Vietnam Consumer Finance Market 2014 Report

‹#›
Published on: 1 April 2014
Vietnam Consumer Finance Market 2014
@ 2014 StoxPlus Corporation.
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Date of report: 20 April 2014
Type of Services: Standard Report
Part of StoxPlus‟s Market Research Report Series for Vietnam www.stoxresearch.com

2
Table of Contents
Research Team
Thuan Nguyen FCCA
Head of Research
thuan.nguyen@stoxplus.com
+84 98 380 0000
Harry Tran CFA
Senior Analyst
harry.tran@stoxplus.com
+44 7515971532 (UK)
Lan Nguyen
Associate
lan.nguyen@stoxplus.com
+84 96 494 6760
Trang Truong
Data Manager
trang.truong@stoxplus.com
+84 98 342 2985
Executive Summary 4 – 5
1 Major Economic Context 6 – 28
1.1 Macroeconomic context 6 – 9
1.2 Banking sector context 10 – 12
1.3 Non-bank sector context 13 – 17
1.4 Major policy changes 18 – 21
1.5 Bank & non-bank consolidation 22 - 25
1.6 Analysis of foreign interests in Vietnam 26 – 28
2 Consumer Finance Market 29 - 62
2.1 Sector Structure 29 – 31
2.2 Market Size and Growth 32 – 40
2.3 Competition Dynamics 41 – 52
2.4 Market Concentration 53 – 54
2.5 Informal Finance Activities 55 – 58
2.6 Global Perspective on CF 59 - 64
Content Page

3
Table of Contents
Research Team
Thuan Nguyen FCCA
Head of Research
+84 98 380 0000
Harry Tran CFA
Senior Analyst
harry.tran@stoxplus.com
+44 7515971532 (UK)
Lan Nguyen
Associate
+84 96 494 6760
Trang Truong
Data Manager
trang.truong@stoxplus.com
+84 98 342 2985
3 Key Players Analysis 65 – 75
3.1 Non-Bank licensed Players 65 – 72
3.2 Bank-licensed Players 73 – 75
4 Market Potentials and Challenges 76 – 88
4.1 Key Growth Drivers 76 – 81
4.2 Main Product Trends 82 – 85
4.3 Main Challenges 86 – 88
Appendices 89 - 105
Appendix 1: Vietnam Retail Banking Capacity Matrix 90 – 91
Appendix 2: Key Financial Data of Finance Companies 92
Appendix 3: Regulations related to CF business 93 – 95
Appendix 4: Profiles of Local Finance Companies 96 – 98
About StoxPlus 99 - 105
Content Page

4
Executive Summary
Vietnam Consumer Finance Report 2014 is the second issue published by StoxPlus covering this segment. Our first issue was
released in 2013, covering consumer finance (“CF”) market data up to 31/12/2011. Our 2013 report was the first in-depth
sector research for consumer finance in Vietnam.
 What’s new in this Issue? In this 2014 version, we not only update the data in up to 31/12/2013, but also includes
many new insightful analysis that we have accumulated over the last few years on this sector. Taking into account
feedbacks from our clients on the Issue 1, in addition to the comprehensive analysis of the market itself, the Issue 2
covers a section on macroeconomic context and policy development that having significant impacts on the CF
business. We also analyze how the bank and non-bank consolidation ongoing will likely create changes in the
landscape of CF market in Vietnam in the next few years. Another improvement in this issue is that we also indicated
certain market trends relating to motorcycles, used cars and electronic devices and other driving factors.
 The landscape of CF market in Vietnam would be fundamentally changed in the next few years for a number of
reasons:
– More banks are switching to a retail and consumer-oriented strategy to increase growth. Since 2010, banks
suffered from a high ratio of non-performing loans due to the economic and financial crisis. Credit growth picked
up only modestly in real terms, mostly concentrated in export-oriented and agricultural sectors, despite a
significant decline in lending rates. It is because of decreasing credit demand from corporate and businesses. Both
ROA and ROE of the Vietnamese local banking system in 2012 decreased in comparison to 2011. ROA fell by over
27% from 2011 to 2012, while ROE fell by 33%. In this context, many banks such as VP Bank or HD Bank are now
aggressively switching into consumer finance as way to improve their bottom lines in a consolidated basis and fuel
their growth sustainably.
– We witness a continued soaring foreign interest in Vietnam CF market. From 2005 (before Vietnam joined WTO)
to 2010, the interest of foreign financial institutions in Vietnam banking sector had been very high, focusing on
equity investment and collaboration with commercial banks. However, in reality many such collaborations failed
to meet the expectations. Foreign financial institutions exit from banks, but non-banks including CF are of a very
strong interest. The type of strategic investment seemed to be out of favor. There are two approaches that
foreign investors would like to take: (i) owning a controlling stake or (ii) acquiring CF/ retail banking business of a
non-bank or commercial bank.

5
Executive Summary (continued)
 CF market size is still small, estimated at US$8.8bn as at 31/12/2013, increasing by 15% compared to 2012. The
consumer loan includes housing loans (mortgages and housing improvements), vehicle loans (automobile and motorcycle
loans), home appliance and kitchen wares, credit cards, overdraft etc pas per the definition under Decree 81 by the State
Bank of Vietnam. This total CF loan book accounts for 5.2% of total country loan book and 5.4% of the country 2013 GDP.
 CF products are becoming more diverse. Main consumer finance products are still motorbike loans and mobile phone
loans; however, we notice a trend that CF companies are aggressively expanding their POS network to provide CF services
for electronic devices, home appliances and kitchen devices. Besides providing credit to purchase merchandise, CF
companies are also exploring introducing more technologically advanced products, such as payroll-linked CF such as
MobiVi – an e-wallet licensed company.
 CF is expected to continue its fast-growing trajectory due to important growth triggers. CF market had modest growth
in 2012, but expanded rapidly in 2013 with more potential for growth in the coming years. Reasons for this forecast
include: growing middle class and affluent population, young population with a “borrowing-to-buy” culture, and soaring
interest for foreign players to get into CF business.
 However, there are several key issues that existing CF players and that new CF comers need to consider in the
Vietnam context and practice:
– The economy is still in the recovering process. Consumers, especially in Hanoi area, are still worried about their
short-term financial conditions. This is a challenge for existing CF players because it is unlikely that consumers will
open their pocket for purchase in the near future.
– Collection and payment methods are still a big challenge, not only for foreign newcomers, but also for current
players. Even leading CF companies have very high NPL rate (which we have estimated to be 25-30%). Hence, any CF
companies need to invest in and build an effective team of collection to manage NPL. The most common method of
payment is still bank transfer. Payment via post office system and direct debits are working at some players.
– There is yet a standardized credit scoring model in Vietnam. Many credit decisions are based on relationship lending
with proprietary information. The level of credit scoring model sophistication varies from bank to bank.
– Most importantly, major regulations and policies will have a fundamental impact on the CF landscape. M&A regulation
between foreign financial institutions and local ones is recently loosened, due to a high number of weak credit
institutions. Prime Minister now increase the foreign capital limit cap to “more than 30%”, and can even allow foreign
players to take the control stake at weak credit institutions. This new development provides a gateway for foreign
players to get into the CF business in Vietnam by acquiring a weak credit institution (most likely a local bank or
finance company), and then turn it into a CF-focused business. In the past, this approach has been taken by Fullerton
Holdings when they acquired Mekong Development Bank and gradually turned the bank into a CF-focused business. We
expect more foreign investors would be interested in taking this market entry route.

6
Contents
Section 1: Major economic context
 Macroeconomic context
 Banking sector context
 Non-bank sector context
 Major policy changes
 Bank & non-bank consolidation
 Analysis of foreign interests in Vietnam

7
Macroeconomic context
Vietnam economy posted strong performance until 2007. Adverse
spill-over impacts from export markets occurred from late 2007.
• From the late of 1990s till 2007, except for a short period during the
Asian financial crisis, Vietnam economy posted a good performance.
At the same time, asset bubbles started building up especially in real
estate and stock markets from the early 2000s. The bubble burst in
2007 when the Vietnam Government tried to cool off the overheating
economy and then Vietnam suffered adverse spill-over impacts. Since
then Vietnamese policy makers faced constantly a difficult dilemma
of trade-off between growth and macro economic stability.
• In an effort to protect the economic growth, a major stimulus
program totalling about VND160 trillion (approximately US$8bn) or
about of 10% of the nominal gross domestic product (“GDP”), was
introduced under the form of interest-subsidised short term loans to
qualified companies in various sectors in late 2009. The stimulus
package helped economic growth rebound to 6.5% in 2010.
• Nevertheless, the price of growth appeared to be much higher than
what Vietnam‟s government had expected. As soon as the stimulus
package was implemented, Vietnam faced serious macroeconomic
instability issues. Inflation returned to double-digit area and reached
11.8% in 2010 and then 18.1% in 2011. Vietnam currency (VND) came
under devaluation pressure. After intervention efforts to preserve the
parity between VND and USD, Vietnam‟s foreign currency reserve was
reportedly felt to below the safety threshold of 12 import weeks.
• The government unveiled a broad, "three pillar" economic reform
program in early 2012. identified three central policy themes for the
next 5-10 years: (1) rationalization of public spending and
improvement of public investment efficiency, (2) reform of state-
owned enterprise sector and (3) overhaul of the banking and financial
sector.
The story of Vietnam economic growth: a background recap
Source: StoxPlus from General Statistics Office of Vietnam
402 441
558
731
1,070
1,224
1,596
1,9606.8%
7.1%
7.8%
8.2% 8.5%
5.3%
6.8%
5.9%
5.0%
5.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
0
500
1,000
1,500
2,000
2,500
US$perCapital
GDP per capita GDP Growth
Figure 1: Vietnam GDP per capita and GDP growth
After a rough few years, Vietnam’s economy seems to be slowly recovering
• After two years of implementation, the economy has started to show some
signs of stabilization. Among the country‟s biggest successes in 2013 was the
fact that inflation was brought under control, down to 6.0%, becoming the
lowest rate. The country‟s GDP saw an increase of 5.42% in 2013. While not
as high as neighboring countries, the news of Vietnam‟s GDP growth is met
with optimism, especially when the consumer price index (“CPI”) is taken
into account.
• However, according to our view, low CPI does not necessarily reflect
well-controlled inflation, but rather tightened spending of consumers
amid employment uncertainty and little-improved incomes. This could
has hamper the high growing consumer finance business in Vietnam.

8
Vietnam economy is still in the recovering process with some signs of slowing growth in early 2014.
-0.6%
0.8%
4.0%
3.0%
9.7%
8.7%
6.6%
12.8%
19.9%
6.5%
11.8%
18.1%
9.2%
6.0%
-5%
0%
5%
10%
15%
20%
25%
Figure 2: Vietnam CPI
Source: StoxPlus from General Statistics Office of Vietnam
Monetary policies play a central role in bolstering the economy
• In the last two years, State Bank of Vietnam (SBV) has focused its
policy on taming the inflation rate to single digit. The country‟s
monetary policy had stopped the “stampeding horse” of inflation.
The second success was stabilizing the exchange rate between the
Vietnamese Dong and foreign currencies while increasing the foreign
currency reserves. The third was to cut the interest rate, which has
been a difficult task for Vietnam for a long time.
• Due to the falling rate of inflation, SBV is able to cut the benchmark
interest rate. It helps lower the annual lending rate to 12.5% while
deposit rate stands at 6.0%.
The economic outlook for Vietnam is not completely optimistic
• The government has announced that its economic restructuring plans
will continue into 2014, and issued a bullish set of economic targets
for the new year. Specifically the government has stated that it
wants to achieve: a GDP growth rate of 5.8%, CPI growth rate of 7%,
poverty reduction to 1.7-2%, and 1.6mil new jobs.
• Even though these goals are considered aggressive, StoxPlus thinks
that Vietnam economy is still in the recovering process. For an
emerging market economy, GDP growth rate of less than 6% is not an
impressive number. Moreover, even though controlled inflation is
considered beneficial for growth, it could also be a sign of low
investment and consumption.
• Particularly in the first 3 months of 2014, CPI experienced the
lowest increase in 13 years and far lower than the same period the
average CPI in the previous 12 years (3.26%): 0.69% in January, 0.55%
in February, and in March fell 0.44%. These factors have led to
forecast from the public about the ability of CPI and economic
growth deflation (still growing but at an even slower rate than
previous years).

9
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Despite the economic crisis, Vietnamese consumers have enjoyed an increasing income in the period of
2008-2013, subsequently fueling retail sales.

10
Contents

11
Banks suffered from a high ratio of non-performing loans, making it difficult for banks to spur credit
growth
NPL reported by banks under local accounting standards never higher
than 5%. SBV’s Supervisory Authority once reported a 8.6% NPL in mid
2012.
• More than 70% of the country loan book (appr. US$130bn) is for corporate
lending. The prolonged economic crisis since 2010 made the loan book
quickly deteriorated and the NPL problem become worse and significantly
impacted the banking sector. Skyrocketed inflation increased the cost of
borrowing for businesses, Meanwhile, sluggish economic activities and
mis-management at many borrowers made it difficult for businesses to
repay the loans, making them go bad.
• According to the SBV, the ratio of non-performing loans (NPL) in late 2010
was 2.16 %, in 2011 was 3.1 %, and reached a peak in Sept 2012 at 4.93%.
However, the actual bad debt problem is much more severe than the
number reported. In late 2012, SBV organized a special Supervisory
Authority to assess the bad debt situation of local banks. This group
reported a much higher NPL ratio of 8.6% (or VND220,000 billions of NPL).
In March 2014, the international credit agency Moody‟s reported a
“negative” outlook for the banking system of Vietnam, and a NPL
estimate of 15%. According to our review of International Financial
Reporting Standards (“IFRS”) against the local standards and
regulations (“VAS”) for several banks and non-banks, it is our finding
that NPL categorized under IFRS, which is more conservative, is
usually 4 times higher than VAS. This would imply a NPL ratio of
around 15% in an approximation basis.
• SBV introduced many aggressive policies to manage the bad debt situation
in 2013. In addition to the forced restructuring, an important milestone
was the introduction of Viet Nam Asset Management Company (VAMC) in
July 9, 2013. However, the operation of VAMC still very limited and its
efficiency is questionable by many experts.
Figure 5: Vietnam Local Banks’ NPL ratio (reported by banks under VAS)
2.90%
3.20%
3.00%
2.00%
3.50%
2.20%
2.60%
3.40%
4.08%
3.79%
Source: StoxPlus from State Bank of Vietnam
3.79%
8.60%
15%
SBV (31/12/2013) SBV's Supervisory Authority in
2012 (31/3/2012)
Moody's (2/2014)
Figure 6: Vietnam NPL ratio by different expert views
Source: SBV, Moody’s, StoxPlus’s Analysis
Banking sector context

12
Corporate lending is very competitive and not really profitable. Commercial banks are looking for new
opportunities to increase lending, especially to consumers.
Banking sector context

13
Contents

14
A number of local finance companies have been established from 1998 under non-banking licenses.
However, these firms have been serving their parent groups activities. Only few provide lending to
individuals.
Non-bank sector context

15
SOEs are forced to withdraw from non-core investment activities, and local finance companies are likely
to be shaken off.

16
Foreign participation by Prudential Finance and PPF Vietnam in 2007 has indicated a strong signal for
development of consumer finance sector in Vietnam.

17
Currently, 6 foreign finance companies are very active, and see significant growth in the period of
2011-2013.

18
Contents

19
Major policy changes
Circular 02 will likely increase the NPL rate and collateral requirements of commercial banks and CF
companies.

20
Loosened M&A regulation between foreign financial institutions and local ones: Prime Minister will decide
who can become the strategic investor and even take the control stake at weak credit institutions

21
Dec-09 Dec-10 Jun-11 Dec-11 Jun-12
VNDbn VNDbn VNDbn VNDbn VNDbn
Securities Loans 33,968 54,679 20,746 34,800 15,000
Real Estate Loans 202,084 247,554 220,787 249,534 218,887
Consumer Loans 128,610 160,693 155,883 131,556 92,422
364,662 462,925 397,417 415,890 326,310
% over Total Country
Loans 19.5% 18.7% 16.9% 15.0% 11.3%
• Consumer loans used to be discouraged by the Government:
Consumer loans in Vietnam are classified into so called “non-production
loans” which is currently discouraging by the Government. As part of
credit tightening policy, the preferential areas for credit allocating
include agricultural, export oriented enterprises and manufacturing
companies.
• Non-production loans as at 31/12/2010 amounted to VND462,925bn (USD
23.7bn), representing 18.7% of total country loan book. However, the
ratio was extraordinary high at many small banks.
• In an instruction on March 1st 2011, the SBV asked all commercial banks
to reduce the non-production loans to below 22% by 30 June 2011 and
below 16% by 31 Dec 2011. This instruction made the overall non-
production loan ratio fell to 15% in overall by year end 2011 and
significantly declined to 11.3% by 30 June 2012.
• Why consumer loans had a sharp decrease: As part of the non-
production loans, consumer loans in Vietnam experienced a sharp
decline over periods from June 2011 when SBV issued the instruction to
all banks to reduce the non-production loans. In fact, the majority of
retail loans of banks are related to housing and real estate investment.
Taking Techcombank, a leading local retail bank, as an example, 77.7%
of their USD1.1bn retail loan book as at 31/12/2011 was mortgages for
new house purchase.
• Items related to CF were later removed from the restriction: On
04/10/2012, the Governor of the State Bank of Vietnam (SBV) issued
Document No. 2056/NHNN-CSTT excluding two groups of loans from the
previous non-production loans restrictions, including loans related to
consumer real estate financing, consumer financing for everyday life
purposes (vehicles and home appliances), for education purposes, and
medical purposes.
Source: StoxPlus from State Bank Of Vietnam
Figure 12: Breakdown of Non-production Loans in Vietnam
Consumer finance was previously discouraged by the Government as part of the non-production loan
strategy. However, the Government has now removed the restrictions for CF related lending.
• Implications for CF business: This change in the definition of non-
production loans can change banks’ CF strategy. Previously, banks were
reluctant to expand consumer finance as they were discouraged by the
Government. Now, some banks such as Sacombank re-categorized CF-
related lending under encouraged lending section, and reported an
impressive growth for CF (compared to the general loan decrease for
non-production loans). Banks are now free from the restrictions to
promote CF business.

22
Contents

23
Bank & Non-bank consolidation
Banking consolidation has been experiencing a busier schedule than ever in Vietnam and that
might change the consumer finance landscape fundamentally

24
M&A can have impact on the CF market landscape in several ways

25
A case study: How did Fullerton Financial Holdings transform Mekong
Development Bank into a consumer finance focused business?

26
 Foreign interests in Vietnam CF
Contents

27
Foreign financial institutions exit from banks but non-banks including CF are of a very strong interests
Foreign interests in Vietnam CF sector

28
There are 4 options for foreign investors to consider when getting into Vietnam CF business
Foreign interests in Vietnam CF sector

29
Section 2: Consumer Finance Market
 Sector Structure
 Market Size and Growth
 Competition Dynamics
 Market Concentration
 Informal Financing Activities
 Global Perspective on CF
Contents

30
In addition to the 6 foreign consumer finance companies, only foreign banks and a few private local
commercial banks are active in this business.
There are 40 domestic commercial banks (including the 5 SOCBs), 5 foreign wholly-owned banks, 12 local finance companies, 16 finance leasing
companies and 6 foreign consumer finance companies and thousands of pawnshops currently operating in Vietnam. In addition to the 6 foreign
consumer finance players, the most active groups in consumer finance business are 100% foreign banks and a few local joint stock commercial banks
(“JSCBs”).
Figure 13: Major Participants in Consumer Finance Markets in Vietnam
Section 2: Consumer finance market
Sector Structure

31
The most popular consumer finance products in Vietnam currently are motorbikes loans and mobile
phones loans.
Sector Structure

32
Contents

33
The size of consumer loans in Vietnam is estimated at VND188 trillion (US$8.88bn) as of 31/3/2013. It
is upside trend but volatile with the economy performance and related monetary policies
Market size and growth

34
Market sizing analysis: more detailed write-ups

35
Consumer lending has been increasing rapidly, especially among pure CF model.

36
Figure 18: Breakdown of Vietnam Consumer Loans, as of 31/12/2013
Source: StoxPlus from SBV
Housing loans account for 38% of Vietnam consumer loans. Home appliances and furniture loans
account for 31%, while transportation vehicle loans account for 12% (as of 31/12/2013)

37
Housing loans percentage in total consumer loans decreased in 2013 compared to 2012, while other
types of consumer loans such as home appliances and furniture went up.
Source: StoxPlus from SBV

38
Some JSCBs significantly increased their consumer loan portfolio in 2013. The most notable is VP Bank.
Others might potentially have an interest in CF business.
• Most JSCBs increased their consumer loans quickly in 2013 (except for
VIB who had a decrease of 10%, and Techcombank whom we did not
have consumer loans data for 2013).
• However, even though these banks provide loans for consumers to
purchase goods and services, they still require collaterals (e.g. a valued
asset, or a savings account with the bank). This is different from a pure
CF model that is simple and convenient, and does not require any
collaterals for the loans.
Section 1: Consumer Finance Market Overview
Market size, growth and segmentation
Figure 20: Top 10 JSCBS with the largest consumer loans in 2013 (VNDbn)
• Among these banks, only VP Bank is known to have a CF business (under
the brand of FE Credit). In 2013, VP Bank increased its loan book
rapidly. VP Bank‟s consumer loans grew 126% in 2013 compared to
2012, from VND4,180bn to VND9,427bn. Transportation vehicle loans
account for the majority (65%) of VP Bank‟s consumer loans. Home
appliances and furniture loans account for 4%. Other extended CF loans
(housing loans, credit card loans) account for another 30% of the total
consumer loans of VP Banks. It is our observation that currently VP
Bank is the only bank that has a pure CF business model among JSCBs.
Source: SBV, StoxPlus
0%
57% 47%
126%
75%
43%
75%
-10%
333%
19%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
0
2000
4000
6000
8000
10000
12000
14000
16000
Techcombank Sacombank Eximbank VP Bank ACB Military Bank DongA Bank VIB GP Bank Vietbank
2012 2013 Growth rate
VP Bank is the only bank with a
pure CF model via the sub-brand FE
Credit. It is also among the largest
and fastest growing JSCBs.

39
The size of CF companies are still very small. However, the leading player PPF is growing quickly in
2013.

40
ACS Trading Co. is a trade finance company providing installment services for consumer durables. It
also has seen an impressive growth rate and quickly expanded the business.
Market Size and Growth

41
Contents

42
Summary of Competition Dynamics
Competition Dynamics

43
Summary of Competition Dynamics (cont’d)
• Marketing strategy: Some CF companies are very aggressive with their
marketing efforts to gain market share and establish a brand name in this
sector, such as PPF, HD Finance, and VP Bank / FE Credit. Some focus on
their niche areas to differentiate (such as Prudential Finance with their
Upper Mass / white-collar professional strategy, or ACS with their Lower
Mass / student-focused strategy). A few, such as Toyota Financial
Services, are positioned as a value-added service for their core business,
hence they do not focus on marketing for CF services per se.
• HD Finance / HD Bank is taking the advantage of the CF banking model to
increase the convenience for customers with their value-added banking
services. They also use CF as a sales channel to cross-sell other banking
products.
• Financials: In 2012, consumer finance companies still reported attractive
performance results (ROE > 10%) while banking sector is experiencing a
tough time.
Competition Dynamics

44
There are three main groups of competitors: commercial banks and foreign finance companies, and ACS
Trading Co.
JSCBs Pure CF companies ACS Trading Co.
Products Housing loans, new car loans, credit
cards
Motorbikes, automobiles, mobiles & tablets,
laptops, other electronic devices (home
appliances, kitchen devices), cash loans
Installment sale of consumer durables,
such as personal computers, home
appliances and furniture
Interest rates Low interest rates: 10-15%/year High interest rates: 20-70%/year High interest rates: 20-70%/year
Average loan
size
Much bigger loan size (hundreds of
millions and billions VND)
Small size loans (VND 2.5 million – 150 million) Small size loans
Sales Channels Walk-in branches Independent retailers, sale agents, telesales,
cross-selling with other products
Independent retailers, sale agents
Application
process
Long and complicated to assess
credit ability. May take weeks and
months. Requires ID and other basic
documents, as well as proof of
collaterals
Quick and convenient. Can take up to 30 minutes
to a few hours to process. Only requires ID and
some basic documents (proof of employment /
income, utilities bills, family register)
Quick and convenient. Can take up to
30 minutes to a few hours to process.
Only requires ID and some basic
documents (proof of employment /
income, utilities bills, family register)
Collection /
Repayment
Including pre-collection, early collections, late
and field collection. Intensive SMS/calling/letter
methods are used, starting from very early pre-
collection stage to learn and keep customers in
current bucket. Will proceed to “legal call” as a
last resort.
Competition Dynamics – Groups of Competitors

45
Mass consumers are the target market of CF companies.
Competition Dynamics – Target Market
Figure 22: Vietnam Income Groups 2011

46
Main CF Products offered by Key Players Foreign Finance Companies
Competition Dynamics - Products

47
Main CF Products offered by Key Players: selected JSCBs

48
Motorbikes
• Motorbike loans are the most popular consumer finance products in Vietnam
and the market is very competitive with active participation from foreign
consumer finance companies (e.g. PPF, JACCS, HD Finance). The reason is
because automobiles and motorbikes are more standardized, more reliable
collaterals than other products.
• However, motorbikes mortgage loans still require huge cost for finance
companies to supervise since Vietnam is the heaven of motorbikes and there
are millions of motorbikes in circulation. People can buy autos or motorbike
with famous brand names such as Honda, Yamaha, Toyota. Usually, buyers
go to retail outlets of Honda, Toyota or to dealers (e.g. Hong Duc Honda,
Toyota Giai Phong, Savico) to look for their favorite vehicles.
• Banks and finance companies cooperate directly with these dealers to
finance the loans. The buyers can borrow up to 70% value of the vehicles and
repay within 9 to 24 months with the vehicles acting as the collaterals. Thus,
the buyers can only take a copy of the certificates of registration, banks and
finance companies keep the original certificates until maturity date.
Automobiles
• Auto loan in Vietnam is insignificant compared to the total auto sales. There
are 25 thousand units sold by Toyota Motor Vietnam in 2012 but only 3.17%
financed by TFSVN.
• Beside of TFSVN, there are several banks that also provide auto loans, such
as Vietcombank, Techcombank, Vietnam International Bank, Military Bank,
Ocean Bank, HSBC, Sacombank, VPBank, etc with lending rate ranging from
10 to 20% per annum. Due to the market condition as well as customer
demand, it seems that banks do not promote auto loan operation.
• Although the number of cars financed by banks is unknown, in our view, auto
loan operation in Vietnam is underdeveloped.
Motorbikes are still the major CF merchandise. Automobile lending is traditionally dominated by
commercial banks, and Toyota Financial is the only player targeting this product.
No. CF Company Automobile lending situation
1 • PPF is a market leader in providing
motorbike financing. 65% of PPF loan book is
for motorbikes.
2 • Similar to PPF Vietnam, HDFinance also has a
strong focus on motorbike installment loans,
providing loans for Honda, SYM, and Yamaha
motorbikes.
3 • JACCS Vietnam has only cooperated with
Honda Vietnam to provide installment loans
for Honda motorbikes, capturing over 60%
motorbike CF market share of Ho Chi Minh
City, Southeast and Southwest provinces.
4 • FE Credit became a leader in motorbike loan
market with 45% market share in 2012.
• In 2013, its network expanded to more than
2,000 motorbike POS.
5 • Auto loan in Vietnam is insignificant
compared to the total auto sales. There are
25 thousand units sold by Toyota Motor
Vietnam in 2012 but only 3.17% financed by
TFSVN.

49
Sales and collection network will be vital to CF success.
Competition Dynamics – Sales and Collection

50
Marketing strategy of key players clearly demonstrate their strategic focus.
Competition Dynamics – Marketing Strategy

51
Marketing strategy of key players clearly demonstrate their strategic focus.
Competition Dynamics – Marketing Strategy

52
Consumer finance companies still reported attractive performance results while banking sector is
experiencing a tough time.
Competition Dynamics – Financials

53
 Informal Finance Activities
Contents

54
48%
43%
4%
4%
1%
State-owned commercial
banks
JSCBs
Finance Companies
Foreign banks
People's Credit Fund
Commercial banks (both private and state-owned) account for the majority (91%) of total consumer
loans as of 31/12/2013
Figure 26: Outstanding loan as of 31/12/2013
All together, local commercial banks (both JSCBs and
state-owned commercial banks) account for the
majority (91%) of total consumer loans. This is
understandable since their portfolio consists mainly of
high-value items, such as housing loans and
automobile loans.
Finance companies only account for a small
portion of the total consumer loans (only 4%).
Other credit institutions (including 100%
owned foreign banks, people’s credit funds,
and microfinance) make up the other 5% of
the market.
Five state-owned commercial banks account for nearly
half of the total consumer loans (48%), of which
Agribank contributes as much as 60%, BIDV 22%,
Vietcombank 12% Vietinbank 5%, and Mekong Housing
Bank 1%.
Figure 25: Breakdown of Vietnam Consumer Loans by players as of 31/12/2013
71
128
45
215
19
0
50
100
150
200
250
HD Finance Prudential
Vietnam
Finance
Toyota
Financial
PPF Vietnam
Finance
JACCS
International
Vietnam
Finance
Mirae Asset
Finance
US$mn
Source: StoxPlus from SBV via NFSC
Market concentration

55
Contents

56
Informal lending operations are very active in consumer finance sector in Vietnam
Informal Finance Activities

57
Pawnshops are a popular source of credit for a wide range of consumers, due to their simple and
convenient process. The interest rate for pawnshop lending is regulated at 110% per years.
• Segment Structure: Pawnshops can be found everywhere, on every
street of major cities in Vietnam. It is unclear how this segment is
structured, but there exists large players (chains of pawnshops under
the same owners), as well as small individual pawnshops. As of
1/6/2013, there are 2,729 pawn shops in Hanoi, including 76
businesses and 2,653 individual / household businesses.
• Pawnshops are scattered, but they also locate in clusters. In Hanoi,
for example, there are three streets that are considered the major
areas for pawnshop activities: Dang Dung Street, Lang Street, and
Nhon Intersection.
• Products: Pawnshops have a long history of providing credit, the
majority of which is secured cash loans directly to customers. What is
special about pawn shops is that they accept all types of assets for
collateral, from ID cards to tangible assets such as motorbikes, cars,
houses, etc.
• Collaterals are valued based on the assessment of “credit officers” at
pawnshops. Customers can borrow up to 70% the value of their
collaterals.
• The interest rate for pawnshops lending is regulated by Law at a
maximum rate of 0.03% per day, or 110% per year. The pawnshop
insiders often times refer to the rule that it takes 11 months 2 days
for a loan to accumulate interest equal to the original principle. Most
pawnshops apply this maximum interest rate on all of their loans.
• Target market: A wide range of consumers consider pawnshops as a
source of credit, from students to working professionals to business
owners. Many pawnshop consumers would not be considered for credit
from traditional banks. Many others, such as the business owners, can
attain credit elsewhere, but the process would be too complicated and
time-consuming to be cost-effective.
• These consumers appreciate credit services from pawnshops as they are
very quick, simple, and convenient. To get a loan from the bank could
take 3-5 months for a good credit consumers, given the credit
assessment and asset valuation process. Pawnshops to the contrary can
do such procedures in a few hours.
• Sales channel: Pawnshops usually use word-of-mouth for sales channel.
Since pawnshops are very popular with the same interest from shop to
shop, consumers can even just stop by a random store to get credit
without much advertisement.
• Collection: Pawnshops are very strict with their collection policy. If
needed, they are willing to use “black market” methods such as
threatening or using gangs to get the loans collected. Based on the
collateral, pawnshops can liquidate assets to get the full, or part,
amount of money owned.

58
Pawnshops are a popular source of credit for a wide range of consumers, due to their simple and
convenient process. The interest rate for pawnshop lending is regulated at 110% per years (cont’d).
• Licensing: There is a license that pawnshops have to apply and be
approved before being operated. Pawnshop‟s owners have to submit
a licensing application to the Police of the Ward that they are
operating in. Pawnshops are usually registered under the Household
business entity, as they want to take the lowest level of
responsibility and avoid some business taxes.
• The Business registration certificate for pawnshops is approved with
conditions, meaning that the Ward Police has to certify that the
owners have the ability to operate a pawnshop business, have a
physical address for the office, and have sufficient financial means
to provide credit to consumers.
• The process to apply for a pawnshop Business registration certificate
varies. There are even services to help pawnshop owners get the
license in a timely manner, which may mean 5 to 7 business days.
• Regulation: The regulation governing pawnshop activities is stated in
Joint Circular of the State Bank - 02/TT/LB dated 10/05/1995 (later
changed in 1997, 1999, and 2003) to guide business activities of
pawnshops.
• The Circular clearly stated permitted activities, responsibilities of
the borrowers, responsibilities of pawnshops, borrowing contract,
interest rates, procedures to apply for a certification of eligibility to
do pawnshop business, as well as many other details related to the
operations of pawnshops.

59
Contents

60
CF companies are negatively portrayed on local media due to high interest rates and ambiguous
lending terms.
Global Perspective on CF

61
Consumer finance is very popular in emerging markets, both from the perspectives of consumers as
well as policy makers
We are grateful to receive the
global insights and inputs from:
Mr. Krisztián Orbán
Managing Partner, Oriens
Ex-McKinsey consultant for 6
years
Ex-Deputy CEO of Eastern
Europe‟s third largest listed
chemical group
MBA from MIT Sloan, MA in
Law and Diplomacy from the
Fletcher School

62
In developed market like Japan, consumer lending is mostly channeled through the use of credit cards.
CF companies used to be more popular, but now they were cleaned out due to Government regulation.
Ms. Yoko Ogimoto
Senior Consultant, Nomura
Research Institute
17 years of experience at
Nomura Research Institute
Previously worked at Mizuho
Financial Group
MBA from University of
Washington

63
In developed market like Japan, consumer lending is mostly channeled through the use of credit cards.
CF companies used to be more popular, but now they were cleaned out due to Government regulation
(cont’d)
Ms. Yoko Ogimoto
Senior Consultant, Nomura
Research Institute
17 years of experience at
Nomura Research Institute
Previously worked at Mizuho
Financial Group
MBA from University of
Washington

64
Brazil: A successful case of CF regulation
• Consumer finance is huge in Brazil, and Brazil National Bank has
introduced very effective solutions to increase competition and
transparency among the merchants, CF providers, and consumers.
• Growing middle class: Brazil‟s middle class now represents 52% of the
population, up from roughly 30% fifteen years ago. In the past five years
nearly 30 million people have joined the ranks of the middle class. Many
of these consumers were previously employed in the informal sector and
transacted mostly in cash, but are now joining the financial system. For
the first time, they have access to bank accounts, credit cards and
other forms of consumer finance.
• Booming consumer credit: Credit in Brazil has been growing very
rapidly in recent years. Consumer credit, albeit decelerating slightly
during 2011 with an annual growth rate of 20.7% compared to 22.4%
during 2010, continues to expand at a strong rate (data from IMF).
Consumer indebtedness (as a percentage of disposable income) has
steadily increased and currently exceeds 40% of income - according to
Brazil Central Bank estimates.
• Increased transparency: Brazil‟s PCR, Cadastro Positivo, was
established in 1998 by the central bank, but focuses only on credit
information of large commercial loans. To reduce check fraud, the
Sociedade de Proteção ao Crédito (SPC) keeps an up-to-date database
of individuals whose checks have bounced twice. This information is
shared with banks, credit institutions, and companies that accept post-
dated checks.
Tighter financial policies: Since mid-2010 through mid-2011, the
central bank hiked policy rates. In addition, in response to the rapid
increase of certain types of consumer loans and loosening lending
standards (such as lack of down payment or excessive loan tenors),
the central bank tightened macroprudential measures in specific
lending products since late 2010.In December 2010, the central bank
announced an increase of the minimum payment for credit card bills
(effective in June 2011) and increased capital requirements for long
term consumer loans (Annex 2). In April 2011, the IOF on consumer
credit operations was increased to 3% (previously 1.5%).

65
Section 3: Key Players Analysis
 Non-Bank licensed Players
 Bank-licensed Players
Contents

66
PPF Vietnam: 65% of its loan book is motorbike loans
Section 3: Key players analysis
Non-Bank licensed players

67
Prudential Finance: “walk-in” model with cash loans and mainly focusing on
white-colour workers

68
SGVF has been acquired by HDBank in October 2013 and renamed to
HDFinance

69
Toyota Finance: Its small loan book (3.17% of total sales) indicates that auto loan market is
relatively underdeveloped

70
JAACS – Cooperating with Honda Vietnam providing motorbike loans.

71
Mirae Asset: focus on cash loan for employee, especially teachers and hospital employee

72
ACS Vietnam: a trade finance business model focusing on consumer durables

73
Section 3: Key Players Analysis
 Non-Bank licensed Players
 Bank-licensed Players
Contents

74
Individual loans accounted for 51% total loan book as at 31/12/2012
Bank-licensed players

75
Bank-licensed players

76
Section 4: Market Potentials and Challenges
 Key Growth Drivers
 Main Product Trends
 Main Challenges
Contents

77
Vietnam has the fastest growing middle income and affluent (MAC) population compared to other
countries in the region
• Vietnam„s urban population is shifting from a pyramid income
demographic to a diamond demographic, indicating a growing
base of middle income urban group - a wealthier, more savvy
consumer base.
• According to BCG report in 2013, Vietnam is forecasted to have
the fastest growing MAC population compared to other countries
in the region. The MAC population in Vietnam is defined to be
from Emerging to Affluent, with a monthly income cutoff from
$190. This segmentation corresponds to StoxPlus‟ previous
analysis of the Mass and Affluent population. BCB forecasts the
annual MAC growth rate is 12.9% for Vietnam, 8.4% for Myanmar
and Indonesia, and 4.2% for Thailand.
• Moreover, this new wealth is well-distributed. Income in rural
areas is actually growing faster in in urban areas, growing at
18.5% between 2002 and 2010, compared to 16.6% in urban areas.
• Today, a company can reach one-half of the MAC
population by serving Ho Chi Minh City and Hanoi
provinces.
• However, by 2020, a company needs to have a presence
in nearly as twice many locations as it does today to
reach comparable coverage (data and forecast from
BCG).
• Implications for CF: This trend indicates a growing demand for
consumption from consumers. This MAC population will be the
key driver for CF growth.
0%
20%
40%
60%
80%
100%
2012 2020 2012 2020 2012 2020 2012 2020
Vietnam Myanmar Indonesia Thailand
Poor Aspirant Emerging Established Affluent
Figure 28: Middle income and Affluent Population of Vietnam and Neighboring
Countries – 2012 and forecast for 2020
Source: StoxPlus from Boston Consulting Group
Section 4: Market potentials and Challenges
Key Growth Drivers
3.4
3.4
3.4
3.7
3.7
3.9
3.5
3.4
3.2
3.0
2.9
2.1
1.5
1.0
0.9
0.8
0.6
0.5
0 1 2 3 4 5
0 - 4
10 - 14
20 - 24
30 - 34
40 - 44
50 - 54
60 - 64
70 - 74
80 - 84
Female
3.8
3.7
3.6
3.9
3.8
3.8
3.5
3.4
3.2
3.0
2.6
1.9
1.2
0.7
0.7
0.5
0.4
0.2
0246
Male
Age Group Population (in million)Population (in million)
Vietnam - 2012
Figure 29: Vietnam Population Structure 2012
Source: StoxPlus from GSO

78
There is a potential for CF companies to expand their merchandise financing schemes beyond
motorcycles.
Key Growth Drivers

79
Vietnamese consumers are transitioning from traditional shoppers to modern shoppers, preferring to
shop at modern retail malls. This creates an effective sales channel for CF products.
• Changing consumers’ behaviors: Vietnam‟s urban consumers
continue to shift their shopping from traditional to modern channels,
where they can find a better range of products at more competitive
prices, in particular through larger pack sizes and promotions, while
enjoying a safe and convenient shopping experience.
• The Lifestyle Survey conducted by Kantar Worldpanel reveals that
70% of urban families like to buy all their groceries in one shop.
Shoppers nowadays are seeking for convenience factor – they
purchase less frequently (less daily shopping) yet put more in their
shopping basket each trip.
• This “bulk buying” trend has provided favorable opportunities for
modern channels to flourish in Vietnam.
• Booming modern retail stores: Vietnam‟s retail market had 21
wholly foreign invested businesses which had rapidly expanded their
market share. In addition, modern retail channels, including
hypermarkets, supermarkets, and small self-service stores, accounted
for only 18% of the market, leaving big opportunities for businesses.
• Vietnam has targeted to increase the percentage of modern retail
channels to 45% by 2020. By the end of last year, the country had 130
commercial centers, 700 supermarkets, and more than 1,000 self-
service stores.
• Implications for CF business: This change in consumer’s behaviors
present an opportunity for CF companies, as retailers play a very
important role as an effective sales channel for CF products.
• Retails would also be interested in financing schemes provided by CF
companies to boost consumptions. CF companies have a potential to
build new partnerships as more retailers will enter into the Vietnam
market.
13 17 18
63
62 62
13
12 12
11 8 9
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006 2010 2012
Modern trade Street shops Market Others
Figure 31: Vietnam Retail Structure by Types of Providers
Source: StoxPlus from Kantar World Panel
2008 2012
Value share in Hyper-
Supermarket
1.00% 3.70%
Penetration
(% households)
9.60% 37.70%
Source: StoxPlus from Kantar World Panel
Key Growth Drivers

80
Key Growth Drivers
There is a potential for foreign players to get in Vietnam CF market due to several reasons.

81
There is a potential for foreign players to get in Vietnam CF market due to several reasons (cont’d).
Key Growth Drivers

82
 Main Challenges
Contents

83
Motorbike loans
• As of July 2012, there were 35.2mn registered motorbikes in circulation.
Motorbike market has grown with a two-digit rate over the last 10 years
but started to stall in 2011, with the growth rate of only 8%. In 2012, the
situation was even more negative, with a growth rate of only 4.5%, the
slowest growth rate since 2000.
• The key players in providing motorbike loans are VP Bank / FE Credit,
PPF and JACCS. But these companies still account for a small piece in
the overall pie of motorbike market. Motorbike loans book of JACCS is
equivalent to only 0.19% of total value of the motorbike market, PPF is
1.7%.
• The advantage of motorbike lending services provided by these finance
companies is their simple and quick procedures, with borrowing amount
up to 80% value of the motorbike. However, the lending rate is usually
much higher than the interest lending rate offered by banks, ranging
from 20% to 40% per annum along with several extra fees. These are the
main factors that influence the decision of motorbike buyers and confine
the growth of motorbike loans market.
Auto loans
• There were nearly 2mn registered autos in circulation as at 31/12/2012.
Over last 10 years, auto market of Vietnam has grown with the average
annual rate of 18%. Especially in 2009, the number of autos in circulation
had grown 67% compared to 2008. However, from 2011 to 2015,
automobiles also saw a modest growth rate of only 4.4%.
• The number of autos purchase financed by banks is tiny compared to
total auto sales. While Toyota Motor Vietnam is the leader in autos
market with total sales of 17,000 units in 2011, Toyota Financial Services
Vietnam (TFSVN) only financed 3% of the total sales.
Motorbike and automobile loans are still undeveloped compared to the huge motorbike and automobile
market.
Source: StoxPlus from Vietnam Automobile Manufacturers Association
310 330
420 470
546
610 640
787
950
1,587
1,700
1,868
1,951
7
8
10
12
14
16
19
21
23
25
31
34
35
0
5
10
15
20
25
30
35
40
0
500
1000
1500
2000
2500
2000 2002 2004 2006 2008 2010 Jul-12
Auto-Millions
Moor-Thousands
Auto Motorcycle
Figure 33: Number of automobiles and motorcycles in circulation
Main Product Trends

84
There are still a lot of potential for consumer finance to provide credit beyond motorcycles, such as
with cell phones, home appliances, and education loans.
Main Product Trends

85
Housing
• There are two kinds of housing loans, i.e. loans for purchasing house
without the land use right (assets on land) and housing loans with asset
together with land ownership. House buyers can borrow up to 70% value
of the house and repay within a long period (often more than 10 years).
The house/asset ownership or land use right certificate are often used as
a collateral for the loan (in some case, other valuable assets are needed
to be supplementary collateral). Borrowers have to certify their ability
to repay by monthly income, saving book, gold, etc. For example,
Techcombank (a leading bank in housing loans) offers loan amount from
USD5,000 to USD500,000 with duration from 1 to 25 years. Meanwhile,
PVFC (a leading finance company in housing loans) has the maximum
duration of 20 years.
Credit cards
• There were over 1.59 million credit cards, both international and
domestic in circulation as at the end of 2012. Cards are produced based
on two main technologies: magnetic-stripe and chip.
• Credit cards only account for 2.5% of the total number of cards in
Vietnam. Most consumers prefer debit cards to credit cards as they carry
no mortgage or minimal income requirements and their fees are much
lower than those of credit cards. In terms of government supports, debit
cards continued to win out in 2013. The State Bank of Vietnam
continued to impose restrictions on credit card growth. Moreover, the
hassle of having to top-up directly at the issuing bank made it impossible
for pre-paid cards to compete with debit cards.
• Store cards: Store cards development in Vietnam are still in the infancy
stage. As store cards work like credit cards, many retailers are still
reluctant to issue this type of card due to the small size of the niche
category of credit cards.
Housing and credit cards segment are dominated by commercial banks. There are potentials for pure
CF players to expand in these areas.
Source: StoxPlus from Vietnam Bank Card Association
30%
22%
0%
15%
8%
6%
6%
4%
3%
2%
4%
Vietcombank
VietinBank
Techcombank
Sacombank
BIDV
Asia Commercial Bank
Eximbank
VIBBank
Agribank
MBBank
Others
Figure 34: International Credit Card market share by Revenue 2012
Main Product Trends
• Besides, as the majority of consumers still prefer cash to cards for purchase
on most occasions, retailers have not seen any major value-added points
store cards could bring to their stores.
• Store cards could be an effective sale channel for CF business, as they are
the link between credit providers, retailer, and consumers. There is an
opportunity for CF players to expand their credit offering through credit
cards, especially store cards. ACS Trading Co. is exploring this channel.
They announced in 2013 that they are exploring the credit card business in
Vietnam.

86
 Main Challenges
Contents

87
The economy is still in the recovering process. Consumers are still worried about their short-term
financial conditions.
Challenges and Key Considerations

88
There are also operation challenges that players need to consider carefully before getting into the CF
business.
Challenges and Key Considerations

89
Appendices
 Appendix 1: Vietnam Retail Banking Capacity Matrix
 Appendix 2: Key Financial Data of Finance Companies
 Appendix 3: Regulations related to CF business
 Appendix 4: Profiles of Local Finance Companies
 Appendix 5: About StoxPlus and StoxResearch
Contents

90
Ticker Name Exchange Total Assets Total Loans Charter Capital Retail Loan %/Total Loans
VNDbn 2012 2012 2012 2012 2012
CTG VietinBank HOSE 503,530.3 333,356.1 26,217.5 49,819.6 14.9%
BID BIDV HOSE 484,784.6 339,923.7 23,011.7 47,437.4 14.0%
ACB Asia Commercial Bank HNX 176,307.6 102,814.8 9,377.0 44,348.8 43.1%
STB Sacombank HOSE 152,118.5 96,334.4 10,739.7 33,453.5 34.7%
VCB Vietcombank HOSE 414,488.3 241,167.3 23,174.2 28,783.7 11.9%
TCB Techcombank OTC 179,933.6 68,261.4 8,848.1 27,748.4 40.7%
EIB Eximbank HOSE 170,156.0 74,922.3 12,355.2 26,468.2 35.3%
VPB VPBank OTC 102,576.3 36,903.3 5,770.0 17,740.9 48.1%
SHB SH Bank HNX 116,537.6 56,939.7 8,865.8 15,937.1 28.0%
MHBB MHB Bank OTC 37,979.9 24,650.7 3,439.9 14,000.0 56.8%
EAB DongA Bank OTC 69,278.2 50,650.1 5,000.0 13,103.6 25.9%
PNB Southern Bank OTC 75,269.6 43,633.6 4,000.0 11,975.7 27.4%
MBB MBBank HOSE 175,610.0 74,478.6 10,000.0 9,263.8 12.4%
HDB HDBank OTC 52,782.8 21,147.8 5,000.0 8,719.0 41.2%
GDB Viet Capital Bank OTC 20,670.4 7,781.8 3,000.0 3,122.9 40.1%
NVB National Citizen Bank HNX 21,585.2 12,885.7 3,010.2 3,115.8 24.2%
PGB PG Bank OTC 19,250.9 13,787.4 3,000.0 2,688.4 19.5%
DCB OceanBank OTC 64,462.1 26,240.1 4,000.0 2,482.3 9.5%
NAB Nam A Bank OTC 16,008.2 6,848.1 3,000.0 1,843.8 26.9%
MSB MaritimeBank OTC 109,923.4 28,943.6 8,000.0 1,515.0 5.2%
Appendix 1: Vietnam Retail Banking Capacity Matrix

91
Ticker Name Exchange Total Assets Total Loans Charter Capital Retail Loan %/Total Loans
VNDbn 2012 2012 2012 2012 2012
BVB Bao Viet Bank OTC 13,283.0 6,748.2 3,000.0 990.0 14.7%
ABB An Binh Bank OTC 46,013.7 18,755.8 4,200.0 - -
AGRB Agribank OTC - - - - -
DAB DaiA Bank OTC 17,910.2 9,158.9 3,100.0 - -
GB GP Bank OTC 18,165.4 6,745.8 3,018.0 - -
KLB Kien Long Bank OTC 18,581.0 9,683.5 3,000.0 - -
LVB LienViet Post Bank OTC 66,412.7 22,991.7 6,460.0 - -
MDB Mekong Development Bank OTC 8,597.0 3,717.0 3,750.0 - -
NASB North Asia Bank OTC 33,738.3 22,323.1 3,000.0 - -
OCB ORICOMBANK OTC 27,424.1 17,238.8 3,234.0 - -
PVF PVcomBank OTC 88,170.9 39,725.0 6,000.0 - -
SCB Saigon Commercial Bank OTC 149,205.6 88,154.9 10,583.8 - -
SEAB SeaBank OTC 75,066.7 16,694.4 5,334.7 - -
SGB Saigon bank for industry and trade OTC 14,852.5 10,860.9 3,080.0 - -
TB Vietnam Construction Bank OTC 15,553.4 13,315.7 3,000.0 - -
TPB Tien Phong Bank OTC 15,120.4 6,083.0 5,550.0 - -
VAB Viet A Bank OTC 24,608.6 12,890.2 3,098.0 - -
VIB VIBBank OTC 65,023.4 33,887.2 4,250.0 - -
VNDB Vietnam Development Bank OTC - - - - -
VTTB VietBank OTC - - - - -
Appendix 1: Vietnam Retail Banking Capacity Matrix

92
Appendix 2: Key Financial Data of Finance Companies

93
Generally, finance companies and consumer finance companies are classified
as “credit institutions”. As such, these non-bank licensed companies need to
comply with all regulations applicable to a credit institution in terms of
licensing, permitted activities, capital adequacy and other prudential ratios,
minimum capital and interest rate regulations:
Fund mobilization:
Finance companies are only permitted to accept deposits from organizations
with duration of one year and above. Consumer finance companies such as
PPF, HD Finance and Prudential Finance are not allowed to accept deposits
from any type of customers.
• Pursuant to the Law on Credit Institutions and Decree 81/2008/ND-CP,
finance companies are not allowed to accept either short-term deposits
(duration of less than 1 year) or any deposits from individuals. They are
permitted to accept only deposits from organizations with minimum
duration of 12 months. This regulation causes a big problem to finance
companies in fund mobilisation. Currently, deposit yield curve in Vietnam
is flat i.e. there are no significant difference between for a 1-month
interest rate and a 12-month interest rate. A customer would prefer a
shorter term for the same interest rate and this makes non-bank companies
could not mobilize funds.
• Consumer finance specialized companies, such as PPF Vietnam, Prudential
Finance and Société Generale Viet Finance, are not allowed to accept any
deposits. As such, in addition to their paid-in charter capital, these
consumer finance companies have to borrow from other credit institutions
via interbank markets.
For example, to finance total assets of VND3,975bn (USD189mn) as at
31/12/2011, PPF Vietnam had to source its funding from commercial banks
in Vietnam, including from interbank markets, amounting to USD133mn.
Regulations for consumer finance business is generally more stringent than for commercial banks.
• Unlike other finance companies, which are prohibited from acceptance
of short-term deposits, in fact, PVFC has mobilized shot-term capital
via short-term deposits for the past few years. As of 31/12/2011, PVFC
had USD423.1mn of total short-term deposits with duration ranging
from 1 to 12 months. Thus, we doubt that PVFC has somewhat a
special license compared to other finance companies.
• Another way to mobilize short-term capital is using entrusted fund
contracts, which is not subject to restrictions on duration and currently
applied by PVFC and some other finance companies. Entrusted funds
investment service offered by finance companies is the business
where a finance company receive funds from its customers and offer a
pre-determined investment yield just like interest rate in deposits. In
fact, PVFC’s deposit contracts and entrusted fund management
contracts are the same in most conditions and terms.
• We are confirmed that so far PVFC does not mobilize fund from
individuals. All mobilized deposits and entrusted funds are from
organizations.
PetroVietnam Finance Corporation
(“PVFC”) - a special finance company
Appendix 3: Regulations related to CF business

94
Interest rate regulations:
• Until 31 January 2002, credit activities in Vietnam are subject to lending rate
caps in accordance with the Decision 242 issued by the SBV. Maximum lending
rates were determined on base rate plus a percentage range, which were 0.3%
per month for short-term loans and 0.5% per month for medium and long term
loans.
• From 1 February 2002, lending interest rates are under negotiable regime in
accordance with the Decision 546/2002/QĐ-NHNN dated 30 May 2002. That
means lending rates are agreed upon between credit institutions (including
finance companies) and their customers.
• However, from 16 May 2008, pursuant to Decision 16/2008/QD-NHNN, lending
rates are still under negotiable regime but must not be higher than 150% of the
base rates advised by SBV on a monthly basis. This made many finance
companies including PPF Vietnam, Prudential Finance in difficulties to amend
their system to cope with the new regulation, according to SBV in a conference
in consumer finance in October 2008.
• The cap rate set forth in Decision 16/2008/QD-NHNN has raised many
difficulties for banks and finance companies since it does not reflect the
market rate in current situation of the economy. In the latest response to solve
this problem, the SBV has issued Circular 12/2010/NHNN dated 14 April 2010,
allowing the lending rates to be negotiable between credit institutions and
their customers. The use of base rate as the reference rate is not compulsory
up to now.
Permitted activities
• Except mobilizing capital from deposits and through-account
payment services, a finance company is permitted to do most
activities as a commercial banks, e.g. cash loan, mortgage loan.
There is no restriction on lending activities of a finance companies.
• However, some other activities are strictly subject to SBV‟s
approval, including: deployment of POS, issuance of credit cards and
factoring. A finance company is allowed to issue credit cards only if
it is stated in the company‟s license otherwise the company has to
submit for approval from the SBV and update its license accordingly.
• In conclusion, although the above activities are permitted, they
must be set forth in and in accordance with the license, which is
issued by the SBV. In other words, a finance company is not allowed
to do an activity if it is not stated in the company‟s license, even
this activity is permitted under law. For example, according to PPF‟s
license, the company is permitted to operate within the HCM area
only. However, after getting approval from the SBV to deploy POS,
PPF has been aggressively introduce its POS not only throughout HCM
city but in nearby provinces and received warning from the SBV last
year.
Regulations for consumer finance business is generally more stringent than for commercial banks
(cont’d).

95
Regulations on microfinance organizations (“MFO”)
• Microfinance was introduced in Vietnam from 1980s under the form of saving-credit projects. In
the first period of 1980s, microfinance was closely related to small-farmer economy. The next
10 years from 1990 to 2000 witnessed the rapid expansion with respects to both values and
types. Microfinance expands to other activities beyond production like education, healthcare,
housing, etc. From 2000 to present, microfinance in Vietnam has developed in depth with strong
support from the government.
• Decision 28-2005/ND-CP dated 9 March 2005 and Decision 165/2007/ND-CP dated 15 November
2007 are Government‟s Decisions providing regulations on establishment, organization and
operation of MFO. These two Decisions marked the appearance of a legal framework for
microfinance activities. Decision 2195/2011/QD-TTg dated 06 December 2012 demonstrates the
Prime Minister's approval on designing and developing the microfinance system in Vietnam up to
2020. Organizations including SBV, Ministry of Finance, Ministry of Planning and Investment are
responsible for building an appropriate mechanism for microfinance activities.
• There are three types of organizations operating in microfinance area in Vietnam including
official (e.g. Agribank, Vietnam Bank for Social Policies), semiofficial (e.g. NGOs like Oxfam GB,
CRS) and unofficial (e.g. Rotating savings and credits association - ROSCA like Women's Unions).
People can borrow from such organizations on purpose of production. Money cannot be used for
consumption or investment in real estate. Some key players in microfinance sector are C.E.P
Vietnam, T.Y.M, and M7 Group.
Regulations for consumer finance business is generally more stringent than for commercial banks
(cont’d).

96
# Company Owners/Partners
Retail Loan
31/12/2012 Highlights
1
Vietnam Textile
and Garment
Finance
VINATEX USD2.9mn
• Established in 1998 as a 100% owned subsidiary by Vinatex, TFC has been privatised in
2010 with charter capital of VND500bn. Its principal is to mobilize deposits (from 13
months) and provide corporate lending and consumer finance services.
• TFC has total assets of VND1,488bn and total loan book of VND440bn as at 31/12/2012.
TVFC has 58 employees working at head office in Hanoi and HCMC branch.
• TFC earned total revenue of VND248bn and VND58.5bn in 2011. Its reported NPL ratio is
at 0.67% as at 31/12/2011.
• ( Some data are not updated for 2012)
2
Rubber Finance
VN RUBBER
GROUP
Very small
• Established in 1998 as a 100% owned subsidiary by Vietnam Rubber Group. RFC has
charter capital of VND699bn. RFC has 164 employees working at offices in Hanoi , HCMC
and 8 transaction points and 1 branch.
• RFC has total assets of VND2,679bn and total loan book of VND2,894bn as at
31/12/2012. RFC earned total revenue of VND760.8bn in 2012.
• RFC also involves in managing loans from the trusted fund sponsored by Agence
Française de Développement (AFD) for natural rubber enterprises in Vietnam
3
Post and
Telecommunication
Finance
VNPT None
• Established in 1999 as a 100% owned subsidiary by VNPT. PTF has charter capital of
VND128bn. PTF does not involve in retail lending at all. Its total assets of VND395bn and
total loan book of VND67bn as at 31/12/2012.
• PTF‟s principal activities are securities investments in various companies including
member companies within VNPT by its own capital and funds managed for its clients.
4
Vinashin Finance
Vinashin None
• Vinashin Finance has total charter capital of VND1,623bn but it was default upon the
court case Vinashin. Vinashin Finance involved heavily in receiving the USD700mn
sovereign bond guaranteed by the Government and then accused of misusing the fund.
Total assets of Vinashin Finance amounted to VND3,839bn and total loan book of
VND5,113bn as at 31/12/2012 which mainly represents on-lending Vinashin‟s members
and uncollectible now.
Appendix 4: Profiles of Local Finance Companies

97
Retail Loan
5
Handico Finance
HANDICO USD25.5mn
• Handico Finance (Hafic) was a State-owned Company established in 2005 and equitized in 2008. It
operates as a financial intermediary and arranges funds for Hadinco.
• Hafic provides consumer finance services including auto loans, housing loans as well as corporate
loans but mainly financing for Hadinco projects.
• Hafic has total assets of VND2,761bn (USD131.5mn) and total loan book of VND709bn
(USD33.8mn).
• It reported total revenue of VND474bn and net profit of VND47bn as at 31/12/2012.
6
Mineral and Coal
Finance
VINACOMIN None
• Mineral and Coal Finance (CMF) was established in 2007 as a 100% owned subsidiary by Vinacomin.
CMF has charter capital of VND1,227bn, total assets of VND2,622bn and total loan book of
VND2,093bn.
• It reported total revenue of VND233.9bn and net profit of VND65.8bn as at 31/12/2012.
• CMF runs under the corporate banking model with 60 employees. CMF firstly focused merely on
raising fund and lending activities but now it has expanded onto foreign exchange and investment
service.
7
Song Da Finance
SONGDA HOLDING None
• Song Da Finance was established in 2008 with three founding shareholders include: Song Da
Holding, Military Commercial JSB and Bao Minh Insurance Corporation. Song Da Finance has
VND766bn chartered capital.
• Song Da Finance has total assets of VND2,438bn and total loan book of VND141bn of which
individual loan of VND0.1bn as at 31/12/2012.

98
Retail Loan
8
EVN Finance
EVN None
• Established in 2008 with charter capital of VND2,500bn (EVN 40%, An Binh Bank 8.4%, REE
corporation 1.8% and others). EVN Finance has 136 employees.
• EVN Finance‟ lending activities deployed in the orientation of concentrating on serving EVN and
its member units as the strategic customers. EVN Finance granted direct loans, parallel under
the form of entrusted loan, capital contribution co-sponsor.
• EVN Finance has total assets of VND19,188bn and total loan book of VND3,230bn.
9
Cement Finance
VICEM USD0.81mn
• Cement Finance was established in 2008 with three leading: Vietnam Cement Industry
Corporation (Vicem), Vietnam Steel Corporation (Vnsteel) and The Bank for Foreign Trade of
Vietnam (Vietcombank). Cement Finance has VND650.7bn chartered capital and 63 employees.
• Cement Finance has total assets of VND1,765bn and total loan book of VND604bn as at
31/12/2012.
10
Vietnam Chemical
Finance
VINACHEM USD1.39mn
• Established in 2008 with charter capital of VND600bn. Vietnam Chemical Finance has 48
employees working at offices in Hanoi.
• Vietnam Chemical Finance has total assets of VND2,042bn and total loan book of VND793bn. It
reported total revenue of VND258.2bn and net profit of VND92.8bn as at 31/12/2012.
11
Vinaconex-Viettel
Finance
VINACONEX +
VIETTEL
None
• Established in 2009 with the founding shareholders include: Vinaconex Corporation, Viettel
group, BIDV Insurance Corporation and other. Vinaconex-Viettel Finance (VVF) has VND1,126bn
chartered capital and 50 employees.
• VVF has total assets of VND3,615bn and total loan book of VND714bn at 31/12/2012.

99
About StoxPlus and Research Capability Statements
Contents

100
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StoxPlus is proud to be the largest provider of reliable and up-
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About StoxPlus

101
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 Our research team with a team of 5 experienced analysts
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About StoxPlus
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102
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About StoxPlus

103
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‹#›
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