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Understanding banking services through financial statements of a Vietnam commercial bank
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Class: Advanced Finance 62B Lecturer: M.Sc. Lê Phong Châu Class: Advanced Finance 62B Lecturer: M.Sc. Lê Phong Châu Class: Advanced Finance 62B Lecturer: M.Sc. Lê Phong Châu Class: Advanced Finance 62B Lecturer: M.Sc. Lê Phong Châu Class: Corporate Finance 63E Lecturer: Mrs. Truong Hoai Linh
- HANOI - 1.1. Industry overview 1.1.1. Macroeconomics indicators Source: State bank of Vietnam a. Inflation Rate: “According to data announced by the General Statistics Office, the average CPI in 2021 increased by 0.81% compared to 2020, lower than the average CPI (up 1.84%). Thus, CPI in 2021 is the lowest increase since 2016. Vietnam’s consumer price index (CPI) in 2022 rose 3,15% against the previous year. The increase in CPI was attributed to raise in the demand for production of goods for consumption and export as well as the impact of world commodity prices”
Cre: Tổng cục thống kế cho biết chỉ số giá tiêu dùng, chỉ số giá đô la mỹ 12/ b. Interest Rate: The interest Rate in Vietnam remained unchanged in January 2023. The maximum level was 15% and the minimum was 4%. Interest Rates Value Document No Effective date Discount Rate 3,500%
Refinancing rate 5,500%
Source: State bank of Vietnam Average interest rates in Vietnam c. Exchange rate Exchange Rate of Vietnam
Vietnam (Vietcombank), with a provision ratio of 402%, equivalent to each VND of bad debt, Vietcombank has VND 4.02 in the provision”, according to Ha Linh (2022). Governor of the State Bank Nguyen Thi Hong (quoted in Ha Linh (2022)) stated that “In fact, The State Bank has actively managed monetary policy, which requires controlling inflation and maintaining macroeconomic stability. Regarding bad debt handling, the State Bank has submitted to the Prime Minister for approval a scheme to restructure the system of credit institutions associated with bad debt settlement in the 2021-2025 period and at the same time focus on perfecting institutions. on bad debt settlement, ensuring the safety of the banking system.” 1.2. General information about Vietcombank Vietcombank’s general information compression table Name Official name: JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIET NAM Trading name: VIETCOMBANK Charter capital
Contact Phone number: +84 (24) 3934 3137 Website: Vietcombank.com.vn Central / Head office: No.198 Tran Quang Khai Str., Ly Thai To Ward, Hoan Kiem Dist., Ha Noi, Vietnam Subsidiaries Vietcombank Securities Limited Company (Vietcombank Securities - VCBS ) Vietcombank Financial Leasing Company (Vietcombank Leasing - VCBL ) Source: vietcombank.com.vn
2. ANALYSIS OF BAKING SERVICES 2.1. Deposit services 2.1.1. Amounts due to the Government and the State Banks Item 31 December 2021 (VND million)
31 December 2021 (VND million)
Deposits from 7,694,274 99.686 36,393,923 93.
the State Treasury Demand deposits in VND
Demand deposits in foreign currencies
Term deposits in VND
Deposits from the State Bank of Vietnam
Total 7,718,532 100 38,829,701 100 Source: Consolidated Financial Statements of VCB 2021 As can be seen from the table, the majority of deposits come from the State Treasury, with a proportion of approximately 93% and 99% in 2020 and 2021, respectively. A sharp drop in the deposits of the State Treasury and the State Bank of Vietnam might result from the COVID-19 pandemic. In the deposits from the State Treasury, the most significant proportion was given to the term deposits in VND, followed by demand deposits in foreign currencies and demand deposits in VND. 2.1.2. Deposit from other credit institution Item 31 December 2021 (VND million)
31 December 2021 (VND million)
Demand deposits 57,059,865 54.842 48,778,071 48. In VND 17,340,108 30.389 6,654,782 13. In foreign currencies
Term deposits 46,983,952 45.158 52,138,362 51. In VND 40,870,931 86.989 33,600,000 64. In foreign 6,113,021 13.011 18,538,362 35.
Source: Consolidated Financial Statements of VCB 2021 From the perspective of deposit type, deposits from customers are the composition of demand deposits, term deposits, deposits for specific purposes and margin deposits. Although having experienced a downward trend, term deposits remained the highest percentage of all types and accounted for more than 67% and 64% of most customer deposits in 2020 and 2021. A deposit for a specific purpose is where money or property is delivered to the bank to be applied to a designated object Robert A. Hovis (1932); likewise, a margin deposit is the initial amount of money a trader needs to put down to open a leveraged trading position. As a result, the lowest proportion went to deposits used for specific purposes and margin deposits. Demand deposits and term deposits in VND witnessed an upward trend; whereas, the figure in foreign currencies was depicted as concave downward. This can be the result of an increase in the value of other currencies, which caused the bank to sell more foreign currencies and earn more VND. 2.1.3.2. Deposits from customers by customer type Item 31 December 2021 (VND million) Proportion of each item (%) 31 December 2021 (VND million) Proportion of each item (%) Economic entities
Individuals 565,900,638 49.845 509,788,506 49. Total 1,135,323,913 100 1,032,113,567 100 Source: Consolidated Financial Statements of VCB 2021 From a customer-type perspective, even though deposits from economic entities and individuals are relatively equal at approximately 50%, the amount from economic entities has a higher proportion in both 2020 and 2021. 2.2. Loan services 2.2.1. Interest income from loans Since the customers usually send their deposits in order to maintain the cash inflow, the banks need to find a way to evaluate that money for getting the interest income, so the banks can continue to be on the market, and one of those is loan activities. Loan activities of the banks are one of the types which have highest revenue during the year compared to other services of the banks, such as getting the deposits or real estate investments. According to the Vietcombank’s Balance Sheets between 2020 and 2021, the loans and leases sectors took part in the proportions extremely high in the total bank’s
assets, which is similar to most of the banks in general, from 50% to 60% or even more depending on the finance situation each year. At the end of 2020, Vietcombank evaluated the loans and leases total value up to VND 820.545.467 million, which accounted for approximately 61.8% of the total assets. With the total assets’ value of VND 1.326.230.092 million, other sectors in the total assets of Vietcombank only took the percentage or even other assets are only around 5% to 10%. Additionally, the loan activities slowed down at the end of 2020 by increasing by only 3.5%. However, the loans and lease value slowed down, which still became the majority of the total assets in Vietcombank. With the interest rate from loan activities around 0% to 12% depending on the period types and purpose of loan activities, the interest income from loan activities between 2020 to 2021, respectively, is 56.056. and VND 59.307.940 million. 2.2.2. Loans to customers Item 31 December 2021 (VND million)
31 December 2020 (VND million)
Loans to local economic entities and individuals
Discounted bills and valuable papers
million) million) State-owned companies
Limited companies 169.542.086 17.6 155.046.852 18. Foreign invested enterprises
Co-operatives and unions of co- operative
Individuals and individual business households
Others 213.526.546 22.22 182.320.869 18. Total 960.749.955 100 839.788.261 100 Source: Consolidated Financial Statements of VCB 2021 In line with Vietcombank's orientation to focus on small and medium-sized businesses and individuals in 2 years 2020 and 2021, there has been significant growth: Vietcombank's personal loans in 2020 reached 380.751.584 million, accounting for 45.3% of the total outstanding loans, in 2021 reached 448.102.945 million VND. This is the largest growth rate in the structure of outstanding loans of Vietcombank. In second place are other loans and limited company loans. If in 2020 the loan to a limited company is VND 155.046.852 million, accounting for 18.4% out of the total outstanding loans, in 2021 the total outstanding loans for the region this sector reached 169.542. million VND, accounting for 17.6% of the total outstanding loans of Vietcombank. This is possible because Vietcombank has actively developed and extensively deployed various forms of loans and retail products such as new houses, luxury cars, study abroad loans, consumer loans, loans by savings books and valuable vouchers. 2.2.5. Loan portfolio by sectors Item 31 December 2021 (VND million)
31 December 2020 (VND million)
Construction 86.628.722 9.01 71.273.525 8. Electricity, petroleum 59.813.456 6.22 40.333.441 4.
and steam Production and processing
Mining 15.084.113 1.57 14.591.656 1. Agricultural, forestry and aquaculture
Transportation, logistics, and information
Trading and services 152.212.435 15.8 202.773.035 24. Hospitality 16.921.726 1.76 10.166.471 1. Other activities 373.220.491 38.8 278.215.911 33. Total 960.749.955 100 839.788.261 100 Source: Consolidated Financial Statements of VCB 2021 In general, operations for loans serving other activities still accounted for the largest proportion and had the largest increase within 2 years. (from 33.1% in 2020 to 38.8% in 2021). Loans to other sectors such as construction, production & distribution of electricity, mining,… all decreased in proportion in the loan structure by sectors. 2.3. Payment services Item 31 December 2021 (VND million)
31 December 2020 (VND million)
Fee and commission income
Settlement services 5,984,352 53.022 6,017,661 56.
up from minus 3,192,493 to minus 2,998,989 VND million. Net profit from sub-services gradually increased because of a slight increase in treasury service expenses from minus 109932 to minus 119558 VND million. Moving to the downward trend, the data for other services indicate the biggest number, which is 65,023 VND million over the period. Treasury services and telecommunication services are slightly decreased by minus 9,626 and minus 5.978 VND million. As an outcome, the revenue of fee and commission expenses has experienced a significant revenue growth of nearly minus 100,000 VND million. 2.3.3. Net fee and commission income Net fee and commission income went up by 799,756 VND million in one year, from 6,607,317 VND million in 2020 to 7,407,073 VND million in 2021 2.4. Other services Item 31 December 2021 (VND million)
31 December 2020 (VND million)
Gain from trading of foreign currencies
From spot currency to contracts
From currency derivative financial instruments
From foreign exchange differences
From revaluation of derivative contracts
Losses on the trading of foreign currencies
From spot currency to contracts
From currency (1,374,802) 25.836 (1,068,516) 26.
derivative financial instruments From foreign exchange differences
From revaluation of derivative contracts
Net gain from trading of foreign currencies
Source: From Annual Report of VCB, 31/12/ 2.4.1. Foreign exchange trading services Net gain from trading of foreign currencies With many synchronous and effective business solutions, Vietcombank's foreign currency trading has had many innovations and strong growth, contributing to enhancing Vietcombank's position in the foreign exchange market. Vietcombank is currently leading in the interbank market in terms of sales and market share. By the end of 2020, foreign currency trading sales maintained a stable growth rate, profits increased slightly by over 50% compared to 2021. By the end of this year, Vietcombank's sales and profits continued to be the highest leading banks in Vietnam's foreign exchange market. 2.4.2. Securities brokerage services Net gain from trading securities Item 31 December 2021 (VND million)
31 December 2020 (VND million)
Income from trading securities
Expenses for trading securities
Allowance (made)/reversed for trading securities (Note 7)
Net gain from 104,114 1,
market research company in Japan), Vietcombank was ranked the No. 1 in banking industry, No. 2 in Vietnam market, maintaining its leading position for 5 consecutive years as the bank with the best working environment in Vietnam. In 2021, Vietcombank is honored to receive the “Best-managed bank during the COVID-19 pandemic” award by The Asian Banker, which recognizes local corporations for their prominent contributions to business efficiency, leadership, and policies in response to the COVID-19 pandemic. REFERENCES