Joint-Stock Commercial Bank for Foreign Trade of Vietnam: Report of the Board of Directors

JSC BANK FOR FOREIGNERS

SOCIALIST REPUBLIC OF VIETNAM

VIETNAM TRADE

Independence – Freedom – Happiness

Address: 198 Tran Quang Khai, Hanoi

Company registration number 0100112437

Hanoi, April 28and 2022

(15and revision of April 14and2022)

TABLE OF THE MANAGEMENT REPORT

I.

COMPANY PERFORMANCE IN 2021

The global economy has gradually recovered after the deployment of vaccines andreopening of economies. The IMF estimated the global GDP growth rate in 2021 to be around 5.9%, with challenges ahead. Supply chain disruptions continued to increase inflationary pressures in the second half. As a result, many central banks have tightened monetary and fiscal policy and planned to raise interest rates. Nevertheless, the rapid spread of new virus variants has posed a great threat to the progress of the global economic recovery.

Since mid-October 2021, the Vietnamese government has adopted new guidelines on safely adapting to the COVID-19 pandemic, which is ‘Safe adaptation, flexible and effective control of COVID-19 pandemic’. Subsequently, the economy gradually recovered in the fourth quarter, after a sharp decline in the third quarter. The GDP growth rate in 2021 reached 2.58%. The manufacturing sector gradually recovered and the processing and manufacturing industry increased by 6.01%. Besides, the import and export business continued to be remarkable with a total turnover of 668.5 billion dollars, up 22.6% compared to last year and a surplus $4 billion business. The average CPI in 2021 increased by 1.84%, the lowest rate since 2016. However, there are challenges due to the complicated and unpredictable development of the COVID-19 pandemic, market turmoil and changes in international politics.

Under the threat of the resurgence of COVID-19, the banking sector has beenplaying a vital role in supporting the economy and actively offering solutions to support customers such as interest rate reduction, debt restructuring and cost reduction, while strictly controlling credit quality, by increasing the provision for credit risks, minimizing operating costs, etc. The credit growth rate in 2021 reached 13.53%, as well as a of the system stability of liquidity and increase in foreign exchange reserves.

1.

VCB business performance in 2021

Despite a difficult socio-economic environment, Joint StockThe Commercial Bank for Foreign Trade of Vietnam (VCB) succeeded in achieving “multiple goals”: preventing COVID-19 pandemic effectively; ensure the well-being of employees; share difficulties with customers; and maintain business continuity. In 2021, most business objectives assigned by the General Meeting of Shareholders and the Board of Directors have been achieved.

1.1. Strict implementation of COVID-19 pandemic prevention and control measures while sharing difficulties with businesses and individuals

  • Actively research vaccine sources and implement early vaccination for employees and families to ensure safety and health.

  • Management and operating strategies adjusted to adapt to difficult conditions; organized teleworking and shift work to maintain business continuity and ensure adequate, transparent and timely provision of banking services, even in times of social distancing in accordance with Directive No. 15 and Directive No. 16.

  • Improved policies, digitized processes and rapidly deployed online transaction solutions to support businesses and individuals.

  • Synchronously implemented solutions to support and accompany businesses, individuals and households affected by the COVID-19 pandemic through interest rate support programs, fee and interest rate reduction and loan restructuring.

  • Total restructured debt of customers affected by the COVID-19 pandemic

without reclassification amounted to VND 10,540 billion (outstanding principal and interest were approximately VND 9,410 billion and VND 1,130 billion respectively).

  • Participation in many social welfare activities, especially COVID-19 pandemic prevention programs. The total value of commitments for social protection activities reached approximately VND 723 billion, of which VND 246 billion was contributed by employees and the social protection fund; VND 381 billion has been donated to COVID-19 pandemic prevention and control activities.

  • The VCB remained the main payer of the state budget in the banking sector (about VND 11 trillion).

1.2. Growth of deposits and transformation of the structure of the deposit portfolio were in line with the predetermined direction

  • Total customer deposits stood at VND 1,152,712 billion, up 9.4% from 2020.

  • The share of demand deposits reached 35.1% (3% more than in 2020).

1.3. Driven credit growth year-to-date; reorientation of the credit portfolio structure towards security and efficiency; controlled and improved credit quality

  • The credit balance reached VND972.680 billion, up 15% from 2020, within the credit growth limit allowed by the State Bank of Vietnam (SBV).

  • Strictly controlled credit quality: the ratio of the mentioned special loans (group 2) was 0.36%; The NPL ratio was 0.63%.

  • VCB has fully constituted a specific provision for restructured loans (100%) in accordance with circular n° 03 – two years earlier than SBV regulation. The loan loss coverage ratio reached the highest level in the banking sector.

1.4. Impressive results in turnover and customer development:

  • Payment/card usage revenue increased by 19.2% compared to 2020.

  • New deposit and wholesale credit customers increased by 33.2% and 45.2% respectively compared to 2020.

  • New E-Banking and individual customers increased by 29.4% and 4.9% respectively compared to 2020.

  • Sales in foreign currencies increased by 13.2% compared to 2020.

  • International Settlement – Trade finance revenue increased by 23.7% compared to 2020. Market share was 15.36%.

1.5. Exceptional business results; positive service revenue growth

  • Pre-tax profit target assigned by the SBV and the General Council Meeting of shareholders was reached.

  • Services and trade finance revenues increased by 12.1% compared to 2020, accounting for 16.5% of total revenues.

  • Revenue from canceled loan recoveries reached VND 2.912 billion, up 20.3% from 2020.

  • ROAA and ROAE increased significantly compared to 2020, at 1.60% and 21.59% respectively.

1.1. Largest market capitalization among listed banks

The market capitalization of VCB was ~16.7 billion dollars, which consolidated the leading position among listed banks.

1.2. Full compliance with banking regulatory ratios

  • VCB has fully complied with the security requirements in banking operations in accordance with the SBVit is regulations.

  • The equity ratio (CAR) was 9.31%.

2.

Management activities in 2021

With safe adaptation, flexible and effective control of COVID-19

pandemic in the system, VCB has consistently implemented the motto “Transformation, Efficiency, Sustainability”, focusing on implementing 03 initiatives and 05 breakthroughs in 2021.

  • 2.1. Manage mobilization activities in balance with the use of funds and the market situation; continued to restructure funding sources to control input costs.

  • 2.2. Focused on credit growth since the beginning of the year with a variety of new products introduced and effective management policies.

  • 2.3. Led and successfully managed the implementation of 03 commercial pillars:

  • RetailPillar”: continued to strengthen the retail base sector, including improving processes, policies, products and services; step-by-step deployment of products, services and utilities on digital channels.

  • A service“pillar: preferredrental price policies, boosting the volume of transactions and turnover. Acceleration of the development of new products and services; increased the usefulness of existing products and services.

  • Investment” Pillar: promote cooperation in the distribution of investment banking products to wholesale customers.

  • 2.4. Implementation of digital transformation to improve service quality and customer experience; automated and optimized operations.

  • 2.5. Enhanced credit quality control; encouraged recovery of non-performing/ written-off loans; develop appropriate solutions for restructured debt in accordance with Circular No. 01, Circular No. 03, Circular No. 11 and Circular No. 14.

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