report on business result activities of the ......2016/08/10 · 3 report on business activities of...

REPORT ON

BUSINESS RESULT ACTIVITIES OF THE

YEAR 2013

(To be submited to The Shareholders’ Meeting on April 23rd

for approval)

Hochiminh City, April 2014

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Report on Business Activities of the year 2013

CONTENTS

EXECUTIVE SUMMARY ............................................................................................................... 1

DETAILED REPORT ....................................................................................................................... 4

A. MARKET OVERVIEW ............................................................................................................... 4

I. THE WORLD AND VIETNAM ECONOMIC OVERVIEW IN 2013 ................................. 4

II. VIETNAM FINANCE - BANKING INDUSTRY IN 2013 ................................................... 6

B. RESULT OF BUSINESS ACTIVITIES IN 2013 ........................................................................ 7

I. FINANCE ............................................................................................................................... 7

II. CUSTOMER - EXTERNAL ................................................................................................ 11

1. Consumer banking ......................................................................................................... 11

2. Corporate banking .......................................................................................................... 13

3. Financial investment and interbank activities ................................................................ 15

4. Network development & Marketing activities ............................................................... 15

III. OPERATION - ORGNIZATION ......................................................................................... 17

1. Risk management ........................................................................................................... 17

2. Operation management .................................................................................................. 19

3. Credit management ........................................................................................................ 20

4. Bad debt workout ........................................................................................................... 20

5. Quality control management .......................................................................................... 21

6. Information technology management ............................................................................ 21

IV. LEARNING & HUMAN DEVELOPMENT ....................................................................... 22

1. Human Resource development and management .......................................................... 22

2. Management and enhancement of professional ethics .................................................. 23

3. Restructuring project ...................................................................................................... 24

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1 Report on Business Activities of the year 2013

EXECUTIVE SUMMARY

The year 2013 was a year full of difficulties and challenges for the economy in general and for

the banking system in particular. In that difficult circumstance, 2013 was considered as a year

of safe and stable operation for ABBANK, the bank continued to receive trust and support from

valued partners and customers. In April 2013, Internaltional Finance Corporation (IFC)

officially became ABBANK„s major foreign shareholder and the Bank‟s charter capital

increased from roundly VND 4,200 billion to nearly VND 4,800 billion. Operation scale in

2013 achieved positive growth in total assets, loans and deposits. As at the end of the year,

ABBANK‟s total assets reached VND 57,792 billion, increased by 25% compared to January

2013. The lending and deposit activities reached and exceeded targeted plans, the credit quality

was improved.

The operating expenses in 2013 were strictly controlled. The restructuring of labour force has

been implemented all over the whole bank with a purpose of enhancing labour productivity and

cost efficiency. The operating expenses have fallen by VND 42.8 billion (equivalent to 4%)

compared to 2012, even though there were 5 new transaction points were opened in 2013.

Total income from interest in 2013 continued high growth. Besides the mentioned growth

results, accumulated earning before tax of year 2013 reached 191 billion dong which

uncompleted the planned target due to the following main reasons: (i) The increase of credit

risk provision; (ii)The average interest for loans in 2013 quickly decreased due to the policy of

reducing interest from SBV, while the rate of reducing deposit interest in the market could not

follow because there was always a delay, so that the profit margin of loans in 2013 significantly

reduced compared to 2012 as well as compared to plan 2013; and (iii)The deposits from

organizations and individuals in 2013 increased dramatically higher than loans. Below is a

summary of some key business indicators that ABBANK achieved in 2013.

Summary table of key business indicators

Unit: billion

dong Items

Actual

2013

Actual

2012

Budget

2013

Compared to

2012

Compared to

2013

+/(-) % +/(-) %

Total asset 57,792 46,166 50,157 11,626 125% 7,635 115% Loans 37,558 23,266 24,744 14,293 161% 12,814 152% - 1st Market 23,647 18,756 22,711 4,891 126% 936 104% - 2nd Market 13,912 4,510 2,033 9,402 308% 11,879 684%

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Deposits 51,150 40,560 42,936 10,589 126% 8,214 119% - 1st Market 40,796 33,564 39,676 7,232 122% 1,120 103% - 2nd Market 10,354 6,997 3,260 3,357 148% 7,094 318% NPLs (Group 3 - 5) 1,804 532 847 1,273 339% 957 213% - NPL ratio/ Total

outstanding 4.80% 2.29% 3.42% 2.51% 210% 1.38% 140%

Services Income 96 99 147 (3) 97% (51) 65% Operating cost 1,052 1,095 1,112 (43) 96% (60) 95% Earning before tax 191 492 650 (301) 39% (459) 29% ROaE 3.47% 10.23% 10.25% -6.76% 34% -6.79% 34% ROaA 0.37% 1.14% 1.30% -0.77% 32% -0.93% 29%

The significant achievments in 2013

1. ABBANK was ranked as one of the commercial banks that have an impressive growth in

2013 on banking market as well as in the ABBANK developing history, details as below:

Total assets as at the end of 2013 reached VND 57,792 billion, completing 115% of the

year plan. The net growth of loans and deposits sales within roundly 18 months as at the

end of 2013, ABBANK‟s total assets increased by approximately VND 20,000 billion.

This increase was roughly equivalent to the total assets of a small-scale commercial

bank, but the quality of total assets growth is good and healthy.

The loans in 2013 reached VND 37,558 billion, completing 152% of the year plan and

increased by 61% compared to 2012. In which, loans from 1st market reached VND

23,647 billion, completing 104% of required plan and increased by 26% compared to

2012. ABBANK focused on developing credit, in addition to enhancing effective

services for traditional customers, the Bank has always attempted to search and expand

new customers selectively.

The deposits in 2013 reached VND 51,150 billion, completing 119% of year plan and

increased by 26% compared to 2012. In which, the deposits from 1st market reached

VND 40,796 billion, completing 103% of year plan and increased by 22% compared to

2012. The activities of deposits in 2013 were effective, achieving high growth while

deposit expenses were well controlled, lower than the average level of the market as

well as the planned target. The impressive results of deposits in 2013 thanks to the

valued support of major ABBANK shareholders as well as deposits from Geleximco,

EVN and preferential quota from IFC and Maybank.

2. Bad debt workout was determined by BOM as the focus duty throughout the year 2013.

The speed of bad debt recovery was pushed up via a series of measures such as debt

collection in cash, additional collateral security and debt restructure (under Decision No.

780), making provision and using provision or selling debts for Vietnam Asset

Management Company (VAMC). Having operated under difficult situation of the banking

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industry in 2013, ABBANK made efforts to tightly control the credit quality and bad debt

ratio/total loans at 4.8%, and initially obtain achievements of handling and preventing new

bad debts arising.

3. The operating activities of the system were frequently interested, enhancing coordination

and cross-check between HO’s divisions and business units, strengthening risk

management activities. In particular, the main activities include:

Implement the Plan of Restructuring the system of ABBANK for the period from 2013

– 2015 approved by SBV. ABBANK continued to evaluate overall and complete the

remaining items of ABBANK restructuring project under consultation of Deloitte,

Singapore.

Seriously rectify recommendations of SBV Inspectors by the end of 2013, ABBANK

has completed recommendations basically. The remaining recommendations are being

continued to correct and is expected to complete in 2014.

ABBANK has completed the increase of charter capital from VND4,200 billion to

VND4,800 billion through the successful conversion of VND 59.8 million of

convertible bonds issued in 2010 into common registered shares. After this increase of

capital, the total ownership of foreign investors is 30%: Internaltional Finance

Corporation (IFC) owns 10%, and Maybank continues to own 20% of charter capital.

Especially, 2013 was also the year which ABBANK celebrated the 20th Anniversary of

establishment and development (1993-2013), marking the significant milestone for the

maturity of ABBANK on Vietnam financial - banking industry. Many internal activities

were launched extensively, attracting the attention and response of all staff in the whole

bank.

The performance of ABBANK in 2013 is specified in the detailed report as attached. Kindly

submit to General shareholders‟ Meeting for approval.

Respectfully.

Ho Chi Minh City, April 07th

2014

An Binh Commercal Joint Stock bank

(ABBANK)

CHIEF EXECUTIVE OFFICER

(Signed)

PHAM DUY HIEU

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DETAILED REPORT

A. MARKET OVERVIEW

I. THE WORLD AND VIETNAM ECONOMIC

OVERVIEW IN 2013

1. The World economy

Contrary to optimistic prediction at the beginning of the year, the World economy in 2013

experiences a downturn. According to Standard & Poor report, the World economy growth

2013 was about 2.7% - 3.1%, lower than predicted figure of 3.3% - 3.5% at the beginning

of the year.

The US‟s GDP only grew by 1.7% while EU economy was still in recession and difficulty.

It is predicted to grow by 1% in 2013. Japan‟s economy possibly maintained at 1.8% to

2%. Economic growth at Asian Area (except Japanese) was still leading, but declined in

comparison with 2012.

China‟s economy was considered to be dynamic and had the highest growth rate in the

world, but after long period of high growth, it started to decline. In 2013, it only reached

7.5% to 7.7%. Region of Asia and ASEAN countries‟ economies are still dynamic,

expected to remain at 6.6%, a higher figure compared to 2012 (at 6%) and also higher than

predicted figure at the beginning of the year which forecasted at 5.75%.

2. Vietnam economy

In general, Vietnam economy had considerable improvements in 2013. However, there

were some targets that did not reach as expected at the beginning of the year.

2.1 Gross domestic product (GDP)

2013‟s GDP grows by 5.42% compared to 2012. Although it is lower than the set target

for 5.5% but still higher than 2012‟s figure of 5.25% and there was a sign of recovery.

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Source: General Statistics Office

2.2 Consumer Price Index (CPI):

CPI in 2013 increased by 6.04% compared to 2012 which was the lowest in the recent 10

years. In 2013, CPI had the highest increase in February 2013, rose by 1.37% compared to

previous month. The lowest increase was in March at -0.19% compared to February.

Source: General Statistics Office

2.3 Import and export

In 2013, export volume was estimated at USD 132.2 billion, increasing by 15.4%

compared to 2012. Import volume 2013 reached USD 131.3 billion, increasing by 15.4%

compared to last year. Thus, the trade balance is in surplus of USD 0.9 billion, after

surplus of USD 0.78 billion reported in 2012 (General Statistics Office / Vietnam customs)

2.4 Foreign Direct Investment (FDI)

According to data of General Statistics Office, total FDI capital registered in 2013 was

estimated to reach USD 21.6 billion. Total disbursement is estimated to reach USD 11.5

billion. This is the highest amounts in 4 recent years. Industrial processing and

manufacturing is the most attractive sector in 2013, accounting for 76.9% of total FDI

capital registered. (Source: General Statistics Office)

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II. VIETNAM FINANCE - BANKING INDUSTRY IN 2013

1. The lowest interest rate since 2005

In 2013, the State Bank of Vietnam decreased policy rates by 2%/ year; decreased short

term maximum lending interest rate in VND by 3%/ year for prioritize areas; decreased by

1%/ year maximum deposit interest rate in VND. From end of June, commercial banks

were entitled to set deposit interest rate in VND with tenor from 6 months upwards.

Lending interest rate decreased by 2-5%/ year in 2013.

2. Stable foreign exchange rate, soaring forex reserve

In 2013, foreign exchange rate adjustment was just 1.3%, lower than the target of 2-3% set

by the State Bank. End of 2013, foreign exchange rate at commercial banks was listed at

VND 21,085 – 21,125 (purchase – sell), lower than the amount at 21,100 – 21,246 VND/

USD at Main transaction center of the State Bank.

Thanks to the stable foreign exchange rate, the State Bank of Vietnam bought a large

amount of foreign currencies from Commercial Banks. Forex exchange was estimated to

reach about USD 30 billion, increasing by 50% compared to 2012 and double-increasing

compared to 2011.

3. Credit growth

As at 12 December 2013, total means of payment increases by 14.64%; deposit increases

by 15.61%. By the end of 2013, credit growth increased to 12.51% compared to end of

2012 and exceeded 0.51% compared with the planned (12%).

Source: SBV

4. Restraint of bad debts and establishment of VAMC

According to report of Ministry of Planning and Investment, the average growth rate of

bad debt in first 10 months of 2013 was 2.38%/ month, lower than 3.91%/ month in 2012.

It sharply decreased compared to average growth rate of 6.35% in first 10 months of 2012.

-0.37

-0.05

1.17

2.22

3.13

4.72

5.36

6.44

6.87

7.27

8.21

12.51

-2

0

2

4

6

8

10

12

14

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Credit growth in 2013

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In addition to increase of risk provision, recovery and self handling, the growth rate of bad

debt was restrained by policies with considerable impacts: SBV Decision No.780/ on

23/04/2012 on restructuring debt without debt group transfer, postponement of

implementing SBV Circular No.02/2013 on 21 Jan 2013 on classification and risk

provision. Especially, Vietnam Asset Management Company (VAMC) was established

and have had considerable affects on handling bad debts.

5. Active Mergers and Acquisition (M&A) deals in banking sector

In 2013, M&A in banking sector became active. Western Bank merged with PVFC to

become PvcomBank. A new group of investors bought 85% of stake in TrustBank and

renamed it to Vietnam Construction Bank. UOB of Singapore officially approached GP

Bank to implement actual survey and possibly buy this bank; HDBank bought French

financial company SGVF and merged with DaiA Bank, many banks such as Sacombank,

HDBank, MB, Southern Bank are seeking foreign investors to sell stake…

B. RESULT OF BUSINESS ACTIVITIES IN 2013

I. FINANCE

1. The Bank’s business peformance

Unit: billion

dong

No. Items

Actu

al

2013

Actual

2012

Budget

2013

Compared to

2012

Compared to

2013 plan

+/(-) % +/(-) %

I. BUSINESS INDICATORS

1 Total asset 57,79

2

46,166 50,157 11,626 125% 7,635 115% 2 Equity & funds 5,724 4,862 6,339 862 118% (615) 90% 3 Charter capital 4,798 4,200 4,798 598 114% (0) 100% 4 Loans (1st Market) 23,64

7

18,756 22,711 4,891 126% 936 104% 5 Deposits (1st Market) 40,79

6

33,564 39,676 7,232 122% 1,120 103% II. BUSINESS RESULT

1 Interest Income 1,316 1,668 1,653 (352) 79% (337) 80% 2 Services Income 96 99 147 (3) 97% (51) 65% 3 FX Income 25 (30) 34 55 182% (9) 74% 4 Investment Income 103 18 70 84 568% 32 146% 5 Other income 47 3 66 43 1344

%

(19) 71% 6 Total income 1,586 1,758 1,970 (172) 90% (384) 80% 7 Operating Cost 1,052 1,095 1,112 (43) 96% (60) 95% 8 Net operating

income

533 662 858 (129) 81% (324) 62%

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9 Provision expense for

credit losses 343 170 208 172 201% 135 165%

10 Earning before tax 191 492 650 (301) 39% (459) 29%

III. INTERBANK & INVESTMENT OPERATION

1 Deposit at and

Lending to other

credit institutions

16,116 10,816 4,840 5,301 149% 11,276 333%

Deposit at other

credit institutions 2,205 6,306 2,807 (4,101) 35% (602) 79%

Lending to other

credit institutions 13,912 4,510 2,033 9,402 308% 11,879 684%

2 Deposit and

Borrowing from

other credit

institutions

10,354 6,997 3,260 3,357 148% 7,094 318%

Deposit from other

credit institutions 13 3,801 1,760 (3,788) 0% (1,747) 1%

Borrowing from

other credit

institutions

10,341 3,196 1,500 7,145 324% 8,841 689%

3 Stock Investment 11,129 6.841 11.541 4,288 163% (412) 96% 4 Stock Trading 5 5 - - 100% 5 - 5 Long term

investment

520 522 587 (2) 100% (67) 89%

IV. FINANCIAL INDICATORS

1 ROaE 3.47% 10.23

%

10.25

%

-

6.76%

34% -6.79% 34% 2 ROaA 0.37% 1.14% 1.30% -

0.77%

32% -0.93% 29%

3 NLPs (Group 3 - 5) 1,804 532 847 1,273 339% 957 213%

- NPL ratio/ Total

outstanding 4.80% 2.29% 3.42% 2.51% 210% 1.38% 140%

Operation scale in 2013 achieved positive growths in total assets, loans and deposits,specified

as below:

- Total assets as at the end of 2013 reached VND 57,792 billion, increased by 25%

compared to 2012 and completed 115% of year plan, with a good quality of asset growth.

- The loans in 2013 reached VND 37,558 billion, increased by 61% compared to 2012 and

completed 152% of year plan. In which, loans from 1st market reached VND 23,647

billion, completed 104% of required plan and increased by 26% compared to 2012.

- The deposits in 2013 reached VND 51,150 billion, completing 119% of year plan and

increased by 26% compared to 2012. In which, the deposits from 1st market reached VND

40,796 billion, completed 103% of year plan and increasing 22% compared to 2012.

- Investment activities rose by 62% compared to 2012 and ensured all safe conditions, with a

main growth of investment in Government bonds.

- Non-interest income (including income from foreign exchange and income from other

activities) increased to partially offset the decline in interest income.

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Besides the mentioned growth results, 2013 profits declined in comparison with 2012 and

below the primary plan due to the following reasons:

- Bad debts in 2013 increased compared to 2012 as well as compared to 2013 plan because

the potential bad debts in previous time continued to transfer groups. The increase in bad

debt is the main cause leading to interest income decreased by 12% compared to 2012 and

reached only 89% of the plan. Meanwhile, the costs for deposits were still estimated and

paid, so it lead to an increase of the costs from 2013 interest compared to 2012 income

from interest. Additionally, provision for credit risk increased by 200% compared to 2012

that also significantly impact on the bannk‟s profit.

- The average interest for loans in 2013 quickly decreased due to the policy of reducing

interest from SBV, while the rate of reducing deposit interest in the market could not

follow because there was always a delay, so that the profit margin of loans in 2013

significantly reduced compared to 2012 as well as compared to plan 2013, specified as

below:

Interest (%) 2012 2013 2013 Plan

Loans 15.5 11.4 13.6

Deposit 9.7 7.4 7.7

Margin 5.8 3.97 5.9

- The deposits from organizations and individuals in 2013 increased dramatically higher

than loans. In which, structure of deposits from individuals and deposits with terms

increased higher than deposits from organizations and deposits with no terms. This

indicated that the deposit of ABBANK in 2013 had a sign of more stable growth, but in

return, ABBANK had to pay more interest. Besides, the interest on the interbank market

also fell sharply compared to 2012, therefore, the deposit surplus from 1st market which

was transfered to trading on 2nd

market also got less efficiency compared to 2012.

In overall, ABBANK business performance in 2013 had a strong and comprehensive growth, in

both scale and quality, indicated in growth of total assets, deposits and loans. However, an

increase of NPL ratio and provision for credit risk was a significant reason affecting the 2013

profit.

2. Analysis of operating expenses

Total of operating cost 2013 Unit: Million dong

OPERATION

EXPENSE

Actual

2013

Actual

2012

Budget

2013

Compared with

2012

Compared with

the budget

+/- % +/- %

Taxes and 2,067 2,474 2,388 -407 83.5% -321 86.5%

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other fees

Salary

expenses 384,759 425,796 465,850 -41,037 90.4% -81,091 82.6%

Expenses for

management

activities

389,788 401,388 325,331 -11,600 97.1% 64,457 119.8%

Expenses for

assets 252,927 226,223 283,197 26,705 111.8% -30,270 89.3%

Provision &

deposit

insurance

22,837 39,341 34,084 -16,504 58.0% -11,247 67.0%

Other expense 1,295 -1,295

Total 1,052,377 1,095,221 1,112,145 -42,843 96.1% -59,768 94.6%

In 2013, the operating expenses in 2013 were strictly controlled, total operating expenses

reached 1,052.3 billion dong which was 59.7 bil dong lower than the 2013 budget

(equivalent to 5.4%) and reduced by 42.8 bil dong (equivalent to 3.9%) compared to 2012

even though there were 5 new transaction points were opened in 2013

- Taxes and fees payment: This item accounted for 0.2% in operating cost structure and

included cost of land tax, registration tax and transportation fees. This once increased in

demand for purchase and transport of the bank.

- Staff cost: this expense items accounted for the largest part in the cost structure of banking

operations. In 2013, this item significantly reduced compared to 2012 in both absolute

terms and the proportion of the total cost. This shows the effectiveness of restructuring of

labour force throughout the system, the arrangement and personnel management in a

scientific way, given priority to activities of business development and debt settlement that

contributed distribution to increase labor productivity across the system.

- Expense for management activities: in 2013, this cost was lower than the one in 2012 by

11 bil dong (equivalent to 2.9%) including:

Administrative costs: consisted of many cost items such as: printing paper, material,

purchasing newspapers and books, Postage phones, Electronic, drinking water, sanitary

cost…

Marketing cost: consisted of promotion, advertisement, image promotion, customer

gratitude and reception, conference

Other expenses: Training, auditing, etc.

Although the 2013 inflation increased, the thrifty has deployed on the system in 2013, the

bank saved a maximum of administrative costs and other related expenses. However, in

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order to develop and expand the brand closer to the public, the bank also made more

programs to advertize on media. Details: “24 Living Sponsors Green” Program, “An Binh

Tet”, “Loving summer”, “VietNam talent”, supporting finance for construction of hero VN

mothers memorial house, “Walking for agent orange victims”, “Asean famous brand ward”,

supporting bench for natural engineering structure. Besides, in order to increase deposits

and loans, many conferences, ads programs were taken place: “Integrating mark to receive

gifts”, “New spring taking buds”, “Increasing speed-get over”, WU program, “Tet reunion-

Spring meeting”, “Fast loan large win”,…

- Asset expense included depreciation of fixed asset, cost of maintaining, repairing asset,

purchasing fixed asset, tool, insurance and renting asset. This expense was higher than the

one in 2012 by 26.7 bil dong (equivalent to 11.8%) and lower than the budget by 30.2 bil

dong (equivalent to 10.7%),

In addition to the annual cost such as leasing costs of repairing and upgrading branches

/sub-branches in order to improve the image quality of ABBANK, in order to meet the

demand for management, in 2013, the bank invested more infrastructure, server equipment,

modern information management software.

- Provision for bad debts and customer’s deposit insurance: The actual cost was 22.8 bil

dong which lower than the cost in 2012 by over 16.5 bil (equivalent to 48%) and lower

than the budget by 11 bil (equivalent to 33%). This cost consisted of deposit insurance and

provision cost for other doubtful debts. In 2013, some doubtful debts accounts were paid.

So, this cost was lower than in 2012 and the budget 2013.

In the context of the increasing inflation ratio, the result of reducing operating expenses in 2013

compared to 2012 and saved 5.4% compared with the budget in 2013 was considered as a

remarkable achievement..…

II. CUSTOMER - EXTERNAL

1. Consumer banking

- Total deposits of consumer customer: reached 17,481 billion dong, increased by 33%

compared to the end of 2012 and completed 102% plan of year 2013.

- Total loans of consumer customer: reached 7,801 billion dong, increased by 48% compared

to the end of 2012 and completed 112% plan of year 2013.

- Number of consumer customer: reached 442,814 customers, increased by 65,983 customers

compared with the end of 2012.

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- Card activities:

Total for issued cards: 64,009 cards, increased by 3,633 cards compared to the year

2012. In which:

o YOUCard : 57,277 cards

o Visa Debit : 3,332 cards

o Visa Credit : 3,400 cards

Development of POS payment channel: New deployment in 2013 were 253 POS,

number of accumulated POS in 2013 is 407 POS.

Development of ATM channel: New installment were 10 ATM machines, increase the

number of accumulated operating ATM at 31 December 2013 to 158 ATM.

- Services:

WU service (Western Union) reached total amount of transactions more than USD 6.1

million with 9,525 transactions.

Number of customers applied to use e-services (excluded Topup service): reached over

130,000 customers.

o SMS Banking : 117,788 customers

o Online Banking : 7,806 customers

o Mobile Banking : 9,094 customers

- Significant achievements of Consumer Banking in 2013:

In 2013, expansion of transaction channels more than traditional channels to reduce

costs, increase market shares and help customers to access the bank and related services

and products more easily and conveniently.

To deploy new service “Interbank transfer” received and used by customers, this service

increased deeply through months and reached the number and value of transactions

equivalent to traditional transfer service via ABBANK‟s ATM machine.

To deploy service “Automatically electricity bill payment – YOUautopayE”: to support

business units for manual tracking proactively, to avoid erroneous in payment results

and increase the quality of automatically electricity bill payment.

To deploy service “Online electricity bill payment E-Online” to help customers to pay

their electricity bill proactively without communicating at the counter and depending on

transaction time and locations.

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To strengthen the operation of linkage with partner‟s company in order to increase the

added value in ABBANK‟s products, to compete with the products of other banks and

improve the image of ABBANK in financial market.

To continue to develop and increase service fees through insurance cooperative

activities – Bancassurance. To find out the partners and effective new sales channels

such as VNI Aviation Insurance JSC., Vietnamese Life Insurance General Company...

Besides the operations to develop the retail business channel, Consumer Banking

Division always focuses on implementation the promotion programs and internal

competition in order to speed up the sale numbers through marketing customers and

promote sales team on the whole bank.

Continue to complete policies, supporting activities and sales stimulation. Setting up KPIs of

year 2013 - Indicators for assessing performance's sales team.

2. Corporate banking

- Total deposits of corporate customer: reached 23,315 billion dong, increased by 14%


- Total loans of corporate customer: reached 15,845 billion dong, increased by 17%


- Number of corporate customer: reached 18,490 clients, went up to 20% over the year end

of 2012. Conservatively speaking, this performance was fairly good under the points of

view of continuously recessionary global and local economies when many corporations

must close their businesses.

- Service fees collection: In 2013, although ABBANK‟s big trading customers, operating in

import and export activities related to fishery industry were still in deep difficulties that was

the main reason for the decrease in revenue but services income of ABBANK still reached

96 billion dong, equivalent to 97% compared to the previous year.

- International payment: Revenue was VND 859.7 billion, which achieved 71% of 2013‟s

target and decreased 15.7% compared to 2012 due to some ABBANK‟s big and primary

trading customers, operating in import and export activities were still in deep difficulties.

- Significant achievements of Consumer Banking in 2013:

Loans: Corporate Banking Division followed the oriented strategy statement of

“Maximizing customers‟ satisfaction alongside with market changes” such as applied

some of effective selling tools, and launched the regionally and geographically unique

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and integrated product bundles. Thanks to that strategy, ABBANK satisfied institutional

clients‟ financial needs at reasonable prices and fees, and still assured the ABBANK‟s

target in term of expected profitability margin. Strategically, these actions would

support our clients to overcome the existing economic difficulties, and would advance

the impetus of ABBANK in years then.

Deposits: The deposit growth of ABBANK equivalent to the growth of the market. Due

to well-performed capital market, in 2013 the Corporate Banking Division always stuck

close on the market‟s movements to timely launch deposit policies resulted in low-price

capital pool. As a result of that, the division would actively boost its financing

campaigns for corporate clients at competitive lending rates.

Products: In 2013, ABBANK has still developed new products and improved its

existing ones to aim niche market in which the bank provides unique products

compatible with high-end technology (including bill payment at counter or at home

services, automatic payment, capital management service in power projects), automatic

payment, Online-banking and E-banking improvement,… geographically and regionally

credit products, and integrated products such as UPASLC, “VND borrowing at USD

interest rate” products, etc.

In addition to them, the division has just accomplished the KPI project‟s phase I and

still worked on; it, also, has developed the Customer Profitability Report project for

better customer management.

Pie chart of loans and deposits structure between corporate & consumer banking in

2013

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3. Financial investment and interbank activities

Significant achievements of Financial Investment and Interbank activities in 2013

- Financial Investment activities: Income of financial investment activities in 2013 exceeded

higher than planned.

- Government Bond Trading: government bond trading activities were highly effective in

2013.ABBank included in top 15 on government bond transaction turnover in the secondary

market.

- Interbank activities

Balanced the funding and in/out cash flow which optimized the effectiveness of capital

using as well as ensured the ABBank‟s liquidity at anytime.

Forecasted interest rate trend and initiatively proposed the adjustment of internal

interest rates, resulted in orientation of lending and mobilization activities in accordance

with the plan, and with reasonable interest rates.

Expanded customer relationship in the interbank market: ABBANK increased 40%

limit volume granted for other banks, and ABBANK was granted an increase of 35%

limit from other counterparties in comparison to that of the year 2012.

In addition, Division proactively coordinated with business units to launch sales stimulation

programs for branches promptly, in order to enhance efficiency of bank fund.

4. Network development & Marketing activities

4.1 Network Development

As of 31/12/2013, ABBANK's transaction network reached 145 transactions including 30

branches, 99 transaction offices and 16 saving points at 29 provinces/cities. In comparision

with 2012, total transactions increased by 4 offices and saving point increased by 1 ponit.

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ABBANK’s networking development for the period from 2011 – 2013

Main activities of network development implemented in 2013:

- Completing and issuing the Process on network development under ABBANK‟s new

organizational structure with a purpose of giving guidelines for network development all

over the bank.

- Setting up 4 sub-branches and 1 savings-fund, including: sub-branches of Song Ma (Son La

branch), Khoai Chau (Hung Yen branch), Yen Lac (Vinh Phuc branch), Ba Muoi Thang Tu

(Ba Ria-Vung Tau branch); and Xuan Hoa savings-fund (Vinh Phuc branch).

- Ensuring the coordination of units in the bank to send reports timely upon requirements of

SBV‟s inspection and supervision agency.

4.2 Activities of Marketing and Brand development

Year 2013 was the year marking a milestone of the 20th anniversary of ABBANK‟s

establishment. Therefore, the brand promotion has been specially focused to transfer the

message "ABBANK – a friendly retail bank with 20 years of experience and stable,

sustainable development on market":

- Widely promoting image of ABBANK to customers through media campaigns and at

locations of branch network: ABBANK 20 years of sustainable development

Externally, the campaigns focus on promoting the image on advertising systems through the

icon "ABBANK 20 years" The anniversary of “Celebrating The 20th Anniversary of

ABBANK‟s Establishment" in Hanoi.

0

20

40

60

80

100

120

140

160

31/12/2011 31/12/2012 31/12/2013

30 30 30

9095

99

13 15 16

133140

145

Branch

Transaction office

Saving point

Total

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Internally, the movement to celebrate ABBANK‟s 20th anniversary has been launched

deeply and widely, which attracted the attention of many units from Head office to

branches with more than 100 initiatives from 18 units on the entire system of ABBANK.

- Successfully organizing the press conference to announce “the issuance of shares to foreign

investor – IFC”

The event was attended by representatives of SBV, credit institutions, strategic partners,

and strongly attracted the attention and communication of more than 50 channels of the

press, and 4 television channels. It is considered as a bright spot on communication in a

bleak year of the banking and financial market.

- Enhancing promotion of ABBANK image: Friendly retail banking with responsibility to

community.

Festival Charity Program “Tet An Binh” on January 2013 with the theme of “giving

warmth – receiving smile” has brought a warm Tet holiday to the poor people in Tua Chua

District - Dien Bien, combined with charity music show taken place in Hanoi. They

become the annual programs and being live broadcasted on the national television channel.

In addition, ABBANK has sponsored a range of social welfare programs in the Northwest

region, the Central Highlands, the Southwest, showing the image of ABBANK as a bank

with responsibility to community.

Achieved awards: In 2013, ABBANK has achieved some encouraging recognitions through

awards such as: “Vietnam Excellent Brand 2012 Award”, “Represented Ho Chi Minh City

business in 2013 Award”, “ASEAN famous brand”...

III. OPERATION - ORGNIZATION

1. Risk management

1.1 Market risk management:

In 2013, ABBANK continued to maintain and enhance policies and methodologies on

identifying, measuring, following and controlling market risk and liquidity risk of the bank.

These policies have made its contribution in ensuring the Bank‟s prudential and stable

operations, mitigating liquidity risk and market risk that may happen. Liquidity status of the

Bank in 2013 is always ensured.

- The Bank has made use of some measurement tools as well as set investment limit,

transaction limit, foreign exchange position limit… to control and ensure risk within

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permitted tolerance level. These limits are periodically reviewed and amended by Asset

Liability Committee (ALCO) adopt current situations of the bank and the market.

- The Bank‟s market risk management policies comprises regulations, processes and risk

limits to ensure market risks of new products/ services are identified and adequately

addressed prior to launch. The Bank adopts a daily Value at Risk (VAR) to estimate market

risk by using historical simulation method within a 99% confidence interval. Through

monthly meeting, ALCO reviews and provides direction, strategy on market risks matters.

- Management of balance sheet risks: To manage balance shee risks, the Bank sketched a

consistent mechanism including policies, limits and periodical reports in order to monitor

and manage interest rate risk as well as liquidity risk.

- Interest rate risk: ABBANK has deployed a variety of tools to follow and report on interest

rate risks based on market fluctuation indicators to spot changes to NII and equity value.

Liquidity risk: ABBANK always maintains a certain amount of high liquidity asset and

diversifies asset portfolio to meet capital demands and ensure the bank operates within liquidity

limits.

1.2 Operational risk management

ABBANK designed, developed and put into use tools for identifying, measuring, and

controlling operational risks to carry out risk management practices in the whole system.

The risk management tools and methods to be used on a periodical basis include: Risk

Control and Self-Assessment (RCSA), Key Risk Indicators (KRIs), Incident Management

and Data Collection (IMDC).

The deployment of risk management tools has facilitated the analysis, evaluation and

composition of reports on operational risks, allowing the bank to identify potential risks in

operation and in the process of reviewing operational procedures, documents, new products

and to provide suitable coping strategies.

1.3 Credit risk management

ABBANK is developing and implementing Credit Risk Management process, ensuring the

alignment with Credit Risk Management principles of Basel Committee on Credit

Supervision and compliance to the SBV‟s regulations on risk management. For a

sustainable growth and development of the bank as well as value add to shareholders and

staffs of ABBANK, Credit Risk Management practices must meet all requirements and

criteria to ensure risk and return balance through Risk Appetite Statement approved by

Board of Directors.

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- Risk Appetite Statement is linked closely to Business Strategy and Capital Plan of

ABBANK.

- All policies and processes to identify, assess, measure, monitor and report on credit risk are

documented with clarity and communicated to all related divisions and units throughout the

whole system to ensure enforcement and consistent implementation.

- Internal credit rating system is formulated in compliance with the SBV‟s standards. It is

used to access customers‟ credit risk and used in the process of credit approval, debt

classification and risk provisioning in accordance with the SBV‟s regulations.

- Risk Management in general and Portfolio Management in particular help to identify,

measure, monitor, control and mitigate all kinds of risks for ABBANK during all activities

that create balance sheet and off balance sheet credit risks.

2. Operation management

Credit Administration activities: In June 2013, the Board of Directors approved the

establishment of Credit Support Center under Operations Division. Organizational structure of

this Center comprises 3 Departments: Guarantee Department, Credit Controlling Department,

Disbursement Support Department. The establishment of Credit Support Center is seen to be

important and essential by the Board of Directors and Human Resources Committee, helping to

mitigate credit risk from operations in guarantee issuance, limit, disbursement and collateral

management on the basis of centralized control and management of the compliance with

processes, regulations of the Law and ABBANK; improve work performance; and additionally,

make contribution to ensure sustainable and prudential development for ABBANK in the next

years.

- International payment activities:

STP rate (straight through processing) is 96.7%. The 5th

time consecutively, ABBANK

rewarded as “STP excellent bank” by Wells Fargo, USA.

Ensure operational safety of 100%.

Conclude a service agreement with ICBC Bank on remittance to China, Taiwan and

Hongkong.

- Customer Service activities: Implement Customer service 24/24: has served 64,787 in-

bound calls and inquiry from customers.

- Card Operation Center

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Complete the Project on becoming a Visa Principle member (Visa International)

improving the image of ABBANK in the domestic and international Card market,

facilitating service and product development to meet our business targets.

In international co-operation: ABBANK has co-operated with BanknetVN to implement

successfully the project on connecting to the ATM network of countries such as

Thailand, Malaysia, South Korea … providing service for ABBANK local cardholders

transacting in these countries.

Complete the project of interbank fund transfers by local debit cards via BanknetVN

and Smartlink channel – ABBANK cardholders are able transfer money directly to

more than 20 banks via BanknetVN and Smartlink networks

3. Credit management

- Credit appraisal activities: Reappraise credit documents and consult CEO and Credit

Committee to reduce credit risk. Assist branches in business development and help them to

achieve the 2013 business target.

- Credit administration activities: Centralized disbursement, issue guarantee about Credit

extension authority over of branch at ABBANK. Support controlling disbursement all about

branches which without Director . At that time, Enhance the objective and disbursement

control better.

- Credit monitoring activities: This is an important operation, accordingly, the Credit

Monitoring Department under the Credit Management Division and established under the

Decision No.100/QD-HDQT dated 30/10/2013 and currently in the process of finalizing the

organizational structure and setting up internal processes, operational regulations.

Additionally, Credit Monitoring Department also has implemented the control function in

the various aspects, such as Reviewing the completeness of the collateral documents by

requiring the branches to count 100% collaterals stored; correcting the periodic

reassessment of loans and guarantees; reviewing the high risk credit portfolios as credits

pledged by stocks, receivables…

4. Bad debt workout

- Under the direction of the BOD, NPL workout has been settled as key assignment in 2013

by BOM. The speed of bad debt recovery was pushed up via a series of measures such as

debt collection in cash, additional collateral security and debt restructure (under Decision

No. 780), making provision and using provision or selling debts for Vietnam Asset

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Management Company (VAMC). NPL Workout Board has collaborated closely with the

business units to develop efficient recovery plans and strengthen activities of inspection

and supervision of units‟ debt collection.

Having operated under difficult situation of the banking industry in 2013, ABBANK made

efforts to tightly control the credit quality and bad debt ratio/total loans at 4.8%, and

initially obtain achievements of handling and preventing new bad debts arising.

5. Quality control management

With the purpose to improve service quality in order to increase the competitiveness of

ABBANK, in 2013, the SQM department has tried to achieve significant achievements as

follows:

- Promulgation of the Service Quality Standards: The Service Quality Standards were

uniformly applied at the whole system to gradually standardize the service quality for

external customers and is the basis of management, assessment and monitoring the quality

service. This will be the basis for implementing programmes of improvement the service

quality in the coming time.

- For the project "Realizing Code of ethics ABBANK": Under the assignment of the BOD,

ABBANK conducted the project "Realizing Code of ethics ABBANK". The project

completed 80% of the planned schedule with remarkable achievements. A series of internal

programs gradually attracted a lot of staff ABBANK to participate. Therefore, the

ABBANK Code of ethics was implemented by every unit,and individual. The project

continues to perform and is expected to be completed in Quarter 1/2014.

6. Information technology management

The main achievements in improving the work of consolidating and effective management

of information resources:

- Activities of project deployment

IT Infrastructure management: Infrastructure and Operation Center (IO Center)

deployed 16 projects (13 projects completed, 3 projects in progress) and also completed

2 additional projects in 2013. The activities of IT infrastructure development and

management in 2013 have been focused, enhancing the continual monitoring of the

operating system and ensuring it is always at a safe level. Some important projects in

2013 are as Project of Constructing Data Center, Project of Deploying monitoring

solution to manage IT services system; Project of Upgrading WAN Infrastructure and

Transforming Internet access management model…

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Development of applications, products supporting for business development and

banking management information: In 2013, Centre for Development and Application

Management (CDAM) has coordinated closely with Divisions/Business Centers to

complete 100% of application development projects – 150 application development

projects (including additional projects beyond plan).

- IT policy and security operation

In 2013, ABBANK has proactively researched, coordinated with other related units to

construct the plan of “IT security plan in the period of 2013-2014, orienting to 2016”.

Operation & Infrastructure Center coordinates with other related units to issue operating

procedures for important operation systems (including: Procedure of IBM AIX

operation system; Procedure of Microsoft operation system; Procedure of guidelines to

develop IT system at business units; Procedure of periodic maintenance of IT system).

IV. LEARNING & HUMAN DEVELOPMENT

1. Human Resource development and management

HR management of ABBANK in 2013 that was to have close attention from highest leaders.

With orientation building a strong line-up with high professional moral standards,

commitment and high working productivity, all activities were focused on developing

human factor. The significant achievments includes:

- Training activity focused on “quality” and cost saving:

In 2013, The Bank organized nearly 200 training courses which focus on main training

groups such as managing & soft skills; professional knowledge and programs for

updating knowledge on internal processes & products with more than 6,500 attendances

in different training forms.

Especially in 2013, The Training Program “10 Key competence skills for leaders” (The

Bullet Proof Managers), carried out by CRESTCOM in co-operation with Institute of

An Binh Institute (ABI) under international standards, has been organized for more than

100 turns of managers and leaders at middle and high levels of the bank.

The movement encouraging initiatives to improve services and training courses have

helped the staffs and business units to update their knowledge of the products and to

improve customer services for more effective business operation.

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The Bank also maintains adaptation programs to help newly-recruited employees

quickly adapt to ABBANK working environment and to encourage sharing and support

among staff.

- Attached great importance on improving quality of the staffs: Apart from offering good

promotion of managerial positions to internal staffs, ABBANK took on and attracted

experienced and qualified employees externally. Most of the recruited staff have university

and post-university degrees and have 1-10 years of experience, depend on the positions.

- Salary management and compensation: Payment and staff policies were implemented

timely and in conformity with the law. The Bank starts to formulate salary policy and new

salary scale in appropriate with new demands of salary and human resources management

in general.

- Completion of documents and policies of HR Management: Procedures, Policies on HR

Management of ABBANK have been developed and completed in order to assure the best

HR activity and policy that brings in a professional working environment as updated labor

regulations, collective labor agreements, regulations on recruitment, employee

management, performance assessment, training ...

- Enhance awareness and appreciate ethics in doing business: Continuously deploy programs

to strengthen staffs‟ ethics such as issuing Code of ethics and professional conducts,

preparing handbook on communicating with customers, ABBANK good ethics example…

Union activities designed to raise morale and to foster solidarity among staff such as team-

building, blood donation and musicals conducted in the whole system were jointly

organized by ABBANK Human Resources Management Division and Trade Union.

2. Management and enhancement of professional ethics

With the aim to build feasible ethic measure system for ABBANKers during the operation

and effectively manage as well as communicate ABBANK Ethic Code that contribute to

ABBANK cultural development, brand enhancement, BOD has approved to implement the

project “Realizing ABBANK Ethic Code” in January 2013 and assigned to the Service

Quality Management Department of Strategy & Development Division to be the project

manager with supports from Marketing Department, Risk Division, HR Management

Division. The project attracted the participation with a lot of ABBANKer over the whole

bank contributing, sharing and encouraging related to the implementation of the rules of

professional ethics.

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3. Restructuring project

Plan of Restructuring the system of ABBANK for the period from 2013 – 2015 approved

by SBV. ABBANK continued to evaluate overall and complete the remaining items of

ABBANK restructuring project under consultation of Deloitte, Singapore. Detailed

evaluations on Restructuring project are as follows:

- The Project commenced in February 2012 with scope is included 5 Phases as following:

Objectives Contents

Assessment of need and

project planning

Kick-off deck, Project plan,

Communications plan

Future state organization

structure proposal

New organizational structure,

Job description & KPIs for

new positions, RACI matrix,

Performance Management

System PMS

Establish readiness for

change and roadmap

Talent assessment report,

Transition strategy and

roadmap, Risk mitigation plan

Preparation for

implementation

Training on Performance

Management System (PMS)

Additional guidance during

implementation

Refinement to transition plan

& roadmap

- After one year year of operation main items of project has been handed over. Divisions

have basically completed the transformation under the new structure according to roadmap.

The project has had a positive impact to the operation of the whole bank:

To clear regional branches, enhancing the independent role and responsibility of

Branches.

To implement vertical model and systematic management. Business Units are provided

with regular Technical support, complete management, and increase cross-check over

the whole system and operational effectiveness improvement.

To execute transformation process methodologically, personnel assessment

scientifically for a smooth transformation to new model with no operational

interruption.

Phase 1

Phase 2

Phase 3

Phase 4

Phase 5

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The recognition on the bank‟s re-structure and innovation has positively affected to a

part of employees.

- However, in process of project implementation, the project also faced with many

difficulties as incomplete awareness on the project of the part of employees, impact of

difficulties on the financial - banking industry to orientation of ABBANK... In order to

meet the demand of operation, business and risk management in the situation of a lot of

changes to the Bank and environment, BOD has approved on adjustment of organization

structure with following main points:

Separate the NPL workouts and collection (Credit Management Division) as an

independent division and establish the NPL workouts and collection Division (The

Division consists of two departments including North Department and South

Department): To assure the independence in approval and NPL settlement as well as to

increase investment in NPL work-out of the Bank.

Establish the Credit Administration Centre managed by Operation Division: To enhance

operating capacity and customer service, and create independence between credit

approval and credit disbursement process.

Reunite the marketing function of the whole bank and to be centralized managed by

Marketing Department of Strategy and Development Division: To accelerate identical

marketing activity and cost effectiveness.

- Branch restructure model was approved by BOD which ensured the simple & effective

machine and improving HR management capacity to serve business activities.

- The remaining items of the restructuring project which will continue to be evaluated

overall , complete and focus on the strategic priorities as well as better emphasis on

executing those priorities well with the support and consultation from foreign strategic

partners that are Maybank and International Finance Corporation (IFC).

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