Commercial bank (Ngân hàng thương mại): Analysis of some indicators in the financial statements of Asia Commercial Joint Stock Bank (ACB) Phân tích chỉ tiêu tài chính ACB 2021

Analysis of some indicators in the financial statements of Asia Commercial Joint Stock Bank (ACB)Bản Tiếng Anh Phân tích các chỉ tiêu tài chính của ngân hàng ACBLấy số liệu từ báo cáo hợp nhất quý 2 năm 2021 của ACB

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATION PROGRAMS

Analysis of some indicators in the financial statements of Asia Commercial Joint Stock Bank

Group: 5 Class: Investment Economics K61

Lecturer: Tran Phuoc Huy

Subject: Commercial Bank Members: Le Hoang

Nguyen Lan Chi

Nguyen Phuong Ha

Nguyen Thi Kim Anh

Le Thi Thu Anh

Ha Noi, 2021

TABLE OF CONTENTSY

I News brief 3

1 Dragon Capital sub-fund continues to divest from ACB 3

2 ACB: Decision of the Board of Directors on the increase of charter capital for ACBS 3

3 ACB pays a stock dividend 4

4 ACB's credit "quota" will be extended to a maximum of 15% 4

5 VN 30 Basket: Add ACB, SAB, GVR 5

6 ACB successfully offered 2,500 billion dongs of bonds 5

II General introduction to Asia Commercial Joint Stock Bank 6

III Analysis of financial indicators of Asia Commercial Joint Stock Bank 8

1 Capital mobilization growth rate 8

2 CASA rate - demand deposit rate 9

3 Analysis of the bank's NIM 11

4 Indicators reflecting credit situation 12

a Credit growth analysis 12

b Analysis Credit outstanding balance compared to Mobilized capital 14

c Analysis of overdue debt ratio on total loan outstanding balance 15

d Analysis of Allowance for Credit Losses 16

e Analysis of net overdue debt ratio 17

5 The ratio of profitable assets to the source of capital payable 18

6 Fixed assets status 20

7 Income and expense criteria 21

8 Profitability analysis criteria 22

a Net profit margin ratio 22

b Net Marginal Non-Interest Income Ratio 24

c Average interest rate difference 25

d Interest difference from credit activities 27

e Ratio of return on average total assets 28

9 Liquidity analysis criteria 29

a Analysis of affordability ratio 29

b Analysis of the bank's quick ratio 30

IV General assessment and forecast of future trends of Asia Commercial Joint Stock Bank 34

1 General assessment 34

2 Forecast of future trends of Asia Commercial Joint Stock Bank 34

I News brief

1 Dragon Capital sub-fund continues to divest from ACB

Before the transaction, the subsidiary fund of Dragon Capital owned nearly4.93 million ACB shares and registered to sell 900,000 ACB shares, resulting in thesale of 894,800 shares This fund announced that they didn’t sell out all the sharesregistered because of the fluctuating market price.

Dragon Capital Group is currently a shareholder of ACB through its holdings

of DC Developing Markets Strategies Public Limited Company, Samsung VietnamSecurities Master Investment Trust (SMITH) and Norges Bank

ACB stock price movement from the beginning of 2021 to the session 22/06/2021

2 ACB: Decision of the Board of Directors on the increase of charter capital for ACBS

ACB Securities CoLtd 's charter capital was increased by1,500,000,000,000,000 (one thousand five hundred billion Vietnamese dong) onJune 8, 2021; bringing the total new charter capital to 3,000,000,000,000 (threehundred trillion dong) in the form of equity contribution

Implementation time: in 2021 after being approved by the State SecuritiesCommission

Form of capital increase: Owners of Asia Commercial Joint Stock Bank(ACB) contribute more capital.

3 ACB pays a stock dividend

Recently, on June 16, 2021, ACB increased its capital by issuing 540 millionshares to pay dividends, equivalent to 25% After the issuance, the total chartercapital of ACB will increase to more than 27,000 billion dongs

The bank said that the increase in charter capital is to ensure safe ratios for thebank, increase medium and long-term capital for credit extension activities, invest ingovernment bonds, and add capital to renovate, invest in strategic projects in thecoming years

 Closing the trading session on May 31, 2021,

ACB's stock price stood at VND

41,400/share, up 47% compared to the

beginning of the year

In the first quarter of 2021, ACB's pre-tax

profit reached VND3,104 billion, up 61% over the

same period last year As of March 31, 2021, ACB's

total assets reached VND 449,515 billion, up 1.1%

compared to the beginning of the year Outstanding loans to customers increased by4,1% to 324,311 billion dongs

4 ACB's credit "quota" will be extended to a maximum of 15%

June 25, 2021, ACB Bank - ACB Commercial Joint Stock Bank is likely to beextended credit room by the State Bank in 2021 to 15% ACB has a credit quotagranted by the State Bank for the whole year of 9.5%, but at this point, the creditroom is tight, so the bank is proposing to increase it to 15% Along with private

banks such as VPB, TCB, and MBB, private bank ACB has achieved phenomenalcredit growth in both revenue and profit despite the COVID-19 pandemic That iswhy the State Bank of Vietnam provides joint-stock banks with the most creditspace.

5 VN 30 Basket: Add ACB, SAB, GVR

On July 19, the Ho Chi Minh City Stock Exchange (HOSE) announced thelist of component stocks of the VN30 basket for the July 2021 period The list takeseffect on August 2, 2021

According to this portfolio reversal, the VN30 basket will add three stocks:ACB, SAB, GVR, and exclude TCH, SBT, and REE

6 ACB successfully offered 2,500 billion dongs of bonds

Asia Commercial Joint Stock Bank (ACB) has just announced a successfulsale of 2,500 bonds, equivalent to VND2,500 billion, to a domestic institution with aterm of 3 years, due on July 15, 2024

ACB's bonds are non-convertible bonds without warrants, are not secondarydebts, and are unsecured The bond interest rate is 3.5%/year, paid periodically once

a year

Previously, from May 6 to July 8, ACB issued 7 other bond lots with a totalvalue of 11,700 billion dongs Accumulated from the beginning of the year untilnow, this bank has mobilized 14,200 billion dongs of bonds

II General introduction to Asia Commercial Joint Stock Bank.

ACB (Asia Commercial Joint Stock Bank) started its operation in 1993 ACBhas 28 years of development and continuous growth to become one of the leadingjoint-stock commercial banks

On October 31, 2006, ACB was listed on the Hanoi Stock Exchange At theAnnual General Meeting of Shareholders (AGM) 2020, ACB shareholders agreed tochange the listing floor from HNX to HOSE More than 2.16 billion shares of AsiaCommercial Joint Stock Bank (ACB) were transferred following the exchange, andthey have been formally trading on HOSE since December 9, 2020

ACB aims to provide financial products and services to individual andcorporate customers through traditional transaction channels, while constantlydeveloping the branch system to help customers transact quickly and easily throughelectronic channels (ACB online, ACB Mobile Apps, ACB Business Apps), self-service channels (ATM, CDM), associated with payment intermediary services (e-wallet: Shopee Pay).

The main products and services of the bank are:

 Mobilizing capital (receiving deposits from customers) in Vietnam dong,foreign currency and gold

 Use of funds (credit, investment, joint venture) in Vietnam dong, foreigncurrency and gold

 Intermediary services (making domestic and foreign payments, performingtreasury services, remittances and quick money transfers, life insurancethrough banks

 Trading foreign currency and gold

 Issuance and payment of credit and debit cards

In the 5-year development strategy for the period of 2019 - 2024, ACB sets avision to be the leading retail bank, with high gross income growth, the bestcustomer experience, and the highest profit margins, on equity capital (ROE) of20%/year or more, focusing on target segments in individual customers, small andmedium enterprises, and selectively developing large enterprise customers

Some prestigious awards achieved by ACB in 2020

 Most Recommended Retail Bank in VN - The Asian Banker

 10th Ranking in Asia Pacific - The Asian Banker

 Best Customer Service Provider Asia 2020 - International Banker (UK)

From 2020 to the end of the second quarter of 2021, ACB's P/E ratio is lowerthan the average banking industry in Vietnam (13,01) according to a reportpublished in May 2021

EPS ratio is stable and increases quarterly from 2021 to the end of the secondquarter of 2021 => The bank's business is effective despite the impact of thepandemic

III Analysis of financial indicators of Asia Commercial Joint

Stock Bank.

1 Capital mobilization growth rate

In total capital, mobilized capital is a very important indicator for the bank'soperations If the bank mobilizes more capital, the unit is able to expand the loanscale because the bank is a borrower to lend Therefore, the unit must regularlymonitor the scale and structure of mobilized capital by term, by object ofmobilization (economic organizations, individuals), by currency (VND and foreign

currencies), etc the basis for determining the structure of each component in themobilized capital Thereby, it is possible to consider and evaluate mobilized capitalsources to take reasonable adjustment measures At the same time, to understand thegrowth rate of mobilized capital, the following criteria can be calculated:

Deposit growth rate (%) = (Balance of mobilized capital this period / Balance of mobilized capital in the previous period – 1) x 100

This is the basis for assessing the bank's ability to attract capital fromcustomers to expand its business activities as well as its reputation The higher thegrowth in mobilized capital, proves that during the period the unit has applied manymeasures to increase capital mobilization capacity, or because the bank's reputationhas been enhanced in the market, the unit has created a traditional customer portfoliosystem From the mobilized capital, it will be a condition for the bank to expandcredit activities and other activities that are income-generating activities for thebank

Figures from the financial statements:

Time period Charter capital

Balance at the beginning of the

ACB's capital mobilization growth rate is 0% Thus, in the second quarter of

2021, the bank did not raise additional charter capital

2 CASA rate - demand deposit rate

CASA stands for Current Account Savings Account, also known as demanddeposits When customers go to the bank to open an account (current account) todeposit/withdraw money, transfer money, receive salary, open ATM card, etc., youhave contributed to increase the CASA rate for the bank

The higher the CASA ratio, the cheaper capital the bank can mobilize, therebyhelping the bank improve its net interest income (NIM) ratio and have morecompetitive conditions on lending interest rates in the market On the other hand,this ratio also indirectly reflects the effectiveness of a commercial bank's policies onproduct development, utility services, customer base creation, etc

CASA = (Demand deposit + Margin deposit)/ (Total deposit + Priced paper issuance)

Meaning: The Casa Index is the ratio of demand deposits at banks A highCasa index means a lower cost of capital When assessing a bank's Casa index, it isnecessary to compare it with other banks and the industry average A high Casaindex will help the bank improve the NIM ratio and have more competitiveconditions for lending interest rates in the market On the other hand, the higher theCasa index reflects the development background of the bank's services, as manyother value-added products and services are associated with customers' demanddeposit accounts

Figures from the financial statements:

Subject 30/6/2021 31/12/2020

Demand deposit Credit institutions 86,993 51,840

Total deposit Credit institutions 27,085,956 23,875,242

3 Analysis of the bank's NIM

Net interest margin (NIM) is a measurement comparing the net interestincome a financial firm generates from credit products like loans and mortgages,with the outgoing interest it pays holders of savings accounts and certificates ofdeposit (CDs)

Expressed as a percentage, the NIM is a profitability indicator thatapproximates the likelihood of a bank or investment firm thriving over the longhaul

This metric helps prospective

investors determine whether or not to invest

in a given financial services firm by

providing visibility into the profitability of

their interest income versus their interest

expenses

NIM = Net interest income / Profitable assets

Profit in the first 6 months of 2021 grew strongly thanks to NIM expansion.ACB recorded pre-tax profit of VND6,353 billion, with the main contributioncoming from a sharp drop in deposit interest, helping NIM's net profit marginexpand by 0.8% since the beginning of 2020

ACB's high net interest income margin (NIM) is due to: the bank continues toincrease the proportion of retail lending with high profit margin and the bank'sstrategy to increase CASA ratio

This ratio is very important when investors want to invest in a certain bankstock The higher the NIM, the better the bank's profitability

4 Indicators reflecting credit situation

Analysis of credit situation at Asia Commercial Joint Stock Bank (ACB)Credit is the relationship between a borrower and a lender In which, the lender hasthe task of transferring the right to use the loaned money or goods to the borrower

within a certain period of time The borrower is obligated to pay the borrowedamount or goods in full when due, with or without interest.

Bank credit is a credit relationship between banks, credit institutions andbusinesses or individuals (borrowers) In which, the bank or credit institution willtransfer the property to the borrower for use within a certain period of time, whendue, the borrower must repay both principal and interest to the credit institution

Credit activities are the current and future income-generating activities of thebank, an important indicator and usually account for the largest proportion of totalassets

a Credit growth analysis

Credit growth rate (%) = (Credit outstanding balance of this period / Loan outstanding balance of the previous period -1) x100

Credit growth is the percentage increase or decrease in the credit outstandingbalance when compared to a point in time in the past

Time period Credit outstanding balance (million VND) Credit growth rate (%)

Based on the analysis in the table above, ACB's credit balance over the quartersand from 2020 to 2021 tends to increase rapidly and evenly with good qualitydespite the negative impact of the Covid-19 pandemic

Credit growth in 2020

reached 15.9%, 1% higher than

planned In the first half of

2021, credit growth will reach

9.2% with a customer loan

scale of approximately VND

337 trillion, faster than the

growth rate of 5.9% of the

whole industry

Chart: Credit scale and credit growth rate

With the advantage of abundant equity from retained earnings and earlyresponse to the State Bank's call to reduce interest rates Along with that,outstanding loan growth in the first half of 2021 was mainly due to individualcustomers and small and medium enterprises (SMEs), these two customer groupsaccounted for 93% of ACB's outstanding loans at the end of 2020 Partly due to theimpact of the pandemic, banks simultaneously reduced lending interest rates, which

is also the reason that directly affects the increase in size and credit growth rate atAsia Commercial Joint Stock Bank (ACB)

ACB continues to not hold corporate bonds in its credit portfolio andmaintains high lending standards

b Analysis Credit outstanding balance compared to Mobilized capital

Ratio of credit outstanding balance to mobilized capital = (Credit outstanding balance/ Mobilized capital) x 100

The ratio of credit outstanding balance compared to mobilized capital reflectsthe effective use of capital of the bank The higher this ratio, the greater the liquidityrisk of the bank

Comparison table of credit outstanding balance to mobilized capital of ACB

Unit: Million VND

Time

period

Credit outstanding balance

Mobilized capital

Credit outstanding balance/ Mobilized capital (%)

Through the performance evaluation index, the lending situation of AsiaCommercial Joint Stock Bank has gradually become more effective over time Theratio of outstanding loans to mobilized capital is always over 77%, especially in thefirst half of 2021, it has improved significantly when it is always over 81% Thisshows that ACB has used most of the mobilized capital to lend, promoting theefficiency of mobilized capital However, with the increase in this ratio, the bankfaces additional liquidity risk But with this ratio, ACB still ensures to haveappropriate provisions.

The table also reflects that ACB has always met enough mobilized capital forcustomers' borrowing needs

c Analysis of overdue debt ratio on total loan outstanding balance.

Overdue debt ratio (%) = (Overdue debt/ Total loan outstanding balance) x 100

Determining the overdue debt ratio is a very important factor in assessing thecredit quality of a bank, to reflect loans with poor repayment ability

If this ratio is low, it means that the business of the entity is good, most of thecredits of the business are profitable and recoverable On the contrary, if this ratio ishigh, banks need to take measures to control overdue debts, limit the risk of losingcapital due to overdue debts

From this table, it can be seen that the ratio of overdue debt to totaloutstanding loans of ACB is kept at less than 1%, this is a positive sign that the debtcollection at the bank is being done well However, compared to 2020, this ratio hasincreased by 0.16% in the first half of 2021, so the bank needs more completesolutions to reduce the amount of overdue debt to the lowest possible level.

d Analysis of Allowance for Credit Losses

Allowance for credit losses ratio (%) = (Allowance for credit losses fund/ Total loan outstanding balance) x 100

Allowance for credit losses is an amount set aside to provide for possiblelosses due to customers of a credit institution not performing their obligations ascommitted

Setting up allowance for credit losses fund is an annual activity, to evaluatehow the bank's Allowance for credit losses ratio is, in order to forecast a reasonablerate for the next period

Unit: million VND

Number Criteria 31.12.2020 30.6.2021

1 Allowance for credit losses fund 2,950,364 4,839,861

2 Total loan outstanding balance 316,888,754 348,955,320

We can see that the bank's credit growth has a positive impact on theallowance for credit losses As the credit outstanding balance increases, theallowance for credit losses ratio also increases

In 2020, this ratio is 0.93%, which is quite low, showing that the bank hasquite well managed the loan amount, and has limited the losses that may occur due