Techcombank Annual Report 2016 - Ngân hàng Kỹ thương Việt Nam - Báo cáo thường niên 2016

SPREADING THE VALUE OF

TRUST

ANNUAL REPORT

TECHCOMBANK ASPIRES TO BE A WORLDCLASS ORGANIZATION THAT BRINGS THE GREATEST VALUE BOTH TO VIETNAM AND THE WORLD. OUR 23-YEAR JOURNEY HAS POSITIONED US AS A CLEAR INDUSTRY LEADER AND PLACED US ON A DIRECT PATH TO BECOMING THE BEST BANK IN VIETNAM

BY THE YEAR 2020.

www.techcombank.com.vn

Contents 04

Chairman’s statement for 2017

BUILDING TRUST 08 12 16

The Individual Customer Story The Small and Medium Enterprise Story The Corporate Customer Story

LIVING UP TO YOUR TRUST 22 32 40

The CEO’s Story Driving Success Operational Excellence

INSPIRATION 46 50

Strong Corporate Culture Compliance and Risk Awareness

OUTSTANDING SUCCESS 59 60

Overcoming Challenges Outstanding Performance

CORPORATE GOVERNANCE 78

79 82 84

Techcombank’s Corporate Governance Structure and Framework Governance Structure “Customer-Centric” Organization Structure BOD - BOM Profiles

FINANCIAL STATEMENTS 96 98 99 101 104 106 108

General Information Report of the Board of Management Independent Auditors’ Report Consolidated Balance Sheet Consolidated Income Statement Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements

CHAIRMAN’S

STATEMENT FOR 2017 Dear valued shareholders and partners,

echcombank aspires to be a world-class organization that brings the greatest value both to Vietnam and the world-wide community. our 23-year journey has positioned us as a clear industry leader and placed us on a direct path to becoming the best bank in Vietnam by the year 2020.

W

e attribute our success to the consistent support from our valued investors and shareholders, as well as to the unwavering trust of our customers and partners. This support has been, and will continue to be, a vital source of motivation for our past, present, and future achievements.

Our strong team of 7,500 Techcomers take pride in belonging to a leading financial institution built by their concerted efforts.

The drive of every Techcomer to become a better banking professional has created a strong synergy of innovation and dedication that will lead us to another year of success!

Though proud of our present accomplishments, we look forward to the challenge of our even broader visions and loftier goals during the period 2018-2020 and beyond.

Recognizing these ambitions, we are privileged to have our shareholders’ unfailing support. Our vision represents our persistence in forging a path to success.

Techcombank has a first-mover advantage in engaging world-leading consulting firms and advisers who help shape our strategy, design business models, build business fundamentals and develop advanced technologies that are the cornerstones in expanding our franchise across the nation. Our organizational culture, eagerness to learn and our ability to recognize where and how to play ensures that we remain one step ahead of the competition. This engagement has lifted working barriers for expatriate and local colleagues alike. We all embody “Techcomer DNA” – sharing knowledge and experiences to collaborate towards our common goals.

A N N UA L R E P O RT

Techcombank’s ultimate objective is that customer and partner realize the value the Bank generates. I look forward to the day when the people of Vietnam recognize Techcombank as the best bank in the country.

That said, I am a firm believer in building strong fundamentals – No pain, no gain. For banking, this means practicing sound risk management and persistently pursuing our goals. If we stay focused on these principles, then no challenge is insurmountable.

My favorite analogy of Techcombank’s journey is that of a sturdy ship weathering the volatile seas.

Though it is a much easier path for a canoe to navigate a calm stream, a ship has the strength to weather the oft stormy temperament of the ocean and the endurance to reach the final destination.

This ocean voyage very much represents our own daring journey. We are prepared to overcome whatever the seas throw at us. These are the attributes that Techcombank encompasses: a sturdy foundation; a well-defined voyage; a highly capable and experienced crew - that spares no effort in working towards our bright future.

Success awaits and you’re welcome to join us.

Sincerely,

Ho Hung Anh Chairman

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5

BUILDING TRUST At Techcombank, we are known for having a deep understanding of our customers, our ability to grasp market trends, and our strong risk management culture. Our unified sense of corporate culture helps manifest outstanding achievements that meet our customers’ financial needs in responsible and comprehensive ways.

BUILDING

TRUST

As a regular customer of Techcombank, i am deeply impressed by the consistent level of customer service i receive, regardless of the branch that i visit.

Nguyen Thi Thu Thuy Johnson & Johnson Business Director, Vietnam

A

s Vietnam steadily recovers from the economic downturn, banks are under intense competition to win customers through improved services. Consumers have multiple options when selecting their bank of choice.

Nguyen Thi Thu Thuy – Johnson & Johnson Country Director in Vietnam – smiles as she recalls the bumpy start she had with Techcombank a few years ago.

In mid-2014, Thuy was buying a villa at Vinhomes Riverside when she was recommended Techcombank’s mortgage loan. Her initial reaction was to say “no” as she wanted to finance the purchase through another big bank (of which she was a regular customer).

However, Techcombank was the

A N N UA L R E P O RT

preferred lender to the project so Thuy decided to give it a try.

Later two years, Thuy became a loyal customer, using many of Techcombank’s services and products. She explains that from day one, she received timely and up-to-date information as well as solid financial advice from our dedicated

and knowledgeable team. Thuy found the level of service she experienced with Techcombank to be unmatched by any other financial institution she had previously encountered. Even more significantly, Thuy admits, she was a customer with very specific and hard-tosatisfy financial demands. A very tough nut to crack.

Upon the approval of her home mortgage loan, Thuy was offered a credit card/ debit card so that she could enjoy the privileges exclusive to Techcombank’s Priority Customers. After several transactions, she was so satisfied with her experience and tailored service that she decided to open up an additional card for her daughter - who studies in the U.S. Thuy recalls, “I was very impressed with the card’s seamless transaction process and high security features. The card offered exceptional support from the Bank’s Card Center and Priority Relationship Manager. These features were especially helpful to manage risks, particularly when I need to lock the card in an emergency or have it renewed”.

Thuy’s checking account - originally opened to service her home mortgage loan - has now become her primary transaction account. Describing her experience, she states, “Techcombank’s checking account service is so convenient that whenever I cannot find time to visit a branch but need to transfer money to my friends and business partners or pay utilities bills, I can easily use Techombank’s E-banking or Mobile banking services. Both services are extremely user-friendly and charge zero fees! I really can’t ask for more”.

Thuy has become a satisfied customer and has recommended Techcombank’s Priority service to all of her friends and family. She says, “I am an enthusiastic Techcombank ambassador.” Thuy’s

words are the ultimate testimony and commendation of our service. A warm, thank you.

“As a regular user of Techcombank’s products and services, I am particularly pleased by the personal care I have received, as well as the level of service and quality of your facilities,” said Thuy.

In addition to her debit and credit cards, she now also uses Techcombank’s account services, deposit products, and lending products. Several of the friends and family members that she has referred to Techcombank, have also become loyal Priority Customers.

Thuy spares no praise for Techcombank and affirms that we are her “top choice” when it comes to fulfilling her financial needs. Thuy adds: “Techcombank now sends instant SMS messages not only to my primary visa card inn Vietnam, but also to my daughter’s supplementary card overseas. It is wonderful that we are both able to stay informed about our card transactions through real-time messages”.

The trust of every customer, including loyal platinum customers like Thuy, is the foundation for our continued success. we strive to gain trust through our quality products and honest services. as chairman ho hung anh puts it, “i look forward to the day when i can take pride in hearing every vietnamese say that Techcombank is the best bank in the country”.

For Techcombank to become the best, our products and services must not only be the best-in-class, but also expand into an ecosystem that caters to our customers’ every need. For individual customers, Techcombank can offer a full range of products and services for daily requirements. For enterprise customers, Techcombank offer financial packages tailored to individual business needs – this requires a profound understanding of a customer’s business to better support them in the good times as well as bad. This is especially true in the case of Tran Huynh Quang Co., a subsidiary of Coteccons Construction Company, both of which are loyal Techcombank customers.

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BUILDING

TRUST

RETAIL BANKING BUSINESS IN NUMBERS

40,000

2,000

20,000

2013

2014

2015

Average growth 39.21%

2016

2013

2014

2015

12,856

3,000

9,771

60,000

7,359

20,000

2016

Average growth 12.27%

Demand deposits balance Average growth 28.70%

A N N UA L R E P O RT

4,552 3,412

5,000

4,000

6,031

30,903

40,000

22,851

60,000

6,000

2,699

80,000

Total operating income (VND billion)

2,217

80,000

93,597

100,000

87,801

100,000

61,644

120,000

50,124

120,000

111,786

Deposits from customers (VND billion)

79,005

Loans to customers (VND billion)

1,000

2013

2014

2015

Average growth 27.10%

2016

6

15

4

10

2

5

2013

2014

2015

Average growth 14.64%

2016

2

1.32

1.21

1.12

1.05

18.29

19.30

8.38

20

15.74

8

30

Number of active customers (Million)

25

7.63

10

Non net interest income/Total operating income (%)

25.51

10.44

12

11.50

Demand deposits/Total deposits from customers ratio (%)

1

2013

2014

2015

Average growth 17.45%

2016

2013

2014

2015

2016

Average growth 7.93%

10

11

BUILDING

TRUST

“With their customer-centric approach, Techcombank will surely win the business of many corporate customers - just as they have already won our business”.

Huynh Thi Uyen CEO, Tran Huynh Quang Co.

I

n order to gain the trust of individual customers - just as with Thuy in the previous story - Techcomers must keep asking themselves how to add even more value for customers. Answering this question is more challenging when it comes to corporate customers - as we aim to help with both personal and business financial solutions – however we have the imagination and creativity to come up with innovative ideas.

Our ability to offer these solutions is an example to illustrate Tran Huynh Quang Co. The Company’s CEO, Huynh Thi Uyen, recalls: “It all started as a coincidence.

In December 2015, just when we were in dire need of specialized credit to expand our business, I received a phone call from a Techcombank Relationship Manager at Quang Trung branch, introducing an exclusive financing program for Coteccons’ contractors.

Techcombank was offering a joint product with Coteccons – an important

A N N UA L R E P O RT

business partner of Tran Huynh Quang Co. Once I heard the description of the program’s credit policies, I immediately realized that this was exactly what I was looking for, so I invited him over to discuss the program in more detail.

After only one meeting, we decided that Techcombank would be our financial partner”.

Tran Huynh Quang Co.’s main line of business involves supplying and installing of mechanical/electrical facilities. On the trading side, the Company is the main contractor of Nival electrical equipment spanning 13 Mekong provinces. Additionally, they are the producer of ventilation pipes and hoses for M&E companies. On the installation side, the Company is a Coteccons’ subcontractor, with 90% of its installation revenue coming from Coteccons.

Though Tran Huynh Quang Co. formerly had a credit relationship with two other local banks before Techcombank, the

Company primarily relied on its own limited equity capital. Thus, leaving their great market potential untapped.

Prior to becoming Tran Huynh Quang Co.’s CEO, Huynh My Uyen was in charge of the finance and accounting of various multinational companies in Taiwan, South Korea, Malaysia, and Singapore. This gave her a heightened awareness of the limitations that can occur when a company does not have adequate capital or cannot access suitable financing for expansion purposes. In fact, for a long period, Tran Huynh Quang Co. did not bid for any construction packages in excess of VND 20 billion, due to limited financial resources.

During mid-2015, the Company leadership realized the exciting opportunities and great potential of being a part of the fast-growing mechanicalelectrical construction industry. On one hand, Tran Huynh Quang Co. was confident in the capabilities of their

based of business model, evaluation of market potential, assessment of business risks, and overall added value.

Our ability to gain customer insight has helped Coteccons’ contractors and countless other small to medium-sized enterprises succeed. According to Tran Huynh Quang Co.’s leadership, Techcombank’s offer came at precisely the right time and perfectly matched their needs.

Since early 2016, with Techcombank’s financing, Tran Huynh Quang Co. has been able to expand business operations by bidding on larger-scale projects. This has resulted in a doubling in revenue and a tripling in the value of their contracts compared to 2015.

people and equipment to deliver largescale projects; on the other hand, the company did not have enough financial resources to bid on these projects.

Hence, they needed strong leverage to improve their bidding capabilities.

As they considered possible financial solutions, several local banks offered their services. However, they found that these proposals did not offer their business suitable credit policies that met their needs, or guarantee long-term collaboration.

So, when Techcombank proactively approached the Company, it was easy for them to decide that the tailored solution offered was exactly what they needed. The custom solution offered to Coteccons’ contractors was the result of our thorough customer analysis insight

What impressed the Company’s leadership was not only our welldesigned financial solutions, but also the professional attitude and personalized care shown by the customer service team at Quang Trung branch. By mid2016, in addition to establishing a credit relationship, the Company decided to switch to Techcombank for its payroll needs as well.

“Throughout our partnership, Techcombank has always met and exceed expectations. I am sure that through this customer-centric mindset, the bank will win many more customers, as it has with us” – said Huynh Thi Uyen, the Company’s CEO. Tran Huynh Quang Co. is one of thousands of small enterprises and customers that Techcombank serves; their experience is a great example of how we are able to repeatedly increase our customer base by providing tailored product bundles along value chains. Our ability to leverage our relationship with their parent companies and suppliers/ contractors as loyal customers - was a great example of how Techcombank has become a trusted partner of Tran Huynh Quang Co. and other small & medium size businesses.

We are proud to have a long list of customers with similar success stories of collaboration. Our next example shares a customer experience from the beautiful Nha Trang Bay.

There are many reasons why Tran huynh Quang has chosen Techcombank to be their long-term financial partner. in the beginning, it was the satisfaction that came from our tailored solution and the dedication and professionalism of our sales and customer service teams. over time, the most important aspect of our partnership is the trust that builds. Overtime, Techcombank strives to build trust with every customer and believes that through trust we can help customers to become financially successful and sustainable.

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BUILDING

TRUST

SMALL AND MEDIUM ENTERPRISES BANKING IN NUMBERS

18,412

Deposits from customers (VND billion)

2,000

1,376

1,572 106

2013

2014

2015

Average growth 6.21%

A N N UA L R E P O RT

2016

2013

2014

2015

2016

2013

2014

2015

219

500

180

5,000

150

5,000

1,000

10,820

10,000 9,018

10,000

9,877

12,197

1,262

1,500

1,240

15,000

Total operating income (VND billion)

15,746

16,566

20,000

14,482

15,000

14,686

15,352

17,778

20,000

18,392

Loans to customers (VND billion)

2016

Average growth 3.59%

Average growth 8.24%

Demand deposits balance Average growth 10.59%

Income from trade finance Average growth 27.36%

60

16,071

66.24

68.72

Number of active customers (Customers)

20,000

54.44

68.20

80

40

12,978

12,199

32.27

32.60

40

37.28

15,000

36.21

60

Non net interest income/Total operating income (%)

17,089

Demand deposits/Total deposits from customers ratio (%)

10,000

20 20

5,000

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

14

15

BUILDING

TRUST

The collaboration [with Techcombank] has brought us success beyond our expectations. Our Nha Trang Bay dream has become a reality thanks to the whole-hearted support of our partners - Techcombank and Coteccons.

Le Anh Duc Chairman of Nha Trang Bay Construction Company

W

ith a great view of Nha Trang Bay – one of the 29 most beautiful bays in the world – Panorama Nha Trang Project is in a prime location.

Though experienced investors, this was the first condo project that the Company had invested in and they quickly realized the unavoidable marketing challenges of this type of development. To add to the challenge, top leadership of the investment held skepticism towards financial institutions due to the real estate downturn of 2011 - 2013.

For that reason, Le Anh Duc, the Company’s chairman, decided that he would not finance the Nha Trang Bay condo project through banks.

However, as construction was nearing completion and the condos were ready to be marketed, Vietnam’s Real Estate Law required a bank to guarantee the Project.

Over the course of three months, Mr. Duc took several flights between Nha Trang and Hanoi to meet with top leaders of

A N N UA L R E P O RT

local banks to explore how his company could get the required guarantee.

Despite talking with many banks, he was disappointed that he could not find a bank to match his needs. Either that, or their guarantee policies and processes were too complicated and overly cumbersome.

a reputable and professional financial institution,” said Duc. From there, the story began and Techcombank’s deal team was entrusted as the Company’s adviser on branding, marketing, and real estate financing. This makes the Panorama Project a compelling story of collaboration.

“After several futile attempts [with other banks], I decided to make a phone call to Techcombank’s Chairman to seek support, as I heard that the Bank was

Vital factors for a successful and marketable real estate project include a strong brand, solid reputation, and proven capacity of the developer and its

partners. For these reasons, Coteccons – a leading construction company – was selected as the builder of the condo project.

were met on time. The deal team stayed up with the developer the entire night before the day of launch to make certain that everything was ready for the event.

Coteccons has been a loyal customer of Techcombank for many years, so, with such a big name involved, the condo buyers had peace of mind that the quality and progress of the project would go smoothly. Even more-so, with Techcombank as the guarantor, we were able to build on the trust of our long-term partner to ensure superior quality throughout the project.

As a result of our combined efforts, this collaboration yielded a positive return for our customer. Originally, the developer calculated that it would take 1.5 years for the feasibility study, 2 years for construction, and another 2 years for selling the condos. However, within the very first week after the market launch, 250/800 condos were sold. Following this success, another 100 condos were sold in the second week at even higher prices.

Several Techcombank employees at Nha Trang branch even wanted to buy Panorama condos for themselves.

“In our opinion, the developer needed a distinct go-to-market strategy that sold more than just an ordinary condo, but also the dream of owning a luxury living space. And, most importantly, a means to help realize their customers’ dreams.

All thanks to the financial support from Techcombank,” said Phan Thi Hai Yen, Senior Banker in charge of VIP Corporate Clients in North Vietnam.

Within 10 days, the guarantee and financing contract was concluded, allowing the developer to market the condos to potential buyers. This was an extraordinarily short turn-around time given the fact that guarantee procedures in the market for real estate projects are very tedious.

In preparation of the launching ceremony, Techcombank put together a “deal team”, including experts from Risk Management, HUB, Business Center and the local Nha Trang branch to ensure that all of the customer’s needs

The dream on Nha Trang Bay came to fruition thanks to Techcombank’s ability to connect with our customers – Coteccons and Panorama. Le Anh Duc remarked: “Our project would not have gone as well without the support of Techcombank and Coteccons.”

The fruitful collaboration between Nha Trang Bay Construction Company as the developer, Techcombank as the guarantor, and Coteccons as the builder, highlights the importance of connecting customers across the value chain. This example of profound customer insight is rewarding and inspiring.

These shared anecdotes are just a few of thousands of success stories that highlight successful collaboration between Techcombank and its partners, both individual and corporate. These stories demonstrate real life examples of our “Customer-Centric” approach to business.

With feedback from more than four million individual customers and thousands of corporate customers that bank with us, we realize that our customer potential is infinite, and the needs of our customers are unlimited.

This expresses that even though Techcombank has satisfied customers, it takes more effort to bring about a superior and satisfactory customer experience. To that end, Techcombank has been and is transforming

the mindset, organizational structure, and behavior of every Techcomer.

Though positive changes are continually taking place and results are being achieved, more must be accomplished on our path to becoming the leading financial institution in Vietnam and the world. We will continue to gain the trust and live up to the expectations of our customers, partners, and shareholders.

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BUILDING

TRUST

WHOLESALE BANKING BUSINESS IN NUMBERS

Loans to customers (VND billion)

Deposits from customers (VND billion)

3,000

2015

Average growth 24.96%

A N N UA L R E P O RT

2016

2015

1,507 2016

2013

2014

2015

119

129

2014

97

2013

90

4,766

2014

3,975

20,000

1,000

8,747

14,342

20,000

2013

2,000

890

29,407

24,407

34,718

40,000

32,071

44,278

40,000

32,897

60,000

1,907

43,250

62,581

2,490

60,000

80,000

Total operating income (VND billion)

2016

Average growth 21.01%

Average growth 40.91%

Demand deposits balance Average growth 53.38%

Income from trade finance Average growth 9.76%

Demand deposits/Total deposits from customers ratio (%)

Non net interest income/Total operating income (%)

30

Number of active customers (Customers)

443

500

383

372

21.57

400

16.31

300

13.61

13.93

20

16.21

20

26.59

30

409

33.16

40

16.29

200 10

10 100

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

18

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LIVING UP TO YOUR TRUST With a strong financial foundation and “customer-centric� strategy, Techcombank continues to affirm our position with the absolute trust of our customers. Techcombank builds the trust by one customer at a time across our large banking network with experienced and dedicated team members.

LIVING UP TO YOUR TRUST THE CEO’S STORY

CONVICTION – PERSISTENCE AND PROMINENT POSITION

A N N UA L R E P O RT

TECHCOMBANK IS PROUD TO HAVE FULFILLED 23 YEARS OF IMPRESSIVE ACHIEVEMENTS; HOWEVER, THIS IS ONLY THE BEGINNING OF OUR JOURNEY. WE STILL HAVE MANY MORE MILESTONES TO ACHIEVE, MANY MORE CHALLENGES TO OVERCOME WITH THE PERSISTENCE AND TEAMWORK. OUR MORE THAN 7,500 TECHCOMERS ARE SAYING “BRING IT ON” AS WE FORGE AHEAD ON OUR PATH TO SUCCESS. Mr. Nguyen Le Quoc Anh Techcombank’s CEO

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LIVING UP TO YOUR TRUST THE CEO’S STORY

2016 IN A NUTSHELL

A N N UA L R E P O RT

Customer satisfaction is a mission to provide happiness to every customer. Every Techcomer strives to give valuable advice to their customers to ensure satisfaction and happiness.

L

ast year was the first year that Techcombank successfully hit every single one of our financial targets. We are proud that this achievement contributes to the success of the Vietnamese economy and regional communities that we represent.

Vietnam is a fast growing country that is quickly integrating into the regional and global marketplace. Integration opens doors for cooperation and new opportunities, but also brings competition and change. Techcombank is working hard to strengthen our foundation and preparing to navigate future challenges.

Techcombank’s strategy is focused on individual customers and small to medium-sized enterprises. Our strategy also emphasizes effective operating cost management, investment in technology, and greater automation. These strategic components help explain why Techcombank has the lowest Cost-to-Income Ratio (CIR) among joint-stock banks in Vietnam, and justifies our confidence in delivering our five year objectives. Techcombank is rapidly setting the stage to become the best bank in Vietnam.

At the year end, Techcombank’s NPL ratio was approximately 1.57% - this ratio is remarkably low when compared to the rest of the banking industry. This figure can be attributed to our conservative and disciplined risk management practices, coupled with our well-polished system capable of the early detection of potential risks.

Looking back, as Vietnam and the financial industry began to feel the pains of the 2008 global financial crisis, so did Techcombank.

However, after some time and perseverance, Techcombank is one of few banks today that have survived the bad debt crisis and bounced back with full force.

In learning this lesson, we have been able to cushion the blow from the crisis and continue to reinforce Techcombank’s sustainable development.

Today, we are further strengthening our Risk Management, as Techcombank is currently one of only ten local banks in Vietnam piloting the international business standards of Basel II; moreover, Techcombank is nearing completion of the pilot period and close to full implementation. We have conducted an assessment, worked closely with the State Bank of Vietnam, as well as introduced automated processes to meet Basel II’s requirements.

Concurrently, Techcombank is proactive in controlling the pace of our growth to ensure that we are in tandem with the country and world economy.

Following the global financial crisis of 2008, the Government of Vietnam embarked on an economic stimulus plan of which Techcombank has been an enthusiastic supporter.

Techcombank has played an important role in supporting the corporate sector to get back on its feet, while being conscious of the dangers of a W-shaped recovery versus a V-shaped recovery. By 2011, the problem of Non-Performing Loans (NPLs) began to emerge, and, in response, Techcombank decided to take a conservative approach to credit growth. In doing so, the Bank deliberately moved more slowly during 2012 - 2013. This approach meant making conservative provisions, controlling business activities, becoming more selective in acquiring new customers, and revamping the processes for better governance.

The resilience of Techcombank in 2014 was the result of our conservative precautions along with strategic changes of 2012 - 2013. Throughout 2015 - 2016, the Bank continued to make radical transformations, further setting the springboard for success in 2017 and beyond. In addition to meeting the targets of 2017, the bank is readily preparing to achieve even more aspirations in the 2018 - 2020 period.

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LIVING UP TO YOUR TRUST THE CEO’S STORY

A N N UA L R E P O RT

THE STORY OF TRUST At Techcombank, the mindset of embracing TRUST has been of great significance during the last few years. In order to ensure the bank’s continuity and gain the trust of our customers and partners, we must first ensure that every coworker, line worker and subordinate have trust in each other.

Of course, it takes two to tango. At Techcombank, we harness this trust in each other through the promise of the future, as well as the belief in our position, the social responsibilities of the banking system and the national economy.

TRUST

will be the launching pad for Techcombank’s journey to achieve greatness in the years to come!

As we forge ahead, we are prepared for roadblocks along the way, and are mindful of human nature’s innate resistance to change. We, as humans, often feel at ease maintaining the status quo and have a tendency to resist new ideas or experiences - rarely stepping out of our comfort zone.

Techcombank is a large organization with many established processes, regulations, policies and practices, in addition to having 7,500 unique employees with different mindsets.

Therefore, in order for us to fully embrace change, we must not only instill desire in 7,500 Techcomers, but also create a strong political will to make change possible.

The correct path for overcoming the comfort of the status quo is our belief in our bright future. However, change does not happen overnight. We understand that this change must come from the top and will take time to be conveyed, embedded and accepted by the whole organization.

For that reason, 2017 will be the year of strengthening our core values and fundamentals. PERSISTENCE will be the buzzword to ensure that Techcomers will have the endurance

to reach our ambitious goals on our path towards regional and global recognition.

So what is required for each of the Bank’s leaders to nurture this PERSISTENCE? The human experience has conditioned us all to share very similar logic: KNOW – UNDERSTAND – BELIEVE – DO. The majority of unsuccessful leaders are those who do not spend enough time and effort helping their subordinates understand and believe in what they do or want to do. That said, each and every Techcomer must clearly understand their role and know how their tasks fit into the big picture.

“It won’t fail because of me” – is our motto to ensure the concerted effort, trust, and synergy that will drive the organization forward.

Helping people KNOW – UNDERSTAND – BELIEVE – DO is one of the vital initiatives that the Bank’s senior leadership worked on last year and will continue to instill in the years to come.

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LIVING UP TO YOUR TRUST THE CEO’S STORY

BE PROACTIVE Life is full of problems that need to be solved.

With aspirations come difficulties, and Techcombank encounters challenges every day, every hour. Therefore, being PROACTIVE is a way of life for Techcomers.

Proactive problem solving cannot rely on a firefighting approach. We must anticipate and think through sticky situations before they occur. With well-planned execution, problems can be resolved efficiently and with complete confidence.

This brings us to our next question: What problems do leaders need to solve?

The BOD’s Chairman, Ho Hung Anh, and I recently watched several plays preparing for the Bank’s 23rd anniversary celebration. Each script was based on a storyline conveying Techcomers’ corporate and customer insight. After watching each team’s interpretation of the challenges faced, the Chairman shared with me his confidence that Techcomers are now ready to play their “roles” at work. Within the next 3 5 years, Techcombank’s success will depend on the Bank’s leadership rather than employees. The latter are responsible

A N N UA L R E P O RT

for execution and innovation in daily work; while the former must set the direction, guide the execution, and transform individual forces into a concerted effort that will drive the Bank forward.

A strong focus on resources and clear mindset during critical moments will help the Bank achieve major breakthroughs and be on a par with regional and global competition. This requires adjustments in our way of thinking, working, and the continual development of every Techcomer and the entire system.

The People of Vietnam are widely revered as smart and adaptable – Techcomers are no exception. However, it takes time to learn and embrace international values.

Externally, “Customer-Centricity” is our key to success; whereas internally, employees are placed at the center of the

Bank’s operations. Therefore, it is of the utmost importance that we ensure the capability of our people to facilitate and achieve Techcombank’s strategic objectives.

growth of the banking industry, and the success of Vietnam’s economic integration. In achieving this, each Techcomer must position their talent in the correct areas to bring optimal value.

For large institutions, such as Techcombank, it is essential that corporate culture becomes the glue connecting people as well as the backbone of the corporation. This overarching theme is the driving force of our corporate culture and we are intrinsically developing this philosophy across all aspects of our organization. Through this corporate change, we are set on aligning our culture with the development of Techcombank, the

Building on these cultural ideals, corporate alignment requires that every Techcomer practice ethical behavior both in their daily work and personal life. Ethical norms are essential in creating a solid foundation for risk management. Moreover, this requires corporate compliance, self-awareness, and the establishment of a professional work environment to embark upon international practices.

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LIVING UP TO YOUR TRUST THE CEO’S STORY

PREPARING FOR OPPORTUNITIES

Why is “PERSISTENCE” the key word of 2017?

The main reason is that our vision is long term.

Planning and preparation are a vital part of our ability to face the challenges of the transformation ahead. With careful resource planning, there aren’t any problems too complicated or any challenges that are insurmountable.

For this reason, Techcombank does not place too much focus on the past opportunities of 2016 or, indeed, the upcoming opportunities of 2017. Instead, we are preparing for opportunities that will arise in 2018–2020 and beyond.

We believe that Techcombank seized every opportunity in 2016. One can argue, that winning means grabbing opportunities as soon they emerge on the market. However, Techcombank’s experience has shown that opportunities should only be seized if you are fully prepared to grasp them in such a way that you never let go. Therefore, opportunities can only bring value to those who are ready to “bring it on”.

Throughout 2018–2020, Vietnam will experience deeper integration into the regional and global economy. However, an increase in opportunity does not come without its pitfalls. We must be able to respond effectively to intense external competition and pressure. This will require a strong foundation in terms of our systems, resources, and employees. We must be certain that we are ready for these opportunities and ready to sustain our success in an increasingly competitive environment.

At Techcombank, we believe opportunities are only ours to seize if we have the necessary fundamentals in place.

SUSTAINABLE success only ever comes to those who are well prepared to handle it.

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LEADING POSITION Techcombank will LEAD the transition of Vietnam’s financial and banking sectors towards deeper integration.

By 2018 - 2020, Techcombank will take the LEADING POSITION among domestic banks, and be on a level playing field with regional and global banks.

The future does not guarantee which opportunities will unfold, but we know for sure that if we fail to prepare today, we risk preparing to fail for the next two years. Therefore, our biggest challenge will be preparing the fundamentals in terms of employees, customers, business owners and resources so that Techcombank can be on a par with regional and global banks.

Furthermore, each Techcomer must understand their role and the overall development of the bank from a local and global perspective. This will ensure that we are capable of playing on a level field with other wellestablished financial institutions.

Above all, our expectation that each Techcomer fully understands and plays their role well is an important part of our preparation. If we embed this mindset in our every thought and daily task, we will be able to focus on pertinent work and avoid unnecessary risks.

What will Techcombank look like in 2017 and beyond?

In a nutshell, Techcombank will LEAD the transition of Vietnam’s financial and banking sectors towards deeper integration. By 2018-2020, Techcombank will take the LEADING POSITION among domestic banks, and be on a level playing field with regional and global competition.

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DRIVING SUCCESS

We always consider how we can add value for our customers and help them succeed in their business and personal financial lives.

In doing so, we believe we can win the loyalty of our customers we understand that adding value requires profound customer insight.

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LIVING UP TO YOUR TRUST DRIVING SUCCESS

UNDERSTANDING CUSTOMERS Addressing Customer’s Problems

Each of the 2,340 direct sales officers of Techcombank have their own targets of customer care and acquisition.

However, the difference between these employees and those of many other banks is that each must understand the needs of their customer before determining which products and services to offer. This customer-focus mindset is a new approach. In the past, sales were focused on offering available products and/or achieving assigned sales targets.

First and foremost, Techcombank requires all of our sales force to learn and understand their customers’ needs. This allows us to help make our customers more successful, rather than merely selling products and/or services.

We believe that if customers are given a satisfactory banking experience, they will naturally have a greater demand for services as they become more successful. We also believe that, alongside referrals from current customers, new customers, impressed by our evolved customer experience and professional sales team, will join in large numbers. Every Techcomer knows that the success of our customers is the key to our success.

With this belief and knowledge, each Techcomer focuses on addressing customers’ needs and helping meet challenges within the Bank’s risk appetite (instead of simply pursuing higher sales revenue or volume).

We are focused in ensuring that customers have an effective capital utilization plan and a well-designed business strategy based on capability and market knowledge. These key aspects, along with our professional advice and solutions, will assure the success of both the customer and Bank.

For example, small and medium-sized enterprises are considered successful if they can survive the first three to five years from start of operation.

During that initial period, short-term financial cost does not particularly sway their decision-making. The issues businesses are more concerned about include having the required capital to help manage risks such as stabilizing input price, implementing production plans and enhancing their reputation in the marketplace.

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LIVING UP TO YOUR TRUST DRIVING SUCCESS

Techcombank understands these needs very well and helps advise companies to achieve their goals and survive the challenges of this initial phase. This partnership will help to build a lasting relationship with the customer.

Similarly, for individual customers, a 1% difference in interest rate does not necessarily influence their decision.

Customers are more interested in tailored solutions that can ensure a healthy financial life for their business for the next three, five or even ten years.

Techcombank understands that “employees will treat customers in the same way that their organization treats them”. Therefore, in order to deliver excellent financial services to customers, Techcomers need an excellent working environment - where every Techcomer is empowered to develop themselves, raise their voice, and be recognized.

Providing Solutions for Customers

We are proud to have leaders who are not only professional banking experts, but also knowledgeable industry insiders that are able to bring even more value to customers.

Techcombank takes pride in helping customers succeed.

Techcombank often organizes industry specific workshops (i.e. coffee, cashew, iron, and steel) for customers as a way of sharing useful information regarding industry trends. Through these workshops, our customers gain a deeper understanding and are given a platform to discuss implications of geopolitical developments, policy changes, as well as competition in the marketplace.

Our Senior Management Team, including Mr. Nguyen Canh Vinh, Mr. Nguyen Tuan Minh, and Ms. Phan Thi Hai Yen, have become well-known speakers amongst businesses in areas of real estate, import-export, agricultural products and consumer goods.

In 2016, Techcombank also held several workshops for different

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corporate customer segments. Of these workshops, two large seminars were held in Hanoi and Ho Chi Minh City for Coteccons - including 19 contractors in North Vietnam and 44 contractors in the South - with the title, “Planning for Success.” Another workshop was held on “Legal Issues and Solutions for Risk Mitigation” specifically for import- export trading customers; Participation included hundreds of customers representing industries such as agricultural, furniture, garments, and consumer goods.

Industry specific workshops such as these have allowed Techcombank to gain a deeper understanding of our customers. In gaining this insight, we are able to provide better service and design solutions to meet the individual needs of customers.

Listening to our Customers

Since early november 2016, Techcombank has incessantly communicated this message bank wide, so that each of our 7,500 employees understand and embrace this mindset.

“Listening to our Customers” is not just a slogan. At Techcombank, business objectives are measured and expressed by the value generated for our customers.

We believe that our customers are also our best critics regarding the quality of our products and services. Therefore, in addition to the conventional “Mystery Shoppers” program, the Bank has actively carried out monthly surveys to report on customer feedback (beginning at the end of 2015 and continuing through 2016 and beyond).

Additionally, driven by the desire to actively listen to our customers, Techcombank developed even more channels of communication for customers to provide feedback.

This 2016 program has helped to further shape our corporate culture and foster a proactive mindset for delivering a valuable customer experience.

This new feedback program was piloted at four branches in Hanoi and Ho Chi Minh City, and yielded positive results: 78% of customers visiting piloted branches and transaction service outlets were introduced to a feedback channel; 10% of those customers commented on ways Techcombank can improve services; and 100% of those comments were evaluated and considered to help Techcombank improve the customer service experience. This feedback program will be officially introduced bank-wide from the second quarter of 2017.

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LIVING UP TO YOUR TRUST DRIVING SUCCESS

PROFESSIONALISM

Profound Knowledge

At Techcombank, training is a key factor in our success in employing knowledgeable people with customercentric values.

At Techcombank, we realize that each customer has a distinct set of financial needs. In determining these needs, we recognize that our people are the most valuable assets for understanding and providing proper solutions. With this in mind, the banking industry is subject to market risks, operational risks and fraudulent risks – all of these risks can be mitigated by talented “PEOPLE”.

The people that make up an organization are the most important asset as they have the ability to provide an organization with a competitive edge. Thus, “People Excellence” has become one of the three main pillars of Techcombank’s

In 2015 and 2016, the JobCat Project was deployed with 130 online and offline courses for 2,340 direct sales staff (equivalent to a 6,021 class enrollment).

In the second phase, the participants’ average “after” test score was 90.2%, representing a 20.27% increase versus “before” test results.

In 2016, the JobCat Project along with our RM Capability Initiative were implemented as part of 8 capability framework programs for Business Banking RMs that will be deployed in 2017.

In addition to in-class training programs, Techcomers recognize that coaching and training by line managers is an important aspect of learning.

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strategy since 2015: emphasizing talent acquisition, retention, and development.

Techcombank training programs are well-designed for different groups of employees:

»» New Recruits are provided with career orientation programs to familiarize themselves with the new working environment. »» Existing Employees are provided with regular and in-depth training courses to improve technical expertise and sharpen their soft skills.

Training incentive: Techcombank also gives scholarships for employees to improve their English language skills. »» High performers, Middle Management and Senior Executives are provided with the Bank’s flagship training programs – TechcomLead and TechcomFuture – which deliver advice from internationally prestigious consulting firms such as McKinsey and YSC.

A Long-Term View

Therefore, Techcombank has deployed different programs and activities to gain better customer insight.

We understand that enterprise initiatives not only seek short-term capital, but also financial partners and solutions suitable for the long term.

Our number one priority is to create value for and meet the expectations of our customers.

Every Techcomer asks themselves two questions, “How can we understand customers’ needs?” and “How can we meet those needs?” We pride ourselves

on finding mutually satisfactory answers to those questions. Our ability is reflected in the positive feedback we receive from customers and, in turn, our belief in positively reinforcing the customer-centric path we have chosen.

Techcombank has transformed and continues to embrace a “Customer First” mindset. We constantly consider the desires of individual and corporate customers, and their need for a credible, reliable, and eager financial partner.

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LIVING UP TO YOUR TRUST DRIVING SUCCESS

People Excellence

“People excellence” is one of the primary reasons that Techcombank has the lowest cost-to-income ratio (cir) among Vietnamese joint stock commercial banks. This achievement gives us confidence in reaching our five-year objectives and becoming the best bank in Vietnam.

An example of our dedication towards People Excellence is our flagship program, TechcomLead, which has been implemented with the support of McKinsey since February 2011.

Additional training that emphasize Techcombank’s devotion to “People Excellence” include programs focused on improving the recruitment process, developing alternate recruitment channels, retaining talent through incentive policies, enhancing performance through training, offering development activities, and much, much more. These employee focused programs have made Techcombank a leader and an “Employer of Choice” amongst competitors.

Techcombank’s Human Resource Division measures “Quality” and “Quantity” across personnel diversity indicators (i.e. gender, education, experience, etc.) and some notable achievements are highlighted below:

»» Gender: The number of female employees has remained higher than male employees: Female employees account for 58% of the Bank’s total workforce - a characteristic normally only observed in the service industry. »» Education: The number of employees with college degrees or higher keeps increasing, with strongest growth in the number of those with Masters or PhD degrees (9%). »» Experience: The average tenure of employees is 4.73 years (representing a 5% increase). This is an encouraging number that reflects Techcomers’ engagement with the organization - compared with the average tenure of 3 years in the financial industry.

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Techcombank’s strategy development focuses on:

regarding

talent

acquisition,

retention,

and

»» Value Proposition: Introducing a clear employee Value Proposition highlighting compelling reasons for talent to join and stay with our organization, including excellent career development and performancebased promotion opportunities. A key factor in this value proposition relies on our dedicated middle management’s drive to lead business activities, develop teams, and share their dream of global engagement. Equally, they must share their vision to grow Techcombank to be the leading enterprise in Vietnam. »» Recognize and Reward: Offering competitive salary and benefit schemes to Recognize and Reward employee contributions. Moreover, Techcombank’s compensation policies help Techcomers build a solid financial foundation for the future. »» Training and Development: Building a strong workforce with capable employees via Training and Development. We strive to build comprehensive training frameworks based on regional standards and specialized knowledge. These programs offer employees a clear career path and longterm benefits. »» Empowering Work Environment: Providing an Empowering Work Environment where each employee is fully engaged and supported in providing the best service. Techcombank recognizes employee achievements and acknowledges that their personal success helps drive success for the organization as a whole.

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LIVING UP TO YOUR TRUST OPERATIONAL EXCELLENCE

OPERATIONAL EXCELLENCE In the digital age, technology is fundamental in developing new services.

2016 marks an important milestone with Techcombank becoming the best card service provider in Vietnam. This achievement was made possible due to system optimization and upgrades including new features (some of which offer superior features compared to our international competitors).

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TECHNOLOGICAL EXCELLENCE

Streamlined Systems and Automation

Since Techcombank’s establishment in 1993, technology has driven our success. Our Information Technology (IT) Division is advanced, well-directed and compliant with international standards; these attributes give us a significant competitive edge over our peers. Techombank’s Board of Directors recognize the importance of technology and have committed to continued large scale investment in this area.

An example of Techcombank’s commitment to technology is our 2016 partnership with Singapore-based company, FinTech. This partnership provided money transfer service via social networks. Through this innovation, we have demonstrated our commitment to mobile banking and been awarded industry recognition, including “Best Mobile Banking Project” by The Asian Banker.

Manage business

1

We have demonstrated our commitment to mobile banking and been awarded industry recognition, including BEST

MOBILE BANKING

Banking technology is typically divided into three areas:

2

3

Grow business

Transform business

PROJECT

by The Asian Banker.

Techcombank is proud to have achieved success across all three areas. Technological development is a high priority and major investments are being contemplated and implemented.

Technology has helped and will continue to help Techcombank transform our business towards more streamlined, professional, and automated operations.

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LIVING UP TO YOUR TRUST OPERATIONAL EXCELLENCE

Cost Optimization and Fraud Mitigation

Electronic tax payment regarding customs procedures has been reduced from five to three steps, considerably minimizing the turn-around time for customers.

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2016 marks an important milestone with Techcombank becoming the best card service provider in Vietnam. This achievement was made possible due to system optimization and upgrades, including new features (some of which offer superior features compared to our international competitors).

Techcombank has also improved various other operational processes that have helped increase productivity by 23% compared to 2015. For example, electronic tax payment regarding customs procedures has been reduced from five to three steps, considerably minimizing the turnaround time for customers.

In the digital age, technology is fundamental in developing new services; although this poses the challenges of transaction and information security. In 2016, the Banking Industry experienced incidents of losing customer information and money in accounts. Though these incidents did not occur at Techcombank our IT team has proactively developed counter and preventative measures to ensure secure and seamless banking operations.

Techcombank understands the importance of information security and has established a dedicated IT Security Team in charge of supervision, detection, and reaction. Since being established, the team has successfully detected and prevented malicious cyber-attacks and frauds, ensuring safe and secure transactions for all customers.

As a result of these efforts, Techcombank’s IT Security Team has been selected as one of the six members of the Executive Committee of Information Security Incident Recovery Network for Vietnam’s Banking Industry - established by the State Bank of Vietnam. Moreover, Techcombank’s Chief Information Security Officer (CISO) has been recognized by the ASEAN CSO awards.

Data Excellence

In order to maximize customer satisfaction, Techcombank must have the specialist capabilities to meet customers’ evermore sophisticated needs.

A deep customer insight not only means understanding the needs of customers, but also understanding the business environment, market trends, human resource demands, technological changes, and competitive landscape, etc. Therefore, hosting a solid data warehouse and utilizing automated tools will help us better design and provide suitable solutions for our customers.

Techcombank heavily utilizes in-depth analysis to build data and operational

excellence. This focus allows us to provide convenient and fast banking services for a positive customer experience.

Data excellence and operational excellence are the two building blocks for implementing the “CustomerCentric” strategy of Techcombank. In turn, this means that information and technology are important pillars for our strategic execution. The top priorities for the Bank’s IT Team include effectively supporting business activities, automating processes, developing digital transaction channels, improving product quality and services, increasing productivity, and ensuring information security.

Fast-paced iT developments require Techcomers to manage a huge volume of activities, while continuously acquiring fresh knowledge and know-how in relation to the latest technology.

Techcombank’s iT team is highly rated in the labor market and able to attract capable people from both technological and banking backgrounds to effectively handle these demands.

Though challenging, we take great pride in Techcombank’s ability to attract and retain talented employees in such a competitive market.

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INSPIRATION At Techcombank, customer satisfaction is the motivation and ambition for every service we provide. The key factors for customer satisfaction are our dedication to finding the right solutions and the understanding of our customers needs.

INSPIRATION

STRONG CORPORATE CULTURE

A N N UA L R E P O RT

Techcombank’s aspiration is to become a world-class organization that brings the greatest value to our community and society as a whole.

This aspiration is reflected in our mission, our core values, and the behavioral norms of every Techcomer. it is our strong corporate culture that sets us apart from our peers.

Through our culture, we are able to create outstanding products that benefit our national economy, our customers, and our Bank.

Customers First: Everything we do is only valuable if it brings benefit to our customers.

Accountability: Techcomers must be committed to overcoming difficulties in order to achieve success.

Innovation: We must continually make innovative improvements.

Techcombank’s Core Values

People Development: Investing in people gives us a competitive advantage and will lead us to greatness.

Teamwork: Exceptional performance is the result of teamwork and collaboration.

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INSPIRATION

Engagement, Sharing and Creating Outstanding Values

At Techcombank, on both branch and corporate levels, every function has a distinct role and every Techcomer has their own Key Result Areas (KRAs) and targets. Techcomers all share a common aspiration and vision.

Techcombank’s corporate culture requires each employee to understand that individual success comes from their own efforts as well as the support of the organization.

Techcombank’s corporate culture is consistently shared bank wide: across all levels, various functions, and between longtime and new employees.

Strong and Effective Corporate Culture

Since 2010, Techcombank has put in place a set of behavioral norms. This initiative has helped Techcomers to form a deeper understanding of the Bank’s core values through daily practice.

These behavioral norms are continually assessed through fixed criteria,

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An exceptionally talented individual can only excel for a short time if they do not fully embrace corporate culture.

The development of an individual is limited once their experience and capability has been used to the fullest potential. Contrary, an employee with

customer feedback, and cross evaluation throughout the Bank. This allows each Techcomer to know the best way they can make a meaningful contribution to the organization.

In 2016, our annual survey on corporate culture showed encouraging improvements across all criteria. Most notably, the message of “Customer First” was thoroughly embraced and practiced, with the score of 90% at the head office and nearly 100% at branches.

We believe that a strong and effective culture must also yield excellent business performance. In 2016, Techcombank was proudly placed at the top of commercial banks in terms of business performance, productivity,

great interpersonal and social skills will succeed through their ability to expand on the experience and capabilities of others, thereby bringing great success to an organization.

A strong corporate culture is a platform that brings competitive advantage to an organization. Techcombank understands that no matter how superior tangible assets such as our products, services, and procedures may be, there is always the risk of imitation; good employees can be headhunted by competitors. However, a strong and effective corporate culture helps develop outstanding products and inspires innovation that cannot be replicated.

return on equity (ROE), return on assets (ROA), and more.

Furthermore, many of Techcombank’s products are considered market champions and hold an impressive market share. An example of one our most recent market out-performers is our mortgage loan offered to affluent and mass affluent customers.

Our products are more than the combination of superior technology, processes, and policies, but also tailored innovation to meet the needs of our customers. Techcomers understand the financial needs of each individual customer and can therefore design relevant products and offer a more customized experience.

Simplicity and Persistence

Techcombank views building corporate culture the same as climbing a mountain. At first glance, it appears to be a fairly simple task, but in reality it requires relentless practice as the challenge increases in difficulty.

Therefore, continuous practice helps translate our core values into the daily action of every Techcomer.

With practice, these values become ingrained and we are able to provide the best service to our customers.

Techcombank holds an annual Corporate Culture Journey with numerous communication workshops for our employees. Throughout this Journey, the criteria is clearly outlined in a quantifiable and qualitative way to help incentivize improvements and measure compliance amongst branches.

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INSPIRATION

COMPLIANCE AND RISK AWARENESS Our compliance culture is nurtured, developed, and respected.

Every Techcomer willingly and fully complies with the bank’s regulations.

Moreover, compliance is part of the core values for all Techcombank employees and is reinforced through our strong code of ethics.

Inevitable Risks

The 2012-2016 non-performing loan (NPL) crisis emphasized the crucial role of risk management in the banking industry. Through this crisis, Techcombank learned that we must take a pro-active approach in managing risk.

Techcombank understands that risk management must be the backbone of our business. Therefore, we have implemented a conservative and disciplined Risk Management strategy focusing on customer insight,

A N N UA L R E P O RT

compliance, and innovation. We will be in a better position to protect ourselves if we can control the risks for our customers.

For this reason, Techcombank manages more than just our business risks, but also assumes an active role in advising and assisting customers to assess their own risks (i.e. investment plans, business cycles). In other words, the success of our customers means the success of our Bank.

Customer-Centric Risk Management

Thanks to our customer-centric approach in risk management, Techcombank is able to help customers take a proactive approach to risk while controlling cash flow, costs, sales, and revenue.

Here is a true story about Vingroup – one of the largest private enterprises in Vietnam. Vingroup is a greatly sought after client in the banking industry and has selected Techcombank to be their financial partner not due to price, but because of our high level of customer service.

Thanks to our customer-centric approach in risk management, Techcombank is able to help customers take a proactive approach to risk while controlling cash flow, costs, sales, and revenue. Vingroup is growing exponentially and driving Techcombank to the top with them.

Techcombank provides financial solutions not only to Vingroup, but also to Vingroup’s customers. For example, several of Vingroup’s construction projects are financed by Techcombank.

As part of our service, we provide useful advice regarding effective governance and risk management solutions. We also grant credit to customers in Vingroup’s ecosystem such as contractors, suppliers, and home buyers.

This customer-centric approach to risk management is in line with international standards and applied to Vingroup and all of our customers. Our strategic model is developed for different customer segments and takes into account the size of the business, its characteristics, and behaviors. We have found that customer-driven risk management has resulted in better performance, deeper insight, earlier risk identification, and balanced credit decisions.

At Techcombank, we have developed sound provisions accompanied with a set of flexible market and liquidity risk management methods.

Flexible governance facilitates capital management and business operation while offering a wide range of tailored products and services to customers.

Recently, select Techcombank products have been highly commended. Most notably, the market has particularly been impressed by our investmentlinked product that offers corporate bonds to individual customers.

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INSPIRATION

Compliance Culture

Techcombank’s strict compliance with legal requirements and international standards reinforces our efforts to build a transparent and credible system for our customers and partners.

Our compliance culture is nurtured, developed and respected. Every Techcomer willingly and fully complies with the Bank’s regulations. Moreover, compliance is part of the core values for all Techcombank employees and is reinforced through our strong code of ethics.

This code of ethics is the foundation of our risk management. Techcombank cultivates a healthy risk culture where every employee is a risk manager.

Understanding potential risks and managing them effectively is the only path to develop sustainability and achieve strategic objectives.

Techcombank is committed to the code of conducts for Techcomers:

»» Be Ethical. Always comply with the internal regulations of Techcombank and applicable laws. »» Be Honest. Always be truthful, objective, fair, and transparent. »» Be Professional. Ensure capability, caution, and accountability. »» Be Loyal. Always act in the best interest of the bank - NEVER make fraudulent claims or abuse your position. »» Be Proud. Act as brand ambassador of Techcombank - protect our assets, reputation, and interest.

To that end, Techcombank will continue to focus on the ‘people’ aspect of risk management so that every Techcomer can become an effective risk manager.

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Communication shall be conducted regularly and through various means to raise the awareness of all employees. We believe that understanding and controlling risk is essential to managing sustainable development and achieving strategic objectives.

Therefore, each employee should have a good knowledge of the Bank’s risk policies, legal regulations, and the consequences of non-compliance.

Communication on Risk Management

Training on Risk Management

For every Techcomer to become an effective risk manager (with special focus regarding sales staff) they must be regularly trained on matters of risk identification, assessment, and mitigation. In addition to classroom training, on-the-job training is very important as risk managers can directly work with customers and business units to assess, control, and identify risks.

Daily practice of Risk Management

All work performance evaluations should include risk management criteria. Sales force and supporting units are assessed annually based on various criteria including risk management.

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INSPIRATION

Continuous Innovation

Basel II

A N N UA L R E P O RT

We believe that in order to meet the needs of our customers, we must make continuous improvements to provide greater automation and suitable solutions. Data-driven automated risk management tools aid the Bank in better understanding our customers. Utilizing these tools allow us to better respond to individual needs, minimize turn-around time, reduce costs and identify risks in an early, proactive, and effective manner.

Techcombank aims to continue being a market leader regarding R&D in information technology and data. This drive is our basis for a sound and strong risk management culture.

Since 2012, Techcombank has piloted and partly implemented Basel II standards. The Bank has complied with SBV’s requirements including gap assessments and CAR (Capital Adequacy Ratio) calculations. In 2016, Techcombank has continued to assess internal capital requirements, foresee hypothetical scenarios, and fulfill disclosure obligations.

Our proactive self-assessment has helped us facilitate the improvement of risk management and the preparation of resources for the early adoption of Basel II. The full implementation of Basel II will assist the Bank in maintaining healthy capital, calculating risk costs, ensuring disclosure, and better preparing against external adversity.

THIS CODE OF ETHICS IS THE FOUNDATION OF OUR RISK MANAGEMENT. TECHCOMBANK CULTIVATES A HEALTHY RISK CULTURE WHERE EVERY EMPLOYEE IS A RISK MANAGER. UNDERSTANDING POTENTIAL RISKS AND MANAGING RISKS EFFECTIVELY IS THE ONLY PATH TO DEVELOP SUSTAINABILITY AND ACHIEVE STRATEGIC OBJECTIVES.

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OUTSTANDING SUCCESS 2016 marked a year of many accomplishments for Techcombank, including impressive financial growth rate indicators, low bad debt ratio, improved risk management, and prizes from reputable international financial institutions. Techcombank’s success affirms our journey to becoming the “Best Bank in Vietnam”. These achievements are huge stepping stones in Techcombank’s preparation to become listed on the Vietnam stock market.

OUTSTANDING

SUCCESS

TOTAL ASSETS at Year End 2016

235.363 235,363

VND BILLION

22.6% growth against the previous year

Techcombank is determined to move forward so as to avoid being left behind. 2016 business performance is the result of this mindset.

Techcombank has overcome challenges and continue to build a solid foundation for the developments of coming years.

PROFIT BEFORE TAX at Year End 2016

3.997 3,997

VND BILLION

up by 96.2% against the previous year, equivalent to 113% of the budget

OVERCOME CHALLENGES In 2016, the Banking Sector Restructuring Scheme yielded initial positive results, however much remains to be accomplished.

The first challenge is the complex impact of the global political economy, particularly Brexit and the US presidential election. These changes have impacted the projections of

Foreign Direct Investment (FDI) inflow, exchange rates, and financial market predictability. At home, the economy is recovering and beginning to grow steadily, but challenges still remain for many enterprises. As trade and integration are strengthened, domestic players are facing more competition from international rivals.

This impact is a reminder that the financial sector is very sensitive to macroeconomic growth. In 2016, the banking industry faced yet another challenging year as some banks continued to recover and restructure after the non-performing loan crisis of years past.

Despite these challenges, Techcombank continued to build upon our strong fundamentals and professionalism. This gave us the opportunity to gain better customer insight, prepare for challenges ahead, and adapt to global integration.

We believe that delaying innovation is not an option if we want to survive and thrive. Therefore, we are determined to move forward so as to avoid being left behind.

Techcombank’s 2016 business performance, illustrated below, is the result of this “can-do� mindset. We have overcome challenges and continue to build a solid foundation for the developments of the coming years.

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OUTSTANDING

SUCCESS

OUTSTANDING PERFORMANCE

6 6

Layers of “Customer Centricity” STRATEGIC TRANSFORMATION 2016 was the first year of our ambitious 5-year transformation to become the best bank in Vietnam by 2020. Through this transformation, we have shifted from a “Product-Centric” to a “Customer-Centric” strategy.

A Major Step Forward Techcombank’s new strategy may only change one word - “product” to “customer” - but actually entails a radical change of mindset. We are working hard to increase the average number of products per customer from 1.4 in 2016 to 4.0 by 2020.

In the past, with a “product-centric” approach, Techcombank tried to sell our products to all customer segments. However, this has now changed and our focus over the next five years

A N N UA L R E P O RT

is to design products and services that are tailored to the needs of our customers. To this end, Techcombank must establish streamlined policies/procedures and gain insight regarding the needs of each segment.

At Techcombank, “Customer-Centricity” is embedded in a consistent manner throughout our transformation plan - from business models to breakthrough business programs to strategic initiatives and to organizational structure.

Utilizing Customer Insight to Drive Business Decisions

Institutionalizing CustomerCentric Indicators

Performance Indicators and Incentives based on Customer-Centricity

Identifying and Owning the Customer Experience

The effective analysis of customer data and financial behavior allows Techcombank to develop insight concerning consumer demands. knowledge of client demographics (such as age, occupation, income, etc.) enables the bank to categorize customers into groups of similar demand and customize business programs for each segment.

Metrics impacting financial targets such as lead through rate (lTr) and customer satisfaction (csaT) are frequently tracked by Techcombank’s analysts and boosted to ensure customer-centricity at all levels and decisions of the Bank.

Customer satisfaction is improved through our branch optimization initiative. The initiative accesses satisfaction through a thorough review of post-sale activities, branch services, and credit management. The purpose of this assessment is to identify the drivers of customer satisfaction and develop processes to enhance the customer experience.

Techcombank is shifting performance indicators and business incentives to reflect customer insight. specifically, the bank’s key performance indicators (kpis) include not only financial metrics, but also the number of products per customer and customer satisfaction.

The typical customer journey at Techcombank is outlined and analyzed at every turn. each unit must be an owner of the customer experience along each stretch of the journey. This ownership approach helps to ensure the understanding and satisfaction of every customer’s journey.

In this regard, our credit process initiative shall focus on risk management during the customer journey to mitigate risk and loss for the bank. This enhances the value for customers through clearly defined indicators and more consistent input and output.

Reinforcing the Customer-Centric Mindset

Techcombank understands and believes that customer-centricity is vital in bringing value to our customers and our bank. after the initial year of shifting our strategic focus, each employee transitioned their business view - from selling available products, to selling what customers need and offering better value through product bundles. This outlook is practiced in the daily activities of every leader and employee: from training and developing processes, to analyzing scenarios in order to work more effectively with customers.

Managing the Customer Journey through Customer Insight

Techcombank aims to develop customer-centric mechanisms (including policies, rewards, training programs, etc.) in order to better manage the customer journey and improve customer retention. Through these developments, we place emphasis on data-driven decision-making to personalize business programs for different focus segments and sub-segments. This requires us to effectively execute, operate, analyze and develop results across performance indicators.

2016 was the first year of Techcombank’s Customer-Centric business strategy. Our initial results were encouraging as the Bank hit both revenue and profit targets. These positive results and continued transformation through 2017 and beyond has reinforced the confidence in our strategy and provided us with a firm foundation to truly become the best bank in Vietnam.

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POWERFUL FIGURES

Total Assets (VND billion)

159,010

235,363

200,000

127,387

191,994

94,543

98,004 2014

100,000

2013

150,000

94,207

150,000

2012

175,902

158,897

179,934

250,000

200,000

Credit Growth (VND billion)

100,000

A N N UA L R E P O RT

2016

2016

2015

2014

2013

2012

Techcombank has maintained an impressive asset growth rate for the past five years with a Compound Annual Growth Rate (CARG) of 6.9%. Our total assets as of 31 December 2016 reached VND 235,363 billion - a 22.6% growth against the previous year.

2015

50,000

50,000

At Year End 2016, Techcombank achieved robust credit growth of 24.82%, which was within SBV regulations.

The lending balance grew by 27.13% compared to the end of 2015; whereas retail lending continued to be the largest proportion of total lending balance reaching 43%.

Return on Equity (%)

In 2016, Techcombank experienced a major gain in profit before tax (PBT) up by 96.2% against the previous year, reaching VND 3,997 billion (equivalent to 113% of the budget). Over the past five years, the Bank’s average profit before tax growth has increased 40.8%.

1.49 9.73

2015

0.39 2013

2014

0.42 2016

2015

2012

0.63

7.40

0.86

1

4.77 2014

2012

2016

2015

2014

5

2013

5.58

1,417

10

878 2013

2012

1,018

2,000

1,000

2

15

2,037

3,000

20

2016

4,000

Return on Assets (%)

17.50

3,997

Profit before Tax (VND billion)

Profitability ratios of Return on Equity (ROE) and Return on Assets (ROA) were 17.5% and 1.5% respectively. These figures illustrate impressive growth in 2016, nearly double the returns of 2015. This positive trajectory marks a new peak for Techcombank’s five-year growth.

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MANAGING BALANCE SHEET & LIQUIDITY RISK

Balance Sheet Management

Throughout 2016, Techcombank reported healthy and sustainable balance sheet growth. As of 31 December 2016, the Bank’s total assets was more than VND 235,363 billion.

This figure indicates a VND 43.3 trillion increase against 31 December 2015.

Liquid Assets (VND billion)

38,596

VND billion

TOTAL LIQUID ASSETS as of 31 December 2016

Market-1 Mobilization (VND billion) Demand and Margin Deposits Term Deposits Valuable Papers Issued Total

A N N UA L R E P O RT

Moreover, Techcombank maintained a high liquidity level (retention of assets that can be converted into cash quickly without affecting the price) of VND 38,596 billion, accounting for 16.4% of total assets.

31/12/2016

31/12/2015

Variance

Cash, Gold, Gemstones

2,957

2,754

203

Balance with the SBV

2,534

2,677

-143

Government Bonds/ Government Guaranteed Bonds

33,105

26,749

6,356

Total

38,596

32,180

6,416

Total Market-1 Mobilization (from individuals and organizations) increased by 22.3% against the end of 2015. This accounted for 78.1% of total assets. Demand deposits increased

by VND 10,059 billion, raising the share of demand deposit/total deposit to 21.4% (31 December 2016) from 19.5% (31 December 2015). Customer deposits are regularly maintained at banks.

Balance

Share of total deposits

31/12/2016

31/12/2015

Movements

31/12/2016

31/12/2015

39,396

29,337

10,059

21.4%

19.5%

134,053

112,903

21,150

72.9%

75.1%

10,415

8,134

2,281

5.7%

5.4%

183,864

150,374

33,490

100.0%

100.0%

As of 31 December 2016, Techcombank’s owner’s equity reached VND 19,586 billion, a growth of 10.2% within the past five years.

Capital Management

19,586

VND billion

OWNER’S EQUITY as of 31 December 2016 a growth of 10.2% within the past five years.

Liquidity Management

In order to manage liquidity risk, Techcombank has established internal policies and regulations including: liquidity risk management, measurement, monitoring and notification.

The consolidated Capital Adequacy Ratio (CAR) as at 31 December 2016 was 13.1%, 4.1% higher than the 9% regulatory ratio of the State Bank of Vietnam.

Techcombank managed to maintain

Audit and Risk Committee (ARCO) issues the risk appetite framework for the entire bank.

Asset-Liability Committee (ALCO) is responsible for monitoring and managing liquidity, ensuring risk appetite compliance, and reviewing prescribed limitations as advised by ARCO. Additionally, liquidity stress testing is conducted monthly concerning idiosyncratic and market scenarios.

Testing ensures that cash flow

Liquidity Ratios

a high Capital Adequacy Ratio (CAR) while sustaining a steady Compound Annual Growth Rate (CARG) of 6.9% for the past five years. This stability was made possible as the Bank did not pay dividends, enabling the Bank to re-invest 100% of its profit after tax (PAT) until 2015 for future development.

Techcombank is now ready to adopt capital ratios under Basel II requirements in accordance with the State Bank of Vietnam’s proposed road map.

forecasts are provided within a certain period and under the assumption of (minimal) liquidity stress such as massive deposit withdrawal and limited access to interbank fund. The bank also manages a Liquidity Contingency Plan (LCP) to respond timely to stress scenarios and prevent liquidity crises.

Techcombank ensures compliance with regulatory liquidity ratios by the State Bank of Vietnam as prescribed in Circular No. 36/2014/TT-NHNN, amended by Circular No. 06/2016/ TTNHNN, (see table below).

Limit

31/12/2016

31/12/2015

Reserve Ratio

>= 10%

19.07%

17.12%

Liquidity Coverage Ratio

>= 50%

77.54%

73.52%

Loan to Deposit Ratio

>= 10%

28.08%

32.13%

Short-Term Fund for Medium-to-Long-Term Loans

<=60%

41.51%

45.91%

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LENDING AND DEPOSIT

the Bank will suffer from losses; hence overall operation and profits were better protected.

As of 31 December 2016, Techcombank’s total outstanding loans reached VND 142,616 billion - an increase of 27.13% against 2015.

Lending

Lending (VND Trillion)

+27.1%

31/12/2016

142.6 112.2

43.2%

44.7%

Individual Customers

15.8%

Small and Medium Enterprises

39.5% 2015

Corporate Customers

During 2016, Techcombank made impressive debt recovery efforts to settle overdue debts sold to Vietnam Asset Management Company (VAMC) in exchange for VAMC special bonds. As of 31 December 2016, the special bond balance fell to VND 2,922 billion. This balance decreased 21.9% compared to the end of the previous year. The bank plans to settle all VAMC bonds in 2017.

Despite a fast-growing loan balance, Techcombank managed to keep delinquency under control with (bucket 3-5) debt ratio falling to 1.57% in 2016, down from 1.67% in 2015.

Techcombank’s ratio of provision/ overdue debt (bucket 3-5) increased to 66.6% in 2016 – the higher the ratio indicates a decreased likelihood that

VND billion

Proportion

VND billion

Proportion

138,204

96.91%

108,566

96.77%

2,166

1.52%

1,751

1.56%

Bucket 3 - Substandard

397

0.28%

309

0.28%

Bucket 4 - Doubtful

475

0.33%

538

0.48%

Bucket 5 - Loss

1,375

0.96%

1,017

0.91%

VAMC Bonds

2,922

Bucket 1 – Current Bucket 2 – Special mentioned

12.9%

43.9%

2016

TOTAL OUTSTANDING LOANS as at 31 December 2016

A N N UA L R E P O RT

31/12/2015

3,742

142,616

VND billion an increase of 27.13% against 2015.

Deposit (VND Trillion)

Deposit

Deposit Structure (VND Trillion)

+21.9%

173.4 173.4

142.2

142.2

66%

11% 23% 2015

173,449

Individual Customers Small and Medium Enterprises Corporate Customers

64% 79%

TOTAL DEPOSIT BALANCE as at 31 December 2016 an increase of 21.94% compared to the end of 2015.

77%

Demand deposit

23%

11% 25%

21%

2016

2015

The bank’s total deposit balance grew steadily to VND 173,449 billion, an increase of 21.94% compared to the end of 2015.

VND billion

Term deposit

By Year-End 2016, deposits of individual customers’ sustained a high proportion of 64% of total deposits; this balance was stable compared with the low cost of funds. In addition, Techcombank offered comprehensive service packages for enterprises, encouraging them to use Techcombank as their primary bank for transactions; this assisted in raising the enterprise deposit ratio from 34% to 36%.

2016

One of the most important goals of Techcombank’s 5-year strategy is to increase the demand deposit ratio in the total deposit balance. Accomplishing this increase will improve the Net Interest Margin (NIM) of the Bank.

In 2016, Techcombank made the first attempt in achieving this goal and witnessed an increase of 34.29% of bank-wide demand deposits. This increase almost doubled the growth of term deposits, thus improving the demand deposit ratio in Techcombank’s total deposit to 22.71% (up by 2.1% as compared with 2015).

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OPERATING INCOME

The total operating income of Techcombank in 2016 reached VND 11,919 billion, an increase of 27.6% against the previous year - attributed to a leap of 77.3% in non-interest income.

32%

23%

77%

68%

Techcombankâ&#x20AC;&#x2122;s income structure witnessed a decrease in interest income from 77% to 68% and rise of non-interest income from 23% in 2015 to 32% in 2016.

The shift from interest income to noninterest income represents a major step forward in Techcombankâ&#x20AC;&#x2122;s 5-year strategic goals; non-interest income is non-funded and poses less risk bringing sustainable profit for the Bank.

Net Interest Income Non-interest income

11,919

VND billion

TOTAL OPERATING INCOME OF TECHCOMBANK IN 2016 an increase of 27.6% against the previous year.

Operating Income

by Businesses

2015

VND billion

Proportion

VND billion

Proportion

Individual Customers

4,552

38%

3,412

37%

Small and Medium Enterprises

1,572

13%

1,376

15%

Corporate Customers

2,490

21%

1,907

20%

Treasury & Financial Markets

1,740

15%

1,326

14%

Investment Banking

626

5%

482

5%

Others

939

8%

841

9%

Total

A N N UA L R E P O RT

2016

11,919

9,344

During 2016, nearly 60% of Techcombank’s total operating income was contributed by retail and large corporate customers.

The Personal Finance Service (PFS) Division continued to be the best performer in terms of operating income growth, reaching 33% in 2016; in which, Net Fee Income (NII) was VND 1,161 billion, a growth of 86%. This achievement enabled retail banking to enhance their contribution to the Bank’s total revenue from 37% in 2015 to 38% in 2016.

Moreover, Techcombank’s Treasury and Markets Division managed to utilize the favorable conditions of the market to boost income growth by 31% against 2015, becoming the third highest income division of the Bank.

The main components of Techcombank’s total Net Interest Income (NII) include: income from lending, debt security investment, and deposit interest.

Net Interest Income

8,142

The Wholesale Baking (WB) Division grew by 31% in operating income against the previous year and maintained a ratio of 21% for the total operating income of the Bank.

In 2016, lending interest income increased by VND 2,824 billion, equivalent to 31%.

Interest expense on deposit also increased by VND 1,171 billion, equivalent to 21.1%.

VND billion

NET INTEREST INCOME by the end of 2016.

Focusing on lending to individual customers: Shifting the outstanding balance structure from wholesale banking to high-quality retail banking customers to diversify risks.

By the end of 2016, Techcombank reached VND 8,142 billion of Net Interest Income (NII), compared with VND 7,214 billion during 2015. The Bank also improved Net Interest Margin (NIM) from 3.8% in 2015 to 4.06% in 2016, representing an increased returns on.

Optimizing deposits: Through increasing Loan to Deposit ratio from 70.91% to 71.77% at the end of 2016.

Growing demand deposits: Term deposits incur a much higher interest rate than demand deposits. This means the higher the demand deposit proportion, the lower the Bank’s funding cost – leading to higher interest income. In fact, 2016 performance followed this objective and experienced growth of 34.3% in outstanding balance and a rise in demand deposit ratio from 20.06% to 22.7%.

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In 2016, Techcombank achieved VND 1,956 billion in net interest income, an increase of VND 684 billion (equivalent to 53.7%) against 2015. Notably, insurance commission generated a revenue of VND 337 billion, a 9-fold increase against 2015 revenue. Overall, insurance commission/ total fee income ratio was up from 2.1% in 2015 to 13.2% in 2016, and has

Non-Interest Income

1,956

Fee Income from Services

2016 Proportion

VND billion

Proportion

1,270

49.6%

1,126

62.0%

2

0.1%

4

0.2%

Entrustment and Agent

61

2.4%

31

1.7%

Advisory

76

3.0%

211

11.6%

Insurance Commission

337

13.2%

38

2.1%

Issuance Underwriting

337

13.2%

86

4.8%

Others

476

18.5%

320

17.6%

2,559

100.0%

1,815

100.0%

Cash & Vault

2,559 1,815

2,500

2,000

2015

VND billion

Cash and Trade

3,000

In addition, revenue from underwriting services increased by VND 250 billion, which is a factor that helped increase net fee income, thus raising the proportion of this fee from 4.8% in 2015 to 13.2% in 2016.

VND billion

NET INTEREST INCOME equivalent to 53.7% against 2015.

Total fee income from services (VND billion)

beenexpected to continue to increase in subsequent years.

Total fee income

1,500

1,000

A N N UA L R E P O RT

2016

2015

500

In spite of a lower growth rate (12.9% in 2016), fee income from cash & trade service still accounts for the largest proportion (49.6%) of the Bankâ&#x20AC;&#x2122;s total fee income.

2016 also yielded success for Techcombankâ&#x20AC;&#x2122;s foreign exchange and securities trading with increased revenue of VND 432 billion (equivalent to 225%) and VND 455 billion (equivalent to 301%), respectively, based on favorable market conditions.

COST MANAGEMENT

In 2016, Techcombank continued to strengthen cost control to optimize and improve cost efficiency, enhance productivity, and increase profit.

Total operating costs increased by 15.82%, against those of 2015, while income growth was up by 27.56%. As a result, the Cost-Income Ratio (CIR) fell to 35.75% in 2016 from 39.37% in 2015.

Additionally, Techcombank experienced increased investment in human resource and business promotion; these expense increases were expected as Techcombank gave priority to these investments. Other operating costs were maintained at a reasonable level in line with the Bankâ&#x20AC;&#x2122;s long-term development strategy.

31/12/2016

31/12/2015

Variance

VND billion

Proportion

VND billion

Proportion

VND billion

%

2,316

54.35%

1,898

51.59%

418

22.01%

Rental Costs/Depreciation (i.e. office, assets and equipment)

963

22.60%

946

25.70%

17

1.82%

Marketing and Promotion Costs

253

5.94%

180

4.90%

73

40.43%

Deposit Insurance

135

3.16%

124

3.37%

11

8.87%

Travel Allowance

60

1.41%

54

1.47%

6

11.60%

Training and Coaching Costs

29

0.67%

25

0.67%

4

16.06%

Workshop and Seminar Costs

41

0.96%

22

0.60%

19

87.20%

464

10.90%

431

11.70%

34

7.87%

Total Costs

4,261

100%

3,679

100%

582

15.82%

Average Number of Employees

7,702

7,518

184

2.45%

Annual Income/Employee

1.55

1.24

0.30

24.51%

Annual Cost/Employee

0.55

0.49

0.06

13.06%

35.75%

39.37%

Salary and Relevant Costs

Other

Cost/Income Ratio (CIR) (%)

-3.62%

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In 2016, staff costs increased by 22% against that of the previous year and account for 54.35% of total operating costs.

This rise is partially attributed to an increase in the average number of employees by 184 persons, equivalent to a 2.45% increase.

Furthermore, the income/employee ratio increased by 24.51% while the cost/employee ratio rose by 13.06%; Illustrating a 2.8-fold increase against cost/employee ratio, while it was a 2.54-fold increase in 2015.

HR strategy and talent retention policies have also been bolstered. The Bank has initiated programs for high performers, direct sales, and supporting teams so as to improve service quality. As a result, total training and coaching costs increased by 16%.

Moreover, the Bank has given greater focus on corporate culture and engagement activities for employees. For example, departments implemented various team building activities.

The Bank also, as a thank you to employees and their families, extended services to families of Techcomers in the form of complimentary corporate buses that drove to and from the hometowns of Techcomers during Tet Holiday.

Marketing and promotion costs increased by 40.43%, focusing on individual customers and enabling individual customers to conduct free-of-charge on line transactions (Zero fee, from September, 2016). The Bank also promoted different programs for Tet, summer, and public holidays which helped raise revenue from individual customers by 36%. Brand

A N N UA L R E P O RT

communication, advertising, promotions and customer care also contributed to the income growth for the Bank.

Costs that grew due to income growth include: Deposit Insurance increased by 8.87% against a 21.94% growth in Deposit Revenue, and travel allowance increased by 11.6%.

Most management costs were kept stable, while few costs were slightly up due to market fluctuations in areas of: security, utilities, parking, building management, location referral, lease management (branch), office expenses, etc.

BEST in Vietnam 2016 BANK

by FinanceAsia

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WELCOMING 2017

IN 2016, TECHCOMBANK WAS HONORED TO RECEIVE VARIOUS INTERNATIONAL AND DOMESTIC AWARDS. WE WERE RECOGNIZED WITH THE FOLLOWING AWARDS THANKS TO OUR OUTSTANDING BUSINESS PERFORMANCE AND CSR ACTIVITIES.

A N N UA L R E P O RT

Best Mobile Banking Project in Vietnam

Best Treasury Management Project in Vietnam

The Asian Banker (The Asian Banker Journal), a member of the Asian Banker Company (Singapore) is a reputable magazine in Pacific Asia.

Annually, the Magazine votes on banking institutions that demonstrate excellence in services such as trade finance, cash management, payment, etc. Financial institutions awarded

by The Asian Banker are reputable, credible, and possess outstanding service quality. An award by The Asian Banker is an honor for any regional bank.

Best Bank in Vietnam 2016

Best Local Trade Finance in Vietnam 2016

Best Bond House in Vietnam 2016

Best Local Cash Management Bank in 2016

Platinum Award: Best Local Bank

Home Equity Loan and Mortgage Loan of the Year

FinanceAsia, one of the most reputable finance publications in Asia, informing readers of current market trends and the latest developments of the financial market throughout Asia. Target audiences of the magazine include: Chairman of the Board, Chief Executive Officer, and Chief Finance Officer of financial companies/organizations; financial experts, investors, and leaders of governmental agencies in developing countries; and major financial markets in Europe, America, and especially Asia.

Asian Banking and Finance was established in 2008 and a leading magazine and member of Charlton Media Group (CMG). CMG is one of the largest publishers in Asia with offices in Hong Kong, Singapore and Philippines. The Magazine has more than 160,000 subscribers and owns various regionally reputable economic publications such as Asian Power, Investment Asian, Asian Banking and Finance, etc. The Magazine provides banking awards on an annual basis to banks with notable achievements by region and by country.

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HR Award 2016 for “The best compensation and rewards policies”

Techcombank was voted in TOP 2 Best Place to Work in the field of Banking and Finance

by Anphabe in association with Nielsen Global Market Research

This award was assessed through international professional methods from the Singapore HR Institute, launched by the Labour and Society Newspaper and Talentnet Corporation, and sponsored by The Ministry of Labour, Invalids and Social Affairs (MOLISA).

According to the survey - “Vietnam’s Best Workplace 2016”, announced on March 22, 2017 - Vietnam Technological and Commercial Joint Stock Bank (Techcombank) was voted in the TOP 2 Best Places of Work in Vietnam for Banking and Finance, and ranked 18th in the Top 100 Best Workplaces of Vietnam, up from 29th in 2015.

Vietnam’s Best Workplace Survey is the first and most professional survey of Employer Branding in Vietnam and is conducted annually by leading recruitment solution’s company, Anphabe, in association with Nielsen Global Market Research.

A N N UA L R E P O RT

CORPORATE GOVERNANCE

With the ambition of becoming the Best Bank in Vietnam, Techcombank’s leadership not only pays attention to business development for short-term income and profit growth, but also focuses on strengthening governance to comply with statutory requirements and international practices. The ultimate goal of our corporate governance practices includes efficient and transparent operations, sound risk control, sustainable long-term value, and attraction of more capital to finance the Bank’s growth.

Techcombank’s strategic objectives for 2016 - 2020 include growing business performance on the basis of transparency.

Corporate Governance plays a critical role in delivering the Bank’s strategic objectives and securing sustainable development.

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CORPORATE

GOVERNANCE

TECHCOMBANK’S CORPORATE GOVERNANCE STRUCTURE AND FRAMEWORK

Techcombank is proud of our strong governance structure and framework. The overall plan supports our Board of Directors and Board of Management in achieving longterm objectives towards sustainable values. Through governance, Techcombank aims to build and maintain the trust of investors and the general public.

Techcombank’s structure and framework improves the role of stakeholders through corporate governance, promoting transparency, improving efficiency, and clearly defining

A N N UA L R E P O RT

responsibilities of management, supervision, execution, and operation teams to protect customers’ interests.

In addition, the development of an efficient governance framework is important in Techcombank’s strategy and development. Proper governance helps to lead an organization by providing standards for the Board of Directors and outlining their accountability to the Bank and shareholders.

GOVERNANCE STRUCTURE

Techcombank’s governance structure is divided into three layers: 1. Board of Directors and Committees under the Board of Directors (direction/governance layer); 2. Chief Executive Officer and Committees under the management of the Chief Executive Officer (management layer); 3. Execution Committees under the management of the Chief Executive Officer (execution layer).

The Bank outlines collective authorization mechanisms to Committees under the Board of Directors, as well as from the Board of Directors to the Chief Executive Officer.

The Board of Directors appoints individuals, or authorizes the Chief Executive Officer to undertake or re-authorize tasks with detailed and clear standards and criteria. This structure helps ensure the smooth and effective execution and management of Techcombank’s day-to-day business activities.

The Chief Executive Officer delegates authority to Board of Management and committees under his span of control. This ensures effective management and support divisions in a safe, timely and smooth manner.

In general, Techcombank’s current governance structure has clearly stipulated the roles and responsibilities of divisions and units, ensuring strategy direction and efficient supervision of the Bank’s operations. Simultaneously, clear authorization mechanisms correspond to each layer (governance, management and execution) to promote the autonomy of divisions and risk control in business.

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CORPORATE

GOVERNANCE

GOVERNANCE STRUCTURE

ANNUAL GENERAL SHAREHOLDERSâ&#x20AC;&#x2122; MEETING

BOARD OF DIRECTORS (BOD)

Transformation Committee Project Management Office (PMO)

CHIEF EXECUTIVE OFFICER

Strategic Initiatives Steering Committee

Initiative Director

BOM

Business Divisions

A N N UA L R E P O RT

Supporting Divisions

Subsidiaries

Supervisory Board

Internal Audit

DIRECTION/GOVERNANCE BOD Standing Committee

Nomination & Remuneration Committee

Capital/assets investment Financial investment

Audit & Risk Committee Risk appetite framework General Director

MANAGEMENT Product Committee

Investment Committee

Risk Committee

EXECUTION ALCO

Management

Credit Risk & Debt Settlement Committee

CORM & Legal Committee

Report

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CORPORATE

GOVERNANCE

As an important component in bank governance, the organization structure enables Techcombank to have a consistent overall objective, mission, and strategy to achieve optimal business performance. Additionally, the organization structure makes sure that objectives of each function are well aligned and include a clear road map towards common objectives.

Techcombank’s 2016 “customer-centric” strategy, has been implemented into the organizational structure and fine-tuned in accordance with the new business model. The business model separates divisions into four groups with distinct roles, responsibilities, and mechanisms for collaboration to best serve customers.

A N N UA L R E P O RT

“CUSTOMERCENTRIC” ORGANIZATION STRUCTURE

Personal Financial Services Division, Business Banking Division and Wholesale Banking Division are responsible for the business development and direction through the formulation of strategy and business models. This provides the customer selection criteria in order to meet customersâ&#x20AC;&#x2122; financial demands.

Treasury & Financial Markets Division are responsible for collaboration with the above business divisions to tailor products and product packages for each segment/ sub-segment to best meet customersâ&#x20AC;&#x2122; financial needs.

Sales & Distribution Division, Risk Management Division, Technology & Operations Division provide services, monitor and support to business divisions.

Strategy and Corporate Development Division, Compliance, Operational Risk Management and Legal Division, Human Resources Management Division, Finance & Planning Division, Corporate Services Division and Marketing Division have responsibility to support, advise and provide resources and/or information to business divisions for smooth and efficient operation.

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CORPORATE GOVERNANCE

BOARD OF DIRECTORS

Mr. Do Tuan Anh Vice chairman Cum Deputy CEO

Mr. Ho Hung Anh Chairman

Mr. Lee Boon Huat Member

Mr. Do Tuan Anh has been the vice chairman of the BOD and Deputy CEO of Techcombank since June 2015, having previously served as a member of Techcombank’s BOD from December 2012. Prior to his appointment to the BOD, Mr. Do Tuan Anh held various management positions at the State Bank of Vietnam including the Deputy Director of General International Cooperation Department and the Director of the Banking Supervision Agency. Moreover, he has held key positions at Techcombank, including Senior Assistant to the BOD and Head of the Strategy and Corporate Development Division.

Mr. Ho Hung Anh has been the Chairman of Techcombank’s Board of Directors (BOD) since May 2008. Prior to his appointment as chairman, Mr. Ho Hung Anh served as a member of Techcombank’s BOD since 2004. His professional career has also included several years of executive experience at large organizations, like Masan.

Mr. Lee Boon Huat has been a member of Techcombank’s BOD since May 2014. Previous to this position, he was Techcombank’s Independent Director of the BOD from December 2012 to April 2014. Before joining Techcombank, Mr. Lee Boon Huat worked with several international organizations, including: the Monetary Authority of Singapore, HSBC, Canadian Imperial Bank of Commerce, Chemical Bank, and Standard Chartered Bank.

Mr. Do Tuan Anh holds a master’s degree in wealth management from Singapore Management University, as well as a bachelor’s degree in linguistics from Hanoi University.

A N N UA L R E P O RT

Mr. Ho Hung Anh holds a degree in electrical engineering from the Kiev Polytechnic Institute in the Ukraine.

He holds a bachelor’s degree in business accounting from the Western Australian Institute of Technology (now Curtin University).

Mr. Nguyen Dang Quang First Vice Chairman

Mr. Nguyen Thieu Quang Vice Chairman

Mr. Nguyen Doan Hung Independent member

Mr. Nguyen Canh Son Vice Chairman

Mr. Nguyen Dang Quang has served as the First Vice Chairman of the Techcombank’s BOD since April 2016. Previously, he also held positions on Techcombank’s BOD since May, 2014 to March, 2016 and the first vice chairman from May 2008 to April 2014. In addition, Mr. Nguyen Dang Quang has more than 20 years of executive experience, including membership on the Board of Directors for Masan and key management positions at Techcombank since 1995.

Mr. Nguyen Thieu Quang has been the Vice Chairman of Techcombank’s BOD since May 2008 and has served on the BOD since 1999. Mr. Nguyen Thieu Quang brings a wealth of executive experience to Techcombank having held positions with Masan, Vinaconex, and Senco.

Mr. Nguyen Doan Hung has been Techcombank’s Independent Director of the BOD since May 2014.

He has extensive management experience with the State Bank of Vietnam, having held positions that include: Head of the Capital Market Research and Development Department, Head of the Governor’s Office, and Head of the Foreign Exchange Management Department.

He also served as the Deputy Executive Director of the World Bank and Vice Chairman of the State Securities Commission of Vietnam.

Mr. Nguyen Canh Son has been the Vice Chairman of Techcombank’s BOD since April 2009 and has served on the BOD since May 2008.

Prior to joining Techcombank, Mr. Nguyen Canh Son had more than 20 years’ executive experience having held past positions as the Chairman of Eurowindow Holding and Board of Directors for T&M Invest Vietnam.

Mr. Nguyen Dang Quang holds a doctorate from the National Academy of Sciences of Belarus and an MBA from the Plekhanov Russian University of Economics.

In addition, he holds a degree in civil engineering from Donetsk Polytechnic Institute in the Ukraine (now Donetsk National Technical University).

He holds a bachelor’s degree in language from Hanoi University (Vietnam) and a master’s in financial management from the University of London (England).

He holds a degree in civil engineering from the Moscow Institute of Civil Engineering in Russia (now Moscow State University of Civil Engineering).

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85

CORPORATE GOVERNANCE

BOARD OF MANAGEMENT 1

5

2

3

6

4

7

1. Mr. Nguyen Le Quoc Anh Chief Executive Officer

2. Mr. Ngo Hoang Ha Deputy Head in charge of Finance a nd Planning Division

3. Mr. Phung Quang Hung Head of Sales and Distribution Division

5. Ms. Nguyen Thi Van Anh Head of Marketing Division

6. Ms. Pham Vu Minh Dan (Alexis) Chief Human Resource Officer

7. Mrs. Tran Thi Minh Lan Deputy Head of Strategy and Corporate Development Division

A N N UA L R E P O RT

4. Mr. Chester Gorski Chief Technology and Operations Officer

8

9

13

10

11

14

12

15

8. Mr. Do Tuan Anh Vice Chairman cum Deputy Chief Executive Officer

9. Mr. Phan Thanh Son Head of Treasury and Financial Markets Division

10. Mr. Le Ba Dung Chief Risk Officer

11. Ms. Le Thi Bich Phuong Head of Personal Financial Services Division

12. Mr. Nguyen Anh Tuan Deputy Head of Business Banking Division

13. Mr. Nguyen Canh Vinh Head of Wholesale Banking Division

14. Mr. Nguyen Xuan Minh Head of Investment Banking Division

15. Mr. Pham Quang Thang Head of Compliance, Operational Risk Management and Legal Division

86

87

CORPORATE GOVERNANCE

BOARD OF MANAGEMENT

Mr. Nguyen Le Quoc Chief Executive Officer

Anh

Mr. Nguyen Le Quoc Anh was appointed Chief Executive Officer in September 2016. Before this appointment, from May 2014 he led Techcombank as the Head of Strategy & Corporate Development Division. Prior to joining Techcombank, Mr. Nguyen Le Quoc Anh had almost 20 years of experience and held a variety of senior management positions in banking, financial services, telecommunications and advisory firms including: Wells Fargo, Nissan USA, Fortress Investment Group, T-Mobile, and McKinsey & Company.

He earned a Ph.D. in Nuclear Engineering from Purdue University (USA) as well as an M.S. in Econometrics from California State University (USA).

Mr. Ngo Hoang Ha Deputy Head in charge of Finance and Planning Division Mr. Ngo Hoang Ha was appointed as Techcombank’s Deputy Head of Finance and Planning Division in September 2016. He has had more than five years’ experience at Techcombank and more than ten years’ experience in Audit at Pricewaterhouse Coopers.

He holds an MBA from Sydney University (Australia).

Mr. Phung Quang Hung Head of Sales and Distribution Division Mr. Phung Quang Hung became the Head of Sales and Distribution Division in November 2014. Prior to this appointment, Mr. Phung Quang Hung led as Techcombank’s Head of Chief Technology and Operations Officer from September 2010. In addition to his experience at Techcombank, he has 15 years of management experience at international banks, including previous positions, such as: Head of IT and Operations at ABN AMRO Vietnam and Business Partner at the National Australia Bank, London.

Mr. Phung Quang Hung has a master’s degree in international business from Washington State University (USA) and a bachelor’s degree in computer science from the Hanoi University of Science and Technology (Vietnam).

A N N UA L R E P O RT

Mr. Chester Gorski Chief Technology and Operations Officer Mr. Gorski has led the Operations & Technology Division at Techcombank since February, 2016. He has significant executive experience in banking, financial institutions, and management consulting organizations. His career includes senior leadership roles at Wells Fargo, Aon, and other financial institutions, as well as consulting roles at PwC and McKinsey & Company where he focused on financial institutions.

Mr. Gorski earned an MBA from the University of Chicago (USA).

Ms. Nguyen Thi Van Anh Head of Marketing Division Ms. Nguyen Thi Van Anh joined Techcombank in November 2014, she was appointed Techcombank’s Head of Marketing Division in June 2016. Prior to joining Techcombank, Ms. Nguyen Thi Van Anh served as the Head of Marketing at major local and international corporations, including Vingroup, BP Vietnam, and British American Tobacco (BAT).

She holds an MBA from University of Westminster (UK) and a master’s degree in Marketing from Swinburne University of Technology (Australia).

Ms. Pham Vu Minh Dan (Alexis) Chief Human Resource Officer Ms. Pham Vu Minh Dan (Alexis) was appointed as the Head of Human Resources Division at Techcombank in January 2015. Prior to this, she had more than 10 years’ working experience in human resource management at British American Tobacco (BAT). During her tenure with BAT, she was appointed to various senior HR roles in Vietnam and Asia, including Regional Head of Talent, for the Asia Pacific region.

She holds a bachelor’s degree in business from Nanyang Technological University in Singapore.

88

89

CORPORATE GOVERNANCE

BOARD OF MANAGEMENT

Ms. Tran Thi Minh Lan Deputy Head of Strategy and Corporate Development Division Ms. Tran Thi Minh Lan was appointed as Techcombank’s Head of Transformation Program and the Deputy Head of Strategy and Corporate Development in December 2015. In these key roles, she has been responsible for building and implementing the overall strategy of the bank. She has had more than 14 years’ experience in banking and has held senior positions at Techcombank such as Head of Credit Supervision and Deputy Head of Risk Management Division.

Ms. Tran Thi Minh Lan has a master’s degree in Financial and Accounting Management from the University of Berlin (Germany) and a bachelor’s degree in Finance and Banking from the Banking Academy (Vietnam).

Mr. Do Tuan Anh Vice Chairman cum Deputy Chief Executive Officer Mr. Do Tuan Anh has been the vice chairman of the BOD and Deputy CEO of Techcombank since June 2015. Additionally, he served as a member of Techcombank’s BOD since December 2012. Prior to his appointment to the BOD, Mr. Do Tuan Anh held various management positions at the State Bank of Vietnam, including Deputy Director of General International Cooperation Department, Director of the Banking Supervision Agency. He has held key positions at Techcombank, including Senior Assistant to the BOD and Head of the Strategy and Corporate Development Division.

Mr. Do Tuan Anh holds a master’s degree in wealth management from Singapore Management University as well as a bachelor’s degree in linguistics from Hanoi University (Vietnam).

Mr. Phan Thanh Son Head of Treasury and Financial Markets Division Mr. Phan Thanh Son joined Techcombank as the head of the Treasury and Financial Markets Division in January 2011. Prior to this appointment, he held various positions in Global Markets Divisions at Standard Chartered Bank (Vietnam), Citibank (Vietnam), and Citigroup Global Markets Ltd. (Hong Kong). Before joining Techcombank, he was the Deputy Chief Executive Officer at TienPhong Bank.

Mr. Phan holds a master’s degree in economics from the National Economics University, Hanoi.

A N N UA L R E P O RT

Mr. Le Ba Dung Chief Risk Officer Mr. Le Ba Dung was appointed head of Techcombank’s Risk Management Division in September 2015.

He is also a member of the bank’s Audit and Risk Committee (ARCO). Moreover, Mr. Le Ba Dung has nearly 25 years experience in finance and banking. Prior to joining Techcombank, he held several senior positions in risk management, including: Chief Risk Officer of Asia Commercial Bank; Global Risk Head of Merger & Acquisitions for Consumer Business at Standard Chartered Bank; and Managing Director and Chief Risk Officer for GE Capital Asia Pacific’s Healthcare Commercial Finance.

Mr. Le Ba Dung holds a master’s degree in international affairs from Georgetown University (USA), as well as a master’s degree in electrical engineering from the State University of New York (USA).

Ms. Le Thi Bich Phuong Head of Personal Financial Services Division Ms. Le Thi Bich Phuong was appointed Techcombank’s Head of Personal Financial Services Banking in June 2016. She has been with Techcombank for more than 13 years – holding executive sales and distribution positions, including: Head of Area, Head of Region, and Head of S&D South.

Ms. Le Thi Bich Phuong has a bachelor’s degree in economics and international business from the Hanoi University of Social and Human Sciences (Vietnam).

Mr. Nguyen Anh Tuan Deputy Head of Business Banking Division Mr. Nguyen Anh Tuan was appointed the Deputy Head of Business Banking Division in October 2016.

Mr. Nguyen Anh Tuan has 11 years’ working experience in Techcombank and held various senior positions including Manager of a Super Branch and Regional Head positions for Central Vietnam, Central Highlands, and Hanoi. He has also been a key participant in Techcombank’s 2016-2020 strategy development team.

Mr. Nguyen Anh Tuan holds an MBA from the National University of Vietnam and a bachelor’s degree from the Banking Academy (Vietnam).

90

91

CORPORATE GOVERNANCE

BOARD OF MANAGEMENT

Mr. Nguyen Canh Vinh Head of Wholesale Banking Division Mr. Nguyen Canh Vinh has held several leadership positions at Techcombank including: Head of Business Centre, Business Manager of Region 1, and the Head of the Sales and Distribution Division. He has served as Techcombank’s Head of Wholesale Banking since November 2014.

Mr. Nguyen Canh Vinh holds bachelor’s degrees from Construction University and the National Economics University (Vietnam), as well as an MBA from La Trobe University (Australia).

Mr. Nguyen Xuan Minh Head of Investment Banking Division Mr. Nguyen Xuan Minh was appointed the Head of Investment Banking Division – Chairman of the Board of Directors of Techcom Securities Company Limited in October 2013. He has over 20 years in investment and fund management experience. His previous experience includes leadership positions as the CEO of Vietnam Asset Management Ltd. (VAM) and Senior Vice President of Franklin Templeton Investments in Singapore.

Mr. Nguyen xuan Minh holds a Master’s of Applied Finance & Investment (Australia) and a Master’s of Science, Oil & Gas – Mechanical Engineering, USSR (Russia).

Mr. Pham Quang Thang Head of Compliance, Operational Risk Management and Legal Division Mr. Pham Quang Thang became the Head of CORM & Legal Division in January 2014. Prior to this appointment, he held various executive positions at Techcombank, including: Chief Accountant, Head of the Treasury and Transactions Management Centre, Head of the Commercial Banking Division, Head of the Credit Acceptance Division, and Deputy Chief Executive Officer responsible for areas of finance, planning, and strategy.

He holds a master’s degree in international accounting from Swinburne Technology University (Australia).

A N N UA L R E P O RT

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93

FINANCIAL STATEMENTS

2016 is the first year Techcombank implemented our â&#x20AC;&#x153;Customer-Centricâ&#x20AC;? business strategy, and the results were positive with full-year earnings exceeding business targets.

These results reinforced our confidence in this strategy, setting a solid foundation for our transformation in 2017 on the journey towards becoming the best bank in Vietnam.

GENERAL INFORMATION

THE BANK Vietnam Technological and Commercial Joint Stock Bank (“the Bank”) is a commercial joint stock bank registered and incorporated in the Socialist Republic of Vietnam.

The Bank was incorporated pursuant to Business License No. 0040/NH-GP issued by the Governor of the State Bank of Vietnam (“the SBV”) on 6 August 1993 and Business Registration Certificate No. 055697 issued by the Hanoi Department of Planning and Investment on 7 September 1993. The operating duration was extended to 99 years under Decision No. 330/QD-NH5 issued by the SBV on 8 October 1997.

The principal activities of the Bank are mobilizing and receiving short, medium and long-term deposit funds from organizations and individuals, lending on short, medium and long-term basis up to the nature and ability of the Bank’s capital resources, conducting settlement and cash services and other banking services as approved by the SBV, conducting investments in subsidiaries, associates, joint-ventures, bonds and other companies and dealing in foreign exchange in accordance with applicable regulations.

BOARD OF DIRECTORS Members of the Board of Directors of the Bank for the year ended 31 December 2016 and until the date of these consolidated financial statements are as follows:

Name

Position

Mr. Ho Hung Anh

Chairman

Mr. Nguyen Dang Quang

The first Vice Chairman (from 25 March 2016) Member (until 24 March 2016)

Mr. Nguyen Thieu Quang

Vice Chairman

Mr. Nguyen Canh Son

Vice Chairman

Mr. Do Tuan Anh

Vice Chairman

Mr. Lee Boon Huat

Member

Mr. Nguyen Doan Hung

Independent Member

BOARD OF SUPERVISION Members of the Board of Supervision of the Bank for the year ended 31 December 2016 and until the date of these consolidated financial statements are as follows:

Name

Position

Mr. Hoang Huy Trung

Head of Board of Supervision cum Member in charge

Mr. Mag Rec Soc Oec Romauch Hannes

Member

Ms. Nguyen Thu Hien

Member in charge

Ms. Bui Thi Hong Mai

Member

A N N UA L R E P O RT

BOARD OF MANAGEMENT Members of the Board of Management of the Bank for the year ended 31 December 2016 and until the date of these consolidated financial statements are as follows:

Name

Position

Mr. Nguyen Le Quoc Anh

Chief Executive Officer (from 23 September 2016) Deputy Chief Executive Officer in charge (from 1 March 2016) Head of Strategy and Corporate Development

Mr. Yuldashev Murat Mashraphovich

Chief Executive Officer (until 29 February 2016)

Mr. Do Tuan Anh

Deputy Chief Executive Officer

Mr. Pham Quang Thang

Deputy Chief Executive Officer cum Head of Compliance, Operational Risk Management and Legal

Mr. Nguyen Canh Vinh

Deputy Chief Executive Officer (from 1 March 2017) Head of Wholesale Banking (until 28 February 2017)

Mr. Nguyen Dang Thanh

Head of Business Banking (until 1 June 2016)

Mr. Vikesh Mirani

Group Chief Financial Officer (until 21 October 2016)

Mr. Phan Thanh Son

Head of Transaction Banking (from 3 January 2017) Head of Treasury and Financial Markets (until 31 December 2016)

Mr. Vu Minh Truong

Head of Treasury and Financial Markets (from 3 January 2017)

Mr. Phung Quang Hung

Head of Sales and Distribution

Ms. Pham Vu Minh Dan

Head of Human Resources

Mr. Le Ba Dung

Head of Risk Management

Ms. Le Thi Bich Phuong

Head of Personal Financial Services

Ms. Nguyen Thi Van Anh

Head of Marketing and Branding

Mr. Chester Gorski

Head of IT and Operations

LEGAL REPRESENTATIVE The legal representative of the Bank for the year ended 31 December 2016 and until the date of these consolidated financial statements is Mr. Ho Hung Anh, the Chairman.

Mr. Nguyen Le Quoc Anh is authorized by Mr. Ho Hung Anh to sign off reports/documents related to managing the operation of the Bank which comprise the accompanying consolidated financial statements for the year ended 31 December 2016 in accordance with Decision No. 0312/UQ-HDQT dated 25 February 2016.

AUDITORS The auditor of the Bank is Ernst & Young Vietnam Limited.

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97

REPORT OF THE BOARD OF MANAGEMENT

The Board of Management of Vietnam Technological and Commercial Joint Stock Bank (“the Bank”) is pleased to present its report and the consolidated financial statements of the Bank and its subsidiaries for the year ended 31 December 2016.

MANAGEMENT’S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS The Board of Management of the Bank is responsible for the consolidated financial statements of each financial year which give a true and fair view of the consolidated financial position of the Bank and its subsidiaries and of the consolidated results of their operations and their consolidated cash flows for the year. In preparing those consolidated financial statements, the Board of Management is required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and • prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Bank and its subsidiaries will continue its business.

The Board of Management of the Bank is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the consolidated financial position of the Bank and ensuring that the accounting records comply with the applied accounting system. It is also responsible for safeguarding the assets of the Bank and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board of Management of the Bank confirmed that it has complied with the above requirements in preparing the accompanying consolidated financial statements.

STATEMENT BY THE BOARD OF MANAGEMENT

The Board of Management does hereby state that, in its opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Bank and its subsidiaries as at 31 December 2016, and of the consolidated results of their operations and their consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System for Credit Institutions, regulations stipulated by the State Bank of Vietnam and statutory requirements relevant to preparation and presentation of consolidated financial statements.

For and on behalf of the Board of Management:

Mr. Nguyen Le Quoc Anh Chief Executive Officer Hanoi, Vietnam 22 March 2017

A N N UA L R E P O RT

Reference: 60899747/18714638-Techcombank-LR/HN

INDEPENDENT AUDITORS’ REPORT

TO:

THE SHAREHOLDERS OF VIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT STOCK BANK

We have audited the accompanying consolidated financial statements of Vietnam Technological and Commercial Joint Stock Bank (“the Bank”) and its subsidiaries, as prepared on 22 March 2017 and set out on pages 6 to 76 which comprise the consolidated balance sheet as at 31 December 2016, the consolidated income statement and the consolidated cash flow statement for the year then ended and the notes thereto.

MANAGEMENT’S RESPONSIBILITY The Bank’s Board of Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System for Credit Institutions, regulations stipulated by the State Bank of Vietnam and statutory requirements relevant to preparation and presentation of consolidated financial statements, and for such internal control as the Board of Management determines is necessary to enable the preparation and presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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99

Reference: 60899747/18714638-Techcombank-LR/HN

INDEPENDENT AUDITORSâ&#x20AC;&#x2122; REPORT (Cont.)

OPINION In our opinion, the consolidated financial statements give a true and fair view, in all material respects, of the consolidated financial position of the Bank and its subsidiaries as at 31 December 2016, and of the consolidated results of their operations and their consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System for Credit Institutions, regulations stipulated by the State Bank of Vietnam and statutory requirements relevant to preparation and presentation of consolidated financial statements.

ERNST & YOUNG VIETNAM LIMITED

Nguyen Xuan Dai Deputy General Director Audit Practising Registration Certificate No. 0452-2013-004-1 Hanoi, Vietnam 23 March 2017

A N N UA L R E P O RT

Tran Thi Thu Hien Auditor Audit Practising Registration Certificate No. 2487-2013-004-1

CONSOLIDATED BALANCE SHEET

B02/TCTD-HN

as at 31 December 2016

Notes

31 December 2016 VND million

31 December 2015 (reclassified) VND million

2,956,708

2,754,299

ASSETS Cash and gold

5

Balances with the State Bank of Vietnam

6

2,533,875

2,677,303

Balances with and loans to other credit institutions

7

21,598,874

14,762,552

Balances with other credit institutions

7.1

9,058,942

7,488,015

Loans to other credit institutions

7.2

12,539,932

7,274,537

8

8,024,620

1,875,993

8,035,905

1,885,098

(11,285)

(9,105)

141,120,529

111,012,648

Securities held-for-trading Securities held-for-trading Provision for securities held-for-trading Loans to customers Loans to customers

9

142,616,004

112,179,889

Provision for loans to customers

10

(1,495,475)

(1,167,241)

11

18,493

30,629

19,466

32,241

Debts purchased Debts purchased Provision for debts purchased Investment securities

12

Available-for-sale securities Held-to-maturity securities Provision for investment securities Long-term investments

13

Other long-term investments Provision for long-term investments Fixed assets Tangible fixed assets

14 14.1

Cost Accumulated depreciation Intangible fixed assets

14.2

Cost Accumulated amortization Investment property Cost Accumulated amortization

15

(973)

(1,612)

45,674,924

45,017,189

38,575,369

39,243,607

8,560,113

6,902,350

(1,460,558)

(1,128,768)

577,746

597,151

582,672

601,230

(4,926)

(4,079)

1,582,722

882,081

576,836

538,147

1,518,287

1,341,998

(941,451)

(803,851)

1,005,886

343,934

1,423,050

668,490

(417,164)

(324,556)

1,278,536

1,310,184

1,447,256

1,442,827

(168,720)

(132,643)

100

101

CONSOLIDATED BALANCE SHEET (Cont.) as at 31 December 2016

B02/TCTD-HN

31 December 2016 VND million

31 December 2015 (reclassified) VND million

Receivables

6,829,557

10,043,380

Accrued interest and fees receivable

3,992,328

3,046,539

27,659

2,645

650,888

595,485

29,647

39,529

(1,504,323)

(2,614,476)

235,363,136

191,993,602

Other assets

Notes 16

Deferred tax assets Other assets In which: Goodwill Provision for other assets TOTAL ASSETS

9,996,109

11,073,573

LIABILITIES Borrowings from the State Bank of Vietnam

17

1,447,970

-

Deposits and borrowings from other credit institutions

18

24,886,126

20,745,990

Deposits from other credit institutions

18.1

15,114,917

8,079,207

Borrowings from other credit institutions

18.2

9,771,209

12,666,783

173,448,929

142,239,546

Deposits from customers

19

Derivatives and other financial liabilities

20

67,892

85,891

Other borrowed and entrusted funds

21

587,383

336,421

Valuable papers issued

22

10,414,842

8,133,896

Other liabilities

23

4,923,518

3,994,292

Accrued interest and fees payable

2,195,582

2,086,665

Other liabilities

2,727,936

1,907,627

215,776,660

175,536,036

Share capital

8,878,079

8,878,079

Reserves

5,219,182

4,744,903

Retained earnings

5,489,215

2,834,584

TOTAL LIABILITIES SHAREHOLDERS’ EQUITY

TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

A N N UA L R E P O RT

25

19,586,476

16,457,566

235,363,136

191,993,602

CONSOLIDATED OFF-BALANCE SHEET ITEMS

Notes

31 December 2016 31 December 2015 VND million VND million

Contingent liabilities Guarantees for borrowings

6,547

3,898

-- Commitments to buy foreign currencies

1,895,364

1,819,562

-- Commitments to sell foreign currencies

598,543

659,092

52,521,119

22,618,252

Letters of Credit

9,651,241

9,310,047

Other guarantees

11,731,082

9,215,883

Other commitments

23,848,679

12,062,100

100,252,575

55,688,834

Commitments for currencies contracts

-- Commitments for currency swap contracts

20

Prepared by:

Approved by:

Approved by:

Ms. Bui Thi Khanh Van Chief Accountant

Ms. Thai Ha Linh Director of Accounting, Financial Policy and Tax, Finance and Planning Division

Mr. Nguyen Le Quoc Anh Chief Executive Officer

Hanoi, Vietnam 22 March 2017

102

103

CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2016

B03/TCTD-HN

Notes

2016 VND million

2015 (reclassified) VND million

Interest and similar income

26

15,736,077

13,379,387

Interest and similar expenses

27

(7,593,856)

(6,165,707)

Net interest and similar income

8,142,221

7,213,680

Fees and commission income

2,558,990

1,815,286

(603,226)

(543,148)

Fees and commission expenses Net fees and commission income

28

1,955,764

1,272,138

Net gain/(loss) from trading foreign currencies

29

240,201

(192,002)

Net gain from securities held-for-trading

30

124,780

63,400

Net gain from investment securities

31

481,457

87,948

1,653,250

1,373,267

(679,417)

(485,304)

Other income Other expenses Net gain from other operating activities

32

973,833

887,963

Income from investments in other entities

33

470

10,815

11,918,726

9,343,942

(4,260,995)

(3,678,848)

7,657,731

5,665,094

(3,661,091)

(3,627,889)

3,996,640

2,037,205

Total operating income Operating expenses

34

Profit before provision for credit losses Provision expenses for credit losses

35

Profit before tax Current corporate income tax expenses

24.1

(872,808)

(483,862)

Deferred corporate income tax (expenses)/benefit

24.3

25,014

(24,155)

A N N UA L R E P O RT

2016 VND million

2015 (reclassified) VND million

Corporate income tax expenses

(847,794)

(508,017)

Profit after tax

3,148,846

1,529,188

Notes

Basic earnings per share (VND/share)

36

3,525

1,694

Diluted earnings per share (VND/share)

36

2,929

1,382

Prepared by:

Approved by:

Approved by:

Ms. Bui Thi Khanh Van Chief Accountant

Ms. Thai Ha Linh Director of Accounting, Financial Policy and Tax, Finance and Planning Division

Mr. Nguyen Le Quoc Anh Chief Executive Officer

Hanoi, Vietnam 22 March 2017

104

105

CONSOLIDATED CASH FLOW STATEMENT

B04/TCTD-HN

for the year ended 31 December 2016

2016 VND million

2015 (reclassified) VND million

Interest and similar receipts

14,790,288

13,673,972

Interest and similar payments

(7,484,939)

(5,986,919)

1,955,764

1,272,138

Net receipts/(payments) from trading activities (foreign currencies, gold and securities)

834,851

(95,172)

Other income receipts

569,638

444,854

404,195

443,109

(3,493,511)

(3,451,652)

(721,092)

(381,295)

6,855,194

5,919,035

(Increase)/decrease in balance with and loans to other credit institutions

(5,459,376)

2,523,697

(Increase)/decrease in securities held-for-trading

(7,140,332)

4,756,128

(30,436,115)

(31,872,322)

(4,108,625)

(1,456,946)

3,134,746

530,985

Increase in deposits and borrowings from SBV

1,447,970

-

Increase in deposits and borrowings from other credit institutions

4,140,136

1,274,582

31,209,383

10,549,736

2,278,819

1,880,273

Increase in other borrowed and entrusted funds

250,962

269,155

Increase/(decrease) in derivatives and other financial liabilities

(17,999)

67,482

Increase in other liabilities

200,534

256,665

(127)

(16,628)

2,355,170

(5,318,158)

Notes CASH FLOWS FROM OPERATING ACTIVITIES

Net fees and commission receipts

Recoveries from loans written off previously

32

Operating and salary expenses payments Current income taxation paid for the year

24

Net cash flows from operating activities before changes in operating assets and liabilities Changes in operating assets

Increase in loans to customers Use of provision to write off loans, securities, long-term investments, receivables Decrease in other operating assets Changes in operating liabilities

Increase in deposits from customers Increase in valuable papers issued (excluding valuable paper issued classified into financing activities)

Payments from reserves Net cash from/(used in) operating activities

A N N UA L R E P O RT

25

2016 VND million

2015 (reclassified) VND million

Payments for purchases of fixed assets

(941,512)

(124,265)

Proceeds from disposals of fixed assets

2,303

86,580

Payments for disposals of fixed assets

(1,189)

-

Proceeds from investments in other entities

18,558

36,400

-

(1,677)

470

10,815

(921,370)

7,853

Proceeds from long-term valuable papers issued classified into ownerâ&#x20AC;&#x2122;s equity and other long-term loans

2,127

-

Cash from financing activities

2,127

-

1,435,927

(5,310,305)

12,757,170

18,067,475

14,193,097

12,757,170

Notes CASH FLOWS FROM INVESTING ACTIVITIES

Payments for investments in other entities Dividends received from long-term investments Net cash (used in)/from investing activities CASH FLOWS FROM FINANCING ACTIVITIES

Net cash flows for the year Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

37

Prepared by:

Approved by:

Approved by:

Ms. Bui Thi Khanh Van Chief Accountant

Ms. Thai Ha Linh Director of Accounting, Financial Policy and Tax, Finance and Planning Division

Mr. Nguyen Le Quoc Anh Chief Executive Officer

Hanoi, Vietnam 22 March 2017

106

107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended

1.

B05/TCTD-HN

GENERAL INFORMATION Vietnam Technological and Commercial Joint Stock Bank (“the Bank”) is a commercial joint stock bank registered and incorporated in the Socialist Republic of Vietnam.

Establishment and Operations The Bank was incorporated pursuant to with Business License No. 0040/NH-GP issued by the Governor of the State Bank of Vietnam (“SBV”) on 6 August 1993 and Business Registration Certificate No. 055697 issued by the Hanoi Department of Planning and Investment on 07 September 1993. The operating duration was extended to 99 years under the Decision No. 330/QD-NH5 issued by the SBV on 8 October 1997.

The principal activities of the Bank are mobilizing and receiving short, medium and long-term deposit funds from organizations and individuals, lending on short, medium and long-term basis up to the nature and ability of the Bank’s capital resources, conducting settlement and cash services and other banking services as approved by the SBV, conducting investments in subsidiaries, associates, joint-ventures, bonds and other companies and dealing in foreign exchange in accordance with applicable regulations.

Charter capital As at 31 December 2016, the charter capital of the Bank is VND 8,878,078,710,000 (31 December 2015: VND 8,878,078,710,000), equivalent to 887,807,871 common shares with face value of VND 10,000 per share.

Network The Bank’s Head Office is located at 191 Ba Trieu, Hai Ba Trung District, Hanoi. As at 31 December 2016, the Bank has one (1) Head Office, two (2) representative offices, three hundred and twelve (312) transaction offices nationwide and four (4) subsidiaries.

Subsidiaries As at 31 December 2016, the Bank has four (4) subsidiaries as follows:

% owned by the Bank

No.

Name

Business License No.

Industry

1

Techcom Securities Company Limited

98/UBCK-GP, dated 18 September 2008 granted by the State Securities Commission

Securities activities

100%

2

Vietnam Technological and Commercial Joint Stock Bank – Asset Management Company Limited

0104003519 dated 18 June 2008 granted by the Hanoi Department of Planning and Investment

Debt and asset management

100%

3

Techcom Capital Management Company Limited

40/UBCK-GP dated 21 October 2008 granted by the State Securities Commission

Fund management

100%

4

Technological and Commercial Finance Company Limited

340/GP-NHNN by the State Bank of Vietnam dated 29 December 2008

Finance – Credit

100%

Employees As at 31 December 2016, the Bank has 7,787 employees (31 December 2015: 7,616 employees).

A N N UA L R E P O RT

2.

ACCOUNTING PERIOD AND CURRENCY

2.1

Accounting period The annual accounting period of the Bank starts on 1 January and ends on 31 December.

2.2

Accounting currency Currency used in accounting of the Bank is Vietnam dong (“VND”) and is rounded to the nearest VND million for presentation of consolidated financial statements.

3.

APPLIED ACCOUNTING STANDARDS AND SYSTEM

3.1

Statement of compliance The Board of Management of the Bank confirmed that it has complied with Vietnamese Accounting Standards, Vietnamese Accounting System for Credit Institutions, regulations stipulated by the State Bank of Vietnam and statutory requirements relevant to preparation and presentation of consolidated financial statements.

Accordingly, the accompanying consolidated balance sheet, the consolidated income statement, the consolidated cash flow statement and notes to the consolidated financial statements, including their utilization are not designed for those who are not informed about Vietnam’s accounting principles, procedures and practices and furthermore are not intended to present the consolidated financial position of the Bank and its subsidiaries, the consolidated result of their operations and their consolidated cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam.

3.2

Basis of preparation The consolidated financial statements have been prepared in accordance with the Accounting System for Credit Institutions required under Decision No. 479/2004/QD-NHNN issued on 29 April 2004 by the SBV Governor which was enacted from 1 January 2005 and decisions, circulars on amendment and supplementation of Decision No. 479/2004/QD-NHNN, Decision No. 16/2007/ QD-NHNN issued on 18 April 2007, Circular No. 49/2014/TT-NHNN on amending and supplementing some articles regarding the financial reporting regime for credit institutions issued accompanying Decision No. 16/2007/QD-NHNN, and Vietnamese Accounting Standards issued by the Ministry of Finance as per:

•

Decision No.149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (series 1);

•

Decision No.165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (series 2);

•

Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (series 3);

•

Decision No.12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (series 4); and

•

Decision No.100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (series 5).

108

109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

3.

APPLIED ACCOUNTING STANDARDS AND SYSTEM (CONTINUED)

3.3

Basis for consolidation

B05/TCTD-HN

The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries for the year ended 31 December 2016. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Bank obtains control, and continued to be consolidated until the date that such control ceases.

The financial statements of subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

All intra-company balances, income and expenses and unrealised gains or losses result from intra-company transactions are eliminated in full.

3.4

Basis for assumptions and uses of estimates The preparation of the consolidated financial statements requires the Board of Management make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the income, expenses and the resultant provisions. Therefore, such estimates are necessarily based on assumptions involving varying degrees of subjectivity and uncertainty and actual results may differ resulting in future changes in such provision.

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

4.1

Changes in accounting policies and disclosures

4.1.1 Changes in accounting policies for the year On 30 December 2014, the Ministry of Finance issued Circular No. 210/2014/TT-BTC providing guidance on accounting policies applicable to securities companies (“Circular 210”).

On 27 Febuary 2016, the Ministry of Finance issued Circular No. 334/2016/TT-BTC amending, supplementing and replacing Apendix 02 and 04 of Circular No. 210. These circulars replaces Circular No. 95/2008/TT-BTC dated 24 October 2008 of the Ministry of Finance providing guidance on accounting policies appliable to securities companies and Circular No. 162/2010/ TT-BTC dated 20 October 2010 amending and supplementing Circular No. 95/2008/TT-BTC. Circular 210 is applicable to fiscal year beginning on or after 1 Januar 2016. Circular 210 prescribes contents related to accounting vouchers, system of accounting accounts as well as method of preparing and presenting the financial statements of securities companies.

4.1.2 Accounting policies issued but not yet effective On 20 November 2015, the National Assembly of Vietnam passed the Law on Accounting No. 88/2015/QH13 (“the new Accounting Law“). The new Accounting Law extends its governing scope to electronic accounting documents and allows the application of fair value basis for some types of assets and liabilities which their value frequently varies in line with market fluctuation, provided that the fair value of these assets and liabilities can be reliably determined. The new Acounting Law takes effect from 1 January 2017.

A N N UA L R E P O RT

4.2

Cash and cash equivalents Cash and cash equivalents comprise cash, gold, balances with the SBV, Treasury bills and other short-term valuable papers eligible for rediscount with the SBV; balances with other credit institutions that have maturity of three months or less from the transaction date and securities with recovery or maturity of three months or less from date of purchase.

4.3

Balances with and loans to other credit institutions Deposits and loans to other credit institutions are stated at cost. The classification of balances with and loans to other credit institutions and the corresponding provision are made in accordance with Circular No. 02/2013/TT-NHNN issued by the SBV on 21 January 2013 on asset classification, risk provisioning and use of provision against credit risks by credit institutions and foreign bank branches (“Circular 02”) and Circular No. 09/2014/TT-NHNN issued by the SBV on 18 March 2014 amending and supplementing a number of articles of Circular 02 (“Circular 09”).

Accordingly, the Bank is required to make specific provision for balances with (except for current accounts) and loans to other credit institutions as described in Note 4.5.

According to Circular 02, the Bank is not required to make general provision for balances with and loans to other credit institutions.

4.4

Loans to customers Loans to customers are stated at the amount of the outstanding principal less any provision for loans to customers.

Short-term loans are those with a repayment date within one year of the loan disbursement date. Medium-term loans are those with repayment date between one to five years of the loan disbursement date. Long-term loans are those with a repayment date of more than five years from the loan disbursement date.

The classification of loans and provision for credit losses are carried out in accordance with Circular 02 and Circular 09 as described in Note 4.5.

4.5

Asset classification and provisioning rate, risk provisioning for balances with and loans to other credit institutions, investments and trusted investments in non-listed corporate bonds, loans to customers and entrustments for credit granting Asset classification for balances with and loans to other credit institutions, investments and trusted investments in non-listed corporate bonds, loans to customers and entrustments for credit granting (here refer as “debts”) is made by the quantitative method as regulated under Article 10 of Circular 02.

Specific provision as at 31 December is made based on the outstanding principal balance less discounted value of collaterals multiplied by provision rates which are determined based on the loan classifications as at 30 November. The basis to determine the value and discounted value for each type of collateral is specified in Circular 02.

110

111

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

B05/TCTD-HN

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.5

Asset classification and provisioning rate, risk provisioning for balances with and loans to other credit institutions, investments and trusted investments in non-listed corporate bonds, loans to customers and entrustments for credit granting (continued)

Loans classification and rates for specific provision for each group are presented as follows:

Group

Description

Provision rate

1

Current

(a) Current debts that being assessed as fully and timely recoverable, both principals and interests; or (b) Debts which overdue for a period of less than 10 days and being assessed as fully recoverable, both overdue principals and interests, and fully and timely recoverable both remaining principals and interests.

2

Special mention

(a) Debts which are overdue for a period of between 10 days and 90 days; or (b) Debts which are restructured repayment term for the first time.

5%

3

Substandard

(a) Debts which are overdue for a period of between 91 days and 180 days; or (b) Debts which are extended repayment term for the first time; or (c) Debts which are exempted or reduced interest because customers do not have sufficient capability to pay all interests under credit contracts; or (d) Debts in one of the following cases have not been recovered in less than 30 days from the date of the decision to collect: »» Debts violating Clause 1, 3, 4, 5, 6 under Article 126 of Law on Credit Institutions ; »» Debts violating Clause 1, 2, 3, 4 under Article 127 of Law on Credit Institutions ; or »» Debts violating Clauses 1, 2 and 5 under Article 128 of Law on Credit Institutions. (e) Debts which are recovered under inspection conclusions.

20%

4

Doubtful

(a) Debts which are overdue for a period of between 181 days and 360 days; or (b) Debts, which are restructured for repayment term the first time, but still overdue for a period of less than 90 days under that restructured repayment term; or (c) Debts which are restructured for repayment term the second time; or (d) Debts which are specified in point (d) of Group 3 that have not been recovered for a period of between 30 days and 60 days after decisions on recovery have been issued; or (e) Debts which must be recovered under inspection conclusions but fail to be repaid although the recovery term was overdue from 60 days ago.

50%

5

Loss

(a) Debts which are overdue more than 360 days; or (b) Debts, which are restructured repayment term for the first time, but still overdue for a period of 90 days or more than under that first restructured repayment term; or (c) Debts, which are restructured repayment term for the second time, but still overdue under that second restructured repayment term; or (d) Debts, which are restructured for repayment term for the third time or whether debts are overdue or not; or (e) Debts which are specified in point (d) Group 3 that have not been recovered for a period of more than 60 days after decisions on recovery have been issued; or (f) Debts which must recovered under inspection conclusions but fail to be repaid although the recovery term was overdue for more than 60 days; or (g) Debts of customers being credit institutions which are announced by the State Bank of Vietnam to place in special control status as announced, or foreign banks’ branches of which capital and assets are blockad.

100%

A N N UA L R E P O RT

0%

Where a customer has more than one debt with the Bank and one of outstanding debts is classified into a higher risk group, the Bank is required to classify all the remaining debt of such a customer into a higher risk groups.

When participating in a syndicated loan as a participant, the Bank classifies loans (including syndicated loans) of the customer into a higher risk group between the assessment of the leading banks and its own assessment.

In accordance with the requirements of Circular 02, as at 31 December the Bank is also required to make a general provision of 0.75% of total outstanding loans excluding balance with and loans to other credit institutions and excluding any loans classified into loss loan group as at 30 November.

4.6

Securities held-for-trading

4.6.1 Classification and recognition Securities held-for-trading are debt securities or equity securities, which are acquired for trading purpose. Securities held-fortrading are initially recognized at cost.

4.6.2 Measurement Listed debt securities held-for-trading are stated at cost less provision for impairment in the value by reference to the yield curve listed at the Hanoi Stock Exchange at reporting date.

Debt securities held-for-trading which are unlisted corporate bonds are stated at cost less provision for credit risk as stipulated in Circular 02 and Circular 09 as described in Note 4.5.

Equity securities are recognized at cost at transaction date and continuously recognized at cost in the following accounting periods. Periodically, equity securities are subject to review for impairment in value. Provision for impairment of securities is made when their carrying values are higher than their market values, which are determined in accordance with Circular No. 228/2009/ TT-BTC dated 7 December 2009. In case market prices of securities cannot be determined, no provision for impairment is made.

Provision for impairment of securities held-for-trading as described above is reversed when the subsequent increase in the recoverable value of the securities is due to the objective events occurring after the provision is made. The maximum amount to be reversed cannot exceed book value of the securities before making provision.

Gains or losses from the sales of securities held-for-trading are recognized in the consolidated income statement.

112

113

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

B05/TCTD-HN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.6

Securities held-for-trading (continued)

4.6.3 De-recognition The Bank derecognizes securities held-for-trading when the contractual rights to the cash flows from these securities expire or when the significant risks and rewards of ownership of these securities have been transferred.

4.7

Investment securities

4.7.1 Classification Investment securities include available-for-sale investment securities and held-to-maturity investment securities. The Bank initially recognizes investment securities at cost. The Bank classifies investment securities at purchase date. According to Official Letter No. 2601/NHNN-TCKT by the SBV dated 14 April 2009 for investment securities, the Bank is allowed to reclassify maximum only once after purchase.

Held-to-maturity investment securities Held-to-maturity investment securities are debt securities with fixed maturities and fixed or determinable payments, where the Bank has the positive intention and ability to hold until maturity.

Available-for-sale investment securities Available-for-sale investment securities are debt or equity securities which are held for an indefinite period and may be sold at any time.

4.7.2 Recognition The Bank recognizes investment securities on the date that it acquires substantially all the risks and rewards of owning these securities.

4.7.3 Measurement Equity securities Listed available-for-sale equity securities are recorded at cost less provision for diminution in value of securities determined on closing prices of securities from the Ho Chi Minh City Stock Exchange and from the Hanoi Stock Exchange as at the consolidated balance sheet date.

For unlisted available-for-sale equity securities which are actively traded on the unlisted public company market (â&#x20AC;&#x153;Upcomâ&#x20AC;?), provision for diminution in value is determined by the average trading price in the market at the reporting date.

A N N UA L R E P O RT

For unlisted available-for-sale equity securities which are not registered on the Upcom, provision for diminution in value is calculated based on the average quoted prices of three securities companies with their share capital of above VND 300 billion. In case the quoted prices of three securities companies cannot be obtained, these securities are recorded at cost.

Debt securities Debt securities are initially stated at cost, including transaction costs and other directly attributable costs. They are subsequently recognized at amortized cost (affected by premium/discount amortization) less provision for impairment value. Premium and discounts arising from purchases of debt securities are amortized to the consolidated income statement on a straight-line basis over the period from the acquisition date to the maturity date.

Post-acquisition interest income of available-for-sale debt securities and held-to maturity investment securities is recognized in the consolidated income statement on an accrual basis.

Listed available-for-sale debt securities and held-to-maturity investment securities are measured at cost less provision for impairment which is determined by reference to the yield curve quoted on Hanoi Stock Exchange at the consolidated balance sheet date.

For unlisted corporate debt securities, provision for credit risk is determined in accordance with Circular 02 as described in Note 4.5.

For other available-for-sale corporate debt securities and held-to-maturity debt securities: provision for credit risk is determined in accordance with regulations stipulated in Circular 228/2009/TT-BTC dated 7 December 2009 and Circular N89/2013/TT-BTC dated 28 June 2013.

4.8

Special bonds issued by VAMC Special bonds issued by VAMC are term valuable papers, which aim to purchase bad debts of the Bank. Special bonds are classified as held-to-maturity securities and are initially recorded at cost at transaction date and subsequently carried at par value less provision. Par value of special bonds is equivalent to the value of bad debts sold which is the principal balance net of specific provision made but not utilized for those debts.

During the period holding special bonds, the Bank is required to make specific provision for special bonds annually in accordance with requirements of Circular No. 14/2015/TT-NHNN dated 28 August 2015 by SBV amending Circular No. 19/2013/TT-NHNN on the purchase, sales and resolution of bad debts of VAMC Specific provision for each special bond is recognized in the consolidated income statement in â&#x20AC;&#x153;Provision expense for credit lossesâ&#x20AC;?. General provision is not required for the special bonds.

114

115

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.9

Repurchase and reverse repurchase agreements

B05/TCTD-HN

Securities sold under agreements to repurchase at a specific date in the future are not derecognized from the consolidated financial statements. The corresponding cash received is recognized as a borrowing in the consolidated balance sheet. The difference between the sale price and repurchase price is amortized on a straight line basis to the consolidated income statement over the term of the agreement.

Conversely, securities purchased under agreements to resell at a specific date in the future are not recognized in the consolidated financial statements. The corresponding cash payment is recognized as an investment in the consolidated balance sheet and the difference between the purchase price and resale price is amortized on a straight line basis to the consolidated income statement over the term of the agreement.

4.10

Long-term investments

4.10.1 Other long-term investments Other long term investments are investments in the equity of companies without having control or significant influence over the investees. These investments are initially stated at cost.

4.10.2 Provision for impairment of long-term investments Other long term investments are investments in unlisted shares and their fair value was not able to be determined reliably as at the reporting date. Therefore, provision for impairment is required for long-term investments when the investee companies suffer losses, except when the loss was anticipated in their business plan before the date of the investment. Provision for impairment is determined as the total actual contributed capital of parties to the investee company (par value) less (-) the actual ownerâ&#x20AC;&#x2122;s equity multiplied (x) by the Bankâ&#x20AC;&#x2122;s ownership percentage (par value) in the investee company. A provision is reversed only to the extent that the investmentâ&#x20AC;&#x2122;s carrying amount does not exceed the carrying amount that would have been determined if no provision had been recognized.

4.11

Tangible fixed assets

4.11.1 Cost Tangible fixed assets are stated at cost less accumulated depreciation. The initial cost of a tangible fixed asset comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use, and the cost of dismantling and removing the asset and restoring the site on which they are located. Expenditure incurred after the tangible fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the consolidated income statement for the year in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of tangible fixed assets beyond its originally assessed standard of performance, the expenditure is capitalized as an additional cost of tangible fixed assets.

A N N UA L R E P O RT

In case of rental period is 90% and over of the useful life of the assets, the Bank could recorded renting expense as fixed assets if all of the following conditions are met simultaneously: »» »» »» »»

The lessee is not entitled to cancel the lease contract and the lessor has no obligation to repay the amount received in advance in all cases and in all forms; The amount received by lessor in advance is not less than 90% of the total value of renting contract and the lessee must pay the remaining amount within 12 months from the beginning of the lease; Almost all the risks and benefits associated with ownership of the leased asset are transferred to the lessee; The lessor must estimate relatively the full cost of the lease.

4.11.2 Depreciation Depreciation of fixed assets is computed on a straight-line basis over the estimated useful lives of tangible fixed assets which are as follows: »» »» »» »»

4.12

buildings and building improvements machines and equipment vehicles other fixed assets

8 - 50 years 3 - 10 years 6 - 10 years 4 - 10 years

Intangible fixed assets

4.12.1 Computer software The cost of acquiring new software, which is not an integral part of the related hardware, is capitalized and treated as an intangible asset. Software costs are amortized on a straight-line basis from 4 to 8 years.

4.12.2 Land use rights Land use rights comprise: »» »»

those acquired in a legitimate transfer; and rights to use leased land obtained before the effective date of Land Law (2003) for which payments have been made in advance for more than 5 years and supported by land use right certificates issued by a competent authority.

Land use rights are stated at cost less accumulated amortization. The initial cost of land use rights comprises its purchase price and any directly attributable costs incurred in conjunction with securing the land right. Amortization is computed on a straight-line basis over the leasing period.

116

117

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

B05/TCTD-HN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.12.3 Other intangible fixed assets Other intangible fixed assets are stated at cost less accumulated amortization. Amortization is computed on a straight line basis from 4 to 8 years.

4.13

Investment property

4.13.1 Cost Investment property is stated at cost less accumulated depreciation. The initial cost of an investment property comprises its purchase price, cost of land use rights and any directly attributable expenditures of bringing the property to the condition necessary for it to be capable of operating. Expenditure incurred after investment property has been put into operation, such as repairs and maintenance, is charged to the income statement for the year in which the expenditure is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in future economic benefits in excess of the originally assessed standard of performance of the existing investment property, the expenditure is capitalized as an additional cost of investment property.

4.13.2 Depreciation Depreciation of investment property is computed on a straight-line basis over the estimated useful life of investment property which is as follows: 

4.14

Building

10 - 40 years

Operating lease payments Payments made under operating leases are recognized in the consolidated income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the consolidated income statement as an integral part of the total lease expense.

4.15

Other receivables Accounts receivable other than receivables from credit activities of the Bank are initially recognized at cost and subsequently presented at cost less provision.

Receivables are subject to review for impairment based on overdue period from the original maturity date of receivables or estimated loss arising from undue debts which the indebted economic organizations fall bankrupt or are undergoing dissolution procedures; debtors are missing, have fled, are prosecuted, detained or tried by law enforcement bodies, are serving sentences or have deceased.

Provision expense is recorded in operating expenses for the year.

For overdue receivables, the Bank use provision rate based on the overdue days in accordance with Circular 228 and Circular 89 as below:

A N N UA L R E P O RT

Status of aging

Provision rate

From six (06) months up to under one (01) year

30%

From one (01) year up to under two (02) years

50%

From two (02) years up to under three (03) years

70%

From three (03) years and above

100%

Classification and provisioning for debts which have been sold but not yet collected The Bank reclassifies and makes provision for the debts which have been sold but not yet collected, using the loan classification and collateral value as before the selling date in accordance with Circular 02 and Circular 09.

4.16

Business combination and goodwill Business combinations are accounted for using the purchase method. The cost of a business combination is measured as the fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange plus any costs directly attributable to the business combination. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values at the date of business combination.

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost the business combination over the Groupâ&#x20AC;&#x2122;s interest in the net fair value of the acquireeâ&#x20AC;&#x2122;s identifiable assets, liabilities and contingent liabilities. If the cost of a business combination is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statement. After initial recognition, goodwill is measured at cost less any accumulated amortization.

Goodwill is amortized over five-year period on a straight-line basis.

4.17

Convertible bonds Convertible bonds issued by the Bank entitle bondholders to convert their bonds into a fixed number of shares of the Bank at the time of issuance. Therefore, the issuance of bonus shares or dividends after the issuance date of the convertible bonds will impact on the conversion rate and number of shares that can be converted at the maturity date of the convertible bonds due to the antidilution term of the bonds.

The Bank classifies convertible bonds as financial liabilities. There are two types of convertible bonds including: (1) mandatory convertible bonds where the bondholders have entered into a commitment to convert their bonds to shares at maturity and (2) normal convertible bonds where the bondholders have the option to convert at maturity. Both types of convertible bonds are classified as financial liabilities in the consolidated balance sheet.

For the presentation of the consolidated financial statements as required by Circular No. 49/2014/TT-NHNN, the equity and debt components of convertible bonds are determined and presented in Note 25.3.

118

119

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.18

Share capital

B05/TCTD-HN

4.18.1 Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity.

4.18.2 Share premium On receipt of capital from shareholders, the difference between the issue price and the par value of the shares is credited to share premium account in equity.

4.18.3 Reserves and funds Reserves and funds of the Bank: The Bank is required to make the following allocations before distribution of profits in accordance with Law on Credit institutions No. 47/2010/QH12 and Resolution No 57/2012/ND-CP and regulation of the Bank:

Percentage of profit after tax

Maximum balance

Supplement share capital reserve

5% of profit after tax

100% share capital

Financial reserve

10% of profit after tax

25% share capital

Other equity funds are allocated from profit after tax. The allocation from profit after tax and utilization of the other equity funds are approved by the shareholders in the Annual General Meeting. These funds are not required by law and are fully distributable.

Reserves and funds of subsidiaries: Vietnam Technological and Commercial Joint Stock Bank - Asset Management Company Limited: According to Circular No. 27/2002/TT-BTC dated 22 March 2002 issued by the Ministry of Finance, the creation of reserves is made as the same as the Bank.

Techcom Securities Company Limited and Techcom Capital Management Company Limited:

A N N UA L R E P O RT

According to Circular No. 146/TT/2014/TT-BTC issued by the Ministry of Finance issued on 6 October 2014 guiding the financial regime for securities, fund management companies, from 2014 onwards, realized profit of the Company shall be distributed as follows:

Percentage of profit after tax

Maximum

Supplement share capital reserve

5% of profit after tax

10% charter capital

Financial reserve

5% of profit after tax

10% charter capital

Financial reserve is used to compensate for losses in business activities. These legal reserves are made at the year end and, not allowed to be distributed and transferred into shareholderâ&#x20AC;&#x2122;s capital.

Technological and Commercial Finance Company Limited: According to Circular No. 57/2012/ND-CP dated 20 July 2012, the creation of reserves is made as the same as the Bank.

4.19

Revenue and expense recognition

4.19.1 Interest income Interest income is recognized in the consolidated income statement on an accrual basis, except for interest on debts classified in Group 2 to Group 5 as defined in Notes 4.5 which is recognized upon receipt.

4.19.2 Fees and commission income Fees and commissions are recognized in the consolidated income statement on an accrual basis.

4.19.3 Dividend income Dividends receivable in cash are recognized in the consolidated income statement when the Bankâ&#x20AC;&#x2122;s right to receive payment is established.

In accordance with Circular No. 244/TT-BTC dated 31 December 2009 issued by the Ministry of Finance, dividends received in the form of shares, bonus shares and rights to purchase shares of the existing shareholders, shares distributed from retained earnings are not recognized as an increase in the value of the investment and income is not recognized in the consolidated income statement. Instead only changes in number of shares held by the Bank are updated and monitored.

120

121

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

B05/TCTD-HN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.19.4 Income and expenses from the sale of debts Income and expenses from the sale of debts are recognized in accordance with Decision No. 59/2006/QD-NHNN issued by the SBV promulgating regulations on sale and purchase of debts by credit institutions. From 1 September 2015, income and expenses arising from purchase and sale of debts are recognized following SBV Circular No. 09/2015/TT-NHNN providing guidance on the sale of debts of credit institutions and foreign bank branches.

According to Decision No. 59/2006/QD-NHNN and Circular No. 09/2015/TT-NHNN, the difference between the prices of debts purchased or sold and their book value are recorded as follows: •

•

For debts recorded in the consolidated balance sheet: »»

If the sale price is higher than the book value of the debt, the difference shall be recorded as income of the Bank in the year.

»»

If the purchase or sale price is lower than the book value of the debt, the difference shall be used to offset against the indemnity paid by an individual or guarantor (in case such individual or guarantor is determined to be responsible for the damage and obliged to make indemnity under prevailing regulations), or the compensation paid by the insurer, or use of outstanding provision recognized as expense previously. The remaining balance (if any) shall be recognized as an operating expense of the Bank for the year.

For debts written off and monitored off-balance sheet, the proceeds from sale of debts shall be recognized as other income of the Bank.

Book value of debts sold is the book value of the principal, interest and related financial obligations (if any) of debts recorded in the balance sheet or off balance sheet at the date of debts sold; or the book value at the date of writing-off of debts; or the book value of debts written off previously at the date of debts sold.

Price of debts sold is the sum of consideration to be paid by a debt buyer to a debts seller under a debts purchase and sale contract.

4.19.5 Interest expenses Interest expenses are recognized in the consolidated income statement on an accrual basis.i.

4.20

Foreign currency transactions The Bank maintains its accounting system and records all transactions in original currencies. Monetary assets and liabilities denominated in foreign currencies are translated into VND using average interbank rates at the consolidated balance sheet date.

Income and expenses arising in foreign currencies during the year are converted into VND at rates ruling on the transaction dates.

Foreign exchange differences arising from the translation of monetary assets and liabilities into VND in the year are recognized and followed in the “Foreign exchange differences” under “Shareholders’ equity” in the consolidated balance sheet and will be transferred to the consolidated income statement at the end of the financial year.

A N N UA L R E P O RT

4.21 Taxation Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the consolidated income statement.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous year.

Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

4.22

Fiduciary assets Assets held in a fiduciary capacity are not reported in the consolidated financial statements as they are not assets of the Bank.

4.23

Commitments and contingent liabilities At any time, the Bank has outstanding commitments to extend credit. These commitments take the form of approved loans and overdraft facilities. The Bank also provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. Many of the contingent liabilities and commitments will expire without being advanced in whole or in part. Therefore the amounts do not represent firm commitment of future cash flows.

Off balance sheet commitments including guarantees, payment acceptances and irrevocable unconditional loan commitments with specific implementing time.

The classification of off-balance sheet commitments are made only for the purpose of managing and monitoring the credit quality under the policy applied to debt classification as described in Note 4.5.

In accordance with Circular 02, no provision is required for off-balance sheet commitments.

122

123

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.24

Derivative financial instruments

B05/TCTD-HN

4.24.1 Foreign exchange contracts The Bank involves in currency forward contracts and currency swap contracts to facilitate customers to transfer, modify or minimize foreign exchange risk or other market risks, and also for the business purpose of the Bank.

The currency forward contracts are commitments to settle in cash on a pre-determined future date based on the difference between pre-determined exchange rates, calculated on the notional amount. The currency forward contracts are recognized at nominal value at the transaction date and are revalued for the reporting purpose at the exchange rate at the reporting date. Gains or losses realized or unrealized are recognized in the consolidated income statement.

The currency swap contracts are commitments to settle in cash on a pre-determined future date based on the difference between pre-determined exchange rates, calculated on the notional principal amount. The discount or premium arising from difference between spot exchange rate at the effective date of the contract and the forward rate is recognized at the effective date of the contract as an asset if positive or a liability if negative in the consolidated balance sheet. This difference will be amortized on a straight line basis to the consolidated income statement over the term on the contract.

4.24.2 Interest rate swap contracts Commitment value in interest rate swap contracts is not recognized in the consolidated balance sheet. Differences in interest rate swaps are recognized in the consolidated income statement on an accrual basis.

4.24.3 Commodity futures contracts The Bank provides brokerage services for clients enter into the commodity future contracts, and accordingly the value of those contracts is not recognized in the consolidated balance sheet. Income arising from the brokerage transactions is recognized in the consolidated income statement.

4.25

Offsetting Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset financial assets against financial liabilities or vice-versa, and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

4.26

Employee benefits

4.26.1 Post-employment benefits Post-employment benefits are paid to retired employees of the Bank by the Social Insurance Agency which belongs to the Ministry of Labor, Invalids and Social Affairs. The Bank is required to contribute to these post-employment benefits by paying social insurance premium to the Social Insurance Agency at the rate of 18% of an employeeâ&#x20AC;&#x2122;s basic salary on a monthly basis. The Bank has no further obligation.

A N N UA L R E P O RT

4.26.2 Voluntary resignation Under Article 48 of the Labor Code No. 10/2012/QH13 effective from 1 May 2013, the Bank has the obligation to pay voluntary resignation benefits by a half of monthly salary plus other allowances (if any) for each working year up to 31 December 2008 for voluntary resigns. Since 1 January 2009, average monthly salary to compute voluntary resignation allowances is adjusted at the end of reporting period according to the average salary of the six latest months up to the resignation date.

4.26.3 Unemployment allowance According to Circular No. 32/2010/TT-BLĐTBXH providing guidance for Decree No. 127/2008/ND-CP on unemployment insurance, from 1 January 2009, the Bank is required to contribute to unemployment insurance at the rate of 1% of salary and wage budget of unemployment insurance joiners and appropriate 1% of monthly salary and wage of each employee to pay for unemployment insurance fund at the same time.

4.27

Financial instruments Solely for the purpose of providing disclosures about the significance of financial instruments to the consolidated financial position, consolidated results of operations and the nature and extent of risk arising from financial instruments in compliance with Circular No.210/2009/TT-BTC, the Bank classifies its financial instruments as follows:

4.27.1 Financial assets Financial assets recognized at fair value through profit or loss: A financial asset at fair value through profit or loss is a financial asset that meets either of the following conditions: •

•

It is considered by management as held-for-trading. A financial asset is considered as held-for-trading if: -

it is acquired principally for the purpose of selling it in the near term;

-

there is evidence of a recent pattern of short-term profit-taking; or

-

a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument).

Upon initial recognition, it is designated by the Bank as at fair value through profit or loss.

Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Bank has the positive intention and ability to hold to maturity, other than: •

Financial assets that, upon initial recognition, were categorized as such recognized at fair value through profit or loss statements;

•

Financial assets already categorized as available-for-sale;

•

Financial assets that meet the definitions of loans and receivables.

124

125

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

4.27

Financial instruments (continued)

B05/TCTD-HN

4.27.1 Financial assets (continued) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those:

• that the Bank intends to sell immediately or in the near term, which are classified as held-for-trading, and those that the entity on initial recognition designates as at fair value through profit or loss;

• that the Bank, upon initial recognition, designates as available-for-sale; or • for which the Bank may not recover substantially all of its initial investment, other than because of credit deterioration, which are classified as available-for-sale.

Available-for-sale investments Available-for-sale assets are non-derivative financial assets that are designated as available-for-sale or are not classified as:

• Financial assets at fair value through profit or loss; • Held-to-maturity investments; or • Loans and receivables.

4.27.2 Financial liabilities Financial liabilities at fair value through profit or loss A financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions:

•

•

It is considered by management as held-for-trading. A financial liability is considered as held-for-trading if: - it is incurred principally for the purpose of repurchasing it in the near term; -

there is evidence of a recent pattern of short-term profit-taking; or

-

a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument).

Upon initial recognition, it is designated by the Bank as at fair value through profit or loss.

A N N UA L R E P O RT

Financial liabilities carried at amortized cost Financial liabilities which are not classified as financial liabilities at fair value through profit or loss are classified as financial liabilities carried at amortized cost.

The above described classification of financial instruments is solely for presentation and disclosure purpose and is not intended to be a description of how the instruments are measured. Accounting policies for measurement of financial instruments are disclosed in other relevant notes.

4.28

Items with nil balance Items or balances required by Decision No. 16/2007/QD-NHNN dated 18 April 2007 and Circular No. 49/2014/TT-NHNN dated 31 December 2014 issued by SBV stipulating the financial reporting mechanism for credit institutions that are not shown in these consolidated financial statements indicate nil balance.

5.

CASH AND GOLD 31 December 2016 31 December 2015 VND million VND million Cash on hand in VND Cash on hand in foreign currencies Gold on hand

6.

2,187,535

2,290,289

733,126

432,421

36,047

31,589

2,956,708

2,754,299

BALANCES WITH THE STATE BANK OF VIETNAM

31 December 2016 31 December 2015 VND million VND million Balances with the SBV -

In VND

-

In foreign currencies

1,744,926

2,085,467

788,949

591,836

2,533,875

2,677,303

Balances with SBV include settlement and compulsory deposits in accordance with the regulations of the SBV. Under the SBV regulations relating to the compulsory reserve, banks are permitted to maintain a floating balance for the compulsory reserve requirement (â&#x20AC;&#x153;CRRâ&#x20AC;?). The monthly average balance of the reserves must not be less than the preceding monthâ&#x20AC;&#x2122;s average balances of deposits in scope multiplied with the CRR rates as follows:

126

127

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

6.

B05/TCTD-HN

BALANCES WITH THE STATE BANK OF VIETNAM (CONTINUED) CRR rates 31 December 2016 31 December 2015 Deposits in foreign currencies with term of less than 12 months

8.00%

8.00%

Deposits in foreign currencies with term of 12 months and above

6.00%

6.00%

Deposits in VND with term of less than 12 months

3.00%

3.00%

Deposits in VND with term of 12 months and above

1.00%

1.00%

Interest rates per annum at the reporting date are as follows:

31 December 2016 31 December 2015 Deposits in VND Compulsory deposits

0.10%

0.10%

Amount over compulsory deposits

0.00%

0.00%

Compulsory deposits

0.00%

0.00%

Amount over compulsory deposits

0.05%

0.05%

Deposits in foreign currencies

7.

BALANCES WITH AND LOANS TO OTHER CREDIT INSTITUTIONS

7.1

Balances with other credit institutions 31 December 2016 31 December 2015 VND million VND million Current accounts

1,510,529

1,622,165

224,066

51,623

1,286,463

1,570,542

Term deposits

7,548,413

5,865,850

-

In VND

6,185,634

4,957,415

-

In foreign currencies

1,362,779

908,435

9,058,942

7,488,015

-

In VND

-

In foreign currencies

A N N UA L R E P O RT

Interest rates per annum of balances with other credit institutions at the reporting date are as follows:

31 December 2016 31 December 2015 Current accounts -

In VND

-

In foreign currencies

0.15% - 0.3%

0.15%

0.00%

0.01% - 0.15%

3.20% - 9.60%

4.00% - 9.60%

0.80% - 1.70%

0.30% - 1.60%

Term deposits

7.2

-

In VND

-

In foreign currencies

Loans to other credit institutions 31 December 2016 31 December 2015 VND million VND million In VND

8,624,954

4,918,182

In foreign currencies

3,914,978

2,356,355

12,539,932

7,274,537

31/12/2016

31/12/2015

Interest rates per annum of loans to other credit institutions at the reporting date are as follows:

Loans to other credit institutions

7.3

-

In VND

2.40% - 7.00%

4.10% - 8.00%

-

In foreign currencies

1.50% - 3.60%

1.00% - 1.80%

Credit quality for balances with and loans to other credit institutions Analysis of credit quality for balances (excluding current accounts) with and loans to other credit institutions at the reporting date are as follows:

Group Current

31 December 2016 31 December 2015 VND million VND million 20,088,345

13,140,387

128

129

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

8.

B05/TCTD-HN

SECURITIES HELD-FOR-TRADING

31 December 2016 VND million

31 December 2015 (reclassified) VND million

8,035,905

1,842,845

5,823,972

-

960,155

104,413

960,155

-

1,251,778

1,738,432

-

42,253

- Shares issued by local credit institutions

-

42,253

- Shares issued by local economic entities

-

-

(11,285)

(9,105)

(11,285)

(9,105)

8,024,620

1,875,993

Debt securities - Government bonds - Bonds issued by local credit institutions In which: Bonds guaranteed by the Government for settlement - Bonds issued by local economic entities Equity securities

Provision for securities held-for-trading - In which: general provision for debt securities

Movements in general provision for securities held-for-trading for the year ended 31 December 2016 are as follows:

General provision VND million As at 1 January 2016

9,105

Provision made for the year (Note 30)

11,551

Provision reversed during the year (Note 30)

(9,371)

Balance as at 31 December 2016

11,285

A N N UA L R E P O RT

Movements in provision for securities held-for-trading for the year ended 31 December 2015 are as follows:

Specific provision VND million

General provision VND million

Provision for impairment VND million

Total provision VND million

-

-

3,072

3,072

3,786

10,230

-

14,016

(3,786)

(1,125)

(3,072)

(7,983)

-

9,105

-

9,105

As at 1 January 2015 Provision made for the year (Note 30) Provision reversed during the year (Note 30) Balance as at 31 December 2015

The listing status of securities held-for-trading is as follows:

31 December 2016 31 December 2015 VND million VND million

9.

Debt securities

8,035,905

1,842,845

- Listed

6,822,527

-

- Unlisted

1,213,378

1,842,845

Equity securities

-

42,253

- Unlisted

-

42,253

8,035,905

1,885,098

31 December 2016 VND million

31 December 2015 (reclassified) VND million

141,203,267

110,381,694

1,038,376

1,408,056

2,166

-

362,158

387,063

10,037

3,076

142,616,004

112,179,889

LOANS TO CUSTOMERS

Loans to local economic entities and individuals Discounted bills and valuable papers Payments on behalf of customers Loans financed by trusted funds Loans to foreign economic entities and individuals

130

131

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

9.

B05/TCTD-HN

LOANS TO CUSTOMERS (CONTINUED) Interest rates per annum of loans to customers at the reporting date are as follows:

31 December 2016 31 December 2015 Loans to customers in VND

0.84% - 21.84%

0.00% - 21.84%

Loans to customers in foreign currencies

0.00% - 5.70%

0.00% - 6.50%

9.1. Loan portfolio by quality 31 December 2015 (reclassified)

31 December 2016 VND million

%

VND million

%

138,203,644

96.91

108,565,644

96.77

2,166,056

1.52

1,750,539

1.56

Substandard

396,736

0.28

309,301

0.28

Doubtful

474,551

0.33

537,739

0.48

1,375,017

0.96

1,016,666

0.91

142,616,004

100.00

112,179,889

100.00

Current Special mention

Loss

According to the Bankâ&#x20AC;&#x2122;s report on loans rescheduled without changing in the loan group to SBV, as at 31 December 2016, the outstanding loans which are maintained in the same group as they were classified before rescheduled in accordance with Clause 3a, Article 10 of Circular 02/2013/TT-NHNN and previous Decree 780/QD-NHNN as follows:

31 December 2016 31 December 2015 VND million VND million Rescheduled or extended portions of loans maintained in Group 1 (Current) Rescheduled or extended portions of loans maintained in Group 2 (Special mention)

A N N UA L R E P O RT

750,020

2,227,184

1,033

18,079

751,053

2,245,263

9.2.

Loan portfolio by term

Short term Medium term Long term

9.3.

31/12/2016 VND million 35,884,319 62,492,501 44,239,184 142,616,004

31 December 2015 (reclassified) VND million

%

25.16 43.82 31.02 100.00

30,492,970 45,690,256 35,996,663 112,179,889

%

27.18 40.73 32.09 100.00

Loan portfolio by industrial sectors 31 December 2015 (reclassified)

31 December 2016 VND million Loans to economic entities Agriculture, forestry and aquaculture Mining and quarrying Manufacturing and processing Electricity, petroleum and hot water manufacturing and distributing Water supply, waste and wastewater management and processing Construction Wholesale and retail trade; repair of motor vehicles, motor cycles Transportation and warehousing Storages and foods services Information and communication Banking, finance and insurance Real estates Science and technology Administration activities and supportive services State administration, security and national defence: Party, Unions, compulsory social guarantees Education and training Health care and social work Arts and entertainment Other services Household businesses Loans to individuals

% VND million

%

80,972,179 66,167 1,528,042 16,793,775 1,270,437 24,549 7,329,029 10,798,437 6,045,594 2,370,756 894,777 3,911,569 24,182,046 161,191 462,050 -

56.78 0.05 1.07 11.78 0.89 0.02 5.14 7.57 4.24 1.66 0.63 2.74 16.96 0.11 0.32 0.00

62,056,029 172,336 2,234,085 13,317,353 1,030,914 67,045 4,542,728 8,395,698 7,096,432 236,939 1,799,047 1,849,102 17,579,947 66,708 382,823 1,200

55.32 0.15 1.99 11.87 0.92 0.06 4.05 7.48 6.33 0.21 1.60 1.65 15.68 0.06 0.34 0.00

31,624 97,574 80,563 4,285,579 638,420 61,643,825 142,616,004

0.02 0.07 0.06 3.00 0.45 43.22 100.00

47,336 74,458 47,039 1,366,745 1,748,094 50,123,860 112,179,889

0.04 0.07 0.04 1.22 1.56 44.68 100.00

132

133

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

9.

LOANS TO CUSTOMERS (CONTINUED)

9.4.

Phân tích dư nợ theo loại hình doanh nghiệp 31 December 2015 (reclassified)

31 December 2016 VND million

%

VND million

%

80,972,179

56.78

62,056,029

55.32

3,795,377

2.66

3,883,063

3.46

32,321,234

22.66

35,341,185

31.50

283,305

0.20

566,505

0.50

41,220,658

28.91

20,183,279

18.00

881,741

0.62

903,358

0.81

1,701,518

1.19

760,975

0.68

31,547

0.02

90,141

0.08

Administration units, Party, unions, associations

422,558

0.30

166,913

0.15

Others

314,241

0.22

160,610

0.14

61,643,825

43.22

50,123,860

44.68

142,616,004

100.00

112,179,889

100.00

Loans to economic entities State-owned one-member limited companies Other limited companies Joint-stock state-owned companies with Other joint-stock companies Private companies Foreign-invested companies Cooperatives and cooperative unions

Loans to individuals

10.

B05/TCTD-HN

PROVISION FOR LOANS TO CUSTOMERS Movements in provision for loans to customers for the year ended 31 December 2016 are as follows:

31 December 2016 VND million

31 December 2015 (reclassified) VND million

General provision

1,001,355

756,015

Specific provision

494,120

411,226

1,495,475

1,167,241

A N N UA L R E P O RT

Movements in provision for loans to customers for the year ended 31 December 2016 are as follows:

As at 1 January 2016 Provision made for the year (Note 35) Provision reversed during the year (Note 35) Use of provision As at 31 December 2016

Specific provision VND million

General provision VND million

Total VND million

411,226

756,015

1,167,241

4,014,875

474,998

4,489,873

(201,729)

(229,658)

(431,387)

(3,730,252)

-

(3,730,252)

494,120

1,001,355

1,495,475

Movements in provision for loans to customers for the year ended 31 December 2015 are as follows:

As at 1 January 2015 Provision transferred from subsidiary at the acquisition date Provision made for the year (Note 35) Provision reversed during the year (Note 35) Use of provision As at 31 December 2015

11.

Specific provision VND million

General provision VND million

Total VND million

396,382

563,395

959,777

37,566

3,471

41,037

1,301,377

412,607

1,713,984

(218,236)

(223,458)

(441,694)

(1,105,863)

-

(1,105,863)

411,226

756,015

1,167,241

DEBTS PURCHASED

Debts purchased in VND Provision for debts purchased

31 December 2016 VND million

31 December 2015 (reclassified) VND million

19,466

32,241

(973)

(1,612)

18,493

30,629

134

135

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

11.

B05/TCTD-HN

DEBTS PURCHASED (CONTINUED) Breakdown of principals and interest of debts purchased is as follows:

31 December 2016 VND million

31 December 2015 (reclassified) VND million

Principal of debts purchased

54,821

67,366

Interest of debts purchased

21,538

21,768

76,359

89,134

2016 VND million

2015 (reclassified) VND million

1,612

491

(639)

1,121

973

1,612

31 December 2016 VND million

31 December 2015 (reclassified) VND million

Available-for-sale securities

38,575,369

39,243,607

- Debt securities

38,428,116

39,138,605

147,253

105,002

Held-to-maturity securities

8,560,113

6,902,350

- VAMC special bonds

2,922,058

3,741,995

- Other debt securities

5,638,055

3,160,355

(1,460,558)

(1,128,768)

45,674,924

45,017,189

Movements in provision for debts purchased are as follows:

Opening balance Provision made/(reversed) for the year (Note 35) Closing balance

12.

INVESTMENT SECURITIES Investment securities at the reporting date included:

- Equity securities

Provision for investment securities

A N N UA L R E P O RT

12.1

Available-for-sale securities

31 December 2016 VND million

31 December 2015 (reclassified) VND million

Debt securities

38,428,116

39,138,605

Government bonds

15,483,278

19,461,753

Bonds issued by local credit institutions

14,858,346

11,538,010

In which: Bonds with settlement guaranteed by the Government

10,156,005

6,300,484

8,086,492

8,138,842

147,253

105,002

Bonds issued by local economic entities

2,255

2,255

Bonds issued by local credit institutions

144,998

102,747

Provision for available-for-sale securities

(76,996)

(89,865)

General provision

(76,996)

(89,865)

38,498,373

39,153,742

Bonds issued by local economic entities Equity securities

12.2

Held-to-maturity securities (excluding special bonds issued by VAMC) 31 December 2016 31 December 2015 VND million VND million Debt securities Government bonds

3,160,355

571,803

874,355

Bonds issued by local credit institutions

30,001

30,000

Bonds issued by local economic entities

5,036,251

2,256,000

(16,022)

(16,920)

Provision for held-to-maturity securities General provision

12.3

5,638,055

(16,022)

(16,920)

5,622,033

3,143,435

Special bonds issued by VAMC 31 December 2016 31 December 2015 VND million VND million Par value Provision for VAMC bonds

2,922,058

3,741,995

(1,367,540)

(1,021,983)

1,554,518

2,720,012

136

137

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

12.

INVESTMENT SECURITIES (CONTINUED)

12.4

Analysis of credit quality

B05/TCTD-HN

Analysis of credit quality for securities (excluding special bonds issued by VAMC) which are classified as assets bearing credit risk is as follows:

Current loan

12.5

31 December 2016 VND million

31 December 2015 (reclassified) VND million

15,903,094

15,090,593

Provision for investment securities 31 December 2016 31 December 2015 VND million VND million General provision for unlisted corporate bonds (*) Provision for special bonds issued by VAMC (**)

93,018

106,785

1,367,540

1,021,983

1,460,558

1,128,768

(*) Movements in provision for unlisted corporate bonds for the year ended 31 December 2016 are as follows:

General provision VND million As at 1 January 2016 Provision made for the year (Note 31) Provision reversed during the year (Note 31) As at 31 December 2016

A N N UA L R E P O RT

106,785 24,781 (38,548) 93,018

Movements in provision for unlisted corporate bonds for the year ended 31 December 2015 are as follows:

Specific provision VND million

General provision VND million

Total VND million

319,247

140,272

459,519

43,277

-

43,277

149,239

67,101

216,340

Provision reversed for the year (Note 31)

(176,303)

(100,588)

(276,891)

Utilization of provision for the year

(335,460)

-

(335,460)

-

106,785

106,785

As at 1 January 2015 Provision transferred from subsidiary at the control date Provision made for the year (Note 31)

As at 31 December 2015

(**) Movements in provision for VAMC special bonds are as follows:

2016 VND million

2015 VND million

1,021,983

463,635

879,386

686,611

Provision reversed during the year (Note 35)

(155,456)

(128,263)

Utilization of provision for the year

(378,373)

-

1,367,540

1,021,983

Opening balance Provision made for the year (Note 35)

Closing balance

13.

LONG-TERM INVESTMENTS 31 December 2016 31 December 2015 VND million VND million Other long-term investments â&#x20AC;&#x201C; cost

582,672

601,230

Provision for long-term investments

(4,926)

(4,079)

577,746

597,151

138

139

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

13.

LONG-TERM INVESTMENTS (CONTINUED)

13.1

Other long-term investments 31 December 2016

31 December 2015

Ownership

At cost

Ownership

At cost

%

VND million

%

VND million

2.08

570,405

2.28

570,405

-

-

5.77

16,500

11.00

660

11.00

660

Ky An Security JSC

-

-

11.00

748

Mercury Investment and Trading JSC

-

-

10.00

600

Hue Real Estate Trading and Investment Co Ltd

-

-

0.50

50

10.00

600

10.00

600

PCB Investment JSC

6.64

7,962

6.64

7,962

Society for Worldwide Interbank Financial Telecommunication

0.00

1,005

0.00

1,005

Banking Operations Training and Advisory JSC

7.79

1,040

9.87

1,040

Vietnam National Financial Switching JSC

0.42

1,000

0.52

1,000

-

-

11.00

660

Vietnam Airlines Corporation Vietnam TCO Investment JSC Vietnam Real Estate Exchange JSC

TCBOND Consultancy and Investment Company Limited

Techcom Developer JSC

582,672

13.2

B05/TCTD-HN

601,230

Provision for long-term investments

Opening balance Provision made for the year (Note 34) Closing balance

A N N UA L R E P O RT

2016 VND million

2015 VND million

4,079

3,842

847

237

4,926

4,079

14.

FIXED ASSETS

14.1. Tangible fixed assets Movements in tangible fixed assets for the year ended 31 December 2016 are as follows:

VND million

Buildings & building improvements

Machines and equipment

Means of transportation

Other

Total

As at 1 January 2016

103,356

1,089,097

146,967

2,578

1,341,998

Addition

138,042

40,366

8,314

-

186,722

-

39

-

-

39

(208)

(6,107)

(1,936)

(90)

(8,341)

-

(1,787)

-

(344)

(2,131)

241,190

1,121,608

153,345

2,144

1,518,287

15,786

714,147

72,081

1,837

803,851

6,279

125,677

14,017

214

146,187

3

-

131

-

134

(208)

(5,420)

(1,683)

(90)

(7,401)

-

(950)

-

(370)

(1,320)

21,860

833,454

84,546

1,591

941,451

87,570

374,950

74,886

741

538,147

219,330

288,154

68,799

553

576,836

Cost

Other increases Disposal Other decreases As at 31 December 2016 Accumulated depreciation As at 1 January 2016 Charge for the year Other increases Disposal Other decreases As at 31 December 2016 Net book value As at 1 January 2016 As at 31 December 2016

140

141

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

14.

B05/TCTD-HN

FIXED ASSETS (CONTINUED)

14.1. Tangible fixed assets (continued) Movements in tangible fixed assets for the year ended 31 December 2015 are as follows:

VND million

Buildings & building improvements

Machines and equipment

Means of transportation

Other

Total

105,774

1,105,144

146,814

3,667

1,361,399

25,041

41,642

10,218

-

76,901

14

679

3,313

214

4,220

(27,415)

(24,788)

(13,378)

(1,118)

(66,699)

(58)

(33,580)

-

(185)

(33,823)

103,356

1,089,097

146,967

2,578

1,341,998

12,794

626,113

62,890

2,570

704,367

3,780

140,392

15,767

363

160,302

3

416

2,581

202

3,202

(733)

(24,569)

(8,677)

(1,118)

(35,097)

(58)

(28,205)

(480)

(180)

(28,923)

15,786

714,147

72,081

1,837

803,851

As at 1 January 2015

92,980

479,031

83,924

1,097

657,032

As at 31 December 2015

87,570

374,950

74,886

741

538,147

Cost As at 1 January 2015 Addition Other increases Disposals Other decreases As at 31 December 2015 Accumulated depreciation As at 1 January 2015 Charge for the year Other increases Disposal Other decreases As at 31 December 2015 Net book value

A N N UA L R E P O RT

Additional information of tangible fixed assets:

31 December 2016 31 December 2015 VND million VND million Cost value of tangible fixed assets which have been fully depreciated but still in use

297,613

176,904

14.2 Intangible fixed assets Movements in intangible fixed assets for the year ended 31 December 2016 are as follows:

VND million

Computer software

Definite land use rights

Others

Total

As at 1 January 2016

641,837

22,250

4,403

668,490

Addition

161,272

593,518

-

754,790

Cost

Other decreases As at 31 December 2016

(230)

-

-

(230)

802,879

615,768

4,403

1,423,050

321,986

341

2,229

324,556

Accumulated amortization As at 1 January 2016 Charge for the year

86,363

6,207

78

92,648

Other increases

190

-

-

190

Other decreases

(230)

-

-

(230)

408,309

6,548

2,307

417,164

As at 31 December 2016 Net book value As at 1 January 2016

319,851

21,909

2,174

343,934

As at 31 December 2016

394,570

609,220

2,096

1,005,886

142

143

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

14.

B05/TCTD-HN

FIXED ASSETS (CONTINUED)

14.2 Intangible fixed assets (continued) Movements in intangible fixed assets for the year ended 31 December 2015 are as follows:

VND million

Computer software

Definite land use rights

Others

Total

597,067

23,112

4,152

624,331

47,069

-

295

47,364

Cost As at 1 January 2015 Addition Other increases

926

-

40

966

(3,225)

(862)

(84)

(4,171)

641,837

22,250

4,403

668,490

242,491

504

1,863

244,858

78,904

35

409

79,348

591

-

40

631

-

(198)

(83)

(281)

321,986

341

2,229

324,556

As at 1 January 2015

354,576

22,608

2,289

379,473

As at 31 December 2015

319,851

21,909

2,174

343,934

Disposal As at 31 December 2015 Accumulated amortization As at 1 January 2015 Charge for the year Other increases Other decreases As at 31 December 2015 Net book value

Additional information on intangible fixed assets:

31 December 2016 31 December 2015 VND million VND million Cost value of intangible fixed assets which have been fully depreciated but still in use

15.

42,753

13,804

INVESTMENT PROPERTY

Investment property mainly includes Techcombank Building with cost and accumulated amortization amounting to VND 1,431,035 million and VND 167,294 million, respectively, as at 31 December 2016.

Movements in investment properties for the year ended 31 December 2016 are as follows:

A N N UA L R E P O RT

Building VND million Cost As at 1 January 2016

1,442,827

Transfer from construction in progress

4,429

As at 31 December 2016

1,447,256

Accumulated amortization As at 1 January 2016

132,643

Charge for the year

36,077

As at 31 December 2016

168,720

Net book value As at 1 January 2016

1,310,184

As at 31 December 2016

1,278,536

Movements in investment properties for the year ended 31 December 2015 is as follows:

VND million

Land use right

Buildings

Total

19,526

1,470,130

1,489,656

(19,526)

(27,303)

(46,829)

-

1,442,827

1,442,827

As at 1 January 2015

-

100,267

100,267

Charge for the year

-

36,987

36,987

Disposal

-

(4,611)

(4,611)

As at 31 December 2015

-

132,643

132,643

19,526

1,369,863

1,389,389

-

1,310,184

1,310,184

Cost As at 1 January 2015 Disposal As at 31 December 2015 Accumulated amortization

Net book value As at 1 January 2015 As at 31 December 2015

144

145

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

16.

B05/TCTD-HN

OTHER ASSETS

31 December 2016 VND million

31 December 2015 (reclassified) VND million

Other receivables

6,829,557

10,043,380

Internal receivables

67,263

48,214

6,762,294

9,995,166

496,778

541,008

- Receivables related to Interest Subsidy Program

21,148

21,148

- Prepaid for suppliers

59,508

47,919

- Deposits for gold, commodity and foreign currencies trading in future markets

74,000

65,442

135,495

191,259

- Receivables from loans sold contract (iii)

3,488,943

6,801,015

- Receivables from deferred L/C (iv)

2,189,972

1,791,534

112

4,302

External receivables - Deposits for office rental (i)

- Construction in progress (ii)

- Corporate income tax overpaid (Note 24) -

Receivables from VAMC (v)

68,149

27,149

-

Receivables from securities trading

11,688

1,060

- Other external receivables

216,501

503,330

Interest and fees receivable

3,992,328

3,046,539

27,659

2,645

Other assets

650,888

595,485

- Materials

19,960

23,410

485,258

532,546

29,647

39,529

116,023

-

(1,504,323)

(2,614,476)

9,996,109

11,073,573

Deferred tax assets (vi)

- Prepaid expenses - Goodwill (vii) -

Other assets

Provision for other assets (viII)

A N N UA L R E P O RT

(i) These represent deposits for office rental of the Bank’s headquarter and branches, in which the largest amount was the deposit for the South Head Office at Lim Tower Building at No. 9-11, Ton Duc Thang Street, Ben Nghe ward, District 1, Ho Chi Minh City amounting to VND392 billion. (ii) This mainly includes costs for “Vo Van Kiet High School” construction for the educational development investment project of Kien Giang Province People’s Committee sponsored by the Bank amounting to VND87,753 million. The construction was completed and put into use but the finalization and hand-over procedures are still pending. (iii) Receivables from loans sold are outstanding receivables from licensed debts purchasing companies.

(iv) Receivables from deferred L/C are from importers who are the Bank’s clients of usance payable at sight imported letter of credit financing service provided by the Bank. This product has been approved by the SBV under Official letter No. 5698/ NHNN-TD. Accordingly, the Bank finances the usance letter of credit for the beneficiaries (exporters) prior to the matured date of the letter of credits dates and earns fees for advanced settlement services from 1.00% to 6.00% of advanced settlement value. Settlement period ranges from 1 to 17 months. (v) Receivables from VAMC related to termination before due date of special bonds issued by VAMC. The Bank has not received back several loans due to the incompletion of procedures to repurchase rights of creditors. These receivables correspond with the remaining outstanding balance of the loans that will be bought back after the final settlement of special bonds. (vi) Movement of deferred income tax assets during the year is as follows:

Deferred income tax assets related to deductible temporary tax differences

VND million

Opening balance

Incurred

Reversed

Closing balance

2,645

25,026

(12)

27,659

(vii) Goodwill of the Bank was derived from the acquisition of Technological and Commercial Finance Company Limited (“TCF”) for the prior year. Change in goodwill for the period is presented as follows:

31 December 2016 31 December 2015 VND million VND million Total goodwill

49,411

49,411

Amortization periods

5 years

5 years

- Opening balance of unamortized goodwill

39,529

-

-

49,411

- Amortization for the period

(9,882)

(9,882)

Total closing balance of unamortized goodwill

29,647

39,529

- Increase from the acquisition of TCF Goodwill decrease for the period

146

147

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

16.

B05/TCTD-HN

OTHER ASSETS (CONTINUED) (viii) Provision for other assets comprises of provision for inventories, overdue receivables, receivables from deferred L/C and receivables from loans sold are as follows:

31 December 2016 VND million

31 December 2015 (reclassified) VND million

1,435,143

2,555,828

- General provision

22,242

2,087

- Specific provision

1,412,901

2,553,741

69,180

58,648

1,504,323

2,614,476

Provision for credit risk

Other provision

Movements in provision for other assets for the year are as follows:

2016 VND million

2015 VND million

2,614,476

785,982

-

26,863

(1,141,115)

1,805,900

General provision made for receivables from deferred L/C (Note 35)

20,429

-

Provision made for other assets (Note 34)

11,895

8,246

Reversal of provision for impairment of inventories (Note 34)

(1,362)

3,108

Opening balance Transferred from subsidiary at the date of acquisition Provision made/(reversed) for outstanding receivables from loans sold (Notes 35)

Utilization of provision to write off overdue receivables Closing balance

17.

-

(15,623)

1,504,323

2,614,476

BORROWINGS FROM THE STATE BANK OF VIETNAM 31 December 2016 31 December 2015 VND million VND million Borrowings from the State Bank of Vietnam

1,447,970

-

The borrowings from the State Bank of Vietnam at 31 December 2016 has term of 7 days and bear interest rate of 5% per annum.

A N N UA L R E P O RT

18.

DEPOSITS AND BORROWINGS FROM OTHER CREDIT INSTITUTIONS

18.1

Deposits from other credit institutions 31 December 2016 31 December 2015 VND million VND million Demand deposits

449,116

227,645

- In VND

448,525

186,235

- In foreign currencies

591

41,410

Term deposits

14,665,801

7,851,562

- In VND

10,526,500

4,660,000

4,139,301

3,191,562

15,114,917

8,079,207

- In foreign currencies

Interest rates per annum of deposits from other credit institutions at the reporting date are as follows:

31 December 2016 31 December 2015 Deposits from other credit institutions

18.2

- In VND

2.70% - 6.20%

3.80% - 5.60%

- In foreign currencies

0.85% - 1.60%

0.25% - 1.05%

Borrowings from other credit institutions 31 December 2016 31 December 2015 VND million VND million In VND

6,231,630

10,649,317

In foreign currencies

3,539,579

2,017,466

9,771,209

12,666,783

Interest rates per annum of borrowings from other credit institutions at the reporting date are as follows:

31 December 2016 31 December 2015 Borrowings from other credit institutions - In VND - In foreign currencies

3.2% - 5.00%

3.70% - 5.30%

0.75% - 4.79%

0.60% - 5.05%

148

149

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

19.

B05/TCTD-HN

DEPOSITS FROM CUSTOMERS

19.1. Analysis by category of deposits 31 December 2016 31 December 2015 VND million VND million Current accounts

35.826.887

26.787.141

Current accounts in VND

31.030.697

23.861.243

4.796.190

2.925.898

Term deposits

134.053.365

112.902.604

Term deposits in VND

125.958.279

102.664.274

Term deposits in foreign currencies

8.095.086

10.238.330

Marginal deposits

3.568.677

2.549.801

Marginal deposits in VND

3.405.369

2.049.976

163.308

499.825

173.448.929

142.239.546

Current accounts in foreign currencies

Marginal deposits in foreign currencies

Interest rates per annum of deposits from customers at the reporting date are as follows:

31 December 2016 31 December 2015 Demand deposits in VND

0.00% - 0.30%

0.10% - 0.30%

Demand deposits in foreign currencies

0.00% - 1.25%

0.00% - 0.01%

Term deposit in VND

0.50% - 11.94%

0.20% - 11.00%

Term deposit in foreign currencies

0.00% - 0.60%

0.00% - 2.00%

A N N UA L R E P O RT

19.2. Analysis of deposits portfolio by ownership

Deposits from organizations State-owned one-member limited companies Other limited companies Joint-stock State-owned companies Other joint-stock companies Private enterprises Foreign-invested enterprises Cooperatives and cooperative unions Administration units, Party, unions, associations Others Deposits from individuals

31 December 2016 VND million

%

31 December 2015 VND million

%

61.662.821

35.55

48.642.808

34.20

6.186.670

3.57

6.793.838

4.78

23.719.606

13.68

20.093.264

14.13

585.640

0.34

367.481

0.26

26.386.488

15.21

16.951.504

11.92

160.296

0.09

135.515

0.10

2.690.503

1.55

2.058.139

1.45

7.372

0.00

16.045

0.01

1.145.799

0.66

1.488.603

1.05

780.447

0.45

738.419

0.52

111.786.108

64.45

93.596.738

65.80

173.448.929

100.00

142.239.546

100.00

150

151

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

20.

B05/TCTD-HN

DERIVATIVES AND OTHER FINANCIAL LIABILITIES VND million

31 December 2016

31 December 2015

Total contract nominal value

Total carrying value

Total contract nominal value

Total carrying value

Foreign exchange forward contracts

23,144,183

(85,978)

14,453,007

(73,730)

Foreign exchange swap contracts

52,521,119

18,086

22,618,252

(12,161)

75,665,302

(67,892)

37,071,259

(85,891)

Total contract nominal value is at the foreign exchange rate at the value date.

Total carrying value is at the foreign exchange rate at the date of consolidated financial statements.

21.

OTHER BORROWED AND ENTRUSTED FUNDS 31 December 2016 31 December 2015 VND million VND million Other borrowed and entrusted funds in VND - International credit project with Japan Bank for International Cooperation

173,632

137,176

- Bank for Investment and Development of Vietnam

413,751

199,245

587,383

336,421

A N N UA L R E P O RT

22.

VALUABLE PAPERS ISSUED

Valuable papers issued and categorized by terms follow:

31 December 2016 31 December 2015 VND million VND million Up to 12 months (i)

42,822

94,187

From 12 months to 5 years (ii)

3,480,184

1,150,000

Over 5 years (iii)

3,891,836

3,889,709

Convertible bonds issued (iv)

3,000,000

3,000,000

10,414,842

8,133,896

(i)

These certificates of deposits bear interest at rates ranging from 6.00% to 7.20% per annum (2015: 5.00% to 7.05%).

(ii) These certificates of deposits bear interest at rates ranging from 7.00% to 8,00% per annum (2015: 7.00% to 7.90%). (iii) These bonds and deposit certificates bear interest rates ranging from 8.20% to 8.80% per annum (2015: 8.20% to 8.80%). (iv) These represent convertible bonds issued to the shareholders of the Bank with term of 10 years. The bonds were issued in 2010 and bear an interest at rate of 0% per annum in the first five years. From the sixth year, interest rate applied is the lower of 15% per annum or ceiling interest rate applied for equivalent bonds. The bond holders have an option to convert these bonds to ordinary shares of the Bank after five years. The conversion rate is VND101,135.72.

On 26 July 2016, the Bank’s Board of Directors issued Decision No. 1088/QD-HDQT-NQ-TCB amending and supplementing some conditions of convertible bonds issued by the Bank in 2010. Accordingly, the conversion of bonds is extended from the 6th year to another later time before the bonds’ maturity date which will be determined and announced by the Bank’s Board of Directors. During the extension period to the day immediately before the first day of the conversion, interest rate applicable is 0.00%. From the first day of the conversion, the applicable interest rate is the lower of 15.00% per annum or ceiling interest rates applicable to similar bonds. The value of rights to bond conversion shall be added every year with an amount equal to the interest on the bonds calculated at 15% per annum, for extended periods of 0% interest rate per year.

Initial conversion rate is VND17,188.38 for a common stock, par value VND10,000 at the date of issuance. After the Bank issued bonus shares in 2011, the rate was adjusted to VND13,683.04 for a common stock due to the anti-dilution provisions of the convertible bonds (see also Note 25.3).

152

153

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

23.

B05/TCTD-HN

OTHER LIABILITIES 31 December 2016 31 December 2015 VND million VND million Accrued interest and fee payables

2,195,582

2,086,665

Other liabilities

2,727,936

1,907,627

179,195

194,232

2,548,741

1,713,395

-- Remittance payables

104,153

86,783

-- Payable to employees

456,896

280,502

-- Settlement on behalf of other credit institutions

101,399

201,377

-- Tax payables (i)

376,979

224,551

8,903

62,817

-- Other accrued expenses

452,838

242,015

-- Salaries accrued expenses

220,199

176,245

-- Payables relating to marketing and promotion

16,093

3,524

-- Bonus and welfare funds

17,864

12,528

-- Disbursements awaiting for settlement (ii)

200,892

42,235

-- Deposit certificates of customers awaiting settlement

327,624

135,236

-- Other payables

264,901

245,582

4,923,518

3,994,292

Internal payables External payables

-- Deferred income

(i) Tax payables:

31 December 2016 31 December 2015 VND million VND million Value added tax Corporate income tax (“CIT”) Other taxes

A N N UA L R E P O RT

13,438

18,565

336,725

189,170

26,816

16,816

376,979

224,551

Refer to Note 24 for details of tax payables. (ii) This represents the amounts disbursed to customers under credit agreements which have been entered into but not yet disbursed or transferred to the beneficiary accounts. These amounts have been settled in January 2017.

24.

OBLIGATIONS TO THE STATE BUDGET VND million

Value added tax Corporate income tax Other taxes Taxes payables

24.1

Opening balance payable

Opening balance receivable

Incurred during the year Paid

Closing balance -payable

Closing balance receivable

18,565

-

163,961

(7,683)

(161,405)

13,438

-

189,170

(4,302)

872,808

29

(721,092)

336,725

(112)

16,816

-

243,241

-

(233,241)

26,816

-

224,551

(4,302)

1,280,010

(7,654)

(1,115,738)

376,979

(112)

Payable Adjustment

Current Corporate Income Tax Current Corporate Income Tax payables are determined based on taxable income of the current year. Taxable income may be different from the amount reported in the consolidated income statement since taxable income excludes income which are eligible for tax or expenses which are subtracted in prior years due to the differences between the Bankâ&#x20AC;&#x2122;s accounting policies and the current tax policies, and also excludes tax-exempted income and non-deductible expenses. The current Corporate Income Tax payables of the Bank are calculated based on the statutory tax rates applicable at the end of the year.

154

155

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

24.

OBLIGATIONS TO THE STATE BUDGET (CONTINUED)

24.1

Current corporate income tax (continued)

B05/TCTD-HN

Provision for current corporate income tax for the year ended 31 December 2016 is computed as follows:

2016 VND million

2015 VND million

3,996,640

2,037,205

(470)

(10,815)

(727)

(47,508)

12,507

20,323

355,784

243,120

(2,502)

(50,936)

4,361,232

2,191,389

872,246

482,106

562

1,768

-

(12)

Current corporate income tax expense for the year

872,808

483,862

Opening corporate income tax payable

189,170

85,696

(4,302)

(241)

(721,092)

(381,295)

-

(505)

29

(2,649)

336,725

189,170

(112)

(4,302)

Profit before tax Adjustments: -

Non-taxable dividend income Other non-taxable income

-

Adjustment on profit for consolidation purpose

-

Non-deductible expense

-

Loss from subsidiary

Taxable corporate income -

Corporate income tax expense calculated on taxable income of current period

- Adjustment for under provision of corporate income tax expense in prior year -

Effect of changes in tax rate applied to subsidiaries

Opening corporate income tax receivable Corporate income tax paid for the year Transferred from TCF at the date of acquisition Corporate income tax adjusted for prior years Closing corporate income tax payable Closing corporate income tax receivable

A N N UA L R E P O RT

24.2

Applicable tax rate Effective from 1 January 2016, the Bankâ&#x20AC;&#x2122;s income tax rate is reduced from 22% to 20% due to change in the income tax law.

24.3

Deferred corporate income tax

2016 VND million

2015 VND million

25,026

472

(12)

(11,005)

Deferred corporate income tax benefit/(expenses) arising from:

25.

-

Deductible temporary tax differences

-

Reversal of deferred income taxes payable

-

Use of losses transferred from prior years

-

(13,535)

-

Changes in tax rate

-

(87)

25,014

(24,155)

CAPITAL AND RESERVES

25.1 Statement of changes in equity For the year ended 31 December 2016:

VND million

Reserve to Share supplement capital capital As at 1 January 2016

Financial reserve

Other reserves

Total reserves

Retained earnings

Total

8,878,079

3,492,508

1,251,921

474

4,744,903

2,834,584

16,457,566

Net profit for the year

-

-

-

-

-

3,148,846

3,148,846

Utilization of reserves

-

-

(127)

-

(127)

-

(127)

Appropriation to bonus and welfare fund

-

-

-

-

-

(19,716)

(19,716)

Other movements

-

-

-

-

-

(93)

(93)

Appropriation of reserves

-

166,188

308,218

-

474,406

(474,406)

-

As at 31 December 2016

8,878,079

3,658,696

1,560,012

474

5,219,182

5,489,215

19,586,476

156

157

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

25.

B05/TCTD-HN

CAPITAL AND RESERVES (CONTINUED)

25.1 Statement of changes in equity (continued) For the year ended 31 December 2015:

VND million

Reserve to Share supplement capital capital As at 1 January 2015

Financial reserve

Other reserves

Total reserves

Retained earnings

Total

8,878,079

3,415,781

1,135,305

474

4,551,560

1,556,411

14,986,050

Net profit for the year

-

-

-

-

-

1,529,188

1,529,188

Utilization of reserves

-

-

(16,628)

-

(16,628)

-

(16,628)

Appropriation to bonus and welfare fund

-

-

-

-

-

(25,472)

(25,472)

Other movements

-

(620)

(620)

-

(1,240)

(14,332)

(15,572)

Appropriation of reserves

-

77,347

133,864

-

211,211

(211,211)

-

As at 31 December 2015

8,878,079

3,492,508

1,251,921

474

4,744,903

2,834,584

16,457,566

25.2. Share capital 31 December 2016

Authorized share capital

31 December 2015

Number of shares

VND million

Number of shares

VND million

887,807,871

8,878,079

887,807,871

8,878,079

887,807,871

8,878,079

887,807,871

8,878,079

887,807,871

8,878,079

887,807,871

8,878,079

Issued share capital Ordinary shares Shares in circulation Ordinary shares

Norminal value of the Bank’s ordinary share is VND10,000. Each share is entitled to one vote at meetings of the Bank. All shareholders are entitled to receive dividend as declared from time to time. All ordinary shares are ranked equally with regard to the Bank’s residual assets.

As described in Note 4.17 and Note 22, mandatory convertible bonds also ranked equally to ordinary shares with regard to the Bank’s residual assets (See also Note 22).

A N N UA L R E P O RT

25.3. Information on compound financial instruments 31 December 2016 31 December 2015 VND million VND million Convertible bonds Debt component

157,713

82,785

Equity component

2,842,287

2,917,215

Total value

3,000,000

3,000,000

Number of bonds was committed by investors to convert to ordinary shares is 28,422,873, accounting for 94.74% (31 December 2015: 97.24%) of total convertible bonds issued. Commitment conversion ratio changes as decided by investors after the Bankâ&#x20AC;&#x2122;s Board of Director issued Decision No. 1088/QD-NQ-HÄ?QT-TCB to amend and supplement some conditions of the convertible bond (see also Note 22).

25.4. Dividends Retained earnings 2015 after deducting the statutory funds were retained and not distributed to the shareholders in order to support the business operations of the Bank.

26.

INTEREST AND SIMILAR INCOME

Interest income from deposits Interest income from loans Income from debt securities investments Income from guarantee services Income from debts purchasing activities Other income from credit activities

2016 VND million

2015 VND million (reclassified)

220,924

276,210

11,967,798

9,143,826

3,298,872

3,736,329

223,400

149,065

18,054

10,739

7,029

63,218

15,736,077

13,379,387

158

159

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

27.

INTEREST AND SIMILAR EXPENSES 2016 VND million

2015 VND million

6,727,965

5,556,485

Interest expenses for borrowings

288,629

278,794

Interest expenses for valuable paper issued

577,262

330,284

-

144

7,593,856

6,165,707

2016 VND million

2015 (reclassified) VND million

Fees and commission income from

2,558,990

1,815,286

Settlement and cash services

1,270,342

1,125,544

1,784

4,213

Trustee and agency services

61,050

30,579

Consulting services

75,926

211,316

Insurance commission services

336,976

37,713

Income from securities trading brokerage

336,504

86,300

Other services

476,408

319,621

Fees and commission expenses for

(603,226)

(543,148)

Settlement and cash services

(241,119)

(210,157)

Communication charges

(34,319)

(37,916)

Cashiering services

(52,502)

(47,015)

Consulting services

(88,973)

(50,161)

(186,313)

(197,899)

1,955,764

1,272,138

Interest expenses for deposits

Other credit expenses

28.

B05/TCTD-HN

NET FEES AND COMMISSION INCOME

Cashiering services

Other services

A N N UA L R E P O RT

29.

NET GAIN/(LOSS) FROM TRADING FOREIGN CURRENCIES

2016 VND million

2015 (reclassified) VND million

Income from foreign exchange trading

347,317

580,082

Income from currency financial derivatives

679,975

282,089

Expenses for foreign exchange trading

(103,865)

(670,678)

Expenses for currency financial derivatives

(683,226)

(383,495)

240,201

(192,002)

2016 VND million

2015 (reclassified) VND million

Income from trading of securities held-for-trading

274,046

88,261

Expenses for trading of securities held-for-trading

(147,086)

(18,828)

(11,551)

(14,016)

Income from trading of foreign currencies

Expenses for trading of foreign currencies

30.

NET GAIN FROM SECURITIES HELD-FOR-TRADING

Provision made for securities held-for-trading (Note 8) Provision reserved for securities held-for-trading (Note 8)

31.

9,371

7,983

124,780

63,400

2016 VND million

2015 (reclassified) VND million

Income from trading of investment securities

646,829

462,361

Expenses for trading of investment securities

(179,139)

(434,964)

(24,781)

(216,340)

38,548

276,891

481,457

87,948

NET GAIN FROM INVESTMENT SECURITIES

Provision made for investment securities (Note 12.5) Provision reserved for investment securities(Note 12.5)

160

161

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

32.

NET GAIN FROM OTHER OPERATING ACTIVITIES

2016 VND million

2015 (reclassified) VND million

1,653,250

1,373,267

Income from other derivatives

402,533

434,803

Recovery of loans previously written-off

404,195

443,109

Income from entrusted debt collection

109,315

84,535

Income from settlement of VAMC

505,597

79,875

Other income

231,610

330,945

Other operating expenses

(679,417)

(485,304)

Expenses for other derivatives

(328,310)

(355,223)

Other expenses

(351,107)

(130,081)

973,833

887,963

2016 VND million

2015 VND million

470

10,815

Other operating incomes

33.

B05/TCTD-HN

INCOME FROM INVESTMENTS IN OTHER ENTITIES

Dividends received for the year from long-term investments

A N N UA L R E P O RT

34.

OPERATING EXPENSES

2016 VND million

2015 (reclassified) VND million

2,315,874

1,898,079

Publication, marketing and promotion

253,236

180,335

Office and asset rental

440,688

445,338

Depreciation of fixed assets

274,912

276,637

Tax, duties and fees

65,899

65,945

Tools and equipment expenses

32,942

28,002

Telecommunication expenses

35,557

38,233

214,234

195,584

49,127

50,969

134,792

123,811

60,200

53,941

847

237

9,882

9,882

10,533

11,354

Notes Salaries and related expenses

Expenses for maintenance and repair of assets Utilities expenses Expenditure on payment of insurance premium for customersâ&#x20AC;&#x2122; deposits Per diem expenses Provision for long-term investments Goodwill amortization expenses

13.2 16

Provision made for other assets - Provision made for other assets

16

11,895

8,246

- Provision made/(reversed) for inventories

16

(1,362)

3,108

Training and education expenses

28,529

24,581

Conference expenses

41,107

21,959

292,636

253,961

4,260,995

3,678,848

Other operating expenses

162

163

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

35.

PROVISION EXPENSES FOR CREDIT LOSSES

Notes Reversal of specific provision for deposits at other credit institutions

36.

B05/TCTD-HN

2016 VND million

2015 (reclassified) VND million

-

(9.770)

General provision made for loans to customers

10

474,998

412,607

Reversal of general provision for loans to customers

10

(229,658)

(223,458)

Specific provision made for loans to customers

10

4,014,875

1,301,377

Reversal of specific provision for loans to customers

10

(201,729)

(218,236)

Provision/(reversal) for loans sold but not yet received

16

(1,141,115)

1,805,900

Provision made for receivables from deferred L/C

16

20,429

-

Provision made/(reversed) for loans purchases

11

(639)

1,121

Provision made for VAMC bonds

12.5

879,386

686,611

Reversal of provision for VAMC bonds

12.5

(155,456)

(128,263)

3,661,091

3,627,889

EARNINGS PER SHARES Basic earnings per share are calculated by dividing the profit or loss after tax which is attributable to shareholders holding ordinary shares of the Bank (after adjusting for appropriation to bonus and welfare fund) to the weighted average of the number of common shares outstanding for the period.

Diluted earnings per share are calculated by dividing the profit or loss after tax which is attributable to shareholders holding ordinary shares of the Bank (after adjusting for the dividends of convertible preferred shares) to the total of weighted average number of ordinary shares outstanding for the period and the weighted average number of ordinary shares which are issued in case all potential ordinary shares which have a diluted impact are converted into ordinary shares.

A N N UA L R E P O RT

2016

2015

3,148,846

1,529,188

(19,716)

(25,472)

3,129,130

1,503,716

79,549

26,481

3,208,679

1,530,197

Weighted average number of ordinary shares used for calculation of basic earnings per share

887,807,871

887,807,871

Effect of mandatory convertible bonds

207,723,346

219,249,489

1,095,531,217

1,107,057,360

Basic earnings per share

3,525

1,694

Diluted earnings per share

2,929

1,382

Profit after tax attributable to ordinary shareholders of the Bank (VND million) Adjusted for appropriation to bonus and welfare fund Profit after tax attributable to ordinary shares shareholders of the Bank for calculating basic earnings per share (VND million) Interest expense on convertible bonds Adjusted profit after tax attributable to ordinary shareholders of the Bank for calculation of diluted earnings per share (VND million)

Weighted average number of ordinary shares used for calculation of diluted earnings per share Earnings per share (VND)

37.

CASH AND CASH EQUIVALENTS 31 December 2016 31 December 2015 VND million VND million Cash, gold

2,956,708

2,754,299

Balances with the State Bank of Vietnam

2,533,875

2,677,303

Balances with other credit institutions with original terms less than or equal three months

8,702,514

7,325,568

14,193,097

12,757,170

164

165

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

38.

39.

B05/TCTD-HN

EMPLOYEE BENEFITS 2016 VND million

2015 VND million

7,702

7,518

1,760,761

1,481,326

555,113

416,753

2,315,874

1,898,079

I.

Average number of employees for the year (person)

II.

Employeesâ&#x20AC;&#x2122; remuneration

1. Basic salaries

2. Allowances and other income

3. Total (1+2)

4. Average monthly salary/month

19

16

5. Average annual remuneration/month

25

21

ASSETS, VALUABLE PAPERS ISSUED, MORTGAGED, PLEDGED, DISCOUNTED AND REDISCOUNTED

39.1 Assets, valuable paper issued, mortgaged, pledged, discounted and rediscounted to the Bank 31 December 2016 31 December 2015 VND million VND million From customers

378,892,668

261,553,712

Real estate

180,972,454

134,554,678

Movable assets

52,800,245

45,060,119

Valuable paper issued

65,630,986

28,430,420

Other collaterals

79,488,983

53,508,495

1,533,856

2,776,432

Valuable paper issued

695,291

691,416

Other collaterals

838,565

2,085,016

380,426,524

264,330,144

From other credit institutions

A N N UA L R E P O RT

39.2 Assets, valuable paper issued, mortgaged, pledged, discounted and rediscounted by the Bank 31 December 2016 31 December 2015 VND million VND million Investment securities

40.

7,668,288

10,736,996

7,668,288

10,736,996

SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES Related party transactions are transactions undertaken with other entities to which the Bank is related. A party is considered to be related to the Bank if:

(a) Enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the reporting Bank. (This includes holding companies, subsidiaries and fellow subsidiaries); (b) Associates (see VAS No. 07 â&#x20AC;&#x153;Accounting for Investments in Associatesâ&#x20AC;?); (c) Individuals owning, directly or indirectly, an interest in the voting power of the reporting Bank that gives them significant influence over the Bank, and close members of the family of any such individual. Close members of the family of an individual are those that may be expected to influence, or be influenced by, that person in their dealings with the Bank, for examples: parent, spouse, progeny, siblings, etc; (d) Key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the reporting Bank, including directors and officers of the Bank and close members of the families of such individuals (e) Enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. This includes enterprises owned by directors or major shareholders of the reporting Bank and enterprises that have a member of key management in common with the reporting Bank.

166

167

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

40.

B05/TCTD-HN

SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (CONTINUED) The Bank has the following significant balances with related parties at the end of the year: VND million

Related party

Relationship

Receivable/(payable) 31 December 2016 31 December 2015

Loans from the Bank The European Plastic Window JSC

(iii)

407,606

171,468

Nui Phao Mining Company Ltd.,

(iii)

681,982

1,867,316

T&M Hatay, JSC

(iii)

193,052

-

HSBC Bank (Vietnam) Ltd.,

(i)

(2,252)

(53,250)

Masan JSC

(ii)

(1,155)

(1,131)

Masan Group Corporation

(ii)

(49,854)

(680,727)

The European Plastic Window JSC

(iii)

(40,354)

(105,941)

Nui Phao Mining Company Ltd.,

(iii)

(39,828)

(179,289)

Hai Phong Construction No. 3 JSC

(iii)

(23,614)

(4,383)

Masan Resources JSC

(iii)

(897)

(498)

Masan Consumer Corporation

(iii)

(3,091,157)

(674,635)

Masan Brewery Ltd.,

(iv)

(220,887)

(2,366)

Masan Vision JSC

(iii)

(5,839)

(34,067)

Sam Kim Ltd.,

(iii)

(502)

(291)

Vinh Hao Mineral Water JSC.

(iv)

(134,260)

(109,197)

Vina Cafe Bien Hoa JSC

(iv)

(283,071)

(11,030)

Deposits at the Bank

A N N UA L R E P O RT

Significant transactions with related parties during the year are as follows: VND million

Related party

Relationship

2016

2015

The European Plastic Window JSC(EPW)

(iii)

21,840

16,159

Nui Phao Mining Company Ltd.,

(iii)

91,276

102,470

T&M HATAY, JSC

(iii)

10,807

-

HSBC Bank (Vietnam) Ltd.,

(i)

(30)

(10,394)

Masan JSC

(ii)

(4)

(93)

Masan Group Corporation

(ii)

(7,982)

(15,469)

The European Plastic Window JSC

(iii)

(83)

(1,096)

Nui Phao Mining Company Ltd.,

(iii)

(4,211)

(2,570)

Hai Phong Construction No. 3 JSC

(iii)

(398)

(119)

Masan Resources JSC

(iii)

(3)

(181)

Masan Consumer Corporation

(iii)

(110,108)

(59,232)

Masan Brewery Ltd.,

(iv)

(9,033)

(471)

Masan Vision JSC

(iii)

(5,914)

(1,345)

Sam Kim Ltd.,

(iii)

(22)

(247)

Vinh Hao Mineral Water JSC.

(iv)

(5,283)

(2,121)

VinaCafe Bien Hoa JSC

(iv)

(2,290)

(15)

Remuneration of members of the Board of Directors and Board of Supervisors

(28,989)

(29,315)

Remuneration of members of the Board of Management

(67,372)

(53,701)

Interest income

Interest expenses

Remuneration of key management

(i) (ii) (iii) (iv)

Shareholder Shareholder has its representative in the Board of Directors of the Bank Related party has its representative in the Board of Directors of the Bank Related party has its representative related to members of the Board of Directors, or Board of Management or Board of Supervisors of the Bank

168

169

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

41.

B05/TCTD-HN

GEOGRAPHICAL DISPERSION OF ASSETS, LIABILITIES AND OFF-BALANCE SHEET ITEMS VND million

Derivatives (*)

Trading and investment securities

Total loans

Total deposits

Contingent liabilities

Domestic

155,145,899

188,247,900

45,237,549

75,665,302

55,171,387

Overseas

10,037

315,946

-

-

-

155,155,936

188,563,846

45,237,549

75,665,302

55,171,387

(*) Nominal contract value

42.

RISK MANAGEMENT DISCLOSURE

This section provides details of the Bank’s exposure to risk and describes the policies, the methods used by management to control risk. The most important types of financial risk to which the Bank is exposed are credit risk, liquidity risk and market risk.

The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s financial risk management framework to facilitate its business activities to thrive safely and sustainably.

Having taken that responsibility, the Board of Directors appropriately promulgates risk management policies and strategies, establish business limit, approve high-value business transactions in accordance with both legal and internal requirements, and determine organizational structure and key managing directors.

Risk management strategies and policies are adhered to the Bank’s charter and General Shareholders’ Meeting resolution.

Audit Risk Committee (“ARCO”) is established by the Board of Directors for the purpose of undertaking a number of functions and tasks related to the audit, supervising and monitoring risk management of the Bank’s operation which are assigned/authorized by the Board of Directors.

ARCO is responsible for promulgating and monitoring risk management framework, risk appetites and risk management policies in the Bank’s operation activities and approving market risk limit, credit risk limit for each industry, business line and other general risk limits of the Bank.

A N N UA L R E P O RT

43.

CREDIT RISK

The Bank is subject to credit risk through its lending, investing activities and in cases where it acts as an intermediary on behalf of customers or other third parties or issues guarantees. The risk that counterparties might default on their obligations is monitored on an ongoing basis. To manage the level of credit risk, the Bank attempts to deal with counterparties with good credit standing, and, when appropriate, obtains collaterals. The Bank’s primary exposure to credit risk arises through its loans. The amount of credit exposure in this regard is represented by the carrying amounts of the assets on the consolidated balance sheet. In addition, the Bank is exposed to off balance sheet credit risk through commitments to extend credit and guarantees issued.

The Bank manages credit risk by using various tools: development and issuance of internal policies and regulations on credit risk management; development of credit procedures and manuals; regular review of credit risk; development of a credit rating system and loan classification; setting up authorization levels within the credit approval process.

The following table presents the maximum exposure to credit risk from balance sheet, before taking account of any collateral held or other credit risk enhancements:

31 December 2016 VND million

31 December 2015 (reclassified) VND million

21,598,874

14,762,552

8,035,905

1,842,845

142,616,004

112,179,889

19,466

32,241

Investment securities – gross (*)

46,988,229

46,040,955

Others financial assets – gross

10,665,130

12,873,210

229,923,608

187,731,692

Balances with and loans to other credit institutions – gross Securities held-for-trading – gross (*) Loans to customers – gross Debts purchased – gross

(*)

Excluding equity securities.

170

171

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

43.

B05/TCTD-HN

CREDIT RISK (CONTINUED)

43.1. Financial assets that are neither past due nor impaired Information about credit quality of financial assets that are neither past due nor impaired is as follows:

31 December 2016 VND million

31 December 2015 (reclassified) VND million

21,598,874

14,762,552

8,035,905

1,842,845

Loans to customers – gross

138,203,644

108,565,644

Investment securities – gross

44,066,171

42,298,960

7,108,731

6,002,834

219,013,325

173,472,835

Balances with and loans to other credit institutions – gross Securities-held-for trading – gross

Others financial assets – gross

The Bank’s financial assets, which are neither overdue nor impaired, include loans in Group 1 (current); securities, receivables and other financial assets which are not overdue.

The Bank believes that those financial assets can be fully and timely recovered in the future.

43.2. Financial assets that are past due but not impaired Information about financial assets that are past due but not impaired as at 31 December 2016 is as follows: VND million

Quá hạn

Loans to customers

Under 90 days

From 91-180 days

From 181-360 days

Over 360 days

Total

619,147

111,705

181,714

414,454

1,327,020

These past-due loans are impaired due to they are secured by adequate collateral assets.

A N N UA L R E P O RT

43.3. Financial assets that are impaired Information about financial assets which are impaired as at 31 December 2016 is as follows: VND million

Quá hạn Not past due yet

Under 90 days

-

1,546,909

285,031

19,466

-

Investment securities

2,922,058

Other assets

Loans to customers Debts purchased

44.

From 91-180 From 181-360 days days

Over 360 days

Total

292,837

960,563

3,085,340

-

-

-

19,466

-

-

-

-

2,922,058

3,488,943

-

-

-

67,456

3,556,399

6,430,467

1,546,909

285,031

292,837

1,028,019

9,583,263

MARKET RISK

44.1 Interest rate risk Interest rate risk arises when there is a difference of term in valuation of interest rate between assets and liabilities. All loans activities, mobilization activities, investments activities of the Banks create interest rate risk.

On the basis of the state of “interest rate sensitivity” according to periodic changes in interest rates, the indicators which are assets, equity and off-balance sheet assets are classified by terms into the table “interest gap” of the whole Bank.

Interest rate repricing terms for items with fixed interest rate for remaining period until maturity date of assets, as for floating interest rate which is remaining period until changes in interest rate.

The followings assumptions and conditions are applied when constructing “interest gap” table:

•

Cash and gold; capital contribution; long-term investments; fixed assets, other receivables and other liabilities are classified as non-interest sensitivity items;

•

Balances with the State Bank of Vietnam, demand balances with and loans to other credit institutions, demand deposits are classified as non-interest sensitivity items;

•

Interest rate repricing of trading securities and investment securities are based on the actual maturity date at the reporting date if such securities have a fixed interest rate or based on revaluation of interest rate if such securities have a floating interest rate;

•

Interest rate repricing of balances with and loans to other credit institutions; loans to customers; deposits and borrowings from Government and State Bank of Vietnam are identified as follows:

172

173

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

44.

B05/TCTD-HN

RỦI RO THỊ TRƯỜNG (TIẾP THEO)

44.1. Rủi ro lãi suất (tiếp theo)

• •

--

Items with fixed interest rate for the duration of contract: interest rate repricing based on actual maturity date since reporting date of the consolidated financial statements;

--

Items with floating interest rate: interest rate repricing based on nearest interest since reporting date of the consolidated financial statements;

Interest rate repricing of valuable papers issued based on the acutual maturity date of each type of valuable papers if there is a fixed interest rate or time-based revaluation if there is a floating interest rate; Interest rate repricing of other borrowed and entrusted funds are based on actual maturity date at the reporting date of consolidated financial statement of each other borrowed and entrusted funds if the interest rate is fixed or based on the revaluation if the interest rate is floating.

Interest rate sensitivity

Assuming that all other variables remain constant, the effects of fluctuation in interest rates of the loans with floating interest rates on profit before tax and shareholders’ equity of the Bank is as follows:

Effect on Increase in interest rate

Profit before tax VND million

Equity VND million

USD

1.50%

(11,119)

(8,895)

VNĐ

3.00%

1,230,317

984,254

As at 31 December 2016

The following table presents the assets and liabilities of the Bank based on “interest gap” at the reporting date:

A N N UA L R E P O RT

VND million Interest re-pricing for the year Overdue

Non-interest sensitivity

Over 5 years

Total

Cash and gold

-

2,956,708

-

-

-

-

-

-

2,956,708

Balances with the SBV

-

2,533,782

93

-

-

-

-

-

2,533,875

Balances with and loans to other credit institutions (*)

-

1,329,649

3,409,749

13,441,446

2,513,943

784,983

119,104

-

21,598,874

Securities held-for-trading (*)

-

-

-

200,000

817,446

400,000

4,466,479

2,151,980

8,035,905

In which: Government bonds and bonds guaranteed by the Government for settlement

-

-

-

-

211,068

-

4,421,079

2,151,980

6,784,127

4,412,360

-

68,934,031

13,979,866

17,108,172

23,579,627

12,359,001

Debts purchased (*)

-

19,466

-

-

-

-

-

-

19,466

Investment securities (*)

-

3,545,861

-

4,966,000

5,950,088

7,340,177

19,842,600

5,490,756

47,135,482

In which: Government bonds and bonds guaranteed by the Government for settlement

-

-

-

2,247,258

1,942,364

209,713

16,348,190

5,573,762

26,321,287

Long-term investments (*)

-

582,672

-

-

-

-

-

-

582,672

Fixed assets and investment property

-

2,861,258

-

-

-

-

-

-

2,861,258

40,592

11,459,840

-

-

-

-

-

-

11,500,432

4,452,952

25,289,236

72,343,873

32,587,312

26,389,649

32,104,787

36,787,184

Deposits and borrowings from SBV

-

-

1,447,970

-

-

-

-

-

1,447,970

Deposits and borrowings from other credit institutions

-

451,710

22,298,054

1,153,351

795,731

183,099

-

4,181

24,886,126

Deposits from customers

-

39,989,034

45,459,649

40,865,181

20,876,780

21,108,835

5,128,669

Derivatives and other financial liabilities

-

-

108,059

(58,881)

32,789

(13,419)

(656)

-

67,892

Other borrowed and entrusted funds

-

-

-

15,757

6,112

12,477

553,037

-

587,383

Valuable papers issued

-

-

17,682

10,650

-

44,668

6,450,000

3,891,842

10,414,842

Other liabilities

-

4,923,518

-

-

-

-

-

-

4,923,518

-

45,364,262

69,331,414

41,986,058

21,711,412

21,335,660

12,131,050

3,916,804 215,776,660

4,452,952

(20,075,026)

3,012,459

(9,398,746)

4,678,237

10,769,127

24,656,134

5,968,879

31 December 2016

Up to From 1 to 3 From 3 to 6 1 month months months

From 6 to Over 1 to 5 12 months years

Assets

Loans to customers (*)

Other assets (*) Total assets

2,242,947 142,616,004

9,885,683 239,840,676

Liabilities

Total liabilities Interest sensitivity gap

20,781 173,448,929

24,064,016

(*): These amounts exclude provisions.

174

175

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

44.

B05/TCTD-HN

MARKET RISK (CONTINUED)

44.2 Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Bank was incorporated and operates in Vietnam, with VND as its reporting currency. The major currency in which the Bank transacts is VND. The Bank’s asset-liabilities structure included different types of currencies (such as USD, EUR, AUD…), which is the main cause of currency risk. The Bank has set limits on positions by currency based on internal risk assessment process and regulations of the SBV. Currency positions are monitored on a daily basis and hedging strategies used to ensure positions are maintained within established limits.

Exchange rate sensitivity Assuming that all variables remain constant, the following table shows the effects on profit before tax and equity of the Bank exchange rates. Risk due to change of exchange rate to other currencies of the Bank is not significant.

Effects on Level of increase

Profit before tax VND million

Equity VND million

USD

1.00%

906

725

EUR

1.00%

(14)

(11)

Vàng

3.00%

1,081

865

As at 31 December 2016

The table in the next page shows the analysis of assets and liabilities in VND and foreign currencies translated into VND at 31 December 2016.

A N N UA L R E P O RT

VND million

31 December 2016

Other USD EUR Gold currencies VND equivalent equivalent equivalent equivalent

Total

Assets Cash and gold

2,187,535

489,378

53,636

36,047

190,112

2,956,708

Balances with the SBV

1,744,926

788,949

-

-

-

2,533,875

15,034,654

6,242,323

46,179

-

275,718

21,598,874

8,035,905

-

-

-

-

8,035,905

134,513,621

8,076,484

25,899

-

- 142,616,004

19,466

-

-

-

-

19,466

47,135,482

-

-

-

-

47,135,482

582,672

-

-

-

-

582,672

Fixed assets and investment property

2,861,258

-

-

-

-

2,861,258

Other assets (*)

9,177,327

2,156,278

159,393

-

7,434

11,500,432

221,292,846

17,753,412

285,107

36,047

1,447,970

-

-

-

-

1,447,970

17,206,655

7,567,407

109,574

-

2,490

24,886,126

160,394,345

11,839,054

543,521

-

1,245,717

(578,954)

(358,206)

-

(240,665)

67,892

587,383

-

-

-

-

587,383

10,414,842

-

-

-

-

10,414,842

4,806,608

112,760

2,855

-

1,295

4,923,518

196,103,520

18,940,267

297,744

-

FX position on balance sheet

25,189,326

(1,186,855)

(12,637)

36,047

38,135

24,064,016

FX position off-balance sheet

-

1,277,499

11,279

-

-

1,288,778

25,189,326

90,644

(1,358)

36,047

38,135

25,352,794

Balances with and loans to other credit institutions (*) Securities held-for-trading (*) Loans to customers (*) Debts purchased (*) Investment securities (*) Long term investments (*)

Total assets

473,264 239,840,676

Liabilities Deposits and borrowings from SBV Deposits and borrowings from other credit institutions Deposits from customers Derivatives and other financial liabilities Other borrowed and entrusted funds Valuable papers issued Other liabilities Total liabilities

Total FX position on and off-balance sheet

672,009 173,448,929

435,129 215,776,660

(*): These amounts exclude provisions.

176

177

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

44.

B05/TCTD-HN

MARKET RISK (CONTINUED)

44.3 Liquidity risk Liquidity risk arises in the general funding of the Bank’s activities and in the management of positions. It includes both the risk of being unable to fund assets at appropriate maturities and rates and the risk of being unable to liquidate an asset at a reasonable price and in an appropriate time frame.

The maturity term of assets and liabilities represents the remaining period from the date of the consolidated financial statements to the contractual maturity date of assets and liabilities.

The following assumptions and conditions are applied in the analysis of overdue status of the Bank’s assets and liabilities:

•

Balances with the State Bank of Vietnam are classified as demand deposits which include compulsory deposits. The balance of compulsory deposits depends on the proportion and terms of the Bank’s customer deposits;

•

The maturity term of investment securities is calculated based on the maturity date of each category of securities; In which, securities issued by Gorvenment/ guaranteed by Government, although classifed based on residual maturity, but considered as liquid assets in the market that are readily convertible to known amounts of cash and subject to an insignificant risk of change in value;

•

The maturity term of balances with and loans to other credit institutions; and loans to customers is determined on the maturity date as stipulated in contracts. The actual maturity term may be altered because loan contracts may be extended/prepaid;

•

The maturity term of equity investments is considered as more than five years because these investments do not have specific maturity date;

•

The maturity term of deposits and borrowings from credit institutions and customers’ deposits is determined based on features of these items or the maturity date as stipulated in contracts. Demand deposits are transacted as required by customers and therefore being classified as current accounts, however, a large proportion of this deposits type of customers remain stable at the Bank over one year. The maturity term of borrowings and term deposits is determined based on the maturity date in contracts. In fact, these amounts may be rotated and therefore they last beyond the original maturity date;

•

The maturity term of fixed assets is determined on the remaining useful life of assets;

•

The maturity term of valuable papers issued is calculated based on the maturity date of each category of valuable paper;

•

The maturity term of other borrowed and entrusted funds is determined on the maturity date as stipulated in contracts as at the reporting date of each contract;

•

The maturity term of other liabilities is determined on the actual maturity date of each liability.

The table in the next page shows the analysis of assets and liabilities of the Bank according to their maturities.

A N N UA L R E P O RT

VND million Overdue

Current

Up to 3 months

Over 3 months

Up to 1 month

From 1 to 3 months

From 3 to 12 months

From 1 to 5 years

Over 5 years

Total

Cash and gold

-

-

2,956,708

-

-

-

-

2,956,708

Balances with the SBV

-

-

2,533,875

-

-

-

-

2,533,875

Balances with and loans to other credit institutions (*)

-

-

4,239,398

13,941,446

3,298,926

119,104

-

21,598,874

Securities held-for-trading (*)

-

-

-

-

211,068

5,672,857

2,151,980

8,035,905

In which: Government bonds and bonds guaranteed by the Government for settlement

-

-

-

-

211,068

4,421,079

2,151,980

6,784,127

2,166,056

2,246,304

3,551,286

9,568,858

35,657,609

41,261,184

Debts purchased (*)

-

-

-

-

19,466

-

-

19,466

Investment securities (*)

-

-

150,822

2,547,045

4,902,389

30,711,452

8,823,774

47,135,482

In which: Government bonds and bonds guaranteed by the Government for settlement

-

-

-

2,247,258

2,152,077

16,348,190

5,573,762

26,321,287

Long term investments (*)

-

-

-

-

-

-

582,672

582,672

Fixed assets and investment property

-

-

131,093

617

18,287

360,030

2,351,231

2,861,258

Other assets (*)

-

67,456

5,842,864

1,176,687

2,153,941

1,842,229

417,255

11,500,432

2,166,056

2,313,760

19,406,046

27,234,653

46,261,686

79,966,856

Deposits and borrowings from SBV

-

-

1,447,970

-

-

-

-

1,447,970

Deposits and borrowings from other credit institutions

-

-

22,749,764

1,153,351

978,830

-

4,181

24,886,126

31 December 2016

Assets

Loans to customers (*)

Total assets

48,164,707 142,616,004

62,491,619 239,840,676

Liabilities

Deposits from customers

-

-

81,390,964

32,812,288

33,079,539

26,143,238

In which: Current accounts

-

-

35,826,887

-

-

-

-

35,826,887

Derivatives and other financial liabilities

-

-

27,211

66,008

(25,983)

656

-

67,892

Other borrowed and entrusted funds

-

-

-

15,757

18,589

553,037

-

587,383

Valuable papers issued

-

-

17,688

10,650

58,961

6,428,581

3,898,962

10,414,842

Other liabilities

-

-

3,242,685

641,915

875,175

158,263

5,480

4,923,518

Total liabilities

-

- 108,876,282

34,699,969

34,985,111

33,283,775

2,166,056

2,313,760 (89,470,236)

(7,465,316)

11,276,575

46,683,081

Net liquidity gap difference

22,900 173,448,929

3,931,523 215,776,660 58,560,096

24,064,016

(*): These amounts exclude provisions.

178

179

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

45.

FINANCIAL ASSETS AND LIABILITIES

45.1

Book value and fair value of financial assets and liabilities

B05/TCTD-HN

Book value and fair value of financial assets and liabilities of the Bank as at 31 December 2016 are as follows: VND million

Book value Assets and other liabilities by amortized Total book cost value

Fair value through Profit & Loss statement

Held-tomaturity

Loans and receivables

Availablefor-sale

Cash and gold

-

-

2,956,708

-

-

2,956,708

2,956,708

Balances with the SBV

-

-

2,533,875

-

-

2,533,875

2,533,875

Balances with and loans to other credit institutions

-

-

21,598,874

-

-

21,598,874

(*)

8,035,905

-

-

-

-

8,035,905

(*)

Securities held-for-trading

Fair value

Loans to customers

-

- 142,616,004

-

- 142,616,004

(*)

Debts purchasing activities

-

-

19,466

-

-

19,466

(*)

Available-for-sale securities

-

-

-

38,575,369

-

38,575,369

(*)

Held-to-maturity securities

-

8,560,113

-

-

-

8,560,113

(*)

Long term investments

-

-

-

582,672

-

582,672

(*)

Other assets

-

-

10,665,130

-

-

10,665,130

(*)

8,560,113 180,390,057

39,158,041

8,035,905

- 236,144,116

(*) The Bank has not determined the fair value of these items due to insufficient information and lack of detailed guidance on fair value under Vietnamese Accounting Standards and Vietnamese Accounting System for Credit Institutions.

A N N UA L R E P O RT

Book value and fair value of financial assets and liabilities of the Bank as at 31 December 2016 are as follow: VND million

Book value Liabilities and other borrowings by amortized Total book cost value

Fair value through Profit & Loss statement

Held-tomaturity

Loans and receivables

Availablefor-sale

Deposits and borrowings from other credit institutions

-

-

-

-

24,886,126

(*)

Deposits from customers

-

-

-

- 173,448,929 173,448,929

(*)

Derivatives and other financial assets

67,892

-

-

-

-

67,892

(*)

Other borrowed and entrusted funds

-

-

-

-

587,383

587,383

(*)

Valuable papers issued

-

-

-

-

10,414,842

10,414,842

(*)

Other liabilities

-

-

-

-

4,537,636

4,537,636

(*)

67,892

-

-

- 213,874,916 213,942,808

24,886,126

Fair value

(*) The Bank has not determined the fair value of these items due to insufficient information and lack of detailed guidance on fair value under Vietnamese Accounting Standards and Vietnamese Accounting System for Credit Institutions.

180

181

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.)

B05/TCTD-HN

as at 31 December 2016 and for the year then ended

46.

SEGMENT REPORT

46.1 Segment report by geography Segment report by geography for the year then ended 31 December 2016:

Criteria

VND million

North (*)

Central

I. Income

31,002,919

556,924

16,326,182

(457,062)

47,428,963

1. Interest income

25,057,759

515,266

15,792,723

(97,662)

41,268,086

Interest income from external

12,547,038

369,391

2,819,648

-

15,736,077

Interest income from internal

12,510,721

145,875

12,973,075

(97,662)

25,532,009

2. Income from operating activities

2,058,468

37,076

473,132

(9,686)

2,558,990

3. Income from other operating activities

3,886,692

4,582

60,327

(349,714)

3,601,887

II. Expenses

(23,890,724)

(404,475)

(15,760,814)

284,781

(39,771,232)

1. Interest expenses

(17,833,453)

(340,631)

(15,049,443)

97,662

(33,125,865)

Interest expenses to external

(5,322,732)

(194,756)

(2,076,368)

-

(7,593,856)

Interest expenses to internal

(12,510,721)

(145,875)

(12,973,075)

97,662

(25,532,009)

(267,720)

(699)

(6,493)

-

(274,912)

2. Depreciation expenses

South Elimination (**)

Total

3. Expenses from operating activities

(5,789,551)

(63,145)

(704,878)

187,119

(6,370,455)

Profit before provision expenses for credit losses

7,112,195

152,449

565,368

(172,281)

7,657,731

(3,404,299)

(13,068)

(241,099)

(2,625)

(3,661,091)

3,707,896

139,381

324,269

(174,906)

3,996,640

193,556,851

3,177,996

42,773,080

(4,144,791)

235,363,136

1,821,310

145,437

989,961

-

2,956,708

Provision expenses for credit losses Segment profit III. Assets 1. Cash 2. Fixed assets

1,560,269

2,619

19,834

-

1,582,722

3. Other assets

190,175,272

3,029,940

41,763,285

(4,144,791)

230,823,706

IV. Liabilities

151,700,824

4,719,068

61,339,238

(1,982,470)

215,776,660

1. Liabilities to external

149,547,044

4,711,339

61,339,082

-

215,597,465

2. Liabilities to internal

2,153,780

7,729

156

(1,982,470)

179,195

(*) The Bankâ&#x20AC;&#x2122;s Head office (in the North segment) has incurred operating expenses for the whole bank, but has not allocated these expenses to other segments. (**) Elimination of internal transactions.

A N N UA L R E P O RT

46.2 Segment report by operating activities

Segment report by operating activities for the year then ended 31 December 2016:

VND million

Bank

Assets Management

Trading securities

Fund Management

Finance

Adjustment (*)

Total

I. Revenue

46,675,694

335,297

825,706

16,634

32,694

(457,062)

47,428,963

1. Interest revenue

41,271,705

10,060

46,688

4,753

32,542

(97,662)

41,268,086

Interest income from external

15,739,696

-

43,145

4,430

18,294

(69,488)

15,736,077

Interest income from internal

25,532,009

10,060

3,543

323

14,248

(28,174)

25,532,009

2. Operating revenue

2,031,605

-

525,190

11,881

-

(9,686)

2,558,990

3. Other revenue

3,372,384

325,237

253,828

-

152

(349,714)

3,601,887

II. Expense

(39,581,566)

(230,371)

(221,651)

(16,459)

(5,966)

284,781

(39,771,232)

1. Interest expense

(33,153,676)

(69,488)

(363)

-

-

97,662

(33,125,865)

Interest expenses to external

(7,621,667)

-

(363)

-

-

28,174

(7,593,856)

Interest expenses to internal

(25,532,009)

(69,488)

-

-

-

69,488

(25,532,009)

(231,750)

(39,734)

(3,038)

-

(390)

-

(274,912)

(6,196,140)

(121,149)

(218,250)

(16,459)

(5,576)

187,119

(6,370,455)

7,094,128

104,926

604,055

175

26,728

(172,281)

7,657,731

(3,659,915)

639

-

-

810

(2,625)

(3,661,091)

3,434,213

105,565

604,055

175

27,538

(174,906)

3,996,640

234,948,998

1,526,863

2,249,088

57,600

725,378

(4,144,791)

235,363,136

1. Cash

2,956,707

-

-

-

1

-

2,956,708

2. Fixed assets

1,562,230

14,766

5,356

-

370

-

1,582,722

3. Other assets

230,430,061

1,512,097

2,243,732

57,600

725,007

(4,144,791)

230,823,706

IV. Liabilities

216,554,952

849,464

347,143

5,399

2,172

(1,982,470)

215,776,660

1. External liabilities

216,375,757

849,464

347,143

5,399

2,172

(1,982,470)

215,597,465

179,195

-

-

-

-

-

179,195

Criteria

2. Depreciation expense 3. Operating expense Profit before provision expenses for credit losses Provision expenses for credit losses Segment profit III. Assets

2. Internal liabilities

(*) Adjustment of internal transactions

182

183

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Cont.) as at 31 December 2016 and for the year then ended

47.

B05/TCTD-HN

CORRESPONDING FIGURES Certain corresponding figures stated in the prior year have been reclassified to conform to the current year’s presentation due to changes as required by Circular No. 210/2014/TT-BTC:

CONSOLIDATED BALANCE SHEET

31 December 2015 (as previously 31 December 2016 reported) Reclassify (reclassified) Notes VND million VND million VND million

Trading securities

i

2,600,693

(715,595)

1,885,098

Loans to customers

ii

111,625,772

554,117

112,179,889

Provision for loans to customers

iii

(1,164,407)

(2,834)

(1,167,241)

Debts purchased

ii

395,375

(363,134)

32,241

Provision for debts purchased

iii

(4,446)

2,834

(1,612)

Available-for-sale securities

i

38,528,012

715,595

39,243,607

Receivables CONSOLIDATED INCOME STATEMENT

ii

10,234,363

(190,983)

10,043,380

Net gain from trading securities

iv

303,577

(240,177)

63,400

Net gain from investment securities

iv

(152,229)

240,177

87,948

Interest and similar income

v

13,374,087

5,300

13,379,387

Fees and commission income

v

1,682,123

133,163

1,815,286

Other income

v

1,511,730

(138,463)

1,373,267

Operating expenses

vi

(3,682,803)

3,955

(3,678,848)

Provision expenses for credit losses CONSOLIDATED CASH FLOW STATEMENT

vi

(3,623,934)

(3,955)

(3,627,889)

v

13,668,672

5,300

13,673,972 1,272,138

Interest and similar income

Fees and commission income

v

1,138,975

133,163

Other income/(expenses)

v

583,317

(138,463)

444,854

(Increase)/decrease in loans to customers

ii

(31,318,205)

(554,117)

(31,872,322)

(Increase)/decrease in other operating assets

ii

(23,132)

554,117

530,985

(i) Reclassify “Securities held for trading” from “Investment securities available for sales”. (ii) Reclassify “Loans to customer” from “Receivables” and “Debts purchased”. (iii) Reclassify “Provision for loans to customers” from “Provision for debts purchased”. (iv) Reclassify “Net gain from trading securities” from “Net gain from investment securities”. (v) Reclassify revenue from “Other income” from “Fees and commission income” and “Interest and similar income” (vi) Reclassify “Provision expenses for credit losses” from “Operating expenses”.

A N N UA L R E P O RT

48.

EVENTS AFTER THE CONSOLIDATED BALANCE SHEET DATE There has not been any matter or circumstance that has arisen since the consolidated balance sheet date that has affected or may significantly affect the operations of the Bank, the results of those operations or the state of affairs of the Bank in subsequent periods.

49.

EXCHANGE RATES OF APPLICABLE FOREIGN CURRENCIES AGAINST VIETNAM DONG 31 December 2016 31 December 2016 VND VND AUD

16,432

15,994

CAD

16,952

15,965

CHF

22,360

22,524

CNY

3,279

3,404

DKK

3,223

3,243

EUR

23,946

24,161

GBP

28,106

33,042

HKD

2,936

2,765

JPY

195

185

NOK

2,636

2,517

SEK

2,500

2,641

SGD

15,723

15,740

THB

635

607

USD

22,159

21,890

Prepared by:

Approved by:

Approved by:

Ms. Bui Thi Khanh Van Chief Accountant

Ms. Thai Ha Linh Director of Accounting, Financial Policy and Tax, Finance and Planning Division

Mr. Nguyen Le Quoc Anh Chief Executive Officer

Hanoi, Vietnam 22 March 2017

184

185

DISTRIBUTION NETWORK

TECHCOMBANK IS PRESENT AT as of 31 December 2016

45 45

PROVINCES

After 23 years of continuous development, Techcombank offers the most advanced banking technology in Vietnam with a nationwide network of 314 Branches/ Transaction Offices/ Representative Offices and 1,193 ATMs across 45 provinces.

TECHCOMBANK HAS as of 31 December 2016

A N N UA L R E P O RT

314 314

BRANCHES/ TRANSACTION OFFICES/ REPRESENTATIVE OFFICES

No.

Province/ City

Number of branches and transaction offices

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

An Giang Bac Giang Bac Ninh Binh Dinh Binh Duong Binh Phuoc Binh Thuan Ca Mau Can Tho Da Nang Daklak Dong Nai Dong Thap Gia Lai Ha Nam Ha Noi Ha Tinh Hai Duong Hai Phong Ho Chi Minh Hue Hung Yen Khanh Hoa Kien Giang Lam Dong Lang Son Lao Cai Long An Nam Dinh Nghe An Ninh Binh Phu Tho Quang Nam Quang Ngai Quang Ninh Soc Trang Tay Ninh Thai Binh Thai Nguyen Thanh Hoa Tien Giang Vinh Long Vinh Phuc Vung Tau Yen Bai

1 2 5 1 4 1 1 1 5 10 1 6 1 1 1 100 3 3 9 100 3 3 4 2 1 3 3 1 2 4 1 2 2 2 5 1 1 1 4 2 1 1 3 5 1

Total

314

VIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT-STOCK BANK

Techcombank Tower, 191 Ba Trieu, Ward Le Dai Hanh Hai Ba Trung District, Ha Noi, Vietnam [T] : (84 4) 3944 6368 [F] : (84 4) 3944 6395 [W] : www.techcombank.com.vn