Solutions to expand card services at petrolimex group bank

CHAPTER 5 SOLUTION TO EXPAND CARD SERVICES AT PETROLIMEX GROUP BANK...48 5.1 Overall assessment of card services at PG Bank...48 5.2 Solution to expand card services...52 5.2 Recommendat

NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM

- -Bachelor Thesis

TOPIC:

SOLUTIONS TO EXPAND CARD SERVICES AT

PETROLIMEX GROUP BANK

Student’s name : NGUYEN VIET HAI

Class : ADVANCED FINANCE

Intake : 50

Internship guide : Mr NGUYEN VIET HUNG

Supervisor : ASSOC.PROF.DR BUI HUY NHUONG

Hanoi, 2012 Chuyên đề thực tập Tốt nghiệp

TABLE OF CONTENTS

ACKNOWLEDGEMENT

ABBREVIATION

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1: INTRODUCTION 1

1.1 Rationale 1

1.2 Research objective 2

1.3 Research methodology 2

1.4 Scope of research 2

CHAPTER 2: THEORITICAL FRAMEWORK 3

2.1 Bank card 3

2.2 Factors affect the expanding of card services 12

2.3 Expanding the card services 14

CHAPTER 3: OVERVIEW OF PETROLIMEX GROUP BANK 19

3.1 The establishment of PG Bank 19

3.2 Vision and Culture 21

3.3 Organizational structure of PG Bank 23

3.4 Strategic Shareholders 24

3.4 Products and Services 25

3.4 Overview of Hanoi Card Centre 28

CHAPTER 4: CURRENT SITUATION OF CARD SERVICES AT PG BANK 30 4.1 Types and benefits of PG bank cards 30

4.2 Flexicard Issuing Procedure 32

4.3 Fees and Charges of Flexicard 33

4.4 Quality of Flexicard 37

4.5 Distribution and Promotion of Flexicard 37

4.6 The results of Card services of PG Bank in comparison with other banks 38

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CHAPTER 5 SOLUTION TO EXPAND CARD SERVICES AT PETROLIMEX

GROUP BANK 48

5.1 Overall assessment of card services at PG Bank 48

5.2 Solution to expand card services 52

5.2 Recommendations 55

CHAPTER 6: CONCLUSION 57

COMMENTS

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It is a great pleasure for me to work with the report based on the topic “Solution to expand

card services at Petrolimex Group Bank” which is very significant for economy I hope

working on the topic will help me to gather various exposures to practical field So, at the

very beginning, I would like to express my gratitude to several people who help me to

complete this thesis

First of all, I would like to thank National Economics University (NEU), especially

Advanced Program, for providing much precious opportunities to know real nature of the

banking activities through this internship

Equally important, I am sincerely grateful for all the help and advice I received from my

supervisor Assoc.Prof Dr Bui Huy Nhuong, Director of Advanced Educational Programs

ofNational Economics University I appreciated all time and effort Mr Bui Huy Nhuong

put into guiding and encouraging me during the time of marking this thesis

Also, I sincerely thank all of the staff at Petrolimex Group Bank who gave me favorable

conditions, helps and guidance in the days of internship at the bank

Lastly, I would especially like to thank all my friends in Advanced Class Intake 50 for all

their encouragement and intellectual support that has made this report possible

StudentNguyen Viet Hai

Chuyên đề thực tập Tốt nghiệp

PG Bank Petrolimex Group Bank

ATM Automated Teller Machine

POS Point of sale

EDC Electronic Data Capture

MOIT Ministry of Industry and Irade

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LIST OF TABLES

Table 4.1: Charges for Debit Cards 33

Table 4.2: Charges of withdrawal cash at the Petrolimex petrol stations 34

Table 4.3: Charges for Prepaid Cards 35

Table 4.4: Charges for Debit Cards of Commercial banks 36

Table 4.5: Market share of Total number of bank cards in 2011 39

Table 4.6: Market share of Total Used Turnover of bank cards n 2011 41

Table 4.7: Market share of Total Payment Turnover of Domestic cards in 2011 43

Table 4.8: Market share of ATMS and POSs in 2011 46

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LIST OF GRAPHS

Graph 2.1: Process of issuing card 5

Graph 2.2: Process of paying card 6

Graph 2.3: 4Ps Marketing mix 15

Graph 3.1: Organizational Structure of PG Bank 23

Graph 3.2: Organizational Structure of Hanoi Card Centre 28

Graph 4.1: Total number and Market share of PG Bank Flexicards 38

Graph 4.2: Total Used Turnover & Market share of PG Bank Flexicards 40

Graph 4.3: Total Payment Turnover & Market share of Domestic bank cards 42

Graph 4.4: Total number of ATMs and POSs 44

Graph 4.5: Market share of PG Bank ATMs & POSs 45

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CHAPTER 1:

INTRODUCTION

1.1 Rationale

Bank cards payment comes from the purchase on credit of retail goods and the application

of technology in banking While bank cards have played an important role in daily life of

many people all over the world, especially in the developing countries by dint of their

usage and convenience, that mean of payment is really attracted Vietnamese people and

commercial banks in recent years Seeing the born of bank cards in 1995, facts show that

bank cards services of Vietnam increase in services quality to satisfy customer needs

Realizing the benefits of development in bank card services, Petrolimex Group Bank with

their craft strategies has penetrated that new market in order to meet the customer needs

It is undeniable that despite gaining much specific achievement, the bank card services of

PG Bank still be inadequate in some circumstances in reality

Being a collaborator of Retail Banking at PG Bank, I have experienced in their campaign

of issuing cards That is the reason why I choose the topic “ Solution to expand card

services at Petrolimex Group Bank ” for my internship report to understand the situation

and find the solutions to improve the quality of card services as well as the competitive

ability with other commercial banks

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1.2 Research objective

Through this research, I would like to

 Study the basic overview of card services of PG Bank

 Interpret and evaluate the real situation of card services quality of PG Bank

 Propose the solutions to improve the quality of card services as well as the

competitive ability of PG Bank with other commercial banks

1.3 Research questions

 What is the current situation of card services at PG Bank?

 What are the factors affecting card services at PG Bank?

 What are the existing problems of card services at PG Bank?

 What are solutions and recommendations should be carried on to overcome these

existing problems and to expand card services at PG Bank?

CHAPTER 2:

THEORITICAL FRAMEWORK

2.1 Bank cards

2.1.1 Definition of bank cards

Bank cards, the non-cash instrument, are issued by banks for customers A standard bank

card must be required with its three dimensions 8.5cm x 5.5cm x 0.7cm The front of bank

card needs to have bank trademark, bank logo, embossed card number and user name

Equally important, magnetic stripe with encoded information and signature of user must

be included at the back of bank card

2.1.2 Main types of bank cards

Based on technical features, there are three types of bank cards: Embossed card,

Magnetic card and Smart card All information is encoded in each type, but in different

levels For instance, embossed card is no longer used because of low level of data

security Whereas, magnetic card with the magnetic stripe for encoding is the most

popular at the present, while smart card with all information encoded and secured by a

microchip is modern with high level of data security

Based on payment methods, bank cards are classified in three types: Debit card, Credit

card and Prepaid card To specify, debit card allows drawing of funds up to the available

balance in cardholder’s account By comparison, credit card allows drawing of funds up

to an approved credit limit based on the prestige and payment ability of customers The

last type is prepaid card, which is normal card without issuing procedure but limited

numbers of money and time period

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2.1.3 Parts involved in bank card services

There are four basic part of the chain of activities involving issue, use and payment of

domestic banks in Vietnam market, which are Issuing bank, Payment bank, Cardholder

and Merchant (Card acceptance point) Besides, one more important part is Vietnam Bank

Card Association Every part plays the essential role in order to maximize the function of

this non-cash instrument method

 Vietnam Bank Card Association: is the head of the system of all banks that operate

in card services This organization makes the basic regulations, and acts as an

intermediary of member banks Especially, Vietnam Bank Card Association has no

direct relationship with the cardholders and merchants, because this organization

just provide the national telecommunication network for all member banks

 Issuing bank: is the bank issued cards with their own trademark All bank cards

must include the name of issuing bank That bank requires terms and conditions for

using card to customer Issuing bank may sign agency contracts with a third party

bank, a credit institution or other card issuers That activities bring the benefit to

issuing bank with taking full advantage of experience and penetration the market

of the agency banks, but issuing bank has to act as a guarantee for them when

dealing with financial risks

 Payment bank: is the bank accepting all cards as the method of payment via

signing a contract with the merchants (card acceptance points) Payment bank

provides each merchant with services equipment, guides them the way to operate

and tackle the process In most cases, payment banks charge the service fees for

acceptance as a merchant of them base on the value of each transaction

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In fact many banks are not only the issuing banks but also the payment banks As

issuing banks, they regard the customers as cardholders otherwise their customers

are the merchants if the banks act as payment banks

 Cardholder: The bank issues official cards for cardholder, who is individual or

representative person for an organization directly benefit the card services A

cardholder can own many types of cards Using cards as the convenience payment

method is the primary advantage for cardholders Furthermore, the customers who

use credit cards will receive the statement with fully information of each

transaction, balance of debit, expire date and the money they must pay for banks

 Merchant is a goods or services company (hotels, supermarkets, commercial

center, etc) which signs a contract with cards issuing bank for acceptance that card

as a method of payment Merchants play the importance role in expanding the

scope of payment by cards and bringing the banks to be closer with customers

2.1.4 Process of issuing and paying card

2.1.4.1 Process of issuing card

Graph 2.1: Process of issuing card

(Source: Report of Vietnam Bank Association)

Bank cardBank card

Registrationform

Customers’

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First of all, the customers who would like to have a new bank card have to fill the

registration form of the bank The information of customers was secured and transferred

to Card Centre For Debit cards, the bank needs only the basic information such as name,

address, contacts, and the signature of customers But in case of Credit cards, by dint of

the bank’ credit ratings the customers will be evaluated via the regular income (for

individuals) or financial situation (for corporations) After few days, the new card with

full information of customers for transaction will be produced and sent to Issuing bank

There, the customers receive the bank card with the Personal Identification Number

(PIN) The PIN is very important for the security of bank card When the customers

receive the default PIN from Issuing bank, they should change it immediately in the first

using time

2.1.4.2 Process of paying card

Graph 2.2: Process of paying card

(Source: Report of Vietnam Bank Association)

Payment bank

Issuing bank

Advance

Bill ofservices

Debits

Credits

Statement /MessagesPayment

Buy goods/ services

Bill of services

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Merchants such as hotels, supermarkets, commercial center, etc are the places the

cardholders buy goods or services, and receive the bill of services That bill will be sent to

Payment bank, and then the merchants are gave the advance for the transaction The data

of transaction is transferred to issuing bank There, the Debits are accounted to Issuing

bank, and the Credits are accounted to the opposite side for Payment bank If the

cardholders would like to know about all of the transaction in periods, the issuing bank

will send the monthly statement or messages after each transaction in order to update the

information timely

2.1.5 Role of bank cards

For issuing banks, card is one way for capital mobilization by dint of increasing in

deposits Secondly, cards payment is conducive to more professional, more convenient

and safer payment activities Thirdly, credit cards are useful for bank to set up the credit

rating system as well as develop the credit activities Also, the banks can gain a large

amount of money from service fees

For cardholders, using cards is a safety holding money place They do not have to worry

about the risk of counterfeit money when doing transactions Another benefit users can

achieve from that convenient and flexible mean of payment is the sales promotion and

present program As the result of maintaining amount of money in their accounts even if

no transaction, the cardholders will receive the interest at the end of period with small

interest rate because the banks consider that money as bank deposits

For payment banks, the trade discounts and withdrawing cash fees which they charge

from card acceptance points are their most important revenue Besides, they also receive

the benefits from issuing banks via their accounts as well as the cardholders

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For card acceptance points (Merchant), being card acceptance points, they can avoid risks

from counterfeit money as well as reduce the cost of administration Their accounts at

banks via cards help them to increase the effectiveness of capital turnover

2.1.6 Card services activities of commercial banks

The card services activities of commercial banks include issue, payment, risk

management, marketing and customer services

 Issue: Basically, that activity of banks involves the following components:

 Organizing of marketing activities to bring their products to market

 Evaluating the customers with specific criteria

 Setting up the credit limit for credit cards

 Purchasing the blank cards

 Relief printing and encoding cards

 Creating the Personal Identification Number (PIN) for customers

 Managing the information of cardholders

 Managing the card using activities of customers

 Managing the real fact of Debit collection from customers

The banks have to set out the rule of using card and collecting the Debits in order to

manage the risks of operation card services For example, the minimum paying

requirement, expire date, grace date, fees and interests, the maximum and minimum of

credit limit and incentive policies for customers

 Payment:

When the bank expand their payment activities of bank cards overall market, it means that

the number of merchants will increase and merchants appear at much more places,

especially hotels, supermarkets, commercial center, etc The bank cards are acceptable in

many places via more convenience and easier process of payment, which is conducive to

more benefits to cardholders, merchants, issuing banks and payment banks Besides,

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maintaining the relationship with customers after purchasing products by dint of a large

system of merchants is very important The main process of Payment activities involves:

 Setting and managing the customer information system

 Managing the operation of merchants network

 Organizing the payment for transactions at merchants

 Providing the customer services to cardholders

 Training the employee at merchants

 Providing the equipment and machines for merchant

 Risk management:

The more card services are expanded, the more risk management needs to be concerned

The reason is that the risks not only affect directly the revenue and reputation of banks,

but also interfere with the customers The risk management includes the following

activities:

 Preventing and investigating the false card

 Managing the accounts of cardholders whose stolen cards

 Intensifying vigilance by security system of customers’ PIN

 Training the bankers and staff of merchants in solutions when dealing with

the problems of false cards

 Cooperating with appropriate authorities in case of false contracts for

issuing cards

 Marketing and Customer Services

Marketing and Customer Services in Card Business include all of method to find and

persuade the customers (cardholders and merchants) to use that non-cash instrument of

banks Furthermore, encouraging them to become customers of bank in long term is the

most significant goal which the bankers need to follow The basic activities in Marketing

and Customer Services are:

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 Contacting with potential agencies and Persuading them to be card

acceptance points

 Designing the promotion program for Banks and Merchants

 Setting the discount policies for Cardholders and Merchants

 Contacting with Individuals and Corporations and Persuading them to use

the bank cards

 Encouraging the cardholders to take part in long term bank deposits by

giving accumulate bonus points and presents

2.1.7 Risk of card payment activities

2.1.7.1 Fraud

 Fraud in issuing

 Fake application for opening accounts

When the issuing banks do not appraise the information of cardholder written on the

application for opening accounts, they will have suffer the problems of contact with

customers and credit losses when the cardholders cannot pay money for the banks or do

not want to pay

 Fake cards

Fake cards are made by individuals or organizations in order to take illegally information

on magnetic tape from customers There are many types of fake cards which depend on

abilities of the hackers

The first type is Embossed card with re-embossed information We can realize this card

by comparing the signature of cardholders or scanning via the machines using EDC

(Electronic Data Capture) technique

The second type is Magnetic card with re-encoded information We can know whether it

is false or not by scanning through EDC machines

The third type is Blank cards with no information These cards will be ejected when doing

transactions at ATMs/ POSs

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The most sophisticated type is fake card with new encoded information the actual card.

That card is only detected when cardholders do transactions fully and clearly

 Cards are stolen or lost

In this case, the customers should inform the banks about the problems as soon as

possible so as to ensure the benefit of customers and the reputation of banks

 Fraud in payment

 Fake Merchants

In this situation, the merchants deliberately provide incorrect information with payment

banks The result is that payment banks cannot recover the money supplied for merchants

 Collusion between merchants and Cardholders

There are two kinds of collusion: Common Purchase Point (CPP) – the merchants

unintentionally store the data of fake cards, which causes many fraud transactions; and

Point of Compromise (POC) – The merchants intentionally do the fraud transactions with

fake cards, white cards of customers

 Skimming at POSs:

The customers do not know that in the POS there is extra equipment which can collect the

encoded information of cardholders The criminal organization can exploit this gap

withdraw the amount of customers’ money without their cards

2.1.7.2 Credit risk

The credit card allows its holder to buy goods and services based on the holder's promise to pay

for these goods and services The issuing bank of the card creates a revolving account and grants

a line of credit to the cardholders from which the user can borrow money for payment to a

merchant or as a cash advance to the users Credit risk is bank's risk of loss arising from

cardholder who does not make payments as promised If this situation appears in large scale, the

banks can go bankrupt because of much loss of capital

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2.1.7.3 Technology risk

The risks are the problems of the information system of management which include errors

of connecting, updating data process, or maintaining data security Because card activities

are continuous and online 24/24h, even small errors will cause the large loss directly to

the transaction time, and the accuracy of payment activities

2.1.7.4 Ethic risk

Ethic risks are unethical bankers ‘behaviors, which are the situations that some bankers

take advantage of their knowledge, their official position, and the gap in payment process

to steal cards or information on cards for self-interest They enter into collusion with

merchants and criminal organizations, which results in damages for issuing bank,

payment bank and cardholders

2.2 Factors affect the expanding of card services

2.2.1 Internal factors

 Qualification of bankers:

Bankers who are the people directly work in card services environment, have clearly

understand about payment process, and fraud behaviors By dint of their accumulated

experience and working awareness, the staffs provide their banks easier access to avoid

the risks, and restrict the losses The more bankers are professional, the more benefits the

banks can achieve to enhance the quality of card services

 Quality of customer assessment

Customer assessment is the most important for the banks issuing credit cards and

expanding the merchants systems Selecting the good customers to contact and

maintaining the relationship with them in long term are the goals the banks follow

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 Financial competences and degree of banking technology

The banks with modern and convenience process of card payment can strengthen the

quality of card services The customers always would like to have safe and quick

transactions at banks Not every bank can invest to have the optimal method to do that So

as to become a strong and trust bank, the bank should improve itself first

 The development strategies of banks

The development strategies of banks depend on the vision and philosophies of the leader

If they would like to expand card services, finding target customers and marketing

strategies need to be concerned

2.2.2 External factors

 Population environment

The habit of using cash of consumers has been for many years In near several decades,

bank cards, the non-cash instrument, appear and develop in the era of modernization of

banking industry with modern technology Like the any new products, bank cards need

many years to be widely acceptable In fact, many people do not concern about the new

functions of bank cards and the benefits they can bring for social life Besides, merchants,

ATMs, and POSs usually are threatened by hackers and criminal organizations’

conspiracies Most of Vietnamese people regard cash as the most convenience method of

payment Vietnamese bank cards began to appear in the market during the 1990s, but

actually develop in recent 10 years Nowadays, in open-market economies, the number of

merchants, ATMs and POSs increase strongly, which results in the popularity of bank

cards not only in large cities but also in rural area, where the banking offices cannot

approach In near future, in Vietnam, bank cards will be the most popular payment

method like many developing countries in the world

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 Economics environment

In highly competitive economy, the bank cards services have to satisfy the customer need

by the reasonable issue and payment fees because the income of customers are different

Banks should enable every customer, especially poor people to approach the new payment

method If the banks do not care for their potential customers in long term, the banks will

lost them because the other banks encourage the customers to use their product with

higher quality The high pressure among banks actually brings more choices for

customers, which results in the development of bank card services in each bank

 Technological environment

The bank cards activities are much influenced by the level of science and technology

because the safety and time of transactions play the important role in evaluating whether

the services of a bank is efficient or not Vietnamese technological environment is more

and more expanded, and approached the up-to-date methods of the modern nations All

banks can get the benefits from that and have the chance to upgrade their ATMs, and

POSs system

 Legal environment

The law and the administration of State Bank of Vietnam affect directly affect not only

development of the cards business but also the risk management The more clearly and

closer the policies are with real facts, the less frequently risks will appear

2.3 Expanding the card services

By dint of understanding the internal and external factors affecting the card services, the

banks should have judicious strategies for expanding the card services One of the

theories they need to concern is Marketing mix

2.3.1 Marketing mix

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The 'four Ps' consist of the following:

Graph 2.3: 4Ps Marketing mix

(Source: Principles of Marketing –Philip Kotler)

 Product

A product is seen as an item that satisfies what a consumer needs or wants It is a tangible

good or an intangible service Intangible products are service based like the tourism

industry & the hotel industry or codes-based products like cell phone load and credits

Tangible products are those that can be felt physically Typical examples of

mass-produced, tangible objects are the motor car and the disposable razor A less obvious but

ubiquitous mass produced service is a computer operating system

Every product is subject to a life-cycle including a growth phase followed by maturity

phase and finally an eventual period of decline as sales falls Marketers must do careful

research on how long the life cycle of the product they are marketing is likely to be and

focus their attention on different challenges that arise as the product moves through each

stage of product life

The marketer must also consider the product mix Marketers can expand the current

product mix by increasing a certain product line's depth or by increase the number of

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product lines Marketers should consider how to position the product, how to exploit the

brand, how to exploit the company's resources and how to configure the product mix so

that each product complements the other The marketer must also consider product

development strategies

 Price

The price is the amount a customer pays for the product The price is very important as it

determines the company's profit and hence, survival Adjusting the price has a profound

impact on the marketing strategy, and depending on the price elasticity of the product, it

will affect the demand and sales as well The marketer should set a price that

complements the other elements of the marketing mix

When setting a price, the marketer must be aware of the customer perceived value for the

product Three basic pricing strategies are: market skimming pricing, marketing

penetration and neutral pricing The 'reference value' (where the consumer refers to the

prices of competing products) and the differential value (the consumer's view of this

product's attributes versus the attributes of other products) must be taken into account

 Promotion

Promotion represents all of the methods of communication that a marketer may use to

provide information to different parties about the product Promotion comprises elements

such as: advertising, public relationships, personal selling and sales promotion

Advertising covers any communication that is paid for, from cinema commercials, radio

and Internet advertisements through print media and billboards Public relations is where

the communication is not directly paid for and includes press releases, sponsorship deals,

exhibitions, conferences, seminars or trade fairs and events Word-of-mouth is any

apparently informal communication about the product by ordinary individuals, satisfied

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customers or people specifically engaged to create word of mouth momentum Sales staff

often plays an important role in word of mouth and public relations

 Place

Providing the product at a place which is convenient for consumers to access is very

important Place is synonymous with distribution Various strategies such as intensive

distribution, selective distribution, exclusive distribution and franchising can be used by

the marketer to complement the other aspects of the marketing mix

The marketing mix elements called product, price, place, and promotion these are called

the four elements of marketing mix and also called 4ps of the marketing mix

2.3.2 Steps of expanding process of the card services

So as to expand the card services, the commercial banks can follow the 4Ps marketing

mix

As the theory mentioned before, banks should have specific strategy at each period of

time It also depends on the financial competences and degree of their technology The

process of making customers’ satisfaction about the bank cards services including four

steps: product mix, pricing mix, promotion mix and place mix

 Product mix

Products of card services are bank cards When the cardholders can use the bank cards

easily and safely, it means that the products of banks are highly appropriated Following

the theory of product mix, the marketer can expand the current product mix by increasing

a certain product line's depth or by increase the number of product lines In case of banks,

issuing many types of bank cards can bring more choices to customers In addition to this,

hybrid card is new type of bank card, which allows cardholder to benefit more than one

function of only one card

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 Price mix

The fees for issue and each transaction are the most important things which the customers

concern when selecting the banks to become cardholders When the quality of cards of

different commercial banks is quite indifferent, fee is the most sensitive matter which

affects the choice of customers

 Promotion mix

According to the theory, Promotion comprises elements such as: advertising, public

relationships, personal selling and sales promotion In bank card services, to help customers

to become familiar with the function of cards, the banks need to show the economic benefits and

the convenience when using this non-cash instrument

After the customers become the cardholders, the program for long term customers should be built

with the purpose of maintaining the good relationship between banks and cardholders

The bankers of cards business, who speak in the capacity as the representative of banks, need to

have sales and communication skills for building the customers’ trust

Finally, the frequent presents and promotion programs is indispensible to encouragement the

customers to take part in the activities of banks

 Place mix

The last of 4Ps marketing mix is place mix In cards business, the banks with the large

system of merchants, ATMs and POSs will have the competitive advantages in approach

the customers The good place mix strategy is conducive to making the distance of banks

and customers to be closer

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CHAPTER 3:

OVERVIEW OF PETROLIMEX GROUP BANK

3.1 The establishment of PG Bank

■ Petrolimex Group Commercial Joint Stock Bank (PG Bank) was formerly Dong Thap

Muoi Rural Joint Stock Bank Dong Thap Muoi Rural JS Bank’s operation permit was

issued by the State Bank’s Governor’s License No 0045/NH – GP dated November 13,

1992 Accordingly, the bank’s initial charter capital was 700,000,000 VND and its

operating district was Dong Thap province

■ After 10 years of operation, PG bank‘s organizational system has constantly been

strengthened, achieving a steady growth rate with a low overdue debit and an annual

business result that always brings about high profits to its shareholders The bank’s

charter capital has now reaches 5,000 million VND, which is seven times higher than the

initial charter capital

■ In July 2005, Dong Thap Muoi Bank decided to invite new shareholders to participate,

making an increase of the charter capital to 90 billion VND Among the new shareholders

were financially potential and banking-business experienced Vietnam National Petroleum

Corporation (Petrolimex) and Sai Gon Security INC (SSI)

■ Petrolimex Group Commercial Joint Stock Bank has made significant progress with the

contribution of big shareholders In September 2006, the bank increased its capital to 200

billion VND Its total asset as of December 31st, 2006 was 1,187 billion VND, the

outstanding loan was 801 billion VND, the total revenue in 2006 was 69 billion VND and

its profit before tax was 17.49 billion VND

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The bank, in cooperation with a foreign consultant, was able to create a long-term

development strategy It was also successful in the selection and deployment of the core

banking software by IFLEX, one of the most modern banking software presently

■ In March 2007, Dong Thap Muoi Rural JS Bank was authorized to be transformed into

an urban joint stock bank by State Bank Decision No 125/QD-NHNN dated January 12,

2007 and to change its name to Petrolimex Group Commercial Joint Stock Bank (PG

Bank) by Decision No 368/QD- NHNN dated February 8, 2007

Accordingly, PG bank was licensed to expand its network nation-wide and to perform full

banking services including international payment and foreign currency trading

■ In May 2007, it was decided at PG Bank Annual Shareholder Conference to increase

the Bank’s capital to 500 billion VND in 2007 with a plan to increase the capital to at

least 1,000 billion VND in 2008 and at least 3,000 billion in the period from 2008 to

2010 In June 2007, PG Bank Hanoi Branch was officially inaugurated and increased

charter capital to 500 billion VND

■ In November 2008, PG Bank reached the title “2008 A Rating” by the State Bank of

Vietnam and begin implementation of international payment PG Bank was granted the

award of Vietnam Excellent Brand 2008 by Promotion Agency (MOIT) and Vietnam

Economic Times

■ In December 2009, PG Bank was awarded “Vietnam Top Trade Services 2009” by

Ministry of Industry and Trade (MOIT) to honor the outstanding achievements in

financial sector

■ On 17 March 2010, PG Bank’s headquarter officially moved to Hanoi by State Bank

Decision No 3209/QD-NHNN date December 25, 2009 PG Bank's new headquarter

located at Office 5, 18T1-18T2 Building, Trung Hoa - Nhan Chinh, Le Van Luong, Nhan

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Chinh Ward, Thanh Xuan District, Hanoi In April 2010, PG Bank reached the title “Top

Trade Services 2009” by MOIT for the second times In December 2010, PG Bank

continuously reached the title “Bank grade A” awarded by the State Bank and “Top Trade

Services 2010” by MOIT for the third times

■ Up to now, PG Bank has had 64 branches and transaction offices nationwide PG Bank

reaches total asset value of 22.022 trillion dong and pre-tax profit of 184.8 billion dong by

March 31, 2011

3.2 Vision and Culture

■ Vision

Become a leading commercial joint-stock bank offering outstanding quality financial and

banking services based on highly competent and dedicated personnel, and a world-class

technology

■ Philosophies

 Committed to achieve ultimate customer satisfaction by providing products and

services with the highest level of integrity, quality, innovativeness and

professionalism

 Establish strategic partnership and alliances whenever possible in a mutually

beneficial, synergy enhancing and sustainable manner

 Promote a highly dedicated, proactive and competent workforce with a sound

corporate culture

 Ensure sustainable growth with adequate levels of returns built upon competitive

edges, differentiation strategies and effective management practices

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■ Corporate Culture

In order to maintain the sustainability of the Bank’s achievements, especially in the fast

changing and highly competitive business environment, PG Bank has strived to create and

reinforce the Bank’s own unique corporate culture, which involves around five core

The logo of PG Bank is meant to represent the dynamic, modern and high-tech

characteristics of the Bank

The two streaks of light bear the two colors that identify Petrolimex, giving off a feel of

the continuous movements forward of the Bank, seeking to seize the opportunities that

emerge from the financial market The two light streaks moving together also symbolize

the strong bond and great cooperation within the Bank, which play crucial parts in

preserving the success of the Bank

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3.3 Organizational structure of PG Bank

Graph 3.1: Organizational Structure of PG Bank

(Source: Official website of PG Bank)

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3.4 Strategic Shareholders

■ Vietnam National Petroleum Corporation (Petrolimex)

Vietnam National Petroleum Corporation (Petrolimex) is the biggest shareholder of PG

Bank (40%) As one of very important state corporations, Petrolimex occupies 60% of

domestic oil and gas market with nation-wide network

Petrolimex has more than 2,000 corporate-owned stations and more than 4,000

retail-owned stations under the Petrolimex brand name

Along with the core business, Petrolimex also achieved much success in other fields, such

as transportation, gasoline, petrochemical, insurance, etc In the end of 2010, total revenue

of the corporation was about VND 140,000 billion, in which VND 25,000 billion was

contributed to the state budget

Petrolimex has 41 subsidiaries, 34 branches that are affiliated with 100% state owned

subsidiaries, 23 joint stock companies, 3 joint venture companies and 1 private limited

company in Singapore

■ Saigon Securities Inc (SSI)

Saigon Securities Inc (SSI) owns 9.98% of PG Bank’s charter capital Being listed on Ho

Chi Minh Stock Exchange (HSX), SSI has the biggest market capitalization in Vietnam

stock market Strong financial capability and professional personnel are among factors

that enable SSI to provide a diverse range of high quality financial products and services

to customers

With satisfying performance in recent years along with great growth potential, SSI has

attracted not only domestic investors but also well-established, internationally recognized

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financial institutions such as DBJ, ANZ, Daiwa, JP Morgan, HSBC, Credit Suisse,

CitiGroup In 2010, total revenue of SSI reached over VND 1,500 billion, while profit

was about VND 911 billion

As at 30/09/2011, SSI has a large operation network, including 01 head quarter, 08

branches, 03 transaction offices and 01 Fund Management Company located in big cities

such as: Hanoi, Hai Phong, Quang Ninh, Nha Trang, Vung Tau and Ho Chi Minh City

3.5 Products and Services

PG Bank provides a comprehensive range of traditional banking products and services,

including deposit and lending products, cross-border remittance service, trade financing

and card-related services In addition, the Bank has also put great effort in developing and

offering customers more diversified and advanced financial products and services, notably

corporate finance and commodity derivatives

■ Personal Products and Services

PG Bank personal daily products and services include: Accounts, Savings, Loan Products,

and Cards,

 Accounts: There are three types of PG Bank Accounts

o Golden Accounts

Those are payment accounts by VND currency for individuals with fully functions such

as cash withdrawal, deposit, transfer money, etc The type of accounts have the minimum

requirement balance: 100,000 VND and the monthly minimum requirement balance

monthly: 9,000,000 VND The users of accounts benefit free transactions for transferring

money at bank offices, via Internet Banking, and SMS Banking, free fees for receiving

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statement via email and SMS, and receive the interest from 10% to 12% depends on the

account balance

o Current Account

The accounts are paid by VND, USD, EUR currencies The minimum requirement

balance of those accounts is 50,000 VND/ 5 USD/ 10 EUR Account users will receive

the interest as the same as non-term deposit

o Flexible Saving Account

The payment accounts are only paid by VND currency The minimum requirement

balance is 50,000 VND for each account The interest which account users receive stairs

of interest depends on the account balance, daily accumulated, and monthly paid

 Savings

o Normal Savings

The accounts by are paid by VND, USD, EUR currencies The minimum requirement

balance is much more than Current Account with 1,000,000 VND/ 100 USD/ 100 EUR

At the end of term, the users will receive their interests

o Savings deposit with flexible fund withdrawal

Unlike those above accounts, that saving deposits are paid by VND/USD currency with

the same minimum requirement balance as normal saving 1,000,000 VND/ 100 USD The

interests are 0% with the deposits less than 1 month; 10%-12% for VND, 1.5-2% for USD

in term of 1-36 months deposit

o Savings deposit with interest paid periodically

The payment accounts are just paid by VND currency with the minimum requirement

balance: 1,000,000 VND and the periodically paid interest

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