Home / Foreign Currency

Proportion of Foreign Currency Trading Turnover of Vietnamese Commercial Banks by Type


and the business and individual market decreased by 14.2%. The fluctuation in exchange rates in the domestic market and the prolonged foreign currency supply tensions combined with international factors were the main reasons leading to the sharp decline in sales in the two markets above.

Table 2.8 Proportion of foreign currency trading turnover of Vietnamese commercial banks divided by subjects

Unit of measure %

Object

2006

2007

2008

2009

2010

2011

Client

64.5

61.9

61

61.2

58.9

60.2

TCTD

35.5

38.1

39

38.8

41.1

39.8

Add

100

100

100

100

100

100

Maybe you are interested!

Proportion of Foreign Currency Trading Turnover of Vietnamese Commercial Banks by Type

(Source: Annual Report of Vietnamese Commercial Banks 2006-2011)

On the level of foreign currency diversification in foreign currency trading of Vietnam Commercial Banks

According to foreign exchange management regulations, foreign currencies allowed for trading are determined by the General Director of the credit institution. Currently, Vietnamese commercial banks conduct business with 18 foreign currencies including AUD, CAD, CHF, DKK, EUR, GBP, HKD, INR, JPY, KRW, KWD, MYR, NOK, RUB, SEK, SGD, THB, USD.

However, in the foreign currency trading structure of Vietnamese commercial banks, USD accounts for the highest proportion, followed by EUR and JPY.

For Agribank, the trading turnover in USD accounts for a much larger proportion than other currencies, on average in the period 2006-2011 accounting for 83.7%, transactions in EUR account for 14.2%, JPY is 1.9% and the rest are in other currencies. Transactions in USD, although still accounting for a high proportion, have a tendency to decrease, accounting for only 78.2% in 2011, transactions in EUR increased strongly, reaching 19.1% in 2011.

Thus, Agribank's foreign currency transactions are mainly conducted with USD and EUR, accounting for 98%. This reflects the reality that import-export enterprises mainly use USD in international payments. This reality


There are huge risks when there are fluctuations in the USD exchange rate.

Table 2.9 Proportion of Agribank's foreign currency trading turnover divided by foreign currency

Unit: %


Foreign currency

2006

2007

2008

2009

2010

2011

TB

USD

83.6

80.1

90.1

85.2

79.8

78.2

83.7

EUR

15.0

17.9

7.4

12.0

18.6

19.1

14.2

JPY

1.2

1.9

2.3

2.6

1.5

2.0

1.9

Other

0.2

0.1

0.3

0.2

0.1

0.7

0.2

Add

100

100

100

100

100

100

100

(Source: Agribank Annual Report 2006-2011)

For BIDV, the proportion of foreign currency trading revenue in 2006-2011 for USD accounted for 69.4%, EUR accounted for 22.3%, JPY accounted for 3.8%, GBP accounted for 2.9% and the rest were other currencies.

In fact, for VCB, in foreign currency trading, USD accounts for a large proportion, more than 75%, followed by EUR more than 14%, Japanese Yen about 4%, transactions in other currencies such as GBP, HKD, SGD, CAD... account for a small proportion. In the period 2006-2007, the proportion of sales in USD reached 78% in 2006, transactions in other currencies accounted for 22%. However, the proportion of sales in USD gradually decreased in 2007. This shows that transactions in other currencies have increased. In the period 2007-2008, foreign currency sales in USD continued to increase, however, the proportion of sales in USD continued to decrease sharply. In particular, in 2008, the proportion of USD in VCB's foreign exchange transactions was the lowest at 65%, EUR was 23%, JPY accounted for 5%, and the rest were other currencies. The reason for the decline in the role of USD in VCB's foreign exchange transaction structure is that the common European currency EUR has been asserting its position in the world currency market, EUR is increasing in value compared to USD. In addition, the decline in USD is due to the US economy showing signs of recession after a long period of prosperity. At the same time, the US is facing


facing domestic financial scandals, terrorist threats and especially the inability to stabilize after focusing on the Iraq attack. On the other hand, the demand for international payments and reserves in EUR is also increasing significantly. This increases the turnover of transactions in EUR. In addition, the EU market is the traditional and largest export market of Vietnam, so the turnover of foreign currency trading for transactions in EUR is increasing. Foreign currency transactions in Japanese Yen also account for a significant proportion.

However, 2008 was the year of global economic recession, global economic output declined, import and export activities decreased, so foreign currency transactions decreased, leading to a decrease in the proportion of transactions in USD, which is the commonly used currency due to the habit of import and export payments.

During the period 2009-2011, the proportion of EUR and USD in VCB's foreign exchange transactions remained high. However, transactions in other currencies also increased and reached 7% of total transaction turnover.

90.0%

80.0%

70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

2005

USD EUR JPY

Other currencies

2006

2007

2008

2009

2010

2011

2012


Chart 2.4 Proportion of foreign currency trading turnover divided by currency of VCB

(Source: VCB's Business Results Report 2006-2011)

For the group of joint-stock commercial banks such as Techcombank, in the foreign currency structure of business, the USD accounts for a higher proportion than the group of state-owned commercial banks, at over 83%. However, the proportion of EUR accounts for a lower proportion.


14.87%, JPY accounts for 1.49%, and other currencies account for only 0.35%. The reason why USD accounts for a high proportion in Techcombank's foreign exchange transactions is due to the actual needs of customers. Techcombank's customers mainly pay for import-export contracts in USD. On the other hand, Techcombank's foreign exchange business reality shows that the proportion of USD trading has decreased but is still high, nearly 80%, while the proportion of EUR and JPY has increased. This shows that Techcombank is gradually diversifying foreign currencies in the bank's business.

In summary, through the analysis of the level of foreign currency diversification in the business of Vietnamese commercial banks, it can be seen that the proportion of USD business turnover decreased, the proportion of turnover in currencies other than USD tended to increase in the period 2006-2011, reflecting the fact that Vietnamese commercial banks have achieved development in foreign currency business of banks.

On diversifying foreign exchange business operations of Vietnamese commercial banks .

Foreign exchange trading activities of Vietnamese commercial banks include spot transactions, forward transactions, interest rate swaps and options. However, Vietnamese commercial banks mainly conduct spot transactions accounting for about 87.6%, forward transactions accounting for 9.6% and swaps about 3.2%, options are exercised but account for a small proportion.

Spot trading turnover accounts for a high proportion of total trading turnover of Vietnamese commercial banks but tends to decrease gradually in the period 2006-2010. Specifically, the proportion of spot trading in 2006 was 93%, but by 2011 it was only 82%. Forward and swap transactions tended to increase by 5.3% and 3.7% respectively (comparing 2011 with 2006). Although options trading was carried out at BIDV and VCB, it accounted for a small proportion of about 0.003% in 2011.

The turnover proportion of transactions of Vietnamese commercial banks is not uniform. For Agribank, on average, spot transactions account for 80%, period


term is 10.9% and swap is 9.1%. BIDV Bank has an average proportion of spot transactions accounting for 98.9%, the rest are other transactions. Particularly, VCB, the proportion of spot transactions is lower at 82.4%, 13.4% and 4.1% respectively for spot, term and swap transactions. Data from Vietnamese commercial banks shows that the turnover of spot transactions always achieved high growth rates throughout the period 2006-2008. Spot trading turnover in 2008 increased by 54.3% compared to 2007, and increased by 78.1% compared to 2006. However, in 2009, spot trading turnover decreased sharply compared to 2008. Spot trading turnover in 2009 decreased by 18.5% compared to 2008. In 2010-2011, spot trading turnover increased again with an increase of 4.3% and 1.6% in 2010 and 2011, respectively. The reason why spot transactions account for a high proportion of foreign exchange trading of Vietnamese commercial banks is because for spot transactions, banks can immediately determine the loss/profit after each transaction. Especially in the domestic market, because the selling exchange rate is always higher than the buying exchange rate, banks can immediately calculate the profit of the transaction.

Table 2.10 Sales turnover of Vietnamese commercial banks divided by transaction

Unit: Million USD


Transaction

2006

2007

2008

2009

2010

2011

Immediate delivery

64255.5

74,172.7

114,464.5

93,297.1

97,355.2

98,883.2

Term

4889.0

7,005.2

11,666.8

10,976.1

14,427.3

15,435.4

Swap

698.4

1,236.2

3,224.9

4,901.2

5,165.1

6,261.3

Options



4.5

5.4

4.7

6.3

Add

69,843

82,414

129,361

109,180

116,952

120,589

(Source: Annual Report of Vietnam Commercial Banks for the period 2006-2011)

For futures transactions, the turnover of futures transactions has mostly grown steadily except for a slight decline in 2009. Futures transactions are also quite popular in Vietnamese commercial banks. However, the proportion is lower than that of spot transactions. The reason is that on the one hand, customers do not have much knowledge about this type of transaction. On the other hand, due to the exchange rate management mechanism of banks.


The state-owned banks have been quite stable in the recent past, with the VND depreciating against foreign currencies to encourage exports while still ensuring stability for import-export activities. For this reason, exporters do not feel worried about the depreciation of foreign currencies when signing export contracts, so there is no need to sell foreign currencies in terms of terms. On the importer's side, although foreign currencies have appreciated against VND, the appreciation of foreign currencies is still kept under control by the State Bank, so importers do not really think that using forward transactions to hedge against exchange rate risks. Another factor that makes the turnover of forward transactions of Vietnamese commercial banks account for a modest proportion is that for a long time, the State Bank has maintained the average interbank exchange rate much lower than the price on the free market. Therefore, when businesses have foreign currencies, they often exchange them on the free market to get a higher exchange rate than the listed bank's exchange rate. Besides, the ability to forecast exchange rate fluctuations of import-export enterprises is still weak, so the choice of forward transactions is limited.

Thus, forward transactions can satisfy the needs of customers to buy and sell foreign currencies, the transfer of which is made in the future. However, forward transactions are mandatory transactions, so when the maturity date comes, both the bank and the customer must execute the contract. However, forward contracts only meet the needs of buying or selling in the future. In fact, sometimes customers have both the need to buy and sell foreign currencies in the present and the need to buy and sell foreign currencies in the future. Therefore, to satisfy the needs of customers, a new transaction is formed, which is a swap transaction. This is one of the means to prevent risks for banks.

During the period 2006-2011, the average swap transaction turnover increased by 1,112.88 million USD, equivalent to an average increase of 55.1%. Vietnamese commercial banks mainly conduct swap transactions with the State Bank, while the proportion of customers accounts for an insignificant small proportion. Option transaction turnover accounts for a small proportion.


in the total foreign exchange turnover of Vietnamese commercial banks but there was a steady increase from 2008 to 2011, reaching 6.3 million USD.

2.2.2.3 Current status of foreign currency trading income development in the international market of Vietnamese commercial banks.

The income from foreign exchange trading activities of Vietnamese commercial banks in the period 2006-2011 increased and decreased erratically. In the period 2006-2007, the income from foreign exchange trading of Vietnamese commercial banks was low at over 800 billion VND. However, in 2008, Vietnamese commercial banks achieved strong growth in income, specifically foreign exchange trading income increased by 224.3% compared to 2007. BIDV Bank had the highest income, followed by ACB and VCB. Techcombank had the lowest income of 21,793 million VND.

Table 2.11 Net foreign exchange trading income of Vietnamese commercial banks

Unit: Million VND


Bank

2006

2007

2008

2009

2010

2011

Agribank

127,608

67,384

238,846

(68,582)

253,065

308,321

BIDV

107,700

139,700

790,700

208,800

288,700

314,418

VCB

274,050

354,530

591,402

925,290

570,010

1,179,584

Vietinbank

60,002

64,087

290,046

59,278

158,444

382,562

ACB

70,320

155,140

678,852

422,336

191,104

(161,467)

Techcombank

7,491

24,583

21,793

48,089

(91,383)

(698,913)

Add

647,171

805,424

2,611,639

1,595,211

1,369,940

1,324,505

(Source: Annual Report of Vietnamese Commercial Banks 2006-2011)

In 2009-2010, this was a difficult time for the world economy and Vietnam. Therefore, most banks had a decrease in foreign currency trading income, some banks even suffered losses such as Agribank, which lost up to 68,582 million VND, except for VCB and Techcombank. VCB is one of the banks with extensive experience in foreign currency trading, 2009 was the year VCB achieved the highest income during the period 2006-2010, accounting for 23.44% of the bank's total profit.


However, in 2010, VCB's income decreased by 38.4%. The reason was due to complicated fluctuations in the world economic situation, fluctuations in the USD/VND exchange rate caused certain pressures in the bank's foreign currency business.

Foreign exchange trading is one of the basic activities of Vietnamese commercial banks, contributing a significant proportion to the bank's profits, on average in the period 2006-2011 accounting for 8.0% of pre-tax profits of Vietnamese commercial banks.

Table 2.12 Net business income/net profit ratio of Vietnamese commercial banks

Unit:%



2006

2007

2008

2009

2010

2011

TB

Agribank

10.2%

2.9%

8.6%

-2.5%

11.4%

15.6%

7.0%

BIDV

9.7%

6.9%

33.6%

5.8%

6.2%

7.4%

10.3%

VCB

7.1%

11.3%

16.7%

18.5%

10.4%

20.7%

14.6%

Vietinbank

7.2%

4.2%

11.9%

3.5%

3.4%

4.6%

5.2%

ACB

10.2%

7.3%

26.5%

14.9%

6.2%

-3.8%

8.7%

Techcombank

2.1%

3.5%

1.4%

2.1%

-3.3%

-16.6%

-5.8%

Medium

7.98%

6.80%

17.09%

8.78%

5.05%

5.05%

8.0%

(Source: Annual Report of Vietnamese Commercial Banks 2006-2011)

For the group of state-owned commercial banks, VCB is the bank with the highest ratio of foreign currency trading income to pre-tax profit at 14.6%, followed by BIDV with a ratio of 10.3%. In particular, in 2008, BIDV had a sudden increase in foreign currency trading income, accounting for 33.6% of after-tax profit. The reason for such high growth is that in 2008, BIDV maximized its potential in the foreign currency trading sector and achieved outstanding results, earning VND 791 billion from foreign currency trading activities. BIDV's net income from foreign currency trading in 2010 compared to 2006 increased 2.7 times (from VND 107 billion to VND 289 billion). In 2008, net income from KDNT increased dramatically 5.6 times compared to 2007 (from 140 billion VND in 2007 to 791 billion VND in 2008). Thus, it can be seen that the growth rate

Comment


Agree Privacy Policy *