Vietnam Banking Report 2020 - FiinResearch

2
FiinGroup Joint Stock Company
Head Office
10th Floor, Peakview Tower
36 Hoang Cau, Dong Da
Hanoi, Vietnam
Tel: +84 (24) 3562 6962
www.fiingroup.vn
Ho Chi Minh City Branch
3rd Floor, Profomilk Plaza Bldg, 51-53 Vo
Van Tan, Ward 6, District 3, Ho Chi Minh,
Vietnam
Tel: +84 (28) 3933 3586
Date: Sep 4, 2020
Dear Our Valued Clients,
Re: The publication of Vietnam Banking Report 2020
FiinResearch, the market research and consulting division of FiinGroup,
is pleased to present our Vietnam Banking Report 2020. So far,
FiinGroup has been publishing annually updated Vietnam Banking Report
for five years, providing the most comprehensive and insightful reports
on the sector.
In addition to the comprehensive analysis of the market, we updated
Vietnam Banking Report this year with emphasis on the impact of the
COVID-19 pandemic on credit growth, asset quality, earning quality and
operation efficiency of the whole banking sector as well as individual
banks. In-depth analysis of key development trends and regulatory
framework in the sector are also covered in the report.
During the research work, leveraging on our extensive business network,
we have conducted various discussions with key industry players to
capture the in-depth sector insights, market situation and performance.
We understand that this is a targeted but also an open research. We would
be happy to provide further information to address any questions that you
may have on the report or for any specific sector or target business in
Vietnam.
Should you have any questions, please contact me or our lead analyst of
banking sector, Ms. Oanh Tran at +84 (24) 3562 6962 (ext. 120) or her
email: oanh.trankieu@fiingroup.vn.
Yours sincerely,
Le Xuan Dong
Director, Head of Research and Consulting Services (“FiinResearch”)
FiinGroup Joint Stock Company

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PART CONTENT PAGE
What's new in this report 6
1
Vietnam’s economy in the light of the COVID-19
pandemic
8
2 Review of banking sector 15
2.1 Credit growth 16
2.2 Deposit growth 23
2.3 Asset quality 27
2.4 Earning quality 34
2.5 Liquidity 40
2.6 Capital adequacy 45
2.7 Operation efficiency & profitability 47
3 Vietnam non-bank updates 50
3.1 Consumer finance 51
3.2 Capital market 53
3.2.1 Equity market 54
3.2.2 Fixed market 57
TABLE OF CONTENTS
PART CONTENT PAGE
4 Key development trends in financial sectors 69
4.1
Loopholes in Corporate bond market and local
regulators’ reaction
70
4.2 Digital Transformation in financial sectors 76
4.3 M&A and sector consolidation 83
5 Major Policy and Regulatory Framework Updates 86
5.1 Policy responses to the COVID-19 pandemic 87
5.2 Updated regulations on banking sector 92
5.3
Updated regulations on non-bank credit
institutions
95
5.4 Updated regulations on capital market 98
5.5 Updated regulations on financial inclusion 101
6 Appendices 105
6.1 Profiles of SOCBs 106
6.2 Profiles of selected JSCBs 110

4
Abbreviations
No Word Stands for
1 1H First half
2 Q1 First quarter
3 Q2 Second quarter
4 7M 7 months
5 ABB An Binh Commercial Joint Stock Bank
6 ABO Asia Bond Online
7 ACB Asia Commercial Joint Stock Bank
8 ADB Asian Development Bank
9 AGRB Vietnam Bank for Agriculture and Rural Development
10 ATM Automated Teller Machine
11 ACH Automated Clearing House
12 BAB Bac A Commercial Joint Stock Bank
13 BID JSC Bank for Investment and Development of Vietnam
14 bn Billion
15 BNM Bank Negara Malaysia (Central Bank of Malaysia)
16 BPS Badan Pusat Statistik (Central Bureau of Statistics of Indonesia)
17 BSA Banking Supervision Agency
18 BVB Viet Capital Joint Stock Commercial Bank
19 CAGR Compounded Annual Growth Rate
20 CAR Capital Adequacy Ratio
21 CASA Current Account Savings Account
22 CF Consumer Finance
23 CFF Cash Flow from Financing Activities
24 CFI Cash Flow from Investing Activities
25 CFO Cash Flow from Operating Activities
No Word Stands for
26 CI Credit Institution
27 CIR Cost-to-Income Ratio
28 CTG Vietnam Joint Stock Commercial Bank for Industry and Trade
29 DOS Singapore Department of Statistics
30 EBIT Earnings before Interest and Taxes
31 EBITDA Earnings before Interest, Taxes, Depreciation and Amortization
32 EIB Vietnam Commercial Joint Stock Export Import Bank
33 E-KYC Electronic-Know Your Customer
34 FDI Foreign Direct Investment
35 FII Foreign Indirect Investment
36 Fincos Finance Companies
37 FOL Foreign Ownership Limit
38 FRED Federal Reserve Economic Data
39 GDP Gross Domestic Product
40 GSO General Statistics Office of Vietnam
41 HDB Ho Chi Minh Development Joint Stock Commercial Bank
42 HNX Hanoi Stock Exchange
43 HOSE Hochiminh Stock Exchange
44 IIP Index of Industrial Production
45 IMF International Monetary Fund
46 IPS Intermediary Payment Services
47 JSCB Joint-Stock Commercial Bank
48 JV Joint Venture
49 KLB Kien Long Commercial Joint Stock Bank
50 KOSIS Korean Statistical Information Service
51 LDR Loan to Deposit Ratio

5
Abbreviations
No Word Stands for
52 LPB LienViet Post Joint Stock Commercial Bank
53 M&A Mergers & Acquisitions
54 MBB Military Commercial Joint Stock Bank
55 MLT Medium and Long Term
56 mn Million
57 MOF Ministry of Finance
58 MOT Ministry of Transport
59 MoM Month-over-month
60 MPI Ministry of Planning and Investment
61 MSB Vietnam Maritime Commercial Joint Stock Bank
62 NAB Nam A Commercial Joint Stock Bank
63 NBS National Bureau of Statistics of China
64 NFSC National Financial Supervision Commission
65 NIM Net Interest Margin
66 NPL Non-performing Loan
67 NVB National Citizen Commercial Joint Stock Bank
68 OCB Orient Commercial Joint Stock Bank
69 ODA Official Development Assistance
70 OTC Over-the-Counter
71 P2P Peer-to-peer
72 PGB Petrolimex Group Commercial Joint Stock Bank
73 PMI Purchasing Managers Index
74 POS Point of Sales
75 QoQ Quarter on Quarter
76 ROA Return on Asset
No Word Stands for
77 ROE Return on Equity
78 SBV State Bank of Vietnam
79 SCB Saigon Joint Stock Commercial Bank
80 SEAB Southeast Asia Commercial Joint Stock Bank
81 SGB Saigon Bank for Industry and Trade
82 SHB Saigon Hanoi Commercial
83 SME Small and Medium-sized Enterprises
84 SOCB State-Owned Commercial Bank
85 ST Short-term
86 STB Sai Gon Thuong Tin Commercial Joint Stock Bank
87 TCB Vietnam Technological and Commercial Joint Stock Bank
88 VAB Vietnam Asia Commercial Joint Stock Bank
89 VAMC Vietnam Asset Management Company
90 VBB Vietnam Thuong Tin Commercial Joint Stock Bank
91 VBMA Vietnam Bond Market Association
92 VNBA Vietnam Banks Association
93 VCB Bank for Foreign Trade of Vietnam
94 VIB Vietnam International Commercial Joint Stock Bank
95 VPB Vietnam Prosperity Joint Stock Commercial Bank
96 YoY Year over Year
97 YTD Year To Date

6
What’s new in this Report
NPL ratio of credit institutions, 2016 – 1H2020
VND trn % of National loan book
2016 2017 2018 2019 Mar-20 Apr-20 May-20 Jun-20 Jul-20
VNDtrn
2014 2015 2016 2017 2018 2019 1Q2020 1H2020
Jun-16 Jun-17 Jun-18 Jun-19 Jun-20
Outstanding loans affected by the Covid-19 by sectors, mid-Apr 2020
Credit outstanding & YoY growth
Credit, deposit and total money supply (M2) YTD growth
in the first 6 months, 2016 - 2020

7
YoY EBIT change and interest coverage ratioTotal outstanding loans of consumer finance players
(excluding inactive FinCos’ loans) (VNDbn) and YoY
growth
What’s new in this Report
2015 2016 2017 2018 2019
CF as a
% of
Nation
al loan
book
%
Use food
delivery
services
more
frequently
%
Shop through
online
shopping
channels more
frequently
%
Use mobile
wallets/intern
et banking
more
frequently
%
Total
number of
cashless
transactions
%
Total value
of cashless
transactions
Average NIM of Vietnamese banks, 2015 – 1H2020
Growth of online payment transactions, Jun 2020
2014 2015 2016 2017 2018 2019 1Q2020 1H2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017 2018 2019 2020

8
Section 1: Vietnam’s economy in the light of the COVID-19 pandemic 8-14
Contents

9
1H2020 GDP growth slumped to 1.81% as the economy has deeply absorbed the negative
impact of COVID-19 since April
Figure 1: GDP growth (YoY), 1H2011 – 1H2020
1H2011 1H2012 1H2013 1H2014 1H2015 1H2016 1H2017 1H2018 1H2019 1H2020
Figure 3: Sector growth Y-o-Y, 1H2017 – 1H2020
Section 1: Vietnam’s economy in the light of the COVID-19 pandemic
% of GDP
(1H2020)
Figure 2: Economic growth by selected economies, 2019 – 1H2020

10
Figure 5: ADB’s economic growth forecasts for key economies in 2020
(Updated June 2020)
Figure 4: COVID-19 Active Cases and Total Recovered
Vietnam successfully contained the first phrase of COVID-19, enabling supply chains and
production to resume, the second wave is still under control

11
Vietnam’s production started to recover in May and continued to improve in June 2020
Figure 6: Vietnam PMI, Jan 2019 – Jun 2020 Figure 7: PMI, Jan 2020 – Jun 2020
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Figure 8: Index of Industrial Production (IIP), Jun 2019 – Jun 2020

12
Tourism revenue slumped in 1H2020 due to strict border control policies in response to
the pandemic, while retail sales remained steady thanks to consistent domestic demand
Figure 9: Revenue of retails, VND trillion and MoM growth, Jan 20 – Jul 20 Figure 10: Revenue of tourism, VND trillion and MoM growth, Jan 20 –
Jul 20
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20

13
Low CPI levels and considerable fiscal space have allowed Vietnam to cope with the COVID-
19 pandemic
Figure 12: CPI and core inflation M-o-M, Jan 2020 –
Jun 2020
1H2015 1H2016 1H2017 1H2018 1H2019 1H2020
Figure 11: CPI and core inflation Y-o-Y, 1H2015 –
1H2020
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
2015 2016 2017 2018 2019 7M2020
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Figure 13: State budget deficit/surplus (VND trn),
2016 – 7M2020
Figure 14: State budget deficit/surplus (VND trn),
Jan 2020 – Jul 2020

14
USD/VND has been sustaining at a constant level, easing the pressure on inflation and
interest rate
Figure 15: Foreign exchange rates USD/VND of Free market and
Vietcombank, Jan 2019 – Jul 2020
Figure 16: Trade balance (US$bn), Jul 2019 – Jul 2020
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20

15
Section 2: Review of banking sector
Contents
2.5 Liquidity 40

16
Credit outstanding & growth
Credit growth remained slow due to the impact of the COVID-19 epidemic, but showed
signals of recovery since late April along with the resumption of domestic supply chains
Figure 17: Credit outstanding (VNDtrn) & YoY growth, 2015 – Jul 20 Figure 18: Credit outstanding (VNDtrn) and YTD growth, Jan 20 – Jul 20
2015 2016 2017 2018 2019 Mar-20 Apr-20 May-20 Jun-20 Jul-20
VNDtrn
Jan-20 Feb-20 Mar-20 14-Apr-20 Apr-20 May-20 Jun-20 Jun-20 Jul-20
2.1 Credit growth

17
When business plans have already been held back because of COVID-19, businesses focus
on capital recovery and secure liquidity rather than seeking for new loans
Figure 19: YTD credit growth by economic sectors
% of
National
loanbook
(Jun 2020)
Figure 20: Average lending interest rates in VND
2.1 Credit growth
Credit growth by economic
sectors

18
New loans were mainly concentrated on prioritized sectors but also grew very slowly
compared to the same period last year
Figure 21: YTD credit growth by prioritized business sectors
% of
National
loanbook
(Jun 2020)
3%
4%
5%
6%
7%
8%
Effective Date
Figure 22: Maximum Interest Rates on Short-term Loans for Prioritized
Sectors
2.1 Credit growth
Credit growth by prioritized
business sectors

19
Credit growth varies among banks: large sized state-owned banks recorded modest
growth, while JSCBs focusing on retail loans performed positively in 1H2020
Figure 23: Outstanding customer loans (VNDbn) and YTD growth by selected banks, 1H2020
2.1 Credit growth
Credit growth by banks

20
The room for credit growth will vary among banks and can be flexible adjusted to fit the
macro-economic situation
Figure 24: Credit growth 2019 and credit growth limit set by SBV for selected banks (updated Apr 2020)
2.1 Credit growth
Credit growth limit

21
2017 2018 2019 1Q2020 2017 2018 2019 1Q2020
2017 2018 2019 1Q2020
2.1 Credit growth
Credit continued to flow into real estate with the growth contributed by loans routed to
developers
Figure 25: Developer and homebuyer loan & their contribution to
national loan book (VNDtrn), 2017 – Q1/2020
Figure 26: Developers vs. Homebuyers’ loans, 2017 – Q1/2020
2017 2018 2019 1Q2020
Real estate loans
Figure 27: Contribution of real estate loan to national loan book, 2017
– Q1/2020

22
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Figure 29: 2019 retail loan growth and % Change in Retail loan growth between 2019 and 2018
Retail banking is expected to remain the credit growth driver in 2020
Retail loan as
% of total
customer loans
Figure 28: Individual vs. Corporate banking YoY growth of 26 selected banks in the last 10 years (including total loans, corporate loans and retail loans)
2.1 Credit growth
Retail loans

23
Contents
2.5 Liquidity 40

24
In 1H2020, deposit growth expanded modestly along with lowering saving interest rates
Figure 30: Customer deposit growth , Jan 20 – Jul 20 Table 1: Total customer deposit, VND bn, 2019 & YTD growth by selected
banks
- 500,000 1,000,000
Customer deposit (VNDbn), 2019
1Q2020 vs
YE2019 (%)
1Q2019 vs
YE2018 (%)
1H2020 vs
YE2019 (%)
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20
2019 20/03/2020 15/5/2020 10/7/2020
Figure 31: Average deposit interest rates in VND, 2019 – 10/7/2020
2.2 Deposit growth

25
Bank
Under 3-
month
deposit
2018
Under 3-
month
deposit
1H2019
1H2019 YTD
VNDbn %
Figure 33: Customer deposit of all credit institutions, by types of
customer, 2016 – Jun 2020
The first 6 months witnessed massive withdrawal of under 3-month deposit from corporate
depositors
Figure 32: Customer deposit by tenors, 2019 vs. 1H2020 Table 2: Deposit under 3 months of selected banks, 2018 – 1H2020
2019 1Q2020 1H2020
Under 3-
month
deposit
2019
Under 3-
month
deposit
1H2020
1H2020 YTD
VNDbn %
2.2 Deposit growth
2016 2017 2018 2019 Mar-20 Jun-20

26
2.2 Deposit growth
Large withdrawal short-term deposits in the first six months also led to sharp decline in
Current and saving deposit (CASA)
Figure 34: Change in CASA deposit by top banks with highest CASA ratio Figure 35: Top 10 banks with highest CASA ratio
-30%
-20%
-10%
0%
10%
20%
30%

27
Contents
2.5 Liquidity 40

28
VND trn % of National loan book VND trn
Sectors with outstanding
loans impacted by Covid-19
By Mid-April, at least one-fourth of total outstanding loan amounting to over VND2,000trn
was seriously impacted by the pandemic and some potentially become NPLs
Figure 36: Outstanding loans affected by the Covid-19 by sectors by mid-Apr 2020
The results of debt restructuring
recorded by 13 Jul 20
Number of
customers
Outstanding loans
(VNDtrn)
Table 3: Results of debt restructuring, 13/7/2020
2.3 Asset quality

29
Figure 38: On-balance sheet NPL reported by banks, 2019 vs. 1H2020
NPL ratios
The picture of asset quality in 1H2020 appeared to be distorted as a large amount of
affected loans has not yet been recategorized as NPLs thanks to SBV’s supportive policies
Figure 37: Non-performing loan (NPL) ratio of credit institutions, 2016 – 1H2020
2016 2017 2018 2019 1Q2020 1H2020
Reported NPL 1H/2020 Reported NPL 2019
2.3 Asset quality

30
Corporate earning deteriorates in 1H2020 amid the increasing prevalence of COVID-19,
escalating the pressure on debt repayment
Figure 39: Quarterly net revenue & net profit after tax growth of non-bank
companies, YoY, Q1/2015-Q2/2020
Figure 40: Quarterly net revenue growth by sector, YoY, Q2/2020
Case study: Corporate earnings &
implications for asset quality
2.3 Asset quality
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017 2018 2019 2020

31
The impact of worsening corporate earning on banks’ asset quality is temporarily hidden by
SBV’s supportive policies at Circular 01on restructuring of debts impacted by the COVID-19
Figure 41: YoY EBIT growth by sectors of non-financial companies,
YoY, Q2/2020
Figure 42: YoY EBIT change (VNDtrn) and interest coverage ratio,
Q1/2015-Q2/2020
Case study: Corporate earnings &
implications for asset quality
2.3 Asset quality
Total EBIT growth: %
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017 2018 2019 2020

32
Provision for loan loss
Banks had to make less provision thanks to Circular 01; however, given the risks from loans
impaired by the COVID-19, many banks have proactively set aside higher provision
Figure 43: Provision for loan loss/total outstanding loans, 2015 – 1H2020 Figure 44: Bad debt coverage ratios, 2015-1H2020
Figure 45: Provision for loan loss/NPL by selected banks, 2019 – 1H2020
2015 2016 2017 2018 2019 1Q2020 1H2020
2.3 Asset quality
2015 2016 2017 2018 2019 1H2020

33
2012 2013 2014 2015 2016 2017 2018 2019 1Q2020
Source: FiinResearch from SBV
Bad debt
resolutions
Figure 46: NPL resolution progress (VNDbn), 2012 – Q1/2020
Figure 47: % NPL reported vs. %NPL including bad debts recognized at VAMC of selected banks, 1H2020
Covid-19 increased the burden of bad debt resolution as 2020 is the deadline to settle bad
debts sold to VAMC, while new NPLs are foreseeably rising
2.3 Asset quality

34
Contents
2.5 Liquidity 40

35
Banks’ earning quality diminished in all segments amidst the ragging effects of the COVID-19
Figure 48 : Income structure of18 listed banks, Q2/2017-Q2/2020, VNDtrn
Figure 49: Income QoQ growth by segments of 18 listed banks, Q2/2017-Q2/2020
0
20
40
60
80
100
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2017 2018 2019 2020
-45%
-30%
-15%
0%
15%
30%
45%
60%
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2017 2018 2019 2020
Income structure
1H2020
2.4 Earning quality

36
Net interest income margin has worsened in Q1&Q2 mainly due to slow credit growth, lower
interest rates and declining CASA deposit as a low-cost source of funds
Figure 50: Average NIM of Vietnamese banks, 2014 – 1H2020 Figure 51: QoQ Net interest income growth, Q4/2017 – Q2/2020
2014 2015 2016 2017 2018 2019 1Q2020 1H2020
-10%
0%
10%
20%
30%
40%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2017 2018 2019 2020
2.4 Earning quality
Net Interest Income

37
Net interest income margin (NIM) of most banks worsened in 1H2020
Figure 52: Profitability of 28 selected banks, 2019 vs. 1H2020
Credit YTD growth
1H2020
Change in NIM,
1H/2020 vs 2019
NIM 1H/2020
(annualized)
2.4 Earning quality
Net Interest Income

38
Net income from service activities decreased in 1H2020 mainly due to banks’ initiative to
cut down on service fee to share difficulties with customers since the COVID outbreak
Figure 53: Net fee and commission income growth of 18 listed banks,
Q4/2017-Q2/2020
Figure 54: Net fee and commission income and growth (QoQ) of 18 listed
banks, Q2/2020
-40%
-20%
0%
20%
40%
60%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2017 2018 2019 2020
-50%
0%
50%
100%
150%
200%
250%
300%
0
250
500
750
1,000
1,250
2.4 Earning quality
Net Fee &
Commission Income

39
In 1H2020 banks reveal sudden increase in the proportion of net gain from remaining
activities
Figure 55: The growth of other operating income, Q4/2017-Q2/2020 Figure 56: Structure of other operating income, Q1/2019-Q2/2020
-50%
0%
50%
100%
150%
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2017 2018 2019 2020
Q1 Q2 Q3 Q4 Q1 Q2
2019 2020
2.4 Earning quality
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20
Figure 57: Securities portfolio of listed banks, VND trn, 2018-2020
Other operating
income

40
Contents
2.5 Liquidity 40

41
Figure 58: Interbank rate, Jan 2019 - Jun2020
Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
System liquidity remained abundant due to the plunge of interbank rate and slow credit
growth
Figure 59: Credit, deposit and total money supply (M2) YTD growth, 1H2016-1H2020
Jun-16 Jun-17 Jun-18 Jun-19 Jun-20
2.5 Liquidity

42
SBV’s Circular 22 became effective, adjusting the ceiling loan to deposit to 85% which
expects affecting loan book growth of state-owned banks, while benefiting private
commercial banks.
Figure 60: Loans to Deposit ratio (LDR) by groups of banks, Q4/2018-Q1/2020
JSCBsSOCBs
Figure 61: Loans to Deposit ratio under Circular 22 by selected banks,
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2018 2019 2020
Mar-20
2.5 Liquidity

43
Figure 62: Capital Structure of Selected Banks, 1H2020 Figure 63: Outstanding Valuable Papers of Banking Sector, 2017-
2019,VND bn
2017 2018 2019
2017 2018 2019
Figure 65: Valuable Paper breakdown by types, Top 10 Valuable Paper
Issuers, 1H2020, VNDbn
Banks have accelerated to raise capital from issuance of valuable papers i.e. C-bonds and
certificates of deposit to improve loans to deposit ratios (LDRs)
2.5 Liquidity
Figure 64: Average CD Interest Rates vs Banks’ Deposit Rates, 2017-
2019

44
2015 2016 2017 2018 2019 1Q2020 SOCBs JSCBs Finance and leasing
companies
Source: FiinResearch from SBV
Figure 68: Bank loans by maturity & deposit by tenors, 2019-1H2020
2.5 Liquidity
Also, as the Covid-19 is dragging, the banking system will still be exposed to the liquidity
risk from maturity mismatch
Figure 66: ST deposit to MLT lending of all credit institutions, 2015 –
1Q2020
Figure 67: ST deposit to MLT lending by types of banks, 2019 vs.
Q1/2020
2019 1Q2020 1H2020 2019 1Q2020 1H2020

45
Contents
2.5 Liquidity 40

46
2017 2018 2019 1Q2020
Figure 71: CAR of banks not having qualified Basel II for CAR, 2019 &
Q1/2020
2.6 Capital adequacy
Vietnamese banks with low capital buffer (only 18/46 banks satisfying Basel II requirement
for capital adequacy) will still be vulnerable to shocks such as the COVID-19
Figure 69: CAR by types of banks, 2017 – Q1/2020
Figure 70: CAR of banks having qualified Basel II for CAR, 2019 & Q1/2020

47
Contents
2.5 Liquidity 40

48
Along with promoting non-interest income from service fees and cross selling to compensate
for decreasing interest income, banks are on the trend of tightening their belts
Figure 72: Cost to income ratio of banking sector, 2015 – 1H2020
Figure 74: Cost to income ratio by 29 selected banks, 2019 vs. 1H2020
2015 2016 2017 2018 2019 1Q2020 1H2020
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2018 2019 2020
Figure 73: Operating income and expense growth, QoQ, Q1/2018-
Q2/2020
2.7 Operation efficiency & profitability Operation efficiency

49
Figure 76: Total owner’s equity & ROE by 28 selected banks, 1H2020 Figure 77: Total assets & ROA by 28 selected banks, 1H2020
2.7 Operation efficiency & profitability
Bank profit remained positive thanks to aggressive operating cost reduction and delayed
provision expenses
Figure 75: Average ROE & ROA of Vietnamese banks, 2014 – 1H2020
2014 2015 2016 2017 2018 2019 1Q2020 1H2020
Profitability

50
Section 3: Vietnam non-bank updates
Contents

51
CF as a % of
National
Loan Book
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
After a rapid expansion period, consumer finance market got steady growth over the last
three years amid tighter supervision
Figure 78: Total outstanding loans of consumer finance players
(excluding inactive FinCos’ loans) (VNDbn) and YoY growth
Figure 79: Proportion of banks' CF and active Fincos, 2015 - 2019
3.1 Consumer finance

52
Timeline Regulated
proportion of
cash loan (%)
Remark
2018 2019
2018 2019
2018 2019
2018 2019
FinCos 2018 2019
Table 4: Circular 18/2019’s roadmap to reduce proportion of cash loan Table 5: Cash loans as % of FinCos’ loan book
3.1 Consumer finance
Consumer loans via credit cards witnessed exponential expansion, while cash loans still
dominated Fincos’ loan book
Figure 80: Market Segment by Products 2019 vs. 2018 (VNDbn)

53
Contents

54
Vietnam stock market tumbled during the first quarter of 2020 with March seeing a 31%
slump due to concern over the global spread of the coronavirus
Figure 81: VNIndex closing prices, 2019 – Jun 2020
Figure 82: VNIndex trading volumes (mn shares), 2019 – Jun 2020
3.2 Capital market

55
Figure 84: Net buying/selling value of foreign investors from the beginning of 2020 – 19 Aug 2020
Vietnam stock market tumbled during the first quarter of 2020 with March seeing a 31%
slump due to concern over the global spread of the coronavirus
Figure 83: Market capitalization (US$bn), 2012 – 1H2020
2012 2013 2014 2015 2016 2017 2018 2019 1H2020
3.2 Capital market
Equity market
Jan-20 Jan-20 Feb-20 Mar-20 Apr-20 May-20 May-20 Jun-20 Jul-20 Aug-20

56
Figure 87: Stock price change (%) of key industries, beginning of 2020 –
7/8/2020
As VNIndex experienced volatility and correction, the average market valuation also
observed decrease in term of price multiples such as P/E, P/B and P/S
Figure 85: Market’s P/E equivalent to VN-Index point, 2019 – July 2020 Figure 86: Market multiples of Vietnam stock market, 2018 – 7M2020
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
P/E P/B P/S
2018 2019 7M2020
3.2 Capital market
Equity market

57
Contents

58
Fixed income market had grown significantly in 2019 but leveled off in 1H2020 due to
complicated development of COVID-19
Source: FiinResearch from MOF, ABO
2012 2013 2014 2015 2016 2017 2018 2019 1H2020
Figure 88: Fixed income market size, 2012 – 1H2020 Figure 89: Growth of fixed income market size YoY, 2012 – 1H2020
2012 2013 2014 2015 2016 2017 2018 2019 1H2020
Figure 90: Bond outstanding value as percentage of GDP, 2012 – 1H2020
3.2 Capital market
Fixed market
y-o-y y-o-y y-o-y y-o-y y-o-y y-o-y y-o-y y-o-y y-o-y
2012 2013 2014 2015 2016 2017 2018 2019 1H2020

59
2012 2013 2014 2015 2016 2017 2018 2019 1H2020
Despite remarkable growth since 2015, Vietnam’s bond market remains smallest in East
Asia
G-bond market
Figure 92: Scale of listed G-bonds by volumes (VNDtrn), 2012 – 1H2020
2015 2016 2017 2018 2019 1H2020
3.2 Capital market
Figure 91: G-bond market size (outstanding value) as % of GDP, 2015 –
1H2020

60
G-bonds was an appealing instrument for investors in 2019, with a recorded of
winning/offering ratio of 80%, but had lost their charm stepping into 2020
G-bond market
Figure 93: G-bond listing structure, 2019 – 1H2020 Figure 94: Primary market – Winning/Offering ratio of G-bonds, Jan 19
– Jul 20
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
3.2 Capital market

61
2014 2015 2016 2017 2018 6M2019 2019 1Q2020
G-bond market
Bank is no longer the primary investors of G-bonds
Figure 95: G-bond trading value in the secondary market (US$bn), Jun 18
– Jun 20
Figure 96: G-bond investor profile, 2014 – Q1/2020
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
3.2 Capital market

62
G-bonds lost their attractiveness in Q1/2020 as interest rate declined and foreign investors
net sold, but it regained in Q2/2020
G-bond market
Figure 97: Net buying/selling outright value of foreign investors
(VNDbn), Jan 2019 – Jun 2020
Figure 98: G-bond yield curve, Dec 2017 – Jul 2020
3.2 Capital market

63
Issuance value in Q2/2020 exceeded planned, especially in 10-year and 15-year bonds
Tenor Plan for 2020 Plan for Q3/2020 Plan for Q2/2020 Issuance in Q2/2020
% Winning in
Q2/2020
G-bond market
Table 6: G-bond issuance plan in 2020 (VNDbn)
3.2 Capital market

64
Corporate bonds market grew exponentially over the past few years, but over 90% of issued
bonds were under private placements!
C-bond market
Figure 99: C-bond issued volume and market size, 2015 – 1H2020 Figure 100: New issuances of C-bonds (VND trn), 2015 – 1H2020
-
50
100
150
200
250
300
350
2015 2016 2017 2018 2019 1H2019 1H20202015 2016 2017 2018 2019 1Q2020 1H2020
VNDtrn
Figure 101: C-bond market size (outstanding value) as % of GDP, 2015 –
1H2020
2015 2016 2017 2018 2019 1H2020
3.2 Capital market

65
Figure 103: Volume of C-bonds (VNDbn) issued by real estate developers
1H2020
Banks and real estate companies remained major issuers of C-bonds in 1H2020
Figure 104: Volume of C-bonds (VNDbn) issued by banks, 1H2020
Figure 102: Structure of C-bond issuers, 1H2020
C-bond marketSection 3: Vietnam non-bank updates
3.2 Capital market

66
C-bond issuance has emerged as an alternative source of capital for businesses and a new
investment instrument for investors thanks to attractive interest rates
C-bond market
Figure 105: C-bond average tenure and interest rates by issuers,
1H2020
Figure 106: Average deposit interest rates of over 12-month tenure by
commercial banks, 1H2020
3.2 Capital market

67
C-bond market
Individual investors emerging as major C-bond investors
Figure 107: C-bond investor structure, 2019 vs 1H2020
3.2 Capital market

68
Individuals are seen pouring money in real estate bonds regardless of worrying performance
of real estate developers
Figure 108: Real estate C-bond investor structure
3.2 Capital market
C-bond market

69
Section 4: Key development trends in financial sectors
Contents
4.1 Loopholes in Corporate bond market and local regulators’ reaction 70

70
Loopholes in C-
bond market
The C-bond market witnessed the fever of growth over the past year but also revealed
prominent problems
4.1 Loopholes in Corporate bond market and local regulators’ reaction

71
Nearly 95% of total bonds issued in 2019 were under opaque private placement while
current regulations exist significant loopholes that cause information asymmetry and credit
risks
Issues of private
placements
Figure 109: C-bond issuance structure, 2016 – 1H2020
2016 2017 2018 2019 1H2020

72
Figure 110: Listed corporate bonds value (VNDbn), June 2020
Liquidity is also one of the key risks for corporate bond market in Vietnam, especially
under the circumstances of limited numbers of listed bonds
Liquidity riskSection 4: Key development trends in financial sectors

73
Corporate earning non-financial companies' performance are worsening, ringing a wake-up
call for credit risk management for both banks’ lending and C-bond investment
Figure 112: Quarterly profit after tax growth, YoY, Q1/2017 – Q2/2020
Corporate earning
of key bond issuer
Figure 111: Quarterly net revenue growth, YoY, Q1/2017 – Q2/2020

74
Decreased earnings quality has led to a sharp decline in corporate ability to pay both
principal and interest
Corporate earning
of key bond issuer
Figure 114: 5-year quarterly interest coverage earning of real estate sector, Q1/2015 – Q2/2020
Figure 113: Debt/EBITDA ratios of real estate and non-financial companies, Q1/2015 – Q2/2020

75
Government’s
response
The regulators completed revisions of Decree 163. Law on Enterprises and Securities Law
which are aimed to address the regulatory loopholes in private placements

76
Contents

77
Figure 115: Cashless transaction value via mobile phone and internet
channels (VND trn), 1H2018 – 1H2020
Use food delivery
services more
frequently
Shop through
online shopping
channels more
frequently
Use mobile
wallets/internet
banking more
frequently
Total number of
cashless transactions
Total value of
cashless transactions
Figure 116: Survey on consumer use of E-commerce after social
distancing and cashless transactions indicator, June 2020, YoY growth
Consumer Behavior Government Support
Table 7: Drivers of cashless payments
COVID-19 outbreak boosts the appeal of cashless transactions, especially digital payments,
which has been thriving over the last 3 years
4.2 Digital transformation in financial sector
1H2018 1H2019 1H2020

78
Digital transformation has bloomed among Vietnamese banks
Digital
Transformation in
Banking

79
Digital banking transaction volume and value have accelerated recently thanks to banks’
remarkably growing investment in technology
1H2018 1H2019 1H2020
Figure 118: VPB’s Digital Banking Transaction
Volumes & Number of Digital Banking Users,
(000)
Figure 117: TCB’s Retail E-Banking transaction
value & volume (VNDtrn & Mn)
2016 2017 2018 2019 1H2020

80
Banks are increasingly partnering with Intermediary Service Providers (IPS), enabling more
consumers to have access to non-cash payment services
Case Study 1:
Case Study 2:

81
Fintech platforms have become important partners of banks and consumer finance
companies in helping them improve their services and expand their customer base

82
OPPORTUNITIES CHALLENGES
Figure 119: Number of mobile subscriptions (million), 7M2019
Figure 120: Cybersecurity index by countries (points), 2018
Telecommunication companies are entering the digital payment market, providing Mobile
Money service which has a lot of opportunities for growth

83
Contents

84
4.3 M&A and sector consolidation
Figure 122: Case study of specially controlled local bank restructurings
M&A activity in banking sector has remained relatively quiet in 2019
Figure 121: Recent and upcoming investments in the banking sector

85
Fincos Description
Deal Estimated deal value
Table 8: Korean investors dominated the M&A deals in the CF market (FCCOM, Lotte Finance, Shinhan Finance).
Table 9: Covid-19 halted the growth of Fincos, but the market is expected to witness increasing M&A deals in 2020 with the entrance of other
foreign institutions along with the comeback of inactive players.
The increasing presence of foreign investors and revival of previously inactive Fincos are
poised to help the market regain the momentum
4.3 M&A and sector consolidation

86
Section 5: Major Policy and Regulatory Framework Updates
Contents
5.3 Updated regulations on non-bank credit institutions 95

87
Vietnamese government issued various supportive policies in response to the impact of
COVID-19 on the economy
TITTLE SCOPE OF APPLICATION KEY ACTION IMPLICATIONS
5.1 Policy responses to COVID-19 pandemic

88
The Government also laid down specific guidelines for tax and credit polices to help reduce
financial pressure for individuals and enterprises affected by the pandemic

89
Figure 123: 8 PPP expressway (3 to be converted by the Government to
public investment) (US$mn)
The Government drastically accelerate the disbursement of public investment drastically to
stimulate economic growth

90
The SBV has implemented urgent measures to help customers overcome the stressed time
during the pandemic

91
SBV is going to issue the revised version of Circular 01 to add support for customer loans
disbursed between 23 Jan and 24 Apr
TITTLE CIRCULAR 01 CIRCULAR AMENDING CIRCULAR 01

92
Contents

93
SBV issued Circular 08/2020 revising Circular 22/2019, extending the roadmap for credit
institutions to fulfill prudent ratio of ST capital financing MLT loans
TITTLE
SCOPE OF
APPLICATION
KEY ACTION
RATIONALES FOR
CHANGES
IMPLICATIONS
5.2 Updated regulations on banking sector

94
SBV has cut down a series of policy interest rates, effective from May 13, 2020 to help
reduce funding cost for credit institutions and
5.2 Updated regulations on banking sector

95
Contents

96
SBV is imposing tight supervision related to lending to real estate sectors of non-bank
credit institutions
TITTLE
SCOPE OF
APPLICATION
KEY ACTION RATIONALES FOR CHANGES IMPLICATIONS
5.3 Updated regulations on non-bank credit institutions

97
Circular 18/2019 is came in force with the concept of "direct disbursement and a roadmap
for FinCos to reduce the proportion of cash loans to 30% by 2024
TITTLE
SCOPE OF
APPLICATION
KEY ACTION
RATIONALES FOR
CHANGES
IMPLICATIONS
5.3 Updated regulations on non-bank credit institutions

98
Contents

99
New decree guiding Securities Law is set to come in force next year with a view to ensure
stability and sustainability of the securities market
TITTLE
SCOPE OF
APPLICATION
KEY ACTION IMPLICATIONS
5.4 Updated regulations on capital market

100
Decree 81 with important changes for C-bond issuance under private placements was
introduced to develop a healthy bond market and reduce risks for ultimate investors
TITTLE
SCOPE OF
APPLICATION
5.4 Updated regulations on capital market

101
Contents

102
SBV aims to encourage growth and innovation in Fintech, while maintaining stability and
safety of the financial market
TITTLE
SCOPE OF
APPLICATION
5.5 Updated regulations on financial inclusion

103
SBV is going to promulgating a more comprehensive on non-cash payment. However, foreign
ownership is still a controversial topic
TITTLE
SCOPE OF
APPLICATION

104
New regulations on e-wallet services are expected to promote cashless payment, especially
digital payment
TITTLE
SCOPE OF
APPLICATION

105
Appendices
Contents

106
Appendices
Agribank
BUSINESS PROFILE OWNERSHIP STRUCTURE (1Q2020)
KEY FINANCIAL & OPERATIONAL INDICATORS (2019) DISTRIBUTION NETWORK
Business Results VNDbn Key Ratios %
Outstanding loan Market share (Loans)
Total assets Market share (Deposit)
Charter capital Reported NPL
Owner's equity Net Interest Margin
Gross profit ROE
Net profit after tax ROA

107
Appendices
Vietcombank
BUSINESS PROFILE OWNERSHIP STRUCTURE (1H2020)
KEY FINANCIAL & OPERATIONAL INDICATORS (1H2020) DISTRIBUTION NETWORK
Busines Results VNDbn Key Ratios %
Gross profit ROE

108
Appendices
Bank for Investment And Development Of Vietnam
Gross profit ROE

109
Appendices
Vietinbank
Gross profit ROE

110
Appendices
Contents

111
Appendices
Asia Commercial Bank
Gross profit ROE

112
Appendices
Ho Chi Minh Development Bank
Gross profit ROE

113
Appendices
Military Bank
Gross profit ROE

114
Appendices
Techcombank
BUSINESS PROFILE
Gross profit ROE
OWNERSHIP STRUCTURE (1H2020)

115
Appendices
Vietnam Prosperity Bank
DISTRIBUTION NETWORK
Outstanding loan Market Share (Loans)
Gross profit ROE
KEY FINANCIAL & OPERATIONAL INDICATORS (1H2020)

116
Appendices
Vietnam International Bank
Total asset Market share (Deposit)
Gross profit ROE

117
Appendices
Tien Phong Commercial Joint Stock Bank
Gross profit ROE

118
Appendices
Orient Commercial Joint Stock Bank
Gross profit ROE

119
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Publishing License No. 2527-2020/CXBIPH/03 – 37/HD dated on July 3rd, 2020

120
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