course bank management military commercial joint stock bank

Hanoi University

FACULTY OF MANAGEMENT AND TOURISM

COURSE: BANK MANAGEMENT Military Commercial Joint Stock Bank x MB

Group: 08 Class: Tutorial 04

Tutor: Nguyen Thi Minh Hang

Students: Nguyen Thi Mai Anh — 1904040006 Bui Viet Ha — 1904040030 Dinh Thi Mai Linh — 19040401062 Do Thi Mai Trang — 1904040118

December 5, 2021

ABSTRACT

In recent years, financial institutions and the services they provide are becoming more internationalized, and most financial service providers are growing in size and complexity Bank boards of directors, supervisors, and managers must adapt in a variety of ways to effectively manage their banking operations as a result of these changes As a result, bank management is essential in coordinating banking activities with the goal of boosting revenues while lowering risks Known as an enterprise under the Ministry of National Defense, Military Commercial Joint Stock Bank was in the top 5 most prestigious banks in Vietnam This paper will provide the important information and analysis of MB Bank in three recent

years, 2018, 2019 as well as 2020 It will base on three aspects: bank's structure, bank's

performance, risk management, capital management, and lending management.

VỊ — Capital management of MB Bank 02 1212111211111 1111111011811 1111111011151 01 81 ray 15 AT anh 15 Phan 17 VII — Lending management of MB Bank 12 20121111 1011211 11211 191110111211101 11151011 xer 18 MH§ e3 21

Ill

IV

LIST OF FIGURES Figure 1: Ownership structure of MB Bank

Figure 2: Net Income and Total Assets of MB Bank (2018 — 2020) Figure 3: Equity Capital and ROE ratio of MB Bank (2018 — 2020) Figure 4: EPS of MB Bank (2018 — 2020)

Figure 5: Total Operating Revenues and Total Assets of MB Bank (2018 — 2020) Figure 6: Fund Management Efficiency of MB Bank (2018 — 2020)

Figure 7: Tax Management Efficiency of MB Bank (2018 — 2020) Figure 8: Asset Management Efficiency of MB Bank (2018 — 2020) Figure 9: Expense Control Efficiency of MB Bank (2018 — 2020) Figure 10: The interest rate of MB Bank (2018 — 2020) Figure 11: CAR of MB Bank (2018 — 2020)

LIST OF TABLES Table 1: Profitability ratios of MB Bank (2018 — 2020) Table 2: Net Interest Income and NIM of MB Bank (2018 — 2020) Table 3: Net Non-interest Margin of MB Bank (2018 — 2020) Table 4: Net Operating Margin of MB Bank (2018 — 2020) Table 5: Activity ratios of MB Bank (2018 — 2020) Table 6: Dollar Gap of MB Bank (2018 — 2020)

Table 7: Change in Net Interest Margin of MB Bank (2018 — 2020) Table 8: Liquidity Management of MB Bank (2018 — 2020) Table 9: Capital Management of MB Bank (2018 — 2020)

Table 10: The particular amount of MB’s Loans made to various sorts of borrowers Table 11: The comparison of household businesses and individuals

Table 12: The particular amount of MB’s Loans made by corporations and individuals Table 13: Non-performing loan ratio of MB Bank (2018 — 2020)

Table 14: Qualifying MB’s Loan ranked in 2020

VI

VI

1— Introduction

Military Commercial Joint Stock Bank (HOSE: MBB), shortened as Military Bank or MB, is a Vietnamese joint-stock commercial bank formed on May 11, 1994, as an entity directly under the Ministry of National Defense MB Bank is currently one of the recognized banks with great financial potential and high-quality goods and services, works for the country’s property and the benefit of its clients After over 27 years of construction and expansion, MB has become stronger and stronger This report is aimed to analyze Military Bank in 5 aspects including bank’s structure, bank’s performance, risk management, capital management, and lending management

Il — Structure of MB Bank

1 Organizational structure

In terms of organizational structure, MB Bank consists of 3 main divisions: Board of

Directors (BOD), Board of Management (BOM) and Supervisory Board

The Board of Directors is the highest authority who is in charge of discussing business strategies, long-term goals, guiding the Board of Management in making decisions They are responsible for ensuring effective risk management and regulatory compliance and monitoring the company's social responsibility (Reverse Bank of India, 2012) The Chairman of the BOD is Mr Le Huu Duc who has been holding this position since 2011 Besides, BOD has 3 Vice Chairmans, 6 members and 1 independent member (Annual report, 2020) The Board of Management takes responsibility for the day-to-day operation of the bank, who complies with the strategies of the BOD They are also in charge of Assets and Liabilities Management, Risk Management, Management of Capital, etc In 2017, Mr Luu Trung Thai has been appointed to be the Chief Executive Officer of MB Bank Besides, there are 5 Deputy Executive Officers, 1 Chief Financial Officer and 5 other members playing important roles in the development of MB Bank (Annual report, 2020)

The Supervisory Board elected in the General Meeting of Shareholders conducts internal investigations, monitors and evaluates compliance with the decisions of the General Meeting

of Shareholders, the Internal Regulations, the Charter, the Resolutions, the Decisions of the

General Meeting of Shareholders, and the BOD The Head of the Supervisory Board is Ms Le Thi Loi who has been elected in 2019 Moreover, there are 1 Deputy Head of the Supervisory Board and 3 other members (Annual report, 2020)

Regarding the organizational structure, MB Bank Tower is located at 35 Le Van Luong Street,

Trung Hoa Ward, Cau Giay District, Hanoi In detail, the MB Bank network comprises 296 branches and transaction offices from the North to the South of Vietnam Moreover, it

operates 3 overseas offices in Laos and Cambodia Six subsidiaries make up the non-bank

network, with an emphasis on investing, insurance, and financial services (Annual report,

2020)

2 Ownership structure

Till the end of December 2020, the total number of shares of MB Bank is 2,798,756,872

Specifically, domestic institutions hold more than half of the total shares of MB Banks, foreign investors own a large portion of shares (22.91%), domestic individuals own approximately 19.65% of MB Bank’s shares while the rest (0.92%) belongs to Treasury stocks

Figure 1: Ownership structure of MB Bank

m@ Domestic institutions @ Foreign investors um Domestic individuals m Treasury stocks

3 Subsidiary

Even though subsidiaries with their core activities efficiently offer supporting services along with services of MB, they also benefit from the Group’s advantages to conduct their business efficiently in their fields (Annual report, 2014) MB includes six subsidiary companies that

mainly focus on investment, insurance, and financial sectors

The first is Military Bank Assets Management Company Limited which MB Bank holds 100% of its chartered capital The company's business is debt and asset management playing an important role in the credit process of MB It actively joins in debt activities and made up 56% recovery value of MB's bad debt (Annual report, 2020)

The second is MB Capital Management Joint Stock Company which 90.77% of its chartered capital is contributed by MB The firm’s main services are fund management, portfolio management, and investment advisory In 2020, the company achieved a pre-tax profit growth, ranking 5th in the same sector (Annual report, 2020)

The third is MB Securities Joint Stock Company which MB accounts for 81,94% of its total chartered capital, provides investment brokerage and securities trading services In 2020, it witnessed an increase in pre-tax profit of 16% compared to 2019, (Annual report, 2020) The fourth is Military Insurance Corporation (MIC) which 68,37% of its chartered capital is owned by MB The company's core product is non-life insurance such as energy, aviation, windy energy insurance, and friendly insurance products like Insurance care, Miracle Insurance, etc After nearly 14 years of establishment, MIC had remained a growth in revenue of more than 40% in 4 consecutive years from 2012 (MIC, n.d.).

The fifth is MB Ageas Life Insurance Company Limited which 61,00% of its chartered capital belongs to MB It consists of a wide range of insurance such as life insurance, health

insurance, etc In 2020, it noticed a remarkable rise of 51% in insurance premium revenue

compared to the previous year (Annual report, 2020)

Finally, MB Shinsei Finance Limited Liability Company (MS), which MB holds half of its chartered capital, primarily engages in consumer finance In 2020, MS's pre-tax profit was 320 billion VND, which grew 77% compared to the year before (Annual report, 2020)

Ill — Products of MB Bank

With effective business activities, MB has affirmed its brand and reputation in the Vietnamese

financial services industry by diversifying product and service activities based on excellent risk management, modern information technology infrastructure, and strong development and expansion of operations in new market segments besides the traditional market of a commercial bank There are five main service arrays provided:

« Deposit: Term deposits and Non-term deposits

« - E-banking: Mobile banking, eMB, Associated card « Loans: Home loans, Auto loans, Consumer loans

¢ Card services: International debit card, International credit card, Domestic debit card

¢ Fund transfer and payment: Transfer from overseas to Vietnam, Receive from

overseas to Vietnam, Domestic transfer

Besides, MB also offers other services such as Accounts services for MBS investors,

Products and services for soldiers and Assets custody services

IV — Performance of MB Bank

1 Profitability analysis

When a firm is conceived, one of its top objectives is to raise profit In other words, every business owner wants his corporation to generate more than it spends The behavior of stock prices may be regarded as the finest indication of a financial institution’s performance due to

its reflection on the market’s assessment However, to evaluate the growth of smaller banks

and other relatively small financial-services corporations, meticulous study on earnings is more crucial because the stock issued by these organizations has limited liquidity This report is going to take a closer look at the vary of profitability ratios as follow:

Table 1: Profitability ratios of MB Bank (2018 — 2020)

a Return on Assets (ROA)

Return on Assets calculated by using the bank’s net income over the total assets is one of the efficiency ratios used to evaluate and analyze how effectively a bank’s assets are utilized

According to Moody’s standards, ROA ratio ranging from 1% to 2% to be considered as an

efficient operation level Over three years from 2018, MB Bank witnessed a fluctuation of

around 1.80% in ROA ratio Surprisingly, instead of the big four banks in Vietnam, asset exploitation belonged to small and medium banks with outstanding profitability (Vnfinance, 2020) By reducing numerous costs and diversifying revenue resources (such as issuing

securities, providing different loans, insurance, etc.), in 2020, MB Bank ranked in the top six

banks which have the most efficient ROA ratio while this ratio of BIDV is 0.47% b Return on Equity (ROE)

The relationship between net profits and total equity capital is one of the financial ratios used to analyze and assess the entity's profitability Net Profits and Shareholders’ Equity are the two most essential components of this ratio

ROE =

Figure 3: Equity Capital & ROE ratio of MB Bank (2018 - 2020)

surpassed VP Bank to rank at 6th, under top banks, namely BIDV, Vietinbank, Vietcombank, Techcombank, and Agribank

Moody’s clarified that a return on equity (ROE) of 12 - 15 percent is sufficient Thus, MB Bank is in a state of effective use of equity capital Nevertheless, similar to the ROA ratio, the period of three years from 2018 experienced a fluctuation of ROE Compared to 2019, the ROE ratio decreased by more than 3% in 2020 after going up from 18.11% (in 2018) to 20.23% in 2019

c Net Interest Margin (NIM)

NIM =

Table 2: Net Interest Income and NIM of MB Bank (2018 — 2020)

As mentioned above, the total assets of MB Bank experienced an uneven growth rate (increased slightly from 2018 to 2019 and climbed sharply in 2020) In contrast, net interest income went up significantly by VND 3 trillion each year throughout the last three years The changes in these figures lead to volatility in NIM from 4.02% in 2018 to 4.37% in 2019, then down to 4.10% in 2020 Despite a slight decrease in NIM compared to other banks listed on stock exchanges, this was still a relatively safe number These indicators are positive which means that MB Bank is still doing well in making profits on capital loans

d Net Non-interest Margin (NNM)

NNM=

Table 3: Net Non-interest Margin of MB Bank (2018 — 2020)

3,575,553

e Net Operating Margin (NOM) NOM =

Table 4: Net Operating Margin of MB Bank (2018 — 2020)

10,802,761 362,325,062

2.98%

14,926,742 411,487,575 3.63%

16,806,716 494,982,162 3.40% (Unit: VND million)

The figure shows that both the operating profit before tax and the balance sheet total has gradually increased, leading to an increase in the net operating margin from 2.98% in 2018 to 3.40% in 2020 However, during the period 2019-2020, EBITDA growth and revenues were

significantly lower than the previous growth (1,879,974 VND versus 4,123,981 VND) While

in total assets, the opposite occurs The growth rate of total assets during the period 2019 2020 is higher than that of the period 2018 2019 (83,494,578 VND against 49,162,513 VND) Due to the opposition of the growth index to the numerator and the denominator, the net operating margin increased slightly from 2018 to 2020 but decreased slightly over the period 2019-2020

jf Earnings per Share (EPS)

Figure 4: EPS of MB Bank (2018 - 2020)

VND 4,000

3,596 VND 3,500

VND 2,500 2,416

VND 2,000 VND 1,500 VND 1,000 VND 500

In 2018, MB's EPS turned into VND 2,416, many of the pinnacle 10 banks with the very best

EPS in Vietnam In 2019, the index increased to VND 3,596 In 2020, this index will lower from VND 3,596 to VND 2,758 EPS increase withinside the length 2018 - 2020 is forty-one

times It may be visible that the EPS of MB financial institutions has elevated step by step over time, which proves that the profitability of MB is getting higher and higher This can assist MB appeal to an increasing number of investors

2 Activity analysis

In order to make profits from the bank and understand how well the bank is doing, most investors and even clients have been observing a bank’s financial strength through metrics of asset utilization and other efficiency ratios

Table 5: Activity ratios of MB Bank (2018 — 2020)

a Asset Utilization (AU)

Firstly, it is asset utilization which indicates the extent of efficiency in using assets to generate earnings The asset utilization ratio is calculated by dividing total operating revenues by total assets and it will be described as follows:

AU=

Figure 5: Total Operating Revenues and Total Assets of MB Bank (2018 - 2020)

trillion and more than VND 27 trillion in two years later Besides, the total assets also

increased during this period with year-over-year figures of VND 362 trillion, VND 411 trillion, and approximately VND 494 trillion respectively for 2018, 2019, and 2020 This positive growth led to a good index in asset utilization of MB Bank within the last two years from 2018 to 2019 as a result of the greater the use of assets, the greater is the bank’s ability to generate earnings from their assets However, there is a slight decrease in the asset utilization ratio in 2020 even though the two other categories that make up this ratio rise

b Fund Management Efficiency

The fund management efficiency ratio displays the efficiency of the cost of borrowed funds which can be computed by dividing the total assets by the total equity capital and it will be described as follows:

Fund Management Efficiency =

Figure 6: Fund management efficiency of MB Bank (2018 - 2020)

c Tax Management Efficiency

The tax management efficiency ratio measures how many percentages of earnings are lost to taxation It is calculated by dividing the net income by the pretax net operating income

(Chron, n.d.)

Tax Management Efficiency =

Figure 7: Tax Management Efficiency of MB Bank (2018 - 2020)