Branch management at multinational banks: Experience of Mizuho Corporate Bank, Ltd and lessons for Vietnamese commercial banks

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(equivalent to 2,671.37 billion Yen), good capital ratio reached 10.55%, the founding members all have very good credit rating (S&P = A). MHFG is the second largest corporation in Japan with total assets, second only to Mitsubishi UFJ Financial Group (MUFG) with total assets of 2.02 trillion USD. [18, 19].

Table 1: Total assets and capital ratio of MHFG in March 2009

MHFG

Financial Group

Sumitomo (SMFG)

Tokyo Financial Group

Mitsubishi (MUFG)

CEO

product

USD1.55

trillion

USD1.22

trillion

JPY119.6

trillion

USD2.02

trillion

JPY198.73

trillion

Proportion

capital (BIS Ratio)

10.05%

11.47%

11.77%

Proportion

(S&P)

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Source: 2008 fiscal year-end summary report on MHFG

At the same time, the founding members of MHFG participated in the listing of the group's shares on the Tokyo Stock Exchange, the Osaka Stock Exchange and the New York Stock Exchange. MHFG is one of the largest financial institutions in the world, providing a complete financial service system including financial services in retail banking, corporate banking, securities advisory and mergers and acquisitions, asset and trust management, credit cards and consumer finance, private banking and financial management services, capital projects and private capital, corporate research and consulting, etc. providing loans through its founding members, in which the founding members are multinational banks, multinational companies with many branches and representative offices, and functional management units.

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APPENDIX 2: INTRODUCTION OF MIZUHO CORPORATE BANK, LTD. HANOI BRANCH

1. Formation and development process

Mizuho Corporate Bank, Ltd. Hanoi Branch, one of 39 branches of MHCB in the world, was established in Vietnam in 1996 with the original name of Fuji Bank, Hanoi Branch (establishment license No. 26/NH-CP issued by the State Bank of Vietnam and effective from July 3, 1996, with transaction address: 4th Floor, Building 63 Ly Thai To, Hanoi, Vietnam, initial legal capital: 15 million US$. On April 1, 2002, Fuji Bank, Hanoi Branch changed its name to Mizuho Corporate Bank, Ltd. Hanoi Branch after the merger of three major Japanese banks to form Mizuho Financial Group. After 14 years of operation and continuous development, Mizuho Corporate Bank, Ltd. Hanoi Branch has a relatively stable market and a significant number of loyal customers in Vietnam. In In recent years, Vietnam has had a favorable investment environment and has increasingly received investment capital from foreign individuals and organizations, including Japanese investors. With such a development trend and with the strategy of expanding global business, MHCB has opened a representative office in Ho Chi Minh City (address: 18th Floor, Sunwah Tower, 115 Nguyen Hue, District 1, Ho Chi Minh City) and has received an official operating license since March 30, 2006 (Establishment License No. 02/NH-GP issued by the State Bank of Vietnam). On October 1, 2007, the representative office in Ho Chi Minh City was officially converted into a foreign bank branch under the name Mizuho Corporate Bank, Ltd. Ho Chi Minh City Branch.

With the noble mission applied to all branches of MHCB in the world: "Mizuho is your global financial partner - Your Global Financial Partner", the Headquarters in general and branches of MHCB in the world in particular, especially the Hanoi Branch, are making every effort to become a "Global Bank", capable of providing financial solutions and added value to the customer network.

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customers worldwide through a unique strategy, which is the "Channel to discovery" business strategy . With this strategy, the bank has continuously developed service types, expanded its global business network and other social activities carried out at all branches such as financial support for educational and training institutions, charity activities, environmental protection activities... The bank always aims for a goal of "Financial partner to help customers orient the future and achieve all their wishes".

Table 2: Data of Hanoi branch (as of March 31, 2009)

Unit: million dollars

Profit

Hanoi Branch	HCMC Branch	Total HN and HCMC
Operating profit dynamic	17.46	7.79	25.25
Net profit	11.03	4.35	15.38
Total assets	1.101	503	1,604
Total deposit	273.53	184.97	458.50
Total Loans	183.65	191.46	375.11

(Source: Financial data summary table of Hanoi Branch)

2. Organizational structure of MHCB Bank. Hanoi Branch

In recent times, MHCB Bank. Hanoi Branch has continuously expanded its business and developed. In 2006, MHCB Hanoi Branch had only 07 departments and 90 employees, by September 30, 2009 this number had increased to 11 departments and 125 employees. Members of the Board of Directors include: Mr. Akihiro Saito: General Director, Mr. Norihiko Shimizu: 1st Deputy General Director, Mr. Kimihisa Ono: 2nd Deputy General Director. Specialized departments: Human Resources Department, General Administration Department, Accounting Department, Business Department 1, Business Department 2, Information Technology Department, Japanese Enterprises Department, Corporate Finance Department, Foreign Exchange Business Department, Risk Management Department, Legal Department.

APPENDIX 3: OVERVIEW OF VIETNAM'S BANKING INDUSTRY

Before 1990, the Vietnamese Banking System was a one-tier system, with no separation between management functions and business functions. The State Bank played the role of both the Central Bank and a Commercial Bank. In May 1990, two Banking Ordinances were issued, the Ordinance on the State Bank of Vietnam and the Ordinance on Credit Cooperative Banks and Finance Companies, which officially changed the operating mechanism of the Vietnamese Banking System from one tier to two tiers: The State Bank performs the task of State management of monetary, credit, payment, foreign exchange and banking business activities; performs the tasks of a Central Bank (CB) - the only bank allowed to issue money; is a bank of banks and is the State Bank; The Central Bank is the agency that organizes the implementation of monetary policy, taking the task of stabilizing the value of money as the main objective and fundamentally controlling specific management policies for the system of level 2 banks (source: Banking sector summary report). The banking level operates in the fields of currency circulation, credit, payment, foreign exchange and banking services throughout the national economy, carried out by banking and non-banking financial institutions.

In recent years, the banking industry has grown rapidly in both quantity and scale. From 1991-1993, the number of joint stock commercial banks jumped from 4 to 41 and peaked at 51 in 1997. After the 1997 financial and monetary crisis, a number of banks went bankrupt or had their operating licenses revoked due to ineffective business operations, so this number has decreased. As of October 2009, the Vietnamese banking system has 3 state-owned commercial banks, 40 joint stock commercial banks, 5 joint stock commercial banks and 41 branches of the State Bank of Vietnam.

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Table 3: Number of banks in the period 1991-2009

Year

199 1	199 3	199 5	199 7	199 9	200 1	200 5	200 6	200 7	200 8	2009 *
Commercial Bank D	4	4	4	5	5	5	5	5	5	4	3
Joint Stock Commercial Bank	4	41	48	51	48	39	37	34	35	39	40
NHLD	1	3	4	4	4	4	4	5	5	5	5
CNNHN N	0	8	18	24	26	26	29	31	41	41	41

(Source SBV – 2009* is as of October 2009)

In addition to the growth in quantity, the scale of operations of the banking system also grew strongly. In 2007, the total assets of the entire system increased to more than 1,500 trillion VND, equivalent to more than 130% of GDP in 2007. The growth of the banking system focused on two traditional activities: lending and mobilization. The growth rate of credit and deposit mobilization activities was very high, reaching an average of over 35%/year during the period 2002-2007. In particular, in 2007, credit growth became too hot when it reached a growth rate of 54% due to the high demand for credit in the economy, including the demand for capital for investment in securities and real estate (source: IMF, General Statistics Office, BVSC). Rapid credit growth puts the banking industry at greater risk as the industry-wide credit/deposit ratio is always above 90%, higher than the regional average (about 83%). [21]

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Credit/Deposit Ratio, 2002 - 2007 in Asia Region, 2006

2007

2006

2005

2004

93%











	91%

91%

99%

Korea Thailand Malaysia Vietnam China Philippines Singapore

98%

95%

91%

86%

85%

81%

121%

India 76%

2003

2002

93%

Indonesia Taiwan

Hong Kong

68%

66%

42%

Figure 2: Comparison of credit/deposit ratio with countries in the region

Source: Summary report on credit management of Vietnamese commercial banks by ADB and BVSC

synthetic

Financial depth has also changed significantly as Vietnam's credit/GDP and deposit/GDP ratios have increased rapidly over the years and reached 71% and 78% respectively by the end of 2006. This shows the rapid development of the Vietnamese banking system. However, this ratio is still lower than the average in the region.

Korea Taiwan Hong Kong China Malaysia Singapore Thailand

160%

143%

134%

131%

113%

95%

77%

Hong Kong Taiwan China Korea Malaysia Singapore Thailand

322%

216%

152%

133%

120%

118%

79%

Vietnam 71% Vietnam 78%

India Philippines Indonesia

57%

35%

25%

India Philippines Indonesia

75%

41%

37%

Figure 3: Comparison of credit/GDP and mobilization/GDP ratios in 2006

Source: Summary report on credit management of Vietnamese commercial banks by ADB and BVSC

synthetic

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These indicators show that the banking system still has growth potential, but the growth rate in the coming years will decrease. At the same time, the banking system will have to focus more on increasing financial capacity and improving credit quality to ensure system safety.

In addition to the two traditional business segments of credit and capital mobilization, the service business segment has also grown strongly. Along with strong investment in technology, facilities and diversification of products and services, income from these business segments has also increased sharply in recent years.

In 2007, the average growth in net service income reached 92% compared to 2006. For banks that have implemented a strategy to develop service activities, income from this activity also accounts for an increasingly high proportion of total income. Banks with leading positions in service activities include: VCB, BIDV, ACB, EAB, TCB.

However, Vietnamese commercial banks also face many challenges and great competition from other banks, especially from branches of foreign banks. Through the above analysis, the banking market has a clear differentiation between banking groups. There is a clear differentiation between banking groups in terms of scale, market share, customer base as well as development strategy. The scale of assets and equity of Vietnamese banks in recent years has grown strongly but is still much lower than the average in the region. The state-owned commercial bank sector has a superior scale, but the growth rate is slower than that of the joint-stock commercial bank sector.

The rapid growth in capital scale has helped banks significantly improve their financial capacity. The average capital adequacy ratio (CAR) of state-owned commercial banks increased from 7% in 2006 to 9% in 2007, while that of joint-stock commercial banks averaged over 12%. Meanwhile, this ratio of the Asia Pacific region is 13.1%, of the East Asia region is 12.3%. According to BASEL II regulations, CAR of banks must reach a minimum of 8%. Therefore, in the coming years, the trend of increasing capital of banks will continue to occur.

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Table 4: Capital adequacy ratio (CAR) of some banks

AGRI	VCB	BIDV	ICB	MHB	ACB	STB	EAB
2005	0.41	7.27	3.97	4.36	10.19	12.1	15.4	8.94
2006	4.94	9.57	4.82	5.18	9.31	10.89	11.82	13.57
2007	7.2	N/A	11	N/A	9.44	16.19	11.07	14.36

Source: Banking industry report 2008 compiled by BVSC

Market share among banking sectors has shifted strongly from the state-owned commercial bank sector to the joint-stock commercial bank sector in recent years:

Table 5: Lending market share in the period 2000-2007

2000	2001	2002	2003	2004	2005	2006	2007
National Commercial Bank	77%	79%	80%	79%	77%	73%	65%	55%
Joint Stock Commercial Bank	9%	9%	10%	11%	12%	15%	21%	29%
CNNHNN&LD	12%	10%	9%	9%	10%	10%	9%	9%
Financial organization other	2%	2%	2%	2%	2%	2%	5%	7%

Source: ADB Banking Industry Report 2008 compiled by BVSC

Table 6: Market share of mobilization in the period 2000-2007

2000	2001	2002	2003	2004	2005	2006	2007
National Commercial Bank	77%	80%	79%	78%	75%	75%	69%	59%
Joint Stock Commercial Bank	11%	9%	10%	11%	13%	16%	22%	30%
CNNHNN&LD	10%	10%	9%	9%	10%	8%	8%	9%
Financial organization other	1%	1%	1%	1%	2%	2%	1%	2%

Source: ADB Banking Industry Report 2008 compiled by BVSC

The State-owned commercial banks are still dominating the market share in the main business segments. However, the market share of this group is tending to narrow due to strong competition from the Joint Stock Commercial Banks and the State Bank of Vietnam. In 2006-2007, the market share of this group decreased sharply because the State-owned commercial banks did not focus much on increasing

Branch management at multinational banks: Experience of Mizuho Corporate Bank, Ltd and lessons for Vietnamese commercial banks - 17

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