Credit Activity Orientation at Vietnam Joint Stock Commercial Bank for Industry and Trade

- The bank has effectively implemented the work of approaching businesses, guiding businesses to prepare reasonable and correct loan applications in order to create conditions for businesses to complete loan application procedures quickly and conveniently.

- The bank branch has fully utilized capital mobilization sources from Vietnamese Dong as well as USD to lend at reasonable interest rates, ensuring compliance with regulations.

- In recent years, the branch has achieved remarkable results: stable loan sales and credit debt collection, the number of customers coming to make credit transactions has increased, affirming the customer acceptance of the bank branch.

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- The branch has continued to invest and meet the capital needs of units with good financial status, highly competitive products, high consumption and meeting short, medium and long-term capital needs. Thereby creating conditions for enterprises to develop production and business. Along with maintaining credit relations with traditional customers, the branch also pays attention to other economic sectors, especially small and medium enterprises, with feasible plans and collateral in accordance with VietinBank's regulations.

- Credit activities have been carried out in accordance with VietinBank's regulations, risk assessment activities are independent from loan assessment activities. Through assessment, lending departments have been able to target the right subjects and loan purposes, contributing to the discovery of unfeasible plans and projects.

2.4.2. Existence and causes.

Besides the achievements, credit activities of the Hai Phong branch of the Bank for Industry and Trade in recent times have also revealed some limitations and shortcomings.

2.4.2.1. Existing issues.

Although VietinBank branch is considered a prestigious and long-standing bank with high quality in recent times, the branch still exists but has limitations. Those limitations are:

- The branch's strategy to diversify its lending base has not been fully completed. The branch's strategy to diversify its lending base has been expanded and achieved some significant results.

+ The proportion of medium and long-term loans remains high (about 60%), causing credit turnover to decrease.

+ In 2012 and 2013, some industries faced many difficulties in business operations due to the impact of the economic recession such as shipbuilding and steel production, but the proportion of loans to these industries still accounted for a large proportion of total outstanding debt.

+ Although the import-export credit financing activities at the Branch have received more attention, they have not yet brought high results.

+ The overdue debt situation is not yet completely under control. Credit business performance is still not high.

- Although the Bank's marketing work has initially achieved certain results, compared to the requirements, there are still many limitations, so it also affects the growth of outstanding loans in particular and the credit efficiency of the branch in general. The work of investigating, monitoring, and market developments to grasp the development trends of the economy and the needs and tastes of customers has been paid attention to but not regularly, the proactive development of capital investment plans, and approaching customers has been available but not strong enough to promptly meet the capital needs of customers.

- VietinBank Hai Phong branch is located in an area with many other bank branch systems that have to face fierce competition for market share. Lending revenue is limited by credit limits or depends on the scale of mobilized capital, especially when the economic situation is as volatile as it is now.

2.4.2.2. Causes of existence.

Subjective causes:

 First of all, the loan conditions, which are the loan guarantees, are one of the main reasons preventing economic sectors from borrowing from banks. Collateral can be machinery, equipment, land use rights, etc., so valuation is very difficult. If the valuation is too low, it will affect the customer's ability to borrow.

 Information collection is often based on customer information and information collected by the bank from outside. The information that customers provide to the bank is usually financial reports, which are often inaccurate and do not reflect the financial potential of the customer. Therefore, poor information collection affects the evaluation of project effectiveness as well as the customer's ability.

 Bank marketing: Marketing activities at banks are only focused on the surface of advertising and promotion, while the application of marketing to market analysis and customer research to improve service quality is still limited.

 Due to fierce competition between credit institutions and other banks operating in the same area.

 On the other hand, the legal environment for credit activities has not been completed. The lack of unity and synchronization in legal regulations makes it difficult for credit activities to increase outstanding debt levels and credit safety at branches. Some factors of the macroeconomic environment are not really stable such as exchange rates and inflation, which have affected interest rates and loan quality of banks.

Objective reasons:.

The first is the causes originating from the customer side.

 The financial reports provided by customers to banks do not ensure transparency of information. The financial reporting system is often incomplete, not updated and unreliable, which makes the appraisal, inspection and control of banks difficult.

 The financial capacity of the customer is not enough to borrow capital from the bank. This is the biggest difficulty preventing customers from borrowing capital from the bank. The scale of equity capital is small in the total operating capital of the customer, so it does not meet the conditions of equity capital, mortgaged assets, and project feasibility, so it is not enough for the bank to lend.

 Poor customer skills in predicting business problems and poor management lead to business losses and damage, affecting the ability to repay bank loans.

 Enterprises are still quite confused in choosing investment directions, projects are not feasible and do not meet the conditions for equity capital participation. Enterprises have a very high demand for loans but they do not meet the conditions for loans: such as not having feasible projects, not enough equity capital to participate in the project, not having enough legal collateral.

Second are the causes from market factors:

 Legal environment: Although the laws and sub-law documents governing banking activities have been amended to be more and more consistent with the rules

of the market economy, but there are still many problems such as overlap between regulations of laws, slow issuance of decrees guiding the implementation of laws, and bureaucratic and arbitrary implementation of the law enforcement apparatus.

 Economic environment: Although the macroeconomic situation has improved in 2013, economic growth is forecast to continue to be below potential due to structural problems related to State-owned enterprises, the banking sector, reduced budget revenue, and difficulties in private investment. Vietnam's economy is currently heavily dependent on fluctuations in the world economy (the openness of the economy in terms of foreign trade/GDP in the recent period has reached 150%).... In addition, the State Bank of Vietnam has implemented a tight monetary policy to reduce inflationary pressure, which has limited banking activities.

 Newly established branches operating in the area have many commercial banks also doing business in currency, credit and banking services, so they always have to face fierce competitive pressure to survive and develop.

CHAPTER III: SOME SOLUTIONS TO IMPROVE THE EFFICIENCY OF CREDIT ACTIVITIES AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE - BRANCH

HAI PHONG

3.1. Credit activity orientation at Vietnam Joint Stock Commercial Bank for Industry and Trade - Hai Phong Branch.

At VietinBank, credit is a focused and enhanced area of activity. With the continuous expansion of the network and the acumen in the management of the Board of Directors as well as the extensive development of VietinBank's credit market share

However, in the process of economic development towards industrialization, modernization, and integration with the world, credit institutions in general and VietinBank Hai Phong branch in particular still face many challenges and difficulties, requiring them to focus their intelligence and steadfastly follow the path of innovation, exploit potential, and take advantage of every opportunity to move forward. With the goal of " solidarity - responsibility - innovation ", Vietnam Joint Stock Commercial Bank for Industry and Trade - Hai Phong Branch has set out the following strategic direction for credit activities:

 Continue to expand and strengthen credit, develop and focus on access to finance for coal mining and processing, tourism, trade, industrial parks, export processing zones... which are the strengths of the city. Select effective projects of units for loan approval. When approving projects, consider the effectiveness and feasibility of the project as the top criteria.

 Increase information collection on investment and development programs of the city, ministries, and corporations, combined with business operations to plan specific approaches and have appropriate policies to meet customer needs.

 Regularly maintain customer evaluation and classification periodically (based on selected information), thereby building credit limits for each customer and having appropriate interest rate policies combined with product and service development policies in the direction of maximally meeting customer needs in order to increase the number of services provided to each customer, while increasing transaction turnover.

 Access and search for customer information from many sources to expand the scale of credit activities.

 Expand lending to other sectors and economic sectors such as joint stock companies, joint ventures, foreign-invested enterprises...

 Strictly implement the law on credit institutions and the industry's credit procedures, enhance the role of project appraisal in loan approval, strengthen inspection and control, especially for businesses showing signs of difficulty to prevent the occurrence of additional overdue debts and credit risks.

The bank branch is determined to carry out and achieve many high achievements, successfully completing the targets and tasks assigned by Vietnam Joint Stock Commercial Bank for Industry and Trade.

3.2. Some solutions to improve the efficiency of credit activities at Vietnam Joint Stock Commercial Bank for Industry and Trade - Hai Phong Branch.

3.2.1. Diversify loan products to many economic sectors.

Diversifying loan products is necessary to meet more customer needs, not only creating more abundant revenue sources but also contributing to minimizing credit risks and improving credit performance. Banks need to take the following measures:

 The bank's current loan products are designed in an open direction to ensure flexibility, meeting the diverse needs of customers such as: Loans for purchasing means of transport, loans for home repair and construction, loans to support production capital, loans for buying houses, loans for studying abroad, real estate loans, loans for mortgaged assets... At the same time, research and develop new products to create differences, increase competitiveness with other banks to create a unique attraction for customers.

 In addition to diversifying loan products, banks need to focus on building, consolidating and expanding credit relationships with customers in the private economic sector, maintaining good relationships with long-term customers. To do this, banks need to exploit information about new customers who can be business partners of customers who already have credit relationships with the bank, have marketing campaigns such as distributing leaflets to each agency, business, especially private businesses, individual households, consulting and convincing as well as answering questions for customers on the spot...

3.2.2. Diversify lending methods.

Currently, the proportion of medium- and long-term loans of the branch is still high (> 60%), so it is necessary to diversify lending methods, especially short-term loans. Applicable methods are limit loans, one-time loans, salary support loans, import-export document transfer loans, trust financing loans, etc. Each lending method has certain advantages and disadvantages. Banks can consider and apply each lending method to each type of enterprise, creating conditions for enterprises to borrow capital to use the loan capital well. Banks can lend to customers with healthy financial status according to the credit limit and require them to have collateral to ensure additional support. If after a certain period of time the customer does not repay the loan or there are signs of appropriating the loan capital, the bank can temporarily stop providing the loan capital, require the customer to properly perform the terms in the credit contract and transfer the loan to each item for the issued loan amount. In addition, the bank can apply the overdraft service. The advantage of this service is that the customer can use the capital and loan money flexibly and proactively. This service should only be applied to traditional customers with healthy financial capacity, irregular deposit accounts, and debt arising in a short period of time and no history of delay in debt repayment.

3.3.3. Improve the effectiveness of consulting customers on planning, production and business plans and building investment projects.

To improve the effectiveness of consulting for customers on planning, production and business plans and building investment projects , the branch needs to improve the project appraisal work, shifting from conventional financial analysis to financial analysis using modern methods. The branch should use the sensitivity analysis method and the comparison method to have a more accurate view of the feasibility and safety of the project, which means placing the project in the fluctuations of related factors: If a project in the worst case still achieves an internal rate of return (IRR) and a net present value (NPV) sufficient to cover the interest payable to the bank at a level acceptable to businesses, then that project has the highest debt repayment capacity. The bank should establish a specialized project appraisal committee. For the appraisal work to be highly effective, the bank can stipulate that for projects with capital greater than a certain level, there must be a specialized appraisal department that will be more comprehensive and comprehensive. In addition, the branch should open more

Consulting services for customers on the use of medium and long-term capital, bringing high efficiency to customers and also having a positive impact on the bank.

3.3.4. Promote capital mobilization to balance capital structure.

In fact, capital mobilization at the Branch in recent years (2011-2013) has fluctuated in a negative direction, so it has not yet met the capital demand for lending. Therefore, the bank needs to develop a capital mobilization strategy to meet the investment demand for credit development. Consider this as one of the key tasks of the branch because only with capital can credit be granted and to proactively meet the increasing capital demand. It can be said that mobilized capital is a premise for improving the efficiency of credit activities. Make the most of temporary idle capital sources in the area to have a source of disbursement to serve projects. Some measures that the bank can take to attract capital are:

+ Further diversify deposit products to create more choices for customers.

+ Focus on developing new products and services.

+ Branches need to continuously improve the quality of payment services to attract payment deposits from customers. It is necessary to pay attention to capital mobilization of enterprises with credit relationships but no deposit relationships. In particular, it is necessary to increase marketing with enterprises that have payment transactions through deposit accounts at banks because payment deposits of enterprises are an attractive source of mobilized capital with large deposits.

+ Adjust interest rates appropriately, compete with other banks to retain old customers and at the same time attract new customers... Banks need to have appropriate interest rate policies to compete with other banks combined with special incentives for customers with large deposits such as :

+ Improve service quality, foster communication culture for the transaction staff at the branch to be more dynamic, more friendly, creating a comfortable feeling for customers coming to deposit money.

+ Strengthen the marketing of the bank's savings products to each customer. Not only do bank employees wait for customers to come to the bank to deposit money, but bank employees, especially tellers, must directly go to central areas, businesses, and stores to market. This is a matter of survival for the Bank. In the current context, branches need to proactively implement this issue well.

Credit Activity Orientation at Vietnam Joint Stock Commercial Bank for Industry and Trade - Hai Phong Branch.

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