In Vietnam, as in other emerging markets, the banks that have built strong franchises in the right market segments and implemented robust risk governance structures have the potential for strong growth and attractive returns on capital. Banking provides a leveraged play on the economy as financial intermediation grows in importance and bank instruments replace cash. For all of the banking sector's rapid growth over the last several years, the banking sector remains underpenetrated and SOEs continue to account for most loans in the banking system. According to SBV, only 20% of Vietnam's population hold bank accounts and approximately 14% of transactions are non-cash as of December 31, 2011. According to Euromonitor it is also estimated that Vietnamese consumers only held approximately 550,000 credit cards as of 30 June 2011, a level which certainly has much room to grow as GDP per capita rises. Further, various estimates place the amount of physical gold and USD held outside the banking system at approximately US$40-70 billion (equivalent to 40-70% of GDP). It is expected that much of this wealth will eventually flow into the Vietnamese banking system.
Vietnam’s banking sector has grown rapidly for most of the past decade, yet there have been challenges. Rapid credit growth ballooned Vietnam’s domestic credit as a percentage of GDP ballooning from 71% in 2006 to the high (but not yet critical) level of 104% in 2011. More recently, many banks have struggled as tight monetary policy has revealed underlying weaknesses in terms of limited access to funding and illiquid and undercapitalized balance sheets. The quality of banking sector assets and risk controls remains a concern and Techcombank stands out for our strengths in many areas that are weaknesses for the banking sector overall, such as our liquid balance sheet, strong deposit franchise and robust risk controls which we believe will enable us to capitalize on the sector opportunity.