VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMIC AND BUSINESSFACULTY OF FINANCE AND BANKING GRADUATE THESIS MAJOR: FINANCIAL AND BANKING TOPIC: FACTORS AFFECTING CREDIT SERVICE AT SAIG
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1.2.1 Definition and characteristics of credit services
Credit services encompass various financial products offered by banks and credit unions, enabling individuals and businesses to borrow money These services include loans, credit cards, and lines of credit, providing access to funds for diverse purposes like purchasing goods, investing in businesses, or managing unexpected expenses.
Credit services are characterized by five key features Firstly, they charge interest on borrowed amounts, representing the cost of borrowing money Secondly, these services have specific repayment terms that can vary from a few months to several years, depending on the type of credit and the borrower's creditworthiness Thirdly, lenders conduct credit checks to assess borrowers' creditworthiness before approval Fourthly, some credit services, like secured loans, may require collateral, such as a home or car, to secure the loan Lastly, additional fees, including origination and late payment fees, may apply to credit services.
1.2.2 The role of credit services
In a market economy, banks focus on profitability by acting as financial intermediaries that mobilize capital through deposit and payment accounts, while also trading on behalf of their customers They offer a variety of products, including payment services, management solutions, and consulting, and generate credit based on the capital they gather This traditional banking activity not only constitutes a significant portion of their total assets but also serves as a primary income source for banks.
Despite a decrease in the proportion of credit activity, credit services continue to be the main use of capital in commercial banks This credit foundation allows banks to expand their offerings, such as domestic and international payments, attracting deposits, foreign currency trading, and consulting services By diversifying their asset portfolios, banks can enhance revenue streams and ensure long-term growth.
Bank credit plays a crucial role in enhancing the financial well-being of individual customers by facilitating the purchase of essential assets such as homes, cars, and appliances Through credit services, banks empower individuals to achieve their long-term financial goals and improve their quality of life For example, a mortgage loan enables home ownership, providing both stability and a valuable investment Similarly, auto loans enhance access to reliable transportation, boosting employment opportunities and income potential Additionally, personal loans and credit cards help individuals manage unexpected expenses or make significant purchases that may be beyond their immediate financial reach.
Bank credit plays a crucial role for companies in fulfilling their capital needs for production expansion, improving distribution, and boosting overall business efficiency By leveraging bank loans, businesses can address operational challenges, secure necessary funding for scaling production, invest in technology, and drive growth This not only enhances operational efficiency but also supports the successful establishment of new enterprises, allowing them to thrive in a competitive environment.
Bank credit is essential for fostering international economic relations and supporting the growth of developing nations like Vietnam As global economic integration intensifies, foreign debt becomes crucial, and bank credit facilitates this need This support not only drives economic growth but also improves living standards in these countries.
Bank credit is essential for accelerating the production and exchange of goods and currency, which stimulates economic growth and regulation By redistributing monetary capital based on the principle of return, banks enhance the efficient circulation and utilization of resources in production They meet short-term capital needs, ensuring seamless production processes and facilitating expansion Additionally, bank credit is vital for establishing an optimal economic development structure, enabling the state to inject funds into the economy aligned with its development goals.
1.2.3 Types of credit services at commercial banks
Commercial banks play a crucial role in the economy by providing essential credit services, including lending, discounting, guarantees, and factoring These services are fundamental to their operations and significantly contribute to their overall credit extension activities.
Credit classification involves categorizing loans into groups based on specific criteria, which can vary depending on the bank Various criteria can be used to classify credit, including:
1.2.3.1 Based on the maturity of the loan
Short-term credit - from 12 months or less; Medium-term credit - from over 1 year to 5 years; Long-term credit - over 5 years
Short-term credit is a financial solution with a duration of less than one year, designed to meet urgent working capital needs for businesses or personal expenses This type of credit presents a lower risk for banks, as the limited timeframe and minimal fluctuations allow for better predictability of potential changes.
Medium-term credit is a financing option with a duration of one to five years, commonly used for acquiring fixed assets, enhancing technology, expanding production capabilities, and developing infrastructure This type of credit features a shorter repayment period than long-term credit, making it less risky for banks due to the predictability of potential fluctuations.
Long-term credit, defined as loans exceeding five years, is essential for financing capital construction, infrastructure projects, and investments in new manufacturing facilities to boost large-scale production However, the extended repayment duration introduces considerable risk, as unforeseen economic fluctuations can arise over time Therefore, banks are required to perform thorough credit analyses prior to approving such loans.
1.2.3.2 Based on credit - granting method
A loan is a borrowed sum of money that must be repaid within a specified period, with interest accruing until full repayment Various types of loans cater to different needs, making them an ideal solution for both planned and unexpected expenses, such as purchasing a home or vehicle, funding a wedding, starting a business, or pursuing education Understanding the different loan types available, including lending, discount, guarantee, and factoring, is essential for making informed financial decisions.
Lending activities are primarily divided into short-term loans, which support working capital needs, and medium to long-term loans, aimed at financing fixed assets and investment projects Additionally, loans can be classified based on the method of determining the loan amount into two categories: line lending and installment loans.
If based on the method of determining the loan amount, there are two types of loans:
Line lending involves a bank providing a customer with a credit limit for a specified period, allowing access to funds based on agreed conditions, typically for short-term needs In contrast, an installment loan requires customers to submit a detailed application outlining the loan's purpose, which the bank evaluates to determine creditworthiness and project viability This assessment influences the loan amount, repayment terms, interest rates, and collateral requirements Installment loans are commonly utilized for medium to long-term financing and investment projects in commercial banking, with the bank collecting both principal and interest as per the loan agreement.
REASEARCH METHODOLOGY nhanh 16 2.1 The method of data colẽ@CtẽOTI -ccssecscxverrrkrerrrrkirtkrrrrtrrrirrrriirrrrirrrrrrirrrrrkerrie 16 2.2 Data collection and processing methOở . sssccrrkeitkrirtrtiiiriiriiirrriirrrkerie 16 2.2.1 Formulas for assessing Credit quality At DONKS, -ô ceccsreeierrssrrrrrrrrerrrk 17
2.1 The method of data collection
This thesis employs qualitative research methods, utilizing confidential data obtained from lenders during my internship at the bank The focus of the research is on the credit history within the bank, specifically examining credit services and loans offered at Sacombank's S-office during the specified period.
2018 -2022 Besides, I also collect data from Sacombank's financial statements for the period from 2018 to 2022.
Data collection for this article relies on information gathered from existing references, with the bank's internal loan situation data used exclusively to support the argument.
2.2 Data collection and processing method
After collecting data related to the bank's lending activities, I will use 2 comparison methods are Absolute comparison method and Relative method of comparison.
In order to make a comparison, the following basic things need to be done:
To conduct a meaningful comparison, first identify the standards to be used as a comparative basis, referred to as the comparative base period This base period should be chosen based on the specific research objectives For instance, using data on Sacombank's loan situation from the previous year can help evaluate the development trends of key indicators Additionally, comparing average industry metrics, business area performance, and customer needs or orders can provide insights into the enterprise's market position and its capacity to meet lending demands The targets established for the performance period, which are compared to the base period, reflect the business results achieved.
The comparative technique evaluates lending activities by comparing indicator values from the analysis period to the base period, revealing fluctuations in economic phenomena Additionally, when analyzing data from Sacombank, the relative number of plan completion is calculated using ratios, which essentially represents the result of a division.
16 between the value of the analysis period and the base period of the indicators economic spending It reflects Sacombank's plan completion rate at that time
Besides using the comparison method, I also use the formulas through which I can know how Sacombank's credit performance over the years is doing
2.2.1 Formulas for assessing credit quality at banks. a) Scale indicator Outstanding growth rate
Bank credit growth measures the percentage change in the monetary value of loans provided by banks to individuals, businesses, and organizations over a specific period Positive credit growth reflects an increase in the money supply circulating in the economy, while negative credit growth suggests a contraction, potentially impacting economic stability The outstanding growth rate is calculated to assess these changes effectively.
(This year's outstanding balance - Last Outstanding growth rate (%) year's outstanding balance) x 100%
Outstanding balance of previous year
This metric evaluates a bank's credit balance growth over time, reflecting its size, ability to acquire customers, and effectiveness in executing credit plans A higher index indicates stronger performance in expanding the bank's size, while a lower index suggests challenges in customer acquisition and credit plan implementation For foreign trade banks, a healthy average loan balance growth index is at least 25% annually.
" Credit sales, credit sales growth rate
Credit sales refer to the total amount of credit extended by a bank over a specified time frame, regardless of the loan collection status Typically, these sales are assessed on a monthly, quarterly, or annual basis.
(This year's Credit Sales - Last
Credit sales growth rate (%) = year's Credit Sales) x 100%
Credit sales include loan sales, underwriting sales, and letter of credit sales, while turnover represents the total credit extended to customers by a bank within a financial year This metric highlights the growth rate of transaction volume in credit activities of foreign trade banks, with a higher ratio indicating enhanced capital movement and credit expansion capabilities An average turnover growth rate of 20% per year is deemed optimal for foreign trade banks, serving as a key indicator of profitability and income.
Profit and income, while often seen as similar, are fundamentally different financial metrics that influence an organization in unique ways Profit represents the difference between total expenses and total earnings over a specific period, whereas income denotes the actual amount of money received during that time Understanding these distinctions is crucial for effective financial management.
Profit is a key financial metric that reflects the income remaining after all expenses are deducted, representing the surplus earned within a specific period The profit margin is directly related to an organization's revenue, indicating that lower revenue leads to a reduced profit margin By calculating profit, businesses can effectively assess their earnings in relation to the costs incurred in generating that revenue.
Net income, or simply income, is a key financial metric that indicates a company's profitability by accounting for all money inflows and outflows over a specific period It is determined by deducting total expenses, including taxes and interest, from the company's total revenue This comprehensive calculation encompasses all revenue sources and incurred expenses, reflecting the actual earnings available for investment or distribution to shareholders.
Credit activities’ income ratio is calculated following the formula below:
Income from credit activities Credit activities’ income ratio = x 100%
Income consists of two main components: interest income and non-interest income Interest income is derived from borrowing and depositing activities, whereas non-interest income is generated from various services offered Additionally, income from credit activities specifically relates to earnings from extending credit It's important to note that a low delinquency ratio does not necessarily indicate financial health.
Eighteen banks struggle to boost income through credit activities, as improved credit quality is only beneficial if it leads to income growth With foreign trade banks focusing more on fee collection and non-interest income, an appropriate income ratio from credit activities to total income is between 35% and 40%.
Credit activities Profit from credit activities x 100% profit rate Total loans
To determine profit, we deduct operating, provision, and other expenses from the income generated through credit activities This calculation reflects the profitability of the credit extended to customers, with a higher profitability ratio signifying effective and high-quality credit practices For foreign trade banks, an optimal profitability level from credit activities should be around 1% of total outstanding loans.
Credit turnover measures the total number of transactions conducted by a commercial bank over a specific period, usually annually This key metric assesses the bank's efficiency in managing and utilizing its credit capital while ensuring it meets customer demands for high-quality credit services.
FACTORS AFFECTING CREDIT SERVICES AT SAI GON THUONG TIN
Overview of Sai Gon Thuong Tin Commercial Joint Stock BanĂ
On January 13, 2000, Saigon Thuong Tin Joint Stock Bank, now known as Sacombank, relocated and rebranded, becoming a key player in investment, development, and fund management in accordance with state plans The bank's investment portfolio spans nearly all areas of capital construction, resulting in thousands of completed projects across various sectors in the city, including residential and commercial buildings, infrastructure, and public facilities In addition to its extensive investment activities, Sacombank provides a comprehensive range of banking services, including capital mobilization, medium and long-term loans, domestic and international payment solutions, card services, ATMs, and collection-payment services.
Customer Accounting Human General Computer Service — Treasury Resource departm room
The individual in this position is tasked with managing branch operations, implementing strategies to optimize local market opportunities, and ensuring the efficient performance of departments and staff.
The team is tasked with overseeing compliance with regulations and processes to enhance credit quality, maintain capital adequacy, and reduce risk They have the authority to enter into various contracts, including credit, pledge, and mortgage agreements, in line with Sacombank's policies Accountable to the General Director and legal standards, they are also responsible for establishing goals and strategic plans for the branch.
The credit documents submitted by customer relations are sent to the appraisal department for review Once approved, this department oversees the disbursement process, including signing essential documents, conducting asset-related procedures, and verifying all disbursement documentation.
Appraisal department: The credit department submits credit documents to this role, which then conducts an appraisal, approves the necessary documents, and submits them to the appropriate authorities for approval.
The International Payment Department is responsible for managing trade finance and international payment documents from clients Key tasks include processing import and export letters of credit, issuing bank guarantees, acknowledging import-export revenue, and facilitating international money transfers.
The incumbent is responsible for accurately monitoring the bank's operations through diligent data checking and oversight of capital plans Daily bookkeeping and regular financial reporting are essential tasks that provide leaders and inspection agencies with timely updates Additionally, the role includes managing the branch's treasury, which involves daily cash collection, verification, and the secure management of cash sources to ensure optimal safety.
The individual in this role advises the Director on personnel matters, including recommending appointments, transfers, and salary increases, while also overseeing the recruitment of cadres and public employees under the Branch Director's management Furthermore, they manage the receipt, issuance, monitoring, and storage of correspondence at the Branch.
The position requires the development, monitoring, and evaluation of the branch's annual plan while ensuring compliance with internal and external regulatory reporting It involves synthesizing interest rates, exchange rates, and fee schedules per head office regulations Additionally, the role includes managing product parameters, serving as a marketing focal point, and effectively communicating information to enhance the branch's brand and image.
Its function is to install programs, transmit data between departments, and promptly prevent incidents to ensure the proper functioning of the network system.
3.1.3 Types of credit services offered by Sai Gon Thuong Tin
At Sacombank, credit service activities for customers include: Mortgage loans, Unsecured consumer loans, Unsecured consumer loans, Consumer loans, Loan to buy project house, Business loan, Car loan.
Mortgage loans for valuable papers:
A collateral loan allows borrowers to pledge property of any value to secure the funds they need While customers retain ownership of their property during the mortgage process, the lender holds the necessary documents If the borrower fails to repay the loan, ownership of the property will be transferred to the lender.
The form of loan support does not require collateral and relies on the customer's reputation to approve the loan limit.
To secure a loan, borrowers must provide clear and transparent proof of income to demonstrate their repayment capability Consequently, the interest rate for this loan will be higher than average.
Consumer loans secured by property
This type of loan requires customers to have collateral, with a high loan limit and flexible loan term.
Loan to buy project house
Vietcombank's project home loan offers an ideal real estate solution, enabling you to secure a home for your family with financing options that cover up to 100% of the property's value.
The loan offers a 20-year repayment period, competitive interest rates, and a gradually decreasing principal amount, all designed to alleviate debt repayment pressure and enhance customers' repayment capabilities.
Moreover, with quick implementation procedures and customers can quickly receive loans.
Customers who need a loan as well as have enough debt payment ability can immediately prepare the documents below to apply for a loan:
This product provides customers with a loan to support the business's production and business activities.
This is a product that attracts many businesses with large loan terms and attractive and competitive interest rates.
A medium-term business loan offers customers a flexible repayment period of up to 60 months, with a maximum loan amount of VND 5 billion The interest is calculated based on the reducing balance method.
The car loan product provides borrowers with a limit of up to 70% of the value of the car that the customer intends to buy.
If the customer uses other collateral, the loan limit can change up to 100% of the vehicle value.
Borrowers have a term of 5 years to be able to pay their debts with competitive interest rates, Vietcombank also supports customers to pay with many different methods.
3.1.4 Credit process at Sai Gon Thuong Tin Commercial Joint Stock Bank
The credit process at Sacombank will include 7 steps:
Step 1: Receive customers’ needs and collect CTD request documents
When a customer applies for a loan at Sacombank, the staff will review the request and ask for essential documents to assess the customer's financial capacity.
Step 2: Credit analysis and preparation of Credit Application
The second step involves conducting a credit assessment using the documents submitted by the customer, such as financial records for a comprehensive financial evaluation Following this assessment, recommendations will be made to the superiors based on the findings.
When the credit extension has been verified as well as assessed that the customer can pay the debt, the superior will approve it.
Step 4: Credit reassessment of Credit
Then, after being approved, the credit will be deployed depending on how long the customer needs the money
Step 5: debt management and recovery
During the disbursement process for customers, the credit staff will always follow up with customers and urge customers to pay their debts early.
Step 6: Completing the dossier and implementing the judgment.
After being able to pay interest and principal, the customer will pay off the credit Step 7: Finalization of credit application documents
After all procedures are completed, the bank will keep customer records for
3.1.5 Current situation and business activity of Sacombank
Types of credit services offered by Sai Gon TRUONG Tinivecsssssscsssssessssessnsssssssessssnnen 22 3.1.4 Credit process at Sai Gon Thuong Tin Commercial Joint Stock Bank 24 3.1.5 Current situation and business activity Of SACOMDANK wees 24
At Sacombank, credit service activities for customers include: Mortgage loans, Unsecured consumer loans, Unsecured consumer loans, Consumer loans, Loan to buy project house, Business loan, Car loan.
Mortgage loans for valuable papers:
A collateral loan allows borrowers to pledge any property of value to secure the loan they desire While customers retain ownership of their property during the mortgage process, the lender holds the necessary documentation If the borrower fails to repay the loan, ownership of the property will be transferred to the lender.
The form of loan support does not require collateral and relies on the customer's reputation to approve the loan limit.
To secure a loan, borrowers must provide clear and transparent proof of income to demonstrate their repayment capability As a result, the interest rate for this loan will be higher than average.
Consumer loans secured by property
This type of loan requires customers to have collateral, with a high loan limit and flexible loan term.
Loan to buy project house
Vietcombank's project home loan product offers an ideal real estate solution, enabling you to secure a home for your family with a loan limit of up to 100% of the property's value.
The loan offers a 20-year repayment period, competitive interest rates, and a gradually decreasing principal amount, all designed to alleviate debt repayment pressure and enhance customers' ability to repay.
Moreover, with quick implementation procedures and customers can quickly receive loans.
Customers who need a loan as well as have enough debt payment ability can immediately prepare the documents below to apply for a loan:
This product provides customers with a loan to support the business's production and business activities.
This is a product that attracts many businesses with large loan terms and attractive and competitive interest rates.
A medium-term business loan offers customers a flexible repayment period of up to 60 months and a maximum loan amount of VND 5 billion, with interest calculated on a reducing balance basis.
The car loan product provides borrowers with a limit of up to 70% of the value of the car that the customer intends to buy.
If the customer uses other collateral, the loan limit can change up to 100% of the vehicle value.
Borrowers have a term of 5 years to be able to pay their debts with competitive interest rates, Vietcombank also supports customers to pay with many different methods.
3.1.4 Credit process at Sai Gon Thuong Tin Commercial Joint Stock Bank
The credit process at Sacombank will include 7 steps:
Step 1: Receive customers’ needs and collect CTD request documents
When customers approach Sacombank for a loan, the staff will review their requests and guide them to submit the required documents for assessing their financial capacity.
Step 2: Credit analysis and preparation of Credit Application
The second step involves assessing the customer's credit by analyzing the documents they provide, such as financial records Following this evaluation, recommendations will be made to superiors based on the credit assessment results.
When the credit extension has been verified as well as assessed that the customer can pay the debt, the superior will approve it.
Step 4: Credit reassessment of Credit
Then, after being approved, the credit will be deployed depending on how long the customer needs the money
Step 5: debt management and recovery
During the disbursement process for customers, the credit staff will always follow up with customers and urge customers to pay their debts early.
Step 6: Completing the dossier and implementing the judgment.
After being able to pay interest and principal, the customer will pay off the credit Step 7: Finalization of credit application documents
After all procedures are completed, the bank will keep customer records for
3.1.5 Current situation and business activity of Sacombank
Sacombank, like other joint-stock commercial banks in the region, diversifies its operations across various industries to maximize profitability In response to the evolving banking landscape that emphasizes risk reduction, the bank is shifting its focus from traditional lending to offering a comprehensive range of products and services Additionally, the branch is committed to enhancing security measures in its operations.
Sacombank Capital aims to enhance its position as the leading bank in the country by expanding and diversifying its product offerings By improving service quality, the bank seeks to better meet customers' needs and achieve strong business outcomes.
The branch has consistently diversified its banking products and services while enhancing their quality to effectively compete with other local banks This commitment to improvement is evident in the branch's strong business performance.
Table 3.1: Business results of Sacombank in the period 2018 - 2022.
(Source: Financial report of Sacombank over the years)
Over the past decade, Sacombank has demonstrated remarkable business performance by focusing on capital efficiency and expanding its service offerings The bank has consistently achieved profitable results, earning recognition in 2018 as one of the top twenty banks among over 100 branches, serving 300,000 customers, including 14,180 corporate clients In 2019, Sacombank reported a profit of 435 billion VND.
In 2019, the bank's total revenue was 2,122 billion VND, which rose to 2,479 billion VND in 2020, marking a growth of 375 billion VND or 16.8% By 2022, revenue further increased to 3,321 billion VND, up by 67 billion VND or 6.2% compared to 2020 These figures demonstrate the bank's effective business performance and the positive transformation of the local economy.
In 2020, the bank's expenses amounted to VND 1,971 billion, an increase of VND
284 billion compared to VND 1,687 billion in 2019, representing a 16.8% increase In
In 2022, Sacombank's expenses reached VND 2,640 billion, reflecting a VND 669 billion increase from 2020, which represents a notable 33.9% growth This substantial rise in costs highlights the bank's commitment to expanding and enhancing its branch network.
By 2022, the bank has demonstrated a consistent rise in expenses, indicative of its commitment to stable operations and network expansion This increase encompasses interest payments on loans and customer deposits, as well as marketing expenditures for its products and services, highlighting the branch's active engagement in the market.
The bank has experienced a steady rise in profits over the past few years, with total profits increasing from 435 billion VND in 2019 to 508 billion VND in 2020, and reaching 681 billion VND in 2022 This consistent growth in business activities, even amidst economic fluctuations, highlights the effectiveness of the bank's strategic management and execution As a result, the branch has strengthened its position and enhanced its competitiveness against other regional banks.
Table 3.2: Summary of credit balance and non-performing loans at Sacombank - in the period 2018-2022.
Amount| Amoun | Amount Amount Amount
(Source: Annual financial reports of Sacombank over the years)