Business strategy of Nam Viet commercial jointstock bank - Hai Phong branch period 2012 - 2017 capstone project report Ha Noi

LIST OF ABBREVIATED WORDS NHNN State Bank of Vietnam HN Ha noi Navibank Nam Viet Joint Stock Commercial Bank Navibank HP Nam Viet Joint Stock Commercial Bank – Hai Phong Branch IT Info

LIST OF ABBREVIATED WORDS

NHNN State Bank of Vietnam

HN Ha noi

Navibank Nam Viet Joint Stock Commercial Bank

Navibank HP Nam Viet Joint Stock Commercial Bank – Hai Phong Branch

IT Information Technology BTA Bilateral Trade Agreement

EFE External Factor Evaluation Matrix IFE Internal Factor Evaluation Matrix SWOT SWOT matrix (Strengths, Weaknesses, Opportunities, and Threats) SPACE SPACE matrix (The Strategic Position and Action Evaluation)

QSPM Quantitative Strategic Planning Matrix

Vietinbank HP Vietnam Industry and comercial Bank – Hai Phong Branch

BIDV HP Bank for Investment and Development of VN – Hai Phong Branch Vietcombank HP The Bank for Foreign trade of Vietnam – Hai Phong Branch

TCTD Banker

LIST OF TABLES – FIGURES

Table 2.1 Results of implementation of some operation norms for the 2005 – 2010 period Table 2.2 Results of business operation of Navibank in Vietnam for the 2005- 2010 periodTable 2.3 Operating results of Navibank – Hai Phong branch

Table 2.4 Data sheet of customers‟ deposit mobilzation

Table 2.5 Loan and structure of outstanding credit in the 2007 – 30/09/2011 period Table 2.6 Services operations

Table 2.7 The growth of number in banking industry

Table 2.8 Growth of capital mobilization and credit

Table 2.9 EFE matrix

Table 2.10 Compatitive image matrix

Table 2.11 IFE matrix

Table 3.1 SWOT matrix for Navibank Hai Phong

Table 3.2 SPACE matrix for Navibank Hai Phong

Table 3.3 QSPM matrix for Navibank Hai Phong

Figure 1.1 Business strategy formulation process

Figure 1.2 External environment

Figure 1.3 SWOT Matrix

Figure 1.4 SPACE Matrix

Figure 1.5 Grand Strategy Matrix

Figure 2.1 Operational and institutional structure

Figure 2.2 Map of transaction offices under the branch

Figure 2.3 GDP growth speed of economic sectors in the 2000 – 2010 period

Figure 2.4 Average GDP per capita in the 2000 – 2010 period

1 Reasons for topic

The financial crisis has rocked the globe and one again confirmed the special role

of banks in the globalized economy in recent years Today, close the bank or weakened banking system not only disrupt the domestic economy but also quickly spread like infectious diseases Although Vietnam's economy is not really integrated into the

regional economy, but the consequence of the financial crisis has left the Vietnam

banking system, which to be solved The integrated trend is a objective process, time of integration is very near To integrate successfully requires the Vietnam banks improve their competitiveness quickly

Currently Vietnam Commercial bank system includes five state-owned banks, 37 joint stock banks, 5 joint venture banks and 48 foreign bank branches To be sure, with the easing route and banking liberalization for foreign banks, the competitive level will

be increasingly fierce among banks

In the extremely difficult period of the Vietnam banks when Vietnam integrates into the world economy, if business strategy of a bank executed well, it will be the determining factor to the survival, development or speed up of the bank With the

knowledge gained from the MBA course of Griggs University and is one of the staff of Navibank Hai Phong with a desire to contribute to the Bank growing more and more,

Group 7 decided to select topic: “Building business stratery for NAVIBANK – Hai

Phong branch for period 2012-2015”

2 Purpose of research

The topic is with a view to establish and select business strategy for Navibank Hai Phong branch period 2012- 2015 and propose solutions to implement this strategy, aiming at leading Navibank Hai Phong to be one of great branches among Navibank system and on the its area

The great assignment is done by a group of most members who are working in banking and is investigated, analyzed based on the reality, therefore business strategy set up for Navibank Hai Phong by this group must make a positive contribution to the branch‟s activitites in the following years

3 Research method

Mainly based on knowledge of the economic subjects such as: strategic

management, financial and monetary theory, marketing management, human resource management, financial management and practical knowledge application

The data analysis according to historical materialism method and descriptive statistics based on the statistics, the figures reported by the State Bank and of the

commercial banks

4 Lay-out of the Capstone report

Apart from introduction, conclusion, reference materials, the great assignment

includes 3 chapters:

Chapter 1: Theoretical framework about business strategy formulation

Chapter 2: Analysis of business strategy formulation for Navibank Hai Phong branch

Chapter 3: Business strategy of Navibank Hai Phong branch for period

2012-2015 and solution for implementation

CHAPTER 1: THEORETICAL FRAMEWORK OF BUSINESS STRATEGY

1.1 Concept of strategy and role of business strategy

1.1.1 Concept of strategy

A strategy is a plan of action designed to achieve a vision Strategy is all about gaining (or being prepared to gain) a position of advantage over adversaries or best exploiting emerging possibilities As there is always an element of uncertainty about future, strategy is more about a set of options ("strategic choices") than a fixed plan Moreover, strategies are potential actions that require top management decisions and large amounts of the firm‟s resources In addition, strategies affect an organization‟s long-term prosperity, typically for at least five years, and thus are future-oriented

Strategies have multifunctional or multidivisional consequences and require

consideration of both the external and factors facing the firm

1.1.2 Strategic management

Strategic management can be defined as the art and science of formulating,

implementing and evaluating cross-functional decisions that enable an organization to achieve its objective

Strategic management focuses on integrating management, marketing,

finance/accounting, production/operations, research and development, and information system achieve organizational success

Strategic management process consists 3 stages are formulation, implementation and evaluation of strategies Each stage based upon set of activities performed by the individual working in the organization

+ Strategy Formulation:

Strategy formulation is the first stage of strategic management, this stage

includes developing vision and mission statement, identifying external opportunities and threats, evaluating company internal strengths and weaknesses, developing

alternative strategies, selection strategies which benefits the business Strategy

formulation issues include deciding what new business to enter, what business to

abandon, how to allocate resources, whether to expand operation or diversify, whether

to enter international market Whether to merge or form a joint venture

No organization have unlimited resources, strategists must go with the strategies which are most feasible and beneficial for the business Strategy formulation commits

an organization to specific products, services, markets, resources and technologies over

an extended period of time Strategies are developed for long term competitive

advantage over its competitors

+ Strategy Implementation:

Strategy implementation is the second stage of strategic management Strategy implementation can be only proceeds after completion of strategy formulation stage, when strategists are done with strategies selection This stage includes number of

activities such as defining policies, building organizational structure, allocating resource

to implementing strategy, assigning tasks to each functional area employees and

tracking the progress of strategy implementation

+ Strategy Evaluation:

Strategy evaluation is the last stage of strategic management, the purpose of this stage to monitor the implemented strategies and find out whether they are working or not to achieve organization objectives Strategy evaluation consists of three fundamental activities reviewing external and internal factors that are bases for current strategies, measuring performance and taking corrective action Each implemented strategy is evaluated to determine the outcomes, if the outcomes are meeting the expectation it means strategy is successfully otherwise corrective action is required

+ Role of a strategic management:

Strategic management allows an organization to be more proactive than reactive

in shaping its own future; it allows an organization to initiate and influence activities and thus to exert control over its own destiny

Historically, the principle benefit of strategic management has been to help

organizations formulate better strategies through the use of the more systematic, logical and rational approach to strategic choice

Research indicates that organizations using strategic management concepts are more profitable and successful than those that do not Businesses using strategic

management concepts show significant improvement in sales, profitability, and

productivity compared to firms without systematic planning activities

Besides helping firms avoid financial demise, strategic management offers other tangible benefits, such as an enhanced awareness of external threats, an improved

understanding of competitors‟ strategies, increased employee productivity, reduced

resistance to change and a cleared understanding of performance-reward relationships Strategic management enhances the problem-prevention capabilities of organizations because it promotes interaction among managers at all divisional and functional levels

Firms that have nurtured their managers and employees, shared organizational objectives with them, empowered them to help improve the product or service and

recognized their contributions can turn to them for help in a pinch because of this

interaction

In addition to empowering managers and employees, strategic management often brings order and discipline to an otherwise floundering firm It can be the beginning of the efficient and effective managerial system The strategic-management process

provides a basis for identifying and rationalizing the need for change to all managers and employees of firm; it helps them view change as an opportunity rather than as a threat

1.1.3 Classification of strategy

Depending on the different criteria strategies can be classifed differently In real estate field, our group relize some type of classification should be studied as follows:

Classifying by managerial level

- Company: Strategy at the company level is to identify and define the purposes

and objectives of the company, identifying the business activities pursued by the

company, create policies and plans to achieve the company's goals, allocating resources between businesses activities Company strategy is applied to the entire enterprise

- Business: Strategy at business level is planned to determine the selection of

products for private business within the company In the strategy at business level,

people must determine the way that each business unit must be completed to contribute

to accomplishing the goal of the company

- Function: In strategy at function level, people focused on supporting

company‟s strategy and focus on areas of operational business areas such as finance, human resources, marketing

Classification of strategy based on the way companies build competitive position

- Cost - leading : As a result, businesses have more profits than the average one

of the whole fiel The total cost based on the scale of production efficiency, cut costs

sharply based on experience, control cost tightly and minimize the cost of the parts such as: research and development, sales, advertising …

- Characterized differences through the creation of the distinct attributes of the products or services with other businesses in the same fiel, such as quality, brand image, technology, features, customer service or dealer network This strategy will help

businesses get profits above the fiel‟s average one because it established a solid position

to deal with competition in the same fiel

- Focusing on the group of customers, product segment or a specific geographic market This strategy is built around serving a particular target well and each of the policies is developed with the direction The strategy gives business unique

characteristics due to better meet the requirements of specific targets or have lower costs in the service of that goal, or both From this, enterprises can get profits above the fiel‟s average one

Classification of strategies based on performance way

The combined strategy group includes: Combined forward; combined back; combined horizontally

Intensive strategy group includes: Market penetration, market development; product development

Group strategy to expand activities includes

- Diversify concentric activities: put on the existing market products or services related to the current products

- Diversify activities horizontally: put on the existing market for the current customer group of new products or services, not related to the current products

- Diversify mixed activities: put on the existing market with the products or services, not related to the current products

Other strategy group include:

- Joint ventures strategy: when one or more businesses unite with each other to pursue a certain goal

- Narrow operating strategy: when businesses need to restructure, conducting to remove a number of products or activity areas to save the position of the business

- Liquidation strategy: the sale of assets of the business Enterprises accept defeat and try to save up maximum all the things they can

1.2 Tool, Models of strategic analysis and evaluation

1.2.1 Analyze the business environment

Environmental analysis for a business looks at the factors inherent in a business's environment that may have some impact thereof This type of analysis is relatively qualitative and involves the identifying, scanning, analyzing and forecasting of the environmental variables Some frameworks of environmental analysis have received large amounts of attention in the world of business management literature, such as SWOT analysis and PEST analysis

1.2.1.1 Analyze the micro environment - PEST model:

PEST analysis stands for "Political, Economic, Social, and Technological

analysis" and describes a framework of macro-environmental factors used in the

environmental scanning component of strategic management It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations

+ Political factors are how and to what degree a government intervenes in the

economy Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore, governments have great influence on the health, education, and infrastructure of a nation

+ Economic factors include economic growth, interest rates, exchange rates and

the inflation rate These factors have major impacts on how businesses operate and make decisions For example, interest rates affect a firm's cost of capital and therefore

to what extent a business grows and expands Exchange rates affect the costs of

exporting goods and the supply and price of imported goods in an economy

+ Social factors include the cultural aspects and include health consciousness,

population growth rate, age distribution, career attitudes and emphasis on safety Trends

in social factors affect the demand for a company's products and how that company operates For example, an aging population may imply a smaller and less-willing

workforce (thus increasing the cost of labor) Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers)

+ Technological factors include technological aspects such as R&D activity,

automation, technology incentives and the rate of technological change They can

determine barriers to entry, minimum efficient production level and influence

outsourcing decisions Furthermore, technological shifts can affect costs, quality, and lead to innovation

+ Environmental factors include ecological and environmental aspects such as

weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance Furthermore, growing awareness of the potential

impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones

+ Legal factors include discrimination law, consumer law, antitrust law,

employment law, and health and safety law These factors can affect how a company operates, its costs, and the demand for its products

The model's factors will vary in importance to a given company based on its industry and the goods it produces For example, consumer and companies tend to be more

affected by the social factors, while a global defense contractor would tend to be more affected by political factors Additionally, factors that are more likely to change in the future or more relevant to a given company will carry greater importance For example,

a company which has borrowed heavily will need to focus more on the economic

factors (especially interest rates)

1.2.2 Analyze the industry environment – M.Porter’s five forces model

As illustrated in Figure below, Porter‟s Five-Forces Model of competitive

analysis is a widely used approach for developing strategies in many industries The intensity of competition among firms varies widely across industries According to Porter, the nature of competitiveness in a given industry can be viewed as a composite

of five forces:

Potential development of sustitute products

- Potential competitors: potential competitors include companies which have

just joined in, their current competitiveness is still weak, but they have great potents and still have competitiveness in the future Potential competitors may reduce the

profitability of the business because they put into operation new production capacities, with the desire to gain market and the necessary resources Therefore, when formulating strategies managers should consider the risk due to the entry of new potential

competitors

- Current Competitors: This is the second competitive forces based on Michael

Porter‟s model They are competitors with strong position in the market in the same business The higher level of cometition is, the lower reduction of profit is

There are three important factors constituting the level of competition between

companies operating in the same field, namely: competitive structure; situation of

market demand; barriers out of the business sector Important part of controlling

external factors is to identify all the competitors and identify their advantages,

disadvantages, capabilities, oppotunities, threats, objectives and strategies

- Matrix-competition images: In all events and environmental trends may affect

the strategic position of a company, the impact of competition is often considered as the most important one Matrix-competition images identifies the principal competitors with their special advantages and disadvantages

- Buyers: The 3rd force in the model of Michael Porter is the ability to bargain of the customer Normally, customers request a price reduction or quality requirements

Potential entry of new competitors

Bargaining power of

suppliers

Rivalry among competing firms

Bargaining power of consumers

accompanied by impeccable service This makes the cost of operations increase,

creating the risk of competitive price

- Providers: The 4th force is the ability to bargain of suppliers Suppliers not

only supply materials, equipments and labor power but also the consulting firm,

providing advertising services, transportation… Generally, they provide the inputs of production and business processes To avoid bargain or the pressure of suppliers,

company should build a mutal relation interest or expected various supply

- Substitutes: The last force is the competitiveness of substitutes products

Substitutes products are the products of competitors in the same field or business sector which have same function to meet consumer demand To limit the important stress of this risk, companies need to consider carefully the price trends and forecasts of the substitutes products in the future

1.2.3 Tools to develop a strategy

According to Fred R David, important techniques in developing a strategy

consist of three stages Tools used in this process can be employed in any model and organization They help managers to define, assess and select strategies and are

Internal Factor Evaluation Matrix (IFE)

The matching stage

External – Internal Matrix (IE)

Grand Strategy Matrix

The decision stage

Quantitative Strategic Planning Matrix (QSPM)

Source: Fred R David, Strategic Management Concepts and Cases, Figure 6-2, P.222

Figure 1.4: Model of developing a strategy

Stage 1: input into EFE, IFE and CPM This phase sums up basic input

information which is very necessary to form a strategy

Stage 2: The matching stage This stage presents pratical strategies which can be

selected by arranging and combining important external and internal factors In this stage, we choose one of matrixes such as SWOT, CG, IE and SPACE

Stage 3: The decision stage This stage only include one technique which is

using QSPM (Quantitative StrategicPlanning Matrix) This matrix uses input

information in the first stage to objectively evaluate and select possible strategies in the second stage, and then choose a suitable strategy in the third stage

External Factor Evaluation matrix (EFE matrix)

EFE matrix lets strategy planners to summarize and evaluate competitive,

technological, legal, government, political, geographic, demographic, cultural, social and economic information There are five steps to develop an external factor evaluation matrix:

Step 1: List down 10 to 20 key external opportunities and threats which are

defined as decisive factors to the firm‟s sucess in the external audit process

Step 2: Assign weights to each factor that ranges from 0,0 (not important) to 1,0

(most important) The total weights must sum up to 1.00 It should be noted that the importance of weights depend upon the probable impact of factors on the strategic position of the company

Step 3: rate each factor (ranging from 1 to 4) on the basis of company‟s response

to that factor (Here, 1 shows poor response, 2 shows average response, 3 shows above average respons and 4 shows superior response) These rates are based on effectiveness

of business strategy To sum up, classification in this step is relied on the company‟s scale while that in step 2 is based on the industry

Step 4: Caculate the weighted scores by multiplying the each factors weight by

its rating

Step 5: Finding the total weighted score by adding the weighted score for each

variable The toal weighted score ranges from 1 to 4 regardless of the total unmber of

opportunities and threats If the total weighted score is under 2.5, the company is

internally weak On the contrary, if it is over 2.5, the company is internally strong

Internal Factor Evaluation matrix ( IFE matrix)

The final step in analysis of internal situation is to build a internal factor evaluation matrix This strategic tool summarizes and evaluates strengths and weaknesses of

functional areas of business It also provides principles to define and assess evaluate relations among those areas There are five steps to develop IFE matrix:

Step 1: List key internal factors as identified in the internal audit process Use a

total of from ten to twenty internal factors, including both strengths and weaknesses

Step 2: Assign a weight that ranges from 0.0 (not important) to 1.0 (all

important) to each factor The weight assigned to a given factor indicates the relative importance of the factor to being successful in the firm‟s industry Regardless of

whether a key factor is an internal strength or weakness, factors considered to have the greatest effect on organizational performance should be assigned the highest weights The sum of all weights must equal 1.0

Step 3: Assign a 1 to 4 rating to each factor to indicate whether that factor

represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor

strength (rating = 3), or a major strength (rating = 4) Note that strengths must receive a

4 or 3 rating and weaknesses must receive a 1 or 2 rating Ratings are thus company based, whereas the weights in Step 2 are industry based

Step 4: Multiply each factor‟s weight by its rating to determine a weighted score

for each variable

Step 5: Sum the weighted scores for each variable to determine the total

weighted score for the organization

The toal weighted score ranges from 1 to 4 regardless of the total unmber of strengths and weaknesses If it is over 2.5, the company‟s internal position is better

Competitive Profile Matrix (CPM)

Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their

competitors There are five steps to build CPM:

Step 1: List down 10 key decisive factors to the competitiveness of the firm

Step 2: Assign a weight that ranges from 0.0 (not important) to 1.0 (all

important) to each factor The weight assigned to a given factor indicates the relative importance of the factor to being competitive in the firm‟s industry The sum of all weights must equal 1.0

Step 3: rate each factor (ranging from 1 to 4) on the basis of company‟s

competitiveness to that factor (Here, 1 shows weak, 2 shows average, 3 shows above average and 4 shows good

Step 4: Multiply each factor‟s weight by its rating to determine a weighted score

for each variable

Step 5: Sum the weighted scores for each variable to determine the total

weighted score for the organization Compare the total weighted score of the firm with that of competitors to assess competitiveness of the firm

The Strengths-Weaknesses-Oppotunities-Threats(SWOT) Matrix is an important matching tool that helps managers to develope four types of strategies : SO Strategies,

WO Strategies, ST Strategies, WT Strategies Matching key external and internal factor sis the most difficult part of developing a SWOT matrix and requires good judment- and there is no one best set of matches

SO Strategies use a firm's internal strengths to take advantage of external

opportunities All managers would like their organizations to be in a position where internal strengths can be used to take advantage of external trends and events

Organizations generally will pursue WO, ST, or WT Strategies in order to get into a situation where they can apply SO Strategies When a firm has major weaknesses, it will strive to overcome them and make them strengths When an organization faces major threats, it will seek to avoid them in order to concentrate on opportunities

WO Strategies aim at improving internal weaknesses by taking advantage of

external opportunities Sometimes key external opportunities exist, but a firm has

internal weaknesses that prevent it from exploiting those opportunities For example, there may be a high demand for electronic devices to control the amount and timing of fuel injection in automobile engines (opportunity), but a certain auto parts manufacturer may lack the technology required for producing these devices (weakness) One possible

WO Strategy would be to acquire this technology by forming a joint venture with a firm

having competency in this area An alternative WO Strategy would be to hire and train people with the required technical capabilities

ST Strategies use a firm's strengths to avoid or reduce the impact of external

threats This does not mean that a strong organization should always meet threats in the external environment head-on A recent example of ST Strategy occurred when Texas Instruments used an excellent

WT Strategies are defensive tactics directed at reducing internal weaknesses and

avoiding environmental threats An organization faced with numerous external threats and internal weaknesses may indeed be in a precarious position In fact, such a firm may have to fight for its survival, merge, retrench, declare bankruptcy, or choose liquidation

Quantitative Strategic Planning Matrix (QSPM)

The QSPM incorporates earlier stage details in an organize way to calculate the score of multiple strategies in order to find the best match strategy for the organization

According to Ferd R David, it takes six steps to build QSPM:

Step 1: List down all key external threats and internal weaknesses of the firm Step 2: Assign weights to each key external and internal factor These weights

are identical to those in the EFE Matrix and the IFE Matrix

Step 3: dentify alternative strategies that the organization should consider

implementing

Step 4: Determine the Attractiveness Scores (AS), defined as numerical values

that indicate the relative attractiveness of each strategy in a given set of alternatives The attractiveness score ranges from 1 to 4: 1 = not attractive, 2 = somewhat attractive,

3 = reasonably attractive, and 4 = highly attractive

Step 5: Caculate Total Attractiveness Scores Total Attractiveness Scores are

defined as the product of multiplying the weights (Step 2) by the Attractiveness Scores (Step 4) in each row The higher the Total Attractiveness Score, the more attractive the strategic alternative

Step 6: Sum Total Attractiveness Score Add Total Attractiveness Scores in

each strategy column of the QSPM he magnitude of the difference between the Sum Total Attractiveness Scores in a given set of strategic alternatives indicates the relative

desirability of one strategy over another

CHAPTER II ACTUAL BUSINESS SITUATION OF HAI PHONG BRANCH OF NAM VIET

JOINT STOCK COMMERCIAL BANK

2.1 Introduction to Hai Phong Branch of the Nam Viet Joint Stock Commercial Bank

2.1.1 Overview of the Nam Viet Joint Stock Commercial Bank

2.1.1.1 Introduction

Set up since 1995, after 15 years of operation, the Nam Viet Joint Stock Commercial Bank (Navi Bank) has established its place in the financial-monetary market in Viet Nam that was manifested in its rapid growth rate and stability in terms of total asset and the efficiency of its the business activity The NaviBank has demonstrated a strong vitality of a trade mark, which suffices to affirm the correct business strategy

In the context of economic integration that led to growing acute competition as at

present, the NaviBank has identified that it should follow a strategic thrust to enhance its

competitive capability through increasing its financial capability, perfecting the information technology system and practice a good governance of risks

NaviBank is proud to be a financial mainstay to support its clients in order to attain greater successes in their business activities and daily life

2.1.1.2 Vision and missions

+ Vision: “ Becoming a leading retail bank in Viet Nam”

NaviBank

- Bringing about long-term and attractive benefits through implementing sound business strategy and good risks management

2.1.1.3 Results and achievements attained

2.1.1.3.1 Improvements of organizational structure, policies and management:

- NaviBank has separated the business function from the managerial function of the Headquarter through the establishment and operation of the Nam Viet Transaction Office (16

September 2010) The separation of the business and the managerial functions was aimed at further enhancing the quality of the direction and governance in order to best support the

- Risk of liquidity: Risks of liquidity areas always under special supervision and control

of the Bank in order to preserve its capability for liquidity and to observe the regulations on liquidity put forth by the State Bank of Viet Nam

- Risk of credits: The Bank has implemented a number of various policies of control in order to minimize risks of credits as much as possible on the basis of strengthening the

organizational apparatus, increasing the quality of appraising and approving the grant of credits, strengthening the supervision and control before, during and after granting credits

- Risk of interest rates: The Bank has improved the governance of the risk of interest rates

in a flexible and efficient manner As a result, the interest rates of deposits and credits have been adjusted according to changes of the market on the basis of the calculation of the actual costs, the analytical reports of the average rates of the inputs and outputs to ensure that the gap of the interest rates is always with a reasonable range and to make sure that the business activity is to

be efficient

Additionally, the Bank places the control and supervision on the activities of the Bank on the basis of the objective, impartial principle regarding all activities of the Bank; and the Bank also put in the first place the organizational structure and system of documents, regulations, guiding process

2.1.2 Overview of the Nam Viet Joint Stock Commercial Bank - Hai Phong Branch

2.1.2.1 Developments:

The Nam Viet Joint Stock Commercial Bank (abbreviated as NaviBank) formerly named the Joint Stock Commercial Bank of Song Kien Rural Areas, was set up under the Permit No

00057/NH-GP dated 18 September 1995 issued by the State Bank of Viet Nam and the Permit

No 1217/GP-UB dated 17 October 1995 issued by the Provincial People‟s Committee of Kien Giang

The Bank conducts its business activities under the Registration Certificate No

4103005193 issued by the Planning and Investment Department of Ho Chi Minh City

Throughout 15 years of operation, the Nam Viet Joint Stock Commercial Bank has established its place in the financial and monetary market in Viet Nam as shown by its sustainable growth and stability in terms of the size of the total assets and business efficiency

Full name: Ngân hàng Thương mại Cổ phần Nam Việt (Nam Viet Joint Stock

Commercial Bank)

International transaction name: Nam Viet Joint Stock Commercial Bank

Short name: NAVIBANK

Head Office address: 343 Pham Ngu Lao, Pham Ngu Lao Ward, District 1, Ho Chi Minh City Phone: (08) 38 216 216 Fax: (08) 39 142 738

Website: www.navibank.com.vn Email: navibank@navibank.com.vn

Established since 1995, throughout 15 years of operation, albeit not a long period of time,

it suffices to prove the strong vitality of a trade mark as well as the correct business strategy The NaviBank has affirmed its place in the financial and monetary market through its robust growth rate and stability in terns of the total assets, the registered capital and the business

efficiency At present, the registered capital of the Bank is VND 3.010 billion

In the context of ongoing competition, in order to seize opportunities offered by the trend

of international economic integration, the Bank identifies that it should follow the strategic thrust in upgrading its business capability through financial information technology capability and the good governance of risks Parallel to that, the Bank also pays attention to research and development and application of information technology into widening the usability of the

financial services and products

In addition to the head office at 343 Pham Ngu Lao, District 1, Ho Chi Minh City, the Bank possesses a wide network of activities in 24 cities and provinces and more than 100

transaction sites throughout the country The Bank employs staff size of 1300 professional and dynamic members The Bank‟s total assets passes the landmark of VND 20.000 billion, and the profit before tax payment reached more than 241 billion

The Nam Viet Joint Stock Commercial Bank – Hai Phong Branch (NaviBank Hai Phong)

was set up under the Business Certificate for the branch office No 17001697-004 issued by the Business Registration Section of the Planning and Investment Department of Hai Phong City It first registered on 24 November 2006 and registered for changed for the third time on 9

November 2011 NaviBank formally operated on 6 January 2007 and it became one of the main branches in the North of the NaviBank When first set up, NaviBank Hai Phong had only 30 employees with tow transaction sites in Hai An and Le Chan Districts Up to now, after 5 years

of activities in Hai Phong, the NaviBank Hai Phong has constantly grown with the total assets of somewhat VND 1.000 Billion, with a network of transaction at 08 sites and the staff size of more than 100 members, among them, there are two master degree holders, 85 % of them are university graduates and the rest are secondary professional training certificates and non-

professional working as guards or drivers Taking good care of the clients, promoting marketing with a list of diversified and modern financial services and products, NaviBank Hai Phong has earned trust and confidence of many individuals and organizations

2.1.2.2 Organizational structure:

The main office of the NaviBank Hai Phong is at No 326-328 To Hieu, Ho Nam Ward,

Le Chan District, Hai Phong City Since its birth, NaviBank Hai Phong has developed a wide network with 08 transaction sites in order to create favorable conditions for business activities in Hai Phong, Quang Ninh and Thai Binh, namely:

- NaviBank Hai An: 413 Ngo Gia Tu, Hải An District, Hai Phong

- NaviBank Le Chan: 88-90 Tran Nguyen Han, Le Chan District, Hai Phong

- NaviBank Hong Bang: 155 Quang Trung, Hong Bang District, Hai Phong

- NaviBank Ngo Quyen: 9F Tran Phu, Ngo Quyen District, Hai Phong

- NaviBank Quang Ninh: 577 Tran Phu, Cam Trung, Cam Pha, Quang Ninh

- NaviBank Thuy Nguyên: 49 Bach Đang, Núi Đèo, Thuy Nguyen District, Hai Phong

- NaviBank Hoang Van Thu: 18 Trần Hưng Đạo, Hong Bang District, Hai Phong

- NaviBank Thai Binh: 176 Hai Ba Trung, Đe Tham, Thai Binh

Chart 2.1 Management Organisational Structure of Hai Phong

Functions and responsibilities of the leading staff of the sections and sub-sections:

- Director of the Branch: having the overall responsibilities for managing, directing all

activities of the whole branch, with the direct responsibility for business operation of the Section for Clients Relations and Transaction Sections

- Deputy Director of the Branch: having the direct responsibilities for Section of Client

Services, the Administrative Section, the Section of Accountancy, the Information Technology Section and all client services by all the transaction sections in the branch

Director in General

Customer Relations

Division

Vice Director (VD)

Customer Service Division

Admin and HR Division

Internal Monitor Division

Accounting division

IT Division

VD Thuy Nguyen

VD Hoang Van Thu

VD Hai An

VD

Le Chan

VD Hong Bang

VD Ngo Quyen

VD Quang Ninh

VD Thai Binh

- Section for Client Relations: having the responsibility for providing credits and credit

repayment by clients such as enterprises and individuals in order to ensure the high level of business efficiency; compiling and preparing reports on business activities to submit to the State Bank and the Headquarters

- Section for Client Services: the main function is to mobilize capital, develop the

network of depositors and managing the capital

- Section on Administrative Affairs and Personnel: having the function of formulating

the monthly, quarterly and annual business plans; providing advisory inputs to the Director in recruiting new employees, training, resource allocation, managing the salaries of the staff;

preparing plan for proper, equipment purchase; organizing events, in charge of PR and

marketing…

- Section for internal control: Inspecting, controlling the implementation of

professional regulations in line with the law, decisions of the State Bank and the NaviBank in ensuring the safety of activities relating to money, credits and banking services

- Section of Accountancy: carrying out statistic accounting and accounting in line with

the regulations of the branch, identifying financial criteria, settlement of financial revenues and expenditures plan, the budget for salaries of the staff for the consideration of the Headquarters

- Section of Information Technology: Formulating plans to develop a system of banking

information technology; running the computer network, the banking software

2.1.2.3 Main business activities of NaviBank Hai Phong :

- Money deposit services: mobilizing capital from organizations, individuals from various

economic sectors, accepting deposits in NVD and foreign currency under various forms, diversified timeframes

- Credit services: providing credits to various economic enterprises and individuals

under the forms of providing loans to economic enterprises and individuals in the forms of credits, discounted commercial papers and other valuable papers, guarantee and other forms in line with the regulations of the State Bank

- Payment services: providing payment services in the forms of providing payments

means, in-country payment or international payment services when permitted by the State Bank, debt collection and treasury services

- Other activities: Issuing and accepting payments for credit cards such as the

NaviCard-Debit, NaviCard-Credit, e-pockets … participating in the currency market, foreign exchange

business and business activities relating to gold

2.1.2.4 Outcomes of business activities

2.1.2.4.1 Capital mobilization

Right after the establishment, NaviBank Hai Phong has paid attention to the work of mobilizing capital in order to control the source of capital for business activities Capital is an important pre-condition, having the decisive factor relating to the scale, scope of activities as well as other business activities of the banks As such, the senior staff and the entire employers

of the NaviBank Hai Phong have paid special attention to activities relating to capital

mobilization with diversified forms, applying various products for money depositing, for

instance: saving deposits, deposits for payments, accumulative deposits, escalative deposits…in order to mobilize as much as possible the idle capital among the local population and economic enterprises…

In addition to normal forms of capital mobilization, NaviBank Hai Phong also has regular programs of incentives, saving with rewards, setting up of NaviBank clubs with a view

to creating a special program to take special care of the clients and as an expression of

appreciation to clients, meeting reasonable needs of clients Up to now, NaviBank Hai Phong has had a big number of clients who have deposited their money in a traditional way With a network of 7 transaction offices in the city and the neighboring provinces, NaviBank Hai Phong is trying to mobilize as much as possible the capital resources from the communities

Table 2.1 Capital mobilization for 2009 – 2010 period by NaviBank Hai Phong

13.71%

Forms of

mobilization 451,847 498,594 469,714 46,747 10.% (28,880) -5.79%

Money deposit

67,874 103,935 69,337 36,060 53.13% (34,598)

33.29%

Money deposited by

economic enterprises 9,557 9,006 5,914 (550) -5.76% (3,092)

34.33%

Chart 2.1: funding structure over time

Short – termmedium and long term

From the above data, one can see that out of the total mobilized capital by NaviBank Hai Phong, the short-term capital occupies a big percentage: 93.59% in 2009, 96.73% in 2010 and 97% in 2011 The capital is mainly mobilized from the local population and capital in VND takes a big percentage: 77.02% in 2009 and 72, 53% in 2010 and 85, 13% in 2011 This shows that the majority of the people still follow the trend of depositing their money for short -term period since the interest rate was higher than those of the medium and long -term period and in line with the need for using capital Furthermore, in the market, there were other forms

of medium and long-term investment with higher return and therefore the mobilization of capital for medium and long-term period by the Bank had certain constraints The percentage

of deposited money in VND was higher that that of foreign currencies since the depositors hold a psychological fear regarding the exchange rates and there was a small number of people

- 50,000

Year 2009 Year 2010 Year 2011

Chart 2.2: structure deposits in the form

savings deposits of economic organization other deposits

- 50,000

Year 2009 Year 2010 Year 2011

Chart 2.3: structure deposits by type of deposit

Deposits VNĐ deposits foreign currency s

and economic enterprises still had deposits in foreign currencies

The situation of capital mobilization in 2010 increased by VND 46, 747 million, 10.35% higher than 2009 Though 2010 was a difficult year for the economy, with various products offer for saving money and with flexible interest rates, that were more attractive than other banks, the NaviBank Hai Phong was able to mobilize an amount of capital bigger than that of 2009

In 2011, the capital amount mobilized was smaller than that of 2010, an decrease of 28,880 million, or 5.79% lower due to the decreases in the medium and long-term mobilized capital (13.71%) and the deposits in foreign currencies sharply reduced as in the 2011, there were many ups and downs in the exchange rates, creating a physiological fear among the

depositors 2011 was also a very difficult year for banks in mobilizing capitals so they engaged

in a race of deposit rates, thus leading to uncertainties in the capital market In face of that the State Bank issued an Instruction No 02/CT-NHNN of 7 September 2011 putting in order the implementation of the regulations concerning the deposit rates in VND and US dollars by credit institutions and foreign bank branches in Viet Nam and the State Bank also took active measures and applied punitive actions regarding violation of the deposit rates Consequently, the whole banking system, including NaviBank Hai Phong seriously observed the regulations of the State Bank and they had to increased services to support clients in order to attract more money from people and economic enterprises The capital mobilized was a bit lower than 2010 showed that the senior staff o NaviBank Hai Phong had made greater efforts in the overall difficult context

of the economy

2.1.2.4.2 Utilization of capital

The utilization of capital in NaviBank Hai Phong was mainly in the form of providing credits for individuals and economic enterprises This is also an activity creating the main source

of revenues for the bank Right after its coming into existence, NaviBank Hai Phong

immediately enhance the quality of serving clients, creating favorable conditions for the clients

to borrow money from the bank on the basis of respecting all regulations of the State Bank and the NaviBank Starting with a small number of clients, NaviBank Hai Phong has gradually developed a system of clients diversified in economic occupations, contributing to providing

capital to the growing economy of Hai Phong City

Table 2.2 Utilization of capital at NaviBank Hai Phong

Unit: Million VND

Spending Year Year Year 2010/2009 2011/2010

Total 709.371 976.066 918.026 266.695 79,19% (58.040) 340,06%

(Source: Report of Navibank Hai Phong's operation 2009 - 2011)

Through the above data we find the utilization of capital to loan funds accounted for almost all of the utilization of capital by the bank, lending rates were over 99% of every year Total outstanding loans in 2010 rose 265,951 million compared with 2009, equivalent to

37.66% This shows that the credit activity is increased But in 2011 the credit rate have reduced 6.23% compared to 2010 due to the credit policies of Navibank focused more on short-term loan

to increase the working capital, temporarily cease spending lending and fixed asset investment The deposits at the State bank and credit institutions accounts for a negligible proportion, and did not bring high profit to Navibank Hai Phong

2.1.2.4.3 Other activities of NaviBank Hai Phong

In addition to two main activities of the bank, that is to mobilize comitial and to provide credit, NaviBank Hai Phong has also broadened other business activities, such as guarantee, international payment survives, issuing credit cards, foreign exchange business… in order to meet the needs of all clients, in line with the prevailing trends of the time, at the same time to increase the source of revenues for the bank

- International payment: at present, NaviBank Hai Phong has not yet a Section dealing

with international payments and this is done through the Section of International Payments at the Headquarters This sometimes affects the speed of payments for imports or exports of the clients Due to that though NaviBank Hai Phong tries to increase the revenues from this source from that activity, the outcome has not met expectation In 2009, revenues from international payments reached 487 million but in 2010, it was only 285 million

- Guarantee: the bank has had diversified guarantees such as guarantee for the

implementation of contracts, guarantee for payments, guarantee for bidding, guarantee for

quality of products, guarantee for advanced money…and thanks to that the revenues form the guarantee has increased year by year: in 2009, it was 23 million, in 2010, it was up to 85 million and in 2011, it was 91 million NaviBank Hai Phong has not paid any debt for client

However, this source of revenues still occupies a small percentage in the total revenue of the branch and it should take more proactive measures in order to attract more clients in the guarantee client category

- Gold and foreign currencies business: NaviBank Hai Phong has not had strong

activities concerning gold and foreign currencies business and revenue from this kind of

business is still low In 2020 and 2011, the world gold and foreign currencies markets underwent many upheavals and the State Bank had taken may measures to tighten the relevant activities and hence the revenue from this activity tremendously went down

- Card issuance: together with the strong advance of banking technology, needs for

automatic transactions, payments of clients also increases Keeping in mind of that NaviBank has paid special attention to the development of a system of payment cards throughout the

country

From 10 July 2010 NaviCard of NaviBank could have transactions in the VNBC

(connecting with more than 1,100 ATM of the Dong A Bank) Therefore, the successful

connection of the Smart link BanknetVN, VNBC has created favorable conditions to card

holders in general and NaviCard holders in particular when conducting transaction at any time, anywhere at 10 ATM and with tens of thousands of POS in the whole country From 8 August

2011, the NaviCard issued by NaviBank could conduct transaction in the system of about

50,000 POS (supermarkets, restaurants, hotels…with equipments accepting payment cards) of

28 banks belonging to Smartlink, BanknetVN and VNBC Apart from issuing cards like

NaviCard-Debit, NaviCard-Credit, NaviBank also issues Navifund applying to all clients who wants to join the Association of supporters to the soccer club of Nam Viet Sai Gon Bank, the Payoo… Up to now, NaviBank Hai Phong has successfully issued about 10,000 cards from all the transaction sites in the city

(Source: Report of Navibank Hai Phong's operation 2009 - 2011)

The business of NaviBank Hai Phong over the past years has met with not few

difficulties; right after it was established, the national economy faced with a crisis The bank encountered many big challenges: a race for deposit and credit interest rates; prices of gold and foreign currencies escalated in the country; growth rate of credits was higher than that of capital mobilization; the share of overdue and bad loans increased… Despite of that NaviBank Hai Phong had made tremendous effort to overcome and business activities also produced benefit, ensuring the stable development of the bank

2.2 Analysis of environment factors

2.2.1 Analysis of external environment factor

2.2.1.1 Analysis of macro-economic environment using the PEST model

(1) Economic environment:

+ GDP growth rates:

Due to the major impact of the global financial crisis, Viet Nam‟s GDP growth

rates over the past three years have been decreased as compared with the previous years

In 2011, the GDP growth rate was 5.89%, lower than 6.78% of the year 2010 Keeping

in mind the difficult economic situation faced by the country and her efforts focused on

inflation control and macro-economic stability, that rate looked to be rather high and

reasonable

Out of the 5.89% growth rate, the agro-forestry-fishery registered a 4% growth rate (contributing 0.66% to the overall GDP growth rate), the industry and construction

attained a 5.53% rate (contributing 2.32% to the overall GDP rate) and the service

sector made a 6.99% rate (contributing 2.91% to the GDP rate)

CHART 1: GDP GROWTH RATES BY YEARS

According to Hai Phong People‟s Committee, city‟s GDP in 2011 reached

11.03%, higher than that of 10.96% in 2010 and of 7.57 % in 2009

In which, the agro-forestry, fishery sectors increase by 4.5%, the industry and

construction sectors raise 10 %, service sector climbs to 12.8% The high GDP growth creates strong jump for Hai Phong while agriculture is in a bumper crop, fishery is

increasing in bulk, shipbuilding grows positively, the amount of commodity across port keeps the increasing speed, budget is high, etc Additionally, a number of new

evidences show the gradually growth of economy for the fact that a lot of large industry plans operate stably, with higher revenue and yield, plenty of large-scale investment

plans are carried out in Hai Phong…

→ Hai Phong‟s GDP growth facilitates Navibank – Hai Phong to have more

chance to gain more new customers, and grow credit

+ Inflation:

For a long period of time, Viet Nam accepted a high inflation rate in order to

follow the target of economic growth with loose monetary policies Nonetheless, high

and prolonged inflation rate constituted instability and produced a major impact to the sustained growth of the overall national economy in general and the banking sector in particular

CHART 2: GROWTH OF CONSUMER PRICE INDEX VIETNAM PERIOD

2005 - 2011

In a turbulent year of 2011, Consumer price index in Vietnam increases

significantly Be aware of this situation, Hai Phong city has boosted the GDP growth to 11.02% To this end, banking sector and city‟s departments, panels fully implement measures of inflation curb since the first months, focus on controlling credit growth, funding in order to raise the effectiveness of capital utilize Hence, to encourage the manufacture, banking sector should lower the mobilization interest rate

+ Export growth rates:

- The 2011 export reach USD 96 3 billion as compared with the year 2010 of USD 72.24 billion The value of 2011 export increased by 33.3% against 2010 and the reasons for such growth were the increased prices in the world

- The 2011 import reached USD 105.8 billion, an increase of 24.7% against 2010

of USD 84.84 billion Import value increased also due to higher prices of commodities

in the world

In 2011, export- import growth in Hai Phong also obtained positive results Local export turn-over increased by 18.9% up against previous year Index- Industry Products IIP mounted to 10.02% Until now, Hai Phong always takes the advantage of sea port

and the flow of commodity through port which reached 43.55 million tons in 2011, 23.74% up against previous year

→ This is also another advantage for Hai Phong Navibank to attract more

customers and raise its own revenue

+Issues relating to credits and liquidity of the banking system:

As the inflation took place in a long period of time, the State Bank had to

followed tightened monetary policies in order to somewhat contain the negative impact

to the national economy However, these policies could not produce immediate

influence and only by the end of 2010 and the beginning of 2011, these policies could

be vigorously carried out in a synchronized manner

These policies, to some extent, have exerted an impact to many areas of the national economy in general and the banking sector in particular as it was shown by a series of changes to the exchange rate and deposit growth rate

Meanwhile, the negative turns of the stock market helped higher and higher inflation rates and this also affected activities of the banking sector

To ensure the stable development of banking sector in the last months of 2010 and early 2011, State Bank, Hai Phong branch directed local commercial branch bank to enhance mobilization, control credit growth in an appropriate level against mobilization capacity, follow State Bank‟s instruction of mobilization interest rate State Bank‟s administration of Hai Phong branch needs to increase monitoring, checking commercial banks‟ activities After a “hot” period of credit growth, banks return traditional fields and concentrate on measures promoting at maximum level of the field Security and real estate loans are narrowed, in case of accepting for loan; it is required to mortgage of value assets such as real estate, or deposit certification, saving card, etc

(2) Technology environment

Technology holds a key to the development of the national economy and

contributes to the success of enterprises and to gaining a comparative advantage against other competitors Therefore, any bank that has a more advanced technology would gain

a better competing position against other banks in the market

After joining WTO, Viet Nam‟s economy has been more and more developed and integrated Hence, the technical-technological system of the banking sector has also been upgraded and provided with more advanced equipments so as to meet the

increasingly high requirements of clients The application of more advanced technology also helps the banks reduce costs and enhance the efficiency of banking business

activities

But realities reveal that at present, investment into technological system by the banks are independent and not integrated and connected and not sharing resources, for instance information sharing That affects the efficiency of the inter-bank information sharing system and at the same time reduces the benefits provided to clients

At the same time, the infrastructure of information technology and

telecommunications in Viet Nam still faces with many incompatibilities, such lack of stable quality of the national data-transmission network; low speed, high usage costs and this also affect the network of information technology and the quality of services of the banks

(3) Demographic environment

+ Population size and structure

Presently, Viet Nam has the third largest population in Southeast Asia and is ranked 13 among the most populous in the world and this constitutes a large potential market of the banks if they know how to tap this market

The population growth rate in Viet Nam is also significantly high This is one of factors that make the banking market more attractive Yet, to develop banking services,

it depends, to a large degree on the purchasing power of the population

However, it can be said that the domestic market for the banks holds large

untapped potentials The tapping depends on the business strategy of each banks

Domestic banks could tap this market in order to help stabilize the monetary market so that domestic banks could compete with foreign banks and they could follow

a more outward-looking strategy that is going to the global market

Population- ethnic: according to daily survey, Hai Phong city involves 2.077.000 people mainly of Kinh group People of working age represent 58%, in which 75% has graduated secondary school or higher education level

People awareness: 100% of districts deploy educational universalize At present, Hai Phong has universalized education at secondary level and expected in 2012 to

universalize at high school for people within age There are 220 primary schools (92 ones meet the national standard) with 173.816 pupils; 48 high schools (20 schools are

private ones) with 59.122 pupils; 189 secondary schools with 138.028 pupils The city has over 20 thousand teachers at all level, in which over 2000 teachers get bachelor, more than 200 teachers get master degree There are 1010 doctors, 900 physicians, 1465 nurses, 135 senior pharmacists, 115 intermediate pharmacists, 310 prescription clerks and 4516 beds for patient Until 2000, there are 23 patient beds, 5.8 doctors per 10 thousand people; each ward has at least one doctor and intermediate obstetric one

+ Geographical position

NaviBank Hai Phong is located in Le Chan District, a big and central district of Hai Phong city This district is one of districts that have huge potentials for economic development with the natural size of 12 km2, a population of 180,000 people, having 14 administrative wards, annual GDP growth rate of 25-31% Its economic structure:

industry occupies 35%; trade takes 30% and 35% for the services

It is adjacent to Ngo Quyen district and part of Kien Thuy district to the East and Kien An, An Duong to the West

During the 2005-2011 period, Le Chan district made leap and bound

development with the average growth rates of the service and trade sectors at 28% Hai Phong city and Le Chan district made large amount of investment for the development

of trade infrastructure, restaurants, hotels, financial and banking centers It therefore can

be said that Le Chan district is an area with robust economic development and has huge potentials for further development This provides good basis for activities by banking sector in general and NaviBank Hai Phong in particular The latter is located in To Hieu street, Le Chan district but its activities covers the whole Hai Phong city A favorable condition for NaviBank Hai Phong is that it has a rather developed infrastructure, high intellectual and income levels of the local population and there is a big number of

economic enterprises operating in this district

Along that favorable condition, the NaviBank Hai Phong, like other banks, also face fierce competition from other banks operating in To Hieu street and Le Chan district In Le Chan district, at present, there are many banks working there, such as Techcombank, Maritime bans, VP bank, Vietinbank, MB, GB bank, Agribank, Ocean bank…

(4) Political and legal environment

+ Political:

Politically, Viet Nam has been recognized as relatively stable This is a factor that helps attract foreign capital investing in the country and this is also a favorable condition for the development of Viet Nam‟s national economy in general and the

banking system in particular

A politically stable country will help reduce risks of terrorism, strikes… thus the productive and business activities of enterprises are smoothly carried out, avoiding unnecessary risks that in turn will indirectly promote the development of the banking sector

In recent years, the renewal policy of the Party and the State in connection with the economy and trade liberalization and investment, privatization of the State-owned enterprises has significantly contributed to providing favorable conditions for the

commercial banking system in Viet Nam so that they could increase their financial capability, enhance the transparency, take initiative in integrating into the world market and apply international practices in the banking sector

In Hai Phong city, leaders, Party and leading offices especially State Bank take priority for credit institutions to support them in serving on-the-spot and with the best quality for enterprises‟ demand as well as individuals and households

+ Legal

The banking sector is under strong influence by the policies and legislation of the State That‟s why activities of the banking sector are subjected to tight adjustment

measures in line with the laws concerning the banking system In addition to the

influence by the legal system, the commercial banks are also placed under strong

supervision by the State Bank

As time goes by, together with the integration and development, the legal

framework for the activities of the banking sector has been gradually improved in order

to respond to the needs of integration into the global economy and to raise the efficiency

of monetary business of the banks

In the recent time, there have been a number of regulations for the commercial banks, most prominent ones including: Decree No 141/2006/ND-CP of 22 November

2006 regarding the minimum charter capital of NVD 3,000 billion, by the end of 2010, there was a Circular No 15/2009/TT-NHNN dated 10 August 2009 requiring

commercial banks to utilize, at the maximum level, 30% instead of 40% of the total