Capital Use Structure and Deviation of Asset Proportions Compared to Previous Year of Vietinbank

Table 2.2. Coefficients and ratios of capital structure conversion at VietinBank

Year

Source: Table 2.1 and calculations of the researcher

The coefficient of capital use structure shift Dm hđ in the years is insignificant. The index of Xdm hđ from 2008-2016 is 0.003314. Thus, in 2009, 2010, 2012, Dm hđ is larger than Xdm hđ, proving that the capital use structure according to activities at Vietinbank has shifted greatly in these years. When calculating the ratio of capital use shift , although the measurement data is not consistent in all years, it basically reflects the level of capital use structure shift quite consistent with the coefficient of capital use . Specifically, in 2008-2009, the value of cosФ = 5.7621, corresponding to the ratio of capital use of 6.4%; In 2009-2010, the value of cosФ = 4.646 corresponds to the operating rate of 5.16%, in 2011-2012, the value of cosФ = 4.3434 corresponds to the operating rate of 4.83%.

In the remaining years of the research period, the index Dm hđ < Xdm hđ shows that the capital structure at the Bank has not changed significantly, the scale of change is lowest in 2014 with the coefficient Dm hđ = 0.00033 followed by 2011 with Dm hđ = 0.00099. The years of high K hđ at VietinBank are due to the fluctuation in the proportion of most asset items. The proportion of treasury value decreased from 7.17% in 2008 to 3.68% in 2010. Similar to the value of deposits and

Through the indicators of capital structure by activity, deviation of item proportions, coefficients and conversion ratios (Dm hđ , K hđ ), it can be seen that: From 2008-2012, the capital structure by activity at the Bank shifted significantly. This was also the period when the macroeconomic situation was complicated, the Vietnamese financial market was greatly affected by domestic and foreign instability, and many Vietnamese commercial banks lacked available capital. The capital structure by activity at Vietinbank was affected by monetary policy management tools and market adjustment measures of the State Bank. Along with that, Vietinbank proactively shifted its activities from market 1 to market 2 to increase the profitability of business capital during the period when the demand for available capital of other credit institutions increased. During the period 2013-2016 when the currency value was stable, the shift in capital structure according to activities at Vietinbank was insignificant.

2.2.1.2. Shifting the capital structure within each activity

(1) Shifting the treasury structure

The treasury structure and deviation of the proportion of treasury items at Vietinbank in 2008-2016 are reflected in Table 2.3.

* Budget structure and deviation of proportion of each budget item

Monthly, at the ALCO Committee meeting, the capital balance and liquidity are the main topics discussed. Based on the analysis and assessment, the ALCO Committee makes recommendations to the Board of Directors and the Executive Board for timely guidance to ensure the maintenance of liquidity. The treasury is the primary reserve of commercial banks. At Vietinbank, it is mainly maintained in the general account at the State Bank and other credit institutions.

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Table 2.3. Treasury structure and deviation of item proportions compared to previous year at Vietinbank

Unit: billion VND

Target

Source: [59] and NCS's calculation

According to the SBV's Regulation on Deposit Provisions, credit institutions must maintain deposit provisions on their temporary deposits at the SBV according to the principle that the average balance of the temporary deposits account during the period of deposit provision maintenance must not be lower than the deposit provision during the period. Vietinbank, as well as other credit institutions, usually maintain the balance in the temporary deposits account at the SBV just enough for the required deposit provision. Cash at the Bank accounts for a low proportion of the treasury value. Meanwhile, the proportion of temporary deposits at other credit institutions accounts for a fairly high proportion and increased sharply in 2016 to 68.23%. Compared to the list of other forms of capital use, the deviation in the proportion of treasury items between years is very large, which also comes from the characteristics of this type of asset - high liquidity.

In 2008-2010, the deviation in the proportion of treasury items was not large, the shift was mainly from deposits at the State Bank to cash because since 2009, the State Bank has adjusted down the reserve requirement ratio. In 2011, the deviation in the proportion of current accounts at the State Bank was

+21.89%, due to the SBV increasing the reserve requirement ratio for customer deposits in foreign currencies (4% at the end of 2010, 8% at the end of 2011). The high value of deposits at the SBV also reflects that the value of mobilized capital of the Bank in 2011 was still mainly short-term, leading to a decrease in the proportion of cash and current assets at other credit institutions, mainly due to a decrease in the proportion of current assets at other credit institutions (-19.28%). In 2012, the change in treasury structure took place in the opposite direction: the deviation of deposit proportion at the State Bank was -19.96%, combined with the deviation of cash proportion at the treasury of -9.47%, leading to the deviation of current account proportion at other credit institutions of +26.43% compared to 2011. The treasury structure in 2013-2015 did not have a large shift, the value proportion of items was quite stable between years. In 2016, the treasury structure fluctuated strongly in the direction of reducing the proportion of cash with a deviation of (-6.76%), deposits at the State Bank (-13.45%), increasing current account proportion at other credit institutions with a deviation of +20.21%.

* Coefficient and ratio of fund structure transformation (Dm nq and K nq )

The level of fund structure transformation at Vietinbank during the research period through the coefficient Dm nq and the ratio K nq is reflected in Table 2.4.

Table 2.4 . Coefficient Dm nq and rate of fund structure shift K nq

Year

Source: Table 2.3 and calculations of the researcher

The coefficient of Dm nq in the years is very large, the average of Xdm nq in the period 2008-2016 is 0.02133 , so the coefficient of Dm nq in 2011, 2012, 2016 is much larger than Xdm nq in the whole period, K nq in these years are 29.36%, 32.18% and 21.91% respectively. Meanwhile, from 2013-2015, the Dm nq index is very low compared to Xdm nq in the whole period and tends to decrease gradually, shown through the shift rate between the years from 2013-2015 is 3.01%, 6.82% and 1.56% respectively.

Thus, it can be seen that the treasury structure at Vietinbank during the research period has fluctuated strongly. In terms of nature, this is the most liquid item on the balance sheet, so the conversion between items will be easier. The large shift is mainly due to the impact of the adjustment of the SBV's reserve ratio, which has affected the transfer between cash and temporary deposits at the SBV and at other credit institutions. In addition, one of the reasons that greatly affects the decreasing trend of cash ratio is the innovation in Vietinbank's capital management mechanism implemented since April 2011: implementing the transition from the deposit - lending mechanism to the capital buying - selling mechanism (centralized capital management mechanism FTP - Fund Transfer Pricing). Along with the establishment of the VietinBank Payment Center since October 2014, a model for centralized management and processing of money transfer transactions has been successfully built. Up to now, all money transfer transactions from the LNH payment system and bilateral payment system have been processed centrally at the Center, contributing to reducing the proportion of cash in the total value of the Bank's treasury.

(2) Shifting the lending structure at Vietinbank

In Vietinbank's business strategy, lending is identified as the core business activity [63]. The Bank's risk management work is gradually being innovated and

completed. Before 2013, Vietinbank's lending strategy and risk management strategy were not comprehensive. Because in the T-DH strategy or annual development strategy, although some contents such as: loan structure by term, customer target, growth rate,... were mentioned, they were only principles and orientations. Since December 2012, Vietinbank has issued documents detailing lending limits, acceptable risk levels (risk appetite). Decision 769/QD-HDQT-NHCT35 issued on June 5, 2013 and currently Decision 532/2016/QD-HDQT-NHCT9 specifically stipulate the risk management organization model; risk management steps (at the portfolio and transaction levels); policy system and information technology infrastructure supporting risk management.

Since 2013, Vietinbank has controlled and managed RRTD by setting limits corresponding to the risk limits that the Bank sets for each customer and each sector. Decision 1867/2012/HĐQT-NHCT35, dated November 29, 2012, regulating lending limits is the basis for forming and adjusting the lending structure.

Table 2.5. Loan limits at Vietinbank

STT

Source: [63]

* Shifting loan structure according to customer and economic sectors

- Loan structure by customer type, economic sector and proportion deviation:

The structure of outstanding loans by customer type and economic sector at Vietinbank has shifted in a positive direction. It can be mentioned that the distinction between customer ownership forms has been eliminated, customer groups have been divided according to scale and lending industry to avoid concentrated risks. In order to match the development trend of the economy, Vietinbank has focused on developing lending products for SMEs in non-state economic sectors. The data in Table 2.6 clearly reflects this situation.

The proportion of outstanding loans to state-owned enterprises tends to decrease gradually. If in 2004, outstanding loans to state-owned enterprises accounted for 45%, in 2005 it was 38% [59], by the end of 2016, outstanding loans to state-owned enterprises (100% state-owned capital) were VND 95,167 billion, accounting for 14.38% of total outstanding loans. Meanwhile, the proportion of outstanding loans to state-owned enterprises (including types of limited liability companies, joint stock companies, and FDI enterprises) increased. In 2008, outstanding loans to state-owned enterprises reached VND 62,305 billion, accounting for 51.6%, then by 2016 it was VND 409,679 billion, accounting for 61.89% of total outstanding loans. In particular, the proportion of outstanding loans to the FDI business sector, if in 2008 it accounted for 2.12% of total outstanding loans, increased to 5.7% by 2016. The data on the deviation of the proportion of outstanding loans to state-owned enterprises between consecutive years shows a mainly decreasing trend except for 2010, 2012, and 2013.

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Table 2.6. Loan structure by customer type and deviation in proportion of items compared to previous year

Unit: billion VND

Target

Source: [59] and NCS's calculation