STUDYING THE QUALITY OF THE FUND MOBILIZATION ACTIVITIES AT COMMERCIAL BANK OF VIETNAM- LANG SON

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Cohort 2015 – 2017

MASTER’S THESIS

STUDYING THE QUALITY OF THE FUND MOBILIZATION ACTIVITIES AT 
COMMERCIAL BANK OF VIETNAM- LANG SON

AUTHOR: LAI VAN TOAN

SUPERVISOR: Dr. PHAM THI LIEN

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ACKNOWLEDGEMENT

I declare that this master’s thesis is my own research and the data and the material used
in this thesis have clear sources and references to all the sources. The result of this thesis is
honest and derived from the actual situation of the organization.

In order to complete this master’s thesis I owe many people many thanks for their
supporting.

First, I would like to express my endless thanks and gratefulness to my supervisor Dr.
Pham Thi Lien. Her kindly support and continuous advices went through the process of
completion of my thesis. Without his assistance, the thesis would have been done effectively.

So far, I would like to thank all the lectures and staffs of International school – Vietnam
National University Hanoi and University de Nantes for their teaching and supporting me to
achieve knowledge and experience.

My special thanks to all staffs and management’s branch of Vietinbank- Lang Son
branch; for their kind assistances and support in providing me data and advices to complete
the research.

Finally, I would like to express my special thanks to my parents for their endless love
and motivation

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TABLE OF CONTENTS

INTRODUCTION ... 1

CHAPTER 1: THEORETICAL BASIS FOR FOR FUND MOBILIZATION 
ACTIVITIES OR COMMERCIAL BANKS ... 4

1. The concept of commercial banks ... 4

1.1. What is a commercial bank? ... 4

1.2. Basic operations of commercial banks ... 4

1.1.1. Mobilization of fund activities ... 4

1.1.2. Lending activity ... 5

1.1.3. Investment activities ... 6

1.1.4. Other service activities ... 6

1.2. Quality of fund mobilization ... 6

1.2.1. Definition of quality of fund mobilization ... 6

1.2.2. Size of mobilized capital ... 6

1.2.2. The growth rate of fund mobilization ... 7

1.2.3. Structure of mobilization of fund ... 7

1.2.4. Cost of fund mobilization ... 8

1.2.5.Other indicators: ... 10

1.2.6. Ensuring the safety of mobilized fund: ... 10

1.3. Factors affecting the quality of capital mobilization ... 11

1.3.1. Objective factors: ... 11

1.3.2. Subjective factors ... 12

Chapter II: Assessment of the quality of mobilization fund activities of VietinbankLang 
Son. ... 14

2.1. General introduction of VietinbankLang Son ... 14

2.1.1. Overview: ... 14

2.1.2. Business performance of VietinbankLang Son ... 15

business activities of Vietinbank Lang Son in the period 2013 - 2016 ... 15

2.2. Fund raising in Vietinbank Lang Son ... 22

2.2.1. Fund mobilization growth rate ... 22

2.2.2. Structure of mobilized fund ... 23

2.2.3. Market share of mobilized fund ... 27

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2.3.1. Result ... 28

Chapter III: Proposion of solutions to improve the quality of capitalMobilization of 
Vietinbank Lang Son. ... 36

3.1. Development orientation and orientation of fund mobilization strategy of Vietinbank
Lang Son ... 36

3.2. Solutions to improve the quality of fund mobilization at Vietinbank Lang Son ... 38

3.2.1. For the objective reasons ... 38

3.2.2. For the subjective reasons ... 39

3.2.3. Recommendations to improve the quality of fund mobilization ... 44

Conclusion ... 46

List of references: ... 47

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ABBREVATIONS

Vietinbank Vietnam Joint Stock Commercial Joint bank for Industry and trade
FM Fund mobilization

MCR Mobilization Capital resources

LIST OF TABLES

Table 2.1 Some major indicators reflect the results of business activities of Vietinbank Lang Son in
the period 2013 - 2016

Table 2.2 Growth rate and structure of mobilized fund of Vietinbank Lang Son
Table 2.3 Balance of funds in 2015 -2016

Table 2.4 Growth rate and loan structure of Vietinbank Lang Son in the period 2013 - 2016
Table 2.5 Overdue debt and overdue debt ratio at Vietinbank Lang Son in the period 2013 -2016
Table 2.6 International Payment Sales in the period 2013 - 2016

Table 2.7 Data on the share of deposits by currency

Table 2.8 The average mobilizing interest rate of Vietinbank Lang Son in the period 2013 -2016
Table 2.9 The average lending interest rate of Vietinbank Lang Son in the period 2013 -2016
Table 2.10 Difference in interest rates on loans and deposits

Table 2.11 Relationship between fund mobilization and lending of Vietinbank Lang Son

LIST OF FIGURES

Figure2.1 Fund growth of Vietinbank Lang Son in the period 2013-2016
Figure 2.2 Scale of capital mobilized by customers

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INTRODUCTION

1. The necessity and meaning of the research thesis

Commercial banks are a financial intermediary. In each country, financial
intermediaries are divided differently. However, there is always a common point that the role
of commercial banks and the contribution of assets and importance to the economy.With that
role, the profit is first element for Commercial banks and only tool that helps commercial
banks get profit is capital..

It can be said that the banking and financial market in Vietnam has been strongly
fluctuated by the establishment and development of domestic and foreign banking
organizations. It is the rapid development of the banking system that makes business in the
bank more difficult and fierce competition. Capital is one of the key factors that determine the
competitiveness of the banks. The fact has shown that the capital size, professional skills and
modern technical means are prerequisites for attracting capital, and large capital sources will
create favorable conditions for banks to expand their credit relations with other banks and
economic composition in terms of size, volume of credit, initiative in terms of time and
interest. The result of increasing is to help multifunctional banks in the market, disperse risk,
create more capital for banks and then inevitably in the market competitiveness of the bank
will increase.

From the end of 2013 to now, the business situation of Commercial banks have been
extremely difficult because of the impact of Vietnam's economy that lead to the loss of
liquidity, higher bad debt, high potential loss of capital, professional ethics harm and
inconsistent regulations with the growth of the market ... They are main causes that affected
the operation and effectiveness of the banking sector and Vietnam Joint Stock Commercial
Joint bank for Industry and trade – Lang Son branch is not exception.

As a branch, based on the development orientation of the system as well as the annual
business plan assigned, the Lang Son branch - Vietnam Joint Stock Commercial Bank for
Industry and Trade has developed a business plan for implementation. Good business task. In
particular, the mobilization of capital for the next stage is necessary for Vietinbank Lang Son

in the area to survive and develop in accordance with the strategy and direction of the system.

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the topic "Studying the quality of fund mobilization activities at Vietnam Joint Stock
Commercial Bank for Industry and Trade- Lang Son branch" (shorted: Vietinbank Lang Son)
"for my graduation thesis.

2. Objectives of the study

This is an important task to contribute to the development of the strategy for
Vietinbank Lang Son

Objective 1: Theoretical framework on fund mobilization of commercial banks.

Objective 2: Assessing the quality of fund mobilization activities of Vietinbank Lang
Son. Determining the strengths, weaknesses, opportunities and challenges that Vietinbank
Lang Son has to face in mobilizing fund

Objective 3: Proposing the solutions to improve the quality for fund mobilization of
Vietinbank Lang Son.

3. Methodology of the study

Qualitative method for case study of Vietinbank Lang Son.

Data: Primary and secondary (from other sources such as journals, banking statements,
statistical report, internet ...)

Method for data collection: Mainly collecting secondary data for research purposes. The
data is used in the research process such as annual reports, financial statements and
business situation review report of the year 2013, 2014, 2015 and 2016 of Vietinbank

Lang Son.

Data analysis: After collecting data were researched and analyzed. The results of the
analysis will be used to assess the quality of fund mobilization, professionalism of fund
mobilization officers, possibilities and opportunities of market access of staff to fund
mobilization activities Vietinbank Lang SonOn the basis of the information obtained from
the financial reports, the business plan of Vietinbank Lang Son with the competitors in the
area.

4. Scope of the study

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5. Significance of the study

Applied knowledge is learned to have the right solution to increase the amount of capital
through fund mobilization activities such as deposit, loan and other operations (trust service,
Intermediary payment...) for Vietinbank Lang Son.

Analyzing and selecting suitable solutions for Vietinbank Lang Son to exploit maximum
strength, take advantage of market opportunities (focus resources, the best opportunity) in
the capital mobilization.

A reference situation for other studies.

6.Limitationsof the study

The topic focused on fund mobilizing at Vietinbank Lang Son; Draw conclusions as well as
selective solutions for applying to Vietinbank Lang Son only.

7. The structure ofthe study

Introduction

Chapter I: Theoritical basic for fund mobilization activities for commercial banks

Chapter II:Assessment of the quality of fund mobilization activities of Vietinbank Lang Son.

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CHAPTER 1: THEORETICAL BASIS FOR FOR FUND MOBILIZATION 
ACTIVITIES OR COMMERCIAL BANKS

1. The concept of commercial banks 
1.1. What is a commercial bank?

A commercial bank is an economic organization that conducts banking activities in the
areas of monetary supply, financial services between customers and banks, or vice versa.

According to the Law on Credit Institutions: commercial banks are credit institutions
which are entitled to carry out all banking activities and other related business activities for
profit purposes in accordance with the Law on Credit Institutions Use and other provisions of
the law. (Decree No. 59/2009 / ND-CP of the Government on the organization and operation of
commercial banks)

1.2. Basic operations of commercial banks

Banking activities such as mobilizing capital, lending, discounting, guaranteeing,
providing financial services and other related activities. ...

1.1.1. Mobilization of fund activities

The business activities of any enterprises must have capital. With commercial banks the
capital is the entire monetary resources that banks create, mobilize to lend, invest and execute

banking services. Capital plays a very important role in banking operations. Initial capital is the
condition for a bank to be permitted to conduct its business in accordance with the law. In
addition, mobilized capital sources allow the bank to source loans, invest in valuable papers,
assets and loans for economic development activities of the country.

Capital of commercial banks includes: equity, fund mobilized and loans. Capital is the
capital mobilized from banks and economic organizations. In addition, during the operation, the
bank also borrowed capital from the State Bank or other credit institutions to ensure liquidity.
In order to have capital for business activities, commercial banks must mobilize capital. Fund
mobilization of commercial banks is the use of specific tools, methods, methods and programs
to attract the attention of individuals and organizations, and from there to deposit money into
banks.

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Mobilizing capital through the issuance of valuable papers, borrowing from other credit
institutions, borrowing from the central bank. Capital of commercial banks includes Equity and
Debt Capital.

* Equity: Equity accounts for a small share of the bank's total capital, but equity is a legal

requirement when starting a bank. On the other hand, equity is also considered as a security
asset, which creates confidence among customers, maintaining solvency in the case of bank
losses.

* Debt capital and debt mobilization operations: Commercial banks as a major part of

the intermediary financial system, receiving idle money or issuing debt instruments such as
certificates of deposit, Vote... to attract idle capital in the economy. Debt capital includes:

- Deposit and deposit mobilization: Deposits from customers are important sources of
commercial banks. Typically, this source accounts for more than 50% of total bank operating

capital. Based on the purpose of the deposit, can be classified into three types of deposits as
belows:

+ Deposit payment (deposit transactions): These are deposits of businesses or individuals
deposited in a bank for banks and payment hold status when required. Within the allowable
balance, the needs of the business and individual are taken into account by the bank. Interest
rates on these deposits are very low but account holders can enjoy low-cost banking services.

+ Tenor deposits of enterprises, organizations and social enterprises and social
organizations to send a certain amount with a maturity and will be paid after a specified time.

+ Savings deposits of the population: All classes of people have unused temporary
savings (savings), which can be deposited in savings accounts in order to achieve the objectives
of preservation and profitability. His savings. Unlike payment deposits, saving deposits are
more stable, but higher mobilization and management costs.

- Deposits from banks, financial institutions, other credit: The commercial banks can
deposit money at the bank for the purpose of payment of households.

- Loans and borrowing activities of commercial banks: These are formed on capital
borrowed relations between commercial banks with the Central Bank or the State with other
credit institutions.

1.1.2. Lending activity

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+ If the object based on the loan, it is broken down into loans and working capital loans
under investment projects.

+ Consumer lending: The Bank lends to individual consumers to buy goods to meet
personal consumption demands such as loans to buy motorbikes, houses, cars.

+ Loan co-financing investment projects: The bank stands out as a focal point calling on
other credit institutions to participate in lending a project. Co-financing is for risk sharing or
may be due to a lack of funds by the bank, or a limit on customer loans.

1.1.3. Investment activities

Besides lending, commercial banks also use the money to invest for profit. Investment
activities of commercial banks include a number of activities such as investing in securities,
investing in short-term valuable papers with a term of less than 12 months, Treasury bills,
commercial papers and other valuable papers.

1.1.4. Other service activities

Foreign exchange trading; Money transfer and payment services; collection service;
Guarantee, rent safes ...

1.2. Quality of fund mobilization

1.2.1. Definition of quality of fund mobilization

The quality of commercial banks' mobilization is an objective and scientific objective in
selecting capital mobilization methods to ensure the growth and stability of mobilized funds.
To balance and match the capital mobilized with the capital use demand, to ensure the optimal
capital structure and the lowest capital cost, thus contributing to raising the business efficiency
of commercial banks.

To the social, in order to achieve the goal of industrialization and modernization of the
country, a great amount of capital is needed to create material premise, capital for construction
of infrastructure, technology and capital for production and business.

To the bank, in order to conduct business effectively, diverse forms of business, improve
competitiveness and generate profits, banks need a large fund mobilization inflows from
domestic sources and foreigners.

To achieve that, the bank must have appropriate and effective for mobilization of fund.
The quality of fund mobilization in the bank must be assessed through the following aspects:

1.2.2. Size of mobilized capital

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expand and expand their scope of operations and scale up liquidity, stability and confidence of
cutomer

Mobilizations of funds vary in size from stage to stage. Large-scale banks are more
likely to be mobilized than smaller banks. In the context of competition in terms of market
share, the interest rates usually do not differ much between banks, so customers often choose
large banks to ensure the safety and liquidity for their deposit.

1.2.2. The growth rate of fund mobilization

The growth rate of fund mobilizingrepresents the ability to expand the scale of
mobilization of fund by the bank over the years, showing how the fund varies with the trend
and the ability of the bank to control fund mobilization. That affects the ability to enhance and
expand its market operations. If the growth rate is stable, the bank will take the initiative in
planning its long-term development strategy as well as creating confidence in depositing and
investing in banks. On the other hand, this indicator demonstrates the ability of the bank to
compete with other commercial banks

In terms of volume, the growth rate of fund mobilization is usually assessed through:

The growth rate of fund mobilization (FM)= (∑FMthis time -∑FM last time)/(∑last 
time)*100

This indicator reflects changes in the size of fund mobilized over time.

If this ratio is > 100%, the size of bank’s mobilization of fund has been extended. The
continuous expansion of fund mobilization with increasing capital growth proves that means
the scale of operation of the bank is increasing and the efficiency of raising capital of the bank
is improving. In addition, this indicator can be used to compare with the growth rate of capital
of other banks or the average growth rate of capital system.

1.2.3. Structure of mobilization of fund

The structure of fund mobilization influences the structure of assets and affects the
bank's average operating expenses, thus affecting the bank's outward or outgoing interest
rates. The mobilization structure must be in line with the structure of use, to meet the
requirements of use, to maximize outstanding loans and investment, thereby maximizing
profits without having to pay interest on mobilized capital. lost. By identifying the capital
structure, it is possible to identify the strengths and weaknesses of the bank in its business
operations.

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conditions for the bank to operate smoothly, the bank can restructure its capital, expand the
scale of its operations, take the initiative in planning its development strategy, enhancing its
prestige and competitiveness.The structure of mobilized capital can be assessed through the
propotion of mobilized fund.

Proportion of each mobilized fund = (the amount of each fund) / (total mobilized 
funds) * 100

This indicator reflects the ratio of mobilizedfund, the rationalization of the mobilization

of different types of funds. The capital structure should be diversified and balanced in order to
ensure a reasonable ratio between short-term, medium-term and long-term deposits, as well as
domestic and foreign currencies...Each source have its strengths and weaknesses in
mobilization and exploitation. Hence, the change in capital structure will lead to a change in
the structure of capital use and hence the change in profitability and safety of the bank. The
volatility of the mobilization structure depends partly on the bank's adjustment plan and the
volatility of its external factors, which demands that the bank always pays attention to
studying the market in order to make appropriate and timely adjustments

a) Structure of mobilized capital sources by subjects

The proportion of mobilized capital sources by subjects= (Amount of mobilized capital
sources by subjects) / (Total amount of mobilized capital resources) * 100

b) The structure of fund mobilized by term

Proportion of capital mobilized by term = (Amount of mobilized capital by term) /
(Total amount of mobilized capital resources) * 100

c) The structure of fundmobilized by types of currencies

Proportion of capital mobilized by types of currencies = (amount of capital mobilized
by types of currencies) / (Total amount of mobilized capital resources) * 100

1.2.4. Cost of fund mobilization

Reasonable cost of fund mobilization

The cost of fund mobilization is a decisive factor in the effectiveness of capital
mobilization as it directly determines how the bank uses its funds and returns.

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excessivefunds, while customers still deposit money, the deposit interest rate will decrease.
Conversely, during a period of economic downturn, or the Government implements tight
monetary policy, the bank's shortage of bankable capital will push up deposit interest rates.
Also, the bank can set interest rateswhich are higher or lower than the ones in the
marketdepending on the competitive strategy of each bank.

In terms of cost, banks must meet the following criteria:

-First: Finding the lowest cost source to meet the needs of borrowing and investing
while satisfying the requirements in terms of scale, duration and structure.

-Second: Increasing profits for banks without having to take high risks due to the
pressure of increasingthe cost of fund. Basically, bank profitsare calculated as total income
minus total cost, but most of it is interest cost; therefore, to maximize profits, the bank must
minimize its operating costs. Short-term resources are often at low cost and unstable, and vice
versa, the longer the capital sources are, the higher but more stable the costs become.
Therefore, in order to set up a business strategy for each period, basing on the ongoing law
and the basis of payable interest, the bank will issue appropriate capital mobilization policies.
Depending on the characteristics of each source of fund, the bank will offer different nominal
interest rates. In order to compete for expanding funds, banks are trying to create their own
advantages;one ofthem is the interest competitiveness.

The determination of the cost of fund mobilization is very useful for the bank to set up
effective business policies. Banks typically determine the cost of fund mobilization through
the average interest expense and non-interest expense

Average interest expenses = (Interest expenses) / (Total operating expenses)

This indicator reflects the amount of money the bank has spent on a mobilized capital.

The average interest expense has been decreasing over the years, accompanied by the growth
in size of funds, indicating that the bank's capital mobilization has been effectively organized.

Average non-interest expense = (Non-interest expense) / (Total mobilized funds)

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Fund mobilization and use are two aspects of a problem, they are interrelated and
interdependent. Therefore, when considering capital cost norms of capital mobilization
activities, it is necessary to considerthe average interest rate obtained from lending activities:

Average loan interest = Total income from interest / Loan balance

Or calculate interest rate difference

Interest rate difference = Average loan interest - Cost of fund 
1.2.5.Other indicators:

Apart from the above criteria, the quality of capital mobilization is also assessed
through several indicators:

•Operation level of mobilized funds: It is assessed by the coefficient of capital
utilization.

Efficiency of Capital utilization= Total outstanding loans / Total mobilized capital

This indicator reflects how much the bank lends in total mobilized capital; and also
assesses the bank's ability to raise fund.

If this indicator is large, on the one hand, it reflects that the balance between capital
mobilization and lendingis good; on the other hand, the fund mobilization is not good. If this
indicator is small, on the one hand, it reflects thatissuing loans is bad; on the other hand, the

situation of good capital mobilization is reflected.

It is better if the coefficient of capital use approaches to 1. This presents the maximum
use of mobilized funds.

• Customer Convenience: It is evaluated through deposit, withdrawal, bank services,
etc., to save customers’time and money.

• Time to mobilize a certain amount of fund.

• The amount of capital withdrawn before the maturity, the actual maturity of the funds ...

1.2.6. Ensuring the safety of mobilized fund:

Mobilized fund is used for loans and investments, but these are potentially risky
activities. The ineffective using of fund andgenerating overdue debts or bad debts,exert bad
influence on the mobility, reduce the effectiveness of capital mobilization.

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bank. Therefore, it is necessary to consider it in terms of the appropriateness of the time
between assets and liabilities (mobilized fund)

The imbalances of assets and liabilities in term will have potential risks of interest rate,
payment, and foreign exchange.

Interest rate risks occurin two forms: the risk of refinancing liabilities and the risk of
reinvestment of assets. When the term of the mobilized fund is shorter than the maturity of the
investments, if the market interest rate tends to increase, the bank will have to raise capital at
a higher interest rate to continue financing the investments. Conversely, when the time of
capital use is shorter than the term of the mobilized capital, the bank will face the risk of
reducing profit when the interest rate in the market decreases.

Banks often use a part of their short-term capital to invest in longer-term assets but only
at a certain rate due to regulatory compliance as well as the demand for the paymentability. If
the bank uses too much short-term capital to invest in long-term credits, the bank will face
liquidity risk. While the term of the debt is not due, the pressure of liquidity from customers
will force the bank to accept the mobilization of additional funds with high interest rates to
pay for customers or it becomes worse when payment inability occurs. In contrast, if banks
use long-term funds for short-term loans, it is difficult to ensure the income for long-term
resources often have high interest rates while short-term loans carry lower interest rates than
medium- and long-term loans.

1.3. Factors affecting the quality of capital mobilization 
1.3.1. Objective factors:

1.3.1.1. Economic Environment: The economic environment affects the income,
payment, expenditure and the need for capital and deposits of customers. The economic
environment creates opportunities for the bank and challenges for the banking business.

The increase in inflation causes the devaluation of the currency; the benefits of
depositors will decrease due to the real interest rate decreases, thus creating the psychology
for customers to switch to hold gold, strong foreign currencies or commodities to ensure the
value of the currency, thereby reducing the bank's debt capital.

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1.3.1.3. Environment of Competitiveness: The development of competitors has made
the monetary market develop, the market share of commercial banks has changed
whichpromotesnew services; products have become more diversified and quality of services
has been improved therefore creating more choices for customers. Under the competition
conditions, commercial banks have to introduce more forms of mobilization, increase
marketing activities and apply flexible interest rate policy.

1.3.2. Subjective factors

1.3.2.1. Interest rates: Interest rates are one of the macro management tools of the
economy and a key factor in banking operations. Regardless of any aspects, interest rates are
always a factor that is highly sensitive to the economy. Moreover, the interest rate directly
affects the borrowing and thus affects the bank's profitability.

On the other hand, interest rates are of the top concern when an individual or an
economic organization wants to deposit money in a bank. Because thosewho have money
want to deposit it into banks, they first compare in which bankthe deposit rates are higher,
next is the deposit security as well as the utilities they receive when sending money into the
bank.

1.3.2.2. Forms of fund mobilization: Customers deposit money in banks for various
purposes, some for safety, and others mainly for monthly interest. Therefore, they have
different forms of deposit as well as interest perhaps 3, 6, 9 months ... Therefore, in order to
mobilize more capital in the people, commercial banks must take various forms of capital
mobilization.

1.3.2.3. Banking network: For many people, using a convenience service is more
important than the price of the service. The network system creates the flow of services from
the banks to the customers.As a result, the more the distribution network grows and expands,
the more modern technical facilities, the higher the efficiency of capital mobilization.

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1.3.2.5. Marketing and advertising policies: The effect of marketing activities is to
attract customers' attention on the bank's image so that customers can compare and choose
before deciding to participate in transactions with banks. Building a consistent, attractive
image for customer observation is an issue that commercial banks must pay attention to when
building the network.

1.3.2.6. Information technology: Applying modern banking technology helps banks to
manage and develop modern products and services to meet the increasing demands of
customers. The development of banking technology creates many opportunities for business
but also many challenges for each bank itself.

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Chapter II: Assessment of the quality of mobilization fund activities of

VietinbankLang Son.

2.1. General introduction of VietinbankLang Son 
2.1.1. Overview:

The branch of Industrial and Commercial Bank of Lang Son was established in July
1995 according to the Decision No. 260 / QD-NHCT dated September 1st, 1994 of the
Chairman of the Board of Directors of Vietinbank for implementing the strategy of
distributing to develop the network of the sector, contributing to promoting the development
of Lang Son economy. With the motto: "Success of customers is the success of the branch", in
the past years, the branch of Industrial and Commercial Bank of Lang Son has well
implemented the policy of the sector "Development, safety, efficiency". Annually, the
mobilized fund growth rate is 25%/year on average. To date, Vietinbank Lang Son has a
network with 8 transaction offices, 14 ATMs and more than 100 employees are serving more
than 30,000 customers. In 2016, the branch changed the credit management model towards
more professional. At the same time, branch is also in the testing phase, completing the
transformation of the new Core Banking system towards modern, convenient and friendly
with customers.

With the goal of striving to exceedthe anual norms of business activities assigned by the
Head Office, VietinBank Lang Son actively mobilizes all idle capital in the economy. Since
then, Vietinbank Lang Son has always promoted production, business and consumption loans;
issuing loans to projects for socio-economic development of Lang Son province. Up to now,
Vietinbank Lang Son has increasingly affirmed the position and belief for customers in the

area.

Some key tasks to improve the competitiveness of Vietinbank Lang Son

Promoting fund mobilization in VND, foreign currencies, maximizing capital sources,
meeting capital needs in the area.

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Actively urging there covery of debt, dealing without standing debt to ensure the
safety of the branch’s fund.

Promoting banking services, increasing banking convenience in the direction of
multi-functional banks.

Strength of the training, continuously improving staff qualifications to meet the
requirements of integration(Statistical data of VietinbankLang Son).

2.1.2. Business performance of VietinbankLang Son

In a challenging competitive environment, to implement Vietinbank's guiding direction,
Vietinbank Lang Son is determined to innovate and develop and has achieved success in there
form road map to prepare necessary conditions for each particular item: Each investment item
has been improved: the portfolio has been upgraded, the financial health has been improved,
the products and services have been extended, the network has been upgraded and the banking
technology has been modernized. The basic norms are completed excessively compared to the
business plan with the guideline "quality - safety - efficiency".

Table 2.1: Some major indicators reflect the results of

business activities of Vietinbank Lang Son in the period 2013 - 2016

Unit: billion VND

Targets Year 2013 Year2014 Year2015 Year2016

-Total assets 93,271 116,373 137,854 163,107

- Total loans and investments 83,112 103,987 125,123 150,021

In which businessesprovide loans

for the economy 64,159 75,886 79,611 101,450

- mobilizedfund 81,597 100,572 126,624 148,240

- Equity 4,909 5,072 5,668 7,961

- Profit after tax 207 403 786 1,450

- Profit / Asset 0.22% 0.35% 0.57% 0.88%

- Profit / Equity 4.21% 7.95% 13.86% 18.20%

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The assessment of business activities of Vietinbank Lang Son in the above table shows
the efficiency, profits in the latter year are always higher than in the formerone. In 2016, profit
after tax reached 1,450 billion VND. Profit margins on total assets also increased significantly,
reaching 0.88% in 2016 compared to 0.57% in 2015 and 0.22% in 2013. Also in Table 2.1
shows that the return on equity of Vietinbank Lang Son increased significantly, in 2016
reached 18.2% compared to 2013 only 4.21%.

Assessment of some key business activities of Vietinbank Lang Son

Capital work

Table 2.2: Growth rate and structure of mobilized fund of Vietinbank Lang Son

Unit: billion VND

Targets Year

2013 Year 2014 Year2015 Year 2016 
1. By economic sector 81,597 100,572 126,624 148,240

- Residents’ deposits 30,401 39,370 52,773 68,190

Proportion % 37.2 39.1 41.7 46.0

- Deposits of economic organizations 34,301 39,421 44,879 58,038
Proportion % 42.0 39.2 35.4 39.2
- Deposits of financial institutions 12,642 16,657 26,941 18,310
Proportion % 15.6 16.6 21.3 12.4
- Issuance of valuable papers 4,253 5,124 2,031 3,702
Proportion % 5.2 5.1 1.6 2.5

2. By type of deposits 81,597 100,572 126,624 148,240

- Vietnam dong (VND) 67,562 86,101 104,805 118,740
Proportion % 82.8 85.6 82.7 80.1
- Foreign currency in VND 14,035 14,471 21,819 29,500
Proportion % 17.2 14.4 17.3 19.9

3. 3. By term of deposit 81,597 100,572 126,624 148,240

- demand deposits 26,368 28,655 24,342 41,655
Proportion % 32.3 28.5 19.3 28.1

- time deposits 55,229 71,917 102,282 106,585
Proportion % 67.7 71.5 80.7 71.9

Capital growth (%) 20.2 14.7 23.2 17.07

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Table 2.3: Capital balance by 2015 -2016

unit: billion VND

Targets Year 2015 Year 2016

Amount

Proportion

% Amount

Proportion
%

1. demand deposits 24,342 19.2% 41,655 28.1%

2. time deposits 102,282 80.8% 106,585 71.9%

In which:

- Term 07 days - 01 month 3,200 3.1% 6,702 6.3%

- Term 01 month 2,860 2.8% 4,920 4.6%

- Term 02 months 1,950 1.9% 2,515 2.4%

- Term 03 months 20,396 19.9% 27,501 25.8%

- Term 04 months 40 0.0% 38 0.0%
- Term 05 months 21 0.0% 16 0.0%

- Term 06 months 19,750 19.3% 24,090 22.6%

- Term 07 months 161 0.2% 3,600 3.4%

- Term 08 months 5 0.0% 3 0.0%

- Term 09 months 10,101 9.9% 6,500 6.1%

- Term 12 months 19,150 18.7% 23,160 21.7%

- Term 18 months 10,150 9.9% 4,100 3.8%

- Term 24 months 11,298 11.0% 2,900 2.7%

- Term 36 months 2,850 2.8% 405 0.4%

- Term 60 months 350 0.3% 135 0.1%

Total mobilized fund 126,624 100% 148,240 100%

Classified by the term for short-term and medium-term loans

3. Non-term loans 24,342 19.2% 41,655 28.1%

4. Term of less than 12 months 77,634 61.3% 99,045 66.8%
5. Term of 12 - 24 months 21,448 16.9% 7,000 4.7%
6. Term over 24 months 3,200 2.5% 540 0.4%

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According to Table 2.2, mobilized fund to the end of 2016 reached VND148, 240
billion, an increase of VND22, 616 billion compared with 2015, a growth of 17.07%. Of
which, VND mobilized capital reached VND 118.740 billion, accounting for 80.1% of the
total mobilized fund and USD mobilized fund reached VND 29,500 billion, accounting for
19.9% of the total mobilized capital.

In terms of deposits, demand deposits reached VND 41,655 billion, accounting for
28.1% of total mobilized capital and term deposits (including deposits with term of 7 days or
more). 60 months) reached VND106, 585 billion, accounting for 71.9% of total fund.

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Credit work

Table 2.4: Growth rate and loan structure of Vietinbank Lang Son period 
2013 - 2016

unit: billion VND

Targets Year

2013

Year

2014 Year2015

Year 
2016 
1. Outstanding loans by term 64,159 75,886 80,152 101,450

- Short-term 35,056 44,641 47,329 60,347

Proportion % 54.6 58.8 59.0 59.4

- Medium term, long term 27,584 28,796 31,388 40,213

Proportion % 43.0 37.9 39.1 39.6

- Other loans 1,519 2,449 144 890

Proportion % 2.4 3.3 1.9 0.9

2. Outstanding loans in terms of

currency 64,159 75,886 80,152 101,450

- Vietnam dong (VND) 55,267 63,798 66,997 83,645

Proportion % 86.1 84.0 83.6 82.4

- Foreign currency in VND 8,892 12,088 13,155 17,805

Proportion % 13.9 16.0 16.4 17.6

3. Outstanding loans by economic

sectors 64,159 75,886 80,152 101,450

- State owned enterprises 26,918 29,116 24,599 29,116

Proportion % 41.9 38.4 30.6 28.7

- Non-state enterprises 37,241 46,770 55,553 72,334

Proportion % 58.1 61.6 69.4 71.3

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Loans to the economy in 2016 reached VND 101,450 billion, an increase of 21,298
billion VND in comparison with the year 2015 and a growth rate of 26.6%; Medium- and
long-term loans rates in the two years of 2015 and 2016 will remain stable at 39% of total
loans for the economy, in line with the Board's plan (40%). In 2007, Vietinbank Lang Son has
appraised and signed credit agreements for a number of large projects with a total committed
amount of VND17.600 billion;

In particular, Vietinbank Lang Son has paid attention and shifted to lending to the
non-state sector, so lending and lending to this sector increased significantly in absolute numbers
as well. Relative number of outstanding loans in 2016 for the non-state sector reached 72.334
trillion dong, accounting for 71.3% of total outstanding loans, an increase of 16.781 trillion
dong compared to 2015, an increase of 1.9%, as shown in Table 2.3.

In 2016, Vietinbank Lang Son targets to increase and improve the quality of credit, so
the outstanding debt and bad debt significantly reduced, much lower than the requirements of
the parent bank. In 2016, overdue debt was 1,010 billion VND, accounting for 0.99% of total

outstanding loans and decreasing 118 billion VND compared to 2015 (Table 2.4).

Table 2.5: Overdue debt and overdue debt ratio at Vietinbank 
 Lang Son period 2013 -2016

unit: billion VND

Targets Year

2013

Year

2014 Year2015

Year 
2016

- Total outstanding loans 64,159 75,886 80,152 101,450

Of which: Overdue debts 481 1,354 1,128 1,010

- Overdue loan rate / Total

outstanding loans (%) 0.75 1.78 1.4 0.99

Source: Annual Report Vietinbank Lang Son

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Services

Table 2.6: International Payment Sales period 2013 - 2016

Unit: million USD

Targets Year

2013

Year

2014 Year2015

Year 
2016 
1. Payment by L / C 2,418 2,957 3,353 4,373

- L / C import 1,575 2,111 2,389 2,945

- L / C export 843 846 964 1,428

2. TTR remittance payment 1,756 2,292 2,835 3,354

- Transfer incoming money 710 911 1,187 1,368

- Transfer out coming money 1,046 1,381 1,648 1,986

3. Income from payment 255 280 363 575

- payment from transferring incoming

money 110 123 130 170

- payment from transferring out coming

money 145 157 233 405

4. Traveler’s checks, credit cards 11 18 19 38

- Traveller's checks 5 4 5 12

- Credit cards 6 14 14 26

Total sales 4,440 5,547 6,570 8,340

Report on business activities of Vietinbank Lang Son in 2016

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increase of $ 519 million compared to 2015. Payment through bank deposits in 2017 reached
$ 575 million, an increase of $ 212 million over 2015.

Financial results: Comparing the income structure of Vietinbank Lang Son over the
last 4 years, from 2013 to 2016. Table 2.2 shows that the proportion of income from credit
activities still accounts for a high proportion of total income and ranges from 80 to 90%. This
ratio decreased in 2016 but still accounted for 83.3% of total income structure of Vietinbank
Lang Son (2016 down 6.9% compared to 2015). This is a great effort of Vietinbank Lang Son
to gradually increase income from intermediary services, remittances, checks, money transfer,
guarantee, payment ... and gradually reduce income from credit activities, enhance
competitiveness in the integration process.

2.2. Fund raising in Vietinbank Lang Son 
2.2.1. Fund mobilization growth rate

Table 2.2 shows that the growth rate of mobilized funds in 2014 increased from 14.7%
in 2013, to 23.2% in 2015 and 17.07% in 2016, respectively. In general, capital mobilization
of Vietinbank Lang Son has increased over the years but the growth rate is unstable and tends
to decrease.

Figure 2.1: Fund growth of Vietinbank Lang Son period 2013-2016

0
5
10
15
20
25

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Table of figures illustrated in Figure 2.1

Unit: %

Targets Year 2013 Year 2014 Year2015 Year 2016

Business deposits 42 39.2 35.4 39.2

Residents’ deposits 37.2 39.1 41.7 46

Deposits of other financial

institutions 20.8 21.7 22.9 14.8

Total 100 100 100 100

Growth rate 20.2 14.7 23.2 17.07

Source: Annual report of Vietinbank Lang Son

2.2. 2. Structure of mobilized fund

* Capital structure by type of deposit

In terms of the currency types, as can be seen in table 2.4, Vietnam dong deposits
account for the bulk of deposits (accounting for more than 80% of total deposits) and
the proportion of deposits in VND tended to decreasein 2016, while the proportion of
foreign currency deposits in total funds tended to increase over the former year.
Deposits in Vietnam dong in 2016 increased by 13.935 trillion dong compared with
2015 and the growth rate was 13.3 percent; foreign currency deposits in Vietnam
dong reached 29.500 billionVND, up 7.681 billionVNDcompared to the year 2015,
accounting for 19.9% of total mobilized fund structure.

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Table 2.7: Data on the share of deposits by currency

Unit: Billion VND

Targets Year 2013 Year 2014 Year2015 Year 2016

Deposits in Vietnam dong

(VND) 67,562 86,101 104,805 118,740

Proportion % 82.8 85.6 82.7 80.1

Foreign currency in VND 14,035 14,471 21,819 29,500

Proportion % 17.2 14.4 17.3 19.9

Total fund 81,597 100,572 126,624 148,240

Proportion % 100 100 100 100

Source: Annual report of Vietinbank Lang Son 
* The structure of fund mobilized by customers

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Chart 2.2: Scale of capital mobilized by customers

Figures of chart 2.2

Targets Year 2013 Year 2014 Year2015 Year 2016

Business deposits 34,301 39,421 44,879 58,038

Residents’sdeposits 30,401 39,370 52,773 68,190

Deposits of other financial

institutions 16,895 21,781 28,954 22,012

Total fund 81,597 100,572 126,624 148,240

Source: Annual report of Vietinbank Lang Son

*The structure of capital mobilized by deposit term

By December 31st, 2016, demand deposits reached 41,655 billion VND, an increase of

17,313 billion VND compared to 2015, a growth rate of 71.1%; Time deposits reached

106,585billion VND, an increase of 4,303 billionVND, an increase of 4.2% over 2015. It is

noteworthy that the growth rate of non-term deposits in 2016 increased faster than the rate of

increase of the proportion ofdemand deposits in 2015, while time deposits rates reduced

0
20
40
60
80
100
120
140
160

2013 2014 2015 2016

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(Table 2.4). As the demand deposit structure increased, term deposits affected the safety of

capital mobilization and liquidity of banks.

On the other hand, according to Table 2.5, in 2016 term deposits reached 41,655 billion

VND, accounting for 28.1% of total mobilized fund while term deposits reached 106,585

billion VND, accounting for 71.9% in mobilized fund. However, when looking at the details

of the deposit structure for the year 2015 and 2016, table 2.5 shows that in 2016, the term

deposit in 3 months was 27,501 billion VND, accounting for 25.8% of the total deposits;

six-month deposits were 24,090 billion VND, accounting for 22.6% of total deposits and 12.1

trillion VND in term deposits, accounting for 21.7% of total deposits.

If the total amount of deposits below 12 months in 2016 was 99.045 billion VND,

accounting for 66.8% of total deposits, while deposits with term from 12 months to 24 months

will be only 7,000 billion VND, accounting for 4.7% of the total mobilized fund, term

deposits and term deposits over 24 months was only 540 billion, accounting for 0.4%.

Meanwhile, medium and long- term loans of Vietinbank Lang Son (loans with a term of over

12 months) in 2016 were 40.213 billion, accounting for 39.6% of total outstanding loans.

Thus, with the structure of capital mobilization time limit as above would greatly affect credit

activities, the basic source of income of the bank. In order to have medium and long- term

loans, banks will have to use part of their short-term deposits to finance medium and

long-term loans. If the situation was not soon improved, it would greatly affect the scale of credit,

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Chart 2.3: mobilized fund according to the deposit period 2013-2016

Figures for Chart 2.3

Unit: billion dong

Targets Year 2013 Year 2014 Year2015 Year 2016

Non-termed deposits 26,368 28,655 24,342 41,655

Termed deposits 55,229 71,917 102,282 106,585

Total mobilized fund 81,597 100,572 126,624 148,240

Source: Annual report of Vietinbank Lang Son

2.2.3. Market share of mobilized fund

From 2013 onwards, the capital market share of Vietinbank Lang Son is gradually
narrowed. The market share reduced to 16.6% in 2013 and 13.2% in 2015 and to 9.6% in
2016 and it is the third largest state-owned commercial bank in Lang Son (after the
Agriculture and Development Bank Viet Nam Rural Development - 17.4% and Bank for
Foreign Trade of Vietnam - 12.5%). Figures were shown as the following.

0
20
40
60
80

100
120
140
160

2013 2014 2015 2016

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Chart 2.4: Vietinbank Lang Son’s fund mobilization in 2016

Figures of Chart 2.4

Unit: percent %

Targets Year

2013

Year

2014 Year2015

Year 
2016

- Viettinbank 16.7 15.6 13.2 9.6

- Vietcombank 12.2 12.9 10.5 12.5

- BIDV 14.2 16.8 14.9 9.4

- Agribank 20.1 19.3 17.8 17.4

- Other commercial banks 36.8 35.4 43.6 51.1

Source: report of VietinbankLang Son

2.3. Assessing the quality of fund mobilization of Vietinbank Lang Son 
2.3.1. Result

* Sources of fund mobilization achieved certain growth: the growth rate of mobilized

capital has been quite good, basically met the capital loan and investment of Vietinbank Lang
Son. In 2014, the rate of growth increased by 14.7% compared to 2013 and by 2015, the rate
increased rapidly by 23.2% and by 2016 the rate increased by 17.07%. In the year 2016,
Vietinbank Lang Son also successfully issued two bonus savings, attracted more than 5,000
billion VND.

Vietinbank
17%

VCB
12%

BIDV
14%
Agribank

20%
Others

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The form of mobilizing savings deposit was also more diversified, applying from the
term of 7daysup to 60 months to attract idle money in the people and economic organizations.
In addition, the interest rates were also more flexible for each deposit term, the amount of
each term deposit (deposit interest rate savings by deposit balance), so despite the fierce
competition on the interbank market on the mobilized fund, Vietinbank Lang Son still has had
the speed and scale of mobilized fund at a high level, meeting the capital needs for business
activities.

*Cost of fund mobilization at reasonable level: In the first six months of 2016,

Vietinbank Lang Son held the bonus saving. The result of the two saving campaigns was over
5,000 billion VND. For Vietinbank Lang Son is a large state-owned commercial bank that has
been reputable for many years in Lang Son province, engraved in the human so that
Vietinbank Lang Son could have attracted idle money from enterprises and organizations with
low interest rates, thus made the average deposit rate of Vietinbank Lang Son reasonable and
relatively low compared to many other commercial banks, especially joint-stock commercial
banks.

Table 2.8: The average mobilizing interest rate of Vietinbank Lang Son 
in 2013 -2016

Unit: billion VND

Targets Year 2013 Year

2014 Year2015

Year 
2016

Total mobilized funds (1) 81,597 100,572 126,624 148,240

Deposit Interest payments (2) 3,295 4,394 6,127 8,750

Fund mobilization expenditure (3)

=1/2 4.04% 4.37% 4.84% 5.90%

Source: Financial report of Vietinbank Lang Sơn

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The average lending interest rate of Vietinbank Lang Son period 2013 - 2016

As interest rates increase, in order to cover costs and make profits, lending rates tend to
increase accordingly.

Bảng 2.9: The average lending interest rate of Vietinbank Lang Son 
 period 2013 – 2016

Unit: billion VND

Targets Year 2013 Year 2014 Year2015 Year 2016

Outstanding loan 64,159 75,886 80,152 101,450

Income on lending interest 5,624 7,032 7,658 9,889

Average lending interest rate 8,77% 9,27% 9,55% 9,75%

Source: Financial report of Vietinbank Lang Son

Table 2.9 - The average lending rate of Vietinbank Lang Son shows that the average
lending rate is also likely to increase from 2013 to now.

Interest rate difference and deposit rates in period 2013 - 2016

If other costs involved in mobilizing interest rates such as salary expenses for fund
mobilization staff, bank management costs, asset depreciation etc…are ignored, the difference
between input and output interest rates of Vietinbank Lang Son in the period 2013-2016 was
relatively effective. This guaranteed the expense and profitability of the bank. With this,
Vietinbank Lang Son could use flexible interest policy to attract more funds to banks.

Table 2.10- Difference in interest rates on loans and deposits.

Unit: billion dong and percentage (%)

Targets Year

2013

Year

2014 Year2015

Year 
2016

Average lending interest rate 8,77 9,27 9,55 9,75

Averageinterest on fund mobilization 4,04 4,37 4,84 5,9

Average interest rate difference 4,73 4,90 4,71 3,85

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The increases of equity size: Vietinbank Lang Son is a commercial bank owned by the
state, so equity is formed from the fund allocated by the state (chartered capital) and the
capital which is supplemented itself from the retained earnings gained in the course of
business operations.

The equity owned by ViettinbankLang Son has been increasing, as of December 31,
2016, equity was 7.961 trillion VND, an increase of 2,293 billion VND from 2015. The
increase in equity during the course of business has positive impact to improve the financial
capacity of Vietinbank Lang Son in the past years, reflected through a number of financial
indicators: ROA increased over the years, specifically on December 31, 2013 was 0.22%, to
December 31, 2014: 0.35%; in 2015: 0.57%; in 2016: 0.88%; ROE will also improve
significantly, if 31/12/2013 is 4.21%, to 7.95% in 2014, 13.86% in 2015 and 18.20% in 2016.
(Table 2.1).

2.3.2.1. Assessment of VietinBank's capital mobilization activities

According to the analysis above, it can be seen that the capital raising activities of Vietinbank
Lang Son have achieved certain success and ensured good use of the branch’s fund.

The outstanding achievement is that the branch has created stable and growing fund, served
effectively for the business fields. The fund mobilized is enough for investment projects, the needsto
develop investment fund and business capital of customers in Lang Son.

Proper awareness of the position, important role of capital work and fund management in
mobilization, branch leaders always focus on directing this work, considering that fund creation is a
prerequisite condition to raise the position and strength in competition, affirming the position,
stature and prestige of Vietinbank Lang Son as well as Vietinbank system in general, creating
favorable conditions for business operations of the branch at present and in the coming years.

Total capital of the branch grew in 2015 and 2016, reached 148,240 billion VND by the end
of 2016 (Table 2.8). In general, the increase in total capital for these two years was mainly due to the
increase in mobilized fund.

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2.3.2.2. Limitations and reasons

- The growth rate is unstable and tends to decrease gradually. In the period of

2013-2016, the capital of Vietinbank Lang Son had a good growth, a 4 year average growth rate of
18.7% / year, corresponding to growth rate of total assets. However, the growth rate of
mobilized fund tended to decrease in recent years, from 23.2% in 2015 to 17.07% in 2016.
This trend also reflected that Vietinbank Lang Son was increasingly encountering the tougher
competition from other credit institutions in fund mobilizing .Table 2.4 reflects the growth
rate and structure of mobilized fund of Vietinbank Lang Son.

Mobilized capital does not meet business demand: In fact, whether or not the fund

mobilization in banks is effective done is not likely to be fully assesseddespite of the
continuous growth in terms of scale as well as fund structure in general and mobilized fund in
particular.Indeed, if the bank mobilizes a lot of capital and uses less, it will lead to a fund
collapse. On the contrary, if the fund mobilization is less and the demand for capital is
increased, the greater the risk to the bank. Thus, it can be seen that even though the bank
mobilizes a lot of fund but the business efficiency is still not high, and to achieve high
efficiency, the only solution that banks have to do is to combine mobilized fund and ability to
lend out in a harmony way.

Table 2.11 below shows that Vietinbank Lang Son's credit utilization ratio is still low
and tends to decrease, the mobilized fund cannot be lent out, thus causing waste of fund and
the efficiency of mobilizedfund is not high. In order to avoid capital wastage, in 2016,

Vietinbank Lang Son had used a part of capital to invest in the interbank market such as
treasury bills, government bonds.

Table 2.11: Relationship between fund mobilization and lending of Vietinbank Lang Son

Unit: billion dong

Targets Year 2013 Year 2014 Year2015 Year 2016

Mobilized fund 81,597 100,572 126,624 148,240

lending 64,159 75,886 80,152 101,450

Coefficient of using capital

(times) 0,78 0,75 0,63 0,68

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- The mobilized capital does not meet the demand for medium and long term loans:As
mentioned above, long-term deposits account for a very low share of total deposits. To meet
the demand for medium and long- term loans, the bank has to use short-term mobilized fund
to provide medium and long-term loans. The use of such capital will greatly affect the
liquidity of the bank.

The table below shows the relationship between medium and long-term fund
mobilization (term deposits over 12 months) for medium and long-term loans at Vietinbank
Lang Son. If in 2015, the medium and long-term mobilized fundwas 24.648 billion dong,
outstanding loans medium and long term is 31.388 billion dong, the capital utilization
coefficient was 1.27 times. In 2016, the medium and long-term fund mobilization was 7.540
billion VND, but the medium and long term loan balance was 40.213 billion VND, the capital
utilization coefficient increased 5.33 times. Thus, it can be seen that in 2016 Vietinbank Lang

Son has used a large proportion of short-term mobilized funds for medium and long-term
loans; this affected the security of fund mobilization of Vietinbank Lang Son.

Table: 2.12: Relationship between medium and long- term fund mobilization

Unit: billion dong

Targets Year 2015 Year 2016

Mobilizing medium and long- term fund 24,648 7,540

Medium and long- term lending 31,388 40,213

Coefficient of using fund (times) 1,27 5,33

Source: Annual report of Vietinbank Lang Son

Main reasons

Limitations in mobilizing capital of Vietinbank Lang Son in the past years mainly stem from
the following reasons:

Objective reasons:

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capital flow into this market. The shortage of foreign currency happenedfor a long time, the
exchange rate, the price of gold increased, investor psychology changed ... all of them
haveexerted competitive pressure on the interest rates and policies to mobilize capital between
banks.

- The flow of capital into the business sector with the expectation of higher income

rather than interest on bank deposits.

- The competition of commercial banks in the area on the ability to provide new
services, mobilizing and lending interest rates has become increasingly severe for the business
operation of the branch. In addition, other channels of mobilizing fund outside the banks of
life insurance companies, postal savings, treasury bonds, securities investment, etc. also
significantly affected the amount of capital mobilized into the bank.

- Average income, saving rate in the residents is low. Some customers do not really trust the
bank. There is a small part of the population who are still unfamiliar with banking operations and
use, psychological fear of depreciation ... still hesitate in sending money to the bank.

- Objective reasons

+ The form of mobilization of capital is not diversified: Customers, especially in urban
areas, have many options to choose for the use of their accumulated, idle funds such as
deposits at banksto gain interest, life insurance, Goods or financial institutions, buying life
insurance, securities, land, investing in businesses, providing loans toacquainters ... So the
development of products to raise capital to best satisfy thecustomers’ diversified needs are
especially important for commercial banks.

+ Interest rate policy is not flexible: State-owned commercial banks have relatively
similar deposit rates; the interest rate difference between banks is not large (about 0.01%).
However, in each specific area each bank may offer different interest rates.

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rate of this form of savings is progressively calculated based on the deposit balance - the
higher the deposit the higher the interest.

+ Marketing activities are not properly considered, ambitious in both branch offices and
transaction offices, not strategic and lack of flexibility in deployment. Banks are not interested in

promoting brand names, bank products and services in general and products of mobilizing fund in
particular with different forms such as giving gifts to customers who deposit money, cards for
supermarket, inviting customers to participate in the prize with many high values, sponsoring for the
Festival and fairs, advertising on television, newspapers, leaflets, banners ...

+ The bank has not promoted the efficiency of the wide network: Vietinbank Lang Son
has a large branch network, the second largest in Lang Son Province.

+In addition, fund mobilization activities are also facing increasing competition from
joint stock commercial banks due to the policy of expanding the network, such as Sacombank,
Asia Commercial Bank, East Asia. ...

Beside the traditional network system, banks are also stepping up the development of
modern distribution channels such as ATM, Internet Banking, Phone-Banking ... to create
cross links between products and services to keep and attract new customers. The banks
leading in this field are Foreign Trade Bank, Asia Commercial Bank...

+ Banking technology has many shortcomings, which does not meet the professional
requirements: Technology system of Vietinbank Lang Son is still quite inadequate: INCAS
program has been deployed in most of the system, however, the program is not complete,
there are many inadequacies. Many new forms of mobilization can not be applied because the
program can not be developed or has to wait for the second phase.

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Chapter III: Proposion of solutions to improve the quality of capital 
Mobilization of Vietinbank Lang Son.

In comercial banks, fund mobilization and the use of capital are the two main activities
that determine the existence and development of the bank. Mobilizationis a precondition for
the use of fund. It is the decisive factor to the profitability of bank, if the business use the fund
effectively, it has a positive impact on the bank's fund mobilization. Through the analysis of

the actual situation of fund mobilization at the Branch of Vietnam Joint Stock Commercial
Bank - Lang Son Branch achieved much success, contributing to meet the capital needs for
production and business, serving the economic development of the city. But the target of the
branch in the coming time is to continue to increase mobilized fund and expand credit
operations.

3.1. Development orientation and orientation of fund mobilization strategy of 
Vietinbank Lang Son

Vietinbank Lang Son strives to become a modern bank, one of the best banks in the
province, capable of providing modern banking services to meet the needs of users. Service,
in accordance with international practice.

With the motto "Development, safety, sustainable efficiency for the prosperity of
customers and the community", Vietinbank Lang Son with business strategy to 2020 become
a versatile, modern and active bank. Effective on the fields of banking, accordingly,
Vietinbank Lang Son builds the following specific strategy with the following contents:

- Maintaining and consolidatingits position as one of the top three leading banks in
Vietnam, implement leading banking strategy in retail banking with low cost and highquality.

- Building Vietinbank Lang Son as amodern and multi-functional bank; enhancing the
financial capacity, modernizing the banking techniques and technology.

- Reforming the model of business organization to be come a modern comercial
bankmodel with aneat and efficient apparatus; training and developing human resources to
have resources to meet immediate and long-term needs.

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-The financial and operational objectives from 2015 to 2020 of Vietinbank Lang Son as
follows:

Targets 2015 2020

Capital adequacy ratio CAR 6 % 8%

Ratio of Income After Tax / Asset (ROA) 1% 1%

Ratio of income after tax / equity fund 10 - 13% 13 - 15%

Annual asset growth rate 20% 15%

Outstanding loan / Total Assets 75 - 80% 65 - 70%
Overdue debt / Total outstanding loans ratio 5% 3%

Liability / Asset 10% <10%

Service Revenue / Total Income 15 - 20% 25 - 30%
Proportion of non-profitable assets 7 - 8% <5%

Capital resource growth 40% 50%

Interest rate difference 0,4%. 0,4%.

Source: Business Strategy of Vietinbank Lang Son

The strategic orientation of capital mobilization of Vietinbank Lang Son in the coming
years is: Maintaining fund mobilized from economic organizations, boosting the mobilization
of fund from residential areas.

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3.2. Solutions to improve the quality of fund mobilization at Vietinbank Lang Son

3.2.1. For the objective reasons

Of the bank activities, fund mobilization and use of capital are always subject to direct
influences from economic indicators such as growth rate, income, unemployment, inflation....
As the economy grows, production develops, thereby facilitating greater accumulation,
creating a favorable environment for bank fund attraction. On the contrary, when the economy
recedes, inflation has made the investment environment of the bank shrink, making the
process of raising fund of the bank difficult.

No country can develop if the political environment is unstable. This is also a factor
affecting the bank's fund mobilization.

Demography is also a factor that influences capital through population distribution,
education, age, etc. Banks should also consider these factors in the fund mobilization.

First of all, in the context of slow economic growth, Vietinbank Lang Son needs to
constantly improve the prestige of the bankin fund mobilization; the first step is to gain
prestige and trust for customers. Depositors have the right to choose the place they think the
safest and most profitable. The bank has taken full advantage of its strengths to serve
attentively the needs of customers.

In the fund using task, banks constantly improve credit quality; invest capital in the
most effective way to enhance the bank's reputation. On the other hand, the bank must pay
more attention to the inspection and examination in order to timely prevent bad behavior
which affects the reputation of the bank.

Second, in order to adapt to the increasingly fierce competition environment, tomeet
customers’ needs is a prerequisite condition for achieving business success. Banks need to
have more flexible forms of mobilization and term deposits that will attract more new
customers and retain existing customers than other banks. Vietinbank Lang Son not only

mobilizes savings deposits but also encourages people to deposit money in various forms such
as opening deposit accounts, mobilizing bills, bonds which are diversifiedin terms of face
value, terms and types…

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with different characteritics in terms of quantity, quality and term ... then it will help
Vietinbank Lang Son use its fundmore flexibly, safely and effectively.

Banking services are only a by-product of the Bank's operations, but in its competitive
strategy, it has shown that banks with diversified services and high quality services that meet
the needs of customers will attract customers to come to the banks. Nowadays, with the
participation of many types of banks and non-bank organizations to compete with each other,
it means that customers have more favorable conditions to choose the best bank that best
satisfy their demand.Therefore, banking service plays an increasingly important role and is
one of themost effective factors inattracting customers.

In each period, based on the assigned targetsof fund mobilization, using capital and
other activities of the bank, Vietinbank Lang Son has to plan and balance betweenmobilizing
and using fund. If recognzing that there are good projects that borrow large amounts of fund
in the long termin the year, Vietinbank Lang Son will have plans to raise fund to find the
corresponding capital by offering the type of mobilization with attractive interest rates,
diversified terms.

Finally, in its business strategy, the bank needs to pay special attention to the cost of
fund that the bank incurs in fund mobilization. Looking for cheap, long-term funds through
the selection of different types of mobilization, so that Lang Son new branches are active in
searching and using of capital.

In order to improve the quality of fund mobilization at Vietinbank Lang Son Branch, it
is necessary to get the support, impact and assistance of the Head Office of Vietnam Industrial
and Commercial Bank.

3.2.2. For the subjective reasons

3.2.2.1. Diversify the forms of fund mobilizationby diversifying products and services

Firstly, diversifying the forms of deposit:

Diversifying the forms of savings deposit such as: retirement savings, savings for
studying abroad, saving for building houses, saving in security, stepup interest rate.

Second, diversifyingterms ofdeposits:

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weeks, 3 weeks, 1 month, 2 months, 3 months, 6 months, 9 months, 12 months, 24 months, 36
months, 60 months.

Third, link the products - services:

Boosting fund attraction through payment activities, opening personal deposit account;
Raising fund management and investment services for clients. These are service packages to
meet the demand for money, fund management of large enterprises, economic groups with
branch network or member units throughout the country.

In addition, it is necessary to promote the development of services for individual
customers such as ATM, Visa / Master Card, Phone Banking. The deposit amount for credit
card, minimum balance in ATM card account, idle money waiting for payment in ATM card
and debit card are all sources of funds with low and relatively stable interest rates which the
bank can use for business.

Fourth, intensifying the form of long-term mobilization:

Besides standardizing and perfecting products and services, the bank will restructure
mobilized fund in the direction of increasing the proportion of long-term mobilized fund to
30-40% of total mobilized fund through channels such as issuing negotiable notes, bonds in
foreign currency and local currency, especially bonds, certificates of deposits with a term of
more than 2 years, focusing on population classes, companies / Insurance funds, credit
institutions, securities companies.

Fifth, increasing the conveniences for depositing money:

Concentrating more resources for the completion of business modules such as Deposit
Module, CIF Module, etc. so that they can soon provide utility services to depositors such as
depositing at one place but withdrawing in many places for customers who send money at
Vietinbank Lang Son.

3.2.2.2. Policy on mobilizing interest rates

Interest rate policy: The first thing that any individual or economic organization wants
to refer to when depositing money into the bank is interest. Therefore, interest rate policy is
one of the most important policies among the bank's supporting policies.

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and attract more capital, the bank needs to set competitive interest rates, implement interest
rate incentives for big customers whohave regular deposits.

However, not all banks offer high interest rates to attract more idle capital from the
population. The problem is, how much actual income the bank offers depositors with that
specific interest rate. That means that the interest rate the bank offers must always be greater
than the inflation rate, so the bank must accurately predict the rate of inflation in each period
to give a reasonable interest rate. In addition, it depends on a number of factors when deciding
what rate to set up, such as the maturity of the deposit, the ability to switch between terms, the
level of risk and the return those results from other investments, government regulations,

regulations of the central bank, the rate of interest that the bank can apply to borrowers.

The higher the interest rate, the more attractive with the depositors but the high deposit
interest rates is also meant that the loan interest rates should also be high respectively so that
banks can make profits. Interest rates high enough to attract customers but not too high so that
the bank is still able to attract borrowers without reducing the bank's profits. Moreover, the
bank has to take into account the cost of raising its fund and its deposit interest rates
compared to other banks.

3.2.2.3. Being flexible in fund raising policy

First,increasing the autonomy in determining the deposit interest rate and switching

towards the fact that the head office manages the interest rate difference between inputs and
output; determining interest rates for fund mobilization productsfor businesses that are
flexible for each customer.

Second,strengthening the synchronized combination of interest rate policy - customer

policy - product policy, creating customer segmentation in interest rates.

Third, applying interest rates and service charges in a flexible and competitive manner

to limit interest rate risk and liquidity risk.

3.2.2.4. Renovating marketing and promotion policy

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market in order to have more competitive measures than their competitors to win the
advantages for itself.

The level of seniority and prestige of the bank: Based on the reality available, each bank
has been creating its own image in the market. A big, prestigious bank will have an advantage
in banking activities in general and fund mobilization in particular. The trust of customers will
help the bank to stabilize the amount of fund mobilized and save on mobilization costs which
will help the bank more active in business. A bank with a long history with reputation,
facilities, and qualified staff ... will create good image of the bank, attracting the attention of
customers from the customer to attract customers who deal with the bank.

Promoting marketing activities, promotion in a professional and flexible manner, taking
business performance as a decisive criterion in management of marketing and promotion
activities. To do well on this issue, the bank needs to:

- Promulgate regulations on customer marketing policy.

- Organize seminars for directors of branches who are in charge of business and
marketing to exchange experiences in raising fund.

- Annually build marketing and promotional expenses to allocate to the branches.
Identify marketing and promotion activities necessary for business operations of the bank.

3.2.2.5. Developingactive network

- Soon setting up a number of new branches and transaction offices in urban
centers and residential areas with great potential. New branches and transaction
offices must be fully invested in facilities, human resources and information
technology systems such as computers and transmission lines.

-Supplementingmore functions, tasks for transaction points, savings funds such as
allowing them to pay remittances, check payments, providing loans to individual customers at
certain limits to improve the efficiency of mobilizing fund.

-Deployingsample transaction points throughout the system rapidly.

3.2.2.6. Modernizing information technology

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customers to send, withdraw and borrow money. If being done well, this will limit the
circulation of cash flow which is both inefficient and unsafe. In addition, if the non-cash
payment rate increases, the bank will attract more idle money in the economy into the banking
system and contribute to reducing printing, preserving, checking and calculating…

At present, banks are mobilizing residents to open deposit accounts, carry out the
process of payment for goods and services through deposit accounts in which the bank acts as
a payment intermediary. In addition,thebank also offers ways of raising funds through
attractive forms such as savings deposit in a place that can be withdrawn in many places,
payment via credit card, deposit card ...

To make good use of this problem, the banking sector must continue to be equipped
with modern technologies, especially payment. On the other hand, the bank needs to study to
introduce appropriate forms of mobilization so that it helps the fund flow become fast and
convenient for control.

- Quickly deploying Silverlake to shorten transaction time for customers, enhancing the
bank's management capabilities.

- Studying the possibility of developing new high technology systems which are open,
easy to develop or integrate with programs on new products and services. Because the
Silverlake program is being closed, it is very difficult to develop or integrate with new
programs such as bonus savings, cumulative savings, and deposit savings.

3.2.2.7. Developing the human resources

Continuously improving the qualifications and professionalism of the staff,
regularly training ethics education, career style for the staff.

Under current conditions, science and technology is increasingly developed,
cadresresponsible for banking operations must be regularly trained with professional
skills, equipped with the internal and external knowledge. Adapting and timely
understanding the requirements of banks operating in the market mechanism.

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3.2.3. Recommendations to improve the quality of fund mobilization 
3.2.3.1 for Vietnam Joint Stock Commercial Bank for Industry and Trade

As the management agency which operates the whole systemof commercial banks, Vietnam
Joint Stock Commercial Bank for Industry and Trade (VietinBank) is responsible for policy
formulation, building regulations and development plans for the whole system as a basis for the
development of business plans including the plans for development of capital resources of branches
in the system.

In order to improve the quality of fund mobilization at Vietinbank - Lang Son Branch, it is
necessary to have the support, impact and assistance of Vietnam Industrial and Commercial Bank.

Supporting the training and retraining activities, both domestic and abroad, especially the
modern banking business, timely have the documents as a legal basis and professional facilities to
extend products and services such as electronic payment card services, traveler’s checks ...

- Implementinglaborors to ensure sufficient staff to complete the work, limiting the overwork,
creating conditions on time for staff to study to improve professional qualifications.

- Enhancing the facilities, ensuring enough space for transaction, enhancing the
modernization of technical equipment for business.

In addition, Vietnam Joint Stock Commercial Bank for Industry and Trade (Viettinbank)
should show its role in managing and directing the whole system through the following activities:

- Regularly organizing seminars to exchange experiences among branches, gathering
comments and recommendations from the grassroots, and contributing to the development of
documents which is appropriate with practice, especially professional business processes done in
reality . If they are not properly built the branch will find that it is difficult for to operate because it
does not meet the requirements of the regulations. Branches also do not dare to use or violate the
rules

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Conclusion

Mobilizing capital for the industrialization and modernization of the country is a very
important measure which decisively contributes to build socialist society in our country. It
requires commercial banks in particular and the banking system in our country in general to
constantly innovate their bank operations to provide solutions and measures appropriate to
each economic region in order to maximize the idle capital domestically and abroad available,
maximize internal resources of the economy, contribute to the stabilization and development
the economy and improve the people’s living standard. In addition, the State must also have
appropriate policies and measures to support the development of the banking system, so that
the operation of the banking sector will increasingly have a positive impact on the renewal
and development of the banking system and develop the country's economy.

In the coming time, in order to continue to meet the increasing capital demand of the
economy, especially medium and long- term fund, in addition to efforts to explore and
develop new forms of mobilization effectively, Vietinbank Lang Son needs the support of the
authorities in creating a favorable macro environment for Vietinbank Lang Son to
successfully accomplish the task of providing fund for investment and businessdevelopment.

Although there was some time to research, but due to the limited ability and experience of
the author, there are inevitable shortcomings and limitations in this research. Therefore, I
would like to receive any comments from teachers and all colleagues at Vietinbank Lang Son
so that this research can develop its effects in reality.

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List of references:

1. 1. Annual report; Business Summary Report; Financial report of Vietinbank Lang
Sonin 2013, 2014, 2015 và 2016.

2. Frederic S.Mishkin (2004), Tiền tệ Ngân hàng và Thị trường Tài chính, Science and
Technology Publishing House, Hanoi.

3. Le Thi Tuyet Hoaand Nguyen Thi Nhung, 2011. Ho Chi Minh: Phuong Dong
Publishing House.

4. Le Vinh Danh, 2009. Tiền và hoạt động ngân hàng. Ho Chi Minh: Publisher of
Transportation.

5. The Law on the State Bank of Vietnam No. 01/1997 / QH10 dated 12/12/1997 and the
Law on the amendment, supplement of several articles of the Law on the State Bank
of Vietnam dated 10/2003 / QH11 dated 17/06/2003.

6. The Law on Credit Institutions No. 02/1997 / QH10 dated 12/12/1997 and the Law on
the amendment, supplement of several articles of the Law on Credit Institutions No.
20/2004 / QH11 dated 15/06/2004.

7. Nguyen Thi Mui va Tran Canh Toan, 2011, Commercial Banking Administration
Program, Financial Publishing House.

8. Nguyen Trong Hoai, 2009. Forecasting and analysis of data in economics and finance.
Hanoi: Statistical Publishing House.

9. Nguyen Minh Hieu, Currency Bank, Statistical Publishing House, 2006

10.Phan Thu Ha, Giáo trình Ngân hàng Thương mại, Statistical Publishing House, Hanoi,
2006.

11. Pham Quang Sang, Hieu qua tai chinh (2011), htpp://thuviendientu.violet.vn

12.Quyết định số 1627/2001/QĐ-NHNN ngày 31/12/2001 của Ngân hàng Nhà nước ban
hành kèm theo quy chế cho vay của TCTD đối với khách hàng ; Quyết định số
127/2005 ngày 03/02/2005 về sửa đổi một số điều tại Quyết định số
1627/2001/QĐ-NHNN.

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14.Decision No. 02/2004 / QD-NHNN dated 04/01/2004 of the Governor of the State
Bank of Vietnam on the issuance of the Regulation on the issuance of valuable papers
by credit institutions to mobilize domestic capital.

15.Decision No. 1160/2004 / QD-NHNN dated 13 September 2004 of the Governor of
the State Bank of Vietnam on the promulgation of the Regulation on savings deposit.

16.Decision No. 312 / QD-HDQT-NHCT9 dated 12/9/2005 of VietinBank's Board of
Directors on the issuance of the regulation on savings deposit in VietinBank.

17.Decision No. 2217 / QD-NHCT19 dated 19/12/2006 of VietinBank's General Director
on the issuance of deposit transaction procedures.

18. Tran Viet Hoang and Cung Tran Viet, 2009. The principles of monetary banking and
financial markets. Hanoi: Statistical Publishing House.

19.

20.

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Assessment of Master thesis

Student: Lai Van Toan

Submission date: 19th June, 2017

Title: Studying the quality of the fund mobilization activities at Commercial Bank of 
Vietnam - Lang Son branch

The research topic is relevant; the thesis describes well research issues, research
question and objective, research model, and methodology;

The thesis is well structured and readable; arguments and ideads are clearly stated;

The literature review section is well written, with appropriate references from various
academic and industry sources;

The interpretations of the results of data analysis is good, associated with adequate
analysis of data; graphs are used extensively for descriptive purpose;

The conclusions reflect what have been found in the analysis; the recommendation
are good though yet to show the points more effectively

The citations in the body of the text and in list of references follow standard citation
protocol.

Date: Hanoi, June 19, 2017

Signature

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