NATIONAL ECONOMICS UNIVERSITY BUSINESS SCHOOL NGUYEN DOAN KHANG IMPROVE PERSONAL LENDING PRODUCTS IN RETAIL BANKING OF ANZ BANK MASTER OF BUSINESS ADMINISTRATION THESIS HANOI - 2011 NATIONAL ECONOMICS UNIVERSITY BUSINESS SCHOOL NGUYEN DOAN KHANG IMPROVE PERSONAL LENDING PRODUCTS IN RETAIL BANKING OF ANZ BANK MASTER OF BUSINESS ADMINISTRATION THESIS SUPERVISOR: Dr Pham Truong Hoang HANOI - 2011 ACKNOWLEDGEMENTS From experience I can tell that this thesis has depended on the generous support, help of many people Throughout the thesis I have able to improve the knowledge regarding managing services of banking industry Firstly, I would like to thank my supervisor Dr Pham Truong Hoang for his guidance through the process of the research My thanks are also given to my friends and teachers in Business School in helping me during this course Lastly, I would like to thank to my colleagues, manager in ANZ and especially customers, for contributing me worthwhile feedback TABLE OF CONTENTS ABREVIATIONS LIST OF FIGURE LIST OF TABLES CHAPTER 1: INTRODUCTION 1.1 RATIONALE .6 1.2 RESEARCH FORMULATION 1.3 RESEARCH OBJECTIVES 1.4 RESEARCH QUESTIONS .9 1.5 RESEARCH METHODOLOGY .10 1.5.1 Research process .10 1.5.2 Research data sources .11 1.5.3 Data analysis 12 1.6 RESEARCH SCOPE 12 1.7 RESEARCH STRUCTURE 12 CHAPTER 2: THEORETICAL BACKGROUND ON PERSONAL LENDING PRODUCT 13 2.1 RETAIL BANKING OF COMMERCIAL BANK 13 2.1.1 Definition of retail banking .13 2.1.2 The services of retail banking 15 2.2 PERSONAL LENDING PRODUCTS 20 2.2.1 Concept of product 20 2.2.2 Personal lending products 24 2.2.3 Marketing mix in service 26 2.2.4 General theories about product development 30 2.3 FACTORS EFFECT DEVELOPING PERSONAL LENDING PRODUCTS 36 2.3.1 Factors of bank itself 36 2.3.2 Activity environment of bank 38 2.3.3 Factors about customers 39 CHAPTER 3: ANALYZING PERSONAL LENDING PRODUCTS IN RETAIL BANKING OF ANZ BANK 41 3.1 INTRODUCTION OF ANZ 41 3.1.1 ANZ’s strategy 41 3.1.2 ANZ’s brand .43 3.1.3 ANZ’s Core Activity Standards - summary 43 3.1.4 ANZ’s Governance 44 3.1.5 Introduction of ANZ in Vietnam 46 3.2 PERSONAL LENDING PRODUCTS IN RETAIL BANKING INDUSTRY 51 3.3 ASSESSING PERSONAL LENDING PRODUCTS IN RETAIL BANKING OF ANZ BANK 57 3.3.1 Customer and market 57 3.3.2 Analyzing personal lending activities in retail banking of ANZ bank .59 3.3.3 Assessment of customer about the service quality of personal lending activities of ANZ Vietnam 70 3.4 Summary of findings 78 CHAPTER 4: RECOMMENDATION TO IMPROVE PERSONAL LENDING PRODUCTS IN RETAIL BANKING OF ANZ BANK 79 4.1 STRATEGIC ORIENTATION OF ANZ IN DEVELOPING PERSONAL LENDING PRODUCT 79 4.1.1 The economic – banking and financial trends 79 4.1.2 Strategic orientation of ANZ in developing personal lending products .81 4.2 RECOMMENDATION TO IMPROVE EXISTIM PRODUCTS 83 4.2.1 Diversifying and improving services/products 84 4.2.2 Developing modern distribution network 88 4.2.3 Developing human resource 90 4.3 RECOMMENDATION TO DEVELOP NEW PRODUCTS 93 4.4 CONDITIONS TO IMPLEMENT RECOMMENDATIONS 94 CONCLUSION 96 LIST OF REFERENCES 98 APPENDIX .100 ABREVIATIONS ATM: Automatic Tellers Machine GDP: Gross domestic product JSCB: Joint Stock Commercial Bank NPD: New Product Development SBV: State Bank of Vietnam SME: Small and Medium Enterprise SOCB: State Owned Commercial Bank SOE: State Owned Enterprise WTO: World Trade Organization LIST OF FIGURE Figure 2.1: Service marketing mix ……… ……………………………………27 Figure 3.1: Organization of ANZ Vietnam ……………………………………49 Figure 3.2: Numbers of branches of some big banks in Vietnam …………… 54 Figure 3.3: Total asset of large local banks, US$ billion ……………………55 Figure 3.4: Structure of customers of retail banking ………………………… 58 Figure 3.5: Structure of retail banking loans……….………………………… 62 Figure 3.6: Lending process at ANZ Vietnam ……………………………… 64 Figure 3.7: Mortgage interest rate competitor matrix – as at 15th August …… 66 Figure 3.8: Customer satisfaction of service quality ………………………… 76 Figure 3.9: Customer’s evaluation about the success of services …………… 77 Figure 3.10: Customer’s willingness to continue to use other services of ANZ 77 Figure 3.11: Recommendation the service at ANZ to friends and relatives ….78 LIST OF TABLES Table 1.1: Time plan ……………………………………………………… Table 1.2: Data sources …………………………………………………… Table 3.1: Business result in 2010 ………………………………………… Table 3.2: Products categories of some banks ……………………………… Table 3.3: Number of loans ………………………………………………… Table 3.4: Respondent’s evaluation for service quality …………………… Table 3.5: Respondent’s evaluation for service quality (Continued) ……… Table 3.6: Respondent’s evaluation for service quality (Continued) ……… Table 3.7: Respondent’s evaluation for interest and fees at ANZ ………… 11 12 51 56 69 71 73 74 75 EXCUTIVE SUMMARY The thesis was conducted to study about the current situation of personal lending activities in retail banking of ANZ Vietnam; the thesis also proposed some possible solutions for developing personal lending product policies at ANZ Vietnam The research objectives of the thesis are to study and analyze current situation of personal lending product policies at ANZ Vietnam Other objectives of thesis are to assess the quality of personal lending service at ANZ and propose solutions to improve personal lending product at ANZ Vietnam The research is mainly based on interviews and questionnaire with existing and potential customers The research methodologies used in the thesis are comparisons Real figures and documents were colleted from the annual report and newspaper as well as report that are published in order to determine factors that effect the developing of personal lending activities and propose solution to develop retail banking operations From findings of thesis, the thesis has some following contributions: - The thesis researches details of personal lending activities - Finding some assessments on business operation of personal lending activities - Propose some solutions to improve personal lending product The thesis divides into four chapters as follows: CHAPTER 1: Introduction The first chapter is introduced main points of the study This chapter provides overview information about Vietnam’s banking industry development, and also presents the the background, the questions and the objectives of this research CHAPTER 2: Theoretical background on personal lending product - Enhancing more competitive strengths for the bank The supply of modern products and services will increase competitive strengths for the bank compared to other banks - The bank receives more profit - Saving more expense, human resource… thanks to applying technology and information technology in developing modern products/services 4.4 CONDITIONS TO IMPLEMENT RECOMMENDATIONS To implement these solutions, ANZ bank needs some requirements: - ANZ bank needs to invest more capital in this field Capital is an important requirement to develop modern services and products because expense to develop modern products/services such as development of products/services, investment on technology, marketing program… is very big - ANZ bank invests more technology to research and supply services that are more modern and products with high technology ratio - Building strategy to develop modern products/services Researching and applying more modern products and services - Launching reasonable products/services with the business orientation of bank With this solution, the bank will develop and diversify more modern banking services and products ANZ bank should focus on some aspects: - ANZ bank should strategy to research and develop modern products and services that are reasonable with capital, business strategy, capacity of ANZ bank at present 94 - Adding more values for modern products and services ANZ bank has a customer strategy for each modern product/service, with each product/service ANZ bank adjusts fee and expense with reasonable approximate Competitive fee and customer policy will enhance competitive ability of services of ANZ bank Besides core value of modern products/services, ANZ bank should add more value for modern products/services such as image of services… This soared value will strengthen competitiveness with other banks and this value will create differences between ANZ bank and other bank - Cooperating with other banks to share modern services With present financial situation of ANZ bank, ANZ bank should cooperate with other banks as well as other companies to research and launch modern products/services for customers This corporation will bring many benefits for both parties, customers, ANZ bank and its partners - Changing risk management and assessment procedure to suitable with Vietnam market ANZ Vietnam has to apply the risk management system and all the procedures under control of ANZ Global so that it can not meet the demands of some customer groups + Expand the customer groups such as the customer has long-term business… + Change some conditions in lending contract such as paying method… 95 CONCLUSION Retail banking plays an important role in the development of each bank The retail banking market share is increasing and many banks are focusing on this market to reduce high risk in corporate banking At present, retail banking is facing with many pressures and high competition in financial – banking market Therefore how to improve product policies in retail banking to attract more new customers in order to gain more profit in this situation? Based on above argument, with the topic “Improve personal lending product policy in retail banking of ANZ”, the thesis did solve following problems: - Finding situation problems in personal lending product policy In this part, the thesis referred the strengths as well as the weakness of personal lending product policy in retail banking of ANZ - Finding threats and opportunities to improve personal lending product policy How to build personal lending product policy to take advantage of opportunities to develop retail banking Besides, the thesis also focuses on solution group to improve personal lending product policy such as: - Improving management capacity - Diversifying and improving products/services - Developing modern products/services - Developing modern distribution network 96 Within the thesis, this thesis mainly adopts compare methodology to analyze secondary data and interview methodology All collected secondary data are compared in order to find all matters relating to personal lending activity in retail banking of ANZ The interview methodology is conducted with participation of existing and potential customers 97 LIST OF REFERENCES In Vietnamese Lê Xuân Nghĩa (2005), Tài liệu Hội thảo – Một số định hướng chiến lược phát triển hệ thống dịch vụ ngân hàng đến năm 2010 Lưu Thị Hương (1998), Giáo trình Tài doanh nghiệp Nhà xuất Giáo dục Ngân hàng ANZ toàn cầu, ANZ Việt Nam Báo cáo thường niên năm 2008, 2009, 2010 Nguyễn Đức Thảo (2005), Tài liệu Hội thảo – Giải pháp xây dựng chiến lược phát triển dịch vụ ngân hàng trình hội nhập kinh tế quốc tế Nguyễn Thị Minh Hiền (2004), Giáo trình Marketing Ngân hàng Nhà xuất Thống kê Phan Thị Thu Hà (2004), Giáo trình Ngân hàng Thương Mại Nhà xuất Thống kê Peter Rose, Quản trị ngân hàng thương mại Nhà xuất Giáo dục Vụ chiến lược phát triển ngân hàng (2005), Xây dựng chiến lược phát triển dịch vụ ngân hàng đến năm 2010 tầm nhìn đến năm 2020 In English Burt Edward (2004), Credit Management Handbook, Gower Publishing Limitted, England 10 Credit Scoring for Vietnam’s Retail Banking Market: Implementation and Implications for Transactional versus Relationship Lending, Dinh Thi Huyen Thanh & Stefanie Kleimeier, Limburg Institute of Financial 98 Economics (LIFE), Faculty of Economics and Business Administration (FdEWB) 11 Elizabeth Mays (1998), Credit Risk Modeling, Design and Application, Fitzroy Dearborn Publisher, Chicago & London 12 Jerry Chien (2009), Vietnam Banking System Outlook, Moody’s Global Banking 13 Jill Hussey and Roger Hussey (1997), Business Research 14 Moving forwards: Retail Banking Gains Ground, Manabu Tsurutani, Nomura Institute 99 APPENDIX QUESTIONNAIRE I/ PERSONAL INFORMATION (Please tick the appropriate box below) Age:    21 - 30 years old 41 - 50 years old > 60 years old        10 – 15 mil VND 25 – 35 mil VND 45 – 55 mil VND    Company: State-owned comapany  Foreign company  Private company Personal company   Knowing ANZ bank through: Internet  Advertising  Friends, relatives Others   < 20 years old 31 - 40 years old 51 - 60 years old Income: < 10 mil VND 15 – 25 mil VND 35 – 45 mil VND > 55 mil VND II/ Experience in using personal lending services at ANZ: Please circle one number to indicate your agreement on each statement EXP1 I know little about ANZ I know much about ANZ EXP2 I not have experience in I am very experienced in lending capital from ANZ lending capital from ANZ EXP3 I not have any information I know much about the about the personal lending personal lending services of services of ANZ ANZ 100 COR1 COR2 COR3 COR4 COR5 COR6 COR7 COR8 COR9 COR10 COR11 COR12 COR13 COR14 COR15 Neutral Agree Strongly agree Items Disagree STT Strongly disagree III/ Service quality of personal lending services at ANZ bank: (Please circle one number to indicate your agreement on each statement) ANZ provides fully lending services to buy house as informed ANZ provides lending service to buy house in exact progress that promised with customers ANZ always solve the problems that customers often have with whole hearted Staffs of ANZ carry out operations exactly at the first time Staffs of ANZ have knowledge and professional skills to explain clearly and in detailed about the lending product to buy house Conditions about property to put as security of ANZ is suitable with market condition ANZ only accepts income from salary, wages that paid income tax is suitable with customer ANZ only accepts income from buying stock, private business after minus income tax of enterprises is suitable with customer ANZ doesn't accept income from hiring property which is paid each months is suitable with customer Customers can only use 60% of total income to pay debt is safe for customer Customers have only one choice is paying lending money + interest every month is the most suitable Customers have to transfer monthly income to account in ANZ is possible condition When customers buy bottom land, they have to have the building license before lending money is possible condition ANZ requires customers to update their property, they can only lending 70% of pledge's value is possible condition in Vietnam Assessing customers' information via telephone is to 101 Strongly agree Agree Neutral Disagree Items Strongly disagree STT ensure the exact of lending documents COR16 Assessing property through property company is to ensure the objective is suitable REL1 The working hours of ANZ is flexible and convenient for customers REL2 Customer can contact easily with the staffs who responsible for the customer's loan REL3 Customers get the answer from ANZ about the loan in the soonest time REL4 Customers don't have to come to ANZ many times during providing this lending REL5 Documents which ANZ requires customers to prepare and carrying out process are simple and easy REL6 Terms and conditions in lending contract to buy house are set clearly and easy understanding REL7 ANZ takes care of each customer REL8 Staffs of ANZ carry out the operations exactly and professionally REL9 Staffs of ANZ understand clearly customers' demand and are ready to consult, help customer to choose the most suitable services for customers REL10 Staffs of ANZ are always polite and friendly REL11 ANZ provides supplement services with loan REL12 The environment in ANZ makes customers comfortable REL13 ANZ brings trust and safety to customer TAN1 The branches of ANZ is convenient for customers' transaction TAN2 Equipments and facilities of ANZ are modern, professional and friendly TAN3 ANZ's parking place is convenient for customers TAN4 TAN5 TAN6 Staffs' uniform is tidy, elegant and polite Transaction records are clear, easy to understand Information about the loan is always updated monthly by documents 102 Neutral Agree Strongly agree Các tiêu chí Disagree STT Strongly disagree IV/ Interest and Fee of Personal lending services of ANZ (Please circle one number to indicate your agreement on each statement) INT1 Lending interest of ANZ to buy house is lower than other banks INT2 Fees which have to be paid during the lending at ANZ is lower than other banks INT3 Interest and fees for lending to buy house at ANZ is set clearly and reasonably Agree Strongly agree Neutral Items Disagree No Strongly disagree V/ Customer satisfaction about the service quality of Personal lending service at ANZ (Please circle one number to indicate your agreement on each statement) The service quality of Personal lending service at ANZ is good The service quality of Personal lending service at ANZ is better than other banks You will continue to use the services at ANZ next time You will recommend the service at ANZ to friends and relatives Thank you very much for having taken the time to complete this questionnaire! 103 Lending products of ANZ’s competitors in Vietnam Name of bank Product Mortgage loan Home equity Auto loan Personal installment loan Loan secured by valuable paper Techcombank Secured overdraft and unsecured overdraft Abroad study loan Auto loan with business purpose Super flexible loan for household business 10 Credit limit loan for household business 11 Securities loan Mortgage loan Consumer loans Vietcombank Auto loan Personal account overdraft Vietinbank Loan for household business Mortgage loan Installment loan for home, home-base purchasing, home construction and renovation Auto loan Consumption loans and consumer installment loans Loan for Overseas study Loan for developing business activities 104 Securities and value paper loans Mortgage loan Installment loan for home, home-base purchasing, home construction and renovation Auto loan BIDV Loan secured by valuable paper Secured overdraft Consumption loans Abroad study loan Securities loan Commercial paper mortgage loan Auto loan Installment loan for home, home-base purchasing, home construction and renovation Loan for Overseas study Military Bank Loan for developing business activities Consumption loans and consumer installment loans Securities and value paper loans Overdraft loans HSBC Loans for individual purchasing Home Mortgage Loan Home Equity - Renovation Home Equity - Overseas Education Home Equity – Other purposes Auto Loan Secured Overdraft 105 Personal Installment Loan Lending process 106 Regional Credit Singapore Regional Office Head of Retail & Wealth Branch Managers HCMC/Hanoi Consumer Lending Specialists HCMC /Hanoi Consumer Finance Department (CFD) Saigon South Consumer Credit Manager Assessment Officers Saigon Fulfilment Officers Saigon Cutomers Registration Officers Saigon Registration Officers Branch Hanoi 107 ... products in retail banking of ANZ bank Chapter 4: Recommendation to improve personal lending products in retail banking of ANZ bank Conclusion CHAPTER 2: THEORETICAL BACKGROUND ON PERSONAL LENDING. .. lending products of retail banking; - To analyze current situation of personal lending at ANZ; - To recommend solutions to improve personal lending products in retail banking of ANZ bank 1.4 RESEARCH... ANZ? ??s Governance 44 3.1.5 Introduction of ANZ in Vietnam 46 3.2 PERSONAL LENDING PRODUCTS IN RETAIL BANKING INDUSTRY 51 3.3 ASSESSING PERSONAL LENDING PRODUCTS IN RETAIL