notes to the consolidated financial statements - Sacombank

FInAnCIAL MAnAGEMEnt
FINANCIAL RESTRUCTURING WITH THE AIM OF SAFETY AND EFFICIENCY
In 2011, the Vietnamese economy faced many challenges due to domestic difficulties and international uncertainties.
Macro-economic uncertainty and high inflation had a significant impact on the financial and monetary market. Affected
by the central bank’s monetary tightening policy, many banks with low VND liquidity had to raise deposit interest rates
sharply. The result was an increase in loan interest rates and a slowdown of business activities for enterprises. Numerous
enterprises decreased their demand for loans, impacting the credit growth rate in 2011 and credit growth was much lower
than in previous years. Consequently, the financial performance of many banks was significantly affected, and appropriate
adjustments were made to adapt to this new business environment.
In this economic environment, Sacombank actively and flexibly managed its business activities in line with the SAFE
OPERATION – EFFICIENT BUSINESS & SUSTAINABILITY approach after years of high growth compared with the average
growth rate of the banking industry. Therefore, the Bank’s growth rate in 2011 was controlled properly to achieve key
targets and exceed the planned profit goals within predetermined safety guidelines.
In 2012, the Bank anticipates a mixture of opportunities and challenges. The Government’s tight monetary policies are
expected to continue, with interest rates to be gradually reduced in order to help enterprises to overcome difficulties,
which means that banks will continue to face difficulties in attracting deposits. In addition, permissible limited credit
growth (around 15%-17%) will present a difficult problem for banks in terms of meeting customer demand and achieving
business performance goals.
On the other hand, bad debts and bad debt handling will continue to be a topical issue for the banking industry in 2012,
as the standard bad debt ratio is believed to be much higher than the quoted ratio of 3.4%. Therefore, safety and performance
indices, such as Capital Adequacy Ratio (CAR), rates of return (ROE, ROA), bad debt ratio and loan portfolio, etc. will be
closely controlled by the State Bank of Vietnam. Accordingly, the bad debt ratio and safety indices of each bank and the
banking industry as a whole may have an impact on people’s trust, and this is likely to be an important factor in the
restructuring of the banking sector and individual banks in future. In parallel, the requirement that banks improve their
financial capacity in line with the roadmap for accession to the WTO, the business performance pressure, the requirement
to enhance operating safety standards, etc. are urgent problems that need early resolutions; and the merger-consolidation
solution for certain weaker banks is likely to be an indispensable trend in future.
Those banks that can adapt to market developments, set out proper corporate resolutions and restructuring programs,
and capitalise on the opportunities will improve their financial position and competitive edge, thus creating breakthroughs
in the new development period.
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ANNUAL REPORT 2011