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Vietnam Banking and Financial Services Report Q1 2019
Vietnam Banking and Financial Services Report Q1 2019
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Vietnam
Banking & Financial Servic
Services
es
Report
Includes 10-year forecasts to 2027
Vietnam Banking & Financial Services Report | Q1 2019
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 7
Industry Forecast........................................................................................................................................................................... 8
Banking Snapshot ........................................................................................................................................................................................................................ 8
Vietnam's Loan Growth To Slow As Banks Endure Capital Squeeze ......................................................................................................................10
Forecast Tables ............................................................................................................................................................................................................................12
Competitive Landscape ..........................................................................................................................................................................................................14
Regulatory Environment .........................................................................................................................................................................................................20
Market Overview..........................................................................................................................................................................23
Insurance Snapshot...................................................................................................................................................................................................................23
Competitive Landscape ..........................................................................................................................................................................................................25
Regulatory Environment .........................................................................................................................................................................................................28
Market Overview..........................................................................................................................................................................30
Asset Management Snapshot ...............................................................................................................................................................................................30
Competitive Landscape ..........................................................................................................................................................................................................31
Regulatory Environment .........................................................................................................................................................................................................32
Market Overview..........................................................................................................................................................................34
Stock Exchanges Snapshot ....................................................................................................................................................................................................34
Competitive Landscape ..........................................................................................................................................................................................................35
Regulatory Environment .........................................................................................................................................................................................................38
Macroeconomic Forecasts........................................................................................................................................................40
Vietnam's Manufacturing Powerhouse To Sustain Strong Growth Momentum...............................................................................................40
Macroeconomic Forecasts .....................................................................................................................................................................................................43
Household Income Forecasts ...............................................................................................................................................................................................46
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THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Key View
Key View: Vietnam's commercial banking and financial services industry is relatively underdeveloped, and financial penetration is
shallow. However, the sector boasts significant growth potential. We expect strong economic growth performance over the coming
decade to boost household incomes and wealth levels considerably; this will create strong demand for retail banking, insurance and
wealth management products.There are many opportunities for domestic and foreign players to grow organically, as well as through
mergers and acquisitions, despite a strict foreign ownership cap. Vietnam's regulatory and legal framework, as well as its business
environment, are mediocre relative to regional standards, but continuous improvement going forward should boost the
attractiveness of the market.
We hold a constructive view on the Vietnamese financial services sector over the next ten years as its underdeveloped nature,
coupled with a large and relatively young population and rapid economic growth, suggest immense potential for industry growth.
Vietnam's finance, banking and insurance industry grew by a collective 7.7% y-o-y in real terms in Q118, higher than the headline
real GDP growth of 7.4% y-o-y. Over the coming quarters, we forecast growth in the financial services sector to remain buoyant,
supported by robust expansion in other sectors of the economy (particularly construction and manufacturing), favourable
demographics and an increase in banking penetration among the population, which is from a low base. Additionally, growing
affluence among Vietnamese will likely lead to higher demand for premium services like wealth management, life insurance and
retail banking products.
The commercial banking sector is poised to see sustained strong growth over the coming quarters, particularly in the retail banking
segment, amid an increase in urbanisation rate, growing affluence and income of households and a continuous rise in working age
population. While the Vietnamese banking sector remains mired in high levels of bad debt accumulated during the 2012 property
crash, we believe that there is no immediate danger to financial stability. We expect more consolidation within the banking sector
over the coming quarters as policymakers appear committed to overhauling the banking system, and as competition intensifies due
to the gradual opening up of the sector.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
The national insurance sector is developing rapidly, albeit from a low base line. Both the life and non-life segments are posting
steady premium growth and testify to the significant growth potential of the industry. The coverage levels are currently minimal, and
we expect rising household incomes to commensurate with insurance demand. The influx of foreign investment will help to
diversify the range of products available in the market, and will also result in an expansion of distribution channels, enabling insurers
to reach new segments of the potential consumer market.
Vietnam's asset management industry has grown considerably in recent years despite a challenging investment climate, and we
expect improvements in macroeconomic stability and the business environment to further boost growth in the coming years. This
will be aided by an increase in the number of company listings on the stock exchanges, as well as a deepening of capital and money
markets.
• As the Vietnamese banking system shifts towards Basel II standard, which is scheduled for January 2020, we expect multiple
state-owned and joint-stock commercial banks to face capital shortfalls. Banks are likely to face difficulties raising capital given
the small domestic capital market and strict foreign ownership cap. We are lowering our loan growth forecast to 14.0% in 2018
and 13.0% in 2019, from 16.0% and 14.0% previously.
• The Vietnamese banking sector remains on a steady path of recovery aided by a robust macroeconomic outlook and efforts by
the Vietnamese authorities to speed up the resolution of problem loans. That said, we note that sustained high credit growth,
undercapitalisation, poor financial transparency, and a weak risk management framework pose downside risks to the otherwise
positive outlook.
• The government announced that it will be looking to limit or possibly stop the issuance of new licenses for foreign banks in
August as it seeks to encourage foreign takeovers of weaker local banks in order to consolidate and strengthen the financial
system.
• Vietnam is looking to lift limits on the foreign ownership of listed companies according to an announcement by the finance
ministry on November 7. The move would broadly remove the existing foreign ownership cap of 49%, but would exclude
companies operating in 'sensitive and important' sectors.The draft law is expected to be submitted to lawmakers for approval
next year and would take effect in January 2020. The limit for banks, however, will remain at 30%, while insurance will be kept at
49%. The new law would pave the way for Vietnamese companies to be included in the MSCI emerging markets index.
• The Vietnamese government has issued the Social Security Scheme for expatriate workers, also known as Decree No. 143/
2018/ND-CP, which will enter into force on December 1, 2018. The new regulations will affect payroll and taxation. Expatriate
workers with a minimum one-year labor contract that have been granted a work permit, practicing certificate, or practicing
license will be affected by the new measure.
• Vietnam’s wealth management market is still at a nascent stage, but has seen tremendous growth over the past two- to three
years, according to industry insiders. We expect continued strong economic growth to underpin the rise of an affluent and
upper-middle class, which will, in turn, drive the demand for wealth management products.
Finance nominal GVA, USDbn 11.25 12.24 13.43 14.98 16.77 18.84
Finance USD nominal growth, % y-o-y 7.2 8.8 9.7 11.6 11.9 12.3
Finance nominal GVA, VNDbn 251,691.60 278,064.57 310,154.24 354,224.09 403,259.60 457,698.07
Finance VND nominal GVA growth, % y-o-y 9.4 10.5 11.5 14.2 13.8 13.5
Finance nominal GVA, % total GVA 6.28 6.27 6.33 6.50 6.65 6.79
e/f = Fitch Solutions estimate/forecast. Source: National Statistics Office, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Finance nominal GVA, USDbn 21.16 23.72 26.53 29.65 33.10 36.92
Finance USD nominal growth, % y-o-y 12.3 12.1 11.9 11.7 11.6 11.5
Finance nominal GVA, VNDbn 518,325.34 585,761.15 660,666.82 744,219.75 837,422.60 941,394.32
Finance VND nominal GVA growth, % y-o-y 13.2 13.0 12.8 12.6 12.5 12.4
Finance nominal GVA, % total GVA 6.91 7.02 7.12 7.21 7.29 7.36
f = Fitch Solutions forecast. Source: National Statistics Office, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
SWOT
SWOT Analysis
Strengths • Untapped market with room for increased participation of foreign banks.
• Large population with a high savings rate and potential for income growth.
• The Vietnamese government aims to speed up the process of privatising state-owned banks, which will help
modernise the industry.
• State-owned banks will gradually play a lesser role going forward, and the risks associated with state-directed
lending will decrease over time.
• Vietnam's sizeable population and lack of development in both the life and non-life markets are positives for
investors and new entrants.
• There are clear signs of pricing discipline in the non-life segment, and claims control is improving.
Weaknesses • Domestic banks continue to lag behind their foreign peers in terms of financial strength and the
technological curve.
• Accounting standards lag behind international standards and the lack of transparency entails significant
risks for foreign investors.
• Small banks have an overwhelming exposure to real estate and individual loans, resulting in highly skewed
and risky loan portfolios.
• Many of the domestic non-life companies are sub-scale and lack ready access to new capital.
• Many Vietnamese households still do not have sufficient income to purchase non-essential life or non-life
products.
Opportunities • The country remains one of the most under-banked in the region, with significant potential for adopting
cash-free payment systems and new mobile banking technologies.
• Rising income levels and deepening capital markets could give rise to opportunities in more sophisticated
financial products and growth for the local asset management industry.
• Rising income levels mean many households will be in a position to afford insurance products by 2021 and
beyond.
• The government has launched a trial programme to promote the development of export credit insurance.
• Vietnam's government is gradually easing restrictions on foreign companies and appears more receptive to
overseas investment and ownership.
Threats • Track record of macroeconomic instability threatens the credibility of the government and could potentially
drive economic policy away from further liberalisation.
• The high level of government debt risks triggering a fiscal crisis, undermining confidence in the banking
sector.
• The ASEAN Economic Community and the ASEAN Banking Integration Framework will allow more foreign
competition into domestic markets.
• Lack of development and volatility in the Vietnamese capital and bond markets complicate investment
strategies.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Industry Forecast
Banking Snapshot
Key View: The Vietnamese commercial banking industry has strong growth potential given the under-banked nature of the
population, particularly in rural areas, and fast-rising income of households. We expect asset growth to continue outpacing
GDP growth over the coming years. However, the banking system is burdened by high levels of bad debts and has low levels of
capitalisation, which are posing downside risks to financial stability in the country.
• As the Vietnamese banking system shifts towards Basel II standard, which is scheduled for January 2020, we expect multiple
state-owned and joint-stock commercial banks to face capital shortfalls. Banks are likely to face difficulties raising capital given
the small domestic capital market and strict foreign ownership cap. We are lowering our loan growth forecast to 14.0% in 2018
and 13.0% in 2019, from 16.0% and 14.0% previously.
• The government announced that it will be looking to limit or possibly stop the issuance of new licenses for foreign banks in
August as it seeks to encourage foreign takeovers of weaker local banks in order to consolidate and strengthen the financial
system.
• The Vietnamese banking sector remains on a steady path of recovery aided by a robust macroeconomic outlook and efforts by
the Vietnamese authorities to speed up the resolution of problem loans. That said, we note that sustained high credit growth,
undercapitalisation, poor financial transparency, and a weak risk management framework pose downside risks to the otherwise
positive outlook.
• It was reported in February that some of the notable players, such as the Asia Commercial
Bank (ACB), Vietcombank, Techcombank, and Military Bank have successfully written down their VAMC bond exposure
from their balance sheets ahead of schedule. These bonds were previously issued by the VAMC to banks in exchange for their
problem loans, and strong profitability have allowed these banks to set aside higher provisioning expenses.
• In November 2017, the national assembly granted authorities the ability to declare troubled banks bankrupt, through an
amendment to a law on the operation of credit organisations, effective January 15. Although this move is largely symbolic and
unlikely to happen in practice unless as a last resort, it removes a level of safety for underperforming banks.
• The government has introduced Resolution 42, effective August 15 2017, which aims to speed up the resolution of NPLs in the
banking sector. If successfully executed, this will likely help to free up much-needed capital (which is currently set aside as loan
loss provisions), which should be supportive of loan growth and positive for financial stability.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 9
Vietnam Banking & Financial Services Report | Q1 2019
• As the Vietnamese banking system shifts towards Basel II standard, which is scheduled for January 2020, we expect multiple
state-owned and joint-stock commercial banks to face capital shortfalls.
• Banks are likely to face difficulties raising capital given the small domestic capital market and strict foreign ownership cap.
• We are lowering our loan growth forecast to 14.0% in 2018 and 13.0% in 2019, from 16.0% and 14.0% previously.
We believe that Vietnamese banks are likely to face capital pressures over the coming quarters as the banking system transits to the
Basel II regulatory framework. Specifically, state-owned banks will be under greater pressure to raise capital given their larger
shortfall relative to their private sector peers. Given the relatively small domestic capital market and strict foreign ownership caps on
the banking sector, we believe that many banks will struggle to raise sufficient capital to meet the new regulatory requirement. This
is likely to restrict the ability of banks to lend, which poses downside risks to Vietnam’s real GDP growth going into 2019 and 2020.
We are revising down our loan growth forecasts to 14.0% in 2018 and 13.0% in 2019 (from 16.0% and 14.0% previously), but note
that risks are weighted to the downside.
The Vietnamese banking system is set to adopt Basel II standards with effect from January 1, 2020. Under the more stringent rules,
risk-weighted assets will increase as higher weights are assigned to credit risk, while capital charges are also needed for operational
and market risks. Basel II requires that the total capital adequacy ratio (CAR) of banks must be no lower than 8.0%, but Vietnamese
regulators may require banks to meet a minimum tier 1 capital ratio of 8.0% over time, which is much more stringent. Although the
system-wide CAR stood at 12.1% as of May 2018, this belies the challenges that banks will face over the coming quarters. Fitch
Ratings estimates that the average risk weighted assets will increase by around 42% under Basel II calculations. This suggests that
the overall CAR would fall to just 8.5%, according to our calculations at Fitch Solutions, which is just barely above the minimum
requirement.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Moreover, not all segments of the banking sector will have sufficient capital buffers under the Basel II framework. For instance, the
state-owned banks (which account for around 45% of total banking assets) only had CAR of 9.4% in May 2018. Assuming that risk-
weighted assets would increase by the average of 42%, state-owned banks would end up with CAR of only 6.6%. Joint-stock
commercial banks, with a share of 40.6%, would also see their CAR drop from 11.3% to just under 8%, under the enhanced
measures.
Given the imminent capital squeeze on banks, we expect that banks will have to raise capital in the coming quarters in order to
sustain their lending activities. However, we at Fitch Solutions believe that many banks will face difficulties in raising sufficient capital
given constraints on both the size of the domestic capital market and strict ownership restrictions which will weigh on foreign
investor interest.
Domestically, we note that the large size of the banking system relative to its fledgling capital market will limit the ability of banks to
raise capital from domestic sources. For instance, total system assets stood at 165.1% of GDP at end-2017, while the total market
capitalisation of the Ho Chi Minh Stock Exchange index was less than 60% of GDP.
Externally, although we highlighted that the banking sector remains attractive to foreign investors, most foreign banks still prefer to
enter the market via wholly-owned foreign subsidiaries (see ‘Vietnam’s Banking Sector Still Attractive To Foreign Investors’, August
10). This would limit the increase in capitalisation of the banking sector. To that end, the government has announced that it will be
looking to limit or possibly stop the issuance of new licenses for foreign banks in August as it seeks to encourage takeovers of
weaker local banks in order to consolidate and strengthen the financial system.
We believe that either one or a combination of the few scenarios below would have to happen over the coming quarters, or the
ability of Vietnamese banks to facilitate financial intermediation would be negatively impacted, which would adversely shock the
economy. First, there is a chance that the government would step in to inject capital into state-owned banks. Second, state
regulators may postpone or implement the Basel II framework in prolonged phases, allowing more time for banks to grow their
capital organically via retained earnings, while gradually paring back risky loans. Third, policymakers may decide to lift foreign
ownership restrictions from the current 30% limit to attract more foreign banks.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Forecast Tables
ASSETS FORECASTS (VIETNAM 2016-2021)
Indicator 2016 2017e 2018f 2019f 2020f 2021f
Client loans, USD per capita 2,590 3,038 3,327 3,645 4,029 4,474
Client loans, % of total assets 79.3 79.7 79.7 79.7 79.7 79.7
Source: IMF, Fitch Solutions
ASSETS FORECASTS (VIETNAM 2022-2027)
Indicator 2022f 2023f 2024f 2025f 2026f 2027f
Client loans, USD per capita 4,969 5,521 6,136 6,824 7,593 8,453
Client loans, % of total assets 79.7 79.7 79.7 79.7 79.7 79.7
Source: IMF, Fitch Solutions
LIABILITIES FORECASTS (VIETNAM 2016-2021)
Indicator 2016 2017e 2018f 2019f 2020f 2021f
Total liabilities and capital, VNDmn 7,030,432,193 8,267,788,258 9,425,278,615 10,650,564,835 12,035,138,263 13,599,706,238
Total liabilities and capital, USDmn 308,880 364,251 402,789 445,630 497,319 557,365
Total liabilities and capital, % y-o-y 16.2 17.6 14.0 13.0 13.0 13.0
Client deposits, USD per capita 2,817 3,132 3,369 3,659 4,009 4,412
Client deposits, % of total liabilities 86.3 82.2 80.7 80.0 79.3 78.6
Source: IMF, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Client deposits, USD per capita 4,856 5,348 5,892 6,494 7,162 7,902
Loan/deposit ratio 91.92 97.01 98.74 99.63 100.52 101.41 102.32 103.23 104.15 105.08 106.02 106.97
Loan/asset ratio 79.30 79.70 79.70 79.70 79.70 79.70 79.70 79.70 79.70 79.70 79.70 79.70
Source: IMF, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Competitive Landscape
The Vietnamese banking industry consists of a wide range of players, from relatively large state-owned and joint-stock commercial
banks to small privately held banks. These banks held a collective asset of over VND10,000trn as of December 2017, with state-
owned commercial banks (SOCBs) claiming 45% of market share. Joint-stock commercial banks (JSCBs) followed closely behind with
market share of 41% of total assets. Chartered capital of JSCBs was higher than that of state-owned banks, with the former at
around 42% of market share, while the latter accounted for roughly 29% of total industry chartered capital. Joint-venture and 100%
foreign-owned banks accounted for a relatively small market share of 10% by assets, but a higher market share of 21% in terms of
chartered capital.
The classification of SOCBs includes Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Joint Stock
Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Foreign Trade of Vietnam
(Vietcombank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam
Construction Bank, Global Petro Commercial Bank and OCEAN Commercial Bank. These banks may not be 100% fully
government-owned, but have been classified as SOCBs by the central bank.
The state bank introduced a new rule, which took effect in February 2015, forcing domestic banks that have cross ownership of
other lenders to either merge with one another or divest their stakes. Under this rule, banks can own shares of not more than 5
percent in a maximum of two other credit institutions. The State Bank is also urging larger banks to acquire weaker banks, in order
to strengthen the banking sector.
BIDV
The largest bank by total assets in Vietnam is BIDV, with assets in excess of VND1,268trn (USD54.4bn) as of June 2018. This is
followed by Agri Bank, Vietinbank, and Vietcombank. BIDV overtook Agribank in 2016 and became the first bank in Vietnam to
achieve a total asset value of more than VND1.0 quadrillion. BIDV has about 190 branches and 815 transaction offices nationwide
as of end-2016, with one foreign branch in Myanmar. The customer base of BIDV has reached over 7.7mn, representing over 8% of
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 14
Vietnam Banking & Financial Services Report | Q1 2019
Vietnam's population.
Agribank
The second largest bank by assets is Agribank, and it is the only 100% state-owned commercial bank in Vietnam. As of end-2017,
Agribank also boasts total assets in excess of VND1.0 quadrillion, as well as a network of over 2,300 branches and transaction offices
across the country. In contrast to BIDV, Agribank has a focus on Vietnam's agricultural and rural areas, which account for over 70%
of its outstanding loans. In 2010, Agribank expanded overseas and opened its first branch in Cambodia. Agribank has completed a
long-term financing agreement with the state oil company Petrovietnam to provide financing at lower interest rates for the
company to develop Vietnamese oil resources.
The bank has been plagued by a series of high-profile embezzlement scandals. A former Agribank chairman was arrested in
September 2014 over an alleged USD4.4mn scam. In January 2013, Vietnamese federal police said they had arrested former
general director of the state-owned Agribank, Pham Thanh Tan, for 'irresponsibility causing serious consequences.' In another case,
three senior employees at Agribank's leasing arm were sentenced to death, and another four given life in prison for embezzlement
and corruption. In January 2016, 13 ex-bank officials, including Pham Thanh Tan, were given prison sentences for corruption.
In 2014, Agribank began to implement a restructuring plan in order to eliminate bad practices, which have led to high levels of bad
debt, and by the end of 2015 claimed to have slashed the amount of toxic debt on its books.
Vietinbank
Vietinbank is the third largest lender in Vietnam, and was established in 1988 after being separated from the State Bank of Vietnam.
As one of the four largest state-owned commercial banks in the country, Vietinbank's total assets account for a significant part of
the market share of the overall Vietnamese banking system.
Vietinbank has developed a retail and administration network across the country, with about 155 branches and over 1,000
transaction offices nationwide. Vietinbank has assets worth VND1,140trn as of June 2018 and total common equity of VND63.7trn
as of end-2017, the highest of all banks in the country. The bank is also expanding its international presence, with branches in
Frankfurt and Berlin (Germany), a representative office in Myanmar and a subsidiary in Laos. It also has a correspondent relationship
with 1,000 banks in 90 countries worldwide.
At the start of 2015, the State Bank of Vietnam said that Vietinbank should play an active role in the consolidation of the banking
sector by merging with or acquiring weaker lenders, increasing the chances of a merger with PG Bank; however, as of May 2017,
the acquisition has not yet been completed.
Vietcombank
Vietcombank is the fourth largest lender in the country by asset, and was established in 1963 as a state-owned commercial bank. It
is the oldest commercial bank for external affairs in Vietnam and was the first bank in the country to have a centralised capital
management structure. It describes itself as an 'interbank forex payment centre for over 100 domestic banks and foreign banks'
branches operating in Vietnam', and was the first commercial bank in the country to deal in foreign currencies.
After more than half a century in operation, the bank has, as of November 2016, almost 14,000 employees, more than 460
branches/transaction offices/representative office/affiliates both in Vietnam and abroad, including a head office in Hanoi, one
operation centre, one training centre, 96 branches and over 368 transaction offices all over the country. The bank also has three
subsidiaries in Vietnam, two subsidiaries in other countries, one representative office in Singapore and six joint ventures.
Japan's Mizuho Corporate Bank acquired a 15% stake in Vietcombank for a total of VND11.8trn (USD559.04mn) in January 2012,
some months after the deal was revealed.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 15
Vietnam Banking & Financial Services Report | Q1 2019
Singapore's GIC announced in August 2016 that it will acquire a 7.73% stake in the bank and the deal was supposed to be finalised
in Q416. However, the deal hit a snag after the government failed to give approval.
na = not available. Note: Data is latest available. Source: Company reports, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
na = not available. Note: Data is latest available. Source: Company reports, Fitch Solutions
na = not available. Note: Data is latest available. Source: Company reports, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 17
Vietnam Banking & Financial Services Report | Q1 2019
na = not available. Note: Data is latest available. Source: Company reports, Fitch Solutions
Interbank Assets (%
Loans (% of customer Customer Deposits
of interbank Date
deposits) (% of total funding)
liabilities)
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Interbank Assets (%
Loans (% of customer Customer Deposits
of interbank Date
deposits) (% of total funding)
liabilities)
na = not available. Note: Data is latest available. Source: Company reports, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Regulatory Environment
The State Bank of Vietnam (SBV) is the main financial regulatory agency which carries out oversight of all state-owned, joint-stock,
joint-venture and foreign commercial banks. The SBV is not a wholly independent body like the US Federal Reserve, and it continues
to operate under government influence despite the passage of the new State Bank Law in 2010, which nominally expanded its
independence. Some key areas of operation, such as the provision of liquidity support, monetary policy, the management of foreign
currency reserves, foreign exchange rates and issuance of banking licenses, are subject to prime ministerial approval or
consultation.
Pursuant to Decree No. 26/2014/NĐ-CP issued by the Government on April 7 2014 on the organisation and operation of banking
inspection and supervision, the Banking Supervision Agency is a state supervision body and has the following organisational
structure:
Pursuant to Decision No. 35/2014/QĐ-TTg issued by the Prime Minister on June 12 2014, on the functions, missions, authority and
organisation of the SBV Banking Supervision Agency, the agency is comprised of:
• Department for inspection and supervision of domestic credit institutions (Department I).
• Department for inspection and supervision of foreign credit institutions (Department II).
• Department for administrative inspection, appeals, accusations and corruption preventing and fighting (Department III).
• Department for banking system safety supervision (Department IV).
• Department for banking operation safety policies (Department V).
• Department for management of credit institution and banking operation licensing (Department VI).
• Department of human resources (Department VII).
• Office for banking supervision, Hanoi city (Office I).
• Office for banking supervision, Ho Chi Minh City (Office II).
• Office for preventing and fighting money laundering (Office III).
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Decree 22/2006/ND-
February 28 2006 March 22 2006 Permits foreign banks to operate in Vietnam.
CP(Decree 22)
Decree 10/2011/ND-
January 26 2011 March 15 2011 Raises minimum charter capital to VND3.0trn.
CP(Decree 10)
Circular 11/2011/TT- Restricts the usage of deposits and provisions of loan in the
April 29 2011 May 1 2011
NHNN(Circular 11) gold and foreign exchange markets.
Circular 38/2012/TT-
December 28 2012 January 10 2013 Restricts credit institutions from trading gold bars.
NHNN(Circular 38)
Circular 01/2013/TT-
January 7 2013 June 18 2012 Regulates interbank borrowing.
NHNN(Circular 01)
Commercial banks and foreign bank branches in Vietnam will be required to maintain a minimum capital adequacy ratio (CAR) of
8% from 2020 onwards under Circular 41. The new circular will replace Circular 13/2010/TT-NHNN that stipulates a CAR of at least
9% at present.
Circular No. 41/2016/TT-NHNN, dated December 30 2016, will be effective from January 1 2020 and is oriented towards Basel II
standards, including many changes compared to Circular No. 13/2010/TT-NHNN, dated May 20 2010, on adequacy ratios of credit
institutions. Under the Basel II standards, the minimum CAR requisite of banks will be 8%, the same ratio required under Basel I.
However, the CAR under Basel II will calculated using a new formula, which constitutes a tightening of capital requirements.
Resolution 42, which came into effect on August 15, 2017, stipulates the pilot implementation of various policies on NPLs
settlement and the handling of pledged collateral for bad debts of credit institutions, branches of foreign banks, and the Vietnam
Asset Management Company (VAMC) which was established by the government in 2013 to temporary remove these sour loans off
credit institutions. It also defines the rights and duties of all agencies, organisations, and individuals involved in the settlement of the
bad debts and guaranteed assets for the bad debts. Some of the clauses include:
• Article 10 states that debtors' collateral to banks is not limited to residential properties, and there are no legal restrictions on
other types of real estate, such as hotels, resorts, factories and commercial properties, that can be used as pledged assets.
• Article 7 acknowledges creditors' rights to commandeer pledged assets from debtors, according to their debt contract, unless
the asset in question is being held by litigation courts as evidence of a criminal offence on the debtors' behalf.
• Article 8 of the Resolution allows more transparent and simplified legal procedures in dealing with disputes over nonperforming
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Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 21
Vietnam Banking & Financial Services Report | Q1 2019
loans.
• Bad debts can now be sold below their book value, meaning that they are no longer worthless assets (ie, have a positive recovery
rate) to commercial banks.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Market Overview
Insurance Snapshot
Key View: Vietnam's insurance industry remains underdeveloped, with total premiums comprising only around 2% of overall GDP
at present. Widespread poverty and low household incomes have limited the affordability of even basic property and motor
products. As it is one of Asia's fastest-growing economies, we believe that there is potential for rapid growth across most lines over
the next few years. In the personal insurance segment, increasing car ownership will support higher demand for motor insurance
products, while fast growth in private healthcare usage will drive wealthier households to purchase health and personal accident
insurance products. The fragmented nature of the market at present will also provide scope for mergers and acquisitions.
The Vietnamese life insurance sector is poised to grow robustly over the coming years. Growth is estimated to begin from a low
base and is already garnering the attention of major regional Asian and international multinational providers. Life carriers are looking
to gain a foothold in the expanding market as the lucrative untapped potential is vast. The Vietnamese insurance market has some
barriers to entry and laws regarding foreign investment, as well as labour restrictions which will hamper short-term growth. Over the
long term, we expect to see a higher number of new entrants to the market, potentially via mergers and acquisitions and local
partnerships.
The Vietnamese non-life sector is more fragmented and has a smaller overall share when compared to the life sector. The
competitive dynamics of the non-life sector are such that a significant number of domestic and regional providers are competing
with an ever increasing number of multinationals looking to capitalise on market growth prospects. As the premiums are set to
grow steadily and the market becomes more receptive to foreign investment, we expect to see a steady rise in the number of new
entrants to the non-life sector, which will boost product innovation, diversity and the overall sales and distribution network.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
• The Vietnamese government has issued the Social Security Scheme for expatriate workers, also known as Decree No. 143/
2018/ND-CP, which will enter into force on December 1, 2018. The new regulations will affect payroll and taxation. Expatriate
workers with a minimum one-year labor contract that have been granted a work permit, practicing certificate, or practicing
license will be affected by the new measure. Workers exempted from the new social security measures include intra-corporate
transferees and employees who have reached Vietnam’s statutory retirement age, which is 60 years for males and 55 years for
females.
• It was reported that a draft securities law presented by Vietnam's finance ministry at a forum held in Hanoi on November 7 would
broadly remove the existing 49 percent foreign ownership cap on most local companies. However, foreign ownership caps on
companies operating in 'sensitive and important' sectors such as security, defence, telecommunication and insurance, will be
kept at 49%.
• Vietnam Insurance Association reported that Bao Viet Group ranked first among insurance companies in the country with a
revenue of more than VND9.9trn (USD423.7mn) in H118. This accounted for more than a quarter of the total revenue of the 18
life insurance firms operating in the country, which totalled VND36.0trn in the same period. The top five insurance market
leaders are Bao Viet, Daiichi, Prudential, Manulife and AIA.
• According to a report by the Ministry of Finance, total insurance premiums in the first seven months of 2018 surged by 30.8% y-
o-y to VND69.5trn (USD3.0bn). Total assets of insurance firms also rose sharply by 29.7% y-o-y in the same period to
VND365.5trn, while total payout to customers totalled VND18.7trn, marking an increase of 15.2% y-o-y.
• In May 2018, South Korea’s Mirae Asset Life Insurance Co. launched its merged entity with Prevoir Vietnam Life
Insurance, the latest bearing the Mirae name. The Korean insurer bought a 50% stake in Prevoir Vietnam Life Insurance last
year. According to the company, Prevoir Vietnam Life Insurance is Vietnam’s 10th largest life insurer and has shown the fastest
growth in insurance premiums over the past four years.
• Vietnam’s insurance market has grown rapidly from an influx of foreign insurers and new products, government deregulation,
and rapid economic growth. In addition to Mirae Asset Life Insurance, some other Korean companies that have entered the
market include Samsung Fire & Marine Insurance Co., DB Insurance Co., and Hanwha Life Insurance.
Total gross premiums written, VNDbn 87,361.00 105,611.00 125,149.83 143,326.32 164,010.32 183,352.20
Total gross premiums written, VND, % y-o-y 24.5 20.9 18.5 14.5 14.4 11.8
Gross life premiums written, VNDbn 50,497.00 65,050.00 79,562.23 93,212.52 108,883.98 122,724.45
Gross life premiums written, VND, % y-o-y 31.9 28.8 22.3 17.2 16.8 12.7
Gross non-life premiums written, VNDbn 36,864.00 40,561.00 45,587.59 50,113.80 55,126.34 60,627.75
Gross non-life premiums written, VND, % y-o-y 15.6 10.0 12.4 9.9 10.0 10.0
f = Fitch Solutions forecast. Source: National sources, Fitch Solutions
GROSS INSURANCE PREMIUMS WRITTEN (VIETNAM 2022-2027)
Indicator 2022f 2023f 2024f 2025f 2026f 2027f
Total gross premiums written, VNDbn 204,672.07 228,229.32 254,202.89 283,060.06 315,098.75 350,680.10
Total gross premiums written, VND, % y-o-y 11.6 11.5 11.4 11.4 11.3 11.3
Gross life premiums written, VNDbn 137,997.50 154,859.76 173,491.21 194,192.92 217,208.01 242,800.73
Gross life premiums written, VND, % y-o-y 12.4 12.2 12.0 11.9 11.9 11.8
Gross non-life premiums written, VNDbn 66,674.58 73,369.56 80,711.68 88,867.14 97,890.74 107,879.37
Gross non-life premiums written, VND, % y-o-y 10.0 10.0 10.0 10.1 10.2 10.2
f = Fitch Solutions forecast. Source: National sources, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 24
Vietnam Banking & Financial Services Report | Q1 2019
Competitive Landscape
Life Insurance Slowly Attracting More Middle Class
Life insurance density and overall market penetration in Vietnam are very low compared to other countries. This is not necessarily
negative for the life market, as there is significant room for growth, given the country's population of 90mn. Nevertheless, the life
segment has not yet attracted the same range of market entrants that has been attracted to general insurance in Vietnam. The
speedy growth of the middle class, coupled with a culture that places a high value on children's education, should mean that the
Vietnamese become more enthusiastic about buying life cover over the forecast period. Moreover, corporate customers are likely to
see the benefit of buying group life policies as a means of attracting and retaining skilled staff.
The Vietnam Insurance Association reported that there were 18 life insurance companies as of July 2018. Among the 18 life
insurers, only Bảo Việt Life Insurance is Vietnamese owned, while the remainder were joint ventures or wholly foreign-owned
companies. A few companies divide the lion's share of the life segment between them, with Prudential and the former state
monopoly Bao Viet Life, taking about 42%s of premiums, which is down from about 65% in 2015. We remain of the view that, over
time, these two companies' combined shares will be further eroded as new entrants come to the Vietnamese life insurance market.
Bảo Việt 210.4 217.3 249.2 300.4 347.3 462.1 601.6 769.1
Sun life n.a. n.a. n.a. 48.7 11.0 38.2 37.7 25.0
Vietnam's non-life segment is much more fragmented than its life insurance segment, reflecting the fact that whereas life policies
remain affordable only for the relatively small (but growing) middle class, insurance is mandatory for drivers and business property.
Given Vietnam's low average incomes, price competition for basic compulsory lines is fierce.
The market incumbents are the former state monopolies that were corporatised during Vietnam's doi moi shift towards economic
liberalism. Although their businesses are growing in absolute terms, their market share is being squeezed by newer entrants,
particularly the local businesses of major multinational insurers. The three largest players in Vietnam's non-life insurance market are
Bao Viet, PetroVietnam Insurance (PVI) and Bao Minh; together, they accounted for more than half of the total premiums
written in 2013. However, the remainder of the market is fragmented, with particular groups focusing on niche specialties.
There are a total of 30 insurers in the non-life segment. Local companies include AAA, Agricultural Bank Insurance, BIC (a
subsidiary of Bank for Investment and Development of Vietnam), Bao Tin, GIC, Great Mountain JSC, Hung Vuong JSC, Military
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Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 25
Vietnam Banking & Financial Services Report | Q1 2019
Insurance, Petrolimex Joint Stock Insurance Company (PJICO), Nha Rong Insurance (Bao Long), Post Office Insurance,
SVIC, Union Insurance, VietinBank Insurance, VNA Insurance, Vietnam National Reinsurance (VinaRe) and VASS. Joint
ventures include Samsung Vina Insurance and Bao Viet Tokio Marine Insurance. Foreign groups with a presence on the
ground include AIG, QBE, Liberty Mutual, Fubon Insurance, MSIG and ACE (Non-Life).
The development of the premiums of the various non-life companies over 2007-2015 highlights a number of key features and
trends. First, Vietnam's non-life segment is growing steadily in absolute terms, even if this is due to a rise in overall GDP rather than
non-life penetration. Second, the larger companies (other than Bao Viet) have close links with state-owned enterprises that are not
naturally in the insurance businesses. These insurance subsidiaries continue to handle industrial risks for their parents; this is an
aspect of the market which makes it somewhat unusual. Third, very few of the players have scale, even though a few of them are
affiliates of regional/global insurers who can see their Vietnam operations in the context of a larger entity. Many of the companies
that are active in the segment are writing premiums of around USD10mn annually. They are rather small by almost all standards.
Bảo hiểm Bảo Việt 219.6 236.1 257.9 269.8 269.0 265.9 293.5 354.4
Bảo hiểm PVI 183.7 205.3 223.2 242.5 273.9 294.6 291.8 294.5
Bảo Minh 101.5 107.0 109.5 109.7 117.5 128.7 138.7 149.5
Health insurance is likely to be a growth opportunity. In 2014, the World Bank said that Vietnam had made 'huge progress' in
extending social care insurance to the general population, but out-of-pocket costs still made up nearly 60% of health care costs.
Further subsidies for health premiums should sustain the uptake of health insurance policies over the coming years.
Vietnam has one of the fastest-growing car and motorcycle market in South East Asia, which will support growth for general
insurance premiums. Rapid urbanisation will also assist the sale of property insurance, with compulsory fire and explosion cover a
springboard for the marketing of non-mandatory comprehensive policies.
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Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
There are also opportunities for reinsurers. Under Vietnamese law, the maximum loss or liability that an insurer can take on each risk
must be no more than 5% of its equity. The rest must be laid off in outwards reinsurance. Vietnamese domestic non-life insurers rely
heavily on outwards reinsurance, indicating that they are still unable to tap international financial markets to strengthen their
balance sheets. This offers an opportunity for foreign insurers to partner with them and use their local knowledge to expand market
share, while using their own financial strength to improve retention rates.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 27
Vietnam Banking & Financial Services Report | Q1 2019
Regulatory Environment
The Law on Insurance Business (LOIB) dated December 9 2000 replaced previous attempts to regulate insurance providers, and
provides a comprehensive approach to the insurance business. A decade on, some parts of the LOIB were amended and
supplemented by Law 61/2010/QH12 which was issued by the National Assembly on November 24 2010 ("Law 61").
The Ministry of Finance (MOF) is the main supervisory body for the insurance sector in Vietnam. The ministry has the authority to
grant and withdraw licenses, and to issue legal documents, such as circulars and decisions which provide guidelines for the
operation and activities across the industry. The Insurance Supervisory Authority (ISA) is a part of the MOF, which performs the
supervisory task.
In accordance to the Schedule of Specific Commitments in Services annexed to the Protocol of Accession of Vietnam to WTO and
national laws, qualified foreign insurers are permitted to provide (cross-border) insurance services into Vietnam via a broker licensed
to operate in Vietnam.
• Insurance services provided to enterprises with foreign-invested capital, foreigners working in Vietnam.
• Reinsurance services.
• Insurance services in international transportation, including insurance of risks relating to: international maritime transport and
international commercial aviation, with such insurance to cover any or all of the following: the goods being transported, the
vehicle transporting the goods and any liability arising there from; goods in international transit.
• Insurance broking and reinsurance broking services.
• Consultancy, actuarial, risk assessment and claim settlement services.
All restrictions on the ability of foreign insurers to establish 100% foreign-owned subsidiaries were removed on January 1 2008
according to Vietnam's WTO Commitments. Starting from January 2012, which marks the 5th year from the date of Vietnam's
accession, non-life branches of foreign insurance were also permitted, but subjected to regulations.
Divisions, splits, mergers, amalgamations, conversions of the form, transfers of 10% or more of the charter capital or dissolution/
shutdown of an insurer or branch require prior approval of the MOF. Approvals from MOF are also required for a wide range of
changes, including a change of name; adjustment in charter or allocated capital; establishment and closure of branches,
representative offices and business facilities; relocation of head office, branches and representative offices; revision to the content,
scope and duration of operations; change of the Chairperson of the Board of Directors, Chairperson of the Members' Council,
Chairperson of the Company, General Director/Director (CEO), Appointed Actuary, or Reserving Appointed Actuary. The relocation of
any business facilities must also be notified to the MOF.
Below is a summary of the minimum legal capital required for each segment of the business:
Insurer with general insurance, health insurance, and aviation insurance or satellite insurance VND350bn
Insurer with general insurance, health insurance and aviation insurance and satellite insurance VND400bn
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Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Insurer with life insurance, and investment-linked insurance or pension insurance VND800bn
Branch of foreign insurer with general insurance and aviation insurance or satellite insurance VND250bn
Branch of foreign insurer with general, aviation, and satellite insurances VND300bn
Life insurer which wish to add investment-linked and pension insurances To be advised by MOF
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Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Market Overview
Asset Management Snapshot
Key View: Vietnam's asset and wealth management sector is only slightly over a decade old, having been officially established in
May 2007 with the government's issuance of Decision 35, which stipulates the regulation and operation of fund management
companies. Since then, it has attracted high levels of interest from foreign investors despite being held back by a challenging
investment climate in the country, stemming from multiple dong devaluations, periods of high inflation and high interest rates. As
the number of the wealthy individuals grow alongside the strong performance of the economy, we expect the industry's growth
momentum to gain further traction.
• Vietnam’s wealth management market is still at a nascent stage, but has seen tremendous growth over the past two- to three
years, according to industry insiders. We expect continued strong economic growth to underpin the rise of an affluent and
upper-middle class, which will, in turn, drive the demand for wealth management products.
• Bordier & Cie announced in October 2018 that it is gearing up to make its presence in Vietnam. The Swiss private bank has
signed an agreement with the Military Commercial Joint Stock Bank (MB) to launch a new private banking service. As part of the
deal, Bordier will share with MB its wealth management expertise employed in both its Singapore office and Geneva
headquarters.
• According to the Global Wealth Report 2017, wealth per adult in Vietnam was recorded at USD5,391 in 2017, from USD1,638 in
2000. This represented more than a three-fold increase.
• South Korea’s NH Investment & Securities Co. announced in February that it has acquired the full stake in its Vietnamese
joint venture (NH Vietnam Securities) to make it a wholly-owned entity for an undisclosed amount. NHVS provides a full range
of banking services for Vietnamese customers, from retail and corporate banking to investment banking and asset
management.
• It was reported that the State Securities Commission (SSC) has been tasked with building the revised Securities Law, which
should be submitted for the National Assembly’s review in the sixth meeting in October.
• Singapore's CapitaLand has established a new USD300mn commercial fund targeting the Vietnam market. The new vehicle,
CapitaLand Vietnam Commercial I, will be dedicated to investing in grade A commercial real estate in the country, which is
CapitaLand's third largest market in South East Asia by asset size, after Singapore and Malaysia.
• According to Bao Viet Fund Management Company, there are 18 open-end funds, including five bond investment funds and
10 stock investment funds, in Vietnam as of February 2017. The total value of the open-end funds reached more than VND3.0trn
in 2016, a yearly increase of 41%.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 30
Vietnam Banking & Financial Services Report | Q1 2019
Competitive Landscape
Currently, the market size for the asset and wealth management industry is small in Vietnam compared to other developing
countries. There are multiple obstacles still in place and the concept of financial planning is still in its infancy. According to our
estimates, there are about 44 local fund management companies in Vietnam, and there are also several offshore funds investing in
the country. VinaCapital, Mekong Capital, Saigon Asset Management and Dragon Capital are the prominent players in the
industry. Foreign practices, such as Singapore-based private wealth and corporate advisor Rosemount are increasingly looking to
enter Vietnam to get a first-mover advantage.
VinaCapital is a fund management company with a heavy focus on real estate; it has helped IDP become a top-five manufacturer of
dairy products in Vietnam, and Quang Ngai Sugar to gain 85% of market share in Vietnam's bottled soy milk market. Historically, in
VinaCapital's private equity portfolio, larger deals have provided higher returns. Its top 10 exits account for 30 percent of invested
capital, but represent 54 percent of the total exit proceeds, according to a report by DealStreetAsia. VinaCapital manages three
closed-end funds trading on the AIM market of the London Stock Exchange. These funds are: VinaCapital Vietnam Opportunity
Fund Limited (VOF), VinaLand Limited (VNL) and Vietnam Infrastructure Limited (VNI). VinaCapital also co-manages the DFJ
VinaCapital L.P. technology venture capital fund with Draper Fisher Jurvetson.
Mekong Capital is a Vietnam-focused private equity firm which specialises in consumer-driven businesses and came to prominence
with a nine-fold return from restaurant chain operator Golden Gate Group's divestment and a 22 times return on partial exit from
Mobile World. Established in 2001, Mekong Capital has completed 30 private equity investments, of which 21 have been fully
exited and one has been partially exited.
Saigon Asset Management is a fund management and investment banking firm domiciled in the Cayman Islands. It had an initial
focus on Vietnam and subsequently expanded into the ASEAN region. The company manages two open-end funds which are listed
on the Stuttgart Stock Exchange; Vietnam Equity Holding invests in Vietnam-listed equities, and Vietnam Property Holding invests in
Vietnam-listed property-focused equities and private equity.
Dragon Capital was established in 1994 with USD16.0mn, but now has USD1.82bn in assets under management. Located in the UK,
Dragon Capital Markets Europe (DCME) is the group's representative office and is regulated by the Financial Conduct Authority
(FCA).
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 31
Vietnam Banking & Financial Services Report | Q1 2019
Regulatory Environment
The State Securities Commission (SSC), which is an ancillary of the Ministry of Finance (MOF), is the official regulatory body of fund
management companies (FMCs) in the country. On December 5 2012, the MOF issued Circular No. 212/2012/TT-BTC (Circular 212)
on the establishment, organisation, and operation of FMCs, which replaces Decision No. 35/2007/QD-BTC, dated May 15 2007 (as
amended on December 26 2008, Decision 35). Circular 212 came into effect on March 1 2013.
Circular 212 stipulates the conditions and procedures for establishing, organising and operating FMCs, and for the operation of
relevant organisations and individuals in Vietnam. These conditions include:
Under Decree 58, a foreign investor may acquire up to 49% of the charter capital in an existing FMC and, if certain criteria are met, a
new FMC wholly owned by a foreign investor may be set up. Circular 212 sets out in detail such necessary conditions, making it
possible for a foreign investor to acquire capital in an FMC or to establish a 100% foreign-owned FMC.
In contrast to Decision 35, Circular 212 requires any FMC that is a public company, a public funds management company or a public
fund securities investment company to establish an internal audit department. The internal audit department of an FMC has the
authority to inspect, evaluate, and audit management activities, compliance with the regulations, and the internal processes and
operations of all the departments of the FMC. Circular 212 prescribes operating principles for these auditing activities as well as
professional conditions applicable to the members of the internal audit department. The FMC must report to the SSC the
appointment or removal of, or changes to, any members of the internal audit department. The operation of the internal audit
department, together with the internal control department, aims at providing the shareholders or members with another channel
through which they can manage and supervise the activities of the executive board and the FMC.
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Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Under Circular 212, FMCs will be allowed to provide similar services as a securities investment consultancy. These services include
advising clients on investment policies and transactional strategies (such as the allocation of capital, types of investment assets,
method of determining asset value and forms of investment), publishing information on securities investment, and providing the
necessary training programmes on securities investment. To conduct this new business activity, FMCs must sign an investment
consultancy agreement with its clients.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Market Overview
Stock Exchanges Snapshot
Key View: The HOSE will continue to play an important role in the process of privatisation of SOEs in the country, as the
government attempts to pare back its public debt levels to prevent it from hitting the ceiling of 65% of GDP, which is set by the
National Assembly. However, recent volatility in the Vietnamese stock market is likely to hamper the government's divestment
efforts.
• The revised Draft Law on Securities is expected to be submitted to the government in Q219 before moving up to the National
Assembly for consideration, and approval is likely to be in Q419. The State Securities Commission (SSC) was tasked with building
the revised Securities Law earlier in the year.
• Under the SOE equitisation plan approved in July 2017 by Prime Minister Nguyen Xuan Phuc for 2017-2020, the Government
has to divest its stakes in 316 SOEs. However, in the first nine months of 2018, only 11 SOEs’ equitisation plans were approved,
raising the number of SOEs with approved equitisation plans to 26 since the beginning of 2017.
• Vietnam is looking to lift limits on the foreign ownership of listed companies according to an announcement by the finance
ministry on November 7. The move would broadly remove the existing foreign ownership cap of 49%, but would exclude
companies operating in 'sensitive and important' sectors.The draft law is expected to be submitted to lawmakers for approval
next year and would take effect in January 2020. The limit for banks will remain at 30%, while insurance will be kept at 49%. The
new law would pave the way for Vietnamese companies to be included in the MSCI emerging markets index.
• The Ministry of Finance has proposed to cut 51.4% of the total number of business investment conditions under the ministry’s
management. In the field of securities, the ministry will ease the conditions on minimum charter capital for self-trading securities
activity from VND100bn (US$4.3 million) to VND50bn, and reduce the conditions on the number of years of experience with
general directors.
• Vietnam’s stock market regulator, the State Securities Commission of Vietnam, announced a ban in July on ‘cryptocurrency
activity’ for companies operating under its watch. The ban follows a directive from the Prime Minister office, which ordered
authorities to crack down on 'activities related to Bitcoin and other cryptocurrencies'. The move was prompted by high profile
initial coin offering scams, which stole as much as USD660mn from over 32,000 people in Vietnam.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Competitive Landscape
There are two stock exchanges for public listed securities in Vietnam, and a third exchange for public companies not yet listed.
The Ho Chi Minh City Stock Exchange (HOSE) began operations in 2000 with just two listed companies. By end-2017, there were
344 companies listed on the HOSE Index with a total market capitalisation of VND2,614.2trn (USD114.8bn). The total trading
volume of the HOSE in 2017 was more than 47.7bn securities, worth VND1,041.2trn.
The Hanoi Stock Exchange (HNX), formerly the Hanoi Securities Trading Center, opened in July 2005 with six listed companies, and
was renamed in 2009. As of end-December 2017, the HNX Index reported 384 listed stocks with a total market value of
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
VND223.64trn (USD9.8bn). To provide more indicator tools for the government bond market, the HNX launched a bond index series
in January 2015.
The Unlisted Public Company Market (UPCoM) is the market at HNX for public companies not yet listed and was launched in June
2009 with 10 companies. After all shares of publicly listed companies were mandated to register at the Vietnam Securities
Depository, many companies have chosen UPCoM for trading. Currently, trading on UPCoM includes stocks, convertible bonds of
unlisted public companies and stocks of companies delisted from listed markets. Securities registered for UPCoM must be
registered for depository at the Securities Depository Center and backed up by a member. Stocks delisted from HOSE or HNX, or
suspended due to losses, will be moved to UPCoM for trading. 690 stocks are listed on UPCoM Index as of end-2017, with an
estimated market capitalisation of VND648.9trn (USD28.5bn).
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Regulatory Environment
The State Securities Commission of Vietnam (SSC), a subsidiary of the Ministry of Finance, is the main supervisory body of stock
exchanges in Vietnam. The listing conditions on the Ho Chi Minh City Stock Exchange (HOSE) are generally tougher than those on
the Hanoi Stock Exchange (HNX) (including, for example, higher paid-up charter capital, longer operation duration and more
stringent shareholder requirements).
Below is a summary of the requirements for listing as stipulated by Decree 58/2012/ND-CP of the SSC dated July 20 2012.
Conditions for listing shares on HOSE are regulated by Article 53 of Decree 58 and are as follows:
• The shareholding company must, at the time of registration for listing, have paid-up charter capital of VND120.0bn or more,
calculated at book value.
• The company has been in business for at least two years in the form of a shareholding company, calculated up to the time of
registration for listing (except for a state enterprise conducting equitisation associated with listing); the return on equity (ROE) in
the most recent year must have been a minimum of 5% and the business operation in the last two consecutive years must have
been profitable; no debts payable which are overdue for more than one year; not have accumulated losses calculated to the year
of registration for listing; complies with the provisions of law on accounting and financial statements.
• Any member of the board of management or board of controllers, the director (general director), deputy director (deputy general
director), chief accountant, a major shareholder and affiliated persons must make public disclosure of any debts they owe to the
company.
• At least 20% of the voting shares in the company must be held by at least 300 shareholders who are not major shareholders,
except in the case of a state enterprise converting into a shareholding company in accordance with regulations of the prime
minister. Shareholders being individuals or organisations must commit to hold 100% of the shares they own for six months from
the date of listing and 50% of this number of shares for the following six months.
Conditions for listing shares on HNX are regulated by Article 54 of Decree 58 and are as follows:
• The shareholding company must, at the time of registration for listing, have paid-up charter capital of VND30.0bn or more,
calculated at the value recorded in the accounting books.
• The company has operated for at least one year in the form of a shareholding company, calculated up to the time of registration
for listing (except for a State enterprise conducting equitisation associated with listing); the ROE in the most recent year was a
minimum 5%; does not have debts payable which have been overdue for more than one year; does not have accumulated
losses calculated to the year of registration for listing, and it complies with the provisions of law on accounting and financial
statements.
• At least 15% of the voting shares in the company must be held by at least 100 shareholders who are not major shareholders,
except in the case of a State enterprise converting into a shareholding company in accordance with regulations of the Prime
Minister.
• Shareholders being individuals or organisations must undertake to hold 100% of the shares they own for six months from the
date of listing and 50% of this number of shares for the following six months, excluding any shares held by such individuals as
representative of the State owner.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Registration for trading by unlisted public companies in UpCom is governed by Article 56 and conditions are as follows:
• Public companies as prescribed in article 25 of the Law on Securities with securities already registered for depository at the
Securities Depository Centre, but not listed on the Stock Exchange, are permitted to register to trade on the UpCom.
• Any public company making a public offer to sell unlisted securities or securities which do not satisfy all the conditions for listing,
must register to trade the securities on the UpCom in accordance with article 12.1(d) of the Law on Securities.
• The Ministry of Finance shall provide specific regulations on the application file and procedures for registration for trading by
unlisted public companies.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Macroeconomic Forecasts
Vietnam's Manufacturing Powerhouse To Sustain Strong Growth
Momentum
Key View
• We maintain our forecast for Vietnam’s real GDP to grow by 6.9% in 2018 and 6.5% in 2019, following an expansion of 7.0% y-o-y
in the January – September period.
• This will likely be mainly driven by continued strong growth in the export-oriented manufacturing sector, underpinned by liberal
trade policies, positive demographics, and upskilling of its labour force.
• The rise of the tourism sector – supported by government-led marketing campaigns – will provide a boost to the services sector.
Vietnam posted real GDP growth of 6.9% y-o-y in Q318, up from 6.7% y-o-y in the previous quarter, bringing the cumulative growth
in the first three quarters of 2018 to 7.0% y-o-y. We believe that continued efforts by the government to liberalise the economy will
underpin robust growth in the export-oriented manufacturing and construction sectors, while the services sector will also benefit
from higher tourist arrivals. Indeed, the expansion in Q318 was largely led by strong manufacturing growth of 12.7% y-o-y, followed
by the construction, and wholesale and retail sectors which both grew by 8.5% y-o-y. The strong economic performance was in line
with our expectations, and we are therefore maintaining our real GDP growth forecasts of 6.9% in 2018 and 6.5% in 2019.
Source: Vietnam Statistics, Fitch Solutions. Data for first nine months of each year.
The manufacturing sector continued to be the outperformer and main engine of growth, contributing 2.6 percentage points (pp) to
the headline GDP figure. Over the coming quarters, we expect this strong trend to continue, underpinned by three factors.
First, in our view, increasingly liberal trade policy has been the key factor for Vietnam’s industrial success. Vietnam
shares the top spot in Southeast Asia with Singapore for having the most number of bilateral and multilateral free trade agreements
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
(FTAs), being a signatory to 16 of them. We believe that as Vietnam continues to live up to its commitments to further reduce import
tariffs, this will lead to deeper economic integration with the world, boost foreign investments, and enhance productivity. Some of
these reductions in import tariffs have already come into effect since January 2018 (such as 0% import tariff for automobile,
motorbike, vehicle components under the ASEAN FTA) and there are further commitments to progressively reduce tariffs to 0% by
2022 for a range of other commodities. For instance, under the ASEAN – Japan Comprehensive Economic Partnership, the existing
5% import tax rate for various commodities will be removed by 2019. Similarly, under the ASEAN – India FTA, items currently
subjected to import tax rates of between 1-3% will see 0% import tariffs by 2019. Under the Vietnam – Korea FTA, a range of
commodities with import tax rates ranging from 10-20% will also see a gradual reduction to 0% by 2022.
Second, Vietnam has made steady progress in improving its business environment. This can be seen by the higher
scores in the World Economic Forum’s competitiveness index where it improved by five places to 55th (out of 137) in the 2017-18
edition, and in the 2018 World Bank’s ease of doing business index where it climbed by 14 places to 68th among 190 economies.
The Vietnamese government has also invested heavily in power and transport infrastructure to meet rapidly rising demand from the
burgeoning manufacturing sector, resulting in a positive feedback loop.
Third, Vietnam will continue to enjoy demographic dividends over the coming decade, with more than half of its
population currently under the age of 35. Moreover, the Vietnamese government’s efforts to promote access to quality primary
education seems to be having some success. In the latest 2015 OECD Programme for International Student Assessment (PISA),
which tests high school students in math, science and other disciplines, Vietnam ranked a respectable eighth out of 72 participating
countries, ahead of other more developed countries like Germany and Netherlands. This will likely help to ensure a steady pool of
skilled labour going forward.
We believe that Vietnam’s tourism sector (which directly contributed 5.9% of GDP in 2017) has enormous potential and combined
with coordinated government efforts will continue to provide a tailwind for the services sector. Indeed, out of all the services
subsectors, the retail and wholesale sector was the fastest growing and contributed the most (0.9pp) to headline growth the first
nine months of 2018. This was supported by continued strong growth in the number of international tourist arrivals by 14.9% y-o-y
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
in Q318 (23.1% y-o-y in Q218), which brought the total number of foreign visitors to 11.6mn in the January – September period. The
government is looking to sustain this strong momentum and in September, the Vietnam National Administration of Tourism held
various marketing activities in foreign markets including the US, Canada, and Indonesia. In recognition of Vietnam’s achievement in
tourism, the country also won the award for ‘Asia’s Leading Destination’ at the 2018 World Travel Awards in Hong Kong in
September.
Risks To Outlook
While we believe that Vietnam could see short-term gains from the intensifying trade tensions between the US and China as
manufacturers shift their production out of mainland China, Vietnam’s longer-term growth outlook is more uncertain. Vietnam is
highly trade dependent and relies heavily on imported capital goods for its exports. The economy would therefore suffer if rising
trade tensions disrupt global production networks and supply chains. Meanwhile, Vietnam’s reliance on foreign direct investment
also puts the economy at risk from the drying up of external financing due to growing risk-off sentiment and rising interest rates
globally.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 42
Vietnam Banking & Financial Services Report | Q1 2019
Macroeconomic Forecasts
MACROECONOMIC INDICATORS (VIETNAM 2017-2027)
Indicator 2017e 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f
Nominal GDP,
220.5 240.3 261.9 287.5 317.5 351.2 388.4 429.4 474.8 525.1 580.7
USDbn
Nominal GDP,
195.1 200.2 219.1 236.6 257.1 283.2 310.7 343.5 379.9 420.1 464.6
EURbn
GDP per
2,307 2,490 2,687 2,922 3,197 3,505 3,842 4,212 4,620 5,071 5,568
capita, USD
GDP per
2,042 2,074 2,249 2,405 2,589 2,826 3,074 3,369 3,696 4,056 4,455
capita, EUR
Real GDP
growth, % y- 6.8 6.9 6.5 6.5 6.5 6.5 6.5 6.5 6.6 6.6 6.6
o-y
Private final
consumption, 68.0 68.1 68.3 68.5 68.7 68.8 69.0 69.2 69.3 69.5 69.6
% of GDP
Private final
consumption,
7.3 7.0 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8
real growth %
y-o-y
Government
final
6.5 6.5 6.4 6.4 6.4 6.3 6.3 6.2 6.2 6.2 6.1
consumption,
% of GDP
Government
final
consumption, 7.3 6.2 6.2 6.1 5.8 5.8 5.8 5.8 5.8 5.8 5.8
real growth %
y-o-y
Fixed capital
formation, % 23.8 24.3 24.7 24.8 24.9 25.0 25.1 25.2 25.3 25.4 25.5
of GDP
Fixed capital
formation,
10.2 9.3 8.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0
real growth %
y-o-y
Population,
95.54 96.49 97.43 98.36 99.28 100.19 101.08 101.94 102.76 103.54 104.28
mn
Consumer
price
3.5 3.7 4.8 4.8 4.8 4.7 4.7 4.6 4.6 4.6 4.6
inflation, % y-
o-y, ave
Lending rate,
7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0
%, ave
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Indicator 2017e 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f
Central bank
policy rate, % 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25 6.25
eop
Exchange
rate VND/ 22,715.29 23,100.00 23,650.00 24,050.00 24,300.00 24,500.00 24,700.00 24,900.00 25,100.00 25,300.00 25,500.00
USD, ave
Exchange
rate VND/ 25,668.13 27,725.78 28,261.75 29,220.75 30,010.50 30,380.00 30,875.00 31,125.00 31,375.00 31,625.00 31,875.00
EUR, ave
Budget
balance, -12.3 -10.5 -10.9 -11.7 -12.6 -13.6 -14.6 -15.8 -17.1 -18.6 -20.1
USDbn
Budget
balance, % of -5.6 -4.4 -4.2 -4.1 -4.0 -3.9 -3.8 -3.7 -3.6 -3.5 -3.5
GDP
Goods and
services
229.0 252.0 277.2 304.9 335.2 368.5 404.8 444.5 488.2 536.1 588.8
exports,
USDbn
Goods and
services
232.8 256.4 282.2 309.9 340.2 373.4 409.6 449.1 492.5 540.2 592.4
imports,
USDbn
Balance of
trade in
goods and -3.8 -4.4 -5.1 -5.0 -5.0 -4.9 -4.8 -4.6 -4.3 -4.0 -3.6
services,
USDbn
Balance of
trade in
goods and -1.7 -1.8 -1.9 -1.8 -1.6 -1.4 -1.2 -1.1 -0.9 -0.8 -0.6
services, % of
GDP
Current
account
4.7 5.0 5.3 6.3 7.5 8.8 10.3 12.0 13.9 16.1 18.5
balance,
USDbn
Current
account
2.1 2.1 2.0 2.2 2.4 2.5 2.7 2.8 2.9 3.1 3.2
balance, % of
GDP
Foreign
reserves ex 49.1 68.5 88.2 109.4 132.2 156.8 183.4 212.2 243.4 277.2 314.0
gold, USDbn
Import cover, 2.9 3.6 4.2 4.8 5.2 5.6 6.0 6.3 6.6 6.8 7.0
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Indicator 2017e 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f
months
e/f = Fitch Solutions estimate/forecast. Source: National Sources, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Gross Income, per capita, VND 43,821,543.1 48,113,565.5 53,204,212.7 58,847,050.9 65,064,172.3 71,925,958.9
Gross Income, per capita, USD 1,929.16 2,105.63 2,303.21 2,525.62 2,768.69 3,034.85
Households earning
21.9 25.6 29.8 34.6 39.7 45.0
USD5,000+, % total
Households earning
5.0 6.1 7.4 9.0 11.0 13.3
USD10,000+, % total
Households earning
0.1 0.1 0.2 0.2 0.3 0.3
USD50,000+, % total
e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
The accompanying charts detail the population pyramid for 2017, the change in the structure of the population between 2017 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
(1990-2050)
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
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Vietnam Banking & Financial Services Report | Q1 2019
Population, total, '000 68,209.6 80,285.6 84,308.8 88,472.5 93,571.6 98,360.1 102,763.5
Population, total, male, '000 33,583.9 39,551.4 41,521.8 43,683.1 46,284.6 48,687.7 50,847.9
Population, total, female, '000 34,625.7 40,734.2 42,787.0 44,789.4 47,287.0 49,672.4 51,915.6
Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
KEY POPULATION RATIOS (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Active population, total, '000 38,808.1 49,712.2 55,862.2 61,728.5 65,651.4 67,881.1 69,607.9
Active population, % of total population 56.9 61.9 66.3 69.8 70.2 69.0 67.7
Dependent population, total, '000 29,401.5 30,573.4 28,446.6 26,744.0 27,920.1 30,479.1 33,155.6
Dependent ratio, % of total working age 75.8 61.5 50.9 43.3 42.5 44.9 47.6
Youth population, total, '000 25,494.1 25,416.1 22,896.9 20,948.8 21,609.2 22,556.6 22,780.1
Youth population, % of total working age 65.7 51.1 41.0 33.9 32.9 33.2 32.7
Pensionable population, '000 3,907.4 5,157.2 5,549.7 5,795.2 6,311.0 7,922.5 10,375.5
Pensionable population, % of total working age 10.1 10.4 9.9 9.4 9.6 11.7 14.9
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
URBAN/RURAL POPULATION & LIFE EXPECTANCY (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Urban population, '000 13,815.9 19,568.8 23,000.3 26,888.6 31,433.5 36,195.5 41,048.9
Urban population, % of total 20.3 24.4 27.3 30.4 33.6 36.8 39.9
Rural population, '000 54,393.7 60,716.8 61,308.5 61,583.9 62,138.1 62,164.6 61,714.6
Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.2 60.1
Life expectancy at birth, male, years 66.0 68.4 69.3 70.2 71.3 72.5 73.6
Life expectancy at birth, female, years 75.1 78.1 79.2 80.0 80.7 81.5 82.3
Life expectancy at birth, average, years 70.5 73.3 74.3 75.1 76.1 77.1 78.0
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
POPULATION BY AGE GROUP (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, total, '000 9,211.6 7,244.5 6,760.0 7,277.4 7,752.9 7,645.5 7,494.0
Population, 5-9 yrs, total, '000 8,512.6 9,119.0 7,139.9 6,656.5 7,233.4 7,711.0 7,607.6
Population, 10-14 yrs, total, '000 7,769.8 9,052.6 8,997.0 7,014.9 6,622.9 7,200.1 7,678.5
Population, 15-19 yrs, total, '000 7,277.1 8,401.7 8,951.0 8,891.4 6,981.7 6,592.4 7,169.7
Population, 20-24 yrs, total, '000 6,570.6 7,610.2 8,257.3 8,774.7 8,816.8 6,918.2 6,532.6
Population, 25-29 yrs, total, '000 5,938.8 7,019.5 7,427.8 8,037.0 8,674.1 8,719.6 6,834.2
Population, 30-34 yrs, total, '000 5,079.5 6,300.3 6,876.9 7,243.5 7,947.4 8,583.2 8,632.0
Population, 35-39 yrs, total, '000 3,842.8 5,746.6 6,197.3 6,731.1 7,165.6 7,866.5 8,501.2
Population, 40-44 yrs, total, '000 2,447.5 4,938.4 5,665.1 6,103.5 6,652.7 7,086.0 7,784.6
Population, 45-49 yrs, total, '000 2,004.0 3,710.6 4,877.2 5,594.3 6,011.3 6,557.4 6,991.7
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 48
Vietnam Banking & Financial Services Report | Q1 2019
Population, 50-54 yrs, total, '000 1,956.2 2,331.9 3,653.0 4,798.7 5,469.1 5,884.3 6,429.0
Population, 55-59 yrs, total, '000 2,033.3 1,873.8 2,226.7 3,496.6 4,622.9 5,280.5 5,696.1
Population, 60-64 yrs, total, '000 1,658.3 1,779.2 1,729.8 2,057.8 3,309.8 4,392.9 5,036.7
Population, 65-69 yrs, total, '000 1,402.8 1,759.7 1,603.9 1,557.8 1,896.4 3,066.7 4,093.7
Population, 70-74 yrs, total, '000 1,021.2 1,313.9 1,522.6 1,393.9 1,375.0 1,688.1 2,750.6
Population, 75-79 yrs, total, '000 747.2 978.0 1,073.6 1,256.6 1,161.7 1,158.7 1,438.3
Population, 80-84 yrs, total, '000 426.6 593.2 726.9 809.2 958.5 900.0 910.2
Population, 85-89 yrs, total, '000 221.8 334.0 382.6 479.4 541.5 654.8 625.7
Population, 90-94 yrs, total, '000 70.5 131.4 176.3 208.3 265.6 307.6 379.6
Population, 95-99 yrs, total, '000 15.4 40.5 52.3 73.5 88.5 116.1 137.3
Population, 100+ yrs, total, '000 1.9 6.5 11.5 16.5 23.8 30.4 40.2
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
POPULATION BY AGE GROUP % (VIETNAM 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, % total 13.50 9.02 8.02 8.23 8.29 7.77 7.29
Population, 5-9 yrs, % total 12.48 11.36 8.47 7.52 7.73 7.84 7.40
Population, 10-14 yrs, % total 11.39 11.28 10.67 7.93 7.08 7.32 7.47
Population, 15-19 yrs, % total 10.67 10.46 10.62 10.05 7.46 6.70 6.98
Population, 20-24 yrs, % total 9.63 9.48 9.79 9.92 9.42 7.03 6.36
Population, 25-29 yrs, % total 8.71 8.74 8.81 9.08 9.27 8.87 6.65
Population, 30-34 yrs, % total 7.45 7.85 8.16 8.19 8.49 8.73 8.40
Population, 35-39 yrs, % total 5.63 7.16 7.35 7.61 7.66 8.00 8.27
Population, 40-44 yrs, % total 3.59 6.15 6.72 6.90 7.11 7.20 7.58
Population, 45-49 yrs, % total 2.94 4.62 5.78 6.32 6.42 6.67 6.80
Population, 50-54 yrs, % total 2.87 2.90 4.33 5.42 5.84 5.98 6.26
Population, 55-59 yrs, % total 2.98 2.33 2.64 3.95 4.94 5.37 5.54
Population, 60-64 yrs, % total 2.43 2.22 2.05 2.33 3.54 4.47 4.90
Population, 65-69 yrs, % total 2.06 2.19 1.90 1.76 2.03 3.12 3.98
Population, 70-74 yrs, % total 1.50 1.64 1.81 1.58 1.47 1.72 2.68
Population, 75-79 yrs, % total 1.10 1.22 1.27 1.42 1.24 1.18 1.40
Population, 80-84 yrs, % total 0.63 0.74 0.86 0.91 1.02 0.91 0.89
Population, 85-89 yrs, % total 0.33 0.42 0.45 0.54 0.58 0.67 0.61
Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.28 0.31 0.37
Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.09 0.12 0.13
Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 49
Vietnam Banking & Financial Services Report | Q1 2019
Our industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric
modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard
practice, by the prevailing features of the industry data being examined.
Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a variable using more than
the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil
consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most
desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile
form of univariate models: the autoregressive moving average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases,
we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.
We mainly use OLS estimators, and, in order to avoid relying on subjective views and encourage the use of objective views, we use a
'general-to-specific' method. We mainly use a linear model, but simple non-linear models, such as the log-linear model, are used
when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy
variables are used to determine the level of impact.
Effective forecasting depends on appropriately selected regression models. We select the best model according to various different
criteria and tests, including but not exclusive to:
Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience, expertise and knowledge of
industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a
purely mechanical forecasting process would not.
Sector-Specific Methodology
Our Banking & Financial Services Report series is closely integrated with our analysis of country risk, macroeconomic trends and
financial markets. The reports draw heavily on our extensive economic dataset, which includes up to 550 indicators per country, as
well as our in-depth view of each local market. We collate our banking databanks from official sources (including central banks and
regulators) wherever possible, and only fall back on secondary sources where all attempts to secure primary data have failed.
Company data is sourced, in the first instance, from company reports, with central bank, regulator or trade association data only
used as a backup.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 50
Vietnam Banking & Financial Services Report | Q1 2019
• The banking forecast scenario focuses on total assets, client loans and client deposits.
• Total assets are analogous to the combined balance sheet assets of all commercial banks in a particular country. They do not
incorporate the balance sheet of the central bank of the country in question.
• Client loans are loans to non-bank clients. They include loans to public sector and state-owned enterprises. However, they
generally do not include loans to governments, government (or non-government) bonds held or loans to central banks.
• Client deposits are deposits from the non-bank public. They generally include deposits from public sector and state-owned
enterprises. However, they only include government deposits if these are significant.
• We take into account capital items and bond portfolios. The former include shareholders funds, and subordinated debt that may
be counted as capital. The latter includes government and non-government bonds.
In quantifying the collective balance sheets of a particular country, we assume that three equations hold true:
In terms of the equations, other assets and other liabilities are balancing items that ensure equations two and three can be
reconciled with equation one. In practice, other assets and other liabilities are analogous to inter-bank transactions. In some cases,
such transactions are generally with foreign banks.
In most countries for which we have compiled figures, building societies/thrifts are an insignificant part of the banking landscape,
and we do not include them in our figures. The US is the main exception to this.
In some cases, total assets and client loans include significant amounts that are owned or that have been lent to customers in
another country. In some cases, client deposits include significant amounts that have been deposited by residents of another
country. Such cross-border business is particularly important in major financial centres such as Singapore and Hong Kong, the
richer OECD countries and certain countries in Central and Eastern Europe.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 51
Vietnam Banking & Financial Services Report | Q1 2019
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch
Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.
fitchsolutions.com 52
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