OVERVIEW OF VIETINBANK FOR INDUSTRY AND TRADE

OVERVIEW OF VIETINBANKFOR INDUSTRY AND TRADE

Part I:

OVERVIEW OF VIETINBANK FOR INDUSTRY AND TRADE – DAKLAK BRANCH

1.1 Overview of Vietnam Bank for Industry and Trade - VietinBank

Vietnam Bank for Industry and Trade – VietinBank was established in 1988, after being separated from State Bank of Vietnam VietinBank is one of the four largest State-owned commercial banks of Vietnam VietinBank’s capital resources keep on increasing over the years and have been substantially rising since 1996 with the annual average growth of 20 percent, especially up 35 percent a year against that of last year.

VietinBank has developed an operations network comprising of 01 Head Office; 03 Transaction Centers; 141 branches, 188 transaction offices, 258 points of sales and 191 savings offices, 742 Automatic Telling Machines (ATMs), throughout 56 provinces and cities, centered more in big cities such as Hanoi (12 branches and 02 transaction centers),

Ho Chi Minh City (17 branches and 01 Transaction center), industrial zones, trading and economic parks, densely-populated areas VietinBank’s traditional services as well as other modern and valued added services have reached nation-wide users This has enabled VietinBank to diversify its products suitable to each segment of customers

Being diversified with 03 independent accounting subsidiaries: VietinBank Leasing Company, VietinBank Securities Company, Ltd., VietinBank Liability Management and Asset Development Company and Insurance Company, Ltd, and 03 non-profit making units: VietinBank Information Technology Center and VietinBank Training Center, Training and Human resources Development Center

Being the founder of the following Financial Credit Institutions:

- Saigon Bank for Commerce and Industry

- Indovina Bank (the first joint-venture bank in Vietnam)

- Vietnam International Leasing Company – VILC (the first financial leasing company in Vietnam)

- VietinBank – Asia Insurance Company

Being the official member of:

- Vietnam’s Banker Association

- Asian Banker’s Association

- Society for Worldwide InterBank Financial Telecommunications (SWIFT)

- Visa International Services Association

VietinBank has signed 8 framework-credit Agreements with foreign countries, including: Belgium, Germany, South Korea, Switzerland and established correspondent relationship with 600 large banks of 50 countries and territories all over the world

VietinBank is the first bank in Vietnam to apply modern technology and e-commerce in its banking operations

1.2 Vietnam Bank for Industry and Trade – DakLak Branch

1.2.1 The process of formation and development of Vietnam Bank for Industry and Trade - DakLak Branch

Vietinbank Dak Lak is a member of VietinBank Vietnam, and was established by the Decision 21/QD – VietinBank Vietnam on 12/02/1999 of the Chairman of the Board of VietinBank Vietnam After the preparation of the infrastructure, personnel and organizations, VietinBank DakLak officially started to operate on 08/07/1999

Like other Commercial banks in the area, VietinBank DakLak has functions such as mobilizing capital, making credit, Banking security services, accounting payment, Banking fund and other tasks In spite of being a young branch compared with other State owned commercial banks which have operated for a long time, VietinBank DakLak has gained many achievements such as exceeding the level of mobilization, lending’s account outstanding of the year higher than the previous, especially from the first year, first quarter of the operation… Up to now VietinBank DakLak has made its own reputation in the province to improve the quality of passenger service The branch has opened two more transaction offices: One at No 25 Phan Chu Trinh – Buon Ma Thuot City and one named transaction office Buon Ho – Buon Ho town, KrongPak dist., DakLak province

The staff since its establishment had 15 to 74 people now 80% have University level and constantly improve their skills, tasks, to assert the position as one of the four main commercial banks of the country as well as provide capital to the development of the province

1.2.2 Structure

Each unit, each field of industry has a different requirement for the number and level

of their labor How reasonable, how effective to allocate the human resources becomes necessary Because of that importance, every organization should build a system that suitable for the duties of each period

Diagram: The structure of VietinBank DakLak

Direct relation

Functional relation

This structure is convenient for the activities of VietinBank DakLak Beside the direct relation between superiors and subordinates, VietinBank DakLak in its operation show the functional relation among the departments In addition to completing the specific tasks, professional responsibilities of each department, VietinBank has linked closely all

of the departments together to make the work more convenient and effective All activities

of the bank are under the supervision of the internal supervisory department With the typical activities of banking, this is a suitable system It works well in the job of each department as well as the job of the whole bank to help the board of management control all happenings and solve problems on time

DEPUTY DIRECTOR

Buon Ho T.Office

Phan Chu Trinh T.Office

Accounti

ng

Dept

Personnel Dept

Transaction Dept

Cash &

Vault Dept

Customer Dept

DIRECTOR

Risk Management Dept

DEPUTY DIRECTOR

Part II:

THE MATTER’S ANALYSIS

2.1 The making loans’ summary of VietinBank DakLak:

Table 1: The lending’s status of Vietinbank DakLak

Unit: Million VND

Volume of

lending 1,752,208 100% 2,181,854 100% 429,646 24.52%

Short-term 1,502,762 85.76% 2,005,600 91.92% 502,838 33.46% Medium &

Long-term 249,446 14.24% 176,254 8.08% -73,192 -29.34%

Volume of

collecting 1,463,727 100% 1,981,265 100% 517,538 35.36%

Short-term 1,298,681 88.72% 1,883,012 95.04% 584,331 44.99% Medium &

Long-term 165,046 11.28% 98,253 4.96% -66,793 -40,46%

Debt balance by

loan category 1,016,238 100% 1,216,827 100% 200,589 19.73%

Short-term 437,985 43.09% 560,573 46.06% 122,588 27.99% Medium &

Long-term 578,253 56.91% 656,254 53.94% 78,001 13.49%

Medium &

Source: Customer Department

Short term loan making is the main activity in lending activity and general credit activity In the last 2 years short term debt balance in gross debt balance was down to 32% in 2008 and up to 43% in 2009 Athough VietinBank Daklak had the policy increasing in making short term loan and decreasing in making medium and long term loan, there are lot of other comercial banks in Daklak area so it had to compete strongly in

lending activity Therefore, the last 2 years the rate of short term loan making had a low growth’s speed, only 32,2% in 2008 and in 2009, reduced to 30,6%

The volume of lending in 2009 is 429.646 million VND( 24,52%) higher than 2008 The volume of short term loan lending had a majority in total volume of lending In

2008, it was 85,76% while volume of medium and long term loan lending were only 14,24% In 2009 the volume of short term loan lending increased 502.838 million VND( 33,46%), compared with 2008 However, the volume of medium and long term loan lending decreased -29,34%

The volume of collecting in 2008 was 1.463.272 million VND and in 2009 was 1.981.265 million VND, increased 35,36% compared with 2008 The volume of short term loan collecting in 2009 was 1.883.012 million VND, increased sharply 584.331 million VND( 44.49%), compared with 2008

Lending activity of VietinBank DakLak develops well, increases the ability to compete with other Commercial banks in the area that showed through the debt balance

by loan category of 1,216,827 million VND in 2009, increasing 200,589 million VND (19.73%) compared with 2008

Bad debts in 2008 was 4,135 million VND, accounting for the rate of 4.07% of total average debt balance Overdue debt in 2009 was 2,793 million VND, accounting for the rate of 2.3% of total average debt balance The absolute reduction was 1,342 million VND compared with 2008, and the rate decreased 32.45%, in which overdue short-term debt was 2,012 million VND, accounting for the rate of 1.65% of total average debt balance, decreased 35.1% compared with 2008 and overdue medium and long-term was

781 million VND, accounting for the rate of 0,% / total average debt balance, reduced 25.54 % compared with 2009 This was a bright sign of VietinBank DakLak The rate of bad debts which incurred in the year reduced, so it gave chance to make loans and recover debts

2.2 The making short-term loans’ summary of VietinBank DakLak:

2.2.1 The analysis of structure in short term loan making by economic sectors:

Table 2: Structure in short term loan making by economic sectors 2008-2009

Unit: million VND

Indicators

1.Volume of lending

- State-owned enterprise

- Joint-stock company

- Limited company

- Private company

- Other

1.502.762

482.988 371.633 340.977 92.720 214.444

100

32.14 24.73 22.69 6.17 14.27

2.005.600

686.116 412.351 484.754 160.047 262.332

100

34.21 20.56 24.17 7.98 13.08

2 Volume of collecting

- State-owned enterprise

- Joint-stock company

- Limited company

- Private company

- Other

1.298.681

402.461 366.358 255.451 87.141 187.270

100

30.99 28.21 19.67 6.71 14.42

1.883.012

642.295 375.284 416.146 148.570 300.717

100

34.11 19.93 22.10 7.89 15.97

3.Average debt balance

- State-owned enterprise

- Joint-stock company

- Limited company

- Private company

- Other

1.016.238

318.004 254.850 217.324 66.782 159.278

100

31.29 25.08 21.39 6.57 15.67

1.216.827

373.223 234.454 283.501 75.050 250.599

100

30.67 19.27 23.30 6.17 20.59

Source: Customer Department

State-owned enterprise was the main lending object of VietinBank, about over 32%

in total volume of short term lending in 2008 Next was joint-stock company with the volume of lending of 24,73% and limited company with the volume of lending of 22,69% In 2009 the volume of lending increased 502.838 million VND and the growth’s speed was 33,46%.Almost the volume of lending to economic sectors in 2009 was higher than 2008 In 2009 the increase of volume of lending to private company was 67.326 million VND with the growth’s speed of 72,6% compared with 2008 It was the highest in the increase of volume of lending to the total economic sectors

The volume of collecting depends on the volume of lending Therefore, as well as the volume of lending, the volume of collecting in 2009 went up strongly Among them the increase of volume of collecting to State-owned enterprise was highest, up to 239.834 million VND( 59,59%) while the others did not increase much

Besides, the average debt balance by sector category in 2009 increased less than

2008 Therefore, VietinBank should pay more intention in managing debt balance to ensure that it would develop in next years

2.2.2 The analysis of structure in short term loan making by fields:

Customers of VietinBank are all economic organizations and individuals which have enough condition In there customers who work in industry, trade and service are given priority However, in the last years VietinBank had the policy that expanded the scope of investment into other fields

Table 2: Structure in short term loan making by fields 2008-2009

Source: Customer Department

In DakLak agriculture mainly produces coffee.This sector has a low rate debt balance, 7,54%, in total debt balance in 2008 In the last 2 years companies which work in agriculture had to face many serious difficulties, high risks, many of them were in hard situation or went bankrupt Therefore, VietinBank DakLak had the policy that decreased actively the volume of lending in agriculture and focused on industry, especially on hydroelectric plans Trade and service sector had a highest proportion in total debt balance in 2008 and 2009 Industry had the rate of 28.76% in 2009 In last 2 years, debt balance in 2009 increased 160.260 million VND( 77,65%) compared with 2008

Other sector: had the great volume of lending In 2009 it increased 240.552 million VND and had the growth’s speed of 60,4%

1 Volume of lending

-Agriculture

-Trade

-Industry

-Others

1,502,762

23,143 432,194 649,193

398,232

100

1.54 28.76 43.2 26.5

2,005,600

41,115 592,454 733,247 638,784

100

2.05 29.54 36.56 31.85

2 Volume of collecting

-Agriculture

-Trade

-Industry

-Others

1,298,681

17,532 360,514 571,160 349,475

100

1.35 33.76 45.98 18.91

1,883,012

38,225 556,242 688,429 600,116

100

2.03 29.54 36.56 31.87

3 Average debt balance

-Agriculture

-Trade

-Industry

-Others

1,016,238

11,719 353,653 486,535 164,331

100

1.15 34.80 47.88 16.17

1,216,827

10,915 356,219 550,125 299,568

100

0.90 29.27 45.21 24.62

In recent time the structure of short term loan lending of VietinBank DakLak has followed the instructions of Vietnam Bank for Industry and Trade that is safety, effective, suitable to the changes of market

2.2.3 Analysis of secured and non secured short term loan:

Unit: million VND

Indicators

1 Volume of lending

- Secured by property

- Not secured by property

1.502.762 1.023.554 479.208

100 68,11 31,89

2.005.600 1.329.087 676.513

100 66,27 33,73

2.Volume of collecting

- Secured by property

- Not secured by property

1.298.681 924.491 374.190

100 71,19 28,81

1.883.012 1.231.002 652.010

100 65,37 34,63

3.Average debt balance

- Secured by property

- Not secured by property

1.016.238 785.998 230.240

100 77,34 22,66

1.216.827 871.221 345.606

100 71,60 28,40

Source: Customer Department

In 2009, the volume of secured short term loan lending had a high proportion, 66,27% This happened because VietinBank had focused on lending secured loans which had collateral were real estate, land,… that are hard to damage Therefore, those loans had low risk, high safety In contract, the volume of non secured loan had a low proportion compared with secured loan

In recent years, VietinBank had expanded the scope of customers, appraised lending profile more closely before lending and after lending, credit officers had inspected and managed the lending purpose of customers strictly Therefore, the volume of collecting

had been raised In 2009, the volume of collecting of secured increased sharply 1.231.002 compared with 2008

PART III – CONCLUSIONS & PROPOSALS

3.1 Conclusions

After researching the short-term lending situation at VietinBank DakLak, I offer a conclusion as followed:

Credit activity is always a key part of banks Expanding the credit volume is necessary to expand the operation of banks However, the matter of credit’s quality decides the existence and development of the banks

Despite having many problems in the lending activity, and increasing in the rate of overdue debts, but the short-term credit activity of VietinBank DakLak generally increases in the last years: The volume of lending increased 90,516 million VND, the volume of collecting debts increased 28,544 million VND That shows the effort of the bank in expanding the scope, in striving constantly, as well as in the resolutions for overdue debts, to deserve to its position in the development of DakLak

VietinBank DakLak has to encounter many difficulties that need to be resolved, in short time and long time also Moreover, it has followed the circular number 2 on 05/02/2002 by the Ministry of Justice and the State of Vietnam, guiding the implementation process of selling mortgage assets to collect debts and get benefits for the bank

To really improve the ability in short-term credit activity, the bank needs to develop the diversification of credit, fields, object loans, increasing advertising and marketing…

In addition, credit activity has to attach to the policies of the Party and State, the guidelines of the local to have the right way for the activities of the bank

With its own advantages, VietinBank Daklak has achieved many remarkable achievements, and showed its important role in providing capital in the area

3.2 Proposals

Through the practice in nearly 3 months at VietinBank DakLak, I have found out the bank’s credit activity in recent years I have some suggestions as followed: