Other practical solutions for BIDV

CHAPTER 4: IMPLICATIONS AND RECOMMENDATIONS FOR BIDV

4.2. Recommendations for BIDV to improve the profitability in the future

4.2.5. Other practical solutions for BIDV

BIDV need to sell more to each customer specially focus on two operations are cross-selling and up-selling. In fact, many branches currently use only about 3 personal service products while the bank has more than 30 including accounts, mobilization, card services, e-banking credit and insurance, etc. The goal should be to have at least 6 products and services per customer. In addition, in order to increase the share (wallet-share), up-selling must be thoroughly applied in all departments from customer specialist to the counter at the counter - how to turn the branch into select. The main choice of customers for the transaction from payment, savings to, swipe cards to investment credit, consumption.

Focusing on high margin products. In which, it is necessary to develop products with high profit margins and good fee opportunities such as demand deposits, card services, unsecured loans, overdrafts and insurance I.ncreasing the productivity of sales: the optimization of sales productivity should be considered the focus of the branch and must be carried out continuously. If observed, with the current centralized approval and disbursement process - a loan record (mortgage) is usually completed within 5-7 days. As a result, every customer server has to disburse four monthly records. In the absence of pressure on the credit line, the bank can focus more resources to develop premium products such as credit cards, insurance, e-banking services.

Beside this customer growth, in which, the increase in the number of customers opening accounts helps bring opportunities to charge fees, increase demand deposits and help to further expand customer relationships.

Therefore, the bank needs to actively develop the customer system - especially payroll customers and large population in the area within a radius of 1-3km.

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The last, reducing the cost of sales and service. there is a fact that in many branches, due to lack of orientation, experts go to exploit the area too far for profile loan just a few hundred million or go more than a dozen kilometers just to release each card. By doing so, the credit dispersed, every single retail customer in the area so far makes operating costs high and also become more risks in customer care and management. On the other hand, the bank should actively guide and encourage customers to use alternative channels such as internet banking, mobile banking, ATM, etc. To save on service costs - but do not miss out on cross-selling opportunities. In addition, the bank should promote the development and exploitation of channel collaborators and agents to reduce fixed costs.

Along with the great development of information technology, banking products and services have developed remarkably, diversified and diversified products, bringing convenience to users. E-banking services are now diversified and increasingly developed, in which home banking services are being applied and developed at domestic commercial banks, bringing benefits to both customers. goods and banking. Therefore, besides the traditional solutions for BIDV to improve the bank‟s performance, the development in technology in business operating is one of the key factors that lead to the BIDV‟ future success. Currently, BIDV has its own E-banking on mobile phone with the easy using display that help customer can control their account and accepted for payment online. Moreover, by cooperating with many partners in other industry such as airline, telephone agencies, and other businesses that the customer can connect directly to their shopping habit by using BIDV account via their personal phone. This convenient using by applying technology help BIDV become more attractive than other banks in current time.

CONCLUSION

Research summary:

In conclusion, the study that focus on the case of BIDV has highlighted the role of maintaining effective credit management system as the vital concern in profit maximization. The attempt of BIDV in tightening credit performance in the recent years could be therefore tracked as the crucial factors contributing to the impressive profit making performance of the bank lately. In turn, the research outputs and lessons from BIDV should be adopted as the guideline for other commercial banks in Vietnam to sustain in the ever fierce competition of Vietnam financial market as well as the changes promoted by the integration of Vietnam banking system to the global environment.

Accordingly, the control on non-performing loan should be kept at the central part of the bank strategy, given that the level of bad debt leaves severe influence on the bank profit while further measures covering the loss could further pulling off the profitability. Moreover, the capital adequacy should be seen as the indicator of bank stability in long run rather than a factor driving bank profitability. On this ground, it is recommended that BIDV should persistently maintain the capital adequacy as required by the Central Bank and BASEL but still keeping capital adequacy at a relevant level for profit maximization. Last but not least, the active engagement of bank in innovating credit management regime is also seen as the core factors contributing to the stability of the credit system. Hence generating favorable condition for the bank to achieve the expected objective of profit making.

Research limitations and future orientations for this thesis:

First of all, it is important to highlight the absence of qualitative factors in the research model as one of the limitation which somewhat distort the accuracy

of the model employed. According to Krauss, (2005), the qualitative variables play important role in shaping the comprehensive environment of commercial bank. In a moving economy, the banking performance is also under external pressure such as well-being of economy, level of inflation, interest rate adjustment under monetary policies of the government. However, to set the focal point on the specific context of BIDV, this research has assumed that external factors hold equivalent influences on all banks in the same environment, hence external impacts have been ignored to keep the model as simple as possible. However, it is certain that the over-simplified research model embeds with lower accuracy would be less likely to reflect the reality.

Therefore, the future research should take account into these external factors to complete the big picture of bank profitability.

Another limitation can be referred to the method implemented in the study which focused too much on measurement in a broad scale. Accordingly, the study has concerned more to gauging the factors in panel analysis while taking little concern to the specific settings of BIDV. The generalization of the study with employment of data of BIDV and Vietinbank does not help get insight into the case of BIDV and the underlying problems occurring in profit making performance of this bank. Therefore, the practicality of the research outcome is still rather limited. In the future research, it is suggested that qualitative measure such as interview should be adopted to further access the problems of BIDV

Another shortcoming of the study is the examination of moderator effects between factors and the profit level. A particular example is the lack of measuring moderator effect that the increase of non-performing loan on the level of loan loss provision as well as this effect on the profit. Because of this omission, the total effect of the predictors in the model on profitability could

have been distorted. The future study should, therefore take account into the cross effect to draw out the big picture of bank profitability.

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APPENDIX

(Sources: SBV website and Annual reports of 8 Commercial banks)

CAR NPL LDR LLPR TA DR ROA ROE

2006 Vietinbank 5.800% 0.138% 85.210% 2.658% 18.724 7.500% 0.620% 11.300%

STB 10.450% 1.120% 69.800% 1.230% 17.025 5.700% 1.580% 18.890%

BIDV 8.650% 0.890% 91.000% 1.200% 18.945 9.100% 1.980% 15.330%

ACB 10.900% 0.700% 129.000% 0.530% 17.614 15.000% 2.900% 33.800%

Vietcombank 12.280% 0.760% 111.200% 2.700% 18.933 11.000% 2.490% 29.420%

MBB 15.890% 0.950% 92.120% 1.180% 16.621 10.000% 1.950% 22.700%

EIB 16.700% 0.843% 104.200% 1.100% 16.724 12.000% 2.240% 27.200%

SHB 7.560% 2.041% 65.200% 2.285% 14.097 8.000% 1.050% 12.340%

2007 Vietinbank 11.620% 0.102% 90.230% 2.120% 18.928 8.000% 1.010% 14.120%

STB 11.820% 1.093% 80.000% 1.620% 17.983 5.900% 1.686% 19.200%

BIDV 7.850% 1.500% 93.220% 1.470% 19.105 6.900% 1.270% 15.200%

ACB 6.800% 0.680% 52.540% 0.817% 18.263 18.000% 3.250% 38.320%

Vietcombank 12.650% 0.880% 88.950% 1.120% 19.101 14.000% 2.220% 26.200%

MBB 14.900% 0.750% 82.600% 1.154% 17.204 13.000% 2.220% 26.080%

EIB 17.000% 0.701% 98.900% 1.060% 17.333 15.000% 1.780% 27.260%

SHB 17.900% 1.700% 78.000% 2.820% 16.331 7.000% 0.850% 10.280%

2008 Vietinbank 11.200% 0.210% 91.500% 1.540% 19.081 10.000% 1.350% 15.700%

STB 12.160% 1.330% 57.200% 1.470% 18.041 5.000% 1.040% 12.310%

BIDV 8.940% 1.710% 95.700% 1.760% 19.323 6.500% 1.250% 13.600%

ACB 12.400% 0.900% 56.990% 1.147% 18.474 11.000% 2.320% 24.500%

Vietcombank 11.500% 1.340% 71.560% 1.350% 19.220 8.500% 1.370% 16.540%

MBB 11.470% 1.150% 89.670% 1.210% 18.055 8.000% 1.530% 17.800%

EIB 35.890% 3.410% 87.240% 4.989% 17.721 4.300% 0.670% 7.430%

SHB 25.800% 2.620% 65.460% 3.963% 16.479 5.000% 0.911% 8.760%

2009 Vietinbank 8.600% 0.610% 96.480% 0.890% 19.312 12.000% 1.540% 20.600%

STB 11.410% 0.670% 64.420% 0.740% 18.460 5.700% 1.780% 18.050%

BIDV 9.540% 1.420% 106.920% 1.630% 19.507 10.000% 0.940% 21.050%

ACB 9.970% 0.700% 60.730% 0.950% 18.939 16.000% 2.100% 31.240%

Vietcombank 8.100% 1.070% 83.570% 1.370% 19.360 11.000% 1.640% 25.580%

MBB 12.000% 1.018% 107.250% 1.300% 18.050 12.000% 2.660% 26.610%

EIB 26.870% 2.830% 85.000% 2.860% 17.997 5.000% 0.790% 8.650%

SHB 17.060% 1.940% 68.480% 2.750% 17.128 8.000% 1.590% 11.590%

2010 Vietinbank 8.000% 0.660% 118.290% 1.220% 19.723 13.470% 1.510% 22.100%

STB 10.660% 1.520% 61.220% 2.220% 18.842 5.000% 1.390% 14.860%

Internal factors effecting the bank profitability

Other external factor effecting the bank profitability