(Luận văn HV chính sách và phát triển) improving efficiency of credit operations at vpbank from 2018 to 2020

ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE DISSERTATION Topic: “Improving efficiency of credit operations at Vpbank from 2018 to 2020” Supervisor: Mrs Dang Thuy Nhung Student: Tran Thi Thanh Hien Student ID: 5083101515 Class: CLC 8.3 Hanoi, June 2021 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE DISSERTATION Topic: “Improving efficiency of credit operations at Vpbank from 2018 to 2020” Supervisor: Mrs Dang Thuy Nhung Student: Tran Thi Thanh Hien Student ID: 5083101515 Class: CLC 8.3 Hanoi, June 2021 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Contents INTRODUCTION CHAPTER I 11 LITERATURE REVIEW ON EFFECTIVENESS OF CREDIT OPERATIONS AT COMMERCIAL BANKS 11 1.1 Overview of commercial banks 11 1.1.1 Definition of commercial banks 11 1.1.2 1.1.3 Function of commercial banks 12 Commercial banks activities 13 1.2 Credit operations at commercial banks 15 1.2.1 Definition of commercial bank credit operations 15 1.2.2 The nature and principles of credit 15 1.2.3 Classification of commercial bank credit operations 16 1.2.4 Role of commercial bank credit operations 18 1.3 Effectiveness of credit operation at commercial bank 21 1.3.1 Definition of effectiveness of credit operation at commercial bank………………… 21 1.3.2 Set of criteria for evaluating the bank's credit operations 22 1.3.3 Factors influence effectiveness of bank’s credit operations 28 CHAPTER II: 35 CREDIT OPERATIONS AT VPBANK IN THE PERIOD OF 2018-2020 35 2.1 Overview of VPbank 35 2.1.1 2.1.2 2.2 The process of formation and development 35 Organizational structure 37 Business results of the VPbank from 2018 to 2020 38 2.2.1 VPbank's capital mobilization results for the period of 20182020………………… 38 2.2.2 Bank lending performance at VPbank from 2018 to 2020 39 2.2.3 Financial results of VPbank from 2018 to 2020 42 2.3 Orientation of VPbank in the future 47 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.4 General provisions on credit operations at VPbank from 2018 to 2020………………… 49 2.4.1 Lending principles and conditions 49 2.4.2 Lending period 51 2.4.3 Credit interest rates 52 2.4.4 2.4.5 Lending process at VPbank from 2018 to 2020 52 Procedure for dealing with bad debts and provisioning risks 59 2.5 Credit operations at VPbank from 2018 to 2020 63 2.5.1 Analysis of the credit operations by customer type at VPbank from 2018 to 2020 63 2.5.2 Analysis of the credit operations by business lines at VPbank from 2018 to 2020 66 2.5.3 Analyze the situation of lending by guarantee type VPbank from 2018 to 2020 69 2.6 Evaluate the current status of credit operations 71 2.6.1 Achievements 71 2.4.2 Difficulties and shortcomings 72 2.4.3 Causes of limitations 72 CHAPTER III: 76 SOLUTIONS TO IMPROVE THE EFFICIENCY OF CREDIT OPERATIONS AT VPBANK 76 3.1 Some major solutions to improve the credit quality of VPbank 76 3.1.1 Solutions on extending credit scale and loan term 76 3.1.2 Solutions to minimize bad debt and prevent risks 77 3.2 Other supporting solutions 77 3.2.1 Solution to ensure transparency of financial information 77 3.2.2 Solutions to improve financial capacity 78 CONCLUDE 79 REFERENCES 81 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKOWLEDGEMENT During nearly four years of learning at the Academy of Policy and Development, I even have accumulated plenty of helpful knowledge and therefore the facilitate of the many teachers I prefer to give thanks to: First of all, I would like to sincerely thank Mrs Dang Thuy Nhung for guiding and helping me complete my graduation thesis I would also like to thank the teachers at the Academy of Policy and Development for teaching, training and helping me during my studies at the school Due to my own limitations, my thesis will inevitably make mistakes I would like to ask my teachers for suggestions to improve my thesis Student Tran Thi Thanh Hien LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES USED Oder Criteria for evaluating the bank's credit operations Loan performance of Vpbank from 2018 to 2020 Financial result of Vpbank from 2018 to 2020 Interest rate of Vpbank Credit operations by customer type at Vpbank from 2018 to 2020 Credit operations by business line at Vpbank from 2018 to 2020 Loan situation by guarantee form at Vpbank from 2018 to 2020 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF DIAGRAMS Oder Organizational chart of VPbank from 2018 to 2020 Mobilizing by type Credit granting process Bad debt handling process LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com INTRODUCTION The urgency of the subject Along with the increase of the country' economy from 1990 to present, experiencing 31 years of existence and development The bank normally and business banks especially are more and more declarative their position within the World economy The bank plays a crucial role in curb inflation, boosting the nation' economy, shifting the country' economic structure from agriculture to trade and services In conjunction with the overall development of Vietnam' banking industry, it's not possible to not mention the present limitations These are problems that require to run several solutions to beat and most of them in the main have credit problems Meanwhile, credit is one in all the foremost important elements to work out the existence and development of a bank Therefore, rising the potency of disposition activities is one of the key topics that business banks are implementing and providing effective solutions to market lending method and expand the market banking industry VPbank is additionally one of the branches of the bank system of Vietnam However, this drawback exists within the credit department is kind of massive because of the target and subjective factors which will be mentioned in the content of this essay From the limitations of the same banks, once a amount of LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com direct follow at the branch and with the assistance of the teacher, I made a decision to settle on my thesis topic as follows: “Improving efficiency of credit operations at VPbank from 2018 to 2020” Research purposes The purpose of this thesis is provide solutions to improve the efficiency of credit operations at VPbank Object and scope of the study - The article of the study: The credit operations of VPbank - Scope of research: From 2018 to 2020 Research methods There are two methods:  Data collection: Summarize information and analyze knowledge via websites, on-line newspapers  Data analysis: Using methods of collating, comparing and statistical data Research structure Besides the introduction and conclusion, the thesis consists of three chapters: Chapter 1: Literature review on effectiveness of credit operations at commercial banks LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Chapter 2: Effectiveness of credit operations at VPbank in the period of 2018-2020 Chapter 3: Solutions to improve the effectiveness of credit operations at VPbank towards 2025 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com receive the right to use Land to build houses Activities of international 8,377 0.00 3,259 0.00 613 0.00 100 290,816,086 100 organizations and agencies TOTAL 221,961,996 100 257,183,959 (Source: Balance sheets and business results of Vpbank for the period 2018-2020) Loan sales increased continuously over time When considering by business lines, Vpbank mainly lends for household business, namely: By the end of December 2020, VPBank had more than VND 290,816 billion of total outstanding loans (the entire amount that customers owe the bank at one point in time, including both principal and interest), of which loans are made Employment activities in households, production of physical products and services for self-consumption of households accounted for the largest proportion, with 113,042 billion VND, equivalent to 38.88% This bank also disbursed more than VND 36,924 billion, equivalent to 12.70% (accounting for the second highest proportion in the loan balance structure by industry) to lend in the real estate sector Personal loans to buy houses, receive land use rights to build houses are VND 36,334 billion, equivalent to 12.49% of the total loan balance 68 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Moreover, VPBank's proportion of loans for real estate business in 2018-2019 was in the range of 9-10% Personal loans to buy houses, receive land use rights to build houses are also in the range of 9-10% 2.5.3 Analyze the situation of lending by guarantee type VPbank from 2018 to 2020 Table 7: Loan situation by guarantee form at Vpbank from 2018 to 2020 (Union: million VND) Year 2018 2019 2020 TOTAL CREDIT 221,961,996 257,183,959 290,816,086 29,427,338 30,765,442 32,899,125 Ratio (%) 13.26% 11.96% 11.31% Loan sales 27,969,353 25,815,331 31,664,782 Debt 27,541,464 22,546,723 29,513,324 19,840,578 20,596,662 24,332,228 192,534,658 226,418,517 257,916,961 Ratio (%) 86.74% 88.04% 88.69% Loan sales 189,795,127 213,863,725 245,705,669 Debt 179,494,882 208,601,879 232,702,669 158,200,471 200,420,543 213,574,695 BALANCE Credit balance with guarantee Credit balance collection Average credit balance Credit balance without guarantee Debit balance collection Average credit balance (Source: Balance sheets and business results of VPbank for the period 2018-2020) 69 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Regarding loans in the form of guarantees at VPbank's branches, most of them are unsecured loans To ensure transparency and certainty, mortgages such as red books, large houses or cars are an integral part of the bank's lending process However, with the current form of lending at VPbank, it mainly lends to households from VND 200 million to VND 300 million, so people not need to mortgage assets according to the State's regulations The increase in loan sales in the past years proves that the bank is increasingly lending very actively, but there is a great potential risk when there is no collateral Specifically, in 2018, loan sales were VND 189,795,127 million, in 2019 was VND 213,863,725 million, an increase of VND 24,068,598 million compared to 2018 compared to 2020, an increase of VND 31,841,944 million Along with that, debt collection over the years also increased steadily Specifically, debt collection revenue in 2018 was VND 179,494,882 million, VND 208,601,879 million in 2019, an increase of VND 249,106,997 million compared to 2019 and VND 232,702,669 million in 2020 Regarding the average outstanding balance, in the period of 2018 - 2020, the average outstanding balance of unsecured loans is always much higher than that of secured loans It also proves that VPbank's loan quality is currently not good, credit risk is high, and solutions are needed to minimize this problem 70 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.6 Evaluate the current status of credit operations 2.6.1 Achievements - The Bank's loan sales have always remained at a stable level, the scale of outstanding loans has steadily increased over the years Short-term and medium, long-term credits quickly meet the capital needs of businesses and individuals - The collection of overdue debts and bad debts is focused properly; overdue debt classification, debt checking and comparison are conducted regularly Overdue debt ratio has always been focused on checking and adjusting at a safe level by the Bank - The Bank has implemented business outreach activities, instructing enterprises to prepare loan documents properly and in accordance with regulations in order to create conditions for businesses to quickly and smoothly complete the loan application procedures The bank gradually attached itself to businesses through the role of consultant - During the lending process, the Bank conducted customer checks before, during and after lending In addition, the Bank also considers market issues, consumer products, and income of customers within the permitted range - The Bank has selected staff with full professional expertise, responsibility and enthusiasm, and the credit bureau has created favorable conditions to help businesses business effectively 71 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.4.2 Difficulties and shortcomings - Credit activities only focus on lending to customers and discounting commercial paper Types of credit have not been developed synchronously, notably, guarantee activities are very few and financial leasing activities have not been implemented - Credits also focus on short- and medium-term loans to supplement working capital for SMEs Credit recipients are mainly individuals and small and medium enterprises As a result, loans are usually small in size and are often itemized - The rate of overdue debt tends to increase, which is a sign of increasing risks in credit activities - The ability to forecast market fluctuations is still limited, credit activities are still heavily influenced by external market factors, so they are still passive 2.4.3 Causes of limitations - Due to economic recession, wholesale banking activities have become more difficult, many commercial banks actively develop into retail business, the competition for market share of VPbank became even more fierce Some leading banks in retail banking such as ACB, Sacombank and Techcombank have clear development strategies and paths Now in the context of more and more competitors, especially those from abroad that have strengths in retail banking in 72 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com general and personal credit activities in particular, the more difficult for VPbank in order to compete and develop - Personal credit development was not synchronized from Head Office to branches and transaction offices Specifically, the product construction at Head Office still follows the traditional method, has not met the trend of market demand and has not had sales support tools for branches In the implementation at VPbank still has mentality of "afraid" of retailing because the procedure is cumbersome, time consuming, and labor intensive On the side of the branch, it is not active in looking for opportunities for cooperation and association with local partners such as investors of real estate projects, real estate trading floors, car showrooms for sale of personal credit products issued Transaction offices are also passive in receiving and obeying the instructions of the Head Office and branches to adjust credit policies to suit the trend of the market in each specific conditions and circumstances - The personal credit development strategy of commercial banks has many similarities in products, policies, governance This reflects the general development ground of commercial banks in Vietnam But it is also a difficult point in building its own strategy when it comes to building its own in public Especially for VPbank, when the image of a wholesale bank has gone deep into the subconscious of customers, the retail development that wants to have a 73 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com foothold in the market must create a positive difference compared to with competitors Traditional loan products in Vietnam are mainly single products to meet individual needs Vietnam's financial and banking market develops after quite a distance compared to other developed economies in the world On the basis of inheritance and promotion, the challenge for VPbank is to research and launch personal credit products in the direction of combining into a personal financial service package in accordance with habits and practices of Vietnamese This is a new direction to help VPbank to meet the market demand in Vietnam - The training of employees the management and customer relations work, though deployed, are really not systematic, lack of method, and have not caught up with development needs Typically, the leaders of VPbank are not aware of the importance as well as the need to deploy personal credit at the branch Branch leaders only have accounting expertise, but have no expertise and lack of experience in credit work, so they are not brave enough to review credit records The workforce working in the personal credit department is still thin VPbank has not yet planned the number of personnel needed for personal credit development in the short and long term Since then, it leads to sporadic recruitment and training of personnel, which is costly, and also does not timely meet the needs of developing and expanding sales 74 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com - Personal credit deployed at VPbank is restricted from lending products with collateral to be formed in the future Loan products restricted at transaction offices include Project home loans and Car loan Therefore, it does not satisfy customers' needs when seeking loans at transaction offices, and also limits opportunities for credit officers of VPbank when marketing and searching for customers To handle the needs of project home loans and car loans, the transaction office will receive and transfer loan documents to the branch This causes waste of time and effort of customers, thereby leading to the fear of approaching VPbank for the next time, in addition to showing a lack of professionalism in sales However, the strategy of developing retail in parallel with wholesale has been set out so that VPbank can compete and maintain its position in the integration period Therefore, in order to improve its competitiveness, VPbank needs to consider accepting a high level of risk (high individual bad debt ratio) to achieve great profits (large share of personal credit) 75 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER III: SOLUTIONS TO IMPROVE THE EFFICIENCY OF CREDIT OPERATIONS AT VPBANK 3.1 Some major solutions to improve the credit quality of VPbank 3.1.1 Solutions on extending credit scale and loan term In addition to focusing on lending to individuals, it is advisable to expand the customer segment with incentives such as reducing loan interest rates, at the same time developing products and services, improving credit quality, and strictly controlling the loans Maintain the proportion of medium and long-term loans accounting for 50% of total outstanding loans Credit growth according to plan, strengthening and improving credit quality control, ensuring safety, strictly managing cash flow of large customers and related customers Focus on lending to precedence topics of the Government and the State Bank Consumption loans with confined black credit, actively open overdraft cards Looking for clients to enlarge lending to prison entities consistent with the assigned plan 76 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3.1.2 Solutions to minimize bad debt and prevent risks Strictly observe guidelines on debt classification, provisioning and credit score danger managing in step with guidelines Detect capacity commercial enterprise troubles to take suitable measures to address, save you and save you risks, and direct debt evaluation and for every credit score officer Continue to coordinate with political and social companies in addition to with courts and judgment enforcement to get better money owed Actively examine horrific money owed and money owed which can be coping with risks, inspire and be strict with clients with late money owed to lessen the horrific debt ratio significantly Continue to recall and publish to the advanced financial institution to modify the hobby fee for late penalties, exempt or lessen hobby for clients of commercial enterprise families in difficulty, that specialize in measures to address horrific debt recovery Changes in regulations for unsecured creditors to lessen the danger of horrific debt and unstable debt 3.2 Other supporting solutions 3.2.1 Solution to ensure transparency of financial information In order to avoid the situation that enterprises have many different financial statements in for an accounting year, VPbank needs to request 77 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com enterprises wishing to borrow money from banks need to provide audit reports made by independent auditing companies or reports to be submitted to tax authorities for basis documents, credit appraisal information as well as credit approval In addition, to honestly report the data on the financial newspaper, it is necessary to have sanctions against enterprises that intentionally cheat or make false declarations 3.2.2 Solutions to improve financial capacity - Regularly analyze bad debt, outstanding interest, risk-treated debt, assign specific plans to each credit officer to increase revenue Through payment and money transfer services, foreign currency trading services to fulfill the target of non-credit revenue - To save costs, pay the norm for expenses such as: telephone, electricity and water, materials, printing paper, petrol ensure the difference between income and expenses according to the plan assigned by the superior bank Carry out profitable business, ensure to pay enough salary, shift meals and other regimes for officials as prescribed 78 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CONCLUDE With the research objective of the topic of improving credit quality in order to contribute to improving business efficiency and competitiveness of VPbank in the process of integration, the thesis has implemented the following contents Mainly as follows: Firstly, the thesis presents an overview of the basic theories of bank credit and the system of criteria for assessing bank credit quality Which refers to the concept, characteristics; the role of credit for actors in the economy; credit products; Indicators to evaluate the credit performance of commercial banks Secondly, the thesis delves into the current situation, solutions and measures to improve the efficiency of VPbank's credit operations in the period 2018 - 2020 At the same time, it also points out the limitations that need to be overcome and the causes leading to the limitations to the development of credit activities and improving the efficiency of credit activities at VPbank Thirdly, on the basis of the causes of limitations and development direction of VPbank, the thesis proposes solutions to improve the credit efficiency for VPbank 79 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com The above solutions need to be implemented synchronously and firmly in order to implement the bank's development strategy, contributing to improving competitiveness and maintaining the bank's position in the period of competition and integration This is not a new topic, but it is a matter of interest to VPbank in particular and of banks that previously focused on business activities in general Because in the current integration situation, fierce competition not only in domestic banks but also in foreign banks makes wholesale business no longer a comparative advantage In order to survive and develop, these banks are forced to actively shift to parallel development of retail banks in order to improve their competitiveness I look forward to the valuable contributions of scientists, teachers, brothers and sisters and friends to make the thesis more complete and complete Thank you very much! 80 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com REFERENCES Assoc.Prof Dr Nguyen Dang Don, 2015, Bank Credit, Statistics Publishing House Assoc.Prof Dr Nguyen Dang Don, 2014, Bank Currency, Statistics Publishing House Assoc.Prof.Dr Nguyen Dang Don, Dr Hoang Duc, Assoc.Prof Dr Tran Huy Hoang, Dr Tram Xuan Huong, 2015, Banking Currency, Statistics Publishing House Assoc.Prof.Dr Nguyen Dang Don, Dr Hoang Duc, Assoc.Prof Dr Tran Huy Hoang, 2005, Bank Credit, Statistics Publishing House Assoc.Prof.Dr Nguyen Dang Don, Dr Hoang Duc, Assoc.Prof Dr Tran Huy Hoang, Dr Tram Xuan Huong, 2015, Banking Administration, Labor and Social Publishing House Dr Nguyen Minh Kieu, 2017, Commercial Banking, Statistics Publishing House Assoc.Prof Dr Tran Huy Hoang, 2017, Administration of Commercial Bank, Labor and Social Publishing House The State Bank of Vietnam, Decision 1627/2001 / QD-NHNN, Decision 493/2007 / QD-NHNN, Decision 18/2007 / QD-NHNN Financial Statement of VPbank in 2018, 2019, and 2020 81 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 82 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... performance of Vpbank from 2018 to 2020 Financial result of Vpbank from 2018 to 2020 Interest rate of Vpbank Credit operations by customer type at Vpbank from 2018 to 2020 Credit operations by... operations by customer type at VPbank from 2018 to 2020 63 2.5.2 Analysis of the credit operations by business lines at VPbank from 2018 to 2020 66 2.5.3 Analyze the situation... process at VPbank from 2018 to 2020 52 Procedure for dealing with bad debts and provisioning risks 59 2.5 Credit operations at VPbank from 2018 to 2020 63 2.5.1 Analysis of the credit operations