Luận văn studying the quality of the fund mobilization activities at commercial bank of vietnam lang son

7, The structure ofthe study Introduction Chapler |: Theoritical basic or find mobitization activities for commercial banks Chapter II: Assessment of the quality of fand mobilization ac

UNIVERSITE DE NANTES

Cohort 2015 — 2017

MASTER’S THESIS

STUDYING THE QUALITY OF THE FUND MOBILIZATION ACTIVITIES AT

COMMERCIAL BANK OF VIETNAM- LANG SON

AUTHOR: LAI VAN TOAN SUPERVISOR: Dr PHAM THI LIEN

Hanoi, June 2017

ACKNOWLEDGEMENT

declare that this master’s thesis is my own research and the data and the material used

im this thesis have cleat sources and references to all the sourecs The result of this thesis is

honest and derived from the actual situation of the organization

In order to complete this master’s thesis I owe many people many thanks for theiz supporting,

First, I would like to express my endless thanks and gratefiilness to my supervisor Dr Pham Thi Lien Ter kindly support and continuous advices went through the process of

completion of my thesis Without his assistance, the thesis would have been done effectively

Sơ far, Twould like to thank all the lectures and staffs of International school — Vietnam National University Hanoi and University de Nantes for their teaching and supporting, me to achisve knowledge and experience

My special thanks to all staffs and management's branch of Vietinbank- Tang Son

‘branch; for their kind z

the research,

ances and support in providing me data and advices lo complete

Finally, 1 would like to express my special thanks to my parents for their endless love

and motivation

“Thank you!

CHAPTER 1: THEORETICAL BASIS FOR FOR FUND MOBILIZATION

L.A What is a commercial bank? 4

1.2 Basic operations of commercial banks - od 1.1.1 Mobilization of firnd activitdes „4

1.1.3 Tavestnent activities 6

1.2.1 Definition of quality of fund mobilization 26

1.2.2 Size of mobilized capIfal se nhe Ổ

1.2.4 Cost of fand mobilization e ceecces 8

1.2.5 Other indicators: - - - - 10

1.3 Factors affecting the quality of capital mebilization well 1.3.1 Objective factors: - - AL

2.1.2 Business performance of VietinbankLang Son - co AS

‘business activities of Vielinbank Tang Son in lhe peniod 2013 - 2016 IS

2.2 Fund raising in Vietinbank Lang §on - -Ö-22

1.7.1 Fưnd mobilizaiton growlh rale - - - - z2

2.3 Assessing the quality of fund mobilization of Vietinbank Lang Son 28

2.3.1 Result - —-.- Chapter II: Proposton of soluttons to improve the quality of capital Mobilization of

4.1 Development orientation and orienfation of fund mobilization strategy of Vietinbank

3.2 Solutions to improve the quality of fand mobilization at Victinbank Lang Son 38

3.2.3 Recommendations to improve the quality of fund mobilization

Tablc 23 — | Balance of funds in 2015 -2016

Table 24 — | Growth rate and Joan structure of Vietinbank Lang Son in the period 2013 - 2016

Table 2.5 | Overdne debt and overdue debt ratio at Vietinbank Lang Son in the period 2013 -2016

Table 2.6 | Imemational Payment Sales in the periad 2013 - 2016

Table 2.7 Data on the share of deposits by cumency

Table2.8 | The average mobilizing interest rate of Vietinbank Lang Son in the period 2013 -2016

‘able 2.9 | ‘rhe average lending interes! tale of VieGinbank Lang Som in Lhe period 2013 -2016

Table 2.10 — | Difference in imesest rates on Jouns and deposils

Table 2.11 | Relationship between fund mobilization and lending of Vietinhank Tang Son

LIST OF FIGURES

Kigure2.1 | fund growth of Vietinbank Lang Son in the period 2013-2016

Figure 2.2 | Scale of capital mobilized by customers

Figure 2.3 | Mobilized fimd according to the deposit period 2013-2016

Figure 24 | Vietinbank Lang, Son's fiund mobilization in 2016

INTRODUCTION

1 The necessity ani} meaning of the research thesis,

Commercial banks we a financial intermediary In cach country, Gnancial intermediaries are divided differently However, there is always a common point that the role

of commercial banks and the contribution of assets and importance to the economy With that role, the profit is first clement for Commercial banks and only tool that helps commercial banks get profit is capital

It can be said that the banking and financial market in Vietnam has been strongly fluctuated by the establishment and development of domestic and foreign banking

organizations Il is the rapid de stern thal, makes business

bank more difficult and flerce competition Capital is one of the key factors that determine the competitivensss of the banks The fact has shown that the capital size, professional skills and

lopriont of the bariking s

modem technical means are prerequisites for altracting capital, and large capital sources will create favorable conditions for banks to expand their ctedit relations with other banks and economic composition in terms of size, volume of credit, initiative in terms of time and

inlarest The result of increasing is to help mullifimetional banks in the markel, disperse tisk,

‘As a branch, based on the development orientation of the system as well as the annual business plan assigned, the Lang Son branch - Visinam Joint Stock Commercial Bank for Industry and Trade has devcloped a business plan (or implementation Good business tisk, In particular, the mobilization of capital for the next stage is necessary for Vietinbank Lang Son

in the area to survive and devetop in accordance with the strategy and direction of the system

Coming from the practice of the branch combining with the knowledge leamed in the training program Mastor of Finance — Ranking - Insurmes (Soulhoast Asia), combining

between the International School - VNU and the University of Nantes, I would like to select

ths topie "Studying the quality of fimd mobilization activities at Vietnam Joint Stock Comercial Bank for Industry and Trade- Lang Son branch" (shorted: Vietinbank Lang Son)

"for my graduation thesis

2, Objectives of the study

‘This is an important task to contribute to the development of the strategy for Vietinbank Tang Son

Objective 1: Theoretical framework on fund mobilization of commercial banks

Objective 2- Assessing the quality of fund mobilivalion activities of Vielinbankk Lang

3, Methodology of the study

© Qualitative mathod for case stutly of Vietinbank Tang Son

~ Data: Primary and secondary (from other sources such as journals, banking statements,

statistical roport, internet .}

* Method for data collection: Mainly collecting secondary data for research purposes The data is used in the research process such as annual reports, financial statements and

‘business sifnation review report of the year 2013, 2014, 2015 and 2016 of Victinbank Lang Son

+ Data analysis: After collecting data were researched and analyzed, The results of the analysis will be used to assess the quality of fund mobilization, professionalism of fund mobilization officers, possibilities and opportunities of market access of staff to fund mobilization activities Vietinbank Lang SonOn the basis of the information obtained from the financial reports, the business plan of Victinbank Lang Son with the competitors in the area

4 Scope of the study

‘Thesis focuses on the analysis of fund mobilization situation of Vietinbank Lang Son from 2013 back, so il cam cvaluate the quality of fund mobilization al the branch

5, Significance of the study

*Applied knowledge is leamed to have the zight solution to increase the amount of capital through fund mobilization activities such as deposil, loan and alher operations (trusl service, Intermediary payment ) for Vietinbank Lang Son

«Analyzing and selecting suitable solutions for Vietinbank Lang Son to exploit maximum strength, take advantage of markct opportunitics (focus resources, the best opportunity) in the capital mobilization,

« Areference situation for other studies

6.Limitationsof the study

‘rhe topic focused on find mobilizing at Vietinbank Lang Son; Draw conclusions as well as selective solutions for applying to Vietinbank Lang Son only

7, The structure ofthe study

Introduction

Chapler |: Theoritical basic (or find mobitization activities for commercial banks

Chapter II: Assessment of the quality of fand mobilization activities of Vietinbank Lang Son Chapter IIl-Proposing the solutions to improve the quality of fimd mobilization of Vietinbank

Lang Som

CHAPTER 1: THEORETICAL BASIS FOR FOR FUND MOBILIZATION

ACTIVITIES OR COMMERCIAL BANKS

1 The concept of commercial banks

1.1 What is a commercial bank?

A commercial bank is an economic organization that conducts banking activities in the axcas of monctary supply, financial scrvices between customers and banks, or viec versa,

According to the Law on Credit Institutions: commercial banks are credit mstitutions

which are entitled 1o cary oul all banking activities and other related business activilies for profit purposes in accordance with the Law on Credit Institutions Use and other provisions of the law (Decree No 59/2009 / ND-CP of the Government on the organization and operation of commercial banks)

1.2 Basic aperations of commercial hanks

Banking activities such as mobilizing capital, lending, discounting, guaranteeing, providing financial services and other related activities

1.1.1, Mobilization of fund activities

‘The business activities of any enterprises must have capital With commercial banks the capilal 1s the cnlire monetary resources that banks ereale, mobilize to Tend, invest and execute

‘banking scrviccs Capital plays a very important role in banking operations, Initial capital is th= condition for a bank 4o be permiited to conduct its business in accordance with the law, In addition, mobilized capital sources allow the bank lo source loans, invest in valuable papers, assets and loans for economic development activities of the country,

Capital of commercial banks includes: equity, fund mobilized and loans, Capital is the capilal mobilized from banks and econornic organizations In addition, during the operation, the bank also borrowed capital trom the State Bank or other credit institutions to ensure liquidity

In order to have capital for business activities, commercial banks must mobilize capital Fund mobilization of commercial banks és the use of specific tools, methods, methods and programs

to alfraet the attention of individuals and organizations, and from there ta deposit moncy inlo banks

As a financial intermediary of the economy, find mobilization plays a very important role for both commercial banks, depositors and the cconomy Forms of fund mobilization of commercial banks include: fund mobilizing ftom deposits of economic organizations and individuals throughout the counby (including demand deposits, savings deposits, isrm daposiis

Mobilizing capital through the issuance of valuable papers, borrowing from other credit institutions, borrowing from the central bank, Capital of commercial banks includes Equity and Debt Capital

* Lqutty: Equity accounts for a small share of the bank's total capital, but equity is a legal requirement when starting a bank On the other hand, equity is also considered as a security assct, which creates confidcnec among customers, maintaining solvency in the casc of bank losses,

* Debt capital and debt mobilization operations: Commercial banks as a major part of the intermediary financial system, receiving idle money or issuing debt instruments such as

certificates of deposit, Vote to attract idle capital in the economy Debt capital includes:

~ Deposit and daposil mobilization: Deposi

commercial banks, Typically, this source accounts tor more than 50% of total bank oparating

s from customers are important, sources of

capital Based on the purpose of the deposit, can be classified into three types of deposits as belows

+ Deposit payment (deposit transactions); Thesc are deposits of businesses or individuals deposited in a bank for banks and payment hold status when required Within the allowable balance, the needs of the business and individnal are taken into account by the bank, Interest rates on these deposits are very low but account holders can cnjoy low-cost banking scrviccs

= Tenor deposits of enterprises, organizations and social enterprises and social onganivations to send a certain amoont with a malurily and will be paid afler a specified time

+ Savings deposits of the population: Al classes of people have unused lemporary

savings (savings), which can be deposited in savings accounts in order to achieve the objectives

of preservation and profitability 1lis savings Unlike payment deposits, saving deposits are

more slable, bul higher mobilization and management cosls,

- Deposits ftom banks, financial institutions, other credit; The commercial banks can deposit money at the bank for the purpose of payment of households

- Loans and borrowing activilics of commercial banks: These arc fonncd on capital borrowed relations between commercial banks with the Central Bank or the State with other

credit institutions

1.1.2, Lending activity

Lending is a major activity of commercial banks to finance capital for businesses, individuals and organizations Loans usually account for a large proportion of total assets and provide a major source of income far the bank, medium and long ler

If the abject based on the loan, it is broken down into loans and working capital loans

under investment projeels

+ Consumer lending: The Bank lends to individual consumers to buy goods to meet

personal consumption demands such as loans to buy motorbikes, houses, cars

Loan co-financing investment projects: The bank stands out as a focal point calling on

other credit institutions to participate in lending a projcet Co-financing is for risk sharing or

may be due to a lack of funds by the bank, or a limit on customer loans

1.1.4, Other service activities

Forzign exchange trading; Money transfer and payment services; collection service;

Guarantee, rent safes

1.2 Quality pf fand mobilization

1.2.1 Definition of quality af fund mabilizaiion

‘rhe quality of commercial banks’ mobilization is an objective and scientific objective in sclovting vapilal mobilization methods to cnsure the grawth and stabilily of mobilized funds,

To balance and match the capital mobilized with the capital use demand, to ensure the optimal capital structure and the lowest capital cost, thus contributing to raising the business efficiency

of commerciat banks

To the social, in order to achicve the goal of industrialization and modemization of the country, a great amount of capital is needed to create material premise, capital for construction

of infiastruciure, technology and capital for production and business

To the bank, in order to conduct business effectively, diverse forms of business, improve competitiveness and generate profits, banks need a large fund mobilization inflows from domestic souaces and forcigners

To achieve that, the bank must have appropriate and effective for mobilization of fund

‘The quality of fund mobilization in the bank must be assessed through the following aspects:

1.2.2 Size of mobilized capital

Seale 15 the indicator refleels the amount of fund mobilization by the bank With the increasing scale of mobilization of fund, bariks will be able to support their operations,

expand and expand their scope of operations and scale up liquidity, stability and confidence of

culomer

Mobilizations of funds vary in size tom stage to stage Large-scale banks are more likely to be mobilized than smailer banks In the context of competition in terms of market share, the interest ratex usnally do not differ much between banks, so customers often choose large banks to cnsurz the safety and liquidity for their deposit,

1.2.2, The growth rate of fund mobilization

The growlh tate of fund mobitivingrepresents the abilily lo expand the scale of mobilization of fund by the bank over the years, sliowing how the fund varies with the trend and the ability of the bank to control fund mobilization ‘That affects the ability to enhance and expand iis markcl aparalions If the growth vale is stable, the hank will take the initiative in planning its long-term development strategy as well as creating confidence in depositing and investing in banks On the other hand, this indicator demonstrates the ability of the bank to compete with other commercial banks

In terms of volume, the growth rate of fund mobilization is usually asscssed through: The growth rate of fund mobilization (FM)= (_FMthis time -FM last time)/(Llast

time)* 100

This indicator reflects changes in the size of fund mobilized over time

If this ratio is > 100%, the size of bank’s mobilization of fund has been extended, The continuous expansion of fund mobilization with increasing capital growth proves (Int means tho scale of operation of tho bank is increasing and the cfficicney of raising capilat of the bank

is improving In addition, this indicator can be used to compare with the growth rate of capital

of other banks or the average growth rate of capital system,

‘The structure of bank funding is judged to b2 reasonable if its components meet the plan

of capital use and have the lowest cost of mobilization Llaving capital will create favorable

conditions for the bank to operate smoothly, the bank can restructure its capital, expand the seale af ils opcrahons, lake the initiative in planning its development stralegy, enhancing ils preshge and competitiveness The structure of mobilized capital can be assessed through the propotion of mobilized fund

Propertion of cach mobilized fund = (the amount of cach fund) / (total mobilized

funds) * 100

‘This indicator reflects the ratio of mobilizedfund, the rationalization of the mobilization

of different types of funds The capital structure should be diversificd and balanced in order to ensure a reasonable ratio between short-term, medium-term and lang-term deposits, as well as domestic and foreign currencies Rach source have ils sirengths and weaknesses in mobilization and exploitation Hence, the change in capital structure will lead to a change in the structure of capital use and hence the change in profitability and safety of the bank The volatility of the mobilization structure depends partly on the bank’s adjustment plan and the volatifity of ils external faciors, which demands thal tho bank always pays allention to studying the market in order to make appropriate and timely adjustments

a) Structure of mobilized capital sources by subjects

The proportion of mobilized capital sources by subjects (Amount of mobilized capital sources by subjects) / (Fotat amount of mobilized capital resources) * 100

b) The structure of fund mobilized by term

Proportion of capital mobilized by term = (Amount of mobilized capital by term) / (Lotal amount of mobilized capital resonrees) * 100

¢) The structure of findmobilized by types of currencies

Proportion of capital mobilized by types of currencies = (amount of capital mobilized

by types of ewrencies) / (Total amount of mobilized capital resourees) * 100

1.2.4, Cost of fund mobilization

Reasonable cost of fund mobitication

The cost of fund mobilization is a decisive factor in the effectiveness of capital mobilization as it directly determines how the bank uses its funds and retums,

The cost of interest is themain onethe banks takecare of, The interest rate of mobilized fund is usually determined by the supply and demand in the market, when banks have

excessivoftnds, while customers still deposit money, the deposit interest rate will decrease Conversely, during @ period af ceonomie downlum, or the Goverment implements tight monetary policy, the bank's shortage of bankable capital will push up deposit interest rates Also, the bank can set interest rateswhich are higher or lower than the ones in the marketdepending on the competitive strategy of each bank

Tn Lerms of cost, bariks maust mel the following criteria

-First: Finding the lowest cost source to meet the needs of borrowing and investing

while satisfying the requirements in terms of scale, duration and structure

-Sccond: Ineroasing profits for bunks without having to take high risks duz to the pressure of mereasingthe cost of fund Basically, bank profitsare calculated as total income minus total cost, but most of it is interest cost; therefore, to maximize profits, the bank must minimize its operating costs Short-term resources arc often at low cost and unstable, and vie

versa, the longer the capital sources are, the higher but more stable the costs become

‘rherefore, in order to set up a business strategy for each period, basing on the ongoing law and the basis of payable inicrest, the bank will issue appropriate capital inobilization policics Depending on the characteristics of each source of fund, the bank will offer different nominal interest rates, In order to compete for expanding funds, banks are trying to create their own advantages;one oftham is the inferes! competitiveness

The determination of the cost of fund mobilization is very useful for the bank lo scl up elfective business policies Banks typically determine the cost of fund mobilization through

the average interest expense and non-interest expense

Average interest expenses = (Interest expenses) / (Total operating expenses)

‘This indicator reflects the amount of money the bank has spent on a mobilized capital

‘The average interest expense has been decreasing over the years, accompanied by the growth

¢ of furuls, indicating that the bank's capital mobilization has bee:

Avarage non-intorast cxpansc = (Nom-incrast expense) / (Total mobil

‘This helps banks (rack the movernent of capital casts over time and average interest rates, provide a relative benchmark for making decisions of how banks should lend and

invest Llowever, such calculations ars not really perfect because it just stops at considering

the cost of capital rescmrces, which means that there are still many other costs that need being

calculated in order to actually obtain funds.

und mobilization and use are two aspects of a problem, they are interrelated and inlzrdependenl Therefore, when considsring capital cost worms of capital mobilization activities, it is necessary to considerthe average interest rate obtained from lending activities:

Average loan interest = Total income from interest / Loan balance

Or calenlale interest vate difference

Interest rate difference = Average loan interest - Cost of fund

Efficiency of Capital utilization= Total outstanding loans / ‘Total mobilized capital

This indicalor reflects how auch the bank lends in total mobilized capilal, and also assesses the bank's ability to raise fund

If this indicator is large, on the one hand, il roflzcls thal the balance betwen capita mobilization and lendingis good; on the other hand, the fund mobilization is not good If this indicator is small, on the one hand, it reflects thatissuing loans is bad; on the other hand, the

situation of good capital mobilization is refle

It is better if the coefficient of capital use approaches to 1 This presents the maxiaum

‘use of mobilized funds

+ Customer Convenicnec: It is cvaluated through deposit, withdrawal, bank scrvices,

etc., to save customers’time and money

+ 'Pime to mobilize a certain amount of fund

~ The amount of capital withdrawn before the maturity, the actual maturity of the timds

1.2.6 Ensuring the safety of mobliilzed fund:

Mobilized fund is used for loans and investments, but these are potentially risky activilics The inoffotive using of fund andgcnerating overdue debs or bad debls,oxert bad influence on the mobility, reduce the effectiveness of capital mobilization

The term of mobilized funds must be appropriate with the term of use, and at the same time create the stability of the source after mobilizing fund, which will form the assets of the

10

bank, ‘Iherefore, it is necessary to consider it in terms of the appropriateness of the time

belween asscts and habilitics (robilized fund)

The imbalances of assets and liabili

s in lerm will have polential risks of imeresl rale,

payment, and foreign exchange

si rate risks oeewin two forms: the risk of refinancing liabil reinvestment of assets When the term of the mobilized fund is shorter than the maturity of the investments, if the market interest rate tends to increase, the bank will have to raise capital at

a higher interest rate to continue financing the investments Conversely, when the time of capital use is shorter than the term of the mobilized capital, the bank will face the risk of

reducing profil when the interest rate in the markel decreases

Banks often use a part of their short-term capital to invest in langer-term assets but only

at a certain rate duc lo regulalory coruplianec as well as the demand for the paytncntabitity TẾ the bank uses too much short-term capital to invest in long-term credits, the bank will face liquidity risk, While the term of the debt is not due, the pressure of liquidity fom customers will force the bank 10 aoccpL the mobilization of additional fands with high inulerest rales to pay for customers or it becomes worse when payment inability occurs In contrast, if banks use long-term funds for short-term loans, it is difficult to ensure the income for long-tenm resaurces oflen have high intereal rales while shorl-term loans carry lower interest rates than mediuin- and long-tenn loans

1.3 Fuctors affecting the quality of capital mobilization

1.3.1 Objective factors:

1.3.1.1 Economic #nvironment The economic environment affects the income,

payment, expenditure and the need for capital and dapasits of customers The economic environment creates opportunities for the bank and challenges for the banking business

and legal Environment: Every country has a certain political systsm,

political stability or foreign policy which will have a positive impact on the bank’s capital mobilization Citizens of the country have peace of mind depositing idle eamings into banks without having lo spcaulate on other praperty valuss

11

1.3.1.3 Environment of Competitiveness: ‘he development of competitors has made tho imoncty market develop, the market share of commercial banks hus changed whichpromotesnew services, produets have become more diversified and quality of services has been improved therefore creating more choices for customers Under the competition conditions, commercial banks have to introduce more forms of mobilization, increase

marketing activitics and apply flexible interest rate policy

1.3.2 Subjective factors

1.3.2.1 Interest rates: Interest rates arc one of the macro management tocls of the economy and a key factor in banking operations Regardless of any aspects, interest rates are always a factor that is highly sensitive lo the economy Moreover, the inlerest rate directly

affects the borrowing and thus affects the bank's profitability

Ôn the olher hand, interest rates are of the lop concer when an individual or an economic organization wants to deposit money in a bank Because thosewho have money want to deposit it into banks, they first compare in which bankthe deposit rates are higher, noxt is the deposit sccurity as well as the utilities they zeccive when sending money into the bank

1.3.2.2 Forms of fund mobilization: Customers deposit money in banks for various purposes, some for safety, and others mainly for monthly interest ‘Therefore, they have different forms of deposit as woll as interasl perhaps 3, 6, 9 months Therefore, in order to mobilize mare capital in the people, commercial banks must take various foums of capital mobilization

1.3.7.3 Banking network: For many people, using a convenience service is more

important than the price of the service The network syslstn creates the flow af services from the banks to the customers.As a result, the more the distribution network grows and expands, the more modem technical facilities, the higher the efficiency of capital mobilization

1.3.2.4 Style and qualifications of bank staff: Capital mobilization is a form of direct selling, so the salesman's style, attitudes and qualifications of salesmen affect the cffectivencss of sales and buyers’ psychology The recruitment of employees with good professional ethics, responsibility, enthusiasm for the profession, good at jobs to help banks

serve customers best, access to modem business methods to meet the needs of economic

1.3.2.5, Marketing ani advertising policies: ‘The effect of marketing activities is to

attract customers! allculion on the bank's image so (hal enstomers ean cormpare and choose

before deciding to participate in transactions with banks Building a consistent, attractive image for customer observation is an issue that commercial banks must pay attention to when

ilding the network

4.3.2.6 Infermation technology: Applying modern benking technology helps banks ta manage and develop modem products and services to meet the increasing demands of customers The development of banking technology creates many opportunities for business but also many challenges for each bank itself

Tn Chapter 1, an overview of the concepls related lo the quality of capital mobilization that any conunercial bank needs to consider when developing strategies for raising capital is presented ‘he quality of capital mobilization of Vietinbank Lang Son will be discussed in the

next chapter

Chapter II: Assessment of the quality of mobilizatiun fund activities of

VietinbankLang Son

2.1 General introduction of VictinbankLang Son

2.1.1 Overview:

‘The branch of Industrial and Commercial Bank of Lang Son was established in July

1995 according lo the Decision No 260 / QD-NHCT daled Seplerber Isl, 1994 pf the

Chauman of the Board of Directors of Vietinbank for implementing the strategy of distributing to develop the network of the sector, contributing to promoting the development

of Lang Son ceonomy, With the matio: “Suevess of customers is the success of the branch", i the past years, the branch of Industrial and Commercial Bank of Lang Son has well implemented the policy of the sector "Development, safety, efficiency" Annually, the mobilized fund growth vals is 25%/ycar on average To daic, Victinbank Lang Son has a network with 8 transaction offices, 14 ATMs and more than 100 employees are serving more than 30,000 customers In 2016, the branch changed the credit management model towards more professional, At the same time, branch is also in the testing phase, completing the transfonuation of the new Core Banking system towards modem, convenicnt and fiicndly

Actively urging there covery of debt, dealing without standing debt fo ensure the

safety of the branch's fund

APromoting banking services, increasing banking convenience in the direction of

anulti-functional banks

AStrength of the Iraining, conlinnously improving staf? quatificalions lo mee the

requirements of integration(Statistical data of VietinbankLang Son)

2.1.2 Business performance of VietinbankLang Son

Ina challenging competitive cnvironment, to implement Victinbank’s guiding dircetion,

Vietinbank Lang Son is determined to innovate and develop and has achieved success in there

form road map to prepare necessary conditions for each particular item: Rach investment itera

has been improved: the poutfolio has been upgraded, the financial health has been improved,

the procuets and services have been extended, the network has been uperaded and the banking technology has been modernized ‘he basic norms are completed excessively compared to the business pan with the guidotine "quality - safely - efficicncy”

Table 2.1: Some major indicators reflect the results of business activities of Vietinbank Lang Son in the period 2013 - 2016

Unit: billion VND

= Total loans and investments 83,112 103,987] 125,123] 150/021

‘The assessment of business activities of Vietinbank Lang Son in the above table shows the efficiency, profits in the Taller yor are always higher than in Ihe formerane In 2016, profit after tax reached 1,450 billion VND Profit margins on total assets also inereased significantly,

reaching 0.88% in 2016 compared to 0.57% in 2015 and 0.22% in 2013 Also in Table 2.1

shows that the return on equity of Vistinbank Lang Son increased significantly, in 2016 reached 18.2% compared to 2013 only 4.21%

Assessment af same key business activities of Vielintunk Lang Son

- Deposits of economic organizations 34,301 39,421 44,879 38,038

3 3 By term of deposit 81,597 1060572 126634 148,240

- demand deposits 26,368 28,655 24,342 41,655 Propottion % 32.3 285 193 281 time deposits 55,229 71/017 — 102282 — 106,585 Proportion % 617 718 80.7 no Capital growth (%) 20.2 14.7 232 17.07

Source: Annual report of Vietinbank Lang Son

Table 2.3: Capital balance by 2015 -2016

Amount — Proportion | Anvoụụy | Proportion % %

Classified by the term for short-term and medium-term loans

According to Tabls 2.3, rnobilized fund †o the end of 2016 reached VNDI48, 240 billion, an Imercssz of VND22, 616 billien comparzl with 2015, ø growlh of 17.07% Of which, VND mobilized capital reached VND 118.740 billion, accounting for 80.1% of the total mobilized fund and USD mobilized fund reached VND 29,500 billion, accounting for 19.9% of the total mobilized capital

In terms of deposits, demand dopostis reached VND 41,655 billion, accountings for 28.1% of total mobilized capital and term deposits (including deposits with term of 7 days or

more) 60 months) reached VND106, 585 billion, accounting for 71.9% of total fimd

Regarding customers’ structure, in 2016, the capital fom enterprises and economic organizations reached 98.038 trillion dong, up 13.158 willion dong, accounting for 39.2 percent and 68,190 trillion dong, and 15.417 trillion dong, accounting for 46% of total mobilized funds, Deposits from financial institutions reached VND18, 310 billion, down VNDB, 631 billion

1 Outstanding loans hy ierm 64159 75,886| 8f,152 101,450

- Shorl-lerma 39,055 44641] 47,329 60,347

Proportion 94 546 588 580 594

- Meditun term, long term 27,584 28/796| 31/388 — 40/213

Proportion % 43.0 379 30.1 39.6 + Other Toans L519 2,449 144 890

Proportion % 24 33 19 08

- Vietnam dong (VNI) 55,267 63,798 | 66/097 — 83645

Proportion % 86.1 840 83.6 82.4

- Foreign currency in VND 8892 12,088; 13155 17,805

Proportion % 13.9 16.0 16.4 176

& Ouisian ding leans by economic 64,159 75,886 80,152 101,450

- State owned enterprises 26918 2916| 24,599 28/116

Loans to the economy in 2016 reached VND 101,450 billion, an merease of 21,298

billion VNT) in comparison with th

2013 and a growth sale of 26.6%, Medium- and long-term loans rates in the two years of 2015 and 2016 will remain stable at 39% of total loans for the economy, in line with the Board's plan (40%) In 2007, Vietinbank Lang Son has appraised and signed credit agreements for a number of large projects with a total committed amount of VND17.600 billion,

In particular, Vietinbank Lang Son has paid attention and shifted to lending to the non- state sector, so fending and lending to this sector increased significantly in absolute numbers

as well Relative number of outstanding loans in 2016 for the non-state sector reached 72.334

tillion dong, accounting for 71.3% of lotal oulstanding loans, an inerease of 16.781 trillion

dong compared to 2015, an increase of 1.9%, as shown in Table 2.3

In 2016, Vietinbank Lang Son targets to increase and improve the quality of credit, so the outstanding debt and bad debt significantly reduced, much lower than the requirements of the paront bank Tn 2016, overdue dsbt was 1,010 billion VND, accounting for 0.99% of Lotal outstanding loans and decreasing 118 billion VND compared to 2015 (Table 2.4)

Table 2.5: Gverilue debt and overdue debt ratio at Vietinbank

Tang Son period 2013 -2016

unit: billion VND

Source: Annual Report Vietinbank Lang Son

- In addition, the ratio of loans to stats-owned enterprises decrcased fiom 30.6% in

2015 tw 28.7% in 2016 (Table 2.3) It could be assessed that quality and credit strueture of Vietinbank Lang Son were improved and renovated in safer and inore effective way in

2016.

Services

Table 2.6: International Payment Sales period 2013 - 2016

Unit: million USD

- Transfer oul coming money 1,046 1,381 1,648 1,986

+ payment from wansferring incoming

Report on business activities of Vietinbank Lang Son in 2016

‘The services of Vielinbank Lang Son have had significant development in terms of sales

as well as quality of service, Vietinbank Lang Son has focused on increasing revenue as well

as income from service activities in total income of the bank Payment of L / C in 2016 reached a tumover of 4,373 mniltion USD, an increase of 1,020 million USD compared ta that

of 2015 Of which, L / C payment was 2,945 million USD, L./ C payment reached 1,128 million USD USD; TTR remittance payments for the year reached $ 3,354 million, an

increase of $ 519 million compared to 2015 Payment through bank deposits in 2017 reached

$575 million, an increase of $ 212 million over 2015

Financial results; Comparing the income structure of Vietinbank Lang Son over the

last 4 years, from 2013 to 2016 Table 2.2 shows that the proportion of income from credit

activities still accounts for a high proportion of total income and ranges from 80 to 90% This

ratio decreased in 2016 but still accounted for 83.3% of total income structure of Vietinbank

Lang Son (2016 down 6.9% compared to 2015) This is a great effort of Vietinbank Lang Son

to gradually increase income from intermediary services, remittances, checks, money transfer,

guarantee, payment and gradually reduce income from credit activities, enhance

competitiveness in the integration process

2.2 Fund raising in Vietinbank Lang Son

2.2.1 Fund mobilization growth rate

Table 2.2 shows that the growth rate of mobilized funds in 2014 increased from 14.7%

in 2013, to 23.2% in 2015 and 17.07% in 2016, respectively In general, capital mobilization

of Vietinbank Lang Son has increased over the years but the growth rate is unstable and tends