2013
OPEN LETTER
For the attention of the Board of Directors of The Asia Commercial Bank. At first, please receive the best wishes from the Treasury Department for good health and prosperity in the New Year. Since the establishment about 20 years ago, the Asia Commercial Bank has continuously developed and remained its position among the top banks in the bank industry of Vietnam. This achievement is due to the non-stop working effort of many generations of employees over the past 20 years. Our first-rate mission now is to inherit and continue to bringing ACB to a new higher level: ACB will no longer be just a national brand name but also an international one. In 2012, the economy has witnessed many difficulties. As a result of that, the bank industry had been suffering from serious problems as well. Especially, there are some unfortunate events has occurred in ACB, bring us more obstacle than ever. However, despite that, ACB is still standing firm on its ground . Succeeding 2012 is 2013 with full of opportunities. In preparation for this year, according to the Chairman of BODs request, we - the Treasury Department, has written this strategic financial report. This report will analyze the external and internal factors that affect the position of ACB in present as well as in the near future. Base on those analyses we offer 2 projects for our bank in 2013. We are looking forward to receive your feedback. With many thanks, Treasury Department Nguyen Thu Hang (manager) Nguyen Huyen Trang Do Thi Cam Van Vu Thi Ninh Nguyen Viet Trinh Nguyen Duy Thanh
INTRODUCTION
In this strategic financial report, we highly appreciate the outside environment such as the macro situation of the world as well as in of our country, Viet Nam; or the real state of affair of banking system, which all have significant importance of our oriented plan of ACB in 2013. After having a general view about Vietnamese macroeconomic situation through non-financial ability, we use the Camels Model, a useful tool to examine the safety and soundness of banks, and help mitigate the potential risks which may lead to bank failures. With the using this CAMELS model, the situation of financial health of Asia Commercial Bank will be analyzed and evaluated in different ways. All of the analysis above is the result of examining SWOT analysis in 4 respects: Strengths, Weaknesses, Opportunities, and Threats of Asia Commercial Bank at that time. Using SWOT Matrix, we make attempt to put forward the strategic plan for Asia Commercial Bank in the future as well as propose and re-evaluate 2 projects in 2013.
Contents
I. 1. 2. Affecting factors External environment analysis Internal environment analysis A. B. C. II. III. IV. V. Financial analysis Non-financial analysis Performance analysis
4 5 9 9 27 33 40 46 55 56
Affecting
factors
4 | External Environment Analysis
Developing economies
Eurozone:The world economy in 2012 experienced a lot of "bass note" and
lowered growth forecasts several times a year. The United Nations (UN) predicts the global economy will grow 2.2% in 2012, lower than the forecast 2.5% in June / 2012, and continues to grow "below potential" with an increase of 2.4% in 2013 and 3.2% in 2014. In particular, the debt crisis in the euro area (Eurozone) is the biggest risk for the global economy. Eurozone situation in 2012 can be encapsulated in three words "fragile". Europe: Many European economies came into recession and ultimately the Eurozone did not avoid recession back in III/2012 quarter. European Central Bank (ECB) said that the eurozone economy will decline 0.5% in 2012 and 0.3% in 2013 before recovering to 1.2% growth in 2014 American: the world's largest economy had relatively sluggish growth in 2012 and predicted no significant improvement in 2013 and 2014. UN predicts the U.S. economy will only grow by 2.1% in 2012, 1.7% in 2013 and 2.7% in 2014. Japan: The large investments to rebuild areas devastated by the earthquake tsunami in March / 2011 has helped Japan's economic recovery, but this recovery is "shortness of breath" when these expenses go down. Deflation, slow growth of world trade, weak domestic demand and exports decline, especially to China (down to 14.5% in 11/2012), is pushing Japan the risk of the fifth recession in 15 years.
Lastest forecast 2012 3,5 1,4 2,0 -0,3 2,4 5,6 8,0 5,4 2013 3,9 1,9 2,3 0,7 1,5 5,9 8,5 5,8 Compared to the July 2012 forecast 2012 2013 -0,1 -0,2 0,0 -0,2 -0,1 -0,1 0,0 -0,2 0,4 -0,2 -0,1 -0,2 -0,2 -0,3 0,0 -0,3
World Developing economies USA Eurozone Japan Emerging economies China ASEAN
B. Vietnam situation
2012 was a difficult year for the economy of Vietnam, from the difficult macroeconomic difficulties of enterprises and households. This is in the lowest economic growth for 10 consecutive years. But looking at separately for each quarter of 2012 saw more growth quarter after quarter. This economy shows signs of self-transformation, plus the impact of macro-economic policy.
C. Environment in bank
In the last 10 years, Vietnam has shown that a hot growth economy based on credit growth. The main focus in this situation is: bad debts rise while credit growth is too low, interest rates fall, liquidity is stable, profits plummeted, the change in the structure of the sector and issues of gold deposit..
1. Capital adequacy
CAR - capital adequacy ratio
Bank as to accept more risk, as requiring more equity capital to support the bank's activities and offset potential losses associated with a higher risk level. By this ratio one can determine the bank's ability to pay its debts with a term and facing other risks such as credit risk, operational risk. Because of the above reasons, the management of the banking sector are clearly defined and supervision of banks to maintain a minimum capital adequacy ratio, in Vietnam in accordance with Circular No. 13/2010/TT- SB on 20.05.2010 this ratio is defined as 9%.
Coefficient of self-financing
This coefficient demonstrates the ability to self-finance and long-term stability of the business. The higher self-financing of enterprises, the ability of self-control of the larger enterprise.
Sources: the financial statement of ACB over years Ratio of Chartered equity / Total assets of the bank decreased from 2008 to 2011, the biggest drop in 2011 due to asset size increased to 37% compared to 2010, but in 2012, when chartered equity does not fluctuate much, but Total assets were significantly reduced (as a result of business losses in 2012) makes the coefficient of self-financing surged 7.21%, however, the funding ratio is still low proved that ACB is not capable of self-financing, as well as offset losses if the risk occurs. As for equity, the bank ranked sixth, followed by three state-owned commercial banks and 2 other banks STB and EIB.
Strategic financial Report 2013 The chartered equity of some banks in 2011
Source: the financial statement of ACB in 2011 Regarding the charted equity, the bank ranked sixth after three state-owned commercial banks, BIDV, VCB, CTG and two other commercial banks STB and EIB. The cause of low chartered equity of ACB in the first quarter in 2011 due to the bank make dividend payments in cash 1st, 2011 at 20%.
It tells us that the ratio between the two basic sources of capital (debt and chartered equity) that banks use to pay for their operating activities. These two funds have distinct characteristics and the relationship between them is widely used to assess the financial situation of the bank. If this ratio is too high, the bank could be at risk in the payment of debts however when the rate is too low would show credit activity of banks is not good, not take full advantages of the equity from debts. Since bank is a special type of enterprise with the main function of the Total credit intermediary, the ratio will always be much greater than 1, an average of liabilities/tot 12.5 al charted equity.
2. Asset quality
Assets structure
In the list of total assets for ACB, lending still accounts for the largest proportion of 37% (2011) of total assets, followed by the inter-bank investment activities being 29% (2011) , investment securities occupied 9% of total assets. Most notable is the proportion of other assets of ACB is at a very high (18%) compared to other banks.
Sources: the financial statement in 2010, 2011 In terms of value of total assets compared to other commercial banks having the same scale, ACB ranked fifth after the state-owned commercial banks as AGRB, CTG, BIDV, VCB. In addition, loans and customer deposits balance of the bank also ranked after 4 state-owned commercial banks , left away behind Trading banks, ACB is the only non-state banks raise capital and loans to over 100,000 billion from customers. Therefore , ACB is non-state bank having total assets scale, loans and deposits is greatest.
Total assets
300,000 250,000 200,000 150,000 100,000 50,000 0 2008 2009 2010 2011 2012 105,306 167,881 205,103 177,012 Total assets 281,019
41%
2008
2009
2010
2011
Q2/2012
Compared with a group 1 of commercial banks , LAR of ACB is in the 4th low after MSB, TECH and SHB. Conversely BIDV is the highest rate of LAR with the proportion of loans up to 72% of the value of total assets. In addition, LAR at too high can cause liquidity risk for banks by credits with low liquid. The LAR of some commercial banks in 2011
2.50% 197.11%
200.00%
170.44%
150.00%
2.10%
2.00%
1.56%
1.50%
Coverage
100.00%
50.00%
0.00%
Sources: the report of VCBS In general, according to the quality of asset management of ACB, this bank is fully able to hedge against the risk of bad debts in the present time. Bank's NPL ratio reached 1.56% , which only higher than STB 1.29% and relatively low compared to the remaining banks. NPL coverage ratio is 80%, the two banks have greater rate are VCB and STB setting up enough reserves to cover bad loans.
3. Earnings
ACB witnessed speedy profit growth in the 20032007 period and started to slow down from 2008, when the financial crisis impact on the banking system. Profitability effect on total assets (ROA) and equity (ROE) is always at a high level compared to the industry average, although the two indices fluctuate from year to year. In 2007, ROA and ROE are at impressive peak rate with 3 per cent and 44 per cent, but in the next year, the index fell and in 2012 are on target respectively 0.52% and 7.19%. One of the causes for the high rate of profitability of the bank was due to the performance of the branches and transaction offices increasingly improved. At the time of 2011, for example, deposits and loans average per employee CN / PGD increased respectively 11% and 28% compared to the end of 2010.
3.00%
44.00%
2.10%
28.47%
1.31%
25.32%
ROE ROA
0.52%
However, in quarter 3/2012, the bank recorded a loss of 520.7 billion dong, caused by business activities of gold and foreign exchange losses to 1,144 billion. Because the rules of the State Bank of Vietnam (SBV) asked banks to stop raising capital in gold on 25th November,2012 (this deadline has now been pushed back - PV), so banks have to worry about buying gold to settle the loan, resulting in loss. Depending on the future price of gold, the losses can also arise in quarter 4/2012 when a bank boost gold buying high price in the market to offset state to the prescribed limit (calculated the first nine months of this activity loss 1,251.23 billion during the same period last year, a loss of 187.63 billion dong). In addition, business activities such as: trading securities, investment securities and other activities were at a loss. In addition, strong fluctuations of the bank's senior personnel also had no small influence on reputation of the bank, the deposit rate fell sharply with 14% by the end of September, 2012, in comparison with the beginning of the year, in the first nine months of 2012, ACB has reduced interest rate to 41.5%, expected ROAA and ROEA of 2012 decreased, respectively, 0.8% and 14.6%.
Calculated as:
Source: the financial statement over years According to the evaluation of S&P, the NIM is less than 3% would be considered low, while NIM is greater than 5% is too high. Average 5-year NIM (end of September,2012) was 3.08%, notably in 2008, 2009 which were the highest NIM , is the years that the system in liquidity got difficulties and the small banks must ask for a loan on the interbank market with high interest rate difference.
4. Liquidity
The second source is the most highly loosen assets in cash and investment securities decreased by 20% and 46%, while deposits and loans on TT2 increased to 139% in 2011, most likely due to bank navigating interest rate to interbank command to enjoy differences. Specifically, 06/30/2012, ACB mobilized 48,104 billion gold certificate less than 12 months and 74ty gold certificates from 12 months to 5 years, accounting for nearly 90% of total loans outstanding and valuable papers of the Bank. In addition, according to information from the shareholders' meeting in 2012, the bank is planning to issue $ 100 million of international bonds to raise foreign currency funds with long-term stability.
Change in assets and highly liquid debt over the years
While money and investment securities reduced ... ...Debt securities increased quickly though
Not only in the field of lending, personal deposit decreased from 84% in 2006 to 72% in 2011. The dependence of the ACB to mobilize resources from the SME sector (small and medium enterprises) is growing and alternative sources of personal deposits is strongly scattered by the
prosperity of the stock market (stock market) or routine people used to hoard gold. With the continuous interest rate ceiling down (to on 6/11/2012 9% / year), ACB personal cash flow expectations are out of the banking system, and thus to predict the proportion of deposits in the private sector also continued to decline.
Structure mobilized short and lending long term risk is not a major concern of the ACB. The proportion of short-term loans is maintained above 50%, while for medium and long-term structural shift: the share increasing medium-term loans and long-term replacement for loans. In contrast, the structure of deposits for a term not much changes when savings deposits accounted for the largest share, followed by term deposits and demand deposits. Although savings up to 70% of total deposits, mostly from the period of one year or less, the savings in the first year accounted for a negligible proportion. By more than 80% of the customer's deposits are concentrated in maturities of less than three months should net liquidity gap of less than 3 months of ACB always negative. However, thanks to the major credit term of 3 months (credits less than 3 months 19%), the difference in net liquidity kyhan than 3 months of positive ACB is reached. With the yield curve being set back, along with the cooling down of interest rates, we expect that in the long term deposits will increase in the future.
18% 11% 6%
8%
12% 9%
2010 10% 8% 2011 10% 16% 2nd 2012 10% 16% 0% 20%
Rate loan / deposit (LDR) of ACB tend to increase rapidly from 46.9% in 2005 to 81.5% in 2010 before being dropped to 71.2% in 6/30/2012. In our opinion, the tightening of credit growth of SB caused LDR decreases dramatically in the past year. In terms of liquidity, this ratio is quite safe by keeping below the 100% correct with prudent lending criteria of the bank. However, as mentioned above, the Bank also uses a variety of sources to mobilize and use of capital, the bank used LDR chinh1de more accurately reflect the liquidity of the bank. So to LDR adjust are higher than in the year, reaching a peak in 2010 with 93.2% before decreasing to 66.6% in 2011. LDR rate adjustment at 67.1% in our opinion is reasonable, for see ACB resources to finance new loans, not to depend too much on external resources.
Source: FR ACB
With cautious lending policy, percentage of LDR of ACB to 30/6/2012 reached 71.2%, the low 2 in comparison NH. If additional amounts raised from the issuance of valuable papers, investment trust and securities investments, LDR adjustment of ACB dropped to 67.1%. Along with the STB, TECH and SHB, ACB is the only 1 in 4 NH LDR adjusted below 100%. The capital adequacy ratio is always higher than the prescribed level. Very healthy financial situation, the minimum capital adequacy ratio CAR of the bank is always higher than the minimum prescribed level of 9% of the central bank. Total capital of ACB mainly to the rich from Tier 1 capital is constantly being added over the years. Tier 2 capital resources almost negligible except in 2007 when the ACB enjoy 1,400 billion through asset revaluation differences.
Solvency ratio (total assets immediate payment of liabilities) of ACB is always higher than 15% of central bank regulations. Rate in 2011 was 18.47%, down 1.4% compared to 2010. To more accurately reflect the safety of capital, we exclude benefits thethuong texture and intangible assets from total assets and Tier 1 leverage ratio (Tier 1 Leverage ratio). After reaching a high of 7.4% in 2008, this rate continued to fall, and only 4.3% in 2011. According to international practice, the leverage ratio of Tier 1 capital falls below 5% of the signal is to pay attention. However, as of 30/06/2012, the leverage ratio of tier 1 capital of the bank has increased to over 5% (5.3%) after the bank increased its capital in Quarter I/2012 success.
6. Performance
Cost ratio / Income (CIR)
CIR of the bank tends to increase sharply and has reached over 50% in quarter 2/2012 due to an increase from the cost of paying employees and branch expansion. In difficult economic times, the cost of paying employees increased due to the negative impact from inflation. In particular, staff costs in 2008 increased to 76%, in 2011 was 62% compared with the previous year. Proportion of these expenses account for about 50% of the cost of business management ACB. Investment property expenses also account for quite a large and constantly increasing over the years. The number of branches increased from 100 units in 2007 to 200 units in 2009, more than 300 units in 2011 and are expected to increase nearly 400 units in 2012 if there are no restrictions from the central bank.
B.
Non-financial analysis
1.
Attaching great importance to the development of the system non-traditional distribution channels
ACB attached great importance to the development of the system nontraditional distribution channels such as e-banking or telephone sales (telesales). ACB is a pioneer in providing retail banking services: the first commercial banks of Vietnam issued MasterCard and Visa credit cards; is one of the first banks in the country offer derivative products for customers like gold options, currency options. In January/ 2012, ACB has been selected MasterCard Worldwide cooperation to introduce the first MasterCard In Control Family service in the world. This is a revolutionary service that helps consumers manage personal finances of the family. The ACB became the first bank in the world to use new and innovative applications on the web platform shows potential development of e-banking services of the bank has reached out to the territory of Vietnam.
2.
ACB Startups information technology modernized system early
ACB system boot modernize banking information technology from an early age. This is the first bank access to modern banking in one comprehensive program lasts two years and by the foreign teachers in the banking sector performance. At the end of 2001, the bank official operating system core banking technology is The Complete Banking Solution allows all branches and transaction offices networked together, instant transactions, shared database centralized data. In the next year, ACB constantly upgrades the core banking system, in partnership with Microsoft and PricewaterhouseCoopers on the application of information technology
Comprehensive assistance in the array of risk management, financial management and human resource management
3.
In the strategic partnership between Vietnam banks and foreign banks, the bond between the ACB and SCB is one of the sustainable relationships and bring more added value. In 2005, ACB and SCB have signed an agreement comprehensive technical support and SCB officially became a strategic shareholder of the bank. In 2007, SCB supports ACB to issue bonds to raise capital. In particular, since 2008, SCB has sent personnel seconded to the ACB to help banks in the array of risk management, financial management and human resource management.
4.
With the motto of "faster growth - good management - High efficiency", ACB ambition by 2015 to become one of four banks has the largest scale, safe and efficient operations in Vietnam. ACB has carried out active diversification strategy by establishing three subsidiaries by the ACB direct investment 100% and one company may invest indirectly through subsidiaries. ACB Securities (ACBS): By the end of 2011, the market share of ACBS accounting for 4.76% of the whole market, including the market share in HOSE accounted for 5% and HNX is 4.36%. Customer account number accounting for 5.5% of the market. ACBS strong investment in information technology systems, online transactions account for 65.4% of the total number of transactions. Debt management companies and mining properties ACB (ACBA): ACBA responsible for the management and recovery of overdue ACB system and exploit the assigned assets. Original debt recovery rate improved over the years and reached 34% in 2011. Leasing companies ACB (ACBL): total assets and profits continued to increase sharply over the years; the delinquency rate was maintained at 0%. ACB Fund Management Company (ACBC): In 2011, ACBC successfully mobilized the first public fund scale 240.08 billion. Expected in 2012, ACBC will fund certificate officially listed on the Ho Chi Minh Stock Exchange.
5.
Restructure bank management apparatus in 2011 The participation of high-level experts in the organization
"To ensure the capacity of efficient management and operation of a large bank that ACB is ambitious to achieve, the bank is willing to accept the necessary changes to be able to soon offer standards and best international practice applied in the management and administration of the bank "... extract ACB Annual Report
In 2011, the bank has set up a new organizational and adjust, operate a number of committees of the Board of Directors. A special feature in the management of the bank is pretty much the Government's high-level experts are involved in advising and administration of the Bank. This can help the bank get some perks and privileges from the government.
ACB is one of With experience and brand reputation from 20 years of boom, the bank the best banks in kept its position as the strength of the banking sector Bank of Vietnam. ACB Vietnam has received the title of "Best Bank in Vietnam for four years in a row 2009, 2010, 2011, 2012" by the prestigious international magazines: Euromoney, Global Finance, Asiamoney, Finance Asia, The Asset vote Despite struggling in 2012, ACB still trust is the best bank in Vietnam in 2012, awarded by Eurmoney magazine. Especially, ACB also made the top 10, ranking second in the 500 largest private enterprises in Vietnam. Currently, the bank is the 5th largest bank in Vietnam with total assets as of the end of September / 2012 was 214,000 billion.
6.
7.
Brand strength
According to the evaluation report of Vietcombank Securities Company Limited May / 2012, ACB still is the bank belonging to the first group of brand strength, reflected in the brand strength index BEI is 2.6. In particular, the ACB has the greatest brand strength in Ho Chi Minh City
Brand strength index large banks in Vietnam in 2011 Source: Annual report of the Nielsen Moody's downgraded credit rating of ACB from D-to E + credit rating firm Fitch 4/2/2013 retain long-term issue rating of ACB at B, and bring ACB from negative watch list(Rating Watch Negative).
9. Activity cards
Card sales transactions in of ACB increased steadily over the years,
30 | Internal Environment Analysis| Non-financial Analysis
10.
Identify competitors
Sacombank and Eximbank are considered two fierce competitors with most banks in the retail sector today. Sacombank is proved to be more dominant than the banks in the current retail market share increased rapidly, extensive network and process fast. In particular with Eximbank, banks are proved to be weaker than the ACB and Sacombank, but thanks to extensive distribution network will be an opportunity to increase access to banking customers thereby expanding its market share
C.
Performance analysis
1. CAPITAL MOBILIZATION
2012 was a turbulent year for the Vietnam economy in general and the banking sector in Vietnam in particular by the impact of the macroeconomic situation in the world. For ACB, 2012 is a memorable year when the unfortunate incident occurs leadership of the serious economic consequences. With the disadvantages mentioned above, the growth rate of money tend to fall is inevitable. From 2007 to 2012, deposit growth tend to fluctuate sharply. Reaching the highest point in 2007,customer deposit growth hit up to 88.07%. This number varies from year to year, but in 2012, due to facing a number of difficulties, customer deposit growth fell to -12.31% At the same time the government reduced interest rates to curb inflation that money into other investment channels. Deposits, however, has a high proportion of the total resources that mobilization from consumers, who play a leadership role in creating the source for ACB
100.00% 88.07% 80.00% 60.00% 40.00% 20.00% 0.00% -20.00% 35.35% 33.56% 23.03% 16.16% -12.31% 160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 The speed of the development of deposits from customers Deposits from customers
Raise capital growth: Customers deposit mobilization always keeps a crucial role in generating funds for ACB"
Structure of funding sources "The rate of deposits of individual customer groups tend to increase."
Mobilize capital structure of banks ACB notable characteristics are deposits no term, savings and capital from individuals quite high. This helps reduce bank deposits from commercial banks and government-owned banks. Personal customers and business customers account for 82% and 18% of total deposits at the end of 2009. By the end of 2010 the proportion of individual deposits more than five times the capital of the enterprises (84% and 16%) due to benefit from the provisions of the ceiling interest rates up to 14%. However in 2011, the capital raised from the business increased 28% due to incentives from the bank. This is an important advantage for the brand of the
Currency structure, VND deposit accounts for 78.7% of total customer deposits in 2009 and the remaining deposits in foreign currencies and gold. In the period 2007-2012, the percentage of customer deposits in VND fairly evenly. The proportion of foreign currency capital higher than the average customer in the industry thanks to the ACB is the import-export business. Foreign currency deposits and loans ACB pretty balanced so the risk of losing the balance of sources and uses of foreign currency and funded in ACB be underestimated.
85
82.48
78.69
80.34
86.98
92
2007
2008
2009
2010
2. CREDIT ACTIVITIES
Credit growth "Credit growth fell sharply from 2007 to present." Growth rate of outstanding loans decreased in 5 years. The difficulties in the process of enterprise business, large inventory, in addition to increasing bad debt ratio are the cause of low credit growth in 2012. From 87% in 2007 fell to -0.62% in the fourth quarter of 2012
Credit structure: short-term lending and business sector accounts for a high proportion of the debt structure.
In 2011, loans grew 17.9%, reaching 102 809 156 million, including corporate loans accounted for 65.13%. Loans to individuals accounted for only 34.87% of total loans, down slightly from the level at the end of 2010 (37.36%). Short-term loans accounted for more than half of total loans (51.9%), the proportion of short-term loans has increased compared to 2010 but still less than in 2009 (57%). This part shows a high long-term interest rates that consumers do not want a long-term loan.
100% 49.99% 46.13% 63.11% 62.63% 65.13% 50% 50.01% 53.87% 36.89% 37.37% 34.87% 0% 2007 2008 2009 2010 2011 Economic Entities Individuals
ACB is the proportion of foreign currency loans is much higher than the industry average.
Ratios of loans to state-owned enterprises remain at a high level although this percentage has decreased from 2009 to 2011. Debt structure has changed a bit in a good way in the period 2009-2011 in which the ACB increase short-term loans and personal loans. This helps reduce maturities imbalance between the lending and deposit. USD loan outstanding was 74%, while foreign currency loans are 26% in the second quarter of 2012. Above rate do not fluctuate more than the previous year, the proportion of foreign currency loans in total loans of high ACB than the industry average (23-24%). ACB always balance their lending and deposit foreign currency bank and is active in financing export and import activities.
ACB has prescribed very strict loan classification include Current (Group 1), Special Mention (Group 2), Substandard (Group 3), Doubtful (Group 4), loss (Group 5). This debt groups tend to fluctuate from year to year. ACB has continuously improved credit risk management activities, the NPL ratio of the Group for the period from 2007-2011 are maintained below 1% and by the end of 2009 was 0.41% when the government launched stimulus package to support business, continues to be the only bank among the leading joint-stock commercial banks with bad debt ratio of less than 0.5%. But the first quarter and the second quarter of 2012 the bank's NPL ratio in excess of 1% but is still low bad debt in the context of the current banking system. We appreciate the ability to cover the bank's NPL coverage (Coverage ratio) average in 2008 and are now 119%. However, this rate continued to fall is also noteworthy, can bad debt provisioning policy is loose and do as tight as before. ACB is a diversified banking sector lending rate for the highest loan is out of balance. In the future, this will benefit the expansion and raising capital and expanding array of personal credit in a favorable way.
0.00%
Loan's Structure by industry Trading Agriculture, forestry and aquaculture Processing and manufacturing Construction Individual & Community Service Transportation, logistics and communication Training and Education Real estate Hotels and Restaurants Financial services Others 2007 25% 0% 17% 2% 47% 2% 0% 1% 1% 0% 3% 2008 23% 1% 13% 3% 51% 2% 0% 2% 1% 0% 4% 2009 32% 0% 18% 4% 37% 3% 0% 1% 2% 1% 3% 2010 32% 0% 16% 4% 38% 3% 0% 1% 2% 1% 3% 2011 36% 0% 15% 5% 34% 3% 0% 1% 2% 1% 3%
3. INVESTING ACTIVITIES
In recent years, from 2009 to 2012, total investment tends to decrease. In "Total investment fell sharply in five 2007, due to the explosion of stock market investing and stock trading this year has brought ACB a major source of income is 1241 billion. Cash flows years" from investing activities in 2009 were 327.877 million. However 2010, growth from investment activities decreased, even negative as 2011 2,275,468 million. Total investment fell sharply as stock market plummeted so the investments securities decreased. "portfolio Portfolio of bank in 2011 decreased 42% compared to 2010 mainly decreased due to reduced investment securities. Including investment securities primarily due to available for sale decreased by 85% by 1647 billion government bills that the reduced investment bank in 2010 to term. Investment securities held-to maturity investment decreased by 44% by ACB reduced investment in securities issued by credit securities" institutions in other countries (62%) and economic organizations in country of issue (33%), at the same time invest 1326 billion of government bonds to
By the end of quarter 2/2012, the portfolio of the bank increased by 12% compared to 2011, including securities trading down 31%, investment securities increased by 15%, long-term investment, no significant reduction0.5%. The main reason of trading securities decreased due to the difficult economy, the dismal stock market, interest rates plummeted nen banks tend willing to sell increased dramatically, from 269 billion to 3558 billion contract. These debt securities are mainly government bonds as a liquidity cushion for banks.
Structure of the investment portfolio Currency : VND billion 2010 2011 Q2/2012 Planned target 978 850 583 1.Trading securities 5 5 5 Debt securities 1.163 1.044 606 Equity securities 190 198 27 Allowances 48.202 26.089 29.897 2. Investment securities 2.033 294 3.587 Available-for-sale investment securities 1.912 269 3.558 Debt securities 241 60 56 Equity securities 120 35 27 Allowances 46.169 25.795 26.310 Held-to-maturity investment securities 7.738 9.064 Government bonds Debt securities issued by other credit 30.593 11.516 institutions Debt securities issued by other local 7.838 5.215
38 | Internal Environment Analysis| Performance Analysis
SWOT Analysis
STRENGTHS
1. Strong and reliable banking brand ACB brand is trusted the best bank in Vietnam 2012 2. Belong to the top joint-stock commercial banks In terms of total assets, and loans ACB is now one of the leading commercial banks of Vietnam, and is a member of the G12 (G12 is group of 12 leading banks in Vietnam and now account for 85% market share)
3. Supported from the government and state banks 4. Stable and efficient operation
Although the last time, the economy face with a lot of difficult, but business activities of the bank is quite good, the years are profitable and have positive growth , if compared to the other items are listed on the HOSE and HNX, ACB is the most efficient banking operations, ROE and EPS respectively reached 29%; 2900 dong
5. There is extensive support of Standard Chartered Bank (SCB) 6. Effective business management
A special feature in the management of ACB is having pretty much Government's high-level experts involving in advising and operating Bank
9. Scale capital
ACB is the bank's total assets stood 5th in the Vietnamese banking system, accounting for 10% market share of the country's savings mobilization, more
41 | SWOT Analysis
12. Competitive lending rates 13. High profitability 14. Easy payment operation
In addition to cash withdrawals at more than 11,000 ATMs and pay for goods at the POS unit iconed Banknetvn / Smartlink / VNBC nationwide, now with ACB local debit card, you can make payments for goods and services online at the website of the card-accepting unit (CAU) connected with the online payment system of the bank and / or the partner of ACB
42 | SWOT Analysis
WEAKNESSES
1. Network
Its thin when compared to banks in the block and does not cover the whole country
5. No clear differences in the provision of products and services 6. Credit activities of banks
Focus much on Ho Chi Minh city, while demand for credit from other regions is not trivial.
8. Technology
Still not enough to meet the needs of customer transactions, especially on gold trading.
43 | SWOT Analysis
OPPORTUNITIES
1. Vietnam's economic - integration and development
a. In the context of the Vietnamese economy is entering the stage of industrialization and integration, the country will witness the rapid economic transformation in all three aspects: agriculture, industrial and service sector, in particular service growth, accounting for superiority; labor structure will also have a corresponding shift; non-state economy has condition to develop rapidly. b. Law and political environmental: the political environment of Vietnam facilitates the formation and development banks, the stable political situation, especially with reputable banks and major brands such as ACB
THREATS
1. Competitive pressure
Severe pressure on domestic banks and foreign banks The opening of the financial markets will increase the number of banks, which have strong financial resources, technology, management skills, quality service and the result is increasing in competitive pressure. The foreign bank branches operating in Vietnam are famous brand in world financial markets.
45 | SWOT Analysis
oples bank
Development projects
In this Strategic Financial Reporting, we will evaluate the current external environment like: the national and international macro situation, the real state of affairs in the banking sector at present. After having an overall view of the macro situation, we will evaluate ACBs internal situation through the non-financial ability, operations and financial health. Specially in the financial analysis, we use the CAMELS model- a famous model used to evaluate financial intermediation. With the CAMELS, the financial health situation of ACB will be analyzed under different ankles. The result of all analysis above will be summarized in the SWOT analysis about: Strengths, weaknesses, opportunities and threats of ACB. Using the SWOT matrix, we would like to offer the developed direction for ACB in the near future and at the same time recommend two projects for 2013.
47 | Development Projects
I.
Project Evaluation:
We suggest this project for the network that of ACB is thin compared with the bank in the block and doesnt have nationwide coverage Based on non-financial analysis, we can see the network of branches and transaction offices of the new ACB is concentrated in the areas of economic development, the largest city, while the cash needs in the areas rural areas is increasing (especially the families members who send their children to the city), so, we need to shift money between rural and urban areas. Moreover, according to the statistics, 10 consecutive years of growth in agricultural production Svetlana was maintained at 4.8% / year, recent years was stable at 3.5% / year, this is a relatively high growth rate, it has the potential and attract domestic and foreign credit institutions, financial control is convenient for rural development. In addition, the views of the macroeconomic situation in the world, we can see many rural financial markets of countries in the world, especially countries in Asia with the agricultural and rural economy as Vietnam, such as Thailand, Indonesia, China, has been very successful. Therefore, in addition to concentrate in the major cities, the bank should expand its activities on the Vietnamese rural and fully potential land.
II.
Construction of transaction potential in rural areas. In the first implementation of this project, we selected four provinces in the North East for the application: Ninh Binh, Thai Binh, Bac Ninh, Hai Duong. These are the provinces that rural agriculture is quite characteristic. You can choose locations for branches and transaction offices in which attract many people (shopping centers, contact centers, etc.), there, ACB can easily reach customers. Moreover, with psychological farmers, we should apply the deposit program incentives, gifts or combined with the insurance company applies for customers and employees will entice more people to take family. At the same time, due to the access to rural financial system in Vietnam is not high, so we need to invest in quality deals staff to advise the people here, to help them understand and reducing risk.
48 | Development Projects
V.
Potential assessment
Based on the psychology of saving of Vietnamese and education situation is on respect, we believe that project is likely to succeed
We are planning to open one more branch and two transactions in each of the provinces so the initial cost is very high, estimated to take about 10 260 millions. While consuming a high cost, but because in these provinces, the bank has not been widely promote the image and prestige for the people, the number of customers is limited, leading to turnover can not be high (about 20 000 millions). Revenue growth maintained at an average of 10%. We use excel to calculate the NPV of this project will be -599. So after review and recalculate, we found this project is very hard to success.
49 | Development Projects
II.
Front office
Middle Office
Back Ofice
Investment Bank Investment Management Commercial banks Market Research Strategic Consulting
Operations
The main activities of investment bank is exchange, purchase and sale of financial products. Specifically, the investment bank is an institution acting as a financial intermediary to perform a range of financial services, such as underwriting: an intermediary between the issuer of securities and the investment, acting as an advisory: consult to help settle the M&A and restructuring activities or as a broker-dealer: an agency in the act as the client's issuance of securities. ACB will expand the network in the form of setting up the Investment Banking team, which has a wealthy knowledge and experience in the stock market as well as monetary finance to advise and implement monetary raise funds on the capital market for the customers. This service will be
51 | Development Projects
52 | Development Projects
V.
Budget
This is a project funding requirements are not too high. Initial Investment= Revenues in year 1= Lifetime of the investment Var. Expenses as % of Rev= Revenues growth Bil. VND 3,3 Bil. VND 5 10 50% From the second year to the 5th year: 15% each year
From the 6th year to the 10th year: 0% each year because of competitiveness. 15% each year Fixed Expenses The initial investment, which includes money for staff training costs and the installation cost of equipment and marketing at the beginning is 3,3 billion dong. The lifetime of the investment will be about 10 years and depreciation method is double declining balance method If we deposit the amount of money used for initial investment of 3,3 billion dong in another commercial bank with the average expected interest rate for the next 10 years is 10.8% per year, the opportunity cost is calculated as follow 3,3 (1 + 0,108) = 9,2 billion dong. The tax credit is 10%. The net working capital is estimated at 55 million dong. The working capital as percentage of revenue is 25%. The salvageable fraction at the end is 100%. Revenue in the first year will be approximately 5 billion dong. The variable expense as percentage of revenue is 50%. Fixed expense in the first year is 0 billion VND. The tax rate on net income is 25%, according to law of enterprises income of Vietnam 2013. The discount rate expected in this project is 10% After carefully assess, we have the NPV and internal rate of return as follow: = 4,49 Billion VND and = 15,20%
CONCLUSION
2012 marked a fluctuated year to Vietnam economy. Along with the ongoing global crisis, the dark side of the financial and banking sector made 2012 an unforgettable year of instability and dissolution of firms, companies, operationsProblems like losses, high amount of NPL, has been the reasons for losing faith in banks and they are now waiting to be solved with urgent solutions. Facing up all of those general challenges, with the threats from internal events, ACB is still standing firm as a prestigious brand name for all customers. Our operation reports at the end of 2012 has shown that ACB has been gradually overcoming the difficulties, restoring the development in the past step by step. This is partly thanks to the efforts of the whole bank, including employers directions and employees awareness and professionals. From 2013, on the basis of research, evaluation of macro and micro environment, and SWOT analysis, we would like to offer two potential projects with the hope that ACB will always grow stably and steadily, worthy with the title one of the top banks in Vietnam. We are now looking forward to your recommendations and feedbacks.
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REFERENCES
1. Lectures of MBS. Nguyen Thi Hong Nguyen: Slides and sample problems solutions. 2. Bodie, Z & Merton, R (2000), Finance, Prentice Hall Inc. 3. Bagley, N., slides on Finance, Copyright Prentice Hall Inc.1999 4. The official website of Asia Commercial Bank http://www.acb.com.vn/ and all the financial statements from 2007 to 2012. 5. Some official websites on securities analysis that information of Asia Commercial Bank http://finance.vietstock.vn/ACB-ngan-hang-tmcp-a-chau.htm http://www.vinacorp.vn/stock/hnx-acb/ngan-hang-thuong-mai-co-phan-a-chau http://ebank.vnexpress.net/gl/ebank/ http://vneconomy.vn/p0c6/tai-chinh.htm http://www.stockbiz.vn/Stocks/ACB/CompanyReports.aspx http://www.cophieu68.com/incomestatementq.php?view=bs&id=acb&year=2012 6. Introduction to Project Finance, 2005, Andrew Fight.
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