The bar chart represents the change in the proportion of term deposit and demand deposit under ACB Thang Long branch from 2009 to 2011.
The main feature of this graph is that term deposit always makes up the greatest proportion in total mobilized capital. On the contrary, demand deposit accounted for much lower rate, at 10%. Nevertheless, demand deposit witnessed an upward trend from roughly 7% to nearly 15% between 2009 and 2011. Referring to 2011 Vietnamese situation which was unstable and had high inflation, customers are definitely more
likely to take demand deposit which gives them the right to withdraw money at any time rather than term deposit. Safer for customers to ensure the value of the money and avoid the wildly fluctuation of market leads customers’ habits change years by years.
1.2.2. Lending activities
Lending is inevitable one of the most important part to commercial bank’s business performance. How well a lender performs in fulfilling the lending functions has a great deal to do with the economic health of its region because loans, no doubt, support the growth of new business and then create more jobs for local people, developing economy. Whether lending is risky or not, it still proves to be the most profitable part of the bank.
Table 4.2: ABC Thang Long branch’s total outstanding loan structure Unit: billion VND
No Indicators 2009 % 2010 % 2011 %
Total outstanding loan
1,907 100% 2,243 100% 2,119 100%
1 Classification by term of loan
a Short term 484 25.40% 621 27.71% 488 23.04%
b Medium term 518 27.15% 373 16.62% 506 23.89%
c Long term 905 47.45% 1,249 55.68% 1,125 53.08%
2 Classification by types of currency
a VND 1,799 94.36% 2,109 94.01% 2,064 97.41%
b Foreign currency 108 5.64% 134 5.99% 55 2.59%
c Gold 0 0.00% 0 0.00% 0 0.00%
3 Classification by types of customers
3.1 Individual customers
389 20.38% 516 23.01% 527 24.86%
3.2 Enterprise customers
1,518 79.62% 1,727 76.99% 1,592 75.14%
a State- owned
Corporation
924 60.86% 1,036 59.99% 892 56.01%
b Limited Company, 370 24.40% 355 20.55% 273 17.16%
Big JSC with revenue > 400 billion c Limited Company,
Big JSC with revenue <400 billion
170 11.22% 308 17.86% 402 25.25%
d Private Company 53 3.52% 28 1.60% 25 1.57%
(Source: ACB Thang Long branch’s internal source)
The table illustrates how the total outstanding loan changed in three years from 2009 to 2011. Firstly, an increase in total loan by almost 18% to 2,243 billion VND in 2010 shows a good point to the bank. However, right after that, 2011 witnessed a marginal drop by almost 6% to only 2,119 VND billion. Contradicted to the expectation of increasing total outstanding loan, total loan in ACB Thang Long branch reduced and thus really caused a concern. There is mounting evidence that ACB has lost a number of customers due to its policy in lending or ineffective credit procedure.
However, it is undoubted true that total mobilized capital is also the convincing reason.
As is mentioned in the previous part, total mobilized capital in 2011 was also lower than that in 2010; as a consequence, the loan sales must need to reduce in order to match with the situation.
When it comes to loan classification based on term, total outstanding loan is divided into 3 groups. In general, the main characteristic is a slight decrease in short term loan which is contradicted to a rise in both medium and long term loan.
Theoretically, higher proportion of long term loan means greater risk for banks.
Fortunately, this one was realistically consistent with SBV’s policy which aims to support economic activities. Apparently, long term loan was mostly for enterprises’
long term investing or purchasing of infrastructure or building factories meanwhile medium and short term loan was more preferable among individual customers.
Regarding type of currency which was used in lending, the vast majority was in VND. Foreign currency proportion went up and down around 5% meanwhile no loan is made in Gold, suggesting SBV’ policy in gold lending applied strictly in ACB Thang Long branch.
Despite ACB is the retail bank when individual customer is considered as the main target, ACB Thang Long branch showed a significant percentage of enterprise customers, making up for about 75%. It lies in the fact that each loan made by enterprise has much higher scale than one made by individuals. Also, the location of ACB Thang Long branch which is close to numerous nearby enterprises enables them to easily access to customers.
Last but not least, state-owned Corporation was really a big customer to this branch. Although a marginal decline was showed over time, this rate still came top in three years in comparison with the other types of enterprises.
1.2.3. General business result
Table 4.3: Pretax profit at ACB Thang Long branch Unit: VND million
Indicator 2009 2010 2011
Pretax profits 40,498 52,978 66,004
Change 30.82% 24.59%
(Source: ACB Thang Long branch’s internal source)
As is seen, the recorded period recorded a soar in pretax profits at ACB Thang Long branch. Admittedly, there were several existent problems under mobilized and lending activities but pretax profits seems to be still as good as expected, keeping increase sharply by more than 20% annually. All in all, from 2012 onwards, the tasks for the branch are fair heavy but also very potential with the expected recovery of global economy in general and Vietnam’ economy in particular.
2. Evaluating lending quality for SMEs at ACB Thang Long branch
2.1. The importance of lending for SMEs
Table 4.4: The importance of lending for SMEs at ACB Thang Long branch
Unit: VND million
No Indicator 2009 2010 2011 1 Loan to SMEs 288,397 336,096 427,253 2 Total outstanding loan 1,906,553 2,243,371 2,119,284
% Loan to SMEs/ Total outstanding loan 15.13% 14.98% 20.16%
3 Loan to enterprise customers 1,517,997 1,727,128 1,592,498
% Loan to SMEs/ Loan to enterprise customers
19.00% 19.46% 26.83%
Source: ACB Thang Long branch’s internal source
The most obvious point to note from the table, without doubt, is the significant value of loan for SMEs to ACB Thang Long branch. It was shown that more than 15%
of total outstanding loan was used for SMEs in 2009. The rate then experienced an upward trend, increasing to a fifth in 2011. Furthermore, in total loan to enterprise, it accounted for massive 30% by 2011. Hence, lending quality for SMEs undeniably plays as so essential part that it needs a great deal of care to achieve the least risk.
2.2. Structure of outstanding loan for SMEs