Techcombank's Orientation to Improve Business Efficiency by 2020

orientation and roadmap set out and has achieved some remarkable results.

In 2015, the bank merger will still be vigorously implemented. According to the results reported by the State Bank to the Government, from 2011 to now, 8 out of 9 banks classified as weak and needing to be restructured have been completed. The operations of the 8 banks mentioned above are assessed to have improved, the situation is gradually becoming clearer. Specifically, when the Government approved the project, the list of 9 banks that must be restructured included Habubank, SCB, TinNghiaBank, Ficombank, TPBank, TrustBank, Navibank, Western Bank, Construction Bank and GP.Bank. Up to now, Saigon Bank (SCB), Vietnam Tin Nghia Bank (TinNghiaBank) and First Bank (Ficombank) have merged and the operating results of 2014 are considered quite positive. Nam Viet Bank (Navibank), after restructuring itself, changed its name to National Bank (NCB). Similar to Nam Viet, Tien Phong Bank (TienPhongBank) and Dai Tin (TrustBank) also chose to restructure themselves by increasing their charter capital from shareholders. In addition, Hanoi Housing Bank (Habubank) merged into Saigon - Hanoi Bank (SHB). In addition, Western Bank also merged with the Petroleum Finance Corporation (PVFC). In addition, the market also witnessed a voluntary merger between Dai A Bank (DaiABank, headquartered in Dong Nai) and Ho Chi Minh City Development Bank (HDBank) into a single brand, HDBank, with the aim of improving the quality of operations.

Along with the small bank group, the merger wave has also been positively responded by leading commercial banks in Vietnam. Notably, at the shareholders' meeting held on April 17, 2015, the Bank for Investment and Development of Vietnam presented a plan to merge with the Mekong Delta Housing Development Bank - considered a bank that is not weak, has a healthy financial situation and has a lot of experience operating in the field of high-tech agriculture. Most recently, the State Bank of Vietnam announced the purchase of all shares of Ocean Commercial Joint Stock Bank, Construction Bank, Global Petroleum Bank, and at the same time appointed the Vietnam Joint Stock Commercial Bank for Industry and Trade, the Bank for Investment and Development of Vietnam, and the Bank for Foreign Trade

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Vietnam participates in the management and operation of these banks.

The efforts of commercial banks have also received active support from the State Bank, especially in handling bad debts and improving the legal environment to develop the Vietnamese banking system in an increasingly sustainable direction, contributing positively to the country's socio-economic development.

Not only focusing on solving weak domestic banks, in the past 3 years, the State Bank has also implemented many solutions to restructure commercial banks, foreign banks and non-bank credit institutions. Therefore, the number of credit institutions and foreign bank branches has actually been reduced, especially for weak institutions. Data released in early 2015 showed that the entire system has reduced 7 credit institutions, 2 joint venture bank branches, 4 foreign bank branches, 5 people's credit funds through mergers, consolidations, license revocation, and conversion of operating forms.

In the context of the lack of capital support from the state budget, the option of issuing bonds through the Vietnam Asset Management Company (VAMC) is considered an appropriate solution. Therefore, the State Bank of Vietnam attaches great importance to improving the position and operational capacity of this financial institution. Since its establishment until the end of 2014, VAMC has purchased bad debts from 39 credit institutions with a total principal value of

121,000 billion VND and has recovered over 4,100 billion VND. Thanks to that, the bad debt ratio of the Vietnamese credit institution system by the end of 2014 was only 3.25%. In 2015, VAMC set a target of buying 70,000-80,000 billion VND of bad debt in the form of special bonds, and this plan was approved by the State Bank.

Recently, the Government issued Decree No. 34/ND-CP dated March 31, 2015 [8], amending and supplementing a number of articles in Decree No. 53/3013/ND-CP on the establishment, organization and operation of VAMC, effective from April 5, 2015. In this Decree, the Government added the provision that "VAMC is allowed to issue bonds to purchase bad debts at market prices based on the bond issuance plan approved by the State Bank". This is an important content, marking the next effort of the State Bank and relevant ministries and branches in creating an open environment for handling assets of the

Credit institutions. This content is attracting the attention of domestic and foreign investors participating in the bank debt trading market, contributing to accelerating the progress of bad debt settlement in a public and transparent manner, increasing trust in the system of Vietnamese credit institutions. In addition to selling debts to VAMC, each credit institution is also applying a series of debt recovery solutions, actively setting aside provisions and preventing the risk of new bad debts.

It can be said that the entire banking industry has actively carried out restructuring according to the Project "Restructuring the system of credit institutions in the period of 2011-2015", approved by the Government in Decision No. 254/QD-TTg dated March 1, 2012 [7]. This result shows that the implementation of the Project on restructuring Vietnamese credit institutions will reach the destination on schedule and according to the set goals. (NHNN, 2015) [56].

Thus, from the State Bank's determination to reform the banking system, it is expected that the market in 2015 will have many exciting M&A deals or self-restructuring and many changes.

Development trends of Vietnam's commercial banking system

In terms of structure , the banking sector will form large-scale financial institutions that can operate across borders, in addition, medium-sized institutions will mainly meet domestic financial service needs and develop microfinance organizations to actively contribute to the country's poverty reduction efforts by 2020 and vision to 2050 (Nguyen Thi Kim Thanh) [73].

Regarding the provision of products and services , retail banking activities are considered to be very "fertile" and will be focused on by banks in the coming years, especially when credit is still difficult. Banks will continue to promote consumer loans (homes, cars, small consumption) and individual business (individual business). Card payment services will be promoted by banks through links with payment point systems such as: game companies, online shopping, electricity bill payments, phone/supermarket systems.

At the same time, further progress will be made in improving the capacity of some of the most troubled banks so that customer confidence will soon return.

Since 2014, the development of retail banking services will be an inevitable development trend of Vietnam. With the characteristics of a developing country with a market size of 90 million people, low average income, a rudimentary banking system, and exponentially increasing demand for finance and payment services, the retail banking market in Vietnam will certainly develop strongly in the next decade, opening up great opportunities for commercial banks to help consumers increase asset value and manage their business activities well as perform daily payment activities.

While the need for cash payments remains popular, more and more consumers and businesses want to use more convenient payment methods such as online payments. This is both an opportunity and a challenge for domestic banks in building an effective infrastructure system to meet this modern payment trend.

Sharing the same view, when discussing the development trend of Vietnamese banks, Can Van Luc (2014) [41] said that retail operations are the main trend of banks on the basis of modern technology because in terms of opportunities, information technology helps increase 43% - 48% of banks' net profits but can also reduce 29% - 36% when considering the challenge aspect.

In addition, domestic banks will have the opportunity to work with policymakers to develop more products that help consumers increase the value of their assets by investing directly or using borrowed funds selectively to invest in productive assets such as real estate or expand their businesses.

Thus, in the context of globalization, foreign banks are present in countries and have both positive and negative impacts on economic development in general and the development of the domestic banking system in particular. Foreign banks (branches) often have large capital, better management skills and more effective business operations. Therefore, right at home, local commercial banks have to compete fiercely with foreign banks. At the same time, in the context of

Globalization, the elements that make up commercial banks have also globalized. These are the elements that govern the business activities (technology, engineering, currency, etc.) of the banking system of any country.

Impacts and positioning for Techcombank

Through the analysis of Techcombank's business performance along with the restructuring of the banking system in the current context of globalization, it can be seen that Techcombank has strengths, opportunities, and also inevitable weaknesses and challenges. The main strengths are the advantages of consumer lending, IT systems, and the development of high-end personal customer services of Techcombank. The main opportunity is that the retail banking segment has a lot of potential for growth, the real estate industry is gradually recovering. In addition, Techcombank is also honored to be one of 10 commercial banks (with good "health") selected by the State Bank to implement Basel 2 standards. This is a favorable opportunity for the bank to review and gradually improve the risk management system. However, it is also a big challenge in improving the capital standards and operational safety of this bank with the risk of a decrease in profit growth, provisioning costs and bad debt that may increase or be difficult to reduce. This challenge is like an athlete gradually training to lift heavier weights, which may be painful and difficult in the beginning but cool later. Techcombank's most obvious weakness is bad debts due to hot lending activities in the past, profitability has not really recovered, credit risk provision ratio is low while bad debt ratio is still high (about 50% - 60% before 2013 and about 40% in 2014 [82]. The context and restructuring trend have also affected Techcombank when this bank is aiming to merge with another bank (Thanh Thanh Lan) [42]. However, to do this, it is necessary to build good internal capacity, to standard. It is impossible to M&A in the direction of 2 organizations that still have too many things that are not standard.

Although there are still weaknesses, it can be said that Techcombank is still in the top 5 largest joint stock commercial banks (excluding the equitized state-owned sector), including: Military Bank (MB), Saigon Thuong Tin Bank

(Sacombank), Vietnam Export Import Bank (Eximbank), Asia Commercial Bank (ACB) and Techcombank, in which Military Bank leads in business efficiency. The top 5 banks in the Vietnam Joint Stock Commercial Bank sector are quite similar in terms of scale, brand position and business efficiency in previous years. The gap in total asset size between Techcombank and the leading member MB is not too large. However, Techcombank's business efficiency began to widen compared to MB since 2012, and has not been able to narrow it yet, and Techcombank has not been able to regain its former strength, as well as its former leading position in the top 5. However, the targets and results of the 2014 period also show that they have become more cautious, expectations have become more reasonable in the face of a difficult business environment, especially after what they experienced in the two years 2012-2013.

4.1.2. Orientation to improve Techcombank's business efficiency by 2020

4.1.2.1. Vision

With twenty years of accumulated knowledge and experience, and a network of branches spread across 44 major cities and provinces nationwide, Techcombank has the strength and advantage in understanding and best meeting the needs of banking and financial services of customers across the country. Based on these strengths, Techcombank is aiming for a clear and consistent vision:

To become the best bank in Vietnam providing the best financial solutions to customers.

Become a business with a leading working environment for its employees.

Building a business that understands, respects and cares for employees and customers, because this is what makes Techcombank different.

4.1.2.2. Development orientation 2015 - 2020

General Objective

 Provide the best financial products, services and solutions for

each customer

 Continuously improve and simplify procedures and processes to create convenience for customers in transactions or using Techcombank's convenient products and services.

 Perfecting the governance and management model of modern financial banking groups, on the basis of absorbing international practices and applying them appropriately to the situation in Vietnam in each period.

 Continuously update and improve to ensure that the internal control system is fully established, operates effectively, and meets the requirements of preventing, detecting and promptly handling signs and behaviors that cause risks in banking activities.

 Standardize the network of branches, transaction offices, and ATMs to reduce management and operating costs and improve transaction capabilities and customer service. Continue to promote investment in developing the electronic banking transaction system because this is a convenient transaction channel, capable of meeting customers' transaction needs without being limited by time, space, or area of operation.

 Build and develop a team of highly qualified, professional, knowledgeable and dedicated staff who work and contribute according to Techcombank's core cultural values.

 Invest and exploit technology effectively by creating many products and services with many utilities to satisfy the growing needs of customers.

 Research the market to decide to establish some companies/branches abroad to improve operational capacity and development ability, expand the market to bring economic efficiency and reputation to the bank.

 Research and choose the right time to list Techcombank shares on the stock market to ensure the best interests of shareholders and the bank.

Specific goals

Strategic risk management mechanism

The Bank continues to re-adjust its risk management strategy, apply policies to build internal strength and maintain effective portfolios. The Bank has also implemented the Basel-II Project to prepare for when the government issues new regulatory regulations. The strategic direction of risk management and serious investment in lending standards is a long-term orientation, in line with the development of the Bank.

Strategic Partner

In addition to its internal strength, Techcombank continues to receive direct support from HSBC, the bank's strategic partner, under a technical support cooperation contract. In addition, the bank has been and will continue to rely on its in-depth understanding of market and customer needs to design the most suitable products.

Segment growth

Maintaining focus with a clear and sharp vision is the driving force for sustainable growth. The bank’s priority banking services in the personal financial services segment continue to gain momentum, providing opportunities to expand cooperation with small and medium-sized enterprise customers. The bank will continue to promote market share growth while enhancing its capacity to achieve its market dominance goals.

+ Personal customer service

The bank is focusing not only on the group of customers with good and high incomes but also expanding to the group of middle and high incomes. In the coming time, the bank will continue to optimize the sales network and develop alternative transaction channels. The pilot service model at multi-function branches and super branches has contributed to shortening transaction times and increasing effective cross-selling, which will be actively deployed throughout the system. Online, mobile and ATM transaction channels continue to be invested in application development.

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