0 0 343,418 243,934 386,730 429,580 476,716 528,565 -29.0% 58.5% 11.1% 11.0% 10.9%

5 Derivatives 0 0 0 0 - - -

6 Net loans and advances to clients 5,947,768 7,956,945 17,793,644 25,303,892 34,010,811 39,495,571 45,817,760 53,151,944 33.8% 123.6% 42.2% 34.4% 16.1% 16.0% 16.0%

7 Investment securities 114,082 462,117 291,997 135,801 359,201 404,554 373,270 420,347 305.1% -36.8% -53.5% 164.5% 12.6% -7.7% 12.6%

8 Long term investments 64,910 53,510 639,187 820,758 711,110 782,221 860,443 946,487 -17.6% 1094.5% 28.4% -13.4% 10.0% 10.0% 10.0%
EAB EARNINGS MODEL

9 Fixed assets 210,144 236,576 364,691 549,467 793,784 919,235 1,007,414 1,087,871 12.6% 54.2% 50.7% 44.5% -27.0% 0.0% -10.8%

10 Other assets 486,848 491,767 1,042,777 2,087,709 1,474,241 1,695,377 1,949,684 2,242,136 1.0% 112.0% 100.2% -29.4% 3270.7% 16.3% 16.7%

Total Assets 8,515,912 12,040,338 27,376,038 34,713,192 42,520,402 49,692,628 57,769,415 67,439,071 41.4% 127.4% 26.8% 22.5% 16.9% 16.3% 16.7%

1 Deposits & Loans from SBV 0 0 0 0 19 0 0 0

2 Deposits from Banks 622,900 621,085 6,070,574 3,611,521 4,767,739 4,003,531 3,541,534 3,143,988 -0.3% 877.4% -40.5% 32.0% -16.0% -11.5% -11.2%

3 Customer deposits 6,513,795 9,271,350 14,329,311 23,010,437 27,973,540 33,568,248 40,953,263 49,143,915 42.3% 54.6% 60.6% 21.6% 20.0% 22.0% 20.0%

4 Trusted funds 183,812 204,989 200,736 203,966 291,047 334,704 384,910 442,646 11.5% -2.1% 1.6% 42.7% 15.0% 15.0% 15.0%

5 Liabilities from derivatives 0 0 0 0 0 - -

6 Bonds & Certificates of deposits 0 0 1,055,508 2,970,812 3,682,086 4,492,145 5,480,417 6,576,500 181.5% 23.9% 22.0% 22.0% 20.0%

7 Other liabilities 483,647 411,703 2,490,714 1,401,502 1,605,448 1,846,265 2,215,518 2,658,622 -14.9% 505.0% -43.7% 14.6% 15.0% 20.0% 20.0%

8 Shareholders' equity and other funds 711,758 1,531,211 3,229,195 3,514,954 4,200,523 5,447,735 5,193,774 5,473,399 115.1% 110.9% 8.8% 19.5% 29.7% -4.7% 5.4%

Chartered capital 500,000 880,000 1,600,000 2,880,000 3,400,000 4,500,000 4,500,000 4,500,000 76.0% 81.8% 80.0% 18.1% 32.4% 0.0% 0.0%

Share premium 1,228,000 0 0 0 - -

Treasury shares

Funds 71,129 448,131 80,316 107,369 199,691 269,757 339,133 480,941 530.0% -82.1% 33.7% 86.0% -100.0%

FX revaluation 0 0 0 - 0

Asset revaluation

Retained profits 140,629 203,080 320,879 527,585 600,832 677,978 354,642 492,457 44.4% 58.0% 64.4% 13.9% 8170.6% 16.3% 16.7%

9 Minor shareholders' interests 0 0 0 0

Liabilities and Equities 8,515,912 12,040,338 27,376,038 34,713,192 42,520,402 49,692,628 57,769,415 67,439,070 41.4% 127.4% 26.8% 22.5% 16.9% 16.3% 16.7%

Source: Company financial statements and HSC forecasts


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February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 852,910 884,889 1,375,852 3,853,216 3,325,056 5,748,218 6,715,303 7,787,497 3.7% 55.5% 180.1% -13.7% 72.9% 16.8% 16.0%

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2 Interest expenses (645,025) (613,283) (864,951) (2,971,376) (2,218,224) (4,469,887) (5,296,525) (6,223,612) -4.9% 41.0% 243.5% -25.3% 101.5% 18.5% 17.5%

3 Net interest income 207,885 271,606 510,901 881,840 1,106,832 1,278,331 1,418,778 1,563,885 30.7% 88.1% 72.6% 25.5% 15.5% 11.0% 10.2%

4 Fee and commission income 82,323 103,596 180,747 203,524 272,570 313,456 391,819 489,774 25.8% 74.5% 12.6% 33.9% 15.0% 25.0% 25.0%

5 Fee and commission expenses (6,059) (13,303) (22,822) (52,132) (52,858) (60,787) (69,905) (80,390) 119.6% 71.6% 128.4% 1.4% 15.0% 15.0% 15.0%

6 Net fee and commission income 76,264 90,293 157,925 151,392 219,712 252,669 321,915 409,384 18.4% 74.9% -4.1% 45.1% 15.0% 27.4% 27.2%

7 Foreign exchange gain - net 6,563 28,977 16,285 333,365 262,492 157,495 181,119 208,287 341.5% -43.8% 1947.1% -21.3% -40.0% 15.0% 15.0%

8 Income from trading securities 0 17,676 92,891 12,672 4,916 5,000 5,000 5,000 425.5% -86.4% -61.2% 1.7% 0.0% 0.0%
EAB EARNINGS MODEL

9 Income from investment securities 0 0 (0) 0 64,690 10,000 60,000 60,000

10 Other income 1,368 16,232 60,235 112,712 3,787 91,520 4,000 4,000 1086.5% 271.1% 87.1% -96.6% 2316.7% -95.6% 0.0%

11 Equity income 4,147 6,665 14,785 (12,910) 1,152 1,500 1,500 1,500 60.7% 121.8% -187.3% -108.9% 30.2% 0.0% 0.0%

12 Total operating income 296,227 431,449 853,022 1,479,071 1,663,581 1,796,515 1,992,312 2,252,056 45.6% 97.7% 73.4% 12.5% 8.0% 10.9% 13.0%

13 Administration expenses (140,780) (196,039) (348,832) (565,710) (728,977) (838,329) (975,798) (1,131,721) 39.3% 77.9% 62.2% 28.9% 15.0% 16.4% 16.0%

14 Pre-provision profits 155,447 235,410 504,190 913,361 934,604 958,185 1,016,514 1,120,336 51.4% 114.2% 81.2% 2.3% 2.5% 6.1% 10.2%

15 Provision loss (17,001) (24,618) (50,516) (210,192) (146,848) (313,903) (378,575) (463,726) 44.8% 105.2% 316.1% -30.1% 113.8% 20.6% 22.5%

16 Profit before tax 138,446 210,792 453,674 703,169 787,756 644,282 637,939 656,610 52.3% 115.2% 55.0% 12.0% -18.2% -1.0% 2.9%

17 Income tax (37,604) (50,841) (121,801) (164,432) (200,108) (161,071) (159,485) (164,152) 35.2% 139.6% 35.0% 21.7% -19.5% -1.0% 2.9%

18 Net profit 100,842 159,951 331,873 538,737 587,648 483,212 478,454 492,457 58.6% 107.5% 62.3% 9.1% -17.8% -1.0% 2.9%

19 Minority interests

20 Net profit for their shareholders 100,842 159,951 331,873 538,737 587,648 483,212 478,454 492,457 58.6% 107.5% 62.3% 9.1% -17.8% -1.0% 2.9%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 188

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

EAB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 44 69 106 148 173 203 233 263
II Financial leverage
1 Equity/Total Assets 8.4% 12.7% 11.8% 10.1% 9.9% 11.0% 9.0% 8.1%
2 Equity multiplier = TA/Equity 12.0 7.9 8.5 9.9 10.1 9.1 11.1 12.3
III Asset quality
1 NPL 3-5 na 0.45% 0.77% 0.60% 1.33% 2.51% 2.51% 2.51%
2 Loan loss reserve coverage na 38% 46% 175% 75% 50% 49% 49%
IV Liquidity
1 Loan to customer deposit ratio 91% 86% 124% 110% 122% 118% 112% 108%
2 Loans/(customer deposits + CD + entrusted 89% 84% 114% 97% 106% 103% 98% 95%
funds)
3 Loans/Total assets 70% 66% 65% 73% 80% 79% 79% 79%
4 Interbank funds (borrowing+deposits)/equity 0.9 0.4 1.9 1.0 1.1 0.7 0.7 0.6
5 (Interbank funds +CDS +bonds)/equity 0.9 0.4 2.2 1.9 2.0 1.6 1.7 1.8
6 Interbank funds/total deposits 9% 6% 28% 12% 13% 9% 7% 5%
7 Net interbank position/total assets 2% 5% -11% -2% -9% -6% -3% -1%
V Profitability & Efficiency
1 ROAA 1.2% 1.6% 1.7% 1.7% 1.5% 1.0% 0.9% 0.8%
2 ROAE 14.2% 14.3% 13.9% 16.0% 15.2% 10.0% 9.0% 9.2%
3 Net interest margin (NI/AEA) 3.1% 3.4% 3.3% 3.6% 3.5% 3.4% 3.2% 3.0%
4 Operating Exp/ AEA 2.1% 2.4% 2.3% 2.3% 2.3% 2.2% 2.2% 2.2%
5 Net Interest income/total operating income 70.2% 63.0% 59.9% 59.6% 66.5% 71.2% 71.2% 69.4%
6 Cost to income ratio 47.5% 45.4% 40.9% 38.2% 43.8% 46.7% 49.0% 50.3%
7 Net profit/total operating income 34.0% 37.1% 38.9% 36.4% 35.3% 26.9% 24.0% 21.9%
VI Growth Ratios
1 Asset growth Na 41.4% 127.4% 26.8% 22.5% 16.9% 16.3% 16.7%
2 Loans growth Na 33.7% 124.0% 43.2% 34.4% 16.4% 16.0% 16.0%
3 Deposit growth Na 42.3% 54.6% 60.6% 21.6% 20.0% 22.0% 20.0%
4 Growth in total deposits and CDS Na 42.3% 65.9% 68.9% 21.8% 20.2% 22.0% 20.0%
5 Capital growth Na 115.1% 110.9% 8.8% 19.5% 29.7% -4.7% 5.4%
6 Profit growth Na 58.6% 107.5% 62.3% 9.1% -17.8% -1.0% 2.9%

Source: Company financial statements and HSC forecasts

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July 14h 2008

EAB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 6.2% 9.3% 7.1% 5.9% 6.2% 6.1% 5.7% 5.8%
2 Balances with State bank 4.8% 4.0% 7.1% 2.2% 2.9% 3.4% 3.5% 3.6%
3 Deposits with other financial institutions 8.8% 10.2% 11.0% 8.0% 2.2% 2.5% 3.4% 4.0%
4 Net Securities - Held for trading 0.0% 0.0% 1.3% 0.7% 0.9% 0.9% 0.8% 0.8%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 69.8% 66.1% 65.0% 72.9% 80.0% 79.5% 79.3% 78.8%
7 Investment securities 1.3% 3.8% 1.1% 0.4% 0.8% 0.8% 0.6% 0.6%
8 Long term investments 0.8% 0.4% 2.3% 2.4% 1.7% 1.6% 1.5% 1.4%
9 Fixed assets 2.5% 2.0% 1.3% 1.6% 1.9% 1.8% 1.7% 1.6%
10 Other assets 5.7% 4.1% 3.8% 6.0% 3.5% 3.4% 3.4% 3.3%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2 Deposits from Banks 7.3% 5.2% 22.2% 10.4% 11.2% 8.1% 6.1% 4.7%
3 Customer deposits 76.5% 77.0% 52.3% 66.3% 65.8% 67.6% 70.9% 72.9%
4 Trusted funds 2.2% 1.7% 0.7% 0.6% 0.7% 0.7% 0.7% 0.7%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 0.0% 3.9% 8.6% 8.7% 9.0% 9.5% 9.8%
7 Other liabilities 5.7% 3.4% 9.1% 4.0% 3.8% 3.7% 3.8% 3.9%
8 Shareholders' equity and other funds 8.4% 12.7% 11.8% 10.1% 9.9% 11.0% 9.0% 8.1%
Chartered capital 5.9% 7.3% 5.8% 8.3% 8.0% 9.1% 7.8% 6.7%
Share premium 0.0% 0.0% 4.5% 0.0% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 0.8% 3.7% 0.3% 0.3% 0.5% 0.5% 0.6% 0.7%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.7% 1.7% 1.2% 1.5% 1.4% 1.4% 0.6% 0.7%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 8.8% 10.2% 11.0% 8.0% 2.2% 2.5% 3.4% 4.0%
Deposits from other banks as % of balance sheet 7.3% 5.2% 22.2% 10.4% 11.2% 8.1% 6.1% 4.7%
Net position 1.5% 5.1% -11.2% -2.4% -9.0% -5.5% -2.7% -0.7%
SBV positions
Deposits in SBV as % of balance sheet 6.2% 9.3% 7.1% 5.9% 6.2% 6.1% 5.7% 5.8%
Deposits from SBV as % of balance sheet 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net position 6.2% 9.3% 7.1% 5.9% 6.2% 6.1% 5.7% 5.8%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 45,495 43,292 101,864 249,417 461,293 778,530 1,051,016 1,349,807 -4.8% 135.3% 144.9% 84.9% 68.8% 35.0% 28.4%

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2 Balances with State bank 152,870 64,676 278,445 499,996 793,789 1,531,166 1,760,335 2,233,902 -57.7% 330.5% 79.6% 58.8% 92.9% 15.0% 26.9%

3 Deposits with other financial institutions 1,521,482 4,344,146 8,209,257 15,755,248 25,210,364 43,107,502 45,729,381 57,012,285 185.5% 89.0% 91.9% 60.0% 71.0% 6.1% 24.7%

4 Net Securities - Held for trading - - - - 67,876 60,060 67,937 84,846 -11.5% 13.1% 24.9%

5 Derivatives 228 -100.0%

6 Net loans and advances to clients 2,316,693 2,851,489 6,493,389 11,124,146 23,698,496 37,124,846 50,025,784 67,461,428 23.1% 127.7% 71.3% 113.0% 56.7% 34.8% 34.9%

7 Investment securities 193,165 1,016,355 2,169,236 3,921,402 11,092,973 19,684,520 22,266,157 27,808,024 426.2% 113.4% 80.8% 182.9% 77.5% 13.1% 24.9%

8 Long term investments - 12,200 29,710 79,368 218,112 392,740 444,248 554,818 143.5% 167.1% 174.8% 80.1% 13.1% 24.9%
MSB EARNINGS MODEL

9 Fixed assets 74,268 87,797 103,047 219,635 258,567 310,750 394,240 513,208 18.2% 17.4% 113.1% 17.7% 20.2% 26.9% 30.2%

10 Other assets 74,560 101,102 184,076 776,842 2,080,574 2,641,826 3,170,191 3,772,528 35.6% 82.1% 322.0% 167.8% 27.0% 20.0% 19.0%

Total Assets 4,378,532 8,521,285 17,569,024 32,626,054 63,882,044 105,631,940 124,909,290 160,790,845 95% 106% 86% 96% 65% 18% 29%

1 Deposits & Loans from SBV 28,323 25,974 32,339 22,491 29,243 32,167 35,384 37,153 -8.3% 24.5% -30.5% 30.0% 10.0% 10.0% 5.0%

2 Deposits from Banks 576,370 3,492,545 7,820,734 14,603,271 23,832,614 32,414,439 27,219,167 34,547,438 506.0% 123.9% 86.7% 63.2% 36.0% -16.0% 26.9%

3 Customer deposits 3,333,608 3,785,316 7,368,648 14,111,556 30,053,287 47,183,661 63,697,942 81,806,473 13.6% 94.7% 91.5% 113.0% 57.0% 35.0% 28.4%

4 Trusted funds 0 0 0

5 Liabilities from derivatives 0 5,911 3,973 -32.8% -100.0%

6 Bonds & Certificates of deposits 312,410 256,762 1,134,177 5,368,259 11,810,170 14,172,204 17,006,645 -17.8% 341.7% 373.3% 120.0% 20.0% 20.0%

7 Other liabilities 194,737 109,985 206,737 875,274 1,041,216 7,877,466 11,816,199 17,724,299 -43.5% 88.0% 323.4% 19.0% 656.6% 50.0% 50.0%

8 Shareholders' equity and other funds 245,493 795,055 1,883,804 1,873,374 3,553,452 6,314,037 7,968,394 9,668,838 223.9% 136.9% -0.6% 89.7% 77.7% 26.2% 21.3%

Chartered capital 200,000 700,000 1,680,607 1,500,000 3,000,000 5,000,000 6,050,000 7,050,000 250.0% 140.1% -10.7% 100.0% 66.7% 21.0% 16.5%

Share premium 607 607 180,000 180,000 528,607 528,607 528,607 0.0% -100.0% 0.0% 193.7% 0.0% 0.0%

Treasury shares - - -

Funds 12,317 15,198 54,162 103,937 216,762 319,901 526,499 751,777 23.4% 256.4% 91.9% 108.6% 47.6% 64.6% 42.8%

FX revaluation 0 0 0 0 0 0 0 0

Asset revaluation 0 0 0

Retained profits 32,569 79,250 149,035 89,437 156,690 465,529 863,288 1,338,454 143.3% 88.1% -40.0% 75.2% 197.1% 85.4% 55.0%

9 Minor shareholders' interests 0 0 0 0 0 0 0 0

Liabilities and Equities 4,378,532 8,521,285 17,569,024 32,626,054 63,882,044 105,631,940 124,909,290 160,790,845 94.6% 106.2% 85.7% 95.8% 65.4% 18.2% 28.7%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 191

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 225,305 564,065 1,060,638 2,481,604 4,041,658 7,079,058 9,733,986 12,173,624 150.4% 88.0% 134.0% 62.9% 75.2% 37.5% 25.1%

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2 Interest expenses (111,855) (355,011) (706,589) (1,755,292) (2,763,209) (4,729,630) (6,785,098) (8,795,122) 217.4% 99.0% 148.4% 57.4% 71.2% 43.5% 29.6%

3 Net interest income 113,450 209,054 354,049 726,312 1,278,449 2,349,428 2,948,889 3,378,502 84.3% 69.4% 105.1% 76.0% 83.8% 25.5% 14.6%

4 Fee and commission income 17,148 19,263 48,049 74,475 148,192 162,615 177,855 195,641 12.3% 149.4% 55.0% 99.0% 9.7% 9.4% 10.0%

5 Fee and commission expenses -3,194 (4,714) (6,928) (15,175) (25,450) (25,841) (24,655) (27,120) 47.6% 47.0% 119.0% 67.7% 1.5% -4.6% 10.0%

6 Net fee and commission income 13,954 14,549 41,121 59,300 122,742 136,774 153,201 168,521 4.3% 182.6% 44.2% 107.0% 11.4% 12.0% 10.0%

7 Foreign exchange gain - net 2,137 6,114 6,989 10,354 87,768 35,000 36,750 38,588 186.2% 14.3% 48.1% 747.7% -60.1% 5.0% 5.0%

8 Income from trading securities - (7,708) -100.0%


MSB EARNINGS MODEL

9 Income from securities investment 5 2,016 498 (8,717) 64,292 126,430 114,822 140,082 39030.4% -75.3% -1850.4% -837.5% 96.7% -9.2% 22.0%

10 Other income 31,923 1,834 33,054 8,650 87,130 34,852 87,130 87,130 -94.3% 1702.3% -73.8% 907.3% -60.0% 150.0% 0.0%

11 Equity income 645 956 504 7,007 42,482 57,468 68,962 84,134 48.2% -47.3% 1290.3% 506.3% 35.3% 20.0% 22.0%

12 Total operating income 162,113 234,523 436,215 802,906 1,675,155 2,739,953 3,409,753 3,896,957 44.7% 86.0% 84.1% 108.6% 63.6% 24.4% 14.3%

13 Administration expenses -60,458 (83,443) (138,296) (291,595) (509,120) (1,007,126) (1,299,243) (1,548,004) 38.0% 65.7% 110.8% 74.6% 97.8% 29.0% 19.1%

14 Profit before provision loss for credit 101,656 151,080 297,919 511,311 1,166,035 1,732,827 2,110,510 2,348,952 48.6% 97.2% 71.6% 128.0% 48.6% 21.8% 11.3%

15 Provision loss -56,681 (41,644) (58,060) (74,303) (160,720) (237,823) (262,013) (326,151) -26.5% 39.4% 28.0% 116.3% 48.0% 10.2% 24.5%

16 Profit before tax 44,975 109,436 239,859 437,008 1,005,315 1,495,004 1,848,497 2,022,801 143.3% 119.2% 82.2% 130.0% 48.7% 23.6% 9.4%

17 Income tax -12,406 (30,368) (67,013) (120,358) (232,429) (359,384) (444,884) (484,667) 144.8% 120.7% 79.6% 93.1% 54.6% 23.8% 8.9%

18 Net profit 32,569 79,068 172,846 316,650 772,886 1,135,620 1,403,613 1,538,134 142.8% 118.6% 83.2% 144.1% 46.9% 23.6% 9.6%

19 Minority interests 0

20 Net profit for their shareholders 32,569 79,068 172,846 316,650 772,886 1,135,620 1,403,613 1,538,134 142.8% 118.6% 83.2% 144.1% 46.9% 23.6% 9.6%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 192

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

MSB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 7 20 40 89 120 160 190 220
II Financial leverage
1 Equity/Total Assets 5.6% 9.3% 10.7% 5.7% 5.6% 6.0% 6.4% 6.0%
2 Equity multiplier = TA/Equity 17.8 10.7 9.3 17.4 18.0 16.7 15.7 16.6
III Asset quality
1 NPL ratio groups 3-5 Na Na Na 1.49% 0.63% 3.00% 3.10% 3.02%
2 Loan loss reserve coverage Na Na Na 51% 115% 31% 36% 41%
IV Liquidity
1 Loans to deposits 69% 75% 88% 79% 79% 79% 79% 82%
2 Loans to deposits (including CDS + entrusted 69% 70% 85% 73% 67% 63% 64% 68%
funds)
3 Loans/total assets 53% 33% 37% 34% 37% 35% 40% 42%
4 Interbank funds (borrowing+deposits)/equity 2.3 4.4 4.2 7.8 6.7 5.1 3.4 3.6
5 (Interbank funds +CDS +bonds)/equity 2.3 4.8 4.3 8.4 8.2 7.0 5.2 5.3
6 Interbank funds/total deposits 15% 46% 51% 49% 40% 35% 26% 26%
7 Net interbank position/total assets 22% 10% 2% 4% 2% 10% 15% 14%
V Profitability & Efficiency
1 ROAA 0.7% 1.2% 1.3% 1.3% 1.6% 1.3% 1.2% 1.1%
2 ROAE 13.3% 15.2% 12.9% 16.9% 28.5% 23.0% 19.7% 17.4%
3 NIM 2.8% 3.4% 2.8% 3.0% 2.8% 2.9% 2.7% 2.5%
4 Operating Exp/ AEA 1.5% 1.4% 1.1% 1.2% 1.1% 1.3% 1.2% 1.1%
5 Net Interest income/total operating income 70.0% 89.1% 81.2% 90.5% 76.3% 85.7% 86.5% 86.7%
6 Cost to income ratio 37.3% 35.6% 31.7% 36.3% 30.4% 36.8% 38.1% 39.7%
7 Net profit/total operating income 20.1% 33.7% 39.6% 39.4% 46.1% 41.4% 41.2% 39.5%
VI Growth Ratios
1 Asset growth Na 95% 106% 86% 96% 65% 18% 29%
2 Loan growth Na 23% 128% 71% 113% 57% 35% 35%
3 Deposit growth Na 14% 95% 92% 113% 57% 35% 28%
4 Growth of (deposits +CDS) Na 23% 86% 100% 132% 67% 32% 27%
5 Capital growth Na 224% 137% -1% 90% 78% 26% 21%
6 Net profit growth Na 143% 119% 83% 144% 47% 24% 10%
Source: Company financial statements and HSC forecasts

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July 14h 2008

MSB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.0% 0.5% 0.6% 0.8% 0.7% 0.7% 0.8% 0.8%
2 Balances with State bank 3.5% 0.8% 1.6% 1.5% 1.2% 1.4% 1.4% 1.4%
3 Deposits with other financial institutions 34.7% 51.0% 46.7% 48.3% 39.5% 40.8% 36.6% 35.5%
4 Net Securities - Held for trading 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 52.9% 33.5% 37.0% 34.1% 37.1% 35.1% 40.0% 42.0%
7 Investment securities 4.4% 11.9% 12.3% 12.0% 17.4% 18.6% 17.8% 17.3%
8 Long term investments 0.0% 0.1% 0.2% 0.2% 0.3% 0.4% 0.4% 0.3%
9 Fixed assets 1.7% 1.0% 0.6% 0.7% 0.4% 0.3% 0.3% 0.3%
10 Other assets 1.7% 1.2% 1.0% 2.4% 3.3% 2.5% 2.5% 2.3%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 0.6% 0.3% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0%
2 Deposits from Banks 13.2% 41.0% 44.5% 44.8% 37.3% 30.7% 21.8% 21.5%
3 Customer deposits 76.1% 44.4% 41.9% 43.3% 47.0% 44.7% 51.0% 50.9%
4 Trusted funds 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 3.7% 1.5% 3.5% 8.4% 11.2% 11.3% 10.6%
7 Other liabilities 4.4% 1.3% 1.2% 2.7% 1.6% 7.5% 9.5% 11.0%
8 Shareholders' equity and other funds 5.6% 9.3% 10.7% 5.7% 5.6% 6.0% 6.4% 6.0%
Chartered capital 4.6% 8.2% 9.6% 4.6% 4.7% 4.7% 4.8% 4.4%
Share premium 0.0% 0.0% 0.0% 0.6% 0.3% 0.5% 0.4% 0.3%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 0.3% 0.2% 0.3% 0.3% 0.3% 0.3% 0.4% 0.5%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.7% 0.9% 0.8% 0.3% 0.2% 0.4% 0.7% 0.8%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 34.7% 51.0% 46.7% 48.3% 39.5% 40.8% 36.6% 35.5%
Deposits from other banks as % of balance sheet 13.2% 41.0% 44.5% 44.8% 37.3% 30.7% 21.8% 21.5%
Net position 21.6% 10.0% 2.2% 3.5% 2.2% 10.1% 14.8% 14.0%
SBV positions
Deposits in SBV as % of balance sheet 1.0% 0.5% 0.6% 0.8% 0.7% 0.7% 0.8% 0.8%
Deposits from SBV as % of balance sheet 0.6% 0.3% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0%
Net position 0.4% 0.2% 0.4% 0.7% 0.7% 0.7% 0.8% 0.8%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 98,124 309,483 383,038 435,548 607,518 911,277 1,066,194 1,247,447 215.4% 23.8% 13.7% 39.5% 50.0% 17.0% 17.0%

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2 Balances with State bank 263,134 561,462 1,211,629 1,138,214 937,968 937,968 1,097,423 1,283,984 113.4% 115.8% -6.1% -17.6% 0.0% 17.0% 17.0%

3 Deposits with other financial institutions 2,209,059 3,249,317 12,846,626 7,472,500 17,416,619 16,020,625 18,423,718 21,187,276 47.1% 295.4% -41.8% 133.1% -8.0% 15.0% 15.0%

4 Net Securities - Held for trading 627,684 - - - - - -100.0%

5 Derivatives 137 3,119 - - 2176.6% -100.0%

6 Net loans and advances to clients 5,255,206 9,058,234 16,611,779 19,587,856 27,103,139 39,982,993 46,583,259 54,223,629 72.4% 83.4% 17.9% 38.4% 47.5% 16.5% 16.4%

7 Investment securities - 2,587,467 6,748,219 4,818,934 8,818,224 11,021,841 12,895,554 15,087,798 -28.6% 83.0% 25.0% 17.0% 17.0%

8 Long term investments 87,045 30,056 143,806 216,425 290,684 319,752 374,110 437,709 -65.5% 378.5% 50.5% 34.3% 10.0% 17.0% 17.0%
VIB EARNINGS MODEL

9 Fixed assets 33,984 131,828 212,736 277,947 250,441 275,485 322,318 377,112 287.9% 61.4% 30.7% -9.9% 10.0% 17.0% 17.0%

10 Other assets 393,445 598,776 1,147,202 771,496 1,211,230 1,332,353 1,732,059 2,251,677 52.2% 91.6% -32.7% 57.0% 10.0% 30.0% 30.0%

Total Assets 8,967,681 16,526,623 39,305,035 34,719,057 56,638,942 70,802,294 82,494,635 96,096,631 84.3% 137.8% -11.7% 63.1% 25.0% 16.5% 16.5%

1 Deposits & Loans from SBV - 66,657 - - - - -

2 Deposits from Banks 2,852,872 5,045,454 12,018,720 7,890,365 18,591,680 14,564,204 17,039,906 19,936,507 76.9% 138.2% -34.3% 135.6% -21.7% 17.0% 17.0%

3 Customer deposits 5,268,617 9,813,515 17,686,761 23,905,294 32,364,898 48,547,347 56,800,396 66,456,463 86.3% 80.2% 35.2% 35.4% 50.0% 17.0% 17.0%

4 Trusted funds 63,615 50,903 95,638 27,496 23,695 23,695 27,723 32,436 -20.0% 87.9% -71.2% -13.8% 0.0% 17.0% 17.0%

5 Liabilities from derivatives - -

6 Bonds & Certificates of deposits 594 1,538,739 52,835 1,845,230 1,845,230 2,158,919 2,525,935 -96.6% 3392.4% 0.0% 17.0% 17.0%

7 Other liabilities 189,196 360,163 5,782,644 550,529 864,541 1,194,217 1,397,234 1,634,764 90.4% 1505.6% -90.5% 57.0% 38.1% 17.0% 17.0%

8 Shareholders' equity and other funds 592,787 1,189,931 2,182,533 2,292,538 2,948,898 4,627,601 5,070,456 5,510,526 100.7% 83.4% 5.0% 28.6% 56.9% 9.6% 8.7%

Chartered capital 510,000 1,000,000 2,000,000 2,000,000 2,400,000 4,000,000 4,000,000 4,000,000 96.1% 100.0% 0.0% 20.0% 66.7% 0.0% 0.0%

Share premium - 20,547 65,142 65,142 26,539 1,639 1,918 2,244 217.0% 0.0% -59.3% -93.8% 17.0% 17.0%

Treasury shares (23,334) (25,150) (25,150) (25,150) (25,150) 7.8% 0.0% 0.0% 0.0%

Funds 12,141 18,066 32,140 81,885 82,979 119,860 193,623 266,914 48.8% 77.9% 154.8% 1.3% 44.4% 61.5% 37.9%

FX revaluation 1,571 - -

Asset revaluation - -

Retained profits 70,646 151,318 83,680 168,845 464,530 531,252 900,065 1,266,518 114.2% -44.7% 101.8% 175.1% 14.4% 69.4% 40.7%

9 Minor shareholders' interests

Liabilities and Equities 8,967,681 16,526,623 39,305,035 34,719,057 56,638,942 70,802,294 82,494,635 96,096,631 84.3% 137.8% -11.7% 63.1% 25.0% 16.5% 16.5%

Source: Company financial statements and HSC forecasts


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July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 530,133 1,030,878 1,949,745 4,098,267 3,721,763 4,731,154 5,677,384 6,812,861 94.5% 89.1% 110.2% -9.2% 27.1% 20.0% 20.0%

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2 Interest expenses (339,818) 641,805 (1,240,563) (3,279,493) (2,586,595) (3,475,491) (4,240,099) (5,172,921) -288.9% -293.3% 164.4% -21.1% 34.4% 22.0% 22.0%

3 Net interest income 190,315 1,672,683 709,182 818,774 1,135,168 1,255,662 1,437,285 1,639,940 778.9% -57.6% 15.5% 38.6% 10.6% 14.5% 14.1%

4 Fee and commission income 53,187 91,785 145,539 203,138 274,236 334,568 408,173 58.6% 39.6% 35.0% 22.0% 22.0%

5 Fee and commission expenses 11,311 (23,614) (36,369) (46,873) (69,841) (90,793) (118,031) 54.0% 28.9% 49.0% 30.0% 30.0%

6 Net fee and commission income 19,313 64,498 68,171 109,170 156,265 204,396 243,775 290,142 234.0% 5.7% 60.1% 43.1% 30.8% 19.3% 19.0%

7 Foreign exchange gains - net (3,490) 13,714 69,389 122,213 50,000 65,000 84,500 406.0% 76.1% -59.1% 30.0% 30.0%

8 Income from trading securities 44,141 80,642 (78,302) 67,443 155,623 150,000 150,000 -197.1% -186.1% 130.7% -3.6% 0.0%
VIB EARNINGS MODEL

9 Income from Investment securities

10 Other income (1,047) 42,021 (4,853) (19,427) 102,244 50,000 50,000 50,000 -4113.5% -111.5% 300.3% -626.3% -51.1% 0.0% 0.0%

11 Equity income 6,273 17,372 10,395 9,931 12,910 16,783 21,818 -40.2% -4.5% 30.0% 30.0% 30.0%

12 Total operating income 208,581 1,826,126 884,228 909,999 1,593,264 1,728,591 1,962,844 2,236,401 775.5% -51.6% 2.9% 75.1% 8.5% 13.6% 13.9%

13 Administration expenses (113,317) (212,251) (387,957) (606,078) (866,602) (940,209) (1,081,240) (1,243,426) 87.3% 82.8% 56.2% 43.0% 8.5% 15.0% 15.0%

14 Profit before loan loss provision 95,264 1,613,875 496,271 303,921 726,662 788,383 881,604 992,975 1594.1% -69.2% -38.8% 139.1% 8.5% 11.8% 12.6%

15 Provision loss (107,637) (70,572) (73,476) (112,351) (126,296) (215,213) (315,432) 4.1% 52.9% 12.4% 70.4% 46.6%

16 Profit before tax 95,264 1,506,238 425,699 230,445 614,311 662,086 666,391 677,543 1481.1% -71.7% -45.9% 166.6% 7.8% 0.7% 1.7%

17 Income tax (25,983) (53,916) (116,877) (61,601) (151,095) (162,846) (169,500) (176,256) 107.5% 116.8% -47.3% 145.3% 7.8% 4.1% 4.0%

18 Net profit 69,281 1,452,322 308,822 168,844 463,216 499,240 496,891 501,287 1996.3% -78.7% -45.3% 174.3% 7.8% -0.5% 0.9%

19 Minority interest (7,489) (8,500) (8,500)

20 Net profit for their shareholders 69,281 1,452,322 308,822 168,844 463,216 491,752 488,391 492,787 1996.3% -78.7% -45.3% 174.3% 6.2% -0.7% 0.9%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 196

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

VIB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 63 83 107 116 140 155 170
II Financial leverage
1 Equity/Total Assets 6.6% 7.2% 5.6% 6.6% 5.2% 6.5% 6.1% 5.7%
2 Equity multiplier = TA/Equity 15.1 13.9 18.0 15.1 19.2 15.3 16.3 17.4
III Asset quality
1 NPL ratio groups 3-5 Na Na 1.24% 1.84% 1.27% 1.50% 3.00% 3.00%
2 Loan loss reserve coverage Na Na 64% 51% 72% 62% 34% 37%
IV Liquidity
1 Loans to deposits 100% 92% 94% 82% 84% 82% 82% 82%
2 Loans to deposits (including CDS + entrusted 99% 92% 86% 82% 79% 79% 79% 79%
funds)
3 Loans/total assets 59% 55% 42% 56% 48% 56% 56% 56%
4 Interbank funds (borrowing+deposits)/equity 4.8 4.2 5.5 3.4 6.3 3.1 3.4 3.6
5 (Interbank funds +CDS +bonds)/equity 4.8 4.2 6.2 3.5 6.9 3.5 3.8 4.1
6 Interbank funds/total deposits 35% 34% 38% 25% 35% 22% 22% 22%
7 Net interbank position/total assets -7% -11% 2% -1% -2% 2% 2% 1%
V Profitability & Efficiency
1 ROAA 0.8% 11.4% 1.1% 0.5% 1.0% 0.8% 0.6% 0.6%
2 ROAE 11.7% 162.9% 18.3% 7.5% 17.7% 13.0% 10.1% 9.3%
3 NIM 2.5% 15.0% 2.8% 2.4% 2.7% 2.1% 2.0% 1.9%
4 Operating Exp/ AEA 1.5% 1.9% 1.5% 1.8% 2.0% 1.6% 1.5% 1.5%
5 Net Interest income/total operating income 91.2% 91.6% 80.2% 90.0% 71.2% 72.6% 73.2% 73.3%
6 Cost to income ratio 54.3% 11.6% 43.9% 66.6% 54.4% 54.4% 55.1% 55.6%
7 Net profit/total operating income 33.2% 79.5% 34.9% 18.6% 29.1% 28.9% 25.3% 22.4%
VI Growth Ratios
1 Asset growth Na 84% 138% -12% 63% 25% 17% 16%
2 Loan growth Na 72% 83% 18% 38% 48% 17% 16%
3 Deposit growth Na 86% 80% 35% 35% 50% 17% 17%
4 Growth of (deposits +CDS) Na 86% 96% 25% 43% 47% 17% 17%
5 Capital growth Na 101% 83% 5% 29% 57% 10% 9%
6 Net profit growth Na 1996% -79% -45% 174% 6% -1% 1%
Source: Company financial statements and HSC forecasts

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July 14h 2008

VIB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.1% 1.9% 1.0% 1.3% 1.1% 1.29% 1.29% 1.30%
2 Balances with State bank 2.9% 3.4% 3.1% 3.3% 1.7% 1.32% 1.33% 1.34%
3 Deposits with other financial institutions 24.6% 19.7% 32.7% 21.5% 30.8% 22.6% 22.3% 22.0%
4 Net Securities - Held for trading 7.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 58.6% 54.8% 42.3% 56.4% 47.9% 56.5% 56.5% 56.4%
7 Investment securities 0.0% 15.7% 17.2% 13.9% 15.6% 15.6% 15.6% 15.7%
8 Long term investments 1.0% 0.2% 0.4% 0.6% 0.5% 0.5% 0.5% 0.5%
9 Fixed assets 0.4% 0.8% 0.5% 0.8% 0.4% 0.4% 0.4% 0.4%
10 Other assets 4.4% 3.6% 2.9% 2.2% 2.1% 1.9% 2.1% 2.3%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2 Deposits from Banks 31.8% 30.5% 30.6% 22.7% 32.8% 20.6% 20.7% 20.7%
3 Customer deposits 58.8% 59.4% 45.0% 68.9% 57.1% 68.6% 68.9% 69.2%
4 Trusted funds 0.7% 0.3% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 0.0% 3.9% 0.2% 3.3% 2.6% 2.6% 2.6%
7 Other liabilities 2.1% 2.2% 14.7% 1.6% 1.5% 1.7% 1.7% 1.7%
8 Shareholders' equity and other funds 6.6% 7.2% 5.6% 6.6% 5.2% 6.5% 6.1% 5.7%
Chartered capital 5.7% 6.1% 5.1% 5.8% 4.2% 5.6% 4.8% 4.2%
Share premium 0.0% 0.1% 0.2% 0.2% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% -0.1% 0.0% 0.0% 0.0% 0.0%
Funds 0.1% 0.1% 0.1% 0.2% 0.1% 0.2% 0.2% 0.3%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.8% 0.9% 0.2% 0.5% 0.8% 0.8% 1.1% 1.3%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 24.6% 19.7% 32.7% 21.5% 30.8% 22.6% 22.3% 22.0%
Deposits from other banks as % of balance sheet 31.8% 30.5% 30.6% 22.7% 32.8% 20.6% 20.7% 20.7%
Net position -7.2% -10.9% 2.1% -1.2% -2.1% 2.1% 1.7% 1.3%
SBV positions
Deposits in SBV as % of balance sheet 1.1% 1.9% 1.0% 1.3% 1.1% 1.3% 1.3% 1.3%
Deposits from SBV as % of balance sheet 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net position 1.1% 1.5% 1.0% 1.3% 1.1% 1.3% 1.3% 1.3%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 19,356 51,376 67,479 139,081 249,692 862,115 489,908 165.4% 31.3% 106.1% 79.5% 245.3% -43.2%

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2 Balances with State bank 18,870 204,852 216,117 920,132 1,196,172 1,966,683 1,869,018 985.6% 5.5% 325.8% 30.0% 64.4% -5.0%

3 Deposits with other financial institutions 664,096 5,383,351 2,945,975 6,357,324 7,628,789 9,535,986 11,820,219 710.6% -45.3% 115.8% 20.0% 25.0% 24.0%

4 Net Securities - Held for trading - 9,186 480,531 16,500 130,000 162,500 203,125 5130.9% -96.6% 687.9% 25.0% 25.0%

5 Derivatives 369 3,663 0 0 0 892.7% -100.0%

6 Net loans and advances to clients - 491,516 4,175,420 6,227,158 12,701,664 23,922,038 29,745,847 37,163,655 749.5% 49.1% 104.0% 88.3% 24.3% 24.9%

7 Investment securities - 3,066 382,521 1,955,500 4,865,643 5,741,460 7,176,823 8,971,029 12378.2% 411.2% 148.8% 18.0% 25.0% 25.0%

8 Long term investments - - 382,600 748,159 269,799 337,249 421,561 526,951 95.5% -63.9% 25.0% 25.0% 25.0%
SHB EARNINGS MODEL

9 Fixed assets - 86,111 343,949 823,991 853,627 938,990 1,173,737 1,467,171 299.4% 139.6% 3.6% 10.0% 25.0% 25.0%

10 Other assets 39,012 1,434,187 916,031 1,341,764 4,687,882 5,859,853 7,324,816 3576.3% -36.1% 46.5% 249.4% 25.0% 25.0%

Total Assets - 1,322,027 12,367,441 14,381,310 27,469,197 44,832,271 56,905,105 69,835,892 835.5% 16.3% 91.0% 63.2% 26.9% 22.7%

1 Deposits & Loans from SBV 0 0 0 0

2 Deposits from Banks 402,000 7,091,785 2,235,084 9,943,404 9,943,404 11,918,488 14,472,056 1664.1% -68.5% 344.9% 0.0% 19.9% 21.4%

3 Customer deposits 368,001 2,804,869 9,508,142 14,672,147 26,340,931 32,898,377 41,242,951 662.2% 239.0% 54.3% 79.5% 24.9% 25.4%

4 Trusted funds 0 0 500,000 625,000 781,250

5 Liabilities from derivatives 31,674 51,899 25,473 31,884 31,884 39,855 49,819 63.9% -50.9% 25.2% 0.0% 25.0% 25.0%

6 Bonds & Certificates of deposits 0 0 3,464,135 4,330,169 5,412,711

7 Other liabilities 9,057 240,478 345,956 404,717 607,076 758,844 948,555 2555.0% 43.9% 17.0% 50.0% 25.0% 25.0%

8 Shareholders' equity and other funds - 511,294 2,178,409 2,266,655 2,417,045 3,944,841 6,334,372 6,928,550 326.1% 4.1% 6.6% 63.2% 60.6% 9.4%

Chartered capital 500,000 2,000,000 2,000,000 2,000,000 3,497,519 4,997,519 4,997,519 300.0% 0.0% 0.0% 74.9% 42.9% 0.0%

Share premium 48,000 48,000 48,000 97,322 48,000 48,000 0.0% 0.0% 102.8% -50.7% 0.0%

Treasury shares (2,351) (4,957) (5,260) (5,260) 110.8% -100.0% 0.0%

Funds 1,497 2,536 53,494 102,880 165,231 237,455 322,338 69.3% 2009.5% 92.3% 60.6% 43.7% 35.7%

FX revaluation 0 0 0 0

Asset revaluation 0 0

Retained profits 9,797 127,873 167,512 271,122 184,769 1,056,657 1,565,953 1205.3% 31.0% 61.9% -31.9% 471.9% 48.2%

9 Minor shareholders' interests 0 0 0 0

Liabilities and Equities - 1,322,027 12,367,441 14,381,310 27,469,197 44,832,271 56,905,105 69,835,892 835.5% 16.3% 91.0% 63.2% 26.9% 22.7%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 199

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 51,151 444,438 1,293,370 1,662,188 3,307,829 4,300,177 5,482,726 768.9% 191.0% 28.5% 99.0% 30.0% 27.5%

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2 Interest expenses (24,149) (354,976) (132,570) (1,016,747) (2,176,096) (2,828,925) (3,677,602) 1369.9% -62.7% 667.0% 114.0% 30.0% 30.0%

3 Net interest income 27,002 89,462 1,160,800 645,441 1,131,733 1,471,253 1,805,124 231.3% 1197.5% -44.4% 75.3% 30.0% 22.7%

4 Fee and commission income 35 2,975 14,398 78,031 117,047 152,160 197,809 8436.5% 383.9% 442.0% 50.0% 30.0% 30.0%

5 Fee and commission expenses (142) (2,008) (6,986) (17,949) (26,924) (35,001) (45,501) 1316.7% 247.9% 156.9% 50.0% 30.0% 30.0%

6 Net fee and commission income (107) 967 7,412 60,082 90,123 117,160 152,308 -1005.2% 666.1% 710.6% 50.0% 30.0% 30.0%

7 Foreign exchange gain - net 5 2,467 26,023 52,487 35,000 45,500 59,150 49756.1% 954.7% 101.7% -33.3% 30.0% 30.0%

8 Income from trading securities 13,719 (14,168) 31,939 12,000 15,600 20,280 -203.3% -325.4% -62.4% 30.0% 30.0%
SHB EARNINGS MODEL

9 Income from securities investment 0 43,361 40,000 52,000 62,400 -7.8% 30.0% 20.0%

10 Other income 3,270 137,722 294,755 11,746 40,000 52,000 62,400 4111.1% 114.0% -96.0% 240.5% 30.0% 20.0%

11 Equity income 18,000 2,955 16,936 9,000 11,700 14,040 -83.6% 473.1% -46.9% 30.0% 20.0%

12 Total operating income 30,170 262,338 1,477,777 861,992 1,357,856 1,765,212 2,175,702 769.5% 463.3% -41.7% 57.5% 30.0% 23.3%

13 Administration expenses (16,120) (73,585) (190,535) (340,133) (620,000) (744,000) (892,800) 356.5% 158.9% 78.5% 82.3% 20.0% 20.0%

14 Profit before provision loss for credit 14,050 188,753 1,287,242 521,859 737,856 1,021,212 1,282,902 1243.4% 582.0% -59.5% 41.4% 38.4% 25.6%

15 Provision loss (4,254) (12,518) (17,891) (104,669) (110,000) (266,700) (373,380) 194.3% 42.9% 485.0% 5.1% 142.5% 40.0%

16 Profit before tax 9,797 176,235 1,269,351 417,190 627,856 754,512 909,522 1699.0% 620.3% -67.1% 50.5% 20.2% 20.5%

17 Income tax (2,743) (49,346) (74,591) (96,785) (146,360) (188,628) (224,451) 1699.0% 51.2% 29.8% 51.2% 28.9% 19.0%

18 Net profit 7,054 126,889 1,194,760 320,405 481,496 565,884 685,070 1699.0% 841.6% -73.2% 50.3% 17.5% 21.1%

19 Minority interests - - 0 0 0 0 0

20 Net profit for their shareholders 7,054 126,889 1,194,760 320,405 481,496 565,884 685,070 1699.0% 841.6% -73.2% 50.3% 17.5% 21.1%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 200

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

SHB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 30 33 95 122 153 191
II Financial leverage
1 Equity/Total Assets 38.7% 17.6% 15.8% 8.8% 8.8% 11.1% 9.9%
2 Equity multiplier = TA/Equity 2.6 5.7 6.3 11.4 11.4 9.0 10.1
III Asset quality
1 NPL ratio groups 3-5 Na Na 1.9% 2.8% 2.80% 3.00% 3.00%
2 Loan loss reserve coverage ratio Na Na 22% 35% 23% 39% 41%
IV Liquidity
1 Loans to deposits 134% 149% 65% 87% 91% 90% 90%
2 Loans to deposits (including CDS + entrusted 134% 149% 65% 87% 79% 79% 78%
funds)
3 Loans/total assets 37% 34% 43% 46% 53% 52% 53%
4 Interbank funds (borrowing+deposits)/equity 0.8 3.3 1.0 4.1 2.5 1.9 2.1
5 (Interbank funds +CDS +bonds)/equity 0.8 3.3 1.0 4.1 3.4 2.6 2.9
6 Interbank funds/total deposits 52% 72% 19% 40% 25% 24% 23%
7 Net interbank position/total assets 20% -14% 5% -13% -5% -4% -4%
V Profitability & Efficiency
1 ROAA 0.5% 1.9% 8.9% 1.5% 1.3% 1.1% 1.1%
2 ROAE 1.4% 9.4% 53.8% 13.7% 15.1% 10.6% 10.2%
3 NIM 2.3% 1.6% 10.8% 3.6% 3.7% 3.5% 3.5%
4 Operating Exp/ AEA 1.4% 1.3% 1.8% 1.9% 2.0% 1.8% 1.7%
5 Net Interest income/total operating income 89.5% 34.1% 78.6% 74.9% 83.3% 83.3% 83.4%
6 Cost to income ratio 53.4% 28.0% 12.9% 39.5% 45.7% 42.1% 41.3%
7 Net profit/total operating income 23.4% 48.4% 80.8% 37.2% 35.5% 32.1% 31.1%
VI Growth Ratios
1 Asset growth 835% 16% 91% 63% 27% 23%
2 Loan growth 749% 49% 104% 88% 24% 25%
3 Deposit growth 662% 239% 54% 80% 26% 25%
4 Growth of (deposits +CDS) 662% 239% 54% 103% 26% 25%
5 Capital growth 326% 4% 7% 63% 46% 9%
6 Net profit growth 1699% 842% -73% 50% 18% 20%
Source: Company financial statements and HSC forecasts

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July 14h 2008

SHB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 1.5% 0.4% 0.5% 0.5% 0.6% 1.5% 0.7%
2 Balances with State bank 1.4% 1.7% 1.5% 3.3% 2.7% 3.5% 2.7%
3 Deposits with other financial institutions 50.2% 43.5% 20.5% 23.1% 17.0% 16.8% 16.9%
4 Net Securities - Held for trading 0.0% 0.1% 3.3% 0.1% 0.3% 0.3% 0.3%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 37.2% 33.8% 43.3% 46.2% 53.4% 52.3% 53.2%
7 Investment securities 0.2% 3.1% 13.6% 17.7% 12.8% 12.6% 12.8%
8 Long term investments 0.0% 3.1% 5.2% 1.0% 0.8% 0.7% 0.8%
9 Fixed assets 6.5% 2.8% 5.7% 3.1% 2.1% 2.1% 2.1%
10 Other assets 3.0% 11.6% 6.4% 4.9% 10.5% 10.3% 10.5%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2 Deposits from Banks 30.4% 57.3% 15.5% 36.2% 22.2% 22.2% 22.2%
3 Customer deposits 27.8% 22.7% 66.1% 53.4% 58.8% 58.8% 58.8%
4 Trusted funds 0.0% 0.0% 0.0% 0.0% 1.1% 1.1% 1.1%
5 Liabilities from derivatives 2.4% 0.4% 0.2% 0.1% 0.1% 0.1% 0.1%
6 Bonds & Certificates of deposits 0.0% 0.0% 0.0% 0.0% 7.7% 7.7% 7.7%
7 Other liabilities 0.7% 1.9% 2.4% 1.5% 1.4% 1.4% 1.4%
8 Shareholders' equity and other funds 38.7% 17.6% 15.8% 8.8% 8.8% 8.8% 8.8%
Chartered capital 37.8% 16.2% 13.9% 7.3% 7.8% 7.8% 7.8%
Share premium 0.0% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 0.1% 0.0% 0.4% 0.4% 0.4% 0.4% 0.4%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.7% 1.0% 1.2% 1.0% 0.4% 0.4% 0.4%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 50.2% 43.5% 20.5% 23.1% 17.0% 16.8% 16.9%
Deposits from other banks as % of balance sheet 30.4% 57.3% 15.5% 36.2% 22.2% 20.9% 20.7%
Net position 19.8% -13.8% 4.9% -13.1% -5.2% -4.2% -3.8%
SBV positions
Deposits in SBV as % of balance sheet 1.5% 0.4% 0.5% 0.5% 0.6% 1.5% 0.7%
Deposits from SBV as % of balance sheet 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net position 1.5% 0.4% 0.5% 0.5% 0.6% 1.5% 0.7%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 23,100 145,842 196,530 130,299 673,025 1,687,297 1,805,407 1,931,786 531.4% 34.8% -33.7% 416.5% 150.7% 7.0% 7.0%

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2 Balances with State bank 131,347 239,842 173,563 568,930 835,504 1,587,000 1,698,090 1,816,956 82.6% -27.6% 227.8% 46.9% 89.9% 7.0% 7.0%

3 Deposits with other financial institutions 208,796 1,202,299 3,255,201 4,671,306 4,399,322 6,876,998 7,358,388 7,873,475 475.8% 170.7% 43.5% -5.8% 56.3% 7.0% 7.0%

4 Net Securities - Held for trading 0 0 61,008 852 354 344 368 393 -98.6% -58.5% -2.9% 7.0% 7.0%

5 Depravities 0 0 0 1,503 0 - - -

6 Net loans and advances to clients 3,343,271 8,395,448 19,397,780 23,100,712 30,969,115 24,140,078 24,183,409 25,396,617 151.1% 131.1% 19.1% 34.1% -22.1% 0.2% 5.0%

7 Investment securities 33,271 316,382 886,321 4,181,835 8,723,719 9,521,998 10,188,537 10,901,735 850.9% 180.1% 371.8% 108.6% 9.2% 7.0% 7.0%

8 Long term investments 28,675 39,075 57,325 700,906 736,402 740,600 792,442 847,913 36.3% 46.7% 1122.7% 5.1% 0.6% 7.0% 7.0%
SCB EARNINGS MODEL

9 Fixed assets 58,549 186,583 324,971 572,145 678,961 659,119 705,257 754,625 218.7% 74.2% 76.1% 18.7% -2.9% 7.0% 7.0%

10 Other assets 205,290 406,114 1,588,855 4,667,564 7,476,072 7,934,998 7,934,998 7,934,998 97.8% 291.2% 193.8% 60.2% 6.1% 0.0% 0.0%

Total Assets 4,032,299 10,931,585 25,941,554 38,596,052 54,492,474 53,148,431 54,666,896 57,458,499 171.1% 137.3% 48.8% 41.2% -2.5% 2.9% 5.1%

1 Deposits & Loans from SBV 0 60,721 58,996 0 3,000,000 - - - -2.8%

2 Deposits from Banks 2,012,333 5,299,081 5,323,749 7,775,638 11,958,013 2,974,103 3,182,290 3,405,050 163.3% 0.5% 46.1% 53.8% -75.1% 7.0% 7.0%

3 Customer deposits 1,616,524 3,575,631 15,970,543 22,969,094 30,113,315 40,833,092 42,874,747 45,018,484 121.2% 346.6% 43.8% 31.1% 35.6% 5.0% 5.0%

4 Trusted funds 5,927 214,027 74,749 72,743 77,835 83,283 3511.1% -65.1% -2.7% 7.0% 7.0%

5 Liabilities from derivatives 62,843 61,156 65,437 70,018 -2.7% 7.0% 7.0%

6 Bonds & Certificates of deposits 0 1,000,000 1,399,999 3,647,189 3,755,794 3,654,995 2,558,496 2,635,251 40.0% 160.5% 3.0% -2.7% -30.0% 3.0%

7 Other liabilities 73,023 202,151 551,387 1,180,938 943,944 918,610 982,913 1,051,717 176.8% 172.8% 114.2% -20.1% -2.7% 7.0% 7.0%

8 Shareholders' equity and other funds 330,419 794,001 2,630,953 2,809,166 4,583,816 4,633,731 4,925,178 5,194,695 140.3% 231.4% 6.8% 63.2% 1.1% 6.3% 5.5%

Chartered capital 271,788 600,000 1,970,000 2,180,683 3,635,429 4,185,000 4,185,000 4,185,000 120.8% 228.3% 10.7% 66.7% 15.1% 0.0% 0.0%

Share premium 0 0 407,531 335,287 429,792 168,041 179,804 192,390 -60.9% 7.0% 7.0%

Treasury shares 0 0 0 (56,000) (87,709) (87,709) (93,849) (100,418) 0.0% 7.0% 7.0%

Funds 11,887 95,518 24,933 95,828 231,082 217,068 265,573 310,418 703.6% -73.9% 284.3% 141.1% -6.1% 22.3% 16.9%

FX revaluation 0 (74,373) (79,579) (85,150)

Asset revaluation - - -

Retained profits 46,744 98,483 228,489 253,368 375,222 225,704 468,229 692,455 110.7% 132.0% 10.9% 48.1% -39.8% 107.5% 47.9%

9 Minor shareholders' interests 0 0 0 - - -

Liabilities and Equities 4,032,299 10,931,585 25,941,554 38,596,052 54,492,474 53,148,431 54,666,896 57,458,499 171.1% 137.3% 48.8% 41.2% -2.5% 2.9% 5.1%

Source: Company financial statements and HSC forecasts


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February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 284,742 734,588 1,702,241 4,351,582 4,343,848 6,029,810 6,120,257 6,245,722 158.0% 131.7% 155.6% -0.2% 38.8% 1.5% 2.1%

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2 Interest expenses (178,655) (479,603) (1,258,563) (3,333,736) (3,511,130) (4,964,469) (5,068,723) (5,170,097) 168.5% 162.4% 164.9% 5.3% 41.4% 2.1% 2.0%

3 Net interest income 106,087 254,985 443,678 1,017,846 832,718 1,065,341 1,051,534 1,075,625 140.4% 74.0% 129.4% -18.2% 27.9% -1.3% 2.3%

4 Fee and commission income 5,112 31,581 142,161 158,393 58,261 145,653 151,479 162,082 517.8% 350.1% 11.4% -63.2% 150.0% 4.0% 7.0%

5 Fee and commission expenses (3,124) (1,996) (5,923) (9,473) (19,813) (23,776) (24,727) (25,716) -36.1% 196.7% 59.9% 109.2% 20.0% 4.0% 4.0%

6 Net fee and commission income 1,988 29,585 136,238 148,920 38,448 121,877 126,752 136,366 1388.2% 360.5% 9.3% -74.2% 217.0% 4.0% 7.6%

7 Foreign exchange gains - net 207 (149) 2,499 57,306 139,215 (181,000) 40,000 60,000 -172.0% -1777.2% 2193.2% 142.9% -230.0% -122.1% 50.0%

8 Income from trading securities 0 0 7,875 (35,508) 38,621 (60,000) - - -550.9% -208.8% -255.4% -100.0%
SCB EARNINGS MODEL

9 Income from Investment securities 0 11,900 69,305 0 4,428 - - -

10 Other income 13,960 1,013 6,338 34,332 12,053 30,000 30,000 40,000 -92.7% 525.7% 441.7% -64.9% 148.9% 0.0% 33.3%

11 Equity income 0 816 558 4,415 1,043 2,000 2,000 2,000 -31.6% 691.2% -76.4% 91.8% 0.0% 0.0%

12 Total operating income 122,242 298,150 666,491 1,227,311 1,066,526 978,218 1,250,286 1,313,992 143.9% 123.5% 84.1% -13.1% -8.3% 27.8% 5.1%

13 Administration expenses (57,462) (118,697) (417,073) (466,673) (455,240) (459,792) (528,761) (592,213) 106.6% 251.4% 11.9% -2.4% 1.0% 15.0% 12.0%

14 Profit before loan loss provision 64,780 179,453 249,418 760,638 611,286 518,426 721,525 721,779 177.0% 39.0% 205.0% -19.6% -15.2% 39.2% 0.0%

15 Provision loss (18,086) (27,027) (33,923) (114,215) (203,917) (300,000) (350,000) (350,000) 49.4% 25.5% 236.7% 78.5% 47.1% 16.7% 0.0%

16 Profit before tax 46,694 152,426 215,495 646,423 407,369 218,426 371,525 371,779 226.4% 41.4% 200.0% -37.0% -46.4% 70.1% 0.1%

17 Income tax (13,399) (42,536) (54,506) (182,533) (108,548) (54,606) (92,881) (92,945) 217.5% 28.1% 234.9% -40.5% -49.7% 70.1% 0.1%

18 Net profit 33,295 109,890 160,989 463,890 298,821 163,819 278,644 278,834 230.0% 46.5% 188.2% -35.6% -45.2% 70.1% 0.1%

19 Minority interest 0 0 2,294

20 Net profit for their shareholders 33,295 109,890 163,283 463,890 298,821 163,819 278,644 278,834 230.0% 48.6% 184.1% -35.6% -45.2% 70.1% 0.1%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 204

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July 14h 2008

SCB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 26 40 51 112 112 112 112
II Capital Adequacy Ratio
1 Equity/Total Assets 8.2% 7.3% 10.1% 7.3% 8.4% 8.7% 9% 9%
2 Equity multiplier = TA/Equity 12.2 13.8 9.9 13.7 11.9 11.5 11 11
III Asset quality
1 NPL 3-5 na 2.3% 0.3% 0.6% 1.2% 6.0% 6% 6%
2 Loan loss reserve coverage na 20% 121% 133% 92% 28% 40% 49%
IV Liquidity
1 Loan to customer deposit ratio 207% 235% 121% 101% 103% 59% 56% 56%
2 Loans/(customer deposits + CD) 207% 183% 112% 86% 91% 54% 53% 53%
3 Loans/Toal assets 83% 77% 75% 60% 57% 45% 44% 44%
4 Interbank funds (borrowing+deposits)/equity 6.1 6.7 2.0 2.8 2.6 0.6 0.6 0.7
5 (Interbank funds +CDS +bonds)/equity 6.1 7.9 2.6 4.1 3.4 1.4 1.2 1.2
6 Interbank funds/total deposits 55% 54% 23% 22% 26% 6% 7% 7%
7 Net interbank position/total assets -45% -37% -8% -8% -14% 7% 8% 8%
V Profitability & Efficiency
1 ROAA 0.8% 1.5% 0.9% 1.4% 0.6% 0.3% 1% 0%
2 ROAE 10.1% 19.5% 9.5% 17.1% 8.1% 3.6% 6% 6%
3 Net interest margin (NI/AEA) 3.0% 3.8% 2.7% 3.7% 2.2% 2.5% 3% 3%
4 Operating Exp/ AEA 1.6% 1.8% 2.5% 1.7% 1.2% 1.1% 1% 1%
5 Net Interest income/total operating income 86.8% 85.5% 66.6% 82.9% 78.1% 108.9% 84% 82%
6 Cost to income ratio 47.0% 39.8% 62.6% 38.0% 42.7% 47.0% 42% 45%
7 Net profit/total operating income 27.2% 36.9% 24.2% 37.8% 28.0% 16.7% 22% 21%
VI Growth Ratios
1 Asset growth 171% 137% 49% 41% -2% 3% 5%
2 Loans growth 151% 131% 19% 34% -22% 0% 5%
3 Deposit growth 121% 347% 44% 31% 36% 5% 5%
4 Growth in total deposits and CDS 183% 280% 53% 27% 31% 2% 5%
5 Capital growth 140% 231% 7% 63% 1% 6% 5%
6 Profit growth 230% 49% 184% -36% -45% 70% 0%
Source: Company financial statements and HSC forecasts

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July 14h 2008

SCB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 0.6% 1.3% 0.8% 0.3% 1.2% 3.2% 3.3% 3.4%
2 Balances with State bank 3.3% 2.2% 0.7% 1.5% 1.5% 3.0% 3.1% 3.2%
3 Deposits with other financial institutions 5.2% 11.0% 12.5% 12.1% 8.1% 12.9% 13.5% 13.7%
4 Net Securities - Held for trading 0.0% 0.0% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 82.9% 76.8% 74.8% 59.9% 56.8% 45.4% 44.2% 44.2%
7 Investment securities 0.8% 2.9% 3.4% 10.8% 16.0% 17.9% 18.6% 19.0%
8 Long term investments 0.7% 0.4% 0.2% 1.8% 1.4% 1.4% 1.4% 1.5%
9 Fixed assets 1.5% 1.7% 1.3% 1.5% 1.2% 1.2% 1.3% 1.3%
10 Other assets 5.1% 3.7% 6.1% 12.1% 13.7% 14.9% 14.5% 13.8%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 0.0% 0.6% 0.2% 0.0% 5.5% 0.0% 0.0% 0.0%
2 Deposits from Banks 49.9% 48.5% 20.5% 20.1% 21.9% 5.6% 5.8% 5.9%
3 Customer deposits 40.1% 32.7% 61.6% 59.5% 55.3% 76.8% 78.4% 78.3%
4 Trusted funds 0.0% 0.0% 0.0% 0.6% 0.1% 0.1% 0.1% 0.1%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1%
6 Bonds & Certificates of deposits 0.0% 9.1% 5.4% 9.4% 6.9% 6.9% 4.7% 4.6%
7 Other liabilities 1.8% 1.8% 2.1% 3.1% 1.7% 1.7% 1.8% 1.8%
8 Shareholders' equity and other funds 8.2% 7.3% 10.1% 7.3% 8.4% 8.7% 9.0% 9.0%
Chartered capital 6.7% 5.5% 7.6% 5.7% 6.7% 7.9% 7.7% 7.3%
Share premium 0.0% 0.0% 1.6% 0.9% 0.8% 0.3% 0.3% 0.3%
Treasury shares 0.0% 0.0% 0.0% -0.1% -0.2% -0.2% -0.2% -0.2%
Funds 0.3% 0.9% 0.1% 0.2% 0.4% 0.4% 0.5% 0.5%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% -0.1% -0.1% -0.1%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.2% 0.9% 0.9% 0.7% 0.7% 0.4% 0.9% 1.2%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 5.2% 11.0% 12.5% 12.1% 8.1% 12.9% 13.5% 13.7%
Deposits from other banks as % of balance sheet 49.9% 48.5% 20.5% 20.1% 21.9% 5.6% 5.8% 5.9%
Net position -44.7% -37.5% -8.0% -8.0% -13.9% 7.3% 7.6% 7.8%
SBV positions
Deposits in SBV as % of balance sheet 0.6% 1.3% 0.8% 0.3% 1.2% 3.2% 3.3% 3.4%
Deposits from SBV as % of balance sheet 0.0% 0.6% 0.2% 0.0% 5.5% 0.0% 0.0% 0.0%
Net position 0.6% 0.8% 0.5% 0.3% -4.3% 3.2% 3.3% 3.4%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 48,740 82,547 154,802 167,874 177,159 279,634 373,311 504,851 69% 88% 8% 6% 58% 34% 35%

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2 Balances with State bank 56,782 131,298 37,763 87,271 237,563 298,891 406,636 558,403 131% -71% 131% 172% 26% 36% 37%

3 Deposits with other financial institutions 1,109,794 3,603,660 10,894,263 8,675,515 8,619,783 12,916,448 18,088,298 25,947,793 225% 202% -20% -1% 50% 40% 43%

4 Net Securities - Held for trading - 5,343 68,324 23,103 899,409 557,814 656,537 808,881 1179% -66% 3793% -38% 18% 23%

5 Derivatives - 5,210 -100%

6 Net loans and advances to clients 3,293,681 5,915,744 9,285,862 10,275,166 13,138,567 15,710,463 20,876,198 27,755,905 80% 57% 11% 28% 20% 33% 33%

7 Investment securities 858,634 1,559,234 2,411,833 3,532,726 5,268,166 6,593,690 7,760,659 9,561,452 82% 55% 46% 49% 25% 18% 23%

8 Long term investments 31,690 129,515 267,975 302,337 180,625 403,497 474,909 585,107 309% 107% 13% -40% 123% 18% 23%
HBB EARNINGS MODEL

9 Fixed assets 31,777 47,874 98,240 183,780 207,895 238,814 277,903 327,327 51% 105% 87% 13% 15% 16% 18%

10 Other assets 93,693 210,103 299,622 358,945 506,002 624,705 763,410 880,297 124% 43% 20% 41% 23% 22% 15%

Total Assets 5,524,791 11,685,318 23,518,684 23,606,717 29,240,379 37,623,954 49,677,862 66,930,017 112% 101% 0% 24% 29% 32% 35%

1 Deposits & Loans from SBV 343,838 193,271 307,434 - 2,441,814 2,563,905 2,692,100 2,826,705 -44% 59% -100% 5% 5% 5%

2 Deposits from Banks 1,462,272 4,857,999 10,805,535 8,324,362 7,573,385 7,130,546 10,249,992 14,675,657 232% 122% -23% -9% -6% 44% 43%

3 Customer deposits 3,096,275 4,484,804 8,467,382 11,081,949 13,648,467 21,543,224 28,760,205 38,894,138 45% 89% 31% 23% 58% 34% 35%

4 Trusted funds 46,618 67,736 97,964 554,706 236,210 798,777 958,532 1,150,238 45% 45% 466% -57% 238% 20% 20%

5 Liabilities from derivatives 2,439 -100%

6 Bonds & Certificates of deposits 0 131,292 292,021 1,568,500 1,050,000 810,000 1,458,000 122% -100% -33% -23% 80%

7 Other liabilities 184,324 193,835 369,003 652,939 517,665 828,264 1,325,222 2,120,356 5% 90% 77% -21% 60% 60% 60%

8 Shareholders' equity and other funds 391,464 1,756,381 3,179,345 2,992,761 3,251,899 3,709,238 4,881,811 5,804,923 349% 81% -6% 9% 14% 32% 19%

Chartered capital 300,000 1,000,000 2,000,000 2,800,000 3,000,000 3,000,000 4,050,000 4,860,000 233% 100% 40% 7% 0% 35% 20%

Share premium 0 567,455 818,455 18,455 1,455 1,455 1,455 1,455 44% -98% -92% 0% 0% 0%

Treasury shares - -

Funds 20,949 32,155 66,198 101,383 118,353 172,155 241,660 314,632 53% 106% 53% 17% 45% 40% 30%

FX revaluation 1,931 1,931 - - 0% -100%

Asset revaluation - -

Retained profits 70,515 156,771 294,692 70,992 130,160 535,629 588,696 628,836 122% 88% -76% 83% 312% 10% 7%

9 Minor shareholders' interests

Liabilities and Equities 5,524,791 11,685,318 23,518,684 23,606,717 29,240,379 37,623,954 49,677,862 66,930,017 112% 101% 0% 24% 29% 32% 35%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

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INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 407,416 816,971 2,115,914 2,541,248 2,408,016 3,091,006 4,249,613 5,553,648 100.5% 159.0% 20.1% -5.2% 28.4% 37.5% 30.7%

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2 Interest expenses (310,010) (595,144) (1,492,959) (1,780,422) (1,749,422) (2,350,190) (3,327,082) (4,459,937) 92.0% 150.9% 19.3% -1.7% 34.3% 41.6% 34.0%

3 Net interest income 97,406 221,827 622,955 760,826 658,594 740,816 922,530 1,093,711 127.7% 180.8% 22.1% -13.4% 12.5% 24.5% 18.6%

4 Fee and commission income 17,375 36,702 103,317 131,564 122,406 150,773 191,595 243,563 111.2% 181.5% 27.3% -7.0% 23.2% 27.1% 27.1%

5 Fee and commission expenses (1,748) (3,199) (17,279) (9,280) (13,105) (12,549) (15,973) (20,339) 83.0% 440.1% -46.3% 41.2% -4.2% 27.3% 27.3%

6 Net fee and commission income 15,627 33,503 86,038 122,284 109,301 138,223 175,622 223,224 114.4% 156.8% 42.1% -10.6% 26.5% 27.1% 27.1%

7 Foreign exchange gains - net 3,556 1,367 2,718 7,639 32,192 38,630 46,356 55,628 -61.6% 98.8% 181.1% 321.4% 20.0% 20.0% 20.0%

8 Income from trading securities (58,874) 15,159 -125.7% -100.0%


HBB EARNINGS MODEL

9 Income from Investment securities 58,487 122,113 9,074 1,676 51,299 161,139 120,040 96,202 108.8% -92.6% -81.5% 2960.8% 214.1% -25.5% -19.9%

10 Other income 550 8,037 4,356 5,295 26,637 109,956 109,933 89,900 1361.3% -45.8% 21.6% 403.1% 312.8% 0.0% -18.2%

11 Equity income 1,527 1,056 12,800 10,949 9,190 10,667 15,893 21,228 -30.8% 1112.1% -14.5% -16.1% 16.1% 49.0% 33.6%

12 Total operating income 177,153 387,903 737,941 849,795 902,372 1,199,431 1,390,375 1,579,893 119.0% 90.2% 15.2% 6.2% 32.9% 15.9% 13.6%

13 Administration expenses (59,273) (108,831) -192,263 (259,058) (339,896) (421,485) (521,859) (648,133) 83.6% 76.7% 34.7% 31.2% 24.0% 23.8% 24.2%

14 Profit before loan loss provision 117,880 279,072 545,678 590,737 562,476 777,946 868,515 931,760 136.7% 95.5% 8.3% -4.8% 38.3% 11.6% 7.3%

15 Provision loss (14,783) (31,025) (84,923) (110,315) (57,626) (184,061) (218,418) (247,197) 109.9% 173.7% 29.9% -47.8% 219.4% 18.7% 13.2%

16 Profit before tax 103,097 248,047 460,755 480,422 504,850 593,885 650,098 684,563 140.6% 85.8% 4.3% 5.1% 17.6% 9.5% 5.3%

17 Income tax (27,907) (62,854) (95,123) (128,255) (97,303) (113,577) (158,551) (165,834) 125.2% 51.3% 34.8% -24.1% 16.7% 39.6% 4.6%

18 Net profit 75,190 185,193 365,632 352,167 407,547 480,308 491,547 518,729 146.3% 97.4% -3.7% 15.7% 17.9% 2.3% 5.5%

19 Minority interest - - - - -

20 Net profit for their shareholders 75,190 185,193 365,632 352,167 407,547 480,308 491,547 518,729 146.3% 97.4% -3.7% 15.7% 17.9% 2.3% 5.5%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 208

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

HBB EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 21 30 39 49 68
II Financial leverage
1 Equity/Total Assets 7.1% 15.0% 13.5% 12.7% 11.1% 9.9% 9.8% 8.7%
2 Equity multiplier = TA/Equity 14.1 6.7 7.4 7.9 9.0 10.1 10.2 11.5
III Asset quality
1 NPL ratio groups 3-5 1.10% 0.95% 2.49% 3.25% 2.25% 3.26% 2.86% 2.49%
2 Loan loss reserve coverage 100% 119% 57% 70% 73% 62% 74% 85%
IV Liquidity
1 Loans to deposits 106% 132% 110% 93% 96% 73% 73% 71%
2 Loans to deposits (including CDS + entrusted 105% 126% 105% 88% 85% 67% 68% 67%
funds)
3 Loans/total assets 60% 51% 39% 44% 45% 42% 42% 41%
4 Interbank funds (borrowing+deposits)/equity 3.7 2.8 3.4 2.8 2.3 1.9 2.1 2.5
5 (Interbank funds +CDS +bonds)/equity 3.7 2.8 3.5 2.8 2.8 2.2 2.3 2.8
6 Interbank funds/total deposits 32% 51% 55% 42% 33% 23% 25% 26%
7 Net interbank position/total assets -6% -11% 0% 1% 4% 15% 16% 17%
V Profitability & Efficiency
1 ROAA 1.4% 2.2% 2.1% 1.5% 1.5% 1.4% 1.1% 0.9%
2 ROAE 19.2% 17.2% 14.8% 11.4% 13.1% 13.8% 11.4% 9.7%
3 NIM 1.9% 2.7% 3.7% 3.4% 2.6% 2.3% 2.2%
4 Operating Exp/ AEA 1.1% 1.3% 1.1% 1.1% 1.3% 1.3% 1.3%
5 Net Interest income/total operating income 55.0% 57.2% 84.4% 89.5% 73.0% 61.8% 66.4% 69.2%
6 Cost to income ratio 33.5% 28.1% 26.1% 30.5% 37.7% 35.1% 37.5% 41.0%
7 Net profit/total operating income 42.4% 47.7% 49.5% 41.4% 45.2% 40.0% 35.4% 32.8%
VI Growth Ratios
1 Asset growth Na 112% 101% 0% 24% 29% 32% 35%
2 Loan growth Na 80% 57% 11% 28% 20% 33% 33%
3 Deposit growth Na 45% 89% 31% 23% 58% 34% 35%
4 Growth of (deposits +CDS) Na 49% 90% 27% 37% 48% 31% 36%
5 Capital growth Na 349% 81% -6% 9% 14% 32% 19%
6 Net profit growth Na 146% 97% -4% 16% 18% 2% 6%
Source: Company financial statements and HSC forecasts

www.hsc.com.vn Page 209

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

HBB EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 0.9% 0.7% 0.7% 0.7% 0.6% 0.7% 0.8% 0.8%
2 Balances with State bank 1.0% 1.1% 0.2% 0.4% 0.8% 0.8% 0.8% 0.8%
3 Deposits with other financial institutions 20.1% 30.8% 46.3% 36.8% 29.5% 34.3% 36.4% 38.8%
4 Net Securities - Held for trading 0.0% 0.0% 0.3% 0.1% 3.1% 1.5% 1.3% 1.2%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 59.6% 50.6% 39.5% 43.5% 44.9% 41.8% 42.0% 41.5%
7 Investment securities 15.5% 13.3% 10.3% 15.0% 18.0% 17.5% 15.6% 14.3%
8 Long term investments 0.6% 1.1% 1.1% 1.3% 0.6% 1.1% 1.0% 0.9%
9 Fixed assets 0.6% 0.4% 0.4% 0.8% 0.7% 0.6% 0.6% 0.5%
10 Other assets 1.7% 1.8% 1.3% 1.5% 1.7% 1.7% 1.5% 1.3%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 6.2% 1.7% 1.3% 0.0% 8.4% 6.8% 5.4% 4.2%
2 Deposits from Banks 26.5% 41.6% 45.9% 35.3% 25.9% 19.0% 20.6% 21.9%
3 Customer deposits 56.0% 38.4% 36.0% 46.9% 46.7% 57.3% 57.9% 58.1%
4 Trusted funds 0.8% 0.6% 0.4% 2.3% 0.8% 2.1% 1.9% 1.7%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 1.1% 1.2% 0.0% 5.4% 2.8% 1.6% 2.2%
7 Other liabilities 3.3% 1.7% 1.6% 2.8% 1.8% 2.2% 2.7% 3.2%
8 Shareholders' equity and other funds 7.1% 15.0% 13.5% 12.7% 11.1% 9.9% 9.8% 8.7%
Chartered capital 5.4% 8.6% 8.5% 11.9% 10.3% 8.0% 8.2% 7.3%
Share premium 0.0% 4.9% 3.5% 0.1% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 0.4% 0.3% 0.3% 0.4% 0.4% 0.5% 0.5% 0.5%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 1.3% 1.3% 1.3% 0.3% 0.4% 1.4% 1.2% 0.9%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 20.1% 30.8% 46.3% 36.8% 29.5% 34.3% 36.4% 38.8%
Deposits from other banks as % of balance sheet 26.5% 41.6% 45.9% 35.3% 25.9% 19.0% 20.6% 21.9%
Net position -6.4% -10.7% 0.4% 1.5% 3.6% 15.4% 15.8% 16.8%
SBV positions
Deposits in SBV as % of balance sheet 0.9% 0.7% 0.7% 0.7% 0.6% 0.7% 0.8% 0.8%
Deposits from SBV as % of balance sheet 6.2% 1.7% 1.3% 0.0% 8.4% 6.8% 5.4% 4.2%
Net position -5.3% -0.9% -0.6% 0.7% -7.7% -6.1% -4.7% -3.5%
Source: Company financial statements and HSC forecasts

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BALANCE SHEET (VNDMillion) y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Cash and cash equivalents 54,504 72,765 119,369 144,425 200,016 236,019 571,422 271,422 33.5% 64.0% 21.0% 38.5% 18.0% 142.1% -52.5%

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2 Balances with State bank 73,895 214,772 511,669 112,914 1,493,565 1,493,565 2,717,600 1,975,240 190.6% 138.2% -77.9% 1222.7% 0.0% 82.0% -27.3%

3 Deposits with other financial institutions 2,658,972 3,317,688 8,584,977 9,159,686 14,382,900 8,262,614 11,115,137 13,338,164 24.8% 158.8% 6.7% 57.0% -42.6% 34.5% 20.0%

4 Net Securities - Held for trading - 263,488 759,111 724,985 491,027 662,886 762,319 876,667 -32.3% 35.0% 15.0% 15.0%

5 Derivatives - - - -

6 Net loans and advances to clients 1,347,680 3,353,999 10,994,812 7,506,934 9,464,859 11,855,230 15,138,242 16,538,887 148.9% 227.8% -31.7% 26.1% 25.3% 27.7% 9.3%

7 Investment securities 1,218,342 2,040,000 3,968,000 2,340,000 2,292,000 2,635,800 3,031,170 3,485,846 67.4% 94.5% -41.0% -2.1% 15.0% 15.0% 15.0%

8 Long term investments 22,000 27,500 44,900 156,002 182,902 237,773 273,438 314,454 25.0% 63.3% 247.4% 17.2% 30.0% 15.0% 15.0%

9 Fixed assets 14,114 32,655 65,056 118,868 195,635 205,417 236,229 271,664 131.4% 99.2% 82.7% 64.6% 5.0% 15.0% 15.0%

10 Other assets 735,429 877,550 1,190,944 2,004,412 1,894,091 2,651,727 3,049,487 3,506,909 19.3% 35.7% 68.3% -5.5% 40.0% 15.0% 15.0%

Total Assets 6,124,937 10,200,417 26,238,839 22,268,226 30,596,995 28,241,031 36,895,044 40,579,252 66.5% 157.2% -15.1% 37.4% -7.7% 30.6% 10.0%
SEABANK EARNINGS MODEL

1 Deposits & Loans from SBV 70,090 - -

2 Deposits from Banks 2,735,388 4,834,294 9,805,315 8,142,897 12,297,482 7,284,050 9,022,736 10,987,960 76.7% 102.8% -17.0% 51.0% -40.8% 23.9% 21.8%

3 Customer deposits 2,312,406 3,511,683 10,744,179 8,587,008 12,345,847 14,568,099 20,973,125 21,163,460 51.9% 206.0% -20.1% 43.8% 18.0% 44.0% 0.9%

4 Trusted funds 30 - -

5 Liabilities from derivatives 3,042 2,885 2,885 3,311 3,793 -5.2% 0.0% 14.8% 14.6%

6 Bonds & Certificates of deposits 2,000,000 1,000,000 - 200,000 229,526 262,961

7 Other liabilities 715,278 798,904 325,106 506,307 469,341 469,341 538,630 1,617,092 11.7% -59.3% 55.7% -7.3% 0.0% 14.8% 200.2%

8 Shareholders' equity and other funds 291,776 1,055,536 3,364,209 4,028,972 5,481,440 5,716,656 6,127,716 6,543,986 261.8% 218.7% 19.8% 36.1% 4.3% 7.2% 6.8%

Chartered capital 250,000 500,000 3,000,000 4,068,545 5,068,545 5,334,656 5,334,656 5,334,656 100.0% 500.0% 35.6% 24.6% 5.3% 0.0% 0.0%

Share premium 23 450,000 46,246 - - -89.7%

Treasury shares - -

Funds 1,602 7,045 64,685 67,452 141,607 28,650 101,190 174,649 339.6% 818.2% 4.3% 109.9% -79.8% 253.2% 72.6%

FX revaluation - -

Asset revaluation - -

Retained profits 40,151 98,492 253,278 (107,025) 271,288 353,350 691,870 1,034,681 145.3% 157.2% -142.3% -353.5% 30.2% 95.8% 49.5%

9 Minor shareholders' interests - -

Liabilities and Equities 6,124,937 10,200,417 26,238,839 22,268,226 30,596,995 28,241,031 36,895,044 40,579,252 66.5% 157.2% -15.1% 37.4% -7.7% 30.6% 2

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 211

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
INCOME STATEMENT y/y

2005 2006 2007 2008 2009 2010e 2011F 2012F 2006 2007 2008 2009 2010e 2011F 2012F

1 Interest income 317,782 595,311 1,474,717 2,988,287 1,644,834 1,900,277 2,109,307 2,341,331 87.3% 147.7% 102.6% -45.0% 15.5% 11.0% 11.0%

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2 Interest expenses (254,756) (419,164) (1,005,702) (2,342,737) (923,348) (1,037,474) (1,141,221) (1,243,931) 64.5% 139.9% 132.9% -60.6% 12.4% 10.0% 9.0%

3 Net interest income 63,026 176,147 469,015 645,550 721,486 862,803 968,086 1,097,400 179.5% 166.3% 37.6% 11.8% 19.6% 12.2% 13.4%

4 Fee and commission income 3,742 10,662 10,810 114,374 101,357 114,027 131,131 150,800 185.0% 1.4% 958.0% -11.4% 12.5% 15.0% 15.0%

5 Fee and commission expenses (1,165) (2,426) (4,118) (6,725) (12,169) (13,768) (14,870) (16,059) 108.3% 69.8% 63.3% 81.0% 13.1% 8.0% 8.0%

6 Net fee and commission income 2,577 8,236 6,692 107,649 89,188 100,258 116,261 134,741 219.6% -18.7% 1508.6% -17.1% 12.4% 16.0% 15.9%

7 Foreign exchange gains - net - (12,986) 1,421 (16,899) 30,615 30,615 30,615 30,615 -110.9% -1289.2% -281.2% 0.0% 0.0% 0.0%

8 Income from trading securities - - -

9 Income from Investment securities (6,742) 24,443 27,524 (283,235) 100,358 50,179 50,000 60,000 -462.5% 12.6% -1129.1% -135.4% -50.0% -0.4% 20.0%

10 Other income 10 7 22 17,695 4,665 6,998 10,000 10,000 -31.7% 217.1% 81637.3% -73.6% 50.0% 42.9% 0.0%

11 Equity income 17,965 - 47,659 2,715 2,715 3,000 3,000 0.0% 10.5% 0.0%
SEABANK EARNINGS MODEL

12 Total operating income 76,836 195,846 552,333 470,760 949,027 1,053,568 1,177,962 1,335,756 154.9% 182.0% -14.8% 101.6% 11.0% 11.8% 13.4%

13 Administration expenses (26,196) (52,126) (103,921) (199,288) (266,592) (295,959) (349,231) (412,093) 99.0% 99.4% 91.8% 33.8% 11.0% 18.0% 18.0%

14 Profit before loan loss provision 50,639 143,720 448,412 271,472 682,435 757,609 828,731 923,663 183.8% 212.0% -39.5% 151.4% 11.0% 9.4% 11.5%

15 Provision loss (5) (6,843) (39,658) (33,283) (82,122) (94,440) (186,992) (280,488) 479.5% -16.1% 146.7% 15.0% 98.0% 50.0%

16 Profit before tax 50,635 136,877 408,754 238,189 600,313 663,169 641,739 643,175 170.3% 198.6% -41.7% 152.0% 10.5% -3.2% 0.2%

17 Income tax (10,532) (38,326) (109,790) (65,229) (140,513) (155,225) (161,200) (163,243) 263.9% 186.5% -40.6% 115.4% 10.5% 3.8% 1.3%

18 Net profit 40,103 98,551 298,964 172,960 459,800 507,943 480,539 479,932 145.7% 203.4% -42.1% 165.8% 10.5% -5.4% -0.1%

19 Minority interest -

20 Net profit for their shareholders 40,103 98,551 298,964 172,960 459,800 507,943 480,539 479,932 145.7% 203.4% -42.1% 165.8% 10.5% -5.4% -0.1%

Source: Company financial statements and HSC forecasts


September
February 2011
July 14h 2008

2009

Page 212

Please refer to the disclosures of potential conflict of interest and the disclaimer at the end of this report
July 14h 2008

SEABANK EARNINGS MODEL


February 2011
September 2009

KEY RATIO 2005 2006 2007 2008 2009 2010e 2011F 2012F
I Number of branches and sub-branches 15 30 42 70 72 85 100 115
II Financial leverage
1 Equity/Total Assets 4.8% 10.3% 12.8% 18.1% 17.9% 20.2% 16.6% 16.1%
2 Equity multiplier = TA/Equity 21.0 9.7 7.8 5.5 5.6 4.9 6.0 6.2
III Asset quality
1 NPL ratio groups 3-5 2.50% 4.00% 4.00%
2 Loan loss reserve coverage 59% 44% 61%
IV Liquidity
1 Loans to deposits 58% 96% 102% 87% 77% 81% 72% 78%
2 Loans to deposits (including CDS + entrusted 58% 96% 86% 78% 77% 80% 71% 77%
funds)
3 Loans/total assets 22% 33% 42% 34% 31% 42% 41% 41%
4 Interbank funds (borrowing+deposits)/equity 9.4 4.6 2.9 2.0 2.2 1.3 1.5 1.7
5 (Interbank funds +CDS +bonds)/equity 9.4 4.6 3.5 2.3 2.2 1.3 1.5 1.7
6 Interbank funds/total deposits 54% 58% 43% 46% 50% 33% 30% 34%
7 Net interbank position/total assets -1% -15% -5% 5% 7% 3% 6% 6%
V Profitability & Efficiency
1 ROAA 0.7% 1.2% 1.6% 0.7% 1.7% 1.7% 1.4% 1.3%
2 ROAE 13.7% 14.6% 13.5% 4.7% 9.7% 9.1% 8.2% 7.7%
3 NIM 1.2% 2.5% 2.9% 3.0% 3.2% 3.5% 3.6% 3.5%
4 Operating Exp/ AEA 0.5% 0.7% 0.6% 0.9% 1.2% 1.2% 1.3% 1.3%
5 Net Interest income/total operating income 82.0% 89.9% 84.9% 137.1% 76.0% 81.9% 82.0% 81.6%
6 Cost to income ratio 34.1% 26.6% 18.8% 42.3% 28.1% 28.1% 29.6% 30.6%
7 Net profit/total operating income 52.2% 50.3% 54.1% 36.7% 48.4% 48.2% 40.9% 36.4%
VI Growth Ratios
1 Asset growth 67% 157% -15% 37% -8% 21% 10%
2 Loan growth 149% 228% -32% 26% 25% 17% 9%
3 Deposit growth 52% 206% -20% 44% 18% 24% 1%
4 Growth of (deposits +CDS) 52% 263% -25% 29% 20% 24% 1%
5 Capital growth 262% 219% 20% 36% 4% 7% 7%
6 Net profit growth 146% 203% -42% 166% 10% -5% 1%
Source: Company financial statements and HSC forecasts

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July 14h 2008

SEABANK EARNINGS MODEL


February 2011
September 2009

BALANCE SHEET 2005 2006 2007 2008 2009 2010e 2011F 2012F
1 Cash and cash equivalents 0.9% 0.7% 0.5% 0.6% 0.7% 0.8% 1.5% 0.7%
2 Balances with State bank 1.2% 2.1% 2.0% 0.5% 4.9% 5.3% 7.4% 4.9%
3 Deposits with other financial institutions 43.4% 32.5% 32.7% 41.1% 47.0% 29.3% 30.1% 32.9%
4 Net Securities - Held for trading 0.0% 2.6% 2.9% 3.3% 1.6% 2.3% 2.1% 2.2%
5 Derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Net loans and advances to clients 22.0% 32.9% 41.9% 33.7% 30.9% 42.0% 41.0% 40.8%
7 Investment securities 19.9% 20.0% 15.1% 10.5% 7.5% 9.3% 8.2% 8.6%
8 Long term investments 0.4% 0.3% 0.2% 0.7% 0.6% 0.8% 0.7% 0.8%
9 Fixed assets 0.2% 0.3% 0.2% 0.5% 0.6% 0.7% 0.6% 0.7%
10 Other assets 12.0% 8.6% 4.5% 9.0% 6.2% 9.4% 8.3% 8.6%
Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

1 Deposits & Loans from SBV 1.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
2 Deposits from Banks 44.7% 47.4% 37.4% 36.6% 40.2% 25.8% 24.5% 27.1%
3 Customer deposits 37.8% 34.4% 40.9% 38.6% 40.3% 51.6% 56.8% 52.2%
4 Trusted funds 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
5 Liabilities from derivatives 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
6 Bonds & Certificates of deposits 0.0% 0.0% 7.6% 4.5% 0.0% 0.7% 0.6% 0.6%
7 Other liabilities 11.7% 7.8% 1.2% 2.3% 1.5% 1.7% 1.5% 4.0%
8 Shareholders' equity and other funds 4.8% 10.3% 12.8% 18.1% 17.9% 20.2% 16.6% 16.1%
Chartered capital 4.1% 4.9% 11.4% 18.3% 16.6% 18.9% 14.5% 13.1%
Share premium 0.0% 4.4% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0%
Treasury shares 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Funds 0.0% 0.1% 0.2% 0.3% 0.5% 0.1% 0.3% 0.4%
FX revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Asset revaluation 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Retained profits 0.7% 1.0% 1.0% -0.5% 0.9% 1.3% 1.9% 2.5%
9 Minor shareholders' interests 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Liabilities and Equities 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Interbank positions 2005 2006 2007 2008 2009 2010e 2011F 2012F
Deposits in other banks as % of balance sheet 43.4% 32.5% 32.7% 41.1% 47.0% 29.3% 30.1% 32.9%
Deposits from other banks as % of balance sheet 44.7% 47.4% 37.4% 36.6% 40.2% 25.8% 24.5% 27.1%
Net position -1.2% -14.9% -4.7% 4.6% 6.8% 3.5% 5.7% 5.8%
SBV positions
Deposits in SBV as % of balance sheet 0.9% 0.7% 0.5% 0.6% 0.7% 0.8% 1.5% 0.7%
Deposits from SBV as % of balance sheet 1.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net position -0.3% 0.7% 0.5% 0.6% 0.7% 0.8% 1.5% 0.7%

Source: Company financial statements and HSC forecasts

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July 14h 2008

September 2009

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