The necessity of the topic
In today's world, the banking system in Vietnam has developed quite thoroughly, which plays an important role in the circulation of capital in the economy and contributes to socio-economic development The general operational principle of commercial banks is safety and profitability To ensure two principles above, commercial banks create operational process as well as compulsory requirements for all credit activities In particular,, in credit lending activities, commercial banks often require customers to have collaterals Based on collaterals, commercial banks determine the loan and the appropriate loan amount Besides, the collaterals are very diverse Currently, most of the collaterals for bank loans are often the real estate
Mortgaged real estate valuation is one of the most important operations in credit activities of commercial banks On the one hand, from banks' perspective, the valuation not only helps the bank to determine a reasonable loan level based on calculation and prediction of potential risks but also increases the competitiveness of commercial banks in establishing reputation and attracting customers in the field of lending, improving the quality of lending activities In particular, and credit activities in general of commercial banks From customers' perspective, the accurate and reasonable determination of the value of mortgaged real estate will accelerate capital conversion in production and business At the same time, it will build trust for customers in the quality of operations of commercial banks, which is truly considered as a "midwife" when customers need capital
Joint stock Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch has increasingly affirmed the prestige and market share in credit activities in the area With credit activities, the Branch always focuses on the valuation of mortgaged real estate However, there still exist many shortcomings in the mortgaged real estate valuation at the branch such as: customer relationship department is still involved in the real estate loan valuation without showing complete objectivity To ensure the safety of a loan, the value of the real estate usually accounts for 70% of the market value and this price scale is often lower than the real value of the real estate, which, as a consequence, influences the loan limit as well as the benefits that the borrower may have Moreover, the application of evaluation methods is still not flexible and re-evaluation requests are still popular
From the above practice, the author has chosen the topic: "Completing the valuation of
2 mortgaged real estate at Joint Stock Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch " as the research topic.
Objectives of the study
- Provide basic theoretical issues on the real estate valuation, mortgaged real estate valuation of commercial banks
- Analyze the current situation of mortgaged real estate valuation at BIDV - So Giao Dich
1 Branch between 2016 and 2018 Indicate the achieved results but also clarify the limitations and their causes in the valuation of mortgaged real estate at the branch
- Propose a number of solutions to improve the mortgaged real estate valuation at BIDV -
So Giao Dich 1 Branch by 2025.
Researched subjects
The subject of the research is the valuation of mortgaged real estate at BIDV - So Giao Dich 1 Branch.
Research scope
- In terms of content: The dissertation focuses on analyzing the reality of the real estate valuation in lending activities at BIDV - So Giao Dich 1 Branch through primary and secondary data Thereby, proposing solutions to complete the mortgaged real estate valuation at BIDV - So Giao Dich 1 Branch
- In terms of time: Data collected during 2016 - 2018
- In terms of space: Dissertation at BIDV - So Giao Dich 1 Branch.
Research methodology
- The method of data collection
+ Secondary data: To analyze and assess the status of mortgaged real estate valuation at BIDV - So Giao Dich 1 Branch, the author collects secondary data from textbooks, magazines, Internet, the research works related to mortgaged real estate valuation of commercial banks At the same time, the author collects from the business reports of BIDV - So Giao Dich 1 Branch; The current legal documents of the State and BIDV related to loan guarantee, property valuation and other legal documents related to the real estate management
+ Primary data: The author surveyed employees tubers a BIDV - So Giao Dich 1 Branch related to valuation activities mortgaged real estate The content of the survey aims to evaluate the real estate valuation at BIDV - So Giao Dich 1 Branch such as the compliance with the regulations on mortgaged real estate valuation, the reasonableness of the mortgaged real estate valuation method, the basis for valuating mortgaged real estate at
The data is collected and summarized and processed by Excel software
- Methods of information analysis include:
+ Descriptive statistical method: Summing up the collected data and data to describe the situation of mortgaged real estate valuation of BIDV - So Giao Dich 1 Branch, showing the advantages and disadvantages, the limitations, inadequacies and causes
+ Comparative analysis method: This method is used to compare statistical indicators, to compare the differences in the application of mortgaged real estate valuation methods
Comparison with absolute numbers: Through the results of the word between the values of the analysis between compared to the base between of economic indicators, the absolute numerical variation of the analytical criteria is found
Relative numerical comparison: From the results of comparison between the actual number and the original number, it has been adjusted according to a coefficient of the relevant norm in the direction of the scale of the analytical index to see reality compared to the base between how many percentages increase or decrease?
+ Method of graphing: The method of representing analytical criteria through chart types and graphs From the visual recognition of the shape of a straight line or a bar graph, It is possible to assess the trend, the degree of fluctuation of the indicators, or to evaluate the proportion of the constituent parts
+ Survey method: The author collects information from the survey subjects who are employees involved in mortgaged real estate valuation at BIDV - So Giao Dich 1 Branch Through the results of the survey, the author assesses the results and limitations in the real estate valuation activities at BIDV - So Giao Dich 1 Branch.
The structure of the thesis
In addition to the introduction, conclusion, list of references, , the thesis consists of 3 chapters:
Chapter 1 Rationale for commercial the real estate valuation of commercial banks Chapter 2 Actual situation of mortgaged real estate valuation at Joint Stock Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch
Chapter 3 Solutions to perfect the valuation of mortgaged real estate at Joint Stock Commercial Bank for Investment and Development of Vietnam – So Giao Dich 1 Branch
THEORETICAL BASIS FOR MORTGAGED REAL ESTATE
Overview of mortgaged real estate
1.1.1 Definition of Mortgaged real estate
The real estate is a commonly used concept in almost every country in the world In English people use the word “The real estate” In French the concept of the real estate (RE) is represented by the word “Immobilier”; China uses the term “Property” (assets associated with land) In Vietnam the concept of RE is expressed in Article 174 of the Civil Code:
“The real estate is immovable property including: Land, houses, construction works attached to land, including properties associated with such houses and constructions; Other properties associated with the land; Other properties prescribed by law” Identifying properties as real or the real estate is not simple Whether all the buildings and architecture are called RE; Similarly, are all properties associated with the construction work also RE? Even to all lands are considered RE? These difficulties often make business or the real estate appraisers have misconception about the true value of the RE consideration In order to avoid errors in RE evaluation, we need to study to identify the specific characteristics of RE, criteria to distinguish between RE and movable property, and other properties
Thus, RE are physical assets that cannot be relocated, and exist in long-term stability Thus, an asset is considered RE when the following conditions are met:
- Being a material element useful to people;
- Occupied by an individual or a community of people;
- Can be measured by certain values;
- Cannot be relocated or just limited relocated so that its properties, functions and morphology are not changed;
RE can be classified into the following groups:
- Land: Land is the first element and a basic component of RE Without land there cannot be RE and vice versa no kind of RE that is not tied to the land So the land itself is RE and it is also an integral part of other RE However, not all lands are RE Only those areas of land that are not relocated or relocated insignificantly, which have their own sovereignty defined, measured and quantified according to certain measurement standards
- Construction works associated with the land and properties attached to such works Permanent construction houses cannot be relocated, or are not moved significantly, construction works attached to land The properties attached are inseparable from that construction These constructions must be able to measure and quantify into values according to certain measurement standards
- Other properties associated with land such as perennial gardens; constructions for aquaculture, salt fields, tourism, recreation, sports and mining projects
The above delimitation of RE helps appraisers understand the essence of RE, thereby drawing the unique characteristics of the RE to have a basis for determining the value of the real estate assets
Regarding RE Mortgage in lending activity of commercial banks (CB)
RE is always an important guaranteed asset and accounts for a large proportion in the total collateral of commercial banks, including major properties such as land, houses, workshops, construction works attached to land and properties associated with construction works They may be existing assets, they may also be assets formed in the future (i.e assets formed during and after the time of signing the mortgage contract) such as income gained from using RE, assets formed from loan capital, construction works in the future
To be collaterals in lending activities, RE must meet the following conditions:
- Under the ownership of the mortgage at the time of signing mortgage transactions RE
- RE without dispute: RE when signing a security transaction, the owner of that RE is not sued by a third person at a court or competent State agency
- RE must be allowed to be traded and able to be sold: The real estate is not prohibited from circulation as prescribed by law at the time of signing the mortgage transaction For activities of mortgage lending of commercial banks, the requirements on the liquidity of the collateral is of paramount importance Therefore, besides the conditions on the legal nature of the real estate, the condition of the ability to transfer or the liquidity in the market of collateral is very interested in commercial banks
In order to determine the loan size based on customer requirements and the value of collateral, one of the first requirements in mortgage lending is to require the bank to valuate the real estate at the time of signing the guaranteed contract For each type of asset, depending on the nature, characteristics of the asset and the relationship with customers, the bank has different ways of evaluating RE is a kind of special property, diversity, the components of the real estate value is very complex and also very different than the property is the real estate or other assets, even in some countries it is considered
6 property the real estate is the power assets (i.e the assets expressed in the form of ownership and the right to use RE, not the RE itself) Therefore, determining the value of RE requires specific methods of determination
1.1.2 Features of mortgaged real estate
In addition to the characteristics created by an asset, the real estate assets have their own characteristics that other properties do not make the property different from other properties At the same time, it is also one of the factors that create the real estate value Therefore, appraisers need to consider how these characteristics affect RE values
First of all, RE is an asset attached to land or is a land that cannot be relocated, so it is always considered a fixed asset Therefore, the value and benefits of RE are associated with each specific position The location factor is not only determined by common geographic measurement criteria, but it is assessed primarily by the distance to centers, to public service points, to public facilities such as commercial, cultural, medical, educational and dependent on accessibility Also because RE has a fixed position and is associated with a certain location, the value and benefits of the real estate are affected by regional factors It is the duty of the appraisers to evaluate the impact of location factors on RE values such as natural, socio-economic and environmental conditions When there are changes in the above factors, the value of RE will change accordingly
The real estate is also a special property and individual The difference of RE is primarily due to the difference in plot location; different in structure and architecture, different in direction, different in landscape and exterior Therefore, when evaluating RE, it is necessary to pay attention to the difference of each RE individual, can not valuate and compare stamping between RE with each other
The real estate is a form of property with limited surface area size due to land area limits and location factors, which leads to the real estate shortage In addition, the supply- demand relationship of the real estate always unbalanced in the direction of supply is smaller than demand, leading to speculation about the real estate, so in the long term, the real estate value tends to increase, especially in the developing areas or potential development areas
The real estate is a type of property that has a very strong influence between adjacent the real estate and has a strong impact on the related socio-economic activities
When evaluating the real estate prices, it is necessary to take into account the impact when other the real estate projects will be born
In addition, RE is also a property of great value and long term existence in terms of
7 both the physical life and economic life of RE Therefore, when evaluating the RE, it is necessary to consider and calculate the crystallization expenses in the process of forming RE and the time to bring income to RE users
1.1.3 The role of mortgaged real estate
While customers mortgage the real estate, customers not only have capital for production and business but also can continue to use the mortgaged real estate, improving the efficiency of the real estate use At the same time, when customers come to mortgage the real estate to borrow capital, mortgaged real estate must have legal papers, so customers need to go to the state management agency to complete the documents This has reduced the real estate without legal documents while speeding up the issuance of papers and reforming administrative procedures
Valuation of mortgaged real estate of joint stock commercial banks
According to Oxford Dictionary: "Valuation is a professional judgement about how much money something is worth; it’s estimated value"
According to Fred Peter Marrone - Marketing Director of AVO (Association of Australia Evaluation) presented in a valuation training course in Ho Chi Minh City on 25/05/1999 “Valuation is the determination of the value of RE at a time, taking into account the nature of the property and the purpose of its valuation So pricing is applying the comparative market data that you collect and analyze, and then compare it with the assets you value to determine their value ”
According to the Law on The real estate Business, RE valuation is an activity of consulting and determining the price of a specific RE at a specified time The valuation of RE must be based on technical standards, nature, location, scale, real situation of RE and market price at the time of valuation RE valuation must be independent, objective, honest and compliant with law
According to Article 4, the Law on Prices was passed by the National Assembly of the Socialist Republic of Vietnam on June 20, 2012 “Valuation is the regulation of the competent State agency or the organization of individual production and business prices for goods and services”
From the above points of view, RE valuation is the determination of a specific
9 property value for a certain purpose, at a given time, taking into account the characteristics of the RE, potential economic factors in the RE market, according to certain methods and standards
Therefore, mortgaged RE valuation is an estimate of the value of mortgaged RE for the purpose of determining the loan amount to the borrower, limiting the risk to the lender at a specific time, taking into account the characteristics of RE and the potential economic factors in the RE market The assessed value of RE may be equal to, higher or lower than the market value The accuracy of the estimated price depends on the qualifications, competence and experience of the appraiser, the reputation of the valuation service providers and other social conditions
In author’s view, mortgaged real estate valuation is determining the value of mortgaged real estate In particular, by morphological currency at a specific time, as basis for determining the level of lending by banks based on the collateral is RE Valuation of mortgaged real estate is one of the important processes and the indispensable rules of lending by commercial banks in order to determine the legality of collateral RE and is the basis for inclusion of reasonable lending rates
1.2.2 Foundation and principles of mortgaged RE valuation 1.2.2.1 Foundation of mortgaged real estate valuation
First, it depends on the elements of the RE itself
The valuation mortgaged estate must be based on elements of the value of RE that surface area, location, space, environment, economic, social, natural, Based on the utility, purpose of use and exploitation of RE Based on the artificial form of the real estate such as structure, architecture of the real estate; the durability of the real estate; Psychology related to the current self of the real estate
Based on factors of the real estate location and the influence of the location:
Location of RE, the relationship between this RE in the overall with other RE to see this
RE position compared to other RE, which plays role of RE valuation
Second, it is based on market conditions
These are the competition of the market and factors of the economy, supply and demand for the real estate, the impact and economic development in general such as the expanding areas, the demand for the real estate in the center increases, with large investment capital amount, the demand for the real estate also increase
Third, it is based on legal basis
Including legal factors related to the real estate, laws not related to the real
10 estate itself, which are general provisions, regulations on the possession and use of the real estate functions, but provisions of law related to valuation activities and methods of determining land prices
1.2.2.2 Principles of mortgaged real estate valuation
The value of the real estate is formed by many impact factors such as use value, scarcity, demand, solvency When studying the valuation process, it is necessary to consider and apply the rules and principles to accurately evaluate the impact of such factors on the real estate valuation
The essence of the real estate valuation is the analysis of factors that influence the value formation process of a particular asset
Firstly, the best and most effective use principles
The best and most effective use of the real estate is to achieve the maximum level of usefulness in practically appropriate socio-economic circumstances, which can be economically, regulatory, financially and economically permissible, bringing the greatest value to the real estate
A property is considered to be the most effective and most effective if it shows at the time of valuation that the property is being used legally as well as giving the greatest net income or the ability to give the greatest present value of future The highest usage can persist continuously for a specified between of time The highest and most effective use reflected in the four faces is:
- Legality of use and income stream
- The present value of net income flows of all elements constituting the largest the real estate
- Time for long and stable income
- Satisfying common selection criteria suitable for size
Therefore, when conducting the real estate valuation, it is necessary to evaluate the current status of the real estate in order to estimate the best value of RE
Secondly, the principle of supply and demand
The value of a the real estate is determined by the supply - demand relationship of that the real estate in the market In contrast, the value of the real estate also affects supply and demand of the real estate The value of the real estate changes proportional to demand and inversely proportional to the supply of the real estate
The value of the real estate is determined by the supply-demand relationship, which has physical and socio-economic characteristics different from those of other the real estate
11 properties This attribute is reflected in the supply and demand relationship and the value of the real estate The price of the real estate must be determined at the time of the demand balance and must predict the factors that change the supply and demand of the real estate in the market
Thirdly, the principle of substitution
In case two or more the real estate can replace each other in the process of using the value of the property is determined by the interplay of the real estate to the real estate other The valuation of the value of the real estate is usually related to the value of other the real estate that can be replaced
When two the real estates are equally helpful, which the real estate offered at the lowest price will be sold first The upper limit of the real estate value tend to be set by the cost of buying a the real estate replace necessary equivalent terms without undue delay alter affect replacement
Factors affecting mortgaged real estate valuation of joint stock commercial
First of all, the different views of the Commercial banks about mortgaged real estate valuation: Each commercial bank pursues different operational objectives and in order to achieve that goal, commercial banks will identify business strategies to conform their operating conditions in each specific between Therefore, the views of each bank on mortgaged RE valuation are not the same With the view to expanding credit in the context of stable economic development, low-risk market, Commercial bank will reduce the conditions for lending including provisions on collaterals, as that the valuation of collateral assets in general and ensure estate particular will be eased and vice versa The Commercial banks’ viewpoint on valuation is also expressed through the viewpoint on development of mortgaged real estate activities With a view to mortgage assets only for the purpose of the loan, then the problem valuation estate mortgage will be banks as basis for determining the lending justified on the basis of risk mitigation, so prices valuation estate mortgage will far more than the market value of RE, and the mortgaged real estate valuation will bring the subjectivity of each bank, or for each type of bank units based on the level of risk determination and the rate of recovery of RE when customers cannot repay the debt, as well as the level of competition in the financial and monetary market
Second of all, the method to organize and the process of mortgaged real estate valuation: The organization of valuation is also a very important factor affecting the mortgage the real estate valuation, showing professionalism or unprofessionalism in the valuation process The close coordination between the components in the banking system
18 will make the organization of valuation become simpler Establishing a simple, clear and standard valuation process will shorten the time and cost of valuation work, thus affecting pricing too
Third of all, choose the appropriate valuation method: RE is the properties with special characteristics, especially, under the influence of many factors both objective and subjective Therefore, the choice of valuation method will directly affect the valuation result In the RE valuation, there is no most accurate method, only the appropriate and effective method that is on the scale of compliance with the applicable conditions and type of Mortgaged real estate, and it is more important to minimize costs in the valuation process Selecting an appropriate valuation method based on available and reliable information and data sources will help appraisers to offer a high level of trust and persuade customers to have a scientific basis and reduce the cost of valuation
Fourthly, the pricing information system: Although information is an objective factor from the market, the construction of the information system completely depends on the subjective of the appraisers and the strategy of each bank To determine the value of RE requires appraisers to regularly collect and process information Standard information systems, reliable, complete and timely information sources will be the basis for assessors to evaluate and analyze accurately, thereby greatly affecting the results and time for the RE valuation
Fifth, human resources for the valuation: Under any conditions, the human resources for the valuation work are also very important The ethical qualities and qualifications and experience of the valuation staff greatly influence the RE valuation process and results RE valuation is a difficult task, complicated and requires valuation officers must have expertise, be trained, knowledgeable about the real estate itself and the factors affecting its value, master the economic, technical and social knowledge to apply in the valuation process Besides moral quality is also a factor that influences and dominant greatly to the valuation by the valuation of the mortgaged real estate will affect the lives the value of loans and thus will arise the dominant relationships affecting the work of the appraisers and may falsify valuation results Therefore, if the valuation officer does not have good ethical qualities, for personal gain, he/she may collude with the mortgagee in order to raise the value of RE beyond its real value, thus affecting the quality and valuation results
Sixth, other subjective factors: In addition to the above subjective factors, there are other subjective factors that affect the valuation process and the quality of the valuation
19 work For example, the Bank's business strategy in stages; how to organize the mortgage; facilities system for valuation work: office, equipment, software system for information processing and interbank activities
Firstly, factors about natural conditions: Natural conditions are an objective factor, creating a relative and absolute position for estate, thereby affecting the value of RE which needs to be valued For example: RE in favorable locations, with good natural conditions, in accordance with the development conditions of estate, the value of RE will be valued higher and vice versa The RE have shape, size, other areas will also be different valuation
Secondly, the legal environment, mechanisms and policies: RE is the property under the strict management of the State and law Therefore, the provisions of the State property, use property, conditions estate involved in mortgage transactions will impact significantly on the process of getting collateral as RE and will affect the valuation The state policy in the framework of land prices and construction norms as well as the objective factors affecting the mortgaged real estate of valuation of Banks
Thirdly, the economic environment: The development of economic conditions will stimulate the RE market, causing the RE market price to soar Therefore, RE in areas with favorable economic environment, the use of RE creates a large income, the value of RE in those areas will be higher than in other areas In addition, as the economy develops, so does the demand for capital for production, thus increasing the amount of loans at commercial banks, which makes the number of valuations increasing Such economic environment as well as one of the objective factors have a direct impact to the mortgaged real estate valuation
Fourthly, the real estate market activties, development trends of financial the real estate market and stock market Valuation is the activity of establishment and development associated with market activities The stronger the market develops and operates, the more professional pricing is required For pricing mortgaged real estate is based on the nature and conditions of operation of the market is very important Therefore, the mortgaged RE valuation should be based on the development characteristics of each stage of the market RE Financial RE market occurs when the conversion of RE assets value into capital value and is traded on the market As such, this market is closely associated with the operation of the commercial banking system and credit institutions specialized in mortgage lending The valuation of mortgaged RE will be the basis for determining the value of capital for mortgage loans have been securitized
CURRENT SITUATION OF MORTGAGED REAL ESTATE AT
The process of formation and development
Joint Stock Commercial Bank For Investment And Development Of Vietnam - So Giao Dich 1 Branch (referred to as BIDV – So Giao Dich 1 Branch) is a special-ranked first-class branch of BIDV, is the legal representative of BIDV, has a seal, a summary of assets (the balance sheet) and is responsible for implementing BIDV's activities as authorized by the General Director and a dependent accounting unit in BIDV system
BIDV - So Giao Dich 1 Branch is a unit established under Decision No 76 QD/TCCB dated March 26, 1991 of the General Director of Vietnam Bank for Investment and Development of Vietnam Born in the context of the country in the early years of the transition, BIDV- SGD 1 was assigned important tasks, undertaking a great mission: Pilot new business models before deployment on the entire system of Joint Stock Commercial Bank for Investment and Development of Vietnam In particular, and the whole banking system in general In addition, BIDV - So Giao Dich 1 Branch is the direct business unit of the head office, performing strategic tasks of BIDV Currently BIDV - So Giao Dich 1 Branch is headquartered at Tower A of Vincom Tower 191 Ba Trieu, Hai Ba Trung District, Hanoi After more than 27 years developing, BIDV- So Giao Dich 1 Branch has grown stronger in terms of scale, service quality, and development stage of So Giao Dich 1 Branch can be divided into 5 main stages as follows:
- Phase 1 (1991-1995): This is considered to be the most difficult phase of So Giao Dich 1 Branch, when both trading and shaping and perfecting the newly established organizational apparatus
- Phase 2 (1996-2000): This is a between of strong transition to an independent economic accounting business under the market mechanism
- Phase 3 (2001-2005): Successful implementation of SIBS core banking system, complete the project of restructuring the entire organization, technological innovation and human resource development, preparing for the process International economic integration of banking industry and Vietnam's economy
- Phase 4 (2006-2008): The stage of restructuring operations in parallel with the organizational restructuring, actively increasing the credit scale for small and medium enterprises, promoting retail business
- Phase 5 (October 2008 - up to now): Successful implementation of transformation, restructuring of the organizational model according to TA2 model to minimize risks and specialize banking activities, improve competitiveness, meet the standards of an advanced bank
Since 1998, the Branch has been split into an independent accounting branch and by 2000, BIDV – So Giao Dich 1 Branch really moved into a multi-purpose business model During the past 27 years, since its inception, the Branch has gradually grown up, affirmed itself as a reliable address, a brand worthy of being the "Leading Bird" as CEO of BIDV has praised.
Organizational structure
In addition to expanding the network of branches, performing the tasks entrusted by BIDV, So Giao Dich 1 Branch has been continuously separating and successfully establishing level 1 branches under BIDV in the area Hanoi In 27 years of establishment and development, BIDV - So Giao Dich 1 Branch has split and established 07 level 1 branches of BIDV
Till December 2018, the organizational model of BIDV - So Giao Dich 1 Branch had 22 operational departments to fully perform the operations of commercial banks, including 5 transaction offices in the districts of Hanoi city Cabinet and branch are promoting activities to prepare for the establishment of new transaction offices and saving funds The organizational model of BIDV - So Giao Dich 1 Branch His continuing to improve in the direction of a modern, dynamic bank, improving competitiveness, contributing to BIDV to affirm the prestige and brand of a unit that is always "Share opportunities - Successful cooperation” with customers in the between of intensive integration into the international economy
The organizational structure of BIDV's So Giao Dich 1 Branch is shown in detail in Figure 2
Figure 2.1 Organizational structure of BIDV - So Giao Dich 1 Branch
Source: Human Resource Department of BIDV – So Giao Dich 1 Branch
BIDV - So Giao Dich 1 Branchwas established with the following three main functions:
- Uniformly check, evaluate and supervise development investment projects funded by the state budget, especially in the field of infrastructure construction With a nature of spreading throughout the country, not segmented by location, with different characteristics and requirements, these projects require strict control to ensure management efficiency as well as financial efficiency
- Test new operations, new structural projects before applying them to the entire BIDV system In the context that the economy is on the rise with the fluctuations of the financial market, with the appearance of many foreign banks, creating a fierce competitive environment, requiring quick adaptation but not accepting the error Testing to learn from experience and perfecting new businesses is always an important task to enhance the
23 competitiveness and minimize risks for BIDV
- In charge of business management in addition to the general management of the Head Office BIDV is increasingly growing and expanding in scale, so it is necessary to set up a unified and strict management and supervision system from the central to grassroots levels in order to improve the operational efficiency, in addition to timely detect and handle risks
From the above functions, the tasks of the So Giao Dich 1 Branch include:
- Effective use of mobilized credits
- Development of capital, assets and other resources
- Testing new products and restructuring projects of BIDV
- Manage the lists, debts, fees receivable - payables in the summary of assets within the scope of capital of the Department
- Perform obligations to customers as committed
- Receiving deposits: Savings deposits, demand deposits, time deposits, issuance of certificates of deposit, promissory notes, treasury bills and other forms of deposits
- Credit extension: Lending, discounting, factoring, financial leasing, guarantee
- Providing non-cash payment services: Performing cheque payment services, payment orders, payment orders, collection orders, collection orders, bank cards, letters of credit…
Business situation of Joint stock Commercial Bank for Investment And
Capital mobilization is always a matter of great concern to commercial banks and businesses Because only when the capital is guaranteed will create momentum for the rational use of capital for different purposes And to be able to create their own capital with the cheapest cost, the best way is to bank mobilize from the economy but mainly from economic organizations and people
Recognizing that problem with the motto of capital creation as the way to pave the way to create a solid growth capital floor BIDV - So Giao Dich 1 Branch has tried in capital mobilization with many different forms of mobilization to meet the needs demand of customers Therefore, the capital source of the bank is constantly growing
Capital raising results of BIDV - So Giao Dich 1 Branch are summarized
Table 2.1: Capital raising results of BIDV - So Giao Dich 1 Branch between 2016 - 2018
Mobilized from the financial institutions 12 268 12 946 13 376 678 5, 53 430 3, 32
Deposit from corporate customers 22 129 25 628 30 842 3 499 15, 81 5 214 20, 34 Deposit from people 4 947 5 346 6 247 399 8, 07 901 16, 85
Source: Summary report of 2016, 2017, 2018 of BIDV - So Giao Dich 1 Branch
In the between of 2016 - 2018, the economy in the recovery between, although the business environment was still difficult, fierce competition among banks in the context of the state bank tightly controlling market interest rates, but So Giao Dich 1 Branch has got quite good capital raising results The average growth of capital mobilization in the between of 2016 - 2018 reached 13.17%/year In 2018, capital mobilization increased by more than 6,545 billion compared to 2017, equivalent to a growth of 14.9% compared to
2017 In the 2016 - 2018 between, capital mobilization from financial institutions tended to increase slowly, the growth rate in 2017 reached 5.53% but in 2018 decreased to 3.32%
Instead, capital mobilization growth has mainly come from corporate customers Some traditional customers of the branch increased their deposits at the branch such as Viettel Military Telecom Corporation (increased VND 2,013 billion), Vietnam Oil and Gas Group (increased VND 1,011 billion), Vietnam Social Insurance (increased 784 billion) Due to its specific characteristics, BIDV - So Giao Dich 1 Branch has the advantage of relationships with major economic and financial institutions Therefore, the capital raised from financial institutions and enterprises is very large (accounting for 87% of the capital of the Branch) but this is also a disadvantage of the Branch, due to the fact that the
25 economic between was instability and difficulty, businesses lack capital for manufacturing and business, inevitably leading to a decrease in mobilization from these customers
Although the proportion is not large in the total mobilized capital, but in recent years, the proportion of mobilized capital from the population has tended to increase and make solid steps Capital mobilized from the population is assessed to be stable and less volatile than that of economic organizations In recent years, the Branch has combined various forms of flexible capital mobilization from direct mobilization at transaction locations of the branch to the organization of mobilizing working capital in residential areas to promote Strong capital mobilized from the population Although the absolute growth is not significant, in terms of growth, the average growth rate of population mobilization in the between of 2016 - 2018 is 11.66% per year This growth rate is still smaller than the average branch capital mobilization growth of 11.3%
Recognizing the importance of credit operations, the Branch always pays special attention to the development of credit activities With a long history of operation as a focal point for major customers of the system, officers are highly specialized in credit appraisal activities, operating in a densely populated area and relationships with many businesses, economic organizations throughout the country, abundant sources of capital mobilized The branch is fully able to meet the customer's complex credit and commercial financing requirements Credit operations of the branch in recent years are shown in Table 2.2:
Table 2 2: Credit performance of BIDV - So Giao Dich 1 Branch between 2016 - 2018
1 Debit balance according to customers
5 Ratio of medium and long-term loans to total outstanding loans (%)
Source: Summary report of 2016, 2017, 2018 of - So Giao Dich 1 Branch
Credit growth of the branch in recent years has been growing and at a high level, higher than the average of the whole system In particular,, the growth rate in 2017 increased by 23.43% compared to 2016; in 2018, an increase of 28.9% compared to 2017 The reason for this encouraging achievement is the policy of the branch and head office, in part to make the most of the strength and the position of the branch in the context of the economy is recovering and growing
In terms of customers, the branch primarily provides credit to corporate customers The proportion of outstanding loans to corporate customers often accounts for over 89% of total outstanding loans In particular,, the branch has a very high level of credit focus on the group of large corporate customers (the group of 10 customers with the highest debit balance, accounting for 57% of the total outstanding loans of the branch) This can help the branch grow credit quickly This can help the branch grow credit quickly However, there are limitations in the case of economic fluctuations, and the branch debt balance can be significantly reduced due to the change in business activities of customers Therefore, in the direction of the branch's credit operations, in addition to traditional businesses, the branch's large enterprise is still proactive and actively marketing to customers of small and medium enterprises, micro enterprises, FDI customers aim to diversify customers, gradually reducing the risk of focusing credit on big customers
Besides, the Branch also gradually increased the debit balance to individual customers and
27 households In recent years, although the outstanding loans to individual customers and households have increased in absolute value, the growth rate has tended to slow down In particular,: Debit balance to science and technology, households in 2016 reached 2,516 billion VND, in 2017 reached 3,426 billion VND (an increase of 910 billion VND), equal to 36.17% compared to 2016 In 2018, the outstanding debit balance for science and technology and households reached VND 4,237 billion, an increase of VND 811 billion, equal to 23.67% It is also one of the branches' risk diversification methods to reduce dependence on large corporate customers
In terms of credit terms, branches mainly provide medium and long-term credit products The ratio of medium and long term loans to total outstanding loans of the year was 54.9%; 63.4% and 67.8% This shows that the branch is still developing medium and long-term credit activities
In addition to the pressure on the scale of credit growth, the branch must also ensure the criteria of credit quality, safety and operational efficiency According to Table 2.2, the bad debt ratio of the branch is kept stable at less than 1% However, along with the credit growth, the bad debt ratio of the branch is also on the rise Therefore, in the coming time, the branch needs to pay attention to this bad debt balance to ensure the bad debt ratio next year is not higher than the previous year and to ensure stability at less than 1%
BIDV - So Giao Dich 1 Branch has implemented measures to improve the quality of products and services through consultancy, product introduction suitable for customers, bringing practical efficiency There is a flexible, competitive service fee policy to attract customers Focus on promoting products and services that bring in major revenue sources such as: Payment services; Guarantee; Trade sponsorship At the same time, continuing to expand services such as: BSMS card services, Internet Banking/Mobile Banking, Results from banking services for the between of 201 6 - 201 8 are summarized in Table 2.3:
Table 2 3: Service performance results of BIDV - So Giao Dich 1 Branchin the between 2016 - 2018
Source: Summary report of 2016, 2017, 2018 of BIDV - So Giao Dich 1 Branch
According to Table 2.3, net service revenue in the between 201 6 - 2018 achieved a stable growth, the average net service income grew by approximately 2% per year Fee sources accounted for a large proportion, such as payment service fee, guarantee fee collection, trade finance fee collection, which had good growth, partly because the branch has a good customer base, and economic recovery Fee sources such as credit fees, card service fees, insurance premiums, e-banking, bill payment, electronic tax collection, etc saw a slight growth, although the proportion of total service revenue was modest
With the aim of increasing the proportion of service fee collection compared to the traditional revenue sources from credit activities and capital mobilization, diversifying service fee revenue sources, the Branch has promoted the deployment of products and services such as: Credit card products, international debit cards, payroll services; Combining insurance products with credit activities, Western Union money transfer, Internet Banking, mobile banking, Smart banking, BSMS, VNTopup, Bankplus Although they are all small products and services, these are products with
29 good cross-selling ability, high potential for development and a stable source of fee collection for banks
2.2 Analyze the status of mortgaged RE valuation at th Joint Stock Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch.
Types of mortgaged real estate at the Branch
In fact, there are much the real estate was taken out as collateral for loans from commercial banks However, to ensure the safe operation of the bank as well as to create favorable conditions for the RE supervision and management, according to the staff survey results in BIDV and according to principles of mortgaged types of RE at banks including: Houses and construction works attached to land and land use rights, which are prescribed by mortgage law
In the period of 2016 - 2018, BIDV - So Giao Dich 1 Branch lent with mortgaged RE such as: Apartments; Agricultural and forestry land; Production and business land, business premises, trade centers; Land and assets attached to land and other the real estate
Table 2.4: Debit balance for mortaged the real estate of BIDV - So Giao Dich 1 Branch between 2016 and 2018
Land used for production and business, business premises and trade centers 1,911 513 2,378 642 3,071 846 Residential land and properties attached to the land 24.181 7,914 29 671 11,352 43.125 16.145
Source: List of security assets for the between of 2016 - 2018 of BIDV
Chart 2.1: Structure of debit balance under the collaterals of BIDV - So Giao Dich 1
Source: Structure of debit balance by collaterals for the 2016-2018 between of BIDV
As Chart 2.1 shows, outstanding loans with secured assets accounted for a large proportion of total debit balance In particular,, the ratio of debit balance with collaterals in
2016, 2017, 2018 reached 88%, 92% and 95% respectively The proportion of debit balance without collaterals accounts for only 5% to 12% in years In particular,, the proportion of debit balance with the real estate collaterals accounted for 71.32% to 83.34%, and the trend increased gradually, the following year was higher than the previous year
In particular,: According to Table 2.4, the situation of lending with the real estate at the branch tends to increase over the years If in 2016, the total outstanding loans with secured assets were the real estate was VND 18,074 billion, by 2018, it would have reached VND 33,617 billion, an increase of nearly 1.76 times compared to 2016 This was a between of economic development so the Branch's debit balance also grew significantly
The real estate of the branch is mainly residential land and properties on land; Apartment
Agricultural and forestry land; Production and business land, business premises and trade centers only account for a small proportion This is quite consistent with the city of Hanoi.
Bases and principles of mortgaged RE valuation at the branch
Currently, the valuation of mortgaged RE at BIDV - So Giao Dich 1 Branch
Dư nợ không có tài sản đảm bảo Dư nợ có BĐS đảm bảo Dư nợ theo
Debit balance with Other collaterals v v
Debit balance with The real estate collaterals
31 is based on the following legal documents:
- 2013 Land Law and Government Decrees on the implementation of the Land Law;
- Decree No 102/2017/NĐ-CP, September 1, 2017 of the Government on registration of security measures;
- Decision No 1161/QD-BXD, October 15, 2015 of Ministry of Construction on announcing construction investment rate;
- Decree No 153/2007/NĐ-CP issued by the Government, October 15, 2007, providing guidelines for a number of articles of the Law on RE Business;
- National Assembly's Resolution No 19/2008/QH12, June 3, 2008, on piloting of foreign organizations and individuals to buy and own houses in Vietnam;
- Decree No 51/2009/NĐ-CP 2009 of the Government guiding the implementation of a number of articles of the National Assembly's Resolution No 19/2008/QH12, June 3, 2008, on piloting for foreign organizations and individuals to buy and own houses in Vietnam;
- Decree No 102/2010/NĐ-CP issued by the Government, October 1, 2010, guiding a number of articles of the Enterprise Law (Decree 102);
- Decision No 24/2005/QĐ-BTC, November 1, 2005 of the Minister of Finance on the issuance of valuation standards 03 Vietnam (TDGVN 01, 03, 04);
- Decision No 77/2005/QĐ-BTC, November 1, 2005 Promulgating 03 Criteria of Vietnam appraisal of prices (VNR 02, 05, 06);
- Decision No 129/2008/QĐ-BTC of the Minister of Finance promulgating 06 standards of appraisal of Vietnamese prices (phase 3);
- Decree No 71/2010/NĐ-CP, June 23, 2010 guiding the Housing Law;
- Circular 16/2010/TT-BXD, September 1, 2010, detailing and guiding the implementation of a number of contents of Decree No 71/2010/NĐ-CP, June 23th, 2010 The Government details and guides the implementation of the Housing Law;
- Decree No 69/2009/NĐ-CP, August 13, 2009, additional regulations on land use planning, land prices, land acquisition, compensation, support and resettlement issued by the Government onions;
The provisions of the mortgaged RE are specified in the legal documents of the Government, the State Bank and at commercial banks frequently amended and supplemented for the purpose of completing the legal framework for the valuation of mortgaged RE lending in the credit institutions in general and in some domestic joint-stock commercial banks particularly Currently, BIDV - So Giao Dich 1 Branch appraises
RE according to the documents issued by the State Bank:
- Circular No 36/2014/TT-NHNN, November 20, 2014, stipulating limits and prudential ratios in operations of credit institutions and foreign bank branches This Circular provides for prudential limits and ratios in operations that credit institutions and foreign bank branches must regularly maintain, including: the minimum capital adequacy ratio; Credit limit; Solvency ratio; The maximum ratio of short-term funds used for medium and long-term loans; Limits on capital contribution, share purchase; The ratio of outstanding loans to total deposits
- Circular No 18/2016/TT-NHNN, June 30, 2016, amending and supplementing a number of articles of Circular No 21/2012/TT-NHNN dated June 18, 2012 of the State Bank of Vietnam Governor of the State Bank regulates lending and borrowing activities; definite purchase, sale of valuable papers between credit institutions and foreign bank branches
- Circular 06/2016/TT-NHNN, May 27, 2016, amending and supplementing a number of articles of Circular No 36/2014/TT-NHNN dated November 20, 2014 of the Government The Governor of the State Bank shall stipulate the prudential ratios and ratios for operations of credit institutions and foreign bank branches
- Decision No 8955/QD-PC dated December 31, 2014 of the General Director of Bank for Investment and Development of Vietnam regarding Regulations on security transactions
- Decision No 96/2014/QĐ-UBND dated December 29, 2014 of Hanoi City People's Committee, promulgating the regulations on prices of land types in Hanoi city, applicable from January 1, 2015 to December 31, 2019
(2) Based on the elements of RE itself
* Conditions for land use rights:
- Having a certificate of land use rights, ownership of houses and properties attached to land or other equivalent documents such as: Certificates of land use rights, Certificates of ownership of houses, and land use rights Use residential land or other equivalent documents
- Papers proving that the total exemption or fulfillment of financial obligations (payment of land use levies, payment of land rent) has been made to the State and the paid land use levy does not originate from the State budget (if any)
- Land use right without litigation
- Land use right not be distrained to guarantee judgment
- The remaining land use term is at least 03 years from the time the customer
33 requests the loan, at least 2 years until the loan is due The remaining land use term is determined based on the land use term recorded in the Land Use Right Certificate
* Conditions on properties attached to land:
- There is a certificate of ownership of the house or a certificate of ownership of the construction work (in case the property attached to the land has not yet been certified ownership, the part of the property attached to that land is an indivisible division separate from the land use right and the owner of the property must make a commitment to the bank that the part of the property attached to the land is also part of the mortgage assets at the bank
- Not located in areas banned from construction under the provisions of construction law
- RE on the street/street frontage in urban districts, wards of cities directly under the Central Government, cities under the province where BIDV's Business Units are located or on the street/street in inner town towns/town where BIDV is headquartered RE at the road surface according to the List of routes accepted as collaterals at BIDV, issued from time to time;
- RE on the road and street of urban districts and wards of cities and provinces where BIDV has not had its head office;
- RE in an alley/alley/alley/exhaustion (hereinafter referred collectively to as alley) if it meets the following requirements: RE in an alley in urban districts of Ho Chi Minh City Hanoi/TP Ho Chi Minh City has the smallest cross-sectional width from the road/street to the mortgaged RE minimum of 1.5m and the distance from the curb/street to the RE does not exceed 1km (the right road/street) to be officially named, if not already named, regarded as 1 lane)
- There are wide cross section gateway smallest from the curb to the mortgaged real estate minimum 2m and distance from the road surface of the road on the list of routes considering the real estate as collaterals in BIDV to mortaged realestate does not exceed 500m
- RE in the alley in communes, suburban Hanoi/TP Ho Chi Minh City: The minimum cross-sectional width from the curb to the mortgaged real estate is at least 3.5m and the distance from the road surface of the road is in the list of roads considering RE as collaterals in BIDV to mortaged realestate does not exceeding 300m
- RE in the inner lane of other cities where BIDV's Branch/Transaction Center is
34 located: Minimum width of the lane cross section from the edge of the road in the List of routes to mortgaged RE 2m and minimum distance from the pavement on the list of routes considering the real estate as collaterals in BIDV to mortaged realestate does not exceed
Current situation valuation method at the Branch
In mortgaged real estate valuation, BIDV – So Giao Dich 1 Branchhas also applied common valuation measures The principal method of comparison is the comparative method and cost method to determine the market price of collaterals The value of mortgaged real estate is calculated by the average between the price bracket according to the above calculation method
43 and the market price determined by the valuation officer and not exceeding K times the price bracket issued by the People's Committee of the province or city (by year) The K coefficient issued by the General Director in each between is based on the level of development of each locality, for example, currently specific in some districts in Hanoi are prescribed as follows:
+ Districts of Ba Dinh, Dong Da, Hai Ba Trung and Cau Giay: K = 4;
+ Thanh Xuan, Long Bien, Hoang Mai and Tay Ho districts: K = 3.5;
Maximum loan rate: For RE positions 1.2, the maximum loan rate is 75% of the valuation price; while RE is at 3,4 position, the maximum loan rate is 70% of the valuation
Position 1 is the parcels of a land user and has at least one side adjacent to the road or street
Position 2 is the land parcels of a land user, at least one side adjoining alleys, alleys and alleys and has the smallest lane cross section of 3.5 m or more
Position 3 is the parcels of a land user, with at least one side adjacent to the alley and the smallest alley from 2 m to 3.5 m
Position 4 is the parcels of a land user, at least one side adjacent to the lane and the smallest cross-section less than 2m
The important basis in the real estate valuation of a branch is the market value of the real estate The market value of a the real estate is understood as the estimated price to be traded in the market at the time of valuation, between one party being a buyer willing to buy and one side being a seller willing to sell in an objective and independent buy-sell transaction Under normal commercial conditions, there are specific elements of the real estate: Front, parcel of land, technical infrastructure, surrounding social infrastructure the real estate This market price is determined based on successful transactions of the real estate that have similar conditions to be valued, probably via newspapers, internet, direct investigation around the real estate valuation, the company's prices on the real estate, the real estate brokerage offices
Although the valuation methods have been applied in line with the RE valuation of the branch, the valuation results are still not quite as expected by the branch In particular,: the number of documents with deviations in the location of mortgage the real estate; The number of the real estate valuation records still needs to be adjusted and tends to increase
Chart 2.2: Number of documents with deviations in the location of mortgaged real estate of BIDV– So Giao Dich 1 Branch
Source: BIDV Risk Management Department, BIDV - So Giao Dich 1 Branch
According to Table 2.2, the number of RE records that have a deviation in the location of RE tends to decrease significantly In 2016, the number of files in the RE position was misleading was 28 records, in 2017 it decreased to 23 records and in 2018 continued to decrease to 14 records
In the between of 2016 - 2018, the number of mortgaged RE valuation dossiers subject to price adjustment still remains, although accounting for a negligible proportion but also causes customers' displeasure when having to adjust
Table 2 8: The adjusted number of the real estate valuation records of BIDV–
Total number of RE valuation records 16,431 20,330 26,894 3,899 23.73 6.564 32.29 The number of records must be adjusted
The proportion of records must be adjusted
Source: BIDV Risk Management Department, BIDV - So Giao Dich 1 Branch
According to Table 2.8, the number of documents subject to the value of the real estate must be adjust in recent years has been decreasing The number of the real estate
Số hồ sơ BĐS sai lệch về vị trí BĐS
The number of documents with deviations in the location of RE
45 appraisal dossiers required to be adjusted in 2016 is 18, accounting for 0.11%, in 2017 reduced to 16 records, accounting for 0.08%, by 2018, there were only 13 lakes records must be adjusted, accounting for 0.05%
Thus, the statistics on the number of re-valuated files required to be adjusted show that: the number of cases of rehabilitation records resulting in accounting for a very small proportion of the total valuated records performed The above results demonstrate the role of mortgaged RE valuation becoming more and more important The above results show that the mortgaged real estate valuation at the branch is gradually improving, contributing to improve the efficiency in the work of lending at the branch.
Current situation of mortgaged RE valuation process at the Branch
Mortgaged RE valuation is a part of the credit granting process BIDV - So Giao Dich 1 Branch1 Therefore, after credit officer analyzes the customer's loan profile about the loan capacity, the purpose of the loan, the financial capability, reputation If all are in accordance with the bank's business policy and acceptable risk level, the Branch will conduct document assessment and mortgage the real estate valuation
According to BIDV's regulations, at all BIDV's branches, all valuation request documents must be reviewed by the Head of Business Department before being transferred to appraisers, credit officers are not allowed to conduct the valuation by themselves without the direction of Branch leaders A valuation team was set up including the Head of Corporate Banking Department, the leadership of the credit division, and the credit department staff The credit officer directly conducts the valuation of security assets, which are the real estate (houses, residential land) and assets, machinery, valuable papers of customers
According to BIDV, the mortgaged RE valuation in BIDV - So Giao Dich 1 Branch1 is conducted according to the process includes the following steps:
Figure 2 2 The real estate valuation process of BIDV - So Giao Dich 1 Branch
Source: BIDV Risk Management Department BIDV - So Giao Dich 1 Branch Step 1: General identification of RE in need of valuation and determination of market or non-market value as a basis for valuation This is the first step in the mortgaged RE valuation process, so BIDV has a fairly high accuracy requirement, any small errors that occur in this step can lead to serious deviations of the results of valuation activities
In this step, appraisers need to clarify the basic legal, economic and technical characteristics of the assets to be valued These factors must be built in the most general way to ensure that specific information collection can be implemented, without missing any elements
Regarding the purpose of valuation: The valuation department must clearly determine that the purpose of valuation is to provide credit to customers through mortgage Determining the purpose of accurate valuation, the valuation work may also take place more smoothly because it is possible to determine the most appropriate method of valuation
When making a general determination of the RE, it is necessary to clearly identify the conditions for determining the object of valuation These constraints will govern the entire valuation activity The pricing department must make assumptions and conditions that are limited to:
- Requirements and purposes of securing loans through mortgaged RE
Overview of the real estate to be valued
PROCESS OF THE REAL ESTATE VALUATION
Step 6: Report the results, create the valuation records
Evaluate the real estate valued
Step 3: Field survey, collect information
- Legal restrictions, use of RE as mortgage loan
- Rights and obligations of the pricing department under the transaction contract
- Restrictions on information related to mortgaged RE
The setting of restrictions and constraints of the valuation department must be based on policies in accordance with the applicable laws and regulations
After determining the restrictions related to RE valuation, the valuation officer needs to determine the time for RE valuation The time of valuation ensures that the valuation process can take place quickly, on schedule, and create prestige for valuation activities BIDV has quite specific provisions for determining the time of valuation
- The determination of the time of valuation needs to be made immediately after signing the valuation contract and the evaluation of the value of RE subject to valuation is given within the permitted scope of the contract
- Determining data sources needed to be priced
- Determining the basic value of RE
On the basis of general identification of characteristics and types of RE, valuation measures, the clarification of value types as the basis for valuation: Market value or non- market value
It can be seen that, at step 1, BIDV requires the appraisers to know the most general overview of RE valuation as well as the time to conduct valuation Knowing these factors will help the appraisers with an initial basis to conduct RE valuation
After determining the time of valuation, the next task must be done by a valuation plan to determine the work to be done and the time to perform each specific task as well as all the time for valuation
The content of the plan must include the following basic tasks:
- Identify appropriate supply and demand factors with functions, characteristics and rights attached to RE to be valued in the market
- Identify documents to be collected about RE to be valued, documents about RE to be used for comparison
- Identify and test sources, ensure they are reliable and must be verified
- Develop research progress, determine the order of data collection and analysis, and allowable duration of the order to be performed
- After completing the second step, the appraisers have basically grasped the contents to be valued as well as the order of collecting information about these contents
Step 3: Field survey, collect information
* Field survey Field surveys are very important for valuation The information obtained from the field reality of RE subject to valuation is the information directly and decisively affecting the valuation results
When surveying site information, appraisers need to survey information about the actual location of the RE, make comparisons with the location on the registration map, and describe the legal description related to the RE The content to survey about RE in the field includes:
- Exterior and interior details of RE including land area and architectural structures This information needs to be directly measured and appraised by appraisers
- Considering the surrounding scenery, infrastructure of the area (water supply and drainage, telecommunications, electricity, roads )
- Type of architecture, structure, modernity, age of works, status of maintenance, repair
- For works in progress, valuation must be carried out in combination with field site surveys and reports on surveys and constructions of investors and contractors who are conducting construction works
- During the survey process, to have full evidence for the valuation, appraisers can take pictures of RE in different forms and directions
In addition to information and data collected from a field survey, the valuation department must collect other information related to RE It is the information surrounding
- Information related to the cost of formation, cost of construction, use history and income of comparable properties
- Information about market supply and demand factors, market participants, dynamics of buyers and potential sellers in the market
- Information about the legal status of RE
- Information, data on economy, society, environment, factors affecting the specific value of RE (address, cadastral map, planning, administrative border, infrastructure floor )
For the real estate valuation, information must be obtained from a variety of sources including, for example, previously recorded purchases, asking prices, sales
49 methods, buying and selling conditions, forms of payment, and transaction volumes ; practical information from the field; information through interviews with RE companies and associated services, information from banks, credit institutions, press releases, information from legal documents
Evaluate the status of mortgaged RE valuation at Joint Stock Commercial
Valuation of mortgage the real estate at BIDV- So Giao Dich 1 Branch has achieved certain results:
Firstly, the real estate valuation has provided the credit department with data on the value of mortgaged RE as a basis for consideration and proposal of appropriate loan decision and also the basis for implementing credit management tasks, which is secured by the loan regulations of the State and BIDV;
Secondly, it has served the signing of loan security contracts in accordance with regulations All collaterals in general and mortgaged real estate In particular, at the branch are valued before concluding the mortgage contract The value of mortgaged real estate is
54 determined based on agreement and agreed by the parties The value of the mortgage real estate is clearly stated in the loan security contracts and it guarantees the loan amount including the principal, interest, fees ;
Thirdly, due to the choice of a simple valuation method and adherence to the regulations of the State, the unit price framework issued by the state, the valuation work is always carried out quickly, smoothly and with a legal basis;
Fourthly, the real estate valuation helps for the management of assets securing loans generally are conducted quickly and more often, the registration of guaranteed transactions is done thoroughly resolve the situation the validity of mortgaged real estate contracts and the validity of a third party, contributing to the implementation of BIDV's goal of credit safety and risk reduction;
Fifthly, the re-valuation every 6 months helps the bank to monitor the loan more closely, timely capture the situation of customers' assets, in case the value of the real estate is reduced in time, it is required that customers add collaterals to ensure the value of the loan; In addition, the between the real estate revaluation helps the bank to better understand the market situation of the real estate value, thereby bringing out the market's trend in subsequent valuation times
Despite of the achieved successes and certain results but in the work of the real estate valuation, there are still some following limitations:
- In terms of the application method and implementation process: The comparison method used in the valuation of mortgaged real estate at BIDV – So Giao Dich 1 Branch does not have comparable the real estate, does not make adjustments but only refers to the market value at the same time; The value of mortgaged real estate is bound by BIDV's regulations on the real estate valuation
The process of valuation of mortgaged real estate at BIDV – So Giao Dich 1 Branch is still sketchy, just descriptive and not strict Compared to the theory of the valuation process, there are still many shortages and the work to be done at stages is not specified
Although there is basic training in valuation, valuation is a very difficult field, requiring basic skills and a deep understanding of other disciplines related to the value of
RE, land such as construction industry, furniture industry,.etc to have a more accurate view of RE - land, thereby giving its value more accurately But most of the staff in the
55 valuation department are very young, sometimes they do not have enough experience to handle, so they still face certain limitations in determining the value of RE - land
- In terms of information for the valuation: Information for the valuation is still limited, mainly based on information provided by the mortgagors Due to the short time of valuation, valuation officers do not have conditions to collect and process information related to RE in need of valuation On the other hand, the information storage and exploitation of BIDV is still limited Currently there is no software to store information so that officers in the whole system can exploit and refer to each other's information
Appraisers can only find out information from the mortgagors or learn through all kinds of mortgaged real estate that you have participated earlier valuation
- In terms of quality: The quality of mortgaged real estate valuation is not high, does not reflect the real value of the real estate at the time of valuation Most of the mortgaged real estate is valued based on the price frame issued by State agencies, not based on the market value of the real estate in each stable market between
2.3.2.2 The causes of the limitations
* Causes from the bank Firstly, the application of valuation methods is not flexible, rigid and does not follow any standard Currently when conducting mortgaged real estate valuation, Branch officers mainly base on comparative method and cost method, refer to the land unit price brackets, property compensation unit prices issued by the State to value mortgaged real estate without basing on market prices If so, the field value basis is for reference only and not used or used not much in the results of the mortgaged real estate valuation of the Branch
Secondly, awareness of the Branch officers about the mortgaged real estate valuation is not really adequate Most of the workforce involved in mortgaged real estate valuation considers this as a secondary task, without fully evaluating the significance and important role of mortgaged real estate valuation and management as a banking contributing to ensure credit safety and improve the efficiency of the real estate resources utilization On the other hand, the work of emulation and commendation for the departments and officers who perform the task of mortgaged real estate valuation is not available but still considers it a task to do so it does not create encouragement for officers to do well the work of valuation, sometimes the appraisers still have a superficial mentality, a form of getting things done
Thirdly, according to the survey result, the level of staff directly working on the valuation and management of Mortgaged real estate is still limited due to the nature
56 concurrently Most officers are not trained intensively about the valuation and management of Mortgaged real estate but only trained purely about financial and banking operations (21.43% of feedbacks stated that the staffs are high-qualified; 64.29% stated that the staffs are at average level, and 14 28% stated that the staffs are quite low- qualified) Meanwhile, business valuation and management of Mortgaged real estate is very complex task, requiring the immediate implementation must have in-depth knowledge, trained in a professional manner
Fourthly, according to the survey result, the current valuation system of the branch has not been completed yet, the valuation team concurrently with members who are the leaders of the operations departments and the valuation staff are credit officers There is no independent valuation department from Headquarters to Branches The pricing is mainly done by the valuation officers who are also a specialized credit officer and supervised and re-inspected by the leaders of the department and leaders of the branch based on reports, documents and information collected by the valuation officers is provided Therefore, the real estate valuation at the Branch is subjective of the appraiser, lack of control and sometimes leads to the disagreement of the valuation results among the members of the valuation team
* Cause from the external environment According to the survey of valuation staffs, the external causes that the Branch faces when evaluating price including:
SOLUTIONS TO IMPROVE THE VALUATION OF
Development orientation of Investment and Development Bank of Vietnam -
To implement the directive Investment and Development Bank of Vietnam in Resolution No 1008/NQ-BIDV dated December 10, 2018 on the adoption of goal- oriented, business plan targets in 2019's the whole system; Directive 80/CT-BIDV dated January 18, 2019 on the action plan for 2019
Stemming from operational practices, BIDV - So Giao Dich 1 Branch sets the business targets of the between 2019-2023 as follows:
- Compliance with the orientation direction of the Investment and Development Bank of Vietnam and the Banking sector in the province in banking activities
- Credit growth is safe, effective, focused fiercely bad debt recovery processing, potentially risky debt, off-balance sheet debt, ensure stable NPL ratio below 1%
- Branches also strengthen to control credit growth, growth must be safe and efficient; ensure a reasonable structure - credit proportion in the direction of gradually increasing the proportion of non-state loans, increasing the proportion of loans with secured assets; ensure bad debt ratio according to assigned plan
- Diversifying customer base and products & services, promoting retail activities, developing SME customers; Diversify and restructure revenue sources, strive to increase the proportion of income from non-credit services compared to 2018
- Focus on strongly developing modern banking services to serve as the foundation for the development of digital banking in accordance with BIDV's development strategy in all aspects of business activities, processes, products, Distribution channels are in line with the development trend of Industry 4.0
- Continue to expand and improve the operational efficiency of branches and transaction offices of BIDV - So Giao Dich 1 Branch
- Enhance the competitiveness of BIDV - So Giao Dich 1 Branch in the area, increase market share of business activities
- Increasing business efficiency to ensure life and income for employees
- Ensure absolute safety and safety of treasury, security, fire and explosion at the agency
3.1.2 Orientation to improve the mortgaged RE valuation
The general development direction of BIDV - So Giao Dich 1 Branch is to increase the proportion of loans with collaterals, i.e., the valuation of collaterals in general and the real estate valuation In particular, in the future requires further improvement and improvement
In particular, BIDV - So Giao Dich 1 Branch wants to enhance the completion of mortgaged real estate pricing process towards specialization, accuracy and speed Ensure that the valuation process can maximize its role as well as be a solid framework for banking valuation
The real estate valuation activities regularly capture the changes in the RE market to ensure that information used for the most accurate mortgaged real estate valuation These changes must be documented and analyzed In particular, to ensure the most up to date pricing information
Branch building and improving the system of information on mortgaged real estate as well as information on mortgaged real estate valuation activities in the bank, ensuring this is the information reliable, accurate and fast quickly
The methods applied in the valuation process mortgaged real estate have high scientific basis, the ability to accurately calculate the value large the real estate These methods must have clear rules for the application of mortgaged RE valuation In addition to the comparison method and the cost method still being applied, the branch can apply some other methods such as profit method, surplus value method, etc to enhance the valuation operation for special properties
When conducting the valuation, the branch must elaborate the contents of the mortgaged RE valuation clearly, fully and concisely These valuation contents are divided into different categories related to the mortgaged RE which needs to be priced to ensure it can fully grasp the information and value of the mortgaged RE
The branch also develops a complete pricing plan for each valuation dossier, ensuring that the construction pricing plan is built with high feasibility, completeness and accuracy
Strengthen assessors both in quantity and quality Currently, the branch is focusing on expanding the mortgage loan should the workload of staff increased pricing many, especially for the valuation of mortgaged RE This requires the branch to strengthen its personnel in terms of both quantity and quality valuation through recruiting new staff and
60 training to improve the qualifications of former staff
In addition to the increase of officers, the branch has also developed regulations on responsibilities of valuation officers in general and valuation of the real estate In particular, at each stage and for each valuation document, a clear mechanism of reward, sanctions
In addition, the branch also aims to increase the use of scientific and technological advances in mortgaged RE valuation to improve the efficiency of valuation activities.
A number of solutions to improve the mortgaged RE valuation at Joint Stock
3.2.1 Big data application in mortgage real estate valuation
Big Data is a term for processing a very large and complex data set that traditional data processing applications cannot handle Big data includes challenge such as analysis, collection, data monitoring, search, sharing, storage, transmission, visualization, querying and privacy Big Data size is getting bigger and more important in banking operations and especially the current 4.0 industry
As analyzed above, in the assessment of mortgage real estate of the Branch, the difficulties encountered by the branch include difficulties from loan appraisal and approval capacity, difficulties from organizing the process of setting up mortgage prices, difficulties from the weakness of the credit information infrastructure In particular, the information element is more necessary than ever, because it directly determines the price The value of biotechnology must be assessed In order to have high accuracy valuation results, it is necessary to have high quality information, which is expressed in completeness, clarity, timeliness, suitability and testability To complete the information collection work, a number of solutions may be used as follows:
First of all, it is necessary to identify the information to collect: Information about RE comparisons; market transactions as a basis for comparing, analyzing, evaluating and adjusting information on legal documents of the State and local governments affecting the right to exploit benefits of RE; general information about economy, politics, culture, society, etc It helps the appraisers avoid the possibility of omitting the information, especially important information
Classify information and identify the primary & secondary information are considered as a basis for the real estate valuation Making a form includes a detailed list of information collected including basic criteria such as location, legal basis, use purpose, street type, road width, facade, depth, infrastructures, properties on land, purchase status,
61 transaction time and sources of information Comparative information needs to be collected from three RE or more, appraisers need to invest time to collect the real estate that has been traded on the market, while information of the real estate for sale is only for reference The source of information collected is usually from field surveys, databases, specialized agencies, banks, government, internet, newspapers Information collection sources must be identified so that the reliability of the information can be checked In addition, it should choose appropriate sources of information, should not collect information from sources that are not reliable enough, Appraisal officers are not able to check as a basis for valuation The selection of these sources of information is only for reference or reluctant Information to collect is a lot and can be obtained from many different sources, but not all information is really reliable After gathering the information, the appraisal officers, with their own experience, combined with the actual market analysis, should retest the information to ensure that the information is accurate and complete reliable
The collection of information is very important but the handling and analysis of new information is the work of decision directly to the final result of RE valuation activities Information analysis work must be conducted in a scientific and detailed manner, In particular,:
When analyzing properties, it is necessary to identify main characteristics and standards of the real estate which may affect the value of RE in need of valuation
Since then, appraisal officers proceed to remove information too petty, unnecessary to focus on evaluating fundamentals, avoid too far from target evaluation or assessment is too general appraised RE
In comparative analysis, the appraisal officers needs to consider and assess the origin and nature of market evidence, consider whether the transactions are market transactions or not, on the basis of “people voluntary sale and voluntary buyer "or not
When estimating the remaining difference of construction works, it is necessary to have a clear basis In some cases, to get accurate results, it is possible to hire domestic and international experts in the field of construction, architecture
When arguing to arrive at a final outcome, the appraisers needs to consider relevant market factors that affect the value of RE in order to make appropriate conclusions, because the nature of the market is diverse and constantly changing
The information element is an important basis for applying RE valuation methods, especially direct comparison method In fact, information gathering is a complex task,
62 prone to certain shortcomings In order to complete the analysis and evaluation of information, in addition to the above specific measures, the core issue is to improve the qualification of the appraisal officers Therefore the appraisal officers in the process of mortgaged RE valuation must be very careful and have certain professional experience
Build Big Data providing information to the real estate valuation is a solution should also be done at BIDV – So Giao Dich 1 Branch This is of great significance in helping the appraisal officers to find quick reference information as well as increase the work intensity but still ensure effective accuracy In the market mechanism, information about RE ever-changing, volatile, so to be able to assess accurately the value of the mortgaged real estate, the need to store and analyze the information from market schools, given the forecasts about housing a RE future At the same time, it is possible to search, get information quickly, accurately and with more bases than the current internet search
3.2.2 Completing and strictly complying with the process of valuation for mortgaged RE
The mortgaged RE valuation process plays a very important role in the lending process at BIDV – So Giao Dich 1 Branch Strict adherence to the process of appraising
RE is very necessary for the current situation of BIDV – So Giao Dich 1 Branch A rigorous, scientific appraisal process will save time and cost for branches and customers On the other hand, it is possible to limit accidental or intentional errors from the appraisal officers, making customers feel professional and trust the branch's SA results
The appraisal officers should comply fully with the steps of the real estate valuation process that BIDV made provisions for the entire system, not arbitrarily cut off a certain process or a certain stage of evaluation This is an important solution in improving the professionalism as well as the accuracy of the valuation results
The process of appraising the real estate at a branch which wants to be effective needs to be clearly specified in the steps of conducting the real estate valuation In particular,:
Clarify the legality of RE to be appraised after receiving documents Legal documents (sovereignty, construction permits, design documents) must be valid original documents for the appraisal officers to examine, compare and use more effectively, avoiding risks to the branch when customers forge papers At the same time, identify clearly the documents to be used in the valuation process, legal documents, documents as evidence and comparative bases; Identify the agencies and organizations that can and are
63 responsible for providing reliable resources for valuation