Annual Report 2008

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Vietnam Joint Stock commercial Bank for induStry and trade
Content
02 04 06 08 10 13 Message from the Chairman of the Board of Directors An Overview of Vietnam Economy in 2008 The Board of Directors The Board of Management Milestones of Success in 2008 VietinBanks Performance in 2008 Fund Mobilization 19 25 28 30 33 Loans to the Economy Investment Banking Services Risk Management Business Plan for 2009 VietinBank and Equitization Process Organization Chart Independent Auditors Report
message from the Chairman of the Board of Directors

Annual Report 2008 VietinBank 2
Ladies and gentlemen,

The Vietnamese economy first faced challenges in 2008 as the result of the increased trade deficit of USD 17 billion and an inflation rate of 22.9%. Later in the year the global economic turmoil further strained the economy as we saw dramatic swings in commodity prices such as steel, oil, gold and foreign exchange rates. The impact was broad as both trading volumes and liquidity declined sharply in the capital and property markets. Hit especially hard were the small and medium enterprises across the economic horizon. In response to these many shocks, the Government took decisive action on several fronts. Eight solution packages were introduced that resulted in lower inflation while allowing the economy to grow at 6.23%. Industrial production increased 14.6% while export turnover reached VND 62.9 billion. In addition, for the first time total registered Foreign Direct Investment rose to USD 64 billion. Within the context of these adverse economic times, Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) managed to achieve a lot in 2008. We closely managed liquidity throughout the year while being able to sharply increase fee based income. Great strides were made in managing risk and performance ratios improved. The bank was able to expand our branch network, grow total assets by 17% and increase equity to VND 12,300 billion. These achievements were largely the result of a conservative and strong management team remaining focused on prudent banking principles. The year was also a milestone for the bank in a number of other aspects. After 20 years the bank went through a rebranding exercise, launching a new brand name of VietinBank. Additional accomplishments included centralization of Trade Finance processing to reduce risk and improve efficiencies (Main Operation Center No. 3), establishment of a Disaster Recovery Data Backup Center, inauguration of the Human Resource Developing and Training School and was awarded Second-Place Independence Medal presented by the State. These were all important steps for the development, modernization and global integration of VietinBank. The final accomplishment for the year came about on 25th December 2008 when we became among the first State owned banks to launch our Initial Public Offering. With the anticipation of continuing economic challenges domestically and globally, 2009 will be at least partly internally focused. While participating in the Governments Monetary Policies, VietinBank will focus on expense management in order to provide more favorable interest rates and fee structures to our customers. Industries the bank will continue to primarily focus on are exporters, the agricultural sector and small and medium industries. The goals for 2009 include a 24% increase in mobilized funds, and loan growth of 29% while maintaining nonperforming loans below 3%. Projected earnings for the year are estimated to reach over VND 2,500 billion, with fee income contributing VND 800 billion. Listing on the local stock exchange is also scheduled in July 2009. Longer term goals of the bank will focus on Modernization whereby the bank will be transformed. Areas of focus include improved financial transparency, standardization of services, implementation of strong corporate governance and improved human resource development programs. The objective will be while growing and expanding across all areas of the financial services industry, VietinBank plans to build an institution based on prudent and efficient policies that will allow us to meet international practices and standards. On this occasion, the Board of Directors, the Board of Management and all of the VietinBank Staff would like to express our thanks to customers, local and foreign partners for your trust and cooperation which have contributed to VietinBank successes in 2008. We hope that VietinBank will continue to receive your kind support and cooperation.
Pham Huy Hung Chairman of the Board of Directors
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an overview of Vietnam Economy in 2008
In 2008 the economy of Vietnam encountered complicated and unpredicted movements of the world economy and domestic difficulties.
In the first half of 2008, Vietnam suffered the impact of overheating economy, high inflation, trade deficit, real estate bubble and declined investment quality. In an effort to stabilize the macro-economy, the Government adjusted from high growth target to inflation control and maintaining of appropriate growth. In the late of 2008, the risks of sub-prime mortgage in the US inflamed the global financial crisis which brought not only developed countries but also emerging economies in the financial triangle Asia-Europe-US to recession. Although Vietnam was not severely impacted, the countrys economy was facing numerous difficulties and challenges as a consequence of such crisis. In 2008, Vietnams economic growth tended to slow down and remained at only 6.2 percent after high growth of over 8 percent in 3 consecutive years. Notwithstanding such difficult situation, Vietnam export turnover in 2008 attained nearly USD 63 billion, which was an encouraging result. Export turnover of all commodities experienced increase against the previous year with crude oil reaching USD 10.4 billion (increasing by 23.1%), textiles: USD 9.2 billion (increasing by 17.5%), coal: USD 1.5 billion (increasing by 44.4%), rice: USD 2.8 billion (increasing by 94.6%). In 2008, the banking system of Vietnam also saw unprecedented movements. The tightened and flexible monetary policy implemented in early 2008 was gradually shifted to prudently loosen in the second half of the year. In line with this process was the State Bank of Vietnams unprecedented adjustment of management instruments, which focused mainly on key interest rates, reserve requirement and exchange rate control. The year of 2008 saw 3 times of base interest rate increase and 5 times of base interest rate reduction by the State Bank of Vietnam. Re-financing interest rate and rediscount interest rate experienced the same adjustment frequency. Reserve requirement rate increased in February and experienced decline for 4 times in the last 3 months of the year (including 2 times of decline in foreign currency reserve
Gdp
growth rate was
6.2
in 2008
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VietinBank
requirement). Interest rates applicable to reserve requirement saw 5 times of adjustments (including 3 times of increase and 2 times of reduction). Foreign exchange control mechanism experienced exceptional adjustments with exchange rate band being widened for 3 times, average interbank exchange rate being strongly adjusted in June and late December. The exchange rate in 2008 was characterized with opposite fluctuations. In early 2008 the market saw surplus of foreign currencies with VND/USD exchange rate falling to the bottom level, equivalent to VND 15,300, while the scarcity of USD supply occurred both in official and free markets from May. Nevertheless, thanks to the State Banks intervention and foreign exchange reserve capacity which was officially publicized for the first time, the exchange rate was gradually stabilized in late of the year. In summary, Vietnam Economy in 2008 coped with major difficulties such as reduced growth rate, increased inflation and imports surplus, unstable securities and real estate markets, difficult production and business activities. In 2009, the economy of Vietnam will certainly face numerous challenges and the danger of reduced growth rate. However, given the flexible policies of the Government and the great efforts of the whole society, the country will strongly sustain and create a momentum for sustainable growth in the following years.
The movements of the major interest rates in 2008 (%)
16 14 13 12 10 8.25 8 6 4 2 12 11 8.75 7.5 6
15 14 13 12 11 10 9 14 13 13 12 12 11 11 10 9.5 8.5 7.5
Base Rate Refinancing rate Discount rate 1/1 1/2 19/5 11/6 21/10 5/11 21/11 5/12 22/12
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Board of Directors
Dr. PHAM HUY HUNG

Chairman of the Board of Directors
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Dr. PHAM XUAN LAP

Member, CEO
Dr. PHAM THI HOANG TAM

Member
Dr. DO THI THUY

Member
Mr. TRAN XUAN CHAU

Member
Mrs. NGUYEN HONG VAN

Member
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Ban iu Hnh
Dr. PHAM XUAN LAP

Member of Board of Directors - CEO
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Mr. NGUYEN VIET MANH

Deputy General Director
Dr. NGUYEN VAN THANH

Mr. VO TAN THANH

Mrs. NGUYEN PHUONG LY

Mr. NGUYEN VAN DU

Mr. PHAM ANH TUAN

Mrs. BUI NHU Y

Mr. NGUYEN VAN CHUNG

Chief Accountant
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1.
milestones of Success in 2008
the launching of new brand name VietinBank in replacement of the former name incombank On 15th April 2008, the new brand name VietinBank was officially launched in order to create a nationally and internationally new and consistent image to meet the goals of Reliability, Efficiency, Modernity and Growth. The adoption of the new brand name VietinBank was a milestone for the bank in the integration process to the world economy and sustainable development into a diversified financial group keeping leading position in Vietnam. Apart from that, VietinBank will actively integrate into the region and the world, becoming a major commercial bank in Asia and contribute to the successful implementation of industrialization, modernization and international economic integration of Vietnam. establishment of VietinBank main operation center (Vmoc) Established on April 1st, 2008 VMOC is a centralized processing center for international settlements and trade finance of the whole VietinBank system including money transfer, letters of credit, guarantees and counter-guarantees, collection, factoring, transfer of receivables, risk participation, open accounts; trust receipts, bill discounting, refinancing, etc, which are offered to all kinds of customers ranging from domestic and foreign corporates, financial institutions to individuals. VMOC also offers consultancy services, international settlement and trade finance solutions for all customers. By implementing research and development of new trade finance-related products, VMOC has contributed to improving the competitiveness of VietinBank and satisfying customers requirements.
2.
3.
VietinBanks reception of Second-place independence medal and celebration of the 20th anniversary of incorporation and development
4. 5.
Successful ipo
On 5th August 2008, it is great honor for VietinBank to receive SecondPlace Independence Medal a high level award of the State on the occasion of its 20th anniversary. opening of VietinBank Human resource development and training School On 30th September 2008 VietinBank officially opened its Human Resource Development and Training School. This is considered as the right direction as well as a comprehensive and long-term solution in human resource development strategy of VietinBank.
inauguration of VietinBanks disaster recovery data Back-up center On 15th December 2008 VietinBank Data Back-up Center was officially launched in Hoa Lac High Technology Zone, which was well equipped and constructed in a good location, meeting all requirements of State Bank of Vietnam as well as international standards for a back-up site, marking an important progress in ensuring the continuousness, safety and efficiency of the banks business operation.
6.
On 25th December 2008 VietinBank successfully offered 53,600,000 shares to investors with the average successful bidding price of VND 20,265 VND per share compared to the starting price of VND 20,000. In the unfavorable turndown of securities market, the Banks IPO was considered as a typical event of Vietnam securities market in 2008.
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VietinBanks
PERFORMANCE
in 2008
Fund Mobilization
In 2008 deposits from individuals to VietinBank kept on increasing, regardless of the difficulties faced by banking system in fund raising.
Thanks to the large network spreading over the country and diversified deposit products offering a variety of benefits to depositors, the bank sources of funds have been increasing from year to year. Despite fierce competition among commercial banks for liquidity, VietinBank sources of funds kept on increasing in 2008. Deposits from customers amounted to VND 121,634 billion, accounting for 69.5% of total mobilized funds. Of total deposits from economic entities, deposits from state-owned enterprises were VND 35,528 billion, accounting for 75.8%, deposits from private enterprises and others made up 17% of total deposits from economic entities; deposits from foreign invested enterprises were up by 20.2 %, accounting for 7.2% of total deposits from economic entities. Given the advantage of an extensive network and good reputation, in 2008 deposits from individuals to VietinBank kept on increasing, regardless of the difficulties faced by banking system in fund raising. As of 31st December 2008, deposits from individuals reached VND 67,670 billion, increasing by 24% compared to 2007.
92,359 31/12/2008
total mobilized funds were Vnd
174,905
billion
increased by 15.6%
31/12/2007
CUSTOMER DEPOSITS BY TYPES OF DEPOSITS

in VND billion
79,628
25,714
382 1 2 3
99 4
255 5
2,825 6
1. Demand deposits 2. Term deposits 3. Deposits for specific purpose 4. Money transfer payables 5. Other amounts due to customers 6. Margin deposits
29,087
362 1 2 3
134 4
614 5
2,600 6
31/12/2008
31/12/2007
CUSTOMER DEPOSITS BY TYPES OF CUSTOMERS

in VND billion 46,841
67,670 55,082 54,591
1. Deposits from business entities 2. Deposits from individuals 3. Deposits from others
7,123 1 2 3 1 2
2,752 3 14
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Loans to the Economy

11.33% Other activities 4.24% Agriculture, Forestry and Aquaculture 28.24% Mining and quarrying 7.19% Community, social and personal service activities 9.49% Transport; storage and communications
9.54% Electricity, Petroleum and Water 18.74% Wholesale and retail trade; repair of motor vehicles, motor cycles and personal goods 11.23% Construction
In 2008, VietinBank continued to sign strategic cooperation agreements with 4 major national corporations including Vietnam National Coal-Mineral Industries Group, Vietnam National Shipping Lines Corporation, Vietnam National Petroleum Corporation and Vietnam Expressway Corporation.
Given the tightened monetary policy of the State Bank of Vietnam in the first three quarters of 2008 and the huge demand for credit, VietinBank was prudent in selecting efficient borrowers and key production industries for loan disbursement. From the end of the third quarter when the monetary policy was loosened and became more flexible and significant interest rate decrease which enabled enterprises to have access to funds from banks, VietinBanks credit orientation was enhancement of lending to enterprises in all economic sectors, while ensuring safety, efficiency in credit activities and maintaining market share. Loans to the economy as at 31st December 2008 were VND 120,752 billion, rose by VND 18,561 billion representing an increase of 18.2%. Medium and long-term loans accounted for 41.9%; loans to state owned enterprises accounted for 19.9% of total loans. The proportion of non-collateralized loans have been reduced in recent years, getting to the lowest level of 22.7% of total loans in 2008, a 3% decrease against that of the beginning of the year. Thanks to the strict controlling policy from the beginning of the year, VietinBank has eliminated risks arising from lending for real estate and securities investment. Loans to corporates, SMEs and individuals were 45.4%, 36% and 18.6% respectively.
Loans to the economy
Investment
In the first half of 2008, available capital was mainly used for assuring liquidity of the bank. From the third quarter of 2008, VietinBank continued investing in the interbank market and valuable papers market. The Bank also continued to restructure its investment and capital contribution to its affiliates and joint ventures and complete the buy back of the paid-in capital of the foreign partner in the joint venture insurance company (IAI), which has resulted in IAI being 100% owned by VietinBank. As at 31st December 2008, investment in the interbank market were VND 18,274 billion, increasing by 42.3% compared to 2007, of which term deposits and loans to other credit institutions totaled VND 12,235 billion, demand deposits and loans to other credit institutions were VND 6,039 billion. As of 31st December 2008, total exposure to securities for investment and trading purposes doubled that of 2006, reaching VND 41,714 billion, an increase of 9.4% against 2007. Securities held by VietinBank are of high liquidity and low risks. Available for sale investment securities, which include treasury bills, central banks bonds, municipal bonds, bills and bonds issued by reputable credit institutions and corporations, accounted for 88.8% of total investment in securities and reached VND 37,039 billion, increasing by nearly 14.5% as compared to last year. Held to maturity securities, which include government bonds, education bonds, transportation and irrigation project-supporting bonds, treasury bonds, debt securities issued by other credit institutions and corporations, were VND 3,920 billion, decreasing by 22.4% as compared to the previous year.
investment in the interbank market increased by
42.3%
as compared to 2007
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Banking Services
Payment and Remittance Services By the end of 2008, VietinBank has 3 Main transaction centers, 141 branches and more than 700 transaction offices and saving offices. With the advantage of the banks nationwide network, domestic money transfer continued its growing impetus in 2008. Number of payment transactions increased by 29.4% and reached 6.2 million. Total payment volume was VND 2,800 billion, up by 29.1% against 2007. Bilateral payments amounted to VND 311,000 billion, increasing by 32.6% against the previous year with 1.3 million transactions representing an increase of 16.2%. Interbank e-payment volume increased by 27.9% to VND 1,300 billion with 1.1 million transactions. In 2008, VietinBank deployed many payment related products and services such as conversion of card transactions into INCAS (VietinBank core banking system), deployment of Home Banking service to corporate customers. In 2008 VietinBank also signed a bilateral payment agreement with Vietnam Development Bank and cooperated with State Treasury, General Department of Taxation, General Customs of Vietnam to start up the State budget collection through VietinBank.
OVERSEAS REMITTANCE VOLUME
(USD million) 900 750
International Banking In 2008, VietinBank continued to expand the correspondent banking network and now has more than 850 banks in more than 80 countries and territories. Cooperation with foreign banks has been developed across wide geographies, with many long standing in depth relationships. Import payment volume in 2008 was USD 7.02 billion, up by 44.68% against 2007, accounting for 8.46% of import payment volume of the whole country. Export payment volume amounted to USD 4.25 billion, increasing by 48.8% as compared to 2007 and accounting for 8% of export payment volume of the country. Cross-border payments maintained its growing impetus represented by an increase of 50% in comparison with 2007. Card Service and E- Banking Service By the end of the year 2008, VietinBank has had 2.3 million customers using debit cards with 900,000 new customers. VietinBank accounts for 17% of the total card market share. The card holders can make transactions at 1042 ATMs of VietinBank and 4,000 ATMs of other banks joining 2 card alliances - Banknet and Smartlink. There were 3,905 credit cards issued by VietinBank in 2008, increasing by 94% as compared to 2007. Card payment volume rose up to VND 626 billion representing an increase of 40% against 2007. Up to now, VietinBank has established 1,700 POS for VietinBanks international credit cards and 20,000 POS for cards issued by Banknet joiners. From May 2008, SMS banking service has attracted more than 35,000 customers.
404 230 108
450
2003
2004
2005
2006
2007
2008
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Risk MANAGEMENT
Risk Management
VietinBank has developed a strategy on risk management in which the Board of Directors is responsible for reviewing and approving VietinBanks risk management strategies and policies while the Board of Management takes responsibility for implementing and developing those approved strategies and policies.
Risk Management at VietinBank is currently functioned by the Risk Management Group (RMG). RMG is separated from sales divisions. It reports directly to the Board of Management and consists of 5 Departments each responsible for managing different kinds of risk, including credit risk, market risk, liquidity risk, and operational risk. These 5 Department members are: Department of Credit and Investment Risk Management (CIRM), Department of Credit and Investment Policy, Department of Market and Operational Risk Management, Department of Non-Performing Loans Management, and the Board of Internal Controllers. In addition, the Department of Planning and ALCO Supporting is responsible for managing liquidity risk, interest rate risk, and foreign exchange risk. Legal Department is in charge of managing legal risks.
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Credit Risk Management Since 2005, VietinBank has developed credit strategies fully setting out targeted clients, markets and sectors. The Banks targeted clients are large healthy financial and highly capable corporations while potential clients are small and medium enterprises and individuals. Our targeted markets are those of large cities, potential economic zones, and developing municipal and industrial areas. And the targeted sectors are those of industry, trading and service. VietinBank published policies on credit risk management in late 2004. The principles of these policies include investment portfolio diversification, multi-level process of authorization and approval, regular monitoring procedures and credit limit control. Depending on VietinBanks targeted markets and overall credit strategies as well as past performance of credit operations, markets fluctuations, and projected capital needs, the Department of Credit and Investment Risk Management proposes levels of credit growth for VietinBank, and levels of credit limits for the whole system based on types of products, currency, sectors, industries, ownership, clients, client groups, etc. These proposals are then submitted to the General Director and then to the Board of Directors for approvals. VietinBanks daily risk management is jointly functioned by the Department of Credit and Investment Policy, the Department of Credit and Investment Risk Management, the Department of Non-Performing Loans Management, and the Department of Planning and ALCO Supporting. In addition, the Board of Internal Controllers
VietinBank is in the process of developing internal credit rating system in accordance with international standards
evaluates VietinBanks credit operations both periodically and unexpectedly to ensure compliance with VietinBanks Credit Manual and legal regulation. Collateral valuations are currently undertaken by the customer departments and risks management departments at VietinBanks branches at the time of making loans and conducting reappraisals according to VietinBanks Guidelines. The loan to collateral value ratio is capped by a certain percentage of the total value of each type of collateral asset. Collaterals are re-evaluated at least once a year (depending on which type of collateral) or unexpectedly.
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Authorizations to approve credit contracts at multiple levels are based on two criteria: (i) Credit Authorization Levels, which are reviewed annually based on levels of relationship management and the capability of the authorized personnel at the Head Office or branch size, the ability of credit officers, and performance at Branches; (ii) Customer Qualification Levels: Credit requirements are being established, modified, and adjusted to comply with Laws and suit to market reality to ensure safety and competitiveness in VietinBanks operation. Market and Operational Risk Management In March of 2006, VietinBank established Department of Market and Operational Risk Management (MORM) to monitor market risks and operational risks within VietinBank system. The Departments functions are to develop policies, procedures, and early warning system for market and operational risks. To minimize interest rate risks, Department of Planning and ALCO Supporting and Department of Investment jointly analyze interest rate changes based on most updated market information and specialist expertise. Floating interest rates are often applied to medium and long term loans, and even to short term loans in case of adverse market rates fluctuations. Securities investments are currently focused on low risk products. The Banks investment portfolio includes State Treasury bonds and other Government bonds. The Department of Planning and ALCO Supporting prepares monthly reports on key financial indicators and capital adequacy ratios as required by the State Bank of Vietnam and submits these reports to the Board of Management for review and approval. VietinBank has developed strategies on risk management (included in General business strategy of VietinBank for the period 2005-2010) and temporary regulations on operational risk management to meet international standards on operational risk management. In addition, VietinBank has established an internal control system from the Head Office to branches. This control system is responsible for regular review and supervision of VietinBank operations to discover and timely prevent frauds and mistakes, propose recommendations to refine operational mechanisms, policies, and procedures to ensure the Banks efficiency, safety, and compliance with laws.
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Legal Risk Management Legal risks at VietinBank are managed by the Legal Department which functions to consult and train business units on legal issues and to ensure VietinBank compliance with Laws and current regulations. In specific cases, for example bond underwriting, guarantees for overseas issuance, or providing loans to large projects, VietinBank might hire law firms. Branches are also allowed to hire external lawyers to solve their legal issues. However, complicated legal issues or issues stemming from staffs errors are to be reported to and handled by the Legal Department at VietinBanks Head Office. For new products, the Department reviews all legal respects to ensure compliance with Laws and other current regulations. Liquidity Risk Management Liquidity risk management is currently functioned by Department of Planning and ALCO Supporting which is mainly responsible to make plans for assets and liability management, liquidity maintenance, and allocation of reserve funds. The Department reports directly to the Board of Directors and Board of Management on a monthly basis to update VietinBanks current liquidity situation and project next months liquidity. VietinBank strictly complies with all prevailing regulations of the State Bank of Vietnam in management of liquidity risks. VietinBank currently monitors liquidity by calculating liquidity ratios as guided by the State Bank of Vietnam and reports to the State Bank of Vietnam on a regular basis. To actively ensure liquidity and avoid unexpected events, VietinBank considers and maintains an appropriate liquid asset ratio so that cash, liquid assets, cash equivalents, nostro accounts, money market instruments, and reserves at the State Bank account for about 25% of total assets of VietinBank. In emergency cases, VietinBank is able to apply for support from the State Bank of Vietnam and other domestic banks.
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Business
PLAN
for 2009
Business Plan for 2009

Funding and Owners Equity
Total liabilities in 2009 are expected to increase to VND 226,803 billion, up by 25% as compared to 2008, of which fund mobilization from the economy is VND 204,813 billion (up by 24%), fund mobilization from inter-bank market is VND 13,038 billion (up by 48%). Chartered capital by the end of 2009 is expected to reach VND 12,253 billion. Retained earnings and reserves of about VND 1000 billion may be used to supplement to VietinBanks chartered capital. Investment in valuable papers In 2009, VietinBank plans to make more investments in corporate bonds which are considered a potential market and of higher efficiency than government bonds and more liquid than loans because of the fact that financial institutions are increasingly active in trading valuable papers in capital market. The trading volume of valuable papers including bonds and bills of Government, SBV bonds, municipal bonds and corporate bonds are expected to increase by VND 8,899 billion to reach VND 50,700 billion in 2009. Financial investments
Assets
Loans During the past few years, annual average loan growth of VietinBank is around 17-18%, lower than the industry average as the Bank has been focusing on restructuring loan portfolio together with the issuance of internal policies and procedures in credit activities as well as credit risk management. In 2009, on the basis of the banks internal management capacity, branch network expansion together with the governments stimulus packages, VietinBank sets the target for loan growth of 28.9% while enhancing the credit quality of loan portfolio and keeping NPL ratio under 3%.
Financial investments include investment in joint ventures and other long-term investments. In 2009, VietinBank plans to increase the financial investments by VND 1,056 billion, including the capital injection to Indovina Bank (estimated VND 450 billion), establishment of life insurance jointventure company (estimated VND 300 billion), capital contribution to the Gold Joint-venture Company (VND 100 billion), capital contribution to Thai Nguyen Steel Company (VND 100 billion) and other long term investments. Loan loss provision In 2008, VietinBank has allocated sufficient loan loss provision. In 2009, given the target for loan growth of 29%, and NPL ratio of below 3%, it is expected that VND 1,000 billion will be allocated for loan loss provision; and the provision reserve at 2009 yearend will reach VND 2,500 billion, of which general provision is VND 1,170 billion and specific provision is VND 1,330 billion.
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Plan for branch network expansion

In 2009, VietinBank plans to open 4 new branches: Dien Bien, Bac Kan, Ha Giang, Hau Giang, and the total number of branches and main operation centers will increase to 148. VietinBank will open more than 80 transaction offices in 2009, focusing on developed towns and districts nationwide.
Business performance
Interest income in 2009 is projected to be VND 20,635 billion, decreasing by 2.03% as compared to 2008. Fee income from service and other activities are expected to reach VND 2,137 billion, increasing by VND 633 billion or 42% against 2008. In 2009, before tax profit is estimated to reach VND 2,592 billion, ROA 1.2%; profit after tax are VND 1,945 billion, ROE is 16.54%, the expected cash dividend (for the second half of the year) is 4.31%.
CAR ROA ROE
11% 1.20% 16.54%

>
plan for 2009 (in VND billion) Total assets Chartered capital Fund mobilization from economy Total loans Profit before tax 240,388 12,253 204,813 155,700 2,592
% change 24% N/A 24% 29% 6.4%
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VietinBank and Equitization Process

As a result of great efforts during the 4 years equitization preparation process, VietinBanks Initial Public Offering (IPO) was successfully launched on December 25th 2008 at Ho Chi Minh City Stock Exchange. All 53.6 million shares offered were bought with the highest winning price of VND 45,000/ share, lowest winning price of VND 20,000/share and average winning price of VND 20,265/share.
VietinBanks IPO was launched amid the ongoing global financial crisis and the near bottom of Vietnam stock market and lowest level of total market capitalization. However, the registered share volume was 4.29% higher than total offered volume, the bidding capital volume was VND 1,086 billion which almost doubled total trading value of both HOSE and HaSTC on the same day. This indicated that VietinBanks share are attractive and potential.
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Listing on the Stock Exchange To improve the position and image of VietinBank on the market as well as attract resources from the society, enhance corporate governance, transparency and prepare for international IPO, the Bank plans to list its shares on Ho Chi Minh Stock Exchange in July 2009 after completion of procedures for transformation into a joint-stock bank.
After the equitization, the State Capital Investment Corporation (SCIC) manages the States capital in the Vietnam Joint Stock Commercial Bank for Industry and Trade. The State Bank of Vietnam will assign representatives for the State ownership and participate in the Board of Directors of the Bank. According to the roadmap to the year 2012, the State stake will reduce to 51 percent, domestic investors will own 29% and foreign strategic shareholders will hold 20 percent of the Banks capital. The transformation to joint-stock bank status, the diversification of ownership and participation of non-state owned sector and foreign strategic investors will enhance corporate governance and business culture as well as increase the competitiveness of the bank. There will be more opportunities for accessing new technology and expertise in banking business. After equitization, organization structure will be restructured to facilitate the renovation and enhancement of the banks human resource structure. After equitization, VietinBank will develop into VietinBank Financial Group. The period from now on to 2010 will be the transition period with focus given to completion of organization structure, strategies and operation mechanism of a financial group. After 2010 the financial group will operate in its full functions. These are considered as crucial basis for VietinBank to have sustainable development and successful integration.
Chartered capital
as at June 2009
1.82% Employees 2.83% Trade Union 4.76% Public 1.81% Domestic strategic investors
89.23% State
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organization Structure
general shareholders meeting board of directors
it management committee
assets and liabilities management committee
ceo
credit committee
dePUtY general directors and chief accoUntant

financial institutions committee
business group
banking services group
risks management group
supporting group
corporate banking department smes banking department consumer banking department financial institutions department
card service center
credit and investment Planning and alco risk management supporting department department credit and investment Policy department market and operational risk management department nPls management department board of internal controllers mis department
financial accounting management department accounting Policy department cash and Vault management department
e-banking department Vnd remittance department Vietinbank main operation center cash Payment department overseas remittance department
legal department
iso management department human resources department labour and salary management department Vietinbank human resources development and training school call center
Back Office
dealing room
administration department capital construction and Purchasing department emulation department information and communication department
investment department
business and service department
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sUPerVisorY board
ceos office
it group
Main Transaction Offices
branches
representative Non-profit Offices making Units
subsidiaries
it center
transaction Offices
savings Offices
transaction Offices
savings Offices
command center and help desk
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Independent
AUDITORS REPORT
VietinBank
Reference: 60755043/13562388
34
Annual Report 2008
INDEPENDENT AUDITORS REPORT

To: The Board of Directors and Board of Management of Vietnam Bank for Industry and Trade
We have audited the accompanying consolidated balance sheet of Vietnam Bank for Industry and Trade (the Bank) and its subsidiaries as at 31 December 2008, and the related consolidated statement of income statement, consolidated statement of retained earnings, consolidated statement of cash flows for the year then ended and the notes thereto (the consolidated financial statements) as set out on pages 2 to 66. The consolidated financial statements are the responsibility of the Banks Management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Basis of Opinion We conducted our audit in accordance with the Vietnamese and International Standards on Auditing applicable in Vietnam. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Banks Management, as well as evaluating the overall consolidated financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.. Opinion In 2008, the Bank has amortised 50% for the intangible asset relating to the lease payment for land use right at Hanoi Nam Thang Long City Complex based on the Banks analysis which are presented in Note 13.2. The accounting treatment, however, does not comply with Vietnamese Accounting Standard (VAS) 01 Frame work and VAS 06 Lease and related regulations, accordingly, land use right lease is normally regarded as operating lease and lease fee paid once in advance for many years should be recognised as prepaid expense and allocated into yearly operating expense over the lease period using straight line method. Had the Bank followed this accounting treatment, the net book value of intangible fixed assets as at 31 December 2008 would have been decreased by VND 424,944 million, other assets as at 31 December 2008 would have been increased by VND 831,649 million and consequently, the net profit for the year 2008 in the accompanying consolidated financial statements would have been increased by VND 182,171 million. In our opinion, except for the effects of the matter described in the preceding paragraph, the consolidated financial statements give a true and fair view, in all material respects, of the financial position of the Bank and its subsidiaries as at 31 December 2008 and of the results of operations and cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System for Credit Institutions and comply with other relevant financial and accounting regulations stipulated by the State Bank of Vietnam.
Ernst & Young Vietnam Limited
Vo Tan Hoang Van Deputy General Director Registered Auditor Certificate No: 0624/KTV Hanoi, Vietnam 20 May 2009
Vo Xuan Minh Auditor in-charge Registered Auditor Certificate No: 0923/KTV
CONSOLIDATED BALANCE SHEET

as at 31 December 2008
35
Notes ASSETS Cash and cash equivalents Balances with the State Bank of Vietnam Placements with and loans to other banks Current accounts with other banks Term deposits with and loans to other banks Provision for loans to other banks Trading securities Trading securities Less: provision for impairment Derivative financial instruments and other financial assets Loans and advances to customers Loans and advances to customers Less provision for credit losses Investment securities Securities available-for-sale Securities held-to-maturity Provision for impairment of investment securities Long-term investments Investment in subsidiaries Investment in joint ventures Investment in associates Other long-term investments Provision for impairment of long-term investments Fixed assets Tangible assets Cost Accumulated depreciation Intangible assets and land use rights Cost Accumulated amortization Other assets Interest and fee receivables Construction in progress Receivables Acquisition and major repair of fixed assets Other assets TOTAL ASSETS
31/12/2008 VNDm 1,980,016 6,010,724 18,273,849 6,038,534 12,235,315 755,256 796,927 (41,671) 86,810 118,601,677 120,752,073 (2,150,396) 40,959,079 37,039,093 3,919,986 907,724 761,330 146,394 1,995,515 1,279,280 2,823,054 (1,543,774) 716,235 1,272,299 (556,064) 4,019,707 2,416,172 236,479 312,279 436,499 618,278 193,590,357
31/12/2007 Reclassified VNDm 1,743,604 8,496,135 12,841,040 4,829,941 8,011,099 739,381 742,456 (3,075) 258 100,482,233 102,190,640 (1,708,407) 37,404,891 32,352,839 5,052,052 684,138 579,531 104,607 1,214,196 996,671 2,238,996 (1,242,325) 217,525 309,642 (92,117) 2,507,095 1,659,447 175,060 220,964 146,955 304,669 166,112,971
4 5 6 6.1 6.2 7
8 9 10 11 11.1 11.2 12 12.1 12.2 13 13.1
13.2
14 14.1 14.2 14.3
The attached notes from 1 to 42 form part of these consolidated financial statements
VietinBank
36
CONSOLIDATED BALANCE SHEET (continued)

Annual Report 2008
Notes LIABILITIES Borrowings from the Ministry of Finance and the State Bank of Vietnam Deposits and borrowings from other banks Current accounts from other banks Term deposits and borrowings from other banks Customer deposits and other amounts due to customers Debts issued and other borrowed funds Valuable papers issued Derivative financial instruments and other financial liabilities Other liabilities Accrued interest expenses Other payables Provision for contingent liabilities and off-balance sheet commitments TOTAL LIABILITIES OWNERS EQUITY Capital Chartered capital Capital to purchase fixed assets Other capital Reserves Foreign exchange translation reserve Difference from assets revaluation Retained earnings TOTAL OWNERS EQUITY TOTAL LIABILITIES AND OWNERS EQUITY 22 22 22 22 22 15 16 16.1 16.2 17 18 19 8 20 20.1 20.2 10
31/12/2008 VNDm
31/12/2007 Reclassified VNDm
769,677 8,824,710 1,968,678 6,856,032 121,634,466 40,217,706 3,459,121 6,348,518 3,064,924 3,094,646 188,948 181,254,198
712,745 5,259,911 1,094,289 4,165,622 112,425,814 29,296,023 3,672,024 6 4,099,919 1,832,736 2,106,755 160,428 155,466,442
7,717,168 286,419 106,061 3,947,333 94,880 184,298 12,336,159 193,590,357
7,608,643 297,065 66,472 2,420,702 61,585 192,062 10,646,529 166,112,971
CONSOLIDATED BALANCE SHEET (continued)

37
off-Balance SHeet itemS 31/12/2008 VNDm 31/12/2007 Reclassified VNDm 75,402 13,995,644 6,006,839 20,077,885
Notes Contingencies Credit guarantees Letters of credit Other guarantees 34 34 34
16,941 7,882,510 8,033,477 15,932,928
Prepared by:
Approved by:
Approved by:
Mr. Dinh Quoc Tuan Head of Accounting Department Hanoi, Vietnam 20 May 2009
Mr. Nguyen Van Chung Chief Accountant
Mr. Nguyen Van Thanh Deputy General Director
VietinBank
38
CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2008
Annual Report 2008
Notes OPERATING INCOME Interest and similar income Interest and similar expenses NET INTEREST AND SIMILAR INCOME Fees and commission income Fees and commission expenses Net gain from fees and commission income Net gain from dealing in foreign currencies Net gain / (loss) from securities trading Net share of profit in associates and joint ventures and dividend income Net gain from other operating activities TOTAL OPERATING INCOME OPERATING EXPENSES Payroll and other staff costs Depreciation and amortization charges Other operating expenses TOTAL OPERATING EXPENSES Net profit before provision for credit losses Provision of credit losses Reversal of provision for credit losses PROFIT BEFORE TAX Current enterprise income tax Deferred enterprise income tax NET PROFIT FOR THE YEAR Prepared by: Approved by: 23 24
2008 VNDm 21,062,887 (13,873,456) 7,189,431 588,190 (150,205) 437,985 290,046 (22,787) 135,099 664,479 8,694,253 (2,947,019) (827,162) (1,183,504) (4,957,685) 3,736,568 (3,784,606) 2,484,426 (1,300,180) 2,436,388 (631,924) (631,924) 1,804,464 Approved by:
2007 VNDm 12,769,280 (8,085,890) 4,683,390 437,656 (102,909) 334,747 64,087 71,374 88,247 1,406,835 6,648,680 (1,619,189) (312,022) (834,816) (2,766,027) 3,882,653 (2,690,853) 337,285 (2,353,568) 1,529,085 (379,643) (379,643) 1,149,442
25 26 27 28 29
13 30
10 10
21
CONSOLIDATED STATEMENT OF RETAINED EARNINGS

39
Notes RETAINED EARNINGS AT THE BEGINNING OF THE YEAR Net profit for the year RETAINED EARNINGS BEFORE APPROPRIATIONS Less: Decrease of interest income subsidization from the MOF Additional creation of reserve for prior year Creation of reserves for current year Supplementary capital from retained earnings Additional tax expense in accordance with Tax Finalization of 2007 Others RETAINED EARNINGS AT YEAR END 22 22
2008 VNDm 192,062 1,804,464 1,996,526 (6,331) (12,164) (1,780,531) (8,294) (4,908) 184,298
2007 VNDm 57,551 1,149,442 1,206,993 2,422 (1,012,352) (5,001) 192,062
Prepared by:
Approved by:
Approved by:
VietinBank
40
CONSOLIDATED STATEMENT OF CASH FLOWS

Annual Report 2008
Note
2008 VNDm
2007 Reclassified VNDm
CASH FLOW FROM OPERATING ACTIVITIES Interest and similar income receipts Interest and similar expense payments Fees and commission income receipts Net gain from dealing in foreign currencies Net gain / loss from securities trading Other operating income Recovery from bad debts previously written-off Payment to employees and suppliers Tax paid in the year Net cash flow from operating profit before changes in operating assets and working capital Changes in operating asset (Increase)/decrease in placements with and loans to other banks (Increase)/decrease in investment in securities (Increase)/decrease in derivatives financial instruments (Increase)/decrease in loans and advances to customers Use of provision to write off bad debts Other (Increase)/ decrease in other operating assets Changes in operating liabilities Increase/(decrease) in borrowings from the MOF and SBV Increase/(decrease) in deposits and loans from other Banks Increase/(decrease) in customer deposits and other amounts due to customers Increase/(decrease) in debts issued and other borrowed funds Increase/(decrease) in valuable papers issued Increase/(decrease) in derivatives financial instruments and other financial liabilities Increase/(decrease) in other liabilities Utilization of reserves in the year Net cash flows (used in)/from operating activities 22 21 29 25 20,306,162 (12,641,268) 437,985 283,863 (22,787) 16,757 647,722 (4,130,523) (377,475) 4,520,436 (18,076,828) 1,075,454 961,706 (86,552) (18,579,436) (829,671) (618,329) 24,066,807 110,860 3,564,799 9,208,652 10,921,683 (212,903) (6) 710,843 (237,121) 10,510,415 12,390,675 (8,212,246) 334,747 64,087 71,374 61,212 1,345,623 (2,454,005) (262,441) 3,339,026 (23,783,745) 16,604,169 (17,911,373) (258) (22,038,306) (495,037) 57,060 25,376,689 (15,583,770) 336,169 36,725,106 7,770,344 (4,506,350) 6 771,737 (136,553) 4,931,970
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

41
Note
2008 VNDm
2007 Reclassified VNDm
CASH FLOW FROM INVESTING ACTIVITIES Acquisition of fixed assets and construction in progress Proceeds from disposal of premises and equipments Additional equity investments in associates and joint ventures Receipts from equity investment in associates and joint ventures Dividend income received from other long-term investments Net cash used in investment activities CASH FLOW FROM FINANCIAL ACTIVITY Increase in chartered capital Net cash flows from financial activities Net cash flow of the year Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 31 22 72,600 72,600 8,686,426 23,426,389 32,112,815 3,992,600 3,992,600 8,474,756 14,951,633 23,426,389 12 12 (1,677,880) 6,256 (307,698) 82,733 (1,896,589) (409,276) 4,920 (120,660) 21,757 53,445 (449,814)
NON-MONETARY TRANSACTIONS RELATING TO INCREASE IN THE BANKS CHARTERED CAPITAL IN THE YEAR IS AS FOLLOWS: VNDm Capital increase in form of writting-off of borrowings from SBV in accordance with Decision 37/ Q/NHNN 07 issued by the SBV 35,925
Prepared by:
Approved by:
Approved by:
VietinBank
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

as at and for the year ended 31 December 2008 1. corporate information Vietnam Bank for Industry and Trade (herein referred to as VietinBank or the Bank) is a Vietnamese stateowned commercial bank incorporated and registered in the Socialist Republic of Vietnam. Vietnam Bank for Industry and Trade is a state-owned commercial bank which was initially established on 14 November 1990 in accordance with Decision No. 402/CT dated 14 November 1990 by the President of the Ministerial Council. In line with the policy of the Government to model the National State-owned Corporations in accordance with Decision No. 90/TTg dated 7 March 1994 by the Prime Minister, the Bank was subsequently re-established into State-owned corporation type in accordance with Decision No. 285/QD-NH5 dated 21 September 1996 by the Governor of the State Bank of Vietnam (the SBV) with an effective operating period of 99 years commencing from the date of re-establishment. On 23 September 2008, the Prime Minister of Viet Nam signed the Decision No. 1354/QD-TTg approving the Banks plan of equitization. Under the equitization plan, the current capital of the Government in the Bank remains unchanged with additional shares to be issued on the condition that the Government still holds not less than 51% of charter capital of the joint stock bank after equitization. Total additional shares planned to be issued amounts to 20% of charter capital, in which those being publicly offered to domestic investors, offered to domestic strategic investors and preferentially offered to employees contributes for 10% and those offered to foreign strategic investors accounts for the rest 10%. On 25 December 2008, Vietinbank undertook Initial Public Offerings to domestic investors and employees with total number of shares amounting to 10% of its legal capital. Average selling price was VND 20,265/share at par of VND 10,000/share. The Banks main activities are to provide banking services including mobilizing and receiving short-term, medium-term, and long-term deposits from organizations and individuals; making short-term, medium-term, and long-term loans and advances to organizations and individuals based on the nature and capability of the Banks sources of capital; foreign exchange transactions, international trade financial services, discounting of commercial papers, bonds and other valuable papers, providing brokerage services and other banking services allowed by the SBV. 2. 2.1 SiGnificant accountinG policieS Basis of presentation of the consolidated financial statements Statement of compliance with Vietnamese Accounting Standards and System for Credit Institutions he Board of Management confirms that the accompanying consolidated financial statements are prepared in T accordance with Vietnamese Accounting Standards and System for Credit Institutions. Basis for presentation of the consolidated financial statements The consolidated financial statements of the Bank, which are expressed in millions of Vietnamese Dong (VNDm), are prepared in accordance with the Vietnamese Accounting Standards and System for Credit Institutions under Decision No. 479/2004/QD-NHNN issued on 29 April 2004 by the Governor of the State Bank of Vietnam which was enacted from 1 January 2005 regarding the chart of accounts applied for credit institutions; Decision No. 16/2007/QD-NHNN issued on 18 April 2007 by the Governor of the State Bank of Vietnam regarding the financial reporting system for credit institutions and the Vietnamese Accounting Standards and related guidance issued by the Ministry of Finance as:
Annual Report 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

as at and for the year ended 31 December 2008 2. 2.1 SiGnificant accountinG policieS (continued) Basis of presentation of the consolidated financial statements (continued)
43
Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 1); Decision No. 165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 2); Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 3); Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 4); and Decision No. 100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 5).
The accompanying consolidated financial statements have been prepared using accounting principles, procedures and reporting practices generally accepted in Vietnam. Accordingly, the accompanying consolidated balance sheet, the related consolidated income statement, the related consolidated statement of retained earnings, the consolidated statement of cash flows, the accompanying notes to the consolidated financial statements and their utilization are not designed for those who are not informed about the Vietnams accounting principles, procedures and practices and furthermore are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam. 2.2 2.3 fiscal year The Banks fiscal year starts on 1 January and ends on 31 December. Basis of consolidation The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries as at and for the year ended 31 December each year. The financial statements of the subsidiaries are prepared using accounting policies that are consistent with and for the same reporting year as the Banks. All intra-group balances, transactions, including accrued interests, income, expenses, profits and losses resulting from intra-group transactions are eliminated in full. Financial statements of subsidiaries as presented in Note 1 are fully consolidated starting from the date Vietinbank had the control over the subsidiaries. The control exists as the bank has power to either directly or indirectly governs the subsidiaries operations or financial policies so as to obtain benefits from subsidiaries activities. The operating results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal, as appropriate.
VietinBank
44

as at and for the year ended 31 December 2008
Annual Report 2008
2. 2.4
SiGnificant accountinG policieS (continued) corresponding information Certain items in prior years consolidated financial statements were reclassified to be in conformity with this years presentation as follows: 31/12/2007 Audited VNDm 5,428,856 112,692,813 28,952,892 4,007,106 31/12/2007 Reclassified VNDm 5,259,911 112,425,814 29,296,023 4,099,919
Extracted from the consolidated balance sheet as at 31 December 2007 PAYABLES Deposits and loans from other Banks Deposits and other amounts due to customers Debts issued and other borrowed funds Other payables
Note
Reclassification VNDm (168,945) (266,999) 343,131 92,813
2.4.1 2.4.2 2.4.3 2.4.2.2
Extracted from consolidated statement of cash flow for the year ended 31 December 2007 (Increase)/ Decrease in deposits at and lending to other credit institutions (Increases)/ Decrease in securities trading Increase/ (Decrease) in deposits and loans from other banks Increase/ (Decrease) in customers deposits (including State Treasurys) Increase/(Decrease) in debts issued and other borrowed funds Increase/ (Decrease) in other liabilities Net impact to Net cash flow from operating activities Net impact to Net cash flow of the year Cash and cash equivalent at the end of the year
Note 2.4.4 2.4.5 2.4.1 2.4.2 2.4.3 2.4.2.2
31/12/2007 Audited VNDm 8,272,339 (19,987,437) 505,114 36,992,105 7,427,213 678,924 (5,475,924) (1,933,138)
Reclassification VNDm 8,331,830 2,076,064 (168,945) (266,999) 343,131 92,813 10,407,894 10,407,894 10,407,894
31/12/2007 Reclassified VNDm 16,604,169 (17,911,373) 336,169 36,725,106 7,770,344 771,737 4,931,970 8,474,756 23,426,389
2.4.6
13,018,495

45
2. 2.4 2.4.1
SiGnificant accountinG policieS (continued) corresponding information (continued) current deposits from other credit institutions T his item includes the reclassification of VND 168,945 million being funds received from other banks of Vietinbank Securities Company under repurchase contracts from account Current deposits of other credit institutions in VND into account Other borrowed funds.
2.4.2
deposits and other amounts due to customers T his comprises following reclassifications (balances of Vietinbank Securities Company): 2.4.2.1 2.4.2.2 Reclassify VND174,186 million being funds received from other enterprises and individuals from account Customer demand deposits in VND into Other borrowed funds Reclassify following items from account Customer demand deposits in VND into Other payables account: Amount VNDm 743 362 6,502 84,962 244 92,813
Description Payables to securities exchange center Advances to buyers Payables to securities issuers Payables to investors as settlement of securities exchange Payables to sellers Total 2.4.3 debts issued and other borrowed funds This item includes the followings: Description Impact of adjustment on reclassification presented in Note 2.4.1 Impact of adjustment on reclassification presented in Note 2.4.2.1 Total 2.4.4 (increase)/ decrease in placements with and loans to other Banks
Amount VNDm 168,945 174,186 343,131
T his item includes the reclassification of balance with the SBV amounting at VND 8,331,830 million as a component of cash and cash equivalent. 2.4.5 (increase)/ decrease in trading securities Reclassify VND 2,076,064 million of Investment securities under 3 months as a component of cash and cash equivalent item.
VietinBank
46

Annual Report 2008
2. 2.4 2.4.6
SiGnificant accountinG policieS (continued) corresponding information (continued) cash and cash equivalents Descriptions Impact of adjustment on reclassification presented in Note 2.4.4 Impact of adjustment on reclassification presented in Note 2.4.5 Total Amount VND 8,331,830 2,076,064 10,407,894
2.5
loans and advances to customers Loans and advances to customers are disclosed at the principal amounts outstanding at the end of the financial year.
2.6
provision for credit losses In accordance with the Law on Credit Institutions effective from 1 October 1998, Law on Amendment and Addition to a number of articles of the Law on Credit Institutions effective from 1 October 2004, Decision 127/2005/QD-NHNN dated 3 February 2005, Decision 493/2005/QD-NHNN dated 22 April 2005 and Decision 18/2007/QD-NHNN dated 25 April 2007 issued by the State Bank of Vietnam, the Bank is required to classify loans and create provisions for credit losses. Accordingly, loans are graded using the following risk classifications: Current, Special Mention, Substandard, Doubtful and Loss based on the payment arrears status and other qualitative factors. Net loan and advance exposure for each individual customer is calculated by subtracting from the loan balance the related determined value of collateral which is subject to certain accepted discount rates in accordance with Decision 493/2005/QD-NHNN. Specific provision is established based on the net loan and advance exposure for each individual customer using the prescribed provision rates applicable to that loan classification as follows: Group 1 2 3 4 5 Category Current Special mention Substandard Doubtful Loss Provision rate 0% 5% 20% 50% 100%
Loans classified as either Substandard, or Doubtful or Loss are considered as non-performing loans.

47
2. 2.6
SiGnificant accountinG policieS (continued) provision for credit losses (continued) In accordance with Decision 493/2005/QD-NHNN of the State Bank of Vietnam, a general provision is made for credit losses which are yet to be identified during the loan classification process and in specific provision as well as in case of the Banks potential financial difficulty due to deterioration in loan quality. According to Decision 493 of the State Bank of Vietnam, the Bank is required to fully create and maintain a general provision at 0.75% of total of loans classified in groups 1 to 4 plus guarantee, irrevocable commitments and acceptance for payment within 5 years commencing from May 2005. These provisions are recorded in the consolidated income statement as an expense that will be used to write off any credit losses incurred. At the discretion of the Banks Risk Settlement Committee, loans can be written off if they are classified under Group 5 or if the borrowers have been liquidated or are bankrupt entities, or if individual borrowers are deceased or are missing. Details of loan classification, provision calculation and provision the Bank creates as at 31 December 2008 is presented in note 10.
2.7
trading securities Trading securities include debt securities, equity securities and other kinds of securities that the Bank fully purchased and intended to sell in short term in order to gain profits from price fluctuation. Trading securities are initially recognized at cost as at the value date and subject to review for impairment as at balance sheet date. Provision for impairment is made when book value of the securities is higher than market value. Any impairment or decline in market value incurred is recognized as Net gain/loss from securities trading in the consolidated income statement.
2.8 2.8.1
investment securities Held- to-maturity investments Held-to-maturity are those which carry fixed or determinable payments and have fixed maturities and which the bank has the intention and ability to hold to maturity in order to gain interests. These should neither be sold before maturity nor transferred to trading or available-for-sale securities. Held-to-maturity investments are initially recognized at par value as at the value date. Any discount or surplus in the differences between par value and the costs comprising par value plus accumulative interest (if interest payment is made at maturity) or subtract prepaid interest (if interest income is paid in-front) are recognized in consolidated income statement using straight-line method over the remaining time to maturity of the securities. Interest income is accrued using straight-line method over the remaining time to maturity of the securities. eld-to-maturity investments are subject to review for impairment. If there is objective evidence that a longH term impairment loss has been incurred, the amount of loss is presented in the consolidated income statement as Net Gain/loss from securities trading.
VietinBank
48

Annual Report 2008
2. 2.8 2.8.2
SiGnificant accountinG policieS (continued) investment securities (continued) Available- for-sale investments Available-for-sale investments include equity instruments and other debt instruments that the Bank has intention to hold for investment and that are ready for trading. These securities are not frequently traded but could be sold at any time the transactions yield benefit. Equity available-for-sale securities are recognized at cost and debt available-for-sale securities are recognized at par value as at transaction date. Any discount or surplus in the differences between par value and the costs comprising par value plus accumulative interest (if interest payment is made at maturity) or subtract prepaid interest (if interest income is paid in-front) are recognized in consolidated income statement using straight-line method over the remaining time to maturity of the securities. Interest income is accrued using straight-line method over the remaining time to maturity of the securities. Availablefor-sale investments are subject to review for impairment. When the investments market value is less than their book value, impairment should be incurred, the amount of loss is presented in the consolidated income statement as Net Gain/loss from securities trading.
2.9
repurchase and reverse repurchase agreements Securities sold under agreements to repurchase at a specific date in the future (repos) are not derecognized from the consolidated balance sheet. The corresponding cash received is recognized in the consolidated balance sheet as a liability. The difference between the sale price and repurchase price is accrued over the life of the agreement using the interest rate stipulated in the contract. Conversely, securities purchased under agreements to resell at a specific date in the future (reverse repos) are not recognized in the consolidated balance sheet. The corresponding cash paid is recognized in the consolidated balance sheet as an asset. The difference between the purchase price and resale price is accrued over the life of the agreement using the straight-line interest rate method.
2.10
investment in joint ventures The Banks investment in joint ventures is accounted for under equity method of accounting. The Banks share in joint ventures profit or loss in the year is recognized in the consolidated income statement. Value of the investment in joint ventures is carried in the consolidated balance sheet at the amount that reflects its share of net profit or loss of the joint ventures. The reporting currency of Indovina Joint Venture Bank is the United States dollar (USD). For the purpose of equity accounting investments in joint venture under equity method, assets and liabilities of the company are translated into VND at the ruling exchange rates as of the balance sheet date, equity accounts are translated into VND at the ruling exchange rates on the transaction date, and the income statement is translated at the average exchange rates for the year. Foreign exchange differences arising on the translation are recognized as a separate component of owners equity.
Details of the Banks investments in joint ventures are presented in Note 12.1.

49
2. 2.11
SiGnificant accountinG policieS (continued) other long term investments Other long term investment represents the Banks capital investments in other enterprises at that the Bank owns less than 20% of voting right. This investment is recognized at cost and is reviewed for impairment when market value is below book value, or when objective evidence of long-term impairment exists. Provision for impairment of long-term investment is made when the investee performs at loss (except that loss was previously stipulated in business plan) in accordance with Circular 13/2006/TT-BTC issued by the Ministry of Finance dated 27 February 2006. Accordingly, provision is the difference between actual investment of the parties at business entity plus its owners equity, multiply with its investment capital ratio and actual contributed capital of investment parties at the business entity
2.12
fixed assets Fixed assets are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price plus any directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, improvements and renewals are capitalized and expenditures for maintenance and repairs are charged to the consolidated income statement. When assets are sold or retired, their cost and accumulated depreciation are removed from the consolidated balance sheet and any gains or losses resulting from their disposal are posted to the consolidated income statement.
2.13
depreciation and amortization D epreciation and amortization of tangible fixed assets and intangible assets is calculated on a straight-line basis over the estimated useful life of the assets, which are as follows: Buildings and materials Machines and equipments Motor vehicles O ther tangible fixed assets Accounting software Intangible asset relating to lease payment for land use right at Hanoi Nam Thang Long City Complex Other intangible fixed assets Land use rights (*) 6 - 25 years 3 - 7 years 6 10 years 5 years 3 - 5 years 2 years 4 - 5 years based on lease terms
(*):
The cost of the land use rights is not amortized if it is granted by the Government of Vietnam and has indefinite term. The cost of land use rights with a definite term is amortized over the lease term.
VietinBank
50

Annual Report 2008
2. 2.14
SiGnificant accountinG policieS (continued) revenue and expenditure recognition Interest income and interest expense are recognized in the consolidated income statement on an accrual basis except for interest income on Special Government Bonds which is recognized as an increase in chartered capital upon actual receipt, and not recognized in consolidated income statement in accordance with Circular 100/2002/TT-BTC dated 4 November 2002 issued by the Ministry of Finance. The recognition of interest income is suspended when loans become impaired, which occurs when a loan is classified from either group 2 to group 5 according to criteria set in Decision 493/2007/QD-NHNN dated 22 April 2005 and Decision 18/2007/QDNHNN dated 25 April 2007 issued by the State Bank of Vietnam. Accrued interest income of impaired loans is recorded off-balance sheet in consolidated income statement until actually received. Fees and commissions are recognized when incurred. Dividend income on trade equity investment is recognized in the consolidated income statement once the board of directors of the investee company approves the dividend distribution plan of the investee company.
2.15
foreign currency transactions In accordance with the Banks accounting system, all transactions are recorded in original currencies. Monetary assets and liabilities denominated in foreign currencies at year-end are translated into VND using exchange rates ruling at the balance sheet date (see list of exchange rates of applicable foreign currencies against VND as at 31 December in Note 42). Income and expenses arising in foreign currencies during the year are converted into VND at rates ruling at the transaction dates. Unrealized foreign exchange differences arising from the translation of monetary assets and liabilities at the balance sheet date are recognized in the consolidated income statement. The reporting currency of Indovina Joint Venture Bank is the United States dollar (USD). For the purpose of equity accounting investments in joint venture under equity method, assets and liabilities of the company are translated into VND at the ruling exchange rates as of the balance sheet date, equity accounts are translated into VND at the ruling exchange rates on the transaction date, and the income statement is translated at the average exchange rates for the year. Foreign exchange differences arising on the translation are recognized as a separate component of owners equity.
2.16
enterprise income taxes Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from (or paid to) the taxation authorities. The tax rates and tax laws are applied and enacted at the balance sheet date. The Banks tax returns are subject to examination by the tax authorities. Due to the ambiguity associated with the applicability of tax laws and regulations in Vietnam, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities.

51
2. 2.16
SiGnificant accountinG policieS (continued) enterprise income taxes (continued) Deferred tax Deferred tax is provided using the balance sheet liability method on temporary differences between the tax base of assets and liabilities and their carrying amount for financial reporting purpose at the consolidated balance sheet date. Deferred tax liabilities are recognized for all taxable temporary differences, except where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which these differences can be utilized, except where the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset realized or the liability is settled based on tax rates and tax laws that have been enacted at the balance sheet date. Deferred tax is charged or credited to the consolidated income statement, except when it relates to items recognized directly to equity, in which case the deferred tax is also dealt with in the equity account. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxable entity and the same taxation authority and the Bank intends to settle its current tax assets and liabilities on a net basis.
2.17
cash and cash equivalents Cash and cash equivalents consist of cash, short-term deposits and highly liquid short-term investments that are readily convertible to known amounts of cash and are within 90 days of maturity when acquired at transaction day.
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Annual Report 2008
2. 2.18
SiGnificant accountinG policieS (continued) fiduciary assets Assets held in trust or in a fiduciary capacity are not reported in the consolidated financial statements since they are not assets of the Bank.
2.19
offsetting Financial assets and financial liabilities are reported at a net amount in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset financial assets against financial liabilities or vice-versa, and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.
2.20
use of estimates The preparation of the consolidated financial statements requires the Board of Management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the income and expenses and the resultant provisions. Such estimates are necessarily based on assumptions involving varying degrees of subjectivity and uncertainty and actual results may differ resulting in future changes in such provision.
2.21
Employee benefits Post employment benefits Post employment benefits are paid to retired employees of the Bank by the Social Insurance Agency which belongs to the Ministry of Labor and Social Affairs. The Bank is required to contribute to these post employment benefits by paying social insurance premium to the Social Insurance Agency at the rate of 15.00% of an employees basic salary on a monthly basis. The Bank has no further obligation to fund the post employment benefits of its employees, other than the liability to pay Social Insurance Agency on a monthly basis. Employees who lose employment as a result of the restructuring of the Bank are entitled to allowance of one basic monthly salary for each year of service and basic monthly salary for each month before their retiring age (maximum 30 months). In addition, in accordance with internal remuneration policy of the Bank, the employees are entitled to a one-off allowance of 3 months current salary. Voluntary resignation and retrenchment benefits Voluntary resignation benefits: the Bank has the obligation, under Section 42 of the Vietnam Labor Code amended on 2 April 2002, to pay allowance arising from voluntarily resignation of employees, equal to onehalf months salary for each year of employment plus salary allowances (if any).

53
2. 2.21
SiGnificant accountinG policieS (continued) Employee benefits (continued) Retrenchment benefits: the Bank has the obligation, under Section 17 of the Vietnam Labor Code, to pay allowance to employees who are retrenched as a result of organizational restructuring or technological changes. In such case, the Bank shall pay to employees an allowance for loss of work equivalent to the aggregate amount of one months salary for each year of employment, but no less than two months salary. The Bank has the obligation to pay allowance to employees who are retrenched an allowance for their loss of work equivalent to the aggregated amount of one and a half months salary for each year (12 months) of employment, plus a haft months salary for each year of before-time retirement (maximum 30 months). In addition, the Bank also accounts for area pricing factors: 10% on the total allowance of for Hanoi and Hochiminh city, and 5% on the total allowance for grade I and II regions. While the obligations under Sections 17 and 42 are compulsory, the implementation of these Sections is subject to detailed guidance issued by the Ministry of Finance in implementing circulars. In accordance with Circular 64/1999/TT-BTC dated 7 June 1999 and Circular 82/2003/TT-BTC dated 14 August 2003 by the Ministry of Finance which superseded Circular 64/1999/TT-BTC, banks are required to calculate retrenchment allowance between 1% and 3% per annum on the basic salary of the employees; and the outstanding balance of employee termination reserve which was previously created at 10% from the profit after tax and after appropriation of supplementary capital reserve in accordance with the guidance of Circular 64/1999/TT-BTC should be transferred to retrenchment allowance as provided under Circular 82. I n 2008, since prior years termination allowance reserve is assessed as sufficient for the obligations expected to be incurred, the Bank ceases the creation of this reserve for the year 2008.
3.
BuSineSS comBination In 20 November 2008, the Bank purchased 50% capital contribution of the joint venture partner, Tokio Marine Insurance Singapore, in the Asia Insurance Joint Venture Company by signing a capital transferring contract; therefore increasing the Banks ownership in the Asia Insurance Company to 100%. Asian Insurance Co., Ltd was established under license of investment 21 GP/KDBH dated 12 December 2002 with effective operating period of 30 years. In 17 December 2008, Asia Insurance Joint-venture Company is officially renamed to Vietinbank Insurance Limited according to License No. 21/QPDC5/KDBH. The company remains its main business of non-life insurance after becoming a subsidiary of Vietinbank. Fair value of net assets and identifiable liabilities of the Company are presented as follow: Fair value at the acquisition date VNDm Cash and cash equivalents Account receivables Other current assets Fixed assets 98,515 13,487 144 646
Book value VNDm 98,515 13,487 144 646
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Annual Report 2008
3.
BuSineSS comBination (continued) Long term investments Other long term assets Current liabilities Non-current liabilities Net asset Ownership percentage in net assets (50%) Goodwill Cost 14,838 4,805 (13,658) (10,499) 108,278 54,139 239 54,378 4,802 4,805 (13,658) (10,499) 98,242
Total acquisition cost of VND 54,378 million was paid in cash. Goodwill is allocated in full to the general administration expense due to its immateriality. Vietinbank Insurance Companys financial statements were consolidated to the Banks since the date of acquisition.
4.
caSH and caSH eQuiValentS 31/12/2008 VNDm Cash in VND Cash in foreign currencies (FC) Valuable papers in FC 1,510,720 466,079 3,217 1,980,016 31/12/2007 VNDm 1,363,031 377,384 3,189 1,743,604
5.
BalanceS WitH tHe State Bank of Vietnam (tHe SBV) 31/12/2008 VNDm Settlement accounts with the State Bank of Vietnam In VND In FC 4,703,431 1,307,293 6,010,724 7,435,510 1,060,625 8,496,135 31/12/2007 VNDm
Balances with the State Bank of Vietnam are kept for settlement purposes and maintain compulsory deposits. In 2008, only compulsory deposits in VND and settlement deposits in foreign currency earn annual interest at rates of 8.5% and 1.00% respectively. In accordance with the regulations of the SBV, the Bank is required to maintain certain cash reserves with the SBV in the form of compulsory deposits. At the reporting date, reserve ratios are 6.00% and 2.00% applicable to customer deposits with maturity less than 12 months and over 12 months; and 7.00% and 3.00% (2007: 10.00% and 4.00%) for customer deposits in USD with maturity less than 12 months and over 12 months. Accordingly, the total required average compulsory deposits (in both VND and foreign currencies) in December 2008 amount to VNDm 4,989,794. During the year, the Bank has maintained its compulsory deposits in compliance with the compulsory deposit requirement notifications from the SBV.

55
6.
placementS WitH and loanS to otHer BankS 31/12/2008 VNDm 31/12/2007 VNDm 4,829,941 8,011,099 12,841,040
Current accounts with other banks Term deposits with and loans to other banks
6,038,534 12,235,315 18,273,849
6.1
current account with other banks 31/12/2008 VNDm Current accounts with local banks in VND Current accounts with local banks in foreign currencies Current accounts with overseas banks in VND Current accounts with overseas banks in foreign currencies 1,865,180 2,067,149 4 2,106,201 6,038,534 31/12/2007 VNDm 1,574,439 1,155,118 2,100,384 4,829,941
6.2
term deposits with and loans to other banks 31/12/2008 VNDm Placements with other banks under three months Placements with other local banks in VND Placements with other local banks in foreign currency Placement with overseas banks in foreign currency Loans to other banks Included in cash and cash equivalents Placements with other banks over three months Placements with other local banks in VND Loans to other local banks in VND over 3 months 605,000 50,000 12,235,315 2008 Interest rates %/per annum Term deposits with local banks denominated in VND Term deposits with local banks denominated in FC Term deposits with overseas banks in FC Commercial loans to other local banks in VND From 1.50 to 17.50 From 1.50 to 2.50 From 0.05 From 7.90 to 17.10 1,690,454 40,000 8,011,099 2008 Interest rates %/per annum From 6.00 to 9.00 From 4.90 to 5.90 From 4.20 to 4.93 From 8.50 to 8.80 9,230,000 565,334 1,434,981 350,000 11,580,315 4,529,000 362,565 1,349,080 40,000 6,280,645 31/12/2007 VNDm
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Annual Report 2008
7.
tradinG SecuritieS 31/12/2008 VNDm Debt securities Securities issued by the Government of Vietnam Securities issued by other local credit institutions Securities issued by local business entities Securities issued by foreign entities Equity securities Securities issued by other local credit institutions Securities issued by local business entities Securities issued by foreign entities Other trading securities Provision for impairment of trading securities 33,480 95,906 (41,671) 755,256 11,503 109,339 (3,075) 739,381 33,440 632,134 1,967 31/12/2007 VNDm 384,766 125,759 111,089 -
Listing status of trading securities is as follows: 31/12/2008 VNDm Debt securities Listed Unlisted Equity securities Listed Unlisted Other securities Listed Unlisted 665,574 1,967 67,792 61,594 796,927 31/12/2007 VNDm 510,525 111,089 89,824 31,018 742,456
8.
deriVatiVe financial inStrumentS and otHer financial aSSetS 31/12/2008 Total net book value (at the exchange rate of balance sheet date) Assets Liabilities VNDm VNDm FC derivative financial instruments Forward contracts Swap contracts Other currency derivative financial instruments Total 31/12/2007 Total net book value (at the exchange rate of balance sheet date) Assets Liabilities VNDm VNDm
15,354 71,456 86,810
258 258
(6) (6)

57
9.
loanS and adVanceS to cuStomerS 31/12/2008 VNDm Commercial loans Commercial bills and valuable papers loans Receivables from finance leases Obligated payables from customers Official Development Assistance-funded loans Trusted loans State directed and state planning loans Frozen loans and loans pending resolution 118,664,585 292,628 735,948 144 979,935 50,469 10,731 17,633 120,752,073 2008 Interest rate per annum (%) Receivables from financial leases Commercial loans in VND Commercial loans in FC from 11,4 to 21 from 10,5 to 21 from 5,5 to 11,5 31/12/2007 VNDm 100,215,914 308,944 612,515 1,674 909,995 79,664 6,077 55,857 102,190,640 2008 Interest rate per annum (%) Minimum 11.5 10.3 to 12.96 6.3 to 9.5
Commercial loans comprise short-term, medium-term and long-term loans including syndicated loans led by or participated in by the Bank denominated in both VND and USD. State directed and state planning loans are the loans that are partly funded and appointed interest by the SBV. The Bank is entitled to receive interest supporting at rate of 2.4% per annum on the average outstanding loan balances from the SBV/MOF. Official Development Assistance-funded loans are loans sponsored from official development assistance (ODA) through the MOF and SBV. The Bank bears credit risk of these loans as stipulated in agreements with the ODA donors, the MOF and SBV. Frozen loans are loans which have become non-performing and been immobilized under the Governments instruction. As such, the Bank stopped accruing interest during the period the loan is frozen (which normally lasts for 3 to 5 years). At the same time, the SBV also granted certain non-interest bearing loans to the Bank in order to reduce Banks financial pressures during the period the loan is frozen. The Government and the SBV will determine the resolution for each frozen loans after the immobilization period expires, on a case-by-case basis.
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Annual Report 2008
9. 9.1
loanS and adVanceS to cuStomerS (continued) analysis of loan by original terms 31/12/2008 VNDm Short-term loans Medium-term loans Long-term loans 70,124,650 16,368,102 34,259,321 120,752,073 31/12/2007 VNDm 61,090,835 14,690,071 26,409,734 102,190,640
9.2
details of loan portfolio by type of business entity Details of the Banks loan portfolio by type of business entity as at year end are as follows:: 31/12/2008 VNDm Loans to corporate Central state-owned enterprises Provincial state-owned enterprises State limited companies Private limited companies State joint-stock companies Other joint-stock companies Partnership companies Private companies Foreign invested enterprises Co-operatives Loans to individuals Other loans 20,193,852 3,816,067 4,453,382 21,572,060 14,496,711 16,562,011 11,867 7,102,993 2,559,109 862,668 27,860,738 1,260,615 120,752,073 16,72% 3,16% 3,69% 17,86% 12,01% 13,72% 0,01% 5,88% 2,12% 0,71% 23,07% 1,04% 100% 17,724,188 4,157,145 3,669,529 17,789,811 11,372,384 10,589,725 12,791 6,077,655 2,101,753 802,553 26,557,259 1,335,847 102,190,640 17,34% 4,07% 3,59% 17,41% 11,13% 10,36% 0,01% 5,95% 2,06% 0,79% 25,99% 1,31% 100,% % 31/12/2007 VNDm %

59
9. 9.3
loanS and adVanceS to cuStomerS (continued) details of loan portfolio by type of industrial sectors Details of the Banks loan portfolio by type of industrial sectors as at year end are as follows: 31/12/2008 VNDm Agricultural and Forestry Aquaculture Mining and quarrying Manufacturing Electricity, Petroleum & Water Construction Wholesale and retail trade; repair of motor vehicles, motor cycles and personal goods Hotels and restaurants Transport; storage and communications Financial intermediation Scientific and technology Real estate business and advisory Compulsory national defend and management Education and training Health care and social work Culture, sporting activities Community, social and personal service activities Households Extra-territorial organizations and bodies Other activities 3,885,097 1,230,795 3,046,098 31,053,212 11,523,866 13,565,930 22,632,090 2,883,230 11,460,130 409,820 167,833 363,331 579,496 304,884 879,108 86,614 8,686,349 3,119,385 17,956 4,856,849 120,752,073 % 3,22% 1,02% 2,52% 25,72% 9,54% 11,23% 18,74% 2,39% 9,49% 0,34% 0,14% 0,30% 0,48% 0,25% 0,73% 0,07% 7,19% 2,58% 0,01% 4,02% 100% 31/12/2007 VNDm 4,284,351 1,295,712 2,021,308 24,572,262 8,877,652 10,851,994 21,594,964 2,571,687 8,371,873 607,434 139,633 164,019 225,044 367,208 618,768 75,776 8,180,089 2,577,312 48,683 4,744,871 102,190,640 % 4,19% 1,27% 1,98% 24,05% 8,69% 10,62% 21,13% 2,52% 8,19% 0,59% 0,14% 0,16% 0,22% 0,36% 0,61% 0,07% 8,00% 2,52% 0,05% 4,64% 100%
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Annual Report 2008
9. 9.4
loanS and adVanceS to cuStomerS (continued) Loan classification D etails of loan classification as at 31 December 2008 are as follows: : Amount VNDm Standard Special mention Substandard Doubtful Loss 114,596,417 3,968,311 846,985 803,542 536,818 120,752,073
10.
cHanGeS in proViSion for credit loSSeS Details of provision for credit losses balance is presented in the consolidated balance sheet as at 31 December 2008 as follows: Amount VNDm Provision for credit losses Provision for contingent liabilities and off-balance sheet commitments 2,150,396 188,948 2,339,344 Changes in the provision for credit losses in 2007 are summarized below:: Specific provision VNDm Balance as at 1 January 2008 Provision charged to expenses from January to November Reversal of provision from January to November Provision for bad debts written-off from January to November Balance as at 30 November 2008 Provision charged to expenses in December Balance as at 31/12/2008 1,019,238 3,470,958 (2,323,463) (45,558) 2,121,175 (784,113) 1,337,062 General provision VNDm 849,597 313,648 (160,963) 1,002,282 1,002,282 Total VNDm 1,868,835 3,784,606 (2,484,426) (45,558) 3,123,457 (784,113) 2,339,344

61
10.
cHanGeS in proViSion for credit loSSeS (continued) Changes in the provision for credit losses in 2007 are summarized below: Specific provision VNDm Balance as at 1 January Provision charged to expenses during the year Reversal of provision from January to November Provision for bad debts written-off from January to November Other provisions Balance as at 30 November 2007 Provision for bad debts written-off in December Provision creation in December Reversal of provision in December Balances at 31 December 2007 8,852 1,677,161 (137,881) 12,345 1,560,477 (507,382) 165,547 (199,404) 1,019,238 General provision VNDm 1,452 848,145 849,597 849,597 Total VNDm 10,304 2,525,306 (137,881) 12,345 2,410,074 (507,382) 165,547 (199,404) 1,868,835
The Bank conducts loan classification under Decision 493/2005/QD-NHNN and Decision 18/2007/QD-NHNN. Accordingly, provision for credit losses as at 31 December 2008 is established basing on classification of outstanding loan balances and off-balance sheet exposures, including irrevocable commitments, payment guarantees and other letter of guarantees as at 30 November. Breakdown of loan classification and credit loss provision as required by Decision 493 and the Banks loan classification and provision policy as at 30 November 2008 are as follows: Provision for credit losses as at 30 November 2008 is as follows: Loan balance (*) VNDm 110,486,012 4,112,246 1,124,204 723,357 1,574,710 118,020,529 Specific provision VNDm 132,549 191,637 170,186 1,567,651 2,062,023 General provision VNDm 827,036 30,842 8,432 6,176 872,486
Classification Current Special Mention Substandard Doubtful Loss
Total VNDm 827,036 163,391 200,069 176,362 1,567,651 2,934,509
(*) Balances as at 30 November 2008 excluded trusted loan amounting at VNDm 214,379 on which the Bank does not bear credit risk..
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Annual Report 2008
10.
cHanGeS in proViSion for credit loSSeS (continued) Provision for contingent liabilities and commitments as at 30 November 2008 is as follows: Off balance sheet exposures (*) VNDm 16,894,541 248,433 160,467 2,825 37,211 17,343,477 (*): balances as at 30 November 2008 As at 31 December 2008, the Bank has fully created provision for outstanding loan balances as at 30 November 2008 including both specific provision and general provision in accordance with Decision 493/2005/QD-NHNN and Decision 18/2007/QD-NHNN issued by the SBV. Breakdown of loan classification and credit loss provision as required by Decision 493 and the Banks loan classification and provision policy as at 30 November 2008 are as follows: Specific provision for off-balance sheet VNDm 59,152 59,152 General provision for off-balance sheet VNDm 129,796 129,796 Specific provision VNDm 10,936 26,427 677 21,112 59,152 General provision VNDm 126,709 1,863 1,203 21 129,796
Classification Current Special Mention Substandard Doubtful Loss
Total VNDm 126,709 12,799 27,630 698 21,112 188,948
Provision for credit loss According to Decision 493 Recorded by the Bank Difference 11. inVeStment SecuritieS
Specific provision VNDm 2,062,023 2,062,023 -
General provision VNDm 872,486 872,486 -
Total VNDm 3,123,457 3,123,457 -
31/12/2008 VNDm Available-for-sale securities Government bonds Debt securities issued by other local credit institutions Debt securities issued by local business entities 34,378,487 828,867 1,831,739 37,039,093 Held-to-maturity securities Government bonds Debt securities issued by other local credit institutions Debt securities issued by local business entities Provision for impairment of held-to-maturity securities 3,139,986 130,000 650,000 3,919,986 40,959,079
31/12/2007 VNDm 29,691,944 690,000 1,970,895 32,352,839
4,064,700 750,000 237,352 5,052,052 37,404,891

63
11. 11.1
inVeStment SecuritieS (continued) available-for-sale securities Details of debt securities available-for-sale held by the Bank as at 31 December are as follows: 31/12/2008 Par value VNdm Securities issued by the Government Treasury bills Treasury bills issued by the SBV Compulsory treasury bonds Bonds issued by the Government in VND Bonds issued by the Government in USD Municipal bonds issued by Peoples Committee of HCM City Municipal bonds issued by Peoples Committee of Hanoi Debt securities issued by other local credit institutions Bills issued by VBARD Bonds issued by BIDV Bonds issued by Asian Commercial Bank (ACB) Bonds issued by Assistance and Development fund Bond issued by PetroVietnam Join stock Finance Corporation (PVFC) Debt securities issued by local business entities Bond issued by Electricity of Vietnam (EVN) Bonds issued by LILAMA Vietnam Ship Building Industry Corporation Bonds issued by Vietnam Mineral Corporation Bonds issued by Minh Phu Sea food Corporation Bonds issued by Expressway Corporation 34,455,363 5,837,860 6,508,838 3,000,000 18,067,037 817,083 224,545 841,000 170,000 391,000 50,000 230,000 1,829,910 729,910 50,000 500,000 200,000 50,000 300,000 37,126,273 Carrying value VNDm 34,378,487 5,837,860 6,508,838 3,000,000 17,990,161 817,083 224,545 828,867 163,249 385,618 50,000 230,000 1,831,739 731,739 50,000 500,000 200,000 50,000 300,000 37,039,093 Par value VNDm 29,686,325 1,619,700 15,900,000 11,643,830 80,570 200,000 242,225 690,000 30,000 350,000 50,000 60,000 200,000 1,970,895 1,270,895 50,000 400,000 200,000 50,000 32,347,220 31/12/2007 Carrying value VNDm 29,691,944 1,619,700 15,900,000 11,649,449 80,570 200,000 242,225 690,000 30,000 350,000 50,000 60,000 200,000 1,970,895 1,270,895 50,000 400,000 200,000 50,000 32,352,839
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Annual Report 2008
11. 11.1
inVeStment SecuritieS (continued) available-for-sale securities (continued) Treasury bills carry a term of less than 1 year, were purchased at discounted prices and bear interest at rates ranging from 8.00% to 15.00% per annum (2007: 3.55% to 4.80% per annum) in which, interest is prepaid on value date; The State Bank of Vietnam bills carry a term of less than 1 year and bear interest at rates of 4.5% (2007:from 3.70% to 7.75% per annum), interest is prepaid on value date Compulsory State Bank of Vietnam bills carry a term of 1 year, issued by the State Bank of Vietnam and must be purchased compulsorily by financial institutions from 2008 to 2009. Holders should not use the bills for re-supplying capital transactions with the SBV. Initially, the bills interest rate was 7.7%; however; during 2008, SBV had adjusted the rate twice to 13% p.a. and 4.5% p.a; Government bonds in VND have term ranging from 2 to 16 years, bear interest at rate ranging from 6.5% to 17.5% (2007: from 6.50% to 9.55% p.a.), interest is payable on the annual anniversary date; Municipal bonds issued by Peoples Committee of Ho Chi Minh City are five-year term bonds which are issued in different times. These bonds earn interest at rate ranging from 8.35% to 9.55% per annum depending on each issuance. Municipal bonds issued by Hanoi Peoples Committee have a term of 5 year and bear interest at rate ranging from 8.7% to 9.10% p.a. (2007: from 8.7% to 9.10% p.a.), interest is payable on the annual anniversary date; Bonds issued by Vietnam Bank for Agriculture and Rural Development have term ranging from 10 to 15 years with interest rate ranging from 9.8% to 10.2% p.a., interest is payable on the annual anniversary date; Bonds issued by Bank for Investment and Development of Vietnam have term ranging from 10 to 15 years and interest rate from 8.15% to 9.08% p.a. (2007: 8.15%), interest is payable on the annual anniversary date; Bonds issued by Asia Commercial Bank have a term of 5 year, bear interest at rate of 8.60% per annum (2007: 8.6% p.a.) and interest is payable on the annual anniversary date. Bonds issued by Petro Vietnam Joint Stock Finance Company have a term from 3 to 5 years and earn interest at the rate of 8.60% per annum except one has floating interest rate Interest is payable on the annual anniversary date. Bonds issued by Electricity of Vietnam Corporation have a term of 5 years with floating exchange rate, interest is payable on the annual anniversary date; Bonds issued by Vietnam Machinery Erection Corporation (LILAMA) have a term of 5 years with interest rate of 9.60% per annum (2007: 9.60% p.a.) and interest is payable on the annual anniversary date; Bonds issued by Vietnam Ship Building Industry Corporation (VINASHIN) have term ranging from 5 to 10 years and earn interest at rates ranging from 9.40% to 10.50% per annum (2007: 9.40% to 10.50% p.a.), except one has floating interest rate. Interest is payable on the annual anniversary date; Bonds issued by VINACOMIN Mineral Corporation have a term of 10 years and earn interest at a rate of 9.50% per annum on the annual anniversary date; Bonds issued by Minh Phu Seafood Corporation have a term of 5 years, bear interest at rate of 9.80% (2007: 9.80% p.a.) and interest is payable on the annual anniversary date; Bonds issued by Expressway Corporation have term ranging from 5 to 15 years, bear interest at rate ranging from 9.00% to 16.00% p.a., interest is payable on the annual anniversary date.

65
11. 11.2
inVeStment SecuritieS (continued) Held-to-maturity securities 31/12/2008 Par value Carrying value VNDm Government securities Special government bonds Education Government bonds Municipal Bonds for irrigation works (Irrigation Bonds) Treasury Bills Municipal bonds issued by Peoples Committee of HCMC Cau Moi Dong Nai water resevior bonds Municipal bonds issued by Peoples Committee of Hanoi Debt securities issued by other credit institutions Promissory notes issued by MHB Bonds issued by MHB Debt securities issued by VABRD Bonds issued by VABRD Debt securities issued by other business entities Bonds issued by PetroVietnam Join stock Finance Corporation (PVFC) Bonds issued by Electricity of Vietnam 3,143,467 2,200,000 582,603 11,010 169,804 150,000 15,000 15,050 VNDm 3,139,986 2,200,000 579,138 11,010 169,788 150,000 15,000 15,050 VNDm 4,070,688 2,200,000 805,445 39,410 8,750 1,017,083 31/12/2007 Par value Carrying value VNDm 4,064,700 2,200,000 799,457 39,410 8,750 1,017,083 -
130,000 130,000 650,000 650,000 3,923,467
130,000 130,000 650,000 650,000 3,919,986
750,000 100,000 450,000 200,000 237,352 237,352 5,058,040
750,000 100,000 450,000 200,000 237,352 237,352 5,052,052
Special Government Bonds: These bonds have a term of 20 years commencing from 2002, 2003, 2004 and earn a fixed interest rate of 3.30% per annum, interests are received every anniversary date of the bonds. The Bank is not permitted to sell, transfer or discount these bonds within 5 years from the date of issuance. Interest income on Special Government Bonds is restricted to funding the increase of the Banks chartered capital in accordance with Circular 100/2002/TT-BTC dated 4 November 2002 by MOF, In 2008, the Bank received VNDm 72,600 of interest income on these bonds from the Government of Vietnam and used it to increase its chartered capital (see Note 22); Details of Special government bonds as at 31 December 2008 are as follows: Start date First issuance Second issuance Third issuance Fourth issuance 20/09/2002 04/06/2003 18/11/2003 21/12/2004 Maturity date 20/09/2022 04/06/2023 18/11/2023 21/12/2014 Interest rate (%/pa) 3.30 3.30 3.30 3.30 Face value VNDm 1,000,000 400,000 400,000 400,000
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11. 11.2
inVeStment SecuritieS (continued) Held-to-maturity securities (continued) Education Government Bonds were issued in 2 times: the first issuance was in 2003, yields interest at the rate of 8.00% per annum and matures in 2008. The second issuance was in 2005, earns interest at a rate of 8.20% per annum and matures in 2010. Interest income on Education Government Bonds will be paid once at maturity; Irrigation Bonds were issued in two times. The first issuance was in 2003 of which the bonds extend to maturity in 2008, bears interest of 8.50 % per annum. The second issuance took place in 2005 and shall come to maturity in 2010, yields after-maturity interest rate of 8.6% per annum and normal annual interest rate of 8.8%; Treasury bonds issued in 2006 are two-year or five-year term bonds that bear interest at rates of 8.6% per annum in which interest will be received on the maturity date of the bonds. Municipal bonds issued by Peoples Committee of Ho Chi Minh City are five-year term bonds which are issued in different times. These bonds earn interest at rate ranging from 8.35% to 9.55% per annum depending on each issuance. The Bank has ability and intention to hold these bonds to maturity; Bonds issued by Vietnam Bank for Agricultural and Rural Development: have five-year, ten-year and fifteen-year term and earn interest at the average rates of 8.56%, 9.8% per annum and 10.20% per annum in which interest is payable on annual anniversary. The Bank has ability and intention to hold these bonds to maturity. The Bank is holding Certificates of deposit issued by Vietnam Bank for Agricultural and Rural Development (VBARD) which yields annual interest at rates ranging from 9.12% to 9.24% in which interest is payable annually in-front. The Bank has ability and intention to hold these bonds to maturity; Bonds issued by the Electricity of Vietnam (EVN) have a term of 5 years with floating interest rate. The applied rates as at 31 December 2008 were 12.3% and 18.45%..
12.
lonG-term inVeStmentS 31/12/2008 VNDm 761,330 146,394 907,724 31/12/2007 VNDm 579,531 104,607 684,138
Investment in joint ventures Other long term investments
Movement of long term investments during 2008 is as follows: Investments in Other long term investments joint venture VNDm VNDm Balance as at 1 January 2008 579,531 104,607 Increase contributed capital 168,100 41,787 Share of gain/(loss) from associates and joint ventures 102,299 under equity method Difference from financial statement translation 33,295 Less: Dividends received for the year (71,515) Decrease in contributed capital (50,380) Balance as at 31 December 2008 761,330 146,394
Total 684,138 209,887 102,299 33,295 (71,515) (50,380) 907,724

67
12. 12.1
lonG-term inVeStmentS (continued) investment in joint ventures Details of the Banks investments in joint ventures as at 31 December are as follows:
31/12/2008 Cost in VNDm equiv. 516,356 516,356 Carrying value in VNDm 761,330 761,330 % owned by the Bank 50% 31/12/2007 Cost in VNDm equiv. 348,256 46,206 394,462 Carrying value in VNDm 529,553 49,978 579,531 % owned by the Bank 50% 50%
Cost in USD Indovina Joint venture Bank Asian Insurance JV Company 35,000,000 35,000,000
Cost in USD 25,000,000 3,000,000 28,000,000
Indovina Joint Venture Bank (Indovina Bank) was incorporated in Vietnam with its Head Office located in Ho Chi Minh City and is engaged in the provision of banking services. It is a joint venture between the Bank and Cathay United Bank, which is a bank incorporated in Taiwan. The joint venture was granted by the Banking License No 08/NH-GP dated 29 October 1992 issued by the State Bank of Vietnam for a period of 20 years with chartered capital of USD 25,000,000. From the establishment, charter capital of Indovina Bank has been increased several times under the approval of the State Bank of Vietnam, accordingly, the capital contributed by both parties concurrently increased while the ownership proportion remained unchanged. Details are as follow:
The Banks contribution (USD) 17,500,000 25,000,000 35,000,000 50,000,000
Time 1 2 3 4
Year 2006 2007 2008 2008
Share capital (USD) 35,000,000 50,000,000 70,000,000 100,000,000
Value (USD) 10,000,000 15,000,000 20,000,000 30,000,000
State Bank of Vietnams document of approval Official document 9024/NHNN-CNH dated 23 October 2006 Official document 9278/NHNN-CNH dated 24 August 2007 Official document 5807/NHNN-CNH dated 26 June 2008 Official document 10560/NHNN CNH dated 2 December 2008
Having got approval from the SBV for the 4th capital increase, on 31 December 2008, Vietinbank transferred USD 15,000,000 (50% of the total additional capital) to Indovina banks blocked account at the SBV transaction center. However, as at 31 December 2008, Indovina had not recognized the additional capital contribution of Vietinbank since by that date, they had yet to receive credit note from the SBVs transaction center regarding the amount. Only upon receiving official credit note on 5 January 2009, did Indovina record the capital transferred from Vietinbank. Accordingly, as at 31 December 2008, the amount of USD 15,000,000 (equivalent to VNDm 262,290) was accounted for by the Bank in other assets rather than investment in joint ventures. As at 31 December 2008, the Asian Insurance Joint Venture Company became the Banks subsidiary and renamed to Vietinbank Insurance Company (refers to note 3).
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Annual Report 2008
12. 12.2
lonG-term inVeStmentS (continued) long-term investments Details of long-term investments are as follows:
31/12/2008 % ownership of the Bank 31/12/2007
Par value Investment in credit institutions Gia Dinh Commercial Joint stock Bank Saigon Bank for Industrial and Trade Central Peoples credit fund Investment in business entities Vietnam National Financial Switching Company Ha Tien Cement Joint stock Company (*) 15,000 8,283 55,283 16,888 5,000
Cost VNDm
Present value VNDm
Par value
Cost VNDm
Present % ownervalue ship of the VNDm Bank
55,283 16,888 5,000
55,283 16,888 5,000
5,42% 1,69% 0,82%
55,283 7,588 5,000
55,283 7,588 5,000
55,283 7,588 5,000
5,42% 2,36% 4,47%
15,000 21,736 22,287 380 9,820
15,000 21,736 22,287 380 9,820
15,87% 0,94% 0,49% 9,09% -
15,000 8,283 91,154
15,000 21,736 -
15,000 21,736 -
15,87% 0,94% -
Phuoc Hoa rubber joint stock Company (*) 4,000 PCB investment joint stock Company VINARE joint stock Company 380 4,802
109,636 146,394 146,394
104,607 104,607
(*) At 31 December 2008, market price of Ha Tien Cement II and Phuoc Hoa Rubber company are lower than their book value. However, since Vietinbank is strategic investor of the two companies and is restricted from transferring these share within 3 years (from November 2007), the Bank did not make provision for these investments accordingly.

69
13. 13.1
fiXed aSSetS Tangible fixed assetsh Movements of tangible fixed asset categories during 2008 are as follows:: Buildings & construction materials VNDm Cost: As at 1 January 2008 Additions in the year Acquisitions Investment in constructions Other additions Decreases in the year Disposals Other decreases As at 31 December 2008 Accumulated depreciation: As at 1 January 2008 Charged in the year Other increases Decreases in the year As at 31 December 2008 Net book value: As at 1 January 2008 As at 31 December 2008 393,481 376,868 484,082 722,478 81,979 125,686 37,129 54,248 996,671 1,279,280 (11,411) 305,423 244,289 72,545 720,148 237,612 536 (34,669) 923,627 177,605 31,474 307 (9,682) 199,704 (5,350) 115,020 100,283 20,087 1,242,325 361,718 843 (61,112) 1,543,774 637,770 55,128 21,026 33,669 433 (10,607) (7,225) (3,382) 682,291 1,204,230 485,453 484,020 1,433 (43,578) (43,133) (445) 1,646,105 259,584 74,140 73,584 556 (8,334) (8,334) 325,390 137,412 36,817 36,453 364 (4,961) (4,358) (603) 169,268 2,238,996 651,538 615,083 33,669 2,786 (67,480) (63,050) (4,430) 2,823,054
Machines & equipments VNDm
Motor vehicles VNDm
Others VNDm
Tng triu ng
VietinBank
70

Annual Report 2008
13. 13.1
fiXed aSSetS (continued) Intangible fixed assets (continued) Movements in tangible fixed asset categories during 2007 are as follows: Buildings & construction Machines & materials equipment VNDm VNDm Cost: As at 1 January 2007 Additions in the year Acquisition Investment in constructions Other additions Decreases in the year Disposals Other decreases As at 31 December 2007 Accumulated depreciation: As at 1 January 2007 Charged in the year Decreases As at 31 December 2007 Net book value: As at 1 January 2007 As at 31 December 2007 371,991 393,481 467,403 484,082 81,952 81,979 37,542 37,129 958,888 996,671 213,915 35,332 (4,958) 244,289 537,366 197,585 (14,803) 720,148 163,544 22,291 (8,230) 177,605 85,136 18,497 (3,350) 100,283 999,961 273,705 (31,341) 1,242,325 585,906 56,822 2,397 54,425 (4,958) (4,958) 637,770 1,004,769 218,657 218,657 (19,196) (19,196) 1,204,230 245,496 22,318 21,638 680 (8,230) (8,230) 259,584 122,678 18,385 18,385 (3,651) (3,651) 137,412 1,958,849 316,182 261,077 54,425 680 (36,035) (36,035) 2,238,996
Motor vehicles VNDm
Others VNDm
Total VNDm

71
13. 13.2
fiXed aSSetS (continued) Intangible fixed assets (continued) Movements in intangible asset categories during 2008 are as follows: Land use right lease payment (*) VNDm Cost: As at 1 January 2008 Additions in the year Other increases Other disposals As at 31 December 2008 Accumulated depreciation : As at 1 January 2008 Charged to expense in the year Other increases Decreases As at 31 December 2008 Net book value As at 1 January 2008 As at 31 December 2008 424,944 174,225 242,178 43,172 49,007 128 106 217,525 716,235 424,944 424,944 8,172 26,556 34,728 83,340 13,892 (1,513) 95,719 605 52 16 673 92,117 465,444 16 (1,513) 556,064 849,888 849,888 182,397 94,509 276,906 126,512 23,282 (5,068) 144,726 733 30 16 779 309,642 967,709 16 (5,068) 1,272,299
Land use right VNDm
Accounting software VNDm
Others VNDm
Total VNDm
(*): In 2008, the Bank signed a land lease contract with Hanoi Nam Thang Long City Complex Development Company, accordingly, the lease time is from the land hand-over date to 29 December 2046, and the lease fee for the whole lease period is USD 56,361,400 (equivalent to VND 849,888 million), which was paid in full by the Bank in 2008. The Bank recorded the payment as intangible fixed asset and recognised 50% amortization charge based on the following analysis:
Circular
161/2007/TT-BTC providing guidance on implementing 16 Vietnamese accounting standards and Decision 15/2006/QD-BTC promulgating accounting regime for corporates: Cost of intangible fixed asset which is termed land use right: is either value of land use right when the lease fee is paid once in advance for many years and the certificate of land use right is granted to the lessee, or the amount settled on receiving legal land use right transfer, or land use right value as contributed capital; amortization period of intangible fixed assets is 20 years, based on which, the Bank decided to amortize 50% of the asset in 2008;
Paragraph 54, Vietnamese Accounting Standard No. 4 Intangible fixed assets prescribing maximum
The Banks financial capability and operating result of the year 2008 exceeded the target..
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72

Annual Report 2008
13. 13.2
fiXed aSSetS (continued) Intangible fixed assets (continued) Movements in intangible asset categories during 2007 are as follows: Other intangible assets VNDm
Land user right VNDm Cost: As at 1 January 2007 Increases during the year Disposals Other decreases As at 31 December 2007 Accumulated depreciation: As at 1 January 2007 Charged to expenses during the year Disposals As at 31 December 2007 Net book value: As at 1 January 2007 As at 31 December 2007 145,412 174,225 5,762 2,410 8,172 151,174 31,223 182,397
Accounting software VNDm
Total VNDm
113,187 26,556 (13,231) 126,512
944 140 (351) 733
265,305 57,919 (351) (13,231) 309,642
60,876 35,695 (13,231) 83,340
518 212 (125) 605
67,156 38,317 (13,356) 92,117
52,311 43,172
426 128
198,149 217,525
14.
otHer aSSetS 31/12/2008 VNDm Interest and fee receivables Construction in progress (Note 14.1) Receivables (Note 14.2) Purchases and major repair of fixed assets Other assets (Note 14.3) 2,416,172 236,479 312,279 436,499 618,278 4,019,707 31/12/2007 VNDm 1,659,447 175,060 220,964 146,955 304,669 2,507,095

73
14. 14.1
otHer aSSetS (continued) constructions in progress 31/12/2008 VNDm Constructions in progress Major constructions include: Ly Thuong Kiet construction project Construction of Head office Ba Dinh Branch Hoa Lac construction project Construction of Head office Que Vo Industrial zone Branch Construction of deputy director Tran Lam office Thai Binh Branch Construction of Head office Bien Hoa Industrial zone Branch Construction of office and warehouse Thanh Xuan Branch Van Canh construction project, Ha Tay Construction of Head office Binh Dinh Branch Construction of office and warehouse Ha Nam Branch Construction of office and warehouse Phu Bai Branch Construction of Head office Ben Tre Branch Construction of office and warehouse Hai Duong Industrial zone Branch Construction project 10 Le Lai Other constructions 42,964 16,632 16,419 7,107 3,648 11,171 41,733 13,209 2,412 9,389 2,330 7,083 4,504 5,677 52,201 236,479 12,419 6,576 2,213 8,169 16,118 471 7,317 63 6,564 2,231 31,238 81,681 175,060 31/12/2007 VNDm
14.2
receivables 31/12/2008 VNDm Advance for office rental at Nguyen Trai branch Advance for purchasing of land use right at Cua Dai branch using bonus and welfare funds Receivable from SBV in clearing settlement Receivable from card issuers Advance for purchasing of land use right at Cua Dai branch using bonus and welfare funds Receivables from State budget Advance for equitization consultancy fee Receivables from debts trading activities Advances for other operating activities Receivables from selling of foreclosed assets Receivables relating to securities activities Other receivables Less: Provision for un-collected receivables 41,000 37,181 38,060 19,818 13,919 25,473 14,038 35,851 20,347 5,177 62,415 (1,000) 312,279 31/12/2007 VNDm 41,000 39,291 13,034 15,430 27,128 41,445 43,636 220,964
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Annual Report 2008
14. 14.3
otHer aSSetS (continued) other assets 31/12/2008 VNDm Investment in financial leasing assets Materials and equipments Prepaid land lease and house rental expense Prepaid interest expense Others (*) 248,810 20,237 61,238 16,217 271,776 618,278 31/12/2007 VNDm 228,514 19,037 46,688 7,903 2,527 304,669
(*): The amount includes the advance of USD 15,000,000 (VND 262.290 million equivalent) to Indovina Joint venture Bank as at 31 December 2008 (see note 12.1)
15.
BorroWinGS from tHe SBV and tHe mof 31/12/2008 VNDm 1. Borrowings from SBV Special borrowings to support victims of natural disasters (Storm 5 in 2003) Borrowings for Banking and Settlement System Modernization Project Borrowings for re-lending to settle debts of SOEs Valuable papers borrowings 2. Current accounts held by the State Treasury In VND In USD 665,686 769,677 321,385 712,745 60,444 43,547 53,928 65,021 54,411 218,000 31/12/2007 VNDm
Borrowings denominated in foreign currencies to implement the Banking Modernization and Settlement System Project are loans from SBV to settle for the Banks Information Technology System. These borrowings shall mature in 20 years and bear annual interest at rates ranging from 4.31% to 6.81% (equivalent LIBOR 6 months + 1.50% per annum + 0.2% per annum (charged for service fee); Borrowings for re-lending to settle debts of SOEs were funded from SBV with an aim to settle long outstanding debts among state owned enterprises, in line with the program of clearing loans owed to a SOE. These are non-interest bearing borrowings.

75
16.
depoSitS and BorroWinGS from otHer BankS 31/12/2007 Reclassified VNDm 1,094,289 4,165,622 5,259,911
Current accounts held by other banks Term deposits and borrowings from other banks
31/12/2008 VNDm 1,968,678 6,856,032 8,824,710
16.1
current accounts held by other banks 31/12/2007 Reclassified VNDm 1,003,659 87,340 3,290 1,094,289
Current accounts from other local credit institutions in VND Current accounts from other local credit institutions in FC Current accounts from overseas credit institutions in VND Current accounts from overseas credit institutions in FC
31/12/2008 VNDm 1,763,639 186,331 17,397 1,311 1,968,678
16.2
term deposits and borrowings from other banks 31/12/2007 Reclassified VNDm 2,170,000 306,166 -
31/12/2008 VNDm Term deposits and borrowings from other banks less than three months Term deposits from other local credit institutions in VND Term deposits from other local credit institutions in FC Term deposits from overseas credit institutions in VND Borrowings from other local credit institutions in VND Term deposits and borrowings from other banks over three months Term deposits from other local credit institutions in VND Term deposits from other local credit institutions in FC Borrowings from other local credit institutions in VND Borrowings from other local credit institutions in FC Borrowings from other oversea credit institutions in FC 3,010,802 455,054 50,000 250,000
1,232,900 478,900 1,378,376 6,856,032 2008 Interest rate %/ year From 2.00 to 17.00 From 2.00 to 4.00 13.00 N/A N/A From 2.8 to 5.6
1,310,000 64,456 315,000 4,165,622 2007 Interest rate %/ year From 3.60 to 9.60 From 4.15 to 5.60 N/A From 0.50 to 4.75 From 3.80 to 13.20 From 2.70 to 6.10
Term deposits from other local credit institutions in VND Term deposits from other local credit institutions in FC Borrowings from other oversea credit institutions in VND Borrowings from other oversea credit institutions in FC Borrowings from other local credit institutions in VND Borrowings from other local credit institutions in FC N/A: Not applicable
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76

Annual Report 2008
17. 17.1
cuStomer depoSitS and otHer amountS due to cuStomerS Balances by types of deposits 31/12/2007 Reclassified VNDm 25,270,678 557,426 3,219,531 39,426
31/12/2008 VNDm Demand deposits Demand deposits in VND Demand saving deposits in VND Demand deposits in foreign currencies Demand saving deposits in foreign currencies Term deposits Term deposits in VND Term saving deposits in VND Term deposits in foreign currencies Term saving deposits in foreign currencies Deposits for specific purpose Deposits for specific purpose in VND Deposits for specific purpose in foreign currencies Money transfer payables Money transfer in VND Money transfer in foreign currencies Other amounts due to customers Other cash managed and kept on behalf of customers Other amounts due to customers Margin deposits Margin deposits in VND Margin deposits in foreign currencies 2,085,590 739,004 121,634,466 254,443 950 60,930 38,537 270,352 111,421 22,866,272 49,513,818 6,280,258 13,698,769 22,819,421 185,771 2,689,947 18,983
26,715,367 38,957,974 2,121,006 11,833,600
304,032 58,151
116,790 17,695
612,624 1,630
1,601,637 998,247 112,425,814

77
17. 17.1
cuStomer depoSitS and otHer amountS due to cuStomerS (continued) Balances by types of deposits (continued) 2008 interest %/year Demand deposits in VND Demand saving deposits in VND Demand deposits in foreign currencies Demand saving deposits in foreign currencies Term deposits in VND Term saving deposits in VND Term deposits in foreign currencies Term saving deposits in foreign currencies Certificates of deposit in VND Certificates of deposit in foreign currencies 2.4 to 4.5 3 to 4.5 0.5 to 1.25 1 to 1.25 4.8 to 17 6 to 15.5 2.1 to 16 2 to 16 1.5 to 17.9 5 to 6 2007 interest %/year 3 3 1.25 1.25 6.00 to 8.40 5.40 to 8.40 1.50 to 5.00 1.50 to 4.87 3 1.25 to 5.50
17.2
analysis of customer deposit portfolio by types of customers 31/12/2007 Reclassified VNDm 55,082,996 43,801,563 8,486,173 2,795,260 54,591,107 2,751,711 112,425,814
Deposits from business entities - State-owned enterprises - Private enterprises and others - Foreign invested enterprises Deposits from individuals Deposits from others
31/12/2008 VNDm 46,841,216 35,528,362 7,952,485 3,360,369 67,669,985 7,123,265 121,634,466
18.
deBtS iSSued and otHer BorroWed fundS 31/12/2007 Reclassified VNDm 15,805,152 12,449,631 131,245 625,989 284,006 29,296,023
31/12/2008 VNDm Funds received from State Treasury Funds received from other organizations in VND Funds received from other organizations in USD Funds received from international organizations in VND Funds received from international organizations in USD 17,158,653 20,578,580 1,500,538 679,721 300,214 40,217,706
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Annual Report 2008
18. 18.1
deBtS iSSued and otHer BorroWed fundS (continued) funds received from State treasury Funds received from State Treasury bears interest at rate of 4.80% per annum for deposits less than of VNDm 2,000,000 and 2.4% for the deposits more than that limit. funds received from other organizations in Vnd Details of funds received from other organizations as at 31 December 2008 are as follows: Term (year) Current 1 year 1 5 years 1 5 years 3 months 6 - 12 months Current and 1 12 months Current 1 month 6- 12 months 1 month Current 12 months less than 1 month less than 1 month 1 5 years 31/12/2008 VNDm 4,114 5,681,391 9,733,000 925,000 1,190,009 385,000 374,011 324,761 300,000 256,000 125,000 111,800 100,000 159,894 45,000 863,600 20,578,580 14.0 to 17.0 8.50 to 9.45 3.00 9.20 to 9.70 18.5 8.3 3.00 17.0 7.6 to 9.5 8.0 1.4 to 16.8 Interest rate (%/year) 3.00 8.00 to 16.00 8.4 to 16.8 1.38 to 17.5
18.2
Organizations State Capital Investment Corporation State Capital Investment Corporation Vietnam Social Insurance Company Vietnam Deposit Insurance Company Financial foreign affairs Department Ministry of Finance Southern Airports Corporation Financial Post joint stock company Financial Coal and Mineral limited Company Handico Financial Joint stock Company Bao Viet Corporation Industrial Development Company Ho Chi Minh stock exchange Petro Vietnam Joint stock Company Sai Gon Securities Petrolimex Group Commercial Joint stock Bank Others
18.3
funds received from other organizations in uSd Term (year) 3 months 1 - 3 months 6 - 12 months 3 months Current, 1 - 12 months 31/12/2008 VNDm 529,168 220,701 577,877 93,374 79,418 1,500,538 Funds received from the above organizations (Note 18.1, 18.2 and 18.3) are under trusted contracts and are recognized as funds received from other organizations in accordance with official correspondent 729/CV KTTC2 dated 31 May 2002 of the SBV. Interest rate (%/year) 2.2 to 4.0 3.6 to 4.0 4.8 to 6.8 3.0 1.0 to 5.0
Organizations Financial foreign affairs Departments Ministry of Finance Hanoi Assets Management Company Southern Airports Corporation Saigon Tourism Company Others

79
18. 18.4
deBtS iSSued and otHer BorroWed fundS (continued) funds received from international organizations 31/12/2008 VNDm 143,734 104,110 429,832 2,045 679,721 In foreign currency Funds received from Deutsche Investitions und Entwicklunggsesellschaft mbH (DEG ) Funds received from program BLTK&HQNL Total 271,353 28,861 300,214 979,935 267,892 16,114 284,006 909,995 31/12/2007 VNDm 146,050 123,305 354,567 2,067 625,989
Organizations In VND Funds received from Kreditanstalt Fur Wiederaufbau (KFW) Funds received from European Commission -Project Small and Medium Enterprise Development Fund (SMEDEF) Funds received from Japan Bank of International Corporation (JBIC) Funds received from European Commission International Program for Vietnamese Asylum Seekers (ECIF)
Funds received from international organizations are primarily those received under the framework of Official Development Assistance program, detailed information are as follows: Grace period (year) 10 12 1 10 interest (%/per annum) 4,8 4,8 n 15 8,98 1 n 1,25 8,4 -
Organizations KFW JIBIC SMEDF BL TK&HQNL DEG ECIP
Value date 2001 1999 1998 2007 2003 -
Period (year) 40 <10 1 n 7 5 40 -
2008 VNDm 143.734 429.832 104.110 28.861 271.353 2.045 979.935
2007 VNDm 146.050 354.567 123.305 16.114 267.892 2.067 909.995
interest (%/ per annum) 0,75 4,80 n 6,36 6,28 1,25 0,75 -
Funds received from ECIP are under a sponsorship program established by the European Community, initially worth USD 6,500,000, with an aim to support Vietnamese repatriates. The Bank receives management and training fees and bears no credit risk relating to the re-lending of funds.
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Annual Report 2008
19.
ValuaBle paperS iSSued 31/12/2008 VNDm Certificates of deposits Term under 12 months Term from 12 months to 5 years Term over 5 years Bills Term under 12 months Term from 12 months to 5 years Term over 5 years Bonds Term under 12 months Term from 12 months to 5 years Term over 5 years 251 3,459,121 1,390 3,672,024 3,255,526 188 119,914 6 203,156 3,550,714 31/12/2007 VNDm
20.
otHer liaBilitieS 31/12/2007 Reclassified VNDm 1,832,736 2,106,755 160,428 4,099,919
31/12/2008 VNDm Interest payables Other payables and other liabilities Provision for contingent liabilities and off-balance sheet commitments 3,064,924 3,094,646 188,948 6,348,518 20.1 interest payables 31/12/2008 VNDm Accrued interest expenses Other interest payables 2,747,884 317,040 3,064,924
31/12/2007 VNDm 1,780,653 52,083 1,832,736

81
20. 20.2
otHer liaBilitieS (continued) other payables and other liabilities 31/12/2007 Reclassified VNDm 624,140 547,404 179,268 138,340 383 69,053 66,180 34,050 19,097 11,000 6,502 7,428 84,962 15,895 6,124 296,929 2,106,755
31/12/2008 VNDm Payable to employees Interest received in advance from financial instruments pending allocation Enterprise income tax payables Payable to the SBV from recovery of written-off bad debts Payables for leasing and selling foreclosed assets Payables to SBV in clearing settlement Payables to constructors Pending interest income arising from funds provided by the SBV to support the restructuring of loans to SOEs Payable relating to financial lease activities Termination allowance reserve Trade Union fee payable Payable to bonds issuing institutions Value added tax payable Payables to customers relating security activities Payables to Deposit insurance Payables to ATM Bank Net Proceed from land selling pending resolution (*) Other tax payables Other payables Others 1,244,719 555,016 440,331 154,343 57,303 49,009 5,406 16,113 35,069 25,247 13,906 75,709 20,072 17,433 45,783 32,073 39,616 267,498 3,094,646
(*) This is the receipt from transfer of land located at 138 Dinh Tien Hoang, Ward No. 1, Binh Thanh District, HCM city to Saigon Commercial Joint Stock Bank. Under the Prime Ministers Decision No. 1145/TTG-CN, the Bank is allowed to use the amount to increase its chartered capital, however, as at 31 December 2008, the Bank still recorded it in other liabilities due to incomplete transferring procedures.
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Annual Report 2008
21.
oBliGationS to tHe State BudGet of tHe Bank Movement during the year Balance as at 1 Jan 2008 VNDm Value added tax Enterprise income tax In which The Bank Vietinbank Securities Company Vietinbank Leasing Other taxes 158,641 18,015 2,612 6,124 192,820 623,518 67 8,339 83,375 811,283 5,593 1,792 7,385 (349,052) (19,103) (9,320) (59,218) (526,199) 438,700 (1,021) 1,631 32,073 485,289 7,428 179,268 AdjustPayable of ments to tax the year finalization VNDm VNDm 95,984 631,924 5,593 Balance as at 31 Dec 2008 VNDm 13,906 439,310
Paid VNDm (89,506) (377,475)
The Bank has obligation to pay Enterprise Income Tax (EIT) at the rate of 28% of taxable profits. The Banks tax reports are subject to examination by the tax authorities. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities. Current enterprise income tax payables are determined based on taxable income of the current year. Taxable income is different from the one reported in the consolidated income statement because taxable income excludes taxed income and deducted expenses over years due to the difference between Vietinbanks accounting policies and current tax regulations, and items which are exempted from tax or undiscounted for tax calculation. Current EIT payable of the Bank is calculated using margin tax rates applicable to the end of the fiscal year.

83
21.
oBliGationS to tHe State BudGet of tHe Bank (continued) 31/12/2008 VNDm Profit before tax Less Dividend income exempted from EIT Income from Government Education Bonds exempted from EIT Profit of subsidiaries Share of profits from equity investments in joint ventures Income from re-evaluation of exchange rate differences and derivatives instruments not subject to EIT Plus EIT expense of the Bank Net income from disposal of investment in Vietnam International leasing company VLIC Taxable income of the Bank EIT expense of the Bank EIT expense of subsidiaries Total EIT in fiscal year Adjustment in accordance with Tax Finalization of 2007 EIT payables at the beginning of the year EIT paid during the year The Bank Vietinbank Leasing Vietinbank Securities Company EIT payable at the end of year In which: EIT payables Advanced EIT 440,331 (1,021) 179,268 6,460 2,226,849 623,518 8,406 631,924 5,593 179,268 (377,475) (349,052) (9,320) (19,103) 439,310 8,646 1,273,030 356,448 23,195 379,643 62,066 (262,441) (248,083) (4,798) (9,560) 179,268 (19,998) (47,809) (39,710) (102,299) (6,183) (60,478) (121,421) (82,802) 2,436,388 31/12/2007 VNDm 1,529,085
21.2
deferred income tax No deferred tax was recognized in the year since there was no material temporary difference between carrying value and tax base of assets and liabilities in the consolidated financial statements.
22. 22.1
oWnerS eQuity and reSerVeS changes in owners equity Total capital of the Bank represents capital contributions received by the Bank from the Ministry of Finance or the State Bank of Vietnam in the form of cash, Special Government Bonds and other assets. Capital is also transferred from supplementary capital and other reserves, which are normally created from the profits after tax of the Bank in accordance with the regulations of the State Bank of Vietnam. In addition, interest income received from Special Government Bonds are also directly charged to the chartered capital account in accordance with Circular 100/2002/TT-BTC dated 4 November 2002 issued by the Ministry of Finance.
22.
Annual Report 2008 84
oWnerS eQuity and reSerVeS (continued)
VietinBank
22.1 Reserves of the Bank
changes in owners equity (continued) Changes in the Banks capital during 2008 are detailed below:
Ch tiu 297,065 66,472 1,324,403 341,051 149,575 605,673 61,585
Chartered capital VNDm 192,062
Capital to purchase fixed assets VNDm Other capital VNDm Business & Financial development fund reserve VNDm VNDm Bonus and welfare fund VNDm Total VNDm
Capital supplementary reserve VNDm
Financial statements translation Retained earnings reserve VNDm VNDm
Opening balance
7,608,643
10,646,529
Capital increase from Special government Bonds interest received 72,600 -
72,600
Capital increasel according to decision 37/Q/NHNN -07 35,925 (10,646) 10,646 (3,121) 11,748 1,156 28,943 837,501 148,147 74,297 608 3,121 691,643 (1,348) -
1,804,464 (1,780,531) (12,164) 33,295 -
35,925 1,804,464 33,295
Net profit of the year
Increase from retained earnings
Additional creation of reserves for prior year
Reserves reclassification
Increase from reevaluation
Decrease of interest income subsidization from the MOF -
(6,331)
(6,331)
Additional Tax expense from Tax Finalization of 2007 286,419 106,061
2,170,531
(123) 490,231
227,601
(236,998) 1,058,970
94,880
(8,294) (4,908) 184,298
(8,294) (237,121) (4,908) 12,336,159
Utilization of reserves
Other decreases
Closing balance
7,717,168

85
22. 22.1
oWnerS eQuity and reSerVeS (continued) changes in owners equity (continued) Detailed increase of the Banks chartered capital in 2008 is as follows: Date 19 June 2008 19 October 2008 21 November 2008 23 December 2008 23 December 2008 37/QD/ NHNN Decree VNDm Description
13,200 Increase capital from receipts of interest income on SGB - series 1 33,000 Increase capital from receipts of interest income on SGB - series 2 13,200 Increase capital from receipts of interest income on SGB - series 3 13,200 Increase capital from receipts of interest income on SGB - series 4 35,925 Increase charted capital in accordance with decision QD37/ NHNN dated 05 December /2008 108,525
22.2
Statutory reserves of the bank On 23 November 2005, the Government issued Decree No, 146/2005/ND-CP regarding the financial management regime of credit institutions which was effective from 16 December 2005. Accordingly, state-owned commercial banks are required to make the following allocations of profit after tax to create statutory reserves: Annual allocation from the profit after tax Supplementary capital reserve 5% of the profit after tax Maximum balance Chartered capital
The following reserves are calculated based on the profit after tax, and after deducting the allocation to the supplementary capital reserve and the utilization to compensate prior years losses which are out of time to be deducted into profit before enterprise income tax. Financial risk reserve Business and development reserve Bonus and welfare funds 10% of remaining profits 50% of remaining profits 25% chartered capital Not applicable
3 months salary if current years profit margin Not applicable is not lower than previous years and 2 months salary if current years profit margin is lower than previous years Remaining profit Not applicable
Business development reserve
Utilization of statutory reserves is in accordance Decision 146. 22.3 Statutory reserves of subsidiaries Statutory reserves of the securities company According to Circular 11/2000/TT-BTC dated 1 February 2000 issued by the Ministry of Finance, securities companies are required to make the following allocations of profit after tax to create statutory reserves:
VietinBank
86

as at and for the year ended 31 December 2008 22. 22.3 oWnerS eQuity and reSerVeS (continued) Statutory reserves of subsidiaries (continued) Annual allocation from the profit after tax Supplementary capital reserve Financial reserve 5% of the profit after tax 5% of the profit after tax Maximum balance 10% chartered capital 10% chartered capital
Annual Report 2008
The allocations of profit after tax to create statutory reserves are made in the following year, after approved by the parent company Vietinbank. For the purpose of equitization, under equitization plan, Vietinbank Securities Company re-evaluated the business value as at 31 December 2007 in accordance with decision 155/QD/HDQT-NHCT26 dated 14th April 2008 issued by the management board of Vietinbank. Total asset increase resulted from asset re-evaluation is VND 61,101 million, of which good will amounting to VND 45,218 million is recognized in financial statements as at 31 December 2008.
23.
intereSt and Similar income 2008 VNDm Interest income from deposits to other credit institutions Interest income from loans to customers Interest income from financial leasing Interest income from securities investment Interest income from other activities 1,345,944 17,033,232 123,597 2,559,062 1,052 21,062,887 2007 VNDm 1,148,442 9,349,935 80,627 1,977,649 212,627 12,769,280 2007 VNDm 6,617,578 823,317 525,744 48 119,203 8,085,890 2007 VNDm 183,973 65,300 5,444 182,939 437,656 (14,603) (34,850) (53,456) (102,909) 334,747
24.
intereSt and Similar eXpenSe 2008 VNDm Interest and similar expense from deposits Interest and similar expense from borrowings Interest expense from valuable papers Interest expense from financial leasing Expense from other credit activities 11,374,218 2,012,921 476,840 1 9,476 13,873,456
25.
net fee and commiSSion income 2008 VNDm Fees and commission income from Settlement services Treasury activities Agent services Other fees and commissions Fees and commission expense from Settlement services Treasury activities Other fees and commissions Net fee and commission income (23,522) (52,449) (74,234) (150,205) 437,985 239,766 122,235 9,108 217,081 588,190

as at and for the year ended 31 December 2008 26. net Gain from dealinG in foreiGn currencieS 2008 VNDm Income from dealing in foreign currencies Income from foreign exchange spot rate differences Income from dealing in gold Income from monetary derivative financial instruments Expense from dealing in foreign currencies Expense from foreign spot rate differences Expense from dealing in gold Expense from monetary derivative financial instruments Net gain from dealing in foreign currencies (136,102) (194,806) 290,046 (22,123) (10,720) 64,087 546,190 74,764 92,674 4,256 2007 VNDm
87
27.
net Gain / loSS from SecuritieS tradinG 2008 VNDm Income from trading of investment securities Expense from trading of investment securities - In which: Provision for impairment of investment securities 104,733 (127,520) (38,596) (22,787) 2007 VNDm 139,623 (68,249) (169) 71,374
28.
net SHare of profit in aSSociateS and Joint VentureS and diVidend income 2008 VNDm Profit of subsidiaries From equity trading securities Profit of the Bank From other long-term investments Share of profit in associates and joint ventures under equity method (See note 12.1), in which: Indovina Joint venture Bank Asian Insurance Joint venture Company (before the Bank repurchases) 19,998 102,299 101,897 402 135,099 82,802 82,802 88,247 12,802 5,445 2007 VNDm
VietinBank
88

Annual Report 2008
29.
net Gain from otHer operatinG actiVitieS 2008 VNDm Incomes from other operating activities Recovery of bad debts written off Income from debt trading activities Income from assets disposal Other gains Expenses for other operating activities Expense for other derivative financial instruments Other operating expenses Net other operating income 664,479 1,406,835 647,722 3,090 13,667 664,479 1,345,623 43,138 1,414 16,660 1,406,835 2007 VNDm
30.
otHer operatinG eXpenSeS 2008 VNDm Taxes and fees expenses Materials for banking activities Business trip expenses Training expenses Research and development expenses Telecommunication expenses Publication, marketing, promotion and reception expenses General administration expenses Asset repair and maintenance expenses Tool and equipment expenses Asset insurance expenses Office rental Insurance for customer deposits Other operating expenses 64,216 93,130 57,206 24,070 37,938 31,725 110,060 399,947 131,526 64,351 5,255 72,811 71,549 19,720 1,183,504 2007 VNDm 18,606 69,164 43,252 23,734 11,665 27,974 65,047 277,466 93,171 53,307 4,571 48,870 62,072 35,917 834,816

89
31.
caSH and caSH eQuiValentS Cash and cash equivalents included in the consolidated statement of cash flows comprise the following amounts: 31/12/2008 VNDm Cash and cash equivalents Balances with the State Bank of Vietnam Placements with other banks Term deposits with and loans to other banks under three months Investment securities under three months 1,980,016 6,010,724 6,038,534 11,580,315 6,503,226 32,112,815 31/12/2007 Reclassified VNDm 1,743,604 8,496,135 4,829,941 6,280,645 2,076,064 23,426,389
32.
employeeS remuneration Actual incurred in 2008 VNDm I. II. Total number of employees (person) Employees income (VNDm) 1. Total salary 2. Allowance for lunch 3. Total income (1+2) 4. Monthly salary 5. Monthly income 2,747,653 69,781 2,817,434 13,53 13,87 1,462,200 65,986 1,528,186 7,11 7,43 16,923 Actual incurred in 2007 VNDm 17,147
33.
collateralS and mortaGeS Book value 31/12/2008 VNDm Real estate properties Movable assets Valuable papers Other assets 135,827,042 58,755,351 15,884,182 18,536,950 229,003,525 31/12/2007 VNDm 117,266,861 44,273,088 7,294,981 15,876,050 184,710,980
VietinBank
90

as at and for the year ended 31 December 2008 34. contiGent liaBilitieS and commitmentS In normal course of business, the Bank is a party to financial instruments which are recorded as off-balance sheet items. These financial instruments mainly comprise financial guarantees and commercial letters of credit. These instruments involve elements of credit risk in excess of the amounts recognized in the balance sheet. Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party to a financial instrument fails to perform in accordance with the terms of the contract. Financial guarantees are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party including guarantee for borrowings, settlement, performing contracts and bidding, The credit risk involved in issuing guarantees is essentially the same as that involved in extending facilities to other customers. ommercial at sight letters of credit represent a financing transaction by the Bank to its customer where the C customer is usually the buyer/importer of goods and the beneficiary is typically the seller/exporter. Credit risk is limited as the merchandise shipped serves as collateral for the transaction. Deferred payment letters of credits represent the amounts at risk should the contract be fully drawn upon and the client defaults in repayment to the beneficiary. Deferred payment letters of credit that were defaulted by clients are recognized by the Bank as granting of a compulsory loan with a corresponding liability representing the financial obligation of the Bank to pay the beneficiaries and to fulfill the guarantor obligation. he Bank requires margin deposits to support credit-related financial instruments when it is deemed necessary. T The margin deposit required varies from nil to 100% of the value of a commitment granted, depending on the creditworthiness of clients as assessed by the Bank. The outstanding commitments and contingent liabilities as at 31 December are as follows: 31/12/2008 VNDm Contingencies Financial letter of guarantees At sight letters of credit Deferred payment letters of credit 8,050,418 7,630,647 251,863 15,932,928 35. related party tranSactionS Related party transactions include all transactions undertaken with other parties to which the Bank is related, A party is related to the Bank if: (a) directly, or indirectly through one or more intermediaries, the party::

Annual Report 2008
31/12/2007 VNDm 6,082,241 12,251,065 1,744,579 20,077,885
controls, is controlled by, or is under common control with, the Bank (this includes parents, subsidiaries and fellow subsidiaries); has an interest in the Bank that gives it significant influence over the Bank; or; has joint control over the Bank.

as at and for the year ended 31 December 2008 35. related party tranSactionS (continued) (b) the party is a joint venture in which the Bank is a venturer (see VAS 8Interests in Joint Ventures); (c) the party is a member of the key management personnel of the Bank or its parent; (d) the party is a close member of the family of any individual referred to in (a) or (c); (e) the party is a Bank that is controlled, jointly controlled or significantly influenced by, or of which, significant voting power in such Bank resides with, directly or indirectly, any individual referred to in (c) or (d). Significant transactions with related parties in the year 2008 are as follows: Related party The SBV The SBV The MOF The MOF Indovina JV Bank Relationship Direct controller Direct controller Direct owner Direct owner Investee Transactions Decrease in settlement deposit Compulsory investment in treasury bills Deposits for specific purposes Receipts of interest income from Special Government bonds Demand deposit VNDm 2,483,526 3,000,000 3,347 72,600 6,948
91
Amount due to and due from related parties as at 31 December 2008 are as follows:: Related party The SBV The MOF The MOF Indovina JV Bank Relationship Direct controller Direct controller Direct controller Investee Transactions Settlement deposits Deposits for specific purposes Term deposit Deposits Receivable VNDm 6,010,723 364 Payable VNDm (13,401) (417,283) (1,817)
Chi tit giao dch ln vi cc bn lin quan trong nm 2007 nh sau: Related party The SBV The SBV The MOF The MOF The MOF The MOF Indovina JV Bank Relationship Direct controller Direct controller Direct controller Direct owner Direct owner Direct owner Investee Transactions Net increase in deposits for settlement and compulsory reserves Borrowings from SBV Specific deposits of the MOF Increase in term deposit Receipts of interest income from Special Government bonds Interest rate supported Deposits VNDm 2,875,823 391,360 1,420 72,600 7,249 48,457
VietinBank
92

Annual Report 2008
35.
related party tranSactionS (continued) Amount due to and due from related parties as at 31 December 2007 are as follows: Related party The SBV The SBV The SBV The MOF The MOF Indovina JV Bank Relationship Direct controller Direct controller Direct controller Direct controller Direct owner Investee Transactions Net increase in deposits for settlement and compulsory reserves Net decrease in borrowings Borrowings Specific deposits Interest rates supported Deposits Receivable VNDm 8,496,135 16,047 235 Payable VNDm (120,563) (65,021) (12,477) -
36.
currency riSkS Currency risk is the risk that values of financial instruments fluctuates due to changes in foreign exchange rate. As the Bank was incorporated and operates in Vietnam, its reporting currency is Vietnam dong (VND), which is also the major currency in which the Bank transacts. The Banks loans and advances were mainly denominated in VND with the remainder mainly in US dollar (USD). Nonetheless, some of the Banks other assets are in currencies other than VND and USD. To better manage currency risks, quarterly, Alco Planning and Supporting Department analyses and projects cash-in and cash-out flow and proposes fund planning plan for each type of currency (mainly VND, USD and EUR equivalent) to the Banks Board of Management) based on actual cash flows and growth target registered by business units. The plan determines limits, fund growth rate and fund utilization for the whole bank as well as each branch. It is managed based on daily outstanding balance in accordance with guidance to ensure the safety and effectiveness of the whole system. The Bank establishes the policy that centralizes the management of whole banks foreign currency position at Head office, and that prescribes daily foreign currency position to each branch and overall position of the whole bank so that the daily foreign currency position of the whole bank is reasonable, safe as well as compliant with the requirements of the State Bank of Vietnam. Beside the fund planning and foreign currency position management, the Bank also centralizes the foreign currency trading activities with other credit institutions at Head office, builds up limits for international transactions as well as enters into derivatives such as swaps and forward contracts to minimize foreign currency risks. During 2008, significant fluctuation in local currency exchange rate against USD has impacted remarkably on the Banks balance between local currency and foreign currencies denominated capital, especially USD denominated capital source. In May 2008, Vietinbank experienced the surplus in USD denominated capital while having deficit in VND denominated capital. In order to raise sufficient VND funds to meet the economys growing credit demand as well as lending demand for purchasing foods for export and import necessities of gasoline, medicines and fertilizers, etc, the Bank asked for approval of SBV to use swap contract, accordingly, the Bank swapped USD 300 million for VND equivalent capital in July and August in 2008.
36. EUR equivalent VNDm VNDm

1,517,305 4,619,923 12,209,334 796,927 86,810 98,799,147 40,922,185 907,724 1,995,515 1,899,362 163,754,232 5,911,166 97,174,253 38,416,954 3,172,819 3,771,659 1 29,492,457 (1,775,352) 12,325,400 10,550,048 12,336,158 160,783,009 2,971,223 356,158 3,327,381 1,572,727 1,658,835 478,930 478,930 1,179,905 1,179,905 83,649 2,459 1,980,016 6,010,724 18,273,849 796,927 86,810 120,752,073 40,959,079 907,724 1,995,515 4,019,707 195,782,424 271,353 2,229,505 146,155 2,647,013 5,239 3,251,370 3,256,609 286,302 2,241,756 1,800,752 22,230,708 2,932,938 9,594,387 121,634,466 40,217,706 3,459,121 6,159,570 12,336,159 193,401,409 2,381,015 15,932,928 18,313,943 98,363 862,320 1,563,216 128,353 2,652,252 27,717,105 1,991,992 36,894 18,816,983 5,202,195 1,307,152 361,889
currency riSkS (continued) USD equivalent VNDm Other currency VNDm Total VNDm
Assets
Cash and cash equivalents
Balances with the SBV
Placements with and loans to financial institutions (*)
Trading securities (*)
Derivatives and other financial assets
Loans to customers (*)
Investment securities (*)
Long term investments (*)
Fixed assets and investment real estates
Other assets
Total assets
Liabilities and owners equity
Deposits and borrowings from other banks (including SBV)
Customers deposits and other amounts due to customers
Debts issued and other borrowed funds
Issuing valuable papers
Other liabilities (*)
Owners equity
Total liabilities and owners equity
Balance sheet currency position
Off-balance sheet currency position
Total currency position
(*) These items do not include provision.
93
VietinBank
94

Annual Report 2008
37.
liQuidity riSkS The maturity of monetary assets and liabilities represents the remaining terms of these assets and liabilities from the balance sheet date to the maturity date according to the underlying contractual agreements or terms of issuance. The following assumptions and conditions have been adopted in the preparation of the Banks maturity analysis:
Balance with the State Bank of Vietnam is considered as current, this includes the compulsory reserves, which is dependent upon the composition and maturity of the Banks customer deposits. ; The maturity of investment securities is based on redemption dates established by the issuer of these financial instruments. The maturities of amounts due from other banks and loans and advances to customers are based on the contractual maturity date. The actual maturity sometimes varies from contractual term when the contract is extended. In addition, loans and advances to customers are shown as net of provisions for impairment loss. The maturity of equity investments is considered to be over one year as equity investments have no stated maturity. Amounts due to other banks and owed to customers are determined based on either the nature of the amount or the maturity of their contractual agreements. For example, Vostro accounts and current accounts paid upon customers demand are considered to be current. The maturity of term deposits is based on their contractual maturity date. In practice, such items may be rolled over and maintained for longer periods without withdrawal or repayment.
Up to 31 December 2008, as the Bank has not set up asset/ liability management committee, liquidity risk is managed by Alco Planning and Supporting department and Investment department. Alco planning and supporting department analyses and projects flow of cash-in, cash-out in accordance with fund planning and balancing plan, which is approved quarterly and annually; and provides decisions on available fund management based on monthly, quarterly and annually movement of the Banks capital and its expected utilization. Based on the projection of available capital movement, Investment Department creates the Banks liquidity buffer through purchasing highly liquid valuable papers, which could be converted into cash through secondary market. Investment Department might decide to either sell back valuable papers to SBV in open market, or to borrow to replenish working capitals deficiency to ensure liquidity position of the whole bank. The Bank maintains liquidity through calculating and maintaining average actual balance of deposits in VND and foreign currencies at the SBV not less than the required level of compulsory reserve to be maintained; and maintaining its liquidity ratios within the levels regulated by the SBV. In addition to complying with liquidity regulations of SBV, Vietinbank also estimates and maintains a reasonable and safe level of liquidity assets in forms of cash, cash equivalents, high liquid deposits, Nostro accounts, monetary market instruments and special reserves at the SBV (contributed to around 25% of total assets) to be able to cope with any possible liquidity problem. Besides, Investment Department also establishes credit limit with other banks for mutual assistance when needed.
37. Over due Overdue within 3 months Due within 1 month Total VNDm
1,980,016 6,010,724 5,944,710 1,995,515 82,399,380 98,337 5,046,308 32,177,095 10,478,410 1,513,409 1,688,728 69,251,582 (48,358,856) 985,116 3,038,576 48,488,921 9,220,266 27,270,816 15,250,883 960,596 2,932,046 51,558,986 30,840,394 25,324,611 5,653 1,809,724 11,571,160 188,948 11,765,761 13,558,850 907,724 6,852,434 2,917,253 6,852,434 18,273,849 796,927 86,810 120,752,073 40,959,079 907,724 1,995,515 4,019,707 195,782,424 769,677 8,824,710 121,634,466 40,217,706 3,459,121 6,159,570 181,065,250 14,717,174
liQuidity riSkS (continued) Current Overdue over 3 months Due from 1 to 5 years VNDm
4,269,473 19,059,623 -
Due from 3 Due from 1 months to a year to 3 months Due over 5 years VNDm VNDm
12,235,315 109,400 38,131,995 3,212,770 4,019,707 57,709,187 6,141,860 75,569,993 687,527 -
VNDm
1,980,016 6,010,724 6,038,534 86,810 176,526 6,600,116 20,892,726 665,687 1,968,678 62,186,555 915,358 915,358 915,358 1,688,728 1,688,728 -
VNDm
VNDm
VNDm
Assets
Placements with and loans to other banks
Loans and advances to customers
Investment securities
Long-term investments
Other assets
Total assets
Liabilities
Borrowings from the MOF and SBV
Deposits and borrowings from other banks (including SBV)
Customer deposits and other amounts due to customers
Issuing valuable papers
Total liabilities
NET MATURITY RISK STATUS
95
VietinBank
96

Annual Report 2008
38.
intereSt rate riSkS Repricing terms of effective interest rate is the remaining period from balance sheet date to closest interest rate repricing date of assets and liabilities. The following assumptions and conditions have been adopted in the analysis of the Banks interest rate risk:
Cash and cash equivalents; long term investments and other assets (including fixed assets, investment properties and other assets) are classified as non-interest bearing; Balances at the State Bank of Vietnam are considered as current, therefore, its interest rate repricing term are classified as within 1 month; The interest rate repricing term of investment and trading securities are considered based on the actual maturity of each type since the balance sheet date; The interest rate repricing term of placements with and loans to financial institutions; loans to customers; borrowing from Government and State Bank of Vietnam; deposits and borrowings from financial institutions and customer deposits are determined as follow:
Items with fixed interest rate during the contractual term: The effective interest rate repricing term is determined based on actual remaining term from the balance sheet date.. Items with floating interest rate: The interest rate repricing term is determined based on the closest repricing date since the balance sheet date..
The interest rate repricing term of valuable paper issued are based on the actual maturity date of each type; The interest rate repricing term of Debts issued and other borrowed funds of which the financial institution bearing the risk are categorised into 1 to 5 years; The interest rate repricing term of other liabilities are categorised into 1 to 3 months. In practice, these items may have different repricing terms.
As interest rate fluctuates dramatically in 2008, almost all of Vietnam commercial banks have more or less suffered from interest rate risk. Market interest rate sometimes reached extremely high levels. Vietinbank has prudently managed its deposit and lending interest rate policy while still maintained a reasonable level of flexibility to ensure the operational effectiveness and market share growth.. Investment activities: main factors and information being considered are:

The balance of the Banks working capital in short term and long term; The balance of capital flows in the market and market interest rate trend forecast (using Reuter, interview, etc); Information from large banks and other parties; Policies from the SBV; and Other sources of information.
The Bank forecasts fluctuation of market interest rate and makes appropriate investment decisions. If a decreasing trend in interest rate is forecasted, the Bank will invest more in long term instruments to gain profitability. On the contrary, if market interest rate is projected to increase, the Bank will focus on short term investments to minimise interest rate risk.

97
38.
intereSt rate riSkS (continued) Fund mobilization and utilization: interest rate for fund mobilization is determined under market price principles, in which interest rate is subject to demand, fund mobilization scale and market interest rate movements. Fund is mobilized mainly in short term with the following structure:

Within 12 months: 67.4% From 12 months to 24 months: 24.4% Over 24 months: 4.4% Fund mobilized from other financial institutions (mainly within 12 months): 3.8%
Lending activities: Vietinbank determines lending interest rate based on the cost of funds, management expense plus targeted profit margin. Branches apply the floor lending interest rate regulated by the Head office. Since most of the funds mobilised by the Bank is short term (having maturity within 12 months), Vietinbank requires all medium and long term loans to have floating interest.
Medium and long-term loans interest rates equal to the 12 month interest rate plus/minus certain margin. The Bank adjusts the interest rates every 6 or 12 months basing on 12 month interest rate.
Annual Report 2008 98
VietinBank
38. Over due Non bearing interest Due within 1 month Total VNDm
1,980,016 6,010,724 2,788,628 81,018,733 2,056,725 32,177,095 10,478,410 1,513,409 1,980,016 69,251,581 (37,890,667) 985,116 3,038,576 48,735,922 3,094,430 98,337 4,799,307 27,270,816 12,775,428 960,596 2,888,144 48,792,628 32,226,105 1,995,515 23,291,971 5,654 14,046,615 87,402 14,139,671 9,152,300 907,724 3,696,352 145,448 145,448 3,550,904 18,273,849 796,927 86,810 120,752,073 40,959,079 907,724 1,995,515 4,019,707 195,782,424 769,677 8,824,710 121,634,466 40,217,706 3,459,121 6,159,570 181,065,250 14,717,174
intereSt rate riSkS (continued) In due From 1 3 motnhs VNDm

3,306,500 109,400 38,131,995 6,262,750 4,019,707 51,830,352 8,371,860 71,439,746 4,269,473 17,026,983 687,527 519,600 -
Over due Over due over 3 less than motnhs 3 motnhs From 3- 12 motnhs VNDm VNDm VNDm From 1 5 years Over 5 months VNDm
1,325,384 1,325,384 1,325,384 1,278,702 62,186,555 2,917,253 1,968,678 665,686 1,278,702 1,980,016 31,360,914 6,508,858 1,278,702 4,306,773 86,810 14,447,749 6,010,724 1,980,016 -
VNDm
VNDm
VNDm
ASSETS
Placements with and loans to other credit institutions
Loans to customers (*)
Investments in securities
Long term investments
Other assets
TOTAL ASSETS
LIABILITIES
Borrowings from the MOF and SBV
Deposits and borrowings from other Banks
Customers deposits and other amounts due to customers
Valuable papers issued
TOTAL LIABILITIES
Balance sheet interest rate risk
Off balance sheet interest rate risk 1,325,384
1,278,702
1,980,016
(37,890,667)
3,094,430
32,226,105
9,152,300
3,550,904
14,717,174
Interest rate risk

99
39.
GeoGrapHical denSity of aSSetS, liaBilitieS and off-Balance SHeet itemS Derivatives (Total transaction values per contracts VNDm) 86,810 -
Total loan balance VNDm Domestic Oversea 121,152,073 -
Total deposit VNDm 14,332,663 3,541,186
Credit commitments VNDm 7,399,770 8,533,158
Trading and investment in securities VNDm 41,756,006 -
40.
capital and operatinG leaSe commitmentS 2008 VNDm Capital commitments: premises construction, and equipment acquisition Capital commitments: equity investments Non-cancelable operating lease commitments Of which: - due within one year - due from two to five years - due after five years 47,198 103,220 18,407 11,071 43,274 13,103 401,155 24,878 168,825 2007 VNDm 90,498 33,000 67,448
41.
eVentS after Balance SHeet date Other than as disclosed in Note 1 about the equitization and initial public offering, at the date of this report, there were no events which occurred subsequent to 31 December 2008 that might significantly impact to the financial position of the Bank as at 31 December 2008.
VietinBank
100

Annual Report 2008
42.
eXcHanGe rateS of applicaBle foreiGn currencieS aGainSt VietnameSe donG at year-end 31/12/2008 VND 16,977 24,447 24,992 16,373 191,56 12,038 14,221 11,949 9,989 458,42 2,241 2,481 3,281 2,232 31/12/2007 VND 16,114 23,484 31,816 14,171 142,15 11,033 16,267 14,016 12,347 422,58 2,496 2,956 3,153 2,045
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noi CE t, Ha OFFI Stree D ao HEA 030 ng D 42 1 n Hu Tra 4.39 :0 108 032 42 1 .vn 4.39 :0 Tel bank ietin w.

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Vietnam Joint Stock commercial Bank for induStry and trade

message from the Chairman of the Board of Directors

Ladies and gentlemen,

Pham Huy Hung Chairman of the Board of Directors