annual report 2008 vietinbank vietnam joint stock commercial bank for industry and trade

Message from the Chairman of the Board of Directors An Overview of Vietnam Economy in 2008 The Board of Directors The Board of Management 30 33 Loans to the Economy • Investment • Banki

Message from the Chairman of

the Board of Directors

An Overview of Vietnam Economy in 2008

The Board of Directors

The Board of Management

30 33

Loans to the Economy

• Investment

• Banking Services

• Risk Management Business Plan for 2009 VietinBank and Equitization Process Organization Chart

Independent Auditors’ Report

message from

the Chairman

of the Board of Directors

2 Annual Report 2008 VietinBank 2

Ladies and gentlemen,

The Vietnamese economy first faced challenges in

2008 as the result of the increased trade deficit of

USD 17 billion and an inflation rate of 22.9% Later

in the year the global economic turmoil further

strained the economy as we saw dramatic swings in

commodity prices such as steel, oil, gold and foreign

exchange rates The impact was broad as both

trading volumes and liquidity declined sharply in

the capital and property markets Hit especially hard

were the small and medium enterprises across the

economic horizon

In response to these many shocks, the Government

took decisive action on several fronts Eight solution

packages were introduced that resulted in lower

inflation while allowing the economy to grow at

6.23% Industrial production increased 14.6% while

export turnover reached VND 62.9 billion In addition,

for the first time total registered Foreign Direct

Investment rose to USD 64 billion

Within the context of these adverse economic times,

Vietnam Joint Stock Commercial Bank for Industry

and Trade (VietinBank) managed to achieve a lot in

2008 We closely managed liquidity throughout the

year while being able to sharply increase fee based

income Great strides were made in managing risk

and performance ratios improved The bank was

able to expand our branch network, grow total

assets by 17% and increase equity to VND 12,300

billion These achievements were largely the result

of a conservative and strong management team

remaining focused on prudent banking principles

The year was also a milestone for the bank in a

number of other aspects After 20 years the bank

went through a rebranding exercise, launching

a new brand name of VietinBank Additional

accomplishments included centralization of Trade

Finance processing to reduce risk and improve

efficiencies (Main Operation Center No 3),

establishment of a Disaster Recovery Data

Back-up Center, inauguration of the Human Resource

Developing and Training School and was awarded

Second-Place Independence Medal presented by

the State These were all important steps for the

development, modernization and global integration

of VietinBank The final accomplishment for the

year came about on 25th December 2008 when we became among the first State owned banks to launch our Initial Public Offering

With the anticipation of continuing economic challenges domestically and globally, 2009 will be at least partly internally focused While participating in the Government’s Monetary Policies, VietinBank will focus on expense management in order to provide more favorable interest rates and fee structures to our customers Industries the bank will continue to primarily focus on are exporters, the agricultural sector and small and medium industries The goals for 2009 include a 24% increase in mobilized funds, and loan growth of 29% while maintaining non-performing loans below 3% Projected earnings for the year are estimated to reach over VND 2,500 billion, with fee income contributing VND 800 billion Listing on the local stock exchange is also scheduled

in July 2009

Longer term goals of the bank will focus on Modernization whereby the bank will be transformed Areas of focus include improved financial transparency, standardization of services, implementation of strong corporate governance and improved human resource development programs The objective will be while growing and expanding across all areas of the financial services industry, VietinBank plans to build an institution based on prudent and efficient policies that will allow us to meet international practices and standards

On this occasion, the Board of Directors, the Board

of Management and all of the VietinBank Staff would like to express our thanks to customers, local and foreign partners for your trust and cooperation which have contributed to VietinBank successes in 2008 We hope that VietinBank will continue to receive your kind support and cooperation

Pham Huy HungChairman of the Board of Directors

Annual Report 2008 VietinBank 3

In 2008, Vietnam’s economic growth tended to slow down and

remained at only 6.2 percent after high growth of over 8 percent in 3

consecutive years Notwithstanding such difficult situation, Vietnam

export turnover in 2008 attained nearly USD 63 billion, which was an

encouraging result Export turnover of all commodities experienced

increase against the previous year with crude oil reaching USD 10.4

billion (increasing by 23.1%), textiles: USD 9.2 billion (increasing by

17.5%), coal: USD 1.5 billion (increasing by 44.4%), rice: USD 2.8

billion (increasing by 94.6%)

In 2008, the banking system of Vietnam also saw unprecedented

movements The tightened and flexible monetary policy

implemented in early 2008 was gradually shifted to prudently loosen

in the second half of the year In line with this process was the State

Bank of Vietnam’s unprecedented adjustment of management

instruments, which focused mainly on key interest rates, reserve

requirement and exchange rate control.

The year of 2008 saw 3 times of base interest rate increase and 5

times of base interest rate reduction by the State Bank of Vietnam

Re-financing interest rate and rediscount interest rate experienced

the same adjustment frequency Reserve requirement rate increased

in February and experienced decline for 4 times in the last 3 months

of the year (including 2 times of decline in foreign currency reserve

In 2008 the economy of Vietnam encountered complicated and unpredicted movements of the world economy and domestic difficulties.

In the first half of 2008, Vietnam suffered the impact of overheating economy, high inflation, trade deficit, real estate bubble and declined investment quality In an effort to stabilize the macro-economy, the Government adjusted from high growth target to inflation control and maintaining of appropriate growth In the late of

2008, the risks of sub-prime mortgage in the US inflamed the global financial crisis which brought not only developed countries but also emerging economies in the financial triangle Asia-Europe-US to recession Although Vietnam was not severely impacted, the country’s economy was facing numerous difficulties and challenges as a consequence of such crisis

Gdp growth rate was

in 2008

4 Annual Report 2008 VietinBank 4

13 11 12

10 9

11 10

12 11

13 12

14 13

The movements

of the major interest rates in 2008 (%)

of foreign currencies with VND/USD exchange rate falling to

the “bottom level”, equivalent to VND 15,300, while the scarcity

of USD supply occurred both in official and free markets from

May Nevertheless, thanks to the State Bank’s intervention and

foreign exchange reserve capacity which was officially publicized

for the first time, the exchange rate was gradually stabilized in

late of the year.

In summary, Vietnam Economy in 2008 coped with major

difficulties such as reduced growth rate, increased inflation and

imports surplus, unstable securities and real estate markets,

difficult production and business activities In 2009, the economy

of Vietnam will certainly face numerous challenges and the danger

of reduced growth rate However, given the flexible policies of the

Government and the great efforts of the whole society, the country

will strongly sustain and create a momentum for sustainable

growth in the following years.

Annual Report 2008 VietinBank 5

Board of Directors

Dr PHAM HUY HUNG

Chairman of the Board of Directors

6 Annual Report 2008 VietinBank 6

Dr PHAM THI HOANG TAM

Ban Điều Hành

Dr PHAM XUAN LAP

Member of Board of Directors - CEO

8 Annual Report 2008 VietinBank 8

Mr NGUYEN VIET MANH

Deputy General Director

Dr NGUYEN VAN THANH

Deputy General Director

Deputy General Director

Mr PHAM ANH TUAN

Deputy General Director

Mrs BUI NHU Y

Deputy General Director

Mr NGUYEN VAN CHUNG

Chief Accountant

Annual Report 2008 VietinBank 9

The adoption of the new brand name “VietinBank” was a milestone for the bank

in the integration process to the world economy and sustainable development into a diversified financial group keeping leading position in Vietnam Apart from that, VietinBank will actively integrate into the region and the world, becoming a major commercial bank in Asia and contribute to the successful implementation of industrialization, modernization and international economic integration of Vietnam.

establishment of VietinBank main operation center (Vmoc)

international settlements and trade finance of the whole VietinBank system including money transfer, letters of credit, guarantees and counter-guarantees, collection, factoring, transfer of receivables, risk participation, open accounts; trust receipts, bill discounting, refinancing, etc, which are offered to all kinds of customers ranging from domestic and foreign corporates, financial institutions

to individuals VMOC also offers consultancy services, international settlement and trade finance solutions for all customers By implementing research and development of new trade finance-related products, VMOC has contributed

to improving the competitiveness of VietinBank and satisfying customers’

inauguration of VietinBank’s disaster recovery data Back-up center

in Hoa Lac High Technology Zone, which was well equipped and constructed

in a good location, meeting all requirements of State Bank of Vietnam as well

as international standards for a back-up site, marking an important progress in

ensuring the continuousness, safety and efficiency of the bank’s business operation.

Successful ipo

investors with the average successful bidding price of VND 20,265 VND per share

compared to the starting price of VND 20,000 In the unfavorable turndown of

securities market, the Bank’s IPO was considered as a typical event of Vietnam

securities market in 2008.

VietinBank’s reception of Second-place independence medal

development

On 5th August 2008, it is great honor for VietinBank to receive Place Independence Medal – a high level award of the State on the occasion of its 20th anniversary

Second-opening of VietinBank Human resource development and training School

On 30th September 2008 VietinBank officially opened its Human Resource Development and Training School This is considered as the right direction as well as a comprehensive and long-term solution in human resource development strategy of VietinBank.

VietinBank’s

PERFORMANCE

in 2008

1 Deposits from business entities

2 Deposits from individuals

3 Deposits from others

67,670

2

31/12/2007 31/12/2008

CUSTOMER DEPOSITS

BY TYPES OF CUSTOMERS

in VND billion

7,123 3

29,087 25,714

1 1

1 Demand deposits

2 Term deposits

3 Deposits for specific purpose

4 Money transfer payables

5 Other amounts due to customers

6 Margin deposits

79,628 92,359

2 2

31/12/2007 31/12/2008

CUSTOMER DEPOSITS BY TYPES OF DEPOSITS

in VND billion

362 382

3 3

134 99

4 4

614 255

5 5

2,600 2,825

6 6

Thanks to the large network spreading over the country and diversified

deposit products offering a variety of benefits to depositors, the bank’

sources of funds have been increasing from year to year Despite

fierce competition among commercial banks for liquidity, VietinBank’

sources of funds kept on increasing in 2008.

Deposits from customers amounted to VND 121,634 billion, accounting

Given the advantage of an extensive network and good reputation,

in 2008 deposits from individuals to VietinBank kept on increasing,

regardless of the difficulties faced by banking system in fund raising

67,670 billion, increasing by 24% compared to 2007.

14 Annual Report 2008 VietinBank 14

Loans to

the economy

Loans to the Economy

Given the tightened monetary policy of the State Bank of Vietnam in the first three

quarters of 2008 and the huge demand for credit, VietinBank was prudent in selecting

Loans to the economy as at 31st December 2008 were VND 120,752 billion, rose by

VND 18,561 billion representing an increase of 18.2% Medium and long-term loans

accounted for 41.9%; loans to state owned enterprises accounted for 19.9% of total

loans The proportion of non-collateralized loans have been reduced in recent years,

getting to the lowest level of 22.7% of total loans in 2008, a 3% decrease against that

of the beginning of the year Thanks to the strict controlling policy from the beginning

of the year, VietinBank has eliminated risks arising from lending for real estate and

securities investment Loans to corporates, SMEs and individuals were 45.4%, 36% and

18.6% respectively

In 2008, VietinBank continued to sign strategic cooperation

agreements with 4 major national corporations including

Vietnam National Coal-Mineral Industries Group, Vietnam

National Shipping Lines Corporation, Vietnam National

Petroleum Corporation and Vietnam Expressway Corporation.

Annual Report 2008 VietinBank 15

In the first half of 2008, available capital

was mainly used for assuring liquidity

of the bank From the third quarter of

2008, VietinBank continued investing

in the interbank market and valuable

papers market The Bank also continued

to restructure its investment and capital

contribution to its affiliates and joint

ventures and complete the buy back

of the paid-in capital of the foreign

partner in the joint venture insurance

company (IAI), which has resulted in IAI

being 100% owned by VietinBank

the interbank market were VND 18,274

billion, increasing by 42.3% compared

to 2007, of which term deposits and

loans to other credit institutions totaled

VND 12,235 billion, demand deposits

and loans to other credit institutions

were VND 6,039 billion.

and trading purposes doubled that of 2006, reaching VND 41,714

billion, an increase of 9.4% against 2007 Securities held by VietinBank

are of high liquidity and low risks

Available for sale investment securities, which include treasury bills,

central bank’s bonds, municipal bonds, bills and bonds issued by

bonds, treasury bonds, debt securities issued by other credit

institutions and corporations, were VND 3,920 billion, decreasing

by 22.4% as compared to the previous year

investment in the interbank market increased by

42.3%

as compared to 2007

16 Annual Report 2008 VietinBank 16

International Banking

In 2008, VietinBank continued to expand the correspondent banking network and now has more than 850 banks in more than 80 countries and territories Cooperation with foreign banks has been developed across wide geographies, with many long standing ‘in depth’ relationships

Import payment volume in 2008 was USD 7.02 billion,

up by 44.68% against 2007, accounting for 8.46%

of import payment volume of the whole country Export payment volume amounted to USD 4.25 billion, increasing by 48.8% as compared to 2007 and accounting for 8% of export payment volume

of the country Cross-border payments maintained its growing impetus represented by an increase of 50% in comparison with 2007.

Card Service and E- Banking Service

By the end of the year 2008, VietinBank has had 2.3 million customers using debit cards with 900,000 new customers VietinBank accounts for 17% of the total card market share The card holders can make transactions at 1042 ATMs of VietinBank and 4,000 ATMs of other banks joining 2 card alliances - Banknet and Smartlink.

There were 3,905 credit cards issued by VietinBank

in 2008, increasing by 94% as compared to 2007 Card payment volume rose up to VND 626 billion representing an increase of 40% against 2007 Up

to now, VietinBank has established 1,700 POS for VietinBank’s international credit cards and 20,000 POS for cards issued by Banknet joiners From May

2008, SMS banking service has attracted more than 35,000 customers.

Banking Services

Payment and Remittance Services

By the end of 2008, VietinBank has 3 Main transaction

centers, 141 branches and more than 700 transaction

offices and saving offices With the advantage of

the bank’s nationwide network, domestic money

transfer continued its growing impetus in 2008

Number of payment transactions increased by

29.4% and reached 6.2 million Total payment

volume was VND 2,800 billion, up by 29.1% against

2007 Bilateral payments amounted to VND 311,000

billion, increasing by 32.6% against the previous

year with 1.3 million transactions representing an

increase of 16.2% Interbank e-payment volume

increased by 27.9% to VND 1,300 billion with 1.1

million transactions.

In 2008, VietinBank deployed many payment –

related products and services such as conversion

of card transactions into INCAS (VietinBank core

banking system), deployment of Home Banking

service to corporate customers In 2008 VietinBank

also signed a bilateral payment agreement with

Vietnam Development Bank and cooperated with

State Treasury, General Department of Taxation,

General Customs of Vietnam to start up the State

budget collection through VietinBank.

OVERSEAS REMITTANCE VOLUME

(USD million)

108 2003

Risk

MANAGEMENT

Risk Management

VietinBank has developed a strategy on risk management in which the Board of Directors is responsible for reviewing and approving VietinBank’s risk management strategies and policies while the Board of Management takes responsibility for implementing and developing those approved strategies and policies

Risk Management at VietinBank is currently functioned by the Risk Management Group (RMG) RMG is separated from sales divisions It reports directly to the Board

of Management and consists of 5 Departments each responsible for managing different kinds of risk, including credit risk, market risk, liquidity risk, and operational risk These 5 Department members are: Department of Credit and Investment Risk Management (CIRM), Department of Credit and Investment Policy, Department of Market and Operational Risk Management, Department of Non-Performing Loans Management, and the Board of Internal Controllers.

In addition, the Department of Planning and ALCO Supporting is responsible for managing liquidity risk, interest rate risk, and foreign exchange risk Legal Department is in charge of managing legal risks.

20 Annual Report 2008 VietinBank 20

Credit Risk Management

Since 2005, VietinBank has developed

credit strategies fully setting out targeted

clients, markets and sectors The Bank’s

targeted clients are large healthy financial

and highly capable corporations while

potential clients are small and medium

enterprises and individuals Our targeted

markets are those of large cities, potential

municipal and industrial areas And the

targeted sectors are those of industry,

trading and service

VietinBank published policies on credit

risk management in late 2004 The

principles of these policies include

multi-level process of authorization and

approval, regular monitoring procedures

and credit limit control Depending

on VietinBank’s targeted markets and

overall credit strategies as well as past

performance of credit operations, markets

fluctuations, and projected capital needs,

the Department of Credit and Investment

Risk Management proposes levels of credit

growth for VietinBank, and levels of credit

limits for the whole system based on types

of products, currency, sectors, industries,

ownership, clients, client groups, etc

These proposals are then submitted to the

General Director and then to the Board of

Directors for approvals

VietinBank’s daily risk management is jointly

functioned by the Department of Credit

and Investment Policy, the Department of

Credit and Investment Risk Management,

the Department of Non-Performing

Loans Management, and the Department

of Planning and ALCO Supporting In

addition, the Board of Internal Controllers

evaluates VietinBank’s credit operations both periodically and unexpectedly to ensure compliance with VietinBank’s Credit Manual and legal regulation.

Collateral valuations are currently undertaken by the customer departments and risks management departments

at VietinBank’s branches at the time of making loans and conducting reappraisals according to VietinBank’s Guidelines

The loan to collateral value ratio is capped by a certain percentage of the total value of each type of collateral asset Collaterals are re-evaluated at least once a year (depending

on which type of collateral) or unexpectedly.

VietinBank is in the process of developing internal credit rating system

in accordance with international standards

Annual Report 2008 VietinBank 21

Authorizations to approve credit contracts at multiple levels are based on two criteria: (i) Credit Authorization Levels, which are reviewed annually based on levels of relationship management and the capability of the authorized personnel at the Head Office or branch size, the ability of credit officers, and performance at Branches; (ii) Customer Qualification Levels: Credit requirements are being established, modified, and adjusted to comply with Laws and suit to market reality to ensure safety and competitiveness in VietinBank’s operation.

Market and Operational Risk Management

In March of 2006, VietinBank established Department of Market and Operational Risk Management (MORM) to monitor market risks and operational risks within VietinBank system The Department’s functions are to develop policies, procedures, and early warning system for market and operational risks.

To minimize interest rate risks, Department of Planning and ALCO Supporting and Department of Investment jointly analyze interest rate changes based on most updated market information and specialist expertise Floating interest rates are often applied to medium and long term loans, and even to short term loans in case of adverse market rates fluctuations Securities investments are currently focused on low risk products The Bank’s investment portfolio includes State Treasury bonds and other Government bonds The Department of Planning and ALCO Supporting prepares monthly reports on key financial indicators and capital adequacy ratios as required by the State Bank

of Vietnam and submits these reports to the Board of Management for review and approval.

VietinBank has developed strategies on risk management (included

in General business strategy of VietinBank for the period 2005-2010) and temporary regulations on operational risk management to meet international standards on operational risk management In addition, VietinBank has established an internal control system from the Head Office to branches This control system is responsible for regular review and supervision of VietinBank operations to discover and timely prevent frauds and mistakes, propose recommendations to refine operational mechanisms, policies, and procedures to ensure the Bank’s efficiency, safety, and compliance with laws.

22 Annual Report 2008 VietinBank 22

Legal Risk Management

Legal risks at VietinBank are managed by the Legal Department which functions to consult and train business units on legal issues and to ensure VietinBank compliance with Laws and current regulations In specific cases, for example bond underwriting, guarantees for overseas issuance, or providing loans to large projects, VietinBank might hire law firms Branches are also allowed to hire external lawyers to solve their legal issues However, complicated legal issues or issues stemming from staff’s errors are to be reported to and handled by the Legal Department

at VietinBank’s Head Office For new products, the Department reviews all legal respects to ensure compliance with Laws and other current regulations.

Liquidity Risk Management

Liquidity risk management is currently functioned by Department of Planning and ALCO Supporting which is mainly responsible to make plans for assets and liability management, liquidity maintenance, and allocation of reserve funds The Department reports directly to the Board of Directors and Board of Management on a monthly basis to update VietinBank’s current liquidity situation and project next month’s liquidity VietinBank strictly complies with all prevailing regulations of the State Bank of Vietnam in management of liquidity risks

VietinBank currently monitors liquidity by calculating liquidity ratios

as guided by the State Bank of Vietnam and reports to the State Bank

of Vietnam on a regular basis To actively ensure liquidity and avoid unexpected events, VietinBank considers and maintains an appropriate liquid asset ratio so that cash, liquid assets, cash equivalents, nostro accounts, money market instruments, and reserves at the State Bank account for about 25% of total assets of VietinBank In emergency cases, VietinBank is able to apply for support from the State Bank of Vietnam and other domestic banks.

Annual Report 2008 VietinBank 23

PLAN

for 2009

Funding and Owners’ Equity

Total liabilities in 2009 are expected to increase

to VND 226,803 billion, up by 25% as compared

to 2008, of which fund mobilization from the

economy is VND 204,813 billion (up by 24%), fund

mobilization from inter-bank market is VND 13,038

billion (up by 48%).

Chartered capital by the end of 2009 is expected

to reach VND 12,253 billion Retained earnings and

reserves of about VND 1000 billion may be used to

supplement to VietinBank’s chartered capital

Assets

Loans

During the past few years, annual average loan

growth of VietinBank is around 17-18%, lower than

the industry average as the Bank has been focusing

on restructuring loan portfolio together with the

issuance of internal policies and procedures in credit

activities as well as credit risk management In 2009,

on the basis of the bank’s internal management

capacity, branch network expansion together with

the government’s stimulus packages, VietinBank sets

the target for loan growth of 28.9% while enhancing

the credit quality of loan portfolio and keeping NPL

ratio under 3%.

Investment in valuable papers

In 2009, VietinBank plans to make more investments

in corporate bonds which are considered a potential market and of higher efficiency than government bonds and more liquid than loans because of the fact that financial institutions are increasingly active

in trading valuable papers in capital market The trading volume of valuable papers including bonds and bills of Government, SBV bonds, municipal bonds and corporate bonds are expected to increase by VND 8,899 billion to reach VND 50,700 billion in 2009.

450 billion), establishment of life insurance venture company (estimated VND 300 billion), capital contribution to the Gold Joint-venture Company (VND 100 billion), capital contribution to Thai Nguyen Steel Company (VND 100 billion) and other long term investments.

joint-Loan loss provision

In 2008, VietinBank has allocated sufficient loan loss provision In 2009, given the target for loan growth

of 29%, and NPL ratio of below 3%, it is expected that VND 1,000 billion will be allocated for loan loss provision; and the provision reserve at 2009 year- end will reach VND 2,500 billion, of which general provision is VND 1,170 billion and specific provision

is VND 1,330 billion.

Business Plan for 2009

26 Annual Report 2008 VietinBank 26

Plan for branch network expansion

In 2009, VietinBank plans to open 4 new branches: Dien Bien, Bac

Kan, Ha Giang, Hau Giang, and the total number of branches and

main operation centers will increase to 148 VietinBank will open

more than 80 transaction offices in 2009, focusing on developed

towns and districts nationwide.

Annual Report 2008 VietinBank 27

VietinBank and Equitization Process

As a result of great efforts during the 4 years’ equitization preparation process, VietinBank’s Initial Public Offering (IPO) was successfully launched

shares offered were bought with the highest winning price of VND 45,000/ share, lowest winning price of VND 20,000/share and average winning price

of VND 20,265/share

VietinBank’s IPO was launched amid the ongoing global financial crisis and the near bottom of Vietnam stock market and lowest level of total market capitalization However, the registered share volume was 4.29% higher than total offered volume, the bidding capital volume was VND 1,086 billion which almost doubled total trading value of both HOSE and HaSTC on the same day This indicated that VietinBank’s share are attractive and potential.

28 Annual Report 2008 VietinBank 28

After the equitization, the State Capital Investment Corporation (SCIC) manages the State’s capital in the Vietnam Joint Stock Commercial Bank for Industry and Trade The State Bank of Vietnam will assign representatives for the State ownership and participate in the Board of Directors

of the Bank According to the roadmap to the year 2012, the State stake will reduce

to 51 percent, domestic investors will own 29% and foreign strategic shareholders will hold 20 percent of the Bank’s capital The transformation to joint-stock bank status, the diversification of ownership and participation of non-state owned sector and foreign strategic investors will enhance corporate governance and business culture as well as increase the competitiveness of the bank There will

be more opportunities for accessing new technology and expertise in banking business After equitization, organization structure will be restructured to facilitate the renovation and enhancement of the bank’s human resource structure.

After equitization, VietinBank will develop into VietinBank Financial Group The period from now on to 2010 will be the transition period with focus given to completion of organization structure, strategies and operation mechanism

of a financial group After 2010 the financial group will operate in its full functions These are considered as crucial basis for VietinBank to have sustainable development and successful integration.

Listing on the Stock Exchange

To improve the position and image of VietinBank on

the market as well as attract resources from the society,

enhance corporate governance, transparency and prepare

for international IPO, the Bank plans to list its shares on Ho

Chi Minh Stock Exchange in July 2009 after completion of

board of directors general shareholder’s meeting

ceo

supporting group

financial accounting management department

Planning and alco supporting department

accounting Policy department

human resources department

capital construction and Purchasing department

legal department

Back Office

Vietinbank human resources development and training school

information and communication department

iso management department

administration department

business group banking services group risks management group

card service center credit and investment risk management

departmente-banking

department credit and investment Policy department

Vnd remittance department

market and operational risk managementdepartmentnPls management departmentboard of internal controllers

overseas remittance department

dePUtY general directors and chief accoUntant

30 Annual Report 2008 VietinBank 30

it group Main Transaction Offices branches representative

Offices making Units subsidiaries Non-profit

Annual Report 2008 VietinBank 31

Independent

AUDITORS’ REPORT

Annual R

34 INDEPENDENT AUDITORS’ REPORT

To: The Board of Directors and Board of Management of

Vietnam Bank for Industry and Trade

We have audited the accompanying consolidated balance sheet of Vietnam Bank for Industry and Trade (“the Bank”) and its subsidiaries as at 31 December 2008, and the related consolidated statement of income statement, consolidated statement of retained earnings, consolidated statement of cash flows for the year then ended and the notes thereto (“the consolidated financial statements”) as set out on pages 2 to 66 The consolidated financial statements are the responsibility of the Bank’s Management Our responsibility is to express an opinion on these consolidated financial statements based on our audit

Basis of Opinion

We conducted our audit in accordance with the Vietnamese and International Standards on Auditing applicable in Vietnam These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements An audit also includes assessing the accounting principles used and significant estimates made by the Bank’s Management, as well as evaluating the overall consolidated financial statements presentation We believe that our audit provides a reasonable basis for our opinion

Opinion

In 2008, the Bank has amortised 50% for the intangible asset relating to the lease payment for land use right at Hanoi Nam Thang Long City Complex based on the Bank’s analysis which are presented in Note 13.2 The accounting treatment, however, does not comply with Vietnamese Accounting Standard (“VAS”) 01 – Frame work and VAS 06 – Lease and related regulations, accordingly, land use right lease is normally regarded as operating lease and lease fee paid once

in advance for many years should be recognised as prepaid expense and allocated into yearly operating expense over the lease period using straight line method Had the Bank followed this accounting treatment, the net book value of intangible fixed assets as at 31 December 2008 would have been decreased by VND 424,944 million, other assets as at

31 December 2008 would have been increased by VND 831,649 million and consequently, the net profit for the year 2008

in the accompanying consolidated financial statements would have been increased by VND 182,171 million

In our opinion, except for the effects of the matter described in the preceding paragraph, the consolidated financial statements give a true and fair view, in all material respects, of the financial position of the Bank and its subsidiaries

as at 31 December 2008 and of the results of operations and cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System for Credit Institutions and comply with other relevant financial and accounting regulations stipulated by the State Bank of Vietnam

Ernst & Young Vietnam Limited

Vo Tan Hoang Van Vo Xuan Minh

Hanoi, Vietnam

20 May 2009

Reference: 60755043/13562388

CONSOLIDATED BALANCE SHEET

ASSETS

Cash and cash equivalents 4 1,980,016 1,743,604

Balances with the State Bank of Vietnam 5 6,010,724 8,496,135

Placements with and loans to other banks 6 18,273,849 12,841,040

Term deposits with and loans to other banks 6.2 12,235,315 8,011,099

Derivative financial instruments and other financial assets 8 86,810 258

Loans and advances to customers 118,601,677 100,482,233

CONSOLIDATED BALANCE SHEET (continued)

LIABILITIES

Borrowings from the Ministry of Finance and

Deposits and borrowings from other banks 16 8,824,710 5,259,911

Term deposits and borrowings from other banks 16.2 6,856,032 4,165,622 Customer deposits and other amounts due to customers 17 121,634,466 112,425,814 Debts issued and other borrowed funds 18 40,217,706 29,296,023

Foreign exchange translation reserve 22 94,880 61,585