A survey on the development of banking services at vietnam bank for agricultural and rural development cau giay branch from 2012 to 2015,graduation thesis

BANKING ACADEMY Foreign Language Faculty ------ GRADUATION THESIS A SURVEY ON THE DEVELOPMENT OF BANKING SERVICES AT VIETNAM BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT CAU GIAY B

BANKING ACADEMY Foreign Language Faculty

- -

GRADUATION THESIS

A SURVEY ON THE DEVELOPMENT OF BANKING SERVICES AT VIETNAM BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT CAU GIAY BRANCH

FROM 2012 TO 2015

Supervisor :M.A Tran Thi Thu Thuy Student :Than Yen Nhu

Class : K15ATCC Student ID :15A7510179

Hanoi, 2016

BANKING ACADEMY Foreign Language Faculty

- -

GRADUATION THESIS

A SURVEY ON THE DEVELOPMENT OF BANKING SERVICES AT VIETNAM BANK FOR AGRICULTURAL AND RURAL DEVELOPMENT CAU GIAY BRANCH

FROM 2012 TO 2015

Supervisor :M.A Tran Thi Thu Thuy Student :Than Yen Nhu

Class : K15ATCC Student ID :15A7510179

Hanoi, 2016

ACKNOWLEDGEMENT

First of all, I would like to convey my gratitude to my supervisor, Ms Tran Thi Thu Thuy, MA from Foreign Language Faculty of Banking Academy for her significant contributions to my work Despite her bustling schedule, she was whole – hearted to offer me great inspiration, devoted advices and corrections during the research process from preparing to completing period It is obvious that without her guidance, I would not have finished this graduation thesis

Secondly, I am very thankful to Ms Nguyen Thi Kim Oanh, Deputy Head of Administration Department, Mr Vu Thai Bao, Deputy Head of Marketing Department and Ms Pham Thi Thu Huyen, Head of Forex Department at Agribank Cau Giay Branch, whose support truly assisted me in collecting relating data and documents as well as technology explaination

Besides, I would like to show my appreciation to all lectures of Banking Academy in general and teachers in Foreign Language Faculty in particular for the useful knowledge in many respects, which laid the solidly based for my research

I also wish to express my heartfelt gratefulness to my family and friends for their greatly spiritual encouragement to help me complete my course at Banking Academy Last but not least, I would like to thank those who are spending time reading my graduation thesis

STATEMENT OF AUTHORSHIP

I declare that this graduation thesis named “A survey on the development of banking

services at Vietnam Bank for Agricultural and Rural Development Cau Giay Branch from 2012 to 2015“ is the intellectual product of my own work which has not

been previously submitted for my degree or examination in any other university All the sources I have used have been specified and acknowledged as completed references

Signature

THAN YEN NHU

LIST OF ABBREVIATIONS

1 ABIC Agribank Insurance Company

3 Agribank Vietnam Bank for Agricultural and Rural

10 E – banking Electronic banking

11 E – commerce Electronic commerce

12 EDC Electronic Data Capture

13 FDI Foreign Direct Investment

14 Forex Foreign exchange

15 FTA Free Trade Agreement

16 IPCAS Interbank Payment and Customer

Accounting System

17 IPO Initial Public Offering

18 IT Information Technology

19 L/C Letter of credit

20 MIS Management Information System

21 NPLs Non – performing loans ratio

22 ODA Official Development Assistance

23 PBX Private Branch Exchange

24 POS Point of Sale

25 SBV State Bank of VietNam

26 TPP Trans – Pacific Partnership

27 WTO World Trade Organization

Figure 4.3: The relationship between fund mobilization and lending at

Agribank Cau Giay from 2012 to 2015

LISTS OF TABLES

Table 4.1: Outstanding loans situation according to terms at Agribank

Cau Giay Branch from 2012 to 2015

38

Table 4.2: Outstanding loans situation according to currency at Agribank

Cau Giay Branch from 2012 to 2015

LIST OF CONTENTS

ABSTRACT 1

Chapter 1: Introduction 2

1.1 Rationale of the study 2

1.2 Aim of the study 3

1.3 Scope of the study 3

1.4 Research methodology 4

1.5 Thesis structure 4

Chapter summary 5

Chapter 2: Literature review 6

2.1 Banking services 6

2.1.1 Definition 6

2.1.2 Types of banking services 7

2.2 Banking services development 13

2.2.1 Definition 14

2.2.2 The evaluation criteria of banking services growth 14

2.2.3 Factors affecting the potentiality of banking services expansion 15

2.2.4 Roles of burgeoning banking services 18

Chapter Summary 20

Chapter 3: Research Methodology 21

3.1 Research subject - Agribank Cau Giay Branch 21

3.1.1 Establishment and Development history 21

3.1.2 Organizational structure 21

3.1.3 General business activities 24

3.1.4 Business orientation in 2016 25

3.2 Research Methodology 26

3.2.1 Method orientation 26

3.2.2 The participants 26

3.2.3 The instruments 26

3.2.4 Data analysis 28

Chapter Summary 29

Chapter 4: Findings on banking services at Agribank Cau Giay Branch from

2012 to 2015 30

4.1 Fund mobilization services 30

4.1.1 Total mobilized fund 30

4.1.2 Mobilized capital structure according to maturity 32

4.2 Credit services 35

4.2.1 Total outstanding loans 35

4.2.2 Outstanding loans structure according to maturity 37

4.2.3 Outstanding loans structure according to currency 39

4.2.4 Non – performing loan ratio (NPLs) 40

4.3 Non – credit services 43

4.3.1 Foreign currency trading 43

4.3.2 International payment 45

4.3.3 Overseas Remittance 46

4.3.4 Card services 49

4.4 Other services 50

4.4.1 E – banking, M – Plus, etc 50

4.4.2 Insurance 51

4.4.3 Treasury and currency management 52

Chapter Summary 54

Chapter 5: Recommendations to improve the banking services development at Agribank Cau Giay Branch 55

5.1 Improving and modernizing technology 55

5.2 Developing the strength of available services 56

5.2.1 Fund mobilization 57

5.2.2 Bettering credit operation 59

5.2.3 Non – credit products 62

5.3 Branching out and improving the quality of banking services 65

5.4 Fostering the development of marketing and brand image 65

5.4.1 Advertising the branch’s brand 65

5.4.2 Strengthening opportunities of using banking services for customers 66

5.4.3 Implementing the supply of products and services 66

5.4.4 Performing advertisement campaigns 66

5.4.5 Reinforcing the public relations and customers services 66

5.5 Improving the quality of governance, inspection and internal control 66

5.6 Perfecting the distribution channels system 67

5.6.1 For traditional distribution channels 67

5.6.2 For modern distribution channels 67

Chapter summary 68

CONCLUSION 69

REFERENCES 71

ABSTRACT

It is evident that the integration and globalization of the world economy create either economic competitive opportunities or challenges for enterprises However, they also have been becoming the commercial leverage for the innovation and development of the whole economy In other words, banking system is considered the backbone of each economy whether in the micro or macro outlook Over the passing years, not being out of the international integration, Vietnamese financial banking system has constantly innovated and invested in a comprehensive way to adjust the ratio of the types of bank income by cutting down the earnings from risky credit operations, underwriting and enhancing competitive sinew with other regionally and internationally based banks

Banking services development is a burning field and an urgent requirement of international integration process nowadays This was clearly demonstrated when Vietnam officially becomes a member of the World Trade Organization (WTO) in November 7th, 2006 and especially after the adherence to the Trans – Pacific Partnership (TPP) which is considered an ideal for regional economic cooperation in the early 21st century in February 4th , 2016 Regarded as one of the young financial and banking systems because of modern science and technology as well as the deployment of services development policies, such sector in our country is inevitable confront of fragilities in certain aspects compared with those of other developing countries in the world However, having overcome a vast array of hindrances, Vietnamese banking system has continuously grown in size, quality, operational efficiency as well as the branches network throughout many regions With correlation issue, a case study of the banking service enlargement at Vietnam Bank for Agricultural and Rural Development – Agribank in general and Agribank Cau Giay Branch in particular was chosen to draw a detailed picture about the its services effectiveness, limitations and then propose essential recommendations

Chapter 1: Introduction

1.1 Rationale of the study

There is an argument that countries with efficient financial systems grow faster while inefficient financial systems bear the risk of bank failure (Kasekende, 2008) From that point, it is obvious that banking and finance industry plays a considerable role in the prosperity of each economy In spite of extraordinary losses caused by insurances, banks, securities through the recent recession, the contributions of Commercial Banks (CBs) should not be denied Over the passing years, the banking services contributed positively to raising capital, financing business activities and attracting foreign investment All of mentioned things prove that they have become the most efficient channel satisfying the diverse and complex demands of individuals and organizations

In addition, they are also substantial monetary tools which can elevate the economic growth

Business activities of CBs can be divided into three areas namely credit, investment and services Previously, revenues of CBs are mainly gained from credit activities However, the recent economic crisis has shown that such trend has not become feasible In addition, investment operations have high risks and long terms Therefore, CBs are entering a new race in which they increase the proportion of other services in total source of income Developing miscellaneous and multi – utilities banking services are harmonized to the needs of the economy on the basis of further improving the quality and effectiveness of traditional banking services and bettering transaction procedures However, raising capital and credit extension still need to be attached significant importance since fund is one of the most important and scarce resources Such view was supported by Bencivenga and Smith (1991, pp 195 – 209) reckoning that “Consumption goods in the economy are produced from capital and labour An entrepreneur who owns the capital invested in the business uses it to employ labour in order to produce goods This results in the production function made up of labour and capital which can be used in estimation” Last but not least, it is necessary to quickly access modern financial and banking services containing high technological content to meet the needs of the economy and maximize the added value for the credit institutions, customers and society

Being one of the leading commercial banks in Vietnam, Agribank always focuses on technological innovation, governance, organizational structure and distribution network in order to develop the modern, advanced, convenient banking services systems for all customers From that point, it strives to achieve stable growth and strengthen their position in the Hanoi area

There are a various kinds of advanced products and services supplied and developed

in recent years, such as Internet banking, mobile banking, forms of deposits, etc However, besides the gained achievements, there are specific weaknesses to overcome

On balance, a study on the banking services development in Agribank in general and Agribank Cau Giay in particular was chosen to be the main content of this research

The thesis “A survey on the development of banking services at Vietnam Bank for

Agricultural and Rural Development Cau Giay Branch from 2012 to 2015“ will

deeply investigate the effectiveness and seek out problems then suggest corresponding solutions

1.2 Aim of the study

The overall objective of the thesis is to analyze the effectiveness of banking services operations at Agribank Cau Giay Branch from 2012 to 2015 Besides, there are three main particular targets Firstly, the study will systematize the fundamental theoretical issues of either banking services or their expansion in CBs; hence, the necessity of the subject will be clarified Secondly, one of the major purposes when the author conducted such research is to learn the current situation of services activities advancement at Agribank Cau Giay Branch between 2012 and 2015 Last but not least, the author sets a target that the study is able to put forward suitable measures and proposals to improve the quality of services development

1.3 Scope of the study

To improve the competitive capacity of Agribank, it requires the endeavor of all the branches at the same system in every aspect However, in this study, the investigator intends to mainly overview a brief of the theory and the current situation of banking services operations at Agribank Cau Giay Branch Moreover, due to the limitation of time, conditions and materials, the data was collected in the period from 2012 to 2015

From that point, some suggestions will be proposed to motivate the development of the branch in particular and Agribank in general

In order to fulfill the research aims, both qualitative and quantitative methods were utilized to examine the real development situation of banking services and products at Agribank Cau Giay Furthermore, collected information and data have been analyzed

by other methods namely comparison, statistics, synthesis and mathematic models to make suggestions which are beneficially appropriate to the case study and banking sector in Vietnam

1.5 Thesis structure

The thesis consists of five main chapters In particular, in the first chapter, the author explains how the main topic was chosen This introduction part also points out the aims, scopes, methodology and the organization of the study Besides, the literature review of banking services and their development are obviously stated in the second chapter Especially, definitions, classification, roles in the economy, evaluation criteria and effecting elements are clearly illustrated The following chapter markedly describes the conducted instruments to analyze the data when carrying out the research namely the annual financial reports analysis, interview and observation Furthermore, research subject, participants and the data analysis process are also obviously demonstrated In addition, an insight into the services practice of Agribank Cau Giay is evidently drawn in the forth chapter From that point, the readers are able

to recognize either the achievements or drawbacks in the services operations at the branch Last but not least, the last chapter emphasizes the implications of the thesis in which some major recommendations are proposed to improve the quality and

efficiency of banking services development at Agribank Cau Giay in particular and Agribank in general

Chapter 2: Literature review

be withered away when it is produced" From this point, “service” is considered a third economic sector This means that all economic activities beyond agriculture and industry are hold to be in the service sector

At another standpoint, Marx argued: "The service is the brainchild of the commodity economy When such economy flourishes and requires a smooth as well as constant circulation to satisfy the increasing needs of people, the service is growing” Thus, Marx showed the development origin of services and proved that the better commodity economy develops, the better services thrive Services not only include traditional subdivisions such as transport, tourism, banking, commerce, insurance, postal and telecommunications but also spread to the very advanced fields namely culture services, finance, environmental protection and financial consultancy

It is obviously that services evolve in an amount of numerous economic sectors in which banking services seem to be the breath of the economy life However, there has not a standard definition for this type of service According to WTO, the definition of banking and financial services has not clearly separated yet In Vietnam, the concept

of the former is greatly diverse and profound There is the perception that: "Banking services are all the intermediate products of CBs or financial institutions created to serve the savings, profitable investments, securities, etc needs of all economic subjects thereby inducing income from interest rate differences and service charges for the supplying organizations” This observation indicates all operations satisfying the reasonable demands of the customer In the banking development trends today, CBs are regarded as financial supermarkets with lots of different services depending on the

classification and the bank degree This concept is in correspondence with the factual state, international practice and sub – sectors of services taxonomy in the WTO draft agreement that Vietnam committed

On the other hand, some believe that the banking operations apart from lending are called service activities This viewpoint undoubtedly defines credit operation, a traditional and essential activity carried out by the CBs in Vietnam, with service activities which have been developed recently Such discernment in the currently integration trend allows CBs implementing focused combined with multiform strategies and polishing up the efficiency of non – credit activities

No matter how such abstraction is interpreted, banking and financial services have a profound effect on our life, job opportunities, the cost of living and the sufficiency of our savings Simultaneously, it is also an urgent requirement for CBs to mature, branch out and augment the quality of their business operations The current situation

in Vietnam market has revealed that traditional credit activities have also been exploited in the diversification direction of product forms such as home loans, auto loans, student loans, etc Besides, latest banking services such as cards, foreign exchange trading, discount, money transfers, remittances, consulting, etc are also being invested in terms of technology, machinery equipments, qualification training, marketing, branding, prestige building, etc to meet growing competitive demands

2.1.2 Types of banking services

According to Peter S Rose and Sylvia C Hudgins, banking services are divided into two types depending on the time and level of economic development

2.1.2.1 Traditional services

Traditional banking services are the type of those which have the long – term formation and progression In particular, there are eight main services provided by CBs

Firstly, it can not be denied that fund mobilization is one of the specific activities of

CBs Such operation has proved that CBs have an substantial part in the market economy These activities impulse the income increase and its structure amendment since 80% of CBs income is gained from credit operations which have a very high risk Based on their nature, they can be divided into two categories The initial one is

demand deposit which is a bank account allowing money to be withdrawn from the available balance, by the account holder at his or her will and by any means, without notice to the bank Demand deposits are important to consumers because they often use the funds to pay day – to – day expenses Without the ability to obtain funds on demand, depositors would not be able to make any purchases without first telling the bank On the other hand, a term deposit is a deposit held at a financial institution that has a fixed term These are generally short – term with maturities ranging anywhere from a month to a few years When a term deposit is purchased, the lender (the customer) understands that the money can only be withdrawn after the term has ended

or by giving a predetermined number of days notice These types of financial products are sold by banks, thrift institutions and credit unions This is a stable fund source of CBs so that they can use this resource to grant short, medium and long term loans To attract customers for this type of deposit, CBs often use interest rate tools, promotion

or other forms of marketing It is obviously that by raising capital, CBs will attract savings from individuals and institutions then they use mobilized funds (after deducting required reserve) for loans with different interest rates and maturities In addition, such service is also regarded as a prerequisite which promotes CBs to reserve the financial resources to develop their other products or services

Secondly, on the attracted capital foundation, CBs conduct lending activities for

earning profit Loans, also known as credit, is the process that one party (the lender) provides financial resources for other object (the borrower) in which the borrower agrees to repay the lender at some date in future and generally with interest In fact, credit operation is deployed in different forms A trade credit is an agreement where a customer can purchase goods on account (without paying cash), paying the supplier at

a later date Through bank credit, CBs mobilize funds from customers and lend to others for gaining profit Besides, the activity that government or corporate issues bonds to the public to borrow from organizations and individuals is also considered a form of credit Especially, the financial leasing operations by the financial leasing companies are also regarded as a form of credit in the market economy To conclude, credit operations include lending, consumer loans, valuable papers discount, etc Depending on the demand for loans term, CBs apply the form of loans under the

supply and demand on the market or in the mutual trust relationship to implement suitable interest rates with each economic subject

Thirdly, by supplying payment services, CBs accommodate convenient methods of

payment for customers Nowadays, customers can choose between two forms namely cash payments and non – cash payments It is evident that non – cash payments are more widely utilized since they are safe, economical and swift Currently, CBs in Vietnam use payment services such as check payment, collection, payment order, letter of credit, bill of exchange, money order, debit cards, etc

Fourthly, the currency exchange is another traditional banking service The banking

history has revealed that one of the first offered banking services was currency exchange in which banks trade one form of currency (such as dollars) to another (such

as VND) against a service fee It is evident that favorable opportunities for domestic enterprises to expand to overseas markets have been broader and brighter since Vietnam became an official member of WTO and especially TPP accession Therefore, such service is growing to satisfy the trading demand in foreign trade activities

Fifthly, CBs have been conducting the trust service as though it is one of major

operations Through many years, banks have carried out the asset and finance management activities for either individuals or economic organizations and charge a fee Providers of such services typically act as trustees for managing a deceased customer’s estate by paying claims against his estate, keeping valuable assets safe, and inspecting whether legal heirs receive their rightful inheritance They consist of entrusted loan capital for households, entrusted issuance and even asset management for the deceased

Sixthly, commercial notes and certification of value discount is also considered a

typical activity of CBs In the initial development period, CBs have begun to discount commercial bills or in other words, CBs make loans to local companies who sold undue valuable papers to the banks in exchange for cash This is the preferred operation for both customers and banks because of low risks

Seventhly, CBs are entrusted with an important task that offers the finance for

government activities In the Middle Ages, CBs were allowed to execute on

condition that they have to buy government bonds in a certain proportion of the

deposits they received The banks were committed to finance government operations

in wartime

Finally, due to the extreme solvency of a bank to its customers and the holding

deposits position, it grasps a huge prestigious in guarantee Such kind of service is

issued to those who receives the repayment commitment in the event of their default

or incomplete repayment on time Guarantees services are thriving and increasingly diverse in recent years Especially for reputable banks, the proportion of this activity

is considerably extraordinary in the bank's total revenues

2.1.2.2 Modern services

In the ambience of market economy development, as competitive pressures among financial institutions are growing and requirements of users are also increasing, especially because of the information technology storm, banking services are constantly being improved and laid the basis for modern banking formation

CBs can offer the market new services or provide traditional services with a high technological content Modern banking is understood to include the evolution traditional banking services on the basis of modern technologies and new services which are provided in order to bring these new gadgets for the users Modern banking services have following specific characteristics Firstly, they are developed based on modern technologies Moreover, the modern banking products usually are anonymous service package, thus CBs are required to regularly supply and improve service quality Up to the present, CBs have supplied seven popular modern services

Initially, the cards service is the most familiar product with customers Bank cards

are convenient services by which customers do not use cash for payment CBs issue card accounts to customers with the aim of helping them purchase products and services or automatic cash withdrawal through the Point of Sale (POS) or Automated Teller Machine (ATM) within their deposit balance or granted credit limit

Credit cards are cards issued by a financial company giving the holder an option to borrow funds They usually charge interest and are primarily used for short –term financing Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual's credit rating They are considered means of non – cash payment which allow customers to spend now and

pay back later within the credit limit granted by issuing banks Statement cycles and the process from the expenditure to payment depend on the type of card for different organizations If cardholders pay off the outstanding balance on the due date, they will have not to pay interest to the closing balance at the end of the statement period However, if in due, cardholders will be compelled to pay fees and deferred interest When they acquit themselves of the incurred account outstanding, credit limit will be restored to its original condition That is the circulation of credit cards

The issuers of credit cards such as banks or financial companies based on reputation and the ability to ensure each customer's payment determined by his or her income, expenditure situation, working location, etc Each customer has a different credit limit Therefore, there are varied card classes such as gold cards, standard cards, platinum cards, diamond cards, etc

Debit card, also called check card, is another mean of non – cash payment that deducts money directly from a consumer’s checking account to pay for a purchase Unlike credit cards, debit cards do not allow the users to go into debt, except small negative balances that might be incurred if the account holder has signed up for overdraft coverage In other words, a check card uses account balance of the customer deposits for transactions and required the prescribed balance in their account

ATM card is the first developed form of debit cards that directly enables cardholders

to withdraw money at ATMs Currently, CBs provide their customers numerous utilities such as account inquiries, transfers, withdrawals, statement printing, etc ATM system also allows cardholders to send money to other accounts at the same ATM and perform other banking services such as saving deposits, electricic payment, water and telecommunications postage

Next, the cash management service is another modern banking product which is had

the confidence in utilizing by most of individuals and enterprises Over the years, financial institutions have found that some of the services they provide for themselves are also valuable for their customers One of the most prominent services is treasury services in which CBs manage revenues and expenditure for clients Simultaneously, they invest the surplus cash in temporary securities and short – term credit to bring profitability

Cash management services of CBs are growing including the transactions like VND collection and exchange, foreign exchange, submission services, cash withdrawals, storage services, direct payroll service, credit card payment service, etc

Moreover, selling insurance services are the expanded business operations of CBs

not only in the world’s finance – banking market but also in Vietnam In recent years, CBs has sold the credit life insurances that ensure the payment in case borrowers died

or lost their solvency Currently, CBs often underwrite their customers through joint ventures or exclusive sales agents By this way, an insurance company agrees to put

an agent's office at the bank After that, such bank will receive a portion of income from these services

Besides, CBs also carries out the brokerage services for securities investment It

can not be negated that CBs are striving to provide enough financial services permitting clients to satisfy all their needs in one location from which such banks become true financial conglomerates This is one of the prime reasons why CBs began selling the securities brokerage services, offering customers the opportunities to buy stocks, bonds and other securities In particular circumstances, banks cooperate with

the securities companies or securities brokers to provide brokerage services

Furthermore, the electronic banking services are regarded as one of the most

essential and profitable business activities of CBs Electronic banking is a services system which authorizes customers to remotely access to the bank These services are developed based on the application effectiveness of information technology Such services take aim at assisting customers to collect information, perform transactions and financing depending on deposit accounts The E – banking services include following products

Firstly, Phone banking is automatic answering system about services and products

information By using this service, customers can investigate their account balances, check the latest transactions, receive information on exchange rates, interest rates and require their banks publish the statement through fixed phones

Secondly, by using Internet banking, customers can search for the needed information about the services, access to information on individual accounts such as balances, account transactions through the Internet

Thirdly, Mobile banking enables customers to automatically check account balances,

transaction lists, balance notifications, exchange rates and interest rates, pay bills for electricity, water, telephone, Internet and recharge cards just by mobile

Fourthly, customers can use Home banking to perform most transactions at home or

their office without going to banks Those utilizing such services have to install the bank's program to connect to the bank

Fifthly, SMS Banking allows clients to query information and banking transactions by

mobile phone messaging syntax defined in advance to the Private Branch Exchange (PBX) that banks offer

Sixthly, by utilizing Electronic wallet, customers are able to conveniently and safely

pay commercial transactions or exchange in the E – commerce website on condition that they registered with the bank

In addition, the financial advising services are the specific activities of CBs Banks

are specialized financial institutions which own a lot of financial experts in investment, financial management, merger and acquisition enterprises Therefore, more and more customers will consider CBs financial advisors encouraging them to optimize revenues and diminish risks

Several banks have shed the spotlight on providing consulting services to meet the needs of financial and managerial advisory of small and medium enterprises These businesses encounter financial predicaments and management problems In such occasions, banks will enlighten resolutions and advise businesses in costs government, valuation, fundamental investment rating and forecast income and asset management, etc

Last but not least, the financial leasing services are the ways by which businesses

can obtain the components of machinery, equipments, vehicle, etc without capital investment Enterprises being lack of capital to purchase needed assets to serve production and business processes can go to the leasing companies to hire the property and pay a fee according to the negotiation between the two sides Such property obviously belongs to the ownership of leasing company during the rental time

2.2 Banking services development

2.2.1 Definition

Development is the expansion and improvement from incomplete to impeccable In other expression, it can be acquired as the coordination of expanding the number and enhancing the quality of banking services to meet the growing needs of customers and ensure the objectives and tasks of the banks

Banking services growth is a form of banking services diversification including service species development, scale and capacity market expansion for the purpose of risks allocation, competitiveness and business performance strengthening These types

of services can be supported services, alternative services or additional services which are in an attempt to create new utilities by elaborating operational processes and simplifying procedures

To conclude, services development is a crucial work since it not only meets arising needs of customers but also broadens the market thereby improving the bank's position

2.2.2 The evaluation criteria of banking services growth

2.2.2.1 Quality criterion

Services quality reflects the CBs’s development, professionalism and possibility of providing services It will produce charisma and ability to attract new customers as well as nurture existing customers in the domestic and international market There are four major criteria reflecting the quality of banking services

To begin with, customers’s satisfaction is considered the fundamental element which determines the success as well as profit of products and services supplied by CBs Like the ordinary services providers, CBs also provide specific products to meet the demands of their customers The high quality of services either meets the expectations

of current clients or allures more potential consumers because of chains effect This is the first and the most important criterion when one chooses services suppliers

Additionally, price of services is another criterion which assesses the advancement of banking services of CBs In general, when purchasing or deciding to use any type of products, people are concerned about their price In other words, they always want to use a good service at the most reasonable price Therefore, it can be said that a sound

service charge will form premises for attracting the usage of customers This is also one of the traditional competitive methods of CBs

Moreover, by realizing the services superiority, business risks of CBs will be remarkably reduced if their services can minimize transactions errors and customers complaints

Besides, the incessant increase in the income’s size and proportion from banking services is also one of factors helping one evaluate the banking services growth in the fixed period This is the criterion reflecting not only the diversity of services but also their quality However, the latter seems to be more prominent Providing that the service quality can not be guaranteed, their diversification will be insignificant since customers do not consume such products

2.2.2.2 Quantity criterion

The number of offered services and their catalogue reflects the scale and the diversity

of the types of business services However, the number of service development requires CBs not to either merely maintain the quality of the existing services or continuously improve and innovate to meet the customers’s requirements

2.2.3 Factors affecting the potentiality of banking services expansion

2.2.3.1 Subjective factors

To start with, business strategy of CBs directly has the huge impact on their services growth When an organization is established and begins to operate, it will identify peculiar missions and visions To have a deep – rooted and enduring development, CBs must have superior business strategies in keeping with their conditions thereby ensuring that such operation will efficiently bring the highest benefit This procedure should focus on the issue of human and technology resources to efficiently utilize input and output sources at the least risk Moreover, sales and marketing policies should be carefully considered as it has a direct impact on the development process as well as the competitive position consolidation of CBs in the market

In addition, financial and technology capability is another subjective factor Financial potentiality is a measure of a bank’s strength in a given time It is demonstrated by indicators such as capital adequacy levels, ability to raise capital, asset quality, profitability and liquidity If the equity to total assets is lower than the 8%, the

expansion of services numbers will face restrictions especially those craving for a major capital investment In general, the strong financial resource will ensure productive business operations Moreover, it will help CBs in Vietnam enhance the competitiveness when the foreign banks are penetrating Vietnamese market under the WTO commitments

The service expansion, especially with modern banking services, is closely linked with the technology elements Advanced technology incubates convenient services to meet the needs of customers Beside traditional products and services, customers nowadays have been increasing demands for modern products and services Banking technology includes not only electronic payment systems, retail banking, ATMs, but also Management Information System (MIS), etc within the bank Therefore, the modern banking technologies application will spread out valuable opportunities to develop banking services In addition, it is important that CBs should know how to choose equivalent technology to gratify the actual needs of users

Besides, the streamlined and reasonable structure organizational arrangement from the head office to branches is essential for most of the activities of the CBs Furthermore,

a scientific arrangement of departments ensures prompt handling work, information connection; hence, management efficiency will be maximized Branch network expansion originates in the business development needs However, CBs should efficiently exploit economic sectors and frequently carry out the inspection and supervision to ensure their effectiveness

Moreover, human resource is a crucial factor for any businesses including CBs Taking full advantage of those, the development of enterprises will be fostered Conversely, if bankers have not enough professional competence, the development of the business will be inhibited To improve the quality of services in integration process, they must improve labor skills and proficient qualifications throughout the bank branches The growth of banking activities requires the increasing officer’s quality in order to be able to effectively put modern technology into practice to serve business operations during the renovation period In addition, bankers must have expertise, economic, legal, market knowledge, honesty and pleasant customer service attitude to establish the faith of customers on CBs

2.2.3.2 Objective factors

It is obviously that the stability or precariousness of the economy and the economic policies of each country has a direct impact on business productivity of enterprises in the market In addition, they also demonstrate the market size, desires of consumers and consumption capacity through the income information A stable economy will be

a favorable environment in which business activities of CBs can gain high profits and create many advantages for the services development On the contrary, the instability also affects the bank's operations quality and causes depletion to them

Globalization trend in the world economy has certain effects on the operation of the national economy in general and the activities of CBs in particular This is one of factors that policy makers always timely grasp to devise appropriate measures to minimize the disadvantages and exploit advantages for their countries

Additionally, legislation plays a significantly important role in each country It is a part of society and banking activity is not an exception Furthermore, since banking activities have specific characteristics, they should be properly concerned However, current Vietnam's banking legislation is still prolix, flawed and inappropriate with the international standards so that it can inhibit the development of banking services The social environment includes factors such as population, educational level, income, etc Banking services can only thrive in a stable political environment without unexpected fluctuations From that point, people and businesses feel secure to invest and participate to social and economic activities Since then, the needs to use banking services will be raised

Besides, operating in the market economy, CBs face increasingly fierce competition between the domestic CBs and the foreign banks If the financial market has many CBs which not only are state – owned but also belong to the shareholders, Joint Venture banks, branches of the foreign banks or the financial intermediaries forms such as financial companies, leasing companies, people's credit funds and other financial institutions, the capacity to attract customers and occupy the market share will confront of intense competition Such situation requires CBs to concentrate on improving product quality, customer service custom and reducing costs in terms of money and time Furthermore, CBs are obliged to apply modern technologies and

develop the utilities of products and services Owing to that, banking services are increasingly expanded and perked up

Furthermore, the services provision must focus on the consume psychology of customers Similarly, when CBs want to develop services, they must grasp the needs and consumption habits of customers in order to offer the suitable products and services to different clients segments They need to consider and understand the behaviorism of each customer to be able to either advise or choose the suitable services From that point, CBs are able to enhance and establish sustainable relationships with customers

Moreover, it is clear that modern technology is the foundation and the service activities decision basis of the CBs nowadays Technology management of CBs has grown from handicraft to using national networked computer systems to connect globally The appearance of the ATMs, debit cards, credit cards have proven that technological revolution has created new capacity for CBs In particular, it helps CBs cut down operational costs, improve services quality and pave the way for further development thereby gaining advantages in competition

Last but not least, the integration of the international financial market is the decisive element to the development of not only banking services but also all other operational fields of CBs The basic problem in the process of the economic integration in the realm of financial services is the gradually opening for the foreign banks and Credit Institutions (CIs) This means that the state controls the participation of foreign entities providing financial services under the development of the domestic market Such movement may increase the competitiveness and the efficiency of all economic backgrounds in the economy In fact, Vietnam is located in the dynamic economic region, the Asean Economic Community (AEC) which has the abundant investment of the large transnational companies and corporations The presence of these groups has significantly contributed to the growth of banking services in Vietnam

2.2.4 Roles of burgeoning banking services

2.2.4.1 In the banking system development

Firstly, the development of banking services contributes to a healthy competitive environment and overcomes the monopoly in the banking sector Therefore, banking system will grow with every passing day

Secondly, the growth of banking services is conducive to connect banks to each other, thereby creating financial groups which have profuse capital, powerful potentiality and ensure the safety of operations

Finally, the development of banking services is instrumental in the promotion of competition among banking system to provide the most convenient services to the users

2.2.4.2 In the market economy

Banking services not only bring out profit for CBs, but also show the development of the national economy Therefore, their development is extremely important for all countries in the world

In addition, they have a great significance in deposits mobilization and effectively allocate resources to contribute to the economic growth They also relate to all activities of the enterprise from the payments, transfers to capital stimulation or access

to financial information It can be said that all businesses are required to use banking services at the different levels

Moreover, the banking service development is a leverage helping bring the investment capital to its target quickly and efficiently Relying on that, CBs perform the function

of promoting and supporting the economic growth and the income generation By raising capital services, CBs generate income for those with idle funds Furthermore, they use the raised capital to invest, loan business entities, help businesses restructure their production mechanism, renovate technology equipment to lower costs and improve competitiveness

Chapter Summary

In this chapter, the thesis has systematized such basic theoretical concepts such as defitions and classification of products and services of CBs On that basis, the author identified the influencing factors that competitiveness evaluation criteria among the CBs From that point, we can see that the development of banking services and products proved to be essential for not only banks but also the economy to help the bank meet the increasing demands of customers and enhance its competitive position

in the context of progressively economic intergration The above theoretical investigation has assited the author to perfectly and accurately examine the real situation of the banking activities at Agribank Cau Giay Branch and propose efficient solutions in the forth and fifth chapters

Chapter 3: Research Methodology

This research project, as briefly presented in the first chapter, investigates the current situation of banking services operations at Agribank Cau Giay between 2012 and

2015 It also aims to provide recommendations for the development of more effective services The purpose of this chapter is to present how this study was conducted It includes the description of the employed research approach, the methods used for collecting data and the data analysis

3.1 Research subject - Agribank Cau Giay Branch

3.1.1 Establishment and Development history

Agribank Cau Giay Branch is the first class branch established in January 13th, 2006

by the Decision No 28 of Agribank’s Board Chairman Agribank Cau Giay Branch has its headquarter at No 99 Tran Dang Ninh, Cau Giay District, Hanoi After ten years of construction and development, Agribank Cau Giay Branch has experienced steady development to confirm its prestige and position on the path of monetary operations and banking services reform

3.1.2 Organizational structure

Total number of staff on the payroll up to December 31st, 2015 is one hundred and twenty nine officers including one at doctoral level, eighteen master officers and one hundred and eight bachelor staffs

Figure 3.1: Organizational Structure of Agribank - Cau Giay Branch

To begin with, Board of Directors includes one director and four deputy directors

managing all the branch's businesses

Next, Accounting Department directly deploys accounting, statistical accounting and

payment operations prescribed by Agribank Moreover, it has to either archive documents of the operational departments, the data according to the current

Director

Deputy

Director

Deputy Director

Deputy Director

Deputy Director

Forex trading Department

Marketing Department

General Planning

Department

IT Department

Internal Control Department

Administration Department

regulations or manage internal transactions, payroll and other monthly income for the staff Besides, such department needs to coordinate with the related departments in order to analyze and evaluate the operational results of the branch taking an aim at submiting to the branch leaders to set aside a risk reserve fund

The following division named Credit Department whose mission is to provide loans

for state – owned enterprises, private enterprises and loans to households In addition,

it also performs capital mobilization, implements the pledge guarantee services for economic units and builds up projects and the annual business strategies Moreover, it needs to regularly classify loans, analyse overdue loans, seek the causes and propose countermeasures and appraise lending projects as credit authorization

One of the most potential parts of the branch is Forex trading Department which carries out operations of foreign currency trading in the form of opening Letter of

credit (L/C), setting up documents for export units, buying and selling foreign currencies Furthermore, such department has to coordinate with other customers – relation departments to launch marketing work to clear foreign currency source for the branch as well as attract customers using banking products and services

Marketing Department which is also considered a crucial unit to significantly

contribute to the banking services development deploys following tasks Firstly, it is

required to research suitable marketing methods and find out the implicit truth of customers In addition, behaviors of potential customers also need to be surveyed Moreover, officers of such department must classify market segment, define targets, determine the brand position as well as develop and complete products with the attributes desired by the market Furthermore, they are entrusted with the products management (Products Life Cycle) namely introductory, growth, maturity and decline stages Last but not least, such department has to draw up and implement strategic marketing plans such as 4P (product, price, place, promotions) and 4C (customer solutions, customer cost, convenience and communication)

General Planning Department is another division which is attached special

importance by Agribank Cau Giay Such department has to develop business plans,

synthetic track business targets and striking a balance to other Agribank branches in the operational area Moreover, it must effectively balance capital sources, utilization

and harmonization of business funds In addition, it is also the clue for researches of business network expansion in Vietnam handed in Agribank and the root for scientific subject deployment and development of the branch

Besides, Information Technology Department implements management tasks,

maintains computerized information systems at the branch and ensures the smooth operation of network systems Besides, there needs to coordinate with the expert bureaus to either propose new products and technologies or require the advancement, system modifications and the training deployment on information technology at the branch

To ensure that the whole system of Agribank Cau Giay is smoothly operated, Internal

Control Department has four main missions In particular, it has to review

administrative, financial, operational and engineering transactions of all departments

at the branch as well as the adequacy of the internal control system to ascertain whether it provides reasonable assurance of safeguarding assets In addition, the reliability, integrity of information and the efficient use of resources are compelled to

be maintained so that the branch can accomplish established objectives and goals Furthermore, such department must evaluate the extent of the branch compliance concerned with government policies, laws, rules and regulations Lastly, the fiscal review of Head Office financial transactions is prescribed to be conducted by this division

The final department is Administration Department which implements staff traning

organization at the branch in accordance with the policies and regulations of Agribank, performing the work of management to serve business activities at the branch and carrying out the branch security missions

3.1.3 General business activities

To perform business development guidelines "Dynamic, Qualitative, Efficient, Equitable", Agribank Cau Giay Branch always tries to exploit every possible advantage in the operational areas and promote the creativity of each individual , maintain the balance of capital, stabilize the capital growth, reasonably expand credit coupled with improving credit quality and ensure the interests between CBs and their customers

Up to the present, Agribank Cau Giay Branch has implemented a variety of modern convenient services One of the provided traditional products is that the bank receives deposits, savings deposits, bonds in VND and foreign currencies from economic organizations and individuals with flexible and attractive interest rates Especially, deposits of economic sectors are insured under the provisions of the State Besides, the branch performs co – sponsored by VND, USD projects, large economic program

as the leading bank or member bank with the most favorable procedures Moreover, Agribank Cau Giay also conducts loans business like other CBs by lending all economic sectors under the interest rate agreements with various types of loans namely short, medium, long term in VND and hard currencies Furthermore, Agribank loans to individuals and households secured by property, consumer loans, etc In addition, the bank carries out a vast array of modern services such as issuing credit cards and pay payrolls through customers account, implementing bank guarantee, for example, bid security, contract performance guarantee, payment guarantee, product quality assurance, etc, settling goods, services import and export, securely transfering

by SWIFT to the largest banks in the world at the low – cost, transfering money quickly with Weston Union services, students transfer and remittances, trading currency futures and spot forex, issuing Visa, Master cards, providing treasury and cash management, furnishing Automated teller services 24/24 (ATM), accommodating customers with telephone queries service and transactions from remote network and fulfilling other financial and banking services

Under the sagacious guidance of the leaderships, along with the determination of banker at Agribank Cau Giay, business operations of the bank in recent years has experienced positive changes Therefore, the bank completes the tasks allocated by the Managing Board and the Board of Directors and positively contributes to the socio – economic development of the city

3.1.4 Business orientation in 2016

The domestic and international economy is predicted to recover; furthermore, prices and inflation will be stabilized at the low level over the period from 2016 to 2020 The economy will be converted from a model developed by the width to those developed

in depth The economic structure continues to shift in the direction of increasing the

proportion of the contribution of the industrial sector and services to create higher added values However, the domestic economy is still facing difficulties due to the changes in political tensions between countries, climate change, complex international financial markets, restricted competitiveness when Vietnam joins TPP and Free Trade Agreement (FTA) and deeper integration into international institutions

In such circumstances, Agribank Cau Giay Branch chalks out following oriented business objectives in 2016 Firstly, the bank will try to increase the capital growth rate by 15% compared up to December 31st, 2016 Total capital will reach VND 4,647 billion in which population deposits account for between 55% and 60% Secondly, the bank endeavors to make the growth rate of total outstanding loans reach the target of Agribank but not less than 6% compared to those in 2015 By December 31st, 2016, the minimum total outstanding loans will reach VND 2,900 billion In particular, medium and long term loans account for 30% to 35% of total outstanding loans Moreover, bad debt (from Group 3 to Group 5) will be less than 2% of total outstanding loans Last but not least, the revenue from non – credit collection will make up about 25% to 30% compared to those in 2015

3.2 Research Methodology

3.2.1 Method orientation

As stated in the first chapter, to gain the aims with high practicability, the research employed different methods which are annual financial reports analysis, interviews and observation These methods were used to collect data from Agribank Cau Giay with the intention of addressing the marks of the study after that the author

quantitatively and qualitatively anlyzed

3.2.3.1 Annual financial reports analysis

In general, financial reports represent one of the most common types of quantitative research when one conducts the business valuation investigation They are financial

data documents which CBs or CIs publish on an annual, biannual, quarterly or monthly basis In other words, such documents draw a comprehensive view of the bank’s operations and financial conditions at a certain time Furthermore, these reports often contain an outstanding combination of graphics, photos, tables and figures of the bank’s operational information over the past years Thanks to that, either financial planners or accountants are able to make decisions regarding to future planning, expansions as well as products and services launches Besides, relying on the released financial results, customers can also put forth their own decisions whether they should have a confidence in using banking services and depositing their money into such bank or not Moreover, financial reports are considered one of appraisal tools which are used by administrators, the State Bank of Vietnam (SBV) or other related

economic backgrounds in order to evaluate the business result of CBs and CIs

With such advantages of financial reports analysis method, the author carried out the examination of Agribank Cau Giay Branch’s annual financial reports from 2012 to

2015 In particular, the researcher inspected the operational result of the branch in terms of the nine banking services deployment over the mentioned period of four years After collecting the essential results, the investigator utilized synthetic and statistic methods to bring about the final outcome which was demonstrated by suitable figures and tables In fact, the process from preparation to accomplishment took around two weeks

3.2.3.2 Interview

Qualitative interviewing method assists researchers to observe and record a subject's unique perspective or experience as it relates to a particular issue A qualitative interview poses directed, open – ended questions to subjects with the intent of getting back a detailed, first – person perspective about a particular event, topic or situation This gives the interviewer insight into where a subject is coming from, rather than getting “yes” or “no” answers that provide incomplete feedback Furthermore, such approach allows an interviewer to gather not only hard, factual data, but to collect emotional data, as well From these above uses of interview, it is evident that with this study, using interview instrument is very suitable to be applied This second instrument, the interview, was used to investigate how Marketing Department at

Agribank Cau Giay distributes and spreads out banking services In particular, the researcher carries out working sessions with Mr Vu Thai Bao, Deputy Head of Marketing Department, Ms Nguyen Thi Kim Oanh, Deputy Head of Administration Department and Ms Pham Thi Thu Huyen, Head of Forex Department at Agribank Cau Giay Branch Each meeting lasts for about thirty minutes in which both sides exchange the services characteristics as well as the result of such services supply at the branch in the period from 2012 to 2015 In addition, they instructed the author how to collect the truly necessary statistics in the field of banking services development from annual reports in order to either save time and effort or obtain the effective research result

3.2.3.3 Branch observation

To suppliment previous instruments, the author employed branch observation for more data The primary advantage of such method is that the researcher can directly see what people do rather than relying on what they say they do In this research, participants and direct observation were put into practice In particular, with the assistance of Mr Vu Thai Bao, Ms Nguyen Thi Kim Oanh and Ms Pham Thi Thu Huyen, the author had a valuable opportunity to join in different divisions at Agribank Cau Giay such as Credit, Forex trading, Marketing and Accounting departments to observe the activities of officers in the deployment of nine products namely fund mobilization, credit, foreign currency trading, international payment, overseas remittance, card services, E – banking, insurance and treasury Furthermore, the researcher records such services characteristics and gathers operational results in the given period Moreover, this instrument was conducted to help the writer recognize the actual competitive edges and drawbacks of the branch in services operations compared to other banks

3.2.4 Data analysis

Firstly, the researcher read through all the observation notes and gathered annual reports results The data were then organized and categorized into different types Finally, such categories were compared to bring out the assessment of the branch’s performance in banking services development from 2012 to 2015

Chapter Summary

In short, this chapter mainly discussed the methodological aspects of the research, which includes research subject, method orientation, the participants, the instruments and data analysis process This also lays the basis ground for the analysis of banking services expansion at Agribank Cau Giay Branch between 2012 and 2015 in the next chapter

Chapter 4: Findings on banking services at Agribank Cau Giay Branch from

2012 to 2015

4.1 Fund mobilization services

With any business, capital is one of the esential inputs of business activities For CBs – a currency trading organization that primarily and regularly recieves deposits from customers and loans from the mobilized money and implement bank services, the role

of capital becomes crucialy important Such mobilization is considered either a core issue in the economic development strategy of the country or a survival matter in the competition among CBs as well as international integration In recent years, the banking system has to seek ways and means to raise capital However, according to scientific researchs, the number of idle capital has not been mobilized and used to effectively invest

In recent years, in the complicated development of the capital market and the fierce competition among CBs, Agribank Cau Giay always considers the fund mobilization

is one of the indispensable tasks Agribank Cau Giay was active in the marketing and trading style innovation The mobilization forms have also been more diverse including demand deposits, savings deposits, issuance of valuable papers and loan of domestic credit institutions contributing capital growth and creating logical input structure In addition, the bank is trying to take advantage of its strengths to attract capital from various economic sectors Moreover, the branch had adjusted interest rates conforming to the interest rates premises of Agribank As a result, the capital structure shifted towards long – term stability and interest rates started to decline

4.1.1 Total mobilized fund

Through ten years of development, Agribank Cau Giay has asserted the burst of a young bank branch then contributes to evolving the local economy Operational scale

of branch has briskly increased in comparision with those when the bank was established in 2005 in which the raised capital was a very unstrusive figure (VND 135,5 billion) In spite of comparing with the mobilization of other banks at the same time, this was a very small figure However, Agribank Cau Giay was interested by businesses and financial entities