Solutions to Improve Owner's Equity Management Capacity at Military Commercial Joint Stock Bank

Regarding the content of capital management, the assessment of the current status of capital management at MB mentioned above has partly pointed out the limitations in capital management at M. Summarizing these limitations in comparison with each content of capital management, we can see:

First, equity strategy and indicators: the strategy is clearly communicated and fully disseminated to stakeholders in equity management, equity indicators are given but lack comparison with other commercial banks due to insufficient information and data;

Second, equity diagnosis and measurement: simple methodology and measurement tools;

Third, reduce waste of equity capital: there are no specific assessments, only at the bank-wide level, and no specific calculations for business units;

Effective/Equity-Saving Business Model: Adjusting, refining and transforming the business model based on the assessment of equity efficiency is still at a qualitative level due to the lack of reliable results from the diagnosis and measurement of equity;

Fourth, equity allocation and equity efficiency assessment: There are regulations, but they have not been fully implemented, and they have not been truly allocated according to risk. Equity efficiency is assessed at the bank-wide level;

Fifth, organization and administration: there are specific processes and regulations but the level of implementation is not high.

2.3.3 Limitations

The limitations in equity management at MB come from the following different causes:

2.3.3.1 Subjective causes

The above limitations in equity management at MB can be attributed to the following subjective causes:

Firstly, before 2011, M focused on capital management based on efficiency on ROE capital and capital adequacy ratio (CR) according to the regulations of the State Bank without mentioning equity management from the perspective of economic capital. During this period, M also did not separate the measurement of income and expenses by business unit/segment. Business results were only calculated for the entire bank and the horizontal axis was the branches.

Second, from 2011-2015: MB implemented the strategy with leading consulting firm M and this was also a very difficult period of the economy. Therefore, capital management in terms of efficiency and capital safety ratio must be considered comprehensively in all aspects, and capital management content is also one of the contents in the strategic solutions implemented at MB in the past 5 years. However, equity management approaching international practices is a difficult and complicated content, has a great impact and requires full awareness of all units in the entire Bank, so it is necessary to study deeply and carefully and need to implement some other solutions first (such as internal cost price system FTP, operating cost allocation, risk measurement according to Circular 36 and Basel 2) to have a sufficient basis to implement equity management according to international practices.

Third, the awareness of units in the bank to approach and accept good practices that are new to Vietnamese banks in general and M banks in particular needs time.

Fourth, the issue of data (complete and clean) and technology infrastructure as well as investment in risk measurement tools are challenges not only for MB but also for the entire system of commercial banks in Vietnam.

2.3.3.2 Objective causes

Objective reasons affecting MB's equity management are as follows:

Firstly, on the part of the management agency, directly the State Bank, in recent years, there have only been guiding documents (Decision No. 457 and Circular 13 of the State Bank previously) regulating the capital adequacy ratio (CAR) for the entire Bank and only calculated on the basis of on-balance sheet and off-balance sheet risky assets simply through regulations on risk levels for asset groups in the balance sheet.

Second, the State Bank has just researched and built a project to implement BASEL II starting from 2014, expected to be completed by the end of 2018, and M is also one of the 10 banks in this project. Therefore, it is a mandatory roadmap for banks to apply according to the roadmap of the State Bank, although M has proactively researched and approached the methodologies on equity management approaching best practices (basel) since the years of implementing the strategy for the period 2011-2015.

Third, regarding the information disclosure requirements of the management agency for listed and unlisted banks, there are no requirements for information disclosure such as economic capital or risks according to operating segments. Therefore, there are no mandatory factors for banks to manage equity capital as mentioned in Chapter 2.

Fourth, in general, Vietnamese commercial banks only stop at capital management based on the efficiency index (ROE) and capital adequacy ratio (CAR), and no bank has researched economic capital and capital management like M.

Chapter 2 Conclusion

Chapter 2, after generalizing the formation and development, organizational structure and business performance of MB in the past time. The thesis has deeply analyzed the current status of equity management of MB in the period 2010-2015 with rich, updated and clearly sourced data sources.

From there, the Thesis has pointed out the achievements and limitations in M's equity management, and at the same time clearly pointed out the causes of these limitations. This is a solid basis for proposing solutions to improve M's equity management capacity in chapter 3.

CHAPTER 3. SOLUTIONS TO IMPROVE EQUITY MANAGEMENT CAPACITY AT MILITARY COMMERCIAL JOINT STOCK BANK

3.1. Orientation to improve the capacity of equity management at Military Commercial Joint Stock Bank

3.1.1 Business orientation of Military Commercial Joint Stock Bank to 2020

Building and implementing M's banking strategy has been highly valued since its establishment in 1994. During the development process in different stages, M has been regularly updating, adjusting, supplementing and renewing its strategy to suit the goals of each stage with the development of the economy. Up to now, M has completed the implementation phase of the 2011-2015 strategy and is ready for the next development phase with the goal of becoming a sustainably developing bank among the top banks in Vietnam in terms of efficiency, profitability and profit. The main features of the current MB strategy include:

Client

MB's target customers are all customer segments: large corporate customers, SME customers, individual customers, non-profit organizations including government agencies and local authorities. Sub-segments within each major segment are individualized and have certain priority focuses through each stage.

Implementation phase

M has implemented the strategy for the period 2011-2015, which is considered very successful in the context of the economy during this period still having many difficulties and challenges.

knowledge. In the coming period, MB will continue to develop its business, increase its market share and scale, and at the same time perfect and develop core and new competencies to support business development and improve efficiency in business administration and banking administration.

Strategy implementation solutions

22 strategic solutions of M have been and are being deployed, most of the solutions have been completed and put into practical application, which has the effect of increasing management and business capacity for M to overcome difficulties and develop sustainably as in the past period. These groups of solutions continue to be applied in practice, refined and improved. The major groups of solutions include:

Business development solutions and new business models;

Business support solutions for increasing risk management/system management capacity;

Solutions for building a culture of fast execution and improving service quality.

With the goal of effective sustainable development and being one of the leading banks in Vietnam, MB needs to achieve a number of financial and operational targets to realize this aspiration. M has compared with a number of rival banks to determine specific goals, it can be seen that the gap between MB and the closest larger bank at the present time, Vietcombank, is still quite far. Therefore, MB's business plan needs to have specific estimates to shorten this gap while joint stock commercial banks of the same rank as MB are currently growing very rapidly through different solutions: internal development, scale growth through mergers and acquisitions.

Based on market analysis, overall economic picture, and financial services industry trends, the author presents overall business plans with the following financial goals and targets.

Assumptions and principles for calculating the plan up to 2020:

- Annual growth in total assets and average annual growth ensure a narrowing of the gap with the nearest top bank. Asset structure ensures balance and harmony according to risk appetite and depending on the general economic situation, good control of asset quality;

- Ability to transform and develop new business models and new services that require less capital, thus increasing non-interest income growth rapidly and increasing the proportion of fee revenue over net revenue;

- Increase total risky assets higher than or equal to the growth rate of equity;

- The dividend policy prioritizes paying dividends through increasing charter capital (paying dividends in shares) to consolidate the capital base in an increasingly scarce capital environment, accumulating capital through the use of retained earnings converted into capital to increase Tier 1 capital.

These foundations and principles will guide and orient the development in the coming years. Based on these principles, the financial target figures are given in the following table:

MB's projected financial plan until 2020 Regarding assets

Table 3.1: B's Asset Plan 2016 – 2020

Unit: Billion VND

Asset

2015	2016	2017	2018	2019	2020
Cash	1,236	2,000	2,000	2,000	2,000	2,000
Deposits at the State Bank & other TCTD	36,841	25,000	25,000	25,000	25,000	25,000
Securities and other invest	51,932	73,600	80,900	88,600	97,600	106,400
Customer Loans	119,372	140,047	163,155	189,259	217,648	250,296
Fixed assets & assets other products	11,661	11,000	12,000	14,080	13,000	13,500
Total assets	221,043	251,647	283,055	318,939	355,248	397,196

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Source: [48] and NCS's calculation

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