An overview about Vietnam joint stock commercial bank for industry and trade

Therefore, I would like to divide my report into 3main parts, including: Chapter 1: An overview of VietinBank’s Main Operation Center.. Chapter 1: An overview about Main Operation Center

HANOI, 2014

PREFACE

The purpose of the report is to describe my valuable experience during the

internship in Import –Export Office of VietinBank’s Main Operation Center This report is also to fulfill the requirement for my Finance and Banking course in Foreign Trade University For the whole internship, I had opportunity to learn general operation process in that Bank and to observe how banking officers perform their duties day by day Besides that, I was able to put my theoretical knowledge into the real cases and gain a lot experience

In the report, I intend to concentrate on analyzing the business performance of the whole VietinBank and suggesting some recommendations to improve the effectiveness in its operation Therefore, I would like to divide my report into 3main parts, including:

Chapter 1: An overview of VietinBank’s Main Operation Center

Chapter 2: Internship journal

Chapter 3: Recommendations to improve the effectiveness in VietinBank’s performance

Over the period of internship, I would like to give my special thanks to my internship guide Mr Nguyen Thanh Hai and other banking officers in Import -Export Office for their supports and suggestions And the person I most wish to thank is my supervisor Professor Tran Thi Thu Huong for her dedicated instructions to help me accomplish my internship report

Chapter 1: An overview about Main Operation Center of Vietnam joint stock commercial

bank for industry and trade 3

1 Profile of Vietinbank 3

1.1 Formation and development 3

1.2 Organization structure and function of Main Operational Center 4

1.3 Current performance of Vietinbank’s Main Operation Center 7

Chap 2: Internship Journal 9

Chapter 3: Nghiệp vụ thanh toán L/C xuất nhập khẩu tại SGD 12

Chapter 1: An overview about Main Operation Center of Vietnam joint stock commercial bank for industry and trade

1 Formation and development

Vietinbank was established on 26 March 1988 after its separation from the State Bank of Vietnam in accordance with Decree No.53/HDBT by the Ministers Council Its register name in English is “VIETNAM JOINT STOCK COMERCIAL BANK FOR INDUSTRY AND TRADE” and its trade name is “VietinBank” The head quarter is located in 108 Tran Hung Dao Street, Hoan Kiem District, Hanoi, Vietnam with the network of 147 branches across 63 provinces and cities nationwide and 3 foreign branches: 1 branch in Frankfurt, Germany, 1 branch in

In terms of scope of business, VietinBank offers a wide range of retail and wholesale banking products and services both at home and abroad VietinBank also operates in the following areas: lending, investment, trade finance, guarantee, re - guarantee, forex trading, deposit, payment, money transfer, card services, local and international credit card, traveler’s cheque, securities trading, insurance, financial leasing, and many others

Since 16 July 2009, Vietinbank stock has been official traded on HCM City Stock Exchange (HOSE) The diagram below illustrates its formation and development over a twenty five years period

Phase 1: 1988-2000

Established and transformed into a two-tier bank, officially put Vietnam JSC Bank for Industry and Trade into operation Phase 2: 2001- 2008Successfully implemented the organized restructuring project in terms of debts handling, general policies & mechanisms and business operations

Phase 3: 2009 to present

Successful carried out equalization and conducted a complete system innovation towards modernization and standardization in all aspects of banking act ivies; converting the current organization model and corportate governance in accordance with interantional standards and practices

Figure 1: Twenty five years of construction and development

Source: Vietinbank annual report 2013

Before, period of foundation, VietinBank was a bank in small size and had only 01 transaction center However, over the time, up to now, VietinBank has developed

an operation network comprising of 01 Transaction Centers, 150 branches, over

1000 transaction offices/ savings offices It also established correspondent relationship with 900 banks, financial institutions of 90 countries and territories all over the world

Over the period of building and development, until now, VietinBank has been achieving many outstanding results in fund allocation and its credit activities In

2004, it successfully mobilized VND 64,160 billion and lent to a large number of companies about VND 121 billion And after that, these figures increased to VND 422,995 billion and nearly VND 468 billion Over the recession period, this bank still maintained nonperforming loan (NPL) ratios under 3 % Up to present, in implementing the State’s reform guidelines, the bank has been active to mobilize medium and long term capital besides the State budget fund for important projects and works

1.1 Organization structure and function of Main Operational Center

1.1.1 Organization structure

Branch network

Import Documentary Settlement 1 Dept

Bank guarantee & Import Documentary Settlement 2 Dept.

Factoring and Receivables Financing Dept

Accounting Dept

HR and administration Dept .DEDept

Research and service development Dept SWIFT & test key Dept

Technical Dept Cash transfer Dept

Operational center (Transaction center)

Main functional

divisions Supporting divisions

Export Documentary Settlement Department

Vietinbank’s headquarter General directors-CEO Board of directors

Figure 2: Organization chart

Source: HR and administration Dept.

1.1.2 Function of main divisions of Main Operation

Center

Export Settlement Department

This is an outstanding product of VietinBank, ensuring that the exporter will be

paid upon delivery of goods/services and presentation of the documents

complied with the terms and conditions of the L/C VietinBank will serve you as

an advising bank, paying bank, confirming bank or negotiating bank

points, upon receipt of L/C and during preparation of documents to claim for payment according to L/C

favourable terms and preferential interest rates

Import Settlement Department (1 &2)

After clients import goods and their partners want to select a secure payment method, VietinBank will issue L/C for the importers and pay/accept to pay

foreign banks upon receipt of compliant shipping documents within the validity

of the L/C

practice and special terms and conditions of the L/C in order to minimize risks arising from foreign trade payments

documents

Factoring and Receivable Financing Dept.

As a leading bank in international payments, Vietinbank always provides the best services, facilitating the international trade activities Services at the department include: export factoring/financial risk guaranty and proflifting Factoring is a special form of short-term finance where Vietinbank purchases the seller’s receivables and assumes the credit rish, either with or without recourse to the seller ….Porfaiting

Recently, export factor is a common new practices

Stipulated tolerances in credit amount, quantity, unit price or other variables have not been met

SWIFT & test key Dept.

Xác nh n ch ký c a ngân hàng thông báo xem có đúng hay không.ậ ữ ủ

Accounting Dept.

Accounting Division is responsible for the mobilization and administration of the Bank's financial resources, both the assets and liabilities, and for the management of the Bank's liquidity, accounting and financial records, and the relations with financial markets and intermediaries In addition, it manages the Bank's accounting system and is responsible for keeping the accounts and mandatory ledgers (annual accounts and accompanying documents, as well as the periodic reports)

HR & Administration Dept.

The generic function of this department are: recruitment of new employees; orientation and placement of the recruited employees; administration of benefits and compensation programmes; ensuring efficient HR Information Systems; developing and running with a strategic approach to human resources; monitoring compliance with legal requirements as well as administering award and recognition programmes Under the same division lies the Staff Benefits Section which is responsible for all employee welfare matters including the administration of pensions; administration of the medical aid scheme; administration of group life insurances for members of staff; supervision of the sports club; employee wellness

1.3 Current performance of Vietinbank’s Main Operation Center.

As of financial-year-end 2013, Vietinbank’s impressive results were driven by increasing growth momentum together with secure and efficient operations More specifically, Vietinbank’s revenue rose significantly throughout the five-year period from 3373 billion in 2009 to 7751 billion in 2013, a growth of 56% Such achievement was brought about by the diversification of services and other activities which attracts more customers and increases the income from payment fee, money transfer charge, L/C issuance, etc In the year 2011, Vietinbank’s revenue reached a peak of nearly double that in the previous year, which signals the result of a fruitful cooperation between Vietinbank and other international

commercial banks However, likewise the upward trend in profit, its costs tripled from 2400 billion at the beginning to over 6000 billion in 2011 The high total cost was attributed by a rise in surcharges, advertising, promotion and

investment on new technology Vietinbank continuously expands its branches, clearing houses and transaction offices

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Total Revenue Total Cost Profit

F igure 3: Vietinbank’s performance

Source: Vietinbank’s annual report, 2013

VietinBank always adheres to policies on provisioning for non-performing loans

At the end of the third quarter, the bank continued to maintain a provision of 4.051 trillion VND, significantly higher than the value of non-performing loans The frequency at which VietinBank makes provisions for credit risk is 1.08 times This is a factor that ensures safety of operations, allowing the bank to deal with non-performing loans at its discretion In addition, VietinBank achieved ROA, ROE, and CAR figures that far surpass the targets set by the shareholders’

committee This achievement is a testament to VietinBank’s effectiveness in increasing capital and profits.Having achieved such results, at the end of the third quarter, VietinBank was the leading bank in Vietnam despite difficult conditions

in the economy as well as the banking industry It is expected that by year end

2014, VietinBank’s financial results will be yet more favorable, owing in large part to wise managerial decisions and sound business solutions that are being taken as the year comes to a close

Chap 2: Internship Journal

Day One: Monday, July 01 st , 2014, 12:30 PM – 4:30 PM (Hours: 4)

Today is my first day at the Main Operational Center of Vietinbank The office was nicely and tastefully decorated, which made a deep impression on me A small bulletin board was hang on the wall and artificial flowers were lying on each table Working hour is divided in three shifts: the first shift is from 8:0 a.m to 5:30 p.m, the second shift is from 9 a.m to 8 p.m and the third shift is from 1:30 p.m until the work finished

As I walked in my first day, I was greeted with cheerful smiles and positive attitudes My supervisor, Nguyen Thanh Hai, introduced me to each person present and gave me a description of what types of things they work on After introductions, he showed me around the office and work center He described various departments within the work center, such as Export Documentary Dep., Import Documentary Dep and Factoring and Receivables Bank Financing Dep

We then went on to some personal details and job expectation It came to my surprise to know that my supervisor, as well as many people there, was a graduate from FTU, K45 and that he had an internship at the headquarter of Vietinbank before

Day Two: Tuesday, July 02, 2014, 10:15AM – 4:15PM (Hours: 6)

Today I helped my supervisor, Mr Hai, with sorting L/C to each group The Main Operational Center was responsible to monitor banking branches in provinces, so

each group of four staff working together to deal with documents from six provinces

The morning shift has fewer tasks than the afternoon one, so fewer bank officers came to the workplace The first thing that they do in the morning is check their emails, then prioritize their activities for the working day When observing the staff doing their tasks, I read the operation guideline and found out how close it was to what I had studied at my university so far The first chapter in the guidebook is steps to open an L/C and the second is about documentary collection

Day Three: Wednesday, July 03, 2014, 9 A.M – 4 PM (Hours: 7)

Today I was introduced to the Export Documentary Settlement Department This office included four men and six women, which was a common picture in most banks Through observing my supervisor I learned that communication and connection were very essential Interbank chat was available at all time to help the staff conduct teamwork more effectively Though the workload was sometimes stressful, I could feel a cozy and comfortable atmosphere where there was always a smile on people’s face The Main Operation Center seemed to be their second family and occasionally they told jokes toward each other

After having background information about L/C and other documents and categories of service relating L/C that VietinBank supplies, I was guided to check the accuracy of every single document when VietinBank played a role as advising bank First of all, the banker had to read and understood all terms and conditions

of L/C Subsequently, he/ she continued to check other papers, for example: packing list, commercial invoices, bill of lading, bill of exchange, or some kinds of certificates under the rules of Incoterm 2010 If there is no mistake, discrepancy, then banker would be responsible to pack these entire documents and send them

to issuing bank in foreign country and write a notification to customer, informing that VietinBank complete its duty Otherwise, the banker had to notify to his/her

clients and required them to correct the discrepancies until the issuing bank accepted or agreed to pass

Day Four: Monday, July 08, 2014, 9 A.M –2 PM (Hours: 5)

Today was the first day of the week so everyone in the office got busier than usual and the office was far from being quiet Everyone received more LC application from the banking branches and customers Hardly did the printer stop working Once it was out of order, the fixer came immediately to fix it

The discrepancies among several documents were widely discussed, such as the lack of Certificate of Origin (CO) number, the incorrect measurement of carton, the lack of an unit for weight For example, a $30 000 contract with Japan lacked the CO form VJ… Common customers of Vietinbank were Viglacera Ceramic Tile Company (Ceramic), Hoa Sen (steel), Tu Thanh Company Lmt (gherkin), Cty co phan may mac QTNĐ, May 10 Company Lmt (Garment)…

Day 20: Tuesday, July 29, 2014, 9 A.M – 3 PM (Hours: 6)

Today, Mr.Hai gave me a real task: dealing with information using TRADE FINANCE system and SWIFT program While giving instruction, he always made sure that I remember the key words and typical codes I became interested to know that most letter of credit was in the SWIFT format, with about 49 terms A complex term of L/C was included in article 47 of the SWIFT form During the period, I realized the importance of learning international payment, which I had not studied at my university

My supervisor encouraged me to ask if there was anything sound ambiguous He emphasized that understanding the procedure thoroughly was of great necessity to conduct a hands-on task

Day 21: Thursday, July 31, 2014, 9 A.M – 4 PM (Hours: 7)