INTRODUCTION
Introduction
Vietnam's economy is experiencing significant growth and integration into the global market, presenting both opportunities and challenges for various sectors, particularly the banking industry Recently, the Vietnamese banking system has been undergoing reforms to align with more developed economies Given that banking deals primarily with money, it remains a highly vulnerable sector, facing numerous challenges across its business operations Notably, credit activities are crucial, as they play a vital role in determining a bank's survival and growth within the market economy.
Credit activities often bring significant profits to commercial banks, accompanied by changes in the domestic economy, and the credit performance of commercial banks has also changed for many years
In today's competitive business landscape, securing adequate capital for starting or expanding a business poses significant challenges Companies often struggle to achieve a balance between their available funds and bank loans, making the selection of a trustworthy bank and understanding suitable loan procedures critical Many banks are now competing to offer diverse loan opportunities and attractive policies to support businesses in need of capital In response, Asia Commercial Bank has implemented development strategies aimed at attracting loans from domestic enterprises As a result, the bank's credit activities for businesses have gained greater attention and improved efficiency Specifically, the Hoang Cau Branch of Asia Commercial Joint Stock Bank has enhanced the quality of its enterprise loans since its inception, successfully meeting its targets and continuously striving to optimize loan efficiency for its business customers.
Effectively managing and lending loans is crucial for banks to ensure profitability while enhancing the operational efficiency of businesses This article focuses on the "Assessment of enterprise loans management at Asia Commercial Bank - Hoang Cau branch for the period of 2017-2019." It analyzes the current state of enterprise credit, identifies key factors influencing this situation, and proposes solutions to expand the scale of loan operations at Asia Commercial Bank - Hoang Cau branch.
Background of the Study
Asia Commercial Bank (ACB) stands out as a prominent joint-stock commercial bank in Vietnam, boasting an extensive network of branches nationwide and offering a diverse array of financial products and services.
With years of experience in the banking sector, ACB has established itself as a leading financial institution, guided by principles of professional management, sustainable growth, and legitimate profitability The bank offers a wide range of services, including capital mobilization, lending, discounting, capital cooperation, insurance, payment services, gold trading, securities trading, and financial leasing.
ACB Hoang Cau, the largest branch in Northern Vietnam, has experienced significant growth within the ACB system This growth has led to the development of robust credit activities, emphasizing the importance of effective loan management, particularly for enterprises Consequently, enhancing loan management practices will further improve business operations at the branch.
Credit is a crucial aspect for joint-stock commercial banks, particularly in enterprise lending, which is a primary growth focus for ACB Hoang Cau branch Effective management of enterprise loans involves careful consideration of the lending process, outstanding loans, debt collection, and bad debt risks ACB Hoang Cau has demonstrated strong performance in managing enterprise loans, employing various supervisory methods within a cohesive system Despite these achievements, the inherent risks associated with loans remain a concern.
The management and planning across the three branches lack thoroughness, leading to an unoptimized lending process and persistent issues with bad debt Consequently, the actual outstanding loan balance at the branches has fallen short of the targets set by the ACB Headquarter plan.
Objectives of the Study
The research focuses on offering strategic recommendations for ACB Hoang Cau to optimize its management of enterprise loans, leveraging its existing credit operations This approach aims to strengthen the company's competitive edge and enhance its contribution to the economy.
To achieve the general objective, there are four specific objectives as follows:
Firstly, Introducing and analyzing credit operation at ACB Hoang Cau in terms of:
Overview of Asia Commercial Joint Stock Bank
The target of lending to enterprise customers
Method of making loan plan
The lending process to enterprise customers
Secondly, Analyzing capital of mobilization at ACB Hoang Cau to show current achievements and limitations
Thirdly, Studying enterprise loan management of ACB Hoang Cau in terms of
Enterprise debt collection and debt collection coefficient
The bad debt of enterprise customers
Risk provision for enterprise customers
Finally, Proposing solutions in order to improve enterprise loan management efficiency.
Significant of the Study
Each good quality loan will create the overall quality for the entire branch and the whole system The bank's profit is mainly generated from credit activities
The quality of loans significantly impacts the profitability of individual banks and the overall banking system This study aims to provide practical benefits to ACB Hoang Cau and the broader ACB system by enabling a comprehensive review of its business operations It offers an opportunity to reassess lending practices and enhance the management of enterprise loans By analyzing the successes of Asian banks from 2017 to 2019, ACB can draw valuable insights that will inform future development strategies The Board of Directors can leverage these findings to formulate clearer solutions and actionable plans moving forward.
2020 to 2022 This research may contribute to Asia Commercial Joint Stock Bank's enterprise loan management success in the future
This paper serves as a valuable reference for students and researchers interested in the topic, providing a foundation for future studies It highlights areas that may require further investigation, addressing any shortcomings not covered in the current research Ultimately, it aims to assist the Banking Academy and students seeking to deepen their understanding of this field.
Scope and Limitation of the Study
The study, conducted from March to May 2021, aims to analyze the service management activities of ACB's Hoang Cau branch from 2017 to 2019 This analysis is based on a comprehensive collection of internal bank documents, including financial records and customer information, spanning a six-year period.
This study acknowledges certain limitations stemming from both objective and subjective factors during the analysis process Conducted at the Asia Commercial Joint Stock Bank - Hoang Cau branch, the findings may be specific to this location and may not be applicable to all branches within the banking system Additionally, time constraints hindered a comprehensive exploration of all business aspects, preventing the development of the most timely and suitable solutions for the branch in question.
Definition of Terms
Case size: refers to the size of credit limit that enterprise customers are provided
Loan officers in ACB will categorize customers according to their credit limits and then decide reasonable interest rates, credit terms, and additional offers
Capital mobilization: refers to the activity a commercial bank raises more capital for its business (Cambridge dictionary)
Commercial banks are vital organizations that significantly impact both the economy and local communities According to the 2010 Law on Credit Institutions in Vietnam (No 47/2010/QH12), a commercial bank is defined as an entity that can perform all banking operations and engage in other profit-driven business activities as permitted by law.
Customers’ partner account: refers to the account of a business partner that has a transaction with ACB’s enterprise customers The transactions could be sale contracts, VAT invoices, guarantees, etc
A credit decision is the bank's assessment of whether to approve or deny a loan application from borrowers (Vietnambiz.vn) In the ACB system, all credit decisions require full approval from the Headquarter, which then communicates the outcome directly to customers, bypassing the branch level.
Credit risk is the potential loss that arises when a borrower fails to repay a loan or fulfill contractual obligations This risk primarily concerns lenders who may not receive the principal and interest owed, leading to disrupted cash flows and increased collection costs To manage credit risk, lenders can use excess cash flows as a buffer and may opt for a higher coupon rate to enhance cash flows when facing elevated credit risk.
Disbursement, defined as an amount of money allocated for a specific purpose, can occur in two forms at ACB: cash disbursement and disbursement through customers' partner accounts.
An enterprise is defined as an organization, particularly a business, or a significant plan aimed at generating profit In the context of ACB, enterprises, especially small and medium-sized enterprises (SMEs), are viewed as potential customers due to their need for capital and cash flow stability, making them the primary focus of the research.
An enterprise loan is a debt-based funding arrangement between a business and a financial institution, like a bank This type of financing is primarily utilized to support significant capital expenditures or to manage operational costs that the company may struggle to cover on its own.
Medium-term loan: refers to a loan that must be paid back between two or ten years after the money is borrowed (Cambridge dictionary)
Short-term loan: refers to the money that is lent for a short time, usually less than one year (Cambridge dictionary)
Risk-free rate: refers to the theoretical rate of return on investment with zero risks
Government bond yields serve as the standard for evaluating other investments that carry risk, making them the most widely recognized risk-free rates for various assets.
Lending rate: refers to the amount that a bank charges on money that it lends (Cambridge dictionary)
A loan is a sum of money borrowed from a financial institution, such as a bank, which must be repaid along with an additional fee or interest charged for the borrowing.
A long-term loan is defined as a loan that is repaid over a duration ranging from three to ten years, and in some cases, it can extend up to twenty years.
LITERATURE REVIEW
Literature review
In the realm of enterprise loans at commercial banks, previous studies have primarily concentrated on credit risk management for SMEs, often overlooking the broader spectrum of enterprises in Vietnam This focus highlights a gap in research that needs to encompass all types of businesses, rather than limiting the analysis to small and medium-sized enterprises.
The study titled “Credit Risk Management for Small and Medium Enterprises at Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) - Hanoi Branch” by Tran Thi Quynh (2017) emphasizes the critical importance of credit risk management in banking, particularly concerning small and medium enterprises (SMEs), which constitute nearly 90% of the bank's clientele This research highlights that effective credit risk management is essential for successful lending activities and overall loan management The findings from this study can be effectively applied to enhance credit risk management practices for enterprises in Vietnam.
This study employs frequency analysis to assess the current state of credit risk management at Vietinbank - Hanoi Branch, utilizing tables and figures for enhanced precision Excel serves as the primary tool for data analysis, facilitating the creation of tables, metrics, and frequency analyses The research encompasses data from 2012 to 2014, revealing that state-owned banks, through effective credit risk management for SMEs, have greater profit opportunities However, the analysis indicates that credit management has not achieved significant breakthroughs during this period.
8 centralized application processing tissue at Central Hub causes a lot of backlog and delay in time
The study titled “Enhancing Risk Management Culture for Sustainable Growth of Asia Commercial Bank (ACB) in Vietnam under Mixed Effects of Macro Factors” by Le Dinh Hac et al (2018) presents a framework for understanding risk management in the banking sector and the influence of macroeconomic factors on market risk The research, which analyzed the Beta CAPM model during the low inflation period from 2015 to 2020, highlights the growing importance of risk management in commercial banks, particularly with new governance and management models Focusing on ACB, the study utilized semiannual data to assess the impact of external macro factors, revealing that market risk is significantly influenced by variables such as CPI, GDP growth, risk-free rates, and lending rates The findings emphasize the banking system's critical role in managing credit growth and rates to foster sustainable economic policies.
The graduate thesis that belongs to Tran Kim Phuc (2013), called “Developing enterprise credit at Nam Viet Commercial Joint Stock Bank branch in Da Nang”
The University of Da Nang conducted a study on enterprise credit within the Nam Viet bank system, focusing on the development of enterprise loans in commercial banks Tran Kim Phuc analyzed the current state of enterprise loan activities at the Nam Viet Commercial Joint Stock Bank branch in Da Nang, identifying key limitations Based on these findings, the study offers recommendations to enhance the growth of enterprise loans, aiming to address existing challenges and improve overall lending practices.
Tran Kim Phuc conducted a comprehensive analysis using both traditional investigation methods and online data collection to identify nine key causes related to the situation at hand By employing statistical and mathematical techniques, the research highlighted the critical role of businesses in the market economy, particularly focusing on the growth of commercial banks The study specifically examined the achievements of Nam Viet Commercial Joint Stock Bank in Da Nang over the past three years, providing valuable insights and recommendations to address its weaknesses and enhance business credit stability The findings are particularly relevant to leading enterprises in Da Nang, allowing for the application of similar research methods and solutions.
In her 2014 thesis, "Analysis of Short-Term Credit Activities for Corporate Customers at Ocean Commercial Joint Stock Bank - Can Tho Branch," Nguyen Thi Ngoc Hau evaluates the short-term credit activities of enterprises from 2011 to 2013, focusing on loan sales, debt collection, outstanding loans, and bad debts Utilizing comparative analysis of relative and absolute figures, the study reveals that while the growth indexes for short-term enterprise credit at Ocean Commercial Joint Stock Bank remained stable, a significant level of bad debts persisted, and mobilized capital fell short of meeting business borrowing needs The thesis concludes with several proposed solutions aimed at enhancing the quality of corporate credit and improving the efficiency of business operations in the future.
Theoretical and Conceptual framework
Figure 2.1: Theoretical framework of enterprise loan management at ACB Hoang Cau
The thesis aims to evaluate the straightforward yet comprehensive theories presented in Colquitt's book, "Credit Risk Management: How to Avoid Lending Disasters & Maximize Earnings" (2007) Colquitt emphasizes that effective credit management is essential for mitigating risks and enhancing profitability in lending practices.
- Credit management process, i.e activities in reality
Colquitt’s theory offers a comprehensive framework for managing lending activities within the banking system Drawing on prior research in enterprise loan management, the author identifies key factors essential for studying enterprise loans at ACB Hoang Cau The management of enterprise loans encompasses three interconnected issues, as illustrated in Figure 2.1, which require focused attention and stringent oversight Any issues in these areas can significantly impact the income and growth of the branch and the overall banking system at ACB.
Enterprise loan management at ACB Hoang Cau
Capital mobilazation at ACB Hoang Cau
Enterprise loans management at ACB Hoang Cau
The author selected Colquitt’s theory for its simplicity and suitability for a bachelor’s thesis, as it provides a comprehensive understanding of credit management The theory highlights credit operations, encompassing lending activities, regulations, orientations, and processes, which are fundamental to the banking system Additionally, credit mobilization, the process of supplying funds for lending, plays a crucial role in determining lending rates—greater mobilization leads to lower rates Finally, analyzing the credit management process allows for the identification of strengths and weaknesses, facilitating recommendations to enhance development potential in the banking sector.
Therefore, the author applied Colquitt’s theory with the I-P-O model to assess the efficiency of enterprise loan management at ACB Hoang Cau for the period of 2017-2019
Assessing the reality of enterprise loans at ACB Hoang Cau is critical to figure out solutions for improving enterprise loan management The ACB Headquarter plan,
• ACB Hoang Cau's annual reports in
• Comparing and reporting figures in the period 2017 -
• Drawing new figures and tables
• Proposing recommendations to cope with shortcomings
12 economic newspapers in Vietnam, and other annual reports for the year 2018-2020 constitute the thesis's initial input data
After collecting data from the official statements of the ACB Hoang Cau branch, a comprehensive analysis will be conducted to compare and contrast the figures from 2017 to 2019 Additionally, various graphs and tables will be generated to visually represent trends and proportions during this period.
Recent findings on enterprise loan management at the ACB Hoang Cau branch reveal critical issues, prompting the proposal of practical solutions to address these challenges effectively.
RESEARCH METHODOLOGY
Locale of the study
This study focuses on the ACB - Hoang Cau Branch, situated at 85 Hoang Cau Street in the O Cho Dua Precinct of Dong Da District, Hanoi The branch comprises a management team of one and a workforce of 50 employees.
Research Design
This thesis utilized a qualitative method and secondary data to address its research objectives, given the project's complexity and the absence of quantitative evidence Although quantitative data could provide more precise results, the qualitative approach was adequate for the explanatory and evaluative nature of this study.
The research design process consists of five steps, which will be explained in detail below:
In the initial phase, the author consults with their supervisor and other experts to determine the study's topic and research objectives Following this, they review existing literature to establish a theoretical framework and develop a robust research methodology.
Step 5: Concluding and proposing recommendations
Step 4: Posting results and discussing Step 3: Examining the information gathered
Step 2: Collecting the data Step 1: Determining research topic
The study will utilize internal data from the Hoang Cau branch of Asia Commercial Bank, focusing on selecting, sorting, and filtering the information to ensure the collection of the most valuable and reliable data necessary to achieve the research objectives.
This thesis uses mostly secondary data extracted from the internal economic and financial reports at ACB Hoang Cau
The author gathered internal data from ACB.com.vn using both their own and an instructor's accounts, focusing on insights from a banker at ACB Hoang Cau This internal data was complemented with external sources, including key phrases, definitions, hypotheses, and previous research from books and articles accessed through Google Scholar, the ACB website, and the Banking Academy library Additionally, the author reviewed the bank's internal documents, such as financial reports, income statements, and business results spanning from 2017 to the second quarter of 2020.
Step 3: Examining the information gathered
In this stage, the data collected in Step 2 is utilized to compare and refine decision-making The figures may be converted into relative formats, like percentages, or presented in their original form to illustrate trends, proportions, or correlations related to the research objectives.
Source of Secondary data
The study utilized data sourced directly from ACB Hoang Cau's Enterprise Banking Department, including branch income statements, balance sheets, and annual activity reports related to enterprise lending services To ensure relevance and accuracy, the research focused on data from 2017 to 2019, reflecting the current state of business lending operations at the branch.
Evaluation criteria of Secondary data
The information was gathered by the supervisor of the ACB Hoang Cau branch's Enterprise Banking Department After that, he gave this source of knowledge to the
15 researcher to use in the study's investigation In terms of numeric and proportional figures, the data was collected from 2017 to 2019
The information from ACB Hoang Cau Enterprise Banking Department aligns perfectly with the data provided to ACB Headquarters The study includes detailed tables and charts that analyze specific criteria related to regulations, lending processes, credit mobilization, and the features of ACB Hoang Cau's enterprise loan management Notably, the lending rate policy will be preserved and compared with those of other banks based on online research findings.
Statistical treatment
All collected data will be entered into Excel to create informative tables, utilizing Excel's formulas to calculate essential indices The final step involves plotting the filtered data in these tables.
Reliability and validity
The research paper utilizes factual data sourced from annual economic reports at ACB Hoang Cau from 2017 to 2019, accessible through ACB.portal.com.vn and logged in by authorized loan officers from ACB Headquarters, each using a unique account on designated computers Additionally, the article includes insights from interviews conducted with bankers both within ACB and the broader banking industry to enhance the study's reliability and validity To maintain the confidentiality of internal bank information, only partial figures are quoted.
FINDINGS AND DISCUSSION
Overview of Asia Commercial Joint Stock Bank and the ACB Hoang Cau
4.1.1 Overview of Asia Commercial Joint Stock Bank
Asia Commercial Joint Stock Bank (ACB), established on April 24, 1993, under License No 0032/NH-GP by the State Bank of Vietnam, began operations on June 4, 1993 The bank, with the full name Asia Commercial Joint Stock Bank and commonly referred to as ACB, holds a business registration certificate numbered 0301452948 It registered a charter capital of 9,376,965,060,000 VND on May 19, 1993, and is headquartered at 442 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
The Asia Commercial Bank - Hoang Cau branch, located at 85 Hoang Cau, O Cho Dua Ward, Dong Da District, Hanoi, was established on September 29, 2009, originally as the Hoang Cau Transaction Office It is the 212th unit in ACB's nationwide network of branches and transaction offices On February 24, 2020, the bank transitioned from the Hoang Cau Transaction Office to officially operate as the ACB Hoang Cau branch.
Currently, ACB has built a very strong banking system with more than 350 branches and transaction offices More than 11,000 ATMs and 850 Western Union agents nationwide serve customers' needs
In addition, ACB has 4 affiliated subsidiaries, operating in the fields of finance and securities
ACB Securities Company – ACBS: 41 Mac Dinh Chi, Da Kao Ward, District One, Ho Chi Minh City
Debt Management and Asset Exploitation Company ACB – ACBA: 8th ACB Building, 444A – 446 Cach Mang Thang Tam, District Three, Ho Chi Minh City
ACB Finance Leasing Company – ACBL: 131 Chau Van Liem, Phuong Fourteen, District Five, Ho Chi Minh City
ACB Fund Management Company – ACBC: 12th Floor, ACB Building, 480 Nguyen Thi Minh Khai, Ward Hai, District Three, Ho Chi Minh City
4.1.2 Organizational structure at ACB Hoang Cau
Figure 4.1: Organizational structure at ACB Hoang Cau
The Enterprise Banking Department specializes in facilitating transactions with businesses, managing capital in both VND and foreign currencies, and executing credit operations in accordance with current banking regulations This department is also responsible for marketing and promoting a range of financial products and services tailored for businesses.
The Individual Banking Department is dedicated to directly engaging with individual customers, facilitating transactions in both VND and foreign currencies This department specializes in credit-related operations, adhering to the current bank lending rates to optimize capital utilization.
Administration and human resources Vice President
18 are directly advertising, marketing, introducing, and selling products and services to individuals
The Transaction Office - Treasury is responsible for managing the collection and expenditure of Vietnamese Dong, payment checks, foreign currencies, cash transfers, and traveler's checks for international transactions Additionally, it oversees the management of cash reserves, funds, collateral, and valuable securities.
Credit Support Department: is the department that support the business team
(planning specialist) in processing customer documents after the loan has been approved
Administration and Human Resources: is the department that help the Board of
Directors (Branch Manager and Vice President) in arranging, transferring, rewarding, or disciplining promptly, recruiting staff by the branch Staff administer basic construction, purchasing furniture, electricity contrasts, water bills, etc.
Credit operation at ACB Hoang Cau
4.2.1 The orientation of lending to enterprise customers at Asia Commercial Bank - Hoang Cau branch until 2022
At the end of 2019, ACB Headquarters focused on enhancing its lending activities, particularly for enterprise loans, by gathering comprehensive reports from the system This effort culminated in the establishment of specific lending objectives for enterprise customers at ACB Hoang Cau.
The credit plan for the year 2022 of the Asia Commercial Bank - Hoang Cau branch is expected to grow by 5% compared to 2021 and 10% compared to
2020, according to the Head Office plan
The plan to increase the number of customers is 10%, which means it will reach 1100 customers
NPL ratio is below 1%, and the lending market share is 14%
In order to be able to achieve its development goals, the orientation of ACB - Hoang Cau Branch will focus on the following essential tasks:
Firstly, continuing to implement the long-term strategy: Developing Retail products
- Improving service quality - Multi-function business; aiming to become the best branch in the whole ACB system and the leader of the enterprise loan providing unit among ACB’s branch
To capitalize on emerging markets and opportunities, ACB Hoang Cau should focus on enhancing customer marketing strategies while effectively identifying and addressing issues related to bad debts It is crucial to prioritize sustainable growth over rapid expansion, ensuring compliance with legal regulations to foster a safe and stable business environment.
To enhance human resource management, it is essential to refine the existing model and develop a streamlined, efficient workforce that ensures competitive salaries for employees Emphasis should be placed on professional training and skill development across the organization, particularly in cultivating a strong middle management team Additionally, standardizing operational regulations and procedures, along with comprehensive training for staff in all departments, is crucial for overall effectiveness.
Fourthly, strengthening risk management capacity, improving credit supervision, risk management, early detection of problematic debt handling, bad debt, upgrading credit rating system, customer reviews, building a risk warning system
Fifthly, modernizing the technology system to meet development requirements, improving the quality to serve the expansion of the scale and bettering the customer service requirements and internal administration
Sixthly, standardizing activities for cost management and benefit-sharing based on business efficiency
Seventhly, promoting the brand image of ACB - Hoang Cau branch so that customers can understand the banking business model
4.2.2 Lending regulations to enterprise customers at ACB Hoang Cau
Table 4.1: Regulations of enterprise loan at ACB Hoang Cau
Criteria Short-term loan Medium and long-term loan
Credit term 6 – 11 months Depending on the project
Credit limit (according to collateral value)
Collateral Real estate, new cars Real estate, new cars
Principal: paid periodically Interest: according to reducing balance
Principal: paid periodically Interest: according to reducing balance
(Source: ACB Hoang Cau internal annual reports in 2017,2018,2019)
Lending is the most profitable activity but the highest risk of commercial banks For the bank to survive and develop stably, lending activities must be safe and efficient
To effectively meet business needs, the ACB Hoang Cau branch categorizes loans into two main groups: short-term loans and medium to long-term loans Enterprise customers can select the loan type that best fits their requirements Typically, loan officers recommend short-term loans due to their benefits, including quick capital turnover, stable debt recovery within a period of 6 to less than 12 months, and lower interest rates compared to medium and long-term loans.
ACB Hoang Cau bank offers enterprise loans that are fully secured by collateral, eliminating the use of unsecured options This approach reduces risks and allows loan officers to evaluate customers' repayment capabilities based on the collateral provided Borrowers are required to make regular principal payments, with interest calculated on the remaining principal balance.
The ACB Hoang Cau branch offers a significant advantage for enterprise customers by allowing them to pay their debts before the due date without incurring any penalty fees This proactive approach enables businesses to manage their financial plans effectively and avoid the risks associated with bad debts.
At the same time, customers will prefer to use ACB's services then become loyal customers
The credit limit is determined by the customer's collateral, primarily real estate, which accounts for 80% of its value Loan officers face challenges in accurately valuing these properties due to rapid fluctuations in land prices, which can change monthly or quarterly This necessitates extensive verification of customer documents, leading to delays in processing credit applications Consequently, customers experience setbacks in securing loans, impacting their business plans and compliance with ACB Hoang Cau regulations.
4.2.3 The basis of making loan plan of ACB - Hoang Cau branch
Firstly, regarding the total outstanding loan at the end of each year (usually around
Every November, the Board of Directors evaluates the loan growth plan for ACB Hoang Cau, taking into account the branch's actual capabilities Typically, the loan balance target set by ACB Head Office exceeds the growth rate established by the ACB Hoang Cau branch.
Secondly, regarding the structure of outstanding loans by enterprise customers:
ACB Hoang Cau will assess the customer portfolio to estimate the total outstanding loans for borrowers with medium and long-term loans during the planning year.
ACB Hoang Cau evaluates short-term borrowers by analyzing their customer portfolio and comparing the granted credit limit with the current balance This assessment is crucial for estimating the expected outstanding balance of short-term loans for the planning year.
Table 4.2: Enterprise lending plan at ACB Hoang Cau from 2017 to 2019
Buying materials 34 customers 63 customers 47 customers
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
ACB Hoang Cau aims to optimize profits by providing credit to multi-industry businesses, promoting loan diversification In contrast, Techcombank primarily concentrates on investments and customer acquisition within Vingroup and Masan.
In 2019, Vingroup's customer file was crucial across all branches of Techcombank, significantly influencing the bank's outstanding loan growth Analysts indicate that the bank's performance is closely tied to the sales progress of Vingroup's major projects, highlighting a strong dependency on these developments for Techcombank's overall financial success.
Loan growth across branches has varied significantly; however, at ACB, loan officers actively engage all customers in transactions, resulting in exceptionally stable growth rates and ensuring consistent cash flow for the bank.
4.2.4 Lending process at ACB Hoang Cau to enterprise customers
Figure 4.2: Lending process at ACB Hoang Cau to enterprise customers
The credit granting process for enterprises at Hoang Cau follows eight strict and interconnected steps, necessitating seamless coordination among departments at ACB Hoang Cau to manage customer documentation effectively In recent years, there has been a significant rise in the number of businesses seeking bank loans, particularly among small and medium-sized enterprises (SMEs).
From 2017 to 2019, the number of bank loan applications increased significantly, rising from 170 in 2017 to 227 in 2019 Despite this growing demand for loans, not all enterprises are able to secure the necessary credit limits from banks, as loan officers take various factors into account when making credit decisions.
In step 1, enterprise customers need to supply required documents therefore loan officers could check on data and evaluate partly the potential of the customers Loan documents includes:
Loan application form according to the form issued by ACB
Step 2: Receiving application and loan appraisal
Collecting debt, interest and fees
Step 7: Handling overdue debt collection
Capital mobilization at ACB Hoang Cau
Table 4.3: Capital mobilization at ACB Hoang Cau from 2017 to 2019
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
Banks operate in the unique currency business, making capital a crucial element that cannot be ignored As such, capital mobilization is a key focus for all banks, including the ACB Hoang Cau branch, which prioritizes this activity to ensure its financial stability and growth.
Total mobilization in 2017 reached 1,821.2 billion VND In 2018, capital mobilization increased by 348 billion VND, equivalent to 19.1% compared to 2017
By 2019, capital mobilization reached 2628.2 billion VND, reaching the highest level in the past three years, increasing 459 billion VND with the corresponding increase in 2018 by 21.15%
Total mobilized capital serves as essential funding for banking operations, primarily focusing on credit activities However, credit activities represent only a portion of this capital ACB Hoang Cau will record General Ledger disbursement entries and transfer funds to the Head Office, which will then allocate capital to various distribution channels within the ACB system or engage in interbank lending Consequently, even if the bank does not utilize the entirety of its capital for lending each year, ACB maintains key performance indicators (KPIs) for capital mobilization This strategy has contributed to a steady increase in ACB's total mobilized capital over the three years since 2017.
For more details on capital mobilization, ACB Hoang Cau has divided capital into three categories in terms of
Table 4.4: Capital mobilization at ACB Hoang Cau from 2017 to 2019 classified by customer group
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
Deposits from residents accounted for a large proportion of the entire structure In
In 2017, residential deposits made up 68.9% of total deposits, indicating a strong reliance on this funding source While the data shows a gradual increase in deposits mobilized from credit institutions, financial institutions, and bonds, the growth has not been significant in recent years.
ACB's current deposit interest rates are relatively low, ranging from 3% to 5% over six months, which reflects a broader trend of decreasing rates Nirukt Sapru, General Manager of Standard Chartered Bank, emphasizes that the government's intention behind lower interest rates is to encourage savers to invest in other sectors rather than keeping their money in banks This strategy aims to stimulate economic growth by directing funds into productive businesses As a result, residential deposits saw a slight decline in 2019 However, the traditional mindset of Vietnamese savers regarding deposits remains resilient, prompting ACB Hoang Cau to enhance its capital mobilization efforts targeting diverse customer segments.
Despite ACB providing exceptional payment account products and fast financial services tailored for SMEs, the capital mobilized from enterprises remains relatively low ACB offers free transfers within its network and to other banks, helping businesses save costs, alongside services like bill payment, 24/7 customs clearance, electronic tax payment, and salary processing However, while ACB Hoang Cau addresses SME needs, it lacks variety in service types and promotional forms Additionally, its interest rate policy is unappealing, and the range of products and services is limited, with insufficient emphasis on marketing and communication efforts.
In a highly competitive landscape, products and services for SMEs are increasingly similar, prompting commercial banks to swiftly introduce innovative offerings To sustain and enhance its market share in capital mobilization from SME customers, ACB Hoang Cau must focus on strategic development in the coming years.
Table 4.5: Capital mobilization at ACB Hoang Cau from 2017 to 2019 classified by term of deposit
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
Term deposits account for the majority of the proportion In 2017, term money accounted for 1,193.93 billion VND, equivalent to 65.6% of total mobilization In
2018, term deposits increased by 506.41 billion VND compared to 2017, accounting for 78.39% of total mobilization In 2019, the growth of term deposits continued to reach VND 2,213.91 billion VND, equivalent to 84.2%
According to a February 20, 2021 article from tapchitaichinh.vn, demand deposits play a crucial role in the capital mobilization of commercial banks, as they offer the lowest interest rates, approximately 0.2% per year A higher CASA (current account savings account) ratio, which indicates the proportion of demand deposits to total customer deposits, enhances a bank's potential to increase its net interest income (NIM) ratio This advantage positions banks favorably in the competitive landscape of lending interest rates.
ACB Hoang Cau still focused on time deposit and missed the opportunity of increasing demand deposits This can be caused by the low interest rate that the
ACB Hoang Cau currently lacks key performance indicators (KPIs) for demand deposits, which diminishes staff motivation to increase these deposits To address this issue, ACB should enhance its Payroll program to effectively mobilize demand deposits from employees' salaries.
Table 4.6: Capital mobilization at ACB Hoang Cau from 2017 to 2019 classified by currency
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
In 2019, local currency dominated the financial landscape, comprising 96.6% of total mobilization with 2,538,841 billion VND, while foreign currency increased to 3.4%, amounting to 89,358 billion VND This marks a notable rise from 2018 and 2017, where foreign currency represented only 2% of the branch's total mobilization.
Despite facing many challenges from the market, during this time, ACB has increasingly gained customers' trust and confidence Therefore, it has helped to increase capital mobilization capacity
ACB employs a diverse capital mobilization strategy, primarily attracting domestic currency deposits from residential customers, with a focus on term deposits that offer higher interest rates for longer terms However, recent trends show a decline in demand deposits, indicating a need for ACB to develop preferential programs for the CASA group to enhance customer attraction Additionally, the bank's mobilization from enterprises, despite their stable cash flows, remains lower than anticipated Nevertheless, ACB Hoang Cau has successfully increased its stable deposits and continues to perform effectively compared to other branches within the Hanoi system.
Enterprise loans management at ACB Hoang Cau
4.4.1 Enterprise loan management planning at ACB Hoang Cau
Based on business performance and anticipated credit balance growth, ACB - Hoang Cau branch will present its plan to the Head Office for approval This plan, which includes the structure of outstanding loans for the planning year, will serve as a foundation for implementation Specifically, the planning data on outstanding loans prepared by ACB - Hoang Cau branch and submitted for approval during the 2018-2019 period is outlined as follows:
Table 4.7: Outstanding loan at ACB Hoang Cau from 2016 to 2019
Criteria Outstanding loan Growth rate
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
Formular of growth rate (GR)
In general, the target for planned loan balance for the period of 2018-2019 tends to increase, the target of the following years is higher than the target of previous years
The reason is the orientation of ACB - Hoang Cau branch wants to boost loan balance growth: The following year increased by 30% over the previous year
In 2016: ACB - Hoang Cau branch achieved 195.6 billion VND which was the target of the loan plan for 2018 The 2016 plan assigned by the Head Office was
200 billion VND Actual implementation of outstanding loans by the end of 2016 is VND 195.6 billion
In 2017: ACB - Hoang Cau branch achieved the target of the loan project in 2017 of
234.7 billion VND, the plan for 2017 increased by 19.19% compared to the actual outstanding balance at the end of 2016 Plan in 2017, assigned by the Head Office is
250 billion VND Actual realization of outstanding loans by the end of 2017 is 234.7 billion VND
In 2018, ACB's Hoang Cau branch successfully achieved its loan project target, reaching 285.2 billion VND This represents a significant increase of 21.52% compared to the outstanding balance at the end of 2017.
In 2019, the ACB - Hoang Cau branch successfully achieved its loan project target of 365.4 billion VND, marking a 28.12% increase compared to the outstanding balance at the end of 2018.
ACB Hoang Cau has effectively aligned with the targets set by ACB Headquarters, achieving outstanding loan levels, particularly in 2019 when the branch exceeded its goals The Covid-19 pandemic prompted businesses to restructure, leading to increased capital demands from banks Seizing this opportunity, ACB Hoang Cau launched comprehensive credit campaigns in Hanoi, offering competitive short-term secured loans at a 6.5% interest rate Additionally, the credit staff demonstrated flexibility by bundling products such as international payment services and bank guarantees.
4.4.2 Outstanding loan of enterprise customers at ACB Hoang Cau
Table 4.8: Outstanding loan at ACB Hoang Cau from 2017 to 2019
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
From the data sheet, we can see that credit activities at branches are growing and increasing gradually from 2017-2019 Total outstanding loans as of December 31,
In 2018, ACB's total outstanding loans reached 405.26 billion VND, marking an increase of 96.06 billion VND, or 18.13% By December 31, 2019, this figure rose to 532.45 billion VND, reflecting a significant growth of 118.19 billion VND, or 21.88% ACB is clearly focused on enterprise loans, with the ACB Hoang Cau branch performing exceptionally well in alignment with this strategy Over the years 2017, 2018, and 2019, personal credit consistently comprised the majority of the loan portfolio, accounting for 60.23%, 60.16%, and 60.32% respectively This trend highlights the branch's strength in personal lending, which should continue to be leveraged moving forward.
The positive changes in the unit's performance can be attributed to effective restructuring and organization In 2019, the lending rate showed consistent growth; however, in 2020, SMEs at ACB encountered significant challenges due to tightened credit policies and increased competition from local banks The Covid-19 pandemic severely impacted businesses, leading to bankruptcies and reduced demand for bank capital, resulting in stagnation in business credit Consequently, lending activities in 2020 are not expected to see substantial improvements compared to the previous year.
Figure 4.3: Outstanding loan of individual and enterprise customers at ACB Hoang Cau from 2017 to 2019
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
Outstanding loan of individual and enterprise customers at ACB Hoang Cau from 2017 to
Individual outstanding loan Enterprise outstanding loan
Table 4.9: Outstanding loan of enterprise customers at ACB Hoang Cau from
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
The data indicates a steady rise in the outstanding loan ratio in recent years, with corporate customer debt reaching 285.2 billion VND in 2018, reflecting a growth rate of 21.52%.
2017, an increase of 1.53% In 2019, the corporate customer debt growth rate reached 28.12%, equivalent to 365.4 billion VND, up 6.6% over the previous year
From 2017 to 2019, ACB Hoang Cau successfully reformed its personnel apparatus and expanded its customer base, resulting in a consistent annual increase in the ratio of outstanding loans to enterprise customers To sustain this positive trend, it is crucial for the organization to effectively implement the policies set forth by the Board of Directors Despite the overall growth in outstanding loans, the branch's size has remained stable with only 12 employees in the Enterprise Customer Relations department, indicating a need for strategic enhancements to maximize performance.
State-owned banks in Hanoi have joined commercial banks in offering competitive interest rates, with ACB providing rates as low as 6.5% This positions them favorably against other banks, such as VIB, which currently offers an 8.5% interest rate, and another bank at 7.7% These attractive incentives are aimed at supporting enterprises in the region.
ACB currently lacks a standout preferential interest rate program for loyal customers compared to competitors like Vietcombank, which offers a fixed interest rate of 4.5% to potential borrowers This competitive landscape has intensified in the banking market, prompting ACB Hoang Cau to enhance its offerings and provide more incentives for loyal enterprise customers As a result, some valued enterprise clients at ACB Hoang Cau are considering opening credit limits with Vietcombank, highlighting the need for ACB to strengthen its appeal in order to retain its customer base.
4.4.3 Enterprise debt collection and debt collection coefficient
Table 4.10: Enterprise debt collection and debt collection coefficient at ACB Hoang Cau from 2017 to 2019
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
In recent years, the rise in debt collection and the debt collection coefficient indicates positive trends in the branch's debt management and reminders ACB Hoang Cau should capitalize on these advantages to enhance and expand its efforts, ultimately improving the quality of each loan.
In 2017, debt collection in Vietnam totaled 259.7 billion VND, achieving a debt collection coefficient of 1.01 The following year, 2018, saw an increase in debt revenue by 68.2 billion VND, a rise of 26.26% from 2017, which elevated the debt collection coefficient to 1.04 By 2019, the coefficient further improved to 1.05, indicating a positive trend in debt collection performance.
38 that the debt collection increased by 28.36% compared to the previous year, equivalent to 93 billion VND
Formula for calculating debt collection coefficient:
This target assesses the effectiveness of banks in collecting debts by measuring the capital recovered from outstanding loans over a specific period A higher collection rate indicates better debt recovery performance, reflecting the bank's efficiency in managing its credit operations.
ACB Hoang Cau is demonstrating strong loan quality assurance, indicating effective management of enterprise loans, as all loans are secured by personal collateral from the enterprise's director or shareholders To enhance productivity, the branch should continue implementing proposed measures and consider increasing human resources The bank also collects quarterly financial statements and VAT invoices during customer transactions to ensure a stable cash flow and repayment capacity for its clients.
4.4.4 Bad debt caused by enterprise customers at ACB Hoang Cau from 2017 to
Table 4.11: Bad debt caused by enterprise customers at ACB Hoang Cau from
(Source: ACB Hoang Cau internal annual reports in 2017, 2018, 2019)
Despite the involvement of multiple departments in managing bad debt at ACB Hoang Cau, some overdue debts remain inevitable However, statistics indicate a positive trend, with overdue debts declining over the past three years This improvement reflects effective debt management practices, including diligent capital monitoring, customer classification, and the implementation of timely and consistent action plans for customer accounts.
SUMMARY OF FINDING, CONCLUSION, AND
Summary of findings
ACB Hoang Cau has experienced notable success, marked by substantial growth in enterprise loans, which has significantly expanded the branch's scale The branch prioritizes customer care and invests in human resources to enhance customer satisfaction Effective management of credit risk has also contributed to considerable profits from enterprise loans However, despite these achievements, there are still areas for improvement in ACB Hoang Cau's enterprise loan activities.
The lending process at ACB Hoang Cau faces several challenges, including a backlog of customer documents due to centralized management at the Head Office The bank's collateral policy is inflexible, accepting only two types of real estate and new cars, which has limited customer attraction Additionally, post-disbursement loan checks are insufficient, leading to instances of customers misusing funds, exacerbated by ACB's cash disbursement policy.
Conclusion
The exploration of ACB Hoang Cau's lending activities for enterprise customers revealed that, despite achieving significant successes, the branch is confronted with numerous challenges.
From July 2020 to May 2021, I conducted an internship and research project culminating in my graduation thesis titled “Assessment of Enterprise Loan Management at ACB Hoang Cau for the Period of 2017-2019.” This thesis achieved its objectives by providing a comprehensive evaluation of the bank's loan management practices during that timeframe.
Firstly, introducing and analyzing credit operation at ACB Hoang Cau in terms of:
Overview of Asia Commercial Joint Stock Bank
The target of lending to enterprise customers
Method of making loan plan
The lending process to enterprise customers
Secondly, analyzing capital of mobilization at ACB Hoang Cau to show current achievements and limitations
Thirdly, studying enterprise loan management of ACB Hoang Cau in terms of
Enterprise debt collection and debt collection coefficient
The bad debt of enterprise customers
Risk provision for enterprise customers
Finally, proposing solutions in order to improve enterprise loan management efficiency.
Recommendation
5.3.1 Orientation for perfecting management of lending activities at ACB Hoang Cau
To enhance the management of ACB lending activities, the Hoang Cau branch must develop a strategic approach aimed at improving the quality of loan management for customers in the upcoming years, prioritizing several key issues.
Firstly, synchronously innovating from loan policy, staff capacity, organizational structure of lending operations, to internal regulations on lending activities, customer strategy, loan structure,
To enhance the safety of bank loans, it is essential to strengthen internal controls and improve their efficiency Additionally, ongoing innovation in banking operations, particularly in lending, is crucial for successful international integration.
Thirdly, expanding the mobilization of capital sources in the society as a solid basis for lending, meeting capital needs for production and business expansion in the city
To enhance economic growth, it is essential to expand lending and prioritize funding for critical projects Emphasizing the structure of production and business planning will ensure that resources are allocated effectively Additionally, implementing supportive policies for small and medium enterprises, as well as private economic entities, will foster a more robust business environment.
Enhancing the skills and qualifications of managers is essential for reducing risks in business activities, particularly those affecting the private sector By fostering an environment that allows the private economy to engage fully, we can ensure that it effectively navigates and understands the distinctions among various economic sectors.
These are the responsibilities of ACB Hoang Cau Board of Director Managers need to agree on strategies and plans to improve the loan management of branch
5.3.2 Recommendations to the State Bank
Improving the function of Credit Information Center (CIC) which is to provide information to credit institutions, businesses, step by step improving the operating environment improving working mechanism
To effectively identify potential credit risk issues, it is crucial to provide comprehensive information, which in turn necessitates robust analytics A key factor in assessing creditworthiness is understanding the reasons behind creditors' inability to fulfill their obligations As highlighted in Chapter 4, the existing challenges with the CIC system pose significant hurdles for loan officers at ACB Hoang Cau Consequently, it is essential for the State Bank to enhance the CIC system to improve information retrieval capabilities.
5.3.3 Recommendation to the ACB Hoang Cau
The first is about human resource training
The success of an enterprise loan management system hinges on its people, with the young and enthusiastic staff at ACB Hoang Cau playing a crucial role While their energy and willingness to tackle challenges are commendable, there is a noticeable gap in their professional experience To address this, it is essential to enhance their training with comprehensive knowledge in areas such as enterprise loan risk management, collateral appraisal, and potential customer evaluation.
ACB Headquarters offers comprehensive training programs focusing on 47 essential soft skills, specialized skills, and technology-related skills With the launch of a centralized training center and online classes through Zoom and ACB.portal.com.vn, ACB aims to enhance the expertise of loan officers Experienced instructors, each with over 10 years of seniority, lead these classes, ensuring participants gain the necessary knowledge to perform their roles more professionally.
ACB Hoang Cau should prioritize regular training and examinations, as the ACB system currently conducts only one basic banking exam every two years This lack of frequent assessments has led to staff forgetting important official communications, resulting in incorrect advice to customers For instance, loan officers may provide inaccurate lending rates, hindering customers' ability to create precise business plans.
The second is about managing enterprise customer documents
To streamline the loan approval process and reduce document backlogs at ACB Headquarters, it is essential to decentralize management based on loan size By adopting a policy similar to Sacombank SBL, ACB can empower branch managers to directly approve loans below 3 billion VND, while area managers can handle loans ranging from 3 billion VND to 10 billion VND Loans exceeding 10 billion VND should be submitted to the Head Office's general HUB due to their higher risk This approach will facilitate timely loan disbursement aligned with customer business progress, ensuring that clients do not miss out on valuable opportunities.
Thirdly, ACB Hoang Cau needs a flexible credit policy with a variety of products as well as receiving a wider variety of guaranteed assets
ACB Hoang Cau offers secured loans that require collateral in the form of real estate or new vehicles However, many small and medium-sized enterprises (SMEs) may not possess these assets, limiting their access to financing To enhance their loan offerings, ACB Hoang Cau could consider adopting strategies from MB Bank.
The use of collateral as inventory or project products can enhance customer attraction while minimizing risks for the bank Although ACB offers competitive interest rates, they may not be the best available, making collateral diversification a strategic approach to attract more customers Additionally, implementing preferential interest rate policies for VIP customers—those with long-term, high-limit transactions—will be essential in retaining these valuable clients when extending credit.
Fourthly, ACB Hoang Cau should have a specialize department to manage enterprise loan in the form of cash disbursement
At ACB Hoang Cau, disbursement occurs in two forms: cash disbursement and disbursement through customers’ partner accounts Loan officers submit documents for approval, after which the branch manager determines the disbursement method However, the risk of enterprises misusing loan capital is significant, and although ACB has an Internal Inspection Department, its limited capacity to oversee multiple branches hinders regular checks at ACB Hoang Cau To enhance oversight, ACB Hoang Cau should create a specialized department dedicated to inspecting capital loans This department would gather essential documents such as bank statements, debit account histories, and VAT invoices, enabling controllers to categorize customers based on their disbursement methods.
Firstly, every year, the City People's Committee needs to provide a land price bracket for areas in the city
When appraising a customer's collateral, loan officers must carefully assess the property's value, as this information is crucial for future debt recovery However, the fluctuating land prices and lack of standardized valuation across different areas complicate the determination of the true worth of collateral assets.
When a bank overvalues a property, it exposes itself to considerable risks if the customer defaults on their loans Additionally, the lack of a standardized framework for land pricing can lead to situations where credit officers deliberately inflate property values to benefit from collusion with clients, ultimately compromising the bank's integrity and financial stability.
The management board of the industrial zone, in collaboration with the Department of Natural Resources and Environment, should facilitate a streamlined process for businesses to obtain their land use certificates.