Some Indicators Reflecting Business Results of Commercial Banks

Source: IMF-Table 21.Vietnam: Statistical Appendix and Background Notes, IMF Staff Country Report No, 2002

Credit quality is most clearly reflected in the overdue debt index. In general, the credit quality of domestic commercial banks is low, with high overdue debt, especially in urban joint stock banks. The group of foreign bank branches and joint venture banks, although limited in capital mobilization and scope of operations, has advantages in foreign currency lending sources, business management capacity and risks, so the credit quality is quite good with the lowest overdue debt and bad debt ratio.

By the end of 2002, the overdue debt ratio of banks was gradually improving thanks to efforts to restructure debt and strengthen credit appraisal management. However, this ratio was still much higher than the overdue debt ratio of foreign bank branches (less than 1%).

2.1.3.2 Banking services

Banking services are still monotonous, inconvenient, unattractive, mainly traditional operations. Up to now, deposit receiving and credit granting activities are still the main business areas, revenue from service activities only accounts for a very small part. In particular, the Bank for Foreign Trade of Vietnam is recognized as the leading provider of international banking services in Vietnam, so revenue from service activities has a higher proportion. Modern banking services, especially retail banking services with applications in information technology such as ATM, Internet banking, home-banking, online payment have been applied by some banks. However, these services are still very new, most of them only stop at the level of looking up information related to the balance and account activities of customers at the bank. In addition, due to limited capital and technology level, the development of e-banking of domestic banks is still difficult.

Credit activities bring the main income for domestic banks, while service income only accounts for about 10-15% of total income and only performs about 300 different business operations. Meanwhile, the main source of income for foreign commercial banks and joint ventures is service income, accounting for about 40-50% of total income. Currently, a commercial bank is considered advanced in the world when income from banking services accounts for 30% or more of total income and the total number of banking services performed is 6,000 business operations.

2.1.3.3 Business results

Although having a dominant market share in credit and capital mobilization activities, the operational efficiency of state-owned commercial banks is not high. Although state-owned commercial banks have the largest scale in the entire Vietnamese commercial banking system, their profitability is not only inferior to regional banks but also inferior to effectively operating joint-stock commercial banks.

Table 2.8 : Some indicators reflecting the business results of commercial banks

Unit:%

Target

1999		2000		2001		2002
Commercial Bank QD	ACB	Commercial Bank QD	ACB	Commercial Bank QD	ACB	Commercial Bank QD	ACB
Interest on deposits, for loan/total income	88.2	72.2	89.0	79.0	89.5	87.2	87.6	85
Service charge/total revenue enter	4.9	12.0	4.4	13.2	5.1	8.8	4.9	9.1
Foreign exchange business income, other income/total income	6.9	15.8	6.6	7.8	5.4	4	7.5	5.9
Net Profit/Equity return on equity (ROE)	6.4	13.6	8.6	14.7	10.7	20.7	7.1	26.3

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Source: Data calculated based on Annual Reports of banks

The income structure of state-owned commercial banks over the years not only shows that our banks have not fully exploited the strengths of a monetary business but also shows the poverty in the scope of service provision as well as the great dependence of state-owned commercial banks on traditional business activities of receiving deposits and lending.

From the above general analysis of the business situation, it can be seen that the Vietnamese commercial banking system, especially the state-owned commercial banks, is facing huge challenges from internal factors within the system. These are weak financial capacity, too small equity, low competitiveness, monotonous banking products and services, not convenient and attractive to customers.

2.2. Current status of customer strategy development of Vietnamese commercial banks in recent times.

Building and implementing a competitive customer strategy is crucial to the success of a bank's business operations. However, for Vietnamese commercial banks, this is a fairly new field. Banks mostly focus on building business strategies without a specific plan to implement customer strategy building. The customer strategy of Vietnamese commercial banks currently essentially only stops at customer work and competitive activities to attract customers. Each bank has not yet built its own comprehensive customer strategy, suitable to its operational capacity. Therefore, the thesis analyzes and evaluates the current status of building customer strategies of banks according to the content of customer strategies, focusing on the current status of the customer system and the operational efforts of Vietnamese commercial banks to attract customers.

2.2.1. Current status of identifying target customers

2.2.1.1 Customers of Vietnamese Commercial Banks

Domestic and foreign customers of Vietnamese commercial banks are currently divided into three main groups:

Individual customer group

Customers in this group include: civil servants, employees in the State apparatus, students, farmers' households; the elderly, retirees... Currently, more than 10 million farmers' households have become a large customer base of commercial banks. According to the General Statistics Office in 2002: 50.2% of the total number of households in our country have loans, of which about 60% of the total loans are used for production and business activities, 17.6% are loans for buying and building houses, the rest are borrowed for basic construction investment, purchasing furniture, consumption... In addition, in the total capital mobilization, deposits from the residential sector also account for a large proportion in most commercial banks.

This is a group of customers with small transaction values but the total number of transactions and volume will not be small. In the future, they may become regular customers, bringing practical benefits to the bank. These customers also have the advantage of low risk and are often loyal to the bank.

Corporate customer group

Based on the characteristics of ownership types, including: State-owned enterprises, private enterprises, joint venture enterprises, 100% foreign-owned enterprises, in which state-owned and private enterprises are the main customers of Vietnamese commercial banks today.

State-owned enterprises : are the economic sector that plays a key role in our country's economy. However, there are still many state-owned enterprises that operate inefficiently, incur losses, have low equity, and their production and business activities mainly rely on bank loans. State-owned enterprises

has been and is being reorganized in a concentrated, large-scale, focused direction in key, spearhead industries, reducing the number of small, inefficient enterprises. The trend in the coming years is that the number of state-owned enterprises will decrease significantly, the state will only keep key industries and fields that other economic sectors are not capable of implementing, the rest will be mostly equitized. According to the reorganization and innovation roadmap, the number of state-owned enterprises has decreased significantly: from 12,300 state-owned enterprises in 1990, in 1998 to 5,700 and by 2003 this number was 4,275 [21].

Private enterprises : Private enterprises are gradually being encouraged by the state to develop, especially private enterprises, joint stock companies and limited liability companies. In general, these types of enterprises are still small, having just been formed and developed recently thanks to the state's open economic policy. The number of private enterprises in our country is growing very quickly, however, only a few have strong scale and financial capacity, the rest have limited competitiveness and there are many issues that need to be rectified in terms of law, management and accounting.

Customer groups are Government and financial institutions.

The Government is also a customer of the bank through the use of banking products such as State Treasury deposits, Government bonds, etc.

Financial institutions are banks operating domestically and internationally, finance companies, credit funds, etc. These customers also act as recipients of banking products and services through activities such as: deposits, joint ventures, co-financing, guarantees, agents for other credit institutions; technical dissemination relationships, technology transfer, etc.

2.2.1.2 Selecting target customers

Block of State-owned commercial banks

State-owned commercial banks have a large similarity in customer structure, customers are mainly state-owned enterprises with a proportion of over 50% of total outstanding loans. Lending to these customers, banks aim to serve key projects of the Government and localities, industries with key positions in the national economy in the fields of energy, telecommunications, construction and transportation, industry, electricity. State-owned commercial banks providing payment and credit services to mass customers in the residential area are still too reserved. The reason is that on the one hand, customers do not have enough conditions and access, on the other hand, banks are afraid of high costs and risks.

The customer structure of banks has the following outstanding characteristics:

- The Bank for Agriculture and Rural Development, due to its own characteristics, has customers who are farmers and individual producers, accounting for a large proportion of its customer structure. This bank accounts for about 95% of the credit market share in the rural economic sector, with outstanding loans for rural households alone reaching about 74,170 billion VND, accounting for over 50% of the total number of households in rural areas [6].

- Foreign Trade Bank has an advantage in international payments, playing a major role in implementing import-export credit financing for customers who are enterprises operating in the field of foreign trade.

- In addition, the State-owned commercial banks are actively participating in large and long-term syndicated investment loans for state-owned enterprises. The scale of the Government's infrastructure projects seems to have become too large for a single State-owned commercial bank to provide funding, as it even exceeds the safety limit and, therefore, either all the State-owned commercial banks participate in syndication

for these loans, or the Government allows exceptions to lend above the current ceiling of 15% of legal capital.

Joint Stock Commercial Bank Block

The customer structure of joint stock commercial banks is very different from that of state-owned commercial banks, with individual customers being the main target of these banks. A representative of a fairly effective group of joint stock commercial banks found that individual loans accounted for 60% of the total outstanding loans of Asia Commercial Bank (ACB) and loans to state-owned enterprises accounted for only 9%. By industry, loans to the industrial, manufacturing and processing sectors accounted for only 25%, to commerce 12%, while the personal service sector accounted for 41% of the total outstanding loans of this bank [11].

2.2.2 Research activities, customer attraction

2.2.1.1 Research activities on customer information and needs

During the subsidy period, customers came to banks to deposit and borrow money. Nowadays, according to the market mechanism, commercial banks have realized that the business results of the bank are closely linked to the success of customers, considering customers as "God". Banks are more interested in and accepting customers' opinions on banking activities, proactively innovating in style, content, and service methods, reducing hassles to better meet customers' needs. Banks have all built a motto for customers. The motto of the Industrial and Commercial Bank is "For the success of everyone, every family, every business"; the Foreign Trade Bank "Always brings success to customers"; the Investment and Development Bank "For the production and business efficiency of customers and the sustainable development of the bank"; the Bank for Agriculture and Rural Development "For the prosperity and sustainable development of the country".

customers and banks”; As for Asia Commercial Joint Stock Bank, the motto is “Towards perfection to serve customers”.

The bank conducts customer information research through customer communication, customer records such as legal records, data on financial reports, deposit and loan relationships at banks, etc. From there, customers are evaluated and classified to find out customer needs in terms of the ability to use products and services, thereby having appropriate policies for each customer group. In addition, the bank also conducts research and analysis of customer groups according to each economic sector in each period to develop new customers, narrowing relationships with ineffective business customers, with no development prospects and potential risks.

Banks also have preferential policies for traditional customers and growing businesses. Customers who have a relationship with a reputable bank, make frequent transactions, and have large values will enjoy higher deposit interest rates, lower loan interest rates, buy and sell foreign currencies at preferential prices, exempt from deposit to open L/C, and reduce service fees...

2.2.1.2 Promotion and communication activities

The image of a bank is everything that customers feel about the level, reputation, quantity, quality of services provided, history and business culture. Realizing this, over the years, banks have had many activities to introduce their bank's image to the public. Banks always allocate a certain part of their budget for advertising and marketing on mass media, mainly introducing their capacity and products and services so that customers can clearly understand and choose. At the same time, they actively participate in social activities such as lending to the poor at preferential interest rates, supporting flood victims, etc. Sponsorship activities are also carried out. Banks often

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