Building business strategy for joint-stock commercial bank in Ho Chi Minh city - Thang Long Branch (HDBank - Thang Long) in the period of 2012-2017

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT "Building business strategy for joint-stock commercial bank in Ho Chi Minh city - T

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

"Building business strategy for joint-stock commercial bank in Ho Chi Minh city - Thang Long Branch (HDBank - Thang Long) in the period of 2012 - 2017"

Le Quy Hien Chung Duy Thao Ngo Song Toan

HA NOI - 2012

Griccd) CAPSTONE PROJECT REPORT Group No.08 - GaMBA0I.X0710

CONFIRMATION HDBANK —- THANG LONG

Address: No.17, Pham Hung street, My Dinh social, Tu Liem district, Ha noi city

To: - Master of business administration program — Griggs University

- ETC — Vietnam national university, Ha noi

Subject: Comment of HDBank — Thang Long about Capstone of Group 8 —

GaMBA01.X0710—Griggs University, © ~~ CC CC

- HDBank - Thang Long has done fully support for Group 8 — GaMBAO1.X0710 when they practiced and learned in bank about operation status, vision and strategy of bank

- Goup member have expressed an enthusiastic and creative Have closely followed up current situation of bank and receive a good result in working time

in HDBank — Thang Long

HDBANK —- THANG LONG

Griccd) CAPSTONE PROJECT REPORT Group No.08 - GaMBA0I.X0710

CONEIRMATION HDBANK - THANG LONG

Address: No.17, Pham Hung street, My Dinh social Tu Liem district, Ha noi city

To: ~- Master of business administration program — Griggs University

- ETC — Vietnam national university, Ha noi

Subject: Comment of HDBank — Thang Long about Capstone of Group 8 —

- HDBank — Thang Long has done fully support for Group 8 - GA€MBA01.X0710 when they practiced and learned in bank about operation status, vision and strategy of bank

- Group member have expressed an enthusiastic and creative Have closely followed up current situation of bank and receive a good result in working time in HDBank — Thang Long

HDBANK —- THANG LONG

I

(CG Global Advanced Master of Business Administration

Program

Griccd CAPSTONE PROJECT REPORT Group No.08 - GaMBA0I.X0710

ACKNOWLEDGEMENTS

We would like to express our deeply gratitude to:

Vietnam by Technology and employment Training Center — Vietnam National University, Hanoi affiliated with the University of Griggs - United States

real experience, management experience for us during the MBA course

Graduation Exercises for group with all the responsibilities and spirit and the most

enthusiasm

functional departments who enthusiastically guided and made the best conditions during the process of making Graduation Exercise

Finally, we would like to thank all friends who always encourage our group in all aspects

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MỤC LỤC

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LIST OF TABLES

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Table 2.1: Business result of HDBank from 2008 - 2010 23

Table 2.2: Balance Sheet of HDBank — Thang Long in the period of 2008-2010 24 Table 2.3: Balance Sheet of HDBank — Thang Long in the period of 2008-2010 25 Table 2.4: GDP Growth rate ffom 1999-2011 27 Table 2.5: Turn over of export and import -c 28

Table 3.1: SWOT matriX 2.20000000121011 1n nh ánh nen n 49 Table 3.2: SPACE ImaHTÏX 225-525 S23 E121E11111121151111111111111 0521 EEEEEeere 3]

Grice) CAPSTONE PROJECT REPORT Group No.08 - GaMBA01.X0710

LIST OF FIGURES

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Figure 1.1: Five Forces Model by Michael E Porter S22 08

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INTRODUCTION

1 The necessity to choose research topic

Vietnam's economy is gradually integrating into the regional and global economies: though the business environment of enterprises is extended, the competition is increasingly tougher This has not only created business opportunities but also contained potential risks threatening the development of enterprises

By the end of 2011, when foreign banks are considered as Vietnamese ones, Vietnamese banks will have to face stiff competition from these competitors Currently, banks are urgently expanding activities to make their certain position Planning business strategies in accordance with the specific characteristics of each bank in order to survive, develop and improve competitiveness are urgent needs for each bank

From the above practice, Group 8 would select the topic: "Building strategies of housing development for joint-stock commercial bank in Ho Chi Minh city - Thang Long Branch (HDBank - Thang Long) in the period of 2012 - 2017" for our great graduation exercise and hope to make the business strategy accordingly

To propose solutions for successful deployment and implementation of selected business strategy to rank HDBank - Thang Long among strongly developed banks in the region and the world

3 Research subject and scope

- Research subject is Business strategy of HDBank - Thang Long period 2012 -

2017

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CHAPTER 1 RATIONALE ON BUSINESS STRATEGY OF ENTERPRISES

1.1 Concepts and roles of strategy and strategic management

1.1.1 Concepts of strategy and strategic management

There are many concepts of strategy and strategic management approached and addressed in many different angles, but in this text, our group would just mention a few concepts most common and accessible

1.1.1.1 The concept of strategy

- Strategy is the overall decisions and actions related to choices of means and resource allocation to achieve a certain goal, said Alain Raymond Thietart

- According to William J Glueck, strategy is a consistent comprehensive and associative plan designed to ensure the basic objectives of the business to be conducted

Business strategies are usually defined at three levels:

* Company-level strategy

It is considered as strategic decisions of a company, which specifies and defines the

purpose, objectives of the company, identifics the business activities that the company is pursuing, creates basic policies and plans to obtain company’s goals

Hence, company-level strategy is the generally strategy applied for the entire company

* Business-level strategy (SBU)

Business-level strategy involves how companies can compete successfully in a specific market, strategic decisions on selecting products, meeting customer demands, finding competitive advantage compared to competitors, exploring and creating new opportunities

* Function-level strategy

It is known as strategies defined for each specific business line In the system of business strategies, the functional ones play a role as the solution strategies to implement the overall business strategy Therefore, the functional level strategies are formed based on overall strategy and specific results of environment analysis and prediction, especially the market

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1.1.1.2 The concept of strategic management

- According to Alfred Chandler, strategic management is the process of identifying long-term basic objectives of the business selecting methods or action directions and allocating necessary resources to implement that goal

- According to John Pearce and Richard B Robinson, strategic management is a system of decisions and actions to establish and implement plans to achieve business goals

1.1.2 The role of business strategies in the business activities of enterprises

In the context of market fluctuation, more than ever the only thing that businesses can be sure is changes Strategic Management is like a direction, which helps these organizations to overcome vicissitudes in the business world, leading to the future by their efforts and ability Business strategy is designed to help business adapt to long- term changes in the best way

Strategic management makes an organization more active rather than passive in the outline of its future, allows an organization to be proactive and influential in its Operating environment and therefore, uses all its capabilities to control difficulties Management strategies make important perception for each person Both the Board

in the enterprises understand what and why the enterprises are doing, they feel they are parts of the business and will commit to support all activities of the business 1.2 Types of business strategy

1.2.1 Strategy of centralized growth

Each company's strategy is applicable to the business unit level However, at the level of business unit, we must first pay attention to the strategy of focused growth because the central objects of this strategy are products and markets

This strategy group is primarily aimed at improving the competitive position of companies with available products based on marketing promotion and change of existing market strategy without changing the product This type has three main strategies:

- Market penetration: Searching market share for products and services currently available in the market through marketing efforts

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- Market development: Providing available products and services to new areas

- Product development: Raising sales by improvement and innovation of available products and services

1.2.2 Competitive strategies in accordance with M Porter viewpoint

Michael E Poter - professor at Harvard University has given the basic competitive strategies in "Competitive Strategies":

1.2.2.1 Low cost leading strategy

Companies focus all efforts toward the goal of producing goods and services at lower cost than that of competitors

1.2.2.2 Differentiation strategy

Identifying or establishing enterprise characteristics of products, distribution channels, price, and promotion policies to achieve business goals

1.2.2.3 Key focused strategy

Under this strategy, the business units pay their attention on narrow segments of the entire market The segments can be determined according to geographic area, products and customers The attractive selected segments are places where there is no competitor or they cannot meet customer needs and desires

1.2.3 Competitive strategies for business units according to market share position in the market

In spite of serving for the same company, business units have different market share position in the market

1.2.3.1 Business units to lead the market

- The strategy to expand the total market demand: Searching new geographic areas for sale, finding new customers, developing new uses and encouraging greater use of products

- The strategy to defense: Making business unit a market leader, keeping his position

on the current market The market leader is always threatened by competitors especially those who have challenging positions in the market Therefore, business units have to defend continuously against attacks by competitors

- The strategy to expand market share: purchasing or acquiring the business units of smaller competitors, attacking to seize market share of weak competitors

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1.2.3.2 Business units to challenge the market

To attack leading business units and other competitors to raise market share or run the business in parallel way with competitors and do not touch the competitors behind To make attacking strategy the business units need to perform the following

Steps:

- Defining the competitors to attack and targets of attacking strategy

- Selecting appropriate strategies to attack: forward attack, side-on attack, siege attack

1.2.3.3 Business units to follow the market

The business units who do not want to confront to leading competitors or challenge the market because of insufficient resources fear of loss should follow market leaders through simulation strategy:

- Fully simulating products, distribution methods, and advertisement and marketing activities; supplying sensitive target markets with products at low price

- Simulating some key contents in Marketing-mix of leading competitors and creating a number of difference in packaging, pricing, advertising, sales network, etc

- Innovatively simulating to adapt to the market by relying on marketing-mix of _market-leading rivals to make specific improvements for their marketing-mix to meet needs and desires of the target markets

1.2.3.4 Business units to lurk the market

These business units always look for one or some safe and profitable market segments to lurk To be successful on narrow market segments, they often make the typical specialization strategy:

- Specialization in end users: Depending on the industry, lurking market business units select customers wishing to use the products or services to serve

- Specialization in stages of the production and distribution process: The business units can select details, components of a finished product or an item to supplement to main products, etc

- Specialization in client: Selecting customers according to demographic standard to serve such as high-income customers, medium or low; or clients of children, teenagers, youth, etc

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industries

1.3 The process of developing strategies

1.3.1 Identifying business tasks

Identifying strategic tasks and goals of the business is the beginning phase extremely important to the implementation of strategic business management The objectives are Clearly and particularly identified which is important to business success

1.3.2 Analyzing the external environment

1.3.2.1, Analyzing the influences of macro environment

The important influences of macro environment are

* Economic element

The main economic influences include growth rate; economic policy; business cycle, inflation rate, unemployment, exchange rates, financial system; status of natural resources; economic infrastructure, situation of import and export; balance of

payments, etc

_* Political and legal element |

The element of politics and law has an increasingly great effect on banks’ activities Banks must stringently comply with all provisions of law It normally includes such elements as:

- The system of policy tools and state provisions which have great influence on business activities of Banks such as policies of finance, monetary, income, import

- Political stability, political institutions, the consistency of policies, basic guidelines and policies of the State

* Socio-cultural element

The variations of the socio-cultural environment also create opportunities and risks for banks However, theses variation are often slow and hard to recognize making it difficult for banks to forecast and determine their impact on business activities of the

Banks

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* Technological element

It can be seen that most of technological activities are associated with the technology development The current technologies that banks are using, the development of new technologies and the life cycle of technologies are also issues affecting the business

of banking

* The natural and infrastructure elements

The natural and infrastructure elements include geographical location, climate, landscape, land, river and sea, minerals in the earth environment weather, temperature, economic infrastructure which can create opportunities and challenges for banks

1.3.2.2 Analyzing banking environment (micro- environment)

We applied Five Forces Model by Michael E Porter to analyze micro- environment

of the enterprises (also known as analysis of industry structure)

Figure 1.1: Five Forces Model by Michael E Porter

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* Buyers

It is known as an integral part of the Bank Customers’ trust is the most valuable assets of the Bank However, to protect their rights customers always find ways to put pressure on the business in term of price quality, delivery conditions, after-sales service Therefore, banks need to gain their own initiatives in the relationship with their partners How to get a new customer is difficult, but to retain a customer is much more difficult Banks should establish classification table of present and future customers The information obtained from this classification table is the orientation basis important planning, especially planning directly related to Marketing

* Supplier

Suppliers is one of the competitive forces of enterprises This is also correlated forces

of the business The bank also must be active in relations with suppliers The bank must take steps to bind the supplier For suppliers, the bank should never give them exclusive rights to provide input, in that way they are easier to put pressure on banks Supplier - Banking - Customers makes up the value chain, which has close ties with each other, linked and bound together The stronger the association is, the more robust that industry is When looking for financial providers, banks need to ask

Substitutes are sometimes risks threatening existing products of the bank

Replacement process usually takes place in two ways

- Common replacement: products are temporarily replaced by others more dominant

- Complete replacement: products will gradually disappear in the market due to the appearance of new products more in line with demand The complete replacement actually becomes threat to the business

The Bank who does not pay attention to the potential substitutes might be lagged behind and excluded from the game Therefore, banks should not stop research, predict potential substitutes, gain resources to apply and develop technology in their

own business

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1.3.3 Analyzing Internal bank (analysis of internal environment)

1.3.3.1 Analysis of financial capacity

Analysis of the financial capacity of a bank usually focused on four main contents:

- Liability quality

- Assets quality

- Income, expenses and business results

- The financial factors

1.3.3.2 Analysis of Banking

- Capital attraction, deposits, loans from credit institutions

- Guaranty, financial leasing

- Investment and other business

- Banking services

1.3.3.3 The structure of organization and management system

Management functions, management field is an important condition for business development Management functions within the enterprises make up "methods that we're in that job." Business who has good function and governance will encourage

employees to receive and be more aware of what they do; hence it make them to work

harder to achieve organization goals Management functions and areas include:

- The model, the organizational structure and functions

- Governance mechanism

1.3.3.4 Human resources

People are the core, indispensable factors determining the production-business outcome of the enterprise The quality of human resources in the enterprise is determined by the following elements:

- The structure of staff qualification

- The structure of working age

- The structure of expertise

- Regulations, recruitment policies, management, training, planning, evaluation and appointment

- The structure of treatment policy and salary

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1.3.3.5 Information technology and information management systems

- Hardware system and media

- The deployment and application of information technology

- Security and control

1.3.3.6 Technical material facilities

Technical material facilities are the key condition associated with the formation of products, critical to the success or failure of the business Production process affects most of the rest field of the business Good technical material facilities will enable better services and products with ensuring quality; facilitate the marketing, finance, human resources, etc of the business

1.3.4 Analyzing and selecting strategies

Strategy analysis and selection aimed at establishing long-term targets, creating alternative strategies and selecting some of them to pursue Analyzing and selecting strategies to determine a series of actions, which enable the business to reach their mission as well as set up targets

1.3.5 Implementing strategies

This stage is important to change planned strategies into specific actions

Strategy deployment has an intensive and extensive effect on the entire business, divisions and function departments Individual skills are extremely essential for strategy implement Strategy deployment consists of developing strategies such as supporting budget, cultural programs of the company in association with encouraging, commending and rewarding the staffs

Whether the strategy implement is successful or not depending not only on strategy quality but also on staff promotion of managers

1.3.6 Inspecting and evaluating the strategy implement

In the process of strategy implement, it is necessary to inspect regularly if those strategies are carried out as planed or not There are many reasons causing the failure

of a strategy They are environment and situation changes or ineffective human resource attraction Therefore, businesses need to monitor and evaluate the strategy implement through feedback information system and inspecting measures

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1.4 Tools for developing strategies and selecting business strategies

1.4.1 Tools providing information for formulating strategies

1.4.1.1 [FE Matrix (Internal Factor Evaluation)

IFE Matrix summaries and evaluates important strengths and weaknesses of function business parts IFE matrix is developed in five steps:

internal evaluation

important) for each factor Total taxonomic levels must be equal to 1.0

3 is the smallest strength, 2 is smallest weakness, | is the biggest weakness

(equal to step 2 x step 3) to determine the importance point

v Step 5: Add the total points of importance for each factor to determine the total importance points for the organization

1.4.1.2 EFE Matrix (External Factor Evaluation)

EFE Matrix helps us to summarize and quantify the effects of environmental factors

to the business Developing an EFE matrix consists of five steps: Be

v Step 1: Make a list of factors that play a decisive role to the enterprise’s line of business

v Step 2: Classify the importance from 0.0 (not important) to 1.0 (very important) for each factor

Vv Step 3: Classify from 1 to 4 for each determinant of success to show how current strategies of the company response to these factors, in which 4 is good response, 3 is fair, 2 is average and 1 is little response

v Step 4: Multiply the importance of each variable with its classification level (equal to step 2 x step 3) to determine the importance point

v Step 5: Add the total points of importance for each variable to determine the total importance points to the organization Higher score reflects better response of the enterprise to external factors

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1.4.1.3 Competitive Image Matrix

This matrix identifies the major competitors of the enterprise This matrix is an extension of the EFE Matrix the same meaning to the importance of those factors, the score of each factor and the total score

Competitive Image Matrix is different from EFE matrix at this point: some internal factors having the decisive importance are also included for comparison Total ratings of competitors will be compared with the chosen business model

1.4.2 Tools for developing feasible strategies

1.4.2.1 SWOT Matrix (Strength - Weakness - Opportunity — Threat)

Analysis and evaluation of SWOT matrix is to identify the strengths (S), weaknesses (W), opportunities (O), threats (T) from the effects of business environment to enterprises to create strategies and solutions to develop strengths and overcome weaknesses, take advantage of opportunities, limit and control challenges

Through the SWOT matrix, the following basic strategies can be planned:

SO Strategy: Use internal strengths of the enterprise to take advantage and exploit opportunities from the external environment

WO Strategy: Take advantage of opportunities from the external

environment to minimize the weaknesses of the enterprise = stst—S

WT Strategy: Strategies to overcome weaknesses in order to limit the threat

of external environment

ST Strategies: Strategies to enhance leverage and strength within the enterprise to overcome or reduce the impact from the threat of external environment 1.4.2.2 Main strategy matrix

All organizations can be located in 1 of 4 corners of the main strategy matrix This matrix evaluates position of companies based on two aspects: competitive position and market growth Appropriate strategies for the organization are listed in attractiveness order in every square corner of the matrix

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- The financial strength of the organization (FS)

- Competitive advantage (CA)

- [The stability of the business environment (ES)

- Attractiveness of the sector (IS)

SPACE Matrix is developed in the following steps:

v Step 2: Assign values from | (worst) to 6 (best) to FS and CA, from -1 (best)

to -6 (worst) for ES and IS

on the vertical axis and mark the results Mark the position of this new point

v Step 6: If the results are offensive, defensive, competitive, cautious strategies:

- Offensive strategy: take advantage of the strengths and opportunities, overcome weaknesses and threats and use maximum resources to develop

- Defensive strategy: focus resources and specialization to overcome weaknesses,

- Competitive Strategy: to promote the growth of products and services to strongly penetrate into the market

- Cautious strategy: exploratory growth, focus sufficient resources to maintain appropriate growth

1.4.3 Tools for selecting strategies: Quantitative Strategic Planning Matrix (QSPM)

QSPM Matrix is a tool to evaluate and analyze information that planners have completed in the steps to develop EFE matrix, IFE, SWOT, to review and determine the optimal strategy to carry out in practice QSPM matrix is developed based on the following six basic steps:

matrix; analyze external factor and internal factor matrix

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analyze external factor and internal factor matrix

Divide strategic into groups if possible

the scale from 1 to 4, in which | is not attractive, 2 is somewhat attractive, 3 is quite attractive, 4 is very attractive

multiplying classification score (step 2) and attractiveness score (step 4) in each row

preferentially selected

In summary, after having developed a number of basic strategies based on the analysis results from the QSPM Matrix, the most appropriate strategy will be selected

1.5 Characteristics of the banking sector that affect the strategic management Banking business is a specific one; it has different characteristics in comparison with

other economic sectors which affect the strategic management of the bank

1.5.1 The potential demand for banking services oe

The potential demand is the factor that has a big impact to any other industry Analysis of the following factors can tell us the demand for banking services in the future:

- Changes in population structure, population growth (especially urban areas), the rise of industrial zones, new urban areas will lead to the increase of companies and individuals who need banking services

- Average income of people over years When income is raised, banking services will also have the corresponding developments

With big demand scale of customers, banks can take advantage according to the scale, and improve their business operations and services

1.5.2 The management of the State Bank

The State Bank of Vietnam (SBV) is a State management agency on currency This

is the agency responsible for the issue, management of currency and advisory of

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policies related to currency for the government such as currency issuing exchange rate policy, interest rate policy, foreign reserves management, drafting bills on banking and credit organizations, considering the establishment of banks and credit organization, management of commercial banks So banks are the conveyor belts that transfer monetary policies in the economy Strategies developed by banks must

be governed by laws and regulations promulgated by the SBV

1.5.3 Development level of relevant sectors and accessories

The development of banks is not separated from the development of relevant fields and accessories such as stock, insurance, information technology (IT) The mutual support to develop of banks and stock, insurance, IT is clearly seen in the world market

Development level of these fields has a direct impact on the development of the banking sector, creating capital mobilization channel and new investment for banks, reducing risk, minimizing transaction costs IT plays a critical role in creating the products of banks such as credit cards, automated teller machines, etc

In today's information age, the presence and development of relevant fields and accessories will increase the productivity as well as competitiveness of banks

1.5.4 Competitors

Banking branch is concentrated so there are less competitors than other sectors Until now, banking system network of Vietnam (SBV) includes 43 domestic commercial banks (including 4 100% State-owned banks, the majority of capital of Vietcombank and Vietinbank owned by the State), 5 100% foreign capital banks, 47 branches of foreign banks, 5 joint venture banks

The opponents clearly know each other about: financial capacity, operation network, operation market, interest rates and services fee Therefore, in business strategy, it is likely that the competitors will offer opposite strategy On the other hand, banks have

to compete and cooperate to develop together due to reputation system characteristics The failure of a bank would badly affect the safety of credit organization system; this bad effect is very fast and has a high propagation, big range

of effect, extending beyond the banking sector

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1.5.5 The internal factors of the bank

Banking services are a complex, risky service sector; therefore the banking sector highly demands on the supply conditions such as human resources, capital, scientific and technical base, etc The internal factor of banks is evaluated via the following criteria:

1.5.5.1 Operation network system:

Business advantages of scale are also important to banks’ activities, especially when services of traditional banks are still developing and the information technology system is not capable of deploying a modern banking system

1.5.5.2 Human resources:

The indispensable resource in any organization Competitiveness of human resources

is reflected in these factors: the level of training and qualifications, expertise, motivation, and the closeness to the enterprise, awareness and working style

Qualification or skill of employees: is an important indicator to show the quality of human resources; however, motivation and closeness levels of employees is also an important indicator reflecting whether a bank has advantages of human resource or not If a bank has a high employee turnover rate, there will be no advantage as recruitment and training of bank staff is costly in time and effort Therefore, evaluation of human resources also includes evaluating indicators: average salary, bonus

1.5.5.3 The level of product variety and quality of customer service:

A bank which has many product categories and service types provided in accordance with market demand and management capacity of the bank will have advantages Diversification of products and services not only helps banks develop more stably but also helps banks promote the advantages of scale The diversification of products and services also must be compatible with existing resources; otherwise, it is not efficient

1.5.5.4 Prestige of the bank:

Will create trust for customers That’s why a reputable bank will have a competitive advantage to attract customers

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1.5.5.5 The capacity of technology:

Technology is the most important element in the elements of infrastructure needed in the bank Machines and automated equipment shorten operation time: improve accuracy convenience of banking services Technology is the fundamental condition for banks to deploy modern services Technology in banking also includes information management system, risk reporting system within the bank

The capacity of technology is not only reflected in current quantity and quality of but also reflected in the innovative capabilities of modern technologies in term of technical and economic aspect

1.5.5.6 Management capacity and the organizational structure:

Capacity management is reflected in the target, motivation, level of commitment of executive committee to the maintenance and improvement of operation efficiency of the bank It is also reflected in salary and income policies to employees, business policies and processes as well as risk management processes, internal control processes

The organizational structure is an important indicator to reflect whether the allocation of bank resources is appropriate to the scale, level of bank management, sector’s characteristic and market requirements or not The organizational structure

of banks is reflected in the division of departments, units, and the relationship between components

In summary, in their business process, enterprise must always determine annual goals and long-term goals for themselves Business strategy is the way and steps on the path to achieve those goals

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CHAPTER 2 ANALYSIS OF BUSINESS ENVIROMENT OF

HDBANK — THANG LONG 2.1 General introduction on HDBank

2.1.1 Introduction on HDBank

- Establishment: HDBank was established on 01.04.1990, is one of the first joint- stock commercial bank in the country with an initial charter capital of 3 billion By January 2011, HD Bank has achieved the charter capital of 3,000 billion VND

- Development Strategy: Following the trend of integration of banking and financial sector of Vietnam, for the development and global economic integration, HD Bank has successfully implemented Phase | (2009 - 2010) Restructuring Project (2009 - 2012) with the aims to build a HDBank into retail banking, multi-function, accessing

to international standards in management; Strengthening financial capacity, developing modern technology, building and improving strong and professional human resources; offering diverse, high quality and lump sum products which meet requirement of all customers Parallel to the development of retail banking, HDBank has been started to build a model of investment bank to maximize efficiency of

capital business

- Operations Network: By 9/2011 HD Bank has 115 transaction points in nationwide, available in major economic centers of the country such as Ho Chi Minh City, Hanoi, Danang, Nha Trang, Binh Duong, Can Tho, Long An, Vung Tau, Dong Nai, Nghe An, An Giang, Hai Phong, Dak Lak province, Bac Ninh

- Legal compliance: whole activities of HDBank were conducted under the unified process, regulation of HDBank, strictly abide by rules of law HDBank fully meet the criteria for rapid, healthy and sustained growth of a joint-stock commercial banks 2.1.2 General introduction on HDBank - Thang Long

2.1.2.1 The process of establishment

HDBank - Thang Long is one of the branches established in 2008 Over 03 years of Thang Long HDBank development, together with the trading room have fully met the financial and banking needs of customers On 27/04/2011, HDBank Thang Long opened new headquarters at 17 Pham Hung, My Dinh, Tu Liem district, Hanoi With

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HDBank Thang Long with a large new headquarters located in residential area will provide consumers more convenience With open, modern and friendly space, HDBank Thang Long helps customers feel comfortable, safe and saves maximum time transaction for customers

HDBank Thang Long opened the new office marking a new development to modernize facilities and improve customer service, perform the best interest

commitment to customers

2.1.2.2 Organizational structure

HDBank Thang Long was held in the model of the functional departments divided by type of products and services including: Accounting and Finance; Personal credit: Business credit; personalized customer service; Business customer service: organization administration; appraisal; cash in hand The advantage of this model is that employees have deeply invested into narrow specialized products and services

‘eading to skills of staffs are improved

However, with the expansion of branch network, the increase in the volume of customers and diverse needs of banking products and services of customer this organizational structure also has disadvantages:

- The client management does not close because there is no clear division of responsibilities among the offices in management of the same client

- The office is organized under profession that would make it difficult and time consuming for customers to contact many divisions

- The such division of department makes staff does not know or understand the operations of other department, leading to difficulty in customers guiding process

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- Internal control is still weak, slow to detect the existence and internal mistakes

- The organizational structure is not customer — oriented, lack of research department, product development and customer care department

- Especially the issue of risk control is still managed by the department itself Risk Control Division is also the division of operation

2.1.4 The financial capacity

Financial capacity is considered to be the decisive factor in the success of the business of bank Below is a financial capacity assessment of HDBank

HDBank’s total assets increased continuously over the years with relatively high growth rate, this shows the scale of HDBank’s business is increasingly expanding

Total assets from time of upgrading in | 1/2004 was approximately 1,000 billion after

one year of operation, 1,500 billion in 2005 and up more than 34.000 billion after 20 years of running

Credit quality remains the key criterion, but the advance ratio with asset backing was over 80% - 90%, bad debt has not yet appeared Overdue loans are tightly controlled and monitored to recapture in time

Structure of assets maintains the relatively good proportion as the structure of short- term loans and long term 70:30, short-term and long term 70:30 mobilization

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business results as follows:

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Network expansion Branch 45 65 96

Capital adequacy ratio (CAR) | % — | 1612| 15.67 127] Total value of generated TTQT | Million USD | _ 13271 2039| 2382|

| Number of debit card — | Cards | 626,890] 724,351] 2,510,354; —-

overseas national currency

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2.2 Overall assessment of business operations of the branch

Table 2.2: Balance Sheets of HDBank — Thang Long in the period of 2008-2010

Calculation unit: Million VND

II Cash in bank and credit

ILI Investment securities

other credit agency

III Investment trust fund

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| Profit before tax 60 — 65 | — 81 OO 109

(Source: Business result report of HDBank — Thang Long in 2008-2010)

The above table shows the index of revenue, expenses, profit in 2009 increased in comparison with 2008, those in 2010 is lower than those in 2009

The 2010 was the year of great change in interest rates of banks But with the intervention of the State Bank such as adjusting buy and sell foreign currency at a reasonable level to regulate the supply - demand for foreign currency, increasing market liquidity, supporting foreign currency for import demand of essential goods for domestic production, import for gold again, decline in the prices of precious metals and making dollar on the free market cooling off

Besides some credit agencies have not yet confronted to the business ratio under regulations of the State Bank, so they have to take risks of term between lending and

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fund mobilization Money markets show signs of instability and limited connectivity and assistance, the situation of unfair competition and lack of transparency that make customers confused and bargaining in interest rates

In addition, money market linked to stock market, real estate foreign exchange, but

these markets are not stable, have sign of more speculation, and affect the demand - supply of capital and interest

With the operation of sector listed above, HDBank is also influenced more or less to businesses and HDBank - Thang Long is no exception

Despite many challenges, to achieve business is thanks to the timely guidance of the Board, the dynamic and determined of the Executive Board and the efforts of all staffs in branch in improving service quality, making HDBank trademark become familiar with all people

2.3 Analysis of influence of external environment to business operations of HDBank - Thang Long

The over period marks success of Vietnam's international economic integration, in which the most prominent events are Vietnam has successfully hosted the 14th APEC Summit, officially became 150th member of WTO and the United States adopted the permanent normal Trade Relations (PNTR) to Vietnam

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(Source: Calculated from Statistical Yearbook data VN, WB and IMF)

About economic environment: according to the statistics of the Head office of statistics, general domestic products of the year 2011 estimated to increase 5.89% in compare to the year 2010 and gradually increase in the all three area, in there quarter I increased 5.57%; quarter II increased 5.68%; quarter III increased 6.07% and quarter IV increased 6.10% The increasing speed of GDP in the year 2011 even though lower than the increasing level 6.78% of the year 2011, but in terms of the production situation is difficult and the whole nation is concentrated in controlling inflation primarily, stable the macroscopic, then the increasing above is quite high and suitable In the general 5.89% increasing of the economy, agriculture, forestry and aquatic products area increased 4%, contributed 0.66%; industry

and construction area increased 5.53%, contributed 2.32% and service area increased 6.99%,

contributed 2.91%

Economic situation in the period of 2000 - 2007 is much more convenient to operate banking activities and HDBank with the GDP growth reached 6.79% in 2000 and continuously increased until 2007, from 2008 to 2011 GDP growth rate is somewhat lower than previous years

As the economy grows, businesses need capital investment to expand production not only in nation but also translation giving rise to strong demand for payment services, guarantees, foreign exchange also require banks to develop under

The factor about Political Economy is the throughout factor and strongly integrates the trading activities of the banking system in general and in HD Thang Long in particular In the recent years, because of the effect of the global economic crisis, raising inflation, the Government has conducted many new legal policies which are closer and and safer Specifically, on the day 24th February 2011, the Government promulgated the 11/NQ-CP resolution, gave out 6 groups of main methods about

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controlling inflation, stabling macroscopic and ensuring the social security in the year 2011 To concretize the spirit of Resolution no.11 the Vietnamese State Bank also applied some administrative quasi-methods like controlling the increasing speed

of credit in the year 2011 in the level of 20% to all the commercial banks At the same time, proposed the route to decrease the non-production credit of the banks to about 22% of the total loans at the day 30th June 2011 and the total loans at the end

of the year 2011, limit the growth of the means of payment to be under 15-16%

* Export — import

Table 2.5: Turn over of export and import

Calculation unit: billion USD

(Source: Calculated from Statistical Yearbook data VN, WB and IMF)

Total export and import turnover over the years are as follows: in 2008 as exports: 62.69 billion USD, imports of 80.71 billion USD; in 2009 was 56.6 billion USD for

84 billion USD for import; in 2011 is estimated at 78.8 billion USD for export and import of 92.98 billion USD Increased export activity raises demand for banking services such as discount of documents, currency converter, loans for production

* Investment

In recent years, the government has gradually improved investment environment and create conditions for business activities Thus, social investment has increased significantly The legal system is adjusted in the direction of international economic integration Many legal documents relating to banking activities have been issued under the favorable direction for banking activities that provides convenience for HDBank in business as well as the handling of outstanding deposition

Economic recovery is an important cause in promoting investment development Social investment in 2010 has achieved positive results The total social investment

in 2010 reached 800 trillion VND, increasing 12.9% compared with 2009 and

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