Research on the impact of loan portfolios on profitability of joint stock commercial banks

- Transforming the accounting account system, accounting contents, accounting voucher regime and building all kinds of accounting reports and financial statements in accordance with the practices and standards of the international accounting system. .

- The transformation of the accounting system must be carried out on the basis of selectivity, in accordance with the principles and accounting practices of developed economies from the point of view of the Ministry of Finance and the State Bank.

- Implement the annual audit regime and each bank needs to choose for itself a reputable auditing company, performing the audit according to international standards.

5.3.2 Other recommendations

5.3.2.1 Recommendations to the Government

The government plays an important role in macroeconomic management, creating an environment for the development of commercial banks as well as businesses in the economy, thereby also having certain influences on the investment portfolio. loans from commercial banks.

The reality of the past time has shown that the role of the Government in operating is not really effective, which has a negative impact on banking activities in general and loan portfolio management in particular of commercial banks. Therefore, the author has some recommendations to the Government as follows:

Firstly, in the coming period, the Government needs to consider to ensure a reasonable harmonization between the economic growth target and the goal of economic stability and inflation control. The reality of the past years has shown that, overemphasizing economic growth on the basis of investment capital (in breadth) rather than on effective productivity (in depth), on the one hand has led to capital investment is scattered and inefficient: some non-manufacturing industries grow "too hot" without control, while other production and business sectors face difficulties.

On the other hand, in the condition that all economic sectors have difficulty in capital, the capital demand for economic growth will be pushed to the banking system. This is also a reason for the banking system to expand too much in number (banks, branches) and at the same time with excessively "hot" credit growth, the unbalanced portfolio structure in this period. period 2006-2007, causing many consequences for later years. Therefore, it is thought that the Government needs to consistently and persistently pursue the goal of economic stability, on that basis, to develop appropriate operating policies with long-term stability, creating peace of mind. trust for actors in the economy.

Maybe you are interested!

Second: Accelerate the process of economic restructuring, including restructuring the banking system and businesses, accept the dissolution/bankruptcy of weak businesses, economic groups and banks. consider it as a necessary screening process, to form a market economy with actors with independent and really effective competitiveness. At the same time, there are measures to remove (such as tax policy, support for trade promotion ...) to help business entities facing difficulties to stand firm and overcome the current economic crisis. indirectly positively affects lending activities and loan portfolio of commercial banks.

Thirdly: There are measures to improve macro management capacity, including the ability to monitor and forecast the economy, etc. to help business entities, including banks, to develop strategies. long-term business strategy, favorable for the good implementation of loan portfolio management in a proactive manner, maintaining stability, and being able to withstand adverse impacts of the economic cycle.

Fourth: It is necessary to form and maintain the habit of information transparency at a macro perspective as well as in industries and business entities, step by step creating a healthy socio-economic environment, creating trust for customers. The business world, people as well as partners and countries have relationships with Vietnam, affirming the prestige and national brand name in the international business environment.

5.3.2.2 Recommendations to businesses

As the main contributors to economic development, businesses need to have a long-term strategy to improve their financial capacity, limit the business scale within the capital capacity, and not be too dependent on sources of capital. bank capital. The past period has shown that many businesses abuse financial leverage, expand their business scale excessively, exceed their capital capacity as well as management capacity, so when the economy has unexpected fluctuations. profits, bank interest rates increased, many businesses fell into loss and had to close down and go bankrupt.

5.4 Limitations of the thesis

The data for this study are only domestic commercial banks, without mentioning joint venture banks and foreign banks in Vietnam. Therefore, the research results do not fully reflect the fluctuations in the performance of the entire banking system in Vietnam.

The thesis only considers the relationship between the concentration of the loan portfolio and profitabilitywithout taking into account the relationship between loan portfolio concentration and risk. An efficient loan portfolio is one that both increases returns and controls risk within a limit acceptable to the bank. Loan portfolios of commercial banks can be formed randomly or according to plan. The stochastic method exhibits passivity in DMCV bar shaping. According to this method, DMCV will form depending on the needs of the market, being led by the market, the trend of lending according to the movement will be difficult to avoid. This loan portfolio with unreasonable loan proportions and high concentration of risk exceeds the bank's capital tolerance. The consequence of this situation is that the bank will have an inefficient DMCV. The planned DMCV is a loan portfolio that requires the bank to have an orientation,Since the loans have not been approved, managers must design a DMCV with the expected weights. A DMCV formed according to the plan, the loans are systematically and purposefully arranged with certain proportions, in line with the bank's goals, is considered an effective DMCV. In order to have an optimal DMCV, the bank needs to have DMCV governance objectives. This is the first important factor that the bank needs to determine before building a DMCV.This is the first important factor that the bank needs to determine before building a DMCV.This is the first important factor that the bank needs to determine before building a DMCV.

The objective of DMCV management is to show the level of loss that the bank can accept in relation to the maximum profit the bank expects to achieve.

Therefore, when studying DMCV we need to consider 3 issues:

- Impact of loan portfolio on bank profitability.

- Examine the relationship between loan portfolio and bank's risk.

- How to manage loan portfolio effectively.

The thesis only considers the impact of the loan portfolio on the bank's profitability. The remaining two issues will be a new research direction of the thesis.

REFERENCES

1. Bui Dieu Anh (2010) "Lending portfolio management at Vietnamese joint stock commercial banks ", banking technology magazine No. 92 dated 19/11/2013.

2. Government (2006), On the approval of the Project on the development of the banking industry in Vietnam up to 2010 and orientations to 2020.

3. Ha Van Duong “State management on diversification of credit activities of joint stock commercial banks in Ho Chi Minh City until 2020.

4. Hoang Trong and Chu Nguyen Mong Ngoc. 2008. “Applied Statistics in Socio-Economics”, Statistical Publishing House, Ho Chi Minh City, pp. 79 – 330 5. State Bank (2010), explanation of amendments to the decision Decision 493/2005/QD-NHNN dated April 22, 2005 and Decision 18/2007/QD-NHNN dated April 25, 2007 of the Governor of the State Bank.

6. State Bank, annual report for the period 2004 - 2014.

7. State Bank, Directive 03/2007/CT-NHNN dated 28/5/2007; Decision No. 03/2008/QD-NHNN dated February 1, 2008; Circular 13/2010/TT-NHNN dated 20/5/2010; Circular No. 19/2010/TT-NHNN dated September 27, 2010.

8. State-owned commercial bank, annual report published on the website of the State Bank of Vietnam, Ho Chi Minh City branch, data reported by the planning department for the years 2006-2010 9. Commercial Joint Stock Bank: ACB , EXIMBANK, SACOMBANK, SCB, SAIGONBANK, TECHCOMBANK ..., annual report published on Website from 2004 - 2014 10. ACB Commercial Joint Stock Bank, TECHCOMBANK, Internal Credit Manual 11. Law on State Bank, Law on Organizations Vietnam's credit in 2010 12. General Statistics Office for the period 2004-2014 13. Bui Dieu Anh, “Thoughts on measuring risk in loan portfolios at commercial banks", Technology magazine Bank No. 53 (August 2010).

14. Bui Dieu Anh (2010), "List of loans of commercial banks and necessary notes", Journal of Banking Technology No. 56 (November 2010).

English document

1. Acharya, I. Hasan, and A. Saunders. Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios. Journal of Business, 32: 1355–1412, 2004.

2. Andreas and Gabrielle (2011).

3. Anna and Hoi (2007).

4. Anthony Saunders & Linda Allen (2002), Credit Risk Measurement, John Wiley & Sons, Inc.

5. Akhavein; Berger and Humphrey. 1997. "The Effects of Megamergers on Efficiency and Prices: Evidence from a Bank Profit Function," Board of Governors of the Federal Reserve System (US).

6. Andreas Kamp (University of Munster), Andreas Pfingsten (Unversity of Munster), Danek Prath (Deutsche Bundesbank) (2005). “Do banks diversify loan portfolios? A tentative answer based on individual bank loan portfolios”.

7. Benjamin M. Tabak, Dimas M.Fazio and Daniel O.Cajueiro (2010). “The effects of loan Portfolio Concentration on Brazilian bank's return”.

8. Baltagi, Econometric analysis of Panel Data, Third edition 2005.

9. Bebczuk and A. Galindo. Financial Crisis and Sectoral Diversification of Argentine Banks, 1999-2004. Applied Financial Economics, 18:199–211, 2008.

10. Blundell and SR Bond. Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87:115–143, 1998.

11. BIS. Measuring and Controlling Large Credit Exposures. Basel Committee on Banking Supervision, Basel, 1991.

12. Berger; Hanweck and Humphrey. 1987. "Competitive Viability in Banking: Scale.

13. Scope, and Product Mix Economies." Journal of Monetary Economics.

14. Bourke. 1989. "Concentration and Other Determinants of Bank Profitability in Europe, North America and Australia." Journal of Banking and Finance 13, 65-79.

15. Biker and Hu. 2002. "Cylicical Patterns in Profits, Provisioning and Lending of Banks and Procyclicality of the New Basel Capital Requirements." Banca Nazionale del Lavoro Quarterly Review, 143-75.

16. Charles W. Smithson (2002), Credit Portfolio Management, John Wiley & Sons, Inc.

17. Diamond. Financial Intermediation and Delegated Monitoring. The Review of Economic Studies, 51:393–414, 1984.

18. Elyasiani & Deng (2004).

19. Eichengreen & Gibson (2001).

20. Fotios and Kyriaki Kosmidou. 2007. "Factors Influencing the Profitability of Domestic and Foreign Commercial Banks in the European Union." Research in International Business and Finance, 21, 222–37.

21. Gujarati, Damodar and Dawn Porter. 2004. Basis Econometrics. The McGrawHill Companies.

22. Gelman, Andrew and Iain Pardoe. 2006. "Bayesian Measures of Explained Variance and Pooling in Multilevel (Hierarchical) Models." Technometrics, 48.

23. Haslem. 1968. "A Statistical Analysis of the Relative Profitability of Commercial Banks." Journal of Finance, 23.

24. Hausman, J. 1978. "Specification Tests in Econometrics." Econometrica, 46, 1251.

25. Kamp, A. Pfingsten, and D. Porath. Do Banks Diversify Loan Portfolios? A Tentative to Answer Based on Individual Bank Loan Portfolios. Discussion Paper 3, Deutsche Bundersbank, 2005.

26. Kamp, A. Pfingsten, A. Behr, and C. Memmel. Diversification and the Banks' Risk-Return-Characteristics - Evidence from Loan Portfolios of German Banks. Discussion Paper, Deutsche Bunderbank, 2007.

27. Meyer and T. Yeager. Are Small Rural Banks Vulnerable to Local Economic Downturns? Technical report, Federal Reserve Bank of St. Louis, Mar 2001.

28. Molyneux and Thornton. 1992. "Determinants of European Bank Profitability: A Note." Journal of Banking and Finance 16, 1173-78. Mc Elligott and Stuart [2007].

29. Profitability in Banking." Journal of Money, Credit, and Banking.

30. Pfingsten and Rudolph (2002) German Banks' Loan Portfolio Composition: Market-orientation vs. Specialization?” .

31. Rossi, M. Schwaiger, and G. Winkler. How Loan Portfolio Diversification Affects Risk, Efficiency and Capitalization: A Managerial Behavior Model for Austrian Aanks. Jornal of Banking and Finance, 32:2218–2226, 2009.

32. Should Banks Be Diversified? Evidence from Individual Bank Loan Portfolios.

33. Stomper. A Theory of Banks' Industry Expertise, Market Power and Credit Risk. Management Science, 52:1618–1633, 2004.

34. Short. 1979. "The Relation between Commercial Bank Profit Rates and Banking Concentration in Canada, Western Europe and Japan." Journal of Banking and Finance 13, 209-19.

35. Smirlock. 1985. "Evidence on the (Non) Relationship between Concentration and and Profitability in Banking." Journal of Money, Credit, and Banking.

36. Sibel Yilmaz Turkmen, Ihsan Yigit (2012) “Diversification in Banking and its Effect on Banks' Performance: Evidence from Turkey.

37. Witton (1999),Don't Put All Your Eggs in One Basket? Diversification and Specialization in Lending, Working Paper, University of Minnesota.

38. Wooldridge, Jeffrey M. 1997. Econometric Analysis of Cross Section and Panel Data. Massachusetts London, England".