Cách tính: lấy số cuối năm 2010 của Vietinbank (annual report)/ số của ngành Source: Vietnam Commercial Banking Report Q1 2011 - BMI
Nguồn: lấy từ các báo cáo mà mọi người đã đưa ra
We are waiting for the approval of the BOD for the 2012 targets. We will add the 2012 targets next week.
Vietinbank-Aviva Life Inssurance Joint Stock Company has been contributed by its two shareholders in August 2011 and started operation since October 2011.
This Development plan is Vietinbank 2011-2015 – 5 year plan
Ssoo 30/6/2010: của Veitinbank: lấy từ
Loans with collateral as at 30 June 2011 is 76,38%. We are still waiting for the breakdown to 5 loan groups.
Interest rate risk is a part of market risk.
Overview of VietinBank 1988 2009 2010 <ul><li>Vietnam Joint Stock Commercial Bank for Industry and Trade (“Vietinbank”) is a leading financial and banking group of Vietnam with diversified activities </li></ul><ul><li>Established in 1988, upon its separation from the State Bank of Vietnam (“SBV”) </li></ul><ul><li>In 2008, the Vietnam Bank for Industry and Trade successfully undertook its Initial Public Offering </li></ul><ul><li>The Bank was equitized and renamed into Vietnam Joint Stock Commercial Bank for Industry and Trade in July 2009 </li></ul><ul><li>As at 31/Dec/2010, VietinBank has total assets of VND367.7trn accounting for a 12.7% market share, total customer deposits of VND[205.9]trn, accounting for 12.1% of the market share and total customer loan of 231.4trn accounting for 10.4% of the loans market share </li></ul><ul><li>Provides a range of banking and financial products and services (retail banking, trade finance, Internet banking, etc.) as well as manages correspondent banking relationships ~1000 banks worldwide </li></ul><ul><li>Present in 63 provinces and cities and has the 2 nd largest distribution network in Vietnam </li></ul>VietinBank has formidable franchise with strong market share (As at 31/12/2010) Overview
Key business lines and product portfolio Product portfolio Key business lines Corporate and financial institution banking SME banking Retail Banking International Banking <ul><li>Offers credit lines, syndicated loans and project specific loans </li></ul><ul><ul><li>Corporate loans constitute 45% of gross loans as at 30 Jun 2011 </li></ul></ul><ul><li>Interbank and valuable papers trading </li></ul><ul><li>Trusted and pioneering bank for SME clients </li></ul><ul><li>SMEs constitute 35% of gross loans as at 30 Jun 2011 </li></ul><ul><li>Range of consumer lending products, including business and consumer loans </li></ul><ul><li>1,093 branches, Transaction offices and Saving offices </li></ul><ul><li>Trade financing, international settlement and overseas remittance services </li></ul>Card Services Import-export payment Derivative products Overseas remittance Foreign exchange Guarantee Securities Other products <ul><li>VietinBank cards and international credit cards </li></ul><ul><li>Export/Import LC confirmation, transferring, settlement </li></ul><ul><li>Document processing, shipping guarantee issuance </li></ul><ul><li>Spots, forwards, swaps and options </li></ul><ul><li>Speed remittance through remittance companies </li></ul><ul><li>Spots, forwards, swaps and options </li></ul><ul><li>Interbank market </li></ul><ul><li>Guarantees for loans, advanced payment, performance, payments, tax/customs, warranty </li></ul><ul><li>Brokerage services, securities custody analysis and investments etc. </li></ul><ul><li>Money transfer, leasing, insurance, individual and corporate savings </li></ul>
Second Largest Branch Network in Vietnam North: 1 MOC & 71 branches Central: 28 Branches South: 50 Branches 1 Main Operation Center in Ha Noi 1,093 branches, Transaction offices and Saving offices 2 Representative offices in Da Nang and Ho Chi Minh City 2 Joint-Venture Companies 6 Subsidiaries 3 non-profit making units Multiple touch points for individual and corporate customers across Vietnam Expanding network overseas <ul><li>Opened a branch in Frankfurt in September 2011 </li></ul><ul><li>Plans to open branches in Berlin and Laos in 4th quarter of 2011 </li></ul><ul><li>Plans to expand network to England , France , Czech , Poland and South-east Asia nations in 2012 </li></ul>Branch expansion plan Strong distribution footprint in Vietnam with significant expansion potential Correspondent Banking Relationships with nearly 1.000 financial institutions in the world 2 3 1
Pre-eminent financial institution in Vietnam with a dominant market share Assets (VND trn) Loans (VND trn) Deposits (VND trn) Branches (VND trn) Joint Stock Commercial Banks State Owned Banks Largest bank in Vietnam in terms of total loans and 2nd largest in terms of distribution network
VietinBank’s Credit Strengths Customer Base Products & Services Technology & Management Human Resources Network <ul><li>Good knowledge of customers with a large number of traditional customers </li></ul><ul><li>Large and increasing source of deposits </li></ul><ul><li>Large lending customer base </li></ul><ul><li>Diversified products and services which are constantly improving </li></ul><ul><li>Focused investments on modernization, software application in banking management </li></ul><ul><li>Management system which complies with the standard of modern banking management </li></ul><ul><li>Professional, secured and modern model of operation and management </li></ul><ul><li>Young, enthusiastic competent and well-trained staff and management </li></ul><ul><li>Second largest bank in Vietnam in terms of assets </li></ul><ul><li>Wide network of diversified business lines with central and convenient locations </li></ul>
Performance Highlights Source: Company Data TO BE UPDATED WITH 2012 TARGETS. Please confirm figures H12011 and 2010 Figures We are waiting for the approval of the BOD for the 2012 targets. We will add the 2012 targets next week. 2011 Target H1 2011 Results 2010 Results Total assets 441,000 395,852 367,712 Chartered capital 20,000 – 25,000 16,858 15,172 Total mobilized funds 408,000 226,286 339,699 Mobilized funds growth rate 20% 54% Total loans 419,000 263,267 232,204 Total loans growth rate 20% 43.5% Profit before tax 5,100 3,894 4,598 Profit after tax 4,000 2,919 3,414 ROE 16% – 18% 17.45% 22.1% ROA 1.2% 1.12% 1.50% NPLs ratio <3.0% 1.71% 0.66% CAR >9% 10.41% 8.02%
Vietinbank Subsidiaries’ Performance Source: Company Data 1 2 3 4 5 6 8 7 Subsidiaries Contributed Capital (VND bn) Ownership (%) Total assets As at 30.06.2011 (VND bn) Chartered Capital As at 3 0 .06.201 1 (VND bn) Profit before tax As at 30/6/2011 (VND bn) VietinBank Leasing Company Ltd 500 100% 1,612 500 50 VietinBank Securities Joint Stock Company 500 75.61% 999 790 30 VietinBank Debt Management and Asset Exploitation Company Ltd 30 100% 41 30 0,6 VietinBank Insurance Company Ltd 300 100% 477 300 41 VietinBank Gold and Jewelry Trading Company Ltd 300 100% 330 300 17 VietinBank Fund Management Company Ltd 500 100% 1,133 500 26 Indovina Joint Venture Bank 696 50% 21,802 3,402 317.5 Vietinbank – Avia Life Inssurance Joint Stock Company 400 50% - 3,402 -
Ownership Structure Stakes of Major Shareholders Major shareholders’ support Shareholder Support Vietnamese Government <ul><li>VietinBank is currently 80% owned by the Government. Government’s share holding will not fall below 51% at any time </li></ul><ul><li>The majority of Board of Director’s members are appointed by Government </li></ul>IFC <ul><li>Conducting technical assistants to VietinBank in: </li></ul><ul><ul><li>Risk Management </li></ul></ul><ul><ul><li>SME services </li></ul></ul><ul><ul><li>Energy saving efficiency </li></ul></ul><ul><ul><li>Information technology </li></ul></ul><ul><ul><li>Standardization of other services </li></ul></ul>
Strong Relationship with Government & SBV <ul><li>VietinBank is currently 80% owned by the Government </li></ul><ul><li>Government’s share holding shall fall below 51% at any point in time under .. </li></ul><ul><li>Government has been an active contributor to VietinBank’s capital raising on a regular basis </li></ul><ul><li>VietinBank has 7 Board of Directors out of which 6 are nominated by Govt. </li></ul><ul><li>Members of the Management Board needs approval by the SBV </li></ul><ul><li>SBV is the direct regulator for the Bank’s operation </li></ul><ul><li>Vietinbank is a pioneer bank in implementing government and SBV’ monetary policies. </li></ul>Government Ownership Explicit Government Support Appointment of Board of Directors Under supervision of the SBV Implementation of Govt. Policies
Corporate Mission and Strategic Objectives <ul><ul><li>Continue to expand business vertically and horizontally to increase market share </li></ul></ul>1 <ul><ul><li>Enhance service quality to ensure the efficiency in the context of well-managed risks </li></ul></ul>2 <ul><ul><li>Improve financial capability and transparency </li></ul></ul>3 <ul><ul><li>Strengthen corporate governance and risk management in line with international standard </li></ul></ul>4 <ul><ul><li>Accelerate modernization of the Bank </li></ul></ul>5 <ul><ul><li>Become the leading financial group and key player in Vietnam </li></ul></ul>6 <ul><ul><li>Maximize stakeholder’s value </li></ul></ul>7 Mission Establish VietinBank as the leading financial group in Vietnam and highly rated bank in the international domain with motto: Safety – Efficiency – Modern – Sustainable growth, focusing on Commercial banking, Investment banking and others Overall Strategic Objectives
Strategic Objectives <ul><li>Assets & capital </li></ul><ul><ul><li>Annual average growth rate of total assets 25-35% </li></ul></ul><ul><ul><li>Acceleration of post-equitization process to increase shareholders’ equity </li></ul></ul><ul><ul><li>Diversification of ownership while keeping the Government stake of at least 51% </li></ul></ul><ul><ul><li>Strengthen capital base to enhance financial strength (CAR >=10%, ROE: 20-25%; ROA: 1.5-2.0%) </li></ul></ul><ul><li>Organization & Management </li></ul><ul><ul><li>Manage and develop the organization with reasonable and clear hierarchy; </li></ul></ul><ul><ul><li>Standardize internal policies and procedures in each department </li></ul></ul><ul><ul><li>Develop and establish subsidiaries </li></ul></ul><ul><ul><li>Expand business network both domestically & internationally; </li></ul></ul><ul><ul><li>Strongly develop retail banking system </li></ul></ul><ul><ul><li>Focus on risk management: maintain NPL ratio <=3.0% </li></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Establish a unified, modern, and secured information technology system, one which is highly integrated, stable, and centralized </li></ul></ul><ul><li>Human Resources </li></ul><ul><ul><li>Standardize human resources, reinforce training and enhance staff capacities; all to improve the quality of the Human Resources </li></ul></ul><ul><ul><li>Innovate and refine employment and remuneration mechanisms </li></ul></ul><ul><ul><li>Completely comply with Internal Labor Regulation and Corporate Culture </li></ul></ul><ul><li>Credit and Investment </li></ul><ul><ul><li>Credit operations remain key operations and stay market competitive </li></ul></ul><ul><ul><li>Adjust credit structure appropriately, suitable for VietinBank advantages </li></ul></ul><ul><ul><li>Enhance credit risk management quality, ensuring NPLs below 3% </li></ul></ul><ul><ul><li>Diversify credit and investment activities in financial markets, remain a market maker, and enhance capital employment and liquidity management efficiencies </li></ul></ul><ul><li>Products & Services </li></ul><ul><ul><li>Broaden customers & products base </li></ul></ul><ul><ul><li>Develop non-banking products & services to increase share of non-interest income to around 30-40% of the total income </li></ul></ul><ul><ul><li>Use modern technology as the foundation for customer-centric services development </li></ul></ul><ul><ul><li>Position the bank as a strong universal bank, providing a full spectrum of banking products & services </li></ul></ul>4 6 5 2 3 1 <ul><li>Oth ers </li></ul><ul><li>Enhance marketing & PR </li></ul><ul><li>Improve social responsibilites & community services </li></ul>7
Future Prospects and Plans Development Plan for 2011 & beyond Source: Company Data Realize the Vision 2015: To become the leading, efficient, and modern banking and financial group for the economy 4 Increase capital to ensure operational safety 2 Invest in modern banking technology, standardize governance, products and services, procedures, and slowly integrate into the global financial system to enhance VietinBank’s brand name both in the domestic and overseas markets 3 Continue to accelerate post-equitization processes, enhancing competitiveness and integration 1
VietinBank has enhanced its scale steadily Assets and Loan Growth NII and Margins (*) VND bn Source: Company Data (*) Net Interest Margin calculated as Net Interest Income / Earning Assets. Earning Assets calculated as Balances with the SBV + Placements with and loans to other banks+ Loans & Advances to customers + Investment securrities – held to marturity VND bn Strong growth in assets, loans and deposits have resulted in higher margins
Healthy yield and cost trend Yield on Funds Cost of Funds Well positioned to maintain margins in a rising interest rate environment Source: Company Data
Diversified non-interest income supports growth Net Fee and Commission Income VND bn Fee and Commission Income Breakdown Source: Company Data Increased fee income contribution has helped sustain earnings growth
VietinBank has managed its operating cost well…. Cost to Income Ratio Operating Expenses Breakdown Source: Company Data VND bn Declining costs have resulted in an improved cost to income profile
…resulting in strong overall profitability Profitability Trends Healthy ROAA and ROAE Levels VND bn Source: Company Data Focused operating achitecture has enabled efficient growth in profitability
Asset quality overview <ul><li>VietinBank has in place healthy credit systems, utilising relevant exposure limits and credit risk appetite </li></ul><ul><li>Such systems are enhanced by a strong credit culture, benefiting from well-defined delegations of authority and reporting lines </li></ul><ul><li>Advances are relatively well diversified across business entities & Industrial sectors, ensuring a high degree of diversification of potential risks </li></ul><ul><li>Comprehensive and detailed loan classification and provisioning requirements and policies are in place, consistent with regulatory norms and guidelines </li></ul><ul><li>Existence of robust procedures have resulted in positive developments in non-performing asset measures in recent times </li></ul><ul><li>Strong Credit risk management system is in place which has ensured improvement in the asset quality in this growing economic environment </li></ul>Healthy Credit Systems Well Defined Sectoral, Single Party and Group Exposure Limits Comprehensive Loan Classification and Provisioning Requirements Strong Credit Risk Management System
Bank has robust credit rating processes in place Rating Procedures 1 Information collection and scoring information submission (implemented by customer relationship staffs) 1 Scoring and rating customers (implemented by Risk Management Staffs) 2 Reviewing and checking scoring and rating results (implemented by Heads of Risk Management Department) 3 Approving the scoring and rating results (implemented by the competent levels) 4 Completing scoring and rating documents 5 Following-up and observing any fluctuation/changes of the scoring and rating results (implemented by Risk Management Department at the Head Office) 6 Recording & Filing documents 7 1 For corporates, individuals and household customers and financial Institutions
Quantifiable scoring and rating grades helps to maintain credit quality Total Scores No. Corporates Individuals & Household Customers Financial Institutions Ratings Group 1 90 – 100 90 – 100 90 – 100 AAA Group 2 80 - < 90 80 - < 90 85 - < 90 AA Group 3 73 - < 80 73 - < 80 75 - < 85 A Group 4 70 - < 73 70 - < 73 65 - < 75 BBB Group 5 65 - < 70 63 - < 70 55 - < 65 BB Group 6 60 - < 65 60 - < 63 50 - < 55 B Group 7 56 - < 60 56 - < 60 45 - < 50 CCC Group 8 53 - < 56 53 - < 56 40 - < 45 CC Group 9 45 - < 53 44 - < 53 35 - < 40 C Group 10 20 - < 45 20 - < 44 < 35 D
Diversified loan portfolio Loan Portfolio by Industry Source: Company Data Other*: Agricultural & forestry, Business and advisory services, Financial intermediation, Health care & social work, Aquaculture, Education & training, Others, Science and technology, Recreational, culture, sporting activities, State management, security and national defense, party union & social guarantee, International organization and bodies Inner ring total loans 31 Dec 2010: 234,204 VNDbn Outer ring total loans 30 Jun 2011: 263,267 VNDbn Inner ring total loans 31 Dec 2010: 234,204 VNDbn Outer ring total loans 30 Jun 2011: 263,267 VNDbn
Diversified loan portfolio Loan Portfolio by Borrower Type Inner ring total loans 31 Dec 2010: 234,204 VNDbn Outer ring total loans 30 Jun 2011: 263,267 VNDbn Source: Company Data Loan Portfolio by Business Entity Other corporate loans*: Provincial state-owned enterprises, Foreign invested enterprises, Co-operatives and Partnership companies Inner ring total loans 31 Dec 2010: 234,204 VNDbn Outer ring total loans 30 Jun 2011: 263,267 VNDbn
Loan Portfolio by Currency Loan Portfolio by Original Term Source: Company Data Short Term Loans : Tenors of less than 12 months Medium Term Loans: Tenors of [ ] months and over Long Term Loans: Inner ring total loans 31 Dec 2010: 234,204 VNDbn Outer ring total loans 30 Jun 2011: 263,267 VNDbn Diversified loan portfolio Inner ring total loans 31 Dec 2010: 234,204 VNDbn Outer ring total loans 30 Jun 2011: 263,267 VNDbn Please define Medium term loans and Long-term loans
Prudent Classification & Provisioning for Non-performing Assets <ul><li>The provisioning for NPA accounts is made based on availability of security, chances of recovery, age of the asset, etc.: </li></ul>Current Special mention Substandard Doubtful Loss Debts that are not due and the borrower is able to pay the principal and interest of debts in full and in a timely manner Debts that are overdue less than 90 days and rescheduled debts that are not due Debts that are overdue from 90 to 180 days and rescheduled debts that are overdue less than 90 days Debts that are overdue from 181 to 360 days and rescheduled debts that are overdue from 90 to 180 days assets Debts that are overdue more than 360 days, rescheduled debts that are overdue more than 180 days and debts that are subject to rescheduling arrangements as directed by the Government Please confirm if below is correct and please provide NPA provisioning measures for each classification of NPL 1 2 3 4 5 Non-performing loans:
Asset Quality is Robust as Seen By Low NPL Group 30 June 2011 2010 2009 2008 Value (VND bn) % Value (VND bn) % Value (VND bn) % Value (VND bn) % Group 1 Current 255,125 96.91 230,267 98.32 160,510 98.37 114,596 94.90 Group 2 Special mention 3,636 1.38 2,399 1.02 1,660 1.02 3,968 3.29 Group 3 Substandard 1,326 0.50 925 0.39 230 0.14 847 0.70 Group 4 Doubtful 439 0.17 411 0.18 333 0.20 803 0.67 Group 5 Loss 2,739 1.04 203 0.09 437 0.27 537 0.44 Total 263,267 100.00 234,205 100.00 163,170 100.00 120,751 100.00
NPL Classification – By Industry VND trn 2010 Group 1 Group 2 Group 3 Group 4 Group 5 Total Industry 2010 As at 30 Jun 2011 2010 As at 30 Jun 2011 2010 As at 30 Jun 2011 2010 As at 30 Jun 2011 2010 As at 30 Jun 2011 2010 As at 30 Jun 2011 Construction & Transportation 42.21 46.8 1.62 2.6 0.28 0.56 0.14 0.19 0.23 1.32 44.01 51.47 Industrial 86.98 98.87 0.48 0.29 0.76 0.19 0.14 0.18 0.12 0.92 88.46 100.45 Trade & Services 79.7 85.02 0.29 0.34 0.14 0.41 0.13 0.04 0.61 0.45 80.33 86.26 Agriculture, Forestry and Aqua-Culture 5.12 6.21 0.5 0.15 0.20 0.03 - 0.02 0.60 0.01 5.13 6.42 Consumers 12.96 15.00 0.4 0.2 0.10 0.12 - 0.01 0.10 - 12.96 15.33 Others 3.30 3.23 0.7 0.06 - 0.01 0.06 - - 0.03 3.31 3.33 Total 230.27 255.13 3.99 3.64 1.48 1.32 0.47 0.44 1.66 2.73 234.21 263.26
NPL Classification – By Borrowers VND trn 2010 Group 1 Group 2 Group 3 Group 4 Group 5 Total Industry 2010 As at 30 Jun 3011 2010 As at 30 Jun 3011 2010 As at 30 Jun 3011 2010 As at 30 Jun 3011 2010 As at 30 Jun 3011 2010 As at 30 Jun 3011 Corporates 103.51 117.41 1.02 0.96 0.75 0.57 0.11 0.08 0.29 2.19 105.42 121.21 SMEs 80.68 86.68 1.10 2.50 0.61 0.55 0.22 0.33 0.14 0.53 82.21 90.59 Individuals 45.50 49.45 0.12 0.18 0.11 0.20 0.78 0.03 0.29 0.01 45.83 49.87 Others 0.75 1.59 0.00 0.00 00.0 0.00 0.00 0.00 0.00 0.00 0.75 1.59 Total 230.27 255.13 2.40 3.64 0.93 1.32 0.41 0.44 0.20 2.73 234.21 263.26
NPL ratio - Industry comparison Source:SBV, VietinBank NPL ratio much lower than the industry average
Improving Asset Quality Moderate Credit Costs Provision Coverage Ratio Moving in right direction to achieve its objectives
Loan classification - By collateral Most of the existing loans in all categories are covered by adequate collateral (As at 31 March 2011) Source: Company Data
Loan to Deposit Ratio Loans and advances funded by low cost deposit base with average loan to deposit ratio of 110.81% Healthy Loan to Deposit Ratio VND bn Source: Company Data Amended values to be consistent with slide 24. Please confirm if below is correct.
Stable Fund Mobilization Growth VND bn Deposits of customers & credit institutions (VND bn) Source: Company reports By Source Inner ring: As at 30 June 2010: 318,805 VNDbn Outer ring: As at 30 June 2011: 336,413 VNDbn 130,458 163,386 241,014 117,686 240,049 176,014
Customer Deposits Breakdown By Type By Customers Total deposits 2010: 205,918 VNDbn Total deposits 30 June 2011: 192,208 VNDbn Total deposits 2010: 205,918 VNDbn Total deposits 30 June 2011: 192,208 VNDbn Source: Company reports
Customer Deposits Breakdown (Cont’d) By Maturity* By Currency *Short-term refers to < [xx] years/months *Medium & long term refers to > [xx] years/months Total deposits 2010: 205,918 VNDbn Total deposits 30 June 2011: 192,208 VNDbn Total deposits 2010: 205,918 VNDbn Total deposits 30 June 2011: 192,208 VNDbn Please confirm what is short-term, medium and long term
Securities Portfolio Diversified securities investment portfolio Diversified debt holdings Securities type As at 30 Jun 2011 (VND bn) % As at 31 Dec 2010 (VND bn) % Available for sale 65,348 96.20% 55,646 89.96% Debt securities 65,203 55,501 Government securities 36,000 30,943 Securities issued by other domestic credit institutions 6,383 6,907 Securities issued by domestic economic corporations 22,820 17,651 Foreign debt securities - - Equity securities 145 0.21% 145 0.23% Securities issued by other domestic credit institutions - - Securities issued by domestic economic corporations 145 145 Foreign equity securities - - Securities held to maturity 2,579 3.80% 6,209 10.04% Government securities 2,379 2,379 Securities issued by other domestic credit institutions - 80 Securities issued by domestic economic corporations 200 3,750 67,926 100.00% 61,855 100.00%
Credit Risk Management Policy (CRMP) <ul><li>To step by step use the IRB approach of Basel 2 for the best custom of risk management (risk-based pricing, risk portfolio management , risk adjusted return on capital – RAROC, determining minimum capital) </li></ul><ul><li>To obey the laws and have adaptability with the changes in laws </li></ul><ul><li>To obtain the development target and strategy of Vietinbank from time to time. To ensure long-term strategic targets while quickly reacting to fluctuation of the market </li></ul><ul><li>To limit the risk of credit centralization through diversifying loan portfolio and systemizing credit limits for each portfolio </li></ul><ul><li>To build an appropriate credit risk environment though a clear strategy approved by the Board of Directors </li></ul><ul><li>An uniform risk management culture is implemented in whole Vietinbank system to actively manage credit risks </li></ul><ul><li>To ensure that credit policies are adequate and clear, the credit granting criteria and the mechanism of authorization classification are specific, reasonable and able to minimize risks. </li></ul><ul><li>To maintain a credit risk measurement system </li></ul><ul><li>To timely find out credit risk signals and ensure adequate supervision </li></ul>To achieve credit expansion required for sustaining the profitability of the Bank with an emphasis on quality assets, profitable CRMP Philosophy CRMP Objectives CRMP Principals To optimize the balance between expected income and credit risk with an emphasis on competition advantages; to ensure measures, control/insurance of risks
Credit Risk Management <ul><li>To build up a credit risk management framework including basic principles of risk management; organization structure of risk management division, single credit management mode and loan portfolio, system of credit policies, procedures, system of credit risk measurement; risk management on new products and credit supervision </li></ul><ul><li>To build up a clear risk strategy, bank’s acceptable risk limits for each group of relative customers, based on the centralization level of currency, term, collateral, sector and geography </li></ul><ul><li>To ensure an independence, objectiveness among the customer relationship department, credit appraisal department, and the risk management and supervision. Credit activities must be supervised on regular basis to ensure credit activities are implemented in accordance with the bank’s regulations and within the acceptable risk level </li></ul><ul><li>The system of credit policies, procedures must be adequate and clear in terms of criteria of credit granting, mechanism of approval authorization decentralization </li></ul>Credit risk management framework Clear risk strategy Credit activities supervised on regular basis Adequate and clear system of credit policies, procedures <ul><li>Customers’ credit risk is quantified through the bank’s internal credit rating system </li></ul>Internal credit rating system <ul><li>To build up the early risk warning system to point out and define any risk signals related to probable changes in financial situation as well as borrowers’ repayment capability </li></ul>Risk warning system <ul><li>To build up an effective, useful credit report and information system to support credit risk management, to regularly supervise credit limits granted to customers, specially corporate customers who have big loan exposures </li></ul>Effective credit report and information system
Liquidity Risk Management Process <ul><li>Liquidity risk is defined as the risk that the Bank will encounter difficulty in meeting obligations associated with financial liabilities </li></ul><ul><li>To limit this risk, management diversifies its funding sources in addition to its core deposit base, and adopt a flexible policy in managing liquid assets and monitoring future cash flows and liquidity on a daily basis </li></ul><ul><li>The Bank also keeps an account of access to cash flows and the availability of collaterals in case the Bank needs to mobilize more capital </li></ul><ul><li>Alco Planning and Supporting Department analyses and projects flows of cash-in, cash-out in accordance with fund planning and balancing plan, which is approved annually; and provides decisions on available fund management based on movement of the Bank’s capital and its daily utilization </li></ul><ul><li>Based on the regulations of the SBV, the Alco Planning and Supporting Department, in cooperation with the Investment Department, proposes available fund management plan in order to make sure the actual average balance of deposits in VND and foreign currencies at the SBV not less than the required level of compulsory reserve to be maintained </li></ul><ul><li>Investment Department might decide to either sell back valuable papers to the SBV in open market, or to borrow to replenish working capital’s deficiency to ensure liquidity position of the whole bank </li></ul>Diversified funding sources “ Emergency” funds Dedicated Alco Planning and Supporting Department to managing risks Open market transactions to ensure liquidity position is maintained <ul><li>Besides, Investment Department also establishes credit limit with other banks for mutual assistance when needed. The management process of capital spare at VietinBank is operated within the INCAS system and the inter-bank settlement program (CITAD). By the centralized settlement scheme at the Head office, VietinBank is always active in the daily liquidity management </li></ul>Credit lines with other banks <ul><li>The Bank is currently setting up software, developing upgrades and finalizing the risk management process to catch up with the international standard </li></ul>Software upgrades VietinBank has proactively reserved secondary liquidity sources across Government Bonds, Treasury bills, Corporate bonds, Credit Institution bonds etc.
Operational Risk Management Procedure <ul><li>Operational risk is defined as the possibility of damage/loss happened directly or indirecty by the man, an inactive or unadequate procedures/system or the outside factors. </li></ul><ul><li>Vietinbank manages its operational risk through the risk management system of SAS OpriskMonitor with the 3 main tools including LDC (Loss Data Collection); RCSA (Risk and Control Self-Assessment); KRI (Key Risk Indicator). </li></ul><ul><li>The Operational risk management procedure is summarized as follows: </li></ul>SAS Oprisk Monitor <ul><li>Be responsible as an independent risk management section – the second defense coat in the “3 coat model” of the bank’s risk management. The Market and Operational Risk Management Department shall monitor, supervise, analyze, and synthesize risk reports based on risk level to submit to the Risk Management Committee and the Management in accordance with the bank’s regulation from time to time </li></ul>Be responsible as an independent risk management section Analyse the process of handling works Supervise & Control Manage potential market risks & solution plan Define risks & control methods Evaluate Results of the control methods Report risk accidence & loss Key risk indicator RCSA – Risk & Control Self Assessment LDC – Loss Data Collection KRI – Key Risk Indicator
Market Risk Management <ul><li>The market risk is defined as risk in the position of the balance sheet and off balance sheet which arises from price fluctuation in the market including: interest rate, foreign exchange, securities, goods </li></ul><ul><li>Vietinbank manages the market risk based on its market risk management procedures and tools to calculate market risk, including definition and supervision/monitoring of respective market risk level </li></ul><ul><li> The market risk management procedure includes the following steps: </li></ul><ul><li>Market Risk Management Tools includes the measurement tools (VAR, Stresstesting, Backtesting) and the limits for each tradingbook activities (Position limit, limits for customer relationship officer, limits for partners etc.) </li></ul><ul><li>The ARIMA model is also used to analyse and forecast the macro indicators (CPI, exchange rate, interest rate etc.) for market risk management </li></ul>Realize and define Market risks Realize and determine market risks Measure Supervise and control Prevent and minimize market risks 1 2 3 4 Internal Reporting System Specific market risk management procedure Market Risk Management Tools
Interest Rate Risk Management Process <ul><li>Interest Rate Risk is managed by the Bank through the use of GAP analysis of rate sensitive assets and liabilities and monitored through its prescribed prudential limits </li></ul><ul><li>The Bank forecasts fluctuation of market interest rate and makes appropriate investment decisions </li></ul><ul><li>If a decreasing trend in interest rate is forecasted, the Bank will invest more in long term instruments to gain profitability </li></ul><ul><li>On the contrary, if market interest rate is projected to increase, the Bank will focus on short term investments to minimize interest rate risk </li></ul>Investments <ul><li>Interest rate for fund mobilization is determined under market price principles, in which interest rate is subject to demand, fund mobilization scale and market interest rate movements </li></ul>Fund mobilization and utilization <ul><li>Lending activities: VietinBank determines lending interest rate based on the cost of funds, management expense plus targeted profit margin </li></ul><ul><li>Branches apply the floor lending interest rate regulated by the Head office. Since most of the funds mobilized by the Bank is short term (having maturity within 12 months), VietinBank requires all medium and long term loans to have floating interest (no fixed lending rate) </li></ul>Lending activities <ul><li>Inspection and monitoring by written documents in accordance with internal regulations applied to related activities like credit activities </li></ul><ul><li>Develop scenarios that can happen when market conditions change; proactive in risk management </li></ul><ul><li>Construct interest parameters that are managed within INCAS system and under control of department in-charge </li></ul>Inspection and monitoring regulations
Currency Risk Management Process <ul><li>Currency risk is the risk that values of financial instruments fluctuates due to changes in foreign exchange rate </li></ul><ul><li>The Bank’s loans and advances were mainly denominated in VND with the remainder mainly in US dollar (USD) </li></ul><ul><li>Nonetheless, some of the Bank’s other assets are in currencies other than VND and USD </li></ul><ul><li>The Bank has applied limitation system to mange currency positions on a daily basis. Risk prevention strategy is to keep the currency positions in the established limitation </li></ul>Limitation systems <ul><li>Alco Planning and Supporting Department analyses and projects cash-in and cash-out flow and proposes fund planning plan for each type of currency (mainly VND, USD and EUR equivalent) to the Bank’s Board of Management) based on actual cash flows and growth target registered by business units </li></ul><ul><li>It is managed based on daily outstanding balance in accordance with guidance to ensure the safety and effectiveness of the whole system </li></ul>Alco Planning and Supporting Department <ul><li>VietinBank commands all its subsidiaries to take reasonable precautions while expanding lending in USD </li></ul>Well managed subsidiaries <ul><li>Restricts lending in importing goods that can be domestically produced and establishes preference for lending to import essential goods such as fuel, petroleum, fertilizer, pesticides etc. </li></ul>Lending preferences <ul><li>Have ensured enough FX funding lines with International financial institutions </li></ul>FX funding lines
Liquidity Mismatch Analysis (as of 30 June 2011) Unit: VND m Overdue Current Total Over 3 months Within 3 months Due within 1 month Due from 1 to 3 months Due from 3 to 12 months Due from 1 to 5 years Due over 5 years Assets Cash, gold and germstones - - 2.904.141 - - - - 2.904.141 Balances with the SBV - - 7.267.865 - - - - 7.267.865 Placements with and loans to other banks (*) - - 29.122.706 10.785.380 1.100.000 726.650 - 41.734.736 Trading Securities (*) - - - - 472.649 - - 472.649 Derivatives and other financial assets - - - 3.172 - - - 3.172 Loans and advances to customers (*) 3.158.061 1.321.867 14.244.311 44.064.365 109.074.463 41.064.863 50.339.555 263.267.485 Investment securities (*) - - 299.980 1.370.000 13.319.445 45.526.622 7.410.412 67.926.459 Long-term investments (*) - - - - - - 2.386.355 2.386.355 Fixed assets and investment real estates - - - - - - 3.155.505 3.155.505 Other assets (*) - - 1.192.712 2.981.780 5.963.558 1.789.068 - 11.927.118 Total assets 3.158.061 1.321.867 55.031.715 59.204.697 129.930.115 89.107.203 63.291.827 401.045.485 Liabilities Borrowings from MOF and SBV - - 7.626.429 - 20.000.000 15.376 48.938 27.690.743 Deposits and borrowings from other banks - - 21.312.773 15.655.645 10.869.135 4.226 - 47.841.779 Customer deposits and other amounts due to customers - - 88.805.795 37.848.993 29.235.940 36.317.196 500 192.208.424 Derivatives and other financial borrowings - - - - - - - - Debts issued and other borrowed funds - - - 11.029.570 25.199.619 3.604.703 2.577.250 42.411.142 Issuing valuable papers - - 14.450.556 3.010.326 7.330.127 1.470.870 - 26.261.879 Other liabilities (*) - - 1.389.337 2.863.172 14.622.118 17.234.445 - 36.109.072 Total Liabilities - - 133.584.890 70.407.706 107.256.939 58.646.816 2.626.688 372.523.039 Net Maturity Risks Status 3.158.061 1.321.867 (78.553.175) (11.203.009) 22.673.176 30.460.387 60.665.139 28.522.446
Capital Source: Company Data Capital Adequacy Ratio Risk Weighted Assets (VND Bn) <ul><ul><ul><li>The Bank has successfully backed its RWA growth with adequate capital base </li></ul></ul></ul>
Capital Policy & Strategy Principle Schedule <ul><li>Accelerate augmenting shareholders’s equity, in order to meet the requirement of future growth </li></ul><ul><li>Ensure to meet the CAR requirement of SBV and commitment with partners, approach Basel standards on owner’s equity (commitment with IFR: Car>10% after 31 Dec 2012 </li></ul><ul><li>Diversify shareholder’s equity structure for both Tier 1 and Tier 2 capital by issuing shares, bonds, convertible bonds, borrowing in the secondary market etc, with a special focus on expanding Tier 2 capital </li></ul><ul><li>4 th Quarter 2011: Issue more shares to existing customers to increase the Chartered capital by 3,372bn (in nominal value). This plan has been submitted to the Government by the Ministry of Finance </li></ul><ul><li>1 st Quarter 2012: Sell shares (value amounting to 15% of chartered capital) to Bank of Nova Scotia. This plan is in negotiation and hopefully will complete in early 2011 </li></ul>
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