Vietnam commercial Banking report Q1 2012

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Vietnam commercial Banking report Q1 2012 has many contents: Executive Summary, SWOT Analysis, Business Environment Outlook, Global Commercial Banking Outlook, Asia Banking Sector Outlook, Vietnam Banking Sector Outlook, Economic Outlook, Company Profiles, BMI Banking Sector Methodology.

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Q1 2012 www.businessmonitor.com Vietnam commercial Banking report INCLUDES BMI'S FORECASTS iSSn 1758-454X published by Business monitor international ltd.
VIETNAM COMMERCIAL BANKING REPORT Q1 2012 INCLUDING 5-YEAR INDUSTRY FORECASTS TO 2016 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: December 2011 Business Monitor International © 2011 Business Monitor International. 85 Queen Victoria Street All rights reserved. London EC4V 4AB All information contained in this publication is UK copyrighted in the name of Business Monitor Tel: +44 (0) 20 7248 0468 International, and as such no part of this publication Fax: +44 (0) 20 7248 0467 may be reproduced, repackaged, redistributed, resold in Email: subs@businessmonitor.com whole or in any part, or used in any form or by any Web: http://www.businessmonitor.com means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained.
Vietnam Commercial Banking Report Q1 2012 © Business Monitor International Ltd Page 2
Vietnam Commercial Banking Report Q1 2012 CONTENTS Executive Summary ......................................................................................................................................... 5 Table: Levels (VNDbn) .......................................................................................................................................................................................... 5 Table: Levels (US$bn) ........................................................................................................................................................................................... 5 Table: Levels At March 2011 ................................................................................................................................................................................. 5 Table: Annual Growth Rate Projections 2011-2015 (%) ....................................................................................................................................... 6 Table: Ranking Out Of 59 Countries Reviewed In 2011 ........................................................................................................................................ 6 Table: Projected Levels (VNDbn) .......................................................................................................................................................................... 6 Table: Projected Levels (US$bn) ........................................................................................................................................................................... 6 SWOT Analysis ................................................................................................................................................. 7 Vietnam Commercial Banking SWOT .................................................................................................................................................................... 7 Vietnam Political SWOT ....................................................................................................................................................................................... 7 Vietnam Economic SWOT ..................................................................................................................................................................................... 8 Vietnam Business Environment SWOT.................................................................................................................................................................. 9 Business Environment Outlook .................................................................................................................... 10 Commercial Banking Business Environment Ratings ............................................................................................................................................... 10 Table: Vietnam’s Commercial Banking Business Environment Rating ................................................................................................................ 10 Commercial Banking Business Environment Rating Methodology ...................................................................................................................... 11 Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 12 Global Commercial Banking Outlook........................................................................................................... 13 Asia Banking Sector Outlook ........................................................................................................................ 22 Table: Banks’ Bond Portfolios............................................................................................................................................................................. 28 Table: Asia Commercial Banking Business Environment Ratings ....................................................................................................................... 29 Table: Comparison Of Loan/Deposit, Loan/Asset And Loan/GDP Ratios ........................................................................................................... 30 Table: Anticipated Developments In 2012 ........................................................................................................................................................... 31 Table: Comparison Of Total Assets, Client Loans And Client Deposits (US$bn) ................................................................................................ 32 Table: Comparison Of Per Capita Deposits, 2011f (US$) ................................................................................................................................... 33 Table: Interbank Rates And Bond Yields ............................................................................................................................................................. 34 Vietnam Banking Sector Outlook ................................................................................................................. 35 Economic Outlook .......................................................................................................................................... 39 Table: Vietnam Economic Activity, 2011-2016 .................................................................................................................................................... 41 Company Profiles ........................................................................................................................................... 42 Vietcombank ........................................................................................................................................................................................................ 42 Table: Key Statistics For Vietcombank, 2004-2008 (VNDmn) ............................................................................................................................. 43 BIDV .................................................................................................................................................................................................................... 44 Table: Key Statistics For BIDV, 2004-2006 (VNDmn) ........................................................................................................................................ 45 VietinBank ........................................................................................................................................................................................................... 46 Table: Key Statistics For VietinBank, 2005-2008 (VNDmn) ................................................................................................................................ 47 Agribank .............................................................................................................................................................................................................. 48 Table: Balance Sheet, 2004-2008 (VNDmn) ........................................................................................................................................................ 49 Table: Balance Sheet, 2004-2008 (US$mn) ......................................................................................................................................................... 49 Table: Key Ratios, 2004-2008 (%)....................................................................................................................................................................... 49 © Business Monitor International Ltd Page 3
Vietnam Commercial Banking Report Q1 2012 MHB Bank ........................................................................................................................................................................................................... 50 Table: Key Statistics For MHB Bank, 2006-2008 (VNDmn)................................................................................................................................ 51 Eximbank ............................................................................................................................................................................................................. 52 Table: Balance Sheet (VNDmn, unless stated), 2005-2008 .................................................................................................................................. 53 Table: Balance Sheet (US$mn, unless stated), 2005-2008 ................................................................................................................................... 53 Table: Key Ratios (%),2005-2008........................................................................................................................................................................ 53 Sacombank ........................................................................................................................................................................................................... 54 Table: Stock Market Indicators, 2005-2009......................................................................................................................................................... 55 Table: Balance Sheet (VNDmn, unless stated), 2005-2009 .................................................................................................................................. 55 Table: Balance Sheet (US$mn, unless stated), 2005-2009 ................................................................................................................................... 56 Table: Key Ratios (%),2005-2009........................................................................................................................................................................ 56 Saigonbank .......................................................................................................................................................................................................... 57 Table: Stock Market Indicators............................................................................................................................................................................ 57 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 58 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 58 Table: Key Ratios (%).......................................................................................................................................................................................... 58 SeABank............................................................................................................................................................................................................... 59 Table: Balance Sheet (VNDmn, unless stated) ..................................................................................................................................................... 60 Table: Balance Sheet (US$mn, unless stated) ...................................................................................................................................................... 60 Table: Key Ratios (%).......................................................................................................................................................................................... 60 BMI Banking Sector Methodology ................................................................................................................ 61 Commercial Bank Business Environment Ratings ............................................................................................................................................... 62 Table: Commercial Banking Business Environment Indicators And Rationale.................................................................................................... 63 Table: Weighting Of Indicators ........................................................................................................................................................................... 64 © Business Monitor International Ltd Page 4
Vietnam Commercial Banking Report Q1 2012 Executive Summary Table: Levels (VNDbn) Total Client Bond Liabilities Client Date assets loans portfolio Other and capital Capital deposits Other March 2010 2,342,752.9 1,935,790.0 159,117.9 247,845.0 2,342,752.9 336,053.0 1,771,242.5 235,457.4 March 2011 3,092,978.4 2,584,860.0 225,505.0 282,613.4 3,092,978.4 479,064.0 2,220,589.1 393,325.3 Change, % 32% 34% 42% 14% 32% 43% 25% 67% Source: BMI; Central banks; Regulators Table: Levels (US$bn) Total Client Bond Liabilities and Client Date assets loans portfolio Other capital Capital deposits Other March 2010 122.8 101.4 8.3 13.0 122.8 17.6 92.8 12.3 March 2011 148.0 123.7 10.7923 13.5 148.0 22.9 106.3 18.8 Change, % 21% 22% 29% 4% 21% 30% 15% 53% Source: BMI; Central banks; Regulators Table: Levels At March 2011 GDP Per Capita, Deposits per Loan/deposit ratio Loan/asset ratio Loan/GDP ratio US$ capita, US$ 116.40% 83.57% 124.04% 1,068 1,206 Rising Rising Falling Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page 5
Vietnam Commercial Banking Report Q1 2012 Table: Annual Growth Rate Projections 2011-2015 (%) Assets Loans Deposits Annual Growth Rate 20 20 14 CAGR 21 21 14 Ranking 4 2 13 Source: BMI; Central banks; Regulator Table: Ranking Out Of 59 Countries Reviewed In 2011 Loan/deposit ratio Loan/asset ratio Loan/GDP ratio 8 1 10 Local currency asset growth Local currency loan growth Local currency deposit growth 2 2 9 Source: BMI; Central banks; Regulators Table: Projected Levels (VNDbn) 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f Total assets 1,747,335 2,286,351 2,953,153 3,720,973 4,614,007 5,536,808 6,644,170 7,973,004 9,567,605 Client loans 1,339,260 1,869,260 2,475,540 3,119,180 3,867,784 4,641,340 5,569,608 6,683,530 8,020,236 Client deposits 1,341,143 1,680,717 2,209,896 2,651,875 3,076,175 3,506,840 3,997,798 4,557,489 5,195,538 f = BMI forecast. Source: BMI; Central banks; Regulators Table: Projected Levels (US$bn) 2008 2009 2010 2011f 2012f 2013f 2014f 2015f 2016f Total assets 99.94 123.79 151.46 180.19 223.44 275.46 340.73 419.63 517.17 Client loans 76.60 101.21 126.96 151.05 187.30 230.91 285.62 351.76 433.53 Client deposits 76.71 91.00 113.34 128.42 148.97 174.47 205.02 239.87 280.84 f = BMI forecast. Source: BMI; Central banks; Regulators © Business Monitor International Ltd Page 6
Vietnam Commercial Banking Report Q1 2012 SWOT Analysis Vietnam Commercial Banking SWOT Strengths Rapid growth. Untapped potential. Weaknesses Domestic banks lack capital and technology to sustain high credit growth. The financial accounts of many banks are still opaque. Opportunities Population still under-banked. Income levels likely to rise strongly over the medium term. Threats Macroeconomic instabilities threaten the credibility of the government and could potentially drive economic policy away from further liberalisation. Vietnam Political SWOT Strengths The Communist Party of Vietnam remains committed to market-oriented reforms and we do not expect major shifts in policy direction over the next five years. The one-party system is generally conducive to short-term political stability. Relations with the US have witnessed a marked improvement, and Washington sees Hanoi as a potential geopolitical ally in South East Asia. Weaknesses Corruption among government officials poses a major threat to the legitimacy of the ruling Communist Party. There is increasing (albeit still limited) public dissatisfaction with the leadership’s tight control over political dissent. Opportunities The government recognises the threat corruption poses to its legitimacy, and has acted to clamp down on graft among party officials. Vietnam has allowed legislators to become more vocal in criticising government policies. This is opening up opportunities for more checks and balances within the one-party system. Threats Macroeconomic instabilities in 2010 and 2011 are likely to weigh on public acceptance of the one-party system, and street demonstrations to protest economic conditions could develop into a full-on challenge of undemocratic rule. Although strong domestic control will ensure little change to Vietnam’s political scene in the next few years, over the longer term, the one-party- state will probably be unsustainable. Relations with China have deteriorated over recent years due to Beijing’s more assertive stance over disputed islands in the South China Sea and domestic criticism of a large Chinese investment into a bauxite mining project in the central highlands, which could potentially cause wide-scale environmental damage. © Business Monitor International Ltd Page 7
Vietnam Commercial Banking Report Q1 2012 Vietnam Economic SWOT Strengths Vietnam has been one of the fastest-growing economies in Asia in recent years, with GDP growth averaging 7.2% annually between 2000 and 2010. The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 12.0% in 2009. Weaknesses Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving the economy vulnerable to global economic uncertainties in 2011. The fiscal deficit is dominated by substantial spending on social subsidies that could be difficult to withdraw. The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also keeps import costs high, contributing to inflationary pressures. Opportunities WTO membership has given Vietnam access to both foreign markets and capital, while making Vietnamese enterprises stronger through increased competition. The government will in spite of the current macroeconomic woes, continue to move forward with market reforms, including privatisation of state-owned enterprises, and liberalising the banking sector. Urbanisation will continue to be a long-term growth driver. The UN forecasts the urban population rising from 29% of the population to more than 50% by the early 2040s. Threats Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam. If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis. Prolonged macroeconomic instability could prompt the authorities to put reforms on hold as they struggle to stabilise the economy. © Business Monitor International Ltd Page 8
Vietnam Commercial Banking Report Q1 2012 Vietnam Business Environment SWOT Strengths Vietnam has a large, skilled and low-cost workforce, that has made the country attractive to foreign investors. Vietnam’s location - its proximity to China and South East Asia, and its good sea links - makes it a good base for foreign companies to export to the rest of Asia, and beyond. Weaknesses Vietnam’s infrastructure is still weak. Roads, railways and ports are inadequate to cope with the country’s economic growth and links with the outside world. Vietnam remains one of the world’s most corrupt countries. Its score in Transparency International’s 2010 Corruption Perceptions Index was 2.7, placing it in 22nd in the Asia-Pacific region. Opportunities Vietnam is increasingly attracting investment from key Asian economies, such as Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech skills and know-how. Vietnam is pressing ahead with the privatisation of state-owned enterprises and the liberalisation of the banking sector. This should offer foreign investors new entry points. Threats Ongoing trade disputes with the US, and the general threat of American protectionism, which will remain a concern. Labour unrest remains a lingering threat. A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period. © Business Monitor International Ltd Page 9
Vietnam Commercial Banking Report Q1 2012 Business Environment Outlook Commercial Banking Business Environment Ratings Table: Vietnam’s Commercial Banking Business Environment Rating Limits of potential returns Data Score; out of 10 Ratings score; out of 100 Total assets; end 2010 US$151.5mn 6 Market Structure 63 Growth in total assets; 2011- 2015 239,439.4 6 Growth in client loans; 2011- 2015 200,714.9 7 Per-capita GDP; 2011 US$1,353.7 2 Country Structure 53 Tax 2.9 3 GDP volatility 0.4 10 Financial infrastructure 5.6 6 Risks to realisation of returns Regulatory framework and development 4.5 5 Market Risk 40 Regulatory framework and competitive landscape 5.0 5 Moody’s rating for local currency deposits 2.0 2 Long-term financial risk 4.8 5 Country Risk 46 Long-term external risk 3.3 3 Long-term policy continuity 7.0 7 Legal framework 3.7 4 Bureaucracy 3.9 4 Commercial banking business environment rating 54 Source: BMI © Business Monitor International Ltd Page 10
Vietnam Commercial Banking Report Q1 2012 Commercial Banking Business Environment Rating Methodology Since Q108, we have described numerically the banking business environment for each of the countries surveyed by BMI. We do this through our Commercial Banking Business Environment Rating (CBBER), a measure that ensures we capture the latest quantitative information available. It also ensures consistency across all countries and between the inputs to the CBBER and the Insurance Business Environment Rating, which is likewise now a feature of our insurance reports. Like the Business Environment Ratings calculated by BMI for all the other industries on which it reports, the CBBER takes into account the limits of potential returns and the risks to the realisation of those returns. It is weighted 70% to the former and 30% to the latter. The evaluation of the ‘Limits of potential returns’ includes market elements that are specific to the banking industry of the country in question and elements that relate to that country in general. Within the 70% of the CBBER that takes into account the ‘Limits of potential returns’, the market elements have a 60% weighting and the country elements have a 40% weighting. The evaluation of the ‘Risks to realisation of returns’ also includes banking elements and country elements (specifically, BMI’s assessment of long-term country risk). However, within the 30% of the CBBER that take into account the risks, these elements are weighted 40% and 60%, respectively. Further details on how we calculate the CBBER are provided at the end of this report. In general, though, three aspects need to be borne in mind in interpreting the CBBERs. The first is that the market elements of the ‘Limits of potential returns’ are by far the most heavily weighted of the four elements. They account for 60% of 70% (or 42%) of the overall CBBER. Second, if the market elements are significantly higher than the country elements of the ‘Limits of potential returns’, it usually implies that the banking sector is (very) large and/or developed relative to the general wealth, stability and financial infrastructure in the country. Conversely, if the market elements are significantly lower than the country elements, it usually means that the banking sector is small and/or underdeveloped relative to the general wealth, stability and financial infrastructure in the country. Third, within the ‘Risks to the realisation of returns’ category, the market elements (ie: how regulations affect the development of the sector, how regulations affect competition within it, and Moody’s Investor Services’ ratings for local currency deposits) can be markedly different from BMI’s long-term risk rating. © Business Monitor International Ltd Page 11
Vietnam Commercial Banking Report Q1 2012 Table: Asia Commercial Banking Business Environment Ratings Limits of Potential Risks to Potential Returns Returns Overall Market Country Market Country Structure Structure Risks Risks Rating Ranking Bangladesh 43.3 45.0 30.0 44.0 42.3 57 China 93.3 52.5 56.7 76.0 74.4 11 Hong Kong 73.3 92.5 70.0 84.0 80.2 5 India 83.3 57.5 53.3 56.0 67.6 20 Indonesia 73.3 62.5 76.7 42.0 65.1 25 Japan 33.3 77.5 63.3 78.0 57.3 38 Malaysia 73.3 80.0 76.7 78.0 76.4 9 Pakistan 43.3 50.0 56.7 36.0 45.5 53 Philippines 50.0 62.5 56.7 52.0 54.7 41 Singapore 70.0 95.0 96.7 84.0 82.7 4 Sri Lanka 23.3 55.0 36.7 46.0 37.9 58 South Korea 80.0 85.0 76.7 70.0 79.2 6 Taiwan 76.7 72.5 83.3 74.0 75.8 10 Thailand 60.0 65.0 80.0 68.0 65.2 23 Vietnam 63.3 52.5 40.0 46.0 54.4 43 United States 90.0 85.0 100.0 74.0 86.9 2 Scores out of 100, with 100 the highest. Source: BMI © Business Monitor International Ltd Page 12
Vietnam Commercial Banking Report Q1 2012 Global Commercial Banking Outlook Europe On The Brink The biggest risk to the global commercial banking sector remains the European crisis, with the worst-case scenario of a euro bloc breakup looming large in the background, and the health of the global banking sector hanging in the balance. Our core global economic view is that the world is not about to enter a double-dip recession, but that weak ongoing growth leaves the global economy fragile, and thus susceptible to a major shock. A disorderly eurozone breakup would have devastating consequences for core eurozone banks, given their exposure to peripheral eurozone debt. Furthermore, with sovereign bond spreads soaring, commercial banks exposed to European debt are seeing their balance sheets erode, with the effect compounded by a weak economy hurting lending conditions. The market is discounting a negative outcome for bank asset value, with European and US bank shares trading well below book value. We stress that our core scenario for the eurozone is one of ‘muddle through’ rather than ‘meltdown’. Furthermore, the exact path of events in the eurozone is difficult to predict, with potential outcomes including a full breakup of the monetary union, to austerity-induced recession, to European Central Bank support for the banking sector. However, it is worth looking at the potential contagion risks from a European financial crisis. Looking at the commercial banking universe covered by BMI, direct exposure to the weakest links in the eurozone is fairly limited, and is (unsurprisingly) most prevalent in European states. We are also acutely aware of the potential for contagion from a European financial crisis into emerging markets. However, looking at the data, emerging market exposure is mainly concentrated in Emerging Europe, as one would expect given the significant degree of banking sector integration across the continent over the past two decades. Furthermore, emerging markets tend to be exposed to the European banking sector on the liabilities side, far more than on the assets side (in other words, they are in danger of having European banks pulling lending from their economies). The following chart shows European banks’ lending as a percentage of the destination country’s GDP. Unsurprisingly, major financial centres figure prominently (eg Hong Kong, Singapore and the UK), as do emerging European economies. © Business Monitor International Ltd Page 13
Vietnam Commercial Banking Report Q1 2012 If European Banks Pull Out, How Bad Would It Be? European Cross-Border Bank Lending To Country As % of Country’s GDP (Excluding Eurozone) Source: BMI, Bank for International Settlements The accompanying chart draws upon Bank for International Settlements (BIS) data, and shows cross- border bank lending to the ‘PIIGS’ (Portugal, Ireland, Italy, Greece and Spain) as a percentage of commercial banking sectors’ total foreign lending exposure. Here, core eurozone banking sectors including Germany and France’s, and major developed markets such as the UK, are heavily exposed. © Business Monitor International Ltd Page 14
Vietnam Commercial Banking Report Q1 2012 Emerging Markets Fairly Well-Insulated From Direct Exposure Lending To PIIGS As % of Total Foreign Lending Exposure Source: BMI, Bank for International Settlements Looking solely at our commercial banking universe, lending exposure to the PIIGS as a percentage of national commercial banking systems’ assets shows that Austria, Germany and France are the most heavily exposed to a peripheral eurozone crisis. These exposures are relatively small, as they do not include sovereign bond holdings, but they show fairly clearly that a) the core eurozone states are the most exposed, and b) emerging markets are not heavily exposed, at least not directly. As the Lehman Brothers crisis taught us, however, the collapse of a major financial institution can have wide-reaching and unpredictable effects. © Business Monitor International Ltd Page 15
Vietnam Commercial Banking Report Q1 2012 Core Eurozone Most Exposed To Periphery Exposure To PIIGS As % of Banking Sector Assets Source: BMI, Bank for International Settlements EM: Regional Outlooks On a region-by-region basis, the risks to emerging commercial banking sectors come largely from abroad, with economic growth in Europe, the US and China all set to slow, and the eurozone crisis rumbling on. Emerging Asia: The regional outlook for Asian banks has deteriorated significantly in recent months, as the yet unresolved European fiscal debt crisis as well as sluggish US growth threatens economic growth within Asia. Moreover, there is also the significant threat of a reduction of European lending to Asian banks, both in terms of trade financing and longer-term business loans – that may threaten to destabilise the balance sheets of lenders within the Asian region. In addition, we believe Asian banks will also have to contend with an abrupt slowdown in Chinese economic growth, led by a steep contraction in domestic money supply growth that should constrain lending activity and hence, overall activity within China. © Business Monitor International Ltd Page 16
Vietnam Commercial Banking Report Q1 2012 Some Biting Off More Than They Can Chew Asia – Loan-To-Deposit Ratio, % Source: BMI Latin America: Massive capital inflows since late 2009, particularly into the more dynamic South American economies, has increased the risk of tighter liquidity exposing weaknesses in banks’ balance sheets, concerns which were reinforced following the wealth of headlines about dubious lending practices in Brazil and Chile, the region’s two most developed banking sectors. Yet despite the selloff in equities, to date no country has suffered a major threat to its banking sector from external headwinds, and in our view, any systemic risks that do emerge will be home grown, prompted by excessively loose monetary conditions and/or too much state intervention in local credit markets. The countries’ we believe are most exposed to this risk are Argentina and Venezuela, with the others set to suffer no more than a cyclical slowdown in credit growth and subdued profitability as regulators enforce stricter provisions for bad credit. The one possible exception is Brazil, where the authorities’ desire to maintain strong economic growth may yet harm financial stability, although our core scenario remains for a period of consolidation followed by a more sustainable growth trajectory. © Business Monitor International Ltd Page 17
Vietnam Commercial Banking Report Q1 2012 Few Have Grown As Aggressively As Brazil Change In Commercial Banks’ Assets % GDP Between 2004-2010, pp Source: BMI, central banks, banking supervisory bodies Emerging Europe: We maintain our broadly constructive view on Central and Eastern European banking sectors due to lower levels of leverage as compared to Western European banks and more sound macroeconomic backdrops that will help promote growth and we expect the broad-based recovery to continue at a relatively slow pace in most markets. However, we caution that risks to this outlook are mounting in light of the ongoing eurozone debt crisis and signs that the global slowdown may be more sustained than we had previously expected. Indeed, we expect this continued moderation of economic expansion combined with more cautious lending practices to weigh on banks’ profitability going forward. We also believe that given the less supportive external environment, banking sectors with a more domestic focused funding structure are better placed to weather the slowdown (we view the Czech Republic and Poland most positively). © Business Monitor International Ltd Page 18
Vietnam Commercial Banking Report Q1 2012 Generally Slow Recovery In Europe With Few Outliers Central and Eastern Europe – Loan Growth, % chg y-o-y Source: central banks Sub-Saharan Africa: The outlook is mixed for the three major Sub-Saharan African markets covered by BMI – the South African, Nigerian and Kenyan banking sectors. We see Nigeria as having the strongest growth potential over the short term, while South Africa should see slow but stable expansion, and Kenya will likely struggle amid various macroeconomic challenges. © Business Monitor International Ltd Page 19