Porter’s Five Forces 1980 20The Organizational structure of Bank for Investment and 2 | Figure 2.1 25 Development of Vietnam - BIDV 3 | Table 2.2.1 | Capital mobilization from customer d
An overview about BID`V - - - cv ng ng TH nh ng HH 24
Situation of Main Retail Banking activities in BIDYV
Capital mobilization 0.00 h
This is a traditional operation of commercial banks, contributing to the formation of mobilized capital of commercial banks, for individual customers, the mobilized capital has the following characteristics:
Capital mobilization is predominantly concentrated in specific regions and among certain customer segments, primarily occurring through payment deposits, savings deposits, and securities This trend is especially evident in economically developed urban areas.
Cost prices vary by region and change over time due to local socio-economic conditions and interest rate levels Each bank tailors its interest rate proposals based on these factors and its specific needs.
- Cost of capital is relatively high compared to mobilization from other customers.
For the group of small and medium enterprise customers, the capital mobilized mainly through the enterprise's current account or margin deposit to guarantee payment at the bank.
Within the limit of the thesis topic Retail Banking Business Performance, the author only mentioned mainly about mobilizing capital from Customers Deposits ofBIDV.
Table 2.2.1: Capital mobilization from customer deposits 2016 - 2020
Propo Propo Propor Propor Propor
Value Value - Value Value Value rtion rtion tion tion tion
In the general conditions of the economy, BIDV has followed closely to the policy of the State Bank of Vietnam, flexibly respond to market developments, while
28 proactively, creatively, striving to fulfill the targets, including the main targets Capital mobilization is always focused, especially capital mobilized from Customer deposits.
BIDV is focused on enhancing its mobilized capital from customer deposits by implementing effective marketing, product, and customer strategies aligned with its retail banking development goals Household businesses and individual customers consistently represent over 50% of these deposits, reaching nearly 58% in 2018 This strong performance underscores BIDV's leading market position, with residential deposits accounting for 11% of the total industry, reflecting the bank's brand strength and prestige.
Due to the State Bank's policy limiting foreign currency deposits to very low interest rates, it is understandable that BIDV's foreign currency deposits consistently account for 5-6% of the total.
Customer deposits predominantly consist of Term deposits, consistently accounting for over 80% and peaking at 84% in 2019 before declining to 82% in 2020 due to the impact of Covid-19 In contrast, Demand deposits have remained below 20%, dropping to 16% in 2019 but rebounding to 18% in 2020, driven by increased demand for non-cash payments during the pandemic The average size of Demand deposits grew by 14.9% in 2020 compared to 2019 As Demand deposits represent a low-cost capital source, BIDV can enhance profitability by effectively mobilizing this capital through innovative products, such as non-fee accounts with required average balances, similar to strategies employed by Techcombank and Vietinbank.
As socio-economic development progresses, personal and household loan services at BIDV are experiencing significant growth, with individual loans representing a crucial portion of commercial banks' portfolios Personal consumption loans exhibit distinct characteristics that cater to the evolving financial needs of consumers.
- Loan size is usually small, but the amount is large, so the cost of borrowing that banks must bear is higher than other loans.
- Loans to individuals and consumer loans are often more risky than commercial and industrial loans Therefore, lending rates are often higher than other types of loans.
- Customer’s demand for consumer loans often depends on the economic cycle, increasing during a period of prosperity and declining during a recession.
- Customer’s demand for borrowing is almost inelastic with interest rates, borrowers are usually more interested in the amount to be paid than the interest payable.
Income and education levels are closely linked to consumer borrowing needs, with high-income earners often borrowing beyond their current earnings For these individuals, borrowing serves as a means to attain a desired lifestyle rather than a solution for emergencies.
- The quality of financial information of borrowers is often not high and incomplete.
- Simple techniques. b, Loans for small and medium enterprises:
- The relatively small size of the loan makes the borrowing costs of commercial banks high.
- Subjects of the loan are mainly buying and investing in new machinery and equipment, supplementing working capital,
Popular forms of SME loans included: one-time loan, overdraft loan, limit loan, c, Analyzing Loans structure of BIDV
Loan portfolio by customers and type of businesses
@ Household businesses and individuals @ Other businesses
Figure 2.2.2: The structure of Loan portfolio by customers and type of businesses of BIDV 2016 — 2020
Between 2016 and 2020, the proportion of Household businesses and Individuals among customers has been lower than that of Other businesses, yet it shows a notable upward trend during this five-year period.
BIDV is strategically focusing on the retail lending segment, targeting individual customers and business households by expanding its network and establishing retail branches The bank's credit policies prioritize these customers, while also offering online unsecured loans through the BIDV SmartBanking application As a result, individual customers are increasingly opting for bank loans over informal credit options.
Despite BIDV's extensive network and significant credit scale, its retail outstanding loans remain relatively limited To effectively compete in the rapidly expanding retail banking market, BIDV must enhance its efforts to promote retail loans.
BIDV is dedicated to supporting small and medium enterprises (SMEs) nationwide by bridging the gap between banks and businesses, thereby enhancing their access to credit capital The bank aligns its efforts with the long-term development goals set by the Government and the State Bank of Vietnam, contributing to the country's economic growth To facilitate this, BIDV implements various solutions and policies that simplify the credit granting process and reform administrative procedures Additionally, the bank offers preferential credit packages with substantial capital support and favorable interest rates, specifically designed for SMEs.
60% Wholesale & Retail; repair of cars, O, motorcycles & others
# Production & distribution of electricity, gas & water
Figure 2.2.3: The structure of Loan portfolio by Sector of BIDV 2016 — 2020
BIDV is strategically shifting its focus towards retail banking by restructuring its loan portfolio to prioritize sectors with a higher concentration of small and medium enterprises, such as Services and Wholesale & Retail, while reducing exposure to larger industries like Construction and Real Estate Notably, the Services sector saw an increase from 7% in 2016 to nearly 12% in 2020, with the Wholesale & Retail segment experiencing a significant rise from 23.5% to 30.8% during the same period Conversely, the Construction industry declined by 3%, dropping from nearly 12% in 2016 to 9% in 2020, and the Real Estate sector also fell by 3%.
Between 2016 and 2020, the demand for loans decreased from 5% to 2%, largely influenced by the economic impact of Covid-19 in 2020 Despite this downturn, there has been a notable shift in the lending structure by sector, with a growing emphasis on retail activities, which aligns with BIDV's strategic focus.
MStandard Special mention Substandard Doubtful Loss
Figure 2.2.4: The changing in Loan portfolio by Quality of BIDV 2016 — 2020
The average NPL of the bank is staying low compared to other banks when the bad debt groups are always below 6% and with a decreasing trend over the years (1.54% in
In 2020, the appraisal process for safeguarding BIDV's capital demonstrated effectiveness, highlighting the importance of monitoring upcoming debts to remind customers and prevent the risk of bad debts.
In 2016, standard debt constituted over 94% of total debt, while the Special Mention category represented nearly 4%, marking the highest proportion during the analysis period From 2016 to 2020, both of these debt groups displayed a noticeable trend.
34 opposite directions When the standard debt group tends to increase gradually and reached a peaks at nearly 97% in 2020, the special mention group decreased to just only over 1%.
Payment services and Internet banking Services .- 5< ô++<<++<2 35
The bank facilitates payments on behalf of customers for goods and services by issuing and clearing checks, offering an electronic payment network, and managing cash distribution This enables account holders to utilize payment services effectively for their purchases.
In the 21st century, modern banking services like phone banking, e-banking, and internet banking have gained immense popularity in retail banking, enabling customers to make payments more easily and quickly through global networks.
- Phone-banking: Help customers access and use banking services through mobile phone devices.
E-banking, also known as internet banking, enables customers to access banking services anytime and anywhere with an internet connection This convenient service allows users to conduct transactions proactively without the need to visit a physical bank, providing immediate access to essential information Key features include the ability to make direct payments for daily bills such as electricity and water, shop online, and quickly retrieve account balances, transaction details, as well as current exchange rates, interest rates, and stock prices.
In 2020, e-banking transactions surged to 250.23 million, marking a 37% increase from the previous year This remarkable growth highlights the ongoing innovation and comprehensive reform across all retail activities, focusing on enhancing customer experience and ensuring high-quality products and services to meet the rising demand.
Figure 2.2.6: Number of Transactions on Digital platform of BIDV 2016 - 2020
By the end of 2020, there was a significant shift in transaction methods, with over 250 million transactions conducted through digital channels, representing 53% of total transactions and a 66% increase from 2019 The number of business customers using the bank rose by 77% to 54,800, while Smartbanking users increased by 56% to 4.4 million Additionally, the transaction volume through BIDV SmartBanking reached 1.832 trillion VND, more than double that of 2019, and overall transactions on digital channels surged by 69.8%, highlighting the successful transition of BIDV's customers from traditional to digital banking.
BIDV's SmartBanking software has room for improvement in processing efficiency and service diversification, particularly in integrating investment options like securities and bonds, similar to Techcombank To address these challenges, BIDV is committed to enhancing its digital banking platform by leveraging API architecture to deliver comprehensive information and services.
BIDV offers 38 services, including domestic money transfers, and integrates directly with enterprise applications like MISA and FAST The bank enhances customer service by diversifying support channels beyond traditional methods such as voice, email, chat, and social networks, by introducing new platforms like Zalo in November 2020 and the Bsmart automated teller machine in December 2020 These initiatives are pivotal in strengthening BIDV's payment network and establishing its reputation as a modern retail bank catering to all customer segments.
The Covid-19 pandemic significantly impacted payment services, particularly international money transfers, due to declines in tourism, manufacturing, and agricultural exports Despite these challenges, BIDV's payment service fees grew impressively, exceeding VND 2.057 billion, marking a 12.76% increase from 2019 This growth can be attributed to BIDV's proactive approach in enhancing connectivity, automating payment channels, and introducing innovative international remittance products like HanaEZ and Korona Pay.
The payment system is integrated with approximately 700 financial institutions across key domestic and international payment networks, including IBPS, Clearing House, VCB Money, and SWIFT It facilitates both bilateral and multilateral transactions, linking payments to organizations like the Treasury and over 20 domestic banks.
In recent years, the total number of bank cards and card accounts in Vietnam has continued to grow, although the pace of this growth is slowing down According to the Vietnam Banks Association, the current number of cards in circulation reflects this trend.
December 31, 2019 is nearly 103 million cards, of which 91,3 million debit cards (88,7%), 6,7 million prepaid cards (6,5%), and 4,9 million credit cards (4,7%).
State-owned banks continue to dominate the card market share, with institutions like Agribank, Techcombank, ACB, VPBank, MSB, and TPBank actively promoting new card issuance Meanwhile, retail-oriented banks such as Vietcombank, BIDV, and Agribank are increasingly demonstrating higher efficiency in card sales.
CTG VCB BID AGRMBB STB DAB TCB ACB VPB EIB MSB VIB TPBHDB
Figure 2.2.7: Market share of number of cards by the end of 2019 and Sales by number of cards in 2019 of Banks in Vietnam.
Retail banking activities of BIDV continued to be strengthened, affirming the leading position in the market in terms of size, especially in the number of customer accounts.
In 2020, BIDV saw its individual customer base grow to 11.6 million, marking a 14% increase and representing 11.9% of the nation's population, which translates to 1.45 million new customers Additionally, the cross-selling rate of products and services rose to an average of 4.0 products per customer, reflecting a slight increase of 0.05 products.
BIDV is strategically enhancing its retail banking focus by expanding its Business Customers group, particularly targeting small and medium-sized enterprises (SMEs) and foreign direct investment (FDI) clients, while reducing reliance on large corporate customers By 2020, BIDV successfully onboarded 44 new customers, bringing the total number of SME clients to nearly 311,000, marking a 9% increase from 2019, with approximately 27,000 new customers added.
The rapid growth in customer numbers has led to a significant increase in card service revenue, driven by the digitization of card operations BIDV has introduced 12 new card products, 22 new features, and upgraded 27 existing features to meet the rising demand for services like e-commerce payments and the Visa Cashback Contactless card With over 2 million new cards issued, BIDV has also become the first bank in Vietnam to successfully integrate the acceptance of MIR cards into its POS system.
The card service is supported by a comprehensive ATM/POS system across Vietnam, featuring over 1,900 ATMs and more than 33,000 POS terminals This network is integrated with the country's banking system and connects with regional partners through the Napas system, facilitating card payments from providers such as VISA, MasterCard, JCB, CUP, and UPI Additionally, it enables the issuance and acceptance of payments for new cards.
Income struture analySis - - ôs11 vn ng nếp 45
The income structure serves as a key indicator of the distribution of various income sources within the bank, enabling BIDV managers to assess which income streams dominate This analysis is crucial for developing strategies to enhance and optimize business operations.
P t P rt P rt P t P t ropor Value T9P9 Value rope Value TOPOR Value TOPOF Value ion ion ion ion ion
(Source: Compiled from Financial Statements and Annual Reports of BIDV 2016 - 2020)
Through Table 2.2.2, we can see that BIDV is shifting the proportion of Interest
& Similar Income to Income from Services and tends to develop more segments of
In today's interconnected economy, generating income from gold and foreign currency trading has become essential, particularly for the retail banking sector, where distinguishing between products and brands is increasingly challenging Focusing on service-based income is crucial for growth and competitiveness in this evolving landscape.
Moreover, with the proportion of Interest & Similar Income always accounting for more than 86%, it shows BIDV's position in the industry "Best Retail Bank in
In 2019 and 2020, Vietnam experienced significant fluctuations in interest rates, influenced by the State Bank's decision to lower rates and the impact of the Covid-19 pandemic, which affected the business conditions of nearly all banks, including BIDV.
Due to shifts in monetary policies, commercial banks employ various strategies to increase interest rates while adhering to State Bank regulations, leading to intense competition Nevertheless, BIDV consistently upholds the prudent credit policy established by its Head Office.
47 always maintains a fixed interest rate ceiling, making Income from Interest & Similar decreased.
BIDV is strategically decreasing its reliance on Interest & Similar Income while increasing its revenue from gold and foreign currency trading, as well as trading securities This shift aims to minimize losses associated with risks such as interest rate and credit risk.
Table 2.3.3: Structure of Interest and Similar Income 2016 - 2020
Value Proport ion Value Proport ion Value Proport
Other income from credit activities
(Source: Compiled from Financial Statements and Annual Reports of BIDV 2016 - 2020)
BIDV, a bank focused on traditional business activities, generates over 80% of its income from credit and lending, which is not surprising given the current economic climate Amid the ongoing US-China trade tensions and slowing growth in major economies like China and the EU, exacerbated by the Covid-19 pandemic, BIDV has strategically prioritized interest income from customer loans This focus is reflected in the increasing proportion of income from loans, rising from 81.66% in 2016 to 87.06% in 2020, despite facing challenges that resulted in losses exceeding 87 trillion VND.
BIDV effectively mitigates business risks during economic downturns by reducing its investment in debt securities, which has declined for five consecutive years from 13.58% to just 7.72% in 2020, in contrast to interest income generated from loans and deposits.
In addition, Income from Guarantee activities, Income from Finance Leases account for a negligible proportion, but the proportion still grows annually, and there is
49 a breakthrough in 2020 when customers have more demand for guarantees to minimize risks in business.
It can be said that BIDV has been flexible in its business strategy, especially retail business by trying to minimize risks.
Table 2.3.4: Structure of income from services 2016 - 2020
Services TOPON Value ropor Value TOPOF Value r9por Value TOPOF Value
(Source: Compiled from Financial Statements and Annual Reports of BIDV 2016 - 2020)
The proportion structure of Income from services has fluctuated, especially the item that accounts for the main proportion is Income from Settlement activities when it
From 2018 to 2020, there was a notable increase in payment activities, driven by government policies promoting non-cash transactions and the rise of e-commerce platforms like Shopee, Tiki, and Lazada, as well as e-wallets such as Momo and Viettel Pay However, the US-China trade competition in 2019 led to unstable commodity prices, resulting in decreased demand for payment activities Additionally, the onset of the Covid-19 pandemic further slowed the economy, causing a significant decline in payment demand, which contributed to a reduction in BIDV's settlement activities during the 2019-2020 period compared to 2018.
In Vietnam, despite the ongoing Covid-19 pandemic being relatively controlled compared to other countries, the demand for online shopping has surged due to nationwide lockdowns Consequently, while the proportion of settlement services has declined, their value remains significant, generating over 300 billion VND more than in 2019 As a leading retail bank, BIDV continues to effectively uphold its settlement services during these challenging economic times.
The expense structure serves as a key indicator of a bank's financial health, reflecting the proportion of various expense items When analyzed alongside the income structure, it helps determine the appropriateness of these costs, identifying areas that may require adjustment or replacement for optimal performance.
Proport Proport Proport Proport Proport
Value Value Value Value Value ion ion ion ion ion
(Source: Compiled from Financial Statements and Annual Reports of BIDV 2016 - 2020)
In financial institutions such as banks, costs are not like normal manufacturing businesses, mainly concentrated in main groups such as: interest payment, service costs, salary costs,
Corresponding to the main source of Interest & Similar income, which accounts for nearly 90% of the income, so is the expenses of BIDV, with the highest proportion
52 of Interest & Similar expenses account for more than 90% of the expenses structure.
Unlike Interest & Similar Income which has tended to decrease over the past 5 years,
Interest & Similar Expenses fluctuated slightly when decreased in 2018 and then increased slightly again.
In contrast to Interest & Similar Expenses, Expenses on Services experienced a slight increase in 2018, followed by a decline in 2020 This fluctuation can be attributed to enhancements in organizational structure and employee capabilities, alongside advancements in technology that streamline operations and reduce costs Additionally, the impact of the pandemic contributed to the decrease in this expense category.
Between 2016 and 2020, BIDV experienced an inevitable increase in expenses related to gold and foreign currency trading, aligning with the growing trend of diversifying and expanding income sources.
Table 2.3.6: Interest & Similar Expense Structure 2016 - 2020
Expenses robot Value HN: Value croboii Value Proper Value coBô Value lon lon ion ion rtion
(Source: Compiled from Financial Statements and Annual Reports of BIDV 2016 - 2020)
BIDV's deposit interest expenses increased sharply after 4 years from 82,25% in
From 2016 to 2019, BIDV saw an increase in capital mobilization costs, rising to 89.57%, which is crucial for enhancing the bank's prestige and competitiveness However, in 2020, these costs decreased to 87% and 56.47 trillion VND, not due to the Covid-19 pandemic impacting customer deposit demand, but rather because of a significant drop in deposit interest rates Despite this, BIDV successfully attracted a 10.1% increase in customer deposits compared to 2019, capturing an 11% market share in the industry, as deposits remained a safe investment channel for customers.
Interest expenses for Borrowing decreased proportion from 8,37% to 4,51% andInterest Expenses for valuable papers issued decreased from 8,79% to 8,49%, indicating
54 a decrease in the dependence on capital from credit institutions, capital markets, money markets, where banks have to pay interest at high costs.
Table 2.3.7: Expenses structure on services 2016 - 2020
‘ P P P P P services roport Value roport Value roport Value roport Value roport Value
(Source: Compiled from Financial Statements and Annual Reports of BIDV 2016 - 2020)
With the rapid growth and fluctuation of income from Payment activities, so is the cost of these activities (increasing the proportion from 8,38% in 2016 to 18,61% in
From 2018 to 2020, BIDV experienced a decrease in market share from 11.55%, attributed to its focus on digital strategy consulting and the successful implementation of innovative solutions in digital distribution channels and modern banking services Notable advancements during the 2016-2018 period included the launch of BIDV Home, online payment for national level 4 public services, and interbank clearing payments with Napas BIDV has continually innovated and reformed its operations to enhance customer service quality and meet the growing daily transaction demands As a result, income from settlement services increased while costs decreased, particularly in 2020, which saw a surge in e-banking transactions, totaling 250.23 million and reflecting a 37% growth.
2019; transactions through BIDV SmartBanking reached 1.832 trillion VND, 2 times compared to 2019.
2.3.3 Analysing criteria to evaluate profitability
In order to have the most objective analysis of the profitability indicators of BIDV, the author compare with similar competitors such as Vietcombank (VCB) and
Vietinbank (CTG) with figures in 2020.
Table 2.3.8: Table of indicators for evaluating profitability 2016 - 2020
(Source: Compiled from Financial Statements and Annual Reports of BIDV, VCB and
Net Profit Margin = Net Income/Net Sales x 100%
The Net Profit Margin is a crucial metric for evaluating the profitability of commercial banks, and it reflects how effectively BIDV manages costs relative to its sales Historically, BIDV has maintained a stable profit rate exceeding 20%, peaking at nearly 24% in 2019 with a 2.22% increase from 2018 However, the pandemic's impact in 2020 caused a decline to 20.18% In comparison to competitors like VCB and CTG, which reported Net Profit Margins of 50.9% and 38.6% respectively, BIDV's margin was significantly lower despite similar net sales of around 36,000 trillion VND To enhance profitability, BIDV must focus on improving its expense management.
ROA = Net Income/Total average assets x 100%
Analysing criteria to evaluate prOfItab1ẽIty - ô++<Ê++eex+seszeeeexee 55 2.4 Current factors affecting the Retail Business Performance of BIDV
In order to have the most objective analysis of the profitability indicators of BIDV, the author compare with similar competitors such as Vietcombank (VCB) and
Vietinbank (CTG) with figures in 2020.
Table 2.3.8: Table of indicators for evaluating profitability 2016 - 2020
(Source: Compiled from Financial Statements and Annual Reports of BIDV, VCB and
Net Profit Margin = Net Income/Net Sales x 100%
The Net Profit Margin is a crucial metric for evaluating the profitability of commercial banks, and BIDV has maintained a stable profit rate of over 20% over the years, peaking at nearly 24% in 2019, which was a 2.22% increase from 2018 However, in 2020, the pandemic's impact caused a decline to 20.18%, making BIDV's margin significantly lower than its competitors, with VCB at 50.9% and CTG at 38.6% Despite similar net sales of approximately 36,000 trillion VND among these banks, BIDV's profitability challenges stem from high expenses, highlighting the need for better cost management to enhance their profit margins.
ROA = Net Income/Total average assets x 100%
Return on Assets (ROA) is a key metric for assessing a bank's efficiency in generating net income from its assets It indicates the profitability derived from each unit of assets, with a higher ROA reflecting better business performance BIDV has consistently demonstrated effective asset utilization, maintaining a stable ROA of 0.6% over the years, with the exception of one notable year.
In 2020, BIDV reported the highest total assets among its peers but faced challenges with a lower net income, resulting in the lowest return on assets (ROA) at just 0.5% In comparison, VCB achieved an ROA of 1.45% and CTG recorded 1.06%, indicating that BIDV's asset management was less effective than that of its competitors.
ROE = Net Income/Total average Equity x 100%
Return on Assets (ROA) assesses management performance, while Return on Equity (ROE) evaluates a bank's business performance quality, closely linked to financial leverage Although a higher ROE indicates better capital efficiency in generating income, it also correlates with increased risk BIDV has maintained a ROE of 14.6% and 14.23% in 2017 and 2018, respectively, but saw a decline to 12.66% and 9.18% in 2019 and 2020, aligning with safety regulations set by the State Bank during economic downturns caused by the US-China trade war and the Covid-19 pandemic However, compared to its competitors, BIDV's ROE is notably lower, with only 9.18% in 2020, while VCB and CTG reported 21.09% and 16.83%, respectively To satisfy shareholders, BIDV must enhance its capital utilization for profit generation.
2.4 Current factors affecting the Retail Business Performance of BIDV
2.4.1 Macro factors (PEST Analysis) a, Economic and Technological factors
To enhance its retail business performance, BIDV must closely monitor and understand shifts in both the domestic and international economies, as outlined by the PEST Model Currently, the global economy is experiencing significant fluctuations due to factors like the US-China trade war and the sluggish growth of economies such as China and the EU, which have a considerable impact on Vietnam's economy Despite these challenges, Vietnam has consistently achieved notable successes, including maintaining inflation at a controlled rate of 2.79%.
58 economic growth over 7%; export turnover reached a peak at more than 545 billion USD; export surplus is highest ever with more than 20 billion USD (BIDV, 2021).
The Vietnamese banking industry plays a crucial role in the nation's economic development, acting as a vital artery for financial flow To enhance Vietnam's economy, BIDV must leverage and improve the quality of its products and services while diversifying its organizational structure to better adapt to market demands Notably, foreign investors hold 17.4% of BIDV's shares, highlighting the importance of efficient management of foreign capital Additionally, inflation significantly impacts BIDV's retail business performance; however, effective control by the State Bank has kept the inflation rate at a stable 2.79%, allowing BIDV to maintain interest rates in line with the established ceiling.
Technological advancements significantly influence business performance, particularly in product and service innovation Organizations must adopt innovative operational methods to gain a competitive edge through technology, such as e-commerce, which facilitates rapid delivery and meets market demands In the banking sector, the shift towards digital banking enhances competitiveness and utilizes modern distribution channels with robust information security Banks are diversifying their offerings with solutions like M-POS, internet banking, mobile banking, chip card technology, and e-wallets, providing convenience and cost savings for both customers and the banks To thrive amid intense technological competition, BIDV must focus on developing its digital distribution channels.
To enhance the digital landscape, it is essential to digitize traditional products and innovate new offerings through digital channels Strengthening digital banking infrastructure based on API architecture will facilitate efficient domestic money transfer and inquiry services, aligning with current policy objectives.
In PEST Analysis, government policy plays a crucial role in influencing the economy and specific industries, notably through the State Bank's regulations on interest rates and banking services, which directly impact BIDV's retail operations The years 2019 and 2020 marked significant changes, as the State Bank implemented monetary policy adjustments aimed at enhancing flexibility to achieve financial objectives, particularly through interest rate modifications A key focus was the tightening of credit for high-risk sectors like real estate, with a notable reduction in reliance on medium and long-term capital; specifically, the credit limit decreased from 40% between January and September 2020 to 30% starting in October.
1, 2022 (Circular 22/2019 / TT-NHNN) In addition, as the Law on Deposit Insurance
In 2012, BIDV underwent significant changes in its retail business to comply with legal requirements, necessitating a proactive approach to deposit insurance fees and an increase in risk estimates The State Bank's policies have a profound impact on the banking system, making it crucial for BIDV to adapt and align its operations accordingly Additionally, social and cultural factors play a vital role in shaping the bank's strategies and responses to the evolving market landscape.
The population structure significantly influences the demand for products and services in the business landscape, particularly within the PEST Model Since 2015, Vietnam has been experiencing an aging population, leading to shifts in social psychology, income levels, and family dynamics According to Dr Can Van Luc (2016), older individuals tend to prioritize saving over borrowing, which has resulted in a growing demand for financial management services and insurance consulting This trend presents both opportunities and challenges for BIDV in addressing the evolving needs of its customers.
Young tech-savvy individuals, particularly those who prefer seamless integration, are increasingly limiting their in-person transactions Instead, they primarily engage in financial activities through applications, e-wallets, and internet banking.
BIDV must swiftly adapt to the evolving market by diversifying its product offerings and leveraging technology platforms This strategic shift is essential to align with current trends and cater to the growing demands of the younger demographic Emphasizing innovation will enable BIDV to remain competitive and relevant in a rapidly changing financial landscape.
The Vietnamese banking industry is characterized by intense competition and significant potential, particularly in the retail sector As noted by Pham Tien Dung (2020), only 43 million people in Vietnam had bank accounts by the end of 2019, highlighting a substantial opportunity for growth With advancements in technology, banks are increasingly focusing on attracting new customers and exploring innovative areas, which may reduce competition levels However, the trend of market integration may invite a surge of foreign banks, which possess considerable experience and service advantages, potentially capturing a large customer base In this evolving landscape, BIDV must assess its strengths and weaknesses to develop agile and effective strategies for adaptation.
The survival of retail banks relies heavily on individual customers, particularly through capital mobilization such as customer deposits For instance, BIDV reported customer deposits totaling 1.226 trillion VND at the end of 2020, reflecting a growth of over 10% compared to the previous year Without sufficient capital, banks face inevitable failure Additionally, the low switching costs for individual customers mean they can easily move their funds, posing a challenge for banks to retain deposits and attract investments.
Facing the risk of being easily replaced, BIDV should consider trade-offs between customers and profits, understand customer psychology to always maintain their trust and satisfaction. c, Substitution Products
Bank’s Internal factors 6
Human resources are crucial for the success of banks, particularly in the finance and banking industry, where highly qualified, productive, and experienced personnel are essential A 1996 study by Sinha highlighted that employees with business and technical educational backgrounds are better equipped to understand and navigate complex realities, significantly impacting business performance As of the end of 2020, BIDV's banking system employed over 26,700 individuals, with more than 91.4% holding university degrees or higher BIDV prioritizes the development of skilled human resources and streamlining operations to enhance overall labor productivity, ultimately leading to increased customer satisfaction.
In 2020, BIDV launched a nationwide recruitment campaign, successfully attracting high-quality candidates from across the country This initiative not only left a positive impression on the public and potential applicants but also played a significant role in enhancing BIDV's brand image in the competitive market.
BIDV officially implemented the Training Framework that successfully organized
BIDV has successfully conducted 139 courses, equivalent to 415 classes, exceeding 120% of its annual training plan This includes 265 domestic classes, 115 E-learning sessions, and 35 classes featuring international elements, benefiting 61,616 students and achieving 263% of the annual target, with a 60% increase in trainees since 2019 The swift transition to E-learning in response to the Covid-19 pandemic, utilizing platforms like Webex for virtual classrooms and simulation training, has attracted a significant number of participants, with E-learning students comprising 79% of the total On average, each staff member engages in 2.5 training sessions annually, supported by a team of experienced trainers that enhances the overall quality of education.
To retain talent and cultivate a productive workforce, BIDV consistently implements training programs and fosters innovation, while also providing appropriate and satisfying incentives for its employees.
The strength and competitiveness of commercial banks are primarily determined by their financial resources, which serve as a safety net for managing risks in banking operations A study by Kristiansen et al in 2003 highlighted a significant correlation between financial flexibility and business success in Indonesia BIDV, as the largest commercial bank in Vietnam, boasts a charter capital exceeding 40 trillion VND and total assets of 1,516,686 billion VND, reflecting a 1.8% increase since 2019 With an equity capital of nearly 80 trillion VND, which rose by 2.6% compared to 2019, BIDV possesses the financial flexibility to invest in cutting-edge banking technology This investment is crucial for reducing costs, saving time, and enhancing productivity and overall business performance.
In 2020, BIDV allocated 64 trillion VND, reflecting a growth of over 4% compared to 2019, into its reserve fund for risk estimation; however, this amount must be meticulously calculated to prevent the wastage of idle capital.