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

ANALYZE THE INVESTMENT ACTIVITIES OF VIETCOMBANK 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

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 that offers services to people and businesses, for example, keeping money in accounts and lending money.

Investment activities: are often mainly associated with buying and holding 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 a series of typical benefits and positive impacts:

First and foremost, investing helps banks generate profits in many different fields such as stocks, bonds, real estate, and business projects to make money from the increase in the value of assets or income from interest and dividends.

In addition, investment activities help banks diversify their income sources Diversification also helps them optimize profits in a variety of economic conditions.

Assist bank customers in meeting their personal and business financial goals by providing investment products and services to help customers generate 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 specific businesses, projects, or assets that they can control and manage Below are 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 or investment opportunities through financial instruments and financial markets Below are some indirect investment activities of commercial banks:

- Investing in Securities

- Investment Fund Management

- Participation in the Stock Market and Currency Market

- Forex Trading

- Borrowing and Lending in Financial Markets

4 Typical activities of commercial banks:

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

- 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 deposit and savings services to individual customers They allow you to open a savings account and hold money there to earn monthly interest At the same time, they also provide loans, for example, home loans Homebuyers can borrow money

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

In addition, commercial banks also provide bank account management services 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 an amount of money to use for a certain purpose and period according to an agreement with the principle of repaying both principal and interest Lending is the most profitable but highest-risk activity of commercial banks 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 the agreed purpose This helps limit credit risks for banks.

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

● Third, banks lend to projects that are feasible, effective, and have the ability to repay debt Thanks to that, banks can earn profits from lending.

Lending activities are activities with a large proportion and bring the 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 the risks of commercial banks.

Individual:

Consumer loans with collateral: Vietcombank supports you with capital of up to 1 billion VND with this product Preferential interest rates 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, savings books, certificates of deposit, etc.).

Project housing loans; loans to buy real estate; and home construction loans.

Car loan.

This is the bank's main source of revenue, calculated based on the loan amount, loan term, and interest rate Vietcombank's personal loan interest rates 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 for businesses through leasing machinery, equipment, means of transportation, and other real estate Businesses can use the property and pay the rent gradually throughout the period agreed upon in the lease contract.

Short-term loan: This is a form of credit granting for a maximum term of 12 months, in which Vietcombank meets the loan needs associated with the loan purpose and specific business plan Each time there is a need to withdraw capital, the business will have to prepare a set of loan documents 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 with project 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 "Big capital comes quickly - "Competitive interest rates" with preferential loan interest rates from only 5.6%/year for short-term loans and from only 6.3%/year for the first 6 months.

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

Investment operations are profitable operations of commercial banks In this operation, commercial banks invest in securities and contribute capital 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 Vietnam Joint Stock Commercial Bank for Foreign Trade Securities Company (VCBS) established in 2002 with 100% capital of Vietcombank VCBS provides securities services including Securities brokerage; Securities investment

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

A Investing in credit: Vietcombank provides many types of loans such as collateralized consumer loans, valuable paper mortgage loans, project home loans, car loans, and other programs Short-term production and business loans.

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

1.2.2 Participate in projects:

Loans for invested projects: To meet the needs of expanding and upgrading production and business activities of businesses, Vietcombank can provide long-term financial plans as well as management consulting for businesses in this process.

Loan restructuring: In this case, the business has borrowed long-term capital from other credit institutions However, at the request of businesses, 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 and beneficial 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 the provisions of the Law, then redistributing profits proportionally to capital contributors.

VCBF Strategic Balanced Investment Fund (VCBF – TBF)

This fund has the flexibility to allocate assets according to a defensive or growth investment strategy depending on available investment opportunities at different times Under normal market conditions, VCBF-TBF Fund will invest 50% of net asset value (NAV) in stocks and 50% in fixed-income assets with good credit quality The investment objective of VCBF-TBF Fund is to provide long-term profits through growth of principal 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 The investment objective of VCBF-BCF Fund is mainly to increase principal capital 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 the VCBF-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 convenient and safe features These services include VCB-SMS B@nking message

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

Foreign exchange activities: Vietcombank provides foreign currency trading products such as Spot Trading, Forward Trading, Options Trading, 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), through which it can mobilize capital from foreign investors to participate in large projects.

Other activities: o Payment account.

o Card services: International credit cards, international and domestic debit cards

o Saving

o Transfer and receive money domestically and internationally

o Insurance o Digital Bank

III Objectives of investment banks:

o Profit Optimization: This entails maximizing the highest possible profit while minimizing the lowest costs in investment activities to achieve high-profit efficiency Banks need to monitor and reduce unnecessary expenses to enhance performance and profitability.

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

o Investment in the development of the economy: elevating the standard of living and generating wealth for other investors, serving as robust capital for businesses, and earning the trust of entrepreneurs 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 substantial increase of 28.2% This growth indicates the expansion of the bank's holdings and resources during the specified period.

Revenue showed a positive trend, increasing by 20.5% This rise in revenue signifies improved earnings and income generation for the bank during the year.

Pre-tax profit exhibited notable growth, surging by 36% This substantial increase in pre-tax profit demonstrates the bank's improved financial performance and profitability in the specified period.

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

IV Factors affecting investment activities:

Competitive: The competitiveness of other banks can significantly impact a bank's ability to attract and retain customers, ultimately affecting its profitability Intense competition among banks may exert downward pressure on interest rates, thereby squeezing bank profits.

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