Analysis Report of Saigon Thuong Tin Comercial Bank Advantages

VIETNAM NATIONAL UNIVERSITY[pic 3][pic 4][pic 5][pic 6]

UNIVERSITY OF ECONOMICS AND BUSINESS

ANALYSIS REPORT OF SAIGON THUONG TIN COMERCIAL BANK ADVANTAGES

GROUP MEMBERS

Nguyen Thanh Dat

Lai Thanh Loan

Doan Thai Ngan

Nguyen Bao Chinh

Nguyen Phuong Chi

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1. Introduction

1. Understanding the target bank - Sai Gon Thuong Tin Commercial Joint Stock bank:

• Sai Gon Thuong Tin Commercial Joint Stock bank (Sacombank) was established in 1991 and is the largest-capital-commercial joint stock bank in Vietnam. Sacombank has charter capital at 18,853 billion VND in 2015, which is 5th ranked in Vietnam commercial banking system. This is result from the M&A between Sacombank and Southern Bank in Oct, 2015.

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• Sacombank has more than 200 branches with over 300 offices in Vietnam, Lao and Cambodia. After being merged with Southern Bank, Sai Gon Thuong Tin Commercial Joint Stock bank is expected to enlarge its size, enhance the reputation and extend transaction network.

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• The most favorite Electronic Banking in Vietnam - My eBank 2014
• Best Domestic Bank in Vietnam 2014

1. Economy estimation:

• Vietnam GDP growth is predicted at 6.5% in 2016 by World Bank where as the Inflation rate is 1.5%. CPI possibly will remain constant at low level.
• However, there is a chance FED will raise US interest rate by 0.5% which will globally effect the borrowing costs.

1. Analysis on Materiality in Statement of Finance Position and Comprehensive Income

• A gradual increase in Total Asset

Sacombank witnessed an upward trend in Total Asset when the growth rate stood at average 11% per year.  This is the result of a rapid growth in Total Deposits from the customers. The number of Deposit doubled over 4-year-period (from 75 trillion VND to 163 trillion VND in 2014). One of the main causes was the promotion in Long-term interest rate of Sacombank to the Retail customers. In addition, the massive network of branches and transaction offices aided STB approach easily the customers. This trend is expected to continue after Southern Bank since the increase in property.

• A surge of Long-Term Deposits and Loans

This trend led to an negatively decrease in  Duration Gap. As increase in US interest rate is predicted, Sacombank will have the advantage in the future[pic 12]

• A decline in the gap between Short-Term Loans and Deposits

In spite of the fact that this downtrend made STB less sensitive to asset, overall this bank is still significantly Asset-sensitive by which its Net Interest Margin will grow if the estimated interest rate comes true.

• The proportion of investment securities, PLL percentage decreased while Trading securities and Intangible assets increased slightly

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 This illustrates that STB tried liquidized while lessen the number of investment securities, which probably means it was trying to focus on the main function as a bank. Moreover, the PLL percentage decreased represented for a lower default risk since this bank sought for retail customers who are less risky [pic 14]

1.  Analysis on Business Phenomenon

1. Profitability Ratios

1. ROA

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ROA had downward trend that is similar to the trend of the average of Banks. However, in 2013 and 2014, ROA of Sacombank was better than the average of Banks. That shows the management and use assets of Sacombank more effective. Although in 2012 ROA of STB only 0.66% because Net Income decreased. This is due to credit low because of weak demand many companies are not eligible to borrow, interest rate reduction 3-8%; bad debt shot up - all the system was about 8.5-10% per year.

1. ROE

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The profitability of Sacombank shows an upward trend, which means more and more net income are able to be created overtime. We can see that either the asset utilization or ROE declined but ROE went down much slightly. However, we believe this is the result of industry negative effect since the NIM of Banks in group A showed a same trend which will be mentioned in the following part.

After the crush in 2012, STB recovered considerably which represented an efficient governing of the board of director.

1. NIM-NNM

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Overall, there was a decreasing trend in the NIM in the banking industry whereas, the NNM shows a significant difference between Banks in Group A and our target bank (STB).

While STB NNM showed an upward trend after the crush in 2012, NNM of group A remain constant over the period. It could be the positive sign of a sharp recover of Sacombank as a result of the restructuring of the industry.

It can be seen from the line graph that over 4-year-period, NIM of Sacombank exceeded this figure of the group, about 1.5 times

1. Risk indicators

1. Credit risk

- In general, the amount of Sacombank’s bad loans is lower than others bank stand in the same level (SHB, ACB, Techcombank, Eximbank…), which shows in graph below

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• The graph gives information about The preparation of Sacombank for Loans losses.[pic 19]
• In 2012, 4 ratios, especially ALL/Total Equity, climbed significantly. At that time, not only Sacombank but also almost Vietnamese Bank had to face with bad loans.
• Bad situation was ameliorated in 2013. After that, there were different trend between ALL/Total Loans, ALL/Total Loans (went down) and PLL/Total Loans, PLL/Total Equity (went up). This was good signal since they were able to manage charge-offs better. The main reason was Sacombank’s rasing long-term deposits and short-term loans

The graph gives information about the preparation of Sacombank for Loans losses.

• In 2012, 4 ratios, especially ALL/Total Equity, climbed significantly. At that time, not only Sacombank but also almost Vietnamese Bank had to face with bad loans.
• Bad situation was ameliorated in 2013. After that, there were different trend between ALL/Total Loans, ALL/Total Loans (went down) and PLL/Total Loans, PLL/Total Equity (went up). This was good signal since they were able to manage charge-offs better. The main reason was Sacombank’s rasing long-term deposits and short-term loans

The chart shows the Credit Risk from Nonperforming Loans of Sacombank.

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• In 2012, there was a dramatic rise in Nonperforming Loans/Total Loans and Nonperforming Loans/Total Equity. Due to regress period of Banking system  in Vietnam. There were so many loans they could not collect in time.  
• After that time, Nonperforming Loans/Total Equity fell remarkably from 14.403% to 8.429%. A slight decrease of 0.877% in the number of Nonperforming Loans/Total Loans. As a result, Sacombank was safer, not be in danger because of charge-offs.

1. Liquidity risk

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Net loans/toal assets ratio of Sacombank increased from 2011 to 2013 due to an increasing in both assets and loans. Then this ratio has been facing with a light downward trend from 66.785% to 66% until 2014. However, the proportion of net loans in assets was higher than Cash &due of the bank. This is an ordinary condition of bank’s activities, which have the most earning from making loans.