There are 4 mains part which showed very clearly about SHB. The first is introduction about SHB, we study about its foundation, structure, achievements, branches..docx

Foundation and Development of SHB Bank The Saigon-Hanoi Commercial Joint Stock Bank SHB, originally known as the Nhon AiRural Commercial Joint Stock Bank, was founded in Can Tho province

FACULTY OF MANAGEMENT & TOURISM

Table of Contents

Abstract 1

I Introduction about SHB Bank 3

1 Foundation and Development of SHB Bank 3

2 Management structure 4

3 SHB’s main services and products 5

II Analysis of bank performance 6

1 Return on equity 6

2 Return on asset 8

3 Net interest margin 8

III Interest risk management 9

1 Interest sensitive gap analysis 9

2 Ability to mobilize capital and lending of SHB 10

3 Interest rate management of SHB 10

4 Liquidity Risk of SHB 11

IV Capital Management of SHB 11

1 Capital Management Process 11

2 Capital management ratio 12

3 Risk management policies 14

V Conclusion 15

I Introduction about SHB Bank

1 Foundation and Development of SHB Bank

The Saigon-Hanoi Commercial Joint Stock Bank (SHB), originally known as the Nhon AiRural Commercial Joint Stock Bank, was founded in Can Tho province on November 13,1993

- Transformation period (2006-2011):

Nhon Ai Rural Commercial Joint Stock Bank received clearance from SBV in 2006 toreform its business model to become an Urban Commercial Bank and change its name toSaigon – Hanoi Commercial Joint Stock Bank (SHB) with a charter capital of $22 million In

2008, it relocated SHB Bank’s headquarters from Can Tho to Hanoi's capital city, signaling amajor shift in its size, position, and power From 2009 to 2011, it became one of the firstVietnamese commercial joint stock banks to be legally registered on the Hanoi StockExchange SHB built branches in Cambodia and Laos after receiving clearance from the StateBank, kicking off SHB Bank’s international investments (2011)

- Pioneering phase of mergers - acquisitions and penetration into regional financial markets (2012-2016):

SHB Bank officially opened branches in Cambodia in the month 2/2012 with the totalinvestment to $37 million and branches in Laos on 9/2/2012 with charter capital of 104billion Kip Laos In the month 8/2012, SHB Bank merged with Hanoi Commercial JointStock Bank (Habubank) In the next 2 years, SHB Bank received the President's Medal ofLabor, Second Class (2013) It’s not over yet, SHB presented in 40 provinces and citiesaround the country, as well as in two nations, Laos and Cambodia; participation in thefinancing of significant capital projects of national significance (2014) And just two yearlater (2016), SHB Bank brought about the charter capital of approximately $500 million, thenetwork up to almost 500 points in and outside the country

- Preparation and completion stage on platforms towards modern banking 2018)

In 2017, SHB increased financial capacity, and approved the establishment of arepresentative office in the Republic of Myanmar This is also a major move for SHB, as itexpands its presence beyond the Indochina peninsula and into the South East Asian area.Besides, SHB in 2018 won the Second and Third Classes Labor Medal from the StatePresident, confirming its status as a major Vietnamese bank Also in this year, SHB Bankthoroughly implemented the restructuring of its organizational structure and operation model

by merging many divisions in accordance with its development strategy; rearranging 100percent of job titles and salary systems for employees; implementing key performanceindicators (KPIs) across the system and completing many technology projects to supportbusiness

- Comprehensive renovation phase (2019-present)

In 2019, SHB completed a full re-structure, organization, and operating model with themerging of numerous departments of business in accordance with strategy development;using the indicators to analyze the overall system's work performance indicators (KPIs);execute several projects involving technology to assist company operations, management,and risk management Not only that, but at the same time, it established and implemented 3original project strategies: Board Strategy and Development, Board of ModernizationBanking and Restructuring, Management and executive Management by the Chairman of theBoard of Directors Continuing in the years 2020 and 2021, SHB Bank has made a significantchange when the capital increased to almost $800 million; completed three pillars of thetreaty of capital Basel II before the deadline, to meet compliance with the requirements ofThe State Bank Yet, Home Bank authorized increasing SHB Bank’s charter capital to over

$836 million in May 2021 This is a critical backdrop for SHB to become more assertive andcredible with the investment community in the country and abroad

2 Management structure

Management of SHB:

First to be founded in 1993, after 24 years of development, Saigon-Hanoi CommercialJoint Stock Bank has been adapting and changing itself to fit the transformation of thebanking industry associated with the rapid technological changes and customer behaviors.The managerial system of SHB is currently recognized as one of the most accomplishedsystems among commercial banks in Vietnam as it was honored “Bank of the year in 2020”

by The Banker (Le Phuong-TTXVN) The management structure of SHB is stimulated in thefollowing diagram

In general, the management mechanism of SHB is a mechanistic structure which is a rigidand tightly controlled structure The underlying reason for its structure is due to itsspecialization in managing the flows and the uses of assets For the same reason, the span ofcontrol of the institution is small and the decision-making process centralizes at a singlepoint, the employees will have no or little rights in making decisions Moreover, according tothe diagram the tasks are very well-formalized to maximize efficiency and minimize externaland internal errors.

In terms of directory structure, its components are respectively “Board of Supervisory”,

“Board of Director” and “General Director” which for short will be called as B.O.S, B.O.Dand G.D The first component to mention is the “Board of Supervisory”, which has thehighest position among the three and functions independently from the B.O.D and G.D butworks directly to the “General assembly of shareholders” The core mission of the B.O.S is tosupervise the activities of SHB through “Internal audit division” The other component to bementioned is the “Board of directors” The B.O.D is in charge of controlling five committeesand being reported directly from the G.D And the last part in the SHB system is the “Generaldirector”, the most important and complex among the three due to its direct obligation to thetasks and risk The G.D is the association of seven Departments and twelve Divisions In eachdepartment, the responsibilities are differently established as its call sign Hierarchicallylower than the departments, the divisions are directly under the supervision of G.D Eachdivision deals with specific tasks by being decomposed into smaller centers Thanks to anaccomplished structure, the risk management activities at SHB are well constructed since theuncertainties must break plenty of defensive walls from the lowest to the highest in hierarchy

order and even though one of the walls is drilled, the failure will be minimized and thedamages will not be significant.

3 SHB’s main services and products

- Main services :

With being one of the largest joint-stock commercial banks in Vietnam, the services ofSHB have always maintained safety and transparency in business operations Moreover, SHBalso tries its best to improve better service for different kinds of customers (Individualcustomers and corporate customers) such as Personal banking and corporate banking

In personal banking, there are many main services like card, savings, money transferservice, E-banking, credit, and current account… With many options of personal bankingservice, customers can choose the suitable way to use for their demand to have the bestexperience The saving interest rate of SHB from 1 to 3 months is approximately 3.35-3.6%/year, from 6 to 9 months is 5.5-5.8% and from 12 months or more is 5.8% Due to thepandemic of Covid 19, deposit saving money is rated very highly and attract many people touse their money to invest

Being one of the biggest commercial banks in Vietnam, SHB has a variety of corporatecustomers, from small to large enterprises In corporate banking, services like credit, depositaccount management, forex and treasury, investment, and hedging… are used frequently

- Main products :

SHB provides 3 popular cards in the bank: domestic debit card, international debit card,and international credit card First, in domestic debit cards, there are Galle Privilege PrepaidCard, SHB Prepaid Card, and SHB Solid Card Second in international debit card includesSHB Visa Debit, SHB-FCB MasterCard Debit, and ManCity-SHB Visa Debit Final aboutInternational credit cards, there are many cards such as Mancity Visa Cashback, SHB VisaPlatinum, SHB – FCB MasterCard Credit, SHB-Vinaphone MasterCard, Huba-SHBMasterCard, and SHB MasterCard With the variety of cards, customers have many choices

to use SHB anywhere, anytime, and suitable for their demand

https://www.shb.com.vn/

https://bnews.vn/lai-suat-tiet-kiem-ngan-hang-shb-hom-nay/191652.html

https://baoquocte.vn/nguoi-dan-dang-gui-tien-nhieu-hon-vao-ngan-hang-155441.html

1333730#hmenuid2

https://www.dienmayxanh.com/kinh-nghiem-hay/shb-la-ngan-hang-gi-co-uy-tin-khong-II Analysis of bank performance

1 Return on equity

The Return on equity of SHB is calculated by using the following formula:

The DuPont equation breaks down the ROE as the following expression:

Equity multiplier is the ratio which reflects sources of fund decision In 2020, this ratioreduced by 2.57x which means the main source of funds used in 2020 derived from ownerequity financing policy Both net profit margin and the asset utilization from 2019 to 2020 areobservant with small change Specifically, the net profit margin decreased insignificantly of0.42% whilst the asset utilization appeared with a minor increase of 0.06% In terms of netprofit margin, it reflects the effectiveness of expense management and service pricing policy.Although in 2020, the whole Vietnamese economy was hammered by the COVID-19 whichaffected the growth of GDP of only 2.91%, the lowest rate in the past 5 years, the bankingindustry in general and the SHB in particular still managed to overcome the pandemic-year.Even though in 2020, the profit of SHB increased by over 200,000 million VND, however,the operating expense flew up which created a minor fall in Net profit margin Moreover, theincrease in profit is the achievement of the effort to control the bad debt (SHB news).Besides, in 2020, SHB proactively lowered interest rates for existing customers and loweredinterest rates for new loans which resulted in positive profit In terms of asset utilization It isthe reflecion of the portfolio management policy, the mix and the yield on assets Due to thesevere effects of the pandemic, the credit services could not operate as well as they did in

2019 SHB itself had adapted quickly to be immune to COVID The bank was in speculationmode when increasing the available-for-sale-securities by over 9,000,000 million VND anddressed the held-to-maturity by about 2,000,000 million VND The bank also raised its equitysecurities by over 10,000,000 million VND

https://www.shb.com.vn/xu-ly-quyet-liet-no-shb-giam-ty-le-no-xau-ky-luc-ve-171/?

fbclid=IwAR21KHqzsOpHjh-152pxugdjzvxD38svHwtgjhpvFrs9Q6bMFDS2_RuYmOM

2020 2019Total equity capital 24.036.220 18.507.443Tax management efficiency 0,80

From four elements of ROE listed on the table above, it is clear that compared to 2019, in

2020 SHB witnessed a decline in funds management ratio while the rest increased So, in

short, SHB was doing well in controlling their operation effectiveness, well-used of financial

leverage and fund resources even though the bank had to undergo a hard time during 2020

However, it is noticeable that the asset management efficiency went down from 0,02 to 0,01,

which mean that there should be a examination why it happened, (perhaps because of the

downfall in both revenues and assets, which is understandable since 2020 most banks fall on

hard times due to the pandemic) and what should be done to achieve the 2021's goal

2 Return on asset

ROA is an important ratio which is measuring how profitable a company is relative to its

total assets ROA is based on three simple component ratios:

ROA = Net interest margin + Net noninterest margin + Special transactions affecting net

According to the data, it is can be seen that the ROA of SHB in 2020 (0.67%) decline

slightly compared to 2019 (0.70%) This can understand that during 2020, the pandemic

Covid19 has affected seriously the economy in the world However, SHB made the effect of

Covid19 not to overcontrol with ROA just decrease only 0.03% This is reason why SHB

aims to be the number 1 target budget in terms of business efficiency and technology in the

commercial banking system in Vietnam

3 Net interest margin

Net interest margin (NIM) is a measurement comparing the net interest income a financial

firm generates from credit products like loans and mortgages, with the outgoing interest it

pays holders of savings accounts and certificates of deposit Net interest margin calculated by

the formula:

Net Interest margin = Interest income−Interest expense

Total earingasset

From the data above, in 2020, the NIM of SHB increase slightly from 2.51% to 2.83%

compared to 2020 This is result from bank income structure in 2020: Net profit from gold

and foreign exchange business is 192 billion VND, contributing 1.57% of total banking

income Net profit from service activities was 514 billion VND, accounting for 4.20% of total

operating income Net interest income was valued at 9,965 billion VND, contributing 81.45%

of total operating income Total operating income is worth 12,235 billion VND Net profit

from securities trading was at 1,306 billion VND, accounting for 10.68% of the Bank's

III Interest risk management

1 Interest sensitive gap analysis

Overdue free of

interest

up to 1month

1 to 3months

3 to 6months

6 to 12months

1 to 5years

over 5years

Total

2020 13,298,528 14,468,197 31,884,664 106,378,288 -70,855,357 -47,934,426 -29,766,136 11,262,586 28,736,34

4 Cumulative 13,298,528 27,766,725 59,651,389 166,029,677 95,174,320 47,239,894 17,473,758 28,736,344 57,472,68

8

2019 11,073,655 22,842,662 27,490,438 87,693,341 -61,482,054 -50,671,230 -22,129,308 8,103,443 22,920,94

7 Cumulative 11,073,655 33,916,317 61,406,755 149,100,096 87,618,042 36,946,812 14,817,504 22,920,947 45,841,89

Table 1: SHB Bank's interest-sensitive gap in 2020

Interest-sensitive gap management, one of the most common interest rate hedging

methods, was utilized as an effective instrument to control the risk of banks As shown in

table 1, SHB Bank's assets and liabilities were split into eight categories to quantify

interest-sensitive gaps: overdue, free of interest, up to 1 month, 1-3 months, 3-6 months, 6-12 months,

1-5 years, and more than 5 years

In the table, for up to 3-6 months, 6-12 months, and 1-5 years of maturities, SHB Bank

showed a negative gap (which interest-sensitive assets-interest-sensitive liabilities 0)

Meanwhile, if the market interest rates increase, or conversely, if interest rates increase,

making interest income increase more slowly than the cost of interest (NIM decreased),

interest rate risk will re-appear The reason for the variance from 3 to 6 months maturity was

that customer deposits (VND 76,531,534) were significantly larger than loans to customers

(VND 6,903,269), debt acquired, and securities investments (VND 7,179,285) but deposits

and borrowings from other institutions (VND 5,453,693) were smaller than them Similarly,

negative gaps in other maturities (6-12 months and 1-5 years) were caused by considerably

higher deposits and borrowings from other institutions and customer deposits compared to

loans to customers, debt acquired, and securities investments

Table 1 also clearly showed that there were positive gaps in late, free of interest, up to 1

month, and 1-3 months (interest-sensitive assets-interest-sensitive liabilities > 0) At this

time, if the market interest rate increased, it would increase the profit for commercial banks

But if market interest rates fell, interest income fell faster than interest expense (NIM

decreases) and risk also emerged The positive gaps occurred as a result of a considerably

greater proportion of loans to customers and debt acquired, as well as investments in

securities, when compared to deposits and borrowings from other institutions and client

deposits In 1-3 months, for example, the loan to customer and debt acquired was VND

170,313,950, more than three times the number of customer deposits (VND 56,581,589)

2 Ability to mobilize capital and lending of SHB

In general, there is a bonding relationship between interest-sensitive gap and the capital

mobilization plus lending SHB has a positive interest-sensitive gap which is represented by

the amount of interest-sensitive assets greater than the interest-sensitive liabilities With a

positive interest-sensitive asset, theoretically the bank is easily harmed by the fall of the

interest From 2019 to 2020, many banks lowered the interest rate due to the COVID but

SHB did not decrease interest-sensitive assets to offset the loss and still increased by over

20,000,000 minion VND The way that SHB Bank used to prevent NIM from falling is

slightly different Because the financial firm could not gain profit as much as it did from

basic banking services before the COVID, it had to find other sources of income therefore, it

obtained more securities for sale by 2,500,000 million VND It also increased the short-term

loans by 177,000,000 and extended the due date of previous loans Thanks for those efforts,

the NIM of SHB the witness a raise by percent