Report subject money and capital markets topic commercial bank

TON DUC THANG UNIVERSITY FALCULTY OF BUSINESS ADMINISTRATION REPORT Subject Money and Capital Markets Topic COMMERCIAL BANK Lecturer Do Thi Thanh Nhan Group 02 Group members To Vu Minh Chau Phan Tu Qu[.]

TON DUC THANG UNIVERSITY

FALCULTY OF BUSINESS ADMINISTRATION

REPORT Subject: Money and Capital Markets

Topic: COMMERCIAL BANK

Lecturer: Do Thi Thanh Nhan Group: 02

Group members: To Vu Minh Chau

Phan Tu Quyen Dinh Quang Hiep Nguyen Tran Dong Quan Major: International Business

HCMC, 10 th December , 2022

GROUP’S MEMBERS

 Summarize the report

INTRODUCTION 5

CHAPTER 1: GENERAL INTRODUCTION OF VIETNAM COMMERCIAL BANK SYSTEM 6

1.1 Definition of commercial bank 6

1.2 How does a commercial bank make money? 6

1.3 Function 6

1.3.1 Primary Functions 6

1.3.2 Secondary Functions 7

1.4 Types of commercial banks 8

1.4.1 Public Sector Banks 8

1.4.2 Private Sector Banks 8

1.4.3 Foreign Banks 8

1.5 Types of loans offered by commercial banks 9

1.5.1 Term loan 9

1.5.2 Bank Overdraft facility 9

1.5.3 Letter of credit 9

1.5.4 Bank Guarantee 9

1.5.5 Lease Finance 9

1.5.6 SME collateral-free loan 10

1.5.7 SME credit card 10

1.5.8 Commercial vehicle loans 10

1.6 Regulation by Central bank 10

1.7 SWOT analysis 11

1.7.1 Strengths 11

1.7.2 Weaknesses 11

1.7.3 Opportunities 11

1.7.4 Threat 11

CHAPTER 2: THE IMPORTANCE, THE ADVANTAGES, AND DISADVANTAGES OF COMMERCIAL BANK 12

2.1 The importance of commercial bank 12

2.1.1 Role of commercial banks in economic development 12

2.2 The advantages and disadvantages of commercial bank 13

2.2.1 The advantages of commercial bank 13

2.2.2 The disadvantages of commercial bank 14

CHAPTER 3: TOP 5 OF THE BEST COMMERCIAL BANKS AND ANALYSIS OF THE BEST COMMERCIAL BANK IN VIETNAM 2022 16

3.1 Top 5 commercial Banks in Vietnam 2022 16

3.2 Analysis of Vietcombank commercial bank, Vietcombank South Sai Gon branch 16

3.2.1 Organization Structure 18

3.2.2 Capital analysis 21

3.2.3 Credit operations 22

3.2.4 Business report 23

CONCLUSION 25

REFERENCES 26

APPENDIX 28

The banking industry consists of systems of financial institutions known asbanks that assist people in storing and using their money Banks allow customers toopen accounts for a variety of purposes, such as saving or investing money Thebanking industry is also beneficial to the economy because it provides resources forindividuals, families, and businesses to use for transactions and investments One waythe banking industry accomplishes this is by organizing and distributing loans toapplicants for purposes such as purchasing real estate, starting a business, or financing

a college education

In the banking industry, there are many different types of professionals, each ofwhom serves a specific purpose in managing people's money Bank tellers, forexample, can assist customers in opening and closing accounts, making deposits andwithdrawals, and setting up recurring payments for other services A mortgageconsultant is another type of baking professional who can assist individuals andfamilies in applying for mortgages that allow them to purchase real estate Similarly, acredit analyst at a bank can examine a client's credit to determine whether they are agood candidate for a loan

While the banking industry remains a constant in society, it changes as newtrends emerge One of the most popular current banking trends is the use of onlinebanking, which allows account holders to access and manage their funds from homevia computer A closely related trend is the rise of mobile banking, which allows users

to access their bank accounts via mobile devices Both of these trends are related totechnological advancements that assist the banking industry in improving itsprocesses

The rise of investment banking is another widespread trend in the bankingindustry Investment banking is a service in which banking professionals advise theirclients on where they should invest their money Investment banking is becomingincreasingly popular as a result of advancements in artificial intelligence andautomated banking processes Many people use investment banking to inform theirinvestment decisions while also saving money on professional advice because manyinvestment banking tasks can be automated

Through a brief introduction to the banking industry, we can see that there aremany types of banks in the banking industry Among the types of banks, my teamchose commercial banks as the topic of this report

CHAPTER 1: GENERAL INTRODUCTION OF VIETNAM COMMERCIAL

BANK SYSTEM

1.1 Definition of commercial bank

A commercial bank may provide its customers with loans, certificates ofdeposit, savings accounts, overdrafts, and other banking goods and services Financialinstitutions earn a profit by lending customer money and collecting interest.Commercial banks provide loans for companies, autos, residences, people, and evencolleges

Deposits made by customers in various accounts are used to fund loans.Deposits are utilized to finance loan offers A country's economy must have access tocommercial banks because of their role in developing new forms of money, credit, andmarket liquidity While the majority of these organizations are still located inmetropolitan areas, their digital equivalents are becoming more prevalent

1.2 How does a commercial bank make money?

Commercial banks provide typical banking services to individuals and small tomedium-sized enterprises on behalf of the general public Banks make income via feesfor customer service and other levies Fees that may be incurred include, but are notlimited to, overdraft charges, safe deposit box fees, late payment penalties, and so on

In addition to interest, other loan-related expenses may be incurred

Profits are generated by banks via the issuance of loans using the fundsdeposited with them Banks earn more money from client deposits than from theinterest they charge on loans they provide For example, a bank may give 0.30 percentyearly interest on savings accounts but 4.80 percent on mortgages

Typically, commercial banks are headquartered in structures that providecustomers with access to tellers and automated teller machines Since the introduction

of faster and more dependable internet connections, the majority of banks nowprovide their clients the opportunity to complete the vast majority of their bankingoperations online People may now send money transfers, make deposits, and pay billsonline

1.3 Function

1.3.1 Primary Functions

Accepting Deposits – Commercial banks accept deposits from their customers

in the form of saving, fixed, savings rent deposits

Savings Deposits – Savings deposits allow a customer to credit funds towardstheir ato for up to a certain limit These deposits are preferred by individuals with afixed income, utilized to create ate savings over time

Fixed Deposits – Fixed deposits come with a predetermined lock-in period.Fixed deposits are also referred to as time deposits as the funds are deposited for aspecific time frame.

Current Deposits – Current deposits allow account holders to deposit andwithdraw money whenever necessary In some cases, current accounts also offeroverdrafts until a pre-specified limit to individuals and businesses

Providing Loans – One of the main functions of commercial banks is toprovide credit to organizations and individuals, and profit from the earned interest.Usually, banks retain a small reserve for their expenses while offering the remainingamount to customers as various types of short and long-term credits

Credit Creation – A unique function of commercial banks is credit creation.Instead of offering liquid cash, banks create a line of credit and transfer the loan to abusiness or commercial body all at once

Categories of Secured and Unsecured Loans provided by Commercial BanksCash Credit – Commercial Banks and their Functions include extendingadvances to individuals and organizations against bonds, inventories, and other types

of securities This facility, commonly known as cash credit, provides a moresubstantial sum when compared to other forms of credit

Short-Term Credits – Short-term loans are usually pledged without anysecurity, offering a smaller loan amount and repayment tenor These are also referred

Exchange of Securities – The purchase and sale of bonds and other securities is

an additional service provided by commercial banks Customers find it mostconvenient to deal with the financial institution on their own when purchasing orselling a unit

Discounting Bills of Exchange – Currently, discounting business invoices is theprincipal service provided by commercial banks By discounting bills, financial firmsmay profit Because bills are considered negotiable documents, they provide a

continual flow of cash without the risk connected with payment In none of theseinstances is the financial institution required to participate in a lawsuit

Bank as an Agent – Commercial banks serve as agents in the financial industry

by providing a variety of services to their clients, one of which is helping consumersmanage their money

Common components of such services – Managing an estate on behalf of aclient as their administrator, trustee, or executor Helping customers with their taxreturns, refunds, and related tasks Facilitating the transaction of dues, loan payments,etc Providing a medium for the transmission of financial data electronically; thisincludes the processing of payments (such as checks, drafts, and invoices)

1.4 Types of commercial banks

To explain how commercial banks work, it is helpful to first familiarize oneselfwith the many other sorts of financial organizations In general, three distinct varieties

of commercial banks exist Here are the items:

· Government banks

· Private sector banks

· Regional rural banks

1.4.1 Public Sector Banks

Banks that are owned by the state, or the public sector, are referred to as

"public sector banks." The government has a significant stake in such groups TheReserve Bank of India, the country's central bank, is responsible for establishingpolicy for the country's public sector banks

1.4.2 Private Sector Banks

Banks operating in the private sector are often limited liability firms The majorpart of the share capital of such companies is owned by individuals or privatebusinesses

1.4.3 Foreign Banks

Banks that are based outside of the country's borders are said to be foreignbanks There was a dramatic growth in the number of international banks operating inIndia after the country's financial reform in 1991 They are crucial to a country'seconomic growth

There are commercial banks that provide loans and take deposits, and there isthe Central Bank, which is the ultimate authority when it comes to financialinstitutions The commercial banking system is regulated, interest rates aredetermined, and the economy's monetary supply is managed by the Central Bank Thisfinancial institution does not interact with the general public in the same way as

commercial banks do when it comes to offering banking services As a result, thepublic will never get assistance from the Central Bank on par with that from privatebanks.

1.5 Types of loans offered by commercial banks

1.5.1 Term loan

A term loan is any loan given to a business with a predetermined paybackduration It is payable monthly or quarterly and has a set interest rate There are bothsecured (where the collateral is provided) and unsecured (where no collateral isprovided) term loans A secured term loan will often have a cheaper interest rate than

an unsecured loan

1.5.2 Bank Overdraft facility

A Bank Overdraft Facility refers to the capacity to draw cash more than isavailable in the company's current account Before a facility is sanctioned, the amount

of the facility and the interest rate on overdrafts are normally agreed upon Since theoverdraft may be paid back with the next deposit, it is considered a short-term source

1.5.4 Bank Guarantee

A bank guarantee is a written promise by a bank to pay a specified quantity ofmoney to a beneficiary during the guarantee's validity term if the beneficiary presentsthe bank with a letter of guarantee issued on behalf of the customer Thecircumstances under which a guarantee may be called upon are often spelled out in aguarantee letter A line of credit would have been paid out regardless of whether ornot the other party fulfilled their contractual responsibilities, but in this case, paymentwould only be made if the other party breached the terms of the contract To protectone party from financial loss in the event of the other party's breach of contract, abank guarantee is often employed

1.5.5 Lease Finance

Lease Financing is a cutting-edge form of financing that allows borrowers touse and benefit from specific assets for medium- to long-term periods fix payments.Lessor (financial institution) acquires and takes title to the property Lessor wouldhave earned interest on the rentals or installments paid by Lessee, and Lessor wouldhave recovered a large portion (or all) of the initial cost of the identified asset at theend of the leasing period Lessee may purchase the asset at the end of the lease term

by making the final rental or installment payment, or by agreeing to a purchase pricewith the lessor As long as the lease is in effect, the lessor (finance company) retainsfull ownership of the leased property In any case, the lessee has the management ofthe asset and uses it as necessary.

1.5.6 SME collateral-free loan

This is generally a business loan issued to SMEs and is collateral-free orwithout a third-party guarantee Here the borrower is not obliged to offer collateral toreceive the loan It is made accessible to SMEs in both the start-up as well as currentstages to fulfill working capital needs, acquisition of machinery, and support growthambitions However, it needs to be mentioned that small enterprises dealing in retailtrade are not eligible for this sort of loan

Loans are available for the purchase of both new and used constructionequipment, including but not limited to excavators, backhoe loaders, cranes, and high-end machinery Loan terms may range from 12 to 60 months in length, depending onthe specifics of the agreement and the borrower's ability to make monthly payments

In most cases, the machine itself serves as collateral for the loan

1.5.7 SME credit card

Cash Credit and Term Loan - type Small and Medium-Sized Enterprise CreditCards are offered, with credit limits of up to 10 Lakhs

Small factories, stores, businesses, and shipping companies may all benefitfrom this lending program Cash Credit has a 3-year payback term, whereas TermLoans have a 5-year term

1.5.8 Commercial vehicle loans

Commercial vehicle loans can be used to finance the purchase of anycommercial vehicle, including trucks, buses, tippers, and even light commercialvehicles Loan terms may range from 12 to 60 months in length, depending on thespecifics of the agreement and the borrower's ability to make monthly payments

Companies with over 2 years of operating history, the current owner of at least

2 commercial vehicles, captive customers, and transporters are eligible for this loanfacility

1.6 Regulation by Central bank

In every nation, commercial banks are subject to regulation from a variety ofgovernment bodies

Commercial banks are subject to oversight and regulation by central banks,which helps assure compliance with the law on the part of the commercial bankingsector

A minimum bank reserve is the amount of money that a bank is required tokeep on deposit with the central bank to fulfill the standards set out by the regulatory

agencies This protects financial organizations against things like bank runs and theinability to meet their obligations.

1.7 SWOT analysis

1.7.1 Strengths

 There has been a growth in the number of domestic banking options available

to consumers When people have more disposable income, they are more likely

to utilize and benefit from financial services

 The financial system, and notably major domestic banks, enjoys the trust of itscustomers, who feel secure investing and transacting via the system

 Loans tied to State policy are reducing, and so is the importance of Statecommercial banks The fact that banks can compete fairly is an indication ofthe market's vitality

1.7.2 Weaknesses

 Traditional banking services dominate the domestic financial landscape, which

is boring, of poor quality, and not focused on customers' requirements There is

a lack of variety in the goods and services available for export

 Small and medium-sized businesses, as well as the general populace,particularly those living in rural and outlying locations, have poor serviceaccess

 Not only is the safety ratio low, but Basel II's implementation into corporategovernance is also incomplete

1.7.3 Opportunities

 The banking and financial sector is expected to expand in conformity withcommon goals The motivation for institutional change, such as the adaptation

of commercial banking to international standards

 Develop your retail market and enhance your offerings to increase your interest revenue

non- As a consequence of the Comprehensive and Progressive Agreement for Pacific Partnership, opportunities for the banking industry to aid firms inexpanding their operations are on the horizon

 Competition is rising as new players enter the market, such as multinationalbanks and foreign investment firms

CHAPTER 2: THE IMPORTANCE, THE ADVANTAGES, AND

DISADVANTAGES OF COMMERCIAL BANK 2.1 The importance of commercial bank

2.1.1 Role of commercial banks in economic development

2.1.1.1 Capital Creation

A country's economic progress depends on capital production, which is acrucial part of what banks do Through its nationwide network of branches, theymobilize the modest savings of the people who are dispersed across a large area andmake them available for useful uses

Banks now offer a lot of enticing incentives for customers to save their moneywith them and transfer the funds to the organized money market If the banks don'tfulfill this role, deposits either go unused or are used

2.1.1.2 Credits are created

To increase the amount of money available for development projects, bankscreate credit Credit expansion has a positive impact on production, employment,sales, and prices, which accelerates economic growth

2.1.1.3 Channelizing the money toward profitable investment

Banks invest the savings they have raised in profitable ventures Commercialbanks perform a variety of tasks in addition to capital formation To boostproductivity, shared savings should be distributed among different economic sectors.Only then can it truly be regarded to have contributed significantly to the growth ofthe economy

2.1.1.4 Promotion of the Right Industries

By offering loans to the proper kinds of people, many banks support the growth

of the right kinds of industries They contribute in this way to the nation'sindustrialization as well as its economic growth They provide producers with loansand advances whose goods are in high demand By adopting new productiontechniques, firms improve their output in turn and contribute to a rise in the nation'sGDP Subprime financing is occasionally copied as well In the US, there was aneconomic crisis in 2007–2008

2.1.1.5 Monetized debt by banks

Commercial banks convert the loan that must be returned after a specifiedamount of time into cash so that it can be used right away for business operations.Without selling items on a credit basis, manufacturers and wholesalers cannot boosttheir sales However, credit sales could cause capital to be locked up Thus,productivity can also be affected negatively Businesses can conduct their economicactivities without interruption because banks can lend money by discounting bills ofexchange

2.1.1.6 Finance for the government

In impoverished nations, the government promotes companies by providing thenecessary financing Banks give the government long-term credit by investing theirmoney in government assets, and they give it short-term credit by buying TreasuryBills In the fiscal year 2018–19, the RBI distributed 68,000 crores to the Indiangovernment or 99% of its surplus

2.1.1.7 Creation of Jobs

After the nationalization of large banks, the banking sector experiencedsignificant growth The opening of new Bank branches typically creates newemployment possibilities

2.1.1.8 Banks boost business performance

Recently, banks have taken on the responsibility of encouraging youngentrepreneurs to take on well-formulated ventures and providing counseling serviceslike technical and management support, especially in emerging nations like India

For worthwhile initiatives that are both technically and financially feasible,banks offer 100% credit Therefore, commercial banks support the growth ofentrepreneurship in the nation

2.2 The advantages and disadvantages of commercial bank

2.2.1 The advantages of commercial bank

Commercial banks have the following advantages:

 Information Confidentiality: When lending money or accepting deposits,

banks do not share the information with anyone Banks respect theircustomers' privacy by keeping their personal information confidential.Customers' or account holders' personal information is kept secure by banks

 Economical: Commercial banks are widely regarded as the least expensive

source of funding It is a cost-effective source because it does not require theissuance of a prospectus, underwriting fees, or any other fees Bankingservices provided by commercial banks are free of any hidden fees

 Versatile: Commercial banks are regarded as a versatile source of funding

because borrowers can easily borrow money from them whenever they requiremoney or funds Borrowers can easily increase or decrease the number ofborrowings based on their convenience and needs Banks make funds available

to borrowers as and when they are required Borrowers can also repay themoney if they do not feel the need

 Less Formalities: Borrowers can easily raise funds from commercial banks

because there are no stringent formalities to follow up on As a result, there is

no paperwork involved in the entire borrowing process It does not necessitateany formalities such as seeking an underwriter or issuing a prospectus As aresult, it simplifies and streamlines the process

 Encourage saving: Commercial banks encourage saving among the general

public through their operations Banks, through this service, provide a saferway for individuals to collect money that they might otherwise consumeimpulsively The amount of savings is subject to a fixed interest rate.Individual savings, whether small or large, increase capital accumulation withbanks, which can then be used to invest or lend to the general public

 Facilitates digital transactions: As digitization has grown, commercial banks

have emerged as important financial institutions by providing atechnologically advanced platform for making digital payments Apart frombasic services, it facilitates online transfers, the use of cheques, ATMs, bankdrafts, and so on The availability of online wallets is a relatively new feature

of commercial banks Individuals and businessmen used to have to handlelarge sums of money that were vulnerable to theft, but now they can keep theirmoney safe in their wallets and use it to make digital payments

2.2.2 The disadvantages of commercial bank

Commercial banks have the following drawbacks:

 Procedural Difficulty: When lending funds to borrowers, commercial banks

must ensure that the advances are made to the correct entity The only way to

be sure is to conduct a thorough investigation into the firm's history andfinancial affairs It adheres to strict rules, making the borrowing processdifficult and rigorous

 Difficulty in Renewal: Commercial bank loans are typically only available for a

short period It is nearly impossible to renew or extend the borrowings.Furthermore, extending the term of borrowed funds can be difficult, and onlynew loans can be obtained

 Security is required: Commercial bank loans cannot be made without security.

There is a requirement for any asset or personal guarantees from the borrowersagainst which borrowings can be issued for any amount of loan or advances.Most of the time, the loan amount is less than the value of the security As aresult, it has become detrimental to the general public and businesses

 Strict terms and conditions: Before lending loans or funds, commercial banks

may impose a few difficult conditions on borrowers Terms and conditions can

be so difficult to meet that the entire borrowing process is hampered As aresult, firms' borrowing decisions are restricted to the point where theywithdraw from this source of funds and shift to another source of funds withmore favorable terms and conditions

 Bankruptcy: Banks may be unable to provide the amount requested by

borrowers even if the money belongs to the customers and has only beendeposited in their savings account This occurs when bank management fails totake proper care of depositors' or investors' finances and instead mismanages