Techcombank Qwik Report


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Techcombank Qwik Report

  1. 1. Report ABOUT US OVERVIEW We are currently one of the largest private sector banks in Vietnam in terms of total assets, loans, deposits and net income. We have built industry-leading franchises in retail deposits and SME and retail lending. In the 18 years since our establishment, we have developed a diversified range of financial products and services to cater to the financial needs of Vietnam’s 50 million strong labor force and 305,000 private enterprises. At Techcombank, our vision is to be: The bank of choice for SME and affluent/ mass affluent retail customers in Vietnam, providing a full range of financial products and services through personalized customer-centric relationships; The premier retail liability franchise in Vietnam; An institution that delivers strong returns for our shareholders via business execution and rigorous corporate governance and risk management practices; A great working environment where our employees have the platform to develop, contribute and build successful careers; and The best bank in Vietnam. OVERVIEW HISTORY OVERVIEW BOARD OF DIRECTORS Ho Hung Anh Chairman Ho Hung Anh is the Chairman of Techcombank and Vice Chairman of Masan Group. He also serves as the board member of Masan Consumer. Hung Anh holds a Bachelor of Electronic Engineering from the Kiev Polytechnic Institute.[12/27/2011 9:24:26 AM]
  2. 2. Report Nguyen Dang Quang First Vice Chairman Dr. Nguyen Dang Quang is the Chairman of Masan Group’s Board of Directors. In addition, he serves as the Chairman of Masan Consumer, First Vice Chairman of Techcombank, and Chairman of the Member’s Council of Nui Phao Mining Company Limited. Dr. Quang has a Doctorate degree in Technical Sciences from the National Academy of Sciences of Belarus and a Master’s degree in Administration and Business Management from the Plekhanov Russian Economic University. Nguyen Thieu Quang Vice Chairman Nguyen Thieu Quang is the Vice Chairman of Techcombank and Chairman of La Giang Company, Da My JSC, Saigon Construction and Environment JSC, and Hoa Sen JSC. He also serves as the board member of Masan Consumer, Vinaconex, and Hai Phong Construction JSC. Thieu Quang has a Bachelor in Underground Works Construction from Donetsk National Technical University. Nguyen Canh Son Vice Chairman Nguyen Canh Son is the Vice Chairman of Techcombank. He also serves as the Chairman of T&M Vietnam JSC and Eurowindow Holding JSC. Son holds a Bachelor of Construction Engineering from U.S.S.R. Stephen Banner Member Stephen Banner has over 20 years of international experience with HSBC, including Executive Vice President of HSBC Finance Corporation in the U.S.A. and CEO of HSBC in Bangladesh. Stephen holds a BA in Business from the University of Sheffield, U.K.[12/27/2011 9:24:26 AM]
  3. 3. Report Tran Thanh Hien Member Tran Thanh Hien previously held management positions in several institutions experience, including member of the Ministry of Planning and Investment, Head of Investment and Development Department, and Deputy Head of Finance and Accounting for Vietnam Airlines. Hien holds an MBA from the Asian Institute of Technology, Vietnam. Madhur Maini Member Madhur Maini is the CEO of Masan Group. He also serves as the board member of Masan Consumer and Vice Chairman of Nui Phao Mining Limited. Madhur spent over 14 years with Merrill Lynch and Deutsche Bank where he has extensive experience in building successful businesses in Asia. Some of the businesses he built include Malaysia, Thailand, Financial Institutions Group and the Principal and Private Equity business for Southeast Asia at Deutsche Bank. Madhur is a graduate of the Management and Technology program at the University of Pennsylvania, where he was a Benjamin Franklin Scholar. He has a BS in Economics with a concentration in Finance from the Wharton School and a BS in Applied Sciences from the School of Engineering and Applied Sciences, both at the University of Pennsylvania. Stephen Colin Moss Member Stephen Colin Moss serves as Head of Asia-Pacific Strategy & Planning for HSBC. He was formerly Director of Operations of HSBC Hong Kong and Head of European Equities of HSBC London. Stephen holds a Bachelor of Economics and Accounting from the University of Kent, U.K. Nguyen Duc Vinh Member and CEO Nguyen Duc Vinh has served as Chief Executive Officer of Techcombank since 2000. He was formerly Deputy General Director of Vietnam Airlines. Vinh holds MBA degrees from the University of Michigan and the Institut Superieur des Affaires, Groupe HEC, Paris, France.[12/27/2011 9:24:26 AM]
  4. 4. Report OVERVIEW ORGANIZATIONAL STRUCTURE STRATEGY STRATEGY We have successfully established Techcombank as one of Vietnam’s leading Joint Stock Commercial Banks. Our strategy is focused on providing a full range of banking products and services to two primary customer groups: Vietnams rapidly growing number of SMEs; and Vietnams increasingly wealthy retail customers, especially those in the affluent (financial asset at least of US$60,000 and mass affluent (annual income of at least US$4,500). We have steadily built our status as the leading SME and retail bank since we embarked on this strategy in 2000. The keys to our success have included:[12/27/2011 9:24:26 AM]
  5. 5. Report Building a strong nationwide distribution network – We have the 2nd largest distribution network in terms of branch locations and largest network in terms of ATM locations among Vietnam’s JSCBs. This extensive footprint gives us excellent coverage of the key urban markets that have high concentrations of SME and affluent/mass-affluent retail customers. Persistent and disciplined growth of this network has been fundamental to our growth. As such, our deposits from customers have grown at a significantly higher rate compared to our peers. Leading the industry in product and service innovation – We have stayed ahead of the curve in introducing innovative products and services that offer customers greater convenience and functionality. Boosting productivity, enhancing service quality and controlling risk through effective use of technology – Our progressive application of technology has enabled us to achieve higher growth and deliver superior execution for our clients. Aligning with strong strategic partners – We have realized tremendous benefits from our strategic partnership with our two largest shareholders, HSBC and Ma San Group Corporation (Masan Group). Relentless focus on best practices and execution – We constantly strive to apply the best in international banking practices and deliver superior execution in all areas of our operations, whether in customer services, operations, risk management or IT & systems. Prudent approach to banking combined with rigorous risk management – We have adopted a conservative approach to lending and liquidity management, supported by a well-developed risk governance structure and risk management policies and procedures. Focus on secured lending with high levels of collateral; Maintain a liquid balance sheet and a conservative loan-to-deposit ratio of 65.4% as of 31 December 2010; and Adopt robust risk management systems, including being the first Bank in Vietnam to separate credit marketing from credit approval and to have a specialized market risk management function. Cultivation of the best banking talent and a customer-centric service culture. We aim to extend our franchise as a leading bank and further strengthen our market position by executing on these strategic pillars: Focusing on our core customer segments to drive sustainable, high-quality growth; Deepening our physical and electronic distribution channels; Expanding our deposit base, primarily from retail customers; Lending to core customers, combining high-margin loan products with robust credit controls; Increasing transaction and fee services to generate high-margin, low risk, loyalty-building income streams; Consolidating market share and profitability via new product offerings and world class customer services; Continually enhance our risk management platform; Maintaining a conservative risk profile, with a particular focus on Maintaining a strong funding base and liquid balance sheet;[12/27/2011 9:24:26 AM]
  6. 6. Report Secured, asset-backed lending Maintaining a diversified loan portfolio with minimal exposure to SOEs and real estate development; Maintaining high capitalization ratios in excess of regulatory requirements; and Adopting International Financial Reporting Standards ("IFRS”) accounting standards. PARTNERS SHAREHOLDERS Masan Group has a 31% interest in Techcombank as of June 30, 2011. HSBC is the other substantial shareholder, with approximately 20% stake in our Bank. INVESTOR CENTER NEWS PRESENTATIONS & REPORTS[12/27/2011 9:24:26 AM]
  7. 7. Report FINANCIAL INFORMATION[12/27/2011 9:24:26 AM]
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  11. 11. Report AWARDS & REGCOGNITIONS 2011 Vietnam’s Best Bank in 2011” from FinanceAsia magazine "Best Cash Management Bank in Vietnam in 2011” from FinanceAsia magazine "Best Trade Finance Bank in Vietnam in Vietnam in 2011” from FinanceAsia magazine "Best Retail Bank in Vietnam in 2011” from Asian Banking & Finance magazine "Global Payments Excellence Award” for 2010 from Citibank, Wachovia and Bank of New York 2010 Named the "Best Bank in Vietnam in 2010” by Euromoney, a UK financial publication Officially named a "National Brand 2010” by the National Brand Association, Vietnam Received an award for "Most Dynamic Trade-Support Bank - East Asia”, from the International Finance Corporation (IFC), a member of the World Bank Received "International Star for Leadership in Quality 2010” award from B.I.D. (Business Initiative Directions). 2009 Awarded "Excellence in International Payment Operations” by Wachovia Bank and "Excellence in International Bank Payments” by Citibank Received prize for "Top Trade Services” over three consecutive years and "Top 10 service excellence enterprises” from the Ministry of Commerce and Industry Listed as a "Top 500 largest enterprises in Vietnam 2009” by Vietnam Report Awarded prestigious securities brand and leading Vietnamese joint stock company by the State Securities Commission CORPORATE DOCUMENTS[12/27/2011 9:24:26 AM]
  12. 12. Report VIETNAM BANKING OVERVIEW SECTOR OVERVIEW In Vietnam, as in other emerging markets, the banks that have built strong franchises in the right market segments and implementedrobust risk governance structures have the potential for strong growth and attractive returns on capital. Banking provides a leveraged play on the economy as financial intermediation grows in importance and bank instruments replace cash. For all of the banking sector’s rapid growth over the last several years, the banking sector remains underpenetrated and SOEs continue to account for most loans in the banking system. According to Euromonitor, only 13% of Vietnam’s population had access to the banking system as of 2010. It is also estimated that Vietnamese consumers only held approximately 550,000 credit cards as of 30 June 2011, a level which certainly has much room to grow as GDP per capita rises. Futher, various estimates place the amount of physical gold and USD held outside the banking system at approximately US$40-70 billion (equivalent to 40-70% of GDP). It is expected that much of this wealth will eventually flow into the Vietnamese banking system. Vietnam’s banking sector has grown rapidly for most of the past decade. The reasons for investors’ aversion to the sector are understandable. Rapid credit growth led to Vietnam’s domestic credit as a percentage of GDP ballooning from 71% in 2006 to the high (but not yet critical) level of 130% in 2010. More recently, many banks have struggled as tight monetary policy has revealed underlying weaknesses in terms of limited access to funding and illiquid and undercapitalized balance sheets. The quality of banking sector assets and risk controls remains a concern. As discussed elsewhere in this website, we stands out for our strengths in many areas that are weaknesses for the banking sector overall, such as our liquid balance sheet, strong deposit franchise and robust risk controls which we believe will enable us to capitalized on the sector opportunity. SECTOR OVERVIEW RETAIL AND SME SECTOR We believe that SME and retail banking is the right sector focus for Vietnam due to: Rapid growth of the private sector and of household incomes, consumption and wealth – Vietnam’s GDP per capita tripled from US$440 in 2002 to US$1,327 in 2010. 1 Growth in incomes as translated to growing consumption, with retail sales growing by 24.5% in 2010. 2[12/27/2011 9:24:26 AM]
  13. 13. Report Rapid growth of SME sector – Vietnam’s private sector (including SMEs) has grown rapidly over the last several years, with the number of private enterprises increasing by an estimated 50% between 2008 and 2010.[12/27/2011 9:24:26 AM]
  14. 14. Report High productivity of the private sector (including SMEs) compared to SOEs – Studies indicate that over 1999-2009, the incremental capital output ratio (i.e, the incremental amount of capital required to produce an incremental unit of output) was just 3.74 for Vietnam’s private sector, versus 8.28 for the country’s SOEs.3 This statistic indicates that Vietnam’s private enterprises have a better track record of deploying capital to generate returns. Huge potential for growth in SME and retail banking, given Relatively low leverage of Vietnam’s private sector and households - Private sector borrowing comprises just 46% of domestic credit, one of the lowest levels in Asia ex-Japan. 4 Low penetration rates for basic retail banking products – According to Euromonitor, just 13% of Vietnamese aged 15 years or older have a formal relationship (e.g., current/savings account, checking account, credit card) with a bank or other financial institution as of 2010. By this measure, banking sector penetration in Vietnam is less than half the level seen in Indonesia, the Philippines and roughly one quarter of the level in India, China, Thailand and Malaysia.5 As of 30 June 2011, it is estimated that Vietnamese consumers held just 550,000 credit cards compared to a robust labor force over 50 million. 6 In addition, Vietnam’s retail lending as a percentage of GDP is lower than that of most of the higher income emerging markets. These data points suggest that retail banking has tremendous potential to grow as the country develops.[12/27/2011 9:24:26 AM]
  15. 15. Report Very attractive risk/return profile of SME and retail lending – SME and retail lending tend to command higher lending rates than large corporate and SOE loans. Given the margins, credit risk and collateral levels associated with SME and retail lending, TCB believes these segments offer very attractive risk/return profiles.[12/27/2011 9:24:26 AM]
  16. 16. Report 1 McKinsey 2 "Vietnam’s retail sales hit US$78 billion in 2010,”, 4 January 2011 3 "Private Economic Sector: Persistent to Raging Waves,” Vietnam Chamber of Commerce & Industry, 18 February 2011 4 Credit Suisse, "Vietnam Market Strategy”, 29 August 2011 5 Euromonitor International, Banking Sector in Vietnam, September 2011 6 Ho Chi Minh City Securities estimate INDUSTRY REPORTS INDUSTRY REPORTS BANKING REGULATION The Vietnamese banking industry is strictly regulated. The primary legislation governing the banking industry is the Law on Credit Institutions (the "Law on Credit Institutions”) enacted by the National Assembly, which took effect on 1 January 2011. It specifies permitted activities for commercial banks and non-bank credit institutions (i.e., financial companies, financial leasing companies, and other non-bank credit institutions). The main regulator of the banking industry is the State Bank of Vietnam ("SBV”), the country’s central bank. SBV’s major regulatory responsibilities include: Licensing of banks, including approval of changes to a bank’s areas of operation and chartered capital, establishment of new branches, corporate actions such as mergers or consolidations and, in some cases, introduction of new banking products and services; Establishing regulations to ensure the safety and soundness of the Vietnamese banking system, including setting minimum prudential ratios and policies and procedures to be adopted by banks; and Supervision of licensed credit institutions to ensure compliance with the terms of their licenses and SBV regulations. In addition, SBV has promulgated regulations regarding the interest rates that banks may charge to borrowers and pay to depositors and limiting the rate of loan growth in the banking sector. In 2011, for instance,SBV has sought to contain credit growth for the year to 20% and set a ceiling of 14% for VND deposit rates. Many other policies adopted by SBV in its monetary and foreign exchange management roles also affect the banking system. Major examples include: The statutory reserves banks are required to maintain with SBV; Open market operations to manage liquidity in the banking system; and Regulations governing the sale of gold and foreign exchange Over the last several years, SBV has pursued increased capital requirements as part of its efforts to increase the safety and soundness of the Vietnamese banking system. Major policies relating to bank capital include: Raising the minimum chartered capital for commercial banks from VND1,000 billion to VND3,000 billion effective 31 December 2011; Requiring each commercial bank to establish a compulsory financial reserve fund, which accumulates annually at a rate of 10% of the bank’s net income until reaching 25% of chartered capital; and Raising the minimum required capital adequacy ratio for commercial banks from 8% to 9% effective 1 October 2010.[12/27/2011 9:24:26 AM]
  17. 17. Report Regulatory changes over the last few years have allowed increased participation by foreign strategic and institutional investors in Vietnam’s banking industry. Foreign shareholders and their affiliates may now own up to 30% of the chartered capital in a Vietnamese bank in total. A foreign credit institution that qualifies as a "strategic investor” may own up to 15% of a Vietnamese bank’s chartered capital, which can be further increased to 20% with special approval from the Prime Minister. In recent years, SBV has granted licenses for several foreign banks to establish wholly foreign-owned Vietnamese subsidiaries. Pursuant to WTO regulations, these institutions are eligible for the same treatment as local banks starting 1 January 2010. Commercial banks are required to participate in the deposit insurance program established by the Deposit Insurance of Vietnam, which insures VND deposits. At present, depositors are insured up to a maximum of VND50 million, and banks are required to pay an annual premium of 0.15% of the average deposit balance of accounts that are required to be insured. OUR PRODUCTS We offer a variety of loan, deposit and fee-generating products and services tailored to meet the needs of PFS, SME, Corporate Banking and Financial Institution clients. These products and services are described in further detail below.[12/27/2011 9:24:26 AM]
  18. 18. Report PERSONAL FINANCIAL SERVICES Personal Financial Services (PFS) customers, especially those in the affluent and mass affluent segments, are the core of our deposit base and an increasing component of our loan portfolio. As of 31 December 2010, the PFS Division accounted for 35% of our branks loans to customers and 71% of deposits from customers. We believe retail banking for affluent and mass affluent customers is an attractive business in Vietnam with high and sustainable growth potential. Appealing features of retail banking in Vietnam include Growing incomes, spending and wealth levels of Vietnamese consumers; Strong orientation of the Vietnamese economy towards domestic consumption, with private consumption representing 56% of GDP; Vietnam’s low level of banking sector penetration, as evidenced by the low numbers of bank accounts, credit cards and other basic retail banking products; More attractive risk / return profile for PFS customers compared to corporate borrowers; and The high levels and quality of collateral for most retail loan products (e.g., land and buildings for housing loans, automobiles for vehicle loans). Major products for PFS customers include Housing loans; Vehicle loans; Gold or valuable paper (e.g., Certificate of Deposit) collateralized loans; Study loans for tuition at overseas schools; Secured and unsecured personal loans; Credit and debit cards; Liability products, such as current accounts, savings accounts and time deposits; Other banking services such as "Bill Box" payment, securities discounting, fast fund transfer and remittances; and Wealth management. We combine this product offering with a high level of customer service, such as "anytime, anywhere” attention from senior Priority Banking relationship managers for affluent customers.[12/27/2011 9:24:26 AM]
  19. 19. Report SME SME customers are currently the mainstay of our lending business and a significant component of its deposit base. As of 31 December 2010, loans to limited liability companies, joint stock companies and private enterprises represented a combined 59% of loans to customers, with the SME division accounting for the vast majority of these loans. On the deposit side, corporate borrowers (mostly from the SME Division) accounted for 24% of customers deposits. We believe that SME banking is an attractive business line due to: Rapid growth of Vietnam’s private sector; High productivity of Vietnam’s private sector compared to that of large SOEs; More attractive risk / return profile for SMEs compared to SOEs and other large corporate borrowers; and High levels of collateral available from SME borrowers. While it is difficult to prove, we also believe that as a group, SMEs have less of tendency to require rollovers or de facto restructurings than larger corporates. We segment our SME customers into Micro SMEs (MSMEs) with annual revenue of less than US$1 million, SMEs with annual revenue of US$1-10 million, and Middle Market Enterprises (MMEs) with annual revenue of US$10-50 million, and we tailor our products and loan application processes to fit the requirements of each category. Major products for SME customers include: Working capital loans; Short-term call loans/overdraft facilities; Fixed asset financing loans; Loans collateralized by agricultural commodities such as rice, pepper, cashews and coffee; Logistics financing; Supplier and trade financing; Factoring; Import and export loans; and Liability products, such as current accounts, savings accounts and time deposits. CORPORATE BANKING CORPORATE BANKING Our Corporate Banking Division focuses on enterprises with annual revenue greater than US$50 million, particularly those in Vietnam’s private sector. We offer these customers Loan products similar to those offered by the SME Banking Division, with the addition of project financing and syndicated loans; and Liability products similar to those offered by the SME Banking Division. TRANSACTION BANKING Transaction banking is significant and fast-growing source of fee income for us. This trend is expected to continue as[12/27/2011 9:24:26 AM]
  20. 20. Report Vietnam’s international trade grows, its payment system develops and companies’ cash management becomes more sophisticated. In 2010, we created a specialized Transaction Banking Division to focus on developing, marketing and aiding the Corporate Banking and SME Divisions with sale of transaction banking products. Key transaction banking products include Letters of credit; Bank guarantees; Cash manangement and payroll; Domestic and international payment services (E.g., wire transfer, SWIFT); and Cash handling and collection. TREASURY Our Treasury Division plays an important role in generating interest and non-interest income and accessing the money markets to provide supplemental funding for our Bank. Due to our strong deposit base and liquid balance sheet, we have historically taken advantage of tight market liquidity conditions and depressed markets to earn attractive returns from interbank lending and investment in securities. The Treasury Department generates interest income and trading profits from: Interbank lending and borrowing; Investment in government bonds; Investment in financial institution bonds/CDs; and Investment in corporate bonds. Our Treasury Division also makes selective investments in equity securities to achieve capital appreciation and trading gains. Fee-generating products sold by the Treasury Division include: Foreign exchange; Commodities hedging products; Foreign exchange and interest rate swaps and derivatives; and Debt placements for corporate customers OUR PEOPLE Our dynamic management team comprises of highly qualified professionals with diverse and extensive experience from leading multi-national banks. Nguyen Duc Vinh Chief Executive Officer[12/27/2011 9:24:26 AM]
  21. 21. Report Nguyen Duc Vinh has served as Chief Executive Officer of Techcombank since 2000. He was formerly Deputy General Director of Vietnam Airlines. Vinh holds MBA degrees from the University of Michigan and the Institut Superieur des Affaires, Groupe HEC, Paris, France. Pham Quang Thang Head of SMEs Pham Quang Thang joined Techcombank in 1994 and has served in critical management roles such as Deputy General Director and Head of Treasury & Transaction Center. Thang holds a Master in International Accounting from Swinburne University of Technology. Le Xuan Vu Head of Strategy and Corporate Development Le Xuan Vu has over 15 years of experience at Techcombank, including as Head of the IT Center Deputy General Director and Head of Region 2 (Southern Vietnam). Vu holds an MBA in Electronic Commerce from North Central University, USA. Bach Thuy Ha Head of Transaction Banking Bach Thuy Ha was formerly with Citibank (Vietnam) and Deutsche Bank, serving as Chief Representative of the Hanoi Office. She has over 17 years of experience in banking. Ha holds an MBA from the University of Technology, Sydney and MA in Sociology from Lueven University, Belgium. Nguyen Cong Thanh Head of Corporate Banking Nguyen Cong Thanh was formerly Investment Director of Temasek Holdings in Vietnam, a senior manager at ABN-AMRO Bank and Natixis Bank. He has over 11 years of experience in banking and investment. Thanh graduated from HCMC Economics University.[12/27/2011 9:24:26 AM]
  22. 22. Report Phan Thanh Son Head of Treasury and Financial Markets Phan Thanh Son was formerly Deputy General Director at Tien Phong Bank. He has 13 years of experience in banking. Son holds a Master in Economics from the National Economics University. Cu Anh Tuan Head of Finance and Planning Cu Anh Tuan was formerly Chief Financial Officer at State Capital Investment Corporation (SCIC) and Fujitsu. He has 16 years of experience in accounting and finance. Tuan holds Master of Finance and Accounting at Swinburne University of Technology and a member of CPA Australia. Nguyen Canh Vinh Head of Sales & Distribution Nguyen Canh Vinh formerly TCB’s Head of Business Center at the Head Office and Head of Region 1 (Northern Vietnam). Vinh holds an MA from Latrobe University. Do Diem Hong Head of Financial Institutions Do Diem Hong was formerly Director of Import-Export Trade Finance of JP Morgan Chase in Vietnam and Deputy General Director, and Head of Credit and Credit Risk Management of TCB. Hong holds an MBA from France-Vietnam Management Training Center (CFVG).[12/27/2011 9:24:26 AM]
  23. 23. Report Phung Quang Hung Head of IT & Operations Phung Quang Hung was formerly with ABN Amro in Vietnam and IT Business Director for National Australia Bank in UK. He has over 16 years of experience in banking. Hung holds a Master in International Commerce from the University of Washington State. Dang Tuyet Dung Head of PFS Dang Tuyet Dung was formerly Head of Cash Management & International Payment Product Development at Citibank Vietnam. She has over 17 years of experience in banking. Dung graduated from the Hanoi National Economics University. BUSINESS RISK MANAGEMENT RISK GOVERNANCE We have organized our risk management function to monitor our exposure to credit, market, asset and liability risks and operational risks on a dynamic basis and to enable us to react to potential threats. As in other areas of our bank, we place a high priority on ensuring that we have the right organizational structure, policies and procedures, systems and analytical tools to monitor and manage our risk exposures. We place a high emphasis on risk management and encourage frontline staff to proactively identify and address risks and implement risk management policies and procedures. As pictured below, our risk governance structure includes a number of committees, divisions and departments that are responsible for credit approval and our overall risk management. The chart below illustrates our Committees, Divisions and Departments that have a primary focus on risk management.[12/27/2011 9:24:26 AM]
  24. 24. Report As outlined above, Techcombank’s Board of Directors has two committees that take key decisions and monitor the Bank’s performance relating to risk management. These committees include the ARCO, which addresses the Bank’s overall risk management framework, and the Credit Risk & Problem Loans Management Committee, which addresses NPL management and bad debt recovery. In addition, the Audit Control & Compliance Department performs the Bank’s internal audit functions and reports to the Board of Directors and Supervisory Board. Our Board of Directors has two committees that oversee and monitor our risk management platform. These committees include the ARCO, which addresses the Bank’s overall risk management framework, and the Credit Risk & Problem Loans Management Committee, which addresses NPL management and bad debt recovery. In addition, the Audit Control & Compliance Department performs our internal audit functions and reports to the Board of Directors and Supervisory Board. The Board of Management has three committees that monitor risk exposure, formulate policy and approve key decisions regarding different aspects of our risk management platform. The ALCO addresses the Bank’s asset-liability management, while the Senior Credit Committee is responsible for approving loans above a certain size. The FICO sets market risk limits for and approves selected investments by our Treasury Division. In addition to the committees listed above, we have sub-committees that focus on certain aspects of risk management as part of their broader mandates. The Product Committee, for instance, considers the risk profiles of any new products before we start offering them to customers. Risk Management Division Our Risk Management Division has the primary responsibility for overseeing, formulating policies for and developing tools to measure the Bank’s credit, operational, market, and risk exposures. The Division has specialized departments related to: Corporate and Financial Institution Credit Assessment; Personal Credit Assessment; Credit Monitoring for the Northern and Southern regions, including monitoring of existing loans for deterioration and support for loan restructuring efforts; Market Risk Management; Operational Risk Management; Collateral Assessment and Management; and Risk Strategy, including risk management policy and modeling development.[12/27/2011 9:24:26 AM]
  25. 25. Report Credit Approval Process Our SME, PFS, Corporate Banking and Treasury Divisions have their own respective credit approval processes. The credit processes for each division are designed with the aim of combining an appropriate level of rigor in its credit approval processes with timely and responsive decision-making and customer services. The process for each division is tailored to the risk profile and service requirements of its customers and product portfolio. All divisions’ approval teams are separate from the teams that focus on credit origination and marketing, giving us greater independence to apply our credit standards. RISK MANAGEMENT CREDIT APPROVAL AND RISK MANAGEMENT We have multiple levels of credit approval authority depending on the size of the proposed credit exposure and security offered. The credit limit, which is proposed in the credit application, will serve as a basis to determine appropriate approval levels. Each group of personnel has different authority limits, which are based on loan size and collateral type. As a result, the required level of approval can range from branch-level credit officers for very small loans or loans with low-risk (e.g., cash) collateral up to the CEO level for larger loans with less security or unconventional forms of collateral. Where loan size and simplicity permit, we have sought to improve the efficacy and efficiency of our credit approval process through use of credit scoring models. The SME Division introduced a scorecard-based credit approval process designed with the assistance of McKinsey & Company in December 2010 and has used it for all loans up to VND5 billion since March 2011. The PFS Division currently uses a scorecard developed in-house with assistance from HSBC for the evaluation of conventional credit applications. In May 2011, we acquired Experian’s application processing and analytics software, which we plan to deploy to further improve the quality and speed of our PFS loan approval process. On going Portfolio Monitoring We have developed a framework to identify, monitor and report potential credit risks from disbursed loans and other outstanding credit exposures. Responsibility for ongoing monitoring of an individual loan is allocated to the branch or the appropriate body at the regional or head office depending on a variety of factors, including the size and quality/ classification of the loan. In 2010, we improved our loan portfolio monitoring by implementing an early warning system ("EWS”) that aims to identify performing loans at risk of becoming NPLs. RISK MANAGEMENT MARKET RISK MANAGEMENT We were one of the first banks in Vietnam to establish a separate unit for monitoring and managing risks associated with market fluctuations. The Risk Management Division contains a Market Risk Management Department that is distinct from the Treasury Department and conducts 24 hour a day monitoring of our FX, money market, securities and commodity exposures. This organizational structure provides greater transparency for ALCO, ARCO, the Board of Management and the Board of Directors in monitoring our exposure to market risks. In 2003, we became the first bank in Vietnam to successfully deploy a market risk monitoring system, which has been continually extended and improved. Since then, the system has been upgraded and customized to focus on detecting and minimizing risks related to the trading of foreign exchange, money market instruments/financial institution obligations, securities and commodities. In 2009, the Market Risk Management Department implemented the T-Risk software application from Temenos, which automatically calculates the value of our money market, security and other portfolios and key market risk metrics.[12/27/2011 9:24:26 AM]
  26. 26. Report RISK MANAGEMENT ASSET AND LIABILITY RISK MANAGEMENT We are keenly aware of the risks associated with asset and liability mismatches in terms of interest rates, maturity and currency, especially given the growth in the size and diversity of our funding and lending portfolios over the last several years. To address risks associated with asset-liability mismatches, we emphasize: Controlling the size, structure and P&L of assets and liabilities; Developing contigency plans to ensure adequate access to funding; Identifying and analyzing risks of specific assets and liabilities and setting optimal ratios and limits for each component of the balance sheet; Performing stress tests to measure our exposure to asset-liability mismatches to maintain sound liquidity; and Checking that all activities conform to our overall risk management framework. We gather and analyze news and market information to generate forecasts that provide us with an overview of the market in the short, medium and long term. These efforts help us identify risks to our Bank and take steps to minimize risks and optimize returns. RISK MANAGEMENT OPERATION RISK MANAGEMENT We place great emphasis on operational risk management, and we have developed a comprehensive framework for managing operational risks. We consider operational risks to be the responsibility of each employee and cultivate awareness of operational risks as part of our culture. Management seeks to ensure that line managers implement risk and limit policies and conduct operational risk reviews on processes and products. Additionally, our Risk Management Division and Operational Risk Management Department build key risk indicators ("KRIs”) to support line managers in the early identification of operational risks and collection of data on loss events. Our segregation of front and back-office functions also provides a system of internal controls designed to improve transparency and mitigate operational risks. Our Audit Control & Compliance Department, which reports to the Supervisory Board and the Board of Directors, also minimizes our level of operational risks. This department conducts regular reviews of each department and branch’s compliance with Vietnamese banking regulations and our internal policies and procedures. Our Legal & Compliance Division provides legal/ compliance advice to senior management, oversees legal and compliance functions and litigation matters, sees that potential risks are properly indentified and reported to management. We have instituted a Business Continuity Plan ("BCP”) to provide for our continued operation in case of natural or other disasters. We have also staged rehearsals for staff to raise awareness of the protection measures that have been put in place. RISK MANAGEMENT TECHNOLOGY RISK MANAGEMENT[12/27/2011 9:24:26 AM]
  27. 27. Report Our Operational Risk Management Department identifies, evaluates, and suggests criteria to manage operational risks associated with technology, such as backup for IT systems, monitoring IT projects, delivering warning messages on through the IT system, and training staff on information security. DISTRIBUTION Branches and sub-branches are our main distribution channel in Vietnam with ATMs and electronic banking playing an increasingly important role in facilitating customer transactions. We have expanded its branch network rapidly in order to expand our customer base and provide better services. As shown in the table below, our branch and sub-branch network grew from 188 locations in 2009 to 282 as of December 31, 2010. These branches provide the main platform for the coverage of our SME and PFS clients. For SME and Priority Banking PFS customers, we also provide door-to-door services. As shown below, our branch network has grown at the fastest pace of the major JSCBs. Our branch network gives us extensive coverage in key urban centers throughout Vietnam, especially in the vicinity of Ho Chi Minh City and Hanoi.[12/27/2011 9:24:26 AM]
  28. 28. Report We also have the largest network of ATMs amongst private sector banks in Vietnam as of 31 December 2010. Our ATM network grew by approximately 81% from 565 in 2009 to 1,021 ATMs in 2010. CUSTOMER SERVICE We place a high priority on offering convenient, reliable and efficient customer services. This commitment is demonstrated by Significant investment in broadening the reach of our branch and ATM networks; Development of electronic banking channels, such as internet and mobile phone banking; Establishment of a 24/7 customer service center; and Door-to-door service for SME and Priority Banking PFS customers. ASSETS LOAN CLASSIFICATIONS AND PROVISIONS[12/27/2011 9:24:26 AM]
  29. 29. Report We classify loans based on the framework set forth by SBV in Decision No. 493/2005/QD-NHNN and 18/2007/QD-NHNN. These regulations classify bank loans and require general and specific provisions against loan losses as shown in the table below. The specific allowance rates illustrated below are applied against principal outstanding less the allowed value of loan collateral. These categories are set forth in the table below. As at 31 December 2010, non-performing loans (i.e., those in categories 3-5) represented 2.31% of total loans according to our VAS accounts. As at 31 December 2010, cumulative loan loss provisions equated to 50.5% of NPLs based on our VAS accounts. ASSETS OUR BUFFERS AGAINST CREDIT LOSSES To shield orselves against loan losses, we strive to Follow a thorough credit approval process; Comply with provisioning requirements set forth under SBV regulations and Vietnam accounting standards; and[12/27/2011 9:24:26 AM]
  30. 30. Report Obtain significant collateral for most loans to customers, loans to certain interbank borrowers and certain bonds purchased by ourTreasury. We enjoy a high degree of collateral coverage, with total collateral value of VND141,173 billion at 31 December 2010 versus total net loans of VND52,928 billion and total interest-earning assets of VND130,804 billion. This level of collateral cover provides us with a significant additional buffer against loan loss. ASSETS COLLATERAL EVALUATION We conduct our own appraisal of the assets offered as collateral for secured loans. We apply different appraisal methods for different types of collateral: For real estate, our staff performs on-site inspections and collect data on recent sale prices for similar assets in the area. For movable collaterals such as goods (e.g., inventories, commodities) and machinery, we take the actual market price of the asset or similar assets minus depreciation and costs, such as storage, transportation and customs expenses and potential liquidation costs. For new and used automobiles, we refer to a set of predetermined values issued by the General Department of Customs of Vietnam. For securities, we refers to trading prices, current market conditions and future forecasts and an internally generated rating for the security based on our volatility and liquidity. For each of these forms of collateral, we typically apply a discount to these benchmarks to arrive at an appraised value, providing an additional buffer against illiquidity of the asset or changing market conditions. INFORMATION TECHNOLOGY We view our information technology ("IT”) infrastructure as a core competency and a competitive advantage. Techcombank has proactively developed a comprehensive IT infrastructure to support its suite of banking products and activities. We aim to continue to develop our IT infrastructure to international standards and maintain our competitive advantage through improved efficiencies and enhanced service to our customers as we continue to expand our network. In 2002, we became the first bank in Vietnam to implement a core banking system, thereby consolidating information on the activities of all the Bank’s locations under a unified system. We selected T24 from Temenos Holdings, a core banking solution used by many of the world’s leading financial institutions, and today runs Release 10 of the software. We believe that our progressive approach to adopting new technology and information systems allows us to be substantially ahead of the competition. Other areas where we have shown leadership in adopting technology include being The first joint stock bank to join the Smartlink-Banknetvn ATM network; One of the first Vietnamese banks to offer fully-service internet banking for retail customers; Being the first Vietnamese bank to offer fully-service internet banking for corporate/SME customers; The first Vietnamese bank to offer payment services via mobile phone text message; The Vietnamese bank to select and implement a Business Process Management ("BPM”) platform for its retail and SME credit application processes; and The first Vietnamese bank to adopt an automated front- and middle-office treasury solution. Other major IT investments by Techcombank in recent years include implementation of Oracle’s Data Warehouse Model in[12/27/2011 9:24:26 AM]
  31. 31. Report 2010 and its recent purchase of Experian’s credit application process and decisioning system in 2011. MARKETING According to a market survey conducted on our bank in late 2010, customers demonstrated a high level of satisfaction based on the services per customer, frequency of customer transactions, percentage of satisfied customers and number of customers considering our products. The percentage of our customers willing to recommend our products to their friends and relatives was also high. Our brand awareness and brand usage ratios scored highly in the North and improved significantly in the South. Market studies have consistently shown that consumers regard us as a dynamic, creative and friendly bank. Our marketing strategy emphasizes the themes of "Convenience” and "Quality Service” Examples of "Convenience” include ready access to our branches and ATMs within one kilometer of many key business districts, reliable and user- friendly electronic banking channels and door-to-door service for Priority Banking customers. Examples of "Quality Service” include expeditious processes for account openings and standardized loan products, reliable 24/7 service channels and value-added services for our customers. We are continually developing new and improved products and services to meet the needs of its customers. Our ongoing initiatives include: Introducing savings and current account products with superior features and added value to meet customer requirements at different stages in their lives; Continued promotion of our payroll product to increase the number of basic customers and build a base for cross-selling other products and services; Promoting insurance products and competitive money transfer services to increase the proportion of fee income generated by the PFS Division; Developing bancassurance and structured finance products, particularly for Priority Banking customers; and Developing a long-term loyalty program to bring added value to our customers. SME In our marketing to SME customers, we emphasize our position as a trusted institution that offers reliable service. We have grown with many of our customers over the years and broadened its relationships with them beyond our historical focus on lending to include deposits and other products, such as trade finance, guarantees, payment services, foreign exchange and commodity derivatives. Towards this end, we focus on: Building personal relationship with corporate customers by relationship managers based at our branches and Head Office; Providing a high level of support and customer education on various banking products (e.g. advising clients on how to open letters of credit to support international trade); Providing additional advice to customers on developing and executing their business plans and strategies; Creating a specialized Transaction Banking Division purely focused on serving the transaction banking needs of its SME customers; and Working with business associations to organize seminars and presentations on economic and finance-related topics. These initiatives reinforce our reputation for outstanding services and deepen our relationships with corporate customers. PERSONAL FINANCIAL SERVICES We have established a strong reputation amongst retail consumers as a safe institution for maintaining deposit accounts that also offers high quality service. We have leveraged our brand equity with marketing campaigns built around the theme[12/27/2011 9:24:26 AM]
  32. 32. Report of "Trust”. This reputation, our deep distribution and convenient withdrawal options and payment services enabled us to increase its deposit base at a CAGR of 48.7% over 2007-2010 compared to 27.5% for the banking sector as a whole (system deposit data from IMF). We have also launched successful retail products such as Techcombank Visa credit cards, consumer finance and savings products that have helped us win the recognition as an innovative and technology-oriented bank. Attentive customer service is also a key ingredient of our strategy, with senior relationship managers providing "any time, anywhere” service for Priority Banking customers. We have also pursued a number of marketing initiatives to promote retail loan products. We cooperate with property developers to offer home loan projects for new developments. We also cooperate extensively with property agents and car dealerships to identify qualified customers and offer them home and car loans, respectively. To promote consumer finance, we have signed cooperation agreements with many manufacturers, retail stores, and supermarkets to gain access to potential clients. [back to top] Contact Us | Sitemap | Privacy Policy | Legal Notice | Qwik Report | © 2011 Masan Group. All rights reserved[12/27/2011 9:24:26 AM]