Developing retail credit at vietnam joint stock commercial bank for industry and trade ha tinh branch

MASTER OF FINANCE – BANKING – INSURANCE (Southeast Asia) 2016 - 2018 DEVELOPING RETAIL CREDIT AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE – HA TINH BRANCH TRUONG THUY CHUNG Advisor: Assoc Prof., Ph.D Nguyen Van Dinh Hanoi, 2018 ACKNOWLEDGMENTS This thesis is a result of the guidance, support, and encouragement of many faculty, family, and friends A special thanks to Assoc Prof Nguyen Van Dinh (Ph.D) His knowledge and patience pushed me beyond my perceived abilities His honest critique and steady guidance have been essential ingredients in my completion of this thesis I would also like to thanks the BOM & staff of Vietinbank Ha Tinh for providing the data of the company i CONTENTS ACKNOWLEDGMENTS i LIST OF TABLES AND FIGURES iv INTRODUCTION CHAPTER 1: LITERATURE REVIEW AND THEORETICAL BACKGROUND 1.1 Literature review 1.2 Theoretical background 1.2.1 Commercial banks and their characteristics 1.2.2 Main activities of commercial banks 1.2.3 Credit activities of commercial banks 10 1.2.4 Retailed credits of banks 14 CHAPTER 2: RESEARCH METHODS 23 2.1 Research approach 23 2.2 Data collection method 23 2.3 The data analysis methods 24 2.4 Research design 24 2.4.1 Identify targets, objects and scope of research: 25 2.4.2 Choosing research methods of the topic 26 2.4.3 Learning and studying the theoretical basis related to research topics 26 2.4.4 Collect data on retail credit status in Vietinbank Ha Tinh 26 2.4.5 Analyze, synthesize and put into the final research thesis 26 CHAPTER 3: CURENT SITUATION OF RETAIL CREDIT ACTIVITIES AT VIETINBANK HA TINH BRANCH 27 3.1 Introcution to Vietinbank Ha Tinh 27 3.1.1 History 27 3.1.2 Organizational structure 28 3.1.3 Business operation results of Vietinbank Ha Tinh through year (2015-2016) 31 3.2 Retailed credit activities in Vietinbank Ha Tinh 37 3.2.1 Retail credit polices 37 3.2.2 Retail credit activities 38 3.2.3 Retail credit products of the Branch 40 3.2.4 Asessements of current situation 45 ii CHAPTER 4: THE PROPOSED SOLUTIONS DEVELOPMENT TO IMPROVE RETAIL CREDIT AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE – HA TINH BRANCH (VIETINBANK HA TINH) 52 4.1 The orientations and objectives to expand retail credit activity 52 4.1.1 The orientations for development of retail credit in Vietinbank system 52 4.1.2 The orientations and objectives to develop retail credit activity at Vietinbank Ha Tinh 53 4.2 The proposed solutions to improve retailed credit at Vietinbank Ha Tinh 54 4.2.1 Developing customer policy 55 4.2.2 Diversification of types, retail credit products 56 4.2.3 Developing distribution channel system 57 4.2.4 Improve the quality of retail credit human resources 57 4.2.5 Promoting marketing activity 58 4.2.6 Increasing risk management capacity and improve retail credit operation efficiency 59 4.3 The Recommendations 60 CONCLUSION 64 REFERENCES 66 iii LIST OF TABLES AND FIGURES Table 3.1 Main performance indicators in 2015, 2016 32 Table 3.2 Capital raising results of Vietinbank Ha Tinh in the period of 2014 - 2016 33 Table 3.3 Loan result of Vietinbank Ha Tinh for the period 2014-2016 34 Table 3.4 Compare the number of retail credit products of banks in the area 38 Table 3.5 the overview of retail credit activities of Vietinbank Ha Tinh Branch in the period of 2014 - 2016 39 Table 3.6 Result of Loans for land purchase, construction and repair of houses 41 Table 3.7 Result of Loans for business 42 Table 3.8 Result of mortgated loans 43 Table 3.9 Result of car loans 44 Figure 2.1 Research design used in research topic 25 Figure 3.1 Organized at VietinBank Ha Tinh 29 Figure 3.2 Capital raising results of Vietinbank Ha Tinh in the period of 2014 - 2016 33 Figure 3.3 Loan results of Vietinbank Ha Tinh by period 2014-2016 35 Figure 3.4 Loan result of Vietinbank Ha Tinh by customers in period 2014-2016 35 Figure 3.5 The income of services over the year at Vietinbank Ha Tinh 37 Figure 3.6 Outstanding retail loans at Vietinbank Ha Tinh branch for the period 2014 – 2016 39 Figure 3.7 Outstanding retail credit products for the period 2014-2016 40 Figure 3.8 Outstanding of loans for land purchase, construction and repair of houses 42 Figure 3.9 Outstanding of loans for business 43 Figure 3.10 Outstanding of mortgaged loans 44 Figure 3.11 Outstanding of car loans 45 iv INTRODUCTION In recent years, With the deepening integration process, Vietnamese commercial banks operate in fierce competition, in order to innovate and improve service quality,Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) has chosen a long-term and sustainable development orientation Developing retail banking services and consider retailing activity as the most important strategies, in there focusing on retailed credit services is the one of activities that bring in the main income and profit Therefore, The Vietinbank branches have been deploying activities in accordance with the development orientation of the whole system Ha Tinh in recent years has become one of the bright spots in attracting investment of the country Vung Ang Economic Zone and many industrial clusters have been formed as potential convergence places for economic development Accordingly, the development of demand for capital and finance of enterprises and individuals increased rapidly Therefore, many banks have joined and created fierce competition in the retail market in the area To capture the real demand as well as to strengthen the competitiveness with banks in the area, Vietinbank Ha Tinh Branch has developed different types of retail credit for corporate clients and individuals, households However, retail credit balance of branch is not high, the development of retail credit in the area is difficult, the number of products deployed is still limited, the proportion of credit is still lower than the total outstanding loans of the bank On the other hand, advertising, marketing as well as the development of retail credit network, human resources still exist difficulties, objective and subjective obstacles affecting the development of retail credit activities of the Branch From that reason, I decided to choose the topic "Development of retail credit in the Vietnam Joint Stock Commercial Bank for Industry and Trade - Ha Tinh Branch" for thesis to provide general solutions to develop retail credit in the current period The research topic of the thesis is through the theoretical foundation of developing retail credit services, analyzing the Bank's current resources in the local operating environment, determining the causes that limit the development of the Bank's retail credit services to show the challenges that banks are facing, Thereby offering solutions to develop retail financial services in the Vietnam Joint Stock Commercial Bank for Industry and Trade - Ha Tinh Branch in the future  Research Questions With the title of the thesis topic, research questions are: What is retail credit? What are the characteristics of retail credit? What are the results and limitations of retail credit activities in Vietinbank Ha Tinh? What are the causes of those limitations? To develop retail credit in Vietinbank Ha Tinh, what solutions should be implemented?  Research objectives The major objectives of the research are: (1) Systematize theories of retail credit and retail credit development; (2) Analyze and assess the current situation of retail credit activities in Vietinbank Ha Tinh; and (3) Proposed solutions to develop retail credit in Vietinbank Ha Tinh The first important task of the research is to study the general theories of retail credit and retail credit development for analysis Based on these models, the research will assess the current situation of retail credit activities in Vietinbank Ha Tinh Finally, the research will propose solutions to develop retail credit in Vietinbank Ha Tinh based on the above standard models and the results from the situation analysis of the bank  The object and scope of the reseach Research subject Research subject: Research the related issues in the retail credit activities in the actual situation of Vietinbank Ha Tinh branch Scope of the research: Content: The research topic focuses on the following main contents: + Actual retail credit activities in Vietinbank Ha Tinh + The problems posed in the development of retail credit products branch mainly: Loans for business and consumption for individuals and micro-enterprises; Loan for financial proof, study loan Spatial range: Vietnam Joint Stock Commercial Bank for Industry and Trade - Ha Tinh Branch Time range: Data are collected, analyzed and used for three years from 2014 to 2016  Research methodology - Systematic method: Assess all the factors that can affect retail credit activities in Vietinbank Ha Tinh With this method, the assessment of factors affecting the bank’s retail credit activities includes both external and internal environment of Vietinbank Ha Tinh - Secondary data analysis method: This method is used to study the theoretical background for the development of retailing credit - Primary data analysis method: Assess the actual situation of Vietinbank Ha Tinh in the developing retailed credit services and implementation retailed credit activities - Quantitative method: This method is used to select data and analyze  Structure of the thesis In addition to the Table of contents, Introduction and List of references, this thesis includes four following chapters: Chapter 1: Literature review, theoretical background Chapter 2: Research methods Chapter 3: Curent situation of retail credit activities at Vietinbank Ha Tinh Branch Chapter 4: The Proposed solutions development to improve retail credit at Vietnam Joint Stock Commercial Bank for industry and trade – Ha Tinh Branch (Vietinbank Ha Tinh) CHAPTER 1: LITERATURE REVIEW AND THEORETICAL BACKGROUND 1.1 Literature review Developing retail banking in general and retail loans service has become an imperative not only for commercial banks, but also for articles in journals and surveys Masters of thesis or other scientific studies at our country and abroad Typical articles on economic magazine At the post number 2, economy and forecast review, Dr Nguyen Dai Lai, Deputy Director of the Development Department of the Vietnam State Bank has written “Identify and propose solutions to develop retail credit services at commercial banks in Vietnam” In the article, the author raises the issue of the distinction between wholesale bank and retail bank and simultaneously highlights the development of retail banking for commercial banks in allocating fees as well as Cost accounting and selling price The author also outlines the current status of operations of Vietnamese commercial banks in the global economy, which will serve as a basis for developing retail development plans in general and developing retail credit services particularly, market strategy of commercial banks Some master's thesis on the subject studied a) Nguyen Thi Hai Ha, master thesis "Solution for developing retail credit services in Thanh Xuan branch - Bank for Investment and Development of Vietnam", 2009 Throughout the thesis, in the general theoretical chapter, the author presents the general concepts of commercial banks and the development of retail credit services at commercial banks The thesis analyzed the current status of retail credit activities of BIDV in general and Thanh Xuan branch in particular, From this situation, the author has presented a panoramic picture of retail credit services of Thanh Xuan branch and analyzed the overall business environment of Thanh Xuan branch so that there are evaluations on the process of retail credit services Based on the overall analysis of the business environment and the current status of retail credit services at Thanh Xuan branch, the author outlines the causes that exist objectively and subjectively while learning business Experienced in developing retail credit services of banks around the world The thesis has provided basic solutions in terms of market access and customer management, technology, human resources development, financial capacity building as the basis for the development of retail credit services at BIDV Thanh Xuan However, throughout the essay, the authors did not analyze each specific factor affecting the retail operation at BIDV Thanh Xuan, but rather the general situation of the Bank for Investment and Development of Vietnam from which infer to Thanh Xuan Branch, so the persuasiveness of the solution is not high b) Vo Thi Hong Hien, master thesis "Strategic development of retail credit services at Vietcombank Quang Ngai Branch", 2010 Unlike Nguyen Thi Hai Ha, Vo Thi Hong Hien analyzes the current status of retail credit operations at Vietcombank Quang Ngai branch through strategic elements, brand names, products, organizational structure, personnel and finance to identify the strengths and weaknesses of Vietcombank Quang Ngai Branch in combination with external socioeconomic and political analyzes to help Vietcombank Quang Ngai Branch to plan its operational strategy retail credit as well as solutions to implement that strategy most effectively From the above situation, the author has introduced solutions: Developing technology, people, distribution channels, product development, brand name, risk management in retail credit activities at Vietcombank Quang Ngai branch also issued a number of recommendations to the Government, the State Bank and related agencies to achieve the ultimate goal of developing retail credit services at Vietcombank Quang Ngai By analyzing the same research topics on retail credit development as mentioned above, we find that although the authors have provided basic solutions to develop retail credit services, However, most of the theses still go from general theory, These have not applied a specific theoretical model to develop specific solutions to develop retail credit service Recognizing the outstanding issues of the studied research on the development of retail credit services together with the statement "Development of retail credit services at Vietinbank Ha Tinh" is a new field of research but in the future It will bring many development opportunities that previously had no research work on this field in Ha Tinh branch The author went from systematizing the general theoretical issues of commercial bank credit services to concurrent application of the Ansoff matrix combined with the analysis of individual factors of Ha Tinh town where Vietinbank Ha Tinh operates as well as retail credit analysis From the point of view, the author provides the solutions for developing retail credit services of the Vietinbank Ha Tinh branch 1.2 Theoretical background 1.2.1 Commercial banks and their characteristics 1.2.1.1 Commercial bank The bank is one of the most important financial institutions in the economy Banks depend on the economic development in general and the financial system in particular, in which For education, health, infrastructure towards the goal of sustainable development, reflecting the philosophy of "raising the value of life" With the success of two consecutive years of winning the Best Retail Bank Award in Viet Nam, VietinBank has confirmed its strong move in retailing as well as establishing the position of leading commercial bank in Vietnam This activity is also in line with VietinBank's new Business Strategy, which is to develop the retail and payment services sector, ready to reach the regional level and integrate into the international market modern and regional level 4.1.2 The orientations and objectives to develop retail credit activity at Vietinbank Ha Tinh For VietinBank Ha Tinh, the goal is to become the leading bank in Ha Tinh in terms of scale as well as service quality, providing banking services package with modern technology, products translation It has diversified and high-quality services, operates in a flexible manner and extends its network to locations with favorable business locations in Ha Tinh city and neighboring districts and towns The basic contents of the objectives are expressed as follows: Target customers: individual customers and medium and small enterprises, import-export businesses Focus on developing retail banking, focusing on individual customers The segment of customers is reasonable for customers such as general customers, loyal customers, important customers and potential customers to develop new products and services such as car loans, loans for studying abroad, Expand the network of distribution channels, establish two more transaction offices and two savings funds in densely populated areas Expanded ATM system and international credit card payment locations (about ATMs and 10 points accept POS cards) Developing banking products and services for all customers Strengthening and refining traditional products such as mobilization and lending, and applying modern technology to supporting products and services such as foreign exchange, international and domestic payment, etc Banking services such as Ipay, internet banking, mobile banking, vntopup… Focus on developing retail banking products and services such as payment services (paying international payment), international credit cards, visa debit, and ATM cards Enhance the capacity of management and administration, strengthen the internal control and risk management Specific objectives of Vietinbank Ha Tinh period 2018-2022 - Total assets increase 15% / year on average - Mobilizing capital increases 17% / year on average 53 - Outstanding loans increased by 14% per annum on average, - Bad debt is controlled at less than 3% of total outstanding loans, - The international payment market share is not lower than 14% - Keep your card market share at least 40% - Established transaction offices and savings funds Developed according to VietinBank Ha Tinh: "Effective and sustainable growth" Orientation of retail credit development of Vietinbank Ha Tinh Retail credit is now more favorable in terms of economy, politics and technology This is a potential market, many banks focus on expanding investment Understanding this situation, Vietinbank Ha Tinh determination retail credit activities should be concerned and give directions: - Vietinbank Ha Tinh plans to expand retail credit in ways, form the more scientific method The expansion of retail credit involves broadening the scope of lending, kind of lending, place of lending, along with improved service quality (reasonable transaction time, avoidance of borrower status long overdue) and ensure the safety and quality of retail credits (maintaining the overdue loan ratio