Chapter 2

A bank has financial statements with following information: (Unit: billion dong)
Ave
Average rage
Asset interest Liability inte
rate rest
rate
Cash on hand, gold, silver and Amounts due to the
2.10
gemstones (Cash and cash 54,678 0% Government and the State 128,538
%
equivalents) Banks
Balances at central banks and Deposits from other credit
7,890 3% 41,853
other credit institutions institutions
Financial investment (Trading
0.20
securities & Investment 124,670 5.10% Demand deposits 38,977
%
securities)
1.60
Short-term loans 366,835 8.20% Term Deposits, <12T 2,807
%
4.50
Medium & long-term loans 166,280 9.70% Term Deposits, >12T 69
%
Borrowings from other 1.50
Fix assets & other assets 46,095 0% 8,355
credit institutions %
Deposits from customers 531,389
0.20
Demand deposits 158,966
%
4.30
Term Deposits, <12T 228,497
%
7.30
Term Deposits, >12T 143,926
%
5.90
Valuable papers issued 3,661
%
Other liabilities 1,557
0.00
Shareholder equity 51,095
%
Total assets 766448 Total liabilities 766,448
Known:
Net Fee and commission income 3,610
Net gain from trading of foreign currencies 3,250
Net gain from trading securities and investment
728
securities
Net other income 1,279
Operating expenses 18,590
Allowance for credit loss 7,199
Require:
Brieftly comment on the bank’s profitability, given that corporate income tax:
20%
Answer 52804.500
Interest income
interest expense 23816.494
Net after tax 9652.8048
0.01259420
ROA 7
0.18891877
ROE 5

Exercise 2. A commercial bank announces the deposit rates as following:

1. Current account (0.75% annually)

2. Savings account (2.75 % annually)
3. CDs (3.7% annually)

a/ A customer would like to deposit $15,000 to this bank for 12 months. Calculate the interest
payments this customer would receive the three types of deposits. Give a short comment on the
results.

b/ The client decides to open a savings account for 9 months with $10.000, but then withdraws
the money aster 6 months. The bank interest policy is that any pre mature withdrawal receives
current account interest rates. How much money would he receive for full term anđ after 6
months? Comment on the results.

Answer:

1. Interest payment :

Current account = 112,5

Savings = 412,5

CDs= 555

2. Interest full term: 206,25

After 6 months: 37,5

Exercise 3: The X joint-stock commercial bank is currently offering the following deposit
rates:

- Interest rate for demand deposits: 0.2 % per year.

- Interest rate for term deposits: 6-month term (unit: % per year)
 Monthly At maturity
At the counter 6.5% 6.6%
Online 6.5% 6.65%

A customer has a deposit at the X joint-stock commercial bank with following information:

 Deposit amount: 100 million dong.

 Deposit maturity: from 10/3/2022 to 10/9/2022

1. Calculate the interest payment to the customer in two cases, making deposit at the counter
and via an online channel:

 Interest paid at the end of the period (at the maturity)

 Interest paid monthly
 The customer withdraws all her deposit on 20/5/2022 to buy a car

2. Comment on the amount of interest customer receives in the different cases.

Answers:
at the counter online
Interest paid at the end of the
3.327123288 4.617358491
period
Interest paid monthly 3.276712329 3.301917808
The customer withdraws all
her deposit on 20/5/2022 to 0.03890411
buy a car
Comment:
- Interests in case of depositing at the counter are always lower than that in case of online
deposits.(due to that bank would like encourage customers to deposit online, saving costs for
the bank)
- Related to term of the deposit, interest paid at the end of the period is always higher than that
interest paid monthly (due to time value of money)
- If the customers withdraw the deposit before the due date, they will receive the interest for
demand deposit.

Exercise 4.
Customer Minh Tung applies for a bank loan to buy a 2 billion dong car. The bank agrees to
finance 75% of the value of the car, with the following terms:
- Loan maturity: 3 years
- Lending rate: 16%/year
- Repayment schedule: semi-annually.
- Payment method: installment, interest payment for each period is calculated based on the
actual outstanding balance at the beginning of the repayment period.
Require: 
1. Prepare a spreadsheet of the principal and interest repayments for each period.
2. In order to finance the above loan, how much deposit must the bank has to raise, given that
the required reserve ratio and the solvency reserve ratio are 5% and 3% respectively for a
deposit of 3-year term. Interest expense is 3.5%/year and non-interest expense is 1%/year.
How much is the total profit the bank earned when making the above loan.
Answers:
1.
1500
8%
6
P B P I T
0
1 1500 250 120 370
2 1250 250 100 350
3 1000 250 80 330
4 750 250 60 310
5 500 250 40 290
6 250 250 20 270

2.
deposit 1630.434783

total cost 220.1086957

profit 199.8913043

Exercise 5:
Commercial Bank A provides a loan to a customer to buy a car with the following terms:
- Loan amount: 1000 million VND
- Loan maturity: 2 years
- Lending rate: 12%/year
- Repayment period: Quarterly
- Payment method: Equal installments for the principal amount and interest payment is
calculated based on the loan balance at the beginning of the repayment period.
Require:
1, Make a spreadsheet of the principal and interest repayments for the loan. How much is the
total interest income of the bank from the loan.
 2, Suppose that the customer requests to repay the loan early at the end of the first year. Given
that the prepayment fee is 2% of the prepayment amount, how much does the customer have to
pay to terminate the loan upon his request.
Answers:
1. Spread sheet

terms: 8 Amount: 1000

interest rate:3%
P B P I T
0
1 1000 125 30 155
2 875 125 26.25 151.25
3 750 125 22.5 147.5
4 625 125 18.75 143.75
5 500 125 15 140
6 375 125 11.25 136.25
7 250 125 7.5 132.5
8 125 125 3.75 128.75
Total interest 135
2. Prepayment
Principal: 500
Prepayment fee: 2%*500 = 10
Total amount to pay: 510
Exercise 6
The ABC Bank makes a loan commitment to company Y, which specializes in importing
electronic components, with a credit line of USD 20,000 for 6 months with the following fees:
- Commitment fee: expressed as a percentage of the total commitment: 2%
- Usage fee: levied on the unused portion of the credit line: 2.5%.
- Servicing fee: as a percentage of the on the borrowed amount: 0.75%
- The borrower must opens a current account and the deposit balance at the bank equal
10% of credit line during the commitment period.
During the commitment period, the firm withdrew 5,000 USD with a term of 6 months, the
interest rate is 8%/year. Calculate the net profit of the commercial bank assuming that the
average business interest rate of the bank is 5% and the deposit rate on current account is 0.5%
and the average cost related to loan commitment is 3% of the credit line.
Answers:
 Total Income: 1062.5 USD
- Commitment fee: 2%*25000 = 400
- Usage fee : 2.5%*(20000-5000) = 375
- Service fee: = 37.5
- Interest from the borrowing: 8%*5000*6/12 =200
- Business interest: 5%*10%*20000*6/12 = 50
 Total cost: 605 USD
- Interest for current account: 10%*20000*0.5%*6/12 = 5
- Cost related to loan commitment: 20000*3.% = 600
 Net Profit: = 457.5 USD

Exercise 7
ABC Bank signs an irrevocable L/C contract with customer Y with the following terms:
- L/C value is 100,000 USD
- Customer deposits 80% of L/C value on the current account at the time of signing
- Foreign currency swap fee 0.05% of the total value of L/C-
- L/C issuance fee is 2% of the total value of L/C
At the time the Bank makes the payment to the counterparty, customer Y commits to allow the
Bank to automatically debits the checking account and takes a loan with the residual amount at
the interest rate specified by the Bank.
1 month after the L/C was signed, the counterparty of Y presented the required documents and
the bank processes with the payment
Bank's current interest rate on demand-deposit is 0.06%/year. Calculate the income for the
bank for the L/C in the following 2 cases:
a. Customer Y pays immediately to the bank when their counterparty presented the
shipping documents
b. Customer Y pays after 2 months from the date the Bank made the payment. Knowing
that the lending rate for the deferred payment is 6%/year
Answers:
1. Total income: 2050
- Foreign currency swap fee: 0.05%*100000 = 50
- L/C issuance fee: 2%*100000 = 2000
Total cost: 4.25
- Interest of demand deposit: 85%*100000*0.06%*1/12 = 4.25
Net profit: USD 2045.75
2. After 2 months
- Additional income: 15%*100000*6%*2/12 = 150
- Net profit: 2045.75+150 = 2195.75
Chapter 3
Exercise 8: The following table presents a simplified balance sheet of the ABC bank:
Bank ABC BALANCE SHEET (Unit: mil VND)
ASSET LIABILITIES AND EQUITIES
 Cash Deposits and borrowings from
27 500 other credit institutions 100 100
Securities 86 000 Customer's deposits 250 500
Loans ???? Issuance of valuable papers 34 200
Loan loss provision -1500 Equity 19300
Fixed assets and other properties 19 100
404,10
Total Assets
0 Total liabilities and equities 404 100

1. Calculate the total loan volume to customers of this bank. Comment on the proportion
of loans over total assets of the bank.
2. Calculate ROE, ROA and bank leverage ratio, given the following assumptions: Interest
revenue: VND 3,850mil, interest expense: VND 1,725mil, non-interest revenue:
VND1,500mil, non-interest expense: VND 607.5mil, allowance for loan loss is VND
336mil; tax rate: 10%
3. Given that last year, the bank’s ROA is 0.55%, the bank leverage ratio is 21.5. What
was the bank’s ROE last year? Comment on the bank performance.

Answer:

1. Loan: 273000

Percentage: 67.76%--> comment:…accounts for the majority part of total asset.

2. ROA, ROE

Interest income 3850

In expense 1725
Non-in income 1500
Non-interest
expense 607.5
Allowwan for
loan loss 336

Afer tax profit 2413.35

ROA 0.6%
ROE 12.5%

3. ROE : 11.83%. Bank performance decreased.

Exercise 9. The following tables present a balance sheet and an income statement (which have
been simplified) of an example bank:
 Bank ABC BALANCE SHEET (Unit: mil VND)
ASSET LIABILITIES AND EQUITIES
Cash Deposits and borrowings from
27 500 other credit institutions 25 100
Securities 86 000 Customer's deposits 411 640
Loans ??? Issuance of valuable papers 30 100
Loan loss provision -9500 Equity 35160
Fixed assets and other properties 19 100
502,00
Total Assets
0 Total liabilities and equities 502 000
1. Calculate the total loan volume to customers of this bank. Comment on the proportion of
loans over total assets of the bank.

2. Calculate net income margin (NIM) and cost income ratio (C/I) given the following
assumptions: Interest revenue: VND 3,850mil, interest expense: VND 1,725 mil, non-interest
revenue: VND1,500mil, non-interest expense: VND 607.5 mil, other things in the income
statement are not material. Present your comments NIM and C/I of this bank if these two
figures in the previous period were 0.4% and 17%, respectively.

Answer:

1. Loan: 378900; proportion of loans over total assets: 75.4%--> comment:…accounts for
the majority part of total asset
2. NIM is improved; CI decreases.

0.00423306
NIM 8
0.11355140
CI 2

Exercise 10. The following tables present a balance sheet and an income statement (which
have been simplified) of an example bank:

Bank ABC BALANCE SHEET (Unit: mil VND)

ASSET LIABILITIES AND EQUITIES
Cash Deposits and borrowings from
27 500 other credit institutions 25 100
411
Securities
86 000 Customer's deposits 640
Loans 378 900 Issuance of valuable papers 30 100
Loan loss provision -9500 Equity 35160
Fixed assets and other
properties 19 100
 502
Total Assets
502 000 Total liabilities and equities 000

a) Briefly comment on the structure of the bank balance sheet.

b) Calculate ROE, ROA and bank leverage ratio, given the following assumptions: Interest
revenue: VND 3,850mil, interest expense: VND 1,725mil, non-interest revenue:
VND1,500mil, non-interest expense: VND 607.5mil, allowance for loan loss is VND
336mil11; tax rate: 10%
c) Given that last year, the bank’s ROA is 0.55%, the bank leverage ratio is 21.5. What
was the bank’s ROE last year? Comment on the bank performance
Answer:
a. ROA, ROE

Interest income 3850

In expense 1725
Non-in income 1500

Non-in expense 607.5

Allowwan for
loan los 336

Afer tax profit 2413.35

ROA 0.60%
ROE 12.50%
Bank leverage 14.28
b.
ROE: 12.84%
ROA decreases, ROE is improved.