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Number of Subsidiaries of NHTM CP by 2011


different. For example, before that, a series of debt management and asset exploitation companies were established to support debt collection, followed by companies operating in the fields of real estate, gold trading, securities, and in the context of tight credit as present, financial companies under commercial banks appear more. Joint stock commercial banks consider subsidiaries and affiliated companies as one of the solutions to overcome difficulties, especially financial companies with functions similar to banks, helping joint stock commercial banks diversify their business.

Specifically, Sacombank still determines the policy of establishing a Finance company in the form of a single-member LLC. This is also the policy of expanding the business activities of one of many other large and small banks in the area. Specifically, Viet A Commercial Joint Stock Bank (VIETABANK) has agreed on the policy of establishing subsidiaries such as investment companies, finance companies, real estate business and services companies, banking information services companies, banking service companies, remittance companies... to support and expand the bank's business. Saigon Commercial Joint Stock Bank (SCB) - a bank whose customers are mainly traders and small investors, also decided to establish subsidiaries to carry out business activities. For example, Nam A Bank also consulted shareholders on the establishment of Nam A Finance One Member Co., Ltd. with a charter capital of VND500 billion, and at the same time planned to contribute capital to joint ventures with domestic and foreign partners to establish companies and enterprises in Vietnam. Some other banks with small charter capital also said that they would reserve a certain amount of capital to contribute capital to real estate and securities investment companies.

These companies contribute to forming a system of subsidiaries, linked around the parent bank to cross-sell products to customers. Thus, from a certain perspective, it shows the parent company - subsidiary model in the banking sector or in other words, it is the premise of the TC-NH group model in the future in Vietnam in general and Ho Chi Minh City in particular.


Table 2.3: Number of companies under Joint Stock Commercial Bank by 2011


STT

Bank

Number

quantity

Subsidiary's field of operation

1

ACB

7

Securities, Fund Management, Financial Leasing, Asset Management, Security, Real Estate, ACB Jewelry

2

EAB

3

Securities, Remittances and EAB Cards

3

Eximbank

2

Stocks, Real Estate

4

Sacombank

5

Remittances, securities, gold, debt management, financial leasing..

5

Saigonbank

1

Debt management and asset exploitation

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Number of Subsidiaries of NHTM CP by 2011

( Source : author's synthesis) [61]

- Fourth, commercial joint stock banks in Ho Chi Minh City always develop strongly compared to the whole system, are dynamic, proactive in merging and consolidating to expand their scale of operations.

A review of the process of formation and development of joint stock commercial banks has shown some outstanding points compared to the system of joint stock commercial banks in Vietnam, that is, the area has the largest number of joint stock commercial banks and the most diverse development in terms of structure, ownership and scale. Total charter capital accounts for about 45% of the entire joint stock commercial bank system in the country. Total profit also accounts for a similar proportion. In particular, the origin of formation often starts from the times of restructuring the system and after each time, the development is much stronger.

Specifically, after Sacombank merged with a rural joint stock commercial bank, its profit in 2005 was 8.7 times higher than in 2001. By 2011, it had increased nearly 69 times compared to 2001. Similarly, total assets were 4.6 times and 21.5 times respectively (see Appendix 1). Most of the large joint stock commercial banks in the area have experience in mergers such as between credit cooperatives and banks, between urban joint stock commercial banks and rural joint stock commercial banks to expand the market.


Particularly in 2011, in the face of domestic currency fluctuations as well as the impact of the global financial crisis, the first three joint stock commercial banks in Ho Chi Minh City proactively and voluntarily carried out a historic merger, increasing their charter capital to over VND10,500 billion, continuing to maintain a safe operating status, strengthening internal strength for development in the new post-crisis period. According to the general assessment and from the orientation of restructuring the banking system of the State Bank, there will be many similar mergers to form banks with larger scale and stronger development potential in the area in the following years.

- Fifth, commercial banks want to build a traditional and sustainable customer system to always maintain the market and expand their market share.

When forming a TC-NH group, the factor of consolidating both the market and market share is an issue of common concern for all parties. At that time, all members of the group have the opportunity for a wider market and thereby help each member shorten the search time and save on market development costs. At the same time, through coordinated investment, cross-selling of products as well as implementing preferential policies during operation, it will contribute to building a long-term traditional customer base as well as expanding the target market share. Normally, commercial banks classify customers based on transaction history and the level of participation in using banking products and services to have different preferential policies. In addition, the equitization of commercial banks in the form of issuing public shares requires banks to ensure transparency and transparency in organization, management, operation and efficiency will help banks always have a number of traditional customers. This customer system becomes the foundation for banks and financial groups to develop stably and sustainably.

- Sixth, large and powerful TC-NH groups will be effective competitors and contribute to maintaining the stable development of the TCTD system.


Since April 1, 2007, 100% foreign-owned subsidiary banks have been officially allowed to be established in Vietnam and are treated equally as domestic joint stock commercial banks. Our country's financial system is facing an unprecedented challenge of fierce competition with the world's leading financial groups. These foreign banks established in Vietnam are mainly established by large financial groups, so they have many advantages in terms of capital scale, information technology, good management level, highly qualified staff, diverse products and services, and especially new products and services, lower service prices will be real competitors to Vietnamese banks. Therefore, to solve the problem of efficiency in financial business activities, commercial banks must inevitably develop a roadmap to establish financial-banking groups, in order to gradually become a competitive counterweight to the world's leading financial groups [3,9].

This orientation is also clearly shown in the government's project to restructure the system of credit institutions by 2015, which is to rectify and rearrange Vietnam's joint-stock commercial banks, finance companies, and financial leasing companies to ensure safe, healthy, effective, and legal operations, and together with state-owned commercial banks, to keep the system of credit institutions stable and develop firmly.

- Seventh, build a TC-NH group to increase the ability to provide a full package of banking and financial services or meet customers' needs for integrated financial products.

Through practical surveys, it is shown that current joint stock commercial banks do not only operate simply in the business of mobilizing and lending but also perform many different services through the commercial banks themselves or their subsidiaries. The development of derivative products between banking - insurance - securities - investment is no longer new. Cross-selling of products and services between parent banks and subsidiaries is always regular and coordinated. Depositing customers can use their deposit accounts for payment card services, services


buy and sell securities at affiliated companies. Or with deposit accounts, customers can entrust the bank to perform regular payment services without having to go to the bank. For lending activities, currently loans are expanded to the securities sector such as loans for enterprise equitization, securities advance loans, securities mortgage loans, repo, forward, option, future operations similar to those in the foreign exchange sector.

In addition, bancassurance services such as export credit insurance, cargo insurance, property insurance, etc. are increasingly popular and almost mandatory to prevent risks (see Figure 2.2). In addition, insurance also takes advantage of the banking network to transact with customers through consulting, cross-selling products and collecting insurance premiums. Statistics show that in France, 70% of business insurance premiums are collected through distribution channels at banks, this figure is 68% in Portugal and 63% in Spain.

Figure 2.2: Cross-selling banking products with insurance



Card

credit


Cash flow management


Mortgage Loans


Asset purchase loan


Personal Loans


BANKING PRODUCTS


Lost Card Insurance

credit

Life insurance

Property insurance

mortgage

Financial Insurance

product

Insurance attached to fish

core

INSURANCE PRODUCTS

( Source : author's synthesis) [61]

In fact, if there is no TC-NH group, customers can use the above services separately but still meet their needs. However, each separate service will not be convenient and can increase the cost of use, while the socio-economic life is increasingly developing, the need to use the above service package is increasing. Therefore, if TC-NH group is formed,


The ability to provide cross-product packages between credit - securities - insurance will be better because with the same subject, customers do not have to spend much time learning but get advice and service faster.

- Eighth, the trend of mergers and acquisitions to take advantage of each other's advantages and overcome each other's limitations and weaknesses has become common among commercial banks.

Instead of competing with each other to reduce market share and profits, small financial institutions will join together, helping to accelerate the process of capital accumulation and concentration, forming large financial institutions with higher competitiveness. At that time, the shortcomings will be studied and overcome more easily and the investment needs will not be a burden because the financial strength after the merger as well as the available advantages in customers and the market will allow commercial banks to develop better. This is also to meet the need for increasingly strict and tough state management to improve the health of the commercial banking system.

There is no full assessment yet, but the merger or consolidation between joint stock commercial banks will first bring about mechanical changes. That is, equity will increase, customers and market share will also increase exponentially. Of course, unnecessary costs or organizational structures will be filtered out to ensure the bank operates effectively.

- Ninthly, the formation of financial-banking groups will gradually increase the contribution of the financial services sector to GDP as well as open up opportunities for joint stock commercial banks to continue to develop based on economic advantages of scale and advantages of opportunity.

The banking and financial system always contributes a significant proportion to the annual national GDP growth. In developed countries, this ratio is even higher, specifically in developed countries in the OECD group, the proportion of the financial sector in GDP is quite high, from 15% - 25%. In China alone, this proportion in recent years is 20% [24].


Vietnam is striving to become an industrialized country, so it is in great need of large, long-term capital sources for investment. Therefore, the formation of TC-NH groups will help banks open up a development trend based on economic advantages through scale, economic advantages through opportunities, and through the operational efficiency of the banks themselves, they will gradually increase their contribution to the national GDP.

2.2. CURRENT STATUS OF BASIC CONDITIONS FOR THE FORMATION OF TC-NH GROUP IN HO CHI MINH CITY

2.2.1. The "necessary" conditions for the formation of TC-NH group in Ho Chi Minh city.

2.2.1.1. Development trends according to objective laws of joint stock commercial banks in Ho Chi Minh City

As analyzed in the above sections, the formation and development of the Vietnamese commercial banking system in general and in Ho Chi Minh City in particular always follow the objective laws of development. Banks are products of the commodity economy and will always develop according to the development of the commodity production economy. In the context of Vietnam's integration into the world economy, economic development is intertwined with market trends and in the context of Ho Chi Minh City's strong development of the market economy, the activities of commercial banks also move, change and develop accordingly. It can be said that there is a lame comparison, but the merger of credit cooperatives in Ho Chi Minh City is similar to the first merger and consolidation between financial institutions, between the predecessors of commercial banks in the area with each other to overcome the credit cooperative crisis. The result of the first merger and consolidation is a series of joint-stock commercial banks, contributing to stabilizing the monetary market in the area and the whole country.

The second merger in the history of commercial banks in Vietnam can be seen as a merger or investment in controlling shares between


Urban joint stock commercial banks with rural joint stock commercial banks to increase charter capital and expand the market such as:

- Saigon Thuong Tin Commercial Joint Stock Bank merged with Thanh Thang Rural Commercial Joint Stock Bank in 2001.

- Dong A Commercial Joint Stock Bank merged with Tan Hiep Rural Commercial Joint Stock Bank to increase charter capital to 257 billion VND and establish 3 branches in Kien Giang.

- Orient Commercial Joint Stock Bank with Tay Do Rural Joint Stock Bank - Can Tho in 2003.

- Phuong Nam Joint Stock Commercial Bank merged with Dong Thap Joint Stock Commercial Bank in 1997; with Dai Nam Joint Stock Commercial Bank in 1999; bought Dinh Cong Thanh Tri People's Credit Fund, Hanoi in 2000; merged with Chau Phu Rural Joint Stock Commercial Bank in 2001 and merged with Cai San Rural Joint Stock Commercial Bank, Can Tho in 2003.

- International Commercial Joint Stock Bank and Mekong Commercial Joint Stock Bank in 2001.

After Vietnam joined the WTO in 2007 and faced with the pressure of competition with foreign banks to survive, these joint stock commercial banks once again sought a more suitable model for development. One of the first steps was that joint stock commercial banks in the area sought to increase equity capital, improve financial capacity through equitization, promote high credit growth for many years and establish a series of affiliated companies, specifically Sacombank has increased its charter capital 6 times since 2006, established 6 subsidiaries and associates; ACB has increased its charter capital 9 times, established 7 subsidiaries and associates; Eximbank and EAB have increased their capital no less than 4 times and have no less than 2 associates or subsidiaries.

Impact of the 2007-2008 financial crisis up to now, banking activities in Vietnam in general and Ho Chi Minh City in particular have begun to face difficulties.

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