Brand valuation for Vietnam’s commercial banks

1 PREAMBLE (ii) Propose brand valuation model for Vietnam’s commercial banks (iii) Experiment the proposed brand valuation model on Bank for Investment and Introduction 1.1 The necessity of the subject In banking business, trust is the key factor for millions of individuals and organizations to send their savings, satisfy their demand for loans, or for effective Development of Vietnam (BIDV) to calculate its brand (iv) Establish conditions to apply brand valuation model for Vietnam’s brands in practicality 1.4 Subject of research: Brand valuation for Vietnam’s commercial banks financial consultancy Moreover, together with the development of science and Research methodology and sources of statistics technology, as well as integration process, the competition in banking is increasingly 2.1 Research methodology fierce The deciding factors for customers to choose a bank are not only tangible and - Inherited method material elements but also ones related to emotion, perception, trust, etc Therefore, - Analytical – comparative method brand in banking has become an essential factor for the success of commercial banks So - Interdisciplinary research method the question of how to measure a commercial bank’s brand value in a specific - Case study research method financial figure, while the economic value of a bank’s brand is widely accepted, is of - Dialectical materialism method great concern to managers 2.2 Sources of statistics From this above situation, the author has chosen the subject “Brand valuation for Vietnam’s commercial banks” as dissertation topic 1.2 Scope of research There are two approaches that result in very different brand value: - Calculate brand value by market research (called “Brand evaluation” by the of Vietnam (49 Ly Thai To Street – Hoan Kiem District – Hanoi), Annual Report audited in 2010, 2011, 2012 and confidential report named Valuation before IPO of Bank for Investment and Development of Vietnam (35 Hang Voi Street – Hoan Kiem District – Hanoi) The contribution of the thesis author) - Calculate brand value by financial data (called “Brand valuation” by the 3.1 In terms of academic literature - Summarize two brand valuation approaches for commercial banks, including: (i) author) The purpose of thesis is to propose a brand valuation model for Vietnam’s commercial banks based on financial data Brand valuation for commercial banks is a process with many steps; however, the thesis will concentrate on researching and proposing brand valuation model for Vietnam’s commercial banks 1.3 Purpose of research (i) The sources of statistics used in the thesis are from the website of The State Bank Systemize theories of calculating brand value Calculate brand value for commercial banks based on market research; (ii) Calculate brand value for commercial banks based on financial data - Select the estimated income based method of the second approach, combining with analysis on characteristics of commercial banks’ business operation to propose a brand valuation model for Vietnam’s commercial banks 3 • Chapter 1: General research on brand and brand valuation 3.2 In terms of practical application • Chapter 2: Theory of brand valuation for commercial bank • Help to confirm that brand is a valuable asset of commercial banks, which has to • Chapter 3: Current situation of legal system for brand valuation and Vietnam’s commercial banking system be reported on the annual bank’s balance sheet • Make it easier and more accurate in acquisition, merger or brand franchising plans • Chapter 4: Developing brand valuation model for Vietnam’s commercial banks or transactions • Help to complete reports on commercial bank valuation CHAPTER • Users: Can be used by all subjects that have demand for brand valuation for GENERAL RESEARCH ON BRAND AND BRAND VALUATION commercial bank • Time of use: Can be implemented anytime 1.1 Overview of brand • Used for all commercial banks 1.1.1 Concept of brand Research model Basing on research methods used in the thesis, a research model is designed as “Brand is customer’s perception, emotion and trust in all elements of an enterprise” 1.1.2 Functionality of brand below: 1.2 Overview of brand valuation Brand valuation model for Vietnam’s commercial banks 1.2.1 The process of brand value recognition in the world 1.2.2 Approaches to research on brand valuation Financial forecast - Calculate brand value based on market research: the basis of this method is to Financial data of commercial banks Brand contribution value Brand discount rate Financial value of commercial bank’s brand conduct investigations/surveys on attitudes, perceptions, emotions, reactions, etc, of customers and concerned parties towards brand The results of this method are qualitative - Calculate brand value based on financial data: basing on financial data of Discounted cashflows generated by bank’s brand The layout of the thesis Apart from preamble, conclusion, list of tables, figures and refereces, the thesis is divided into chapters: commercial banks (can use historical or future data) to calculate brand value The results of this method are quantitative CONCLUSION OF CHAPTER Chapter has fulfilled the thesis’ first and second objectives First, it has used Susan’s concept of brand as standard definition for the thesis Second, it has summarized two approaches of brand valuation theory For each approach, the thesis has summarized the content, advantages and disadvantages of its methods and models selected as the basis for researching the brand valuation model for Vietnam’s for brand valuation commercial banks 2.2.1.3 Definition of brand valuation for commercial banks CHAPTER “Brand valuation for a commercial bank is a set of jobs to calculate financial value THEORY OF BRAND VALUATION FOR COMMERCIAL BANK of the commercial bank’s brand.” 2.2.2 Conditions and the necessity of brand valuation for comercial banks 2.1 Overview of commercial bank 2.3 Basic model for brand valuation for commercial banks 2.1.1 Definition of commercial bank Table 2.1: Comparison of different brand valuation methods of financial data based approach Method 2.1.2 Basic functionality of commercial bank Content Characteristics The cost based Brand value is calculated by Calculating 2.1.3 Role of commercial bank approach brand value by total cost invested to create a brand cost is unreasonable in 2.2 Overview of brand valuation for commercial bank new or replace an existing both theory and practice 2.2.1 Theory and concept of brand valuation for bank brand 2.2.1.1 Definition of commercial bank’s brand The “A bank’s brand is a combination of factors in order to satisfy customers’ financial demand, based approach market Brand value is calculated by the Market data about brand are agree in the brand transaction and to gain their perception, trust and emotion towards the bank.” income Loyalty approach Behavior Customer Perception and disproportioned based present value of future earnings calculate => up to now, it is the generated by the brand over the most suitable method to measure rest of its useful life Bank limited estimated Brand value is calculated by the Use bank’s financial data to The Communication behavior, business process, products, branch network, transaction office, Logo, slogan, uniform, Interior-exterior architecture, etc price at which seller and buyer always brand value In order to propose an approach model for brand valuation for banks, the thesis will conduct deep research on two models of the estimated income based method, as follows: Type of ownership, organization structure, strategy, operational objective, etc Emotion 2.3.1 Interbrand’s model Step 1: Market segmentation Step 2: Financial analysis Diagram 2.2: Commercial bank’s brand 2.2.1.2 Theory on brand valuation for commercial bank The thesis’ objective is measuring brand value for commercial banks in a specific financial figure, therefore the estimated income based approach of Aswath Damodaran is Step 3: Demand analysis Step 4: “Brand strength” and “discount rate” determination Step 5: Brand’s net present value determination Example of applying Interbrand’s valuation model is Binh Minh Plastic joint stock criteria: leadership, stability, market, geography, brand trend, support activities, brand company with “Binh Minh Plastic” brand which is valuated 349.4 billion VND by the protection; whereas, Brand Finance’s brand ß scoring template includes 10 criteria: time University of Economics Ho Chi Minh City’s research group in the market, distribution channel, market share, market position, sale growth rate, price 2.3.2 Brand Finance’s model premium, price elasticity, marketing spend, advertising awareness, brand awareness This different step leads to different valuation results of two models Each table of The brand valuation process is illustrated by this below diagram: criteria has advantages and disadvantages, and the status and level of advantages and Market data Financial data Demand drivers Risk factors disadvantages depend on each valued brand CONCLUSION OF CHAPTER Chapter has fulfilled the thesis’ first and third objectives Regarding the first Brand forecasts objective, the thesis has given out the definition of a commercial bank’s brand, which is Economic value added Brand value added index Brand ß analysis Brand value added “a set of factors in order to satisfy customers’ financial demand, and to gain their perceptions, trust and emotion towards the bank.” Regarding the third objective, from Aswath Damodaran’s original idea of using financial instruments for brand valuation in business valuation, the thesis has based on the income approach and used two brand Discount rate Brand value Diagram 2.5: David Haugh’s brand valuation model Step 1: Market segmentation Step 2: Financial forecast Step 3: Brand value added (BVA) calculation Step 4: Discount rate determination There are differences between Brand Finance’s and Interbrand’s summary reports on most valuable brands Although Interbrand and Brand Finance use the same basic theory for brand valuation, which is discounted cashflow method, to calculate brand value, the difference between two models is at the calculation step of brand’s contribution value to businesses Interbrand use “brand index” scoring template with valuation models of Interbrand and Brand Finance as reference to propose a new model that can approach to brand valuation for Vietnam’s commercial banks 9 CHAPTER 10 chapter to fulfill the forth, fifth and sixth objective of the thesis CURRENT SITUATION OF LEGAL SYSTEM FOR BRAND CHAPTER VALUATION AND VIETNAM’S COMMERCIAL BANKING SYSTEM DEVELOPING BRAND VALUATION MODEL FOR VIETNAM’ S COMMERCIAL BANKS 3.1 Legal framework for brand valuation in Vietnam 3.1.1 Legal framework for brand and international integration of brand in Vietnam - The legal system of regulations primarily derives from section VI of the Civil Code of the Socialist Republic of Vietnam in 2005 - The agency that is responsible for granting permission is the National Office of Intellectual Property of Vietnam - The agencies that are responsible for enforcement are Court, Market Surveillance, Economic Police, Culture and Information Inspector, Science and Technology Inspector, 4.1 Orientation in building brand valuation model for Vietnam’s commercial banks 4.2 Brand valuation model for Vietnam’s commercial banks The author has combined Interbrand and Brand Finance’s calculation steps with specific characteristics of Vietnam’s commercial banking system to propose a new model to approach brand valuation for banks, including following steps: Step 1: Financial forecast Collect, analyze and process information to predict a bank’s revenue and expense in a period of to years – from which calculate its brand’s economic value added in Deparment of Customs the future This step can be done by the bank itself or inherit annually financial forecast • Regarding legal framework • Government’s point of view on brand • International integration of brand 3.1.2 Legal framework for brand valuation in Vietnam Up to now, the system of legal documents in Vietnam has no official definition of brand These documents mainly stipulate a number of contents related to brand such as intellectual property, trademark, geographical indication, trade name, but not directly mention brand in general and brand valuation in particular 3.2 The current situation of Vietnam’s commercial banking system 3.2.1 Characteristics of Vietnam’s commercial banks 3.2.2 Brand valuation for Vietnam’s commercial banks CONCLUSION OF CHAPTER results from reputable sources in the world like S&P, Ernst&Young, Moody, etc Step 2: Calculate Brand Value Added - BVA Calculate the proportion of brand contribution to economic value added or use available figures of position, target customers, growth rate of an equivalent bank, which are available in the US or UK market, when researching, based on theory – brand valuation based on research The process of taking step and is similar to Interbrand and Brand Finance’s calculation processs – these are standard process accepted by most researchers and practice Step 3: Calculate brand discount rate Factors including the time value of money and the risks that may impact must be taken into account when calculating discount rate Chapter has presented the current situation of commercial banking system and legal system of brand valuation in Vietnam These are important bases for the next Calculate brand ß index Discount rate 11 - Calculate brand ß index: From Brand Finance’s scoring template for brand ß index and Interbrand’s “brand 12 customers, from which it can gain its brand awareness Branch network is proportional to attribute score strength” calculation table, together with particular characteristics of Vietnam’s The criteria for building scoring template for the attribute of branch network are: commercial banking system, the scoring template for brand discount rate of commercial + The number of branches in 63 cities and provinces and regions (North – Central banks is researched, adjusted and proposed as below: Table 4.1: Scoring template for brand discount rate of Commercial banks Attribute Score Time in the market 0-15 Branch network 0-15 New products growth rate 0-15 Number of customers growth rate 0-15 Proportion of mobilized capital 0-10 Proportion of outstanding balance 0-10 Non-performing loans ratio 0-10 ROA growth rate 0-10 Total 0-100 -Attribute – Time in the market: is a factor that represents a bank’s brand strength because a bank can be maintained and exist for a long time only when it receives trust and recognition from customers Time in the market is proportional to attribute score Based on the milestones of Vietnam’s economy, the scoring criteria for this attribute are proposed as below: Table 4.2: Scoring criteria for the attribute of time in the market Criteria Score Established parallel to the movement for independence (the 1954 15-12 period) Established during the economic transformation process (the 1986 12-9 period) Established after 1986 and before the U.S removed the embargo 9-6 against Vietnam in 1995 Established between 1995 and before joining WTO in 1997 6-3 Established from 2007 to present 3-0 - Attribute – Branch network: is an important factor for a bank to serve its – South), so smaller criteria for network segmentation are 1/2, 2/3 and total number of 63 cities and provinces +Level of international cooperation, measured by: Does a bank open overseas branches? does it have joint venture with foreign companies? does it act as an agent for a foreign bank? with levels as follow: Level 1: Open branches or subsidiaries overseas, act as an agent for a foreign bank, have international business transactions Level 2: Open branches or subsidiaries overseas, or act as an agent for a foreign bank, or have international business transactions Level 3: Open overseas representative offices Level 4: Have no form of cooperation Table 4.3: Scoring template for the attribute of branch network Criteria Score Have branches in 63 cities and provinces, have international cooperation level 15 Have branches in 63 cities and provinces, have international cooperation level 14 Have branches in 63 cities and provinces, have international cooperation level 13 Have branches in 63 cities and provinces, have international cooperation level 12 Have branches in 2/3 of 63 cities and provinces, have international cooperation level 11 Have branches in 2/3 of 63 cities and provinces, have international cooperation level 10 Have branches in 2/3 of 63 cities and provinces, have international cooperation level Have branches in 2/3 of 63 cities and provinces, have international cooperation level Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation level Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation level Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation level Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation level Have branches in less than 1/3 of 63 cities and provinces, have international cooperation level 13 Have branches in less than 1/3 of 63 cities and provinces, have international cooperation level Have branches in less than 1/3 of 63 cities and provinces, have international cooperation level Have branches in less than 1/3 of 63 cities and provinces, have international cooperation level 14 Have new products in group, receive reward, vote level Have new products in group, receive reward, vote level Have new products in group, receive reward, vote level No new product but receive reward or vote No new product and no reward or vote 1 - Attribute – Number of customers growth rate: Banks are institutes that serve Attribute – New products growth rate: Developing new products is required for continuous growth and prosperity for a bank The new products growth rate shows the capability of creating and maintaining the development of the bank’s brand It is based on two criteria: + The creation of new financial products based on four orgininal banking products all types of customers whenever they have financial needs Therefore, commercial banks have more diverse and abundant customers than any other organization in the economy The attribute of number of customers growth rate clearly reflects customers’ preference and trust in a bank This attribute is calculated by a bank’s number of customers including saving, loan, payment and financial consultancy is an important factor for including household and organization in groups of products in the calculated year maintaining brand in the market compared with that of the previous year, and is proportional to attribute score + Rewards or votes for a bank or its products, with levels as follow: Level 1: Receive international reward and domestic vote for product or bank Level 2: Receive international reward Level 3: Receive domestic vote for product or bank Table 4.5: Symbols for the calculation of the attribute of number of customers growth rate Customer Symbol Product Symbol Household H (Household) Saving S (Saving) Organization O (Organization) Loan L (Loan) Payment P (Payment) Financial consultancy FC (Financial Consultancy) Level 4: Receive no reward or vote New products growth rate is measured by the number of banking products in the researched year compared with that of the previous year This rate is proportional to attribute score Table 4.4: Scoring template for the attribute of new products growth rate Criteria Score Have new products in groups, receive reward, vote level 15 Have new products in groups, receive reward, vote level 14 Have new products in groups, receive reward, vote level 13 Have new products in groups, receive reward, vote level 12 Have new products in groups, receive reward, vote level 11 Have new products in groups, receive reward, vote level 10 Have new products in groups, receive reward, vote level Have new products in groups, receive reward, vote level Have new products in groups, receive reward, vote level Have new products in groups, receive reward, vote level Have new products in groups, receive reward, vote level Have new products in groups, receive reward, vote level 4 Have new products in group, receive reward, vote level Combined with analyses of the attributes of proportion of mobilized captital, proportion of outstanding balance and new products growth rate, this attribute is measured by the combination between household and organization customers growth rate (or out of types of customers) with products with from high to low importance: Saving (S) Loan (L), Payment (P) and Financial Consultancy (FC) There are many combinations between customer growth rate and products, in which the more important criterion is customer growth rate because there is already an attribute for product growth rate Therefore, the scoring template for the attribute of number of customers growth rate is as follow: 15 16 Table 4.6: Scoring template for the attribute of number of customers growth rate Criteria Total mobilized capital of the economy in the year before calculated year Score Increase H, O with (S, L, P, FC) 15 Increase H, O with (S, L, P), or Increase H, O with (S, L, FC) 14 Increase H, O with (S, L) 13 Increase H, O with (S, P, FC), or Increase H, O with (L, P, FC) 12 Increase H, O with (S, P), or Increase H, O with (L, P) 11 Increase H, O with (S, FC), or Increase H, O with (L, FC) 10 Increase H, O with S or L Increase H, O with (P, FC) Increase H, O with P Increase H, O with FC Increase H or O with groups of products Increase H or O with (S, L, P) or Increase H or O with (S, L, FC) Increase H or O with (S, L), or Increase H or O with (S, P, FC), hay A = Total number of banks in the year before calculated year + The attribute score of 10 is for the credit institution having highest mobilized capital in the year before calculated year + The bank having highest mobilized capital has maximum score of 10 The gap between maximum score of 10 and average score of is points, so each higher-thanaverage point is calculated by: preceding attribute score + B, with: Mobilized capital of the commercial bank having highest mobilized capital in the year before calculated year – A B = + The bank having lowest mobilized capital has minumum score of The gap between minimum score of and average score of is points, so each lower-thanaverage point is calculated by: preceding attribute score – C, with: A- Mobilized capital of the commercial bank having lowest mobilized Increase H or O with (L, P, FC) Increase H O with S or L, hay Increase H or O with (P, FC) Increase H O with P, or Increase H O with FC No customer growth rate - Attribute – Proportion of Mobilized capital: Customers’ deposit is the deciding factor for a bank’s capital There are several factors that affect the amount of deposit on a bank, among which the bank’s reputation and customers’ trust in it is the main one The proportion of a bank’s mobilized capital in total mobilized capital of the economy is proportional to attribute score, which is calculated as below: + Attribute score is = Average mobilized capital for a commercial bank (A) capital in the year before calculated year C = Table 4.7: Scoring template for the attribute of proportion of mobilized capital Criteria Mobilized capital is in the range of (A + 4B; the highest mobilized capital) Score 10 Mobilized capital is in the range of (A + 3B; A + 4B) Mobilized capital is in the range of (A + 2B; A + 3B) Mobilized capital is in the range of (A; A + 2B) Mobilized capital is in the range of A + B Average mobilized capital A Mobilized capital is in the range of (A – C; A) Mobilized capital is in the range of (A – 2C; A – C) Mobilized capital is in the range of (A – 3C; A – 2C) Mobilized capital is in the range of (the lowest mobilized capital; A – 3C) For example, the calculated year is 2013, total amount of mobilized capital of 48 17 18 commercial banks in 2012 is 3.2 million billion VND, in which Max commercial bank Mobilized capital is in the range of (53,625; 66,500) billion VND has the highest amount of mobilized capital of 540,000 billion VND, Min commercial Mobilized capital is in the range of (40,750; 53,625) billion VND bank has the lowest amount of 15,000 billion VND So the calculation of attribute is: Mobilized capital is in the range of (27,875; 40,750) billion VND Mobilized capital is in the range of (15,000; 27,875) billion VND Total mobilized capital of the economy in the year before calculated year 3.2 million billion VND = 66,500 billion VND A = Total number of banks in the year before calculated year Mobilized capital of the commercial bank having highest mobilized capital in the year before calculated year –A B 48 540,000 – 66,500 = 94,700 billion VND = = 5 A- Mobilized capital of the commercial bank having lowest mobilized capital in the year before calculated year C = 66,500 – 15,000 = 12,875 billion VND = 4 Table 4.8: Scoring template for the attribute of proportion of mobilized capital Critera Score Mobilized capital is in the range of (445,300; 540,000) billion VND 10 Mobilized capital is in the range of (350,600; 445,300) billion VND Mobilized capital is in the range of (255,900; 350,600) billion VND Mobilized capital is in the range of (161,200; 255,900) billion VND Mobilized capital is in the range of (66,500; 161,200) billion VND Mobilized capital = 66,500 billion VND 19 20 - Attribute – Proportion of outstanding balance: To commercial banks, credit is a traditional and basic business, accounting for high proportion in asset structure and revenue structure However, it is also a complex and risky business The proportion of a bank’s outstanding balance in total outstanding balance of the economy is proportional to attribute score The basis for calculating score for the attribute of proportion of outstanding balance is similar to the that of mobilized capital, as follow: + Attribute score of = Average outstanding balance for a commercial bank Total outstanding balance of the economy in the year before calculated year D = Total number of banks in the year before calculated year + The attribute score of 10 is for the credit institution having highest outstanding balance in the year before calculated year + The bank having highest outstanding balance has maximum score of 10, the one having lowest outstanding balance has minumum score of + The gap between maximum score of 10 and average score of is points, so each higher-than-average point is calculated by: preceding attribute score + E, with: Outstanding balance of the commercial bank having highest outstanding balance in the year before calculated year – D E = + The gap between minimum score of and average score of is points so each lower-than-average point is calculated by: preceding attribute score - F, with: D- Outstanding balance of the commercial bank having lowest outstanding balance in the year before calculated year F = 21 22 Table 4.9: Scoring template for the attribute of proportion of outstanding balance Criteria Table 4.10: Scoring template for the attribute of NPLs ratio Score Criteria Score Outstanding balance is in the range of (D + 4E; the highest outstanding balance) 10 NPL = 0% 10 Outstanding balance is in the range of (D+3E; D + 4E) NPL is in the range of (0.6%; 0%) Outstanding balance is in the range of (D+2E; D + 3E) Outstanding balance is in the range of (D+E; D + 2E) NPL is in the range of (1.2%; 1.8%) NPL is in the range of (1.8%; 2.4%) Outstanding balance is in the range of (D; D + E) Outstanding balance = D NPL is in the range of (2.4%; 3%) Outstanding balance is in the range of (D – F; D) NPL = 3% Outstanding balance is in the range of (D – 2F; D - F) NPL is in the range of (3%; 4.75%) Outstanding balance is in the range of (D – 3F; D - 2F) NPL is in the range of (4.75%; 6.5%) Outstanding balance is in the range of (the lowest outstanding balance; D – 3F) NPL is in the range of (6.5%; 8.25%) - Attribute – Non-performing loans ratio: NPL is in the range of (8.25%; 10%) If non-performing loans (NPLs) are not strictly controlled, they will directly affect a NPL = 10% bank’s profit as well as its liquidity NPLs ratio is inversely proportional to brand value, high NPLs ratio can even delete brand from the market (this is clearly illustrated in fact) - Attribute – ROA (return on equity) growth rate: ROA growth rate is propotional to the attribute score NPLs ratio is measured by outstanding balance of group 3,4,5 divided by total outstanding The base to calculate attribute is similar to that of mobilized capital and balance, NPLs ratio is inversely proportional to attribute score Specifically, NPLs attribute score is calculated as below: outstanding balance growth rate attributes, specifically: + Attribute score is equal to = average ROA for a commercial bank + The State Bank of Vietnam stipulated standard score for this content is 3%, so, Total ROA (+) of the economy of the year before calculated year the attribute score of is equivalent to NPLs ratio of 3% G + According to Circular No 08 of the State Bank special control towards Total number of banks having ROA (+) before calculated year Commercial Banks, all commercial banks having NPLs ratio of 10% and above will be subject to special control of the state bank, therefore, attribute score of will be equivalent to NPs ratio of 10% The gap between minimum score of and average score of is points, so each lower-than-average point is calculated by: (10% - 3%)/4 = + Attribute score of 10 is the score for the credit institution achieving the highest ROA in the year before calculated year Attribute score of is for banks that not have ROA (+) + The gap between the maximum score of 10 and the average score of is points, 1.75% + A bank having no NPL will get maximum attribute score of 10 The gap between so each higher-than-average point is calculated by: preceding attribute score + K, with: ROA (+) max of the year before calculated year – G maximum score of 10 and average score of is points, so each higher-than-average point is calculated by: 3%/5 = 0.6% = K = 23 24 + The gap between minimum score of and average score of is points, so each formula lower-than-average point is calculated by: preceding attribute score - M, with: 4.3 Experiment the brand valuation model to evaluate brand value of Bank for G- ROA of the year before calculated year M earnings generated by the brand to the net present value, as in the discounted cashflow = Investment and Development of Vietnam (BIDV) 4.3.1 Reasons to select (BIDV) to experiment [[ Table 4.11: Scoring template for the attribute of ROA growth rate Criteria 4.3.2 BIDV brand valuation Score Table 4.21: BIDV’s brand value in 2013 (unit: million VND) ROA is in the range of (G+ 4K; G + 5K) 10 ROA is in the range of (G+3K; G + 4K) After tax earnings ROA is in the range of (G+2K; G + 3K) BVA (23%) ROA is in the range of (G+K; G + 2K) ROA is in the range of (G; G + K) ROA is equal to G 2013 2014 2015 2016 2017 2018 5,312,133 6,740,538 8,517,784 2,593,618 12,141,189 14,035,303 Earnings generated by the brand 1,221,790.6 1,550,323.7 1,959,090.3 596,532.13 2,792,473.48 3,228,119.65 Brand strength index 81 5 Brand discount rate 12.0405% ROA is in the range of (G – M; G) Discount 1,383,717.23 1,560,645.91 424,139.505 1,772,102.77 1,828,413.55 ROA is in the range of (G – 2M; G – M) ROA is in the range of (G – 3M; G – 2M) ROA is in the range of (G – 4M; G – 3M) No ROA (+) No Criteria NPV of the brand after the first years Brand growth rate in the long term NPV of the brand from 6th year attributes After measuring total score of brand ß index, brand discount index will be calculated by the linear equation proposed by Interbrand Y=axX+b The bases to calculate a and b coefficients are government bond interest rates 1% 9,473,967 17,664,776.64 10 Total score of brand discount ß index is calculated based on total score of brand 8,190,809.56 NPV of the brand So BIDV’s brand value in 2013 is 17,664,776.64 million VND 4.4 Conditions to apply the model in practice • Build and complete legal framework for brand as well as brand valuation • Complete macro and micro forecasts of the same term and profit expectation of stock investors in the researched year that • Ensure the transparency and health of commercial banks’ financial reports is most profitable • Develop information support department for brand valuation Step 4: A bank’s brand value is measured by discounted cashflow from future 25 26 Conclusion of chapter THE AUTHOR’S RESEARCH RELATED TO THE THESIS Chapter has accomplished three final targets of the thesis which are: proposing brand valuation model for Vietnam’s commercial banks; applying proposed model to evaluate Bank for Investment and Development of Vietnam (BIDV)’s brand; and establishing conditions to apply valuation model for Vietnam’s brands in practice CONCLUSION Brand valuation for Vietnam’s commercial banks is an important content in both research and management practice The research of theories and methods to develop a brand valuation model for commercial banks is essential for such important issues as merger and acquisition, brand franchising, or report on the balance sheet, etc In the research process, the thesis has selected the estimated income based method of the second approach – brand valuation based on financial data, to develop the brand valuation model for Vietnam’s commercial banks, including steps: Financial forecast Brand contribution value Brand discount rate Discounted cashflow from bank’s brand The thesis also fulfilled research objectives set forth both in theory and practice ðỗ Hoài Linh (2010), “The development of brand awareness and the recognition of brand valuation in practice”, Banking Review ðỗ Hoài Linh (2012), “Theory on brand valuation based on market research”, Banking Review [...]... Vietnam (BIDV)’s brand; and establishing conditions to apply valuation model for Vietnam’s brands in practice CONCLUSION Brand valuation for Vietnam’s commercial banks is an important content in both research and management practice The research of theories and methods to develop a brand valuation model for commercial banks is essential for such important issues as merger and acquisition, brand franchising,... – brand valuation based on financial data, to develop the brand valuation model for Vietnam’s commercial banks, including 4 steps: Financial forecast Brand contribution value Brand discount rate Discounted cashflow from bank’s brand The thesis also fulfilled research objectives set forth both in theory and practice 1 ðỗ Hoài Linh (2010), “The development of brand awareness and the recognition of brand. .. • Develop information support department for brand valuation Step 4: A bank’s brand value is measured by discounted cashflow from future 25 26 Conclusion of chapter 4 THE AUTHOR’S RESEARCH RELATED TO THE THESIS Chapter 4 has accomplished three final targets of the thesis which are: proposing brand valuation model for Vietnam’s commercial banks; applying proposed model to evaluate Bank for Investment... of 8 brand 8,190,809.56 NPV of the brand So BIDV’s brand value in 2013 is 17,664,776.64 million VND 4.4 Conditions to apply the model in practice • Build and complete legal framework for brand as well as brand valuation • Complete macro and micro forecasts of the same term and profit expectation of stock investors in the researched year that • Ensure the transparency and health of commercial banks ... ROA for a commercial bank + The State Bank of Vietnam stipulated standard score for this content is 3%, so, Total ROA (+) of the economy of the year before calculated year the attribute score of 5 is equivalent to NPLs ratio of 3% G + According to Circular No 08 of the State Bank special control towards Total number of banks having ROA (+) before calculated year Commercial Banks, all commercial banks. .. brand value of Bank for G- ROA min of the year before calculated year M earnings generated by the brand to the net present value, as in the discounted cashflow = Investment and Development of Vietnam (BIDV) 5 4.3.1 Reasons to select (BIDV) to experiment [[ Table 4.11: Scoring template for the attribute of ROA growth rate Criteria 4.3.2 BIDV brand valuation Score Table 4.21: BIDV’s brand value in 2013... Criteria NPV of the brand after the first 5 years Brand growth rate in the long term NPV of the brand from 6th year 0 attributes After measuring total score of brand ß index, brand discount index will be calculated by the linear equation proposed by Interbrand Y=axX+b The bases to calculate a and b coefficients are government bond interest rates 1% 9,473,967 17,664,776.64 10 Total score of brand discount... of the state bank, therefore, attribute score of 1 will be equivalent to NPs ratio of 10% The gap between minimum score of 1 and average score of 5 is 4 points, so each lower-than-average point is calculated by: (10% - 3%)/4 = + Attribute score of 10 is the score for the credit institution achieving the highest ROA in the year before calculated year Attribute score of 0 is for banks that do not have... the year before calculated year – G maximum score of 10 and average score of 5 is 5 points, so each higher-than-average point is calculated by: 3%/5 = 0.6% = K = 5 23 24 + The gap between minimum score of 0 and average score of 5 is 5 points, so each formula lower-than-average point is calculated by: preceding attribute score - M, with: 4.3 Experiment the brand valuation model to evaluate brand value... NPL is in the range of (6.5%; 8.25%) 2 - Attribute 7 – Non-performing loans ratio: NPL is in the range of (8.25%; 10%) 1 If non-performing loans (NPLs) are not strictly controlled, they will directly affect a NPL = 10% 0 bank’s profit as well as its liquidity NPLs ratio is inversely proportional to brand value, high NPLs ratio can even delete brand from the market (this is clearly illustrated in fact)