RESEARCH FOR EXPANDING LENDING TO BUSINESS CUSTOMERS AT AGRIBANK SOUTH DA NANG BRANCH, PERIOD 2019 2021

DUY TAN UNIVERSITY INTERNATIONAL SCHOOL PSU DIVISION - - UNDERGRADUATE THESIS RESEARCH FOR EXPANDING LENDING TO BUSINESS CUSTOMERS AT AGRIBANK SOUTH DA NANG BRANCH, PERIOD 2019-2021 Instructor : TRAN DINH UYEN Student : TRAN MINH CHIEN Class : K24PSU-QNH Student code: 24212403696 Đà Nẵng, 2022 ABSTRACT In the situation that the whole world economy is seriously affected by the Covid19 pandemic in general and Vietnam's economy in particular, almost all industries in Vietnam are affected more or less And the Bank is no exception Despite many impacts, Agribank South Da Nang branch has not stopped growing and developing Through the analysis of the branch's lending situation to corporate customers in the three years from 2019 to 2021, it helps us to see more clearly the development of the branch's business loans And to be able to achieve the orientations set forth by the Branch, capital mobilization is a very important input factor If it mobilizes a lot of capital, the branch will have conditions to extend credit, enhance competitiveness as well as get resources to implement customer care policies From there, it affects a series of other related products, making the bank's business efficiency increase, its competitive position in the market increasingly solid In addition, there are a number of other solutions to achieve the branch's orientation, such as transforming the income structure from mainly credit to noncredit, increasing the proportion of corporate loans, improving the quality of credit, and improving the credit quality use, strive to maintain the bad debt ratio below the level assigned by the Head Office DISCLAIMER I certify that the attached thesis is my original work No other person’s work has been used without due acknowledgement Except where I have l clearly stated that I have used some of the this material , it has not been presented by me for examination in any other course or subject at this or any other institution I understand that the work submitted may be reproduced and/or communicated for the purpose of detecting plagiarism I understand that should this declaration be false, I am libel to be penalized under the Duy Tan University regulations Signature: Date: ACKNOWLEDGEMENTS First, I would like to thank Duy Tan University for creating conditions for me to complete my study program in the most convenient way Thanks to the help of the lecturers in the School, I was able to grasp and understand more useful knowledge in life Especially, I would like to thank Mr Tran Dinh Uyen who followed closely throughout the process of writing this thesis, he pointed out my mistakes as well as guided me to complete the thesis quickly and correctly During my internship at Agribank - South Da Nang branch, I also received enthusiastic support from the members of the Corporate Customer Department Thanks to everyone's enthusiastic support, I have a better and more realistic understanding of the operations of a commercial bank Due to the lack of experience in making Thesis as well as the limitations of knowledge, there will certainly be shortcomings in the Dissertation I look forward to receiving comments, suggestions and criticisms from teachers to make my thesis more complete Finally, I would like to wish you good health, success and happiness Student Tran Minh Chien TABLE OF CONTENTS ABSTRACT i DISCLAIMER ii ACKNOWLEDGEMENTS iii TABLE OF CONTENTS iv LIST OF TABLES viii LIST OF FIGURES ix INTRODUCTION CHAPTER 1: BASIC ISSUES OF LENDING TO BUSINESS CUSTOMERS BY COMMERCIAL BANKS 1.1 COMMERCIAL BANK AND ACTIVITIES OF COMMERCIAL BANK 1.1.1 Definitions commercial bank 1.1.2 Activities of commercial bank 1.2 BASIC ISSUES OF LENDING TO BUSINESS CUSTOMERS IN COMMERCIAL BANK OPERATIONS 1.2.1 Definitions lending to business customers 1.2.2 Characteristic of lending to business customers 1.2.3 Classifications of lending to business customers 11 1.3 CRITERIA FOR EVALUATING LENDING ACTIVITIES TO BUSINESS CUSTOMERS .12 1.3.1 Loan sales 12 1.3.2 Debt collection revenue 12 1.3.3 Debt 12 1.3.4 Bad debt 13 1.3.5 Bad debt ratio 13 1.4 REGULATIONS OF STATE BANKS ON BAD DEBTS 13 1.4.1 Regulations of the State Bank on debt classification 13 1.4.2 Regulations of the State Bank on the current allowable bad debt level 16 1.5 FACTORS AFFECTING LENDING TO BUSINESS CUSTOMERS 17 1.5.1 Internal Factors 17 1.5.2 External Factors 20 1.6 EXPERIENCE OF EXPANDING ACTIVITIES OF BUSINESS LOANS 22 CHAPTER 2: THE SITUATION OF LENDING TO BUSINESS CUSTOMERS AT AGRIBANK SOUTH DANANG BRANCH, PERIOD 2019-2021 24 2.1 OVERVIEW OF AGRIBANK SOUTH DA NANG BRANCH 24 2.1.1 Introduction to Agribank Nam Da Nang Branch 24 2.1.2 Organizational apparatus of Agribank Nam Da Nang Branch 24 2.2 BUSINESS RESULTS IN YEARS 28 2.2.1 Capital mobilization situation of Agribank South Da Nang branch 28 2.2.2 Loan situation of Agribank South Danang Branch 31 2.2.3 Business results of Agribank South Danang Branch 34 2.3 ANALYSIS OF THE SITUATION OF AGRIBANK BUSINESS LOANS IN SOUTH DA NANG BRANCH IN YEARS 36 2.3.1 Business lending process at Agribank South Da Nang Branch 36 2.3.2 Analysis of business lending activities at Agribank South Da Nang branch, period 2019-2021 39 CHAPTER 3: RECOMMENDATION FOR EXPANDING LOANS TO BUSINESS CUSTOMERS AT AGRIBANK SOUTH DA NANG BRANCH 56 3.1 BASIS OF PROPOSED SOLUTION .56 3.1.1 Overall assessment of research subjects (SWOT) .56 3.1.2 Orientation of Agribank South Da Nang branch in the coming time 58 3.1.3 Trends of research subjects .58 3.2 PROPOSED SOLUTION FOR EXPANDING AGRIBANK'S BUSINESS CUSTOMER LOANS OF AGRIBANK SOUTH DA NANG BRANCH 58 3.2.1 Main solutions 58 3.2.2 Support solutions 60 3.2.3 Affiliate solutions 62 CONCLUSION 64 LIST OF TABLES Table Capital mobilization situation of Agribank Nam Da Nang branch, period 2019-2021 29 Table 2 Loan situation at Agribank Southern Branch, period 2019-2021 31 Table Business results in Agribank Nam Da Nang branch, period 2019-2021 34 Table General situation of business lending activities at Agribank Nam Da Nang Branch 2019-2021 40 Table The situation of lending to business customers at Agribank South Da Nang by term, 2019-2021 42 Table The situation of lending to business customers at Agribank South Da Nang by purpose, 2019-2021 45 Table The situation of lending to business customers at Agribank South Da Nang by form of loan, 2019-2021 49 Table The situation of lending to business customers at Agribank South Da Nang by repayment method, 2019-2021 52 LIST OF FIGURES Figure Organization chart of Agribank South Danang Branch 25 Figure 2 Capital mobilization situation of Agribank Nam Da Nang branch, period 2019-2021 30 Figure Loan situation at Agribank Southern Branch, period 20192021 32 Figure Business results in Agribank Nam Da Nang branch, period 2019-2021 35 Figure Loan steps at Agribank Branch of Danang 36 Figure The situation of lending to business customers at Agribank South Da Nang by term, 2019-2021 43 Figure The situation of lending to business customers at Agribank South Da Nang by purpose, 2019-2021 46 Figure The situation of lending to business customers at Agribank South Da Nang by form of loan, 2019-2021 50 Figure The situation of lending to business customers at Agribank South Da Nang by repayments method, 2019-2021 .53 10 INTRODUCTION Reason for chossing a research topic In the current operations of Vietnamese commercial banks, credit activities are still a traditional business, bringing the main profit and determining the business results of the bank In addition, business lending plays an extremely important role and position in determining the success or failure of banks In recent years, Agribank Nam Da Nang branch has had solutions to improve the quality and efficiency of lending activities to corporate customers Recognizing the importance of lending to corporate customers, many studies have been conducted to expand among them: Research by Tran Thi Lieu (2013) "Expanding corporate lending at Bank branches Bank for Agriculture and Rural Development of Kon Tum Province" has raised three results as follows: research and systematize theoretical issues related to business lending expansion at commercial banks In-depth analysis and assessment of the current situation of business loan expansion at Agribank Kon Tum branch and propose some solutions to expand business lending at Agribank Kon Tum Research by L.T.X Trang (2013) "Expanding lending to corporate customers at the branch of Bank for Agriculture and Rural Development in Cam Le district, Da Nang city" has pointed out limitations such as: bad debt and bad debt bad debt ratio is high, the number of businesses getting loans is still low, the quality of services provided is still inadequate And some solutions have been proposed such as: Diversifying customers for business loans; To rationalize the structure and form of enterprise lending; Apply loan insurance policies to businesses Research by L.H Hieu (2014) "Expanding business loans at Bank for Agriculture and Rural Development Branch in Thanh Khe district, Da Nang city" has pointed out limitations such as: Growth of outstanding loans Enterprises are still very slow; short-term loans account for a large proportion; lending forms for corporate customers are accounting for 80.77 percent of the total Debt collection revenue, an increase of VND 169,652 million, equivalent to an increase of 49.73% compared to 2020 Loans by the method of "Repayment by term" of Debt collection revenue in 2020 only achieved 86,035 million VND, accounting for 20.14% of the total Debt collection revenue , down 50,951 million VND, equivalent to a decrease of 37.19% compared to 2019 In 2021, Debt collection revenue will reach 121,613 million VND, an increase of 35,578 million VND, accounting for 19.23% of the total Debt collection revenue, equivalent to an increase of 41.35% compared to 2020 Outstanding debt: The loan section under the loan section under the "One-time repayment" method, the outstanding debt in 2020 is 510,431 million VND, accounting for 79.64% of the total outstanding debt , an increase of 52,376 million VND, equivalent to an increase of 11.43% compared to 2019 In 2021, the outstanding debt is VND 606,032 million, accounting for 81.25% of the total outstanding debt , an increase of VND 95,601 million, equivalent to an increase of 18.73% compared to 2020 Loans by the method of "Repayment by term" of the outstanding debt in 2020 is 130,492 million VND, accounting for 20.36% of total outstanding debt , up 18,189 million VND, equivalent to an increase of 16.20% compared to 2019 In 2021, outstanding debt are 139,853 million VND, increasing by 9,361 million VND, accounting for 18.75% of total outstanding debt debt, equivalent to an increase of 7.17% compared to 2020 Bad debt: From Table 2.8, we can see that bad debt in the loan section under the "One-time repayment" method always accounts for a higher proportion than the bad debt in the loan section under the "Repayment by term" method, approximately 80 % Specifically, in 2019 it is 3,709, accounting for 81.07%, 2020 is 2,013 accounting for 79.98% and in 2021 it is 3,747, accounting for 82.95% CONCLUSION CHAPTER Chapter of the Thesis reflects on the current situation of business lending expansion at Agribank South Da Nang branch, honestly assesses the lending expansion situation, thereby drawing comments and assessments on the opening activities expand business loans at the branch And this is the basis for the author to come up with solutions in Chapter 71 72 CHAPTER 3: RECOMMENDATION FOR EXPANDING LOANS TO BUSINESS CUSTOMERS AT AGRIBANK SOUTH DA NANG BRANCH 3.1 BASIS OF PROPOSED SOLUTION 3.1.1 Overall assessment of research subjects (SWOT) To be able to offer solutions, we need to rely on the data obtained in Chapter as well as whether the Branch's lending products for corporate customers are attractive enough; then we need to evaluate the Branch according to the SWOT model to be able to answer those questions 3.1.1.1 Strenght The mobilized capital of Agribank South Da Nang branch has grown steadily for years, despite 2020 being heavily affected by the epidemic, total mobilized capital in 2020 increased by 102.7% compared to 2019 With mobilized capital source increasing over the years, Agribank South Da Nang branch has enough financial strength to lend to businesses Having such results is because the Branch has applied many promotions to attract idle money from the economy The bad debt ratio of Agribank South Da Nang branch is always below the industry average This shows that the quality of loans at Agribank South Danang Branch is effective In addition, business results at Agribank South Da Nang branch are also very good; Although there is a slight decrease in 2020 but in 2021, it will increase dramatically Such positive results are due to the proper leadership of the Bank's board of directors along with the unremitting efforts and striving of a team of experienced and highly qualified staff In addition, this shows that Agribank South Da Nang Branch operates, manages costs very well and effectively 3.1.1.2 Weak Based on Table 2.3, we can see that the income structure of Agribank South Da Nang branch still revolves around credit activities As the trend of other commercial 73 banks is gradually shifting their income structure to more non-credit; Specifically here is Techcombank when the current income structure of this bank is 50% from noncredit activities and 50% from credit activities Based on Table 2.2, we can also see that the outstanding debt of Agribank's business loans of Agribank South Da Nang branch is still not commensurate with its potential, when the proportion of loans to corporate customers still accounts for a low proportion in the outstanding balance of the years 3.1.1.3 Oppoturnity With the State Bank implementing a policy to support interest rates of 2%/year in the two years 2022-2023 through the system of commercial banks for commercial loans to businesses, it will help businesses overcome difficulties , problems as well as will have the motivation to borrow money to be able to resume production and business In addition, the Government's support packages for businesses also partly give businesses closer access to the branch's loans 3.1.1.4 Threat Although the pandemic has ended, in the coming time, there will be two crises that will cause banks and businesses to face many challenges First, the crisis between Russia and Ukraine will cause the import and export of enterprises to suffer, costs will increase and the prices of raw materials imported from Russia will also increase And it also negatively affects the world economy in general and Vietnam in particular Next, the world's inflation is having complicated movements, which will make the money mobilized by banks decrease because depositing money in the bank will cause the currency to depreciate; As a result, the bank's credit activities will also decrease In addition, it also affects the import and export of enterprises when the import price of some raw materials and input materials for domestic production in the first quarter of 2022 compared to the same period last year increased 74 3.1.2 Orientation of Agribank South Da Nang branch in the coming time With the recovery of the epidemic, along with political fluctuations in Europe and the evolution of inflation, Agribank South Da Nang branch plans to try to increase the proportion of corporate loans in the near future to remove debt difficulties and problems for businesses Next, it will continue to lend to agriculture because this is a traditional activity of the Branch, especially for high-tech businesses 3.1.3 Trends of research subjects In order to catch up with the digital transformation trend in the bank, Agribank South Da Nang branch will focus on lending to digital transformation businesses, green technology businesses, businesses with affiliates and let loans to businesses with diversified investment markets 3.2 PROPOSED SOLUTION FOR EXPANDING AGRIBANK'S BUSINESS CUSTOMER LOANS OF AGRIBANK SOUTH DA NANG BRANCH 3.2.1 Main solutions 3.2.1.1 Transforming income structure from credit activities to non-credit activities In order to transform the structure of Agribank South Da Nang branch, it is necessary to promote non-cash payment; Increasing the number of businesses and people accessing financial services and lending products of the branch In addition, in order to be successful in the transformation process, Agribank South Da Nang Branch needs to develop a comprehensive strategy, specific goals and roadmap, ensuring that all levels and departments in the Branch are equal must be involved in the transition Taking customers as the center, building products and services that meet the right needs, and at the same time suggest new needs for customers; have appropriate pricing 75 policies for each product and each customer group; application of modern technology increases the customer's experience and satisfaction level when using the service Expansion of financial service provision through modern distribution channels applied on electronic devices in developed areas, in addition, it is also necessary to pay attention to traditional distribution channels in some regions but the technology dissemination is still limited to increase the bank's brand recognition, thereby boosting the customer's demand for financial services Appropriate investment for technology system development, customer database building, and at the same time must ensure system safety and customer information confidentiality Building and training human resources to adapt to the bank's digital transformation process 3.2.1.2 Increase the proportion of loans to business customers First, proactively contact the business registration agency to find new businesses, and quickly establish relationships with these customers in many aspects to strengthen strategic cooperation Second, search and increase new customers, but also not forget to retain existing customers, with a dedicated service attitude and good customer care policy Finally, actively expand the market, seek to attract new customers However, it is necessary to carefully select customers with good business, effective and feasible projects and low-risk investment fields 3.2.1.3 Continue to promote total mobilized capital In order for the Branch to continue to increase its total mobilized capital in the current context of fierce competition and complicated developments, the branch needs to focus on the following solutions: Firstly, implementing policies to attract customers, especially businesses With the trend of international input boxes in the financial sector, commercial banks in general and branches in particular; not only compete with banks in the city but also foreign competitors in the city However, with the understanding of customer 76 psychology and the Branch's experience, it is clear that the Branch has a huge advantage over domestic and foreign banks in the same city Policies for the Branch to attract customers in raising capital include: Marketing, interest rates, service portfolio and other policies related to the relationship of customers and the bank Second, a reasonable interest rate policy In operation, the interest rate tool is always considered as a contributing factor to create capital for the Branch through mobilizing capital from the economy Although, each period is different, the interest rate is also different, but it is still attractive enough for customers, retaining traditional customers and attracting new customers Third, promote marketing policy This is a policy so that the Branch can attract more new customers, thereby improving its competitiveness with other commercial banks in the same city; and in the coming time, the Branch should continue to promote this work with a scientific strategy and a tight schedule to achieve the highest efficiency 3.2.1.4 Try to keep bad debt ratio below industry average In order to maintain the bad debt ratio below the industry average, the Branch needs to be determined to implement Resolution 42/2017/QH14 of the State Bank and to reduce this ratio, the Branch needs to closely monitor the epidemic situation the client's business activities; proactively assess and forecast the damage level of customers due to the impact of the epidemic in order to promptly support according to regulations In addition, proactively identify potential debts that are at risk of becoming bad debts to have solutions to prevent new bad debts from arising; Reduce costs to focus on supporting loan interest rate reduction… 3.2.2 Support solutions 3.2.2.1 Improving and upgrading information technology Agribank South Da Nang branch needs to have an investment strategy, update modern machinery and equipment for its branches Fully equipped with synchronous 77 computer system, install useful software to provide optimal information to subordinate units Agribank South Da Nang branch needs to focus on training to improve the level of banking technology for officials and employees Soon to computerize the appraisal of loan documents so that the appraisal can be carried out quickly and accurately, shortening the time in the loan process, and improving the efficiency of the appraisal Technology must always innovate to exploit information related to the Enterprise Regularly plan to check and maintain the internal network system to ensure stable operation 3.2.2.2 Improve staff Agribank South Da Nang branch needs to select capable, qualified and ethical staff to be assigned to the credit department Agribank South Da Nang branch must constantly improve the quality of credit officers Allocate enough and reasonably assign tasks to staff, avoiding the situation of assigning too much work to one officer Renovating the remuneration policy for credit officers in terms of salary, bonus In addition, Agribank South Da Nang branch needs to have intensive training courses on corporate lending such as corporate financial analysis, valuation, project loan appraisal, and relevant legal knowledge to banking activities, customer communication skills 3.2.2.3 Continuously improve processes and activities Agribank South Da Nang branch needs to shorten the time at each operation step to reduce the time from the time the business applies for a loan to the time of disbursement 78 When businesses have a need to borrow money at Agribank South Da Nang branch, credit officers should visit the facility to preliminary review the necessary requirements for the properties intended to be mortgaged or secured, guide the preparation of loan documents and procedures, in accordance with the requirements of the Bank, to avoid wasting time when the enterprise has made a dossier but does not ensure that the request must be redone Currently, although the reduction of documents has reduced the complexity of lending activities for enterprises, along with it, the appraisal time has not been significantly reduced 3.2.3 Affiliate solutions 3.2.3.1 Building relationships with all levels of government Branches need to regularly approach state management agencies in the industry and localities to know the State's guidelines and policies From there, the new branch can offer policies and interest rates to suit the circumstances, helping businesses to get closer to the branch's loans and remove difficulties and obstacles of enterprises in a timely manner time 3.2.3.2 Build relationships with industry associations Branches also need to link with agencies and industry associations to capture information about industries to promote lending activities It is necessary to maintain regular relationships to promptly capture information of newly established businesses and quickly establish relationships with these customers in many aspects to strengthen strategic cooperation 3.2.3.3 Maintain relationships with law enforcement agencies for bad debt recovery For businesses that are difficult to collect and slow to recover, the Branch needs to strongly take advantage of the support of authorities at all levels, departments, 79 boards, branches and especially legal agencies to resolutely handle in order to collect revenue loan repayment 80 CONCLUSION CHAPTER From the theoretical basis, along with the analysis of the current situation of expanding business lending in Chapter 2, it helps the author to identify and evaluate the strengths and weaknesses as well as the opportunities and threats muscle Combined with finding out the goals and orientations in expanding business loans at the branch and through the investigation and analysis process to propose solutions and recommendations 81 CONCLUSION Through the analysis and evaluation The thesis has pointed out the current situation of business lending activities at Agribank South Da Nang branch in the period of 2019 - 2021, has identified the achieved results but still has limitations, since then made some recommendations to expand business lending activities In summary, the thesis has achieved the following results: Firstly, the thesis has summarized the basic issues of lending to business customers by Commercial banks Secondly, the thesis highlights the current situation of business lending activities at Agribank South Da Nang branch in years 2019, 2020 and 2021; evaluate the branch's business lending activities, state the achieved results, limitations and causes of limitations Thirdly, from the limitations and causes of limitations on the current situation of business lending activities at the branch, the general orientation of the operation as well as the influencing factors, the thesis has proposed some recommendations to improve business lending activities at Agribank South Da Nang branch in the near future However, due to limited capabilities, the mentioned problems are certainly more or less limited and incomplete, and the solutions offered may not be optimal Therefore, I hope to receive the comments and suggestions of teachers and staffs in the branch so that the thesis can be completed with a higher quality MATERIALS 1/ Trần Thị Liễu (2013) "Mở rộng cho vay doanh nghiệp Chi nhánh ngân hàng Nông nghiệp phát triển nông thôn Tỉnh Kon Tum” 2/ L.T.X.Trang (2013) “Mở rộng cho vay khách hàng doanh nghiệp chi nhánh Ngân hàng Nông Nghiệp Và Phát Triển Nông Thôn quận Cẩm Lệ, thành phố Đà Nẵng” 3/ L.H.Hiếu (2014) “Mở rộng cho vay doanh nghiệp chi nhánh Ngân Hàng Nông Nghiệp Phát Triển Nông Thôn quận Thanh Khê, TP Đà Nẵng” 4/ L.T.M.Tâm (2014) “Mở rộng cho vay doanh nghiệp Ngân hàng Thương Mại Cổ Phần Hàng Hải, chi nhánh Đà Nẵng” 5/ N.T.H.Thanh (2018) “Hoàn thiện hoạt động cho vay doanh nghiệp Ngân hàng Nông Nghiệp Phát Triển Nông Thôn Việt Nam – Chi nhánh Liên Chiểu, thành phố Đà Nẵng” 6/ Ngân hàng nông nghiệp phát triển nông thôn Việt Nam (2019) Quyết định ban hành quy định nhiệm vụ Phòng nghiệp vụ Hội sở Agribank Nam Đà Nẵng 7/ Ngân hàng nông nghiệp phát triển nông thôn Việt Nam (2019) Quyết định điều chỉnh phạm vi quản lý Chi nhánh Agribank địa bàn Thành phố Đà Nẵng 8/ Ngân hàng nông nghiệp phát triển nông thôn Việt Nam (2020) Quyết định thay đổi tên Agribank Chi nhánh Hải Châu Đà Nẵng Phòng giao dịch phụ thuộc 9/ Ngân hàng nông nghiệp phát triển nông thôn Việt Nam (2019) Quyết định hướng dẫn quy chế cho vay khách hàng hệ thống Ngân hàng Nông nghiệp Phát triển nông thông Việt Nam ... The situation of lending to business customers at Agribank South Danang branch, period 2019-2021 16 Chapter 3: Recommendation for expanding loans to business customers at Agribank South Danang... The situation of lending to business customers at Agribank South Da Nang by form of loan, 2019-2021 49 Table The situation of lending to business customers at Agribank South Da Nang by... situation of lending to business customers at Agribank South Da Nang by term, 2019-2021 42 Table The situation of lending to business customers at Agribank South Da Nang by purpose, 2019-2021