Causes of the Limitations

- The relationship between MB and its parent units (vertically) and customers (economic groups - horizontally) is an advantage that contributes significantly to the development of MB's retail banking services. Comprehensive cooperation agreements with military units have created opportunities for MB to provide a complete package of banking products, which is a great advantage for MB that not every bank has.

- In addition, NHBL services are also actively deployed to provide the market such as card services, Viettel bill payment, salary payment, etc. These services with diverse and rich utilities and features have met the needs of a large number of MB customers and achieved a fairly high growth rate in both sales and collected fees.

The number of NHBL products and services is increasing, the product and service portfolio is diverse.

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- From 2006 to present, MB has continuously diversified its product portfolio, improved and increased the utility features of traditional products and services, and developed modern product and service supply channels.

- MB has a portfolio of basic banking products on the market, meeting the needs of individual customers relatively fully. Many of MB's banking products have quite competitive features compared to the market. In addition, MB has deployed a number of unique products and also successfully deployed Mobile banking/Internet banking products in 2010, laying the foundation for the development of modern banking products and services.

Existing product evaluation, new product development and quality

better products and services

- MB has made efforts to research new products on a modern technology platform, centralized data management by implementing a core banking system, contributing to diversifying MB's non-credit service portfolio and increasing service fee revenue.

- MB has also been proactive in researching, searching and testing business cooperation models and has been successful in bringing to market banking products and services in association with other financial institutions. At the same time, MB has promoted business cooperation with many large enterprises such as Viettel, electricity, etc. in the service sector, not just the credit sector as before.

 Quantitative indicators:

Retail banking services contribute to increasing income for MB

- In the period of 2010 - 2012, capital mobilization from residents continuously increased at an average rate of over 30%/year, accounting for an increasingly high proportion of total capital mobilization. The products for mobilizing residential capital were continuously developed, and the improved deposit structure contributed significantly to stabilizing and increasing the capital base for the branch.

- Retail credit activities tend to reduce their proportion in MB's total commercial credit balance. However, the quality of retail credit is increasingly better controlled and the bad debt ratio is always lower than the general level of the whole system. The unsecured consumer loan item (mainly Overdraft) has grown strongly and promises to make a breakthrough if there is an effective business implementation policy for those in need.

NHBL activities have contributed to maintaining and developing the current number of customers, reaching about ~10,000 customers by the end of 2012, accounting for 3% of the city's population and maintaining a market share of about 8%, with an average growth rate of over 150%/year in the number of customers. Along with developing the retail customer base, MB has initially focused on encouraging customers to use many products and services, increasing cross-selling and bundling products to increase efficiency for each customer.

The product portfolio is increasingly perfected to meet customer needs. The portfolio of retail banking services has grown rapidly in both quantity and quality and is always "customer-oriented". The development of new products is focused on, bringing to the market many convenient products with high technology content to attract customers. MB has developed a relatively

Full range of basic NHBL products on the market (over 50 products in 7 different product lines). The products are continuously researched and supplemented with additional utilities to better meet customer needs.

Distribution channels are constantly expanding. The NHBL distribution channel network is focused on development, with 20 new transaction points developed in 2012, bringing the total number of transaction points in the entire system to 182 (including 34 domestic branches/transaction offices; 2 foreign branches in Laos and Cambodia, and affiliated transaction offices). The ATM network (over 1,200 machines) is continuously expanding, spread across developed urban areas and has been connected to the banking system in the Banknet alliance, Smartlink and VISA card payment connection. The POS network and card acceptance units are continuing to be strongly deployed.

Management and operation have made positive improvements, guided by international standards and practices. With the implementation of building orientations, policy mechanisms, issuing many legal documents, standardizing regulations, and operating procedures towards customers. Guiding and directing branches to promptly implement NHBL business activities in line with market developments. In particular, MB has successfully deployed the KHCN Credit Approval Rating System - CRA, ITizing the KHCN credit provision process has created a profound change in awareness and high consensus throughout the system, creating a fundamental change in commercial banking operations for MB to become a leading NHBL in terms of market share, profit, efficiency, and at the same time affirming the MB brand.

2.2.3.2. Limitations

Although MB has made many efforts in developing its NHBL services and achieved some successes, MB's NHBL activities are still weak, have not created an impression and have not built a position in the fiercely competitive NHBL market as it is today. Therefore, MB needs to proactively recognize its limitations to overcome and make positive changes.

Firstly, the proportion of retail revenue is not commensurate with the potential . The operating results are not commensurate with the advantages and potential of MB, the proportion of operating income

The contribution of the NHBL business (excluding income from capital mobilization and credit activities) to the overall results of the branch is still small (about 4%). The proportion of some main NHBL activities such as capital mobilization from the population and outstanding retail credit is still low compared to the required target. The scale has grown but the market share of some product lines: Capital mobilization, credit, and cards tends to decrease compared to competitors.

Second, the quality of NHBL services is not high . NHBL products are still not competitive or have not really won the sympathy of customers due to complicated procedures, lack of utilities and features, and low stability of technology in the products. For example, some new, modern retail services have not brought high efficiency such as POS, credit cards, and the quality of SMS Banking services is not completely stable. MB does not have many products that are ahead of the market, does not provide product packages suitable for customer needs, and the products are not linked to each customer segment. It has not yet launched truly outstanding products and services that are highly competitive and representative of the MB brand. The product development is not really linked to each customer segment, so the effectiveness of the products is still modest. There is no effective monitoring and evaluation system for each NHBL product, and after-sales customer care has not received due attention... Service quality has been gradually improved but is not consistent across all branches and distribution channels.

Third, the retail banking transaction procedures are not convenient. Procedures are an important factor in attracting customers because they are related to transaction time and customers' perception of the quality of the bank's service. MB has tried very hard to improve the process, provide one-stop transaction services, and simplify procedures, but the procedures are still not standardized and the professionalism is not high. The current process is designed for convenience and to ensure no risks for the bank rather than to bring benefits to customers. In particular, personal loan procedures are still too cumbersome, personal loans are still too rigid in terms of paperwork and loan forms, and disbursement times take a long time, making customers feel reluctant to go to the bank to borrow money. Specifically, MB does not have credit products

Retail meets the time requirements with very fast procedures such as ACB has the product "Super fast loan 24h", HSBC lends within 48h... ACB is the leading retail bank in Vietnam, so ACB provides its customers with extremely rich consumer lending services. Reasonable loan levels for each type of loan, fast loan processing time. ACB is considered one of the most successful domestic commercial banks in the field of retail banking services. MB with the development orientation in the period of 2010 - 2015 is "Convenient Bank", developing both Wholesale and Retail sectors at the same time, but the types of retail credit that MB provides as well as the procedures are not as diverse and flexible as ACB.

Fourth, the market share of NHBL services is low, the products have not created a brand, and the competitiveness is weak. With nearly 19 years of existence and sustainable development, the MB brand has gained a foothold in the Vietnamese financial market, especially at the end of 2012, MB has built a fairly large reputation and surpassed a number of rival banks in financial indicators, however, in other services, especially NHBL services, the MB brand is still little known. MB has not created any breakthrough product lines with its "imprint" like some banks have. VCB with products in the field of international payments, Dong A with card products; ANZ with card products and internet banking. It can be said that the MB brand in the general banking service market and NHBL services in particular is still not prominent, and its competitiveness is weak.

2.2.3.3. Causes of limitations

 Objective reasons

One is, from Vietnam's economic conditions.

Although the economy has favorable conditions for the banking industry in general and MB in particular, there are opportunities for development and growth. However, the banking industry, including MB, is facing macroeconomic challenges due to weak economic strength, unreasonable structure, deficit in balance of payments, large trade deficit and high inflation. The global economic crisis has also had impacts leading to a decline in foreign investment flows and production and business activities of the business community.

Vietnam's economic development level is still low, the intellectual level of the majority of the population in banking activities is still limited. The average income per capita in 2012 was 1,596 USD/year [Source: worldbank.org], much lower than other countries in the region, Vietnam's economy has not yet surpassed the group of low-income countries and is a country with an economy using cash payment at a large rate. The habit of Vietnamese people when using cash in payment cannot be changed because on the one hand, non-cash payment methods in Vietnam are not really convenient and have not reached all people. A large part of the Vietnamese population has not used them so they do not know the convenience of banking services.

Non-cash payments in Vietnam are still low, the proportion of cash used in circulation outside the banking system/total means of payment is currently at 24% - 25%, much higher than other countries in the region (Thailand: 6.3%, China: 9.7%...). The mentality of using cash, including VND and foreign currency, and the low understanding of banking services of the majority of Vietnamese people, are also the reasons why the expansion of new banking services is facing many difficulties.

Second, Originating from the legal environment

The institutional framework related to the development of banking services is still inadequate, incomplete and inconsistent. Although there has been significant progress in perfecting the system of legal documents related to banking services, the current banking legal system is not complete, not consistent, not capable of covering all issues and not consistent with international practices, especially in the field of international payments and electronic banking.

The system of legal documents related to the provision and use of Internet application services such as: Ebanking, homebanking... is still lacking, slow to innovate and improve compared to the requirements of developing modern technology and widely deploying modern banking services, not creating a basis for handling disputes, creating hesitation when using and providing these services.

State management agencies have not yet properly and fully assessed the requirements for the legal environment and operating conditions to encourage and ensure the development of the economy.

safe and effective development of the banking system, therefore there is no strategy and solution to support the systematic development of banking services.

Third, Originating from the State Bank of Vietnam

The mechanism for managing and supervising banking activities has not kept up with the process of banking modernization and is not consistent with international practices and standards: The State Bank has gradually formed an open policy environment for banking activities, but has not yet kept up with practical requirements, especially in terms of access to the provision of banking services, including conditions and licensing procedures for the provision of new services and the establishment of organizations providing banking services. The State Bank is still limited in its ability to supervise the provision of banking services, especially in its inability to give early warnings about risks in banking activities and has not yet established an effective monitoring system.

Fourth, Causes from customers and competitors

Along with the development of the economy, people's lives are constantly improving and their demands for banking products and services in particular are increasing, thus requiring banking products and services to be constantly improved to meet customers' demands.

The level, customs and habits of the population are also a factor that significantly affects the development of banking services. The higher the level of the population, the more favorable conditions for banking services to develop and vice versa. Currently, a part of the population, due to limited level of education, is still reluctant to contact banking services, especially modern banking services. In addition, the customs and habits of using cash of the population also contribute to limiting the development of banking services.

In addition, the difficulty for MB is also from the increasing pressure of the competitive environment, competitors have increasingly diversified business activities and are strong in terms of market share growth as well as operating resources.

On the other hand, in the current integration conditions, domestic commercial banks are constantly investing in science and technology, so the quality of their banking services is constantly improved. Along with the appearance of foreign banks with modern technology and extensive experience in the banking sector, their products have outstanding advantages.

both in quality and convenience. That makes NHBL products and services fast

quickly become obsolete and lose competitive advantage.

Five, Some other reasons

Coordination between sectors in building service development strategies has only just begun. Especially in the financial services sector, the finance, banking and insurance sectors lack a common strategy for all three sectors and coordination and mutual support to develop many services are still very limited.

 Subjective causes from MB

One is, Limitations on equity capital

Although MB is currently one of the joint stock commercial banks with high charter capital, by the end of 2012 MB's charter capital was over 10 trillion VND, but compared to regional and international banks, this number is not large. On the other hand, equity capital also affects the scale of bank operations, according to current regulations, equity capital scale also directly affects capital mobilization and credit activities. In addition, equity capital is also an important source of capital for investment in facilities, science and technology... serving the bank's operations. Therefore, the limitation of equity capital will bring certain limitations to the development of NHBL products and services.

Second, the distribution channel is not really effective.

The large nationwide network is a strength of MB, but it will be an obstacle to deploying new technology, deploying and developing NHBL services. Without good coordination from the head office as well as coordination between branches, it will lead to inconsistent service quality between branches.

MB's network is still scattered, especially in key areas, so MB's market share tends to shrink over the years. The image of the branch network, transaction offices, and savings funds is not unified, and has not created a separate brand for MB. The expansion of the modern distribution channel network is slow. This is also a disadvantage for MB when expanding retail activities, while most large commercial banks already have this distribution channel.

Third, about information technology

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