purchases and will collect the debt when the business sells the goods. Revolving loans are often applied to commercial or manufacturing enterprises with short consumption cycles and regular borrowing and repayment relationships with banks.
Installment loan: A form of credit in which the bank allows customers to repay the principal in installments within the agreed credit period. Banks often lend to consumers in installments through a certain limit. This is a high-risk type of loan because customers often mortgage goods purchased in installments, so the interest rate on installment loans is usually the highest interest rate in the bank's lending interest rate range.
Indirect lending: Is a form of lending through intermediary organizations. Indirect lending is often applied to markets with many small loans, borrowers scattered, far from banks. Through this form to reduce risks and costs of banks.
Other lending methods not prohibited by law, in accordance with the provisions of the Lending Regulations and the business conditions of the credit institution and the characteristics of the borrower.
- Based on loan repayment method
According to the method of loan repayment, credit can be divided into two types: one-time repayment loans and installment loans.
Lump sum loans: Loans that are repaid in one lump sum at a specified time in the credit agreement, interest may be repaid as agreed in the agreement, such as monthly, quarterly or annually.
Installment loan: Repayment is made periodically, these amounts may be equal or unequal, depending on the agreement and are made on the principle of installment payment throughout the contract period.
1.2.5. Criteria for evaluating corporate customer lending activities
1.2.5.1. Quantitative indicators
* Customer target group
- Customer market share
It can be said that customer market share is one of the measures to evaluate the success of a bank. The more market share a bank has, the more
proving their success. Of course, market share is not the only factor to evaluate the growth of banks, but it is still an extremely important criterion that cannot be ignored. Market share is also closely related to market power, banks with a large customer market share demonstrate that the market power of that bank is also very large.
* Sales target group
- Loan turnover
Loan turnover is the amount of money that the bank has disbursed to customers in a certain period of time. High and growing loan turnover over the years reflects the increasingly expanding credit scale and the bank's increasing ability to meet capital needs. At the same time, high loan turnover helps the bank generate large income from credit activities.
This criterion shows the absolute number of business customer loan sales in year t compared to the previous year. This criterion is calculated as the difference between the total business customer loan sales in the fiscal year and the business customer loan sales in the previous year.
opposite to
Absolute loan sales growth value= | Total business customer loan turnover year t | - | Total business customer loan turnover year (t-1) |
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- Debt collection revenue
Debt collection turnover reflects the amount of loan capital that the bank has repaid in a period. Debt collection turnover growth over the years reflects the quality of secured credits, effective business operations, and favorable conditions to repay bank loans on time.
absolute debt collection growth
Value added= | Total debt collection corporate customer loans year t | - | Total debt collection for corporate customer loans year (t-1) |
- Credit balance
Outstanding credit for businesses is the amount of money the bank is lending to customers.
corporate customers at a given point in time. Outstanding loans are calculated by the ending balance on the bank's balance sheet. To evaluate lending to corporate customers, banks need to consider the relationship of this indicator to the safety of the loans.
The growth rate of outstanding loans to corporate customers (%) reflects whether the scale of lending activities of commercial banks is expanding or shrinking. This rate is determined as follows:
(This year's outstanding debt - Last year's outstanding debt)
Outstanding loan growth rate (%) = ------------------------------------------------ x 100 (%)
Last year's outstanding balance
This indicator is used to compare the growth of outstanding credit over the years to evaluate the bank's lending capacity, customer search and credit plan implementation status.
The higher the index (from 10% - 15%), the more stable and effective the bank's operations are. On the contrary, the bank is facing difficulties, especially in finding customers and showing ineffective implementation of the credit plan .
When considering this indicator, it should not be considered at a separate point in time but must be considered throughout the process based on analysis of external factors because not at any time a high total outstanding debt reflects high credit quality of the bank.
* Risk indicator group
- Bad debt ratio (%)
Bad debt
Bad debt ratio ( % ) = --------------------- x 100 (%)
Total outstanding debt
This indicator shows the overdue debt situation at the bank, and also reflects the bank's credit management ability in lending and debt collection. This is an indicator used to assess credit quality as well as credit risk at the bank.
- Secured debt ratio
Secured debt
Secured debt ratio ( % ) = ------------------------------------- x 100 (%)
Total outstanding debt
This indicator shows the collateral status of outstanding loans. Collateral is not the most important factor in showing credit quality, however, adding collateral increases the enterprise's responsibility for the loan and reduces the risk for the loan itself. At the same time, together with the overdue debt ratio, this indicator is directly related to the provision for credit risk, affecting the bank's profits and direct operating efficiency.
* Business performance indicators group
- Profitability ratio of corporate loans
This indicator reflects the profitability of credit activities, indicating how much profit is earned per 100 VND of outstanding debt. The higher this indicator, the better the credit quality.
Profit from corporate lending
Profitability ratio of corporate loans = ------------------------------------- x 100(%)
Average outstanding loan balance for enterprises
- Capital efficiency
Capital utilization efficiency = Total outstanding debt/total mobilized capital x 100 (%)
This indicator reflects how much the bank lends compared to the mobilized capital. It also shows the efficiency of the bank's use of mobilized capital, showing whether the bank has been proactive in actively creating profits from mobilized capital or not.
This large index shows the ability to mobilize mobilized capital. If this index is greater than 1, the bank has not done a good job of mobilizing capital, the mobilized capital used for lending is low, the bank's ability to mobilize capital is not good. If this index is less than 1, the bank has not effectively used all mobilized capital, causing waste.
1.2.5.2. Qualitative indicators
“Customer satisfaction” is the guiding principle and competitive advantage between enterprises. Over time, “Customer satisfaction” has increasingly become a key performance indicator and an essential element of business strategy. It is also the foundation for building brand loyalty.
“Customer satisfaction” is an important indicator because:
This is an indicator of the customer's ability to reuse a product or service: Customer satisfaction is the best criterion to evaluate the customer's ability to repurchase a product or use a service again in the future.
The point that marks the difference between companies providing the same type of product or service: Companies that provide products and services that bring high customer satisfaction will not only retain customers, but also attract new customers through referrals from existing customers.
Reduce customer churn rate: According to research, the price of goods and services is not the main reason why customers abandon products and services, but the quality of service.
In the world, many banks have conducted research, surveys, and assessments of "Customer Satisfaction". From qualitative and quantitative analysis, banks have found the relationship between service quality, customer satisfaction, and customer loyalty to the bank's services and products such as: Retail credit products, card products, eBanking...
Service quality is one of the key factors that greatly affects the competitiveness of a business. A bank can differentiate itself from other banks by improving its service quality.
1.2.6. Factors affecting commercial banks' lending activities to corporate customers
1.2.6.1. Objective factors
- Impact of economic environment
This is a factor that always affects the financial capacity of the borrower or more specifically, if the bad economic environment causes business operations to encounter difficulties.
difficulties, affecting the repayment period and the ability to repay the loan to the bank, thereby affecting the quality of the bank's credit. On the contrary, if the economic environment is favorable, it will help the business's production and business activities to be favorable, capital will be recovered quickly, and the profits will be high, thereby the business's ability to repay the loan, the loan will be paid on time, and the bank credit will be of good quality.
- Impact of the legal environment
A bank is a business that always has to operate within a narrower legal corridor than any other manufacturing or trading business. Therefore, the more complete and synchronous a legal system is, the more effective it will be for the bank and businesses and ensure the credit quality of those businesses with the bank. If the legal environment is not complete and has many loopholes, the result will be the opposite for both the bank and the businesses, thereby making the quality of bank credit for businesses worse and difficult to recover.
- Impact of political and social environment
A stable socio-political environment is an important factor in creating confidence for investors to promote and expand investment, production and business activities. This creates a need for bank loans to promote credit activities. When politics is unstable and the business environment is unfavorable, it will negatively affect the production and business activities of borrowing enterprises, making it difficult for banks to collect debts, and thus affecting credit quality.
- State macroeconomic policy
In a market economy, the State's macroeconomic policies, including monetary and financial policies, interest rate policies, foreign policies, etc., play an important role in the operation of the economy in general and the operation of banks and enterprises in particular. Economic policies in this context have an effect on both banks and enterprises, but in other contexts, the opposite is true. These policies aim to prioritize the development or restrict a certain industry to ensure balance for the economy. Therefore, the owners
The State's policies and guidelines must be correct to promote production and business development, which is a necessary condition to achieve the quality and efficiency of bank loans.
- Natural environment
Force majeure events occurring in the natural environment such as natural disasters (droughts, floods, earthquakes, etc.), fires, etc. affect the production and business activities of enterprises, especially those related to agriculture, forestry, and fisheries. Therefore, when the natural environment is unfavorable, enterprises will encounter difficulties, thereby reducing the credit quality of banks. However, this is an unavoidable risk, banks can still continue to finance enterprises to overcome difficulties, creating opportunities for banks to recover principal and new debts.
1.2.6.2. Subjective factors
* Factors related to the bank
- Credit policy
This is the guideline for the bank's credit activities, it has a decisive meaning for the success or failure of the bank. Credit policy must be consistent with the economic development guidelines of the Party and the State, and at the same time, the result must be harmonious between the interests of the bank's depositors and the users of loan capital. To do so, credit policy must be built on a scientific and practical basis.
- Credit process
The credit process is a synthesis of the bank's principles and regulations in granting credit. It establishes specific steps in a certain order from preparing documents, appraisal, loan approval, disbursement, checking and monitoring the loan process until debt collection and termination of credit relations. This is a process that includes many stages that are interconnected, in a certain order, and at the same time have a close relationship and are closely linked to each other, to ensure the safety of credit capital. Therefore, credit quality depends on the correct, appropriate and flexible implementation of regulations at each step in the credit process.
- Loan process
The business lending process is very important for the bank's business lending activities. A reasonable lending process will contribute to improving quality and minimizing risks in lending. In addition, the lending process is the basis for defining the responsibilities and powers of each department involved in lending activities, creating a basis for controlling the lending process, on that basis, it will identify weaknesses that need to be adjusted in the implementation process and propose improvement measures to improve lending quality and enhance competitiveness in credit granting activities.
- Bank's capital capacity
Banks are intermediary organizations that mobilize temporarily idle capital to lend to the economy. Mobilized capital plays an important role in improving credit quality. The larger and more diverse the mobilized capital, the more capable the bank is of lending and expanding credit activities. On the other hand, the term of mobilized funds greatly affects the term, sales, and profits from loans.
- Quality of human resources, infrastructure, techniques and technology of the bank.
The technical infrastructure and technology of the bank are the first factors that affect the psychology of customers when they have a transaction relationship with the bank. From there, it is possible to retain traditional customers and establish a new customer base for the bank. Banks using modern technology equipped with high-quality technical means will facilitate the simplification of procedures, shorten transaction time, and bring maximum convenience to customers borrowing capital. That is the premise for banks to attract more customers and expand the scale of lending. The support of modern technical means also helps to collect information quickly and accurately, credit analysis, planning, and building credit policies are also more effective. In the business activities of banks, besides advanced machinery and equipment, people contribute greatly to the success of the bank. Business lending activities require officers to have a general level of knowledge, a dialectical view of all issues, and the ability to detect and analyze issues skillfully. For credit officers, when working, they must be sensitive and flexible in handling all issues, not applying principles mechanically.