An overview about Vietnam joint stock commercial bank for industry and trade

HANOI, 2014 PREFACE The purpose of the report is to describe my valuable experience during the internship in Import –Export Office of VietinBank’s Main Operation Center This report is also to fulfill the requirement for my Finance and Banking course in Foreign Trade University For the whole internship, I had opportunity to learn general operation process in that Bank and to observe how banking officers perform their duties day by day Besides that, I was able to put my theoretical knowledge into the real cases and gain a lot experience In the report, I intend to concentrate on analyzing the business performance of the whole VietinBank and suggesting some recommendations to improve the effectiveness in its operation Therefore, I would like to divide my report into 3main parts, including: Chapter 1: An overview of VietinBank’s Main Operation Center Chapter 2: Internship journal Chapter 3: Recommendations to improve the effectiveness in VietinBank’s performance Over the period of internship, I would like to give my special thanks to my internship guide Mr Nguyen Thanh Hai and other banking officers in Import Export Office for their supports and suggestions And the person I most wish to thank is my supervisor Professor Tran Thi Thu Huong for her dedicated instructions to help me accomplish my internship report Chapter 1: An overview about Main Operation Center of Vietnam joint stock commercial bank for industry and trade .3 Profile of Vietinbank .3 1.1 1.2 Formation and development Organization structure and function of Main Operational Center .4 1.3 Current performance of Vietinbank’s Main Operation Center Chap 2: Internship Journal Chapter 3: Nghiệp vụ toán L/C xuất nhập SGD .12 Chapter 1: An overview about Main Operation Center of Vietnam joint stock commercial bank for industry and trade Formation and development Vietinbank was established on 26 March 1988 after its separation from the State Bank of Vietnam in accordance with Decree No.53/HDBT by the Ministers Council Its register name in English is “VIETNAM JOINT STOCK COMERCIAL BANK FOR INDUSTRY AND TRADE” and its trade name is “VietinBank” The head quarter is located in 108 Tran Hung Dao Street, Hoan Kiem District, Hanoi, Vietnam with the network of 147 branches across 63 provinces and cities nationwide and foreign branches: branch in Frankfurt, Germany, branch in Berlin, Germany and branch in Vientiane, Lao PD In terms of scope of business, VietinBank offers a wide range of retail and wholesale banking products and services both at home and abroad VietinBank also operates in the following areas: lending, investment, trade finance, guarantee, re - guarantee, forex trading, deposit, payment, money transfer, card services, local and international credit card, traveler’s cheque, securities trading, insurance, financial leasing, and many others Since 16 July 2009, Vietinbank stock has been official traded on HCM City Stock Exchange (HOSE) The diagram below illustrates its formation and development over a twenty five years period Figure 1: Twenty five years of construction and development 2001- 2008 and conducted athe complete innovation towards modernization andinto standardization in all aspects&ofmechanisms banking act ivies; converti ully aontwo-tier implemented bank, officially organized putsystem Vietnam restructuring JSC Bank project for Industry in terms and of Trade debts handling, operation general policies and busines Source: Vietinbank annual report 2013 Before, period of foundation, VietinBank was a bank in small size and had only 01 transaction center However, over the time, up to now, VietinBank has developed an operation network comprising of 01 Transaction Centers, 150 branches, over 1000 transaction offices/ savings offices It also established correspondent relationship with 900 banks, financial institutions of 90 countries and territories all over the world Over the period of building and development, until now, VietinBank has been achieving many outstanding results in fund allocation and its credit activities In 2004, it successfully mobilized VND 64,160 billion and lent to a large number of companies about VND 121 billion And after that, these figures increased to VND 422,995 billion and nearly VND 468 billion Over the recession period, this bank still maintained nonperforming loan (NPL) ratios under % Up to present, in implementing the State’s reform guidelines, the bank has been active to mobilize medium and long term capital besides the State budget fund for important projects and works 1.1 Organization structure and function of Main Operational Center 1.1.1 Organization structure Figure 2: Organization chart Board of directors General directors-CEO Vietinbank’s headquarter Branch network Operational center (Transaction center) Main functional divisions Supporting divisions Export Documentary Settlement Department Accounting Dept Source: administration HRHR andand administration Dept Dept Import Documentary DEDept Settlement 1.1.2 Dept.Function of main divisions of Main Operation Research and service development Dept Center Bank guarantee & Import Export Settlement Department Documentary Settlement Dept SWIFT & test key Dept Technical Dept This is an outstanding product of VietinBank, ensuring that the exporter will be Factoring and Receivables Financing Dept Cashof transfer Dept paid upon delivery of goods/services and presentation the documents complied with the terms and conditions of the L/C VietinBank will serve you as an advising bank, paying bank, confirming bank or negotiating bank  Exporters will receive consultancy about unfavorable or exceptional points, upon receipt of L/C and during preparation of documents to claim for payment according to L/C  Exporters will be financed through export financing solutions with favourable terms and preferential interest rates Import Settlement Department (1 &2) After clients import goods and their partners want to select a secure payment method, VietinBank will issue L/C for the importers and pay/accept to pay foreign banks upon receipt of compliant shipping documents within the validity of the L/C  Importers will receive free consultancy on international trade rules and practice and special terms and conditions of the L/C in order to minimize risks arising from foreign trade payments  VietinBank will be responsible for checking the compliance of the documents  Importers will be financed through import financing solutions Factoring and Receivable Financing Dept As a leading bank in international payments, Vietinbank always provides the best services, facilitating the international trade activities Services at the department include: export factoring/financial risk guaranty and proflifting Factoring is a special form of short-term finance where Vietinbank purchases the seller’s receivables and assumes the credit rish, either with or without recourse to the seller ….Porfaiting Recently, export factor is a common new practices Stipulated tolerances in credit amount, quantity, unit price or other variables have not been met SWIFT & test key Dept Xác nhận chữ ký ngân hàng thơng báo xem có hay khơng Accounting Dept Accounting Division is responsible for the mobilization and administration of the Bank's financial resources, both the assets and liabilities, and for the management of the Bank's liquidity, accounting and financial records, and the relations with financial markets and intermediaries In addition, it manages the Bank's accounting system and is responsible for keeping the accounts and mandatory ledgers (annual accounts and accompanying documents, as well as the periodic reports) HR & Administration Dept The generic function of this department are: recruitment of new employees; orientation and placement of the recruited employees; administration of benefits and compensation programmes; ensuring efficient HR Information Systems; developing and running with a strategic approach to human resources; monitoring compliance with legal requirements as well as administering award and recognition programmes Under the same division lies the Staff Benefits Section which is responsible for all employee welfare matters including the administration of pensions; administration of the medical aid scheme; administration of group life insurances for members of staff; supervision of the sports club; employee wellness 1.3 Current performance of Vietinbank’s Main Operation Center As of financial-year-end 2013, Vietinbank’s impressive results were driven by increasing growth momentum together with secure and efficient operations More specifically, Vietinbank’s revenue rose significantly throughout the five-year period from 3373 billion in 2009 to 7751 billion in 2013, a growth of 56% Such achievement was brought about by the diversification of services and other activities which attracts more customers and increases the income from payment fee, money transfer charge, L/C issuance, etc In the year 2011, Vietinbank’s revenue reached a peak of nearly double that in the previous year, which signals the result of a fruitful cooperation between Vietinbank and other international commercial banks However, likewise the upward trend in profit, its costs tripled from 2400 billion at the beginning to over 6000 billion in 2011 The high total cost was attributed by a rise in surcharges, advertising, promotion and investment on new technology Vietinbank continuously expands its branches, clearing houses and transaction offices 9000 8000 7000 billion 6000 5000 Total Revenue Total Cost Profit 4000 3000 2000 1000 2009 2010 2011 2012 2013 F igure 3: Vietinbank’s performance Source: Vietinbank’s annual report, 2013 VietinBank always adheres to policies on provisioning for non-performing loans At the end of the third quarter, the bank continued to maintain a provision of 4.051 trillion VND, significantly higher than the value of non-performing loans The frequency at which VietinBank makes provisions for credit risk is 1.08 times This is a factor that ensures safety of operations, allowing the bank to deal with non-performing loans at its discretion In addition, VietinBank achieved ROA, ROE, and CAR figures that far surpass the targets set by the shareholders’ committee This achievement is a testament to VietinBank’s effectiveness in increasing capital and profits.Having achieved such results, at the end of the third quarter, VietinBank was the leading bank in Vietnam despite difficult conditions in the economy as well as the banking industry It is expected that by year end 2014, VietinBank’s financial results will be yet more favorable, owing in large part to wise managerial decisions and sound business solutions that are being taken as the year comes to a close Chap 2: Internship Journal Day One: Monday, July 01st, 2014, 12:30 PM – 4:30 PM (Hours: 4) Today is my first day at the Main Operational Center of Vietinbank The office was nicely and tastefully decorated, which made a deep impression on me A small bulletin board was hang on the wall and artificial flowers were lying on each table Working hour is divided in three shifts: the first shift is from 8:0 a.m to 5:30 p.m, the second shift is from a.m to p.m and the third shift is from 1:30 p.m until the work finished As I walked in my first day, I was greeted with cheerful smiles and positive attitudes My supervisor, Nguyen Thanh Hai, introduced me to each person present and gave me a description of what types of things they work on After introductions, he showed me around the office and work center He described various departments within the work center, such as Export Documentary Dep., Import Documentary Dep and Factoring and Receivables Bank Financing Dep We then went on to some personal details and job expectation It came to my surprise to know that my supervisor, as well as many people there, was a graduate from FTU, K45 and that he had an internship at the headquarter of Vietinbank before Day Two: Tuesday, July 02, 2014, 10:15AM – 4:15PM (Hours: 6) Today I helped my supervisor, Mr Hai, with sorting L/C to each group The Main Operational Center was responsible to monitor banking branches in provinces, so each group of four staff working together to deal with documents from six provinces The morning shift has fewer tasks than the afternoon one, so fewer bank officers came to the workplace The first thing that they in the morning is check their emails, then prioritize their activities for the working day When observing the staff doing their tasks, I read the operation guideline and found out how close it was to what I had studied at my university so far The first chapter in the guidebook is steps to open an L/C and the second is about documentary collection Day Three: Wednesday, July 03, 2014, A.M – PM (Hours: 7) Today I was introduced to the Export Documentary Settlement Department This office included four men and six women, which was a common picture in most banks Through observing my supervisor I learned that communication and connection were very essential Interbank chat was available at all time to help the staff conduct teamwork more effectively Though the workload was sometimes stressful, I could feel a cozy and comfortable atmosphere where there was always a smile on people’s face The Main Operation Center seemed to be their second family and occasionally they told jokes toward each other After having background information about L/C and other documents and categories of service relating L/C that VietinBank supplies, I was guided to check the accuracy of every single document when VietinBank played a role as advising bank First of all, the banker had to read and understood all terms and conditions of L/C Subsequently, he/ she continued to check other papers, for example: packing list, commercial invoices, bill of lading, bill of exchange, or some kinds of certificates under the rules of Incoterm 2010 If there is no mistake, discrepancy, then banker would be responsible to pack these entire documents and send them to issuing bank in foreign country and write a notification to customer, informing that VietinBank complete its duty Otherwise, the banker had to notify to his/her clients and required them to correct the discrepancies until the issuing bank accepted or agreed to pass Day Four: Monday, July 08, 2014, A.M –2 PM (Hours: 5) Today was the first day of the week so everyone in the office got busier than usual and the office was far from being quiet Everyone received more LC application from the banking branches and customers Hardly did the printer stop working Once it was out of order, the fixer came immediately to fix it The discrepancies among several documents were widely discussed, such as the lack of Certificate of Origin (CO) number, the incorrect measurement of carton, the lack of an unit for weight For example, a $30 000 contract with Japan lacked the CO form VJ… Common customers of Vietinbank were Viglacera Ceramic Tile Company (Ceramic), Hoa Sen (steel), Tu Thanh Company Lmt (gherkin), Cty co phan may mac QTNĐ, May 10 Company Lmt (Garment)… Day 20: Tuesday, July 29, 2014, A.M – PM (Hours: 6) Today, Mr.Hai gave me a real task: dealing with information using TRADE FINANCE system and SWIFT program While giving instruction, he always made sure that I remember the key words and typical codes I became interested to know that most letter of credit was in the SWIFT format, with about 49 terms A complex term of L/C was included in article 47 of the SWIFT form During the period, I realized the importance of learning international payment, which I had not studied at my university My supervisor encouraged me to ask if there was anything sound ambiguous He emphasized that understanding the procedure thoroughly was of great necessity to conduct a hands-on task Day 21: Thursday, July 31, 2014, A.M – PM (Hours: 7) Today I learned that bank officers need to have flexible attitude and alert mind in the workplace They enjoyed a cup of coffee after lunch or when feeling drowsy During the tea break, they received a updated list of banned countries for American companies Cuba, North Korea and Egypt were examples of the countries with which American companies were banned from doing business As a result, US dollar transaction with these countries was not allowed and other trade currencies, such as euro, were an optimal choice For the countries and products which were suspected to encounter trade restriction or limitation, officers in Export Documentary Dept needed to ask the R&D officers to check Day 25: Tuesday, August 05, 2014, A.M – PM (Hours: 7) Today is the last day I am at the office It is near the mid-autum festival, so the office was full of moon cake and fruits Everyone seemed to be cheerful The reason why I chose to have an internship in the Main Operation Center is because I have a passion for the banking industry and international finance I enjoy the aspects of the office: being organized, checking the documents and collaborating with other members, The internship period plays a pivotal role and of great necessity for all undergraduate students It does not only provide me a golden chance to check theoretical knowledge but also helps me learn how to put theories into practices The tasks, at first, sounded fairly simple for a newcomer like me However, I realized that it really requires the staff many qualities such as: carefulness, patience and proficiency In addition, I also observed the typical works of banking officers and their attitudes when dealing with the problems Even though, I had only five weeks for my internship in VietinBank’s Main Operation Center, I would still feel more self – confident than before And personally, I think this valuable opportunity would be a stepping – stone and unforgettable experience for me to prepare the best things for my future career Chapter 3: Nghiệp vụ toán L/C xuất nhập Main Operation Center Letter of Credit (L/C), as people know, is a payment method in which the issuing bank, upon request of the applicant (the importer), commits to pay a certain amount of money to the beneficiary (the exporter) or accept the bill of exchange drawn by the beneficiary after receiving the documents in conformity with the terms and conditions of the L/C More specifically, figure illustrates the process in which L/C is issued and payment is made Seller Figure 4: Letter of credit Advising Contract Payment Do cu me nt paym ent Payment Advising bank Document Issue Buyer Documentsapp pa lica y tion m en t Issuing bank Source: Viettinbank’s procedure guideline L/C issuance At the request of the customer (the importer), the Import Documentary Settelemt and of VietinBank issues the L/C, committing to pay to the beneficiary at sight or at maturity when the beneficiary presents the documents in conformity with the terms and conditions of the L/C Depending on your credit history, L/C can be issued with or without a deposit Vietinbank acts like an intermediary ensures safety for both exporter and importer; reduces capital pressure for the importer; and give advises on the transactions to ensure customers’benefits This is particularly important to bear in mind that Vietinbank only deal in documents, not in goods In the case L/C amendment, VietinBank amends the L/C upon request of the customer (the importer) As illustrated in Figure 5, L/C is issued by the following process Figure 5: L/C opening procedure Step1:Chckdoumn Step2:IsuL/C Step3:Rciv,hkandrosmbul Step4:Paymndc Step5:ClosdcumnarviL/ Step6:avdocumns Example: SALES CONTRACT Date: 2014-06-26 Contract No: S04688 Seller: CARGILL INTERNATIONAL TRADING PTE LTD 300 Beach Road, #23-01 The Concourse Singapore 199555 Phone: (65)6295-1112 Fax: (65)6393-8880 Co: Reg No.196700442 Buyer: HOA SEN GROUP No 9, Thong Nhat Boulevard, Song Than II Industrial Park Di An Ward, Di An Town, Binh Duong Province, Vietnam Commodity: Prime Newly Produced Hot Rolled Steel Coils Specification: HRC grade: SAE1006 Step 1: Receive documents to open L/C On 20th May, representative from Hoa Sen Group sent L/C application letter and letter to borrow foreign currency Bank officer checks the information in the application form The commodity traded is steel coils, so it is in conformity with the business scope of the company Because the documents related to L/C is sent through fax, SWIFT & Testkey staff is responsible to check the documents, the number of documents received and the signature of Hoa Sen Group’s representative If the signature is correct, SWIFT & Testkey staff notes the words “Test Correct” on the documents Step 2: Open L/C Upon received of the verified documents, Vietinbank rechecks to see if the document fit with international practices, governing rule of Vietnam state bank, international commercial contract, whether it is risky for the customers and issuing banks If there exists any discrepancy, Vietinbank immediately contacts Hoa Sen Group’s representative to review the documents As Vietinbank follows the SWIFT message body of issurance of letter of credit, it uses MT 700-Issue of a Documentary Credit swift messages when issuing a L/C Step 7: Save documents The documents is then put together in file and after several days is packed then all the documents was transported to Dong Anh to save (hn does not have land) L/C advising VietinBank will serve exporters as an advising bank, paying bank, confirming bank or negotiating bank At present, it is common practice in Vietinbank that L/Cs are issued as SWIFT messages in a standardized format This procedure facilitates both the issue of the L/C and authentication at the advising bank, which will then be able to advice it immediately to the seller Today, most L/C are issued in a standardized SWIFT format, as shown below The box on page… shows a standard SWIFT format This example shows a freely negotiable L/C, available at sight with the issuing bank, and advised to the seller without the advising bank’s confirmation Vietinbank advices L/Cs to the seller through its internet-based advising services, which means that the seller can expect to receive the L/C almost immediately after the bank receives it In this form of the L/C can then easily be distributed in a standardized electronic format to and within the company, thus increasing its effectiveness and reducing possible errors in transmission The next phase in the chain, the presentation of documents, can also be completed electronically in some cases, but only if the L/C indicates that it is subject to the eUCP rules The main limitation in presenting all documents in this form seems to be the transport documents, which are not always available in an electronic format Example of an L/C issued through SWIFT CONCLUSION After more than 25 years of development, Vietinbank has achieved several accomplishments and has been one of the leading banks in Vietnam It is proved by the continuous efforts of all branch employees on improving service quality as well as maintaining a sustainable growth in both fund mobilization and credit activity Although there are still some certain difficulties existing, from my point of view, the appropriate strategies and targets of the Bank will guarantee that its stable position in the eyes of customers It will be an unforgettable time of my life when I had the experience in working as a banking officer Moreover, working as an internee assists me to comprehend more about banking system, which is very useful for my future career To conclude, I would like to express my gratefulness to everyone, who support me accomplish the report REFERENCE Anders Grath, The handbook of International Trade and Finance, Nordia Publishing Ltd for the Institute of Export, 2005, Great Britain Annual reports of VietinBank from 2009 to 2013, available on VietinBank’s website: http://investor.vietinbank.vn/FinancialReports.aspxv Analysis of ABC securities in 2013 about VietinBank’s security Information about VietinBank, http://www.stoxplus.com/ available on website of StoxPlus, ...Chapter 1: An overview about Main Operation Center of Vietnam joint stock commercial bank for industry and trade .3 Profile of Vietinbank .3 1.1 1.2 Formation and development... nhập SGD .12 Chapter 1: An overview about Main Operation Center of Vietnam joint stock commercial bank for industry and trade Formation and development Vietinbank was established on 26 March... for the mobilization and administration of the Bank' s financial resources, both the assets and liabilities, and for the management of the Bank' s liquidity, accounting and financial records, and