Quản trị chiến lược tại ngân hàng cổ phần thương mại SHB – thực tế và giải pháp

LUẬN VĂN THẠC SĨ – MBAQuản trị Chiến lược tại Ngân hàng cổ phần Thương mại SHB – Thực tế và giải pháp THESIS MBA STRATEGIC MANAGEMENT IN SAI GON-HA NOI COMMERCIAL JOINT STOCK BANK – REAL

LUẬN VĂN THẠC SĨ – MBA

Quản trị Chiến lược tại Ngân hàng cổ phần Thương mại SHB –

Thực tế và giải pháp THESIS MBA

STRATEGIC MANAGEMENT IN SAI GON-HA NOI

COMMERCIAL JOINT STOCK BANK – REALITY AND

However, strategic management is a difficult, complicated task in which a smallmistake can lead to bankruptcy no matter how internal strength of banks

Sai Gon – Ha Noi Bank (SHB) is a newly founded bank that has turned rural share intourban one and is in the way of building brand mark, finding strategy to dominate themarket in term of modern banking Its basic conditions of capital, banking technology,manpower, management experience are still in low profile These conditions areposing difficulty for strategic management and requiring strategic measures for SaiGon – Ha Noi bank

Basing on such reality, Group No.8 has decided to do research on:

“

1 Aims of the study

- Study theory of strategic management of commercial bank

- Analyze reality of strategic management in Sai Gon – Ha Noi commercial joint stockBank

- Propose solutions and measures in order to improve strategic management in Sai Gon– Ha Noi commercial joint stock bank

2 Objectives and scope of the study

- Objectives of the study: To study real issues in strategic management in Sai Gon –

Ha Noi commercial joint stock Bank

- Scope of the study:

+ Place: In Sai Gon – Ha Noi commercial joint stock Bank

+ Time: From 2006 to 2008 and in early months of 2009

3 Methods of the study

Methods of specific and real problem solution: Statitics method, Analysis,Comparision, systemation, combination of theory and practice.

4 Structure of the study:

The study consists of 3 chapters:

CHAPTER 1 9

BASIC ISSUES ON STRATEGIC MANAGEMENT OF COMMERCIAL BANK 9

1.1 Commercial bank and necesarity of stategic management in commercial bank 9

1.1.1 Generalization of commercial bank 9

1.1.1.1 Definition of commercial bank 9

1.1.1.2 Activities charateristics of commercial bank 10

1.1.2 Necessity of strategic management of commercial bank 11

1.1.2.1 Definition of commercial bank stategic management 11

1.2 Basic contents of strategic management 15

1.2.1 Defining missions and strategic business objectives 15

1.2.1.1 Defining business missions 15

1.2.1.2 Building business strategic objectives 17

1.2.2 Analysis of outside business environment 19

1.2.2.1 Analysis of marcro environment 19

1.2.2.2 Analysis of micro environment 19

1.2.2.3 Determination of opportunity and challenge 20

1.2.3.International environmental analysis 20

1.2.3.1 Financial resource analysis 20

1.2.3.2 Marketing-PR capacity analysis 21

1.2.3.3 Analysing resources 21

1.2.3.4 Analaysing organization skill 22

1.2.3.5 Materials 22

1.2.3.6 Defining strenths and weaknesses 22

1.2.4 Establishing business strategy 23

1.2.4.1 Suggesting assignment 23

1.2.4.2 Strategic analysis .24

1.2.4.3 Choosing strategy 24

1.2.5 Implementing business strategy 25

1.2.5.1 Establishing annual target 25

1.2.5.2 Building polices 26

1.2.5.3 Construction of operation programs .27

1.2.5.4 Resource distribution 27

1.2.5.5 Deployment of policy execution 28

1.2.6 Examination and adjustment of business policy 28

1.2.6.1 Purpose of policy examination amd evaluation 29

1.2.6.2 Procedure of policy examination 30

1.3 Experience in policy management in some domestic and international trading banks 31

1.3.1 Experience in policy management in some domestic and international trading banks 1.3.1.1 Experience in policy management in some domesticl trading banks 37

1.3.1.2 Experience in strategic administration in foreign bank 40

1.3.2 Experience lesson about strategy administration 42

CHAPTER 2 43

CURRENT SISTUATION OF STRATEGIC MANAGEMENT ……… 43

AT SAIGON – HANOI COMMERCIAL JOINT STOCK BANK ……….43

2.1 Overview about Saigon – Hanoi Commercial Joint Stock Bank ……… …….43

2.1.1 Establishment and Development of the bank ……… 43

2.1.2 Organizational structure of Saigon-Hanoi Commercial Joint Stock Bank 44

2.1.3 Main activities of Saigon-Hanoi Commercial Joint Stock Bank 45

2.1.3.1 Operation and Management ……….45

2.1.3.2 Risk management activities……… 45

2.1.3.3 Capital Mobilization activities……… 45

2.1.3.4 Credit activities 47

2.1.3.5 Other business activities……… …….48

2.1.3.6 Other activities 49

2.1.4 Financial situation of Saigon – Hanoi Commercial Joint Stock Banks during 2006-2008…… 49

2.1.4.1 Charter capital 49

2.1.4.2 Business results……… ……….50

2.2 Current situation of Strategic Management at Saigon – Hanoi Commercial Joint Stock Bank 50 2.2.1 Define the business mission and strategies……… 50

2.2.1.1 Content of business mission of SHB ………50

2.2.1.2 Evaluation on bussiness mission and strategies of SHB 51

2.2.2 Evaluation on the environment analysis at SHB……….…………53

2.2.2.1 Environment analysis ….………….……… ……… 53

2.2.2.2 Evaluation on environment analysis of SHB……….71

2.2.3 Evaluating existing status of strategic plan in SHB……….… ……….…….72

2.2.4 Evaluation on the strategy deployment at SHB………72

2.2.4.1 Evaluation on existing business policies……… … 72

2.2.4.2 Evaluation on setting annual objectives……….73

2.2.4.3 Evaluations on action plans……… ………….74

2.2.4.4 Evaluation on resources allocation during implementation………74

2.2.5 Evaluation on the checking and adjustment of strategy at SHB………….………….75

2.2.5.1 Content and criteria for strategy evaluation at SHB……… 75

2.2.5.2 Evaluation on the checking and adjustment of strategy at SHB………76

2.3 Evaluation on the current situation of strategic management at SHB ……… 77

2.3.1 Achievements 77

2.3.2 Shortcomings and reasons 77

2.3.2.1 Shortcomings 77

2.3.2.2 Reasons for shortcomings 79

CHAPTER 3 82

THE SOLUTION FOR IMPROVING STRATEGIC MANAGEMENT IN THE SAI GON – HANOI JOINT STOCK COMMERCIAL BANK 82

3.1 The strategic management direction in Sai Gon – Hanoi Joint Stock Commercial Bank in the integration era 82

3.1.1 The strategic management direction in banking industry 82

3.1.2 The developing strategic direction of SHB in the next time 83

3.2 The solution in improving the strategic management in SHB 85

3.2.1.Preparing the prerequisite conditions in performing sucessful strategic management 85

3.2.2 Primary solution group 86

3.2.2.1 Solutions for strategic planning 86

3.2.2.2 Solutions for strategy implementation 94

3.2.2.3 Overall solution for the checking work and strategic adjustment 97

3.2.3 Solution supporting group 100

3.2.3.1 Improve the financial strength 100

3.2.3.2 Improving human resources’ quality 100

3.2.3.3 Innovating technology and improve the quality of information and communication system in bank 104

3.2.3.4 Building banking culture 104

3.2.3.5 Consolidating the organization 105

3.3 Suggestions 105

3.3.1.Suggestions to the State Bank 105 3.3.1.1 Complete all the managing mechanism for banking operation 105 3.3.1.2 State bank enhances its role as the force planning the developing targets for

banking industry 1063.3.1.3 The State Bank upholds its role in encouraging, controlling, contributing tocomplete the administration system and operate the administrationsystem 106CONCLUSION 109

REFERENCE LIST 110

CHAPTER 1

BASIC ISSUES ON STRATEGIC MANAGEMENT OF COMMERCIAL BANK 1.1 Commercial bank and neccessarity of strategic management in commercial bank

1.1.1 Generalization of commercial bank

1.1.1.1 Definition of commercial bank

There are many definitions about bank One of these is the definition in

Commercial Bank management by Peter S Rose:

Bank is one type of financial organization providing lists of various financial service – particularly credit, saving and payment sevice – and implementing much more financial functions in comparision with other business organizations in economy.

In Vietnam, definition of bank is specified in Law of Credit banker in 1997 whichwas supplemented and admended in 2004 as follows:

“Bank is one type of credit organizations that performs banking functions and other relevant business activities According to characteristics, aims of activities, banks include: Commercial bank, development bank, Investment bank, Co-operation bank, and other types of bank ”

In these above types of banks, Commercial bank are overwhelming in fields ofcapital scale, market share, and quantity

Pursuant to Decree No.49/2000/ ND-CP on 12th September 2000 issued byGovernment about organization and activity of commercial bank, Commercial bank istype of bank that perform all banking and other business activities, Commercial bank isbank that performs banking functioons and other business activities for sake of benefit,

in order to implement State’s economic targets In which, banking activities are: moneybusiness activities and banking sevices with regular content of recieving money andusing that amount of money for loan and payment services

Activities of commercial bank include 3 aspects: debt operation (capitalmobolization), loan operation (loaning, investment, business services) and agent

operation (payment, agent, consultant, information, document and precious objectskeeping, etc.) These 3 operations has closed relations, supports each other for muatualdevelopment in order to create reputation for a bank

1.1.1.2 Activities charateristics of commercial bank

Being a financial agent, commercial bank is an enterprise because it has its owncapital, trading activities, expenditure and activities for benifitcal purpose Commercialbank, however, is an enterprises with its own natures as follows:

Fisrt, activities of commercial bank are activities in doing business in money,

bullion, securities, etc and supplying banking services according to laws

 Business activities of commercial bank are based on the basis of “borrowing” for

“lending” through its own credit operations or in other word, the nature of commercial bankactivities is to purchase “right of monay use” for selling “right of money use” to others

 Commercial bank does not doing business in money by its own capital , but bymoney of depositors through its role as a credit agent for investors and hoarders

 In order to buy “right of money use” in specific period, commercial bank must payspecific amount of money for the capital owner (interest rate of fund rasing) and when

it sells right of money use, it also receives an amount of money which is called(interest rate of loan) Therefore, in activities of a commercial bank, interest rate is theprice of loan use right Similar to other kinds of business, capital mobilization and loanhave an important role, deciding success or failure of banks in particular and of aneconomy in general

Second, products of commercial bank are immaterial and invisible Service supply

is relatively dependent on customers Products of commercial bank will be generatedwhen customers diliver following documents to bank: Letter of account opening, thierauthorization from trading and credit contract in or der to fullfil any financial duty.Thus passive and independent characters of bank are significant

Third, relations between bank and customers (depositors and loaners) is in the

basis of mutual trust and benefit “To do business in banking is to do business of happiness ” In the relations between bank and customers, borrowing and lending activities are the transference of “rights of money use” in which bank just purchases or

sells “using value of money”, so when commitment of usage ends in terms of time,

money will return without changing in value and difference (if available) according tocommitment is interest rate Moreover, price of purchasing or selling – interest rate ofdeposit and loan- of money use right is very little in comparision with value of loan, sothat compensation for risk if happens is little, too Therefore, confidence in bankingactivities is significant and in the first prioirty Regarding confidence, we refer tofaithfulness and honesty that mean determination of loand paying of borrower as well

as capacity of them in thier carrier activities

Fourth, activities of commercial bank is risky ans sensitive to market, therefore,

commercial bank is subject to strict supervision and management of State through Statebanking system at provincal level Commercial banks need to perform measures toensure operating activities such as: to maintain specific capital for paying, to havecapacity in order to cope with market changes, to choose trustful customers, to balancecapital, to supervise operation, to diversify property for minimize risks; to use timeeconomical market or market of debt instrument selecting and cross-exhange of interestrate in order to minimize risks of interest rate and exchange rate, etc

1.1.2 Necessity of strategic management of commercial bank

1.1.2.1 Definition of commercial bank stategic management

a Definition of commercial bank strategy

There are many different definitions of business strategy in gernaral and bankbusiness strategy in particular In general, bank business strategy can be difined asfollows:

“Business strategy of a bank is a comprehensive and long-term activities program so

as to create long lap of a bank, a committment to implement basic and comprehensive targets of a bank and the allocation of important resources so as to achieve these target in activities environment in the future.”

* Term “Stategy” contains the following content:

First, strategy is a kind of long-term directive plan in different levels or in general

or in grass root level or in functional activity level

Second, strategy is not an unchanged long-term plan but a flexible and adjustable

one depending on conditions of business environment Thus, analysis and forcast of thebusiness environment is an important basis to plan strategy Furthermore, resources

factors should also be paid carefully attention to give out goo strategies that aresuitable with business environment and adjustable

Third, business strategies are not amorphous direction but they are aimed at

specific targets which reflect general results of business progress that a bank mayachive in the future

* Role of business strategy in activities of commercial bank

First: Defining long-term direction of activities for bank.

Second: Providing manager of banks a framework for intellectual guidance and

activities in short term and long term (prequisite for implementation of basic functions

in each level of management)

Third: Providing solid foundation for making decisions and plans in business.

b Definition of commercial bank strategic management

Ensuring the directive position of strategy for business activities of a bankeffectively and flexibly is an important task pf bank managers Tasks of bank managersinclude organization and supervision of strategy management

It can be said that contents of strategic management has clarified relations betweenbank and business environment It is the process of finding answers for such questions:Where is the bank in the market? Where should the bank be in the future? What aretargets, images of the bank in the future? How will bank managers allocate resources toachieve these targets? How to recognize and ensure rgar bank should achieve desiredposition and image in the future?

In general, definition of strategic management can be specified as follows:

“Business strategic management is the process of analyzing present environment, predicting business future environment, defining missions, targets and strategic program;implementing, supervising, evaluating strategic programs and target in reality”

Strategic management is not only a science but also an art of organizing,implementing and evaluating decisions relevant to function activities of bank on thebasis of combination of these activities (marketing, manpower, supply of bankingservice, finance, budget, development research, etc.) so as to allow banks to effectivelyfullfil their business targets

c Model of strategic management

Diagram 1.1: Model of strategic management procedures

1.1.2.2.Necessity of strategic management

What are the role of strategy and strategic management to success of a bank? It

is the question for all banks In order to understand role of strategic management, it isnecessary to understand strengths and weaknesses of strategic management inimplementation process

a Strengths

First, to assist executive managers and employee in banks to recognize aims and

direction of their business activities Therefore, strategic management will encourageboth managers and employees to achieve better achievements to improve benefits ofbanks

Second, strategic management is the basis to define future image of bank It means

that the forcast of bank position in comparision with other competitive banks

Third, strategic management helps banks actively find out and obtain potential

opportunities as well as avoid risks to enhance benefit chances and minimize risks inchanging business environment

Fourth, process of strategic management motivates innovation: if strategic

managers want to achieve high efficency in management, they must adjust or changeold methods of management by the more suitable ones

b Weaknesses

In addition, strategic management also has some weaknesses

Developi

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business environ ment trong

Streng

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weakn essyếu

Developi

ng outside

business evironm entenvir onment trong

PT Mtr

KD bên ngoài

Opport unity/

Challen ge

Revie wing target

Plannin

g strategy

Implem enting bussine

ss

Check

&

adjust strateg yy

Construc tion

Implement ation

Check and adjustment

Defining mission,

environment of

bank

First, in the process of forming model of strategic management, it is necessary to

invest effort and time This view is absolutely true for newly applied banks that arelack of necessary knowledge, skills and experiences, recruitment, training for modeloperation, conversion of intellectual and style of management

Second, strategic targets may become unchangable when they are in written form.

The overbelief in selected targets and strategies and not paying attention to changes inenvironment as well as not updated information may lead to failure in strategy

Third, mistakes in forcast of environement especially in long term is significant.

Changes may happen in any cases deleting changes or turn them into challengestherefore strategy will be out of direction

Fourth, great efforts in planning strategy without paying much attention to

direction of implementation leads to bad results in achieving targets This makesstrategic manager unconfidient in helpfulness of strategic management However, it ismistake of managers, not mistake of the management manager

Such weaknesses lead to doubts in value and helpfulness of strategic management

in banks However, these weaknesses can be overcome and achievements fromstrategic management are clear

Therefore, study and implementation of strategic management in banks are verynecessary and suitable with trend of development of modern management theory

1.2 Basic contents of strategic management

1.2.1 Defining missions and strategic business objectives

Analysis of present strategy and defining long term mission, objectives of banks arethe initial point in model of strategic management

1.2.1.1 Defining business missions

Business missions of a bank are its purposes in doing business, are reasons for its foundation, existence and development Business missions answer the questions: What

are purposes of a bank?

A sound business mission is firstly the direction of customer because customers aredetermining factor for the existence of banks Customers pays for services supplie bybanks

In practical view, business mission are in written form When making businessmission of a bank, the following factors should be paid attention and approciatelyselected:

Customer: Who are customers of a bank? Which group of customers will bank

select?

Service: What are services will bank offer? Will the bank offer oner service or a

group of services? What are main service of the bank? …

Market: Where will the bank do business? What is scale of business of a bank:

local or national or regional or global? In which, business mission must define details

of main market This depend much on scale of the bank

Technology: Is technology the interest of a bank? Is technology weakness or

strength of the bank?

Attention to development and profit opportunities: Is the bank involving in

development objectives and profitability with shareholder? This is confirmed inproperty growth, its own capital, ROE indicator to prove growth in scale and benefit ofshareholders and increase in value of the bank

Position in business industry: What is position of the bank in the market and its image in

the future? In general, only well-known banks specifies this point in business mission

Competitive advantages: Each bank has its own competitive advantages in the

market For example, competitive advanteges are history of the bank, quality ofservice, staff, diversity of services, fees, delivery system, etc However, the businessmission only specifies outstanding strength of the bank in comparision with other bank

Care for employee: What are attitude and attention of the bank to its employee?

Viewpoint of recruitment, development, encouragement and attraction of skilledemployees, working conditions, salary, benefit, appointment opportunities, workingatmosphere, co-operation and respect to each other

Human philosophy: What are belief, care for human being, sharing spirit of

interest, development of human

Attention to community image: Does the bank pay attention to community? Is the

bank a good example in business region? Does the bank contribute to improving livingstandard of people and economic growth in the area that it is doing business?

The business mission document can be made in various level: Department level toreflect general aims; branch level to show in detail about theose aims in relationshipwith community; in owned company level (selling and purchasing, sercurity, insurancecompanies) the business mission is characterized in service and market

1.2.1.2 Building business strategic objectives

Strategic objective is defined as achievement that the bank tries to obtain in process of pursuring its business missions in long period.

The first requirement in defining strategic objective is to ensure character of exactness It isnecessary to define list of important and significant objectives and arrange them basing onpriority order instead of making an out-of-order list of objectives

Requirements of exactness of objectives

Reality as well as theory have shown that the exact objectives are ones that meet asmuch as these following requirements about:

 Detail

An exact objective is the detailed one It will clarify content, time and place scope

of the objective The more detailed the objective is, the easier finding out direction andstrategic solution is In general, objectives at department level are general meanwhilethose at lower level are more detailed

 Measurability

A detailed ojective is measurable Thus objectives should be in form of relative orabsolute statistics Measurability is attached to standards for checking and evaluatingachievement

 Consistency

In defining strategic objectives, it is necessary to pay attention to consistencybecause the consistency of objectives is poor and the objectives themselves havecontrasting relations such as short-term profit is contrary to long-term growth, loosing

of credit may increase credit risk, etc

 Feasibility

The objectives should be feasible for implementation This point means that theobjective must reflect desire and comply with ability of the bank

Theoretically, objectives are classified in to 2 groups: Qualitative objectives are theones that reflect quality and characters (quality of resources, specialization level);Quantitive objectives are the one that reflect results that are measurable according tospecific unit (scale of property, market share, profit, etc.) after each period of doingbusiness

List of objectives in a popular business strategy of a bank includes:

 Objectives about financial profits presenting in objectives of: revenue on asset(ROA), revenue on equity capital (ROE), Profitable asset on total asset, etc

 Objectives about sales, scale of activities, presenting in objectives of: Mobilizingand lending sales, new branches number, number of auto telling machine (ATM);number of newly recruiting staff; number of increasing customer, etc

 Objectives about market domination presenting in objectives of: Share of the bank

in the market; Type of customers; Scope and place of business activities, etc

 Objectives about quality of business activities such as: Quality of banking service;quality of managers; quality of banking technology; quality of communication, etc

1.2.2 Analysis of outside business environment

Strategic management depends on good understanding of conditions in outside

environment that the bank is doing business at present and in the future Business

environment of a bank is scene in which the bank exists and performs activities and is affected by it Bank’s business environment can be described by factors that are

considered as driving force on all business activities of banks The outside businessenvironment is divided in to 2 levels: micro and marcro environment

1.2.2.1 Analysis of marcro environment

Macro environment includes general factors such as economy, politics, law, culture,poplulation, nature and international environment that has effect on all industries ofbusiness and financial institution However, the effect is not necessarily similar inmethodology, direction and level

In banking activities, factors such as economy, law and policy always have strongand direct effect However, it does not mean that we can ignore other factors in theenvironment Here below is analysis of each factor in macro environemnt:

a Economic environment

Economic factors must be paid particular attention in banking business becausethey have direct and strong effect on activities of the bank, for example, economiccycle, inflation rate, unemployment rate, GDP growth rate, prospect of economicindustries that use capital of bank, shifting structure among economic sectors, stablity

of price, interest, integrating opportunities into international market, for example,increase or decrease in market interest rate in disadvantegous way that can lead toserious decrease in net profit revenue and own capital of banks

b.Environment of politics-law and Government policies

These factors in banking business should be well analyzed because in nature, banksare finacial agent and their activities has an important effect on national finacialsystem Therefore, in comparision with other business industries, State strictlysupervises in terms of law and policy in many fields such as competition, bankruptcy,combination, bank organization structure Regulations of lending, deposit insurance,provision of credit risk, capital scale, etc are specified in Banking Law and guidanceabout law implementation

Stability level of political environment, internal and external affairs of the State.Economic, financial and money policies or Govenment policies of foreign exchange,tax, debt management of Govenment and other relevant bodies such as Central Bank,Ministry of Finance, ect should be also paid atttention in environmental analysis

c Environment of culture-society-population-nature

Social culture that includes many long-lasting and slowly changing issues playimportant role in strategic analysis such as consuming culture, habit of using bankingservice in daily life, economical custom, investment and behaviour in communicativeand business relations, desires in life, etc Business strategy is a failure if it is not incomformity with conditions of social culture, population, nature

Population character includes size of population, population structure according toage, sex, income, popuplation growth rate, potential of population shift amongeconomic sectors, between urban and rural area, etc

Natural character consists of natural resources, goods production capacity indifferent natural conditions such as lack of energy or watse of natural resources, etcmay lead to considerations in investment, lending or funding for projects avoidingdemage and waste of natural resources

d Environment of technology

Technology should be focused because in banking industry, service products areeasy to imitate, change quickly with need of customer Furthermore, technology is also

a requiring condition in creating differences in competition Therefore, it is necessary

to obtain new trend in technology so as not to be left behind and be disadvantegous incompetition

1.2.2.2 Analysis of micro environment:

a Analysis of present competitor

Present competitors are banking organizations that have been able to directlycompete with our bank, they use their own different statics to create advantages forcompeting, invading each other’s market or new market segment and so on Especially,the trend of loosening regulations created more and more severve competition amongbanks as well as other financial institutions such as insurance companies, financecompanies, finance leasing companies, pension fund ect Wherefore, information and

competition analysis need to pay attention to competitor’s several important aspectssuch as what they want to achieve, what they have been able to do, how their impact onthe market and what their strengthness and weakness are

b Analysis of potential competitos

Operation boundary among banks, finance institutions and non-financialinstitutions will be able to be cleared and appear mutual penetration in servicesprovided to customers in the future As a result, besides present competitors, it isnecessary to pay attention to potential ones in the future such as insurance companies,construciton associations, goods distributing wholesalers and retailes, hugecorporations intended taking part in banking industry like foundation of bank, financecompanies, finance leasing companies and so on dirrectly under mother company

of the bank, knowledge of finance, investment ability, scale and stability in income andbusiness, sensitiveness to service quality or interest rate and so on

d Subsitution in finance markets

In business banking, substitution rarely appears However, in some cases, it still exists andhas trend that customers invest in stock market, real estate ect instead of using traditionalbanking services such as depositing, borrowing and opening saving accounts

In conclusion, factors in external micro and macro environment are usuallycomplicated, various and multidirectional To analyse well them, it is necessary to owneffective information collection and analysis system updated and supplementedfrequently into database for assessing again seriously and carefully on term

In technological aspect, it should be established a summary of environmentalfactors according to each group of micro-impact, macro-impact and detailed impact instructure on the basis of importance level of line of business with studied bank and

characteristics of each impact according to the level from very good to very bad issimultaneously mentioned

1.2.2.3 Determination of opportunity and challenge

“Opportunity” mentions influence of economy, society, politics, technology,competition trend and events that can bring huge benefit to the bank

An opportunity can be simply understood as a situation in which goalimplementation and bank’s operation are conveniently influenced by someenvironmental factors for example: Stable economic growth in the bank’s marketsegments or the state’s tax reduction to banking industy

A chalenge involved in impacts of economic, social, politic and technologicalissues but it can bring about disadvantages and difficulties and threatens business ofthe bank

Chalenge can be also simply understood as a situation in which goalimplementation and bank’s operation are not conveniently influenced or are restrained

or disadvantaged by environmental factors such as riskes of being pushed out of targetmarket by competitors, decreasing quality of passenger service due to underdevelopedtechnology, losing capital due to out of risk control and so on

The important thing is that it shoudn’t consider all advantages and disadvantages asopportunities and challenges altogether It is necessary to apply appropriate method torestrict and arrange in which paying attention to the best opportunities and the worstrisk to find out the balance between strengthness and weakness and resources to get thebest result

Table 1.1: Major opportunities and challenges

with banking business operationOpportunities

- Interest, priority of the government to

the bank’s business operation

- Tax allowance

- Opportunites in jointing venture and

integrating with foreign banks

- Opportunites of expanding market to

other nations in the region and all over

the world

- Opportunites in technology transfer

- Increasing saving trend

- Appearance of new market segments

- Opportunities of trade relationship in

international integration or priorites

thank to bilateral relationship

1.2.3.International environmental analysis

Internal analysis or resource condition analysis is defined as the analysis ofinternal factors in bank that can be changed or mobilized or controlled to give intobusiness operation The resource definition includes many factors like: resources,materials, organizational struction, service policy, finance, marketing and so on

1.2.3.1 Financial resource analysis

Financial resources are shown in the following criteria: banking ownershipscale; the abiligy in capital mobilization compare with competitors; capital and assetstructure; growth rate indicators (profit growth rate, account outsourcing growth,mobilization growth rate); Profit and profit distribution policy; the balance betweencapital resources and capital resource using; capital expense compared to overallindustry and competitprs; liquidation ability; the ability in control expenses and reducethe capital expense; financial scale; profit percentage like gross profit total over totalasset ROA or ROE; the relationship with the owners, shareholders and investor;payment; liquidity and provison for financial loss and so on

1.2.3.2 Marketing-PR capacity analysis

The marketing and public relation capacity analyisis includes the followingcontents: the ability in researching market, customers and the marketing informationsystem; competitive position in the market; the ability to define clearer the targetedcustomer, the diversification level on service item and the development in new service;banking service quality; transaction network and service distribution; marketing andcommunication system; interest and other expenses and so on

1.2.3.3 Analysing resources

Human resources plays an important part, it supplies the input data and take themain role in the strategic management process

When analysing human resources, it is necessary to analyse: the quality of

managing regime and administrator; staff’s profession about communicationknowledge, responsibilitu, eagerness, professional ethnic; internal environment;personnel policies about recruitment, training, remaining and developing humanresources, personnel experience, the ways in encouraging personnel; the density intransfer personnel or quiting jo, the number of personnel relative to the scale andworking efficiencies

1.2.3.4 Analaysing organization skill

Analysing organization skill in bank includes the following contents: the current

organizational structure; prestige and position of bank; organizing the internalcommunication systeml system for control, investigating, the environment andorganizaion order; the strategic planning system, capacity; caring levels of superiorleaders; the abilities in using methods and technique in drafting decisions and so on

1.2.3.5 Materials

Analysing material factors including the following contents: the transactionheadquarter and transaction places; instruments serving customers, internal machine;payment system, computer system, banking technology knowledge

After analyising the human resources factor, the next important step is toestablish the data table and what is more important, gathering human resources factor

in group so that it is necessary to evaluate the major strengths and primaryweaknesses

1.2.3.6 Defining strenths and weaknesses

The deep analysis and general table for resource factors due to their importanceallow the bank to discover the strengths, weakness which will become the basis foranalysing strategic matrix Bank’s strengths and weaknesses can be:

Table 1.2: Commercial bank s strengths and weakness ’s strengths and weakness

Strengths:

Bank’s products are lower in price

compared with the competitor’s

The products are differentiated,

unique and famous

Service organization is efficient

Wide branch network

Bank can approach low cost capital

resources

Good relationship with customers

High technology

Eager and high skilled staff

The information system supporting

for the efficient banking activities

Not yet establishing the good relationship with customer

Old technology and have many problems;

The working environment does not encourage the new creativity and innovation

The information system has not been efficient and can supply enough information for staff

Other weaknesses

Strategic anaylsis is the way to choose the right strategy, catch up withstrategies in order to take advange of strengths and make goods for weaknesses

1.2.4 Establishing business strategy

The primary task in establishing the strategy: suggesting the potential businessplan, analysing and choosing plan to find out the optimal business strategy; giving outthe business strategic decision

1.2.4.1 Suggesting assignment

The suggestion for strategic plan always ask the reconsideration whether it is suitable

or right for the chosen target and then give out the plans to implement Both target and visionestablished before need to be changed, supplemented if the changes are needed via theenvironement and resource analysis Primary strategy groups are as following:

a Rising strategic group

a1 Inward rising strategy

* Centralized rising strategy

This strategy focus on innovation and opening much more services or currentmarket without changing any factors Some plans can be implemented

Firstly, penetratin market: finding market share to increase services or current

market via better marketing encouragement in order to increase the lending revenue;increasing the account number, increasing the customers in transactions and increasingtimes in transaction and so on

Secondly, developing market: bring current traditional service into new market

or new customer group

Thirdly, developing market: launching new services into current market by

innovationg or upgrading the previous with high quality service or sell more or crossproducts

* Open rising strategy

This is strategy focusing on giving more financial services basing on newmarket or penetrate in non-financial sector This strategy asks to open resource scale,knowledge in various industries There are two primary forms:

Firstly, the focused diversification strategy

Giving more new services in order to create new market mentioning aboutfinancial demand like services relating to new sectors like securities, arising financialservice and so on

Secondly, the block diversification strategy: developing into other industry notrelating to the financial demands like tourism, communication service and so on.However, the bank finds difficulties in developing in this direction because of thebanking regulations

a2 Outward rising strategy

Instead of growing by the internal strengths, the bank can catch up with thestrategy by the outward direction, there are three primary strategy:

Firstly, merging strategy: merging with another bank to create a stronger bank

in capital, managing experiences, market share, changes in organizational structureand other changes

Secondly, repurchasing strategy: a bank repurchases another bank by buying

shares and holding the control rights but still keep name, organizational structure orrepurchase financial company, security company to supplement new service item

Thirdly, joint-venture strategy: joint ventures happen when two or more banks

combine to implement a problem that an individual bank cannot do completely and has

no effect on the property rights of two parties

b Narrowed operation strategy group

This strategy is suitable when the bank needs to rearrange to increase theoperation efficiencies in the unstable and recession economu, some businesses havingloss or realizing the other attractive oppotunities This strategic group includesfollowing detailed strategy:

b1 Cut-cost strategy

This is a temporary strategy to rearrange the more efficient business operationwhen having any industry in low productivity while the expenses are too high, orhaving temporary difficulties relating the business environment condition

b2 Strategy in cut out some business lines

This strategy happens in the ways to transfer, sell or close some business placesdirectly under the bank with the aim to withdraw investment capital from businesslines that cannot bring profit or collect capital into some activities or sectors which arehaving high profit and potential development

b3 Harvest strategy

Havesting is to fine the way to maximize the monetary for the foreseenpurposes in regardless of the consequences in the long term, this strategys is applied tothe bank or member banks who are in the side of bankruptcy by concentrating onwithdrawing the debts, stopping mobilize capital and lending, selling assets of bankand so on

b4 Dissolution strategy

This is the last strategy that is forcable, it stops all the business operation, repaymoney for lenders and debts in regardless of the complete failure

Notice: in reality, many banks apply the mixed strategy, it means to apply many

strategic strategies and strategic types in order to find the balances and set-off Forexample, in Strategy in cut out some business lines, closing business places in order tofocus on the high profitable market and so on

1.2.4.2 Strategic analysis

The choices in strategic ways are often affected seriously by the objectivefactors Although we can deny the experienced roles of the strategy maker, it requiresthe analysing process to reduce objective factors basing on the information source andapplying the right analysing analysing and scientific technique

This step is very complexed and requires high professional characteristics Thetheoretical basis for implementing this strategy is the theory on investment portfolioand applying it into the strategic matric analysing technique There are some popularmatrix in strategic analysis as following: BOSTON’ consulting group matrix; G.Estrategic network strategy of General Electric Company; matrix for internal andexternal factors (I.E); Grand strategy Matrix; SWOT and so on

In the topic scope, the thesis will concentrate on researching simple matrix buthaving many values and efficiencies in analysing strategy is SWOT mathix

The use of this matrix in strategic analysis is carried out as following:

List of main oppotunities from business environment

List of main threats from business environment

List of primary strengths from banking sources

List of primary weaknesses from banking sources

Combining couple in matrix in order to create 4 strategic group: SO, WO, ST,

WR Besides, it is possible to combine in more complicated way to choose the mixstractegy way

SWOT Matrix

SWOT matrix

O: OppotunitiesList of main oppotunities

T: threatsList of main threats

S: strengths

List of primary strengths

S-O: Strength combination strategy in taking advantages of oppotunities

S-T: Strength combination strategy to restrict threats

W: List of primary

weaknesses

W-O: combination strategy to overcome weaknesses and take advantages of oppotunitiesC

W-T: combination strategy for weaknesses and threats in order to overcome

or avoid

1.2.4.3 Choosing strategy

The strategic analysis shows that optimal business strategis can be shown viamatrix However, bank does not go along with all but giving out the final decision tochoose one or some strategic business to catch up with

The consideration in order to ensure optimum requires to consider beforemaking any decisions, basing on:

Bank’s competitive advantage compared with competitors

Bank’s tasks and targets

Management board’s view

Political environment in bank

Administration board’s roles

1.2.5 Implementing business strategy

1.2.5.1 Establishing annual target

* Definition: Annual targets are the result that the bank tries to achive in eachyear and achive the long term targets

* Characteristics

Firstly: annual targets are measured, directed and challenging, suitabl reality,

and high feasibility

Secondly: annual targets are divided in section target, and then take it as the

basis for members to carry out

Thirdly: annual tartgets are defined by the criteria that can bring profit, thegrowth rate createria and market share for each business sector in geographical regionand customer group

* Meaning: Is the basis to distribute the resource in the process of strategyimplementation; is the basis to evaluate the level in completing administrator’s jobs; isthe important technique to control the strategic implementation in order to achive thelong term target; is the preferential basis for organizations and departments

* Purposes: Defining annual targets in order to: instructing and directingmember’s operations; defining standards in order to evaluate the performanceefficiencies; supply basis for implementation

1.2.5.2 Building polices

* Definition: Policy is the regulating regulation, procedure methos, regulations, formsand administrative works that are established to support and encourage the work due tothe positioned targets

* Roles: Is the equipment to implement the strategy; is the basis for control strategicmanagement

Building and completing policies in order to supply the general regulation ininstruction the ways in thinking and acting for the administration level in the process

of implementing the assignments in each level, each unit or operation aspects

Policies also contribute important role in making target more specific andunderstandable The dominant policies in the bank in order to support the strategicimplementation including: marketing policy, credit policy, investment policy, capitalmobilization policy, human resources policy, financial policy, technology policy and

so on

1.2.5.3 Construction of operation programs

Operation program is a complex of targets, policies, procedures, principles and asigned tasks, steps of operation, necessary resources and other elements to successfully execute tasks and gain proposed targets

It is easy to understand that operation program is concretization of specificcontents, concrete used resources measures and order of operation steps It answers thequestion: What is necessary to do? Operation period includes: Starting and finishingtime of work, people to execute and to be responsible for work execution, resourecesmobilized to execute work, result of work

In many banks, programs are devided into main following types: General programs;main programs, subprograms

1.2.5.4 Resource distribution

Important resources of a bank include: Financial resource, material, human andtechnological resources Each resource has its own limit thus resource distribution mustobey principle of priority order according to annual targets and built policies andoperation programs

Content of resource distribution includes: Resource evaluation and adjustment,ensuring and distribution

1.2.5.5 Deployment of policy execution

Execution organization of long-term targets is based on achievement of annualtargets via execution of business policies, built operation programs and reasonableresource distribution

1.2.6 Examination and adjustment of business policy

The last step of policy management process is policy examination or naturallyprocess of operation result evaluation process of bank in execution of proposed policy

1.2.6.1 Purpose of policy examination amd evaluation

First, enhancing execution of targets, clearly orienting performance prospect of

each member of operation machine, directing personnel in struggling and striving toachieve high result with purpose of deserving rewarding

Second, defining errors in target, measurement and method and execution result of

policy content in comparison with primary expectation to define present status

Third, Defining direction and level of errors

Fourth, definig reasons of these errors.

Fifth, providing measurements to adjust operation or policy,

1.2.6.2 Procedure of policy examination

a Defining detail and standard of examination

examination details are all works relating to stages of previous policy management,including: Tasks, target, business environmental analysis, proposal, selection andexecution of policy

Examination standards are also clearly defined Without examination standards,examintion will be meaningless Standards to examine are targets, lines and previouslyselected policies

b Achieved result measurement

Measurement of real achievement of bank via execution of specific policy is acomplicated work although framework and evaluation technique are also included inpolicy content previously defined

c Conparison between achieved result and proposed standard

Difficulty in comparison is difference of used measurement methods, inconsistency

in system of measurement standard and evaluation, and exsisting of elements not beable to be directly mesured by normal methods There are two basic methods:

First, qualitative comparison: For qualitative target, achieved result is evaluated by

comparison between real result and proposed target

Second, quantitative measurement: Targets of common policy are clearly

determined , thus examination of execution achievement of these targets is also based

on concrete measurement mostly according to percentage of plan execution of eachterm (month, quarter, year 5 years)

d Defining of error reason

In examination, it is very important to clearly define error reasons both in objectiveand subjective faces Error may start from policy due to inaccuracy in forcasting ofenvironmental status, errors in policy building method, unappropriate executionprocess…and be considered as base to adjust policy

1.2.6.3 Procedure of policy adjustment

This is the diagram showing procedure of policy adjustment

Diagram 1.2: procedure of policy adjustment

1.3 Experience in policy management in some domestic and international

trading banks

For a young bank like SHB, experiences in policy management in some domesticand international trading banks are valuable lessons to apply flexibly to specificsondition in context of common environment of present and futural economy.Hereafter, we will numerate some experiences in policy management in two domestictrading banks and one international one

1.3.1 Experience in strategic management in some domestic and international trading banks

1.3.1.1 Experience in strategic management in some domestic and trading banks

The thesis statement has chosen two domestic trading banks to reasearchexperiences in policy management One is a long-standing bank with depth ofconstruction and development history- Vietnam commercial bank; and the another is anewly-built bank with quite sufficient and methodical system of policy management –Lien Viet Trading Joint-Stock Bank

a

Experiences in strategic management in Vietnam Commercial Bank

The Bank always considered as leading one in banking industry in Vietnam isVietnam commercial bank (VCB) With depth of cosntruction and developmementhistory, VCB pursues development policy of mixed growth, including: Concentricgrowth and diversification, buyback and joint-venture policy

Executing policy adjusment

Reevaluatin

g policy adjustment

Pursueing development policy of mixed growth with advantage of operation andscale, force of personnel having high knowledge and awareness of business operation,VCB always assesses information technology at its true worth and considersmodernization of technology as one of basic conditions to direct to internationalstandard of a modern bank VCB, on the base of modern technology, has brought out

to the market new products such as card service and online banking service…highlyevaluated by customers, opponents and management authorities Investment in bankingtechnological developement is a true and timely policy of VCB; constructingmarketing policy not noisy but having deep strength, close finacial and credit policiesbut not losing flexibility in changing context of business environment With humanresource policy absorbing talents for many important roles, operation organizationmodal of VCB shows closeness, tidiness and effectiveness in operation of a versatileand modern bank

In order to enhance credit quality and management of credit risk, VCB has a creditmarking and grading system managing system information Basing on this system, thebank will consider and evaluate customer then built credit limits for each customer, toboth ensure safety and most effectively protect interest of customer

Beside automatic marking and grading system, VCB also has management system

of relationship and interest evaluation for customer Basing on that, the bank has beenusing it to analyse market, segment customer and construct reasonable policies for eachits target market and potential group of customers Policy system of VCB is quitesufficient and flexible

Thus, VCB has a quite close and flexible system of policy management basing onmodern information technologicl foundation, reasonably balancing resources tobecome a leading bank providing many new service products for the market,maintaining number-one role in banking industry in Vietnam

b Lien Viet Joint Stock Company

Upon mentioning Lien Viet Joint Stock Company (LienViet Bank), few people arenot surprised about strong growth in its profit

Right before official start in operation, LienViet Bank organized Logo design andselected its message as effective measure of advertisement

With newcomers entering the market, capital, technology and experience ofmanagers are essential weapons to win in competition LienViet Bank was establishedwith charter bank of 3,300 billion VND in 28 March 2008 At that time, this capitalwas regarded as the biggest among joint-stock banks, which is favorable condition forLienViet Bank to impletion further business strategy.

Unlike other young banks (including SHB) those select inexpensive, low-qualityCore Banking system, Lien Viet Bank developed a systematic technologicalinvestment strategy aiming at the objective of becoming the No 1 bank in Vietnam in

term of modernization LienViet Bank bought Core Banking Flexcube from the

world’s top financial service IT solution supplier – I-Flex Solutions

If anyone read LienViet Bank General Culture, he shall learn vision, determinationand confidence of the bank leaders In spite of shortness, it fully indicates mission, keyvalues, prospect, objective and behavior principle of LienViet Bank’s members

Although Lien Viet Bank is newly established, it has developed a relativelyadequate and flexible policy system including credit policy, financial polity, humanpower policy, Marketing, research and development policy With each policy, thebank specify clear reward and fine system to ensure discipline and motives for allemployees

With such development rate, LienViet Bank is expected to achieve considerableprogresses compared with medium-grade joint stock company and rise with seinerbanks in joint stock bank sector including ACB, Sai Gon – Thuong Tin Bank in thenear feature

Extract from mission, vision announcement of some joint-stock bank: a-Maritime Joint-stock Bank (MSB):

Mission:

* Create effective relationship with financial group in main industries such asmaritime, telecommunication, aviation, investment, insurance

* Sustainable development, trustworthy for small and medium business customers

* Provide high quality banking services for all customers

* Build effective partnership with international and domestic financial institutions

Core value:

* Focus on satisfying customer by quality service

* All business operations have effective result

* Learning and creating to reach perfectness

* Cooperation and truth is the motivation to succeed.

b-VIB BANK

-Vision and mission of VIB

To customer: Outstanding in supply of creative solution to make maximum

fulfillment of customers’ demand

To employee: Establish effective culture, business spirit and efficient working

environment

To shareholder: Bring out attractive and sustainable values for shareholders.

To the community: Make active contribution to community development.

c-Techcombank

Mission

Techcombank is a multi-functional Joint Stock bank of Vietnam, providing individualsand companies with high competitive, various and uniformed financing services andproducts in order to meet all demands of customers, creating rising for shareholders,developing interests for Techcombank staffs and contributing to the development ofcommunity

Vision 2010

Techcombank is making endless efforts to be ranked as the top bank of Viet Nam in trust, quality and effectiveness

d- Sai Gon – Hanoi Joint Stock Bank (SHB)

With existing foundation and strength, SHB identifies its strategy to strive to the top, modern retail bank in Vietnam and a strong financial corporation by 2015.

Target customers

 Small and medium enterprises: 10,000 customers by 2010

 Consumption customers and households: 1,500,000 customers by 2010

 Local and international big customers: 100 customers by 2010

Target market

 Big cities: Hanoi, HCM, Da Nang, Can Tho and Hai Phong

 Provinces, cities with high growth rate including: Quang Ninh, Vinh, Hue, Nha Trang, Vung Tau, Lang Son, Lao Cai

 Industrial parks in big cities including Vinh Phuc, Hung Yen, Bac Ninh, Chu Lai, Binh Duong, Quy Nhon, Dong Nai

1.3.1.2 Experience in strategic administration in foreign bank

Due to limit in time, the thesis only presents administration experience in a foreignbank as HSBC

HSBC is one of financial service organization and the world’s biggest bank withbranches in Europe, Pacific Asia, America, Middle East and Africa HSBC positions itstrademark through massage “Global bank understands locality” HSBC achieves

various defeats in Vietnam and on 01 January 2009, HSBC becomes the first foreign bank to officially operate subordinate bank in Vietnam.

Global development is one of the key business strategies of HSBC Sustainabledevelopment with HSBC includes responsibility, sensitivity in long-term businessmanagement method in which benefits in human beings, education, society,environment are placed first.

With the message “global bank, local understanding”, how has HSBC operatedquality administration operation?

In term of strategy and quality administration of HSBC, HSBC develops businessstrategies those are renewed, adjusted timely in the event of changes in economy Thelatest adjustment strategy is announced in 23 November 2007 through presentation ofHSBC leaders in front of the public, employees and analysis experts from financialorganizations, banks, big corporation of the world in the form of open workshop, inwhich questions and answers are raised to highlight as well as protect feasibility oftheir business strategy Information in strategies, policies, action plans, serviceproducts, price, fees, business results, advertisement information cover all varied,open, updated, accessible operation of the bank in order to serve various subjectsincluding clients, investors, shareholders, employees of the bank This proves respect

to above-mentioned partners and confirms style of strategic administration based oneffective information foundation of HSBC

As a global bank, HSBC is characterized by multi-colored culture, because eachcountry, territory in which HSBC operates contains specific culture and speciallyrespected by the bank All the statement, film clips, advertisement images of HSBCshow human respect, especially respect of customers, people in the world and highlyappreciate success in the world

Research in strategies and strategy administration of HSBC does not aim at learningtheir strategies because with Vietnamese Commercial Bank, it is a big expect as well astakes 10 years or more to achieve global success like HSBC because we do not haveadequate material and human condition However, we can learn experience in strategyadministration that is the optimum information transparency and openness, respect inhuman beings, community, society, environments rarely achieved by any banks inthe world Strategic information openness is capable of expressing status in the marketand absolute trust for concerned subjects

1.3.2 Experience lesson about strategy administration

By study of strategy management experience of domestic and foreign banks, it is possible

to dray in some experience in commercial bank strategy management as follows:

Firstly: The bank management board is required to be aware of significance of

strategy administration and pay proper attention to this process It is recommended toinvest in organization, development of administration of strategy in systematic mannerright from the earl days of establishment or mode transfer Since the first right steps arebasic premises for further progress in sustainable development of the bank (clearexample in LienVietBank.)

Secondly: To successfully pursue strategy, the bank must develop modern

technology and effective communication system, since they are important factorssupporting strategy administration in all steps of this process from environmentalinformation analysis, market segment, and selection of target customers, dissemination,and strategy announcement to customers, employees and concerned agencies Especially, if it is possible to develop customer feedback system, strategyadministration must be supported from the bank and provided with feedback, support

of customer, functional authorities to make proper adjustment to ensure successfulstrategies

Thirdly: A successful business strategy is that with information transparency,

openness in term of strategies, respect of people, community, culture, society,environment (Lesson learnt from HSBC)

Fourthly: Promote strength; make use of opportunities when obtaining necessary

resources to become the leader in business activity in a sector with various risks ascurrency business that requires investment in time, material and human power.However, advantage of a pioneer in new product and service supply in the market shallresult in big success for the bank (Lessons learnt from VCB)

Fifthly: Strategies aims at diversifying product, service categories, reducing income

density from risky traditional products such as credit, which is a wise strategy

Conclusion of Chapter 1:

Above is all general explanation and lessons learnt about strategy administration in commercial banks It is theoretical foundation for Vietnamese commercial banks in general and SHB in particular to make flexible application in strategy administration depending on their

actual condition To make good application of above issues for strategy administration, this thesis shall study operation status in SHB, good points and weakness as well as reasons in following chapter.

CHAPTER 2 CURRENT SISTUATION OF STRATEGIC MANAGEMENT

AT SAIGON – HANOI COMMERCIAL JOINT STOCK BANK

2.1 Overview about Saigon – Hanoi Commercial Joint Stock Bank

2.1.1 Establishment and Development of the bank

13/11/1993: The Rural Commercial Joint Stock Bank Nhon Ai (precursor of Saigon

– Hanoi Commercial Joint Stock Bank - SHB) was established under license of0041/NH/GP on November 13, 1993 issued by the Governor of State Bank of Vietnamand officially went into operation on December 12, 1993 with the initial registeredcharter capital of 400 million

20/01/2006: Governor of State Bank of Vietnam signed Decision No VN

93/QD-NHNN of consent for conversion SHB model from rural commercial banks into urbancommercial bank, thereby creating favorable conditions for SHB to improve itsfinancial capacity, expand scope of business, to become more competitive developing,marking a new stage of development of the SHB The bank aims to become one of theleading retail commercial banks in Vietnam, providing diversified products andservices to the market, which is sustainable and safe to meet the requirements ofinternational economic integration

After 15 years of operation, the current charter capital of SHB reaches 2,000 billionVND (as of September 30, 2009), business networks are present in most major citiesacross the country with many new products and services utilities SHB's customers arediversified and from different economic sectors and different business lines Businessactivities of SHB in the past years stay safe in terms of capital ratio, high prudentcredit policies, and reasonable procedures

It is expected that by the end of 2009, SHB will increase its charter capital to VND3,500 billion and continues to increase its charter capital in the coming years to meetthe increasingly high business needs for expansion and development

Specific business development plans in accordance with action plan, the roadmap

of integration of Vietnamese bank with potential financial strength of potentialshareholders, the determination of the leaders and all to bank staff will be the positivefactors in the development stage and will help SHB develop in a sustainable way

during its integration process.

2.1.2 Organizational structure of Saigon-Hanoi Commercial Joint Stock Bank

The organizational structure of Saigon-Hanoi Commercial Joint Stock Bank isdepicted in the following diagram:

Diagram 2.1: Organizational structure of SHB

2.1.3 Main activities of Saigon-Hanoi Commercial Joint Stock Bank

2.1.3.1 Operation and Management

In terms of operation and management, with the greater autonomy in managementoperations and management of the bank, Board of Directors actively arrange forappropriate personnel and make timely decision related to debt recovery and businessdevelopment, as well as actively in the development and implementation ofmechanisms to encourage employees Thus, business activities of SHB have achievedencouraging results which are presented below

2.1.3.2 Risk management activities

With the motto to control and prevent risks to actively prevent rather than solvingthe risks, SHB has a strict and scientific system of risk management from higher levels

to individual staff Risk management structure includes Control Board, ALCO cil, the Council on Credit, Credit Management Office, Internal control Department,

Coun-Law department

Administration Department

Plan department

International payment

Resource of fun

& trading currency

Foreign & Public relation Department Payment centre

Service card Department

Customer enterprise Department Credit control

Board of Audit internal control

BRANCHS AND DEALING ROOM

Board of General DirectorCommittees

Risk management Department In addition, the risk management activities also get the

assistance from relevant departments such as Planning Department, Accounting

De-partment of Finance and Computing Center which are responsible for reporting when

detecting signs of risk

2.1.3.3 Capital Mobilization activities

Capital mobilization has gain great attention of SHB with the aim of ensuring loans, safe

liquidity and increasing assets, enhancing the position of the SHB in the banking system

Table 2.1 : Capital mobilization of SHB during 2006-2008

Item

Balance (Billions đong)

Density (Billions Balance

Source: Capital source and foreign currency business Department – SHB

By the end of 2008, Mobilization from the market I of SHB reached 9508 billion,

an increase of 19% compared to the end of 2007, increasing over 15,000 times

compared to the end of 2006 Balance of Mobilization from the market II by the end of

2008 is VND 2,235 billion a decrease of 68.48% compared to 2007 However, the total

mobilized capital is sufficient to meet growth and demand for capital liquidity, lending

and investment Capital structure also changes the direction of increasing the

proportion of non-term deposits, so the cost of interest reduced significantly, thereby to

get profit from the difference in average mobilized interest rates and average credit

interest and investment rate

Non-period saving accounts

Source: Capital source and foreign currency business Department – SHB

Table 2.2: Structure of credit loan during 2006-2008 of SHB

Unit: billion VND