annual report 2012 vietinbank vietnam joint stock commercial bank for industry and trade

2012 Annual Report 9 Mission Be the leading financial and banking group in Vietnam with versatile operation, providing products and services according to international standards to impro

HISTORY OF THE BANK

REPORT OF THE BOARD OF DIRECTORS

REPORT OF THE BOARD OF MANAGEMENT

ORGANIZATION STRUCTURE, HUMAN RESOURCES AND CORPORATE GOVERNANCEASSOCIATED COMPANIES

FINANCIAL STATEMENTS FOR 2012

2012 Annual Report 5

To our valued customers, partners, and

shareholders,

In 2012, due to the global economic crisis, all

the major economies of the world struggled

in the face of slow growth, difficult challenges,

widespread unemployment, low purchasing

power, and growing public debt On the

domestic front, businesses experienced great

difficulty in running their operations, leftover

inventories were at alarmingly high levels, the

real estate market became increasingly stagnant,

and tens of thousands of enterprises went

bankrupt The banking industry, which has been

undergoing a restructuring process, was affected

as well Credit growth was low in comparison to

the target set by the State Bank of Vietnam, and

non-performing loans were on the rise

Despite having to brave such tremendous

hardships, VietinBank prevailed and carried

out our duties with flying colors VietinBank’s

performance results were all favorable

and indicative of stellar quality, safety, and

effectiveness We continued to revamp our

organizational structure, improve upon our

corporate governance and risk management

practices, recruit new talents, and invest in our

information technology infrastructure The year 2012 was a significant one for VietinBank and marked a series of reforms In line with our tradition, VietinBank confirmed our position as a leading commercial bank of Vietnam that follows the mandates of the Party and the State, adheres

to national monetary policies, contributes to the stabilization of the macro economy, and strives

to integrate into the global economy

VietinBank was able to maintain secure and effective growth throughout 2012 The following achievements could be observed: total assets reached VND 503.5 trillion (an increase of 9.4%

from the previous year); loans increased by 13.6%; mobilized funds increased by 9.3%; profit before tax was over VND 8,168 billion; ROE and ROA were 19.9% and 1.7%, respectively These figures are indicative of VietinBank’s leading position and truly remarkable given the adverse conditions seen throughout the entire banking industry over the past year

2012 was a successful year for VietinBank In May

2012, VietinBank became the first Vietnamese bank to issue USD 250 million international bonds and was chosen by FinanceAsia as Best Borrower in Vietnam In addition, by the end

Message from the Chairman

6 2012 Annual Report

of the year, VietinBank had opened branches

in Vientiane, Laos, and Berlin, Germany These

achievements constitute the pride of not only

VietinBank, but also of Vietnam’s entire financial

and banking sector They also mark VietinBank’s

effort to soar into the international banking arena

Despite the fact that foreign investors have been

wary of engagements in Vietnam’s market, at

year end 2012 VietinBank managed to sign a

strategic cooperation agreement with the Bank

of Tokyo-Mitsubishi UFJ, Ltd (BTMU), the largest

bank in Japan and a subsidiary of the Mitsubishi

UFJ Financial Group, the world’s third largest

financial group The agreement, which saw 20%

of VietinBank’s stake, equivalent to USD 750

million, sold to BTMU, is up until now the single

largest and most successful transaction of its

kind in Vietnam It is a testament to VietinBank’s

thriving reputation and position as perceived by

investors all around the globe

It was also in 2012 that VietinBank made

positive changes and had breakthroughs in

modernizing and restructuring our organization

We kicked off two major projects, the Core

Banking Replacement (CBR) Project and the

Organizational Restructuring and Development

of Human Resources Strategies (ORP) Project

The CBR project serves to vastly modernize

our information technology system, satisfy

customer demands, expand our operations, and

fulfill our long-term growth strategies The ORP project is aimed at completely revamping our organizational structure and business model, thus allowing us to gain a competitive edge and to adhere to the latest and most accepted international standards and practices Further, to continuously undergo sustainable development with the help of a solid workforce, VietinBank put into operation VietinBank Human Resource Development and Training School in Van Canh, situated on a 10 hectare plot of land The school

is equipped with state of the art technology and facilities It is meant to facilitate training and produce a body of staff that is on par with international standards

We anticipate that 2013 will be yet another challenging year for the Vietnam’s financial and banking sector Hence, as members of the Boards of Directors and Management, we cautiously set the following targets: increase total assets by 10%; increase mobilized funds

by 8%; increase loans and investment by 12%; restrain non-performing loans ratio under 3%; increase profit before tax by 5%; keep capital adequacy ratio above 10% We also make it our mission to lead the way in carrying out national monetary policies, to modernize the bank, as well as to enhance our financial strength and competitive capacity Finally, it is imperative that we provide better staff training, improve upon our service and product quality, manage

Message from the Chairman

2012 Annual Report 7

risk in compliance with Basel II, and curb

non-performing loans In so doing, VietinBank will

have what it takes to undergo secure, effective,

and sustainable growth

The coming year is sure to bring about

many challenges and opportunities alike In

anticipation of VietinBank’s 25th anniversary,

the entire bank is committed to building on

our achievements, exerting yet more effort,

performing duties with steadfast determination,

and contributing to the growth of the banking

industry as well as that of the whole economy

Chairman

Dr Pham Huy Hung

8 2012 Annual Report

NGÂN HÀNG THƯƠNG MẠI CỔ PHẦN CÔNG THƯƠNG VIỆT NAMVIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADEVietinBank

108 Tran Hung Dao street, Hoan Kiem district, Hanoi, VietnamVND 26,218 billion (as at December 31, 2012)

No 142/GP-NHNN dated July 3, 2009 by the State Bank of Vietnam

0100111948 (first issuance dated July 3, 2009 by the Hanoi Department of Planning and Investment, registered for the 7th amendment on July 6, 2012) 0100111948

ICBVVNVXDomestic branches: 147 branches across 63 provinces and cities nationwideForeign branches:

1 branch in Frankfurt, Germany

1 branch in Berlin, Germany

1 branch in Vientiane, Lao PDR 19,840 (as at December 31, 2012)International Finance Corporation (IFC)Deloitte Vietnam

Registered name in Vietnamese:

Registered name in English:

2012 Annual Report 9

Mission

Be the leading financial and banking group in Vietnam with versatile operation, providing products and services according to international standards to improve the values

- Dynamic, innovative, professional, devoted, transparent, modern;

- Employees are entitled to make their best efforts, to be justly compensated

for the effectiveness and results of their contributions, and to pay homage to

outstanding employees, best performers.

Business Philosophy

- Secure, effective, sustainable, and in compliance with international standards;

- United, cooperative, sharing, and socially responsible;

- Client’ prosperity is VietinBank’s success.

10 2012 Annual Report

ESTABLISHMENT

VietinBank was established on March

26, 1988, upon separation from the

State Bank of Vietnam under Decree

No.53/HDBT of the Council of Ministers

SCOPE OF BUSINESS

VietinBank offers a wide range of retail

and wholesale banking products and

services both at home and abroad

VietinBank also operates in the

following areas: lending, investment,

trade finance, guarantee, re-guarantee,

forex trading, deposit, payment,

money transfer, card services, local and

international credit cards, traveler’s

cheques, securities trading, insurance,

financial leasing, and many others

LISTINg

Ho Chi Minh City Stock Exchange

(HOSE) since July 16, 2009

Stock type: Common

Stock symbol: CTG

Par value: VND 10,000

Shares Outstanding: 2,621,754,537

shares (as at December 31, 2012)

History of the Bank

IMPORTANT MILESTONES April 15, 2008

Change of name from IncomBank to VietinBank

2012 Annual Report 11 History of the Bank

Of which: Charter capital VND Billion 26,218 20,230 15,172 11,252 7,717

Profit before tax VND Billion 8,168 8,392 4,638 3,373 2,436Profit after tax VND Billion 6,169 6,259 3,444 2,583 1,804

(*) From 2012 audited consolidated financial statements

(1) Excluding portion of equity belonging to minority shareholders

(2) ROAA

(3) ROAE

History of the Bank

2012 HiGHliGHTs

feb 9, 2012 - Opening of Vientiane Branch

feb 25 - feb 26, 2012 - Over 11,000 VietinBank staff across 10 cities and provinces signed up for blood donation feb 28, 2012 - VietinBank’s 2012 General Shareholders’ Meeting

May 2012 - Issuance of USD 250 million international bonds

May 28, 2012 - Opening of Berlin Branch

sep 25, 2012 - Inauguration of VietinBank Human Resource Development and Training School in Van Canh, Hoai Duc, Hanoi Dec 27, 2012 - VietinBank and the Bank of Tokyo-Mitsubishi UFJ, Ltd signed an agreement in Hanoi for the sale of 20%

of VietinBank’s stake to the Bank of Tokyo-Mitsubishi UFJ, Ltd

2012 Annual Report 13

14 2012 Annual Report

AWArDs reCeiVeD in 2012

4 Bank Receiving Best Assessment from the Media Media Tenor (Switzerland), a partner of Vietnam Report

5 Leader in POS and initiatives about card payment Visa

7 Top 3 tax payers among Vietnamese enterprises and

the number one in banking in the list of top 1000 tax

payers among Vietnamese enterprises in 2012.

Vietnam Report, Tax Magazine – General Department of Taxation, and VietnamNet

8 Top 20 Vietnamese largest enterprises Vietnam Report and VietnamNet

9 Top 50 most effective Vietnamese enterprises in 2012 Investment Bridge Magazine and Thien Viet Securities Company

10 Top 100 Vietnamese companies in terms of products

11 Outstanding Retail Bank Award and Outstanding

Banking IT system Award for 2012 Vietnam Banking Association and IDG

12 Top 30 annual reports in 2012 Ho Chi Minh Stock Exchange in association with Securities Investment Magazine and Dragon Capital

records:

The first Vietnam bank in the list of Top 2000

enterprises in the world as ranked by Forbes,

and the single enterprise with the most

number of blood donors

Vietnam Records Association

History of the bank

2012 Annual Report 15

1 Capital base

2 Business results

Funds utilization ratio

+ Total loans/ deposits (LDR) % 69.71% 82.99%

+ Total loans/ total assets (LAR) % 63.73% 66.2%

3 liquidity

2012 finAnCiAl resUlTs

16 2012 Annual Report

Assets and Funds

Increase total assets;

Expedite equitization process to

increase owners’ equity, as well

as to ensure growth demands

and CAR requirements are met

Diversify ownership structure

while maintaining State

ownership at 51% or above

History of the bank

Development outlook for 2013

Credit and investmentCredit is a critical part of the Bank’s operations, in which competition is based on market principles,Make necessary adjustments to credit structure to match VietinBank’s strengths

Minimize credit risks and keep NPL ratio under 3%

Diversify credit and investment activities in the financial market, maintain a leading role in the market, enhance the effectiveness of fund utilization and liquidity management

ServicesDevelop fee-based banking services, identify key service groups to focus on

Make use of a modern IT infrastructure to develop services, with the ultimate goal being to satisfy customers

2012 Annual Report 17

In 2013, VietinBank makes it a priority to strengthen growth, maintain its dominance in the market, reinforce its key role in the implementation of the Government and the Party’s policies The Bank will spare no effort in comprehensive reform towards a more modern and competitive structure Moreover, VietinBank will further invest in information technology, standardize operational procedures, enhance products and services, and manage risk in conformance to Basel II

VietinBank will curb non-performing loans and focus on collecting off-balance sheet debts It is the Bank’s ongoing quest to ensure sound and sustainable growth and promote VietinBank image domestically and internationally At VietinBank, we aspire to become an even more modern, effective financial and banking group that plays a key role in the region.

Human resourcesStandardize and further invest in training of human resourcesRevamp and improve upon mechanism of utilizing employees and compensation

Build a competent and professional workforceImplement thoroughly internal work regulations and abide by corporate culture

TechnologyRecognize IT as a crucial component that supports all facets of business

Build a consistent IT system that is modern, secure, and stable

Organization and GovernanceDevelop a clear, appropriate

organizational structureEstablish subsidiaries to provide a wide array of financial products and services

Expand network, open new branches and representative offices

Strengthen retail banking operations

Development outlook for 2013

P.26

20 2012 Annual Report

Mobilized funds

increased by

Report of the Board of Directors

in 2012, adverse economic conditions could be

observed in Europe, the United States, Japan, and

China Vietnam too fell victim to the crisis: foreign direct

investment was on the decline, the real estate market

was stagnant, and GDP growth did not exceed 5.03%,

the lowest it had been in 13 years The banking industry

faced challenges as well, given intense competition and

growing bad debt figures In response to such unfavorable

conditions, VietinBank’s Board of Directors closely

followed the directions of the Government and the State

Bank of Vietnam, as well as setting guidelines that require

VietinBank personnel to adhere to international standards

and to take the initiatives in coping with market changes

VietinBank managed to overcome challenges and

achieved remarkable results: total assets amounted

to VND 503.5 trillion (an increase of 9.4% from 2011),

reinforcing VietinBank’s position as the second largest bank in Vietnam in terms of total assets; mobilized funds increased by 9.3%; loans by 13.6% VietinBank is at the forefront of the banking industry in relation to agricultural lending, exporting, and granting loans to manufacturing enterprises at reasonable interest rates in compliance with the directives of the Party and the Government Over 2012, asset quality was preserved, and the non-performing loans ratio was kept at 1.46% or lower, which was below the industry average Profit before tax was at VND 8.168 trillion, equivalent to 109% of the target set forth by the

2012 General Shareholders’ Meeting

It was thanks to our joint efforts and determination, especially the comprehensive leadership from the Board of Directors that VietinBank was able to achieve the above results

2012 Annual Report 21

Key TArGeTs seT By GenerAl sHAreHOlDers’ MeeTinG AnD PerfOrMAnCe resUlTs

12/31/2012 Result vs Plan

Total assets (VND Billion) 475,000 503,530 Surpassed

Mobilized funds (VND Billion) 430,000 460,082 Surpassed Total loans and investments (VND Billion) 440,000 467,879 Surpassed

Profit before tax (VND Billion) 7,500 8,168 Surpassed

Compensation for the Board and Supervisory board

1: Resolution no 05/NQ-DHCD dated 2/28/2012 and no 06/NQ-DHDCD dated 12/28/2012

2: Based on year-end charter capital

Mobilized

funds

increased by

Total loans

increased by

22 2012 Annual Report

with BTMU, the likes of which had never before been seen in Vietnam It also marked yet another step in VietinBank’s integration into the international banking scene, at the wake of which S&P rated VietinBank’s outlook as “positive”

In light of favorable business performance throughout

2012, VietinBank scheduled a high dividend payouts to investors Not only keeping an attractive dividend payout ratio, as a premier commercial bank in Vietnam, VietinBank deems it important to keep shareholders well informed VietinBank continually improves upon its hosting of big events, for it is through such events that the Bank promptly communicates official information to investors and analysts in and outside the country VietinBank is regarded as having excellent relations with stock market investors

Sound business strategies and solid performance had positive impact upon the value of VietinBank’s shares (ticker symbol: CTG) Over the course of 2012, CTG shares rose 51.1% in value, which was the highest growth rate among bank shares on the stock market and 3 times higher than VN-Index’s growth of 17.7% Trading volume

Report of the Board of Directors

To bolster its financial strength, VietinBank increased

charter capital from VND 20.2 trillion to VND 26.2 trillion

through stock dividends and bonus shares to existing

shareholders At year-end, consolidated CAR was

10.33%, well over the State Bank’s regulated level of 9%

On December 27, 2012, with the approval of the

Government and the General Shareholders’ Meeting,

VietinBank and the Bank of Tokyo-Mitsubishi UFJ, Ltd

(BTMU), the largest bank in Japan and a subsidiary of

the Mitsubishi UFJ Financial Group, the world’s third

largest financial group, signed an agreement for the

sale of 20% of VietinBank’s stake to BTMU through

private placement of 644,389,811 common shares)

It is estimated that by the time the deal is finished,

VietinBank’s charter capital will amount to VND 32.661

trillion VietinBank’s ownership structure will be such

that the Government will own 64.46% of the stake, BTMU

will own 19.73%, IFC will own 8.03% (previously 10%),

and other shareholders will own an aggregate of 7.78%

(previously 9.69%), making VietinBank the number one

bank in Vietnam by charter capital At the close of a

rather uneventful year for Vietnam’s securities market,

VietinBank managed to sign a significant agreement

2012 Annual Report 23

of CTG shares also tripled from 2011 Additionally, CTG

shares have been garnering more attention from foreign

investors

Two significant events in 2012 further established

VietinBank’s growing presence in foreign markets They

were the issuance of USD 250 million international bonds in

May and the sale of shares to BTMU in December With the

global financial market in a state of stagnancy, these two

events showed VietinBank’s strength and perseverance

in times of hardship Chosen by FinanceAsia as the Best

Borrower in Vietnam, VietinBank indeed appears to be a

highly promising organization in the eyes of investors

In addition, VietinBank kept on pursuing its international

expansion strategy Two new branches were opened,

one in Vientiane, Laos and the other in Berlin, Germany

In total, VietinBank has three foreign branches, with

the first one having been opened in Frankfurt in 2011

Admitting that difficulties still lay ahead, VietinBank’s

oversea branches have achieved encouraging results,

promoting VietinBank’s brand in the international

market The Bank is also looking to open representative

offices and branches in other countries such as England,

Poland, and the Czech Republic

Owing to our joint efforts, VietinBank garnered recognition

from Brand Finance The world renowned brand

assessment company announced VietinBank’s position

as the 328th most valuable brand in the world, making

VietinBank the only Vietnamese bank among the top 500

global banking brands and the No.1 brand in Vietnam

valued USD 271 million and rated A+

VietinBank always strives to establish itself as the leading

commercial bank in Vietnam and a key player in the

greater region The Board of Directors places focus on the

following issues:

• Improvement of risk management and bank

governance processes: In 2012, VietinBank undertook

radical steps to change its organization and business

model for the better The Board recognized that

operating in compliance with international standards

and practices requires having solid risk management mechanisms, striking a delicate balance between profits and risk, and minimizing risk Hence, in January 2013, the risk management Division was born Its purpose is

to manage risk in three independent lines of defense, as required by Basel II, and to usher in a new credit granting model that (i) centralizes appraisal as well as collateral evaluation and management, and (ii) affords greater specialization of departments and better management

of risk across the board

From April 2013, the Treasury and Capital Market Division will be formally established to promote sale and become the only contact of the Bank in the market

to generate more profit given the challenges in credit activities In addition, the three dedicated departments with separated functions are designed to better manage investment activities, strengthen risk management and improve performance The Treasury and Capital Market Division will oversee all investment and treasury activities

in the capital market, sell investment banking and treasury products to customers This is one of two main business pillars and an important premise to promote investment banking in VietinBank to increase the scale and effectiveness of investment banking activities, gradually approaching model of investment banking of the leading banks in the region and the world

VietinBank has formulated sets of procedures, processes, and regulations for its foreign branches In particular, for German branches, VietinBank follows Germany’s MaRisk standards (Basel II), which the Bank plans to apply in Vietnam some time in 2013

• Consolidation of senior management team

In the past year, the composition of the Board of Directors and Management were further consolidated Two new members were added to the Board of Directors, Mr Cat Quang Duong and Ms Nguyen Thi Bac, replacing Mr Tran Xuan Chau and Ms Tran Thi Hong Hanh Mr Nguyen Viet Manh, Mr Nghiem Xuan Thanh, and Mr Nguyen Van Thanh were replaced by Mr Pham Huy Thong, Mr Tran Kien Cuong, and Mr Nguyen Duc Thanh as Deputy General Directors VietinBank’s top management team were united in carrying out their duties and responsibilities throughout the year, contributed extensively to the business performance of 2012

24 2012 Annual Report

• Upgrades to Information Technology System To

pave a foundation for a more modern IT system that

conforms to international standards in an effort to better

facilitate the management and governance of the Bank,

VietinBank implemented the IT strategies for the period

from 2011 to 2015 in partnership with IBM In 2012, the

Board commissioned the Core Banking Replacement

Project, aimed at allowing VietinBank to expand and

to better satisfy the ever changing needs of the clients

and the Bank’s long-term development strategy The

Organizational Restructuring Project was sanctioned in

2012 and officially kicked off in early 2013 The project of

applying MX3 system by Murex for the Treasury division

which has been implemented since 2011 was officially

put into operation from February 2013 In addition, such

projects as LOS, credit risk management, enterprise data

warehouse, SOA middleware system, etc., continue to be

implemented in accordance with the schedules

IT systems continue to be upgraded to support the development of products and services, increase the application of technology, enhance productivity, reduce business costs, thereby enhance competitiveness and control of operations

Report of the Board of Directors

VietinBank Human Resource Development and Training School

2012 Annual Report 25

Indicators Units Targets targets vs 2012 results % growth of 2013

Total loans and investments VND Billion 524,000 12%

By overcoming economic challenges that have been

plaguing the entire globe as well as those that are unique

to Vietnam, VietinBank successfully fulfilled the objectives

assigned by the General Shareholders’ Meeting Not only

did the Bank manage to grow its operations in a safe and

effective manner, VietinBank also took remarkable steps

toward gaining a stronger foothold in the global economy

As a leading commercial bank in Vietnam, VietinBank

also carried out the policies set forth by the Party, the

Government, and the State Bank pertaining to cost and

interest rate reduction VietinBank also held on successfully

to the position as the leading bank in lending, investment,

payment, trade finance, remittance, card services, etc

The above results, along with the hard work done by all

of VietinBank staff, are a testament to the sound direction

of the Board of Directors The Board members took part

in monitoring and guiding all of the bank’s activities

They worked with foreign experts and capitalized on their

strengths and knowledge, which benefited the entire

bank on all fronts The challenges faced by the Bank were dealt with swiftly and flexibly in the best interests of shareholders VietinBank’s Board of Directors fulfilled its role, seized opportunities, and completed the duties to which it had expressed its commitment before the General Shareholders’ Meeting

2013 is anticipated to be yet another difficult year for VietinBank in particular and for Vietnamese banks in general The Board has extensive experience in guiding the bank and is committed to continually finding new ways and scouring for new opportunities to undergo sustainable growth, gain reputation, and become more effective In so doing, VietinBank believes that it will make it evident to investors that the Bank is worthy of the confidence they place in To have the best chance

of carrying out the Bank’s plans, VietinBank’s Board

of Directors hopes to continue benefiting from the guidance of the Party, the State, the Government, and the State Bank, the support of Government agencies, the confidence of the partners, as well as the contributions

of the staff

(*): In accordance with the State Bank of Vietnam’s regulations

Over 2012, total assets grew by 9.4%, mobilized

funds by 9.3%, and total loans by 13.6%

2007 2008 2009 2010 2011 20120

100000 200000 300000 400000 500000

600000 Growth in size (VND billion)

Total Assets Total Loans Mobilized funds

2012 Annual Report 27

Despite 2012’s challenges, including fluctuating interest

rates and exchange rates, VietinBank’s profitability remained

intact Profit before tax was at VND 8.168 trillion, equivalent

to 109% of the target set

8392 8168

2008 2009 2010 2011 2012

Profit before tax

(VND billion)

28 2012 Annual Report

Report of the Board of Management

In 2012, the State Bank of Vietnam

repeatedly decreased the cap for

deposit interest rate from 14% p.a

at the beginning of the year to 8%

p.a at year-end On top of that,

unfavorable economic conditions

and difficulties in banking sector

were the challenges facing

VietinBank throughout the year

Through relentless determination,

VietinBank continued to pool funds

from domestic and international

sources, thus ensuring liquidity and

compliance with the State Bank of

Vietnam’s regulations As at December

31, 2012, mobilized funds were at VND

460 trillion, an increase of 9.3% and

equivalent to 107% of the target set

by the General Shareholders’ Meeting

The growth of funds has now reached a state of stability, with the improvement

of long and medium term funding

Eighty-one percent of funds are composed of VND The market share

of VietinBank’s fund mobilization is around 12 percent

VietinBank is the leading bank

in obtaining funds from foreign sources The Bank was chosen by FinanceAsia, the leading magazine

in Asia on finance and banking, as the Best Borrower in Vietnam Their assessment was partly based on the May 2012 issuance of VietinBank USD 250 million international bonds (clean, unsecured), an event that is reflective of the confidence investors place in the Bank

23.9%

9.3%

At year end 2012, total loans and

investments reached VND 468 trillion,

an increase of 9% from 2011

- Credit activities:

Every bank encountered challenges

in its credit activities over the past

year due to adverse economic

conditions Credit growth for the

entire banking industry was negative

throughout the first six months of

2012 In the third Quarter of 2012,

the economy was picking up By

simultaneously taking a number of

remedial measures such as assisting

enterprises in difficulty, offering

preferential packages and interest

rates, and focusing on granting

loans to manufacturing enterprises,

Growth (%)Outstanding loans (VND Billion)

of 13.6% from the start of the year

This is a remarkable achievement contributing to the fulfillment of the target of credit and economic growth stimulation of the banking sector

VietinBank followed closely the guidelines on credit policy of the State Bank of Vietnam and put forward strict internal regulations to control credit quality Non-performing loans were controlled at 1.46% of total loans

In 2012, VietinBank successfully completed phase 1 of the credit model change process toward centralization

of risk management, aimed at making its operations more conformant to international practices

30 2012 Annual Report

Report of the Board of Management

States-owned enterprises100% State-own one-member limited companyOther limited companies

Joint-stock companies with over 50% state ownershipOther Joint-stock companies

Private companiesForeign invested enterprisesBusiness households and individualsOthers

Manufacturing and processing

Wholesale, retail, automobile and motorcycle repair

Construction

Electricity, petroleum and water

Mining

Transport, warehouse

Agricultural, forestry and aquaculture

Real estate business

Other industries

2012 Annual Report 31

- Investment

Enhancement of profitability was set as the target for

investment activities of VietinBank At year end 2012,

investment activities made up VND 134.5 trillion, equating

to 26.7% of total assets Aside from traditional investment

products, VietinBank launched more modern products over

the past year, including interest rate option, interest rate

swap, currency swap and other commodity derivatives that

aim to assist customers and the bank in managing interest

rate and exchange rate risks

- Interbank market: As at December 31, 2012, VietinBank’s

investments in the interbank market amounted to

approximately VND 58 trillion, accounting for 43% of the

total investment portfolio VietinBank continually maintains

high liquidity and remains profitable

- Bonds, valuable papers (excluding equity securities): At year

end 2012, investment in securities was slightly above VND

73 trillion, an increase of 8.6% from the same time of the

previous year Most of VietinBank’s securities investments are

Government bonds and corporate bonds which are highly

liquid with dominant share in Vietnam bond market

- Capital contribution: As at December 31, 2012, VietinBank

invested a total of nearly VND 3 trillion into joint-ventures,

affiliates and other long-term investments

VietinBank’s 2012 transactions in the interbank market

were about USD 19 billion in value In terms of foreign

exchange trading, VietinBank was the leading bank in

the interbank market with a market share of 20%, and

was the second ranked bank in the non-interbank market

with revenues of over USD 11 billion The trading volume

tripled from 2011 thanks to improvements made to the

system and to increasing direct sales

- Domestic payment services:

Owing to the constantly improved quality of payment

services, the growth in market share and VietinBank’s

reputation, total payments reached VND 7,300 trillion and

fee revenue were VND 447 billion in total

- International payment services and trade finance:

VietinBank’s international payment services and trade finance services have been growing steadily in recent years, with its market share growing slightly as well In

2012, total import-export payments were in excess of USD

32 billion, an increase of 15% from 2011 VietinBank’s share

of the country’s import-export market was roughly 14%

Inter-bankGovernment bondsEquity securities

Debt securities issued

by business entitiesDebt securities issued

by credit institutionsCapital contribution

32 2012 Annual Report

- Card services and e-banking

• Card services: VietinBank resumed the market leader status with a 23% share of the debit card market (11 million cards)

and a 9.5% share of the credit card market (nearly 400 thousand cards) VietinBank’s POS network is second to none in Vietnam

• Electronic banking (e-banking) services: As the Bank further developed its e-banking services, including IPAY, VBH, and

SMS banking, to better serve customers, a remarkable surge in customers that registered for e-banking services (about 2.6 million additional registrations for an aggregate of over 5 million) was observed

Report of the Board of Management

20092008

120211400

2012 Annual Report 33

- Risk Management 

• Credit risk management: In 2012, VietinBank had

the lowest NPL ratio among all commercial banks in

Vietnam (1.46%) thanks to the improvement in credit risk

management The Bank followed closely the directives

of the Government and the State Bank of Vietnam, and

regularly improved upon risk management practices In

adherence to Basel II, VietinBank promulgated regulations

on credit risk and completed a credit risk management

framework Research on revamping the credit

management mechanism was conducted in tandem with

changes to the centralized credit management model

• Management of liquidity risk, interest rate risk and

market risk: VietinBank has continually enhanced its fund

management, liquidity management, and interest rate

risk management practices in adherence to international

practices by means of advanced software and systems

• Operational risk management: VietinBank has made

substantial changes to its organizational model and risk

management framework so as to further comply with Basel II The world’s leading operational risk management system was implemented in 2011 and continues to run stably to date It greatly supports the Bank’s management of operational risk

- Internal Audit and Control

VietinBank has implemented a new internal audit and control model that promotes independence, quality,

to ensure the safety, and effectiveness in the Bank’s daily business and to fit the new credit appraisal model Problems that exist at the branch level are quickly dealt with to ensure consistency across the board

- Human Resources Management and Network Expansion

• Organizational structure: VietinBank has been

implementing the Organizational Restructuring Project Step by step, VietinBank is revamping its organizational and operational models so as to gain competitive advantage and

to further comply with international standards and practices

34 2012 Annual Report

• Network expansion: VietinBank’s ever growing

network is the second most expansive in Vietnam It is

comprised of over a thousand domestic locations Aside

from Frankfurt branch, VietinBank now has a Berlin branch

and a Vientiane branch, both of which were opened in

2012 The Bank’s network is indicative of its status as the

leading Vietnamese bank with regard to international

expansion

• Human resources: VietinBank has made appointments

to all levels of management Careful selection of highly

competent individuals to join VietinBank has been done

during 2012 VietinBank continues to be seen as an

attractive employer to candidates of great skills

• Remuneration: Despite adverse economic conditions,

VietinBank has gone to great lengths to ensure the stability

of the payroll fund More effort has been put into tying

compensation with performance Project on payroll

mechanism and employment of KPIs in accordance with

international standards has been completed in material

respects by year end 2012

- Information Technology and Bank Modernization

VietinBank has carried out many information technology

strategies and projects In particular, the Core Banking

Project was officially kicked off on December 17, 2012

Upon completion, the new Core Banking system is expected

to allow VietinBank to better meet customer demands,

further expand its operations and carry out the long term

development strategies with greater ease

- Communication and Brand Promotion:

Great effort was put into diversifying VietinBank’s

promotional campaigns The messages and communication

channels were improved drastically In anticipation of the 25th anniversary, VietinBank is making preparations for communication programs though a variety of media

- Customer Service:

VietinBank officially inaugurated a contact center It aims to provide customers with modern, professional services and accurate information Its purpose is also to give advices to customers and take in their feedback, as well as to promote VietinBank’s image and reputation

- Investor Relations:

In 2012, a new website for investor relations was set up to provide investors with a reservoir of important information VietinBank is regarded as a leading figure in the securities market Over the year, CTG shares had a profitability ratio

of 51% (triple the growth of the VN-index), which was well above those of other shares on the market

of VietinBank’s training strategies

- Emulation and Awards :

At all levels of VietinBank’s organization, numerous groups and individuals earned awards: awards for 42 individuals and

41 groups were granted by the Prime Minister; 3rd place labor medal bestowed on 21 individuals; 2nd place labor medal granted to 1 individual and 3 groups Of particular significance,

Report of the Board of Management

2012 Annual Report 35

the President of Vietnam signed Decision no 26/QD-CTN which

would see an award for heroic labor conferred upon VietinBank

Pursuant to Resolution 11/CP, Resolution 30a/CP,

VietinBank took a number of measures for the greater

good of the community and of society, such as reducing

operational costs, engaging in charity work, focusing

on curbing poverty, and building infrastructure in rural areas On February 25 and 26, 2012, VietinBank hosted blood donation days Over 11 thousand staff and union members donated their blood, which led to over 8000 units of blood being accumulated As such, VietinBank broke Vietnam’s record for an enterprise having the largest number of employees donating blood for charity VietinBank is well regarded not just as a business entity but also as a charitable organization

the prudential ratios: VietinBank continues to promote

mobilization of all sources of funding, in both local and

foreign currencies domestically and internationally, with

particular emphasis on mobilization from individuals and

institutions; Issue timely mechanisms, policies, products,

managing interest rates which are appropriate and close to

the market; Attract and make use of funds from traditional

clients with large deposits, long-term international

sources to achieve a balance with lending and investment

activities; streamline the capital structure by increasing

the proportion of stable long-term capital; Understand the characteristics and movement of markets in each locality of operation to actively implement effectively mobilization products

• VietinBank’s credit growth is linked to quality, efficiency and sustainability: VietinBank continues to promote the

growth of short-term credit to improve credit portfolio, including strengthening of credit growth in key industries and priority areas; regularly follow up with economic forecasts, international and domestic markets, and improve the quality of analysis, evaluation and forecast to have a clear credit orientation for each clientele, each group of industries; diversify credit and banking products services for each

2012 Annual Report 37

customer segmentation; improve the quality of customer

evaluation, project appraisal and loan schemes, enhance

following-up with customers, regularly monitor, classify

and evaluate the business operations, financial capacity of

customers; further improve corporate governance capacity,

tighten credit discipline, focus more on inspection, control

and monitoring credit risk, operational risk, minimize new

bad debts; Implement three separate lines of defense

according to Basel II standards to control and maintain good

credit quality

• Foreign exchange trading:

VietinBank will focus on implementing business goals

under a long-term vision to continue to improve its market

share of foreign exchange; implement comprehensive

marketing plan to sell foreign exchange products;

expand cooperation with domestic and foreign financial

institutions, as well as with export customers to enhance

the exploitation of foreign currency to meet the needs of

customers; develop new business of investment banking

and currency trading such as currency derivatives, interest

rate derivatives and exchange rate derivatives in order to

maximize investment opportunities and minimize risks

• Fee-based services:

- Domestic payment operations: VietinBank continues to

implement measures to ensure the safe operation of

payment; improve mechanism of management monitoring,

inspection of payment transactions at Head office and at

branches; improve and upgrade user applications, increase

automatic processing, etc., to expand domestic payment and

make sure of the quality of centralized payment transactions

through Head office (bilateral payment, IBPS payment);

promote research and development of new payment

products, expand customer base, distribution channels and

market share of VietinBank’s payment services

- International payment and trade finance: VietinBank will

restructure its customer base; focus on low-risk sectors,

innovate funding mechanisms for trade finance in the

direction of modern banking, based on an assessment

of the flow of goods and cash flow, free from traditional

mindset of credit

- Card Services: VietinBank continues to maintain leading

market position across all card businesses; promote research, plan the deployment of new technological projects, keep up with technology trends in the region and the world; innovate, improve the quality of card products and services to make the difference through quality and

value added services.

• Equitization and increase of charter capital:

Equitization and increase of equity are some of the areas of focus under the plan on renovation, restructuring banking operations, expanding business operations and improving risk management in accordance with international standards The key goal

in 2013 of VietinBank is to increase charter capital, thereby enhancing owners’ equity, through the sale of shares to foreign strategic shareholder and issuance of additional shares to the existing shareholders In 2013, VietinBank’s charter capital is expected to exceed VND

37 trillion and owners’ equity is expected to be VND

52 trillion, the percentage of ownership of the State, strategic partner BTMU and IFC are expected to be 64.3%, 20% and 8% respectively, bringing VietinBank

to be the bank with largest capital base and strongest shareholder structure in Vietnam

VietinBank is conducting comprehensive restructuring of the risk management division to strengthen and promote the role of three independent lines of defense according

to international practices VietinBank continues to improve internal audit model, consolidate audit personnel and enhance the provision of consultancy service and recommendations to its branches At the same time, the Bank keeps strengthening its internal remote monitoring through monitoring programs and system in order to improve the efficiency of the inspection, control and internal audit function

VietinBank continues to comply with the rules, procedures and regulations in its course of business The development

of risk prevention culture, active control and management

of risks in all activities are receiving attention and further enhanced, especially for ethical risks and operational risks

38 2012 Annual Report

• VietinBank continues to restructure and

improve its organization structure: In 2013,

VietinBank will actively carry out the ORP project

to gradually restructure the organizational model;

standardize and improve its sets of processes

and regulations The transformation of the

organization structure of the Bank to strengthen

its operations in wholesale banking, retail banking,

investment banking, supporting activities, finance

management and risk management, etc., according

to international practices will be accelerated to

enhance its competitiveness and risk management

capacity, contributing to the safe and effective

business of the Bank

• VietinBank continues to standardize personnel

management: The Bank will improve the quality of

human resources, especially of those who with limited

or weak performance; restructure and plan staff for

succession, evaluate and monitor the performance

and progress of each staff in succession planning on

a monthly basis; continue the succession planning

for talented staff in 2013; recruit and provide training

to staff to well prepare for foreign branches The

assessment of staff’s performance will be innovated

and made transparent by employing the balanced

scorecard method

• VietinBank further reforms the payroll,

bonus, and emulation mechanisms: In 2013,

VietinBank will implement new payroll mechanism

and employ key performance indicators (KPIs) to

ensure the transparency and fairness of income

policy; continue to do research on and apply new

welfare policies, especially insurance policies in

order to improve and enhance the remuneration,

motivating employees to strive and dedicate

wholeheartedly to VietinBank Emulation and

staffing need innovation toward standardizing the

staff‘s assessment, commending and rewarding

staff promptly at units to arouse their sense of pride

and loyalty, promoting innovations, improving

labor productivity

• VietinBank reviews to improve network

efficiency: In 2013, VietinBank will further

strengthen and consolidate the operation of its units; consider the merger, dissolution or winding

up of the local units with poor performance and no growth potential; speed up the upgrading of foreign branches of the Bank into subsidiaries and promptly implement procedures to open branches in Poland, Czech Republic, England in Quarter III/2013

• VietinBank accelerates the implementation

of integrated information technology strategy, particularly the Core banking replacement project The Bank will continue to take measures

to ensure the smooth operation and continuity of the IT system as well as the quality and reliability of information used for decision making

• VietinBank continues to accelerate investment in infrastructure development and capital construction: key projects such as

headquarter construction project - VietinBank Tower

in Ciputra, Training Center in Hue, Representative Office at 93-95 Ham Nghi in Ho Chi Minh City, Representative Office in Da Nang, etc., shall be put into operation soon

• VietinBank continues to enhance its brand value through communication activities, marketing and brand development: VietinBank

continues to develop an overall communication strategy with promotion campaigns and programs for products and services, major events to enhance business efficiency and improve brand reputation Communication programs are being implemented

to celebrate 25 years of construction and development of VietinBank

In 2013, VietinBank continues to pursue poverty reduction objectives set by the Party and the Government in an effort to improve the lives

of people; implement effectively and monitor closely gratitude and social charity programs

to ensure that the funds from VietinBank will

be efficiently used for right purposes and right persons and in compliance with procedures and regulations on investment, capital construction and financial management

Report of the Board of Management

VietinBank is the first Vietnam bank

in the list of forbes Global 2000 leading companies