UNIVERSITY OF ECONOMICS AND BUSINESSVIETNAM NATIONAL UNIVERSITY GRADUATION THESIS CORPORATE CREDIT MANAGEMENT AT THE JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM
Business results BIDV Trang An in the period from 2020 to 2022
Table 3.1 Business result at BIDV Trang An in the period of 2020 to 2022
Growth from 2022 YEAR 2021 compared 4 to 2021 iteri: compared to
(Source: Finance and Accounting department — BIDV Trang An) Through the table of business results at BIDV Trang An in three years (2020,
2021, 2022), we can observe the fluctuations between these years:
Mobilized capital has experienced steady growth, increasing from 8.783 billion VND in 2020 to 10.155 billion VND in 2021, and further rising to 12.596 billion VND in 2022 The post-COVID-19 economic recovery has seen many businesses, particularly in industrial zones, attracting substantial foreign investment, which has significantly boosted mobilized capital levels.
Total credit balance: The credit balance to corporate clients have always played a significant and high proportion in the total credit portfolio of BIDV Trang
An The total outstanding loans have increased over the years, with a significant surge in 2022 In 2020, it amounted to 3.523 billion VND, and it increased by 18,14% in
In 2021, BIDV Trang An's outstanding loans amounted to 4.162 billion VND, which surged by 41.13% to reach 5.874 billion VND in 2022 This significant growth in credit activities reflects the ongoing recovery of the Vietnamese economy post-pandemic, driven by the establishment of new businesses and an increased demand for loans.
BIDV Trang An has demonstrated a positive revenue growth trend over the years, with figures reaching 306.52 billion VND in 2020, a 16.95% increase to 358.46 billion VND in 2021, and further rising to 454.96 billion VND in 2022, marking a significant 26.92% growth year-over-year This impressive performance is attributed to the bank's proactive debt collection strategies and effective management of overdue debts.
BIDV Trang An has increased its workforce to meet the growing credit demands of businesses, resulting in rising operational costs over the years The expenses for the years 2020, 2021, and 2022 were recorded at 240.52 billion VND, 279.46 billion VND, and 362.96 billion VND, respectively.
Profit Before Tax: According to the data, BIDV Trang An's revenue increased every year, but the costs were relatively high Therefore, the profit of BIDV Trang
An was not exceptionally large Specifically, in 2020, it reached 66 billion VND, increased to 79 billion VND the following year, and reached 92 billion VND in 2022.
BIDV Trang An has demonstrated consistent growth in net profit over the last three years, achieving impressive growth rates of 19.7% in 2021 and 16.46% in 2022, reflecting the increasing effectiveness of its business operations.
The situation of corporate credit management at BIDV Trang An
The situation of creating a plan for corporate credit 3.2.2 Situation of the mplementation of plans of corporate credit 3.3 Evaluation of corporate credit management at BIDV Trang An 3.3.1 Results and achievements 3.3.2 Drawbacks of BIDV Trang An’s corporate credit management
3.2.1.1 Creating plans for corporate credit capital management
BIDV Trang An effectively plans and manages corporate credit capital by setting annual growth targets based on previous mobilization and current demand estimates The Board of Directors closely monitors the implementation of these plans, assigning specific targets to departments and employees, which are linked to economic benefits and salary distribution This strategic approach has led to improved labor productivity and enhanced overall business efficiency, particularly in mobilizing corporate credit capital.
Table 3.2 LDR of BIDV Trang An in the period from 2020 to 2022 (billion VND) oe Year
(Source: Finance and Accounting department — BIDV Trang An)
BIDV Trang An‘s capital efficiency is consistently high, ranging from approximately 41% to over 46% over the three years This indicates that BIDV Trang
An has come up with solutions to raise mobilized corporate credit capital to satisfy credit needs from business.
3.2.1.2 Creating plans for managing corporate credit
BIDV Trang An offers a comprehensive range of 13 corporate credit categories, aligning with the bank's general plan These categories include commercial housing, public housing, industrial zones, hotels and resorts, golf courses, and renewable energy projects such as solar and wind energy, as well as hydroelectric plants Additionally, the bank supports sectors like cement and steel production, ores and metal excavation, the oil industry, sea transportation, airlines, hospitals, and schools This diverse portfolio ensures that BIDV Ha Tay meets various corporate credit needs effectively.
BIDV Trang An emphasizes the significance of a structured credit analysis process to enhance corporate credit management This critical step involves gathering and evaluating essential client information, such as credit utilization capacity, reputation, profit generation ability, funding sources, asset ownership, and other relevant economic factors A key focus for the bank is ensuring the authenticity of the information collected to maintain effective credit management.
Assessing clients' assets is vital for the bank, as these assets serve as collateral for credit, ensuring debt recovery in times of client profitability loss Corporate credit officers must prioritize evaluating treasury, valuable securities, inventory, and fixed assets when analyzing clients' financial standings.
3.2.1.3 Creating plans for managing corporate credit risks
BIDV has established comprehensive credit policies through key regulations, including Resolution No 806/NQ-BIDV from October 30, 2017, which focuses on controlling credit grants for real estate investments Additionally, the bank released a Handbook for the appraisal of grid-connected solar power projects, as per official dispatch No 4997/BIDV-KHDNL dated August 24, 2020 Furthermore, Directive 2688/CT-HDQT, issued on August 21, 2015, outlines the control measures for credit granting in Build-Operate-Transfer (BOT) projects.
BIDV issues regulations on credit activities that are timely, comprehensive, and aligned with the actual operations of commercial banks, adhering to the guidelines set forth by the State Bank of Vietnam and relevant legal frameworks.
Evaluating client debts is crucial for BIDV Trang An, as it enables the bank to assess clients' financial capabilities and understand its standing among creditors By maintaining a superior position, the bank can enhance its debt collection efforts compared to competitors.
An uses ratios such as: Liquidity ratio, profitability ratio to evaluate the borrower's ability to meet short-term financial responsibilities and the borrower's ability to generate profits.
BIDV issues corporate credit plans promptly and comprehensively, aligning them with the actual operations of commercial banks while adhering to the regulations set by the State Bank of Vietnam (SBV) and relevant laws.
3.2.2 Situation of the mplementation of plans of corporate credit
3.2.2.1 Implementation of managing corporate credit capital
Table 3.3 Growth rate of mobilized capital at BIDV Trang An in the period from
2020 | 2021 | 2022 | Absolute (%) Absolute | Rate(%) Rate fo
(Source: Finance and Accounting department — BIDV Trang An)
Mobilized capital has exhibited steady expansion over the specified years In
In 2020, mobilized capital totaled 8.783 billion VND, rising to 10.155 billion VND in 2021 and reaching 12.596 billion VND by 2022 This significant growth reflects the post-COVID-19 economic recovery, as many businesses, especially in industrial zones, successfully attracted considerable foreign investments, leading to increased levels of mobilized capital.
3.2.2.2 Implementation of managing corporate credit a Disbursement sales
Table 3.4 Disbursement sales (private enterprises) of BIDV Trang An in the period from 2020 to 2022 (billion VND)
The BIDV Trang An branch has experienced a notable rise in disbursement sales for private enterprises, achieving 1.017 billion VND in 2020.
In 2021, BIDV Trang An achieved an outstanding loan balance of 1.354 billion VND, reflecting a significant growth rate of 33.14% This impressive growth accelerated to 99.48% in 2022 compared to the previous year Despite facing a challenging economic environment in 2020, characterized by inflation, a gold price surge, a stagnant real estate market, high lending interest rates, and the impacts of the COVID-19 pandemic, the branch successfully navigated these obstacles The reputable BIDV brand played a crucial role in maintaining high credit growth rates By 2021, the economic landscape showed positive trends, with controlled inflation, a gradual banking system restructuring, and interest rate reductions These statistics underscore the importance of focused development in the corporate credit segment, which is vital for both BIDV Trang An's credit activities and the branch's overall performance.
Total outstanding loans by loan term
Table 3.5 Outstanding loans of BIDV Trang An in the period from 2020 to 2022
Criteria Outstanding loans 2021 compared | 2021 compared to 2020 to 2020
Rate Rate Year 2020 2021 2022 | Absolute (%) Absolute (%)
(Source: Finance and Accounting department — BIDV Trang An)
Over the past three years, BIDV Trang An has experienced a steady increase in total outstanding loans, rising from 3.523 billion VND in 2020 to 5.874 billion VND in 2022 Short-term loans grew from 2.289,95 billion VND in 2020 to 3.818,1 billion VND in 2022, while long-term loans also increased, reaching 2.055,9 billion VND in 2022 This growth reflects a balanced approach to credit activities; however, an overemphasis on medium and long-term lending could hinder the bank's ability to support small-scale production and local consumer needs To ensure sustainable development and maintain a balanced funding source, BIDV has established a policy to limit medium and long-term loans to 35% of total outstanding loans.
Total outstanding loans (OL) by economics sectors
Table 3.6 Outstanding loans of BIDV Trang An in the period from 2020 to 2022
Compared Compared es Proportion Proportion! with 2020 Proportion | with 2021
Criteria | Amount (%) Amount! (0%) “uy Í Rate Amount] (gạ) ——
OL of state-own 9 | 9 | 0 | 0 | 0 |000 0 | 0 | 0 |000 enterpris es
OL of private 5908 | 82,54 | 3399| 81,67 | 491 |16,88| 5045| 85,89 | 1646 enterpris es
OL of househol dsand | 615 | 17,46 | 763 | 18,33 | 148 |24,07| 829 | 14,11 | 66 |8,65 individua
(Source: Finance and Accounting department — BIDV Trang An)
BIDV has not extended loans to state-owned enterprises, while its outstanding loans to private enterprises have shown consistent growth In 2020, loans to non-state-owned enterprises totaled 2.908 billion VND, rising to 3.399 billion VND in 2021 and reaching 5.045 billion VND in 2022 This remarkable increase of 48.46% in 2022 highlights BIDV Trang An's commitment to enhancing credit activities for private enterprises To achieve these results, BIDV Trang An has actively monitored its client base, providing timely support and guidance to foster business growth.
Table 3.7 Debt collection sales of BIDV Trang An in the period from 2020 to
(Source: Finance and Accounting department — BIDV Trang An)
The credit capital turnover rate at BIDV Trang An highlights its lending capacity, revealing a consistently low performance over three years, with rates of 0.177 in 2020, 0.172 in 2021, and 0.168 in 2022 These figures suggest that BIDV Trang An's ability to utilize capital effectively is limited, indicating slow capital turnover and reduced participation in business cycles.
Table 3.8 CEI of BIDV Trang An in the period from 2020 to 2022 (billion VND)
2020 2021 2022 Loan portfolio 1.017 1.354 2.701 Debt collected 622 715 989 CEI (%) 61,16% 52,8% 36,61%
(Source: Finance and Accounting department — BIDV Trang An)
The data reveals a consistent decline in the CEI at BIDV Trang An over the years, suggesting a lack of effectiveness in fund recovery This annual decrease can be attributed to a reduction in short-term loans, contrasted by a steady increase in the ratio of medium to long-term loans.
3.2.2.3 Implementation of corporate credit risk management a Non-performing loan management
Table 3.9 Non-performing loan ratio at BIDV Trang An in the period from 2020 to 2022
2021 in 2022 in Chi tiêu comparison | comparison
Rate Corporate clients 0,95 0,76 0,57 -0,19% -0.19% Individual clients 0,12 0,10 0,10 -0,02% 0,00%
(Source: Finance and Accounting department — BIDV Trang An)
Culprits of the drawbacks key " 58
Despite a relative decrease in non-performing loans, their absolute increase highlights ongoing risks in the branch's credit operations, indicating that credit quality remains a concern.
Second, the credit scoring process has not been fully effective as it heavily relies on information provided by clients and the subjective assessments of corporate credit officers.
Inadequate assessments of loan proposals significantly hinder BIDV Trang An's capital recovery capabilities The evaluation process is crucial yet often compromised by subjective and objective factors Appraisal officers must consider various elements, including market dynamics, technical specifications, and socio-economic impacts However, the lack of reliable information in Vietnam complicates this task, as few businesses conduct market research Consequently, officers frequently depend on unofficial sources like newspapers and the internet for market insights Additionally, many enterprises, particularly small and medium-sized ones, exhibit a weak development of project and business plans, further complicating the appraisal process.
Many businesses lack rigor in implementing accounting and statistical practices, often providing banks with inaccurate information The absence of mandatory auditing regulations for small and medium-sized enterprises (SMEs) exacerbates this issue, leading to frequent inaccuracies in their reports This situation presents significant challenges for bank officers during the appraisal process.
Some clients misallocate funds, using them for unintended purposes, while others struggle to utilize borrowed capital effectively There is often a reluctance to provide essential information, and some may intentionally manipulate or falsify financial statements Additionally, clients may conceal losses and show an unwillingness to repay principal and interest on time.
Macroeconomic fluctuations and the effects of COVID-19 significantly impact BIDV Trang An's credit operations, particularly through unfavorable exchange rate changes and high inflation rates Elevated lending rates have resulted in reduced liquidity for companies, while a stable economic environment can enhance the bank's operations In 2021, the pandemic forced 33% of domestic private enterprises and 18% of foreign direct investment (FDI) firms to downsize their workforce, with an average of 4 to 5 layoffs per company, leading to the dissolution or temporary suspension of many small businesses Currently, the Vietnamese economy is on the path to recovery, though it faces fluctuating market policies and evolving government strategies Additionally, the complexities of the capital market and the lingering effects of COVID-19 continue to lower liquidity, impacting BIDV Trang An's fundraising and lending activities, which are critical considerations for effective credit management.
The legal framework governing credit activities has seen improvements, yet it remains inconsistent and may not effectively align with the competitive nature of a market-oriented economy The complexity of loan procedures and conditions often results in a high rate of rejection for loan applications submitted to banks.
Government policies play a crucial role in shaping the growth of specific client segments within various industries Restrictive policies can create significant challenges for businesses, making it harder for them to manage loan repayments due to operational difficulties.
The government has launched initiatives offering preferential interest rates to aid businesses in agriculture and rural development; however, there is a notable absence of a comprehensive capital support policy for these clients This gap leads to inconsistencies in the interest rates banks receive, prompting them to expand their loan portfolios without a corresponding rise in profits.
SOLUTIONS TO IMPROVE CORPORATE CREDIT
Recommendations ro improve corporate credit management at
4.3.3.1 Improve and stabilize economic and social development policies
The government is essential in enforcing risk prevention strategies within commercial banks, providing both broad frameworks for sustainable risk mitigation and targeted solutions for operational challenges To enhance credit risk management in the banking sector, specific recommendations for the government include implementing comprehensive measures that address the unique risks faced by banks.
Predict and timely direct economic development, especially in the financial and monetary markets, towards sustainable development in the face of global market fluctuations.
Continue to introduce measures to promote investment activities, strengthen and develop the financial system, stock market, and banking system.
Improve the investment climate, including foreign investment in the overall economy and the banking sector, in line with the domestic financial infrastructure.
A supportive legal framework is essential for the effective functioning of commercial banks To strengthen this environment, it is vital to focus on refining legal documentation related to collateral assets, particularly in clarifying ownership rights Additionally, the government must establish a more transparent procedure for the liquidation of collateral assets belonging to enterprises with non-performing loans.
To enhance the legal framework for currency and banking operations, it is essential to improve the autonomy of financial organizations and align with international standards Establishing new banking laws will create a solid legal foundation for a modern central banking model and foster the growth of financial institutions Additionally, enforcing regulations that require businesses to deliver accurate financial reports will facilitate better assessment and evaluation by banks, ultimately reducing risks associated with banking activities.
The government must implement essential measures to ensure consistent and thorough enforcement of the law In the banking sector, this entails enhancing regulations governing banking operations to align with the evolving demands of economic development in the context of global economic integration Proposals for the State Bank of Vietnam (SBV) should focus on these regulatory improvements.
Effective financial supervision hinges on four key aspects: the structuring of the supervisory system, the development of supervisory indicators, the empowerment of the supervisory agency, and the cost implications of supervision To enhance and standardize the banking supervision framework while facilitating the adoption of risk management practices in line with Basel II, the State Bank of Vietnam (SBV) should undertake specific strategic actions.
1 Improve the organizational structure of the banking inspection machinery from the central level to grassroots levels, ensuring relative independence in management and operational activities within the SBV's organizational structure. Apply fundamental principles of effective banking supervision as outlined by the Basel Committee, and adhere to prudential rules in the inspection process.
2 Continue to apply the basic principles of effective banking supervision as outlined by the Basel Committee and adhere to prudential principles in the inspection process.
3 Implement measures to improve the banking supervision system along the following key directions:
Enhancing the quality of financial analysis is crucial for credit institutions, alongside the development of an effective early warning system to identify potential operational issues This involves establishing on-site inspection teams that utilize a random sampling approach for financial reporting analysis, allowing for the identification of sensitive points within the institution's operations.
- Develop and standardize the banking supervision approach based on theoretical and practical foundations.
- Establish an approach to assess the quality of risk management internally within credit institutions.
These recommendations are designed to enhance the State Bank's banking supervision framework, aligning it with international best practices, particularly the principles set forth by the Basel Committee This alignment will lead to improved credit management and oversight within Vietnam's banking sector.
4.3.2.2 Building and enhancing necessary systems for ensuring the security of banking credit operations
To ensure the security of banking credit operations, it is recommended to:
Implementing robust systems and controls for international capital flows and foreign debt is essential, particularly emphasizing supervisory mechanisms for foreign currency lending and borrowing by credit institutions This approach will effectively reduce risks associated with exchange rate fluctuations and foreign currency exposure, enabling credit institutions to receive timely alerts and manage potential financial threats proactively.
Raise the criteria in the credit system and technical requirements for credit institutions based on financial stability standards and safety indicators in their operations.
To enhance the banking system, it is crucial to persistently pursue restructuring, closing, merging, and consolidating efforts Accelerating the privatization of state-owned commercial banks is essential, and this process should be tied to stock market listings to effectively diversify risks.
Credit institutions must be evaluated and rated based on international standards and the management requirements of the State Bank of Vietnam (SBV) These evaluations will enable the SBV to enhance its oversight of compliance, risk classification, and overall ratings.
Furthermore, it is necessary to establish and strengthen financial security- related funds in banking activities, such as compulsory reserves, deposit insurance, and risk provisioning.
Continuously enhance and broaden the application of essential financial instruments in the money market, including bills of exchange, deposit certificates, and diverse bonds and promissory notes from credit institutions Additionally, implement a wider range of risk-limiting operations in the currency market, such as reverse repos, futures, and options.
4.3.2.3 Cooperating with the technology sector
The State Bank of Vietnam (SBV) must enhance collaboration with regional and global financial institutions to modernize its banking system By embracing continuous innovation in banking technology, credit institutions can effectively mobilize and utilize capital Gradual internationalization of banking operations will facilitate smoother engagement in international credit and payment processes To elevate technological standards and improve efficiency, the SBV should seek financial and technical support from international partners, thus accelerating the integration of advanced technology in banking practices.
4.3.3 Proposals for the Headquarter of BIDV
4.3.3.1 Diversifying Investment and Lending Portfolios
To enhance financial flexibility, it is essential to diversify credit product offerings, including options like credit limit loans, item-specific loans, co-branded loans, and delegated lending Furthermore, incorporating entrusted loans can provide additional avenues for borrowers, enriching the overall lending landscape.
Diversifying a bank's lending portfolio is essential for minimizing credit risk and aligns closely with investment portfolio diversification To effectively develop a strategy and business plan, banks must assess various factors, including market risk, client segments, credit product combinations, lending capacity, and overall portfolio focus By diversifying their lending offerings, banks can mitigate risks associated with loans, which inherently vary based on client capabilities, scale, industry, and ownership structure.
4.3.3.2 Establish groups for risk recognition indicators
Legal risk group: includes risks related to client identity, document forgery; risks related to disputes over collateral, ownership of assets