Military Bank: Outstanding with Good Asset Quality

Since it was set up nearly 17 years ago, Military Bank (MB) has always enjoyed high and sustainable growth. Its nonperforming loan ratio is always checked at below two percent. The success is attributed to high-quality managers and employees, advanced transparent risk management policies and systems, and well-selected customer policies and systems. This is also the reason why the Asian Development Bank (ADB) selected MB as one of intermediary banks in Vietnam.

 

First of all, ADB has its own criteria for selection of participating issuing banks for this programme (Trade Finance Programme). MB is one of 10 selected Vietnamese banks. A MB official said: "We were chosen because MB is one of leading joint stock banks in Vietnam, has a good reputation on international markets, and has relations with over 800 banks and branches worldwide. MB can handle a large volume of international payment transactions and revenues increase year by year (revenues of international payments were more than US$3 billion in 2009 and US$5.3 billion in 2010). For the past five years, MB has repeatedly won the “Excellent International Payment Bank” Award from world-leading lenders like Citibank, HSBC and Wells Fargo. Besides, before being admitted to the programme, MB had to pass a very detailed and all-inclusive "test" from ADB. Apart from ADB’s qualitative criteria (having management information system, transparent reporting which meets ADB’s requirements and is audited by a well-reputed independent audit firm, etc), MB also has to meet its quantitative criteria like capital adequacy ratio reaching at least 8 percent, asset liquidity/total asset rate reaching 20 percent, strict compliance to the State Bank of Vietnam’s regulations on safety, operating expenses/operating incomes not exceeding 75 percent, and net intangible and tangible fixed assets/total net assets not exceeding 50 percent. ADB updates this information on a quarterly basis. They even hired independent experts to assess our compliance when we joined this programme. MB always satisfies all information required by ADB in a prompt and complete manner.”

 

MB has an internal credit rating system, a customer rating process, an advanced transparent and coherent risk management system. These factors help MB use ADB’s loans in particular and its funds in general very transparently and efficiently. Thus, MB always has a high standing for its very good asset quality. Currently, MB has a plan to use ADB funds to support importers of petroleum and equipment, etc. The bank will give priority to SMEs if they meet MB’s requirements.

 

With very good results in 2010, MB expects ADB will consider increasing the credit for MB in 2011. MB highly appreciated ADB for raising the credit limit for MB from US$15 million in 2009 to US$40 million in 2010. The Hanoi-based lender also hopes ADB will diversify its products (not only limited to financing but also guarantee and L/C confirmation, etc). In addition, ADB may consider coordinating with the Government of Vietnam to provide loans not only in US dollars but also in Vietnamese dong and increase the lending term (currently a maximum of one year) to assist Vietnamese banks to restructure capital sources.