introduction vietinbank
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1
Overview of VietinBank
1988 2009 2010
• Vietnam Joint Stock Commercial Bank for Industry and Trade (“Vietinbank”) is a leading financial and banking group of Vietnam with diversified activities
• Established in 1988, upon its separation from the State Bank of Vietnam (“SBV”)
• In 2008, the Vietnam Bank for Industry and Trade successfully undertook its Initial Public Offering
• The Bank was equitized and renamed into Vietnam Joint Stock Commercial Bank for Industry and Trade in July 2009
• As at 31/Dec/2010, VietinBank has total assets of VND367.7trn accounting for a 12.7% market share, total customer deposits of VND[205.9]trn, accounting for 12.1% of the market share and total customer loan of 231.4trn accounting for 10.4% of the loans market share
• Provides a range of banking and financial products and services (retail banking, trade finance, Internet banking, etc.) as well as manages correspondent banking relationships ~1000 banks worldwide
• Present in 63 provinces and cities and has the 2nd largest distribution network in Vietnam
VietinBank has formidable franchise with strong market share
(As at 31/12/2010)
Overview
12.70%
12.10%
10.40%
15.00%
23.00%
Assets
Deposits
Loans
OverseasRemittance
Credit CardBusiness
2
Key business lines and product portfolio
Product portfolioKey business lines
Corporate and financial
institution banking
SME banking
Retail Banking
International Banking
• Offers credit lines, syndicated loans and project specific loans
• Corporate loans constitute 45% of gross loans as at 30 Jun 2011
• Interbank and valuable papers trading
• Trusted and pioneering bank for SME clients• SMEs constitute 35% of gross loans as at 30 Jun
2011
• Range of consumer lending products, including business and consumer loans
• 1,093 branches, Transaction offices and Saving offices
• Trade financing, international settlement and overseas remittance services
Card Services
Import-export payment
Derivative products
Overseas remittance
Foreign exchange
Guarantee
Securities
Other products
•VietinBank cards and international credit cards
•Export/Import LC confirmation, transferring, settlement
•Document processing, shipping guarantee issuance
•Spots, forwards, swaps and options
•Speed remittance through remittance companies
•Spots, forwards, swaps and options•Interbank market
• Guarantees for loans, advanced payment, performance, payments, tax/customs, warranty
• Brokerage services, securities custody analysis and investments etc.
• Money transfer, leasing, insurance, individual and corporate savings
3
Second Largest Branch Network in Vietnam
North: 1 MOC & 71 branches
Central: 28 Branches
South: 50 Branches
1 Main Operation Center in Ha Noi
1,093 branches, Transaction offices and Saving offices
2 Representative offices in Da Nang
and Ho Chi Minh City
2 Joint-Venture Companies
6 Subsidiaries
3 non-profit making units
Multiple touch points for individual and corporate customers across Vietnam Expanding network overseas
• Opened a branch in Frankfurt in September 2011
• Plans to open branches in Berlin and Laos in 4th quarter of 2011
• Plans to expand network to England, France, Czech, Poland and South-east Asia nations in 2012
Branch expansion plan
Strong distribution footprint in Vietnam with significant expansion potential
Correspondent Banking Relationships with nearly 1.000 financial institutions in the world
2
3
1
4
Pre-eminent financial institution in Vietnam with a dominant market share
Assets (VND trn) Loans (VND trn) Deposits (VND trn) Branches (VND trn)
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Largest bank in Vietnam in terms of total loans and 2nd largest in terms of distribution network
396
233
179
143
141
130
115
535
366
307
43
25
18
38
24
20
2303
597
358
259
102
58
69
81
33
56
192
141
91
58
75
57
77
1093
320
281
183
378
142
151
5
VietinBank’s Credit Strengths
Customer Base
Products & Services
Technology & Management
Human Resources
Network
• Good knowledge of customers with a large number of traditional customers
• Large and increasing source of deposits
• Large lending customer base
• Diversified products and services which are constantly improving
• Focused investments on modernization, software application in banking management
• Management system which complies with the standard of modern banking management
• Professional, secured and modern model of operation and management
• Young, enthusiastic competent and well-trained staff and management
• Second largest bank in Vietnam in terms of assets
• Wide network of diversified business lines with central and convenient locations
6
Performance Highlights
2011 Target H1 2011 Results 2010 Results
Total assets 441,000 395,852 367,712
Chartered capital 20,000 – 25,000 16,858 15,172
Total mobilized funds 408,000 226,286 339,699
Mobilized funds growth rate 20% 54%
Total loans 419,000 263,267 232,204
Total loans growth rate 20% 43.5%
Profit before tax 5,100 3,894 4,598
Profit after tax 4,000 2,919 3,414
ROE 16% – 18% 17.45% 22.1%
ROA 1.2% 1.12% 1.50%
NPLs ratio <3.0% 1.71% 0.66%
CAR >9% 10.41% 8.02%
Source: Company Data
TO BE UPDATED WITH 2012 TARGETS. Please confirm figures H12011 and 2010 Figures
We are waiting for the approval of the BOD for the 2012 targets. We will add the 2012 targets next week.
7
Vietinbank Subsidiaries’ Performance
Source: Company Data
SubsidiariesContributed
Capital (VND bn)
Ownership(%)
Total assetsAs at 30.06.2011
(VND bn)
Chartered CapitalAs at 30.06.2011
(VND bn)
Profit before taxAs at 30/6/2011
(VND bn)
VietinBank Leasing Company Ltd 500 100% 1,612 500
50
VietinBank Securities Joint Stock Company 500 75.61% 999 790
30
VietinBank Debt Management and Asset Exploitation Company Ltd
30 100% 41 30
0,6
VietinBank Insurance Company Ltd 300 100% 477 300
41
VietinBank Gold and Jewelry Trading Company Ltd
300 100% 330 300
17
VietinBank Fund Management Company Ltd 500 100% 1,133 500
26
Indovina Joint Venture Bank 696 50% 21,802 3,402 317.5
Vietinbank – Avia Life Inssurance Joint Stock Company
400 50% - 3,402 -
1
2
3
4
5
6
8
7
8
Ownership Structure
Stakes of Major Shareholders
80%
3%
7%
10%
State Bank of Vietnam
IFC
IFC Capitalization Fund
Others
Major shareholders’ support
Shareholder Support
Vietnamese Government
• VietinBank is currently 80% owned by the Government. Government’s share holding will not fall below 51% at any time
• The majority of Board of Director’s members are appointed by Government
IFC
• Conducting technical assistants to VietinBank in:
• Risk Management
• SME services
• Energy saving efficiency
• Information technology
• Standardization of other services
9
Strong Relationship with Government & SBV
•VietinBank is currently 80% owned by the Government
•Government’s share holding shall fall below 51% at any point in time under ..
•Government has been an active contributor to VietinBank’s capital raising on a regular basis
•VietinBank has 7 Board of Directors out of which 6 are nominated by Govt.
•Members of the Management Board needs approval by the SBV
•SBV is the direct regulator for the Bank’s operation
•Vietinbank is a pioneer bank in implementing government and SBV’ monetary policies.
Government Ownership
Explicit Government
Support
Appointment of Board of Directors
Under supervision of
the SBV
Implementation of Govt. Policies
10
Corporate Mission and Strategic Objectives
Continue to expand business vertically and horizontally to increase market share1
Enhance service quality to ensure the efficiency in the context of well-managed risks2
Improve financial capability and transparency3
Strengthen corporate governance and risk management in line with international standard4
Accelerate modernization of the Bank5
Become the leading financial group and key player in Vietnam6
Maximize stakeholder’s value7
MissionEstablish VietinBank as the leading financial group in Vietnam and highly rated bank in the international domain with motto: Safety – Efficiency – Modern – Sustainable growth, focusing on Commercial banking, Investment banking and
others
Overall Strategic Objectives
11
Strategic ObjectivesAssets & capital
• Annual average growth rate of total assets 25-35%
• Acceleration of post-equitization process to increase shareholders’ equity
• Diversification of ownership while keeping the Government stake of at least 51%
• Strengthen capital base to enhance financial strength (CAR >=10%, ROE: 20-25%; ROA: 1.5-2.0%)
Organization & Management
• Manage and develop the organization with reasonable and clear hierarchy;
• Standardize internal policies and procedures in each department
• Develop and establish subsidiaries
• Expand business network both domestically & internationally;
• Strongly develop retail banking system
• Focus on risk management: maintain NPL ratio <=3.0%
Technology
• Establish a unified, modern, and secured information technology system, one which is highly integrated, stable, and centralized
Human Resources
• Standardize human resources, reinforce training and enhance staff capacities; all to improve the quality of the Human Resources
• Innovate and refine employment and remuneration mechanisms
• Completely comply with Internal Labor Regulation and Corporate Culture
Credit and Investment
• Credit operations remain key operations and stay market competitive
• Adjust credit structure appropriately, suitable for VietinBank advantages
• Enhance credit risk management quality, ensuring NPLs below 3%
• Diversify credit and investment activities in financial markets, remain a market maker, and enhance capital employment and liquidity management efficiencies
Products & Services
• Broaden customers & products base
• Develop non-banking products & services to increase share of non-interest income to around 30-40% of the total income
• Use modern technology as the foundation for customer-centric services development
• Position the bank as a strong universal bank, providing a full spectrum of banking products & services
4
6
52
3
1
Others• Enhance marketing & PR• Improve social responsibilites & community services
7
12
Future Prospects and Plans
Development Plan for 2011 & beyond
Source: Company Data
Realize the Vision 2015: To become the leading, efficient, and modern banking and financial group for the economy4
Increase capital to ensure operational safety2
Invest in modern banking technology, standardize governance, products and services, procedures, and slowly integrate into the global financial system to enhance VietinBank’s brand name both in the domestic and overseas markets
3
Continue to accelerate post-equitization processes, enhancing competitiveness and integration1
13
166,113
193,590
243,785
367,712
295,009
395,852
161,619
234,205
184,911
263,267
148,530
192,208
118,602100,482112,426
121,634
155,965
205,919
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Total assets Customer loans and advances Customer deposits
VietinBank has enhanced its scale steadily
Assets and Loan Growth NII and Margins (*)
4,683
7,189
7,932
12,089
5,326
9,357
4.00% 4.04%
3.02%3.04%
4.12%
2.31%
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Net interest income Net interest margin
VND bn
Source: Company Data(*) Net Interest Margin calculated as Net Interest Income / Earning Assets. Earning Assets calculated as Balances with the SBV + Placements with and loans to other banks+ Loans & Advances to customers +
Investment securrities – held to marturity
VND bn
Strong growth in assets, loans and deposits have resulted in higher margins
14
Healthy yield and cost trend
10.77 10.559.94 10.11
9.679.06
6.977.077.007.297.14
7.91 9.008.87
9.549.51
8.72 8.82
2007 2008 2009 2010 30-Jun-10 30-Jun-11
% %
Yield on Advances Yield On Investments Yield on Funds
Yield on Funds Cost of Funds
4.89
6.436.67
6.16 6.28
5.655.11
6.496.75
6.17 6.27
5.76
3.61
2.79 2.71 2.733.063.02
2007 2008 2009 2010 30-Jun-10 30-Jun-11
% %
Cost of Deposits Cost of Funds Spread
Well positioned to maintain margins in a rising interest rate environment
Source: Company Data
15
Diversified non-interest income supports growth
Net Fee and Commission Income
335
438
649
1,436
688 709
1,631
1,067
804
1,294
716
545
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Net fee and commission income Non interest income
VND bn
Fee and Commission Income Breakdown
Source: Company Data
42.0% 40.8% 41.6%
29.2% 27.4%35.1%
14.9% 20.8% 22.5%
17.1% 16.6%
20.2%
1.2%1.6%
5.3%
14.2% 16.8%
10.7%
41.8% 36.9%30.6%
39.4% 39.2%33.9%
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Settlement Services (%) Treasury activities (%)
Agent services (%) Other fees and commissions (%)
Increased fee income contribution has helped sustain earnings growth
16
VietinBank has managed its operating cost well….
Cost to Income Ratio
42%
57% 58%
49%
54%
48%
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Cost to income ratio
Operating Expenses Breakdown
1,619 2,947 1,794 4,1412,293 3,381
312827
289 644
297348
8351,184
1,081 2,412823 1,475
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Other operating expensesDepreciation and amortization charges
Payroll and other staff costs
Source: Company Data
VND bn
Declining costs have resulted in an improved cost to income profile
17
…resulting in strong overall profitability
Profitability Trends Healthy ROAA and ROAE Levels
14.12%
15.70%
22.99%22.01%
28.36%
17.20%
1.35%
1.31%
1.01%1.11%
0.83%
1.53%
2007 2008 2009 2010 30-Jun-10 30-Jun-11
ROAE ROAA
VND bn
Source: Company Data
1,149
1,804
2,873
3,414
1,652
2,919
3,883 3,737
4,264
7,622
2,884
5,621
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Profit after tax Profit before provision for credit losses
Focused operating achitecture has enabled efficient growth in profitability
18
Asset quality overview
• VietinBank has in place healthy credit systems, utilising relevant exposure limits and credit risk appetite
• Such systems are enhanced by a strong credit culture, benefiting from well-defined delegations of authority and reporting lines
• Advances are relatively well diversified across business entities & Industrial sectors, ensuring a high degree of diversification of potential risks
• Comprehensive and detailed loan classification and provisioning requirements and policies are in place, consistent with regulatory norms and guidelines
• Existence of robust procedures have resulted in positive developments in non-performing asset measures in recent times
• Strong Credit risk management system is in place which has ensured improvement in the asset quality in this growing
economic environment
Healthy Credit Systems
Well Defined Sectoral, Single Party and Group Exposure Limits
Comprehensive Loan Classification and Provisioning
Requirements
Strong Credit Risk Management
System
19
Bank has robust credit rating processes in placeRating Procedures1
Information collection and scoring information submission (implemented by customer relationship staffs)
1
Scoring and rating customers (implemented by Risk Management Staffs)2
Reviewing and checking scoring and rating results (implemented by Heads of Risk Management Department)
3
Approving the scoring and rating results (implemented by the competent levels)
4
Completing scoring and rating documents5
Following-up and observing any fluctuation/changes of the scoring and rating results (implemented by Risk Management Department at the Head Office)
6
Recording & Filing documents7
1For corporates, individuals and household customers and financial Institutions
20
Quantifiable scoring and rating grades helps to maintain credit quality
No. Corporates Individuals & Household Customers Financial Institutions Ratings
Group 1 90 – 100 90 – 100 90 – 100 AAA
Group 2 80 - < 90 80 - < 90 85 - < 90 AA
Group 3 73 - < 80 73 - < 80 75 - < 85 A
Group 4 70 - < 73 70 - < 73 65 - < 75 BBB
Group 5 65 - < 70 63 - < 70 55 - < 65 BB
Group 6 60 - < 65 60 - < 63 50 - < 55 B
Group 7 56 - < 60 56 - < 60 45 - < 50 CCC
Group 8 53 - < 56 53 - < 56 40 - < 45 CC
Group 9 45 - < 53 44 - < 53 35 - < 40 C
Group 10 20 - < 45 20 - < 44 < 35 D
Total Scores
21
Diversified loan portfolio
Loan Portfolio by Industry
Source: Company Data
29%
17%
12%
6%3%2%6%
27%
19%
12%
11%
7%
4%2%
6%
12%
6%
7%
6%
6%
Manufacturing and processing
Households
Wholesale and retail trade, repairof motor vehiclesConstruction
Transport, warehouse andcommunications Mining and quarrying
Community, social and personalservice activitiesElectricity, petroleum and water
Hospitality services
Other*
Other*: Agricultural & forestry, Business and advisory services, Financial intermediation, Health care & social work, Aquaculture, Education & training, Others, Science and technology, Recreational, culture, sporting activities, State management, security and national defense, party union & social guarantee, International organization and bodies
Inner ring total loans 31 Dec 2010: 234,204 VNDbn
Outer ring total loans 30 Jun 2011: 263,267 VNDbn
20%
38%
33%
19%
37%
35%
2%6%
2%1%
6%
1% Construction andtransportation
Industrials
Trade and services
Agriculture, forestryand aqua-culture
Consumers
Others
Inner ring total loans 31 Dec 2010: 234,204 VNDbn
Outer ring total loans 30 Jun 2011: 263,267 VNDbn
22
Diversified loan portfolio
Loan Portfolio by Borrower Type
46%
34%
19%
45%
35%
20%
0%
1%
Corporates
SMEs
Individuals
Others
Inner ring total loans 31 Dec 2010: 234,204 VNDbn
Outer ring total loans 30 Jun 2011: 263,267 VNDbn
Source: Company Data
Loan Portfolio by Business Entity
20%
18%
16%
4%
19%0%
20%
16%
15%13%
7%
6%
19%
0%
6%
4%
13%
4%
Private limited companies
Other joint-stock companies
State joint-stock companies
Central state-owned enterprises
State-limited compnaies
Private companies
Other corporate loans*
Loans to individuals
Other loans
Other corporate loans*: Provincial state-owned enterprises, Foreign invested enterprises, Co-operatives and Partnership companies
Inner ring total loans 31 Dec 2010: 234,204 VNDbn
Outer ring total loans 30 Jun 2011: 263,267 VNDbn
23
Loan Portfolio by Currency Loan Portfolio by Original Term
Source: Company Data
1%
21%
78%
1%
19%
80%
EUR
USD
VND
60%12%
28%
60%
12%
28% Short-term loans
Medium-term loans
Long-term loans
Short Term Loans : Tenors of less than 12 months Medium Term Loans: Tenors of [ ] months and overLong Term Loans:
Inner ring total loans 31 Dec 2010: 234,204 VNDbn
Outer ring total loans 30 Jun 2011: 263,267 VNDbn
Diversified loan portfolio
Inner ring total loans 31 Dec 2010: 234,204 VNDbn
Outer ring total loans 30 Jun 2011: 263,267 VNDbn
Please define Medium term loans and Long-term loans
24
Prudent Classification & Provisioning for Non-performing Assets
The provisioning for NPA accounts is made based on availability of security, chances of recovery, age of the asset, etc.:
Current Special mention Substandard Doubtful Loss
Debts that are not due and the borrower is ableto pay the principal and
interest of debts in full and in a timely manner
Debts that are overdue less than 90 days and rescheduled debts that
are not due
Debts that are overdue from 90 to 180 days andrescheduled debts that are overdue less than
90 days
Debts that are overduefrom 181 to 360 days
and rescheduled debtsthat are overdue from90 to 180 days assets
Debts that are overdue more than 360 days, rescheduled debts that are overdue more than 180 days and debts that are subject to reschedulingarrangements as directed by the Government
Please confirm if below is correct and please provide NPA provisioning measures for each classification of NPL
1 2 3 4 5
Non-performing loans:
25
Asset Quality is Robust as Seen By Low NPL
Group 30 June 2011 2010 2009 2008
Value (VND bn) % Value
(VND bn) % Value (VND bn) % Value
(VND bn)%
Group 1
Current255,125 96.91 230,267 98.32 160,510 98.37 114,596 94.90
Group 2
Special mention3,636 1.38 2,399 1.02 1,660 1.02 3,968 3.29
Group 3
Substandard1,326 0.50 925 0.39 230 0.14 847 0.70
Group 4
Doubtful439 0.17 411 0.18 333 0.20 803 0.67
Group 5
Loss2,739 1.04 203 0.09 437 0.27 537 0.44
Total 263,267 100.00 234,205 100.00 163,170 100.00 120,751 100.00
26
NPL Classification – By Industry
VND trn 2010 Group 1 Group 2 Group 3 Group 4 Group 5 Total
Industry 2010
As at 30 Jun 2011 2010
As at 30 Jun 2011 2010
As at 30 Jun 2011 2010
As at 30 Jun 2011 2010
As at 30 Jun 2011 2010
As at 30 Jun 2011
Construction & Transportation 42.21 46.8 1.62 2.6 0.28 0.56 0.14 0.19 0.23 1.32 44.01 51.47
Industrial 86.98 98.87 0.48 0.29 0.76 0.19 0.14 0.18 0.12 0.92 88.46 100.45
Trade & Services 79.7 85.02 0.29 0.34 0.14 0.41 0.13 0.04 0.61 0.45 80.33 86.26
Agriculture, Forestry and Aqua-Culture 5.12 6.21 0.5 0.15 0.20 0.03 - 0.02 0.60 0.01 5.13 6.42
Consumers 12.96 15.00 0.4 0.2 0.10 0.12 - 0.01 0.10 - 12.96 15.33
Others 3.30 3.23 0.7 0.06 - 0.01 0.06 - - 0.03 3.31 3.33
Total 230.27 255.13 3.99 3.64 1.48 1.32 0.47 0.44 1.66 2.73 234.21 263.26
27
NPL Classification – By Borrowers
VND trn 2010 Group 1 Group 2 Group 3 Group 4 Group 5 Total
Industry 2010
As at 30 Jun 3011 2010
As at 30 Jun 3011 2010
As at 30 Jun 3011 2010
As at 30 Jun 3011 2010
As at 30 Jun 3011 2010
As at 30 Jun 3011
Corporates 103.51 117.41 1.02 0.96 0.75 0.57 0.11 0.08 0.29 2.19 105.42 121.21
SMEs 80.68 86.68 1.10 2.50 0.61 0.55 0.22 0.33 0.14 0.53 82.21 90.59
Individuals 45.50 49.45 0.12 0.18 0.11 0.20 0.78 0.03 0.29 0.01 45.83 49.87
Others 0.75 1.59 0.00 0.00 00.0 0.00 0.00 0.00 0.00 0.00 0.75 1.59
Total 230.27 255.13 2.40 3.64 0.93 1.32 0.41 0.44 0.20 2.73
234.21 263.26
28
NPL ratio - Industry comparison
Source:SBV, VietinBank
NPL ratio much lower than the industry average
1.41%
2.30%
1.81%
0.61% 0.66%
1.09%
1.71%
2.65%
1.79%
2.13%1.99%
2.16%2.30%
3.10%
2006 2007 2008 2009 2010 30-Jun-10 30-Jun-11
VietinBank Industry average
29
Improving Asset Quality
Moderate Credit Costs Provision Coverage Ratio
Moving in right direction to achieve its objectives
1
2
1
1
2
2 1.811.81
1.181.19
0.96
1.7
2007 2008 2009 2010 30-Jun-10 30-Jun-11
%
Credit Cost (Loan loss provision / Total Advances)
Credit Cost (Loan loss provision / Net Advances)
14.48
38.6949.85
6.278.6710.01
76.98
65.37
53.97
48.0565.78
81.73
2007 2008 2009 2010 30-Jun-10 30-Jun-11
%
Loan loss provisions expense to operating profits
Provision Coverage Ratio
30
Loan classification - By collateral
80.20%
95.22% 99.47%
23.60%
91.57%
4.78% 0.53%
76.40%
8.43%19.80%
Group 1 Group 2 Group 3 Group 4 Group 5
With Collateral Without Collateral
Most of the existing loans in all categories are covered by adequate collateral
(As at 31 March 2011)
Source: Company Data
31
Loan to Deposit Ratio
Loans and advances funded by low cost deposit base with average loan to deposit ratio of 110.81%
Healthy Loan to Deposit Ratio
VND bn
Source: Company Data
Amended values to be consistent with slide 24. Please confirm if below is correct.
112,426 121,634
148,530
205,919
118,602
161,619
192,208
155,965
100,482
234,205
263,267
184,911
89.38%97.51%
108.81% 113.64%118.56%
136.97%
2007 2008 2009 2010 30-J un-10 30-J un-11
Customer Deposits Loans and Advances to Customers Loan to Deposit Ratio
32
11%
8%
14%
57%
13%3%
14%7%
65%
8%Due to Government & SBV
Depositis & Borrowings fromcredit institutions
Customer deposits
Sponsor capital, entrustedinvestment that the creditinstitution has risks
Value papers issued
112,426 121,634148,374
205,918
155,965
192,208
5,2608,824
15,012
35,096
20,049
47,841
2007 2008 2009 2010 30-Jun-10 30-Jun-11
Deposits and borrowings from other banks
Customer deposits and other amounts due to customers
Stable Fund Mobilization Growth
VND bn
Deposits of customers & credit institutions (VND bn)
Source: Company reports
By Source
Inner ring: As at 30 June 2010: 318,805 VNDbn
Outer ring: As at 30 June 2011: 336,413 VNDbn
130,458
163,386
241,014
117,686
240,049
176,014
33
34%
11%3%
10%
1%
52%
30%
58%
2%
State-owned companies
Non state-ownedcompanies
Foreign investment
Individuals
Others
Customer Deposits Breakdown
By Type
76%
77%
3%
20%
1%1%
1%
2%
4%
17%
Demand deposits
Term deposits
Deposits for specificpurposes
Margin deposits
Other amounts due tocustomers
By Customers
Total deposits 2010: 205,918 VNDbn
Total deposits 30 June 2011: 192,208 VNDbn
Total deposits 2010: 205,918 VNDbn
Total deposits 30 June 2011: 192,208 VNDbn
Source: Company reports
34
Customer Deposits Breakdown (Cont’d)
By Maturity*By Currency
86%
14%
83%
17%
VND
ForeignCurrencies
*Short-term refers to < [xx] years/months
*Medium & long term refers to > [xx] years/months
Total deposits 2010: 205,918 VNDbn
Total deposits 30 June 2011: 192,208 VNDbn
Total deposits 2010: 205,918 VNDbn
Total deposits 30 June 2011: 192,208 VNDbn
82%
18%
84%
16%
Short-term
Long & Mediumterm
Please confirm what is short-term, medium and long term
35
Securities Portfolio
Diversified securities investment portfolio
Securities type
As at 30 Jun 2011(VND bn) %
As at 31 Dec 2010 (VND bn) %
Available for sale 65,348 96.20% 55,646 89.96%
Debt securities 65,203 55,501
Government securities 36,000 30,943
Securities issued by other domestic credit institutions 6,383 6,907
Securities issued by domestic economic corporations 22,820 17,651
Foreign debt securities - -
Equity securities 145 0.21% 145 0.23%
Securities issued by other domestic credit institutions - -
Securities issued by domestic economic corporations 145 145
Foreign equity securities - -
Securities held to maturity 2,579 3.80% 6,209 10.04%
Government securities 2,379 2,379
Securities issued by other domestic credit institutions - 80
Securities issued by domestic economic corporations 200 3,750
67,926 100.00% 61,855 100.00%
35%
56%
12%
32%
10%
55%
Government securities
Securities issued by other domestic credit institutions
Securities issued by domestic economic corporations
Diversified debt holdings
36
Credit Risk Management Policy (CRMP)
• To step by step use the IRB approach of Basel 2 for the best custom of risk management (risk-based
pricing, risk portfolio management , risk adjusted return on capital – RAROC, determining minimum
capital)• To obey the laws and have adaptability with the changes in laws• To obtain the development target and strategy of Vietinbank from time to time. To ensure long-term
strategic targets while quickly reacting to fluctuation of the market• To limit the risk of credit centralization through diversifying loan portfolio and systemizing credit limits
for each portfolio
• To build an appropriate credit risk environment though a clear strategy approved by the Board of
Directors• An uniform risk management culture is implemented in whole Vietinbank system to actively manage
credit risks• To ensure that credit policies are adequate and clear, the credit granting criteria and the mechanism
of authorization classification are specific, reasonable and able to minimize risks. • To maintain a credit risk measurement system• To timely find out credit risk signals and ensure adequate supervision
To achieve credit expansion required for sustaining the profitability of the Bank with an emphasis on quality assets, profitable
CRMPPhilosophy
CRMP
Objectives
CRMP
Principals
To optimize the balance between expected income and credit risk with an emphasis on competition advantages; to ensure
measures, control/insurance of risks
37
Credit Risk Management
• To build up a credit risk management framework including basic principles of risk management; organization structure of risk management division, single credit management mode and loan portfolio, system of credit policies, procedures, system of credit risk measurement; risk management on new products and credit supervision
• To build up a clear risk strategy, bank’s acceptable risk limits for each group of relative customers, based on the centralization level of currency, term, collateral, sector and geography
• To ensure an independence, objectiveness among the customer relationship department, credit appraisal department, and the risk management and supervision. Credit activities must be supervised on regular basis to ensure credit activities are implemented in accordance with the bank’s regulations and within the acceptable risk level
• The system of credit policies, procedures must be adequate and clear in terms of criteria of credit granting, mechanism of
approval authorization decentralization
Credit risk management framework
Clear risk strategy
Credit activities supervised on regular basis
Adequate and clear system of credit
policies, procedures
• Customers’ credit risk is quantified through the bank’s internal credit rating systemInternal credit rating
system
• To build up the early risk warning system to point out and define any risk signals related to probable changes in financial
situation as well as borrowers’ repayment capability
Risk warning system
• To build up an effective, useful credit report and information system to support credit risk management, to regularly
supervise credit limits granted to customers, specially corporate customers who have big loan exposures
Effective credit report and
information system
38
Liquidity Risk Management Process
• Liquidity risk is defined as the risk that the Bank will encounter difficulty in meeting obligations associated with financial liabilities
• To limit this risk, management diversifies its funding sources in addition to its core deposit base, and adopt a flexible policy in managing liquid assets and monitoring future cash flows and liquidity on a daily basis
• The Bank also keeps an account of access to cash flows and the availability of collaterals in case the Bank needs to mobilize more capital
• Alco Planning and Supporting Department analyses and projects flows of cash-in, cash-out in accordance with fund planning and balancing plan, which is approved annually; and provides decisions on available fund management based on movement of the Bank’s capital and its daily utilization
• Based on the regulations of the SBV, the Alco Planning and Supporting Department, in cooperation with the Investment Department, proposes available fund management plan in order to make sure the actual average balance of deposits in VND and foreign currencies at the SBV not less than the required level of compulsory reserve to be maintained
• Investment Department might decide to either sell back valuable papers to the SBV in open market, or to borrow to
replenish working capital’s deficiency to ensure liquidity position of the whole bank
Diversified funding sources
“Emergency” funds
Dedicated Alco Planning and Supporting
Department to managing risks
Open market transactions to ensure liquidity
position is maintained
• Besides, Investment Department also establishes credit limit with other banks for mutual assistance when needed. The management process of capital spare at VietinBank is operated within the INCAS system and the inter-bank settlement program (CITAD). By the centralized settlement scheme at the Head office, VietinBank is always active in the daily liquidity management
Credit lines with other banks
• The Bank is currently setting up software, developing upgrades and finalizing the risk management process to catch up with
the international standardSoftware upgrades
VietinBank has proactively reserved secondary liquidity sources across Government Bonds, Treasury bills, Corporate bonds, Credit Institution bonds etc.
39
Operational Risk Management Procedure
Analyse the process of handling
works
Supervise& Control
Manage potential
market risks
& solution
plan
Definerisks &control
methods
Evaluate Results of the control methods
Report risk
accidence & loss
Key riskindicator
RCSA – Risk & Control Self Assessment
LDC – Loss Data Collection KRI – Key Risk Indicator
• Operational risk is defined as the possibility of damage/loss happened directly or indirecty by the man, an inactive or unadequate procedures/system or the outside factors.
• Vietinbank manages its operational risk through the risk management system of SAS OpriskMonitor with the 3 main tools including LDC (Loss Data Collection); RCSA (Risk and Control Self-Assessment); KRI (Key Risk Indicator).
• The Operational risk management procedure is summarized as follows:
SAS Oprisk Monitor
• Be responsible as an independent risk management section – the second defense coat in the “3 coat model” of the bank’s risk management. The Market and Operational Risk Management Department shall monitor, supervise, analyze, and synthesize risk reports based on risk level to submit to the Risk Management Committee and the Management in accordance with the bank’s regulation from time to time
Be responsible as an independent risk
management section
40
Market Risk Management
• The market risk is defined as risk in the position of the balance sheet and off balance sheet which arises from price fluctuation in the market including: interest rate, foreign exchange, securities, goods
• Vietinbank manages the market risk based on its market risk management procedures and tools to calculate market risk, including definition and supervision/monitoring of respective market risk level
The market risk management procedure includes the following steps:
• Market Risk Management Tools includes the measurement tools (VAR, Stresstesting, Backtesting) and the limits for each tradingbook activities (Position limit, limits for customer relationship officer, limits for partners etc.)
• The ARIMA model is also used to analyse and forecast the macro indicators (CPI, exchange rate, interest rate etc.) for market risk management
Realize and defineMarket risksRealize and determine
market risks
Measure Supervise andcontrol
Prevent andminimize
market risks
1 2 3 4
Internal Reporting System
Specific market risk management procedure
Market Risk Management Tools
41
Interest Rate Risk Management Process
• Interest Rate Risk is managed by the Bank through the use of GAP analysis of rate sensitive assets and liabilities and monitored through its prescribed prudential limits
• The Bank forecasts fluctuation of market interest rate and makes appropriate investment decisions
• If a decreasing trend in interest rate is forecasted, the Bank will invest more in long term instruments to gain profitability
• On the contrary, if market interest rate is projected to increase, the Bank will focus on short term investments to minimize interest rate risk
Investments
• Interest rate for fund mobilization is determined under market price principles, in which interest rate is subject to demand, fund mobilization scale and market interest rate movements
Fund mobilization and utilization
• Lending activities: VietinBank determines lending interest rate based on the cost of funds, management expense plus targeted profit margin
• Branches apply the floor lending interest rate regulated by the Head office. Since most of the funds mobilized by the Bank is short term (having maturity within 12 months), VietinBank requires all medium and long term loans to have floating interest (no fixed lending rate)
Lending activities
• Inspection and monitoring by written documents in accordance with internal regulations applied to related activities like credit activities
• Develop scenarios that can happen when market conditions change; proactive in risk management
• Construct interest parameters that are managed within INCAS system and under control of department in-charge
Inspection and monitoring regulations
42
Currency Risk Management Process
• Currency risk is the risk that values of financial instruments fluctuates due to changes in foreign exchange rate
• The Bank’s loans and advances were mainly denominated in VND with the remainder mainly in US dollar (USD)
• Nonetheless, some of the Bank’s other assets are in currencies other than VND and USD
• The Bank has applied limitation system to mange currency positions on a daily basis. Risk prevention strategy is to keep the currency positions in the established limitation
Limitation systems
• Alco Planning and Supporting Department analyses and projects cash-in and cash-out flow and proposes fund planning plan for each type of currency (mainly VND, USD and EUR equivalent) to the Bank’s Board of Management) based on actual cash flows and growth target registered by business units
• It is managed based on daily outstanding balance in accordance with guidance to ensure the safety and effectiveness of the whole system
Alco Planning and Supporting Department
• VietinBank commands all its subsidiaries to take reasonable precautions while expanding lending in USDWell managed subsidiaries
• Restricts lending in importing goods that can be domestically produced and establishes preference for lending to import essential goods such as fuel, petroleum, fertilizer, pesticides etc.
Lending preferences
• Have ensured enough FX funding lines with International financial institutionsFX funding lines
43
Liquidity Mismatch Analysis (as of 30 June 2011)
Unit: VND m
Overdue Current
TotalOver 3 months Within 3 monthsDue within 1
monthDue from 1 to 3
monthsDue from 3 to 12
monthsDue from 1 to 5
yearsDue over 5
years
Assets
Cash, gold and germstones - - 2.904.141 - - - - 2.904.141
Balances with the SBV - - 7.267.865 - - - - 7.267.865
Placements with and loans to other banks (*) - - 29.122.706 10.785.380 1.100.000 726.650 - 41.734.736
Trading Securities (*) - - - - 472.649 - - 472.649
Derivatives and other financial assets - - - 3.172 - - - 3.172
Loans and advances to customers (*) 3.158.061 1.321.867 14.244.311 44.064.365 109.074.463 41.064.863 50.339.555 263.267.485
Investment securities (*) - - 299.980 1.370.000 13.319.445 45.526.622 7.410.412 67.926.459
Long-term investments (*) - - - - - - 2.386.355 2.386.355
Fixed assets and investment real estates - - - - - - 3.155.505 3.155.505
Other assets (*) - - 1.192.712 2.981.780 5.963.558 1.789.068 - 11.927.118
Total assets 3.158.061 1.321.867 55.031.715 59.204.697 129.930.115 89.107.203 63.291.827 401.045.485
Liabilities
Borrowings from MOF and SBV - - 7.626.429 - 20.000.000 15.376 48.938 27.690.743
Deposits and borrowings from other banks - - 21.312.773 15.655.645 10.869.135 4.226 - 47.841.779
Customer deposits and other amounts due to customers - - 88.805.795 37.848.993 29.235.940 36.317.196 500 192.208.424
Derivatives and other financial borrowings - - - - - - - -
Debts issued and other borrowed funds - - - 11.029.570 25.199.619 3.604.703 2.577.250 42.411.142
Issuing valuable papers - - 14.450.556 3.010.326 7.330.127 1.470.870 - 26.261.879
Other liabilities (*) - - 1.389.337 2.863.172 14.622.118 17.234.445 - 36.109.072
Total Liabilities - - 133.584.890 70.407.706 107.256.939 58.646.816 2.626.688 372.523.039
Net Maturity Risks Status 3.158.061 1.321.867 (78.553.175) (11.203.009) 22.673.176 30.460.387 60.665.139 28.522.446
44
Capital
Source: Company Data
6.50%
12.02%
8.02% 8.00%
9.82%8.46%
11.62%
2006 2007 2008 2009 2010 30-Jun-10 30-Jun-11
Capital Adequacy Ratio Risk Weighted Assets (VND Bn)
The Bank has successfully backed its RWA growth with adequate capital base
83,05992,007
202,319
154,402
206,711
74,007
150,132
2006 2007 2008 2009 2010 30-Jun-10 30-Jun-11
45
Capital Policy & Strategy
Principle
Schedule
• Accelerate augmenting shareholders’s equity, in order to meet the requirement of future growth
• Ensure to meet the CAR requirement of SBV and commitment with partners, approach Basel standards on owner’s equity (commitment with IFR: Car>10% after 31 Dec 2012
• Diversify shareholder’s equity structure for both Tier 1 and Tier 2 capital by issuing shares, bonds, convertible bonds, borrowing in the secondary market etc, with a special focus on expanding Tier 2 capital
• 4th Quarter 2011: Issue more shares to existing customers to increase the Chartered capital by 3,372bn (in nominal value). This plan has been submitted to the Government by the Ministry of Finance
• 1st Quarter 2012: Sell shares (value amounting to 15% of chartered capital) to Bank of Nova Scotia. This plan is in negotiation and hopefully will complete in early 2011
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