Enhancing residential capital mobilization at joint stock commercial bank for investment and development of vietnam transaction office 1

ii 1.2.5 Experience in enhancing residential capital mobilization at commercial banks and lessons for BIDV – So GiaoSo Giao Dich 1 Dich 1 Branch .... 61 3.2 Solutions to enhance resident

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

ĐỖ NGỌC DŨNG

ENHANCING RESIDENTIAL CAPITAL MOBILIZATION AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - TRANSACTION OFFICE 1

TĂNG CƯỜNG HUY ĐỘNG VỐN DÂN CƯ TẠI NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM - CHI NHÁNH SỞ GIAO DỊCH 1

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2018

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

ĐỖ NGỌC DŨNG

ENHANCING RESIDENTIAL CAPITAL MOBILIZATION AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM - TRANSACTION OFFICE 1

TĂNG CƯỜNG HUY ĐỘNG VỐN DÂN CƯ TẠI NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM - CHI NHÁNH SỞ GIAO DỊCH 1

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS PHẠM THỊ THANH HÒA

Hà Nội - 2018

DECLARATION

The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article

The other’s research result and documentation (extraction, table, figure, formula,and other document) used in the thesis are cited properly and the permission (if required) is given

The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration

ACKNOWLEDGEMENT

I would like to express my deep gratitude to the teachers of the Hanoi school of Business and Management, Vietnam National University, especially the teachers who imparted to me a lot of knowledge and helped me Carry out this essay

I would like to express sincere gratitude to Dr Pham Thi Thanh Hoa has spent a lot of time, dedicated guidance, only told me during the course

of the topic

I sincerely thank family, friends and colleagues for encouraging and supporting me in the process of study and research

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TABLE OF CONTENTS

TABLE OF CONTENTS i

LIST OF TABLES iv

INTRODUCTION 1

1 Rationale 1

2 Research overview 2

3 Research objectives 4

3.1 Overall objective 4

3.2 Specific objectives 5

4 Research questions 5

5 Research object and research scope 5

6 Research methods 5

7 Organization of the thesis 6

CHAPTER 1: THEORETICAL FaRAMEWORK ON ENHANCING RESIDENTIAL CAPITAL MOBILIZATION AT COMMERCIAL BANKS 7

1.1 Overview of residential capital mobilization activities of commercial banks 7

1.1.1 Basic concepts 7

1.1.2 Forms of mobilizing residential capital of commercial banks 8

1.1.3 Characteristics of residential capital 9

1.1.4 Role of residential capital 10

1.2 Enhancing residential capital mobilization at commercial banks 11

1.2.1 Concept 11

1.2.2 Contents of enhancing residential capital mobilization at commercial banks 11 1.2.3 Factors affecting residential capital mobilization at commercial banks 16

1.2.4 Criteria for assessing the effectiveness of residential capital mobilization at commercial banks 20

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1.2.5 Experience in enhancing residential capital mobilization at commercial banks

and lessons for BIDV – So GiaoSo Giao Dich 1 Dich 1 Branch 23

CHAPTER 2: REALITY OF ENHANCING RESIDENTIAL CAPITAL MOBILIZATION AT BIDV - SO GIAO DICH 1 26

2.1 Introduction of BIDV - So Giao Dich 1 26

2.1.1 History of foundation and development 26

2.1.2 Functions and tasks 28

2.1.3 Organizational structure 29

2.1.4 Business results 31

2.2 Reality of enhancing residential capital mobilization at BIDV - So Giao Dich 134 2.2.1 Establishing targets for residential capital mobilization 34

2.2.2 Building policies to enhance residential capital mobilization 35

2.2.3 Conducting activities to enhance residential capital mobilization 39

2.2.4 Evaluating the efficiency of residential capital mobilization activities 46

2.3 Evaluation of factors affecting residential capital mobilization at BIDV - So Giao Dich 1 50

2.3.1 Subjective factors 50

2.3.2 Objective factors 55

2.4 General evaluation 57

2.4.1 Achievements 57

2.4.2 Limitations and causes 58

CHAPTER 3: SOLUTIONS TO ENHANCE RESIDENTIAL CAPITAL MOBILIZATION AT BIDV - SO GIAO DICH 1 61

3.1 Development orientations and objectives of BIDV - So Giao Dich 1 61

3.1.1 General development orientations 61

3.1.2 Development orientation for enhancing residential capital mobilization 61

3.2 Solutions to enhance residential capital mobilization at BIDV - So Giao Dich 163 3.2.1 Continue to promote marketing and searching for customers 63

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3.2.2 Enhance training to improve the quality of the bank’s staff 64

3.2.3 Innovate and change banking technology 65

3.2.4 Increase propaganda to change people’s habit of keeping money at home 66

3.2.5 Expand the network of transaction offices 66

3.3 Recommendations 67

3.3.1 Recommendations to the State 67

3.3.2 Recommendations to the State Bank 68

3.3.3 Recommendations to BIDV 68

CONCLUSION 70

REFERENCES 71

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LIST OF TABLES

Table 2.1: Business results of BIDV - So Giao Dich 1 32Table 2.2: Targets for residential capital mobilization of BIDV - So Giao Dich 1 34Table 2.3: Individual customer policy of BIDV 35Table 2.4: Diversification and innovation of residential capital mobilization products at BIDV – So Giao Dich 1 37Table 2.5: Interest rates for capital mobilization of BIDV compared to other commercial banks in Hanoi on 31 December, 2016 39Table 2.6: Expenses for the propaganda and promotion of residential capital mobilization products 41Table 2.7: Promotion activities for residential customers using residential capital mobilization products 42Table 2.8: Amounts of promotion gifts in the program "Golden Gift of October" at BIDV – So Giao Dich 1 44Table 2.9: Contents of the training of residential capital mobilization staff 45Table 2.10: Structure of residential capital mobilization at BIDV – So Giao Dich 1 46Table 2.11: Structure of types of residential capital at BIDV – So Giao Dich 1 47Table 2.12: Market share of residential capital mobilization of some commercial banks

in Hanoi 48Table 2.13: Expenses for residential capital mobilization at BIDV – So Giao Dich 1 50Table 2.14: Marketing activities to enhance residential capital mobilization at BIDV –

So Giao Dich 1 51Table 2.15: Reality of human resources in capital mobilization at BIDV – So Giao Dich 1 53

of accelerating industrialization and modernization of the country - helping the country through underdevelopment and improving the quality of life In order to successfully execute that strategy, the demand for capitals is very huge and urgent Therefore, current banks are constantly improving their service quality, expanding their operation network, and modernizing their systems in order to attract more capitals In which, the capital mobilized from residents is being paid special attention by commercial banks since the potential capital in the population is great but not yet exploited and people have not been aware of the profitability of deposits

in banks, together with many other objective reasons

As one of the largest commercial banks in Vietnam, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) in general and So Giao Dich 1 in particular are actively implementing many measures to mobilize the maximum capital from residents in order to finance the projects of socio-economic investment and development, serving effectively for the industrialization and modernization of the country Accordingly, the branch has carried out many advertising activities such as advertising on radio channels, social networks, hanging posters and banners, etc Some promotional programs deployed branches

by the bank such as "Getting Gold with BIDV", "Double Lucks – Multiple Happiness", "Soon Deposit - Big Presents" have been enthusiastically supported by customers in the area However, due to the general difficulties of the economy and the fierce competition among banks in the area, the mobilization of capitals from

Based on the above reality, in order to help the Board of Directors of Vietnam Joint Stock Commercial Bank for Investment and Development clearly understand the successes as well as the shortcomings in the mobilization of residential capital at the branch in the past few years and have a basis for carrying out the residential capital

mobilization, the author selected the topic "Enhancing residential capital mobilization at Joint Stock Commercial Bank for Investment and Development of Vietnam–So Giao dich 1 Branch" as his thesis topic

2 Research overview

A bank is an organization that plays an important role in the economy Traditional banking services includelending, foreign exchange trading, trade financing, providing transaction accounts, and so on With the traditional model, offering loans is considered a highly profitable activity, so banks have proposed many solutions to mobilize the sources of loan capital In addition to the capital from foreign credit institutions, one of the important sources of capital is the capital mobilized from residents in domestic market However, how to mobilize residential capitals effectively

is the question that banks need to consider so that they can find out solutions to expand and enhance the efficiency of residential capital mobilization Therefore, this topic has been concerned by many scholars and managers

A scientific research was conducted by Dinh Thuy Kim Hoang (2011) entitled

"Solutions to enhance mobilization of savings deposits at Eximbank - Dong Nai Branch" In the study, the author administered survey questionnaires to 100 customers

in Dong Nai Province and then used SPSS software to process the data With a combination of many research methods including statistics, investigation, comparison,

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analysis, synthesis, and so on, Dinh Thuy Kim Hoang triggered the reality of capital mobilization in the form of savings deposits at Eximbank and proposed feasible solutions to expand and enhance the efficiency of capital mobilization at Eximbank The study was carried out in the period of time when the economy was facing high inflation, so the research results made important contributionin helping the management of Eximbank deploy solutions to promote the efficiency of residential capital mobilization However, due to the small sample size and the large scope of the research, the results of the survey were not representative

Nguyen Ngoc Phuong (2008) carried out a study on "Some solutions to enhance residential capital mobilization at Vietcombank - Ba Dinh branch" With a combination of various methods such as dialectical materialism methods, statistics, comparison, etc., the author systematized and clarified the basis of the theoretical framework on capital mobilization and confirmed the role of capital mobilization in business operations of the bank At the same time, the reality of mobilizing capitals

at Vietcombank - Ba Dinh branch (mainly in VND) was also evaluated From that, the research provided solutions and recommendations to improve the efficiency of capital mobilization at the branch The research was of high practical value; however, the contents of the research mainly focused on capital mobilization but did not present the contents as well as the factors affecting the mobilization of residential capitals of Vietcombank

Another research conducted by Nguyen Hoa Nhan (2013) was about

"Extending residential capital mobilization at BIDV - Nam Ha Noi Branch" The study synthesized basic theoretical issues on capitals, especially the mobilization of residential capitals of commercial banks Based on the criteria reflecting the enhancement of residential capital mobilization, the author conducted an analysis and assessment of the reality of residential capital mobilization at BIDV – Nam Ha Noi Branch and looked for solutions to expand the residential capital mobilization

at BIDV – Nam Ha Noi branch The study made feasible recommendations that were in line with the business situation of the branch, helping the branch promote the efficiency of capital mobilization, especially from residents However, the study

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had not mentioned the factors affecting the expansion and increase of residential capital mobilization of commercial banks in general, and of BIDV – Nam Ha Noi Branch in particular

Omankhalen (2015) conducted a study entitled "The Role of Banks in Capital Formation and Economic Growth: The Case of Nigeria." In this study, the author mainly examined the relationship between bank mobilization and internal economic growth in Nigeria At the same time, the author also analyzed the reality of capital mobilization at commercial banks in Nigeria and proposed solutions to improve the efficiency of this work The study supplemented the literature demonstrating the positive relationship between bank capital mobilization and economic growth However, the study just generally mentioned capital mobilization without further analyzing and evaluating the sources of capitals mobilized from residents

The research of Chris Humephery Rumenda, Joash Simiyu Wakoli, and Winnie Wanjiru Nyantika (2012) was about the "Factors influencing savings mobilization by commercial banks: A case study of commercial banks in Nakuru" The study focused on assessing the mobilization of savings from residents of commercial banks in Nakuru, and particularly studied the factors affecting the mobilization of savings deposits at the banks

By testing the impact of each factor, the author made suggestions and recommendations

to help commercial banks in Nakuru improve the efficiency of mobilizing savings deposits from residential areas

It can be realized that each of the studies above had a particular approach that suited the research objectives of each topic, but there had been no comprehensive research on the enhancement of capitalmobilization from residential areas Therefore, in order to complete and fill the gap of previous studies, the author carried out the topic of enhancing residential capital mobilization at commercial banks and selected BIDV - So Giao Dich 1 as a case study

3 Research objectives

3.1 Overall objective

The research aims at studying and evaluating the strengths and weaknesses

of the mobilization of residential capital in the last period, from which

Research scope

- In terms of space: The study was conducted at BIDV - So Giao Dich 1

- In terms of time: The research data were collected in the stage of

2014-2016 at BIDV – So Giao Dich 1

6 Research methods

Research using the following methods:

+ Comprehensive Analytical Methods: Based on the collected data and materials, the author will conduct analytical and critical review and selection of critical material and will undertake thesis analysis The author used this method to analyze the efficiency of

business results, Targets for residential capital mobilization of BIDV - So Giao Dich 1, Interest rates for capital mobilization of BIDV compared to other

So Giao Dich 1 branch

7 Organization of the thesis

The thesis consists of the following three main chapters:

Chapter 1: Theoretical framework on enhancing residential capital mobilization at commercial banks

Chapter 2: Reality of enhancing residential capital mobilization at BIDV - So Giao Dich 1

Chapter 3: Solutions to enhance residential capital mobilization at BIDV - So Giao Dich 1

of development, the introduction of a specific concept of commercial banks remains controversial for economists There are different concepts at different times:

According to the world economists,a commercial bank is a type of business operating and trading in the monetary and credit sectors.A commercial bank is a type of financial institution which provides the most diversified portfolio of financial services, especially savings, payment services and performs more financial functions than any other organizations in the economy

According to the Law on Credit Institutions in Vietnam, "A commercial bank

is a credit institution which is entitled to carry out all monetary operations, perform banking functions and other related activities", in which "Banking activities include monetary trading and banking services with regular contents of receiving deposits, using deposits to offer credit and provide payment services" (Law on Credit Institutions, 2010)

Thus, commercial banks are one of the financial institutions specializing in providing a variety of financial services with the basic operations of receiving deposits, lending and providing payment services In addition, commercial banks also provide other services to satisfy the maximum demand for products and services of the society

Capital mobilization

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Capital mobilization is an activity that creates capital for commercial banks, which plays an important role and affects the quality of banking operations This activity provides banks with capital to carry out other activities such as granting credit and providing banking services to customers The capital mobilization activities of the banks are reflected in the debit assets

According to the Law on Credit Institutions (2010) in Vietnam, commercial banks are allowed to mobilize capital in the following forms:

- Receiving deposits from organizations, individuals and other credit institutions in the forms of demand deposits, time deposits and other types of deposits

- Issuing certificates of deposit, bonds and other valuable papers to mobilize capital of domestic and foreign organizations and individuals when permitted by the Governor of the State Bank

- Borrowing capital from other credit institutions operating in Vietnam and foreign credit institutions

- Borrowing short-term capital from the State Bank in accordance with the Law of the State Bank of Vietnam

Residential capital mobilization

Residential capital mobilization (i.e mobilizing deposits from residents) is the activity that banks implement to mobilize capital from residents, agents with payment accounts, time deposits or valuable papers issued by the banks (Nguyen Van Tan, 2016)

According to Che Thi Thanh Nguyet (2012), the activity of mobilizing residential capital of commercial banks is one of the major and important activities

of commercial banks This activity generates capital for commercial banks in various forms such as receiving demand deposits, time deposits and issuing debt recovery instruments to attract idle funds from all classes of population

1.1.2 Forms of mobilizing residential capital of commercial banks

Commercial banks can mobilize residential capital from in the following forms:

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- Opening payment accounts for individuals: Payment deposits includepayment deposits with interest and payment deposits without interest This is the most volatile capital and it is difficult to predict the size of deposits The interest paid to this account balance is the lowest, so the cost of capital mobilization is very low

- Mobilizing time deposits fromresidents: This type of deposit is an agreement between the bank and the customer about the time of depositing and is a source of intermediate deposit between payment deposit and savings deposit Time deposits usually have long maturities and high interest rates, so they are relatively stable

- Mobilizing savings deposits from residents: Savings deposits are created to attract the capital of those who wish to put aside some money for specific goalsor financial needs in the future The interest rates applied for this type of deposit are much lower than for demand savings deposits

- Mobilizing by issuing valuable papers: This is the form of mobilization in which banks mobilizing monetary capital by issuing valuable certificates, including certificates of deposit, promissory notes and bonds Certificates of deposit are short-term debt notes with specified par value.Bonds are medium and long-term debtnotes Promissory notes are short-term valuable papers (in one year) They have the same characteristics as bonds but have a shorter term than bonds, so they are used for the purpose of short-term capital mobilization of banks These types of debt notes are issued by banks on a case-by-case basis

1.1.3 Characteristics of residential capital

+ Residential capital often hasshort terms

Residential capital include residents' payment deposits,which are consumption or business payments and are usually transferred from one account to another, from a bank to another bank or withdrawn for the purpose of spending As

a result, this type money stays in the customers' accounts in a very short time

+ Residential capital is more stable than capital mobilized from economic organizations

Due to the large number of individual customers and the smaller amounts of deposits than those of organizations, the fact that an individual customer

+ The expenses for residential capital mobilization are high

Due to the stability and the profitability purpose of customers, the expensesfor mobilizing residential capital are normally high Theseexpenses include interest expenses and non-interest expenses Interest expensesare the interest payablesto types of deposits in accordance with the deposit interest rates agreed by the banks and the customers Non-interest expenses are diversified, including expenses directly paid to depositors such as gifts, insurance, expenses for paying salaries tothe bank staff, and expenses for increasing utilities for depositors such as opening more branches, transaction offices, and so on

1.1.4 Role of residential capital

The development of residential capital mobilization brings benefits not only

to commercial banks but also to the society and residential customers:

For the society:The mobilization of residential capital of commercial banks

is used to supplement capital for the economy and raise the living standard of people instead of using the capital for other expenditures Thanks to the savings, people have increased their production and business activities, created more jobs for laborers and raised their living standard through the indirect benefits of the savings capital The larger the residential capital is, the more benefits it brings to the society This capital will benefit both the banks and the people, and the State will reduce an investment in the economy In addition, the mobilization of residential

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capital will contribute to developing personal payment deposits, boosting non-cash payment and saving the costs for issuing and circulating cash in the economy

For residential customers: Customers who participate in the activity of

capital mobilization of commercial banks will have income from the amount of money they deposit into the bank Using capital mobilization products of the banks, customers are guaranteed capital security, enjoy interest and, most importantly, can use fast and convenient payment services

For banks:Residential capital is important to the banks and is the major

object that the banks aim at to maintain in the long-term and sustainable development Mobilization of residential capital is not only of great social significance, but also of great significance for the banks themselves

The more residential capital is mobilized, the stronger the banks’ financial capacity is Residents are not only the objectsfor capital mobilization of commercial banks but also their customers When there is idle money, a number of people will deposit it into banks Meanwhile,otherswho have the opportunity to do business but do not have capital will come to banks to apply for loans Thus, the mobilization of residential capital of commercial banks benefit both people and the banks themselves, contributing to raising the efficiency of capital use for the society

1.2 Enhancing residential capital mobilization at commercial banks

1.2.1 Concept

Enhancing residential capital mobilization at commercial banks refers to the activities carried out by commercial banks to increase the volume of deposits from residential customers,expand the size of mobilized capital with suitable deposit structure and reasonable mobilization expenses to meet the banks' demand for capital, increase the market share of residential capital mobilization andenhance the quality of capital mobilization service

1.2.2 Contents of enhancing residential capital mobilization at commercial banks

1.2.2.1 Establishing targets for residential capital mobilization

+ Looking for cheap sources of capital

Interest expense is considered the largest expense of a bank in the mobilization of residential capital In which, the largestexpenseis for paying

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interests for time deposits Normally, there are three ways of paying interests for residential capital including: interests paid in advance, interests paid at maturity and interests paid periodically

Of the types of residential capital, payment deposits are the one with the least costssince banks must provide some utility services for this kind of mobilized capital, and they can be sent and withdrawn at any time Therefore, this is the source of residential capital that commercial banks need to increase

+ Creating stable sources of capital and appropriate structure

The structure of residential capital should be diversified by maintaining a ratio between short-term and long-term deposits, between local currency and foreign currency A bank with high quality of residential capital will have abundant sources of capital and a balanced capital structure, which help the banks avoid financial stress in the changing business environment

The change in the structure of residential capital depends partly on banks' adjustment plans and external factors which require the banks to regularly research and approach the market to determine the suitable structure of residential capital for their banking activities

+ Developing stable sources of capital

A bank which wants to expand its operations needs a large volume of capital, in which residential capital is an important part The volume of residential capital must reach a certain scale according to the mobilization plan of the bank In order to properly implement this issue, it is necessary to harmonize other factors such as interest rates, marketing policies, forms of capital mobilization and prestige of banks

1.2.2.2Developing policies to enhance residential capital mobilization

The policy of mobilizing residential capital of commercial banks is one of the decisive factors for the success of the enhancement of residential capital mobilization In each period, the demand for capital of a bank is different The policy to enhancethe mobilization of residential capital includes the following contents:

- Customer policy

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Customer policy includes all contents related to business activities which aim

at approaching customers of banks The success or failure of a bank is determined

by its ability to attract customers to use its capital mobilization products Through the customer policy in each period, the bank can use appropriate methods and measures to attract customers without affectingcustomers’ trust and expectations towards the bank

- Interest rate policy

Interest ratesare the prices of loans When mobilizing capital, banks always expect deposit interest rates to be low so that the costs for mobilization are cheap In contrast, customers depositing at banks always want high interest rates

With different types of residential capital mobilization, banks offer different interest rates, such as low interest rates for payment deposits, but high interest rates for savings deposits In the same method of mobilization, but interest rates are different for different terms The longer the terms are, the higher the interest rates are Moreover, banks often have to ensure a positive real interest rate to attract savings depositors

Therefore, when carrying out the mobilization of residential capital, commercial banks should consider changing interest rates so that customers feel they are beneficial and satisfied As a result, the residential capital of commercial banks will be increased

Short-term capital: is the capitalwith a term of less than 12 months

Medium-term capital: is the capital with a term of 12 months to less than 60 months

Long-term capital: is the capital with a term of more than 60 months

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+ Based on the methods of mobilization, it is possible to divide residential capital mobilization into deposit mobilization, loan mobilization andissuance of valuable papers

+ Based on types of currency, residential capital mobilization is divided into local currency mobilization and foreign currency mobilization

1.2.2.3Conducting activities to enhance residential capital mobilization

In order to enhanceresidential capital mobilization, commercial banks can carry out the following activities:

Establishing a network of transaction points

The larger the operation network is andthe more diversified the forms of mobilizationare, the more effective the capital mobilization will be in terms of quantity and quality

Through the operations and survey of the real situation, customers are not only interested in interest rates, utility services of banks when providing residential capital mobilization products but also pay attention to the convenience of money deposit Therefore, it is necessary to create convenience for residential customers in order to fully mobilize the idle money from residents and compete with other credit institutions

Strengthening propaganda and advertising activities

In today's strongly competitive environment, it is difficult to maintain the product differentiation and pricing, so advertising and serving strategies are crucial

to attracting customers to use capital mobilization products of commercial banks Friendly and thoughtful attitude is a condition to attract customers Besides, suitable advertising strategies will help banks have many new customers Therefore, in order

to have prestige in the market tomaintain the relationship with traditional customers and attract more new customers, banks must constantly improve the quality of their services and have a reasonable advertising strategy so that more peoplewill know aboutthe banks and their residential capital mobilization products

Strengthening promotion activities

Promotions are activities that go along with advertising In the mobilization

of residential capital of commercial banks, the promotion programscan beappliedas follows:

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- Encourage customers to use new services and new distribution methods;improverelationships with loyal customers

- Show preferential treatment to loyal customers

- Increase customers’ attention at the time of fierce competition Banks often use forms of promotion in the capital mobilization such asoffering gifts, organizing customer conferences, spinning wheels for prizes, giving materials, etc

Promoting staff training

Human resources are also one of the factors that enhance commercial banks' residential capital mobilization A bank with a team of skillful, friendly, dynamic staffand a reasonable organization meeting the requirements of business development will have advantages in the mobilization of residential capital and vice versa

1.2.2.4Evaluating efficiency of residential capital mobilization activities

To evaluate the efficiency of residential capital mobilization activities of commercial banks, managers can use the following indicators:

+ The growth of residential capital volume

The growth rate of residential capital volume of a bank is the indicator reflecting the scale of residential capital mobilization that bank, which is evaluated

by the increase in residential deposit balance at each time and in each period of the bank

+ The structure of residential capital

The structure of residential capital must be derived from the plan of capital use in terms of terms, portfolio, amount of foreign currency, loan interests, etc in order to have the most effective mobilization strategy Based on that, banks will build a reasonable residential capital structure

+ The growth of market share of residential capital

This indicator shows commercial banks’ ability to mobilize residential capital compared to their competitors and helps commercial banks to assess the results of their capital mobilization

+ Expenses for mobilizing residential capital resources

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The expenses forresidential capital mobilization a bank include interest expenses and other expenses This indicator shows how much money is needed to mobilize anamount of capital

+ Quality of residential capital mobilization services

For commercial banks, an important way to increase competitiveness as well

as increase sources of residential capital is to improve the quality of mobilization products This has a significant impact on attracting customersto usethe products and services of the banks

1.2.3 Factors affecting residential capital mobilization at commercial banks

1.2.3.1 Subjective factors

Marketing activities

In order to enhance the residential capital, good products are not enough Commercial banks need to carry out marketing activities so that customers can understand the advantages and benefits of the product

The basic elements of banking marketing activities are public relations, market research, organization and management of banking services, prices of banking services (in capital mobilization, prices are understood as interest rates), promotional activities and service delivery activities These factors have a strong, close relationship with each other The completion of this factor a prerequisite for implementing the others and ultimately achieving the goal of developing and offering different types of serviceswithhigh quality and utilities which satisfy the needs of customers

Thus, marketing activities play an important role in the operations of the banks in general and the mobilization of residential capital in particular, contributing to attracting customers and increasing the business efficiency of the banks

Quality of human resources

In terms of management

Banks need to manage their human resources, assets and liabilities well In the course of its business operations, banks should be able to anticipate the risks and

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predict whether the investment environment is effective and promptly capture the changes in the market to be able to advise their customers most effectively This will attract customers and expand the banks’ investment environment Moreover, if the management is good, banks will ensure the safety of capital, increase prestige, and thereby expand the deposit customers

In terms of professional competence

If the professional competence of the bank staff is good, the process of operationswill be carried out quickly, accurately and effectively.From this,bankswill have conditions to expand business and attract more customers to use their residential capital mobilization products

In terms of serving attitude

Service attitude is a subjective factor affecting the size of residential capital

at commercial banks If a bank operates well witha team ofopen, enthusiasticbank staffthat always create favorable for customers in the transactions will create a good reputation for customers As a result, the bank willbe able to attractmore residential customers to use capital mobilization products and the volume of residential capital

of commercial banks will be increased

Technology level of the banks

Since banking products and services are intangible and can only be felt in the process of using products and services Therefore, customers are forced to search for banks with good quality products with good brand name, transaction locations, level of technological equipment, prestige, and so on

Banking facilities and technology are factors that directly influence the expansion and enhancement of service quality and residential capital of commercial banks Technology will create customers’ satisfaction thanks to products of residential capital mobilization with good quality, shortened transaction time, safety and security For commercial banks, modern technology will create a breakthrough

in exploiting residential capital mobilization products and services in both quantity and quality, indirectly affirming the image of the banks In terms of management, thanks to technology, the internal management in the banks will be more effective;

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the management ofrisksin residential capital mobilization will be better Thus, in the process of providing services of residential capital mobilization, in order to develop and increase the mobilized capital, apart from the management ability of the banks’ leaders, facilities and technology have a very important role

Reputation of the banks

Large, reputable banks are usually preferred for deposits by residents The prestige of commercial banks is reflected in their business operation andbrand value Banks can only create prestige by making people believe in their enthusiastic,thoughtful and fast serving style.The principal and interest of mobilized capital is returned on time

In addition, promotion policies of the banks will also be a good measure to increase their prestige The better prestige the bankshave, the more confidence customers have when using capital mobilization products and the efficiency of capital mobilization will be strengthened Therefore, commercial banks need to pay attention to building their own brands.In addition to affirming their positions and prestige in the market, they need to establish vision, mission and objectives and set

up a common brand identity system for themselves and their branches

1.2.3.2 Objective factors

Laws and policies of the State

The State’s policies, especially the economic policies, have great influence

on the capital mobilization in general and the residential capital mobilization in particular, namely:

Regulations on interest rates of the State Bank: Commercial banks are intermediary financial institutions that borrow money and lend it at higher interest rates Therefore, there should be a suitable interest rate policy as the basis forbanks

to raise the efficiency of residential capital mobilization, which ensuresthe benefits

of depositors as well astheir safe, convenient payment

Investment policy: The State has issued many policies to encourage investment, expand production and business, and create conditions for all economic

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sectors to develop.The increase in people's incomes will facilitate the mobilization

of residential capital of commercial banks

Tax policy: Tax is a factor directlyaffecting people's incomes If the State has

a preferential personal income tax policy, people's incomes will increase and thereby will affect people's deposits in banks

Deposit insurance is also one of the policies of the State Bank It works not for profits but for maintaining the stable, safe and healthy development of the banking system, creating customers’ confidence when depositing money into banks

Macroeconomic environment

Economic environment is where all activities of commercial banks happen Like human beings, commercial banks also need a clean, healthy and stable environment, where banking activities can exist and develop This is a prerequisite factor, not only affecting the banks’ capital mobilization activities in particular, but also affecting the whole operation of the banks In a favorable economic environment where inflation is moderately restrained and the subjects in the economy have many conditions to develop and gain more profits,the capital mobilization of the banks also become easier

Customers

People’s incomes have a great influence on their needs to deposit savings in the bank People will put money into the bank when the needs of their lives are satisfied Thus, when people's incomes increase andtheir daily needs aresatisfied, the demands for depositing money in the bank also increase As a result, commercial banks will be able to raise their capital mobilization

Customers’ habits also influence the capital mobilization of commercial banks Influenced by the previous economy, when there is surplus or idle money, people usually store it in their house in forms of cash or gold instead of depositing

in the bank This habit makes banks difficult to mobilize residential deposits andcreate more circulatingmoney and the money is not used effectively Therefore, gradually changing people’s habits of keeping money at home will help the capital mobilization of banksmore effective

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1.2.4 Criteria for assessing the effectiveness of residential capital mobilization at commercial banks

Size of mobilized residential capital

Size is the indicator reflects the amount of capital mobilized from residents

of the bank An increasing capital mobilized from residents will support the bank's capital to operate, develop and expand its business scope and scale, facilitating the liquidity, stability and increasing the trust of customers

The residential capital is different in size in each period Bigger banksare more likely to mobilize capital than smaller banks In the competitive situation of market share of residential customers, interest rates often do not make much difference between banks Customers often choose large-size banks to ensure the safety and liquidity for their deposits Therefore, the larger the size of residential capital is, the more effective the capital mobilization of the bank will be

Growth rate of mobilized residential capital

The growth rate of residential capital represents the ability to expand the size

of capital mobilized from residential areas of the bank over the years, showing how the residential capital changes and how the bank controlsthe mobilize capital of the bank That affects the ability to increase and expand its operation market If the growth rate is stable, it will create the initiative for the bank in planning long-term development strategy as well as create confidence for depositors and investors in the bank In addition, this indicator shows the ability of the bank to compete with other commercial banks in mobilizing capital

In terms of volume, the growth rate of mobilized capital is usually assessed through:

Growth rate of residential capital = (Total residential capital of this period - Total residential capital of the previous period) / (Total residential capital of the previous period) x 100

This indicator reflects the change in the size of the residential capital over periods If the ratio is> 100%, the size of the bank's residential capital has been expanded The continuous expansion of capital with higher and higher capital

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growth rate proves that the operation scale of the bank is increasing and the efficiency of capital mobilization of the bank is improving

Structure of mobilized residential capital

The structure of mobilized residential capital affects the structure of assets and the average operating costs of the bank, thus affecting the bank's output costs(or interest rates) The structure of residential capital must be consistent with the use structure to meet the requirements of use, maximize credit and investment, thereby maximizing profits without paying interest on the surplus capital The determination

of the capital structure can determine the strengths and weaknesses of the bank in its business operations

The bank's residential capital structure is considered to be reasonable if its components meet the capital use plan and have the lowest mobilization cost With capital, the bank will be able to restructure its capital sources, expand its scale of operations, take initiative in strategic planningand enhance their prestige and competitiveness It is possible to assess the structure of the mobilized residential capital through the proportion of mobilized capital

Proportion of each mobilized residential capital = (Volume of each mobilized residential capital) / (Total mobilized residential capital) x 100

This indicator reflects the ratio of types of mobilized capital, the reasonableness in the mobilization of different types of capital The capital structure should be diversified and balanced in order to ensure a reasonable ratio between short-term and medium and long-term deposits, between domestic and foreign currencies Each capital source has its strengths and weaknesses in the mobilization and exploitation Therefore, the change in capital structure will lead to a change in the structure of capital use and hence the change in profitability and safety of the bank

Expenses on residential capital mobilization

Expenses on residential capital mobilization are the total cost of the bank spent in the process of mobilizing capital Expenses on residential capital mobilization consist of two parts: interest payment expense(deposit interest rate)

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and non-interest paymentexpense Interest paymentexpenseis the major part of the expenses on residential capital mobilization In addition,non- interest payment expenseincludes employee salaries, expenses onlocation, machinery, infrastructure, marketing, etc

The main expense concerned by the bank is the interest payment expense The deposit interest rate is usually determined by the supply and demand relation on the market.When banks have surplus capital while residential customers still deposit money, the deposit interest rate will decrease Conversely, in a period of economic downturn or the Government’s tight monetary policy, banks' lack of available capital will push up deposit rates Besides, depending on the competitive strategy of each bank, each bank can set higher or lower interest rates than the market interest rate

When evaluating the effectiveness of capital in terms of expenses, the bank must meet the following criteria:

First: Find the lowest cost sources to meet loan and investment needs while meeting the requirements of scale, duration and structure

-Second: Increase profits for the bank without having to take high risks due

to the pressure to increase capital costs Basically, the bank’s profit is calculated by total income minus total expense (in which most of it is interest payment expense),

so to maximize profit, the bank must minimize its operating expenses The determination the expense on residential capital mobilization is very useful in building effective business policies Banks typically determine the expense on capital mobilization through the criteria of average interest payment expense and non-interest payment expense

Average interest payment expense = (Interest payment expense) / (Total mobilized residential capital)

This indicator reflects the amount of money the bank has to pay for a mobilized capital The decreased average interest payment expense over the yearsaccompanied by the growth in the size of residential capital demonstrates that the residential capital mobilization of commercial banks is effectively organized

as tintucvietnam, vietnamnet, etc Periodically, Agribank conducts a survey to collect public comments on the types of residential capital mobilization that the bank has deployed From the feedback of customers, the bank will draw the experience for the next deployment In addition, the bank also strengthens marketing by maintaining and developing relationship with customers through regular appreciation conferences

- Implementing preferential policies for depositors

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For each deposit, customers will receive cash prizes, interest bonuses, free ATM cards, or a trip to Europe for two people, etc Besides, there are other programs such as savings with prizes, lucky draws for home car, and so on Every year, on birthdays or big ceremonies, the bank often sends flowers to congratulate customers This creates more friendly feelings between customers and the bank

1.2.5.2 Experience of Vietcombank

Taking advantage of its technological strengths, Vietcombank has promoted the application of modern banking technology to increase the capital mobilized from residents Accordingly, the experience has been applied by Vietcombank include:

- Strengthen investment in developing the system of transaction and payment channels that the bank has deployed such as ATM, Telephone Banking, Home Banking andmobile payment services so that customers can register to use new services, conduct personal information search and check their account balance easily At the same time, this transaction system must be built on the basis of confidentiality and safety

- Develop investment strategies and update advanced and modern technologies and machines in line with the reality of the sector; develop advanced information technology applications to improve infrastructure for bank products

1.2.5.3 Lessons for BIDV - So Giao Dich 1

Through the experience of other commercial banks, BIDV – So Giao Dich 1 drew the lessons to enhance the mobilization of residential capital as follows:

Firstly, continue to enhance the image and prestige of BIDV in the customers' hearts

Secondly, focus on promoting and improving the quality of services when customers come todeposit money

Thirdly, focus on promoting marketing activities to promote and introduce products ofresidential capital mobilization to a large number of customers

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Fourthly, develop flexible interest rate policies and implement special incentives for VIP customers, loyal customers, or customers deposit in large amounts

Finally, boost the investment in the application of modern banking technology in the development of capital mobilized from residential areas

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CHAPTER 2: REALITY OF ENHANCING RESIDENTIAL CAPITAL

MOBILIZATION AT BIDV - SO GIAO DICH 1

2.1 Introduction of BIDV - So Giao Dich 1

2.1.1 History of foundation and development

BIDV, previously asBank for Construction of Vietnam, was established in

1957 with the task of receiving capital from the State’s budget to offer capital tobasic construction projects Currently, BIDV is one of the largest jointstock commercial banks in Vietnam with 1 transaction Office, 131 branches and more than 400 transaction points with business cooperation with more than 800 banks in the world

So Giao Dich 1 was established on March 28, 1991 under Decision No 76/QĐ-TCCB of BIDV’s General Director - Nguyen Van Doan BIDV Transaction Office (currently BIDV Branch of So Giao Dich 1) hasa 25-year history of development

In the history of 59 years of establishment, growth, innovation and development of BIDV, So Giao Dich 1 was honored to be a member unit with the largest scale and always join the whole system in the implementation of professional tasks Through many years of up and down, So Giao Dich 1hadstrongly achieved proud results, which was a typical example for the renewal, growth and development of the system of BIDV

The process of formation and development of BIDV – So Giao Dich 1can be divided into the following stages:

(i) So Giao Dich 1 was establishedwith the innovative mission of BIDV system (1991 - 1999);

(ii) So Giao Dich 1 confirmed it position as the key unit of the system (2000 - 2011);

(iii) The branch has conducted integration and sustainable development (2012 - present)

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In the 25 years of construction and growth from 1991 to 2017, So Giao Dich 1has split and upgraded four more member branches grade I with the total assets of each member unit of over 1,000 billion VND, namely:

- BacHa Noi Branch (2002) with the scale of 69 employees, total assets (converted) of 1,122 billion VND, mobilized capital of 322.7 billion VND, outstanding loan balance of 1,100 billion VND and guarantee balance of 85 billion VND

- Ha Thanh Branch (2003) with the scale of 54 employees, total assets (converted) of 567,1 billion VND, mobilized capital of 520,6 billion VND, outstanding loan balance of 63 billion VND andguarantee balance of 4.4 billion VND

- Dong Do Branch (2004) with a scale of 67 employees, total assets of 753.8 billion VND, mobilized capital of 729.5 billion VND, outstanding loan balance of 26.4 billion VND andguarantee balance of 2.7 billion VND

- Quang Trung Branch (2005) with the scale of 66 employees, total assets (converted) of 1,395.2 billion VND, mobilized capital 1,343.7 billion VND, outstanding loan balance of 284.1 billion VND and guarantee balance of 3.5 billion VND and 0.3 million USD

- Hai Ba Trung Branch (2008) with the scale of 55 employees, mobilized capital of 380 billion VND, outstanding loans of 216 billion VND and 5.6 million USD, outstanding guarantee balance of 85 billion VND and 0.2 million USD

- Hoan Kiem Branch (2010) with the scale of 95 employees, mobilized capital (converted) of 1,313.11 billion VND, outstanding loans of 674.7 billion VND and guarantee balance of 18.7 billion VND

- Thanh Tri Branch (2016) with a scale of 90 employees and outstanding loans of 500 billion VND

After splitting the member units, BIDV – So Giao Dich 1has continued to maintain its operational scale Up to now, BIDV – So Giao Dich 1has had 15 operational departments at the branch office and 5 transaction offices with nearly

300 managers and employees BIDV – So Giao Dich 1has been restructured under the TA2 model, which isconvenient in coordinating between departments

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andmanaging customer information with modern and smart software to improve the quality as well as customer service efficiency

2.1.2 Functions and tasks

BIDV – So Giao Dich 1has the following tasks:

- Effectively use, preserve and develop the bank's capital, assets and other resources

- Return fully and in time the deposits to depositors under agreements

- Settle debts, charges and expenses in the asset balance sheet managed by the BIDV

- Returncredits which are directly borrowed by BIDV – So Giao Dich 1or perform obligations on behalf of customers guaranteed by the branch if customers are unable to perform their obligations

- Be the place to test new products of BIDV system such as ATM, HomeBanking, etc

BIDV – So Giao Dich 1has the functions of performing the following operations:

- Receive savings deposits, demand deposits, time deposits, and payment deposits of domestic and foreign organizations and individuals in VND and foreign currencies

- Issue certificates of deposits, treasury bills, promissorynotes, bonds and other forms of capital mobilization to meet the requirements of economic development and business activities of the bank

- Offer short-term, medium-term and long-term loans in VND and foreign currencies to economic organizations, individuals and households of all economic sectors under the credit mechanism of the State Bank and BIDV

- Discount commercial papers, promissory notes and valuable papers in accordance with the regulations of the State Bank and BIDV

- Perform L/C payment, guarantee or re-guarantee andtrade foreign exchange

in accordance with BIDV's regulations

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- Perform other payment operations such as payment, domestic and international money transfer, overseas remittance, check payment and other banking services

- Implement safety principles of fundsafety, cash insurance, payment checks and important printouts Ensure timely and accurate payment of cash and checks

- Act as a securities trading agent, a broker Store, manage and preserve and securities and valuable papers and assets for customers under regulations of the State Bank and BIDV

- Carrying out other tasks assigned by BIDV

2.1.3 Organizational structure

Currently, the organizational structure of BIDV – So Giao Dich 1 is arranged

as follows:

Operation Department

Internal Management Department

Credit Management Division

Individual Customer Transaction Division

Corporate Customer Transaction Division

Customer management and service division

Financial Planning Division

Administrative division

-

-

Thang Transaction Office

Quoc Tu Giam Transaction Office

Kham Thien Transaction Office

Corporate

Customer

Division 6

Hoa Binh Transaction Office

Individual

Customer

Division 2

- Take initiative in organizing the implementing the tasks assigned; directly conduct, handle and performoperations in the assigned fields under the regulations, competence and professional procedures, contributing to completing the business mission of the branch

- Take full responsibility for the accuracy of procedures, rules and regulations; ensure safety and efficiency within the assigned scope; contribute toimproving the operation efficiency of the branch

- Closely cooperate with other professional divisions at BIDV according to promulgated procedures

- Organize the storage of records, management of information, synthesis and compilation of reports within the scope of tasks and operations of the department in order to serve the work of management and administration of BIDV - So Giao Dich

1, BIDV and the request of the State management agencies

2.1.4 Business results

The world economy in 2016 was slowly recovered and faced many risks.International organizations such as the World Bank and IMF continuously lowered the forecast of world economic growth in the year (estimated at 3.1% -3.2%) compared to 3.4% in 2015 The US’s economy grew less than expected in the first two quarters and improved from the third quarter Europe's economy was still

in stagnant growth China's economy was facing many challenges due to the impact

of economic transformation when industrial production was surplus, economic debt was high, financial and real estate markets was unstable, etc These factors affected our economy, especially for export activities and state budget revenues

In 2016, Vietnam's economy had many difficulties due to the impact of natural disasters In this context, the Government and ministries, sectors and