Number and Number of Consumer Loan Customers Over the Years

Figure 2.3: CVTD outstanding debt situation

(Source: Loan situation report of the QHKH department in 2011-2013)

Figure 2.3 shows: CVTD outstanding debt since 2011 has grown continuously at a strong rate. ( Note: Total outstanding debt of the branch in the table above includes ODA outstanding debt, CVTD outstanding debt includes overdraft and Visa card ). In particular, we can mention the breakthrough in 2013, although the total outstanding debt of the whole branch decreased due to: from the end of 2012 to the beginning of 2013, the branch incurred a number of bad debts that had been lent before and the branch's policy in 2013 was to focus on capital mobilization and bad debt recovery. The branch also reviewed its customer policy and applied a higher collateral ratio to outstanding debts. This caused some large customers to not meet the branch's collateral requirements and so they temporarily stopped borrowing. In addition, the branch temporarily stopped lending to customers related to high-risk sectors (real estate business, securities, ...). However, with strict requirements on customer policies as well as collateral, CVTD's outstanding debt in 2013 still increased significantly compared to 2012, the result was due to the branch focusing on expanding consumer lending activities.

Thus, the branch's CVTD has continuously expanded in scale and increasingly accounts for a larger proportion of total outstanding loans. The increase in CVTD outstanding loans is mainly due to the value of loans from home purchases, car purchases, etc. This result is also due to the branch.

Maintain good relationships with old customers, actively seek new customers, and attract more borrowers. This is considered the branch's success in maintaining and expanding this activity.

a) Proportion of consumer loans in total outstanding loans

If placed in the overall correlation, it can be seen that CVTD increasingly accounts for a high proportion of the total outstanding loans of the bank. If in 2011, the proportion of CVTD was only 9.96%, then by 2013 this figure had nearly doubled to 15.35% (chart 2.3). This shows the increasingly important position of CVTD activities. This figure is expected to continue to increase. However, it is clear that CVTD still accounts for a small proportion of the branch's lending activities, so the branch needs to have timely solutions to expand this type of lending.

b) Number and number of consumer loan customers

Looking at table 2.7, we can see that the number of consumer loan customers of the branch has grown strongly, from 446 people in 2011 to 658 people in 2013 with a growth rate of 61.2%. The number of consumer loan customers has also increased strongly and reached 950 people in 2013. The high number of consumer loan customers demonstrates the trust that customers have in the bank.

Table 2.7: Number and number of consumer loan customers over the years

Unit: Person, turn

Target

2011	2012	2013
Number of people/turn	Number of people/turn	Number of people/turn
1. Number of consumer loan customers	446	638	719
- Household customer volume	290	383	482
- Individual customer volume	156	255	237
2. Number of consumer loan customers	619	887	950

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(Source: Report of the Department of Science and Technology over the years)

The number of consumer loan customers at the branch, mostly household customers, increased by 66.2% in 2013 compared to 2011 and 26% compared to 2012. In addition, the number of individual customers increased by only 52% compared to 2011 and had a slight decrease of 7% compared to 2012. The reason why the number of household customers always accounts for a higher proportion than individual customers is because the bank always wants to ensure that the capital source has been

disbursement. When lending to households, banks require the representative (i.e. the head of household) to list the heirs and supporting documents. When the head of household is unable to repay the debt, the debt will be transferred to the heir. Therefore, lending to households is less risky than lending to an individual. In addition, the consumption needs of households are often greater than that of individuals. This leads to the number of household customers always accounting for a higher proportion than that of individual customers.

In which, consumer lending focuses mainly on unsecured loans, auto loans, and real estate-related loans, with the number of customers borrowing capital related to buying houses accounting for the highest proportion over the years. In 2012 alone, the number of customers borrowing capital related to mortgaging savings books increased sharply.

With real estate-related loan products, home purchases, statistics show that the number of customers has decreased. The reason can be explained by the fact that there are many uncertainties leading to the situation of lending for speculative purposes rather than for consumption purposes, thereby leading to risks for the branch.

2.2.2.3. Consumer lending structure

a) CVTD structure by product and field

Table 2.8: CVTD by product over the years

Unit: Billion VND

Product

2011		2012		2013
Value	Proportion (%)	Value	Proportion (%)	Value	Proportion (%)
- Loans for new purchases and home repairs	172.43	85.9	103.54	41.36	130.42	49.16
- Car loans	2.95	1.47	2.98	1.19	3.67	1.39
- Loans to support studying abroad	1.70	0.85	41.92	16.75	23.89	9.00
- Consumption	10.57	5.26	71.75	28.66	37.94	14.30
- Overdraft	1.61	0.80	2.78	1.11	7.39	2.79
- Other (mortgage, GTCG securities; other)	11.49	5.72	27.35	10.92	61.99	23.37
Total	200.75		250.32		265.29

(Source: Consumer lending report by product over the years)

Figure 2.4: Outstanding loan situation by sector

(Source: Report of the Department of Planning and Investment over the years)

Looking at table 2.8 and figure 2.4, it can be seen that the consumer loan structure of the branch has not changed much over the past 3 years, there has been no sudden change. The loan products provided by the branch mainly focus on relatively large needs: Buying a house, consumer loans.

The proportion of loans related to home purchases tends to decrease over the years, corresponding to the proportion of real estate loan customers in the total number of customers also decreasing as analyzed above. Most real estate loans are secured by the assets formed from the loan capital. Therefore, this type of loan depends heavily on the real estate market. This market fluctuates a lot, leading to the situation that most speculators in this market have left the market due to the prolonged freeze, the stagnant capital, and increasing bank debt. This increases the risk of lending this product. Therefore, the branch has been more cautious in deciding to approve and lend.

The proportion of auto loans has increased over the years and at a relatively stable rate, but still at a modest level. The reason is that many famous car brands: Ford, Toyota, Mitsubishi, Mercedes... have become familiar with the Vietnamese market, creating a supply of auto products. At the same time, the development of the high-income class and

stable in Vietnam, forming a supply and demand factor for shopping. Therefore, this will be a product that brings stable income to the branch. However, the lending rate of this product in the branch is still low and not commensurate with the position of the branch, located in an area with many large car showrooms, where car buying and selling activities are bustling.

In addition, the branch also makes other consumer loans. The lending purposes for these disbursements are quite diverse, the loan term is often short, the value is small (loans to buy phones, laptops, motorbikes, etc.)

Thus, it can be seen that the branch's consumer loan products are almost only focused on some traditional consumer loan products: Real estate-related loans, unsecured loans, installment car loans. Some other products such as: study abroad loans, medical treatment loans, valuable paper loans, securities loans, overdraft loans are also deployed, but these loan options are not many and are not proportional to the branch's other products, not meeting the diverse needs of customers.

b) Consumer loan structure by loan term

Table 2.9: CVTD structure by loan term

Unit: billion VND, %

Year

2011		2012		2013
Classification by time	Value	Proportion (%)	Value	Proportion (%)	Value	Proportion (%)
Short-term CVTD debt	148.51	74.61	189.92	75.87	190.22	71.70
Medium-term CVTD debt balance	50.24	25.24	58.80	23.49	66.38	25.02
Long-term CVTD debt	0.30	0.15	1.60	0.64	8.68	3.27

(Source: Report of the Department of Planning and Investment over the years)

Based on table 2.9, it can be seen that most of the branch's loans are short-term, short-term loans account for a fairly large proportion: in 2011 it was 74%, in 2012 it increased to 75.8% and in 2013 it decreased to 71.7%, but in general the proportion of short-term CVTD is very large, in recent years it has accounted for more than 70% of the branch's total outstanding CVTD.

By 2013, the proportion of medium and long-term loans tended to increase, due to the strong increase in the demand of people for buying cars and houses. It can be seen that the proportion of medium and long-term loans in the total outstanding balance of CVTD is reasonable because the demand of customers for long-term purposes such as real estate, buying cars, etc. is increasingly popular. With such loans, they cannot pay in the short term, these loans usually have an average loan period of about 24 - 36 months.

c) Loan structure based on collateral

Table 2.10: CVTD structure according to loan collateral

Loans on collateral	2011		2012		2013
Loans on collateral	Value	Proportion (%)	Value	Proportion (%)	Value	Proportion (%)
Outstanding loans with collateral	177.14	89.00	233.93	93.45	247.60	93.33
Outstanding CVTD without collateral (credit)	21.90	11.00	16.39	6.55	17.69	6.67
CV balance summary	199.04	100	250.32	100	265.29	100

Unit: billion VND

(Source: Report of the Customer Relationship Department over the years) In CVTD activities, Thang Long branch mainly lends secured loans.

That is lending with collateral, pledge or third party guarantor. In addition to lending based on the source of repayment and the customer's own reputation, collateral is a factor that needs to be considered.

With the branch, outstanding loans with high collateral assets account for 90% of total outstanding CVTD because the branch has realized that consumer loans are often the riskiest for banks, because the financial situation of customers often changes rapidly depending on their work status and health.

Normally, unsecured loans are only applied to loan options for employees in the banking industry... with monthly salary sources. Otherwise, most CVTD branch products always pay attention to the collateral factor.

2.2.2.4. Consumer loan quality

a) Proportion of CVTD interest income in total interest income

Table 2.11: Proportion of income from CVTD interest in total interest income.

Unit: Billion VND

Content

2011	2012	2013
Interest income from total outstanding loans	183.89	184.17	208.93
Interest income from outstanding CVTD loans	13.82	34.26	44.94
CVTD Loan Interest Collection Ratio/Total Interest Collected (%)	7.52	18.60	21.51

Figure 2.5 - CVKHCN profit over the years

(Source: Branch income and expense reports over the years)

Based on Figure 2.6, it shows that interest income from CVTD activities accounts for a small proportion of total loan interest income but tends to increase both in absolute and relative terms over the years. In 2011, it reached 13.82 billion VND, accounting for 7.52%, showing that CVTD is increasingly effective in the bank's operations. In 2013, this figure reached 44.94 billion VND, accounting for 21.51% of the total interest income of the entire branch. If we look at Figure 2.4, the proportion of outstanding CVTD debt in total outstanding debt shows that CVTD interest income is higher. This is because CVTD loans often have higher and more stable interest rates than corporate loans, so interest income from CVTD is increasing in total interest income.

b) Overdue debt ratio

In banking operations, credit growth and credit quality are goals that need to be achieved simultaneously because if growth is rapid but credit quality is not good, many debts cannot be collected, and the overdue debt ratio is high, it will lead to risks for the bank. Realizing this since the strong implementation of CVTD products, it can be said that BIDV Thang Long's risk control is quite tight, debt monitoring and collection take place regularly, so the collection of principal and interest is carried out very seriously.

Table 2.12: Bad debt situation of branches

Unit: Billion VND

Target

20	2	2
- Bad debt of customers (group 3.4.5)	19	9	1
- Total bad debt of the branch (group 3.4.5)	19	1	2
- Bad debt ratio of customers/bad debt of the whole branch	10	9	3
- Bad debt ratio of KHVTD/Total outstanding CVTD debt (%)	9.	3	3

Figure 2.6: Overdue debt of CVTD activities

(Source: Branch summary reports over the years)

From Figure 2.6, it can be seen that although in absolute terms, the overdue debt of both branches and CVTD overdue debt increases over time, the proportion of CVTD overdue debt of branches tends to decrease, in particular, bad debt for CVTD in 2011 accounted for 10.2% of the total bad debt of the whole branch, in 2012 it was 9.31%, in 2013 it was 3.49%. In general, the overdue debt arising from CVTD loans issued by banks is not large, this is one of the bases for branches to continue to expand CVTD activities.

c) Rate of misuse of capital

The first principle of borrowing is that the customer must use the loan for the purpose agreed upon in the contract. The branch performs a good job of checking thoroughly before, during and after lending. Each time checking the use of the loan, the lending officer makes a record of checking the use of the loan, closely monitors the use of the loan for the right purpose, collects the loan in full and on time, thereby expanding and improving the quality of lending.

During the implementation process for direct payment options to the seller, the branch often requires direct payment to the seller and must make a 100% transfer; and for cash withdrawal options larger than 100 million VND, the credit officer is required to make the payment with the customer. This is considered an effective measure to reduce the possibility of customers misusing capital.

However, because customers are individuals and households, controlling the purpose of capital use is difficult because their purposes are diverse and rich, and there are not always invoices and documents. The branch also has a number of cases where customers violate the regulations and make records, but the number is not much, these cases are all required by the branch to repay the debt before the due date.

2.3. Assessment of the current status of CVTD expansion at Vietnam Development Bank - Thang Long Branch

2.3.1. Results achieved

- Firstly , the expansion of CVTD at the branch has been effective, first of all reflected in the increasing sales and outstanding loans of CVTD in the total outstanding loans in general.

CVTD sales and outstanding loans have grown strongly over the years. CVTD accounts for an increasingly large proportion of the branch's loan sales and outstanding loans. This continuous and stable growth continued in the following years and achieved an increasingly high growth rate, contributing to the overall increase in loan sales, total assets and increased income of the branch. The ratio of CVTD outstanding loans to total outstanding loans as of December 31, 2013 was 12%, higher than the entire BIDV system (10.03%), in 2013 it was 15.35%, the growth rate in the period 2011-2013 was 51%, this is a fairly good growth rate, CVTD outstanding loans secured by assets reached 93%, this ratio is positive and quite safe for consumer loans.

Interest income from CVTD is increasing day by day and ensuring positive fluctuations. The number of customers borrowing consumer loans has increased significantly, accounting for 63% of the total number of customers borrowing capital of the branch. This customer base is stable, creating favorable conditions for the branch to deploy new products. This proves that the branch has made efforts and focused on promoting the expansion of consumer loans and has achieved encouraging results.

- Second , CVTD products are being increasingly deployed. In the process of consumer lending, the branch has combined cross-selling other products and services and applied flexible lending policies, focusing on BIDV's new CVTD products.

The system of CVTD products that the branch is currently applying is relatively complete and is continuously being researched and supplemented with utilities to better meet the needs of customers. The branch's consumer credit network is quite good and widely distributed throughout the operating area, deployed at the QHKHCN department at the branch's headquarters and all transaction offices located in residential areas, the ATM network is appropriately distributed in residential areas, and the human resources serving retail credit activities are guaranteed to work.

CVTD not only focuses on diversifying the products provided but also increases the ability to introduce and provide cross-selling of other products and services of the bank. The introduction of products: Savings, domestic and international money transfers, ATM cards ... along with CVTD has been paid attention to and invested in, the branch has provided customers with comprehensive products, advised customers to know more about the bank's modern products and services, as well as the benefits of customers when transacting, helping customers to use the services more easily and effectively.

- Third , customer development marketing work has been carefully implemented and thoroughly understood by each QHKHCN officer.

Customer development marketing at branches is carried out in two ways: direct and indirect. Direct marketing is the way in which QHKHCN staff come into direct contact with customers to introduce products. CVTD products marketed in this way are usually salary loans, overdrafts, home purchases, etc. Indirect marketing is when branches go through affiliated partners, organizations, etc.

socio-economic to introduce CVTD products. Products marketed in this way are usually: Consumer loans, home loans, car loans, study abroad loans,...

In addition, identifying the significance of network expansion has a positive impact on lending expansion in general and CVTD in particular, in recent times the branch has also focused on network development. The transaction offices are located in beautiful, spacious locations with modern equipment systems, attracting customers.

- Fourth , risk management and credit appraisal for CVTD are properly invested, leading to a reduction in the level of risk in lending.

The branch has strictly complied with the consumer lending process of the Head Office, limited lending in areas with high risks, and done a good job of debt collection, so the rate of overdue debt and bad debt in the consumer lending sector over the years has not exceeded the allowable limit (always less than 3%). This is the result of the efforts of the branch's staff and management, and has demonstrated the ability to grow sustainably in expanding consumer lending, bringing growth in both scale and quality. The consumer lending process of the system in general and the branch in particular is relatively strict, ensuring independence, publicity, transparency, and enhancing safety in operations, so current consumer lending activities are guaranteed to be safe.

- Fifth , the branch has made large investments in both facilities and human resources to improve loan quality, moving towards expanding the current CVTD segment.

The branch has invested heavily in facilities for transaction offices, ATM systems, POS systems, etc. The system of modern technological equipment supports the process of granting credit and managing credit conveniently, effectively and safely. The Vietnam Development Bank system is using the most modern technology in the banking industry. The integrated software connecting the entire Silvelake system helps to manage records and handle related operations quickly, conveniently and safely.

The professional staff is basically qualified and well-trained. The branch has focused on sending individual customer service officers to attend training courses on situation handling skills, information processing, and sales skills to best serve the needs of customers and maximize benefits for the bank.

- Sixth , the branch has initially built the image of a dynamic and customer-friendly retail bank .

More and more customers know and use the bank's CVTD products. This proves that the bank's reputation has been established and developed. Besides banks such as ACB, Sacombank, Techcombank, BIDV is considered the unit providing the most effective CVTD products and meeting the increasing demands of customers. With programs such as installment car purchase, study abroad loans, credit limit loans, the combination of branches with large business units, car showrooms, real estate investors, real estate projects, large supermarkets and restaurants in the area ... has created conditions for people to access the bank's loan products easily.

2.3.2. Some limitations and causes

2.3.2.1. Some limitations

- Firstly , although the scale of outstanding CVTD loans has increased, it is generally slow and unstable, and CVTD lending expansion activities have not achieved the best results.

Although the branch has invested resources in CVTD, the outstanding balance of CVTD is not really commensurate with the advantages and potential of BIDV and the branch. In 2013, although there were many positive factors affecting, the outstanding balance of retail credit was still low (15%/Total outstanding balance), compared to other joint stock commercial banks with a ratio of 25%, the branch's ratio was only half. The quality of CVTD of the branch is not good, the overdue debt ratio of 4% is still quite high compared to current retail banks such as ACB, Techcombank. The number of customers is large but the outstanding balance per customer is low and these customers only use credit products and rarely use other products of the branch, leading to limited revenue when lending interest rates fluctuate, compared to the population in the area, the number of these customers is very small. Product development is not really linked to the characteristics of individual customers and each customer segment, so the product's effectiveness is not high.

In fact, the outstanding balance of CVTD has improved over the years but still accounts for a very small proportion. This leads to the situation where CVTD activities cost more to manage loans than lending for production and business. In particular, CVTD loans contain more risks because they depend heavily on the borrower's debt repayment awareness and their future income.

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