enabling
FINANCIAL
SUCCESS AND SECURITY
2017
ANNUAL REPORT
SINCE ITS ESTABLISHMENT 24 YEARS AGO, TECHCOMBANK HAS NURTURED ITS AMBITION TO BECOME A WORLD-CLASS VIETNAMESE ENTERPRISE THAT MAKES VALUABLE CONTRIBUTIONS TO THE DEVELOPMENT OF SOCIETY. TODAY, THE BANK IS MAKING REMARKABLE PROGRESS IN ITS JOURNEY TO BECOMING THE BEST BANK IN VIETNAM, AS WELL AS A LEADING BANK IN THE REGION, BY 2020.
Table of Contents
04
Chairman’s Message 2018
07
THE STRENGTH TO SUCCEED
08
The CEO’s Narrative
15
16 22 24 25 32 34 37
38 46 48 49 51
MANAGEMENT EXCELLENCE
Corporate Governance Our Board of Directors Our Supervisory Board Our Board of Management Effective Business Model Standard Operation
COMPREHENSIVE SOLUTIONS
Optimal Choice The Bank of Choice for Businesses Outstanding Solutions for Large Enterprises Creating Distinct Value for SMEs ONE VISION
53 65
Transforming Corporate Culture “Growing” Techcomers
75
VALUE OF SUSTAINABILITY
76
Risk Management
82
Outstanding Performance
86
Sustainable Development to Ensure Financial Security for Customers
99
FOR THE LOVE OF VIETNAM
107
PLAN FOR THE FUTURE
113
FINANCIAL REPORT
202 OPERATION NETWORK
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CHAIRMAN’S MESSAGE 2018
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ANNUAL REPORT 2017
THE IMPLEMENTATION OF OUR TRANSFORMATION PROGRAM BACKED BY THE STRONG CONFIDENCE FROM OUR CUSTOMERS, SHAREHOLDERS AND INVESTORS, IS LEADING US EVER CLOSER TO ACHIEVING OUR MISSION OF BECOMING A VIETNAMESE COMPANY OF THE HIGHEST STANDARD, PROUDLY CONVEYING VIETNAMESE VALUES ACROSS THE REGION AND AROUND THE WORLD. Dear Valued Shareholders, Clients and Techcomers,
2017
was a significant year for Techcombank, as the Bank achieved a breakthrough consolidated pre-tax profit of VND8,036 billion, double that recorded in 2016. Return on equity (ROE) increased sharply, reaching 23.84%, and return on assets (ROA) increased to 2.09%. Numerous achievements allowed us to capitalize on strong growth momentum. Techcombank is the sector leader for Visa credit card payments, our free-of-charge online transactions through the “Zero Fee” program and the bancassurance scheme continue to break new milestones, and bad debt that we were holding has been dealt with in a thorough and transparent manner.
Looking further into 2018, Techcombank has an ambitious goal – to be on a par with its regional and global peers, and in alignment with international best practices. We aim to realize our ambitions by implementing Phase II of our Transformation Program, which focuses on consolidating and improving the Bank’s organizational structure, while at the same time developing and upgrading our core systems. To this end, the Board has approved a largescale investment to transform Techcombank into a pioneering technology-driven credit institution. This will not only create the best experience for our customers, but also support their ability to make decisions and provide a sustainable, transparent and flexible banking platform to meet their financial needs. The implementation of our Transformation Program, backed by the strong confidence from our customers, shareholders and investors, is leading us ever closer to achieving our mission of becoming a Vietnamese company of the highest standard, proudly conveying Vietnamese values across the region and around the world.
These results prove that our decision to prioritize high-value and less risky customer segments, while optimizing operational expenses and contingencies, was the right move for the Bank to take. As a result, S&P upgraded Techcombank’s credit rating in line with Vietnam’s sovereign rating, while The Asian Banker, a prestigious regional banking sector magazine, voted Techcombank among the top two banks in Vietnam, with the highest profitability from their core business operations.
(*) On the monthly basis, excluding the bancassurance agency supporting fee and gain from selling Vietnam Airlines shares in 2017
Sincerely,
HO HUNG ANH Chairman
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ANNUAL REPORT 2017
Mr. NGUYEN LE QUOC ANH
CEO
The strength
TO SUCCEED THE PINNACLE OF TECHCOMBANK’S SUCCESS STORY IN 2017 WAS OUR STABILITY, WHICH AFFORDED US THE RESILIENCE TO ENDURE DIFFICULT MARKET CONDITIONS, CHALLENGES FROM THE GLOBAL ECONOMY AND INTRINSIC VIETNAMESE ECONOMIC ISSUES.
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THE STRENGTH TO SUCCEED
THE CEO’S NARRATIVE
Dear Valued Shareholders, Clients and Techcomers, 2017 was a positive year for our Nation’s economy, creating ideal conditions for the success and development of both Vietnamese businesses and the Vietnamese people.
A SIMPLE YET PRESSING QUESTION WE MUST ASK OURSELVES - HOW HAVE WE, AS PART OF VIETNAM’S BANKING SECTOR, CONTRIBUTED TO THIS SUCCESS?
The banking system is the lifeblood of the economy. It plays the role of financial intermediary for many people and organizations. When banks allocate financial resources to sectors with more growth opportunities, consequently the economy and the banks themselves grow. By contrast, when banks direct resources towards problematic sectors, bad debts arise and banks are not contributors, but rather disruptors of growth.
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ANNUAL REPORT 2017
TECHCOMBANK HAS A CLEAR STRATEGY. FOR US, THE MOST IMPORTANT THING IS TO BE CONSISTENT WITH THE GOALS WE HAVE SET, PURSUING THEM TO THE END.
In 2017, the Vietnamese Government and the State Bank of Vietnam (SBV) made important policy decisions which decided the direction of Vietnam’s economic development – they directed the credit flow towards sectors with high growth potential, such as the private sector, start-ups, manufacturing, importexport, and hi-tech agriculture. Generally speaking, this policy has been successfully implemented and banks thus made a significant contribution to Vietnam’s economy last year.
Choosing the right direction
A
s one of the major banks in Vietnam, Techcombank closely follows the .policies set by the Government and the directions set by the State Bank to allocate capital and provide financial services. What sets Techcombank apart from it peers is that we select our customers based on a thorough review of their backgrounds and stringent risk assessment processes, to ensure that we can successfully accompany the development and growth of their companies throughout the business cycle.
CHOOSING THE RIGHT DIRECTION ENABLES TECHCOMBANK TO FOCUS ITS RESOURCES ON APPROPRIATE CUSTOMER SEGMENTS, EFFECTIVELY MANAGE RISK AND EXTEND THE TECHCOMBANK VALUES TO OUR CUSTOMERS.
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THE STRENGTH TO SUCCEED
THE CEO’S NARRATIVE (continued)
Understanding our customers
to understand our customers' customers; that is to understand the entire ecosystem. This is how we choose the customers who ultimately bring value to the end-users. For our customers, Techcombank does not simply provide financing, but rather delivers comprehensive solutions.
I
n the last five years, and particularly in 2017, one of Techcombank’s greatest achievements . was to define a clear, customer-centric strategy. Techcombank has always held the view that when its customers succeed, Techcombank and its employees succeed. It is this success that allows Techcombank to achieve its higher objectives of providing support for the important financial decisions members of the Vietnamese public will make during their lifetimes. To achieve this, requires that each Techcomer be guided by a clear and consistent goal: not only to understand Techcombank’s customers, but also
OVER
5,000,000 RETAIL CUSTOMERS
OVER
114,000 CORPORATE CUSTOMERS OF THESE ALMOST 1,000 ARE LARGE ENTERPRISES
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ANNUAL REPORT 2017
Over the past year, we have many examples that demonstrate how we were able to succeed in realizing this goal, and the proof lies within our numbers – Techcombank service users increased significantly in 2017 to over 5 million retail customers and over 114,000 corporate customers, of which almost 1,000 are large enterprises. In addition, Techcombank saw a major increase in the number of transactions it processed. The current account balance of large corporate clients increased by an average annual rate of 20% over the past 3 years. Many customers have also moved 70-80% of their banking transactions to Techcombank. Moreover, our SME and Upper SME clients conducted about 63,000 transactions, making up approximately 15% of the total market transactions in 2017.
TECHCOMBANK IS PROUD OF ITS STRONG PERFORMANCE. AS FOR OUR FINANCIAL RESULTS, WHILE NOT THE LARGEST IN SCALE, OUR OUTSTANDING FINANCIAL INDICATORS ARE FAR ABOVE SECTOR AVERAGES.
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THE STRENGTH TO SUCCEED
THE CEO’S NARRATIVE (continued)
Successful transformation
I
IN JULY 2017, TECHCOMBANK ENTERED THE SECOND PHASE OF ITS TRANSFORMATION PROGRAM. OVER THE PREVIOUS TWO YEARS, PHASE 1 OF OUR TRANSFORMATION PROGRAM ACHIEVED MANY
MPORTANT
ACCOMPLISHMENTS
Firstly, all employees have taken on board and executed Techcombank’s customer-centric strategy. Secondly, we have established a strong culture, whereby Techcomers are guided by the same goals, the same code of conduct, and the same core values. Thirdly, we have ensured that all Techcomers have built solid bases of technical knowledge, and that all senior executives have undertaken new means of doing business and are making decisions based on clear analysis.
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ANNUAL REPORT 2017
A number of innovative ideas have been implemented to improve the Techcombank customer experience. This is already apparent in our results. In 2017, our profit before tax was double that of the previous year, the number of non-performing loans reduced noticeably, and the number of transactions and our share of customers increased considerably. Another outcome of the 2017 Transformation Program that deserves mentioning is our improved internal coordination – not just between individuals in teams, but between units across the entire organization. Techcombank understands that customers are only satisfied when their demands are met in the fastest, most convenient way. This requires cooperation across departments, branches and the head office. In 2017, Techcombank set up more than ten working groups with representatives from different departments to deliver optimal solutions for our customers. One challenge was to change pre-existing mindsets. The Bank achieved this through specially designed communication initiatives, group discussions, training and talks which took place at all levels from headquarters to branches and from newly recruited empoyees to those who have been with the Bank long-term. All this has improved awareness across the Bank on how we move together to create the best value for our customers. We conducted two surveys in 2017 – one among 1,000 of our senior employees and the other among all Techcomers. The results of the survey, which had a 97% response rate, were highly consistent and we are pleased to see that Techcomers displayed a strong sense of unity and harmony.
Economic integration is not only an opportunity Phase 2 of our Transformation Program, which rolls out in 2018, we see us continue to solidify the platforms that serve our customers. This year Techcombank will also make large investments in technology, data, operations and risk management. In addition, we will continue to strengthen our customer service team through recruitment, as well as theoretical and on-the-job training. Our goal is to transform each relationship manager into an excellent personal finance consultant (for retail customers) and an excellent CFO (for corporate clients). At the same time, we plan to continue to enhance our processes to connect better with the businesses of our customers, rather than merely focus on finetuning our internal processes.
I
n 2017, Vietnam's economy delivered a strong performance - a stable macroeconomic base, GDP growth of 6.81% which was higher than expected, most businesses achieved good results, the exchange rate was stable and interest rates were favorable.
THESE FACTORS CREATE A SUPPORTIVE FOUNDATION FOR A SUCCESSFUL 2018 FOR VIETNAM’S BANKING SECTOR, AND SPECIFICALLY FOR TECHCOMBANK.
In 2018, and into the future, the Vietnamese economy will see a stronger and more substantive integration. Techcombank, like other Vietnamese banks, will find itself part of a larger playing field, facing bigger challenges. Past success is a prerequisite, but, if need be, we must “forget” what has already been accomplished in order to focus fully on the next phase of our development, in a new context and with our new aspirations.
A big ship takes more time to maneuver and a skilled crew to steer it. As a large organization aiming to make a breakthrough, we want to nurture the unifying strength of our workforce, from the highest level down to each frontline employee. The challenges that lie ahead for Techcombank are still large, and in order to succeed, every Techcomer will need to show perseverance and consistency. Through doing this, Techcombank will rise, overcome challenges and reach its destination.
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ANNUAL REPORT 2017
management
EXCELLENCE GOOD COPORATE GOVERNANCE IS REGARDED AS FUNDAMENTAL TO THE CREATION, PROTECTION AND ENHANCEMENT OF THE BANK’S VALUE AS WELL AS THE SUSTAINABLE DEVELOPMENT OF THESE VALUES.
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MANAGEMENT EXCELLENCE
CORPORATE GOVERNANCE
TECHCOMBANK CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE
AT THE GOVERNANCE LEVEL, WE ARE COMMITTED TO ENSURING PRUDENT MANAGEMENT AND ACCOUNTABILITY WITHIN THE BANK, AND FAIRNESS TO OUR CUSTOMERS, EMPLOYEES AND SHAREHOLDERS. DURING OUR TRANSFORMATIONAL PERIODS, WE REMAIN COMMITTED TO SAFEGUARDING BUSINESS CONTINUITY AND THE HIGHEST LEVELS OF PERFORMANCE.
Implemented in 2010, Techcombank’s corporate governance structure was designed with support from leading consulting firm, McKinsey & Company, and HSBC. This robust structure has led the Bank through one of the most challenging chapters in the history of the Vietnamese economy and the last six years of evolution in the banking sector.
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ANNUAL REPORT 2017
Since 2017, in anticipation of the draft amendments to the Law on Credit Institutions - which became effective on 15/01/2018 - and to ensure we adopt the highest level of international best practice, Techcombank has identified Corporate Governance as one of its Key Strategic Initiatives to be implemented, reviewed and refreshed in response to the challenges posed by rapid changes in the national and regional economic conditions.
A transparent and effective corporate governance structure, that defines a clear separation between governance and management layers, is a must to instill confidence among investors and relevant stakeholders, and for Techcombank to become a highly-valued organization. In 2018, Techcombank will continue to protect shareholders’ interests, to enhance effectiveness amongst its Board of Directors and Board Committees, and to implement the new governance structure. Other initiatives will also be deployed with the aim to strengthen the Bank’s governance structure.
TECHCOMBANK CEO’S STATEMENT ON CORPORATE GOVERNANCE
AT MANAGEMENT LEVEL, WE ARE COMMITTED TO ENSURING THE GROWTH AND SUSTAINABILITY OF THE ORGANIZATION.
In 2017, we redesigned and redeveloped our Corporate Governance model to comply with the current laws in Vietnam and regulations of the governing bodies for credit institutions that are public companies. We also reviewed leading Corporate Governance practices around the world and ensured compliance with the followings :
1. Laws on Credit Institutions in Vietnam; 2. Enterprise Laws in Vietnam; 3. Listing regulations in Vietnam; 4. Corporate governance principles for G20/OECD; and 5. Corporate governance principles for banks by the Basel Committee on Banking Supervision.
In order to meet the requirements for the expected growth set out in Techcombank’s strategy and vision, our refreshed Corporate Governance structure aims to improve our status from a leading local bank to the one that competes in the regional market. In 2018, we will continue to implement our new Corporate Governance model, which will see the Board of Management and its Committees further improve the Bank's efficiency, ensure the delivery of solid business results, as well as optimize the Bank’s allocation of resources.
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MANAGEMENT EXCELLENCE
CORPORATE GOVERNANCE (continued)
TARGETED CORPORATE GOVERNANCE MODEL FROM 2018
Techcombank’s targeted Corporate Governance model will allow for comprehensive and transparent separation between:
GOVERNANCE AND DIRECTION LEVEL
SUPERVISORY BOARD
MANAGEMENT AND EXECUTIVE LEVEL
Internal Audit
MANAGEMENT LEVEL
The Board of Directors and Board Committees which function to ensure the existence of the Bank, and the fairness to our customers, employees and shareholders.
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ANNUAL REPORT 2017
The Board of Management and Management Committees which function to ensure the sustainability and development of the Bank.
Management level operates at the direction of the Board of Directors and other Board Committees. The Management Committees are established by the Board of Directors and are headed by members of the Board of Management. The Management Committees assist the CEO and the Board of Management in operating the Bank and to execute the respective Board Committee’s directions. These committees help the Bank ensure smooth operations, increase management effectiveness, and allow management to implement relevant policies and strategies.
The main functions at the Board level are: »» bank governance, oversight of strategies of the Bank’s management activities;
BOARD LEVEL
»» appointing the Chief Executive Officer, Board of Management personnel and other senior management positions; »» holding the Annual General Shareholder’s Meeting; managing the charter capital and assets of the Bank; and »» managing the disclosure and transparency of the information.
GENERAL ASSEMBLY OF SHAREHOLDERS
BOARD OF DIRECTORS
CHIEF EXECUTIVE OFFICER/ BOARD OF MANAGEMENT
BOARD AUDIT COMMITTEE The Board Audit Committee’s main areas of supervision include: »» financial statements, disclosure of financial information; »» maintaining the quality, suitability and scope of work for External Audit; »» ensuring the adequacy and effectiveness of internal control systems and the internal audit function; and »» reviewing and implementing policies for accounting, external audit and internal audit within the Bank.
BOARD RISK MANAGEMENT COMMITTEE The Board Risk Management committee is responsible for establishing, monitoring and approving these key functions: »» the Bank’s Risk Management Framework; »» risk management practices and policies including Credit risk, Operational risk, Liquidity risk and Market risk; »» risk appetite, the risk monitoring model and parameters; »» reviewing the Bank’s risk profile; »» an effective reporting system and early risk warning system; and »» proposing the selection and/or dismissal of the CRO.
BOARD CREDIT COMMITTEE *
BOARD NOMINATION COMMITTEE The Board Nomination Committee’s main responsibilities include: »» establishing criteria and policies in regard to the selection, appointment, dismissal of members of the Board of Directors, CEO and members of the Board of Management; »» ensuring the independence, diversity and experience of the Board of Directors; »» overseeing selection, dismissal, and succession plans for members of Board of Directors, Commitees under the Board, CEO and Board of Management; and »» performance evaluation and producing necessary education-development plans for members of the Board and Board of Management.
BOARD REMUNERATION COMMITTEE The Board Remuneration committee’s main areas of oversight include: »» establishing remuneration policies bankwide; »» establishing and maintaining the remuneration mechanism which aligns the band/position and performance of Directors, members of Board of Management and other key positions; »» directing and approving the human capital management strategy for the Bank; and »» directing and approving talent attraction/retention, development - education policies.
BOARD STRATEGY COMMITTEE
COMMITTEES – MANAGEMENT LEVEL
Subsidiaries
Business Divisions
The Board Credit Committee’s main areas of oversight include: »» the credit quality of the Bank; »» credit limit and approval process of credit approval units; and »» monitoring and approving special credit matters (the Board’s stakeholders, key clients, special industry).
The Board Strategty Committee’s main areas of oversight include: »» assisting the Board in directing the Bank’s strategy as well as monitoring the execution of the approved plans; »» producing recommendations and proposals in regard to the Bank’s annual business plan; »» monitoring the Board of Management’s proposed medium- and long-term objectives; and »» monitoring the effectiveness of the Bank’s financial and operational activities.
To be implemented.
Supporting Divisions
Recently Techcombank has been implementing the necessary initiatives to transform the Corporate Governance model above into practicality applicable for the Bank’s governance operation. (*) The Board Credit Committee is established with the purpose of enhancing the credit function of the Bank in medium-term. In long-term, Board Credit Committee will be integrated as a function of Board Risk Management Committee. ENABLING FINANCIAL SUCCESS & SECURITY
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MANAGEMENT EXCELLENCE
OUR BOARD OF DIRECTORS
Mr. HO HUNG ANH Chairman Mr. Ho Hung Anh has been the Chairman of Techcombank’s Board of Directors since May 2008. Prior to his appointment as Chairman, Mr. Ho Hung Anh served as a member of Techcombank’s Board of Directors from 2004. His professional career also includes several years of executive-level experience at large organizations, including Masan. Mr. Ho Hung Anh holds a degree in electrical engineering from the Kiev Polytechnic Institute in the Ukraine. Mr. NGUYEN DANG QUANG The First Vice Chairman
1
Independent Directors
5
Non-executive Directors
1
Executive Directors
Mr. Nguyen Dang Quang has served as First Vice Chairman of Techcombank’s Board of Directors since April 2016. Previously, he was a member of Techcombank’s Board of Directors from May 2014 to March 2016 and was First Vice Chairman of the Bank from May 2008 to April 2014. Before becoming a Director of Techcombank, Mr. Nguyen Dang Quang had more than 20 years’ of executive experience, including membership on the Board of Directors of Masan and key management positions at Techcombank since 1995.
AGE GROUP OF OUR DIRECTORS 28%
29%
43%
61 - 70 years old 29%
14%
29%
57%
Under 50 years old 28% 51 - 60 years old
43%
TENURE OF OUR DIRECTORS Under 5 years
14%
5 - 7 years 29% Above 7 years 57%
20
Mr. Nguyen Dang Quang holds a PhD from the National Academy of Sciences of Belarus and an MBA from the Plekhanov Russian University of Economics
ANNUAL REPORT 2017
Mr. NGUYEN THIEU QUANG Vice Chairman
Mr. Nguyen Thieu Quang has been a member of Techcombank’s Board of Directors since 1999 and became Vice Chairman of Techcombank’s Board of Directors in May 2008. Mr. Nguyen Thieu Quang has significant executive experience including various key positions at Masan, Vinaconex, and Senco. Mr. Nguyen Thieu Quang holds a degree in civil engineering from Donetsk Polytechnic Institute in the Ukraine (now Donetsk National Technical University).
Mr. DO TUAN ANH Vice Chairman cum Deputy CEO Mr. Do Tuan Anh has been Vice Chairman of the Board of Directors and Deputy CEO of Techcombank since June 2015 and served as a member of Techcombank’s Board of Directors since December 2012. Prior to his appointment to the Board of Directors, Mr. Do Tuan Anh held various management positions at the State Bank of Vietnam and Techcombank, including Deputy Director of the General International Cooperation Department and Director of the Banking Supervision Agency, Senior Assistant to the Board of Directors and Head of the Strategy and Corporate Development Division. He holds a Master’s degree in Wealth Management from Singapore Management University (Singapore). Mr. LEE BOON HUAT Board Member Mr. Lee Boon Huat has been a member of Techcombank’s Board of Directors since May 2014, prior to that, he was an Independent Director of the Board of Directors 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. Lee Boon Huat holds a Bachelor’s degree in business accounting from the Western Australian Institute of Technology (now Curtin University).
Mr. NGUYEN CANH SON Vice Chairman, Non Executive Director Mr. Nguyen Canh Son has served on the Board of Directors since May 2008 and has been the Vice Chairman of Techcombank’s Board of Directors since April 2009. Mr. Nguyen Canh Son has more than 20 years of experience including positions as the Chairman at Eurowindow Holding and Board member at for T&M Invest Vietnam. He holds a degree in civil engineering from the Moscow Institute of Civil Engineering in Russia (now Moscow State University of Civil Engineering).
Mr. NGUYEN DOAN HUNG Independent Board Member Mr. Nguyen Doan Hung has been an Independent Director of the Board of Directors of Techcombank since May 2014. He has extensive management experience with the State Bank of Vietnam, having held positions including 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 Doan Hung holds a Bachelor’s degree in English language from Hanoi University (Vietnam) and a Master’s degree in financial management from the University of London (England).
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MANAGEMENT EXCELLENCE
OUR BOARD OF DIRECTORS (continued)
INDEPENDENT DIRECTOR (1)
An independent director has to meet the requirements and conditions below: »» does not currently work for the credit institution or its subsidiaries and hasn't worked for the credit institution or its subsidiaries in the three preceding years; »» does not enjoy a salary or regular pay from the credit institution other than allowances for members of the Board of Directors under regulations; »» has no spouse, parent, child, sibling, or spouse thereof, who is a major shareholder, manager or member of the Supervisory Board of the credit institution or its subsidiaries; »» does not directly or indirectly own or represent ownership of 1% or more of the charter capital or voting share capital of the credit institution; together with his/her related persons not owning 5% or more of the charter capital or voting share capital of the credit institution; and »» is not a manager or member of the Supervisory Board of the credit institution nor has been at any time in the five preceding years. The Independent Director also could be considered an Independent Non-Executive Director according to international practices.
NON EXECUTIVE DIRECTOR (2)
EXECUTIVE DIRECTOR (3)
»» The Non-Executive Director is a member of the Board of Directors who is not a director (general director) or deputy director (general deputy director), chief accountant, and executive of other enterprises as specified in the company's charter. The Non-Executive Director also could be considered a Non-Independent Non-Executive Director (“NINED”) according to international practices.
»» A member of the Board of Directors and holds a position in the Board of Management of the organization. »» The Executive Director cannot be an Independent Board member. Remark: Point (1) and (2) were made pursuant to the Law on Credit Institution no. 47/2010/QH12 and Decree no. 71/2017/ND-CP guiding on the corporate governance of public companies. Point (3) was referred to leading international practices such as Guidelines on Corporate governance principles for banks by Basel Committee on Banking Supervision (BCBS 328) and The Vietnamese Corporate Governance Manual by the International Finance Corporation (IFC).
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ANNUAL REPORT 2017
EXPERTISE AND EXPERIENCE OF BOARD OF DIRECTORS
Regulatory, Law & Compliance
Community Affairs, Governmental Relations, Social Responsibility and Public Policies
EXPERTISE
Operation & Technology
Human Capital and Banking Management
Risk Management
Banking and Financial Services EXPERIENCE Management or Other Leadership Experience
Number of Directors 0
1
2
3
4
5
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7
MANAGEMENT EXCELLENCE
OUR SUPERVISORY BOARD
Mr. HOANG HUY TRUNG
Ms. NGUYEN THU HIEN
Ms. BUI THI HONG MAI
Mr. MAG REC SOC OEC
Mr. Hoang Huy Trung has many years of experience in the banking industry and has held various management positions at the State Bank of Vietnam and Techcombank. He has been the Head and a Member in Charge of the Techcombank Supervisory Board since December 2012.
Ms. Nguyen Thu Hien has been active in Techcombank’s accounting and control activities since 1999. She served as Head of Supervisory Board cum Member in charge from April 2010 to December 2012. She has been a Member in Charge of the Techcombank Supervisory Board since December 2012.
Ms Bui Thi Hong Mai has many years of experience in accounting and finance. From April 2010 to December 2012, she was a Member in charge of the Techcombank Supervisory Board. She has been a member of the Techcombank Supervisory Board since December 2012.
Mr. Hoang Huy Trung graduated with a Master’s degree in Economics, specializing in banking from the National Economics University in Hanoi and a Bachelor in Economics, majoring in banking-finance from the Academy of Finance, Vietnam.
Ms. Nguyen Thu Hien holds a Bachelor’s degree in Credit Finance in Russia.
Ms. Bui Thi Hong Mai holds a Bachelor’s degree in Accounting and Finance
Mr. Mag Rec Soc Oec Romauch Hannes has many years of experience in banking finance, and has held many important management positions such as in the Corporate Banking Unit at Carinthia State Bank; Risk Administration Unit at Carinthia and Styria Bank; Risk analysis/ management/consulting at Carinthia and Styria Bank; Marketing Director at Vietnam T&M limited company; and Deputy Director of CB Richard Ellis Hanoi – Asset Management. He has been a member of the Techcombank Supervisory Board since December 2012.
Head of Supervisory Board cum Member in Charge
Member in Charge
Member
ROMAUCH HANNES Member
Mr. Mag Rec Soc Oec Romauch Hannes holds a Master’s degree in Business Administration, majoring in Finance, Banking and Marketing from Klagenfurt University, Austria. 24
ANNUAL REPORT 2017
MANAGEMENT EXCELLENCE
OUR BOARD OF MANAGEMENT
Mr. NGUYEN LE QUOC ANH
Mr. DO TUAN ANH
Mr. LE BA DUNG
Mr. Nguyen Le Quoc Anh was appointed Chief Executive Director of Techcombank in September 2016. Prior to this, he was Head of Strategy and Corporate Development from May 2015 and Deputy Chief Executive Officer from January 2016. He has more than 25 years of experience, including a variety of senior management positions in banking, financial services, telecommunications and advisory firms including Wells Fargo, Fortress Investment Group, T-Mobile, and McKinsey & Company.
Mr. Do Tuan Anh has served as a member of the Board of Directors since December 2012 and became Vice Chairman of the Board of Directors and Deputy CEO of Techcombank in June 2015. He has 22 years of experience in banking. Previously, he was Unit Deputy Head of the International Cooperation Department and Department Head of the Banking Supervision Agency at the State Bank of Vietnam, Senior Assistant to the Board of Directors and Head of the Strategy and Corporate Development Division.
Mr. Le Ba Dung was appointed Chief Risk Officer in September 2015. He has more than 20 years of experience in finance and banking risk management. Prior to joining Techcombank, he served in senior executive risk management positions at Asia Commercial Bank (Vietnam), Standard Chartered Bank (Singapore), and GE Capital Asia-Pacific (Hong Kong, South Korea, and China).
He holds a Ph.D. in Nuclear Engineering from Purdue University (USA) and a Master’s degree in Econometrics from California State University (USA).
He holds a Master’s degree in Wealth Management from Singapore Management University (Singapore).
Chief Executive Officer
Vice Chairman of the Board of Directors cum Deputy CEO
* Information on the Board of Management was updated as at 01/03/2018.
Chief Risk Officer
He holds a Master’s degree in International Affairs from Georgetown (USA) and a Master’s degree in Electrical Engineering from the State University of New York (USA).
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MANAGEMENT EXCELLENCE
OUR BOARD OF MANAGEMENT (continued)
Mr. PHUNG QUANG HUNG
Ms. TRAN THI MINH LAN
Mr. TRINH BANG
Mr. Phung Quang Hung was appointed Head of the Sales and Distribution Division in November 2014. Prior to this, he was Techcombank’s Chief Technology and Operations Officer from September 2010. He has more than 20 years of management experience at international banks, including previous positions as Head of IT and Operations at ABN AMRO (Vietnam) and Business Partner at National Australia Bank (London).
Ms. Tran Thi Minh Lan was appointed Head of Strategy and Corporate Development in August 2017. Before this, she was Techcombank’s Head of Transformation Program and the Deputy Head of Strategy and Corporate Development, from December 2015, responsible for building and implementing the Bank’s overall strategy. She has more than 15 years of experience in banking strategy and risk management. She has held several senior positions such as the Deputy Head of the Risk Management Division at Techcombank.
Mr. Trinh Bang was appointed Chief Financial Officer in January 2018. He has more than 23 years of global banking and finance experience – including 18 years with Morgan Stanley in New York, Singapore, and most recently as Senior Advisor and Managing Director/Country Head for Vietnam and the Philippines.
Head of Sales and Distribution
He holds a Master’s degree in International Business from Washington State University (USA).
Head of Strategy and Corporate Development
Ms. Tran Thi Minh Lan holds a Master’s degree in Financial and Accounting Management from the University of Berlin (Germany). She participated in the Executive Development Program at the Wharton School, the University of Pennsylvania (USA).
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ANNUAL REPORT 2017
Chief Financial Officer
He holds a Bachelor’s degree in Systems Engineering from the University of Virginia (USA).
Mr. CHESTER GORSKI
Ms. NGUYEN THI VAN ANH
Mr. PHAN THANH SON Transformation Director of Transaction Banking
Mr. Chester Gorski was appointed Chief Technology Operation Officer in February 2016. He has more than 25 years of experience, including senior leadership roles in banking, insurance and financial services at firms including Wells Fargo, Wachovia, Aon, as well as advisory firms including PwC and McKinsey & Company.
Ms. Nguyen Thi Van Anh joined Techcombank in November 2014 and was appointed Techcombank’s Head of Marketing in June 2016. Prior to joining Techcombank, she had more than 20 years of experience as Head of Brand and Head of Marketing at major national and multi-national companies including Vingroup, British Petroleum, and British American Tobacco (BAT).
Mr. Phan Thanh Son was appointed Transformation Director of Transaction Banking in July 2017. Prior to this, he was Head of the Treasury and Financial Markets Division from January 2011. He has more than 20 years of experience in local financial markets and played an important role in developing local fixed income markets. He was the Deputy Chief Executive Officer at TienPhong Bank. He has held various positions in the Global Markets Divisions at Standard Chartered Bank (Vietnam), Citibank (Vietnam), and Citigroup Global Markets Ltd. (Hong Kong).
Chief Technology Operation Officer
He holds an MBA from the University of Chicago (USA).
Head of Marketing
She holds an MBA from University of Westminster (UK) and a Master’s degree in Marketing from Swinburne University of Technology (Australia).
* Information on the Board of Management was updated as at 01/03/2018.
He holds a Master’s degree in Economics from the National Economics University, Hanoi (Vietnam).
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27
MANAGEMENT EXCELLENCE
OUR BOARD OF MANAGEMENT (continued)
Mr. CHUNG BA PHUONG
Ms. LE THI BICH PHUONG
Mr. NGUYEN XUAN MINH
Mr. Chung Ba Phuong was appointed Head of Insurance in August 2017. He has more than 24 years of experience in developing and growing insurance businesses for renowned insurance groups such as Generali (Europe), Manulife (Canada), American International Group (USA) and consultant Towers Perrin (Willis Towers Watson). Directly prior to joining TCB he led Generali Hong Kong as the CEO and General Manager.
Ms. Le Thi Bich Phuong was appointed Techcombank’s Head of Personal Financial Services in June 2016. She has more than 15 years of experience in banking, holding executive sales and distribution positions including Head of Area, Head of Region, and Head of S&D South.
Mr. Nguyen Xuan Minh was appointed Head of Investment Banking Division – Chairman of the Board of Directors of Techcom Securities Company Limited in October 2013. He has more than 20 years of experience in fund management and investment banking, including in previous positions such as CEO of Vietnam Asset Management Ltd. (VAM) and Senior Vice President of Franklin Templeton Investments under Mark Mobius in Singapore.
Head of Insurance
He holds a Bachelor of Commerce (Honors) from the University of Manitoba (Canada), and is a member of the Fellow Society of Actuaries (USA).
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ANNUAL REPORT 2017
Head of Personal Financial Services
She holds a Bachelor’s degree in Economics and International Business from the Hanoi University of Social and Human Sciences (Vietnam).
Head of Investment Banking
He holds a Master’s degree in Applied Finance & Investment from Securities Institute of Australia (FINSIA), and an M.S. in Science, Oil & Gas – Mechanical Engineering from Gubkin Russian State University of Oil and Gas (Russia). He is a CFA Charterholder.
Mr. PHAM QUANG THANG
Mr. VISHAL SHAH
Mr. ASHISH SHARMA
Mr. Pham Quang Thang was appointed Deputy Chief Executive Officer and Head of Compliance and Legal in January 2014. He has more than 20 years of experience in banking, including several senior positions such as Chief Accountant, Head of Treasury and Transactions Management Center, Deputy Chief Executive Officer in charge of Finance, Planning and Strategy, Head of the Commercial Banking Division, and Head of the Credit Approval Division.
Mr. Vishal Shah was appointed Head of Business Banking in March 2018. He has more than 20 years of experience in leading companies with strong expertise in commercial banking, retail banking and financial advisory services. He has held key leadership positions at Standard Chartered Bank in Singapore, India, and the UAE. He has also held advisory roles at Ernst & Young and KPMG.
Mr. Ashish Sharma was appointed Head of Transformation Office in June 2017. He has 20 years of experience in establishing and running business banking platforms and banking strategy in leadership roles. He has held Director and Executive Director roles at large corporate and financial institutions such as Standard Chartered Bank, McKinsey & Company, The Goldman Sachs Group, and INC, among others.
Mr. Vishal Shah is a Qualified Chartered Accountant (ACA) and Cost and Works Accountant (Grad CWA). He holds a Bachelor’s degree in Commerce from HR College of Commerce and Economics, Mumbai University (India).
He holds an MBA in Finance from New York University (USA) and a Master’s degree in Computer Sciences from MIT (USA).
Deputy Chief Executive Officer cum Head of Compliance and Legal
He holds a Master’s degree from Swinburne Technology University (Australia).
Head of Business Banking
* Information on the Board of Management was updated as at 01/03/2018.
Head of the Transformation Office
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29
MANAGEMENT EXCELLENCE
OUR BOARD OF MANAGEMENT (continued)
Ms. PHAM VU MINH DAN (ALEXIS)
Mr. VU MINH TRUONG Head of Treasury and Financial Markets
Ms. NGUYEN HUONG GIANG
Ms. Pham Vu Minh Dan (Alexis) was appointed Head of the Human Resources Division at Techcombank in January 2015. Prior to this, she gained more than 14 years of experience in human resource management at British American Tobacco Group (BAT). During her tenure with BAT, she was appointed to various senior HR roles in Vietnam,Malaysia, the United Kingdom and the Asia-Pacific region. Her last role with BAT was Regional Head of Talent for the Asia-Pacific region.
Mr. Vu Minh Truong was appointed Head of Treasury and Financial Markets in January 2017. He has more than 20 years of experience, including senior management positions in major international banks such as ABN AMRO, HSBC, ANZ and Standard Chartered. In more recent years, he worked in VPBank and TPBank as Deputy CEO.
Ms. Nguyen Huong Giang joined Techcombank as Head of Transaction Banking in July 2017. She has 25 years of experience working at leading global banks including ANZ and Citibank. She has held senior roles such as Head of Client Delivery & Implementation, Head of Sales and Product Development of the Transaction Banking Division, and Director - ASEAN Channel Product.
He holds a Bachelor’s degree in Business Administration from the Technical University of Berlin (Germany).
She holds a Bachelor’s degree in Linguistic Education from National University, Hanoi (Vietnam).
Chief Human Resource Officer
She holds a Bachelor’s degree in Business Management from Nanyang Technological University (Singapore).
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ANNUAL REPORT 2017
Head of Transaction Banking
Mr. CHAN JONATHAN CHUNG MING
Ms. PHAN THI THANH BINH
Ms. PHAN THI HAI YEN
Mr. Jonathan Chan joined Techcombank as Transformation Director of Personal Financial Services in December 2017. He has more than 30 years of experience in finance and corporate banking in both Asia and the USA. His most recent experience includes Managing Director positions at Fu An Investments, QBE Mortgage Insurance, and PMI Mortgage Insurance (Hong Kong). He has also held key risk and finance positions at GE Commercial Finance and GE Capital.
Ms. Phan Thi Thanh Binh was appointed Transformation Director of Wholesale Banking at Techcombank in July 2017. She has more than 20 years of experience with ANZ in various positions including Head of Markets Vietnam, acting CEO of ANZ (Vietnam), Member of the Board of Directors at ANZ (Vietnam, Cambodia, and Laos) and Chairwoman of ANZ (Laos).
Ms. Phan Thi Hai Yen was appointed Deputy Head of Wholesale Banking in March 2017. She has more than 20 years of experience in the banking industry, holding various executive positions at Techcombank, including Head of Product development, Head of VVIP North.
Transformation Director of Personal Financial Services
Transformation Director of Wholesale Banking
She holds a Master’s degree from University Libre de Bruxelle (Belgium).
Deputy Head of Wholesale Banking
She holds a degree from the University of Language and International studies, Vietnam National University (Vietnam).
He holds a Bachelor’s degree in Economics from the University of California, Los Angeles (USA).
* Information on the Board of Management was updated as at 01/03/2018.
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MANAGEMENT EXCELLENCE
Effective business model EACH TECHCOMER NOW HAS A SPECIFIC FOCUS: TO INCREASE THE VALUE THEY CAN BRING TO THEIR CUSTOMERS, TO UNDERSTAND THEIR CUSTOMERS’ NEEDS AND HOW THEY CAN HELP THEM MEET THOSE NEEDS AND ACHIEVE THEIR GOALS.
FROM 2016 TO 2020 TECHCOMBANK SET ITSELF AN OBJECTIVE TO SHAPE ITS BUSINESS MODEL BASED ON
7
KEY COMPONENTS. OF WHICH, CUSTOMERS ARE THE MOST IMPORTANT FOCUS, ALONG WITH SIX OTHER CORE COMPETENCIES ALL DESIGNED TO HELP THE BANK MEET CUSTOMERS’ FINANCIAL NEEDS IN THE MOST COMPREHENSIVE MANNER.
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ANNUAL REPORT 2017
I
n 2017, while many banks pushed for growth in size, Techcombank focused on the quality of its growth. The Bank prioritised developing a sustainable and effective business model and optimized its return on investment, while using stateof-the-art technological solutions to provide customers with outstanding service and experience. Thanks to the remarkable success of Phase 1 of the Transformation Program, each Techcomer is now focused on increasing the value they are able to deliver to customers. They understand their customers’ unique needs and work towards meeting those needs – overcoming challenges and celebrating success along the way.
In order to fully execute its business model, Techcombank has perfected the ability to understand customers’ needs and develop solutions, through an optimal sales structure and internal organization. This also means that Techcombank is able to offer customers not just individual products but packages of comprehensive solutions. Armed with a better understanding of the customers’ needs, Techcombank aims to further strengthen its risk management capabilities, to help customers control risk and direct their business to areas that have strong growth potential. This level of shared success and client satisfaction will in turn increase the attractiveness and thus the use of Techcombank’s products and services.
Techcombank will continue, through its Transformation Program, to further enhance its understanding of customers’ needs and build capacity in technology, human resources, and risk management. These inititives are designed to position Techcombank as the leading bank in Vietnam by 2020, and one in which customers can put their trust.
DATA EXCELLENCE
PEOPLE EXCELLENCE
RISK MANAGEMENT EXCELLENCE
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MANAGEMENT EXCELLENCE
STANDARD OPERATION
THE KEY TO CREATING THE BEST EXPERIENCE FOR CUSTOMERS IS A CULTURE OF
COMPLIANCE AND A COMMITMENT TO QUALITY THAT IS UPHELD BY EVERY EMPLOYEE.
A
s one of the leaders in the finance and banking sector in Vietnam, Techcombank has for many years been guided by the principles of compliance, responsibility, and high standards. This is how Techcombank creates trust with its customers and investors. For the Bank, the key to providing the best experience for customers is a strong compliance culture and a commitment to quality that is upheld by every employee.
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ANNUAL REPORT 2017
The Bank strives to ensure that customers can entrust the Bank with their finances, and with absolute peace of mind. Utmost attention is given to compliance. Business units continuously develop and deploy management and control tools and at the same time, training programs are put in place to improve employees' awareness, compliance capability and professional ethics. At Techcombank, customercentric solutions are designed based on synergies between the business units, risk management, control and compliance, to meet the unique demands of each customer segment. For example, the Bank has been helping clients deal with fraudulent transactions, and providing timely support by responding to complaints and inquiries.
TECHCOMERS DEVOTE THEIR EVERY EFFORT TO MEETING CUSTOMERS’ NEEDS, SO THAT ALL FEEDBACK BECOMES AN OPPORTUNITY FOR IMPROVEMENT AND TO BRING AN EVEN BETTER EXPERIENCE TO CUSTOMERS.
The highest priority for every Techcombank employee is to ensure that customers benefit and see the value in the Bank. Techcombank strives for all employees’, through their words and actions, to convey reliability, proactiveness, and readiness to serve. Head office departments and frontline business units are always in communication to constantly improve the quality of customer service and experience. To this end, the Bank implements activities such as refresher training of behavioral standards, internal competitions, customer feedback, and on the job training, specifically designed to maintain a high level of quality and relevance.
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ANNUAL REPORT 2017
Comprehensive
SOLUTIONS
TECHCOMBANK IS PROUD TO BE THE BANK OF CHOICE FOR MANY HIGH-INCOME CUSTOMERS AND APPRECIATES THAT DEMAND CANNOT BE MET WITH A SINGLE PRODUCT BUT RATHER WITH A COMPREHENSIVE PACKAGE OF SERVICES THAT FULLY ADDRESS THEIR FINANCIAL NEEDS.
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37
COMPREHENSIVE SOLUTIONS
OPTIMAL CHOICE
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ANNUAL REPORT 2017
A
s Vietnam’s economy grows, the demand for banking and financial services becomes more sophisticated. Customers who come to Techcombank, and other commercial banks, increasingly demand high quality products and services. Techcombank acknowledges this change in customer behavior and is intent on meeting these demands and improving customer experience. According to market surveys, 69% of retail customers in Vietnam are reluctant to transact with banks for a variety of reasons, including the perception that banking procedures are cumbersome, transactions are lengthy and bank employees do not have sufficient knowledge of their products to advise customers. The only way to change these perceptions is for banks to provide solutions that address customers’ financial needs efficiently and effectively.
TECHCOMBANK STRIVES TO CREATE SOLUTIONS THAT EQUIP CUSTOMERS ON THEIR JOURNEY OF FINANCIAL GROWTH.
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39
COMPREHENSIVE SOLUTIONS
OPTIMAL CHOICE (continued)
Remarkable products and services IN 2017, TECHCOMBANK LAUNCHED A VARIETY OF FINANCIAL SOLUTIONS TO MEET THE INCREASING FINANCIAL DEMAND FROM CUSTOMERS AND THE DIVERSITY OF REQUIREMENTS FROM CLIENTS IN STRATEGIC SEGMENTS.
PERSONAL PAYMENT ACCOUNT: FREE OF CHARGE, FULL ENJOYMENT
ONE TOUCH
RECEIVE YOUR CAR AFTER ONE MEETING ‘One Touch’, launched in July 2017, received the Trademark Registration Certificate from the Intellectual Property Department. Exclusive to Techcombank’s existing customers, this program offers “preapproval” packages based on an analysis of customers’ behavior and understanding of their needs. The procedure only takes one meeting to finalise. At present, One Touch applies only to auto loans but will soon be extended to mortgages and credit cards.
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ANNUAL REPORT 2017
In 2017, Techcombank continued to offer its personal payment account service, which comes with a number of benefits for customers, one of which is ‘Zero Fee’ – the free-of-charge transaction service designed to encourage customers to use Ebanking. This is a special feature offered by Techcombank and only a few other banks in Vietnam. This is part of an effort to move transactions online, reducing pressure on branches while significantly helping customers save time and effort.
CREDIT CARDS According to VISA, Techcombank has the highest Visa card transaction volume in Vietnam. This is the direct result of customers’ appreciation of Techcombank products, which come with many practical incentive packages such as “Smile” and “Xsmile”, which was introduced in 2017. In addition to Visa and JCB, Techcombank is preparing to launch the MasterCard World credit card, which will be available to customers making regular large payments. This addition will expand the selection of Techcombank card products, enabling the Bank to confidently compete in domestic as well as foreign markets. At the same time, Techcombank is restructuring its product offering model for credit cards and payment cards in an effort to serve customers in each specific segment better.
MORTGAGES
Techcombank’s mortgage product is another success story. Thanks to the association with leading real estate developers such as Vingroup, Thao Dien Masteri and Sungroup, Techcombank’s mortgages are not only simple cash loans but can also be bundled with other investment products, such as bonds and savings, to optimize customer benefits.
IN ADDITION TO PROVIDING CUSTOMERS WITH OPTIMAL FINANCIAL SOLUTIONS, TECHCOMBANK STRIVES TO CREATE A CULTURAL SHIFT IN THE DAILY LIVES OF VIETNAMESE PEOPLE - AWAY FROM THE CASH-BASED SOCIETY TO A MORE MODERN BANKING SYSTEM WHERE TRANSACTIONS ARE MADE WITH CARDS. THIS WAY, CUSTOMERS’ INTERESTS ARE FURTHERED THROUGH THE EFFECTIVE USE OF IDLE FUNDS AND THE RISKS ASSOCIATED WITH HOLDING LARGE AMOUNTS OF CASH ARE ELIMINATED.
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COMPREHENSIVE SOLUTIONS
OPTIMAL CHOICE (continued)
Absolute security
AROUND THE WORLD, BANKS ARE INCREASINGLY GOING DIGITAL. IN VIETNAM, TECHCOMBANK IS PROUD TO BE A PIONEER IN THIS FIELD. IN 2017, TECHCOMBANK CONTINUED TO OFFER MORE COMPLETE SOLUTIONS TO FINE-TUNE AND AUTOMATE VARIOUS PROCESSES TOWARDS GREATER SECURITY FOR ONLINE TRANSACTIONS. In the age of digitalisation, security is a top priority. Techcombank has utilized the PCI DSS international security standard since 2013. Techcombank has been and will continue improving its systems and products to ensure full compliance with legal regulations and to stay up to date with international developments, while providing a user- friendly experience. The Bank will continue to invest in digital and online platforms with the help of the latest technology of the industrial revolution 4.0, including contactless payment (QR Code, Contactless, etc) and modern identification tools (PIN, OTP, fingerprint, etc.) for payment services in partnership with Visa, MasterCard, JCB, Napas, etc.
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ANNUAL REPORT 2017
Pioneering insurance products IN VIETNAM, TECHCOMBANK HOLDS
THE LARGEST SHARE OF THE BANCASSURANCE MARKET.
2017 marked the signing of a landmark 15year exclusive partnership agreement with the Multinational Insurance Group of Manulife (Canada). As of 2017, it was estimated that less than 7% of Vietnamese people had life insurance. This figure is much lower than other countries in the region, such as Indonesia, Malaysia or Singapore, where the proportion of insured people is over 50% of the population.
The signing of the strategic partnership agreement between Techcombank and Manulife.
In developed countries like the US, the UK, France and Spain, bancassurance accounts for up to 70% of total insurance premium income, while in developed Asian markets such as Malaysia, Korea and Singapore, this figure is about 30-40%.
to introduce insurance products to more consumers. Thanks to a team of experienced and knowledgeable financial consultants and a nationwide network of branches, Techcombank has been able to deliver optimal insurance solutions to customers through its professional advisory services and easy, time-saving procedures. Techcombank has been successful at establishing trust with customers, thereby giving them peace of mind when using Techcombank bancassurance products
With a view to bringing the social security of Vietnamese people on a par with the rest of the region, the Bank is working tirelessly
In 2017 alone, Techcombank’s total annual premium equivalent (APE) reached nearly VND649 billion (+44% y / y).
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43
COMPREHENSIVE SOLUTIONS
OPTIMAL CHOICE (continued)
LEADING IN SELECTED FOCUS SEGMENTS - BY NUMBERS Leading the Vietnamese bancassurance market in sales APE FOR THE YEAR INCREASED BY
44% FROM 2016 AND TRIPLED THAT OF 2015
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ANNUAL REPORT 2017
Techcombank’s Visa Credit card topped the market in transaction volume
13.9% of the Visa credit card transactions market share. Techcombank’s Visa Credit card has held the number one position among all banks in Vietnam since October 2017.
Promoting the online channel
THE NUMBER OF ONLINE TRANSACTIONS FOR THE YEAR INCREASED BY OVER
Healthy credit growth
TECHCOMBANK’S CREDIT BALANCE IN 2017 REACHED
400% 181,002 VND billion
from 2015 and more than 2.8 times the number in 2016, reaching nearly
2,800,000
an increase of from 2016
15.96%
transactions per month.
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COMPREHENSIVE SOLUTIONS
THE BANK OF CHOICE FOR BUSINESSES
WITH THE GUIDING PRINCIPLE THAT TECHCOMBANK DOES NOT SIMPLY SELL FINANCIAL PRODUCTS BUT
COMPREHENSIVE
SOLUTIONS TO CUSTOMERS, EACH MEMBER OF THE SALES TEAM ACTS AS A FINANCIAL CONSULTANT WITH A TRUE UNDERSTANDING OF THEIR CUSTOMERS, THEREBY DELIVERING REAL ADDED VALUE TO THEIR BUSINESSES.
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ANNUAL REPORT 2017
ENABLING FINANCIAL SUCCESS & SECURITY
47
COMPREHENSIVE SOLUTIONS
Outstanding solutions for large enterprises
L
arge corporate clients have complex financial demands and expect high .quality products and services as well as timely delivery. In order to satisfy their needs and make a difference, Techcombank has developed comprehensive solutions that, within the customer’s ecosystem, provide fullcircle financial services, from input to output, throughout their production and business cycle. The goal is to bring maximum value and effectively manage risk for both the clients and the Bank, which in turn makes Techcombank the Bank of choice for customers.
WHAT SETS TECHCOMBANK APART FROM OTHER BANKS IS THAT WE FOCUS ON LARGE CORPORATE CLIENTS WITH STRONG FINANCIAL FOUNDATIONS AND HIGH GROWTH POTENTIAL, WHO HAVE THEIR OWN ECOSYSTEMS AND OPERATE IN KEY ECONOMIC SECTORS IN WHICH TECHCOMBANK HAS EXPERTISE.
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ANNUAL REPORT 2017
For example, for real estate developers, Techcombank’s solutions go beyond financing the project. Techcombank offers comprehensive solutions which address many problems that our customers face. These may include: how to sell the products, as well as ensure timely and optimal cash flow; how to build and promote a brand; how to effectively manage risks; and how to apply a successful model to other projects. Techcombank’s financial solutions are offered not only to developers but also to homebuyers, and other constituents of the customers’ value chain, including suppliers, contractors and insurance providers. With the guiding principle that Techcombank does not simply sell financial products but comprehensive solutions to customers, each member of the sales team at Techcombank acts as a financial consultant with a true understanding of their customers, thereby delivering real added value to their businesses.
Creating distinct value for SMEs
their financial and management expenses were reduced.
T
echcombank targets small and medium enterprise (SME) .customers in the ecosystems of larger corporate clients, or in high-growth niche segments, within the serviceability and risk appetite of the Bank.
This segment of customers requires secure capital to maintain and expand their business operation, especially during peak seasons. They also need convenient and user-friendly solutions to conduct transactions and advice on how to enhance their business efficiency. To best meet these demands, and ensure that policies on fees, interest rates,
security assets, and transaction processing times are optimized for each customer, Techcombank offers differentiated value for each focus customer segment. Based on the nature of their businesses and financial behavior, Techcombank provides the right solutions at the right time, leveraging the Bank’s best service capabilities. On that basis, Techcombank has successfully built innovative business programs for each focus customer segment, delivering the highest value to customers. The Bank's solutions have started to yield quantifiable results. Our customers saw increase in projected revenue and profit based on estimated cost and cash flow. Similarly,
Techcombank has initiated a specialized service model for the key customer subsegments through specialized business banking centers, set up to serve specific key sub-segments. At these centers, customers will be served by relationship managers with specialized training, strong knowledge of the sub-segments as well as deep understanding of the customers’ business models. They will be the best advisors to help customers choose the solution most suited to their financial needs. Policies and procedures are being continuously developed and improved to meet the specific needs of each key sub-segment. This is the key to Techcombank's outstanding position in the financial-banking market: it strives to attract the most demanding, highest-value clients while delivering outstanding value.
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ONE VISION ONLY WHEN EVERYBODY SHARES THE SAME VISION CAN THE MACHINE RUN SMOOTHLY WITHOUT ANY INTERNAL FRICTION.
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ONE VISION
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ANNUAL REPORT 2017
TRANSFORMING CORPORATE CULTURE TECHCOMBANK’S CORPORATE CULTURE IS BASED ON
5 1 2
core values
CUSTOMER FIRST INNOVATION
3
TEAMWORK
4
PEOPLE DEVELOPMENT
5
ACCOUNTABILITY
At Techcombank, “Corporate Culture” is defined as the organization’s DNA: the Bank's shared beliefs, values, and behavior. This corporate culture, which is strengthened every day and every hour, will transform Techcombank into a bank with its own personality, creating outstanding banking products, and contributing to the development of the country’s economy, the Bank’s customers and Techcombank itself.
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ONE VISION
TRANSFORMING CORPORATE CULTURE (continued)
CORPORATE CULTURE
MANAGEMENT SYSTEM
OPERATIONAL SYSTEM
RESOURCES
PRODUCTS & SERVICES
MARKET
TECHCOMBANK’S TOWER OF ORGANIZATIONAL DEVELOPMENT MODEL, DEVISED IN 2014, IN CONSULTATION WITH THE MANAGEMENT SYSTEM CONSULTING CORPORATION, NOT ONLY CLEARLY INDICATES THAT CORPORATE CULTURE IS ONE OF THE SIX KEY COMPONENTS THAT ENSURES THE SUSTAINABLE SUCCESS OF THE BANK, BUT ALSO INSPIRES A TECHCOMBANK IDENTITY WHICH EACH TECHCOMER EMBODIES IN THEIR DAILY PROFESSIONAL ACTIVITIES. SITTING ATOP THE TOWER OF ORGANIZATIONAL DEVELOPMENT, CORPORATE CULTURE SERVES AS A POINT OF REFERENCE FOR MEASURING THE SCALE, THE FOUNDATION AND CAPACITY TO GROW OF THE ORGANIZATION, WHICH IS VITAL FOR CREATING A COHESIVE ORGANIZATION, COMMITTED TO ACHIEVING LONG-TERM, SUSTAINABLE SUCCESS.
Fully aware of the role of corporate culture in its overall operations, Techcombank has invested not only financially but also considerable time and intellectual resources, into building a corporate culture based on five core values: Customer First, Innovation, Teamwork, People Development, and Accountability.
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ANNUAL REPORT 2017
FIVE CORE VALUES
NOT ONLY DID TECHCOMBANK INTRODUCE THE DEFINITIONS, THE BANK ALSO DEVELOPED A SPECIFIC BEHAVIORAL FRAMEWORK FOR EACH CORE VALUE.
CUSTOMER FIRST
Techcombank services only matter if they bring value to customers and colleagues
1. Customers’ interests – first priority 2. Understanding customers, overcoming challenges
INNOVATION
Always stay in leading position
1. Breakthrough innovation, outstanding achievements 2. Immediate actions, effective daily
TEAMWORK
At Techcombank, success comes from cooperation
1. Understanding brings people closer 2. Fewer emails, more in-person discussions
PEOPLE DEVELOPMENT
Capable people bring competitive advantages and outstanding success to the organization
1. Building development path, coaching and training programs 2. Everyone is a student and a teacher
Overcoming challenges to achieve great success
1. Always follow through and overcome challenges 2. Personal interests come after commitment to the organization
ACCOUNTABILITY
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ONE VISION
TRANSFORMING CORPORATE CULTURE (continued)
Customer First
A
t Techcombank, the “customer first” culture guides the day-to-day business .operations as well as the Bank’s long-term strategy. Given the nature of the financial services sector, in order to gain customers’ trust and loyalty the Bank must provide superior quality products and services.
UNDERSTANDING CUSTOMERS, TAKING TIMELY ACTION, AND MAKING EVERY EFFORT TO MEET CUSTOMERS' NEEDS HAS BECOME A PRIORITY OF EVERY TECHCOMER.
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ANNUAL REPORT 2017
The pressing question at the forefront of every Techcomer’s mind is: “How do we deliver the best value to our customers?” All products and services of Techcombank are results of thorough research and deep understanding of the customers’ needs. Understanding customers, taking timely action and making every effort to meet customer needs has become a priority of every Techcomer, so much so that every reflection on the services provided becomes an opportunity to deliver positive customer experience and win lasting appreciation from customers.
Innovation
W
hat can we do differently today than we did yesterday? and What ideas .for tomorrow can we apply to our work today? are questions all Techcomers have to consider daily. They are empowered to challenge the status quo and in 2017 alone, hundreds of procedural innovations suggested by employees were applied to the Bank’s systems.
In order to achieve the strategic goals and solidify the Bank’s leading position in the sector, Techcombank promotes outside-of-the-box ideas and encourages innovative thinking, all the while ensuring that the Bank is well-positioned in the market, and fully complies with regulatory requirements. AT TECHCOMBANK, INNOVATION AND IMPROVEMENT ARE NEVER ONE-OFF INITIATIVES. RATHER, THEY REPRESENT A MINDSET PRESENT AT EVERY LEVEL OF THE ORGANIZATION AND IN EVERY ACTION.
The spirit of “Innovation” will help Techcombank identify and develop appropriate business models and transform Techcombank into a technologybased business organization, strengthening the workforce and corporate culture.
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ONE VISION
TRANSFORMING CORPORATE CULTURE (continued)
Teamwork
E
ach unit of Techcombank, from branches to Head Office departments, was set up for .a specific function and each Techcomer works towards their own performance indicators to achieve this function. All Techcombank employees, from the veterans to the new recruits, share the same goal and vision.
HARMONY IN CORPORATE CULTURE IS CRUCIAL FOR ENABLING EMPLOYEES TO ACHIEVE THEIR GOALS.
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At Techcombank, all employees understand that success is a result of their own effort combined with the support they receive from the system. The harmony in corporate culture is crucial for enabling employees to achieve their goals. Conversely, when the employees are in tune with the corporate culture and understand Techcombank’s vision, success will follow.
Human resource development
I
f the guiding principle of our banking services is "customer centricity," internally, it is "employee .centricity." Investment in our employees to help them enhance their knowledge and capability is an integral part of the Bank's strategy.
In preparation for the future, Techcombank allocates more of its resources to recruiting and training programs than most other banks in the industry. The Bank recognizes TECHCOMBANK’S COMMITMENT TO PROMOTING EMPLOYEE TRAINING DEMONSTRATES HOW MUCH THE BANK VALUES "PEOPLE EXCELLENCE."
that its most valuable asset is human capital, so the budget for training is ring-fenced. Techcombank's commitment to promoting employee training demonstrates how much the Bank values "People Excellence." This uncompromising emphasis on training has contributed to high levels of employee dedication and motivation, and underpins the Bank’s success. Employees can clearly see the connection between the Bank’s success and their own contribution. The success of Techcombank in turn translates to added value to its customers and shareholders. This further embeds a commitment to high professional standards and ethics, and ultimately leads to stronger customer relationships based on trust.
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ONE VISION
TRANSFORMING CORPORATE CULTURE (continued)
EMPLOYEES ARE COMMITTED TO INTERNAL COMPLIANCE, TAKING INITIATIVE AND EMPLOYING CONTINUOUS INNOVATION, WHILE MANAGEMENT IS RESPONSILBE FOR THE IMPLEMENTATION OF STRATEGY AND CONNECTING INDIVIDUAL EFFORTS TO PRODUCE A SMOOTHLY-FUNCTIONING ORGANIZATION THAT CAN ADVANCE THE ENTIRE SYSTEM.
Accountability
4
T
he State’s legal system, together with Techcombank’s internal policies, regulations and corporate culture, have clearly stipulated the responsibilities of each of the over 8,000 employees in the Bank. Employees are committed to internal compliance, taking initiative and employing continuous innovation, while management is responsilbe for the implementation of strategy and connecting individual efforts to produce a smoothly-functioning organization that can advance the entire system. Compliance has always been a core principle by which Techcombank builds trust, safety and business sustainability. Compliance with the Bank’s internal policies and legal regulations as well as commitment to quality have always underpinned Techcombank’s success.
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ANNUAL REPORT 2017
DETERMINING FACTORS MODEL(*)
SKILLS AND TALENT DEVELOPMENT
ENHANCING UNDERSTANDING AND PERSUASIVENESS
IMPROVING THROUGH OFFICIAL MECHANISMS
SETTING EXAMPLES
(*): Recommendation Model developed by McKinsey The five core values, defined by the Bank with the help of McKinsey’s recommended 4 Determining Factors model, have been incorporated into daily operations and delivered through a new employee training program, Talent Pool Talent Development (Skills and Talent Development). The key messages of this training program are reiterated throughout the Bank, for
example, they are printed on items such as calendars and posters (Enhancing Understanding and Persuasiveness). Competency in corporate culture management (Improving through Official Mechanism) also forms 10% of the Board of Management members performance assessment (Setting Examples) – this will rise to 20% in 2018.
IN ORDER TO RECOGNIZE AND REWARD POSITIVE PRACTICES OF THE FIVE CORE VALUES, TECHCOMBANK LAUNCHED AND IS IMPLEMENTING THE
CULTURE JOURNEY PROGRAM THIS PROGRAM HAS SUCCESSFULLY BRIDGED THE GAP BETWEEN HEAD OFFICE AND BRANCH EMPLOYEES. THE PROGRAM HAS BEEN WELL RECEIVED WITH HIGH PARTICIPATION LEVELS.
TCB
In addition, the Bank has introduced The Honors Techcomers Award. The winner is personally selected by the Chairman of the Board of Directors, a highly motivating factor for employees. This Award recognizes employees who put the five core values into practice: they always strive for excellence, always do the right thing (professional ethics), and always align personal interests with the great and long-term success of the organization. Corporate culture helps create a unique identity for Techcombank, allowing it to provide superior products and services that foster the development of the economy, Techcombank as well as its customers In order to realize the Bank’s 2016-2020 strategy and to deliver a successful and sustainable transformation, Techcombank’s Board of Directors decided to establish the Organizational Culture Transformation Strategic Initiative in the fourth quarter of 2017, with direct leadership of the Board of Directors and implemented by the Executive Board, with the aim of building a strong and impactful culture.
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ONE VISION
TRANSFORMING CORPORATE CULTURE (continued)
LEVEL OF MANAGEMENT SKILLS AND CORRESPONDING MANAGEMENT POSITION REQUIRING THE SKILLS
V. CEO, COO, Chairman
IV. Senior Managers
III.
CORRESPONDING LEVELS OF RESPONSIBILITIES
Transition Management Skills
Develop long term vision Plan transition to next stage of growth
Organizational Development Skills »» Strategic Planning »» Strategic Leadership
Develop and monitor strategic plans
»» Organizational Planning »» Cultural Management
Manage day-to-day operation
Organizational Management Skills
Middle Managers
II.
»» Planning »» Management Development »» Organization
»» »» »» »»
Financial Management Performance Management / Control Team building Conflict Management
Operational Management Skills
First Line Supervisors
I.
»» Recruiting & selection »» Training / Coaching »» Motivation
»» Day-to-day supervision »» Management of Meetings »» Performance Appraisal
Core Management Skills
All of the Above
»» Communication »» Interpersonal Effectiveness »» Time Management
»» Operational Leadership Effectiveness »» Delegation Effectiveness »» Problem Solving and Decision Making
Role Concept Making the Transition to Successively Higher Levels of Management Responsibilities
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ANNUAL REPORT 2017
Coordinate work among function units and provide direct reports
Oversee work
THE ORGANIZATIONAL CULTURE STRATEGIC INITIATIVE FOCUSES ON BUILDING THE MANAGEMENT ABILITY OF SENIOR MANAGERS. THE TOWER MODEL, DEVELOPED FOR TECHCOMBANK BASED ON CONSULTATION WITH THE MANAGEMENT SYSTEM CONSULTING CORPORATION, NOT ONLY ENSURES THAT THE SYSTEMATIC DEVELOPMENT OF CORPORATE CULTURE MANAGEMENT IS BUILT INTO ITS VERY FOUNDATION, BUT ALSO HELPS THE BANK SET OUT A CLEAR LEARNING PATH FOR EACH LEVEL OF EMPLOYEE, WITH A PARTICULAR EMPHASIS ON DEVELOPING THE NEXT GENERATION OF LEADERS. Transforming corporate culture has become one of many strategic bank-wide initiatives. Techcombank is committed to raising the corporate culture index, improving employee satisfaction and the working environment (as measured by the Organizational Health Index (OHI) and the Employee Effectiveness Survey (EES)) and heightening the Bank’s ranking among the best workplaces in Vietnam.
In 2017, according to the EES, the level of practice of the five core values at Techcombank reached over 80% on average, following constant improvement over previous years. Techcomers’ engagement is crucial for Techcombank to translate the principles of corporate culture into daily operations. To do so, the Bank will:
1 2 3 4
APPLY AND PRACTICE ITS CORE VALUES THROUGH THE ANNUAL CULTURE JOURNEY PROGRAM; DEVELOP COMPLETE GUIDELINES FOR BEHAVIORAL STANDARDS WITH SPECIFIC AND CLEAR DETAILS ON EACH CORE VALUE AND A SEPARATE CORPORATE CULTURE GUIDELINE FOR EACH BUSINESS COMPONENT OF EACH DIVISION;
IMPLEMENT A VARIETY OF INITIATIVES TO PROMOTE EMPLOYEE KNOWLEDGE, UNDERSTANDING AND TRUST AS WELL AS TO ENCOURAGE CHANGE WITH THE HELP OF EXAMPLES SET BY THE BOARD OF MANAGEMENT, MIDDLE MANAGEMENT AND THE NEXT GENERATION OF LEADERS FROM THE TALENT POOL.; AND
5 core values
Customer First Innovation
Techcombank
85%
Techcomer
87%
Techcombank
87%
Techcomer
84,5%
People Development
Techcombank
78%
Techcomer
79%
Teamwork
Techcombank
79%
Accountability
DEVELOP A ROBUST AND OBJECTIVE PERFORMANCE MEASUREMENT SYSTEM FOR THE 5 CORE VALUES, BENCHMARKING AGAINST INTERNATIONAL ORGANIZATIONS.
Techcomer
82%
Techcombank
80,25%
Techcomer
50%
84%
60%
70%
80%
OVER THE COURSE OF ITS 24 YEARS, TECHCOMBANK HAS GROWN FROM A SMALL-SCALE OPERATION TO A LEADING NATIONAL BANK WITH ASPIRATIONS TO PURSUE INTERNATIONAL STANDARDS AND BRING EVEN GREATER BENEFITS TO THE COMMUNITY AND SOCIETY.
100%
Vision / Meaning
HAPPINESS
As Tony Hsieh said in his bestselling book “Delivering Happiness,” an organization whose goals and vision reach beyond mere profitability is an organization with exceptional potential (from a long-term financial efficiency perspective). Techcombank’s transformation journey with its emphasis on improving the corporate culture management capacity of senior management and that of the next generation of leaders, is certainly a crucial foundation supporting Techcombank’s ultimate goal of becoming the number one bank in Vietnam.
90%
Connectedness
Perceived progress
Perceived control
TIME
ENABLING FINANCIAL SUCCESS & SECURITY
63
ONE VISION
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ANNUAL REPORT 2017
“GROWING” TECHCOMERS IT IS IMPORTANT TO TECHCOMBANK TO HIRE EMPLOYEES THAT ARE
THE BEST FIT FOR THE ORGANIZATION AS A WHOLE. ONLY WHEN EVERYBODY SHARES THE SAME VISION CAN THE MACHINE RUN SMOOTHLY WITHOUT ANY INTERNAL FRICTION. CEO Nguyen Le Quoc Anh
2017
was a year of strong development for the Vietnamese economy and its banking sector. This success was the result of financial institutions across the country overcoming a turbulent year in terms of maintaining and expanding their high-quality workforce to meet customers' increasingly complex demands.
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65
ONE VISION
“GROWING” TECHCOMERS
Techcombank is proud to enjoy a low employee turnover rate. Techcombank employees on average stay with Bank for the longest time across the sector, this is particularly true for middle and senior executives. This confirms that the Bank has a strong human resources strategy, aimed at creating an environment where employees have opportunities to maximize their capabilities, receive recognition, and follow a clear career path, while receiving competitive benefits. Techcombank understand that "people excellence" is fundamental to the sustainable development of any
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ANNUAL REPORT 2017
organization. That is why from the very beginning, the Bank has spared no effort in recruiting, training, retaining and developing talents to align with the Bank’s development goals. Only when sufficient resources are available can the Bank respond to the needs and the deployment of the chosen business strategy and model. The human resources strategy reflects the Bank’s thinking: “It is important for Techcombank to select employees that are the best fit for the organization as a whole. Only when everybody shares the same vision can the machine run smoothly without any internal friction “ (CEO Nguyen Le Quoc Anh)
AT TECHCOMBANK, EMPLOYEES CAN FIND THE WORKING ENVIRONMENT WHERE THEY CAN SUCCEED AND REALIZE THEIR FULL POTENTIAL. THEY ARE ENABLED TO OVERCOME CHALLENGES AND SEIZE OPPORTUNITIES TO BECOME THE "BETTER VERSION" OF THEMSELVES WHILE HELPING TECHCOMBANK PURSUE ITS VISION OF BECOMING THE NUMBER ONE BANK IN THE COUNTRY.
Affirmation: “quantity” 1 In 2017, Techcombank recruited nearly
2,000
employees to expand in line with the business plans. All new employees attended training and orientation sessions to learn and adapt to the Bank's culture.
2 The number of highly qualified employees has increased. As at 2017
92% of Techcombank’s employees are educated to undergraduate degree level, or higher.
The average length of employment at the Bank is 4.7 years. This is substantially higher than both the service industry's 3-year average and the average of the country's finance-banking industry. Not only does this number demonstrate Techcombank employees' high level of engagement, it serves as evidence that the Bank is making progress in providing employees with a good working environment.
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ONE VISION
“GROWING” TECHCOMERS (continued)
THOROUGH SELECTION FROM ENTRY LEVEL Recruitment is a long-term process that starts by identifying the human capital requirement for each division based on the business plans and objectives for the next five years. The recruitment team is specialized to identify, evaluate and select candidates most suited to the Bank's business direction. The recruitment process ensures that the pool of candidates is sufficiently large and that candidates receive appropriate feedback. The process continues to ensure post-recruitment quality, beyond the probationary period. The results of the survey of human resource processes in 2017 showed a 82.59% satisfaction rate (an increase of 2% in comparison to 2016).
OUTSTANDING TRAINING QUALITY Techcombank sets clear developmental milestones for each position to help new employees adapt to the environment and ensure that they continue to develop. Techcombank understands that the integration and comfort of employees from the beginning plays a decisive role in their ability to engage with the organization. This is why in 2017, Techcombank continued to improve its core training programs, by setting up a standard capacity framework for the sales team and continuing to organize specific training programs for managers (TechcomLead). The Bank ran 231
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ANNUAL REPORT 2017
courses and exams for 91,967 trainees. The number of in-house lecturers has also increased over the years, reaching 278 employees (excluding faculty members) in 2017. These impressive numbers highlight a successful year for Techcombank's training programs. Thanks to the improvements in quality of training, Techcombank scored very high in the Employee Efficiency Survey (EES) in 2017 – Techcombank employees scored 66%, the highest score since 2011. For the first time this figure exceeded all comparative groups, confirming the remarkable progress in the quality and cohesion of the Bank’s employees.
231 91,967 COURSES
TRAINEES
Raising the quality level
A
t Techcombank, it is believed that investing in training and development is the right .strategy. Therefore, even when the budget is tight, c ommitment to training is never c ompromised. PROPER PROFESSIONAL TRAINING IS ALWAYS CONSIDERED TO BE THE KEY TO REINFORCE "PEOPLE EXCELLENCE." Techcombank recognizes the importance of “quantity” as well as “quality.” This is evidenced by the range of training courses which include soft skills and e-learning training. Each training session was
“tailored” for specialized groups and has received positive feedback from trainees. Techcombank’s Internal Training team is very qualified and highly skilled at incorporating practical case studies, group competitions, and other techniques in training sessions, in order to ensure concentration and enthusiasm from attendees. Training sessions and activities are not confined to the classroom, they can be incorporated into daily work. This ensures that teams are built with the Techcombank DNA – aspirations, high morale, transparency, strong professional ethics and professionalism - embedded from the start.
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69
ONE VISION
“GROWING” TECHCOMERS (continued)
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ANNUAL REPORT 2017
Create
“People Excellence” THE “PEOPLE EXCELLENCE” STRATEGY, WHICH WAS FIRST IMPLEMENTED IN 2016, WILL CONTINUE INTO 2018 WITH TECHCOMBANK INVESTING IN EMPLOYEE TRAINING TO IMPROVE EMPLOYEES' ABILITY TO DELIVER HIGH QUALITY CUSTOMER SERVICE.
The Bank offers comprehensive career opportunities through its compensation policies, thorough training, positive development and institutional culture. Techcombank continuously improves its benefit program to adapt to the needs of employees and to show the Bank’s recognition of their efforts and contributions to the overall success of the organization.
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ONE VISION
“GROWING” TECHCOMERS (continued)
Program
Program
ELIGIBLE PEOPLE
ELIGIBLE PEOPLE
All employees and their families and relatives.
Employees who have been with the Bank for over one year and with a performance rating of A3 or above.
THE PURPOSE AND BENEFITS OF THE PROGRAM
THE PURPOSE AND BENEFITS OF THE PROGRAM
Launched in 2009, Techcombank Care provides employees and their relatives with a comprehensive benefit program to provide financial support in case of accidents, illness, or during maternity. In 2017, the program upgraded the insurance benefits for VP (Vicepresident), O (Officer) and C (Clerk) level employees.
Designed to meet the needs of employees, the program gives employees the opportunity to realize their dreams as quickly as possible. The program reflects the Bank’s commitment to accompany employees in creating better lives for themselves and their families.
TECHCOMBANK CARE
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ANNUAL REPORT 2017
LOANS FOR EMPLOYEES
IN ORDER TO CONTINUOUSLY IMPROVE AND ENHANCE SERVICE QUALITY, EVERY YEAR TECHCOMBANK CONDUCTS A SURVEY MEASURING SATISFACTION OF INTERNAL CUSTOMERS. IN 2017, THE AVERAGE LEVEL OF SATISFACTION FOR THE WHOLE SYSTEM WAS
83.35%
AN INCREASE OF 2.13% FROM 2016, SHOWING THE IMPROVING QUALITY OF TECHCOMBANK’S INTERNAL SERVICES.
IN 2017, TECHCOMBANK WAS THE ONLY JOINT-STOCK COMMERCIAL BANK IN THE TOP 2 BEST PLACES TO WORK IN THE BANKING SECTOR IN VIETNAM, AND THE BANK IS RANKED 18TH OVERALL IN THE TOP 100 BEST PLACES TO WORK IN VIETNAM, UP BY TWO PLACES FROM 2015 (ACCORDING TO RESULTS PUBLISHED BY AC NIELSEN AND ANPHABE IN THE SURVEY “BEST WORKPLACE IN VIETNAM 2016”). THESE AWARDS ARE TESTAMENTS TO TECHCOMBANK’S EFFORTS IN DEVELOPING HUMAN RESOURCES THROUGH BUILDING A POSITIVE WORKING ENVIRONMENT AND INSPIRING ITS EMPLOYEES.
ENABLING FINANCIAL SUCCESS & SECURITY
73
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ANNUAL REPORT 2017
The Value of
SUSTAINABILITY TECHCOMBANK IS ONE OF THE FEW BANKS IN VIETNAM TO INVEST EARNESTLY IN RISK MANAGEMENT AND THE IMPLEMENTATION HAS BEEN HIGHLY EFFECTIVE.
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75
VALUE OF SUSTAINABILITY
RISK MANAGEMENT
TECHCOMBANK IS ONE OF THE FEW BANKS IN VIETNAM TO
INVEST EARNESTLY IN RISK MANAGEMENT AND THE IMPLEMENTATION HAS BEEN HIGHLY EFFECTIVE.
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ANNUAL REPORT 2017
When risk management becomes a necessity
A
fter a turbulent period in the financial market, the State Bank of .Vietnam (SBV) has taken a cautious stance by regulating the flow of credit capital to the manufacturing and other priority sectors. The risk reserve ratio for non-priority loans has been raised and the proportion of short-term capital to medium and long term loans has been gradually reduced. This is one of the bases of a healthy and sustainable financial market. However, for Techcombank, risk management is not just a matter of compliance with the authority’s regulations, but a necessity. It is a standard procedure that flows from inbuilt principles and the fact that risk management plays a very important role in the operation of a commercial bank. Techcombank has developed a comprehensive Risk Management Framework to help the Bank achieve its strategic objectives while ensuring sustainable development.
The Risk Management Policy requires that all business operations reflect the following principles: 1
3
5
The supervisory role of the Board of Directors and the Board of Management must be highly effective;
Risk management must be supported by effective measurement and stress - testing tools;
Responsibilities related to risk management must be clearly defined
Risk management must be implemented and administered comprehensively;
Risk management and decision making must be based on independent and objective assessments;
2
4
These principles are reflected throughout the components of Risk Management, including: 1
2
3
4
Management framework and risk appetite
Organizational structure
System tools
Risk Culture
ENABLING FINANCIAL SUCCESS & SECURITY
77
VALUE OF SUSTAINABILITY
RISK MANAGEMENT (continued)
Techcombank manages risk through customer understanding, compliance culture and continuous improvements, as demonstrated by the following: 1
2
3
Techcombank understands its customers and manages risk sustainably using a specific risk management model. The model is developed for each client segment according to each segment’s size and characteristics, and is guided by the principle that risk management should be closer to the customers and be based on a deeper understanding of their businesses. This has helped Techcombank to manage risk more effectively, understand customers better, and identify risks early on – ultimately helping to make better decisions and enhance the quality of risk management.
Techcombank has developed flexible tools for risk management and robust risk reserve plans, enabling capital management and convenient business operations. As a result, the solutions and services offered to customers provide a wider range of options to meet different financial situations.
Compliance culture enables Techcombank to pursue its strategic mission to become the number one bank in Vietnam. The Bank has always pioneered the best international practices in business management operations, especially in risk management. Thanks to its full compliance with the laws as well as international standards, and the consistent bank-wide application of these standards, Techcombank aims to build a reliable and transparent system for stakeholders.
COMPLIANCE CULTURE IS PROMOTED AND APPRECIATED AT TECHCOMBANK. ALL TECHCOMBANK EMPLOYEES VALUE THE IMPORTANCE OF COMPLIANCE AND ADHERE TO PROFESSIONAL ETHICS, BY SHOWING ZERO TOLERANCE TOWARDS THE COVER UP OF ANY VIOLATIONS.
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ANNUAL REPORT 2017
Advanced risk management system WITH THE OBJECTIVE OF ENABLING EFFECTIVE, EFFICIENT AND TRANSPARENT RISK MANAGEMENT OF INTERNATIONAL STANDARDS, TECHCOMBANK'S GOVERNANCE MODEL IS SET UP SO THAT BUSINESS OPERATION AND RISK ASSESSMENT AND ACCEPTANCE ARE CLEARLY SEPARATED. ACCORDINGLY, EACH UNIT FUNCTIONS INDEPENDENTLY.
T
he Board of Directors holds the ultimate responsibility for risk .managment. Through the Audit and Risk Committee (ARCO), the risk management framework, risk appetite and other risk management policies are approved periodically to guide the risk management as well as the business operations of the Bank.
The roles and functions of the committees responsible for risk management under the Board of Management are being developed and refined. These committees will be responsible for risk acceptance decision-making. In particular, the risk management division is independent from the business units, under the direct management of the ARCO, with the role to supervise all activities of
the Bank. Accordingly, risk management activities and decisions are transparent, independent and fully evaluated. Techcombank is one of the few banks in Vietnam to invest earnestly in risk management, and the implementation has been highly effective. Rather than passive management that only responds to risk, the centralized risk management system is designed to identify risks early and actively mitigate them. All business plans are developed in alignment with the Bank's risk appetite. This is how the Bank determines its customer selection, credit structures, and risk mitigation options. In parallel, Techcombank has established channels for regular monitoring, early identification of risks, and proactive solutions for all market conditions.
The risk management strategy is not limited to reducing risk for the Bank, but also focuses on risk management solutions for clients. Establishing strong relationships with customers is a key objective for Techcombank. Meaningful partnerships with customers allow the Bank to grow its business and effectively manage risks. Techcombank’s focus on risk management brings peace of mind to customers they can be confident when dealing with the Bank because this culture of risk management is embraced at all levels, from top management through to frontline employees.
Just as customer understanding lies at the core of Techcombank, risk management serves as its pillar. The Bank with its unique risk management culture is able to manage all types of risk, including; credit risk, which is most prominent in the business environment for Vietnam and the banking sector in particular; operational risk; risk of financial fraud, a frequent type of risk; and each are monitored at all levels, using a broad range of tools. Looking forward, Techcombank will continue to consolidate the risk management framework to ensure strong and sustainable growth in line with the Bank’s overarching strategy.
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79
VALUE OF SUSTAINABILITY
RISK MANAGEMENT (continued)
Improving capacity for effective protection
I
n 2017, Techcombank reached the capital adequacy ratio required by .the SBV and the Basel Committee to standardize operational safety regulations under the Basel II framework. To calculate and apply it to management and to optimize the Bank’s capital, Techcombank also standardized its procedures, systemized its data warehouse, collected additional data, and automated reporting. In order to manage credit risk effectively, Techcombank also developed an efficient personal customer rating model. The model has made great strides in moving from credit product evaluation to customer rating. This transformation helps Techcombank build effective cross-sale, up-sale, pre-approval programs, and maintain relationships with long-term customers.
In addition, Techcombank continues to build and develop a model to assess losses when customers lose their ability to pay - Loss Given Default (LGD), specifically for individual and corporate customers. The LGD model is constructed on the basis of the net realizable value of the collateral, rather than the market value, to minimize the risk of market volatility. Techcombank will continue to roll out mini projects to enhance its technological system and databases, business processes
80
ANNUAL REPORT 2017
and systems as well as internal policies related to automation in preparation for early compliance with the SBV’s capital adequacy regulations stipulated in Circular 41/2016 / TT-NHNN. Techcombank has also
laid out the plans and roadmap for the preparatory work for compliance with the SBV's circular on internal audit control and ICAAP (Basel II second Pillar), which is in its drafting stage.
IN ADDITION TO COMPLYING WITH THE SBV'S REGULATIONS, TECHCOMBANK HAS SET HIGHER TARGETS, AND IN ORDER TO COMPLY WITH BASEL II IN A MORE ADVANCED WAY, THE BANK HAS VOWED TO MEET INTERNATIONAL STANDARDS FOR RISK MANAGEMENT. THIS IS AN AMBITIOUS BUT FEASIBLE GOAL THAT LIES WITHIN THE CAPABILITIES OF TECHCOMBANK.
Last year, the Risk Data Mart Project was launched to standardize risk data, create a reliable and consistent source of data, provide automated tools for the risk management reports system, and strengthen the valuation of capital and assets. This has helped Techcombank make effective and proactive management decisions in risk management. In the near future, the focus will be on enhancing risk management capacity, thereby protecting the Bank's business.
IN 2018, TECHCOMBANK WILL CONTINUE TO REFINE THE CORPORATE CUSTOMER RATING MODEL BY INVESTING IN AN INTEGRATED CREDIT APPROVAL SYSTEM, USING CLIENT RISK ASSESSMENT MODELS IN THE END-TO-END CREDIT PROCESS. IN THE NEAR FUTURE, THE FOCUS WILL BE ON ENHANCING RISK MANAGEMENT CAPACITY, THEREBY PROTECTING THE BANK'S BUSINESS.
ENABLING FINANCIAL SUCCESS & SECURITY
81
VALUE OF SUSTAINABILITY
OUTSTANDING PERFORMANCE
IN 2017, TECHCOMBANK ACHIEVED IMPRESSIVE RESULTS WITH PROFITABILITY INDICES INDICATING HIGH GROWTH. IN PARTICULAR, THE BANK’S PROFIT BEFORE TAX APPROXIMATELY DOUBLED OVER TWO CONSECUTIVE YEARS.
G
oing into the second year of the customer-centric strategy, .Techcombank understands that the peace of mind and success of customers is the Bank’s own path to success. Therefore, the foremost purpose of all Techcombank’s products and services is to support the long term financial success of its customers. Techcombank provides customers with comprehensive packages to better meet their financial needs. In evidence of this in 2017, Techcombank achieved impressive results with the profitability index indicating high growth. In particular, the Bank’s pretax profit doubled in two consecutive years.
Indicators
Units
Total assets
VND billion
2017
269,392
Credit growth
%
15.96
Pre-tax profit
VND billion
8,036 Doubled
Pre-tax profit growth ROE (*)
%
23.84
ROA (*)
%
2.09
Demand Deposit Ratio
%
23.51
Non-interest income
%
45.36 Over 5 million customers
Number of Customers Number of employees
Person
8,766
Revenue per employee
VND billion
1.86
Number of branches
Branch
315
Number of ATM
Machine
1,117
%
28.75
Cost / Income
(*) On a monthly basis, excluding the bancassurance agency supporting fee and gain from selling Vietnam Airlines shares in 2017
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ANNUAL REPORT 2017
IN 2017, TECHCOMBANK ACHIEVED IMPRESSIVE RESULTS WITH PROFITABILITY INDICES INDICATING HIGH GROWTH
TOTAL ASSETS (VND BILLION)
CREDIT GROWTH (%)
269,392
15.96
PROFIT BEFORE TAX (VND BILLION)
ROE (%)
8,036
23.84
REVENUE COUNTED PER EMPLOYEE (VND BILLION)
ROA (%)
1.86
2.09
ENABLING FINANCIAL SUCCESS & SECURITY
83
VALUE OF SUSTAINABILITY
OUTSTANDING PERFORMANCE (continued)
GOING INTO THE
TOTAL ASSETS (VND BILLION )
SECOND YEAR OF
CREDIT GROWTH (VND BILLION )
THE CUSTOMERCENTRIC STRATEGY, TECHCOMBANK UNDERSTANDS
269,392
+14% 235,363
158,897
175,902
181,002
+18% 156,088
+14%
191,994
124,032 92,752
94,894
THAT THE PEACE OF MIND AND SUCCESS OF CUSTOMERS IS THE BANK’S OWN PATH TO SUCCESS.
2013
2014
2015
2016
2017
2016
2015
2017
TOTAL ASSETS OF TECHCOMBANK
AS AT 31/12/2017, TECHCOMBANK’S
AS AT 31/12/2017 STOOD AT VND
CREDIT
269,392 BILLION, AN INCREASE OF
TARGET OF 15.96%, WITHIN THE LIMIT
14.5% COMPARED TO THAT OF 2016
GRANTED BY THE SBV.
YEAR END, THEREBY INCREASING PERIOD TO 14.1%.
ANNUAL REPORT 2017
2014
* (exclude VAMC bond)
THE CAGR FOR THE 2013 - 2017
84
2013
GROWTH
REACHED
ITS
PROFIT BEFORE TAX (VND BILLION )
RETURN ON ASSETS (ROA) (*) (%)
RETURN ON EQUITY (ROE) (*) (%)
8,036
23.84
2.09
+74% +50%
+101%
+52%
17.50
1.50
3,997 0.86
9.73 7.40
2,037
4.77
1,417
878
2013
2014
PROFIT
2015
2016
TAX
2017
2014
2015
2016
2017
2013
2014
2017,
2015
2017
THANKS TO IMPRESSIVE EARNINGS,
IN
ROE CONTINUED TO SHOW STRONG
ACHIEVED
EXCEEDING THE TARGET BY 60%,
GROWTH, FROM 17.5% IN 2016 TO
RATE, REACHING 2.09%.
APPROXIMATELY DOUBLING FOR
23.84% IN 2017.
VND8,036
IN
2013
0.39
BILLION,
REACHED
BEFORE
0.63
2016
2017
TECHCOMBANK'S IMPRESSIVE
ROA
GROWTH
THE SECOND CONSECUTIVE YEAR AND GROWING AT AN AVERAGE ANNUAL RATE OF 73.9% OVER THE PAST 4 YEARS.
(*) On a monthly basis, excluding the bancassurance agency supporting fee and gain from selling Vietnam Airlines shares in 2017
ENABLING FINANCIAL SUCCESS & SECURITY
85
VALUE OF SUSTAINABILITY
SUSTAINABLE DEVELOPMENT TO ENSURE FINANCIAL SECURITY FOR CUSTOMERS
THE MOST IMPORTANT CRITERIA FOR RETAIL AS WELL AS CORPORATE CUSTOMERS WHEN CHOOSING A BANK IS
STABILITY, SUSTAINABILITY FOLLOWED BY
of service. Safety and stability are paramount. Customers need to trust that their financial partner is best placed to support and grow their business, as any instability or uncertainty will negatively impact not only their own prospects, but that of the macro economy in general. Imbued with a deep understanding of this need, combined with
a commitment to develop high quality and easily accessible products and services, Techcombank has been constantly strengthening procedures for control and risk management, as well as balance sheet quality management, and ensuring stability and security of financial activities. In this way, the Bank offers customers peace of mind.
TECHCOMBANK’S EFFORTS WERE RECOGNIZED BY THE ASIAN BANKER, WHICH PLACED IT AMONG THE LEADING VIETNAMESE BANKS IN THE TOP 500 ASIA PACIFIC STRONGEST BANKS BY BALANCE SHEET IN 2017.
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ANNUAL REPORT 2017
Improve the balance sheet efficiency IN 2017, TECHCOMBANK MADE POSITIVE CHANGES TO IMPROVE THE EFFICIENCY OF THE BANK’S BALANCE SHEET.
AS AT YEAR END 2017, TOTAL ASSETS REACHED
269,392 VND BILLION Ý VND34,029 BILLION COMPARED TO THAT OF YEAR END 2016.
CAPITAL RAISED INCREASED BY
MARKET 1’S LOANS INCREASED BY
2017’S PROFIT BEFORE TAX INCREASED BY
% COMPARED TO THAT OF 2016.
% COMPARED TO THAT OF 2016.
% COMPARED TO THAT OF 2016.
2.6
Indicator (VND billion )
12.8
101.1
31/12/2017
31/12/2016
Loans to customers
160,849
142,616
18,233
12.78%
Deposits from customers and valuable papers issued
188,611
183,864
4,747
2.58%
170,971
173,449
-2,478
-1.43%
17,640
10,415
7,225
69.37%
8,036
3,997
4,039
101.05%
Deposits from customers Valuable papers issued
Profit before Tax
Growth
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87
VALUE OF SUSTAINABILITY
SUSTAINABLE DEVELOPMENT TO ENSURE FINANCIAL SECURITY FOR CUSTOMERS (continued)
Maintaining a high capital adequacy ratio AS OF 31 DECEMBER 2017. THE CAPITAL ADEQUACY RATIO (CAR) WAS
12.68%
Over the past five years, Techcombank has maintained a high CAR (Capital Adequacy Ratio), despite its assets growing at a compound annual growth rate (CAGR) of 14%. This is due to the Bank’s policy of not paying dividends for five consecutive
88
ANNUAL REPORT 2017
WHICH IS 3.68% HIGHER THAN THE LEVEL SET BY THE SBV.
years; until 2016, profit after tax was invested back into the Bank to allow future growth. Further, Techcombank is ready to implement and apply Basel II capital adequacy ratio standard according to the SBV’s roadmap.
Controlling liquidity risk TECHCOMBANK HAS ESTABLISHED INTERNAL LIQUIDITY
MANAGEMENT
PROCEDURES, MANAGING,
INCLUDING
MEASURING,
POLICIES
AND
SYSTEMS
FOR
MONITORING
AND
FORECASTING LIQUIDITY RISK.
The Audit and Risk Committee (ARCO) is the unit that establishes the bank-wide risk appetite framework. The Asset Liability Management Committee (ALCO) is the unit that executes and monitors the implementation of liquidity risk management, ensuring compliance with risk appetite and warning limit threshold set by the ARCO. In addition, liquidity stress tests are conducted under hypothetical industry-wide scenarios as well as Techcombank-specific scenarios. Liquidity stress tests are conducted monthly to forecast the cash flow for a given period, assuming that the Bank faces a number of stress scenarios such as high deposit withdrawal rate or limited access to interbank capital. Based on these scenarios, Techcombank has developed a liquidity reserve plan (LCP) to respond quickly to stress scenarios and help prevent liquidity crises. Techcombank’s liquidity ratios always meet the requirements stipulated in the Circular 36/2014 / TT-NHNN, amended by Circular 06/2016 / TT-NHNN of the SBV.
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89
VALUE OF SUSTAINABILITY
SUSTAINABLE DEVELOPMENT TO ENSURE FINANCIAL SECURITY FOR CUSTOMERS (continued)
Business development - efficient and sustainable lending
A
s of 31 December 2017, Techcombank’s credit balance reached VND181,002 billion, an .increase of 15.95% compared to that of 2016, of which outstanding loans to customers increased by 12.78% to VND160,849 billion.
OUTSTANDING LOANS COMPOSITION BY CUSTOMER SEGMENT (VND BILLION) 13% 160,849 142,616
WITH A FOCUS ON SAFE AND SUSTAINABLE DEVELOPMENT, TECHCOMBANK’S POLICY IS NOT TO GROW ITS OUTSTANDING LOAN BALANCE BUT TO SHIFT ITS PRIORITY TO SERVING CLIENTS WITH GOOD BUSINESS PRACTICES, THEREBY REDUCING INEFFECTIVE LENDING AND PREVENTING DEFAULTS.
40% Personal
43%
SMEs
13%
Large corporate
44%
14%
In 2017, outstanding loans for small and medium enterprises increased by 20%, thereby increasing their share in the Bank’s total loan balance from 13% in 2016 to 14% as at the end of 2017 (see table).
2016
46%
2017
Shifting its focus to providing short-term loans to corporate customers helped Techcombank grow its short-term loan balance by almost twofold. Short-term loans, subsequently, accounted for 39% of the total loan balance, bringing down the share of medium to long-term loans to 61%.
Structure of outstanding loans based on loan term
31/12/2016
31/12/2017
VND billion
Proportion
VND billion
Proportion
Short-term
63,413
39%
35,884
25%
Medium-term
42,897
27%
62,493
44%
Long-term
54,540
34%
44,239
31%
160,849
100%
142,616
100%
Total outstanding loans
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ANNUAL REPORT 2017
DEPOSIT COLLECTION IS COORDINATED IN ALIGNMENT WITH LENDING ACTIVITIES To maintain an effective and reliable loan-to-deposit ratio (LDR), Techcombank actively managed the increase in customer deposits in different stages throughout the year. For the year ended 31 December 2107, customers' deposits reached VND175,435 billion (including VND4,464 billion of certificate of deposits), of which personal deposits saw a sharp increase, subsequently making up 72% of total deposits.
CUSTOMER DEPOSIT COMPOSITION (VND BILLION) +1% 173.537
175.435
Although the deposit balance did not increase significantly in 2017, the ratio of non-term deposits and term deposits showed positive adjustment. While term deposits maintained at the same level as last year, nonterm deposits grew, resulting in an increase in the share of non-term deposits in total deposits from 22.7% in 2016 to 23.51% in 2017.
72% Personal
64%
Institutional
36%
2016
Structure of customers deposits Term deposits
28%
This helped the Bank reduce the pressure on funding cost, contributing to maintaining the net interest margin (NIM) at 3.90%, which is higher than the average level of the banking sector in Vietnam.
2017
31/12/2016
31/12/2017
VND billion
Proportion
VND billion
Proportion
134,192
76.49%
134,142
77.30%
Current accounts
38,235
21.79%
35,827
20.65%
Marginal deposits
3,008
1.71%
3,569
2.06%
175,435
100%
173,537
100%
Total deposits (*)
(*) including certificated of deposits.
ENABLING FINANCIAL SUCCESS & SECURITY
91
VALUE OF SUSTAINABILITY
SUSTAINABLE DEVELOPMENT TO ENSURE FINANCIAL SECURITY FOR CUSTOMERS (continued)
Proactively identify risks and manage credit quality
O
ver the 2007 - 2012 period, while the Vietnamese banking system .saw a sharp increase in bad debts, Techcombank refocused early on by investing in credit risk management, moving from passive management to active risk identification and mitigation. As a result, the debt ratios of groups 3-5 (see table below) were maintained at a low
level of 1.61% by the end of 2017, placing Techcombank among the banks with very low credit risk in Vietnam. The coverage ratio on Techcombank group 3-5 outstanding loans has increased from 67% in 2016 to 73% in 2017, thereby minimizing the Bank’s exposure to credit risk.
IN JUNE 2017, TECHCOMBANK BECAME THE SECOND COMMERCIAL BANK IN VIETNAM TO COMPLETE THE RECOVERY AND SETTLEMENT OF OVERDUE DEBTS SOLD TO VIETNAM ASSET MANAGEMENT COMPANY (VAMC) WITH FULL PAYMENT BEFORE MATURITY OF VAMC SPECIAL BONDS.
31/12/2016
31/12/2017
VND billion Group 1 – Current debt
Proportion
VND billion
Proportion
155,932
96.94%
138,204
96.91%
2,333
1.45%
2,166
1.52%
Group 3 - Sub-standard debt
575
0.36%
397
0.28%
Group 4 – Doubtful debt
456
0.28%
475
0.33%
1,553
0.97%
1,375
0.96%
Group 2 - Special mentioned debt
Group 5 – Bad debt VAMC bonds
92
ANNUAL REPORT 2017
0
2,922
Optimize & improve cost efficiency 31/12/2016
31/12/2017
VND billion Salaries and related expenses
Proportion
Increase / Decrease
VND billion
Proportion
VND billion
%
2,595
55.23%
2,230
53.41%
365
16.35%
Office rental cost, assets, tools, facilities and asset amortization
993
21.14%
963
23.06%
30
3.16%
Publication, marketing and promotion
263
5.61%
253
6.06%
10
3.95%
Expenditure on payment of insurance premium for customers’ deposits
166
3.54%
135
3.23%
31
22.96%
Per diem expenses
71
1.52%
60
1.44%
11
18.60%
Training and education expenses
29
0.63%
29
0.68%
1
3.25%
Conference expenses
42
0.89%
41
0.98%
1
2.07%
538
11.45%
464
11.12%
73
15.78%
Total cost
4,698
100%
4,175
100%
523
12.52%
Average number of employees (person)
8,766
-
7,787
-
979
12.57%
Revenue/employee/year
1.86
-
1.52
-
0.34
22.69%
Cost/employee/year
0.54
-
0.54
-
0.00
-0.04%
28.75%
-
35.29%
-
-
-6.54%
Other expenses
Cost to Income ratio (CIR) (%)
A
long with improving service quality for customers, Techcombank continuously improves and enhances financial management and cost control to optimize the use of input resources. In 2017, Techcombank’s total operating expenses increased by 12.52% from 2016, equal to just one third of revenue growth. As a result, the Bank’s cost to income ratio in 2017 dropped to 28.75%, the lowest rate in Techcombank’s 25 years of operation, and lowest among joint-stock commercial banks.
THESE RESULTS WERE ACHIEVED THANKS TO A REASONABLE COST STRUCTURE ASSOCIATED WITH THE BANK’S FIVE-YEAR STRATEGY. TOP PRIORITY IS GIVEN TO THE LONG-TERM INVESTMENT COSTS OF THE FOUNDATION SYSTEM, STRATEGIC INITIATIVES AND HUMAN RESOURCES.
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93
VALUE OF SUSTAINABILITY
SUSTAINABLE DEVELOPMENT TO ENSURE FINANCIAL SECURITY FOR CUSTOMERS (continued)
Human resource costs increased by 16% from 2016, increasing to 55% of the Bank’s total operating expenses. The number of employees in 2017 increased by 979, equivalent to an increase of 12.57%. Productivity per employee (calcuated as revenue/ no. of employees) increased by 22.69% compared to 2016, marking the third consecutive year of 20%+ growth rate, placing Techcombank as a leader among joint-stock commercial banks in Vietnam, in terms of the quality and efficiency of its human resources. Techcombank’s development of human resources, to retain talents, provide professional training, build corporate culture, and ensure employee engagement over the years has helped these pleasing results. In addition, the average operating cost per employee in 2017 remained constant while the average employee salary stayed at a high level thanks to effective management of other variable costs. Rental (offices, tools and equipments) and asset depreciation expenses increased by 3% from 2016, accounting for 21% of total operating expenses. This figure closely follows the Bank’s long-term strategy of investing in technology and automation,
94
ANNUAL REPORT 2017
facilitating the realization of its long-term goal in 2020. Marketing and promotion costs remain constant at 5.6% of total operating costs. Marketing activities in 2017 include new incentive programs, new products, new service experience for customers, and brand communication programs. The 2017 HCMC - Techcombank International Marathon sponsored by Techcombank, for example, successfully promoted the Techcombank’s brand to customers and investors. Other normal operating expenses were controlled at a stable level compared to 2016. In 2017, operating expenses were entirely within Techcombank’s projection, due to effective budget preparation, control and accurate periodic forecasts. This supported the Board of Management in making effective decisions throughout the year. Budget control has eliminated inefficient costs, focusing resources on long-term investment in the Bank’s systems and on human resources, ensuring improved labor productivity for the entire Bank.
Diversification of non-interest income TECHCOMBANK UNDERSTANDS THAT THE FINANCIAL NEEDS OF ITS CUSTOMERS ARE EXTREMELY DIVERSE. THEREFORE, THE BANK DOES NOT LIMIT ITS BUSINESS TO LENDING PRODUCTS. IN 2017, THE BANK DIVERSIFIED AND IMPROVED THE QUALITY OF ITS PRODUCTS AND SERVICES TO MAKE TRANSACTIONS FASTER AND MORE CONVENIENT AND THUS IMPROVE CUSTOMERS’ SATSIFACTION, ENCOURAGE THEM TO USE TECHCOMBANK PRODUCTS AND INCREASE TRANSACTION VOLUME.
13%
7% 17%
7%
2016
Net interest income
9%
Net fee income 69%
Income from foreign exchange trading and securities Other income
Gross revenue structure from services
2017
55%
23%
In 2017, the structure of the whole Bank’s operating income continued to show a positive change as the proportion of net interest income declined from 69% to 55%, while the proportion of non-interest income increased substantially. In particular, net interest income from services grew by an impressive 95% year-on-year, due to the one-time agent fee associated with bancassurance products. Excluding this agent fee, Techcombank’s core fee incomes grew at over 20% in 2017 thanks to a number of core fee products (see table).
2016
2017
Billion VND
This approach has enabled the Bank to diversify non-interest income sources and reduce the proportion of interest income to total operating income, which is a common trend among commercial banks in developed countries.
Proportion
Billion VND
Proportion
Settlement & cash services
1,466
32.43%
1,270
49.64%
Trustee & agency services
1,543
34.15%
61
2.39%
Insurance commission services
513
11.35%
337
13.17%
Securities trading brokerage
375
8.29%
337
13.15%
Other services
623
13.79%
554
21.65%
4,520
100%
2,559
100%
Total
ENABLING FINANCIAL SUCCESS & SECURITY
95
VALUE OF SUSTAINABILITY
SUSTAINABLE DEVELOPMENT TO ENSURE FINANCIAL SECURITY FOR CUSTOMERS (continued)
LEADING IN BOND BROKERAGE In addition to granting medium- and long-term loans to corporate clients, Techcombank has boosted the issuance of bonds to clients, as a way to raise capital that offers more advantages than bank loans. In 2017, the volume of advisory services issued by Techcombank increased by 33% from 2016, maintaining the Bank’s leading position in the bond brokerage market, which in turn raised fees from securities underwriting and brokerage services to 11% higher than the previous year and accounted for 8% of the total gross fees.
PREMIUM AS A LARGE SOURCE OF REVENUE PREMIUM INCOME (VND BILLION) 649
574 450
Revenue from exploitation of new contracts 211
+70%
337
Fee income 38 2015
96
ANNUAL REPORT 2017
2016
2017
Techcombank focuses on reducing risks for customers as well as internal risk management. Techcombank’s bancassurance products offer a full range of financial packages to customers to assist with current and future financial plans and meet their long-term needs in a sustainable way. Bancassurance is one of the key products in the Bank's five year strategy. In 2017, revenue from insurance contracts increased sharply by 44%. As a result, insurance delivered the highest revenue growth among all fee products in 2017, at 70%, thus raising the
share of insurance premium income in total fee incomes from 13% in 2016 to 19%. * Excluding agency supporting fee
PROMOTING FEE INCOME FROM TRANSACTION FEES AND CASH SERVICES Card payments are common worldwide and have become popular with a large number of the Vietnamese population, gradually replacing cash. IN 2017, TECHCOMBANK BECAME THE LEADING BANK IN VIETNAM IN TERMS OF VISA CARD TRANSACTION VOLUME
REVENUE FROM PAYMENT AND CASH SERVICES INCREASED BY
+15% HIGHER THAN THE 13% GROWTH RATE RECORDED IN 2016. AS A RESULT, THE CAGR FOR THE PERIOD FROM 2015 TO 2017 ROSE TO 14%.
To leverage upon the trend, Techcombank pioneered a payment infrastructure, and continuously improved its e-banking facilities, to provide clients with the convenience this service affords. Techcombank’s strategic goal is to raise transaction volume on every customers’ card in order to create a competitive advantage over other banks. This strategy brought positive results in 2017, when Techcombank became the leading Bank in Vietnam in terms of VISA card transaction volume. Revenue from payment and cash services increased by 15%, higher than the 13% growth rate recorded in 2016. As a result, the CAGR for the period from 2015 to 2017 rose to 14%. Revenue from payment and cash services still accounted for the highest proportion of the Bank’s total fee income, but the proportion has been declining in favor of premium income.
FEE FROM PAYMENT AND CASH SERVICES (VND BILLION) CAGR: 14%
1,466 1,270 1,126
2015
+15%
+13%
2016
2017
THANKS TO ITS UNCEASING EFFORT IN 2017, TECHCOMBANK ACHIEVED IMPRESSIVE RESULTS BOTH IN TERMS OF QUALITY AND QUANTITY. THIS REAFFIRMS THE BANK’S STRATEGIC DIRECTION FOR 20162020 IS ON THE RIGHT PATH.
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97
98
ANNUAL REPORT 2017
FOR THE LOVE
OF VIETNAM TECHCOMBANK AIMS TO CREATE OPPORTUNITIES FOR ALL VIETNAMESE PEOPLE TO HELP IMPROVE THEIR LIVES AND FULFILL THEIR PERSONAL DREAMS AND ASPIRATIONS.
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99
FOR THE LOVE OF VIETNAM
TECHCOMBANK BELIEVES THAT CORPORATE SOCIAL RESPONSIBILITY (CSR) IS ABOUT NOT ONLY OUTWARD SOCIAL ACTIONS, BUT ALSO STRENGTHENING INTERNAL BANK-WIDE BONDS, TO ENSURE THAT EACH AND EVERY EMPLOYEE, AS WELL AS THE BANK AS A WHOLE, UPHOLDS THE VALUES AND CULTURE PRESENTED IN OUR STRATEGY AND ACTIONS.
T
echcombank understands that its business success sits within the context of the wider community and society in general. Guidance from the Board of .Directors and the Board of Management combined with the efforts and cooperation of the Bank’s employees do not paint the complete picture. The Bank must also recognize the great contribution of its customers and society in general. For this reason, Techcombank considers “Corporate Social Responsibility” integral to its strategic planning and daily operations. Techcombank demonstrates its commitment to social responsibility in its own way. To Techcombank, community activities are a necessity, crucial to the shaping and nurturing of corporate culture in the Bank as well as in each and every Techcomer. Thanks to a series of corporate social programs, Techcombank’s employees had the opportunities to travel to remote areas and offer support to less fortunate communities in difficult circumstances. The experience allowed Techcomers to become more understanding, more compassionate and more willing to deliver the best support to colleagues, customers and business partners.
100 ANNUAL REPORT 2017
AT TECHCOMBANK, WE HAVE THE AMBITION TO FOSTER OPPORTUNITY FOR EVERYBODY IN VIETNAM, TO BETTER THEIR LIVES AND REALIZE THEIR AMBITIONS.
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101
FOR THE LOVE OF VIETNAM (continued)
OUR COMMITMENT IS TRANSLATED THROUGH TWO ACTIONS:
Supporting local people in poorer provincial areas through voluntary CSR programs (CSR - Charity). Every year and particularly in 2017, the Bank has sponsored many local projects including construction of highland schools, upgrading or building new medical facilities, donating houses, digging rural roads and providing scholarships.
102 ANNUAL REPORT 2017
Connecting communities and promoting positive values through sponsorship of large-scale activities. An example of this is the Bank's long-term commitment to support the international marathon in Ho Chi Minh City. One of the goals of this popular event is to inspire young people to prepare themselves for an increasingly international world full of opportunities. (CSR - Community Development).
COMMUNITY DEVELOPMENT HAS BEEN AND WILL CONTINUE TO BE A CORNERSTONE OF TECHCOMBANK’S CSR PROGRAM. TECHCOMBANK’S MANAGEMENT BELIEVES THAT HAVING AN EFFECTIVE AND MEANINGFUL CSR STRATEGY DELIVERS TREMENDOUS VALUE NOT ONLY TO THE BANK, BUT ALSO TO SOCIETY AT LARGE. IN ORDER TO ACCOMPLISH THIS MISSION, TECHCOMBANK ADOPTED CSRPARTNERING, WHICH SITS WITHIN THE REMIT OF ALL TECHCOMBANK EMPLOYEES IN 2017, CSR PARTNERING PUT TOGETHER 2 REMARKABLE EVENTS: THE BLOOD BANK DONATION DAY - PART OF THE “RED JOURNEY” PROGRAM - AND THE 2017 HCMC-TECHCOMBANK INTERNATIONAL MARATHON.
BECAUSE
SHARING BRINGS HOPES AND CONFIDENCE TO PATIENTS IN TIMES OF NEED,
Over 500 Techcombank employees participated in this community blood donation program, held on July 5, 2017 in Ho Chi Minh City and on July 8, 2017 in Hanoi. In total, 407 units of blood were successfully donated to the national blood bank. The program was a meaningful contribution from Techcombank to those in need of medical support across the country.
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103
FOR THE LOVE OF VIETNAM (continued)
The 2017 HCMC-Techcombank International Marathon is another highlight of our program. Over 5,000 athletes from 44 countries, including over 600 Techcombank employees, participated in the 10km, half-marathon (21km) and marathon (42km) categories. The event was an overwhelming success. Additionally, over 300 child athletes participated in the Kids Run event one day prior to the Marathon (25 November 2017).
THROUGH THE HCMC MARATHON, TECHCOMBANK WISHES TO CONVEY THE CORE VALUES THAT ARE WOVEN INTO THE DNA OF THE BANK TO THE PEOPLE OF VIETNAM: PERSISTENCE, PHYSICAL EXCELLENCE, OPTIMISM, AND THE WILL TO BREAK BOUNDARIES. 104 ANNUAL REPORT 2017
"Everyone needs to live with dreams. The only limit to what you can do is your acceptance. However, the limit is personal and the success comes only when individuals overcome their limits to live a more meaningful life." - Miles Hilton Barber
One particular athlete participating in the 2017 HCMC-Techcombank International Marathon, Miles Hilton Barber, is an inspiration to all. He is not only visually impaired, but a world-famous inspirational speaker. At the age of 69, Miles has never stopped challenging his personal limits to realize his seemingly impossible goals. Despite his impaired vision, Miles has completed many physically demanding challenges, including running 241km through the Sahara, pulling sleds across more than 400km in Antarctica, and successfully conquering the summits of Mount Kilimanjaro (the highest mountain in Africa) and of Mont Blanc (the highest mountain in Europe).
A day before the Marathon, Miles spoke for over an hour in the Empire City urban development of Thu Thiem, District 2, HCMC, to share his aspirations with participating runners and their families and friends. Miles said: “Everyone needs to live with dreams. The only limit to what you can do is your acceptance. However, the limit is personal and the success comes only when individuals overcome their limits to live a more meaningful life. “ “Every person, every organization should always try to overcome their limits” is also the reason why Techcombank wants to highlight the annual Ho Chi Minh City- Techcombank International Marathon as a valuable spiritual asset of the HCMC people and sports lovers for many years to come. Because, the marathon is not just a running track, but a place to challenge yourself, pushing you forward. Conquering long distances requires training, planning and persistence. The same is required from Techcombank in its journey to becoming number one in the banking industry in Vietnam.
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105
106 ANNUAL REPORT 2017
Plan for
THE FUTURE TECHCOMBANK IS PUTTING GREAT EMPHASIS ON TECHNOLOGY FOR THE FUTURE. OVER THE COMING YEARS, THE BANK PLANS TO STRENGTHEN ITS DIGITAL ASSETS, ENHANCE SECURITY AND OPTIMIZE OPERATIONS. TECHCOMBANK WANTS TO CREATE A MODERN TECHNOLOGY INFRASTRUCTURE, WHILE ENSURING THE SUSTAINABILITY OF THE SYSTEM AND MAINTAINING THE TRUST OF CUSTOMERS.
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107
PLAN FOR THE FUTURE
2018 IS AN IMPORTANT YEAR FOR TECHCOMBANK. THE BANK IS HALFWAY THROUGH IMPLEMENTING ITS 2016-2020 STRATEGY WHICH SEEKS TO EXECUTE MEANINGFUL TRANSFORMATION, DELIVER BREAKTHROUGH IN BUILDING CAPACITY AND BUSINESS DEVELOPMENT AND
1 VIETNAM
POSITION TECHCOMBANK AS THE NUMBER
BANK IN
108 ANNUAL REPORT 2017
2018 expectations TECHCOMBANK WILL DEEPEN ITS UNDERSTANDING OF CUSTOMERS AND OPTIMIZE PRODUCTS AND SERVICES IN LINE WITH THEIR NEEDS. THE BANK WILL UPHOLD ITS COMMITMENT TO DELIVER EXCEPTIONAL CUSTOMER EXPERIENCE AND VALUE TO ITS MILLIONS OF CUSTOMERS AND BRING OUTSTANDING BENEFITS TO SHAREHOLDERS.
2018
is an important year for Techcombank. The Bank is halfway through implementing its 2016-2020 strategy which seeks to execute meaningful transformation, deliver breakthrough in building capacity and business development and position techcombank as the number 1 bank in Vietnam.
The future looks good. Based on promising macroeconomic indicators and Government incentive policies that will continue to stimulate the economy, Techcombank’s operations have a strong foundation for growth. GDP is in a high growth cycle and improved business conditions lead to higher incomes and a rising number of enterprises. Accordingly, the demand for banking products and services will continue to increase. The exchange rate remains stable,
and the legal framework for dealing with bad debts and collateralized assets is becoming more supportive. These are favorable conditions required for the development of banks in general, and Techcombank in particular. In addition, competition will also increase, not only from traditional rivals at home and abroad, but also digital banks and new financial technology (fintech) businesses. This poses a significant challenge for Techcombank in 2018. In that context, Techcombank will continue to focus on quality development to overcome challenges and take advantage of opportunities in 2018. Techcombank will focus resources to implement Phase 2 of the Transformation Program aimed at consolidating and improving the Bank, improving team capacity, optimizing key processes, and building and improving core systems. These initiatives will help Techcombank identify and develop appropriate business models for customers along the value chain and across the ecosystem, thereby providing superior banking solutions to become a trusted partner of the leaders and chief financial officers of corporate customers. Techcombank will become a technology-based organization, transforming the workforce and strengthening corporate culture. With these resolutions, Techcombank expects 2018 to be another successful year, with revenue and profit growth maintaining at a high level, and cost to income ratio (CIR) and provision expense continuing to improve. More importantly, Techcombank will deepen its understanding of customers and optimize products and services in line with their needs. The Bank will continue to improve working conditions and boost the performance of the thousands of its loyal employees while upholding its commitment to deliver exceptional customer experience and value to its millions of customers and bring outstanding benefits to shareholders.
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109
PLAN FOR THE FUTURE
Digital banking: Reality today, not tomorrow
110 ANNUAL REPORT 2017
Identifying “Data Excellence” and “Operation Excellence” as the key foundations of the “Customer-centric” strategy, the Bank has implemented a number of projects to automate processes, develop online transaction channels, and improve the quality of products and services to focus on customer experience and ensure data security. In 2017, Techcombank focused on upgrading its data and analytical capabilities. This equips the Bank to understand customers and to make accurate, quick, and safer loan decisions.
A
ccording to Nielsen's 2017 Vietnam Smartphone Insights Report, the .percentage of smartphone users in Vietnam in 2017 was 84%, an increase of 6% from the previous year. More notably, in rural areas, 68% of the population now use smartphones. The above figures show an impressive trend – the ubiquity of smartphones and tablets. Habits and behaviors of people in all regions, of all classes and ages are changing. Online services, whether for shopping, making friends, exchanging information, or dating, are becoming more popular. The Banking sector is no different. Users expect to be able to access and use banking services at any time, anywhere and on any device.
Each bank has its own approach to digital banking, which focuses on the customer experience or the ability to provide online services. However, these options can only be successful when delivering the best value to the customer. Right from the start, Techcombank has focused on technology, believing it to be the best way to serve customers and promote business development. During 24 years of operation, Techcombank has continuously strengthened its systems and capacity to best meet the needs of customers. In recent years, Techcombank’s application of technology has delivered remarkable progress, creating breakthroughs to improve operational efficiency and customer satisfaction.
In addition to this, the Bank’s integrated mobile and internet banking platform is highly valued by customers for its userfriendly interface – winning awards in electronic banking. Techcombank’s digital banking system allows customers to use 24/7 banking facilities, support their financial needs anytime and anywhere, saving their time and energy. It also allows employees to focus on providing customers with more complex, valuable services that improve their lives.
IN 2017, THE NUMBER OF E-BANKING CUSTOMERS INCREASED BY 73.2% AND THE VOLUME OF TRANSACTIONS VIA ELECTRONIC CHANNELS INCREASED BY 128%, REFLECTING CUSTOMERS’ POSITIVE EXPERIENCES WHEN USING THE BANK’S DIGITAL SERVICES.
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111
PLAN FOR THE FUTURE
DIGITAL BANKING: REALITY TODAY, NOT TOMORROW (continued)
In addition, Techcombank applied international standards for information security, which meant synchronized information security measures for people, equipment, systems, policies and technology solutions. The Bank is capable of immediately detecting system attacks as well as data breaches and is able to respond promptly. Human resources have been equipped with knowledge and training in accordance with international best-practice standards and with the support of international advisors. This timely investment allowed Techcombank to continue to be a pioneering bank in Vietnam for 2017, while maintaining two of the world’s leading IS certifications, ISO27001: 2013 and PCI DSS 3.2. As technology affects every aspect of life, the development of artificial intelligence, big data, and the growing competition from financial technology (fintech) companies, the supply of banking products and services will have to undergo major changes and banks will be required to continually innovate and update their technology to stay abreast with trends. Techcombank not only chooses to “accept” the need to advance technology, but strives to be a leader, setting the standards for digital banking in Vietnam. In fact, the Bank has introduced
112 ANNUAL REPORT 2017
new technology applications into banking activities, such as approving credit based on big data, checking data automatically and so on. With a large-scale investment in its technology platform and a focus on strengthening digital assets as well as enhancing security and optimizing
operations, Techcombank aims to create a modern technology infrastructure, while ensuring the sustainability of the system and creating trust with customers.
FINANCIAL REPORT
ENABLING FINANCIAL SUCCESS & SECURITY
113
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. 0100230800 issued by the Hanoi Department of Planning and Investment on 28 December 2017. 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 bases 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, jointventures, 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 2017 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
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 2017 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
114
ANNUAL REPORT 2017
BOARD OF MANAGEMENT Members of the Board of Management of the Bank for the year ended 31 December 2017 and until the date of these consolidated financial statements are as follows: Name
Position
Ms. Phan Thi Thanh Binh
Chief Executive Officer Head of Strategy and Corporate Development (until 12 August 2017) Deputy Chief Executive Officer Group Chief Finance Officer (from 25 January 2018) Deputy Chief Executive Officer cum Head of COM and Legal Division Head of Risk Management Deputy Chief Executive Officer (from 1 March 2017 to 19 May 2017) Head of Wholesale Banking (until 28 February 2017) Head of Strategy and Corporate Development (from 14 August 2017) Head of IT and Operations Head of Transaction Banking (from 3 July 2017) Head of Treasury and Financial Markets Head of Sales and Distribution Head of Human Resources Head of Personal Financial Services Head of Marketing and Branding Head of Insurance Division (from 7 August 2017) Transformation Director – Transformation Office (from 19 June 2017) Transformation Director – Transaction Banking (from 3 July 2017) Head of Transaction Banking (until 2 July 2017) Transformation Director – Wholesale Banking (from 26 July 2017)
Mr. Chan Jonathan Chung Ming
Transformation Director – Personal Financial Services (from 1 December 2017)
Mr. Nguyen Le Quoc Anh Mr. Do Tuan Anh Mr. Trinh Bang Mr. Pham Quang Thang Mr. Le Ba Dung Mr. Nguyen Canh Vinh Ms. Tran Thi Minh Lan Mr. Chester Gorski Ms. Nguyen Huong Giang Mr. Vu Minh Truong Mr. Phung Quang Hung Ms. Pham Vu Minh Dan Ms. Le Thi Bich Phuong Ms. Nguyen Thi Van Anh Mr. Chung Ba Phuong Mr. Ashish Sharma Mr. Phan Thanh Son
LEGAL REPRESENTATIVE The legal representative of the Bank for the year ended 31 December 2017 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 on reports/documents related to managing the operation of the Bank which comprise the accompanying consolidated financial statements for the year ended 31 December 2017 in accordance with Decision No. 0312/UQ-HDQT dated 25 February 2016. AUDITORS The auditor of the Bank is Ernst & Young Vietnam Limited.
ENABLING FINANCIAL SUCCESS & SECURITY 115
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 2017. 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 of 31 December 2017, 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, 9 February 2018 116
ANNUAL REPORT 2017
Reference: 60899747/19428498-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 9 February 2018 and set out on pages 119 to 201 which comprise the consolidated balance sheet as at 31 December 2017, and 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 the statutory requirements relevant to the preparation and presentation of the consolidated financial statements, and for such internal control as the Board of Management determines is necessary to enable the preparation and presentation of the 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 auditors consider 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.
ENABLING FINANCIAL SUCCESS & SECURITY 117
Reference: 60899747/19428498-HN
INDEPENDENT AUDITORS’ REPORT (continued)
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 2017, 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 the consolidated financial statements. Ernst & Young Vietnam Limited
DANG PHUONG HA Deputy General Director Audit Practising Registration Certificate No. 2400-2018-004-1 Hanoi, Vietnam, 9 February 2018
118
ANNUAL REPORT 2017
TRAN THI THU HIEN Auditor Audit Practising Registration Certificate No. 2487-2018-004-1
CONSOLIDATED BALANCE SHEET as at 31 December 2017
B02/TCTD-HN
Notes
31 December 2017 VND million
31 December 2016 VND million
ASSETS Cash and gold
5
2,344,362
2,956,708
Balances with the State Bank of Vietnam
6
4,279,431
2,533,875
Balances with and loans to other credit institutions
7
30,155,807
21,598,874
Balances with other credit institutions
7.1
16,243,054
9,058,942
Loans to other credit institutions
7.2
13,912,753
12,539,932
8
6,758,094
8,024,620
6,775,118
8,035,905
(17,024)
(11,285)
36,292
-
158,964,456
141,120,529
Securities held-for-trading Securities held-for-trading Provision for securities held-for-trading Derivatives and other financial assets
20
Loans to customers Loans to customers
9
160,849,037
142,616,004
Provision for loans to customers
10
(1,884,581)
(1,495,475)
11
10,332
18,493
Debts purchased
12,092
19,466
Provision for debts purchased
(1,760)
(973)
51,542,484
45,674,924
Available-for-sale securities
46,018,398
38,575,369
Held-to-maturity securities
5,715,484
8,560,113
Provision for investment securities
(191,398)
(1,460,558)
9,683
577,746
Other long-term investments
12,084
582,672
Provision for long-term investments
(2,401)
(4,926)
Debts purchased
Investment securities
Long-term investments
12
13
ENABLING FINANCIAL SUCCESS & SECURITY 119
CONSOLIDATED BALANCE SHEET (continued) as at 31 December 2017
31 December 2017 VND million
31 December 2016 VND million
14
1,511,446
1,582,722
14.1
569,789
576,836
1,602,956
1,518,287
(1,033,167)
(941,451)
941,657
1,005,886
Cost
1,449,616
1,423,050
Accumulated amortization
(507,959)
(417,164)
1,238,030
1,278,536
Cost
1,442,827
1,447,256
Accumulated amortization
(204,797)
(168,720)
12,541,963
9,996,109
Receivables
9,417,589
6,829,557
Accrued interest and fees receivable
3,876,528
3,992,328
1,773
27,659
557,642
650,888
19,765
29,647
(1,311,569)
(1,504,323)
269,392,380
235,363,136
Notes Fixed assets Tangible fixed assets Cost Accumulated depreciation Intangible fixed assets
Investment property
Other assets
Deferred tax assets Other assets In which: Goodwill Provision for other assets TOTAL ASSETS
120
ANNUAL REPORT 2017
14.2
15
16
Notes
31 December 2017 VND million
31 December 2016 VND million
LIABILITIES Borrowings from the Government and the State Bank of Vietnam
17
1,000,000
1,447,970
Deposits and borrowings from other credit institutions
18
46,323,825
25,473,509
Deposits from other credit institutions
18.1
21,274,375
15,114,917
Borrowings from other credit institutions
18.2
25,049,450
10,358,592
Deposits from customers
19
170,970,833
173,448,929
Derivatives and other financial liabilities
20
-
67,892
Valuable papers issued
21
17,639,970
10,414,842
Other liabilities
22
6,527,007
4,923,518
Accrued interest and fees payable
2,764,162
2,195,582
Other liabilities
3,762,845
2,727,936
242,461,635
215,776,660
9,777,116
8,878,079
Charter capital
11,655,307
8,878,079
Share premium
2,165,058
-
Treasury shares
(4,043,249)
-
6,156,928
5,219,182
10,996,701
5,489,215
26,930,745
19,586,476
269,392,380
235,363,136
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY Share capital
Reserves Retained earnings TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
24
ENABLING FINANCIAL SUCCESS & SECURITY 121
CONSOLIDATED BALANCE SHEET (continued) as at 31 December 2017
CONSOLIDATED OFF-BALANCE SHEET ITEMS 31 December 2017 VND million
31 December 2016 VND million
8,558
6,547
121,109,669
55,015,026
- Commitments to buy foreign currencies
2,911,065
1,895,364
- Commitments to sell foreign currencies
5,440,635
598,543
112,757,969
52,521,119
9,366,321
9,651,241
16,001,135
11,731,082
9,638,324
14,303,477
23,045,517
9,545,202
179,169,524
100,252,575
Notes Contingent liabilities Guarantees for borrowings Commitments for currencies contracts
- Commitments for currency swap contracts
20
Letters of Credit Other guarantees Valuable papers forward commitments Other commitments
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, 9 February 2018
122
ANNUAL REPORT 2017
CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2017
B03/TCTD-HN Notes
Interest and similar income Interest and similar expenses Net interest and similar income Fees and commission income Fees and commission expenses Net fees and commission income Net gain from trading foreign currencies Net gain from securities held-for-trading Net gain from investment securities Other income Other expenses Net gain from other operating activities Income from investments in other entities Total operating income Operating expenses Profit before provision for credit losses Provision expenses for credit losses Profit before tax Current corporate income tax expenses Deferred corporate income tax benefit/(expenses) Corporate income tax expenses Profit after tax Basic earnings per share (VND/share) Diluted earnings per share (VND/share)
25 26
27 28 29 30
31 32 33 34 23.1 23.3
35 35
2017 VND million 17,594,504 (8,664,092) 8,930,412 4,519,685 (707,783) 3,811,902 278,585 396,730 855,760 1,963,425 (248,534) 1,714,891 355,526 16,343,806 (4,698,283) 11,645,523 (3,609,226) 8,036,297 (1,564,816) (25,886) (1,590,702) 6,445,595 7,719 (*)
2016 VND million 15,736,077 (7,593,856) 8,142,221 2,558,990 (603,226) 1,955,764 240,201 124,780 481,457 1,567,677 (679,417) 888,260 470 11,833,153 (4,175,422) 7,657,731 (3,661,091) 3,996,640 (872,808) 25,014 (847,794) 3,148,846 3,525 2,929
(*) As at 31 December 2017, basic earnings per share of the Bank are not affected by dilution factors. 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, 9 February 2018
ENABLING FINANCIAL SUCCESS & SECURITY 123
CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2017
B04/TCTD-HN
2017 VND million
2016 VND million
Interest and similar receipts
17,710,304
14,790,288
Interest and similar payments
(8,095,512)
(7,484,939)
Net fees and commission receipts
3,747,154
1,955,764
Net receipts from trading activities (foreign currencies and securities)
1,635,194
834,851
598,071
484,065
1,116,820
404,195
(4,168,108)
(3,407,938)
(1,034,529)
(721,092)
11,509,394
6,855,194
Increase in balance with and loans to other credit institutions
(1,202,041)
(5,459,376)
Increase in securities held-for-trading
(3,337,613)
(7,140,332)
(36,292)
-
(18,233,033)
(30,436,115)
Use of provision to write off loans, securities, long-term investments, receivables
(4,779,696)
(4,108,625)
(Increase)/decrease in other operating assets
(2,472,881)
3,134,746
(447,970)
1,447,970
Increase in deposits and borrowings from other credit institutions
20,850,316
4,391,098
Increase/(decrease) in deposits from customers
(2,478,096)
31,209,383
7,359,251
2,278,819
Decrease in derivatives and other financial liabilities
(67,892)
(17,999)
Increase in other liabilities
304,627
200,534
(263)
(127)
6,967,811
2,355,170
Notes CASH FLOWS FROM OPERATING ACTIVITIES
Other income receipts Recoveries from loans written off previously
31
Operating and salary expenses payments Current income taxation paid for the year Net cash flows from operating activities before changes in operating assets and liabilities
23.1
Changes in operating assets
Increase derivatives instrument and other financial assets Increase in loans to customers
Changes in operating liabilities Increase/(decrease) in borrowings from the Government and the State Bank of Vietnam
Increase in valuable papers issued (excluding valuable paper issued classified into financing activities)
Payments from reserves Net cash flows from operating activities
124
ANNUAL REPORT 2017
2017 VND million
2016 VND million
Payments for purchases of fixed assets
(175,815)
(941,512)
Proceeds from disposals of fixed assets
5,795
2,303
Payments for disposals of fixed assets
(717)
(1,189)
925,780
18,558
334
470
755,377
(921,370)
2017 VND million
2016 VND million
2,099,999
-
2,708,164
2,127
(4,043,249)
-
764,914
2,127
8,488,102
1,435,927
14,193,097
12,757,170
22,681,199
14,193,097
Notes CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments in other entities Dividends received from long-term investments Net cash flows from/(used in) investing activities
Notes CASH FLOWS FROM FINANCING ACTIVITIES Increase of capital from issuance of shares Proceeds from long-term valuable papers issued classified into owner’s equity and other long-term loans Payments for treasury shares Net 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
36
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, 9 February 2018
ENABLING FINANCIAL SUCCESS & SECURITY 125
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2017 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 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. 0100230800 issued by the Hanoi Department of Planning and Investment on 28 December 2017. 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 bases 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 of 31 December 2017, the charter capital of the Bank is VND 11,655,307,200,000 (31 December 2016: VND 8,878,078,710,000). Network The Bank’s Head Office is located at 191 Ba Trieu, Hai Ba Trung District, Hanoi. As at 31 December 2017, 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 of 31 December 2017, the Bank has four (4) subsidiaries as follows: No. Name
126
Business License No.
Industry
% owned by the Bank
1
98/UBCK-GP, dated 18 September Techcom Securities Company Limited 2008 granted by the State Securities Commission
2
Vietnam Technological and 0104003519 dated 18 June 2008 Debt and asset Commercial Joint Stock Bank – Asset granted by the Hanoi Department of management Management Company Limited Planning and Investment
3
Techcom Capital Management Company Limited
40/UBCK-GP dated 21 October 2008 granted by the State Securities Fund management Commission
100%
4
Technological and Commercial Finance Company Limited
340/GP-NHNN by the State Bank of Vietnam dated 29 December 2008
100%
ANNUAL REPORT 2017
Securities activities
Finance – Credit
100%
100%
Employees As of 31 December 2017, the Bank has 8,766 employees (31 December 2016: 7,787 employees). 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 are 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 Circular No. 10/2014/TT-NHNN dated 20 March 2014 supplementing and amending 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). ENABLING FINANCIAL SUCCESS & SECURITY 127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
3.
APPLIED ACCOUNTING STANDARDS AND SYSTEM (continued)
3.3
Basic of consolidation
B05/TCTD-HN
The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries for the year ended 31 December 2017. 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 unrealized gains or losses resulting from intra-company transactions are eliminated in full. 3.4
4. 4.1 4.1.1
Basis of assumptions and uses of estimates The preparation of the consolidated financial statements requires the Board of Management to 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. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Change in accounting policies and disclosures Changes in accounting policies for the year The accounting policies adopted by the Bank in preparation of the consolidated financial statements are consistent with those followed in the preparation of the Bank’s consolidated financial statements for the year ended 31 December 2016, except for the following changes in the accounting policies. Decree No. 93/2017/ND-CP on financial regime applicable to credit institutions, foreign bank branches and financial supervision and evaluation of efficiency of State capital investment at credit institutions with State owning 100% of charter capital and State-owned credit institutions. On 7 August 2017, the Government promulgated Decree No. 93/2017/ND-CP on the financial regime applicable to credit institutions, foreign bank branches, and financial supervision and efficiency evaluation of State capital investment in credit institutions with State owning 100% of charter capital and State-owned credit institutions (“Decree 93”). Decree 93 replaces Decree No. 57/2012/ ND-CP dated 20 July 2012 of the Government, and takes effect on 25 September 2017, except for regulations on the efficiency evaluation of State investment in joint-stock credit institutions with State owning over 50% of charter capital. Decree 93 supplements the regulations on capital adequacy, income, expenses, accounting currency and the distribution order of profit after corporate income tax.
128
ANNUAL REPORT 2017
Circular No. 39/2016/TT-NHNN on lending activities to customers of credit institutions and foreign bank branches On 30 December 2016, the State Bank of Vietnam (“SBV”) issued Circular No. 39/2016/TT-NHNN on lending activities to customers of credit institutions and foreign bank branches, which has taken effect from 15 March 2017. 4.1.2
Accounting policies issued but not effective On 29 December 2017, the SBV issued Circular No. 22/2017/TT-NHNN amending and supplementing a number of articles of chart of account system applicable to credit institutions issued in connection with Decision No. 479/2004/QD-NHNN dated 29 April 2004 and the financial reporting regime applicable to credit institutions required under Decision No. 16/2007/QD-NHNN dated 18 April 2007 by the Governor of the SBV (“Circular 22”). Circular 22 includes the following amendments: »» Amending and supplementing the guidances on the accounting treatment for foreign exchange and gold transactions; »» Amending a few accounts in the chart of account system applicable to credit institutions; »» Amending the guidances on the accounting treatment for some accounts in the chart of account system applicable to credit institutions; and »» Amending and supplementing the guidances on the financial reporting regime applicable to credit institutions. Circular 22 will take effect on 1 April 2018.
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 historical cost. The classification of credit risks for 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 4.6. According to Circular 02, the Bank is not required to make general provision for balances with and loans to other credit institutions.
ENABLING FINANCIAL SUCCESS & SECURITY 129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4
Securities held for trading
4.4.1
Classification and recognition
B05/TCTD-HN
Securities held for trading include debt securities acquired and held for resale. Securities held for trading are initially recognized at cost. 4.4.2 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 4.6. 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. 4.4.3 De-recognition Trading securities are derecognized when the rights to receive cash flows from these securities are terminated or the Bank transfers substantially all the risks and rewards of ownership of these securities. 4.5
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 4.6.
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ANNUAL REPORT 2017
4.6
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 collateral 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. Loans classification and rates for specific provision for each group are presented as follows: Group
Description
Provision rate
(a) Current debts that being assessed as fully and timely recoverable, both principals and interests; or 1
Current
2
Special mention
(b) Debts which are 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. (a) Debts which are overdue for a period of between 10 days and 90 days; or (b) Debts which have repayment term restructured for the first time.
0%
5%
(a) Debts which are overdue for a period of between 91 days and 180 days; or (b) Debts which have repayment term extended 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
3
Sub-standard
(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.
20%
(e) Debts which are recovered under inspection conclusions.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
B05/TCTD-HN
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.6
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) Group
Description
Provision rate
(a) Debts which are overdue for a period of between 181 days and 360 days; or (b) Debts, which have repayment term restructured for the first time, but still overdue for a period of less than 90 days under that restructured repayment term; or 4
Doubtful
(c) Debts which have repayment term restructured for 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
50%
(e) Debts which must be recovered under inspection conclusions but fail to be repaid although the recovery term was overdue from 60 days ago. (a) Debts which are overdue more than 360 days; or (b) Debts, which have repayment term restructured 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 have repayment term restructured for the second time, but still overdue under that second restructured repayment term; or 5
Loss
(d) Debts, which have repayment term restructured for the third time or whether debts are overdue or not; or
100%
(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 blockaded. 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 the higher risk group.
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ANNUAL REPORT 2017
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 of 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. 4.7
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 of the consolidated balance sheet date. For unlisted available-for-sale equity securities which are actively traded on the unlisted public company market (“Upcom�), provision for diminution in value is determined by the average trading price in the market on the reporting date.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.7
Investment securities (continued)
4.7.3
Measurement (continued)
B05/TCTD-HN
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 billions. 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 4.6. 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 “Provision expenses for credit losses�. General provision is not required for the special bonds.
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ANNUAL REPORT 2017
4.9
Repurchase and reverse repurchase agreements 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 owner’s equity multiplied (x) by the Bank’s ownership percentage (par value) in the investee company. A provision is reversed only to the extent that the investment’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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.11
Tangible fixed assets (continued)
B05/TCTD-HN
4.11.1 Cost (continued) In case of rental period is 90% and over of the useful life of the assets, the Bank could record 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 the 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.
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ANNUAL REPORT 2017
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:  Building 10 - 40 years 4.14
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 uses provision rates based on the overdue days in accordance with Circular 228 and Circular 89 as below:
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.15
Other receivables (continued) 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
B05/TCTD-HN
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 of the business combination over the Group’s interest in the net fair value of the acquiree’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 the conversion rate and the 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 24.3.
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ANNUAL REPORT 2017
4.18
Share capital
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 Treasury shares Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in profit or loss upon purchase, sale, issue or cancellation of the Bank’s own equity instruments 4.18.4 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. 93/2017/ND-CP and Charter of the Bank: Supplement charter capital reserve
Percentage of profit after tax
Maximum balance
5% of profit after tax
100% charter capital
Financial reserve 10% of profit after tax Not regulated 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.18
Share capital (continued)
B05/TCTD-HN
4.18.4 Reserves and funds (continued) Techcom Securities Company Limited and Techcom Capital Management Company Limited: 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 charter 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 shareholder’s capital. Technological and Commercial Finance Company Limited: According to Circular No. 93/2017/ND-CP dated 7 August 2017, 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 regulated which is recognized upon receipt. 4.19.2 Fees and commission income Fees and commission 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 Bank’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.
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ANNUAL REPORT 2017
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. 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.
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. ENABLING FINANCIAL SUCCESS & SECURITY 141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.21
Taxation (continued)
B05/TCTD-HN
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 include 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 4.6. In accordance with Circular 02, no provision is required for off-balance sheet commitments.
4.24
Derivative financial instruments
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.
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ANNUAL REPORT 2017
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 employee’s basic salary on a monthly basis. Since 1 June 2017, the rate has changed to 17.5% of employee’s basic salary plus other allowances. The Bank has no further obligation. 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-BLÄ?TBXH 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. ENABLING FINANCIAL SUCCESS & SECURITY 143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27
Financial instruments
B05/TCTD-HN
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 • It is 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. 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.
144
ANNUAL REPORT 2017
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 • It is 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. 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 have no 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 the SBV stipulating the financial reporting mechanism for credit institutions that are not shown in these consolidated financial statements indicate nil balance.
ENABLING FINANCIAL SUCCESS & SECURITY 145
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4.29
Segment reports
B05/TCTD-HN
A segment is component of the Bank and subsidiaries which can be determined distinctively and participates in providing a group of related products and/or services (operating segments) or providing products and/or services in a particular geographical area (geographic segments). Each segment bears different risk and gains specific economic benefits in comparison with each other. For management purpose, the Bank and subsidiaries have established into the following operating segments: »» Banking activities: Products and services provided to customers include: • Customer deposits; • Credit activities; • Settlement and card services; and • Other banking services. »» Asset management activities; »» Securities trading activities; »» Fund management activities; »» Other finance activities; The Bank and subsidiaries’ operations are mainly conducted within Vietnam territory. Therefore, the Bank presents its segment report by geographical areas including Northern, Central and Southern Vietnam. 5.
CASH AND GOLD
Cash on hand in VND Cash on hand in foreign currencies Gold on hand
146
ANNUAL REPORT 2017
31 December 2017 VND million
31 December 2016 VND million
1,948,066
2,187,535
374,120
733,126
22,176
36,047
2,344,362
2,956,708
6.
BALANCES WITH THE STATE BANK OF VIETNAM 31 December 2017 VND million
31 December 2016 VND million
4,277,877
1,744,926
1,554
788,949
4,279,431
2,533,875
Balances with the SBV - In VND - In foreign currencies
Balances with the SBV include settlement and compulsory deposits in accordance with the regulations of the SBV. Under the SBV’s regulations relating to the compulsory reserve. banks are permitted to maintain a floating balance for the compulsory reserve requirement (“CRR”). The monthly average balance of the reserves must not be less than the preceding month’s average balances of deposits in scope multiplied with the CRR rates as follows: CRR rates 31 December 2017
31 December 2016
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%
31 December 2017
31 December 2016
Compulsory deposits
1.20%
1.20%
Amount over compulsory deposits
0.00%
0.00%
Compulsory deposits
0.00%
0.00%
Amount over compulsory deposits
0.05%
0.05%
Interest rates per annum at the reporting date are as follows:
Deposits in VND
Deposits in foreign currencies
ENABLING FINANCIAL SUCCESS & SECURITY 147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
7.
BALANCES WITH AND LOANS TO OTHER CREDIT INSTITUTIONS
7.1
Balances with other credit institutions
B05/TCTD-HN
31 December 2017 VND million
31 December 2016 VND million
7,108,306
1,510,529
- In VND
1,359,152
224,066
- In foreign currencies
5,749,154
1,286,463
Term deposits
9,134,748
7,548,413
- In VND
7,071,648
6,185,634
- In foreign currencies
2,063,100
1,362,779
16,243,054
9,058,942
Current accounts
Interest rates per annum of balances with other credit institutions at the reporting date are as follows: 31 December 2017
31 December 2016
- In VND
0.30%
0.15%
- In foreign currencies
0.00%
0.00%
- In VND
1.60% - 9.60%
3.20% - 9.60%
- In foreign currencies
1.55% - 2.10%
0.80% - 1.70%
31 December 2017 VND million
31 December 2016 VND million
11,146,941
8,624,954
2,765,812
3,914,978
13,912,753
12,539,932
Current accounts
Term deposits
7.2
Loans to other credit institutions
In VND In foreign currencies
148
ANNUAL REPORT 2017
Interest rates per annum of loans to other credit institutions at the reporting date are as follows:
7.3
31 December 2017
31 December 2016
In VND
3.20% - 5.40%
2.40% - 7.00%
In foreign currencies
2.40% - 3.40%
1.50% - 3.60%
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: 31 December 2017 VND million
31 December 2016 VND million
23,047,501
20,088,345
31 December 2017 VND million
31 December 2016 VND million
6,775,118
8,035,905
3,822,161
5,823,972
- Bonds issued by local credit institutions
116,614
960,155
In which: Bonds guaranteed by the Government for settlement
116,614
960,155
2,836,343
1,251,778
(17,024)
(11,285)
- General provision for debt securities
(14,246)
(11,285)
- Provision for diminution of securities
(2,778)
-
6,758,094
8,024,620
Group Current 8.
SECURITIES HELD-FOR-TRADING
Debt securities - Government bonds
- Bonds issued by local economic entities Provision for securities held-for-trading In which:
Movements in provision for securities held-for-trading for the year ended 31 December 2017 are as follows:
As at 1 January 2017 Provision made for the year (Note 29) Balance as at 31 December 2017
General provision VND million
Provision for diminution VND million
Total VND million
11,285
-
11,285
2,961
2,778
5,739
14,246
2,778
17,024
ENABLING FINANCIAL SUCCESS & SECURITY 149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
8.
B05/TCTD-HN
SECURITIES HELD-FOR-TRADING (continued) Movements in provision for securities held-for-trading for the year ended 31 December 2016 are as follows: General provision VND million
Total VND million
As at 1 January 2016
9,105
9,105
Provision made for the year (Note 29)
2,180
2,180
11,285
11,285
31 December 2017 VND million
31 December 2016 VND million
4,176,174
6,822,527
2,598,944
1,213,378
6,775,118
8,035,905
31 December 2017 VND million
31 December 2016 VND million
158,497,737
141,203,267
1,983,527
1,038,376
358,449
362,158
Payments on behalf of customers
2,166
2,166
Loans to foreign economic entities and individuals
7,158
10,037
160,849,037
142,616,004
31 December 2017
31 December 2016
0.00% - 19.35%
0.84% - 21.84%
1.70% - 6.75%
0.00% - 5.70%
Balance as at 31 December 2016 The listing status of securities held-for-trading is as follows:
Debt securities - Listed - Unlisted
9.
  LOANS TO CUSTOMERS
Loans to local economic entities and individuals Discounted bills and valuable papers Loans financed by trusted funds
Interest rates per annum of loans to customers at the reporting date are as follows:
Loans to customers in VND Loans to customers in foreign currencies
150
ANNUAL REPORT 2017
9.1
Loan portfolio by quality 31 December 2017
31 December 2016
VND million
%
VND million
%
155,931,825
96.94
138,203,644
96.91
2,333,286
1.45
2,166,056
1.52
Substandard
575,397
0.36
396,736
0.28
Doubtful
455,567
0.28
474,551
0.33
1,552,962
0.97
1,375,017
0.96
160,849,037
100.00
142,616,004
100.00
Current Special mention
Loss
According to the Bank’s report on loans rescheduled without changing in the loan group to the SBV, as at 31 December 2017, 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:
9.2
31 December 2017 VND million
31 December 2016 VND million
Rescheduled or extended portions of loans maintained in Group 1 (Current)
75,724
750,020
Rescheduled or extended portions of loans maintained in Group 2 (Special mention)
649
1,033
76,373
751,053
Loan portfolio by term 31 December 2017
31 December 2016
VND million
%
VND million
%
Short-term
63,412,628
39.42
35,884,319
25.16
Medium-term
42,896,541
26.67
62,492,501
43.82
Long-term
54,539,868
33.91
44,239,184
31.02
160,849,037
100.00
142,616,004
100.00
ENABLING FINANCIAL SUCCESS & SECURITY 151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
9.
LOANS TO CUSTOMERS (continued)
9.3
Loan portfolio by industrial sectors
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 Education and training Health care and social work Arts and entertainment Other services Household businesses Loans to individuals
152
ANNUAL REPORT 2017
31 December 2017 VND million % 96,071,606 59.73 301,494 0.19 1,271,854 0.79 20,070,075 12.48 1,858,933 1.16 88,955 0.06 6,100,546 3.79 14,726,910 9.16 3,257,263 2.03 5,571,892 3.46 1,081,104 0.67 9,304,078 5.78 20,326,233 12.64 767,880 0.48 1,868,575 1.16 71,687 0.04 84,188 0.05 15,818 0.01 9,267,660 5.76 36,461 0.02 64,777,431 40.27 160,849,037 100.00
B05/TCTD-HN
31 December 2016 VND million % 80,972,179 56.78 66,167 0.05 1,528,042 1.07 16,793,775 11.78 1,270,437 0.89 24,549 0.02 7,329,029 5.14 10,798,437 7.57 6,045,594 4.24 2,370,756 1.66 894,777 0.63 3,911,569 2.74 24,182,046 16.96 161,191 0.11 462,050 0.32 31,624 0.02 97,574 0.07 80,563 0.06 4,285,579 3.00 638,420 0.45 61,643,825 43.22 142,616,004 100.00
9.4
Loan portfolio by ownership 31 December 2017 VND million %
31 December 2016 VND million %
96,071,606
59.73
80,972,179
56.78
8,424,332
5.24
3,795,377
2.66
32,494,895
20.20
32,321,234
22.66
63,292
0.04
283,305
0.20
51,326,364
31.91
41,220,658
28.91
401,537
0.25
881,741
0.62
2,076,046
1.29
1,701,518
1.19
70,592
0.04
31,547
0.02
Administration units, Party, unions, associations
820,739
0.51
422,558
0.30
Others
393,809
0.25
314,241
0.22
64,777,431
40.27
61,643,825
43.22
160,849,037
100.00
142,616,004
100.00
Loans to economic entities State-owned one-member limited companies Other limited companies Joint-stock state-owned companies Other joint-stock companies Private companies Foreign-invested companies Cooperatives and cooperative unions
Loans to individuals
10.
PROVISION FOR LOANS TO CUSTOMERS Provision for loans to customers as at 31 December 2017 are as follows: 31 December 2017 VND million
31 December 2016 VND million
General provision
1,061,081
1,001,355
Specific provision
823,500
494,120
1,884,581
1,495,475
Movements in provision for loans to customers for the year ended 31 December 2017 are as follows: Specific provision VND million
General provision VND million
Total VND million
494,120
1,001,355
1,495,475
Provision made for the year (Note 34)
2,208,338
397,468
2,605,806
Provision reversed during the year (Note 34)
(130,568)
(337,742)
(468,310)
(1,748,390)
-
(1,748,390)
823,500
1,061,081
1,884,581
As at 1 January 2017
Use of provision As at 31 December 2017
ENABLING FINANCIAL SUCCESS & SECURITY 153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
10.
B05/TCTD-HN
PROVISION FOR LOANS TO CUSTOMERS (continued) Movements in provision for loans to customers for the year ended 31 December 2016 are as follows: Specific provision VND million
General provision VND million
Total VND million
411,226
756,015
1,167,241
Provision made for the year (Note 34)
4,014,875
474,998
4,489,873
Provision reversed during the year (Note 34)
(201,729)
(229,658)
(431,387)
(3,730,252)
-
(3,730,252)
494,120
1,001,355
1,495,475
As at 1 January 2016
Use of provision As at 31 December 2016 11.
DEBTS PURCHASED 31 December 2017 VND million
31 December 2016 VND million
Debts purchased in VND
12,092
19,466
Provision for debts purchased
(1,760)
(973)
10,332
18,493
31 December 2017 VND million
31 December 2016 VND million
Principal of debts purchased
49,516
54,821
Interest of debts purchased
23,619
21,538
73,135
76,359
Breakdown of principals and interest of debts purchased is as follows:
Movements in provision for debts purchased are as follows: 2017 VND million
2016 VND million
Opening balance
973
1,612
Provision made/(reversed) for the year (Note 34)
787
(639)
1,760
973
Closing balance
154
ANNUAL REPORT 2017
12.
INVESTMENT SECURITIES Investment securities at the reporting date include:
Available-for-sale securities Debt securities Equity securities Held-to-maturity securities
31 December 2017 VND million
31 December 2016 VND million
46,018,398
38,575,369
45,798,398
38,428,116
220,000
147,253
5,715,484
8,560,113
-
2,922,058
5,715,484
5,638,055
(191,398)
(1,460,558)
51,542,484
45,674,924
VAMC special bonds Other debt securities Provision for investment securities
12.1
Available-for-sale securities
31 December 2017 VND million
31 December 2016 VND million
Debt securities
45,798,398
38,428,116
Government bonds
13,048,507
15,483,278
Bonds issued by local credit institutions
17,010,279
14,858,346
In which: Bonds with settlement guaranteed by the Government
12,459,709
10,156,005
Bonds issued by local economic entities (*)
15,739,612
8,086,492
Equity securities
220,000
147,253
Bonds issued by local economic entities
220,000
2,255
Bonds issued by local credit institutions
-
144,998
(156,851)
(76,996)
Provision for credit risk of available for sale securities
(141,035)
(76,996)
Provision for diminution of available for sale securities
(15,816)
-
45,861,547
38,498,373
Provision for available-for-sale securities
ENABLING FINANCIAL SUCCESS & SECURITY 155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
12.
INVESTMENT SECURITIES (continued)
12.2
Held-to-maturity securities (excluding special bonds issued by VAMC)
31 December 2017 VND million
31 December 2016 VND million
5,715,484
5,638,055
569,283
571,803
2,030,001
30,001
30,001
30,001
Bonds issued by local economic entities (*)
3,116,200
5,036,251
Provision for held-to-maturity securities
(34,547)
(16,022)
Provision for credit risk of held-to-maturity securities
(34,547)
(16,022)
5,680,937
5,622,033
Debt securities Government bonds Bonds issued by local credit institutions In which: Bonds with settlement guaranteed by the Government
(*)
12.3
12.4
B05/TCTD-HN
During the year, the Bank reclassified VND2,900 billion of bonds issued by local economic entities from held-to-maturity securities to available-for-sale securities due to change in business purpose. On 31 December 2017, the balance of availablefor-sale securities increased by VND2,900 billion due to the reclassification.
Special bonds issued by VAMC 31 December 2017 VND million
31 December 2016 VND million
Par value
-
2,922,058
Provision for VAMC bonds
-
(1,367,540)
-
1,554,518
Analysis of credit quality 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
156
ANNUAL REPORT 2017
31 December 2017 VND million
31 December 2016 VND million
24,110,635
15,903,094
12.5
Provision for investment securities 31 December 2017 VND million
31 December 2016 VND million
175,582
93,018
15,816
-
-
1,367,540
191,398
1,460,558
General provision for unlisted corporate bonds (*) Provision for diminution of securities (*) Provision for special bonds issued by VAMC (**)
(*)
Movements in provision for unlisted corporate bonds and provision for diminution of securities for the year ended 31 December 2017 are as follows: General provision VND million
Provision for diminution VND million
Total VND million
As at 1 January 2017
93,018
-
93,018
Provision made for the year (Note 30)
82,564
15,816
98,380
175,582
15,816
191,398
As at 31 December 2017
Movements in provision for unlisted corporate bonds for the year ended 31 December 2016 are as follows: General provision VND million
Total VND million
As at 1 January 2016
106,785
106,785
Provision reversed during the year (Note 30)
(13,767)
(13,767)
As at 31 December 2016
93,018
93,018
(**) Movements in provision for VAMC special bonds are as follows: 2017 VND million
2016 VND million
Opening balance
1,367,540
1,021,983
Provision made for the year (Note 34)
1,743,194
879,386
(79,428)
(155,456)
(3,031,306)
(378,373)
-
1,367,540
Provision reversed during the year (Note 34) Utilization of provision for the year Closing balance
ENABLING FINANCIAL SUCCESS & SECURITY 157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
13.
13.1
B05/TCTD-HN
LONG-TERM INVESTMENTS 31 December 2017 VND million
31 December 2016 VND million
Other long-term investments – cost
12,084
582,672
Provision for long-term investments
(2,401)
(4,926)
9,683
577,746
Other long-term investments 31 December 2017
Vietnam Airlines Corporation Vietnam Real Estate Exchange JSC TCBOND Consultancy and Investment Company Limited PCB Investment JSC Society for Worldwide Interbank Financial Telecommunication Banking Operations Training and Advisory JSC Vietnam National Financial Switching JSC
31 December 2016
Ownership At cost % VND million 0.00 417 11.00 660 6.64 7,962 0.00 1,005 7.79 1,040 0.42 1,000 12,084
Ownership At cost % VND million 2.08 570,405 11.00 660 10.00 600 6.64 7,962 0.00 1,005 7.79 1,040 0.42 1,000 582,672
During the year, the Bank sold 25,560,000 shares of Vietnam Airlines Corporation by auction through UpCom Stock Exchange and recorded a net gain of VND million 355,192 (Note 32). 13.2
Provision for long-term investments
Opening balance Provision made/(reversed) for the year (Note 33) Closing balance
158
ANNUAL REPORT 2017
2017 VND million
2016 VND million
4,926
4,079
(2,525)
847
2,401
4,926
14. FIXED ASSETS 14.1 Tangible fixed assets Movements in tangible fixed assets for the year ended 31 December 2017 are as follows:
VND million
Buildings & building improvements
Machines and equipment
Means of transportation
Other
Total
241,190
1,121,608
153,345
2,144
1,518,287
Addition
95,552
29,521
8,879
-
133,952
Disposal
-
(33,091)
(13,374)
-
(46,465)
Other movements
-
(2,818)
-
-
(2,818)
336,742
1,115,220
148,850
2,144
1,602,956
As at 1 January 2017
21,860
833,454
84,546
1,591
941,451
Charge for the year
10,673
108,885
19,228
186
138,972
-
(32,246)
(13,374)
-
(45,620)
407
(2,214)
171
-
(1,636)
32,940
907,879
90,571
1,777
1,033,167
As at 1 January 2017
219,330
288,154
68,799
553
576,836
As at 31 December 2017
303,802
207,341
58,279
367
569,789
Cost As at 1 January 2017
As at 31 December 2017 Accumulated depreciation
Disposal Other movements As at 31 December 2017 Net book value
ENABLING FINANCIAL SUCCESS & SECURITY 159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
B05/TCTD-HN
14. FIXED ASSETS (continued) 14.1 Tangible fixed assets (continued) 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
(208)
(6,107)
(1,936)
(90)
(8,341)
-
(1,748)
-
(344)
(2,092)
241,190
1,121,608
153,345
2,144
1,518,287
As at 1 January 2016
15,786
714,147
72,081
1,837
803,851
Charge for the year
6,279
125,677
14,017
214
146,187
Disposal
(208)
(5,420)
(1,683)
(90)
(7,401)
3
(950)
131
(370)
(1,186)
21,860
833,454
84,546
1,591
941,451
87,570
374,950
74,886
741
538,147
As at 31 December 2016 219,330 Additional information of tangible fixed assets
288,154
68,799
553
576,836
Cost
Disposals Other movements As at 31 December 2016 Accumulated depreciation
Other movements As at 31 December 2016 Net book value As at 1 January 2016
Cost value of tangible fixed assets which have been fully depreciated but still in use
160
ANNUAL REPORT 2017
31 December 2017 VND million
31 December 2016 VND million
401,835
297,613
14.2
Intangible fixed assets Movements in intangible fixed assets for the year ended 31 December 2017 are as follows:
Cost As at 1 January 2017 Addition Disposal As at 31 December 2017 Accumulated amortization As at 1 January 2017 Charge for the year Disposal As at 31 December 2017 Net book value As at 1 January 2017 As at 31 December 2017
VND million
Computer software
Definite land use rights
Others
Total
802,879 41,408 (15,297) 828,990
615,768 455 - 616,223
4,403 - - 4,403
1,423,050 41,863 (15,297) 1,449,616
408,309 94,115 (15,297) 487,127
6,548 11,899 - 18,447
2,307 78 - 2,385
417,164 106,092 (15,297) 507,959
394,570 341,863
609,220 597,776
2,096 2,018
1,005,886 941,657
Movements in intangible fixed assets for the year ended 31 December 2016 are as follows:
Cost As at 1 January 2016 Addition Other movements As at 31 December 2016 Accumulated amortization As at 1 January 2016 Charge for the year Other movements As at 31 December 2016 Net book value As at 1 January 2016 As at 31 December 2016
VND million
Computer software
Definite land use rights
Others
Total
641,837 161,272 (230) 802,879
22,250 593,518 615,768
4,403 - 4,403
668,490 754,790 (230) 1,423,050
321,986 86,363 (40) 408,309
341 6,207 - 6,548
2,229 78 - 2,307
324,556 92,648 (40) 417,164
319,851 394,570
21,909 609,220
2,174 2,096
343,934 1,005,886
Additional information on intangible fixed assets
Cost value of intangible fixed assets which have been fully depreciated but still in use
31 December 2017 VND million
31 December 2016 VND million
175,684
42,753
ENABLING FINANCIAL SUCCESS & SECURITY 161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
15.
B05/TCTD-HN
INVESTMENT PROPERTY Investment property mainly includes Techcombank Building with cost and accumulated amortization amounting to VND 1,435,699 million and VND 203,575 million, respectively, as at 31 December 2017. Movements in investment properties in 2017 are as follows:
VND million Building
Cost As at 1 January 2017 Disposal As at 31 December 2017
1,447,256 (4,429) 1,442,827
Accumulated amortization As at 1 January 2017
168,720
Charge for the year
36,077
As at 31 December 2017
204,797
Net book value As at 1 January 2017
1,278,536
As at 31 December 2017
1,238,030
Movements in investment properties for the year ended 31 December 2016 is as follows:
VND million Building
Cost As at 1 January 2016 Transfer from construction in progress As at 31 December 2016
1,442,827 4,429 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
162
As at 1 January 2016
1,310,184
As at 31 December 2016
1,278,536
ANNUAL REPORT 2017
16.
OTHER ASSETS 31 December 2017 VND million
31 December 2016 VND million
9,417,589
6,829,557
Internal receivables
25,774
67,263
External receivables
9,391,815
6,762,294
395,207
496,778
2,352,839
-
- Receivables related to Interest Subsidy Program
21,148
21,148
- Prepaid for suppliers
55,040
59,508
- Deposits for gold, commodity and foreign currencies trading in future markets
45,586
74,000
946,456
135,495
- Receivables from loans sold contract (iv)
1,862,038
3,488,943
- Receivables from deferred L/C (v)
2,789,982
2,189,972
- Corporate income tax overpaid (Note 23)
-
112
- Receivables from other credit institutions
134,884
-
- Receivables from bond principal and interest due on holiday
368,300
-
420,335
296,338
3,876,528
3,992,328
1,773
27,659
Other assets
557,642
650,888
- Materials
24,475
19,960
513,402
485,258
- Goodwill (vii)
19,765
29,647
- Other assets
-
116,023
(1,311,569)
(1,504,323)
12,541,963
9,996,109
Other receivables
- Deposits for office rental (i) - Deposit for purchase of office (ii)
- Fixed asset purchase and construction in progress (iii)
- Other external receivables Interest and fees receivable Deferred tax assets (vi)
- Prepaid expenses
Provision for other assets (viii)
(i)
These are 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 VND 292 billion.
ENABLING FINANCIAL SUCCESS & SECURITY 163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
16.
B05/TCTD-HN
OTHER ASSETS (continued) (ii)
These are deposits to purchase the Bank’s offices in Hanoi and Ho Chi Minh city.
(iii)
These are payments to purchase fixed asset and construct the Bank’s offices in Hanoi.
(iv) (v)
Receivables from loans sold are outstanding receivables from licensed debts purchasing companies.
(vi)
Movement of deferred income tax assets during the year is as follows:
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 range is from 1 to 17 months.
VND million Opening balance
Incurred
Reversed
Closing balance
27,659
-
(25,886)
1,773
Deferred income tax assets related to deductible temporary tax differences (vii)
Goodwill of the Bank was derived from the acquisition of Technological and Commercial Finance Company Limited (“TCF”) in 2015, Change in goodwill for the period is presented as follows: 31 December 2017 VND million
31 December 2016 VND million
Total goodwill
49,411
49,411
Amortization periods
5 years
5 years
29,647
39,529
(9,882)
(9,882)
19,765
29,647
Opening balance of unamortized goodwill Goodwill decrease for the period Amortization for the period Total closing balance of unamortized goodwill
164
ANNUAL REPORT 2017
(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 2017 VND million
31 December 2016 VND million
1,242,318
1,435,143
- General provision
22,127
22,242
- Specific provision
1,220,191
1,412,901
69,251
69,180
1,311,569
1,504,323
2017 VND million
2016 VND million
Opening balance
1,504,323
2,614,476
Provision reversed for outstanding receivables from loans sold (Notes 34)
(193,809)
(1,141,115)
General provision made for receivables from deferred L/C (Note 34)
986
20,429
Provision made for other assets (Note 33)
317
11,895
(248)
(1,362)
1,311,569
1,504,323
31 December 2017 VND million
31 December 2016 VND million
1,000,000
-
-
1,447,970
1,000,000
1,447,970
Provision for credit risk
Other provision
Movements in provision for other assets for the year are as follows:
Reversal of provision for impairment of inventories (Note 33)
17.
Closing balance   BORROWINGS FROM THE GOVERNMENT AND THE STATE BANK OF VIETNAM
Deposit from State Treasury Borrowings from the State Bank of Vietnam
Deposit from State Treasury at 31 December 2017 has 2-month term and 4% interest rate.
ENABLING FINANCIAL SUCCESS & SECURITY 165
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
18.
DEPOSITS AND BORROWINGS FROM OTHER CREDIT INSTITUTIONS
18.1
Deposits from other credit institutions
Demand deposits - In VND - In foreign currencies Term deposits - In VND - In foreign currencies
B05/TCTD-HN
31 December 2017 VND million
31 December 2016 VND million
1,032,265
449,116
1,031,740
448,525
525
591
20,242,110
14,665,801
15,999,300
10,526,500
4,242,810
4,139,301
21,274,375
15,114,917
Interest rates per annum of deposits from other credit institutions at the reporting date are as follows:
18.2
31 December 2017
31 December 2016
In VND
1.00% - 7.00%
2.70% - 6.20%
In foreign currencies
1.60% - 2.20%
0.85% - 1.60%
31 December 2017 VND million
31 December 2016 VND million
19,321,553
6,819,013
5,727,897
3,539,579
25,049,450
10,358,592
Borrowings from other credit institutions
In VND In foreign currencies
Interest rates per annum of borrowings from other credit institutions at the reporting date are as follows: 31 December 2017
31 December 2016
In VND
3.50% - 5.90%
3.20% - 5.00%
In foreign currencies
0.75% - 5.40%
0.75% - 4.79%
 
166
ANNUAL REPORT 2017
19.
DEPOSITS FROM CUSTOMERS
19.1
Analysis by category of deposits 31 December 2017 VND million
31 December 2016 VND million
38,234,560
35,826,887
34,061,915
31,030,697
4,172,645
4,796,190
129,727,778
134,053,365
121,993,210
125,958,279
7,734,568
8,095,086
3,008,495
3,568,677
2,843,993
3,405,369
164,502
163,308
170,970,833
173,448,929
31 December 2017
31 December 2016
Demand deposits in VND
0.00% - 0.80%
0.00% - 0.30%
Demand deposits in foreign currencies
0.00% - 0.10%
0.00% - 1.25%
Term deposit in VND
0.30% - 11.94%
0.50% - 11.94%
Term deposit in foreign currencies
0.00% - 0.75%
0.00% - 0.60%
Current accounts Current accounts in VND Current accounts in foreign currencies Term deposits Term deposits in VND Term deposits in foreign currencies Marginal deposits Marginal deposits in VND Marginal deposits in foreign currencies
Interest rates per annum of deposits from customers at the reporting date are as follows:
ENABLING FINANCIAL SUCCESS & SECURITY 167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
19.
DEPOSITS FROM CUSTOMERS (continued)
19.2
Analysis of deposits portfolio by ownership
B05/TCTD-HN
31 December 2017 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 20.
VND million 49,926,989 2,658,251 19,461,912 132,206 23,100,099 99,386 2,683,171 3,010 1,227,830 561,124 121,043,844 170,970,833
31 December 2016
% 29.20 1.55 11.38 0.08 13.51 0.06 1.57 0.00 0.72 0.33 70.80 100.00
DERIVATIVES AND OTHER FINANCIAL LIABILITIES
VND million 31 December 2017
Foreign exchange forward contracts Foreign exchange swap contracts
Total contract Total nominal value carrying value 18,133,992 144,445 112,757,969 (108,153) 130,891,961 36,292
31 December 2016 Total contract Total nominal value carrying value 23,144,183 (85,978) 52,521,119 18,086 75,665,302 (67,892)
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.
168
ANNUAL REPORT 2017
% 35.55 3.57 13.68 0.34 15.21 0.09 1.55 0.00 0.66 0.45 64.45 100.00
VND million 61,662,821 6,186,670 23,719,606 585,640 26,386,488 160,296 2,690,503 7,372 1,145,799 780,447 111,786,108 173,448,929
21.
VALUABLE PAPERS ISSUED Valuable papers issued and categorized by terms follow: 31 December 2017 VND million
31 December 2016 VND million
6
42,822
11,039,964
3,480,184
6,600,000
3,891,836
-
3,000,000
17,639,970
10,414,842
Up to 12 months (i) From 12 months to 5 years (ii) Over 5 years (iii) Convertible bonds issued (iv)
(i)
These certificates of deposits bear interest rate of 0.00% per annum (2016: 6.00% to 7.20%).
(ii)
These bonds and certificates of deposits bear interest at rates ranging from 5.60% to 8.20% per annum (2016: 7.10% to 8.00%).
(iii)
These deposit certificates bear interest rates ranging from 7.73% to 8.80% per annum (2016: 8.20% to 8.80%).
(iv)
During the year, the Bank approved the conversion of convertible bonds into shares with bond par value of VND million 2,842,287 at the rate of VND 13,683.04, equivalent to 207,722,849 shares, Remaining non-converted bonds are reclassified to ordinary valuable papers (see also Note 24.3).
ENABLING FINANCIAL SUCCESS & SECURITY 169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
22.
OTHER LIABILITIES 31 December 2017 VND million
31 December 2016 VND million
Accrued interest and fee payables
2,764,162
2,195,582
Other liabilities
3,762,845
2,727,936
Internal payables
13,465
23,694
External payables
3,749,380
2,704,242
- Remittance payables
927,230
104,153
- Payable to employees
615,387
456,896
-
101,399
928,393
376,979
9,141
8,903
- Advance from customers
52,595
2,232
- Other accrued expenses
368,949
452,838
- Salaries accrued expenses
237,113
220,199
20,135
16,093
- Bonus and welfare funds
2,680
17,864
- Disbursements awaiting settlement
6,990
200,892
- Deposit certificates of customers awaiting settlement
176,308
327,624
- Deferred proceeds from the sale of collateral
156,580
155,501
- Other payables
247,879
262,669
6,527,007
4,923,518
- Settlement on behalf of other credit institutions - Tax payables (i) - Deferred income
- Payables relating to marketing and promotion
170
B05/TCTD-HN
ANNUAL REPORT 2017
(i)
Tax payables 31 December 2017 VND million
31 December 2016 VND million
10,406
13,438
866,900
336,725
51,087
26,816
928,393
376,979
Value added tax Corporate income tax (“CIT”) Other taxes
Refer to Note 23 for details of tax payables. 23.
OBLIGATIONS TO THE STATE BUDGET
Value added tax Corporate income tax Other taxes Taxes payables 23.1
Incurred during the year
Opening balancepayable
Opening balancereceivable
Payable
Adjustment
Paid
Closing balancepayable
13,438
-
308,343
-
(311,375)
10,406
336,725
(112)
1,564,816
-
(1,034,529)
866,900
26,816
-
341,851
(2,370)
(315,210)
51,087
376,979
(112)
2,215,010
(2,370)
(1,661,114)
928,393
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 Bank’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. The tax returns filed by the Bank are subject to examination by the tax authorities. As the application of tax laws and regulations is susceptible to varying interpretations, the amounts reported in the consolidated financial statements could change at a later date upon final determination by the tax authorities.
ENABLING FINANCIAL SUCCESS & SECURITY 171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
23.
OBLIGATIONS TO THE STATE BUDGET (continued)
23.1
Current corporate income tax (continued)
B05/TCTD-HN
Provision for current corporate income tax for the year ended 31 December 2017 is computed as follows: 2017 VND million
2016 VND million
8,036,297
3,996,640
- Non-taxable dividend income
(334)
(470)
- Other non-taxable income
(682)
(727)
- Prior year non-deductible expense reverted or deductible this year
(268,418)
-
- Temporary differences arising from the previous year deducted in this year
(129,430)
-
27,833
12,507
239,978
355,784
-
(2,502)
7,905,244
4,361,232
- Corporate income tax expense calculated on taxable income of current period
1,581,049
872,246
- Adjustment for under provision of corporate income tax expense in prior year
(16,233)
562
1,564,816
872,808
336,725
189,170
(112)
(4,302)
(1,034,529)
(721,092)
-
29
866,900
336,725
-
(112)
Profit before tax Adjustments
- Adjustment on profit for consolidation purpose - Non-deductible expenses - Loss from subsidiary Taxable corporate income
Current corporate income tax expense for the year Opening corporate income tax payable Opening corporate income tax receivable Corporate income tax paid for the year Corporate income tax adjusted for prior years Closing corporate income tax payable Closing corporate income tax receivable
172
ANNUAL REPORT 2017
23.2
Applicable tax rate The Bank’s income tax rate for this year is 20% (2016: 20%).
23.3
Deferred corporate income tax 2017 VND million
2016 VND million
(25,886)
25,026
-
(12)
(25,886)
25,014
Deferred corporate income tax benefit/(expenses) arising from: - Deductible temporary tax differences - Reversal of deferred income taxes payable
ENABLING FINANCIAL SUCCESS & SECURITY 173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
24.
CAPITAL AND RESERVES
24.1
Statement of changes in equity
B05/TCTD-HN
For the year ended 31 December 2017:
VND million
Charter capital
Shares premium
8,878,079
-
Net profit for the year
-
Treasury shares
-
Reserve to Treasury supplement shares capital
Financial reserve
Other reserves
Total reserves
Retained earnings
Total
2,077,228
765,059
-
-
-
-
-
-
Utilization of reserves
-
-
-
-
(263)
-
(263)
-
Other movements
-
-
-
-
-
-
-
(100)
19,586,476 6,445,595 (4,043,249) 2,099,999 2,842,287 (263) (100)
Appropriation of reserves
-
-
-
325,056
612,953
-
938,009
(938,009)
-
As at 31 December 2017
11,655,307
2,165,058 (4,043,249)
3,983,752
2,172,702
474
6,156,928 10,996,701
26,930,745
As at 1 January 2017
New shares issuance Convertible bonds
-
3,658,696
1,560,012
474
5,219,182
5,489,215
-
-
-
-
-
-
6,445,595
-
(4,043,249)
-
-
-
-
-
700,000
1,399,999
-
-
-
-
-
-
For the year ended 31 December 2016:
174
VND million Charter capital
Reserve to supplement capital
Financial reserve
Other reserves
Total reserves
Retained earnings
Total
As at 1 January 2016
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
ANNUAL REPORT 2017
24.2
Share capital Breakdown of share capital at the reporting date: 31 December 2017 VND million
31 December 2016 VND million
Charter capital
11,655,307
8,878,079
Share premium
2,165,058
-
Treasury shares
(4,043,249)
-
9,777,116
8,878,079
31 December 2017 Number of shares
31 December 2016 Number of shares
1,165,530,720
887,807,871
1,165,530,720
887,807,871
(172,353,345)
-
993,177,375
887,807,871
Movement of number of shares in 2017:
Registered share capital Issued share capital Ordinary shares Treasury shares Ordinary shares Shares in circulation Ordinary shares
Norminal value of the Bank’s ordinary share is VND 10,000. 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. During the year, the Bank issued 70,000,000 ordinary shares with the face value of VND 10,000 per share and converted convertible bonds with par value of VND 2,077,228,490,000, equivalent to 207,722,849 shares. Besides, the Bank purchased 172,353,345 of its ordinary shares from the Hongkong Shanghai Banking Corporation Limited and recorded to treasury shares.
ENABLING FINANCIAL SUCCESS & SECURITY 175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
24.
CAPITAL AND RESERVES (continued)
24.3
Information on compound financial instruments
B05/TCTD-HN
31 December 2017 VND million
31 December 2016 VND million
Debt component
-
157,713
Equity component
-
2,842,287
Total value
-
3,000,000
Convertible bonds
During the year, the Bank approved the conversion of convertible bonds into shares with bond par value of VND million 2,842,287 at the rate of VND 13,683.04, equivalent to 207,722,849 shares. Remaining non-converted bonds are reclassified to ordinary valuable papers. 24.4 Dividends Dividends payout shall be decided at Annual General Shareholders Meeting. 25.
INTEREST AND SIMILAR INCOME 2017 VND million
2016 VND million
332,772
220,924
13,366,312
11,985,852
3,532,333
3,298,872
280,709
223,400
82,378
7,029
17,594,504
15,736,077
2017 VND million
2016 VND million
7,645,664
6,727,965
Interest expenses for borrowings
317,362
288,629
Interest expenses for valuable papers issued
701,066
577,262
8,664,092
7,593,856
Interest income from deposits Interest income from loans Income from debt securities investments Income from guarantee services Other income from credit activities
26.
INTEREST AND SIMILAR EXPENSES
Interest expenses for deposits
176
ANNUAL REPORT 2017
27.
NET FEES AND COMMISSION INCOME 2017 VND million
2016 VND million
Fees and commission income from
4,519,685
2,558,990
Settlement and cash services
1,465,532
1,270,342
1,355
1,784
1,543,389
61,050
3,537
75,926
512,882
336,976
Income from securities trading brokerage
374,551
336,504
Other services
618,439
476,408
(707,783)
(603,226)
(277,686)
(241,119)
Communication charges
(36,819)
(34,319)
Cashiering services
(53,905)
(52,502)
Consulting services
(125,430)
(88,973)
Other services
(213,943)
(186,313)
3,811,902
1,955,764
2017 VND million
2016 VND million
1,105,028
1,027,292
Income from foreign exchange trading
193,142
347,317
Income from currency financial derivatives
911,886
679,975
(826,443)
(787,091)
Expenses for foreign exchange trading
(244,100)
(103,865)
Expenses for currency financial derivatives
(582,343)
(683,226)
278,585
240,201
Cashiering services Trustee and agency services Consulting services Insurance commission services
Fees and commission expenses for Settlement and cash services
28.
NET GAIN FROM TRADING FOREIGN CURRENCIES
Income from trading of foreign currencies
Expenses for trading of foreign currencies
ENABLING FINANCIAL SUCCESS & SECURITY 177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
29.
30.
31.
NET GAIN FROM SECURITIES HELD-FOR-TRADING 2017 VND million
2016 VND million
Income from trading of securities held-for-trading
539,888
274,046
Expenses for trading of securities held-for-trading
(137,419)
(147,086)
Provision made for securities held-for-trading (Note 8)
(2,961)
(2,180)
Provision for diminution of securities held-for-trading (Note 8)
(2,778)
-
396,730
124,780
2017 VND million
2016 VND million
Income from trading of investment securities
1,165,122
646,829
Expenses for trading of investment securities
(210,982)
(179,139)
Provision (made)/reversed for investment securities (Note 12.5)
(82,564)
13,767
Provision made for diminution of investment securities (Note 12.5)
(15,816)
-
855,760
481,457
2017 VND million
2016 VND million
1,963,425
1,567,677
193,008
402,533
1,116,820
404,195
71,659
109,315
Income from settlement of VAMC
424,134
505,597
Other income
157,804
146,037
(248,534)
(679,417)
Expenses for other derivatives
(128,764)
(328,310)
Other expenses
(119,770)
(351,107)
1,714,891
888,260
NET GAIN FROM INVESTMENT SECURITIES
NET GAIN FROM OTHER OPERATING ACTIVITIES
Other operating income Income from other derivatives Recovery of loans previously written-off Income from entrusted debt collection
Other operating expenses
178
B05/TCTD-HN
ANNUAL REPORT 2017
32.
INCOME FROM INVESTMENTS IN OTHER ENTITIES 2017 VND million
2016 VND million
334
470
355,192
-
355,526
470
2017 VND million
2016 VND million
2,594,878
2,230,301
Publication, marketing and promotion
263,412
253,236
Office and asset rental
441,778
440,688
Depreciation of fixed assets
281,141
274,912
Tax, duties and fees
77,426
65,899
Tools and equipment expenses
51,593
32,942
Telecommunication expenses
35,469
35,557
218,704
214,234
53,710
49,127
166,187
134,792
71,397
60,200
13.2
(2,525)
847
16
9,882
9,882
69
10,533
Dividends received for the year from long-term investments Proceeds from the liquidation of long-term investment (Note 13.1)
33.
OPERATING EXPENSES Notes Salaries and related expenses
Expenses for maintenance and repair of assets Utilities expenses Expenditure on payment of insurance premium for customers’ deposits Per diem expenses Provision made/(reversed) for long-term investments Goodwill amortization expenses Provision made for other assets - Provision made for other assets
16
317
11,895
- Provision reversed for inventories
16
(248)
(1,362)
Training and education expenses
29,455
28,529
Conference expenses
41,958
41,107
363,749
292,636
4,698,283
4,175,422
Other operating expenses
ENABLING FINANCIAL SUCCESS & SECURITY 179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
B05/TCTD-HN
34. PROVISION EXPENSES FOR CREDIT LOSSES Notes
35.
2017 VND million
2016 VND million
General provision made for loans to customers
10
397,468
474,998
Reversal of general provision for loans to customers
10
(337,742)
(229,658)
Specific provision made for loans to customers
10
2,208,338
4,014,875
Reversal of specific provision for loans to customers
10
(130,568)
(201,729)
Reversal for loans sold but not yet received
16
(193,809)
(1,141,115)
Provision made for receivables from deferred L/C
16
986
20,429
Provision made/(reversed) for loans purchases
11
787
(639)
Provision made for VAMC bonds
12.5
1,743,194
879,386
Reversal of provision for VAMC bonds
12.5
(79,428)
(155,456)
3,609,226
3,661,091
EARNINGS PER SHARE 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 year 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.
180
ANNUAL REPORT 2017
35.
EARNINGS PER SHARE (continued)
2017
2016
6,445,595
3,148,846
-
(19,716)
6,445,595
3,129,130
-
79,549
Adjusted profit after tax attributable to ordinary shareholders of the Bank for calculation of diluted earnings per share (VND million)
6,445,595
3,208,679
Weighted average number of ordinary shares used for calculation of basic earnings per share
835,039,242
887,807,871
(*)
207,723,346
835,039,242
1,095,531,217
7,719
3,525
(*)
2,929
31 December 2017 VND million
31 December 2016 VND million
Cash, gold
2,344,362
2,956,708
Balances with the State Bank of Vietnam
4,279,431
2,533,875
16,057,406
8,702,514
22,681,199
14,193,097
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
Effect of mandatory convertible bonds Weighted average number of ordinary shares used for calculation of diluted earnings per share Earnings per share (VND) Basic earnings per share Diluted earnings per share (*) 36.
As at 31 December 2017, basic earnings per share of the Bank are not affected by dilution factors.
CASH AND CASH EQUIVALENTS
Balanc es with other c redit institutions with original terms less than or equal three months
ENABLING FINANCIAL SUCCESS & SECURITY 181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
37.
B05/TCTD-HN
EMPLOYEE BENEFITS 2017 VND million
2016 VND million
8,277
7,702
2,069,106
1,675,188
525,772
555,113
2,594,878
2,230,301
4. Average monthly salary/month
21
18
5. Average annual remuneration/month
26
24
I.
Average number of employees for the year (person)
II.
Employees’ remuneration 1. Basic salaries 2. Allowances and other income 3. Total (1+2)
38.
ASSETS, VALUABLE PAPERS ISSUED, MORTGAGED, PLEDGED, DISCOUNTED AND REDISCOUNTED
38.1
Assets, valuable papere issued, mortgaged, pledged, discounted and rediscounted to the Bank 31 December 2017 VND million
31 December 2016 VND million
406,535,584
378,892,668
182,200,811
180,972,454
Movable assets
52,230,799
52,800,245
Valuable papers issued
72,913,916
65,630,986
Other collateral
99,190,058
79,488,983
From other credit institutions
1,733,143
1,533,856
1,724,979
695,291
8,164
838,565
408,268,727
380,426,524
From customers Real estate
Valuable papers issued Other collateral
182
ANNUAL REPORT 2017
38.2
39.
Assets, valuable papers issued, mortgaged, pledged, discounted and rediscounted by the Bank 31 December 2017 VND million
31 December 2016 VND million
Investment securities
17,662,700
7,668,288
Other assets
1,930,000
303,012
19,592,700
7,971,300
SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES Related party transactions are transactions undertaken with other entities to which the Bank is related. The following parties are considered to be related to the Bank: (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 “Accounting for Investments in Associates�); (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.
ENABLING FINANCIAL SUCCESS & SECURITY 183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
39.
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: Receivable/(payable) Related party
Relationship
31 December 2017 VND million
31 December 2016 VND million
Loans from the Bank The European Plastic Window JSC
(ii)
394,097
407,606
T&M Hatay, JSC
(ii)
-
193,052
Nui Phao Mining Company Ltd.,
(ii)
890,802
681,982
In which: Increase
1,192,178
1,572,799
Decrease
(938,358)
(2,758,133)
Par value bond of the Bank Masan Group Corporation
(i)
274,155
94,000
Masan JSC
(ii)
6,012
-
Masan Group Corporation
(i)
(172,521)
(49,854)
The Euro Plastic Window JSC
(ii)
(23,793)
(40,354)
Nui Phao Mining Company Ltd.,
(ii)
(167,262)
(39,828)
Masan Consumer JSC
(ii)
(311,562)
(3,091,157)
Masan Vision JSC
(ii)
(7,741)
(5,839)
Masan Brewery Ltd.,
(iii)
(507)
(220,887)
Vinh Hao Mineral Water JSC
(iii)
(62,706)
(134,260)
VinaCafe Bien Hoa JSC
(iii)
(1,486,643)
(283,071)
Masan Beverage Ltd.,
(iii)
(770,203)
(73,713)
Deposits at the Bank
(*)
184
This is a USD-denominated loan amounting to USD 39,723,599 as at 31 December 2017 (31 December 2016: USD 30,776,770). 
ANNUAL REPORT 2017
Significant transactions with related parties during the year are as follows:
Related party
Relationship
VND million 2017 VND million
2016 VND million
Interest income The European Plastic Window JSC
(ii)
35,342
21,840
Nui Phao Mining Company Ltd.,
(ii)
41,962
91,276
T&M Hatay, JSC
(ii)
18,652
10,807
Masan Group Corporation
(i)
8,294
5,790
Masan JSC
(ii)
16
-
Masan Group Corporation
(i)
(11,854)
(7,982)
The Euro Plastic Window JSC
(ii)
(10)
(83)
Nui Phao Mining Company Ltd.,
(ii)
(1,063)
(153)
Masan Consumer JSC
(ii)
(56,635)
(110,108)
Masan Vision JSC
(ii)
(1,492)
(5,931)
Masan Brewery Ltd.,
(iii)
(6,127)
(14,291)
Vinh Hao Mineral Water JSC.
(iii)
(3,016)
(5,592)
VinaCafe Bien Hoa JSC
(iii)
(7,663)
(2,516)
Masan Beverage Company Limited
(iii)
(5,179)
(2,758)
(28,903)
(28,989)
Interest expenses
Remuneration of key management Remuneration of members of the Board of Directors and Board of Supervisors
Remuneration of members of the Board of Management (65,511) (67,372) (i) Shareholder has its representative in the Board of Directors of the Bank (ii) Related party has its representative in the Board of Directors of the Bank (iii) Related party has its representative related to members of the Board of Directors, or Board of Management or Board of Supervision of the Bank
ENABLING FINANCIAL SUCCESS & SECURITY 185
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
40.
GEOGRAPHICAL DISPERSION OF ASSETS, LIABILITIES AND OFF-BALANCE SHEET ITEMS
Total loans VND million
Total deposits VND million
Contingent liabilities VND million
Derivatives (*) VND million
Trading and investment securities VND million
Domestic
174,754,632
191,691,596
48,421,531
130,891,961
58,509,000
Overseas
7,158
553,612
-
-
-
174,761,790
192,245,208
48,421,531
130,891,961
58,509,000
(*) 41.
B05/TCTD-HN
Nominal contract value
RISK MANAGEMENT DISCLOSURE This section provides details of the Bank’s exposure to risk and describes policies and 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, establishes business limit, approves high-value business transactions in accordance with both legal and internal requirements, and determines organizational structure and key managing directors. Risk management strategies and policies adhere to the Bank’s Charter and General Shareholders’ Meeting resolutions. 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.
42.
186
ARCO is responsible for promulgating and monitoring risk management framework, risk appetites and risk management policies in the Bank’s operating activities and approving market risk limit, credit risk limit for each industry, business line and other general risk limits of the Bank. 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 collateral. 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.
ANNUAL REPORT 2017
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; and setting up authorization levels within the credit approval process. The following table presents the maximum exposure to credit risk from the balance sheet, before taking account of any collateral held or other credit risk enhancements: 31 December 2017 VND million
31 December 2016 VND million
30,155,807
21,598,874
6,775,118
8,035,905
160,849,037
142,616,004
12,092
19,466
Investment securities – gross (*)
51,513,882
46,988,229
Others financial assets – gross
12,326,513
10,665,130
261,632,449
229,923,608
Balances with and loans to other credit institutions – gross Securities held-for-trading – gross Loans to customers – gross Debts purchased – gross
(*) 42.1
Excluding equity securities.
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 2017 VND million
31 December 2016 VND million
30,155,807
21,598,874
6,775,118
8,035,905
155,931,825
138,203,644
Investment securities – gross
51,513,882
44,066,171
Others financial assets – gross
10,378,441
7,108,731
254,755,073
219,013,325
Balances with and loans to other credit institutions – gross Securities-held-for trading – gross Loans to customers – gross
The Bank’s financial assets, which are neither past due 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.
ENABLING FINANCIAL SUCCESS & SECURITY 187
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
42.
CREDIT RISK (continued)
42.2
Financial assets that are past due but not impaired
B05/TCTD-HN
Information about financial assets that are past due but not impaired as at 31 December 2017 is as follows: VND million Overdue Under 90 days From 91-180 days Loans to customers
From 181-360 days
Over 360 days
Total
383,681
61,811
91,820
396,460
933,772
-
19,450
-
-
19,450
383,681
81,261
91,820
396,460
953,222
Other assets
Information about financial assets that are past due but not impaired as at 31 December 2016 is as follows:
VND million
Overdue Under 90 days From 91-180 days Loans to customers
619,147
From 181-360 days
Over 360 days
Total
181,714
414,454
1,327,020
111,705
These past-due loans are not impaired due to they are secured by adequate collateral assets. 42.3
Financial assets that are impaired Information about financial assets which are impaired as at 31 December 2017 is as follows:
VND million
Overdue Not past Under 90 days due yet
Total
Loans to customers
-
1,949,605
513,586
363,747
1,156,502
3,983,440
Debts purchased
-
-
10,410
-
1,682
12,092
1,862,038
-
-
-
66,584
1,928,622
1,862,038
1,949,605
523,996
363,747
1,224,768
5,924,154
Other assets
188
From 91-180 From 181-360 Over 360 days days days
ANNUAL REPORT 2017
Information about financial assets which are impaired as at 31 December 2016 is as follows:
VND million
Overdue Not past Under 90 days due yet Loans to customers
43.1
Total
-
1,546,909
285,031
292,837
960,563
3,085,340
17,784
-
-
-
1,682
19,466
Investment securities
2,922,058
-
-
-
-
2,922,058
Other assets
3,488,943
-
-
-
67,456
3,556,399
6,428,785
1,546,909
285,031
292,837
1,029,701
9,583,263
Debts purchased
43.
From 91-180 From 181-360 Over 360 days days days
MARKET RISK Interest rate risk Interest rate risk arises when there is a difference of term in valuation of interest rate between assets and liabilities. All loan activities, mobilization activities and investment 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. The interest rate repricing term for items with fixed interest rates is the remaining period until the maturity date of the asset. As for items with floating interest rates, it is the remaining period until the next interest rate change.
ENABLING FINANCIAL SUCCESS & SECURITY 189
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
43. 43.1
B05/TCTD-HN
MARKET RISK (continued) Interest rate risk (continued) 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 the Government and the State Bank of Vietnam are identified as follows: •
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%
(10.415)
(8.332)
VND
3.00%
1.490.727
1.192.582
As at 31 December 2017
190
ANNUAL REPORT 2017
The following table presents the assets and liabilities of the Bank based on “interest gap� at the reporting date: 31 December 2017
VND million Interest re-pricing for the year Overdue
Noninterest bearing
Up to 1 month
From 1 to 3 months
From 3 to From 6 to Over 1 to 5 6 months 12 months years
Over 5 years
Assets Cash and gold - 2,344,362 Balances with the SBV 4,279,431 Balances with and loans to other credit - 14,067,026 12,518,193 2,853,255 641,539 75,794 institutions (*) Securities held-for-trading (*) - 1,128,550 1,463,394 237,399 227,196 3,718,579 In which: Government bonds and bonds guaranteed by the 220,196 3,718,579 Government for settlement Derivatives and other financial assets (2,185) (1,118,212) 82,036 88,978 985,675 Loans to customers (*) 4,917,212 71,809,355 29,825,417 13,811,532 16,224,593 22,271,060 1,989,868 Debts purchased (*) 12,092 Investment securities (*) 1,183,369 993,452 2,343,163 11,967,201 9,612,105 17,408,036 8,226,556 In which: Government bonds and bonds guaranteed by the 179,167 4,029,582 13,432,850 8,465,901 Government for settlement Long-term investments (*) 12,084 Fixed assets and investment property 2,749,476 Other assets (*) 86,034 13,767,498 Total assets 5,015,338 20,056,789 91,147,079 44,697,111 30,177,418 26,804,614 40,967,761 13,935,003 Liabilities Borrowings from the Government 1,000,000 and SBV Deposits and borrowings from 34,786,036 9,652,688 807,149 145,628 899,739 32,585 other credit institutions Deposits from customers 91,968,268 32,948,023 22,683,104 17,520,224 5,833,492 17,722 Valuable papers issued - 1,150,000 13,292,170 3,197,800 Other liabilities 6,527,007 Total liabilities - 6,527,007 127,754,304 42,600,711 23,490,253 18,815,852 20,025,401 3,248,107 Interest sensitivity gap 5,015,338 13,529,782 (36,607,225) 2,096,400 6,687,165 7,988,762 20,942,360 10,686,896
(*) These amounts exclude provisions.
Total
2,344,362 4,279,431 30,155,807 6,775,118 3,938,775 36,292 160,849,037 12,092 51,733,882 26,107,500 12,084 2,749,476 13,853,532 272,801,113 1,000,000 46,323,825 170,970,833 17,639,970 6,527,007 242,461,635 30,339,478
ENABLING FINANCIAL SUCCESS & SECURITY 191
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
43.
MARKET RISK (continued)
43.2
Currency risk
B05/TCTD-HN
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%
138,842
111,074
EUR
1.00%
(4,087)
(3,270)
Gold
3.00%
665
532
As at 31 December 2017
The table in the next page shows the analysis of assets and liabilities in VND and foreign currencies translated into VND at 31 December 2017.
192
ANNUAL REPORT 2017
VND million Other currencies equivalent
Total
22,176
69,242
2,344,362
-
-
-
4,279,431
9,223,666
935,164
-
419,236
30,155,807
6,775,118
-
-
-
-
6,775,118
(2,523,991)
2,923,082
(485,984)
-
123,185
36,292
152,379,665
8,439,290
30,082
-
-
160,849,037
12,092
-
-
-
-
12,092
51,733,882
-
-
-
-
51,733,882
12,084
-
-
-
-
12,084
2,749,476
-
-
-
-
2,749,476
10,845,609
2,808,867
190,036
-
9,020
13,853,532
247,787,619
23,634,945
735,690
22,176
620,683
272,801,113
1,000,000
-
-
-
-
1,000,000
36,352,593
9,782,128
189,104
-
-
46,323,825
158,899,118
10,934,596
536,877
-
600,242
170,970,833
17,639,970
-
-
-
-
17,639,970
6,445,242
73,273
6,664
-
1,828
6,527,007
220,336,923
20,789,997
732,645
-
602,070
242,461,635
FX position on balance sheet
27,450,696
2,844,948
3,045
22,176
18,613
30,339,478
FX position off-balance sheet
(13,450,405)
11,039,203
(411,762)
-
133,578
(2,689,386)
Total FX position on and offbalance sheet
14,000,291
13,884,151
(408,717)
22,176
152,191
27,650,092
VND
USD equivalent
Cash and gold
1,948,066
238,486
66,392
Balances with the SBV
4,277,877
1,554
19,577,741
31 December 2017
EUR Gold equivalent equivalent
Assets
Balances with and loans to other credit institutions (*) Securities held-for-trading (*) Derivatives and other financial assets Loans to customers (*) Debts purchased (*) Investment securities (*) Long-term investments (*) Fixed assets and investment property Other assets (*) Total assets Liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit institutions Deposits from customers Valuable papers issued Other liabilities Total liabilities
(*)
These amounts exclude provisions. ENABLING FINANCIAL SUCCESS & SECURITY 193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
43.
MARKET RISK (continued)
43.3
Liquidity risk
B05/TCTD-HN
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 the Government/guaranteed by the 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 are 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 based 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 based on the maturity date as stipulated in contracts as at the reporting date of each contract; »» The maturity term of other liabilities is determined based 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.
194
ANNUAL REPORT 2017
VND million Overdue Over 3 months
Up to 1 month
From 1 to 3 months
Over 5 years
Total
-
-
2,344,362 4,279,431
-
-
-
-
2,344,362 4,279,431
-
-
14,172,940
12,415,143
3,491,930
75,794
-
30,155,807
-
-
-
-
767,399
2,289,140
3,718,579
6,775,118
-
-
-
-
-
220,196
3,718,579
3,938,775
2,333,286 -
2,583,926 12,092 -
(38,492) 9,509,028 399,167
(107,453) 15,600,616 -
154,537 38,912,024 11,024,163
27,700 42,605,273 29,057,332
49,304,884 11,253,220
36,292 160,849,037 12,092 51,733,882
-
-
179,167
-
4,029,582
13,432,850
8,465,901
26,107,500
2,333,286
86,034 2,682,052
28,823 3,639,122 34,334,381
409 3,068,201 30,976,916
34,396 4,186,724 58,571,173
319,330 2,197,993 76,572,562
12,084 2,366,518 675,458 67,330,743
12,084 2,749,476 13,853,532 272,801,113
-
-
1,000,000
-
-
-
-
1,000,000
-
-
34,812,855
9,627,334
951,312
900,965
31,359
46,323,825
87,115,228 38,234,560 3,623,168 - 126,551,251 2,682,052 (92,216,870)
29,706,655 1,576,834 40,910,823 (9,933,907)
35,569,611 1,150,000 1,182,037 38,852,960 19,718,213
18,511,516 9,891,970 136,559 29,441,010 47,131,552
67,823 6,598,000 8,409 6,705,591 60,625,152
170,970,833 38,234,560 17,639,970 6,527,007 242,461,635 30,339,478
31 December 2017 Assets Cash and gold Balances with the SBV Balances with and loans to other credit institutions (*) Securities held-for-trading (*) In which: Government bonds and bonds guaranteed by the Government for settlement Derivatives and other financial assets Loans to customers (*) Debts purchased (*) Investment securities (*) In which: Government bonds and bonds guaranteed by the Government for settlement Long-term investments (*) Fixed assets and investment property Other assets (*) Total assets Liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit institutions Deposits from customers In which: Current accounts Valuable papers issued Other liabilities Total liabilities Net liquidity gap difference
Current
Up to 3 months
2,333,286
(*) These amounts exclude provisions.
From 3 to From 1 to 5 12 months years
ENABLING FINANCIAL SUCCESS & SECURITY 195
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
44.
FINANCIAL ASSETS AND LIABILITIES
44.1
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 2017 are as follows:
VND million
Book value Fair value through Profit & Loss statement
Held-tomaturity
Loans and receivables
Availablefor-sale
Assets and other liabilities by amortized cost
Cash and gold
-
-
2,344,362
-
-
2,344,362 2,344,362
Balances with the SBV
-
-
4,279,431
-
-
4,279,431 4,279,431
Balances with and loans to other credit institutions
-
-
30,155,807
-
-
30,155,807
(*)
6,775,118
-
-
-
-
6,775,118
(*)
36,292
-
-
-
-
36,292
(*)
Loans to customers
-
-
160,849,037
-
-
160,849,037
(*)
Debts purchased
-
-
12,092
-
-
12,092
(*)
Available-for-sale securities
-
-
-
46,018,398
-
46,018,398
(*)
Held-to-maturity securities
-
5,715,484
-
-
-
5,715,484
(*)
Long-term investments
-
-
-
12,084
-
12,084
(*)
Other assets
-
-
12,326,513
-
-
12,326,513
(*)
6,811,410 5,715,484
209,967,242
46,030,482
Securities held-for-trading Derivatives and other financial assets
(*)
196
Total book value
Fair value
- 268,524,618
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.
ANNUAL REPORT 2017
44.2
Book value and fair value of financial assets and liabilities Book value and fair value of financial assets and liabilities of the Bank as at 31 December 2017 are as follow:
VND million
Book value Liabilities and other Availableborrowings for-sale by amortized cost
Fair value through Profit & Loss statement
Held-tomaturity
Loans and receivables
Borrowings from the Government and the State Bank of Vietnam
-
-
-
-
Deposits and borrowings from other credit institutions
-
-
-
Deposits from customers
-
-
Valuable papers issued
-
Other liabilities
(*)
Total book value
Fair value
1,000,000
1,000,000
(*)
-
46,323,825
46,323,825
(*)
-
-
170,970,833
170,970,833
(*)
-
-
-
17,639,970
17,639,970
(*)
-
-
-
-
5,589,473
5,589,473
(*)
-
-
-
- 241,524,101
241,524,101
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. 
ENABLING FINANCIAL SUCCESS & SECURITY 197
THUYẾT MINH BÁO CÁO TÀI CHÍNH HỢP NHẤT (tiếp theo) tại ngày 31 tháng 12 năm 2017 và cho năm tài chính kết thúc cùng ngày
45.
SEGMENT REPORT
45.1
Segment report by geographic region
B05/TCTD-HN
Segment report by geographic region for the year ended 31 December 2017:
VND million
North (*)
Central
South
Elimination (**)
Total
31,061,209
623,795
18,211,918
(291,790)
49,605,132
22,067,063
548,156
17,418,306
(77,067)
39,956,458
Interest income from external
13,974,152
366,490
3,253,862
-
17,594,504
Interest income from internal
8,092,911
181,666
14,164,444
(77,067)
22,361,954
2. Income from operating activities
3,860,377
55,090
610,305
(6,087)
4,519,685
3. Income from other operating activities
5,133,769
20,549
183,307
(208,636)
5,128,989
(442,168) (17,387,587)
241,976
(37,959,609)
Criteria I. Income 1. Interest income
II. Expenses 1. Interest expenses
(20,371,830) (14,200,574)
(364,096)
(16,538,443)
77,067
(31,026,046)
Interest expenses to external
(6,107,663)
(182,430)
(2,373,999)
-
(8,664,092)
Interest expenses to internal
(8,092,911)
(181,666)
(14,164,444)
77,067
(22,361,954)
(273,058)
(661)
(7,422)
-
(281,141)
3. Expenses from operating activities
(5,898,198)
(77,411)
(841,722)
164,909
(6,652,422)
Profit before provision expenses for credit losses
10,689,379
181,627
824,331
(49,814)
11,645,523
Provision expenses for credit losses
(3,379,540)
(27,146)
(194,621)
(7,919)
(3,609,226)
Segment profit
7,309,839
154,481
629,710
(57,733)
8,036,297
221,519,989
4,781,452
47,178,993
(4,088,054)
269,392,380
1. Cash
1,526,442
108,079
709,841
-
2,344,362
2. Fixed assets
1,447,694
1,271
62,481
-
1,511,446
3. Other assets
218,545,853
4,672,102
46,406,671
(4,088,054)
265,536,572
180,065,705
4,965,116
59,326,666
(1,895,852)
242,461,635
1. Liabilities to external
178,164,156
4,957,354
59,326,660
-
242,448,170
2. Liabilities to internal
1,901,549
7,762
6
(1,895,852)
13,465
2. Depreciation expenses
III. Assets
IV. Liabilities
(*) The Bank’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.
198
ANNUAL REPORT 2017
45.1
Segment report by operating activities
Segment report by operating activities for the year ended 31 December 2017:
Criteria I. Revenue 1. Interest revenue Interest income from external Interest income from internal 2. Operating revenue 3. Other revenue II. Expense 1. Interest expense Interest expenses to external Interest expenses to internal 2. Depreciation expense 3. Operating expense Profit before provision expenses for credit losses Provision expenses for credit losses Segment profit III. Assets 1. Cash 2. Fixed assets 3. Other assets IV. Liabilities 1. External liabilities 2. Internal liabilities
(*)
VND million
Bank
Assets Management
Trading Fund securities Management
48,463,254 39,883,130 17,521,176 22,361,954 4,012,138 4,567,986 (37,804,135) (31,054,433) (8,692,479) (22,361,954) (237,504) (6,512,198)
283,630 4,711 4,711 278,919 (206,188) (48,625) (48,625) (39,572) (117,991)
1,084,079 111,300 106,186 5,114 482,229 490,550 (166,687) (55) 238 (293) (3,739) (162,893)
37,272 5,763 5,274 489 31,405 104 (17,482) (43) (17,439)
28,687 28,621 10,786 17,835 66 (7,093) (283) (6,810)
(291,790) (77,067) (48,918) (28,149) (6,087) (208,636) 241,976 77,067 28,149 48,918 164,909
49,605,132 39,956,458 17,594,504 22,361,954 4,519,685 5,128,989 (37,959,609) (31,026,046) (8,664,092) (22,361,954) (281,141) (6,652,422)
10,659,119
77,442
917,392
19,790
21,594
(49,814)
11,645,523
(3,602,150) 7,056,969 268,354,282 2,344,362 1,493,089 264,516,831 243,383,888 243,370,423
367 77,809 1,492,117 10,070 1,482,047 752,247 752,247
(475) 916,917 2,814,882 7,870 2,807,012 211,836 211,836
19,790 75,341 97 75,244 6,726 6,726
951 22,545 743,812 320 743,492 2,790 2,790
(7,919) (57,733) (4,088,054) (4,088,054) (1,895,852) (1,895,852)
(3,609,226) 8,036,297 269,392,380 2,344,362 1,511,446 265,536,572 242,461,635 242,448,170
13,465
-
-
-
-
-
13,465
Finance Elimination (*)
Total
Elimination of internal transactions
ENABLING FINANCIAL SUCCESS & SECURITY 199
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at 31 December 2017 and for the year then ended
46.
B05/TCTD-HN
CORRESPONDING FIGURES Certain corresponding figures stated in the prior year have been reclassified to conform to the current year’s presentation:
Notes
31 December 2016 (as previously reported VND) VND million
Reclassify VND million
31 December 2016 (Reclassified) VND million
CONSOLIDATED BALANCE SHEET Borrowings from other credit institutions
i
9,771,209
587,383
10,358,592
Other borrowed and entrusted funds
i
587,383
(587,383)
-
Other income
ii
1,653,250
(85,573)
1,567,677
Operating expenses
ii
(4,260,995)
85,573
(4,175,422)
Other income receipts
ii
569,638
(85,573)
484,065
Operating and salary expenses payments
ii
(3,493,511)
85,573
(3,407,938)
Increase in deposits and borrowings from other credit institutions
i
4,140,136
250,962
4,391,098
Increase in other borrowed and entrusted funds
i
250,962
(250,962)
-
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED CASH FLOW STATEMENT
(i) (ii) 47.
Reclassify “Other borrowed and entrusted funds” to “Borrowings from other credit institutions”. Reclassify “Operating expenses” and “Operating and salary expenses payments “ from “Other income”.
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 that requires disclosure in consolidated financial statements.
200
ANNUAL REPORT 2017
48.
EXCHANGE RATES OF APPLICABLE FOREIGN CURRENCIES AGAINST VIETNAM DONG 31 December 2017 VND
31 December 2016 VND
AUD CAD CHF CNY DKK EUR GBP HKD JPY NOK SEK SGD THB
17,718 18,053 23,306 3,490 3,660 27,246 30,691 2,907 201.53 2,766 2,768 16,979 697.45
16,432 16,952 22,360 3,279 3,223 23,946 28,106 2,936 195 2,636 2,500 15,723 635
USD
22,425
22,159
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 9 February 2018
ENABLING FINANCIAL SUCCESS & SECURITY 201
OPERATION NETWORK
24
AFTER
YEARS OF ROBUST GROWTH, TECHCOMBANK NOW BOASTS A LARGE SERVICE NETWORK WHICH OFFERS A DIVERSE RANGE OF FINANCIAL PRODUCTS AND SOLUTIONS. NOT ONLY DOES THE BANK HAVE AN ADVANCED DIGITAL BANKING SYSTEM, BUT ALSO ITS PHYSICAL FOOTPRINT, WHICH INCLUDES 315 BRANCHES/ TRANSACTION OFFICES/REPRESENTATIVE OFFICES AND 1,117 ATM’S, NOW COVERS 45 CITIES AND PROVINCES ACROSS THE COUNTRY.
AS AT 31 DECEMBER 2017, TECHCOMBANK HAD
AS AT 31 DECEMBER 2017, TECHCOMBANK HAD
AS AT 31 DECEMBER 2017, TECHCOMBANK WAS PRESENT IN
1,117
315
45
ATMS
202 ANNUAL REPORT 2017
BRANCHES/ TRANSACTION OFFICES/ REPRESENTATIVE OFFICES
CITIES AND PROVINCES IN VIETNAM
Con Co Islands
HOANG SA ISLANDS
Ly Son Islands
EAST SEA
Phu Quy Islands
TRUONG SA ISLANDS
Phu Quoc Islands
Con Son Islands
Hon Khoai Islands
N°
Province/City
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 Ba Ria - Vung Tau Bac Giang Bac Ninh Binh Đinh Binh Duong Binh Phuoc Binh Thuan Ca Mau Can Tho Đa Nang Daklak Đong Nai Đong Thap Gia Lai Ha Nam Ha Noi Ha Tinh Hai Duong Hai Phong Ho Chi Minh Hung Yen Khanh Hoa Kien Giang Lam Đong Lang Son Lao Cai Long An Nam Đinh Nghe An Ninh Binh Phu Tho Quang Nam Quang Ngai Quang Ninh Soc Trang Tay Ninh Thai Binh Thai Nguyên Thanh Hoa Thua Thien - Hue Tien Giang Vinh Long Vinh Phuc Yen Bai TOTAL
Number of branches and transaction offices 1 5 2 5 1 4 1 1 1 5 10 1 6 1 1 1 99 3 3 9 100 3 4 2 1 3 3 1 2 4 1 2 2 2 5 1 1 1 4 2 3 1 2 3 2 315
ENABLING FINANCIAL SUCCESS & SECURITY
203
VIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT STOCK BANK
| Techcombank Tower, 191 Ba Trieu, Hai Ba Trung District, Ha Noi | (84 24) 3944 6368 | (84 24) 3944 6395 | www.techcombank.com.vn