APPLICATION OF CAMELS TO FINANCIAL ASSESSMENT OF BANK

PERFORMANCE

CONTENT
I. Overview of the CAMELS model
1. General introduction
2. Purpose
3. Content
II. Applying the CAMELS model to evaluate the operations of Sacombank
commercial bank in the period (2020-202INCL)
1. Introducing Sacombank
2. Evaluate Sacombank's operational efficiency
2.1. Capital analysis (C-capital adequacy)
2.2. Asset quality analysis (A-Asset quality)
2.3. Analysis of management capacity (M- Management ability)
2.4. Analyze profitability (E-earnings)
2.5. Analyze liquidity (L-liquidity)
2.6. Analyze sensitivity to market risk (S-sensitive)
III. Conclusion
1. Achievement
2. Limitation
I. Overview of the CAMELS model
1. General introduction
- CAMELS are 6 models mainly used in banking risk management to check and
monitor the safety and soundness of commercial banks, introduced in the Federdal
Deposit Insurance Corporation Improvement Act. of 1991 (FDICIA) of the US
- CAMELS is the name of a collection of abbreviations used to refer to the criteria
that make up the ranking system for a bank with the following criteria:
+ C (Capital adequacy)
+ A (Asset quality)
+ M (Management ability)
+ E (Earning)
+ L (Liquidity)
+ S ( Sensitive to market risk )
- After evaluating each detail, the overall score of the organization after ranking
is not determined by the method of calculating the average of the scores of the
factors but is determined by the specific percentage as follows. :
+ Capital adequacy: 20%
+ Asset quality: 20%
+ Management: 25%
+ Earnings: 15%
+ Liquidity: 10%
+ Sensitive: 10%
- The final score used to evaluate the bank's performance level will be based on
5 different scales:
+ Score 1: Strong in all aspects, operating well at a level higher than the
industry average
+ Score 2: Strong fundamentals. Activity at an average or above average level
is not enough for safety purposes
+ Score 3: There are concerns about supervision, operations are below
average
 + Score 4: Unsafe financial or operational conditions. The organization is not
operating reliably, much lower than the average, and needs monitoring to
avoid the risk of losing operational capacity.
+ Score 5: Extremely unsafe financial or operating conditions, very poor
performance, risk of loss of operating capacity, need immediate attention and
supervision.
2. Purpose:
- Operational analysis according to the CAMELS model is a method used to
analyze the operational situation, performance and risks of a bank.
- In fact, the CAMELS evaluation model applies not only to banks but also to
financial institutions in general.
- The CAMELS model is applied to evaluate the bank's safety, profitability
and liquidity, being able to cover all costs and fulfill its obligations.
- After the analysis results are available, the classification results are often not
publicly announced but are only used specifically for management agencies
and executive boards to evaluate operational efficiency, weaknesses and
achievements. Bankruptcy prevention measures.
3. Content:
3.1. Capital adequacy:
There are always risks in the financial market that affect the operations of
credit institutions in general as well as banks in particular, such as credit risk,
exchange rate risk, and risk. interest rates, etc. Therefore, banks need to
properly assess the risks they are and will face as well as maintain a sufficient
amount of capital to cover their operations and prevent risks. ro. Capital
adequacy level represents the amount of equity capital to support the bank's
business activities. The more risk a bank takes, the more equity capital it
requires to support its operations and offset potential losses associated with
higher levels of risk. The letter C in the CAMELS model mainly evaluates the
level of capital adequacy and capital quality of commercial banks compared
to the level of operational risk that the bank is accepting, so to determine it, it
is necessary to use small indicators. :
- Minimum capital adequacy ratio (CAR)
Is one of the important indicators reflecting the financial capacity of banks
used to determine the bank's ability to assess the ability to pay debts with a
term and face other risks such as credit and operational risks
V ố nt ự c ó
CAR = T à i s ả n đã đ i ề u c hỉ n h r ủ iro x 100 %
 According to the Base II capital treaty, the minimum rate to compensate for
the risk of the CAR coefficient is 8%, in Vietnam the State Bank of Vietnam
stipulates it as 8%.
- Circular 36/2014/TT-NHNN stipulates that the minimum capital adequacy
ratio of credit institutions includes the individual minimum capital adequacy
ratio and the consolidated minimum capital adequacy ratio.
- Individual minimum capital adequacy ratio: each credit institution must
maintain an individual minimum capital adequacy ratio of 8%.
Vốntự có riênglẻ
- Individual capital adequacy ratio = Tổng tài sản có rủiro riêng lẻ x 100 %

- Consolidated minimum capital adequacy ratio: Credit institutions with

subsidiaries, in addition to maintaining the individual minimum capital
adequacy ratio, must also maintain a consolidated minimum capital adequacy
ratio of 8%
- Financial leverage ratio: Also known as D/E ratio, this ratio reflects the bank's
debt management capacity and financial scale. The higher the ratio, the lower
the level of safety for depositors or creditors of the bank
Tổng nợ phải trả
- Financial leverage ratio = Vốn chủ sở hữu

3.2. Asset quality

Asset quality of commercial banks is a comprehensive indicator that speaks to
the financial sustainability and management capacity of a credit institution.
Most of the risks in currency trading are concentrated in assets. Asset quality
is the fundamental cause of bank failures. If the market knows that asset
quality is poor, it will put pressure on the bank's short-term capital position,
and this can lead to a liquidity crisis, or a rush to withdraw money from
banks.
- This is one of the most difficult aspects of financial and banking analysis,
when analyzing, researchers often have to go in two directions:
+ Evaluate the strength and weakness of the bank's credit risk management
+ Evaluate the quality of investments and loan portfolios using trend and
comparative analysis
- Indicators for assessing asset quality:
Bad debt
+ Bad debt ratio = Total outstanding debt x 100 %
Includes debt groups 3, 4 and 5 of the bank, classified according to the
decision promulgating regulations on debt classification, setting up and use of
provisions to handle credit risks in the bank's banking activities of credit
institutions in 2014.
 - Bad debt has a very high risk, the ability to recover capital is relatively
difficult, the bank's capital is no longer a risk, but has caused damage to the
bank. A bank with a high bad debt ratio proves that the bank's credit quality is
very low and at this time it needs to review its entire credit activities
otherwise the consequences will be unpredictable.
- Bad debt/total assets ratio: meets international standards of 1.5%
Credit risk provision
+ credit risk provision ratio = Total outstanding debt
An amount set aside to prevent possible losses to the Bank's credits. Credit
institutions carry out debt classification and set up specific provisions
according to the decision promulgating regulations on debt classification,
setting up and use of provisions to handle credit risks in the banking activities
of the institution. credit card in 2014 (number: 22/VBNH-NHNN)
Group 1: 0%
Group 2: 5%
Group 3: 20%
Group 4: 50%
Group 5: 100%
- Outstanding credit/Total assets
This coefficient shows the proportion of credit items in the bank's asset
structure. The larger this ratio, the greater the profit but at the same time the
credit risk is also very high.
Normally, a bank's total outstanding loans are divided into three groups:
Outstanding loans of bad quality, outstanding loans of bad quality, outstanding
loans of poor quality. average quality loans and good quality credit balances
- Structure of profitable and non-profitable assets/Total assets
Evaluating the structure of profitable and non-profitable assets in the bank's
total assets, consider the structure of on-balance sheet assets - the ratio
between profitable assets/on-balance sheet assets.
The higher the ratio of on-balance sheet asset structure, it proves that the bank
has effectively used its assets to serve profit-seeking activities.
- Credit growth rate:
Dư nợ TD cuối kỳ
Credit growth rate = Dư nợ TD đầu kỳ

Indicates the credit level of the period compared to the previous period
High credit growth rate is good news for the banking industry, proving that
the banking system has recovered and the economy has absorbed capital, but
this is not necessarily good but is a warning sign of risks. for the economy,
accompanied by a series of problems related to inflation, capital mobilization,
interest rate racing, etc.
 Banks that want to increase credit growth need to increase capital
mobilization to ensure solvency. Credit growth is usually high at the end of
each year while at the beginning of the year this number is usually below 5%.
3.3. Management
This is considered the most important factor and greatly affects the
performance of banks. It fully reflects the board's ability to identify , measure,
and control the bank's risks. and ensure banks are safe, healthy, and efficient
in accordance with the law. In the CAMELS analysis system, analysis is
considered the most important factor because it plays a decisive role in the
success of the bank's operations.
The administrator's decision will directly affect factors such as:
+ Quality of existing assets
+ Growth rate of assets
+ Income level
The ability and effectiveness of the leadership are evaluated based on:
- Corporate governance
The Board of Directors has a fiduciary responsibility for its members to
maintain standards of professional conduct including but not limited to:
+ Appropriateness of compensation policies
+ Prevent conflicts of interest
+ Ethics and professional behavior
As the person who directly manages and operates commercial banks, all
activities of the bank are affected by the decisions of the board of directors.
- HR policies
Human resources is an indispensable element in a business, human resource
management is one of the important things to maintain good operations of that
business.
Basically, the banking industry's human resource policies follow the same
centralized and unified rules as other organizations and depending on the size
and nature, each bank has changes to suit its operations. Organize yourself
A good human resources policy in the banking industry can be expressed
through three criteria:
+ Regarding knowledge: requires human resources to be at least
knowledgeable about their major in addition to having general knowledge of
many different majors.
+ Competency: sharp, creative, dynamic, able to withstand high work pressure
+ Business style: business activities are based on trust, so each individual
needs to build for themselves a style of maturity, confidence, assertiveness,
good ethics, creating trust for customers.
- Strategic planning:
 The strategic plan will identify risks and threats to the organization and
outline ways to address them.
The business strategy will show customers the development goals of the
commercial bank and the position the bank wants to have in the future. This
helps customers and investors have a comprehensive overview. More than
enough, creating image, reputation and brand for the bank
- Internal control
Internal control plays an important role in controlling potential risks in an
enterprise. Effective internal controls provide safeguards against system
failures
Each banking system has a separate internal control department to check,
broadcast presently and treat physical keep time the wrong leftover avoid cause
image enjoy arrive full set generation system.
 Operational objectives of internal control set:
 Tell brave give echo row active dynamic obey defense France the
law and the regulation determined, procedure paternal set about management
physical and active dynamic, and the standard squid religion virtue due echo
row put go out.
 Ensure the reliability and integrity of financial and non-financial
information main.
 Protect, manage and use assets and resources economically and
effectively fruit.
 Support the implementation of goals set by the Bank's Board of
Directors go out.
3.4. Earnings:
When investing in any business, every investor is interested in the
profitability of that business because it shows how much profit he or she will
receive in the future with the amount of current investment in . Banking
system is no exception.
Profit is the most important index to evaluate the success or failure of a
manager's management and strategic activities. Profits will lead to additional
capital formation, which is essential to attract more capital and future
development support from investors. Profits are also needed to cover loan
losses and make adequate provisions.
Criteria used to evaluate profitability:
 - Return on equity (ROE: Return on equity)

Lợi nhuận sau thuế

ROE = Vốn chủ sở hữu x 100 %

- This indicator reflects the income that shareholders receive from banking
business activities. Income is the final deciding factor for success or failure of
banking. Profitability measures a bank's ability to create value and by adding
resources to maintain and improve capital. It is also a quantitative measure of
management success in terms of asset quality, control and revenue generation.
This is a general indicator reflecting the bank's business results. When ROE
tends to decrease, the bank's competitive position is going down.
- ROA
Lợi nhuận sau thuế
ROA= Tổng tài sản bình quân x 100

ROA provides investors with information about the returns generated from
assets. A bank's assets are formed from loan capital and equity. Both of these
capital sources are used to finance the bank's operations. The effectiveness of
converting investment capital into profit is shown ROA.
- Net interest margin (NIM)
Net interest income
NIM= Average total earning assets x 100 %
(Net interest income = income from loans and securities investments - interest
payments on deposits and other debt )
The marginal interest income ratio is calculated by dividing the interest income
share by the average asset income. According to S&P's assessment, a NIM ratio
below 3% is considered low while a NIM ratio greater than 5% is considered too
high. NIM tends to be higher at small retail banks, credit card banks and lenders
than at wholesale banks, multinational banks or mortgage lenders . An increasing
NIM ratio shows a sign of good asset management, while NIM tends to be low
and shrinking, showing profit. Bank profits are shrinking.
- Non-Interest Margin (N-NIM)
T h u ngo à i lã i−C h i ngo à il ã i
N-NIM= T à i s ả n c ó sinhl ờ i b ìn h qu â n x 100
The marginal non-interest income ratio measures the difference between non-
interest income, mainly fee income from services, and non-interest costs that
the bank must bear (including salaries, repair costs, equipment warranties,
and credit loss costs). For most banks, the non-interest difference is usually
negative, non-interest expenses generally exceed fee income
This is a measure of efficiency as well as profitability, reflecting the ability of
the board of directors and staff to maintain the growth of revenue sources
(mainly revenue from loans and investments). and service fees) compared to
the increase in costs (mainly interest costs on deposits, money market loans,
employee salaries and benefits)
- Total expenses to total income (CIR %):
 This index represents the ability to cover the cost of one revenue
import.
 This is an important financial index, especially in evaluating
banking operations. It shows the correlation between expenses and
income of that bank. This ratio gives investors a clearer view of the
organization's performance; The smaller the ratio, the more efficient the
bank is fruit.
T ổ ng c hi p hí
CIR= T ổ ng t h u n hậ p x 100
3.5. Liquidity
Besides profitability, liquidity management efficiency is also an
important factor in evaluating the operations of a credit institution.

Liquidity knnown as possible power to meet the demand on withdraw

deposits and disburse committed credits. Bank needs liquidity reserves to
cover regular expenses such as interest on deposits, and payment shocks
unexpected account such as a large withdrawal or big loan request.
Liquidity is an important benchmark in evaluating bank
performance
The topic of the project analyzes the Bank's liquidity based on the
following typical indicators:
 - Liquidity reserve ratio
 According to Pine private 36/2014/TT-NHNN Billion rule
attend reserve bar clause Okay count according to merit awake:
Tài sản có tính thanh khoản cao
Liquidity reserve ratio = x 100
Tổng nợ phải trả

- Ratio of outstanding loans to mobilized capital (LDR)

Dư nọ cho vay
LDR= Tỏng tiền gửi x 100

- Affordability ratio in 30 days

Tài sản có tínhthanh khoản cao
Payability ratio within 30 days = Dòngtiền ra ròng trong 30 ngày tiếp theo x 100
3.6. Sensitivity to market risk
Market risk in banking activities is the potential risk that causes negative
impacts on the income or capital of commercial banks. Risk sensitivity
reflects the extent to which changes in interest rates, exchange rates,
consumer prices or capital cost affect a bank’s earnings or capital. It is not
possible to change these factors, but can only predict trends and calculate
levels degree image enjoy to from there give go out the argument France
owner dynamic thing correction regulation tissue, muscle structure assets so
as to minimize possible losses happen.
- The content of the topic is measuring the level of sensitivity to
market risk of bank which is based on the interest rate risk tolerance test
model (Interest Rate Stress Test capacity).
- Interest rate risk tolerance test model (Interest Rate Stress Test
capacity)

Bước 2: Mô hình vệ
Bước 1: Xây dựng Bước 3: Đánh giá khả
tinh đánh giá tác động
kịch bản năng chịu đựng của
cú sốc tới bảng cân đối
Ngân hàng
của Ngân hàng

Diagram 1.1: Steps to implement the Interest Rate Stress

Test model

4. Advantages and disadvantages of the CAMELS model

  Advantage:
- Measuring the strength and safety of a credit institution's
financial operations helps administrators find shortcomings and
inadequacies in the organization's operations, thereby providing
solutions.
- The CAMELS model includes many analytical indicators of high importance
and applicability in managing each basic element of a financial institution.
The indicators used for financial analysis for each decision task in the bank
are closely related to each other, not separate or independent. The indicators
used to analyze this factor are also closely related to the indicators used in
managing other factors of financial institutions. That helps bank
administrators to look at the problem deeply, and make general analytical
assessments that cover the interrelated events shown in the financial situatio
of organization
- Can predict bankruptcy of the banking system and lead to financial crisis,
helping bank administrators know current risks and predict potential risks
in the future. From there, solutions can be proposed to operate effectively.
Not only does it help administrators, using CAMELS to evaluate the
performance of commercial banks also helps shareholders and customers
feel secure about their bank.
- CAMELS is more advanced than other analytical models in
that each component element in it is analyzed, evaluated and assigned a
certain score from 1 (best) to 5 (worst). Analytical indicators are
measured qualitatively or quantitatively, and are also classified according
to their importance to management and financial decision-making in
banking business.
 Disadvantages:
- The CAMELS model is used to effectively analyze financial indicators based
on ratios given by researchers. Observing and analyzing the quality of a
financial institution's operations based on such predetermined indicators
easily makes those assessments depend on many subjective opinions of
analysis and supervisor. These opinions may also differ between banking
groups and they may also change over time.
- Performing performance analysis using the CAMELS method requires
financial institutions to build a team of qualified, capable, and
technologically knowledgeable analysts. This is still relatively difficult for
banks in developing countries with small capital, including banks in Vietnam.
- Using the CAMELS model in analyzing the performance of financial
institutions for the purpose of evaluating, ranking, supervising and
strengthening the national financial system of central banks is also an issue.
encountered many obstacles. Information and data used for analysis must be
truly transparent and include the bank's ability to provide financial
information, the authenticity of financial report information and the
availability of staff. member in interview. Due to highly confidential
information regulations, these requirements are difficult to achie
II. Applying the CAMELS model to evaluate the operations of Sacombank
commercial bank in the period (2020-2022)
1. General of Sacombank:
Saigon Thương Tin commercial joint stock bank is a joint stock
commercial bank established in Vietnam with the name Sacombank in
1991. On October 1, 2015, Southern Commercial Joint Stock Bank was
officially merged into Saigon thuong tin commercial joint stock bank..
Not only stopping at domestic scope, Sacombank also built 2 branches in
Laos and Cambodia in the form of a 100% foreign-owned bank. This has
helped Sacombank become one of the banks with a wide network
domestically and internationally with a team of young, dynamic banking
staff with high professional qualifications and services worth using.

2. Using the CAMELS model to evaluate the performance of Saigon

Thuong Tin Commercial Joint Stock Bank in the period 2020-2023

2.1. C- Capital adequacy

According to the Basel Capital Accord, the minimum capital adequacy ratio
CAR is ≥8%. When this ratio is reached, the bank has the ability to protect
itself against financial shocks, enough to finance all types of risks in the
bank's business activities. Accordingly, the bank with the best capital level is
the bank with CAR ¿ 10 %, has appropriate capital when CAR > 8%, lacks
capital when CAR <8%, clearly lacks capital when CAR <6%, and seriously
lacks capital when CAR <2%. According to research by the Bank for
International Settlements (BIS), when the minimum capital adequacy ratio
increases from 7% to 8%, the probability of a banking crisis decreases by
about 25% - 30% (Le Thi Tuan Nghia and Truong Hoang Diep Huong,
2015). In Vietnam, to monitor and maintain stable operations of credit
institutions, the Governor of the State Bank of Vietnam issued a number of
decisions and guiding circulars to control and evaluate the operational
efficiency of commercial banks as stipulated in the Decision. No. 457,
Circular 13, Circular 36, Circular 06 and Circular 41. We apply CAR
according to Circular 41, which stipulates that credit institutions must
maintain a minimum capital adequacy ratio of 8%.

Sacombank's CAR coefficient tends to decrease in the period 2020-2022

compared to the peak coefficient of 2018, but still meets the minimum level
of 8% according to Circular 41 (applied from January 10, 2020). 2020, and
also meets Basel's minimum capital requirement of CAR ≥ 8 %. In general,
Sacombank's CAR coefficient is always higher than 8% (in 2020) and also
achieves the number compared to the minimum level according to
regulations. of the State Bank. If considering Basel II standards,
Sacombank's CAR is also classified as good safety because it is always
greater than 8%.
 CAR
14.00
11.88 11.53
12.00
9.93
10.00 9.53 9.49

8.00

6.00

4.00

2.00

0.00
2018 2019 2020 2021 2022

(Source: Sacombank's annual report)

2.2. Asset quality

A bank's assets are the capital used to engage in business activities and
maintain the bank's solvency. Whether asset quality is good or bad reflects
profitability and financial capacity, and this is one of the basic factors that
determine a bank's business operations.

According to Clause 8, Article 3 of Circular 11/2021/TT-NHNN, bad debts

are credits that commercial banks are forced to classify into debt groups
3,4,5. In addition, there is a regulation that commercial banks must meet a
bad debt ratio of less than 3% to be classified as a bank with good credit
quality and comply with the state bank's regulations on debt classification. ,
setting up and using provisions to handle credit risks. According to AIA's
CAMELS standard, this ratio is accepted at ≤ 1 %(Tesfasion Sahlu Desta,
2016)
 Non-performing loan ratio
2.50%
2.15% 2.14%
1.97%
2.00% 1.79%
1.70%
1.48% 1.55%1.56% 1.47%
1.50% 1.28%1.27%
1.19%
1.00% 0.90% 0.98%

0.50%

0.00%
20 020 020 020 021 021 021 021 022 022 022 022 023 023
/ 20 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2
uý 1 uý 2 uý 3 uý 4 uý 1 uý 2 uý 3 uý 4 uý 1 uý 2 uý 3 uý 4 uý 1 uý 2
q q q q q q q q q q q q q q

(source: Sacombank financial report)

According to the data collected in the chart above, it can be seen that during
the entire period, Sacombank has implemented good measures to maintain
the bad debt ratio in a good state. In most of the entire period, the bad debt
ratio was below 3%, not violating standards of credit indicators. It is easy to
see a slight increase in the first and middle quarters of 2020, from 1.97% to
2,151% and 2,135% in the second and third quarters. However, the bank
took timely action to control this debt ratio down 1,699% in the last quarter
of the year. In 2021, 2022 and even the first 2 quarters of 2023, Sacombank
is controlling the bank's bad debt ratio quite well. All numbers do not
exceed 1.8%, typically in the last 2 quarters of 2022 when the bank keeps
this number below 1%. If evaluated according to AIA's CAMELS standards,
Sacombank is doing its role very well in credit quality.

In addition, Sacombank also actively exploits the collection management

and debt handling system to better monitor and collect debt. At the same
time, the bank also uses measures such as setting up large amounts of loan
provisions and increasing buffers prevent bad debt risks. As a result, the
bank has significantly reduced the on-balance sheet bad debt ratio from
1.64% in 2020, down to control at 0.93% in 2022.
 On-balance sheet non-performing ratio

2022 0.93%

2021 1.47%

2020 1.64%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80%

In addition, Sacombank also actively sets up risk provisions as well as

allocates costs for handling outstanding assets. In 2020, Sacombank
deducted up to VND 5,600 billion for risk provision costs. The risk reserve
ratio is also around less than 0.5%.

Sacombank is also maintaining a fairly high ratio of outstanding credit

debt/total assets over the past quarters (> 60%). It is known that the higher
this ratio, the greater the profit, but at the same time, the bank's credit risk is
not small and the bank is taking measures to gradually reduce the risk ratio
each period. In 2020, this number hovered around 64%-69%, and in 2021,
extending to the last two quarters of 2023, this number reached 75%.

2.3. Management ability

Organizational structure in 2020:
+ Executive management according to centralized management
mechanism - decentralized management; Ensuring openness,
transparency, and respect for the law in all activities with the principle of
acting for the highest purpose of protecting and increasing the legitimate
interests of shareholders, banks and customers. Specifically, debt
handling activities, credit allocation as well as asset procurement and
liquidation... are all carried out by Sacombank according to the consensus
mechanism through the Councils, Committees, bidding and bidding
mechanisms. Open and transparent competition in accordance with the
spirit of the Board of Directors' Resolution and compliance with the law
 +Continue to review and re-arrange the network system in favorable
locations, creating conditions for units to exploit the area's potential,
increasing scale and operational efficiency. Operational procedures and
processes have also been streamlined by the Bank, with strong
application of digitalization, shortening transaction processing time and
effectively controlling the error rate at the counter. Communication and
marketing work is focused on flexibly deploying on many different
platforms; harmonious combination between Sacombank Brand
Ambassadors and internal KOLs in communication campaigns,
promoting products and services. These actions have actively supported
business. Thanks to that, Sacombank's brand value increased and it
became one of 9 Vietnamese Banks in the Top 500 Banks with the largest
brand value globally.
+ Sacombank not only transformed the training model, but also pioneered
the application of digital transformation in Human Resource Management
to bring superior experiences, engagement and satisfaction to employees,
contributing to increased productivity of labor. Internal connection,
cultural and sports activities continue to be promoted, tightening the spirit
of solidarity and inspiring the staff to work together towards a common
goal. As a result, the spirit of innovation continues to be maintained, the
proportion of employees meeting professional quality standards is high.

 Human resources strategy : (2020-2021)

By 2020, the digital transformation journey in the field of human resource
management at Sacombank achieved landmark changes when the Bank
signed a cooperation agreement with NGS and HR Path - a provider of
human resource management services. world leader - to deploy SAP
SuccessFactors human resources management solution using Cloud
technology.

SuccessFactors helps Sacombank completely digitize all human

resources-related processes through five aspects:

Minimize processing time: Information management system, sharing data

throughout recruitment, integration, training, monitoring work progress,
evaluation, planning, appointment, and source analysis human
resources,... helps automate boring and time-consuming activities to focus
on more value-adding activities.

Increase work efficiency: The system allocates work goals from general
goals to each individual, thereby supporting managers and employees to
 proactively monitor, warn and evaluate goals and instructions. goals need
to be accomplished.

Support for strategic planning: Target management system, measuring

operational efficiency with vivid visual data, thereby helping Sacombank
have full indicators and information on the efficiency of human resource
use to make decisions. Decide and plan annual human resources strategy.

Talent management and development: By measuring each individual's

work results and current capabilities according to the standard
competency framework of each job position, the system will help identify
talents and standardize work. Human resource succession planning,
thereby helping the bank promptly deploy mechanisms to promote
effective human resource use, develop organizational culture and team
cohesion.

Building a culture of proactive learning: The career development process

of personnel will be recognized by the system, and at the same time help
employees determine their own development and promotion roadmap;
The program proposes a suitable learning path, anytime, anywhere to help
motivate each individual to be more proactive in learning and improve
capacity.

It can be said that the above strategy helps Sacombank realize the goal of
effective centralized management, synchronization and standardization of
personnel quality throughout the system. At the same time, the system allows
real-time data extraction, providing timely human resource situation warnings
and serving as a basis for advising the Bank's Board of Directors.
Sacombank will continue to more comprehensively evaluate the impact of the
new system on the volume and nature of operations, continuing to reduce
paperwork; Strongly transform the operating model in both depth and breadth to
build a modern human resources team, according to market needs.

 Personnel size:
As of December 31, 2020, Sacombank's total number of employees was
18,646 people, down 3.1% compared to 2019. During the year,
Sacombank continued to restructure human resources, allocate and
redeploy towards shifting translate, increase direct business flow; Along
with that, actively optimize technology to reduce staff size, limit
recruitment of new staff, and ensure effective and sustainable business
operations. At the same time, the Bank also focuses on improving
training quality, implementing emulation movements, internal
connections...; Thereby increasing employee engagement and
 satisfaction, and the employee turnover rate has also gradually decreased
over the years.

 Development strategy:
Sacombank soon identified technology as a pillar in its development strategy,
paying special attention to investment in digital transformation, creating a solid
foundation for the Bank's comprehensive development in accordance with the
industry 4.0.
The two main digital transformation goals that Sacombank aims for are
optimizing customer experience and operational efficiency, improving
management capacity and labor productivity.
MASTER TECHNOLOGY - GET AHEAD OF THE TREND
-Innovate, CREATE, develop services in a MODERN direction, bringing
optimal, user-friendly, personalized experiences
-Continuously improve technology, control risks, maximize SAFETY AND
SECURITY.
- Promote MOBILE COMMERCE and applications on the website, meeting
basic payment and shopping needs of customers
Organizational structure in 2021:
In the past year, Sacombank has focused on improving management and
operations towards modern practices with 11 documents and methods applied
according to international standards. In particular, the work of building and
operating plans is standardized according to the BSC-OKRs model, linked to
labor productivity and synchronized with emulation, salary/bonus mechanisms,
stimulating units to accelerate business growth.
Strengthen risk management, comprehensively monitor banking operations,
reduce the number of incidents, incidents and errors by 50% compared to the
previous year. Basel II implementation will be basically completed when fully
complying with the contents of the Treaty according to the provisions of
Circulars 13 and 41, and at the same time effectively applying it in controlling
risks in all aspects of operations.
  Human resources strategy : (2021-2022)
By 2020, the digital transformation journey in the field of human resource
management at Sacombank has achieved landmark changes when the
Bank signed a cooperation agreement with NGS and HR Path - a provider
of human resource management services . world's leading company - to
deploy SAP SuccessFactors human resources management solution
according to the company Cloud technology. This is an important step for
Sacombank in the process of digital transformation of banking activities
in general and resource management strategy. human resources in
particular. This solution will help Sacombank completely digitize all
human resource processes, activities to attract - manage and develop
talent, effectively manage resource use and other important human
resource indicators.
At the same time, in 2021, Sacombank continues to promote online
training solutions suitable to the context of separation due to the Covid-
19 pandemic: there have been more than 473 courses deployed (including
online training). and virtual classroom) with nearly 108,000 visits
Employees participate and issue many textbooks/documents in the form
of Video Clips and Micro Learning according to modern trends.
- Therefore, in addition to developing technology tools in the digital
transformation journey, Sacombank has increased skills and knowledge
training as well as efforts to upgrade employees' digital thinking and
capabilities to adapt and respond to continuous market changes
 HR scale (2021)
As of December 31, 2021, Sacombank has a total of 18,659 employees,
always maintaining stability in the organizational structure with an
average turnover rate of 8%/year (15% lower than the market - source
Talentnet). With the orientation of shifting personnel structure towards
increasing direct sales personnel and applying digital technology to
optimize management and business activities to increase labor
productivity, Sacombank has well controlled recruitment. new personnel,
ensuring effective and sustainable business operations.
 Development strategy :(2021)
- The epidemic leads to social distancing, declining economic growth, stagnant
production activities, reduced credit demand and weakened debt repayment
ability are problems that Sacombank has faced over the past time.The bank has
had nearly 2 years to adapt to the prolonged epidemic situation, so it is always
proactive, flexible in responding and has implementation plans for each
different scenario. Accordingly, Sacombank aims to effectively manage
financial indicators and maintain the quality of core operations as key
principles. The bank advocates cost reduction through cutting unnecessary
variable costs, minimizing fixed costs and prioritizing business service costs to
ensure operational efficiency. Thanks to that, business results remain stable
during the epidemic season. Sacombank proactively develops its portfolio
Diverse lending to many different customer segments and distributed across
many regions throughout the country through an extensive transaction network.
In addition, thanks to regular examination Determine loan portfolio, develop
key industries according to the Bank's orientation State-owned banks, limiting
highly speculative risk areas, improving customer quality of Sacombank is
relatively good, has healthy financial capacity and can withstand well in the
future the situation of prolonged separation.
-To limit climate change, Sacombank develops and promulgates internal
guidelines and regulations on environmental and social risk management in
credit granting activities. All customers who need credit at the Bank will have
their environmental and social impact assessed and Sacombank will refuse to
grant credit to customers whose activities violate environmental and social
regulations. festival. Sacombank also established an ESMS (Environmental and
Social Management System) group specialized in building and consulting on
issues of the Environmental and Social Management System. In addition,
Sacombank encourages and develops activities in environmentally friendly
fields. Sacombank has issued lending mechanisms and policies related to
"Green Credit". In particular, the field of clean energy and renewable energy
has been promoted through many different programs and products and services.

4.4. Earnings
No matter how the bank's income and profit index is measured, it mainly
considers the profit level, evaluates the business results and the level of
development of the bank after a period of operation in the banking sector.
correlation with capital, assets, ability to preserve and develop capital. This
index is analyzed through ROA
ROA
0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.05%

0.00%
20 020 020 020 021 021 021 021 022 022 022 022 023 023
/ 20 2 2 2 2 2 2 2 2 2 2 2 2 2
ý 1 ý 2/ ý 3/ ý 4/ ý 1/ ý 2/ ý 3/ ý 4/ ý 1/ ý 2/ ý 3/ ý 4/ ý 1/ ý 2/
Qu Qu Qu Qu Qu Qu Qu Qu Qu Qu Qu Qu Qu Qu
According to statistical experience on ROA ratios of banks around the world,
financial and banking experts believe that: ROA < 0.5% means the business
performance of this bank is weak, if ROA reaches from 0.5% to 1.0% reflects
the bank's business efficiency at a good level, if ROA reaches over 2.0%, it
reflects the bank's business efficiency at a very good level.
Sacombank's total assets in the period 2020-2022 generally grow over time. But
growth is quite strong during 2022 and exceeds VND 600,000 billion. From the
chart, it can be seen that in the early part of 2020, this bank's ROA index was
quite weak, even reaching only 0.07% in the second quarter of this year. After
that, this index increased and showed more positive signs in the following years.
Partly because the bank actively deployed capital improvement while asset
quality continued to improve with profitable assets increasing significantly.
From there, rebalance the bank's revenue structure.
In addition, according to financial and banking analysts, the assessment of a
bank's ROE is also divided into many levels: if ROE is from about 7.5% to
10%, capital efficiency is low, if ROE is above 10%. % to 20%, the efficiency
of capital use is average. If ROE is from above 20% to 30%, the efficiency of
capital use is high. If ROE reaches over 30%, the efficiency of capital use is
very high.
ROE
6.00%

5.00% 4.63% 4.77% 4.68%

4.00% 3.70% 3.65%

3.33%
2.89% 2.93%
3.00% 2.57% 2.73% 2.54%
2.26%
2.01%
2.00%
1.25%
1.00%

0.00%
2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023
/quý /quý /quý /quý / quý / quý / quý / quý /quý /quý /quý /quý /quý /quý
1 2 3 4 1 2 3 4 1 2 3 4 1 2

Sacombank's ROE tends to increase in the period 2020-2022. This bank's ROE
initially only reached 9.63% in 2020, which is quite low compared to the
general average of all banks. However, this number has increased to 10.79% in
2021 and reached 13.83% in 2022. It can be seen that the bank is improving its
ability to invest in equity in a progressive and effective way. than before.
 NIM
1.20%
1.09% 1.10%
1.03%
0.98%
1.00%

0.80% 0.72%
0.70% 0.70% 0.67%
0.63% 0.66% 0.69%
0.60% 0.53% 0.55% 0.50%

0.40%

0.20%

0.00%
2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023
/quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý
1 2 3 4 1 2 3 4 1 2 3 4 1 2

(Source: Sacombank financial report 2020-2023)

In addition, the NIM index of a bank has the ability to allocate assets to the
most profitable assets, giving the best interest income in the period due to
effective mobilization and lending activities and capital allocation. efficiency
will have a high NIM index.
NIM increased very strongly by 1.1% in the third and fourth quarters of 2022 to
only 0.98% in the second quarter of this year. The remaining quarters of the
years also had uneven growth. According to S&P's valuation, Sacombank's NIM
ratio is below 3%, which is considered low. The cause of this decline may be
due to: Mobilization costs increased when banks had to switch to mobilizing in
VND compared to previously mobilizing cheap gold, causing NIM to decrease.
Drastically reducing lending interest rates to ensure market share and retain
large customers reduces NIM. The product structure has deteriorated because
the interbank market no longer brings much profit when small banks reduce
their dependence on the interbank market. SCB is actively involved in both
lending and borrowing in the interbank market, and this continues to affect the
bank.
2.5. Liquidity
LDR ratio is considered an important indicator to refer to the bank's capital
balance and liquidity situation. The higher the ratio, the greater the potential
liquidity risk, but the lower the ratio, the higher the excess liquidity.
 LDR
120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%
2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023
/quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý /quý
1 2 3 4 1 2 3 4 1 2 3 4 1 2

(Source: Sacombank financial report 2020-2023)

During this period, Sacombank's LDR had many fluctuations from period to
period. It is known that according to the provisions of Circular 26, all
commercial banks keep the minimum LDR coefficient reaching the threshold of
85%. But, looking at the chart, in 2020, Sacombank is in a situation of not
meeting the threshold in all 4 quarters and for the whole year only reaching
75.68%, lower than the state bank's regulations. However, by 2021 this index
has increased significantly by >80%. It even reached a high threshold in the
fourth quarter of 2022 with 96.46%. The bank's total customer loans and total
customer deposits show steady growth, especially total loans increase faster
than the growth rate of customer deposits, so the LDR ratio tends to increase
over time.
2.6. Sensitive to market risk

- Due to data limitations, this section only considers capital

mobilization interest rates applicable to individual customers who pay
monthly interest in Vietnam Dong at The headquarters is announced on
the bank's website, branches and transaction offices will have small
adjustments to suit specific mobilization needs. The time axis is not
considered quarterly but is considered each time interest rate changes
during the 2020-2023 period.
 Rates of time deposits for individual customers
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
g g g g g g g g g g g g g g g g
án hán hán hán hán hán hán hán hán án hán hán hán án án án
th t t t t t t t t th t t t th th th
1 2 3 4 5 6 7 8 9 11 12 15 18 24 36
10

2020 Lãi hàng tháng 2021 kỳ hạn

2022 kỳ hạn 2023 lãi hàng tháng

( Source: Sacombank financial report 2020-2023)

Over the period 2020-2022, and most recently the first 6 months
of 2023, Sacombank has had clear fluctuations in continuously
changing deposit interest rates for individual customers. It can be
said that after the Covid-19 pandemic occurred, affecting the
activities of the whole society, especially the world economy was
seriously affected, the FED continuously changed interest rates,
making the in Vietnam are also affected. In 2020, Sacombank's
deposit interest rate is only from 4.2% for a 1-month deposit term
-6.37% for a 36-month term. But by 2021, deposit interest rates
have dropped, only fluctuating between 3.1%-5.61%. This interest
rate will still be maintained throughout 2022. Until 2023,
according to the latest announcement, deposit interest rates have
increased again, attracting many sources of deposits from
individual customers as well as customers. significantly increased
the amount of capital mobilization of Sacombank
 Term Monthly interest
Term Monthly interest
1 month 3.10%
1 month 4.20%
2 months 3.20%
2 months 4.24%
3 months 3.29%
3 months 4.24%
4 months 3.29%
4 months 4.23%
5 months 3.28%
5 months 4.22%
6 months 4.56%
6 months 5.93%
7 months 4.74%
7 months 6.15%
8 months 4.73%
8 months 6.19%
9 months 4.82%
9 months 6.27%
10 months 4.81%
10 months 6.25%
11 months 4.80%
11 months 6.24%
12 months 5.37%
12 months 6.60%
15 months 5.42%
15 months 6.54%
18 months 5.57%
18 months 6.58%
24 months 5.68%
24 months 6.57%
36 months 5.61%
36 months 6.37%
(August - 2020) (August - 2021)

Term Monthly interest Term Monthly interest

1 month 3.50% 1 month 4.50%
2 months 3.69% 2 months 4.64%
3 months 3.79% 3 months 4.73%
4 months 3.98% 4 months 4.72%
5 months 3.97% 5 months 4.71%
6 months 5.14% 6 months 6.02%
7 months 5.18% 7 months 6.11%
8 months 5.22% 8 months 6.19%
9 months 5.26% 9 months 6.27%
10 months 5.29% 10 months 6.35%
11 months 5.33% 11 months 6.38%
12 months 5.65% 12 months 6.41%
15 months 5.80% 15 months 6.45%
18 months 5.85% 18 months 6.45%
24 months 5.86% 24 months 6.39%
36 months 5.78% 36 months 6.25%

(August - 2022) (August - 2023)

3. Conclusion
3.1. Achievement
- Capital safety level
The bank's capital adequacy ratio continuously fluctuates in the period 2020-
2023, but all data in this period are guaranteed to be safe according to Basel III
standards (CAR> 8%). It can be said that these numbers are at a relatively safe
level for Sacombank. In fact, it has been recorded that the CAR coefficient of
large banks often revolves around the prescribed level such as BIDV and
Vietcombank, but for small banks, the CAR coefficient is hidden. Many risks of
capital insecurity have quite high CAR coefficients.
- Asset quality :
+ The bank's total assets continuously increase throughout the period 2020-
2023. At the same time, deposit receiving and lending activities are still the
main activities that bring profit to the bank with the proportion of customer
deposits in total capital and customer loans in assets always accounting for a
fairly large part.
+ Sacombank's NIM index is also at a low level, always fluctuating during this
period. This proves that banks are not too dependent on credit activities and are
starting to focus on finding profits from non-credit activities.
- Management
The management model has changed quite a lot. With the current model, the
bank has achieved high management efficiency, each department has its own,
separate mission. There are separate inspection departments, the management
apparatus and the control board do not manage each department but directly
monitor the general director's reports.
+ The policy of attracting and finding talent has also been strongly implemented
with scholarship programs, potential interns, and more focused recruitment
campaigns.
+ In the new model, in departments and branches, each individual is only
responsible for one specific task.
+ Create many playgrounds and extracurricular activities for officers and
employees to bring a comfortable and rewarding working environment and
build a good corporate culture in each individual.
+ Focus on and change the face of the bank through the attitude and working
style of employees, whether they are security guards or cleaners.
+ Quantitative indicators and risk management are quite good, strengthening
governance and management at the control board and executive board to limit
violations leading to serious risks for the bank after the incident of Ms. Ho Thi
Thuy Duong
- Liquidity:
The bank's liquidity indicators have been improved and maintained at a stable
level.
3.2. Limitation:
- Management :
• Although changing the management apparatus aims to bring more efficiency
in risk management as well as banking administration, Sacombank's apparatus
is too cumbersome and complicated.
In the long term, it is necessary to make appropriate adjustments to minimize
management costs, strengthen links between departments, and limit the situation
where one person handles too much work, which can easily lead to risks in
management at the department. management machine
- Liquidity
The current ROA and ROE indexes are growing quite well, but are still low
compared to the general level of banks in the Vietnamese commercial banking
system, such as large banks BIDV, Vietcombank,... and also fluctuates quite a
lot before the third quarter of 2022.
The bank's NIM index is also at a very low level, Sacombank's NIM index for
the whole period only fluctuated between 0.5% - 1.10%. Normally NIM in the
range of 3% - 5% is considered good, Sacombank's NIM in all quarters is below
3% and still fluctuates quite a lot, showing that the bank has not properly
controlled the bank's profit scale.
- Interest rates: According to statistics, Sacombank's interest rates at times with
different deposit terms are still quite low compared to domestic commercial
banks, although by 2023, deposit interest rates have increased compared to
previous times. This will reduce Sacombank's competitiveness with other banks,
directly affecting the bank's capital source when most of the capital source is
customer deposits. However, it cannot be denied that Sacombank's lending
interest rate is also lower than in the system. Partly it can increase lending but
only to a certain extent to avoid loss of liquidity when customers withdraw
money.