THEORETICAL BASIS ON QUALITY OF CONSUMER LOANS AT
CONSUMER LENDING ACTIVITIES OF COMMERCIAL BANKS
The term "credit" derives from the Latin word "creditum," meaning mutual trust, and in Vietnamese, it refers to a reciprocal borrowing relationship involving the repayment of both principal and interest Essentially, credit is a temporary transfer of value, whether in goods or money, from the owner to the user, with the expectation of returning it in a larger amount after a specific period Banks assess and evaluate customers before granting loans to minimize risk; an objective and accurate appraisal leads to safer credit provision Thus, bank credit can be defined as the transfer of capital usage rights from the bank to the customer for a specified duration and cost.
Bank credit encompasses a variety of financial products, including loans, guarantees, discounts, financial leasing, factoring, trade finance, overdraft loans, and credit-line-based loans, with lending being a primary form of bank credit According to Nguyen Van Tien (2013), lending involves the lender providing a specific sum of money to the borrower for a designated purpose and timeframe, with the expectation of repayment of both principal and interest This creates a loan-debt relationship between the bank and its individual or institutional clients As outlined in Article 3 of the 2009 Law on Public Debt Management, debt includes the repayable amounts such as principal, interest, fees, and other related costs incurred from borrowing, as stipulated by Vietnamese law Consequently, bank liabilities arise when funds are borrowed to acquire goods, services, or financial assets.
According to Nguyen Minh Kieu (2015), bank credit can be categorized based on its purpose, including loans for industrial production, consumer loans, real estate loans, agricultural production loans, and import-export business loans Consumer loans emerged from retailers' demands to stimulate goods consumption, prompting some firms to borrow from banks to address working capital shortages In this role, banks serve as intermediaries, lending to consumers to meet their needs for durable goods such as homes, vehicles, appliances, education, healthcare, and tourism By expanding consumer loans, banks aim to diversify their customer base and enhance their income (Phan Thi Thu).
Consumer lending refers to loans designed to meet the purchasing needs of individuals, particularly for household amenities that enhance living standards This type of lending primarily targets borrowers with low but stable incomes, including a significant number of salaried employees who have secure jobs.
According to Nguyen (2013), consumer loans have the content and characteristics of a loan in general, which are term, repayment and interest rate In addition, consumer loans have specific characteristics:
- Credit beneficiaries are consumers including individuals and households
Credit is primarily intended for purchasing goods and services for personal consumption rather than for production or business activities Key areas where credit is commonly utilized include housing, household appliances, personal transportation, education, healthcare, and tourism.
Consumer loans typically have small loan sizes but large volumes, catering to individual and household needs for consumption purposes The modest loan amounts are sufficient to cover personal or household expenses, resulting in relatively small loan values Consequently, the cost of lending is high due to the small loan sizes, contributing to higher interest rates on consumer loans compared to commercial or industrial loans.
Consumer loans carry a higher risk compared to commercial or industrial loans, as they are affected not only by external factors but also by the borrowers' personal circumstances Events such as illness, accidents, unemployment, or family tragedies can rapidly alter an individual's or household's financial stability Consequently, this inherent risk contributes to the higher interest rates typically associated with consumer loans.
Consumer loans typically have short terms and fixed interest rates, which do not adjust to market fluctuations This structure exposes borrowers to significant interest rate risk, as changes in the economic environment can impact their loan agreements.
Consumer loan demand remains largely unaffected by fluctuations in interest rates, as borrowers tend to prioritize the size of their monthly payments over the interest costs associated with smaller loan amounts.
Consumer loan demand is closely tied to the economic cycle During periods of economic growth, individuals are generally optimistic about their future earnings, leading to increased consumption and a rise in consumer credit Conversely, in times of recession, declining incomes and fears of unemployment prompt consumers to save and reduce spending, resulting in a decrease in consumer credit.
Income and education levels are closely linked to consumer loan demand, as higher income leads to increased spending and a desire for a more comfortable lifestyle Borrowing is viewed as a means to enhance living standards rather than just meeting basic needs Additionally, individuals with higher education typically earn more, making their loans less risky due to reliable repayment sources and a positive perception of their moral character.
In consumer lending, the reliability of borrowers' financial information is frequently low, as businesses seeking bank loans are required to submit financial statements that are often certified by auditing firms In contrast, personal financial data is challenging to verify, leading to potential discrepancies in the assessment of an individual's creditworthiness.
- The prestige of the customer is a difficult factor to identify, but very important, determining the repayment of the loan As with any loan, this is a critical
When evaluating consumer loans, banks consider 15 key criteria, with the borrower's prestige playing a crucial role This qualitative factor, while challenging to quantify, significantly influences the likelihood of proper loan usage and the borrower's willingness to repay Ultimately, a borrower's reputation can decisively impact their creditworthiness and the bank's lending decision.
A consumer loan is a specific category of loan that adheres to general loan classification criteria However, to effectively classify consumer loans, it is essential to emphasize their unique characteristics, as outlined by Nguyen (2013).
1.1.3.1 Based on the purpose of the loan a Residential Mortgage Loan:
Residential consumer loans are designed to meet the financing needs of individuals or households looking to build or renovate their homes These loans differ from other loan types in several key aspects, catering specifically to the unique requirements of home improvement and construction projects.
- The size of a residential consumer loan is usually much larger than the size of a regular consumer loan
QUALITY OF COMMERCIAL-BANK CONSUMER LOANS
1.2.1 Views on the quality of consumer loans
Understanding the quality of consumer loans begins with defining quality itself The International Organization for Standardization (ISO) describes quality as the ability of a product, system, or process to meet the needs of customers and stakeholders In this context, credit quality serves as a key economic indicator, showcasing how well commercial banks adapt to external changes and highlighting their resilience in a competitive landscape (Nguyen Van Tien, 2013; Le, 2021).
A consumer loan is a type of bank credit that measures the effectiveness of lending practices The quality of consumer loans serves as a comprehensive indicator of how well a bank fulfills reasonable customer loan requests while adhering to credit policies It ensures safety and economic efficiency for the bank, while also playing a vital role in fostering overall socio-economic development.
The quality of consumer loans for banks is assessed through two key aspects: safety and profitability This includes criteria such as high and growing profits, a rising volume of outstanding loans, a manageable overdue debt ratio, and a sound capital structure These factors are closely tied to the expansion of loan sizes and borrower diversity, as well as positive changes in the structure of ongoing consumer loans Additionally, the effectiveness of the loans further contributes to their overall quality.
23 used by customers for the right purposes, generating a larger amount of money, through which the bank can recover principal and interest
1.2.2 Indicators reflecting the quality of consumer loans
To assess the quality of consumer-loan lending activities from a bank's perspective, many different criteria can be used, which sees two main groups of criteria:
1.2.2.1 Quantitative target group a Consumer loan sales:
It is the amount of money a bank lends to a customer
Absolute growth = current year sales of consumer loan - previous year sales of consumer loan
The total outstanding balance of consumer loans serves as a key indicator of the growth and scale of banks' consumer lending over time A significant increase in consumer loan sales, coupled with a rapid growth rate, highlights the bank's strong capacity to expand its consumer loan credit However, this metric alone is insufficient to assess the overall quality of consumer loans and should be evaluated alongside additional indicators for a comprehensive analysis.
Consumer loan balance is the amount that customers still owe the bank at a time, reflecting the amount of money that the bank has not yet recovered from consumer loans
The growth of consumer loan balances can be measured in both absolute and relative terms Absolute growth refers to the increase in loan balances over time, typically assessed at the end of the year A year-on-year rise in loan balances indicates a significant expansion in the volume of consumer loans Additionally, the ratio of outstanding consumer loans to total outstanding loans provides further insight into the overall lending landscape.
The consumer loan ratio indicates the percentage of consumer loans compared to total loans, highlighting the growth rate of outstanding consumer loans A higher ratio signifies an improvement in the quality of these loans The calculation of outstanding consumer loans is based on specific metrics.
Proportion d Profit from consumer loans
The profitability of consumer loans is crucial for banks, represented by the difference between deposit interest rates and income from lending interest This key indicator reflects the growth of consumer loan lending, as higher profits correlate with increased lending activities in both quantity and quality Additionally, monitoring the ratio of overdue and bad debts to the total consumer loan balance is essential for assessing the overall health of the bank's lending portfolio.
The overdue debt indicator reflects the bank's debt collection status, highlighting the amount of consumer loan debt that remains uncollected by the maturity date In banking, overdue debt refers to payments that are due and cannot be deferred or extended, indicating that the borrower has failed to meet their repayment obligations This situation undermines the fundamental principle of credit—repayment—leading to a loss of trust between the bank and the borrower The calculation for this indicator is essential for assessing the bank's financial health and borrower reliability.
Overdue debt ratio = Overdue debt x 100%
The overdue debt ratio indicates an increased level of bad debts, specifically those classified as groups 3, 4, and 5 under Decision No 493/2005/QD-NHNN, issued by the Governor of the State Bank on April 22, 2005 This regulation governs the classification of debts, provisioning, and the management of credit risk in banking activities The ratio of bad debt to total outstanding consumer loans serves as a critical metric in assessing the financial health of credit institutions.
25 to evaluate the quality of consumer loans of a commercial bank The calculation formula is as follows:
The total outstanding consumer loans present a significant risk to banks, particularly when the ratio of overdue and bad debts increases To mitigate this risk, banks aim to maintain a low ratio of overdue and bad debts, ideally between 1-3% Additionally, the ratio of secured debt to the total consumer loan balance is a crucial metric for assessing the overall health of consumer lending practices.
Collateral plays a crucial role in securing a loan, as a higher value of collateral relative to the loan amount increases the lender's confidence in their ability to recover the debt.
A higher ratio of secured loans to total consumer loans enhances a bank's capacity to recover capital, especially in cases of delayed repayments Secured loans mitigate the risk associated with non-performing loans, thereby improving overall loan quality Consequently, it is crucial for banks to maintain a high ratio of secured debt to their total consumer loan balance.
Ratio of secured loans to total outstanding consumer g Rate of misuse of capital
- Rate of misuse of capital
The misuse of consumer loans by customers is a common phenomenon, and the indicator of misused outstanding consumer loans provided by banks can serve as a gauge of a bank's loan management capabilities This key performance indicator (KPI) offers valuable insights into the efficiency of capital utilization and the overall quality of consumer loans, enabling banks to identify areas for improvement By analyzing this metric, banks can refine their lending strategies and optimize the use of capital, ultimately enhancing the quality of their consumer loan portfolios.
Rate of misused capital Capital used for wrong purposes x 100%
A high rate of misused capital indicates poor management and supervision of a bank's loan usage, while a low rate reflects effective oversight of the loan process To maintain financial integrity, banks must strive to minimize their rate of capital misuse.
1.2.2.2 Qualitative indicators a The utility of the product
The lending-for-consumption service is designed to address customers' consumption needs swiftly and accurately It is essential that consumer loan products and services offer tangible benefits that align with customer requirements When these products effectively meet customer needs, they recognize the value of the service, leading to increased usage Consequently, high-quality services provided by banks contribute to improved loan quality and enhanced customer satisfaction with consumer loan offerings.
FACTORS AFFECTING THE QUALITY OF CONSUMER LOANS
Banks recognize the significance of consumer-loan lending and are channeling their resources to enhance this sector in alignment with their strategic goals Understanding the factors influencing consumer-loan lending is essential for banks to implement effective strategies and measures.
1.3.1.1 Development orientation of the bank
The expansion of consumer-loan lending activities is essential for determining their development level and scale If a bank neglects this aspect in its development plan, even high customer demand will remain unmet Conversely, a bank focused on growing its consumer-loan lending will implement strategies to attract potential borrowers, thus creating opportunities for promoting and advancing these lending activities.
1.3.1.2 Capital and financial capacity of the bank
Capital is essential for banks to operate effectively, particularly in consumer-loan lending It serves as a foundation for bank leaders to allocate resources strategically A larger capital base enables banks to expand their activities, enhancing their competitiveness and reputation Consequently, this positions banks to better attract and fulfill customer needs.
The financial capacity of a bank is influenced by various factors, including equity, profit margins, overdue debt ratios, and liquid assets A bank with strong financial power can invest in preferred portfolios, fostering the growth of consumer-loan lending activities Conversely, if a bank lacks sufficient capital for priority financing, opportunities for expanding consumer-loan lending diminish.
A bank's credit policy is a framework established by the Administration Council to regulate credit activities, ensuring effective capital utilization for financing businesses, households, and individuals Key components of this policy include credit limits, loan types, collateral requirements, loan terms, and guidelines for managing loans that exceed limits, as well as debt repayment methods This policy provides clear direction for credit officers in evaluating loan requests, significantly influencing overall credit expansion and particularly impacting consumer loans.
In today's competitive banking landscape, customers often find it challenging to secure loans for their spending needs, particularly when banks lack a diverse range of consumer loan options Conversely, banks that offer a variety of high-quality consumer loans can facilitate easier and more convenient borrowing experiences A well-defined credit policy becomes essential for banks to attract customers and stand out in the market.
The quality of consumer loans at banks significantly hinges on the qualifications, motivation, and expertise of their workforce The success of a bank relies on the effective utilization of resources, including capital, technology, and personnel, which are all interrelated Unlike capital and technology, which can be mobilized or replicated, human resources are unique and critical for making strategic decisions To deliver high-quality services, banks must cultivate a skilled and knowledgeable team This requires ongoing recruitment and training initiatives Additionally, to attract and retain top talent, banks should implement competitive salary structures, offer career advancement opportunities, and foster a positive work environment.
The efficiency of a bank's operations is significantly influenced by the increasing demand for consumer loans, which necessitates rigorous monitoring and management strategies Moreover, advancements in science and technology play a crucial role in the assessment and oversight of these loans, ultimately enhancing the overall quality of consumer lending.
This belongs to the demand side of the market, and in this way, the factors affecting the demand for consumer loans should have the following aspects to be considered:
First is about the demand Only when the consumer demand really moves up and he wants to turn that demand into reality, activities of credit lending will increase
Income level plays a crucial role in credit lending, as it serves as the primary source for customers to repay their loans Consequently, an individual's income directly influences their consumption patterns and financial decisions.
Third is related to consumption culture and psychology This determines the customer’s consciousness of consumption, his perception of spending needs, as well as his desire to meet that need
Fouth is the matter of borrowing culture It demonstrates legal capacity and credibility
Demographic factors play a crucial role in consumption patterns, as areas with a younger population tend to exhibit higher consumption rates Additionally, densely populated regions experience greater levels of consumption compared to sparsely populated ones Furthermore, the local culture significantly influences the demand for various products and services.
Factors of the socio-economic environment affecting consumer-loan lending consist of socio-economic factors, socio-cultural factors, competitive factors, and scientific and technological factors
Socio-economic factors significantly influence credit-lending activities, particularly in relation to economic stability In times of high inflation and economic instability, individuals are likely to prioritize saving over consumption Conversely, in a stable economic environment, consumers tend to have greater confidence in their future income, which encourages them to spend more in the present.
Socio-cultural factors significantly influence consumption patterns, as each region possesses its unique culture and customs For instance, individuals in the northern regions are generally more frugal compared to their southern counterparts, highlighting the diverse cultural attitudes towards spending.
Third, competitive factors are related to the fact that the competitive pressure of the credit lending activities for banks is increasing and becoming more intense There is
Vietnam is currently experiencing intense competition not only within the banking industry but also from financial institutions, insurance companies, and large retail groups This competitive landscape is heightened as Vietnam becomes an attractive destination for major banking and retail players.
Scientific and technological advancements play a crucial role in banking activities A well-developed banking technical system enhances customer acquisition and provides numerous advantages for the bank Additionally, the evolution of payment and credit card systems significantly accelerates and streamlines transactions.
The legal environment plays a crucial role in ensuring order and stability in consumer lending activities, fostering their smooth development while minimizing potential issues that could impact the interests of involved parties and national interests, particularly in developed countries with established consumer credit laws The presence of clear, stringent, and reasonable regulations, along with effective enforcement and a robust judiciary, is essential for creating favorable conditions that promote the growth of consumer lending by commercial banks.
Government policies can affect two aspects of consumer loan lending, which are consumption and consumer loan lending
QUALITY STATUS OF CONSUMER LOANS AT TECHCOMBANK
OVERVIEW OF TECHCOMBANK – HANOI BRANCH
2.1.1 History of formation and development
Full name: Vietnam Technological and Commercial Joint Stock Bank
Address: Techcombank Tower at 191 Ba Trieu, Hanoi (Office area of Tower B Vincom Hanoi)
Type of business: Joint stock commercial bank
Website: www.techcombank.com.vn
Charter capital as of 2020: VND 35,049 billion
Operation license: No 0040-NH/GP dated 06/08/1993 of the State Bank
Founded in 1993 with a modest charter capital of 20 billion VND, Techcombank has grown to become one of Vietnam's largest banks Its success is driven by a commitment to addressing the evolving needs of its customers Today, Techcombank serves over 8 million individual and corporate clients through its head office, two representative offices, and 309 transaction points across 45 provinces The bank offers a comprehensive range of products and services that not only facilitate everyday banking transactions but also prioritize the financial security of the Vietnamese people.
Techcombank is dedicated to transforming the finance industry by enhancing the quality of life and empowering individuals to realize their potential Committed to delivering value to customers, employees, shareholders, and stakeholders, Techcombank aims to be the most trusted financial partner while fostering an exceptional work environment and providing attractive, long-term returns for shareholders.
Name of unit: Vietnam Technological and Commercial Joint Stock Bank - Hanoi Branch
Address: No 15 Dao Duy Tu, Hoan Kiem District, Hanoi
Type of entity: Joint Stock Commercial Bank
Techcombank's Hanoi Branch, originally the branch office of Techcombank, was established following the relocation of its head office to 70-72 Ba Trieu in January 2007 The transformation into a dedicated branch was driven by the need to adapt to a new business model in the commercial banking sector Previously, as the head office, Hanoi set the strategic direction for Techcombank; now, it plays a crucial role in fostering cooperative relationships with customers The branch focuses on implementing modern banking technologies and systems while prioritizing the development of skilled, enthusiastic, and honest personnel to enhance its services.
2.1.1.3 Basic functions and tasks of Techcombank’s Hanoi Branch a Function
Hanoi Techcombank performs the following main functions:
- Directly doing business in the area as decentralized by Techcombank
- Organize business operations and internal inspection and audit under the direction of Techcombank
- Balancing business capital and distributing income according to Techcombank's regulations
- Carry out staff organization, training, emulation and commendation as authorized by Techcombank b Basic Quest
Hanoi Techcombank engages in banking and related business activities aimed at generating profit while supporting the State's economic objectives The primary mission of the branch is to fulfill these essential tasks effectively.
- Mobilizing capital from socio-economic organizations, businesses and residents in the area through savings deposit accounts, current accounts
- Short, medium and long-term investment and loans, trust finance loans, guarantees for businesses and residents
- Consulting in the field of financial and monetary
The organizational structure of Techcombank’s Hanoi Branch is as follows:
Chart 2.1 Techcombank's organizational chart - Hanoi Branch
Source: General Administration Department of Techcombank – Hanoi Branch
The Board of Directors, consisting of the branch director and two deputy directors, is legally accountable for the branch's business activities They oversee all operations to ensure maximum efficiency and compliance with state regulations and the directives of the General Director.
- Corporate Customer Department : Planning, performing operations and providing products related to corporate customers such as receiving deposits from
35 corporate customers, lending to corporate customers, payment services, opening L /C, underwriting…
The Personal Customer Department specializes in providing tailored consulting and lending solutions for short, medium, and long-term financial products to meet the diverse needs of both individual and institutional clients This department also oversees the management of disbursed loans, ensuring timely principal and interest payments from customers.
The International Payment Department specializes in managing trade finance and overseeing both import and export activities, facilitating domestic and international transactions It offers a range of products and services tailored to payment and money transfer needs, while also ensuring effective management of international payments and the SWIFT payment system.
The Credit Administration Department is responsible for organizing and managing lending activities using both branch capital and other mobilized sources Its key functions include drafting various contracts related to credit and financing, ensuring proper notarization and registration of secured transactions, and managing the disbursement of funds The department also monitors and supervises the timely collection of principal and interest payments, conducts periodic checks before and after disbursement to ensure funds are used appropriately, and evaluates the effectiveness of investment projects and the financial health of customers to secure timely capital and profit returns.
- General Administration Department : Responsible for administrative organization, serving banking business, archives, internal and external transactions, personnel management, asset management
- Treasury Department : Manage the branch's treasury, manage cash flow in and out of the branch, support the operations of the capital department and the currency department
The Appraisal Department is responsible for conducting appraisals and re-appraisals for medium and long-term loan projects, as well as short-term loans, as requested by the Bank's Director It collaborates with the Credit Department to evaluate collateral assets and serves as the primary advisor to the Bank's Director on credit policies, operational guidelines, risk management strategies, and appraisal processes.
The Information Technology Department is tasked with network and system administration, prioritizing the safety and security of the branch's information It collaborates with the Head Office to enhance IT application activities in banking operations and to establish an effective management and reporting system within the bank.
The Finance and Accounting Department is responsible for managing payment accounting, inter-bank transactions, and internal expenditure accounting, as well as overseeing fixed asset accounting Additionally, it ensures the accurate completion of the branch's financial statements in compliance with the accounting regulations set forth by the State Bank.
The transaction office plays a crucial role in directly engaging with customers to facilitate various banking tasks, such as account openings, payments, deposits, withdrawals, money transfers, and foreign currency exchanges Additionally, it provides valuable advice to the Bank's Director regarding the development of banking services and is responsible for preparing business reports for the department Within the organizational structure of the transaction office, there are two primary divisions: the treasury transaction department and the credit department.
Table 2.1 Network of branches and transaction offices under Hanoi
1 Thang Long Transaction Office 19 Linh Dam PGD
2 Giang Van Minh Transaction Office 20 Minh Khai Transaction Office
3 Bat Dan Transaction Office 21 My Dinh Transaction Office
4 North Gate Transaction Office 22 South Hanoi Transaction Office
5 Au Co Transaction Office 23 Ngoc HaTransaction Office
6 Den Lu Transaction Office 24 Ngoc Lam Transaction Office
7 Dinh Cong Transaction Office 25 Noi Bai Transaction Office
8 Dong Xuan Transaction Office 26 O Cho Dua Transaction Office
9 Giang Vo Transaction Office 27 Tay Ho Transaction Office
10 Ha Dong Transaction Office 28 Thanh Nhan Transaction Office
11 Hoang Cau Transaction Office 29 Thanh Tri Transaction Office
12 Hoang Hoa Tham Transaction Office 30 Thanh Xuan Transaction Office
13 Hoang Quoc Viet Transaction Office 31 Ton Duc Thang Transaction Office
14 Huynh Thuc Khang Transaction Office 32 Tran Dai Nghia Transaction Office
15 Kham Thien Transaction Office 33 Tran Duy Hung Transaction Office
16 Kim Dong Transaction Office 34 Tran Quoc Toan Transaction Office
17 Kim Lien Transaction Office 35 Trang ThiTransaction Office
18 Lieu Giai Transaction Office 36 Tuong Mai Transaction Office
2.1.3 Business performance in recent years
Hanoi Techcombank, a key branch of Techcombank, has experienced significant growth in its business activities, leading to an expansion in scale and a diversification of its product offerings This evolution has enhanced the branch's ability to meet customer needs while simultaneously improving service quality The branch's business performance is detailed in Table 2.2.
Table 2.2 Hanoi Techcombank's business results
Earn profit 3256.3 3813.4 3075.9 557.1 17.1 -737.5 -19.3 Service fee collection 80.6 87.7 69.4 7.1 8.8 -18.3 -20.9 Non-interest income 359.0 388.1 222.1 29.1 8.1 -166.0 -42.8
Profit spending 1781.6 2159.8 1852.3 378.2 21.2 -307.5 -14.2 Service costs 55.3 73.2 43.8 17.9 32.4 -29.4 -40.2 Non-interest expenses 174.6 166.8 189.0 -7.8 -4.5 22.2 13.3
Source: Hanoi Techcombank Business Results Report
Hanoi Techcombank has experienced positive business results in recent years, with total income exceeding 3 trillion dong In 2019, the bank reported an income of VND 4,289.2 billion, marking a 16.1% increase from 2018 However, the Covid-19 pandemic significantly impacted its performance, leading to a sharp decline in income to VND 3,367.4 billion in 2020, a decrease of 21.5% This downturn reflects a broader trend affecting businesses across the economy due to social distancing measures and supply chain disruptions Lending activities remain the primary source of income for Hanoi Techcombank, contributing over 90% to its total revenue Despite a robust growth rate of 17.1% in 2019, interest income fell by over 19% in 2020, dropping to just above VND 3,000 billion.
Operating expenses in 2019 increased sharply compared to the previous year, with an rise of 19.3%, equivalent to nearly 400 billion VND The reason for this is that in
In 2019, the branch focused on enhancing facilities, upgrading technology, and boosting marketing efforts to meet the rising customer demand Despite the increase in operating expenses, the bank's profitability remained intact, as the growth rate of expenses was outpaced by the growth rate of total operating income.
CURRENT SITUATION OF CONSUMER-LOAN QUALITY OF TECHCOMBANK’S HANOI BRANCH
2.2.1 Consumer lending activities of the branch
2.2.1.1 Consumer-loan products of Techcombank – Hanoi Branch
In recent years, Techcombank has intensified its focus on consumer lending, aligning with the broader trends in the banking industry This strategic emphasis has led to an increase in customer interest and a significant rise in loan sales Currently, Techcombank offers various consumer loan products, including unsecured loans, catering to the growing demand for accessible financing options.
Techcombank offers consumer loan products that are quick, convenient, and require no collateral, catering to various personal spending needs for salaried individuals Key benefits include zero related costs, loan interest rates starting at just 1.2% per month, and no requirement for collateral or proof of income Customers can access personal consumption loans of up to 1 billion dong, with flexible repayment terms of up to 60 months, and enjoy rapid application approval and disbursement The product options include both overdraft loans and installment consumer loans.
Table 2.5 Describe the applied types of unsecured consumer loans
- Pay interest only based on actual number of loan days
- Backup limit, up to 12 months
- Convenient, simple to use right on the F@stMobile app
- Pay monthly interest on the last
- Apply by dish, time from 6-60 months
- Cash disbursement channel at the counter, transfer
- Debt collection channel: automatic debit, collection at the counter
- Principal pays monthly interest, according to the decreasing balance of the loan
Source: www.techcombank.com.vn Conditions for registration with unsecured consumer loans:
- Age: From 20 to 60 years of age
- Minimum income 5 million VND/month
- Registration documents include: personal profile, income source profile and credit profile b Flexible mortgage consumer loan
Techcombank offers a flexible mortgage consumer loan that enables customers to use their existing vehicles and real estate as collateral This loan product provides numerous advantages, including a variety of loan purposes tailored to individual needs, no requirement for notarizing the mortgage contract, and flexible repayment options based on either a decreasing balance or annuity Additionally, customers can benefit from a straightforward documentation process to demonstrate the purpose of capital use, with a loan-to-value ratio of up to 95% without needing to prove equity.
Customers can borrow loans for purposes such as paying tuition fees, living expenses, purchasing equipment, home furniture, medical examination and treatment, health care, tourism, financial compensating loans consumption, other
43 consumption Loan limit up to 1 billion VND including flexible mortgage consumer products and F1 personal account overdraft in which:
- The collateral is a car: Maximum limit 500,000,000 VND
- Collateral is real estate: Maximum limit 1,000,000,000 VND
The loan term with car collateral is up to 5 years, and with real estate collateral is 7 years
- Customer's age is from 18 years old and not more than 65 years old at the time of settlement
- The purpose of the mortgage loan is lawful and consistent with the Bank's regulations from time to time
- Having sufficient financial capacity and good debt repayment source to fulfill obligations to Techcombank
- At the time of borrowing, the customer had no bad debt at Techcombank or other credit institutions
To apply for a loan at Techcombank, you need to prepare a comprehensive application file that includes the loan application form and repayment plan, a household registration or temporary residence certificate, a valid ID card or passport, proof of monthly income, documents related to collateral or guarantees, and evidence demonstrating the intended use of the funds An overdraft loan requires additional collateral documentation.
An overdraft loan with collateral allows customers to access funds quickly for unexpected expenses without lengthy bank procedures By providing collateral, customers can apply for an overdraft limit on their personal accounts at Techcombank, enabling them to spend beyond their account balance anytime for various consumption needs.
This product has the following benefits and characteristics:
- Prime continuous overdraft simple and easy
- Time to time to maintain the limit from 03 months to 12 months
The borrowing limit for an overdraft account is determined by the combined income of both spouses and the value of collateral, with a maximum of 500 million VND Customers can utilize the overdraft account to exceed their available funds at any time within the granted limit Additionally, these accounts can accept deposits from various sources and allow transfers to third parties, such as sellers or service providers, for payment transactions.
- Interest is calculated on the actual loan balance and the actual number of days In case of spending and repaying on the same day, no interest will be generated
- Flexible principal by bank transfer/cash deposit and customers only have to fully repay at the time limit expires
- Collateral: Real estate in accordance with Techcombank's regulations from time to time or/and Savings book/savings account at Techcombank
To qualify for a loan at Techcombank, applicants must be between 18 and 65 years old at the time of settlement, possess adequate collateral, and have no outstanding bad debt with Techcombank or any other financial institutions For secured loans, necessary documentation includes a completed loan application and debt repayment plan, proof of residency, a valid ID or passport, evidence of income such as a civil servant recruitment decision or labor contract, and relevant collateral documents Additionally, Techcombank offers unsecured loans specifically for tuition fee payments.
Topica offers online courses designed to assist customers in enhancing their educational qualifications, including training certificates, university degrees, and English language skills Additionally, unsecured loans are available to help cover tuition fees, providing a valuable financial resource for those seeking to improve their academic and professional opportunities.
- Simple loan procedure, borrow up to 100% of tuition fees without collateral or deposit
- The maximum loan amount is equal to the value of the courses (within the Client's financial ability)
- The loan period is flexible according to needs, minimum 12 months and maximum equal to the duration of the course up to 48 months
- Disbursement at the time of approval Monthly interest based on actual outstanding balance with competitive interest rate
- Quick approval and disbursement time within 02 working days
- Get instant gift of Consumer Insurance from Prevoir Vietnam Life Insurance Company when the loan is approved
- At the time of loan application, the customer is 20 years old or older, at the time of payment ≤ 60 years old
- Having a labor contract with a term of 12 months or more or with an indefinite term
To qualify for income verification, individuals must demonstrate a total monthly income of 5 million VND or more, with payments made exclusively through a bank account Additionally, cash payments are accepted, and an income multiplier can be applied for customers employed in administrative and non-business agencies.
- Permanent residence / KT3 in the area where Techcombank is located
- Some other conditions as prescribed by Techcombank
To apply for a study-abroad loan with Techcombank, borrowers must submit several essential documents, including the loan application form and contract, a valid ID or passport, and proof of residency such as a household registration or temporary residence certificate Additionally, applicants need to provide their labor contract or equivalent documentation that verifies their position and seniority, along with a bank statement showing salary payments if not made through Techcombank Lastly, a successful online enrollment form from Topica and any other relevant documents from authorities may also be required.
Techcombank offers a study-abroad loan designed to provide financial support for students pursuing overseas training programs or programs with international components in Vietnam This product aims to assist with financial proof and cover expenses incurred during their studies, ensuring the highest quality of service.
International students can gain significant advantages from this product, including direct access to Techcombank internships, opportunities to become Trainee Administrators, and pathways to full-time employment at Techcombank Additionally, study-abroad loans offer unique characteristics tailored to support their educational journeys.
Students can secure a maximum loan limit covering up to 85% of their total course expenses, which includes airfare, tuition, visa fees, insurance, and accommodation Alternatively, loans may cover up to 95% based on the customer's financial documentation This support remains active throughout the learning process.
- Loan term: minimum 03 months and maximum 120 months
Techcombank offers a flexible debt repayment method where interest is paid monthly, while the principal is settled as per the agreement, but not at the end of the loan term To qualify for a loan, applicants must meet several criteria: they must be Vietnamese citizens, possess a matriculation certificate from a training unit with foreign elements in Vietnam or a foreign institution, and have personal capital of at least 30% of the total funding needed for tuition and living expenses, or at least 10% for financial proof purposes Additionally, borrowers must demonstrate a stable income to repay the student loans, have no outstanding debts with Techcombank or other financial institutions, and provide collateral such as property, valuable papers, or a third-party guarantee.
- Loan application form cum debt repayment plan (according to Techcombank's form)
- Documents proving the relationship of the borrower and the student abroad
- ID card, household registration (or temporary residence) of the borrower
- ID card, household registration (if not yet studying) or passport, visa of the person going abroad to study
When planning to study abroad, it is essential to provide proof of expenses, including documents such as tuition fee notices and living expense statements from overseas educational institutions Additionally, any relevant paperwork related to the preparation of school procedures should also be included, especially if you are in the initial stages of your study abroad journey.
- Proof of income to repay the borrower's debt
- Documents related to the collateral for the loan
47 f Loan for house purchase and repair
Currently, Techcombank has three types of loans, including loans for house purchase, house construction, house repair, and loans to build or repair houses for Vinhomes residents
Table 2.6 Techcombank's form of loan for house purchase and repair
Loans for construction, repair of houses
Loans for construction, repair of houses by Vinhomes residents
- Preferential loan interest rate from only 6.69%/year
- Early repayment fee is only from 0.5%-
- Loan interest rate after the preferential period is only from 10.5%/year
- Loan term up to 35 years
- Loans for house construction / home repair of customers or their family members/relatives
- Loans to compensate for the construction/repair of houses for customers or relatives
- Loans for construction/repair/offset and purchase of interior equipment of that apartment or relatives'
- Loan term: Minimum 1 year and maximum 20 years
- Loan limit: Building a house: up to 5 billion VND
- House repair: up to 3 billion VND
- Ratio of loans to total capital needs: 90%
- Ratio of loan to total value