topic the international payment analysis of ho chi minh city development commercial joint stock bank (hdbank)

UNIVERSITY OF UEH BUSINESS COLLEGE BANKING DEPARTMENT--- ---The essay of final examination International Payment City Development Commercial Joint Stock Bank HDBank Class code:... About

UNIVERSITY OF UEH BUSINESS COLLEGE BANKING DEPARTMENT

-

-The essay of final examination

International Payment

City Development Commercial Joint Stock Bank (HDBank) Class code:

I About HDBank (Ho Chi Minh City Development Commercial Joint

Stock Bank) 1

1 Development History 1

2 Achievement 3

3 Financial performance 3

4 Operational performance 8

II International payment activities 10

A Theoretical basis 10

1 Telegraphic Transfer 10

2 Open Acount 11

3 Clean collection and Documentary collection – D/P, D/A 11

4 Cash against documents (CAD) 12

5 Letter of Credit (L/C) 12

B International payment activities at HDBank 12

1 IMPORT FINANCING 12

2 IMPORT SERVICES 14

3 EXPORT FINANCING 17

4 EXPORT SERVICES 18

III Conclusion 20

IV References 21

List of table

Table 2 Business performance report 8

I About HDBank (Ho Chi Minh City Development Commercial Joint Stock Bank)

1 Development History

HDBank was established under Decision No 47/QD-UB dated

1989 February 11, 1989 with the name of Ho Chi Minh City Housing

Development Bank

HDBank received Operation License No 0019/NHGP dated June 6

1992 issued by the State Bank of Vietnam, officially transformed into

1992

Ho Chi Minh City Housing Development Commercial Joint Stock Bank with a charter capital of 5 billion dong

HDBank increased its charter capital to VN 2,000 billion according

to Official Letter No 6554/NHNN-TTGSNH dated August 27, 20102010

issued by the State Bank of Vietnam In the same year, HDBank also launched card issuance and insurance services

On September 19, 2011, the State Bank of Vietnam issued a decision to approve the amendment of the name of Ho Chi Minh City Housing

Development Commercial Joint Stock Bank to “Ho Chi Minh City

2011

Development Commercial Joint Stock Bank”

HDBank completed increasing its charter capital to VND3,000 billion through issuing shares to existing shareholders.

HD acquired 100% equity of Société Générale Viet Finance(“SGVF”), of Société Générale Group (France) - one of the three

2013

largest financial companies in the market for consumer loans in Vietnam to become a subsidiary of HDBank named HDFinance

Merging Dai A Commercial Joint Stock Bank (DaiABank) intoHDBank, increasing its charter capital to VND8,100 billionDaiABank with 20 years of banking operation, had charter capital

o VND3,100 billion Through the merger of DaiABank intoHDBank HDBank increased its chartered capital to VND8,100billion, tota assets of approximately VND90,000 billion andbecame one of the 10 largest commercial banks in Vietnam

HDBank successfully transferred 49% of its charter capital aHDFinance to Credit SAISON Co., Ltd (Japan) and 1% of charter

capital for Ho Chi Minh City Securities Joint Stock Company

2015

HDFinance officially changed legal status from one memberlimited liability company to one limited liability company withtwo or more members and changed its name to HD SAISON.HDBank was ranked at B2 by Moody for long-term deposit credi2016

rating with a stable outlook

The bank increased its chartered capital to VND8,829 billionthrough issuing shares to pay 7% dividend and 2% bonusshares to existing shareholders

2017

The bank increased its charter capital to VND9,810 billionthrough private share issuance

IPO was successful and HDB was approved to list on HOSE

Listed on HOSE and in the group of 20 largest capitalization stocks

2018

on HOSE

Moody's announced to raise the ranking of long-term deposits (domestic and foreign currencies), counterparty risk rating (CRR) and counterparty risk assessment (CRA) of HDBank to B1, a stable outlook.

2 Achievement

These were some of the honors that HDBank received in 2019:

HDBank has 3 awards as Best Trade Finance Service in 2019 awarded by Asiamoney; Best Cash Management Service in Vietnam in 2019 awarded by Euromoney; Asia Pacific Leading Trade Finance Service in 2019 awarded by Euromoney Next, HDBank

is the typical Green Credit Bank awarded by VNBA and IDC; Best Domestic Retail Bank

of 2019 awarded by Asian Banking & Finance Moreover, they won the Green Bank Award – The Bank with the best Green Trade Finance transactions in 2019 awarded by ADB; won the annual report Platinum award presented by LACP HDBank is the Best Place to Work in Asia awarded by HR Asia; in the Top 6 most prestigious private joint stock commercial banks in Vietnam voted by Vietnam Report; is the Top 10 listed large- cap companies with the best Annual Report voted by HOSE and Investment Newspaper;

in the Top 10 Sustainable Trading - Service Enterprises in 2019 voted by VCCI In addition, HDBank is also the Standard Electronic Payment Implementation Bank in 2019 (MT 103) and (MT 202) awarded by JPMorgan; Green Credit sponsoring bank and Bank with the best service quality in 2019 voted by VnEconomy and Vietnam Economic Times

3 Financial performance

Table 1 Balance Sheet

Source: HDBank

- Total assets

At the end of 2020, HDBank's total consolidated assets reached VND 319,127 billion, up 39.1 percent from the previous year and accounting for 104.5 percent of the plan Besides growing in size, HDBank also maintained a strong balance sheet with good liquidity Consolidated capital adequacy ratio reached 12.1%, a YOY increase of 0.9 percentage points, which effectively ensured capital adequacy requirement under Basel

II The asset structure continued to aim at increasing profitable asset proportion in the total assets, ensuring maximum profit for HDBank HDBank successfully increased its charter capital from VND 9,810 billion in 2019 to VND 16,088 billion (65%) in 2020

through issuing shares as stock dividends in 2019 and increasing equity from owners’ equity

- Mobilization performance

HDBank's overall capital mobilization in 2020 is VND 287,165 billion, up 40.9 percentfrom 2019 This equates to 104.3 percent of the target, assuring robust capitaldemand and healthy liquidity Specifically, customer deposits (including valuablepaper issuance) reached VND 208,953 billion, representing a YOY increase of38.4% Demand deposits accounted for 12.4% of the total customer deposits, whichwas the main factor to reduce mobilization cost and improve net interest margin

rate of only 6.5%/year to help businesses supplement capital sources to maintainthe budget to pay salaries for staff; spend 3,000 billion VND to sponsorbusinesses operating in the field of supplying pharmaceuticals, medicalequipment and supplies The bank waives and reduces most transaction fees toshare difficulties with customers affected by the Covid-19 pandemic.

- Capital adequacy ratio

According to the 2020 annual report, HDBank's capital adequacy ratio would reach12.1 percent in 2020, exceeding the State Bank's minimum required threshold of 8.0percent Since 2019, HDBank has been among the first banks to receive approval bythe State Bank to apply pillar 1 (Capital adequacy ratio - CAR) and pillar 3(information transparency) under Basel II Thriving on these achievements, in 2020,HDBank fulfilled all three pillars of Basel II, international standards, and Circular 13 ofthe State Bank of Vietnam The Bank also ensured the safety pillar for effective andquality development according to the business strategy

- Non-performing load

The bad debt percentage is kept under control at 1.32 percent According to Circular01/2020/TT-NHNN, HDBank has modified the payback period and retained the debtgroup for customers affected by the Covid-19 epidemic in order to assist customersimpacted by the Covid-19 epidemic HDBank also introduced policies in loanmanagement to avoid new bad debts and accelerate debt collection and assethandling As a result, although the banking industry was predicted to experiece anincrease in bad debts due to the impact of natural disasters and the pandemic,HDBank still successfully controlled our separate NPL ratio at 0.93% (over aconsolidated ratio of 1.32%) All VAMC bonds were settled in accordance with thetargets assigned by the General Meeting of Shareholders

4 Operational performance

Table 2 Business performance report

Source: HDBank

- Capital management, trading, monetary and capital market invesment

HDBank continued to expand and strongly invest in capital management, currency trading and investment in 2020 We constantly asserted our position and reputation in the monetary and capital markets while maintaining an active role in capital transactions, money investment and trading During 2020, HDBank was always ranked in the top 10 members of the Government bond market by the Hanoi Stock Exchange (HNX).

We also developed a wide and full range of products and services, specifically focused

on deploying modern derivative products The effective business performance had helped HDBank enhance the reputation, image and influence on the markets of money, foreign exchange and capital We also earned high opinion and trust from our partners, which built a solid foundation for our continuous development and position in the future.

- Digitalization of customer engagement

Cashless payment is an important goal of the banking industry as consumers' payment habits have changed drastically after the COVID-19 pandemic With the goal of becoming the leading digital bank in Vietnam by 2020, HDBank has launched the product "Di HDBank" and authenticated customer information online eKYC, whereby individual or corporate customers only need to open an account online banking, make transactions on personal mobile devices HDBank has tested a new L/C issuance method using the iPaper internal approval system and participating in the globally connected Contour network, established on the blockchain platform Helping businesses reduce costs and expand the efficiency of foreign trade activities for Vietnamese businesses.

- Card operations

The year of 2020 marked a significant milestone in HDBank’s card operations, stemming from the transformation of our organizational and personnel structures.This transformation fully focused on product development, card services, digital

transformation and business activities, which are the core elements for furtheracceleration in 2021.

In 2020, achievements of card services: A YOY increase of 79% in international cardissuance; A YOY increase of 19.0% in card payment; A YOY increase of 7.5% incard profits In addition, the Bank has successfully implemented many programssuch as focus on developing more premium Platinum card products with manyincentives and privileges to best serve VIP customers; implement comprehensivelythe online payment feature for all international card products with 3DSecure 2.0authentication platform to improve customer experience and safety

- Bancassurance

HDBank aims to become a top provider in banking and financial solutions and amulti-functional retail bank We have deployed various products and services tofulfill this mission, including reputable, quality and competitive life and non-lifeinsurance products

HDBank's insurance products are selected and distributed to suit the needs of customers' protection, health care, savings and investment insurance During the implementation process, HDBank has cooperated with insurance partners to apply digital technology to help customers shorten the time to fill out documents Buy insurance online, whereby from the time a customer submits a request for insurance, payment of fees to the issuance of an insurance policy, is done on an online technology platform.

I International payment activities A Theoretical basis

1 Telegraphic Transfer

Payer, Buyer, Institution import…required the Bank serve me to transfer the mostamount intended to pay the beneficiary (seller, exporting organization, personreceive money) at a specified location (account number-NH) for a while certain.

2 Open Acount

The bookkeeping method is the method of payment of debt, collected and paid at thesame time at a certain time (month-end, quarter-end) Usually this method is used inpayment between two units, regular relationship and mutual trust together

3 Clean collection and Documentary collection – D/P, D/A

Collection of payment: The method of collecting is the Bank's handling of the documents

specified in accordance with only Marketing received for: That document is paid

or accepted; Delivered when documents are received paid or accepted; Deliverdocuments properly other terms and conditions

Types of Collections:

Thanks to the smooth collection (Clean Collection): It is thanks to the collection offinancial documents mainly without documents Commerce For example bycollecting sheets and checking in payment

Asking for collection of documents (Documentary Collection): Method of askingfor collection with evidence from thanks to the collection of financial documentsattached according to commercial documents In this payment method,organization exports thanks to the Bank goods collect money from the importingorganization not only based on bill of exchange, but also on evidence commercialword accompanied by exchange promissory note.

4 Cash against documents (CAD)

The CAD method is the method payments in which the organization enters export onthe basis of a sales contract Open request for the Bank of the exporting country trustaccount (Trust account) to pay money to the team export organization when theexporter exports submit all documents in accordance with the agreement favorable

5 Letter of Credit (L/C)

Letter of credit (L/C) is the document (letter) of the bank opening the LC to thebeneficiary, it is written at the request of the applicant to open the LC, in order toexpress the payment commitments of the bank to the beneficiary together withthe terms and conditions and specified conditions

Documentary credit is an arrangement whereby a bank (the opening bank) meets therequirements of a customer (the applicant), commits or authorizes a pay, acceptdrafts or discount documents at the request of the beneficiary of the L/C when theterms and conditions specified in the L/C are properly and fully performed

B International payment activities at HDBank

1 IMPORT FINANCING

Import L/C

Import Letter Of Credit (Import L/C) issued by HDBank at the request of thecustomer (importer/buyer) committing to pay a certain amount to the beneficiary(exporter/buyer) when the beneficiary presents a set of documents in accordancewith the terms and conditions of the L/C and international practices.

Customers: Economic organizations operating legally in Vietnam need to use import L/C services

Product convenience: Import L/C is the most common and safest paymentmethod in international trade Customers when using the product will receive freeadvice to minimize risks and costs and receive financial support through theimport sponsorship program In addition, the procedures have quick processingtime, safety and confidentiality of information

In addition, HDBank also provides services such as: Issuance/amendment of importL/C at sight, deferred payment; Guarantee/authorization to receive goods according

to L/C/endorsement of bill of lading; Notify and check the documents presentedunder the import L/C; Accept payment/Payment of import L/C; Cancellation of importL/C; HDBank also provides services of issuing, amending, and querying imported L/

Cs via Internet Banking - eL/C saving time and effort, connecting 24/7, storinginformation online at a constant cost , simple procedures

UPAS L/C

UPAS L/C is an import finance product under a deferred LC for the importer, with a provision allowing immediate payment to the exporter upon presentation of a valid set of documents The product is financed coordinately by HDBank and the world's leading banks from Japan, Singapore, China, and the Asian Development Bank (ADB).

Customers:Importing enterprises who need to use import L/C and/or are not subject

to foreign currency loans according to regulations of the State Bank of Vietnam