Solutions to promote the efficiency of lending activities for individual customers at Military Commercial Joint Stock Bank

MBBank provides loans to organizations and individuals in many forms such as short-term, medium-term and long-term loans; loans in many currencies, etc. Besides, MBBank has implemented many credit financing activities for customers who are corporations, small and medium-sized enterprises , for individual economic households as well as for financial institutions. individuals for installment loans, for life or business.

The situation of lending activities of Military Commercial Joint Stock Bank in the period 2010 - 2012 is shown in Table 2.3.

Table 2.3. Outstanding loan balance of Military Commercial Joint Stock Bank in the period 2010 - 2012

Unit: billion dong

Targets	2010		2011		Year 2012		Difference
	2010		2011		Year 2012		2011/2010		2012/2011
	Amount of money	Weight (%)	Amount of money	Weight (%)	Amount of money	Weight (%)	Amount increased (+) decreased (-)	Reach rate (%)	Amount increased (+) decreased (-)	Reach rate (%)
Total loan balance	48,797	100	59,045	100	74.479	100	10.248	21.00	15,434	26.14
I. Over time
1. Short term	29.236	59.91	38,929	65.93	53,085	71.28	9,693	33.15	14,156	36.36
2. Medium term	10.102	20.70	11,641	19.72	12,262	16.46	1,539	15.23	621	5.33
3. Long term	5.944	12.18	7.538	12.76	8,565	11.50	1,594	26.82	1.027	13.62
4. Financial support, REPO . contract	3.515	7.21	937	1.59	567	0.76	(2,578)	(73,34)	(370)	(39.49)
II. By target customer
1. Loans to economic organizations	37,965	77.80	50.035	84.74	64.648	86.80	12,070	31.79	14.613	29.21
2. Personal loan	7.317	14.99	8.073	13.67	9.264	12.44	756	10.33	1.191	14.75
3. Financial support, REPO . contract	3.515	7.21	937	1.59	567	0.76	(2,578)	(73,34)	(370)	(39.49)
III. By loan currency
1. VND	38,973	79.87	44.510	75.38	56.572	75.96	5.537	14.21	12,062	27.10
2. Foreign currency (conversion)	9.824	20.13	14.535	24.62	17,907	24.04	4,711	47.95	3.372	23.20

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(Source of Military Bank annual report 2010-2012)

In terms of loan size:

MBBank's total outstanding loans in the period 2010 - 2012 increased in both quantity and proportion. In 2010, outstanding loans reached 48,797 billion VND. In 2011 increased by 10,248 billion VND (up 21.00%) compared to 2010, by 2012 the outstanding loans reached 74,479 billion VND, up 26.14% compared to 2011. The reason was due to the sign of the economy. recovery, economic sectors need capital for production and business, banks support businesses and individuals to borrow capital. In addition, MBBank also implemented a controlled growth policy with the goal of safety and efficiency, gradually reducing loans that were not in the direction of the bank, reducing outstanding loans of customers to lose credibility in the banking sector. credit system. Therefore, the growth rate of the bank's outstanding loans is moderate.

In terms of loan structure:

Structure over time:

If classifying outstanding loans by time, short-term loans accounted for the highest proportion during 3 years 2010, 2011 and 2012 - specifically, always reaching over 60%. Not only that, from Table 2.3, it shows that short-term debt balance has grown strongly: short-term debt balance in 2010 reached 29,236 billion VND (equivalent to 59.91 ), in 2011 reached 38,929 billion VND (equivalent to 65.93 ) and 2012 was 53,085 billion VND (equivalent to 71.28%).

Thereby, it shows that MBBank tends to focus on short-term lending activities. Table 2.1 shows that banks' loans are mainly mobilized from short-term sources (deposits with a term of less than 12 months) with a structure of over 60% of total mobilized capital. Therefore, banks give preference to short-term loans. In addition, because the interest rate race between banks makes borrowers afraid of interest rate fluctuations, so they don't dare to borrow much, borrow for a long time, the demand for loans is not too large and urgent, so short-term loans are a great choice. optimal choice. Especially the financial institutions - the main customers of the bank, the fluctuating interest rates cause the interest payment costs for loans to increase, thereby reducing profits, so the financial institutions give priority to short-term loans.

Medium-term loans have a relatively large proportion, only after short-term loans (accounting for over 16% of total loans). Medium-term loans increased in quantity but decreased in proportion: in 2010 reached 10,102 billion VND, equivalent to 20.70%; 2011 reached 11,641 billion VND, equivalent to 19.73%; 2012 reached 12,262 billion VND, equivalent to 16.46% of total outstanding loans. The reason is that short-term loans increased in both quantity and proportion, so the proportion of medium-term loans decreased. Medium-term loans are loans from 1 year to 5 years, mainly serving financial institutions to invest in machinery, build infrastructure, etc. Most of the bank's long-term loans focus on corporations. , large enterprises such as Vietnam National Oil and Gas Group, Vietnam Coal and Mineral Group, Song Da Group, Viettel, etc.

The proportion of long-term loans did not decrease much, but the number increased, specifically: in 2010 reached VND 5,944 billion, equivalent to the proportion of 12.18%; 2011 reached 7,538 billion dong, equivalent to a proportion of 12.76; 2012 reached 8,565 billion VND, equivalent to 11.50% of total outstanding loans. In early 2011, the real estate market tended to decline, so the bank reduced loans for real estate investment purposes. However, the number of long-term loans increased in number due to the increased consumer demand, especially the need to buy houses and cars. Moreover, the State has introduced a policy to support social housing (a support package of VND 30,000 billion) to help the poor get loans to buy houses. In addition, the State also cut public investment, reduced spending to focus on completing the remaining key projects. The demand for long-term loans is mainly from financial institutions.The interest rate race among banks makes short-term deposit interest rates rise, leading to higher lending rates. Therefore, financial institutions borrow more in the medium and long term to avoid fluctuations in short-term lending rates.

In 2010, because the stock market was developing, financial support and REPO contracts reached a high amount of VND 3,515 billion, equivalent to 7.21% of total outstanding loans. In 2011, these amounts decreased by 2,587 billion dong, reaching only 937 billion dong, equivalent to 1.59 ; 2012 decreased to 567 billion dong, equivalent to 0.76% of total outstanding loans. The reason is that the bank wants MB Securities Company to operate more separately, not depending too much on the parent company, MBBank. Since 2011, the stock market has fluctuated unpredictably, so the bank has reduced the discount of valuable papers of MB Securities Company. As a result, the proportion of financial support and REPO contracts decreased significantly in both quantity and proportion.

Structure by customer:

Most of the bank's outstanding loans focus on financial institutions. Because financial institutions often borrow with special assets, the ability to repay loans is better than individuals, so loans to financial institutions account for a large proportion of the total loan balance (over 70% of the total loan balance). Loans to financial institutions accounted for 77.80 (in 2010), 84.74 (in 2011) and 86.80% (in 2012); 2012 increased by 14,613 billion VND compared to 2011, equivalent to 29.21% increase. Starting in 2011, financial institutions have shown signs of recovering their production and business activities, so the demand for loans has increased. Therefore, the lending activities of banks to financial institutions increased more. Because the loans of financial institutions are mainly short-term loans, banks can recover loans faster, minimizing risks in lending activities.

Although personal loans only account for a small proportion of total outstanding loans, MBBank increasingly focuses on this customer. The proportion of outstanding loans for personal loans gradually decreased over the years (in 2010 it was 16.16, in 2011 it was 13.89 and in 2012 it was 12.53) but outstanding personal loans are increasing in absolute numbers; in 2010 reached 7,317 billion dong, in 2011 it increased by 756 billion dong, equivalent to 10.33% increase compared to 2010, in 2012 it increased 1,191 billion dong, equivalent to an increase of 14.75 compared to 2011. The reason is because in 2012, The bank has increased marketing to households and individuals, increased the convenience of using the bank's products for customers, etc., so customers increased more. However, because the main loan purpose of science and technology is consumer loans for life, the size of these loans is small. Therefore,outstanding personal loans increased in absolute number and decreased in proportion.

The proportion of financial assistance and REPO contracts decreased significantly from 7.21% of total outstanding loans in 2010 to 0.76 of total outstanding loans in 2012. The main reason was due to stagnant stock market, real volatility. often. Moreover, the bank has increasingly focused on its main operations, leaving MB Securities Company to run the business by itself, MBBank only plays a management role. As a result, lending operations are more efficient.

Structure by loan type:

From Table 2.3, we can see that there is a large difference between outstanding loans in domestic and foreign currencies. The amount of loans in VND in 2010 was 38,973 billion VND, in 2011 it increased by 5,537 billion VND, equivalent to 14.21 dong. By 2012, outstanding loans in local currency were VND 56,572 billion, an increase of VND 12,062 billion, equivalent to 27.10% compared to 2011.

The amount of capital mobilized by the bank is mainly from local currency, so local currency loans account for a large proportion of total loans. Customers who have a credit relationship with the bank are mainly financial institutions operating in the field of domestic trade and services.

Therefore, the demand for loans in local currency is very large. Outstanding loans in foreign currencies accounted for a small proportion but tended to increase slightly: in 2010 it was 9,824 billion VND, equivalent to 20.13%; 2011 reached 14,535 billion VND, an increase of 4,711 billion VND, equivalent to 47.95% compared to 2010; 2012 reached 17,907 billion VND, an increase of 3,372 billion VND, equivalent to 23.20% compared to 2011.

The amount of foreign currency loaned is mainly to meet the needs of enterprises engaged in import and export activities, payment for goods to foreign partners, or lending in the form of discounting documents or lending to other entities. wishing to study abroad, export labor. Circular No. 14/2011/TT-NHNN stipulating the maximum deposit interest rate in USD for organizations and individuals at credit institutions is 2/year, which failed to attract customers to deposit money in foreign currencies, so the bank did not have enough foreign currency to provide customers. In addition, according to Circular No. 20/2011/TT-NHNN stipulating the purchase and sale of foreign currency in cash by individuals with credit institutions, individuals and financial institutions are not allowed to freely buy, sell and consume in foreign currencies. Those are the reasons for the decrease in the proportion of outstanding loans in foreign currencies.

Table 2.4. Situation of overdue debt and bad debt of Military Commercial Joint Stock Bank in the period 2010 - 2012

Unit: billion dong

Targets	2010	2011	Year 2012	Difference
				2011/2010		2012/2011
				Amount increased (+) decreased (-)	Gain the ratio (%)	Amount increased (+) decreased (-)	Gain the ratio (%)
Odd debt	48,797	59,045	74.497	10.248	21.00	15,434	26.14
Overdue	1.239	3.341	4.401	2.102	169.65	1,060	31.73
Bad debt	613	937	1.372	324	52.85	435	46.42
Overdue debt/Lending balance (%)	2.54	5.66	5.91	-	-	-	-
Bad debt/Lending balance (%)	1.26	1.59	1.84	-	-	-	-
Bad debt/Overdue debt (%)	49.48	28.05	31.17	-	-	-	-

(Source: Financial Report of Military Commercial Joint Stock Bank 2010 - 2012)

The ratio of overdue debt to total outstanding loans of MBBank increased quite high in 2011 and 2012. In 2010, this ratio was only 2.54%, still within the industry standard (overdue debt is less than 5%). ); but in 2011 this target exceeded the industry standard at 5.66 and increased to 5.91 in 2012. Total overdue debt increased very rapidly, from 1,239 billion VND in 2010 to 3,341 billion VND in year. 2011 and VND 4,401 billion in 2012. This shows that MBBank's appraisal is still not good, has not properly assessed the feasibility of the loan, has limited staff qualifications, and sources of information to make decisions for loans. The loan is still sketchy, incomplete, and detailed about the borrower. In the current economy, financial institutions have reduced profits and revenue, so the source of debt repayment is not guaranteed.

But besides that, Military Commercial Joint Stock Bank has controlled the bad debt ratio at a fairly good level below 2, in 2012, although the whole system had difficulties in dealing with bad debts, MBBank's bad debt ratio was at 1.84 %. However, the total value of bad debts of MBBank increased rapidly in the past 3 years from VND 613 billion in 2010 to VND 1,372 billion in 2012. This result is due to MBBank's appreciation and good performance of credit risk management by how to conduct internal inspection and control throughout the system. The application of the internal credit rating system facilitates MBBank in planning and implementing credit policies, credit risk management policies and customer policies to ensure safe and effective operations. This is also a very good achievement in the lending and debt collection work of the bank when maintaining such a low bad debt ratio.

From Table 2.4, we see that the ratio of bad debt to overdue debt in 2010 was 49.48 ie, out of 100 dong of overdue debt, there was 49.48 dong of bad debt. This is an alarming sign of bad debt situation in 2010. The reason is that in this year, businesses made a loss, did not have money to repay bank loans, so bad debts increased. By 2011, the bank had actively restructured loans for customers, so bad debts were reduced. Therefore, the growth rate of bad debt (in 2011 increased by 52.85 compared to 2010) was much lower than the growth rate of overdue debt (increased by 169.65% in 2011 compared to 2010). Therefore, the ratio of bad debt to overdue debt in 2011 was 28.05. In 2012, this rate increased slightly to 31.17%. Because the growth rate of bad debt in 2012 compared to 2011 was 46.42%, higher than the growth rate of overdue debt of 31.73%, the ratio of bad debt to overdue debt in 2012 increased.

Thereby, banks need to more closely manage their lending activities.

2.2.3. Other business activities

Guarantee activities: Military Commercial Joint Stock Bank provides a variety of guarantee services such as backup guarantee, contract performance guarantee, advance payment guarantee, payment guarantee, etc. Total income from guarantee fees in 2010 the revenue of guarantee fee reached 209 billion VND, an increase of 88.29 compared to 2009, reached 373 billion VND in 2011, this figure was 452 billion VND in 2012. MBBank builds a strict guarantee process, considers granting guarantees to customers as a loan based on the business plan, the bank's ability to control the plan and the decentralization of approval authority. (Branches/Headquarters/Credit Councils…) guarantees and separates, clearly defines the functions and duties of the units participating in the guarantee issuance process. Hence the risk is minimized. It can be said that, among commercial banks,MBBank is one of the banks with the highest guarantee fee income because MBBank has sufficient financial capacity and reputation for the Beneficiary. At the same time, MBBank can take advantage of its diversified customer base, operating in many areas that can be developed in guarantee activities.

International payment activities: With a system of more than 800 correspondent banks around the world, MBBank's payment activities are fast and accurate and highly appreciated by partners. In 2009 the bank was awarded the bank with a high computing success rate by Wachovia Bank New York. In recent years, although the import and export activities of the country faced many difficulties, MBBank's payment services still increased strongly. By the end of 2010, MBBank's total international payment revenue reached USD 5.3 billion, USD 5.9 billion in 2011 and USD 6.2 billion in 2012, an increase of 5 compared to 2011.

Since 2007 until now, MBBank has always been evaluated as one of the banks with an advanced transaction and risk management system according to international standards and has had a great influence on the Vietnamese foreign exchange market. At the same time, MBBank is highly appreciated by domestic and foreign banks by continuously increasing the foreign exchange transaction limit for MBBank in the context that the reputation of its partners in Vietnam is declining.

Foreign exchange products traded include: spot foreign currency trading; futures trading; currency swaps, options trading between foreign currencies and foreign currencies. Specifically, the foreign exchange transaction turnover in 2010 was 12.3 billion USD; in 2011 was 12.8 billion USD, in 2012 the figure was 19.6 billion USD (equivalent to 134% compared to 2011).

Card service: In 2004, MBBank provided Active Plus debit card service to customers, this product has payment features such as POS payment, ATM transfer, personal insurance for owners card . The bank has successfully connected with the Smartlink card alliance system, so customers can make transactions at any ATM in the card alliance. Currently, MBBank has officially become a member of Master. MBBank successfully issued and connected VISA internal payment on December 27, 2010. Accumulated to December 31, 2012, MBBank has issued 10,576 Visa cards and 3,737 Master cards. Newly developed 512 POS, accumulated 1,106 POS. In addition, 61 new ATMs were developed, accumulated at the end of the period reached 388 ATMs.

2.2.4. Business results

The bank's business results are always aimed at achieving high profits. In order to achieve positive business results, banks must pay attention to income and expenses, two factors that make up profits. Strict management and cost reduction are as decisive as increasing revenue. The business performance of Military Commercial Joint Stock Bank is reflected in detail below:

Table 2.5. Business results for the period 2010 - 2012

Unit: billion VND

Targets	2010	2011	2012	Difference
				2010 – 2011		2011 – 2012
				great respect	Relative (%)	great respect	Relative (%)
total income	4.088	5.147	7.813	1.059	25.91	2,666	51.80
total cost	1.254	1.881	2.697	627	50.00	816	43.38
Profit from contract D before DPRR	2.834	3.266	5.117	432	15.24	1.851	56.67
DPRR . cost	546	641	2.027	95	17.40	1.386	216.22
Profit before tax	2,288	2.625	3,090	337	14.73	465	17.71
Profit after tax	1,745	1,915	2,320	170	9.74	405	21.15

(Source: Financial Report of Military Commercial Joint Stock Bank 2010 - 2012)