military commercial joint stock bank report mb bank report

HANOI UNIVERSITY FACULTY OF MANAGEMENT AND

TOURISM

MILITARY COMMERCIAL JOINT STOCK BANK REPORT

Tutor: Nguyen Thi Minh Hang

Subject: Bank management Class: Tut 3 FB, group 8

Member: Pham Vũ Minh Phương - 1704040095 Bùi Thị Thu Thảo - 1704040110

Trần Đoàn Thanh Trang - 1704040123

Hanoi, 2020

PEER EVALUATION FORM

Team member

ID Task given (Written form) Task

given

(%)

Mark perform

Pham Vu Minh Phuong

and management tools

Task 4: The impact of

applying Basel I and Basel

II in the Vietnamese banking system

Task 5: Individual loans

100%

Bui Thi Thu Thao

1704040110 | Task 1: Other Financial services + Non - Financial Services

Task 2: Determining vision,

mission and core values + Shareholders’ Wealth

Task 3: Liquidity risk

management

Task 4: MBB’s challenges

and differences when

applying Basel II Task 5: Corporate loans

100%

Tran Doan Thanh

Trang 1704040123 | Task 1:Introduction +

Insurance + Foreign exchange

Task 2: The analysis of ROE

Task 3: Interest risk - duration

Task 4: What is Basel I, Basel IT and how are they

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REFERENCES 24 I MAIN SERVICES

1 Introduction

Military Commercial Joint Stock Bank (also known as Military Bank) is a joint stock commercial bank of Vietnam under the Ministry of National Defence MB bank was established on 04/11/1994 with an initial charter capital of 20 billion VND and 25 staff members Up to now, MB bank is a multi-functional financial group including 296 transaction points nationwide

with more than 15,000 employees, 02 branches in Laos and Cambodia, 01 representative office in the Russian Federation, and 06 member companies operating in the fields of securities, insurance, real estate, fund management,

consumer finance serving a variety of customer segments, economic sectors, making important contributions to the economic development of the

country

Over the past 25 years of construction and growth, MB bank has made a mark on the financial market with its steady and strong growth, and has always been in the top of Vietnam's leading banks in terms of business performance MB bank is the only bank among joint stock commercial banks in Vietnam that has always maintained its growth rate and has continuously made profits since its inception, even during periods of extremely difficult economic periods or drastic market restructuring periods

Consistent with the motto of operation, flexibly following market movements with

the spirit of "Innovation, Modernity, Cooperation, Sustainability", MB's business

targets in 2019 all have strong growth compared to 2018 Specifically, total assets increased by 13.5%, revenue increased by 24.1%, profit after tax increased by 28%

2 Financial Services 2.1 Commercial Banking

Commercial banks are considered as money trading organizations that mainly and often operate as receiving deposits from people with good financial conditions and banks are responsible for repaying principal and interest as prescribed The amount of money deposited by customers will be used to make loans or to do business with profit purposes in accordance with the State's regulations

a Deposits

After a few changes in the identity image, the demand for deposits from individuals or organizations of MB bank also became stronger when keeping a competitive interest rate of 7.7% In the first half of 2019, MB bank announced an impressive profit up to

4 trillions VND In details, the profit before taxes reached 4,306 billion which

completed by 50.5% of the annual plan and increased by 22.5% over the same period in 2018 (Viettimes, 2019) According to the financial statements of 2019, the total assets of MB bank has gained 49,162 billion dong, an increase of 11.95% compared to 2018, which showed a potential sign for this improvement Policies to welcome customers with the new outlook and also to stimulate demand as well as to increase

capital funds such as increasing deposit interest rates and reducing loan interest rates have helped MB bank achieve these successes

b Loans

Besides providing transferring and deposit services, MB bank also has advantages in terms of lending money According to Viettimes online newspaper, MB bank's credit grew well with the recorded value from customer loans reached 229,125 billion VND in the early 2019 and the bad debt ratio was also controlled at a good level of 1.10%, fortunately lower than the target set at the beginning of the year, 1.5% Compared

with the total asset value of VND383,219 trillion at that time, the total loans to

customers accounted for 59.8%, mainly targeting individuals or small and medium enterprises Although the interest rates have not increased significantly, only remaining at the highest level of 7.7%, MB bank has increased its media and technology to spread the easy, convenient online platform to consumers with controlled risks

2.2 Investment Banking

Within 20 years, MB bank has received many certain achievements, especially in establishing or co-owning 6 subsidiary companies The oldest and most prominent among them are MB Securities, MB Assets Management and MB Capital (with 82%, 100% and 91% of ownership) After many years of efforts, MB Securities has become one of the leading securities companies in Vietnam and typically in two consecutive years 2009 and 2010, MB Securities has risen to the leading brokerage market share in both exchanges : Hanoi Stock Exchange (HNX) and City Stock Exchange HCM (HOSE) This company mainly focuses on two main areas: securities services and investment banking services, supported by in-depth research activities of analysts and professional customer relations specialists

Based on the data of the first half of 2019 financial statements, MB Bank's member

companies have stated to perform outstanding business results with total pre-tax profit

estimated at 669 billion VND, reaching 42.4% of the annual plan Since then, MB

bank aimed to achieve a total pre-tax profit at the end of 2019 of 8,345 billion VND and has actually exceeded expectations at 10,036 billion VND (Annual Report 2018,2019)

2.3 Other Financial services

Besides the fields of commerce and investment, MB bank is also rated as one of the

best banks that apply Fintech (Financial Technology) to customer support service Currently, electronic banking of MB bank includes : Internet Banking MBbank, App MBbank, Bank Plus MBbank, SMS Banking With the e-banking service, customers can perform the functions such as internal or interbank money transfer, bill payment (electricity, water, internet, phone, .), shopping payment (air tickets, train tickets, hotel reservations, .), credit debt payment, App MBbank is the most popular service of all e-banking services of MB bank, it is the unique digital banking App for customers in Vietnam receiving the prize "Sao Khue 2019", It allows customers withdraw money at ATMs via App without using ATM card, QR code payment and it is the first banking application in Vietnam that users can connect accounts of family members, plan and manage family’s expenses as well as having financial investment

methods on App for families to have more conveniences in life, more time to connecting and loving

Another service that is quite convenient for businesses is that MB bank also sponsors business capital for Microenterprises Business financing products for customers that are microenterprises of MB to timely supplement working capital, exclusively for Microenterprises with loan purposes to serve the needs such as management costs payment, production and business costs payment, service payment, It finances 85% of the capital needs, the maximum value of the loan is 5 billion VND/customer and the maximum loan period of 12 months The number of small and medium enterprises

currently accounts for 97% of the total number of enterprises in Vietnam, therefore,

thanks to the support from MB Bank, microenterprises can expand their operating scale and help Vietnam's economy to develop

In addition, MB bank also has services for customers as well as businesses such as

Import tax guarantee, State budget collection service, Electronic tax service,

2.4, Insurance

In insurance areas, MB Ageas Life Insurance Company Limited (MB Ageas Life) was established under the Establishment and Operation License No 74 / GP / KDBH, dated July 21, 2016 of the Ministry of Finance.MB Ageas Life is built on the basis of a partnership between 3 partners, including: Military Commercial Joint Stock Bank (MB Bank) from Vietnam, Ageas Group from Belgium and Muang Thai Life Protection Company from Thailand With the aim of becoming the top most trusted and trusted leading life insurance company, MB Ageas Life implements a "Multi- channel" development strategy In which, Bancassurance channel is fully deployed at 300 branches, MB for room transactions nationwide The traditional agency channel

continues to expand with thousands of consultants, with a system of official offices

present in all provinces Digital channels are developed synchronously, intelligently and professionally on website platforms, fanpage, Zalo, MB App application, Viettel Pay application These are important prerequisites for MB Ageas Life to realize its mission: "Accompany you to build happiness" - Bring to the life insurance market in Vietnam a new approach to financial products key in general and insurance products in particular.(MB Ageas - Khởi nguồn)

2.5 Foreign exchange

In the country's economic development, especially since Vietnam officially joined the World Trade Organization (WTO), Vietnam's economy has been increasingly integrated with the region and the world Therefore, opening up the economy has become an important driving force to promote economic growth, making an important contribution to maintaining the high annual growth rate of the Vietnamese economy Taking this opportunity, MB Bank has taken advantage of its advantages and opportunities to strongly develop foreign exchange trading activities

In 2018, with a network covering 63 provinces and cities nationwide, MB's financial derivative activities had a leap in size The interest rate derivative portfolio reached 1 billion USD for the first time (approximately 23,000 billion VND) with hundreds of regular corporate customers, including large and medium enterprises In addition, thanks to derivative sales increased dramatically, MB Bank was awarded "Largest

ICE Arabica and Robusta coffee futures and options volume" by Phillip Futures Financial Group and it was also in the Top 3 banks with delivery volume Vietnam's largest derivative commodity translation Also in 2019, MB Bank was evaluated by The Asian Banker as the first choice for corporate customers in Vietnam With more than 10 years of experience in derivative operations and a client base with import- export activities, multiple industries and business sectors, with strong financial status, MB Bank has the ability to customize each option Supply derivatives to meet the maximum risk of customers' hedging needs The derivative product chain MB is providing covers all the products currently permitted to supply on the Vietnamese market from foreign exchange derivatives (forwards, swaps, options .); Interest rate derivatives (IRS, CCS, AIRS, cap-floors, FRAs ) and commodity derivatives (futures, swaps, options ) On May 30, 2019 in Bangkok, Thailand, in the framework of the Conference "The Future of Finance 2019" organized by The Asian Banker magazine, MB Bank was honored to be awarded the “Financial Derivatives Provider of the Year award in Vietnam " as a recognition for the Bank's financial derivative supply and commodity price management activities (Minh Ngoc, 2019)

3 Non - Financial Services

After many years of establishment, MB bank regularly deployed gratitude programs to thank customers for always accompanying them in the process of building and developing Specifically, MB bank has just launched the point accumulation program with many attractive preferences for loyal customers that is called “MB Star’ MB Star is built based on three core factors: Diversify the opportunities to accumulate points, Suit customers’ preferences and Connect not only between customers and MB but also between customers with similar interests and lifestyles Customers will be rewarded StarPoint accumulation points when experiencing products and services at MB: using credit cards, saving money online or at the counter, paying bills online Especially, customers who downloaded MBbank App for the first time and identify at the counter will receive 1,000 points immediately The accumulated points will be changed for many attractive gifts and preferences of famous brands in the fields of tourism, food, service, shopping; Dam bay Bong Sen Vang or refund to customer's card

In addition, MB bank also issues international MB Visa credit cards for customers,

meeting all spending, shopping, dining, entertainment or travel needs no matter what you are doing or anywhere MB Visa international credit card includes 03 classes: Classic Card, Gold Card and Platinum card With a card transaction limit from 10

million to 1 billion VND, annual fee from 200,000 to 800,000 VND, interest free for

45 days, low minimum payment - only 5%, customers can enjoy shopping, spending and traveling with discounts from food & beverage and hotel partners of MB bank Moreover, customers who own Platinum cards are also supported with travel insurance up to 500,000 USD, join Gold Platinum Club and enjoy preferential treatment from 5-star resort, golf club, spa services and get the best deals in the MB bank’s Get and More program Specially, MB Visa international credit card is safe and secure with EMV chip card technology, customers can actively manage the card status via: SMS, Internet Banking and MB Branches or Transaction Offices nationwide Those are some preferences that MB bank has brought to customers, with the desire to share benefits and sustainable values, MB always strives to bring the best experience and long-term benefits to customers

ll BANK PERFORMANCE

1 Determining vision, mission and core values

In vision, MB bank is trying to become a leading joint stock bank in Vietnam in select market segments in large urban areas, they specifically focus on the following factors: Traditional corporate customers, economic groups and large enterprises; Selective focus on small and medium enterprises; Developing individual customer services; Expanding business activities in the capital market; Development of investment banking; Close linkage between the Bank and other members towards becoming a strong financial group

In mission, MB dedicates all efforts to build a team of skilled human resources who

are dedicated to serving to provide businesses and individuals with wise financial — banking solutions at optimal costs and great satisfaction

In core values, MB's value is not in assets but in spiritual values that each member of MB always values and promotes, including 6 basic values: Teamwork, Trust,

Customer Care, Creative, Professional, Effective 2 Shareholders’ Wealth

Items Units 2017 2018 2019 Total VND billion 13,867 19,536 24,650

operating income

Total VND billion (5,999) (8,733) (9,723) operating

expense

Total Asset VND billion 313,878 368,325 411,488

Total Equity VND billion 29,601 34,173 39,886

(The annual report of MB bank from 2017 to 2019)

To evaluate shareholders’ wealth, we can look at the data provided in MB bank's

annual financial statements The number of common shares issued increased steadily

from 1,815,505,363 shares to 2,372,732,280 shares, which means that ESP increased

from 1953 to 3596 VND per share and total earning from stock of bank also rose from

18,155,035 VND million to 23,727,322 VND million during 2017 - 2019 However,

every year, MB bank still regularly pays dividends in both cash and stocks at a high rate (in 2018, the total dividend rate is 14%, including 6% in cash and 8% in shares) This method of dividend distribution regularly provides the market with a large amount of shares, but accumulating many years will create a large number of stocks

floating in the market In this case, if MB bank wants to create a high market value

base in the future, the dividend payment plan should probably be adjusted in the direction of only dividing by money, possibly increasing by 0.5-1%,

3 Probability ratios

This report is designed to illustrate the performance of MB Bank and presents a detailed analysis of the two most important rates of return including Return on Asset (ROA) and Return on Equity (ROE) In this section, we provide calculations and evaluations based on two ratios to help review the financial statements in 3 years ( from 2017 to 2019) clearly and specifically

3.1 The analysis of ROA

ROA is a very familiar ratio in business, which is used to measure the profitability of a company compared to its own total assets Therefore, this index will show how effectively a company uses assets to make profit Based on the general formula for ROA calculation and the figures taken from MB bank's financial statements from

2017 to 2019, MBB's ROA is shown as follows: Formula: ROA = Net Income / Total Assets

Besides, it can be seen that MBB's net interest income has increased sharply in these years and led to an increase in the bank's Net Interest Margin, which can happen by expanding the credit growth, increasing income from loan interests, increasing interest income from debt securities investments or reducing capital costs from different funding sources The table below illustrated the rise of Net Interest Margin of MB bank in the period of 3 recent years :

Formula: NIM = Net Interest Income / Earning Assets

Earning Assets 298,766,10 | 343,889.07 | 391,242,019 7 8

Net Interest Margin 3.76% 4.24% 4.60%

(Net Interest Income and Earning Assets are denominated in Million VND)

There is also a slight increase in the Net Non-Interest Margin :

Formula: Net Non-Interest Margin = Net Non-Interest Income / Earning Assets

Earning Assets 298,766,107 | 343,889,07 | 391,242,019 8

Net Non-Interest Margin 0.37% 0.44% 0.54%

(Net Non-Interest Income and Earning Assets are denominated in Million VND)

In general, the bank has shown an upward trend in making profit and how smartly using its own assets In the future, MB bank should try to find a way to keep increasing the profit growth rate as in the 2017-2018 period

3.2 The analysis of ROE

Besides ROA, ROE is also a measure to analyze the bank's performance Return on equity (ROE) is a rate of return that measures a firm's ability to generate a return on its shareholders’ investments in the company In other words, the return on equity tells you how much profit per dollar of equity is normally made Therefore, understanding these related indicators will help shareholders to have a better view of MB Bank's performance

Using the formula ROE=Net Income/Total Equity, together with the summarized data on the Net Income and Total Equity Capital of MB Bank from 2017 to 2019, the Return on Equity ratio of MB Bank has been indicated as follows:

In order to have a profound investigation into this variation, we have studied the

break-down components of the Return On Equity ratio, which are the Net Profit Margin (NPM), the degree of Asset Utilization (AU), and the Equity Multiplier (EM) Using this formula ROE = NPM x AU x EM and summarized data in Financial

Statement, we have the table :