THE BOARD OF
MANAGEMENT REPORT

In 2022, in the context of tightened financial conditions along with strong fluctuations of the world financial market, creating great pressures on the Vietnamese economy as well as the banking and financial sector, SHB will continue to achieve important successes thanks to the capacity and determination of both domestic and foreign systems; support cooperation of partners, customers and the trust of shareholders. The operational targets all increased compared to 2021 and closely followed the plan:

• The growth rate of customer deposits has always been stable over the years and is higher than the market average. By the end of 2022, this number equals 7.6%.
• Total loan outstanding rises by 10.1% in compliance with the credit growth limit granted by the State Bank.
• Net fee income accounts for a significant part of the bank’s profit structure and rises by 52.1%.
• Capital adequacy and liquidity ratio always meet the regulatory requirements of the State Bank contributing to overall liquidity of the banking system.

The network and personnel continued to be invested and expanded along with the focus on reorganizing and consolidating the organizational structure, organizing branches and transaction offices in a streamlined, efficient manner, in line with the governance capability and upscaling operations, building a large network and modern distribution channels.

Thanks to the solidarity between the BOD, the BOM and all employees, the drastic guidance from the BOD to promote business activities, effort to accomplish the plan 2022 assigned by the General Meeting of Shareholders, SHB has made remarkable progress such as:

• Realizing most of the planned targets in terms of outstanding loans, customer deposit, income,...; improvement in financial capacity, governance capability to maintain its position as one of the largest commercial joint stock banks in Vietnam.
• Well controlled operating expenses, bringing CIR to 22.7% - the lowest ratio in the Bank’s operation history and the industry second best.
• Complete the dividend payout plan for existing shareholders.
• Successful co-operation with many international financial institutions such as IFC, ADB, WB... with the agreements’ value up to billions of USD. The final step in the roadmap to divest of SHB Finance to Krungsri Bank of Thailand (a strategic member of MUFG Group - Japan) is conducted to assist SHB in strengthening its foundation, promoting various customer segments, accelerate the digital transformation process and improve risk management capacity.
• Designing an agile and creative business strategy for the 2022-2027 by signing a consultancy contract with the world’s leading consulting firm BCG.
• Banking modernization and comprehensive digital transformation have seen initial successes.

Total assets in 2022 increases by 8.7% to VND 550,904 billion, securing SHB’s position in the largest commercial joint stock banks in Vietnam. The average growth rate of SHB’s assets in the past 5 years amounts to 14.1%, higher than that of the industry average (industry growth equals to 12%).

In parallel with business growth, SHB always pays attention to improving asset quality with the proportion of assets being structured at a reasonable level, ensuring high profitability, operational safety and liquidity. Asset structure shifts towards increasing the proportion of non-credit activities in order to reduce dependence on credit activities.

5 YEAR AVERAGE ASSETS GROWTH RATE EQUAL TO 14.1%

(%)

Promoting its key role as one of the five largest private commercial banks in Vietnam, SHB has actively responded to the policy of the Government and the State Bank of Vietnam, focusing credit on sectors in the socio-economic development strategy for period 2021 - 2025, directing capital flows to customers who are enterprises operating in the field of agriculture - rural areas, enterprises engaged in export business, small and medium enterprises, enterprises operating in support industries, high-tech application enterprises and start-up businesses, etc.

As of December 31, 2022, total outstanding loan amounts to VND 385,633 billion. The loan growth rate average in the past 5 years is 14.4%.

SHB’s profitable asset base is supported by a strong and diversified loan portfolio. As of December 31, 2022, outstanding loans to corporate customers sums up to VND 297,988 billion, accounting for 77.3% of total loans; total outstanding loans to individual customers amounts to VND 87,645 billion, accounting for 22.7% of total loans.

5 YEAR AVERAGE LOAN GROWTH RATE EQUAL TO 14.4%

(%)

As of December 31, 2022, total customer deposit reaches VND 407,134 billion. The average growth rate of customer deposit in the past 5 years has reached 14%, higher than that of the industry equal to 11.8%.

5 YEAR AVERAGE FUNDING GROWTH RATE EQUAL TO 13.7%

(%)

SHB’s total income in 2022 reached VND 45,556 billion, rising by 12.1% compared to 2021. Total operating income reached VND 19,341 billion, up 6.5%. Net interest income (NII) increased by 12.7%, reaching 17,550 billion dong; net fee income (NFI) reached VND 891 billion, an increase of 52.1%;...

The total expense in 2022 is 35,867 billion VND. In which, operating expenses decreased slightly by 0.3% to VND 4,392 billion, closely in line with the objective. Provision expense for bad debts amounts to VND 5,260 billion.

In 2022, with the complicated developments of the global Covid-19 pandemic, seriously affecting the economy, SHB has given timely instructions on making business adjustment based on Covid-19 scenarios. In order to operate and use management costs effectively in accordance with the post-pandemic situation, the bank has practiced thrift and anti-waste, and at the same time reviewed all administrative expenses to used economically and efficiently, ensuring that the target cost growth rate is always lower than the net income growth rate.

While interest income still accounts for the majority of the bank’s income, NFI has increased year on year. From 2016 to 2022, NFI increased from VND 791 billion in 2016 to VND 1,791 billion in 2022, originating from cash collection, cash payment, and management of current accounts, internet banking, payment services, salary payment, insurance, foreign exchange services and trade finance services.

5 YEAR AVERAGE PROFIT BEFORE TAX GROWTH EQUALS TO 41.4%

(%)

Profit before tax in 2022 reaches VND 9,689 billion, an increase of 54.8% compared to 2021. The average growth rate in the last 5 years amounts to 41.4%.

SHB is ranked among the top private joint stock commercial banks in terms of pre-tax profit growth. The Bank’s growth in pre-tax profit was largely due to effective operating costs, including proactively seeking low-cost or preferential capital, and improving the quality of risk management to minimize related costs. to credit and operational risks, promote automation and digitization, and introduce advanced technology into the Bank’s governance to improve governance capacity, as well as significantly increase fee income services from revenue from payment services and cash. Therefore, the ratio of operating expenses to operating income (“CIR”) of the Bank is on a downward trend. In 2022, SHB’s CIR ratio is 22.7%, the lowest in the Bank’s history and as the industry second best.

Rate of return

Basic earnings per share EPS (VND/Share)

In addition to impressive business performance indicators, SHB always adheres to safety and sustainability with the capital adequacy ratio (CAR) always stable above the threshold of 8% according to the state’s regulations in Circular 41/2016/TT-NHNN; reserve requirement ratio in 2022 reached 15.79% (SBV’s regulation ≥ 10%); ratio of using short-term capital for medium and long-term loans 27.60% (SBV’s regulation ≤ 34%); The liquidity coverage ratio complies with the SBV regulations.

SHB also completed 3 pillars of the Basel II Accord in 2020 and implemented annual internal assessment of capital adequacy (ICAAP) since 2021, fully complying with the requirements of the State Bank on risk management activities in particular and the internal control system in general. SHB not only always maintains a minimum capital adequacy ratio with all kinds of material risks, in both normal and adverse conditions, but also ensures a capital buffer to support business operations. The Bank’s business has grown sustainably and effectively.