BANKING ACADEMY BANKING FACULTY ------------------ GRADUATION THESIS TOPIC: APPLY CAMELS MODEL TO EVALUATE FINANCIAL CAPACITY OF VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK Instructor : PhD Tran Manh Ha Name of student : Vu Mai Phuong Student ID : 22A4010270 Class : K22CLCA Course : 2019 - 2023 Ha Noi - 2023 DECLARATION I declare that this is my graduation thesis, which is studied solely by myself, with the support from PhD Tran Manh Ha. The data in the thesis is trustful, the analysis is mine and has not been submitted in any previous studies in whole or in part. If there is any fraudulence recognized, I will take all responsibility before the council, as well as the result of my thesis. Ha Noi, 23th May, 2023 Signature Vu Mai Phuong i ACKNOWLEDGEMENT This graduation thesis can not be completed without the assistance.
For that reason, the author of this study want to send a gratefully acknowledgement to their support during the time of doing the research paper. First and foremost, I want to express my gratitude to all individuals and organization, who have supported and provided assistance to me during the time. I would like to thank all teachers and lectures of the Advanced Program, the Faculty of Banking, and especially the Board of Directors of Banking Academy for having created a favourable conditions and given best oppotunities for me to study and experience valuable lessons. I would also want to sincerely thank Mr.
Tran Manh Ha – who was directly in charge of guiding me to successfully complete this graduation thesis. He always offer the best support as he could to assist me, with the precious knowledge and skills that I could learn from his guidance through the process of researching and completing the thesis. Last but not least, it would be a big mistake if I forget to mention the presence of the Vietnam International Commercial Joint-Stock Bank – Ba Dinh Branch – Le Van Luong Transaction Office. I would like to sincerely thank all the staff leaders in the Individuals Customer Department for creating a wonderful condition for me to learn and apply the theoritical knowledge at school to the reality, as well as completing the thesis successfully.
ii TABLE OF CONTENTS INTRODUCTION. Problem statement and reasons for writings. Objectives of the study. Subject of the study.
Scope of the study. THEORETICAL BASIS ON THE ANALYSIS OF FINANCIAL CAPACITY OF COMMERCIAL BANKS AND CAMELS MODEL. Overview of the financial capacity of commercial banks. Concept of financial capacity of commercial bank.
Factors affecting the financial capacity of commercial banks. Overview of CAMELS model using in analysis of financial capacity. Origin and criteria of the CAMELS model. Advantages and disadvantages of assessing financial capacity using Camels model.
ANALYZING FINANCIAL CAPACITY OF VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK BY CAMELS MODEL. Overview of VIB. Formation and development process. Organization structure of VIB.
Values and strategies. Overview of the business of VIB in the period of 2020-2022. Analyzing financial capacity of VIB by CAMELS model. Sensitivity to Market Risk (Letter S).
Overall assessment to private joint stock commercial banks in Vietnam. STRATEGIC ORIENTATION AND PROPOSED SOLUTIONS TO IMPROVE THE FINANCIAL CAPACITY OF VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK. The strategic orientation of the bank in the next years. Long-term orientation (second phase of the 10-year transformation).
Short-term orientation. For The Government of Vietnam. For The State Bank of Vietnam. 78 iv LIST OF ABBREVIATIONS Abbreviations Full words CAR Capital Adequacy Ratio EM Equity Multiplier GDP Gross Domestic Product VIB Vietnam International Commercial Joint Stock Bank TPB Tien Phong Commercial Joint Stock Bank ACB Asia Commercial Joint Stock Bank NIM Net Interest Margin NPL Non-Performing Loans ROA Return On Assets ROE Return On Equity NNIM Net Non-Interest Margin CIR Cost-to-Income Ratio VCB Joint Stock Commercial Bank for Foreign Trade of Vietnam CASA Current Account Savings Account CBA Commonwealth Bank of Australia HOSE Ho Chi Minh Stock Exchange UPCOM Unlisted Public Company Market LDR Loan to Deposit WB World Bank BoDs Board of Directors v LIST OF TABLES AND FIGURES Figures Page Number Figure 2.1: Organizational structure of VIB in 2022 25 Figure 2.
Structure of raising capital of VIB 2020 - 2022 29 Figure 2. Total outstanding loans and Growth rate of VIB 2020 - 2022 31 Figure 2. Net profit before taxes scale and growth rate of VIB 2020 - 33 2022 Figure 2. Owner’s equity structure of VIB from 2020 - 2022 35 Figure 2.
Capital adequacy ratio (BASEL II standard) of VIB and 36 other joint-stock commercial banks Figure 2. Financial Leverage Ratio of VIB, ACB, TPB from 2020 - 38 2022 Figure 2. Customer loans (without Provision for loan losses) 40 Figure 2. Customer loans growth (without Provision for loan losses) 41 of VIB, ACB, TPB from 2020 - 2022 Figure 2.
NPL of VIB, ACB, TPB from 2020 - 2022 45 Figure 2. NPL coverage ratio of VIB, ACB, TPB from 2020 - 2022 47 Figure 2. CIR of VIB from 2020 – 2022 48 Figure 2. Profit after taxes of 10 commercial banks in Vietnam 2020 52 - 2022 Figure 2.
CIR, ROE, ROA of VIB from 2020 - 2022 55 Figure 2. NIM, CIR, ROE, ROA of VIB, ACB, TPB in 2022 57 Figure 2. Ratio of Short-term funds used for medium and long-term 60 loans (SMLR) Figure 2. Total deposits to total outstanding loans ratio (LDR) 61 Tables Page Number Table 2.
General information about VIB 23 vi Table 2. Members of The Board of Directors of VIB from 2019 - 25 2022 Table 2. Visions, missions and values of VIB 26 Table 2. Deposits from customers’s structure of VIB 2020 - 2022 30 Table 2.
Loans portfolio of VIB 2020 - 2022 31 Table 2. Structure of income and expense of VIB 2020 - 2022 32 Table 2. Owners’ equity scale and proportion of the components of 34 VIB from 2020-2022 Table 2. Capital Adequacy Level of VIB 37 Table 2.
Financial Leverage Ratio of VIB from 2020 - 2022 38 Table 2. Asset structure of VIB from 2020 - 2022 39 Table 2. Investment securities structure of VIB from 2020 - 2022 42 Table 2. Debt groups of VIB from 2020 - 2022 44 Table 2.
Provision for credit losses and NPL coverage ratio of VIB 45 from 2020 - 2022 Table 2. Provision for securities of VIB from 2020 - 2022 47 Table 2. Expenses for employees of VIB from 2020 - 2022 49 Table 2. Efficiency ratio of Human Resources Management of VIB 50 from 2020 - 2022 Table 2.
Net profit after taxes of VIB from 2020 - 2022 52 Table 2. NIM of VIB from 2020 - 2022 53 Table 2. NNIM of VIB from 2020 - 2022 54 Table 2. ROA of VIB from 2020 - 2022 56 Table 2.
ROE of VIB from 2020 - 2022 56 Table 2. ROE components of VIB from 2020 - 2022 57 Table 2. High liquid assets of VIB 2020 - 2022 58 Table 2. Ratios of ability to make payment of VIB 2020 - 2022 59 Table 2.
Net liquidity GAP of VIB 2020 - 2022 61 Table 2. GAP between Interest-sensitive assets and liabilities of 62 VIB 2020 - 2022 vii Table 2. The interest differences by terms of VIB 2020 - 2022 63 Table 2. The currencies state of VIB 2020 - 2022 63 Table 2.
Business plan for 2023 of VIB 70 viii INTRODUCTION 1. Problem statement and reasons for writings The global integration process has contributed to motivate the development of the whole banking system with outstanding numbers and achievements. However, the more integrated a country is, the more affected that country has to receive whenever there are any international issues. In the period of 3 years from 2020 to 2022, there were many changes in Vietnam commercial banks, which is a must to the bank to sustain not only the pandemic, but also the international political tension.
Being the core backbone of the whole economy of any country, the commercial banks had to be insured about their stability when the outbreak was happening, as well as in the post-pandemic period, which is very crucial for the economy to recover from the severe consequences of the pandemic. For those reasons, comprehensive analysis and evaluation of all elements that influence the financial capacity of the commercial banks is indispensable, which not only support the leaders of the bank to be informed of the real situation of the bank to make the right orientation, but also support the investors, customers to get more information about the bank. Vietnam International Commercial Joint Stock Bank (VIB) is a well-known joint-stock commercial bank in Vietnam. Alongside 27 years of operating and development, VIB has been always trying their best to understand the customers and fulfill the customers' demand as closely as possible.
With the continuous effort of the bank, VIB has achieved many impressive milestones of accomplishments. Nonetheless, when the pandemic came, and even in the new normal situation, VIB still had to face a lot of problems and risky issues, which may postpone the bank from being successful with the long-term goal “Being the leading retail bank in Vietnam in terms of quality and scale”. As a result, it is vital to have research to measure and evaluate the bank’s financial capacity in the period of 3 years (2020 - 2022), then point out the potential risks that may happen in the future. Based on that, the leaders of VIB can make the appropriate solutions for the bank’s operation.
From the practical demand and the urgent importance of the topic, along with the theoretical background from school, as well as the knowledge from the internship time in VIB, I have decided to pick topic named: “Applying CAMELS model to 1 analyze and evaluate the financial capacity of Vietnam International Commercial Joint Stock Bank (VIB)” to be my graduation paper topic. Literature reviews - Oversea researches Chakraborty et al. The study used a hypothesis testing method to analyze data and Regression analysis with dependent variable is net profit, independent variable are deposit, loan and investments. The results of study are numerous, but mainly is that the Islamic banking system has lower efficiency in profitability compared to conventional banking systems because the Islamic one operates based on Islamic Sariah.
Rauf (2016) did a study about “Towards Increasing the Financial Performance: An Application of CAMEL Model in Banking Sector in the Context of Sri Lanka”. The study’s objective is to evaluate financial performance of banks in Sri Lanka. The study found out that the private banks are best in all indicators of the model. However, the study did not mention the S letter (Sensitivity to the market risk) into the analysis.
- Domestic researches Nguyen Thi Minh Hue (2012) has done research about “Assessing Vietnamese banking system based on some Financial Soundness Indicators”. The research is based on the calculation results of some financial soundness indicators of 34 commercial banks in Vietnam to propose some policies to increase the sustainability of the Vietnam banking system. The limitations of the study are outdated data, lack vital ratios like NIM, NNIM and vital criteria like Management and Sensitivity. Phan Thi Hang Nga (2013) did a study about “Năng lực tài chính của các Ngân hàng Thương mại Việt Nam”.
Based on the calculation results of financial capacity of commercial banks in Vietnam, the study has found out the model of the financial capacity of Vietnamese commercial banks, which was dominated by 13 factors: equity scale, financial leverage, minimum capital adequacy ratio, Total 2 outstanding loans/Total assets, NPL/Total outstanding loans, ROA, ROE, NIM, CIR, liquidity assets ratio, Total outstanding loans/Total deposits, Short-term liquidity ratio.