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Medium and Long Term Credit Debt Collection Sales Situation


Revenue from debt collection from medium and long-term lending activities


Table 2.13: Sales situation of medium and long-term credit debt collection

2009-2011 period

Unit: Billion VND



Target


Year 2009


2010


2011

Compare

2010-2009

Compare

2011-2010

Value (Ratio)

copper)

Proportion

(%)

Value (Ratio)

copper)

Proportion

(%)

Value (Ratio)

copper)

Proportion

(%)

Amount

(Billion VND)


%

Amount

(Billion VND)


%

Sales

debt collection


5,247.98


100


5930.01


100


7642.70


100


682.03


13.00


1712.69


28.88


Short term


4,098.13


78.09


4885.32


80.54


6,552.27


83.94


787.19


19.21


1666.95


34.12


T&DH


1,149.85


21.91


1,044.69


19.46


1,090.43


16.06


- 105.16


-9.15


45.74


4.38

Outstanding debt

T&DH


2,118.26


_


2,500.78


_


2,632.89


_


382.52


18.06


132.11


5.28

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Medium and Long Term Credit Debt Collection Sales Situation


Lending and debt collection activities are closely related to each other and have a relationship with the branch's bad debt. T&DH debt collection turnover has developments that are different from T&DH lending turnover. In 2010, T&DH debt collection decreased by 9.15% compared to 2009. Although T&DH debt balance at the end of 2009 continued to increase, due to the impact of the economy such as: Difficult business activities of enterprises, continuous natural disasters and floods affecting daily life and production, affecting the quality of new loans in 2009, only a few customers who received interest rate support were temporarily out of difficulty, thereby affecting debt collection turnover in 2010. Entering 2011, debt collection turnover stopped the decline of 2010, but only increased slightly (4.38%) compared to 2010, while loan turnover decreased by 14%, this made the growth rate of medium and long-term debt balance in 2011 compared to 2010 lower than the growth rate of debt balance in 2010 compared to 2011. 2009.


Medium and long term credit cycle

Table 2.14: Medium and long-term credit turnover in the period 2009-2011

Unit: Billion VND



Target


Year

2009


Year

2010


Year

2011

Compare

2010-2009

Compare

2011-2010

Value

%

Value

%

Debt collection turnover

T&DH


1,149.85


1,044.69


1090.43


105.16


-9.15


45.74


4.38

Average T&DH debt balance

army


1,968.90


2,309.52


2,566.84


340.62


17.3


257.32


11.14

Credit capital turnover

T&DH application


0.58


0.45


0.42


-0.13


-22.41


-0.03


-6.67


Looking at the table above, the branch's credit capital turnover in the period 2009-2011 tends to decrease from 0.58 cycles in 2009 to 0.42 cycles in 2011. This means that the number of days of a credit capital turnover in T&DH increases, proving that the credit capital turnover in T&DH is slower over the years.

In 2010, the T&DH credit turnover was 0.45 times, down from 0.13 times in 2009; in 2011 it was only 0.42 times, down from 0.03 times in 2010. The reason was that the average T&DH credit balance in 2010 increased by 17% compared to 2009, while the average T&DH debt collection turnover in 2010 decreased by 9.15% compared to 2009. This made the quality of T&DH credit somewhat decrease and contained many risks. In the period of 2009-2011, new projects tended to increase the loan term, some projects were due but could not pay their debts and had to be extended. Furthermore, while T&DH's outstanding debt has continuously increased over the years, T&DH's debt collection turnover is unstable, showing that T&DH's debt collection activities have not really met requirements and still contain potential risks.

Medium and long term overdue debt situation

Banking business is known to be a risky business.

most in all fields, especially credit activities T&DH. Risks for banks


can occur due to many reasons, both objective and subjective: maturity risk, interest rate risk, natural disaster risk, fire risk. When risks occur, they will create overdue debts and bad debts for banks. Therefore, overdue debts are inevitable for every commercial bank, and are an obstacle to improving the quality of credit and credit quality. The problem for banks is to minimize overdue debts, to both avoid risks and ensure profits, as well as how to handle those overdue debts.

Through the data table below, we see:

During the period 2009-2011, Overdue Debt had complicated and unstable fluctuations. In 2011, the growth rate of outstanding debt was 11% but T&DH debt increased by 32% compared to 2010. Overdue T&DH debt classified by economic sector mainly focused on individuals and households (about 60% to 70% of overdue debt. Meanwhile, the non-state enterprise sector with overdue T&DH debt accounted for about 30%-40%. Overdue debt for households and individuals tended to decrease, although unstable, overdue debt for enterprises tended to increase.

By economic sector, it shows that: In 2010, the agricultural sector decreased slightly compared to 2009, but in 2011 it tended to increase again, although the overdue debt ratio of this sector decreased to 22%. In 2010, the industrial and construction sector decreased compared to 2009, but increased sharply in 2011 (from 26.4 billion VND to 62.6 billion VND, an increase rate of 137%). For the commercial and service sectors, overdue debt at NHNo always accounts for a large proportion (over 45%), debt shows signs of increasing.


Table 2.15: Medium and long-term overdue debt structure of NHNo&PTNT Branch

Phu Tho province 2009-2011 period

Unit: Billion VND



Target


Year

2009

Ratio

weight (%)


Year

2010

Ratio

weight (%)


Year

2011

Ratio

weight (%)

Compare

2010 - 2009

Compare

2011-2010

Amount

%

Amount

%

Overdue debt

T&DH

262,189

100

239,654

100

316,760

100

-22,535

-8.59

77,106

32.17

1.By ingredients

KT











Individual &

Household

178,577

68.11

141,468

59.03

193,224

61

-37,109

-20.78

51,756

37

National Enterprise

business











DNoutside

state-owned

83,612

31.89

98,186

40.97

123,536

39

14,574

17.43

25,350

25.82

2.According to

branch











Agriculture

65,940

25.15

63,341

26.43

70,022

22.11

-2,599

-3.94

6,681

10.55

CN-XD

44,703

17.05

26,409

11.02

62,687

19.79

-18,294

40.92

36,278

137

TN- DV

118,142

45.06

116,519

48.62

145,709

46

-1,623

-1.37

29,190

25.05

Other industries

33,404

12.74

33,385

13.92

38,342

12.10

-19

0.06

4,957

14.83

(Source: Annual summary report of the branch of the Bank for Agriculture and Rural Development of Phu Tho province)

The reason for the branch's overdue debt situation is:

+ First of all, Phu Tho is a mountainous province in the northern midlands, the rural area accounts for 83% of the population. The total number of households in the area is 308,164 households, of which 258,876 households are in rural areas. NHNo is the main commercial bank in rural and agricultural areas with loan objects serving livestock, cultivation, traditional handicrafts, labor export... Therefore, lending mainly focuses on families and individuals in rural areas is correct.


+ Second, in the period 2009-2011, agricultural, forestry and fishery production faced many difficulties (especially in 2011) due to prolonged cold spells, unseasonal storms, bird flu, and widespread blue ear disease. Fertilizer supplies for agricultural, forestry and fishery production fluctuated, affecting production efficiency.

+ Third, due to the global economic crisis, the unstable situation in the Middle East and Africa such as Libya, Lebanon... has affected the local socio-economic situation: Labor export has decreased, many workers are forced to return home due to civil war, the demand for some products such as tea has decreased sharply.

+ Fourthly, due to the impact of the global economic downturn, the prices of gasoline, oil and petrochemical products such as plastic granules (input materials for most foreign-invested enterprises in the area) have increased; foreign orders have also decreased, leading to difficulties for both input and output products, and business profits have decreased.

+ Fifth, the Government's policy has changed: issuing Resolutions and Directives to curb inflation, stabilize the macro economy, tighten public investment, strictly control non-production loans (including consumer loans and real estate investment) leading to many construction enterprises, transportation enterprises, restaurants not being able to collect debts, production and business situation declining. The impact of the Vinashin and Vinalines effects affects companies in related industries in Phu Tho province such as cement companies, stone mining companies, industrial gas companies... In addition, the real estate market is frozen, the capacity for investment expansion is reduced, leading to unfulfilled auctioned assets, increasing overdue debts and bad debts.

All these reasons make it difficult for customers to repay their debts on time as prescribed. During this difficult period, the branch has made continuous efforts in T&DH credit activities, however, the quality of T&DH credit has not been significantly improved.


Table 2.16: Medium and long-term overdue debt situation in the period 2009-2011

Unit: Billion VND



Target


Year

2009


Year

2010


Year

2011

Compare

2010-2009

Compare

2011-2010

Amount

%

Amount

%

Overdue debt

458,132

424,392

584,968

-33,740

-7.36

160,576

37.84


Overdue debt T&DH


262,189


239,654


316,760


-22,535


-8.59


77,106


32.17

Credit balance

T&DH


2,118.26


2,500.78


2,632.89


382.52


18.06


132.11


5.28

Overdue debt ratio T&DH/ Outstanding debt

T&DH


12.38%


9.58%


12.03%





Overdue debt ratio

T&DH/Overdue Debt


57.23%


56.47%


54.15%





Through the above table, we can see that besides the growth of T&DH credit balance, the ratio of T&DH overdue debt/T&DH outstanding debt in the period 2009-2011 has fluctuated unstably and shows signs of increasing again. In 2010, the ratio of T&DH overdue debt was 9.58%, down 2.8% compared to 2009 because the T&DH outstanding debt in 2010 increased by 18% compared to 2009 but the T&DH overdue debt decreased by 8.59%. In 2011, the ratio of T&DH overdue debt increased again to 12.03% (up 2.45% compared to 2010) because the growth rate of overdue debt was greater than the growth rate of T&DH outstanding debt.

The rate of overdue debt is high, fluctuating around 10%. In 2011, the increase in overdue debt was mainly in group 2 debt (classified according to Decision 493 of the State Bank) which was overdue in interest, however, up to 62% of the debt was in the probationary period.

However, the ratio of T&DH Overdue Debt/Overdue Debt in recent times has tended to decrease but still accounts for a high proportion of the total overdue debt of the branch. In 2009 it was 57.23%, in 2010 it was 56.47%, in 2010 it decreased to

56.47% and in 2011 it decreased to 54.15%.


Medium and long term bad debt situation

According to current regulations, bad debt is debt classified into group 3, group 4, group 5 according to Decision 493/2007/QD-NHNN. In recent years, the Phu Tho branch of the State Bank of Vietnam has taken many measures to remove difficulties for businesses, actively handling overdue debts and bad debts. However, the bad debt situation of the Phu Tho branch of the State Bank of Vietnam is potentially high risk, the specific data are as follows:

Table 2.17: Medium and long-term bad debt situation in the period 2009-2011

Unit: Billion VND



Target


Year

2009


Year

2010


Year

2011

Compare

2010-2009

Compare

2011-2010

Amount

%

Amount

%

T&DH bad debt

79,107

43,143

45,207

-35,964

-45.46

2,064

4.78


T&DH balance


2,118.26


2,500.78


2,632.89


382.53


18.06


132.11


5.28

T&DH bad debt ratio/T&DH outstanding debt


3.73%


1.73%


1.72%





Bad debt ratio

T&DH/Bad debt


77%


64.43%


87%





(Source: Annual summary report of the branch of the Bank for Agriculture and Rural Development of Phu Tho province)

During the period 2009-2011, the T&DH bad debt ratio fluctuated erratically. The T&DH bad debt situation is often associated with the same T&DH debt collection turnover. However, the Phu Tho branch of the Bank for Agriculture and Rural Development has a difference in that the T&DH debt collection turnover in 2010 generally decreased compared to 2009, while the bad debt ratio decreased due to:

T&DH's outstanding debt in 2010 increased by 18% compared to 2009, bad debt decreased by 45.46%, equivalent to 35.9 billion VND. Of the 35.9 billion VND in bad debt reduction, 21.3 billion VND was reduced because the branch used many drastic measures to urge customers with overdue debts to pay their debts; consulted and helped weak businesses find partners to buy back factories, lease production workshops, and households to narrow down their business scope, avoiding widespread investment. On the other hand, the branch still maintained the same loan turnover as in 2009.


In 2011, the economy continued to face difficulties. The reduction of public investment caused difficulties for customers in the construction and transportation service sectors. Handling assets by auctioning encountered many difficulties. This led to a slight increase in bad debt of T&DH (VND 2 billion compared to 2010). However, the ratio of overdue debt of T&DH/total overdue debt reached 87%, an increase of 23% compared to 2011, even though the overdue debt ratio in 2010 and 2011 remained at 1.7% < 3% according to the assigned plan. This is a sign that the branch's medium and long-term lending is facing many difficulties. In 2011, the main cause of bad debt was due to customers' business operations losing money (67.18% of total bad debt), followed by customers' weak financial capacity (15.7% of total bad debt), natural disasters and epidemics (8.79% of total bad debt) and the rest were due to other causes. Therefore, in the coming time, banks need to pay more attention to project appraisal, monitoring loans and businesses to minimize businesses with weak financial status and ineffective production activities.

Profit from medium and long term credit activities

Table 2.18: Profit situation from medium and long-term credit activities

Unit: Billion VND



Target


Year

2009


Year

2010


Year

2011

Compare

2010-2009

Compare

2011-2010

Amount

%

Amount

%


T&DH balance


2,118.26


2,500.78


2,632.89


382,526


18.06


132,109


5.28

Total profit

115.34

165,019

232,822

49,679

43.07

67,803

41.09

Credit profit

T&DH application


59,486


95,710


119,554


36,224


60.90


23,844


24.91

TD T&DH Profit/Outstanding Debt

T&DH


2.81


3.83


4.54





TD Profit

T&DH/Total profit


51.57


58.00


51.35






(Source: Annual summary report of the branch of the Bank for Agriculture and Rural Development of Phu Tho province)

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