Outstanding Debt Situation by Economic Sector Over 3 Years 2006

in the seafood export industry, has relationships with many banks and businesses that the branch is lending to, and were previously customers of other banks in the area. Therefore, most of the assets of the businesses were previously mortgaged at other banks, and the branch mainly lends unsecured loans in this field.

The outstanding debt of the Fishery CNCB has changed over the years. Specifically, in 2007, the outstanding debt of the Fishery CNCB increased by 332,936 million VND, equivalent to an increase of 82% compared to 2006, mainly due to the relatively high outstanding debt at the beginning of the period, meaning that the loans that have not yet matured need to be collected, and at the same time, the debt collection turnover has decreased, leading to a decrease in outstanding debt. In 2008, the outstanding debt increased by 183,424 million VND, equivalent to an increase of 24.8% compared to 2007. The reason is that the increase in the quantity of seafood has led to processing companies having a high demand for loans, causing the loan turnover to increase, leading to an increase in outstanding debt, partly due to the fact that there are debts that have not been collected yet, also causing the outstanding debt to increase.

Outstanding debt of the construction industry in 2007 increased by 59,594 million VND, equivalent to an increase of 129.6% compared to 2006, and in 2008 decreased by 72,458 million VND, equivalent to a decrease of 68.6% compared to 2007. The decrease in outstanding debt is due to the impact of increased debt collection turnover, meaning that the Bank is always looking for good ways to collect debt.

Outstanding debt by economic sector

% 50

2006 2007 2008

CNCB Seafood Export Construction

Trade and services

Consumption

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Outstanding loans in the trade - service and consumer sectors have also increased over the years. The main reason is due to the impact of increased loan sales and good debt collection, causing outstanding loans to increase. Shown in the following chart:

Year

Figure 9: Outstanding debt situation by economic sector over 3 years 2006 - 2008

 Debt collection turnover:

TABLE 12: DEBT COLLECTION SITUATION BY ECONOMIC SECTOR AT BIDV CA MAU (2006-2008)

Unit: Million VND

Target

2006		2007		Year 2008		Difference 2007/2006		Difference 2008/2007
Amount	%	Amount	%	Amount	%	Amount	%	Amount	%
CNCB Seafood export	1,834,788	76.2	1,487,707	74.5	1,907,689	76.5	-413.889	-17.2	419,982	28.2
Build	343,402	14.3	353,085	17.7	386.125	15.5	9,683	2.8	33,040	9.3
Love trade-service	48,784	2.0	54,258	2.7	98,763	3.9	5,474	11.2	44,505	82.0
Consumption	182,613	7.6	100,648	5.1	102,045	4.1	-81.965	44.9	1,397	1.4
Total	2,409,587	100.0	1,995,698	100.0	2,494,622	100.0	-413.889	-17.2	498,924	25.0

Department: Planning - synthesis

Debt collection turnover by economic sector

% 40

2006 2007 2008

Year

CNCB Seafood Export Construction

Trade and services

Consumption

Figure 10: Debt collection situation by economic sector over the 3 years 2006 - 2008

Through the data table and chart above, we can see that debt collection turnover is also relatively good. Along with high loan turnover and outstanding debt of the seafood CNCB industry, debt collection turnover of this industry is also effective. However, depending on the situation

Each year, depending on the economic situation, the loan turnover and outstanding debt of each branch industry increases or decreases, and the debt collection turnover is also different. Specifically, in 2007, the debt collection turnover of the seafood CNCB industry decreased by 17.2% compared to 2006, but in 2008, this turnover increased by 28.2% compared to 2007.

Construction debt collection turnover has increased over the years. Specifically, in 2007 it increased by 2.8% compared to 2006 and in 2008 it increased by 9.3% compared to 2007. The reason is that banks only lend to qualified customers, not unsecured loans.

The revenue from debt collection in the trade and service sector has also increased over the years. This shows that the trade and service sector has been operating effectively, so the debt collection situation is also very positive.

Looking at the table above, we can see that the efficiency of consumer debt collection decreased in 2007, specifically by 81,965 million VND, equivalent to a decrease of 44.9% compared to 2006. The reason was that due to the difficult economic situation, people did not have money to pay their debts. However, the debt collection turnover in 2008 increased by 1,397 million VND compared to 2007, equivalent to an increase of 1.4%. This was due to the Branch following the direction on controlling credit activities, temporarily stopping consumer loans for purchasing luxury goods, and actively taking measures to recover previous debts...

 Bad debt:

TABLE 13: BAD DEBT SITUATION BY ECONOMIC SECTOR AT BIDV CA MAU (2006-2008)

Unit: Million VND

Target

2006		2007		Year 2008		Difference 2007/2006		Difference 2008/2007
Amount	%	Amount	%	Amount	%	Amount	%	Amount	%
CNCB Seafood export	8,052.0	47.9	5,032	59.5	4.127	56.4	-3,020.0	-37.5	-905	-18.0
Build	4,179.0	24.9	1,498	17.7	1,025	14.0	-2,681.0	-64.2	-473	-31.6
Love trade-service	1,690.7	10.1	798	9.1	725	9.9	-892.7	-52.8	-73	-9.2
Pepper use	2,895.0	17.2	1,165	13.8	1,442	19.7	-1,730.0	-59.8	277	23.8
Total	16,816.7	100.0	8,463	100.0	7,319	100.0	-8,353.7	-49.7	-1.144	-13.5

Source: Planning and Synthesis Department

Bad debt by economic sector

% 60

2006 2007 2008

Year

CNCB Seafood Export Construction

Trade and services

Consumption

Figure 11: Bad debt situation by economic sector over 3 years 2006 - 2008

Through the data table and chart of bad debt situation by industry, we can see that bad debt has gradually decreased over the years. This shows that the credit quality of loans is increasingly tightly controlled, avoiding cases of lending to unqualified customers. On the other hand, it shows that debt collection work at the Branch is relatively effective. The Risk Handling Department at the Branch has taken timely measures to recover debts, not allowing these debts to be transferred to group 5 according to the regulations of the State Bank. As for previous debts, the department has also gradually found recovery solutions depending on the characteristics of each loan and each type of customer. In addition, the borrower has a good will to repay the debt, this is an important basic factor in debt collection at the branch. When the business activities of this customer become effective again, they will repay the debt to the bank.

Bad debts in the sectors of CNCB seafood export, construction, trade and services have all decreased, although the decrease is not much because over the years the economic situation has had many different fluctuations affecting the operations of enterprises, affecting the repayment of bank loans. However, bad consumer debt increased in 2008 due to the impact of the economic crisis. Consumer loans are mainly used to buy consumer products for

life, these loans are usually medium-term loans, when their income fluctuates, it will affect the payment of interest and debt to the branch, making the branch's debt collection slow.

4.2.3 Some indicators to evaluate the efficiency of credit activities at the Bank TABLE 14: SOME INDICATORS TO EVALUATE THE EFFICIENCY OF OPERATIONS

BANK CREDIT

Target

Unit	Year 2006	Year 2007	Year 2008
Total capital mobilized	Million Dong	343,178.7	230,127.0	145,559.0
Total capital	Million Dong	531,714.5	428,573.0	561,717.0
Total outstanding debt	Million Dong	484,773.1	916,599.1	1,045,868.1
Total loan turnover	Million Dong	2,838,395.0	2,427,524.0	2,613,891.0
Total debt collection	Million Dong	2,409,587.0	1,995,698.0	2,494,622.0
Average total outstanding debt	Million Dong	270,369.1	700,686.1	976,213.6
Total bad debt	Million Dong	16,816.7	8,463.0	7,319
Capital mobilized/Total capital	%	64.5	53.7	25.9
Outstanding debt/Total capital	%	91.2	213.9	184.4
Outstanding debt/ Mobilized capital	%	141.3	398.3	711.7
Bad debt/ Total outstanding debt	%	3.5	0.9	0.7
Debt collection turnover/ Turnover loan number	%	84.9	82.2	95.4
Debt collection turnover/ Outstanding debt average	Round/year	8.9	2.8	2.6
Bad Debt/ Loan Sales	%	0.6	0.4	0.3

Source: calculated from tables

4.2.3.1 Mobilized capital/ Total capital

This indicator assesses the Bank's ability to mobilize capital, indicating whether the Bank's capital depends on the Vietnam Development and Investment Bank or not. The data shows that the ratio of mobilized capital to total capital is decreasing. Specifically, in 2006, this ratio was 64.5%, in 2007, this ratio decreased to 53.7% and this ratio was even lower in 2008.

25.9%. This shows that the Bank's locally mobilized capital is high and is at risk of decline. The Branch also has to use the transferred capital of the Central Bank.

Banking activities mainly rely on mobilized capital, this capital source accounts for 70% of the total capital source to be good. Here, the mobilized capital source of the Bank accounts for a very small proportion, it has not played a key role in the total capital source and still depends a lot on the capital source of the Bank for Investment and Development of Vietnam. This is a limitation of the Branch, so the Branch needs to further promote capital mobilization to attract deposits from all economic sectors so that the Bank has a higher mobilized capital source to be more proactive in lending and investment to bring higher efficiency to the Branch.

4.2.3.2 Outstanding debt/Total capital

This indicator assesses the level of capital concentration in the Bank's credit activities. Normally, this high ratio proves that the Bank has concentrated capital well on credit activities. The table shows that this ratio has always been very high (over 90%) over 3 years: in 2006, this ratio was 91.2%, in 2007 it was 213.9% and in 2008 it was 184.4%. This high indicator is because the Branch focuses more on short-term lending, in order to recover capital quickly, with less risk than medium- and long-term lending, thus ensuring the goal of safety and efficiency. However, because medium- and long-term lending often has higher interest rates, it also brings in large interest income, so the Branch needs to have a harmonious structure in medium- and long-term lending for more effective credit activities.

4.2.3.3 Outstanding debt/Mobilized capital

This indicator shows the ability to use mobilized capital of the Bank. If this ratio is less than 100%, the capital is stagnant and credit activities are not effective. The table shows that this ratio at the Bank is very high over the past 3 years. Specifically, in 2006, this ratio was 141.26%, in 2007, this ratio reached 398.3% and in 2008, this ratio reached 711.7%. This shows that the ability to use capital at the Branch is very high. In addition to using mobilized capital for lending, the Branch also uses more and more transferred capital. The Bank needs to consider carefully before lending to avoid widespread and ineffective lending.

4.2.3.4 Bad debt/ Total outstanding debt

This indicator reflects the Bank's business performance and the credit quality of previous loans. This ratio is accepted at a maximum of 5%, if it exceeds this ratio, the Bank is in an alarming state. The above table shows that this ratio is relatively low and has been decreasing over the past 3 years. Specifically, in 2006, this ratio was 3.5%, in 2007, this ratio decreased to 0.9% and this ratio was only 0.7% in 2008. This is a good sign for the Bank. This shows that the Bank has been using all the best measures to reduce the bad debt ratio to the lowest level in order to improve the credit quality of the Bank.

4.2.3.5 Debt collection turnover/ Loan turnover

This indicator evaluates the efficiency of credit activities in debt collection. It reflects how much capital the Bank has collected in a certain period corresponding to the loan turnover. The debt collection ratio at the Branch is always at a high level, specifically the debt collection turnover ratio on loan turnover in 2006 was 84.9%, in 2007 was 82.2%, and in 2008 was 95.4%. This shows that BIDV Ca Mau is always wise in lending, that is, not pursuing profits but accepting high risks, always finding ways to collect debts well. Such results are due to the efforts of all staff of BIDV Ca Mau who have made their best efforts.

4.2.3.6 Debt collection turnover/ Average outstanding debt

The Bank's credit turnover has been decreasing over the years. Specifically, in 2006, the turnover was 8.9 times/year, in 2007 it was 2.8 times/year, in 2008 it was 2.6 times/year. The credit turnover is affected by debt collection turnover and average debt balance. The branch's debt collection turnover is relatively high. The average debt balance has increased over the years, so the number of turnovers has decreased. The high debt collection turnover is due to the bank having a good debt collection policy, focusing on appraisal work before lending, while the average debt balance has increased over the years because the bank has increasingly lent.

4.2.3.7 Bad debt/ Loan turnover

This indicator reflects the level of risk that may occur. The risk rate at the Branch is very low and has decreased over the years, specifically in 2006 this rate was 0.6%, in 2007 it was 0.4% and by 2008 this rate was only 0.3%. This shows that

Seeing that the Bank has low credit risk means that the Bank's credit activities are always guaranteed to be safe. This shows that the Bank always cares and pays attention to loan appraisal as well as debt collection.

4.2.4 Causes of risks in credit activities at Ca Mau Investment and Development Bank

If business activities in the market mechanism appear to be an inevitable factor, then in the lending relationship, it is more clearly shown by the characteristics of the relationship of buying and selling the right to use capital separate from ownership. Banking activities, by its nature, are affected by many types of risks, but the most typical is the risk in credit activities, this risk is very complicated and can occur from many different causes such as:

- In lending, in addition to the loan application, there are also documents on mortgaged assets or guarantee contracts, but in some cases, when the customer cannot repay the debt, the mortgaged assets cannot be auctioned because of negligence in the lending process regarding the documents, such as insufficient legal documents to auction the assets, or the assets are auctioned without enough costs to repay the bank, leading to risks. Or the case where the guarantor does not agree to pay on behalf of the customer also leads to risks.

- The loan has not been carried out in accordance with the correct procedures, appraisal, inspection, and determination of the legal and personal status of the borrower.

- Not assessing the feasibility of production and business plans, input markets, output markets, and production and business conditions of borrowing establishments.

- Risks from the market due to competition, loss of consumer market, customers no longer use the company's products but switch to other products of higher quality, borrowers cannot consume the products leading to inability to pay and unable to repay debts to the Bank.

- The economic environment is unstable, policies and macro management mechanisms often change in the process of innovation to reach greater perfection.

Outstanding Debt Situation by Economic Sector Over 3 Years 2006 - 2008

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