General introduction about Securities Joint Stock Company Bank for Investment and Development of Vietnam BSC .... Research objectives: Based on studying general theories about the busin
GENERAL THEORETICAL ISSUES ABOUT ANALYSIS AND EFFICIENCY ASSESSMENT OF
Overview of the company's business activities
1.1.1 Definition and characteristics of securities companies a Definition:
A securities company is a business that engages in securities trading as a member of the Stock Exchange This definition is outlined in Clause 1, Article 2 of Decree No 86/2016/ND-CP.
A securities company is a business that operates under securities law, engaging in various activities such as securities brokerage, trading, underwriting, and investment consulting, while also offering financial services in compliance with regulatory standards.
A securities company serves as an intermediary financial institution in the stock market, operating as either a Joint Stock Company or a Limited Company in compliance with legal regulations These companies engage in various securities business operations under the oversight of the State Securities Commission As financial institutions, they facilitate the flow of capital from investors to those in need, arranging transactions for clients and earning a commission on each deal.
A securities company serves as a crucial intermediary in the financial market, significantly impacting the economy To operate effectively, these firms must adhere to legal requirements and specific ethical standards unique to the securities industry, setting them apart from other business types.
To safeguard the market and protect investor interests, countries establish specific legal capital requirements for securities companies These regulations ensure that firms are qualified to operate, with each company's business activities having distinct legal capital thresholds.
The leadership team and personnel of securities companies must possess a high level of education and expertise, along with relevant degrees and certifications that comply with national regulations Additionally, they should demonstrate strong professional ethics to effectively navigate the complexities of the market and contribute to the economic security of the country.
Conflicts of interest are a common challenge in the business operations of securities companies, particularly in brokerage and consulting services These conflicts arise when brokers and consultants prioritize their own financial gain over the interests of their clients, potentially harming customer assets To mitigate these issues, it is crucial for securities firms to employ professionals with strong ethical standards, ensuring that client interests are protected and maintained.
Modern and secure technology is essential for securities companies to facilitate the seamless, accurate, and timely transmission and processing of electronic information This infrastructure not only prioritizes the interests of investors but also enables them to access information quickly and efficiently.
Through activities on the stock market, securities companies have shown an important role for the market in general and the participants in the market in particular
Securities companies play a crucial role in mobilizing capital for businesses and the broader economy They facilitate access to issuers' securities for investors, regardless of their location, ensuring these securities are actively traded in the market This process significantly enhances capital mobilization, supporting the growth of enterprises and contributing to overall economic development.
Securities companies with professional expertise and professional experience have helped issuers save time and effort to ensure a successful issuance and increase the supply of goods for the stock market
Securities companies play a crucial role in stabilizing stock prices within the market Through proprietary trading activities and adherence to legal regulations, these firms help maintain the stability of securities prices and facilitate a market for newly issued securities.
Third, securities companies contribute to the creation of new products and services in the market
Securities brokerage activities involve stockbrokers understanding customer needs and collaborating with the company's product research and development team to launch new products and services This process not only generates ideas for designing offerings that align with customer requirements but also leads to a diverse range of products and services, ultimately enhancing the customer base.
Securities companies play a crucial role in assisting market management agencies by effectively supervising market activities They are obligated to provide essential market information to regulatory bodies, which aids in market oversight Acting as both underwriters and intermediaries for securities transactions, these companies report vital data, including issuer information and foreign investor ownership rates, to management agencies This reporting enables regulatory bodies to detect and address market manipulation and distortion Additionally, the information provided allows management agencies to understand market conditions better, facilitating the development of appropriate policies and measures for market growth.
Securities companies play a crucial role in minimizing transaction costs, mitigating risks, and enhancing investment efficiency for investors By facilitating the buying and selling of securities, these firms significantly lower the costs associated with finding trading partners, thus improving liquidity Additionally, they ensure that investors receive genuine securities upon purchase and timely payments upon sale, effectively reducing risks in the trading process Furthermore, the advisory services provided by securities companies contribute to achieving greater investment efficiency for their clients.
1.1.3 Operating principles of a securities company
The activities of securities companies significantly impact the interests of investors in the market To protect the rights and ensure fairness among all market participants, it is essential for securities companies to adhere to established principles during their operations These principles are outlined in legal documents governing securities companies and are categorized into two main types.
Securities companies are required to maintain legal capital to conduct their business activities, which necessitates ensuring adequate financial resources to fulfill their commitments in securities trading with customers.
+ Ensure capital requirements, capital structure, and principles of accounting and reporting as prescribed by law
Overview of the company's business performance
Analyzing business performance involves evaluating the implementation of business strategies and the outcomes of various activities This process relies on data from departments, accounting records, and economic information, utilizing appropriate methods to inform timely decisions and plans It also identifies potential resources that can be leveraged to enhance the quality of securities operations.
Analyzing and evaluating the business operations of a securities company involves utilizing both financial and non-financial information to assess its performance and financial standing within the context of economic conditions This process helps identify the company's current strengths and weaknesses, serving as a foundation for strategic decision-making and adjustments.
Financial statements of securities companies serve as the primary source of financial information By analyzing and comparing this data with historical performance and that of other firms, we can assess the business capabilities of these companies Additionally, incorporating non-financial information related to the socio-economic landscape enables managers to identify opportunities and challenges, which is essential for developing effective management strategies.
1.2.2 The value of business performance analysis
Business performance analysis is crucial for informed decision-making It plays a vital role for managers, enabling them to make accurate decisions and develop effective future plans and strategies.
Business performance evaluation serves as a vital tool for uncovering hidden capabilities within an organization, ultimately enhancing management mechanisms Regardless of varying operational conditions, businesses possess untapped potential that can be identified and leveraged through thorough analysis and assessment By exploiting these capabilities, companies can achieve greater economic efficiency Additionally, such analysis enables managers to pinpoint the root causes of issues, allowing them to implement effective solutions to mitigate business risks.
Business analysis documents are essential not only for internal managers but also for external stakeholders who engage with the enterprise These documents provide critical information that enables informed decision-making regarding cooperation, investment, and lending activities with businesses.
1.2.3 Methods of evaluating business performance a Traditional analytical methods
The traditional approach evaluates the operating results of securities companies by utilizing ratios derived from two financial variables These financial ratios are categorized into three distinct groups.
- Group of ratios reflecting profitability
- Group of ratios reflecting business ability
- Group of criteria for assessing operational risk
Evaluating business performance using financial indicators is advantageous due to its simplicity and ease of understanding However, it's important to note that each group of ratios only highlights a specific aspect of performance, lacking a clear correlation among them In contrast, modern analytical methods offer a more comprehensive approach to performance evaluation.
The analysis according to current methods is mainly based on evaluation models Each model focuses on a certain aspect to conduct evaluation and has certain advantages and disadvantages
The CAMELS model is recognized as the global standard for evaluating financial institutions, encompassing six key micro-measures: capital adequacy, asset quality, manageability, profitability, liquidity, and market sensitivity.
Specifically, the advantages of this model are: Firstly, the CAMELS model includes many important analytical criteria and is highly applicable in the management of financial institutions
The CAMELS model is an integrated analytical framework that assesses both quantitative and qualitative factors, reflecting the strength and safety of a financial institution's operations By utilizing this model, organizations can predict their current performance and identify potential financial crises, thereby mitigating risks in business activities and ethical concerns, which facilitates effective future planning.
The CAMELS model, while beneficial, has notable limitations Primarily, its analysis relies heavily on available information sources, which can lead to biased results if the data is inaccurate Additionally, the effectiveness of the analysis is contingent upon the analysts' experience and knowledge, as their subjective opinions significantly influence the judgments made.
Overview of CAMELS model
1.3.1 General introduction to the CAMELS model
CAMELS is a widely recognized American bank rating and monitoring system, serving as a standard for evaluating the effectiveness and risks of banks and financial institutions globally Initially approved by the US Federal Financial Institutions Examination Council (FFIEC) in 1979, the CAMELS model gained international prominence after the 1997 Asian economic crisis, when the International Monetary Fund (IMF) and the World Bank recommended its application in countries facing financial turmoil to aid in the recovery of their financial sectors.
CAMEL is an acronym representing five critical factors essential for the soundness, stability, and efficiency of financial institutions, as recognized by the global banking community These factors include C for Capital Adequacy, which assesses the level of capital a bank holds; A for Asset Quality, which evaluates the quality of a bank's assets; and M for Management Quality, focusing on the effectiveness of a bank's management practices.
(Management) – Management capacity, E (Earnings) – Profitability, L (Liquidity) Exposure) – Liquidity After 1997, the constituent elements of CAMEL were added with one more content, which is S
(Sensitivity to market risks) - Sensitivity to market risks, from which there is the CAMELS system as it is today
The analysis results will help analysts divide financial institutions by rating from A to E Grade A (from
Financial institutions are graded based on their performance, with Grade A (80 to 100 points) indicating exceptional performance well above the average Grade B (65 to less than 80 points) reflects an average operational level, just sufficient for safety Grade C (50 to less than 65 points) signifies below-average performance, while Grade D (35 to less than 50 points) indicates unreliable operations that require monitoring to mitigate risks Lastly, Grade E represents the lowest performance tier, highlighting significant concerns.
Financial institutions scoring between 0 and less than 35 points demonstrate significant operational inefficiencies and face the risk of losing their capacity to function effectively, necessitating urgent oversight and intervention Additionally, discrepancies in ratings for individual components can lead to corresponding adjustments in the ratings of other components.
According to Decision No 617/QD-UBCKNN issued by the State Securities Commission on October 9, 2013, securities companies will be evaluated using the CAMEL model, which includes Capital Adequacy (C), Asset Quality (A), Management (M), Earnings (E), and Liquidity Exposure (L) The CAMEL indicators are categorized into two groups: financial indicators (C, A, E, L) assessed through financial statements and audited data, and governance criteria (M), which are qualitative and challenging to quantify.
1.3.2 Contents of CAMEL model applied to Vietnam Securities Company a Capital Adequacy
Applying the CAMEL model to Vietnamese securities companies, the capital adequacy level includes 3 indicators:
The C1 – Equity/Total Assets ratio, which excludes investors' securities trading deposits, is crucial for ensuring that these deposits are kept separate from company assets to prevent conflicts of interest This indicator reflects the actual equity level within total assets that brokers can utilize A high ratio indicates strong financial autonomy for the securities company, demonstrating reduced reliance on loans and minimal debt pressure.
The C2 ratio, known as the equity/legal capital ratio, reflects the capital mandated by the State that brokers must maintain to engage in specific business activities outlined in legal regulations This ratio serves as an indicator of whether a securities company continues to comply with the legal capital requirements after a designated period of operation.
The C3 ratio, also referred to as the financial adequacy ratio, is a key indicator established by the Ministry of Finance under Circular No 226/2010/TT-BTC, dated December 31, 2010, with subsequent amendments and supplements This ratio measures the availability of capital, serving as a crucial metric for financial assessment.
Circular 165/2012/TT-BTC, issued on October 9, 2012, establishes a ratio calculated as a percentage of available capital relative to the total risk value This total risk value encompasses market risk, settlement risk, and operational risk.
Table 1.1: The weights of the ranking criteria in the C factor
Target name Value Value Score Weight
(Source: Regulations guiding the classification of securities companies of the State Securities
The asset quality of securities companies is evaluated based on the following three criteria:
The A1 ratio is calculated by dividing the total assets after risk adjustment by the total assets, excluding fixed assets The total assets after risk adjustment are determined by subtracting the total value of potential risks in asset categories from the total assets (excluding fixed assets) The risk values are established in accordance with Circular No 226/2010/TT-BTC and Circular 165/2012/TT-BTC issued by the Minister of Finance A higher A1 ratio indicates a greater guarantee of financial safety.
- A2 – Provision ratio/(Short-term investments + long-term investments + Receivables)
This marks the inaugural ranking of securities companies based on their receivables Additionally, it is crucial to maintain indexes A2 and A3 within specified limits to uphold financial safety.
Table 1.2: The weights of the ranking criteria in the A factor
Target name Value Value Score Weight
(Source: Regulations guiding the classification of securities companies of the State Securities
Evaluating Management Quality involves 19 criteria, most of which are qualitative and necessitate information from various sources beyond financial statements, including internal data For instance, criteria No 3 and No 4 assess the years of experience in the financial sector of the Chairman and Director/General Director, while criterion 3 also considers the modernity of the information technology system These criteria are challenging to quantify and demand substantial internal information Additionally, some indicators, like criterion 12, require data from all industry brokers, such as the proportion of stock trading volume through the company relative to total market turnover.
Profitability includes the following two criteria:
- E1 – Profit after tax/Total revenue
- E2 – Profit after tax/Average equity
The higher the value of these indicators, the more secure the financial security of securities companies will be
Table 1.3: The weight of the ranking criteria belongs to the factor E
Target name Value Value Score Weight
(Source: Regulations guiding the classification of securities companies of the State Securities
The ratio of short-term assets, excluding investors' securities trading deposits, to current liabilities indicates a company's financial health A higher ratio signifies a greater amount of assets, which enhances the company's ability to meet its debt obligations.
The L2 ratio, which measures the proportion of cash and cash equivalents (excluding investors' deposits for securities trading) to current debt, is crucial for maintaining solvency and enhancing capital efficiency It is essential to keep this ratio at an appropriate level to ensure financial stability and optimize resource utilization.
Table 1.4: The weight of the ranking criteria belongs to the factor L
Target name Value Value Score Weight
(Source: Regulations guiding the classification of securities companies of the State Securities
Pursuant to the Regulation of Decision No 617/QD-UBCK dated October 9, 2013 of the
Chairman of the State Securities Commission, the scoring method and formula are as follows:
Each indicator is evaluated on a scale ranging from 0 to 100 points, with a total of 5 score levels for each indicator However, there are instances where the number of score levels for a given indicator may be fewer than 5.
- The importance of each indicator is expressed through the weight of that indicator Weights are expressed as a percentage
ANALYZING AND ASSESSING BUSINESS EFFICIENCY OF SECTORS THROUGH CAMEL
Introduction of securities companies in the study
Over 20 years ago, the Vietnam stock market launched with just 2 listed codes and 6 securities firms Today, it has significantly evolved, featuring 74 operational securities companies, including 33 with charter capital exceeding 500 billion dongs, reflecting substantial growth in market scale and capitalization value.
Reasons for choosing three securities companies for research
SSI CPC and the Bank for Investment and Development of Vietnam Joint Stock Company, both established in 1999, were listed on HOSE, giving them an early advantage in public awareness compared to CPCK Asia-Pacific, which is listed on HNX This early establishment allowed these two securities companies to develop operating mechanisms that complied with regulations sooner.
There is a significant disparity in capital scale among the three securities companies SSI stands out as the leader with the largest charter capital in the listed market, while BSC falls into the capital range of 500 to less than 1,000 billion dongs In contrast, APEC represents the group with capital below 500 billion dongs.
In terms of capitalization value, SSI leads with the highest charter capital of VND 22,411 billion, significantly surpassing its competitors BSC follows with a capitalization value of VND 1,847 billion, while APEC has the lowest at only VND 401 billion.
2.1.1 General introduction about SSI Securities Joint Stock Company (SSI) a The process of formation and development
SSI Securities Company (Stock Code: SSI), established in December 1999 and formerly known as Saigon CPC, has significantly contributed to the growth of Vietnam's stock market With a charter capital of VND 6,029 billion, SSI has been honored with the title of Labor Hero during the renovation period, marking a pivotal moment for both the company and the securities industry Leveraging its strong human resources, financial capabilities, and extensive partner network, SSI has solidified its position as the leading securities company, renowned for its brand value and market reputation.
SSI, a leading securities firm known for its innovative products and services, offers comprehensive financial solutions that deliver exceptional value to customers This commitment has garnered the interest of both domestic and renowned international investors, including Morgan Stanley, Vinamilk, Vietinbank, Credit Suisse, and Vinhomes.
SSI is dedicated to uncovering new investment opportunities and connecting with financial resources to transform these opportunities into accessible profits, ensuring optimal efficiency for international investors entering the Vietnamese market The annual Gateway to Vietnam Conference, organized by SSI, has gained significant recognition in the financial sector, serving as a vital investment promotion platform and a trustworthy link between domestic and foreign investors.
As the largest listed securities company in the Vietnam stock market, it specializes in a range of activities including securities brokerage, trading, underwriting, depository services, financial consulting, securities investment, margin trading, and trading in derivative securities.
The company aims to be a partner in its customers' success by dedicating all resources and initiatives to foster achievements for customers, employees, and the surrounding community.
2.1.2 General introduction about Securities Joint Stock Company Bank for
Investment and Development of Vietnam (BSC) a The process of formation and development
Established on November 26, 1999, the Bank for Investment and Development of Vietnam Securities Company Limited (BSC) (Stock Code: BSI) proudly became the first securities company within the banking sector to engage in securities trading As one of the initial two securities firms in Vietnam, BSC's launch as a multi-functional intermediary institution signified the inception of the country's securities industry.
In early 2011, BSC rebranded as the Joint Stock Company of Bank for Investment and Development of Vietnam following the successful equitization and auction of over 10 million shares Currently, BSC has increased its charter capital to VND 1,220 billion, significantly contributing to the securities industry.
As a prominent member of the Bank for Investment and Development of Vietnam, BSC benefits from comprehensive support in its operations Recognized as one of the first securities companies certified by BVQI for ISO 9001:2000 quality management standards, BSC boasts strong financial potential and a solid market reputation In addition to executing significant projects with domestic partners, BSC actively fosters relationships with international financial institutions such as the World Bank, IFC, and MPDF to effectively meet customer needs.
Is a securities company listed on the Vietnam stock market with business activities including Brokerage; Securities trading; Underwriting securities; Securities investment consulting;
2.1.3 General introduction about Asia - Pacific Securities Corporation (APEC) a The process of formation and development
Asia Pacific Securities Corporation (APEC), with the stock code APS, is a securities firm established by the State Securities Commission, featuring an initial charter capital of 60 billion VND In July 2010, APEC unveiled a new brand identity aimed at promoting a friendly, professional, and dedicated image, reinforcing its commitment to enhancing service quality Currently, APEC Securities has expanded its charter capital to 390 billion VND and operates 41 branches and agents across major cities and provinces, including Hai Phong, Hue, and Ho Chi Minh City.
Is a securities company listed on the Vietnam stock market with main activities including
Brokerage; Securities trading; Securities investment consulting and securities depository
The company operates intending to contribute to the development of the stock market, bringing benefits to customers, investors, and shareholders of the company.
Analysis of the current state of business performance of securities companies
Overview of the capital situatio n
Table 2.1: Total capital and growth rate of three securities companies in the period of
From 2018 to 2020, SSI's total capital experienced significant growth, rising from 23,825 billion VND in 2018 to 35,769 billion VND in 2020, marking an increase of nearly 12,000 billion VND or 50.13% Similarly, BSC's total capital expanded from 1,757 billion VND in 2018 to 2,921 billion VND in 2020, reflecting a growth of 1,163 billion VND, which is a substantial 66.21% increase In contrast, APEC's total capital showed a declining trend, decreasing by 9.16% to 357 billion VND from 2018 to 2019, followed by a modest increase of 410 billion VND in 2020, equivalent to a growth of only 14.85% This analysis highlights the varying capital growth rates among the companies, with BSC demonstrating the most stability.
Table 2.2: Total Liabilities and equity of three securities companies in the period of 2018 –
Table 2.3: Proportion of total equity of three securities companies in the period of 2018 -
SSI's financial statements reveal that a significant portion of its liabilities consists of short-term debts, totaling VND 25,823 billion at the end of 2020, which represents 72.19% of its total capital and has shown consistent growth over three years This increase is primarily attributed to the company's reliance on short-term bank loans to enhance its working capital for business operations In contrast, BSC and APEC do not have long-term debt, meaning their liability fluctuations are solely driven by changes in short-term debts, resulting in an overall increase in total liabilities.
The disparity between liabilities and equity at SSI has been increasing, with equity rising slightly over the past three years but remaining below 40%, reaching only 27.60% in 2020 This indicates that SSI primarily relies on debt for business investments, leveraging borrowed capital to enhance financial leverage and benefit from tax savings, ultimately boosting profits for owners In contrast, BSC has seen a more balanced ratio between equity and liabilities, with equity dropping from over 80% in 2018 to a more equal distribution two years later, reflecting a shift towards using short-term loans for business expansion Meanwhile, APEC maintains a high equity proportion, exceeding 90% of total capital, due to its unstable financial resources and brand positioning in the stock market, which limits its ability to convert investments into loans While utilizing equity offers stability and avoids interest payments, it also incurs opportunity costs.
Table 2.4: Values of factor C indicators according to CAMEL standards for the period of
(Source: Author's own calculation and synthesis)
According to the CAMEL standard outlined in Decision No 617/QD-UBCKNN, criterion C1 must achieve a minimum of 75% out of 100 points Among the three companies evaluated, APEC demonstrated the strongest financial safety control, averaging 140% over three years and peaking at 194.63% in 2020 This impressive performance is primarily attributed to the high value of the company's equity in VND, which constitutes a significant portion of its total capital Following APEC, BSC recorded the highest C1 ratio value in 2018.
In 2019, BSC experienced a slight decrease in its financial safety indicator, dropping to 110.11% due to significant changes in total assets and employees By the end of 2020, this figure improved to 96.34%, reflecting the company's sound operation in terms of capital In contrast, SSI's financial autonomy remains concerning, with its indicator falling from 44.57% in 2018 to just 31.88% in 2020, highlighting a lack of compliance with financial safety targets.
The three securities companies demonstrate a stable and gradually increasing value over the years, indicating that their legal capital is consistently secured for a period of three years Specifically, the SSI company maintains an equity-to-legal capital ratio (C2) significantly above the statutory minimum of 200%, reaching a remarkable level that is ten times higher than the standard and showing steady growth BSC also exhibits stability in this indicator, with a ratio of approximately 480%, more than double the CAMEL norm Meanwhile, APEC's C2 target has risen from 279.26% to 295.56%, reflecting positive growth in line with the other two companies.
Between 2018 and 2020, three securities companies demonstrated stable growth, consistently maintaining their capital ratios above the safe threshold Notably, SSI's available capital ratio exceeded 300%, peaking at 433.56% in 2018 before slightly declining to 326.33% in 2020 During this period, SSI's total payment risk value rose significantly, from 739 billion VND in 2018 to 1,209 billion VND in 2020, representing nearly 50% of the total risk value Additionally, BSC's working capital ratio remained stable, although it experienced a minor decrease from 647% in 2018.
2020 (616%) However, the company still ensures a level of financial safety in terms of capital
In 2020, the total operational risk value indicator represented a significant portion, nearly 50% of the total risk value In comparison to APEC results, the lowest recorded value in 2018 was 208.32%, which has dramatically increased to 458.11%, exceeding the highest safe threshold established by regulations.
Overview of the asset situation
Chart 2.1: Growth rate of total assets of three securities companies in the period of 2018 -
The chart indicates a consistent increase in the total assets of the three securities companies over a three-year period Notably, SSI's total assets have surged by 50.13%, amounting to nearly VND 12,000 billion However, the growth rate has decelerated over the years, primarily due to the company's limited investment in short-term assets.
In 2019, long-term assets experienced significant growth of 205.62% APEC's total assets rose from VND 393 billion to VND 410 billion, reflecting a modest increase of 4.33% from 2018 to 2020, although this growth was relatively slow Notably, total assets saw a decline of 9.16% in 2019 In contrast, BSC's total assets grew by 66.28% during the same period, reaching VND 1,164 billion.
BSC in 2019 compared to 2018 increased by about 36%, from VND 1,756 billion to VND 2,389 billion The next period 2019 - 2020 marks a large increase of 22.22% compared to 2019, reaching a value of VND 2,920 billion
An analysis of the total asset structure of three securities companies reveals a predominant focus on short-term assets over long-term assets, as evidenced by their financial statements from 2018 to 2020, where short-term assets consistently represent over 80% of total assets This trend is particularly evident among new securities firms, which prioritize short-term investments to swiftly adapt to market fluctuations However, it is crucial for these companies to maintain a balanced ratio of short-term to long-term assets to develop a sustainable long-term strategic vision in their business planning.
Table 2.5: Values of factor A indicators according to CAMEL standards for the period of
(Source: Author's own calculation and synthesis)
Between 2018 and 2020, the A1 ratio of SSI and BSC consistently met safe thresholds, with SSI maintaining an average rate above 90%, reflecting a high safety score of 100 points SSI's ratio stabilized around 90%, supported by steady growth in total assets after risk adjustment and total assets excluding fixed assets, indicating strong financial security BSC also showed stability, with its ratio increasing from 87.62% in 2018 to 92.67% in 2020, demonstrating effective control over asset growth In contrast, APEC's ratio improved from a low of 60.46% in 2018 to 86.09% by the end of 2020, showcasing its efforts in risk management, although it has yet to reach the safe threshold.
Indicator A2 reveals that SSI's value is approximately 0%, equating to 100 points, which is significantly lower than BSC's value of around 6% In 2018 and 2019, SSI's A2 indicator was about 0.25%, peaking at 0.4% in 2020, while BSC's A2 ratio slightly decreased by 1.81% in 2019 to 4.5% During this period, BSC shifted its focus from long-term to short-term investments, resulting in a spike in short-term investments that were effectively managed only in 2020 This indicates that SSI has a higher provisioning ratio than BSC, which has improved over the years, alongside SSI's effective control over receivables and investments In contrast, APEC's A2 rate rose from 55.56% in 2018 to 71.43% in 2019, but plummeted to 12.82% in 2020 due to unstable receivables despite a consistent provisioning ratio of around 10 billion dong Furthermore, APEC's lack of short-term and long-term investments has led to an A2 target significantly exceeding that of SSI and BSC, failing to meet regulatory safety thresholds.
All three securities companies demonstrated effective control over indicator A3, maintaining values below 25%, with SSI and BSC averaging around 1% Despite a significant increase in receivables, total assets remained stable, contributing to BSC's strong capital adequacy in A3, with ratios of 2.33% in 2018, 1.43% in 2019, and 1.61% in 2020, consistently hovering around 1% This stability is attributed to effective receivables management and controlled asset growth, minimizing future financial risks APEC also showed decent results for A3, achieving around 4% from 2018 to 2019, but this figure surged to 19.02%, indicating instability in receivables management and ineffective debt collection policies, which may impact the company's reputation and brand perception.
Three securities companies excelled in 19 evaluation criteria, nearly reaching top scores of 100 and 80 in key indicators, including the tenure of the Chairman of the Board of Directors and the Director or General Manager in the financial and securities sector.
Result
Between 2018 and 2020, the stock market underwent significant fluctuations but is now on a recovery path, leading to improved business performance for securities firms With strategic action plans and decisive leadership, companies like SSI, BSC, and AEPC have experienced effective growth and achieved notable successes.
In terms of capital adequacy
APEC, despite having a legal capital of only VND 135 billion—significantly smaller than SSI and BSC's VND 300 billion—successfully meets safety thresholds for capital adequacy according to current regulations This reflects APEC's commitment to implementing effective policies for financial safety, resulting in stable performance In contrast, while SSI boasts the largest capital scale and market capitalization among the three companies, its operational stability and capital control remain inadequate.
In terms of asset quality
Calculation results indicate that SSI and BSC maintain a high level of asset quality and safety, while APEC achieves only an average level Both SSI and BSC meet the legal target for provisioning ratios and implement effective receivables control policies Additionally, the total assets of securities companies have grown alongside increasing equity over the years Notably, the asset structure of securities companies differs from that of other industries, as evidenced by the consistently high proportion of short-term assets within their total assets.
In terms of management ability
Securities companies generally exhibit strong management capabilities, achieving high scores across most indicators, which reflects effective management policies and a robust risk management system The Board of Directors efficiently identifies, measures, monitors, and controls potential and serious risks However, accurately assessing the leadership ability of these companies is challenging, as high qualitative scores can obscure weaknesses in other indicators, particularly those reliant on internal data.
The profitability of the three securities companies remains at an average level, lacking a solid safety threshold and indicating instability in profit and revenue A significant portion of their total revenue comes from other sources, with brokerage activities following This trend is attributed to the slow recovery of the stock market and the broader Vietnamese economy from the crisis, coupled with ineffective profit-increasing policies that hinder economic activities As trading loses its appeal to investors, securities companies face challenges in enhancing profitability while adhering to CAMEL regulations, necessitating a reduction in operating expenses.
SSI and BSC have failed to meet safety thresholds, adversely impacting liquidity quality and increasing the risk of failure for these securities companies Conversely, APEC prioritizes safety and liquidity quality over a three-year period by relying on equity rather than external loans However, sustaining this high level of safety in the long term may hinder the efficient use of capital in business operations.
Limitations and causes
The analysis reveals significant disparities in operational efficiency and financial stability among securities companies While these firms have achieved notable successes, they continue to face specific limitations.
The three securities companies generally meet capital adequacy levels, particularly in terms of legal capital safety, though they do not achieve the highest safety standards Research indicates significant disparities in total capital values among these companies, with SSI possessing a large capital scale but still falling short in some safety ratios Conversely, BSC and APEC show marked improvement in their capital values Additionally, there are notable differences in the composition of total capital; SSI relies heavily on loans for expansion, while BSC and APEC prioritize equity for investment projects This over-reliance on a single component for business operations may pose risks for the companies.
BSC and APEC companies have not only expanded their asset size but also enhanced the quality of their assets Notably, there is a significant distinction between the total assets of SSI, which represents large-cap companies, and those of smaller-cap companies like APEC.
The financial safety supervision of management agencies and internal risk management systems in companies is gaining importance, yet notable limitations persist, leading to variations among firms While BSC and APEC concentrate on enhancing risk monitoring and governance, SSI has been engaged in these efforts for an extended period Furthermore, the study's evaluation was limited to just one of the 19 criteria, preventing comprehensive conclusions about overall management capabilities.
Fourth, profits have a slow growth rate, leading to low profitability of securities companies, not ensuring a solid safety threshold
Securities companies are increasingly focusing on liquidity, particularly for small-cap firms such as APEC While APEC has achieved a safety threshold in liquidity with consistently high indicators, these results lack stability In contrast, large-cap companies demonstrate more stable liquidity compared to their mid- and small-cap counterparts.
- Subjective causes: the causes come directly from the securities companies
The financial stability of securities companies remains inconsistent, particularly in their investment operations, where they have not fully leveraged their capital Additionally, there exists an imbalance among the various components of the companies' total capital.
Ineffective management of operating expenses hinders profitability and revenue growth Furthermore, a significant portion of securities companies' revenue is derived from sources outside their core business operations.
Securities companies are currently underperforming in managing and utilizing their assets effectively, resulting in a failure to maximize income generation from these assets.
The quality of human resources in securities companies is currently inadequate to meet job requirements, and the existing operational models exhibit several shortcomings, leading to inefficiencies within these firms.
- Objective causes: causes come from outside the market and from regulatory agencies
Between 2018 and 2020, the stock market faced significant challenges due to complex global and domestic economic factors, including the US-China trade war, shifts in major countries' monetary policies, and the onset of the Covid-19 pandemic Notably, Vietnam's stock market experienced a remarkable 40% increase in the VN-Index during the first four months of 2018, reaching a peak of 1,204 points in April, the highest in nearly two decades However, this rapid growth led to profit-taking, resulting in a sharp decline and making the VN-Index the region's most significant loser shortly thereafter By the end of 2020, following the Covid-19 crisis, Vietnam's stock market emerged as one of the fastest recovering markets globally.
The securities industry operates in a highly competitive environment, as evidenced by data from the Securities Depository Center By the end of the first quarter of 2021, domestic individual investors opened a record 113,191 new accounts, marking the highest number in market history.
From the domination of the number of accounts, it can be said that the race for the top dominates the stock brokerage market share
The legal framework of the State Securities Commission has significant loopholes, and the coordination among management agencies is ineffective This situation has fostered a subjective attitude and a lack of control among market participants during transactions.
Chapter II of the thesis first introduced general information about the securities companies studied as well as the process of formation, development and main business operations at securities companies Secondly, in this chapter, the author has analyzed the business performance of securities companies based on the arguments given in Chapter I, that is, applying the CAMEL model Following the last chapter, the author will give necessary solutions and recommendations to improve the performance of securities companies.