Lending to large corporate clients at saigon hanoi commercial joint stock bank

MASTER OF FINANCE - BANKING - INSURANCE SOUTHEAST ASIA Cohort 2016-2018 Master‟s Thesis: LENDING TO LARGE CORPORATE CLIENTS AT SAIGON- HANOI COMMERCIAL JOINT STOCK BANK Advisor: Nguyen Van Dinh, Ph.D., Assoc.Prof Author: Nguyen Thi Quyen – FBA Hanoi, May 2018 ACKNOWLEDGEMENT With the approval of the VNU - International School, the University of Nantes and my Advisor, Ph.D.Assoc.Prof Nguyen Van Dinh, I have chosen the subject of the research "Lending to large corporate clients at Saigon – Hanoi Commercial Joint Stock Bank (SHB)” To complete this thesis, I would like to express my deep gratitude to all the teachers were enthusiastic teaching and guidance during my study, research and training at the department I would like to deeply thank our teacher - Ph.D.Assoc.Prof Nguyen Van Dinh who guided me access to research topics and find out the best solution for this study He has given us a very sincere affection, warmth, an attitude to work very carefully, exemplary I could not have imagined having a better mentor than him to my graduation topic Although my work is very busy, I always try my best to complete the thesis However, the first time doing an academic research brings me from this challenge to another one So it is impossible to avoid all difficulties in doing the research So I would like to receive valuable feedback from the teachers and colleagues to my study in order to get my thesis completed Last but not least, I also would like to express my special thanks to my family for their support during my two years studying in this program as well as during the last highly intensive time for this thesis Sincerely thank with my best regards, Hanoi, 2018 Author: Nguyen Thi Quyen - FBA8 TABLE OF CONTENT ACKNOWLEDGEMENT TABLE OF CONTENT TABLE OF NOTATIONS AND ABBREVIATIONS LIST OF FIGURES LIST OF TABLES CHAPTER 1: INTRODUCTION 1.1 Purpose and aims of the study 1.2 Objectives and research tasks 1.3 Research scope 1.4 Research Methodology CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK 2.1 Literature review 2.2 Theoritical framework 2.2.1 Commercial banks and their main activities 2.2.2 Lending to large corporate clients 11 CHAPTER 3: LENDING TO LARGE CORPORATE CLIENTS AT SAIGON – HANOI COMMERCIAL JOINT STOCK BANK (SHB) 25 3.1 Brief overview on Saigon – Hanoi Commercial Joint Stock Bank 25 3.1.1 General information 25 3.1.2 The establishment and development of Saigon – Hanoi Commercial Joint Stock Bank 25 3.1.3 Main business activities 27 3.1.4 Organization structure and management mechanism of Saigon – Hanoi Commercial Joint Stock banks 28 3.1.5 Major business indicators 29 3.2 Curent situation of lending to Large Corporate clients at Saigon Hanoi Commercial Joint Stock Bank 36 3.2.1 The policy of lending to Large Corporate clients at Saigon Hanoi Commercial Joint Stock Bank 36 3.2.2 The Lending procedures of banks 38 3.2.3 Results of lending to Large Corporate clients at Saigon Hanoi Commercial Joint Stock Bank 40 3.3 Evaluation of lending to large corporate clients at Saigon Hanoi Commercial Joint Stock Bank 49 3.3.1 Achieved resultsments 49 3.3.2 Limitations 50 3.3.3 Reasons for limitations 50 CHAPTER 4: PROPOSED SOLUTIONS TO IMPROVE LENDING TO LARRGE CORPORATE CLIENTS AT SAIGON HANOI COMERCIAL JOIN STOCK BANK (SHB) 57 4.1 Development direction of Saigon Hanoi Commercial Joint Stock Commercial Bank 57 4.2 Development orientation regards to Large Corporate clients at Saigon - Hanoi Commercial Joint Stock Bank 58 4.3 Solutions to improve lending to large corporate clients at Saigon - Hanoi Commercial Joint Stock Bank 59 4.3.1 Improving lending policy for Large Corporate clients 59 4.3.2 Enhancing quality of staff who are in charge of Large Corporate clients 63 4.3.3 Modernizing bank‟s technology, enhancing credit information quality 64 4.3.4 Develop marketing activities for Large Corporate clients 65 CONCLUSION 68 REFERENCES 70 TABLE OF NOTATIONS AND ABBREVIATIONS Abbreviation SHB Meaning Saigon – Hanoi Commercial Joint Stock Bank NHNN State Bank of Vietnam NHTM Commercial Bank WTO World Trade Organization VCCI Vietnam‟s chamber of commerce and industry CIC Credit information center of State bank USA The United Stated of America USD United Stated dollar VND Vietnam Dong SMEFP Small and Medium Enterprises Financing Products LIST OF FIGURES No Figures Content Figure 3- SHB‟s Ownership structure Figure 3-2 SHB‟s Total Assets Figure 3-3 SHB‟s capital mobilization Figure 3-4 SHB‟s Outstanding loan balance Figure 3-5 SHB‟s Outstanding loan balance classification in terms of subjects Figure 3-6 SHB‟s Outstanding loan balance structure in loan terms Figure 3-7 SHB‟s Bad Bebt Ratio Figure 3-8 Figure 3-9 10 Figure 3-10 Outstanding loan balance of Large Corporate clients during 20132016 Scale of lending to Large Corporate clients at SHB during 2013-2016 Large Corporate clients‟ bad debt/SHB‟s total bad debt during 20132016 LIST OF TABLES No Tables Content Table 2-1 Classification of Small and Medium Enterprise in Vietnam Table 2-2 Corporate clients segmentation criteria Table 3-1 SHB‟s organization structure Table 3-2 Business operation results of SHB Table 3-3 Results of Capital Mobilization from clients Table 3-4 Number of SHB‟s Large Corporate Clients during 2013-2016 Table 3-5 Table 3-6 Table 3-7 10 Table 3-8 SHB‟s bad debt during 2013-2016 11 Table 3-9 Large Corporate clients‟s capital turnover 12 Table 3-10 Large Corporate clients‟s incremental capital-output ratio Large Corporate client‟s proportion in total outstanding loan balance of corporate clients at Saigon Hanoi Commercial Joint Stock Bank Structure of SHB‟s outstanding loan balance of Large Corporate clients in loan terms Structure of outstanding loan balance for Large Corporate clients in terms of economic sectors CHAPTER 1: INTRODUCTION 1.1 Purpose and aims of the study In today‟s era of open and free trade, especially after joining the World Trade Organization (WTO), there are an increasing number of mergers in Vietnam, in which enterprises incorporate with or acquire other enterprises, in order to become corporations This is the only path for domestic business to survive and compete with large conglomerates coming from oversea as aultimate effect of joining WTO Large-scale enterprises are able to withstand and function well in unfavorable economic environment The operations of enterprises are vastly experienced; hence they are fairly stable and highly secure Moreover, they have established good reputation and maintained steady growth in the market Despite accounting for a small proportion of the total number of business entities operating in the economy, large firms engage in extremely important industries, make substantial contributions to the national budget and generate much higher GDP than both small and medium business combined Therefore, enterprises are always considered as an indispensable part of national economy, leading the development of country through different economic cycles In the near future, it is believed that the number of large businesses will tend to increase rapidly Therefore, commercial banks are better off to prepare to meet the excessive demand from this potential line of client The benefits that big enterprises bring to banks not only come from giant loans, which provide banks with the highest revenue stream amongst other group of clients Large firms also play as sources of important information and relationship networks, which can exponentially increase client base and revenue for banks The sustainable development of enterprises, especially large enterprises, is crucial for the advancement of Vietnamese macro economy toward a secure and more attractive business environment In the banking industry, enterprises play a special role The continuous growth of a bank has always been accomplished by the contribution of corporations, since these are the major stream of revenue for the bank On the other hand, with strong financial positions and enormous demand in capital, large enterprises often account for the mass of outstanding loans generated from commercial banks, which substantially increase banks‟ assets Therefore, the quality of banks‟ credit operation also depends heavily on their large corporate clients Under recognition of this matter, Saigon – Hanoi Commercial Joint Stock Bank (SHB) has made significant efforts to develop credit schemes to accommodate the demand of enterprises and to stimulate expansion of the bank However, the influence of these efforts has not been commensurate with the bank‟s potential as well as corporations‟ potential The continuous development of credit schemes for large enterprises is of extreme significance for SHB to uninterruptedly expand and develop Therefore, the topic of “Lending to large corporate clients at Saigon – Hanoi Commercial Joint Stock Bank (SHB)” has been selected for further research, bases on its practical applications This study aims to firstly generate a definition of large enterprises, in which the criteria for selection, features, and the role of enterprises in the economy are specified Secondly, the research also establishes an overview of credits, and the influence of credits to business client The suitable credit schemes applied to those clients are also taken into consideration Moreover, the importance of credit scheme development in commercial banks will be taken into account, specifying relevant factor of influence Finally, the research will study credit schemes applied for enterprise in Saigon – Hanoi Commercial Joint Stock Bank during period 2013-2016, the achievement and limitation of which will be discussed In addition some suggestions for the development of credit activities for enterprises in SHB in the future are given for consideration 1.2 Objectives and research tasks The thesis is aimed to establish result both theoretically and empirically First, the research intents to systematize the theoretical basis for the development of credit activities for corporate clients of commercial banks, by establishing and overview of commercial banks‟s credit activities, the characteristic of credit applied for corporate clients, concepts, indicators and analysis of factors that influence the development of credit activities for corporate clients of commercial banks Secondly, the research aims to describe and assess the case study of SHB empirically, demonstrating the reasons for limitation in the development of credit activities for clients On the basis of which, the thesis will propose solutions to develop credit activities for enterprises clients at SHB in the future 1.3 Research scope 1.3.1 Content This thesis is carried out from the view of commercial banks It focuses primarily on the development of credit schemes applied for corporate clients at commercial bank This includes definitions, factors of influence, limitations and suggestion for improvement 1.3.2 Space This thesis is involved in the case study of SHB The credit schemes applied to corporate client at SHB will be discussed 1.3.3 Time The case study section of the thesis explore the time period 2013 - 2016, with suggestions for solution of problems can be applied until 2020 1.4 Research Methodology This thesis employs empirical research with in-depth analysis and comparison to establish a thorough understanding and assessment of the quality of financial analysis procedure at SHB Data uses in the study are mainly secondary data, which are extracted from SHB‟s internal data from 2013 to 2016, including year-end reports, financial reports and reports on business results In addition, the thesis also exploits data from external source such as articles from newspaper, reports, academic curriculum, books, other researches and relevant websites history, focusing on dominant interest rate, minimum required reserve ratio, and spreads in exchange rate The application of monetary policy tools is still rigid and disoriented, interest policy remains inflexible Interest rate fluctuates unexpectedly in large scale, difficult to forecast, which make lending activities of commercial banks more risky During the last half of 2008, lending interest rate has reached climax at 21% per year, resulting in increasing finance costs, generating difficulties for businesses to make prompt loan repayment The authorities still interfere with credit operation of commercial banks through administrative orders Economics activities are unstable, economy analysis and forecast are unable to catch up, being far different from reality, which causes businesses‟ lack of initiatives in developing countermeasures The number of commercial banks newly established increased at a fast rate during recent years, in addition to the expansion in chartered capital and network of existing commercial banks, has created huge pressure for SHB to keep existing Large Corporate clients and attract new one It is widely believed that credit information is an extremely important factor for commercial banks and Large Corporate clients However, information supplied from organization in the economy such as VCCI, CIC, VNR 500, etc is rather limited Vietnamese Chamber of Commerce and Industry (VCCI) has not been able to promote its role in providing information, and establish marketing activities to connect large corporations with domestics and overseas market Credit Information Center (CIC) also hasn‟t operated efficiently, since the majority of information supplied by the center is extracted from reports collected from commercial bank, which is subjected to shortage, inaccuracy and neglect of regular updates, this does not provide bank with much support in operation Functional authorities hasn‟t had specific actions on providing information on mechanism, policies, regimes, market information on prices, technology and innovation for Large Corporate clients Mass media communication has greatly contributed to public attitude and fame However, the communication is still heavily focus on displaying negative images, without stating the important roles of large corporation Unsuccessful examples are often blamed on large corporations themselves, not on poor management of state authorities or fierce market competition This attitude of media companies has imposed limitations in exchanging experience amongst large corporations, dampening business activities hence reducing bank‟s lending quality 56 CHAPTER 4: PROPOSED SOLUTIONS TO IMPROVE LENDING TO LARRGE CORPORATE CLIENTS AT SAIGON HANOI COMERCIAL JOIN STOCK BANK (SHB) 4.1 Development direction of Saigon Hanoi Joint Stock Commercial Bank In order to drive SHB to become a modern and multipurpose commercial bank, which is also a leading bank in portfolio diversification in Vietnam, and with the vision until 2020 to become a financial institution with international standard, which possesses modernized technology infrastructure, professional human resource, nationwide and overseas network of branches, in order to deliver synchronized and beneficial products and services to associates and clients at reasonable expenses, high quality service; specific strategies are illustrated as follow: Strategy on Asset and Capital Increase scale of assets with average annual growth rate of 20-22% Increase amount of equity via retained earnings and issuing additional equity that is suitable to asset scale while maintaining capital reserve ratio Strategy on Credit and Investment Credit is the primary business activities, competing under market principle is necessary to be appropriate for each stages of development, with long term orientation and vision on competitive strategy, always make a difference, primary focus on market and clients Adjust for relevant credit structure, suitable with SHB‟s advantage on capital mobilization Establish a risk management system which is synchronized in depth within the entire network, of high quality, efficient and professional, ensuring a safe and sustainable operation Enhancing credit risk control, maintaining bad debt ratio under 3% Diversify credit and investment activities on financial market, maintaining leading and orientation position in the banking system, increase bank‟s efficiency in capital utilization and liquidity management Strategy on service Develop a variety of commissioned service, determine a group of target service in order to focus on development Base on advanced technology to enhance service, consider level of clients satisfaction as primary direction for development Improve products and services, boosting profit from services/ annual total profit on the foundation of advanced and modernized technology Strategy on human resources: 57 Standardize human resources, strengthen on training to enhance skills and capabilities of staff, developing qualified and professional staff Finalize mechanism for labor utilization and salary payment Develop SHB culture to become spiritual factor that is connected throughout the entire system Establish a professional management and human resource training strategy, ensuring a smooth, efficient and continuous operation throughout SHB system as a whole Strategy on technology Consider the application of information technology as a vital element, assisting in every business development activities Construct a synchronized, modernized, and secure information system, which is united – integrated - highly stable Strategy on management mechanism and structure Operate organizational mechanism in a clearly and appropriately decentralized method Establish and develop new subsidiaries with the orientation of providing a full range of financial service products to the market Expand the network of business, introducing new branches, broaden and strengthen the network of transaction offices Extensively promote retail banking system 4.2 Development orientation regards to Large Corporate clients at Saigon - Hanoi Commercial Joint Stock Bank The direction of developing credit activities for Large Corporate clients of SHB is illustrated with the following principle: Develop credit activities for Large Corporate clients from every sectors of the economy, under the principle of fair and equal treatment on credit terms and conditions, methods of loan security, leading towards process and procedure enhancement, shorten the amount of time for loan settlement while maintaining the compliance of law and regulations, and also general development orientation of SHB Maintain credit market share in terms of Large Corporate clients segmentation, compare to total market share of other commercial banks and financial institutions Develop selective credit activities for Large Corporate clients, associate with improving quality of loan, and also attached with better ability to acquire return on investment capital Change mindset in loan investment, in which actively search for, assist and consult businesses on promoting plans/projects and take assessment of the effectiveness of plans/projects as a criteria for lending decision 58 Develop credit activities for Large Corporate clients, ensuring loan structure must be balanced between medium, long term lending and short term lending Finalize lending policy, apply flexible interest rate scheme which guarantees the maintenance of existing clients relationships, at the same time, positively and actively approach new clients and also sustain competitive advantage over other credit institutions Diversify and enhance quality of credit scheme and maximize profit generated from Large Corporate clients market segment Focus on investing and strengthening bank‟s information system, establish a synchronized, modernized and secure information system Continue on promoting product and service diversification with high quality on the condition of modern technology, maintain control over risks, and deliver various utilities and added values to Large Corporate clients Reinforce the information system on Large Corporate clients and internal information Improve quality of human resource in Large Corporate clients Department from the foundation, without increase on quantity but actually decrease on quantity, meanwhile substantially strengthen the quality of human resource Recruiting staff with high professional qualification, foreign language capability, and ability to efficiently consult with clients Establishing standard code of conduct and behavior, communication of credit staff who are in charge of Large Corporate clients Synchronously and professionally deploying marketing activities, introducing the image of SHB in domestic and international market 4.3 Solutions to improve lending to large corporate clients at Saigon - Hanoi Commercial Joint Stock Bank 4.3.1 Improving lending policy for Large Corporate clients Continuously refresh mindset on lending under the principle of commerce and market, and take serious consideration on sustainable efficiency on the basis of risk adjusted profit are the most fundamental requirements in operation process In order to fulfil these requirements, it is necessary to establish and carry out reasonable clients policy which is in line with new situations and conditions Performing suitable, efficient and flexible lending policy for different groups of clients and different needs for credit, which in details is demonstrated below: Firstly, finalize lending policy SHB continue to complete regulation on lending procedure, ensuring synchronization, coalition and flexibility in order to adapt well with changes in economic environment, enhance competitive capability, stimulate healthy development of lending activities, 59 contribute to risk control Lending policy needs to encourage the development of credit activities within geographical regions in which economy are actively promoted, and industries which possess competitive advantages Review and edit contents in Credit procedure manual to ensure relevance to reality Focus on regularly review and accommodate inadequacies and problems on mechanism, increase in authority delegation together enclosed with responsibility to sub branches, which are reasonable to each units‟ qualification, capability and credit activity scale, while improve initiatives in expanding credit activities accompanying with enhancing quality of loan Secondly, rating, selecting clients and developing clients policy In business operation, clients play the determining role in defining the position and development of the bank In order to choose high quality clients, SHB needs to urgently establish a clients policy, introducing credit rating system to become useful tool in credit management, recommend credit behaviors that are suitable with clients‟ status, promptly carry out the clients rating activities following international standard During recent years, SHB has applied a credit rating system and clients classification system to support loan making decision process However, this process has revealed several problems, arise from both external and internal factors, focusing on the following main aspects: (i) business operation data used for credit rating has low level of transparency; (ii) non-financial criteria remains dependent of subjective assessment of credit rating staff; (iii) many standard credit rating scheme based on which to make comparison and rating are out of reach for Large corporation‟s current capabilities in Vietnam; (iv) there has not been any guiding manuals for the credit rating of clients who are results of spin-off, split, merger and acquisition Clients classification, credit ratings are regularly carried out in lending procedure An accurate conduct of clients classification and rating of would enable SHB to establish and accomplish treatment policy for different types of clients, which play an important role in expanding and strengthening lending quality At the same time, clients classification and rating that follow a unified standard, easy to monitor and rally, will ensure SHB to improve quality of internal control process Thirdly, Clients segmentation classification Large corporations usually operate in many different industries and sectors Therefore, in order to expand credit activities for large corporate clients, branches of SHB need to classify clients into market segmentations, capturing the characteristic and demand of each market segmentation and clients groups, so SHB can generate appropriate lending policy for each 60 types of borrower Large corporate clients in commercial sectors usually demand a great amount of mobilized capital, SHB can favor those clients in term of flexible repayment method On the other hand, large corporations operating in export and import sector usually demand large amount of loan in foreign currency and reduction in cost of payment For large corporation in agriculture sector, SHB can associate with local authorities to establish lending with incentives to stimulate regional economic development Meanwhile for regular large corporate clients, with substantial transaction amount and highly reputable to SHB, SHB can choose to reduce interest rate margin, provide some services and benefits without any charge, etc., in order to encourage those clients to employ SHB‟s whole service package more and more, assuring overall benefit for both bank and business in dual relationship This requires bank staff to be equipped with general knowledge on marketing and market, skillful and professional, flexible handling and excellent performance will enable SHB to establish appropriate lending policy for different groups of clients, improving lending quality Fourth, establishing lending procedure for Large and strategic corporate clients Lending procedure for large and strategic corporate clients needs to concentrate on a few main aspects as followed: - Increase authority of sub-branches on level of limits imposed on unsecured loan to large corporate clients who fully satisfy the condition for loan without asset secured, so subbranches can take initiative in meeting capital requirement of clients; - Provide incentives on ownership capital requirement in registration for participation in investment project when granting medium and long term loan; - Provide incentives on lending interest rates (the level of incentives is proportionate with the result of clients credit rating and the benefits that clients brings to SHB, or can applied a maximum discount of 0.5% per year from the floor lending interest rate that SHB issues in different time period; - Reduce/ eliminate commission fee related to lending as previously stated in banks‟ regulations, apply favorable lending interest rate during each time period for clients; - Deliver cash collection service and payment order without additional charge (satisfy maximum requirement of clients on location, time of collection and payment, transaction currency); - Consider to provide discount on fee when clients transfer capital from other credit institutions to SHB - On the other hand for clients who are strategic partners with comprehensive agreement on cooperation, it is necessary to establish better special incentive policies on 61 other products and services, since these are the clients who has already bring substantial benefit to as well as ensuring competitive advantage for SHB, for example: - Take priority in considering capital contribution, capital acquirement of clients, in order for SHB to become strategic investment partner of valuable papers issued by these clients, choose which clients to become SHB‟s strategic partner; - Provide incentives on interest rate, service commission, favorable conditions on opening salary and payment account for bank staff, etc Fifth, take initiative in approaching investment plans, projects of large corporate clients: - SHB needs to continuously approach and expand lending to clients with stable operation conditions, strong financial capabilities, and investment projects belongs to sectors that possess competitive advantages in order to establish a profitable lending structure - SHB needs to initiatively and closely work with large economic group/cooperation, especially those who are strategic partners with comprehensive agreement on coordination with SHB; continue to improve growth of outstanding loan balance, loan amount to the sectors that are currently encouraged by the State such as: lending for the purchase food processing inputs, purchase of agriculture products, etc - SHB remain concentrated on, examine and assess financial capabilities, risk bearing ability, and business prospects in order to generate direction relevant to each large corporate clients On the other hand, for the purpose of centralized operation of each departments, quickly and timely satisfy demands of large corporate clients, SHB needs to enhance professional function and responsibility for Corporate Clients Departments as follow: - Finalize products and services catering large corporation: regarding exist products applied for some units such as electricity payment for Power Corporation, etc., it is necessary to make detail assessment on the performance of the product including quality, operation time, security, rallying the pros and cons, and finalized the product per clients requests From then carry on expanding that product on larger clients scale for example: Vietnam Post and Telecommunication Groups, Vietnam Electricity Group, Coal – mineral Industry Group, Vietnam National Chemical Group, Vietnam Railway Corporation, etc - Quickly complete and efficiently make use of information system on corporate clients In order to improve quality of management and credit strategy, SHB needs to develop information system on the following aspects: - Information and data reflecting operation capability of large corporate clients with respect to industry and market sector of their products and service On the other hand, 62 construct information system that is capable of analyzing data and profitability of each group of clients (regarding to industry such as large corporation in manufacturing, commerce, agriculture, construction, transportation or regarding to competitive ability such as large corporation in monopoly, competing business) Since each lending product has different cost, different advantage, product profitability has help SHB to develop business strategy and make ultimate decision and solution on bank‟s capital assets structure, directing priority in investment strategy on specific groups which assure efficiency and security at the same time Profitability and return analysis in credit relationship associates with storing and empirical analysis of credit risk, appropriate determination of the cost of loan (lending interest rate) are extremely important in order to maintain profitability of the bank and simultaneously improve lending quality - Develop information system to estimate potential risk according to business industry, geographical region, lending method, asset type and also risk arise in clients‟s side from change in legal and regulation - Develop facilities, infrastructure to support storing, extracting and exchanging information in the system internally - Establish regulation on the exploitation, usage and exchange of information within each department, between related departments at head office as well as at branches Head office is responsible for providing branches with information on activities in industries (average profit, return, level of production technology, policy and initiatives, etc.) in order to promote symmetric information - Establish a relationship based on information exchange between SHB and State Bank of Vietnam, other credit institutions, information organizations and judicial authorities in order to timely detect fraud during the lending procedure of business, hence accurately resolve credit - Beside, credit staff need to improve on market research for Large Corporate clients‟ input material, product consumer market, competitive ability of large corporation in domestic and international market, based on which to generate forecast on the influence of changes in the economy on clients‟s business result, then business‟s actual operation status and condition can be accurately evaluated, while better consult clients on revenue management method, ensuring ability for loan repayment to bank 4.3.2 Enhancing quality of staff who are in charge of Large Corporate clients 63 Credit staff is an extremely important labor source in sustaining and developing credit activities for large corporate clients The problem arise is how SHB can establish a team of skillful, qualified and loyal staff, which is sufficient enough to serve large corporations The first solution is to quickly promulgate regulations on standardization of credit staff The necessary requirements for credit staff are to thoroughly understand procedure, mechanism, process and technical know-how on credit profession; to collect and properly process information which is necessary for clients evaluation and loan plan/project evaluation; to thoroughly understand social and economic development policies and initiatives of the nation, of the industry, and of the region that relates to plan, project and business; understand deeply legal documents, State Bank of Vietnam‟s regulation, regulation for other credit institution, and other regulation which relate to credit activities; firmly understand economic and technological information on market relevant to assigned industries and sectors; understand thoroughly methods on financial capabilities analysis, clients evaluation, loan security assets evaluation, project/plan assessment; to be able to establish a monitoring method for borrowing clients Besides, credit staff needs to possess a few personal characteristics and traits such as: honesty, bravery, also develop a professional and logical working style and a sense of urgency 4.3.3 Modernizing bank‟s technology, enhancing credit information quality SHB needs to be equipped with various types of modern computer, payment machine at head office, transaction centers, and transaction points in order to make sure that remittances are carried out quickly and smoothly for clients Modern technology will enable faster and more accurate information collecting and processing activities Moreover, modernizing technology also includes applying state-of-the-art Core banking management software in order to control the entire system in the most effective and logical way Continuously update and invest in developing system such as InternetBanking, PhoneBanking, Homebanking, aiming for higher quality These are high technological services in commercial bank, with various benefits and utility functions, very convenient for large corporate clients who are constantly ask for better service quality Large corporations usually register for InternetBanking application in order to carry out remittances including debt payment, payment for purchase, acquiring outstanding balance information, information on interest rates and exchange rates, etc over the internet and without having to have physical access to a transaction office, this will help to save substantial amount of time and expenses for both bank and clients, hence lending quality is enhanced 64 Credit information has huge influence on the quality of lending activities This is a limitation of SHB, in which credit information quality remains low Therefore SHB needs to focus on improving credit information efficiency, develop its credit information system to sufficient level with its operation scale in banking system, via several methods SHB needs to develop a fast and simple information transmission system, connecting through the entire system and to credit information center, other information system of State Bank, Ministry of Industry and Trade, etc., in order to retrieve a variety source of updated and accurate information Information must be classified in terms of industries, sectors, subjects, etc., so as to establish a logical information system that supports staff on searching for information quickly, easily and conveniently 4.3.4 Develop marketing activities for Large Corporate clients Marketing activities is extremely useful in credit activities, however these activities have not received proper attention at SHB For the purpose of developing credit activities or large corporate clients, SHB needs to carry out methods to improve marketing activities efficiently Actively search for clients With relentless competition in financial market, to attract clients, especially Large Corporate clients, bank needs to take initiative in approaching them Because Large Corporate clients with strong financial potential and efficient operation usually are chased by credit institution in marketing activities and are also well taken care of Therefore SHB need to develop attractive and effective policy for Large Corporate clients, in order to stimulate lending activities to this group of clients A direct approach of good clients and efficient business project is a strategic move in expanding market share, reducing credit risk, enhancing quality of lending to large corporate clients This task is not only reserved for credit staff but also must be carried out all over the system, every time and everywhere The most important thing is that bank staff must acknowledge the role of marketing activities, deeply understand bank‟s products and service, so as to carry out marketing activities efficiently During contact with clients when they come to carry out transactions, when participating in events and conferences, bank staff can introduce lending products of SHB to clients, aiming to establish credit relationship between them and SHB However, bank staffs need to carefully choose business with financial capabilities, efficient operation in order to ensure business‟s solvency to bank Enhancing service quality 65 A characteristic of banking service is homogeneity, clients employs a bank‟s service primarily for being satisfy with bank‟s service quality However, it is difficult to accurately quantify service quality, because it depends on the person who provides and also the person who employs that service The most important thing is clients satisfaction, in other words, positive feeling of consumer is the result of the entire bank‟s service process, however usually starts from initial feeling, first impression that bank makes when in contact with clients, to be specific, with tellers and clients relationship staff This moment is decisive in the establishment or alteration of clients‟s impression of the bank, which is referred to as “the moment of truth” This moment is “the golden moment” if the team of tellers and credit staff is acknowledged on its importance and a trained to leave a good impression in clients‟ mind Reputation of a bank is influenced by word of mouth A person who is provided a good service usually recommend to others people for example, however when the service provided is unsatisfied, that image will spread to 8-12 other people, and these people might spread further to more people Therefore if the bank does not pay attention to service quality for clients, then banks‟ reputation might quickly deteriorate in the market Credit relationship between banks and clients partially relies on the level of clients‟s trust on banks When business is satisfied with service quality of bank, business also tends to better meet bank‟s requirements on capital loan, and strengthening credit relationship with banks In order to establish a good image, SHB needs to always take into account the enhancement of transaction procedure, enhancing staff‟s professionalism, skills and attitude when serving clients Credit staff need to consult with clients on setting up applications, loan secure method, suitable lending method, profitable investment, so as to build trust and friendliness with clients, then contribute to improve lending quality Tellers must possess good communication skills in order to build strong relationship with clients, enhancing SHB‟ reputation in clients‟s mind Organize events, clients conferences for large corporate clients Large Corporate clients are vital parts of the economy as well as banking operation, therefore SHB needs to pay special attention to these group of clients SHB should regularly organize clients conferences for large corporate clients This is a good opportunities for bank to introduce itself to clients and also a good opportunities for bank to better understand clients‟s needs, approaching potential clients SHB needs to provide information and policies on interest rates, fees, service… applied to large corporate clients, also listen and answer all of the questions and queries raised by businesses about credit activities From this foundation, 66 bank can establish practical solution to overcome difficulties and limitations of Large Corporate clients, also formulate better policies for different groups of clients, provide better service, research and deploy new products that meet business‟s demand Diversify bank’s products and services This is also a method that supports the improvement of lending quality Diverse range of products and services is a factor that encourage large corporation to choose bank because they can benefit more from daily transactions and remittance with their partners On the other hand, additional, supportive services and products also finalize bank‟s lending activities In market economy, any businesses who desire to expand also need to take special attention to marketing activities This is also the case for banks, in order to improve efficiency of credit activities, SHB needs to broadcast its image to clients, via direct contact, and quality of service provided to clients In addition, SHB also need to improve marketing activities via mass media communication channels such as press, television, sponsorship of activities that largely influence for example cultural, sport, entertainment events, etc., hence enhancing trustworthiness with clients Solutions for the development of credit activities for large corporation must be carried out in synchronization, and unify so as to perform efficiently However in order for this to become real, it does not only depend on SHB, but also requires support and coordination from related departments, organization such as: government, state bank, authorities, and large corporations 67 CONCLUSION Lending activities of commercial banks in Vietnam in general and SHB in specific hold a crucial role in the survival of banks, being activities that deliver over 80% of bank‟s revenue currently and also in the future In which, Large Corporate clients with their advantages are primarily taken care of by commercial banks, and also being chased and compete for within commercial banks For the past time, SHB has established many solutions to increase lending quality for Large Corporate clients such as completing mechanism, policies, structure, improving labor resource and marketing activities In fact, credit market share in Large Corporate clients sector of SHB is rather stable with increase in loan balance and number of Large Corporate clients, however the speed of growth has slowed down; SHB is still unable to approach Large Corporate clients which are foreign direct investment business, its mobilized capital remains low, insufficient with its scale of operation, especially medium term and long term capital, hence it is incapable of meeting Large Corporate clients‟s demand on medium and long term credit, lending quality for Large Corporate clients is also depressed, bad debt currently is at below average level however there are a great amount of potential risk in the system, especially capital investment in sectors such as: construction, transportation, aquaculture; SHB‟s range of credit products are not diverse, etc., The above limitations arise from different factors such as: from SHB internally (policy and mechanism, management, staff‟s qualification and capabilities, information and technological system, etc.), from Large Corporate clients (financial capabilities, business structure transformation process, etc.), and from economic environment (macroeconomic mechanism, legal system, the market penetration of many commercial banks) The development of credit activities for Large Corporate clients is still constrained Therefore, research and application of practical solution to enhance lending quality for Large Corporate clients is a vital and urgent matters for SHB This thesis has systemized general analysis on Large Corporate clients, lending activities and the role of lending activities for Large Corporate clients of commercial banks in the economy With specific examples, this thesis has evaluated the actual status of credit activities and the development of credit activities at SHB Vietnam for Large Corporate clients during the past time, , then analyzed the limitations in the expansion of credit activities of SHB Vietnam for large corporation and its reasons On the foundation of which, the thesis has 68 suggested several practical solutions on enhancing lending quality for Large Corporate clients at SHB However Saigon- Hanoi commercial joint stock bank as well as other business, operating in a very diverse and active business environment, which generates many opportunities but also difficulties and increasing competitive pressure amongst businesses Meanwhile, general control and management of current economy still has inadequacy, unable to follow market movement, many macroeconomic policies remain passive and indecisive in operation, which largely influence the operation of businesses in general and the enhancement of credit activities for Large Corporate clients of SHB in specific Therefore, for the aforementioned solutions to perform effectively, favorable conditions on policies and mechanism must be established by authorities and State bank This thesis is still narrow in knowledge; therefore it required much further research in depth The author hopes to receive more contribution and feedbacks from researchers, scientist and authorities in order to finalize the thesis 69 REFERENCES I Vietnamese references Banking and credit institutions laws no 47/2010/QH12 published on 16/06/2010 Bui Cong Nam (2009), Expanding Consumer Loans at Saigon - Hanoi Commercial Joint Stock Bank (SHB), Journal of Economic Management Circular 39/2016/TT-NHNN dated 30/12/2016 of State Bank of Vietnam Credit activity report from 2013 – 2016 of SHB Decision No 2444/2016/QĐ-TGĐ dated 15/11/2016 on determining the segmentation of corporate clients at In Saigon – Hanoi Commercial Joint Stock Bank Decree No 56/2009/NĐ-CP dated 30/6/2009 of the Government Enterprise Law No 68/2014/QH13 of the National Assembly of the Socialist Republic of Vietnam National Assembly, 2005, Law on E-Transactions of Vietnam Nguyen Cao Van & Tran Thai Ninh (2009), Curriculum of theory of mathematical probability and statistics, National Economics University Publishing House 10 Nguyen Hoang Ha (2011), Developing non-credit banking services for individual clients at Saigon- Hanoi Branch Chuong Duong, thesis in economics, Banking University -HaNoi City 11 Nguyen Mai Lan (2012), “Extending lending activities at SHB Hai Phong branch", thesis in economics, Banking University -HaNoi City 12 Nguyen Minh Tuan (2012), “Improving credit quality for small and medium enterprises in Saigon - Hanoi Commercial Joint Stock Bank - Hai Phong Branch”, Journal of Banking, Issue 12 (2012), pp 5-10 13 Phan Chi Anh et al (2013), Study of service quality assessment models, VNU Journal of Science, Economics & Business, Vol 29, Issue (2013), pp 11-22 14 Prime Minister (2006), Scheme on Development of Vietnam's Banking Sector up to 2010 and Orientations toward 2020 (issued together with the Prime Minister's Decision No 112/2006/QD-TTg of May 24th, 2006) II Websites https://vi.wikipedia.org – Digital Encyclopedia http://www.vecita.gov.vn – Ministry of Industry and Trade of Vietnam www.shb.com - Saigon – Hanoi Commercial Joint Stock Bank www.sbv.gov.vn - State Bank of Vietnam 70 ... to Large Corporate clients at Saigon Hanoi Commercial Joint Stock Bank 36 3.2.1 The policy of lending to Large Corporate clients at Saigon Hanoi Commercial Joint Stock Bank ... orientation regards to Large Corporate clients at Saigon - Hanoi Commercial Joint Stock Bank 58 4.3 Solutions to improve lending to large corporate clients at Saigon - Hanoi Commercial. .. of lending to Large Corporate clients at Saigon Hanoi Commercial Joint Stock Bank 3.2.3.1 Outstanding loan balances of Large Corporate clients Credit activities for large corporate clients at