bank management vietnam international bank vib report

ABSTRACT One of the top joint stock banks in Vietnam was the Vietnam International Commercial Joint Stock Bank, also known as Vietnam International Bank VIB.. LIST OF FIGURES Figure 1: V

HANOI UNIVERSITY Faculty of Management and Tourism

Nguyen Trang Nhung -— 2004040086

November 14”, 2022

GROUP’S CONTRIBUTION

Nguyen Trang Nhung 2004040086 100%

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ABSTRACT

One of the top joint stock banks in Vietnam was the Vietnam International Commercial Joint Stock Bank, also known as Vietnam International Bank (VIB) Since more than 25 years ago, VIB has made considerable progress and achieved notable milestones It is also regarded as a top bank for innovation and creativity VIB began operations on September 18th, 1996, with a charter capital of VNDS50 billion and 23 employees Despite the Covid-19 pandemic's arrival, VIB's charter capital exceeded VND 11,000 billion by the end of 2020 Equity had reached

VND 17,972 billion at this point, while total assets had reached VND 244 trillion

Furthermore, VIB's charter capital most recently exceeded 21,076 billion VND on June 30,

2022 Total equity amounted to VND 28,250 billion Total assets exceeded VND 348,000

billion, with equity reaching VND 28,250 billion VIB currently employs over 10,000 people and serves nearly 3.5 million customers through 166 branches and transaction offices in 27 key provinces/cities across the country With core values such as customer orientation, exceptional efforts, honesty, and discipline, VIB aspires to be Vietnam's most innovative and

customer-oriented bank

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LIST OF FIGURES Figure 1: VIB’s income statement 2021

Figure 2: VIB’s income statement 2020

Figure 3: VIB’s income statement 2019 Figure 4: ROA Ratio

Fi 5: ROE Figure 6: NIM coefficient

Figure 7: Net interest margin and Net non-interest margin of VIB over 3 years Figure 8: Interest-Sensitive Gap of VIB in 2021

Figure 9: Credit risk

Figure 11: The risk weighted assets components (million VND) Figure 12: VIB’s consolidated CAR

Figure 13: Three pillars of Basel II were completed at VIB ahead of schedule Figure 14: The loan-to-deposit ratio of VIB from 2019 to 2021

Figure 15: Lending amount of VIB

I Introduction to bank 1, Background of VIB

VIB has been concentrating on practical application of Core Values: “Responsibility, Listening, Respect, Innovation, and Efficiency” to create the greatest performance for its clients, with the goal of developing an effective bank that helps customers to deal with problems quickly and conveniently

Leading retail bank in terms of quality and size

VIB focuses strongly on retail banking with the goal of making VIB the leading retail bank in Vietnam in terms of quality and scale, serving increasingly specific and diversified financial needs and customer sophistication After the first 5 years of transformation, VIB is the bank with the largest retail proportion in Vietnam: accounting for nearly 90% of the portfolio, compared to the industry average of 40% VIB's retail segment is among the top 4 largest retail segments in Vietnam among private commercial banks In addition, VIB is also among the top banks with the strongest growth in credit cards, and quickly becomes the leading bank and sets the trend in credit cards in Vietnam

Outstanding business performance and sustainable benefits

VIB brings to market lean and competitive products, invests heavily in technology and digitization, along with flexible and effective risk management As a result, nearly 4 million individual customers and thousands of corporate and institutional customers have been provided with financial solutions with outstanding service quality

Excellent organizational culture and operating model

Right from the first days of establishment, VIB's operating model and organizational culture have been built based on transparency and democracy, with a compact, flat, dynamic, and decentralized organizational structure, aiming for creativity, fairness, and high efficiency MFM Methodology and Toolkit are unique inventions of VIB that have helped the Bank's human resources system to develop comprehensively in terms of imagination, logical thinking, grasping and knowledge transfer, allowing building and quickly and synchronously deploy business solutions across the entire system

Strong risk management platform

VIB manages risk according to the principle of hedging against material risks including operational risk, credit risk and market risk VIB is one of the few pioneer banks in applying international standards in risk management, corporate governance, financial management and technology.

2, Main services of VIB

As a large bank, receiving the trust of millions of customers Therefore, VIB's products are also very diverse, serving users with many unique experiences such as making loans,

receiving deposits, insurance, etc

To begin with, one of the primary functions of a bank is to provide loans at preferential rates

to businesses or individuals For corporate lenders, the loan amount is 100% of the customer's

working capital needs and 80% of the customer's business investment needs Furthermore, VIB allows corporate customers to spend more than their current balance to meet temporary working capital shortages VIB also contributes to the purchase of non-convertible corporate bonds issued for investment programs and projects, as well as bilateral medium and long-term bilateral loans, i.e financing medium and long-term fixed asset loans, projects to increase production capacity, and expand business activities On the other hand, for Micro SME and individuals, VIB offers loans such as mortgage, auto loans with interest rates ranging from 65% to 80% of the car's value Personal loans with payroll via VIB up to 12x salary and a maximum of 600 million VND or payroll via other banks up to 10x salary and a maximum of 400 million VND

Payment services are then provided, with numerous options including domestic transfer (VIB

Values card), overseas transfer (VIB Platinum card, VIB Classic), payment service via

payment card, and payment via payment card, payment via Pre-paid card, payment via ATM card (VIB Values card), payment via Debit card (VIB i-card, VIB online plus 2inl, VIB platinum, etc.) or payment via Credit card (VIB family, VIP zero interest rate, VIP cash back) Moreover, VIB also have payment services through various types of electronic banking, which is payment via e-banking, mobile banking (MyVIB 2.0), SMS banking With the advancement of digital technology, almost all banks now use online applications to facilitate interaction while also prioritizing customer convenience and speed

Additionally, when it comes to insurance activities, VIB always prioritizes protecting the interests of those who trust in VIB's services The percentage of guaranteed VIB benefits is also committed to high figures, and the terms are clearly and unambiguously stated

3, Structure of VIB

With a commitment to providing clients with the best products and services, VIB has

continuously improved its technology, services, and skills to achieve a wide range of

successes The management system of VIB, which is crucial to running, observing, and completely adjusting the bank system, is one of the most significant contributors to their accomplishments The Vietnam International Commercial Joint Stock Bank is set up similarly

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to a shareholding company, with the General Meeting of Shareholders, the Board of Directors, the Management Team, and the Supervisory Board as its main constituents,

The General Meeting of Shareholders is regarded as the most significant decision-making body for the entire bank It comprises the large number of shareholders overall who have voting rights, functions at annual and special meetings, as well as gathering written opinions In detail, the Chairman of the Board of Directors is Mr Dang Khac Wy The Vice Chairman of

the Board of Directors is Mr Dang Van Son Next, two members of the Board of Directors

are Mr Do Xuan Hoang and Mr Han Ngoc Vu One independent member of the BOD is Mr Nguyen Viet Cuong In the Management Team, Mr Han Ngoc Vu is a member of the Board of Directors cum Chief Executive Officer of Vietnam International Bank Then, there are three Deputy CEOs of VIB: Mr Tran Nhat Minh, Mr An Thanh Son, Mr Ho Van Long and the Chief Accountant of VIB is Ms Pham Thi Minh Hue They are also talented and influential figures Therefore, they can control and give the nmght direction for Vietnam International Bank Besides, there are three members of the Supervisory Board: Ms Nguyen Thuy Linh as Head of the Supervisory Board, Ms Nguyen Luong Thi Bich Thuy and Mr Dao Quang Ngoc There are other additional offices at VIB, including marketing office, risk management, etc As a result, VIB is a trustworthy bank that clients rely on as well as a bank that multinational organizations highly value for its quality and offerings

II ‘Analysis of bank performance

1, Income statement

Investors may look at an income statement as a starting point for assessing the bank's performance The following consolidated income statements illustrate operating income, operating expense, and other factors that contribute to VIB's performance.

Interest and similar income 26 20,975,011 17,437,106 Interest and similar expenses 26 (9,158,864) (8,940,999) Net interest income 26 11,816,147 8,496,107 Fee and commission income 27 3,520,700 2,951,979 Fee and commission expenses 27 (778,748) (563,304) Net fee and commission income 27 2,741,952 2,388,675 Net (loss)/gain from trading of foreign 28 (86,748) 20,789 currencies

Net gain from investment securities 29 196,796 25,240 Other income 280,404 362,288 Other expenses (59414) (79,526) Net other income 30 220,990 282,762 Income from investments in other entities 1,766 1,941 Total operating income 14,890,903 11,215,514 Operating expenses 31 (5,281,843) (4,464,872) Net operating profit before allowance 9,609,060 6,750,642 expenses for credit losses

Allowance expenses for credit losses 32 (1,598,048) (947,635) Profit before tax 8,011,012 5,803,007 Income tax expenses ~ current 33 (1,601,262) (1,160,511) Income tax expenses ~ deferred - (162) Income tax expense 33 (1,601,262) (1,160,673) Net profit after tax 6,409,750 4,642,334 Basic earnings per share (VND/share) 24 4,067 2,926

Figure 1: VIB’s income statement 2021

for the year ended 31 December 2020

Prepared by: Reviewed by

Pham Thi Minh Hue Hoang Linh Han Ngoc Vu Chief Accountant Chief Financial Officer Chief Executive Officer 29 January 2023

Figure 2: VIB’s income statement 2020

Vietnam International Commercial Joint Stock Bank BO3/TCTO-HN

CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2019

2018 VND miltion Interest and similar income 10,085,843 Interest and similar expenses 350) Net Interest Income 4,826,493 Fee and commission income 1,026,934 Fee and commission expen: 292.189) Not fee and commission income 734,745 Net toss from trading of foreign currencies (26,871) Net gain from investment securitios 35.757 Income from investments in other entities

Otner income 598,878

Otner expenses — (3764)

Net gain from other activitios _ _ 518.114 TOTAL OPERATING INCOME 6,085,773 Payroll and other staff costs (1,639,479)

Dep and amortisation charges (81,074)

Prepared by: Approved by: Ms im Thi Minh Hue Ir ing Cink Chief Accountant ‘Chief Financial Officer

Figure 3: VIB’s income statement 2019

In general, the increasing tendency from 2019 to 2021 is prevalent for practically all parameters The quantity of operating profit earned is used to gauge a bank's performance

The operating income of VIB climbed from 8,152,082 VND (2019) to 11,215,514 VND

(2020) and up to 14,890,903 VND (2021), indicating that VIB is operating effectively and continuing through the growth despite the Covid-19 pandemic The VIB’s income statement shows that operating expenses also increase from 2019 to 2021 (from 3,437,100 VND (2019)

to 4,464,872 VND (2020) to 5,281,843 VND (2021)) The consolidated income statement for

the years 2019 through 2021 shows that the profit before taxes in 2019 was just 4,802,257 VND In comparison to 5,803,007 VND in 2020, it is a very small amount of profit before

taxes After that, profit before taxes of VIB peaked in 2021 at 8,011,012 VND, an increase of

more than 138% from 2020 Recently, VIB has made efforts to promote credit supply for low- risk industries, offering suitable products for customers’ circumstances

2, Profitability analysis a, Return on assets (ROA)

Return on assets (ROA) is primarily a measure of managerial effectiveness; it indicates how capable management has been in converting assets into net earnings ROA is calculated by using this formula:

This formula can be broken down as:

ROA is calculated and compared in this report for three years: 2019, 2020 and 2021.

Figure 4: ROA Ratio

Over the last three years, VIB's ROA has steadily increased around 0.1% Thus, it is clear that

VIB has the ability to maintain profitability per dollar of capital for the bank, and the numbers ranging from 1.98% to 2.12% or 2.28% over three consecutive years from 2019 to 2021 indicate that VIB is on the right track and has a stable operating method It can be seen that the consistent increase in ROA benefits both customers and investors by giving them more confidence in the bank they have chosen However, this number has not shown particularly impressive growth; VIB needs to develop more explosive percentage profit indicators in the coming years

According to the table above, interest expense has also been steadily increasing and has

maintained the added value for three years in a row However, the difference in interest

income over the years is significant, ranging from nearly 14 million to more than 17 million (2019 - 2020) This profit demonstrates that VIB has flexibility in the loans that the bank holds In general, VIB's interest income is approximately six times that of non-interest income in all three years Furthermore, when unprofitable revenue is compared to non-interest expenses, it is discovered that non-interest income cannot cover non-interest expenses in all three years

b, Return on equity (ROE)

ROE - the ratio of return on common equity (Return on common equity), is the most important ratio for shareholders, measuring the profitability per dollar of capital of common shareholders It can be calculated by the different between net income and total equity: This index is an accurate measure to evaluate a dollar of capital spent and accumulate how much profit This ratio is often analyzed by investors to compare with stocks in the same industry in the market, thereby referencing when deciding which company to buy shares

The table below is the ROE of VIB from 2019 to 2021:

Vietnam

The ROE of the Viet Nam International Commercial Joint Stock Bank can also be calculated by multiplying Equity multiplier(x), Net profit margin (Net income/revenue), and Asset utilization (Revenue/Average assets) This is called the Dupont model which includes 3 important criteria used to evaluate the overall business performance of an enterprise Looking

at the table above, we see that the indexes of this bank have increased in recent years and are

at a high level compared to the rest of the commercial banks That partly says that VIB is a good bank and worth our consideration

In terms of Net Profit Margin (NPM) index, VIB Banks increased year by year This reflects that this bank is in good financial health, the level of net income generated is proportional to the percentage of revenue received Besides, the Asset utilization index of this bank also increased, which shows the efficiency in using assets to generate revenue.

In general, through VIB's good ROE, we can say that this is a good bank, worthy of our trust and investment compared to other Vietnamese banks in the same segment

c, Net interest margin and net non-interest margin

Net interest margin and net non-interest margin are measures of efficiency as well as profitability how the ability of the board of directors as well as the bank's staff to maintain the growth of revenues (which is primarily driven by service, business and investment activities and other income) relative to the increase of expenses (the interest on deposit and other loans and employee salaries and benefits) However, these two ratios are affected by two different

factors - one is interest and the other is non-interest

The net interest margin (NIM), which measures how much the interest rate difference between deposit and credit investment operations is actually beneficial to the bank, is the percentage difference between interest income and expense for a bank It is determined by dividing the

difference between interest income and interest expense, also known as net interest income,

by the entire amount of earning assets Total earning assets are the aggregate of all interest-

bearing assets, including balances with central banks, loans to other financial institutions and placements therewith, trading securities, derivatives, and other financial assets, loans to

clients, and investment securities This ratio is used to determine if the company's investment decision was a good one or a bad one The investors will decide whether to invest based on that outcome, including whether it is effective or not

On the other hand, the net non-interest margin measures the difference between the bank's non-interest expenses and the service fees' non-interest profits (including salaries and wages, repair and maintenance of facilities, and loan loss expenses) Despite the income's recent rapid growth as a percentage of overall revenues, this ratio is typically negative because non- interest expenses frequently exceed income

According to the financial reports for 2019, 2020, and 2021, the year 2021 had the highest net

interest income of the three It increased by double compared with 2019 (rose by VND 5,602,903 million) and by VND 3,321,806 million when compared to the year 2020 (up 39%) This increase was made possible by the bank's expanding net profit margin of 4.6% in the second quarter of 2021 and falling funding expenses of 1.1% point compared to the previous

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