NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM Internship Report JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM (VCB) Chuong Duong Branch Office Student’s name Nguyen Ngoc Quang[.]
NATIONAL ECONOMICS UNIVERSITY ADVANCED EDUCATIONAL PROGRAM Internship Report JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM (VCB) Chuong Duong Branch Office Student’s name: Nguyen Ngoc Quang Class: ADVANCED FINANCE Intake: 51 Advisor: M.S Le Duc Hoang Internship guide: Mr Tran Tai Bach Hanoi – 12/2012 Contents Abbreviation .4 List of tables List of diagrams Introduction Chapter 1: Overview of VCB and VCB Chuong Duong branch .8 1.1 Foundation and historical development of VCB 1.2 Foundation and historical development of VCB Chuong Duong Branch 1.3 Award and achievement 1.4 Organizational structure of VCB Chuong Duong Branch 1.5 Department duties 10 Chapter 2: Analysis of investment and operation in VCB Chuong Duong branch office 12 2.1 Mobilizing capital activities 12 2.2 Investing and lending activities 15 2.3 Forex trading activity 17 Chapter 3: Analysis of Credit Guarantee in VCB 18 3.1 The general term 18 3.2 The purpose of Credit Guarantee .19 3.3 The application of Credit Guarantee 19 3.4 Credit Guarantee principles 19 3.5 The nature of credit guarantees .20 3.6 Value Loan compared to the value to collateral 20 3.7 The type of collaterals 21 3.8 The types of pledged asset 22 3.9 Conditions for collaterals: The assets used to guarantee the loan must meet the following four conditions stated below: 23 Chapter 4: Risks in lending secured loan by real estate and how to prevent them in VCB 24 4.1 The advantages of lending loans secured by real estate 24 4.2 Risks of loans secured by real estate in VCB .25 4.2.2 Risk in credit analysis procedure .25 4.2.3 Risk in control of lending process 26 4.2.4 Risk in poor credit information system 26 Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 4.3 Solutions to prevent risks in credit guarantee in VCB 26 Abbreviation Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B VCB: Vietcombank VND: Vietnam dong SBV: State bank of Vietnam BOM: Board of management List of tables Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B Table 2.1: Capital mobilization structure .12 Table 2.2: Outstanding loans structure 14 Table 2.3: Revenue from Forex trading and commercial guarantee 16 Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B List of diagrams Diagram 1.1: Organization chart of VCB .9 Diagram 2.1: Capital Mobilization 12 Diagram 2.2: Structure of capital mobilization .13 Diagram 2.4: Credit quality of loans 15 Diagram 2.3: Structure of deposits by term of maturity .15 Diagram 2.5: Revenue from Forex trading 16 Diagram 2.6: Profit gained from Forex trading 17 Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B Introduction During my first internship from 5th November to 24th December, I was interned at Joint stock commercial bank Foreign Trade of Vietnam- 564 Nguyen Van Cu operation branch In more than one month internship, I have worked at customer department, did observe all credit process and learn a wide range of knowledge The goals of this report is to acknowledge the basic information about VCB (including organization structure, duty and responsible of each department), present business operation, financial performance analysis The report includes four parts: Chapter 1: Overview of VCB Chapter 2: Analysis of investment and operation of VCB Chuong Duong Office Chapter 3: Analysis of credit guarantee in VCB Chapter 4: Risks in lending secured loan by real estate and how to prevent them in VCB I want to say thank you to Mr Tran Tai Bach, Ms Nguyen Ngoc Diep- credit officers and Ms Nguyen Thi Phuong Chi-manager of customer department at VCB Chuong Duong branch for supporting and providing very useful data for me to complete my report Moreover, I am heartily thankful to my supervisor, Th S Le Duc Hoang, who has encouraged, supported and guided me to completing understanding of objectives Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B Chapter 1: Overview of VCB and VCB Chuong Duong branch 1.1 Foundation and historical development of VCB In 48 years of development, VCB has contributed to the economic stability and growth of economy, upholding the role of major commercial trading bank, as well as exerting the influence all over the financial community In half century of development, VCB has affirm its position as lead banks, offer various financial service in both international and internal market Besides are the marking important points of time that VCB has gone through: _ On 1/4/1963, VCB was established from the foreign exchange bureau (of the state bank of Vietnam) _ On 2/6/2008, as the first state-owned commercial bank selected for pilot privatization by government, joint stock commercial bank for foreign trade of Vietnam (Vietcombank) officially came into operation _ On 30/6/2009, VCB officially listed (stock code: VCB) on the Ho Chi Minh stock exchange (HOSE) _ On 30/9/2011, VCB successful concluded an agreement on strategic partnership with Mizuho corporate bank (MHCB) - a member of Mizuho financial corporation (Japan) by selling Mizuho 15% of its equity capital 1.2 Foundation and historical development of VCB Chuong Duong Branch VCB Chuong Duong branch was level two branch established on th October, 2003 This is the 49th branch of the Bank for Foreign Trade of Vietnam (Vietcombank) and the third bank branch level two of VCB in Hanoi is put into operation Located at 564 Nguyen Van Cu - Gia Lam - Hanoi Branch Chuong Duong will provide the most advanced available services that VCB has to residential and business community in this area In urban development strategy up to 2020, Gia Lam will be an open and emerging economic area, therefore, projects, industrial parks are also being planned and filled with strength of technology, as well as the availability of modern services, so the presence of VCB at this time in this area are very meaningful Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 1.3 Award and achievement _ The best domestic trade finance bank, Vietnam in 2011 awarded by The Asian Banker _ The Asian banker talent and leadership development award in 201 awarded by The Asian Banker _ The Asian banker promising young banker award, 2011 in Pacific Asia, awarded by The Asian Banker to Mr Pham Quang Dung –deputy general director of VCB _ The most famous brand in banking sector from the results of a survey jointly conducted by FTA Market Research Vietnam – official Vietnamese representative of Esomar (European Society for Opinion and Marketing Research) and Vietnam Chamber of Commerce and Industry (VCCI) _ VCB was ranked among the world’s top 1000 banks by The Banker _ The best trade finance bank in Vietnam awarded by global trade review (UK) _ Leading bank by national brand power index from the results of a survey conducted by Nielsen _ Vietnam strong brand name of 2011 voted and awarded by the Ministry of Trade and Industry and Vietnam Economics Times _ The biggest income tax payment bank in Vietnam among the 10 biggest corporate income tax payers ranked by Vietnam Report, VNR500 Advisory Board and Vietnam General Department of Taxation 1.4 Organizational structure of VCB Chuong Duong Branch VCB Chuong Duong branch structure is designed as the centralized model which is the modern model of banking system Here is the diagram illustrating the structure of organization Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 10 General Director Vice Director Customer departme nt Internatio nal payment departme nt Business and service departme nt Card payment departme nt Debt managem ent departme nt Human resource departme nt Accountin g Departme nt Business and service departme nt Business and service departme nt Transaction Department Diagram 1.1: Organization chart of VCB 1.5 Department duties General Director has the following functions _ Preparation for planning strategy for branch development _ Develop and manage the branch's business plan and the units related _ Ensure reaching business goals of the branch _ Co-operate with other departments and relating units to implement development of the branch network _ Manage, supervise, monitor activities of all department and employees Vice Director of the branch: Support for directors, represent Director to direct some works, sign related document on behalf of director and responsible for all the tasks assigned Customer department in branch includes both personal credit department and enterprise credit department: holds all the transactions with individual customers as well as enterprises In particular: Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 17 Diagram 2.3: Structure of deposits by term of maturity 2.3 Forex trading activity Table 2.3: Revenue from forex trading and commercial guarantee Criteria Revenue from foreign exchange currency Outstanding balance of commercial guarantee Gain (loss) from Forex trading business Unit Million $ Billion vnd Million vnd 2009 2010 2011 193.00 208.00 277.36 162.32 421.81 418.54 414.24 (6,238.41) 25.07 The revenue from Forex trading has increased hugely from 193 million dollar in 2009 to 277.36 million in 2011 (increased 43.7%) Nevertheless, the profit gained from forex trading just reached 25.07 million vnd in 2011 or even lost up to 6238.41 million vnd It is obviously that forex trading business is very risky and ineffective, so VCB Chuong Duong branch should consider maintaining this business and using this capital to invest in more profitable area Diagram 2.5: Revenue from Forex trading Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 18 300 Million dollar 250 200 150 277.36 100 193 208 2009 2010 50 2011 Diagram 2.6: Profit gain from forex trading 1000 414.24 2009 -1000 25.07 2010 2011 -2000 Million vnd Gain (loss) from Forex trading business -3000 -4000 -5000 -6000 -6,238.41 -7000 Chapter 3: Analysis of Credit Guarantee in VCB 3.1 The general term _ Credit guarantee: the credit officers use technique and measures to prevent risks, and use it as legal way to recover debts for the borrowers Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 19 _ Asset-backed loan is a loan, often for a short term, secured by a company's assets Real estate, accounts receivable (A/R), inventory, and equipment are typical assets used to back the loan The loan may be backed by a single category of assets or some combination of assets _ Mortgage loan: A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan _ Collaterals formed from loan: the assets used as collaterals that is bought partially or completely from debt of bank _ Guarantee by collaterals formed from loan: The loan is guaranteed by properties formed from loan capital to ensure the obligation to repay the loan to the bank _ Guarantee by third-party assets: (called the guarantor) is the guarantor committed to the use of his owned property, the value of the right to use his land, used to implement obligation to repay the debt on behalf of the borrower, if borrower fails to make repayment obligation 3.2 The purpose of Credit Guarantee _ To enhance the responsibility to implement the borrower's repayment commitments _ In order to prevent the risk of the failed borrower's repayment plan, or the occurrence of unforeseen risks _ In order to prevent the faults 3.3 The application of Credit Guarantee Base on the financial capacity of the borrower, the feasibility and effectiveness of the loan and the actual situation, the Bank may decide to apply one or several measures to ensure the prepayment of the loans, which are stated below: Guarantee loan by property _ Loans guaranteed by the property of borrower: _ Pledge, mortgage the property of the borrower which formed from debt capital of bank; _ Guaranteed by the property of a third party; Loan guaranteed in cases the loans are not secured by collaterals Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B 20 _ Bank actively seeks for customers qualified for loans not secured by property _ Loans unsecured by collaterals have to follow direction of State Bank and government of Vietnam 3.4 Credit Guarantee principles _ The Bank has the option to decide the loan guaranteed by the property or not and are responsible for their decisions _ If the loans are not secured by the property as direction from the Government, Government will be responsible for the causes of losses on loans _ If the loan is not secured by property, but in the period of using of loans, bank has found that borrowers violate the commitment in the credit agreement, the bank may require the borrower to pledge asset as collaterals or repay the debt before maturity _ In case the borrower or the guarantor fails to perform the obligation to repay the debt commitment, banks may handle collaterals to loans guarantee for debt recovery _ After handling the collaterals, if the borrower or the guarantor still does not meet repayment obligations, the bank may require the borrower or the guarantor continue to comply with the obligation to repay the debt commitments 3.5 The nature of credit guarantees _ Banks can apply one or more way of credit guarantee for a loan _ The value of the pledged property is determined at the time of signing the contract and the value of collateral must be greater than the value of the deb to obligation, unless the Bank and borrower reaches an agreement that using the collaterals as additional way for loans not guaranteed by property _ An asset that can be used as collaterals for multiple loans in a bank _ An asset that can be used to guarantee different loans at different banks but must meet the conditions specified in document1;2;3ofDecreeNo.85/2002/ND-CPof the Government Supervisor: M.S LE DUC HOANGNguyen Ngoc Quang – AF51B