Outstanding Loans on Mobilized Capital of Acb

In 2011, there were signs of an increase again, reaching 864,274 million VND. The decrease in lending and debt collection of ACB - Hue Branch in 2010 was due to the fact that after the period of loosening monetary policy in 2009, in 2010, commercial banks had to bear many impacts of tight monetary policy, restricting lending, especially in the field of real estate lending and non-production lending. In the context of Thua Thien - Hue's economy focusing on developing the service industry, this was a difficulty for business households and enterprises in accessing capital. This reduced ACB's lending and debt collection. However, in 2011, Thua Thien - Hue's economy had many positive changes, which helped ACB increase its lending by 427,126 million VND and its debt collection also followed the same trend, increasing by 375,437 million VND.

Table 2.6. Lending situation of ACB – Hue Branch

Unit: million VND

Target

Year 2009	Year 2010	Year 2011	2010/2009	2011/2010
1. Loan sales	1,468,000	437,148	864,274	-1,030,852	427,126
2. Debt collection turnover	1,384,340	385,826	761,263	-998.514	375,437
3. Outstanding loans	236,900	288,222	391,233	51,322	103.011
4. Target loan balance	260,000	426,000	345.203	166,000	-280.597
5. Target completion rate (%)	91.12	67.66	113.33	-	-

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(Source: ACB Accounting Department - Hue Branch) In terms of outstanding loans, the total outstanding loans of the branch increased from VND 236,900 million in 2009 to VND 288,222 million in 2010, an increase of 21.66%. By 2011, the outstanding loans had increased by VND 103,011 million, an increase of 35.73%. This shows that although the economic situation has many fluctuations that have affected loan sales and debt collection sales, the branch has always maintained an increase in outstanding loans. However, compared with the target assigned by the Head Office, in 2009 and 2010, the branch has not completed

achieved the target and by 2011, there were many efforts and exceeded the plan.

Although the ratio of outstanding loans of ACB – Hue Branch to total mobilized capital decreased in 2010, in the period of 2009 – 2011, this ratio remained at about 30%. Compared with the entire system of commercial banks in Thua Thien Hue Province

Hue, this figure was 88.59% in 2009 and 92.16% in 2010, this rate of ACB - Hue Branch is very low [11] . Besides, compared with the target set by the Head Office, the branch has not yet achieved this target. This reflects that the customer lending activities in the area of ACB - Hue Branch still have many limitations and combined with Table 2.3 , we can see that the branch mobilizes capital mainly to sell capital to the Head Office to enjoy the interest rate difference.

Table 2.7. Outstanding loans on mobilized capital of ACB – Hue Branch

Unit: million VND

Target

Year 2009	Year 2010	2011
1. Outstanding loans	236,900	288,222	391,233
2. Total mobilized capital	711,360	1,067,040	1,173,744
3. Outstanding loans/Mobilized capital (%)	33.30	27.01	33.33
4. Outstanding loans/Target mobilized capital (%)	44.83	51.95	37.21

Although the sale of internal capital will help the entire ACB system ensure the balance of capital sources in different locations, the reality shows that the branch's lending activities will bring greater profits than the sale of internal capital (presented in Appendix 1 ). Therefore, with the low ratio of outstanding loans to mobilized capital as above, ACB - Hue Branch needs to be more active in lending activities to exploit the market and affirm its role in local economic development.

Table 2.8. Loan balance structure of ACB – Hue Branch by customer

Unit: million VND

Outstanding Loans

Year 2009	Year 2010	Year 2011	2010/2009		2011/2010
Year 2009	Year 2010	Year 2011	+/-	%	+/-	%
1. Individual	115,236	142,363	158,751	27,127	23.54	16,388	11.51
2. Private Enterprise	51,374	51,864	58,472	490	0.95	6.608	12.74
3. KHDN	70,290	93,995	174,010	23,705	33.72	80,015	85.13
All branches	236,900	288,222	391,233	51,322	21.66	103.011	35.74

(Source: ACB Accounting Department – Hue Branch)

Branch loan balance tends to increase across customer segments

over the years, in which the strongest increase is in the KHDN group. Specifically: in the period

2009 - 2011, outstanding personal loans of the branch increased by 43,515 million VND, equivalent to an increase of 37.76%, outstanding loans for private enterprises increased by 7,098 million VND, equivalent to an increase of 13.81%, outstanding loans for corporate customers increased by 103,720 million VND, equivalent to an increase of 147.56%.

In terms of outstanding loan structure, the proportion of outstanding loans to individuals is above 40% and is showing a slight downward trend, outstanding loans to private enterprises are relatively stable at 15% and outstanding loans to businesses have increased significantly over the years. This shows that ACB is clearly affirming its goal of becoming the leading retail bank in Vietnam. Although the profits from loans to individual customers are small, ACB - Hue Branch always seeks to exploit this market to the fullest while paying attention to developing strong loans to corporate customers to continuously increase profits.

2.2. Some issues on lending activities for business households at Asia Commercial Joint Stock Bank - Hue Branch

2.2.1. Loan products for business households

Business loans are a group of loan products for customers who are business households with the aim of supporting capital sources to help business households operate smoothly. At ACB, business household loans include the following products:

- Fixed asset investment loan: is a loan product aimed at supporting businesses to invest in fixed assets such as machinery, equipment, and means of transport of legal origin to serve production and business activities.

- Working capital supplementary loan: is a loan product to support capital for businesses that need to supplement working capital regularly or temporarily/seasonally such as: purchasing raw materials/fuel, stockpiled goods, financing late payments from customers, paying employee salaries, electricity and water, etc. to serve production and business activities.

Comparing ACB's business lending products with other commercial banks, it can be seen that the maximum credit level for business is 70% of the cost of implementing the plan (investing in fixed assets or adding working capital) similar to Techcombank and VIB, this will help the bank limit risks in lending activities. In terms of loan term, the maximum loan term

ACB's maximum term is much longer than other commercial banks, which will help businesses reduce their debt burden and at the same time create conditions for ACB to compete with other commercial banks.

Table 2.9. Comparison of business loan products of some banks

Target

ACB	Sacombank	VPB	EAB	Techcombank	VIB
Loan term (in months)
+ Fixed Asset Investment	≤ 120	≤ 12	≤ 60	≤ 12	≤ 84	≤ 60
+ Add VLĐ	≤ 84		≤ 12		≤ 36
Credit level/Cost of implementing the plan
+ Fixed Asset Investment	≤ 70%	Unlimited, optional demand	≤ 80%	Unlimited, optional demand	≤ 70%	≤ 70%
+ Add VLĐ			≤ 90%

(Source: websites of commercial banks www.acb.com.vn;www.sacombank.com.vn;vpbank.com.vn ; dongabank.com.vn ; www.techcombank.com.vn ; www.vib.com.vn )

2.2.2. Loan terms and conditions

The loan customers are enterprises that are currently operating in production and business with a business plan in the same industry as their current business, have a business license (GPKD), or have declared taxes, or paid taxes, or have confirmation from the locality about production and business activities, or produce and do business in industries that are exempt from licenses or taxes.

In addition to complying with the lending principles and conditions prescribed by the State Bank, for lending to business households, ACB also has other detailed conditions and regulations presented in Appendix 2 .

2.2.3. Loan process

ACB's HKD loan process is carried out through the following steps:

Step 1: Receive loan applications, collect and summarize customer information

In this step, credit officers will research, advise, guide, and disseminate to customers ACB's current lending conditions and policies.

Step 2: Credit analysis and appraisal

After the customer provides all necessary documents, the credit officer will directly go to the customer's home and business to conduct an appraisal on many aspects such as: appraisal of customer qualifications in terms of work experience, family structure, credit history through the support of the CIC Credit Information Center; appraisal of financial capacity; appraisal of customer's debt repayment source; appraisal of production and business activities; appraisal of loan plans and appraisal of collateral. The appraisal of collateral is regulated depending on each type of property. For valuable papers and real estate at the approved price of ACB - Hue Branch, the credit officer can appraise the value of the real estate himself. However, for difficult-to-appraise real estate, ACB will have a specialized department for real estate appraisal, the AREV department. Separating the role of asset appraisal will ensure that subjectivity in approving loan limits by employees is limited, thereby minimizing risks for the bank.

Step 3: Make a decision

After conducting the investigation, collecting information, assessing the customer, entering the information into the credit information system for scoring, the credit officer will then prepare a report (according to the form in Appendix 3 ) and give an overview of the customer. Depending on each file, the approval level is the branch credit department or the head office credit department to make a decision on accepting or rejecting the credit. For approved files, ACB will prepare a credit contract and for rejected files, a notice stating the reasons will be issued.

Step 4: Disbursement

With approved documents, ACB proceeds to disburse to customers.

Step 5: Check after disbursement

According to ACB regulations, within 30 days after disbursement, credit officers must check the customer's capital usage process and provide additional documents proving the customer's capital usage purpose.

Step 6: Collect principal and/or interest

Every month, ACB collects principal and/or interest. Credit officers remind/push for debt to remind customers to repay their debts on time through the support of CLCS software - debt reminder/push software and TCBS software.

– ACB core banking software. According to ACB regulations, for loans that are 7 to 10 days overdue, credit officers must call or text to remind customers of the debt, and for loans that are more than 10 days overdue, they must urge customers to pay. ACB checks the overdue debt situation every month and uses the overdue debt situation at the end of the month as a basis for evaluating the work efficiency of employees. Therefore, overdue debts, especially group 2 debts of ACB, are often handled quickly.

Step 7: Periodically check (re-evaluate) the operation of HKD

Every 6 months, the staff must monitor the customer's business activities. If any violations are detected, the credit staff must actively handle and liquidate the debt before the due date.

Step 8: Liquidate credit contract

After the loan term ends, ACB will liquidate the credit contract and recover the loan principal. For short-term additional working capital loans, the branch will re-evaluate the operating situation to continue to prepare new documents and grant credit if the customer has a need.

2.3. Evaluation of the quality of lending to business households at Asia Commercial Joint Stock Bank - Hue Branch

2.3.1. Quantitative indicators

2.3.1.1. Situation of increase and decrease in outstanding loans for business households

a. Business loan turnover

In 2010, the HKD loan turnover decreased sharply compared to 2009. Specifically, the loan turnover in 2009 was 186,491 million VND but in 2010 it was only 114,544 million VND, a decrease of nearly 72 billion VND, equivalent to a decrease of 38.58%. The reason is that in 2010,

Monetary policy began to tighten after a period of loosening, especially strict regulations on credit activities of commercial banks. In the condition that the business households in the area mainly operate in the fields of trade and services, the regulations of the State Bank such as not lowering lending conditions, focusing on the fields of production, agriculture, strictly controlling non-production loans, etc. have caused difficulties for the business households lending activities of ACB - Hue Branch. Therefore, in 2010, the branch's business households lending turnover decreased significantly.

Chart 2.1. Lending situation for business households at ACB - Hue Branch in the period 2009 - 2011

(Source: Accounting Department of ACB – Hue Branch)

In 2011, the economy of Thua Thien - Hue had many positive changes. This was the year that the tourism industry began to make a breakthrough, becoming the spearhead economic sector of the locality. This created favorable conditions for the activities of business households. Understanding this, ACB - Hue Branch was very active in finding customers, especially business households with capital needs to expand tourism services. These factors helped the branch achieve a growth of 28,320 million VND in business household loan turnover compared to 2010.

b. Debt collection turnover for business households

Sharing the same trend with loan turnover, HKD debt collection turnover of ACB – Hue Branch showed signs of decreasing in 2010 and increasing again in 2011. Specifically, loan collection turnover in 2010 reached 109,212 million VND, decreasing by 49,220 million VND respectively.

decreased by 31.07% compared to 2009. The reason is that in 2009, the branch lent many short-term loans with short terms such as 1 month, 3 months, 6 months, so the capital was recovered within the year. Meanwhile, in 2010, in the general difficult situation of the market, the branch mainly disbursed medium and long-term loans to business households, so the capital recovery period was longer and the amount of capital recovered was less than in 2009. In 2011, the revenue from debt collection for business households reached 111,684 million VND, an increase of 2,473 million VND, equivalent to an increase of 2.26% compared to 2010. The slight increase in 2011 in debt collection revenue can be explained by the fact that during the year, short-term loans for business households had longer loan terms, mainly 12 months, besides there were also many medium and long-term loans, so in 2011 ACB - Hue Branch only recovered a part of the principal and instead, these sources of capital will be fully recovered in the following years.

c. Outstanding loans to business households

Although the lending turnover and debt collection turnover of HKD loans of ACB – Hue Branch fluctuated up and down abnormally in the period 2009 – 2011, in terms of outstanding HKD loans, we can see a clear upward trend. Specifically, the outstanding HKD loans in 2009 was at 51,133 million VND, but in 2010 it reached 56,465 million VND, an increase of

5,332 million VND, an increase of 10.43%; in 2011, outstanding loans to HKD increased sharply by 31,179 million VND, an increase of 55.22% compared to 2010. This shows that after a difficult year in 2010, ACB - Hue Branch has found ways to overcome challenges, take advantage of opportunities, and grasp the market to promptly meet the capital needs of HKD. Compared to the unusual fluctuations of other loans, HKD loans have a clear upward trend over the years.

Table 2.10. Structure of outstanding loans for science and technology at ACB - Hue Branch

Outstanding Loans

Year 2009		Year 2010		2011
Value (million VND)	%	Value (million VND)	%	Value (million VND)	%
1. Business household	51,133	44.37	56,465	39.66	87,644	55.21
2. Other loans	64,103	55.63	85,898	60.34	71,107	44.79
Total outstanding loans for science and technology	115,236	100.00	142,363	100.00	158,751	100.00

(Source: Accounting Department of ACB – Hue Branch)

In terms of proportion, through the above table, we can see that the proportion of outstanding loans to business households in the total outstanding loans to business households of ACB - Hue Branch in 2009 was at 44.37%, although it decreased to 39.66% in 2010, it increased again in 2011 and reached 55.21%. The decrease in the proportion of loans to business households in 2010 was due to the general difficulties of the economy as well as the barriers in credit activities of commercial banks for non-production sectors. However, by 2011, the economic situation was positive and ACB - Hue Branch continued to promote its strengths in promptly meeting the capital needs of business households.

-Analysis of outstanding HKD loans by term

Table 2.11. Outstanding loans to business households at ACB – Hue Branch by term

Unit: million VND

Outstanding Loans

Year 2009	Year 2010	Year 2011	2010/2009		2011/2010
Year 2009	Year 2010	Year 2011	+/-	%	+/-	%
1. Short term	33,229	33,495	47,926	266	0.80	14,431	43.08
2. Medium and long term	17,904	22,970	39,718	5,066	28.30	16,748	72.91
Total outstanding debt	51,133	56,465	87,644	5,332	10.43	31,179	55.22

(Source: Accounting Department of ACB – Hue Branch)

Through the table, we can see that the outstanding balance of short-term and medium- and long-term loans to business households tended to increase in the period 2009 - 2011. Specifically, in 2010, the outstanding balance of short-term loans reached 33,495 million VND, an increase of 266 million VND, equivalent to an increase of 0.8% compared to 2009; meanwhile, the outstanding balance of medium- and long-term loans increased by 5,066 million VND, equivalent to an increase of 28.3%. This is explained by the fact that in 2010, business households increased their demand for loans to invest in machinery, equipment, means of transport and supplement regular working capital for business activities with medium- and long-term terms. By 2011, the local economy had many positive changes. Besides the increase of 14,431 million VND, corresponding to a growth rate of 43.08% in short-term loans, the increase of 16,748 million VND, corresponding to a growth rate of 72.91% in medium and long-term loans was relatively large.

In terms of the structure of outstanding loans to HKD by term, we can see that in the period 2009 - 2011, the proportion of outstanding short-term loans tended to decrease from 64.99% to only 54.68%, while the proportion of medium and long-term loans increased from 35.01% to 45.31%.

Note: Medium long term Short term

Chart 2.2. Structure of outstanding loans for business households at ACB - Hue Branch by term

As business activities become more stable and capital needs become more frequent, businesses will tend to borrow long-term capital in the form of installments instead of seasonal short-term loans. This is the reason for the increasing trend in outstanding medium and long-term loans for businesses.

-Analysis of outstanding loans to HKD by capital usage purpose

Table 2.12. Outstanding loans to business households at ACB – Hue Branch by capital use purpose

Unit: million VND

Outstanding Loans

Year 2009	Year 2010	Year 2011	2010/2009		2011/2010
Year 2009	Year 2010	Year 2011	+/-	%	+/-	%
1. Fixed Asset Investment	15,338	17,566	30,062	2,228	14.53	12,496	71.14
2. Supplement VLĐ	35,795	38,899	57,582	3.104	8.67	18,683	48.03
Total outstanding debt	51,133	56,465	87,644	5,332	10.43	31,179	55.22

(Source: ACB Accounting Department – Hue Branch)

Outstanding loans for investment in fixed assets (TSCĐ) and loans for additional working capital at branches in the period 2009 - 2011 both tended to increase. In 2011, outstanding loans for investment in fixed assets reached 30,062 million VND, an increase of 14,724 million VND, equivalent to an increase of 96% compared to 2009; meanwhile, outstanding loans for additional working capital increased from 35,795 million VND in 2009 to 57,582 million VND in 2011, an increase of 21,787 million VND, equivalent to an increase of 60.87%. In terms of absolute value, outstanding loans for investment in fixed assets increased at a lower rate than outstanding loans for additional working capital, but in terms of speed, it was the opposite. This is explained by the fact that in 2009 and 2010, outstanding loans for investment in fixed assets were at

low, besides in 2011 many businesses borrowed capital to invest in means of transport, machinery and equipment to serve tourism service business activities serving festivals and traditional craft village festivals held annually.

Note: Fixed Asset Investment Additional Working Capital

Chart 2.3. Structure of outstanding loans for business households at ACB - Hue Branch according to loan purpose

capital use

In terms of the structure of outstanding loans to business households according to the purpose of capital use, in the period of 2009 - 2011, the general trend was an increase in outstanding loans for investment in fixed assets and a decrease in outstanding loans for additional working capital. However, the structure of outstanding loans to business households remained at a relatively stable rate of about 30% for investment in fixed assets and 70% for additional working capital. This is very suitable for the operations of business households because working capital is a regular source of capital, playing an important role in maintaining and developing the long-term operations of business households. At the same time, working capital is the source of capital that business households will recover after each business cycle, thus ensuring the ability of customers to repay, thereby ensuring the quality of loans of ACB - Hue Branch.

-Analysis of outstanding HKD loans by loan type

Table 2.13. Outstanding loans to business households at ACB – Hue Branch by loan type

Unit: million VND

Outstanding Loans

Year 2009	Year 2010	Year 2011	2010/2009		2011/2010
Year 2009	Year 2010	Year 2011	+/-	%	+/-	%
1. Loan by installment	38,532	43,555	60,491	5.023	13.04	16,936	38.88
2. Loan according to HMTD	10,032	10,217	23,158	185	1.84	12,941	126.66
3. Overdraft	2,569	2,693	3,995	124	4.83	1,302	48.35
Total outstanding debt	51,133	56,465	87,644	5,332	10.43	31,179	55.22

(Source: ACB Accounting Department – Hue Branch)

Outstanding loans in various forms tend to increase over the years. Specifically: outstanding loans by item increased from 38,532 million VND in 2009 to 60,491 million VND in 2011, an increase of 21,959 million VND, equivalent to 56.99%; outstanding loans by credit limit (HMTD) from 10,032 million VND in 2009 to 23,158 million VND in 2011, an increase of 13,126 million VND, equivalent to 130.84%; overdraft loans also increased by 1,426 million VND, equivalent to 55.51% over the two years. Thus, outstanding loans by HMTD are increasing strongly over the years.

Note: Loan by overdraft limit Loan by HMTD Loan by item

Chart 2.4. Structure of outstanding loans for business households at ACB - Hue Branch by loan type

In terms of the structure of outstanding loans by loan type, although the loan type by item has decreased, it still accounts for a large proportion of about 70%, the loan type by credit limit is increasing and the overdraft loan type accounts for a relatively stable proportion.

Lending according to HMTD is a form of lending with many advantages, especially in helping customers take the initiative in borrowing capital, saving time, costs, simple loan procedures, etc. Realizing these advantages, through the advice of bank staff, many customers choose the form of HMTD to borrow capital for business. That is the reason for the increase in outstanding debt and the proportion of outstanding loans according to HMTD in the total outstanding loans for business of ACB - Hue Branch in the period 2009 - 2011. However, the form of lending by item still accounts for a large proportion because this is a popular form of lending and is chosen by many customers, especially for new customers and customers with large capital needs.

Outstanding Loans on Mobilized Capital of Acb – Hue Branch

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