GROUP ASSIGNMENT

I. OVERVIEW OF THE BANK

1. History
 1988: Established as Agricultural Development Bank of Vietnam
 1996: Renamed to Vietnam Bank for Agricultural and Rural Development
 2003: Awarded with the Title of Labor Hero of Doi Moi Era
 2011: Shift to the model of One member State-owned Limited Liability Company
 2013: 25th Anniversary – Awarded Third Labor Medal for the great contribution to
the development of agriculture, rural areas and farmers
 2015: Completed the implementation of Restructuring plan
 2016: Commenced the implementation of the Business Strategic Plan for 2016-
2020 and Vision to 2030
 2017: Prime Minister approved the policy on Agribank’s equitisation
2. Mission, Vision, Business Philosophy
 Mission: Leading State owned commercial bank in Viet Nam; keeping the
dominant role in development of agriculture, rural areas and farmers; contributing
to socio-economic development.
 Vision: developing towards a modern bank with “growth – safety – efficiency –
sustainability”, sound competitive capability and international integration.
 Business Philosophy: “Bring prosperity to customers”.
3. Operational network
- Commercial bank of largest operation network in Vietnam with 2,233 branches and
transaction offices.
- Labor force of nearly 40,000 professional and loyal employees with good command of
the local market.
- Correspondent banking relationship with 825 banks in 88 countries and territories.
- Reliable partner to more than 30,000 enterprises, 4 million of farming households and
12 million individual customers.
4. Key performance indicators
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  Total Assets: 1.155.594 billion dong (USD 52.15 billion)
 Market 1 Mobilization: 1.032.404 billion dong (USD 46.59 billion)
 Outstanding Loans to the economy: 876.496 billion dong (USD 39.55 billion)
 Profit before tax: 5.018 billion dong (USD 226 million)
 Fee income from services: 4.443 billion dong (USD 201 million)
 Owner’s Equity: 55.486 billion dong (USD 2.50 billion)
 Capital: 69.811 billion dong (USD 3.15 billion)
 Tier 1 Capital: 45.359 billion dong (USD 2.05 billion)
(Exchange rate of USD/VND: 22.159 )
5. Prudential Ratios
 NPL Ratio: 1.54%.
 Loan/Deposit Ratio: 84%
 Capital Adequacy Ratio (CAR separate): 10.2%
 Liquidity Reserve Ratio: 13.1%
 Short-term funds/ Long-term lending: 31.9%
 Other prudential ratios: in compliance with regulations of the State Bank of
Vietnam (SBV)
6. Products and Services
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- Over 200 modern banking products and services categorized into 10 groups: Fund
mobilization, Credit facilities, Domestic payment, International payment, Money
market, Investment, Card, E - Banking , Treasury and Monetary management, Linkage
products and services, which best respond to both individual and corporate clients’
demand.
- Modern and diversified distribution channels: nationwide network of branches and
transaction offices, ATM system, EDC/POS, Mobile banking channel, Internet
banking and other channel s for connectivity with customers.
a, For individuals

b, For corporates

c, For FIs
- Correspondent Banking
- International Payments
- Trade Finance
- Treasury
- Forex Dealing

II. GROWTH PROSPECTS FOR THE BANK

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 I. Strengths
- Wide network, with more than 2000 branches and transaction offices, this is considered the
strongest point of Agribank compared to banks and other financial institutions on the
territory of Vietnam. With the network stretching from urban to rural areas, from mountains
to plains, Agribank has given its own advantages such as: Stable market share; abundant
number of customers. Besides, it also creates favorable conditions for Agribank to easily
develop the retail market.
- Brand is the second strength that Agribank has compared to other banks and financial
institutions in the country. Today, the brand is seen as one of the important tools in
establishing relationships, building trust with customers at home and abroad.
- With the support of the Government and the development assistance funds of international
organizations such as ODA, AFD, and ADB for rural development projects, industrialization
of agriculture and forestry, fishery. Specifically, by the end of 2007, Agribank had
effectively received, managed and implemented 111 projects of international organizations,
especially WB and ADB with the capital of over 4 billion USD. The projects continue to aim
at expanding credit for agriculture and rural development, restructuring of plants and
animals, creating jobs, improving people's lives in rural areas of Vietnam.
- Agribank has a particularly important position in the country's economic development; play
a leading and key role in the rural financial market. Currently, Agribank holds a market share
of over 20% of the total mobilized capital of the whole banking system; accounting for
nearly 30% of total outstanding loans. If only lending to agriculture and rural areas,
Agribank accounts for nearly 80% market share. Therefore, Agribank's business activities
have direct impact and influence on economic development, especially in agriculture and
rural development. Because of its particularly important role, Agribank has always received
the support, support and direct attention of the Party Committee, the Government and the
State Bank from the central to grassroots levels.
- Agribank has a modern information technology infrastructure. With the completion of the
Project of banking modernization and payment system phase II, Agribank built a modern
Core Bank; connect all 2,200 branches online. Information technology infrastructure allows
Agribank to transform itself into a new stage - the period of online business. The

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combination of extensive branch network and modern information technology infrastructure
gives Agribank an absolute competitive advantage.
- In addition to banking operations, Agribank currently has 8 independent companies under
its management revolving around three pillars: Finance - Insurance - Banking. Agribank's
subsidiaries are all leading companies with large operating scale in each field. With this
strength, Agribank can develop cross-selling products to maximize the available resources of
the network, people, technology and the experience and professional knowledge of the staff.
. Besides the main business of mobilizing savings and lending, Agribank staff can act as
insurance sales agents; introduction of financial leasing products; or combine telephone,
water, electricity bill...
II. Weaknesses
- Agribank is a commercial bank with 100% chartered capital owned by the State, so
Agribank is heavily influenced by the Government, operating completely for no purpose.
- The industry that Agribank invests in is mainly in agriculture, forestry and fishery, this is a
market affected by natural factors (natural disasters, drought, floods), so the risk of loss is
huge. Besides, the sales for this field are small, but the number of customers is very large so
it is difficult to track and manage so it costs a lot of management and investment costs.
- Financial capacity is still weak compared to international standards.
- The organizational model at the Head Office is not streamlined, effective and is not capable
of directing, operating smoothly, smoothly and with an orientation for a wide, large-scale
branch network system like today.
- The branch network system in the urban area has not been arranged and planned in the
direction of ensuring both efficiency and increasing competitiveness without wasting
resources. The opening of branches and transaction offices in big cities is currently being
conducted in the way the demand is, opening up there leading to overlap, unhealthy
competition and especially inadequate concentration of resources force. Also because there is
no long-term development plan of the network system, the investment in offices and
equipment is not commensurate with the stature and position of Agribank, thus affecting
Agribank's image and brand.
- The products and services are not really diverse and do not have a clear strategy and
orientation in researching, introducing, developing and providing new products and services.
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The introduction and development of products are not based on research, market assessment
as well as evaluation of the effectiveness of each product or service.
- The technology applications have not been fully developed, thus limiting the ability of
administration and administration as well as providing advanced products and utilities.
Agribank has completed the core banking system, a series of application systems have not
been implemented, typically: Management information system; Risk management system;
System interface with external; Information security system...
- The level of technology, experience and business management skills is limited, the staff is
uneven. Risk management is still low, not capable of predicting and forecasting risks.

• Based on the analysis of the external environment (international economic environment,

macroeconomic environment of Vietnam) and analysis of the status of Agribank's
development strategy, here are some opportunities and threats:
III. Opportunities
- Vietnam is integrating more and more deeply into the world economy; Becoming a member
of the WTO has created opportunities to expand the market to the outside (establishing
branches and representative offices; exploiting investment opportunities; seeking capital
sources in the international market; inviting foreign partners, foreign cooperation and
investment in implementing projects in Vietnam); take advantage of technology transfer,
advanced management and administration methods; staff training.
- The rapid development of scientific and technical advances, especially the change and
perfection taking place every day, every hour of information technology applications helps to
shorten the time, creating necessary breakthroughs in modernize banking technology.
- Vietnam has a stable, safe political environment and an increasingly complete business law,
creating a sense of trust and peace of mind for long-term investment and business.
- The Government continues to affirm the policy of reform, accelerate the equitization
process of state enterprises to form economic sectors, enterprises play a key, dominant,
dominant and development orientation economy. Accordingly, there are more and more
corporations, economic groups with large scale and position not only domestically but also
reaching out to the region and the world.

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- The awareness of the people has gradually increased, the demand for quality and use of
banking facilities has become bigger, so the opportunity to develop technology products is
promising.
IV. Threats
- Because Vietnam's economy is integrating deeper and wider into the international
economy, all economic, political and social fluctuations in the world in general and in major
countries in particular are directly impact on Vietnam and first of all the banking system,
finance in terms of exchange rates, liquidity, attracting foreign capital, payment, ...
- The relaxation of operating conditions for foreign banks in the process of implementing
Vietnam's WTO accession commitments means that the domestic market share of
commercial banks will be shared. Competition will be increasingly fierce, putting
commercial banks at risk of falling behind and losing at home.
- Competitors, especially the joint stock banks group, are increasingly active, flexible,
sensitive and daily, expanding hourly, confirming market share in urban areas.
- The substitute products of banking services have been increasingly improved and become
"serious rivals" for commercial banks, the advent and rapid development of securities
companies and fund management companies... Therefore, a large amount of idle money
instead of being deposited into the bank as before is now invested in many forms, many
different channels.
- Foreign banks and joint stock banks pay special attention and invest greatly in perfecting
their existing products and services as well as researching, introducing and launching more
and more convenient product, more useful, better meet the needs and tastes of customers.

From the implementation of SWOT analysis and evaluation of the impact of the
economy, Agribank can be seen as a bank with great development potential. In 2019,
Agribank aims to increase its total assets by at least 10% compared to 2018, increase profits
to a minimum of VND 10,000 billion, enhance financial capacity, consolidate the foundation
to be ready for the roadmap, equitize under the direction of the Government.

Reference source: agribank.com, cafef.vn

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 III. FINANCIAL RATIOS ANALYSIS
1) Profitability Performance

2) Liquidity Performance

3) Asset Credit Quality

4) Capital Structure

5) Market Value ( source : Vietstock)

This table measured the performance of Agribank from 2017 to 2018. The results indicate
that the overall bank performance in terms of liquidity, capital structure, asset management
efficiency, profitability and market value has been improve slightly from 2017 to 2018. An
increasing profitability trend from 2017 to 2018 with a slightly increase in ROA, slightly
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decrease in C/I and a significant increase in ROE. This is come from the increasing in Sales
revenue of financial activities such as : interest from customers, sotck and services. Liquidity
performance measures the ability to meet to obligations as they become due and is crucial to
the sustained viability of banking institutions. In as much as the ratio of net loans to total
assets does not directly measure liquidity, it gives and indication of how much of the bank
assets are tired into illiquid loans. From the trend displayed in the table above, NLTA
decreases by 0.33% LADST and NLDST have increased slightly. Loan to customer
increased by 0.11% from 1,009,694,065m in 2017 to 1,103,606,611m in 2018. The total
asset increased by11.28% from 1,152,486,895 in 2017 to 1,282,448,640 in 2018. An
increasing in loan portfolios in an result in an increasing in loan loss reseverse. The capital
structure has been the same as another commercial bank with high percentage of debts in
total equity and liability. In conclusion, the financial performance of Agribank is worthwide
for investing, as you can see from the market value it has been increased from 2017 to 2018,
and seem like to be increased in the future.

IV. RISK
1) Credit risk

( Source: aggregated from Agribank's financial statements for the year 2016- 2018)

 In the past 3 years, the bank's non-performing loans ratio was within the allowed
limits ( <5%) of 1.8% in 2016 1.5% in 2017 and 1.5% in 2018 could show that
the bank has been trying in managing bad debts, ensuring safety for loans.
 Total-debt-to-total-assets is a measure of the company's assets that are financed
by debt, rather than equity. This leverage ratio shows how a company has grown
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 and acquired its assets over time. In 2018, this ratio was quite high with a value
of 0.939, showing a low level of financial flexibility. However, it means that they
have exploited their financial leverage. In the past 3 years, the ratio always below
1 translates to the fact that a greater portion of a company's assets is funded by
equity.
a) Financial assets that are neither overdue nor impaired
- Assets that have not been overdue and have not yet been devalued include group 1
loans; securities, accounts receivable and other assets which are not past due and are
not subject to provision. The bank assessed that the bank was fully and timely able
to recover.
b) Financial assets are overdue but not yet discounted
- Assets that are overdue but are not discounted are due to the fact that the bank is
holding the collateral assets sufficient to offset the credit losses according to the
current regulations of the State Bank.
- The debt ages of financial assets that are past due but not yet discounted are shown
below:

( Source: aggregated from Agribank's financial statements for the year 2018)
c) Financial assets have expired and have been discounted
The debt age is shown below :

( Source: aggregated from Agribank's financial statements for the year 2018)

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2) Interest rate risk

( Source: aggregated from Agribank's financial statements for the years 2016-2018)

 The table above shows a steady increase over the years in interest rate sensitivity for
assets. In 2016 with a value of 1,062,969,162. 2017 increased by 166,730,769
compared to 2016 and the highest increase in 2018 with a value of 1,303,571,020.
For total liabilities , 2016 is at 951,974,052; 2017 increased 16.01% compared to
2016 is 1,104,375,537; 2018 is the highest at 1,224,268,010
 GAP has always been greater than 0, so the interest rate gap has always been
positive in the past 3 years, deducing the value of assets that are more sensitive to
interest rates than debt-value-sensitive debts. Market rates rise, bank profits will
increase. Market interest rates decrease, interest income will decrease faster than
interest expenses, interest rate risks will appear. We now call the gap state is
sensitive to assets. then the bank may not do anything because it thinks that interest
rates will rise or stabilize, either extend the maturity of the asset portfolio or narrow
the maturity of the debt portfolio on currency markets or increase interest-sensitive
debt or reduce interest rate-sensitive assets.

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  In the past 3 years, the sensitivity ratio has always been greater than 1 meaning that
when interest rates rise, the income of the bank as a result of interest collection will
be greater than the bank's cost due to repayment. Conversely, if the interest rate
falls, then the bank's income is less than the bank's cost, leading to interest rate risk

( Source: aggregated from Agribank's financial statements for the years 2016-2018)

- The following assumptions and conditions apply in the analysis of the effective
interest rate re-pricing term of banks' assets and liabilities:
+ Cash, gold, silver, gemstones, long-term investment capital contribution and other
assets (including fixed assets, investment properties and other assets) are classified as
non-interest-bearing items.
+ Deposits at the State Bank of Vietnam are classified as payment deposits, therefore
the real interest rate re-pricing term is classified to one month.
+ The period of re-pricing actual profit of investment securities and trading securities
is calculated based on the actual maturity date at the time of making financial statements
of each type of securities.

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 + The real interest rate re-pricing term for deposits and loans with credit financing,
loans to customers, government debts and the State Bank of Vietnam, deposits and loans
Credit institutions and customer deposits are determined as follows:
- Items with fixed interest rates throughout the life of the contract: The real interest
rate repricing term is based on the actual maturity date from the date of financial
statements.
- Items with floating interest rate: The real interest rate repricing term is based on the
latest interest rate repricing period from the time of preparation of financial statements.
Items for customers with floating interest rates but with periodic interest rates that have
not been determined in the contract are graded from 6 months to 12 months.
- Overdue loans: The interest rate repricing term is the estimated recovery term,
counting from the time of preparing financial statements.
The real interest re-pricing term of valuable papers issued is based on the actual
maturity date of each valuable paper
3) Liquidity risk
Some indicators to measure the liquidity status of Agribank 2016-2018

( Source: aggregated from Agribank's financial statements for the years 2016-2018)
Liquidity risk management is always the top concern of the Bank Vietnam Agriculture
and Rural Development (Agribank) in Vietnam. In recent years, Agribank's
management is always deeply aware of the consequences. Since this risk happens to
the bank itself, the customer as well the whole economy. Being a 100% State-owned
commercial bank, cashew capital .Agribank's charter depends on budget capital
additional levels. Over the years, Agribank has be supplemented by the Budget with
similar scale. This is a relatively large SBV large chartered capital, reaching 30 trillion
dong annually 2018

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  Theoretically, CAR (minimum capital adequacy ratio) is a measure of bank's
capital adequacy, calculated as a percentage of the total Tier I capital and Tier II
capital compared to the bank's total risk adjusted assets. This shows that CAR of
Agribank has a difference slightly decreased in the period of 2016-2018 : If in
2016 this ratio reached the highest level in 3 years of 11.05%, by 2018 it would
have reached only 9.61%.
 The cash status index is measured by the ratio of the bank's own cash and deposits
at other credit institutions to the total liabilities of the bank calculated at the end of
the fiscal year, deposits at credit institutions (deposits). indefinite and term
deposits); Excluding deposits at the State Bank, because the payment deposits at the
State Bank of banks accounted for a very small proportion because mainly this
account was required reserve deposits. Agribank's cash status index fluctuated in the
period of 2016-2018, namely: 9.16% (2016), the highest increase was 13.31% in
2017 and decreased in 2018 to 11.54%. The higher this ratio proves that NH has the
ability to be stable in work solve immediate cash requests. However, if this ratio is
too high, it is also a sign that the efficiency of capital use is not high because banks
will have to spend many opportunity costs, which reduces bank profits.
 Liquidity index reflects the proportion of holding securities that can be easily
converted into cash compared to the Bank's total "Yes" assets. The higher this ratio,
the better the liquidity status of commercial banks. The liquidity index of Agribank
tended to increase in the period of 2016-2018, namely 16.2% (in 2017) and
increased insignificantly in 2018: 16.5%. The increase of this index indicates that
Agribank's liquidity capacity tends to improve positively.

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From the table data above, we see that the liquidity assets of banks are higher than liabilities,
leading to liquidity surplus.

- Some solutions to solve risk:

 Building a framework, perfecting policies, processes, and methods of liquidity
risk management in the Bank
 Diversifying capital mobilization activities, increasing the stability of capital
sources.
 Improve credit quality
 Strengthening financial capacity
 Diversify risk prevention tools liquidity
 Strengthening the internal control inspection system
ministry of Banking, perfecting the management system
liquidity risk.

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