LV Thạc sỹ_Strategic diagnosis of priority banking service in maritime bank

Maritime Bank ‘s Priority Banking Strategy from 2012-2014INTRODUCTION Retail Banking is the kind of profitable and stable business in the world.. But from the year of 2011, with the deve

Maritime Bank ‘s Priority Banking Strategy from 2012-2014

CONTENTS

ACKNOWLEDGEMENTS 2

INTRODUCTION 3

1 Problem statement 3

2 Objectives of the study 4

3 Methodology of the study 4

4 Limitation of the study 5

5 Scope of research 5

6 Research Structure 5

CHAPTER 1: LITERATURE REVIEW 6

1.1 A definition of strategy 6

1.2 Level of strategy 6

1.3 Strategic management 7

1.4 Benefits and difficulties in strategic planning 14

CHAPTER 2: OVERVIEW OF BANKING SERVICE IN VIETNAM 16

AND MARITIME BANK 16

2.1 Overview of Vietnamese banking industry 16

2.2 Priority Banking Service in Vietnam Market 18

2.3 Overview of Maritime Bank 23

CHAPTER 3: STRATEGIC DIAGNOSIS OF PRIORITY BANKING SERVICE IN MARITIME BANK 34

3.1 Mission of priority banking 35

3.2 Objectives 35

3.3 Situation analysis 35

CHAPTER 4: STRATEGIC PLANNING 46

4.1 Define unique proposition 46

4.2 Target customer 46

4.3 Create business model 47

4.4 Build up the distribution channel 47

4.5 Design a package of product & service 49

4.6 Business number planning 51

RECOMMENDATION AND CONCLUSION 52

REFERENCES 54

ANNEX 1: 56

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Maritime Bank ‘s Priority Banking Strategy from 2012-2014

I am indebted to my family for encouraging me to pursue my education as far as possible.This entire book is dedicated to them I also owe my gratitude to all my friends for love andsupport

I could not have finished this dissertation without all supports

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Maritime Bank ‘s Priority Banking Strategy from 2012-2014

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Maritime Bank ‘s Priority Banking Strategy from 2012-2014

INTRODUCTION

Retail Banking is the kind of profitable and stable business in the world Retail banking aims

to be the one-stop shop for as many financial services as possible on behalf of retail clients

Traditional business in a typical retail bank are Deposit, Lending, Card, Payment,…and Thebank makes much profit on services and lending But when the economy is changing anddeveloping day by day, customers care more on how they will be treated in bank

Nowadays, customer comes to bank not for begging a service or money but to experience thebest service which bank could provide them Among many types of customer, High net worth(HNW) or affluent segment (AF) is one of the sexiest segments, ill-defined and also difficult

to manage And, increasingly, AF itself becomes an important contributor to profit of retailbanking

But how to develop the right service model to HNWs segment or how to develop prioritybanking is a challenge to any retail bank and a big question with many different answers

1 Problem statement

Vietnam’s banking market has been developing quickly in recent years with many new banksjoin the market including joint stock banks, foreign banks so the competition between them isgetting hotter and hotter All banks have to focus not only in product development to meetcustomer demand, price competition, selling performance but also improve service quality togain big market share

‘Priority Banking’ is not a new concept in banking activities but still new in Vietnam Withthe first launching of this service in HSBC from 2010, there looks like a shot to big spacewithout reaction This is because Vietnamese has still not been familiar with that kind ofservices and all banks do not know why they have to build up “another banking service” totheir current customer, and why they have to invest more on those which may increase theircost

Therefore Priority Banking didn’t have much market to grow more But from the year of

2011, with the development of economy and banking services, foreign bank starts bringingnew model from priority to wealth management to Vietnam which makes local bank realizethe segment that they should focus on

Defining the HNWs is itself challenge for any local bank Almost definition is based on theasset customer holding which includes deposit and investment, borrowing only The generalassumption is that Mass affluent is people who care more deposit and lending traditionallyrather than financial management or investment consulting service Then HNWs or AF is themid-station segment from traditional banking and investment banking

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Maritime Bank ‘s Priority Banking Strategy from 2012-2014

Maritime bank (MSB) is young man in the retail banking segment It has just developed retailfor 2 years even it is 20 years old bank As emerging in the market, MSB’s BOM, BOD hasthought about creating the unique or differences of product and service to compete with somebig giants in the market

Author joined MSB as Product Head and Project Manager of Priority banking project Beforejoining MSB, I worked in Maritime Bank on Priority Banking Proposition and StrategyManager From my working experience and deep attention on Affluent segment, it is the righttime for the all big local banks to prepare for priority banking service, and MSB is not out ofthese if MSB wants to develop retail banking in higher level

MSB’s Priority Banking is going to implementation phase and the first effect could mentionhere is deposit growth and customer satisfaction improvement

2 Objectives of the study

With this research, I would like to understand deeply the HNWs and priority banking modelwhich will include following aims:

- To analyze how bank can manage or mis-manage HNWs segment in order to maximizethe contribution from them

- To identify the necessary strategy to develop Priority Banking in MSB

- To provide recommendations and solutions for MSB to set up Priority Banking Service

3 Methodology of the study

Data sources:

Secondary data and primary data will be used together to study the research topic Datacollection method:

- For secondary data: gathering information from published sources such as various

sources like newspapers, websites, journals, reports, researched books…; bankingindustry data published by information from Maritime bank’s annual reports; reportsfrom monthly Retail Banking Division

- For primary data: The main tools for the collection of data included mystery shopping,

interview directly VIP customer and review from expats

+ Interview Relationship Manager from local banks and foreign banks to understandwhich services or products those banks are offering to VIP customers From that, wewill have the actual view from market and give best suggestion to BOM to build upthe strategy

+ Interview VIP customer to understand deeply customer demand and from that canbuild the best product & service packages

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Maritime Bank ‘s Priority Banking Strategy from 2012-2014

+ Interview expats to get recommendation from the best practice in the other marketoutside Vietnam

Mystery shopping Survey

Author and team did a survey of relationship manager in 10 banks (6 local commercial banksand 4 foreign banks) in Jan 2012 in both Hanoi and Ho Chi Minh

The survey was done by playing VIP customer role to talk with sales in other banks followingthe prime set up cases

Interview Information

Author did a survey loan customer satisfaction with current retail products and how theyexpect from Priority banking The survey is with 93 existing customers in April 2012 withseveral questions in both multiple choices and giving feedback type (Annex 01) The surveytook no more than 15 minutes for each customer and was supported by Customer Association

in Maritime Bank’s branches

4 Limitation of the study

In this research, because of the fact that it is just finished the setting phase and in early stage

of implementation, author only focused on analyzing how to develop Priority Banking model,not the practice after building up

In the chapter 2, the study takes the reader the overview of priority segment and how it isdeveloped in Vietnam We also point out why this business is important to retail banking AndHow/What MSB should focus on when they decide to start with this business is mentioned inthe chapter 3

- Chapter 1: Literature review

- Chapter 2: Overview of Maritime Bank and Priority Banking service in Vietnam

- Chapter 3: Strategic Diagnosis of Priority banking services at MSB

- Chapter 4: Strategic Planning

- Recommendation & Conclusion

- Annex 1: Customer survey

- Annex 2: Mystery Shopping Case set up

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Maritime Bank ‘s Priority Banking Strategy from 2012-2014

CHAPTER 1: LITERATURE REVIEW

1

1.1 A definition of strategy

The word “strategy” is derived from the Greek word “stratçgos”; stratus (meaning army) and

“ago” (meaning leading/moving)

There are many definitions of strategy and all have their own reasonable meaning The mostpopular definition which is considered precisely is as follows: “strategy is a direction and scope of

an organization over the long term which achieve advantage in the changing environment through

it configuration of resource and competence with the aim of fulfilling stakeholder’s expectations”(Source: Exploring Corporate Strategy – Eighth edition)

From above definition , some key elements could be understood as follows:

- The scope of an organization’s activities is to answer the question about should theorganization concentrate on one area of activity, or should it have many activities

- Advantage for the organization over competition in the market and could be achieved indifferent ways and may also mean different things

- Strategic fit with the business environment Organizations need to point out theirpositioning in their environment, in terms of the extent to which products or servicesmeet clearly specific market needs This maybe like trying to find a particular niche in amarket, or finding to buy up businesses that have already found successful marketpositions

- The organization’s resources and competences: Following “the resource-based view” ofstrategy, it is to exploit the strategic capability of an organization, in terms of itsresources and competences, to provide competitive advantages and new businessopportunities

- The values and expectations of powerful stake holders inside or outside the organization.These stakeholders – individuals, groups or even other organizations – can effect to somedecisions as whether an organization is expansionist or more concerned withconsolidation, or where the boundaries are drawn for the organization’s activities

Maritime Bank ‘s Priority Banking Strategy from 2012-2014

corporate-level strategy is important: determining the range of business to include is thebasis of other strategic decisions

- Business level of strategy: is a competitive strategy and it is all about how the differentbusinesses included in the corporate strategy should compete in their specific segments Itmaybe concern issues such as pricing strategy, innovation or differentiation, for instance bybetter quality or a distinctive distribution channel Therefore, even though corporate-levelstrategy involves decisions about the organization as a whole or not, strategic decisionsrelate to particular strategic business units (SBUs) within the overall organization In smalland simple organizations with only one business, the corporate strategy and the business-level strategy are almost same Otherwise it is useful to differentiate the corporate-levelstrategy with business level strategy, because the corporate strategy will provide theframework for whether and under what conditions other business opportunities might beadded or rejected

- Operational strategy: is the important part of an organization to see how the otherdepartments inside an organization to deliver effectively the corporate strategy andbusiness-level depend to a large decisions that are taken, or activities that happen, at theoperational level

of the situation related to the analysis of the environment inside and outside This analysis must bedone at a local level as well as outside to identify all opportunities and threats of the externalenvironment as well as the strengths and weaknesses of the organization A situation analysis canproduce a large amount of information, much of which is not specifically related to strategyformulation To make the information more manageable, sometimes it is useful to classify thefactors as the company's internal strengths and weaknesses, and external environmental factorssuch as opportunities and threats threatened Such analysis is often referred to as SWOT analysis.There are a number of questions which will be raised to define future strategies of organizationrelated to:

Maritime Bank ‘s Priority Banking Strategy from 2012-2014

- The macro and micro environment: the way for an organization to exist and compete in the

context of a complex world political, economic, social, technological, environmental andlegal Environmental changes are more complex for some organizations than others Howthis affects the organization may include an understanding of the historical andenvironmental impact, as well as expected or potential changes in the environment variable.Many of the changes will increase the opportunities and others will not pose threats to theorganization - or both External environment has two aspects: the macro environment affectall companies and micro environment affect businesses in a particular industry Analysis ofmacroeconomic environment including political, economic, social, technological and otherfactors and is sometimes referred to as a PEST analysis An important aspect of the analysis

of the micro environment is the industry in which the company operates or is consideringoperating Michael Porter has devised a five forces framework that is useful for industrialanalysis Porter's five forces are including barriers to entry, customers, suppliers, substitutes,and rivalry among competing firms There are a number of factors to assess the externalsituation analysis:

 The market (customers)

Analysis of the external environment tends to focus on the customers Management musthave open visionary in building customer strategy, and should do so by thinking about thechanging market environment, how can impact the customer, for whether customers aresetting the company wants to serve

- The strategic capability of the organization – made up of resources and competences Is the

way of thinking about the Strength and Weakness of company like competitive advantage

or disadvantage) The objective to define those elements is to see the internal influencesand the consequence for strategic choices for future of organization Major influences ofstakeholder expectations will be consider as a part on an organization’s purposes It is allabout an organization’s vision, mission and values The mission describes the purpose oforganization - the purpose for which it has set up and why the organization exists Somereporting duties include the organization's business The company's mission is its reason to

be The task is often expressed in the form of mission statements, which gives a sense of

Maritime Bank ‘s Priority Banking Strategy from 2012-2014

purpose for employees and projects a corporate image to customers In the formulation ofstrategy, mission statement set the mood of where the company should go Others explainthe products or services they produce or what clients they serve Organization missionstatement says what it does? Why does the organization exist? The vision is to see howcompany wants to be in future and the unique proposition that organization wants to apply

It is also the story about how cultural and historical influences can also influence strategy.Cultural influences can be organizational, sectored or national Historical influences cancreate lock-in on particular strategic trajectories The leader needs to indentify thedifference in culture and from that can give the right direction Internal analysis shouldconsider:

There are strategic choices in terms of how the organization becomes more competitive in marketand get business Normally, it will concern to pricing and differentiation strategies, and decisionsabout how to compete with competitors to dominate the market share These includediversification decisions about the portfolio of products and services which company provide tomarket and it also concerned with the relationship among the several parts of the business andhow the company adds value to these various parts In details, it would be:

- The choices as to how an organization positions itself in relation to competitors Michael

Porter proposed three different ‘generic’ strategies by which an organization couldachieve competitive advantage: ‘overall cost leadership’, ‘differentiation’ and ‘focuses It

is very important that organization have to find the way to answer how an organizationdifferentiate themselves from the other rivals in specifics things like pricing, quality ofservice, diversify products,… depending on strategic positioning above It is can be seensame in the chart below Those competitive advantages should be more flexible or stablecompare with competitors also need to be answered by top management

(Source: Exploring Corporate Strategy – Eighth Edition p229)

- The choices of products and markets for an organization are about what an organization to

decide to focus on specific segment or products or services or extend to all scopes TheAnsoff product/market growth matrix1 in the chart below provides a simple way ofgenerating four basic alternative directions for strategic development:

o An organization normally starts in box A, with its current products and markets:According to the matrix, the organization basically has a choice betweenpenetrating still further within its existing sphere (staying in box A);

o And the organization also have a choice to move rightwards by developing newproducts for its current markets (box B); or to move downwards by bringingits existing products into new markets (box C); or taking the most radical step

of full diversification, with altogether new markets and new products (box D)

o The Ansoff matrix explicitly considers growth options Growth is rarely a goodresult in itself Corporate managers are accused of empire building at the expense

of shareholders The fifth option for organization is consolidation which involvesprotecting existing products and existing markets and therefore belongs to box A

(Source: Exploring Corporate Strategy – Eighth Edition p261)

o Organization can choose the technology push or market pull Relying heavily onexisting users can make companies too conservative, and vulnerable to disruptivetechnologies that uncover needs unforeseen by existing markets Technology push

and market pull are best seen as extreme views, therefore, helping to focusattention on a fundamental choice: relatively how much to rely on science andtechnology as sources of innovation, rather than what people are actually doing inthe market In practice, most organizations find a compromise between the twoviews, with the balance varying between industries and often over time The keyissue for managers is to be aware of the dilemma and to review theirorganization’s balance between the two extremes consciously rather than relying

on habit or prejudice

o Product innovation relates to the final product (or service) to be sold, especiallywith regard to its features; process innovation relates to the way in which thisproduct is produced and distributed, especially with regard to improvements incost or reliability Some companies focus more on product innovation, othersmore in process innovation

- The choices about how strategies are to be implemented and tracked For any strategic

choice an organization made, it should be pursued by all related departments, and goalong with company’s development, M&A strategy of company Organizations have tomake choices about the methods by which they pursue their strategies Manyorganizations prefer building new businesses with their own resources Otherorganizations might develop by mergers/acquisitions and/or strategic alliances with otherorganizations The way an organization to track on their action will also related to howthey evaluate their strategic choices:

o Suitability is concerned with whether a strategy addresses the key issues relating

to the strategic position of the organization

o Acceptability is concerned with the expected performance outcomes (like therevenue or risk) of a strategy and the extent to which these meet the expectations

of strategy development by reviewing the different organizational processes that can explain howstrategies come about It is also the relationship between a strategy and how an organizationfunctions such as how people work with each other within formal structures but also moreinformal relationships and key resource areas of an organization The action plan should bedesigned after the main goals and objectives have been set to achieve tasks in an easy way andcan be measured With an Action Plan, itself the goal can be achieved Without an action plan,and measures it requires, it will be impossible to implement the plan and measure success Oncethe longer-term elements of a strategic plan have been developed, it is time to ensure a specificwork plan to begin implementation This strategy can be expressed in high-level concepts andpriorities To do so effectively, it needs to be translated into more detailed policies can be

understood at the functional level of the organization The expression of functional policy strategyalso serves to highlight any practical problems that cannot be seen at a higher level In addition todeveloping the policy function, the implementation phase involves determining the necessaryresources and put in place the necessary organizational changes Strategic planning acknowledgesthat the strategy must reflect the current conditions in the organization and its environment So it

is rare to try to develop detailed annual targets except for the first and second year or may becovered by the strategic plan However, the annual action plan is needed Annual program goalsshould be based on the time and can be measured Objectives and work plan for the Board and theorganization as a whole is as important as the ones related programs Most of the projectsidentified annual goals and work plans as required by donors, while only a strategic plan mayrequire the Board to think about the desired components, its skills, and participation, or theorganizational structure and administrative system Board of Directors must approve the actionplan, while employees (with consulting help, if desired) can do much of the development of theplan This is an area of expertise of the staff, since the implementation of programs and strategiesbased on the policy by the Board of Management is a staff function Completed a strategic plansummarizes the results and decisions of the strategic planning process There is no set format, but

be sure to include the output of each major step Box at the end of this document provides apossibility Develop procedures to monitor, and modify strategies based on changes in theexternal environment or organization Be sure progress toward goals and objectives and thestrategic use of routine monitoring, with the revised strategy and annual objectives developedannually, based on the progress made, the return problems encountered, and the changingenvironment Procedures to take advantage of sudden changes such as more sympathetic toelected officials, appointed, improvements in the economy, changes in the local donor priorities,

or changes in target population

Strategic in action have some key issues as follow to be reviewed:

- How strategies develop in organizations is the first step need to be reviewed Theorganization management must define the outcome of the vision, leadership or

‘command’ of individuals, formal planning systems or the deliberate imposition ofstrategy from outside an organization to support implementation process Strategy will beout of more routine and day-by-day activities in organizations and through culturalprocesses and political processes

- The organization will also have to see how to arrange internal organizing for successfulstrategy implementation There are three separate strands of organizing: organizationalstructures, organizational processes and the management of relationships It is veryimportance for successful organizing of making these various elements work together inorder to create mutually reinforcing configurations that are well matched to anorganization’s strategies

- The relationship between an organization’s overall strategy and the strategies in four keyresource areas: people, information, finance and technology is critical for company topursue their action plan It is about to answer whether the separate resource areas of anorganization are capable of enabling strategies to be executed successfully and whetherthe strategies of an organization are being shaped to capitalize on the expertise in aparticular resource area

- How strategic change might be managed could be done in several ways First, byacknowledging that the challenge of managing change is not the same in all organizations;that the change context matters Second, by looking at different approaches to managechange, including the roles that managers and others play and the styles of managingchange they adopt Next, by considering a range of levers that might be employed tohelp manage change in organizations, including changes to organizational routines, themanagement of political and symbolic processes and other specific tactics for managingchange Finally the chapter considers how these various levers might be employed indifferent change contexts.

- There are three issues in the practice of strategy which includes: who to include instrategy-making activities (not just top management but middle managers, consultants andplanners as well); the kinds of activities that strategists do from selling strategic issues

to communicating chosen strategies; and the kinds of methodologies that strategists use,including away-days, projects, hypothesis testing and business plans

So strategy is all about integrating organizational activities and utilizing and allocating the scarceresources within the organizational environment so as to meet the present objectives Whileplanning a strategy it is essential to consider that decisions are not taken in a vacuum and that anyact taken by a firm is likely to be met by a reaction from those affected, competitors, customers,employees or suppliers

Strategic planning is a tool for organizing the present on the basis of the desired future That is, astrategic plan is a road map to lead an organization from where it is now to where it wants to be infive or ten years It is necessary to have a strategic plan for company or division To develop acomprehensive plan for company or division will include long-range and strategic elements

1.4 Benefits and difficulties in strategic planning

All companies recognize that it can no longer merely react to problems as they appear If it is

to continue as a leader in improving the profession, it must begin predict changes in the futurerather than merely react to change Each company or division must consider the long-termfuture

 Clearly define the purpose of the organization and to establish realistic goals andobjectives consistent with that mission in a defined time frame within theorganization’s capacity for implementation

 Communicate those goals and objectives to the organization’s constituents

 Develop a sense of ownership of the plan

 Ensure the most effective use is made of the organization’s resources by focusing theresources on the key priorities

 Provide a base from which progress can be measured and establish a mechanism forinformed change when needed

 Bring together of everyone’s best and most reasoned efforts have important value inbuilding a consensus about where an organization is going

 Provides clearer focus of organization, producing more efficiency and effectiveness

 Bridges staff and board of directors (in the case of corporations)

 Builds strong teams in the board and the staff (in the case of corporations)

 Provides the glue that keeps the board together (in the case of corporations)

 Produces great satisfaction among planners around a common vision

 Increases productivity from increased efficiency and effectiveness

 Solves major problems

There are a number of pitfalls associated with strategic planning First, the plan cannotbecome successful as expected because of changes in the environment in which the plan isobligation to act In addition, the strategic plan is worthless in an organization of a majorcrisis The crisis is a current problem cannot be solved by a strategic plan And, if theplanning process itself is weak, the resulting plan can be weak and inadequate organization

Maritime Bank‘s Priority Banking Strategy from 2012-2014

CHAPTER 2: OVERVIEW OF BANKING SERVICE IN VIETNAM

AND MARITIME BANK 2.1 Overview of Vietnamese banking industry

2012 is the difficult year for banking industry due to the crisis prolonged from end of 2011 tillnow The economy is facing with many challenges like many SMEs going to bankruptcy, RealEstate Market frozen, Bad debt increased, and pressure to re-structure banking system, etc

(Source:

http://vneconomy.vn/20120822024652648P0C6/no-xau-ngan-hang-sau-mo-xe-den-xan-tay.htm - Minh Đức (August 2012))

Non-performing loans (NPLs) of the banking system by the end of March, 2012 is more than202,000 billion, accounting for 8.6% of total outstanding credit, according to the State Bankannounced this afternoon According to the investigation results of the Inspection, supervision

of banks, with nearly 1.01 million borrowers selected sample of 57 Vietnamese creditinstitutions accounted for 90.1% of total outstanding loans of credit institutions, the NPL31/03/2012 of 202,000 billion VND will be accounting for 8.6% of total loans In some array issaid to be sensitive, the State Bank official "closing" a problematic past Specifically, loans realestate investment business by the end of May, 2012 is about 197,000 billion Bad debts in thissegment accounted for approximately 10.3% of total bank loans The value of collateral forreal estate loans of loans up to 180% of the outstanding loans

In particular, the number of corporate closed is 4105, increase of 35.4% Number ofentrepreneur shut down business is 22,219, increase of 1.3% In June alone, the number ofbankrupt business and deactivated is 4110, in which, the number of bankrupt companies is 610

The State Bank of Vietnam (SBV) has recently announced data on operations of creditinstitutions till the end of June 2012 whereby as of June 30, 2012, according to which the total

Growth rate of bad debt YOY

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

assets of Vietnam’s credit institutions posted a rise of 37.266 trillion dong, equaling to agrowth of 0.76 percent from the end of April 2012 Meanwhile, the equity of credit institutions

increased by additional 2.731 trillion dong and chartered capital increased by over 12 trillion dong.

Regarding chartered capital of credit institutions, as of June 30, 2012, the chartered capital of

state-owned commercial banks increased by additional 8.745 trillion dong, or 8.5 percent from

the end of April 2012.Similarly, chartered capital of joint stock commercial banks surged 2.787

trillion dong

The capital adequacy ratio (CAR),of finance and financial leasing companies decreased from11.71 percent at the end of April 2012 to 8.65 percent as of the end of June, 2012 reflect theunstable in capital management and credit risk of banks

However, following some economists, from Q4 2012 Vietnamese economy will be back ontrack to recover It is thanks to the fiscal policy from government on pricing management andinterest adjustment

Vietnam's economy has overcome the most difficult times and began to tend to thrive QuarterGDP I/2012 4%, II/2012 quarter reached 4.66% Overall, GDP growth rate of the first sixmonths of 2012 is estimated at 4.38%, while inflation is only about 3% (the lowest in threeyears)

Growth rate began a downward trend since 7/2011 and continue to fall in the first six months

of this year In particular, in June CPI is up 2.52% from last year and up 6.9% over the sameperiod Organizations assess the credibility Standard & Poor's has raised the credibility ofVietnam from negative to stable, saying the government was taking measures to tightenfinancial success

Like India and China, Vietnam forced to drastically lower interest rates and to accept slowgrowth to control inflation and stimulate the domestic economy Vietnamese interest rate hasdropped significantly, interest rates for loans to the rural agricultural sector, exports, industrialpopular support at 12% to 13% a year, for other business loans in 14% to 17.5% Basicallystable exchange rate, foreign currency liquidity is improved because of abundant supply offoreign currency from higher exports, the international balance of payments surplus is quitelarge, foreign reserves improved

Index of businesses started with bright signals to dissolve business began to decline about 10%

in May, inventories tend to decrease, from 34.9 percent in March to times 32.1% and 29.4% inthe month 4 and 5 In the first six months of 2012, Vietnam's export turnover has reached $53.1 billion, up 22.2% compared to the same period last year "The results achieved in the firstsix months of the year will support for the prospect of last 6 months which will have growth,better transformation", the Vietnamese newspaper quoted Prime Minister Nguyen Tan Dung inthe first meeting took place in July at the Hanoi

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

The economist also said that there is reason to believe that Vietnam's economic recovery Donot fall prey to "deadlock" in 2011, to support the economy, Vietnam's Prime Minister NguyenTan Dung has a wide range of economic policy decisions by experts as an innovativeassessment Accordingly, despite the economy 'cry' intense, Prime Minister Nguyen Tan Dungpolicy to increase aggregate demand in the plan and not break plans, market support, not only

at the business by supporting measures interest rates in 2009

Although the lowest economic growth over the past three years, but Vietnam will continueprioritize to curbing inflation, stabilizing macro economy Prime Minister Nguyen Tan Dungput the priority on curbing inflation, stabilizing the macro economy not only for 2012 but alsofor the next year It is also the foundation for sustained growth and sustainable development

At the same time, it is needed to maintain growth at a reasonable level, to promote satisfactorygrowth but not to cause macroeconomic instability and the high inflation does not come back

in the next year

Banking is industry reflecting clearly the recovery of economy Credit increases again aftermonths with negative growth ratio Number of new branches and staffs are one of factors to seehow banking system return on road

2.2 Priority Banking Service in Vietnam Market

Piority banking (VIP Banking) was implemented by foreign banks in Vietnam since 2009 Therace to get market share in high-income segment becomes aggressively when the commercialdomestic banks also began to participate in the “potential playing field"

So who is VIP customer? Gets a foreign bank operating in Vietnam as an example, to register

as a VIP customer, the total asset value of maintaining is a 1 billion USD or currencyequivalent value in deposit accounts, or in investments "Standard" VIP customers in thedomestic banks are now little more than a bit For example: deposit of USD 2 billion or more;deposit payment card account 6-month average of 500 million or more; or shareholders owning

2 billion par value of shares or more; addition, income customers from 60 - 70 million VND /month or more is considered VIP clients,

We could see the current domestic and foreign commercial banks when ranked VIP clients aremainly based on the income criteria or average balance of deposits as a basis for evaluation.The banks are also very flexible with the customer ranking criteria from time to time, in linewith the bank's business strategy to attract, and encourage long-term adherence to the bank,become guests VIP customers to be served with the high standards

Recent statistics show that in the world, the highend market segment accounts for about 1.2 2% of the customers in the bank In Vietnam, the estimated number of standard VIP customersaccount for about 10% of the total number of individual customers across the banking system.Therefore, VIP customers are not just customers purely so that they really became partnersbring significant bank revenue

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

Status of implementation VIP customer care

A series of commercial banks deploy services exclusively for VIP customers under differentnames Foreign banks to launch services "Priority Banking" for customers in Vietnam withluxury services chain and global benefits Other commercial banks serve VIP customers underthe name "VIP banking" or "Private banking" But all have a common characteristic: To ensureprivacy, providing optimal utility and transaction security Most banks are focused onexploiting VIP credit card products such as Visa Gold, Premier Master, Cremium VisaPlatinum,

Besides credit cards, some banks are also many products for VIP customers such as: mortgage,investment, insurance, asset management, with a commitment will address immediate financialneeds and take place, special offers on service fees and interest rates, preferential policies foroverdraft services and credit card foreign banks, with the advantage of extensive globalnetwork made commitments: VIP clients, they benefit and credit card use online bankingservices around the globe, the bank can support customers worldwide

In addition, banks are promising VIP customers enjoying the optimum customer care servicessuch as: special offers when using the service, shopping in the system of the bank's majorpartners, gifts, bonus points corresponding to the number of transactions,

With a dedicated card for VIP clients, customers immediately receive a formal welcome andimmediate priority transactions in a separate room, with wireless internet facilities, books,magazines, coffee, and tea serving In case the customer does not reach the bank to performtransactions, customers simply pick up the phone, call the dedicated line for VIP customers,bank will have its own staff to hear, receive the request, made and report back All are quick,accurate and absolute security, the level of "VIP customers"

Currently, the domestic banks’ new strategic focus is on providing a total solution for VIPcustomers such as: giving a separate reception space with amenities; giving the preferentialinterest rate when VIP customers wishing to borrow or savings, increasing overdraft limit, theATM withdrawal limit, reduction of international payment services, money transfer; prioritiessell foreign currency at preferential rates, receive meaningful gift in birthdays, New Year,

In addition, VIP customers always have a team of professional private service with style,attentive service, one-stop service to take place, newsletter real estate market analysis,securities daily With VIP banking, customers also shared consultants and resolve financialneeds That is, the experienced staff will advise investment securities, gold, foreign exchange

or financial services for business customers In addition, if the VIP customer complaints, RMwill be in charge of dealing with rapid time

To build a separate space, provide products of great utility for VIP customers would not havebeen a problem too difficult By the fact that at present, the high-end products for VIPcustomers is basically retail banking products for mass, plus some other value But to have aprofessional staff to serve, knowledgeable financial markets, meet the requirements of VIP

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

customers is not easy Cost and long training time, but also requires the employee experience,skills cause trust with customers

One of the new trends "VIP banking" in the world today is the type of service called "lifestylemanagement", ie bank dedicated completely to the special VIP customer management, orconsultant with a lot of responsibility as the organization of events related to housing, leisure,entertainment, or to the more specific obligations arising as customer support ticket booking,reservation hotels when traveling; currency exchange rate information and advice about health,law

Therefore, at this time, the VIP customer service Vietnam's commercial banks have not "touch"

to all the needs of VIP A profit from operations for VIP collection service is notcommensurate with the costs when products or services are relatively simple operators (mainlycards and related financial transactions directly to the bank) The reason is that the services can

be profitable, high commissions as capital management, investment consulting, partnership,inheritance management, commercial banks are not interested in exploiting properly

Adequate service level

To exploit effective VIP segments, now many banks have concentrated investment of resources

to launch the product flexibility, consistent with the needs of this high-end customer segments.Various products and services in areas such as insurance, investments, credit cards contribute

to enrich the product portfolio to meet the diverse needs of VIP customer in increasing assets.The bank also promote strategic cooperation with suppliers of products and services outside thebanking sector to customer service package only VIP card issued by the bank The goal is forVIP customers can use bank cards as a modern tool of payment and enjoy the preferentialpolicy discount from the unit in addition to cooperation with the banking industry In addition,some commercial banks building data management systems and customer analysis, systemgifts, gift message with the desire to maintain the, socialize relationship between banks andcustomers

Some commercial banks have built for themselves a strategic interest, VIP customer support inall circumstances A number of other banks to consider the possibility of outsourcing servicesgifts for VIP clients But even according to the method are also sharing the same basic process:

- Set the profile gifts for VIP clients: With the support of the CRM tool (software systemsCustomer Relationship Management) is a storage place full of information about the masscustomers as well as customers VIP When conducting a campaign gifts, customer care staffcan base on which to choose gifts, gift given form to match each customer with psychology

Unlike ordinary souvenirs, gifts for customers, partners of VIP requires an imagination and can

be personalized, relevance and implications of the emotional gift with the cover experienceresonates, rich meaning from gifts That is how the record marks, is the invisible cord that linksbanks and VIP customer relationships are a reliable partner, mutual understanding

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

- Before giving gifts: base situation to plan for density gifts, gift funds for services is expected.Contact VIP customers to confirm some basic information and understand the need forcustomer gifts

- Conducting gifts: customer care staff must be instructed and trained more direct customercare skills including behavior, gestures, words, greetings and communication Employeesshould be trained the skills to adapt to each customer VIP on the way, the method of handlingdiverse situations which may occur in the process of gift giving The ultimate goal is customerexperience, and feels the individual care, making customers happy and satisfied with theservices they receive

- After the gift-giving: After giving gifts to customers, from 2 - 4 days, the customer caredepartment will contact (phone / email) to thank customers and match to find out someadditional information such as customer satisfaction on gifts, stylish gifts, as well as servicesthat banks are offering products, learn more about customer preferences for the next gift-givingand gift forms would want

In addition, a number of other banks also conduct daily financial newsletter sent to the office ofVIP customers as a value added service his VIP customer care

Competition and exploit the high-end customer market share among commercial banks havestarted to become exciting A domestic commercial bank said it will open 30 outlets VIP; stillrepresent a foreign bank operating in Vietnam announced that the bank is preparing to launch acompelling product for VIP customers This promises a new race of commercial banks in thedeployment of services and products dedicated VIP customer segment in Vietnam today.Sinceearly 2009, respectively, HSBC, Standard Chartered and ANZ launched retail bankingservices And recently Citibank has Citi Gold product package

Advantages of foreign banks are that they would have individual clients, mainly the VIPsincome and awareness is high For example, using the services of Citi Gold clients, require aminimum balance of $ 50,000 or more

Under pressure to compete with foreign banks, domestic banks also launched financialproducts for high-end customers and have strong plans in late 2009, early 2010

VP Bank is one of the first to offer high-end product line, which is VPBank MasterCardPlatinum credit card - the first card in Vietnam to adopt EMV chip standard securitytechnology for credit limit up to 500 million USD

Other banks also have the Visa-line products for customers with good solvency and largespending needs The credit card banks also assigned credit limits to target different customers

However to have policies specifically for high-end customers is not really obvious While, inthe foreign bank, the customer care is very focused For example, customers have a $ 1 millionbalance will have special care; even banks have necessarily focused affiliates serving 20 - 30VIP clients

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

Techcombank is now piloting financial products for high-end customer segments (privatetransaction for customer preference) Although not widely introduced, but the bank has piloted

in a number of branches

A series of internal bank expressed targeting VIPs Lien Viet bank began to study the earliestpossible time to market the product package dedicated to high-end customers VIB alsoidentify the target audience of the Bank will be subject to income customers from the middleclass and above From customer segments, VIB will study and make specific product package,

in accordance with the characteristics of each customer According to industry experts, thebank will want to enter customer segments upstream and Vietnamese banks also have coreproducts But the current reality, the banks still does not have clear benefits to customers ofthis segment as foreign banks

Most banks in Vietnam have not come up with a package specific to each target customer ismiddle or upper most banks only build the package common to the majority of part of thepopulation, in order to serve the maximum number of customers For the audience, they want

to target or have preferential treatment in the policies of those product they will offer morefavorable conditions for the clients For example, in a mortgage loan products, customers have

a higher income (the income can prove through documentation), the conditions of the loanextension, bigger loan amount, time longer life of the loan, preferential interest ratesprovided

However, the difficulty setting up these products is not less Senior leadership of one of thefive major banks in Vietnam say that the income in Vietnam is generally very low compared tothe world The number of rich people is increasing but not many and a major obstacle is thatincome in Vietnam is not really transparency

"It may in fact, wealthy audience in Vietnam quite large, but the group is ready to prove hiswealth is not much This is pretty big barrier for banks when conducting customer accessdevelopment of this product line, "the share

Creating a separate policy for this segment of customers and bank staff training VIP service in

a professional manner and all, standard infrastructure, as well as no small difficulty makinginternal banks will have to take some time to overcome before reaching this segment in aprofessional manner

Even new egg in Viet Nam, but according to the experts in the industry towards high-endcustomer segments with standard banking services will be the main trend of the bank Bysuperior customer segments in Asia - the region is considered the world's fastest growing, isstill increasing Therefore, Vietnam is no exception within this development, especially whenthe majority of the financial needs of customers in this segment have not been met Mr ShirishApte, CEO of Citibank in the Asia-Pacific share the Citigold product launch that, this is thefirst two CitiBank look far more about the country of Vietnam CitiBank’s CEO also made thecomment, by 2015, Vietnam will be a large market in the segment of high-end customers

(sources:http://www.vnba.org.vn)

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

2.3 Overview of Maritime Bank

Vietnam Maritime Commercial Joint Stock Bank – Maritime Bank is a commercial joint stockbank incorporated and registered in the Socialist Republic of Vietnam

The Bank was established on 8 June 1991 under Operation License No 0001/NH-GP by theState Bank of Vietnam for operating duration of 25 years in Hai Phong and used to be SMEsoriented bank The operating duration was increased to 99 years in accordance with Decision

No 719/QD-NHNN dated on 7 July 2003 of the Governor of the State Bank of Vietnam

The Bank’s principle activities are to provide banking services including receiving short,medium and long-term deposits from organizations and individuals; making short, medium andlong-term loans and advances to organizations and individuals based on the nature andcapability of the bank’s sources of capital; foreign exchange transactions, international tradefinancial services, discounting of commercial papers, bonds and other valuable papers, andproviding other banking services allowed by the State Bank of Vietnam From 2010, MaritimeBank has been transformed with the consultation from Mc Kinsey After 3 years, MaritimeBank changed long term strategy to retail banking

The initial chartered capital of the Bank was VNDm 40,000 under Operation Licence No.0001/NH-GP and increased periodically The actual chartered capital as at 31 December 2011

is VNDm 8,000,000 (as at 31 December 2010: VNDm 5,000,000) Today, Maritime Bank hasmore than 230 TSOs in nationwide, 300 ATMs, and more than 6,000 staffs Maritime Bank isone of the twelve biggest commercial banks in Vietnam which are considered stably growingand profitability Its’ Charter Capital reached 8000bio and total Asset is 110,000bio

Maritime Bank Organization Chart:

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

Board of Directors

Chief Executive Officer

Credit and Investment Committee

HR Committee BOD Office

General Assembly of Shareholders

Board of controllers

Credit Committee Assets and Liabilities

Committee (ALCO) Executive Committee

Internal Audit Dept

EXCO Office

Standing Deputy General Director Credit

Management Board

Risk Recovery Committee Risk Management Committee Strategy Committee

Audit Committee

Board of Auditors

Public Relations Board

Strategy Management Board

Legal and Compliance Control Board Financial

Investment Board

Network Development Action Board

Credit Approval Division

Banking Technology Division

Talent Management Division

Operations Division Credit

Approval Center Credit Controller Center Credit Support Center HN/HCM Area Credit Support Center

Training Center Recruitment Department

HR Manageme

nt Department

HR Operations Department

Card & E-banking Center

Call Center

Transaction Center

FI Operations Department Operations Manageme

nt Department

Banking Technology Developme

nt Center Banking Technology Operations Center Support &

Services Department Banking Technology Solutions Center

SME Banking LC Banking FI Banking

Risk Management Division

service quality dept

Capital Center

FI Center Economic &

Financial Market Research Dept ALM/

Treasury Dept Corporate Bond Investment Dept Support and Operation Dept

Corporate Credit Risk Management Center Counterparty Risk Management GM/FI Dept Operations Risk Management Dept Retail Credit Risk Management Center Risk Analytics, Models Dept

Trade

finance

center

Financial Management Division Mgmt Accounting &

Business Performance Center Financial Accounting &

Corporate Hubs

Cash & Vault Centers

Market/

Liquidity Risk Dept

Credit Appraisal&

Investment Center

Asset Manageme

nt Department Support Center

Visions

To be one of the best commercial banks in Viet Nam

Mission

To provide Customers with ‘best in class’ products and services in line with their needs;

To create for the Employees a professional working environment and offer them significantdevelopment opportunities;

To bring sustainable benefits to Shareholders via focused execution of business plans based onglobal standards;

Logo

Support Divisions Business Divisions

Governance/

Management Units

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

- STP Award from Bank of New York (BNY Mellon);

- Global Payments and Cash Management from HSBC;

- The Recognition Award - For Achieving a High Straight-Through Rate for PaymentProcessing from Wells Fargo

- "Top 20 most famous brands in Vietnam" from VIPA thanks to Maritime Bank’s outstandingachievements in the construction and development of famous brands;

- 3rd grade Labor Medal from the Vietnamese President;

- Emulation flag from the SBV;

- Certificate of merit awarded by the SBV to the CEO and the Executive Committee of TradeUnion for their outstanding achievements in labor emulation, development of sustainable tradeunion

- “Vietnamese Golden Enterprises” cup for the CEO and “Vietnamese Golden Enterprises” cupfor Maritime Bank awarded by VINASME;

- Maritime Bank was one of 3 banks in Vietnam which were awarded with Vietnam BankingReputation Awards 2011 by Media Tenor Group, Vietnam Report JSC and Vietnamnet

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

- Award “Vietnam Strong Brand Name 2011” from the VnEconomy and Vietnam TradePromotion Agency (MIT)

- Among top 3 banks awarded with Best New Card Launch/Relaunch by ASEAN’s leadingexperts of MasterCard and marketing field in 2011 MasterCard Hall of Fame Award

Main Financial indicators

professional and prestigious retail banks in Vietnam financial market, Maritime Bank has made

a relentless effort and achieved encouraging results In 2010, Maritime Bank launched utility accounts as strategic products and in 2011, the bank improved modern payment features

multi-to provide the most effective and convenient financial solutions multi-to cusmulti-tomers Besides, with theaim of diversifying product portfolio serving higher demand of customers, Maritime Bankintroduced a series of new products with leading and advanced features in financial marketsuch as saving packages to suit different customers; packages combining insurance(Bancasuarance) to deliver maximum benefit in value and also to provide comprehensivehealth care service to customers

The number of customers also experienced a dramatic growth rate of 136% as opposed to theyear 2010, which made a substantial contribution to the increasing business scale of the bank

Growth in the number of customers (Unit: Customer)

Growth in deposit balance from individual customers (Unit: VND Bio)

Service quality

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

To improve service quality, Retail Hubs were always examined according to the 5S target andreceived support from PUSH team (Action team – the intermediary that passes requests related

to Human Resources, Administration and Network Development from Retail Hubs to the focalpoints for faster and absolute settlement) The staff always paid attention to opinions ofcustomers in order to improve policies regarding client service

Maritime Bank developed staff training programs on excellent customer service with excellentservice program (B.E.S.T - Beyond Excellent Service Training), examined the 4C targets(Cười – Chào - Cảm ơn – Chúc / Smile – Greeting – Thanks - Wishing), established customerservice team (POLISH team) to support Retail Hubs to ensure staff with the most professionallook Besides, the project of skill improvement for sales force (WINS - Winning, Influencingand Negotiating for Sale) was also organized in order to facilitate the sales force of RetailBanking with important skills in dealing with customers and introducing products

 POS:

Maritime Bank connected with domestic card alliances allowing card holders of the bank to make transactions at 14,000 POS across the country

 M-banking

Internet banking: Maritime Bank successfully implemented the new version and was

highly rated by customers This service allowed customers to easily manage finance everywhere, transfer money without limit, bill payments, prepaid services, online savings and many other services

Mobile banking: Maritime Bank successfully implemented Mobile App for Iphone and

Android users with features and services associated with smart phones Besides,

customers might use Mobile banking with any phones using web browser via Mobile web application of Maritime Bank

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Maritime Bank‘s Priority Banking Strategy from 2012-2014

SMS banking: Maritime Bank upgraded SMS banking allowing customers to transfer

money in the same system and top up for prepaid services using SMS only In addition, SMS brand name service helped customers to recognize Maritime Bank brand more easily

Online payment with M-Paynow: M1 holders of Maritime Bank might make online

payment in more than 300 commercial websites in Vietnam such as Air Mekong, Jetstar, Megastar, Muachung, Nhommua, Nguyen Kim, Media Mart and others

Business orientations for 2012

The year 2012 marks the return of retail credit activities in Retail Banking Aimed at building

up efficient retail business activities and developing sustainably, Retail Banking willprogressively launch credit products that meet a wide range of customer demands andconcurrently continue increasing fee income Besides, the strategy to optimize profits percustomer will continue to be implemented aggressively through the provision of diversifiedproduct packages suitable for each customer segment as well as specific regional characteristic

2.3.2 SWOT analysis of Retail Banking in Maritime Bank

2.3.2.1 Opportunities

Karolyn Seet, Analyst of US Moody’s credit rating agency said at the Vietnam BusinessDevelopment Forum that with the population of over 85 million, Vietnam’s finance marketremained at the beginning and the high potential to develop retail banking services Theinstitution assessed, Vietnam’s retail banking growth may be 30-40% in the forthcoming time

if well applying technologies Meanwhile, US market research firm Research & Marketsexpected Vietnamese card market would be more active with a forecasted growth rate of 18.5%

According to Vu Viet Ngoan—Chairman of the National Finance Supervision Committee, only10-15% of consumers are using banking services, which is a small figure The density of 16transaction offices every more than 100,000 people is a low ratio, centralized in big cities Alot of rick segments should be accessed and expanded by banks

Statistics of International Data Group (IDG) indicated that there are 52 banks in Vietnam,ranking the second in south eastern Asia region in terms of number of banks (after Indonesiawith 77 banks) and the fifth in terms of total assets of $171 billion None of Vietnamese banks is among top ten banks in the region in terms of assets, but statebanks have the workforce of up to 38,000 people, the highest number among southeasternAsia

Till September 2011, the number of payment cards doubled from 14.7 million cards (2008) to

33 million cards, with over 12,000 ATMs and 50,000 POS In which, over 20 banks launchedInternet Banking and around eight lenders offered Mobile Banking at different levels

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