Tóm tắt Luận án Competitiveness evaluation model of commercial banks in Vietnam

1 INTRODUCTION 1. The inevitability of topics: Aspiring to further integrate into the global economy after a milestone event of becoming an official member of the World Trade Organization (WTO), Vietnam has confronted with a number of challenges. In this situation, the banking sector in Vietnam has undergone dramatic restructuring and reform in order to enhance its competitivenes capacity. Much was achieved but more challenges are laying ahead. For that reason, a research title named “Competitiveness evaluation model of commercial banks in Vietnam” was chosen as an author’s PhD Dissertation. 2. Research context International research context. By researching more than 50 international research papers and articles about the issues of competition and competitiveness capacity varying from national level to enterprise level, the author found that a number of models The author has researched more than 50 articles, international scientific studies of competition and competitive ability from national level, sector level to enterprise level, exposes different methods, many models have been used in analysis to figure out the relationship between internal and external elements to the competitiveness; however there have not any study that use the approximate variable models to quantify qualitative variables, thence homogeneous approximated qualitative variables with quantitative variables in the regression model. The domestic research situation. In Vietnam, there are no studies on the competitiveness analysis model in Vietnam commercial banks based on the factor analysis method. It is clear that in this area, no studies provide a quantitative model to evaluate the competitiveness of banks in Vietnam. Each of these research projects have analyzed one or several discrete indicators of competition in the sector. 3. Aims of research: - Categorize the basic theoretical issues of competition, competitiveness capacity and competitiveness evaluation model of commercial banks. - Research on the issues of competitiveness evaluation model of commercial banks in Vietnam, finding the pros and cons, thereby 2 recommending an ultimate model of competitiveness evaluation for Vietnamese commercial banks. - Recommendations an ultimate model of competitiveness evaluation for Vietnamese commercial banks. - An asessment of Vietnamese commercial banks regarding their competitiveness capacity, then scoring them based upon an F competitivenes index. 4. Objectives and Scope of the Disseration 4.1. Objectives of the Dissertation - A research on the competitiveness evaluation model of commercial banks. 4.2. Scope of the Dissertation - The research focuses on commercial banks in Vietnam including state-owned commercial banks and other joint stock commercial banks, but foreign banks and joint-venture banks in Vietnam. - The reserach reviews bank data and statistics of more than 40 Vietnamese commercial banks for the period of 2006-2012 and their financial statements in 2012. 5. Research methodologies: - The Dissertation is based on methodologies of synthesising, comparing and quantity analysing by using softwares such as SPSS, AMOS and DEA, thereby finding the ultimate model. 6. Major finding of the Dissertation and its contribution The new finding of the Dissertation and its contribution are reflected in the followings: - Scope of research: The Dissertation analyses the competitiveness capacity of all commercial banks in Vietnam including state-owned commercial banks, joint stock commercial banks. Meanwhile, most previous researches focused on an individual bank or a brand or a group of banks... - Theoretical issue: The Dissertation presents a system of criteria in order to rank the competitiveness capacity of Vietnamese commercial banks. Besides, the Dissertation categorize models of competitiveness evaluation of commercial banks and then give an assessment about their pros and cons. - Research Methodology: the Dissertation uses variables to operate the model, those combine elements of both qualitative and quantitative. In particular, the author has used approximately variables and non- parametric approach (DEA) based on linear programs to evaluate quantify qualitative variables in order to save time and spending, to collect information through taking surveys together with arithmetric information gathered from financial reports, then they are consistent to 3 run in the SPSS statistical model. This method of study mainly tests theories, uses the empirical natural science model, quantitative research methods those may be proved in practice and in accordance to objectivism. This combination have never been referred in both domestic and foreign. - Applicability of research result: the Dissertation has set up scientific basis for a factor analysis model to evaluate partial and comprehensive competivieness, then ranking competitiveness of commercial banks in Vietnam. The application of factor analysis model in evaluating competitiveness provides a quantitative tool to supplement for the current SWOT to determine the significance of each factor contributing to competitiveness of commercial banks and competitive advantage of each bank.. quickly, comprehensively and more accurately. Based on these analysis results, bank managers can set up a business plan which can be in line with the bank’s characters and agencies can design more appropriate management policies. 7. Structure of the Dissertation Along with the Introduction, Conclusion and Bibliography, the Dissertation is divided into three chapter as follows: Chapter 1. Theoretical basis of competitiveness capacity and competitiveness evaluation model of commercial banks Chapter 2. Issues of competitiveness evaluation model of commercial banks in Vietnam Chapter 3. A selection of competitiveness evaluation model of commercial banks in Vietnam and some policy recommendations CHAPTER 1 THEORETICAL BACKGROUND AND THE COMPETITIVE ADVANTAGE MODEL OF COMMERCIAL BANKS 1.1. Competition and competitiveness of commercial banks 1.1.1. Definition of competition and competitiveness of commercial banks “Competitiveness of commercial banks is the ability to maintain and expand market share, gaining increasing profit in a competitive business environment but at the same time being able to withstand disadvantaged changes of the business environment. A bank’s competitiveness is demonstrated by its business productivity, profit and market share”. 4 1.1.2. Competition in banking sector First, commercial banks both cooperate and compete severely against each other. Second, competition in banking sector should aim toward a healthy environment and against systematic risk. Third, business operation and competition among commercial banks are under influence of external factors. Fourth, Banking competition are frequently vulnerable to changes in international financial market. 1.1.3. What banking competition is about. First, competition in terms of price Second, competition in terms of service quality. 1.1.4. Necessity of improving commercial banks’ competitiveness in times of international integration. First, due to international integration, domestic competition in Vietnam has become more intense. Second, competition among commercial banks is not only confined to traditional product (lending and borrowing) but also in new lines of products. Third, there is an increase in the supply side of the market in times of international integration and there is a constantly changing demand of customers. Fourth, there is a rapid development of financial markets and other side markets related to banking sector. Fifth, technological application is one of crucial factor contributing to raising commercial banks’ competitiveness. 1.1.3. Indicators measuring competitiveness of commercial banks 1.1.3.1. Qualitative indicators - Reputation and brand-name of commercial banks. - Technological level - Human resource quality - Management ability and organizational structure - Distribution channel efficiency and product quality 1.1.3.2. Quantitative indicators  Financial capacity: In order to evaluate financial capacity of a commercial bank, scale of owners’ equity, asset safety rate and asset quality are used.  Operation competence. Each banks’ market share is reflected by the volume of customers, the ability to call for finance and debt scale 5  A bank’s operation efficiency can be evaluated by: absolute value of after-tax revenue, revenue growth rate, revenue structure, Return on Asset (ROA) and Return on Equity (ROE) and Net Interest Margin (NIM).  Ability to assure liquidity including liquidity ability indicators, ratio of preliminary stock over total asset, lending/borrowing ratio.  Personnel productivity. Productivity is shown by: average total asset per capita, average debt per capita, average revenue per capita. 1.1.4. Influential factors of commercial banks’ competitiveness. Commercial Banks’ operation is affected by many factors, which influence directly and indirectly their competitiveness. They can be divided into two groups: internal factors and external factors. 1.1.5. Methods to evaluate competitiveness of commercial banks 1.1.5.1. Qualitative method: it is a qualitative data collection method and aims at describing facts from an analyst’s view. 1.1.5.2. Quantitative method: it is quantitative data collection method and address the relation between theory and explanation-based research. 1.1.5.3. Expert method It is based on materials related to competition to synthesize competitiveness evaluation indicators and employs these direct comparison methods of these factors to evaluate competitiveness against the competitors. 1.2. Competitiveness Evaluation Model of commercial banks 1.2.1. SWOT SWOT came into being in the 60s and 70s at Standford Research Institute, the USA. It is based on Michael Porter’s five forces competition theory model to determine internal and external factors. SWOT model is in the form of two-row and two-column matrix with four parts: Strengths, Weaknesses, Opportunities, Threats. 6 Table 1.1. SWOT matrix External factors Internal Factors Opportunities (O) O1, O2, O3,. Significant external factors Threats (T) T1, T2, T3,... External significant threats Strengths (S) S1, S2, S3,. Banks’ internal strength Combination S+O Turning strengths into opportunities Combination S+T Turning strengths into threat-reducing factors Weakness (W) W1,W2,W3, Banks’ internal weaknesses Combination W+O Employing opportunities to reduce disadvantages Correcting weakness to make use of opportunities Combination W+T Correcting weakness to reduce threats - Advantages and Disadvantages - Applicability 1.2.2. IE Model- Internal and External Evaluation Matrix IFE-Internal Factors Evaluation matrix summarizes and evaluates significant strengths and weaknesses of banks. EFE-External Factors Enviroment matrix summarizes and quantitizes influence of external factors on banks. IFE and EFE can be implemented by 5 steps: Step 1: Listing essential factors as determined in internal evaluation process, including 10 to 20 factors, both strengths and weaknesses. Step 2: Categorize factors in terms of its significance from 0.0 ( insignificant) to 1.0 ( very significant). This categorization shows the relative significance of these factors toward bank’s success. The total of significance level should add up to 1.0. Step 3: Rating from 1 to 4 for each factors, including: 1 stands for the greatest weakness, 2 for the least weakness, 3 for the least strengths and 4 for the greatest strengths. Then, categorization is bank-based. Step 4: Multiply significance level of each factors with its corresponding category ( = step 2 x step 3) to come up with significance score. 7 Step 5: Summarize all significance level of each factor to come up with total significance level for a bank. No matter how many factors an IFR model contains, the highest total significance score possible is 4.0,the lowest score is 1.0 and the average score is 2.5. A greater-than-2.5 scores show the company is internally strong and a less-than-2.5 scores shows the company is internally weak. Total significance score in IE matrix Total significance score in IE matrix Strong 3.0-4.0 Average 2.0-2.99 Weak 1.0-1.99 Strong 3.0 – 4.0 I II III Average 2.0 – 2.99 IV V VI Weak 1.0 – 1.99 VII VIII IX - Advantage and disadvantage - Applicability 1.2.3. Factor Analysis General factors are described as linear combination of observation variables. Assuming that the factor analysis comes up with i factors. This means: Fi = Wi1X1 + Wi2X2 + Wi3X3 + . + WinXn o Fi : the estimated values of the factor i o Wik: weight or factor score coefficient from variable k to weight i o K: variables or items - Pros and Cons - Applying condition 1.3. International experiences and lessons for Vietnam 1.3.1. International experience regarding competitiveness evaluation model for commercial banks in Vietnam First is the World Economic Forum (WEF) and the Institute of International Management Development (IMD) using indicators to measure competitiveness in the study of "national competitiveness". They argue that national competitiveness is a combination of competitive assets and competitive processes, as shown in the following formula: National Competition = competitive assets X competitive process the WEF and the IMF use only some soft and hard index to implement index ranking. While WEF focus on softer index, IMF emphasize on hard indicators. Both organizations use the average score standard 8 deviation for the overall points competition but different weights. However, both of them conduct research on national competitiveness rather than research on the competitiveness of banks. Second is CAMELS model has been applied since the 1970s that includes six factors: C - level of capital adequacy, asset quality A-, M- Quality Management, Profit E-, L-and S-Liquidity sensitivity to market risk. Meanwhile, the banking model ranked FIRST in Japan is considered 10 factors: business management, legal compliance, client management, protection, risk management, comprehensive risk, capital management etc. With the FIRST model, management issues (non- financial) will get more attention. In short, focusing on the CAMELS model analysis and inspection help to make clear forecast for the bank and precautions. FIRST system is also encouraging bank's efforts to improve governance. Third is the ranking method used by the financial magazine including the magazine "The Banker" magazine in the UK and "Euromoney". The organization ranked large banks on a global scale based on factors such as Tier 1 capital, assets, capital assets ratio, profit growth actually, ROE, ROA. The ranking results of this organization has been widely accepted and recognized by the international financial institutions but did not consider the type of subjective factors, so cannot reflect all the components, subjective factors affecting the competitiveness of banks. Fourth is the competitiveness evaluation in the banking sector of the Chinese scholars. The researchers divided the indicators competitiveness into 2 groups: the competitiveness index present (including market size, the level of capital adequacy, asset quality, ROE, Liquidity and internationalization) and group indices potential competitiveness (including human resources, information technology, financial innovation, service providers, corporate governance and internal control). They also developed an evaluation model for competitiveness of Chinese commercial banks: National Competition = competitive assets X competitive process 1.3.2 . Lessons for Vietnam Vietnam should build upon the reasonable distilled from the model but must take into account the particularities of the banking sector in Vietnam. - Vietnam should employ both CAMELS model and the FIRST model to have a combination result , in order to bring the best performance . - Competitiveness evaluation and ranking should be done on each factor to find out the competitive advantage of the commercial banks in 9 Vietnam, contributing to make policy recommendations for the management of bank executives . - Competitiveness evaluation model has to assess comprehensively and consistently based on a ranking system of signs . - Risk assessment based on long -term effects of business cycles , and together with the development trend of the bank in the future . - Develop and finalize the criteria of evaluation competitiveness based on the characteristics of Vietnam's banking system . - Develop integrated quantitative models that rank results must consider both subjective and objective factors affecting the competitiveness of commercial banks in Vietnam. - The indicators of competitiveness were divided into 2 groups : 1 st group includes current competitiveness index current and 2 nd group includes the potential competitiveness index. Then build an evaluation competitiveness model for Vietnam's commercial banks as basis for ranking based on the results of each factor score and aggregate factors affecting capacity of the commercial banks . - Select the appropriate model to estimate the impact analysis of these factors to the competitiveness of the entire commercial banks in Vietnam . Conclusion of Chapter 1: In chapter 1 the author outlined the basics of competition, the competitiveness of commercial banks and the theoretical basis of the model of competitive analysis as the basis for analyzing competitiveness of commercial banks in Vietnam in chapter 2. Chapter 2 SITUATION OF EVALUATION COMPETITIVENESS MODEL FOR COMMERCIAL BANKS IN VIETNAM 2.1 . Overview of the business environment and the activities of commercial banks in Vietnam 2.1.1 . Overview of the business environment of commercial banks in Vietnam 2.1.1.1 . Legal Environment . In the process of integration and opening of domestic financial markets , Vietnam has gradually changed its legal environment in accordance with international practice gradually , leading to the formation of a fair business environment to facilitate Vietnam's interest to avoid conflicts of domestic trade laws and WTO rules . 2.1.1.2 . The business environment of financial services : there have been changes in management practices in term of the number of market participants and especially the operating pattern, products and services provided to customers 10 2.1.2. Operational status of the commercial banking system in Vietnam 2.1.2.1 . The number and network activities of commercial banks 2.1.2.2. The development of products and services 2.1.2.3. The development of distributed systems According to statistics, the number of ATMs by banks drastically increased from 1900 in 2006 to 11700, POS 2012 is 28,100 units. 2.1.2.4. Mobilization and use of investment capital by banks. Banking system has mobilized and provided a large amount of capital for the economy, accounting for an estimated 16-18% of annual GDP, nearly 50% of social investment. 2.1.2.5. The income structure is not diversified, depending mainly on credit operations. Income from credit activities accounted for a large proportion of the income structure of most banks in the country. In 2012, the average proportion of interest income in total income of the 10 banks in Vietnam is 76.8%. For some smaller banks, this proportion is even more than 90% (LienViet bank: 92.2%, Ocean bank: 103.5%, Nam Viet bank: 93.1%, Mekong Development bank: 98.8%). 2.2. Situation analysis models in competitiveness of commercial banks in Vietnam 2.2.1. Survey in model used in the analysis of the competitiveness of Vietnam's commercial banks The survey showed that 47.1% of surveyed commercial banks assess capacity of competitors using the SWOT analysis. However, frequency of use SWOT analysis techniques to evaluate the competitiveness of rivals which accounted for 82.6%, banks frequently use the SWOT model is 47.8% and 34.8% of banks sometimes use this technique. 11 2.2.2. The results of SWOT analysis of competitiveness of commercial banks in Vietnam 2.2.2.1. Current status of financial capability - The capital of commercial banks has been significantly increased, until now, many banks had reached over 1000 billion to 3000 billion, now has 10 JSBs who have strategic partner with foreign banks ownership rate ≤ 30%. - Capital adequacy ratio (CAR) Prior to 2006, the capital adequacy ratio of commercial state banks didn’t meet the minimum requirement of 8% as The decision 457/QD- NHNN *, however by the end of 2012, all Vietnamese commercial banks have achieved safety CAR minimum capital ≥ 9% prescribed in the Circular 13/TT/NHNN-2010 ** unless the global oil and gas bank GB, CAR reached only 6.9%. 2.2.2.2. Status of operation capacity - Mobilization of capital and loans: generally, market share in deposits and lending funds still belongs to the major state-owned commercial banks or state-dominated shareholding as VCB, Vietinbank, BIDV, .. . but generally tends to decrease and makes room for commercial banks and foreign banks & corporated banks.  The size and growth rate of assets: Chart 2.11: Raise capital and credit growth in VN (Source: IMF, Statistic Department, SBV)  Bad debt (Source: SBV) 12 2.2.2.3. Status of governance capacity  Profitability of the banking system Table 2.3. ROA and ROE of some commercial banks Bank Year 2011 Year 2012 ROA ROE ROA ROE AgriB 0.60% 11.60% 0.53% 7.45% BIDV 1.20% 13.20% 0.66% 11.41% Vietcombank 0.90% 17.00% 1.03% 10.20% VietinB 0.60% 26.70% 1.13% 16.34% MHB 0.20% 2.60% 0.25% 2.93% Techcombank 1.80% 28.10% 0.45% 6.07% Average 1.60% 13.90% 0.75% 8.11% Chart 2.13 Percentage of net interest income (NIM) Overall, through the diagram of the profitability ratio, Vietnam commercial banks shows SCBs have lower profitability than some of commercial join stock banks. This fact shows that in case of scale equity assets as well as the greater VCSH, the problems posed to bank managers achieve higher profitability is extremely difficult in the context of increasingly fierce competition.  The ability to ensure safe operation Complicated movements in the currency market in Vietnam in the end of 2007, early 2008 and late 2010, early 2011 has made the liquidity of the banking difficulties. 13 Table 2.5: Percentage of loans / customer deposits in 2012 Commercial bank Abbreviation Year 2012 Mekong Development bank MDB 259.9% Petrolimex and Gas bank PG Bank 117.6% Vietnam Thuong Tin commercial bank VTTB 115.9% Bao Viet commercial bank BVB 114.2% Orient Commercial Bank OCB 113.8% Dai A Bank Dai A Bank 110.4% Mekong Housing Bank MHB 106.7% TienPhong commercial bank Tienphong Bank 103.1% Saigon Bank for Industry and Trade SGB 102.8% Saigon Commercial bank SCB 102.4% Dong A Commercial bank Dong A Bank 101.3% (Source: Author collected) 2.2.2.4. Situation of resources Although labor is a competitive advantage of Vietnam by cheap labor costs, however, the labor productivity is low, mostly manual labor, working style and lack of professional. This is also reflected in the quality of human resources in commercial bank not high and equal. 2.2.2.5. Situation of technology level Currently there are 40 commercial banks in the country to deploy core banking system ( Core Banking ) enables data administrators centralized at the Head Office, reduces operating risk in banking business. Due to modern banking technology, most commercial banks were involved in the operation system SWIFT international payments in order to provide international settlement services to clients with fast speed, high security, safety and low cost . 2.2.2.6. Strengths, weaknesses, opportunities and threats of the commercial banking Vietnam today 14 Strengths S1: broad network S2: The staff are knowledgeable about the local market and cultural proficiency of the customer. S3: Commercial banks’ customers are large and diverse S4: Large market share of credit operations, raising capital and services. S5: Activity-based core banking technology, centralized data management, helping to improve the quality of banking products and services. Opportunities O1: International economic integration has motivated innovation and reform of Vietnam's banking system in many ways, such as capital, operating mode, change the way of thinking,... O2: Interest and special support from the State Bank. O3: Favorable legal environment and schedule of WTO commitments facilitate domestic banks have time to consolidate and improve themselves. Weaks W1: Although the equity capital of Vietnam commercial banks continuously increase in recent years, but in general the equity capital still very small compared with regional banks Threats T1: Due to the low competitiveness, opening up financial markets will increase amount of banks who have strong financial resources, technology, management skills, which makes increasing competitive pressure. W2 : Products and services are not diverse , plentiful , largely focuses only on the traditional business , not high utility . W3 : The quality of Vietnamese banking services (expressed in operational processing speed , safety , accuracy , usability ) is not high , transaction procedures are cumbersome , complex , ... W4 : Capacity management and administration is limited in comparison with the modern requirements of commercial banks W5 : Writing systems , T2 : Pressure of innovative appropriate technologies and techniques to be able to compete with foreign banks . T3 : The legal system in the country , market institutions are incomplete , asynchronous and inconsistent, many shortcomings compared to international integration requirements for banks . T4 : The profitability of most Vietnam commercial banks is lower than banks in the region , which limits the possibility of establishing risk reserve fund and 15 mechanisms and policies of commercial banks are still incomplete W6 : Lack of association among commercial banks. W7 : The implementation of Vietnamese commercial banks’ modernization programs is uneven, which leads to limitation of collaboration in the development of products, services and bank management. W8 : Business activity is seriously about quantity development, not goes into quality yet. W9 : The Vietnam commercial banks invest too much in state enterprises , while the majority of enterprises have low financial rank and weak competitiveness branches . This is potentially risk for the banks. W10: Workforce with professional ethics and high professional who meet the operation requirements of modern banking in terms of integration is largely lacking. equity increase fund . T5 : In the integration process , Vietnam's banking system is also strongly affected by the world financial markets , especially in foreign exchange rates , interest rates , foreign currency reserves , at the same time to make more services and international commitments . T6 : Economic integration , increased international capital transactions and risks of the banking system , whilst mechanisms and information system of banking supervision is still very primitive , unsuitable for routine. T8 : Structure banking system despite strong growth in width but also cumbersome , organizational models are not scientific. T9 : Vietnam Commercial banks have no wage policies and reasonable remuneration to attract and retain good employees . T10: The branches of foreign banks are allowed to expand its network and become retail banking with modern technology T11: The competitive advantage of Vietnam's commercial banks is now very weak 2.3. Evaluating results of the application of the SWOT to analyze the competitiveness of Vietnam's commercial banks 2.3.1. Achievements Using the SWOT model in evaluating the competitiveness of Vietnamese commercial banks helps us easily have an overview of the strengths, weaknesses, opportunities and challenges of Vietnam's 16 commercial banks in the current context to carry out the next steps such as strategy formulation, strategic tactical objectives and specific control strategies mechanisms. With clear and special analysis result, managers can make feasible and effective policies to restructure the banking system of Vietnam into a modern safe banking system, with sustainable development. 2.3.2. Existences and cause of these problems. Results of competitiveness analysis using the SWOT matrix to create a list of strengths , weaknesses , opportunities and challenges of the commercial banks in Vietnam but the factors in SWOT matrix are not attached a certain weight or do not indicate the level of importance of each factor for the competitiveness of banks , not quantified so there is no scientific basis for ranking the competitive capacity of all Vietnamese commercial banks . 2.3.2.2 . The cause of the existence - Due to the lack of a full updated and centralized banking information data base serving to assess the competitiveness of commercial banks in Vietnam. - Because the SWOT model applied to analyzes the competitiveness of Vietnam's commercial banks in chapter 2 only uses quantitative methods of analysis and methodology experts . - Due to technical limitations of the SWOT model Chapter 2 conclusion The analysis of the operation condition and competitiveness of commercial banks in Vietnam through using SWOT model partially reveals the strengths and weaknesses and the opportunities and threats of the commercial banks in Vietnam in the context of international integration. However, the authors also analyzed to assess the advantages and some drawbacks of using SWOT model in competitiveness analysis of the Vietnam banks as a basis to choose a model that analyzes the competitiveness of commercial banks in Vietnam more advantages in chapter 3. Chapter 3 SELECTING A COMPETITIVENESS ANALYSIS MODEL OF SOME COMMERCIAL BANKS IN VIETNAM AND SOME RECOMMENDATION REGARDING APPLICABILITY 3.1. Bases of selecting a competitiveness analysis model of commercial banks in Vietnam 3.1.1. Based on previous research findings regarding selecting a competitiveness analysis model of commercial banks in China and Iran. 3.1.2. Based on the Dissertation research model. 17 3.1.3 Based on drawbacks of currently applied models in Vietnam 3.2. Building a factor analysis model. 3.2.1. Bases of selecting variables for the model. Based on previous research findings, the Dissertation forms a set of indicators including 18 indicators measuring comprehensive competitiveness of commercial banks in Vietnam with 15 quantitative indicators and 3 qualitative indicators. 3 quantitative indicators are measured as follows: (i), Bank management based on general efficiency: to measure general efficiency of each bank, DEA-solver, super- efficiency and constant scale-based efficiency model are used. 0 ,...,2,1, ,...,2,1,... 1 1 ,        i jn I i ini I i imijm z z Nnxxz Mmyzyts pMin    (ii) Business Reform level measured by net technical efficiency level. Many researches have shown that there is high correlation between net technical efficiency level and Business Reform level. 1 0 ,...,2,1, ,...,2,1,.. 1 1 1 ,           I i i jn I i ini I i imijm z z z Nnxxz Mmyzyts pMin    (iii)Variables represent the quality of human resources measured by average income. ∑ labor cost/ ∑ number of employees 3.2.2. Statistic description of research data Data used in the models which estimated the efficiency level were collected from 40 Vietnamese commercial Banks’ assets balance sheets and reports on income and expences form 2006 to 2012 (including 5 state commercial banks, and 35 joint stock commercial banks). Based on collected data and many other researchers’ recommendations related to the scope of this Dissertation, as well as current operation of VN commercial banks, the Dissertation has selected 18 input variables for the factor analysis nodel and the input varialbes for approximate variable model to calculate 3 qualitative variable, including total net fixed assets (K), labor cost (L), total customer deposit (DEPO) and outputs: interest income from fees and other equivalents ( Y1 ) , non- 18 interest revenue and equivalents ( Y2 ) . The two output variables were chosen in the study of Cevdet A. Dinç Denizer and Mustafa (2000 ) , Matthews , C. and tripe , D ( 2002 ) , Richard S. Barr , Kory A. Killgo , and Thomas F. Siems (1999 ) , Thomas , F Siems . and Richard , S Barr (1998 ) ... In order to calculate the cost-effectiveness and allocative efficiency it a must to know the price of the input . The price of the inputs are approximately as follows : cost of capital ( W1 ) = Expenses on assets / total net fixed assets , the price of labor ( W2 ) = Expenses for staff / employees and total price mobilization of capital ( W3 ) = interest paid and equivalent expenses / capital raising 3.2.3. The results of experimental models 3.2.3.1. Testing of KMO (Kaiser-Meyer-Olkin) and Bartlett [26] The method of testing the KMO (Kaiser-Meyer-Olkin) and Bartlett is used to measure the compatibility of the survey samples consists of 40 commercial banks in Vietnam shown in Table 3.3. Table 3.3. Results of KMO and Bartlett Testing Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .644 Bartlett's Test of Sphericity Approx. Chi-Square 852.784 Df 153 Sig. .000 Analysis results shows that EFA is finally recorded in Table 3.4 with KMO = 0.644 (>0.5) (EFA is suitable) and Sig = 0,000 (< 0.05) ( observation variables correlates with each other), total variance is 75.703 (>50%) (showing that factors can account for 75.703 % variation of the data) 3.2.3. Practical analysis and results of ranking competitiveness of commercial banks in Vietnam  Data source  Practical analysis and result Scoring model for each factor Factor F1: Financial capacity Factor F1 0.186X1 0.052X2 0.06X3 0.014X4 -0.095X5 0.003X6 -0.092X7 0.026X8 0.062X9 0.007X10 0.065X11 0.186X12 0.186X13 0.183X14 0.182X15 - 0.013X16 0.021X17 0.076X18 Factor F2: Business Capacity Factor F2 -0.007X1 0.014X2 0.027X3 0.306X4 0.382X5 0.234X5 0.027X7 -0.039X8 0.074X9 -0.342X10 0.015X11 -0.016X12 -0.034X13 -0.008X14 -0.039X15 0.063X16 -0.027X17 0.054X18 19 Factor F3: Human resource Factor Factor F3: F3 -0.018X1 -0.419X2 -0.412X3 0.114X4 0.062X5 -0.072X6 0.091X7 0.179X8 0.14X9 0.112X10 0.061X11 -0.018X12 -0.026X13 -0.043X14 -0.029X14 0.028X16 0.02X17 -0.084X18 Factor F4: Bank Management Technical Factor F4 0.051X1 0.035X2 0.065X3 0.235X4 0.048X5 -0.09X6 0.036X7 0.194X8 0.094X9 0.005X10 0.079X11 0.044X12 0.018X13 0.02X14 -0.004X15 0.487X16 0.102X17 0.55X18 Factor F5: Technology Level Factor F5 0.063X1 0.004X2 -0.037X3 0.073X4 -0.065X5 0.054X6 0.126X7 -0.332X8 -0.383X9 0.096X10 0.417X11 0.036X12 0.048X13 0.064X14 0.063X15 0.085X16 0.514X17 0.079X18 Scoring model for general ranking With a function of contributing factors, a scoring model for general ranking is achieved as follows: 3.3. Apply the research model in Vietnamese commercial banks’ competition capacity analysis. 3.3.1. Ranking based on competition capacity through table By adding variables into the table, we have the total score of each factor and the total results of 5 typical factors together of each commercial bank among 40 choosen ones that shown in table 3.8. Table 3.8. Results of factors and Vietnamese commercial banks’ competition capacity ranking Ranking F1 Ranking F2 Ranking F3 Ranking F4 Ranking F5 Ranking F Finance capacity Business capacity Human resource Manage ment Techniqu es Technolo gy level Competit ion capacity AgriB 1 38 1 1 30 1 VietinB 2 36 3 2 31 2 BIDV 3 37 2 3 32 3 Vietcombank 4 35 4 4 35 4 Techcombank 5 31 5 5 36 5 MB 6 30 6 6 34 6 (210a) F= (33.943 F1 + 13.061 F2 + 11.574 F3 +9.468 F4 + 7.657 F5)/75.700 20 ACB 7 33 7 7 33 7 EIB 8 34 8 8 38 8 Sacombank 9 32 10 9 37 9 VP Bank 13 23 9 12 23 10 Dong A Bank 11 27 12 17 27 11 SHB 16 18 11 19 18 12 SCB 10 26 14 13 26 13 SeaBank 14 21 18 15 21 14 Sounthern Bank 15 25 17 14 25 15 MSB 12 28 15 10 28 16 LPB 17 24 16 23 24 17 OceanBank 18 19 13 18 19 18 VIBank 19 29 19 16 29 19 HDB 20 15 20 21 15 20 An Bình 21 20 21 20 20 21 NASB 22 17 23 22 17 22 OCB 23 14 24 25 14 23 MHB 24 22 33 11 22 24 VAB 25 16 28 26 16 25 Navibank 26 13 27 29 11 26 GDB 27 11 29 32 13 27 PG Bank 28 2 22 33 3 28 Kien long 29 3 30 30 2 29 GP Bank 30 12 26 24 12 30 Dai A Bank 31 6 31 27 6 31 Nam A Bank 32 4 25 28 4 32 SGB 33 9 32 31 10 33 Tienphong Bank 34 7 34 36 8 34 Trust Bank 35 1 36 34 1 35 WEB 36 8 37 37 7 36 BVB 37 5 35 35 5 37 MDB 38 10 38 38 9 38 3.3.2. Analysing Vietnamese commercial banks’ competition capacity via a model of factor analysis 3.3.2. Analyze the competitive ability of Commercial Banks of Vietnam by Factor Analysis Model: 21 In summary, the state-owned commercial banks keep the leading positions in aggregate competitive ability ranking. The majority of this group of banks have strong financial ability, strong brand, those also leads in investing in technological innovation, practical approach of advanced management technques and can attract high-quality resources in compare with the existing small commercial banks. 3.3.3. Evaluating advantages and disadvantages of factor analysis model and SWOT model With factor analysis model, a system of factors will be created through scientifically analysising and determining a corresonding variable with a comparison indicators subjectively and appropriately based on EFA. Factor analysis can employ potential perspectives and other features that are unavailable by direct analysis. Using factor analysis model can be rather simple and cost-effective if good understanding of theoretical background is assured Factor analysis was able to assess both subjective and objective factors, the current competitive factors and the potential impacts on the competitiveness of commercial banks by selecting suitable variables for analysing purpose . 3.3.4. Conditions of applying factor analysis model in analyzing competitive ability of commercial banks in Vietnam - Commercial banks in Vietnam need to form a research division of the competitiveness of banks in order to fully exploit their advantages in competition, and to aware of the strengths and weaknesses of competitors as well; to give advices in making accurate competitive strategy, to limit the risks in business. - Policies of expert training in this field should be provided. Besides the knowledge of mathematics, pattern analysis, the theoretical knowledge on critical research should be equipped for experts in bank 22 competitiveness rating, in order to name accurately the elements those are splitted out from the VARIMAX rotation. - It is neccessary to properly recognize the role and importance of competitiveness analytical model, which is a tool to help accurately, comprehensively assess and reflect the competitive advantages of the commercial bank and its competitors as well, to propose appropriate business strategy to ensure market share and to maintain profit growth for banks in terms of international integration, with the participation of gross and international banks. - Each commercial bank is required to build themselves an information system, a full and up-to-date database about the bank and its competitive banks. - Create the system of statistical data on the activities of commercial banks - Commercial banks need to have the appropriate investment in technology and policy of incentives for people working in this area because it requires creativity in the selection of data, model selection and also research results deciding as a basis for decision making. - NHTM cần nâng cao chất lượng phân tích và xử lý thông tin trên cơ sở một phần mềm đủ mạnh SPSS với hệ thống các tiêu chí đầy đủ, khách quan và khoa học cả về định tính và định lượng, cả về góc độ tài chính và góc độ phi tài chính. - Commercial banks are also demanded to improve the quality of analysing and information processing on the basis of a strong SPSS software with the criteria system of fully, scientifically and objectively, in both qualitative and quantitative aspects, both financial perspective and non-financial perspective. 3.4. Recommendations in applying factor analysis model in assessing the competitiveness of commercial banks in Vietnam. 3.4.1. To the Government of Vietnam and the Authorities - The Government should accelerate the process of restructuring the commercial banking system in Vietnam, the merger of small banks to ensure banks have sufficient capacity and technological level to participate effectively compete [29]. - Create a legal framework for disclosure competitiveness ranking of commercial banks as a basis for the proclamation of the results of the study and research of the companies operating in this field, avoid the reaction of the evaluated organization and society. - Forming an independent research agency that takes part in ranking the competitiveness of nations, local, ministries, businesses, ... - The Government should have the appropriate investment for 23 research & statistic institutions to build a full, up-to-date statistical databases in order to build an annual accurate analysis model of ranking of competitive ability of banks. 3.4.2. To the State bank of Vietnam and relevant Ministries: - Create a legal framework for the model of new credit institutions , organizations those support for the activities of credit institutions , such as: Company of competitiveness rankings , Company of credit ranking, currency brokers to develop a system of credit institutions ... - Creation of financial database, data entering, control of reliability of the data, proceed with the analysis of the research factors, form a system of factors those practically affect under the statistical criteria, compare with expectations of banks about those factors and suggest measures to strengthen / change / or adjust these factors. - The demand of training policy, updating training knowledge, specializing staff, and providing database related to staff who is responsible to analyze and assess the competitive ability of commercial banks. - To minimize the disadvantages of the model, banks should conduct regular research and constantly update competitiveness ranking. CONCLUSION Due to drastic changes of the banking business environment in Vietnam in recent years, especially since 1/1/2011 when distinction between foreign and domestic banks were removed basically under itinerary of Vietnam's WTO accession, it is important to analyze and assess competitiveness ranking of Vietnam commercial banks so that commercial banks and bank managers can find out differences, advantages and disadvantages in competitive fields of commercial banks However, the fact is shown that the current model analysis is difficult to achieve rating analysis of each factor, or overall general assessment through identifing each factor score and arranging factors in a particular order. Therefore, the Dissertation try to research system model to analyse and measure banks’ competitiveness, it will help bank managers realize strengths and weaknesses as well as its advantages in comparison with domestic and foreign competitors, in order to make competition policy in accordance with their capabilities and contribute to improving effectiveness of governance capability and management. In scope and object of study, the Dissertation has demonstrated some of the following contents: 24 Firstly, the Dissertation has been systematized theoretical basis of competition, competitiveness, evaluation criteria and methods of analysis of competitiveness capacity commercial banks. Besides, the Dissertation also generalize pros and cons and these conditions applying analytical competitiveness models of commercial banks. Secondly, on a theoretical basis, the Dissertation used qualitative methods and expert methods combined with SWOT matrix analysis to analyze competitiveness of Vietnam's commercial banks to find out strengths and weaknesses, opportunities and threats of the commercial banks in Vietnam in condition of international integration. The research also indicates some limitations of SWOT analysis tool proposed as a basis to propose solutions and analytical model completion of competitiveness of commercial banks in Vietnam in chapter 3 . Thirdly, in conjunction with theory and status of analysis model of competitiveness of Vietnam's commercial banks, the Dissertation has proposed building a factor analysis model (score model) to analyse competitiveness capacity of commercial banks in Vietnam, with recommendations to the government , the state Bank of Vietnam and the commercial bank in order to create favorable conditions for solution of complete model in competitiveness capability of commercial banks in Vietnam. To accomplish this Dissertation, the author would like to send sincere thank Prof. Dr. To Ngoc Hung and Dr. Tran Thi Hong Hanh who have dedicated guidance and kind support. The author would like to thank teachers , colleagues and staff of Commercial Bank who helped to facilitate the author completed this Dissertation.