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Developments in Deposits and Loans in Market 2 of 08 Joint Stock Commercial Banks in Hanoi from 2002 to 2008


Table 2.6: Developments in outstanding loans of 08 joint stock commercial banks in Hanoi from 2002 - 2008

Unit: billion VND


Bank

Year

2002

Year

2003

Year

2004

Year

2005

Year

2006

Year

2007

Year

2008

I. Large-scale bank group:








- Vietnam Technological and Commercial

1,858

2,296

3,465

5,293

8,696

20,486

26,022

- Army

1,710

2,455

3,462

4,468

6.166

10,630

15,400

- International

687

1.103

2,218

5,278

9,137

16,744

19,774

II. Medium-sized banks:








- Hanoi House

995

1,596

2,362

3.330

5,983

9,419

10,515

- Non-State Owned

1.103

1.525

1,865

3.014

5.031

13,323

12,986

- Maritime

1,282

1,146

1,662

2,333

2,888

6,528

11,210

- Southeast Asia

116

276

533

1,350

3.363

11,041

7,586

III. Small-scale banks:








-Global Oil and Gas





545

1,719

2,787

Province

7,751

10,397

15,567

25,067

41,809

89,890

106,280

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Developments in Deposits and Loans in Market 2 of 08 Joint Stock Commercial Banks in Hanoi from 2002 to 2008

Data source: State Bank, Hanoi branch)

Through table 2.6, it can be seen that in terms of credit scale, the group of 3 large-scale banks had a total outstanding debt as of December 31, 2008 higher than that of 05 medium and small-scale banks.

This shows a clear difference in the ability to supply capital to the economy between banks of different sizes. In terms of credit growth rate, the group of small and medium-sized banks increased by 44%, the group of large-sized banks increased by 28% compared to 2007. Although the growth rate of outstanding loans of the group of large-sized banks is slower than the growth rate of the group of small and medium-sized banks, the 1% growth in absolute numbers is much larger.

In general, the local commercial banks have a positive credit growth rate. The lending market share of the commercial bank system as of December 31, 2008 was 18%, 1.18 times higher than in 2007, ranking second only to the state-owned commercial bank system (43.5%).


Of which, Vietnam Technological and Commercial Joint Stock Bank has the largest growth rate. In 2002, International Commercial Joint Stock Bank was only 1/3 larger than Military Commercial Joint Stock Bank, but by 2007,

đ+ increased significantly. Dong Nam Commercial Joint Stock Bank ¸ started very low in 2002 but in 2008 đ+ had outstanding loans of more than 7,500 billion VND, 65 times higher. This is a very high growth rate among the 8 commercial joint stock banks.

Lending on market 2 (interbank)

In the condition of cautious lending, outstanding loans increase slowly at commercial banks.

Promote capital mobilization for wholesale to other organizations with conditions to expand safe lending and short-term lending in the interbank market.

Table 2.7: Developments in deposits and loans in market 2 of 08 joint stock commercial banks in Hanoi from 2002 to 2008

Unit: Billion VND



Bank

Year 2002

2003

2004

2005

2006

2007

Year 2008

I. Banking Regulations

large scale:








- Vietnam Technological and Commercial

1,884

2,208

3,073

2,632

4,458

9,303

12,636

- Army

1,300

808

2,571

2,951

5,716

11,938

10,970

- International

191

3

0

0

53

500

0

II. Medium-sized Bank Group:








- Hanoi House

0

113

129

83

125

176

0

- Non-State Owned

0

0

0

0

0

0

0

- Maritime

110

0

0

174

557

0

200

-Southeast Asia

0

0

0

0

0

0

0

III. Banking Category

small scale:








- Global Oil and Gas





0

0

85

Province

3,294

2,412

5,773

5,840

10,296

21,917

23,891

( Data source: State Bank of Vietnam, Hanoi branch) In general, only relatively large-scale commercial banks (Techcombank and Military), with strong capital growth, actively participated in lending in the interbank market. In the first half of 2008, when interest rates


In this market, this type of loan brings relatively high income to commercial banks.

As of December 31, 2008, the total outstanding loans in market 2 of 08 commercial banks in the area were 23,891 billion VND, an increase of 625% compared to 2002 and an increase of 9% compared to 2007. Through table 2.7, the activities in market 2 of the large-scale banking group are 83 times larger than the activities of the small and medium-sized banking group.

Stock investment

Securities investment is an important form of capital use of commercial banks. Mobilized capital is invested in valuable papers, other types of securities, mainly some shares of joint stock enterprises, government bonds, construction bonds, urban bonds, bonds of state corporations... Through branches or securities companies of commercial banks, large commercial banks invest thousands of billions to buy government bonds, urban bonds of Hanoi and Ho Chi Minh City, bonds of corporations.

Vietnam Electricity.

Table 2.8: Securities investment developments of 08 joint stock commercial banks in Hanoi from 2002 to 2008

Unit: Billion VND


Bank

Year

2002

Year

2003

Year

2004

Year

2005

Year

2006

Year

2007

Year

2008

- Vietnam Technological and Commercial

108

745

725

1,943

2,877

6,842

10,401

- Army

15

72

63

478

920

306

8,517

- International

584

303

524

628

2,588

6,748

4,872

- Hanoi House

155

152

299

859

1,565

2,480

3,556

- Non-State Owned

0

5

666

1,778

2,091

179

1,699

- Maritime

0

0

20

186

1,016

2,169

3,929

-Southeast Asia

38

30

138

1,218

2,304

4,727

3.019

-Global Oil and Gas





362

2,191

2,069

Province

900

1,307

2,435

7,090

13,723

25,642

38,062

( Data source: State Bank of Vietnam, Hanoi branch)


Investment and trading of securities of commercial banks include equity securities and debt securities. In 2006 and 2007, the stock market increased sharply, and some banks invested in stocks. At the end of 2007, the stock market declined rapidly, forcing banks to set aside provisions for devaluation of securities (TechcomBank, MB). In 2008, the bank with the highest investment and trading of securities was TechcomBank: 10,401 billion VND, the lowest was GPBank:

2,069 billion VND. (See table 2.8)

Implementing the State Bank's tightening monetary policy, in March 2008, all 8 commercial banks fully purchased the State Bank's mandatory treasury bills, many banks also purchased government bonds to participate in the open market, supporting liquidity. Investment in valuable papers of banks up to December 31, 2008 reached over 38,062 billion VND, mainly in debt securities, equity securities accounted for a low proportion so the risk was not high.

Investing in highly liquid securities from an asset management perspective, when necessary, commercial banks will trade securities on the State Bank's open market to meet liquidity needs and improve their available capital.

Investment in capital contribution and share purchase:

Table 2.9: Capital contribution of 08 joint stock commercial banks in Hanoi from 2002 to 2008

Unit: Billion VND


Bank

Year

2002

Year

2003

Year

2004

Year

2005

Year

2006

Year

2007

Year

2008

- Vietnam Technological and Commercial

9

8

8

12

31

37

452

- Army

14

17

25

51

175

720

1294

- International

5

5

5

87

30

143

233

- Hanoi House

9

13

15

32

130

268

302

- Non-State Owned

13

13

12

13

82

564

48

- Maritime

9

7

6

7

12

30

79

-Southeast Asia

10

10

44

22

28

45

84

-Global Oil and Gas





27

117

63

Province

69

73

115

224

515

1,924

2.555

( Data source: State Bank of Vietnam, Hanoi branch)


In general, the capital contribution of the 8 joint stock commercial banks is not large due to the State Bank's regulation that the capital contribution must be taken from the owner's equity. The Military Joint Stock Commercial Bank has the largest capital contribution of 1,294 billion VND. In 2008, the capital contribution to buy shares of VPBank decreased sharply by 516 billion VND, GPBank decreased by 54 billion VND. Due to the general difficulties of the economy, organizations rarely expand investment and cannot increase owner's equity. See table 2.9.

2.3.1.3 Relationship between capital mobilization and lending

The average credit and deposit growth rate of 08 commercial banks in the area in the period 2002-2008 was high at 68%. However, in 2008, many banks lacked capital in VND and foreign currency, some banks faced liquidity difficulties. In particular, banks restricted credit in the economy, causing credit growth to slow down to 18%, down 97% compared to 2007. See chart 2.6

Unit: billion VND


total mobilized capital

160,000

145,714

140,000


120,000

106,280

105,576

100,000

89,890

80,000

`

60,000

47,162

40,000

41,809

28,887

17,247

20,000

10,248

25,067

8,222

15,567

10,397

0

7,751


2002

2003 2004 2005 2006 2007 2008

(Source: State Bank of Vietnam, Hanoi Branch)

Chart 2.6: Credit growth and capital mobilization

of 08 joint stock commercial banks in Hanoi from 2002-2008


2.3.1.4 Development of modern banking services


In the period 2002-2008, some banks paid attention to developing banking services, especially electronic banking services (TechcomBank, VIB). However, the development of new banking products and services focused on quantity without paying attention to service quality. Some banking services were allowed by the State Bank of Vietnam but were not developed at banks: Payment factoring, Future, Option. There were 05/07 banks that issued domestic cards with many utilities: deposit, cash withdrawal and overdraft via card, buying phone cards including TechcomBank, MB, HabuBank, VIB, VPBank. Some banks signed service provision contracts with foreign countries such as: Fast money transfer service with RIA (USA), signed a contract

co-supplying financial switching and card management systems with CTL (UK), this is a modern, comprehensive, flexible card technology solution that will support banks to make breakthroughs in the card field. TechcomBank is one of the units that strongly develop card services and other banking services.

Regarding the development of existing foreign exchange business services: focusing on groups 1 and 2 of commercial banks in Hanoi, which have quite strong competitiveness and occupy a relatively high market share compared to other commercial banks in the area. There are even services in which commercial banks are superior to other commercial banks, such as remittance payment services, occupying 65-70% of the market share; developing a foreign exchange network ... this is an important source of additional foreign currency for commercial banks to increase lending and import-export payments, which was previously always in a deficit situation.

- Currency options services:


Currency options service is a new service in Vietnam, Vietnam Technological and Commercial Joint Stock Bank (TCB) is the first bank in the area.


implementation. Up to now, there are 02 banks in Hanoi providing this service, including 2 joint stock commercial banks; Techcombank; VIB and some state-owned commercial banks such as: Bank for Foreign Trade of Vietnam, Bank for Investment and Development, Vietnam Bank for Industry and Trade. For the number of customers using this service are enterprises. Accordingly, enterprises can buy and sell a certain foreign currency on the market through the bank at an exchange rate that is beneficial to the enterprise at the specified time. This service limits the maximum

Many risks for businesses when exchange rates fluctuate, competition because when businesses need to pay, they have to buy foreign currency at high prices or sell at low prices.

- Option Service: Currently, Techcombank has deployed this service, which brings many benefits to customers and banks by limiting risks due to price fluctuations. At the same time, it creates conditions for banks to be proactive in exploiting and using capital in gold or

ensure the value of gold, as well as gold trading activities.


- Some commercial banks in Hanoi strongly develop these services such as: Techcombank, VIBank, Habubank, Military, VPBank, Dong Nam

¸ . Card payment turnover in 2008 was 22,430 billion VND, 70 times higher than in 2002, in which commercial banks in Hanoi accounted for 55.4% of total card payment turnover.

Commercial banks participate in payment card services in 3 forms:


- Participate as members of international card organizations (Visa card, Mastercard..). Currently, there are 4 commercial banks in the area (TCB, MB, VIB, VPB) that have participated in international card organizations, some other banks are completing procedures to join international card organizations. - The advantage of joining is that commercial banks are supported in terms of operations, technology, infrastructure, and a wide payment network worldwide.


- Card payment agent, with products: Visa International, Mastercard, International; JCB International; Diners Club International; American Express International ... Currently, local commercial banks are agents of many different card companies in the world.

- Issuing domestic cards, with products: cash withdrawal cards, domestic debit cards such as TCB Card; TCB e-Card; MB Card; VIB Card.

This is a popular service, currently some commercial banks develop multi-function ATM card services such as withdrawing savings deposits; withdrawing and depositing into personal deposit accounts, paying electricity and water bills, postal fees ...

- These are the products and services that commercial banks are interested in implementing together with other banks in the area such as: financial consulting and currency investment services; payment by mobile phone; online banking; home banking services; phone banking services;

Table 2.10: Proportion of income from service activities to total income of banking systems from 2002 to 2008

Unit: %



Bank

2002

2003

2004

2005

2006

2007

2008

DV Collection

DV Collection

DV Collection

DV Collection

DV Collection

DV Collection

DV Collection

Joint Stock Commercial Bank

7.08

8.5

8.7

8.8

9

10.5

11

State-owned commercial banks

6.5

7

7.8

8.9

10.5

12.5

15

(Source: State Bank of Vietnam, Hanoi Branch) Table 2.10: The proportion of income from service activities to total income of banking systems from 2002 to 2008 below reflects the general results achieved in the process of developing banking and financial services of commercial banks in comparison with other banking systems.

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