THE MOBILIZATION AND USING CAPITAL ACTIVITIES OF TECHNOLOGICAL AND COMMERCIAL JOINT-STOCK BANK

FOREIGN TRADE UNIVERSITYFACULTY OF FINANCE AND BANKING INTERNSHIP REPORT THE MOBILIZATION AND USING CAPITAL ACTIVITIES OF TECHNOLOGICCAL AND COMMERCIAL JOINT-STOCK BANK Hanoi, August 20

FOREIGN TRADE UNIVERSITY

FACULTY OF FINANCE AND BANKING

INTERNSHIP REPORT

THE MOBILIZATION AND USING CAPITAL

ACTIVITIES OF TECHNOLOGICCAL AND COMMERCIAL

JOINT-STOCK BANK

Hanoi, August 2013

Student: Chu Le Thuy Quyen

Student’s ID: 1114340049

Class: A18- High quality class, Faculty of Finance and Banking, K50

Instructor: M.A Do Duy Kien

1 REASONS FOR CHOOSING TOPIC 7

2 PURPOSE AND SCOPE OF REPORT 8

3 METHODOLOGY 8

4 STRUCTURE OF THE REPORT 8

I OVERVIEW OF VIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT-STOCK BANK 9

1 GENERAL INFORMATION AND HISTORY OF FORMATION 9

1.1 General information 9

1.2 History of formation 9

2 TECHCOMBANK’S ORGANIZATIONAL STRUCTURE 11

3 FUNCTIONS OF EACH DEPARTMENT 12

3.1 Shareholders’ meeting 12

3.2 Board of Directors and Board of Supervisors 12

3.3 Audit and risk committee 13

3.4 Board of Management 13

3.5 Other departments 14

II TECHCOMBANK PERFORMANCE 14

1 OVERVIEW OF OPERATING RESULTS FROM 2011-2013 14

2 MOBILIZATION 16

2.1 Deposits by segments 16

2.2 Deposits by term 17

2.3 General comments 18

2.4 Capital Adequacy rate (CAR) 19

3 USING CAPITAL – LOANS TO CUSTOMERS BY SEGMENT AND BY TERM 19

III ADVANTAGES AND DISADVANTAGES OF TECHCOMBANK 23

1 ADVANTAGES OF TECHCOMBANK 23

2 DISADVANTAGES OF TECHCOMBANK 23

RECOMMENDATIONS AND CONCLUSION 24

1 RECOMMENDATIONS 24

1.2 To State bank of Vietnam 24

2 CONCLUSION 25

REFERENCES 26

SUMMARY OF INTERNSHIP 27

CONTENTS OF ABBREVIATION

1 Technological and Commercial

CONTENT OF DATA TABLES AND CHARTS

Chart I.1: Techcombank’s shareholders 10

Chart I.3: Techcombank’s Organizational Structure 12

Table II.1: Income statement of Techcombank from 2011 to 2013 (Souce: Techcombank’s annual financial report) 15

Table II.1: ROA and ROE of Techcombank in 2012 and 2013 16

Table II.2.1: Deposits by segments (Source: Techcombank’s Annual Financial Report) 16

Chart II.2.1: Deposits by segments 17

Table II.2.2: Deposits by terms from 2011 to 2013 (Source: Techcombank’s Annual Financial Report) 17

Chart II.2.2: Deposits by terms from 2011 to 2013 18

Table II.2.4: Capital adequacy rate from 2011 to 2013 19

Table II.3: Loans to customers by segments from 2011 to 2013 20

Chart II.3: Loans to customers by segments from 2011 to 2013 20

Table II.3: Loans to customers by term 21

Table II.3: Loans classified by credit worthiness 22

1 REASONS FOR CHOOSING TOPIC

The global financial crisis which derived from United State in 2008 has affectedstrongly to the global economy in general and Vietnamese economy in particular Thebubble of the real estate not only lead to the bankruptcy of thousands firms, theextremely high inflation rate but also lead to the best nightmare ever of every bank –Bad Debt

In this scenario, it seems that Vietnamese banks have not found the right way anddirection for themselves After a series of merge and acquisition, many banks whichare unable adapt the market and have weak background have to leave the play Bankswhich are still alive are the strongest ones But it doesn’t mean that these banks do nothave to face to any difficulties The fact that they do deal with their problems and theyare finding the most effective way to recover all loss from the terrible crisis

Moreover, nowadays, the trend of globalization and international economicintegration are stronger than ever before Global economy needs the sturdy relationshipamong subjects And Vietnam is not out of these subjects Especially, in this period, weneed to pay more attention in investment activities with projects bringing back greatadvantages for society In this condition, banks play the vital role in the industrializedand modernized economy

Through learning, I was introduced to Technological and Commercial Joint-StockBank (Techcombank) and I decide to choose Techcombank as the subject of my reportbecause in my opinion, Techcombank is one of the most suitable banks which reflectthe typical condition of Vietnamese banks in recent years with up and down result.Moreover, while participating in Techcombank’s internship, I studied a lot which will

be useful for me in the studying process in universities and it is also the initialexperiences for my future career

All of the reasons above motived me to study and have a deeper look in the topic:

“THE MOBILIZATION AND USING CAPITAL ACTIVITIES OF TECHNOLOGICCAL AND COMMERCIAL JOINT-STOCK BANK”

2 PURPOSE AND SCOPE OF REPORT

Purpose: analysis and assess the effectiveness to see the weakness and strength of

Techcombank

Scope: the operating result of Techcombank from 2011 to 2013.

3 METHODOLOGY

a Method of data collection

- The data used in the report were collected from the Techcombank’s annual financialreport throughout three years 2011, 2012, 2013

- Information and some data in newspaper and financial magazines with the instruction

of Instructor and the Techcombank’s staff

b Methods of data analysis

- Typology

- Absolute comparison method

- Relative comparison method

4 STRUCTURE OF THE REPORT

I OVERVIEW OF VIETNAM TECHNOLOGICAL AND COMMERCIAL

JOINT-STOCK BANK.

II TECHCOMBANK PERFORMANCE.

III ADVANTAGES AND DISADVANTAGES OF TECHCOMBANK.

RECOMMENDATIONS AND CONCLUSION.

I OVERVIEW OF VIETNAM TECHNOLOGICAL AND

COMMERCIAL JOINT-STOCK BANK

1 GENERAL INFORMATION AND HISTORY OF FORMATION.

1.1 General information.

To the approval of Governmental pre- minister, The State bank of Vietnam andState Securities committee, Viet Nam Technological and Commercial Joint StockBank( Techcombank) officially announces the result of released stocks for strategicshareholders- Hong Kong Shanghai banking corporation( HSBC) to raise the chatteredcapital at the second time in 2008

The quantity of released stocks for HSBC: 20.895.459 raising the ownership properties in Techcombank of HSBC to 20 %; in which:

-Type of shares: popular shares

-Value of shares: 10.000 dong/ per share

- Released cost for HSBC: 60.891,52 dong/ per share

Time of release: 5th September 2008

The Techcombank chattered capital after releasing shares for HSBC was3.165.235.710.000 dong (three thousand one hundred sixty five billion two hundredthirty five million seven hundred ten thousand)

The capital using plan: Used for trading business, investing, capital contributing

of Techcombank and supporting IT system of Techcombank, networks, head office andbranches

The limitation of shares authorization: based on the Vietnamese laws.For more information, please contact: secretarial office of Administrative board-Vietnam Technological and Commercial Joint Stock Bank head office, 70-72 Ba Trieu,Hoan Kiem, Hanoi

financial intermediary bridging the savers with the investors in need of capital forbusiness and economic development in the open-door era.

Techcombank’s strategic shareholder is HongKong and Shanghai BankingCoporation (HSBC) with 20% of the shares Techcombank is also the first bank and theFinancial Insights only awarded Bank for leading technology solutions andapplications

Chart I.1: Techcombank’s shareholders

In 1995, the registered capital was increased to VND 51,495 billion Parallel with

this event, the Ho Chi Minh City branch was established starting the process of fastexpansion of Techcombank in the main urban areas

In 1996, Thang Long branch and Nguyen Chi Thanh sub-branch were established in

Hanoi, together with Thang Loi sub-branch in Ho Chi Minh City The Bank’sregistered capital has increased to VND 70 billion

In 1998: With the establishment of Da Nang branch in that year the branch network

has covered all three main regions: the North, Central provinces, and the South

From 1999 to 2013, Techcombank increased the total registered capital from VND80,2020 billion to VND179,934 billion and open over 300 branches and sub-branches

Chart I.3: Techcombank’s Organizational structure

3 FUNCTIONS OF EACH DEPARTMENT

3.1 Shareholders’ meeting

Shareholders’ meeting is the highest authorities of the Bank who has the right todecide on the strategic development of the bank and elects Board of Directors andBoard of Supervisors Shareholders’ meeting is conducted periodically and may behold unusually between two annual meetings

3.2 Board of Directors and Board of Supervisors.

- Board of Directors has seven members; permanent members include the chairman, firstvice president and 3 vice presidents Board of Directors is the governing body of thebank; they have discretion on behalf of the bank to decide matters relating to the

SHAREHOLDERS’

MEETING

BOARD OF DIRECTORS

AUDIT AND

RISK COMMITTEE

BOARD OF MANAGEMENT

Internal

control relationship External

and Marketing

Financial accounting

Credit managemen

branches

Sub-Branches

branches branchesSub-

Sub-Branches

branches branchesSub-

Sub-Branches

branches branchesSub-

Sub-Capital managemen

t and transaction

Offic

e Information

and Technology

Human resource

BOARD OF ASSETS AND LIABILITIES MANAGEMENT

CREDIT COUNCIL BOARD OF SUPERVISORS

purposes and interests of banks, except for matters under the jurisdiction of theshareholders' meeting

- Supervisory Board has three members: Chairman of Supervisory Board memberresponsible for controlling, 1 specialized controller and 1 controller Supervisory Boardshall examine the financial activities of the bank; monitor the observance of theaccounting system, the operating system checks and test internal auditing of the bank

3.3 Audit and risk committee

- This department of Techcombank is built with full parts and tools to ensure thedetection and analysis of risks as soon as they arise the setting and monitoring of riskindicators are carefully planned, as well as the system is always checked, updated andadd added new elements to response positively and effectively with the change ofmarket and economic condition

- Audit and risk committee manage and control the following risk:

- The members of the Board of Management bear joint responsibility for operating as awhole However, the individual members manage the areas assigned to them on theirown responsibility within the framework of the decisions made by the entire Board.The entire Board of Management makes decisions on all matters of fundamentalimportance and in cases where a decision of the entire Board is prescribed by law orotherwise mandatory The rules of procedure of the Board of Management contain alist of topics that must be dealt with and resolved by the entire Board

- Meetings of the Board of Management are held regularly They are convened by theChairman of the Board of Management Any member of the Board of Managementmay also demand that a meeting be held The Board of Management makes decisions

by a simple majority of the votes cast, except where unanimity is required by law Inthe event of a tie, the Chairman has the casting vote

- According to the Board of Management’s rules of procedure and schedule of duties,the Chairman bears particular responsibility for leading and coordinating the Board’swork He represents the company and the Group in dealings with third parties and the

also bears special responsibility for certain departments of the Corporate Center andtheir fields of activity.

3.5 Other departments

Each department has its own function which is relatively the same as its name, such asthe Credit Council is responsible for checking the credit of customer; or Board ofassets and liabilities management is responsible for the risks relating to the balance ofassets and liabilities Because of the limitation of this report, I am unable to manage toexpress all functions of all smaller departments

1 OVERVIEW OF OPERATING RESULTS FROM 2011-2013

In recent years, the context of the world economy, in general, has remained gloomy

so that banking activities had to face to many difficulties in raising capital, loans anddebt recovery Techcombank is not an exception of the Finance and Banking industry

as well as the global economy when the bank’s performance has been affectednegatively and heavily The rate of non-performing debt has reached the highest levelthan ever before in recent year is one of the main important reasons for the going down

of the income curve Moreover, the drear condition of the real estate and stock marketare also elements which contribute to those scenarios However, with the effort ofmanagers and bank’s staffs, Techcombank still get some positive result to strengthenthe faith and ensure the benefit of stockholders Operating results of Techcombank areshown in the following data table:

INCOME STATEMENT 2013 2012 2011

REVENUE

Interest and similar income 13,281,305 17,622,864 19,948,573

Interest and similar

Net interest income 4,335,662 5,115,573 5,298,375

Fee and commission

Net loss from trading of

foreign currencies and

Net gain from trading of

Net gain/(loss) from

Total noninterest expense 5,507,939 5,485,638 2,974,606

Income before income tax 878,206 1,017,856 4,221,113

Income tax expense –

Income tax expense –

Net income after tax 659,071 765,686 3,153,766

Table II.1: Income statement of Techcombank from 2011 to 2013 (Souce:

Techcombank’s annual financial report)

- Operating Income in 2013 reached VND 5,648 billion, slightly lower by 1.9% incomparison to year 2012 as a result of Net Interest Margin (NIM) compression from

- Net Interest Income decreased 16.94%, to VND 4,336 billion Net Fee Incomeincreased 30.2%, equivalent to VND 736 billion

- Trading and Investment Income improved in 2013, from a loss of VND 311 billion in

2012, to a profit of VND 145 billion in 2013

- Operating Expenses increased by VND 62 billion, or 1.87% compared to last year TheBank continued to invest in IT infrastructure and branch offices as to maintain itsextensive network of 315 branches throughout the country

- Provision for Loan Losses stood at VND 1,414 billion, decreasing by VND 36 billion

in comparison with last year following a conservative approach in assessing Performing Loans (NPLs) As of the end of 2013, the NPL ratio of the Bank was at3.65%, representing a significant decrease from 5.9% as of the end of the Third Quarter

Non-of 2013 The Bank has been focusing on bad-debt management and recovery, togetherwith controlling credit risk, following international standards

Table II.1: ROA and ROE of Techcombank in 2012 and 2013

- Profit before Tax reached VND 878 billion, a decrease of 13.7% compared to last year

As a result, Return on Assets (ROA) declined from 0.42% to 0.39%, while Return onEquity (ROE) decreased from 5.58% to 4.47% in 2013 Both reductions are not goodsignal for the development of Techcombank Managers should do something with thebusiness strategy to deal with this situation