SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness No.: /2014/BC-TPB.BDH
Hanoi, dated 25 March 2014
PERFORMANCE REPORT, BUSINESS INDICATORS 2013
AND BUSINESS PLAN 2014
The Board of Management would like to submit to the Board of Directors Performance Report & Business
Indicators 2013 and Business Plan 2014 of Tien Phong Commercial Joint Stock Bank with the following
specific contents:
I. Overview of economy and banking sector in 2013 II. Performance results and business indicators in 2013 1. Highlights of the Bank’s Performance results
2. The main financial indicators in 2013 3. Outcomes of specific activities III. Business plan in 2014 IV. Conclusion
I. Overview of the Economy and Banking Sector in 2013 1. General Economic Background
In 2013, the world economy had positive signs but the growth rate was still lower than that in 2012. The global financial market was relatively stable, many countries continued to maintain a loose monetary policy to support economic growth in condition of low inflation. In Vietnam, the macro economy has developed in accordance with the expected trend indicated by government’s policies and solutions from the beginning of the year. Inflation was controlled at lower level than that of last year, CPI increased by 0.51% in December compared to the previous month and by 6.04% vs. December 2012; and the average index of 2013 was 6.6% higher than that in 2012. Economic growth for the whole year reached 5.4%; industrial production has been changed positively, inventory has slow down, business development situation has improved. Exchange rate and the foreign exchange market have been basically stable, interest rates continued to fall, still ensuring targets of controlling inflation and stabilizing the money market, the liquidity of credit institutions has been improved, NPLs gradually were being solved. However, aggregate demand and purchasing power of the economy were still weak, business and production activities still had many difficulties, and inflation has been controlled at low level but the risk of high inflation return should not be neglected.
2. Banking Activities in 2013
- Interest rates were actively controlled. Prevailing interest rates were stable, there was no unfair competition among banks. Interest rates has been adjusted lower, in which mobilizing interest rates fell by 2-4% , lending interest rates fell by 3-5 % compared to the end of 2012 .
- The credit outstanding balance in the entire banking system reached 12.51 % from the end of 2012. At the end of November 2013, credits granted to the agricultural sector, high-tech applied enterprises, and industrial auxiliaries have increased respectively by 17%, 24.51%, and 10.84%, compared with the end of 2012. - VND liquidity of the Credit institutions system continues to improve, reflected in: (i) VND capital utilization ratio fell to about 92%, (ii) the balance of the credit institutions’ deposits at the SBV often excess than required reserves, (iii) interest rates on the VND interbank market is relatively stable and maintained at low level.
- Foreign exchange market and exchange rate are controlled flexibly; foreign exchange and interest rates policies are combined and synchronized closely. By 31 Dec 2013, the interbank’s average exchange rate was 21,036 VND/USD, exchange rate quoted at commercial banks increased 1.3% compared to the end of 2012. - The gold market has been effectively managed and at low risk, the central bank has drastically directed credit institutions to settle the full balance of capital mobilization in gold, to reduce loan balances in gold; strengthened inspections, closely monitored credit institutions’ and gold trading enterprises’ activities; intervened to stabilize the gold market through gold auction to increase the supply of gold bullion in the market; organized SJC gold production and established a network of buying and selling new gold bars. For TPBank, the year 2013 marked an important milestone in the Bank's operating history. In 2013, the Bank commenced phase 2, phase 3 of its restructuring project, which approved by the Prime Minister, State Bank of Vietnam (SBV) and Board of Directors. By getting massive investments of shareholders, especially DOJI Gold & Gems Group, along with the drastic and close management by the Board of Directors, TPBank has completed its self-restructuring project 2 years earlier than planned. The bank has been gradually going into the orbit of stability, safety and effectiveness.
II. Performance Results and Business Indicators in 2013 1. Highlights of the Bank’s Performance:
2. The Major Financial Indicators in 2013
Table 1- Some Major Financial Indicators
Unit: VND billion, % STT Target 2012 2013 Plan in 2013 Compared with plan Compared with 2012 +/- % 1 Total assets 15,120 32,088 30,000 2,088 107% 212% 2 Charter capital 5,550 5,550 5,550 - 100% 100% 3 Total mobilized capital, in
which 10,785 28,067 25,000 3,067 112% 260% 3.1 Deposits from customers
9,270 14,332 19,000 (4,668) 75% 155%
3.2 Issue Valuable Papers 752 2,341 2,000 341 117% 311%
3.3 Deposits, loan borrowed from
other credit institutions 763
11,394 4,000 7,394 285% 1493%
4 Loan and investment, in
which 14,233 30,179 28,500
1,679 106% 212%
4.1 Loan for customer (including
corporate bonds) 8,617 16,365 16,500 (135) 99% 190% 4.2 Government bonds 2,473 5,284 5,200 84 102% 214% 4.2 Enterprises’ bond 3,143 8,531 6,800 1,731 125% 271% 5 NPL 3.66% 1.97% <3,5% 54% 6 Pre-tax profit 116 381 316 65 121% 328% 7 CAR 19.81% >9% 8 (*) ROE 10.89% 9.09% 1.80% 120%
Note (*): ROE = Profit after tax / owner’s average equity capital
Total assets of TPBank is estimated to reach VND 32,088 billion at the end of 2013, which is 107% of the plan and doubled as compared to the end of 2012. Total capital mobilization is estimated to be over VND 28,000 billion, reached 112% of the plan, in which mobilization from customers was VND 14,332 billion, increased by 55% compared with 2012. Total loans outstanding (including corporate bonds) was VND 16,365 billion, increased by 90% compared with 2012. In those, loan outstanding to clients is nearly VND 11,926 billion, increased by 96% compared with 2012. Debt quality has been improved remarkably, NPL ratio declined from 3.66% in 2012 to 1.97% by the end of 2013.
Total net operating income of TPBank reached 889 billion including interest income reached 597 billion, accounting for 67%; Non-interest income reached 104 billion, accounting for 12%. Profit before Provisions for credit risk reached 466 billion. In 2013 the bank has set aside 80 billion risk provisions for customer loans and off-balance sheet commitments. In that specific provision set aside 39 billion general provisions of 41 billion. Risk provision expense for banks of 4 billion. Pre-tax profit is VND 381 billion, VND 65 billion higher than the plan, and is 3 times higher than that of 2012.
Figure 1: Trend in Market 1’s mobilization, loan outstanding and customer numbers over the years
The year 2013 marked an important step of TPBank with doubled total assets, the number of customers increased by 3 times compared to 2012, reaching more than 245,000 customers. It is an important platform for TPBank to continue growing in the coming years.
These significant accomplishments were achieved as a result of the strong intrinsic restructuring process of TPBank itself, as well as thanks to the timely support policies, flexible stimulus for development from the State Bank of Vietnam.
3. Outcomes of specific activities 3.1. Capital mobilization
In 2013, TPBank has developed products and services for each customer segment; along with improving utility services, value added services; enhancing the quality of services provided to customers; applying flexible policies and programs which promote the sales activities in order to boost deposits from customers and ensure the liquidity of the bank.
Deposits from customers reached VND 14,332 billion, increased by 55% compared to 2012, much higher than that of the banking industry (15.61%). In particular, demand deposit is over VND 2,200 billion, accounted for 15% of total capital mobilization from customers and growth 69% compared to 2012. This is one of important funding sources to help reduce cost of equity and increase profits for the bank. The foreign currency deposit in 2013 was more than 4.7 times of that in 2012, accounted for 14% of total capital mobilization. This also helps the bank to increase foreign trading activities with other financial institutions and customers, raise income from fees and diversify its business.
Unit: Billion VND
Figure 2: Capital Mobilization Composition (by term)
Figure 3: Capital Mobilization Composition (by types of currency)
3.2. Utilization of funds 3.2.1. Credit activities
In the same trend with mobilization, credit activity has also achieved a significant growth. In 2013, loan outstanding to customers reached VND 11,926 billion, increased by VND 5,800 billion, equivalent to a growth rate of 96% compared to 2012. In particular, short-term loans reached more than VND 8,200 billion, accounted for 69% of total outstanding loans, and medium and long-term loans reached nearly VND 3,600 billion, accounted for 31% of total outstanding loans. TPBank did not have to use short-term capital for lending medium and long-term loans, which is a positive factor to help bank actively ensure liquidity and adjust loan interest rates following the prevailing market rates.
Credit performance reflected the efforts of TPBank in the pursuit of sustainable, healthy and safe development as planned. TPBank's credit products are various and sufficient, focusing on targeted customers which are SMEs, and individuals who have medium-and-above income.
Figure 4: Lending activity in 2013
Along with the establishment of Legal, Credit Supervising and Debt Recovery Division, the activities of monitoring and recovering debt have been enhanced, by the end of 2013, Debt Recovery Division recovered VND 123 billion overdue and bad debts; sold nearly more than VND 135 billion bad loans for VAMC to help bank to improve credit quality and to be active in debt collection.
Thanks to the efforts in collecting bad debts and the bank’s high quality growth of newly granted loans, the credit quality has significantly improved, the non-performing-loan ratio decreased from 3.66% in the end of 2012 to 1.97% at the end of 2013.
3.2.2 Treasury activities: investments, disposable capital management, gold and foreign currency trading TPBank’s investment portfolio is managed to ensure profitability, liquidity and compliance with the provisions of SBV.
At the end of 2013, total investment in government bonds and debt securities of other credit institutions was VND 7,700 billion, accounted for 42% of total investment, in order to ensure the liquidity of bank, as well as diversification of the portfolio. TPBank has invested about VND 4,400 billion in debt securities of companies with high reputation and healthy financial positions. Deposits and loans to other financial institutions reached more than VND 6,000 billion, accounted for 33% of total portfolio value.
Figure 5: Portfolio compositions in 2013
Gold and foreign currency trading have achieved worth-encouraging results in the difficult market with total net revenue was VND 11.7 billion, contributed significantly in revenue and net income of the bank.
3.3. Risk management and internal audit and control
2013 is the year during which TPBank restructured successfully, enhanced risk management systems, improved the quality of controlling and managing activities, and achieved goals. The risk identification, which offers solutions in managing and improving the efficiency internal control systems as well as internal audit of the bank, is exclusively focused by TPBank’s Board of Directors. Anti-money laundering activity has been done seriously, and strictly complied in accordance with the requirements of SBV.
Since 2008, the regulations of SBV related to capital adequacy have been strictly complied by TPBank. Specifically, as per Circular No. 13/2012/TT-NHNN and related documents, TPBank’s CAR has been maintained at over 22% (as per regulation, it should be not less than 9%), Quick Ratio has remained above 20% (as per regulation, it should be not less than 15%), the ratio of the total current assets, which are defined to be receivable within the next 7 days, to the total current liabilities, which are defined to be payable within the next 7 days, was maintained at 200% (as per regulation, it should be not less than 100%). In particular, by the end of 2013, the ratios were as follows:
- Quick Ratio was maintained at 20.8%;
- The ratio of payment within next 7 days with respect to VND is 212.8%. 3.4 Performance of supporting Divisions and Units
3.4.1 Human Resource and trainings
As of 31/12/2013, the total number of employees of the system was 1,183, an increase of 352 employees compared with 2012. Restructuring plan was successfully implemented with HR recruitment policy; competitive welfare policy; employee performance evaluation, employee training and loyalty policy.
In 2013, TPBank has made 110 training courses, equivalent to 1,665 hours for 3,373 employees, including 69 professionalism and product training courses, 25 skill training courses, workshops and 32 external training courses. The training programs were organized in a professional and comprehensive manner on orienting new employees, specialized professionalism training and soft skill training.
3.4.2 Information technology (IT)
Based on the existing technology platform, IT has been paid high attention for the development towards modern, highly professional direction, which is consistent with the pattern of developed bank in the world, through which, TPBank’s name as Technology Bank will be affirmed.
- Two of the breakthrough products of TPBank appreciated by customers are eCounter and eGold. These two products are the results of proper and resource-concentrated investments. These products integrated a significant number of modern technologies such as RFID, QR code, fingerprint and touch-screen with unique applications to help customers to have new experiences when dealing with TPBank, however, they are very friendly and approachable;
- Continuously improve to reduce the controlling time and waiting time of customers, enhance quality of services at the counters are also priorities of TPBank. Successful deployment of FCC-VMS helps staffs to reduce over 50% manual steps when servicing customers and also standardize the forms, support filling the information automatically for customers who execute transactions at TPBank.
- Ensuring the standards related to data backup center is also an indispensable requirement for a sustainable development; in 2013, TPBank moved the data backup center to Lang Hoa Lac. This movement satisfies two important criteria, including the safety distance between the data center and technical standard improvement of backup center, to comply with the requirement of SBV as well as meet the international standards.
- During the year, TPBank has upgraded the entire server, along with upgraded and expanded successfully the cloud storage systems for Pseri server. Security system was also strengthened by the modern equipment to support risk prevention and control information security throughout the whole system.
3.4.3 Customers and product development
- In 2013, TPBank has offered numerous diversified products and services to meet the diverse needs of the different customer segments such as affiliated programs, payment gateways connect with Payoo, smartlink, Fonline, Viettel, and launching many new services on eBank in order to increase utility for customers. - The products of international credit and debit cards, along with incentives for cardholders have been widely developed; bringing the total number of issued Visa card of TPBank reached 12,000 cards, an increase of more than 5 times higher than in 2012.
- With flexible and competitive product policies, service quality has been focused; the number of TPBank’s customers increased dramatically, reached 245,000 customers by the end of 2013, and was 2.7 times of that in 2012. This was an important premise for TPBank to continue to grow in the future.
3.4.4 Network development and communication
In 2013, TPBank focused on assessing the current status of transaction points, and had plans to upgrade, renovate and relocate them accordingly. Transaction points of TPBank have been renovated, standardized and they are attractive, convenient for customers to make transactions. This year, TPBank has relocated 12 business units, including 7 units in Hanoi, 4 units in Ho Chi Minh City and 1 unit in Hai Phong. As of 31/12/2013, TPBank reached a network of 10 branches, 19 transactions offices, 4 saving funds and 2 business centers across the country.
On 27/12/2013, The State Bank of Vietnam approved to the openness of 3 branches in key areas, namely Hanoi, Ho Chi Minh City and Binh Duong. This helps TPBank to expand its business network, contributes to improve bank’s position in the market and increase the ability to approach customers, enhance the scale and operation efficiency for bank.
In 2013, TPBank organized many media programs in order to promote the image, products and services of bank to the market and customers; results of communication activities were evaluated positively. A total of more than 2,600 news and articles have been published in the media, including 32% of printed newspapers, 58% of electronic newspapers and 10% television and radio. Especially, TPBank’s event of launching new brand identity on December marked an important moment about an image of a dynamic bank.
3.4.5 Project implementation
A series of projects have been developed, focusing on the service quality improvement; internal processes standardization; technology platform enhancement. Projects successfully implemented include mPOS, Omniflows Project on the processes standardization, service quality control; FCC-VMS Project which helps staffs to reduce manual steps and support filling the information automatically for customers.
III. Business plan and development orientation for 2014
1. Objectives and development orientation
In the next five years, on the basis of resource consolidation in 2013, TPBank will enter the breakthrough phase of its fast and strong development in 2014 and 2015. TPBank is targeted to rank among top 15 banks in Vietnam by 2017. Bellows are focused development areas of TPBank:
- Expanding gold business, stabilizing gold market along with some other banks; providing professional services of gold, silver and precious stones trading;
- Further funding and supporting companies and business units, which use high-tech applications, in terms of finance and management experience;
- Focusing on auxiliary industry services, especially for SMEs;
- Continuing to utilize e-banking and priority banking as TPBank owns competitive advantages in IT applications; and delivering the most innovative financial solutions to our customers, taking advantages of the large shareholders and strategic partners.
These focal areas are generally prioritized for developments in Vietnam, promise to be a potential ground for the TPBank’s development. Along with the tremendous support from strategic shareholders, these are also the fields that we have outstanding competitive advantages compared to other banks.
The specific financial targets are as follows:
Table 2 - Business plan for 2014
Unit: VND billion, customers
NO. Target Result in 2013 Plan in 2014
1 Total assets 32,088 50,000
2 Charter capital 5,550 5,550
3 Total deposits 28,067 44,341
3.1 Deposits of customers 14,332 25,000
3.2 Issue Valuable Papers 2.341 2.341
3.2 Deposits & loans of other financial institutions 11,394 17,000
4 Loans & investment 16,365 25,000
4.1 Loans to customers 11,926 19,580
4.2 Corporate bonds investment 4,439 5,420
5 NPL ratio 1.97% <2.5%
6 Pre-tax profit 381 438
7 CAR >9% >9%
8 ROE (*) -10.89% 11,07%
9 Number of customers 245,269 400,000
Growth rate of Deposit from customer 55% 74%
Growth rate of Loans to customer 96% 53%
Note (*): ROE = Profit after tax / owner’s average equity capital
Thus, under the plan proposed, by the end of 2014, TPBank will reach the total assets of VND 50,000 billion; pre-tax profit of VND 438 billion; number of customers of 400,000; NPL ratio will be at controllable level of lower than 2.5%; adequacy ratios and liquidity will be always under control.
2. Action plan and solutions
To fulfill the objectives, first, TPBank must find and grasp the opportunities and challenges, take advantage of its strengths and weaknesses in the next stage of development.
Figure 6: SWOT analysis for TPBank, period 2013 – 2017
On that basis, TPBank determined the action plan for the period of 2013 - 2017, particularly in 2014, the pivotal year for our breakthrough after recent restructuring efforts. Detailed as follows:
2.1 Business strategy 2.1.1 Capital mobilization
TPBank’s deposits from customers is targeted to reach VND 25,000 billion in 2014, an increase by 74% from that in 2013, on the basis of implementing the following actions:
- For individual customers, TPBank continues to benefit by serving existing customers; focusing on two individual customer segments, which are: high-income customers and medium-income customers; especially prioritizes benefits from customers, who are TPBank’s employees, corporate customers and corporate shareholders. For corporate customers, TPBank focuses on SME segment in Ha Noi, Ho Chi Minh city and other provinces.
- Enhancing technological support, which is incorporated in products, operating processes, service applications, increase utility surplus for customers.
- Improving the quality of service; closely monitor the cash flow needs of customers, providing customer satisfaction.
Outstanding loans in 2014 is expected to reach VND 19,580 billion, which is approximately VND 7,700 billion higher than 2013 (equivalent to an increase by 64%). Credit activities are directed as follows:
- The Bank will focus on retail banking development, targeted group is urban population, with medium income and above; implement co-operation programmes, package and cross-sell products; conduct Loyalty programme for loyal customer in order to strengthen the relationship between TPBank and customers, and increase usage volume and frequency of banking services and products.
- The Sales model will use the co-operations between S&D branch network and direct sales channel, alternative sales channel (Telesales and Call Center). The establishment of Direct Sale Division and Alternative Sale Division will especially support business operations serving individual customer segment, as proposed in business plan.
- For corporate customers, TPBank will focus on enterprises with large and medium sizes in Ha Noi, Ho Chi Minh city, SMEs in other provinces, foreign-invested companies, and customers who frequently use bank’s services.
- TPBank will focus on granting short-term loans to prioritized sectors. The priority orientation is to provide short-term export and import financing in VND, and other Trade Finance activities, which creates deposits or stable cash flow for TPBank.
- Centralising Sale model and Service model by using conventional distribution network, which primarily follows Multi-functional Branch Model; concurrently expanding more direct sales channel from Head Office Corporate Banking Division by establishing Big Corp Centers to boost sales capacity. Building professional team of Relationship Managers (SRM, RM), specialised in serving Big Corp customers.
- Applying technology to update, store, manage customer records, process credit approval, monitor financial performance and solvency of the customers; controlling credit risk according to the risk characteristics of each customer group.
- Controlling credit growth to be in line with capital growth, Government and the State Bank of Vietnam’s policies, and the bank’s liquidity.
- Speeding up the collection of bad debt in the professional and efficient manner, achieve NPL ratio of less than 2.5% in 2014.
2.1.3 Treasury activities and Disposable capital management - Gold and forex trading management
- Diversifying investment portfolio to ensure profitability and reduce risk. Effectively utilize the preferential treatments from SBV for a newly and successfully restructured bank.
- Seeking and developing relationships with major partners who have a stable source of foreign currency, understand customer’s needs of customers to attract, balance their foreign currency needs; widen product range for forex products and services and modern derivatives products to; promote Gold business, use gold business to support other Treasury activities as gold business is deemed typical differentiation advantage of TPBank compared to other competitors.
2.1.4 Risk management, internal audit and control
- Under the orientation to pursue sustainable development, TPBank prioritizes to strengthen its risk management capacity, especially focuses on credit risk warning system, credit monitoring; applies models and technological advances in Asset-Liability management, liquidity risk and market risk management. - Continuing to standardize risk management processes, build risk measurement model in accordance with Basel II requirements; build business continuity plan (BCP) and cope with business interruptions. Build a
banking culture of risk prevention as such each unit actively complies procedures, effectively manages risks; each individual has intuition to prevent and realize risks.
- Completing a qualified audit team, internal audit team and ensure the independence; run tests at the Head Office units and branches on compliance of procedures and codes of ethics to minimize risks in the bank’s operation.
2.2 Human resource policy
- Continuing with policies to attract and retain high-quality human resources; designate employees in appropriate positions in order to improve and stabilize the bank’s organization; build performance-related remuneration scheme, which is competitive, fair, and transparent, that can encourage the dedication and contributions of employees.
- Continuing recruiting experienced sales managers and experienced salesmen, who has ability, techniques, codes of ethics compliance to stabilize branches’ business.
- Investing in more professional training. In 2014, TPBank will test understanding of procedures and compliance throughout the bank.
2.3 Investments in Technology development and banking modernization
For the purpose of modernization, TPBank has constantly made technological improvement and innovation, to quickly bring more utilities and values to customers. In 2014, TPBank will upgrade core banking; conduct BI/DWH project for confidential data storage, automation and centralization of management information system, provide the most advanced tools for analysis, assessments, forecasting, and invaluable supports for business decision making; projects such as FinnOne, CRM, Call Center, ISO27001, upgrade server DR in order to improve service quality, help Board of Management and business units to monitor risks and fast and accurately come to decisions.
2.4 Product and network development and communication activities
- The key products of TPBank are Card products (debit cards, credit cards, ATM cards …); consumer loans, car loans, housing loans; trade finance products; Internet Banking and Mobile Banking; customized product packages for different groups of customers
- Launching customer care programmes such as discount programmes, Loyalty, to best meet customers’ needs.
- In the first quarter of 2014, TPBank has brought three more branches into operation, two more branches in the next quarter, according to legal acceptance documents of The State Bank No. 1464/NHNN- TTGSNH and 1465/NHNN- TTGSNH, five more Business Center at key locations in Hanoi and Ho Chi Minh city. In 2014, network development will relocate 8 standard transaction points in order to promote brand identity, support business activities, increase TPBank’s market share.
- Branding, marketing activities will be promoted, bringing TPBank closer to customers and TPBank’s brand will be identified more clearly in the market.
- With these marketing plans and product & network development policies, TPBank aims to reach 400,000 customers in 2014. Extensive customer network is a very important factor helping TPBank to fulfill its expansion and profit objectives.
IV. Conclusion
With proper, appropriate orientation, along with management ability of Board of Directors, TPBank has overcome many difficulties, challenges caused by market fluctuation, then, to early accomplish restructuring
plan and started to yield success and proud business achievements. The economy in 2014 is projected to have positive changes; the bank will strive for 2014 business target, to become a stable, transparent and effective financial institution, contributing to the development of Vietnam banking system.
Truly yours,
Recipients:
- BOD, BOS, EXCO; - Board of Management; - Office achieve
ON BEHALF OF THE BOARD OF MANAGEMENT CHIEF EXECUTIVE OFFICER