BANKING INDUSTRY REPORT Q2/ PDF Free Download

BANKING INDUSTRY REPORT Q2/2018 1

Content Executive summary 4 2.1.3 Interbank interest rate movement of some countries 34 1. Macroeconomic situation affecting the banking industry 5 2.2 Some basic indicators of Vietnam banking industry 35 1.1 International context 5 1.1.1 World economy overview 6 1.1.2 Current situation of world economy 7 1.2 Domestic context 11 1.2.1 Domestic economy overview 12 1.2.2 Current situation of domestic economy 14 1.3 Policies of ministries, departments and the Government 19 1.3.1 Objectives of macroeconomic policies in 2018 20 1.3.2 Policies of ministries, departments and the Government 21 1.3.3 Policies of the State Bank of Vietnam 22 2 Banking performance evaluation 27 2.1 Operations of world banking system 27 2.1.1 Outstanding policies of central banks over the world and in the region 28 2.2.1 Mobilization and loans 36 2.2.2 Interest rate and exchange rate 40 2.2.3 Balance of Payment 42 2.2.4 Total liquidity 43 2.3 Operations of the State Bank of Vietnam 44 2.3.1 Interest rate 45 2.3.2 Exchange rate 46 2.3.3 OMO market 48 2.3.4 Required reserve 49 2.4 Operations of commercial bank system in Vietnam 51 2.4.1 Banking activity overview 52 2.4.2 Banking network development and payment system of banks 2.4.3 Performance evaluation of some typical banks 69 64 2.1.2 Exchange rate movement of some currencies over the world 33 2.4.4 Outlook and forecast 83 2

Abbreviation AMC Asset Management Company SBV State Bank of Vietnam ATM Automated Teller Machine CB Commercial Bank RE Real Estate ODA Official Development Assistance BOP Balance of Payment OECD Organization for Economic Co-operation and Development MP Monetary Policy POS/EDC/ETF Credit Card Machine DATC Vietnam Debt and Asset Trading Corporation EO Economic Organization FDI Foreign Directed Investment CI Credit Institution IMF International Monetary Fund VAMC Vietnam Asset Management Company IB Interbank VIRAC Vietnam Industry Research and Consultancy JSC 3

Executive summary Banking industry in the first 3 months have achieved many remarkable results such as: In addition, there are some limitations that the banking sector must continue to improve in the future: It is forecasted that the banking sector will continue to operate stably without major fluctuations in 2018. 4

Content 1. Macroeconomic situation affecting the banking industry 1.1 International context 1.2 Domestic context 1.3 Policies of ministries, departments and the Government 5

1. Macroeconomic situation affecting the banking industry 1.1 International context - 1.1.1 World economy overview World economy recovery in 2017 was quite clear. Economic growth and commodity prices, 2010-2018e % Increase in global trade is a key driving force boosting world economy. Source: VIRAC, IMF Global economic growth, 2011-1/2018 Economy in the EU region continues to grow strongly. Source: VIRAC, World Bank 6

1. Macroeconomic situation affecting the banking industry 1.1 International context - 1.1.2 Current situation of world economy Economic growth in ASEAN, 2013-2018F USD billion GDP of ASEAN countries, 1970-2016 Source: VIRAC, ADB Source: VIRAC, Bloomberg 7

1. Macroeconomic situation affecting the banking industry 1.1 International context - 1.1.2 Current situation of world economy The general inflation rate of the world and other major economies tended to increase slightly compared to 2015. % Global inflation rate and in some economic regions, 2012 10M/2016e However, the inflation rate in 2016 was still lower than that in 2014. Source: VIRAC, IMF, WB, GSO % Inflation rate in some countries and in the region, 2014 10M/2016e Source: VIRAC, IMF, WB, GSO 8

1. Macroeconomic situation affecting the banking industry 1.1 International context - 1.1.2 Current situation of world economy In 2017, world commodity prices continued to fluctuate on upward trend, mainly due to sharp rise in energy and metal prices and little volatility of food prices. Basic commodity prices in the world, 2016 2018f Indicator Unit 2016 2017e 2018f 2016-2017e Change 2017e- 2018f Source: VIRAC, World Bank World commodity prices, 2013-2017 Source: VIRAC, World Bank 9

Content 1. Macroeconomic situation affecting the banking industry 1.1 International context 1.2 Domestic context 1.3 Policies of ministries, departments and the Government 10

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.1 Domestic economy overview 2018 is the third year in the whole country to implement the "Five-year Socio-economic Development Plan 2016-2020", taking place in the context of world economic breakthrough growth, vibrant global trade, especially good import export activities in emerging and developing markets, and increase in commodity prices due to increasingly high demand, etc. In 2018 there are several important political and economic events as follows: 11

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.2 Current situation of domestic economy In the first 3 months of 2018, economic growth reached 7.38%, keeping positive trend since the end of 2017. Economic growth, 2014 3M/2018 Indicator 2014 2015 2016 2017 (Unit: VND trillion) 3M/201 8 GDP Agriculture, Forestry and Fishing Industry and Construction Services Products taxes less subsidies on production Economic growth rate, 2014 3M/2018 Source: VIRAC, GSO Source: VIRAC, GSO 12

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.2 Current situation of domestic economy Share of Vietnam's GDP by economic sector, 2014 3M/2018 Source: VIRAC, GSO 13

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.2 Current situation of domestic economy In 2017, the economy in general and commodity market in particular continued to flourish VND trillion Retail sales of consumer goods and services, 2014 3M/2018 Source: VIRAC, GSO % Growth rate of retail sales of consumer goods and services, 2014 3M/2018 Source: VIRAC, GSO 14

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.2 Current situation of domestic economy Consumer price index (CPI) in the first 3 months of 2018 has many changes. Overall consumer price index and commodity groups in the CPI basket, 2014 3M/2018 Source: VIRAC, GSO VND/kg Price movement of some basic commodities, 2014 3M/2018 *Petrol price unit: VND/liter Source: VIRAC, Agency of Price Management 15

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.2 Current situation of domestic economy Other economic indicators: Some macroeconomic indicators of Vietnam, 2014 3M/2018 VND trillion % Some macroeconomic indicators, 2014 3M/2018 Source: VIRAC, GSO Source: VIRAC, GSO 16

1. Macroeconomic situation affecting the banking industry 1.2 Domestic context 1.2.2 Current situation of domestic economy FDI and commodity import-export value, 2014 3M/2018 USD billion Source: VIRAC, GSO FDI and commodity import-export growth, 2014 3M/2018 Source: VIRAC, GSO 17

Content 1. Macroeconomic situation affecting the banking industry 1.1 International context 1.2 Domestic context 1.3 Policies of ministries, departments and the Government 18

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.1 Objectives of the macroeconomic policies in 2018 Objectives of the macroeconomic policies in 2018 19

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.2 Policies of ministries, departments and the Government Policies of the ministries, industries and the Government 20

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.3 Policies of the State Bank of Vietnam Important regulatory policies affecting the banking sector in 2017 21

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.3 Policies of the State Bank of Vietnam Important operating policies in the first three months of 2018 by the State Bank of Vietnam 22

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.3 Policies of the State Bank of Vietnam Thoroughly resolving bad debts through Decree 61/2017/ND-CP and Resolution 42/2017/QH14. 23

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.3 Policies of the State Bank of Vietnam Interest rate support through Decision 1424/QD-NHNN and 1425/QD-NHNN 24

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.3 Policies of the State Bank of Vietnam 25

1. Macroeconomic situation affecting the banking industry 1.3 Policies of ministries, departments and the Government - 1.3.3 Policies of the State Bank of Vietnam 26

Content 2 Banking performance evaluation 2.1 Operations of world banking system 2.2 Some basic indicators of Vietnam banking industry 2.3 Operations of the State Bank of Vietnam 2.4 Operations of commercial bank system in Vietnam 27

2.1 Operations of world banking system 2.1.1 Outstanding policies of central banks over the world and in the region World s top largest economies: Fed Funds Rate, 2008-2017 Federal Reserve System (FED): Year Beginning of the year Increase time Decrease time End of the year Source: VIRAC, FED Interest rate movement according to Fed Funds Rate, % 2008-2017 Source: VIRAC, FED 28

2.1 Operations of world banking system 2.1.1 Outstanding policies of central banks over the world and in the region European Central Bank (ECB): Interest rate of ECB, 2008-2017 Year Beginning of the year Increase time Decrease time End of the year Source: VIRAC, ECB Interest rate of ECB, 2008-2017 % Source: VIRAC, ECB 29

2.1 Operations of world banking system 2.1.1 Outstanding policies of central banks over the world and in the region Bank of Japan (BOJ): Interest rate of BOJ, 2008-2017 Year Beginning of the year Increase time Decrease time End of the year Source: VIRAC, BOJ % Interest rate of BOJ, 2008-2017 Source: VIRAC, BOJ 30

2.1 Operations of world banking system 2.1.1 Outstanding policies of central banks over the world and in the region Some economies in the region Year Interest rate of PBOC, 2008-2017 Beginning of the year Increase time Decrease time End of the year People s Bank of China (PBOC): Source: VIRAC, Global Rate % Interest rate of PBOC, 2008-2017 Source: VIRAC, Global Rate 31

2.1 Operations of world banking system 2.1.1 Outstanding policies of central banks over the world and in the region Other central banks in Asean region: 32

2.1 Operations of world banking system 2.1.2 Exchange rate movement of some currencies over the world USD was devalued on the international market Exchange rates of some currencies in the world, 2016-2017 Indicator Exchange rate Change (%) 2016 2017 2016 2017 USD Index, 2014-2017 Source: VIRAC, Investing.com Source: VIRAC, Investing.com 33

2.1 Operations of world banking system 2.1.3 Interbank interest rate movement of some countries Interbank interest rate in some countries in the world: Interbank interest rate in some countries, 2014-2017 Indicator 2014 2015 2016 2017 Interest rate (Unit: %) Source: VIRAC, OECD Interest rate movement of the interbank market in the world, % 2014-2017 Source: VIRAC, OECD 34

2.2 Some basic indicators of Vietnam banking industry 2.2.1 Mobilization and loans Some indicators of banking industry Total liquidity, capital mobilization and credit to the economy, 2014 3/2018 Indicator 2014 2015 2016 2017 3/2018 Total liquidity Total capital mobilization in the economy Credit to the economy Total liquidity Total capital mobilization in the economy Credit to the economy Value (VND trillion) Growth rate compared to the end of last year VND trillion Source: VIRAC, SBV Source: VIRAC, SBV 36

2.2 Some basic indicators of Vietnam banking industry 2.2.1 Mobilization and loans Loan to deposit ratio (LDR), 8/2016-3/2018 Source: VIRAC, SBV % Loan to deposit ratio, 2/2018 Source: VIRAC, SBV 37

2.2 Some basic indicators of Vietnam banking industry 2.2.1 Mobilization and loans Total Credit to the economy, 2014 3/2018 Indicator 2014 2015 2016 2017 3/2018 Agriculture, Forestry and Fishing Industry and Construction Industry Construction Trading, transport and telecommunication Trade Transport and telecommunication Other services Value (VND trillion) Growth rate compared to the end of last year (%) Total Agriculture, Forestry and Fishing Industry and Construction Industry Construction Trading, transport and telecommunication Trade Transport and telecommunication Other services Source: VIRAC, SBV 38

2.2 Some basic indicators of Vietnam banking industry 2.2.1 Mobilization and loans Structure of credit outstanding balance, 2014 3/2018 (%) Total Agriculture, Forestry and Fishing Industry and Construction Industry Construction Trading, transport and telecommunication Trade Transport and telecommunication Other services 2014 2015 2016 2017 3/2018 Source: VIRAC, SBV 39

2.2 Some basic indicators of Vietnam banking industry 2.2.2 Interest rate and exchange rate VND Average interbank VND/USD exchange rate, 2016 3/2018 Source: VIRAC, SBV 40

2.2 Some basic indicators of Vietnam banking industry 2.2.2 Interest rate and exchange rate Interest rates on the market 1 have been stable since 2015 Average mobilizing and lending rates, 2012-2017e Source: VIRAC, NFSC Marginal interest income ratio, 2012-2017e Source: VIRAC, NFSC 41

2.2 Some basic indicators of Vietnam banking industry 2.2.3 Balance of Payment Balance of International Payment, 2011-2017e Balance of International Payment, 2014 2017 Source: VIRAC, NFSC Indicator 2014 2015 2016 2017 Current account Goods (net) Services (net) Investment income (net) Transfers Financial account Direct Investment (net) Portfolio Investment(net) Other Investment (net) Net Errors and Omissions Overall balance Reserve and related items Source: VIRAC, SBV 42

2.2 Some basic indicators of Vietnam banking industry 2.2.4 Total liquidity VND trillion Total liquidity, 2014 3/2018 Source: VIRAC, SBV Total liquidity structure, 2014 3/2018 Source: VIRAC, SBV 43

2.3 Operations of the State Bank of Vietnam 2.3.1 Interest rate Over the past three years, the SBV has almost no use for interest rates in the economy except for the early 2014. Indicator Basic interest rate Refinancing interest rate Re-discount interest rate Some interest rate policies announced by the SBV, 2014-2017 Beginnin g of the year Adjustments End of the year 2014 Increase Decrease 2017 Overnight rate Interest rate of SBV, 2010-3/2018 Source: VIRAC, SBV Source: VIRAC, SBV 45

2.3 Operations of the State Bank of Vietnam 2.3.2 Exchange rate VND thousand Exchange rate movement at SBV, 2016 3/2018 Source: VIRAC, SBV 46

2.3 Operations of the State Bank of Vietnam 2.3.2 Exchange rate 47

2.3 Operations of the State Bank of Vietnam 2.3.3 OMO market Day Forward interest rate of mortgages and bonds auction on OMO market, 2014-2017 % Open market operations and bonds auction of SBV, 2014 2017 Indicator 2014 2015 2016 2017 Value (Unit: VND trillion/%) Mortgages on the open market Average awarded interest rate Average awarded term Awarded amount Bonds auction of SBV Average awarded interest rate Average awarded term Awarded amount Source: VIRAC, SBV Source: VIRAC, SBV 48

2.3 Operations of the State Bank of Vietnam 2.3.4 Required reserve Required reserve ratio Indicator End of 2014 Adjustments Increase Decrease End of 2017 Source: VIRAC, SBV 49

2.3 Operations of the State Bank of Vietnam 2.3.4 Required reserve Required reserve ratio classified by types of credit institution and currency % Source: VIRAC, SBV 50

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview % Credit growth in 3 months, 2013-2018e Source: VIRAC, GSO Structure of Consumer Loans, 2017 Source: VIRAC, NFSC 52

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview % Interbank interest rate, 2012-3/2018 Source: VIRAC, SBV 53

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Some indicators of banking system, 2014-2017 VND trillion Assets, ROAA and ROAE of commercial bank system, 2014-2017 % Indicator 2014 2015 2016 2017 Value (VND trillion) Total assets** Total mobilization Total credit Growth rate (%) Total assets** Content is intentionally removed Total mobilization for demo purpose Total credit Source: VIRAC, SBV Business performance indicators and banking sector safety ratios(%) ROAA ROAE CAR Credit to mobilization ratio Short-term capital to medium-long term loan ratio Source: VIRAC, SBV 54

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Scale of operations, profits and business performance of the banking industry 55

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Scale of operations, profits and business performance of the banking industry % Some indicators of the whole banking system by credit institutions, 2017 Source: VIRAC, SBV 56

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Scale of operations, profits and business performance of the banking industry 57

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Scale of operations, profits and business performance of the banking industry 58

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview 59

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Bad debt ratio decreased remarkably in 2017. Bad debt ratio movement, 2012-2017e Source: VIRAC, NFSC 60

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview VND trillion Provision for credit losses, 2013-2017e Source: VIRAC, NFSC 61

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview 62

2.4 Operations of commercial bank system in Vietnam 2.4.1 Banking activity overview Minimum Capital Adequacy Ratio, 2012 2017e Source: VIRAC, NFSC Equity capital of 3 state-owned commercial banks according to Basel II, 2018-2020 Source: VIRAC, NFSC 63

2.4 Operations of commercial bank system in Vietnam 2.4.2 Banking network development and payment system of banks Network structure by type of bank, 2016 Bank Dealing room * Bank Dealing room * Source: VIRAC * Summarized from banks' websites Source: VIRAC 64

2.4 Operations of commercial bank system in Vietnam 2.4.2 Banking network development and payment system of banks 65

2.4 Operations of commercial bank system in Vietnam 2.4.2 Banking network development and payment system of banks Dealing room structure by region, 2016 Access ability to dealing rooms, 2016 Source: VIRAC Source: VIRAC The network of banks still has many shortcomings. 66

2.4 Operations of commercial bank system in Vietnam 2.4.2 Banking network development and payment system of banks Development of payment equipment, 2014 - Q1/2018 Source: VIRAC, SBV Development of payment system, 2014 Q1/2018 VND billion Thousand items Source: VIRAC, SBV 67

2.4 Operations of commercial bank system in Vietnam 2.4.2 Banking network development and payment system of banks Thousand items Non-cash payments, 2014 - Q1/2018 VND billion Source: VIRAC, SBV 68

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks 69

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Total assets, 2016-2017 Unit: VND billion Source: VIRAC, Summarized from banks' financial statements 70

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Mobilization and loans, 2016-2017 Source: VIRAC 71

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Profits from forex trading, 2016-2017 Unit: VND billion Source: VIRAC, Summarized from banks' financial statements 72

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Profit after tax, 2016-2017 Unit: VND billion Source: VIRAC, Summarized from banks' financial statements 73

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Net interest income, 2016-2017 Unit: VND billion Source: VIRAC, Summarized from banks' financial statements 74

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Profits from service business, 2016-2017 Unit: VND billion Source: VIRAC, Summarized from banks' financial statements 75

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Profits from investment and stock trading activities, 2016-2017 Unit: VND billion Source: VIRAC, Summarized from banks' financial statements 76

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Profit ratio, 2016-2017 Source: VIRAC 77

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Bad debt ratio, 2016-2017 Source: VIRAC 78

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Provision ratio for risks, 2016-2017 Source: VIRAC 79

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks NIM coefficient, 2016-2017 Unit: % Source: VIRAC 80

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Debt coefficient, 2016-2017 Source: VIRAC 81

2.4 Operations of commercial bank system in Vietnam 2.4.3 Performance evaluation of some typical banks Self-financing ratio, 2016-2017 Source: VIRAC 82

2.4 Operations of commercial bank system in Vietnam 2.4.4 Outlook and forecast For credit to the economy For liquidity of the banking system For interest rate 83

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