Debt classification and risk provisioning at Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch are implemented according to current regulations of the State Bank of Vietnam. The trend of overdue debt over the years tends to increase year after year, the specific data is reflected in the following tables:
Table 3.5: Overdue debt for individual customers
Year
Target
2016 | 2017 | 2018 | Compare | |||||
Number money (tr.đ) | Ratio weight (%) | Amount (VND) | Ratio weight (%) | Amount (VND) | Ratio weight (%) | 2017/ 2016 (Tr.đ) | 2018/ 2017 (Tr.đ) | |
Overdue Debts for Individual Customers core | 5,315 | 100 | 4,967 | 100 | 21,312.9 | 100 | -348 | 16,345.9 |
-Overdue debt under 90 days (Group 2) | 4,167 | 78.4 | 4,547 | 91.5 | 17,487.91 | 82.1 | 380 | 12,940.9 |
- Overdue debt from 91 days to 180 days (Group 3) | 425 | 8 | 148 | 3 | 1,620 | 7.6 | -277 | 1,472 |
-Overdue debt from 181 days to 360 days (Group 4) | 352 | 6.6 | 127 | 2.6 | 1,417 | 6.6 | -226 | 1,291 |
-Overdue debt above 361 days or more (Group 5) | 371 | 7 | 146 | 2.9 | 788 | 3.7 | -225 | 642 |
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(Source: Business performance report from 2016 - 2018 of Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch)
Through table 3.5, we can see that Overdue Debt for Individual Customers fluctuated over the years, specifically decreasing slightly in 2017, down 348 million VND, equivalent to a decrease of 6.5% compared to 2016. Meanwhile, in 2018, it increased significantly.
high, specifically increased by 16,345.9 million VND, equivalent to an increase of 329% compared to 2017. This is an alarming number, more clearly shown through the fluctuations in the structure of debt groups as follows:
The bright spot in the overdue debt structure of the Branch is that the proportion of overdue debt under 90 days (Group 2 debt) is taking a large proportion and tends to increase with the total overdue debt balance, in 2017 it increased by 380 million VND, equivalent to an increase of 9.1% compared to 2016; in 2018 it increased by 12,940.9 million VND, an increase of 285% compared to 2017.
In addition, overdue debt from 91 days to 180 days (Group 3), overdue debt from 181 days to 360 days (Group 4) and overdue debt over 361 days (Group 5) tended to decrease slightly in 2017 and increase sharply in 2018, but the largest increase was in group 3 debt. Specifically, group 3 debt in 2017 decreased by 277 million VND, equivalent to a decrease of 65% compared to 2016; by 2018, it increased by 1,472 million VND, equivalent to an increase of 995% compared to 2017. Group 2 debt in 2017 decreased by 226 million VND, equivalent to a decrease of 64.2% compared to 2016; By 2018, it increased by 1,291 million VND, equivalent to an increase of 1,017% compared to 2017. In particular, group 5 debt tends to fluctuate more gently than group 3 and group 4 debt. Group 5 debt in 2017 decreased by 225 million VND, equivalent to a decrease of 60.6%, and by 2018, it increased by 642 million VND, equivalent to an increase of 81.47% compared to 2017.
3.3. Current status of credit risk management for individual customers at Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch
3.3.1. Identifying credit risks for individual customers at Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch
Techcombank conducts Credit Risk Identification by establishing a rating system for its credit portfolio, to measure the risk of customers' ability to repay when using credit products at Techcombank.
Customer Rating Scale is divided into the following categories:
Table 3.6: Individual Customer Ranking
Status
Credit rating type use | Score achieved | Debt classification | Interpretation | |
1 | AA | Over 60 | Group 1 debt | - Very good debt repayment capacity. - Low risk of capital loss |
2 | A | Over 50-60 | Group 2 debt | - Good debt repayment capacity. - Low risk of capital loss |
3 | BB | Over 40-50 | Group 3 debt | - Good debt repayment capacity. - Medium risk of capital loss |
4 | B | Over 20-40 | Group 4 debt | - Good debt repayment capacity. - Medium risk of capital loss |
5 | C | Under 20 | Group 5 debt | - Poor debt repayment capacity - High risk of capital loss |
(Source: Annual summary report of Risk Management Block 2016, 2017, 2018 Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch)
The minimum rating (cut off) for Customers granted credit and the score for each assessment category are in accordance with the General Director's regulations from time to time.
Specifically, in the period 2016-2018, Vietnam Technological and Commercial Joint Stock Bank has ranked individual customers in detail according to the following table:
Table 3.7: Personal Customer Credit Rating Table
STT
Credit rating type | 2016 | 2017 | 2018 | ||||
Value (Tr.đ) | Proportion (%) | Value (Tr.đ) | Proportion (%) | Value (Tr.đ) | Proportion (%) | ||
1 | AA | 99,520 | 96.10 | 206,970 | 98.12 | 188,052 | 92.87 |
2 | A | 3,412 | 3.29 | 3,457 | 1.64 | 11,858 | 5.86 |
3 | BB | 462 | 0.45 | 318 | 0.15 | 1.805 | 0.89 |
4 | B | 168 | 0.16 | 181 | 0.09 | 764 | 0.38 |
5 | C | 0 | 0 | 0 | 0 | 0 | 0 |
TOTAL | 103,562 | 100 | 210,926 | 100 | 202,479 | 100 | |
(Source: Annual summary report of the Risk Management Block 2016, 2017, 2018 of Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch) Looking at the Credit Ranking above, we see:
Outstanding debt of AA-rated customers in 2017 increased sharply compared to 2016, specifically increased by VND 107,450 million and had a slight decrease in 2018, specifically decreased by VND 18,918 million compared to 2017.
The outstanding balance of A-rated customers did not fluctuate much between 2016 and 2017, but there was a sharp increase in 2018, specifically an increase of VND 8,401 million compared to 2017.
Outstanding debt of BB-rated Customers in 2017 decreased slightly compared to 2016, specifically decreased by 144 million VND and increased sharply in 2018, specifically increased by 1,487 million VND compared to 2017.
Outstanding debt of B-rated customers increased by 13 million VND in 2017 compared to 2016 and increased sharply in 2018, specifically increased by 583 million VND compared to 2017.
Vietnam Technological and Commercial Joint Stock Bank – Thai Nguyen Branch
No group C credit rating in 3 years 2016, 2017, 2018
Depending on the results of credit risk rating for individual customers, the Bank applies credit policies and credit risk management measures as shown in the following table:
Table 3.8: Credit Policy Table by Risk Level for Individual Customers
STT
Credit rating type use | Risk Level | Credit granting | Management measures | |
1 | AA (Very Good) | -Very good debt repayment capacity. - Risk of loss low capital | Prioritize meeting the maximum credit needs of science and technology | Post-loan control according to regulations every 3 months |
2 | A (Good) | - Good debt repayment capacity. - Low risk of capital loss | Prioritize meeting the maximum credit needs of science and technology, especially medium-term and short-term loans. | - Grant credit after analyzing and evaluating the entire financial situation and the customer's ability to repay. - Randomly check the business activities and collateral of the Customer with the Business Household loan 3 times/year - Randomly check the collateral and occupation, business activities of the Customer with real estate and automobile loans. bowl,…2 times/year |
3 | BB (Fair) | - Good debt repayment capacity. - Medium risk of capital loss | - Agree to establish credit relations but limit preferential conditions and long-term loans | - Grant credit after analyzing and evaluating the entire financial situation and the customer's ability to repay. - Post-loan control 1 |
STT
Credit rating type use | Risk Level | Credit granting | Management measures | |
once a month - Randomly check the business activities and collateral of the Customer with the Business Household loan 3 times/year - Randomly check the collateral and occupation, business activities of the Customer with real estate loans, cars,...2 times/year | ||||
4 | B(Average) | - Good debt repayment capacity. - Medium risk of capital loss | - Limit credit expansion, focus only on short-term credits - Disbursement only on the basis of have a feasible solution | - Focus on checking the purpose and plan of capital use, and the situation of collateral assets. - Closely carry out inspection monthly post-loan review |
5 | C (Weak) | - Poor debt repayment capacity - Risk of loss high capital | - Refuse to establish new credit relationships - Find ways to collect debt, including both collateral handling | Consider the economic court proposal |
(Source: Annual summary report of Risk Management Block 2016, 2017, 2018 Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch))
Through the investigation results, we see that in 3 years 2016, 2017, 2018, Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch did not have a group C credit rating, while the proportion of overdue debt still increased over the years, especially group 5 debt still accounted for a small proportion in 3 years 2016, 2017, 2018, respectively 7%; 2.9%; 3.7%. This proves that although
The credit rating system has helped Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch identify credit risks, thereby providing optimal solutions for customers to minimize losses to the Bank, which is an important step in the Credit Risk Management for the Bank's individual customers. However, there are still limitations in the rating work, specifically in the verification of the reasonableness of the data provided, leading to the data not reflecting the true nature of the customer's debt repayment capacity, not identifying customers with potential bad debts. A good sign in the Credit Risk Management for Individual Customers of Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch is that during the operation, the Bank constantly innovates the process, increases many levels of control so that the collected data is evaluated most objectively, the system is improved and enhanced, helping to minimize credit risks for the Bank.
3.3.2. Measuring credit risk for individual customers at Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch
3.3.2.1. Scale and structure of overdue debt of individual customers over time, by loan purpose and customer segment
Overdue debt over time
Table 3.9: Overdue debt by time
Target
2016 | 2017 | 2018 | 2017/2016 | 2018/2017 | ||||||
Amount (VND) | Proportion (%) | Amount (VND) | Proportion (%) | Amount (VND) | Proportion (%) | Tr.đ | % | Tr.đ | % | |
Short term | 361 | 6.8 | 520 | 10.5 | 956 | 4.5 | 159 | 44 | 436 | 83.8 |
Medium, long limit | 4,954 | 93.2 | 4,456 | 89.7 | 20,356.9 | 95.5 | -498 | - | 15,901 | 356.8 |
Total debt
overdue
5,315 | 100 | 4,967 | 100 | 21,312.9 | 100 | -348 | - | 16,345.9 | 329.1 |
(Source: Annual summary report of Risk Management Block 2016, 2017, 2018 Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch)
We can see that the longer the loan term, the higher the possibility of overdue debt. Vietnam Technological and Commercial Joint Stock Bank - Thai Nguyen Branch has a large proportion of medium and long-term outstanding debt in the total outstanding loan balance of the bank. Medium and long-term overdue debt accounts for a large proportion of total overdue debt and tends to increase steadily over the years. By 2018, the proportion of medium and long-term overdue debt accounted for 95.5% of the total overdue debt for outstanding loans of individual customers. Along with the increasing trend of medium and long-term overdue debt, the short-term overdue debt of the bank also increased over the years but with a relatively high proportion. Specifically:
Short-term overdue debt in 2017 increased by 159 million VND, equivalent to an increase of 44% compared to 2016. By 2018, short-term overdue debt increased by 463 million VND, equivalent to an increase of 83.3% compared to 2017.
In 2016, medium and long-term overdue debt reached 4,954 million VND, by 2016 it decreased by 498 million VND to 4,456 million VND, but by 2018, medium and long-term overdue debt increased sharply to 20,356.9 million VND, an increase of 356.8% compared to 2017. This shows that overdue debt has not been strictly managed, personal credit officers only focus on finding new customers to achieve the Branch's target without closely monitoring customers to repay their debts. On the other hand, the high increase in medium and long-term overdue debt in 2018 was also due to the unstable economic situation, the increase in raw material prices affecting production and business. Natural disasters and epidemics have appeared, many farmers do not have enough money in time to repay their debts to the bank on time. Personal credit relationships are essentially a loan-repayment relationship, but people often only mention "