Tài liệu Summary of financial and banking phd thesis development of commercial bank's non credit services in vietnam

THE MINISTRY OF EDUCATION & TRAINING THE STATE BANK OFVIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY

 PHAM ANH THUY DEVELOPMENT OF COMMERCIAL BANK'S NON-CREDIT SERVICES IN VIETNAM SUMMARY OF FINANCIAL AND BANKING PHD THESIS HO CHI MINH CITY, 2013 2 THE MINISTRY OF EDUCATION & TRAINING THE STATE BANK OFVIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY

 PHAM ANH THUY DEVELOPMENT OF COMMERCIAL BANK'S NON-CREDIT SERVICES IN VIETNAM SUMMARY OF FINANCIAL AND BANKING PHD THESIS RESEARCH FIELD: BANKING AND FINANCE CODE: 62.34.02.01 SCIENCE INSTRUCTOR: PROF., DR. TRAN HOANG NGAN HO CHI MINH CITY, 2013 2 3 INTRODUCTION 1. PhD Thesis's necessity and importance Vietnam officially became the 150th member of the World Trade Organization (WTO). This WTO membership will bring both opportunities and challenges for commercial banks (commercial banks) in Vietnam requiring the commercial banks to implement their enormous reforms to maintain and develop their roles in the fiercely competitive business environment. In Vietnam the banking competition is rather fierce. All banks throughout the country are currently doing business with their great excitement. For every minute, the banks are competing with each other by launching new products and services, offering low interest rates, process improvement, modern banking technology application ... In 2012, when Vietnam Government removed some restriction in field of bank finance, the foreign banks performed their business with more free access. So far, for commercial banks, the main source of income is credit operations especially in respect of medium and long term credit, real estate credit.... Due to the credit operation is in possible risks and the State Bank of Vietnam (SBV) firmly decided to set the maximum growth rate, the commercial banks were forced to increase their income from non-credit operation. However, this is not easy way for commercial banks in the current period. It is one of financial restructuring activities of credit institutions in the master plan "Credit institutions restructuring for the period of 2011-2015" approved by the Prime Minister at Decision No. 254/QD-TTg dated 01 March, 2012 that : To gradually restructure the business model of commercial banks with less reliance on credit operations and more income from non-credit services. The non-credit services development is of socio-economic significance making the safe, accurate and fast payment; restricting corruption, illegal trafficking ... In addition, non-credit products will create more stable and safer income for commercial banks, although these banks have been facing with hard competition in the fierce business environment. Therefore, Vietnamese banks have to prepare the appropriate steps in the near future to keep their existence and sustainable development meanwhile the state protectionism for domestic banks is step-by-step removed. Moreover the development of non-credit services provides many positive social and economic impacts as more effective capital accumulation; safer, more accurate and easier monetary transactions; tightlycontrolled illegal income... Based on the above approach, with a desire to participate in the development of commercial bank's non-credit services in Vietnam, I choose this PhD thesis "Development of commercial bank's non-credit services in Vietnam" for my financial economics and banking subject. It is hoped that this PhD thesis will contribute to the development of Vietnam commercial bank's services in the near future. 3 4 2. Overview: According to the author, up to now there is no thesis on the development of commercial bank’s non-credit services in Vietnam. In recent years, there are a lot of scientific studies, research articles on non-credit services in various aspects, with diversified methodologies and at different time. As the result, this PhD thesis is completely not same as the previous research studies. In particular, for this thesis, the author applied the new methodology of combined two research methods including qualitative methods (studying scale of non-credit service development) and quantitative methods (studying quality of non-credit service development). As qualitative research, the author conducts a data survey and analysis in 38/40 commercial banks in Vietnam. It is the new point in his research on scale of Vietnam commercial bank's non-credit services development that the allocation of general operating expenses by operation type (types of credit service, non-credit service and other services) and the cost of provision for credit losses is itemized in the cost of credit operation. As the result, the author calculates the contribution of each type of service to the profit before tax showing the real effectiveness of non-credit service development. As quantitative research, the author conducts a customer survey for non-credit services in a number of commercial banks in Vietnam and SPSS software application to identify the impacts on the customer satisfaction. 3. Objectives To study the non-credit services development on two aspects of scale and quality for identification of both advantages and limitations to the development of commercial bank's non-credit services in Vietnam. On that basis, the thesis proposes solutions for commercial bank's non-credit services development in Vietnam. 4. Subject and Scope of study Subject: Commercial bank‘s non-credit services in Vietnam. Scope of study: Commercial bank‘s non-credit services in Vietnam 5. Methodology The thesis is based on methods of statistics, analysis, synthesis, logic, comparison, inductive, synthesis, dialectical materialism, comparison between theory and practice, combined qualitative and quantitative researches and reference. The fact study was performed in two steps: preliminary and official studies. Preliminary study is performed basing on qualitative methods with expert opinions for adjusting QoS reference point for non-credit services and its impact on customer satisfaction. Official studies are carried out basing on quantitative methods of direct interview and survey via Internet. 6. Thesis Content Apart from the introduction, conclusion, list of abbreviations, a list of tables, list of references ... The thesis consists of 03 chapters as follows: Chapter 1: Theory of commercial bank's non-credit services 4 5 Chapter 2: Current development of Viet nam commercial bank’s non-credit services Chapter 3: Solutions for developing Viet nam commercial bank's non-credit services CHAPTER 1: THEORY OF COMMERCIAL BANK’S NON-CREDIT SERVICES 1.1. OVERVIEW OF BANKING SERVICES 1.1.1. Definition Banking services are banking operations providing customers services as required including deposit saving, lending, payment and foreign exchange trading, guarantee, advisory services, ... 1.1.2. Characteristics of banking products and services 1.1.3. Classification of banking services in term of income source 1.1.3.1. Credit Services 1.1.3.1. Non-credit services + Deposit saving, payment accounts and treasury services + Card Service + E-banking services + Foreign Currency Trading + Guarantee service (fee-based ) + Trust Service + Advisory Service + Banking supervision + Money brokerage + Other non-credit services 1.2. OVERVIEW OF NON CREDIT SERVICES 1.2.1. Definition Non-credit services are bank services creating income apart from interest and from the account payment services, treasury services, fee-based collection services, advisory services, trust services, foreign currency exchange ... 1.2.2. Development of non-credit services 1.2.2.1. Background The author's views: + Development both in scale and quality : Each bank initially builds its investment plan of non-credit services development. It is necessary to improve existing non-credit services with the application of international standards and practices, the maximum exploitation to strengthen customer confidence and optimizing investment. On the other hand, it is required to access to new technologies for developing the customer and market networks. However, the investment capital should not be wastefully and inefficiently allocated. It is essential to harmonize the diversification with quality + Development in line with control capacity and market demand: The bank itself can control the arising risks to meet the customer needs. The massive and out-of-controlled development can lead to unsafe condition at one unit, section or affect the bank's entire operations. 1.2.2.2. The need to develop commercial bank’s non-credit services 5 6 + For Banks - Non-credit service is highly profitable for banks because of its low cost. - Non-credit service not require banks to use more capital - Non-credit service helps banks reducing potential risks as its safe and low-risk level - Non-credit service to help banks in recruiting and staff retraining - Non-credit service to help banks in public relation, brand name promotion and market survey - Non-credit service development is consistent with the trend of banking sector development - Non-credit service to help bank cooperation for development + For the economy - To meet the rising demand for banking service in the economy - Required banking modernization to develop a modern economy 1.2.2.3. Impacts on the non-credit service development The impacts on the development of commercial bank’s non-credit services is classified into two types + Internal impacts First, the financial capacity Second, the information technology infrastructure Third, governance capacity and effective human resources strategy Fourth, the distribution channels Fifth, customer policy + External impacts First, the legal basis Second, the level of international economic integration and intra competition Third, economic growth and social environment Fourth, the political situation and social order and security Fifth, the client's needs Sixth, the government's policy Seventh, competitors 1.2.2.4. Criteria for the non-credit service development The level of non-credit service development is rated basing on the following criterion. First, the criterion for the scale of non-credit service development + Sales and income increase + Customer and market share increase + Number of services Second, the criterion for the quality of non-credit service development + Increased benefits and safety of bank products + Response to customer demand 6 7 + Bank brand name and reputation The criteria evaluation and measurement of banking service quality can be represented upon the model and customer perception of banking services quality. According to previous studies, the banking service quality is often measured by the SERVQUAL model (five-component model) RVPERF model and FSQ & TSQ models. - SERVQUAL model (five components) Reliability Responsiveness Tangibles Capability Empathy 1.2.3. Risks of developing non-credit services 1.2.3.1. Liquidity risk 1.2.3.2. Interest rate risk 1.2.3.3. Exchange rate risk 1.2.3.4. Operational risk 1.2.3.5. Technology and operational risks 1.3. EXPERIENCE ON NON- CREDIT SERVICE DEVELOPMENT OF FOREIGN BANKS AND LESSONS FOR COMMERCIAL BANKS IN VIETNAM 1.3.1. Experiences of some international banks 1.3.1.1. Hang Seng Bank (Hong Kong) 1.3.1.2. Standard Chartered 1.3.1.3. Citibank (Japan) 1.3.2. Lessons for Vietnamese commercial banks First, to improve the legal environment for banking services, especially e-banking services. Second, to create the necessary infrastructure for the banking service development, especially the information technology-based and associated tools and means. Third, to develop governance capacity and professionalism of bank staff, employees. Fourth, to diversify bank products and services, modernizing traditional services in parallel with developing up-to-date services. Fifth, to pay reasonable attention and develop the appropriate banking network. Sixth, to pursue the right customer policies. Seventh, to focus on advertisement, public relation, introduction of banking services benefits . Eighth, to set up reasonable prices. Conclusion of chapter 1 : For Chapter 1, the thesis systematically presents the basic theory of commercial bank services, non-credit service, experiences on developing non-credit services in the world and lessons for commercial banks in Vietnam. For the overview of banking services, the thesis presents banking service concepts, the characteristics of banking products and services and income-based service classification. For the overview of non-credit services, the thesis presents the concept of 7 8 non-credit service, development of non-credit services (in terms of scale and quality of service) and the risks of non-credit services performance for commercial banks in Vietnam. In particular, regarding to the development of non-credit services, the author points out the widely applied models for rating banking service quality and customer satisfaction to build the theory framework for quantitative study shown in Chapter 2. In addition, the thesis refers to the experiences of non-bank credit services development in the world to draw out 8 key valuable lessons for reference for commercial banks in Vietnam. The above arguments help to form basical theory for the realization of taskoriented thesis. CHAPTER 2: CURRENT DEVELOPMENT OF VIETNAM COMMERCIAL BANK’S NON- CREDIT SERVICES 2.1. CURRENT OPERATION OF VIETNAM COMMERCIAL BANKS As of 31 December, 2011, the Vietnam banking system consists of 01 Development Bank, 01 Bank for Social Policy, 5 state-owned commercial banks of which 03 state-owned equitized commercial banks, 35 joint-stock commercial banks, 50 branches of foreign banks, 05 100% foreign invested banks, 4 joint-venture banks. Thus, currently the total number of Vietnam commercial banks is 40. Vietnam banking system is continuously expanded and diversified in terms of scale, ownership and business. However, the weakness of the Vietnam banking system are shown as following: First, a very high level of debt with bad debt compared to the economic growth level; Second, liquidity problem in respect of interest racing for the past time; Third, weak management of corporate and risk, business losses and inefficiency. 2.1.1. Financial capacity 2.1.1.1. Capital and capital adequacy ratio of commercial banks + Capital of commercial banks In 2011, the average chartered capital of commercial banks in Vietnam is VND 6043 billion (equivalent to USD 290 million - as the average inter-bank exchange rate announced by the State Bank of Vietnam on 31 December, 2011). Now there are 14/40 banks with chartered capital of over VND 5,000 billion, of which 7 banks with over VND 10,000 billion in capital namely as Vietnam Bank for Agriculture and Rural Development (VND 21,511 billion), Vietnam Joint Stock Commercial Bank for Industry and Trade (VND 20,230 billion), Joint Stock Commercial Bank for Foreign Trade of Vietnam (VND 19,698 billion), Joint Stock Commercial Bank for Investment and Development of Vietnam (VND 12,947 billion), the Vietnam Export Import Commercial Joint Stock Bank ( VND 12,355 billion), Saigon Commercial Joint Stock bank (VND 10,740 billion), Saigon commercial bank (VND 10,584 billion). Till 31 December, 2011, three small banks with capital of less than VND 3,000 billion as Petrolimex Group Commercial Joint Stock Bank (VND 1,000 billion), Bao Viet commercial bank (VND 1,500 billion) and Saigon commercial bank for Industry and Trade (VND 2460 billion). + CAR Ratio 8 9 Table 2.4: CAR Ratio of Vietnam commercial banks Unit : % Year Category 2008 2010 8,94 9,53 11,02 Source : The securities company analysis [12] CAR Ratio 2009 2011 11,92 2.1.1.2. Equity In recent years, the commercial bank credit operation have been blooming out of control especially in respect of medium and long-term loan for real estate projects causing economic threat of bad debt in Viet Nam. Table 2.7: Bad Debt ratio of Vietnam commercial banking system Unit : % Year 2007 2008 2009 2010 1,6 2,1 2,6 3,0 Source: Annual Reports of State Bank of Vietnam [42] Category Bad Debt Ratio 2011 3,3 2.1.1.3. Business Performance Results + First, the income statement Table 2.9: Business Performance of Vietnam commercial banks Unit: VND million Category 2007 46.291 8.377 5.674 60.342 17.016 2008 52.466 10.722 7.658 70.846 21.041 Year 2009 54.932 11.743 12.698 79.373 29.844 2010 84.969 14.202 12.364 111.535 43.945 2011 132.067 12.707 6.470 151.244 57.926 1. Income from credit operation 2. Net gain from non-credit service 3. Net gain from other operations 4. Total income (1+2+3) 5. Total operating expenses 6. Net operating profit before provision of 43.326 49.805 49.529 67.590 93.318 credit losses (5-6) 7. Cost for provision of credit losses 28.016 26.488 14.650 23.237 37.296 8. Profit before tax (6-7) 15.310 23.317 34.879 44.353 56.022 Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] The year of 2011 is a difficult year for commercial bank's operation in the monetary market. However, as shown in the business performance of a number of commercial banks, the commercial banks 's profit have increased over the years. Second, the operating income structure of Vietnam commercial banks Figure 2.1: The operating income structure of Vietnam commercial banks 9 10 % 100% 9,4 10,8 16,0 11,1 90% 13,9 80% 4,3 8,4 12,7 15,1 14,8 70% 60% 50% 87,3 40% 76,7 74,1 69,2 76,2 30% 20% 10% 0% Năm 2007 2008 2009 2010 2011 Lãi thuần từ các hoạt động khác Lãi thuần từ hoạt động phi tín dụng Thu nhập từ hoạt động tín dụng Source: Annual Reports of 38 Commercial Banks in Vietnam and the author's analysis [8, 10, 11] Table 2.11: Net gain from non-credit service of Vietnam commercial banks Unit: VND million Year Category 2007 2008 2009 2010 2011 1. Net gain from payment service 1.236 2.331 3.739 5.687 6.208 2. Net gain from treasury service 145 238 355 765 882 3. Net gain from guarantee service 547 1.098 1.599 2.018 2.752 4. Net gain from trust service 26 53 101 397 303 5. Net gain from advisory service 15 6 150 112 24 6. Net gain from other services 1.822 2.199 2.560 3.338 2.332 I. Total net profit from services (1->6) 3.791 5.925 8.504 12.318 12.500 II. Net profit from foreign currency 4.586 4.797 3.239 1.884 207 trading operations III. Net profit from non-credit services 8.377 10.722 11.743 14.202 12.707 (I+II) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] Table 2.12: Proportion of net profit from non-credit services of Vietnam commercial banks 10 11 Unit : % Category Net gain from payment service Net gain from treasury service Net gain from guarantee service Net gain from trust service Net profit from advisory service Net gain from other service Net profit from foreign currency trading operations Total net gain/loss from non-credit services Year 2007 2008 2009 2010 2011 14,8 1,7 6,5 0,3 0,2 21,8 54,7 100 21,7 2,2 10,2 0,5 0,1 20,5 44,7 100 31,8 3,0 13,6 0,9 1,3 21,8 27,6 100 40,0 5,4 14,2 2,8 0,8 23,5 13,3 100 48,9 6,9 21,7 2,4 0,2 18,4 1,6 100 Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] As shown in Table 2.12 in respect of proportion of net profit from non-credit activities, payment, treasury, guarantee services are growing with stable net gain. The trust services, advisory services and foreign currency trading business and other services are unstably growing. In particular, net gain from foreign currency exchange operations seriously decreased over the years of 2007-2011 and accounted for lower proportion of total income from non-credit services. Third, the net income of each business after allocation of operating costs Table 2.14: Income statement of Vietnam commercial banks Unit: VND million Year Category 2007 2008 2009 2010 2011 1. Income from credit operation 46.291 52.466 54.932 84.969 132.067 2. Operating expenses for credit operation 13.054 15.582 20.654 33.478 50.581 3. Cost of Provision for credit losses 28.016 26.488 14.650 23.237 37.296 I. Net gain after provision for credit losses 5.221 10.396 19.628 28.254 44.190 and operating expenses allocation 4. Net gain from non-credit service 8.377 10.722 11.743 14.202 12.707 5. Cost for non-credit activities 2.362 3.184 4.415 5.596 4.867 II. Net gain from non-credit activities after 6.015 7.538 7.328 8.606 7.840 operating expenses allocation 6. Net gain from other operations 5.674 7.658 12.698 12.364 6.470 7. Costs for other activities 1.600 2.275 4.775 4.871 2.478 III. Net gain from other operations after 4.074 5.383 7.923 7.493 3.992 allocation of operating expenses IV. Total net gain = Profit before tax 15.310 23.317 34.879 44.353 56.022 Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] Table 2.14 shows the net income of each business (including credit and non-credit services and other services) as taking costs for provision for credit losses into net gain from 11 12 credit services and operating costs allocation for each business. After such allocation, the total net profit from the bank business is equal to the profit before tax. Table 2.15: Proportion of net profit per each business to Total profit before tax Unit: % Year Category 2007 2008 2009 2010 2011 1. Net gain after provision for credit losses and allocation of operating 34,1 44,6 56,3 63,7 78,9 expenses 2. Net gain from non-credit activities 39,3 32,3 21,0 19,4 14,0 after allocation of operating expenses 3. Net gain from operations after 26,6 23,1 22,7 16,9 7,1 allocation of operating expenses 4. Total net gain = Profit before tax 100,0 100,0 100,0 100,0 100,0 Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] Table 2.16: Proportion of Operating income of Viet Nam commercial banks Unit: % Year Category 2007 2008 2009 2010 2011 1. Net gain from credit operation 76,7 74,1 69,2 76,2 87,3 2. Net gain from non-credit operation 13,9 15,1 14,8 12,7 8,4 3. Net gain from other operation 9,4 10,8 16,0 11,1 4,3 4. Total operating income 100,0 100,0 100,0 100,0 100,0 Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] As shown in Tables 2.15 and 2.16 net gain from credit operation takes a smaller proportion of the profit before tax than that of operating income over the years 2007 to 2011. It is proved that the credit operation is the major source of income for Vietnam commercial banks but potentially risky. Meanwhile, income from non-credit activities are taking greater proportion of profit before tax than that of operating income over the years 2007 to 2011. It is proved that income from non-credit operation is less risky and more profitable for Vietnam commercial banks. 2.1.2. Rate of return (%) 2.2. CURRENT DEVELOPMENT OF VIETNAM COMMERCIAL BANK ’S NONCREDIT SERVICES IN TERM OF SCALE 2.2.1. Services 2.2.1.1. Deposit account services, payment and treasury services + First, deposit account services - Product and features Deposits, withdrawals, bank transfers, loan guarantees, loan guarantees to third parties in the bank; collection at the request of customer; other products as flexible savings account – floating interest rate : Customers can deposit more or withdraw a partial capital 12 13 on the interest payment day. Moreover, customers can withdraw all before maturity when needed. Benefit and quality of service: Deposits, withdrawals, transfers, payments; monthly salary receiving; Overdraft account; card issuance, checque issuance; Sign up for e-banking services; online banking services via the internet; banking services via mobile message; banking by phone 24/7; Automatic Transfer for periodic payments; payment transactions, withdrawal, money transaction for securities trading, for auction, online dividends receiving ... with affiliate securities companies; confirmation of financial capacity for abroad travel, study, ... savings account for loan payment or bank transfer to the other account. Capital raising performance: Table 2.19: internal capital raising of Vietnam commercial banks Unit: VND million Category Capital raising from cooperation Increase or decrease rate comparing to the previous year (%) 2007 924.922 - 2008 1.262.51 9 Year 2009 1.618.46 9 36,5 28,2 2010 2.235.331 38,1 2011 2.467.18 3 10,4 Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] As shown in Table 2.19, the growth rate of capital raising of Vietnam commercial banks continuously increased over the years 2007-2011. In 2011, the capital raising has been facing with difficulties due to the impact of tightened monetary policy and strict control of the foreign exchange market. In addition, capital mobilization has been facing much more challenges due to the unfair competition of a number of commercial banks, + Second, the payment service - Domestic Payment - Product and features: Domestic payment products include payment order, collection order, checque payment and card payment. Payment, online payment, payment for electricity, telephone bills, shopping invoices, , airline tickets buying ...;monthly salary receiving; overdraft account; bank cards issuance: Smartlink, Banknet, and VNBC; checque issuance; registered electronic banking services: Internet banking, Mobile banking, Home banking; automatical money transfer for the periodical payment; payment transactions, withdrawal, money transaction for securities trading, for auction, online dividend receiving from securities companies affiliated with banks; -Benefit and quality of service 13 14 To best serve the cardholders, Vietnam commercial banks are constantly expanding their card acceptance points and ATM network throughout the provinces and the cities for ready response to domestic and foreign customer' demands. Customers can use the payment service through ATM and POS as payment for electricity, water, postal charges, shopping in commercial centers ... International Settlement International settlement provided by Vietnam's commercial banks is well growing thanks to the wide network of correspondent banks around the world. Payment service performance Table 2.20: Net gain from payment service of Vietnam commercial banks Unit: VND million Year Category 2007 2008 2009 2010 2011 Income from payment service 1.582 3.022 4.462 6.830 7.828 Cost of payment service 346 692 723 1.143 1.620 Net gain from payment service 1.236 2.331 3.739 5.687 6.208 Ratio of Net gain / income from 77,1 83,8 83,3 79,3 78,1 payment service (%) Increase or decrease rate of payment (0.01) 60,4 52,1 9,2 service over the previous year (%) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analyis [8, 10, 11] As shown in Table 2.20, the ratio of net gain from payment service always reaches at 77% to 83.8%. Thus, the payment service is highly profitable for Vietnam commercial banks. Currently, banks are competing on bank fee for non-credit services. Fee schedule of the state-owned commercial banks are more competitive than that of joint-stock commercial banks in recent years. However, the Vietnam commercial banks apply some not appropriate fee as account management fees, charges for account close, cash withdraw in case the account holder deposited into his account or got interest within two days, high charge for account statements extraction up to VND200,000 / account / month, charge for certified audited balance, charges for all deposits with maturity within 5 days ... fees are sometimes too rigid not to create incentives for large and loyalty customers. + Third, treasury services - Product and features The treasury services include cash collection/withdrawal service with quick and safe deposit and withdraw; Acquisition, change of unqualified VND cash; collection of foreign cash that are crumpled, sticky chemicals, fire, termites and expired at circulation, not qualified for circulation; professional guidance for recognizing fake foreign currency at authorized exchange dealers and other bank units. - Benefit and quality of products Easy account opening and transaction; open an account in VND or foreign currency; Cash on business account is kept safe, secure; convenient deposit and withdrawal at all 14 15 bank branches; instant bank account transfers; diversified payment services with convenience and low fee through a network of bank branches and extensive authorized dealers; modern electronic banking services; special support such as: automatic investment, centralized capital management. - Treasury service performance Table 2.21: Net gain from treasury services of Vietnam commercial banks Unit: VND million Year Category 2007 2008 2009 2010 2011 Incomes from treasury service 207 416 567 1.021 1.194 Cost of treasury service 62 178 212 256 311 Net gain from treasury service 145 238 355 765 882 Ratio of Net gain / income from treasury service 70 57,2 62,6 74,9 73,9 (%) Increase or decrease rate of net gain from treasury 64,1 49,0 115,5 15,4 services over the previous year (%) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] 2.2.1.2. Card services Card services are much invested with modern technology but not bring corresponding benefit with Vietnam commercial banks’s investment. However, the development of card service promotes brand names of Vietnam commercial banks and provides other support services such as billing and account services. Table 2.22: Number of ATM, POS and bank cards through the years Year Category 2007 2008 2009 2010 2011 ATM (unit) 5.234 7.051 9.000 11.137 13.636 POS (unit) 23.543 29.215 36.620 37.258 37.432 Bank Card (million card)) 12,1 13,4 17 24 40 Source: Statistics of Viet Nam Card Association [44 2.2.1.3. . Electronic banking services - Product and features: Internet Banking: banking transactions via the global Internet network Phone Banking: banking transactions via the telephone network. SMS Banking: banking transactions through SMS mobile messages ATM: banking transactions through ATMs WAP Banking: banking transactions over the web on your mobile phone Call Center / Contact Center: answer questions, provide information and banking transactions over the telephone. Mail Banking, Fax Banking, Video Banking: banking by e-mail, Fax, Video - Benefits and quality of product: 15 16 The main benefits of E-Banking are: Providing account information, inquiry, transfer, payment, registration, advisory and other banking operations - E-banking service performance: Cost savings, increased revenue: E-Banking transaction fee is assessed to be very low compared to traditional transactions, particularly transactions through the Internet, thereby to increase operating income for banks. 2.2.1.4. Guarantee service - Functionality: Guarantee services provided by the Vietnam commercial banks are providing loan guarantee, payment guarantees, bid security, agreement performance guarantee, guarantee for tax payment for import and export, advance payment guarantee, warranty guarantees, counter-guarantees, guarantees for specific purposes. - Benefits and quality of guarantee services Vietnam commercial banks with their high reputation in the domestic and international markets, long experience in advisory and providing both domestic and international guarantee services; Commercial banks establish their broad relationships throughout the country and the agency relationships with leading banks in more than 80 countries and territories around the world; - Guarantee service performance : Table 2.25: Net gain from guarantee service of Vietnam commercial banks Unit: VND Year Category 2007 2008 2009 2010 2011 Income from guarantee service 549 1.099 1.601 2.024 2.763 Cost of guarantee service 2 1 2 5 11 Net gain from guarantee service 547 1.098 1.599 2.018 2.752 Ratio of Net gain/ income from guarantee service 99,6 99,8 99,9 99,7 99,6 (%) Increase or decrease rate of net gain from guarantee 100,7 45,7 26,2 36,3 service over the previous year (%) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] As shown in Table 2.25, the ratio of net gain/income from guarantee service reached at over 99% annually and for the period from 2007 to 2011. Thus, the guarantee service creates a very high rate of return for Vietnam commercial banks. 2.2.1.5. Trust Service Table 2.26: Net gain from authorized trust service of Vietnam commercial banks Category Income from trust service 16 2007 349 Unit: VND million Year 2008 2009 2010 2011 763 743 746 648 17 Cost of trust service Net gain from trust service Ratio of net gain / income from trust service (%) 323 26 710 53 642 101 349 397 345 303 7,4 7,0 13,6 53,2 46,7 103,8 89,9 291,7 (23,7) Increase or decrease rate of net gain from trust service (%) Source: Annual Reports of 38 Vietnam Commercial Bank in and the author's analysis [8, 10, 11] As shown in Table 2.26, in 2010 and 2011 trust service brought relatively high net gain. However, trust service now accounts for a very small proportion of net gain from non-credit service of Vietnam commercial banks. Vietnam banks should pay attention to the service development in the near future. 2.2.1.6. Advisory Services Table 2.27: Net gain from advisory service of Vietnam commercial banks Unit: VND million Year Category 2007 2008 2009 2010 2011 Income from advisory service 480 501 820 520 475 Cost of advisory service 465 495 669 408 452 Net gain from advisory service 15 6 150 112 24 Ratio of net gain/ income from advisory 3,1 1,2 18,3 21,6 5,0 service income (%) Increase or decrease rate of net gain from (60) 2.363,2 (25,3) (79,0) advisory service Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] As shown in Table 2.27, the advisory service produces net gain for Vietnam commercial banks. However, in recent years, this service has not fully been developed by Vietnam commercial banks. 2.2.1.7. Other non-credit services Including derivatives of interest rate, portfolio management, securities services, fund management services, rental services, gold trading etc. Table 2.28: Net gain from other services of Vietnam commercial banks Unit : VND million Category 2007 2.445 623 1.822 74,5 2008 3.114 915 2.199 70,6 Year 2009 4.133 1.573 2.560 61,9 2010 5.335 1.997 3.338 62,6 2011 5.939 3.607 2.332 39,3 Income from other services Cost of other services Net gain from other services Ratio of net gain/income from other services (%) Increase or decrease rate of net gain from other 20,7 16,4 30,4 -30,1 services (%) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] 17 18 2.2.2. Foreign currency trading services 2.2.2.1. Foreign Exchange Table 2.29: Net gain from spot foreign currency trading service Unit: VND million Category Year 2007 2008 2009 2010 2011 9.199 10.615 11.202 12.931 12.872 4.811 6.035 7.715 10.540 12.732 4.388 4.579 3.487 2.391 140 Income from spot foreign currency trading service Cost of spot foreign currency trading service Net gain from spot foreign currency trading service Ratio of net gain/income from spot foreign currency 47,7 43,1 31,1 18,5 1,1 trading service (%) Increase or decrease rate of net gain from spot foreign 4,4 (23,9) (31,4) (94,1) currency trading service (%) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] 2.2.2.2 Foreign exchange derivatives Table 2.30: Net gain from foreign exchange derivatives trading service Unit: VND million Year Category 2007 2008 2009 2010 2011 Income from foreign exchange derivatives 621 674 1.068 1.244 2.200 trading service Cost of foreign exchange derivatives trading 423 456 1.316 1.750 2.133 service Net gain from foreign exchange derivatives 198 218 (248) (506) 66 trading service Ratio of net gain/income from foreign 31,9 32,3 (23,2) (40,7) 3,0 exchange derivatives trading service (%) Increase or decrease rate of net gain from foreign exchange derivatives trading service 10,1 (214,0) 104,0 (113,1) (%) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] Table 2.31: Net gain from Vietnam commercial bank's foreign currency trading service Unit: VND million Year Category 2007 2008 2009 2010 2011 Income from foreign currency trading 9.820 11.289 12.271 14.174 15.072 service Cost of foreign currency trading service 5.234 6.492 9.032 12.291 14.865 Net gain from foreign exchange trading 4.797 3.239 1.884 207 4.586 service Ratio of net gain/income from foreign 46,7 42,5 26,4 13,3 1,4 currency trading service (%) 18 19 Increase or decrease rate of net gain from foreign currency trading service (%) 4,6 (32,5) (41,9) (89,0) Source: Annual Reports of 38 Vietnam Commercial Banks and the author's analysis [8, 10, 11] 2.3. CURRENT DEVELOPMENT OF NON-CREDIT SERVICES OF VIETNAM COMMERCIAL BANKS IN TERM OF QUALITY 2.3.1. Research model SERVQUAL model is a popular model and extensively used in marketing research and helpful in systematizing criteria for measuring banking services quality. 2.3.2. Research Process 2.3.2.1. Information collecting method Study data were collected in the form of a questionnaire by convenient random sampling method. 2.3.2.2. Data analysis First of all, the measuring criteria is coded as shown in Annex 3 2.3.3. Research results of Vietnam commercial bank's non-credit service quality The number of feedback votes was 298 of which the appropriate votes for statistical analysis was 281 (17 remaining incomplete votes ). 2.3.3.1. Survey-based evaluation of Vietnam commercial bank's non-credit service quality 2.3.3.2. Cronbach Alpha reliability coefficients-based evaluation of service quality criteria using As the analysis, the Cronbach's alpha reliability coefficient is greater than 0.7 and the coefficient of correlation > 0.3. So the criteria is reliable and all observed variables are used in subsequent factor analysis. 19 20 2.3.3.3 Analysis of EFA factor Table 2.39: Final analysis results of EFA factor of Vietnam commercial banks Component Variances 1 2 3 4 5 6 TC03 ,743 TC05 ,711 TC01 ,703 TC02 ,649 TC04 ,648 NLPV10 ,778 NLPV11 ,714 NLPV09 ,683 NLPV12 ,655 HH21 ,800 HH20 ,653 HH19 ,646 HH22 ,632 DU07 ,856 DU06 ,806 DU08 ,665 DC15 ,744 DC16 ,706 DC14 ,646 DC18 ,736 HH23 ,586 DC17 ,567 Source: The author' summary and analysis 2.3.4. Research results of Vietnam commercial bank's non-credit service quality’s impacts on customer satisfaction. 2.3.4.1. Customer satisfaction rating with Cronbach Alpha reliability coefficient 2.3.4.2. EFA factor analysis 2.3.4.3. Study models of the relationship between the quality of non-credit services and customer satisfaction - 1st adjustment 2.3.5. Model testing by multiple regression analysis 2.3.5.1. Correlation matrix of variables 20