Joint Stock Commercial Bank for Foreign Trade of Vietnam : The Board of Management's Report

JSC BANK FOR FOREIGN	SOCIALIST REPUBLIC OF VIETNAM
TRADE OF VIETNAM	Independence - Freedom - Happiness
Address: 198 Tran Quang Khai, Hanoi
Business Registration No. 0100112437	Hanoi, April 28th 2022
(15th revision dated April 14th, 2022)

THE BOARD OF MANAGEMENT'S REPORT

I.

BUSINESS PERFORMANCE IN 2021

The global economy has gradually recovered after vaccine roll-out andreopening of economies. The IMF estimated that the global GDP growth rate in 2021 was about 5.9%, with challenges lying ahead. Supply chain disruptions continued to push up inflationary pressure in the second half of the year. As a result, many central banks have tightened monetary and fiscal policy as well as planned to raise interest rates. Nevertheless, the rapid spread of new virus variants posed a big threat to the global economy recovery progress.

Since Mid-October 2021, the Vietnamese government has adopted new guidelines on safe adaptation to the COVID-19 pandemic, which is 'Safe adaptation, flexible and effective control of the COVID-19 pandemic'. Afterwards, the economy progressively recovered in the fourth quarter, following a steep decline in the third quarter. The GDP growth rate in 2021 reached 2.58%. The manufacturing sector gradually recovered, and the processing and manufacturing industry increased by 6.01%. Besides, import and export activities continued to be outstanding with a total turnover of $668.5 billion, up 22.6% over last year and a trade surplus of $4 billion. The average CPI in 2021 increased by 1.84%, the lowest rate since 2016. However, there exist challenges due to the complicated and unpredictable developments of the COVID-19 pandemic, market turbulence and changes in international policies.

Under the threat of COVID-19 resurgence, banking sector has beenplaying a vital role in supporting the economy and actively proposing solutions to support customers such as interest rate reduction, debt restructuring and cost reductions, while strictly controlling credit quality, increasing provision for credit risks, minimizing operating costs, etc. The credit growth rate in 2021 reached 13.53%, along with high system's liquidity stability and increased foreign exchange reserves.

1.

Business performance of VCB in 2021

In spite of challenging socio-economic environment, Joint StockCommercial Bank for Foreign Trade of Vietnam (VCB) succeeded in achieving "multiple goals": preventing COVID-19 pandemic effectively; ensuring the wellbeing of employees; sharing difficulties with customers; and maintaining business continuity. In 2021, most business targets assigned by the General Shareholders' Meeting and the Board of Directors have been achieved.

1.1. Strictly implemented COVID-19 pandemic prevention and control measures while sharing difficulties with enterprises and individuals

• ✓ Actively found vaccine sources and implemented early vaccination for employees and families to ensure safety and health.

• ✓ Adjusted management and operating strategies to adapt to harsh conditions; organized teleworking and shift work to maintain business continuity and ensure adequate, seamless and timely provision of banking services, even in time of social distancing according to Directive No.15 and Directive No.16.

• ✓ Improved policies, digitalized processes, and promptly deployed online transaction solutions to support enterprises and individuals.

• ✓ Synchronously implemented solutions to support and accompany enterprises, individuals and households affected by the COVID-19 pandemic through interest rate support packages, fee and interest rate reduction, and loan restructuring.

• ✓ Total restructured debts of customers affected by COVID-19 pandemic

without re-classification were VND 10,540 billion (outstanding principal and interest balance were approximately VND 9,410 billion and VND 1,130 billion respectively).

• ✓ Participated in numerous social welfare activities, especially COVID-19 pandemic prevention programs. Total commitment value for social welfare activities reached about VND 723 billion, of which VND 246 billion was contributed by employees and welfare fund; VND 381 billion was donated to COVID-19 pandemic prevention and control activities.

• ✓ VCB remained the largest payer to State budget in the banking sector (about VND 11,000 billion).

1.2. Deposit growth and deposit portfolio structure transformation were in line with predetermined direction

• ✓ Total customer deposits were VND 1,152,712 billion, up 9.4% compared to 2020.

• ✓ The proportion of demand deposits reached 35.1% (3% higher than 2020).

1.3. Promoted credit growth since the beginning of the year; shifted credit portfolio structure towards safety and efficiency; controlled and improved credit quality

• ✓ Credit balance reached VND 972,680 billion, up 15% compared to 2020, within the credit growth limit allowed by the State Bank of Vietnam (SBV).

• ✓ Strictly controlled credit quality: special mentioned loan ratio (group 2) was 0.36%; NPL ratio was 0.63%.

• ✓ VCB has fully made specific provision for loans restructured (100%) according to Circular No. 03 - two years earlier than the SBV's regulation. The loan loss coverage ratio reached the highest level in the banking sector.

1.4. Impressive results in turnover and customer development:

• ✓ Card payment/usage turnover rose by 19.2% compared to 2020.

• ✓ New wholesale deposit and credit customers increased by 33.2% and 45.2% compared to 2020 respectively.

• ✓ New E-Banking and individual customers increased by 29.4% and 4.9% compared to 2020 respectively.

• ✓ Foreign currency sales grew by 13.2% compared to 2020.

• ✓ International settlement - trade finance turnover rose by 23.7% compared to 2020. Market share was 15.36%.

1.5. Outstanding business results; positive service income growth

• ✓ Profit before tax target assigned by the SBV and the General Shareholders' Meeting was achieved.

• ✓ Income from service and trade finance increased by 12.1% compared to 2020, accounted for 16.5% of total income.

• ✓ Income from recoveries of written-off loans reached VND 2,912 billion, up 20.3% compared to 2020.

• ✓ ROAA and ROAE increased significantly compared to 2020, at 1.60% and 21.59% respectively.

1.1. Largest market capitalization among listed banks

✓

VCB's market capitalization was ~$16.7 billion, which solidified the leading position among listed banks.

1.2. Fully complied with bank regulatory ratios

• ✓ VCB fully complied with safety requirements in banking operations in accordance with the SBV's regulations.

• ✓ The capital adequacy ratio (CAR) was 9.31%.

2.

Management activities in 2021

With safe adaptation, flexible and effective control of the COVID-19

pandemic in the system, VCB consistently implemented the motto "Transformation, Efficiency, Sustainability", focusing on implementing 03 initiatives and 05 breakthroughs in 2021.

• 2.1. Managed mobilization activities in balance with funds usage and market situation; continued to restructure sources of funds to control input costs.

• 2.2. Focused on credit growth since the beginning of the year with a variety of new products introduced and effective management policies.

• 2.3. Successfully directed and managed the implementation of 03 business pillars:

• ✓ "Retail" pillar: continued to strengthen the foundation of the retail sector, including processes, policies, products and services improvements; step by step deployment of products, services, and utilities on digital channels.

• ✓ "Service" pillar: introduced preferential price policies, boosting transaction volume and turnover. Stepped up the development of new products and services; increased the utility of existing products and services.

• ✓ "Investment" pillar: fostered cooperation in the distribution of investment banking products to wholesale customers.

• 2.4. Implemented digital transformation to improve service quality and customer experience; automated and optimized operations.

• 2.5. Tightened credit quality control; promoted recovery of non-performing/written-off loans; develop appropriate solutions for restructured debt in accordance with Circular No. 01, Circular No. 03, Circular No. 11, and Circular No. 14.