Group of commercial banks:
Most joint stock commercial banks have quite good financial capacity compared to their scale of operation. The capital adequacy ratio (CAR) meets international standards (8-10%). Some banks such as Asia Commercial, Techcombank, International, An Binh, Vietnam Prosperity have the participation of foreign banks, so their corporate governance and products have been significantly improved. These are banks that are direct competitors with SeABank in terms of both market share and reputation.
Group of foreign banks:
The State Bank has allowed foreign banks to convert their operating models and functions in Vietnam, accordingly, 5 foreign banks including ANZ, HSBC, Standard Chartered, Shinhan Vietnam and Hong Lehong Bank operate fully as domestic commercial banks. This will change the competitive trend as well as redistribute market share after foreign banks are allowed to operate fully as domestic commercial banks.
Circular No. 04/2010/TT-NHNN issued on February 11, 2010 allows credit institutions to participate in buying, selling, and merging with each other. That is, credit institutions can seek target banks to negotiate mergers, or acquire target banks through the stock market. Thus, both factors, which are foreign bank branches being able to convert their type of operation into 100% foreign-owned commercial banks and the permission to participate in buying, selling, and merging with each other among credit institutions, will be the foundation for creating competitive shifts in the coming time. These banks have had a fairly good growth in terms of mobilized capital and outstanding credit. In particular, the credit quality of the banks is good, reflected in bad debt being much lower than that of domestic banks (3.15%). The strengths of this group of banks are high service quality, global reputation, and technology according to international standards. Superior management skills, low operating costs; small market share - only about 10% - but growing efficiency and promise.
Currently in Ba Ria Vung Tau province, there is only one foreign bank, HSBC at 9 Hoang Dieu, Vung Tau city, which holds an insignificant market share.
2.3.4.2. Competition with non-bank financial institutions
With insurance company:
Currently, in Ba Ria - Vung Tau province, there are about 19 insurance businesses with many different types of ownership. Notable among them are life insurance companies such as: Bao Viet, Prudential, AIA, Manulife, PVI, Groupama, Bao Minh, AAA, ...
With the postal system :
With a system of post offices and transaction points spread to communes in the province and with simple procedures, convenient in transactions as well as time (service both after hours and on holidays...), is an advantage that is attracting more and more customers with domestic and international money transfer services, postal savings services and other products and services such as: payment by phone, payment cards, collection/payment services, agency accepting trust to issue bonds and other financial agency services...
With financial companies :
By the end of 2012, there were many financial companies operating in Vietnam with an average charter capital of 300 billion VND, including a number of large financial companies such as: Vietnam Oil and Gas Finance Corporation (PVFC), Shipbuilding Industry Finance Company, Rubber Finance Company (RFC), Prudential Vietnam Finance Company (PruFC), SG VietFinance Finance Company (SGVF), especially in Ba Ria - Vung Tau province, there is a Petroleum Finance Company with a fairly large charter capital of up to 3,000 billion VND. These financial companies are allowed to conduct most of the same transactions as banking financial institutions, except for some areas that must be permitted by the State Bank such as foreign exchange activities, factoring activities and some other activities.
With People's Credit Fund :
This is a type of cooperative credit organization operating under both the Law on Credit Institutions and the Law on Cooperatives, meeting the capital needs of local members. At the end of 2012, in Ba Ria-Vung Tau province, there were 7 People's Credit Funds operating with more than 8,900 members, including: Xuyen Moc Inter-commune People's Credit Fund, Vung Tau Inter-ward People's Credit Fund, Phuoc Hai Grassroots People's Credit Fund, Binh Chau Grassroots People's Credit Fund, Hoa Binh Grassroots People's Credit Fund, Chau Duc Grassroots People's Credit Fund and Long Dien Grassroots People's Credit Fund. The total mobilized capital of the Funds reached 109 billion VND, the total outstanding loans reached 132.4 billion VND, accounting for 0.44% of the credit market share in the province.
2.3.4.3. Competitiveness of SeABank Vung Tau compared to some other commercial banks in the market
Ba Ria - Vung Tau province
In addition to the analysis and evaluation of SeABank Vung Tau's competitors according to subjective opinions which will be presented in detail and specifically in the following section, the thesis also conducted an objective survey with a random sample of customers (different in terms of occupation, age, geographical location, transaction level, etc.) to measure the competitiveness of SeABank Vung Tau compared to other commercial banks in the province, typically: Saigon Commercial Joint Stock Bank (SCB), Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and DongA Commercial Joint Stock Bank (DongABank). The system of indicators to evaluate SeABank's competitiveness is denoted as: A, B, C, D, E, F, G, H, K, L. Qualitative factors are divided into 8 groups and each group will be calculated with an average score multiplied by (x) weight. Weights are based on the responses to the survey questionnaire: “Please rate the importance of factors from A to L affecting the operations of a bank”.
Competitive factors
The importance of element | SCB | SeABank | Techcombank | DongABank | |||||
Class | Point | Class | Point | Class | Point | Class | Point | ||
A - Market share | 0.08 | 2 | 0.16 | 2 | 0.16 | 3 | 0.24 | 2 | 0.16 |
B - Capital | 0.11 | 3 | 0.33 | 2 | 0.22 | 3 | 0.33 | 2 | 0.22 |
C - Price | 0.08 | 2 | 0.16 | 2 | 0.16 | 2 | 0.16 | 2 | 0.16 |
D - Transaction office network | 0.07 | 3 | 0.21 | 3 | 0.21 | 2 | 0.14 | 2 | 0.14 |
E - Staff | 0.13 | 3 | 0.39 | 2 | 0.26 | 3 | 0.39 | 2 | 0.26 |
F - Marketing Activities | 0.09 | 3 | 0.27 | 2 | 0.18 | 3 | 0.27 | 2 | 0.18 |
G - Product diversity | 0.14 | 3 | 0.42 | 3 | 0.42 | 4 | 0.56 | 3 | 0.42 |
H - Information Technology | 0.14 | 3 | 0.42 | 4 | 0.56 | 3 | 0.42 | 2 | 0.28 |
K - Brand | 0.08 | 3 | 0.24 | 2 | 0.16 | 4 | 0.32 | 3 | 0.24 |
L - Credit loss | 0.08 | 2 | 0.16 | 1 | 0.08 | 3 | 0.24 | 2 | 0.16 |
Total | 1 | 2.76 | 2.41 | 3.07 | 2.22 | ||||
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Table 2.5: Competitive image of SeABank and some other commercial banks in Ba Ria - Vung Tau province in 2012
Note :
* Factor importance level : from 0.00 (not important) to 1.00 (very important) for each factor. The total importance level of the factors is set at 1.00
* Grade : 1 to 4 for each factor, where 4 is good response, 3 is above average response, 2 is average response and 1 is poor response.
* Score = Factor importance * Rank
* Important score: 4.00 is very good response; 3 is above average; 2 is below average; 1 is poor; average is 2.5.
Comment:
With a total score of only 2.41, SeABank Vung Tau's competitiveness is higher than Dong A Commercial Joint Stock Bank (2.22 points), lower than Saigon Commercial Joint Stock Bank (2.76 points) and much lower than Vietnam Technological and Commercial Joint Stock Bank (3.07 points). With a score below the average, it means that SeABank Vung Tau's competitiveness is currently weak and it is difficult to achieve the goal of becoming the leading retail bank in Ba Ria - Vung Tau province. However, with the current available advantages such as: product diversity, modern information technology, a wide transaction network in key areas of the province, in addition to the pricing policies being directed from the Headquarters and the new personnel training model that has just begun to be exploited, along with the economic development in Ba Ria - Vung Tau province, SeABank Vung Tau will bring great growth opportunities but also many challenges from internal strength and increasingly fierce competition from the outside. Therefore, Vung Tau Branch needs to have specific effective measures to focus on overcoming weaknesses, promoting existing advantages to improve competitiveness and achieve the consistent goal of SeABank Headquarters in the coming period, which is to become "The leading retail bank in Vietnam".
Limitations of the survey:
Although this survey has made a positive contribution in identifying factors affecting SeABank's competitiveness compared to other joint stock commercial banks, there are still certain limitations as follows:
- Classification of banking groups: In Ba Ria-Vung Tau province, in addition to SeABank, there is currently 01 branch of the social policy bank, 01 branch of the Vietnam Development Bank, 08 branches of State-owned commercial banks, 24 branches of joint stock commercial banks, 01 branch of
Joint venture bank branch, 01 branch of Petroleum Finance Joint Stock Company, 07 grassroots QTDND and 146 bank transaction points below the branch level network are spread throughout the area. Of which:
+ 08 branches of State-owned commercial banks: Currently holding more than 60% of market share (both deposits and loans), showing that the banking market is highly concentrated in State-owned commercial banks and has customer turnover far exceeding that of joint stock commercial banks, so the author does not compare with this group of banks.
+ 24 branches of Joint Stock Commercial Banks, 01 branch of Joint Venture Bank, 01 branch of Petroleum Finance Joint Stock Company: Joint Stock Commercial Banks have quite good financial capacity, however, in terms of capital scale, assets, number of customers and sales, there are still distinctions between groups, in which SeABank in Ba Ria - Vung Tau province is classified by customers in the same group with banks such as: SaiGonBank, Techcombank and DongABank, so the author has chosen these 3 banks to compare competitive factors.
+ Grassroots QTDND: currently there are many limitations in terms of scale and authority, so the ability to compete is much more limited compared to banks, so the author did not survey.
- Because the author did not have the conditions to directly interview all customers, the survey questionnaires were mainly collected through sending emails to customers and through the Personal Customer Departments at the Branch. Most of the questions were interviewed by personal customer specialists at the Branch, therefore, the data from the collected questionnaires are not guaranteed to be completely accurate.
- Due to lack of conditions, the author only sent 190 questionnaires to customers and 155 samples were valid for the research content. Although the number of collected samples was representative enough for the survey objectives, the number of samples of 155 was still very small compared to the number of customers in Ba Ria - Vung Tau province.
2.3.5. Analysis of the current competitive capacity of SeABank Vung Tau
2.3.5.1. Financial capacity
2.3.5.1.1. Equity
According to the provisions of Article 4, Circular No. 13/2010/TT-NHNN dated May 20, 2010 of the State Bank, credit institutions, except foreign bank branches, must maintain
Minimum capital adequacy ratio of 9% between equity capital and total “With” risk assets of the credit institution (individual capital adequacy ratio).
Equity
Individual Capital Adequacy Ratio (CAR) =
Total Risk-Bearing Assets
According to the financial statements as of December 31, 2012, SeABank's equity capital is 5,582 billion VND, total risky assets are 75,066 billion VND, equivalent to a CAR ratio of 7.4%. Thus, this capital is too small, not meeting the minimum safety ratio of 9% of the State Bank.
Unit: Million VND
Target
2012 | 2011 | Compare | |
1.Charter capital and other capital | 5,334,711 | 5,334,711 | 0 |
2. TCTD Fund | 202,556 | 101,165 | 101,391 |
3. Undistributed profit after tax | 44,832 | 100,893 | -56.026 |
Equity | 5,582,099 | 5,536,734 | 45,365 |
Table 2.6: SeABank's equity in 2011 and 2012
Comment:
As of December 31, 2012, SeABank's equity capital was VND 5,582 billion and charter capital was VND 5,335 billion. Although equity capital increased by VND 45.4 billion compared to 2011, charter capital did not increase compared to 2011. However, the increase in equity capital was due to the bank's funds increasing by VND 101.4 billion, in addition, undistributed profit after tax significantly reduced equity capital by VND 56.0 billion.
In general, the bank's equity increased by 45 billion VND compared to 2011, mainly due to the increase in financial risk provision funds, which shows a bad sign from bad debts forcing the bank to set aside financial risk provisions for debts. The remaining after-tax profit is less than in 2011, proving that in 2012 SeABank is facing many difficulties in its business plan.
Unit: Million VND
Target
SeABank | SCB | DongABank | Techcombank | |
Equity | 5,582,099 | 11,370,065 | 6.104.191 | 13,289,576 |
TS has been adjusted | 75,066,000 | 149,205,560 | 69,278,223 | 179,933,598 |
CAR | 7.4% | 7.6% | 8.8% | 7.38% |
Table 2.7: CAR index of SeABank and some joint stock commercial banks in 2012
Comment:
Through the comparison table of minimum capital adequacy ratio (CAR) in 2012 of retail commercial banks of equal size mentioned above, we can see that SeABank's CAR is only at an average level of 7.4%, lower than Saigon Commercial Joint Stock Bank's 7.6%, Dong A Commercial Joint Stock Bank's 8.8% and higher than Vietnam Technological and Commercial Joint Stock Bank's 7.38%. SeABank's CAR is lower than the 9% prescribed by the State Bank in Circular No. 13/2010/TT-NHNN, but compared to the industry average, that number is still not alarming. The CAR is quite stable, but if looking at equity and total assets compared to other commercial banks, SeABank currently needs to add more equity to improve SeABank's competitiveness compared to other commercial banks.
As of December 31, 2012, SeABank's equity capital was VND 5,582 billion, of which charter capital was
5,335 billion VND. Meanwhile, the charter capital of some leading joint stock commercial banks such as: Eximbank is 12,355 billion VND, Sacombank is 10,740 billion VND, MB is 10,625 billion VND, SCB is 10,584 billion VND, ACB is 9,377 billion VND, SHB is 8,866 billion VND, Techcombank is 8,848 billion VND, Maritimebank is 8,000 billion VND, VPBank is 5,770 billion VND. In this field, when compared with domestic joint stock commercial banks, SeABank is the bank with the 12th/35 charter capital, so SeABank only reaches the average level in terms of charter capital.
Although SeABank has now increased its equity capital to VND 5,582 billion, this is still a very modest figure compared to state-owned commercial banks and some other joint stock commercial banks. This is one of the major limitations when SeABank in general and SeABank Vung Tau in particular want to improve their competitiveness. With the current low equity capital, it will limit the bank's ability to operate its business such as:
- Level of loans, guarantees, and investments of banks: according to the provisions of Article 8, Circular No. 13/2010/TT-NHNN dated May 20, 2010 of the State Bank, the ratio of total outstanding loans and outstanding guarantees of a credit institution for a customer must not exceed 25% of the equity capital of the lending credit institution, in which the total outstanding loans of a credit institution for a customer must not exceed 15% of the equity capital of the credit institution. Meanwhile, many enterprises with large projects in Ba Ria Vung Tau province in fields such as oil and gas, electricity, telecommunications, etc. have a very large demand for loans, exceeding this 25% ratio. Therefore, to increase the level of outstanding loans, guarantees, and investments for a customer, banks must increase their equity capital.
- Investment level in banking technology: Banks can only use their own capital to invest in modern banking technology. Therefore, to quickly innovate technology to provide more modern banking services, SeABank must have large equity capital.
- Expanding operations: Bank operations are controlled by a minimum capital adequacy ratio of 9% between equity and assets. Therefore, to expand its business operations, banks must increase their equity capital accordingly.
Comment:
SeABank's equity capital is still low. In order to develop business, improve service quality, modernize the bank and compete in the market economy, SeABank's urgent task is to increase its equity capital.
2.3.5.1.2. Scale and capital mobilization capacity of SeABank Vung Tau
As of December 31, 2012, mobilized capital was 311.9 billion VND, down 40.7% compared to 2011, reaching 75.2% of the plan, of which deposits from economic organizations were 150.1 billion VND, and deposits from residents were 161.8 billion VND. The capital decreased sharply due to the general economic situation in the area being difficult, in addition to the increasingly fierce competition for mobilized capital among banks.
On the other hand, the attraction of the gold market and the dollar market has also attracted a large amount of capital from banks to these markets. In 2012, the Branch really paid attention to marketing and taking care of large customers with abundant deposits from previous years such as Vietnam Gas Corporation: Southeast Gas Transportation Company, Gas Services Company, Sao Mai - Ben Dinh Oil and Gas Company, Vietnam Oil and Gas Tourism Services Company Limited (OSC Vietnam) including: October Tourism Joint Stock Company, Bien Dong Tourist Area, hotel and restaurant systems such as Palace, Rex, Grand, Cay Bang restaurant, Ganh Hao restaurant, Dai Loi restaurant, PVOil, PTSC M&C, PTSC Shipyard, PVD Offshore, ... however, the amount of money mobilized during the year was still very limited because the care mechanism was not really competitive compared to some other commercial banks. Currently, SeABank Vung Tau is submitting to the Head Office to request a separate mechanism for this strategic customer group.