Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (3)

CHAPTER I: COMPETITION IN BANKING INDUSTRY IN THE 1.2.1 Products and product strategy of the Bank 9 1.2.3 Strategic planning model of a bank to reach the goal in business 12 1.4 Vietnam’

The whole content of this subject has been studied and performed by ourgroup We ourselves collected information and data issued by Sacombank andselected the most necessary information to finish this subject

We guarantee that: Subject "IMPROVING THE COMPETITIVENESS OF SACOMBANK IN THE CONTEXT OF INTERNATIONALIZATION AND INTEGRATION" was not copied from any research papers.

We are absolutely responsible for our compliance to the law and GriggsUniversity

Hà Nội, November 21 st 2009

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CHAPTER I: COMPETITION IN BANKING INDUSTRY IN THE

1.2.1 Products and product strategy of the Bank 9

1.2.3 Strategic planning model of a bank to reach the goal in business 12

1.4 Vietnam’s commitments on international integration in Banking 161.4.1 Commitments on foreign exchange and payment 161.4.2 Commitments on policies of trade and services relating to the

1.5 Opportunities and challenges in international integration in Banking 18 1.5.1 Opportunities on international integration 201.5.2 Difficulties and challenges facing the banking system 221.6 Some lessons learned from developing countries in international

1.6.1 Common real situation of developing countries prior to

1.6.2.1 China’s commitments in Banking to enter WTO 24

1.6.2.2 The competition lesson in banking in China after

1.7.1.2 Operational capacity of Vietnamese banks 29

1.7.1.3 Management capacity 31

1.7.2 Lessons on competition in the process of international

integration for Vietnamese Commercial Banks 32

CHAPTER II: THE REAL SITUATION OF BUSINESS

OPERATIONS OF SACOMBANK ON VIETNAM’S ACCESSION

2.2.5.1 Environment and conditions to do Banking business in

2.2.5.2 Sacombank and its internal factors (SWOT analysis) 44

2.3.2 Business results of Sacombank over the past years 522.4 Real situation of Sacombank business operation 53 2.4.1 General evaluation of Sacombank business operation 53

CHAPTER III: SOLUTIONS FOR IMPROVING

3.1 Solutions for improving financial capability 80

3.1.2 Improving the profitability indicators 80

3.2 Solutions for strengthening operation capacity 85

3.3 Solutions for strengthening management and administration capacity 90 3.3.1 Continuing to restructure the engine 90 3.3.2 Policies of salary and talent attraction 903.4 Solutions to improve information technology capacity 923.5 Solutions for enhancing the prestige and trademark of Sacombank 93

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LIST OF ABBREVIATIONS

LIST OF TABLES

Page

Table 1.1 Scale of chartered capital of some Commercial Banks in Asia 28Table 1.2 ROE of Vietnamese Commercial Banks in the period 1998-2005 29Table 1.3 Credit growth rate in Vietnam in the period 2000-2006 30Table 1.4 Market share of the Group of Banks in Vietnam from 2004-2007 35Table 1.5 Schedule for increasing chartered capital in 10 Vietnam biggest JSBs 36Table 2.1 Result of some activities of Sacombank in the recent years 53Table 2.2 Result of the survey program “Listen to our customers” 54

Table 2.5 Comparing the chartered capital with some Southeast Asia Banks 59Table 2.6 Result of debt management of Sacombank in the recent years 62Table 2.7 Comparing the debt management with other rivals in 2008 62

Table 2.10 Sacombank’s mobilization structure in the recent years 67Table 2.11 Sacombank’s credit state in the recent years 68Table 2.12 Sacombank’s credit growth rate in the recent years 69Table 2.13 Geographical market distribution of Sacombank 71

Table 2.15 Development of correspondent banks in the recent years 73Table 2.16 Sacombank’s investment activities in the recent years 73Table 2.17 Return from securities investment activities in the recent years 74Table 2.18 Return from capital contribution activities in the recent years 75

Table 2.20 Comparing the educational staff with other Rivals in 2008 78

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LIST OF FIGURES

Figure 2.1 Growth in owner equity of Sacombank in the recent years 58

Figure 2.3 ROE compares with other Rivals of Sacombank 64

Figure 2.5 ROA compares with other Rivals of Sacombank 65

Figure 2.9 Credit market shares of the Vietnamese Banks in 2008 72

International economic integration has become a trend of our age and is takingplace vigorously in many fields, reflecting the objective indispensable tendency of aneconomy To catch up with the trend, Vietnam has actively taken part in theinternational integration process by entering ASEAN, joining ASEAN Free TradeArea (AFTA), signing Vietnam - America trade agreement, entering World TradeOrganization (WTO), and participating in various international economicorganizations as well as other agreements on bilateral trade relation promotion In thegeneral context of the whole economy, how Vietnamese commercial banks (NHTM)will face challenges, take full advantage of opportunities and turn challenges intoopportunities to avoid failures on their “home field” require the system of commercialbanks to actively be aware of and prepared to take part in this integration andcompetition process

It is possible to say that Banking is one of the extremely sensitive fields and itsdoors need to be opened nearly completely in accordance with commitments onaccession to the World Trade Organization (WTO) Vietnam’s banking system isconsidered one of the key industries and needs to be restructured to improve itscompetitiveness To be active in the integration process, Vietnam needs to build abanking system, which is prestigious, competitive, highly effective, safe, and capable

of better mobilization of capital resources in the society and investment expansion

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CHAPTER I

BANKING COMPETITION IN THE CONTEXT OF

INTERNATIONALIZATION 1.1 International integration in Banking

International integration in Banking is the process in which the local system ofcommercial banks joins the regional and global Banking system This means aVietnamese commercial bank can do business abroad or foreign banks can completely

do business equally in Vietnam in accordance with Vietnamese laws Hence, alongwith the integration, banking operation in Vietnam may completely be affected ortake full advantage of the trend of the banking system in the world and must followmarket rules and international business principles at the same time

The international economic integration process requires the government toremove, step by step, preferences for the local system of commercial banks and at thesame time, to remove barriers against foreign banks when they do business inVietnam in order to approach equal competition between local banks and foreignbanks Thus, the integration level in banking has a tight relation with the level offinancial - monetary liberalization Financial liberalization means increasedcompetition among financial institutions, together with the termination of legaldiscrimination among different activities Financial liberalization consists ofliberalization of interest rate and exchange rate, elimination of capital subsidy throughcredit assignment, liberalization of activities of local and international finance - creditinstitutions on the basis of liberalization of current accounts and capital accounts

International integration is an indispensable development trend of the worldeconomy in the context that concepts of national border are increasingly unclear andthe tendency of economic regionalization such as EU, NAFTA, ASEAN more andmore becomes a united entity International integration brings about such positiveeffects as easier access to new markets, less tariff and legal barriers and easier access

to technologies and funds for enterprises However, disadvantages will arise due tolimitations in terms of awareness, human resource, technology, capital and prestige ofdeveloping countries, including Vietnam Accordingly, in order to deal with thesedisadvantages, developing countries often make commitments on their integrationprocess

1.2 Competition in Banking

1.2.1 Products and product strategy of the Bank

a Traditional services: Borrowing and lending

Banks develop a lot of products and services for the market and they can meet

a service scope, which covers almost all operation fields of the commercial bank andrelevant financial services However, commercial banks will have their own ways tolaunch specific products and services to the market

Banks specialize specific services in which they will make evident competitionagainst their competitors

However, there are some factors to be noted

- Money can be borrowed with a fixed or changing interest rate

- Loans can be guaranteed for each specific type of asset This is a fact usually used inlending in the field of transportation or construction

- Unsecured loans: This is a common fact in case of specialized, preferred loans

- Loans can be guaranteed - usually applied when the borrower is part of a group ofcompanies Guarantee can be performed in various forms, package guarantee orpartial guarantee of a project

- Loans may consist of one kind of money or various kinds of money Risks that occurmay be compensated or covered by the borrower

- Loans are refunded as required or entrusted to the borrower under a certain term

- Terms promised to refund loans may be:

+ Short-term or medium and long-term

+ Debt payment can be made by each term during the time or by lump-sum payment

at the end of the borrowing time

+ Convenience in refund, the borrower makes a direct repayment at the bank orrefunds by transfer

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In addition, banks can provide extra specialized lending services In order tomake efforts to improve profitability by focusing on appropriate activities,commercial banks can offer lending in the following main fields:

- Fixed asset lending (lending for purchasing fixed assets, capital construction) Thisusually combines many services; some services may make higher profit than otheractivities

- Lending in the field of energy, like fixed assets, energy is a highly potential field,offering good opportunities for commercial banks which understand this field and canprovide package or partial funds in a flexible and creative way

- Mining, minerals, like energy and financial projects, these fields have the sameapplication regulations in lending activity

- Commercial credit funding, including market of customers and enterprises operating

in the field of commerce

- Project funding or lending construction investment projects

- Leasing is the field which has grown strongly in recent years Leasing providescustomers with a lower interest rate rather than one-time investment with very largecapitals

- Lending for activities in the stock market, intermediate market, joint-venturecontribution lending, etc

+ Services of cross exchange, and cross exchange brokerage in the foreign exchangemarket.

- Specialist services:

+ Consulting services: Money management, information center, pension fundmanagement, insurance management, exchange rate prediction, financial and bankingeducation

+ Trust services: bond and stock buying, entrusting, pension fund management, lifeinsurance, dividend, portfolio management and advisory, safe deposit service, assetplanning, etc

+ Other services: Salary accounting and management, data processing service,economic study service, etc

1.2.2 Defining the competitors in banking

Most of Banks do their business in a competition environment In manybanking services, the competition has been increasing in the recent years under theparticipation of the foreigner banks

A result of increasing in competition has created the knowledge for bankingmanagers that to success in doing business not only analyzing the market and thedemand of customer but also considering carefully and detailed the rivals This willhelp the market planners and banking managers to improve their ability to get thechances of the success

To find out and analyze the competitive rivals, the banking managers should:

+ Make a strategy for the bank that can neutralize the strength of the rivals inany where or any time if possible by concentrating on the services that your bank has

a good relationship or choosing carefully the services that your bank has a chance toget success

+ Help the potential customers to access your services better than your rivalsdo

+ Prove that why your customers should choose your bank not your rivals

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+ Confident that you know exactly the strength and the weakness of theservices that your bank supplies to your customers.

Apart from that, the banking managers should also develop a system that can collectthe information from the rivals The collecting information system is one of the mostimportant factors in developing the market and general strategy The competitiveposition of the bank should systematically organize as a part of market strategy Andsome questions will be used in analyzing the competitive rivals:

- Might the rivals be exactly identified?

- Could the new entries be clearly identified?

- Might the information about the rivals be fully collected?

- Can the data of rivals meet the requirement of analyzing? Is there any importantinformation that has not collected yet? If any, how to access and cost for that?

- Could the business strategy of the rivals be fully and practically identified?

- Have the mission and target of the rivals been clearly identified?

- Have the investment portfolio of the rivals been developed and fully probed?

- Have the culture, the organization, the art of leading and the history of the rivalsbeen analyzed? And the impact of these factors to the strategy was appraised?

- Have the strategic ability of the rivals been appraised? The change in the attack ordefend strategy of the rivals could be surely identified?

- Have the strength, weakness relating to your bank been honestly appraised?

1.2.3 Strategic planning model to reach the goal in business

A strategic planning model is selected for the purpose of formulating andimplementing the strategic management plan of a particular organization.Nevertheless, it has been proved that no strategic planning model is perfect Everycompany designs its own strategic planning model frequently by choosing a modeland transforming it as the company advances into formulating its strategicmanagement plan procedures

In the decade of 1970s, a large number of corporations followed a recognizedstrategic planning model, which is top down in nature According to this model,strategic planning was a calculated procedure where the top management woulddesign the strategy of the company and after that it was passed on downward in thecompany for application The steps involved in this strategic planning model were thefollowing:

Therefore, plans described as strategic management of the bank will beperformed by a division of specific objectives Plans of the bank also describestrategies pursued in the form of action plan guidance for business changes under thecontrol of the management

Strategic plans of the bank show in detail:

- Market priority, the bank determines resource allocation

- Market seizing by market priority selection

- Requirement change for capitalization on market opportunities

- Timing for the change of strategies

- Estimation of the environment in which the bank will operate

- Desired rate of the strategy implementation process

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1.3 Competition in the banking industry

1.3.1 Contents of banking product competition

1.3.1.1 Products and Services quality

In a modern economy, science and technology play a very significant role inservice providing activity of a bank For each customer, criteria to assess the quality

of banking services include:

+ Complexity of procedures when using services provided by the bank

+ Fast and accurate processing speed

+ Effectiveness for the customer from services of the bank

+ Ability to consult and perform services of the bank for customers

+ Service attitude of the bank’s employees

+ Level of equipment and technology

As a matter of fact, many banks provide the same service product Hence, customerswill certainly make comparisons when they use services provided by banks anddecide to use the best service provided by a certain bank

For commercial banks, to compete by service quality, then, apart from humanresource factor, only well-constructed infrastructure together with good customerstrategies can well meet the requirement on service quality improvement incompetition

1.3.1.2 Price competition

Price always plays the role to reflect value of a product and use value ofcustomers at the same time For commercial banks, it is price that is interest rates andfee rates applied to services of the banks

In determining rates of interest and fee, commercial banks always face contradictions:

If they provide low-cost services for customers, then this will reduce their income andmake them difficult to develop However, if commercial banks only attach importance

to their income and provide high-cost services for customers, then it will reduce theircompetitiveness, resulting in the fact that the banks cannot expand their markets andwill even lose their market share

During its own operation process, each bank has its own price strategies inorder to best reach its business goals For instance, commercial banks newly enteringthe market can use the strategy of optimal prices for customers to get market share

and build their trademark In the meanwhile, banks with their trademark in the marketusually use the strategy of package prices for their services In general, depending oneach specific condition of the market, of the whole economy or of business strategies,banks may apply their own price strategies to be in accordance with their businessstrategies.

1.3.1.3 Competition by the distribution system

Organizing product consumption activities is an important phase in thebusiness process of each enterprise It is also true for commercial banks The directdistribution channel of the banks is the system of branches, which are developedwidespread This system of branches may be such traditional branches as branches,trading office, system of agent banks, etc or modern branches such as automaticdistribution system (ATMs, automatic money transfer, electronic fund transfer atpoint of sale, etc), electronic banking (E-Banking), etc

Distribution systems have really contributed to the work of fund mobilization,easier access to customers and competitiveness improvement of the bank

1.3.2 Competitiveness of the Commercial Bank

Competitiveness of the commercial bank is the long-term and systematicalself-maintaining of its advantages in the market to obtain particular profit objectives

or the capacity to effectively cope with pressure from competitors These capacitiesinclude:

The reserved funds include:

+ Reserved fund: This is the capital that comes from returned after taxes at a givenrate

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+ Reserved fund for financial risk: This also comes from returned after taxes at agiven rate higher than reserved fund

+ Apart from that, bank can get capital from retained profit or other unused funds

In some countriesy, bank will be restricted in mobilization at a rate not exceexceeding

ss a given level limitation such as 20 times or 30 times of the chartered capital

Therefore, to ensure the business operation of the bank, the managers should beinterested in:

+ Capability to expand the equity

Besides, in a competitive environment, banks have to supply more products andservices that meet the demand of the customers

So it can be resumed as followed:

+ Capability to mobilize and develop funds

+ Lending and investment capability

+ Product and service development capability

+ Prestige and reputation development capability

1.3.2.3 Management capacity

Managerial capacity of a bank is to solve the problem that how to maximize thebenefits for shareholders and ensure the targets that the bank has defined Thiscapacity includes:

+ Model of a modern bank

+ Organizational structure of the bank

+ Employee qualifications

+ Capability of the bank to cope with or predict market situations

1.3.2.4 Information technology capacity

+ Capability of technological equipment, including both equipment and manpower+ Technological satisfaction level and technological uniqueness of each serviceprovided

+ Intra and extra-system association capability of each bank

1.4 Vietnam’s commitments on international integration in Banking

During the negotiation process for WTO accession, Banking is the mostcomplicated negotiation field In order to enter WTO, Vietnam has made thefollowing commitments:

1.4.1 Commitments on foreign exchange and payment

- Liberalization of current transactions and no maintenance of any measureagainst its commitments on banking services and other financial services as well ascurrent transaction payment and international money transfer

- Foreign exchange management measures are only applied in exceptionalcases decided by the Vietnamese government to keep the national financial andmonetary security in conformity with IMF regulations and IMF Document no 144(52/51) dated 14/8/1952

- With respect to capital transactions, Vietnam has loosened capital transfertransactions of foreign investors and foreign loans of residence organizations and onlymaintained some restrictions of residence organizations’ transactions, which transferfunds abroad for investment This funds transfer must be allowed by appropriateauthorities and must be within the amount of foreign currency owned by theseorganizations; residence organizations’ transactions of payment and refund of foreignloans must be registered with the State Bank of Vietnam

- With respect to foreign currency balance, the Government considers andguarantees the balance of foreign currency demands for foreign investors who investinto especially important projects in the Government’s programs and assists thebalance of foreign currency for infrastructure projects and some other importantprojects in case banks allowed to perform foreign exchange transactions cannot meetall demands for foreign currencies

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1.4.2 Commitments on policies of trade and services relating to the banking

- With respect to institution establishment or fund contribution in Vietnam:Foreign credit institutions can operate in Vietnam in the form of representative office,foreign bank branch, joint-venture bank, 100% foreign-invested bank; joint-venturefinance company, or 100% foreign-invested finance company; joint-venture financeleasing company, or 100% foreign-invested finance leasing company with anoperation period of no more than 99 years and no more than operation period of theparent bank in a foreign country

Operation period of the representative office of a foreign credit institution maynot exceed operation period of the foreign credit institution The maximum operationperiod for a joint-venture finance company, 100% foreign-invested finance company,joint-venture finance leasing company, and 100% foreign-invested finance leasingcompany is 50 years, and these business licenses can be extended The contribution ofthe foreign side to a joint-venture bank, which operates as a commercial bank, maynot exceed 50% of the bank’s charter capital while the fund contribution of theforeign side to a joint-venture non-bank credit institution must reach at least 30% ofthe charter capital The total equity of foreign institutions and individuals may belimited at 30% of the charter capital of a joint stock commercial bank of Vietnam,except being allowed by Vietnamese laws or appropriate authorities of Vietnam

Regarding conditions for a foreign bank to have licenses to open a branch inVietnam, according to current Law on Banking and Amendment Law of some articles

of Law on Credit Institutions, foreign financial institutions may establish 100% FBs

in Vietnam since 1/4/2007 One of the key conditions to open a branch of a foreigncommercial bank in Vietnam is that the parent bank must have total assets of over 20billion USD at the end of the year before the time of applying for opening branch

The key condition to establish a joint-venture bank or a 100% foreign bank isthat the parent bank must have total assets of over 10 billion USD at the end of theyear before the time of applying for bank establishment With regards to 100%foreign finance company, the condition is to have total assets of over 10 billion USD

at the end of the year before the time of application Conditions for foreign bankbranches and FBs will be applied on the basis of non-discrimination

- With respect to minimum capital: Concerning a foreign bank branch with itsminimum capital equal or lower than the level required for a local bank established inVietnam, Vietnam has allowed foreign bank branches to operate basing on the parentbank’s funds for the lending purpose A foreign bank branch may not open othertransaction office than its branch head office; operation of transaction points depends

on funds of the branch, but there is no limit on the number of branches

- Regarding fund contribution in the form of stock buying: The total number ofstocks allowed to be held by foreign natural and legal persons at each joint stockcommercial bank of Vietnam may not exceed 30% of the bank’s charter capital exceptother regulations given by Vietnamese laws or being allowed by appropriateauthorities of Vietnam

Within 5 years since participation, Vietnam may restrict rights of a foreignbank branch to receiving deposits in VND from Vietnamese habitants that the bankdoes not have a credit relation with at the ratio against the capital for the branch inaccordance with the following route:

1/1/2007: 650% of chartered capital is provided

1/1/2008: 800% of chartered capital is provided

1/1/2009: 900% of chartered capital is provided

1/1/2010: 1000% of chartered capital is provided

1/1/2011: Full national treatment

1.5 Opportunities and challenges in international integration in Banking in Vietnam

International integration in general and international integration in banking inparticular always brings opportunities and challenges to the local banking system Bigfinancial - banking institutions in the world can officially operate in Vietnam now andshare the market share with local banks in the market This makes competition in themarket increasingly fierce and at the same time brings a great challenge facing localbanks as they will not only have to make great efforts to compete against opponentbanks but also have to cope with other financial institutions such as financecompanies, insurance companies, investment funds, etc

Never since 2006 is the number of banks established and coming into operation

so many in Vietnam By the end of September, 2009, the system of Vietnamese

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financial institutions had 5 state – owned commercial banks (2 of which,Vietcombank and Vietinbank, have been equitized so far), 1 social policy bank, 5100% foreign-invested banks, 6 joint-venture banks, 38 joint stock commercial banks,

47 foreign bank branches, 14 finance companies, 13 finance leasing companies and

998 grassroots people’s credit funds and 1 none – profit bank

Therefore, it can be seen that since after Vietnam’s accession to WTO on 7/11/2006,the competition in Banking in Vietnam has much increased, especially with thepresence of 5 100% foreign-investment banks, including:

- Shinhan Vietnam Bank Limited – SHBVN: 1,670 billion VND of charteredcapital

- Hong Leong Bank Vietnam Limited – HLBVN: 1,000 billion VND ofchartered capital

- Standard Chartered Bank Vietnam Limited: 1,000 billion VND of charteredcapital

- Hong Kong and Shanghai Bank of China Vietnam Limited (HSBC): 3,000billion VND of chartered capital

- Australia and New Zealand Bank (ANZ) Vietnam Limited: 1,000 billion VND

9 140 Southern Bank., JST

13 279 HSBC – Ho Chi Minh City Branch

14 302 Petro Vietnam Finance Company., JST

17 423 SaiGon Commercial Bank., JST

18 440 Orient Commercial Joint Stock Bank

(Source VNR500: http://vnr500.com.vn/web/modules/preview/PreviewArticle.aspx?msgid=80)

Hereupon is the ranking of the Vietnamese Banks on August, 31st 2008announced by Vietnam Report Company There’re 19 banks and finance companieswere ranked in top 500 Vietnam companies

1.5.1 Opportunities on international integration

International integration will improve prestige and position of the Vietnamesebanking system, especially in the regional financial market

- For the State Bank, international integration will create opportunities to improve itscapacity and efficiency in monetary policy management and enforcement, and renewthe mechanism of controlling money, interest rate and exchange rate in line withmarket principles International integration will also promote institution reform, legalsystem perfection and operation capacity improvement for finance managementagencies, remove forms of capital and finance protection and subsidy for localcommercial banks, and reduce the dependence on the assistance given by the StateBank and Government

- For commercial banks, international integration is the driving force for reformpromotion, requiring local banks to operate under market principles, overcomeshortcomings, and to improve competitiveness on the basis of governance andmanagement capacity improvement and banking service development During theprocess of integration and opening of the local financial market, legal framework will

be improved in gradual conformity with international practices, leading to theformation of an equal business environment and gradual divide of the market share

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among groups of banks in a more balanced way in which the State CommercialBank’s market share may decrease and give its place to other groups of banks,especially in cities and big urban areas Depending on strength of each bank, banksoperating in a specialized direction will appear, such as wholesale banks, retail banks,investment banks At the same time a number of large-scale, finance-strong andprofit-making banks will be born Operating under market principles also requiresfinancial institutions to build appropriate employee management and use mechanisms,especially policies on human resource training and treatment in order to attractqualified employees and therefore improve their efficiency and competitiveness in thefinancial market.

- Opening banking service market and loosing restrictions towards foreign financialinstitutions are conditions to attract direct investment to finance and banking; localcommercial banks have conditions to get access to technical assistance, consultancy,and training through forms of joint ventures and associations with international banksand financial institutions Consequently, banks needs to strengthen cooperation fortechnology transfer, development of advanced banking products and services, andmarket exploitation During the integration process, the expansion of internationalagent relation of local banks will create conditions to develop activities ofinternational payment and commercial funding, making contribution to the promotion

of investment cooperation and technology transfer relation

- Thanks to international integration, local banks will get access to the internationalfinancial market more easily, effectiveness in capital mobilization and use will beimproved, contributing to the improvement of quality and operation type Local bankswill react, adjust and operate in a more flexible way in line with local andinternational market signals for profit maximization and risk reduction

1.5.2 Difficulties and challenges facing the banking system of Vietnam

- Opening the financial market creates a growth of the number of banks with strongpotentials of finance, technology and management level Competition pressure is alsogreater along with the route to loosen regulations towards foreign financialinstitutions, especially in terms of opening of branches and transaction points,operation extent, restrictions on customer type and deposits allowed to be mobilized,

ability to expand banking services while Vietnamese financial institutions remain withlots of weaknesses:

+ Inadequate qualification and management level, low efficiency andcompetitiveness, large overdue debts, limited ability to cope with risks, small capital,low financial capacity, and low quality of assets;

+ Credit activities are quickly expanded but credit risks are not closely controlled andassessed, and not in conformity with international standards and integrationrequirements;

+ Scattered products and services, low utility, low service quality The governanceprocess in Vietnamese commercial banks is not in conformity with internationalprinciples and standards, the transparency is low, in which a healthy workingenvironment and business culture are not yet formed because role and responsibility

of working positions are not clear and the system of management information and riskmanagement is not effective;

+ Banking technological infrastructure and payment system are backward and prone

to be left further behind compared to regional countries’ They have not met therequirement on development and service quality improvement; management capacity

of the State Bank and ability of commercial banks to cope with risks are limited;+ Institution of the banking system is inadequate; banking law system is notsynchronous and not suitable with reform requirements and the integration roadmap

As a result, commercial banks of Vietnam will gradually lose competitive advantages

in terms of scale, customers and distribution channels, especially after the year 2010when above restrictions and discrimination are basically removed After that time,operation scale, ability to get access to the market and customer groups, and types ofservice provided by foreign banks will increase Remarkably, risks facing theVietnamese banking system may increase since foreign banks take control of somelocal financial institutions through forms of fund contribution, stock buying, businessassociation; a number of local financial institutions will incur risks and be prone tomake loss or go bankrupted due to their low competitiveness and incapability tocontrol risks when joining international banking operations

- Opening the local financial market increases risks due to external impacts;opportunities to utilize exchange rate and interest rate differences between the local

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market and the international market are decreasing The banking system of Vietnamwill also face international economic and financial shocks and risks of crisis In thosecases, an under-developed capital market will make the banking system suffer fromgreater damages caused by risks.

1.6 Some lessons learned from developing countries in international integration

- Governments support and protect a group-monopoly banking system with requiredreserves and hold of government bonds, allowing states to mobilize savings at a lowinterest rate or at zero rates

- Governments apply interest rate ceilings to reduce private competitiveness in fundmobilization The application of such interest rate ceilings, foreign exchangemanagement and high-required reserves will cause restrictions against the privatecapital market and increase resource flow into the state-owned sector, which is verypoor in management, causing a waste of resources

- Tight financial policy, uncompetitive market, bureaucracy in banking operationsfollowing no market rules and profit tests conducted in developing and under-developed countries may make people apply borrowing standards ineffectively

- High rate of outstanding debts and less-developed lending institutions in thesecountries are due to the following reasons:

+ Association of loans for production investment is not clear, loans sometimes aredeeply political

+ Ignorance of the market factor

+ Disbursement is slow and debt payment schedule is sometimes impractical

+ Loans are used for wrong purposes in many times

+ Indifference of the banking management work in recovering loans

+ Lenders have no responsibility and even no sense of discipline (it may be due tocultural reasons or misunderstanding of roles of the government)

+ In addition, big state-owned companies enter into collusion with banks.

As a result, the integration of developing countries requires a struggle againstthe financial control (political rather than economic goals) Financial liberalizationrequires a removal of interest rate ceilings or at least a balance between interest ratesand market interest rates and creation of market motives for bank governors

1.6.2 Lessons learned from China

China officially entered WTO on 11 December 2001 In order to enter WTO, theChinese Government has to make commitments on opening fields of Banking,insurance and securities

1.6.2.1 China’s commitments in banking section to enter WTO

- Remove geographical restrictions on business in foreign currencies since the date ofentering WTO Restrictions on business in the local currency are gradually reducedwithin 5 years; there will be no restriction on the number of licenses issued to foreignbanks

- Remove restrictions on areas and customers towards the operation to transferforeign currencies into foreign-invested banks, allow foreign-invested banks toperform foreign exchange operations towards Chinese enterprises

- Gradually remove restrictions on the Renminbi trading sector towards invested banks

foreign Gradually remove restrictions on types of customer towards the Renminbi tradingoperation

- On entering WTO, foreign-invested banks allowed to trade Renminbi is allowed,after approved, to perform Renminbi trading operations towards customers in otherareas, which allow Renminbi -related operations

- Allow the establishment of foreign-invested non-bank financial institutions, whichcan enjoy as equal treatments as Chinese financial institutions of the same type can

1.6.2.2 The competition lesson in banking in China after entering WTO

It can be seen from the above commitments that Chinese banks after theaccession to WTO have lost their exclusive position, being no longer

“monopolization” but having to “struggle for the land” against foreign banksoperating in the Chinese market This has really cause difficulties to Chinese banksdue to their poorer capacity and being protected by the Government of China To be

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able to equally compete under market rules, thus, commercial banks of China have tomake great efforts to restructure the banking system and change business strategies aswell as modernize the system

Competition pressure on Chinese banks is increasing remarkably, as the WTOintegration process becomes increasingly wide and deep Consequently, in order tostrengthen their position in the financial - banking market, a special strategy has beenapplied by Chinese banks, namely “cement and the mouse” strategy

a Flexible and smart as the mouse: The mouse strategy

Industrial and Commercial Bank of China (ICBC), China’s largest commercialbank, is the first place where this strategy is implemented To be as smart as “themouse”, ICBC has upgraded its online banking system twofold over the recent twoyears since 2001 and has got a transaction value up to 4 billion RMB (482 millionUSD) per day since December, 2003 ICBC also takes the lead in providing onlinepayment services for fixed and mobile telephone charges in the local market ICBCand a number of other local banks in China have started to launch e-banking servicessince 2000, a little slower than huge banks in the world

Dynamism is also created when the e-banking division has gained great concern fromthe bank leadership They have considered this division to be very important in thedevelopment process; whether the bank can stand firm and exist under competition ornot, whether operations are effective or not, and whether profits gained are biggerthan costs or not depend all on operating results of the e-banking division Forexample, Construction Bank of China usually arrange employees who are proficient

in expertise, knowledgeable about the financial situation, with business relations,clear-headed with situation changes, enthusiastic, resourceful, enterprising but carefuland decisive…to undertake this operation The bank recruits not only employeeshaving knowledge of banking but also ones from business and marketing fields for thee-banking division

b Solid and safe as cement: The cement strategy

The top concern of ICBC as well as of many other Chinese banks is to try tohave the signature of hundreds of millions of customers not only for the e-bankingservice but also for other financial and banking services ICBC is striving for theprovision of more perfect services for 100 million customers who are individuals,

groups and companies of China Almost all insurance companies, most of groups out

of 10 country’s largest insurance brokerage groups and some multi-national financialinstitutions, of which Citibank must be named, are currently customers in the total5,600 customers of the ICBC online banking system The bank has started to keeprecords and analyze transactions performed by customers through a databasecompletely built since 2004 According to ICBC, in spite of advantages oftechnology, service and management, foreign banks still need more time and patience

to convince the Chinese people that clicking the cursor on their website is a better andsafer choice compared to the performance of online transactions at banks TheChinese people always feel safer when they put the money that they have to workhardly to earn in local banks nationwide, a strong point in addition to local onlinebanking services This is place where “cement” proves its usefulness in e-bankingstrategies of Chinese banks Once again, Chinese traditional culture and societybecame an invisible barrier against strong attacks from foreign competitors

The result is that, thanks to their “cement” carefulness and solidity, Chinesebanks have made customers feel comfortable on information exchange, helpingcustomers protect their data and be served through e-service channels all the time Foreach Chinese bank, the e-banking development and application with different scalesand service characteristics depend on management capacity, technological applicationlevel and development strategies of each bank Although there is no common solution

to risk management in e-banking activities for all banks, they all have one thing incommon - development strategy and orientation

The above-mentioned solutions applied by Chinese banks can be considered

“open” orientations; the application to each specific bank needs to be considered andassessed in line with existing e-banking activities and future development plans 1

1.6.2.3 Experience in reforming the banking system of China on international integration

China has officially announced an amount of 45 billion USD plan to transformtwo main state-owned banks of China into groups with the view to improvecompetitiveness of the banking system of China when Beijing is about to open itsfinancial system to foreign opponents

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The first two banks which will be transformed into a group are Bank of China andConstruction Bank of China Like other state-owned banks of China, these two bankshave to deal with bad debts borrowed by other Chinese state-owned companies It isthis matter that has badly affected the banks’ operations.

These two banks will be transformed into groups with shareholders and Board

of directors And foreign strategic investors will be invited, but there has been no signthat individual investors will have right to buy shares to take control of the banks

The common purpose of transforming state-owned banks into groups withoutbeing “backed” by the State is to make high profits for the banking system, and at thesame time to create strengths for Chinese commercial banks in particular and theChinese banking system in general to be able to compete against the strong financialpotential of foreign banks which will invest in China in the coming time However,the government of China will retain control of the banks through its stocks in the twobanks above The number of stocks held by the State has not been determined, but itwill depend on operations of each bank as well as importance level of the bank in thenational economy

The amount of money used to reform the Bank of China and ConstructionBank of China will be taken from China’s foreign currency reserves; the total amount

is estimated to be over 400 billion USD

Both Bank of China and Construction Bank of China will be required to reform

in terms of finance; at the same time, they have to work out policies and plans toarrange and deal with bad debts, and increase cash reserve funds

Industry reform in the banking system is putting China under great pressurefacing foreign requirements On entering the World Trade Organization (WTO),banking system reform and market opening guarantees are one of the commitmentsChina has to perform

The banking system reform this time is a right step taken by the government ofChina in front of the integration doorstep On the one hand, it strengthens investors’trust; on the other hand, it can help the banking system of China overcome the crisisand continue to develop to support the national economy 1

As such, it can be seen that the purpose of reforming the banking system of Chinafocuses on the followings:

- Focus on dealing with bad debts to improve liquidity for Chinese commercial banks

- Increase the scale of charter capital as well as cash reserve for commercial banks inorder to improve their competitiveness against foreign banks

- Redefine the value of enterprises to call on foreign strategic investors (these must beinstitutions) to invest into the system of commercial banks of China so as to utilizeadvantages of technology, management skills, funds as well as competitiveness offoreign investors

- Maintain the state’s presence in management of commercial banks to ensure safetyfor the Chinese government’s objectives concerning the national financial security

1.7 Lessons for Vietnam during the Banking integration process

1.7.1 Real situation of Vietnamese commercial banks before WTO accession 1.7.1.1 Financial capacity

Financial capacity is considered on the following aspects:

+ Equity Statistics show the internal capital of Vietnamese commercial banks is too

low Chartered capital of Agribank was considered to be largest only reaches 400million USD, far lower than that of commercial banks in regional countries

Table 1.1

Scale of chartered capital of some Commercial Banks in Asia 1

Unit: In million USD

UOB (Singapore) (Mil

+ Profitability 2

ROA Ratio

1 (Source: SBV; Fitch Rating; www.bangkokbank.com; www.maybank2u.com.my; www.uob.com.sg;)

2 Phd Nguyen Trong Tai: Competition among commercial banks seen from theoretical and practical aspects in Vietnam

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The ROA ratio of Vietnamese commercial banks is rather low, about 0.38%while this ratio of commercial banks in regional countries is relatively high,including: The ROA ratio of the group of Asia - Pacific banks (including 52commercial banks belonging to 10 countries) is 0.94% The ROA ratio of banks ofemerging countries (Including 14 banks of Thailand, Indonesia, Malaysia, and thePhilippines) is 0.77%

Meanwhile, this ratio of commercial banks of other countries is always over 15%

It is obvious that commercial banks of Vietnam operate with a relatively lowefficiency

1.7.1.2 Operational capacity

+ Mobilizing capacity: Because customers’ demand for operating capital has been

rather high in recent few years, commercial banks have offered a lot of promotion andafter-sales policies to mobilize funds and the competition is generally rather fierce.However, it can be seen that commercial banks of Vietnam still use the low-pricestrategy for fund mobilization Some commercial banks also use the measure ofbranch expansion to get closer to customers, hHowever, the opening of branches isnow rather wild without effectiveness considerations, causing difficulties to thegovernance work and more risks It is clear that the measure to increase interest ratesfor fund mobilization while the State Bank applies regulations on interest rate ceilingwill surely reduce profits for commercial banks

+ Credit capacity A high increase in the demand for credits in the economy has

resulted in a very high credit growth rate in commercial banks and a very stronggrowth of lending outstanding in recent few years Specifically, the average creditgrowth rate of commercial banks is about over 25% per year, especially some bankshave a growth rate of up to 30 - 40% per year, so high a growth rate; moreover, thehigh growth rate lasts for a rather long period of time, but this credit growth tends to

occur in the fields of securities and real estate which consist of a lot of potential riskswhile the capital demand for production much increases but does not meet it in time.This will apparently distort the meaning of credit growth

Total Industry 100 123 130 129 141,65 131,1 119,69

+ Capacity to expand and develop products and services.

In general, much inadequacy still remains, including:

Local payment: Cash payments tend to decrease but are still high, in general.

Specifically, the cash ratio/M2 in recent few years is as follows4: 1991: 31.6%; 1994:43.3%; 1998: 26.4%; 2000: 23.4%; 2002: 22.6%; 2004: 20.35%; 2005: 19.01% and2006: 17.46%

Operation of guarantee and international payment: Not all commercial banks but

only some big, prestigious commercial banks can perform this operation

Operation of exchange business: The exchange market of Vietnam is under

developed because the exchange policy of the State Bank leans to management ratherthan follow market principles and derivative instruments (Swap, Forward, Options,future) are ineffective, resulting in the fact that some commercial banks of Vietnamperforming the exchange business operation have faced high risks over the past years

Other non-credit operations: Just initial access steps taken

1.7.1.3 Management capacity

In general, the management model still leans on type of traditionalmanagement, which are geographically administrative, causing great difficulties todevelop the network to the outside due to limitations in finance, governance andcompetitiveness

1.7.1.4 Technological capacity

3 Source: Annual Report 2006 – SBV

4 Source: International financial statistics -6/2005; Annual statement in 2006, State Bank of Vietnam

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According to the calculations and experience of foreign banks, informationtechnology might reduce 76% in costs for bank operations Whereas this is a fieldrequiring a major investment, for example in order to build up managementinformation system for a state-owned commercial bank need to cost 500 – 600 billionVietnam Dong This is an inadequate for Vietnam bank system due to the low chartercapital

In general, the technology of Vietnam commercial bank is still somewhat weakcompared to the foreign banks In details:

According to the WB, technology index in the banking sector in Vietnamremains low The technology of Vietnamese Banks is just (-0,47) While China’sindex is (-0,35); Thailand’s is (-0,07), Indonesia’s (-0,07), Malaysia’s is 1,08 andSingapore’s is 1,95

The combination among banks in technology resolutions have not high yet that leads to banking services are not abundant, convenient and attractive, businessscope coincides with the fields have advantages of the foreign banks (activities ofinternational payment, commercial aid, project investment,…)

International integration in banking sector increases in capital transaction,while bank management mechanisms and bank supervision information system arevirtually primitive, are not consistent with international practice, has no effect toensure compliance with the law strictly in banking operations and the safety of thebanking system, especially the early warning of the risk of banking operations Thedevelopment of information technology, telecommunications, and networktechnology and digital technique create a foundation for services development likeelectronic bank, automatic bank, such as: Home Banking, Internet Banking, debitcards, electronic transactions, etc thereby making positive contribution to banningactivity civilization, but currently network security in Vietnamese banking operationsstill remain many gaps

e Trademark

Along with economic - social development, human life is increasinglyimproving; the competition for trademark will be stronger and stronger Nature of thetrademark is the prestige in service quality to which a bank is prepared to provide tosociety In this term, Vietnamese commercial banks are almost in a lower prestige, so

in case of open-door policy, the commercial banks will be competed very fiercelyright on the “home field” and shall become worse when considering the reaching-outabroad.

1.7.2 Lessons on competition in the process of international integration for Vietnamese Commercial Banks

a The State

+ To perform the reformation of state-owned commercial banks in the orientation thatthe state only holds one capital part to maintain the presence of the state in conductingmacro-policy

+ To build up a stable legal environment, create favorable conditions for economicactivities To review, improve the legal framework for banking business activities inaccordance with WTO accession commitments of Vietnam to create a fair, secureplaying field in the fields of credit, banking services, investment, and other financialservices

+ To remove the incentive mechanism, the system of protection for commercial banks

in Vietnam step by step To set up and build up safety standards in currency tradingsuch as benchmark for safety in banking system, the standard on deduction and use ofreserve to offset risks, deposit insurance and the provisions on bankruptcy of creditinstitution …

+ Limit to the lowest level of government intervention in business of banks and forbanks actively trades in accordance with provisions of the market

+ Promote and support development of inter-bank market in order to create a goodenvironment for the development of banking services

+ Promote payment through banks to gradually reduce the flow of cash quantity incirculation

b Commercial banks

+ To improve financial capacity through measures such as increasing own capital (this

is entirely done through the stock market); improve the coefficient of profit bearingthrough expanding and improving the quality of quality and services, offer newservices in line with the market segment;

+ Decrease the rate of bad rate by managing closely and improving the quality ofcredit, regular review, timely resolution of risks, increased using of derivative

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professions, frequent implementation of debt classification to take measures forprompt handling

+ Modernization of banking technology to keep up with banks in the region and in theworld

+ Upgrade management capacity; strengthen specialized courses in order to createconditions for bank staff, employees can keep pace with market evolutions in order toproactively offer proper solutions in the banking business operation This was seenvery clearly in 2008 when the State’s Bank increased the required reserve ratio by 1%then a great deal of Commercial Joint Stock Bank has confused and lacked thepayment capacity but not eligible to borrow for discount from the State’s Bank

1.7.3 Achievements after joining WTO

a The State’s Bank

+ Being promoting promptly completion of a new draft Law on State Bank ofVietnam and Law on Credit Institutions (expected to be submitted to the NationalAssembly in 2010) In the process of drafting the Law on State Bank, determination

of the legal status of the State’s Bank of Vietnam has paid attention, including:determining goals, functions, duties; management and supervision operationsconforming to international practice, in accordance with characteristics of Vietnam.+ Expeditiously to complete the draft Law on Safety supervision in banking activities,law on deposit insurance to present the Government for promulgation in the timecoming

+ To complete Proposed Plan on Banking inspection reform and set up remoteinspection system

+ To execute administrative reform, with the focus is: reviewing, simplifyingadministrative procedures in order to create favorable conditions for the operation ofcredit institutions and direction work, management of units of the State’s Bank

+ One of the commitments of the State Bank to the WTO is to ensure equality in theactivities of commercial banks (CB), for which the State’s Bank issues provisions onshareholders, stocks; on risk management

- State’s Bank also has made changes in currency management and bankingoperations, under which the State’s Bank manages the official exchange rate, andsimultaneously, create ventilation in the management and enhance the autonomy of

these activities of commercial banks On the other hand, the State’s Bank is alsoactively implementing measures to enhance the conversion of Vietnam Dong,overcome the tension of dollarization to the economy

In addition, in its plan, the State’s Bank also:

+ Build and develop the money market, including: complete business conditions inthe banking sector in accordance with standards of Vietnam In details: to increaseconstruction capacity and manage currency policy in the direction of the initiative,flexibility, ensuring a stable value for money, promotes economic growth…

+ Develop a comprehensive system of credit institutions towards modernization,multi-functional activities, diversification of ownership and the type, eligibleactivities, stability and improving the competitiveness; diversification of bankingservices, increasing autonomy and self-responsibility of the credit institutions on theprinciple of market…

+ To strengthen and improve monitoring activity effect of the State’s Bank, completeprovisions on management, especially for increasing supervision capacity andmanagement of risk to operation of the credit institutions

+ Renew strongly the administrative reform, build the State’s Bank of Vietnam tobecome a Central Bank modern with a new organization and management model;focus on developing human resources with high professional…

b Commercial banks

+ Basically, complete the processing of the bad debt, accelerate financial restructuringand carry out promptly the equalization of state-owned commercial banks, thereon theBank for Foreign Trade of Vietnam (Vietcombank) and the Industrial andCommercial Bank of Vietnam (Vietinbank) was equities, the Bank for Investment andDevelopment of Vietnam (BIDV) has also actively taken steps necessary to carry outthe equalization Tend to build a banking financial corporate has been taking placevery strongly in Vietnam's major commercial banks is got interested in preparing, inwhich the Bank for Investment and Development of Vietnam and the Vietnam Bankfor Industry and Commerce have taken positive steps

+ The commercial banks are speeding up restructuring, including in particular theincreased financial capacity The joint stock commercial banks have to find strategicpartners for investment cooperation and support the development Parallel with this is

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to actively take measures to increase capital, in which joint stock commercial banksadditionally issue stock (for both strategic investors and existing shareholders) Onthat basis, the commercial banks, especially joint stock commercial banks haveexpanded the scope and areas of operation, market share for credit activities andmobilization has increased significantly while the trend was clearly seen the decline

of state-owned commercial banks

Table 1.4 Market share of the Group of Banks in Vietnam from 2005-2008

Unit: %

Market share in Mobilization

State-Owned Commercial Banks (SOCBs) and

Foreign Banks (FBs) & Joint Venture Banks (JBs) 8 9 9 8

Market share in Credit

State-Owned Commercial Banks (SOCBs) and

Foreign Banks (FBs) & Joint Venture Banks (JBs) 9 8 9 9

New chartered capital (estimated)

Industrial and Commercial Bank of Vietnam 11.252 12.252

Bank for Foreign Trade of Vietnam (VietcomBank) 12.101 13.224

(Source: Collecting from JSBs)

+ Technology applications in the operations of commercial banks have beenstrengthened over, so promote activities of banking services, especially paymentservices, including ATM card payment increases quite strongly (in 2006 about 2500machines with 2 million cards issued, in 2007 had 4300 machines with 10 millioncards to be issued early in 2009 and 7000 machines with the 14 million cards issued).The State’s Bank directs the commercial banks to make connections with automaticdebit card payments via the National financial switched company switched underproposal was approved by the government and two companies so far are: Banknet andSmartlink (PVnet) have signed a contract for the connection between the two paymentsystems of 2 alliance, accounting for most of the major commercial banks in ourcountry

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CHAPTER II

THE REAL SITUATION OF BUSINESS OPERATIONS OF SACOMBANK

ON VIETNAM’S ACCESSESION IN WTO 2.1 General introduction on Sacombank

Officially established and came into operation on 21/12/1991 according to theEstablishment License No 0006/NH-GP dated December 5th 1991 of the State’s Bank

of Vietnam, Sai Gon Thuong Tin Bank derives a small bank, born in the difficultperiod of the country with initial capital of 03 billion Vietnam dong and operatingmainly in areas along Ho Chi Minh city

After nearly 18 years of operation, the Saigon Thuong Tin Bank with transactionname now is Sacombank has become one of the leading Commercial Joint StockBank Vietnam with:

- More than 274 branches and transaction offices in 45/63 provinces and citiesnationwide, 01 representative offices in China, 01 branches in Laos and 01 branches

in Cambodia;

- 10,978 dealers in 306 banks in 81 countries and territories around the world;

- Nearly 7000 young, dynamic and creative employees;

- More than 70,000 shareholders mass;

Sacombank has 03 reputable strategic foreign partners holding nearly 25% of sharecapital:

- Dragon Financial Holdings in the UK, contributed capital in 2001 holds 8.73%shares

- International Finance Corporation (International Financial Company - IFC) underthe World Bank, to contribute capital in 2002 holds 5.25% shares;

- Australia and New Zealand Bank Group (ANZ), to contribute capital in 2005 holds10% shares

Especially Sacombank is one of the first private banks established in Vietnamsince the economy reformed, the first bank was listed shares on the Ho Chi MinhStock Exchange and is also first bank in Vietnam opening branches abroad On 16-5-

2008, Sacombank was officially the first Commercial Joint Stock Bank of Vietnambecoming the Financial Group model (Sacombank Group) in which Sacombank is thecenter of the Group

By the end of 2008, total assets of Sacombank reached 68,438 billion(equivalent to $ 4 billion), total outstanding loans reached over 35 thousand billion,the charter capital reached 5,115 billion (approximately $ 300 million) ranked fifth innumber of Commercial Joint stock banks in Vietnam, the value of marketcapitalization reached 9,411 billion (approximately USD 553 million), enterprisevalue reached over 95 thousand billion, the percentage of overdue debt is 0.99% ratebad debt is only 0.62% - the lowest rate among commercial banks in Vietnam, which

is the rate of capital safety is CAR 12.16% while the international standard of 8%.According to report Feb/2009 of credit assessment organization Fitch Rating,SacomBank evaluated in D with the ACB and VCB (This is the highly rated banks inVietnam)

Factors that Sacombank obtained the foregoing success as can be told to:

- First, Sacombank has firmly believed in economic development policy of the State,the reform policy in industry and the creative and hardworking capacity of team ofemployees;

- Second, Sacombank soon set free long-term development orientation, build a routefor each specific target, form a clear legal framework, always see the consolidationand development like two central tasks;

- Third, Sacombank has focused hard for domestic resources increasing, expandingoperations network, establishing close relationships with strategic partners both withinand outside the country to attract more resources inside and reduce competitivepressure outside

- And finally, Sacombank has known to radically apply policies on material, spiritualand cultural benefits, to build and develop a team of loyal, confident executives in allsituations, a labor force with youth and in particular, Sacombank formed anddeveloped its own target customers and it becomes faithful for long term All thesefactors have created a sustainable foundation for Sacombank

Sacombank has become an indispensable kernel of the financial market of Vietnamand is one of the bank trademarks trusted and loved of all population strata ofVietnam as well as foreign partners

Ambition to become the leading JSBs in Vietnam and a reputed trademark in theregional financial market, Sacombank has realized actions to pursue to the strategic

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focus on: improving financial capability and development of modern technology,expanding operations networks, improving and innovating products and services,improving the quality of human resources and in particular completing the system ofmanagement, in order to add the best banking facilities to life, the Vietnamcommunity toward future prosperity and development.

Logo of Sacombank

Messages of Sacombank: Sacombank strives constantly to give customers banking services with best quality and the most professional service style in favor of expectation to become one of the leading commercial joint stock banks and the most modern multi-purpose retail bank in Vietnam Sacombank commits to serve customers dedicatedly, all for customers, shareholders and partners with prestige and high quality"

 With partners: As the reliable and effective choice for partners

2.2 Strategic management of Sacombank to 2012

2.2.1 Vision

Being a leading retail Joint Stock Bank in Vietnam with the target market in urbanareas and concentrating on:

 Traditional customers of medium and small size companies

 Intensifying to develop the best banking services for individuals

 Intensifying to invest financial resources in members of the Group

2.2.2 Mission

To reach specific target groups mentioned above, Sacombank acting as a Group’scenter has defined its mission: