Analysis of some indicators in the financial statements of Asia Commercial Joint Stock Bank (ACB)Bản Tiếng Anh Phân tích các chỉ tiêu tài chính của ngân hàng ACBLấy số liệu từ báo cáo hợp nhất quý 2 năm 2021 của ACB
NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATION PROGRAMS Analysis of some indicators in the financial statements of Asia Commercial Joint Stock Bank Group: Class: Investment Economics K61 Lecturer: Tran Phuoc Huy Subject: Commercial Bank Members: Le Hoang Nguyen Lan Chi Nguyen Phuong Ha Nguyen Thi Kim Anh Le Thi Thu Anh Ha Noi, 2021 TABLE OF CONTENTS News brief I Dragon Capital sub-fund continues to divest from ACB Before the transaction, the subsidiary fund of Dragon Capital owned nearly 4.93 million ACB shares and registered to sell 900,000 ACB shares, resulting in the sale of 894,800 shares This fund announced that they didn’t sell out all the shares registered because of the fluctuating market price Dragon Capital Group is currently a shareholder of ACB through its holdings of DC Developing Markets Strategies Public Limited Company, Samsung Vietnam Securities Master Investment Trust (SMITH) and Norges Bank ACB stock price movement from the beginning of 2021 to the session 22/06/2021 A CB: Decision of the Board of Directors on the increase of charter capital for ACBS ACB Securities CoLtd 's charter capital was increased by 1,500,000,000,000,000 (one thousand five hundred billion Vietnamese dong) on June 8, 2021; bringing the total new charter capital to 3,000,000,000,000 (three hundred trillion dong) in the form of equity contribution Implementation time: in 2021 after being approved by the State Securities Commission Form of capital increase: Owners of Asia Commercial Joint Stock Bank (ACB) contribute more capital ACB pays a stock dividend Recently, on June 16, 2021, ACB increased its capital by issuing 540 million shares to pay dividends, equivalent to 25% After the issuance, the total charter capital of ACB will increase to more than 27,000 billion dongs The bank said that the increase in charter capital is to ensure safe ratios for the bank, increase medium and long-term capital for credit extension activities, invest in government bonds, and add capital to renovate, invest in strategic projects in the coming years • Closing the trading session on May 31, 2021, ACB's stock price stood at VND 41,400/share, up 47% compared to the beginning of the year In the first quarter of 2021, ACB's pre-tax profit reached VND3,104 billion, up 61% over the same period last year As of March 31, 2021, ACB's total assets reached VND 449,515 billion, up 1.1% compared to the beginning of the year Outstanding loans to customers increased by 4,1% to 324,311 billion dongs ACB's credit "quota" will be extended to a maximum of 15% June 25, 2021, ACB Bank - ACB Commercial Joint Stock Bank is likely to be extended credit room by the State Bank in 2021 to 15% ACB has a credit quota granted by the State Bank for the whole year of 9.5%, but at this point, the credit room is tight, so the bank is proposing to increase it to 15% Along with private banks such as VPB, TCB, and MBB, private bank ACB has achieved phenomenal credit growth in both revenue and profit despite the COVID-19 pandemic That is why the State Bank of Vietnam provides joint-stock banks with the most credit space 5 VN 30 Basket: Add ACB, SAB, GVR On July 19, the Ho Chi Minh City Stock Exchange (HOSE) announced the list of component stocks of the VN30 basket for the July 2021 period The list takes effect on August 2, 2021 According to this portfolio reversal, the VN30 basket will add three stocks: ACB, SAB, GVR, and exclude TCH, SBT, and REE ACB successfully offered 2,500 billion dongs of bonds Asia Commercial Joint Stock Bank (ACB) has just announced a successful sale of 2,500 bonds, equivalent to VND2,500 billion, to a domestic institution with a term of years, due on July 15, 2024 ACB's bonds are non-convertible bonds without warrants, are not secondary debts, and are unsecured The bond interest rate is 3.5%/year, paid periodically once a year Previously, from May to July 8, ACB issued other bond lots with a total value of 11,700 billion dongs Accumulated from the beginning of the year until now, this bank has mobilized 14,200 billion dongs of bonds II General introduction to Asia Commercial Joint Stock Bank ACB (Asia Commercial Joint Stock Bank) started its operation in 1993 ACB has 28 years of development and continuous growth to become one of the leading joint-stock commercial banks On October 31, 2006, ACB was listed on the Hanoi Stock Exchange At the Annual General Meeting of Shareholders (AGM) 2020, ACB shareholders agreed to change the listing floor from HNX to HOSE More than 2.16 billion shares of Asia Commercial Joint Stock Bank (ACB) were transferred following the exchange, and they have been formally trading on HOSE since December 9, 2020 ACB aims to provide financial products and services to individual and corporate customers through traditional transaction channels, while constantly developing the branch system to help customers transact quickly and easily through electronic channels (ACB online, ACB Mobile Apps, ACB Business Apps), selfservice channels (ATM, CDM), associated with payment intermediary services (ewallet: Shopee Pay) The main products and services of the bank are: • Mobilizing capital (receiving deposits from customers) in Vietnam dong, foreign currency and gold • Use of funds (credit, investment, joint venture) in Vietnam dong, foreign currency and gold • Intermediary services (making domestic and foreign payments, performing treasury services, remittances and quick money transfers, life insurance through banks • Trading foreign currency and gold • Issuance and payment of credit and debit cards In the 5-year development strategy for the period of 2019 - 2024, ACB sets a vision to be the leading retail bank, with high gross income growth, the best customer experience, and the highest profit margins, on equity capital (ROE) of 20%/year or more, focusing on target segments in individual customers, small and medium enterprises, and selectively developing large enterprise customers Some prestigious awards achieved by ACB in 2020 • • • Most Recommended Retail Bank in VN - The Asian Banker 10th Ranking in Asia Pacific - The Asian Banker Best Customer Service Provider Asia 2020 - International Banker (UK) From 2020 to the end of the second quarter of 2021, ACB's P/E ratio is lower than the average banking industry in Vietnam (13,01) according to a report published in May 2021 EPS ratio is stable and increases quarterly from 2021 to the end of the second quarter of 2021 => The bank's business is effective despite the impact of the pandemic III Analysis of financial indicators of Asia Commercial Joint Stock Bank Capital mobilization growth rate In total capital, mobilized capital is a very important indicator for the bank's operations If the bank mobilizes more capital, the unit is able to expand the loan scale because the bank is a borrower to lend Therefore, the unit must regularly monitor the scale and structure of mobilized capital by term, by object of mobilization (economic organizations, individuals), by currency (VND and foreign currencies), etc the basis for determining the structure of each component in the mobilized capital Thereby, it is possible to consider and evaluate mobilized capital sources to take reasonable adjustment measures At the same time, to understand the growth rate of mobilized capital, the following criteria can be calculated: Deposit growth rate (%) = (Balance of mobilized capital this period / Balance of mobilized capital in the previous period – 1) x 100 This is the basis for assessing the bank's ability to attract capital from customers to expand its business activities as well as its reputation The higher the growth in mobilized capital, proves that during the period the unit has applied many measures to increase capital mobilization capacity, or because the bank's reputation has been enhanced in the market, the unit has created a traditional customer portfolio system From the mobilized capital, it will be a condition for the bank to expand credit activities and other activities that are income-generating activities for the bank Figures from the financial statements: Balance at the beginning of the Time period Charter capital 31/12/2020 21,615,585 30/06/2021 21,615,585 year Quarter-end balance Capital mobilization growth rate (%): = ( – 1) x 100 = % ACB's capital mobilization growth rate is 0% Thus, in the second quarter of 2021, the bank did not raise additional charter capital CASA rate - demand deposit rate CASA stands for Current Account Savings Account, also known as demand deposits When customers go to the bank to open an account (current account) to deposit/withdraw money, transfer money, receive salary, open ATM card, etc., you have contributed to increase the CASA rate for the bank The higher the CASA ratio, the cheaper capital the bank can mobilize, thereby helping the bank improve its net interest income (NIM) ratio and have more competitive conditions on lending interest rates in the market On the other hand, this ratio also indirectly reflects the effectiveness of a commercial bank's policies on product development, utility services, customer base creation, etc CASA = (Demand deposit + Margin deposit)/ (Total deposit + Priced paper issuance) Meaning: The Casa Index is the ratio of demand deposits at banks A high Casa index means a lower cost of capital When assessing a bank's Casa index, it is necessary to compare it with other banks and the industry average A high Casa index will help the bank improve the NIM ratio and have more competitive conditions for lending interest rates in the market On the other hand, the higher the Casa index reflects the development background of the bank's services, as many other value-added products and services are associated with customers' demand deposit accounts Figures from the financial statements: Subject 30/6/2021 31/12/2020 Demand deposit Credit institutions 86,993 51,840 Demand deposit Customer 77,007,647 74,064,578 Margin deposit Customer 1,645,716 1,774,982 27,504,000 22,107,000 Issuing valuable papers Total deposit Credit institutions 27,085,956 23,875,242 Total deposit Customer 358,474,148 353,195,838 CASA rate 31/12/2020: = x 100 = 19.01 % CASA rate 30/06/2021: = x 100 = 19.06 % Thus, CASA of Asia Commercial Bank has increased by 0.05% in the second quarter of 2021 compared to 2020 The CASA level of the second quarter of 2021 is 19.06%, which is a fairly sustainable CASA level in the banking industry Because ACB has an average CASA, it shows that this bank can mobilize good capital, so the cost of the bank will also be lower than other banks in the same industry Analysis of the bank's NIM Net interest margin (NIM) is a measurement comparing the net interest income a financial firm generates from credit products like loans and mortgages, with the outgoing interest it pays holders of savings accounts and certificates of deposit (CDs) Expressed as a percentage, the NIM is a profitability indicator that approximates the likelihood of a bank or investment firm thriving over the long haul This metric helps prospective investors determine whether or not to invest in a given financial services firm by providing visibility into the profitability of their interest income versus their interest expenses NIM = Net interest income / Profitable assets Profit in the first months of 2021 grew strongly thanks to NIM expansion ACB recorded pre-tax profit of VND6,353 billion, with the main contribution coming from a sharp drop in deposit interest, helping NIM's net profit margin expand by 0.8% since the beginning of 2020 ACB's high net interest income margin (NIM) is due to: the bank continues to increase the proportion of retail lending with high profit margin and the bank's strategy to increase CASA ratio 10 ACB's raised capital tended to increase, with foreign currency gaining up 1.3% in the second quarter With being voted as one of the most prestigious banks in Vietnam in 2020, the number of capital mobilized also has growth momentum and is expected to increase sharply in the coming quarters due to the economic recovery in the context of pushing back Covid-19 These are positive signals for increasing capital as well as income sources for banks Fixed assets status Fixed assets are the initial physical facilities necessary for the bank's operations The service quality of the unit is more likely determined by its equipment and technological infrastructure Thus, in order to enhance competitiveness in the market, units are forced to regularly monitor its status to take measures to improve and upgrade timely This is also an item that accounts for a large proportion of the total assets of the bank, fixed assets are initially assessed and can be re-evaluated during use Original cost and carrying value are two important bases to evaluate fixed assets in any case That is the reason that the accounting entries must be ensured to reflect all three criteria of the value of fixed assets which are original cost, depreciation and carrying value The reflection of the operating capacity of fixed assets is usually shown as follows, through this ratio, fixed assets can be evaluated for their value and condition: Fixed assets status (%) = (Carrying value of Fixed assets/Original cost) x 100 Excerpts from the interim consolidated financial statements: A ASSETS Fixed assets 19 Tangible fixed assets Tangible fixed assets costs Depreciation of tangible fixed assets Intangible fixed assets Intangible fixed assets costs Depreciation of intangible fixed assets We have the following formula: Carrying value of Fixed assets = Fixed assets original cost - Depreciation of fixed assets => Tangible fixed assets status = x 100 = 53.38% => Intangible fixed assets status = x 100 = 69.74% From both above indicators, it can be seen that the status of fixed assets of ACB is still new, the ratio compared to the end of 2020 is approximately 2% different Income and expense criteria Ratio of pre-tax profit to total income = (profit before tax / Total income) x 100 Ratio of pre-tax profit to operating expenditure = (Profit before tax / Operating expenditure) x 100 Unit: million VND Number Criteria 30/6/2020 30/6/2021 Profit before taxes 3,819,587 6,352,753 operating expenditure 4,128,541 3,557,835 20 Total income 15,463,277 16,968,263 Ratio of pre-tax profit to total income 24.7% 37.44% Ratio of pre-tax profit to operating expenditure 92.52% 178.56% ACB's income targets for both periods were low due to the impact of the pandemic However, the income of the first six months of 2021 has tended to be higher than that of 2020 Because the government can control the epidemic situation and have appropriate support policies ACB also has plans to support loans with preferential interest rates for private customers, families, and small businesses ACB's expense target for business activities in the first six months of 2020 is lower than in 2021, showing that in 2020 the bank was forced to reduce costs to increase the bank's income The high expense for the first six months of 2021 shows that the bank's business is not effective due to the effects of social distancing and the bank has to maintain fees while unable to open transaction activities Profitability analysis criteria a Net profit margin ratio Net Marginal Interest Income Ratio: This ratio measures the underlying profitability of an entity's lending activities in terms of its average yielding assets The average indicator is the average between the value at the beginning of the year and the value at the end of the year This is a factor that shows the ability to generate profits in the operation of the currency trading sector The higher this ratio, the better it is for the bank because the rate of interest generated on the profitable assets of the unit is high Net Margin (%) = [(Interest Income – Interest Expense)/Average Profitable Assets] x 100 21 Figures from the financial statements: Unit: million VND 30/06/2021 31/12/2020 Interest Income 16,968,263 15,463,277 Interest expense 8,931,887 7,338,304 Fixed assets 3,703,279 3,782,753 Credit asset 6,787,651 6,893,097 Total assets 471,275,438 444,530,104 Average Profitable Assets = = 447,319,381 Net Margin Interest Income Ratio (%): = x 100 = 2.16% ACB's net profit margin was at 2.16% in the accounting period ending in the second quarter of 2021 This is the average net profit margin compared to other banks in the banking sector b Net Marginal Non-Interest Income Ratio Net Marginal Non-Earnings Ratio: This ratio measures the profitability of the entity's non-credit products relative to its average return on assets 22 If this ratio is high, it means that the business of non-credit products brings high efficiency to the unit And vice versa Practical import and export course in HCMC Net Marginal Non-Interest Income Ratio (%) = [(Non-Interest Income – NonInterest Expense)/ Average Profitable Assets] x 100 Figures from the financial statements: Unit: million VND 30.06.2021 31.12.2020 Profit from forex trading 427,664 295,694 Profits from buying and selling investment securities 93,648 662,178 Profits from other business activities 28,035 102,499 Income from capital contribution 6,542 5,646 Tangible asset 3,703,279 3,782,753 Credit asset 6,787,651 6,893,097 Total assets 471,275,438 444,530,104 Average Profitable Assets = = 447,319,381 Net Marginal Non-Interest Income Ratio (%): = x 100 = 0.12% ACB's net non-interest income ratio reached 0.12% at the end of the second quarter of 2021, which is a low level It shows that ACB does not focus on the noncredit sector Or the bank is not thriving from the business of non-credit products 23 c Average interest rate difference This ratio reflects the efficiency of the bank's intermediary activities in the process of capital mobilization and lending Average Interest Rate Spread = (Interest Income/Average Earning Assets) – (Earning Expenses/Average Capital Interest Payable) x 100 This ratio represents the difference in interest earned from the uses of capital after deducting the cost of paying interest on that capital The higher the interest rate spread, the higher the profit of the unit Figures from the financial statements: Unit: million VND 30/06/2021 31/12/2020 Interest Income 16,968,263 15,463,277 Interest expense 8,931,887 7,338,304 Tangible assets 3,703,279 3,782,753 Credit asset 6,787,651 6,893,097 Total assets 471,275,438 444,530,104 Account payable 430,895,193 409,081,941 Average Profitable Assets = 24 = 447,319,381 Average Capital Interest Payable: = = 419,988,567 Average Interest Rate Spread: = ( - ) x 100 = 2.0% The average interest rate of ACB reached 2.0% at the end of the second quarter of 2021, the average level in the banking sector The difference in interest earned from the use of capital after deducting interest payments for that capital of ACB reached a difference of 2.0%, which proves that the bank is using capital effectively and sustainably d Interest difference from credit activities Interest spread from credit activities: This ratio reflects the efficiency of the bank's credit activities Interest difference from credit activities = (Loan interest collection / Total average outstanding balance) – (Interest payment / Average Source of capital to pay interest) x 100 This indicator shows that the higher the interest rate differential, the higher the profit of the unit Thereby considering which form should increase to bring profit to the bank Figures from the financial statements: Unit: million VND Earning loan interest 30/06/2021 31/12/2020 14,884,436 13,447,892 25 Loan interest payment 69,281 30,914 Loans to customers 336,827,639 308,528,625 Account payable 430,895,193 409,081,941 Average Capital Interest Payable: = = 419,988,567 Total average outstanding balance: = = 322,678,132 Interest difference from credit activities: = ( - ) x 100 = 4.5% ACB's credit activities to customers are very strong, reaching a difference of 4.5%, which is considered a high level in the banking lending industry Therefore, at present, banks are making high profits from the field of customer loans e Ratio of return on average total assets In addition, interested managers and customers of the bank are always interested in the ability to use assets to generate profits of the unit, through the analysis of Return on Average Assets ROA ROA (%) = (Profit after tax/Average total assets) x 100 This ratio indicates the percentage of profit earned on average total assets Therefore, the higher this indicator, the more effective the bank can be confirmed Figures from the financial statements: Unit: million VND 30/06/2021 31/12/2020 26 Total assets Profit after tax (accumulated) 471,275,438 444,530,104 5,071,636 x Total average assets: = = 457,902,771 ROA (%): = x 100 = 1.1% The average rate of return on total assets reached 1.1% at the end of the second quarter of 2021 This is the average ROA compared to banks in Vietnam However, this is only the data ending on June 30, 2021, showing that ACB still kept the profit margin on average total assets at a stable level during the recent Covid epidemic Liquidity analysis criteria In theory, a bank's liquidity is seen as its ability to meet immediate cash needs such as withdrawing deposits and disbursing committed credits, paying operating expenses or other necessities that need to be paid in other currency a Analysis of affordability ratio Ratio of affordability = Instantly Payable Assets/ Volatile Liabilities Instant solvency assets are those which banks can immediately mobilize for payment to customers such as reserves, deposits at credit institutions and concentrated payment deposits at the headquarter of the bank, and volatile liabilities are customers’ call deposits in the bank Unit: million VND 27 Notes 30.06.2021 31.12.2020 6.1 21,700,725 23,311,116 16 71,712,240 69,109,913 ASSETS Deposits at other credit institutions LIABILITIES AND EQUALITY Customers’ call deposit Affordability ratio = x 100 = 30.26% The solvency ratio is an indicator of a bank's liquidity in the future This index is directly proportional to the bank's short-term liquidity, hence, with the figure of 30.26% of ACB, the short-term liquidity can be corresponding b Analysis of the bank's quick ratio The bank's quick ratio, i.e., the ability to make instant payments at the request of customers, is reflected in the ratio below This ratio represents the proportion of assets that can be quickly converted to cash, including reserves and bank investments, in Total Assets Asset Realization Rate (%) = [Average mobile assets (excluding off-balance sheet assets)/ Average total assets] x 100 Unit: million VND Investment securities Capital contribution, investment for long-term Real estate investment Total assets 28 Average mobile assets = [] = 59,839,805.5 Total average assets = = 456,902,771 ACB’s asset realization rate = x 100 = 12.97% This ratio reflects the bank's ability to meet customers' unanticipated withdrawals with its own liquidity, without resorting to external resources The above coefficient reflects the bank's ability to pay to meet the needs of customers to withdraw money Hence this can be considered as the explanation for an unfortunate event that happened in 2003, when a false rumor caused people to flock to withdraw money at the bank; nevertheless, ACB was still balanced and able to meet customers' unexpected withdrawals Deposit Guarantee Coefficient (%) = [Average mobile assets (excluding offbalance sheet assets) / Average total customer deposit] x 100 29 Unit: million VND ASSETS Investment securities Capital contribution, investment for long-term Real estate investment LIABILITIES AND EQUALITY Customers’ deposit Average total customer deposit = = 355,834,993 Deposit Guarantee Coefficient = x 100 = 16.82% This is the indicator showing the ability to pay for the customer's deposits; the higher this indicator, the more the customer's deposit is guaranteed to be paid on demand at any time However, if the liquidity ratios are too high, it will not be beneficial to the unit, as the amounts that can be used to pay customers often not or bring little income to the unit On the contrary, if these indicators are too low, it may make it difficult for the Bank to ensure financial stability With this index, ACB is currently still complying with the regulations of the State Bank Ratio of profitable assets (%) = (Average profitable assets/ Average total assets) x 100 30 Unit: million VND Deposits and loans to other credit institutions Trading securities Investment securities Capital contribution, investment for long-term Total assets Average profitable assets = = 98,106,627 Ratio of ACB’s profitable assets = x 100 = 21.47% This is at a reasonable rate of ACB since if this ratio is high, it will bring a lot of profit to the bank yet causing many difficulties in controlling profitable assets as it always contains many risks However, on the contrary, if the ratio of profitable assets is too low, it is definitely not a good sign for the bank as the unit has not used the maximum profitability from its capital ACB's profitable assets ratio is relatively good compared to other banks with similar asset size, increasing ACB's equity has contributed to improving the bank's business efficiency IV General assessment and forecast of future trends of Asia Commercial Joint Stock Bank General assessment 31 Through all of the above analysis, in the first half of 2021, Asia Commercial Joint Stock Bank had good growth despite the negative effects of the Covid 19 pandemic • Fast growing credit with well maintained quality Due to having abundant Equity from retained earnings and adopting a policy of focusing on customer quality • Compared to other domestic banks, ACB has a good return on equity (ROE) is high thanks to operating under a centralized retail banking model with a focus on individual customers and small and medium enterprises • Low provisioning pressure: ACB has fully made provision for restructuring outstanding loans, according to Circular 03, the reserve pressure in the next quarters is lower than that of the system banking system in general • Deploying digitization helps to reduce operating costs in the long term: ACB is in the integration phase digitize operations, shorten processes to increase customer experience and save money operating costs Forecast of future trends of Asia Commercial Joint Stock Bank Bad debt risk: Despite having superior asset quality compared to the system average, ACB will still face the risk of increased bad debt if the Covid-19 epidemic lasts, causing the cost of room increased NIM net profit margin narrows, reducing the growth rate in the second half of 2021 and 2022 when (1) lending rates fell and (2) liquidity was less abundant, making it difficult for deposit rates to decrease The slow growth of deposits in general and long-term deposits in particular has put pressure on the LDR and short-term capital for medium and long-term loans of ACB and some other banks create pressure increase deposit interest rates in the medium term 32 The provisional reversal of receivables from related lawsuits helps to reduce operating costs in the context of increased cost of provisions due to Covid-19 We expect ACB to continue collect the remaining fraction of this receivable in subsequent quarters Digitization has been successfully implemented in some other banks to help reduce staff size and we expect the growth rate of ACB's staff to be slower than its financial growth rate assets in the following years to help lower the bank's CIR ratio ~THE END~ 33 ... Closing the trading session on May 31, 20 21, ACB's stock price stood at VND 41,4 00/share, up 47% compared to the beginning of the year In the first quarter of 20 21, ACB's pre-tax profit reached VND3,104... 31/12/2020 Demand deposit Credit institutions 86,993 51,8 40 Demand deposit Customer 77,007,647 74,064,578 Margin deposit Customer 1,6 45,716 1,7 74,982 27,504,000 22,107,000 Issuing valuable papers... Interest expense 8,9 31,8 87 7,338,304 Tangible assets 3,703,279 3,782,753 Credit asset 6,787,651 6,893,097 Total assets 4 71,2 75,438 444,530,104 Account payable 430,895,193 409,0 81,9 41 Average Profitable