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Military Commercial Joint Stock Bank (MBB: HOSTC)

The first bank that I will be covering in this series of Vietnamese Banks will be that of the Military Bank of Vietnam (NYSEARCA:MBB). This bank was founded in 1994 and backed by, as its name suggests, the army of Vietnam.

Initially, this was set up to provide banking services for military-based enterprises and individuals but it has expanded beyond and is now a bona fide bank in Vietnam. Nevertheless, MBB's senior management is dominated by ex-army officers.

Capital History

Interesting Features of MBB

Although its name suggests that it is related to government entities, it is actually not a State Owned Commercial Bank (NASDAQ:SOCB). As a result of this, it does not have disadvantages commonly associated with SOCBs like compulsory lending (with little regard for commercial and credit worthiness) to government entities, lending to fulfill national agendas etc.

On the other hand, its close relationship to the military does give it advantages not available to other commercial joint stock banks. For instance, because people perceive MBB to be a quasi-government entity (like other SOCBs), it is able to attract depositors with a lower interest rate for deposits than other banks. This accounts for the relatively high NIM of MBB.

Other than cheap deposits from military owned businesses, it also support business from military entities and the Tan Cang port (a 6% shareholder of MBB). This explains the large off balance sheet exposure due to trade finance. Generally, military related business are considered to be well managed (and hence good risks) as they do not stray far from their core business into real estate and the like but well, we don't really know, do we? Notwithstanding this, MBB gets good fee related income from such activities.

Other things to note is that it has few branches among the large banks. This clearly puts them at a disadvantage compared with let's say STB or CTG.

It also owns Thang Long Securities. In the past few years, securities have been a bad business to be in. It was widely believed that MBB took so long to get listed in HOSE because it was sorting out the steep losses at Thang Long.

Financial Performance from 2004 to 2011

As one can see from the table, MBB does fairly well with NIM, showing it has the ability to attract deposits at low costs. Its ROA and ROE are above those of the SOCBs, closer to that of the commercial joint stock banks.

Like most Vietnamese banks, MBB's profitability has been increasing in the past 3 years. NIM has been very high and stable reflecting its ability to get cheap deposits.

In terms of the growth of the assets and equity, MBB is "only average" compared to other banks in Vietnam. Even so, like all Vietnamese banks, the growth is quite stunning. These are probably among the fastest growing banks in the world.