TABLE OF CONTENT TABLE OF CONTENT LIST OF TABLE AND FIGURE CHAPTER 1 INTRODUCTION 1 1 1 Rationale 1 1 2 Research objective 2 1 3 Research methodology 2 1 4 Scope of research 2 CHAPTER 2 OVERVIEW OF IN[.]
TABLE OF CONTENT TABLE OF CONTENT LIST OF TABLE AND FIGURE CHAPTER 1: INTRODUCTION 1.1 Rationale 1.2 Research objective .2 1.3 Research methodology 1.4 Scope of research CHAPTER 2: OVERVIEW OF INDIVIDUAL LENDING IN COMMERCIAL BANK 2.1 Commercial bank and lending activity in commercial bank 2.1.1 Commercial bank 2.1.1.1 Definition of commercial bank 2.1.1.2 Functions of commercial bank 2.1.2 Lending activity in commercial bank 2.1.2.1 Definition of lending activity 2.2 Individual lending in commercial bank .6 2.2.1 Definition of individual lending 2.2.2 Characteristics of individual lending 2.2.3 Benefit of individual lending 2.2.4 Classification of individual lending 10 2.3 The quality of individual lending in commercial bank 13 2.3.1 Concepts about the quality of individual lending in commercial bank 13 2.3.2 Indicators of evaluating the quality of individual lending 14 2.4 Factors affecting the quality of individual lending 14 2.4.1 Internal factors 15 2.4.2 External factor .17 CHAPTER 3: RESULT/ ANALYSIS OF DATA .19 3.1 Overview of Vietcombank 19 3.1.1 History 19 3.1.2 Geographical Distribution 19 3.1.3 Products & Services .20 3.2 Overview of Vietcombank - Operation Center 20 3.2.1 Foundation 20 3.2.2 Organizational structure .21 3.2.3 Products and Services 23 3.2.4 Business performance result .24 3.3 Situation of business operation of lending in VCB – Operation Center in recent years 24 3.3.1 Lending activity 24 3.4 Analyzing the situation of individual lending in VCB- Operation Center 28 3.4.1 Types of individual loan 28 3.4.2 Process of individual lending applied in VCB Operation Center .30 3.4.3 Credit scoring of VCB Operation Center 32 3.4.4 Current situation of individual lending at VCB Operation Center 34 3.4.4.1 Volume of individual lending 34 3.4.4.2 Business performance of individual lending in VCB Operation Center 35 3.4.3.3 Individual loans structure by borrowing purposes 36 3.4.5 Evaluation of individual lending quality in VCB Operation Center 37 3.4.5.1 Overdue debt ratio 37 3.4.5.2 Debt collection ratio .39 3.4.6 Assessment of the status of individual lending at VCB Operation Center 40 CHAPTER 4: RECOMMENDATION AND SOLUTION TO IMPROVE INDIVIDUAL LENDING QUALITY AT VCB OPERATION CENTER .42 4.1 Solution to improve individual lending quality at VCB Operation Center 42 4.1.1 Concerning loan products 42 4.1.2 Advertising campaign 42 4.1.3 Diversifying individual lending products 43 4.1.4 Raising awareness of bank officers of individual lending 43 4.1.5 Improving quality of banking human resources 43 4.1.6 Improving operational performance 44 4.1.7 Strengthening risk management 44 4.1.8 Preparing development plans in the long run 44 4.2 Recommendations .45 4.2.1 Recommendations to government 45 4.2.2 Recommendations to borrowers 45 LIST OF TABLE AND FIGURE Figure 1: Indirect Lending Relationships 12 Figure 2: Organizational structure 21 Table1 : Bussiness performance result of VCB Operation Center .24 Figure 3: Total outstanding loan 25 Table 2: Classification of outstanding loan at VCB Operation Center 26 Table 3: Bad debt situation at VCB Operation Center 27 Table 4: Real estate loans categories 28 Firgure 4: Individual lending process in VCB Operation Center .30 Figure 5: Volume of individual lending at VCB Operation Center 34 Table 5: Business performance of individual lending in VCB Operation Center 35 Table 6: Individual loan structure by borrowing purposes 36 Table 7: Overdue debt of individual lending at VCB Operation Center .37 Table 8: Structure of overdue debt according to time 38 Table 9: Debt collection ratio .39 CHAPTER 1: INTRODUCTION 1.1 Rationale The economy of Vietnam has transformed from a backward agricultural economy to a modern intensive Standard living of people is becoming higher which leads to the increase of demand for individual borrowing to serve the procurement of goods and services Propensity of people are now not only satisfied with having enough food and clothes but also entertaning and fashion In fact, when individuals need money to consume or invest before they have ablity to pay, they will seek for lending sources with reasonable interest rate Thus, commercial banks offer individual lending to temporarily solve financial problems of customer Due to the economic crisis recently, corporation lending becomes more diffificult and risky for commercial banks while individual lending is a very potential credit field for banks to enhance their profitability and enlarge their customer network In addition, the population ofour country is estimated about nearly 90 millions in 2014 Younger population not only weilds increasing purchasing power but as far as acquiring personal debt is concerned Clearly, it is a very potential individual lending market for commercial banks to exploit For bank itself, individual lending is one of effective ways to expand their operation and earn profit The quality of individual lending represents how the banks can effectively lend their capital to gain profit and collect loans from individuals on time while they still ensure their competitivenss in lending market Being part of the system of state-owned banks, Joint-stock commercial bank for Foreign trade of Viet Nam (Vietcombank- Vcb) a long with VCB Operation Center has achieved successes and remained its top position compared with other commercial banks In recent years, VCB Operation Center has achieved a certain number of results in the area of individual lending, yet this activity in the branch also revealed many shortcomings such as complicated reporting system especially relating to real estate credit, unclear loan- classtified standard The bad debts ratio of individual lending has been high level in recent years In some cases, VCB Operation Center has difficulty in supervising loans and liquidating collateral assets Beside, economic situation also impacts on individual lending activities by the unstable price of gold, real estale and the increase of consuming costs They affects the repay ability of customers and causes bad debts to bank Thus, the questions arising are how VCB Operation Center can expand its individual lending activities, how to ensure that loans will be paid back sufficiently and on time, how to deal with difficult external factors coming from the economy To answer these question, I decide to choose the thesis topic: “The quality of individual lending at Vietcombank – Operation center.” 1.2 Research objective - To have knowledge about basic theories of lending activities in gerenal and individual lending in particular of commercial bank - To have understanding about policy, procedure and process of individual lending in VCB Operation Center - To determine and analyze the quality of individual lending activities as well as factors affecting the quality in VCB Operation Center - To point out achievements as well as limitations of the individual lending area in VCB Operation Center to suggest solution and recommendation to improve the quality of this activity 1.3 Research methodology - Collecting, handling and analyzing data of Financial Reports of VCB Opeartion Center especially paying attention to individual lending - Interviewing staffs to collect more information about achievements and shortcomings of business operation in general and individual lending in particular at VCB Operation Center 1.4 Scope of research In term of space, the thesis will focus on studying individual lending activities in VCB – Operation Center In term of time, the thesis will focus on researching individual lending activities in VCB- Operation Center from 2012 to 2014 CHAPTER 2: OVERVIEW OF INDIVIDUAL LENDING IN COMMERCIAL BANK 2.1 Commercial bank and lending activity in commercial bank 2.1.1 Commercial bank 2.1.1.1 Definition of commercial bank Banks are financial organizations offering a portfolio of the most diversified financial servicesespecially credit, saving, payment services and performing the most financial functions in comparison with any other business organization in the economy Commercial banks are credit organizations performing the most basic tasks of bank such as capital loans and capital mobilization Commercial banks are also bridge between individuals and organizations, mobilizing idle capital and using capital in fields which lack of capital In Viet Nam, pursuant to Banking Act dated May 23th 1990 issued by State’s Council: “Commercial Banks are currency trading organizations which have main and regular activities as receiving customer’s deposits with its repaying responsibility and using these amount for loans, discount and payment services.” 2.1.1.2 Functions of commercial bank Credit agent function: When performing credit agent function, Commercial Bank plays a role as a bridge between people who have excess capital and people who need capital With this function, commercial banks are both borrowers and lender earning profit from difference between deposit interests and lending interests as well as distributing in creating benefits for participants- depositors and borrowers For depositors, they receive profit from idle capital under deposit interest form paid by banks Moreover, banks also ensure them about safety of deposits and provide them convenient payment services For borrowers, they will satify their needs of convenient, assured and legal business capital; spending and paying without costs of time and strength to find out separate capital suppliers Especially in the economy, this function plays an important role in promoting economic growth because it meets capital demands to ensure ongoing reproduction process and expand production scope Credit agent function is considered to be the most important function of commercial banks Payment agent function Commercial banks play a role as a treasurer for businesses and individuals, the payment done at the request of the customer such as deductions from their deposit account to pay for goods or services or add money to their deposit account from their sales proceeds and other revenues under their commands That commercial banks play payment agent function has enormous meaning to the whole economy With this function, commercial banks provide customers many convenient means of payment such as checks, payment order, collection order, debit cards, credit cards… Depending on demands, customers can choose the appropriate payment method Whereby, the economic actors can not keep money in his pocket, or carry cash to meet creditor, or have to meet the creditors even they are near or far, instead they may use a certain method to perform payments Therefore, the economic entities will save a lot of cost, time and ensure secure payment Money creation function The creation of money is not limited in the process of printing more money and isusing new money of the State Bank Banks themselves in the process of implementing its functions can create a credit (or cash book) expressed on deposit accounts of customers at banks This is a part of the money used in the transactions Money creation function is based on two other functions of Commercial Bank as credit function and payment function With credit agent function, banks use mobilized capital for lending, the loan amount will be used to purchasing goods, paying service charges when balance of deposit account is still considered to be a part of transaction amount used for purchasing goods and paying service charges This function shows the relationship between banking credit and currency circulation An amount of credit lent by commercial banks can create money which can increase amount of supplying money Banking Service providing function: Beside above mentioned functions, commercial banking have functions to provide banking services such as: - Savings mobilization - Foreign trade sponsor - Trust services - Valuable securing service - Technical –Trading Services 2.1.2 Lending activity in commercial bank 2.1.2.1 Definition of lending activity Lending activity is one of the basic operations of banks, the main source of profit and always accounts for a large proportion of total asset of commercial banks, so it plays an important role in operations of banks Lending of commercial banks is credit relationship between a party as banks and other party as organizations, individuals and other enterprises in the economy Banking credit is the lending-borrowing relationship between banks and all organizations, individuals and other enterprises in the society It’s not relationship which directly changes capital from temporary surplus units to temporary underfunded units through an immediate unit- the bank Banking credit also brings characteristic of credit relationship: the lending- borrowing relationship in which principal and interest must be repaid after a certain time, the fund using right transfer and equal relationship which brings benefits to both parties 2.2 Individual lending in commercial bank 2.2.1 Definition of individual lending “Individual lending is a lending form in which the bank transfer using rights of an amount to the customers in a certain time with agreements signed by the two