CONTENT. DEVELOPMENT ORIENTATION IN 2015 FINANCIAL STATEMENTS 56 Summarised financial statements as of 31 December 2014

Transcription

1 ANNUAL REPORT 2014

2 CONTENT Page Content OVERVIEW 3 General Information 4 Mission - Vision - Business Strategy - Core values Business Philosophy 6 Milestones 10 Message from Chairman 12 Organization Structure 14 Board of Directors 16 Board of Supervisors 18 Board of Management OVERVIEW OF BUSINESS PERFORMANCE 21 Performance Highlights & Keys Financial Ratios 24 Products and Services Development 28 Typical Products at Postal Transaction Offices 30 Cards and E-Banking Development 32 Big Corporate and Premier Banking 36 Capital Trading and Management 38 International Cooperation 41 Network Development 42 Information Technology 44 Risk Management 48 Human Resources 52 CSR Activities DEVELOPMENT ORIENTATION IN 2015 FINANCIAL STATEMENTS 56 Summarised financial statements as of 31 December

3 ABOUT Full name in Vietnamese Ngân hàng Thương mại Cổ phần Bưu điện Liên Việt Full name in English Lien Viet Post Joint Stock Commercial Bank Abbreviated name LienVietPostBank Banking license Banking license No. 91/GP-NHNN dated March 28th, 2008 issued by the State Bank of Vietnam Chartered capital VND 6,460 billion (In word: Six thousand four hundred and sixty billion Vietnamese dongs) Address No. 32 Nguyen Cong Tru Street, Ward I, Vi Thanh City, Hau Giang Province, Vietnam Telephone number Fax number Website 3

4 MISSION To offer customers and society a wide range of products and services with excellent quality; To create maximum benefits for the Bank and the Society. VISION To become a leading retail bank in Vietnam A Bank for everyone. BUSINESS STRATEGY To be a retail and universal bank. CORE VALUES Discipline, creativity and humanity. 4

5 MISSION - VISION - BUSINESS STRATEGY - CORE VALUES AND BUSINESS PHILOSOPHY BUSINESS PHILOSOPHY 3 core concepts: Without People, the project is meaningless. Without Client, the Bank is purposeless. Without Conscience, Reputation, Talent and Vision, LienVietPostBank is useless. Shareholders: are the foundations of the Bank. Customers: are the benefactors of the Bank. Employees: are the strength of the Bank. Partners: are the companions of the Bank. Products and services: continuously revised to offer what customers need instead of what are available in the Bank. Business awareness: fully comply with laws and regulations; integrate business and society. 5

6 MILESTONES 2014 January Funding USD 200 million for Xekaman 1 Hydropower Project Xekaman 1 Hydropower is the largest hydropower project in Laos which is owned by Viet-Lao Power Joint Stock Company. The project is under the Cooperation Agreement between Vietnam and Laos governments on Energy Development; and plays a great economic, social, and political role between two countries. Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) is the Bank raising fund for the project. Total long-term credit funding amount committed to the project reached USD million in which LienVietPostBank directly covered the amount of USD million. March Opening Big Four Women s LienVietPostBank Volleyball Cup 2014 Tu Hung (Top 4) Women s LienVietPostBank Volleyball Cup 2014 was held in Hau Giang Province from 22 nd to 26 th March 2014 consisting of top 4 national volleyball teams which are Thong Tin LienVietPostBank, VTV Binh Dien - Long An, Phu Rieng Rubber and Tan Binh Ho Chi Minh City. Finally, Thong Tin LienVietPostBank won the championship. This volleyball cup was deemed to celebrate the 68th anniversary of Vietnam s National Sports Day (on 27th March) and the 6th anniversary of LienVietPostBank s operation (28th March th March 2014) - the major sponsor for the tournament. May Co-organizing the 20 th WSBI Asia Pacific Regional Group Meeting The WSBI Asia Pacific Regional Group Meeting was held in Vietnam for the first time, gathered up 80 bankers, leaders, managers and financial experts from more than 20 nations in the Asia Pacific region and several other international organizations. The conference s topic of Turn financial inclusion challenges into business opportunities brought LienVietPostBank an opportunity to meet and discuss with other successful members implementing the Bank - Post model and providing the financial services in the neighborhood as well. 6

7 June Opening branches in provinces of Binh Thuan, Ha Giang, Ben Tre, Thai Binh and Hai Duong As a part of the bank s network expansion in 2014, LienVietPostBank officially opened 5 branches in provinces of Binh Thuan, Ha Giang, Ben Tre, Thai Binh, and Hai Duong in June 2014 to facilitate nationwide customers to access its banking services. LienVietPostBank has its coverage network through-out 56 of 63 provinces/cities in Vietnam and will plan to fulfill its nationwide coverage in the middle of 2016, promoting the objective of becoming A bank for everyone. Launching LienVietPostBank MasterCard Debit card To improve the service quality and diversify the range of card and e-banking products, LienVietPostBank officially introduced LienVietPostBank MasterCard Debit card. The cardholders would be able to make transactions globally with lots of utilities through the link between this newly issued card and the active current accounts at LienVietPostBank. July Coordinating with Vietnam Red Cross Society, High Command of Vietnam Navy, Vietnam Coast Guard, Department of Fisheries Resources Surveillance, Vietnam Charity Fund Vietnam Television (VTV) to launch the Homeland s Sea and Islands program The program directly shares the difficulties of residents and soldiers in the coastal areas, and shows LienVietPostBank s love to fatherland s sacred sea and islands. LienVietPostBank and Vietnam Charity Fund have initiated and promulgated a number of social activities, supporting poor individuals and households nationwide. In which, Going home is a notable program with the total sponsor amount reaching nearly VND 800 billion up till now (targeting to reach VND 1,000 billion Going home in 2015). August Signing the Comprehensive Co-operation Agreement with Tuan Chau Group According to the agreement, LienVietPostBank commits to give a assess to the VND 10,000 billion worth of credit sponsor to the Tuan Chau Group s development projects invested by itself across Vietnam. LienVietPostBank would offer Tuan Chau Group its banking services such as: collections, money transfer, domestic and international payments in local/foreign currencies, which comply with the governing laws and regulations 7

8 September Funding for Hau Nghia High School, Duc Hoa District, Long An Province Hau Nghia High School, the biggest among the school construction projects funded by LienVietPostBank and Him Lam Corporation, was inaugurated at the beginning of the school year with the total funding amount of VND 117 billion. The inauguration and the new school year ceremony were honored to welcome Mr. Truong Tan Sang - Politburo member, President of the Socialist Republic of Vietnam; Mr. Nguyen Van Binh - Member of the Communist Party of Vietnam Central Committee, Governor of the State Bank of Vietnam; Mr. Pham Vu Luan - Minister of Education and Training as well as other leaders of sovereign agencies and local authorities. October Launching the favourable interest rate program Business financing consumption promotion The program was implemented to finance enterprises / business households and promote individual customers consumer loans with the credit line up to VND 4,000 billion at the interest rate of 5% p.a for VND and 2% p.a for USD. December Launching the Premier Banking Premier Banking is a specific priority service for the premier individual customers of LienVietPostBank. Premier individual customers segments of LienVietPostBank are classified as Diamond, Sapphire and Ruby, which refer to 3 gemstones indicating the power, prosperity, fortune, success and happiness. Being awarded by Global Banking & Finance Review (UK) Global Banking & Finance Review is one of the most prestigious journals of banking and finance incorporated in the UK, whose readers consist of CEO, CFO, professional analysts in economics and finance, investors and top leaders of sovereign agencies worldwide. During the official visit to LienVietPostBank, Global Banking & Finance Review gave the bank 2 awards of Best CSR Bank Vietnam and Best Savings Bank Vietnam, which recognized the bank s breakthrough initiatives of products and services as well as its contribution to sustainable development of the community. 8

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10 MESSAGE FROM CHAIRMAN Dear Shareholders, Partners, Customers and LienVietPostBank staff, In 2014, domestic and global economies experienced significant difficulties and challenges. Under these circumstances, LienVietPostBank s Board of Directors and Board of Management were flexible and proactive in managing the bank s operations in harmony with actual conditions. Together with the support from Shareholders, the efforts and unity of all staff, LienVietPostBank fulfilled most of the significant objectives and ensured safe and sound operations. After 6 years of development, LienVietPostBank has persisted its position as a Bank with the largest network among commercial banks in Vietnam with nearly 100 own branches/transaction offices and over 10,000 service-providing Postal Transaction Offices nationwide. In spite of difficulties, LienVietPostBank achieved great impressive results: As of 31st December 2014, LienVietPostBank s total assets increased by 14 times from VND 7,453 billion to VND 100,800 billion and has been currently positioned as the leading commercial bank among those banks established at the same time; total capital mobilization rose by 24 times, reaching VND 91,759 billion, of which customer deposits contributed around 85%, indicating the stable and sustainable development of LienVietPostBank s funding resources. Besides, loans and receivables stood at VND 50,076 billion, a 19-fold increase, meeting capital needs for production and business sectors of the economy, meanwhile remaining non-performing loan ratio (NPL) at 1.23%, which is lower than NPL of other commercial banks and even much lower than the maximum level of 3% as determined by the Shareholder Meeting. Responding to the SBV s guidance in stabilizing macro-economy, curbing inflation, solving difficulties, supporting for agriculture and rural development and facilitating access to finance for enterprises, LienVietPostBank has flexibly adjusted its policies to lower lending interest rate; offer credit sponsor to large-scale and national priority projects; give financing for manufacturing and exporting enterprises, SMEs in order to satisfy capital needs of the economy for manufacturing and trading activities. Notably, regarding foreign exchange trading, on the interbank market in particular, total foreign exchange revenue of LienVietPostBank in 2014 increased nearly 40% in comparison with Accordingly, total revenue of the bank s foreign exchange transactions with SBV reached USD 1.5 billion, one of the banks having largest trading volumes with SBV. LienVietPostBank s revenue of foreign exchange swap reached USD 3.5 billion in 2014 which once again positioned the Bank in the top 10 Vietnamese commercial banks with the highest foreign exchange swap revenues. Despite being one of the newly established banks, LienVietPostBank has been affirmed as an active and effective partner on interbank market. The above positive achievements were gained due to LienVietPostBank s flexible and timely adjustment to deposit policy, utilization of low-cost and stable capital funding, and prompt response to fluctuations of the market and SBV s policies. Besides, one of LienVietPostBank s features is that, LienVietPostBank s personnel in recent years has not only been stable against the market s decreasing trend but even increased compared to the previous years. The total number of employees for the year ended 2014 was nearly 4,000 people which has increased 10 times since establishment and is expected to keep growing. Especially, LienVietPostBank s Database Centre was established to ensure constant and secured update business data. This was an innovation in IT basis, which can only be developed by a few top commercial banks. After 7 years, the earnings before taxes (EBT) reached VND 5,000 billion, showing an average annual earnings of around VND 700 billion, meanwhile dividend payout ratio was maintained at the average level of 11% per annum. The changes of personnel, the increase of network expansion expenses, the provision for credit losses and the concentration on technology development are main reasons for the decrease of LienVietPostbank net profit from VND 644 billion in 2013 to VND 535 billion in However, these investment activities are the cornerstone of LienVietPostBank longrun development. Although the dividend payout ratio was not high as the result of lower net profit, LienVietPostBank s management boards still received the support and sympathy from shareholders, which is a fundamental factor for LienVietPostBank s sustainable development. 10

11 Mr. Duong Cong Minh Chairman Dear Shareholders, Partners, Customers and LienVietPostBank staff, The outlook for the economy in 2015 shows signs of recoveries and improvements; however, the banking industry will still be faced with difficulties. To proceed with positive and impressive results as achieved in previous years and maintain sustainable growth rate in the following years, LienVietPostBank will keep directing its operation under the Government and State Bank of VietNam(SBV) s orientation of monetary and credit operations to meet the needs for national economic and social development. In 2015, LienVietPostBank will launch and finalize strategic programs and projects following the core contents: development of products, services, risk management, operations, human resources, information technology, etc. LienVietPostBank will concentrate its resources on primary business lines and control the credit growth in the first half of 2015: launching sale campaigns on large scale, developing customer relationship and cross selling activities among ordinary sale channels and new alternative ones, designing modern and appropriate banking products and services. We believe that with the apparent strategy of the Board of Directors, the directions of the Board of Management, the unity and determination of LienVietPostBank staff; and the support of Customers, Partners and Shareholders, LienVietPostBank will fulfill all pre-determined objectives. We would like to send our sincere thanks to Customers, Partners and Shareholders who have always been along with LienVietPostBank in the recent period and believe that you will keep staying with us in the forthcoming development stages. Kind regards, On behalf of the Board of Directors Duong Cong Minh - Chairman 11

12 ORGANIZATIONAL STRUCTURE SHAREHOLDER MEETING Board of Directors Stragegy, Technology, Business & International Relations Committee Banking - Postal Services Co-ordination Council Stragery & International Relations Council Business Council Technology Council BOARD OF MANAGEMENT BUSINESS DEVELOPMENT SECTION CONSULTING SECTION E-banking Division Big Corporate & Premier Banking Division Treasury Division International Relations & Global Capital Market Division Product Division PTO Management Division Credit Review Division Legislation, Compliance and Debt Collection Division Strategy,Risk Management and AML Division Organizational Management & Development Division Northern Sales Dept Accounting -Payment Dept Product Research & Development Dept Big Corporate Banking Dept Premier Banking Dept ODA Servicing Dept Capital Management Dept Capital Trading Dept Global Capital Market Dept FI & International Relations Dept Product & Service Design Dept Product & Service Launching Dept Customer Service Dept PTO Product & Service Management Dept Planning & PTO Network Development Dept Northern Credit Review Dept Southern Credit Review Dept Northern Collateral Appraisal Dept Legislation Dept Northern Compliance and Debt collection Dept Southern Compliance and Debt collection Dept Risk Management Analyst Dept Strategy Research and Economy Analyst Dept Planning and Organizational Management Dept Network Development& Construction Division Technology - Operation Dept Southern Collateral Appraisal Dept Southern Sales Dept Branches Big Transaction Offices Transaction offices Sales and Customer Management Dept Accounting-Cash Management Dept Business Control Dept Sales and Customer Management Section Accounting-Cash Management Section Business Control Section Transaction offices Postal Transaction Offices Sales Development Group Cashier - Transaction Group Business Control Group Postal Transaction Group Sales Development Group Cashier - Transaction Group Business Control Group Postal Transaction Group Postal Transaction Offices 12

13 BOARD OF SUPPERVISORS Human Resources, Credit & Cost Management Committee ALCO, Legislation, Risk Management & AML Committee HR Management Council Headquarter s Credit Council Cost Management Council ALCO, Legislation, Risk Management & AML Council Risk Handling and Debt Collection Council Northern Credit Council Southern Credit Council BACK OFFICE SECTION SUPERVISION SECTION Trade Service Division HR Division Finance Division IT Division Administration Division Regional Representative Office Internal Audit Division International Payment Dept HR Management Dept Financial Accounting Dept CoreBanking Management Dept Administration Dept Back up Dept Domestic Payment Dept Training Dept Statistics & Asset-Liability Management Dept Data Base Administration Dept Network Infrastructure & Security Management Dept Assistant & Secretary Dept PR Dept Periodical Audit Dept Regular Supervision Dept Hardware Management Dept PTO Internal Audit Dept Product Research &Development Dept Technique and Support Dept IT Department P. CNTT of Central Khu Region vực miền Trung Note - ALCO: Asset Liabilities Committee - FI: Financial Institution - AML: Anti-Money Laundering - PR: Public Relations - PTO: Postal Transaction Office - IT: Information Technology - ODA: Official Development Assistance - Dept: Department - HR: Human Resources 13

14 THE BOARD OF DIRECTORS Mr. DUONG CONG MINH Chairman Bachelor of Economics University of Economic Planning (now called National Economics University) Mr. NGUYEN DUC HUONG Permanent Vice Chairman PhD in Economics Banking Academy Mr. NGUYEN DUC CU Vice Chairman Bachelor of Commercial Economics Vietnam University of Commerce Mr. PHAM ANH TUAN Member Master of Economics National Economics University 14

15 THE BOARD OF DIRECTORS Mr. NGUYEN VAN HUYNH Member Bachelor of Economics University of Economics, Ho Chi Minh City Mr. NGUYEN DINH THANG Member Bachelor of Economics University of Economic Planning (now called National Economics University) Mr. LE HONG PHONG Member PhD in Economics Banking Academy Ms. DO THI NHIEN Independent Member Bachelor in Banking and Finance Banking Institute in Ho Chi Minh City (now called Banking University of Ho Chi Minh City) 15

16 THE BOARD OF SUPERVISORS Ms. LE THI THANH NGA Chairman of the Board of Supervisors Master of Business Administration National Economics University Mr. TRAN THANH TUNG Member Bachelor in Banking and Finance Banking Academy Ms. NGUYEN THI LAN ANH Member Master of Economics Vietnam University of Commerce 16

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18 THE BOARD OF MANAGEMENT Mr. PHAM DOAN SON CEO Master of Business Administration (MBA) Ms. NGUYEN THU HOA Deputy CEO Master of Applied Finance Mr. TO VAN CHANH Deputy CEO Bachelor in Banking Ms. NGUYEN THI BICH LOC Deputy CEO Master of Business Administration Ms. NGUYEN ANH VAN Deputy CEO Master in Banking and Finance Ms. NGUYEN THI GAM Deputy CEO Association of Chartered Certified Accountants (ACCA UK) Master of Financial Control Ms. NGUYEN THI THANH SON Deputy CEO Master of Business Administration 18 Mr. VU QUOC KHANH Deputy CEO Bachelor of Business Administration Mr. NGUYEN THANH TUNG Deputy CEO Bachelor in Banking Credit

19 THE BOARD OF MANAGEMENT Mr. KIM MINH TUAN Deputy CEO Master in Banking and Finance Mr. BUI THAI HA Deputy CEO Master of Business Administration Mr. TRAN THANH HAI Deputy CEO Bachelor in Public Policy Ms. NGUYEN THU MAI Deputy CEO Master in Finance Mr. NGUYEN QUOC THANH Deputy CEO Master in Information Technology Mr. PHAM HAI AU Deputy CEO Master in Information Administration Mr. DUONG TRONG CHU Deputy CEO Master of Business Administration Mr. NGUYEN NGOC NAM Deputy CEO Master in Banking and Finance Notes: 1. From June 05 th, 2014, Mr. Ho Nam Tien was no longer a Deputy CEO of LienVietPostBank. 2. From June 05 th, 2014, Mr. Nghiem Sy Thang was no longer a Deputy CEO of LienVietPostBank. 3. From October 02 rd, 2014, Mr. Le Hong Phuong was no longer a Deputy CEO of LienVietPostBank. 19

20 OVERVIEW OF BUSINESS PERFORMANCE 20

21 PERFORMANCE HIGHLIGHTS & KEYS FINANCIAL RATIOS In recent years, LienVietPostBank always achieves stable and sustainable growth even in the difficult context of the economy in general and the banking sector in particular. These positive business results are due to the wise leadership of the Board of Directors and the Board of Management in strategic planning as well as the unity and efforts of all LienVietPostBank s staff. The positive growth was reflected in the development of the Bank s financial indicators year over year: LienVietPostBank has total deposits get good growth over the years. The mobilizing policy is timely adjusted and in compliance with the law. LienVietPostBank s Board of Directors always has sensible direction, good execution which helps the Bank take advantage of cheap and stable capital, quickly response to market moves and policy changes of the State Bank of Vietnam. Unit: VND Billion A. BUSINESS RESULTS Total assets 7,453 17,367 34,985 56,132 66,413 79, ,802 Capital and reserves 3,447 3,828 4,105 6,594 7,391 7,271 7,391 Chartered Capital 3,300 3,650 3,650 6,010 6,460 6,460 6,460 Total Deposits 3,801 13,399 30,421 48,148 57,628 71,139 91,759 Total Loans and Advances (*) 2,674 5,983 10,114 12,757 29,325 36,666 50,076 Net operating income before provisions and impairment charges on loans ,161 1, Profit before tax , Profit after tax Note: (*) From 2013, Total Loans and Advances includes Total lending and Investment in Corporate Bonds B. KEY FINANCIAL RATIOS Return on Average asset (ROAA) Return on Average equity (ROAE) 5.96% 4.35% 2.61% 2.14% 1.42% 0.78% 0.52% 12.88% 14.85% 17.22% 18.26% 12.41% 7.72% 6.36% Non-performing loans 0.00% 0.28% 0.42% 2.14% 2.71% 2.48% 1.23% Dividend payout (%/year) 9.00% 13.00% 15.00% 15.00% 10.00% 8.00% 5.00% 21

22 CAPITAL MOBILIZATION VND Billion 100,000 91,759 90,000 80,000 71,139 70,000 57,628 60,000 48,148 50,000 40,000 30,421 30,000 20,000 13,399 10,000 3, TOTAL LOANS VND Billion 60,000 50,076 50,000 As of 31/12/2014, LienVietPostBank s total deposits increased by VND 20,620 billion or 29% to VND 91,759 billion, which was much higher than the industry growth rate (about 16%). Deposits from individual and corporate increased strongly and took a high proportion of the total deposits (85%), which showed the stabilization and sustainability of the LienVietPostBank s deposit growth. Responding to the Government, the State Bank of Vietnam s direction of issues relating to stabilizing macro-economy, curbing inflation, resolving difficulties, supporting agriculture and rural development and facilitating enterprise accessing to loans, LienVietPostBank has timely had adjusted policies to lower lending interest rates, participated in financing national major projects, financed expooriented manufacturing companies and SMEs; therefore contributed to meeting the needs of capital for production and business of the economy. LienVietPosBank s total loans reached VND 50,076 billion at 31/12/2014, up VND 13,410 billion from 2013 (equivalence to 36.6%) and this growth rate was higher than the growth rate of 12.6% of the whole industry. 40,000 30,000 20,000 10, ,666 29,325 10,114 12, 757 2,674 5, Along with the general trend of the banking sector and as a result of influence from the difficulties of the economy in general and the banking system in particular, LienVietPostBank s pre-tax profit in 2014 declined. The main reasons were that the bank had increased risk provision to ensure a safe and sustainable development and expanded its network VND Billion INCOME BEFORE TAX 1, Despite having an under-expected profit, LienVietPostBank was still in the group of banks which made good profits and high dividend payout ratios in This shows the great efforts of LienVietPostBank s leadership in maintaining revenues and profits of the bank. In addition, the figures also reflect the increasing support and trust of which customers are giving in LienVietPostBank

23 PERFORMANCE RESULTS 23

24 PRODUCTS AND SERVICES DEVELOPMENT In 2014, the products and services development (especially retail banking products) was required to transform actively and basically with the addition of the services and utilities to satisfy the clients increasingly varying demand. 24

25 RETAIL PRODUCTS AND SERVICES With the orientation of developing the Retail Bank, the main focus of LienVietPostBank s products and services development in 2014 was to build and renovate the offering of retail products and services, particularly retail credit products. LienVietPostBank s retail credit products were basically renovated, including those for the massmarket and those specifically tailored for different client segmentations and geographic regions with convenient process, simple procedures and short service time. Many products created many highly competitive advantages for LienVietPostBank in the market such as uncollateralized consumer loans for government officers; uncollateralized consumer loans for individuals; credit for pensioners; special uncollateralized consumer loans, etc. Uncollateralized consumer loans specifically for government officers: Characterized by flexible reimbursement, high lending limit, simple procedures and the most competitive interest rate and fee policy in the market for the government officers with high creditability, strong financial capacity based on the ability to manage the income and a low risk level. Special uncollateralized consumer loans: Specifically designed for the individual segmentation in need of loans below 50 million dongs. The product is characterized by the flexibility and convenience of lending methods, reimbursement methods, required documents, validation process and competitive interest rate, etc. The product is accessible to all the clients including farmers, small business keepers, corporate or government officers Pension credit: The first ever credit product launched for the pensioners aims to be a flexible support source for the clients to financially handle their household s and their own financial needs. Uncollateralized overdraft for individual clients: The product allows the clients to spend exceedingly the balance of the current account without collateral and, hence, satisfies the flexible capital demand of the corporate and government officers. Along with developing the credit products, LienVietPostBank also paid much attention to the growth of mobilization products and services. During 2014, LienVietPostBank modified the features of most mobilization products to keep the low cost of the mobilization products based on the market and LienVietPostBank s capital situation. The expansion and development of the services, especially collection and payment, is the main target of LienVietPostBank s product development strategy in 2014, for example, Value Added Tax (VAT) Refund for foreign clients at the airports or international border gates, EVN bill collection, Viettel bill collection, etc. CORPORATE SERVICES AND PRODUCTS In 2014, the economy indicated more positive signs than in However, most of the corporate were running in difficulties while the capital source outmatched the capital absorption capacity of the whole economy In that context, LienVietPostBank has been continuously studying and implementing financial solutions in order to meet the clients demand flexibly along with the fluctuations of the market and strictly followed the operation orientation of the bank. Particularly, LienVietPostBank deployed many corporate products such as Package from Road Maintenance Fund for contractors, Car loans for corporate, Trade finance loans, Overdraft for the agencies of Carlsberg Group and Saigon Beer Alcohol Beverage Corporation (SABECO), Lending programs in cooperation with Vietnam Lottery Company, AEON Corporation, etc. Most of the products were timely launched by LienVietPostBank to satisfy the varying needs of the corporate clients and supplement more capital for the manufacture and business operation of the corporate on the recovery trend of the economy A number of striking corporate products are as follows: Package from Road Maintenance Fund for contractors: Providing credit for the contractors to deploy the road maintenance and modification from Central and Provincial Road Maintenance Fund with the preferential and flexible conditions for collaterals (Collaterals are the receivables or claim from the construction contract), competitive lending rate, preferential guarantee fee, etc). 25

26 Car loan for corporate: The product provides loans for corporate in need of buying cars for transportation, manufacture, business and service activities with the preferential advantages including competitive loan to value ratio; up-to-date car valuation, flexible reimbursement, enabling collateral addition to increase loan-to-value ratio, simple procedures, convenient validation. The clients also take part in promotion programs, preferential interest rate, car insurance at the lowest price, etc. Trade finance loan: The product aims to finance the corporate exporting by L/C method or documentary collection. The trade finance loan makes discount on the documentary of the export consignment for the corporate in need of getting paid within a short time and increasing the capital mobility. The product is integrated with many advantages such as simple and convenient procedures, wide acceptance of documentary, the maximum discount rate and competitive interest rate, flexible collateral requirements (without collateral for the corporate with strong financial conditions and good transaction history). PRODUCTS AND SERVICES DEPLOYMENT In addition to investing much in building and renovating the offering of products and services, LienVietPostBank also concentrated on strengthening products and services deployment. This mission was comprehensively carried out from the section of raising client policies to that of organizing marketing campaigns, building the products and services distribution for each segmentation, area, region, etc and created a great competitiveness in the market. In 2014, LienVietPostBank frequently launched credit promotion programs with highly competitive preferential interest rate, which made good reputation in the banking industry. For example Program Funding for business promoting consumption with the budget of up to VND 4,000 billion for corporate, business household and individuals to bolster business and manufacture activities and finance consumer credit. Program Preferential lending interest rate with the total budget of up to 2,000 billion dongs and 100 million USD for individual clients or households in need of loans for buying houses, buying cards, business and manufacture activities, import and export activities. Program Optional interest rate for thousands of billion dongs with the total budget of 2,000 billion dongs for the individual clients, business households, super small businesses in need of over 12 month loans for consumption like buying houses, buying cars, renovating houses; investing or expanding business and manufacture activities. Program Simplest consumer credit ever is ideally designed for the individual clients, business households in need of loans lower than 50 million dongs. 26

27 SEE THE BANK SEE THE POST Unite to Develop 27

28 TYPICAL PRODUCTS AT POSTAL TRANSACTION OFFICES Whereas 2013 marked the transformation of the postal transaction offices (PTO) with online 1,031 PTOs throughout 63 provinces and cities, 2014 was considered as the year with the explosion of products and services with more than 40 banking products and services developed at the postal transaction offices. Based on the modern technology, the new products and services launched were successfully developed, built and deployed by LienVietPostBank at postal transaction offices. In 2014, the postal transaction offices introduced a wide range of outstanding products and services and satisfied the clients increasingly varying demand. 28

29 DEPOSIT PRODUCTS The group of deposit products offered at the postal transaction offices was regarded as the core postal saving offerings. In 2014, LienVietPostBank developed and launched 2 new products and one mobilization service at the postal transaction offices. They include Flexible accumulative saving, Escalating rate with saving balance, Withdrawal of saving books at any Postal Transaction Offices. The new products and services were specifically designed to meet the clients requirements regarding the term, interest rate, fund transfer and transaction range. In addition to the outstanding availability of services (from 7.30 to all the weekdays including Saturday, Sunday and holidays), LienVietPostBank is now taking full advantage of the wide network as the client can deposit and withdraw cash at any postal transaction offices throughout 63 provinces and cities. As a result of its advantage in technology, network and product, LienVietPostBank s total balance of deposit at Postal Transaction Offices reached 18,900 billion dongs, 105% as high as the 2014 target and 140% that of The rich capital source from the postal transaction offices played an important part in the total deposit balance of LienVietPostBank, promoting the position of a retail bank in the financial market. It is expected that LienVietPostBank will launch mobilization products integrated with technology, creating a safe and effective method of investment for the clients on a national scale. CREDIT PRODUCTS In 2014, LienVietPostBank s transformation in developing credit products at postal transaction offices was also remarkable. Since July 2014, for borrowing money at LienVietPostBank, the clients neither have to withdraw their saving books prior to the maturity nor appear at the bank branches. Instead, they just need to work with Postal Transaction Offices and submit the lending documents with their saving books as collateral. In the meantime, in order to bolster the coordination between LienVietPostBank and Vietnam Post and create favorable conditions for Vietnam Post in need of borrowing at Post Transaction Offices, LienVietPostBank already launched 2 products at Post Transaction Offices including loans with the saving books issued by LienVietPostBank as collateral and consumer credit for Vietnam Post s staff. Both products are initially deployed in 27 provinces and cities. Although the products were still new and firstly launched at the postal transaction offices, they gained a high result within just 5 months after the launching day. Specifically, the disbursement amount reached billion dongs, particularly billion dongs for the former and billion dongs for the latter. PAYMENT AND COLLECTION SERVICES In 2014, in addition to increasing the turnover and expanding the scope of implementing Viettel collection, LienVietPostBank also worked with other big corporates and successfully deployed the payment services, for example, electricity bill collection for Vietnam Electricity Corporation and unlisted collection services for Corporate. As Vietnam electricity industry is organized into many large corporations and sub-companies, building software, relevant procedures for the varying requirements of management, business and manufacture, infrastructure means such a challenging mission to any payment gateway or organizations. LienVietPostBank also has to meet the strict requirements raised by Vietnam Post regarding the speed, convenience, accuracy and promptness in the transaction recorded LienVietPostBank s achievements in implementing the services with 2 Electricity Corporations including Ho Chi Minh Vietnam Electricity and Vietnam Electricity Southern Power Corporation (EVN SPC). Particularly, 17,000 transactions of Ho Chi Minh Corporation Vietnam Electricity, even 24,000 transactions on a peak day, were handled daily on average. For Vietnam Electricity Southern Power Corporation, LienVietPostBank succeeded in building the software and technical procedures to provide the collection service through 3 channels including collection at Post Transaction Offices, collaborators and cash collection from collaborators at Post Transaction Offices. LienVietPostBank carried out the collection methods relevant for the partners in different regions, especially the channel through collaborators currently applied at Thuan An commune, Binh Duong city. The result recorded on the software reached 7,000 transactions in the field. Based on the achievements and the technology infrastructure, the key success of expanding the model on a national scale largely depends on the deployment policy of LienVietPostBank at Postal Transaction Offices. Furthermore, this is also an opportunity for LienVietPostBank to manage and use the current source of capital of the electricity partners with the turnover up to hundred thousands of billion yearly. For the unlisted collection services, a large corporate can consign cash at Postal Transaction Offices and its collection account opened at the branch in that province is simultaneously credited. Besides, the corporate can benefit the other supporting utilities such as automatic closing entry, centralized account management and enabling clients to query account statements through Internet Banking. They are highly beneficial for service commercial corporate, which can satisfy need of receivables and payables management. This is LienVietPostBank s golden advantage over the other banks that do not possess such a large network as Vietnam Post. It is expected that LienVietPostBank will deploy the collection service all over the network as required by the large corporations like SABECO or VMS. This is an opportunity for LienVietPostBank to do cross sale for the big corporate at Post Transaction Offices, from which LienVietPostBank and Vietnam Post can derive a big income. 29

30 CARDS AND E-BANKING DEVELOPMENT 30

31 DOMESTIC DEBIT CARD Domestic debit cards offer a variety of products for different segments of customers such as: Standard Unite to develop debit card, VIP Unite to develop debit card, Instant Unite to develop debit card, New Generation card, Student debit card Apart from conventional utilities offers, the domestic debit cards may offer discounts when shopping or using services on a network of 16,000 ATMs, 168,000 POS and over 100 online payments-enabled websites nationwide. On the 25th November 2014, LienVietPostBank deployed additional utilities on the domestic debit card at 549 PTOs in 27 provinces to expand the coverage through the POS network of Vietnam Post. In comparison with 2013, the outstanding number of domestic debit card mounted by 24% to 143,000 cards which indicates the rising demand of customers for cards. LienVietPostBank s MasterCard Debit card which was officially introduced on the 30th June 2014 is aimed to Global payment Safe consumption and offers great utilities. Shopping at 33 million MasterCard logo-attached POS Bill/check payments, deposits, money transfer, money withdrawal at ATMs. Transactions in a variety of foreign currencies. Experience of discounts during the year and 100 offers including chains of restaurants, hotels, fashion shops, education, medical care, beauty salon, etc. E-banking services development E-banking services including: SMS Banking, Mobile banking, Internet Banking, BankPlus increased significantly by 34% in 2014; especially, the growth of Mobile Banking reached 295% due to the increasing payments on mobile devices. In October 2014, LienVietPostBank in association with Smartlink cards services Joint Stock Company has offered free 24/7 interbank money transfers services using card numbers which stimulates non-cash transactions. Given this service, customers might transfer or receive money within interbank system in Vietnam with the card numbers instead of the linked account numbers on Internet Banking and BankPlus of LienVietPostBank. The advantages of this service are the instant receipt of money and 24/7 access to the service at lower fees than the other conventional money transfer modes. E-Banking services attracted the society s attention by My E-bank 2014 program competition for the best E-banking offering bank in Vietnam classified into Internet banking and Mobile banking. Since June 2014, 29 out of 43 Internet banking and Mobile banking-offering banks in Vietnam had joined the competition including LienVietPostBank. INTERNATIONAL DEBIT CARD MASTERCARD Global payment, Secured transaction 31

32 BIG CORPORATE AND PREMIER BANKING In 2014, for strengthening the effective and sustainable business strategy of Unit to develop, LienVietPostBank continually developed its strong cooperation with the big players in all the sectors. By focusing on developing the specific banking products, LienVietPostBank has not only gained success in building the image, reputation and business results; but also played a good role as one of the core banks to implement the key missions of the banking industry 32

33 BIG CORPORATE RELATION DEVELOPMENT Due to the advanced technology, LienVietPostBank was honorably selected by the General Department of Vietnam Customs for electronic import tax collection. The co-operation agreement was reached between two parties, permiting which permits LienVietPostBank to make contribution to modernize the administrative procedures and support the corporate development. The agreement was signed in May After that, LienVietPostBank continued to sign another co-operation agreement with Tuan Chau Corporation in August 2014 for the mutual business assistance. Based on its strong financial capacity, LienVietPostBank committed to credit sponsorship assessment of the Tuan Chau Corporation s development projects invested by itself across Vietnam with totalwhich is worth of VND 10,000 billion. VND. Tuan Chau Corporation would use the financial services of LienVietPostBank as follows: collections, money transfer, domestic/international payments in either domestic or foreign currencies, which comply with the governing law. In December 2014, LienVietPostBank and VinaFood II came into a co-operation agreement for the stimulation of rice production, supply and trading in Mekong Delta in order to finance the large domestic projects, support the development of the national economy in general and for the national agriculture in particular, promote government s agricultural modernization program. According to the agreement, LienVietPostBank firmly commits to high quality products and services provision; and assistance to the improvement of value chain of Vietnam s rice industry. Furthermore, the year of 2014 also marked a significant development of LienVietPostBank with a variety of new credit line contracts, middle and long-term credit sponsorship signed with large corporations such as: PetroVietnam, EVN, Vinachem, PetroVietnamTechinical Services Corporation (PTSC), etc. Following the success of 2014, in 2015, LienVietPostBank will constantly seek for co-operation with all potential businesses of all industries with the aim of Unite to develop, for the development of LienVietPostBank and partners in particular and for the prosperity of the nation in general. PREMIER BANKING DEVELOPMENT In the recent growth of the banking and finance industry, apart from interest rate competition, favourable policy procedures, and product utilities domestic commercial banks experienced a significant development of banking services, especially Premier Banking service (VIP customers) to promote the bank s images, market shares and competitive advantages. Understanding the overall trend, LienVietPostBank studied the needs of premier customers and designed particular products and services for this customer segment. Besides, Premier banking department (as a constituent of Big Corporate and Premier Banking Division) was officially introduced and launched on the 1st June In December 2014, LienVietPostBank introduced specific Premier Banking service for its premier customers. Premier customer segments are classified as Diamond, Sapphire and Ruby which refer to three precious gemstones indicating power, wealth, luck, success and happiness. For premier customers, LienVietPostBank offers preferential policies regarding prices, fees, investment options, insurance and designated products. Besides, further utilities might be offered according to the customer relationship. For example, regarding credit products, the interest rate for loan is 1% per annum lower than that of conventional customers. 33

34 The introduction of Premier Banking matches the current trend of Vietnam s banking industry. According to LienVietPostBank s study, since 2014, the domestic and global economic conditions show some recoveries which will mark a new era of growth. Whereas, consumer customers are not dramatically influenced by the fluctuation of the market as the total deposit and credit balance as well as non-performing loan ratio of personal customer segment are considered stable. Six months after the introduction of Premier Banking (since June 2014), LienVietPostBank has obtained initial positive results. Objectives of deposits, credit increased steadily over the time; and gratitude programs to customers were introduced as well. Following the success of 2014, in 2015, LienVietPostBank will constantly seek for co-operation with all potential businesses of all industries with the aim of Unite to develop, for the development of LienVietPostBank and partners in particular and for the prosperity of the nation in general. Furthermore, as the bank s objective is becoming one of the top ten commercial banks regarding the number of premier customers, LienVietPostBank will put concentration on analyzing and assessing the potential customers groups; studying and designing new and specialized products and services; deploying tools and assistance procedures to stimulate the sales and satisfy the needs of the customer segments. Convenient procedures Private transaction room Favorable products and services Favorable policies

35 35

36 CAPITAL TRADING AND MANAGEMENT Together with traditional primary market activities, in 2014, LienVietPostBank continued to promote business activities on secondary market (inter-bank market). The money market activities, foreign exchange and debt securities investment/trading were implemented following a flexible and diversified strategy, caught and followed market trends, created substantial profit for LienVietPostBank. 36

37 DEBT SECURITIES INVESTMENT/TRADING During the financial year 2014, LienVietPostBank marked a notable growth of debt securities investment and trading in both quality and quantity. The debt securities portfolio was restructured into a diversified form, which contain mainly safety and high liquidity debt securities such as Government Bonds, Treasury Bills, State Bank Bills with various maturities; while also be extended with a number of selected debt securities including Financial Institution Bonds, Corporate Bonds. The debt securities portfolio was based on the basis of maximizing profit, in line with LienVietPostBank s risk appetite, satisfying the condition for liquidity support when needed. During 2014, LienVietPostBank s debt securities have increased 200% in comparison with 2013, reaching a balance of 30,082 billion VND at 31st Dec The debt securities investment/trading activities in 2014 were not only successful in restructuring the Debt Securities Portfolio into safety and effective form but also contributed significantly in LienVietPostBank s profit by timely and precisely sell/buy decisions. In 2014, net income from debt securities trading activities was billion VND, increased 522% in comparison with In 2014, LienVietPostBank continued to assert as an active trader in both Government Bond primary and secondary market. As rightly fulfilling the membership obligations in 2014, LienVietPostBank has been further selected as Government Bond Tender by Ministry of Finance in LienVietPostBank also demonstrated our effectiveness of treasury operations by actively combining different business segments on the money market, foreign exchange market and debt securities market. The implementation of flexible business combination scheme is a creative way to take advantages of business opportunities and LienVietPostBank will definitely keep using this method in MONEY MARKET DEALING Under three conditions: (1) Interest rate remained stable at relatively low level, (2) inter-bank market liquidity was good and (3) deposits from Postal Transaction Offices grew substantially; LienVietPostBank has ensured funding for general activities and our business plans. During 2014, by implementing flexible deposit/withdraw, borrowing/lending transactions, actively expanding trade relations with Financial Institutions, LienVietPostBank has balanced and distributed capital between Primary and Secondary market properly, ensured liquidity and optimized efficient use of capital. FOREIGN EXCHANGE In 2014, the State Bank of Vietnam has implemented flexible policies and aggressive in managing exchange rate policy, to stabilize and control foreign exchange market within fluctuation range according to the commitment of the State Bank Governor. Therefore, foreign exchange market was moderately stable in Since there was a lack of exchange rate fluctuations, the chances for seeking profit and price arbitrages were limited. Being clear about the market movements, in 2014, LienVietPostBank boosted sales transactions as well as expanding client network, including foreign exchange customers. In inter-bank market, LienVietPostBank s foreign currency sales for 2014 increased nearly 40% in comparison with As the sales of foreign currency with State Bank of Vietnam increased dramatically, reaching more than US $1.5 billion, LienVietPostBank remained in a Group of banks having most foreign currency transactions with State Bank of Vietnam. In2014, sales of foreign currency swaps surpassed US $3.5 billion; hence, LienVietPostBank was in top 10 Banks having biggest sales of foreign currency swaps. Despite being a new player in the market, LienVietPostBank has claimed its position as an active, enthusiastic and effective partner in inter-bank market. In parallel with the growth of sales of foreign currencies in inter-bank market, in 2014, LienVietPostBank has constructed and implemented system support operations fundamentally (including training, research, sales programs, etc.) in order to assist BU in searching, utilizing and expanding foreign exchange customers. These activities initially brought positive results for the whole system of LienVietPostBank, expressed in the significant increase of new foreign exchange customers and the growth rate of sales surpassing 60% in comparison with Focusing on expanding customer base is one of essential steps in long-term plan of creating a solid basis for LienVietPostBank s development. In 2015, LienVietPostBank will continue expanding its capital operation activities on the money market, foreign exchange market and debt securities market. On the basis of coordination, business opportunities exploitation and customer base expansion, LienVietPostBank will satisfy and utilize the needs of customers along with the priority objectives: to ensure liquidity, capital and foreign currency needs. 37

38 INTERNATIONAL COOPERATION 38

39 In 2014, LienVietPostBank continued promoting international cooperation activities, one of those was the event that LienVietPostBank successfully co-organized the 20th Annual Asia Pacific Regional Group MeetingsMeeting of the World Savings and Retail Banks Institute (WSBI). This event marked a major step in branding LienVietPostBank and further expanding the relationship with international partners. This was also the first time the meeting was hosted in Vietnam with the participation of members coming from countries in the region and observers from other continents. The meeting was held on May 21st and 22nd 2014, brought together more than 80 bankers, managers and financial experts from over 20 countries in the Asia - Pacific region, some reputable international organizations, as well as international and local media agencies. Turn Financial Inclusion Challenges into Business Opportunities was the main theme of the members series discussions and presentations. Specifically, the conference focused on two key topics Innovate to reach the last mile and Postal Bank models to foster microfinance with various initiatives and experiences shared by the participants on expanding the range of financial services in order to bring benefits to customers. The meeting provided an opportunity for the banks in the region to discuss and share the experiences, learning and good practices, while helping the members to consolidate the cross-border cooperation relationship following the roadmap for formation and development of ASEAN Economic Community (AEC). The 2014 WSBI Meeting opened up a new direction for WSBI s members to exchange information and enhance partnership through in-depth discussions and experiences sharing. In light of that, members can build their own appropriate strategy and action plan to provide financial inclusion for the poor including micro-savings and micro-credit, thereby contributing to the sustainable development. As a member of WSBI with the same view of Integrating business and society, Reaching the poor and Risks along with opportunities ( Turn financial inclusion challenges into business opportunities ), LienVietPostBank is always heading to the safe and sustainable development, partnering with Vietnamese people, especially the people in rural and remote areas. Hence, the 20th WSBI Annual Meeting was the right opportunity for LienVietPostBank to accumulate experiences, shortening the roadmap of becoming A leading retail bank in Vietnam A bank for everybody. LienVietPostBank s great contribution to the success of the meeting has boosted its reputation and brand image in the eyes of international partners, the politicians and media agencies in Vietnam, as well as to show its capability of organizing the international scale financial events. The meeting attracted the keen interests not only from the State Bank of Vietnam but also from international financial organizations operating in Vietnam such as the World Bank (WB), International Finance Corporation (IFC) and Japan International Cooperation Agency (JICA). Following the success of the meeting, LienVietPostbank will continue coordinating with WSBI to organize the Vietnam Savings Day along with a new project School-Bank in 2015 in order to raise people s awareness of the importance of savings and educate people (especially the young people youth and children) about the savings habit and suitable savings method. Apart from maintaining close ties with WSBI, LienVietPostBank has always been sustaining the long term relationships with international financial organizations such as IFC, The Netherlands Development Finance Company (FMO), La Poste Group, Wells Fargo Bank, JP Morgan Chase, the World Bank, the Asian Development Bank (ADB), JICA with trade finance projects, rural and agriculture lendings, financial supports and foreign exchange transactions. Besides, during the year 2014, LietVietPostBank never stopped exploring and developing the business cooperation with new international financial organizations such as Exim Bank (Taiwan), UniCredit (Italia), Triodos (The Netherlands), Rabobank (The Netherlands), CSOB (Czech Republic), Finnvera (Sweden), EKN (Switzerland), Far Eastern International Bank (China) and export credit agencies worldwide with the aim of further expansion and development of the cooperative relationship with international partners. As a young bank in Vietnam financial market, LienVietPostBank has been usually facing many difficulties, challenges and severe competition from other financial institutions. However, LienVietPostBank still proves to be an active, creative player and makes continuous effort to further affirm its brand name and image on both local and international markets. The initial success of international cooperation promises to positively contribute to the growth and sustainable development of LienVietPostBank. 39

40 HOANG SA POSTAL TRANSACTION NETWORK OF MORE THAN POINTS PHU QUOC TRUONG SA CON SON 40

41 NETWORK DEVELOPMENT In 2014, LienVietPostBank effectively implemented the strategy to develop a broad network across the country, utilizing the PTO network and Vietnam Post transaction points. As of 31st December 2014, LienVietPostBank was present in 51 provinces/cities and will strive to expand its network in all 63 provinces/cities across the country by the end of With 91 own branches/transaction points and exclusive exploitation right on more than 10,000 PTOs, LienVietPostBank now has the largest network among the Commercial Banks of Vietnam. In the market with increasing fierce competition between Joint Stock Commercial Banks, this exceptional large network has created big advantages for LienVietPostBank to position itself into the Top Retail Banks. With these advantages, network development has been being focused and prioritized during the previous year. In 2014, LienVietPostBank registered for licenses to open 5 new branches, 38 transaction offices in provinces/cities across the country. These branches/transaction offices after opening will not only provide products and services to LienVietPostBank s customers, but also contribute to the local economic development. Continuing to deploy banking services on Vietnam Post s postal network, LienVietPostBank cooperated with Vietnam Post to research and list out the potential Transaction Offices, while draft the renovation plans for those offices. It is expected that by the end of 2015, the appearance of the PTO all over the country will have positive changes. The rapid expansion of network assists LienVietPostBank to achieve 2 important goals which are effective management of PTO network and implementation of the Party and Government s policies on the development of rural, agricultural areas. 41

42 INFORMATION TECHNOLOGY According to guidelines of the Board of Directors, LienVietPostBank will become one of Top Retail Banks in In order to achieve that objective, the period was identified as critical time to implement comprehensive renovation of Information Technology (IT) system, which is the foundation for providing banking products and services timely and conveniently. 42

43 Following that direction, in 2014, the Bank worked with foreign consultants to assess the entire current IT system, thereby built a roadmap to modernize the whole IT system, while ensuring efficiency in investment and cost savings. The main results in IT operation the Bank has achieved in 2014 are as follows: CONSTRUCT THE OVERALL STRUCTURE AND ROADMAP TO MODERNIZE IT SYSTEM The IT system structure model was designed toward integrating to integrate products and services. The modules were clearly separated and convenient for investing, integrating system, as well as operation and management. By hiring foreign consultants to fully analyze advantages/ disadvantages of current IT system, LienVietPostBank is able to make appropriate investment roadmap during hard economic times. In order to provide a wide range of products and fully satisfy customers needs, in 2015, LienVietPostBank will focus on modernizing Core systems such as: Core Banking, Card system, Payment system, etc. After that, in 2016, the Bank will continue modernize Security systems to follow international standards to ensure absolute security for customers using LienVietPostBank s services. CONSTRUCT THE DATABASE BACKUP CENTER AS THE BASIS FOR THE SAFETY TRANSITION OF IT SYSTEMS Modernizing IT system is a vital factor on the road to become the leading retail bank in Vietnam. However, the transition process must ensure absolute security, especially data and customers transactions information. Therefore, during 2014, LienVietPostBank invested in Database Backup Center located in Bac Ninh to ensure business data is regularly backed up, updated in case of unexpected incidents. Besides, Database Backup Center helps LienVietPostBank to guarantee persistent services even when there was a problem in the Database Main Center of the Bank located in HCM city. STANDARDIZE PROCESSES, WORKING METHODOLOGIES TOWARD SERVICES The initial investment for modernization of infrastructure and, IT software is relatively high, however the efficiency depends on how people operate and maintain them. Recognizing this issue, in 2014, LienVietPostBank deployed standardization of IT services management activities following ITIL international standard. ITIL, considered as ISO 9000 for IT operations, focuses in supporting management, setting targets, measuring development and results, and resolving the problem when the targeted results are not achieved. ITIL is a framework of processes, roles and a method for measurement of the success of each process in parallel with the control to reduce human risks. With the initial results of the comprehensive renovation of IT system in 2014 and strategic objectives, we believe that in the near future LienVietPostBank will become a modern bank, providing the best products and services to customers. 43

44 RISK MANAGEMENT At LienVietPostBank, risk management is one of the key activities to be frequently maintained and assure to be in line with the business activities. Risk management is identified as not only the responsibility of any individuals, units or risk management department but also the duty of all the officers and units of the bank. Therefore, the culture of risk management has taken shape and synchronized with the whole system of LienVietPostBank. 44

45 Achievements of 2014 RISK MANAGEMENT MODEL One of the most outstanding highlights of LienVietPostBank in 2014 was the transformation of risk management model to approach the international practices on the modern risk management. Accordingly, risk management department acted as an independent unit from other divisions. In the mean time, the departments and their responsibilities are organized coordinately with the specific types of risk management and the organization aims that the management of key risks is conducted by the independent and dedicated departments. Board of Directors was in charge of defining and orienting all the risk management activities of the whole bank. Particularly, ALCO, Legislation, Risk Management and AML Committee is directly under the Board of Directors and in charge of organizing the risk management activities based on the policies and orientations set up by the Board of Directors. LienVietPostBank s risk management system is built on the 3-level controlling model. In the first level, the operating business units take charge of indentifying, controlling and managing the risks of the business units comprehensively. In the second level, the independent risk management department is in charge of building the risk management framework, establishing the principles and risk management policy. The internal audit acted as the third controlling level to enforce and perform independent control. SIGNIFICANT RISKS Significant risks identified within banking activities included but not limited to credit risk, market risk, operational risk, liquidity risk, reputational risk, strategic risk and legal risk. CREDIT RISK MANAGEMENT In 2014, LienVietPostBank carried on transforming the credit risk management toward the centralization orientation at Head Office to ensure the highest effectiveness of risk management before, during and after disbursement. The appraisal, disbursement control, risk management and bad debt management activities were positively improved. Notably, the disbursement control process has currently been carried out fully at Head Office. Besides, LienVietPostBank also reviewed and modified the delegation of credit approval authorization to ensure the independent and objective decisions and avoid the occurrence of the benefit conflicts during the credit validation process. Firstly applied since 2008, LienVietPostBank s internal credit ranking model has been continuously upgraded and developed. Up to now, this model has been customized for each customer segment (individual, corporate, financial institution, scoring tool for micro finance, etc.). This proved to be an effective supporting tool for categorizing, selecting clients and defining applicable credit validation policy. Credit portfolio management and early warning were improved in terms of the methodology, management method and quality of the warning 45

46 information according to the international standards on risk management. LienVietPostBank built the automatic debt alarming system, Loan origination system (LOS) and the advanced credit risk warning tools. All the changes in credit portfolio were recorded, analyzed and reported timely for the early and comprehensive identification of potential risks. MARKET RISK MANAGEMENT LienVietPostBank built a flexible policy of interest rate, exchange rate to adapt with the market fluctuations and satisfy the bank s own risk appetite. By frequently analyzing the interest rate sensitivity GAP and value of bearing risk (VAR), LienVietPostBank frequently observed, assessed its sensitivity to market and modified the policy and strategy appropriately. The market risk management system of LienVietPostBank was conducted with the limit tools. The system of limits covered various aspects including client limit, transaction limit, foreign exchange position limit, stop-loss limit, regulations on exchange rate caps, etc which are periodically reviewed and modified each year. These limits were set up and controlled from transaction level to system level by the independent risk control and review department of LienVietPostBank. OPERATIONAL RISK MANAGEMENT The operational risk management not only recorded issues, risk signs but also aimed to give out the guidelines and recommendations, to handle the existing drawbacks and errors, and to control the operational risks of the banking activities. LienVietPostBank has been building and developing key tools like Loss data collection (LDC), Risk control self assessment (RCSA), Key risk indicators (KRIs), Service level agreement (SLA). The set of indicators to identify and measure the operational risks was reviewed and modified, added with many new criteria regarding the specific technical responsibilities and updated with the database of LienVietPostBank s latest losses. The database of occurrences and risk indicators were collected and updated. In order to increase the performance of operational risk management, the risk management software deployed at LienVietPostBank kept recording the occurrences quickly and timely. LIQUIDITY RISK Ensuring the liquidity means keeping the constant performance of the bank. LienVietPostBank deployed the liquidity risk with many different tools. In term of strategy, LienVietPostBank built and maintained a reasonable structure between assets and liabilities. By analyzing Maximum Cash Obligation (MCO) regularly, LienVietPostbank observed and assessed its sensitivity to the liquidity risks and perform appropriate adjustments. The frequent assessments on centralized risks of the asset structure of LienVietPostBank include many aspects like focusing on clients, sector, maturities, currency, etc. The liquidity risk management was implemented with the limit tools including the caps as regulated by State Bank (CAR, proportion of short-term capital used for mid- and long-term lending, solvency ratio) and the other internal limits. The limits are regularly tracked and used to build the early warning scenarios and contribute to LienVietPostBank s speculations on the fluctuations of ratios and the current liquidity. Moreover, to remain the regular and consistent performance, LienVietPostBank set up the scenarios in advance to handle the unexpected issues that may negatively affect the Bank s liquidity (for example large cash withdrawal, reputation risk, etc.). 46

47 BEST SAVINGS BANK IN VIETNAM Within 6 years since its establishment, LienVietPostBank has been striving to play a role of a young, modern and dynamic bank with a wide range of good products and services to satisfy the clients needs. The wide offering of products and services with many facilities and the staff s good service are the key factors of the brand LienVietPostBank. The Award of Best Savings Bank Vietnam by Global Banking & Finance Review was the recognition and encouragement for the whole human resources of LienVietPostBank. The initial achievements affirm the Bank s strong step on its way to achieve the aim of becoming Bank for Everyone A leading retail bank in Vietnam. 47

48 HUMAN RESOURCES Human Resources is an important factor for the success of any enterprise. At LienVietPostBank, we always focus on developing personal potential and strong spirit of cooperation at all levels in the bank. With the orientation of developing an advanced, modern Postal bank, LienVietPostBank continues attracting experienced officers as well as training and using the ones who understand thoroughly the bank s culture in order to support for a sustainable development and success. 48

49 OVERVIEW OF HUMAN RESOURCES As of December 31st 2014, the total number of employees reached 3,533 (increase by 22% as compared with the same period last year) with the average salary of VND 8.9 million/employee per month. In 2014, LienVietPostBank continually maintained and added more benefits for employees such as increasing allowances or remuneration compliant with the current Vietnamese law, etc. In addition, LienVietPostBank often considered and reviewed to increase staff s salary periodically. On the national holidays and anniversary of the bank, the staff had chances to attend the celebration party or receive related bonuses. PROMINENT RESULTS OF HUMAN RESOURCES IN 2014 Recruit 962 officers (185 officers in Head office and 777 officers in Business Units) in order to provide sufficient human resources for newly established branches and other units in the whole bank. Consider the structure and rearrangement of human resources at Business Units in order to focus on and optimize the active business activities. Issue, supplement, amend the documents of human resource policy in order to synchronize the documental system, manage and develop the human resource efficiently, contribute on promoting the business activities as well as build and reinforce the corporate culture. Continue to review the system of salary, allowances and remuneration in order to ensure the benefits for officers and be compatible with general salary range. Organize 98 training courses with 284 classes for 9,444 trainees in order to improve the personnel competence and quality of the whole bank s staff, as follow: training course about bank overview, products and services introduction for the all newly recruited staff, educational skill training course for middle management, communication and selling skill training course for all sale staff in the whole bank, training course about advanced and intensive operation for all staff at Business Units such as international payment/domestic payment operation, credit review skill, customer analytical skill, etc. Especially, LienVietPostBank continually promoted on new product introduction and training for newly staff in the postal offices in order to increase the operational efficiency of Postal bank model. Along with development and establishment of bank s planned training course and other generated training courses, internal training courses implemented at each department by its management team has been encouraged and become a particular culture of LienVietPostBank. THE ORIENTATION OF HUMAN RESOURCES TRAINING IN 2015 Human resources activities Review and adjust the current sale commission to enhance the motivation for sale staff. Review the human resource structure in the Business Units; adjust human resource arrangement so that enhancing human resource for sale activities and labor productivity. Implement Mobile Director/Manager model to timely enhance and supply human resources for Business Units as well as develop the arrangement program for important officers to arrange actively human resources for management level in the long run as the bank is experiencing a rapid expansion. Rebuild the employment standard sets compatible with each position at Business Units and Head Office according to newly issued function and organizational structure Review, adjust and rebuild all documents related to human resource management such as benefit, salary, 49

50 recruitment, appointment, reward, discipline, transfer so that meet the efficient human resource management s requirement, match with LienVietPostBank s size at current time and development plan in the next years. Build the competency framework for each job position to create the foundation for managing the human resource policies. Examine, evaluate the actual competency of sale team at Business Units and middle management team at Head Office. Implement the software of human resource management People Soft with utilities to improve human resource management in a more efficient and realistic way. Recruitment activities Build the Talent candidates database at all locations, areas and especially the areas where are lack of high- quality human resource. Rebuild the recruitment examination to enhance the efficiency of entrance writing examinations and candidate classification and selection at the areas where having a number of qualified candidates such as Hanoi, Ho Chi Minh, etc. Training activities Implement the training program for each level of job position and initially issue the certificates after finishing the training courses. Develop a diversified variety of training courses, IT applications through implementing the E-learning training solution and building the electronic document/library. Enhance training activities, skill development and professional knowledge for bank s management team as well as promote sale training for the main sale team. Continue to raise the competency of current lecturer team and develop more professional lecturer team of all professional fields in order to enhance training and tutoring role of management team. Rebuild and finalize the perfect training documents for job positions to meet the training requirements at each unit. 50

51 Discipline - Humanity - Creativity 51

52 CORPORATE SOCIAL RESPONSIBILITY BANK LienVietPostBank has been proving its Corporate Social Responsibility (CSR) strongly and continuously for 7 years (28/3/ /03/2015). Since its establishment, LienVietPostBank has been implementing the policy Integrating business and society and, in other words, consistently fulfilling its commitment to CSR with hundreds of CSR activities and programs (particularly, LienVietPostBank s budget for CSR reached over 800 billion dongs). Therefore, it is stated without hesitation that LienVietPostBank is the most outstanding CSR of Vietnamese banks (in terms of social contribution/ bank scale ratio and operating time). The outstanding CSR activities implemented by LienVietPostBank include 1. Internal activities: Built a corporate culture with 3 core values Discipline Humanity - Creativity. 2. Social activities: Education: Built schools (funded and co-funded for constructing 50 schools throughout Vietnam); funding healthcare equipment, utilities like libraries, meeting halls, etc.; encouraging study and talent (founded 8 Study and Talent Encouragement Fund, implemented LienVietPostBank Talent Incubator Program). Healthcare: Sponsored education medical equipment, funded the construction of medical aid stations. Culture: Granted more than 30 thousand TVs to families and individuals under preferential treatment. Local development: Sponsored Xi Man district, Ha Giang province to develop comprehensively according to Government Project 30A. Coordinated with Vietnam s Charity Fund to carry out Going home program and directly supported the poor provinces and families in Vietnam with the funding target of VND 1,000 billion for Since 2010, deployed Tam Nong credit supporting program with preferential interest rates and insurance with charity interest rates for agricultural and rural lending. With the outstanding achievements in social activities in 2014, LienVietPostBank was recognized with Best CSR Vietnam Bank 2014 Award by UK Banking & Finance Review Magazine. Based on these achievements, LienVietPostBank strived to develop the brand of Best CSR Bank in the coming years for the following benefits: 52

53 1. This is a reliable brand as LienVietPostBank has clear CSR policy and real CSR activities. 2. The brand of Best CSR Bank is a strong competitive advantage of LienVietPostBank: In fact, there are few differences in the banking products and services so LienVietPostBank need to find a competitive advantage which can win the heart of the community and clients. For example, a bank can win the award Best Export Funding Bank this year but lose it in the later year, which implies that this is an unsustainable brand. However, CSR brand expresses the continuous and strong effort, which is a reliable and sustainable competitive advantage of LienVietPostBank. Best CSR Bank Vietnam was impressive and won the heart of the domestic community and enterprises. That is the motivation for all LienVietPostBank staff to contribute to a prosperous and developed Vietnam community. 53

54 DEVELOPMENT ORIENTATION IN 2015 I. KEY TARGETS: RATIO 2015 Total assets VND 135,000 billion Outstanding loans to customers VND 82,000 billion Deposits from customers VND 115,000 billion Profit before taxes VND 936 billion Dividend Payout ratio (%) 8% Chartered Capital GENERAL TARGETS: VND 9,000 billion Continuously reinforce operation activities, timely resolve existing issues and weaknesses in management and vision by constantly standardizing policies, procedures, and regulations in compliance with Vietnamese law and international standards with the aim to seize opportunities and be well prepared for new challenges and difficulties. Focus on retaining good existing customers and at the same time approach and establish relationships with other core customers, give new loans with high performance. In particular, special concern should be put on risk management, economic analysis, training and self-education so that the business activities are performed professionally and steadily through each period; Ensure long-term sustainability and safety based on 4 quality pillars: total assets, human resources, modernization, and corporate government adhere to international standards. 54

55 II. ORIENTATION Persistently implement LienVietPostBank s long-term strategy: A Bank for Everyone - A Retail Service Universal bank - Innovation Efficiency Sustainability - Safety. Target household businesses, small and medium enterprises (SMEs), apply the business strategy: Never put all eggs in one basket. Increase tier 1, tier 2 capital, strive to remain LienVietPostBank s position in the top 10 commercial banks of Vietnam. III. SOLUTIONS Strive to accomplish the task of opening 7 Branches in 7 remaining Provinces/Cities to expand the branch network coverage across all 63 Provinces/Cities nationwide, by which deploying effectively more than 10,000 transaction points of the postal network, with the aim to serve all clients, especially those in remote regions and at the same time be able to evaluate specific effectiveness; Develop detailed solutions to continuously reinforce and timely improve the quality and efficiency of all Business Units; Standardize the human resources activities, conduct the training activities from managing level to staff level; enhance human resources efficiently to improve productivity and creativity; implement the HR Quality Scoring software and finalize KPI system; constantly create new products in order to have more friendly-using and convenient products than other banks; Concentrate on loans extending programs through national level investment projects guaranteed by the Government, the VND 5,000 billion lending program for agricultural and rural sectors in the Mekong Delta and develop Macadamia industry in Tay Nguyen; ensure growth to go in line with credit control; Accompany and collaborate with VNPost (Vietnam Post Corporation) to carry out products, services and deploy the strengths of both sides; continue the effective implementation of the pension and social insurance payment services through the postal network; increase the income from these services while following closely regulations under the signed mutual Agreement; timely summarize the cooperation effectiveness in short-term and long-term to come up with specific solutions; Strongly deploy payment services such as collection of customs tax, electricity bills to attract low-cost fund; In 2015 and the coming years, LienVietPostBank will expand retail banking, search for large projects (especially projects guaranteed by the Government, Ministry of Finance, etc.), diversify the investment activities; Strengthen international payment operations, attract export companies in order to increase incomes from export-import activities, gradually change income structure of LienVietPostBank on the basis of rapid fees growth; Further exploit derivative products, do research on new products in compliance with legal law and capital adequacy requirement; Modernize IT system to meet new development trend; simplify policies, procedures and regulations meanwhile ensure the safety of the system; Carry on modifying the working culture of LienVietPostBank and promulgate the working principles in compliance with legal regulations, efficiency, practicality and renovation; Carry out the economic analysis and forecast, anticipate the fluctuations of exchange rate, interest rate, inflation, etc. On the basis of conducting research on the global and Vietnam economy to raise the specific policies and solution; build detailed business scenarios and plans in order to timely apply the management measures appropriately with the market fluctuations; focus more on the audit quality and control before, during and after all the activities to avoid unexpected consequences. carry on strengthening and renovating the management activities to comply with 18 golden principles Dedicated Innovative Transparent United Listening Understanding Engaging Decisive Drastic. 55

56 SUMMARISED FINANCIAL STATEMENTS As of 31 December

57 STATEMENT OF THE BOARD OF MANAGEMENT The Board of Management of Lien Viet Post Joint Stock Commercial Bank (the Bank ) presents this report together with the Bank s summary financial statements for the year ended 31 December BOARD OF DIRECTORS AND MANAGEMENT The members of the Board of Directors and Management of the Bank who held office during the year and to the date of this report are as follows: Board of Directors Mr. Duong Cong Minh Mr. Nguyen Duc Huong Mr. Nguyen Duc Cu Mr. Pham Anh Tuan Mr. Nguyen Van Huynh Mr. Le Hong Phong Mr. Nguyen Dinh Thang Ms. Do Thi Nhien Chairman Standing Vice Chairman Vice Chairman Member Member Member Member Independent member Board of Management Mr. Pham Doan Son General Director Mr. To Van Chanh Deputy General Director (resigned on 01 February 2015) Ms. Nguyen Thu Hoa Deputy General Director Ms. Nguyen Thi Gam Deputy General Director Ms. Nguyen Thi Bich Loc Deputy General Director Mr. Nghiem Sy Thang Deputy General Director (resigned on 05 June 2014) Ms. Nguyen Anh Van Deputy General Director Mr. Ho Nam Tien Deputy General Director (resigned on 09 June 2014) Ms. Nguyen Thi Thanh Son Deputy General Director Mr. Nguyen Van Gam Deputy General Director (resigned on 23 January 2014) Mr. Vu Quoc Khanh Deputy General Director Mr. Le Hong Phuong Deputy General Director (resigned on 01 October 2014) Mr. Le Thanh Tung Deputy General Director Ms. Nguyen Thu Mai Deputy General Director (appointed on 29 April 2014) Mr. Nguyen Quoc Thanh Deputy General Director (appointed on 19 May 2014) Mr. Tran Thanh Hai Deputy General Director (appointed on 01 June 2014) Mr. Bui Thai Ha Deputy General Director (appointed on 11 June 2014) Mr. Pham Hai Au Deputy General Director (appointed on 01 July 2014) Mr. Duong Trong Chu Deputy General Director (appointed on 14 August 2014) Mr. Kim Minh Tuan Deputy General Director (appointed on 01 October 2014) Mr. Nguyen Ngoc Nam Deputy General Director (appointed on 12 November 2014) Mr. Duong Cong Toan Deputy General Director (appointed on 01 February 2015) Address: 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam Audit Company: Deloitte Vietnam Company Limited 57

58 BOARD OF MANAGEMENT S STATEMENT OF RESPONSIBILITY The Board of Management is responsible for the preparation of a summary of the Bank s audited financial statements for the year ended 31 December The Board of Management confirms that the summary financial statements are consistent, in all material respects, with those financial statements. For and on behalf of the Board of Management, Pham Doan Son General Director Hanoi, 16 March

59 Deloitte Viet Nam Company Ltd. 12A Floor, Vinaconex Tower 34 Lang Ha Street, Dong Da District, Hanoi, Vietnam Tel: Fax: No: 854/VN1A-HN-BC REPORT OF THE INDEPENDENT AUDITOR ON THE SUMMARY FINANCIAL STATEMENTS To: The shareholders The Board of Directors and Management Lien Viet Post Joint Stock Commercial Bank The accompanying summary financial statements, as set out from page 60 to page 98, which comprise the summary balance sheet as at 31 December 2014, and the summary income statement, and summary cash flow statement for the year then ended, and related notes, are delived form the audited financial statements of Lien Viet Post Joint Stock Commercial Bank (the Bank ) for the year ended 31 December We expressed an unmodified audit opinion on those financial statements in the Independent Auditor s Report dated 16 March Those financial statements, and the summary financial statements, do not reflect the effects of events that occurred subsequent to the date of our report on those financial statements. The summary financial statements do not contain all the disclosures required by Vietnamese Accounting Standards, Accounting Regime applicable to credit insitutions in Vietnam and legal regulations relating to financial reporting. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of the Bank. Management s Responsibility for the Summary Financial Statements Management is responsible for the preparation of a summary of the audited financial statements. Auditor s Responsibility Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with Vietnamese Standard on Auditing No Engagements to Report on Summary Financial Statements. Opinion In our opinion, the summary financial statements, derived from the audited financial statements of the Bank for the year ended 31 December 2014, are consistent, in all material respects, with those financial statements. Khuc Thi Lan Anh Deputy General Director Audit Practising Registration Certificate No For and on behalf of DELOITTE VIETNAM COMPANY LIMITED 16 March 2015 Hanoi, S.R. Vietnam Nguyen Tuan Anh Auditor Audit Practising Registration Certificate No Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally seperate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. 59

60 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam SUMMARY BALANCE SHEET As at 31 December 2014 Summary financial statements For the year ended 31 December 2014 FORM B 02/TCTD Unit: Million VND NO ITEMS Notes 31/12/ /12/2013 A. Assets I. Cash on hand 3 325, ,590 II. Balances with the State Bank of VietNam ("SBV") 4 1,617,624 6,560,356 III Placements with and loans to other credit institutions Placements with other credit institutions Loans to other credit institutions 5 9,686,853 11,812,527 6,003,362 10,571,763 3,683,491 1,240,764 IV. Trading securities 1. Trading securities V. Derivative financial instruments and other financial assets 6-1,015 VI. Loans to customers 40,815,654 28,954, Loans to customers 7 41,289,105 29,548, Provisions for credit losses of loans to customers 8 (473,451) (593,863) VII. Investment securities 36,252,486 22,107, Available-for-sale investment securities ,782,578 21,799, Held to matutity investment securities 9.2 1,590, , Provisions for impairment of investment securities 10 (120,602) (49,149) VIII. Long -term investments 324,731 24, Other long-term investments ,731 24, Provisions of impairment of long-term investments - - IX. Fixed assets 1,081, , Tangible fixed assets , ,197 a. Cost 1,054, ,695 b. Accumulated dep reciation (316,810) (218,498) 2. Intangible assets , ,701 a. Cost 386, ,527 b. A ccumulated amortisation (42,920) (35,826) X. Other assets 10,698,099 9,117, Other receivable 14 6,955,879 6,652, Interest and free receivables 3,197,863 1,836, Other assets , ,798 - In which: Goodwill 449, , Provisions for other assets (6,415) - TOTAL ASSETS 100,801,752 79,594,241 The notes set out from pages 66 to 98 are an integral part of these summary financial statement 60

61 k LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam SUMMARY BALANCE SHEET (Continued) As at 31 December 2014 Summary financial statements For the year ended 31 December 2014 FORM B 02/TCTD Unit: Million VND NO ITEMS Notes 31/12/ /12/2013 B. LIABILITIES AND OWNER'S EQUITY I. Borrowings from the Government and the SBV 16 25,935 19,185 II. Deposits and borrowings from other credit institutions 1. Dep osits from other credit institutions 2. Borrowing s from other credit institutions 17 12,851,116 15,539,142 10,520,081 14,060,153 2,331,035 1,478,989 III. Deposits from customers 18 77,819,859 55,553,137 IV. Derivatie financial instruments and other financial liabilities 6 45,096 - V. Grants, trusted funds and borrowings at risk of the credit institution 19 1,062,300 27,394 VI. Other liabilities 20 1,606,349 1,184, Interest and fee pay ables 1,302, , Other pay able and liabilities 303, , Other p rovisions - 10,979 TOTAL LIABILITIES 93,410,655 72,322,966 VII. Capital and reserves 22 7,391,097 7,271, Cap ital 6,523,331 6,523,331 a. Charter capital 6,460,000 6,460,000 b. Share p remium 63,331 63, Reserves 662, , Retained earning s 205, ,841 TOTAL LIABILITIES AND OWNER'S EQUITY 100,801,752 79,594,241 The notes set out from pages 66 to 98 are an integral part of these summary financial statement 61

62 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam SUMMARY BALANCE SHEET(Continued) As at 31 December 2014 Summary financial statements For the year ended 31 December 2014 FORM B 02/TCTD Unit: Million VND NO ITEMS Notes 31/12/ /12/2013 I. Contigent liabilities 36 5,004,238 1,802, Loan guarantees 507, , L/C guarantees 2,331, , Other guarantees 2,166,198 1,052,136 II. Commitments 10,749,911 3,340, Foreign currency swaps 7,543,617 2,509, Foreign currency forwards 339, , Other commitments 2,866, ,000 Preparer Approver Nguyen Thi Gam Chef Accountant Hanoi, 16 March 2015 Pham Doan Son General Director The notes set out from pages 66 to 98 are an integral part of these summary financial statement 62

63 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam SUMMARY INCOME STATEMENT As at 31 December 2014 Summary financial statements For the year ended 31 December 2014 FORM B 03TCTD Unit: Million VND NO ITEMS Notes Interest and similar income 23 6,163,158 6,154, Interest and similar expenses 24 (3,872,312) (3,856,416) I. Net interest income 2,288,846 2,298, Income from services 35,527 22, Exp enses on services (342,003) (234,018) II. Net (loss) from services 25 (306,476) (211,446) III. Net gain from trading foreign securities 26 6,312 7,218 IV. Net gain/(loss) from trading securities (234) 5,903 V. Net gain/(loss) from trading investment securities ,563 (15,504) 5. Income from other activities 18,313 57, Expenses on other activities (143,389) (94,512) VI. Net loss from other activities 28 (125,076) (37,106) VII. Operating exp enses 29 (1,350,947) (1,099,889) VIII. Net profit from operating activities before credit provision expenses 761, ,744 IX. Provision expenses for credit losses 30 (226,820) (283,342) X. Profit before tax 533, , Current corporate income tax exp enses (68,705) (98,128) XI. Corporate income tax expenses 31 (68,705) (98,128) XII. Profit after tax 466, ,274 XIII. Basic earnings per share Preparer Approver Nguyen Thi Gam Chef Accountant Hanoi, 16 March 2015 Pham Doan Son General Director The notes set out from pages 66 to 98 are an integral part of these summary financial statement 63

64 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam SUMMARY CASH FLOW STATEMENT As at 31 December 2014 Summary financial statements For the year ended 31 December 2014 FORM B 04/TCTD Unit: Million VND NO ITEMS CASH FLOWS FROM OPERATING ACTIVITIES Interest and similar income 4,802,124 5,643, Interest and similar exp enses (3,241,523) (3,870,122) 03. Income from services (306,476) (211,446) 04. Net cash from dealing in foreign currencies, gold 215,367 46,766 and trading securities 05. Other (exp enses) (125,076) (1,821) 06. Receipts from debts written off or paid off by risk fund - 56, Payments to employees and for operating management (1,236,852) (1,104,653) 08. Corporate income tax p aid (84,041) (96,214) Net cash flows from operating activities before movements in assets and working capital 23, ,151 Movement in operating assets (28,977,811) 880, (Increase)/Decrease in deposits at and loans to other credit institutions (2,442,727) 13,650, (Increase)/Decrease in trading securities (12,533,550) (6,283,246) 11. (Increase)/Decrease in derivaties and other financial assets 1,015 (1,015) 12. (Increase)/Decrease in loans to customers (13,089,458) (6,593,234) 13. Increase/(Decrease) in provisions (credit, securities (242,069) (56,108) and long-term investments) 14. (Increase)/Decrease in other operating assets (671,022) 163,562 Movement in operating liabilities 20,459,574 12,915, Increase/(Decrease) in borrowings from the 6,750 14,313 Government and the State Bank of Vietnam 16. Increase/(Decrease) in deposits and borrowings (2,688,026) (742,831) from other credit institutions 17. Increase/(Decrease) in deposits from customer 22,266,722 14,216,454 (including State Treasury) 18. Increase/(Decrease) in valuable papers (excluding - (300) issued valuable papers charged into financial activities) 19. Increase/(Decrease) in grants, trusted funds and 1,034,906 23,483 borrowings at risk of the credit institution 20. Increase/(Decrease) in derivaties and other 45,096 (18,419) financial liabilities 21. (Increase)/Decrease in other operating liabilities (185,464) (539,370) 22. Cash outflows from reserves of credit institutions (20,410) (38,102) I. Net cash (used in)/from operating activities (8,494,714) 14,257,429 The notes set out from pages 66 to 98 are an integral part of these summary financial statement 64

65 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam SUMMARY CASH FLOW STATEMENT (Continued) As at 31 December 2014 Summary financial statements For the year ended 31 December 2014 FORM B 04/TCTD Unit: Million VND NO ITEMS CASH FLOWS FROM INVESTING ACTIVITIES 01. Acq uisition of fixed assets (277,066) (181,338) 02. Proceeds from sales, disposal of fixed assets 2,343 1, Investments in other entities (300,000) - II. Net cash (used in) investing activities (574,723) (180,129) CASH FLOWS FROM FINANCING ACTIVITIES 01. Dividends and profit paid to shareholders (323,000) (646,000) III. Net cash used in financing activities (323,000) (646,000) IV. Net increase/(decrease) in cash (9,392,437) 13,431,300 V. Cash and cash equivalents at the beginning of the year 17,338,709 3,907,409 VI. Cash and cash equivalents at the end of the year (Note 33) 7,946,272 17,338,709 Preparer Approver Nguyen Thi Gam Chef Accountant Hanoi, 16 March 2015 Pham Doan Son General Director The notes set out from pages 66 to 98 are an integral part of these summary financial statement 65

66 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 1. GENERAL INFORMATION Lien Viet Post Joint Stock Commercial Bank (hereinafter referred to as LienVietPostBank or the Bank ) is a joint stock commercial bank incorporated in the Socialist Republic of Vietnam. Establishment and operation The Bank was formerly known as Lien Viet Bank, which had been established in accordance with Establishment and Operation License No. 91/GP-NHNN dated 28 March 2008 by the Governor of the State Bank of Vietnam (the SBV ). The license is valid for 99 years from the issuance date. In accordance with Official Letter No. 244/TTg-DMDN dated 21 February 2011, the Vietnamese Prime Minister approved the capital contribution of Vietnam Post Corporation ( VNPost ) to Lien Viet Joint Stock Commercial Bank by the value of Vietnam Postal Savings Service Company ( VPSC ) and cash. As at 01 July 2011, VNPost completed the transfer of assets and liabilities of VPSC to the Lien Viet Post Joint Stock Commercial Bank. Under decision No. 1633/QD-NHNN dated 22 July 2011, Lien Viet Joint Stock Commercial Bank was approved to change its name to Lien Viet Post Joint Stock Commercial Bank by the State Bank of Vietnam. The Bank s main activities are to provide banking services including mobilising and receiving short-term, mediumterm, and long-term deposits from organizations and individuals; making short-term, medium-term, and longterm loans to organisations and individuals based on the nature and capability of the Bank s sources of capital; conducting foreign exchange transactions, international trade financial services, discounting of commercial papers, bonds and other valuable papers, and providing other banking services permitted by the State Bank of Vietnam. Charter capital The Bank s charter capital under Establishment and Operation License No. 91/GP-NHNN dated 28 March 2008 is VND 3,300 billion with founding shareholders namely Him Lam Corporation, Saigon Trading Group, and Southern Airports Services Joint Stock Company. On 30 October 2009, the Bank completed its share issuance of VND 350 billion and raised its charter capital to VND 3,650 billion. On 02 April 2011, the Bank completed its conversion of VND 2,000 billion of bonds and raised its charter capital to VND 5,650 billion. On July 2011, through the merger with Vietnam Postal Savings Services Company approved by the Government under Official Letter No. 244/TTg-DMDN, the Bank s charter capital increased to VND 6,010 billion. In 2012, the Bank completed its share issuance of VND 450 billion to Vietnam Post Corporation under agreement and raised its charter capital to VND 6,460 billion. Accordingly, as at 31 December 2014, the Bank s charter capital is VND 6,460 billion. Branch network The Head Office of the Bank is located at No. 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, Vietnam. As at 31 December 2014, the Bank has one (01) Head Office, two (02) representative offices, fifty six (56) branches, thirty three (33) transaction offices and two (02) saving funds nationwide. Employees The total number of employees of the Bank as at 31 December 2014 is 3,533 (as at 31 December 2013: 2,861) 66

67 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanyting summary financial statements are derived from the Bank s audited financial statements for the year ended 31 December The audited financial statements for the year ended 31 December 2014 is published by the Bank in accordance with relevant regulations. The accompanying summary financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. Financial year The Bank s financial year begins on 01 January and ends on 31 December. 3. CASH ON HAND 31/12/ /12/2013 Cash in VND 252, ,150 Cash in foreign currencies 73,201 44, , , BALANCES WITH THE STATE BANK OF VIETNAM ( SBV ) 31/12/ /12/2013 Current account at the State Bank of Vietnam in VND 1,617,312 6,490,664 Current account at the State Bank of Vietnam in foreign currencies ,692 1,617,624 6,560,356 67

68 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 5. PLACEMENTS WITH AND LOANS TO OTHER CREDIT INSTITUTIONS 31/12/ /12/2013 Placements with other credit institutions Demand deposits 376,162 1,463,051 - In VND 141, ,360 - In foreign currencies 235,037 1,182,691 Term deposits 5,627,200 9,108,712 - In VND 5,217,700 7,425,832 - In foreign currencies 409,500 1,682,880 6,003,362 10,571,763 Loans to other credit institutions Loans in VND 2,704,773 1,156,620 Loans in foreign currencies 978,718 84,144 3,683,491 1,240,764 Provisions for credit losses of loans to other credit institutions - - 9,686,853 11,812, DERIVATIVE FINANCIAL INSTRUMENT AND OTHER FINANCIAL ASSETS Nominal value of the contracts Carrying value Assets Liabilities As at 31 December 2014 Currency derivative financial instruments Currency forward contracts 922,076-12,953 Currency swap contracts 1,629,840-32,143-45,096 Net amount (45,096) As at 31 December 2013 Currency derivative financial instruments Currency forward contracts 14,323 3,140 - Currency swap contracts 57,218-2,125 3,140 2,125 Net amount 1,015 68

69 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 7. LOANS TO CUSTOMERS 31/12/ /12/2013 Loans to local business entities and individuals 41,281,676 29,536,904 Discounting of promissory notes and 7,429 11,101 valuable papers 41,289,105 29,548,005 Analysis of loan by quality Current loans Special-mentioned loans Sub-standard loans Doubtdful loans Loss loan 31/12/ /12/ ,507,105 27,985, , ,425 39, , , , , ,893 41,289,105 29,548,005 Analysis of loan balances by term 31/12/ /12/2013 Short-term loans 13,761,910 13,351,017 Medium-term loans 19,220,220 11,175,879 Long-term loans 8,306,975 5,021,109 41,289,105 29,548,005 Short-term, medium-term and long-term loans have initial terms of less than 1 year, from 1 year to 5 years and more than 5 years, respectively. Analysis of loan balances by currency Loans in VND Loans in foreign currencies 31/12/ /12/ ,415,961 28,031,167 3,873,144 1,516,838 41,289,105 29,548,005 69

70 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 8. PROVISIONS FOR CREDIT LOSSES OF LOANS TO CUSTOMERS 31/12/ /12/2013 General provision 286, ,620 S pecific provision 186, , , , INVESTMENT SECURITIES 9.1 Available-for-sale investment securities Debt securities - Debt securities issued by local credit institutions - Debt securities issued by local business entities - Debt securities issued by foreign credit institutions Equity securities - Equity securities issued by other local credit d institutions General provisions for impairment of available-for-sale debt investment securities Specific provisions for impairment of available-for-sale equity investment securities 9.2 Held-to-maturity investment securities (71,597) 70

71 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 10. PROVISION FOR IMPAIRMENT OF INVESTMENT SECURITIES Provisions for Provisions for Provisions for impairment impairment impairment of of of held-tomaturity debt Total available-for-sale available-for-sale equity debt investment investment investment securities securities securities VND million As at 01 January 2014 Provision charged for the y ear ( 38,274) 39,901 71,597 73,224 Provision reserved due to sale of (1,771) (1,771) loans to VAMC in December As at 31 December ,875 38,130 71, , OTHER LONG-TERM INVESTMENTS Investments in business entities Lien Viet Securities Joint Stock Company Xin Man Development Joint Stock Company (*) Viet Lao Power Joint Stock Company (*) The Bank holds more than 20% of the share capital of Xin Man Development Joint Stock Company. However, the Bank has obtained the Primer Minister s approval on the excess of share holding over the normal commercial investment in Official Letter No. 2493/TTg-DMDN dated 15 May The operation objective of Xin Man Development Joint Stock Company is to implement charity activities in Xin Man District, Ha Giang Province. Therefore, the investments in this company is classified as Other long-term investments rather than Investments in associates. 71

72 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 12. TANGIBLE FIXED ASSETS The movement of tangible fixed assets for the year ended 31 December 2013 is a follows: The movement of tangible fixed assets for the year ended 31 December 2013 is a follows: Cost As at 01/01/2013 Acquisitions during the y ear Disposals Other decreases As at 31/12/2013 Accumulated depreciation As at 01/01/2013 Depreciation charged for the year Disposals Other decreases As at 31/12/2013 Net book value As at 31/12/2013 As at 31/12/

73 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 13. INTANGIBLE ASSETS The movement of intangible assets for the year ended 31 December 2013 is a follows: Cost As at 01 January 2014 Acquisitions during the year Disposals As at 31 December 2014 Accumulated amortisation As at 01 January 2014 Amortisation charged for the year Disposals As at 31 December 2014 Net book value As at 31 December 2014 As at 31 December 2013 The movement of intangible assets for the year ended 31 December 2013 is a follows: As at 01 January 2013 Acquisitions during the year Disposals As at 31 December 2013 Accumulated amortisation As at 01 January 2013 Disposals As at 31 December 2013 Net book value As at 31 December 2013 As at 31 December

74 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 14. OTHER RECEIVABLES 31/12/ /12/2013 Advance to the State budget 2,903 2,900 Advance for purchases of fixed assets 2,210,378 2,307,370 Advance for constructions for charity purposes 307, ,586 Deposits for long-term office rental 1,357,114 1,329,132 Deposits for land leases 1,929,000 2,129,000 O ther receivables 1,149, ,501 6,955,879 6,652, OTHER ASSETS Prepaid expenses (i) Goodwill (ii) Other assets 31/12/ /12/ ,384 93, , ,050 16,545 14, , ,798 (i) Prepaid expenses include: 31/12/ /12/2013 Office rental prepaid expenses 22,250 20,368 Office renovation expenses 14,799 9,572 Other prepaid expenses 47,335 63,948 84,384 93,888 (*) Other prepaid expenses as at 31 December 2013 include the value of assets which are transferred to tools and supplies under the guidance of Circular No. 45/2013/TT-BTC dated 25 April 2013 by the Ministry of Finance. (ii) This amount represents goodwill arising from receiving capital contribution by Vietnam Postal Savings Services Company ( VPSC ) from Vietnam Post Corporation ( VNPost ) in Movement of goodwill during the year is as follows: Opening balance 519, ,257 Allocated to expenses during the year (69,207) (69,207) Closing balance 449, ,050 74

75 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 16. BORROWINGS FROM THE GOVERNMENT AND THE STATE BANK OF VIETNAM Borrowings under credit contracts 31/12/ /12/ ,935 19,185 25,935 19, DEPOSITS AND BORROWINGS FROM OTHER CREDIT INSTITUTIONS Demand deposits - In VND - In foreign currencies Term deposits - In VND - In foreign currencies Borrowings - In VND - In foreign currencies 31/12/ /12/ ,732 4,551,982 11,724 4,543, ,841 10,508,349 9,508,171 4,298,690 6,360,360 6,209,659 3,147,811 2,331,035 1,478, , ,144 1,411,035 1,194,845 12,851,116 15,539, DEPOSITS FROM CUSTOMERS Analysis by type of deposits Demand deposits - Demand deposits in VND - Demand deposits in foreign currencies Term deposits - Term deposits in VND - Term deposits in foreign currencies Deposits for specific purpose - Deposits for specific purpose in VND - Deposits for specific purpose in foreign currencies Margin deposits - Margin deposits in VND - Margin deposits in foreign currencies 31/12/ /12/ ,456,112 10,922,366 14,481,482 8,146, ,630 2,776,028 61,723,033 44,482,997 59,885,684 43,009,166 1,837,349 1,473, , ,421 66,138 40, , ,133 77,819,859 55,553,137 75

76 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD Analysis by type of customers and type of business entity Business entities Individuals 31/12/ /12/ ,161,754 34,742,551 28,658,105 20,810,586 77,819,859 55,553,137 Interest rate applied as at the balance sheet date is as follows: 31/12/ /12/2013 %/year %/year Demand deposits in VND 0,00 to to 1.20 Demand deposits in foreign currencies 0,00 to to 0.35 Term deposits in VND 1.00 to to TermGRANT, deposits TRUSTED in foreign FUNDS currencies AND BORROWINGS AT RISK OF THE 0.25 CREDIT to 1.25 INSTITUTION 0.35 to 1.25 Fund received from other organizations and individuals in VND Fund received from other organizations and individuals in foreign currencies 31/12/ /12/ ,381 1,062,300 1,013 1,062,300 27, OTHER LIABILITIES 31/12/ /12/2013 I nterest and fees payable 1,302, ,933 O ther payables and other liabilities (i) 303, ,196 Provision for commitments - 10,979 1,606,349 1,184,108 (i) Details of other payables and other liabilities as at the balance sheet date are as follows: Payables to employees Payables to bonus and welfare funds Other taxes payable (ii) Other payables (iii) 31/12/ /12/2013 5,416 31,073 46,990 43,759 40,486 51, , , , ,196 76

77 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD (ii) Details of tax payables as at the balance sheet date are as follows: Valued Added Tax Corporate Income Tax Other taxes 31/12/ /12/2013 2, ,577 46,913 6,474 4,706 40,486 51,789 (iii) Details of other payables as at the balance sheet date are as follows: Commission payables to local posts Prepaid coupon from treasury bills, SBV bills Prepaid guarantee fee Other payables (*) 31/12/ /12/ ,854 20,698 55,460 8,405 12,128 14, , , , ,575 (*) This amount as at 31 December 2014 mainly includes payables related to the office renovation construction contracts. 21. THE BANK S OBLIGATIONS TO THE STATE BUDGET Value Added Tax Corporate Income Tax Other taxes 77

78 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 22. CAPITAL AND RESERVES The movement of major items in owner s equity Charter capital million VND Share Financial premium reserve fund million million VND VND Charter capital supplement ary reserve million VND Investment and development bank million VND Retained earnings million VND Total million VND (*): Under the approved Resolution of 2014 General Meeting of Shareholders, the Bank made distribution to capital supplementary reserve, financial reserve funds, bonus and welfare fund from 2013 profit and temporarily made distribution to capital supplementary reserve, financial reserve funds from 2014 profit. (**): In accordance with Resolution No.08/2014/NQ-HDQT dated 08 January 2014 of the Bank s Board of Directors, the Bank paid third interim dividends of year 2013 to shareholders with the dividend pay-out ratio rate of 2% on par value in January 2014 (equavalent to VND 129,200 million), and in accordance with Resolution No. 922a/2014/NQ-HDQT dated 02 June 2014, the Bank paid first interim dividends of the year 2014 to shareholders with the dividend pay-out ratio rate of 3% on par value in July 2014 (equivalent to VND 193,800 million). Details of the Bank's number of shares are as follows: 31/12/ /12/2013 Unit Unit Number of registered shares for issue Number of shares offered to the public 646,000, ,000,000 - Ordinary shares 646,000, ,000,000 - Preferred shares - - Number of shares in circulation - Ordinary shares 646,000, ,000,000 - Preferred shares - - Par value of a common share (VND) 10,000 10,000 78

79 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 23. INTEREST AND SIMILAR INCOME Interest from deposits 908, ,818 Interest from loans to customers 3,249,960 3,433,456 Income from guarantee services 28,162 27,712 Interest from trading and investing in debt securities 1,976,612 1,796,588 Other income from credit activities ,163,158 6,154, INTEREST AND SIMILAR EXPENSES Interest expense on deposits 3,833,024 3,581,862 Interest expense on borrowings 39, ,316 Interest expense on valuable papers issued - 36 Expenses on other credit activities ,872,312 3,856, NET (LOSS) FROM SERVICES Income from servies 35,526 22,571 Income from treasury and remittance services 25,233 18,155 I ncome from trust and agency services 1, O thers 9,249 4,030 Expenses for services 342, ,017 Expense on treasury and remittance services 30,345 13,252 O thers 311, ,765 Net (loss) from services (306,476) (211,446) 79

80 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 26. NET GAIN FROM TRADING FOREIGN CURRENCIES Income from trading foreign currencies 191, ,651 I ncome from trading foreign currencies 82,170 46,472 Income from trading derivaties financial instruments 109,558 60,179 Expenses from trading foreign currencie 185,416 99,433 E xpenses for trading foreign currencies 19,355 6,510 Expenses for trading derivative financial instruments 166,061 92,923 Net gain from trading foreign currencies 6,312 7, NET GAIN/(LOSS) FROM TRADING INVESTMENT SECURITIES Trading from trading investment securities 214,907 38,281 Expense for trading investment securities (5,618) (4,636) Provision reserved/(charged) for impairment of investment securities 38,274 (49,149) Net gain/(loss) from trading investment securities 247,563 (15,504) 28. NET (LOSS) FROM OTHER ACTIVITIES Income from other activities 18,313 57,406 Income from recovery of investment in Agribank - 56,088 Leasing Company 2 2, Proceeds from disposal of assets 16, Expense on other activities 143,389 94,512 Expense on social activities 83,636 91,373 Other expenses 59,753 3,139 Net (loss) from other activities (125,076) (37,106) 80

81 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 29. OPERATING EXPENSES Taxes, fees and charges 57,464 46,963 Staff cost 560, ,003 - Salaries and allowances 458, ,912 - Salary-based expenses 59,416 45,019 - Other benefits Others staff costs 42,559 20,281 Expenses for assets 378, ,912 - Deprecitaion and amortisation expenses 114,095 86,609 - Rental expenses 151, ,962 - Maintenance and repair expenses 39,620 45,751 - Materials and tools 70,819 26,116 - Others 3,027 2,474 Expenses for operating management 316, ,416 - Per diem 18,307 12,362 - Expenses for union activities Communication and postal expenses 4,547 3,544 - Printing, marketing and promotion expenses 41,774 37,075 - Others 252, ,310 Insurance premium for customer' deposits 34,832 28,124 Other operating expenses 2,115 4,471 1,350,947 1,099, PROVISION EXPENSES FOR CREDIT LOSSES Provision expense for credit losses of loans to customers 121, ,495 Provision expense for corporate bonds (Note 10) 38,130 - Provision expense for VAMC bonds (Note 10) 71,597 - Provision expense/(reversal of provision) for credit losses (10,979) (153) of off-balance sheet commitments (Note 20) Provision expense for receivables from loans sold 6, , ,342 81

82 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 31. CORPORATE INCOME TAX EXPENSES Profit before corporate income tax 535, ,402 Adjustments for Plus: Non-deductible expenses 8,420 - Taxable profit 543, ,632 In which: - Profit before corporate income tax entitled to incentive tax rate 632, ,963 - Profit before corporate income tax not (89,138) 125,439 entitled to incentive tax rate Tax rate applicable to branches entitled to incentive tax rate (*) 20% 20% The impact of tax redcution (*) 50% 50% Normal corporate income tax rate(*) 22% 25% Current corporate income tax expense 63,273 85,256 Under-provision in previous years 5,347 1,291 Non-deductible expenses CIT paid in arrears after tax finalization 85 10,654 Total current corporate income tax for the year 68,705 98,128 (*): According to Official Letter No. 379/CT-TT&HT dated 19 June 2008 issued by Tax Department of Hau Giang province, the Bank is entitled to an incentive tax rate of 20% of taxable profits for the first 10 years of operation. The bank is exempt from corporate income tax for two years from the first year it has taxble income and is entitled to a 50% reduction in tax payable for the subsequent six years. From the 11 th year of operation, the Bank is subject to corporate income tax at the rate specified at the time. Year 2014 is the 5 th year the Bank enjoys tax reduction of 50%. Incentive tax rate and tax reduction are not applied to other incomes and incomes incurred in the Bank s branches located in provinces and cities other than Hau Giang Province. Such incomes are subject to 22% tax rate. 82

83 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 32. BASIC EARNINGS PER SHARE (i) Profit after tax: Profit after tax , ,274 Appropriation to bonus and welfare funds Profit attributable to ordinary shareholders (23,641) (40,001) 442, ,273 (ii) Weighted average number of ordinary shares: Unit Unit Outstanding ordinary shares carried forward 646,000, ,000,000 Effect of shares issued during the y ear - - Weighted average of ordinary shares for calculation of basic earnings per share 646,000, ,000,000 (iii) Basic earnings per share: Basic earnings per share 2014 VND VND CASH AND CASH EQUIVALENTS PRESENTED IN THE CASH FROM STATEMENT INCLUDES THE FOLLOWING BALANCE SHEET ITEMS Cash on hand (*) 31/12/ /12/ , ,590 Balances with the State Bank of Vietnam (*) 1,617,624 6,560,356 Placements with and loans to other credit institutions with term of less than 3 months 6,003,362 10,571,763 7,946,272 17,338,709 (*): Balances of cash on hand, balance with the SBV and placements with other credit institutions are presented in Note 3, Note 4 and Note 5 83

84 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 34. EMPLOYEE BENEFITS I. Total number of employees (person) II. Employee's income () 3,227 2, Total salary fund 283, , Bonus 150,441 85, Other allowances 24,531 36, Total income (1+2+3) 458, , Avarage monthly salary Avarage monthly income COLLATERAL AND MORTGAGES 35.1 Type and value of collateral and mortgage Real Estate Movable assets Valuable papers Other assets Carryingt value () 31/12/ ,320,122 31/12/ ,977,925 1,884,591 1,821,532 11,692,377 5,206,790 37,749,551 22,762,807 80,646,641 50,769, Collateral and mortgages held by the Bank which are permitted to sell to or re-pledge for a third party in the absence of default by the owner of the collateral As at 31 December 2014, the Bank did not hold any collateral which the Bank is permitted to sell or re-pledge for a third party in the absence of defaul by the owner of the collateral 84

85 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 36. CONTIGENT LIABILITIES AND COMMITMENTS In normal course of business, the Bank uses financial instruments which are related to off-balance sheet items. These financial instruments mainly comprise financial guarantees and commercial letters of credit. These instruments involve elements of credit risk apart from those recognised in the balance sheet. Credit risk of off-balance sheet financial instruments is defined as the possibility of the Bank s sustaining a loss because any other party to a financial instrument fails to meet its contractual obligations. Financial guarantees are conditional commitments issued by the Bank to guarantee the performance of the Bank s customer to a third party, including guarantee for borrowings, settlement, contract performance and bidding, etc. The credit risk associated with issuing guarantees is essentially the same as that associated with loans to customers; other guarantees have risk concentration at lower level. Letter of credit (L/C) transaction is a transaction where the Bank issues a financial guarantee to its customer (buyer or importer) in which the seller or the exporter is the benefinciary. There are 2 types of L/C by term: L/C at sight and usance L/C. Credit risk of L/C is limited if the Bank can manage the receipt of goods. Usance L/C represents higher risk than L/C at sight. If the Bank makes payment to the beneficiary under L/C or financial guarantees conditions but the Bank s customer does not reimburse to the Bank, the Bank has the right to record a loan to the customer under their agreement signed before issuing L/C or fiancial guarantees. The Bank requires margin deposits to cover the credit risk relating financial instruments when it is deemed necessary. The margin deposit required varies from nil to 100% of the value of of commitment granted, depending on the creditworthiness of customers as assessed by the Bank. In addition, the Bank engages conditional commitments, in forms of commitments in interest swap contracts, commitments in valuable papers trading contracts and other commitments. 37. RISK-FREE TRUST AND AGENCY ACTIVITIES T rusted fund from organisations 31/12/ /12/ ,417 13, ,417 13,290 85

86 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 38. FINANCIAL INSTRUMENT On 06 November 2009, the Ministry of Finance issued Circular No. 201/2009/TT-BTC ( Circular 210 ) guiding the application of International Financial Reporting Standards on presentation of financial statements and disclosures of financial instruments, which is effective for the financial year beginning on or after 01 January Circular 210 provides the definition of financial instruments, including financial assets. Financial liabilities, derivative financial instruments and equity instruments and requirements on classification, presentation and disclosures of these financial instruments. As Circular 210 only regulates the presentation and disclosure of financial instruments, the following terms under Circular 210 are adopted for Note 38 to the summary financial statements. Assets and liabilities of the Bank are recognised in accordance with Vietnamese Accounting Standards. Accounting Regime applicable to credit institutions in Vietnam and other prevailing regulations of State Bank of Vietnam. Financial assets Under Circular 210, the Bank s financial assets includes cash, gold and gemstone, balances with the State Bank of Vietnam, placements with and loans to other credit institutions, loans to customers, investment securities, other longterm investments, receivables, and assets under currency derivative contracts. Financial assets within the scope of Circular 210 are classified, for disclosures in the financial statements, into either or the followings: Financial assets at fair value through profit and loss Financial asset at fair value through profit and loss is a financial asset that meets either of the following conditions: a) A financial asset is classified as held for trading if: - It is acquired or incurred principally for the purpose of selling or repurchasing in the near term; - There is evidence of a recent actual pattern of short-term profit-taking; or - It is derivative (except for the derivative that is a financial guarantee contract or effective heding instrument). b) Upon initial recognition, it is designated by the Bank as at fair value through profit or loss. Held-to-maturity investments: Held-to-maturity investments are non-derivative financial assets with determinable payments and fixed maturity that the Bank has the positive intention and ability to hold maturity except for: a) Those that the Bank designates at fair value through profit or loss upon initial recognition; b) Those that the Bank designates as available for sale; and c) Those that meet the definition of loans and receivables. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market except for: a) Those that the Bank intends to sell immediately or in the near term, which shall be classified as held for trading, and those that the Bank designates as at fair value through profit and loss upon initial recognition; b) Those that the Bank deginates as available for sale upon initial recognition; or c) Those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as available for sale. 86

87 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 38. FINANCIAL INSTRUMENT(Continued) Available-for-sale financial assets: Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as: a) Loans and receivables; b) Held-to-maturity investments or; c) Financial assets designated as at fair value through profit or loss. Financial liabilities According to Circular 210, the Bank s financial liabilities include borrowings from the Government and the SBV, deposits and borrowings from other credit institutions, customer deposits, bonds, grants, trusted funds and borrowings at risk of the credit institution, valuable papers issued, other payables and payables under currency derivative contracts. Financial liabilities within the scope of Circular 210 are classified, for disclosures in the financial statements, into either of the following: Financial liabilities at fair value through profit or loss: a) A financial liability must meet either of the following conditions: - It is acquired or incurred principally for the purpose of selling or repurchasing in the near term; - There is evidence of a recent actual pattern of short-term profit-taking; or - It is a derivative (except for the derivative that is a financial guarantee contract or effective hedging instrument). b) Upon initial recognition, it is designated by the Bank as at fair value through profit or loss. Financial liabilities at amortised cost: Financial liabilities that are not classified as at fair value through profit or loss are classified as at amortised cost. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. The risk management policy related to financial instruments The Board of Directors has overall responsibility for the establishment and oversight of the Bank s risk management framework. The Board has established Audit and Risk Committee, which are responsible for developing and monitoring the Bank s risk management policies in specified areas. All Board s committees have executive and non-executive members and report periodically to the Board of Directors on their responsibility. The Bank s risk management policies are established to identify and analyse the risks exposed to the Bank, to set appropriate risk limits and controls, and to monitor risks and adhere to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank, through its training activities, management standards and management systems, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and responsibilities. The Bank s Internal Audit Division and Strategies and Risk Management Division undertakes both regular and ad-hoc reviews of risk management controls and monitoring procedures, the results of which are reported to the Board of Directors. 87

88 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 38. FINANCIAL INSTRUMENT(Continued) Along with setting up the departments in charge of risk management and risk management policies relating to financial instruments, the Bank also coordinates with suppliers in the information technology and telecommunication sectors to build an integrated system of risk management tools to support the risk management operation in protecting customers, suppliers and therefore, to enhance the sustainable development of the Bank. The policies on currency risk, interest rate risk, credit risk and liquidity risk are analysed in details in Notes 39, 40, 41, and 42. Determination of fair value of financial instruments The Bank uses the method and assumptions to estimate fair value as following: Fair value of cash and short-term deposits is measured at the carrying value of the items because these are short-term instruments. The Bank s financial instruments are detailed as follows: 88

89 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD Financial assets Cash on hand Balances with the State Bank of Vietnam Placements with and loans to other credit institutio Trading securities Derivaties financial instruments and other financial Loans to customers Investment securities Other financial assets Financial liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit instituti Deposits from customers Derivaties financial instruments and other financial Grants, trusted funds and borrowings at risk of the credit institution Other financial liabilities (*) The Bank has not determined fair value of financial assets and financial liabilities as at the balance sheet date since Vietnamese Accounting Standards as well as prevailing regulations have not had specific guidance on the fair value determination of such items 89

90 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 38. FINANCIAL INSTRUMENT(Continued) Classification of financial assets and financial liabilities as at 31 December 2014 Book value Financial assets Held-fortrading million VND Held-tomaturity million VND Loans and receivables million VND Available for-sale million VND Amortised million VND million VND Cash on hand Balances with the State Bank of Vietnam Placements with and loans to other credit institutions Trading securities Loans to customers Investment securities Other financial assets Financial liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit institutions Deposits from customers Derivaties financial instruments and other financial Grants, trusted funds and borrowings at risk of the credit institution Other financial liabilities 90

91 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 39. CURRENCY RISK Currency risk is the risk that values of financial instruments will be affected by the changes in foreign exchange rate. The Bank was incorporated and operates in Vietnam and its reporting currency is Vietnam dong (VND). Most of the Bank s transactions are denominated in VND and USD. As reporting currency of the Bank is VND, thus, the Bank s financial statements could be affected by fluctuations of exchange rate between USD and VND. Risk arising from transactions denominated in foreign currency would result in foreign exchange gain or loss and these are recognised in the income statement. This risk exposes when the assets and liabilities of the Bank are denominated in currencies other than the reporting currency and these include cash on hand, placements with and loans to other credit institutions, investment securities, deposits and borrowings from other credit institutions, deposits from customers. The Bank has set limits on position of each currency based on the internal risk assessment of the Bank and regulations of the SBV. A foreign currency position is monitored on a daily basis and hedging strategies that the Bank ensures positions to be maintained within the established limits. The Bank also maintains open positions to earn profits from exchange rate fluctuations. ITEM VND EUR equivalent USD equivalent Other currencies equivalent Assets Cash on hand Balances with the State Bank of Vietnam Placements with and loans to other credit institution Trading securities (*) Derivative financial instruments and other financial Loans to customers (*) Investment securities (*) Long-term investments (*) Fixed assets Other assets (*) Total assets Liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit instituti Deposits from customers Derivaties financial instruments and other financial Grants, trusted funds and borrowings at risk of the credit institution Other liabilities (*) Capital and reserves Total liabilities and owner's equity Balance sheet currency position Total 91

92 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 40. INTEREST RATE RISK Interest rate risk is the possibility of the Bank s income or asset value being affected when market interest rate fluctuates. Interest rate risk to the Bank s operation possibly derives from difference in maturity or amount between interest-bearing assets and liabilities. Some assets have no specific term or are sensitive to interest rates and do not correspond to specific liabilities. The assets and liabilities of the Bank are classified by term according to an earlier time between the repricing period and the maturity date as at the balance sheet date. Expected re-pricing date and maturity date of assets might be very different from those specified in the contract, especially the deposits from customers. Interest rate risk to the Bank possibly arises from investment, funding and lending activities. The effective interest rate re-pricing term of assets and liabilities is the remaining period from the date of financial statements to the nearest interest rate re-pricing date. The following assumptions and conditions have been adopted in the analysis of effective interest rate re-pricing term of the Bank s assets and liabilities: - Cash on hand, long-term investments and other assets (fixed assets, investment properties and other assets) are classified as non interest-bearing items; - Balances with the SBV are considered settlement deposits, thus the re-pricing effective interest rate term is assumed to be within one month; - The effective interest rate re-pricing term of investment securities is determined based on contractual interest rate re-pricing term of each securities; - The effective interest rate re-pricing term of placements with and loans to other credit institutions; loans to customers; borrowings from the Government and the SBV; deposits and borrowings from other credit institutions; deposits from customers are determined as follows: Items with fixed interest rate during the contractual period: the effective interest rate re- pricing term is determined from the balance sheet date to maturity date; Items with floating interest rate: the re-pricing effective interest rate term is determined from the balance sheet date to the nearest interest rate re-pricing date; - The effective interest rate re-pricing term of valuable papers issued is determined based on the actual maturity date of each valuable paper issued; is dependent on the Bank s regulations on interest rates of each issuance; - The effective interest rate re-pricing term of grants, trusted funds and borrowings at risk of the credit institution is determined as the remaining period to maturity date of the transactions since such transactions have fixed interest rates. - The effective interest rate re-pricing term of other borrowings is from one to five years. - The effective interest rate re-pricing term of other liabilities is from one to three months. In fact, these items could have various interest rate re-pricing terms. Interest rate sensitivity Since Circular 210 does not provide specific guidance on implementation of interest rate sensitivity analysis, the Bank has not disclosed such information herein. 92

93 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 40. INTEREST RATE RISK (Continued) Assets Cash on hand Balances with the State Bank of Vietnam Placements with and loans to other credit institutio Trading securities (*) Loans to customers (*) Investment securities (*) Long -term investments Fixed assets Other assets (*) Total assets (*) Liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit instituti Deposits from customers Derivaties financial instruments and other financial Grants, trusted funds and borrowings at risk of the credit institution Other liabilities (*) Total liabilities Balance sheet net interest gap Off-balance sheet commitments affecting sensitivity with assets and liabilities' interest rate Total net interest rate gap (*) Excluding risk provision. 93

94 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 41. FINANCIAL ASSETS OVERDUE BUT NOT IMPAIRED Credit risk to the Bank derives from lending, investing and granting guarantees to customers or third parties in which the Bank acts as an intermediary. Credit risk arises when counterparties lose their ability to pay debt and are monitored continually. To manage the credit risk level, the Bank is attempting to transact only with counterparties who have high credit rating and require collateral if appropriate. Credit risk to the Bank mainly derives from lending and advances to customers. The credit risk level is shown on the carrying value of the assets as at the balance sheet. In addition, the Bank also faces credit risk in the form of off-balance sheet commitments to extend credit and guarantees. The concentration of credit risk (on or off-balance sheet) rising from financial instruments accompanies groups of partners in which members have similar economic characteristics that would cause the ability of the groups to fulfil their obligations to be affected if there are fluctuations in economic conditions or other conditions. The main concentration of credit risk is from various areas and types of customers regarding to investments, loans and advances, credit commitments and guarantees granted by the Bank. Credit risk of the Bank is focused on certain number of economic sectors. The Bank controls and manages risks by setting policies and procedures, including the credit risk management and operation policy of ALCO, Legislation, Risk Management & AML Council and Headquarters Credit Council. The Bank classifies its loans and advances to customers and other credit institutions based on Circular 02 and Circular 09, through which the Bank could regularly assess risks of doubtful debts, non-performing loans, and propose appropriate solutions. The Bank manages and controls credit risk by setting policies and issuing regulations regarding to the management of credit risk, creating credit process, reviewing credit risk, building credit rating system, loans classifying and decentralising credit. Financial assets overdue but not impaired The Bank s overdue financial assets that are not impaired include overdue loans with no provision required under Vietnamese Accounting Standards, Accounting Regime applicable to credit institntions in Vietnam and legal regulations relating to financial reporting ( VAS ). The aging of such financial assets is presented as below: Overdue Within 90 days days days Over 360 days Loans to customers 66,986 10,426 55,749 34,010 The Bank is currently holding collateral in the forms of real estate, movable assets, valuable papers and others in kind for the above financial assets. However, the Bank has not been able to determine the fair value of such assets due to the lack of specific guidance and necessary market information. For the purpose of determining whether the assets are impaired and any provision is needed under VAS, these assets value are measured in accordance with Circular 02 and Circular

95 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 42. LIQUIDITY RISK Liquidity risk is the risk that results to the Bank s losses and/or failing to meet its payment obligation when the Bank cannot mobilise sufficient liquid capital at appropriate costs and/or cannot sell assets at fair value and/or the Bank has to mobilise funds at high costs to meet its payment obligations at a point of time. Liquidity risk arises due to: unmatching of maturity terms of assets and maturity terms of liabilities, the sensitivity of financial assets to changes in interest rates that leads the Bank unable to meet its payment obligation. The maturity term of assets and liabilities represents the remaining period from the balance sheet date to the maturity date agreed in the contracts or in terms of issuance. The following assumptions and conditions have been adopted in the analysis of the Bank s maturity relating to its assets and liabilities: - Balance with the State Bank of Vietnam is considered current including the required reserve, which is determined upon the composition and maturity of the Bank s customer deposits. - The maturity term of investment securities is based on the contractual maturity date of each type of securities. - The maturity term of deposits with other credit institutions and loans to customers is based on the contractual maturity date. The actual settlement date sometimes varies contractual maturity date when the contract is extended. In addition, loans to customers are represented by the residual value after deducting risk provision. - The maturity term of equity investment is considered to be over five years as equity investments have indefinite maturity. - The maturity term of deposits, loans from other credit institutions and deposits from customers are determined on the nature of these amounts or maturity date. For demand deposits from business entities and the grants, trusted funds and borrowings at risk of the credit institution, there is an assumption that a certain volume is maintained in the next term. - The maturity term of vostro accounts and current accounts which are settled upon customers demand are considered to be current. The maturity term of term borrowings and deposits is based on their contractual maturity dates. In practice, such items may be rolled over and maintained for longer period. - The maturity term of fixed assets is determined based on their remaining useful lives. The table below shows the analysis of assets and liabilities of the Bank by terms of maturity based on the remaining period from the balance sheet date to the maturity date. In fact, the settlement date of financial assets and liabilities could be different according to oral agreements or amendments to contracts if any. The data in the Liquidity Risk Table as at 31 December 2014 shows that the Bank net liquidity within one year is quite limited. This is a common situation of commercial banks in Vietnam. In fact, the Bank still maintains an appropriate rate of short-term funds utilisation for medium and long-term loans within the limit required by the State Bank of Vietnam. 95

96 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 FORM B 05/TCTD These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements 42. LIQUIDITY RISK (Continued) Assets Cash on hand Balances with the State Bank of Vietnam Placements with and loans to other credit institutio Trading securities (*) Loans to customers (*) Investment securities (*) Long -term investments Fixed assets Other assets (*) Total assets (*) Liabilities Borrowings from the Government and the SBV Deposits and borrowings from other credit instituti Deposits from customers Derivaties financial instruments and other financial Grants, trusted funds and borrowings at risk of the credit institution Other liabilities (*) Total liabilities Net liquidity difference (*) Excluding risk provision 96

97 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 43. EXCHANGE RATES OF SOME FOREIGN CURRENCIES AT THE END OF THE YEAR 31/12/ /12/2013 VND VND USD 21,246 21,036 EUR 26, ,143 GBP 33,316 34,812 CHF 21,655 23,796 JPY SGD 16, ,660 CAD 18,501 19,814 AUD 17,550 18,960 HKD 2,765 2, SUBSEQUENT EVENT AFTER THE BALANCE SHEET DATE There is no event subsequent to the balance sheet date that might require an adjustment to or disclosure in the financial statements. 97

98 LIEN VIET POST JOINT STOCK COMMERCIAL BANK 32 Nguyen Cong Tru Street, Vi Thanh City, Hau Giang Province, S.R. Vietnam NOTES TO SUMMARY FINANCIAL STATEMENTS Summary financial statements For the year ended 31 December 2014 These notes are an integral part of and should be read in conjunction with the accompanying summary financial statements FORM B 05/TCTD 45. COMPARATIVE FIGURES Compararive figures are those figures of the Bank s audited financial statements for the year ended 31 December The Bank has made reclassification to the opening balances of certain items in the financial statements for the comparative purposes as follows: 2013 Reclassification Items Previously reported Reclassified figures Income statement Interest and similar income 6,127,272 27,712 6,154,984 Income from services 50,284 (27,712) 22,572 Expenses on other activities (3,139) (91,373) (94,512) Operating expenses (1,191,262) 91,373 (1,099,889) Cash flow statement Interest and similar income 5,615,841 27,712 5,643,553 Income from services (183,734) (27,712) (211,446) Preparer Approver Nguyen Thi Gam Chef Accountant Hanoi, 16 March 2015 Pham Doan Son General Director 98