Build up plan for credit and capital mobilization strategy in 2011-2015 at Vietcombank Daklak

As a branch with efficient operation, with average profits achieved from 70-90 billions per year, Daklak Join Stock Commercial Bank for Foreign Trade of Vietnam Vietcombank Daklak is alw

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILD UP PLAN FOR CREDIT AND CAPITAL

MOBILIZATION STRATEGY IN 2011-2015

AT VIETCOMBANK DAKLAK

GROUP 1 MEMBER:

1 LE THI MINH ANH

2 PHAN NGOC DIEN

3 NGUYEN DANH QUANG

4 VU THI QUE

5 BIEN VAN THANH

HCM City – 2011

1.3 The need to improve credit performance and capital raising of

Chapter 2 : Analysis and assessment on current situation of credit operation

2.1.1 The formation and development of Bank for Foreign Trade of Vietnam-

2.1.2 The formation and development of Joint Stock Commercial Bank for Foreign

2.3.2 Targets for raising capital 35

2.4 Characteristics of competitive situation and matrix of competitive image 42

chapter 3 : Building – proposing solutions for deployment of credit and capital

3.1 Analysis application and matrix usage to evaluate and plan credit and

3.1.4 Total of evaluation of the internal factor environment of VCB Daklak 57

3.2 Analysis of swot matrix, IFE & EFE matrix for planning and strategy

LIST OF MAP

LIST OF PICTURES AND CHARTS

Chart 2.1 : Economic indicators anh average growth speed 2007-2010 29 Chart 2.2 : Market share of asset of credit institution group 35

Chart 2.4 : Raising capital market share of credit institutions anh growth speed

Chart 2.6 : Capital mobilization in 2010 anh growth compared with 2009 37 Chart 2.7 : Share of outstanding credit of credit institutions 38 Chart 2.8 : Credit share and growth speed compared with 2009 38

Chart 2.10 : Outstanding credit in 2010 and the growth in compared with 2009 39

Chart 2.12 : Profit in 2010 and growth in compared with 2009 42

LIST OF TABLES

Table 3.1 : Matrix to evaluate external factor environment (EFE ) 53

Table 3.5 : Matrix of key strategies 62

LIST OF ABBREVIATIONS

ACB : Asia Commercial Bank

ADB : Asia Development Bank

Agribank : Vietnam Bank of Agriculture and Rural Development

BIDV : Bank for Invesment and Development of Vietnam

EFE : Extornal Factors Evaluation matrix

Eximbank : Vietnam Export Import Bank

EVN : Vietnam Electricity

FDI : Foreign Direct Investment

FII : Foreign Institutional Investor

GDP : Gross Domestic Product

IFE : Internal Factors Evaluation matrix

NPL : Nonperforming Loan

ODA : Official Development Assistance

Sacombank : Saigon Thuong Tin Commercial Joint Stock Bank

SWOT : Strengths – Weaknesses – Opportunities – Threatens

S/O : Strategy to use Opportunities by using strengths

S/T : Strategy to use strengths to overcome Threats

ROA : Return On Assets

ROE : Return On Equity

USD : United States Dollar

VCB : Joint Stock Commercial bank for Foreign Trade of Vietnam

VND : Viet nam currency

VIB : Vietnam International Bank

Vietinbank : Vietnam Joint Stock Commecial Bank for Industry and trade

WB : World Bank

W/O : Strategy to use opportunity to fix Weaknesses

W/T : Minimize weaknesses to avoid Threats

WTO : World Trade Organization

It can be said that, in the past 5 years, the world economy in general and Vietnamese economy in particular has been experienced the most difficult time after the 2nd World War with the "footprint" is the bottom of the global economy from the "storm" in 2008 monetary with the “legacy” severe impact to the end of 2009 In

2010, the economy has gradually shown signs of prosperity but to confront the risk

of inflation explosion And in 2011, when the echo of monetary crisis has not expired yet, the world continuosly witness demonstration, wars happening in Central Africa, Muslim, earthquakes, disasters, and diseases…all of these have been affecting seriously the recovery process of the economy and the investors’ confidence

Located in the context of resonance which is affected by internal and external factors of the global economy, Vietnamese economy continues to step into 2011, faced with troubles In the market, tense situation of exchange rate of US dollar, gold prices are sometimes at peak, banks join in the race of interest rate, inflation rate is increasing gradually Under these circumstances, the resolution of the 11th National Party Congress affirmed that “Objectives and missions of 2011 economic-social development plans associated with the 5 year economic-social development plan in 2011-2015 are: Inflation restraint, macroeconomic stability, growth model renovation, economy restructuring, social security ensuring.” Since early this year, the Government and the Central Bank have flexible implementation of monetary policy from tightening to loosing with tools such as basic interests rate, reservation ratio requirement, exchange rate adjustment with a very high frequency

Vietnam Commercial Foreign Trade Bank was officially converted to a new operational model of join stock commercial bank (2008) and joined in Ho Chi Minh Stock Exchange (2009) in the historical period with such challenges and difficulties Especially, since the banks with 100% foreign capital are allowed to expand all areas of activities in Vietnam from 1st January 2011 with plans to serve the

customers carefully and “unlimited resources”, the competitive pressures on domestic bank in general and on Vietcombank in particular has been more fierce than ever

As a branch with efficient operation, with average profits achieved from 70-90 billions per year, Daklak Join Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank Daklak) is always one of the banks playing the main role in economic-social development plans in Daklak province Besides the main role in the economy, examplary leader in compliance with monetary policy of the Central Bank; Daklak Vietcombank must also strive to deliver the maximum benefits for shareholders

However, in recent years, Vietcombank Daklak’s position has been threatened seriously by the decline of market share especially mobilized capital and credit

In comparison with mobilized capital growth in Daklak in 2010 is 47 %, Vietcombank Daklak’s growth rate is only 35% with the market share dropped from 13% in 2009 to 12% in 2010 In mobilized capital structure, the proportion of termed funding accounted 76% and tends to increase This gives the advantage to provide a stable source of capital for the branch but increases the cost of bank capital

Similar mobilized capital, whereas the growth rate of total outstanding credit market

in 2010 was 32%, Vietcombank Daklak’s growth rate was only 25% with the market share fell from 14% in 2009 to 13% in 2010 Bad debt ratio of the branch in

2010 was 2,6% , higher than the average rate of the entire area was 2%

A particularly difficult problem for the branch operation in existance for many years

is a serious imbalance between mobilized capital and credit balance To the end of

2010, Vietcombank Daklak’s total assets reached 4.348 billion VND, of which mobilized capital was 1.433 billion, only 33% total assets Vietcombank Daklak’s fund just met 30% outstanding credit need (4.123 billion) The shortfall must be offset by high interest loan from Central Bank (higher cost of borrowing rate of

15% compared with self-raising) This causes stressful pressure on the branch as Central Vietcombank are gradually limiting the branches’ dependence on the capital raised from the Central Government

From the above factors, we can see that, to maintain its position in the area, Vietcombank Daklak must do it utmost to overcome the pressure in the environment sector is considered to have the highest competitive level in Vietnamese market today To solve this problem, our group decided to research and

choose the topic “ Building capital mobilization and credit strategy of

Vietcombank Daklak period 2011-2015” to help business activities of Daklak

branch sustainably develope and enhance the influence of Vietcombank’s trademark

in the area Implementation of the common motto of Vietcombank’s entire system is

“Speed-Safty-Quality-Efficiency”; Vietcombank Daklak will be “flexible, decisive”

in managing to achieve the set objectives Fund raising’s growth from the economy reaches 50% with particular focus on developing capital mobilized from the population For credit activity, the branch will maintain a minimum market share of 15% together with strict control of credit quality with bad debt rate does not exceed 2% Last but not least, it is important to balance credit and capital mobilization to ensure the branch meets the needs of 60% credit activities

CHAPTER 1 SCIENTIFIC BASIC FOR RESEARCH ON BULDING UP CREDIT AND

CAPITAL MOBILIZATION STRATEGY 1.1 CONCEPT, ROLE AND CHARACTERISTISTICS OF STRATEGIC MANAGEMENT

1.1.1 Concept :

Business strategy is an comprehensive plan to control and use the orgnization’s resources in the specific terms of business environment aimed at improving their competitiveness Strategy management is a system of decisions and ations to establish and implement the plans to gain the objectives of business

1.1.2 Role and Characteristics:

In similar business environment, each of company has its own special ability, special business terms, so detailed strategy planning is completely different Bruce Henderson, a strategist and a founder of Boston Consulting Group believes that “ It

is impossible to coexist the two competitors if they have the same business strategy

We need to create new differences to exist” Therefore, in any era and to any feild

of business, process of business strategy planning is always one of the first task of the business Every company must develope strategies consistent with their own internal and external factors in each period of trading, must know how to capture the real opportunity as well as to block potential risks by establishing prior assumptions that can occur

Business strategy planning is a business process which outlines the assumptions as the basic for building company’s objectives It helps coordinate necessary activities

to be undertaken to accomplish objective and is also a control tool the initial assumptions by comparing the actual results with the expected ones outlined in the plan to evaluate and make adjustments if necessary

1.1.3 Strategic management process

1.1.3.1 Environmental research – Gathering and processing information

Environmental studies are considered the most important factor and are the beginning of the process of building and managing strategy The environmental elements of a company include the following things:

- The macro environment of a business includes economic, political, social, natural, scientific and technological elements

- The micro environment of a business is external factors to the enterprise which determine the nature and the extent of competition in business sector Applying model 5 of Michael E Porter to analyse this environment to help managers realize the competitive factors which have direct impacts to business

Implementation external controls to identify opportunities and main threats

Establish long term objectives

Establish annual objectives

Distribution

of resources

Measure and evaluate strategic implement ation Implement

internal controls

to identify the strengths and the weaknesses

Strategic choice to pursue

Set up policies

Feedback

Strategy Formation

Strategy implementation Strategy

Evaluation

Map 1.1 : Model of comprehensive strategy

management

Resouce : Concepts of strategic management – 50 page :

Statistical publishing house

Map 1.2 : Model of 5 competitive pressure of M.Porter

New, latent competitors

The competitors

in the same business

The competition among enterprises in the sector

Replacing products

Consumers Suppliers

Bargaining power of suppliers

Risk of new competitors

Bargaining power of consumers

Risks from products and services

Resouce : Concepts of strategic management – 82 page;

Statistical publishing house

Gathering information:

The gathering and processing information are the most important requirements in the stratefic process The necessary information for strategic process includes the following things:

 External information in the market that organization needs to collect include:

economic environment, politics, law, services and infrastructure, culture, population, and technology

- Technological environment

- Sector environment

- Environment of suppliers – consumers’ consumption trend

- The competitors, strategy and SWOT of key competitors to understand thoroughly the main competitors, the potential competitors, financial ability, resources, organization structure, strengths, weaknesses, opportunities and challenges of competitors, strategies that competitors are and will apply

 Gathering information of internal environment: is the collection of

information inside the company including:

- Planning: all administrative activities related to preparing for the future The specific tasks are: prediction, goals setting, strategy proposal, policy development, and goal establishment

- Organization: structure and governance model of the organization: clearly define governance structure of the enterprise, authorization…

- Leadership: efforts to orient the activities of human beings, namely leadership, communication, group working, changing activities, improving the quality of work, job satisfaction, need satisfaction, changing spirit of organization, employees, and leaders

- Control: related to all management activities to ensure the results match reality, and consistent with the planned results

- Information System: Understanding the management information system

of the enterprise

- Technology: Ability to grasp and to apply technology of the enterprise

- Human resources: qualifications and skills of staff and employees of the enterprise

- Marketing: the process of indetifying, forcasting, establishing, and meeting the desired needs of consumers for products or services; marketing environmental research to identify market opportunites, market segmentation, choosing target markets and positioning market

- Financial resources: financial ability of the enterprise

- Strength: strengths of the enterprise

- Weakness: weaknesses of the enterprise

- Opportunity: opportunities to the enterprise

- Challenge: current and future challenges

Process information and establish strategy: from the collected data, strategists will take steps to process, analyse, and propose strategies from which to choose one or some of the most suitable strategies for practical implementation

1.1.3.2 Strategy Formulation Stage

1.1.3.2.1 Summerize the results of analysis and forecasting of business

environment

Internal Factors Evaluation Matrix (IFE)

This matrix is to evaluate the strengths and weaknesses of departments of the enterprise Matrix construction steps are as follows:

Step 1: Define a list of 10 to 20 important factors including the strengths and the weaknesses of the enterprise These factors are written in column 1

Step 2: Identify the benchmarks to evaluate importance level with the strategic position of the company from 0,0 (not important) to 1,0 (very important) for each element The total number of important levels of all elements must equal 1,0 These values are recorded respectively in column 2

Step 3: Each company will self assess the impact of each factor to the business The level of assessment: 4 – very strong, 3 – quite strong, 2 – quite weak, 1 – weak Step 4: Multiplying the benchmarks of each factor with the level of their impact (= column 2 x column 3) to determine the total impact These results are recorded in column 4

Step 5: Plus the total score of the importance of each factor to determine the total points of the importance for the organization

No matter how many elements IFE matrix has, the higest score of the importance that a company can achieve is 4,0, the lowest is 1,0, and the average is 2,5

Table 1.1 Internal Factor Evaluation Matrix ( IFE )

External Factor Evalutaion Matrix (EFE)

EFE matrix has a summary and quantification of the impact of external environment factors to the enterprise EFE matrix is similar to building IFE matrix May present briefly as follows:

Table 1.2 External Factor Evaluation Matrix ( EFE )

 Column (1) lists from 10 to 20 factors including the opportunities and and threats affecting the company and its business

 Column (2) records the benchmark of the elements with strategic position of the company level from 0.0 (not important) to 1.0 (very important) This assessment is based on the industry basic The total benchmark of factors must equal 1.0

 Column (3) level of assessment: 4 – very strong, 3 – quite strong, 2 – quite weak, 1 – very weak

 Column (4) total points = column 2 x column 3

 Total points accumulated in column 4 shows the strategy of the company makes good use of external opportunities and minimizes the negative effects of the external environment

1.1.3.2.2 Analyse SWOT and combine strategies:

The purpose of SWOT Matrix analysis (Strengths, Weaknesses, Opportunities, and Threats) is to analyze the strengths and weaknesses of the enterprise with the opportunities, and threats to combine suitably the factors to assess, to identify, and

to choose an appropriate business strategy SWOT matrix has 9 squares in which 4 squares are important factors, 4 strategic squares are squares that strategic intersection of the appropriate boxes describing the strategic thinking and an empty box SWOT matrix is built according to the following basic steps:

Step 1: List out opportunities which affect strongly the business that the enterprise needs more research

Step 2: List out possible market risks

Step 3: List out the enterprise’s strengths

Step 4: List out the enterprise’s weaknesses

Step 5: Combine internal strengths and external opportunities ( S/O square)

Step 6: Combine internal weaknesses and external opportunities (W/O square), take advantage of external opportunities to make up for internal weaknesses

Step 7: Combine internal strengths and external threats (S/T square), make good use

of internal strengths to overcome external threats

Step 8: Combine internal weaknesses and external threats (W/T square) to use the opportunities to fix the weaknesses

Table 1.3 SWOT Matrix

Strength (S)

S1, S2…

S/O: strategy to use

opportunities by using strengths

S/T: strategy to use

strengths to overcome threats

Weaknesses (W)

W1, W2

W/O: strategy to use

opportunity to fix weaknesses

W/T: minimize

weaknesses to avoid threats

Analysis and evaluation by SWOT matrix to identify the strengths (S-Strength), weaknesses (W-Weakness), opportunity (O- Opportunities), Threats (T-Threats) from the effects of business environment for the enterprise in order to offer strategies and solutions to capitalize strengths, overcome weaknesses, take advantage of opportunities, constraint and control challenges

SWOT Matrix is an important tool to help managers develop four types of strategies

1.1.3.3 Strategy selection stage:

In this stage, using analysis based on the results from the input stage and on intuition to select an appropriate strategy to implement in practice

1.1.3.4 Strategy implementation stage:

Banking activity is a service activity so in the strategy implementation period, our group focus on researching and applying theories about Maslow Tower on human characteristics to propose solutions and on researching 5 distance model of Parasuraman to narrow gaps but to improve customer services

1.2 CREDIT AND CAPITAL MOBILIZATION OF THE BANK:

Commercial bank is a type of intermediary financial institutions doing business in the field of monetary and banking services.Through this system, idle cash resources

in the society will be mobilized, concentrated with large enough quantities to provide credits for economic organizations, or individuals who have demands to develop society

Commercial bank’s activities in the economic market are relatively diversified and complicated, involving many sectors of economic-social activities, and many kinds

of customers Comercial bank’s activities in general can include a number of major activities: capital mobilization, credit operations, payment services, and other added value activities such as fund management, underwriting, investment, leasing, consulting,…of which capital mobilization and credit operations are the two main most key business and having great significance for the results of bank’s operation

in particular and of the economy in general

1.2.1 Capital mobilization

In the economy, idle cash of people always exists and if this part is mobilized in economic-social organizations, this will create funds for economy development

The role and position as a financial intermediary, commercial banks will mobilize idle money in the economy which meet the needs for economic-social development Capital mobilization plays a role in providing capital for business activities of commercial banks which also contribute to the creation and provision of large capital for economy

1.2.2 Credit operation

This is the activity which using the money that commercial banks have been mobilized in the economy to meet the need of lending business capital, investment funds for economic sectors, and capital needs for society consumption With a credit intermediary function, commercial banks make loans in many ways to meet the needs of many objects

1.3 THE NEED TO IMPROVE CREDIT PERFORMANCE AND CAPITAL RAISING OF VIETCOMBANK DAKLAK IN 2011-2015

Administrative intergration in the economy market of Vietnam has been and will open up opportunities for exchanges and cooperation on international monetary and financial issues, but also requires commercial banks in Vietnam to futher accelerate the renovation process in order to stand firm and to be able to compete equally with foreign banks Currently, the state of capital mobilization and credit of Vietcombank Daklak has some matters that need attention:

The growth rate of capital mobilization and market share declines: Thanks to the

prestige and history, systematic branches spread across proinces, Vietcombank has

a stable source of capital, large scale, but the growth rate in recent years has been lower than the ground of the whole sector, particularly much lower than the join stock bank system leading to the decrease in capital mobilization market share, especially capital from the population In addition, Vietcombank’s mobilized capital

depends heavily on a number of important customers (companies, corporations, stated groups) whose small variation will cause difficulties in liquidity to banks

NPL ratio remains in alert:

Imbalance exist between capital mobilization structure and credit balance:

Competitive environment among banks is increasingly fierce: from 1/1/2011,

according to WTO agreements, Vietnamese Government has been gradually removing market entry barriers for foreign banks and removing protection for domestic banks To the end of 2010, there were about 120 institutions of all kinds to participate in mobilizing capital and providing credit (6 state owned Joint stock commercial banks, 37 joint stock commercial banks, 48 foreign banks and branches,

30 financial companies, and 1 central credit fund have made competition among

banks fierce than ever

With the scale of GDP in 2010 was about 105 billion USD, this amount was too

much Data on China’s commercial bank system as below is an example for

comparision: to 2009, China only had 4 large state owned commercial banks (in the areas of agriculture, investment, trade and foreign trade), 3 state owned commercial banks for policies (import and export, agriculture, and development), 5 more banks under Centre Government (Beijing), 18 commercial banks under local government Besides, only 2 private commercial banks and some foreign commercial banks with a smaller share (about 2%) The foreign investors who want to join in banking activities

in China must mainly purchase Chinese commercial banks’ shares which are government owned

In Daklak province, there are 20 branches of banks and credit funds, not foreign branches of commercial bank Trend in the near future is that domestic banks and foreign banks also participate in branch expansion in Daklak which creates fierce competition among banks

From the current situation and from the above reasons, we can see that

Vietcombank’s system necessarily need deep concern about the strategy to improve competitiveness in capital mobilization and credit operation to reinforce its own position in the future

CHAPTER 2 ANALYSIS AND ASSESSMENT ON CURRENT SITUATION OF CREDIT OPERATION AND CAPITAL MOBILIZATION AT VIETCOMBANK

DAKLAK 2.1 OVERVIEWS OF VIETCOMBANK’S ACTIVITIES

2.1.1 The formation and development of Bank for Foreign Trade of Vietnam-

Vietcombank has focused on applying modern banking management methods, expanding and upgrading branch network of branches and transaction offices So far, the network of Joint Stock Commercial Bank for Foreign Trade of Vietnam has grown all over the country

After equitization, the operational model transformation into joint stock bank with state capital owns 93%, the bank has equity ranks 3rd in the system reach 20.744 billion Simultaneously international networks are co nstantly expanded with over 1300 bank agents in over 90 countries and territories

Company Joint Stock Commercial bank for Foreign

“Leading bank in Vietnam for prosperity”

2.1.2 The formation and development of Joint Stock Commercial Bank for

Foreign Trade of Vietnam – Daklak branch

Joint Stock Commercial Bank for Foreign Trade of Vietnam–Daklak branch ( Vietcombank Daklak) was established under decision No 209 dated 10/10/1996 by the General Director of Vietcombank and officially launched into operation on 15/01/1997

Transaction name: Joint Stock Commercial Bank – Daklak Branch (Vietcombank Daklak)

Headquarter : 06 Tran Hung Đao, Buon Ma Thuot City – Daklak

Phone: 05003.858000, Fax: 05003.855038

2.1.2.1 Organizational structure and function:

On the basis of function and duties, organizational structure of Vietcombank Daklak

is streamline scienctifically to ensure business requirements, and in line with reform situation of the sector as well as with market demands Here is the organizational structure as below: (Map 2.1)

Board of Directors: Responsible for business operation of the branch and direct

impact on the relating departments

Accounting Department: Consist of 15 staffs includes:

Customer directly dealing division: open accounts; work with incomings and outgoings for customers who trade less than 15 million

Internal transaction division: in charge of managing and storing bookkeeping documents, accounting timely arise economic transactions, ensuring all activities of the bank are updated promptly, accurately, and safely as prescribed Implementation

of the budget items in accordance with the state

Budget Division: comprising 8 staffs with duties: revenue-expense related to

amounts of cash

Customer Division: Include 2 sections: Enterprise clients and Individual clients

Currently, enterprise client section is responsible for providing credit products for enterprise customers Individual client section is incharge of providing credit products for individual clients

Debt Management section: Responsible for lending track record and updating

information about clients and security assets, notifying Customer Department about customers’ debt situations

Service and International Payment Department: 10 staffs with duties as below:

Perform tasks such as foreign currency trading, issue ATM cards, direct management of automatic teller machine system, issue certificates of deposits such

as termed bonds, saving, and being the focal issue settlement of international cards such as VISA, MASTERCARD

General Department: Consist of 4 staffs are responsible for:

Ensuring the reporting of the branch; advising Board of Directors of documents for business such as lending rate, deposit rate, exchange rate; and balancing loan from Central Vietcombank

Computing Team: 3 people for network management, installation and maintenance

of computer system to ensure network stable and smooth, especially the absolute safety and security during business activities of the bank

Internal Examination Department: There are 3 employees who are incharge of

internal control on other departments’ activities aims to ensure the proper implementation of rules, regulations to limit the risks may occur in business activities

Human Resources Department: Responsible for recruiting, salary revision, and

administrative tasks

Transaction Office: Mainly focus on retail operation such as: issue credit for

individual customers, mobilize capital, issue cards of all kind…

Map 2.1: Organizational Structure of Vietcombank Daklak

Internal Examination Dept

Human Resources Department

Service and International Payment Dept

Budget Department

Accounting Department Computing Team

Enterprise Client Division

Individual Client Division

Thuan Hoa Transation Office

Tan Loi Transation Office

Transaction Office

No 1

Transaction Office

No 3

Nguyen Tat Thanh Transaction Office Hung Vuong Transaction Office

2.1.2.2 Business Operation Results, financial situation of Vietcombank Daklak

in 2010 has achieved good results with the determination of the leadership and the collective efforts of Vietcombank Daklak’s staff Total assests reached 4.348 billion, up 29.5%, capital mobilized from the economy reached 1.434 billion, up 36%, credit balance reached 4.123, up 25%, NPL ratio decreased from 2,28% to 2,23%; and especially profit of the whole year reached 98,6 billion, nearly 1.5 times over the same period, recording the highest peak during the past 5 years

Table 2.1 Some general indicator of business results

outstanding/ Total capital 102% 99% 98% 95%

4 Profit before tax 52 58 66 99 111% 113% 149%

The coefficients

1 Property using score (=5/1) 10.85% 16.11% 10.59% 12.05%

2 Different in net profit (=4/5) 25.22% 13.73% 18.55% 18.81%

3 Return on total assets ROA

4 Effective rate (=8/(6+7)) 142.28% 84.84% 78.57% 77.52%

Resource: Financial report of Vietcombank Daklak from 2007 to

According to the breakdown in 4 years from 2007 to 2010 as above, we can see that

Vietcombank’s business activities achieved some pretty good economic indicators

The average growth was relatively high such as: average total assets increased 31%,

growth in outstanding loans reached nearly 28%, average mobilized capital

increased 30% and profit reached 24%

Indicators of profitability:

 Property using score (= Total income/ Total assets)

This coefficient of the branch is very high compared with the whole Vietcombank

system is 3% showing that branch’s fund usage is vey effective This effectiveness

mainly focuses on credit activities In 2010, while total assets of the branch

increased 30%, but total income increased 147%; of which net income from interest

increased 148% Therefore, if the branch efforts to promote capital investment, the business results of the branch will grow very strongly

ROA index of the branch over the years is relatively stable and averaged of

over 2%, as international experience shows that business efficiency of the branch is quite good

Difference between net incomes (=net income/total income)

This indicator reflects the profitability of the bank is high or low depends on cost management ability 18% is considered quite high

2.2 CURRENT SITUATION OF CAPITAL RAISING AND CREDIT ACTIVITIES

2.2.1 Capital mobilization:

Capital raising function of the branch is assigned to Department of Service and International payment: mobilize termed deposits from residents, being a termed deposit accouting department for credit institutions, economic organizations, non-termed deposits Capital raise is primarily due to customers’ transaction Results achieved as below:

 The growth rate of capital mobilization :

The growth rate of capital raised from the economy of Vietcombank Daklak in the period of 2007-2010 averaged 30% The rate is lower than the general growth of some banks with the same scale (for example BIDV, Vietinbank) and than the growth of the whole market This proves that market share of capital mobilization

of Vietcombank is being narrowed, as in 2009 the market share was 13% but it was just over 12% in 2010 The cause of market share is competitive pressure of bank system, especially the booming activity of the old and new stock commercial banks joined with the growth over 50%

 Capital mobilization structure :

- Mobilized capital composition according to the branch’s customers including deposit from economic organization and from residents Through the table of mobilization structure, we can see that proportion of these two compositions tends to be unstable While proportion of mobilized capital focused on deposits from economic organizations in

2008 was 60%, in 2008-2010, this rate focused on deposits from residents which accounted 59% and 66%

- Mobilized capital from economic orgnizations increasingly tends to decrease although in 2010 this componet went up again but only 91% compared with 2008 Conversely, mobilized capital from residents has grown impressively Thus, in the upcoming years, the branch should focus on developing market share from economic organizations and keep promoting the growth of resident market share

- Mobilized capital with currency component tends to tilt to Vietnam dong with proportion from 2008 to 2010 increased from 72% to 91% while foreign capital tends to strongly decrease from 28% to 9% The growth rate of raised capital of VND in 3 years tended to stablized (44%) meanwhile mobilized capital of foreign currency decreased continuosly This is an alarming issue for the branch and affects Vietcombank’s reputation because it used to have big advantage in international payment and was considered a center for foreign currency payment of economic organizations and financial institutions

- Mobilized capital in term of the branch has a serious imbalance when it trends to increase overtime with the proportion up to 76% in 2010 This is the branch’s stable capital but also increases interest expense for the bank

- In contrast, non-termed mobilized capital of the branch is being narrowed

in both absolute and relative numbers This is a cheap source of capital that any banks need for development

Table 2.2 Capital mobilization structure

Total capital mobilized

Resource: Financial report of Vietcombank Daklak from 2007 to

Table 2.3 The growth rate of mobilized capital

Indicators 2009/2008 2010/2009

Total mobilized capital 121% 136%

1 Sort by economic sectors

2.2.2 Credit operation:

Enterprise clients department is responsible for reviewing and submitting to competent authorities for credit approval for enterprise clients Individual clients department does for individual clients With low interest policy of Vietcombank system, Vietcombank Daklak has invested in expanding market share and has gained some results as below:

 Growth rate :

Credit growth rate of Vietcombank Daklak keeps stable at approximately 30% This indicator is assessed quite well in the context of the global economy is facing many difficulties However, in two years, Vietcombank Daklak’s mobilized capital market share decreased Specifically, loans in 2009 accounted for 14%, but only 13% in 2010 The reason for this is the strong competition of the commercial banks and shares Vietcombank’s customers

 Credit structure :

Currently, the rate for medium and long term loans of Vietcombank Daklak is about 50% of the total outstanding loans because the branch has been focusing on investment for some hydroelectric plants of EVN Group which are assessed as highly effective projects This project is approved for loan support from Central Vietcombank which makes Vietcombank more proactive in capital

With other 50% share is short term credit, the branch mainly provides loans for customers who are small and medium companies in the fields of trade, investment, construction, and individuals

For credit structure in currency: VND outstanding proportion of the branch’s total outstanding is maintained at 95%-99%; the proportion of foreign currency debt is almost neligible

Table 2.4 Credit Structure over a few years

of the Vietnam’s commercial bank was 3.2% of total loans

2.3 COMPETITIVE SITUATION OF VIETCOMBANK AND OTHER COMMERCIAL BANKS IN MAIN ACTIVITIES

2.3.1 Analysis of indicators of asset size

The total value of asset of joint stock commercial bank group has a small market share of 31%, while asset total value of stated commercial bank group has market share of 69

Total assets of Vietcombank Đaklak is 4.348 billion, accounted for 14% of other

banks’ asset in the area, ranks 3rd

after Agribank, and BIDV

2.3.2 Targets for raising capital

In 2010, Group of State Owned Joint Stock Commercial banks had proportion of

65%, group of joint stock banks share 35% of local mobilized capital In the past 2

years, raising capital market has tended to move lower but group of State Owned

Joint Stock Commercial banks still has large market share

However, Joint Stock Commercial bank Group grows very fast, nearly 55%, and

State owned commercial bank group also grows quite well, nearly 44%

Joint Stock Credit Institutions State Credit Institutions

Resource : the state Bank of Daklak

Resource : the state Bank of Daklak

Capital raising market share of Vietcombank Daklak decreased fromm 13% in 2009

to 12% in 2010, ranks 3rd in size of capital mobilization of banking system in the

area

Capital mobilization growth rate focusing on VIB increased 98%, Vietinbank

increased 82%, and especially Agribank had large market share of 32% with growth

rate over 50% In 2010, other small banks also had growth rate over 100% but their

market share was not large

Chart 2.5 : Capital mobilization market share in 2010

Others 12%

Vietinbank 6%

BIDV 14%

Vietcombank 12%

Agribank 32%

ACB 3%

Resource : the state Bank of Daklak Resource : the state Bank of Daklak

Market share: by the end of 2010, state owned joint stock commercial bank group had

proportion of 65% of total mobilized capital of banking system in the area Joint stock

bank group accounted for 35% For the group of state owned commercial banks, except

Vietinbank, the others increased slightly from 5% to 6% Agribank increased from

31% to 32%.The other commercial banks tended to decrease: BIDV from 17% to

14%, Vietcombank from 1 3 % to 1 2% Market share of joint stock commercial bank

group was up slightly

Growth rate: this indicator of last year showed some dramtical changes In previous

years, joint stock banks always achieved growth rate of capital mobilization very

high, some banks with growth rate up to 60-70%/year (such as ACB, Sacombank,

Techcombank ), stated commercial banks’ growth rate was just 30%/year This year,

average mobilized capital of joint stock banks stayed at 55%/year, and stated

commercial banks go up to 44%/year Especially, Vietinbank increases nearly 82%

and Agribank increases over 50%

Detailed data of commercial banks’ capital mobilization are summarized

in Appendix of this report

2.3.3 Indicators of credit operation

Group of Stated commercial banks continued to increase and ensure the stability of

its credit market share, accounted up to 71%, group of Joint stock commercial banks

Techcombank Eximbank Eabank Others

accounted for 29%

In 2010, Group of Stated commercial banks had fast growth rate reaching 37%,

while Group of Joint stock commrcial bank only reached 23% of growth

Vietcombank Daklak’s credit share also decreased from 15% ini 2009 to 14%

in 2010 and was ranked 3rd among the banks in the area

G of Stated Cre Inst.

Resource : the state Bank of Daklak

8,515,102

20,487,032 23%

Resource : the state Bank of Daklak

Chart 2.8 : Credit share of Credit Institutions and growth

speed compared with 2009

Credit growth rate is mainly VIB increasing of 110%, and Agribank with 54%,

Vietinbank with 37% However, Vietcombank increases lower than the average

growth of the whole system, only 25%

Inconclusion:

Market share: in 2010, the market share of the bank sys te m didn’t

change; the trend of State joint stock commercial banks remained

higher f rom 69% to 71% Meanwhile, the joint stock banks reduced

from 31% to 29%

Group of Stated Commercial Banks: with a long history, large scale and

Chart 2.9 Outstanding credit share in 2010

Others 14%

Vietinbank 7%

BIDV 16%

Vietcombank 14%

Agribank 33%

ACB 4%

Eabank 3%

Resource : the state Bank of Daklak

Vietinbank BIDVVietcombank Agribank ACB STB VIB

Techcombank Eximbank Eabank Others