Exercise 1

Exercise 1. A commercial bank announces the deposit rates as following:

1. Current account (0.75% annually)

2. Savings account (2.75 % annually)
3. CDs (3.7% annually)

a/ A customer would like to deposit $15,000 to this bank for 12 months. Calculate the interest
payments this customer would receive the three types of deposits. Give a short comment on the
results.

b/ The client decides to open a savings account for 9 months with $10.000, but then withdraws
the money aster 6 months. The bank interest policy is that any pre mature withdrawal receives
current account interest rates. How much money would he receive for full term and after 6
months? Comment on the results.

Exercise 2: The X joint-stock commercial bank is currently offering the following deposit
rates:

- Interest rate for demand deposits: 0.2 % per year.

- Interest rate for term deposits: 6-month term (unit: % per year)

Monthly At maturity
At the counter 6.5% 6.6%
Online 6.5% 6.65%

A customer has a deposit at the X joint-stock commercial bank with following information:

 Deposit amount: 100 million dong.

 Deposit maturity: from 10/3/2022 to 10/9/2022

1. Calculate the interest payment to the customer in two cases, making deposits at the counter
and via the online channel:

 Interest paid at the end of the period (at the maturity)

 Interest paid monthly
 The customer withdraws all her deposit on 20/5/2022 to buy a car, current account
interest rate is 0.5%
2. Comment on the amount of interest customer receives in the different cases.
Exercise 3.
Customer Minh Tung applies for a bank loan to buy a 2 billion dong car. The bank agrees to
finance 75% of the value of the car, with the following terms:
- Loan maturity: 3 years
- Lending rate: 14%/year
- Repayment schedule: semi-annually.
- Payment method: installment, interest payment for each period is calculated based on the
actual outstanding balance at the beginning of the repayment period.
Require:
1. Prepare a spreadsheet of the principal and interest repayments for each period.
2. Calculate the amount of deposits the bank has to raise in order to provide that loan, given
that the required reserve ratio and the solvency reserve ratio are 5% and 3% respectively for a
deposit of 3-year term. Interest expense is 4%/year and non-interest expense is 0.5%/year.
How much is the net profit the bank earned when making the above loan.
Exercise 4:
Commercial Bank A provides a loan to a customer to buy a car with the following terms:
- Loan amount: 1000 million VND
- Loan maturity: 2 years
- Lending rate: 12%/year
- Repayment period: Quarterly
- Payment method: Equal installments for the principal amount and interest payment is
calculated based on the loan balance at the beginning of the repayment period.
Require:
1, Make a spreadsheet of the principal and interest repayments for the loan. How much is the
total interest income of the bank from the loan.
2, Suppose that the customer requests to repay the loan early at the end of the first year. Given
that the prepayment fee is 2% of the prepayment amount, how much does the customer have to
pay to terminate the loan upon his request.
Exercise 5
The ABC Bank makes a loan commitment to company Y, which specializes in importing
electronic components, with a credit line of USD 20,000 for 6 months with the following fees:
- Commitment fee: expressed as a percentage of the total commitment: 2%
- Usage fee: levied on the unused portion of the credit line: 2.5%.
- Servicing fee: as a percentage of the on the borrowed amount: 0.75%
- The borrower must opens a current account and the deposit balance at the bank equal
10% of credit line during the commitment period.
During the commitment period, the firm withdrew 15,000 USD with a term of 6 months, the
interest rate is 8%/year. Calculate the net profit of the commercial bank assuming that the bank
can earn on average 5%/year on available funding, the deposit rate on current account is 0.5%
and the average cost related to loan commitment is 3% of the credit line.
Exercise 6
ABC Bank signs an irrevocable L/C contract with customer Y with the following terms:
- L/C value is 100,000 USD
- Customer deposits 80% of L/C value on the current account at the time of signing
- Foreign currency swap fee 0.05% of the total value of L/C
- L/C issuance fee is 2% of the total value of L/C
At the time the Bank makes the payment to the counterparty, customer Y commits to allow the
Bank to automatically debits the checking account and takes a loan with the residual amount at
the interest rate specified by the Bank.
1 month after the L/C was signed, the counterparty of Y presented the required documents and
the bank processes with the payment
Bank's current interest rate on demand-deposit is 0.6%/year. Assuming that the bank can earn
on average 4% on the available funding; the agreed lending rate for the deferred payment from
L/C is 6%/year and the average cost for a L/C contract is 1% of the L/C amount.
Calculate the income for the bank for the L/C in the following 2 cases:
a. Customer Y pays immediately to the bank when their counterparty presented the
shipping documents
b. Customer Y pays after 2 months from the date the Bank made the payment.
Exercise 7: The following table presents a simplified balance sheet of the ABC bank:
Bank ABC BALANCE SHEET (Unit: mil VND)
ASSET LIABILITIES AND EQUITIES
Cash Deposits and borrowings from
27 500 other credit institutions 100 100
Securities 86 000 Customer's deposits 250 500
Loans ??? Issuance of valuable papers 34 200
Loan loss provision -1500 Equity 19300
Fixed assets and other
properties 19 100
404
Total Assets
100 Total liabilities and equities 404 100

1. Calculate the total loan volume to customers of this bank. Comment on the proportion
of loans over total assets of the bank.
2. Calculate ROE, ROA, given the following assumptions: Interest revenue: VND
3,850mil, interest expense: VND 1,725mil, non-interest revenue: VND1.500 mil, non-
 interest expense: VND 607.5 mil, allowance for loan loss is VND 336 mil; tax rate:
10%
3. Given that in the previous year, the bank’s ROA was 0.55% and total asset stood at 90%
this year number. Calculate the bank’s ROE in the previous year, assuming the bank
equity has been unchanged. Comment on the bank performance.

Exercise 8. The following tables present a balance sheet and an income statement (which have
been simplified) of an example bank:

Bank ABC BALANCE SHEET (Unit: mil VND)

ASSET LIABILITIES AND EQUITIES

Cash Deposits and borrowings from

27 500 other credit institutions 25 100
Securities 86 000 Customer's deposits 411 640
Loans ??? Issuance of valuable papers 30 100
Loan loss provision -9500 Equity 35160
Fixed assets and other properties 19 100
Total Assets 502,000 Total liabilities and equities 502 000

1. Calculate the total loan volume to customers of this bank. Comment on the proportion
of loans over total assets of the bank.
2. Calculate net income margin (NIM) and cost income ratio (C/I) given the following
assumptions: Interest revenue: VND 3,850mil, interest expense: VND 1,725 mil, non-
interest revenue: VND1,500mil, non-interest expense: VND 607.5 mil, other things in
the income statement are not material. Present your comments NIM and C/I of this bank
if these two figures in the previous period were 0.4% and 17%, respectively.

Exercise 9. The following tables present a balance sheet and an income statement (which have
been simplified) of an example bank:

Bank ABC BALANCE SHEET (Unit: mil VND)

ASSET LIABILITIES AND EQUITIES

Cash Deposits and borrowings from other

27 500 credit institutions 25 100
Securities 86 000 Customer's deposits 411 640
378
Loans
900 Issuance of valuable papers 30 100
Loan loss provision -9500 Equity 35160
Fixed assets and other properties 19 100
Total Assets 502 Total liabilities and equities 502 000
 000

a) Briefly comment on the structure of the bank balance sheet.

b) Calculate ROE, ROA and bank leverage ratio, given the following assumptions: Interest
revenue: VND 3,850mil, interest expense: VND 1,725mil, non-interest revenue:
VND1,500mil, non-interest expense: VND 607.5mil, allowance for loan loss is VND
336mil11; tax rate: 10%
c) Given that last year, the bank’s ROA was 0.55%, the bank leverage ratio was 7,5%.
What was the bank’s ROE last year? Comment on the bank performance
Exercise 10
Average Average
Asset Liability
interest rate interest rate
Cash on hand, gold, silver and gemstones Amounts due to the Government and the State
54,678 0% 128,538 2.10%
(Cash and cash equivalents) Banks
Balances at central banks and other credit
7,890 3% Deposits from other credit institutions 41,853
institutions
Financial investment (Trading securities &
124,670 5.10% Demand deposits 38,977 0.20%
Investment securities)
Short-term loans 366,835 8.20% Term Deposits, <12T 2,807 1.60%
Medium & long-term loans 166,280 9.70% Term Deposits, >12T 69 4.50%
Fix assets & other assets 46,095 0% Borrowings from other credit institutions 8,355 1.50%
Deposits from customers 531,389
Demand deposits 158,966 0.20%
Term Deposits, <12T 228,497 4.30%
Term Deposits, >12T 143,926 7.30%
Valuable papers issued 3,661 5.90%
Other liabilities 1,557
Shareholder equity 51,095 0.00%
Total assets 766448 Total liabilities 766,448
Known:
Net Fee and commission income 3,610
Net gain from trading of foreign currencies 3,250
Net gain from trading securities and investment securities 728
Net other income 1,279
Operating expenses 18,590
Allowance for credit loss 7,199
Require:
Briefly comment on the bank’s profitability, given that corporate income tax: 10%
Answer:
Asset Aver Liability Aver
 age age
intere inter
st est
rate rate
Cash on hand, gold, silver and gemstones 54,6 Amounts due to the Government 128, 2,10 2,69929
0%
(Cash and cash equivalents) 78 and the State Banks 538 % 8
Balances at central banks and other credit 0,2 Deposits from other credit 41,8
7,89 3%
institutions 37 institutions 53 0
Financial investment (Trading securities & 124, 5,10 6,3 38,9 0,20 0,07795
Demand deposits
Investment securities) 67 % 58 77 % 4
366, 8,20 30, 2,80 1,60 0,04491
Short-term loans Term Deposits, <12T
835 % 080 7 % 2
166, 9,70 16, 4,50
Medium & long-term loans Term Deposits, >12T 69
28 % 129 % 3,105
46,0 Borrowings from other credit 8,35 1,50 0,12532
Fix assets & other assets 0%
95 institutions 5 % 5
531,
Deposits from customers
389 0
52, 158, 0,20 0,31793
Demand deposits
805 966 % 2
228, 4,30 9,82537
Term Deposits, <12T
497 % 1
143, 7,30 10,5065
Term Deposits, >12T
926 % 98
3,66 5,90 0,21599
Valuable papers issued
1 % 9
1,55
Other liabilities
7
51,0 0.00
Shareholder equity
95 %
7664 766, 26,9183
Total assets Total liabilities
48 448 89
Known:
Net Fee and commission income 3,61
Net gain from trading of foreign currencies 3,25
Net gain from trading securities and investment securities 728
Net interest rate
Net other income 1,279
income= 25,886
Total operating
Operating expenses 18,59
income= 743,435
Net profit before
Allowance for credit loss 7,199
tax= 736,236
Net profit after 662,612
Require:
tax= 4999
12,9682
Briefly comment on the bank’s profitability, given that corporate income tax: 10%
ROE 4542
0,86452
ROA 3751