The urgency of the subject
In recent years, Vietnam's commercial banking system has experienced significant growth in both quantity and quality, enhancing its competitive strength to maintain market share and foster development To ensure sustainable growth and remain competitive in today's landscape, banks must implement effective solutions and prioritize performance evaluation through financial analysis tools.
As the number of large enterprises is expected to rise significantly in the near future, commercial banks must prepare to effectively serve this emerging customer base Large enterprises offer substantial benefits to banks, including high-value loans that generate significant revenue, as well as valuable relationships and diverse information sources The Vietnamese economy urgently requires the sustainable growth of large enterprises to enhance macroeconomic stability and improve the business environment Acknowledging this need, Vietinbank has made considerable strides in developing credit services tailored for large enterprises, yet its achievements remain below its potential and the needs of these businesses Therefore, it is crucial for Vietinbank to continue enhancing its credit activities for large enterprises This context underpins the research topic: "The Current Situation of Corporate Customers' Financing Analysis in Credit Activities at Vietinbank - West Hanoi Branch."
Research Overview
The banking system is crucial for national renewal and economic growth, with commercial banks significantly contributing through their credit activities Analyzing customers' financial records is essential for these credit activities, as it enables credit institutions to identify and select clients with strong financial potential.
To enhance credit efficiency and profitability for financial institutions, it is essential to continuously update and adapt solutions and recommendations for the financial analysis of corporate clients in banking activities This approach not only benefits individual credit institutions but also strengthens the overall stability of the banking system Consequently, this topic remains a popular choice among students for their thesis projects.
Research Purposes
The research topic aims to solve the following basic problems:
This article systematically explores the theoretical foundations of credit development for large corporate clients of commercial banks It provides an overview of the credit activities conducted by these banks, highlights the unique characteristics of credit for large corporate customers, and defines key concepts and evaluation criteria Additionally, it analyzes the various factors influencing the development of credit activities tailored to the needs of large corporate clients in the commercial banking sector.
This article evaluates the current challenges hindering the development of credit activities for large corporate clients at Vieinbank It identifies key factors that restrict growth and proposes actionable solutions to enhance credit services for major enterprises.
Object and scope of the study
Research object: Developing credit activities for large corporate customers at commercial banks
Scope of content: The thesis only studies some of the main contents of the development of credit activities at commercial banks
Spatial scope: Research on the development of credit activities for large corporate customers at Vietinbank
Scope of time: The current situation of the research project in the period of 2019-2020, the solutions proposed in the project are meaningful until 2025
Research perspective: Research from the perspective of commercial banks
Research Methods
Approach to problem solving: The thesis applies statistical methods of synthesis, analysis, comparison to analyze and evaluate the current status of financial analysis quality at Vietinbank
Data source: is a secondary data source
The thesis uses data from within Vietinbank from 2017 - 2020 through annual reports, consolidated financial statements, business results reports
External data sources, namely articles published in journals, reports, textbooks, books, theses, theses, research topics, annual reports of the State Bank , related websites
Structure
In addition to the introduction, conclusion and list of references, the thesis is structured into 3 chapters:Chapter 1 Overview of corporate financial analysis in credit to enterprises in commercial banks
Chapter 2: Current status of financial analysis business customers in credit at commercial banks Vietinbank - Branch West Hanoi
Chapter 3: Solutions to complete financial analysis of corporate customers in credit activities at Vietinbank - Hanoi Branch
THEORETICAL BASIS OF FINANCIAL ANALYSIS OF
Overview of corporate financial analysis in credit activities to businesses at commercial
1.1.1.The concept, role and objectives in financing analysis of corporate customer
The analysis of corporate financial activities involves applying scientific analytical methods to evaluate an enterprise's financial status This process aids managers in understanding the current financial health and security of their organization, allowing for accurate predictions of future financial conditions and potential risks Consequently, this analysis empowers decision-makers to make informed choices aligned with their interests.
Stakeholders with a vested interest in a business are keenly focused on its financial activities and require access to relevant economic and financial information Each stakeholder group approaches the financial situation of the enterprise from unique perspectives and with distinct objectives.
- Corporate managers Investors (including current and future shareholders)
- Credit providers for businesses such as banks, financial institutions, corporate bond buyers, other businesses
- Salary earners in the enterprise
Different users of financial information will make decisions with different purposes Therefore, analyzing financial performance for each different audience will meet different goals Specifically:
1.1.1.1 Financial analysis for business managers
As the primary operator of the business, the manager possesses the most comprehensive understanding of its financials, providing valuable insights for analysis It is essential for managers to regularly assess corporate financial performance to evaluate past management effectiveness, adhere to financial management principles, and analyze profitability, solvency, and financial risks This analysis ensures that the Board of Directors' decisions regarding investments, financing, and profit distribution align with the enterprise's actual circumstances.
- Provide the necessary information for financial projections;
- Provide bases for inspection and control of activities and management in enterprises
Financial performance analysis underscores the significance of financial forecasting, serving as a cornerstone for management activities It sheds light on both the financial policies and the overarching strategies within an enterprise.
Investors, including shareholders, individuals, and businesses, allocate their capital to enterprises, seeking benefits while also assuming risks Their primary interest lies in the valuation of the business, as their income is derived from dividends and the appreciation of their capital Both of these financial returns are significantly impacted by the company's profitability, making the assessment of business earnings a crucial focus for investors.
- Average return on business capital, return on equity of the enterprise
- How does the market price of the stock compare to its par value and book value?
- What are the long-term investment projects of enterprises based on?
- The truthfulness and objectivity of the disclosed financial statements
Without the in-depth knowledge to evaluate the financial performance of a business, investors must rely on professional financial performance analysts to provide the necessary information for their decisions
Investors analyze corporate financial activities to assess the enterprise's value and estimate stock prices, focusing on profitability and risk analysis This evaluation relies on thorough research of financial statements and comprehensive economic and financial information.
Engaging directly with corporate management allows analysts to assess financial performance and clarify business development prospects, which is essential for evaluating stocks in the financial market and making informed investment decisions.
1.1.1.3 Financial performance analysis for credit providers
Credit providers lend money to businesses to support their capital needs for production and operations, relying on the borrowers' ability to repay the loans The primary source of income for these lenders is the interest generated from loans Consequently, analyzing a borrower's financial performance is crucial for assessing their repayment capability It's important to note that the analysis methods differ between long-term and short-term loans, each having unique characteristics and requirements.
Short-term credit providers focus on a business's immediate repayment capability, assessing its ability to manage debts as they come due In contrast, long-term credit providers evaluate investment projects financially, overseeing capital disbursement to ensure that the business can repay its debts through income and profitability while effectively managing cash flow across its investment initiatives.
1.1.1.4 Financial performance analysis for salaried employees in the business
Wage earners in an enterprise primarily rely on their salaries as their main source of income, although some may also contribute capital to the business, allowing them to share in profits Both salary and profit sharing are influenced by the enterprise's production and business performance, as well as its remuneration policies and promotion opportunities Analyzing the financial activities of the enterprise is crucial for employees, as it enables them to secure stable employment and confidently engage in their assigned production and business tasks.
State management agencies, including the Ministry of Finance, tax authorities, and customs, serve to represent the power and interests of the people These agencies are responsible for overseeing and managing the economy, with enterprises being the primary subjects of their regulation All developments and activities of these businesses are monitored and reported through these state management bodies.
The analysis of financial activities in enterprises is essential for understanding the management, utilization, and preservation of state capital It provides insights into how financial resources flow between external sources and the market, ensuring that enterprises meet their obligations to the State Additionally, it facilitates the oversight of legal compliance by enterprises, enabling managers to execute their responsibilities more effectively in alignment with the State Bank's objectives.
Other stakeholders: In this group, there are suppliers, customers, competitors, mass media agencies, etc… who are also very interested in the financials of the business with specific goals
Financial analysis of enterprises serves as a vital tool for evaluating economic value, identifying strengths and weaknesses, and uncovering both objective and subjective factors affecting a company This analysis provides management with essential insights, enabling informed decision-making aligned with their specific goals and interests.
1.1.2 Information used in financial analysis of corporate customers
General information encompasses the political, economic, legal, and technological landscape that affects economic and investment opportunities Economic growth significantly influences enterprise performance, while insights from market surveys and development prospects in production and commercial services play a crucial role in shaping business strategies during different periods.
Information by economic sector: Information, reports and forecasts about groups of industries; are the average indexes of the industry or equivalent enterprises in the same industry
Economic sector information reflects how an enterprise's performance is influenced by the characteristics of its industry, including product attributes, technical processes, and production structure These factors significantly affect profitability, capital turnover, growth rates, market size, and future development prospects.
Information by economic sector is information that the performance of an enterprise has the nature of the economic sector such as the characteristics of the economic industry
Factors affecting the financial analysis of corporate customers
1.2.1 Factor belonging to the Bank
The existing credit process focuses solely on the procedural aspects of granting credit to customers, neglecting the importance of an effective marketing strategy This oversight results in a low-quality customer base and an increased risk of lending Furthermore, it hinders the coordinated development of the bank's products and services, ultimately affecting overall business growth.
1.2.1.2 Bank's capacity in loan analysis
The bank's ability to analyze loans remains constrained due to incomplete appraisal reports, insufficient evaluation of project legal aspects, and inadequate assessment of relationships with credit institutions Additionally, the analysis lacks comprehensiveness, failing to fully evaluate the current situation, efficiency, and feasibility of the enterprise's business plan.
Until 2011, Vietinbank implemented a marketing department to handle various tasks, but the department faced significant limitations due to overlapping responsibilities This was particularly evident in areas such as customer strategic planning, market segmentation, brand promotion, and product introduction.
1.2.2 Factors belonging to the enterprise
1.2.2.1 Business capacity of the enterprise
Many businesses operate in a family-oriented and spontaneous manner, which limits their overall capacity This is often compounded by outdated technology and instances of financial mismanagement or fraud, leading to ineffective use of capital.
1.2.2.2 Financial management capacity of the enterprise
This is the core point of the business, affecting the use and coordination of resources of the enterprise to maximize the strength of financial resources in weak business activities
According to statistics from the State Bank, commercial banks currently fulfill only 50%-60% of the loan requirements for enterprises With the continuous growth in the number of businesses over the years, this indicates a significant opportunity for banks to expand their credit offerings to meet the increasing demand from enterprises.
1.2.2.4 Reputation, brand of the business
Many businesses in Hanoi lack established brand names and have low reputations, which leads them to be less concerned about potential reputation loss Additionally, the authorities' inconsistent processes for establishing and dissolving enterprises contribute to this issue.
1.2.2.5 Businesses do not understand the bank's credit regulations
Understanding bank loan procedures and regulations remains challenging due to limited knowledge about loan document reporting This complexity makes it difficult for individuals to navigate the bank loan application process effectively.
1.2.2.6 Financial problems of the business
Many businesses struggle with weak financial capacity and insufficient capital, which often results in low equity and a persistent state of capital shortage This financial instability can hinder their ability to meet the financial security requirements set by banks, ultimately jeopardizing their operations and growth potential.
1.2.2.7 The implementation of regulations on accounting and auditing is not good
Over 80% of enterprises have not undergone audits or received official confirmation of their financial statements, leading to low reliability in their corporate financial situations This lack of verification complicates banks' ability to assess the neutrality and accuracy of these financial reports.
Collateral is also a big problem for businesses when only a few businesses use their own assets to secure loans and mainly use collateral from third parties The rest is unsecured
A well-crafted business plan is crucial for the success of any enterprise; however, many businesses struggle to develop effective plans due to limited methodologies, qualifications, and vision.
In recent years, both domestic and international economic conditions have encountered significant challenges, leading to a decline in market consumption and stagnant inventories As a result, many enterprises have opted to reduce production and operate more conservatively Additionally, the quality of bank loans has diminished due to the challenging business environment faced by customers, making it difficult for banks to recover loans Consequently, banks have become increasingly hesitant and cautious in their lending practices, further contributing to the overall decline in the volume of bank loans.
The lenient approach of authorities towards licensing, bankruptcy, tax inspections, and business operations complicates banks' ability to lend and recover loans effectively The lengthy process of initiating lawsuits and enforcing property judgments hampers successful asset liquidation for banks, as the legal environment remains unsynchronized and incomplete Inconsistent and overlapping laws, resulting from strict yet contradictory regulations by the State and relevant ministries, create confusion for both banks and businesses in legal compliance.
This article provides a comprehensive overview of consumer loans, detailing their concepts, characteristics, benefits, forms, and influencing factors Chapter 1 serves as a foundational exploration, paving the way for a thorough analysis of the current state of consumer loans at the Joint Stock Commercial Bank for Industry and Trade of Vietnam – West Hanoi Branch, which is examined in Chapter 2.
SITUATION OF FINANCIAL ANALYSIS OF BUSINESS
Brief introduction about Vietinbank West Hanoi Branch
Vietinbank has experienced significant growth, now boasting 148 branches, 7 member companies, and 1,000 transaction offices across 63 provinces and cities in Vietnam The West Hanoi branch plays a crucial role in executing Vietinbank's five strategic themes for 2018-2020, which include income restructuring, enhancing payment banking activities, achieving sustainable growth, improving financial capabilities, and optimizing labor productivity and cost management.
- Doan Ke Thien Transaction Office
- Tran Dang Ninh Transaction Office
- Bac Tu Liem Transaction Office
The Vietnam Joint Stock Commercial Bank for Industry and Trade - West Hanoi branch, known as Vietinbank, was established on March 29, 2006, under Decision No 063/QD-HĐQT-NHCT1 by the Bank for Industry and Trade of Vietnam It officially commenced operations on May 2, 2006, and is located at 8 Ho Tung Mau, Mai Dich ward, Cau Giay district, Hanoi The bank's business license number is 0100111948096, with its head office situated at 108 Tran Hung Dao, Hoan Kiem district, Hanoi city.
Vietinbank's Ho Tung Mau branch, established under business license number 0100111948, has consistently pursued stable, safe, and effective growth since its inception This strategic approach has facilitated the branch's development in terms of its organizational structure For more information, contact them at (024) 3842 1032 or visit their website at www.vietinbank.vn.
Up to now, the branch is nearly 15 years old After 15 years of operation since its establishment, the branch has experienced many ups and downs Including 3 main stages:
The first phase: from 2006 to 2011: Business activities of the branch have many advantages, always successfully in completing tasks and exceeding assigned plan targets
From 2012 to 2015, the branch faced significant challenges in its business operations, struggling to meet targets for three consecutive years During this period, the branch focused on finding solutions to overcome difficulties, particularly in addressing bad debts.
Since 2016, the branch has successfully navigated its third phase, achieving all assigned targets and reaching the highest profit levels in a decade Currently, the branch boasts zero bad debts and no group 2 debts, with all business evaluation criteria meeting the established plans.
Vietinbank West Hanoi's success is attributed to the unwavering support from the Board of Directors of the Joint Stock Commercial Bank for Industry and Trade of Vietnam, the dedicated guidance from the main headquarters, and the strong unity among the branch's officers and employees.
The branch has actively implemented various strategies to enhance its capital, recognizing its crucial role in business success By promoting residential deposit growth and targeting new customer segments with stable economic and financial conditions, the branch aims to strengthen its financial position Notably, the branch focuses on improving customer service through a friendly approach, building trust, maintaining professional quality, and providing dedicated care.
Since the start of 2015, Vietinbank West Hanoi has committed to aligning with the strategic direction and business orientation of Vietnam Commercial Bank The branch's business strategy emphasizes growth in scale while prioritizing safety, sustainability, and efficiency.
In the past two years, the branch has prioritized raising capital by enhancing residential deposits, retaining existing customers, and acquiring new ones It has concentrated on providing outstanding loans to corporate clients who demonstrate effective business practices and robust financial health, emphasizing safety, sustainability, and efficiency over scale In retail operations, the branch aims to boost resources for personal loans, home loans, project financing, and car loans, while also promoting cross-selling opportunities for card services, POS, insurance, and e-banking solutions.
To effectively compete with local credit institutions, the branch prioritizes customer satisfaction by nurturing existing relationships and attracting new clients It is committed to professionalism in its operations, delivering expert services and offering a diverse range of products tailored to meet customer needs.
- Make money orders and cheque
Vietinbank offers a range of banking services, including accepting deposits and providing short, medium, and long-term loans to individuals and organizations Additionally, the bank facilitates payment transactions between entities and individuals, engages in foreign currency transactions, and delivers various other banking services authorized by the State Bank of Vietnam.
The capital source is the largest component of a bank's financial structure, significantly influencing its operational and credit capacity Additionally, mobilized capital plays a crucial role in determining the bank's solvency and market standing Vietinbank raises capital through various means, including accepting deposits (such as term deposits and savings), issuing financial instruments like bonds and promissory notes, and borrowing from the State.
Bank or other credit institutions Although the bank's capital is formed from many different sources, but accounts for the largest proportion from 70% to 80%, the capital mobilized from deposits
Vietinbank's basic operating service generates profits through various forms of credit extension, which can be categorized into three classifications: by the nature of credit—such as loans, finance leases, and credit loans; by the duration of credit—short-term, medium-term, and long-term; and by the method of credit—either term-based or item-based Additionally, credit can be classified based on collateral, which includes both unsecured and secured assets.
This operation guarantees regular payment capabilities while maintaining a sufficient cash balance for daily transactions and deposits at Vietinbank It facilitates essential activities such as payments and money transfers for customers Additionally, the deposit includes the mandatory reserve required by the State Bank, with payment deposits utilized for interbank transactions through the State Bank as a payment intermediary.
Vietinbank offers a range of essential services to customers, including currency exchange, secure storage of valuable documents such as real estate ownership papers and movable assets, safe deposit box rentals, and tailored payment services to meet individual customer needs.
2.1.1.1 Organizational structure at Vietinbank West Hanoi Branch
(Chart 1 Organizational structure at Vietinbank West Hanoi Branch)
Source: Vietinbank's Administration Department, West Hanoi Branch)
Current status of financial analysis of corporate customers in credit activities at
at Vietinbank West Hanoi branch
The Branch Customer Relations Officer plays a crucial role in customer engagement, actively seeking out clients through various channels within the Corporate Banking and Retail Divisions This position involves understanding customer needs and assisting them in preparing necessary credit application documents in compliance with commercial banking regulations Additionally, the Leaders of Customer Service Departments at branches and transaction offices are responsible for guiding and supporting branch planning officers in their efforts to effectively market and connect with customers.
2.2.1.2 Receiving and checking credit applications
At this stage, the branch customer relations departments will implement the process by receiving and comparing customer records as outlined in the Appendix for document submission related to granting and credit management It is essential to review the customer-provided documents, accurately record the time of receipt, and establish a timeline for responding to the customer.
Branch Customer Relations Officers must compile a comprehensive assessment report based on customer documents, information from actual customers, and additional sources This report should include a customer assessment, financial capacity evaluation, and analysis of the customer's debt performance capability Additionally, it is essential to assess the customer's credit needs and the planned project for which credit is requested, along with evaluating the social impact and security measures related to the project Following this, the customer classification should be determined in line with the current Credit Rating and Scoring Process The completed Credit Assessment, Appraisal, and Approval/Decision/Proposal must then be signed and submitted to the Credit Appraisal for the credit proposal file In cases requiring further clarification regarding trade finance, the branch's Customer Relations Officer should consult the trade finance department as per the branch's board of directors' regulations.
In this step, the person performing will be the Credit Assessor Main quests include:
- Write down your agreement/disagree to grant credit and attached conditions (if any)
When a case exceeds the authority of the branch, it is essential to inform branch management so the board of directors can oversee the records submitted by the customer department or branch transaction office Additionally, document your agreement or disagreement regarding credit approval, including any attached conditions, and sign the Statement Finally, submit this information to the Head Office via the Credit Approval Department.
The Credit Approval Officer, along with the Re-Appraisal Controller at the Head Office, is responsible for conducting the Re-evaluation process This team holds the competent authority to approve and determine credit decisions at the head office level.
Proposing the credit policy will be Customer Relations Officer at the Head Office; Head of Head Office Customer Department
The Credit Approval Officer is responsible for reviewing the documents submitted by the branch If the case requires input from the Head Office Customer Department, a written notice or email must be sent to them for consultation.
The Head Office Customer Relations Officers will receive the branch's submission from the Credit Approval Department and draft a policy document that outlines their agreement or disagreement with the branch's credit proposal, including any additional comments and security measure recommendations Each page of the document must be signed, and in the event of disagreement, a Notice of Intention to Reject the Credit Proposal will be drafted The final document will then be submitted to the Head of the Department for review.
The Head of the Customer Department at the Head Office will evaluate the documents, initial each page, and provide clear feedback on the branch's credit proposal and any attached conditions If there is a disagreement with the proposal, it is essential to review and initial the Notice of Intention to Reject the Credit Proposal, which will then be forwarded to the Head Office Guest Relations Officer for submission to the Director of Corporate Banking/Retail Division for further review and signature.
Upon receiving the leadership's decision, the Customer Relations Officer at the head office will forward the written consent to the Credit Approval Department for re-evaluation If consent is not granted, a Notice of Policy to Reject the Credit Proposal will be sent to both the Branch and the Credit Approval Department.
The Credit Approval Officer must conduct a thorough re-evaluation, assessing the proposal for credit extension from the Head Office Customer Department and addressing any missing information from the branch's submission Following this, a formal proposal for credit extension should be crafted, specifying the authority responsible for approval The officer then prepares and signs a report detailing the re-appraisal and the subsequent approval or decision regarding the credit Finally, the completed credit proposal is submitted to the Re-appraisal Controller at the Head Office for further processing.
The re-appraisal controller at the Head Office is responsible for overseeing the re-appraisal of applications submitted by the Credit Approval Officer This includes initializing each page of the Re-appraisal and Approval/Decision/Proposal for credit, providing an opinion with any attached conditions, signing the statement, and submitting the profile For credit extensions requiring Board of Directors' authority, submissions must go to the Head Office Credit Council Other cases will be directed to the appropriate authority for credit approval at the head office Additionally, if the Credit Approval Department is likely to refuse credit approval and the customer does not require input from the Head Office Customer Department, the results will be managed accordingly.
The Customer Relations Officer at the head office must prepare a document outlining their agreement or disagreement with the Credit Approval Department's proposal regarding credit approval or refusal, along with any additional conditions Each page of the document must be signed, and it should then be submitted to the Head of the Department for review.
The Head of the Customer Service Department will evaluate the document outlining the agreement or disagreement with the Credit Approval Department's proposal for refusal, including any attached conditions Each page must be signed, along with the final document If there is a unanimous decision to deny credit, the Credit Approval Department is responsible for informing the branch of the refusal.
In cases of disagreement regarding credit refusal, it is essential to coordinate with the Credit Approval Department to escalate the matter to the Credit Approval/Decision Authority at the Head Office This process may involve the Credit Council at the Head Office if the credit decision falls under the authority of the Board of Directors.
The Head Office Credit Council will evaluate the documents provided by the Credit Approval Department in line with the existing regulations Following this review, the council will present the proposal to the Board of Directors for their approval and credit decision.
The person performing at this step will be the Authority to approve/determine credit at the branch and head office
Assessing the current situation of financial analysis of corporate customers in credit
Banking operations in general and Vietinbank - West Hanoi Branch in particular in the past few years have faced some difficulties due to the effects of the Covid-19 epidemic
Despite the challenges posed by the pandemic, Vietinbank - West Hanoi Branch, under the guidance of its Board of Directors, achieved a remarkable pre-tax profit of 16,450 billion dong This accomplishment highlights Vietinbank's role as a leading financial institution, effectively implementing government policies and contributing significantly to the socio-economic development of the country.
In 2020, the Bank of Vietnam focused on restructuring its business operations to enhance both scale and quality, achieving a 7.7% increase in consolidated credit balance compared to 2019 The bank successfully balanced capital mobilization and credit growth, with mobilized capital rising by 11% and the loan-to-deposit ratio increasing by 15.5% Vietinbank exceeded its strategic targets, with non-interest income surging by 35.2% and its share of total operating income growing from 16.5% in 2019 to nearly 20.1% in 2020 Additionally, revenue from foreign currency trading and profits from capital business rose by 24% and 70%, respectively, while maintaining a non-performing loan (NPL) ratio of less than 1% and an NPL coverage ratio above 130%.
In Vietnam, personal pre-tax profits have soared to VND 1,645 billion, empowering banks to enhance their roles as key financial institutions This growth enables them to proactively address the economic capital requirements and financial service demands of the country, while increasingly contributing to the national budget and fiscal stability, thus supporting the upcoming socio-economic development.
61 country Return on equity and return on equity are 16.8% and 1.3% respectively, continuing to grow strongly compared to 2019
2.3.2.1 Consumer loan products are limited and monotonous
Consumer credit products of the Central Bank of Vietnam are still mainly traditional products, still monotonous and lacking in connection with each other
New banks primarily concentrate on offering consumer credit products, including home purchase and repair loans, car loans, and study abroad loans However, they have not fully leveraged other consumer credit options, such as credit card issuance and labor services Additionally, export loans and loans below the overdraft limit are underutilized for financing consumer loans As a result, these banks have yet to maximize the potential of the consumer credit market and effectively harness their own capabilities.
2.3.2.2 The number of borrowers is limited
Consumer loans in West Hanoi are diverse yet not widely understood or utilized by customers A significant challenge lies in the stringent conditions imposed by banks, particularly the requirement for collateral, which reflects a common limitation within Vietnam's commercial banking system The process of appraising collateral and liquidating assets to recover debts also presents additional hurdles for borrowers.
2.3.2.3 The structure of consumer loans is not balanced
The West Hanoi branch of Vietinbank offers a diverse range of consumer loan products, yet the majority of outstanding loans are concentrated in housing and general consumer loans, with student and car loans representing a minor share This trend suggests a significant and largely untapped demand for various consumer loans To achieve a more balanced consumer credit structure, Vietinbank - West Hanoi should focus on expanding its lending options Addressing this imbalance is crucial, as it not only impacts the bank's growth but also restricts access for a broader customer base.
62 entering the bank Sometimes, customers come to the bank, but due to the bank's conditions, the bank is forced to refuse, the customer does not meet the requirements
2.3.2.4 The credit process and regulations are still complicated and not suitable for customers
Customers seeking to borrow capital often encounter lengthy and complex procedures at banks, particularly at Vietinbank, where stringent regulations hinder the process Completing the necessary documentation can be challenging and time-consuming, followed by an extensive appraisal by loan officers, which adds to the overall costs The current consumer credit regulations lack flexibility and do not adequately meet market demands, with strict requirements on loan amounts, terms, and documentation proving income and capital use Additionally, the cumbersome debt collection process poses further difficulties for customers Streamlining the credit process to make it more convenient and efficient could significantly increase the uptake of consumer loan products at the branch.
2.3.2.5 Banking technology is still limited and underdeveloped
Despite the Vietnam Bank for Industry and Trade's advancements in various sectors, the credit department, especially consumer credit, lacks uniform application and completeness Additionally, the management and storage of debt and customer information remain inefficient, hindering effective oversight, review, and analysis of customer data.
The complexity of the credit process can lead to prolonged transaction times and increased costs for customers, negatively impacting the bank's operational efficiency Providing accurate credit information is essential for banks when extending credit Recently, the branch has focused on enhancing its information collection and processing methods, including the use of newspapers and banking magazines, to improve overall efficiency.
Credit information frequently suffers from issues such as incompleteness, inaccuracies, and outdated details Furthermore, the personnel in this sector tend to be relatively inexperienced, with limited years of professional experience.
The West Hanoi Branch encounters challenges in offering consumer loans due to difficulties in verifying borrowers' income and repayment capacity For salaried individuals, assessing income is straightforward through monthly payroll records However, when borrowers have additional external income sources, accurately determining their overall financial situation becomes more complex.
Borrowers without a specific salary sheet must provide proof of income to secure a loan; otherwise, banks may deny their requests, limiting the West Hanoi Branch's credit expansion and impacting overall capital utilization Additionally, consumer habits and psychology significantly influence banks' credit activities, particularly in the realm of consumer loans, which remain underutilized in Vietnam Many Vietnamese consumers are not accustomed to bank loans, often finding the loan process cumbersome and complicated, which deters them from seeking financial assistance from banks Instead, they prefer saving or borrowing from family and friends, reflecting a cultural tendency that differs from Western practices.
The legal framework governing credit activities is incomplete and lacks synchronization, leading to numerous overlaps and challenges Additionally, operational regulations are yet to be established, and existing guidelines on credit guarantees are inadequate Many recently introduced policies related to land, construction, and education remain unimplemented, further complicating the credit landscape.
The Covid-19 pandemic has significantly impacted the economy, leading many companies to downsize and implement layoffs This reduction in workforce directly diminishes individuals' incomes and indirectly influences consumer behavior, prompting people to save rather than spend Consequently, this shift in spending habits has substantial implications for the credit process.
Chapter 2 provides a comprehensive overview of Vietinbank - West Hanoi Branch's formation, development, and business performance from 2019 to 2020 It delves into the loan registration process and appraisal methods used by the branch, supported by examples of clients' financial preparations The analysis highlights the branch's achievements, along with the strengths and weaknesses in its consumer credit activities, and proposes solutions to address these limitations in the following chapter.
CHAPTER 3: SOLUTIONS TO COMPLETE FINANCIAL ANALYSIS OF BUSINESS CUSTOMERS IN CREDIT ACTIVITIES AT VIETINBANK
Oriented development
Vietinbank aims to enhance operational efficiency through a transformative growth model centered on sustainable development, emphasizing scale, quality, and technology Key initiatives include restructuring for retail and SME customers, optimizing income structures, and boosting service revenue while aligning with economic strategies A strong focus on customer experience is essential, achieved by developing financial service linkages and improving service quality, particularly in online payment technologies To support these objectives, Vietinbank must prioritize digital transformation and database development, ensuring technology applications enhance business growth while maintaining security Investing in human resources through training, competitive remuneration, and fostering a dynamic work environment will motivate employees and drive long-term success Additionally, streamlining transaction processing times will enhance operational efficiency and productivity Finally, strengthening risk management and internal controls, alongside unique brand development plans, will solidify Vietinbank's market position amidst increasing competition.
To enhance marketing for products and services, companies must cultivate a young, creative team capable of swiftly identifying trends, ensuring a robust brand presence Placing the customer at the center of strategy is essential, necessitating the development of accessible services for all societal classes and ages This includes offering loans for various needs, such as personal income generation, student tuition fees, and support for new project development.
3.1.2 Development orientation of consumer credit activities
It can be said that consumer credit activities of commercial banks in general and Vietinbank in particular make an important contribution to the economic development of the country
Consumer credit activities pose significant risks that can adversely impact banks' financial stability, making it crucial to enhance the efficiency of these activities within commercial banks To achieve this, improving appraisal quality at every stage is essential Credit Officers should continuously update themselves on industry news, market price trends, and economic data while also conducting on-site surveys of the customer's industry This hands-on approach ensures accurate appraisals and mitigates the risk of relying on potentially misleading information provided by customers.
To enhance capital mobilization, it is crucial to improve the quality of deposit collection by promptly reflecting changes in local credit institutions' interest rates This involves not only attracting deposits from residents and political organizations but also encouraging businesses and economic entities to open payment accounts Such strategies can help reduce input interest rates and boost competitiveness in output interest rates, leading to a rapid increase in capital mobilization and an expansion of service activities Additionally, implementing promotional campaigns, such as gift draws and lucky draws for customers who deposit money at the bank, can further incentivize deposits.
This will directly hit the customer's psychology and will attract the attention of many new customers as well as a number of customers participating in depositing
To enhance credit activities for individuals, households, and businesses, it is essential to innovate and streamline the loan process, making it user-friendly while ensuring loan safety Additionally, reducing the time required for loan appraisal and settlement will alleviate customer frustration related to lengthy paperwork, fostering a more efficient experience.
To bridge the gap between policy and implementation, it is essential to develop streamlined enforcement mechanisms The credit process must be designed effectively, ensuring clarity in appraisal principles, loan conditions, terms, and repayment periods Additionally, establishing interest rates that align with customer needs and market trends is crucial for attracting new clients.
Effective debt management policies are crucial for enhancing efficiency, necessitating close oversight of how customers utilize borrowed capital Credit officers must conduct regular visits to clients' businesses to monitor and guide the appropriate use of funds Each area should have a designated Credit Officer responsible for this oversight Monthly reports should be provided to group leaders to identify and address bad debts associated with households and businesses Additionally, banks must consistently assess the production, business operations, and financial health of their customers to identify potential risks early and implement timely solutions, thereby preventing the escalation of debts into overdue accounts.
If customers are unable to repay their debts on time, it is crucial to report to management for timely advice to enhance the bank's lending strategies Currently, the most effective agricultural lending strategies are value-based, focusing on understanding opportunities and risks in agriculture through analysis and forecasting Credit institutions will adapt their lending approaches according to specific periods, ensuring alignment with market conditions.
Banks play a crucial role in the agricultural value chain by offering pre-harvest loans and trade finance for input materials, which facilitates the consumption and distribution of agricultural products.
To enhance the ability to anticipate the impact of social and economic changes on borrowers, it is crucial for banks to refine their predictive capabilities This will enable timely and accurate assessments of potential risks Additionally, ongoing professional development for industry officials is essential to minimize errors in analysis and evaluation Regular training sessions should be organized to strengthen staff expertise in areas such as credit and credit risk management, ensuring they stay updated on new regulations and equipped to handle various situations This focus on professional growth is vital to meet the evolving demands of customers and adapt to the dynamic market economy and global integration.
Emphasizing the importance of thorough inspection and examination within banks is crucial for enhancing overall quality and effectiveness Promoting internal inspections helps prevent issues such as improper due diligence, faulty credit processes, and inadequate verification of customers and borrowers, particularly those without collateral Additionally, comprehensive oversight is essential, focusing on identifying negative aspects and enhancing the accountability of inspection and control officers responsible for the outcomes of their evaluations.
In today's rapidly evolving information technology landscape, staying updated with the latest trends is crucial for banks to leverage technological advantages and avoid obsolescence Continuous integration of new technologies into software programs and information systems enhances customer convenience and satisfaction Additionally, prioritizing network information security is essential to protect customer data and mitigate risks for both banks and clients Ultimately, the strategic use of technology significantly boosts operational efficiency and customer trust.
69 work of updating the most accurate and new information from which the best steering strategies will be available
Expanding the company's network by opening new transaction offices in rural areas is crucial to ensure accessibility for customers who face difficulties when conducting transactions Additionally, investing in facilities is vital for enhancing the bank's image and instilling confidence in customers, ultimately leading to a more secure and positive transaction experience.
In the near future, banks should focus on integrating traditional consumer lending with public services, as this sector represents a substantial portion of their customer base and contributes significantly to their credit profits To enhance consumer credit activities, banks must establish clear guidelines that promote this strategic development.
- Increase the proportion of outstanding loans in total outstanding loans to banks (the proportion of outstanding loans is approximately 4% -5% of total outstanding loans)
- The annual growth rate of outstanding loans is from 25% to 30%, keeping the delinquency rate below 1%
- Continue to maintain relationships with traditional customers In addition, the bank is also constantly developing new customers
- Strengthen promotion, advertising and marketing of consumer loan products to target a large number of people, new customers, agents, units
Reduced interest rates or preferential interest rates corresponding to the loan limit registered by customers to meet the increasingly diverse financial needs of consumers
The Bank aims to enhance its offerings by providing a diverse range of products and services designed to lower interest rates, offer insurance to borrowers, and increase credit limits, including unsecured loans Additionally, the branch should shift its focus towards developing consumer loans tailored for young customers, a significant demographic in Vietnam that represents a large portion of the population.
Some recommendations to improve credit activities
- The change of Vietinbank's credit model should be done according to a suitable schedule, not too often
- Develop a separate regulatory process for micro- and micro-enterprise customers with a small loan value and collateral value to reduce procedures, time for customers, and reduce staff load
- Credit growth must go hand in hand with credit quality, ensuring safety in business activities
- Building a customer data warehouse, a common security asset for the whole system to all branches in the system
- For credits and collaterals beyond the branch's authority, the Head Office should regulate the credit approval department to appraise it in parallel with the branch's appraisal to save time
- Regularly maintaining internal control activities to help the Branch detect errors for timely correction
3.3.2 Recommendations to the State Bank
The State Bank should enhance the banking institution in line with Resolution 42/2017 from the National Assembly, implementing a Decree on the debt transaction market while addressing challenges in bad debt settlement It is essential to modernize non-cash payment solutions, promote Fintech advancements, and foster digital banking innovations, including e-wallets and mobile money Additionally, collaboration with big tech companies and establishing a regulatory framework for data sharing, such as a sandbox regulatory-test management mechanism, will encourage the success of credit institutions.
The State Bank must persist in guiding and expediting the development of national databases, particularly focusing on population data This foundational step is crucial for banks to create innovative financial products that effectively support the economy.
As of the third quarter of 2019, the stock market's value stands at 81% of GDP, indicating potential for growth compared to regional counterparts To mitigate risks within the commercial banking system and establish a stable long-term capital source for the economy, it is essential to continue robust development in the stock market.
Chapter 3 pointed out solutions to solve outstanding problems in analyzing consumer credit activities at Vietinbank West Hanoi Branch The above recommendations and solutions all have the ultimate purpose of increasing efficiency in credit appraisal as well as consumer credit, increasingly meeting customer needs, in line with the general development orientation of Vietinbank
In the current economic climate, businesses are increasingly seeking bank loans, leading to a rise in credit access and financial analysis demands This trend necessitates improved analytical efficiency while ensuring that customers selected for capital access possess strong financial health and robust production capabilities for timely loan repayment A study conducted at Vietinbank - West Hanoi branch, grounded in theoretical financial analysis, reveals critical insights into these dynamics.
The study establishes the theoretical foundations of corporate financial analysis in the credit sector, detailing the content, processes, and methods used, along with the various factors that influence the analysis process.
The study evaluates the current state of customer financial analysis in the credit operations of Vietnamese commercial banks, identifying both advantages and limitations within the analysis process It further outlines the goals for credit development in the near future and proposes solutions to enhance analysis quality Recommendations are directed towards Vietinbank, the State Bank of Vietnam, and the government to address identified challenges and improve overall performance in the banking sector.
The study acknowledges several limitations stemming from the restricted data collection, qualifications, and analysis time of the author Consequently, the author welcomes feedback and evaluations from educators and peers to enhance the research quality.
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