enterprise valuation according to 2 methods of discounted cash flow fcff and fcfe viettinbank

Type of business: Vietnam Joint Stock Commercial Bank for Industry and Trade, transactionname VietinBank, is one of the largest state-owned commercial banks inVietnam.. Over the past 30

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2 Nguyễn Mai Phương - 11184033

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Enterprise valuation according to 2 methods of discounted cash flow FCFF and FCFE

(VIETTINBANK)

I Purpose of evaluating: 3

II Description the object (Viettinbank): 3

1 Type of business: 3

2 History of Vietinbank: 4

3 Prospects for the economy and the industry: 4

a For the economy: 4

b For the banking industry: 5

4 Products, services, markets and customers: 6

5 Competition: 6

6 Property structure: 7

7 Management apparatus: 8

8 Human resources: 9

9 Shareholders: 10

10 Future prospects: 11

11 Transactions in the past: 11

III The FCFF and FCFE valuation approach 12

1 FCFF- Free cash flows to firm: 12

2 FCFE- Free cash flows to Equity: 15

3 Advantages and disadvantages of the two methods: 17

a Advantages: 17

b Disadvantages: 18

IV Firm valuation 18

1 FCFF – Free cash flow to firm: 18

2 FCFE – Free cash flow to equity: 22

V Conclusion 24

I Purpose of evaluating:

EVALUATING VIETTINBANK IN THE BEGIN OF 2019:

For Viettinbank's internal: results from firm valuation help the Board of

Directors and the Board of Mangagement have accurate analysis and assessment

of the performance of their bank, thereby realizing the challenge as well as afuture opportunity to come up with an effective operational strategy forViettinbank In addition, valuation also helps the bank to serve many otherpurposes such as: investment, capital contribution, association, business, .Specifically, Viettinbank can recognize and set a short-term operation direction

at least in the period of 2019 – 2020

For investors: the valuation result of Viettinbank is like a summary of the

performance report, the operation of the business when they are planning toinvest, contribute capital, into Viettinbank this time Thanks to businessvaluation activities, investors ensure capital safety as well as have the highestlevel of profit at different acceptable levels of risks

1 Type of business:

Vietnam Joint Stock Commercial Bank for Industry and Trade, transactionname VietinBank, is one of the largest state-owned commercial banks inVietnam Established in 1988, VietinBank is currently holding a leading and keyrole of a leading bank in the economy

Currently, Vietinbank is one of four state-owned banks, also known as "Big4" Over the past 30 years of construction and development, the bank has held

an important position in the Vietnamese banking industry With a networksystem spread across our country including 1 main transaction center in thecenter of Hanoi, 151 other large and small branches and more than 1000transaction offices VietinBank is the first and only Vietnamese bank in Europewith two branches in Frankfurt and Berlin - Germany, while actively promotingthe opening of representative offices and branches in many other countries such

as Myanmar, English, Polish, …

2 History of Vietinbank:

Establishment history Vietinbank is divided into 4 phases

 Phase I: From July 1988 to 2000

This is the stage of implementing the construction and transformation from asingle-tier banking system to a two-tier banking system Industrial andCommercial Bank was formed and officially put into operation in the market

 Phase II: From 2001 to 2008

Vietinbank successfully completed the project of restructuring the bankingsystem in terms of debt settlement, organizational model, mechanism policiesand business practices Operationally and professionally, with an increasinglyexpanding scale

 Phase III: from 2009 to 2013

Vietinbank successfully implemented equitization, strong innovation,breakthrough development in banking operations

 Phase IV: From 2014 to present

This is the period with many remarkable achievements of the bank The first

is the successful application of achievements in science, technology andprogress of the financial industries in the world Focusing on building andimplementing governance according to strategy and technology breakthrough.All banking operations have been renewed in a more positive direction Thanks

to that, business results also grew proudly, associated with sustainableefficiency Bring Vietinbank more success, more and more prestige and occupythe trust of customers

3 Prospects for the economy and the industry:

a For the economy:

Commenting on Vietnam's economic development in the period of

2021-2025, the researchers said that Vietnam continues to promote economic growthmainly in depth, perfecting the model of synchronous growth in both economic-technical, socio-economic and eco-ecological aspects, promoting development

on the basis of innovation, improving labor productivity, applying scientific and

technological advances, improving the quality of human resources, promotingcomparative advantage and proactively integrating into the world.

b For the banking industry:

The banking industry is in a good position to cope with risks and can takeadvantage of the economic recovery in 2021 as a springboard for revenue andprofit growth Some of the prospects are:

 Credit growth for the year is expected to be at 14%

The figure is based on the forecast of the recovery of the economy,enterprises returning to production and business, low interest rates supportingeconomic growth and promoting public investment to stimulate disbursement ofloans into projects on construction of bridges and roads Along with that, fiscalpolicies will be promoted through promoting public investment along with taxexemption, reduction and expansion measures implemented in 2020

 Many banks plan credit growth of 14 - 20% in 2021

Thanks to the economic recovery, SME and individual lending will continue

to be boosted on both the demand and supply side, thereby supporting creditgrowth in 2021 Commenting on the growth plan numbers of banks, BSCbelieves that these are feasible numbers

 Capital mobilization has gradually shifted to cheap capital structure.

Currently, many banks focus on increasing CASA, cheap capital by manycentralized strategies

 Bad debt is expected to be below 1.8%

BSC expects that thanks to the recovery of the economy, businesses andindividuals will start to return to production and business activities and createenough cash flow to repay the bank's debts, thereby reducing the risk of baddebts in the near future

 The interest rate level continues to be kept at a low level.

BSC experts expect that the low interest rate level will continue to bemaintained in 2021, helping to stimulate economic growth Regarding fiscal and

monetary policy, BSC believes that Vietnam will continue to go in a stimulatingdirection, keeping interest rates at a low level as at present.

4 Products, services, markets and customers:

The customers of Vietnam Joint Stock Commercial Bank for Industry andTrade are enterprises, economic groups, corporations (Steel Corporation,Vietnam Oil and Gas Group, Vietnam Electricity ), small and medium-sizedenterprises, individual customers and business households as businessorganizations are common in Vietnam when business households use their ownresidence to do business

 Product services for corporate customers include credit investment,trade finance, corporate deposits, foreign currency trading and cardservices,

 Product services for for individual customers are savings deposits,bank cards, personal insurance, loan transactions, …

5 Competition:

In Vietnam, there are many commercial banks operating such as BIDVAgribank, MB, TechcomBank, Lien Viet Therefore, some of the followingstrengths are factors that help Vietinbank be able to compete with other bigbanks

 VietinBank has a strong and reputable brand name, standardizedprofessional process according to ISO 9001-2008 to ensure fast andsatisfy customers' needs;

 Have a high-quality human resource development training school, haveTransaction Center I to centrally handle the entire internationalprofessional system

 Actively promote customer-centric strategy

In the context of complicated developments in Covid-19, VietinBank hasdeveloped an e-banking application to fully meet the needs of using bankingand financial services without having to directly come to the translation at the

bank For example, VietinBank has successfully piloted the system of "SmartDigital Branch - Smart Digital Branch" to help identify and diversify customers,improve customer experience and service quality, contributing to increase laborproductivity

 VietinBank always considers the diversification of products,technological superiority and distribution channel diversity as the corecompetitive strategy Therefore, in addition to enhancing the efficiency ofcapital use, and executive management capacity, continuing to focus ondeveloping retail banking networks and new products, VietinBank alwaysfocuses on cooperating with major domestic and foreign partners toprovide packaged financial solutions for key customer groups

6 Property structure:

As of December 30, 2020, VietinBank's total assets reached VND 1,341 trillion, an increase of 8.1% compared to 2019 The rate of non-interest income increased by 32.5% compared to 2019.

Vietin Bank increased deposits at the State Bank at VND 57,616 billion (up 131.64% compared to the end of 2019) This is the compulsory reserve

management strategy of VietinBank in the direction of optimizing capitalefficiency, saving costs, but still ensuring compliance with the regulations onthe compulsory reserve ratio of the State Bank

Accordingly, the consolidated pre-tax profit in 2020 is VND 17,070 billion,creating a resource for VietinBank to continue to promote its role as a key bank,the mainstay of the economy, making a greater contribution to the State budget.and the country's socio-economic development in the coming time

VietinBank's net interest income in 2020 grew by 7.18% over the same period last year due to the decrease in interest expenses, the bank has flexibly

managed the balance of capital, shifting the term structure of the capital in thedirection of increasing the CASA deposit weight

Customer deposits as of June 30, 2020 reached VND 913 trillion, an increase

of 2.3% compared to the end of 2019 This is still a safe investment channel inthe context of the economy being affected by the COVID-19 epidemic

In 2020, customer loans increased by 8.9%, VietinBank actively managed credit, focusing on sectors and fields encouraged by the Government and the

State Bank of Vietnam, making positive contributions to stability and

development of the country Notably, customer deposits increased by 11% andsteadily increased both demand and term deposits Fluctuates according to theliquidity needs of the bank and balances with the reduction in the scale ofdeposit mobilization from the State Treasury In addition, in the context that theState Bank making adjustments to lowering the ceiling interest rate, the increase

in the capital mobilization scale has shown VietinBank's position with anextensive network and the trust of organizations and population

7 Management apparatus:

The current Board of Directors of Vietinbank includes 9 members of the Board of Directors, 8 members of the Board of Directors, 3 members of the Supervisory Board and 1 chief accountant.

Vietinbank's Board of Directors consists of 9 members, of which 7

members are Vietnamese nationals, the remaining 2 members are Japanese nationals, including:

 Tran Minh Binh - Member and General Director

 Masahiko Oki - Member and Deputy General Director

 Pham Thi Thu Hoai - Member

The Board of Directors of Vietinbank

Vietcombank's Board of Directors consists of 9 members, of which 1member holds the position of General Director, and the remaining 8members hold the position of Deputy General Director

 Tran Minh Binh - General Director

 Masahiko Oki - Deputy General Director

 Nguyen Duc Thanh - Deputy General Director

 Le Nhu Hoa - Deputy General Director

 Nguyen Hoang Dung - Deputy General Director

 Nguyen Hong Van - Deputy General Director

 Tran Cong Quynh Lan - Deputy General Director

 Nguyen Dinh Vinh - Deputy General Director

The Supervisory Board of Vietinbank

The Supervisory Board of Vietinbank consists of 3 members

 Le Anh Ha - Head of the committee

 Nguyen Manh Toan - Member

 Nguyen Thi Anh Thu - Member

Chief Accountant of Vietinbank

 Nguyen Hai Huong - Chief Accountant

About the staff work and staff building VietinBank develops mid-term and annual personnel strategies and plans associated with the bank's business strategy and plan; in each stage, there are synchronous solutions for implementation.

9 Shareholders:

Currently the State Bank is the largest shareholder owning 64.46% of Vietinbank, the second largest shareholder is MUFG Bank (Japan) with 19.73%.

Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank Ticker: CTG) owns 7 subsidiaries and associates, most of the business activities

-of companies recorded growth compared to the previous year

Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank)

is the bank that owns the first-tier subsidiary of the system in many industries,from fund management, insurance, financial leasing to securities, gold, silverand gemstones, even joint venture banks

Notably, VietinBank currently owns a subsidiary bank, VietinBank Lao

10 Future prospects:

The medium-long-term goal of VietinBank is to become a large-scale bank with the best performance in the Vietnamese banking system by 2020.

VietinBank identifies strategic focuses in the next period as follows:

Next business growth practices selectively, effectively, sustainably, stronglyshift the customer structure, the income structure; continue to automate serviceswith high utilities, strongly improve service quality, promote non-creditservices, pay special attention to payment services using modern technologyplatforms; improve financial capacity, enhance the efficiency of bankingoperations, subsidiaries, associates; labor productivity improvement, costeffective management

In the plan for the period of 2021-2023, VietinBank sets a credit growth target of 8% or between 10% -11% depending on a prudent or optimistic scenario The bank is looking to focus on lending rather than investing in

corporate bonds Besides, the bank is also very selective about projects andcorporate bond issuers

VietinBank has shown its decisive governance, business operations have hadmany positive changes, being at the forefront of the commercial banking system

in implementing business strategies under the direction of the Government andthe State Bank of Vietnam to promote development

11 Transactions in the past:

VietinBank closed an exclusive insurance deal with Manulife on 12/12/2020 to establish an exclusive 16-year partnership in the distribution of life insurance through banks The cross-sale of insurance brings in billions of

revenue each year for many banks in the market In 2019, according to datafrom Rong Viet Securities Company, VietinBank earned more than 1,200 billionfrom cross-selling insurance, ranked among the top 5 banks with the largest lifeinsurance premium on the market

On March 15, 2021, VietinBank Securities signed a loan syndication contract worth 30 million USD - equivalent to more than 690 billion VND with the group of 4 leading banks in Taiwan, Union Bank of Taiwan; Taichung Commercial Bank - Labuan Branch; Taishin International Bank and Huanan Commercial Bank, the deal by Union Bank of Taiwan is the Loan Arrangement and Clue The loan of 30 million USD has a term of no more than

12 months with reasonable cost of loan

Recently, VietinBank officially signed a Comprehensive Cooperation Agreement with ON to give customers the opportunity to promote business development through joining the digital technology platform VietinBank is

the pioneer bank in Southeast Asia that introduces customers to ON's platformapproach This platform is especially useful for small and medium enterprises(SME) when the network of customers in this segment is not diverse, businesseshave to spend a lot of costs and manpower to find reputable partners WithEnterprise Connect on a digital platform, businesses can seek diversifiedbusiness opportunities such as market expansion and product promotion Inaddition, businesses can also look for strategic partners to call for capitalparticipation, receive technology and people transfer; merger and acquisition(M&A); Joint venture cooperation to investment opportunities to improvemachinery and equipment Since then, businesses expand operations in newmarkets, strengthen cross-border trade cooperation, optimize asset use, capitalmobilization, domestic and international business development

III The FCFF and FCFE valuation approach