Currently, Vietcombank Thang Long branch often relies on information about the level of doubt about the ability to repay debt, based on the overdue time of the debt. Periodically every quarter, Vietcombank Thang Long branch reviews and re-evaluates debt classification, provisioning and use of provisions, and monitors debt quality to identify the Bank's bad debt.
Activity 2: Bad debt measurement step
Based on the identification results, the Bank measures bad debt, which are: risk level, customer's ability to default on debt, and assesses the impact of bad debt on operations and business results.
Activity 3: Preventing bad debt
After measuring bad debt to keep bad debt within the acceptable range of the Bank, that is, to limit and prevent bad debt, Vietcombank Thang Long branch has implemented: (i) Building a centralized RRTD management model; (ii) Building a risk management strategy: setting up and using reserves to handle risks in the entire system; (iii) Implementing the credit management process well: including appraisal and inspection stages before, during and after granting credit... The strict implementation and management of the process has helped Vietcombank Thang Long branch detect, correct, limit and prevent bad debt in a timely manner, thereby building the most effective credit processes...
Activity 4: Bad debt settlement
Quarterly, Vietcombank Thang Long reviews and re-evaluates debt classification, provisioning and use of risk management provisions (XLRR).
1.4.2. Lessons learned for Vietinbank Thang Long branch
First, focus on bad debt recognition. In any case, “prevention is better than cure”, so it is necessary to focus on bad debt recognition before bad debt occurs, or in other words, banks must build an early warning system for problem loans. To do this, banks must closely monitor borrowers, require regular reports, and control the cash flow of borrowers.
Second, the cause of bad debt is largely due to the quality of credit appraisal is not guaranteed, the risk management system is not responsive, the control is not strict, the credit rating is not appropriate for the customer. Therefore, banks are always vigilant against the limitations of these causes.
Third, improving the effectiveness of internal audit work; developing and effectively managing the banking staff, especially improving the capacity of credit assessment and appraisal and professional ethics of banking staff, is always an important factor to limit and manage bad debt well.
Fourth, bad debt needs to be transparent and comply with the standards for determining bad debt. Branches need to strictly comply with the standards for classifying bad debt, and are not transparent about bad debt. Therefore, bad debt must be recorded fully and promptly, must be classified accurately, thereby determining appropriate measures and purposes for managing and handling bad debt.
Fifth, strengthen inspection and supervision work: The system of bad debt inspection and supervision needs to be carried out regularly, deeply and widely for projects with large capital and very complex, operating environments with high application of information technology but equipping knowledge and technology for the inspection team.
Chapter 2
CURRENT STATUS OF BAD DEBT MANAGEMENT AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE - BRANCH
THANG LONG
2.1. Introduction to Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch
2.1.1. The formation and development process of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch
Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), formerly known as Vietnam Bank for Industry and Trade, was established under the name of Vietnam Bank for Industry and Trade under Decree No. 53/ND-HDBT dated March 26, 1988 of the Council of Ministers on the organization of the State Bank of Vietnam. On July 1, 1988, the Bank was officially established and put into operation on the basis of the Industrial Credit Department and the Commercial Credit Department of the State Bank of Vietnam together with the Credit and Credit Departments of 17 local branches of the State Bank of Vietnam.
On September 21, 1996, authorized by the Prime Minister, the Governor of the State Bank of Vietnam signed Decision No. 285/QD-NH5 on re-establishing the Vietnam Joint Stock Commercial Bank under the State Corporation model prescribed in Decision No. 90/QD-TTg dated March 7, 1994 of the Prime Minister.
Since July 2009, Vietnam Joint Stock Commercial Bank for Industry and Trade has officially launched under the first business registration certificate No. 0103038874 issued by the Hanoi Department of Planning and Investment on July 3, 2009 with total assets of VND 1,000 billion.
240,388 billion VND, charter capital is over 11,252 billion VND, of which, State shareholders hold 89.23% and non-State shareholders hold 10.77%. This is an important foundation of VietinBank in the process of developing into a multi-functional banking and financial group with 2 main pillars: commercial banks and investment banks.
Accompanying the development of VietinBank, VietinBank - Thang Long Branch is one of the key branches in the distribution channel system of region 3.
- Northern cluster. Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch
Long is a unit under the Vietnam Joint Stock Commercial Bank for Industry and Trade, established on August 11, 2009 with business license number: 0100111948-106 dated August 11, 2009 issued by the Hanoi Department of Planning and Investment.
General information about the Branch is as follows:
Full name: Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch.
Abbreviation: Vietinbank - Thang Long Branch
Address: Vinaconex 9 Building, Lot HH2-2, Me Tri Ha Urban Area, Pham Hung Street, Cau Giay, Hanoi
Phone: 024 6265 8989 and 024 6265 9084
After 10 years of construction and development, from the initial stage with many difficulties and challenges, it has now become a large commercial bank in area 3 - Hanoi city. Currently, the business activities of VietinBank - Thang Long Branch are constantly developing in the direction of "safety - efficiency and development" in terms of scale, growth rate, operating area as well as perfecting the structure - network of the organization. With many achievements in business activities, VietinBank - Thang Long Branch is recognized as one of the stable business branches in the system of Vietnam Joint Stock Commercial Bank for Industry and Trade. With the motto "For the success of everyone, every family, every business", VietinBank - Thang Long Branch is committed to always fully and promptly meeting all resources of capital, technology and high-quality human resources to successfully build advanced, modern and classy financial and banking products and services of VietinBank; increasingly satisfy the diverse needs and utilities of customers, affirm the brand and create a solid foundation for the development of VietinBank - Thang Long Branch in the integration period.
2.1.2. Organizational structure of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch
VietinBank Thang Long Branch is organized according to an online-functional model, ensuring flexibility in management while saving time in managing and operating activities.
MANAGER
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Deputy Director 1
Deputy Director 2
Deputy Director of Support Department
Department of Science
Business
Credit Support Department
Retail Department
Accounting Department
Treasury Currency Room
PGD
Dai An
PGD
Hung Phat
PGD
West City
PGD
An Phat
PGD
Duy Tan
PGD
Tu Liem
Figure 2.1: Organizational chart of Vietinbank - Thang Long branch
(Source: Vietinbank Thang Long branch, 2019) Functions and tasks of departments
Board of Directors : Consists of a Director and 03 Deputy Directors. The Director is the highest leader and is in charge of the overall activities of the Branch and is also in charge of the Administrative Organization Department, the General Department and some major customers of the Corporate Customer Department; 01 Deputy Director is in charge of the following departments: Corporate Customer Department, Dai An Transaction Department, Credit Support Department; 01 Deputy Director is in charge of the following departments: Retail Department, Hung Phat Transaction Department, Thanh Tay Transaction Department, An Phat Transaction Department, General Department; 01 Deputy Director is in charge of the following departments: Administrative Organization Department; Duy Tan Transaction Department, Tu Liem Transaction Department and Treasury Currency Department, Accounting Department.
Corporate Customer Department : This is the key department in the bank's business activities. Officers in charge of each unit and each industry sector guide customers in making loan applications, appraise projects before granting credit, check the status of capital use, urge debt collection, etc.
Retail Department : Is a professional department that directly deals with individual customers to mobilize capital in VND and foreign currency, and at the same time performs credit-related operations, manages credit products in accordance with current regulations and guidelines of Vietnam Joint Stock Commercial Bank for Industry and Trade. Directly advertises, markets, introduces and offers products and services to individual customers.
Accounting Department : Is a professional department with the function of performing accounting operations, balancing business capital to determine the amount of capital that needs to be transferred or received and paid through residential deposits, loans from economic organizations, making non-cash payments, clearing payments always ensuring safety. With a caring attitude, civilized, polite and thoughtful transaction style, it attracts more and more customers to transact. Accounting activities always ensure convenient, safe, timely, accurate payments, and customer trust. At the same time, the accounting department also cooperates with specialized departments in asset management, closely monitoring debt terms, calculating and collecting interest correctly, sufficiently and promptly.
General Department : Is a department that advises and assists the Branch Board of Directors in the work of building, assigning plans, synthesizing reports; quality management, risk management and handling of problem debts and risk prevention, fraud prevention at the Branch according to Vietinbank's regulations in each period.
Credit Support Department : This department performs advisory work and assists branch leaders in operations and credit in accordance with Vietinbank's orientation and regulations in each period.
Administrative Organization Department : Is a professional department that carries out the work of organizing staff, labor, salary, training, emulation - rewards of the Branch in accordance with the State's policies and regulations of Vietinbank, implementing the work.
Office administration work serving business activities, basic construction work, ensuring security and safety of assets throughout the Branch.
Treasury Currency Department : Is a professional department that performs treasury safety management according to regulations, advances funds at the beginning of the day and collects money at the end of the day for transaction offices and accounting offices.
Transaction offices : With a wide network of operations in the Hanoi City - Region 3 area with 6 transaction offices, the transaction offices are the retail banking points of the Branch.
2.1.3. Some business performance results of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch
Table 2.1: Some main operating results of Vietinbank - Thang Long branch in the period 2017 - 2019
Unit: Billion VND
Target
2017 | 2018 | 2019 | Compare | ||||
2018 - 2017 | 2019 - 2018 | ||||||
+/- | % | +/- | % | ||||
Total capital | 1,998 | 2,459 | 3.127 | 461.0 | 23.1 | 668.0 | 21.4 |
Total outstanding debt | 1,963 | 2,316 | 2,962 | 353.0 | 18.0 | 646.0 | 21.8 |
Service revenue | 10.3 | 14.4 | 16.6 | 4.1 | 39.8 | 2.2 | 13.3 |
Chi's pre-tax profit branch | 70.3 | 81.6 | 78.4 | 11.3 | 16.1 | -3.2 | -4.1 |
(Source: Vietinbank Thang Long branch, 2017, 2018, 2019)
- Regarding capital mobilization: Based on the interest rate policy and under the direction of Vietinbank, Vietinbank Thang Long branch applies and implements flexibly in capital mobilization. From the above data table, it can be seen that capital mobilization activities are highly focused on by VietinBank - Thang Long branch for development. In recent years, the Bank has always taken measures to attract maximum capital from residents as well as businesses. This is reflected in the scale of capital sources in the past 3 years with high and continuous growth, specifically: in 2018
The total mobilized capital of the Branch reached 2,459 billion VND, an increase of 461 billion VND, equivalent to an increase of 23.1% compared to 2017. In 2019, the total mobilized capital continued to increase to 3,127 billion VND, an increase of 668 billion VND, equivalent to an increase of 21.4% compared to 2018, the average growth rate for the whole period was 22.22%.
- Regarding service activities: In addition to focusing on the two main operations of mobilization and lending, VietinBank - Thang Long Branch also focuses on providing products and services to customers, focusing on meeting the increasing needs of all customers. From 2017-2019, service fees of Thang Long Branch grew steadily and contributed significantly to increasing VietinBank's profits. In addition to promoting traditional products and services such as payment, guarantee, foreign currency trading, the branch has also focused on developing new products and services such as: derivative products, import tax guarantees, preferential VND loans. Revenue from increased services contributes to diversifying revenue sources and increasing profits for the Branch.
- Regarding pre-tax profit: In 2017, the Branch's operating profit reached 70.3 billion VND, in 2018 it reached 81.6 billion, an increase of 11.3 billion, equivalent to an increase of 16.1% compared to 2017. In 2019, the Branch's operating profit was 78.4 billion VND, reaching 89% of the assigned plan, lower than the 2017 profit of 3.2 billion, down 4.1% compared to 2017. The profit in 2019 decreased due to the increase in bad debt in 2019, leading to the need to set aside risk provisions, thereby reducing the Branch's profit. Specifically, in 2019, the Branch's bad debt was 108 billion, so it was necessary to set aside an additional 13 billion, reducing the Branch's profit in 2019.
2.2. Current status of credit activities and bad credit debts of Vietnam Joint Stock Commercial Bank for Industry and Trade - Thang Long Branch
2.2.1. Current status of credit activities of the Branch
Along with capital mobilization, credit granting is the core activity of the Branch because this is the main activity that generates revenue and profit for the bank. In recent years, the development orientation of VietinBank - Thang Long Branch is to approach to expand credit balance for all customers of all economic sectors, along with the close combination between