Proportion of Interest Income from Consumer Lending Activities and Capital Utilization Level

Borrowing money to build or repair a house from a bank has become much easier and more convenient than before, so the number of customers borrowing money to buy, repair and build a new house every year increases rapidly. Another reason is that home loans are all medium and long-term loans, some loans are up to 20 years. Therefore, the outstanding debt over the years will include the outstanding debt of the previous year because the entire principal and interest of the loan have not been collected, so the outstanding debt for home loans tends to increase very quickly.

In consumer lending activities, outstanding loans for car purchases always account for the highest proportion. Other consumer lending activities such as loans to support studying abroad, loans for medical treatment, and some other spending lending activities have not really been active at Dong Do Branch.

2.3.4.2 Time-based classification

Table 2.8: Consumer loan structure over time

Duration

Year 2009		Year 2010		2011		2012
Outstanding debt (billion) copper)	Proportion (%)	Outstanding debt (billion) copper)	Proportion (%)	Outstanding debt (billion) copper)	Proportion (%)	Outstanding debt (billion) copper)	Proportion (%)
Short term	1.2	18.2	2.0	11.6	5.3	17.4	8.4	15.9
Medium, long limit	5.4	81.8	15.3	88.4	25.1	82.6	44.3	84.1
Total	6.6	100	17.3	100	30.4	100	52.7	100

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(Source: Annual report of Lien Viet Post Joint Stock Commercial Bank – Branch)

Dong Do 2009 - 2012)

From the table above, we can see that medium and long-term loans still dominate over the years (82.6% in 2011 and over 84.1% in 2012), especially medium-term loans (from 12 months to less than 5 years, because the main purpose of customers' loans is to buy cars and repair houses). This is because the demand for consumer loans is concentrated in loans to repair, build new houses and buy cars, these are often large loans, while the source of debt repayment is

From the borrower's monthly income, the long repayment period will be suitable for the income of many people with average income in society. Short-term loans tend to decrease in proportion in total outstanding consumer loans. Outstanding short-term consumer loans increased from 5.3 billion in 2011 to 8.4 billion in 2012. Short-term loans when the source of repayment is mainly from selling cars urgently to pay off debts, from loans for other consumption purposes, or the borrower has some unusual source of income. Therefore, the size of outstanding short-term and medium- and long-term consumer loans has such a large difference, which is inevitable, in line with the general trend of most banks today.

2.3.5 Proportion of interest income from consumer lending activities and capital utilization level

for consumer loans at Dong Do Branch

The proportion of interest income from consumer lending activities is shown in the following table:

Table 2.9: Consumer loan interest revenue in total credit interest revenue

Unit: Billion VND

Activities / year

2009	2010	2011	2012
Interest income from consumer loans	1.21	4.83	6.89	8.12
Interest income from general credit activities	20.96	81.12	110.13	124.92
Proportion (%)	5.8	6.0	6.3	6.5

(Source: Credit report of Lien Viet Post Joint Stock Commercial Bank - Dong Do Branch 2009-2012)

Through the above table, we can see that the proportion of interest income from consumer loans in total interest from credit activities tends to increase in the 4 years from 2009 to 2012. If in 2009, the income from interest on consumer loans of banks was 1.21 billion, accounting for 5.8% of total interest from credit activities, then in 2010 this figure was 6.0%, in 2011 it was 6.3% and in 2012 it reached 6.5%. Although interest from consumer loans has increased sharply over the years, we can see that they are still very small numbers compared to the interest income from lending to businesses and financial institutions. This is because, although interest rates on consumer loans are higher than other interest rates, the proportion of outstanding consumer loans in total outstanding credit is still too small. With economic development

As fast as it is now, people's income and consumption needs have increased, so consumer lending activities have the basis to develop strongly.

2.4. Quality of customer care activities at Dong Do Branch

To evaluate the quality of customer care activities at the Branch, we will use the scoring table analyzed in Part 1. The data is based on a survey of customers who came to transact within the 3 months closest to the time of evaluation. The scoring method is based on a scale according to the survey form to evaluate the quality of service at the transaction counter according to the transaction process at the counter of Lien Viet Post Joint Stock Commercial Bank.

The competitive environment in the banking sector is becoming increasingly fierce. Therefore, it is necessary for banks to strengthen their marketing and customer care activities. However, this is an abstract concept, we cannot accurately calculate the quality of service that a bank can provide, but must evaluate it through the subjective perspective of customers, the signals that credit officers recognize through the transaction process: trust, sympathy, and customer preference for this activity.

Not only that, gaining the trust, affection and confidence of the bank is also a very effective channel to promote the bank's name. From there, the bank can increase its ability to mobilize and expand its operations to many different customer groups.

We have the following customer service quality scorecard of Dong Do Branch:

Table 2.10: Results of consumer loan quality assessment at Dong Do Branch

STT

Target	Score
I	Loan procedure guide for customers
1	CBTD provides on-site guidance to customers in need of loans.	10
2	Send email to customers (about loan conditions and procedures)	8
3	Customers are only guided when they arrive at the bank headquarters.	6 (X)

STT

Target	Score
II	Fill in the customer's personal information form, on the purpose of using the loan
1	CBTD asks customers questions and then fills out the form himself.	10
2	Let customers fill out the form themselves	4 (X)
III	Time for customer appraisal, asset appraisal and issuance credit decision
1	4 – 5 days	10 (X)
2	6 – 8 days	6
IV	Customer reviews of bank services
1	80% - 100% positive reviews	10
2	50% - 79% good reviews	7
3	30% - 49% rated good	5 (X)
4	Less than 30% rated good	0

Table 2.11: Evaluation of the results of ranking the quality of consumer lending activities as follows:

Score

Quality Rating
36 – 32	Good
31 – 25	Rather
24 – 20	Medium

According to the above scoreboard, the Branch only achieved 6 + 4 + 10 + 5 = 25 points, and looking at the information from the quality of operations ranking, Dong Do Branch is only ranked fairly and is close to the average limit. This shows that the quality of consumer lending services is not good yet. The fact that customers are only guided when they come to the bank, and in investigating customer information, the bank lets customers fill out the application themselves, shows that. With a team of highly qualified staff and experienced operations in the credit field, the appraisal time

Customer identification, collateral and credit decision making are very fast, the Branch needs to promote this advantage. In general, the quality of consumer lending activities of the Branch is not really good, the bank needs to pay more attention to this issue, improve service quality to attract more customers.

2.5. Innovation in consumer lending activities at Dong Do Branch

To expand and improve the efficiency of consumer lending activities, banks must always change and improve the quality of their products as well as the processes and procedures for implementing consumer lending operations. A bank can hardly compete with other banks if it does not know how to innovate, develop and diversify its consumer lending products. Innovation can be measured through the following indicators:

- Number of new consumer loan products offered.

- Expanding and creating relationships with banking support units in consumer lending activities.

- Number of transaction offices, new branches.

- Bank regulations on: lending subjects, loan amount ratio on collateral value, new lending methods.

- Level of improvement in the process and procedures for implementing consumer lending operations

use

To evaluate the innovation in the Branch's operations, we will look at the level of

How to implement the above targets of the bank. In the 4 years from 2009 to 2012, the consumer loan products at the Branch have not changed. The Department still implements the following products: Car loans, loans for buying, repairing and building new houses, study abroad loans and medical treatment loans. In which, the Branch focuses on 2 main products: car loans and home loans. In the market, there are many other consumer loan products such as: loans for labor export and consumer loans for other life purposes. The Branch needs to research to expand to improve the efficiency of this potential lending activity at its Department. Along with that, although the number of new branches and transaction offices has been expanded nationwide

But in reality, the number of branches providing consumer lending activities is very small, most of them are concentrated in big cities, and services serving people's consumption activities have developed.

Currently, the Branch has established cooperative relationships with major car dealers such as Toyota, Ford Thang Long, Isuzu Cau Giay, Matiz... so that these dealers can introduce customers to the bank to borrow money to buy cars on installments. However, although this relationship has joint contracts, it only stops at the terms of the two parties supporting each other in business activities and has not yet implemented the form of indirect lending. In the coming time, the Branch and these retailers should sign a debt purchase contract, in which the Branch will set out conditions on the target customers who can sell on credit, the maximum amount of money that can be sold on credit, the type of assets that can be sold on credit, etc.

In recent years, the business environment has changed a lot. Banks have faced increasingly fierce competition. The demand for consumer loans from customers has increased, but this is a risky activity for banks. These difficulties have affected the expansion and improvement of the quality of consumer loans and reduced the effectiveness of this activity for banks. However, with its efforts, Dong Do Branch has completed its tasks well and achieved encouraging results for this credit product. Specifically:

Firstly, as a new department in the credit activities at the Branch, consumer lending has been increasing in both outstanding loans and profits.

Second, consumer lending enhances the Branch's image and increases the Department's ability to mobilize capital.

It can be said that consumer lending will bring the bank's name closer to individual customers. The current economic situation is very unstable, mobilizing and lending to businesses is difficult, so the bank's goal at this time is to target individual customers. Coming to Dong Do Branch, customers feel satisfied in borrowing capital, the relationship between customers and the bank is increasingly expanding, and that is the condition to enhance the prestige and name of the bank.

Lien Viet Post Bank in general and Dong Do Branch in particular. This is partly a driving force to increase the ability to mobilize capital and promote other mobilization and credit products for the bank.

Third, the quality of loans of Dong Do Branch has continuously increased.

Overdue debt for consumer loans at the Branch is low and tends to decrease from 2009-2012. The proportion of overdue debt in total outstanding consumer loans is low and tends to decrease. We see an increase in the quality of loans and in the efficiency of debt collection for consumer lending activities. We see that, for capital needs for purchasing and repairing houses, the main collateral is land use rights and assets attached to land, followed by mortgages using land use rights. All bad debts are recoverable. An encouraging result is that the Branch has not had any consumer loans that had to handle collateral to recover loans.

2.6. Existing limitations

Although Dong Do Branch has achieved some results in consumer lending, there are still some of the following limitations:

Firstly, the structure of consumer loan products at Dong Do Branch is not yet diverse and reasonable.

In fact, Dong Do Branch only has 3 main consumer loan products: loans for buying, repairing and building new houses, loans for buying cars and loans for studying abroad. Along with that, the loan structure is not reasonable, the bank only focuses on 2 main activities: loans for buying, building, repairing houses and loans for buying cars. With a fiercely competitive environment like today, along with the increasingly diverse consumer needs of customers, not diversifying the loan product portfolio will put the bank at a disadvantage in competition with other banks. Therefore, Dong Do Branch needs to pay more attention to expanding, diversifying and balancing the loan portfolio.

Structure consumer loans appropriately to improve the efficiency of this activity at the office.

Second, as analyzed above about the achievements that Dong Do Branch has achieved in debt collection and loan appraisal, we can see that the ratio of overdue debt in total outstanding consumer loans tends to decrease in the 3 years 2009-2011. However, looking at the ratio of overdue debt in total outstanding consumer loans, we can see that the credit quality of consumer loans is still poor. Although the loans are always periodically counted with the remaining amount to be paid according to the payment term and credit officers have also urged and reminded customers regularly so that the debts are paid promptly.

This reality has both subjective and objective causes, but it must be affirmed that the appraisal ability of credit officers is not really effective. If we look at the proportion of overdue consumer loans in the total overdue debt of general credit activities, we can see the weakness of this activity compared to other lending activities of the department.

Third, there are restrictions in regulations on loans for buying, building, repairing houses and loans for buying cars.

Currently, Dong Do Branch has some regulations for home loans such as regulations on customer objects, customer income, loan limit,

… accordingly, customers who want to borrow to buy a house must have at least 30% of the value of the house they want to buy and a monthly income of over 6 million VND. In addition, customers must have a permanent residence in Hanoi. In fact, the number of people from other provinces coming to live in Hanoi is very high and the demand for buying houses of this customer group is the highest. Too strict regulations on lending to buy houses will cause banks to lose a large number of customers to other banks. Therefore, commercial banks need to expand lending to people from other places coming to and working in big cities such as Hanoi and Ho Chi Minh City. And along with that are policies to support and advise customers on bank products that are suitable for their income and conditions.

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