Development strategy of bank of investment and development of vietnam in the period of 2010 2015

DEVELOPMENT STRATEGY OF BANK OF INVESTMENT AND DEVELOPMENT OF VIETNAM IN THE PERIOD OF 2010-2015 INTRODUCTORY Rational of the study Business strategy is the foundation of successful business But there are, of course, different types of business strategy The best business strategies must steer a course between the inevitable internal pressure for business continuity and the demands of a rapidly changing world for revolutionary business strategies A full statement of a selected business strategy is a business plan defining: • the company vision • the strategy and tactics that will enable the company to reach those objectives • the resources required, and how they are going to be obtained; • what the main milestones and steps are along the way; • who is responsible for causing each step to occur; • what are the company's business risks and external factors that need to be kept under review for indications that a change in strategy or plan may be required Strategizing is much more than just visioning, forecasting and planning In the new rapidly changing economy, all substantive issues of strategy have been redefined as issues of implementation Today, strategizing is concerned with the match between the internal capabilities of the company and its external environment "The modern subject of business strategy is a set of analytic techniques for understanding better, and so influencing, a company's position in its actual and potential marketplace" There is great potentional for consumer banking including SMEs and individaul given the low banking penetration rate and country’s weng and growing population With the opening of local banking market under WTO the competition will become much fiecer WTO accession brings about both opportunities and challenges for Vietnam in general and financial banking industry in particular As a leading state owned commercial bank in Vietnam, BIDV should have right awareness of international integration process, proactively construct its own action plans, map the strategic targets in the time to come, the bank need great effort to reform in all fields All this suggests the critical need to plan for competition in the years ahead and the critical need to have competitive advantage to not only maintain the market share but to develop BIDV’s success may depend on developing a realistic plan to achieve competitive advantage in several critical products or services, then growing from a base of strength BIDV is among the biggest state commercial banks of Vietnam, with big capital scale, functioning as universal commercial banks, providing full range of currency, credit, banking and non-banking services Main targets of BIDV are to become the leading financial group in Vietnam with main activities: Commercial banking, securities, insurance, and investment,” now BIDV completed equitization and have just conducted IPO bid in first quarter of 2009 We include students, of whom students are BIDV’s employees We chose the research topic of “Development strategy of bank of investment and development of Vietnam in the period of 2010-2015”, wishing to apply theory in evaluating business situation of our bank and base on that, we hope to build up a good strategy for next years with solutions and tactics to successful realize the strategy We hope that, after completing this project, we will be more mature and successful thanks to knowledge and skill learnt from Griggs’s MBA Study objective With topic “Development strategy of bank of investment and development of Vietnam in the period of 2010-2015”, objectives of this research study are formulated as followed: Systematize theoretical issues no strategy, especially strategy for banking activities Analysis and evaluation on the strategy of BIDV in previous time Recommendations on strategic solutions aiming at developing banking activities in the future Subject, scope and methods of research Subject of research: Strategic activities of BIDV, especially banking activities In details, strategic analysis, strategic formulation and choice Scope of research: The topic is researched in the scope of BIDV’s banking activities Relating activities such as Securities, insurance… are not in the scope of research Research method: Documentary and reality research (Survey ); Probabilities methods, analysis and synthesis methods Structure of the research Introductory Chapter I: Theoretical foundation of business strategy, application in banking sector Chapter II: Current situation of BIDV’s strategy Chapter III: Orientation for development strategy of BIDV in 2010-2015 periods Conclusion CHAPTER I THEORETICAL FOUNDATION OF BUSINESS STRATEGY AND APPLICATION IN BANKING SECTOR This theoretical framework will serve as a foundation for analysis in chapter and chapter 3, including: 1) Overview of strategy and strategic management; 2) Strategy formulation; 3) Strategy implementation; 4) Features of banking industry 1.1 Overview of strategy and strategic management 1.1.1 Strategy What is strategy? There is no single, universally accepted definition Various authors and managers use the term differently Strategy According to Henry Mintzberg Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning, points out that people use "strategy" in several different ways, the most common being these four: Strategy is a plan, a "how," a means of getting from here to there Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy Strategy is position; that is, it reflects decisions to offer particular products or services in particular markets Strategy is perspective, that is, vision and direction Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing reality Thus, one might start with a perspective and conclude that it calls for a certain position, which is to be achieved by way of a carefully crafted plan, with the eventual outcome and strategy reflected in a pattern evident in decisions and actions over time This pattern in decisions and actions defines what Mintzberg called "realized" or emergent strategy Mintzberg’s typology has support in the earlier writings of others concerned with strategy in the business world, most notably, Kenneth Andrews, a Harvard Business School professor and for many years editor of the Harvard Business Review Strategy According to Kenneth Andrews Kenneth Andrews presents this lengthy definition of strategy in his book, The Concept of Corporate Strategy: "Corporate strategy is the pattern [italics added] of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities Andrew’s definition obviously anticipates Mintzberg’s attention to pattern, plan, and perspective Andrews also draws a distinction between "corporate strategy," which determines the businesses in which a company will compete, and "business strategy," which defines the basis of competition for a given business Thus, he also anticipated "position" as a form of strategy Strategy as the basis for competition brings us to another Harvard Business School professor, Michael Porter, the undisputed guru of competitive strategy Strategy According to Michael Porter In a 1996 Harvard Business Review article and in an earlier book, Porter argues that competitive strategy is "about being different." He adds, "It means deliberately choosing a different set of activities to deliver a unique mix of value." In short, Porter argues that strategy is about competitive position, about differentiating werself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors In his earlier book, Porter defines competitive strategy as "a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there." Thus, Porter seems to embrace strategy as both plan and position Strategy According to Kepner-Tregoe In Top Management Strategy, Benjamin Tregoe and John Zimmerman, of KepnerTregoe, Inc., define strategy as "the framework which guides those choices that determine the nature and direction of an organization." Ultimately, this boils down to selecting products (or services) to offer and the markets in which to offer them Tregoe and Zimmerman urge executives to base these decisions on a single "driving force" of the business Although there are nine possible driving forces, only one can serve as the basis for strategy for a given business The nine possibilities are listed below: Products offered Production capability Natural resources Market needs Method of sale Technology Method Size/growth of Return/profit distribution It seems Tregoe and Zimmerman takes the position that strategy is essentially a matter of perspective Strategy According to Michel Robert Michel Robert takes a similar view of strategy in, Strategy Pure & Simple [8], where he argues that the real issues are "strategic management" and "thinking strategically." For Robert, this boils down to decisions pertaining to four factors: Products and services Market segments Customers Geographic areas Like Tregoe and Zimmerman, Robert claims that decisions about which products and services to offer, the customers to be served, the market segments in which to operate, and the geographic areas of operations should be made on the basis of a single "driving force." Again, like Tregoe and Zimmerman, Robert claims that several possible driving forces exist but only one can be the basis for strategy The 10 driving forces cited by Robert are: Product-service Sales-marketing method User-customer Distribution method Market type Natural resources Production capacity-capability Size/growth Technology 10 Return/profit Strategy According to Treacy and Wiersema The notion of restricting the basis on which strategy might be formulated has been carried one step farther by Michael Treacy and Fred Wiersema, authors of The Discipline of Market Leaders In the Harvard Business Review article that presaged their book, Treacy and Wiersema assert that companies achieve leadership positions by narrowing, not broadening their business focus Treacy and Wiersema identify three "value-disciplines" that can serve as the basis for strategy: operational excellence, customer intimacy, and product leadership As with driving forces, only one of these value disciplines can serve as the basis for strategy Treacy and Wiersema’s three value disciplines are briefly defined below: Operational Excellence Strategy is predicated on the production and delivery of products and services The objective is to lead the industry in terms of price and convenience Customer Intimacy Strategy is predicated on tailoring and shaping products and services to fit an increasingly fine definition of the customer The objective is longterm customer loyalty and long-term customer profitability Product Leadership Strategy is predicated on producing a continuous stream of state-of-the-art products and services The objective is the quick commercialization of new ideas Each of the three value disciplines suggests different requirements Operational Excellence implies world-class marketing, manufacturing, and distribution processes Customer Intimacy suggests staying close to the customer and entails long-term relationships Product Leadership clearly hinges on market-focused R&D as well as organizational nimbleness and agility 1.1.2 Strategic management The nature and value of strategic management Managing activities internal to the firm is only part of the modern executive’s responsibilities The modern executive also must respond to the challenges posed by the firm’s immediate and remote external environments The immediate external environment includes competitors, suppliers, increasingly scarce resources, government agencies and their ever more numerous regulations, and customers whose preferences often shift inexplicably The remote external environment comprises economic and social conditions, political priorities, and technological developments, all of which must be anticipated, monitored assessed, and incorporated into the executive’s decision marking However the executive often is compelled to subordinate the demands of the firm’s internal activities and external environment to the multiple an often inconsistent requirements of its stakeholders: owners, top managers, employees, communities, customers and country To deal effectively with everything that affects the growth and profitability of a firm, executive employ management processes that they feel will position it optimally in its competitive environment by maximizing the anticipation of environmental changes and of unexpected internal and competitive demands Strategic management is defined as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives It comprises nine critical tasks: Formulate the company’s mission, including broad statements about its purpose, philosophy, and goals Conduct an analysis that reflects the company’s internal conditions and capabilities Assess the company’s external environment, including both the competitive and genera contextual factors Analyze the company’s options by matching its resources with the external environment Identify the most desirable options by evaluating each option in light of the company’s mission Select a set of long term objectives and grand strategies that will achieve the most desirable options Develop annual objectives and short-term strategies that are compatible with the selected set of long-term objectives and grand strategies Implement the strategic choices by means of budgeted resource allocations in which the matching of tasks, people, structures, technologies, and reward systems is emphasized Evaluate the success of the strategic process as an input for future making Figure 1.1: Strategic Management process 10 customer and risk demand of the bank Basing on the internal credit a customer ranking to conduct suitable credit policy + To build up and renovate the credit model and credit processing: To research and make in detail the functions, task of department, demonstration room relating credit activities to make sure the smooth operation of credit activities +To research new credit products, special credit products, and the competitiveness of credit products: To extend the group of customer to chose the package, close credit product; To diversify the products, specially the integrated one, to apply modern technology to enhance the competitiveness and effectiveness of banking operation in general thru the cross-trading non credit products : to construct policy, reviewing measures, calculating the effectiveness of each products so that to fix the price of current product and new one + To identify credit criteria, reasonable career borrowing structure: To focus on structure, credit rate, income from credit activities out of total income, profit of the bank so that identify structure and borrowing rate for different career in the period 2009 – 2012 and the yearly plan with risk control and credit improvement + To renovate the report information, data exploitation on SIBS system: To manage the figure by business line in order to extract the report data to serve credit management activities +To improve the criteria system and customer review measures thru the internal ranking following the reasonable standard and norm of customers base and also develop the information system to alert the risk and support the credit processing to ensure the safety, effectiveness and date of credit activities +To construct the risk structure and risk supervision system: To identify the risk level accepted by BIDV attaching with the business strategy and credit orientation in the period 2009-2012 Of which, identifying the risk level for each business line to give the credit orientation in each period and make detail the measure to evaluate the risk, identify the risk level for each customer, each borrowing amount so that 129 the bank can apply appropriate customer and credit policy To empower the capacity ( human resource, software, supporting material ), supervising, controlling the credit activities ( specially the doubtful transaction points, high risky transaction ) thru the using effectively the credit chart, SIBS system; To increase the supervision in credit line and after-check up from the head office Strict sanction will be applied to violation in credit activities + To renovate and construct the decentralized administration and authorization in credit activities to ensure the centralized principle as in the TA2 (the project on changing the structure model of BIDV consulted by ING bank), and to meet well demand from customers In the time to come, The Head office will revise the authorization structure: The general manager will authorize the credit approval to each Branch so that to serve different customers, credit scale, credit quality and the management capacity of each branch Standardizing the approving procedure of the credit document and the chief of each branch will be responsible higher for their decision in approving credit + To Systematize and publicize the credit documents : To check and systematize the credit legal documents together with completing the credit handbook toward integrated, easy-reading, easy-understanding, easy-searching, easy-updating and managing direction To make sure that all the credit documents issued by Head office will be fully aware of all staff in the branches All of them must read, understand and following the docs strictly + To focus on credit staff training more, to improve the capacity, professional qualifications, analyze and forecast skills to enhance the effectiveness, competitiveness, safety of credit activities Besides, it is necessary to construct the motivation policy for the credit staff together with identifying the standard, cadre’s criteria, and responsibilities of each credit staff in work 3.6.9 Investment and operation of affiliates  To contribute capital directly to strong enterprises of the country 130  To invest in overseas market ( sovereign bonds, short term deposit in international banks )  To strengthen the finance service in under directly companies (securities com, leasing com), request these independent units to pilot strategy for each products  To promote the operation of newly established companies: Insurance, Investment fund management  To conduct step by step the bank investment: Merging and acquisition, guarantee the issuance of enterprise bonds 3.6.10 Service  To identify the focus market, object/demand/customer to construct the suitable strategies  To build up marketing plan for each customer group, each market section  To invest in service section, periodically reviewing the products to determine the expansion or closing of each product package  To connect payment service with strategic partners  To promote the investment consultancy  To construct bank service center thru telephone (BIDV call center 247) to solve customer’s questions, consult the products and service of BIDV for customers  To construct the card center By soonest to provide credit card to all customers  By soonest provide payment service at supermarket, shops thru POS 3.6.11 Brand  To conduct the project “ Promotion of BIDV brand “ to increase the image of BIDV in public 131  To consider the project to hire one company to design the new logo, change the name of the bank in accordance with the strategy and functions of BIDV in new period 3.6.12 Network and distribution channel model  To restructure step by step the branches network under the policy to reduce the power and function of branches and centralizing power and management activities in Head office and area branches To build up the time map to change the network model in accordance with the international norm  To build up automatic counters, bank transactions point in business center, big city and urban areas  To build up electronic distribution channel (Internet/phone/sms banking) professional, modern and to ensure the safety of account/transactions, information confidentiality  To focus expanding the overseas distribution channel (Opening Rep office in America, Singapore) 3.6.13 Competitiveness in integration world:  To check the resolution of BTA, AFTA and WTO commitment on service and investment to identify the time and market penetration level of competitors in finance – Bank section  To research the characteristics, market changing, the operation strategy of competitors to have suitable adjustment  To build up the competition policy to maintain the advantage and minimize the weak points of the BIDV 132 Conclusion  For stable development, any enterprises in any economic sections have to review their policy to revise the strategies to make it in line with the changes of the market BIDV also must identify clearly the plans to penetrate in to the integration, cooperation and competition world BIVD is going into right direction and already gained important achievement BIDV need more detailed strategies and plan to maintain their strength and competitiveness advantages to develop more in their business line  In the period 2010-2015, Human resource, technology, marketing are the top priority to keep the bank at the top The conducting process must be the flexible to reach effectiveness  Through the construction and selection the operation strategies for BIDV, This essay will help confirm that BIDV is one of the top bank in Vietnam with famous brand and admitted bank by International community  Basing on the theory of strategic management and the actual report from BIDV, the essay gives some strategic proposal for BIDV up to 2015  Much effort is taken in essay but it is unable to avoid the shortcomings Therefore hope to receive the supporting comment from readers  The author group would like to give many thanks to the Leader of GIGGS programme as well as the lecturers who provide the invaluable knowledge about business management for us to complete this essay 133 REFERENCE: - Strategy Management Book of MBA program - Hanoi National University – Griggs - BIDV annual report 2005-2008 - Business strategy of BIDV 2000-2005 - Brealey/Myers/Allen - Corporate Finance, McGraw-Hill, eighth edition, - Web site of the World Bank: http://www.worldbank.org.vn - Web site of State Bank of Vietnam: http://sbv.gov.vn 134 APPENDICES Annex 1: BIDV’s organizational structure Annex 2: Overview figure of the economy Annex 3: General Information about 16 biggest Banks in Vietnam Annex 4: Assets – fund source Annex 5: BIDV’s Long term investment list year 2005-2008 Annex 6: Structure of fund mobilization Annex 7: Liquidity criteria 2005-2010 Annex 8: Comparison between debt classify audit and BIDV Annex 9: Owner’s equity (IFRS) Annex 10: DPRR deduction period 2005-2010 Annex 11: Service activities results 135 Annex 1: BIDV’s organizational structure 136 Annex 2: Overview figure of the economy Unit: billion USD 2005 I 2006 2007 2008 2009 2010 Economic size GDP Growth rate (%) 49.0 8.4 52.9 57.1 61.7 66.7 72.0 Economic structure(%GDP) Agriculture-forestry-fishery Industry and construction Service 20.5 41 38.5 20 41.5 40 19 42 41 17 42.3 41.3 16 42.8 41.8 15 43 42 32.23 36.90 -4.67 2.87 -1.80 35.60 42.47 -6.87 5.01 -1.86 40.55 48.63 -8.08 6.16 -1.92 46.10 55.44 -9.34 7.36 -1.98 52.47 63.09 -10.62 8.58 -2.04 59.55 71.29 -11.74 9.64 -2.10 II III 10 Balance of Payment Export total value Import total value Trade gap Invisibility Balance of current account IV 11 12 13 Key export items Heavy industry and minerals Light industry and small handicraft industry Agriculture-forestry and fishery products 9.8 12.6 8.3 11.1 14.7 9.5 12.5 17.0 10.7 14.2 19.5 12.0 16.0 22.7 13.3 18.2 26.0 14.8 V Key import item Machinery, equipments and accessories Material and fuel Consumer goods 11.7 22.5 2.3 13.5 25.8 2.7 15.5 29.4 3.2 17.7 33.1 3.7 20.2 37 4.2 22.8 41.3 4.8 17.4 8.4 5.31 15.740 8.5% 8.3 42.46 18.8 3.7 22 19.6 7.5 5.30 15.855 7.5-8% 9.5 55.20 21.6 4.5 22-24 20.6 5.20 16.495 7-7.5% 11.6 71.76 24.4 5.4 22-24 21.6 6.5 5.10 16.900 6.5-7% 13.8 93.28 27.5 6.1 22-24 22.6 6.5 5.00 17.500 6.5-7% 16.3 121.27 31.3 6.9 22-24 24.4 6.5 5.00 18.000 6-7% 18 157.65 35.6 7.9 22-24 14 15 16 VI 17 18 19 20 21 22 23 24 25 26 Other indexes Total overseas debt Inflation rate (%) Unemployment rate in rural area (%) Expecting exchange rate (USD) Expecting interbank offered rate Exchange reserves Monetary supply (M2) Total investment - From banking channel Credit growth (%) Resource: Indicator 1-16, 19, 24: Socio-economic development plan 2005-2010 Ministry of Planning and Investment Other indicator: Economist Intelligence Report in 8/2005 Draft of Politic Report submitting to the Party Congress X (2/2006) 137 Annex 3: General Information about 16 biggest Banks in Vietnam Units: Billion VND NO Bank name Year VN agriculture and Rural Development Bank 2004 Vietcombank Total Assets Source of fund mobilizati on Credit Balance Owner’s equity Profit before tax First Level Branches network 183,716 158,045 143,396 n/a 2,125 100 2004 121,431 85,340 52,025 4,976 1,311 31 VIDB 2005 121,403 87,026 85,434 6,531 741 82 Vietin Bank 2004 90,734 72,702 64,160 4,908 1,662 56 ACB Bank 2005 24,247 22,332 9,565 1,272 385 61 SacomBanK 2005 14,456 12,280 8,425 1,711 306 31 EximBank 2005 11,369 9,923 6,427 700 29 18 8,197 n/a 6,169 794 97 30 2004 MHB Bank Techcom Bank 2004 7,667 6,987 3,463 413 107 25 10 Millitary Bank 2004 6,900 4,933 3,898 440 105.4 20 11 SEA bank 2005 8,515 6,881 6,088 500 138 62 12 VP Bank 2004 4,150 3,873 1,865 210 60 11 13 HabuBank 2005 5,643 5,578 3,058 300 110 16 14 Maritime Bank 2004 2,700 2,015 1,660 200 60.8 17 15 Saigon Bank 2004 2,268 2,059 1,804 150 59 16 OCBank 2005 4,020 3,547 2,894 300 67 16 Source: Annual Report year 2004, 2005 of the mentioned banks 138 Annex 4: Assets – fund source 2005 Reserve 2006 2007 2008 17,728,728 35,987,490 32,247,530 41,122,662 Investment Credit Other Asset Total assets Debit equity Fund mobilization Owner’s equity Total debt and Owner’s equity 18,484,323 82,716,548 2,473,728 121,403,327 29,125,742 85,746,724 6,530,861 121,403,327 21,724,079 97,201,778 6,309,736 161,223,083 40,060,098 113,611,627 7,551,358 161,223,083 35,265,051 129,079,350 7,919,217 204,511,148 50,677,285 141,857,460 11,976,403 204,511,148 Reserve Investment Credit Other Asset Total assets Debit equity Fund mobilization Owner’s equity Total debt and Owner’s equity 2006 22.3% 13.5% 60.3% 3.9% 100.0% 24.8% 70.5% 4.7% 100.0% 2007 15.8% 17.2% 63.1% 3.9% 100.0% 24.8% 69.4% 5.9% 100.0% 2008 16.7% 16.1% 63.6% 3.6% 100.0% 21.1% 73.4% 5.5% 100.0% Reserve Investment Credit Other Asset Total assets Debit equity Fund mobilization Owner’s equity Total debt and Owner’s equity growth 06/05 103.0% 17.5% 17.5% 155.1% 32.8% 37.5% 32.5% 15.6% 32.8% growth 07/06 -10.4% 62.3% 32.8% 25.5% 26.8% 26.5% 24.9% 58.6% 26.8% growth 07/06 27.5% 12.3% 21.5% 12.5% 20.5% 2.6% 27.6% 12.4% 20.5% 39,595,196 156,870,045 8,906,420 246,494,323 51,980,584 181,047,639 13,466,100 246,494,323 Structure Average of years 18.3% 15.6% 62.3% 3.8% 100.0% 23.6% 71.1% 5.3% 100.0% Growth Average of years 32.4% 28.9% 23.8% 53.3% 26.6% 21.3% 28.3% 27.3% 26.6% 139 Annex 5: BIDV’s Long term investment list year 2005-2008 2008 Criteria Value in million Investment in to other credit Habu Bank National Credit Fund Petrol Finance Corporation Hochiminh HD Bank Dai A Bank Vietcom Bank Millitary Bank Southest Bank Investment in to other economic InterBank organization Vinaconex corporation Credit Guarantee Fund for S & M enterprises VN Investment Fund La Ngau Hydroelectric Plant Cao Son Hydroelectric Plant International Port - Gemadep JSC North Thang Long Investment and Development Sai gon Xanh Property JSC Ngo Han JSC Saigon Postel JSC An Pha S.G JSC Hoàng Anh Dak Lak BECAMEX Infrustration Development JSC Dakrink Hydroelectricity JSC Nam Viet Petrol filter JSC Da Lat Property JSC Viet Nam Fund management for Industry and Mien Bac Electricity Invest and Development Thac Mo hydroelectricity Plant Viet Tien Textile Company Que Phong Hydroelectricity Plant (Petroland) Tran Phu EEG HBC Investment and Service JSC Viet Nam Technology and communications JSC BIDV Property Co Sai gon – Sapa JSC Viet Nam Fund management for Industry and Viet Lao Electricity co Thach Khe steel JSC Oil rig and vessel manufactacturing Co Nhon Trach Power and petrol Co Sabeco Dong Xanh service and construction CO Not yet listed stock that the company is holding 1,110,329 20 1,800 96,000 3,410 5,500 3,300 20,760 111,438 66,275 13,250 71,794 26,040 10,000 31,900 5,000 17,008 17,850 8,892 7,500 80,000 3,114 550 10,000 55,000 1,320 20,000 95,583 13,800 24,000 64,000 42,000 23,518 159,707 Total 1,392,309 2007 Percent age owner of the banks 281,980 23,379 5,000 71,799 71,949 109,853 140 0,80 4,63 9,34 0,08 7,90 6,80 3,41 11,00 1,10 6,67 11,00 1,85 17,67 4,00 7,00 5,00 11,00 5,00 7,46 0,43 1,08 7,00 8,00 4,56 11,00 5,00 11,00 11,00 10,53 11,00 5,00 6,00 2,50 0,096 Value in million 2006 Percenta Percenta ge ge owner Value in owner of Value in of the million million the banks banks 182,935 23,379 5,000 21,300 64,210 69,046 - 1,10 4,49 0,06 7,86 9,00 - 1,236,209 20 41,646 1,800 82,000 1,760 3,550 5,500 3,300 95,460 111,439 64,429 25,200 5,025 71,794 6,510 17,100 18,040 5,000 14,915 23,738 12,644 5,500 48,000 571,839 1,33 6,00 6,80 11,00 1,00 11,00 1,10 13,80 11,00 1,85 10,00 11,00 4,00 7,00 8,75 11,00 5,00 5,26 0,49 1,55 5,50 8,00 - 1,419,144 2005 Percenta ge owner of the banks 135428 14063 5000 1,41 4,49 36430 5000 5000 39322 71477 7,86 9,00 22000 4430 11 5065 501 112858 20 41646 1800 38400 440 3550 1650 3300 0,48 0,09 1,33 6,00 8,29 11,00 1,00 3,30 30,14 1820 20 1800 22050 248,286 38,250 Annex 6: Structure of fund mobilization No Criteria Source of fund Structure of fund mobilization Type of currency classification -Deposit in VND -Deposit in foreign currency Type of customer classification -Deposit from economic -Deposit from individual and others Period Deposit classification -Common savings -Period savings Below 12 months Above 12 months 2005 Balance Rate 85,747 2006 Balance 113,611 2007 Balance 141,857 Rate Rate 2008 Balance Rate 181,048 76,844 61,336 15,509 71.53% 18.09% 116,861 95,051 21,810 83.66% 19.20% 135,336 113,484 1,852 80.00% 15.40% 163,397 124,659 38,738 76.29% 23.71% 41,816 43,931 48.77% 51.23% 60,837 52,774 53.55% 46.45% 5,318 6,539 53.09% 46.91% 88,257 92,791 48.75% 51.25% 18,753 66,989 51,981 15,013 21.87% 78.1% 60.62% 17.51% 29,626 84,300 68,922 15,063 26.08% 74.2% 60.66% 13.26% 2,491 9,216 81,828 17,538 29.95% 69.94% 57.68% 12.36% 44,937 136,111 123,070 13,041 24.82% 75.18% 67.98% 7.20% Note: -In 2005: Fund Mobilization sources include: Savings from customers ( command savings, period savings ), other paid amount ( professional deposit, to be paid transfer money ) and issuance of other value paper - In 2006, 2007, 2008: Fund Mobilization sources include: Savings from customers ( common savings, period savings ), other paid amount ( professional deposit, to be paid transfer money ) and issuance of other value paper ( excluding the bond to increase capital : 3.250 billion - Data of fund mobilization by customers: individual savings and other with value paper - Structure of fund mobilization by currency only count for the savings from customer and other charge paid to customers - Period savings is used to classify the fund source by calculating the time of savings since the date of financial report to the date to pay to customers as written in the contract Annex 7: Liquidity criteria 2005-2010 Unit:Million VND 2005 34,924,759 29,884,154 2006 59,786,129 39,167,192 2007 82,187,994 51,698,774 2008 92,126,373 55,394,640 Total used capital Periodical assets > year 121,403,327 86,478,568 161,277,291 101,491,162 204,511,148 122,323,154 251,938,771 159,812,398 Periodical capital > year HĐV Issuance of value papers 26,986,875 16,291,604 35,713,390 15,062,689 41,125,886 11,929,049 5,608,970 30,640,309 7,861,317 5,057,455 Total of fund mobilization Periodical capital < year 114,872,466 87,885,591 161,277,291 125,563,901 192,534,745 151,408,859 233,028,223 202,387,914 (7,937,884) 77.3% (24,072,739) 59.7% (41,062,108) 50.0% (61,486,064) 33.3% 54.5% 38.5% 33.9% 23.3% 32.3% 71.2% 15.2% 37.5% -25.5% 12.1% Periodical assets > year Net credit (After Risk Reserve ) Difference bw fund source and fund usage Percentage bw medium long term fund source/medium, long term fund usage Percentage bw medium long term fund mobilization/medium, long term fund credit Growth speed in medium, long term fund source Growth speed in medium, long term fund usage 141 Annex 8: Comparison between debt classify audit and BIDV 2004 Debt group Audit BIDV debt classify 2005 Audit Absolute number (billion dong) Group 12,285 17,331 Group 26,374 34,999 Bad debt 23,999 10,138 23,844 Group 16,090 15,993 Group 4,919 4,045 Group 2,990 3,806 Total acc 2,658 69,629 76,174 Proportion on sorted total account outstanding (%) Group 19.61% 22.75% Group 42.09% 45.95% Bad debt 38.30% 14.56% 31.30% Group 25.68% 21.00% Group 7.85% 5.31% Group 4.77% 5.00% Total acc outstanding 100.00% 100.00% 100.00% 2006 BIDV debt classify Audit 2007 BIDV debt classify 2008 BIDV debt classify Audit Audit BIDV debt classify 55,024 17,908 10,392 2,965 892 6,535 83,324 49,138 32,753 8,689 6,232 333 2,124 90,580 57,363 29,322 8,639 5,788 209 2,642 95,324 86,798 28,005 4,756 3,427 212 1,117 119,559 91,145 25,122 3,865 2,606 194 1,065 120,132 116,337 31,452 4,183 2,833 413 937 151,972 122,388 27,006 3,066 1,894 324 848 152,460 66.04% 21.49% 12.47% 3.56% 1.07% 7.84% 100.00% 54.25% 36.16% 9.59% 6.88% 0.37% 2.34% 100.00% 60.18% 30.76% 9.06% 6.07% 0.22% 2.77% 100.00% 72.60% 23.42% 3.98% 2.87% 0.18% 0.93% 100.00% 75.87% 20.91% 3.22% 2.17% 0.16% 0.89% 100.00% 76.55% 20.70% 2.75% 1.86% 0.27% 0.62% 100.00% 80.28% 17.71% 2.01% 1.24% 0.21% 0.56% 100.00% Note: In 2004 BIDV classified debt according to Decision 488; In 2005 BIDV classified debt according to Article Decision 493; From Quarter 4/2006 BIDV classified debt according to Article Decision 493 Annex 9: Owner’s equity (IFRS) Unit: billion dong Indicator 2005 2006 2007 2008 Credit account’s capital 4.713 5.493 9.114 10.352 a Charter capital b Capital for purchasing fixed assets 3.971 742 4.077 1.416 7.699 1.415 8.756 1.596 Credit account’s budget Exchange rate difference 1.583 51 1.345 55 1.107 55 2.041 84 ( 3.197) 621 (3.087) 221 (2.092) (2.509) 3.150 2,67% 4.428 2,80% 8.405 4,17% 9.968 4,11% Difference in asset re-evaluation Inappropriate profits total owner’s equity Percentage of owner’s equity/total asset 142 Annex 10: Risk provision deduction period 2005-2010 Unit: million dong Indicator 2006 TOTAL OPERATION INCOME Operation expense Net profit from operation before credit risking cost 2007 2008 4.783.706 7.845.327 7.979.638 (1.750.608) 3.033.098 (2.638.825) 5.206.502 (3.291.720) 4.687.918 DPRR deduction (2.383.323) (3.103.020) (2.546.228) Holding expense on credit risking cost from loaning to customers Holding expense on credit risking cost from loaning to other Cars (2.383.323) (3.368.071) (2.412.085) (141.430) 265.051 7.287 649.775 78,58% 2.103.482 59,60% 2.141.690 54,31% Holding expense on off-table commitments Credit risking cost redeem TOTAL PRETAX PROFIT DPRR deduction/ net profit Annex 11: Service activities results Unit: million dong Indicator Income from service activities Payment activity Guarantee activity Budgetary activity Retailing activity Insurance activity Other services Service expenses Payment activity Guarantee activity Budgetary activity Retailing activity Insurance activity Other services 2005 151.7 111.5 6.8 8.6 22.3 300.9 True interest from service activities (9.6) (20.9) (15.9) (7.9) (54.3) 246.6 Absolute income from securities activity Absolute income from exchange activity Other incomes Income from capital contribution 6.4 44.2 51.8 7.6 Non interest income Income from interest TOTAL INCOME DVR proportion/total income 356.6 3,544.3 3,900.9 6.32% 7.62% DVR proportion/total income (exchanging characteristics) 143 2006 226.4 181.7 9.6 11.3 2007 2008 323.1 283.9 17.0 11.2 105.3 50.9 791.4 449.4 471.7 16.5 39.8 134.7 148.4 1,260.5 (12.5) (63.2) 414.4 (22.5) (34.5) (22.0) (0.4) (82.7) (5.2) (167.2) 624.2 (23.1) (36.5) (30.2) (14.4) (135.3) (18.0) (257.6) 1,002.9 233.4 104.8 109.1 12.4 194.3 139.6 213.1 16.6 (722.9) 790.8 429.4 (7.6) 48.7 477.6 (12.2) (23.0) (15.5) - 874.1 1,187.7 1,492.6 3,426.3 4,851.2 6,228.7 4,300.4 6,039.0 7,721.3 9.64% 10.34% 12.99% 17.50% 15.86% 13.87% [...]... represent the best long-run opportunities (growth and profitability) in the firm’s portfolio They require substantial investment to maintain (and expand) their dominant position in a growing market This investment requirement is often in excess of the funds that they can generate internally Therefore, these businesses are often short-term, priority consumers of corporate resources Cash cows are businesses... This is earnings and revenue growth Perhaps the biggest distinction that sets the banking industry apart from others is the government's heavy involvement in it Besides setting restrictions on borrowing limits and the amount of deposits that a bank must hold in the vault, the government has a huge influence on a bank' s profitability Interest Rates: Because interest rates directly affect the credit market... new businesses to the banks Coupling that with technological developments like internet banking and ATMs, the banking industry is obviously trying its hardest to shed its lackluster image But banks (and financial institutions) have become cornerstones of the economy for several reasons They transfer risk, provide liquidity, facilitate both major and minor transactions and provide financial information... random forces, it is equally true that objectives can be achieved only if strategies are implemented In fact, long –term objectives and grand strategies are so interdependent that some business consultants do not distinguish between them Long-term objectives and grand strategies are still combined under the heading of company strategy in most of the popular business literature and in the thinking of. .. technological, and (5) ecological factors That environment presents 13 firms with opportunities, threats, and constraints, but rarely does a single firm exert any meaningful reciprocal influence Industry environment mainly concerns competition The nature and degree of competition in an industry hinge on five forces: the threat of new entrants, the bargaining power of customers, and the bargaining power of supplier,... are the skills – the ability and ways of combining assets, people and processes – that a company uses to transform inputs into outputs To use the RBV in internal analysis, a firm must first identify and evaluate its resources to find those that provide the basis for future competitive advantage This process involves defining the various resources the firm possesses, and examining them based on the. .. contributions of different activities within the business to that value VCA takes a process point of view: It divided the business into sets of activities that occur within the business, starting with the inputs a firm receives and finishing with the firm’s products (or services) and after- sales service to customers VCA attempts to look at its costs across the series of activities the business performs... share in low-growth markets or industries Because of their strong positions and their minimal reinvestment requirements, these businesses often generate cash in excess of their needs Therefore, they are selectively “milked” as a source of corporate resources for development elsewhere (to star and question marks) Cash cows are yesterday’s stars and the current foundation of corporate portfolios They... translate business strategy into daily activities people need to execute Functional managers participate in the development of these tactics, and their participation, in turn, helps clarify what their units are expected to do in implementing the business’s strategy Policies are empowerment tools that simplify decision making by empowering operating managers and their subordinates Policies can empower the doers... bargaining power of supplier, the threat of substitute products and services, and the jockeying among current contestants To establish a strategic agenda for dealing with these contending current and to grow despite them, a company must understand how they work in its industry and how they affect the company in its particular situation The essence of strategy formulation is coping with competition Yet it