CURRENT STATUS OF FINANCIAL ANALYSIS OF CORPORATE CUSTOMERS IN CREDIT ACTIVITIES AT MILITARY COMMERCIAL JOINT STOCK BANK - HAI BA TRUNG BRANCH .... Current status of financial analysis o
The urgency of the topic
The trend of globalization has been having far-reaching impacts on economies around the world, so in order to have the opportunity to develop, countries cannot help but participate in the integration process And the banking and finance industry is a pillar of the economy and also an industry with many changes to match the development of the economy With the trend of opening up, the banking industry is gradually becoming more competitive Especially commercial banks with the main source of income from credit activities
In fact, banks act as financial intermediaries to transfer capital from overfunded customers (capital mobilization, bank deposits) to customers who are in need of capital (lending activities) However, lending activities also carry many risks In recent years, there have been many mistakes related to the loss of capital at banks, with the amount of up to trillions VND The reason is the mistake of bank officials to comply with the procedures and regulations in lending activities In addition, the assessment of the financial situation of corporate customers at banks has not been paid much attention The misassessment of the financial situation of customers, the misuse of borrowed funds for the purpose of commitment, leading to capital loss, thereby causing serious losses to the bank Therefore, in order to avoid risks and perform this business well, banks need to improve the analysis of financial statements of enterprises, to ensure the ability to recover capital and the feasibility of projects of enterprises
Military Commercial Joint Stock Bank is one of the large-scale banks, in more than 28 years of operation, the bank has achieved many achievements During the internship and research at the corporate customer department of Military Commercial Joint Stock Bank – Hai Ba Trung branch, I realized that financial analysis in credit activities of the bank plays a very important role, but this activity here is not really improved This hinders the process of cooperating with potential corporate customers of the bank Therefore, the topic “Improving The Financial Analysis of Corporate
Customers in Credit Activities at Military Commercial Joint Stock Bank - Hai
Ba Trung Branch" was chosen as graduation thesis.
Research objectives
Generalize and systematize the theoretical basis of analysis of corporate customer financial statements in lending activities of commercial banks, including general contents of lending activities, the system of analytical indicators and databases for customer financial analysis
Analyzing the current status of analyzing customer’s financial statements in credit activities of Military Commercial Joint Stock Bank – Hai Ba Trung branch
Propose solutions to improve the financial analysis of corporate customers during the appraisal process before lending and during the loan process at the bank.
Research Questions
The paper focuses on answering the following specific questions:
- What problems does the financial analysis of corporate customers in credit activities include?
- How is the financial analysis of corporate customers in credit activities at MB Military Commercial Joint Stock Bank - Hai Ba Trung branch taking place?
- What solutions help improve the financial analysis of corporate customers in credit activities at MB Military Commercial Joint Stock Bank - Hai Ba Trung branch?
Subjects and scope of research
The research object is the financial analysis of corporate customers wishing to borrow capital at Military Commercial Joint Stock Bank – Hai Ba Trung branch
Scope of research: general theory and current status of corporate financial analysis in credit activities at Military Commercial Joint Stock Bank - Hai Ba Trung Branch Study regulatory documents of the State Bank, corporate accounting methods and credit granting process to corporate customers of Military Commercial Joint Stock Bank
Research space: Military Commercial Joint Stock Bank – Hai Ba Trung branch
Research period: corporate financial analysis activities at Military Commercial Joint Stock Bank – Hai Ba Trung branch in the last 2 years Credit records of corporate borrowers, proposal reports, credit grant appraisal to customers.
Research methodology
Primary data: Collect data from the corporate customer department at Military Commercial Joint Stock Bank – Hai Ba Trung branch
Secondary data: Textbooks, documents, journals,
Data processing: The collected data are analyzed, evaluated, compared and compared with the bank's regulations, thereby drawing conclusions about the current status of financial statement analysis in lending activities.
Research overview
Financial analysis of corporate customers is considered the first and extremely important task in lending activities of commercial banks This activity is always a hot issue of concern, so there have been many research articles on corporate financial analysis during the past time Some studies include:
Do Thi Hau (2021) researched the topic "Financial analysis of corporate customers in lending activities at Military Commercial Joint Stock Bank – Hoang Quoc Viet Branch" In his research, the author presented the theoretical basis for corporate financial analysis, then pointed out the current state of analysis at MB Hoang Quoc Viet, exploit the actual situation of analysis in lending activities at the bank and propose methods and recommendations to help improve the quality of analysis efficiency
The thesis "Assessing the financial situation of corporate customers in the lending process at BIDV Bank Branch 1" by Pham Manh Hung in 2018, analyzing the situation at BIDV Bank Branch of the Exchange has a specialized department to analyze customers' financial statements periodically Therefore, the analysis of financial statements at this bank has been very interested by the bank's management, and the analysis results of this department have also helped a lot in making lending decisions at the bank
For the topic “The Role of Financial Analysis Tools in Granting Loans Field Study on Banks Operating within Aqaba Special Economic Zone” (2017) by 3 authors Mousa Mohammad Abdullah Saleh, Laith Ahmad Mohammad Alkasasbeh, Ahmad Ahed Bader they believe that the decision to lend or to minimize credit risk depends a lot on financial instrument analysis
In the research of the author M.Sunil Manohar Subbaiah, K.Indira, C.Jayasudha, P.Aswini (2017) with the topic "The role of ratio analysis in finance statement" through qualitative method, the author draws the conclusions that when analyzing financial ratios can compare and explain the significant features of financial statements; helps identify the strengths and weaknesses of the business and analysis of financial ratios helps evaluate the performance of the company in the past, present condition and future potential of the business
Through an overview analysis of the topic, the author found that the current research theses provide theoretical bases and analyze the current situation of analysis of financial statements of borrowed enterprises at commercial banks Stemming from the current situation, the assessment of the financial situation of corporate customers in the lending process at Military Commercial Joint Stock Bank – Hai Ba Trung Branch is of special interest, the author synthesizes the theoretical bases, basic knowledge and proposes to complete this activity at Hai Ba Trung Branch, in order to help branch improve efficiency in loan appraisal, select customers with a healthy financial load situation, and minimize credit risks.
The structure of the thesis
Chapter I Theoretical basis for financial analysis of corporate customers in credit activities of commercial banks
Chapter II Current status of financial analysis of corporate customers in credit activities at Military Commercial Joint Stock Bank - Hai Ba Trung Branch
Chapter III Solutions to improve financial analysis of corporate customers in credit activities at Military Bank – Hai Ba Trung branch.
THEORETICAL BASIS OF CORPORATE FINANCIAL
Credit activities of commercial banks
Banks are one of the credit institutions that play the most important role in the economy In particular, commercial banks are the type of banks accounting for the largest proportion in terms of total quantity, market share and asset size
Banks are defined in many ways, either by the role, service, or function they perform in the economy In terms of main activities: A bank is a type of credit institution that is allowed to carry out all banking activities and all other related activities For operational purposes, banks include investment banks, policy banks, commercial banks and other types of banks
Within the research framework of this thesis, the concept of Commercial Banking is built according to the traditional approach through its basic functions and activities
According to the Law on the State Bank of Vietnam: "Banking activities are monetary business activities and banking services with the regular content of receiving deposits and using this money to grant credit and provide payment services"
1.1.1.2 Basic activities of commercial banks
- Accepting demand deposits, time deposits, savings deposits and other types of deposits;
- Issuing certificates of deposit, promissory notes, bills, and bonds to mobilize domestic and foreign capital
It includes: Loans, guarantee, discounting and rediscounting negotiable instruments and other valuable papers, issuing credit cards, domestic factoring, international factoring for banks authorized to make international payments and other forms of credit extension after being approved by the State Bank
- Commercial banks are allowed to organize internal payments and participate in the national interbank payment system
- Commercial banks open payment accounts for customers; Provide means of payment; Providing payment services, including: Providing domestic payment services including checks, orders, payment orders, collection requests, collection orders, letters of credit, bank cards; Perform international payment services and other payment services after being approved by the State Bank
- Corporate finance consulting, buying, selling, consolidation, merger and investment consulting; Buying and selling Government bonds, corporate bonds and other business activities related to banking activities after obtaining written approval from the State Bank
- Participating in bidding for Treasury bills, buying and selling negotiable instruments, Government bonds, Treasury bills, State bank bills and other valuable papers on the market
- Trading, providing foreign exchange services and derivative products
- Performing cash management, banking and financial consulting services; services of management, preservation of assets, rental of cabinets, safes
1.1.2 Credit activities at commercial banks
1.1.2.1 Definition and classification of credit activities at commercial banks
According to Article 20, Clause 10 of the Law on Credit Institutions, credit granting means an agreement by a credit institution for a customer to use a sum of money on the principle of repayment by means of lending, discounting, bank guarantee, financial leasing and other operations So the lending activity of a commercial bank is a bank giving money to a customer with a commitment that the customer repays both principal and interest within a specified period of time
In the economy, lending activities of commercial banks are diversified and rich with many different types of credit The application of any form of lending depends on the economic characteristics of each credit capital user in order to use and manage credit capital effectively and appropriately for customers
Currently, banks' lending activities are diverse and abundant and there are some ways to classify:
- Short-term loans (less than 1 year)
- Medium and long-term loans (over 1 year)
Classification by purpose of use of capital
- Loans for production and business
- Import and export business loans
1.1.2.2 Roles of credit activities at commercial banks
For banks , lending is the main business, bringing great profits Revenues from lending activities help offset the bank's deposit expenses, reserve expenses, business and management expenses, floating capital costs, tax expenses, and investment risk expenses
For customers , thanks to loans from banks, customers can realize economic plans and projects and bring profits to customers, promoting the process of expanding the development scale of the business
For the economy , lending helps businesses develop, thereby promoting the consumption of goods, products and services, thereby creating job opportunities for society, creating the ability to circulate capital quickly From there, as a foundation to help the economy develop and grow
1.1.2.3 Credit process of commercial bank
Credit activities account for a large proportion and bring the main source of profit to banks In order for the lending process to take place quickly and safely, minimize risks, and ensure timely debt collection, banks need to put in place a reasonable lending process and manage the process effectively Therefore, understanding the lending process is an indispensable part of the process of understanding the bank's lending activities
The loan process is a summary of a bank's job description from receiving a customer's loan application to making decisions on lending, disbursement, debt collection and liquidation of loan contracts
This process is very important and is the basis for banks to establish loan documents and procedures The loan process includes:
Before receiving the loan application, the credit officer will determine and clarify the loan purpose of the customer, then preliminarily verify the client's financial situation After determining the purpose and verifying the eligibility, the credit officer will guide to prepare a complete set of loan documents according to the requirements and loan conditions of each bank Each bank will have different eligibility requirements and profile composition
Step 2: Appraise personal loan conditions
After receiving the documents that the customer has provided in full, the bank or credit institution will conduct the appraisal of the application This is one of the most important steps in the entire process to verify the accuracy of the loan application provided by the customer, the appraisal will determine whether you are approved for the loan application or not
This step is to identify risks that may happen in order to minimize these risks The content of the analysis will normally include:
- The level of honesty and authenticity of the data provided by the customer
- The number of credit institutions with which the customer has relations and the customer's ability to pay
From the above informations, an analysis and assessment of the customer's reputation, financial ability, and solvency will be made in the past, present and future After that, the approval department will conduct review and approval
Overview of corporate financial analysis in credit activities at commercial
1.2.1 Definition of corporate financial analysis
Financial analysis is considered as a process of processing and evaluating data by appropriate technical methods to help information users know the current financial status of enterprises Through the analysis of the financial situation, users of information can assess the potential, business results as well as risks or prospects of customers, thereby helping banks make the right decisions to meet the needs of customers Financial analysis provides accurate, truthful and timely information so that banks can assess financial strength, operability as well as predict the future of customers
1.2.2 Objectives of corporate financial analysis
Financial analysis involves assessing the financial condition of the business in the past, present and into the future The goal of financial analysis is to detect unhealthy financial performance of the business that may affect future growth In business activity, enterprises belong to different business sectors, different types of ownership, so analysts will aim for different goals Specifically:
Financial analysis managers aim to evaluate the business activities of the enterprise, identify the strengths and weaknesses of the business It is the basis for guiding the decisions of the Board of Directors, the Chief Financial Officer, financial forecasts: investment plans, treasury and control of management activities Corporate financial analysis to the manager will meet the following goals:
- Creating regular cycles to evaluate the effectiveness of business management in the past period, the implementation of financial principles, profitability, risks and solvency in the activities of the firms
- Ensuring that the decisions of Board of Directors in investing, sponsoring, profit dítributing, etc are consistent with the actual situation of the enterprise
- Providing necessary information for financial projections
- Providing bases for inspection, movement and management in the firm
Investors are those who assign their capital to a company for management, profit, and risk-taking These include stockholders, people, organizations, and other businesses These objects have a direct stake in predicting the firm's future value Dividends and capital surplus are the sources of revenue for investors The amount of profit a business makes has a significant impact on these two variables In reality, its rate of return frequently attracts investors' attention What are the long-term investment projects based on? How objective and truthful are the financial statements available to the public? are the crucial questions needed to be answered If they do not have enough specialized knowledge to evaluate the financial performance of an enterprise, investors will have to rely on professional financial analysts who can provide necessary data for their decisions
In conclusion, investors can make the best investment choices when corporate financial analysis evaluates the company, estimates stock value, profitability, risk analysis based on an examination of financial statements, economic news, direct contact with business management, and financial analyst recommendations
Credit suppliers are people who give loans to businesses so they can get the cash they need for operations and production They must be confident in their capacity to repay the debt before lending Interest on debts is how they make money Therefore, a lender's analysis of financial success aims to determine borrower's capacity for loan repayment However, there are differences between the study for long-term loans and short-term loans
For short-term loans, short-term credit providers are especially interested in the business's ability to pay immediately In other words, it is the ability of the business to cope when the debt is due For long-term loans, long-term credit providers must conduct financial appraisal of investment projects, manage the disbursement process using capital for each investment project to ensure repayment ability through income and profitability of the firm as well as control the cash flow of investment projects of the enterprise
The wage earners in the enterprise are the employees of the enterprise, whose main source of income is from the salary paid Some employees also have a certain capital investment in the company in addition to their salary revenue Therefore, they have the profit to share in addition to the income from the salary given Both of these incomes are based on the enterprise's production and business operations, as well as its pay structure and opportunities for advancement in the use of labor As a result, financial analysis of enterprises enables them to devote themselves to the output and business operations of the enterprises in accordance with their assigned tasks
1.2.3 Information sources for corporate financial analysis
Financial statements are written records that convey the business activities and the financial performance of a company Financial statements are often audited by government agencies, accountants, firms, etc to ensure accuracy and for tax, financing, or investing purposes
Financial statements provide key economic and financial information to the people using accounting information in evaluating, analyzing and forecasting financial position of the enterprise Financial statements are used as the main data source when analyzing corporate finance Financial report not only shows the main load situation of the enterprise at the reporting time, but also presents the performance results achieved by the company at that time By reviewing and analyzing financial statements, users can evaluate accurately the financial strength, profitability and prospects of the business The Three major financial statement reports are the balance sheet, income statement, and cash flow statement
Balance sheet is a consolidated financial statement that provides an overview of a company's assets, liabilities, and shareholders' equity at a certain point of time Balance sheets provide the basis for computing rates of return for investors and evaluating a company’s capital structure It can be used with other important financial statements to conduct fundamental analysis or calculate financial ratios
Income statement covers a range of time, which is a year for annual financial statements and a quarter for quarterly financial statements The income statement provides an overview of revenues, expenses, net income, and earnings per share Income statement provides valuable insights into a company’s operations, the efficiency of its management, underperforming sectors, and its performance relative to industry peers
The cash flow statement measures how well a company generates cash to pay its debt obligations, fund its operating expenses, and fund investments The cash flow statement allows investors to understand how a company's operations are running, where its money is coming from, and how money is being spent It also provides insight as to whether a company is on a solid financial footing It contains three sections that report cash flow for the various activities for which a company uses its cash Those three components are: operating activities which include any sources and uses of cash from running the business and selling its products or services; investing activities including all cash sources and expenditures related to a company's long-term assets; and financing activities includes the sources of cash from investors or banks, as well as the uses of cash paid to shareholders
Financial analysis is used to forecast the company's financial performance and potential outcomes so that the right decisions can be made Thus, it is not limited to look up for financial statements but also gather all data related to the financial position of the enterprise, specifically:
- Data about the economy, politics, and laws related to business potential, investment opportunities, technological opportunities, market research, and growth prospects in production, business, and commercial services Economic expansion or contraction has a strong impact on how well the entities perform
CURRENT STATUS OF FINANCIAL ANALYSIS OF
General introduction of Military Commercial Joint Stock Bank - Hai Ba
2.1.1 The process of establishment and development of Military Commercial Joint Stock Bank - Hai Ba Trung Branch
MBBank (Military Commercial Joint Stock Bank) is a joint stock commercial bank of Vietnam, under the Ministry of National Defense The bank was established on November 4, 1994 with a total initial charter capital of 20 billion VND MBBank's head office is located at 165 Xa Dan, Dong Da District, Hanoi City, Vietnam
Over 28 years of operation, MBBank has constantly expanded its scale and scope of operation The bank currently has an extensive network with more than 100 major branches and 190 transaction points nationwide This allows MBBank to provide diversified and convenient financial services to customers everywhere
In addition to expanding its domestic scale, MBBank has also expanded its network to the international environment The Bank has established branches and representative offices in Cambodia, Laos and the Russian Federation, This allows MBBank to access and serve international customers, while facilitating Vietnamese enterprises to expand business and investment relations in overseas markets
During the development process, MBBank not only focused on commercial banking activities, but also expanded into other financial fields such as securities, insurance and asset management This helps MBBank diversify services and meet the diverse financial needs of individual and corporate customers
With more than 28 years of experience, MBBank has built a strong reputation and brand in the banking industry The Bank is committed to providing its customers with professional service, diversified financial products and services, and always strives to meet the needs and trust of customers MBBank is now considered one of the leading commercial banks in Vietnam
Hai Ba Trung branch is the predecessor of Minh Khai transaction office, established on 24/12/2003, under Dien Bien Phu branch On 24/7/2008, Minh Khai transaction office was officially upgraded to Hai Ba Trung branch – Level 1 branch under the head office of Military Bank
Hai Ba Trung branch is located at 458 Minh Khai, Hai Ba Trung District, Hanoi Established with a dynamic and independent operating model, the branch is currently managing Van Ho transaction office With a journey of nearly 20 years of establishment and development, MB Hai Ba Trung is currently a level 1 branch with the top customer scale and product revenue in the whole branch system of MB Military Commercial Joint Stock Bank in the whole area of Hanoi MB Hai Ba Trung has constantly innovated in the operation process and customer service Currently,
MB Hai Ba Trung is constantly striving to improve sales and operational efficiency, contributing significantly to the revenue of MB Bank system
2.1.2 Organizational structure and functions of departments at Military Commercial Joint Stock Bank - Hai Ba Trung branch
Currently, the branch is operating with the following organizational structure:
Figure 2.1: Organizational structure at Hai Ba Trung Branch
Source: Administration Department – Hai Ba Trung Branch
Functions and tasks of the main departments:
Board of Directors: The Board of Directors plays an important role in planning and implementing business plans for departments under branches The Board of Directors supervises and ensures the implementation of policies from the Military Joint Stock Commercial Bank system at Hai Ba Trung branch They are also responsible for proposing and applying effective management measures to help the branch achieve its business goals
Deputy Branch Directors: Deputy Branch Directors are directly in charge of managing corporate and individual customer departments at the branch They are responsible for business development, approval of schemes and support the implementation of the general policy put forward by the banking system Branch Deputy Managers also play an important role in creating and maintaining relationships with customers, ensuring their financial needs are met
Department of individual and corporate clients: the main task is to develop and manage customer lists These two departments take on key roles in identifying and developing new customers, and provide diversified financial products and services such as credit, capital raising and others to meet the needs of individual and corporate clients
Customer Service Department and trading floor: This department is responsible for developing financial targets, finalizing revenue and expenditure plans, managing funds and keeping accounting records They ensure the implementation of relevant processes and regulations in financial management and customer service The Customer Service Department and Trading Platform play an important role in providing information and assistance to clients in financial transactions, while managing and ensuring the accuracy of funds and accounting records
The organization of main departments at Hai Ba Trung branch has shown professionalism and efficiency in customer service and financial management Alignment between these departments is extremely important to ensure all activities are carried out quickly and efficiently The branch management is responsible for overseeing all departmental activities and ensuring compliance with the bank's policies and regulations Branch deputy directors are directly in charge of departments and accompany employees to achieve business goals Personal and corporate client departments are the source of customer supply and financing for the branch, while customer service departments and trading floors are important centers in handling finances and customer support
The close coordination between these departments not only ensures harmony and compatibility in branch operations, but also creates trust and reputation from customers By operating in a cohesive and effective manner, Military Commercial Joint Stock Bank - Hai Ba Trung branch has met the financial and service needs of customers, contributing to building long-term and sustainable relationships with customers, as well as achieving the bank's business goals
2.1.3 Main functions of Military Commercial Joint Stock Bank - Hai Ba Trung Branch
The Military Bank (MB) – Hai Ba Trung Branch has the following main functions:
- Providing banking services: The MB branch serves as a convenient location for customers to access a wide range of banking services These services include opening accounts, depositing and withdrawing funds, issuing and managing bank cards, providing loans and repayment options, facilitating money transfers, and processing bill payments
- Customer advisory and support: The branch offers professional advice and support to customers, helping them choose suitable banking products and services based on their financial needs The branch staff is readily available to answer questions, provide detailed information, and assist customers with transactions and issue resolutions
Current status of financial analysis of corporate customers in lending
2.2.1 Information sources for financial analysis of corporate customers in lending activities at MB Hai Ba Trung
* Internal sources of information (enterprise):
This is a source of data provided by customers, and is the main tool for officers to use for the financial analysis process of the business This data source includes information on financial and non-financial figures
The financial and operational information collected includes:
- Financial statements: Collect tax or audit financial statements of the enterprise, accompanied by notes to financial statements, at least for the last 2 years Financial statements provide information about the overall financial position of the business, including its balance sheet, profits, cash flow, and key financial indicators
- Input and output contracts: Collect a minimum of 3 input contracts and 3 output contracts from the 5 largest output partners of the enterprise Through the review of input and output contracts, officers can assess the degree of dependence of the enterprise on key business partners and assess risks in business operations
- Detailed consolidated reports: Collect detailed consolidated reports arising from accounts in the preceding year Important accounts to consider include: receivables by customer, payable by supplier, aggregate import and export of inventories of goods and finished products, details of collateral and other accounts with a value greater than or equal to 15% of the value of total assets/total capital according to the balance sheet
- Value-added tax return: Collect the most recent value-added tax return of the business Through this declaration, it is possible to review the revenue and tax situation of the enterprise, and also provide information about business activities
- Bank account statement: Collect the latest 12-month account statement of the main transaction bank of the business Bank statements are an important source of information for reviewing a business's financial position, including financial transactions, receipts and expenditures, and cash flows Through account statements, specialists can analyze the financial activities of the business, considering the cash, deposits, loans and repayment situation of customers
In addition, including other information from customers such as the structure of corporate governance, information about members of the executive board including important positions such as shareholders, members of the Board of Directors and the board of directors of the enterprise In addition, experts need to collect more information about the business strategy of the enterprise in the future, including financial goals, product development and market expansion plans, thereby assessing the growth ability and potential of the business in the future In addition, there is information about the products and services of the enterprise, as well as the production process, quality and production efficiency to see the supply ability and competitiveness of the business in the market
* Data source from external (enterprise):
This is a source of information that bank officials will collect from third parties to authenticate and compare with information provided by enterprises including: information from tax authorities, quality control departments, information sources from CIC national credit center In addition, officers also need to use information about the economic situation, monetary policies and information related to the field of business of the enterprise
- Information from tax authorities: Tax authorities provide information about taxes, tax obligations, and tax compliance of businesses Through the validation and reconciliation of tax information, banks can assess the accuracy and reliability of financial information from businesses
- Quality Management Department: The Quality Management Department provides information on compliance with quality standards, safety standards and regulatory compliance of the industry in which the enterprise operates This helps the bank assess the ability of the business to ensure quality and comply with relevant regulations
- National Credit Center (CIC): The National Credit Center provides information about a business's customers and credit, including credit history, existing debt, and solvency Through reviewing information from CIC, banks can assess the credit risk and solvency of the business
- Monetary policy information: Bankers need to monitor information on the overall economic situation, monetary policy and socio-economic factors affecting business activities of enterprises Along with that is information about the business line of the enterprise including trends, competition and regulatory factors in the industry This helps to assess the business environment and price, competitiveness and development potential of the enterprise
2.2.2 Methods of financial analysis of corporate customers in lending activities at MB Hai Ba Trung
To be able to give comprehensive assessments of customers, MB Hai Ba Trung uses a combination of many different analysis methods However, the two most frequently applied methods are the ratio method and the comparison method
Thanks to the complete accounting and financial information from customers, staff will use the bank's support software to quickly get the ratios calculated quickly and accurately according to each different timeline These ratios show the relationship of indicators on the financial statements, the proportion of each indicator on total assets, profit, Combined with that is to use the comparison method to see the fluctuation, change over time of the calculated indicators or the fluctuations up and down of the indicators over the years
In addition, there are some other analysis methods, but at MB Ba Trung are less used Officers will be flexible in choosing many methods to suit each characteristic of the business (field of operation, financial status, )
2.2.3 Financial analysis process of corporate customers in lending activities at
Assessments the current status of financial analysis of enterprise
in credit activities at Military Bank - Hai Ba Trung branch
Currently, Hai Ba Trung branch is the branch with the top revenue of branches in Hanoi area In which, the proportion of capital mobilization from lending activities is the largest, which shows that the credit work of the branch has achieved many achievements over the years
Firstly, the lending process at the branch is strictly regulated, through many moderation reviews After the expert has made the evaluation and recommendation, the proposed report will undergo a review process from the controller and the branch management After that, the loan plan will be appraised and re-appraised to ensure reasonableness and safety
This rigorous vetting process is an important step to minimize errors and risks in approving loan plans for corporate customers By applying strict processes and regulations, the branch ensures accuracy and reliability in the loan evaluation and approval process
In addition, after lending, the specialist also performs the process of evaluating and following up with customers according to the specific requirements of the branch This ensures that the branch has the ability to manage and monitor the customer's finances after the loan, while controlling potential risks
Secondly, effectively applying many methods in the process of financial analysis to assess the business situation of enterprises Experts have used many flexible analysis methods to be able to give the most objective assessment of customers The ratio method is used most often by professionals and is provided with automatic calculation software tools from customer-provided financial statements Horizontal and vertical comparison methods are also combined to analyze volatility and correlations between indices The application of the method of both in- depth analysis of financial indicators of enterprises and comparison with other enterprises in the same industry and the general situation of the economy, helps the analysis results be more comprehensive and objective, thereby proposing reasonable solutions that bring benefits to both parties
Thirdly, there are clear requirements on the contents to collect and analyze customer financial statements The information gathering process is carried out by specialists based on a predefined list of details, ensuring that the information collected is complete and comprehensive, thereby supporting the financial analysis process effectively
MB Bank sets analytical criteria based on the size and field of business activities of customers This helps experts have a clear frame of reference to analyze and make reasonable loan limit recommendations Clear requirements during the analysis process help ensure consistency and due process in financial analysis
Having clear requirements also has the benefit of improving the quality of the branch's analytics Thanks to specific and transparent requirements, professionals can access information and data accurately and consistently, thereby ensuring the integrity and reliability of the financial analysis process In addition, clear requirements also increase efficiency and consistency in financial analysis, while minimizing errors and risks that may occur during the analysis
Fourthly, the timely attention and support of the branch management has helped increase efficiency in the process of assessment customer finances This plays an important role in enhancing the efficiency of the customer financial evaluation process
First of all, in the process of collecting information and analyzing finances, specialists always receive dedicated support and supervision from controllers and deputy directors in charge The Board of Directors is not only the one who directs but also the one who supports and creates favorable conditions for officers to perform the work Professionals always have professional support and receive the right direction from people who are experienced and understand financial analysis
Besides, managers also ensure that specialists are fully equipped with instructional documents and machines and equipment necessary to access and process important information about customers This facilitates professionals to capture and process financial information accurately and in a timely manner The guidance documents provided cover procedures and regulations, helping to ensure consistency and due process in financial analysis
In addition, the Board of Directors also facilitates experts to access and learn many important sources of information about customers such as credit information This plays an important role in expanding the perspective and more dimensions of customers, thereby creating a more comprehensive and accurate view of the financial situation and ability of customers to repay debts
In addition to the achievements that the branch has achieved in the financial analysis of corporate customers, there are still limitations in the reliability of information, inconsistent analysis processes and in-depth analysis content
Firstly, the source of information collected from customers is not reliable, especially financial information Before conducting customer analysis, officers must collect complete information as prescribed, however, these sources of information are often not well verified The most important thing is that most of the financial statements of small and medium-sized enterprises have not been audited As a result, information from these sources may contain errors, leading to ineffective analysis and an inaccurate assessment of your actual business operations In addition, many businesses are not listed and have a short life cycle, so financial indicators are unstable and do not accurately reflect the development trend of the business in the future
Secondly, the analysis process at the branch is not clear and consistent Currently, the financial analysis process completely depends on the experience and subjective opinion of each officer Each officer has his own approach to the customer analysis process, based on different requirements categories As a result, officers face difficulties in accessing and evaluating customer finances comprehensively
SOLUTIONS TO IMPROVE FINANCIAL ANALYSIS OF
Development orientation of Military Bank – Hai Ba Trung branch
Hai Ba Trung branch is one of the top branches of MB Military Bank system in Hanoi area With the goal of development consistent with the common development goal of the whole MB Military banking system, the branch is continuously improving the quality of credit services, strengthening the assessment of customers' financial situation, in order to minimize bad debts and maintain relationships with existing customers, and develop relationships with new customers To achieve these goals, the branch has set out a number of specific directions and tasks:
- The first is to focus on training and improving the professional capacity of staff, especially ethics in assessing customers' financial situation
- It is necessary to invest in modern equipment, develop software to support staff in analyzing and evaluating customers' financial situation
- The management of the branch strengthens the supervision and timely support of difficulties and problems of officers in the process of assessing the financial situation of customers
- Accelerate the completion of the regulatory process to create synchronization and smooth operation between the departments of credit proposal, appraisal and approval
- Improve the classification and management of customers by type, business line and business size, to ensure that the financial analysis of the enterprise is authentic and reliable
Since then, helping the credit work at Hai Ba Trung branch Military Commercial Joint Stock Bank achieve high efficiency, gradually improving and overcoming limitations and making the branch a leading unit in this work in the MB banking system.
Solutions to improve financial analysis of enterprise customers in credit
3.2.1 Improving data sources for financial analysis at Hai Ba Trung branch
The branch should improve the support of officials in accessing customers' credit information, policy information as well as new guidance documents from the State Bank in the timely and prompt manner, in order to obtain the most accurate and up- to-date information to help experts properly assess the credit status of enterprises
- Improve access to credit information: The branch will build an effective and convenient credit information access system for officers This includes establishing links with trusted sources of credit information, including tax authorities, reputable audit firms, and other sources of financial information This makes it easy for officers to access and collect financial information from these sources conveniently and quickly
- Ensure the accuracy and authenticity of financial information: For financial documents provided by customers, such as financial statements, banks will require customers to provide attestation from tax authorities or have been audited by reputable auditing firms This ensures the accuracy and reliability of the financial information provided, and is an important criterion for assessing the financial position of the enterprise
- Thorough inspection and review: If financial documents have not been audited or have not passed inspection by tax authorities, officials should carry out thorough inspection and review before using them as a basis for analyzing the financial position of the enterprise By comparing and contrasting data between documents, officers can promptly detect abnormalities and request customers to provide additional information or revise information to ensure reasonableness and accuracy
- Actively update information: Branches need to regularly update the latest information on credit policies and guiding documents from the State Bank This ensures that officers always have the latest and relevant information to perform financial analysis and make loan decisions
3.2.2 Improving the process of guiding financial analysis of corporate customers
Currently, MB Bank in general and Hai Ba Trung branch in particular do not have any official documents or documents on guiding the process of financial analysis of corporate customers Much of this work is done individually depending on each officer, and is somewhat emotionally dominant, which can lead to a flawed approach Therefore, it is necessary to have a written guide on the steps taken, how to analyze the financial statements, how to compare and comment on each financial indicator, guide the analytical approach and reasonable analysis methods in the analysis process
In addition to guiding the process of analyzing financial statements, banks need to improve the process of guiding the collection of other information such as customers' credit situation, Provide specific instructions for analysis and comparison with other financial information about customers in order to make the most of the information collected to make a comprehensive judgment about customer finance Therefore, it is necessary to have a fully detailed document so that officials can follow the implementation more quickly, effectively and synchronously
To be able to build a specific process and instructions in the most optimal way, banks need to learn and refer to process information from other large banks The completion of this document also contributes to easily guiding staff training, especially at present, most staff at the branch do not have much experience and are well-trained in the lending process and credit work
3.2.3 Improving the content of financial analysis of corporate customers
Regarding the content of financial analysis at the assessed branch, it is still sketchy, not specific and detailed The list of assessment requests given by the bank is incomplete, ignoring many important factors showing the business situation of the enterprise The indicators on the statement of cash flows and financial ratios have not yet been assessed by officers, mainly focusing on the balance sheet of the enterprise
While these indicators provide detailed information about the assets and liabilities of the business, revenues and expenditures over a certain period of time The financial ratios also provide the bank with information about the profitability, solvency and performance of the business From this information, the bank can assess the positivity of the business, make borrowing decisions and price interest rates accordingly If banks ignore or fail to carefully analyze the statement of cash flows and financial ratios, they may be at risk of borrowing to businesses that are unable to pay their debts, causing great losses
In addition, in order to contribute to improving the analysis content of experts, the Board of Directors and Deputy Director together with staff with many years of experience at the branch need to organize more training sessions, share experiences and earn professional knowledge on credit operations In addition, the branch actively sponsors and encourages staff to participate in intensive training courses outside the branch This contributes to improving professional knowledge as well as financial analysis skills of officers, thereby improving the credit quality of the branch.
Recommendations
3.3.1 Recommendations for the State Bank of Vietnam
In order to improve the financial analysis of corporate customers in credit granting activities, the State Bank should systematize standards and requirements on financial analysis contents This will ensure uniformity and transparency in assessing the financial position of enterprises
In the process of systematization, the State Bank needs to identify important indicators and information that need to be evaluated to determine the financial stability, debt repayment capacity and profitability of enterprises At the same time, the State Bank should provide detailed guidance and support to commercial banks in adopting and complying with these standards This will help commercial banks make more efficient lending decisions, reduce risk and enhance credit risk pricing
In order to facilitate experience sharing and improve the quality of financial situation assessment, the State Bank should regularly organize conferences and seminars on financial analysis of corporate customers These events will attract the participation of experts, bank managers and researchers in the field Here, successes and challenges in financial analysis can be shared, experiences learned from real cases can be exchanged At the same time, evaluating the results achieved from advanced financial analysis methods will help improve processes and improve the quality of financial analysis at banks
- Strengthening the credit information system:
In order to enhance the disclosure and use of financial information, the SBV should strengthen the credit information system, with a focus on the important role of the Credit Information Center (CIC) CIC serves as an important source of supporting information for banks in the process of analyzing corporate customer finances
The SBV needs to invest in and upgrade the credit information system, ensuring that CIC has the necessary information and resources to provide commercial banks This requires a process of linking and sharing information related to corporate finance from different data sources CIC should be equipped with modern information technology to collect, process and distribute financial information quickly and accurately
Enhancing the role of CIC will bring many benefits First, it enhances transparency and trustworthiness in the process of evaluating customers and making lending decisions Banks can rely on information provided by CIC to assess customers' creditworthiness comprehensively and accurately This helps mitigate risk and enhance credit analysis capabilities Second, the strengthening of credit information systems also supports the process of monitoring and managing credit risks CIC can provide the State Bank and commercial banks with information regarding the financial position of enterprises and warn about potential risks This helps prevent and promptly deal with potential financial problems and ensures the stability of the financial system
Overall, the systematization of standards and requirements, combined with the strengthening of the credit information system, will play an important role in improving the analysis of customer finance
3.3.2 Recommendations for Military Joint Stock Commercial Bank
First, MBbank needs to strengthen training and improve professional capacity for staff This can be achieved through the organization of periodic trainings and trainings on the process of financial and risk analysis These training courses should focus on mastering financial analysis methods and tools, understanding the regulations and regulations related to credit granting, and having knowledge of different industries and business models At the same time, it is necessary to provide bankers with opportunities to access real cases and complex financial analysis situations to develop practical skills and experience
Second, MBbank needs to upgrade their technology systems and credit information Investing in advanced technologies and building modern credit information systems will help strengthen financial analysis and risk management capabilities Credit information systems should be developed to collect, store and manage information about customers, including financial data, credit history and evaluation indicators In addition, the application of artificial intelligence and data mining will help banks analyze information more quickly and accurately, thereby making decisions to grant credit properly and effectively
The third is to create an environment for collaboration and linkage in the industry Military Joint Stock Commercial Bank needs to establish and develop cooperative relationships with credit agencies, enterprises and financial advisory organizations At the same time, banks need to build a communication environment and share experiences to create connections and cooperation with industry partners This can be done through the organization of conferences, seminars and thematic forums where experts and regulators in the financial sector can meet, exchange information and share experiences This connection will give the bank access to new trends, advanced methodologies and important market information At the same time, the bank can also cooperate with research institutions and universities to jointly carry out research and development projects in the field of financial analysis
In addition, the Military Joint Stock Commercial Bank should strengthen international cooperation and technology transfer Partnering with reputable international banks and trusted financial institutions will give you access to advanced financial analysis standards and effective risk management methods At the same time, banks need to embrace new technology trends such as artificial intelligence, big data and data mining to improve financial analysis processes and make smarter credit decisions The transfer of technology from international partners will also help the bank improve its capacity and visibility in financial analysis
Finally, Military Joint Stock Commercial Bank needs to build an environment of cooperation and coordination in the industry It is very important to promote communication and collaboration with relevant agencies such as the State Bank, ministries and business representative organizations This enhances power and consistency in the analysis of corporate clients' finances, and facilitates the sharing of financial information and data This cooperation also contributes to building a healthy and stable business environment for the entire banking system
In addition, Military Commercial Joint Stock Bank can participate in banking networks and alliances to expand partner networks and enhance access to financial information Through participation in these alliances, the bank can share experiences, access reference materials and participate in joint projects on financial analysis This not only strengthens the knowledge and skills of bankers, but also broadens the scope of cooperation and creates new business opportunities
In general, in order to achieve good cohesion and cooperation in financial analysis, Military Commercial Joint Stock Bank needs to strengthen training and capacity building for officials, upgrade technology systems and credit information, build a communication environment and share experiences, etc international cooperation and technology transfer, along with coordination with industry agencies and partners By taking these measures, the bank will improve its financial analysis capabilities, provide quality credit services and gain trust from customers and the business community
Based on the development orientations in the coming time of Military Bank – Hai Ba Trung branch, thereby offering solutions to improve the quality of data sources from customers and related data sources for the analysis process In addition, proposing solutions to improve the guidance process and content of financial analysis of corporate customers, it is necessary to add specific guidance documents and important contents to analyze and compare to get the most comprehensive assessment of the financial capacity of enterprises From the solutions, chapter 3 makes a number of recommendations to the State Bank in general and the Military Joint Stock Commercial Bank in particular to have timely solutions to support branches
Nowadays, commercial banks expand their operations and expand lending demand in order to increase profitability and reduce risk To make lending decisions, banks need to analyze the finances of borrowers carefully From the actual research at the branch of Military Bank - Hai Ba Trung Branch and inheriting previous researches, the research paper offers solutions to improve the financial analysis of customers, helping branches and credit units make loans more effective To effectively implement these solutions, branches need to apply flexibly, creatively and at the right time