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3.2. SHB's business orientation in the post-M&A period
3.2.1. Short-term goals
SHB aims to always strive to be in the group of 8 largest commercial banks in Vietnam and in the list of 5 largest joint stock commercial banks in terms of all indicators in banking business activities. From 2015 onwards, SHB strives to become a leading modern multi-functional retail commercial bank in Vietnam.
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Main objectives for the period 2015-2020:
- Improve management and operation capacity in all areas of business operations, adjust management and operation methods as well as continue to perfect the organizational structure, institutional system, regulations and processes in accordance with the conditions and scale of the bank as well as general development trends.
- Improve risk management: Strongly promote the risk management system, strengthen inspection, control and internal audit to each business unit throughout the system.
- Promote product and service development: Strengthen research and evaluate the market impact on SHB's existing products, survey and evaluate customer needs to develop specific products and services. From there, continue to increase the number of customers, promote the provision of products and services to customers who are small and medium enterprises, customers using consumer products and services. Promote cross-selling of retail banking products and services such as: Domestic cards, international Master Cards. At the same time, exploit remittance payment activities by maximizing the potential areas for remittance services in Hanoi, Ho Chi Minh City, the Mekong Delta provinces and the Southeast provinces. In addition, we will focus on developing customer groups with high demand for remittance payments such as: international students, labor export, overseas Vietnamese association, foreign student association, etc. Strive to earn service revenue from 25-30% of the bank's total income.
- Continue to develop market share for main business segments: Market mobilization I, credit, gold bar trading, domestic cards, international cards and services
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Other banks. Focus on promoting the work of the Bank serving projects related to ODA capital sources, serving key national projects.
- Develop a competitive business plan with the motto "compete by difference" for each service area and banking product suitable for each stage in each year on the basis of business development towards the goal of sustainable safety and efficiency.
- Focus on training, especially on training in management and operational capacity for managers from department heads/deputy heads and above. Regularly update and provide professional training for all employees with the policy that each employee is a part-time lecturer to guide and train colleagues and other employees within the scope of their work and field of operation. Preserve and develop the culture of the enterprise with SHB's traditional identity.
3.2.2. Medium and long-term development goals:
SHB's medium and long-term development strategy is to become a modern multi-functional retail bank, and by 2020 become a multi-functional financial group, constantly developing and gradually reaching out to international integration. To implement this strategy, SHB focuses on developing new and modern banking services to diversify products and services in a comprehensive, high-end and specialized direction, anticipating the general trend of the financial industry in Vietnam and the world.
SHB's business orientation is to "compete with difference" to take advantage of investment opportunities in the market through clear, long-term strategic planning, proactive forecasting and appropriate adjustment for each stage to ensure competitiveness and create a difference with a modern technology platform, a young, enthusiastic and professional staff, and solidarity in management and operation.
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3.3. Proposing solutions to improve business efficiency for SHB
3.3.1. Group of solutions to improve financial capacity
As analyzed in Chapter 2, although SHB has a large scale of equity, capable of meeting the needs of organizing business activities, over time, the expansion of the scale of operations requires the equity to be continuously consolidated and supplemented. Therefore, improving financial capacity through solutions to enhance equity is a long-term task, which needs to be focused on and implemented regularly so that after integration, the bank not only achieves the safety assurance indicators according to Basel II standards and Circular 36 but also moves towards meeting the basic indicators of Basel III to be commensurate with its position in terms of scale in the industry. Some specific solutions to improve financial capacity:
First of all, increase the charter capital. SHB needs to develop a roadmap for increasing charter capital and follow it to increase the scale of operations and expand business areas. In addition, the increase in charter capital must always follow the roadmap and changes in the requirements for the legal capital scale of the State Bank.
Some possible solutions to increase charter capital are: issuing and offering privately to existing shareholders in case the charter capital issued is low. If the scale of the additional capital is large, the bank can choose to increase capital by attracting foreign strategic shareholders. The promulgation of Decree 01/2014/ND-CP is a favorable opportunity for banks to access more foreign capital. To do this, banks must have a detailed implementation roadmap and thoroughly resolve internal issues.
Issuing convertible bonds is also a measure to contribute to increasing capital, this solution is feasible in the context of the stock market starting to show signs of recovery. In addition, another quite sustainable and cost-effective solution for capital growth is to increase the ability to self-finance with internal capital through retained profits. However, the scale of capital increase from this source may not be high because retaining profits can cause negative reactions from shareholders.
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3.3.2. Group of solutions to improve asset quality
The analysis results from the CAMEL model show that SHB, like many other banks, has an asset structure focused on profitable assets, while SHB's asset quality is on a downward trend.
In this context, Circular 09 has adjusted and supplemented some contents of Circular 02, allowing to extend the time for restructuring debt repayment terms and maintaining the debt group until the end of the first quarter of 2015, which has helped banks have more time to deal with difficulties in credit activities, but the binding conditions are also stricter. Although SHB's bad debt ratio has been controlled to a safe level, in the coming time, regulations on provisioning, debt classification, or information monitoring policies for credit institutions may become stricter to ensure that the restructuring process of the banking industry quickly achieves its goals. Therefore, it is necessary to pay attention to some solutions for banks to effectively improve asset quality:
First and foremost is to review, handle and actively recover bad debts: Bad debts are an issue that cannot be handled immediately but must have a specific, long-term roadmap. In the immediate future, banks must proactively handle bad debts by improving the quality of governance, internal audit, developing risk management systems and business development strategies, and credit granting procedures in a healthy and prudent manner. In addition, banks proactively coordinate with borrowers to restructure debts, extend repayment periods and consider reducing interest rates appropriately to help businesses sell their products and resolve temporary difficulties in business operations. This may reduce banks' profits in the short term, but in return, when businesses recover, it will have a positive impact on banks and compensate for it with future profits.
To handle bad debt and prevent and limit the increase of bad debt in the future, banks need to proactively deploy groups of solutions such as: Re-evaluating the quality and recovery ability of debts to have appropriate handling measures; increasing provisions and using risk reserves to handle bad debt; continuing to restructure debt; continuing to support capital for customers to overcome difficulties; restoring, supplementing, and completing legal documents of secured assets; debt collection and handling of secured assets; debt conversion into capital; debt sale.
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bad for DATC under the Ministry of Finance; strictly control and reduce operating costs; limit bad debts arising in the future. However, for the above measures to be effective, the Bank needs to perform well the following tasks:
First of all, bad debt handling needs to be specific. SHB must classify bad debt to have appropriate separate handling measures.
Second, banks need to increase provisions and use of reserve funds to handle bad debts according to the law. The additional reserve capital will create conditions for banks to aggressively collect debts, have time to liquidate mortgaged assets at reasonable prices, and create revenue for the following years.
Third, securitization of bad debts. Securitization is carried out according to specific methods: For enterprises with a history of good business management, facing difficulties in paying principal debt due to difficult economic situations, due to investment projects being implemented but not yet put into operation, etc., it is possible to convert part of the principal debt into medium-term bonds to support liquidity and help enterprises survive and develop. Convert overdue debt, bad debt into shares and change the position of banks that are creditors into major shareholders, shareholders holding the majority of shares if it is found that after restructuring the enterprise has the ability to survive and develop. For the securitization process to be successful, banks need to actively enhance community spirit, coordinate together to handle bad debts. Banks need to actively use their subsidiaries such as debt trading management companies, securities companies, fund management companies to actively participate in the securitization process.
Fourth, make the information system transparent. To effectively implement information transparency, avoid the situation where banks want to clean up the published numbers to attract customers, which can lead to fraud and publish inaccurate information in a way that benefits them, it is necessary to have an independent organization that plays a role in exploiting information, verifying and controlling information from commercial banks. In addition, to facilitate the supervision of the financial sector, increase the transparency and stability of the financial system, as well as strengthen market discipline. The State Bank also seriously and strictly deploys and implements the "Financial Soundness Indicators" (FSIs) developed and disseminated by the IMF.
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Finally, the bank needs to improve its internal governance mechanism, ensuring that only those with authority and responsibility in the bank can make decisions and that there is close supervision to ensure there are no conflicts of interest or collusion for group interests.
3.3.3. Group of solutions to improve profitability
When the bad debt ratio has been controlled, the group of solutions to improve profitability and competitiveness is the key to improving SHB's business performance. Some measures that need to be implemented:
Continue to diversify income structure, reduce dependence on credit and investment activities: Increase the proportion of income from service activities with diverse, convenient, competitive and synchronized banking products and services on the basis of modern IT platform, in order to provide customers with the highest quality banking products and services, develop a team of good consultants to sell services accompanying the main products. For SHB, it is necessary to actively create a difference in accordance with the direction set by the bank. Currently, SHB's products and services are not as diverse and do not have outstanding features compared to competing banks such as ACB or MB, the proportion of loans to individual customers of SHB is still very low to achieve the goal of becoming a "multi-functional retail bank". Therefore, SHB needs to have a specific strategy, focusing on improving diversity and emphasizing the characteristics of the bank's products as well as enhancing communication and marketing for products and brands.
Exploiting interbank market activities, reducing costs for interbank mobilization: taking advantage of idle capital to do business in the interbank market to improve income and minimize risks for banks. In addition, banks need to extend and negotiate interbank loans in the direction of exempting or reducing interest rates, and at the same time, take advantage of paying off interbank loans to reduce interest costs.
Focus on consolidating and developing core business activities and eliminating risky and inefficient business areas: Focus bank credit on industries and fields belonging to the 3 strategic breakthroughs in the socio-economic development strategy.
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2011-2020 period and prioritize credit capital for production, serving agricultural and rural development, export, supporting industry, manufacturing - processing, small and medium enterprises. This must be done at the same time as expanding the scope and scale of banking operations in rural areas, developing the network of branches and transaction points in remote areas, reducing ineffective branches and transaction points. In addition, it is necessary to rapidly develop payment services in a safe and effective manner, especially payment card products and services on the basis of promoting the modernization of technology, payment systems and increasing the convenience of payment cards and card acceptance points.
The above solutions all aim to diversify banking services, focusing on improving the quality of traditional banking services and rapidly developing modern banking services (payment services, foreign exchange, investment, asset management, risk management for customers, etc.) to gradually transform the banking business model towards reducing dependence on credit activities and increasing income from non-credit service activities.
Reduce costs
Reduce capital mobilization costs by increasing the proportion of cheap capital sources in the mobilization structure. Implement a policy of cutting and strictly controlling management costs based on assigning management targets to each business unit and each individual employee in the entire system to save costs and improve business efficiency.
3.3.4. Group of solutions to improve liquidity
Although SHB's liquidity is currently quite stable, the bank still needs to continuously maintain liquidity indicators at a reasonable level, creating trust for customers, while not affecting the bank's ability to generate profits. Possible solutions:
Increase mobilization from residents and economic organizations: implemented through mobilization products, promotional programs, attractive customer care policies, bringing convenience to customers at appropriate prices. Supplement and maintain cash funds
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at an appropriate level to ensure both affordability for customers and appropriate profitability.
Enhancing the liquidity of the asset portfolio: implemented through solutions to review and recover investment profits, to clear cash flow, create liquidity, and at the same time invest more in liquid assets such as government bonds, credit institution bonds, and liquid securities.
Improve stability and sustainability of payment capacity: increase the stability of capital sources by increasing the proportion of long-term mobilized resources, improve the balance and rationality of terms and currencies between capital sources and capital use.
3.3.5. Group of solutions to improve management and administration capacity
The analysis in chapter 2 shows that after M&A, SHB has to face certain changes in its senior personnel. Some changes may negatively affect the working spirit of employees from the merged bank, as in the case of HBB. Moreover, after the merger, banks often have to reduce their personnel, information may be disrupted, leading to employee insecurity, reducing work efficiency. Therefore, some solutions that need to be implemented for this bank are:
In the first years after the merger :
It is necessary to immediately reassure the internal, make a commitment and demonstrate the development of the bank after the merger. At the same time, review the policies, structure, and working conditions of the staff, find out the reasons why key staff leave. From there, come up with a plan: negotiate, bargain and have measures to keep these staff. In the last case, accept to let them leave but in the most comfortable state for both sides, because they may be future partners.
In the medium and long term, it is necessary to focus on building a high-level human resource system for the bank, increasing investment in developing the image and brand of the bank after the merger. At the same time, focus on building corporate culture and developing business, expanding the market. In addition, the bank needs to strengthen internal marketing, and have measures to integrate the human resource systems of the merged banks. In the long term, it is necessary to consolidate operations.