LV thạc sỹ_Improving lending effectiveness at North Asia Commercial Joint Stock Bank

TABLE OF CONTENT LIST OF TABLE LIST OF DIAGRAM ACKNOWLEDMENT CHAPTER I: INTRODUCTION 1.1 Rationale 1.2 Research objective 1.3 Research methodology 1.4 Scope of research 1.5 Structural topic .4 CHAPTER II: THEORETICAL FUNĐAMENTALS OF LENDING EFFECTIVENESS OF COMMERCIAL BANKS 2.1 Literature review 2.2 Lending activity of commercial banks 2.2.1 Definition 2.2.2 Importance of lending activity 2.2.3 Categories of lending 2.3 Lending effectiveness of commercial banks 11 2.3.1 Definition 11 2.3.2 Indicators reflecting lending effectiveness of commercial banks 11 2.3.3 Conditions ensuring lending effectiveness of commercial banks 15 2.3.3.1 Inside condition .15 2.3.3.2 Outside condition 17 CHAPTER III: CURRENT SITUATION OF LENDING EFFECTIVENESS AT NASB- THAI HA BRANCH 20 3.1 Overview of NASB 20 3.1.1 History of North Asia Commercial Joint-Stock Bank – Thai Ha Branch 20 3.1.2 Organization structure, function and task of each department .21 3.1.2.1 Organization structure .21 3.1.2.2 Function and task of each department .22 3.2 Current situation of activities at NASB-Thai HA Branch .25 3.2.1 Fund mobilization 25 3.2.2 Credit performance 28 3.2.3 Other activities .29 3.2.3.1 Foreign exchange trading 29 3.2.3.2 Internal payment operation .30 3.2.3.3 Payment service 30 3.3 Current situation of lending activity at NASB-Thai Ha branch 30 3.3.1 Indicators reflecting lending volume scale .30 3.3.1.1 Outstanding loans 30 3.3.2 Indicators reflecting safety group 36 3.3.2.1 Overdue debt 36 3.3.2.2 Mortgage loans .39 3.3.2.3 Capital turnover 40 3.3.3 Indicators reflecting the level of profitability group .42 3.4 Evaluations of lending effectiveness at NASB-Thai Ha branch 44 3.4.1 Advantages .44 3.4.2 Disadvantages and cause 45 3.4.2.1 Disadvantages 45 3.4.2.3 Cause 46 CHAPTER IV: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE LENDING EFFECTIVE AT NASB – THAI HA BRANCH .49 4.1 Development orientation of NASB lending activity .49 4.1.1 NASB General Development Orientation in 2011 49 4.1.2 NASB-Thai Ha branch General Development Orientation in 2011 .51 4.2 Solutions for lending effectiveness improvement at NASB- Thai Ha branch.52 4.2.1 Boosting capital mobilization in order to meet the needs of customers .52 4.2.2 Appraising quality 53 4.2.2.1 Improving quality in collecting information 53 4.2.2.2 Improving quality in processing information 53 4.2.2.3 Solution to operating organizations 54 4.2.3 Improving lending process .54 4.2.3 Enhancing risk management activities 55 4.2.4 Improving Network, organization restructuring and human resource 56 4.2.5 Strengthening management and supervision 57 4.3 Recommendations 58 4.3.1 To North Asian Commercial Joint Stock Bank .58 4.3.2 To The State Bank of Vietnam .59 4.3.3 To Government of Vietnam 60 CHAPTER V: CONCLUSION 61 REFERENCES 63 LIST OF TABLE Table 3.1: Structure of fund mobilization according to term of deposit 27 Table 3.2: Other activities of NASB-Thai Ha branch 29 Table 3.3: Annual report from 2008 to 2010 30 Table 3.4: Lending activity report from 2008 to 2010 31 Table 3.5: Overdue debt from 2008 to 2010 36 Table 3.6 Mortgage loan of NASB - Thai Ha branch from 2008 to 2010 39 Table 3.7: Capital turnover at NASB-Thai Ha branch 41 Table 3.8: Profits from bank credit operation from 2008 to 2010 42 Table 4.1 Business strategy of NASB in 2011 .50 Table 4.2 Business strategy of NASB-Thai Ha branch in 2011 .52 LIST OF DIAGRAM Diagram 3.1: Organization structure of NASB-Thai Ha branch 22 Diagram 3.2: Situation of fund mobilization in NASB – Thai Ha branch 25 Diagram 3.3: Structure of deposits by each type of customer in each stage 26 Diagram 3.4: Status of credit balance of NASB-Thai HA branch (2008-2010) .28 Diagram3.5: Outstanding loans in terms of maturity from 2008 to 2010 32 Diagram 3.6: Outstanding loans by industry sector .33 Diagram 3.7: Credit balance by types of customers (2008-2010) 34 Diagram 3.8: Overdue debt by industry sector from 2008 to 2010 37 Diagram 3.9: Overdue debt by customer from 2008 to 2010 38 Diagram 3.10: Outstanding loans of mortgage loans from 2008 to 2010 40 Diagram 3.11: Income from lending activity from 2008 to 2010 43 ACKNOWLEDMENT In the industrialization and modernization of the country, now our economy is experiencing difficulties of inflation, rising prices, natural disasters All these factors influence Small and medium enterprises and banks One of the conditions leading to business survival and development capital is especially bank loans In this relationship, both bank and customer not only benefit each others But also bring benefits to the economy Enterprise and individual capital need for production and business investment, purchase of machinery and equipment but the banks need to borrow money to customers profitable for banks So development lending activity is essential for North Asia Commercial Joint-Stock Bank-Thai Ha Branch I would like to thank my school National Economics University, for having given me this opportunity to put my theories I learnt into practice Also, I want to thank all my teachers who taught and trained me, helping me improve my abilities and skills which will support me in the real world I give thanks to my supervisor, Mrs … , Director, for having trained me and constantly guided and supported me during the internship period CHAPTER I INTRODUCTION 1.1 Rationale In funding sources for business and social-economic activities, bank credit is one of the most important sources which cause a direct impact on the growth and development of the economy as well as other social activities On the ground of increasingly deep and wide economic integration of Vietnam into the region and the world, especially after becoming an official member of World Trade Organization WTO, the operation of the banking system in general and the role of bank credit in particular will further constitute strong influence, create a driving force for the entire economy in achieving growth and greater development Moving in the same direction with the whole banking system, credit quality at North Asia Commercial joint-stock banks has been improved consistently In particular, the scales as well as the overdue debt and bad debt ratio experienced an extensive drop from a trough of crisis at the end of 2008 However, the quality of lending operation which is the main target of many commercial banks in general and NASB in specific was improved negligible It is the fact that the bad debt account for the most proportion of overdue debt while this value are not fell a lot in comparison with the previous year In the banking system for NASB, NASB-Thai Ha branch is one of the most typical branch attracted a large amount of deposit of and execution of many lending operations with small balances The branch provides significant capital for large business customers of the economy In particular, lending activities of affiliates account for a large proportion of the total assets of branches in particular and the NASB system in general In recent years, lending activities of the branches has gained many achievements, but still remain some limitations Therefore, lending effectiveness is low and not suitable with the scale of the branch Besides, it is not meet the capital demands for the economy As the result, a study on principles and practices of lending activity in commercial banks, and NASB-Thai Ha branch in specific, the target of research is evaluating lending effectiveness specially, exactly for give solutions to improve lending situation of Thai Ha branch In addition, along with suggested solution for improvement appears to be extremely significant to banks as well as to the customer and the economy as the whole That is reason I choose the topic: “Improving lending effectiveness at NASB-Thai Ha branch” 1.2 Research objective - To review of principles and theoretical background of credit and lending activity in commercial bank - To learn the basic situation and currency lending activity of NASB-Thai Ha branch - To evaluate result and effectiveness of lending activity of the branch Then, discover their disadvantages and advantages in current situation - To propose solutions to improve the lending effectiveness of the branch 1.3 Research methodology Primary data: Using this method to collect information of lending operation and has overall view of the branch, operation structure, working process of staff in the branch I use following methods: - Interviewing the staff of credit department and customer of the branch - Proving directly questions for interviewers to explain in problem - Observing departments, the working process of employee in the branch Secondary data: The secondary data of this method was acquired through reading many book, legal document for lending, annual report of NASB-Thai Ha Then, accessing the issues in theory and practice, this subject uses the concepts of Bank Credit, and then combines with statistics, analysis, synthesis, and comparison methods at NASB in order to clarify matters 1.4 Scope of research - Time: The data collected was limited, focused research in the period from 2008 to 2010 - Space: NASB-Thai Ha branch - Content: Theory and practice of lending operation of bank 1.5 Structural topic The thesis is constituted by five chapters: Chapter I: Introduction Chapter II: Theoretical fundamentals of lending effectiveness of commercial banks Chapter III: Current situation of lending effectiveness at NASB-Thai Ha branch Chapter IV: Solutions to improve lending effectiveness at NASB-Thai Ha branch Chapter V: Conclusion CHAPTER II THEORETICAL FUNĐAMENTALS OF LENDING EFFECTIVENESS OF COMMERCIAL BANKS 2.1 Literature review A commercial bank is a financial intermediary which collects credit from lenders in the form of deposits and lends in the form of loans or investments A commercial bank holds deposit for individuals and businesses in form of checking The lending effectiveness issue in Commercial bank is a practical problem and As a result, it has been chosen as thesis by economic students Some topic was reached: Student Nguyen Thi Hoa: “Some solutions improve credit effectiveness of Vietnam Joint Stock Commercial Bank For Industry And Trade – Ba Dinh Branch -2007” Student Do Van Viet: “Some solutions improve consumer lending effectiveness of NASA – Thai Ha in 2009” Student Nguyen Thi Hoa: “Improving effectiveness lending for small and medium enterprises at NASB-Thai Ha branch in 2009” Three reports show disadvantages of lending operation of banks, the detail problem are as follows: - The bank has not built credit limitation for each group of customer Therefore, size monitoring operation and credit limitation of bank has many disadvantages and ineffectiveness - Lending appraising process is not fully, closely Not fully concerning about the effectiveness of projects, legal characters of documents, financial status and financial ability of customers - The lending process has not strictly, so bad debt ratio has increased Documents have been unsystematic; thus, when have overdue debts and bad debts, credit officers have faced with many difficulties in handling the issue 2.2 Lending activity of commercial banks 2.2.1 Definition Lending: means a form of credit extension under which the lender gives or commits to give the borrower a sum of money for use for a specific purpose in a certain period as agreed upon on the principle of payment of both principal and interest 2.2.2 Importance of lending activity Lending activity is very important because Firstly, commercial bank has functions below, which promote economy activity - The intermediate payment function: This commercial bank acting as treasurer for businesses and individuals, makes payments follow to the requirement of customer as deductions from their deposit accounts for payment goods, services or enter into a deposit account customer of the sales proceeds and other revenues under their command Commercial banks offer for customers more convenient of payment means such as cheques, standing order, charge card, cash card, credit card… Depending on demand, customers can choose appropriate payment methods for themselves Whereby the subject of Economics not keep money in your pocket, carrying the money to meet creditors, meet who have to pay whether near or Bad debt/ Outstanding