UNIVERSITY OF ECONOMICS AND LAW

FACULTY OF ACCOUNTING AND AUDITING

FINANCIAL STATEMENT
ANALYSIS OF TECHCOMBANK
Subject: Financial Statement Analysis

Lecturer: Mr. Nguyen Vinh Khuong

Ho Chi Minh City, May 2020
 GROUP’S MEMBER

Name Student’s ID Evaluation

Pham Duy Hoang K174091035 100%
Nguyen Thi Le Ly K174091046 100%
Nguyen Van Linh Nhi K174091051 100%
Ngo Thi Nguyen Thao K174091065 100%
Doan Thi Quynh Thuong K174091072 100%

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 TABLE OF CONTENTS

CHAPTER 1: GENERAL INTRODUCTION..........................................................1

1. INTRODUCTION...................................................................................................1

2. ORGANIZATIONAL STRUCTURE....................................................................2

CHAPTER 2: STRATEGY ANALYSIS....................................................................4

1. CORE VALUES......................................................................................................4

2. STRATEGIC MATRICES.....................................................................................4

2.1. External Factor Evaluation Matrix (EFE)...............................................................4

2.2. Internal Factor Evaluation Matrix (IFE).................................................................5

2.3. Competitive Profile Matrix (CPM).........................................................................6

2.4. SWOT Matrix.........................................................................................................6

3. CONCLUSION........................................................................................................8

3.1. Evaluation...............................................................................................................8

3.2. Solution..................................................................................................................8

CHAPTER 3: ACCOUNTING ANALYSIS..............................................................9

1. IDENTIFY KEY ACCOUNTING POLICIES......................................................9

1.1. Cash and cash equivalents......................................................................................9

1.2. Balances with and credit granting to other credit institutions.................................9

1.3. Securities held-for-trading......................................................................................9

1.4. Loans to customers............................................................................................... 10

1.5. Asset classification and provisioning rate, risk provisioning method for balances
with and credit granting to other credit institutions, investments and trusted
investments in unlisted corporate bonds, loans to customers, entrustments for credit
granting and other receivables bearing credit risk........................................................ 10

1.6. Investment securities............................................................................................. 10

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1.7. Repurchase and reverse repurchase agreements .................................................... 11
1.8. Long-term investments ........................................................................................... 11

1.9. Tangible fixed assets .............................................................................................. 11

1.10. Intangible fixed assets .......................................................................................... 12

1.11. Investment property .............................................................................................. 12

1.12. Operating lease payments ..................................................................................... 12

1.13. Other receivables .................................................................................................. 13

1.14. Share capital ......................................................................................................... 13

1.15. Revenue and expense recognition ........................................................................ 13

1.16. Taxation ................................................................................................................ 14

1.17. Fiduciary assets .................................................................................................... 14

1.18. Commitments and contingent liabilities ............................................................... 14

1.19. Derivative financial instruments........................................................................... 14

1.20. Offsetting .............................................................................................................. 15

1.21. Items which have no balance ................................................................................ 15

2. ASSESS ACCOUNTING FLEXIBILITY ............................................................. 15

3. EVALUATE QUALITY OF DISCLOSURE ........................................................ 16

4. IDENTIFY POTENTIAL RED FLAGS ............................................................... 17

5. UNDO ACCOUNTING DISTORSIONS .............................................................. 20

6. ANALYSIS OF THE STATEMENT OF FINANCIAL POSITION .................. 21

7. ANALYSIS OF STATEMENT OF CASH FLOWS ............................................ 22

CHAPTER 4: FINANCIAL ANALYSIS .................................................................. 25

1. ANALYSIS OF PROFITABILITY ....................................................................... 25

1.1. Net profit margin .................................................................................................... 25

1.2. Total asset turnover ................................................................................................ 26

1.3. Return on assets (ROA) .......................................................................................... 27

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1.4. Dupont return on assets......................................................................................... 28

1.5. Operating income margin..................................................................................... 29

1.6. Return on equity (ROE)........................................................................................ 29

1.7. CASA ratio........................................................................................................... 30

1.8. Net interest margin (NIM).................................................................................... 31

1.9. Cost to income ratio (CIR).................................................................................... 33

2. ANALYSIS OF LIDIQUITY OF SHORT-TERM ASSETS.............................. 35

2.1. Accounts receivable turnover................................................................................ 35

2.2. Capital adequacy ratio (Basel II)........................................................................... 35

2.3. Non-performing loan (NPL) ratio......................................................................... 36

3. ANALYSIS OF LONG-TERM DEBT-PAYING ABILITY............................... 39

3.1. Debt ratio (%)....................................................................................................... 39

3.2. Debt/Equity ratio.................................................................................................. 40

3.3. Debt to tangible net worth ratio............................................................................ 40

3.4. Loan to deposit ratio (LDR).................................................................................. 42

3.5. Short-term funding to medium and long-term loans............................................. 43

4. STATEMENT OF CASH FLOWS....................................................................... 44

4.1. Operating cash flow ratio...................................................................................... 44

4.2. Operating cash flow to operating profit ratio........................................................ 45

4.3. Operating cash flow to payment investment activities.......................................... 47

4.4. Operating cash flow per share............................................................................... 48

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 CHAPTER 1: GENERAL INTRODUCTION
1. INTRODUCTION:
Vietnam Technological and Commercial Joint Stock Bank (in Vietnamese
“Ngân hàng thương mại cổ phần Kỹ Thương Việt Nam”), also known as
Techcombank; transaction code: TCB. Which is a joint stock commercial bank of
Vietnam, established in 1993 with an initial capital of 20 billion dong.
Techcombank’s headquarters is located at 191 Ba Trieu Street, Hanoi. The bank
currently has branches and headquarters in provinces and cities across the country with
more than 9,700 employees (as of 2018). Techcombank has been awarded many
financial and banking awards by many Vietnamese and international organizations,
and is considered one of the leading prestigious banks in Vietnam. However,
Techcombank is often mentioned with scandals using gang tricks to recover debts.
Techcombank was established on September 27, 1993 at 24 Ly Thuong Kiet
Street, Hanoi by a group of intellectuals working in Europe and the Soviet Union.
Only one year later, the bank opened a branch in Ho Chi Minh City and increased its
charter capital to VND 51.5 billion. In 1996, Techcombank established Techcombank
Thang Long Branch with Nguyen Chi Thanh Transaction Office in Hanoi, then Thang
Loi Transaction Office under Techcombank in Ho Chi Minh City.
The head office was moved to Techcombank Building, 15 Dao Duy Tu, Hanoi
in 1998. In the same year, they opened their first branch in Da Nang City. By 2005,
they had opened a series of first-class branches in cities and provinces such as Lao Cai,
Hung Yen, Vinh Phuc, Bac Ninh, Nha Trang and Vung Tau, and many new branches
in three central cities. By the end of 2005, the bank had chartered capital of VND 555
billion. Previously, they cooperated with Vietcombank to become the first Vietnamese
bank to issue F@stAccess-Connect 24 in late 2003. Techcombank Visa international
payment card was launched in 2006.
In 2007, Techcombank became the bank with the second largest transaction
network among joint stock commercial banks with nearly 130 branches and transaction
offices. In 2008, they launched Techcombank Visa Credit credit card, then issued a
Techcombank - Vietnam Airlines - Visa co-branded card in 2012.

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 In 2018, Techcombank was listed on Ho Chi Minh Stock Exchange (HOSE code:
TCB). In 2019, total enterprise assets are estimated at VND 383.699 billion with nearly
11,000 employees. Techcombank owns 3 subsidiaries, which are in charge of various
duties including Technological Securities Joint Stock Company, Debt Management One
Member Limited Company, and Technological Fund Management Company Limited.

2. ORGANIZATIONAL STRUCTURE:
Currently, the bank has only one major shareholder, Masan Group, with a
ownership rate of 14.99%. Mr. Ho Hung Anh and his related parties own more than
17% of the capital of this USD 6.5 billion capital bank.
Techcombank will be officially listed on Ho Chi Minh Stock Exchange on June
4, 2018. With the highest floor price offered in banks (128,000 VND/share) and
capitalization scale up to 6.5 billion USD; this is one of the most notable listings this
year. Information about the bank’s shareholder structure is also very interested before
the bank’s listing event, so who owns a large amount of shares here?
After 25 years of establishment, Techcombank has witnessed many times of
changing owners and major changes in key shareholders of the bank. In the past 1
year, the ownership structure at the bank has also changed a lot, the previous fairly
concentrated structure has expanded.
According to the prospectus, the current number of shareholders in
Techcombank is 1,901 people, including 1,700 individuals and 201 organizations.
From mid-2017 and before, the two major shareholders of Techcombank,
HSBC and Masan, owned nearly 40% of the bank’s charter capital. With HSBC
divesting from Techcombank in mid-2017, the bank has only one major shareholder
holding more than 5% of Techcombank’s equity, Masan Group. Masan currently holds
174.7 million TCB shares, equivalent to 14.99% of the bank’s charter capital. Not only
a major shareholder, Masan Group and its subsidiaries are also bis customers here with
more than 1,550 billion deposits at Techcombank (end of March 2018).
The shadow of big names who have accompanied Techcombank from the first steps is
only glimmering at this bank. The three founding shareholders of Techcombank
currently hold very little stake in the bank: Mr. Hoang Van Dao holds 6.4 million
shares, equivalent to 0.55% of the charter capital. Mr. Nguyen Thieu Quang holds 10.1
million 2
shares (0.86% of charter capital), Ms. Nguyen Thi Nga holds nearly 71 thousand
shares (0.006% of charter capital).
Individual shareholders own more than 590 million shares equivalent to 50.25%
at Techcombank. In particular, the family of Chairman Ho Hung Anh owns more than
198 million shares, equivalent to 17% of charter capital. However, a large number of
shares is not in the hands of Mr. Hung Anh (13 million TCB shares) but mainly by
family members.
Mr. Hung Anh’s wife Nguyen Thi Thanh Thuy owns 58 million TCB shares, Mr.
Hung Anh’s mother Nguyen Thi Thanh Tam owns 58 million TCB shares, Hung Anh’s
son Ho Anh Minh owns 31 million shares. Mr. Hung Anh’s sister-in-law Nguyen Huong
Lien owns more than 38.21 million TCB shares. Estimated amount of shares of President
Ho Hung Anh and related people is currently worth VND 25,400 billion.
In addition, Vice Chairman Nguyen Canh Son’s family also holds more than 38
million shares in the bank, equivalent to 3.3% of the charter capital.
Foreign shareholders currently own 22.5% of the capital in the bank, equivalent
to 262 million shares. In which ownership belongs to 170 institutional shareholders
(22.08%), 4 individuals shareholders (0.42%). Sharing at the announcement of the
listing plan on the morning of May 23, 2018, Mr. Nguyen Le Quoc Anh, General
Director of the bank, said that Techcombank will not increase foreign investors’
ownership to 30% at most.
There is not much information about the specific ownership ratio of foreign
investors at Techcombank. It is known that there are 2 foreign investors, Vespa VN
Investments BV and COG Investments BV, bought over 93 million treasury shares of
Techcombank (equivalent to 8% of charter capital) in the first phase of treasury stock
offering in April 2018.
In the second offering of treasury stocks, according to sources of many
international news agencies, GIC, Dragon Capital and Fidelity funds have negotiated
to become basic investors. However, the transaction results have not been disclosed
yet, the ownership ratio of these foreign funds at Techcombank remains unknown.

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 CHAPTER 2: STRATEGY ANALYSIS
1. CORE VALUES:
- The customer is first.
- Continuous improvement.
- Spirit of coordination.
- Human resource development.
- Commitment to action.

2. STRATEGIC MATRICES:

2.1. External Factor Evaluation Matrix (EFE):

Major external factors Weight Point Score by
weight

Opportunity
1. Attractive payment card market 0.12 4 0.48
2. Vietnamese banks' habit of using banking 0.08 3 0.24
services is increasing

3. Potential retail market is becoming the trend 0.1 3 0.3

4. The demand for capital in Vietnam market is 0.05 4 0.2
still very large

5. Banking technology is developing day by day 0.08 4 0.32

6. Stable political and social environment 0.05 2 0.1
7. Integration with the world economy 0.05 3 0.15
Challenge
1. The expansion trend of foreign banks in 0.1 4 0.4
Vietnam

2. Strategy to expand market share, penetrate the 0.08 2 0.16

market of domestic rivals

3. Card operation risks 0.1 3 0.3

4. Weakness of the legal system, especially in 0.03 1 0.03
the field of credit

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5. Vietnam's stock market and real estate are 0.08 3 0.24
thriving

6. Psychology of Vietnamese people 0.06 3 0.18

7. Risk to bank customers 0.02 2 0.04
Total 1 3.14

2.2. Internal Factor Evaluation Matrix (IFE):

Major internal factors Weight Point Score by
weight

Strength
1. High quality human resources 0.1 4 0.4
2. Abundant charter capital 0.12 4 0.48
3. Diversified products and services, highly 0.12 4 0.48
competitive

4. Technology, modern information system, 0.08 3 0.24

advanced

5. Young, enthusiastic working staff at work 0.05 3 0.15

6. Flexible and close customer policies 0.07 3 0.21
Weakness
1. R&D performance is not high 0.05 2 0.1
2. Marketing is not good 0.05 2 0.1
3. Economic benefits for employees are limited 0.08 1 0.08
4. Overall, the staff is inexperienced 0.12 1 0.12
5. The branch network is not much 0.1 1 0.1
6. Bad debt increased 0.06 2 0.12
Total 1 2.58

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2.3. Competitive Profile Matrix (CPM):
Techcombank Eximbank
Major success factors Weight Point Score by Point Score by
weight weight

1. Financial position 0.15 3 0.45 2 0.3

2. Market share 0.15 4 0.6 3 0.45
3. Brand reputation 0.06 4 0.24 3 0.18
4. Product quality 0.1 4 0.4 3 0.3
5. Products and services 0.09 3 0.27 4 0.36
6. Customer service 0.09 4 0.36 3 0.27
7. Technological 0.07 4 0.28 3 0.21
8. Staff 0.15 4 0.6 3 0.45
9. Marketing 0.04 3 0.12 2 0.08
10. Network 0.1 3 0.3 2 0.2
Total 1 3.62 2.8

2.4. SWOT Matrix:

Strength Weakness
1. High quality 1. R&D performance is not high
2. Abundant charter capital
2. Marketing is not good
3. Diversified products and services
3. Economic benefits for employees are
4. Modern and advanced technology and
limited
information system
4. Overall, the staff is inexperienced
5. Young and enthusiastic working staff
5. The branch network is not much
at work
6. Bad debt increased
6. Flexible customer services

Oportunity Challenge
1. Attractive payment card market 1. The expansion trend of foreign banks
in Vietnam
2. The habit of using banking services is
2. Strategies to expand market share,
increasing
penetration

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3. Potential retail market is becoming 3. Card activity risks
trendy 4. Weakness of the legal system
4. The demand for capital in Vietnamese 5. Vietnam’s stock market and real estate
market is still very large are thriving
5. Technology of banking industry is 6. The Vietnamese’s psychology
increasing 7. Risks to customers of bank
6. Stable political and social environment
7. Integration with the world economy

Strength (S) Weakness (W)

S-O W-O
1. Technology development 1. Cooperate with foreign partners
investment (S4, S6, O5, O7) to learn and overcome limitations
2. Diversify products, services in Marketing, R&D activities as
and fields of activity (S2, O3, O4, well as attract good human
O7) resources (W1, W2, O5, O7)
Oportunity 3. Human development strategy 2. Expanding the branch network
to serve the increasing capital
(S1, S5, O7)
4. Expand the product demand of the potential retail
distribution channel through market (W5, O3, O4)
branches and modern technology
to attract new customers as well
as foreign investment (S3, O3,
O5, O7)

S-T W-T
1. Expand branches, attract more 1. Strengthening links, learning
individual customers, small and and expanding relationships from
Threat
medium business (S3, T2, T5) banks, competition of domestic
and foreign banks in Vietnam (W2,
T1, T2)

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 2. Creat favorable conditions for 2. Having clear investment plans,
employees to learn from other setting up risk provisions to
banks (S1, S2, T1, T2) handle bad debt (W6, T6)
3. Use abundant and reasonable
capital to corporate with foreign
enterprises (S2, T1)

3. CONCLUSION:

3.1. Evaluation:
Techcombank prioritizes focusing on learning and enhancing technology in
every process to become more and more professional in accordance with international
standards.
In addition, the bank is trying to come up with diversified product and service
development plans, focusing on the retail market to realize the long-term goal of
"leading retail bank" in big cities.
Every strategy that the bank aims at is directed at people, focusing on human
resource development because this is considered to be the key to Techcombank's
success.

3.2. Solution:
- Modern technology investment.
- Developing high quality human resources.
- Diversify, improve quality.
- Tighten network security.
- Developing distribution channels.
- Participate in charitable activities.

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 CHAPTER 3: ACCOUNTING ANALYSIS
1. IDENTIFY KEY ACCOUNTING POLICIES:
Accounts receivable / net sale is an efficiency ratio or activity ratio that measures how
many times a business can turn its accounts receivable into cash during a period. In
other words, the accounts receivable turnover ratio measures how many times a
business can collect its average accounts receivable during the year.

1.1. Cash and cash equivalents:

Cash and cash equivalents comprise cash, gold, balances with the SBV, treasury
bills and other short-term valuable papers eligible for rediscount with the SBV;
balances with other credit institutions that have maturity of three months or less from
the transaction date and securities with recovery or maturity of three months or less
from date of purchase.

1.2. Balances with and credit granting to other credit institutions:

Balances with and credit granting to other credit institutions are presented at the
principle amounts outstanding at the end of the year. According to Circular 2, the
Bank is not required to make a general provision for placements with and credit
granting to other credit institutions.

1.3. Securities held-for-trading:

Trading securities are securities which the Bank purchases and intends to sell in
the short term for a profit that it expects to generate from increases in the price of the
securities. Securities held for trading are initially recognized at cost.
Listed debt securities held for trading are recognized at cost less provision for
diminution in value of securities. Gains or losses from the sales of securities held-for-
trading are recognized in the consolidated income statement.
Securities held-for-trading are derecognized when the rights to receive cash
flows from these securities are terminated or the Bank transfers substantially all the
risks and rewards of ownership of these securities.

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1.4. Loans to customers:
Loans to customers are presented at the principal amounts outstanding as at the
end of the year less any provision made for loans to customers. Short-term loans have
maturity of less than or equal to one year from disbursement date. Medium-term loans
have maturity from over one year to five years from disbursement date. Long-term
loans have maturity of more than five years from disbursement date.

1.5. Asset classification and provisioning rate, risk provisioning method for
balances with and credit granting to other credit institutions, investments
and trusted investments in unlisted corporate bonds, loans to customers,
entrustments for credit granting and other receivables bearing credit risk:

Asset classification for balances with and loans to other credit institutions,
investments and trusted investments in unlisted corporate bonds, loans to customers,
entrustments for credit granting and other receivables bearing credit risk (here refer as
"debts") is made in compliance with the quantitative method. Where a customer has
more than one debt with the Bank and one of the outstanding debts is classified into a
higher risk group, the Bank is required to classify the entire remaining debts of such
customer into the higher risk group. When participating in a syndicated loan as a
participant, the Bank classifies loans (including syndicated loans) of the customer into
the higher risk group between the assessment of the leading banks and its own
assessment. If a customer is classified by the bank into the risk group which is lower
than the risk group provided by ClC, the Bank is required to adjust the risk group of
such customer following the risk group provided by CIC. In accordance with the
requirements of Circular 02, General provision as at 31 December is made at 0.75% of
total outstanding debt balances excluding placements with and credit granting to other
credit institutions and debts classified as loss (group 5) as at 30 November.

1.6. Investment securities:

Investment securities include available-for-sale investment securities and held-to-
maturity investment securities. The Bank initially recognizes investment securities at cost
and ciassifies investment securities into proper groups at purchase date. According

10
to Official Letter No. 2601/NHNN-TCKT dated 14 April 2009 by the SBV, the Bank
is allowed reclassify investment securities for maximum one time after purchase. The
Bank recognizes investment securities on the date that it acquires substantially all the
risks and rewards of owning these securities.

1.7. Repurchase and reverse repurchase agreements:

Securities sold under agreements to repurchase at a specific date in the future
are not derecognized from the consolidated financial statements. The corresponding
cash received is recognized as a borrowing in the consolidated balance sheet. The
difference between the sale price and repurchase price is recognized in the
consolidated income statement based on the interest rate stipulated in the contract.
Conversely, securities purchased under agreements to resell at a specific date in the
future are not recognized in the consolidated financial statements. The corresponding
cash payment is recognized as an investment in the consolidated balance sheet and the
difference between the purchase price and resale price is recognized in the
consolidated income statement based on the interest rate stipulated in the contract.

1.8. Long-term investments:

Other long-term investments represent investments in other entities in which the
Bank holds less than or equal to 11% of voting rights. These investments are initially
recorded at cost at the investment date. For listed securities or unlisted but registered
for trading securities on unlisted public company market (UPCOM), provision for
diminution in value is made when their listed/registered price for trading is lower than
the carrying value of the securities at year end.

1.9. Tangible fixed assets:

Tangible fixed assets are stated at cost less accumulated depreciation. The initial
cost of a tangible fixed asset comprises its purchase price, including import duties and
non-refundable purchase taxes and any directly attributable costs of bringing the asset to
its working condition and location for its intended use, and the cost of dismantling and
removing the asset and restoring the site on which they are located. Expenditure

11
incurred after the tangible fixed assets have been put into operation, such as repairs
and maintenance and overhaul costs, is normally charged to the consolidated income
statement for the period in which the costs are incurred. Where it can be clearly
demonstrated that the expenditure has resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of tangible fixed assets
beyond its originally assessed standard of performance, the expenditure is capitalized
as an additional cost of tangible fixed assets. Depreciation of fixed assets is computed
on a straight-line basis over the estimated useful lives of tangible fixed assets.

1.10. Intangible fixed assets:

Computer software: The cost of acquiring new software, which is not an
integral part of the related hardware, is capitalized and treated as an intangible asset.
Software costs are amortized on a straigh-line basis from 4 to 8 years.
Land use rights: Land use rights are stated at cost less accumulated
amortization. The initial cost of land use rights comprises its purchase price and any
directly attributable costs incurred in conjunction with securing the land right.
Amortization is computed on a straight-line basis over the leasing period.
Other intangible fixed assets are stated at cost less accumulated amortization.
Amortization is computed on a straight-line basis for the period from 4 to 8 years.

1.11. Investment property:

Depreciation of investment property is computed on a straight-line basis over the
estimated useful life of investment property which is as follows: building 10 - 40 years.

1.12. Operating lease payments:

Payments made under operating leases are recognized in the consolidated
income statement on a straight-line basis over the term of the lease. Lease incentives
received are recognized in the consolidated income statement as an integral part of the
total lease expense.

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1.13. Other receivables:
Accounts receivable other than receivables from credit activities of the Bank are
initially recognized at cost and subsequently presented at cost less provision. The Bank
reclassifies and makes provision for the debts which have been sold but not yet
collected based on the debt classification results and collateral value right before the
debts were sold in accordance with Circular 02 and Circular 09.

1.14. Share capital:

Ordinary shares are classified as equity. Incremental costs directly attributable
to the issue of ordinary shares are recognized as a deduction from equity. On receipt of
capital from shareholders, the difference between the issue price and the par value of
the shares is recorded as share premium in equity. Own equity instruments which are
reacquired (treasury shares) are recognized at cost and deducted from equity. No gain
or loss is recognized in profit or loss upon purchase, sale, issue or cancellation of the
Bank's own equity instruments.

1.15. Revenue and expense recognition:

Interest income is recognized in the consolidated income statement on an
accrual basis, except for interest of debts which are classified in groups 2 to 5 which is
recognized upon receipt.
Fees and commissions are recognized in the consolidated income statement on
an accrual basis.
Dividends receivable in cash are recognized in the consolidated income
statement when the Bank's right to receive dividends is established.
Income and expenses from the sale of debts are recognized in accordance with
Circular No. 09/2015/TT-NHNN providing guidance on the sale of debts of credit
institutions and foreign bank branches.
Interest expenses are recognized in the consolidated income statement on an
accrual basis.

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1.16. Taxation:
Income tax on the profit or loss for the year comprises current and deferred tax.
Income tax is recognized in the consolidated income statement. A deferred tax asset is
recognized only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilized. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.

1.17. Fiduciary assets:

Assets held in a fiduciary capacity are not reported in the consolidated financial
statements as they are not assets of the Bank.

1.18. Commitments and contingent liabilities:

At any time, the Bank has outstanding commitments to extend credit. These
commitments take the form of approved loans and overdraft facilities. The Bank also
provides financial guarantees and letters of credit to guarantee the performance of
customers to third parties. Many of the contingent liabilities and commitments will
expire without being advanced in whole or in part Therefore, the amounts do not
represent firm commitment of future cash flows. Off-balance sheet commitments
include guarantees, payment acceptances and irrevocable unconditional loan
commitments with specific implementing time. The classification of off-balance sheet
commitments is made only for the purpose of managing and monitoring the credit
quality under the policy applied to debt classification as described in Note 4.6. In
accordance with Circular 02, no provision is required for off-balance sheet
commitments.

1.19. Derivative financial instruments:

The Bank involves currency forward contracts and currency swap contracts to
facilitate customers to transfer, modify or minimize foreign exchange risk or other market
risks, and also for the business purpose of the Bank. The currency forward contracts are
commitments to settle in cash on a pre-determined future date based on the difference
between pre-determined exchange rates, calculated on the notional amount

14
The currency forward contracts are recognized at nominal value at the transaction date
and are revalued for the reporting purpose at the exchange rate at the reporting date
Gains or losses realized or unrealized are recognized in the consolidated income
statement.

1.20. Offsetting:
Financial assets and financial liabilities are offset and the net amount reported
in the consolidated balance sheet if, and only if, there is a currently enforceable legal
right to offset financial assets against financial liabilities or vice-versa, and there is an
intention to settle on a net basis, or to realize the asset and settle the liability
simultaneously.

1.21. Items which have no balance:

Items or balances required by Decision No. 16/2007/QD-NHNN dated 18 April
2007 and Circular No. 49/2014/TT-NHNN dated 31 December 2014 issued by the
SBV stipulating the financial reporting mechanism for credit institutions that are not
shown in these consolidated financial statements indicate nil balance.

2. ASSESS ACCOUNTING FLEXIBILITY:

Like many other companies in the same industry, Techcombank uses straight-
line depreciation method for tangible fixed assets as follow:
Techcombank Vietcombank
Building and building 8 -50 years 25 years
improvements

Machines and equipments 3 - 10 years 3 - 5 years

Vehicles 6 - 10 years 6 years
Other fixed assets 4 - 10 years 4 years

According to above table, there are many types of assets with different useful life
times. The estimated useful life of Techcombank is quite high compared to the competitor
Vietcombank. Managers could flexibly perform the nature of their business.

15
Managing credit risk is one of the critical success factors for banks, and managers
have the freedom to estimate expected defaults on their loans. Overall, Techcombank
has moderate flexible accounting policies.

3. EVALUATE QUALITY OF DISCLOSURE:

The disclosure provides business strategies such as position in industry, plans
of business. For example:
- Techcombank was in top 10 out of 100 “Vietnam Best Place to work” in 2018.
- Techcombank was ranked Best bank in Vietnam in 2018.
- Techcombank was awarded Best Trade Finance Bank in Vietnam in 2019.
- In 2019, Techcombank was awarded Best payments Bank in Vietnam by The Asian
Banker.
- Techcombank’s orrientational development is: aspires to be the best bank and a
leading business in Vietnam.
Techcombank applies accounting policies consistently for similar transactions or
events and almost doenn’t change through years.
From 2015 to 2017, the ROA of Techcombank increases significantly, and
steadily increase so far because of focusing on applying CASA to mobilize low-cost
capital. Besides, strong growth in non-interest income in general, and fee income
specifically, grew ROA. The Bank can earn strong profits while prudently managing
their balance sheet.
With the information given in annual report, the Bank has provided more details
of their activities and financial performance. In addition, the Bank gives useful
information that helps investors to have overview and understand strategies and
continue investing.

16
4. IDENTIFY POTENTIAL RED FLAGS:

Account Receivable/Net Sale

80
70
60
50
40
30
20
10
0 2014 2015 2016 2017 2018 2019

Vietcombank 8.31 8.46 7.02 8.74 6.46 11.51

Techcombank 71.5 66.71 37.33 42.59 44.68 43.32
Vietcombank Techcombank

Accounts Accounts receivable / net sale is an efficiency ratio or activity ratio

that measures how many times a business can turn its accounts receivable into cash
during a period. In other words, the accounts receivable turnover ratio measures how
many times a business can collect its average accounts receivable during the year.
According to the above analysis chart, we can see that while companies in the
same industry have low coefficient of Accounts receivable /Net sales and fluctuate a
lot, Techcombank has a higher ranged from 43% - 71%. However, this ratio tends to
decrease year by year. This is show that account receivable are likely to collect lower
and the number of days to collect money is higher, increase from 521 days to 986
days. Of course, this may be due to unefficient business operations rather than
fraudulent activity. As a result, this show no concern.

17
 Asset Turnover
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0 2014 2015 2016 2017 2018 2019

Vietcombank 3.264 2.47 2.534 2.406 2.694 3.011

Techcombank 3.448 3.919 3.811 3.539 3.769 4.047
Vietcombank Techcombank

The asset turnover ratio is an efficiency ratio that measures a company’s ability
to generate sales from its assets by comparing net sales with average total assets. In
other words, this ratio shows how efficiently a company can use its assets to generate
sales. So a higher ratio is always more favorable. Higher turnover ratios mean the
company is using its assets more efficiently.
Based on the chart, we can see that the Asset turnover ratio of Techcombank is
quite higher than the ratio of Vietcombank and this ratio fluctuates unevenly year by
year. This shows that in a year, total assets converted into sales revenue ranged from
3.5 to 4 times. Total asset turnover of Techcombank is good in the industry especially
in 2019. There is no concern about it.

18
 Gross Profit Margin
60
50

40

30

20

10

0 2014 2015 2016 2017 2018 2019

Vietcombank 42.551 49.275 49.128 47.526 50.853 51.056

Techcombank 44.64 53.898 51.742 50.757 52.607 56.994
Vietcombank Techcombank

The chart above shows that the ratio of Techcombank is quite high (range from
0.44 - 0.56). On the other hand, this ratio has an upward trend in the period 2014 -
2019 while its rival Vietcombank is lower (ranged from 0.42 - 0.51).
Consistent sales growth while established competitors are experiencing periods
of weak performance. Of course, this may be due to efficient business operations
rather than fraudulent activity. As a result, this show no concern.

Changes in cash flow from operation/ operation income

600
500
400
300
200
100
0
-100 2014 2015 2016 2017 2018 2019

Vietcombank 242.746 -31.781 77.83 515.558 153.352 54.83

Techcombank 6.778 7.049 7.023 8.759 8.923 8.055
Vietcombank Techcombank

From looking at the change in cash flows from operations / Operating income,
Techcombank is the most stable companies. Therefore, there is no concern. In addition,

19
the company has initially built and operated risk management procedures according to
COSO international standards in 2017. The application of this process help the
management and control work better, minimize the losses that may occur in the
business operations of the company.

Asset Turnover of Operating

10
9
8
7
6
5
4
3
2
1
0 2014 2015 2016 2017 2018 2019
Vietcombank 4.805 4.49 4.466 2.462 2.399 5.144
Techcombank 6.778 7.049 7.023 8.759 8.923 8.055
Vietcombank Techcombank

The operating asset turnover ratio indicates how efficiently a company is using
its operating assets to generate revenue. A higher ratio is desirable, as it shows that a
company is better at utilizing its operating assets to generate revenue. Follow the chart,
we can see asset turnover of operating of Techcombank is higher than its rival
Vietcombank. While Vietcombank’s ratio is unevenly year by year, the ratio of
Techcombank tends to increase year by year ranged from 6.77%-8.9%. As a result, this
show no concern.

5. UNDO ACCOUNTING DISTORSIONS:

Based on on the above analysis, it can be concluded that there is no Accounting
Distortions in Techcombank. Through Financial Statement and related document, the
Group has provide entity’s financial information which could help investors to get
most of financial information for their assessments and decision. Moreover they not
only provide the users to know how well or bad the entity financial position is, or how
big or small the entity, but also prepare for the purpose of helping the user, especially
the investors in predicting the entity’s future cash flow.

20
6. ANALYSIS OF THE STATEMENT OF FINANCIAL POSITION:
Financial structure
2015 2016 2017 2018 2019
Equity 16,457,566 19,586,476 26,930,745 51,782,705 62,072,767
Long-term 8,133,896 10,414,842 17,639,970 13,177,959 17,460,634
liabilities

Non-
current 2,789,416 3,439,004 2,759,159 2,927,143 4,380,524
assets

Working 21,802,046 26,562,314 41,811,556 62,033,521 75,152,877

capital

Current
assets 189,204,186 231,924,132 266,633,221 318,061,798 379,318,937
(excluding
cash)

Current
liabilities
(excluding
short-term 167,402,140 205,361,818 224,821,665 268,898,923 321,626,694
bank loans
and bank
overdrafts)

Working
capital 21,802,046 26,562,314 41,811,556 49,162,875 57,692,243
need

Cash 20,194,154 27,089,457 36,779,600 48,721,313 56,003,107

Deposit
from 142,239,546 173,448,929 170,970,833 201,414,532 231,296,761
customer

Net cash (122,045,392) (146,359,472) (134,191,233) (152,693,219) (175,293,654)

(Unit: million dong)

21
 Statement of finance structure
2015 2016 2017 2018 2019
Working capital + + + + +
Working capital need + + + + +
Net cash - - - - -

Conclusion:
-WC>0:
So, this is positive working capital. Equity + long-term liabilities > non-current
assets or current assets (including cash) > current liabilities. It represents that this
company the short-term receivable of company is more than its short-term payables. It
ensures no bankruptcy circumstances.
-WCN>0:
So, positive working capital need.
-NC<0:
So, Cash < Deposit from customer. The company Deposit from customer much
because current assets is not enough. WC, WCN and NC of Techcombank have been
increased throught the last 6 years. The operating cycle also generates a financing need
which is financed by the working capital. However, the working capital is not
sufficient to cover the working capital need, creates negative net cash.
In conclusion, Techcombank has financial structure with negative net cash and
is in case 2.

7. ANALYSIS OF STATEMENT OF CASH FLOWS:

2015 2016 2017 2018 2019
Net cash
provided by (5,318,158) 2,355,170 6,967,811 298,932 12,631,802
operating
activities

Acquisitions of (124,265) (941,512) 175,815 (401,574) (257,620)

fixed assets

22
(tangible and
intangible)

Proceeds from
sale of fixed 86,580 2,303 5,795 6,097 31,428
assets

Payments for
disposals of fixed - (1,189) (717) (89) (268)
assets

Excess cash flow (5,280,473) 3,295,568 6,786,918 694,498 12,858,262

Proceeds from
investments in 36,400 18,558 925,780 915,560 -
other entities

Payments for
investments in (1,677) - - (799) -
other entities

Dividends 10,815 470 334 271 4,216

received

Available cash (5,236,011) 3,276,540 5,860,804 (220,534) 12,854,046

flow

Increase in
charter capital - - 2,099,999 - 35,428
from share
issuance

Proceeds from
long-term
valuable papers
issued claasified - 2,127 2,708,164 310,000 -
into owners’
equity and other
long-term
borrowings

Payments for
long-term - - - 3,010,000 (3,200,000)
valuable papers

23
qualified to
classify into
owners’ equity
and other long-
term borrowings

Payments for
buying treasury - - (4,043,249) - -
shares

Proceeds from
selling treasury - - - 16,341,177
shares

Increase in
charter capital
from capital - - - 58,201 70,338
contribution by
non-controlling
shareholders

Free cash flow (5,236,011) 3,274,413 5,095,890 (19,939,912) 15,948,280

Other financial - - - - -
Net increase in
cash and cash (5,236,011) 3,274,413 5,095,890 (19,939,912) 15,948,280
equivalent

(Unit: million
dong)

24
 CHAPTER 4: FINANCIAL ANALYSIS
1. ANALYSIS OF PROFITABILITY:

1.1. Net profit margin:

Net profit margin = Net income / Net sales
2015 2016 2017 2018 2019
Net income 1,529,188 3,148,846 6,445,595 8,473,997 10,226,209
Net sales 15,194,673 18,295,067 22,114,189 25,601,943 29,900,749
Net profit 10.06% 17.21% 29.15% 33.1% 34.2%
margin

(Unit: million dong)

Techcombank profit margin 2014 - 2018

30,000,000 40%
25,000,000 35%

30%
20,000,000 25%

15,000,000 20%

10,000,000 15%

10%
5,000,000 5%

0 0%

2015 2016 2017 2018 2019

Net Income Net sales Nets profit Margin

The net profit margin shows how much of each sales dong shows up as net
income after all expenses are paid. For example, in 2019, a 34.2% net profit margin
indicates that for every dong generated by Techcombank in sales, the company kept
0.342 dong as profit. The net profit margin is intended to be a measure of the overall
success of a business. A high net profit margin indicates that a business is pricing its
products correctly and is exercising good cost control. It is useful for comparing the

25
results of businesses within the same industry, since they are all subject to the same
business environment and customer base, and many have approximately the same cost
structures. According to Investing.com, net profit margin 5 years average of Banking
Industries is 22.86%. This ratios of Techcombank (24.74%) higher than industry
median rate at 1.88%. From 2015 to 2019, the net profit margin increasing
continuously, specially in 2016 and 2017.

1.2. Total asset turnover:

Total asset turnover = Net sales / Average total assets
2015 2016 2017 2018 2019
Net sales 15,194,673 18,295,067 22,114,189 25,601,943 29,900,749
Average 183,948,000 213,678,500 252,377,690 252,190,660 383,699,461
total assets

Total asset 0.083 0.086 0.088 0.087 0.078

turnover

(Unit: million dong)

The total asset turnover ratio measures how efficiently a firm uses its assets to
generate sales, so a higher ratio is always more favorable. This ratio is a general efficiency
ratio that measures how efficiently a company uses all of its assets. This gives investors
and creditors an idea of how a company is managed and uses its assets to produce
products and sales. Among Vietnamese banks we are sixth in total assets, assets soared
45% in 2019, driven by strengthening personal investment products including stocks,
bonds and investment funds. As you can see, Techcombank’s ratio in 2019 is only 0.078.
This means that for every million dongs in assets, Techcombank generates 78,000 dongs.
The total asset turnover ratio of industry is 0.09. And during 5 years recently, the ratio
changed little, from 0.078 to 0.088. In summary, Techcombank is not really efficient with
its use of assets and it wasn’t improved at present.

26
1.3. Return on assets (ROA):
Return on assets = Net income / Average total assets
2015 2016 2017 2018 2019
Net income 1,529,188 3,148,846 6,445,595 8,473,997 10,226,209
Average 183,948,000 213,678,500 252,377,690 295,190,660 383,699,461
total assets

Return on 0.83% 1.47% 2.55% 2.87% 2.67%

assets

(Unit: million dong)

Return on assets (ROA) is an indicator of how profitable a company is relative

to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient
a company’s management is at using its assets to generate earnings. Return on assets is
displayed as a percentage. Since company assets’ sole purpose is to generate revenues
and produce profits, this ratio helps both management and investors see how well the
company can convert its investments in assets into profits. You can look at ROA as a
return on investment for the company since capital assets are often the biggest
investment for most companies. In this case, the company invests money into capital
assets and the return is measured in profits. In table, you can see that ROA ratio

27
increased significantly, specially in 2016 and 2017. In 2018, ROA is 2.87%, which is
4.5 times in comparison with 2016. In addition, average industry is 1.25%, it announed
that Techcombank had a change for the better. Among Vietnamese banks
Techcombank is first in ROA. The main driver of our record ROA was our focus on
CASA deposits as a way to mobilise low-cost funds. Besides, strong growth in non-
interest income in general, and fee income specifically, grew ROA. The bank can earn
strong profits while prudently managing our balance sheet.

1.4. Dupont return on assets:

Dupont return on assets = Total asset turnover x Net profit margin
Return on = Total asset x Net profit
assets turnover margin

2015 0.83% = 0.083 x 10.06%

2016 1.47% = 0.086 x 17.21%
2017 2.55% = 0.088 x 29.15%
2018 2.87% = 0.087 x 34.2%
2019 2.67% = 0.078 x 40.88%

The Dupont analysis system separates the different components of business

performance indicators, including ROA, into smaller parts. The dissection of
performance metrics helps business owners determine if all components that make up
these larger figures are performing at peak effectiveness. This is especially important
for ROA, which measures company profit levels relative to total assets. When business
owners can visualize how their companies are handling different aspects of
performance, management can work to make focused changes to improve any weak
areas. This table shows a increasing trend of return on assets in 5 years from 2015 to
2019 although the total assets turnover increased slowly or even declined. The reason
is that the net profit margin increased quickly and continuous. By Dupont analysis,
Techcombank’s manager can see that they should maintain the net profit margin and
find the way to improve the total assets turnover ratio more.

28
1.5. Operating income margin:
Operating income margin = Operating income / Net sales
2015 2016 2017 2018 2019
Operating 9,343,942 11,833,153 16,457,988 18,349,768 21,068,145
income

Net sales 15,194,673 18,295,067 22,114,189 25,601,943 29,900,749

Operating
income 61.49% 64.68% 74.42% 71.67% 70.46%
margin

(Unit: million dong)

The operating margin measures how much profit a company makes on a dollar
of sales, after paying for variable costs of production, such as wages and raw materials,
but before paying interest or tax. It is calculated by dividing a company’s operating
profit by its net sales. The operating income margin is higher than the net profit margin
ratio very much. It implies that the operating expense or tax expense or the banking
has other loss. From 2015 to 2017, the operating income margin increased quickly.
Until 2018, it started declining in 2 years, which implies that Techcombank had
changed to control its expense more efficiently.

1.6. Return on equity (ROE):

ROE = Net income / Equity
2015 2016 2017 2018 2019
Net income 1,529,188 3,148,846 6,455,595 8,473,997 10,226,209
Equity 16,457,566 19,586,476 26,930,745 51,782,705 62,072,767
ROE 9.29% 16.08% 23.93% 16.36% 16.47%
(Unit: million
dong)

Return on equity (ROE) is one of the financial ratios used by stock investors in
analyzing stocks. It indicates how effective the management team is in generating profit
with money the shareholders have invested, and it reflects its financial health. On the

29
contrary, high growth properties tend to have a higher ROE because they can probably
generate additional income without the need for external financing, or the company is
doing a large amount of borrowing, this is because debt decreases equity (equity =
assets - liabilities), driving the ROE up.
To Techcombank, from 2015 to 2017, ROE increased quickly and then declined
significantly, especially in 2018. However, it is always higher than average industry
(14.88%) and ROA is better. Therefore, we can say that management team worked
efficiently.

1.7. CASA ratio:

CASA ratio = Deposits in current and saving accounts / Total deposits
2015 2016 2017 2018 2019
CASA (rounded) 29.3 39.4 41.2 57.8 79.7
Total deposits 142.2 173.4 171 201.4 231.3
CASA ratio 20.6% 22.7% 24.1% 28.7% 34.5%
(Unit: million
dong)

CASA ratio stands for current and savings account ratio. CASA ratio of a bank is
the ratio of deposits in current and saving accounts to total deposits. A higher CASA ratio
indicates a lower cost of funds, because banks do not usually give any interests on
30
current account deposits and the interest on saving accounts is usually very low 3 -
4%. If a large part of bank’s deposits comes from these funds, it means that the bank is
getting those funds at a relative lower cost. It is generally understood that a higher
CASA ratio leads to higher net interest margin and net interest income. In India, it is
used as one of the metrics to assess the profitability of a bank.
In Vietnam, Techcombank is one of three banks has CASA ratio highest and it
tend to increase continuously. Their CASA ratio is approximately 30%, (double to
other banks such as BIDV, Vietinbank, ACB, Sacombank,…). According to annual
report of Techcombank: “Our shift to low-risk assets was only aspect of our strategy.
The main driver of our record ROA was our focus on CASA deposits as a way to
mobilise low-cost funds”.

1.8. Net interest margin (NIM):

2015 2016 2017 2018 2019

Interest 13,379,387 14,790,288 17,710,304 20,445,343 25,677,175
received

Interest 6,165,707 7,484,939 8,095,512 9,797,235 10,865,013

paid

Average 183,948,000 213,678,500 252,377,690 295,190,660 383,699,461

asset

NIM 4.4% 4.1% 4.0% 3.7% 4.2%

(Unit: million
dong)

31
 Net interest margin (NIM) is measurement comparing the net interest income a
financial firm generates from credit products like loans and mortgages, with the
outgoing interest it pays holders of savings accounts and certificates of deposit (CDs).
Expressed as a percentage, the NIM is a profitability indicator that telegraphs the
likelihood of a bank or investment firm thriving over the long haul. This metric helps
prospective investors determine whether or not to invest in a given financial services
firm. Simply put: a positive net interest margin suggests that an entity operates
profitably, while a negative figure implies investment inefficiency. In the latter
scenario, a firm may take corrective action by applying funds toward outstanding debt
or shifting those assets towards more profitable investments. There is hardly bank
having NIM 5% in Vietnam. To Techcombank, NIM is only lower than VPBank and
always higher than average industry (about 3.2%). It is a positive result. NIM in
Vietnam is too low because almost banks are operating depend on fees and service
charges of various kinds instead of interest.

32
1.9. Cost to income ratio (CIR):
Cost to income ratio = Operating costs / Operating income
2015 2016 2017 2018 2019
Operating 3,678,848 4,175,422 4,698,283 5,842,507 7,312,509
costs

Operating 9,343,942 7,657,731 11,645,523 18,349,768 21,068,145

income

CIR 39.4% 35.3% 29.2% 31.8% 34.7%

(Unit: million dong)

The cost-to-income ratio, which measures operating expense as a percentage of

operating income, is used to gauge efficiency and productivity for banks. Lower ratios
generally indicate higher efficiency, but a number of factors can affect the ratio,
including a bank’s business model and size. It is an important financial tool, particular
when evaluating banks. Changes in the ratio can also highlight potential problems: if
the ratio rises from one period to the next, it means that costs are rising at a higher rate
than income, which could suggest that the company has taken its eye off the ball in the
drive to attract more business. Techcombank is in group of banks having CIR under
40%. In 2019, CIR of Techcombank is only higher than BIDV (31%).

33
 However, we can see CIR tends to increase more and more quickly from 2017
to 2019. According to manager of Techcombank, CIR changes suddenly because
TechcomFinance transaction in 2017 made operating income increase. Another reason
is Techcombank is researching and developing technology, so it can’t minimize
operating expenses immediately.
Summary: In 2019, Techcombank continued its momentum with year-on-year
(YoY) revenue growth of 24.7%. Our profit before tax reached VND 12,838 billion,
making Techcombank Vietnam’s second most profitable bank. TCBS’s key financial
ratios were stable and prudent, with total assets and revenue growing steadily between
2015 and 2019. TCBS’s 39% return on equity (ROE) put it in the ranks of Asia’s top
securities companies. Profit before tax hit VND 1,819 billion, up 19% while total
assets soared 45% driven by strengthening personal investment products including
stocks, bonds and investment funds. Net profit margin remained stable at 67% in 2019.
In 2019, Techcombank maintain its position as both Vietnamese most operationally
efficient bank and its most well-capitalized, with return on assets (ROA) of 2.9%.

34
2. ANALYSIS OF LIDIQUITY OF SHORT-TERM ASSETS:

2.1. Accounts receivable turnover:

Accounts receivable turnover = Net sales / Average gross receivables
2015 2016 2017 2018 2019
Net sales 15,194,673 18,295,067 22,114,189 25,601,943 29,900,749
Average
gross 10,300,482 8,436,469 8,123,573 10,369,923 12,138,180
receivables

Account
receivable 1.47514194 2.16856935 2.72222445 2.46886541 2.46336356
turnover

Account
receivable 247.433816 168.313732 134.081523 147.84119 148.171389
turnover in
days

(Unit: million dong)

The receivables turnover ratio of the bank is quite low but tends to increase from 2015
to 2017 and slightly decreases from 2017 to the present. The low receivable turnover ratio
indicates that the company has a poor recovery process, bad credit policies or their
customers are unable to pay. By 2019, the average customer will need 148 days to pay
their receivables. If the company has a 147-day billing policy for its customers, the
average revenue of receivables suggests that the average customer pays one day late.

2.2. Capital adequacy ratio (Basel II):

2017 2018 2019

Capital adequacy ratio (Basel II) 9.40% 14.60% 15.50%

The capital adequacy ratio of Techcombank is increasing, by 2019 is 15.50%.

Higher than the average of Vietnam’s commercial banking industry (11.8%) is 3.7% in
2019. By September 2019, CAR targets of banks are as follows:

35
 Bank ACB BID HDB MBB TCB TPB VCB VIB VPB
CAR 9.7% 10.7% 11% 9.5% 15.5% 10.4% 9.5% 9.6% 11.4%

It can be seen that TCB is still leading in CAR in the industry.

2.3. Non-performing loan (NPL) ratio:

2015 2016 2017 2018 2019

Non-performing loan
(NPL) ratio 1.70% 1.60% 1.60% 1.80% 1.30%

36
 Non-performing loan (NPL) ratio
2.00%
1.80%
1.80% 1.70%
1.60% 1.60%
1.60%

1.40% 1.30%

1.20%

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%
2015 2016 2017 2018 2019

The average NPL ratio over the 5 years (from 2015 to 2019) is 1.6%.
Specifically, in 2016, this rate decreased by 0.1% compared to 2015. In 2017, this rate
remained 1.6% as in 2016. However, in 2018 this rate increased by 0.2%, up to 1 ,8%.
In 2019, it will decrease by 0.5%, keeping the level of 1.3%.
NPL ratio in 2019 of the bank is 1.98%. It can be seen that TCB has lower NPL
ratio than the industry (1.3% < 1.98%). TCB is gradually controlling its bad debt ratio.

37
Customer loan balance and bad debt ratio of banks in 2019. Unit: billion dong
Banks Bad debt Odd debt NPL ratio
2019 2018 % 2019 2018 % 2019 2018
VPB 8,798 7,766 13.28 257,184 221,962 15.87 3.42% 3.50%
PGBank 663 653 1.43 23,697 22,052 7.46 2.80% 2.96%
SeABank 2,280 1,266 80.10 98,614 83,910 17.52 2.31% 1.89%
ABBank 1,312 984 33.34 56,803 52,184 8.85 2.31% 1.89%
MSB 1,300 1,466 (11.29) 63,594 48,762 30.42 2.04% 3.01%
SGB 282 301 (6.20) 14,557 13,671 6.48 1.94% 2.20%
STB 5,733 5,647 1.53 296,030 256,623 15.36 1.94% 2.20%
OCB 1,309 1,288 1.62 71,091 56,316 26.23 1.84% 2.29%
SHB 4,857 5,199 (6.58) 264,204 216,989 22.22 1.83% 2.40%
BID 19,451 18,802 3.45 1,116,925 988,739 12.96 1.74% 1.90%
EIB 1,933 1,921 0.63 113,255 104,043 8.85 1.71% 1.85%
LPB 2,030 1,680 20.82 140,523 119,193 17.89 1.44% 1.41%
HDB 1,997 1,885 5.93 146,324 123,132 18.84 1.36% 1.53%
TCB 3,078 2,803 9.79 230,802 159,939 44.31 1.33% 1.75%
VBB 539 444 21.51 40,919 35,495 15.28 1.32% 1.25%
TPB 1,235 861 43.39 95,644 77,185 23.91 1.29% 1.12%
MBB 2,898 2,860 1.33 250,331 214,686 16.60 1.16% 1.33%
CTG 10,813 13,709 (21.12) 935,271 864,926 8.13 1.16% 1.59%
KLB 342 278 23.13 33,480 29,472 13.60 1.02% 0.94%
VCB 5,724 6,223 (8.02) 734,707 631,867 16.28 0.78% 0.98%
BAB 498 488 2.07 72,933 63,979 13.99 0.68% 0.76%
ACB 1,449 1,675 (13.47) 267,021 228,574 16.82 0.54% 0.73%

38
3. ANALYSIS OF LONG-TERM DEBT-PAYING ABILITY:

3.1. Debt ratio (%):

Debt ratio (%) = Total liabilities / Total assets
2015 2016 2017 2018 2019
Total 175,536,036 215,776,660 242,461,635 269,206,236 321,626,694
liabilities

Total assets 191,993,602 235,363,136 269,392,380 320,988,941 383,699,461

Debt ratio 91% 92% 90% 84% 84%
(Unit: million dong)

Debt ratio
94%
92% 91% 92%
90%
90%
88%

86%

84% 84% 84%

82%

80%

78%

2015 2016 2017 2018 2019

The average debt ratio of Techcombank is 88%. This shows that about 88% of
company assets are formed from debt. High debt ratio indicates low credit risk and
high capital recovery.

39
3.2. Debt/Equity ratio:
Debt/Equity ratio (DER) = Total liabilities / Shareholders’ equity
2015 2016 2017 2018 2019
Total 175,536,036 215,776,660 242,461,635 269,206,236 321,626,694
liabilities

SHs’ equity 16,457,566 19,586,476 26,930,745 51,782,705 62,072,767

DER 10.665978 11.0166147 9.00315365 5.19876735 5.18144606
(Unit: million
dong)

Debt/equity ratio
12 10.66597795 11.01661473
10 9.003153645

6 5.198767349 5.18144606

0
2015 2016 2017 2018 2019

In 2016 it increased 0.35 compared to 2015. In 2017, this ratio decreased 2.01.
2018 decreased quickly 3.8. 2019 decreased slightly by 0.017. Usually, if a DER is
high, it means that the company usually goes through debt to pay for its operations.
This will result in an unstable income, as the company often has to pay accrued
interest. From the diagram, it can be seen that TCB's DER is on the decline, showing
that bank income is becoming more and more stable.

3.3. Debt to tangible net worth ratio:

Debt to tangible net worth ratio = Total liabilities / (Shareholders’ equity - Intangible
Assets)

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 2015 2016 2017 2018 2019
Total 175,536,036 215,776,660 242,461,635 269,206,236 321,626,694
liabilities

SHs’ equity 16,457,566 19,586,476 26,930,745 51,782,705 62,072,767

Intangible 343,934 1,005,886 941,657 930,580 2,414,293
assets

Debt to
tangible net 10.8936357 11.6130144 9.32936296 5.29390337 5.39113176
worth ratio

(Unit: million dong)

Debt to Tangible Net Worth Ratio

14
12 11.61301444
10.89363565
10 9.329362962

6 5.293903372 5.391131761

0
2015 2016 2017 2018 2019

For TCB, this rate is very high and tends to decrease over the years from 2015
to 2018, to 2019, the trend of slight increase is not significant. This is a positive sign
for the ability to protect the bank in the absence of solvency, which can lead to
bankruptcy. However, this is a more conservative index than the debt to equity ratio
because intangible assets are not always valuable when a company is going through a
liquidation process.

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3.4. Loan to deposit ratio (LDR):

2015 2016 2017 2018 2019

Loan to deposit ratio
(LDR) 70% 71.8% 76.60% 65.50% 76.30%

Loan to deposit ratio (LDR)

78% 76.60% 76.30%

76%
74%
71.8%
72%
70%

70%
68%
65.50%
66%
64%
62%
60%
58%
2015 2016 2017 2018 2019

LDR ratio of TCB is quite high, averaging 72.04% (from 2015 to 2019). In 2016, it
increased by 1.8% compared to 2015. In 2017, it increased by 4.8% compared to 2016. In
2018, it sharply decreased by 11, 1% compared to 2017. But in 2019 it increased to 76.3%
(increased by 10.8 % compared to 2018). Circular 36 provides a ratio of 80% of
outstanding loans to total deposits with commercial joint stock banks.An increase in the
LDR ratio shows that the bank is having less than a "cushion" to finance growth and
protect itself from the risk of sudden withdrawals, especially banks that rely too much on
deposits. to finance growth. When the LDR ratio increases to a relatively high level, bank
executives are less likely to lend and invest. Moreover, they will be cautious when the
LDR ratio increases and require credit tightening, so interest rates tend to rise. Although a
high ratio of LDR has never been quantified, it is a factor that influences investment and
lending decisions. For Techcombank, always consistent with the orientation of sustainable
development on the basis of safety in terms of risks, especially credit and liquidity risks.
Reasonable lending to deposit ratio (always maintained at a

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low level compared to the 80% limit) is one of the factors to ensure high liquidity,
creating a premise for Techcombank to seize business opportunities.

3.5. Short-term funding to medium and long-term loans:

2015 2016 2017 2018 2019

Short-term funding to
medium and long-term 45.90% 41.50% 43.00% 31.50% 38.40%
loans

Short-term funding to medium and long-term

loans
50.00% 45.90% 41.50% 43.00%
45.00%
38.40%
40.00% 31.50%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2015 2016 2017 2018 2019

From the beginning of 2019, banks can only use 40% of short-term capital for
medium, long-term loans as prescribed in Circular 19/2017/TT-NHNN. The average is
40 (from 2015 to 2019). Techcombank has ensured a reasonable ratio, foreign bank
branches, gradually controlled liquidity risks to ensure the safety of operations of
banks and foreign bank branches before changes of factors. from inside and outside the
country, contributing to stabilizing banking operations, supporting the promotion of
sustainable economic development.
In Summary, Techcombank maintains compliance with SBV’s liquidity
requirements prescribed in Circular 36/2014/TT-NHNN and amended by Circular
22/2019/TT-NHNN. They further developed our internal liquidity ratios and enhanced
liquidity management forecasts.

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 Techcombank has strong policies and regulations to manage internal liquidity
risks. Audit and Risk Committee (ARCO) has developed a framework setting out the
Bank’s risk appetite, with defined limits and thresholds, and the Asset and Liability
Committee (ALCO) implements and supervises processes to ensure compliance.

4. STATEMENT OF CASH FLOWS:

4.1. Operating cash flow ratio:

2015 2016 2017 2018 2019
Operating 5,919,035 6,855,194 11,509,394 9,926,403 13,007,909
cash flow

Current 142,239,546 173,448,929 170,970,833 201,414,532 231,296,761

liabilities

OCF ratio 0.042 0.040 0.067 0.049 0.056

(Unit: million
dong)

OCF Ratio
0.080
0.070 0.067

0.060 0.056

0.050 0.049
0.042 0.040

0.040
0.030

0.020

0.010

0.000

2015 2016 2017 2018 2019

Operating cash flow (OCF) is one of the most important numbers in a company’s
accounts. It reflects the amount of cash that a business produces solely from its core
business operations. Operating cash flow is intensely scrutinized by investors, as it
provides vital information about the health and value of a company. If a company fails
to achieve a positive OCF, the company cannot remain solvent in the long term. A 44
negative OCF indicates that a company is not generating sufficient revenues from its
core business operations, and therefore needs to generate additional positive cash flow
from either financing or investment activities.
Techcombank's solvency has fluctuated from 2015 to 2019. Specifically, in
2016, it decreased slightly by 0.002 times compared to 2015, in 2017 increased by
0.028 times compared to 2016, 2018 decreased by 0.018 times compared to 2017 and
year. 2019 increased slightly by 0.007 times compared to 2018.It can be seen that the
OCF ratio is always less than 1, so TCB's ability to deal with low debts.

4.2. Operating cash flow to operating profit ratio:

2015 2016 2017 2018 2019
Operating
cash flow 5,919,035 6,855,194 11,509,394 9,926,403 13,007,909

Operating
profit 9,343,942 11,918,726 16,343,806 18,349,768 21,068,145

Operating
cash flow 0.633 0.575 0.704 0.541 0.617
to operating
profit ratio

(Unit: million dong)

45
 Operating cash flow to operating profit ratio
0.800
0.704
0.700 0.633 0.617

0.600 0.575 0.541

0.500

0.400

0.300

0.200

0.100

0.000

2015 2016 2017 2018 2019

This ratio shows that the difference between the net cash flow from business
activities and operating profit (mobilization - lending, providing services). It reflects
the quality of profits in terms of the actual cash flow generated. The average ratio over
the 5 years from 2015 to 2019 is 0.614. TCB's data has changed slightly over the years,
specifically in 2016, it decreased by 0.058 compared to 2015, in 2017 increased by
0.192 compared to 2016, in 2018 decreased by 0.163 compared to 2017, in 2019
increased slightly by 0.076 compared to 2018.

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4.3. Operating cash flow to payment investment activities:
2015 2016 2017 2018 2019
Operating 5,919,035 6,855,194 11,509,394 9,926,403 11,007,909
cash flow

Payment
investment 125,942 942,701 176,532 402,462 257,888
activities

Operating
cash flow
to payment 46.9981 7.2719 65.1972 24.6642 50.4401
investment
activities

(Unit: million dong)

Operating cash flow to payment investment activities

70.0000 65.1972
60.0000
46.9981 50.4401
50.0000
40.0000

30.0000 24.6642

20.0000

10.0000 7.2719

0.0000
2015 2016 2017 2018 2019
Operating cash flow to payment 46.9981 7.2719 65.1972 24.6642 50.4401
investment activities

This ratio shows how much money, net operating activities covers the
investment. It reflects the capacity of commercial banks to cover investment capital
from main business activities. The average ratio over the 5 years from 2015 to 2019 is
38.9143. TCB's data has changed slightly over the years, specifically in 2016, it
decreased by 39.7262 compared to 2015, in 2017 increased quickly by 57.9253

47
compared to 2016, in 2018 decreased quickly by 40.5330 compared to 2017, in 2019
increased quickly by 25.7759 compared to 2018.

4.4. Operating cash flow per share:

2015 2016 2017 2018 2019
Operating 5,919,035 6,855,194 11,509,394 9,926,403 11,007,909
cash flow

Shares 887,807,871 887,807,871 940,492,623 2,244,884,768 3,498,366,061

Operating
cash flow 0.0067 0.0077 0.0122 0.0044 0.0037
per share

(Unit: million dong)

Operating cash flow per share

0.0140
0.0122
0.0120
0.0100

0.0080 0.0077
0.0067
0.0060 0.0044

0.0037
0.0040
0.0020

0.0000

2015 2016 2017 2018 2019

This ratio indicates how much net money each ordinary stock generated from
operating activities. This is an important indicator for shareholders of commercial
banks. The average ratio over the 5 years from 2015 to 2019 is 0.007 million/share.
TCB's data has changed slightly over the years, specifically in 2016, it increased by
0.0011 million/share compared to 2015, in 2017 increased by 0.0045 million/share
compared to 2016, in 2018 decreased by 0.0078 million/share compared to 2017, in
2019 decreased slightly by 0.0007 million/share compared to 2018.

48
 In summary, from 4 ratios above, it shows that TCB's main income is from
business activities. The amount spent on investment activities is very small, so the ability
to manage assets is very good. However, the relatively low debt ratio implies that the
ability to pay the short-term debt by net cash flow from operating activities is low. But
overall, the ratios of profitability and efficiency are very good, so this debt repayment
ratio does not affect much to TCB. This is still one of the leading banks in Vietnam.

THE END

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