ON BUSINESS PERFORMANCE - REPORT 2018 - ABBank

 
 
ON BUSINESS PERFORMANCE - REPORT 2018 - ABBank
REPORT

ON BUSINESS PERFORMANCE
               2018

       Ho Chi Minh City, 04/2019
Content

DETAILED REPORT                                                       5
 I. FINANCIAL PERFORMANCE                                             5
  1. Consumer banking                                                 7
 2. Large corporate banking                                           8
 3. SME                                                               9
 4. Financial investment and interbank activities                    11
 5. Network development and marketing activities                     12
 6. Workout activities                                               13
 III. OPERATION AND ORGANIZATION                                     13
  1. Credit management                                               13
 2. Risk management                                                  14
 3. Operation management                                             14
 4. Implementation status of 05 strategic goals and 20 initiatives   15
 5. Quality management                                               16
 6. IT Management                                                    16
 7. Internal audit                                                   17
 8. Legal & Compliance                                               17
 IV.LEARNING & DEVELOPMENT                                           18

      1   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------

EXECUTIVE SUMMARY
Summary of market overview in 2018

Global economy was expected to grow 3.2% in 2018 in the context of complicated global
financial situation with tightening policy, US basic interest rate increased, along with stronger
Dollar. Besides, US-China trade tensions escalated, Brexit instability, tax policy and budget
dispute between Italy-EU negatively influenced the global economy. Global stock market in
the first nine months of the year was quite good before sharply decreasing at the end of 2018.
Chinese stocks has fell by nearly 25% since the beginning of the year, the S&P500 index fell
by nearly 10% in December only - the worst since February 2009. Global commodity prices
also fluctuated strongly in the second half of the year, when crude oil fell close by the lowest
level of the recent three years, while gold price surged to the highest level of six months

In the circumstance, Vietnam's economy in 2018 still maintained a high growth rate. The
country has completed and exceeded all of the 12 basic targets planned, with an increase of
7.08% in GDP, surpassing all of the most optimistic forecasts. Inflation was under control;
Consumer price index maintained at 3.54%. The major balances of the economy were
guaranteed. Export of goods reached 245 billion USD, 13.8% higher than that of 2017; Export
surplus of goods (7.2 billion USD);

Vietnam's financial system continued to develop sustainably. In the first half of 2018, the
liquidity of the credit institution system was abundant due to the support from the SBV
spending VND to buy about USD 11 bil , but from the end of July 2018, the liquidity was
weaker due to pressure from the exchange rate and increasing demands in the end of the year,
also the credit institutions restructured their capital to ensure the ratio of short-term capital
for medium and long-term loans decreased to 40%, leading to a slight increase in interest rates
on both primary and secondary market. Credit grew by 14%, lower than the target (17%),
deposit growth reached 14.5%. During the year, the central exchange rate increased by 1.5%,
the commercial bank exchange rate increased by 2.8% and the free market exchange rate
increased by 3.5% compared to that in the beginning of 2018, mainly due to the increase of
about 5% in the USD index from the beginning of the year. The exchange rate was still under
pressure from inflation but was supported positively from the balance of supply and demand
of foreign currency. In the short term, Fed's move to raise interest rates in 2018 has not put
any big pressure on the SBV, especially in the context of low inflation, stable macro economy
and relatively high growth.

           2   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
Summary of key business indicators

                                                                                                            Unit: bil dong
                                                                        Actual                     Vs actual of 2017
  No                          Item
                                                               2018               2017             (+/-)          %
   1     Total asset                                            90,237             84,724          5,513.0             7%
   2     Total loans                                            57,325             50,267          7,058.5            14%
         - Loan to customers                                    52,465             48,226          4,238.5             9%
         - Corporate bonds                                        4,860              2,041         2,820.0          138%
   3     Total deposits                                         67,972             62,593          5,379.2             9%
         - Deposits from customers                              64,490             60,126          4,364.4             7%
         - Funds from International FIs                           3,482              2,467         1,014.8            41%
   4     Total operating income                                 2,902.2            2,681.1           221.2             8%
   5     Operating expense                                      1,687.0            1,565.1           121.9             8%
   6     Operating profits before provisions                    1,215.2            1,116.0            99.2             9%
   7     Total credit risk provision                              314.5              511.3          (196.8)         -38%
   8     Profit before taxes                                      900.8              604.7           296.0           49%

Summary of financial indicators

                                                                               Actual
                            Item                                                                        Unit
                                                  2018                                     2017
Return before tax on average Equity (ROE)            13.9%                                   10.2%       %/year
Return before tax on average Assets (ROA)             1.1%                                    0.8%       %/year
Profit before tax / Net revenue                      31.0%                                   22.6%            %
Cost Income Ratio (CIR)                              58.0%                                   57.8%            %
Capital Adequacy Ratio (CAR)                         12.1%                                   12.6%            %
Asset Equity Ratio (A/E)                              13.2                                    13.9        Times
Debt Equity Ratio (D/E)                               12.2                                    12.9        Times
Equity Asset Ratio (E/A)                              7.6%                                    7.2%            %
Debt Asset Ratio (D/A)                               92.4%                                   92.8%            %
1st market loan on total asset (LAR- credit risk factor)
                                                     58.1%                                   56.9%            %
1st market loan on 1st market deposit (LDR)          81.4%                                   80.2%            %
Profit before tax / staff                              234                                     169Mil dong/year
Operating expenses / staff                             433                                     438Mil dong/year

           3   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
Key achievements of 2018

Global and national ecomomy in 2018 witnessed many positive developments, the health of
the banking sector continued to improve strongly, ABBANK’ business results in 2018
obtained many achievements in business profits
 -     Total assets reached VND 90.237 billion, increased by 7% in comparison with that in
       2017.
 -     Total outstanding loans reached VND 57,325 billion, increased by 14% in comparison
       with that in 2017.
 -     Deposit activities had a lower growth rate than credit activities in 2018. Total deposits
       reached VND 67.972 billion, increased by 9% in comparison with the same period of
       2017. In particular, deposits from customers increased by 7% compared to that in the
       end of 2017. Funds from international financial institutions increased by 41% compared
       to that in the end of 2017
 -     The overall profit performance in 2018 had positive growth. Total operating income
       increased by 8% compared to that in the same period of 2017. Operating expenses were
       also effectively controlled at VND 1,687 billion. Provision for credit losses maintains
       impressive efficiency with VND 314.5 billion, decreased by 38% compared to the same
       period of 2017. Strictly controlled income and cost growth was the basis for profit
       exceeding the plan. Profit before tax reached VND 900.8 billion, rose by 49% compared
       to the same period of 2017.
 -     In 2018, Moody’s upgraded a range of ABBANK’ rating indicators: Baseline Credit
       Assessment (BCA) to B1, Counterparty Risk Rating and Counterparty Risk Assessment
       to Ba3. These achievements were due to the ABBANK’ efforts to solve problem assets

Detail of ABBANK activities in 2018 is specified below information. All the number is
updated till Dec 31st, 2018.

Respectfully,

                                                                An Binh Commercial Joint Stock Bank
                                                                                   Acting CEO

                                                                                 Pham Duy Hieu

           4   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------

 DETAILED REPORT
 I.    FINANCIAL PERFORMANCE
      1 ABBANK’ business performance in 2018
                                                                                                            Unit: bil dong

                                                                     Actual                     Vs actual of 2017
                       Ite m
                                                             2018              2017                3              %
Total asse t                                                  90,237            84,724            5,513               7%
             Loan                                             57,325            50,267            7,058             14%
              Consumers                                        22,507            19,655            2,852             15%
 Total loan   SME                                               9,826             9,242              583              6%
              Large corporate                                  24,150            19,329            4,821             25%
              Treasury                                            843             2,041           (1,198)           -59%
             De posit                                         67,972            62,593            5,379               9%
              Consumers                                        30,696            29,819              877              3%
  De posit    SME                                               3,681             2,681            1,001             37%
              Large corporate                                  33,595            30,093            3,502             12%
              In which: IFC+ ADB                               3,482             2,467            1,015             41%
             Goverment bonds                                   13,380            12,273            1,107              9%
             Credit institition’ bonds                          1,462             2,254             (792)           -35%
             Corporate bonds                                    7,247             4,051            3,196             79%
Inve stme nt Share                                                  2                49              (47)           -95%
             Long-term investment and
             capital contribution                                 529                571            (42)             -7%
             Total                                            22,619             19,198          3,421              18%
             Net interest income                              1,995.6            2,149.4         (153.8)             -7%
             Net service income                                 337.0              173.4          163.6              94%
             Other income                                       569.7              358.3          211.4              59%
             Total ope rating income                         2,902.2            2,681.1          221.2                8%
 Busine ss
             Operating expenses                               1,687.0            1,565.1          121.9               8%
  Re sult
             Ope rating profit be fore
             provisions                                      1,215.2            1,116.0            99.2               9%
             Total credit risk provisions                       314.5              511.3         (196.8)            -38%
             Profit be fore taxe s                             900.8              604.7          296.0              49%

 By 31/12/2018, total assets increased by VND 5.513 bil ( equivalent to 7% ) in comparison
 with that in last year due to an increase in credit activities, investment securities against 2017
 that corresponded with an increase in customer deposits

   Analysis on profits of 2018:
    Compared to 2017:
   In comparison with 2017, EBT increased by VND 296 bil ( 49%). Including:
   - Total operating income increased by VND 221.2 bil ( 8%). Including:
    + Net interest income decreased by VND 153.8 bil (7%) compared to that in 2017
    + Net service income increased by VND 163.6 bil ( 94%)
            5   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
    + Other incomes increased by VND 211.4 bil ( 59%) compared to that in 2017
   - Operating expenses increased by VND 121.9 bil ( 8%)
   - Total provisions for credit risks and VAMC reached VND 314.5 bil, decreased by
       VND 196.8 bil ( 38%) compared to 2017.
   In overall, the business result in the whole bank in 2018 was effective with EBT of VND
   900.8 bil

  2 Operating cost analysis
  Operating expenses of 2018
                                                                                                      Unit: bil dong

                                                             Actual                       Vs actual of 2017
          Operating expenses
                                                     2018              2017              (+/-)               %
1. Taxes and other fees                                     1.5            1.8               (0.3)             82.6%
2. Expenses for staff                                     789.3          724.8               64.5             108.9%
3. Expenses for management                                480.8          404.0               76.7             119.0%
4. Expenses for assets                                    376.9          356.7               20.2             105.7%
5. Expenses for provisions and
                                                            38.5             77.7            (39.2)             49.6%
deposit insurance
Total                                                1,687.0           1,565.1             121.9             107.8%

  Implementation status of expense items
   Compared to 2017: Operating expenses increased by VND 121.9 bil (7.8%), the reasons
    are as follows:
   - Expenses for staff: increased by VND 64.5 bil (8.9%) due to the increase in the number
     of employees on demand to change the operating model. In addition, the increase in
     average salaries leads to increased staff costs.
   - Expenses for management activities: increased by VND 76.7 bil (19%) mainly due to
     the increase in marketing costs, conference costs aiming at brand promotion and the
     increase in administration cost to maintain business operation. Also, travelling
     allowance and training expenses increased to boost human development.
   - Expenses for assets: increased by VND 20.2 bil ( 5.7%) due to higher costs of
     maintenance, repairs in 2018 and the cost of renting the property increased to meet the
     need to change or renovate the business location
   - Provisions and customer’s deposit insurance: decreased by VND 39.2 bil. The reason
     is that there were provisions in 2017 while the year 2018 didn’t arise

           6   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
II.      CUSTOMERS & EXTERNAL ACTIVITIES
 1. Consumer banking
 1.1. Business performance of consumer banking in 2018
                                                                                  Unit: bil dong
                                                         Actual                        Vs actual
                             Item
                                                     2018     2017                   (+/-)     %
                 Deposit                              30,696    29,819                   877      3%
                 Loan                                 22,507    19,655                 2,852     15%
                 Number of
                                                     863,246         766,284           96,962           13%
                 customers
                 Card                                  62,638          74,118       (11,480)          -15%
                 Number of ATM                            207            204               3            1%
                 Number of POS                          1,394           1,331             63            5%

 1.2. Significant achievements of consumer banking in 2018

  Product & service development:
  - Deploy card service utility on ABBANKmobile, payment service in batches for
    individual customers, deploy non-contact payment card for ABBANK Visa for
    individual customers
  - Adjust individual customer savings regulation in harmony with the market and the
    SBV's law, draw up a new savings product with optional term of receiving interest
  - Completely modify the product: Loans for additional business capital YOUshop,
    Youshoplus; Loans for mortgage of mobilized products
  - Issue new express products for auto loans to reduce formalities for customers
  - Expand electricity payment services, water bill payment services and automatic
    payment services.
  - Deploy new features for ABBANKmobile: transferring for donation; buying and
    paying cinema and airline ticket (domestic and international). Also, update modern and
    flexible display and interface
  - Deploy e-wallet service 1Pay - recently popular payment type, help customers to pay
    bills: telecommunications, finance, insurance, television, Internet, buy payment cards
    immediately on Wallet app with preferential price to consume the payment services

  Partnership activities:
  - The total number of new partners in 2018 was over 36 partners. Total loans through
    partnership channel in 2018 reached VND 1,877 bil
  - Approach and issue active codes to 265 new sales representatives and collaborators.
    This channel has introduced loans to customers that’s worth VND 697 bil in 2018

           7   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
  Business development activities:
  - Implement direct sales programs to increase the number of customers using banking
    services at following branches: Binh Thuan, Thai Binh
  - Implement and support business units in developing affiliated cards
  - Implement the integration process with water providers in Hai Phong, Son La, Thai
    Binh. Support integration with new water providers in Tien Giang, Can Tho

 2. Large corporate banking
 2.1. Business performance of corporate banking in 2018
                                                                                             Unit: bil dong
                                                                  Actual                   Vs actual of 2017
                        Item
                                                          2018             2017             (+/-)             %

   Deposit                                                   33,595           30,093            3,502            12%
   Loans (*)                                                 24,150           19,329            4,821            25%
   Number of customer                                         2,845            2,740              105              4%
   Service revenue (Excluded credit
                                                              45.59            60.70          (15.11)           -25%
   guarantee)
   Credit guarantee revenue                                   51.06            79.90          (28.84)           -36%
   Trade service revenue (USD mil)                               909           1,136            (227)           -20%
         (*) Loans include corporate bonds that Corporate Banking Division trades

 2.2. Significant achievements of corporate banking in 2018
  Business activities:
  - The proportion of Current account in Total deposits (Casa average) was at 32.8%, met
    105.2% of the 2018 target; The VND average deposit rate of 2018 was at 4.04% pa,
    met 103.9% of the 2018 target
  - Maintain a pretty good interest margin of corporate banking sector: The average
    lending interest rate of Corp. clients averaged 9.52% p.a for VND loans and 8.65% p.a
    mixed (VND and USD). With an average deposit rate was accordingly at 4.10% pa and
    4.04% pa, the loan margin remained at 5.42% p.a for VND and 4.61% p.a mixed (VND
    and USD)
  - Strategic Customer Segment: Continue to tighten the cooperation with EVN after the
    divestments. The scale of cooperation continued to remain stable, and obtains slight
    growth

  Product & service development: Build / review and improve the products and services
    in accordance with the promulgation regulations and meet the needs of customers,
    increase the efficiency of sales
   Credit product:
   - Issue new financing products granting constructions/State Budget financed Procjects
      constractors/ODA capital
           8   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
       - Modify the Conditional Credit Commitments product with stricter product
         management regulations, support for product performance monitoring and evaluation
       - Adjust the Corp. Refinancing products in accordance with Circular 21/2017 / TT-
         NHNN dated 29/12/2017
       - Issue Cars Dealers financing products for corporate clients
       - Adjust clean loans product for corporate customers

        Deposit product and other service
       - Timely adjust and supplement the withdrawal limits of ABBANK Visa Credit Business
         Cards and ABBANK Visa Business Cards regulation, meeting the requirements of the
         SBV in Circular No. 26/2017/TT-NHNN on card activities of the Bank
       - Implement the service "Paying E-customs 24/7" for those wishing to pay import export
         tax, simplifying the tax payment procedures, saving time, costs and securing goods
         clearance right after completing tax payment
       - Successfully build and issue cash flow management product for Geleximco Group and
         its member companies

  Business supports and development:
  - Cooperate with foreign banks and customers to implement Cash collection. In 2018,
    the total revenue from this services reached VND 8,200 bil, service fees were VND
    6.8 bil
  - Implement and prompt preferential programs and emulation programs to create
    business promotion tools, with a view to boosting the achievement of the targets of the
    year

 3. SME
 3.1. Business performance of SME in 2018
                                                                            Unit: bil dong
                                                               Actual      Vs actual 2017
                              Item
                                                            2018      2017 (+/-)      %
           Deposit                                           3,681 2,681     1,000     37%
           Loans (*)                                         9,826 9,242       584      6%
           Number of customer                               24,565 21,914    2,651     12%
           Service revenue (Excluded
                                                                39.2        35.9            3.3           9%
           credit guarantee)
           Credit guarantee revenue                             44.4        54.0          (9.6)        -18%
           Trade service revenue (USD
                                                                 309         363           (54)        -15%
           mil)
 3.2. Significant achievements of corporate banking in 2018
  Credit activities:
   Product & service

           9   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
       - Implement 4 new credit products: Renewing working capital limit in speed; Loans
         financing domestic bid package or business contracts for SMEs’ customer; SME Open;
         Loans secured by Industrial parks Lands, Export Processing Zone Lands, Industrial
         clusters Lands
       - Review and adjust the current credit products such as: SME Flex, SME Easy, SME
         Top Up, SME Biz Loan to match with new credit policy and solve problems for
         business units toward the operation in practice. Guide business unit to issue letter of
         intent with such conditions and regulation of unsecured loan for Large Corporate
         Banking and SME division
       - Boost sales SME Diversity Category: outstanding loans surged 147% compared to that
         in the end of 2017, reached more than VND 742 bil

        Sale promotion programs & System support:
       - Deploy some sale promotion programs, include: ABBANK companion with SME,
         preferential loan for auto 3S and other special sales to create more sales tools for
         business units
       - Build the Working Capital Finance in short-term based on increasing of Loan to Value
         – SME Extra
       - Finish an agreement and the Coordination Process on cross selling products and
         services of ABBANK and Kiu

        Projects:
       - Engage in following projects: Upgrade T24 Sytem; Credit Rating Model SME
         Scorecard; Credit Policies 6C; RWA; LOS

  Partnership activities:
  - Issue the Program “ABBANK to be in connection with Department of Planning and
     Investment (DPI)”
   - Boost business units to increase the number of active customers, and customers using
     multi- product
   - Become the official member of VCCI (March/2018)
   - Continue to be the companion and still the Diamond advocate for Committee of consult
     and support for start-up in the South
   - Complete reconnection with Lazada. Successful cooperation of 3 parties: ABB – KIU
     – LAZ: Lazada's seller activate successful account at ABBANK will be provided free
     of charge for 6 months using Kiu ERP software
  Trade and Cash Management:
  - IFC-ABB smart agricultural finance project are coming into Phase 2: Develop products
    and pilot in the Mekong Delta
  - Issue electronic payment of custom taxes 24/7.
  - Cooperate with Hanoi Department of Planning and Investment to open an Online
    payment account for newly established corporations.
          10   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
 4. Financial investment and interbank activities
 4.1. Business performance
  Scale targets
                                                                                                Unit: bil dong
                                                                   Actual                 Vs actual of 2017
                                Item
                                                               2018        2017             (+/-)       %
         Valuable papers investment                            22,091   18,627               3,464      19%
            Government bonds                                   13,380   12,273               1,107        9%
             Credit institutions bonds                          1,462     2,254              (792)     -35%
             Corporate bond                                     7,247     4,051              3,196      79%
             Share                                                  2        49               (47)     -96%
  Profit target
                                                                                                Unit: bil dong
                                                         Actual                            Actual of 2017
                  Item
                                                 2018                 2017                 +/-            %
  CFU interest                                      (698)                (731)                   31          -4%
  Bond investment                                   1,237                1,194                   76           6%
  Foreign exchange                                    177                   81                 (36)         -45%
  Financial investment                                 34                   32                  (8)         -25%
  Profit/loss from other
                                                        (59)                  (7)                59
  activities
  Trading profits before credit
                                                        487                  314               (85)             -27%
  risk provisions
  Banking profits before credit
                                                        204                  254                207              82%
  risk provisions
  Total profits before credit
                                                        691                  568                122             22%
  risk provisons
  Risk provisions                                       (19)                (50)                 21             -42%
  Total profit after
                                                        672                  518                143             28%
  provisions

 4.2. Significant achievements of financial investment and interbank activities in 2018
  Liquidity and treasury activities
  - The cash flow in - out scenarios was constructed, the cash flow has estimated on daily
      basis, laying a foundation for liquidity management and fund balancing that assure to
      meet liquidity demand of the system and comply with requirements of SBV and
      ABBANK

  Monetary trading activities
  - Focus on transactions serving liquidity of the banking system, less risky transactions (
    Repo, reverse Repo) and transactions with SBV

          11   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
   -    Take opportunities from the market to make gap trading, match tenor trading and
        interest trading activities in VND. By 12/2018, accrued profit from trading reached
        VND 16.9 bil, approximately 99% of the 2018 target

  Capital contribution and Bond activities
  - The Division has sucessfully divested the capital from the investments that violated
    the regulations of The 36th Circular and received VND 32.5 bil from dividend
  - Total value of valuable papers issued by Credit Institution was VND 1,462 bil. The
    trading activities contributed the profit of VND 24 bil
  - At 31/12/2018, the scale of Government bonds portfolio has reached VND 13,380 bil
    and increased by VND 1,107 bil in comparison with that in 31/12/2017. Government
    bond trading activities continue to be the core profitable activity of the Division with
    the accumulative profit of VND 370 bil, increased by VND 147 bil (66%) compared
    to 2017

  FX trading activities :
  - ABBANK held long position in USD, following the upward trend of currency rate in
    the market. Trading activities in interest rate swap USD/VND and EUR/USD was also
    boosted to take advantage of surplus funds and increasing VND interbank rate
  -  Forecast market movements, maintain flexible foreign currency position and take
    advantage of opportunities to buy / sell foreign currency with the SBV. That
    contributed the profit of VND 177 bil in 2018, equivalent of 126% the 2018 plan

 5. Network development and marketing activities
 5.1. Network development activities
   Result of network development in 2018: As of 31/12/2018, netwwork of ABBANK: 165
      business units.

 5.2.   Branding and marketing activities in 2018
       Branding:
  -     Diversify the communication channels
  -     Branding activities with ABBANK Family day, the music show Tet An Binh – 25 years
        of Love’s wings on VTV2
   -    Strengthen corporate social responsibilities through investment in education, building
        houses for the unfortunate people

    Product & Service marketing:
   - Diversify activities to follow close on product features and customer demands: Survey
     before setting plan, analyse Marketing channels to approach customers and survey after
     campaign. The effective channels: VOV traffic (Radio), Facebook Ads, LCD frame,
     PR, POSM, leaflets

    Internal communication:

          12   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
   -     Develop continuously internal communications activities such as: 25th Anniversary of
         ABBANK; Flashmob in business units; Teambuilding; Inspiration workshop; Business
         Kickoff Conference; Sales workshop; and others viral activities (“An Binh la duoc”;
         U23 Vietnam National Football team ..)

    Social media marketing:
   - Focus on key branding events of ABBANK product & service. KOLS and forum
     seedings show its effectiveness through increase of the reach of audiences and talks
     about ABBANK

 6. Workout activities
                                  Bad debt collection result as of 31/12/2018
                                                                                                 Unit: bil dong
                                                                        Asset
           2018           Principle Interest            Others                            Total           Ratio
                                                                      collection
       Workout
                             507.36          71.15             50            94.13          722.63           65%
       unit
       Business unit         322.81         58.86                                          381.68           35%
       Total                 830.17        130.01              50            94.13       1,104.31          100%

    Evaluation:
   - In 2018, ABBANK collected/ handled VND 1,104 bil in bad debts, far higher than that
     in the same period of last year (VND 380 bil)
   - The above result has contributed significantly to the bank-wide’s business results:
     reduced the risk of capital loss, directly contributed to increase the bank’s profit,
     increased the income of next year for the Bank (some provisions are reversed in year
     of 2020)
   - In 2018, the bank-wide workout continued to drastically handle bad debts with many
     measures, especially strengthening and handling security assets according to
     Resolution 42/QH of National Congress. Many bad debts with large outstanding and
     long-standing loans were handled totally in 2018

III. OPERATION AND ORGANIZATION
 1. Credit management
   -     Engage in 4A small-project “Built New Credit Approval Model” and 4B “Check,
         Correct, complement regulations, document system to according to new action system”,
         LOS, DLP project, Intelligent agriculture credit project – IFC, a scorecard project (for
         SME Segment)
   -     Complete and submit land price range : Binh Duong, Soc Trang, Kien Giang, Thai
         Nguyen, Son La. Research the local real estate market: Vung Tau, Tay Ninh, Dien Bien
         and Vinh Long
   -     Manage direct and remote checks of credit-granted customers
          13   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
   -    Early warn at least 30 days in advance for debts in danger of classifying as a bad debt,
        alert business units to overdue debts in daily basic, thus their early settlement

 2. Risk management
   Credit risk management and credit policy:
  - Control credit risks, control the thresholds/limit credit risk, rooms for lending
     securities and related customer group, the adequacy ratio prescribed by SBV
  - Corporate with Deloitte to implement and complete the A Scorecard Project (for SME
     Segment), in which the overall rating scale follows advanced practices, meeting the
     SBV regulation and Basel II standards
  - Implement Environmental risk management activities in credit granting such as:
     reviewing the promulgated regulations related to Environment Management Policies,
     coordinate with Corporate Banking Div to work with EVN for evaluating
     environmental risk in Vinh Tan 4 Project within the ERM's cooperation and IFC's
     financial support.

    Market risk management
   - Develop/review/adjust and issue process documents in accordance with Circular
     13/2018/TT-NHNN; Review the limits related to market risk management and
     liquidity risk management and adjust it in line with the reality of ABBANK and the
     requirements of the State Bank
   - Build the interest rate risk report in the banking book, while reviewing/adjusting the
     liquidity and market risk reports that have been automated

    Operational risk management:
   - Communication on warning, improving risk management culture
   - Information collection and consultancy has been promoted and continuously improved
      in quality, resulting in the risk status of ABBANK maintained at the satisfactory level,
      complied with the risk appetite issued by the BOD
    - The implementation of business continuity plan (BCP): Strengthen warning news and
      guide measures to prevent natural disasters, terrorism, robbery, ... Update Call Tree
      according to the actual situation at each Unit; Instruct and organize training
      programmes in the whole bank

    Basel Project:
   - Calculate CAR following Circular 41/2018/TT-NHNN in 17/5/2018

 3. Operation management
   -    Implement SWIFT GPI project, move the Swift server to DC 36 Hoang Cau, complete
        project of Upgrading Swift system to 7.2 version, complete all requirements of CSP-
        Customer Security Programme from SWIFT
   -    Upgrade the interbank payment system at the request of the SBV&BIDV and upgrade
        the Corebanking R17 system
          14   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
   -    Complete Strategic Project on increasing automation capacity of interbank payment
   -    Innovate and improve operational efficiency of CallCenter; Complete the application
        “Feedback processing”; Coordinate and perform customer sevices through the feedback
        from the channels (Calls, Email, Facebook, Zalo)
   -    Publish documents related to AML software for business units

 4. Implementation status of 05 strategic goals and 20 initiatives
  Implementation status of 05 strategic goals as of 31/12/2018
  No                      Item                         Result 2018               Result 2017                  Note
         Top 5 ROE among privately                                                                        ROE after
  1                                                       10.95%                     8.25%
         owned commercial banks                                                                           tax
         Income from Retail (including               Retail
                                                                            Retail income/TOI:
         consumer and SME) accounts                  income/TOI:
                                                                            43.13%
         for at least 70% of total                   48.94%
  2                                                                         Services
         operating income, and income                Services
                                                                            income/TOI:
         from service fees (including                income/TOI:
                                                                            15.41%
         guarantee fees) accounts for at             19.78%
         least 10
         Top    20%   of in
                  brands total
                            the operating
                                 Vietnam
  3                                                                            Not measure
         income. system
         banking
         Build      a     friendly   and
         professional work culture and Employee
  4      environment,       capable    of sastifition
         attracting employees measured index: 72.5%
         by satisfaction rate bank-wide.
       Build professional and effective
                                          Corporate governance framework of IFC, Moody’s
  5    corporate            governance
                                            credit ratings, Financial reports - IFRS, Basel II
       following international best
       practices
    Implementation status of 20 initiatives as of 31/12/2018
   As of 31 December 2018, ABBANK has deployed 21 projects, in which: 17 completed
   projects; 01 project changes scope (No.12); 02 projects are continued to implement all
   remaining issues (No 11 and 14); 01 project restart (No.7). Among 23 strategic projects,
   03 projects (No.13, 18, 20) have been starting from 2017 onwards and are implementing.
   Out of that, other projects also have been coordinating with IFC for consultant in
   implementing. Details are as followings
   - Project “Improve the ABBANK’s organizational and operational effectiveness”. This
      project divided into 7 sub-projects
   - Project No.11: Upgrade non-conventional channels – mobile, e-banking, MPOS, EMV
   - Project “Application Scorecard” for SME segment (SME and Risk Control Divisions)
   - Project No.18: Improve the appraisal capability and modernize credit assessment –
      LOS
          15   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
   -Project No.20: Building Datawarehouse and BI/MIS
   - “Smart Agricultural Financing Project” This is the project cooperating between
    ABBANK and IFC, IFC consults to set up and implement. The project is carrying out,
    following timeline and will be completed by Q1/2019
  - Project “Banking on Women Credit Granting Project” in order to gain “ABBANK –
    Bank for women selection”
 5. Quality management
   Internal Service Quality:
  - Improve, operate, measure SLAs at 13 Divisions at HO
  - Organize Internal Services Quality Satisfaction Survey and Security Services Quality
    Survey to record the status and suggestions for improvements

    Customer Service Quality:
   - Issue the Call Center Quality Standard, start checking from March 2018 with checked
     315 calls
   - Promulgate Camera Checklist, adding a new channel to current service quality
     checking channels
   - Deploy the service quality checking in business units
   - Build up Service Star 2018 Program, Top service quality in honoring the outstanding
     individuals and business units
   - Construct and implement the 24h Survey
   - Standardize service quality training materials; Complete online training materials

 6. IT Management
    In the year 2018, IT Division had implemented the projects to meet the plan; focus on
    administration and operating of system, details as follows:
  - Deloy the key projects:
   + The completed projects: Key project “Upgrade core software system -Core banking
      to R17 version and convert the database from Oracle to J-Base”. Projects related to
      infrastructure: “Centralized infrastructure”, “Optimize ABBANK network”, “Invest
      in equipment for Data Center DP-DR (meet the BCP)”, “Optimize and centralize
      storage system”. Innovative projects: “Digital form” and “Electronic office using
      digital signature”.
   + Projects being implemented: “Management report system BI/MIS”, “Solutions to
      manage service to connect with external partners – including Fintech, “Loss prevention
      solutions and data encryption”, “Security solutions for electronic banking”,
      “Monitoring security and early warning - complete stage 2 and 3”, “Upgrading
      television conference system”, “Centralized management of Camera system”
  - The operation, applications and IT infrastructure management: IT division restructured
     operation model to separate 3 functions including development, management and
     operation in line with SBV’ requirement. The management of T24 core software system

          16   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
        is stable and reliable, infrastructure systems (entire network system, server and storage)
        is safe and stable
   -    Monitoring safety and security: Develop information security training programs, guilde
        and warn the whole system about information security. Review, issue and update 25
        regulations / processes to ensure compliance with the provisions of the State Bank,
        international standards and the Bank's actual needs
   -    User supporting activities: Support to complete 32 new location/relocation/upgraded
        transaction points, 37 new transaction points with new/relocation/upgraded camera
        system, and complete more than 29,634 end-users through the SDP receiving channel,
        meet 98.89% of SLAs

 7.    Internal audit
  -    In 2018, the Internal Audit (IA) has conducted 50 audits/monitoring themes, including
       31 planned audits and 19 unscheduled monitoring/audit themes upon requests of the
       Board of Directors/Supervisory Board/Executive Board, which surpassed 132% of the
       plan
   -   Some audits/monitoring reports have received positive feedback from the Board of
       Directors/ Supervisory Board/ Executive Board including: Audit report of ABBANK
       Dien Bien, Thai Nguyen and Dong Da; Report on assessment of SMEs perforated
       products; Audit report of partner management with banks; Report on administrative
       expense audit; Report on policy review for Talent Pool loans; Report of monitoring the
       limit of cash balance; Audit report of privileged account management; Network audit
       report
   -   Update and issue a new internal audit manual and procedure to comply with Circular
       13/NHNN and the new organizational structure of ABBANK
   -   Internal Audit also actively applied information technology in auditing to reduce
       working time, increase the productivity of auditors such as tracking software
       development after automatic auditing; IAS software upgrade for field audit
 8. Legal & Compliance
   -    Provide support, legal consultancy for business units, other departments (about
        2500 cases). Review and provide non-standard contracts, economic contracts (about
        500 cases); Approval of sample letters of guarantee, exception forms
        (about 1.000 cases)
   -    Review and provide new legal documents affecting banking activities, issuing monthly
        legal newsletters to guide legal issues arising frequently: 13 cases
   -    Assist to change the entire authorization document when changing the Chairman of the
        Board and 3 times changed the General Director; Review, guide and support the
        authorization and other tasks (about 500 cases). Issuing 11 internal documents in legal
        professional guidance
   -    Representatives of ABBANK participate in the legal proceedings in some cases

          17   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
   -    Review and check the legality of 900 issued internal documents. Work as a focal
        division in terms of operation licenses of ABBANK and advise on bond investment
        documents
   -    Grade non-credit compliance for business units in whole system for 2018
   -    Promulgate Compliance Monitoring Process for non-credit activities in ABBANK;
        Decision 505/QD-TGĐ.18 dated December 26, 2018; Engage in carring out the
        Circular 13 of SBV
   -    Monitor and urge the implementation of 360 conclusions of the Banking Inspection and
        Supervision     Agency-SBV         (BISA):     In    360     recommendations,      there
        are 237 recommendations have been completed; 93 recommendations were completed
        and awaiting confirmation by the SBV, 30 recommendations are still being worked out
   -    Monitor, urge and supervise the units to cover 67 overdue recommendations of the
        Internal Audit as of 31/12/2018; 21 overdue recommendations had been completed, 46
        overdue recommendations are continuing to monitor and urge
   -    Implement remote monitoring reports: Ratio of capital adequacy, ratio of capital for
        buying shares; reports of reviewing business locations; reports of safety and security at
        business locations ... Direct supervision at 06 business units in ABBANK

IV. LEARNING & DEVELOPMENT
    Main activities implemented in 2018
   - Personnel Management
    + Assure the good performance of personnel management task in the whole system in
      accordance with legal requirements
    + Carry out the reward and emulation activities to encourage outstanding individuals and
      teams
    + Promulgate the Mobile Director/ Mobile manager program in 2018
    + Issue new Collective Labour Agreement
    + Cooperate with IT to implement new HR software
    + Completely update business unit’ positions in HR software to meet new model
    + Implement and publish Job Description for main titles in business units
    + Transfer employees in harmony with new structure
   - Salary and compensation
    + Complete the JobValue Assessment and Wage Restructuring Project, expected to be
      deployed in 2019
    + Issue ABBANK Care 2019, offering various benefits for employees
    + Implement salary adjustment for employees in 2018
    + Complete the re- registration of the salary scale with the Ministry of labour – Invalids
      and social affairs due to the regional minimum wage adjustment from 2018, meanwhile
      adjusting the documents in line with the provisions of Law on Social Insurance
   - Recruitment
    + Complete total recruitment of 1,455 employees (455 new hires, 648 replacements, 352
      internal transfers)
          18   Business performance of the year 2018
---------------------------------------------------------------------------------------------------------------------
    + Complete 1,050 records of staff management as required by the units in the whole
      system to meet the business development of the business units
    + Implement Intership Program at Universities in Hanoi and Ho Chi Minh city by a series
      of Career Talks
    + Engage in Career Fair in large universities in Hanoi, Ho Chi Minh city and provinces
    + Cooperate with S-Mentor & Ho Chi Minh city Open University to deploy Business
      Education programs
    + Coordinate with the Bank Training & Consultancy institute (BTCI) to organize a
      Career Orientation Workshop with the topic “ Banking career, Have you been
      interested in” in Ho Chi Minh Agriculture and Forestry university
    + Communicate and implement “ ABBANKers- hand in hand with recruitment” program
    + Cooperate with Vietnam Banker to deploy successfully Bank Visit in Ha Noi and Ho
      Chi Minh city, in which final year students experience actual works
   - Traning & Development
    + In 2018, focus resource on training courses related to sales skills for RM. Total courses
      reach 588 courses with 16,440 engagements
    + Provide a series of sales skill training courses for RM in the whole system such as
      Talkshow “Change thinking for success”, Basic sales skills, Awake creativity in sales,
      Customer care, Successful sign the deal…
    + Provide training courses for managers in accordance with the internal standard
      Crestcom in 3 areas
    + Continue to provide internal training courses with parners such as FWD, VNI,
      Samsungpay and KIU
    + Upgrade training system Elearning with an increase of 14 lessons (planned figure of
      10 lessons), with 13,569 engagements (105% higher than the target)
    + Continue training & development activities for ABBANK Talents in 2018:
      Successfully organized Teambuilding ABBANK Talents in 2018 and be preparing for
      2019
    + Implement activities to develop The Learning Community at ABBANK such as
      ABBANK AMAZING with 11 records for employees; Capacity development news...;
      Event “ Leader team – Learning Together” in Hanoi
    + Complete renovation of training rooms in Da Nang and build practice facilities in
      Hanoi and launch in 2018

          19   Business performance of the year 2018
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