program process of company credit assessment and loans at agribank binh giang hai duong

PROCESS OF COMPANY CREDIT ASSESSMENT AND LOANS AT AGRIBANK, BINH GIANG, HAI DUONG GRADUATE INTERNSHIP REPORT INTERNSHIP COMPANY/INSTITUTION: AGRIBANK, BINH GIANG, HAI DUONG Address: 100

AGRIBANK, BINH GIANG, HAI DUONG

GRADUATE INTERNSHIP REPORT

PROCESS OF COMPANY CREDIT ASSESSMENT AND LOANS AT

AGRIBANK, BINH GIANG, HAI DUONG

GRADUATE INTERNSHIP REPORT

INTERNSHIP COMPANY/INSTITUTION:

AGRIBANK, BINH GIANG, HAI DUONG Address: 100 Pham Ngu Lao Street, Ke Sat Town, Binh Giang District, Hai Duong

SUPERVISOR: Ph.D Diem Thi Thanh Hai

STUDENT: Nguyen Trung Hieu

STUDENT ID: 18071088

COHORT: International Business

CLASS: IB2018G

Hanoi — 2022

ACKNOWLEDGMENT Practical knowledge is required to apply all of the previously acquired knowledge Internships are the stepping stones that allow us to find work after college During my 6- week internship at Agribank, Binh Giang, Hai Duong I gained a lot of practical experience in analyzing credit operations as well as the processes to collect data and compile a thorough financial report I'd want to show my gratitude to everyone who assisted me in completing my thesis

Firstly, I'd want to express my gratitude to Mr Dong Duc Cuong, the bank’s

manager, and the rest of the personnel for their assistance and direction in the finance-accounting area

Secondly, I'd want to thank Ph.D Diem Thi Thanh Hai in particular for assisting

me in completing this internship report It is a privilege for me to be led by you I believe it would be extremely difficult for me to complete my internship report without your guidance and encouragement

Sincerely thanks!

STATUTORY DECLARATION Thereby certify that the Graduate Internship Report is the result of my own research and has never been published anywhere I have taken research ethics extremely seriously throughout the length of this project's implementation; all of this project's findings are the product of my personal study and surveys; and all references in this project are properly credited according to regulations

I assume full responsibility for the correctness of the data, statistics, and other elements in my graduation project

Student

Nguyen Trung Hieu

TABLE OF CONTENTS ACKNOWLEDGMENT

3.1 Overview of Agribank's credit process for commercial loans

3.2 Detailed analysis of the steps in the credit process

CHAPTER 4 ACTUAL LOANS AT BINH GIANG BRANCH

4.1 Capital mobilization situation at Agribank Binh Giang branch

4.2 Loan situation at Binh Giang Branch

CHAPTER 5 CURRENT SITUATION OF CREDIT RISK AT AGRIBANK BINH GIANG BRANCH BRANCH

5.1 Classification of debt groups and credit risks at the bank

5.1.1: Debt grouping

5.1.2 Classification of credit risks

5.2 Bad debt situation at Agribank Binh Giang branch

5.2.1 General situation of bad debt at banks

5.2.2 Analysis of overdue debt situation by customer group 5.2.3 Analysis of overdue debt by loan term

5.3 The Bank makes provisions for and handles credit risks

CHAPTER 6 ANALYSIS OF PROBLEMS IN THE CREDIT PROCESS OF

CHAPTER 7 SOME SOLUTIONS TO COMPLETE THE CREDIT

ASSESSMENT PROCESS AT AGRIBANK BINH GIANG BRANCH

LIST OF TABLES AND FIGURES

Figure 2.1 Total asset of Agribank compared with other banks in 2020 - 2021 9

ABTRACT Vietnam Bank for Agriculture and Rural Development (Agribank) 1s one of the Big 4 banks in Vietnam With strong development since 1988, the bank has made great contributions to the development of Vietnam's economy, especially in rural

areas

I was able to practice and gain experience at the Agribank in Binh Giang, Hai Duong After six weeks of internship, I have a better understanding of the bank's creation, development, and operating position thanks to the aid and advice of the bank's personnel, as well as extensive guidance from Ph.D Diem Thi Thanh Hai With the knowledge, information, and experience gathered throughout the internship, I prepared the internship report at Agribank, Binh Giang, Hai Duong Here's an example of a report I wrote during my internship:

Chapter 1: Background of internship Chapter 2: Background of company

Chapter 3: Overview of the business credit assessment and loans process Chapter 4: Actual loans at Agribank,Binh Giang, Hai Duong

Chapter 5: Current situation of credit risk at Agribank, Binh Giang, Hai Duong

Chapter 6: Analysis of problems in the bank's credit process

Chapter 7: Some solutions to improve the credit appraisal process at banks

CHAPTER 1: BACKGROUND OF INTERSHIP 1.1 Internship Position

Intern in the position of corporate financial-accounting

1.2 Internship Objectives

The 6-week internship is designed to provide students with valuable skills and experience that will aid them in their future jobs The goals I set for myself following my internship are listed below

@ Improve advanced skills including communication, analytical and decision-making abilities, problem-solving abilities, evaluation abilities, and self-discipline

@ Approaching the real-world workplace and determining whether it is a good fit for one's professional objectives and interests

@ To put what one has learnt into practice in every scenario

@ Enhancing specialist knowledge

CHAPTER 2 - BACKGROUND OF AGRIBANK 2.1 Introduction to Agribank

“ Overview Agribank's full name is Vietnam Bank for Agriculture and Rural Development, the company was established on March 26, 1988 under Decree No 53-HDBT of the government The bank is 100% state-invested During more than 34 years of operation, the bank plays an important role in the state banking system of Vietnam.By the end of 2021, Agribank's total assets will have surpassed VND 1.68 billion; capital sources will have surpassed VND 1.58 billion; total outstanding loans to the economy will have surpassed VND 1.31 billion; profit will have surpassed VND 14.5 billion; and it will continue to be one of the enterprises contributing the most to the state budget Agricultural and rural development loans account for nearly 70% of all outstanding loans.The main operating market of the bank is the agricultural and rural areas, so the bank has made an important contribution to the development of the agricultural economy , helping to improve living standards in rural areas According to the recently released financial report for the fourth quarter of 2021, Agribank Securities Company (Agriseco) earned VND 439 billion in pre-tax profit by the end of the year, with profit after tax nearly reached 396 billion dong, 3.6 times and 4 times higher than the same period last year and 23 percent higher than the full year plan Agribank also plays a pioneering role in 2021 Phong is an example of a significant state-owned financial company that has reduced interest rates and payment service costs by up to VND 7,000 billion to assist clients in overcoming problems caused by the Covid-19 outbreak Nearly 3.2 million clients have been spared from paying interest, and the total profit has been decreased by Vietnam

to 5,200 billion VND

Phone number: +842432053205

* Address: No 2 Lang Ha street, Ba Dinh district, Hanoi, Vietnam

* Email: cskh @agribank.com.vn

Agribank was honored with 2 typical Vietnamese Bank Awards 2020 Agribank - Top 10 prestigious Vietnamese commercial banks in 2020 Agribank ranked 190th — the highest ranking among Vietnamese banks in the Brand Finance Banking 500

Agribank AutoBank CDM 24/7 - Excellent system in the field of Sao Khue Banking 2020

“Excellent standard payment rate in 2020” awarded by The Bank of New York Mellon (BNY Mellon)

Agribank was honored with 2 typical Vietnamese Bank Awards 2019 Star Award 2019

Agribank: ranked 142/500 largest banks in Asia in terms of asset size

s% Performance:

Total asset of Agribank compared with other banks in 2020 - 2021

(Billion VND)

2,000,000 1,761,939 1,800,000 TT 1,680,000

Figure 2.1 Total asset of Agribank compared with other banks in 2020 - 2021

In the years 2021, 2020, Agribank's total assets always rank 2nd compared to all other banks The growth rate of Agribank is 7.1% với các chỉ số tài chính trong nam 2021:

- Total equity: 73.843.444 triéu VND

- Total liabilities: 1.620.388.078 triéu VND

- Profit after tax (PAT) : 11.611.119 triệu VND 2.2 Overview of Agribank, Binh Giang, Hai Duong

1989 to establish the institution (now the Government) The branch became a service unit supporting clients’ cash flow requirements, with a competitive aspect, when the two-level banking system from the state bank to the State and business banks was split

Address: No 100 Pham Ngu Lao Street, Ke Sat Town, Binh Giang District, Hai

2.1.2.2 Tasks of the branch:

Perform well in the short, medium, and long-term mobilization of capital

¢ Capital mobilization in both domestic and international languages

¢ Increase the number of safe and effective signals, and react to capital needs in

rural regions, production, business, services, and life development

* Actively seek out effective loan customers

¢ Implement well Decree 41 of the main government on main credit budget servers

payment Mobilizing capital from abroad and other services

* Payment reporting activities

2.2.3 Business activities:

Agribank's target customers in Binh Giang and Hai Duong branches are mostly

households, but with the local economic development, the bank's customers are

increasingly expanding Customers who conduct transactions with customers for the purpose of growing their business play an increasingly important role in the bank's revenue For example: small business and export - import enterprise

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Small- scale business

Figure 2.3 Classification of customers of Agribank a) Service of deposit

* Mobilization of savings deposits, issue of promissory notes, bonds, and

valuable papers in Vietnamese dong and other foreign currencies

¢ Accept deposits in Vietnam Dong and other currencies from local and international organizations and individuals in a variety of forms and maturities b) Credit management

¢ Loans to all economic sectors, short, medium, and long term

* Investing in local and foreign initiatives by lending funds, co-financing, and receiving as trustee service

Individuals, families, cooperative organizations, private companies, production, business, and services in the following fields: consumer loans in Vietnam dong

to meet the living needs of authorities and employees, as well as other issues c) Service for domestic payments

* Receive payments for people and businesses in vietnamese dong and

international currencies (USD and EUR)

* Domestic payment via electronic money transfer

* Bank for project payout Revenue and expenditures on the unit's behalf

* Paying salary using a bank account

d) Additional goods and services

* The ability to deposit and withdraw money from a variety of locations When the deposit balance hits 100 million dong, collect money at the customer's

request

* Providing firm and organization personnel with salary payment services

* Issuing and accepting domestic success cards as well as international visa and master cards

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CHAPTER 3 OVERVIEW OF THE BUSINESS CREDIT ASSESSMENT

AND LOANS PROCESS

3.1 Overview of Agribank's credit process for commercial loans

From the time the Bank receives the company's loan demands until the debt is recovered, the credit lending procedure for corporate clients comprises steps The credit procedure is meticulously designed to assist businesses in borrowing

money in a uniform, logical manner while also limiting the Bank's risks The

outcomes of the previous stage are always a basis for the execution of the future stages in the credit process, altering the work quality of the subsequent stages Agribank's credit processes are summarized as follows:

Steps in the credit process Input of information Mission of Agribank Result of each step

Create a credit

profile The company provides information and

demand for loans

Contact and guide businesses

to make loan documents

Complete the loan application form

interviews, financial documents, and credit

history are included in the loan application dossier

Evaluation of the financial viability of the company

Report evaluation results to the appropriate department, which will determine whether to lend or not to lend

notarizing agreements, and other sorts of

agreements

accordance with | request, return the terms of the | them to the credit contract provider

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Debt collection - Insider information - Examine - Provide

- Credit contract | liquidation

Table 3.1 Agribank's credit banking process

(Source: Agribank, Binh Giang,Hai Duong) 3.2 Detailed analysis of the steps in the credit process

Step 1: Fill out an application for a loan

+

When a company wants to use the bank's loan service, this is the initial stage The following components are included in the loan application given by the firm in this process:

Profile of a legal person

Licenses for establishments; Business Registration; Number of

shareholders, certificate of tax code registration, minutes of capital contribution

The rules of business Decision on Director (General Director) and Chief Accountant appointments

Minutes of the Members’ Council/Board of Directors meeting enabling the Director/Deputy Director to sign loan contracts, mortgage assets, repay

bank loans, and associated documentation other

Financial statements and company performance records

A brief description of the company's operations Financial statements for the previous two years, as well as financial and company status reports up to the date of the bank loan request

Report on the state of contributed capital/equity at the time the capital was borrowed

Information on receivables and payables, inventories, fixed assets, and

short- and long-term debt at the time of borrowing (original)

Import-export-goods-inventory tracking in a revenue book (copy) Monthly tax payment declaration, bank book, cash fund number (the last 6 months)

Economic contracts, as well as input and output invoices, have been completed

Business Plan Profile Write a loan application letter based on your company's plan

Economic contracts for inputs and outputs under the loan plan Other papers relevant to the company's production and commercial status that the Bank is interested in

Paperwork on loan collateral include documents showing ownership and legitimate use of the property, as well as the property owner's identifying

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documents There are a few fundamental documents that are required depending on the type of asset used to secure the loan:

+ If it's real estate, you'll need a certificate of house ownership as well as a certificate of land use right

+ Ifit's commodities, machinery, or equipment, keep track of the sale and purchase contracts, invoices, and other pertinent documents

+ Papers of great value: Savings book, certificate of deposit

- Profiles of Others + Rental agreements for warehouses and offices + Contract of credit with other banks (if any) Step 2: Appraise the company's profile and credit rating

Step 2.1: Check loan documents

Before proceeding to check the customer's loan application, the staff is responsible for checking whether the customer meets the conditions to get a loan

If they meet the customer's requirements, they will be reviewed and evaluated

a, Loan conditions for customers who are Enterprises of the Agricultural Bank of Vietnam

In addition to the general conditions applied by most banks in Vietnam, Agribank has added its own unique features and conditions as follows:

Firstly, the condition "Having civil legal capacity, civil act capacity and civil liability according to the provisions of law" applicable to each type of enterprise

is specified as follows:

- Legal entity: Articles 94 and 96 of the Civil Law, as well as other laws of Vietnamese law, recognize a legal entity A letter of authorization to borrow funds from the legal entity directly managing dependent accounting member companies is required

- Fora private company: The owner of the company must be able to take responsibility for civil law and operate in accordance with the Law on Enterprises

- Partnership: The members of the Board of Directors must have the capacity to be responsible for the civil law and operate under the Enterprise Law

In addition to the current provisions on the purpose of capital use, there is a clear production and business plan Agribank added the condition "financial ability to pay off all debts according to the contract" which is shown as follows:

- The company must use a part of their capital in business and production projects

- The business company in the event of a loss must have a plan to overcome the loss in order to ensure the timely repayment of the debt

- Credit officers are responsible for checking information from a variety of sources After determining that the company meets all the conditions, then move on to checking the legal records

b, Check legal profile

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- The staff in the credit department is responsible for checking and ensuring that customer records are correct Invalid documents will be recognized and discarded

- The credit officer is responsible for checking the quality of the company's financial - accounting statements to avoid the case where the accounts are misrecorded against the standards Risks related to fluctuations in financial ratios in financial statements

- Documents stipulating rights and responsibilities of partners in contracts

of enterprises

- The company's operating rules are also carefully considered: Bankers need

to consider who has decision-making power in the company Ccacshe company makes a decision

- The Bank reviews and authenticates documents deciding who is responsible for the financial management of the enterprise such as: director, general director, chief accountant and legal representatives for the enterprise

c, Check loan documents and loan security documents

The staff of the Ministry of Credit Banks check and verify the documents in the file “Loan application” and “Portfolio Secured Loan” In addition, cash flow projections for the next 3 years and production and business plans, borrowing capacity and debt repayment (resources for debt repayment) should also be considered The analysis of the appropriateness between the industry in which the company registers its business project and the field in which the company registers to operate The receiving bank should also assess its future direction when conducting the review process

Step 2.2 Checking the business's loan purpose

In this step, the bank needs to verify whether the loan purpose of the proposed investment plan is with the business's field of operation In addition, the source of funds should be checked and excluded in case it is used for illegal activities such

as buying banned goods by the government

Step 2.3 Collecting information about customers, production and business plans and investment projects

Step 2.3.1 Regarding customers, there is a demand for loans

The bank's credit officer must gain practical knowledge by going to the company

in person The bank obtains information about the client's management, the condition of the plant's facilities, the equipment and production technology that the company owns Finally, determine the actual value of the collateral assets This is an important step to help the bank check the information provided by the business Moral hazards such as lying, exaggerating the company's situation will

be detected and eliminated in this step

In addition, banks check legal information through government agencies such as accounting Check the creditworthiness of the company through the CIC credit

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center of the State bank of Vietnam, the banks that have lent to the bank and the

company's partners Credit officers need to get as much information as possible

to get the most accurate rating

Step 2.3.2 Production, business and investment projects

Bank staff collect information to evaluate the investment plan of the enterprise through many ways such as: actual demand in the market, prices, production costs for the company's products Products are considered through: suppliers of raw materials for the company, customers who consume the company's products Information about similar industries and products can be found through the internet, television, government agencies and seminars

Step 2.3.3 Industry analysis,

Industry analysis is an important step in the credit analysis process of bank employees When performing industry analysis, the bank will answer the question “Does the industry in which the company invests have many

opportunities? Through market analysis techniques, customers such as: SWOT, PESTEL The risks and opportunities arising from customers, suppliers and the market will be clearly identified The company's competitors also need to be considered, even as substitutes If the credit staff has experience, they can share

to help customers develop

Step 2.4 Financial analysis

Bank analysis through financial statements.Checking the quality of a customer's financial statements is considered the first step when starting to analyze financial statements The financial statements are made in a positive way to show the high financial ability of the client The examination should be done carefully including looking at the numbers, looking at the company's interpretations, analyzing the

company's strategy

In addition to the business financial assessment, the bank needs to add a debt

monitoring table, a bank reconciliation sheet and other documents through which the staff will evaluate based on the indicators

e Liquidity ratio group: There are 2 factors to consider: short-term ratio and Payout coefficient

: Collateral

Short-term payment ratio = Total current liabilities

Payout coefficient= —=eaa« Total current liabilities

If the coefficient is greater than 1, the business is better If the coefficient is less than 1, this means that the business's financial difficulties may have a loss- making business

® Group of operating ratios: Including indexes related to inventory turnover, collection period, debt payment period

OFF Cvecgde@R

CDfg Df gDDdƒDNd * 365 (Day )

Inventory turnover ratio =

16

Average collection period = nang, 0E CN (Day)

eeveCue _ OBEEDUCGS CC@RCDNe

d= CDfg CC ODCE@R x 365 (Day) The longer the capital turnover period, the more difficult it is for businesses to collect debts, repay debts and sell goods

Ratio of overdue debts to total outstanding loans =

@ Income ratio group: Including asset turnover, return on total assets, return

ROA = Neg EePseg @RZDGCN Cffegf Financial leverage = ORIDICN Cffegt EduCg@R

Self-financing rate = Educg@5 ƒDueEeƒ ©FEDgCN ECECgCN This group of ratios measures the efficiency of a business's equity, which indicates the profit generated by the business per unit of its capital If the self- financing ratio is around 40%-60%, the company will be more proactive in doing business

Step 2.5 Analysis of the relationship with the bank

Bank credit officers need to review the status of the relationship between the bank and the customer based on the present and the past

- Credit relationship review

For Agribank Binh Giang branch, factors to consider include: Long-term,

medium-term and short-term outstanding loans, loan turnover, debt collection,

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