REPORT ON BUSINESS PERFORMANCE OF THE YEAR (Submit to the Shareholders Meeting on April 27 th for approval)

Transcription

1 REPORT ON BUSINESS PERFORMANCE OF THE YEAR 2014 (Submit to the Shareholders Meeting on April 27 th for approval) HCM City, April 2015

2 CONTENTS EXECUTIVE SUMMARY 2 DETAILED REPORT 8 A. MARKET OVERVIEW 8 I. GLOBAL AND VIETNAM ECONOMY IN II.VIETNAM FINANCE AND BANKING INDUSTRY IN B. BUSINESS PERFORMANCE IN I. FINANCIAL PERFORMANCE Business performance of the bank 11 II.CUSTOMER AREA Consumer banking Corporate banking Financial investment and interbank activities Network development and marketing activities 20 III.OPERATION AND ORGANIZATION AREA Credit management Work out activities Risk management Operation management Implementation progress of ABBANK s 05 strategic goals and 20 initiatives Service quality management (SQM) IT Management 30 IV.LEARNING AND DEVELOPMENT AREA Human resource management Human resource development 32 Report on business performance of the year 2014

3 EXECUTIVE SUMMARY Year 2014 had finally gone to an end in the context that global economy still slowly recovered after the worldwide financial crisis. Overcoming those obstacles, Vietnam economy in 2014 still showed some achievements as macro-economic instabilities have been well controlled and the economy has gradually entered the growth cycle. However,, the Vietnamese banking industry in 2014 still faced with difficulties and challenges. For example, though NPL ratio decreased, credit quality has not shown much improvement. Nevertheless, some key monetary indicators posed encouraging results as such the growths of credit, deposit and overall payment were 12.62%, 15.76% and roundly 16% respectively. Amidst such context of local economy, ABBANK s business activities in 2014 still showed some significant achievements. As at the end of Dec 2014, total assets of ABBANK reached Vnd 67,198 billion, equivalent to 102% of its target and increased by 16% as compared to Both lending and mobilization activities exceeded the target, and credit quality has been well improved. Operation expenses in 2014 were quite well controlled as only exceeded 0.5% of the set target. Total interest income in 2014 hit Vnd 1,381 billion, up 5% against 2013 and was 85% of the plan. Net service fees income hit Vnd billion, up 21% and completed 90% of the year s plan. Total profit before tax was Vnd billion, not yet met the target due to 02 crucial reasons: (i) higher provisioning than set plan due to bad debts in previous years, (ii) decreased interest rate platform in 2014 as instructed by the SBV led to low interest income. Summary of key business indicators Item Result Plan Compared with Result 2013 Unit: VND bil Compared with Plan /- % +/- % Total assets 67,198 57,792 66,178 9, % 1, % Loans 42,633 37,558 40,998 5, % 1, % 2 Report on business performance of the year 2014

4 Item Result Plan Compared with Result 2013 Unit: VND bil Compared with Plan /- % +/- % - Market 1 25,969 23,647 26,848 2, % (879) 97% - Market 2 (inter bank) 16,664 13,912 14,150 2, % 2, % Deposit 60,712 51,150 55,381 9, % 5, % - Market 1 45,404 40,796 42,781 4, % 2, % - Market 2 (inter bank) 15,309 10,354 12,600 4, % 2, % NPL (Group 3 5) 1,171 1,804 1,842 (633) 65% (671) 64% - NPL/total outstanding loans 2.75% 4.80% 4.49% (2.06%) - (1.75%) - Net services income % (12.9) 90% Operating expenses 1, , , % % Profit before tax (57.1) 70% (266.4) 33% ROaE 2.3% 3.5% 6.7% (1.2%) 67% (4.4%) 35% ROaA 0.2% 0.4% 0.6% (0.1%) 62% (0.4%) 38% Major achievements in There were some achievements of business activities: total assets, retail loans and service fees income all posed good growth Regarding strategic goals approved by the BOD moving forward 2018, ABBANK also achieved significant results in Specifically, total assets of ABBANK increased by almost 16% in 2014 while growth rate of the whole banking industry by the end of Dec 2014 was only 12.20%. Total retail loans also increased by 17.5%, in which SME s loans played the major part with an increase of more than 30% y-o-y, which thus helped lift the retail proportion of 42% to total loans (including market 1 and 2). Especially, total service fees income reached Vnd bn and increased by 21% against 2013, which was a remarkable increase contributing to enhance the sustainability of the bank s total operating income. As of Dec 31th 2014, total assets of ABBANK reached Vnd 67,198 bn, equivalent to 102% of the year s target. Specifically, total assets increased by Vnd 9,406 bn, equivalent to an increase of 16% as compared to 2013, and by Vnd 21,032 bn against 2012, equivalent to an increase of almost 46%. 3 Report on business performance of the year 2014

5 Total outstanding loans, including market 2, were Vnd 42,633 bn, met 104% of the year s target and increased by 14% against According to the State Bank of Vietnam, credit growth of ABBANK in 2014 was approved to stay at 10%. Thus, ABBANK s actual credit growth was higher than the approved level and could be explained by following objective reasons: Total outstanding loans of market 1 were Vnd 25,969 bn and completed 97% of the plan. However, the growth of ABBANK outstanding loans of 10% was still under permission of SBV. In 2014, ABBANK sold debts of Vnd 2,061 bn to VAMC as required. Total outstanding loans (market 1) as of Dec 31, 2014 mentioned above were excluded sold bad debts. Strictly following SBV s direction on measures to remove difficulties for business and production to support market and handle bad debts, ABBANK has put focus on corporate loans, especially SMEs in order to loosen credit capital. Along with the cooperation with IFC to carry out the project enhancing competitiveness in SME segment in order to improve service quality and create better conditions for business to be financed, ABBANK has spent over Vnd 3,000 bn of cheap capital with preferential interest rate from 6.3% per year only to share difficulties with SMEs. Therefore, credit growth of ABBANK (market 1) has mainly focused on SMEs and priority sectors. On the other hand, total organizational bonds at ABBANK by end of 2014 was planned to reach Vnd 3,000 bn. However, in 2014, actual amount of organizational bond investment was Vnd 1,300 bn, thus decreased by 12.1% as compared with Besides, in 2014, ABBANK sold bad debts of Vnd 2,061 bn to VAMC and received an amount of Vnd 1,688 bn of VAMC bonds in return, which thus raised the total VAMC bonds up to Vnd 2,343 bn, increased by 340.9% against Therefore, total amount of bond investment at ABBANK as at Dec 31, 2014 including bonds of economic organizations and VAMC were Vnd 3,643 bn, which thus exceeded the plan mainly due to the enlargement of VAMC bonds. In spite of ABBANK s high credit growth, this was based on high and stable deposit growth. By end of 2014, ABBANK s loans to deposits ratio (LDR) was 57.2%, which was within control and under the target (less than 80%). Moreover, ABBANK has 4 Report on business performance of the year 2014

6 always complied with the SBV s adequacy ratios. Credit activities in 2014 were also given focus, in which credit appraisal/approval and monitoring activities were all strengthened to control all loans. Total deposits, including interbank market, in 2014 were Vnd 60,712 bn, met 110% of the year s target and increased by 19% against In which, total deposits (market 1 only) were Vnd 45,404 bn, achieved 106% of the year s target and increased by 11% against Mobilization activities in 2014 continued to complete the set target with high growth rate and well controlled interest expenses. Profit before provisioning was Vnd bn, increased by 6% as compared with After making provisioning of Vnd bn, profit before tax was Vnd bn and just completed 33% of the year s target. 2. Work-out continues to get oustanding achievements In 2014, work-out continued to be given priority and strong push through variance of methods by cash collection, collateral supplementation, loan restructuring, use of provisioning or loan selling to VAMC. Credit quality has been well improved and NPL ratio decreased from 4.8% in 2013 to 2.75% as at end of This was a significant achievement and a great effort well recognized and highly encouraged bank-wide given fact that the whole banking industry is still struggling with the bad debt issue. 3. The system operation activities were given high concern with internal collaboration and cross-checking between HO s divisions and business lines to strengthen risk governance. In which, major activities include: The implementation of 5 Strategic goals and 20 initiatives already approved by the BOD, the Steering Committee (SC) approved overall plan on deploying projects: to assign coordinator unit and determine period to deploy prioritized projects as 13 projects were already deployed in 2014 and the other nine (add one more initiative on service fees) will be continued to execute in As at end of 2014, there were two projects have been completed and implemented bank-wide, including: (i) The Project of Formulation of new salary & benefit scheme conducted by the HR 5 Report on business performance of the year 2014

7 Division and (ii) The Project of Centralization of operation activities and internal procedures conducted by the Operation Division. The Club Vnd 1000 bn for branches and Vnd 200 bn for sub-branches established in Aug 2014 is promised to create a meaningful play-yard for business lines that are Top branches/sub-branches to share their own experiences and supports for the concurrent development, and to give encourage to the emulation among branches/sub-branches for the scale expansion and efficiency strengthening of the whole system. Thus, many branches/sub-branches keep striving to meet the Club categories, which alltogether contributes to lift ABBANK to a new level. IT activities also had some achievements in 2014, which set milestone for the realization of the bank s strategic vision. This has been the second time that ABBANK itslef successfully upgraded the Corebanking T24 from R11 to R13 without asking for external consultants. This implies the experiences of Application development & Management Center in implementation, governance and use of the Core system. Moreover, the Data Center at 36 Hoang Cau, one of few modern banking data centers leading in Vietnam, is able to meet the international standard in terms of safety and high backup has been officially implemented since Jul 21 st 2014 and is expected to not only maintain the system operation safely and stably, but also to enhance the system productivity. The brand name and reputation of ABBANK continued to be confirmed on the financial banking market. In Dec 2014, ABBANK was chosen one of the first four banks in Vietnam to cooperate with Banknet to implement the fund transfer across countries. Customers of ABBANK can quickly and freely receive money from other banks customers at other countries by accounts. Moreover, ABBANK continues to be honored the Vietnamese strong branding, Top 500 Vietnamese largest corporate, and one of 10 largest traders of Government bonds on local market. 6 Report on business performance of the year 2014

8 Operations and business activities of ABBANK in 2014 are detailed in the attached report. Respectfully. HCMC, April 27th 2015 An Bình Joint Stock Commercial Bank (ABBANK) Chief Executive Officer PHAM DUY HIEU 7 Report on business performance of the year 2014

9 DETAILED REPORT A. MARKET OVERVIEW I. GLOBAL AND VIETNAM ECONOMY IN Global economy In general, the global economy still slowly recovered due to uneven development across regions and grew by 3.3% as at end of 2014, particularly: The US economy firmly recovered with GDP growth of 2.4% while the EU economy was still given highest concern as it has been on the brink recession with growth of only 1.4% in 2014, in which the Eurozone fetched only 0.8% in Especially, the Russia s economy has shown sign of recession with growth of only 0.6% in 2014, resulted by the sanctions imposed by the Western related to Russia penetration into Ukraine s crisis. The Japanese economy felt into the recession and has been facing with further challenges; its GDP growth was projected to hit only 0.04% mainly due to weak domestic demands and low exports. The Chinese economy: grew low and contained potential risks, but still showing growth of 7.3% in 2014, which was considered low as compared to its average growth of 9-10% in the last 10 years. Economies of ASEAN countries, including Vietnam, slowly grew and were expected to grow by 4.7% in Viet Nam economy - GDP growth showed outstanding growth, implying the growth recovery of the economy The picture of Vietnamese economy showed brighter colours in the second half of 2014 with outstanding GDP growth. Specifically, GDP growth for the whole year 2014 was estimated at 5.98%, higher than the set target (5.8%). This was high as compared to that in 2012 and Moreover, most of of economic areas posed good growth, implying the fact that the economy has recovered its growth momentum. - CPI in 2014 was the lowest in the past 10 years The CPI by Dec 2014 only increased by 1.84% as compared to Dec 2013, and CPI of 8 Report on business performance of the year 2014

10 the whole year 2014 up 4.09% against 2013, a lot lower than the target of 7% set early of the year. This was the lowest in 10 years. The drop of CPI is promised to bring more benefits to the whole nation due to stable goods price, and lower interest rate platform gives chance to the recovery of business & manufacturing area. - Imports & Exports Total exports-imports in 2014 reached USD 298 billion, up 13% against 2013, in which exports hit USD 150 billion and imports met USD 148 billion, increased by 13.6% and 12.1% (y-o-y) respectively. Total trade surplus in 2014 was almost USD 2 billion, the highest since Foreign Direct Investment was enhanced in quality Year 2014 was considered a successful year for attracting FDI as the early set target of USD bil had been exceeded by Nov 2014 with total FDI of up to USD 17.3 bil. For the whole year, total newly registered and supplemented FDI was USD 20.2 bil with 1,588 licensed projects, 6.5% reduction in capital, but 25% enlargement in the number of projects as compared to Local enterprises s activities have not really showed stable growth In 2014, 74.8 thousands enterprises were newly registered with total capitals of Vnd thousand bil, decreased by 2.7% in quantity and increased by 8.4% in capital against For the whole year 2014, the number of businesses facing with bankruptcy threat climbed up to 11.6% (y-o-y), higher than growth rate of the number of newly established enterprises (-2.7%) as well as the number of enterprises turning back to business (6.9%). Therefore, although the encouraging signal has initially appeared as investment capital was promoted, the number of enterprises has fallen, thus somehow recovery outlook of local business is not really confirmed. II. VIETNAM FINANCE AND BANKING INDUSTRY IN Interest rate was the lowest within the decade In 2014, the market witnessed 02 times of interest rate adjustment from SBV: SBV expected that with such actions, commercial banks would continue to lower their lending interest base to attract more borrowing from businesses. By year end 2014, interest rate level felt percentage points against year end 2013, in which deposit 9 Report on business performance of the year 2014

11 rate decreased percentage points, lending rate dropped about 2 percentage points per year, bringing the interest rate lower than the rate of period Exchange rate was stayed stably The VND/USD exchange rate remained stable within the first 6 months of The averaged interbank exchange rate was stayed at 21,036 VND/USD since begining of the year and pulled up to 21,246 VND/USD (+1%) since Jun 19, By the end of 2014, exchange rate followed an upward trend. In addition, the strengthening of dollar along with the recovery trend of the US economy also contributed pressure on the exchange rate. - Credit growth met the target 2014 In the first 8 months of 2014, credit growth appeared to be sluggish and increased not higher than 5%, and was always lower than that of the same period of However, sign of recovery was quite late and just started from Sept 2014 with accumulated growth by Nov 2014 of 10.22% (y-t-d). By year end 2014, the drop of interest rate platform had prominently helped credit growth meet 12.62%, 0.11% higher than that of 2013, thus officially achieving the 2014 s target. - NPL was basically controlled, VAMC has gradually enhanced its important role Dealing with bad debts has become the banking system s most of concern since 2012 and so far achieved encouragement results within the last 3 years. This has been proved by monthly NPL line of 2014 always around 4% and lower than that of 2012 and Following a general tendency, in 2014 the NPL ratio increased in the first half then started to drop in last months of the year to return to only 3.8% by Oct 2014 taken note that this was 4.08% in 2012 and 3.61% in Report on business performance of the year 2014

12 According to VAMC, since establishment til Oct 2014, total principal handled by VAMC was estimated at VND 252,000 bil, equaled to 54.3% of total NPLs identified by Sept However, the SBV s objective to bring the NPL ratio to the 3% threshold is still a challenging mission in B. BUSINESS PERFORMANCE IN 2014 I. FINANCIAL PERFORMANCE 1. Business performance of the bank 1.1. The bank s business performance in 2014 No. Item Result 2014 Result 2013 Plan 2014 Compared with Result 2013 Unit: VND bil Compared with Plan /(-) % +/(-) % I. BUSINESS INDICATORS 1 Total assets 67,198 57,792 66,178 9, % 1, % 2 Equity & funds 5,686 5,724 5,952 (38) 99% (266) 96% 3 Charter capital 4,798 4,798 4, % - 100% 4 Loans (1st Market) 25,969 23,647 26,848 2, % (879) 97% 5 Deposits (1st Market) 45,404 40,796 42,781 4, % 2, % II. INTERBANK & INVESTMENTS 1 Deposits at and Lending to other credit institutions Deposits at other credit institutions Lending to other credit institutions 2 Deposits and Borrowing from other credit 19,538 16,116 15,750 3, % 3, % 2,875 2,205 1, % 1, % 16,664 13,912 14,150 2, % 2, % 15,309 10,354 12,600 4, % 2, % Deposits from other credit institutions 3, ,298 25,607% 2, % Borrowing from other credit institutions 11,998 10,341 12,100 1, % (102) 99% 3 Investment Securities 15,124 11,129 18,020 3, % (2,896) 84% 4 Trade Securities (5) 0% 0-5 Long-term investment % (1) 100% III. BUSINESS RESULT 1 Net interest income 1, , , % (248.1) 85% 2 Net service income % (12.9) 90% 3 Other incomes (12.3) 93% % 4 Total income 1, , , % (156.7) 91% 11 Report on business performance of the year 2014

13 No. Item Result 2014 Result 2013 Plan 2014 Compared with Result 2013 Unit: VND bil Compared with Plan /(-) % +/(-) % 5 Operating expenses 1, , , % % 6 Operating profits % (162.3) 78% 7 before Provisions provisions for credit ,9 125% % 8 risk Profits before tax (57.1) 70% (266.4) 33% IV. FINANCIAL INDICATORS 1 ROaE 2.3% 3.5% 6.7% (1.2%) 67% (4.4%) 35% 2 ROaA 0.2% 0.4% 0.6% (0.1%) 62% (0.4%) 38% 3 NPL (Group 3-5) 1,171 1,804 1,842 (633) 65% (671) 64% - NPL ratio/ Total outstanding loans - Analysis of Profit before tax of the year % 4.80% 4.49% (2.06%) - (1.75%) - Compared with result 2013: Profit before tax in 2014 reached Vnd billion, equivalent to 70% compared to result 2013, mainly due to following reasons: Though net interest income slightly increased by 5% y-o-y and net service fees income highly increased by 21% y-o-y, but other incomes showed a decrease mainly caused by provisioning for securities investment and other provisionings. Operating expense in 2014 increased by 43 bn, equivalent to 4% compared to 2013 due to increase of staff expense (salary scheme adjustment, new branches opening ). The expansion of network as well as inflation led to increase of other expenses. Credit risk provisioning in 2014 hit Vnd billion, increased more than 25% compared to 2013, mainly due to high provisioning for bad debts in previous years. Compared to the Plan 2014: Profits before tax in 2014 completed just 33% of the set plan mainly due to following reasons: Total operating income was 91% of the plan. Net interest income was lower than 15% of the plan, in which, interest income was lower than plan while interest expense slightly increased as compared with the plan as mainly caused by higher increase of deposits from corporate and individual than that of loans. Additionally, decreased interest rate platform in 2014 as instructed by the SBV 12 Report on business performance of the year 2014

14 also led to low interest income. Meanwhile, Service fees income was 90% of the plan while other incomes were 281% of the plan. Total operating expenses increased by 0.5% compared to the plan. This implies the expenses saving policies have been complied with the BOD s instruction, and the review and limitation of unreasonable expenses have achieved encouraging signs. Credit risk provisioning increased by 32% compared to the plan. In overall, business performance of the year 2014 was better than Specifically, growths of total assets, deposits and loans were 16%, 19% and 14% respectively as compared to Credit quality has been improved with NPL ratio of only 2.75%. However, Total profit before tax was only Vnd billion, not yet met the target due to 02 crucial reasons: (i) higher provisioning than set target due to bad debts in previous years, (ii) decreased interest rate platform in 2014 as instructed by the SBV led to low interest income Operating expenses analysis Summary of operating expenses in 2014 Operating expenses Result 2014 Result 2013 Plan 2014 Compared with Result 2013 Unit: VND mil Compared with Plan 2014 (+/-) % (+/-) % 1. Taxes and other fees % % 2. Expenses for staffs % (38.6) 91.8% 3. Expenses for management (21.8) 94.4% % activities 4. Expenses for assets % (36.5) 87.8% 5. Expenses for reserve and deposit % (5.1) 86.2% insurance Total 1, , , % % In 2014, operation expenses were well controlled with total expenses of Vnd 1,095.6 bil, almost met the set target (100.5%) and slighly increased by 4.1% against This increase was in line with the bank s scale growth and inflation movement. This 13 Report on business performance of the year 2014

15 result was thus recognized as shown by ABBANK s great efforts to control operation expenses and comply with the spirit of expenses saving amidst the current difficulties of economy. - Tax fees: This item accounted for 0.2% of operating expenses structure and included expenses of land tax, registration tax and transportation fees. This increased following the demand of the bank s purchasing and transportation. - Expenses for staffs: this expense items accounted for the largest part in the cost structure of banking operations. In 2014, the bank implemented new salary scheme leading to higher salary expenses as compared with However, the effectiveness of restructuring of labour force throughout the system, the arrangement and personnel management in a scientific way, therefore, actual salary expense was lower than 38.6 bn and achieved 91.8% compared to the plan. - Expenses for management activities: In 2014, this cost was lower than 21.8 bn, equivalent to (-5.6%) compared to 2013 including: Administrative expenses: consisted of many expenses such as: printing paper, material, purchasing newspapers and books, Postage phones, Electronic, drinking water, sanitary and other expenses related to the bank s frequently operating activities. Marketing expenses: consisted of promotion, advertisement, image promotion, customer gratitude and reception, conference, etc. Other expenses: The transport and travelling, training, auditing, etc. Amidst current difficulties of the banking industry, ABBANK has strictly controlled operation expenses and raised the spirit of expenses saving across bank-wide. Particularly, the bank maximized the administration savings and other related expenses. Also, in order to bring the ABBANK s reputation closer to the public on the basic of maximizing efficiency, the bank executed communication and advertisement programs on public medias like: An Binh Tet festival, Summer love, Strategic workshops, and finances to social welfare programs such as: finance to build primary school at Duc Co, Gia Lai province, or finance to build houses for subjects under the Tay Do battalion, Can Tho city, or finance to build Kim Dong and Binh Minh primary school at Kim Son, Ninh Binh province. Additionally, for the purpose of strengthening 14 Report on business performance of the year 2014

16 deposits to ensure liquidity and increase loans sustainably, the bank enhanced supporting activities like products advertisement, market research and promotions to attract and serve customers. - Asset expense: consisted of depreciation of fixed asset, cost of maintaining, repairing asset, purchasing fixed asset, tool, insurance and renting asset. This cost increased following the demand to maintain, upgrade and expand the network development. In 2014, actual asset expense reached bn, equivalent to 87.8% compared to the plan Provisioning and customer s deposit insurance: actual expenses were Vnd 31.8 billion, lower than the plan of Vnd 5.1 billion, equaled to 86.2% of the plan. These include provision expenses for other receivables and for customer deposit insurance. II. CUSTOMER AREA 1. Consumer banking - Total individual Mobilization reached 18,940 billion dong, increased by 8% compared to the end of 2013 and completed 101% plan of year Total individual Credit reached 8,224 billion dong, increased by 5% compared to the end of 2013 and completed 97% plan of year Number of individual customers reached 506,188 customers, increased by 63,374 customers compared with the end of Card business activity Total of card issued reached 56,606 cards and achieved 151% of the plan In which: o YouCard : 50,564 cards o Visa Debit : 2,092 cards o Visa Credit : 3,950 cards Development of POS: Number of POS deployment in the 2014 was 307 machines, thus making the accumulated number of POS as of Dec 31th, 2014 of 615 POS machines. Development of ATM: total ATM by Dec 31th, 2014 reached 160 machines. - Significant achivements of consumer banking in 2014 Improving Product of YOUfuture and YOU50 and making amendments to 15 Report on business performance of the year 2014

17 specific terms and conditions of several credit products, including capital mobilization mortgage; car loan (YOUcar); packages suitable to the conditions of each location/ region with the aim to increase specific personal account balance at branches. Increasing fee revenue by extending the collection of service fees from domestic guarantee products for individual customers, property payment intermediary service, and collection fees from ABLAND, ABBA. Credit product design: product for intermediaries to introduce customers; Product project with ICCO to finance household coffee plantation in Gia Lai province; Binh Thuan electronic-bill overdraft package. Promulgating the electric bill payment regulation at ABBANK s counters and ABBANK s counters at EVN s location to unify the process of bill payment collection for ABBANK s. Connection of ABBANK ATM and Maybank ATM to allow Youcard holder withdraw money through ATM system of Maybank. Implementation the technical connection of interbank express money transfer services via Smartlink/ BanknetVN by Online Banking channel. Finalizing cooperation with Southern Electricity Corporation, Ho Chi Minh Electricity Corporation, and Central Electricity Corporation on Implementation of electricity bills collection service using Visa cards via ATM, POS channel. Successfully connecting electricity bills payment service via various channels with Northern Electricity Corporation, implementing pilot service offering in Son La province and planning to expand the service s availability throughout other branches of ABBANK in Being the first bank to successfully cooperate with Vietnam National Financial Switching JSC (BanknetVN) in implementing the International Transfer Service, allowing ABBANK cardholders to receive remittances immediately from customers of Korean banks. In the next stage of the project, the service will be made available in member countries of the Asian Payment Network (APN). In 2014, Comsumer Banking Division developed relationship with many partners under various industries, contributing to enlargement of consumer customers as 16 Report on business performance of the year 2014

18 well as product/service revenue of ABBANK. Improving the interface of online banking website and online lending service. The project Enhancing the sales competency is an important project of Consumer Banking Division in 2014 which was developed with an aim to enhance the sales competence of personal relationship officers and all the branches in order to help the business units come up with appropriate sales solutions using all available information and technology resources. Being a component of this project, the project Developing soft business channels has obtained the following achievements. 2. Corporate banking - Total deposits of corporate customer: reached 26,464 billion dong, increased by 14% compared to the end of 2013 and completed 110% of the plan. - Total loans of corporate customer: reached 17,745 billion dong, increased by 12% compared to the end of 2013 and completed 97% of the plan. - Number of corporate customer: reached 20,011 clients, up 8.22% against year Net service income: reached Vnd bn, increased by 21% compared to 2013, and achieved 90% of the plan. In which fees from international payment and guarantee accounted highest proportion. - International payment: International payment revenue was USD 1,229 mil, up 43% compared to 2013 and achieved 120% of the plan. - Significant achivements of corporate banking in 2014 ABBANK was one of banks having impressive proportion of non-term savings to the whole bank s deposits.(38.2%). This rate was fairly high and far exceeded that of other private-owned commercial banks, and was comparable to Stateowned commercial banks. Additionally, ABBANK also focused on SMEs segment to increase lending rate, contributing to distribute risks and increase the bank s interest income. Operation supporting : In 2014, as instructed by the BOD and BOM, the Corporate banking Division succesfully supported 3 branches to complete their set targets and increase total assets to over Vnd 200 bil with recovered profits. 17 Report on business performance of the year 2014

19 Products/services: Focus on the formulation and development of products and services to increase credits and service fees. As a result, ABBANK service fees in 2014 substantially increased by 21% against Moreover,, service fees combined with high tech products was successfully implemented in 2014 as:launched finance packages for electric contractors and maximized credit limit for SME under the SMEFP III project granted by the SBV, etc. Strategic orientation on SME segments has been communicated and implemented bank-wide. At the end of 2014, lending to SME segment grew by 30% y-o-y in terms of customers (up 632 customers) and loans (up Vnd 2,248 billions). Project of Enhancing competitiveness of SME segment has been timely carried out in accordance with the schedule approved by the Steering Project Committee. So far, agreement with IFC has been agreed. Furthermore, some sub-projects have been in the phase of completing and soon been implemented in coming timelike Customer Profitability Report CPR, which thus lays a foundation for enlargement of SME segment in Credit and deposit structure of Consumer banking and Corporate banking in Financial investment and interbank activities Significant achivements of financial investment and interbank activities in Liquidity management and treasury activities Liquidity of ABBANK is always stable with the liquid assets to total assets ratio of approximate 30%. ABBANK pays special attention to term and currencies mismatching management, to fully abide SBV regulations and GAP limits approved by ALCO. The solvency rates of currencies always match SBV s regulation, the short term deposits used for medium and long term loan ratio is controlled at a level of less than 30%. 18 Report on business performance of the year 2014

20 - Corporate bonds investment: Approach to famous names in electricity and real estate s industries. Step by step to cultivate ABBANK s reputation in issuance consulting and to become one of giants among corporate bond investors in the market. - Monetary Market In 2014, ABBANK was much more active and dynamic in the interbank market than in 2013, which contributed to the growth of ABBANK s total assets as well as to improve the ABBANK s market share. Taking advantage of business opportunities which come from the strong fluctuation of the interest rate in the interbank market in the first and last months of 2014, ABBANK s arbitrage activities including gap and matching of tenor and interest rate for both USD and VND were very dynamic and effective, that contributed in average 70% of the size of placement/lending to other banks as well as taking/borrowing from other banks. - Bond investment and trading activities Proactive in assessing market interest rate, T-bond trading activities have harvested many outstanding results 2014 in terms of profit and sales. T- Bond trading has been considered as a core and focus activity to bring income for the bank, especially when interest rate of inter bank still remains constant at low level. - Forex activity We especially boosts up transactions with key partners such as Vietinbank, BIDV, VCB, BIDV, ACB, MBBank to enhance a prestige and support potential customers. Besides, the bank also expands many transactions with small and medium banks such as TPBank, Vietcapital Bank, Indovina Bank, SHB, Shinhanbank, Vietnam Asia Commercial Bank to have competitive currency sources. Besides, Currency swap, the new product was issued to help customer prevent risks, diversify the bank s products and services and create profits. - Methodologies of internal funds transfer pricing system Project by 31 Dec 2104 has implemented the important work such as assessing the current FTP of the banks, setting out GAP analysis, building governance structures FTP, FTP construction methodology, Complete the FTP policy and procedures to ensure timely set. 19 Report on business performance of the year 2014

21 4. Network development and marketing activities 4.1 Network development activities As of 31/12/2014, ABBANK's transaction network reached 146 transactions including 01 Main branch, 29 branches, 101 transaction offices and 15 saving points. In comparision with 2013, total transactions increased by 1 transaction point. Network development from 2012 to 2014 Network activities carried out in 2014 Opened one more sub-branch: Hoi An, under Quang Nam branch, and upgraded 1 saving fund to sub-branch: Xuan Hoa, under Vinh Phuc branch. Timely supported network s operations like relocation, contruction, renovation of purchased house, renewal of renting contracts and adjustment of contract term, adjustment of contract term (price, payment, etc). - Coordinated with Consumer Banking Division and Card Center to implement 12 ATM booths for branches that have plans to install/relocate ATMs. - Coordinated with Marketing department to check and evaluate images and facilities of 103 over 146 transaction points in HCMC, Ha Noi, the Central region, the Southwest region, and the Southeast region. 4.2 Branding and marketing activities in Branding & communication activities of ABBANK to be positioned associated with the image of Retail friendly Bank, in 2014, deployed 15 PR campaigns for Banking product and branding activities. Some branding PR programs 2014, including: Annual shareholders meeting; communicating the leader s images and ABBANK received the 20 Report on business performance of the year 2014

22 award of 300 top brand Vietnam,Vietnam Strong brand award and C.E.O received the award Typical young entrepreneurs. - Successfully organized program of An Binh Tet Festival 2014 and officially owned its copyright since With the theme of Warm Spring An Binh New Year, the main message of campaign is ABBANK 20 year sharing love wishing warm New Year (Tet holiday) to the poor persons in Vietnam. ABBANK organized many activities such as visiting and giving gifts to poor and disadvantaged in Ho Chi Minh city in Lunar new year 2014, the musical concert with the participation of many famous singers. Communication and PR activities reached large Availability and the campaign was received many positive feedbacks from the public. Additionally, ABBANK sponsored for Vietnam Talent 2014 (the 7th consecutive year); Annual Asian conference Leading change with the participation of senior professionals in the financial banking sector; Sponsored TV program For A Green Future : broadcasted weekly on VTV3. - Program of Beloved summer 2014 Sharing with the community (the 5th consecutive year) along with variance of social welfare programs implemented across provinces/cities like: Financed the construction of 02 schools in Kim Son Ninh Binh; kinder garden in Meo Vac, Ha Giang; Vo Van Kiet primary school in Duc Co, Gia Lai;Financed the construction of new rural roads in Tan Trao, Tuyen Quang; Financed the construction of houses for policy objects of Tay Do battalion, Can Tho city. - Played the role of the only bank of the Malta week in Vietnam, including celebration of the 50th Independence Day of the Republic of Malta & 40 years of diplomatic relationship between Malta Vietnam in September 21st, Actively executed advertisements and communications of products & services to variance segments of customer. Particularly, Products/ Services promotion in 2014 focused on online media/ social network for saving cost, wide coverage. In addition, focused on poster frame system advertising in buildings and direct activation activities at business unit. - Performed market research project to measure the level of customer awareness for the brand ABBANK; measurement of customer satisfaction with the products and services of ABBANK as the basis for the Dept/Team in the business plan The result of 21 Report on business performance of the year 2014

23 the study showed that ABBANK was ranked at the 13th of brand recognition effect. The element of customer s products and services of ABBANK is pretty good based on evaluation on several key factors: procedures, staff and fees although there are some mixed opinions about interest rates. - Internal operations were also given concern through the implementation of events, contests and projects for the whole year Some typical events were The Year End Party for all branches, Business startup Conference 2014, ABBANK 2014 creativity contest, Top 10 professional tellers, Beautiful and quality of service standards; the brotherhood program between Main-branch and Can Tho branch together to develop ; Organization and Communication of the Opening Ceremony the Centre of the database 36 Hoang Cau (Data Center); The signing ceremony of the Project Advisory internal Fund Transfer (FTP); Event of Launching the Club Vnd 1000 bn for branches and Vnd 200 bn for sub-branches and plans for media about club s activities, etc. - Communication campaign ABBANK Aspiration and goals Organized Seminar Series for middle managers in four areas throughout the system. Seminar Series attracted nearly 300 attended middle managers and communicated to the press/ media in each region. In campaign scope, ABBANK also focused on communication of projects have been implemented such as: Project of Fund Transfer Pricing, financial Centralization; salary scheme formulation and transition, operation centralization and internal procedure, sale competitive enhancement and retail products improvement, etc. III. OPERATION AND ORGANIZATION AREA 1. Credit management - Credit appraisal activity: Along with credit re-appraisal activities to assist the CEO and Credit Committee on decision making and support business lines, the Credit Management Division also focused on the formulation of tools to increase the professionalism in appraising credit. Particularly, totally built up the system to report credit documents s implementation progress, prepared to integrate into the software system under cooperation with IT Center.Designed and issued customer re-evaluation form in bank wide. 22 Report on business performance of the year 2014

24 - Collateral appraisal activity: In 2014, ABBANK researched, formulated and implemented vital policies like: pricing framework in 10 regions; issuance of ABBANK collateral evaluation provisions adjustment at ABBANK; Supported to build provisions on credit granting ratio over collateral and provisions on receiving collateral at ABBANK - Credit management activity: Reviewed and checked compliance with approval conditions of business units before and during disbursement via T24 according to instruction of BOD s Chairman and General Director. Reviewed and issued to replace documents related to credit management activities. At that time, Managed credit portfolio data of the whole bank and completed reports. - Credit monitoring activity: In 2014, the Credit Monitoring Department checked credit activities at 19 branches / main branch in the whole system and credit profiles directed by managers. Also, the monitoring was strictly operated by performing remote control to status of business units mortgaged warehouse according to notification No.124/TBNB-TGD.14 dated Jul 21, 2014, implementation status of credit approval conditions of large customers, producing the list of customers eligible for risk warning. 2. Work out activities - Since the beginning of 2014, under the close instruction of the BOD, the BOM has recognized the workout and prevent newly occurred bad debts are among top priorities of ABBANK in The Work-out Committee firmly coorperated with business lines to formulate recovery plans and increase the monitoring as well as bad debt recovery. In the meantime, by all solutions to decrease the NPL ratio (group 3-5) reporting to SBV to less than 3%. - By putting efforts and resources on dealing with bad debts, and implementing many flexible collection solutions like entering the lawsuits, cash collection, liquidating collaterals, decreased interests, provisioning and use of provisioning, selling bad debts to VAMC. In 2014, ABBANK greatly controlled credit quality and managed to bring the NPL ratio to 2.75%, which met the target of 3% given by the BOD. 3. Risk management - Market risk management: continued to be strengthened by maintaining and 23 Report on business performance of the year 2014

25 consolidating policies and tools. The result evaluated as of 31 Dec 2014 revealed all indicators related to business, liquidity, compliance and risks have always been complied with ABBANK s internal provisions.. Particularly, some items were: Completed building tools for market risk management including: VaR model and VaR Limit for FX portfolio; stop loss limit for FX portfolio; evaluate the performance bond trading etc. Reviewed, supplemented and adjusted the current reporting system: liquidity risk report, interest rate risk reporting, stress test (liquidity) and some other reports. Composed draft of ALM policy. Monitored and supervised as well as support units in the management of market risks. - Operational risk management (ORM) In 2014, ABBANK continued to formulate and consolidate policies, procedures as well as tools to verify, measure and control operational risks like: built up the draft of risk management performance scoring at units; developed various barricades to prevent risks in T24 system; collected data of RCSA, KRI, IMDC in 2014 from all units and composed adjustment for these risk management tools (KRI, IMDC, RCSA) in order to meet current requirements. Additionally, the supporting and strengthening operational risk management were also reflected by reviewing operational risks of ABBANK s documents; Guided and updated plan on business maintenance for all units in bank wide (BCP). The quality of ERD report was improved step by step under the consultancy of Maybank - Credit risk management On the basic of credit risk management of Basel on monitoring bank and provisions on risk management of SBV, the credit risk management of ABBANK in 2014 was continued to be strengthened and consolidated. Do research and issuing policies, regulations in line with SBV including: Framework on debts rescheduling and Framework on discounting; Regulation on lending margin against collateral value; 24 Report on business performance of the year 2014

26 Deployed the industry analysis as per BOM request for the support to business units in credit orientation; Managed risk indicators, giving warning and solutions; ensuring committed covenants with Maybank and IFC; Analyzed risk and assessed credit portfolio by Industries, products, high risk customers; review of risk thresholds for the support and orientation to respective units in their business planning 2015; Reviewed internal credit rating, cooperation with E&Y and IT Division to improve the existing system for a better meaning ratings as well as enhance the check points, supportive to business units in customers rating. 4. Operation management - Credit Supporting activities Operation of credit supporting center is considered important and necessary to make credit administration system in ABBANK consistent; Professionalizing credit management; increasing productivity; mitigating credit risks; improving service quality; lessening operational expenses; facilitating business units to put more focus on business by lessening their time in operations. In 2014, Credit Supporting Center launched 03 key centralized projects: guarantee operation, credit controlling and disbursement. In which, all tasks of centralized guarantee project and credit controlling have been finished and carried out bank wide. Besides, preparation procedures of centralized disbursement have also been completed and pilotted at some branches before implementing bank-wide. - Trade Service acitivities Transaction safety rate is 100%, Ensure STP rate over 98%. Frequently, sharing information on trade service s risk management via channels over the whole bank and cooperating with Internal Audit to examine compliance in main branch and branches. Publishing International Bank Guarantee Procedures, Guide for Remittance Transaction in CNY; and cooperating to update negotiating export documents via LC and Documentary Collection methods and to public after shipment financing procedure. 25 Report on business performance of the year 2014

27 - Card supporting and operating activities The Project of connecting ABBANK ATM system in Vietnam with MAYBANK ATM system in Malaysia has not only brought an opportunity for ABBANK to expand its card market, but also made a step forward regarding in the cooperation and investment relationship between ABBANK and Maybank. It has also strengthened ABBANK s reputation in card domestic and international market to further increase the bank s service fees income. With regard to international cooperation: ABBANK s COC has cooperated with BanknetVN to become one of the first 4 Vietnamese banks to provide the Cross border fund transfer service in 2014 (CBFT), confirmed the fact that ABBANK has always looked forward the development of value-added services in order to promote payment card activity. - Payment Center activities Successfully implemented centralized payment project at Payment Center Among above achievements, the most prominent project is the centralized payment project at HO, helping interbank payment system increase stability, processing speed and automating implementation of transaction. At that time, Center issued time standard to complete transaction at Payment Center, issued domestic money transfer process, organized to train course on centralized payment process for staffs in HCMC area. As of Dec , 20 over 24 business units had totally been completed their centralized payment, 4 remaining units still keep payment channel to perform monetary deals with provincial State Treasury as recommended by provincial SBV. - Customer Service activities Maintained Customer Service hotline 24/24h: served 79,261 calls and information query from customers in Continued maintaining program "Sales anytime and anywhere": cooperating and assisting business units in introducing ABBANK products. Completed 04 conferences on "Improving customer service quality" in Ha Noi, Can Tho, Ho Chi Minh and Da Nang. 26 Report on business performance of the year 2014

28 In 2014, the project on upgrading customer contact system had been approved and completed technical requirement profile and bidding documents under cooperation with IT Division. 5. Implementation progress of ABBANK s 05 strategic goals and 20 initiatives In 2014, the restructuirng project continues to be implemented under the BOM s instructions with more focus given to strategic initiatives as well as the reality of executing such goals with consultancy from Maybank and IFC. ABBANK continues to accomplish the restructuring project as well as consolidate the HR system as instructed by the BOD to meet the goals implementation roadmap moving forward 2018 as approved by the BOD. In March 2014, the BOD approved the Vision, mission, goals and strategic initiatives of ABBANK moving forward 2018 and ABBANK has started to review and consolidate medium to long term objectives to ensure all the bank s prioritised strategic objectives being executed in alignment with the set roadmap and adoptable to the changes of business environment. - Implementation status of 05 strategic goals as of 31/12/2014 No Item Result Result Goal Remark 1 Total assets Vnd 57,792 bn Vnd 67,198 Top 10 largest privately owned commercial banks ROE ROE- ABBANK: 2.55% ROE industry: 5.18% ROE- ABBANK: 1.82% ROE industry: 5.49%(*) ROE of ABBANK is higher than ROE of industry By end of 2013, ABBANK was ranked 17 th out of 34 privately owned banks ROE after tax 2 Retail loans (individual and SME) Retail loans: Vnd 15,231 bn Proportion: 40.6% Retail loans: Vnd 17,902 bn Proportion: 42.0% At least 60% of total loans Total loans include loans on market 2 27 Report on business performance of the year 2014