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.
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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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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.
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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
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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
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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
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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.
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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
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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,
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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
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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
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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
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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
92
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.
96
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