Retail Credit Quality at Bidv-Hcm Period 2008

The branch's flagship product is a companion product to attract customers with high deposit balances.

BIDV-HCM promotes lending with collateral and gradually reduces lending without collateral, in order to ensure credit safety, limit the occurrence of overdue debt, bad debt. Outstanding loans with collateral are mainly real estate (such as houses, land) on average about 50%/total outstanding loans with collateral, the rest are outstanding loans with collateral being movable property (such as cars), valuable papers (such as savings books, promissory notes, bonds, stocks, etc.) or other valuable assets. The proportion of outstanding loans with collateral is still very high, so the quality of retail credit is still under control.

2.2.4.3. Retail credit quality at BIDV-HCM in the period 2008 - 09/2012:

Table 2.13: Retail credit quality at BIDV-HCM

Unit: million VND

Debt classification

2008		2009		2010		2011		September 30, 2012
Outstanding debt	Proportion	Outstanding debt	Proportion	Outstanding debt	Proportion	Outstanding debt	Proportion	Outstanding debt	Proportion
Group 2 debt	198	0.13%	468	0.20%	3,561	0.84%	8,836	2.35%	12,073	2.40%
Bad debt	39	0.03%	137	0.06%	249	0.06%	435	0.12%	1,332	0.26%
Total outstanding debt	155,441		229,671		422,777		375,830		502,261

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(Source: Retail credit balance report at BIDV-HCM 2008-09/2012)

In recent years, BIDV-HCM has actively limited credit risks and bad debts, especially in TDBL. The bad debt ratio of retail credit activities is relatively low, mainly focusing on unsecured loans. Group 2 debt increased significantly in the period 2010 - September 30, 2012. The reason is that the economy is difficult, manufacturing enterprises still have a lot of unsold inventory, production stagnation, affecting the income source used to pay debts of employees. However, the bad debt ratio and group 2 debt account for a small proportion and are within the bank's allowable limit. In addition, BIDV-HCM always tries to remind and urge customers to pay debts and has measures to support and handle overdue debt cases to control the bad debt ratio and group 2 debt.

Along with the issue of retail credit growth, improving the quality of lending with a reasonable debt structure and diversifying the features of products is extremely necessary. BIDV has gradually implemented the orientation of developing retail banking activities, including retail credit, building a roadmap to strive to become the leading modern commercial bank in Vietnam in providing retail banking products and services.

2.2.5. Achievements, limitations and causes in retail credit activities at Vietnam Joint Stock Commercial Bank for Investment and Development - Ho Chi Minh City Branch

2.2.5.1. Achievements in retail credit activities at Vietnam Joint Stock Commercial Bank for Investment and Development - Ho Chi Minh City Branch

The banking market in Ho Chi Minh City is experiencing fierce competition among banks. In particular, in recent years, realizing the advantages of retail banking services, most commercial banks have targeted individual customers, strengthening the restructuring of customer sources towards rapid and sustainable growth. In accordance with the directives of the State Bank of Vietnam and BIDV, BIDV-HCM has proactively and flexibly responded, promptly implementing measures to maintain scale, prevent capital decline, as well as well control credit activities, strictly manage the balance between mobilization and lending to ensure effective operations. TDBL activities in particular, with the increasingly diverse development of TDBL products, have achieved encouraging achievements:

- Outstanding loans of TDBL have grown strongly and tend to continue to increase. As of September 30, 2012, outstanding retail loans reached 502 billion VND, accounting for 4.08% of total outstanding loans, increasing

41.4 billion VND (about 12.7%) compared to the same period in 2011. Thanks to understanding the increasing demand for quality consumption, BIDV-HCM has continuously improved and promoted retail credit policy for individual customers, while still ensuring the level of credit safety for the Branch.

- The market is increasingly expanding, customers are increasingly diverse. The continuous growth in both scale and credit quality of BIDV-HCM has proven that the bank is attracting more and more customers, the bank's market is increasingly expanding, especially for the large consumer market in Ho Chi Minh City.

- Retail credit products at BIDV-HCM are increasingly improved and diversified, combined with accompanying promotional support. Diversified products create more attractiveness to attract more customers, which also means diversifying customers, helping banks limit risks when focusing on a traditional customer group, creating dynamism and flexibility in the bank's lending activities. This is an important goal in the current context when banks compete with each other more and more fiercely and fiercely. Helping the existence and development of BIDV-HCM, increasing the competitiveness of retail credit with commercial banks, contributing to promoting retail credit growth.

- BIDV-HCM has implemented a new, specialized and independent TDBL issuance process, clearly separating the tasks and responsibilities of departments while implementing risk control and management right in the process, gradually improving to create a legal corridor for safe and effective credit implementation.

- BIDV has a brand, a long history and experience in serving large corporate customers. These customers will have a positive impact on the development of TDBL activities combined with products and services, such as salary payment services via banks, opening ATM cards with unsecured consumer credit products, overdrafts, credit cards, overdrafts... creating conditions for the development of product packages to support retail banking activities in general and TDBL in particular.

- BIDV-HCM's lending interest rate policy for individual customers is always updated from the market in accordance with BIDV and State regulations to create attractiveness, attract many people, and compete with banks in the same area.

- The scale and business quality of the system is strong in both quantity and quality to expand the area of operation, better approach customers to promote activities.

retail banking services. Expanding and developing new distribution channels (ATM network, POS/EDC, Homebanking, Directbanking, etc.) creates added convenience for customers and helps customers easily access banking services, making the BIDV brand increasingly familiar to the people.

- Highly qualified staff. BIDV-HCM is rejuvenating its staff of over 350 people with professional qualifications, skills, and experience in banking operations, quickly accessing new knowledge.

- Information technology infrastructure is focused on, effectively supporting professional development, information exploitation and more effective retail credit management.

2.2.5.2. Some limitations of retail credit activities at Joint Stock Commercial Banks

Vietnam Investment and Development - Ho Chi Minh City Branch

- Compared to other commercial banks, BIDV does not have a strong position in retail banking activities in general and TDBL in particular. Development according to the retail banking model in recent years has been focused on by BIDV-HCM. On the other hand, most people do not know the BIDV brand and often confuse it with the Bank for Agriculture and Rural Development, because BIDV previously served mostly large corporate customers. Therefore, when they need to borrow money for personal needs, these people tend to look for banks specializing in retail such as Asia Commercial Bank, Thuong Tin Bank, Dong A Bank, etc. This causes many difficulties for BIDV-HCM in approaching individual customers and marketing retail credit products.

- Outstanding retail credit accounts for a low proportion of BIDV-HCM's total outstanding debt, reaching only 4.6% of total outstanding debt in 2011, while the proportion of retail credit of joint stock commercial banks accounts for about 40% of total outstanding debt. Therefore, BIDV-HCM's retail credit products, although complete, are not attractive and are still under competitive pressure from joint stock commercial banks in the same area, greatly affecting retail credit growth.

- The structure of retail credit products is unbalanced, the proportion of housing support loans and mortgage loans/discounted valuable papers accounts for too large a proportion of over 40%; study abroad loans, unsecured consumer loans, and loans for individual business households account for too large a proportion.

The importance is too small. Some products exist but are not developed and have no outstanding debt such as loans for workers working abroad, loans for officers and employees to buy shares for the first time in equitized enterprises, showing that the diversification of retail credit products has not really brought about practical results.

- The indicators of group 2 debt and bad debt have increased over the years. Although they account for a very small proportion and are inevitable in the current economic situation, compared to the small scale of retail credit, banks must be more active in credit risk monitoring and control.

- The general retail credit granting process and the regulations on retail credit products in particular have been improved but are still cumbersome, the long appraisal time makes customers lose the opportunity to buy good goods, requires many supporting documents causing difficulties for customers, and the valuation of collateral assets is still low compared to commercial banks in the same area.

- BIDV-HCM has recently focused on implementing marketing activities, but the organization of retail credit marketing activities is still weak and unprofessional, so the efficiency is not high, there is a lack of experience and investment is not appropriate.

- Due to the nature of the work and the rotation of employees according to BIDV's regulations, the personnel of the Personal Customer Relations Department at BIDV-HCM is often subject to change, most of them are young employees, newly graduated and still confused in consulting and guiding customers, and have not yet grasped the documents firmly.

- Customer assessment is not strict and does not follow the correct procedures. When the customer is an acquaintance, getting a loan will be much easier. Besides, there are also customers who use the loan for a purpose other than the original loan.

- BIDV in general and BIDV-HCM in particular still do not have a Customer Support Service Center (Call Center) to quickly answer customer questions and suggestions to improve customer service quality, which also affects the quality of services provided.

2.2.5.3. Causes of limitations in retail credit activities

Stemming from increasingly fierce competition between banks

After Vietnam officially became a member of the World Trade Organization (WTO), competition in the business of products and services for BIDV from domestic and international banks has become increasingly fierce. Vietnam is the target of foreign banks penetrating the Vietnamese market to gain market share through investing in strategic partners who are domestic joint stock banks, expanding operations and establishing 100% foreign-owned bank branches. With the support of capital, technology and experience from foreign strategic partners, domestic joint stock commercial banks have continuously expanded their networks, diversified and improved the quality of their products and services. State-owned commercial banks have also quickly converted to a joint stock model to create a more dynamic operating mechanism under competitive pressure.

In addition, foreign banks have begun to exploit the retail market, instead of only wholesale as before, retail banking products and services have begun to be planned and launched by foreign banks, with the desire to soon dominate the market share. The deep penetration of foreign banks in the Vietnamese financial market is becoming increasingly clear, although domestic banks are also accelerating the launch of many new products .

And some domestic banks leading in retail banking activities such as ACB, Sacombank and Techcombank... have had clear strategies and development directions. Now in the context of more and more competitors, especially foreign competitors who have strengths in retail banking activities in general and retail credit activities in particular, it is even more difficult for BIDV-HCM in particular and BIDV in general to be able to compete and develop TDBL.

Originating from the legal environment

Up to now, credit activities have been regulated according to common mechanisms and policies, from the Law, sub-law documents, to circulars, guiding decrees, and regulations of the State Bank, all of which only provide general regulations for credit activities.

credit activities, regardless of wholesale and retail. Meanwhile, credit activities with their own characteristics require specific policy mechanisms and separate appropriate procedures as a foundation to promote the development of this activity.

In addition, the institutional framework related to the development of banking services is still inadequate, incomplete and inconsistent. Although there has been significant progress in perfecting the system of legal documents related to banking, the current banking legal system is not yet complete and inconsistent, especially in the fields of international payments, electronic banking... The State Bank Law, Labor Law, Bankruptcy Law... still have many shortcomings, not creating a consistent legal environment for the operations of banks and credit institutions in the market mechanism.

From the bank side

- BIDV has not yet developed a development strategy to become a modern , professional retail bank, with a specific roadmap for each stage, with a plan to develop diverse and convenient products and services, with an appropriate organizational model, mechanism, and policies, meeting the requirements of a modern retail bank. At the same time, BIDV has not yet developed a plan to develop specific groups of banking products and services, including retail credit.

- Retail credit products have not attracted many customers and are not suitable for each customer segment. For example, for lending activities to support housing needs at BIDV, there is only one general product for all customer needs (buying new houses/land, building/repairing/renovating houses, purchasing interior equipment, etc.), while joint stock commercial banks and foreign banks often divide into many different products, meeting each specific need of customers (ACB has 4 products: installment loans to buy houses/land, installment loans to build/repair houses, loans to buy Phu My Hung apartments with mortgages using purchased apartments, loans to buy Riveria villas with mortgages using purchased villas; ANZ has 4 products: loans to buy houses for living, loans to buy houses for investment, loans for real estate investment, loans to buy houses with preferential interest rates, etc.).

BIDV lacks potential products compared to other banks such as installment loan products through consumer goods distributors, apartment/land purchase loans through investors...

Some products are not suitable for customers' needs, so after being issued, the products are slow to be implemented in practice, such as: loan products for workers going to work abroad, loan products for officers and employees buying shares for the first time in equitized enterprises.

BIDV's TDBL products have not applied modern technology (online loan application, online consultation, by phone...) so they are not convenient and cannot meet customers' loan needs quickly and promptly.

- Limitations of the current retail credit granting process : Some products have regulations on the time to complete credit granting procedures for customers through the announcement of product quality targets, for home/land loans it is 5 days (from the date of receiving complete documents); mortgage loans, overdrafts are 1 day... According to the current process, granting credit to customers goes through many stages, but there are no detailed regulations on the maximum time for each stage, so it is difficult to ensure the fastest credit granting time for customers.

Some TDBL products are quite simple/safe but must fully implement the steps of the general TDBL process, such as mortgage lending, discounting valuable papers... still have to check the purpose of using the loan before, during and after lending.

The form system is incomplete and not standardized, too many people have to sign but it is not necessary (the receipt/delivery of collateral); customers have to sign multiple times when registering to use a product package including many products (customers registering to use overdraft via card must sign and fill out 5 registration forms: opening an account, overdraft loan, issuing an ATM card, registering for text messaging via mobile phone, and inquiring via the internet).

- The customer relations staff is not professional and has not been trained to meet the requirements of retail banking. BIDV-HCM has a team of credit officers who are well-trained and have in-depth experience in the field of sales .

Retail Credit Quality at Bidv-Hcm Period 2008 – 09/2012:

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