HANOI UNIVERSITY

FACULTY OF MANAGEMENT AND TOURISM

KM 9, NGUYEN TRAI ROAD, THANH XUAN, HANOI, VIETNAM

PHONE: (84) 043 55 33 560

WEBSITE: HTTP://FMT.HANU.VN



BANKING MANAGEMENT
REPORT

Tutor: Mrs. Nguyen Minh Hang

Group: 7_Tutorial:3
Time: 9:30 – 11:10 Friday
Group’s members:
Dao Thi Khanh Ly - 1804040073
Phung Thi Thao - 1804040103
Dao Huong Quynh - 1804040095
Tao Thi Thu Trang- 1804040114

Hanoi, 07th December, 2020

i
 TABLE OF CONTENTS

I. Introduction of Vietcombank
1.The history of formation and development of Vietcombank…………………………….1
2.The structure of Vietcombank……………………………………………………………1
3.Main services of Vietcombank…………………………………………………………...2
3.1 Loan services …………………………………………………………………………..2
3.2 Non-interest services……………………………………………………………………3
II. Report on financial statement
1. Uses of funds……………………………………………………………………………..4
2. Source of funds…………………………………………………………………………..4
3. Strengths and weakness of Vietcombank operation
3.1 Strengths of operation …………………………………………………………………..7
3.2 Weakness of operation…………………………………………………………………..8
III. Interest-rate risk management……………………………………………………………………9
IV. Capital management …………………………………………………………………………….12
V. Liquidity and lending management ……………………………………………………………..20

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I Introduction
1. The history of formation and development of Vietcombank
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank ) is one of three
banks with the largest charter capital in Vietnam, and among the largest companies in the
stock market by capitalization.. According to Finance magazine, by the end of March31 2020,
after tremendously negative impacts of covid-19 in the whole economy, Vietcombank is still
keeping a large total of charter capital(37.089 billion VND) (Te, 2020). In addition,
Vietcombank consecutively ranked first of the top 10 prestigious commercial banks in
Vietnam announced by Vietnam Report. Vietcombank's predecessor was the Foreign
Exchange Management Department of the National Bank of Vietnam established on
January20 1955 (changed Forex Bureau under the State Bank of Vietnam in 1961). In the
early of establishment and in the period of resistance against America (1963-1975),
Vietcombank assumed the obligation as the only foreign trade bank with more functions such
as international payment, debt payment, state aid, foreign exchange management…During
the period 1976-1990, Vietcombank was the unique bank holding a monopoly about 3 aspects:
foreign currency monopoly, monopoly in import and export credit supply and international
payment. In 1990, Vietcombank officially became a state-owned commercial bank, doing
business in foreign affairs and expanded scale of bank by joining international payment
organization SWIFT, becoming the member of Asian Banking association, participating in
international card organizations. By establishing joint venture companies or bank affiliates,
Vietcombank boosted investment , modernized, upgraded the level of technology , diversified
services ,and expanded activities to other fields. Vietcombank also the first bank supplied
online banking services (online banking, ATM, internet banking, etc) in 2002 (Hong, 2019)

Remarkably, in 2007, Vietcombank became the first bank chosen by the government to pilot
equitization (Hong, 2019). On December 26th 2007, Vietcombank issued shares for the first
time into the public and this IPO event was considered the largest and generated revenue
from IPO surplus nearly 10,000 billion dong to the state budget. After that, Vietcombank
officially became a joint stock commercial bank on June 2 2008 after implementing a
successful equitization policy. Vietcombank stocks (VCB) officially listed on Ho Chi Minh
stock exchange on June30 2009. Over 56 years of formation and development, Vietcombank
became multiple-purpose banking, operated in variance fields, supplied full financial services
to customers in the field of international trade, in both traditional activities as well as modern
banking services like foreign currency trading, derivative services, card services, electronic
services(Vietcombank, Qua trinh hinh thanh va phat trien, 2019). Up to now, Vietcombank is
still on the momentum of continuous development, expanding through international
cooperation and confirming their position at home and aboard.

2. The structure of Vietcombank

It is undeniable that the outstanding development of Vietcombank over half a decade
is based on management from the well-organized banking system. The head of the bank is Mr.
Nguyen Xuan Thanh - Chairman of Vietcombank's Board of Directors. From 2014 to 2017,
Vietcombank profit after tax increased 4,499 billion dong, equivalent to 98% to 9,091 billion
dong. This is the historic high interest rate of Vietcombank in particular and the banking
system of Vietnam in general. Regarding the executive board, Vietcombank has 1 general
director, Mr. Pham Quang Dung and 9 deputy general directors. Under the executive board is
the Board of Supervisors, including 1 head of the Supervisory Board Mrs. Truong Le Hien
and 2 members of the Supervisory Board. Finally are committees, including a risk
management committee and a personnel committee. The Risk Management Committee
advises the Board of Directors on approving appropriate policies and orientations in each

1
period related to types of risks, including the determination of ratios, limits or limitations and
risk appetite of the Bank. Furthermore,the Personnel Committee is a committee that advises
and advises the Board of Directors on personnel issues, salary, bonus and other remuneration
policies of Vietcombank.

Over half of century of operation in market, Vietcombank is one of the largest

commercial banks in Vietnam with a huge networks of 111 Branches; 441 transaction offices;
4 domestic subsidiaries; 3 overseas subsidiaries;1 Representative office in the South; in
Singapore and in the US(Portal, 2019);3 non-business units: Human resource training and
development school; 1 Cash Processing Center in Hanoi and 1 Cash Processing Center in Ho
Chi Minh; 4 joint ventures and associates. Regarding personnel, Vietcombank currently has
over 16,800 employees. Moreover, Vietcombank has also developed an Autobank system
with more than 2,536 ATMs and more than 60,000 card accepting units nationwide. Banking
operations are also supported by a network of more than 1,856 correspondent banks in 176
countries and territories around the world (Hong, 2019).

3. Main services of Vietcombank

3.1 Loan service
On the ground that individuals are the main customer, Vietcombank provides a variety of
personal services. Throughout the centuries, the firm has been serving four key types of
borrowing services, which are mortgage loans, consumer loans, business loans and auto loans
with the amount borrowed accounting for 70% to 80% of the value of the collaterals.
First and foremost, about the mortgage loans service, an individual can either borrow to
reconstruct their facilities or buy a new home with flexible payment in up to 20 years till
maturity. According to statistics collected in July,2020 from Topbank.vn, Vietcombank has
published seven special package rates (Topbank.vn, 2020):
• 7,7%/ year for the first 12 months
• 8,4%/ year for the first 18 months
• 8,7%/ year for the first 24 months
• 9,2%/ year for the first 36 months
• 10,3%/ year for the first 60 months
• 11,1%/ year for the first 84 months
• 12,2%/ year for the first 120 months
After the preferential periods, the interest remains between 3% and 3.5% per year. In this
service, the firm applies floating interest and amortized loans, which is really beneficial and
practical for customers. To use this service, an individual should be at least 45 years of age,
earns 10 million to 20 million VND per month, has collateral which is the borrower's or
parents' property and has a good credit score.

Another service which gives a lot of favorable treatments to the users is consumer loans. A
person is able to borrow money for their personal demand up to 1 billion VND under secured
or unsecured loans with flexible payment in 120 months till maturity due and with a 7.3% per
year package rate (Vay tieu dung ngan hang Vietcombank). A qualified customer has to be
from 18 to 65 years old ( if using unsecured loans) or not over 55 years old ( if using secured
loans) at the time signing the contract, has stable finance and earnings of not less than 3 to 5
million VND per month. Moreover, they must hold the legal responsibility for the loans and
rank A in credit score in Vietcombank.

The third most used service is auto loans. Like mortgage loans, amortized loans are also
applied to this type. An individual has the ability to pay by installment, flexible payment in

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60 months with one of four package rates (Vietcombank, Lãi suất vay mua xe ô tô trả góp
ngân hàng Vietcombank năm 2020, 2020):
• 7,5%/ year for the first 12 months
• 8,7%/ year for the first 24 months
• 9,5%/ year for the first 36 months
• 10%/ year for the first 60 months
Requirements for loan applicants are Vietnamese or a foreigner living in Vietnam, belonging
to the 18-to-60-year age bracket, has a good credit score, earns at least 8 million VND per
month for one borrower and 12 million VND for over two borrowers and has vehicles as
collateral.

Last but not least, Vietcombank also provides business loans as mid-term business
and good fortune business loans for individual customers (Vietcombank, Vay von kinh doanh
Vietcombank). Particularly, the amount borrowed is a maximum 5 billion VND with flexible
payment in 12 to 60 months depending on the type of service used. The bank has a special
package rate for this service as well, applying 7.3% per year for the first 6 months for short-
term loans. After that, the interest remains at 3 to 4% per year. A qualified customer has to be
Vietnamese, over 18 years old but not over 65 years of age with legal responsibility for their
borrowings, and has collateral with business certificates and legal documents.

3.2 Non- interest services

Besides making loans, the bank's core business, Vietcombank also offers its customers a wide
range of non-interest services. In this report, we will focus on three main non-interest services
of Vietcombank, which are remittance, card service and e-banking.

First of all, remittances are carried out both domestic and international. Customers of
Vietcombank can choose to receive overseas money via several means including RIA,
Vietcombank branches, Uniteller at Wells Fargo Bank and VBCR, a Vietcombank remittance
limited company specializing in receiving money from international partners and paying out
to beneficiaries in Vietnam. In fact, Vietcombank is top 1 bank for international remittance
with largest networks of banks around the world as well as a wide range of foreign currency
at competitive rates. These diverse channels not only enable customers to receive money and
check transactions within ten minutes but also to be able to transfer receiving money to any
available currency. Vietcombank often charges 0,2% and 0,1% for outward remittance by
Swift and by check, respectively (Vietcombank, 2018). For inward remittance, the fee level
for both Swift and check varies from 0,05% to 0,4% and if customers receive cash in VND at
Vietcombank, they can be free of charge. The domestic remittance services fee schedule is
even cheaper than that of international transfer. Its rate stands at around 0,03% for cash
receiving or sending to accounts from other banks and 5.000VND/transaction within Vietcom
bank system (Vietcombank, Domestic remittance service fee schedule for individual
customers, 2020). Compared to other Vietnamese banks, the service fees are reasonably
competitive.

Card services of Vietcombank can be divided into three main categories: domestic credit card,
international debit and credit card. Depending on the card types, customers may enjoy credit
limits up to 1 billion VND, global medical insurance, travel trip insurance coverage or even
the joy of life program. Vietcombank has actively cooperated with many international banks
and large corporations to issue co-brands cards, which offer customers more privileges like
vouchers, discount payment or reward points on purchases. These attempts can surely cater

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 Vietcombank’s card to all needs ranging from ordinary customers to top businessmen or
enterprise owners.

Thanks to technological advances, Vietcombank like many other Vietnamese banks chooses
to develop its own internet banking system or e-banking to offer customers a time-saving and
convenient way to perform transactions. With four e-banking products, Vietcombank’s
individual customers now can transfer funds, open online deposit accounts, pay bills or even
register value-added services with just a couple of mouse clicks. Although it offers a free
registration fee for mobile banking, other related e-banking fees of Vietcombank are among
the highest fees charged in the industry. According to , while the majority of banks ranging
from Viettinbank to HDbank offer free transaction fee within system, Vietcombank charges
2.000VND/transaction for transferring amount under 50.000.000VND and
5.000VND/transaction for transferring amount over 50.000.000VND within Vietcombank. Its
maintenance fee is 11.000VND/month, which is much higher than that of Vietinbank, SHB or
Techcombank (Bich Ngoc, Thai Cam, 2019).

II. Report on the financial performance

1. Uses of funds of Vietcombank

As mentioned above, Vietcombank concentrates on its core lending business which

accounted for around 60%-a significant percentage of its total assets with over 724 million
net loans in 2019. The statistics had always been in an upward trend since 2017, a stable
growth of approximately 100 million throughout the surveyed periods. The bank also has
deposits at other credit institutions, constituting nearly a quarter billion in 2018. Generally,
VCB was effectively managing its loans business despite the rise in credit risks.

Total short-term and long-term investments for earnings potential and liquidity needs
recorded 13.9% in 2019. Due to the quoted purpose " borrow short, lend long", the bank
focused mainly on short-term investing while gradually reducing the long- term one by 1
million (from 2017 to 2018), and as the latter comprised a mere 1.5% as opposed to the
former in 2019. This means that the bank managers have prepared for the uncertainty of the
interest rate change and sudden liquidity demand.

It is noticeable that the bank managers always planned ahead to cope with the drastic
effect of the unexpected fluctuations or risks in the economy with an allowance amount for
every asset.

2. Source of funds of Vietcombank

SOURCE OF FUND 2017 2018 2019

I. I.Debts to the government and state banks 171.385.068 90.685.315 92.365.806

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 II. Deposits and loans to 66.942.203 76.524.079 73.617.085

other credit institution

1. Deposits with other credit institutions 55.803.878 75.245.679 71.046.512

2. Borrowing from other credit institutions 11.138.325 1.278.400 2.570.573

III. Deposits from customers 708.519.717 801.929.115 928.450.869

IV. Financial derivatives and other financial

liabilities

Financial capital, investment trust at 23.153 25.803 20.431

the bank's risk

VI. Valuable papers issued 18.214.504 21.461.132 21.383.932

VII. Other liabilities 17.650.679 21.221.737 25.997.753

1. Interest and fees payable 8.467.337 8.717.540 10.382.357

2. Deferred corporate income tax payable 20.052 19.295 22.023

3. Other payables and liabilities 9.163.290 12.484.902 15.593.373

4. Other provisions for risks

VIII. Capital and reserves 52.468.635 62.110.390 80.799.523

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 1. Capital of credit institutions 36.321.931 36.322.343 42.428.820

2. Credit institutions' funds 7.253.682 9.445.732 12.186.141

3. Exchange rate difference 94.485 84.450 16.361

4. Asset revaluation difference 83.285 119.178 113.011

5. Undistributed profit / Accumulated loss 8.715.252 16.138.687 26.055.190

6. Funding sources, other funds

IX. Minority interests 89.324 68.989 83.459

TOTAL SOURCE OF FUNDING 1.035.293.283 1.074.026.560 1.222.718.858

The total cost of Vietcombank over the past 3 years has increased in turn, meeting the
needs of growth in all aspects. Vietcombank's outstanding credit balance in 2019 increased by
15% compared to 2018, within the credit growth orientation ceiling assigned by the governor
of the state bank. Total mobilization in 2019 reached 949,835 billion VND, an increase of
15.4% compared to 2018. In terms of government and state banking debt in 2018, it
decreased by nearly half compared to 2017, while 2019 remained at the same level as 2018.
Customer deposits are still the main driver of VCB's total deposits with growth almost
in sync with the increase in total deposits. And because of the focus on customer capital
mobilization, from 2017 to 2019, the numbers have steadily increased over the years.
Regarding mobilizers, VCB is still in the group of banks with a large proportion of
mobilization from corporate customers, by taking advantage of the long-term relationship
with many large enterprises with abundant cash. Meanwhile, in the individual customer group,
VCB along with Vietinbank, BIDV and Agribank are still the four banks with the largest
amount of deposits in terms of value.

Vietcombank continues to strictly control credit quality and promote bad debt
handling. On-board bad debt was VND 5,804 billion, NPL ratio was 0.78%. The ratio of
provision for bad debts on the balance sheet was 179%, reaching the highest level in the
bank's operations. Vietcombank has recorded growth over the years and achieved impressive
results in most areas.

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 3. The strengths and weaknesses of Vietcombank operation.
3.1 The strengths of operation

2017 2018 2019

Net profit margin 31.30% 37.18% 40.48%

Asset utilization 1.66% 2.39% 2.45%

ROE 17.30% 23.49% 22.89%

Earnings per share

(VND) 2,527 3,584 4,481

Tax management efficiency 80.16% 79.95% 80.06%

Along with the sustainable and long-term development of Vietcombank over 50 years of
operation, Vietcombank has become one of the most trusted banks in Vietnam with a huge
customer base. There is nothing to be controversial about Vietcombank being recognized for
3 consecutive years to be voted as the top 10 most prestigious banks in Vietnam through
Vietnam Report (Vietcombank news). Based on uniform development, the total number of
permanent customers of Vietcombank increased sharply year by year. Through the statistics
recognized. By the end of 2019, the total number of active customers using Internet Banking /
Mobile Banking of Vietcombank reached nearly 6 million, an increase of nearly 200%
compared to the end of 2016. After 10 years, from IPO published in mid-year 2009 (112.3
million VCB shares of Vietcombank were officially listed on HoSE) up to now, Vietcombank
always maintains its leading position among the big profit enterprises on the stock exchange.
At the end-year 2019, Vietcombank is now a Vietnamese bank with the highest market
capitalization in excess of US $ 10 billion and in 2018, Vietcombank recorded a profit of
14,605 billion dong, up 60% from the leading banking system in Vietnam by Forbes Vietnam
reviews. As a result, Vietcombank’s shareholders also have absorbed more gain from net
profit after tax of the bank. Certainly, Shareholders will probably be most concerned about
the earnings per share (EPS) of stock that they hold. Vietcombank corporation had 359,776
thousand shares outstanding in 2017 and 370,887 thousand shares of stock in 2019 (according
to its annual report published in the portal of Vietcombank website). The increase in common
shares outstanding reflects that Vietcombank still is in the development momentum to
mobilize capital for investment. Using this data we can calculate the EPS on the bank basis
(using net income).
Toward the figure collected, the EPS of Vietcom bank increased over time (2526, 3584,
4481 vnd per share respectively). The bank experienced a significant climb in stockholder’s
earnings per share, which is remarkable given the challenge for the bank in 2019-2020. The

7
upward movement of earnings per share was due to higher growth rate of income items and
lower growth rates for most expense items. It is expressed by jumping of earnings spread,
which illustrates that Vietcombank management has succeeded in controlling costs over
time with tied-policies. Overall, the success in overseeing revenue and expense drive to
significantly higher pretax net operating income and net income. In addition, ROA also
measured management efficiency, we can explain further through using the ROE equation:
ROE= net profit margin* asset utilization*money multiplier
ROE measured the profitability of business in the relation with equity. Particularly,
shareholders always hire well-managers to maximize worth as well as higher return on equity.
It directly impacts stock valuations- higher ROE, higher intrinsic value of the company. If the
ROE of the company is low, the manager of the company has not used the capital invested
by shareholders efficiently. Back to the value of Vietcombank ROE, from 2017 to 2018 this
data increased dramatically 6.19% (17.30%-23.49%) that means the overhead management
operated effectively and efficiently. The keys tremendously affecting ROE were: net profit
margin, asset utilization ratio, and equity multiplier. First of all, Net profit margin shows how
profit generated from revenue (upward from 31.30%-37.18%). Asset management efficiency
assessing the capability of a bank to convert assets to money in revenue was 2.81% in 2017 to
3.66% in 2018. Last but not least, Money multiplier is considered fact to measure the finance
leverage of a company decreasing from 19.70 times-17.27 times. Remarkably, there is a
slight downward trend of Vietcombank’s ROE from 23.49 % in 2018 to 22.89% in 2019
presents the improvement in tax management 0.11% as well as an increase in pretax income.
In conclusion, total figures show a big picture of the operations and management in order to
generate revenue in Vietcombank.

3.2 The weakness of operation

2017 2018 2019 Trend

ROA 0,88% 1,36% 1,51% Upward

Net interest margin 2,19% 2,75% 2,94% Upward

Earnings spread 2,14% 2,68% 2,85% Upward

Equity multiplier (times) 19,70 17,27 15,12 Downward

During the 3-year period from 2017 to 2019, Vietcombank has witnessed an upward trend
in Return on assets (ROA), net interest margin and earnings spread. First of all, increasing in
ROA, an indicator of managerial efficiency, shows that Vietcombank has done a great job of
converting its assets into net earnings.

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 Secondly, net interest margin is an efficiency measure as well as profitability measure.
Net interest margin of Vietcombank rises from 2,19% in 2017 to 2,94% in 2019, which is a
positive sign, showing that management and staff of Vietcombank have successfully kept the
growth of revenues( which come primarily from loans , investments and services fees) ahead
of the rising costs ( principally the interest on deposits, other borrowings and employees’
salaries and benefits). In fact, a larger spread between interest revenues and interest costs is
resulted from close control over earning assets and pursuit of the cheapest source of funding.
Since earning spread measures the effectiveness of a financial firm intermediation
function in borrowing and lending money and also the intensity of competition in the firm
market area. It can be seen that the earning spread of Vietcombank gradually increased from
2,14% to 2,85% during this period. The rise in earning spread not only proves the
effectiveness of banks in controlling interest rates of both borrowing and lending activities
but also an indicator of a bank’s market possibility. In general, greater competition tends to
squeeze the difference between average asset yields and average liability cost. The increasing
earnings spread illustrates that making loans from customers deposits is and still be a
prosperous land for banks to exploit, and this is also true for the overall trend in Vietnam,
especially for mortgage loans and customers loans.

About equity multiplier, the largest component of ROE, there is a considerable decrease
in this leverage ratio. Although ROE still went up during the 2017-2019 period, this decline
in equity multiplier still poses a heavier stress on Vietcombank managers to have higher
return on equity for its shareholders for following years. It is suggestible for Vietcombank to
raise its fund management efficiency to around 20 by allowing more debt financing so as to
enjoy better leverage for higher ROE.

III. Interest-rate risk management

2018 2019
(VND
million 1-3 3-6 6-12 1-5 Over 5 1-3 3-6 6-12 1-5 Over 5
) months months months years years months months months years years
Balanc
es with
and
loans
to other
credit
instituti
ons – 63,512, 5,682,9 16,507, 43,885, 4,523,8 17,514,
gross 600 19 518 299 46 917
Loans
to
custom
ers – 249,95 169,91 69,009, 56,577, 3,012, 225,29 155,14 57,996, 35,456, 625,22
gross 6,439 6,966 842 264 669 6,445 2,744 128 910 3
Invest
ment 10,561, 8,351,2 29,631, 86,125, 30,943 5,971,1 2,824,6 9,553,9 92,191, 38,451
securiti 314 06 777 572 ,212 07 50 73 178 ,815

9
es –
gross
Total 324,03 183,95 115,14 142,70 33,955 275,15 162,49 85,065, 127,64 39,077
assets 0,353 1,091 9,137 2,836 ,881 2,851 1,240 018 8,088 ,038
Amoun
ts due
to the
Govern
ment
and the
State
Banks
and
deposit
s and
borrow
ings
from
other
credit
instituti 38,688, 11,836, 917,09 2,924,3 4,040,4 2,168,9 1,164,1
ons 625 221 0 01 52 12 81
Deposit
s from
custom 159,73 124,12 136,49 5,734,2 127,54 115,36 121,75 2,490,1
ers 3,741 4,767 7,176 52 9,442 5,490 1,025 2,038 51 4,680
Funds
for
finance
,
entrust
ed
invest
ments
and
entrust
ed
loans 20,283 1,235 18,481 6,087
Valuab
le
papers 5,106,1 14,899, 1,195, 5,153,4 14,899, 1,193,
issued 00 586 211 00 211 885
Other
liabiliti
es 66,873
Total
liabiliti 198,48 135,96 142,52 23,578, 1,204, 131,58 117,52 128,07 17,407, 1,204,
es 9,239 0,988 0,366 422 653 5,942 9,937 0,854 843 652

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Cumul - -
ative 125,54 47,990, 27,371, 119,12 32,751 143,56 44,961, 43,005, 110,24
37,872
$gap 1,114 103 229 4,414 ,228 6,909 303 836 0,245,386
Positiv Positiv Negati Positiv Positiv Positiv Positiv Negati Positiv
Positiv
e e ve e e e e ve e e
Interest Interes Interes
rate Interest Interest Interest Interest t rate Interest Interest Interest Interest t rate
risk rate go rate go rate go rate go go rate go rate go rate go rate go go
when down down up down down down down up down down

As shown above, in the 6-to-12-month period in both year 2018 and 2019, the
cumulative gap was negative, which is that the rate- sensitive liability over strode the rate-
sensitive assets. This means that Vietcombank could benefit from a decrease in interest rate,
net interest margin would increase as the cost- interest expense declines by more than interest
revenues. However, the economy in 2018-2019 was still in expansion; therefore, as soon as
the interest rates kept growing, the bank was likely to be into serious interest- rate risk when
borrowings costs associated with the interest expense exceeds the increase in interest
revenues, dragging the net interest margin and earnings as well. In contrast, the gap remains
positive in other periods, and the institution would be able to enjoy a higher profit as interest
went up, boosting the value of earnings-generating assets relative to that of liability with the
same short duration but facing the risks if the interest rate unexpectedly dropped.
It is interesting to notice that the total interest-sensitive assets and liability were in
the downward trend in the long-run. This means that the bank managers always tried to
reduce the number of the accounts with short duration as low as possible to avoid interest risk
no matter when the economy was in expansion or recession. Conversely, the reduction of
asset accounts seemed to slow down in the 6-to-12 months period, making that of liabilities
exceed, and the gap became negative.
On the ground that the economy was in expansion in 2018 and 2019, to minimize the
drastic effects of increasing interest in the 6-to-12- month period, the bank should increase its
rate- sensitive assets by buying more marketable securities or making more deposits in other
banks. In contrast, in case of unexpected downfall of the economy, to redress the risk
exposure in other periods, Vietcombank should increase its liabilities with short duration by
borrowing more from the money market or issuing CDs in different sizes and maturities.

OFF-BALANCE SHEET ITEMS 2017 2018 2019

1 Credit guarantees 265,179 276,512 292,563
2 Foreign exchange commitments
74,729,089 61,831,282 91,594,629
Forward buying commitments 8,223,247 12,471,111 25,775,812
Forward selling commitments 66,505,842 49,360,171 65,818,817
4 Letters of credit 45,239,213 57,703,713 57,406,598
5 Other guarantees 51,953,402 54,250,031 53,276,574
6 Other commitments 284,135 295,856 349,311

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 To assess the approach to aside possible interest rate risk, banks should focus on the
effects of interest rate on off-balance sheets. Off-balance sheet items are of great concern for
investors when assessing a company's financial health. Off-balance sheet items are often
difficult to identify and track in a company's financial statements because they usually only
appear in accompanying notes. In general, most bank contingent liabilities focus on
derivatives or LC and toward Vietcombank almost all funds on the off-balance sheet is
foreign exchange commitments and LC which means VCB is guarantor to ensure the
transactions payments between 2 parties and receive compensation(commission or fee
services…). These financial products generate a source of fee income and provide interest
rate and exchange rate risk hedging tools. However, they also lead to other risks for the bank
such as liquidity risks, credit risks, interest rate risk,… Amount of total unknown liabilities or
assets of Vietcombank above total assets is extremely high. Although banks seem solidly
developed through years, off-balance sheet items still have the potential to become hidden
liabilities.

Overdue period Allowance rate

From six (6) months to less than one (1) year 30%
From one (1) year to less than two (2) years 50%
From two (2) years to less than three (3) years 70%
From three (3) years and above 100%

Except for receivables from uncollectible income (bad debt expense ),assets which are
not classified as assets bearing credit risk include interest rate risk. Bank provided policies
about compensation level and allowance for these assets is based on their overdue period or
estimated loss for debts whose debtors have become bankrupt or are undergoing dissolution
procedures to avoid risks for long duration.

IV.Report on Capital Management

Estimated
2017 2018 2019 2020

Retention ratio 68.63% 73.64% 74.91% 50.68%

Net profit margin 31.30% 37.18% 40.48%

Asset utilization 2.81% 3.66% 3.74%

Equity multiplier (times) 19.7 17.27 15.12

ROE 17.33% 23.50% 22.89% 14.87%

12
 Internal capital growth rate
(ICGR) 12% 17% 17% 7.53%

During the three-year period, Vietcombank witnessed a positive outcome with upward
trend, especially the ICGR, indicating that the manager had set suitable retention ratios to
keep the payout ratio relatively stable. As a result, the value of the stockholders' investment
was maximized, supported by the growth of ROE (from 17.33% in 2017 to 22.89% in 2019)
and the reduction of the leverage ratio (by 2.58% in 2019). In addition, there was a
flourishment in business with a remarkable increase by over 9% in net profit margin in 2019.

However, 2020 was a completely different situation with the outbreak of coronavirus
and natural disaster in the middle of the country, putting numerous corporations and
businesses in danger. Particularly, the pandemic swayed business activities, leaving a serious
damage to the profits and earnings of the institution. Additionally, floods in the middle of
Vietnam made it more difficult for various customers to pay off their debts. Consequently,
according to CafeF, in the first two quarters of 2020 recorded a significant escalation in bad
debt expense with 39.5%, resulting in the percentage of bad debt growing from 0.79% at the
end of 2019 to 1% at the end of the third quarter of this year. Although the interest rate
dropped to only 4.5% this year, many small and medium-sized corporations were still unable
to get access to the source of funds due to, mainly, bad credit ratings. On the contrary, the
earnings of the banking remained increased by 7-10% but it did not seem to redeem the
intensive credit risk.

As forecasted, the ICGR of Vietcombank is likely to shrink by nearly 10%, from 17%
in 2019 to only 7.53% this year, followed by the drop of retention ratio and ROE, to 50.68%
and 14.87% respectively. This can cause a cut in the owner's dividend income, making the
market value of the stock reduce. Therefore, to minimize the effect, Vietcombank should
take other external capital raising methods into consideration, for instance, selling common
stock, preferred stocks, issuing debt capital, selling assets and leasing facilities, or swap stock
for debt securities.

Weighted
On balance sheet 2017 Asset value Risk weight value

Cash on hand, gold, silver and

gemstones 10,102,861 0% 0

Balances with the State Bank of

Vietnam 93,615,618 0% 0

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Balances with and loans to other credit
institutions 232,973,403 20% 46,594,681

Trading securities 9,669,033 20% 1,933,807

Derivative financial instruments and

other financial assets 832,354 100% 832,354

Loans to customers 535,321,404 100% 535,321,404

Investment securities 129,952,272 50% 64,976,136

Long-term investments 3,552,828 100% 3,552,828

Fixed assets 6,162,361 0% 0

Other assets 13,111,149 50% 6,555,575

total asset 1,035,293,283

On balance
sheet RWA 659,766,784

Off balance sheet Cash charge for Weighted

2017 Value market risk Risk weight value

Credit guarantees 265,179 50% 50% 66294.75

Foreign exchange
commitments 74,729,089 100% 100% 74729089

Letters of credit 45,239,213 100% 100% 45239213

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Other guarantees 51,953,402 50% 100% 25976701

Other commitments 284,135 100% 100% 284135

Off balance
sheet RWA 146295432.8

Total RWA 806,062,216

2017

Tier 1(core capital) 69,630,803

Tier 2 89324

Tier 1 to RWA 8.64% >6

total capital to RWA 6.52% >6

Tier1/tier 779.5307308 >1

leverage ratio 6.73%

Weighted
On balance sheet 2018 Asset value Risk weight value

Cash on hand, gold, silver and gemstones 12,792,045 0% 0

Balances with the State Bank of Vietnam 10,845,701 0% 0

Balances with and loans to other credit

institutions 250,228,037 20% 50,045,607

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Trading securities 2,654,806 20% 530,961

Derivative financial instruments and other

financial assets 275,983 100% 275,983

Loans to customers 621,573,249 100% 621,573,249

Investment securities 149,296,430 50% 74,648,215

Long-term investments 2,476,067 100% 2,476,067

Fixed assets 6,527,466 0% 0

Other assets 17,356,776 50% 8,678,388

total asset 1,074,026,560

on balance
sheet RWA 758,228,471

Off balance sheet Cash charge for

2018 Value market risk Risk weight Weighted value

Credit guarantees 276,512 50% 50% 69128

Foreign exchange
commitments 61,831,282 100% 100% 61831282

Letters of credit 57,703,713 100% 100% 57703713

Other guarantees 54,250,031 50% 100% 27125015.5

Other commitments 295,856 100% 100% 295856

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 Off balance
sheet RWA 147024994.5

Total RWA 905,253,465

2018

Tier 1(core capital) 61,906,762

Tier 2 68989

Tier 1 to RWA 6.84% >6

total capital to RWA 6.87% >6

Tier1/tier 897.3425039 >1

leverage ratio 5.76%

Weighted
On balance sheet 2019 Value Risk weight value

Cash on hand, gold, silver and gemstones 13,778,358 0% 0

Balances with the State Bank of Vietnam 34,684,091 0% 0

Balances with and loans to other credit

institutions 249,470,372 20% 49,894,074

1,801,126 20% 360,225

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Derivative financial instruments and other
financial assets 98,312 100% 98,312

Loans to customers 724,290,102 100% 724,290,102

Investment securities 167,529,689 50% 83,764,845

Long-term investments 2,464,493 100% 2,464,493

Fixed assets 6,710,443 0% 0

Other assets 21,891,872 50% 10,945,936

total asset 1,222,718,858

on balance
sheet 871,817,987

Cash charge for

Off balance sheet 2019 Value market risk Risk weight Weighted value

Credit guarantees 292,563 50% 50% 73140.75

Foreign exchange
commitments 91,594,629 100% 100% 91594629

Letters of credit 57,406,598 100% 100% 57406598

Other guarantees 53,276,574 50% 100% 26638287

Other commitments 349,311 100% 100% 349311

176061965.8
Off balance

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 sheet RWA

Total RWA 1,047,879,953

2019

Tier 1(core capital) 80,670,151

Tier 2 83,459

Tier 1 to RWA 7.70% >6

total capital to RWA 7.72% >6

Tier1/tier 966.584203 >1

leverage ratio 6.60%

There are significant changes in the Tier 1 to RWA from 2017 to 2019. Through
calculation tier1 to RWA = tier1 / total RWA of 3 years took turn 8.64%, 6.84%, 7.70%. Tier
1 capital is a core measure of a bank's financial strength because it includes equity. A
significant drop in tier 1 to RWA 2018 is a bad sign for the bank, but by 2019 this figure has
improved significantly with 7.70%. For total capital to RWA, after applying the formula of
total capital RWA = (tier1 + tier2) / total RWA, we calculate this figure to increase gradually
over the years: 6.52%, 6.87%, 7.72%. This is not a very low number, but it is still not
sufficient for capital adequacy for a bank or a measure of Vietcombank's ability to adequately
meet capital (<8%).

About leverage ratio, apply leverage ratio = tier1 / total asset, this index in 2017 was
the highest with 6.73%, but in 2018 it dropped to 5.76%. Through 2019 this figure will be
improved to 6.60%, but not yet equal to 2017. Because leverage ratio refers to the business
using funding from loans instead of equity, so here in that sense, even though there were
many fluctuations in 3 years, this index was still in the safe zone. Vietcombank still have
assess ability to meet their debt obligations

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 A well capitalized by the ratio of capital of tier 1 and total capital to risk weighted
assets greater than 6%, leverage ratio (tier 1 to total asset) is also greater than 5%. It shows
Vietcombank no significant regulation restriction on expansion. The numbers still show that
Vietcombank can still cope with debt contracts.

V. Liquidity and lending management

Similar to many commercial banks, Vietcombank’s lending sector can be divided into two
categories: personal loans and corporate loans. Key features of Vietcombank personal loans
can be summarized as follows

Types of Benefits Documentation required besides loan

personal loans application form, ID card and
residence book

Consumer loans

Personal Loan amount up to VND 1 billion; -Income documents: showing monthly

installment Flexible loan tenors: up to 120 income greater than 5million VND;
loan with months. -Collateral documents.
collateral -Proof of loan purpose.

Valuable Available funds for urgent needs -Original valuable papers:

papers pledged before your valuable papers' tenor Government bonds, T-bills;
loan is up. promissory notes, bonds, savings,
Up to 100% of the valuable papers. CDs, deposit accounts issued by
Vietcombank and other CIs;
-The Fund Use Plan cum Loan
Agreement cum Pledge Agreement
cum Debt Acknowledgement

Unsecured No property pledge with loan -Income documents: Labor Contract,

loan amount up to VND 500 million Bank statement AND/OR Payslip for
Flexible loan tenors: up to 60 the most recent 6 months,
months Certification letter of company
(income, position…).

Housing loans

Project Loan tenors up to 20 years. Income documents: Labor contract;

housing loan Loan amounts up to 100% the Statement of bank account .
purchased house's value. Collateral documents.
Marital status certificate
Home Flexible loan tenors: up to 15 Customer age: from 18 to 65 at the
renovation years. time of loan application.
loan Loan amount: up to 100% of the Minimum monthly income: 05
home construction/renovation millions VND
value

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Home loan Flexible loan tenors: up to 15
years.
Loan amount: up to 100% of the
house value

Car loan Tenor: up to 5 years; Income documents show stable

Processing times: up to 03 working income of more than 8 million VND
days; monthly
Loan to value: up to 100% value of
the purchased vehicle;
Applicable to most Car Dealers
nationwide (locally manufactured
or assembled cars and imported
cars).

Loan for business

Tai loc Meeting timely the need of short - -Business activities documents;
business loan term working capital for individual -Copy collateral documents.
customers;
Flexible loan term: up to 12
months;

Medium term Flexible loan tenors up to 60 -Funds Utilization Plan

business loan months -Income documents: Business
Loan amount up to VND 5 billion registration certificate and/or other
valid documents (as required by
law)​ , Documents to prove other
income (if any)
-Collateral documents
In general, customers can enjoy simple and transparent procedures with a competitive interest
rate in Vietcombank. For unsecured loans, the criteria for assessment is a bit different. To be
more specific, borrowers will need to meet all below requirements in order to have a loan of
up to 20 times of actual monthly income but not exceeding VND 500 million:
 Age requirement: Not over 55 for women and 60 for men at loan maturity;
 Monthly net salary from and above VND 03 million;
 Credit rating: Grade A and above rated by VCB internal credit rating model.
 Working experience: minimum 12 months at the time of granting credit under this
product.
 Certification letter of company (income, position...)
The internal credit rating is customized for Vietcombank system and not publicly revealed,
however, it is believed to be built based on credit scoring, machine learning and FICO.
Thanks to systematic and uniform credit rating system, lending practices can give qualified
results with quick approval time and equal quality across branches.

In terms of corporate lending, Vietcombank offers a wide range of loan products ranging
from short term loans, working capital financing to leasing and project loans. Based on each
firm's specific industry and financial performance, the interest rate, loan tenures and other
loan conditions about collateral can be changed. In general the rate for business loans are
(LINK:https://azvay.com/vay-kinh-doanh-ngan-hang-vietcombank/):

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  Below 12 months: 7.3% for the first 6 months and floating rate plus 3%-4% for
remaining time
 12 to 24 months: 7.5% for the first 6 months and floating rate plus 3%-4% for
remaining time
 More than 24 months: 7.5% for the first year and floating rate plus 3%-4% for
remaining time
As an important player in Vietnam economy, Vietcombank also actively implements various
packages of interest rate in accordance with government guidelines and regulations. In 2018,
Vietcombank has reduced interest rate on corporate loans for five entities on priority list,
which are start ups, agricultural firms, SMEs, hi-tech companies and others operating in
supporting industries.
The effort to lower interest rates of Vietcombank has greatly ensure the ability to easily get
access to funds and retain firm’s operations through hard time of COVID 19, natural disasters
and intensive international competitive.

Period Current asset Current Current ratio Net working capital

Liabilities
(VND (Current asset/current (Current asset – Current
million) (VND million) liabilities) liabilities)

31/12/2017 489,424,461 255,077,950 1.92x 234,346,511

31/12/2018 443,173,795 188,431,131 2.35x 254,742,664

31/12/2019 430,802,734 153664731 2.8x 277,138,003

Current ratio is a liquidity ratio that measures the bank’s ability to meet short-term
obligations from holdings of current assets. Based on the above table, current rating of VCB
builded up over the year , when current assets covered approximately three times current
liabilities. That means if selling a half of an asset , the bank still has capability to afford
liability. Remarkably, the bank’s liquidity picture is the recent expansion in its net working
capital from 2017 to 2019, upwarding 43million approximately. With higher liquidity ratio,
bank’s savings will be more attractive from lenders to cover loan repayment (interest rate and
principal) to avoid increasing costly and time consuming , especially reducing credit risk. In
contrast, if banks hold too many assets tied up with high liquidity rather than investing or
lending to generate more assets , they will lose opportunities to boost return.

Vietcombank also applies services to manage liquidity of customers such as auto-cash

management and auto-invest…Toward auto cash management, only settle for large-size
corporations with many subsidiaries. The bank will manage inflow and outflow between
central and auxiliary accounts (opening in bank’s branches) to control the daily flow at
subsidiaries, avoiding local surpluses and shortages at the same time, earn more return to

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receive preference from the bank. Furthermore, customers can combine with auto investment
of the bank with surplus gain to increase capital efficiency. With each level of day-end
balance, customers can earn different interest rate, with higher rate for higher balance.In case
customers day-end balance exceeds an agreed level (ceiling), the excess will be automatically
transferred to an auto-invest account to earn higher interest rate.To ensure customers payment
ability, Vietcombank can set up automatic transfer from auto-invest account back to current
account when the day-end balance falls below an agreed level(floor).

Otherwise, toward consumer customers , Vietcombank will have different criteria analysis to
avoid liquidity premium through collecting detailed information about the customer: loan
purpose - amount, term - principal source of repayment, secondary source of repayment -
collateral, risk, relevance, credit policy. To verify the accuracy of information, VCB requires
direct interviews, information declaration: income sources for debt repayment, property
ownership papers, information about the financial capacity of customers and their family.
After that, they analyze the risk level to lend or not and apply different amounts and interest
rates.

In general, Vietcombank still maintains its position in the market. To clarify the aspects
of Vietcombank, this report focuses on researching aspects such as financial performance,
credit risk management, capital management, liquidity and lending
management.Vietcombank needs to focus on credit in priority areas. , sectors are the growth
drivers for the economy, continue to stabilize interest rates and lower lending rates, and focus
credit on priority areas to support the economy's competitiveness. Vietcombank needs to
implement drastically in terms of time and efficiency in dealing with bad debts. Although the
society's general economy is in a state of being affected by epidemics, Vietcombank is still
able to stand firm and achieve its own achievements. With Vietcombank being honored as
"Vietnam's Outstanding Digital Transformation Bank in 2020", once again affirms
Vietcombank's efforts in constantly innovating and innovating to bring customers the most
modern and convenient products and services.

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