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Credit Turnover Table Corporate Credit


Because some businesses have difficulties in production and business and are unable to

payment and have to wait for the economy to improve.

2.3.1. Debt collection ratio

Table 1.9: Debt collection ratio

Unit: Million VND


Target

2010

2011

2012

Debt collection for corporate loans

319,212

364,378

419,847

Business loan turnover

340,195

383,548

443,602

Debt collection ratio (%)

0.94

0.95

0.95

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Credit Turnover Table Corporate Credit

Through the statistics table, we can see that the bank's annual debt collection situation has increased significantly, the debt collection ratio on loan turnover has not changed positively. In 2011, this ratio increased by 0.94%, in 2012, the debt collection coefficient was 0.95%, in 2013 it was 0.95%. To achieve these results, HDbank PGD has established a tight and consistent credit granting system, showing that the bank's debt collection ability is relatively stable. The process is applied according to the principle of independence in the stages of proposing appraisal, valuation, and approval, in which each step and responsibility of each participant is determined. In addition, the system of regulations is quite strict on credit granting and collateral, the bank also builds limits on loan structure by industry, by component, by term, ... to limit concentrated risks.

2.3.2. Credit capital turnover

Table 1.10: Corporate credit capital turnover table

Unit: Million VND


Target

2011

2012

2013

Amount

Amount

Amount

Debt collection turnover

319,212

364,378

389,847

Average outstanding debt of enterprises

292,493

312.124

348.5865

Business loan capital turnover

1.09

1.17

1.12

Debt collection turnover

405,079

458,079

519,366


Average outstanding balance

344,139

371.4745

406,815

General rotation

1.18

1.23

1.28

Through the table, we can see that the capital turnover of corporate loans has fluctuated over the past 3 years, and is quite consistent with the general capital turnover of the entire branch, meaning that the bank earns annual interest on loans. This shows that the bank is implementing a safe credit strategy with low profits but preserving capital. As analyzed above, the bank focuses on short-term lending. Specifically: In 2011, it was 1.18 cycles, in 2012, it was 1.23 cycles, in 2013, it was 1.28 cycles. In general, each year, the bank's capital always rotates more than one cycle, proving that the bank's lending activities to businesses are relatively stable.

2.4. Credit risk at HD Bank – Lanh Binh Thang Branch

Through the analysis of bad debt by term, by economic sector, by economic sector and some financial indicators, we see the causes of credit risk at HD Bank - Lanh Binh Thang branch, including the following causes:

Objective reasons :

Business environment:

Manufacturing and processing industries depend largely on natural conditions, climate, weather, and diseases, which more or less affect production and business.

The construction industry is always facing increasing prices of input materials,

The government's price regulation policy leads to selling prices not covering costs.

The service industry is more stable, less risky for banks, but must constantly improve the quality of technology, the need for capital to invest in modern machinery is often very large. Enterprises want to increase the need for loans, extend the time and this also directly affects the bank's operating capital as well as the bank's loans become more difficult to recover. This risk can cause the bank's operations to go bankrupt.

The legal environment has not yet reached a unified framework. Overlapping legal documents, many loopholes and inadequacies have significantly affected the operations of banks.


Interest rates for business loans fluctuate continuously from 10% - 11.5% at commercial banks, along with competition on interest rates to attract customers, banks have to reduce interest rates to 8.5%/year for businesses borrowing capital in the first 3 months of borrowing capital. Along with the decrease in mobilization interest rates because of excess capital but cannot lend as at present. The constantly changing interest rate difference affects the bank's profits.

Reasons from the business side:

For short-term loans: Enterprises' products cannot be consumed in time, and enterprises' receivables cannot be returned in time to generate revenue to pay interest to the bank every month.

For long-term loans: Enterprises overuse long-term debt from bank loans. Debts come from expanding fixed assets. On the other hand, enterprises using financial leverage like this will kill themselves. Because continuing to borrow to maintain operations can be a temporary solution, but if it lasts too long, the enterprise will go bankrupt with a huge debt.

Weak management apparatus with many shortcomings is found in some small and medium enterprises.

Collateral is usually a land use right certificate. When a business makes a loss, the bank has difficulty in collecting debt and needs time to auction the property.

For joint stock and limited liability companies, they often borrow a large amount of capital for long-term investment. However, they do not use all of the bank's capital for the purpose of the loan as agreed in the contract. In fact, they use a part for the project and the rest for other short-term needs.

Cause from the bank

Based on the analysis of the credit situation of enterprises in the economic sector, it can be seen that the consumption market of products in the construction and processing industries has a very high risk. Because the products of these two industries can be consumed quickly at this time but be in stock at another time, leading to risks in debt collection and interest payments will not be on time.

The ratio of overdue debt/total outstanding debt of the bank is currently quite high >5%. Therefore, the credit quality of the bank needs to be tightened and paid more attention from the appraisal and lending decision stage. The risk will belong to the bank very large if the debt collection work is not implemented well, the ratio will increase.


Credit officers must regularly update circulars and credit regulations of the bank. To inform the customers they are responsible for so as not to violate the signed credit contracts specifically such as loan interest rates, preferential conditions of the bank.

2.5. Assessment of the bank's credit performance

2.5.1. Results achieved

Along with the general development of the economy and the entire banking system, HD Bank - Lanh Binh Thang Branch has gradually affirmed its position in the district with encouraging achievements. Especially in lending, credit quality as well as technical progress of modern interactive technology, the bank always ensures the process as well as the security of records. Effective assessment saves time and costs.

After a period of operation, the bank has a number of familiar customers, thanks to the close relationship with old customers, introducing new customers from which it has been increasingly expanded, and loan sales have also increased . Outstanding loans for businesses have increased over the years, in which short-term loans account for the majority, loans by type of business, joint stock companies account for the highest proportion, and loans by industry, trade and services have the highest outstanding loans among the industries.

The ratio of bad debt to business loans is relatively low, this is also an achievement of the bank. While currently the bad debt situation is increasing in commercial banks, the phenomenon of bankruptcy of many banks has a significant impact on the development of the economy.

The bank always pays attention to the qualifications of its staff. This can be seen through the bank's recruitment process. In addition, the bank also regularly organizes short-term professional training courses, disseminates and guides documents related to personal lending.

Separating the appraisal department as a separate business department also brings certain advantages: credit officers will specialize in a specific business, the staff mechanism will be tighter, limiting the staff from compromising with customers for personal gain. It reduces a lot of pressure on employees, creating comfort in work for credit officers because they do not have to take on many tasks at the same time.


With a wide network throughout the city's districts, building a large distribution system. Especially locally, it penetrates to understand the needs and expands corporate customers due to its location near densely populated residential areas and is home to a relatively large number of LLCs and small businesses. The bank quickly found a place in the hearts of customers and can compete with other large banks.

In general, in the period of 2011-2013, although the economy had instability and difficulties, thanks to the right strategies, wise direction of the leadership as well as timely solutions from all levels, the bank has achieved encouraging achievements.

2.5.2. Existence

Although corporate lending is continuously expanding, accompanied by quality control and capital safety being ensured, this is still not the best quality level that banks can achieve.

The bank's products are not really outstanding enough to create a competitive advantage with other banks in the same area. Most of the banks operating with branches are banks with a good reputation and high customer trust. The bank's lending products are mainly traditional products that most other banks have. Currently, some banks have also introduced many new products in both form and quality that have attracted the attention of customers.

Along with the growth of corporate credit, the bad debt situation has also increased over the years. Although the bad debt ratio accounts for a small proportion, compared to the whole industry, this index is not optimal and brings certain risks and impacts on the profits and liquidity of the bank.

Credit officers rely heavily on the information provided by customers, the checking and verification of information has not been fully implemented and is essentially just a paper check. In reality, there are many cases of falsifying documents, falsely declaring income levels as well as information beneficial to customers, along with the subjectivity of some credit officers, causing great damage to the bank in terms of both money and reputation. Therefore, the customer's character is one of the factors that greatly affects the risk of the loan.

2.5.3. Causes

Objective reasons:


The state policy mechanism changes frequently, so it directly affects the personal lending activities of banks. There is no standard for uniform implementation, it takes a lot of time to adjust as well as risks arise, causing difficulties and confusion for banks when implementing new policy mechanisms.

Regarding the legal environment for banking operations, documents regulating lending regulations are gradually being completed to create a synchronous legal environment and ensure good operation for banks. However, to ensure the effectiveness of the documents, it takes time to implement.

Banking is one of the business sectors with many profits but also potential risks. Banks have to face fierce competition from domestic commercial banks, foreign banks, financial companies, insurance companies, etc. The process of international economic integration has put pressure and required banks to improve their competitiveness, develop diversified products, quality services, etc., requiring multi-functional and modern banks.

Subjective causes :

Business lending is a very diverse and complex activity, production plans and investment projects are increasingly larger in both scale and technical level. Therefore, it requires credit officers not only to be good at professional qualifications but also to be flexible in all related aspects. The staff at the bank has qualifications and working experience. However, the team is still thin in terms of force, not meeting the increasing requirements of the projects, affecting the quality of personal loans.

The most important thing is that the ethics of credit officers have directly affected lending and credit appraisal. The cases of structuring customers and credit officers have led to great losses for the bank.

Thus, besides the achieved results, the bank still has certain limitations. In the coming time, the bank needs to have measures to improve and enhance the efficiency of business lending.


CONCLUSION OF CHAPTER 2

Following the general operating situation at HDBank - Lanh Binh Thang Branch has presented a panoramic picture of business lending credit activities at the branch through analyzing the current status of business lending activities, recording the results that the branch has achieved in the past 3 years, proposing a strategy for wholesale and retail activities. At the same time, it has pointed out the limitations and solutions. The limitations of business credit at the branch are that it has not created breakthrough products and services, the promotion is still weak... In addition to the objective reasons, the subjective reason is that the branch has not paid due attention to the issue of perfecting and developing business credit comprehensively, limited management skills, ineffective distribution channel network, and lack of synchronization. With the above analysis and comparison results, it shows that the branch is a bank with the potential and opportunity to become a large bank with available strengths and opportunities. With the potential to be the right path in developing and perfecting the business lending system. And to effectively implement the proposed orientations, there must be recommended solutions.


CHAPTER 3: SOLUTIONS - RECOMMENDATIONS

1. Solutions to improve corporate credit quality

1.1. Solutions to expand operations

Market development policy: When a bank wants to expand its operations, the most important thing is still the customer. Particularly for HDBank - Lanh Binh Thang branch, the bank should use the advantage of corporate customers to create good relationships with agencies, organizations, and companies in the district to ask them to introduce employees who are about to retire so that the bank can accurately identify the elderly who are likely to have idle money to apply measures to encourage these people to deposit money in the bank appropriately. Thus, the bank will expand its capital sources and stimulate lending to other customers.

Banks must take advantage of the prestige and trust of businesses to offer customer appreciation packages such as implementing special preferential credit packages applicable until the end of the year exclusively for small and medium enterprises and individual business households with a total funding amount of up to 4 billion VND, with a minimum loan interest rate of 8.5%/year. Or sponsoring price stabilization programs for consumer and manufacturing businesses with short-term interest rates. Because businesses in the manufacturing industry

– Processing accounts for a large proportion of bank loans and always maintains a debt ratio

bad debt at acceptable level


Applying marketing to promote the new brand of the bank after the merger will bring the bank closer to individual customers and businesses. Because the current restructuring of the bank will cause people to lose confidence in the sustainability of the bank, especially small banks. Branches need to upgrade, develop and exploit the HDBank website to the maximum, bringing the HDBank brand to each individual and the public. Organizing events, participating in sponsoring charity activities, etc. will help the bank's brand reach further and further, with a strong reputation among customers. Because according to the decision of the President, from January 1, 2015, a bankruptcy law will be issued for weak banks. Thus, branches must strive to do profitable business so that the bank can reduce bad debt to the allowable level.

In addition, banks need to segment the market and have appropriate policies for each type of customer:

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