Dissertation abstracts: Brand valuatinon for Vietnam's commercial banks

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Purpose of research: systemize theories of calculating brand value; propose brand valution model for Vietnam's commercial banks; experiment the proposed brand valuation model on Bank for Investment and Developmemt of Vietnam (BIDV) to calculate its brand;...

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Nội dung Text: Dissertation abstracts: Brand valuatinon for Vietnam's commercial banks

1 2 (ii) Propose brand valuation model for Vietnam’s commercial banks PREAMBLE (iii) Experiment the proposed brand valuation model on Bank for Investment and 1. Introduction Development of Vietnam (BIDV) to calculate its brand 1.1 The necessity of the subject (iv) Establish conditions to apply brand valuation model for Vietnam’s brands in In banking business, trust is the key factor for millions of individuals and practicality. organizations to send their savings, satisfy their demand for loans, or for effective 1.4 Subject of research: Brand valuation for Vietnam’s commercial banks financial consultancy. Moreover, together with the development of science and 2. Research methodology and sources of statistics technology, as well as integration process, the competition in banking is increasingly 2.1 Research methodology fierce. The deciding factors for customers to choose a bank are not only tangible and - Inherited method material elements but also ones related to emotion, perception, trust, etc. Therefore, - Analytical – comparative method brand in banking has become an essential factor for the success of commercial banks. So - Interdisciplinary research method the question of how to measure a commercial bank’s brand value in a specific - Case study research method financial figure, while the economic value of a bank’s brand is widely accepted, is of - Dialectical materialism method great concern to managers. 2.2 Sources of statistics From this above situation, the author has chosen the subject “Brand valuation for The sources of statistics used in the thesis are from the website of The State Bank Vietnam’s commercial banks” as dissertation topic. of Vietnam (49 Ly Thai To Street – Hoan Kiem District – Hanoi), Annual Report audited in 2010, 2011, 2012 and confidential report named Valuation before IPO of 1.2 Scope of research Bank for Investment and Development of Vietnam (35 Hang Voi Street – Hoan Kiem There are two approaches that result in very different brand value: District – Hanoi). - Calculate brand value by market research (called “Brand evaluation” by the 3. The contribution of the thesis author) 3.1 In terms of academic literature - Calculate brand value by financial data (called “Brand valuation” by the - Summarize two brand valuation approaches for commercial banks, including: (i) author) Calculate brand value for commercial banks based on market research; (ii) Calculate The purpose of thesis is to propose a brand valuation model for Vietnam’s brand value for commercial banks based on financial data. commercial banks based on financial data. - Select the estimated income based method of the second approach, combining with Brand valuation for commercial banks is a process with many steps; however, analysis on characteristics of commercial banks’ business operation to propose a the thesis will concentrate on researching and proposing brand valuation brand valuation model for Vietnam’s commercial banks. model for Vietnam’s commercial banks. 1.3 Purpose of research (i) Systemize theories of calculating brand value
3 4 • Chapter 1: General research on brand and brand valuation 3.2 In terms of practical application • Chapter 2: Theory of brand valuation for commercial bank • Help to confirm that brand is a valuable asset of commercial banks, which has to • Chapter 3: Current situation of legal system for brand valuation and be reported on the annual bank’s balance sheet. Vietnam’s commercial banking system • Chapter 4: Developing brand valuation model for Vietnam’s commercial • Make it easier and more accurate in acquisition, merger or brand franchising plans banks or transactions. • Help to complete reports on commercial bank valuation. CHAPTER 1 • Users: Can be used by all subjects that have demand for brand valuation for GENERAL RESEARCH ON BRAND AND BRAND VALUATION commercial bank. • Time of use: Can be implemented anytime. 1.1 Overview of brand • Used for all commercial banks. 1.1.1 Concept of brand 4. Research model “Brand is customer’s perception, emotion and trust in all elements of an enterprise” Basing on research methods used in the thesis, a research model is designed as 1.1.2 Functionality of brand below: 1.2 Overview of brand valuation Brand valuation model for Vietnam’s commercial banks 1.2.1 The process of brand value recognition in the world 1.2.2 Approaches to research on brand valuation Financial forecast - Calculate brand value based on market research: the basis of this method is to Financial Brand contribution value Financial conduct investigations/surveys on attitudes, perceptions, emotions, reactions, etc, of data of value of commercial commercial customers and concerned parties towards brand. The results of this method are banks bank’s brand Brand discount rate qualitative. - Calculate brand value based on financial data: basing on financial data of Discounted cashflows generated commercial banks (can use historical or future data) to calculate brand value. The results by bank’s brand of this method are quantitative. 5. The layout of the thesis CONCLUSION OF CHAPTER 1 Apart from preamble, conclusion, list of tables, figures and refereces, the thesis is Chapter 1 has fulfilled the thesis’ first and second objectives. First, it has used divided into 4 chapters: Susan’s concept of brand as standard definition for the thesis. Second, it has summarized two approaches of brand valuation theory. For each approach, the thesis
5 6 has summarized the content, advantages and disadvantages of its methods and models selected as the basis for researching the brand valuation model for Vietnam’s for brand valuation. commercial banks. 2.2.1.3 Definition of brand valuation for commercial banks CHAPTER 2 “Brand valuation for a commercial bank is a set of jobs to calculate financial value THEORY OF BRAND VALUATION FOR COMMERCIAL BANK of the commercial bank’s brand.” 2.2.2 Conditions and the necessity of brand valuation for comercial banks 2.1 Overview of commercial bank 2.3 Basic model for brand valuation for commercial banks 2.1.1 Definition of commercial bank Table 2.1: Comparison of different brand valuation methods of financial data based approach 2.1.2 Basic functionality of commercial bank Method Content Characteristics The cost based Brand value is calculated by Calculating brand value by 2.1.3 Role of commercial bank approach total cost invested to create a brand cost is unreasonable in 2.2 Overview of brand valuation for commercial bank new or replace an existing both theory and practice. 2.2.1 Theory and concept of brand valuation for bank brand. 2.2.1.1 Definition of commercial bank’s brand The market Brand value is calculated by the Market data about brand are “A bank’s brand is a combination of factors in order to satisfy customers’ financial demand, based approach price at which seller and buyer always limited and and to gain their perception, trust and emotion towards the bank.” agree in the brand transaction. disproportioned. The estimated Brand value is calculated by the Use bank’s financial data to income based present value of future earnings calculate => up to now, it is the Communication behavior, Loyalty business process, products, approach generated by the brand over the most suitable method to measure branch network, transaction office, Logo, slogan, uniform, rest of its useful life. brand value. Interior-exterior architecture, etc Behavior Customer Perception In order to propose an approach model for brand valuation for banks, the thesis will Bank conduct deep research on two models of the estimated income based method, as follows: Type of ownership, organization structure, strategy, operational Emotion 2.3.1 Interbrand’s model objective, etc Step 1: Market segmentation Step 2: Financial analysis Diagram 2.2: Commercial bank’s brand Step 3: Demand analysis 2.2.1.2 Theory on brand valuation for commercial bank Step 4: “Brand strength” and “discount rate” determination The thesis’ objective is measuring brand value for commercial banks in a specific financial figure, therefore the estimated income based approach of Aswath Damodaran is Step 5: Brand’s net present value determination
7 8 Example of applying Interbrand’s valuation model is Binh Minh Plastic joint stock criteria: leadership, stability, market, geography, brand trend, support activities, brand company with “Binh Minh Plastic” brand which is valuated 349.4 billion VND by the protection; whereas, Brand Finance’s brand ß scoring template includes 10 criteria: time University of Economics Ho Chi Minh City’s research group. in the market, distribution channel, market share, market position, sale growth rate, price 2.3.2 Brand Finance’s model premium, price elasticity, marketing spend, advertising awareness, brand awareness. The brand valuation process is illustrated by this below diagram: This different step leads to different valuation results of two models. Each table of criteria has advantages and disadvantages, and the status and level of advantages and Market Financial Demand Risk disadvantages depend on each valued brand. data data drivers factors CONCLUSION OF CHAPTER 2 Brand forecasts Chapter 2 has fulfilled the thesis’ first and third objectives. Regarding the first objective, the thesis has given out the definition of a commercial bank’s brand, which is Economic value added “a set of factors in order to satisfy customers’ financial demand, and to gain their Brand value Brand ß added index analysis perceptions, trust and emotion towards the bank.” Regarding the third objective, from Brand value added Aswath Damodaran’s original idea of using financial instruments for brand valuation in business valuation, the thesis has based on the income approach and used two brand Discount rate valuation models of Interbrand and Brand Finance as reference to propose a new model Brand that can approach to brand valuation for Vietnam’s commercial banks. value Diagram 2.5: David Haugh’s brand valuation model Step 1: Market segmentation Step 2: Financial forecast Step 3: Brand value added (BVA) calculation Step 4: Discount rate determination There are differences between Brand Finance’s and Interbrand’s summary reports on most valuable brands. Although Interbrand and Brand Finance use the same basic theory for brand valuation, which is discounted cashflow method, to calculate brand value, the difference between two models is at the calculation step of brand’s contribution value to businesses. Interbrand use “brand index” scoring template with 7
9 10 CHAPTER 3 chapter to fulfill the forth, fifth and sixth objective of the thesis. CURRENT SITUATION OF LEGAL SYSTEM FOR BRAND CHAPTER 4 VALUATION AND VIETNAM’S COMMERCIAL BANKING SYSTEM DEVELOPING BRAND VALUATION MODEL FOR VIETNAM’ S COMMERCIAL BANKS 3.1 Legal framework for brand valuation in Vietnam 4.1 Orientation in building brand valuation model for Vietnam’s commercial banks 3.1.1 Legal framework for brand and international integration of brand in Vietnam 4.2 Brand valuation model for Vietnam’s commercial banks - The legal system of regulations primarily derives from section VI of the Civil The author has combined Interbrand and Brand Finance’s calculation steps with Code of the Socialist Republic of Vietnam in 2005. specific characteristics of Vietnam’s commercial banking system to propose a new - The agency that is responsible for granting permission is the National Office of model to approach brand valuation for banks, including 4 following steps: Intellectual Property of Vietnam. Step 1: Financial forecast - The agencies that are responsible for enforcement are Court, Market Surveillance, Collect, analyze and process information to predict a bank’s revenue and expense Economic Police, Culture and Information Inspector, Science and Technology Inspector, in a period of 3 to 5 years – from which calculate its brand’s economic value added in Deparment of Customs. the future. This step can be done by the bank itself or inherit annually financial forecast • Regarding legal framework results from reputable sources in the world like S&P, Ernst&Young, Moody, etc. • Government’s point of view on brand Step 2: Calculate Brand Value Added - BVA • International integration of brand Calculate the proportion of brand contribution to economic value added or use 3.1.2 Legal framework for brand valuation in Vietnam available figures of position, target customers, growth rate of an equivalent bank, which Up to now, the system of legal documents in Vietnam has no official definition of are available in the US or UK market, when researching, based on theory 1 – brand brand. These documents mainly stipulate a number of contents related to brand such as valuation based on research. intellectual property, trademark, geographical indication, trade name, but not directly The process of taking step 1 and 2 is similar to Interbrand and Brand Finance’s mention brand in general and brand valuation in particular. calculation processs – these are standard process accepted by most researchers and 3.2 The current situation of Vietnam’s commercial banking system practice. 3.2.1 Characteristics of Vietnam’s commercial banks Step 3: Calculate brand discount rate 3.2.2 Brand valuation for Vietnam’s commercial banks Factors including the time value of money and the risks that may impact must be CONCLUSION OF CHAPTER 3 taken into account when calculating discount rate. Chapter 3 has presented the current situation of commercial banking system and Calculate brand ß Discount legal system of brand valuation in Vietnam. These are important bases for the next index rate
11 12 - Calculate brand ß index: customers, from which it can gain its brand awareness. Branch network is proportional to attribute score. From Brand Finance’s scoring template for brand ß index and Interbrand’s “brand strength” calculation table, together with particular characteristics of Vietnam’s The criteria for building scoring template for the attribute of branch network are: commercial banking system, the scoring template for brand discount rate of commercial + The number of branches in 63 cities and provinces and 3 regions (North – Central banks is researched, adjusted and proposed as below: – South), so smaller criteria for network segmentation are 1/2, 2/3 and total number of Table 4.1: Scoring template for brand discount rate of Commercial banks 63 cities and provinces. +Level of international cooperation, measured by: Does a bank open overseas Attribute Score 1. Time in the market 0-15 branches? does it have joint venture with foreign companies? does it act as an agent for a 2. Branch network 0-15 foreign bank? with levels as follow: 3. New products growth rate 0-15 Level 1: Open branches or subsidiaries overseas, act as an agent for a foreign bank, 4. Number of customers growth rate 0-15 have international business transactions 5. Proportion of mobilized capital 0-10 6. Proportion of outstanding balance 0-10 Level 2: Open branches or subsidiaries overseas, or act as an agent for a foreign 7. Non-performing loans ratio 0-10 bank, or have international business transactions 8. ROA growth rate 0-10 Level 3: Open overseas representative offices Total 0-100 -Attribute 1 – Time in the market: is a factor that represents a bank’s brand strength Level 4: Have no form of cooperation because a bank can be maintained and exist for a long time only when it receives trust Table 4.3: Scoring template for the attribute of branch network and recognition from customers. Time in the market is proportional to attribute score. Criteria Score Have branches in 63 cities and provinces, have international cooperation level 1 15 Based on the milestones of Vietnam’s economy, the scoring criteria for this Have branches in 63 cities and provinces, have international cooperation level 2 14 attribute are proposed as below: Have branches in 63 cities and provinces, have international cooperation level 3 13 Have branches in 63 cities and provinces, have international cooperation level 4 12 Table 4.2: Scoring criteria for the attribute of time in the market Have branches in 2/3 of 63 cities and provinces, have international cooperation level 1 11 Criteria Score Have branches in 2/3 of 63 cities and provinces, have international cooperation level 2 10 Have branches in 2/3 of 63 cities and provinces, have international cooperation level 3 9 Established parallel to the movement for independence (the 1954 15-12 Have branches in 2/3 of 63 cities and provinces, have international cooperation level 4 8 period) Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation 7 Established during the economic transformation process (the 1986 12-9 level 1 period) Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation 6 Established after 1986 and before the U.S removed the embargo 9-6 level 2 against Vietnam in 1995 Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation 5 Established between 1995 and before joining WTO in 1997 6-3 level 3 Have branches in 1/3-2/3 of 63 cities and provinces, have international cooperation 4 Established from 2007 to present 3-0 level 4 Have branches in less than 1/3 of 63 cities and provinces, have international 3 - Attribute 2 – Branch network: is an important factor for a bank to serve its cooperation level 1
13 14 Have branches in less than 1/3 of 63 cities and provinces, have international 2 Have new products in 1 group, receive reward, vote level 2 2 cooperation level 2 Have new products in 1 group, receive reward, vote level 3 1 Have branches in less than 1/3 of 63 cities and provinces, have international 1 Have new products in 1 group, receive reward, vote level 4 1 cooperation level 3 No new product but receive reward or vote 1 Have branches in less than 1/3 of 63 cities and provinces, have international 0 No new product and no reward or vote 0 cooperation level 4 - Attribute 4 – Number of customers growth rate: Banks are institutes that serve Attribute 3 – New products growth rate: all types of customers whenever they have financial needs. Therefore, commercial banks Developing new products is required for continuous growth and prosperity for a have more diverse and abundant customers than any other organization in the economy. bank. The new products growth rate shows the capability of creating and maintaining The attribute of number of customers growth rate clearly reflects customers’ preference the development of the bank’s brand. It is based on two criteria: and trust in a bank. This attribute is calculated by a bank’s number of customers + The creation of new financial products based on four orgininal banking products including saving, loan, payment and financial consultancy is an important factor for including household and organization in 4 groups of products in the calculated year maintaining brand in the market. compared with that of the previous year, and is proportional to attribute score. + Rewards or votes for a bank or its products, with levels as follow: Table 4.5: Symbols for the calculation of the attribute of number of customers growth rate Level 1: Receive international reward and domestic vote for product or bank Customer Symbol Product Symbol Level 2: Receive international reward Household H (Household) Saving S (Saving) Level 3: Receive domestic vote for product or bank Organization O (Organization) Loan L (Loan) Level 4: Receive no reward or vote Payment P (Payment) New products growth rate is measured by the number of banking products in the Financial consultancy FC (Financial Consultancy) researched year compared with that of the previous year. This rate is proportional to attribute score. Combined with analyses of the attributes of proportion of mobilized captital, Table 4.4: Scoring template for the attribute of new products growth rate proportion of outstanding balance and new products growth rate, this attribute is Criteria Score measured by the combination between household and organization customers growth Have new products in 4 groups, receive reward, vote level 1 15 Have new products in 4 groups, receive reward, vote level 2 14 rate (or 1 out of 2 types of customers) with products with from high to low Have new products in 4 groups, receive reward, vote level 3 13 importance: Saving (S) hoặc Loan (L), Payment (P) and Financial Consultancy (FC). Have new products in 4 groups, receive reward, vote level 4 12 There are many combinations between customer growth rate and products, in which Have new products in 3 groups, receive reward, vote level 1 11 Have new products in 3 groups, receive reward, vote level 2 10 the more important criterion is customer growth rate because there is already an Have new products in 3 groups, receive reward, vote level 3 9 attribute for product growth rate. Therefore, the scoring template for the attribute of Have new products in 3 groups, receive reward, vote level 4 8 Have new products in 2 groups, receive reward, vote level 1 7 number of customers growth rate is as follow: Have new products in 2 groups, receive reward, vote level 2 6 Have new products in 2 groups, receive reward, vote level 3 5 Have new products in 2 groups, receive reward, vote level 4 4 Have new products in 1 group, receive reward, vote level 1 3
15 16 Table 4.6: Scoring template for the attribute of number of customers growth rate Total mobilized capital of the economy in the year before Criteria Score calculated year A = Increase H, O with (S, L, P, FC) 15 Total number of banks in the year before calculated year Increase H, O with (S, L, P), or Increase H, O with (S, L, FC) 14 + The attribute score of 10 is for the credit institution having highest mobilized Increase H, O with (S, L) 13 capital in the year before calculated year. Increase H, O with (S, P, FC), or Increase H, O with (L, P, FC) 12 + The bank having highest mobilized capital has maximum score of 10. The gap Increase H, O with (S, P), or Increase H, O with (L, P) 11 between maximum score of 10 and average score of 5 is 5 points, so each higher-than- Increase H, O with (S, FC), or Increase H, O with (L, FC) 10 average point is calculated by: preceding attribute score + B, with: Increase H, O with S or L 9 Increase H, O with (P, FC) 8 Mobilized capital of the commercial bank having highest mobilized capital in the year before calculated year – A Increase H, O with P 7 B = Increase H, O with FC 6 5 + The bank having lowest mobilized capital has minumum score of 1. The gap Increase H or O with 4 groups of products 5 between minimum score of 1 and average score of 5 is 4 points, so each lower-than- Increase H or O with (S, L, P) or Increase H or O with (S, L, FC) 4 average point is calculated by: preceding attribute score – C, with: Increase H or O with (S, L), or Increase H or O with (S, P, FC), hay 3 A- Mobilized capital of the commercial bank having lowest mobilized Increase H or O with (L, P, FC) C capital in the year before calculated year Increase H hoặc O with S or L, hay Increase H or O with (P, FC) 2 = 4 Increase H hoặc O with P, or Increase H hoặc O with FC 1 Table 4.7: Scoring template for the attribute of proportion of mobilized capital No customer growth rate 0 Criteria Score - Attribute 5 – Proportion of Mobilized capital: Customers’ deposit is the Mobilized capital is in the range of (A + 4B; the highest mobilized capital) 10 Mobilized capital is in the range of (A + 3B; A + 4B) 9 deciding factor for a bank’s capital. There are several factors that affect the amount of Mobilized capital is in the range of (A + 2B; A + 3B) 8 deposit on a bank, among which the bank’s reputation and customers’ trust in it is the Mobilized capital is in the range of (A; A + 2B) 7 main one. The proportion of a bank’s mobilized capital in total mobilized capital of the Mobilized capital is in the range of A + B 6 Average mobilized capital A 5 economy is proportional to attribute score, which is calculated as below: Mobilized capital is in the range of (A – C; A) 4 + Attribute score is 5 = Average mobilized capital for a commercial bank (A) Mobilized capital is in the range of (A – 2C; A – C) 3 Mobilized capital is in the range of (A – 3C; A – 2C) 2 Mobilized capital is in the range of (the lowest mobilized capital; A – 3C) 1 For example, the calculated year is 2013, total amount of mobilized capital of 48
17 18 commercial banks in 2012 is 3.2 million billion VND, in which Max commercial bank Mobilized capital is in the range of (53,625; 66,500) billion VND 4 has the highest amount of mobilized capital of 540,000 billion VND, Min commercial Mobilized capital is in the range of (40,750; 53,625) billion VND 3 bank has the lowest amount of 15,000 billion VND. So the calculation of attribute 3 is: Mobilized capital is in the range of (27,875; 40,750) billion VND 2 Mobilized capital is in the range of (15,000; 27,875) billion VND 1 Total mobilized capital of the 3.2 million economy in the year before billion VND calculated year = 66,500 billion A = VND Total number of banks in the year 48 before calculated year Mobilized capital of the commercial bank having highest mobilized capital in 540,000 – 66,500 the year before calculated year –A = 94,700 billion B = = VND 5 5 A- Mobilized capital of the commercial bank having lowest 66,500 – mobilized capital in the year before 15,000 calculated year = 12,875 C = = billion VND 4 4 Table 4.8: Scoring template for the attribute of proportion of mobilized capital Critera Score Mobilized capital is in the range of (445,300; 540,000) billion VND 10 Mobilized capital is in the range of (350,600; 445,300) billion VND 9 Mobilized capital is in the range of (255,900; 350,600) billion VND 8 Mobilized capital is in the range of (161,200; 255,900) billion VND 7 Mobilized capital is in the range of (66,500; 161,200) billion VND 6 Mobilized capital = 66,500 billion VND 5
19 20 - Attribute 6 – Proportion of outstanding balance: 4 To commercial banks, credit is a traditional and basic business, accounting for high proportion in asset structure and revenue structure. However, it is also a complex and risky business. The proportion of a bank’s outstanding balance in total outstanding balance of the economy is proportional to attribute score. The basis for calculating score for the attribute of proportion of outstanding balance is similar to the that of mobilized capital, as follow: + Attribute score of 5 = Average outstanding balance for a commercial bank Total outstanding balance of the economy in the year before calculated year D = Total number of banks in the year before calculated year + The attribute score of 10 is for the credit institution having highest outstanding balance in the year before calculated year. + The bank having highest outstanding balance has maximum score of 10, the one having lowest outstanding balance has minumum score of 1. + The gap between maximum score of 10 and average score of 5 is 5 points, so each higher-than-average point is calculated by: preceding attribute score + E, with: Outstanding balance of the commercial bank having highest outstanding balance in the year before calculated year – D E = 5 + The gap between minimum score of 1 and average score of 5 is 4 points so each lower-than-average point is calculated by: preceding attribute score - F, with: D- Outstanding balance of the commercial bank having lowest outstanding balance in the year before calculated year F =
21 22 Table 4.9: Scoring template for the attribute of proportion of outstanding balance Table 4.10: Scoring template for the attribute of NPLs ratio Criteria Score Criteria Score Outstanding balance is in the range of (D + 4E; the highest outstanding balance) 10 NPL = 0% 10 Outstanding balance is in the range of (D+3E; D + 4E) 9 NPL is in the range of (0.6%; 0%) 9 Outstanding balance is in the range of (D+2E; D + 3E) 8 NPL is in the range of (1.2%; 1.8%) 8 Outstanding balance is in the range of (D+E; D + 2E) 7 NPL is in the range of (1.8%; 2.4%) 7 Outstanding balance is in the range of (D; D + E) 6 Outstanding balance = D 5 NPL is in the range of (2.4%; 3%) 6 Outstanding balance is in the range of (D – F; D) 4 NPL = 3% 5 Outstanding balance is in the range of (D – 2F; D - F) 3 NPL is in the range of (3%; 4.75%) 4 Outstanding balance is in the range of (D – 3F; D - 2F) 2 NPL is in the range of (4.75%; 6.5%) 3 Outstanding balance is in the range of (the lowest outstanding balance; D – 3F) 1 NPL is in the range of (6.5%; 8.25%) 2 - Attribute 7 – Non-performing loans ratio: NPL is in the range of (8.25%; 10%) 1 If non-performing loans (NPLs) are not strictly controlled, they will directly affect a NPL = 10% 0 bank’s profit as well as its liquidity. NPLs ratio is inversely proportional to brand value, - Attribute 8 – ROA (return on equity) growth rate: high NPLs ratio can even delete brand from the market (this is clearly illustrated in fact). ROA growth rate is propotional to the attribute score. NPLs ratio is measured by outstanding balance of group 3,4,5 divided by total outstanding The base to calculate attribute 8 is similar to that of mobilized capital and balance, NPLs ratio is inversely proportional to attribute score. Specifically, NPLs attribute outstanding balance growth rate attributes, specifically: score is calculated as below: + Attribute score is equal to 5 = average ROA for a commercial bank + The State Bank of Vietnam stipulated standard score for this content is 3%, so, the attribute score of 5 is equivalent to NPLs ratio of 3%. Total ROA (+) of the economy of the year before calculated year G = + According to Circular No. 08 of the State Bank special control towards Total number of banks having ROA (+) before calculated year Commercial Banks, all commercial banks having NPLs ratio of 10% and above will be + Attribute score of 10 is the score for the credit institution achieving the highest subject to special control of the state bank, therefore, attribute score of 1 will be ROA in the year before calculated year. Attribute score of 0 is for banks that do not have equivalent to NPs ratio of 10%. The gap between minimum score of 1 and average score ROA (+) of 5 is 4 points, so each lower-than-average point is calculated by: (10% - 3%)/4 = + The gap between the maximum score of 10 and the average score of 5 is 5 points, 1.75% so each higher-than-average point is calculated by: preceding attribute score + K, with: + A bank having no NPL will get maximum attribute score of 10. The gap between maximum score of 10 and average score of 5 is 5 points, so each higher-than-average ROA (+) max of the year before calculated year – G K = point is calculated by: 3%/5 = 0.6% 5
23 24 + The gap between minimum score of 0 and average score of 5 is 5 points, so each earnings generated by the brand to the net present value, as in the discounted cashflow lower-than-average point is calculated by: preceding attribute score - M, with: formula. G- ROA min of the year before calculated year 4.3 Experiment the brand valuation model to evaluate brand value of Bank for M = Investment and Development of Vietnam (BIDV) 5 [[ 4.3.1 Reasons to select (BIDV) to experiment Table 4.11: Scoring template for the attribute of ROA growth rate 4.3.2 BIDV brand valuation Criteria Score Table 4.21: BIDV’s brand value in 2013 (unit: million VND) ROA is in the range of (G+ 4K; G + 5K) 10 No Criteria 2013 2014 2015 2016 2017 2018 1 After tax earnings 5,312,133 6,740,538 8,517,784 2,593,618 12,141,189 14,035,303 ROA is in the range of (G+3K; G + 4K) 9 ROA is in the range of (G+2K; G + 3K) 8 2 BVA (23%) Earnings generated ROA is in the range of (G+K; G + 2K) 7 3 1,221,790.6 1,550,323.7 1,959,090.3 596,532.13 2,792,473.48 3,228,119.65 by the brand ROA is in the range of (G; G + K) 6 4 Brand strength index 81 ROA is equal to G 5 5 Brand discount rate 12.0405% ROA is in the range of (G – M; G) 4 6 Discount 1,383,717.23 1,560,645.91 424,139.505 1,772,102.77 1,828,413.55 NPV of the brand ROA is in the range of (G – 2M; G – M) 3 7 8,190,809.56 after the first 5 years ROA is in the range of (G – 3M; G – 2M) 2 Brand growth rate in 8 1% the long term ROA is in the range of (G – 4M; G – 3M) 1 NPV of the brand 9 9,473,967 from 6th year No ROA (+) 0 17,664,776.64 10 NPV of the brand Total score of brand discount ß index is calculated based on total score of 8 brand So BIDV’s brand value in 2013 is 17,664,776.64 million VND. attributes. After measuring total score of brand ß index, brand discount index will be 4.4 Conditions to apply the model in practice calculated by the linear equation proposed by Interbrand • Build and complete legal framework for brand as well as brand valuation Y=axX+b • Complete macro and micro forecasts The bases to calculate a and b coefficients are government bond interest rates of the same term and profit expectation of stock investors in the researched year that • Ensure the transparency and health of commercial banks’ financial reports is most profitable. • Develop information support department for brand valuation Step 4: A bank’s brand value is measured by discounted cashflow from future
25 26 Conclusion of chapter 4 THE AUTHOR’S RESEARCH RELATED TO THE THESIS Chapter 4 has accomplished three final targets of the thesis which are: proposing 1. ðỗ Hoài Linh (2010), “The development of brand awareness and the brand valuation model for Vietnam’s commercial banks; applying proposed model to recognition of brand valuation in practice”, Banking Review. evaluate Bank for Investment and Development of Vietnam (BIDV)’s brand; and 2. ðỗ Hoài Linh (2012), “Theory on brand valuation based on market research”, establishing conditions to apply valuation model for Vietnam’s brands in practice. Banking Review. CONCLUSION Brand valuation for Vietnam’s commercial banks is an important content in both research and management practice. The research of theories and methods to develop a brand valuation model for commercial banks is essential for such important issues as merger and acquisition, brand franchising, or report on the balance sheet, etc. In the research process, the thesis has selected the estimated income based method of the second approach – brand valuation based on financial data, to develop the brand valuation model for Vietnam’s commercial banks, including 4 steps: Brand Discounted Financial Brand discount rate cashflow from forecast contribution bank’s brand value The thesis also fulfilled research objectives set forth both in theory and practice.