ASSIGNMENT commercial banking research a

STATE BANK OF VIETNAM BANKING ACADEMY Foreign Language Faculty - - COMMERCIAL BANKING ASSIGNMENT RESEARCH ABOUT SOURCES OF FUND & RAISING CAPITAL METHODS OF TECHCOMBANK FROM 2012 TO 2014 Group: Monday Lecturer: Pham Thu Thuy Hanoi, October 2015 TABLE OF CONTENTS I THE OVERVIEW OF TECHCOMBANK Introduction The Vietnam Technological and Commercial Joint Stock Bank, more commonly known as Techcombank is now one of the leading joint stock commercial Banks in Vietnam Since the first opening on the 27th Sep 1993 in the head-office located at 24 Ly Thuong Kiet, Hoan Kiem str with only 20 billion dong, Techcombank has experienced strong growth and market performance as well as been recognized, multiple times, as the Best Bank in Vietnam Today, with HSBC as our strategic shareholder, Techcombank has a strong and sound financial base of almost 179.934 billion dong ( in 2012) Besides, the strength of Techcombank also comes from the extensive service network of 315 branches and 1,229 ATMs which are linked to each other through their state-of-the-art banking technology History of establishment and development a 1993 – 2003 - - - From 1994 to 1998, the branch networks of Techcombank were already covered three main regions with head office and branches in Hanoi, branches in HCM City and 1branch in Da Nang From 2000 – 2001, Thai Ha sub-branch in Ha Noi was established Entered the 20th century, Techcombank signed a contract with a leading software supplier Temenos Holding NV to implement new banking software GLOBUS for all networks in order to meet the growing demands from customers On December 5th 2003, Techcombank commenced issuing F@stAccess cards On December 16th 2003, the bank inaugurated the completion of deployment of the Globus System b - - - - - 2004 - 2014 From 2004 to 2005, Techcombank launched the new logo on June th 2004 and signed a contract to purchase the switching and card management software with Compass Plus on December 13 th In 2005, the new Switching and Card management System of Compass Plus were established Until December 12th, the core banking systems were upgraded to the latest version of Temenos T24 R5 From 2006 to 2007, the bank completed account system with new products: multifunctional savings, period interest paying savings In April 2007, Techcombank became the joint stock bank with the second largest transaction network including 130 branches During the first half of the year, the bank started the establishment of corporate service department, department of credit and risk management, completing structure of banking service and launched many new products In September, the “secret customers” program was set up, in order to access the service quality and attitude to customers of front-line staffs at Techcombank TSO In 2008, Techcombank launched Visa credit card in March and Card Deposit Machine (ADM) in May Many projects on technological modernization were taken, such as: upgrading the core banking system to sample T24.R7, member of two cooperated card organization Smart link and Bank net, opening free Call Centre ( 24/7) 1800 588 822 From 2009 – 2011, Techcombank has won many prestigious awards, such as “International star for Leadership in Quality” (2009), “Best bank in Vietnam” (2010), “Best Cash management bank in Vietnam” (2011) ect that were awarded by famous institutions In 2012, Techcombank’s total registered capital reached 179.934 billions VND – the highest figure in comparison with other commercial banks In 2013, the bank received international awards, highlighted by best cash management and trade finance bank in Vietnam awards, Vietnam Best Bank and Asia's Best Employer General business activities a Fund raising • Receiving short term, medium term and long term of organizations and individuals from internal and external economic sectors in Vietnam dong and foreign currencies • Issuing certificates of deposit, bonds, promissory notes and perform different forms of raising capital as the regulation of State Bank • Borrow short, medium and longterm loans from domestic financial institutions according to the regulation of State Bank • Receive trust and endorse funding from economic organizations and individuals as stipulation of State Bank b Lending Supply short term, medium term and long term in Vietnam dong and foreign currency economic for organizations, individuals and families of all economic sectors c Providing banking services • Guarantee: Techcombank provides customers with many types of guarantee that meet the demands of customers • Foreign trading: Mobilizing capital, lending, foreign currency trading, international payment and other services for foreign exchange • Fast Money Transfer Service: With a wide network that covers almost provinces via Globus software system, Techcombank supplies the clients with payment services within the shortest time and at competitive cost d Services business • Buying and selling gold, silver and card services ATM, credit card, provide storage, safe rental, discount valued papers e Investments, contribute capital to other financial institutions • TECHCOMBANK’S SOURCES OF FUNDS & CAPITAL RAISING PRODUCTS II Sources of funds a Deposits - Current accounts in VND - Current accounts in foreign currencies - Term deposits in VND - Term deposits in foreign currencies b Non – deposits - Borrowings from State Bank of Vietnam - Borrowings from other credit institutions - Valuable paper issued - Other borrows and entrusted fund c Equities - Capital - Share capital - Reserves - Retain earnings - Securities held for trading Techcombank’s capital raising products a Transaction deposit Transaction deposit is designed for individuals and institution customers who want to open account at Techcombank for their payment and expenditure demand The customers are able to open account by VND, USD, EUR…on their own purpose These services are very safety because the customers not need to reserve money at their houses Instead, they can withdraw money in Techcombank ATM or use Homebanking to transfer money  Techcombank visa credit cards  Co-branding visa credit cards  Techcombank visa debit cards - Techcombank visa debit cards (Classic Gold) Techcombank F@st Access domestic debit cards  Co-branding debit cards b Term deposit Term deposit is a contract signed between the bank and customers that is regulated clearly about interest rate policy, payment instruments, interest payment methods The customers will be received the higher interest rate than transaction deposit  Online term deposit  Automatically  Flexible term deposit accumulated deposit  Dual currency deposit  B- express deposit  Option- linked deposit c Savings c This is the main raising capital technique of Techcombank with diverse forms that can meet the demand of customers  Fast saving  Normal saving  Interest upfront saving  Online saving  Phat Loc saving      Dac Loc saving Truong Loc saving Super Kid saving Value added saving Flexible saving    TECHCOMBANK’S FUND SOURCES AND TECHNIQUES OF RAISING CAPITAL FROM 2012 TO 2014 Sources of funds from 2012 to 2014 III a Deposit • Current accounts   Current accounts in VND  Current accounts in foreign currencies (VND)  Term deposits  •      Term deposits in  VND Term deposits in foreign currencies (VND)     Value paper issued Borrowing loans from other institution in VND  Borrowing loans from other institution in USD  Other borrows and entrusted fund (VND)  8,591,30 9m  2012 7,330,82 5m 2,881,78 0m    SBV    2012  Borrowing from  2012 2,425,62 0m   3,839, 454m 2013 5,560, 701m  2,388, 974m 2013  2013  66,526  m     3.186 182   3 2014 2,918,0 92m 4,932,5 00m b Nondeposit c Equity  10,450,  5,643  6,253 843m ,295m ,623m 6,196,4  1,150  38m ,000m 1,702, 786m 2014    2014 43,856 m     3 • Techcombank ‘s equity increased from 8.848 billion VND in 2012 to 8.878 billion • • • VND in 2014 Provision fund for equity: 5% profit after tax Financing provision fund: 10% profit after tax Provision fund: 53.611 billion VND in 2012 and 35.132 billion VND in 2014   2012  Capital (VND) 2013   2014   13  14 920 06  8.8 78 079  669 60  919 60 986 05  8.8 78 079  1.5 56 411  2.0 86 246 Share capital (VND)  Retain earnings (VND)  Securities held for trading (VND)  Reserves   4,3  4,5 3, 72, 38 51, 56      Techniques of raising a Economic measures capital Economic measures are based on the physical elements that through it banks can impact on demand and psychology of depositors of their banks  To improve the efficiency of capital mobilization, economic measures that the bank may apply to attract customers is high interest rates policy, spend gifts for new and traditional customers through the mobilization mechanism  Interest rate for saving account of individual customers in 2014     Bank/ Tenor  Techco  Non       12  18  24  36 term           mbank 0.5 Vietcom   bank 0.5  BIDV   MB  0.5 0.3 Sacomb   0.3 ank 4.4  4.0  4.0  3.4  4.6 4.45  4.3  4.3  4.5  4.6 4.6  5.15  4.5  4.6  4.9  5.0 5.4    5.15 5.15   5.6  5.4  5.2 6.05   5.4   6.5  5.4 6.25  6.2 6.0   6.2 6.35  6.85  6.2  6.2  6.3  6.3   6.3 6.5  6.4   • * Promotion programs for customers: 2012: 90-day great promotions for Techcombank cardholders: On the occasion of Techcombank’s 21st anniversary, the bank will offer multiple attractive offers to the bank’s cardholders When making payment via card and opening new card, each customer will have opportunities to receive thousands of attractive benefits during the promotion period • 2013: Enjoy the summer with Techcombank credit card  For customers opening new Techcombank Visa credit card:  Chance to win a trip to Maldives for people when open a new credit card and have at least successful transaction  Not apply for cobranded Vietnam Airlines Techcombank Visa  For customers spending by Techcombank Visa credit card:  During 90 days, instant cash back of 200.000 VND for the first 20 customers with spending volume from millions VND  Not apply for cash withdrawal • 2014: 21 years - Always keep the faith  Deposit customers from 200 millions for month period(*) will receive ceramic cup or Ecup or set of rice bowls  Deposit customers from 500 millions for month period(*) will receive set of soup bowls or small ceramic cooking pot  Deposit customers from billion for month period(*) will receive set of rice bowls and medium ceramic cooking pot b Technical measures Technical measures for expanding the bank's fund include technological solutions and solutions to enhance the qualifications of staff, participate directly or indirectly in raising capital  • • Transfering money via social network:  Money transfer via Facebook, Google+ , SMS  Request to transfer money via Facebook, google + and SMS  Attach voice messages, pictures, video clips SMS banking – Home banking:  Every time and everywhere, you can receive and request for information via your phone  minute to the bank, only need to make a phone call or access to your email  Registration is free  Annual fee is waived Fee applies for the second phone number registered for the service  Register once, use forever  c Psychological Measures When customers send money to the bank, they always expect to be received high interest rates paid and timely service payments that make they feel safe and trustful Therefore, meet the requirements in terms of customer psychological as well as building the credibility and trust from customers is the success key for the mobilization of bank capital Today, banks are constantly improve themselves and improve credibility in the market to attract customers  In addition, the policies to encourage bank staff plays an important role Improving the wages and incomes for staffs is very important because if the employees feel joy and comfort in their work due to be respectful, be wide communication spacious, timely reward, they will contribute enthusiastically to the development of the bank   2012     N T   2013     A N T A     (  T   e c h c o m b a n k  A C B  S a c o m b a n k  B I D V 1 1       1 1       1 1       1  In addition, the promotion of bank’s prestigious on media will also create beautiful image of the bank Then it will strengthen customers’ faith when they deposit to banks   * Techcombank’s awards from 2012 to 2014  2012: Strongest bank in Vietnam, awarded by The Asian Banker  Best Bank in Vietnam, awarded by Finance Asia  Best Cash management Bank, awarded by Corporate Treasure   2013: Best Internet Bank Vietnam, awarded by Global Banking Vietnam Golden star, awarded by Young Entrepreneur Association Best Bank in Vietnam, awarded by Alpha SEA  2014:  Most favorite brand ASEAN, Awarded by Ministry of Industry and Trade  Trust and Value, awarded by Vietnam Economics Times  Best Bank in Vietnam, awarded by Finance Asia The economic measures, technical above are also effective psychological impact on customers and bank staff, thus creating a better trend in the work of the bank's funding  The implementation of economic, technology and psychology measures have a positive impact to the business of bank and have a positive impact to the efficiency of fund raising  IV FACTORS AFFECT TO FUNDS RAISING ACTIVITIES AND MOBILIZATION PLANS OF TECHCOMBANK Factors affect to funds raising activities a Factors outside the bank Economic development circle: The shortage of economic development is a macro factors which directly impact on the operation of banks in general and the mobilization of capital in particular If the economic is on the move and stable, the income of the people is guaranteed, their demand will be higher, then the volume of deposits in the bank will be increased or the ability of mobilizing capital will be increased In additions, when the economy grows strongly and keep stablely, the demand for capital will increase, the bank may extend credit volume by increasing their interest rates in order to stimulate people to deposit to create funds to meet the demand for credit in the economy In contrast, when the economy falls into recession, the bank will encounter difficulties in mobilizing capital, and reserves management • Regulatory environment: All operations, including operations of the Bank shall be governed by law Banks are now operating in the monetary field,which contains great risks so that banks must follow the provisions of the law • Competitive environment: The two main competitions are the interest rates and services therefore the bank must st up the suitable rate, and the most attractive rate combine with their fame and prestige to increase market share • People's savings : Capital mobilization of bank almost based on monetary resources of population These are idle money earned from people’s current savings to expect to • • • • • spend more in the future Therefore, capital mobilization of bank greatly influenced by this factor If not savings today, there would had no money to invest in production Habit of saving: The saving of the population depends on many factors such as the their income, their spending habits in cash and especially the stability of the economy If economic is instable, currency values are fluctuated, people will change domestic currencies into the strong one (foreign currencies)  b Factors inside the bank Business strategy of the bank: It often depends on the actual situation and the goals of the bank and the bank has many different business strategies When strategy changes, it will immediately affects the policies of raising capital and then, it would affect the size of bank capital Interest rate policy: Interest rate plays an important role in mobilizing capital and changing the scale to attract capital, especially the scale deposits To maintain and attract more capital, banks need to set up competitive interest rates, implemented preferential interest rates for large customers, send money regularly Marketing activities: This is an important issue which help banks can catch the requirements and expectations of customers Then the bank can release the form of raising capital, interest rate policies, credit policies In additions, banks have to collect adequate information, catch timely the needs of the market to take measures moresuitable than competitors to gain advantage for themselves    The growth of capital mobilization of top 10 banks in 2012 2012: Total funds which is mobilized reach 111 462 billion, increase by 26% compared to 31/12/2011, reaching 86% of target in 2012 The main reason was that savings were considered as the most effective investment channel in the context of stock market felt , the real estate was frozen, foreign currency was changed just because of the management of SBV • 2013 : the capital raising at 31/12/2013 was 119 978 billion, increase by 7.64% compared with 2012 • 2014: In the first months, total capital reached 17 792 billion, while deposits from residential continued account for 41% - 7385 billion Others raised from economic organizations account for 21% of total deposits, reaching 3,876 billion • Through December 8, total deposits from residential were over 1,500 billion, accounting for over 30% of the total funds mobilized and increased nearly 60% compare to the same period last year One of the reasons why is thatTechcombank has maintained a very competitive interest rate (average of 8% / year for VND deposits), and Techcombank often have promotions for customers • According to the Report of the Techcombank’s Board of the Directors- the review of tenner 2009-2014  Techcombank provided the appropriate product package to customers: customers had not to make too much paperwork but need just an only agreement to all service packs were made base on their needs such as 10 savings for individual : F@st Saving, normal saving, superKid saving, PhatLoc saving • Providing the best quality consulting services and support to individual and businesses to they can experience the best banking service with many additional benefits to attract customers’s deposit • Building banking systema and distribution channels in 44 provinces and cities in country, with 315 branches • Techcombank effectively controled the liquidity risks, market risks, operational risks, strictly handle violations lead to bad debts The bad debt rate was just 3.65% in 2013 • Mobilization plans  Policy of mobilizing funds from commercial banks is one of the critical factors to the success of the mobilization of capital Because in each period, even at different times , bank capital requirements are also different Therefore, policy of raising capital is also frequently adjusted as appropriately to the situation of commercial banks  Some raising funds plans of Techcombank from 2012 to 2014:    a Policies to attract customers: • Any bank is also concerned about this policy, it includes all the contents related to the operations and business of the bank The success or failure of a bank is determined by the ability to attract customers • Techcombank always trys to find measures to increase mobilized capital sources such as outlining many types of term with many different forms of interest rates, expanding the forms of saving accounts, promissory notes, bonds Besides, Techcombank also mobilized a mass capital from financial institutions and banks in the region to supplement capital business  b Interest rate policy: • Interest rate is understood as the price of the right to use the loan in a given period where users pay for the owners Therefore, interest rate is directly related to the deposit money raised by banks In development history of the banking sector, interest rate instruments has always been considered as a factor contributing to the capital establishment for banks through mobilization from the economy • Techcombank has many reasonable,flexible interest rate tools to attract residential • customer and economic organizations In the period from late 2013 to the present, the interest rate of short-term savings continuously changes over the downtrend and products with long-term is strong in interest rates with flexible time for banks to exploit  Specifying the desire of customers for more and more forms of saving deposits as well as profitable optimization method, Techcombank officially launched new saving products named the "Fortune Deposit"  Benefits of the client are entitled to join the event:  The period of interest payment is variable  High interest rates and competition  Withdraw the principal and interest on demand  Simple procedures  Products meet customer requirements:  There are needs to use the value-added service  There are long-term trends but depositors may arise money demand at anytime  c Expansion of branch network policy: • Capitalizing from residents increased 9.55% and reached 131,438 billion at 31/12/2014 • Techcombank continues to invest in developing the network of branches and transaction offices with a total of 313 branches and transaction offices, 1,231 ATMs Currently, the Bank has grown customer numbers of individuals from 3.3 million customers at the end of 2013 to 3.7 million customers at the end of 2014 • Facilities used for raising capital are much improved, capital mobilization processes are improved by automation with the help of accounting software Corebanking T24 • Young staffs with passion in working and withstand hard pressure environment Bank distributes indicators to each department, each officer, with awards and strict punishment, so it created an atmosphere to achieve common goals for the bank  => As the result, mobilization takes place strongly and achieves greater efficiency  d Marketing policy: • Marketing is understood that there is a system of strategies and measure programs, operation plans, in order to make the whole process of organizing ,the supply of banking services to use in the best way in sastifying target customer Theoretically, marketing activities covers almost all the contents related to the activities of commercial banks, including the operation of capital mobilization policy • Techcombank has used the policy to diversify products ( ATM card of Techcombank is the first card in Vietnam have a direct connection with deposit accounts of customers) Other services are retrieval information , internet banking • The objective of the bank could be developed into a comprehensive retail banking • In addition, the bank also carrys out promotional activities in various medias such as newspapers, TV, radio, Internet, banner, The bank focuses on the anniversary of the Tet festival, holiday that was initially attracted customers to the products and services of savings and bank deposits • In 2014, marketing activities continue to be promoted to put Techcombank to be one of the most professional and friendliest banks in Vietnam • On 09/05/2011, campaign "Keep the faith" of Techcombank conducted by Universal Time officially launch in www.giutronniemtin.vn This is a customer appreciation program of Technological and Commercial Joint Stock Bank Vietnam - Techcombank celebrates his 18th birthday and marks a successful year with prestigious international prize is awarded with the title " Best Bank in Vietnam 2010 " This is the online and social marketing campaign in a comprehensive way of Techcombank and also one of the first online campaign in the banking sector in Vietnam   e Support of customer policy: It is action which Techcombank will assist and advise clients on issues relating to the field of finance and banking,money and more importantly, help customers get the portfolio, select the type of service that the bank offers Through these transactions, the bank will help customers understand the effect of not using cash in circulation and the effect of sending money, assets in banks rather than in home storage f Customer care policy:  Activities of this policy helped banks strengthen relationships with customers, thereby simultaneously extending the scope of activities If a bank wants to succeed, it must combine all policies, and pay more attention in customer care  => Thanks to the efforts in the development plan of mobilization, Techcombank in the context of the economic change still adapts and maintains the volume of stable deposits V DEVELOP SOLUTIONS FOR TECHCOMBANK TO ACHIEVE GROWTH TARGET    Solutions  a Improving and expanding the forms of capital mobilization Diversification of deposit products: Techcombank has to rapidly deploy new products to meet the diverse needs of customers • Grouping and expanding customers: Techcombank has currently diversified products according to customer groups, but just dividing into types of customers: corporate and individual customers Therefore, the deposit products infact has not satisfy the diverse needs of customers Diversification should continue to be exploited with specific characteristics in specific products • Applying modern and convenient deposit products of foreign banks: Citibank, Standard Chartered Bank, ANZ… •  b Development of new products Enhancing the effectiveness of the ATM system with the ability to provide dozens of different types of services (see balance, statement printing, transfer money, withdraw money and pay ) , which can replace a bank branch with tellers Therefore, it is necessary to overcome the limitations of ATM and improve the efficiency of its services • Improving Internet payment service, Home - banking service: ensuring the quickness of online payment Balance must be reported accurately • Developing other services such as asset management services, trust investment, consulting and providing information on demand, Banking database about different customers must be completed •  c Strengthening Customer Care  Customer care policy not only attracts customers but also makes advantages for the bank when there is customer loyalty • Building long-term relationships with customers: This helps Techcombank save cost when evaluating customer demand for other products such as loans Due to traditional customers of the bank, negotiating interest rates, the cost policy will be more easily when there is a change in the competition • Expanding the branch network: gives the bank more benefits besides supporting the deposit Techcombank needs to analyze and assess the effectiveness of the operating network , identify major for each subsidiary • Making customers comfort and satisfaction in transactions: Serving style of Techcombank has improved very well recently However, it only happens in the large branches Competition and the information explosion makes the competitive advantages such as technology investment, product diversification, very easy for competitors to imitate quickly Serving style with good impression in customer's mind can creat a great gap with competitors • Implementing policies about promotional gifts for customers: individual customers often prefer promotional gifts when sending their deposits to the bank Despite small value, there is a good and tight relationship between banks and customers  d Focusing on human resource policies Improving the qualifications and skills of staff: Sometimes customers feel dissatisfied because tellers show no great understanding of profession and major customers are interested in Techcombank should open professional training courses for tellers on professional image, product knowledge, communication skills and handling the situation well • Developing a positive working environment and preferential policies: Techcombank should pay salaries according to the job performance and the ability to work , which helps employees to work effectively • • Enhancing productivity and build a corporate culture and customer-oriented: every member of the bank should seek to understand the needs and desires of employees and customers, always trying for customer satisfaction  e Promoting Marketing policies Performing regularly market research: not all customers have the same needs for banking services, thus customers should be segmented to take suitable customer care policies • Developing brand image of the bank: building a nice symbol through infrastructure, culture of staff or commitment of service quality are the conditions that need to be completed in advance • Providing information about the financial capacity regularly through the mass media for investors and customers to have a quick overview of bank •  f Strengthening technology and modern equipment  In order that quality of products and services raising capital meets the increasingly complex needs, it requires the technology being constantly improved, upgraded , becoming a powerful supporting tool for the bank employees  The Bank’s capacity and implementation conditions • In Techcombank, development of human resources is number-one priority, rather than any other factors During the important development period of the industry, the Board has identified that human resources are essential in building the operational capacity and competitiveness of banks • Techcombank has priority in training staff and implement recruitment to attract many officials and experts with high qualifications from the leading financial multinational Groups • Techcombank apply multichannel training methods: via e-learning system; classroom training and training in mixed units • Techcombank is the first bank in the building and applying advanced technologies in administrative operations controlling transactions, banking operations and supplying convenient products and services For example Techcombank is the first bank to develop and provide online banking services allowing customers to shop online, pay fees, insurance premium payment quickly and conveniently • Techcombank is also the first bank in Vietnam to deploy money-transfering services to mobile subscribers via online banking and receive money at the ATM without using the card  ... in Vietnam, awarded by The Asian Banker  Best Bank in Vietnam, awarded by Finance Asia  Best Cash management Bank, awarded by Corporate Treasure   2013: Best Internet Bank Vietnam, awarded... received international awards, highlighted by best cash management and trade finance bank in Vietnam awards, Vietnam Best Bank and Asia''s Best Employer General business activities a Fund raising •... Global Banking Vietnam Golden star, awarded by Young Entrepreneur Association Best Bank in Vietnam, awarded by Alpha SEA  2014:  Most favorite brand ASEAN, Awarded by Ministry of Industry and