BANK ANALYSIS –

ACB (ASIA
COMMERCIAL BANK)

Date of submission:
November 13th, 2022
 HANOI UNIVERSITY
FACULTY OF MANAGAMENT AND TOURISM


Bank Management Assignment

Bank Analysis – ACB
(Asia Commercial Bank)

Lecturer: PhD. Dao Thi Thanh Binh

Tutor: Nguyễn Thị Minh Hằng – Tutorial 3
Group FMT:
1. Ngô Trà My
2. Trịnh Hoàng Anh
3. Nguyễn Phương Nhi
4. Đặng Vũ Thảo Phương
 Peer Evaluation Form
Task Mark
Team member ID Task given (written form)
given (%) perform

Ngô Trà My 2004040076 - Task 1: Introduction of bank 100%

Nguyễn Phương - Task 2: Analysis of bank

2004040083 performance 100%
Nhi
- Task 3: Analysis of bank risks
Đặng Vũ Thảo
2004040087 - Task 4: Analysis of bank capital 100%
Phương
- Task 5: Analysis of bank loans
Trịnh Hoàng
2004040016 100%
Anh

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 Table of Contents
Peer Evaluation Form.......................................................................................................................1
Abstract.............................................................................................................................................3
I. Introduction:..........................................................................................................................4
1. General information of ACB:............................................................................................4
2. The structure of ACB:........................................................................................................4
II. Body:..................................................................................................................................6
1. Main services:....................................................................................................................6
2. Analysis of bank’s performance:.......................................................................................9
2.1. Analysis of ACB’s performance:...................................................................................9
2.2. ACB’s Financial Performance Report:........................................................................14
3. Risk Management of ACB Bank:....................................................................................17
3.1. Credit risks of ACB:.....................................................................................................17
3.2. Liquidity risks:.............................................................................................................21
3.3. Interest rate risk:...........................................................................................................22
4. Analysis of bank capital:..................................................................................................24
4.1. Report on Capital Management:..................................................................................24
4.2. What is Basel I, Basel II, Basel III? ACB with the application of Basel:....................26
4.3. The Capital Adequacy Ratio of ACB:.........................................................................27
5. Analysis of bank loans:....................................................................................................30
5.1. Liquidity management:................................................................................................30
5.2. Lending management (Analysis of bank loans):..........................................................31
III. Conclusion:......................................................................................................................35
Reference........................................................................................................................................36

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 Abstract
A financial institution that accepts deposits, provides checking account
services, makes different loans, and provides fundamental financial products
like certificates of deposit (CDs) and savings accounts to individuals and small
companies, is referred to as a "commercial bank". A commercial bank is
where most people do their banking. Moreover, commercial banks are
important to the economy because they create capital, credit, and liquidity in
the market (Kargan, 2021). This report's objective is to conduct analysis,
research, and present fundamental details about a commercial bank (including
structure, main services, bank performance, risks, and capital). This report's
objective is to conduct analysis, research, and present fundamental details
about a commercial bank (including structure, main services, bank
performance, risks, and capital). On the basis of it, we may generalize the
valuable information about commercial banks that is necessary for financial
management, investing objectives, etc.

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 I. Introduction:

1. General information of ACB:

When customers want to start using banking services, it is compulsory to put their trust in the
bank. The Asia Commercial Joint Stock Bank (ACB) is one of the leading joint-stock commercial
banks in Vietnam. Established on June 4, 1993, after approximately 29 years of development, the
charter capital of ACB is expected to increase from VND 27,019 billion to VND 33,774 billion,
with an estimated completion time in the third quarter of 2022. Besides, ACB is also honored to
receive many prestigious awards, including the best places to work in Asia 2020, according to the
HR Asia magazine, and the most trusted retail bank in Vietnam, ranking 10th in Asia according
to Asian Banker. It was also one of the 50 best-listed companies in Vietnam, honored by Forbes
Vietnam in 2020. Recently in 2022, Vietnam Report officially announced the Top 10 prestigious
banking companies, of which ACB is ranked at No.6. This further confirms the dominance of
ACB, therefore, customers are completely assured to use its products. Currently, in 2020, ACB
owns a diversified transaction network with 350 branches and delivery offices located in
developed economic zones in 47 provinces and cities across the country, 11,000 ATMs, and 850
Western Union agents nationwide. It also includes four subsidiaries, which are the ACB
Securities Company (ACBS), ACB Asset Management and Debt Management Company
(ACBA), ACB Financial Leasing Company (ACBL), and ACB Fund Management Company
(ACBC). Thus, this research will address ACB bank in more detail.
2. The structure of ACB:

With 20 years of development, it is a process of constant striving and efforts of ACB to bring
customers the most efficient products and services. And to get today's position, the bank's
management system plays important roles in operating, monitoring, and making decisions,
helping ACB achieve many great achievements over the years. Founded by Nguyen Duc Kien
and Tran Mong Hung, ACB has the organizational structure and management in the following
order. At the top is the Shareholders with the highest authority of the bank, below is the Board of
Directors, members of the Executive Board, the Control Board and others headquarters.

a. The shareholders.

The shareholder holding the highest percentage of shares of ACB is Dragon Financial Holdings
Limited with 6.92%, followed by 6.49% of Estes Investments Ltd. Standard Chartered Bank
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holds 5.02% of its shares. Sather Gate Investments Ltd and Whistler Investments Ltd have the
same percentage of shares at 4.99%. Besides, ACB's General Director cum Chairman of the
Board holds 3.43%, while the remaining 68.18% of the bank's shares belong to 37 other small
shareholders.

b. The Board of Directors.

The Board of Directors is chaired by Mr. Tran Hung Huy, Doctor of Business Administration,
Golden Gate University, USA. The Vice Chairman is Mr. Nguyen Thanh Long, with 44 years of
experience in banking and finance. Other members of the Board of Directors, such as Ms. Dinh
Thi Hoa (Master of Business Administration, Harvard Business School), or an independent
member Mr. Hiep Van Vo (Master of Business Administration, Harvard Business School, USA).

c. The Executive Board.

In addition, ACB's executive board also includes talented individuals such as the General
Director – Mr. Tu Tien Phat, the Permanent Deputy General Director – Mr. Bui Tan Tai (Master
of Business Administration, University of Southern California, USA), together with Mr. Huynh
Nghia Hiep – Head of Supervisory Board, Bachelor of Economics in Banking, University of
Economics Ho Chi Minh City and other members of the Supervisory Board.

d. The Control Board.

With the head of the committee is Mr. Huynh Nghia Hiep and other members of the Supervisory
Board, including Ms. Hoang Ngan, Ms. Phung Thi Tot, Ms. Nguyen Thi Minh Lan. They are all
top Bachelors of Economics in Banking from the University of Economics (HCMC), with 26 to
33 years of experience in banking and finance.

e. Others.

According to the management system, ACB also has many other headquarters and departments
such as the Business Development Division, Operations Supervision Division, Resource
Management Division, Financial Valuation Division Asset Management, Inspection, and Control
Department, Quality Assurance Department, Strategy Department, Credit Risk Management and
Policy Department, …. The committees always strictly perform their tasks and are strictly
controlled. Moreover, the head managers are all talented and influential figures in the financial

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field. Therefore, they can control and give appropriate treatment to ACB. Thanks to that, ACB is
a reliable bank trusted by customers, which is highly appreciated for its qualities, services and
getting developed day by day.

II. Body:

1. Main services:

Banks play an important role between surplus and deficit units, and to serve the needs of
customers, today, commercial banks also provide countless different services to adapt customers’
demand. There are multiple customers that commercial banks can provide their services to, such
as households, individuals, firms and corporations. As a legit commercial bank, ACB is regarded
as one of the best banks serving personal and corporate services.

a. Personal services:

Households and individuals are an important set of customers for most banks, and ACB is no
exception. Banks take the deposits of customers and invest them to generate profit. Here are some
of the standout personal services of ACB.

 Credit financial services:

One of the most crucial services ACB provides is credit financial services. The majority of clients
open a bank account to make transactions more conveniently. They can make payments of
checks, payment orders, collection orders, bank cards, letters of credit and discount vouchers.
With a wide connection to restaurants, corporations, and wholesalers, ACB cards can help
customers to make payments anywhere. Coming with this service is one of three types of card
services in ACB, including credit card, debit card and prepaid card, which helps customers make
payment and withdraw money from the ATM.

 Loan and mortgages:

In addition to payment purposes, households or individual customers also look for loans and
mortgages. Some advantages of ACB in mortgages compared to other banks are the interest rate,
discounts and the diversity in types of loans and services. ACB has a long maturity date on the
loan and mortgages, up to 20 years maximum, which gives customers a longer time to pay their
debts. The bank also provides student loans. However, ACB has some requirements towards

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customers when it comes to borrowing money. In order to assure that the borrowers can pay back
their debt, a financial proof of their income is required. The current interest rate of ACB on loans
is from 7% to 9%, depending on the type of loans and mortgages.

 Deposits:

The third personal service of ACB is customers' deposits. This is one of the main sources of
funds for any bank, and so does ACB. Most customers' concerns when they deposit money to
banks are the interest rate and the legitimacy of the banks. They need to know that the bank can
generate their money and that it cannot go bankrupt. The interest rate and term of deposit will be
later addressed.

In recent years, ACB has also developed an Internet banking app, with which an ACB’s
customers can easily manage the services they registered, such as managing the savings account,
checking account, paying utilities and booking airline tickets. This decision has made the bank
more convenient to its customers.

b. Business services:

In addition to serving individual clients, ACB also offers a wide range of appealing services and
products with numerous advantages for business clients. They provide important services such as
capital, insurance, foreign exchange, deposit, financial services, trade finance, credit-guaranteed,
card services and credit-related services.

 Deposits:

Deposits are divided into two types: Term Deposits and Demand Deposits. For demand deposits,
they provide businesses with: Payment accounts to make non-cash payment transactions
anywhere; Online investment deposit with no initial deposits, minimum account balance or
account management fees, with a tiered interest rate as prescribed from time to time; Ladder
deposit with interest rate increasing gradually according to the deposit level of the institution at
ACB; Superior accounts for the unique needs of the business; Margin accounts and Securities
trading accounts. On the other hand, for those who choose term deposits, ACB always has
attractive interest rates (depending on three types of deposits-term-end interest, periodic interest,
and flexible interest rate) for businesses:

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 Figure 1: Preferential Interest Rate for Time Deposit Packages

 Financial services:

ACB also offers a variety of financial services for business activities, including Bill payment via
automatic deduction or at ACB counters; Customs clearance 24/7 with simple application service,
quick procedures; Electronic tax payment 24/7 directly on the website of the Tax Authority or
ACB Online service; Transactions via Fax; Electronic signature transactions; Payroll service;
Keeping valuable papers/documents for businesses; Batch money transfer service; Fast money
transfer service via ACB Online channel; Payment intermediary.

 Commercial finance:

For enterprises wishing to carry out import and export trading transactions, ACB flexibly
financed procurement and reserves, financed before and after delivery, helping businesses
supplement working capital to carry out export orders, and at the same time, meet the payment
needs for imported raw materials, supplies, goods and services, etc. Moreover, ACB always
provides international payment methods and services for customers.

In addition to products and services in the three major segments above, ACB also deals in credit-
guarantees, flexibly meeting short-term capital needs for production and business, medium and
long-term capital needs. Moreover, it provides flexible loans, periodic repayment loans and
furnish non-life insurance packages, credit/debit card making services, diversified foreign
exchange, and capital products at competitive rates for firms.

ACB meets market needs, reputation, core values and diversification of services in the banking
industry. Furthermore, ACB has a strong foothold in the hearts of individual customers,

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companies, corporations and businesses. With these advantages, ACB bank is expected to grow
even further in the upcoming year.

2. Analysis of bank’s performance:

2.1. Analysis of ACB’s performance:
In running a company, one of the primary goals is to increase profits. In other words, all business
owners want their company to generate more than spend. To manage the cash flows, the analysis
of financial statements plays an extremely important role and can be used to evaluate the
financial performance of a business. More specifically, using data and indicators from annual
financial statements helps to evaluate the bank's performance. The figures below are official
statistics published by ACB in its annual report.

Figure 2: ACB’s Official Statistics Report

a. Return On Asset (ROA):

To estimate how well a business creates its net earnings, ROA is an important indicator in the
financial statements of firms. It has the full name of Return On Assets. It has the task of
accurately measuring the profitability of each capital of the companies. Therefore, ROA is always
a concern of business managers. They will rely on ROA to analyze the profitability of their total
assets. From there, determine if the business methods of the enterprise are going in the right
direction to promptly adjust accordingly. Moreover, ROA helps investors have a clearer view of
the business, before making their investment decisions. High ROA tells investors that the
business is exploiting its assets efficiently to generate profits. This indicator is calculated using
the following formula:
Net income
ROA=
Total Assets

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 Figure 3: ACB’s ROA from 2018 to 2021
Overall, we can see from the chart that ACB's ROA is increasing steadily over the four years
from 2018 to 2021. Between the two years 2018 and 2019, this indicator has increased slightly 0.
02%, from 1.67% to 1.69%. It continues to develop and reaches 1.98% in 2021, which is
expected to continue growing. As a result of having the ROA that increases gradually over time,
this shows that the efficiency of the ACB's asset exploitation is increasingly improved. With a
group of banks with ROA from 1% to 2% like ACB, it also shows that the bank's business
activities are efficient and generate high profits, still, it is also necessary to pay attention to the
too high profitability activities that will come along with high risks.
b. Return On Equity (ROE):

ROE – Return on common equity. It is the most important ratio for shareholders, measuring the
return per dollar of the capital of common stockholders. ROE helps business managers know how
much equity a company spends in business will generate a net profit. This ratio is often analyzed
by investors to compare with stocks in the same industry in the market, thereby, referencing when
deciding which company to buy shares. ROE is determined by the calculation:
Net income
ROE= '
Shareholder s equity

Figure 4: ACB’s ROE from 2018 to 2021

Looking at the percentage, it shows that ACB's ROE is decreasing yearlong. With 27.73%, a
stable rate of return for ACB in 2018. But when entering 2019, it dropped to 3.09% and then
continued to decrease to 24.31% in 2020. ROE of ACB in 2021 is 23.9%, and according to
Yuanta Research in the ACB Company Update, it will continue to decline this year, expected to
touch 23%. The above analysis shows that ACB's management has not effectively used

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shareholders' capital to develop the bank. ROE is an important criterion for investors to consider
about investing in a company's stock, and a reduction in ROE will affect ACB's opportunities in
raising investments. ACB needs essential solutions to improve its Return on Equity.

ROA and ROE are two typical indexes that are used to assess the profitability of banks. For the
banking industry, the ROE is high, yet the ROA is low, as the nature of this industry is to take
money from depositors and lend them back or invest. Moreover, the bank's assets account for
70% of the savings deposits of the clients. These two profit indicators can be linked as follows:
ROE=ROA × Equity Multiplier

Figure 5: The correlation of ROA and ROE of ACB from 2017 to 2021
Year 2017 2018 2019 2020 2021
Financial Leverage 17.6% 16.3% 14.5% 12.8% 11.95%

Figure 6: ACB’s Financial Leverage from 2017 to 2021

The two variables ROE and ROA in this equation stand in for managerial effectiveness and
financial leverage, respectively. Looking at the data, ACB's financial leverage is decreasing by
5.56% within five years. In 2017, ACB held 17.6% of the owner's capital and gradually fell to
16.3% in 2018. Total current assets in 2019 of ACB continued to decline to 14.5% and reached
11.95% in 2021. As businesses with high financial leverage need to use external loans to
maintain business, lowering the financial leverage proves that the ability to use capital and the
development of ACB is boosting. To get the desired ROE, a bank must increase its leverage and
lower its ROA, which also means higher risk equates to a higher return.

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 c. Net Interest Margin (NIM):

Net Interest Margin is an indicator that reflects the profitability of commercial banks. It shows
the percentage difference between the interest income and the interest expense payable by the
bank. NIM also tells how much banks are enjoying the difference in interest rates between capital
mobilization, credit, and investment activities. The following operation is used to estimate NIM:
Interest income−Interest expense
NIM =
Total Assets

Figure 7: Resilient net interest margin of ACB

As can be seen from the chart, the percentage of NIM during 2017 of ACB was about 3,5% and
swelled gradually to about 3,6% in 2018. It slightly fluctuated up to 3,7 % in 2020, then is
predicted to remain unchanged between 2021 and 2023 at 4%. A stable positive NIM index
shows that ACB is investing effectively and moving in the right direction on its development
path. At the same time, ACB’s NIM index is looking forward to increase more in the future,
which is a sign of a promising stock and is worth investing in.
d. Net profit margin:
The net profit margin (NPS) is one of the most significant measures of a business's overall
financial health since it shows how much of each dollar in revenue received by a firm, transforms
into profit (usually stated as a percentage).

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 Figure 8: Net profit margin ratios of ACB (million VND)
Around 2018-2019, ACB's NPS climbed slightly by 0.3%, then tended to become stronger and
more consistent over the next two years (up around 3.3%), and reached the peak level in 2021 of
23.92%. These figures can also assist the bank determine if present procedures are effective and
estimate profits based on revenue.
e. Efficiency ratios:
Non-interest expenditures divided by revenue is the efficiency ratio in the banking sector. This
demonstrates how well the bank's management manages their overhead (sometimes known as
"back office") costs. The efficiency ratio, often known as the activity ratio, is a metric used by
analysts to evaluate the performance of commercial and investment banks. Since a bank's
operating expenses are in the numerator and its revenue is in the denominator, a lower efficiency
ratio means that a bank is operating better.

Figure 9: Management Efficiency ratios of ACB (million VND)

The aforementioned graph demonstrates that over the previous four years, total revenue has
gradually increased, peaking at 38,463,641 million VND in 2021. In addition, non-interest

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expenses have gradually increased, reaching their highest level of VND 9,331,111 million in the
same period. As a result, the effective ratio of ACB has started to enhance throughout 3 years
(rising from 20.37% in 2018 to 24.26% in 2020), and then slightly decrease by 0.39% in 2021.
Additionally, the decline in the efficiency ratio is encouraging since it shows that the bank's
operations have grown more effective, reducing overall operating expenses and boosting profits.
f. Earnings per Share (EPS):
Earnings per share (EPS) is calculated by dividing a company's net profit by the total number of
outstanding common shares. It is a frequently used statistic for determining corporate value since
it shows how much money a firm produces for each share of its stock. Because investors would
pay more for a firm's shares if they believe the company has larger earnings relative to its share
price, a higher EPS denotes more value. Similar to above, EPS for banks has the same formula
and meaning.
Financial indicators 2018 2019 2020 2021
EPS of the last 4 years (VND) 4,671.00 4,337.00 4,192.00 3,900.00

Figure 10: ACB’s Earning per Share

ACB's EPS is now exhibiting signals of steadily declining from 2018 to 2021, especially with
substantial swings between 2018 and 2019 (earnings per share declined from 4,671 VND to
4,337 VND), then dropping to the lowest level of 3,900 VND in 2021. This obviously
demonstrates that the bank business is inefficient, despite the fact that the level is fairly high in
comparison to the overall level in the stock market.
2.2. ACB’s Financial Performance Report:
 Balance sheet:

The progress of development of the bank is reflected most clearly in the financial statements. The
bank updated one consolidated Financial Statements a year to the public so that everyone can
know the current operating situations of the bank. In this report, we will analyze the balance sheet
and income statement of the bank. However, since there are multiple accounts and it will be time
consuming to analyze every account in detail, we will divide the data into small tables.

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 Figure 11: ACB’s total assets, liabilities and equity

It can be seen that the company’s total Assets, Liabilities and Equity are all increased quite
significantly. Both Assets, Liabilities and Equity have an upward incremental trend. The increase
in Total Liabilities shows that there has been an increase in the total deposit. From the below
table, it can be seen that the saving deposits took a dominant place in total deposits components.
Up to 283,172,980 million in 2021. So does the demand deposit. The increase in total deposit has
revealed how attractive and legit the bank is toward the private customers.

Figure 12: Liabilities and Shareholder’s Equity

The bank’s total debt increased most significantly in 2021, from 46,041,644 to 85,027,888. This
is roughly 40 million, meanwhile in the previous years, the incremental numbers are only about
10 million to 20 million. The 2 components of total debt are short term and long term debt.
During the 5 years, the bank’s short term debt remained steadily, but in 2021, it dropped from 34
million to 5 million VND only. This also indicated the main reason for the incremental in total
debt comes from the increase in long term debt. In 2020, the long term debt was only 9 million
but in 2021, the number increased dramatically to 79 million VND.

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 Figure 13: ACB’s total debt

 Income statement:

Figure 14.1: Income statement of ACB Bank from 2017 to 2021

According to the consolidated income statement from 2017 to 2021, it is demonstrated that net
income in 2017 only reached 1,968,131 million VND. It is an extremely small number of net
income compared with 2018, which is up to 4,987,502 million VND, nearly 5 times greater After
that, it moderately rose to 5,909,937 million VND in 2019 and continuously increased to
7,582,823 million VND. Finally, it reached a peak of 9,452,746 at the end of the 5-year period.

Figure 14.2: Income statement of ACB Bank from 2017 to 2021 (continue)

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To get this result, the bad debts collection has been cleared by ACB, offset by risk sources,
reduced securities trading. At the end of 2018, net interest income reached nearly 10,389 billion
VND, it was up 23% and continued to increase by 16% in 2019.

Figure 14.3: Income statement of ACB Bank from 2017 to 2021 (continue)

Until 2020, ACB's operating expenses increased by 11% over the same period, because of the
growth in spending on labor and related expenses. ACB's loan loss provision expenses also
increased strongly by 65% to 941 billion VND. After the consolidated income statement report,
pre-tax reached 1,915 billion VND, up 15.2% over the same period. In 2021, ACB still
maintained a steady growth rate, ACB reported that income before and after tax increased by
25%, reaching more than 11,998 billion VND and nearly 9,603 billion VND. Therefore, it can be
seen that ACB's general trend in the period 2017-2021 has developed very stably.

3. Risk Management of ACB Bank:

3.1. Credit risks of ACB:

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Credit risk is the borrower's inability to repay a loan to a lender when the payment is due. Any
payment contract carries credit risk and the lender has to accept this risk. When facing credit risk,
the bank cannot collect the granted credit capital and loan interest, but the bank has to pay the
capital and interest on the mobilized amount when it is due, which makes the bank unbalanced in
terms of payment, revenue and expenditure. When the debt cannot be collected, the credit cycle
decreases, making the bank inefficient. Banks often fall into insolvency, losing confidence in
depositors, which affects the bank's reputation if the credit risk ratio is high.

 Current status of credit risk at ACB:

In today's market, ACB is among the leaders in Risk Management and has an effective risk
management model. In independent assessments by many institutions, ACB stands out for its
sound asset quality and prudent risk management strategy.

Figure 15: Overview of business performance in the five-year period (2017 – 2021)

During the last two years, ACB's credit activities have achieved certain fluctuations. According
to ACB’s financial report for the third quarter of 2021, the bank's bad debt balance, as of the end
of September 30, 2021, was nearly VND 2,800 billion, an increase of 52% compared to the end
of the year 2020. The rate of overdue debt also increased by 94%, from VND 2461 billion at the
end of 2020 to VND 4697 billion in 2021. Although bad debt increased due to the consequences
of the epidemic. However, ACB actively increased provisioning strongly in the past year to
prevent the risk of bad debt from increasing. As a result, the bad debt ratio was still well
controlled.

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Recently in March 2022, ACB was also rated by Fitch Ratings as having stable asset quality, with
a bad debt ratio lower than the average rate of other banks rated by Fitch. At the same time,
according to ACB's credit rating (in 2022) announced by Moody's, the highlight of ACB is solid
asset quality. ACB's total assets reached VND 527,770 billion in 2021. In addition, ACB's pre-tax
profit reached nearly VND 12 billion. After deducting taxes, ACB recorded a profit of 9603
billion VND, an increase of about 25% compared to the same period in 2020.

Figure 16: Provision expense for credit risk (million VND)

Provision expense for credit risks (3,336 billion VND), increased 25% compared to the same
period of 2020, mainly because ACB actively set aside 100% of the difference in provision for
loans classified according to Circular No. 02/11 and No. 01/03/14.

Figure 17: ABC’s credit quality

ABC’s credit quality was continually well-controlled with 0.77% NPL (increased 0.18%) and
209% LLR (up 49%) compared to 2020. This is a high level in the banking system, consistent
with a prudent risk management policy. In August 2022, Yuanta securities company has just
published a banking industry analysis report at the end of the second quarter that follows the
CAMEL model (a method of analyzing the bank's operation and risk situation). It shows that
ACB holds the highest position in the world: Top 1 ranking among 27 banks in Vietnam with a
low bad debt ratio (NPL), the lowest among joint stock commercial banks, and a high bad debt
coverage ratio (LLR).

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The maximum exposure to credit risk is the carrying amount on the balance sheet and off-balance
sheet accounts of financial instruments, excluding collateral or credit risk mitigation measures.
The table below shows the maximum credit risk of ACB:

Figure 18: Maximum credit risk of ACB

 Provision for credit risks at ACB:

ACB is one of the banks that completed the three pillars of Basel II early in accordance with
Circular 41/2016/TT-NHNN and Circular 13/2018/TT-NHNN to improve risk management
capacity and be ready to respond even in the most stressful situations. With a fairly good
background in Risk Management built up over the years, ACB's management has set a goal to
make ACB the bank with the best risk management model in the market.

ACB has regulated and applied a credit risk policy for the entire credit granting process, which
includes targeting target customers, the orientation of credit granting organizations, credit
appraisal, credit risk decisions, and credit management. These policies are to ensure the unifying
between the bank's business strategy and the law regulation. ACB has used a variety of tools to
manage credit risk, including:

● Applying different forms of loan guarantee and from time to time.

● Specifying the authority to approve credit extension (including the authority to approve credit
risk mitigation measures).

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● Building a reporting system to manage credit portfolio, analyze and warn early for the
portfolio, as well as for loans showing signs of deterioration, to have the plan to prevent and
handle risks in time.
● Building, monitoring and managing credit risk limits, including:
→ Credit limit according to the type of customer, industry or economic sector on the basis of the
customer's debt repayment ability, credit risk of the industry or economic sector.
→ Credit limit according to the product and form of security based on the corresponding credit
risk of the product and form of security.

In 2021, ACB's Risk Management Committee held five regular meetings, through which to
discuss priority action programs to strengthen the management of important risks and at the same
time, control the bad debt ratio at a low level.

3.2. Liquidity risks:

Any bank or financial institution will encounter several risks during the process of doing business
and financial management, which might result in decreased revenue, ineffective operations and
even insolvency. One of the most frequent concerns is liquidity risk, which arises when the bank
goes bankrupt, cannot quickly convert assets into cash or cannot borrow enough money to satisfy
contractual obligations, while having the capacity to pay all of its debts in full is one of a bank's
key responsibilities. Furthermore, this has also served to highlight the significance of bank
liquidity risk control, and we may emphasize the ratio of total loans to total deposits to estimate
the magnitude of liquidity risk. The charts below display the Asia Commercial Bank's ratio
during the previous five years:

Figure 19.1: Loans & Deposits (trillion VND) Figure 19.2: Loan-to-Deposit Ratio

The bank's liquidity has changed, as shown in the given charts. The overall loan provided by
ACB went up considerably between 2017 and 2021. In terms of the growth rate, this was roughly

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13.61% higher than the market’s average and reached its highest level (362 trillion VND) in 2021
(up 16.2% from 2020). Additionally, the total amount of deposits received by the bank climbed
steadily, peaking at VND 380 trillion in 2021. As a result, we can calculate and analyze changes
in the loan-to-deposit ratio, which rose between 2017 and 2020 by roughly 1% to 3% and started
to climb higher by 7% in 2021. The optimal percentage was between 80% and 90%, but by 2021,
the liquidity to meet unanticipated funding needs if the ratio is too high.

3.3. Interest rate risk:

Interest rate risk arises as adverse changes in market interest rates, affecting the value of bonds,
valuable papers, and interest-bearing financial instruments on the books of banks and credit
institutions. There are numerous types of interest rate risk caused by the difference between
deposit and lending rates, the imbalance between assets and liabilities, or the maturities of the
assets and liabilities. This is a common issue that all banks must deal with, and ACB is no
exception.

 Interest sensitive gap:

Year 31/12/17 31/12/18 31/12/19 31/12/20 31/12/21
Total sensitive interest gap 9.633.88 16.257.778 20.370.363 24.689.624 34.030.308
4

Figure 20: Total Interest sensitive gap of ACB (2017 – 2021)

As a financial institution, ACB as many other banks, need to consider the changes in the sensitive
interest gap. Interest sensitive gaps reflected the danger of rate exposure. It is typically utilized by
financial institutions and investors to create hedge positions, sometimes using interest rate
futures. The maturity date of the securities utilized and the amount of time left until the
underlying securities mature affect gap estimates. In order to manage the risk, the bank has to
match the asset maturity and liability maturity. More specifically, the bank has to match the long
term loans with long term deposits and vice versa. However, it is impossible to perfectly match
the long or short - term of A and L, so there will always exist a gap. The gap in question is the
interest gap, or the deviation of A and L. Meaning that the bank will be affected by an increase or
decrease in interest risk. The interest sensitive gap is calculated by the following formula:

INTEREST SENSITIVE GAP = RSA - RSL

22
 ● RSA = Interest sensitive Assets
● RSL = Interest sensitive Liabilities

In this report, we have conducted the data on total interest gap from ACB’s bank consolidated
financial statements. From this data, we can see the positive trend in the total sensitive interest
gap. Theoretically, there are 2 types of interest gap which are the negative and the positive. A
positive gap means the gap is higher than 1, while the negative gap is smaller than 1. A positive
interest gap is when an institution's interest rate-sensitive assets are bigger than its interest-rate-
sensitive liabilities. A positive gap proves that the Asset reprice before liabilities.

Following the rules mentioned above about positive gaps, we can conclude that ACB bank in
recent years have experienced an increase in earnings or revenues have increased when interest
rates rose, and in contrast it decreases when interest falls. It can be seen that, with such an
increased interest gap, ACB earning is growing as well

 Duration gap:

After calculating the interest rate’s sensitive gap, the bank can modify it depending on projections
regarding changes in market interest rates. In interest rate risk management, there is a method
commonly used by banks known as the leverage-adjusted duration gap. A duration gap measures
the total amount of interest rate risk that a bank is exposed to. It is determined by subtracting the
modified duration of the assets from the modified duration of the liabilities after accounting for
the bank's financial leverage.

Leverage-adjusted duration gap = DA – DL × K

● DA is the duration of assets

● DL is the duration of liabilities
● K is the ratio of the market value of liabilities to the market value of assets (K = L/A)

Although the database issue is always a major impediment for any budget commodity, the
management system in ACB bank's database is meant to be synchronous, automated, connected,
updated, and adjusted the structure regularly to meet the actual demands of management. ACB-
leveraged forward arbitrage information is hard to gather and correctly quantify. As a result, we
will not analyze the actual data in this study. However, the calculation clearly illustrates that the

23
 liability's value must be higher than the asset's value to decrease interest rate risk. This is because
interest rates become increasingly sensitive as the term differential changes in leverage rise.

4. Analysis of bank capital:

4.1. Report on Capital Management:
 ACB’s capital structure:

The Capital Management will include the percentage of stocks held by investors of the bank up to
date, this report will also include some of the operating activities of ACB. A bank with a large
scale as ACB will have a lot of stockholders. However, not every stockholder holds a significant
amount of stock. Some percentage is below 1% so the table below will only conclude a big
stockholder, other than that, others will be listed in other stockholders. Surprisingly, these small
stock holders each hold a small amount of stock but in total, they took a dominant on the Equity
percentage of the bank which is 82.22%. The table below will show more accurately the
percentage of each stockholder.

Stockholders Ratios
1 Dragon Financial Holdings Limited 6.92%
2 Whistler Investments Limited 4.00%
3 Nguyen Duc Kien 3.44%
4 Tran Hung Huy 3.43%
5 Other stockholders 82.22%

Figure 21: The percentage of each ACB’s stockholder

It can be seen that the Dragon Financial Holdings Limited is the biggest stockholder at 6.92%. In
the yearly dividend meeting for 2022, ACB intends to issue more than 675 million shares to pay
shareholders dividends in 2021 at a rate equal to 25%. The increase in Capital is predicted to be
34,000 billion VND. The incremental capital will be spent on T-bill and credit granting activities.
Until 2021, the bank also accounted for 4.86% and 5% of VOS and BTS company. The total Asset
of the bank in the second quarter of 2022 is 543,737 billion VND. Com paring to some other bank
in the field, ACB have neither too high or too low total Asset. The below chart is the total Asset of
the whole banking industry in Vietnam comparing to each other

24
 Figure 22: Total Asset of ACB in Banking industry

 ACB’s business activites:

2020 2021
Total revenue 35,173,768,000 38,463,641,000
Total profit before tax 9,595,888,000 11,998,112,000
Total cost 26,222,532,000 24,694,987,000
Net profit 7,682,823,000 9,602,746,000

Figure 23: ACB's financial results in 2020 and 2021

ACB's 2021 financial results are generally higher than the prior year due to better management of
its liability structure, cost adjustments and higher non-interest income. Total revenue in 2021 will
be VND 38,464 billion, an increase of almost 10% from 2020 (VND 35,173 billion). Non-interest
income also increased significantly year-over-year. Most notably, profit from services increased
to about VND 2,894 billion, profit from foreign exchange business also increased by 27% (VND
872 billion), profit from securities trading increased 2.7 times (VND 449 billion). It's what
happened.

In this case, the project cost decreased by almost 5% from VND 26,223 billion to VND 24,694
billion. As of 2021, the total assets of the parent bank were VND 475.505 billion. The
outstanding balance of loans to customers reached 330.743 billion dong. Customer deposit
balance reached 36.6206 billion VND. ACB also said its consolidated pre-tax profit in 2021 was
VND 11,998 billion, up 40% from the same period in 2020. As a result, net profit from
operations increased by 46% to reach more than VND15,334 billion. This year, ACB spent more
than his VND 3,336 billion on bad debt provisions, up 3.5 times year-on-year. As a result, the
bank reported a 25% increase in after-tax profit to nearly VND 9,603 billion

25
 4.2. What is Basel I, Basel II, Basel III? ACB with the application of Basel:
 What is Basel I, Basel II, Basel III?
As mentioned by The Investopedia Website, Basel I is a series of international banking laws
enacted by the Basel Committee on Banking Supervision (BCBS). In order to reduce credit risk,
it establishes minimum capital requirements for financial organizations. According to Basel I, the
bank must retain capital (also known as Tier 1 and Tier 2 capital) equivalent to at least 8% of its
risk-weighted assets. This is performed to ensure that banks have enough capital on hand to fulfill
their obligations. Building on Basel I, Basel II offered instructions for determining minimum
regulatory capital ratios and, similarly to Basel I, it reaffirmed the need that banks maintain a
capital reserve equivalent to at least 8% of their risk-weighted assets. Basel II distributes a bank's
eligible regulatory capital into three tiers. The more secure and liquid the tier's assets, the higher
it is. Common stock, reported reserves, and a few other assets compensate Tier 1 capital, which is
the bank's fundamental capital. Tier 1 assets must comprise a minimum of 4% of the bank's
capital reserve. Revaluation reserves, hybrid instruments, and medium- and long-term
subordinated loans are included in Tier 2, which is regarded as supplemental capital. Unsecured,
subordinated debt with a lower credit rating makes up Tier 3. Basel II also modified the definition
of risk-weighted assets, which is used to measure whether a bank has enough capital reserves.
The three pillars are continued in Basel III, together with new standards and safeguards. Basel III,
which builds on Basel I and Basel II, aims to make individual banks more resilient to lower the
risk of systemic shocks and avert further economic crises. A bank might be obliged to have
reserves of up to 10.5% under Basel III, taking into account both the minimum capital (at least
8% of its RWAs) and buffer requirements (ranging from 0% to 2.5% of a bank’s RWAs). The
principal difference between Basel 1, Basel 2, and Basel 3 is that Basel 1 was created to establish
a minimum capital-to-risk-weighted asset ratio for banks, whereas Basel 2 was created to add
supervisory responsibilities and strengthen the minimum capital requirement, and Basel 3 was
created to promote the need for liquidity buffers (an additional layer of equity).

 ACB with the application of Basel II:

Asia Commercial Joint Stock Bank is one of the first 10 Vietnamese banks to implement Basel II,
according to the State Bank of Vietnam (ACB). A representative of ACB recently announced that
the bank's operations would now formally include the ICAAP (Internal Assessment Process of
Capital Availability). In compliance with Circular 41/2016/TT-NHNN and Circular 13/2018/TT -
The State Bank of the State Bank, ACB has finished all three Basel II pillars early with the

26
implementation of ICAAP, the second pillar, from October 2020. The results of three thorough
evaluations using stress test models—stress tests with closing data on December 31, 2019, June
30, 2020, and December 31, 2020—show that ACB complies with the capital adequacy
assessment requirements, has a high level of capital adequacy, ensures the completion of the
business plan within the next five years, and complies with its own risk appetite and State Bank
regulations. According to detailed performance results, ACB's individual risky assets (RWA) are
predicted to increase by 26% in the most stressful scenario, and the capital adequacy ratio is
subsequently decreased to 9.2% by the end of 2021 from 11.6% in the stressful scenario. Along
with finishing and implementing ICAAP earlier than expected, ACB is continuing to implement
Basel II utilizing the Foundation Internal Rating Based (FIRB) technique, concentrating on
developing and improving PD models (probability of default), LGD (loss after default), and EAD
(balance at the time of default).

4.3. The Capital Adequacy Ratio of ACB:

 The Capital Adequacy Ratio of ACB:

According to Adam Hayes, Ph.D., CFA in economics and behavioral finance, the capital
adequacy ratio (CAR) is a measurement of a bank's available capital expressed as a percentage
of a bank's risk-weighted credit exposures.

Figure 24: ACB’s capital adequacy ratio

ACB's capital adequacy ratio has been applied according to Basel II since 2017. ACB actively
manages the capital adequacy ratio ensuring compliance with regulations of the State Bank of
Vietnam. Summary of ACBC's operations and financial position in 2021 with the consolidated
capital adequacy ratio and tier 1 capital adequacy ratio reached 11.23% and 11.26%, respectively,
much higher than the 8% regulated level. This rate is maintained above 10% at all times of the
year. The core capital reached more than 44 trillion dong, up 18% compared to 2020.

27
In 2021, ACB completed an internal assessment of capital adequacy (ICAAP – Internal Capital
Adequacy Assessment Process) according to international standards certified by an independent
auditing firm and a capital adequacy reserve framework, ensuring that ACB always quickly
identifies and effectively handles capital risks.
 ACB’s Tier 1, 2 Capital:

Tier-1 capital, also known as core capital, is the permanent capital that a bank can always use to
protect against losses without having to shut down operations. Furthermore, the term Tier-2
capital (secondary capital) refers to one of the components of a bank's required reserves. In the
event of a company winding up or liquidating or loses all of its Tier-1 capital, it is utilized to
absorb losses.

Three conditions must be met in order to assess whether or not the bank is sufficiently
capitalized:

 Tier 1 risk-based capital ratio = Tier 1 capital/ Total risk- weighted assets ≥ 4%
 Total risk-based capital ratio = (Tier 1 + Tier 2) / Total risk- weighted assets ≥ 8%
 Tier 2 capital/ Tier 1 capital ≤ 1

Information about tier 1 capital, tier 2 capital, value of reduced items when calculating ACB's
consolidated and separate equity as follows:

Figure 25: ACB's consolidated and separate equity (30/ 06/ 2021)
Tier 1 capital components make up the majority of the consolidated and individual capital
structure at ACB, allowing ACB to increase tier 2 capital in case of need. Charter capital and

28
undistributed profits account for a high proportion in the tier 1 capital component. Meanwhile,
the majority of Tier 2 capital is general provision and the proportion of Tier 2 capital from
secondary debt of ACB is decreasing. Based on the statistics above, the Tier 1 risk-based capital
ratio of ACB is higher than the required level of 4%. The ability of ACB Bank's balance sheet to
withstand adverse shocks will increase with the higher tier 1 leverage ratio. Moreover, according
to the last Basel standard, ACB Bank has met a constant ratio of Tier 2 Capital over Tier 1
Capital that is less than 1. By ensuring these ratios and built a buffer against liquidity crises, ACB
has protected both itself and its depositors.
 Risk weighted assets components:

The minimal amount of capital that banks and other institutions must hold to lower the risk of
insolvency is determined using risk-weighted assets. For each type of bank asset, a risk
assessment is used to determine the capital requirement.

Figure 26: ACB's risk weighted assets

Total risk weighted assets of ACB including the assets based on credit risk, market risk and
operational risk. According to the data, credit risk assets are significant risk assets in ACB's
individual and consolidated risky asset structure, while market risk accounts for a very small
proportion. However, the time of market risk tends to increase rapidly in the last 3 quarters and
contributes to higher weight when consolidated, mainly due to the expansion of business
activities from ACBS.

29
 5. Analysis of bank loans:
5.1. Liquidity management:

Liquidity, or a bank's capacity to fulfill its obligations for cash and collateral without suffering
massive losses, is frequently taken into consideration when appraising banks. As a result,
liquidity management refers to the effort made by managers or investors to lower their exposure
to liquidity risk. Simply defined, liquidity management is the approach each bank uses to
maximize, optimize, and protect its liquidity. To ensure the stability of its operations, it is also
one of the most crucial things that the bank must accomplish. Analysis of financial ratios,
comprehension of these ratios' meanings, and optimal course of action implementation are all
components of good liquidity management. In which we can assess a bank's liquidity
management capacity using common financial indicators such as the current ratio.

Period Ending Total Current Assets Total Current Liabilities Current Ratio
30/06/2022 80339048 458063215 0.17
30/09/2022 85454648 466782492 0.18

Figure 27: ACB’s Current ratio

From the table above, the current ratio has indicated some signals of growth over the past two
periods, although not considerably (holding at 0.17 in the 2 nd period and reaching about 0.18 in
the 3rd period in 2022). However, if the bank's current ratio is less than 1, this indicates the bank's
insufficient capacity to repay, which is a signal of probable financial difficulties the bank may
face when it has to pay short-term liabilities. Nonetheless, the issue with the current ratio as a
measure of liquidity is that it only evaluates the number of assets, not their quality. As a result, it
conceals the actual state of a bank's liquidity. It may be roughly estimated using the current ratio.

Figure 28: Liquidity management (based on Annual Report 2021)

30
Based on ACB's 2021 annual report, we can see that the bank has accomplished amazing
indicators used to evaluate the bank's liquidity management in the previous 2 years for a more
realistic perspective: Despite expanding its assets, ACB maintains its liquidity. By the end of
2021, the required reserve ratio of 10% had more than doubled to 22.45%, which is the liquidity
ratio. The proportion of short-term funding to medium- and long-term loans remained at 22.69%,
a significant decrease from the prudential ratio of 40% that the State Bank of Vietnam regulates.
VND had a 30-day solvency ratio of 73.91%, which was over the statutory level of 50%. Also
maintained at a high level was the solvency ratio for foreign currency.
5.2. Lending management (Analysis of bank loans):
i. Individual loan:

Since the first day of operation, Asia Commercial Joint Stock Bank (ACB) has identified
individual customers as the target customers in the business development orientation. Consistent
with this operational orientation, ACB's achievements over the years are reflected in its position
as the leading retail bank in Vietnam. ACB is the leading bank in the Vietnamese banking system
providing credit products for individuals. Lending activities for individual customers of ACB
Hanoi have been implemented quite successfully.

ACB provides a variety of products, more specifically, ACB offers three main loans for
individual customers based on the purpose of using the loan: home loans, business loans, and
consumer loans. First of all, home loan services include land purchases, home repairs, and
apartment projects. In addition, ACB also has business loans. These are loans to supplement
capital, production, business, and investment of individuals and households. For example,
supplementing working capital, purchasing machinery and equipment, investing in facilities for
production and business activities, securities trading. The most popular individual loans are
consumer loans, with services such as Unsecured loans, Secured loans, Automobile loans,
Overdrafts, and Overseas Study support loans.

Depending on each loan purpose and form, ACB offers three deadlines for individual customers'
loans: short-term, medium-term, or long-term. For loans to supplement working capital for
production and business, the loan term is suitable for the production and business cycle of
individuals and households, so the loan term is usually short-term. For loans to serve the
consumption needs of individuals and households, the loan term is usually medium and long

31
term, depending on the bank's ability to meet capital sources, and the customer's repayment
ability, especially for home loans, the loan term can be as long as 30 years.

1. Loan interest rate in VND with collateral

Loan interest rate (%/year)
Type of loan Collateral is real Collateral other than
estate real estate
1.1 Short-term
The first 3 months 10.5% - 11% 12%
Daily loan interest rate 14% 15%
Minimum loan interest rate 9.5% 10.5%
1.2 Medium – Long term
The first 3 months 11% - 11.5% 13%
Daily loan interest rate 15% 16%
Minimum loan interest rate 10% 11.5%
2. Loan interest rate in VND without collateral
Loan interest rate (%/year)
Type of loan Interest rate calculated on the Interest rate calculated on the
original balance reducing balance
Unsecured consumer loans 12% - 13% 21% - 23%
Daily loan interest rate 19% 23%

Figure 29: ACB's individual loan interest rate (apply since October 26th, 2022)

Loans to individual customers continued to be the driving force for ACB's credit growth,
reaching VND 223 trillion, up 19% compared to 2020. Lending in this segment remained in the
direction of lending with suitable collateral, appropriate to the current risk situation. At ACB,
credit balance for home loans accounted for the majority of the total outstanding loans of
individual customers, at a high proportion about over 50% of the total outstanding loans of ACB.

32
 Figure 30: ACB’s customer loans

ACB has the advantage in retail banking, focusing on individual customers and small, medium
enterprises. The proportion of capital mobilization from individual customers is up to 80% of
total deposits. In 2021, under the pressure of reducing deposit rates, ACB launched products and
incentive programs suitable for each customer segment with competitive interest rates. At the
same time, ACB has promoted digital banking with more attractive deposit interest rates
compared to over-the-counter deposits. Demand deposits grew at an impressive rate of 27%,
bringing the proportion of demand deposits from 22% to 25% of total deposits, contributing to
reducing the cost of capital and improving profit margin.

To support the group of individual customers, ACB has also actively applied technology to the
operation process, for example, applying eKYC technology to help customers open an online
account, upgrade the Mobile App or deploy online disbursement via the ACB Online channel
ii. Business loan:

ACB also provides business loans to support firms, corporations and businesses financially.
There are three main types of business loan which are working capital, working capital overdraft
and business investment. In addition, there is a coffee farming category. However, in this report,
we will not include this section.

Firstly, working capital called a loan to supplement working capital supports capital for clients
that require it: purchasing gasoline and raw commodities to support production, commercial, and
service activities. Secondly, business investment loans are a type of credit product designed to
help clients who want to invest in assets like machinery and equipment, means of transportation

33
for use in business and manufacturing, and investment in real estate. acquisition of a home and
land building/ repair of factories, warehouses, offices, inns, and other production and business
locations.

Currently, all clients who participate in ACB business loans are particularly curious about how
the interest rate relates to the loan and if they qualify for special policies. In particularly, for
business loans with a maximum limit of VND 10 billion, ACB is using an average annual interest
rate of 9.8%. a maximum of seven years. After incentives, interest margin equals 13-month
savings rate plus 2.5 – 4 percent. Moreover, 0.25% each month of the prepaid amount is the
prepayment charge.

Additionally, ACB provides enticing insurance with interest rate bonuses for example: Initial
loan year which is 7% fixed annual preferential interest rate for the first three months; 9.5% for
the next nine. After the second year, the interest rate, which is paid at the conclusion of the 13-
month term, is equivalent to that amount.
iii. Bad debt level:
The existence and growth of the commercial banking industry as well as the development of the
Vietnamese economy are both significantly impacted by bad debt (non-performing loans). Recent
years have seen an increase in bad debt, particularly in light of the COVID-19 pandemic. These
debts can be either principal that is more than 90 days past due, unpaid interest that has been
rolled over into the principal, refinanced, or late paid as agreed, or payments that are less than 90
days overdue but for which there are good grounds to doubt that they will be made in full.
However, ACB is always among the banks with a low bad debt ratio (not exceeding 1%).
2019 2020 2021
0.54% 0.6% 0.84%

Figure 31: ACB Bank’s bad debt ratio from 2019 to 2021

ACB reversed a VND 2.8 billion provision at the start of 2019, helping to increase profit by more
than 32% over the same period last year. This is the first time the bank has reversed the provision
since the beginning of the year. On December 31, 2019, ACB's bad debt ratio ended the year at
0.54%, the bad debt coverage ratio reached a high level of 165%. By 2020, the bad debt ratio
increased slightly, however the bank will still be at the lowest level in the bank system.
According to financial statements, bad debt at the end of 2020 at ACB was VND 1,840 billion,

34
up 27% compared to the beginning of the year. The ratio of bad debt to outstanding loans
increased from 0.54% to 0.6%. In 2021, ACB's risk provision expenses will more than triple,
from VND 694 billion to more than VND 2,800 billion. ACB's bad debt coverage ratio increased
to nearly 200% as provisioning was promoted. The bad debt ratio of the bank increased from
0.6% to 0.84%. Notably, the size of group 2 debt (noticeable debt) - that is, debts that are overdue
from 10 to under 30 days, although not yet classified as bad debt, have more than tripled from
576 billion to more than VND 2,400 billion.

Bad debt is considered a warning sign of a financial crisis in the future if it is not taken care of
and handled in a timely manner. However, even though ACB's bad debt has increased, the bank
is still managing it skillfully and in balance.

III. Conclusion:
In the bottom line, banking system stays strong and maintains the development base on the trust
of individuals customers, businesses, corporations, and firms. In order to have the clientele’s
trusts, management throughout the whole banking system is extremely crucial. Each bank is an
important cell in this system. Which is why, every bank needs to having a reliable set of
customers, having a clear plan in managing risks, managing capital and managing its liquidity,
meeting the demand off individual customers otherwise they may account bankruptcy. The
survival and development of one bank is necessary for the whole eco system, if one of them goes
bankrupt, the others like dominos effect, might goes down as well. This has reflected the
necessities of banking management of ACB as well as any other bank.

35
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