Safety Factor of World Banks From 2014 To 2020

*Capital adequacy ratio - CAR

To assess the financial strength of a bank, in addition to the main criteria presented in the above sections, there are also criteria for ensuring the level of safe operation of the system. In which, the capital safety coefficient criterion is of most interest and attention.

Currently, many credit institutions in the world have been applying capital safety standards according to the Basel Accord. There have been many versions such as Basel I, II, III and IV. To suit the actual situation in the operation and management of the banking system, there have been many selections and changes in Basel regulations to suit the situation of each country and region. However, basically, they all comply with Basel's guiding principles to achieve capital safety in the operation of the banking system.

Below are the capital adequacy ratios of 11 selected countries studied in the article:

Table 3.28. Safety coefficient of world banks from 2014 to 2020

Unit: %

STT

Bank name	2014	2015	2016	2017	2018	2019	2020
1	Bank of China	13.87%	14.06%	14.28%	14.19%	14.97%	14.19%	14.28%
2	Hang Seng Bank	15.70%	22.10%	20.80%	20.10%	20.20%	20.80%	20.00%
3	HSBC	15.60%	17.20%	20.10%	20.90%	20.00%	20.40%	21.50%
4	ICBC	14.53%	15.22%	14.61%	15.14%	15.39%	16.77%	13.18%
5	OCBC	15.90%	16.80%	17.10%	17.20%	16.40%	16.80%	17.90%
6	Citibank	12.80%	15.30%	16.24%	16.30%	16.14%	15.87%	15.61%
7	SMBC	15.51%	16.58%	17.02%	16.93%	19.36%	16.93%	17.02%
8	Bangkok Bank	17.41%	17.87%	18.32%	18.17%	17.96%	20.04%	18.34%
9	BEA	16.70%	17.20%	17.40%	17.80%	10.80%	20.40%	21.90%
10	ANZ	16.70%	17.20%	17.40%	17.80%	10.80%	20.40%	21.90%
11	Vietcombank	11.35%	11.04%	11.13%	11.63%	12.14%	9.34%	9.70%

Maybe you are interested!

Source: Author synthesized data from the Bank's annual reports from 2014-2020

Unit: %

Chart 3.15. Capital adequacy ratio of banks from 2014 - 2020

Source: Author synthesized data from the Bank's annual reports from 2014-2020

Overall, Vietcombank's capital adequacy ratio is lower than the other 10 banks in the research group. In 2020, the banks with high capital adequacy ratios in the top group of the 11 banks mentioned above were BEA bank - 21.9%, ANZ - 21.9% and HSBC - 21.5%. Meanwhile, Vietcombank's capital adequacy ratio was much lower, reaching 9.7% in 2020.

From 2014 to 2020, Vietcombank's capital adequacy ratio has tended to decrease, from 11.35% in 2014 to 9.7% in 2020. One of the main reasons for Vietcombank's capital adequacy ratio to decrease in the recent period is that Vietcombank's equity capital is still low, the rate of increase in equity capital is still slow compared to the growth rate of operating scale. Moreover, increasing capital for state-owned banks in general and Vietcombank in particular is facing many difficulties because the State's capital ownership ratio has reached the maximum threshold. Increasing equity capital of 4 state-owned banks, including Vietcombank, is being studied by the Government and relevant ministries and branches. Currently, the issue of increasing capital is an urgent issue being raised.

Evaluate Vietcombank's position through world ranking units and magazines:

- 2018 Ranking by The Banker

Regarding Tier 1 Capital: Vietcombank's position in the top 1000 banks in the world according to The Banker's ranking dropped from 2012 to 2017 and rose back to 403rd in 2018. According to this ranking, in 2018, Vietcombank's Tier 1 capital was only second to Vietinbank when compared to domestic banks.

Regarding Total Assets: Vietcombank's position increased continuously from 2014 to 2018 and ranked 331st out of 1000 largest banks in the world. According to this ranking, in 2018, VCB's total assets ranked after 03 state-owned commercial banks (BIDV, Vietinbank, Agribank) when compared with domestic banks.

Regarding Profit before tax: Vietcombank's profit before tax ranking has increased significantly since 2014, its profit ranking has nearly doubled, from 405th in 2014 to 205th in 2018. Compared to domestic banks, Vietcombank's profit before tax ranking is ranked Top 1 and has a gap of more than 102 places compared to the second ranked bank, Techcombank.

- Ranked by Forbes Magazine

There are 3 Vietnamese banks in Forbes magazine's Global 2000 ranking in 2019, of which Vietcombank is at #1096, far surpassing BIDV (#1716) and Vietinbank (#1769).

In the 4 ranking criteria, Vietcombank is superior in Market Value and Profit compared to the other 2 banks (Market Value is 2.1 times higher than BIDV, 3.2 times higher than Vietinbank and Profit is 1.7 times higher than BIDV, 2.4 times higher than Vietinbank).

In this list, Vietcombank's Profit ranks #1311, Assets #652 and Market Value ranks #1230.

- The Asian Banker magazine : just announced the ranking of banks

Asia-Pacific region. The list of the top 500 banks (AB500Rank) and the 500 strongest banks (Strength Rank) is based on the belief in the long-term profitability of the banks' core businesses. Some indicators with large proportions considered are total asset size (accounting for 17.5%), provisioning ratio/total bad debt (12.5%), bad debt ratio (12.5%), loan/mobilization ratio (10%), capital adequacy ratio (10%),...

Vietnam has 14 banks on the list. In terms of Strength Rank, Vietcombank is the leading bank among 14 banks and ranked 29th in the list of Strongest Banks in Asia - Pacific, up 19 places compared to the 2017 ranking.

In terms of the top bank ranking (AB500Rank), Vietcombank continues to be in the top group of Vietnamese banks on the list and ranks 169th in the regional ranking, up 19 places compared to last year.

- Company: The pioneer consulting unit on employer branding solutions and happy working environment in Vietnam together with Intage - Japan's leading market research company has just announced the survey results of "100 best places to work in Vietnam in 2018". Vietcombank continues to affirm its position as the bank with the most attractive working environment when it was voted first in the entire banking industry, second in the entire Vietnamese market with a ranking increase of 2 places compared to 2017 and in the Top 50 Vietnamese enterprises with the most attractive employer brand.

3.3. GENERAL ASSESSMENT

3.3.1. Results achieved

- Financial scale, operational efficiency:

- In terms of financial scale, Vietcombank currently ranks first in equity, first in profit, third in capital mobilization, fourth in total assets and outstanding loans among the four state-owned commercial banks. This is one of the

financial advantages to meet business expansion needs and capital safety standards set by the State Bank.

- In terms of profitability, Vietcombank is at the top of the 4 commercial banks above. Vietcombank's ROA and ROE are quite good and have a difference compared to the 3 commercial banks above.

- Products and services: The strengths of Vietcombank's products and services are low interest rates, attracting customers, and the ability to select customers in credit granting and management. At the same time, Vietcombank also has advantages in domestic and international payment products, especially related to foreign exchange and trade finance. This is clearly shown in Vietcombank's income structure over the years, with the market share of income from services, foreign exchange and gold trading accounting for a large proportion.

- Operating based on banking technology (core banking): Centralized data management, helping to improve the quality of traditional banking products and services and opening up a number of modern banking products to enrich the product portfolio of Vietcombank commercial banks thanks to the application of science and technology such as card products, electronic banking products. With financial potential and the current science and technology application environment, Vietcombank has been investing in implementing the most modern technology programs to serve customers with the best quality products and services in the digital age.

- Brand and reputation: Strong brand is one of the best banks in Vietnam for 2 consecutive years by Finance Asia Magazine, an award to honor typical banks in each country. Vietcombank is currently the bank with the best asset quality, the highest profitability among banks in the Vietnamese market and the bank with the best working environment as demonstrated by Anphabe - a pioneer consulting unit on solutions and employer branding.

employment and happy working environment in Vietnam - Japan's leading market research company voted it as No. 1 in the entire banking industry, No. 2 in the entire market in the list of "100 best new jobs in 2018". Vietcombank has been raising its position in and outside the region.

- Scale of operation :

Vietcombank is currently the leading bank in the country in terms of modern banking, highly efficient business operations, holding a leading position in many activities, especially the highest profit target in the system and far exceeding other credit institutions, the profit ratio/staff is very high, the highest among current credit institutions (average of credit institutions).

The first bank officially recognized by the State Bank of Vietnam as meeting BASEL II standards in 2018.

Large customer base, leading in many service activities such as international payments, the proportion of demand deposits in total mobilized capital is very high, the highest compared to domestic banks.

- Management and administration: Standards in management, creating corporate culture.

- Human resource quality: high labor productivity, highest operating efficiency among state-owned commercial banks.

3.3.2. Limitations

- About financial capacity:

Currently, although Vietcombank is almost leading in financial factors such as scale and efficiency among the group of 4 state-owned commercial banks. However, Vietcombank still has some limitations in financial capacity when compared with domestic private commercial banks and some commercial banks in the region and the world. Moreover, in recent times, to meet Basel II capital safety standards, Vietcombank has had to increase its charter capital to ensure safety limits in operations.

However, like BIDV, Agribank and Vietinbank, Vietcombank is also facing certain difficulties in increasing charter capital to meet capital safety standards and business requirements. One of the biggest difficulties is that the limit on the State capital ownership ratio has almost decreased to the minimum threshold. Therefore, to increase charter capital, it is necessary to reduce the State capital ownership ratio or the value of State capital contribution must increase according to the private capital contribution. In the context that the Government is advocating divestment from corporations, general companies, State-owned enterprises and the State Budget is under pressure from overspending, increasing capital through a new capital increase plan from the State budget for Vietcombank is very difficult. As the business scale continues to increase, the requirements on capital safety and system operation are increasingly strict, increasing capital and improving financial capacity are inevitable for Vietcombank. Therefore, pressure to increase financial scale will occur with Vietcombank in the near future.

- About products, services and service quality:

Not diverse and rich, mostly focusing on traditional operations, not much convenience, Vietcombank has promoted the development of new products but has not promoted its own unique benefits, products and services are not convenient for all customer classes.

- Regarding the operating network : Branches and transaction offices have not yet covered all provinces and cities, and Vietconbank transaction points still have many limitations. Regarding the operating network, Vietcombank currently has the lowest scale compared to the four state-owned commercial banks, equal to half of the Agribank network. In addition, these banks have recently merged with weak credit institutions, so the scale of operations and network has increased rapidly and significantly.

- Information technology: Information technology systems and operations have been lagging behind for a long time, the corbanking system has been operating for a long time - the operating model is still being standardized, in 2020 Vietcombank officially deployed the new corbanking system.

- Changing the operating model of the system in the operating block to standardize according to the international standard Besel 2, leading to many shortcomings in the completion of processes and personnel.

3.3.3. Causes

- About financial capacity scale:

In recent years, Vietcobank has continuously developed and improved its financial capacity through solutions such as increasing charter capital from capital sources and improving efficiency in business operations. However, due to state policy factors, the increase in charter capital has not been sufficient to improve financial capacity compared to the region.

- About products and services:

Vietcombank was formerly a foreign exchange bank, so Vietcombank's strength in previous years focused on the target of products and services serving wholesale customers and mainly on trade finance and international payment products, without diversifying products and services and customer segments such as developing wholesale and retail loans for credit institutions like commercial joint stock banks.

- On governance, risk management and performance:

Regarding management and risk management, Vietcombank's management in recent years has been relatively good with the management orientation set by Vietcombank. However, with international economic integration, foreign banks have integrated into Vietnam and private commercial banks are proactive, have different talent recruitment policies, have very high business strategies and labor productivity. Operational efficiency is a measurement of business efficiency, management and risk management. Compared to state-owned commercial banks, Vietcombank's average profit/staff performance is the highest, but compared to domestic and foreign joint stock banks, it is still low.

Comment