Annual Report B Á O C Á O T H Ư Ờ N G N I Ê N BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM. 2 BIDV - Annual Report 2009

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1 BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM BIDV Tower, 35 Hang Voi Street, Hoan Kiem District, Hanoi Tel: (84 4) / Fax: (84 4) Website: B Á O C Á O T H Ư Ờ N G N I Ê N Annual Report 2 BIDV Annual Report BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM BIDV Annual Report 3

2 BIDV Annual Report BIDV Annual Report

3 Contents Message from the Chairman Corporate profile Awards Financial highlights (2005) Remarkable events Directors profile Organization chart Head Office organization chart Network expansion and human resource development Information technology Performance analysis Key business performance Corporate social responsibility Performance of subsidiaries Equitization plan 2010 business plan Consolidated financial statements Notes to the consolidated financial statements under IFRS SHARE OPPORTUNITIES Network 80 6 BIDV Annual Report BIDV Annual Report 7

4 MESSAGE FROM THE CHAIRMAN In, the Bank for Investment and Development of Vietnam (BIDV) continued to affirm its position as a nationleading financial institution, making contributions to effectively implementing the Government s macroeconomic and monetary policies, curbing inflation, maintaining growth and ensuring social welfare. Together with the business community in overcoming economic difficulties in, BIDV has proactively implemented the economic stimulus package of the Government, including the interest rate subsidy program to help enterprises gradually cope with the difficulties, thus significantly contributing to preventing economic downturn and maintaining growth. We have maintained sound and effective business operations and successfully completed the proposed plans. As shown in the Consolidated Financial Statements under International Financial Reporting Standards (IFRS) as at end, total assets reached VND 292,198 billion and total outstanding loans VND 198,979 billion, growing by 20.6% and 29.1% respectively compared to those of Profit before tax was VND 3,196 billion, accomplishing 92.2% of the target, financial ratios exceeded the targets with ROE and ROA reaching 21.05% and 0.94% respectively and CAR of 7.55% under IFRS (or 9.53% under VAS), ensuring liquidity and even support some other local financial institutions. In, BIDV continued its diversified international cooperation by expanding into Cambodia in three areas, including Banking, Insurance and Financial investments. This event highlighted our presence in Indochina, which has guided and motivated Vietnamese enterprises to invest billions of dollars in this market. Simultaneously, BIDV has made necessary preparations for its presence in Myanmar to strenghthen the economic cooperation between Vietnam and this potential country. Besides, BIDV has looked for more business opportunities by joining the investment promotion activities in France, Russian Federation and Czech Republic. Despite many difficulties still face the world and national economy, BIDV continues to be highly evaluated by international credit rating agencies such as Standard&Poor s and Moody s Investors Service with a satisfactory credit rating. BIDV has also received trust from international financial institutions (WB, ADB, and JBIC) in managing rural finance projects, ODA funds and international banking operations. In, we also inaugurated our new premises at BIDV Tower, 35 Hang Voi Street, Hoan Kiem District, Hanoi and announced a new Brand Identity Tool Kit for the first time, as our continued effort to reinforce the Bank s brandname with a 53year history. In 2010, the world economy is showing signs of recovery. This is a favorable time for developing countries to set foundations for safer and more efficient financial systems, thus sustainable economic growth in the future. The country is working hard to accomplish the fiveyear ( ) plan for socioeconomic development. To achieve the objectives set in the 2010 business plan and period, BIDV will focus on the following areas: First, to continue with the Bank s comprehensive restructuring in terms of liabilities, assets, customer base and sources of income to ensure steady and sustainable growth and compliance with the prudential regulations for safety and liquidity of the whole system. Second, to accomplish all the planned targets for the year 2010 and the fiveyear plan , for the implementation of the strategic plan and toward Third, to effectively implement the special tasks as given by the Government, with a focus on developing our activities in Indochina, Myanmar and other potential markets. Fourth, to implement the equitization scheme of BIDV and its subsidiaries (BSC, BIC) in an effective and timely manner, to transform BIDV into a Joint Stock Commercial Bank towards building the Bank into a financial holding company with a parentsubsidiary structure. Fifth, to shift our strategies so that BIDV will become a leading commercial bank in Vietnam in retail and feebased banking business, and that the Bank can achieve the key performance indicators under international standards and practices by Our achievements in and so far are derived from the great efforts of our management and staff, from the trust and loyalty of millions of valued customers and partners, from direction and support of the Government and Ministries. With the slogan share opportunities, share successes, we will always walk along with you in overcoming the arising challenges and gaining new successes in the coming time. Best regards, TRAN BAC HA Chairman of the BOD 8 BIDV Annual Report BIDV Annual Report 9

5 CORPORATE PROFILE Full name: BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM International transaction name: Bank for Investment and Development of Vietnam Abbreviated name: SWIFT: Address: Slogan: BIDV BIDVVNVX BIDV Tower, 35 Hang Voi Street, Hoan Kiem District, Hanoi Share Opportunities, Share Successes Chairman of the BOD: Mr. Tran Bac Ha Chief Executive Officer: Mr. Tran Anh Tuan Tel: Fax: Website: bidv.com.vn Owner: Vietnamese Government (100%) Regulator: State Bank of Vietnam Business Registration No: Tax Code: ratings by Moody s Investors Service Ltd: Outlook: Stable Bank Deposits in Domestic/Foreign Currency: Ba2/B1 Issuer Rating: Ba2 Bank Financial Strength Rating (BFSR): E+ Auditor: Financial Advisor for BIDV s Equitization Project: Ernst & Young Morgan Stanley 10 BIDV Annual Report BIDV Annual Report 11

6 1 6 8 AWARDS In, BIDV s efforts in brand promotion and contribution to the community were highly recognized with many prestigious awards. 1. BEST KNOWN BRAND The Award was presented by the Trade Promotion Department, the Ministry of Industry and Trade in coordination with Vietnam Economic Times. The Award aimed at recognizing the enterprises efforts in building and developing their brands in Vietnam, which has helped to improve the national competitiveness in the international arena. Among 120 awarded enterprises, BIDV was listed in the top 20 leading enterprises. This was the fourth time BIDV applied and consecutively won this Award. 2. PRESTIGIOUS EXTERNAL ECONOMICS BRAND The Award was presented by the National Committee for International Economic Cooperation, Vietnam Union of Friendship Organizations and the Voice of Vietnam in order to praise typical enterprises in economic diplomacy and strong brands in external economic cooperation. As a Vietnam leading enterprise ranked by the UNDP, BIDV has its own strength and international cooperation experiences. So far, BIDV has developed correspondent banking relationship with over 1,000 banks worldwide. Based on BIDV s capability and experience in implementing large projects, international financial institutions such as WB, ADB, JBIC, IMF, ECB and bilateral donors have selected BIDV as a bank to disburse the ODA projects th RANK IN VIETNAM TOP 500 ENTERPRISES In, BIDV climbed up to the 14th position from the 35th position in 2008 in the VNR 500, and the 2nd among the ranked banks. Enterprises were ranked by revenue, profit, total assets, growth rate and number of employees. 4. BEST DOMESTIC PROVIDER OF FX SERVICES BIDV received the Best Domestic Provider of FX Services in Vietnam in Award as voted by financial institutions in a AsiaMoney Poll. This is the third successive year that BIDV was selected for this award. This has indicated the acknowledgement of domestic and foreign financial institutions for BIDV s effort in achieving international standards on organizational structure, management skills and operational efficiency in foreign exchange services. 5. PRESTIGIOUS SECURITIES BRAND In, BIDV was awarded the Prestigious Securities Brand for its bond product and the title Typical Financial Intermediary for its performance as a financial intermediary designated for services in the securities market. The Award was presented by the Vietnam Association of Securities Business (VASB), Credit Information Center (CIC), Vietnam Securities Journal and Vietnam Industrial & Commercial Securities Corporation (VICS). 6. CORPORATE SOCIAL RESPONSIBILITY (CSR) AWARD The CSR Award, jointly held by the Ministry of Industry and Trade, Vietnam Journalists Association and Trade Promotion Department, was first presented to 82 enterprises for their great contributions to the social welfare. BIDV was among the 40 enterprises in TOP 1, enterprises with the greatest contributions. Recently, BIDV has proactively and effectively implemented many social programs and policies for the community, in addition to ensuring a good life of work for its 14,000 employees. 7. CERTIFICATE OF MERIT FOR EDUCATION AND TRAINING This is the second time BIDV has been awarded the Certificate of Merit for Education and Training by the Ministry of Education and Training. In recent years, BIDV has regularly spent about 60% of its social community budget on education and training in poor areas. In 2010, BIDV has spent about VND 130 billion to support education activities. 8. THANG LONG GOLDEN LIST CORPORATE CULTURE AWARD For the first time, the Thang Long Golden List Corporate culture Award was held by UNESCO Hanoi Union of UNESCO Vietnam on the occasion of the 1000th anniversary of Thang Long (Hanoi). The award was based on various criteria including the fulfillment of corporate social responsibilities, corporate sustainability and culture, etc. BIDV was one of the 20 enterprises in Hanoi receiving the Award. 12 BIDV Annual Report BIDV Annual Report 13

7 FINANCIAL HIGHLIGHTS (2005) (In accordance with the Consolidated Financial Statements under IFRS) TOTAL ASSETS VND Billion 292, , , , , OWNER S EQUITY VND Billion 13, LOANS AND ADVANCES TO CUSTOMERS (Net) VND Billion , , , , , CUSTOMER DEPOSITS AND OTHER AMOUNTS DUE TO CUSTOMERS VND Billion , , , , , ,405 9,969 PROFIT BEFORE TAX VND Billion , ,150 4, ,103 2, BIDV Annual Report BIDV Annual Report 15

8 REMARKABLE EVENTS The following achievements have contributed to maintaining customers confidence in BIDV, a brand with a history of 53 years of development. 1. EFFECTIVE IMPLEMENTATION OF THE ECONOMIC STIMULUS PACK AGE, COMPLIANCE WITH THE MONETARY POLICIES AND JOINT EF FORTS IN OVERCOMING CHALLENGES The Bank has proactively implemented the Government s economic stimulus package including the interest rate subsidy program, effectively controlled credit growth, managed foreign funds and interest rates in accordance with the resolutions by the Government and the State Bank of Vietnam, which have helped enterprises gradually overcome difficulties, and thus prevent the economic downturn, maintain growth and ensure social security. 2. SOUND AND EFFICIENT BUSINESS OPERATION BIDV has accomplished the business plan with total assets of VND 292,198 billion as at December 31st, outstanding loans of VND 194,157 billion, profit before tax of VND 3,196 billion, CAR under IFRS and VAS of 7.55% and 9.53% respectively, ROA of 0.94% and ROE of 21.05% which should meet international standards. 3. CAMBODIA FOOTPRINT With the establishment of our presence engaging in banking, insurance, financial investment, a Representative Office and the successful joint organization of the Conference on Investment Promotion into Cambodia, BIDV was appointed as Chairman of the Association of Vietnamese Investors in Cambodia. This event also highlighted BIDV s business expansion into Indochina. 4. FURTHER SUCCESS IN DIVERSIFIED INTERNATIONAL COOPERATION AND MARKET EXPANSION BIDV has been selected by such international financial institutions as the World Bank (WB) and the Asian Development Bank (ADB) in management and disbursement of the Rural Finance Projects, ODA funds and in other international banking operations, etc. In addition, a subsidiary of Vietnam Russia JointVenture Bank (VRB) in Moscow was established and cooperation with leading financial institutions in other markets strengthened. 5. ADOPTION OF THE NEW ORGANIZATIONAL STRUC TURE TOWARDS A MODERN RETAIL BANK The Bank has adopted a standardized and modern retail banking model, diversified services and products, and improved service quality. Notably, the introductions of Visa Precious and Visa Flexi cards have helped satisfy the growing needs of both corporate and individual customers. 6. DEVELOPING THE DISTRIBUTION CHANNEL OF IN SURANCE SERVICES, THUS AFFIRMING BIDV S POSI TION IN BANKING, SECURITIES, INSURANCE, ETC. With 19 branches, 108 insurance agents nationwide and two jointventures in Laos and Cambodia, BIDV has maintained its insurance market share in Indochina. BIDV Securities Company and BIDV Leasing Companies (I, II) have also reaffirmed their position in the market. At the same time, the construction of Trung Luong My Thuan Highway commenced as planned. 7. CONTINUING TO PLAY AN ACTIVE ROLE IN THE TRI PARTY PLUS 1 (INVESTORMANAGERBANKER PLUS JOURNALIST) MODEL WITH THE INVESTMENT PRO MOTION ACTIVITIES The Bank continued its role as a facilitator for investment promotion in localities which still face economic difficulties such as Nghe An, Tay Nguyen, Lang Son, Can Tho, Tra Vinh, Hau Giang, Quang Ngai, Gia Lai, etc. The Bank also actively took part in investment promotions in foreign markets like Russia, Cambodia, Laos, etc. 8. CORPORATE SOCIAL RESPONSIBILITY The Bank has set up a project on poverty reduction and social security, which included our support for 5 out of 62 poor districts nationwide, upgrade of over 10,000 temporary shelters and participation in hundreds of projects on healthcare, education support and disaster relief, etc. BIDV also took a leading role in the business community to call for donations for Cuba, Cambodia, Laos, etc. 9. PROMOTING EFFECTIVE INCENTIVE SCHEMES FOR EMPLOYEES Special attention has been paid to employees material and spiritual benefits, with several residential property projects and performancebased incentives. Notably the Bank has developed many forms of recognizing excellent employees through the skill contests such as the Best Cashier and Best Customer Service Officer. 10. PROMOTING BRAND VALUE With the inauguration of the BIDV Tower, located at No. 35 Hang Voi Street, Hoan Kiem District, Hanoi, the launch of a new brand identity tool kit for the first time, and many prestigious awards in, the Bank s brand continues to be recognized. 16 BIDV Annual Report BIDV Annual Report 17

9 DIRECTORS PROFILE Board of Directors MR. TRAN BAC HA CHAIRMAN OF THE BOD Mr. Tran Bac Ha has devoted to BIDV for nearly 30 years. He joined BIDV in February Thereafter, he assumed various management positions including Executive Vice President, BIDV Nghia Binh Deputy Branch Manager, Executive Vice President, BIDV Binh Dinh Deputy Branch Manager and then Executive Vice President, BIDV Binh Dinh Branch Manager. In October 1999, he was nominated as Senior Executive Vice President and four years later appointed as Member of the BOD, Chief Executive Officer. In January 2008, he was appointed as Chairman of the BOD. He is also Chairman of the Investment and Development Company of Cambodia (IDCC). Apart from his main duty as Chairman of the Bank, Mr. Tran Bac Ha has been appointed by the Government of Vietnam into various positions such as Vice Chairman of Vietnam Association of Small and Medium Enterprises, Member of the ASEAN Business Advisory Council (ASEAN BAC) (since March 2006), Chairman of the Association of Vietnamese Investors into Myanmar (AVIM), Chairman of the Association of Vietnamese Investors into Cambodia (AVIC), and ViceChairman of the Vietnam China Friendship Association. 2. MR. NGUYEN TRUNG HIEU STANDING MEM BER OF THE BOD Mr. Nguyen Trung Hieu has been working in the banking sector for almost 34 years. He joined BIDV in November He was appointed as Executive Vice President, BIDV Quang Nam Da Nang Branch Manager in October 1991, and Executive Vice President, BIDV Da Nang Branch Manager in December In September 1997, he assumed the position of Senior Executive Vice President. In June 2007, he was appointed as Member of the BOD, Senior Executive Vice President of BIDV. He has served as Standing Member of the BOD since September In addition, he has also held other positions including Member of the BOD of the Central People s Credit Fund, Chairman of BIDV Tower JointVenture Company and Chairman of BIDV Leasing Company I. 3. MR. TRAN ANH TUAN MEMBER OF THE BOD, CHIEF EXECUTIVE OFFICER Mr. Tran Anh Tuan has been working for BIDV for nearly 30 years. He joined BIDV in Thereafter, he was appointed as Executive Vice President, BIDV Gia Lai Branch Manager (in Gia Lai Kon Tum) in July He was promoted as Senior Executive Vice President of BIDV in September 1998, Member of the BOD in October 2006, and then Member of the BOD, Chief Executive Officer in January MR. LE VIET CUONG MEMBER OF THE BOD Mr. Le Viet Cuong has been working in the banking sector for almost 40 years, since May Before being appointed as Member of the BOD of BIDV in January 2007, he had worked for such institutions as Bac ThaiSon Tay Banking College, the Vietnam Bank for Agriculture and Rural Development, the State Bank of Vietnam where he had assumed such positions such as Head of Secretary Department, Deputy Head and then Head of the Administrative Office. In addition, he was also appointed as Member of the BOD of the Marine Shipyard and Oil Rig Joint Stock Company, Member of the BOD of EVN Finance Joint Stock Company. 5. MR. NGUYEN VAN PHAM MEMBER OF THE BOD Mr. Nguyen Van Pham has been working in the banking sector for nearly 40 years. He started his banking career in 1973 and joined BIDV in Prior to that, he spent over 10 years at various positions in the State Bank of Vietnam, Dak Lak Branch, namely Chief Inspector (from October 1989 to June 1991), and Deputy Director, Chief Inspector (from July 1991 to April 1992). At BIDV, he has assumed various positions including Executive Vice President, BIDV Dak Lak Branch Manager (from May 1992 to January 1997), Executive Vice President, Transaction Center No. II Manager (from February 1997 to September 1999). He was appointed as Member of the BOD, Chief Controller of BIDV from August 2002 to November Since December 2006, he has been Member of the BOD of BIDV and Vice Chairman of the BOD, Chief Executive Officer of Vietnam Russia Joint Venture Bank (VRB). In addition, he has also worked as a Member of the Council and Chief Controller of Vietnam Banks Association. 6. MR. NGUYEN KHAC THAN MEMBER OF THE BOD Mr. Nguyen Khac Than has been working in the banking sector for over 30 years. He joined BIDV in In August 2004, he was appointed as Senior Executive Vice President of BIDV. In September 2008, he was nominated as Member of the BOD. He has assumed various positions including Executive Vice President, BIDV Bac Ninh Deputy Branch Manager (January 1990July 1991 and September 1992 October 1999), the State Bank of Vietnam Bac Ninh Branch Manager (November 1999 June 2002), Executive Vice President, BIDV Transaction Center I Deputy Manager (July 2002October 2002), Executive Vice President, BIDV Transaction Center I Acting Manager (November 2002April 2003), Executive Vice President, Transaction Center I Manager (May 2003April 2005). In addition, he is now also Chairman of BIDV Securities Company, Chairman of BIDVVietnam Partners Investment Management JointVenture Company (BVIM). 7. MR. NGUYEN HUY TUA MEMBER OF THE BOD, HEAD OF SUPERVISORY BOARD Mr. Nguyen Huy Tua has been working in the banking sector for almost 26 years. He joined BIDV in He was nominated as Member of the BOD in October Since December 2006, he has been Member of the BOD, Head of Supervisory Board. At BIDV, he has assumed various positions, namely Executive Vice President, BIDV Thang Long Branch Manager from December 1993 to December 1996, Executive Vice President, Transaction Center No. I Deputy Manager from December 1996 to August 1997, Head of Credit Department 1 from August 1997 to August 2002, Executive Vice President, Head, Credit from August 2002 to March 2005; and Executive Vice President, Transaction Center No.III Manager from March 2005 to December In addition, he is now also Member of the Council, Chief Controller of Vietnam Banks Association, Member of the BOD of Petro Vietnam Nhon Trach Power Jointstock Company, Chairman of BIDV Da Lat Land JointStock Company, Member of the BOD of Viet Lao Power JointStock Company. 18 BIDV Annual Report BIDV Annual Report 19

10 Board of Management MR. TRAN ANH TUAN MEMBER OF THE BOD, CHIEF EXECUTIVE OFFICER Please refer to Mr. Tran Anh Tuan s profile in the Board of Directors. 2. Mrs. PHAN THI CHINH SENIOR EXECUTIVE VICE PRESIDENT Mrs. Phan Thi Chinh has been working for BIDV for almost 20 years. She joined BIDV in 1991, and held many important positions including Senior Vice President, Deputy Head, Finance in March 2003 then Senior Vice President, Head, Finance in August In June 2007, she was nominated as Senior Executive Vice President. She has also been Member of the BOD of BIDV Tower JointVenture Company since October MR. HOANG HUY HA SENIOR EXECUTIVE VICE PRESIDENT Mr. Hoang Huy Ha has been working in the banking sector for over 30 years. Before working for BIDV in 1986, he had assumed different positions in the State Bank of Vietnam, Song Be Branch for over 10 years. In July 2002, he was appointed as Senior Executive Vice President. At BIDV, he has assumed various positions, namely Executive Vice President, BIDV Song Be Branch Manager (from July 1996 to December 1996), Executive Vice President, BIDV Binh Duong Branch Manager (January 1997 October 1999) and Executive Vice President, Transaction Center No. II Manager (November 1999 June 2002). At present, he also serves as Vice Chairman of North Thang Long Investment and Development Joint Stock Company, Member of the BOD of Vietnam Chamber of Commerce and Industry. In addition, he was also Chairman of BIDV Expressway Development Company (BEDC). 4. MR. LE VAN LOC SENIOR EXECUTIVE VICE PRESIDENT Mr. Le Van Loc has been working for BIDV for almost 35 years, since In July 2002, he was promoted as Senior Executive Vice President. He has assumed various important positions in the banking sector, namely Executive Vice President, BIDV Thanh Hoa Branch Manager (July 1995 December 1996), Executive Vice President, SBV Thanh Hoa Branch Manager (January 1997November 2000), Executive Vice President, BIDV Transaction Center I Deputy Manager (December 2000 June 2001), Executive Vice President, Transaction Center I Manager (July 2001 June 2002). In addition, he also serves as Chairman of Sa Pa Tourism JointStock Company, Member of the BOD of Vinaconex Financial JointStock Company. 5. MR. LE DAO NGUYEN SENIOR EXECUTIVE VICE PRESIDENT Mr. Le Dao Nguyen has been working for BIDV for almost 27 years, since In October 1990, he was appointed as Deputy Head of the Credit Appraisal Department and then Head of the Guarantee Services Department in March He was nominated as Executive Vice President, Transaction Center No. I Manager in April In July 1998, he was appointed as Senior Executive Vice President. At present, he also serves as Chairman of BIDV Financial Investment JointStock Company, Member of the BOD of Vietnam National Financial Switching JointStock Company (Banknet) and Member of the BOD of the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) since In addition, he was also Vice Chairman and then Chairman of Lao Viet Bank (LVB). 6. MR. TRAN QUY TRUNG SENIOR EXECUTIVE VICE PRESIDENT Mr. Tran Quy Trung has been working in the banking sector for almost 30 years. He joined BIDV in In April 1997, he was promoted as Head of the Guarantee services Department till November 1999 when he became Head of Human Resources Department. In August 2004, he was appointed as Senior Executive Vice President. At present, he is also Member of the BOD of VID Public JointVenture Bank and Member of the Council of Vietnam Banks Association. 7. MR. PHAN DUC TU SENIOR EXECUTIVE VICE PRESIDENT Mr. Tu has been working in the banking sector for over 25 years. He joined BIDV in In February 1994, he was appointed as Executive Vice President, Quang Ngai Branch Deputy Manager, Executive Vice President, Quang Ngai Branch Manager in November 1998 and Senior Vice President, Head, Human Resources in March He was appointed as Senior Executive Vice President in June At present, he is also Vice Chairman of Lao Viet Bank, Member of the BOD of the Investment and Development Company of Cambodia (IDCC). 8. MR. TRAN THANH VAN SENIOR EXECUTIVE VICE PRESIDENT Mr. Tran Thanh Van has been working in the banking sector for over 25 years. He joined BIDV in He was appointed as Executive Vice President, Quang Nam Da Nang Branch Deputy Manager in October 1991 and Executive Vice President, Da Nang Branch Manager in April In September 2008, he was appointed as Senior Executive Vice President. At present, he is also Chairman of BIDV Expressway Development Company, Chairman of the Bank for Investment and Development of Cambodia, Chairman of Vung Ang Commerce and Ports JointStock Company, Member of the BOD of the Investment and Development Joint Stock Company of Cambodia (IDCC), Member of the BOD of Thach Khe Iron Joint Stock Company. 9. Mrs. NGO THI AT CHIEF ACCOUNTANT Mrs. Ngo Thi At has been working in the banking sector for over 30 years. She joined BIDV in From 1996 to 2002, she was Executive Vice President, Transaction Center I Deputy Manager. From 2003 to 2004, she held the position of Senior Vice President, Head, FinanceAccounting. She has been appointed as Chief Accountant since BIDV Annual Report BIDV Annual Report 21

11 BUSINESS PERFORMANCE 22 BIDV Annual Report BIDV Annual Report

12 ORGANIZATION CHART BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM SUBSIDIARIES ADMINISTRATIVE UNITS, REPRESENTATIVE OFFICES BANKING GROUP JOINTVENTURES AND AFFILIATES/ ASSOCIATES BIDV FINANCIAL LEASING COMPANY (BLC) BIDV INFORMATION TECHNOLOGY CENTER BRANCH/ TRANSACTION CENTER VID PUBLIC BANK ( WITH A MALAYSIAN PARTNER) BIDV FINANCIAL LEASING COMPANY II (BLC II) BIDV TRAINING CENTER (BTC) 107 BRANCHES TRANSACTION CENTER III LAO VIET BANK (WITH A LAOTIAN PARTNER) BIDV SECURITIES COMPANY (BSC) BIDV ASSET MANAGEMENT COMPANY (BAMC) BIDV INSURANCE COMPANY (BIC) REPRESENTATIVE OFFICE IN DANANG CITY REPRESENTATIVE OFFICE IN HOCHIMINH CITY REPRESENTATIVE OFFICE IN CAMBODIA VIETNAM RUSSIA BANK (WITH A RUSSIAN PARTNER) BIDV VIETNAM PARTNERS INVESTMENT MANAGEMENT COMPANY (WITH A US PARTNER) REPRESENTATIVE OFFICE IN MYANMAR BIDV TOWER JOINT VENTURE COMPANY ( WITH A SINGAPOREAN PARTNER) AFFILIATES/ ASSOCIATES (*) (*) Companies of which BIDV serves as a founding shareholder or controlling shareholder such as Vietnam Aircraft Leasing Company, Investment and Development Company of Cambodia (IDCC), Bank for Investment and Development of Cambodia (BIDC), Cambodia Vietnam Insurance Company (CVI), BIDV Expressway Development Company (BEDC), BIDV Financial Investment Joint Stock Company (BFI). 24 BIDV Annual Report BIDV Annual Report 25

13 HEAD OFFICE ORGANIZATION CHART BOARD OF DIRECTORS Supervisory Board Functional Committees BOARD OF MANAGEMENT Asset Liability Management Committee Credit Committee Other Committees (as needed) Wholesale Banking Retail Banking & Networks Treasury Risk Management Operations Finance & Accounting Business Support Corporate Banking Department Retail Products Development & Marketing Department Treasury Department Credit Risk Management Department Payment Centre Accounting Department Administrative Office Investment Department Branch Management Department Market & Operational Risk Management Customer Services Center Finance Department Human Resources Department Financial Institutions Department Card Centre Credit Management Department Trade Finance Operation Center MIS and ALCO Support Department Corporate Planning Department Corporate Products Development Department Legal Affairs Department Internal Control Department Premises & Facilities Management Department Public Relations & Brand Management Department Construction Project Management Department Representative Office in HCM City Technology Department Representative Office in Da Nang City Trade Union Equitization Project Management Department Party Office 26 BIDV Annual Report BIDV Annual Report 27

14 NETWORK EXPANSION & HUMAN RESOURCE DEVELOPMENT BIDV continues to affirm its strengths through the network expansion and human resource development. NETWORK EXPANSION In implementing the plan for network expansion for the period of , in the Bank opened 51 new transaction offices and conducted the network reorganization as required by the Decision No.13/QĐNHNN of the SBV. The names of Transaction Centre 1 and Transaction Centre 2 were changed into Transaction Centre 1 Branch and Transaction Centre 2 Branch, respectively; while that of Transaction Centre 3 remained unchanged. As at the end of, the Bank s network comprised 108 branches (including Transaction Centre 3), 312 transaction offices and 109 saving counters. In 2010, BIDV will continue to open 12 branches mainly located in the two centers, Hanoi and Ho Chi Minh City, and some other areas such as Dong Nai, Hau Giang, Hung Yen, Gia Lai, Binh Duong etc and reorganize the network of transaction offices. By 2010end, the Bank plans to have 120 branches and 483 transaction offices. The most striking feature in the network expansion is that while concentrating in the 2 key areas (Hanoi and Ho Chi Minh City) which account for over 50% of the system), the Bank s network has covered 63 provinces/ cities, spreading from crowded residential and urban areas to commercial and financial centers nationwide. Moreover, with such a network, the Bank is wellpositioned to develop retail banking services in the period Also in, BIDV conducted the classification of transaction offices based on their operational efficiency and growth potential. With nearly 1,000 ATMs and 1,000 POSs, BIDV has ranked the fourth in the banking system in terms of modern distribution network and is one of the two banks with the network throughout the country. In 2010, BIDV plans to increase the total number of ATMs to nearly 1,300, which should support the Bank s effort in increasing its market share in card services. In, connection with 4 other banks was made, giving a total of 16 connected banks through the Banknet for payment services. The Bank has also developed new ATMbased products for payments of telephone and utilities bills. Notably, the year has marked a milestone for the Bank with the issuance of VISA cards nationwide. HUMAN RESOURCE DEVELOPMENT BIDV has placed adequate emphasis on the recruitment and placement of qualified and professional staff for all positions and functional departments to ensure sufficient staff to meet the demands of business development and network expansion. At the end of, the total number of employees was 14,550, including 1,088 at the Head Office and 13,472 at branches and subsidiaries. The workforce is young with an average age of 32.7 in (compared to 33 in 2008) and 56.1% of employees was under 30 years of age. The quality of staff has been improved educationally and professionally. The graduated and postgraduated employees accounted for 84.3%, increased by 2.1% compared to those of Their professional and managerial competences have been improved to enable them to master modern banking technology and adapt to the competitive working environment. Reformed guidelines and policies were given in order to improve the recruitment quality. In, the Bank recruited 1,400 young staff who are well qualified to meet the requirements of the new era. The centralized recruitment process for Hanoibased branches continued to be adopted. This centralization has also been applied to branches in Ho Chi Minh City and those in the neighboring areas of Hanoi and Ho Chi Minh City. Besides, the Bank maintained its recruitment scheme for specific titles and positions (50 recruits) at the Head Office and recruited collaborators for the Card Centre on a pilot basis. The recruitment process was implemented in a transparent, public and wellorganized manner to improve staff quality as well as attract experienced and qualified staff. Therefore, passed candidates fundamentally have qualified background, which is an important factor for the Bank s development. Training plans and programs have been wellorganized and are closely related to the planning and standardization of human resources according to specific titles. In, BIDV organized 218 training courses for 14,676 attendees, of which training syllabus focused on basic and advanced managerial skills, operational skills in retail banking, and change management in adopting the new organizational structure. The Bank also sent 665 employees to participate in overseas studytours and seminars held by other training centers and foreign counterparties. In recent years, the top management has paid special attention to and closely directed the appointment and reappointment schemes, ensuring democracy, publicity, transparency and compliance in staff planning, training, appointment and rotation. Young staff have been given important tasks; thus management positions are filled as needed; and they have gradually adapted to the managerial and operational requirements. In, the Bank appointed and reappointed 116 managers at branches and subsidiaries and 23 leaders at the Head Office. In terms of incentives and rewards, the Bank has strictly followed the statutory policies for employees, encouraged branches and subsidiaries to improve employees physical and spiritual life. Pay and incentives have been gradually based on performance. In the past years, BIDV has always ensured a yoy growth in average income per capita. In addition, employee performance appraisals are undertaken annually, in which outstanding teams and individuals are recognized and recommended for special awards by the relevant authorities. 28 BIDV Annual Report BIDV Annual Report 29

15 INFORMATION TECHNOLOGY The year has recorded dramatic changes in the information technology (IT) activities of BIDV. The Bank has gradually affirmed its foothold in Vietnam s banking system and the region in terms of IT platform. REFORMATION OF IT MANAGEMENT In, BIDV has developed the IT strategy for the period 2015 and the orientation towards 2020 on the basis that the proposal, implementation and operation of IT systems should serve for achieving the business targets and supporting the equitization process. The IT plan is made as part of the overall IT strategy, and based on the need analysis and actual capacity in each period; and its implementation has been in a systematic and scientific manner. KEY IT PROJECTS IN The Project on Bank Modernization and Payment System (Phase II, a WB2 project) The WB2 project is funded by a loan from the World Bank. It includes many components which aim to improve operational safety and the backup system, develop products and modern distribution channels such as Internet Banking and Mobile Banking, strengthen security and training on management and application of modern ITbased banking operations. IT investments have been focused on applications which help develop and diversify services and distribution channels to make BIDV become a leading retail bank in the coming years. Meanwhile, the Bank has continued to invest into technical infrastructure and IT human resource development. The major components of the IT projects therefore focus on developing products, diversifying distribution channels, supporting business operation, and improving corporate governance, risk management and security. The Internet Banking and Mobile Banking Project The Internet Banking and Mobile Banking Project is underway. Once launched, it will provide customers with various utilities such as account inquiry, fund transfer, payments of loans, credit card payables and bills etc. Online registration for using a variety of services including cheque payment, L/C issuance, credit line application, loan disbursement etc; and online search for information on exchange rates, interest rates, services and products etc, are available. All services are provided in a quick, secure and costsaving manner through the Internet and connecting equipment such as computers or mobile phones. The Internet Banking and Mobile Banking system is not only a modern and efficient, but also secure distribution channel due to the application of encoding methods and twofactor verification. Other key projects Other key projects on Customer Relationship Management (CRM) and Call Center are also undertaken to improve customer management and service in a professional manner. The Management Information System (MIS) and Internal Knowledge Management Portal (KM) are upgraded for sharing technological and operational skills. At the same time, IT systems for risk management such as antimoney laundering, operational risk management and credit information are developed. In all projects, security has been paid special attention with the use of Public Key Infrastructure (PKI), twofactor verification, internet security tools etc, in accordance with the regional and international practices. The Bank has also modernized the IT systems for subsidiaries including BIDV Leasing Companies, BIDV Securities Company (BSC), BIDV Insurance Company (BIC) etc. Necessary support for IT has also been provided to the Bank s affiliates and jointventures such as LVB, VRB, BIDC, etc. In addition, the Bank continued to develop online connections with the State Treasury, General Department of Taxation and Vietnam Customs for tax and duties collection purposes. RECOGNIZATION The Bank s ITbased services have increasingly been recognized by customers and partners. In, the Bank continued to participate in the ICT Index ranking and won the firstclass among the commercial banks for the second time, and was the only bank with the firstclass rank in Vietnam ICT Index for three consecutive years (2007). Such results have indicated the Bank s effort in IT development and investments for supporting its business performance. 30 BIDV Annual Report BIDV Annual Report 31

16 Credit structure by type In VND billion In, Vietnam s commercial banks in general and BIDV in particular faced a lot of challenges due to the adverse influences in the business environment. However, with the objectives of maintaining sustainable development and preparing for the equitization process, BIDV has made attempts to achieve the targets. The analysis below shows its performance in terms of capital, asset quality, profitability and liquidity. PERFORMANCE ANALYSIS (UNDER IFRS) CAPITAL Item Owner s equity: Chartered capital 10,499 Capital to purchase fixed assets 1,916 Statutory reserves 3,922 Foreign currency translation reserve 165 Asset revaluation reserve (352) Retained earnings/accumulated losses (2,173) Total Owner s Equity 13,977 As at December 31st, the owner s equity reached VND 13,977 billion, equivalent to USD 779 million, up by 40% as compared to that of 2008, attributing to the increase of owner s equity/total assets from 4.1% in 2008 to 4.8% in and thus has helped enhancing the financial capacity of the Bank. This result has mainly been attributed to the increase of chartered capital by VND 1,743 billion to VND 10,499 billion and statutory reserves by VND 1,881 billion. High net profit also helped considerably reduce accumulated losses from previous years under IFRS due to the differences in loan loss provisions under the Vietnamese Accounting Standards (VAS) and IFRS. With the above improvement in the owner s equity, CAR (Capital Adequacy Ratio) reached 7.55% under IFRS and 9.53% (VAS) which was above the minimum 8% as required by the State Bank of Vietnam (SBV). ASSET QUALITY Total assets have grown with a rational structure: ,756 1,597 2, (2,509) 9,969 In VND billion 1, , (352) 336 4,008 Change 19.9% 20.0% 92.1% 95.7% 40% As at December 31st, total assets reached VND 292,198 billion, equivalent to USD 16.3 billion, which has enabled BIDV to maintain its second position in the domestic market behind the Vietnam Bank for Agriculture and Rural Development. Total assets increased by 20.5% compared to those of 2008 and were slightly lower than the average growth rate of 25% during 2005 due to their already large scale and the adverse impact in the business environment in. Loans and advances to customers accounted for approximately 68%, the largest proportion of total assets and generated the main source of income for the Bank. Item Commercial loans Financial lease Official Development Assistance (ODA) loans Trusted loans Statedirected and policy loans Frozen loans and loans pending for resolution Total outstanding loans before provisions for loan losses 193,962 2,878 8, , ,725 2,501 6, , ,982 Growth % 43, , ,420 29% 15% 38% 8% 39% 100% 28% Total outstanding loans before provisions for loan losses were VND 206,402 billion, increasing by 28% over those in 2008, mainly due to the increase of commercial loans which accounted for 95% of the total outstanding loans. The statedirected and policy loans decreased over years to only VND 755 billion, accounting for approximately 0.4%. Notably, there were no outstanding frozen loans and loans pending for resolution. The loan portfolio has been diversified into various sectors including infrastructure, processing industry, trading, service, tourism, agriculture forestry aquaculture, etc. Loans to stateowned enterprises made up 21%, nonstate enterprises (including limited companies, joint stock companies etc) 65%, foreign invested enterprises 3%, and individuals and households 10% of the loan portfolio. Improved credit quality: Loan classification under IFRS Item Standard Special Mention Substandard Doubtful Loss Total NPLs Provisions for loan losses /NPLs 159,918 32,108 3, , ,594 5, % 80.93% 16.25% 1.79% 0.44% 0.59% 100% 2.82% 118,837 31,452 2, ,472 4, % % 20.36% 1.83% 0.27% 0.61% 100% 2.71% Note: Total outstanding loans which were classified excluded ODA and trusted loans. In VND billion Change 41, ,122 1, % 4.11% 0.05% 0.17% 0.01% 0.11% Although the global economic downturn in left adverse influences on customers financial status and banking operation, the credit quality has considerably improved. The NPL ratio was maintained at a low level of below 3%: In, total outstanding loans increased by over VND 43,000 billion, a yearonyear increase of 28% but the NPL ratio was controlled at 2.82%, which slightly increased over that of The NPL ratio in was still at a low level, given the unfavorable economic conditions, and showed a decline against that of 3.98% in Standard loans to total outstanding loans remarkably increased from 77% in 2008 to 81% in, meanwhile Special Mention loans (inherent loans with high possibility of moving into NPLs) decreased to 16% from 20% in Provision coverage ratio (Provisions for loan losses/npls) was 163% in, a decline as compared to 199% in This indicates that provisions for loan losses have been sufficient for absorbing the NPLs, and the credit quality has been improved with declining provisions charged to expenses. 32 BIDV Annual Report BIDV Annual Report 33

17 The size, structure and quality of the lending activities have indicated the Bank s proper adoption of the credit policies on quality control, diversification and enhancement of credit risk management to ensure growth in parallel with quality control. PROFITABILITY Key Profit and Loss Indicators Item 1. Total assets 2. Owner s equity 3. Total operating income 4. Total operating expenses 5. Profit before provisions charged to expenses 6. Provisions charged to expenses 7. Profit before tax 8. Net profit for the year ,198 13,977 9,983 (5,248) 4,735 (1,539) 3,196 2, ,316 9,969 8,520 (3,292) 5,228 (3,087) 2,141 1,780 Amount 49,882 4,008 1,463 (1,956) 493 (1,549) 1, In VND billion Change Growth in line with efficiency and quality Together with the growth rate of 21% in total assets and 40% in the owner s equity, net profit increased by 42%, higher than the growth rate of total assets and owner s equity. Total operating income recorded at VND 9,983 billion, increasing by VND 1,463 billion, equivalent to 17% as compared to that in 2008, of which net interest and similar income reached VND 6,948 billion, and net noninterest income VND 3,180 billion. Operating expenses were maintained at 53% of total operating income, which was at a reasonable level as recommended by Moody s Investors Service. Provisions for loan losses were lower than those in the preceding year due to the low level of NPL ratio (below 3.0%). Profit before tax recorded at VND 3,196 billion, an increase by VND 1,054 billion. Accordingly, profitability ratios and income structure were as below: Profitability and income structure continued to change in a positive tendency: No. Item ROA (Aftertax profit/average total assets ) ROE (Aftertax profit/average owner s equity) Structure of income expenses Interest and similar income/ total operating income Noninterest income/ total operating income Recovery of off B/S loans/ total operating income Capital Adequacy CAR (IFRS) 0.94% 21.04% 70% 30% 5% 7.55% Percentage % 19.38% 21% 40% 17% 59% 9.4% 73% 27% 9% 6.62% 50% 49% 42% ROA and ROE have improved as compared to those in Income structure demonstrated some positive changes in that noninterest income has increased from 27% in 2008 to 30% in, of which net fee and commission income alone boosted from VND 1,001 billion, or 12% of total operating income in 2008 to VND 1,404 billion, or 14% in. Accordingly, the portion of interest and similar income reduced from 73% to 70%. CAR under IFRS was 7.55%, a sharp increase over that in LIQUIDITY The year witnessed lot of challenges in the business environment and macroeconomic policies which strongly influenced the funding sources, liquidity and growth of the commercial banks. Liquidity ratios Item 2008 Outstanding loans/ deposits (*) Liquid assets/ total liabilities Customer deposits and other amounts due to customers/ total liabilities Deposit growth rate 94.6% 7.1% 73.8% 11.2% 83.0% 7.9% 79.4% 27.3% Note: (*) Deposits include deposits from individuals and economic organizations, issued valuable papers, and excludes deposits of the Ministry of Finance, State Treasury and deposits of and loans from other credit institutions (including the funding source of foreign financial institutions and L/C refinancing). Since the beginning of, the SBV has loosened monetary policy and constantly cut down the base rate from 12% to 7% (till December, when it was increased to 8%) to tackle with the economic downturn. At the same time, the Government launched the interest rate subsidy program. Credits therefore grew faster than mobilized funds, which has caused difficulties in liquidity and tougher competition among banks in fund mobilization. All ratios of deposit growth rate, outstanding loan deposits, liquid assets/ total liabilities, customer deposits and other amounts due to customers/ total liabilities reduced against those of BIDV still ensured adequate liquidity and fund mobilization growth: BIDV set highest priorities for maintaining adequate liquidity and fund mobilization growth. Liquidity was managed through the strict control of cash inflows and outflows of the whole system on a daily basis. In addition, regular analyses, reviews, forecasts and judgements on market situations and liquidity scenarios were conducted, which helped the Bank to proactively and timely respond to various conditions. Even in the second half of the year when more challenges arose, BIDV always ensured adequate liquidity for the whole system as required by the SBV and ALCO and met the funding needs for business operation. Liquidity ratios by currency at monthend and quarterend were within limits as regulated by the SBV. Liquidity ratios as at December 31st : Equivalent in VND month 7 days VND USD EUR Regulations of the SBV Equivalent VND in VND USD EUR 4.87 Regulations of the SBV 1 The ratio of short term funds for medium and longterm loans has always been maintained below 30%, which is complied with Circular No. 15/TT NHNN. This ratio as at December 31st was 25.5%. To sum up, with the endeavors of all employees, BIDV could achieve the targets for growth, asset quality, profitability and liquidity, even in the context of tough business environment in. These results further enable the Bank to position itself for the equitization process in BIDV Annual Report BIDV Annual Report 35

18 KEY BUSINESS PERFORMANCE BANKING SERVICES In, net fee and commission income (excluding net gains from trading foreign currencies) of the Bank only was over VND 1,300 billion, increasing by nearly 35% compared to that of With the high growth rate achieved in recent years, BIDV has ranked the first in the banking system in terms of net fee and commission income since The average net fee and commission income per capita reached VND 97 million, a yoy increase of 20%, which indicates more efficient performance in banking services. No. Indicator Growth (%) Proportion (%) I II Fee and commission income Payment services Guarantee services Cash services Agent services Other Fee and commission expenses 32% 44% 20% 3% 17% 39% 11% 100% 45% 39% 1% 1% 14% Net fee and commission income (excluding net gains from trading foreign currencies) VND billion Guarantee services Guarantees are traditional services and have formed a competitive edge of the Bank. As at December 31st, guarantee fees were over VND 560 billion, accounting for 39% of the fee and commission income and growing by 20% as compared to that of Net outstanding guarantees in reached nearly VND 39,000 billion, a yoy increase of 22% (if payment commitments under L/Cs were included, total net outstanding guarantees and L/C payment commitments achieved VND 70,700 billion, an increase of 10% over those in 2008). 2. Payment services Payment services (including domestic and international payment, and trade finance) account for a large proportion in total fee and commission income. With the proportion of 45% of the Bank s net fee and commission income and a 44% yoy increase, payment services have played an important role in BIDV s banking services. Domestic payment volume was nearly VND 4,000 trillion in, up by 53% over that in International payment volume reached nearly VND 450 trillion as converted, an 87% yoy growth, of which the payment volume through the Western Union was USD 70 million, up by 13% against that in Trade finance: payments for exports and imports were approximately USD 1,200 million and USD 5,100 million, respectively. Accordingly, net fees from trade finance gained over VND 230 billion, growing by 51% over that in In addition to the traditional payment services, BIDV has provided some other payment services such as being the state budget collection agent within the framework agreement with the General Department of Taxation and Vietnam Customs, and the global cash management for Korean, Taiwanese, Malaysian and other providing foreign enterprises in Vietnam Other services Fee and commission income from other services (including card service, noncredit service, mobile banking BSMS, insurance, etc.) recorded at over VND 200 billion, growing by 39% over that in 2008 and accounting for 14 % of total fee and commission income. 36 BIDV Annual Report BIDV Annual Report 37

19 LENDING Credit growth Credit activities in were undertaken in an active, flexible and timely manner, which presented the Bank s leading role in implementing monetary policies, contributing to the stabilization of monetary market and macroeconomy, and also proved its responsiveness to the market movements and funding needs of the whole system. As at December 31st, total outstanding loans before and after provisions for loan losses were VND 206,402 billion and VND 198,979 billion respectively. Credit growth was closely controlled in line with credit quality. The Bank set priority to meeting the funding needs of production, exports and national pivotal projects in parallel with quality control to ensure safety and efficiency in lending. Besides, BIDV has effectively implemented the interest rate subsidy program, making contribution to the stabilization and growth in borrowers business. Credit quality In, BIDV continued to closely monitor credit quality under international practices with appropriate NPL reduction schemes. The NPL ratio under IFRS was 2.8% and notably, Special Mention loans recorded a sharp decline to 16% of total loans. This resulted from the Bank s effort in the improvement of credit quality control, especially in preventing new NPLs and reducing current NPLs. The credit portfolio has been regularly monitored to promptly identify customers who showed signs of financial weakness or unexpected changes which would lead to defaults. These risky loans were then transferred into the NPL group, and necessary actions were planned accordingly. INVESTMENTS Amid the unfavourable conditions of the economy in general and the securities market in particular, and the new limits on investments as imposed by the SBV in, the Bank focused on restructuring the investment portfolio, improving efficiency in the management of subsidiaries and associates, strengthening financial capacity for jointventures and deploying investments in pivotal projects only and as directed by the Government. As at December 31st, total investments were VND 6,422.8 billion, of which investments into subsidiaries reached VND 3,429.5 billion, accounting for 53.4% while stakes into jointventures valued at VND 1,226.6 billion and made up 19.1% of the portfolio. Investments into other entities were VND 1,766.7 billion, accounting for the remaining 27.5% of the portfolio. Most investments have medium and longterm tenors and will generate income after 35 years (beginning from ). Throughout the year, BIDV has also made adequate provisions for securities impairment losses as a result of portfolio revaluation in compliance with the current regulations. The Bank restructured the portfolio for nearly VND 170 billion, which helped improve capital adequacy and profitability and meet the investment limits as regulated by the SBV. As such, the investment performance substantially improved with total income from investments of VND 184 billion (excluding profits from subsidiaries), 2.2 times higher than that in In terms of structure, investments into BIDV s core businesses (finance, banking and insurance) and key projects directed by the Government accounted for 76.7% of the total portfolio and the remainder (23.3%) was placed in important industries such as energy, posts and telecommunications, chemical fertilizers, etc. During the year, in addition to the ongoing two key investments assigned by the Government, which are BIDV Expressway Development Joint Stock Company and Vietnam Aircraft Leasing Joint Stock Company, BIDV has expanded into Cambodia with the establishment of the IDCC to acquire PI Bank, restructured it comprehensively and renamed it into BIDC. Furthermore, IDCC has contributed capital to three other entities which are Cambodia Vietnam Foodstuff Company, Cambodia Fivestar International Fertilizer Company and CVI; and jointly prepared for the establishment of Cambodia Vietnam Securities Company. In 2010, Vietnam s economy has shown signs of continued growth; however, there are still many difficulties and challenges in the national and world economy. BIDV therefore will focus on its set objectives, i.e., continue to restructure the portfolio to ensure efficiency and compliance with the regulations by the SBV, concentrate on implementing the pivotal projects of the Government, and improve performance of the overseas subsidiaries and jointventures. 38 BIDV Annual Report BIDV Annual Report 39

20 As a leading financial institution in Vietnam, the Bank has always been committed to the corporate social responsibility (CSR). In, social security became one of the top priorities of the country, which called for the attention of the political system and contribution of the whole society. In this context, the Bank made breakthroughs in its participation into the social security and poverty reduction programs. CORPORATE SOCIAL RESPONSIBILITY The Bank s support for the social security programs focuses on upgrade of temporary shelters for the poor, healthcare, education and disaster relief. These are the key areas in implementing two out of eight Millennium Goals by the Vietnamese Government, which include poverty reduction and primary education development. With the budget of VND 302 billion, the Bank has developed a Project on Poverty Reduction and ProCommunity during 2010, which includes the following: SUPPORTING POOR DISTRICTS AS INDICATED IN RESOLUTION NO. 30A/2008/NQCP: The Bank has committed to support 5 out of 62 poor districts, namely Thuong Xuan (Thanh Hoa province), Ky Son (Nghe An province), Sop Cop (Son La province), An Lao (Binh Dinh province) and East Dien Bien (Dien Bien province) with a total amount up to VND 158 billion. The monies were utilized to upgrade 9,989 temporary shelters, build 102 new classrooms and 116 boarding rooms for pupils in the mountainous areas; and build or upgrade 17 healthcare centers under the national standards. ASSISTING VOCATIONAL TRAINING IN NORTHWEST, HIGHLAND AND SOUTHWEST REGIONS: The Bank contributed VND 30 billion in total (or VND 10 billion/region) to build vocational training colleges for ethnic minorities. PARTICIPATING IN SOCIAL SECURITY PROGRAMS IN OTHER POOR COMMUNES AND DISTRICTS NATIONWIDE: An amount of VND 92 billion taken from the Bank s social security fund and employees contribution was used to set up a Physical Support Fund to help poor people as follows: Support for the natural disaster relief: VND 7.2 billion; 41,700 clothes and blankets; 139,000 books and 139,000 notebooks. Upgrade of temporary shelters and support for healthcare and education: VND 22.8 VND billion. Participation in the Heart Operation Program for the poor children: VND 1 billion. Provision of 5,000 pairs of lifejackets for pupils in riverside areas and regions frequently suffering from natural disasters with total amount of VND 800 million. It is expected that by 2015 BIDV will contribute 20,000 pairs of lifejackets. Support for preserving and upgrading historical sites such as Vong An Binh (Phu Quoc Island), Thach Han River, Thanh Co ( Ancient Fort in Quang Tri province), Son My Historical Relics Area (Quang Ngai province) etc. BEING THE PIONEER AND CATALYST FOR DONATIONS FROM THE BUSINESS COMMUNITY FOR THE POOR REGIONS AND NEIGH BOURING COUNTRIES; HIGHLIGHTS INCLUDE: The support of VND 29 billion for 62 poor districts in the country to upgrade temporary shelters and schools with the contribution of 17,263 enterprises and individuals. The donation of USD 5,220,000 and 1,200 computers to support education, healthcare, clean water supply and relief aids for storm victims in the Kingdom of Cambodia. The provision of USD 3,590,000 and 200 computers to support the preservation of historical relics, education and healthcare and so on. Notably, the Bank supported construction of the sports village, Sea Games 25 and other historical cultural events between Vietnam and Laos. The donation of 500 computers and 8,000 notebooks (valued at USD 140,000) to support Cuban calamity victims; and The gift of 680 computers to Myanmar. 40 BIDV Annual Report BIDV Annual Report 41

21 PERFORMANCE OF SUBSIDIARIES BIDV SECURITIES COMPANY (BSC): In VND million No. Indicator Total assets Income from brokerage and investment dividends, of which: Brokerage fees and commissions Investment dividends Pretax profit 5,137, ,405 27, ,052 (516,363) Amount %/2008 3,084, ,572 61, , , % 11.4% 122.7% 116.0% In, BSC made a strong improvement after the downturn of the securities market in Taking advantages of the favorable market condition, BSC focused on feebased business, restructured the investment portfolio and the balance sheet towards a more reasonable and efficient structure. As at end, total income recorded at VND 619 billion, increasing by 11.4% in comparison with that in 2008, of which brokerage fees and commissions and investment dividends increased by 122.7% and 116% respectively. Pretax profit reached VND 436 billion and ROE was 82.4%. Total assets as at December 31st were VND 3,084 billion. In, BSC continued upgrading its IT system to facilitate online trading, phone trading, online inquiries, sms trading, online payment connection via banks, etc. The Company successfully transferred from IBS to BSS (a modern management software) and now is ready for online connection with the Vietnam Securities Depository and Hanoi Securities Trading Center. Besides, BSC proactively completed the legal framework and drafted the new organizational and incentives structures towards international practices as part of the preparation for the equitization process in BIDV Annual Report BIDV Annual Report 43

22 FINANCIAL LEASING COMPANY I In VND million No. Indicator 2008 BIDV INSURANCE COMPANY (BIC) No. Indicator Total assets Total premiums, of which: Principal insurance premium Reinsurance premium Indemnity ratio Pretax profit Principal insurance market share 1,746, , ,262 27,107 64% (76,879) 2.5% 1,813, , ,083 36,620 44% 80, % In VND million Amount %/2008 4% 37% 37% 35% 205% In, BIC made attempts to strengthen its insurance business and expand market share with total premiums of VND 406,703 million (or 116% of the target), an increase of 37% against that in Bancassurance sales revenue marked a yoy increase by 272%, accounting for 0.87% of total premiums. Pretax profit recorded at VND 80,680 million. Along with the acceleration of premiums, BIC developed some new products, namely Binh An (Safety) and An Sinh Toan Dien (Comprehensive Safety), which are distributed via the Bancassurance channel. BIC is currently developing other new products including guarantee insurance, aviation insurance, fullpackage of SME insurance and rubber plantation insurance etc. According to the statistics of the principal insurance market, BIC has maintained the 6th position among 28 nonlife insurers in Vietnam with a market share of 2.7% in (from 2.5% in 2008). So far, BIC has 19 branches and 40 regional offices of which 10 new regional offices were established in. BIC has also expanded into foreign countries by participating in the Lao Viet Insurance JointVenture Company (LVI) and serving as a main supporter for the operation of Cambodia Vietnam Insurance JointVenture Company (CVI) Due to the impact of the economic downturn and the fact that the Company was not subject to the Government s interest rate subsidy program like commercial banks, it faced a lot of difficulties in. However, it made attempts to promote leasing to other enterprises. Its outstanding leases to other enterprises as at December 31st recorded at VND 1,391 billion, a yoy increase of 3%. In, the financial leasees (mainly small and medium sized companies), especially those in marine transportation were badly affected by the market downturn, which significantly impacted the credit quality and profitability of the Company. FINANCIAL LEASING COMPANY II No Total outstanding leases, of which: Outstanding leases to other enterprises NPLs/Outstanding leases Provisions for lease losses Pretax profit ROE Indicator Total outstanding leases, of which: Outstanding leases to other enterprises NPLs/Outstanding leases Provisions for lease losses Pretax profit ROE 1,733,126 1,353, % 59,959 54, % ,309,446 1,147, % 42,590 28, % Amount 1,654,667 1,391, % 65,122 8, % Amount 1,621,589 1,486, % 106,783 30,437 %/ % 2.9% 8.6% 84.4% In VND million %/ % 29.6% 150.7% Like other leasing companies, the Financial Leasing Company II also faced various difficulties in. Though total outstanding leases maintained a yoy growth rate of 24%, reaching VND 1,622 billion as at December 31st, due to the economic downturn in general and the customers financial difficulty in particular, the credit quality and profitability of the Company drastically decreased in comparison with those in BIDV Annual Report BIDV Annual Report 45

23 BIDV ASSET MANAGEMENT COMPANY (BAMC) No. Indicator Total assets Loans received Recovered loans Pretax profit 62,497 13,169 7,723 61, ,950 In VND million BAMC was founded in 2001 and was responsible for receiving and settling offbalance sheet debts of the Bank. The initial chartered capital was VND 30 billion. After 6 years of operation, BAMC has basically completed the settlement of the NPLs of the Bank under Decision No. 149/2001/QĐTTg by the Prime Minister, making contribution to strengthening BIDV s financial capacity. In, BAMC completed restructuring its operational model based on the Restructuring Project approved by BIDV s Board of Management, in which the Company maintains its legal status and has narrowed its operation and staff scales. The recovered loans reached VND 883 million, equivalent to 6.7% and pretax profit of VND 2,950 million equivalent to 38% of that in BANK FOR INVESTMENT AND DEVELOPMENT OF CAMBODIA (BIDC) Amount % of % 6.7% 38% As whollyowned by the Investment and Development Company of Cambodia (IDCC), the Bank for Investment and Development of Cambodia (BIDC) was granted its business license on August 28th after the acquisition of the Prosperous Investment Bank (PI Bank). IDCC then restructured PI Bank, increased its chartered capital to USD 70 million and changed the name into BIDC. After 4 months of operation, BIDC has provided banking products and services to customers, which supports Vietnamese enterprises to invest into Cambodia, and Cambodian enterprises to import Vietnamese products. The Bank has affirmed its role as a bridge for the financial markets of the two countries. BIDC opened a branch in Ho Chi Minh City, Vietnam on December 26th. In USD thousand No. Indicator Total assets Mobilized funds Total outstanding loans Pretax profit 174, ,426 84, INVESTMENT AND DEVELOPMENT COMPANY OF CAMBODIA (IDCC) In order to facilitate the connection between the financial markets of Vietnam and Cambodia as guided by the Vietnamese Government, BIDV established IDCC as a whollyowned subsidiary. * Note: Data is consolidated from its subsidiaries(bidc, CVI). BIDV INTERNATIONAL HOLDINGS COMPANY Ltd. (BIDVI) In USD thousand No. Indicator Total assets Investments Profit after tax 199,345 75, IN, IDCC CONTRIBUTED CAPITAL TO FORM: The Bank for Investment and Development of Cambodia (with the chartered capital of USD 70 million). IDCC acquired the PI Bank of Cambodia, comprehensively restructured and changed the name into BIDC. BIDC s objective is to support Vietnamese enterprises to invest into Cambodia. Cambodia Vietnam Insurance JointVenture Company, a jointventure between IDCC and some enterprises in Cambodia with the chartered capital of USD 7 million with 80% (or USD 5.6 million) contributed by IDCC as a controlling shareholder. IDCC has also prepared for the establishment of, or capital contribution into other firms such as Cambodia Vietnam Foodstuff Company, Cambodia FiveStar International Fertilizer Company and CambodiaVietnam Securities Company. Besides, IDCC provides information and supports Vietnamese enterprises looking for investment and trade opportunities and their following activities in Cambodia. BIDVI was granted the Offshore Investment License by the Ministry of Planning and Investment of Vietnam on March 20th 2008 and the Business License by Hong Kong Authority on April 17th BIDVI has the chartered capital of USD 9 million and is 100% owned by BIDV. The Company s objectives are to raise and manage investment funds and provide financial advisory services for the purpose of mobilizing international funds to invest into Vietnam, thus supporting BIDV s integration into the international financial market in particular and the economic development of the country in general. However, the world financial crisis has caused a lot of obstacles to raising investment funds and providing investment banking services. Consequently, BIDVI in was in a hibernating status as stipulated by Hong Kong laws. In the coming time, when market conditions are more favourable, BIDVI may reactivate its operation as set in the initial plan. 46 BIDV Annual Report BIDV Annual Report 47

24 PERFORMANCE OF JOINTVENTURES VID PUBLIC JOINTVENTURE BANK LAO VIET BANK (LVB) In USD thousand No. Indicator 2008 Amount %/ Total assets Mobilized funds Of which: Funds mobilized from business entities and individuals Total outstanding loans Pretax profit NPLs/Outstanding loans ROE 288, , , ,888 9, % 18.20% 354, , , ,163 9, % 10.21% 22.93% 31.41% 21.33% 29.08% 5.79% In, VID Public JointVenture Bank (VPB) actively took various measures to cope with the economic changes after the crisis, including flexible interest rate policy within the limits or regulations by the SBV, reinforcement of marketing activities and loan quality control. As at December 31st, VPB has exceeded the targets for fund mobilization and outstanding loans. Its business has been developed in a sound, efficient and sustainable manner, which further supports economic cooperation between Vietnam and Malaysia. VPB has actively coordinated with two parent banks for marketing and providing overseas remittance services for Vietnamese laborers in Malaysia. After 18 years in operation, VPB has been considered one of the most effective jointventure banks in Vietnam. As at December 31st, with a network including the Head Office, 1 Transaction Center, 6 branches and 1 center specialized in automobile loans, VPB is one of the jointventure banks with the largest network in Vietnam. No. Indicator Total assets Funds mobilized from business entities and individuals Total outstanding loans Provisions for loan losses Pretax profit Aftertax profit ROA ROE 206, , ,500 5,661 1, % 4.20% In USD thousand Amount %/ , , ,480 5,733 2,407 1, % 13.28% 16.8% 24.2% 49.3% 1.27% 105.9% 191.6% In, LVB has achieved encouraging business results in that the Bank has met the targets in all aspects and performed as a bridge for promoting payment activities between Vietnam and Laos. Its pretax profit exceeded the target by 10%. The Bank served payments valued at billions of Lao Kip, thus meeting the demands for payment and banking services of the two countries enterprises, and making significant contribution to the stabilization of macroeconomy and monetary market of the Lao PDR and the trade and investment relations between the two countries. As at December 31st, with the Head Office and 4 branches in large cities of Vietnam and Laos, LVB has formed a complete payment network serving the payment needs of the VietLao business community. 48 BIDV Annual Report BIDV Annual Report 49

25 BIDVVIETNAM PARTNERS INVESTMENT MANAGEMENT JOINTVENTURE COMPANY (BVIM) No. Indicator 2008 In USD thousand Amount % of Total assets Total income Pretax profit After tax profit ROA ROE 2,800 2, % 35.4% 1,977 1, % 8.5% 71% 74% 16% 18% n/a n/a VIETNAM RUSSIA JOINTVENTURE BANK (VRB) Total assets Mobilized funds, of which Funds mobilized from business entities and individuals Total outstanding loans NPLs/Outstanding loans Pretax profit ROE 358, , , , % 3, % 368, , , , % 1, % In USD thousand No. Indicator 2008 Amount %/ % 2.36% 77.12% 71.23% In, VRB continued to gain high growth with positive net profit and initially built its brand name and prestige in Vietnam s business community. In particular, VRB has performed its role as a bridge for promoting payment activities between Vietnam and Russia, making contribution to strengthening investment, commercial and economic cooperation between the two countries by setting up a direct payment channel between Vietnam and Russia via the parent bank, VTB, in which transactions are denominated in USD, EURO and RUB. The Bank has supported investment promotion, introduced projects in Vietnam to potential Russian partners, coordinated with relevant authorities in supporting Vietnamese enterprises to export cat fish, aquacultural and agricultural products to Russia and participate in Vietnamese exports exhibition in Russia. BVIM currently manages two investment funds in Vietnam, namely the Vietnam Investment Fund (VIF) and Vietnam Investment Fund II (VIF II). VIF, with a net asset value of VND 1,358 billion, is a closedend fund with 22 investors which include large corporations and business groups in Vietnam. Its twin fund, VIF II, with a minimum targeted capital of USD 100 million, is also a closedend fund, designated exclusively for foreign investors in Japan, Europe and the USA to carry out indirect investments in Vietnam. In spite of the economic difficulties in, VIF II remained its capital of USD 30 million as committed by Japanese and US investors. At yearend, net asset value of VIF increased by 61% amid the VN Index increasing by 56.8% on a yoy basis. Net asset value of VIF II increased by 36% compared to the face value. In general, BVIM s investment funds have improved considerably throughout the year. BIDV TOWER JOINTVENTURE COMPANY (BIDV TOWER) BIDV Tower JointVenture Company was established in 2005 with an initial chartered capital of USD 13,102,000 between BIDV and a Singaporean partner. The JointVenture was set up to construct, operate and run the BIDV Tower which is located at 194 Tran Quang Khai Street, Hanoi. The 25storey Tower, designed as an A class office building, is also BIDV s premises. In, the Company proactively coordinated with consultants and speeded up contractors to complete the construction of the Tower at the end of. It has selected Savills as a professional and wellknown building management consultant to lease out this Tower. BIDV Tower is put into operation in 2010 with expected revenue of millions of USD per annum. The Tower is not only an outstanding point in the heart of Hanoi but also BIDV s pride in the process of developing BIDV Towers nationwide in the coming years. In, VRB opened its subsidiary in Moscow, Russia, which is Vietnam s first subsidiary in Russia, marking significant progress and confirming VRB s commitment in the two financial markets: Vietnam and Russia. VRB also established its Transaction Center, Khanh Hoa branch and 4 transaction offices, adding to its network which now comprises 01 Transaction Center, 04 branches, 08 Transaction offices and 01 subsidiary in Moscow. 50 BIDV Annual Report BIDV Annual Report 51

26 LAO VIET INSURANCE JOINT VENTURE COMPANY (LVI) No. Indicator Total assets Total premiums, of which: Principal insurance premium Reinsurance premium Pretax profit 3,165, , ,681 (205,616) In USD Amount %/2008 3,111, , ,280 82,073 (433,092) 1.7% 205% 179% (111%) Exchange rate: 1 USD = 8,500 LAK. LVI was founded and has officially operated since June 2008 with the chartered capital of USD 3,000,000. LVI was set up based on a jointventure agreement among Banque pour le Commerce Exterieur Lao (BCEL), LaoViet Joint Venture Bank (LVB) and BIDV Insurance Company (BIC) which contributed 29%, 20% and 51% of the capital, respectively. In, total premiums achieved USD 956,353, increasing by 205% compared to those of 2008, of which principal insurance premiums accounted for 92%. After nearly two years in operation, LVI has set up 3 regional sale departments in the North, Central Region and South and developed the distribution channel via agents throughout the Lao PDR to reach customers. CAMBODIA VIETNAM INSURANCE JOINTVENTURE COMPANY (CVI) In USD No. Indicators Total assets Insurance premiums, of which: Principal premium Reinsurance premium Aftertax profit 7,054,870 57,681 57,681 (54,588) CVI is the first jointventure between Vietnam and Cambodia in insurance business. With the business license granted on July 24th, CVI has officially operated since November 13th with the chartered capital of USD 7 million. CVI is 80% owned by IDCC. Total assets as at December 31st were USD 7,054,870. After 1.5 months in operation, CVI gained total premiums of USD 57,681, of which asset insurance premium accounted for 87%. As the JointVenture has just been put into operation whereas it has spent large expenses on the initial establishment, CVI has not gained profit yet. 52 BIDV Annual Report BIDV Annual Report 53

27 To complete and submit the detailed Equitization Plan to the Government for approval in the second quarter of 2010; arrangement, organizational structure, fiveyear business plan, Article on Association of BIDV Joint Stock Commercial Bank, and share issuance. In implementing the Government s policies on reforming stateowned enterprises, equitization is always considered an important task of the Bank, which should be carefully attended to for its successful reform. BIDV S EQUITIZATION SCHEME In, amid the world economic uncertainties and the Vietnamese Government s solutions to preventing the economic downturn; the Bank, together with other commercial banks, proactively implemented the economic stimulus package and monetary policies of the SBV, which has contributed to stabilizing the monetary market and supporting enterprises. Under these conditions, the Government agreed to defer the valuation of BIDV for equitization to December 31st (according to the Document No. 5060/VPCPĐMDN dated July 27th by the Government Office). To prepare for the equitization, BIDV has made attempts to improve its financial capacity and performance through: (i) continuing to be a leading financial services provider in Vietnam and expanding its overseas operation; (ii) strengthening financial capacity, resolving nonperforming loans, and improving service quality under international standards; (iii) reforming corporate governance, management and operation models; (iv) expanding the network in potential areas to improve competitiveness; (v) modernizing information technology to develop banking products and services; and (vi) improving information disclosure and transparency. To complete the Bank valuation under the net asset value (NAV) and other conventional valuation methods, and submit it to the State Bank of Vietnam for announcement of the corporate value in the third quarter of 2010; To select and offer shares to strategic investors before the IPO; the strategic sale should be completed in the fourth quarter of 2010; To sell shares to the employees under the approval and instructions of the Government; to complete legal procedures for transforming BIDV into a jointstock commercial bank in the first quarter of 2011; To prepare for the IPO as conducting the strategic sales; the IPO timing is flexible and determined subject to the specific conditions as follows: (i) After the strategic sales, the IPO timing will be determined subject to the market conditions and advice from the financial advisor (Morgan Stanley); or, (ii) To conduct the IPO in 2010 in case the strategic sale is not completed in Within the above timeline, BIDV now attempts to make necessary preparation for ensuring success and full compliance, which includes: Preparing documentation (i.e., legal documents, documents of assets, liabilities, long term investments, etc.) as required by the law; Selecting foreign strategic investors with the advice from Morgan Stanley, which includes the establishment of criteria for strategic investors under the guidance of the SBV, provision of information memorandum to potential strategic investors, decision on a shortlist, and nenegotiation with strategic investors. Getting wellprepared for the IPO at a proper time, which should include market assessment, drafting the offering circular (OC) and other information disclosure as regulated by the Ministry of Finance and the State Securities Commission. In 2010, two subsidiaries, namely BSC (BIDV Securities Company) and BIC (BIDV Insurance Company), will also be equitized in the second and third quarter of Their success will make positive contribution to the success of the Bank s equitization. With the abovesaid preparation, the determination and consensus of all staff within the Government s approval and instructions, the Bank s equitization will certainly be a success, which helps build BIDV into a diversified financial services group. The procedures and timeline of the Bank s equitization in 2010 as approved by relevant Ministries and Industries are expected as follows: PROCEDURES FOR EQUITIZATION: The selection and offer of shares to strategic investors through direct negotiations will be made prior to the domestic IPO; in which the price of strategic sales is independent of the average auction price of the IPO. Determining the corporate value using the NAV method which requires lists and classification of assets and liabilities and other obligations at the time of valuation. Determining the corporate value using the discounted cash flows and other conventional methods with the support from Morgan Stanley. TIMELINE FOR EQUITIZATION: Making the postequitization plan covering workforce 54 BIDV Annual Report BIDV Annual Report 55

28 2010 BUSINESS PLAN KEY BUSINESS OBJECTIVES: (i) To restructure the Bank in terms of assets, liabilities, customer base and income to ensure sustainable, stable and efficient growth; and compliance with the prudential regulations, especially on soundness and liquidity. (ii) To achieve the targets for 2010 and the fiveyear ( ) plan, which should create favorable conditions for implementing the fiveyear ( ) strategic plan. (iii) To make a significant shift so that BIDV will become a leading bank in retail banking and feebased income in Vietnam, and that the Bank can achieve the key performance indicators under international standards and practices by (iv) To make necessary preparation for the equitization scheme in KEY TARGETS FOR THE BANKING GROUP IN 2010 Scale targets Total assets growth: 15% 16%. Average fund mobilization growth: 17% 20%. Control of credit growth at a reasonable level to ensure compliance with the SBV s guideline (< 25%), of which retail credit grows at a minimum of 35%. Efficiency targets ROA: 1%. ROE: 15%. CAR: > 9%. Structure and quality targets NPLs: < 3%. KEY STRATEGIES IN 2010 (i) To be a pioneer in performing the key tasks of the banking sector as directed by the SBV Governor, and to make joint efforts in implementing the objectives set by the Government, which focus on ensuring stability, economic recovery and development and inflation control. (ii) To continue with the Bank s comprehensive restructuring by making utmost efforts to accomplish the 2010 business plan as the final year of the strategic plan, thus creating firm premises for implementing the strategic plan and helping define the Bank s development model. (iii) To continue with the adoption of the new organizational structure taking the equitization scheme into account, in connection with improving management quality and human resources to meet the requirements of running a jointstock commercial bank in the context international economic integration. (iv) To make special efforts to implement the equitization scheme of the Bank and its subsidiaries (BSC, BIC) successfully, to transform BIDV into a joint stock commercial bank towards building the Bank into a financial holding company with a parentsubsidiary structure. (v) To expand and make direct investments into potential markets in South East Asia. (vi) To improve risk management and control to ensure safety for the whole Group, which includes completing the organization model, improving quality of internal control and audit, and related rules. (vii) To continue with the social security programs and the special care for employees life of work. 56 BIDV Annual Report BIDV Annual Report 57

29 CONSOLIDATED FINANCIAL STATEMENTS 58 BIDV Annual Report BIDV Annual Report

30 Ernst & Young Vietnam Limited 14th Floor, Daeha Business Center 360 Kim Ma Street, Ba Dinh District, Hanoi Socialist Republic of Vietnam Tel: Fax: Reference: / INDEPENDENT AUDITORS REPORT To: The Board of Directors and Board of Management of Bank for Investment and Development of Vietnam We have audited the accompanying consolidated financial statements of Bank for Investment and Development of Vietnam ( the Bank ) and its subsidiaries, which comprise the consolidated statement of financial position as at 31 December and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in owner s equity and consolidated cash flow statement, a summary of significant accounting policies and other explanatory notes for the year ended as set out on pages from 3 to 89. Management s responsibility for the consolidated financial statements The Bank s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes designing, implementing, and maintaining internal control relevant to the preparation and fair whether due to fraud of error, selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to faud or error. In making those risk assessment, the auditors consider internal control relevant to the Bank s preparation and fair presentation of the consolidated financial statements in order expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Qualification We refer to Note 18 to the consolidated financial statements which states that the Bank holds Special Government Bonds ( the Bonds ) contributed by the Government of Vietnam ( GoV ) in 2003 to increase the Bank s chartered capital. Since the date of issue, the Bonds had been recognized by the Bank at the nominal value of 1,350,000. The recognition of the Bonds at the nominal value is not compliant with International Accounting Standard 39 Financial Instruments: Recognition and Measurement ( IAS 39 ), which requires the initial recognition of financial instruments at fair value. An exact measurement of the Bonds fair value, however, could not be determined due to the absence of an active market for the Bonds in Vietnam. Using the discounted cash flow method and based on the average aftertax interest rate applicable to other GoV bonds of 5.76% per annum, the Bond s fair value at the time of issue estimated at 961,550. This estimated fair value is lover than the recorded nominal value thereby indicating impairment in the value of the Bonds by an amount of 388,450. In addition, IAS 39 requires that the Bonds be subsequently recognized at amortized cost using the effective interest rate method less any allowance for impairment. On this basis, the amortized cost of the Bonds as at 31 December had been estimated to be 1,036,674 (2008: 1,022,337) which is lower than the carrying value of the Bonds of 1,350,000 at that date by an amount of 313,326. The Bank s accumulated losses account as at 31 December is, therefore also understated by the same amount. The consolidated financial statements, however, have not been adjusted or restated to reflect the estimated initial fair value of the Bonds at the time of issue, the estimated impairment in value of the Bonds at 31 December, and the effect of subsequently recognizing the Bonds at amortized cost in accordance with IAS 39. Opinion In our opinion, except for the effects of the matters discussed in the preceding paragraphs, the consolidated financial statements give a true and fair view of the financial position of the Bank and its subsidiaries as of 31 December, and of its financial performance and its cash flows of the year then ended in accordance with International Financial Reporting Standards. Hanoi, Vietnam 22 March, BIDV Annual Report BIDV Annual Report 61

31 CONSOLIDATED BALANCE SHEET as at 31 December In VND million CONSOLIDATED BALANCE SHEET as at 31 December In VND million Note IFRS VAS Note IFRS VAS ASSETS LIABILITIES AND OWNER S EQUITY Cash and cash equivalents on hand Balances with the State Bank of Vietnam ( SBV ) Current accounts with other banks Term deposits with and loans to other banks, net of allowance for impairment losses Derivative financial instruments and other financial assets Financial assetsheldfortrading Loans and advances to customers, net of allowance for impairment losses Of which: Loans and advances to customers Allowance for impairment losses Financial investmentsavailableforsale Financial investmentsheldtomaturity Investments in associates and jointventures Property and equipment Intangible fixed assets Financial lease Goodwill Deferred tax assets Other assets TOTAL ASSETS ,875,773 5,679,704 11,238,483 29,070, , ,979, ,073,912 (9,094,824) 29,766,004 2,246,414 1,863,177 1,198, , ,640 10, ,429 6,986, ,197,734 2,303,873 12,620,934 3,388,992 26,384,623 3,557 2,140, ,175, ,522,200 (8,346,408) 30,001,819 2,350,850 1,642,421 1,002, , ,203 38,222 5,255, ,315,634 2,875,773 5,679,704 11,238,483 28,959, , ,999, ,401,908 (5,402,474) 29,070,837 2,406,414 3,228,124 1,198, , ,640 6,747 8,714, ,432,087 2,303,873 12,620,934 3,388,992 26,230,741 3,557 2,025, ,870, ,982,520 (4,112,475) 29,044,056 2,350,850 2,778,618 1,002, , ,203 6,894, ,519,678 LIABILITIES Borrowings from the Government and SBV Current accounts from other banks Term deposits and borrowings from other banks Customer deposits and other amounts due to customers Valuable papers issued by the Bank Debt issued and other borrowed funds Derivative financial instruments and other financial liabilities Current enterprise income tax payable Deferred enterprise income tax Other liabilities TOTAL LIABILITIES OWNER S EQUITY Chartered Capital Capital to purchase fixed assets Statutory reserves Foreign currency translation reserve Availableforsale asset revaluation reserve Retained earnings/ Accumulated losses TOTAL OWNER S EQUITY TOTAL LIABILITIES AND OWNER S EQUITY 8 22,975, ,680 14,215, ,828,078 16,462,471 28,373, , ,378 55,149 5,842, ,220,486 10,498,568 1,916,096 3,921, ,449 (351,703) (2,173,041) 13,977, ,197,734 17,109,318 1,414,214 7,405, ,290,689 18,251,809 15,408, ,071 28,686 6,176, ,346,961 8,755,818 1,596,870 2,041,125 84,329 (2,509,469) 9,968, ,315,634 22,931, ,680 13,898, ,280,394 16,017,821 28,150, ,915 9,666, ,792,757 10,498,568 1,916,096 4,201, , ,894 17,639, ,432,087 16,985,613 1,414,214 7,349, ,396,947 17,650,692 15,130,369 11,108, ,035,665 8,755,818 1,596,870 2,088,791 84, ,205 13,484, ,519, BIDV Annual Report BIDV Annual Report 63

32 CONSOLIDATED INCOME STATEMENT for the year ended 31 December In VND million CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December In VND million Note IFRS VAS IFRS VAS CASH FLOWS FROM OPERATING ACTIVITIES Interest and similar income Interest and similar expenses NET INTEREST AND SIMILAR INCOME Fee and commission income Fee and commission expenses Net fee and commission income Net gain from trading foreign currencies Net gain/(loss) from trading securities Net profit/(loss) from shares in associates & joint ventures Net gain from other operating activities TOTAL OPERATING INCOME Credit loss expenses for loans to customers Credit loss expenses for loans to banks Recovery of loans writtenoff previously charged to the allowance for impairment losses Impairment losses for heldtomaturity investments Impairment losses for financial investments Reversal of provision for credit losses NET OPERATING INCOME Payroll and other staff costs Depreciation and amortization charges Other operating expenses TOTAL OPERATING EXPENSES PROFIT BEFORE TAX Current enterprise income tax expenses Deferred enterprise income tax NET PROFIT FOR THE YEAR ,183,619 (14,235,364) 6,948,255 1,968,238 (564,112) 1,404, , , , ,094 9,517,314 (1,250,470) (71,129) 466,006 (160,000) (57,690) 8,444,031 (3,480,790) (344,320) (1,423,084) (5,248,194) 3,195,837 (787,968) 111,658 2,519,527 22,124,352 (15,895,605) 6,228,747 1,260,454 (257,566) 1,002, ,779 (722,912) (7,588) 429,407 7,721,321 (2,404,798) (141,430) 799,435 (541,118) 5,433,410 (1,976,002) (310,972) (1,004,746) (3,291,720) 2,141,690 (371,213) 9,536 1,780,013 21,209,756 (14,235,364) 6,974,392 1,968,238 (564,112) 1,404, , , , ,935 9,687,959 (2,121,251) (71,358) 466, ,327 8,141,683 (2,708,988) (344,320) (1,482,906) (4,536,214) 3,605,469 (787,968) 2,817,501 22,139,155 (15,903,047) 6,236,108 1,260,454 (257,566) 1,002, ,779 (839,004) 119, ,500 7,570,430 (2,574,523) (144,497) 799, ,505 5,816,350 (1,876,002) (310,972) (1,260,858) (3,447,832) 2,368,518 (371,213) 1,997,305 Interest and similar income receipts Interest and similar expense payments Fee and commission receipts Net gain from trading foreign currencies Recovery of bad debts previously writtenoff Net gain from securities and other activities Payments to employees and suppliers Tax paid Net cash flows from operating profit before changes in net operating assets (Increase)/decrease in operating assets Placements with and loans to other banks Investment securities Derivative financial instruments and other financial assets Loans and advances to customers Bad debts writtenoff Other assets Increase/(Decrease) in operating liabilities Borrowings from the MOF and SBV Term deposits and borrowings from other banks Debt issued and other borrowed funds Derivative financial instruments and other financial liabilities Customers deposits and other amounts due to customers Reserve utilization Other liabilities Net cash flows from/(used in) operating activities 21,051,296 (15,606,683) 1,404, , , ,390 (4,611,883) (423,728) 2,783,390 3,844, ,693 3,557 (45,652,176) (1,849,948) 7,934,253 2,678,639 11,387, ,915 23,883,446 (2,162) (472,374) 5,563,043 21,631,244 (15,304,376) 1,002, ,779 50, ,477 (2,957,019) (477,570) 5,050,202 2,311,464 (4,799,922) 28,086 (30,417,291) 279,837 1,896,990 1,091,231 8,170,634 28,061,246 2,818,983 14,491,460 21,051,296 (15,606,684) 1,404, , , ,848 (4,131,535) (423,728) 3,094, ,155 (3,305,319) 3,557 (45,419,388) (384,736) (1,779,180) 5,945,454 5,778,989 11,387, ,915 23,883,447 (542,333) (674,863) (1,624,396) 21,646,047 (15,304,376) 1,002, ,779 50, ,676 (2,679,100) (477,570) 5,328,123 1,113,598 (2,876,422) 28,086 (28,998,967) (1,418,326) 279,837 (1,243,419) 798,260 8,170,634 28,061,246 (287,238) 2,818,983 11,774, BIDV Annual Report BIDV Annual Report 65

33 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December In VND million SIGNIFICANT NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNDER IFRS IFRS VAS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of fixed assets and construction in progress Proceeds from disposal of premises and equipment Payments for equity investments in associates & joint ventures Dividends received during the year Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Additional capital injection from the Government Capital increase from recovery of bad loans previously writtenoff by the Bank according to the Government s Decision Capital increase from receipts of interest from Special Government Bonds Utilization of reserves during the year Net cash flows from financing activities Net increase/ (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year (537,520) (24,794) 156,896 (405,418) 1,696,700 44,550 1,741,250 6,898,875 19,925,844 26,824,719 (703,873) 5,216 (793,907) 102,728 (1,389,836) 19, ,435 44,550 (9,319) 853,897 13,955,521 5,970,323 19,925,844 (537,520) (74,664) 156,896 (455,288) 1,696,700 44,550 1,741,250 (338,434) 40,703,826 40,365,392 (703,873) 5,216 (767,071) 102,728 (1,363,000) 19, ,435 44, ,216 11,274,610 29,429,216 40,703,826 Basic of preparation The Bank maintains its records in Vietnam Dong and prepares its consolidated financial statements in millions of Vietnam Dong ( ) in accordance with the Law on Credit Institutions, Law on Amendment and Addition to a Number of Articles in the Law on Credit Institutions and the Vietnamese Accounting Standards ( VAS ) and Vietnamese Accounting System for Credit Institutions. The Bank also prepares a set of consolidated financial statements in accordance with International Financial Reporting Standards ( IFRS ). The accompanying consolidated financial statements prepared in accordance with IFRS differ from the consolidated financial statements issued for statutory purposes in Vietnam in that they reflect certain adjustments, not recorded in the Bank s VAS records, which are necessary to present the financial position, results of operations, cash flows and changes in owner s equity of the Bank in accordance with IFRS except for accounting for impairment on Special Government bonds (under IAS 39 Financial Instruments: Recognition and Measurement). A reconciliation of the retained earnings account per consolidated financial statements prepared in accordance with VAS to the accumulated losses account per IFRS consolidated financial statements is presented in Notes to the consolidated financial statements under IFRS. Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at and for the year ended 31 December each year. The financial statements of the subsidiaries are prepared for the same reporting year as the parent entity, using consistent accounting policies. All intergroup balances, transactions, income, expenses, profits, and losses resulting from intragroup transactions are eliminated in full. The financial statements of the Bank s subsidiaries are fully consolidated from the date when control is transferred to the Bank. Control is achieved where the Bank has the power, directly or indirectly, to govern the financial and operating polices of an entity to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal, as appropriate. Impairment losses on loans and advances The Bank and its subsidiaries review significant loans and advances at each reporting date to assess whether an impairment loss should be recorded in the consolidated income statement. In particular, judgment by management is required in the estimation 66 BIDV Annual Report BIDV Annual Report 67

34 of the amount and timing of future cash flows when determining the impairment loss. In estimating these cash flows, the Bank makes judgments about the borrower s financial situation and the net realizable value of collateral. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Loans and advances that have been assessed individually and found not to be impaired and all individually insignificant loans and advances are then assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision should be made due to incur loss events for which there is objective evidence but whose effects are not yet evident. The collective assessment takes account of data from the loan portfolio (such as credit quality, levels of arrears, credit utilization, loan to collateral ratios etc.), concentrations of risks and economic data (including level of unemployment, country risk, and the deterioration in cash flows). Recognition of income and expense Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized. Recognition of interest and similar income and expense For all financial instruments measured at amortized cost, interest bearing financial assets classified as availableforsale and financial instruments designated at fair value through profit or loss, interest income or expense is recorded using the EIR, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Bank revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original EIR and the change in carrying amount is recorded as Other operating income. However, for a reclassified financial asset for which the Bank subsequently increases its estimates of future cash receipts as a result of increased recoverability of those cash receipts, the effect of that increase is recognized as an adjustment to the EIR from the date of the change in estimate. Once the recorded value of a financial asset of a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original effective interest rate applied to the new carrying amount. Fee and commission income The Bank earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories: Fees income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include investment fund fees, custodian fees, fiduciary fees, commission income, credit related fees, asset management fees, portfolio and other management fees, and advisory fees. Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party such as the arrangement of the acquisition of shares or other securities or the purchase of sale of businesses are recognized on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognized after fulfilling the corresponding criteria. Dividend income Dividend income is recognized when the Bank s right to receive the payment is established. Net income from trading securities Results arising from trading activities include all gains and losses from changes in fair value and related interest income, expense (if any) and dividends for financial assets and financial liabilities held for trading. Employee benefits Post employment benefits Post employment benefits are paid to retired employees of the Bank by the Vietnam Social Insurance which belongs to the Ministry of Labour and Social Affairs. The Bank is required to contribute to these post employment benefits by paying social insurance premium to the Vietnam Social Insurance at the rate of 15.00% of an employee s basic salary on a monthly basis for their working period. The Bank s employees retire due to staff rearrangement are paid one month of their basic salary for one working year (twelve months) and a half of their monthly basic salary for each month retired before retirement age (with the maximum of 30 months). These amounts are recorded on the Bank s reserve for retrenchment. Voluntary resignation and retrenchment benefits Voluntary resignation: According to Article 42 of Labor Law amended on 2 April 2002, the Bank has the responsibility to pay voluntarily resigned employees a half of monthly basic salary for each working year and any allowances (if any). Retrenchment benefits: According to Article 17 of Labor Law, the Bank has the responsibility to pay allowance for employees unemployed due to changes in organizational structure or technology. In this case, the Bank has the responsibility to pay retrenchment benefits of one month of basic salary for each working year. The minimum of retrenchment benefit is equivalent to employees two months of salary. Increase or decrease in the balance of reserve account is recorded in the administration expense in the period. Although obligations stipulated in Article 17 and 42 are compulsory, the implementation of these obligations should comply with the detailed guidance of the Ministry of Finance in guidance circulars. According to Circular No. 64/1999/TTBTC dated 7 June 1999 and Circular No. 82/2003/TTBTC dated 14 August 2003 of the Ministry of Finance in replacement of Circular No. 64, banks have to calculate retrenchment benefits of employees based on 3.00% of employees basic salary. In addition, the balance of retrenchment reserve previously created as 10.00% of profit after tax less addition to chartered capital in accordance with Circular 64 is transferred to retrenchment reserve for employees in accordance with Circular 82. Unemployment insurance reserve: According to Social Insurance Law and Decree No. 127/2008/NDCP dated 12 December 2008 of the Government, since 1 January, the implementation of unemployment insurance came into effect. Accordingly, employees pay 1.00% of their salary, employers pay 1.00% of salary reserve of those participating in unemployment insurance, and the Government provide 1.00% of salary reserve of those participating in unemployment insurance from the state budget. 68 BIDV Annual Report BIDV Annual Report 69

35 2. FINANCIAL ASSETSHELDFORTRADING 4. FINANCIAL INVESTMENTS HELDTOMATURITY BIDV Annual Report Debt securities Listed Nonlisted Equity securities Listed Nonlisted 3.FINANCIAL INVESTMENTS AVAILABLEFORSALE Details of the Bank s availableforsale securities as at 31 December are as follows: Debt securities Equity securities Debt securities Details of debt securities held by the Bank as at 31 December are as follows: Government securities Debt securities issued by other local financial institutions Debt securities issued by local companies Total Equity investments Details of equity investments in other entities held by the Bank as at 31 December are as follows: Equity investments in listed shares Equity investments in OTC traded shares Other equity investments Cost 330, , , , ,872 1,089,186 Cost 28,800,652 1,868,816 30,669,468 Cost 712, , ,047 1,868,816 Fair value 309, , , , , ,438 Fair value 28,235,081 1,530,923 29,766,004 Fair value 18,792,945 3,529,482 5,912,654 28,235,081 Fair value 536, , ,047 1,530,923 Cost 761, ,242 27,603 1,847,966 1,403, ,430 2,609,811 Cost 28,602,776 2,093,049 30,695, Cost 700, , ,811 2,093,049 Fair value 876, ,986 27,603 1,263, , ,093 2,140,084 Fair value 28,428,871 1,572,948 30,001,819 Fair value 22,405,298 1,829,731 4,193,842 28,428, Fair value 462, , ,811 1,572,948 Special Government Bonds (*) Education Bonds Municipal bonds issued by People s Committee of Dong Nai Province Treasury bills issued by State Treasury of Dien Bien province Capital construction Bonds Treasury bills issued by State Treasury of Vung Tau province Bonds issued by business entities Impairment losses (*) Excluding the Special Government Bonds recorded at face value 5.LOANS AND ADVANCES TO CUSTOMERS, NET OF ALLOWANCE FOR IMPAIRMENT LOSSES Loans to local business entities and individuals Discounting valuable papers Receivables from financial lease Compulsory loans to customers Official Development Assistance (ODA) loans Statedirected and stateplanning loans Trusted loans Loans to overseas entities and individuals Frozen loans and loans pending for resolution Accrued interest for loans to customers Less: Allowance for impairment losses Commercial loans in VND Commercial loans in FC (*) Short term: 6.50% p.a. to 8.00% p.a. Medium and long term: Sibor % p.a. to 3.50% p.a. Face value 1,350, ,423 30, , ,000 2,178,834 Amortised cost 1,350, ,828 32, ,115 5, ,449 2,406,414 (160,000) 2,246, ,262,117 2,320,388 2,877,868 1,671 8,267, , , , ,401,908 1,672, ,073,912 (9,094,824) 198,979,088 Face value 1,350, ,423 30, ,000 2,172,423 Amortised cost 1,350, ,902 32, ,505,987 3,218,964 2,500, ,009,379 1,245, ,000 1, ,982,520 1,539, ,522,200 (8,346,408) 154,175, ,489 2,350,850 2,350, Interest rate % per annum to to 7.50 Interest rate % per annum to (*) BIDV Annual Report 71

36 Commercial loans comprise shortterm, mediumterm and longterm loans including syndicated loans denominated in both VND and USD. Statedirected and stateplanning loans are loans provided by the Bank to specific entities and projects according to Development Plans under the instructions of the Government. These loans are respectively funded by borrowings and trust funds from the SBV and the MOF. The SBV and MOF determine interest rates for these loans. Credit loss expenses in accordance with statutory requirements Credit loss expenses reverted in the year in accordance with IFRS Credit loss expenses in the year in accordance with IFRS ,941,153 (690,683) 1,250,470 2,412,085 (7,287) 2,404,798 ODA loans consist of loans to customers funded by official development programs through the MOF. The Bank acts as a loan administration agency in this arrangement. Accordingly, the Bank does not bear any credit risk in relation to these loans. As stated in the agreements with ODA donors and the MOF, any default by the borrowers will be reported to the ODA donors and the MOF for resolution. Any other loans funded by official development programs where the Bank has to bear full credit risk in accordance with the agreements with the ODA donors and the MOF are classified as commercial loans. 6. ALLOWANCE FOR IMPAIRMENT LOSSES Details of the credit loss expenses charged to the consolidated income statement in the year are as follows: Credit loss expenses in accordance with statutory requirements Recovery from bad debt writtenoff Credit loss expenses in the year in accordance with IFRS 1,250,470 (466,006) 784, ,404,798 (799,435) 1,605,363 The grading of the loan portfolio as at 31 December was as follows: Risk classification Current Special Mention Substandard Doubtful Loss Add: Official Development Assistance loans Trusted loans considered as low risk and fully recovered after 31 December Balance as at 31 December Principal 159,917,768 32,108,407 3,531, ,493 1,172, ,594,780 8,267, , ,401,908 Allowance amount 5,997,073 1,439, ,838 1,046,726 9,094,824 The grading of the loan portfolio as at 31 December 2008 was as follows: Ratio of allowance/ outstanding balance % Changes in the allowance for impairment losses consist of the followings: Balance at 1 January Allowance for impairment losses charged to expenses Bad debts written off Balance at 31 December 8,346,408 1,250,470 (502,054) 9,094, ,387,810 2,404,798 (446,200) 8,346,408 Details of the credit loss expenses charged to the consolidated income statement in the year are as follows: Risk classification Current Special Mention Substandard Doubtful Loss Add: Official Development Assistance loans Trusted loans considered as low risk and fully recovered after 31 December 2008 Balance as at 31 December 2008 Principal 118,837,481 31,452,426 2,832, , , ,473,141 6,009, , ,982,520 Allowance amount 5,523,087 1,666, , ,107 8,346,408 Ratio of allowance/ outstanding balance % BIDV Annual Report BIDV Annual Report 73

37 7.INVESTMENTS IN ASSOCIATES AND JOINTVENTURES Balance at 1 January Additional investments in the year Profit/(loss) share in associates and joint ventures using equity method Foreign exchange adjustments (*) Less: Dividend received during the year Decrease in investments during the year Balance as at 31 December 8. CUSTOMER DEPOSITS AND OTHER AMOUNTS DUE TO CUSTOMERS Analysis by types of deposits Demand deposits Demand deposits in VND Demand saving deposits in VND Demand deposits in FC Demand saving deposits in FC Term deposits Term deposits in VND Term saving deposits in VND Term deposits in FC Term saving deposits in FC Deposits for specific purpose Deposits for specific purpose in VND Deposits for specific purpose in FC Accrued interest expenses Deposits from corporates Stateowned enterprises Nonstate owned enterprises and others Foreigninvested enterprises Deposits from individuals Other deposits Investments in joint ventures 1,398,335 94, ,040 47,725 (64,057) 1,603,974 49,256,624 40,509, ,614 8,612,692 21, ,708,384 60,007,233 48,128,651 13,868,321 12,704,179 3,315,386 1,294,377 2,021, ,280,394 1,547, ,828,078 Analysis of customer deposit portfolio by types of customers ,804,276 40,742,844 43,754,709 5,306,723 74,231,968 23,244, ,280,394 Investments in associates 244, , ,203 Total 1,642,421 95, ,159 47,725 (64,057) 1,863,177 (*): The foreign exchange adjustments incurred due to the translation of the joint ventures financial statements from USD to VND for the purpose of equity accounting the investments in joint ventures into the Bank s consolidated financial statements. 44,936,968 32,771, ,564 11,955,425 11, ,267,125 57,936,949 32,418,466 13,574,505 11,337,205 3,192,854 1,333,973 1,858, ,396,947 2,893, ,290, ,256,665 33,108,262 47,013,692 8,134,711 58,006,710 17,133, ,396, NET INTEREST AND SIMILAR INCOME Interest and similar income Interest income from deposits Interest income from loans to customers Interest income from finance lease Interest income from availableforsale securities Interest income from heldtomaturity securities Income from other credit activities Interest and similar expenses Interest and similar expenses from deposits Interest and similar expenses from borrowings Interest expenses from issuing valuable papers Interest expenses from finance lease Expenses from other credit activities 10. NET FEE AND COMMISSION INCOME Fee and commission income from Settlement services Guarantee activities Treasury activities Agent services Insurance services Other fees and commission Fee and commission expenses from Settlement services Treasury activities Post and Telecommunication fees Agent services Insurance services Other fee and commission expenses Net fee and commission income 1,210,481 17,190, ,306 2,211,114 75, ,872 21,183,619 11,616, ,722 1,939, ,651 14,235, , ,619 16,968 13, , ,551 1,968,238 (27,997) (50,289) (39,960) (566) (324,500) (120,800) (564,112) 1,404, ,637,868 18,186, ,539 1,725, ,452 1,190 22,124, ,422,004 1,706,097 1,709,008 58,496 15,895, , ,665 16,505 39, , ,397 1,260,454 (23,103) (36,534) (30,211) (14,406) (135,345) (17,967) (257,566) 1,002, BIDV Annual Report BIDV Annual Report 75

38 11. NET GAIN FROM TRADING FOREIGN CURRENCIES Income from trading foreign currencies Income from foreign exchange spot transactions Income from derivative financial instruments Expense from trading foreign currencies Expenses from foreign exchange spot transactions Expenses from derivative financial instruments Net gain from trading foreign currencies Income from trading securities Expenses from trading securities Changes in fair value of trading securities Net gain/(loss) from trading securities 771,172 91, ,444 (390,611) (262,967) (653,578) 208, NET GAIN/(LOSS) FROM TRADING SECURITIES 341,558 (192,587) 361, , , ,288 1,256,730 (340,593) (125,358) (465,951) 790, ,863 (106,538) (687,237) (722,912) Reference: / INDEPENDENT AUDITORS REPORT To: The Board of Directors and Board of Management of Bank for Investment and Development of Vietnam Ernst & Young Vietnam Limited 14th Floor, Daeha Business Center 360 Kim Ma Street, Ba Dinh District, Hanoi Socialist Republic of Vietnam Tel: Fax: We have audited the accompanying consolidated balance sheet of the Bank for Investment and Development of Vietnam ( the Bank ) and its subsidiaries as at 31 December, the consolidated income statement, consolidated statement of retained earnings, the consolidated cash flow statement for the year then ended and the notes thereto ( the consolidated financial statements ) as set out on pages 2 to 87. These consolidated financial statements are the responsibility of the Bank s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Basis of Opinion We conducted our audit accordance with Vietnamese and International Standards on Auditing applicable in Vietnam. These standards require that we plan and perform the audit to obtain reasonable assurance to determine whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the accompanying consolidated financial statements, in all material respects, give a true and fair view of the financial position of the Bank and its subsidiaries as at 31 December, the Accounting Standards and System for Credit Institutions and comply with other relevant statutory requirements of the State Bank of Vietnam. 13.EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE Other than as disclosed elsewhere in these consolidated financial statements, at the date of this report, there were no events, which occurred subsequent to 31 December that significantly affected the financial position of the Bank as at 31 December. Ernst & Young Limited 76 BIDV Annual Report Vo Tan Hoang Van Deputy General Director Registered Auditor Certificate No: 0264/KTV Hanoi, Vietnam 15 March 2010 Vo Xuan Minh Auditor incharge Registered Auditor Certificate No: 0923/KTV BIDV Annual Report 77

39 NETWORK 78 BIDV Annual Report BIDV Annual Report