Net income growth from foreign exchange activities at BIDV was relatively fast. In the following years, 2009 and 2010 tended to decrease compared to 2008 for many reasons. The first reason was that the competitive environment among banks was increasingly tense. Many other commercial banks in the area began to promote the application of professional techniques in foreign exchange trading, partly because they wanted to compete to attract customers, partly because they wanted to increase the profits of the entire bank. The second reason was that the USD/VND exchange rate during this period was always in a state of tension, the situation of two exchange rates in foreign exchange trading activities at banks due to the ceiling exchange rate in foreign exchange trading transactions according to the regulations of the State Bank of Vietnam caused more difficulties for banks and businesses. In order to meet the needs of customers and not violate the regulations of the State Bank of Vietnam, a part of the exchange rate difference in foreign exchange transactions was accounted for by the units as service revenue of the bank. Therefore, net income from foreign trade reflected in the annual report does not completely accurately reflect the actual profit from the bank's foreign trade activities.
VCB is the bank with the highest foreign exchange income in the Vietnamese commercial banking system. The peak was in 2011 with a profit of VND 1,179,584 million, accounting for 64.8% of the total income of the commercial bank. This was followed by 2009 with a profit of VND 925,290 million, accounting for 59%. However, in 2010, foreign exchange income only reached VND 570,009 million, down 38.4%. The reason in 2010 was that the complicated fluctuations from the world economic situation and the fluctuations in the domestic USD/VND exchange rate put pressure on VCB's foreign exchange business. The most important goal of banks is maximum profit. However, VCB identifies the top goal and focus of the bank as meeting the needs of customers. The bank's foreign exchange business has contributed a significant proportion to the bank's profits. The smallest contribution was 9.53% in 2006 and the largest was 23.46% in 2008. Overall for the whole period, the average proportion of foreign exchange business income was 9.53% in 2006 and 23.46% in 2008.
Foreign exchange business compared to bank profit is 14.6%.
VCB's foreign exchange business development has reached a certain level, demonstrated through the scale of income in the following year being higher than the previous year and the ratio of foreign exchange business income to profit between years is different but in general there is a significant increase.
For the group of joint-stock commercial banks, the income rate from foreign exchange trading activities reached 2.4%, lower than that of the group of state-owned commercial banks (reaching 9.9%). ACB achieved a relatively high rate, an average of 8.7%, much higher than Agribank and Vietinbank. Techcombank had the lowest income from foreign exchange trading activities in both groups, an average of -5.8%. This shows that the development of Techcombank's foreign exchange trading activities is still limited in both quantity and quality.
In terms of foreign exchange trading income structure, the income from spot transactions is the main source, with an average of 116.8% in the period 2006-2011, and derivative transactions -16.8%. The income from derivative transactions decreased throughout the period except for 2007, and even in the period 2009-2010, the income from derivative transactions was negative. For the group of state-owned commercial banks, most derivative transactions were unprofitable, such as Vietinbank, which lost money for 6 years, and VCB, which lost money in the period 2009-2010. The reason is that in 2009-2010, when factors of the domestic and world economies fluctuated, Vietnamese commercial banks conducted derivative transactions in an attempt to maintain the bank's customers and accepted losses for these transactions. As for the group of joint stock commercial banks, although the transaction turnover is low, joint stock commercial banks have achieved certain results for derivative transactions. In 2011, spot transaction income increased strongly by 84.8%, although derivative transaction income was at a loss, it decreased significantly compared to 2010. The reason for the above results is that Vietnamese commercial banks have actively balanced foreign currency for the economy and are the focal point for supporting import and export activities. In the context of tight foreign exchange policy and stable exchange rates, Vietnamese commercial banks have implemented many flexible solutions, expanding the exploitation of foreign currency sources to meet the requirements.
2500000
2000000
1500000
1000000
500000
0
2006
2007
2008
2009
2010
2011
-500000
-1000000
Immediate delivery
Derivatives
Million VND
commitment to import and export needs of goods. (Appendix 2)
Chart 2.5 Foreign currency trading income of Vietnamese commercial banks in the period 2006-2011
( Source: Annual Report of Vietnam Commercial Bank for the period 2006-2011)
Thus, Vietnamese commercial banks have made progress in foreign exchange trading activities through diversifying transaction operations and foreign currencies in trading. However, Vietnamese commercial banks need to develop options trading more strongly in both quantity and quality and apply futures trading in foreign exchange trading to minimize risks in banking business.
In summary, the assessment of the foreign exchange business development of Vietnamese commercial banks through the analysis of data shows that the quality of the operation is not yet developed. Compared to the average, most years are lower than the average rate, except for 2008. In addition, according to the assessment criteria, the rate of the following year is higher than the previous year, most years have negative growth, except for 2008.
2006
2007
2008
2009
2010
2011
600.0
400.0
200.0
0.0
Agribank
BIDV
VCB
Vietinbank
ACB
Techcombank
-200.0
-400.0
-600.0
-800.0
-1000.0
Chart 2.6 Growth in foreign exchange trading income of Vietnamese commercial banks
( Source: Annual Report of Vietnamese Commercial Banks 2006-2011)
2.2.2.4 Current status of risk management in foreign exchange trading in the international market of Vietnamese commercial banks
The development of foreign currency trading of Vietnamese commercial banks is assessed through the level of risk in foreign currency trading, especially exchange rate risk. Exchange rate risk occurs when the bank maintains an open exchange position with a certain foreign currency. Therefore, when the exchange rate of that foreign currency changes unfavorably, it leads to losses for the bank. Therefore, measuring the level of risk for each individual foreign currency and for the foreign currency portfolio is the basis for assessing the development of foreign currency trading of Vietnamese commercial banks.
Data from 2006 shows that, among the main foreign currencies that Vietnamese commercial banks trade, USD is the currency with the lowest risk level, with a coefficient of 0.13%, followed by HKD, with a risk level of 0.14%. AUD is the currency with the highest risk level of 2.75%. However, the data also shows that foreign currencies have a close relationship with each other, shown through the correlation coefficient of VND with foreign currencies. USD is the currency with the lowest correlation coefficient compared to EUR, JPY, GBP, AUD, CAD, CHF. SGD, THB but
has a relatively high correlation coefficient compared to the HKD, with a coefficient of 0.81. In contrast, the JPY has a high correlation coefficient with all currencies except the CAD and HKD. In addition, the exchange rate fluctuations of the USD/GBP reflect an inverse correlation relationship, that is, the correlation coefficient between USD, GBP and VND is -0.12. That is, if the USD increases in value, the GBP will decrease in value and vice versa. Thus, through the analysis of the correlation coefficient, it can be seen that in order to reduce business risks, banks need to maintain a long position on the USD and a short position on the JPY. (Appendix 3)
In 2007, the exchange rate fluctuations of currencies showed that the correlation coefficients of VND with major currencies were low. USD was still the currency with the lowest correlation coefficient compared to the remaining currencies, along with HKD. However, USD had a negative correlation coefficient with EUR, AUD and SGD. This showed that the exchange rate fluctuations between these currencies were in opposite directions. EUR had a relatively high correlation coefficient compared to other currencies, followed by AUD. Therefore, maintaining a long position on currencies in banks can achieve high benefits in foreign exchange trading.
In terms of risk level, in 2007, SGD was still the currency with the lowest risk, followed by USD. AUD was the currency with the highest risk, followed by THB with risk levels of 3.47% and 3.3% respectively. However, the trading volume of these currencies accounted for a small proportion. Therefore, banks can minimize the risks when trading these currencies. (Appendix 4)
In 2008, due to the fluctuation of exchange rates of most currencies with large fluctuations, the risk level when trading foreign currencies increased. As evidence, the standard deviation of EUR increased by nearly 324%, JPY increased by more than 114% and USD also increased by more than 283%. The reason for the strong fluctuation of exchange rates of currencies is due to the relatively high level of liberalization of capital transactions, due to fluctuations
Investment capital flows, especially indirect capital flows, have strongly affected foreign currency supply and demand and exchange rates. In 2008, indirect investment capital flows have fluctuated continuously, causing an imbalance in foreign currency supply and demand. This capital flow increased significantly in the first three months of 2008, causing pressure to increase the VND price. Then, when the world economic situation continued to be difficult, the domestic economy faced inflation, and the trade deficit increased, the VND showed signs of depreciation, increasing the demand for foreign currency. The unpredictable fluctuations of the world economy and financial markets as well as the domestic market have negatively affected the balance of foreign currency supply and demand in the country and ultimately impacted the exchange rate.
In 2009-2010, the risk level of foreign currencies gradually decreased, except for the HKD, which had an increased risk level in 2010. Thus, when considering the risk level of foreign currencies, the USD is the currency with the largest trading turnover compared to other currencies, but has the lowest risk level in bank transactions. The EUR and JPY have relatively high risk levels. In addition, the GBP and AUD maintain a high risk coefficient.
In the first months of 2011, there were dramatic events in the world economy, when the public debt crisis broke out in both Europe and now the US. In particular, global inflation will continue to increase if the US has no other way but to continue issuing new consumer stimulus packages and even printing more dollars to pay off debts. In such a context, the domestic economy, which is already in difficulty, is facing even more risks. The risk of continued high inflation means that interest rates and exchange rates will continue to be unstable. The instability of exchange rates in the first 3 months of 2011 is the result of the exchange rate policy left over from 2010. The pressure of the foreign exchange market weighed heavily on the shoulders of those who managed the exchange rate policy in the last months of 2010 and early 2011. However, with the management of the State Bank with strong adjustment measures according to market signals, the exchange rate was adjusted to increase by 9.3%, plus other administrative measures such as capping the USD mobilization interest rate of commercial banks from 6% to below 2%, implementing foreign exchange and expanding the subjects.
foreign exchange, handling a series of illegal foreign exchange transactions in the free market. Therefore, the risk for foreign currencies of commercial banks tends to decrease, except for USD which increased by 0.58%. EUR and JPY have a sharp decrease in risk, respectively 1.34% and 1.65%.
Table 2.13 Standard deviation of exchange rate changes/month of some foreign currencies of Vietnamese commercial banks
Unit:%
Foreign currency
2006 | 2007 | 2008 | 2009 | 2010 2011 TB | |||
USD | 0.13 | 0.37 | 1.42 | 1.10 | 1.11 | 1.69 | 1.11 |
EUR | 2.14 | 1.46 | 6.20 | 4.61 | 4.56 | 3.21 | 4.03 |
JPY | 2.00 | 2.31 | 4.96 | 4.93 | 2.95 | 1.3 | 3.38 |
GBP | 2.33 | 1.33 | 4.44 | 4.93 | 3.38 | 2.13 | 3.35 |
AUD | 2.75 | 3.47 | 7.51 | 4.78 | 4.34 | 3.88 | 4.7 |
CAD | 1.96 | 2.82 | 5.71 | 4.14 | 3.13 | 2.34 | 3.58 |
CHF | 2.62 | 1.84 | 6.56 | 4.1 | 3.87 | 3.76 | 4.07 |
HKD | 0.14 | 0.39 | 2.86 | 1.84 | 2.43 | 0.9 | 1.75 |
SGD | 1.08 | 0.70 | 3.96 | 3.06 | 2.34 | 2.6 | 2.55 |
THB | 1.72 | 3.32 | 5.82 | 1.10 | 2.50 | 2.0 | 3.14 |
TB | 6 | 2.1 | 5.24 | 3.78 | 3.2 | 2.56 | 3.3 |
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![Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
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At that time, the Branch had to set aside a provision for credit risks, which reduced the Branchs income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giangs profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project Restructuring the system of credit institutions in the period 2011-2015 approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services.
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giangs products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Ministers Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giangs treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giangs income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giangs corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giangs card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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![Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
zt2i3t4l5ee
zt2a3gsnon-credit services, joint stock commercial bank
zt2a3ge
zc2o3n4t5e6n7ts
At that time, the Branch had to set aside a provision for credit risks, which reduced the Branchs income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giangs profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project Restructuring the system of credit institutions in the period 2011-2015 approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services.
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giangs products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Ministers Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giangs treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giangs income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giangs corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giangs card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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Pre-tax Profit of Bidv Tien Giang in the Period 2011-2015
zt2i3t4l5ee
zt2a3gsnon-credit services, joint stock commercial bank
zt2a3ge
zc2o3n4t5e6n7ts
At that time, the Branch had to set aside a provision for credit risks, which reduced the Branch's income.
Chart 2.2. Pre-tax profit of BIDV Tien Giang in the period 2011-2015
Unit: Billion VND
140
120
100
80
60
40
20
0
63.3
80.34
89.29
110.08
131.99
2011 2012 2013 2014 2015
Profit before tax
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, through chart 2.2, it can be seen that BIDV Tien Giang's profit is still increasing continuously, and its operating efficiency is currently leaking. This is a contribution of non-credit services, and this service segment will be increasingly focused on growth by BIDV Tien Giang to ensure the highest profit safety because credit activities have many potential risks. At the same time, focusing on developing non-credit services is consistent with one of the contents of restructuring the financial activities of credit institutions in the project "Restructuring the system of credit institutions in the period 2011-2015" approved by the Prime Minister in Decision No. 254/QD-TTg dated March 1, 2012 [14]: "Gradually shifting the business model of commercial banks towards reducing dependence on credit activities and increasing income from non-credit services".
2.2. Current status of non-credit service development at BIDV Tien Giang.
2.2.1. BIDV Tien Giang has deployed the development of non-credit services in recent times.
Along with the development of the Head Office, BIDV Tien Giang's products and services are constantly improved and deployed in a diverse manner to ensure provision for many different customer groups in the area: individual customers, corporate customers, and financial institutions. Typical services are as follows: Payment services, treasury services, guarantee services, card services, trade finance, other services: Western Union, insurance commissions, consulting services, foreign exchange derivatives trading, e-banking services,...
2.2.1.1. Payment services:
In accordance with the Prime Minister's Project to promote non-cash payments in Vietnam [15], banks in Tien Giang province have continuously developed payment services to reduce customers' cash usage habits through card services and electronic banking services such as: salary payment through accounts, focusing on developing card acceptance points, developing multi-purpose cards, paying social insurance by transfer, paying bills through banks, etc.
Chart 2.3. Net income from payment services in the period 2011-2015
Unit: Million VND
6000
5000
4000
3000
2000
1000
0
3922 4065
4720 5084 5324
2011 2012 2013 2014 2015
Net income from payment services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Along with the technological development of the entire system, BIDV Tien Giang has a payment system with a fairly stable transaction processing speed, bringing many conveniences to customers. The results of observing chart 2.3 show that the income from payment services that the Branch has achieved has grown over the years but the speed is not high and the products are not outstanding compared to other banks. Domestic payment products such as: Online bill payment, electricity bills, water bills, insurance premiums, cable TV bills, telecommunications fees, airline tickets, etc. bring many conveniences to customers. Regarding international payment, this is an indispensable activity for foreign economic activities, BIDV Tien Giang is providing international payment methods for small enterprises producing agriculture, aquatic food and seafood that have credit relationships with banks in industrial parks in Tien Giang province such as: money transfer, collection, L/C payment.
2.2.1.2. Treasury services:
BIDV Tien Giang always focuses on ensuring treasury safety and currency security, always complies with legal regulations, and minimizes risks in operations such as: counting and collecting money from customers, receiving and delivering internal transactions, collecting from the State Bank (SBV) or other credit institutions, receiving ATM funds, bundling money, etc. BIDV Tien Giang's treasury service management department is always fully equipped with modern machinery and equipment such as: money transport vehicles, fire prevention tools, money counters, money detectors, magnifying glasses, etc. to ensure absolute safety in treasury operations, immediately identifying real and fake money and other risks that may affect people and assets of the bank and customers. In addition, implementing regulation 2480/QC dated October 28, 2008 between the State Bank of Tien Giang province and the Provincial Police on coordination in the fight against counterfeit money, in the 3-year review of implementation, BIDV Tien Giang discovered, seized and submitted to the State Bank of Tien Giang province 475 banknotes of various denominations and was commended by the Provincial Police and the State Bank of Tien Giang province [17].
Chart 2.4. Net income from treasury services in the period 2011-2015
Unit: Million VND
350
300
250
200
150
100
50
0
105 122
309 289 279
2011 2012 2013 2014 2015
Net income from treasury services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
However, as shown in Figure 2.4, income from treasury operations is not high and fluctuates. Specifically, in the period 2011-2013, net income increased and increased most sharply in 2013, then in the period 2013-2015, there was a downward trend. This fluctuation is due to the fact that fees collected from treasury services are often very low and can even be waived to attract customers to use other services.
2.2.1.3. Guarantee and trade finance services:
BIDV Tien Giang, thanks to the advantages of the province and the favorable location of the Branch, has continuously focused on developing income from guarantee services and trade finance.
Chart 2.5. Net income from guarantee and trade finance services in the period 2011-2015
Unit: Million VND
14000
12000
10000
8000
6000
4000
2000
0
5193 5695
2742 3420
8889
3992
11604 12206
5143 5312
2011 2012 2013 2014 2015
Net income from guarantee services Net income from Trade Finance
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.5, we can see that BIDV Tien Giang's income from guarantee services and trade finance has grown over the years. The reason is: Among BIDV Tien Giang's corporate customers, the construction industry is the industry with the highest proportion of customers after the trading industry, this is a group of customers with potential to develop guarantee services. The second group of customers is corporate customers in the fields of agricultural production, livestock and seafood processing with high import and export turnover in the area.
are the target of trade finance development. In addition, BIDV Tien Giang also focuses on continuously developing these customer groups to increase revenue for many other products and services in the future.
2.2.1.4. Card and POS services:
As a service that BIDV Tien Giang has recently developed strongly, it can be said that this is a very potential market and has the ability to develop even more strongly in the future. Card services with outstanding advantages such as fast payment time, wide payment range, quite safe, effective and suitable for the integration trend and the Project to promote non-cash payments in Vietnam. Cards have become a modern and popular payment tool. BIDV Tien Giang early identified that developing card services is to expand the market to people in society, create capital mobilized from card-opened accounts, contribute to diversifying banking activities, enhance the image of the bank, bring the BIDV Tien Giang brand to people as quickly and easily as possible. BIDV Tien Giang is currently providing card types such as: credit cards (BIDV MasterCard Platinum, BIDV Visa Gold Precious, BIDV Visa Manchester United, BIDV Visa Classic), international debit cards (BIDV Ready Card, BIDV Manu Debit Card), domestic debit cards (BIDV Harmony Card, BIDV eTrans Card, BIDV Moving Card, BIDV-Lingo Co-branded Card, BIDV-Co.opmart Co-branded Card). These cards can be paid via POS/EDC or on the ATM system. In addition, with debit cards, customers can not only withdraw money via ATMs but also perform utilities such as mobile top-up, online payment, money transfer,... through electronic banking services.
In order to attract customers with card services, BIDV Tien Giang has continuously increased the installation of ATMs. As of December 31, 2015, BIDV Tien Giang has 23 ATMs combined with 7 ATMs in the same system of BIDV My Tho, so the number of ATMs is quite large, especially in the center of My Tho City, but is not yet fully present in the districts. Basic services on ATMs such as withdrawing money, checking balances, printing short statements,... BIDV ATMs accept cards from banks in the system.
Banknetvn and Smartlink, cards branded by international card organizations Union Pay (CUP), VISA, MasterCard and cards of banks in the Asian Payment Network. From here, cardholders can make bill payments for themselves or others at ATMs, by simply entering the subscriber number or customer code, booking code that service providers notify and make bill payments.
Chart 2.6. Net income from card services in the period 2011-2015
Unit: Million VND
3500
3000
2500
2000
1500
1000
500
0
687
1023
1547
2267
3104
2011 2012 2013 2014 2015
Net income from card services
(Source: Report on the implementation of the annual business plan of the General Planning Department of BIDV Tien Giang [24])
Through chart 2.6, it can be seen that BIDV Tien Giang's card service income is constantly growing because the Branch focuses on developing businesses operating in industrial parks, which are the source of customers for salary payment products, ATMs, BSMS. Specifically, there are companies such as Freeview, Quang Viet, Dai Thanh, which are businesses with a large number of card openings at the Branch, contributing to the increase in card service fees [25].
Table 2.6. Number of ATMs and POS machines in 2015 of some banks in Tien Giang area.
Unit: Machine
STT
Bank name
Number of ATMs
Cumulative number of ATM cards
POS machine
1
BIDV Tien Giang
23
97,095
22
2
BIDV My Tho
7
21,325
0
3
Agribank Tien Giang
29
115,743
77
4
Vietinbank Tien Giang
16
100,052
54
5
Dong A Tien Giang
26
97,536
11
6
Sacombank Tien Giang
24
88,513
27
7
Vietcombank Tien Giang
15
61,607
96
8
Vietinbank - Tay Tien Giang Branch
6
46,042
38
(Source: 2015 Banking Activity Data Report of the General and Internal Control Department of the Provincial State Bank [21])
Through table 2.6, the author finds that the number of ATMs of BIDV Tien Giang is not much, ranking fourth after Agribank Tien Giang, Dong A Tien Giang, Sacombank Tien Giang. The number of POS machines of BIDV Tien Giang is very small, only higher than Dong A Tien Giang and BIDV My Tho in the initial stages of merging the BIDV system. Besides, BIDV Tien Giang has a high number of cards increasing over the years (table 2.7) but the cumulative number of cards issued up to December 31, 2015 is still relatively low compared to Agribank, Vietcombank, Dong A (table 2.6).
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Current Status of Foreign Currency Business Development in the International Market of Vietnamese Commercial Banks -
Current Status of Credit Risk Management at Vietnam Bank for Agriculture and Rural Development -
Theoretical Basis of Risk and Risk Management in Foreign Exchange Trading of Joint Stock Commercial Banks -
Current Status of Foreign Exchange Trading Activities at NHtmcp Ctvn
(Source: Foreign exchange rate report of State Bank of Vietnam 2006-2011)
In general, the standard deviation of the exchange rate changes of the main foreign currencies of Vietnamese commercial banks in the period 2006-2011 tended to decrease, except for 2008. Thus, it can be seen that the development of foreign currency trading of Vietnamese commercial banks has achieved qualitative development, as evidenced by the standard deviation in 2011 decreasing by 3.44% compared to 2006, 0.64% compared to 2010. In which, trading in USD has the lowest risk and CHF has the highest risk.
However, assessing the risk for each foreign currency individually, i.e. looking at the open position for each foreign currency, then the foreign exchange risk is overstated.
Because the exchange rate changes between currencies are inversely related, the profit from maintaining an open position in one currency can offset the loss from maintaining an open position in another currency. Therefore, the risk assessment of foreign exchange trading needs to be calculated for the entire foreign exchange portfolio.
P
Table 2.14 Risk coefficients for some strong currencies ( 2 ) (USD, EUR, JPY)
Unit of measure %
Target
2006 | 2007 | 2008 | 2009 | 2010 | 2011 | TB | |
Agribank | 0.11 | 0.13 | 0.07 | 2.34 | 2.98 | 2.76 | 1.40 |
BIDV | 0.08 | 0.06 | 0.045 | 0.03 | 0.44 | 0.53 | 0.20 |
VCB | 0.015 | 0.067 | 0.023 | 0.012 | 0.466 | 0.51 | 0.18 |
Vietinbank | 0.02 | 0.12 | 3.58 | 2.92 | 3.53 | 3.12 | 2.22 |
ACB | 0.032 | 0.014 | 2 | 1.49 | 6.24 | 3.56 | 2.22 |
Techcombank | 0.021 | 0.015 | 1.84 | 1.37 | 3.42 | 2.98 | 1.61 |
TB | 0.046 | 0.068 | 1,260 | 1,360 | 2,846 | 2,243 | 1.3 |
(Source: Report on performance of Vietnamese commercial banks 2006-2011)
Studying the fluctuations of three currencies USD, EUR, JPY corresponding to three economic axes: the US, Europe and Asia, represented by Japan, to see the impacts of changes in the exchange rates of these three currencies on foreign currency trading income of Vietnamese commercial banks. For strong currencies such as USD, EUR, JPY, foreign exchange risks for all three currencies fluctuate erratically. The evidence is that the risk level when trading with the three currencies is high, reaching 0.466% in 2010. The reason for the increase in the risk level of strong currencies is that in 2010, the exchange rates of USD and JPY increased. There were times like July 9, 2010, the exchange rate of JPY/VND increased by about 8% compared to December 31, 2009. The demand for JPY increased because other economies did not prosper, mainly relying on Asian economies. In addition, China's increased purchase of Japanese bonds is also a cause of the increase.