Topic analyze the investment activities of vietcombank subject banking operations

Define:Commercial Bank: a bank with branches in many different places that offers services to people and businesses, for example, keeping money in accounts and lending money.Investment a

THE STATE BANK OF

Subject: BANKING OPERATIONS

Subject Code: BAF301_231_9_TA_L13

Lecturer: Nguyễn Minh Nhật

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Nguy n Th) H#i Uyên 050609211664

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Ho Chi Minh City, September 2023

Table of Contents

I Introduction: 3

1 Define: 3

2 The role of investment activities: 3

3 Types of investment activities and investment forms: 3

3.1 Direct investment activities: 3

3.2 Indirect investment activities: 4

4 Typical activities of commercial banks: 4

II Types of investment contracts and main investment forms: 5

1 Direct investment 5

1.1 Loan: 5

1.2 Securities (Investment in bonds and company securities, Investment in credit, Investment in real estate, ) 7

2 Indirect investment 9

2.1 Through investment funds and fund certificates: 9

2.2 Service activities, outbound services, and some other activities: 9

III Objectives of investment banks: 10

IV Factors affecting investment activities: 13

V Types of risks for Vietcombank: 16

VI Conclusion 20

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I Introduction:

1 Define:

Commercial Bank: a bank with branches in many different places thatoffers services to people and businesses, for example, keeping money inaccounts and lending money

Investment activities: are often mainly associated with buying andholding investment instruments such as stocks, bonds, fund certificates,

or other investment instruments for a long period (possibly several years

or longer) to seek profits based on interest (bonds, dividends)

2 The role of investment activities:

Investment activities play an extremely important role for banks, with aseries of typical benefits and positive impacts:

First and foremost, investing helps banks generate profits in manydifferent fields such as stocks, bonds, real estate, and business projects tomake money from the increase in the value of assets or income frominterest and dividends

In addition, investment activities help banks diversify their incomesources Diversification also helps them optimize profits in a variety ofeconomic conditions

Assist bank customers in meeting their personal and business financialgoals by providing investment products and services to help customersgenerate profits and build personal wealth or business

3 Types of investment activities and investment forms:

3.1 Direct investment activities:

Includes activities that banks participate in to invest in specificbusinesses, projects, or assets that they can control and manage Beloware some direct investment activities of commercial banks:

- Business Loans

- Invest in real estate

- Investing in companies

- Borrowing capital in international markets

- Developing financial products and services

3.2 Indirect investment activities:

Includes activities that banks participate in to invest in assets orinvestment opportunities through financial instruments and financialmarkets Below are some indirect investment activities of commercialbanks:

- Investing in Securities

- Investment Fund Management

- Participation in the Stock Market and CurrencyMarket

- Forex Trading

- Borrowing and Lending in Financial Markets

4 Typical activities of commercial banks:

Commercial banks have many typical activities, such as intermediating in thefinancial system, providing monetary and financial services to customers, andmanaging financial risks Below are some typical activities of commercialbanks:

- Mobilizing deposits and financing loans

- Bank account management and payments

- Providing currency and foreign exchange services

- Support for international payments

- Financial consulting

- Issuing credit and debit cards

- Invest in securities and financial markets

- Financial risk management

- Deposit and savings services

- Business support and credit loans

- Participation in the Stock Market and Currency Market

- Forex Trading

- Borrowing and Lending in Financial Markets

For example, commercial banks such as Vietcombank Bank provide depositand savings services to individual customers They allow you to open a savingsaccount and hold money there to earn monthly interest At the same time, theyalso provide loans, for example, home loans Homebuyers can borrow money

from Vietcombank Bank to buy a house, and then repay the loan amount withinterest over an agreed period.

In addition, commercial banks also provide bank account managementservices You can use this account to make everyday payment transactions such

as transferring money to others, paying bills, or shopping online

II Types of investment contracts and main investment forms:

1 Direct investment

1.1 Loan:

Lending is a form of credit, whereby the bank gives the customer anamount of money to use for a certain purpose and period according to anagreement with the principle of repaying both principal and interest.Lending is the most profitable but highest-risk activity of commercialbanks For banks to survive and develop steadily, lending activities must

be safe and effective

=> To do so, it must be done according to certain principles:

● Firstly, the borrower must ensure that the loan is used for theagreed purpose This helps limit credit risks for banks

● Second, the customer must ensure to repay the loan principaland interest on time as agreed in the contract

● Third, banks lend to projects that are feasible, effective, andhave the ability to repay debt Thanks to that, banks can earnprofits from lending

Lending activities are activities with a large proportion and bringthe largest source of revenue for banks but are also the riskiest activities.Therefore, in its operations, it must comply with lending principles

Lending principles make a very important contribution to limiting therisks of commercial banks.

Individual:

Consumer loans with collateral: Vietcombank supports you withcapital of up to 1 billion VND with this product Preferential interestrates are, the most competitive on the market Flexible loan term of up to

120 months Simple procedures, quick approval time

Lending against valuable papers (bonds, promissory notes, savingsbooks, certificates of deposit, etc.)

Project housing loans; loans to buy real estate; and home constructionloans

Car loan

This is the bank's main source of revenue, calculated based on the loanamount, loan term, and interest rate Vietcombank's personal loan interestrates currently range from 6% to 12% depending on the product type,conditions, and customer's loan purpose

Business: Financial leasing service is a form of credit financing forbusinesses through leasing machinery, equipment, means oftransportation, and other real estate Businesses can use the property andpay the rent gradually throughout the period agreed upon in the leasecontract

Short-term loan: This is a form of credit granting for a maximum term

of 12 months, in which Vietcombank meets the loan needs associatedwith the loan purpose and specific business plan Each time there is aneed to withdraw capital, the business will have to prepare a set of loandocuments Total disbursed amount ≤ Loan amount committed in the

contract Flexible terms from 1 to 12 months; Diverse loan currencies:VND, USD, or other foreign currencies.

Project financing: Competitive loan interest rates; The loan amount can

be up to 85% of the total project investment; Flexible loan term,maximum up to 15 years; Debt repayment cash flow is consistent withproject cash flow and enterprise cash flow; Diverse loan currencies:VND, USD and other foreign currencies

Competitive interest rate program for Small and Medium Enterprise(SME) customers: For SME customers, from March 15, 2022,Vietcombank has launched a loan program of VND 49,000 billion "Bigcapital comes quickly - "Competitive interest rates" with preferentialloan interest rates from only 5.6%/year for short-term loans and fromonly 6.3%/year for the first 6 months

1.2 Securities (Investment in bonds and company securities, Investment incredit, Investment in real estate, )

Investment operations are profitable operations of commercial banks Inthis operation, commercial banks invest in securities and contributecapital to buy shares of credit institutions and economic organizations.Purpose of financial investment:

- Search for profit

- Increase liquidity

- Diversify capital usage to spread risks

1.2.1 Investing in bonds and company securities: Vietcombank has VietnamJoint Stock Commercial Bank for Foreign Trade Securities Company (VCBS)established in 2002 with 100% capital of Vietcombank VCBS providessecurities services including Securities brokerage; Securities investment

consulting; Investment portfolio consulting and asset management; Securitiesmanagement; and managing investors' money In addition, Vietcombank alsocoordinates with Vietcombank Securities Investment Fund Management JointVenture Company (VCBF) to distribute all types of Open Fund Certificates toVietcombank customers.

A Investing in credit: Vietcombank provides many types of loans such ascollateralized consumer loans, valuable paper mortgage loans, projecthome loans, car loans, and other programs Short-term production andbusiness loans

B Invest in real estate: Vietcombank provides real estate lending services.They support customers to own their dream homes from hundreds ofprojects affiliated with Vietcombank

1.2.2 Participate in projects:

Loans for invested projects: To meet the needs of expanding andupgrading production and business activities of businesses, Vietcombankcan provide long-term financial plans as well as management consultingfor businesses in this process

Loan restructuring: In this case, the business has borrowed long-termcapital from other credit institutions However, at the request ofbusinesses, Vietcombank can provide restructuring loan services.New project lending: Vietcombank provides new loans with conditions

on the loan amount, term, and interest rate that are more suitable andbeneficial for businesses than the original loan

2 Indirect investment

2.1 Through investment funds and fund certificates:

Fund certificates are a form of ownership confirmation for investors'capital contributions The funds will be responsible for managing,controlling, and investing in financial products according to theprovisions of the Law, then redistributing profits proportionally to capitalcontributors.

VCBF Strategic Balanced Investment Fund (VCBF – TBF)

This fund has the flexibility to allocate assets according to a defensive orgrowth investment strategy depending on available investmentopportunities at different times Under normal market conditions, VCBF-TBF Fund will invest 50% of net asset value (NAV) in stocks and 50% infixed-income assets with good credit quality The investment objective ofVCBF-TBF Fund is to provide long-term profits through growth ofprincipal and income

VCBF Leading Equity Fund (VCBF – BCF)

This fund invests up to 100% of net asset value (NAV) in listed stocks,mainly in stocks with large market capitalization and good liquidity Theinvestment objective of VCBF-BCF Fund is mainly to increase principalcapital in the medium and long term

VCBF Bond Investment Fund (VCBF – FIF)

This fund is an open bond fund with 100% of the Fund's assets invested

in bonds with good credit quality The main investment objective of theVCBF-FIF Fund is to preserve initial capital and provide regular income

by investing in fixed-income assets

2.2 Service activities, outbound services, and some other activities:

Electronic banking services: Vietcombank provides many convenientand safe features These services include VCB-SMS B@nking message

banking, VCB-Phone B@nking 24/7 switchboard banking, and VCBDigibank digital banking.

Foreign exchange activities: Vietcombank provides foreign currencytrading products such as Spot Trading, Forward Trading, OptionsTrading, Future Trading, and Futures Trading exchange translation.Vietcombank provides foreign exchange and capital market services.This bank also has a relationship with the World Bank (WB), throughwhich it can mobilize capital from foreign investors to participate inlarge projects

III Objectives of investment banks:

o Profit Optimization: This entails maximizing the highestpossible profit while minimizing the lowest costs in investmentactivities to achieve high-profit efficiency Banks need to monitorand reduce unnecessary expenses to enhance performance andprofitability

o Risk Management: Investment activities that yield high profitsfor banks also necessitate effective financial risk management.This includes risk assessment and valuation, ensuring thataccepted loans have repayment capacity, and investing in riskmanagement tools such as insurance.

o Investment in the development of the economy: elevating thestandard of living and generating wealth for other investors,serving as robust capital for businesses, and earning the trust ofentrepreneurs for growth

- VCB's revenue achieved in 2022 is 66,951,893 million VND

=> Conclusion:

In comparing 2021 with 2022 in financial terms:

Total assets experienced significant growth, registering a substantialincrease of 28.2% This growth indicates the expansion of the bank'sholdings and resources during the specified period

Revenue showed a positive trend, increasing by 20.5% This rise inrevenue signifies improved earnings and income generation for the bankduring the year

Pre-tax profit exhibited notable growth, surging by 36% This substantialincrease in pre-tax profit demonstrates the bank's improved financialperformance and profitability in the specified period

Overall, these financial metrics suggest a robust and successful financialyear for the bank in 2022 compared to the preceding year, withsignificant increases in both assets and profitability

IV Factors affecting investment activities:

Competitive: The competitiveness of other banks can significantlyimpact a bank's ability to attract and retain customers, ultimatelyaffecting its profitability Intense competition among banks may exertdownward pressure on interest rates, thereby squeezing bank profits

Economic and Financial Market Conditions: Current economic andfinancial market conditions play a pivotal role in influencing a bank's

investment capabilities and profitability A weaker economicenvironment can dampen loan demand and lead to interest ratepressures The volatility in financial markets can impact the valuation of

a bank's investment portfolio

Digital Transformation: The adoption of digital technology presentsboth opportunities and challenges for banks Embracing newtechnologies can enhance operational efficiency and facilitate thedevelopment of innovative financial products and services However, itnecessitates substantial investments in system infrastructure andtechnology development to remain competitive

Inflationary Environment: Rising inflation may prompt central banks

to raise benchmark interest rates, increasing the cost of capital for banksand affecting profits from investment activities Conversely, a stable ordeclining inflation environment can have a positive impact on interestrates and, consequently, bank profits