Introduction VietinBank

1

Overview of VietinBank

1988 2009 2010

• Vietnam Joint Stock Commercial Bank for Industry and Trade (“Vietinbank”) is a leading financial and banking group of Vietnam with diversified activities

• Established in 1988, upon its separation from the State Bank of Vietnam (“SBV”)

• In 2008, the Vietnam Bank for Industry and Trade successfully undertook its Initial Public Offering

• The Bank was equitized and renamed into Vietnam Joint Stock Commercial Bank for Industry and Trade in July 2009

• As at 31/Dec/2010, VietinBank has total assets of VND367.7trn accounting for a 12.7% market share, total customer deposits of VND[205.9]trn, accounting for 12.1% of the market share and total customer loan of 231.4trn accounting for 10.4% of the loans market share

• Provides a range of banking and financial products and services (retail banking, trade finance, Internet banking, etc.) as well as manages correspondent banking relationships ~1000 banks worldwide

• Present in 63 provinces and cities and has the 2nd largest distribution network in Vietnam

VietinBank has formidable franchise with strong market share

(As at 31/12/2010)

Overview

12.70%

12.10%

10.40%

15.00%

23.00%

Assets

Deposits

Loans

OverseasRemittance

Credit CardBusiness

2

Key business lines and product portfolio

Product portfolioKey business lines

Corporate and financial

institution banking

SME banking

Retail Banking

International Banking

• Offers credit lines, syndicated loans and project specific loans

• Corporate loans constitute 45% of gross loans as at 30 Jun 2011

• Interbank and valuable papers trading

• Trusted and pioneering bank for SME clients• SMEs constitute 35% of gross loans as at 30 Jun

2011

• Range of consumer lending products, including business and consumer loans

• 1,093 branches, Transaction offices and Saving offices

• Trade financing, international settlement and overseas remittance services

Card Services

Import-export payment

Derivative products

Overseas remittance

Foreign exchange

Guarantee

Securities

Other products

•VietinBank cards and international credit cards

•Export/Import LC confirmation, transferring, settlement

•Document processing, shipping guarantee issuance

•Spots, forwards, swaps and options

•Speed remittance through remittance companies

•Spots, forwards, swaps and options•Interbank market

• Guarantees for loans, advanced payment, performance, payments, tax/customs, warranty

• Brokerage services, securities custody analysis and investments etc.

• Money transfer, leasing, insurance, individual and corporate savings

3

Second Largest Branch Network in Vietnam

North: 1 MOC & 71 branches

Central: 28 Branches

South: 50 Branches

1 Main Operation Center in Ha Noi

1,093 branches, Transaction offices and Saving offices

2 Representative offices in Da Nang

and Ho Chi Minh City

2 Joint-Venture Companies

6 Subsidiaries

3 non-profit making units

Multiple touch points for individual and corporate customers across Vietnam Expanding network overseas

• Opened a branch in Frankfurt in September 2011

• Plans to open branches in Berlin and Laos in 4th quarter of 2011

• Plans to expand network to England, France, Czech, Poland and South-east Asia nations in 2012

Branch expansion plan

Strong distribution footprint in Vietnam with significant expansion potential

Correspondent Banking Relationships with nearly 1.000 financial institutions in the world

2

3

1

4

Pre-eminent financial institution in Vietnam with a dominant market share

Assets (VND trn) Loans (VND trn) Deposits (VND trn) Branches (VND trn)

Join

t S

tock

Co

mm

erci

al B

anks

Sta

te O

wn

ed B

anks

Largest bank in Vietnam in terms of total loans and 2nd largest in terms of distribution network

396

233

179

143

141

130

115

535

366

307

43

25

18

38

24

20

2303

597

358

259

102

58

69

81

33

56

192

141

91

58

75

57

77

1093

320

281

183

378

142

151

5

VietinBank’s Credit Strengths

Customer Base

Products & Services

Technology & Management

Human Resources

Network

• Good knowledge of customers with a large number of traditional customers

• Large and increasing source of deposits

• Large lending customer base

• Diversified products and services which are constantly improving

• Focused investments on modernization, software application in banking management

• Management system which complies with the standard of modern banking management

• Professional, secured and modern model of operation and management

• Young, enthusiastic competent and well-trained staff and management

• Second largest bank in Vietnam in terms of assets

• Wide network of diversified business lines with central and convenient locations

6

Performance Highlights

2011 Target H1 2011 Results 2010 Results

Total assets 441,000 395,852 367,712

Chartered capital 20,000 – 25,000 16,858 15,172

Total mobilized funds 408,000 226,286 339,699

Mobilized funds growth rate 20% 54%

Total loans 419,000 263,267 232,204

Total loans growth rate 20% 43.5%

Profit before tax 5,100 3,894 4,598

Profit after tax 4,000 2,919 3,414

ROE 16% – 18% 17.45% 22.1%

ROA 1.2% 1.12% 1.50%

NPLs ratio <3.0% 1.71% 0.66%

CAR >9% 10.41% 8.02%

Source: Company Data

TO BE UPDATED WITH 2012 TARGETS. Please confirm figures H12011 and 2010 Figures

We are waiting for the approval of the BOD for the 2012 targets. We will add the 2012 targets next week.

7

Vietinbank Subsidiaries’ Performance


SubsidiariesContributed

Capital (VND bn)

Ownership(%)

Total assetsAs at 30.06.2011

(VND bn)

Chartered CapitalAs at 30.06.2011

(VND bn)

Profit before taxAs at 30/6/2011

(VND bn)

VietinBank Leasing Company Ltd 500 100% 1,612 500

50

VietinBank Securities Joint Stock Company 500 75.61% 999 790

30

VietinBank Debt Management and Asset Exploitation Company Ltd

30 100% 41 30

0,6

VietinBank Insurance Company Ltd 300 100% 477 300

41

VietinBank Gold and Jewelry Trading Company Ltd

300 100% 330 300

17

VietinBank Fund Management Company Ltd 500 100% 1,133 500

26

Indovina Joint Venture Bank 696 50% 21,802 3,402 317.5

Vietinbank – Avia Life Inssurance Joint Stock Company

400 50% - 3,402 -

1

2

3

4

5

6

8

7

8

Ownership Structure

Stakes of Major Shareholders

80%

3%

7%

10%

State Bank of Vietnam

IFC

IFC Capitalization Fund

Others

Major shareholders’ support

Shareholder Support

Vietnamese Government

• VietinBank is currently 80% owned by the Government. Government’s share holding will not fall below 51% at any time

• The majority of Board of Director’s members are appointed by Government

IFC

• Conducting technical assistants to VietinBank in:

• Risk Management

• SME services

• Energy saving efficiency

• Information technology

• Standardization of other services

9

Strong Relationship with Government & SBV

•VietinBank is currently 80% owned by the Government

•Government’s share holding shall fall below 51% at any point in time under ..

•Government has been an active contributor to VietinBank’s capital raising on a regular basis

•VietinBank has 7 Board of Directors out of which 6 are nominated by Govt.

•Members of the Management Board needs approval by the SBV

•SBV is the direct regulator for the Bank’s operation

•Vietinbank is a pioneer bank in implementing government and SBV’ monetary policies.

Government Ownership

Explicit Government

Support

Appointment of Board of Directors

Under supervision of

the SBV

Implementation of Govt. Policies

10

Corporate Mission and Strategic Objectives

Continue to expand business vertically and horizontally to increase market share1

Enhance service quality to ensure the efficiency in the context of well-managed risks2

Improve financial capability and transparency3

Strengthen corporate governance and risk management in line with international standard4

Accelerate modernization of the Bank5

Become the leading financial group and key player in Vietnam6

Maximize stakeholder’s value7

MissionEstablish VietinBank as the leading financial group in Vietnam and highly rated bank in the international domain with motto: Safety – Efficiency – Modern – Sustainable growth, focusing on Commercial banking, Investment banking and

others

Overall Strategic Objectives

11

Strategic ObjectivesAssets & capital

• Annual average growth rate of total assets 25-35%

• Acceleration of post-equitization process to increase shareholders’ equity

• Diversification of ownership while keeping the Government stake of at least 51%

• Strengthen capital base to enhance financial strength (CAR >=10%, ROE: 20-25%; ROA: 1.5-2.0%)

Organization & Management

• Manage and develop the organization with reasonable and clear hierarchy;

• Standardize internal policies and procedures in each department

• Develop and establish subsidiaries

• Expand business network both domestically & internationally;

• Strongly develop retail banking system

• Focus on risk management: maintain NPL ratio <=3.0%

Technology

• Establish a unified, modern, and secured information technology system, one which is highly integrated, stable, and centralized

Human Resources

• Standardize human resources, reinforce training and enhance staff capacities; all to improve the quality of the Human Resources

• Innovate and refine employment and remuneration mechanisms

• Completely comply with Internal Labor Regulation and Corporate Culture

Credit and Investment

• Credit operations remain key operations and stay market competitive

• Adjust credit structure appropriately, suitable for VietinBank advantages

• Enhance credit risk management quality, ensuring NPLs below 3%

• Diversify credit and investment activities in financial markets, remain a market maker, and enhance capital employment and liquidity management efficiencies

Products & Services

• Broaden customers & products base

• Develop non-banking products & services to increase share of non-interest income to around 30-40% of the total income

• Use modern technology as the foundation for customer-centric services development

• Position the bank as a strong universal bank, providing a full spectrum of banking products & services

4

6

52

3

1

Others• Enhance marketing & PR• Improve social responsibilites & community services

7

12

Future Prospects and Plans

Development Plan for 2011 & beyond


Realize the Vision 2015: To become the leading, efficient, and modern banking and financial group for the economy4

Increase capital to ensure operational safety2

Invest in modern banking technology, standardize governance, products and services, procedures, and slowly integrate into the global financial system to enhance VietinBank’s brand name both in the domestic and overseas markets

3

Continue to accelerate post-equitization processes, enhancing competitiveness and integration1

13

166,113

193,590

243,785

367,712

295,009

395,852

161,619

234,205

184,911

263,267

148,530

192,208

118,602100,482112,426

121,634

155,965

205,919

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Total assets Customer loans and advances Customer deposits

VietinBank has enhanced its scale steadily

Assets and Loan Growth NII and Margins (*)

4,683

7,189

7,932

12,089

5,326

9,357

4.00% 4.04%

3.02%3.04%

4.12%

2.31%

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Net interest income Net interest margin

VND bn

Source: Company Data(*) Net Interest Margin calculated as Net Interest Income / Earning Assets. Earning Assets calculated as Balances with the SBV + Placements with and loans to other banks+ Loans & Advances to customers +

Investment securrities – held to marturity

VND bn

Strong growth in assets, loans and deposits have resulted in higher margins

14

Healthy yield and cost trend

10.77 10.559.94 10.11

9.679.06

6.977.077.007.297.14

7.91 9.008.87

9.549.51

8.72 8.82

2007 2008 2009 2010 30-Jun-10 30-Jun-11

% %

Yield on Advances Yield On Investments Yield on Funds

Yield on Funds Cost of Funds

4.89

6.436.67

6.16 6.28

5.655.11

6.496.75

6.17 6.27

5.76

3.61

2.79 2.71 2.733.063.02

2007 2008 2009 2010 30-Jun-10 30-Jun-11

% %

Cost of Deposits Cost of Funds Spread

Well positioned to maintain margins in a rising interest rate environment


15

Diversified non-interest income supports growth

Net Fee and Commission Income

335

438

649

1,436

688 709

1,631

1,067

804

1,294

716

545

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Net fee and commission income Non interest income

VND bn

Fee and Commission Income Breakdown


42.0% 40.8% 41.6%

29.2% 27.4%35.1%

14.9% 20.8% 22.5%

17.1% 16.6%

20.2%

1.2%1.6%

5.3%

14.2% 16.8%

10.7%

41.8% 36.9%30.6%

39.4% 39.2%33.9%

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Settlement Services (%) Treasury activities (%)

Agent services (%) Other fees and commissions (%)

Increased fee income contribution has helped sustain earnings growth

16

VietinBank has managed its operating cost well….

Cost to Income Ratio

42%

57% 58%

49%

54%

48%

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Cost to income ratio

Operating Expenses Breakdown

1,619 2,947 1,794 4,1412,293 3,381

312827

289 644

297348

8351,184

1,081 2,412823 1,475

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Other operating expensesDepreciation and amortization charges

Payroll and other staff costs


VND bn

Declining costs have resulted in an improved cost to income profile

17

…resulting in strong overall profitability

Profitability Trends Healthy ROAA and ROAE Levels

14.12%

15.70%

22.99%22.01%

28.36%

17.20%

1.35%

1.31%

1.01%1.11%

0.83%

1.53%

2007 2008 2009 2010 30-Jun-10 30-Jun-11

ROAE ROAA

VND bn


1,149

1,804

2,873

3,414

1,652

2,919

3,883 3,737

4,264

7,622

2,884

5,621

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Profit after tax Profit before provision for credit losses

Focused operating achitecture has enabled efficient growth in profitability

18

Asset quality overview

• VietinBank has in place healthy credit systems, utilising relevant exposure limits and credit risk appetite

• Such systems are enhanced by a strong credit culture, benefiting from well-defined delegations of authority and reporting lines

• Advances are relatively well diversified across business entities & Industrial sectors, ensuring a high degree of diversification of potential risks

• Comprehensive and detailed loan classification and provisioning requirements and policies are in place, consistent with regulatory norms and guidelines

• Existence of robust procedures have resulted in positive developments in non-performing asset measures in recent times

• Strong Credit risk management system is in place which has ensured improvement in the asset quality in this growing

economic environment

Healthy Credit Systems

Well Defined Sectoral, Single Party and Group Exposure Limits

Comprehensive Loan Classification and Provisioning

Requirements

Strong Credit Risk Management

System

19

Bank has robust credit rating processes in placeRating Procedures1

Information collection and scoring information submission (implemented by customer relationship staffs)

1

Scoring and rating customers (implemented by Risk Management Staffs)2

Reviewing and checking scoring and rating results (implemented by Heads of Risk Management Department)

3

Approving the scoring and rating results (implemented by the competent levels)

4

Completing scoring and rating documents5

Following-up and observing any fluctuation/changes of the scoring and rating results (implemented by Risk Management Department at the Head Office)

6

Recording & Filing documents7

1For corporates, individuals and household customers and financial Institutions

20

Quantifiable scoring and rating grades helps to maintain credit quality

No. Corporates Individuals & Household Customers Financial Institutions Ratings

Group 1 90 – 100 90 – 100 90 – 100 AAA

Group 2 80 - < 90 80 - < 90 85 - < 90 AA

Group 3 73 - < 80 73 - < 80 75 - < 85 A

Group 4 70 - < 73 70 - < 73 65 - < 75 BBB

Group 5 65 - < 70 63 - < 70 55 - < 65 BB

Group 6 60 - < 65 60 - < 63 50 - < 55 B

Group 7 56 - < 60 56 - < 60 45 - < 50 CCC

Group 8 53 - < 56 53 - < 56 40 - < 45 CC

Group 9 45 - < 53 44 - < 53 35 - < 40 C

Group 10 20 - < 45 20 - < 44 < 35 D

Total Scores

21

Diversified loan portfolio

Loan Portfolio by Industry


29%

17%

12%

6%3%2%6%

27%

19%

12%

11%

7%

4%2%

6%

12%

6%

7%

6%

6%

Manufacturing and processing

Households

Wholesale and retail trade, repairof motor vehiclesConstruction

Transport, warehouse andcommunications Mining and quarrying

Community, social and personalservice activitiesElectricity, petroleum and water

Hospitality services

Other*

Other*: Agricultural & forestry, Business and advisory services, Financial intermediation, Health care & social work, Aquaculture, Education & training, Others, Science and technology, Recreational, culture, sporting activities, State management, security and national defense, party union & social guarantee, International organization and bodies

Inner ring total loans 31 Dec 2010: 234,204 VNDbn

Outer ring total loans 30 Jun 2011: 263,267 VNDbn

20%

38%

33%

19%

37%

35%

2%6%

2%1%

6%

1% Construction andtransportation

Industrials

Trade and services

Agriculture, forestryand aqua-culture

Consumers

Others



22


Loan Portfolio by Borrower Type

46%

34%

19%

45%

35%

20%

0%

1%

Corporates

SMEs

Individuals

Others




Loan Portfolio by Business Entity

20%

18%

16%

4%

19%0%

20%

16%

15%13%

7%

6%

19%

0%

6%

4%

13%

4%

Private limited companies

Other joint-stock companies

State joint-stock companies

Central state-owned enterprises

State-limited compnaies

Private companies

Other corporate loans*

Loans to individuals

Other loans

Other corporate loans*: Provincial state-owned enterprises, Foreign invested enterprises, Co-operatives and Partnership companies



23

Loan Portfolio by Currency Loan Portfolio by Original Term


1%

21%

78%

1%

19%

80%

EUR

USD

VND

60%12%

28%

60%

12%

28% Short-term loans

Medium-term loans

Long-term loans

Short Term Loans : Tenors of less than 12 months Medium Term Loans: Tenors of [ ] months and overLong Term Loans:






Please define Medium term loans and Long-term loans

24

Prudent Classification & Provisioning for Non-performing Assets

The provisioning for NPA accounts is made based on availability of security, chances of recovery, age of the asset, etc.:

Current Special mention Substandard Doubtful Loss

Debts that are not due and the borrower is ableto pay the principal and

interest of debts in full and in a timely manner

Debts that are overdue less than 90 days and rescheduled debts that

are not due

Debts that are overdue from 90 to 180 days andrescheduled debts that are overdue less than

90 days

Debts that are overduefrom 181 to 360 days

and rescheduled debtsthat are overdue from90 to 180 days assets

Debts that are overdue more than 360 days, rescheduled debts that are overdue more than 180 days and debts that are subject to reschedulingarrangements as directed by the Government

Please confirm if below is correct and please provide NPA provisioning measures for each classification of NPL

1 2 3 4 5

Non-performing loans:

25

Asset Quality is Robust as Seen By Low NPL

Group 30 June 2011 2010 2009 2008

Value (VND bn) % Value

(VND bn) % Value (VND bn) % Value

(VND bn)%

Group 1

Current255,125 96.91 230,267 98.32 160,510 98.37 114,596 94.90

Group 2

Special mention3,636 1.38 2,399 1.02 1,660 1.02 3,968 3.29

Group 3

Substandard1,326 0.50 925 0.39 230 0.14 847 0.70

Group 4

Doubtful439 0.17 411 0.18 333 0.20 803 0.67

Group 5

Loss2,739 1.04 203 0.09 437 0.27 537 0.44

Total 263,267 100.00 234,205 100.00 163,170 100.00 120,751 100.00

26

NPL Classification – By Industry

VND trn 2010 Group 1 Group 2 Group 3 Group 4 Group 5 Total

Industry 2010

As at 30 Jun 2011 2010

As at 30 Jun 2011 2010

As at 30 Jun 2011 2010

As at 30 Jun 2011 2010

As at 30 Jun 2011 2010

As at 30 Jun 2011

Construction & Transportation 42.21 46.8 1.62 2.6 0.28 0.56 0.14 0.19 0.23 1.32 44.01 51.47

Industrial 86.98 98.87 0.48 0.29 0.76 0.19 0.14 0.18 0.12 0.92 88.46 100.45

Trade & Services 79.7 85.02 0.29 0.34 0.14 0.41 0.13 0.04 0.61 0.45 80.33 86.26

Agriculture, Forestry and Aqua-Culture 5.12 6.21 0.5 0.15 0.20 0.03 - 0.02 0.60 0.01 5.13 6.42

Consumers 12.96 15.00 0.4 0.2 0.10 0.12 - 0.01 0.10 - 12.96 15.33

Others 3.30 3.23 0.7 0.06 - 0.01 0.06 - - 0.03 3.31 3.33

Total 230.27 255.13 3.99 3.64 1.48 1.32 0.47 0.44 1.66 2.73 234.21 263.26

27

NPL Classification – By Borrowers

VND trn 2010 Group 1 Group 2 Group 3 Group 4 Group 5 Total

Industry 2010

As at 30 Jun 3011 2010

As at 30 Jun 3011 2010

As at 30 Jun 3011 2010

As at 30 Jun 3011 2010

As at 30 Jun 3011 2010

As at 30 Jun 3011

Corporates 103.51 117.41 1.02 0.96 0.75 0.57 0.11 0.08 0.29 2.19 105.42 121.21

SMEs 80.68 86.68 1.10 2.50 0.61 0.55 0.22 0.33 0.14 0.53 82.21 90.59

Individuals 45.50 49.45 0.12 0.18 0.11 0.20 0.78 0.03 0.29 0.01 45.83 49.87

Others 0.75 1.59 0.00 0.00 00.0 0.00 0.00 0.00 0.00 0.00 0.75 1.59

Total 230.27 255.13 2.40 3.64 0.93 1.32 0.41 0.44 0.20 2.73

234.21 263.26

28

NPL ratio - Industry comparison

Source:SBV, VietinBank

NPL ratio much lower than the industry average

1.41%

2.30%

1.81%

0.61% 0.66%

1.09%

1.71%

2.65%

1.79%

2.13%1.99%

2.16%2.30%

3.10%

2006 2007 2008 2009 2010 30-Jun-10 30-Jun-11

VietinBank Industry average

29

Improving Asset Quality

Moderate Credit Costs Provision Coverage Ratio

Moving in right direction to achieve its objectives

1

2

1

1

2

2 1.811.81

1.181.19

0.96

1.7

2007 2008 2009 2010 30-Jun-10 30-Jun-11

%

Credit Cost (Loan loss provision / Total Advances)

Credit Cost (Loan loss provision / Net Advances)

14.48

38.6949.85

6.278.6710.01

76.98

65.37

53.97

48.0565.78

81.73

2007 2008 2009 2010 30-Jun-10 30-Jun-11

%

Loan loss provisions expense to operating profits

Provision Coverage Ratio

30

Loan classification - By collateral

80.20%

95.22% 99.47%

23.60%

91.57%

4.78% 0.53%

76.40%

8.43%19.80%

Group 1 Group 2 Group 3 Group 4 Group 5

With Collateral Without Collateral

Most of the existing loans in all categories are covered by adequate collateral

(As at 31 March 2011)


31

Loan to Deposit Ratio

Loans and advances funded by low cost deposit base with average loan to deposit ratio of 110.81%

Healthy Loan to Deposit Ratio

VND bn


Amended values to be consistent with slide 24. Please confirm if below is correct.

112,426 121,634

148,530

205,919

118,602

161,619

192,208

155,965

100,482

234,205

263,267

184,911

89.38%97.51%

108.81% 113.64%118.56%

136.97%

2007 2008 2009 2010 30-J un-10 30-J un-11

Customer Deposits Loans and Advances to Customers Loan to Deposit Ratio

32

11%

8%

14%

57%

13%3%

14%7%

65%

8%Due to Government & SBV

Depositis & Borrowings fromcredit institutions

Customer deposits

Sponsor capital, entrustedinvestment that the creditinstitution has risks

Value papers issued

112,426 121,634148,374

205,918

155,965

192,208

5,2608,824

15,012

35,096

20,049

47,841

2007 2008 2009 2010 30-Jun-10 30-Jun-11

Deposits and borrowings from other banks

Customer deposits and other amounts due to customers

Stable Fund Mobilization Growth

VND bn

Deposits of customers & credit institutions (VND bn)

Source: Company reports

By Source

Inner ring: As at 30 June 2010: 318,805 VNDbn

Outer ring: As at 30 June 2011: 336,413 VNDbn

130,458

163,386

241,014

117,686

240,049

176,014

33

34%

11%3%

10%

1%

52%

30%

58%

2%

State-owned companies

Non state-ownedcompanies

Foreign investment

Individuals

Others

Customer Deposits Breakdown

By Type

76%

77%

3%

20%

1%1%

1%

2%

4%

17%

Demand deposits

Term deposits

Deposits for specificpurposes

Margin deposits

Other amounts due tocustomers

By Customers

Total deposits 2010: 205,918 VNDbn

Total deposits 30 June 2011: 192,208 VNDbn



Source: Company reports

34

Customer Deposits Breakdown (Cont’d)

By Maturity*By Currency

86%

14%

83%

17%

VND

ForeignCurrencies

*Short-term refers to < [xx] years/months

*Medium & long term refers to > [xx] years/months





82%

18%

84%

16%

Short-term

Long & Mediumterm

Please confirm what is short-term, medium and long term

35

Securities Portfolio

Diversified securities investment portfolio

Securities type

As at 30 Jun 2011(VND bn) %

As at 31 Dec 2010 (VND bn) %

Available for sale 65,348 96.20% 55,646 89.96%

Debt securities 65,203 55,501

Government securities 36,000 30,943

Securities issued by other domestic credit institutions 6,383 6,907

Securities issued by domestic economic corporations 22,820 17,651

Foreign debt securities - -

Equity securities 145 0.21% 145 0.23%

Securities issued by other domestic credit institutions - -

Securities issued by domestic economic corporations 145 145

Foreign equity securities - -

Securities held to maturity 2,579 3.80% 6,209 10.04%

Government securities 2,379 2,379

Securities issued by other domestic credit institutions - 80

Securities issued by domestic economic corporations 200 3,750

67,926 100.00% 61,855 100.00%

35%

56%

12%

32%

10%

55%

Government securities

Securities issued by other domestic credit institutions

Securities issued by domestic economic corporations

Diversified debt holdings

36

Credit Risk Management Policy (CRMP)

• To step by step use the IRB approach of Basel 2 for the best custom of risk management (risk-based

pricing, risk portfolio management , risk adjusted return on capital – RAROC, determining minimum

capital)• To obey the laws and have adaptability with the changes in laws• To obtain the development target and strategy of Vietinbank from time to time. To ensure long-term

strategic targets while quickly reacting to fluctuation of the market• To limit the risk of credit centralization through diversifying loan portfolio and systemizing credit limits

for each portfolio

• To build an appropriate credit risk environment though a clear strategy approved by the Board of

Directors• An uniform risk management culture is implemented in whole Vietinbank system to actively manage

credit risks• To ensure that credit policies are adequate and clear, the credit granting criteria and the mechanism

of authorization classification are specific, reasonable and able to minimize risks. • To maintain a credit risk measurement system• To timely find out credit risk signals and ensure adequate supervision

To achieve credit expansion required for sustaining the profitability of the Bank with an emphasis on quality assets, profitable

CRMPPhilosophy

CRMP

Objectives

CRMP

Principals

To optimize the balance between expected income and credit risk with an emphasis on competition advantages; to ensure

measures, control/insurance of risks

37

Credit Risk Management

• To build up a credit risk management framework including basic principles of risk management; organization structure of risk management division, single credit management mode and loan portfolio, system of credit policies, procedures, system of credit risk measurement; risk management on new products and credit supervision

• To build up a clear risk strategy, bank’s acceptable risk limits for each group of relative customers, based on the centralization level of currency, term, collateral, sector and geography

• To ensure an independence, objectiveness among the customer relationship department, credit appraisal department, and the risk management and supervision. Credit activities must be supervised on regular basis to ensure credit activities are implemented in accordance with the bank’s regulations and within the acceptable risk level

• The system of credit policies, procedures must be adequate and clear in terms of criteria of credit granting, mechanism of

approval authorization decentralization

Credit risk management framework

Clear risk strategy

Credit activities supervised on regular basis

Adequate and clear system of credit

policies, procedures

• Customers’ credit risk is quantified through the bank’s internal credit rating systemInternal credit rating

system

• To build up the early risk warning system to point out and define any risk signals related to probable changes in financial

situation as well as borrowers’ repayment capability

Risk warning system

• To build up an effective, useful credit report and information system to support credit risk management, to regularly

supervise credit limits granted to customers, specially corporate customers who have big loan exposures

Effective credit report and

information system

38

Liquidity Risk Management Process

• Liquidity risk is defined as the risk that the Bank will encounter difficulty in meeting obligations associated with financial liabilities

• To limit this risk, management diversifies its funding sources in addition to its core deposit base, and adopt a flexible policy in managing liquid assets and monitoring future cash flows and liquidity on a daily basis

• The Bank also keeps an account of access to cash flows and the availability of collaterals in case the Bank needs to mobilize more capital

• Alco Planning and Supporting Department analyses and projects flows of cash-in, cash-out in accordance with fund planning and balancing plan, which is approved annually; and provides decisions on available fund management based on movement of the Bank’s capital and its daily utilization

• Based on the regulations of the SBV, the Alco Planning and Supporting Department, in cooperation with the Investment Department, proposes available fund management plan in order to make sure the actual average balance of deposits in VND and foreign currencies at the SBV not less than the required level of compulsory reserve to be maintained

• Investment Department might decide to either sell back valuable papers to the SBV in open market, or to borrow to

replenish working capital’s deficiency to ensure liquidity position of the whole bank

Diversified funding sources

“Emergency” funds

Dedicated Alco Planning and Supporting

Department to managing risks

Open market transactions to ensure liquidity

position is maintained

• Besides, Investment Department also establishes credit limit with other banks for mutual assistance when needed. The management process of capital spare at VietinBank is operated within the INCAS system and the inter-bank settlement program (CITAD). By the centralized settlement scheme at the Head office, VietinBank is always active in the daily liquidity management

Credit lines with other banks

• The Bank is currently setting up software, developing upgrades and finalizing the risk management process to catch up with

the international standardSoftware upgrades

VietinBank has proactively reserved secondary liquidity sources across Government Bonds, Treasury bills, Corporate bonds, Credit Institution bonds etc.

39

Operational Risk Management Procedure

Analyse the process of handling

works

Supervise& Control

Manage potential

market risks

& solution

plan

Definerisks &control

methods

Evaluate Results of the control methods

Report risk

accidence & loss

Key riskindicator

RCSA – Risk & Control Self Assessment

LDC – Loss Data Collection KRI – Key Risk Indicator

• Operational risk is defined as the possibility of damage/loss happened directly or indirecty by the man, an inactive or unadequate procedures/system or the outside factors.

• Vietinbank manages its operational risk through the risk management system of SAS OpriskMonitor with the 3 main tools including LDC (Loss Data Collection); RCSA (Risk and Control Self-Assessment); KRI (Key Risk Indicator).

• The Operational risk management procedure is summarized as follows:

SAS Oprisk Monitor

• Be responsible as an independent risk management section – the second defense coat in the “3 coat model” of the bank’s risk management. The Market and Operational Risk Management Department shall monitor, supervise, analyze, and synthesize risk reports based on risk level to submit to the Risk Management Committee and the Management in accordance with the bank’s regulation from time to time

Be responsible as an independent risk

management section

40

Market Risk Management

• The market risk is defined as risk in the position of the balance sheet and off balance sheet which arises from price fluctuation in the market including: interest rate, foreign exchange, securities, goods

• Vietinbank manages the market risk based on its market risk management procedures and tools to calculate market risk, including definition and supervision/monitoring of respective market risk level

The market risk management procedure includes the following steps:

• Market Risk Management Tools includes the measurement tools (VAR, Stresstesting, Backtesting) and the limits for each tradingbook activities (Position limit, limits for customer relationship officer, limits for partners etc.)

• The ARIMA model is also used to analyse and forecast the macro indicators (CPI, exchange rate, interest rate etc.) for market risk management

Realize and defineMarket risksRealize and determine

market risks

Measure Supervise andcontrol

Prevent andminimize

market risks

1 2 3 4

Internal Reporting System

Specific market risk management procedure

Market Risk Management Tools

41

Interest Rate Risk Management Process

• Interest Rate Risk is managed by the Bank through the use of GAP analysis of rate sensitive assets and liabilities and monitored through its prescribed prudential limits

• The Bank forecasts fluctuation of market interest rate and makes appropriate investment decisions

• If a decreasing trend in interest rate is forecasted, the Bank will invest more in long term instruments to gain profitability

• On the contrary, if market interest rate is projected to increase, the Bank will focus on short term investments to minimize interest rate risk

Investments

• Interest rate for fund mobilization is determined under market price principles, in which interest rate is subject to demand, fund mobilization scale and market interest rate movements

Fund mobilization and utilization

• Lending activities: VietinBank determines lending interest rate based on the cost of funds, management expense plus targeted profit margin

• Branches apply the floor lending interest rate regulated by the Head office. Since most of the funds mobilized by the Bank is short term (having maturity within 12 months), VietinBank requires all medium and long term loans to have floating interest (no fixed lending rate)

Lending activities

• Inspection and monitoring by written documents in accordance with internal regulations applied to related activities like credit activities

• Develop scenarios that can happen when market conditions change; proactive in risk management

• Construct interest parameters that are managed within INCAS system and under control of department in-charge

Inspection and monitoring regulations

42

Currency Risk Management Process

• Currency risk is the risk that values of financial instruments fluctuates due to changes in foreign exchange rate

• The Bank’s loans and advances were mainly denominated in VND with the remainder mainly in US dollar (USD)

• Nonetheless, some of the Bank’s other assets are in currencies other than VND and USD

• The Bank has applied limitation system to mange currency positions on a daily basis. Risk prevention strategy is to keep the currency positions in the established limitation

Limitation systems

• Alco Planning and Supporting Department analyses and projects cash-in and cash-out flow and proposes fund planning plan for each type of currency (mainly VND, USD and EUR equivalent) to the Bank’s Board of Management) based on actual cash flows and growth target registered by business units

• It is managed based on daily outstanding balance in accordance with guidance to ensure the safety and effectiveness of the whole system

Alco Planning and Supporting Department

• VietinBank commands all its subsidiaries to take reasonable precautions while expanding lending in USDWell managed subsidiaries

• Restricts lending in importing goods that can be domestically produced and establishes preference for lending to import essential goods such as fuel, petroleum, fertilizer, pesticides etc.

Lending preferences

• Have ensured enough FX funding lines with International financial institutionsFX funding lines

43

Liquidity Mismatch Analysis (as of 30 June 2011)

Unit: VND m

Overdue Current

TotalOver 3 months Within 3 monthsDue within 1

monthDue from 1 to 3

monthsDue from 3 to 12

monthsDue from 1 to 5

yearsDue over 5

years

Assets

Cash, gold and germstones - - 2.904.141 - - - - 2.904.141

Balances with the SBV - - 7.267.865 - - - - 7.267.865

Placements with and loans to other banks (*) - - 29.122.706 10.785.380 1.100.000 726.650 - 41.734.736

Trading Securities (*) - - - - 472.649 - - 472.649

Derivatives and other financial assets - - - 3.172 - - - 3.172

Loans and advances to customers (*) 3.158.061 1.321.867 14.244.311 44.064.365 109.074.463 41.064.863 50.339.555 263.267.485

Investment securities (*) - - 299.980 1.370.000 13.319.445 45.526.622 7.410.412 67.926.459

Long-term investments (*) - - - - - - 2.386.355 2.386.355

Fixed assets and investment real estates - - - - - - 3.155.505 3.155.505

Other assets (*) - - 1.192.712 2.981.780 5.963.558 1.789.068 - 11.927.118

Total assets 3.158.061 1.321.867 55.031.715 59.204.697 129.930.115 89.107.203 63.291.827 401.045.485

Liabilities

Borrowings from MOF and SBV - - 7.626.429 - 20.000.000 15.376 48.938 27.690.743

Deposits and borrowings from other banks - - 21.312.773 15.655.645 10.869.135 4.226 - 47.841.779

Customer deposits and other amounts due to customers - - 88.805.795 37.848.993 29.235.940 36.317.196 500 192.208.424

Derivatives and other financial borrowings - - - - - - - -

Debts issued and other borrowed funds - - - 11.029.570 25.199.619 3.604.703 2.577.250 42.411.142

Issuing valuable papers - - 14.450.556 3.010.326 7.330.127 1.470.870 - 26.261.879

Other liabilities (*) - - 1.389.337 2.863.172 14.622.118 17.234.445 - 36.109.072

Total Liabilities - - 133.584.890 70.407.706 107.256.939 58.646.816 2.626.688 372.523.039

Net Maturity Risks Status 3.158.061 1.321.867 (78.553.175) (11.203.009) 22.673.176 30.460.387 60.665.139 28.522.446

44

Capital


6.50%

12.02%

8.02% 8.00%

9.82%8.46%

11.62%

2006 2007 2008 2009 2010 30-Jun-10 30-Jun-11

Capital Adequacy Ratio Risk Weighted Assets (VND Bn)

The Bank has successfully backed its RWA growth with adequate capital base

83,05992,007

202,319

154,402

206,711

74,007

150,132

2006 2007 2008 2009 2010 30-Jun-10 30-Jun-11

45

Capital Policy & Strategy

Principle

Schedule

• Accelerate augmenting shareholders’s equity, in order to meet the requirement of future growth

• Ensure to meet the CAR requirement of SBV and commitment with partners, approach Basel standards on owner’s equity (commitment with IFR: Car>10% after 31 Dec 2012

• Diversify shareholder’s equity structure for both Tier 1 and Tier 2 capital by issuing shares, bonds, convertible bonds, borrowing in the secondary market etc, with a special focus on expanding Tier 2 capital

• 4th Quarter 2011: Issue more shares to existing customers to increase the Chartered capital by 3,372bn (in nominal value). This plan has been submitted to the Government by the Ministry of Finance

• 1st Quarter 2012: Sell shares (value amounting to 15% of chartered capital) to Bank of Nova Scotia. This plan is in negotiation and hopefully will complete in early 2011

Introduction VietinBank

Economy & Finance

Transcript of Introduction VietinBank