A study on the enhancement of personal loans quality at Vietnam International Joint - Stock Commercial Bank – Hai Ba Trung Branch

Nowadays, as a developed society, people''s lives are Increasing, accompanied by significant improvement of human beinøs in manufacturing secfors such as science and technoloøy, transportation, home appliances. Thank that, demand for capifal use of people and businesses that have pushed to the maximum. Along with the burgeoning of commodity production, the commercial banking sysfem 1s expanding while confirming 1fs vifal role in the economy and finance. In parficular, credit activify 1s considered the foundation of the entire banking Indusfry, accounting for a large proportion of the bank''s tofal assets profitably. After experlencing many periods of hardship from world economic crises such as the 1997 Asian financial crisis, 200§ world financial crisis; Now, the banking markets of many countries, include Vietnams banking system, have been dramatically reformed and arranged In a new order. By multi-secfor restrucfuring acfivities, they have succeeded In improving their quality and diversifying product Items. In specific, the credit products for the individual customer seøment evaluate as one of the hiøgh potential products which have a vibrant market, with the pArficipatlon of most commercial banks. In line with McKinsey''s forecasfs (2020), Asia would reach more than $900 billion ¡1n retail banking revenue, with an average ørowth rate of 14% per year by the end of 2020. Of course, the retail banking market in Vietnam wIll catch up with the øeneral trend of the world, and the potential for personal lending ¡n the fufure 1s enormous. Due to Le Thi Anh Quyen''s (2020) report, personal loans account for 60- 709% of total loan sales (at VIB or Agribank ) and are ørowing higher and higher. However, the ørowth rate of customer loans in the banking system still had a strong differentiation. Some banks had negative ørowth, while another bank had a growth rate of over 10%, as Indicated 1n diagram I.1. Overall, the consequence that bankers are flush with cash.

Studenf : Vu Thi Thu Van

Graditafion TÌiesiS Banking 4cadeIny

CERTIEICATE OEF ORIGINALITY

I would like to reassure that my øraduation thesis 1s conducted by myself with the support of the Instructor and do not copy the research works of others The secondary Information dafa used in the article 1s sourced and explicitly cited

Itake full responsIbility for this certlficate of originality!

ACKNOWLEDGEMEXNIS

I would like to express my deep and sincere øratitude to my supervisor, Ms Pham Thị Hoang Anh (Assoc Prof PhD), for helping me in the process of the research and providing ¡nvaluable guidance throughout my research Ms Hoang Anh has made a suitable sugøestion and detailed commenfs to make my article as complete as possible It was a øreaf privilèe and honor to work under her guidance

I also take Immense pleasure in thanking all of my teacher in Foreign Languàe Faculty at Banking Academy for their compensation and expensive lessons during the past 4 years of study

Finally, my special thanks are extended to Vietnam International Joint-Stock Commercial Bank — Hai Ba Trung Branch Especially, the Board of Directors of the bank has expedited me to go to the practice and enthusiastically supported me during the training period At the same time, I would like to thank the staff working

In the personal client room for enthusiastically helping and facilitating me during the training process at the branch

Sfidenf: VmTĩn Tĩnt Van H Sfudenf ID: 2017510201

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TABLE OEF CONTENT

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1.5 Scope and limifation of the SfUỦY ác St xSnn ru 5 ISWNEn i00 2 5

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CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK ?7

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2.2.1 Theoretical Background of Personal Loans at Commercial Bank 9

2.2.2 Theoretical Background of Personal Loans QuaÏity + «~++- 14

CHAPIER 3: PROCEDURE OFE SECONDARY DATA COLLECTION AND ANALYSIS/ RESEARCH METHODOLOGY + 5+ + St svxeeveeeeereeee 20 kNNPuv lồi là mẽ 20

3.2 Research design/ methoclOlÒV .- - - - + Sc 22 2x vn ng ng 21 K00 0002 21

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K60 300i 5 21

3.3 Sources of Secondary ÏDafa - -: - c cv vs x HH ng rrêc 24

3.4 Validity and Reliability of data analySIS -Ă S series 24

Sfidenf: VmTĩn Tĩnt Van II Sfudenf ID: 2017510201

3.5 Self Reflectlon on Secondary Data Collection AnalyS1S . - 25 CHAPTER 4: FINDINGS AND DISCUSSION cà cieieieirree 27 4.1 Findinøgs and Discussion of the business operations at VIB Hai Ba Trung

Branch for three years (201§-2020) . ¿5c 232121 *E +23 rrsrrrrrrkerkerkrrkrrerree 27

4.1.1 Business Results of VIB Hai Ba Trung Branch from 2018 to 2020 28 1U 9) 00/0000 00000 31 4.1.3 Outstanding OaINS .- + tt vn TT HH TT nhe 35 4.1.4 Indicator reflecting the quality of business aCfIVIfIeS -.- 39 4.2 Findinøs and Discussion of øeneral assessmenf on Personal Credit AcfIvifies at 1; ; 8 47

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AC on Š .Ả 4§ 4.2.3 Main causes limiting personal loans quaÏIfV - ¿+ s+<+xs+s+xs+xsxss2 49

“6tu9 0n ỞỎ 52 CHAPTER Š: CƠNCLUSION AND RECOMMENDATION 53 5.1 Orlenfation for enhancing personal loans quality at VIB Hai Ba Trung Branch

08001 505y1:0920530922 01101 353 5.2 SolutIlons for enhancing personal loans quality at VIB Hai Ba Trung Branch S6 5.2.1 Product developmenf SỌufIOIS .- 65-5 5+ St S+SvsvEererrerrrrrrrrrrrrree 56 5.2.2 Solutlons fo Improve credIf quaÌIfV -‹s-ccsxsxxsnisereixrrrrrrrrrrrrrrrree 57

5.2.3 Human resource development SoÏufIOIS ¿5255252 s+* sex 59

5.2.4 Solutlons to enhancing technologøy InÍrastruCfure - 55s s+ss+xsxss+ 60 5.2.5 Solutlons to broaden customer relations and marketing acfIVIfIes 60

=NC dung ha 62 5.3.1 Recommendations to The Goverment and The State Bank of Vietnam 62

Š.3.2 Recommendation to The head office of Vietnam International Joint Stock

0n 2v0/10805.0) T1 64

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LIST OEF ABBREVLATIONS

KPIs Key Performance Indicators

ITME International Monefary Fund

UNCTAD United Nations Conference on Trade and Development

EFDI Foreign Direct Investment

WTO World Trade Organization

ILO International Labour OrganizatIlon

OCB OricomBank

ACB A Chau Joint-Stock Commercial Bank

CIE Customer Information Files

CIC Credit Information Center

SBV State Bank of Vietnam

VND Viet Nam Dong

LIST OE TABLES

Table 4.1: VIB Hai Ba Trungˆs Outstanding Loans based on Page: 37

customer types from 2018 to 2020

Table 4.2: Loss Loan Provision of VIB Hai Ba Trung over the Page: 42

vears (2018-2020)

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LIST OE EIGURES

Diagram 1.1: The proportion of personal credit ørowth of banks In Pàe: 2

2020

Diagram 1.2: Lowest Personal Loans IR in 12/2020 Page: 4

Diagram 1.3: Credit Granting Process Page: l3

Diagram 4.1: Total Operating Income of VIB Hai Ba Trung (2018- Page: 28

2020)

Diagøram 4.2: Total Mobilized Capital of VIB Page: 32 Diagram 4.3: Mobilized Capital based on customer types Page: 34 Diagram 4.4: Total Outstanding Loans of VIB Hai Ba Trung Branch Page: 36 (2018-2020)

Diagram 4.5: VIB Hai Ba Trung ˆs Oufstanding Loans based on Page: 38

customer types from 2018 to 2020

Diàram 4.6: NPLs and Overdue Debt Ratio of VIB — Hai Ba Trung Pàe: 40 Branch In period 2018 — 2020

Diagram 4.7: Customer survey results on the abilify to meet theneeds Page: 43

of customer at the HBT Branch

Diagram 4.8: Customer survey results on the safety of credit Page: 44 transactlons at VIB HBT

Diagøram 4.9: Customer survey results on utilitles of products Pagøe: 45 Diagram 4.10: Customer survey results on satisfaction with the service l p„gẹ: age: 46 attitude of employees

ABSTREACT

It is undeniable that personal credif is a very pofenf type of service, promising

to bring øreat profifs to commercial banks Accordingly, enhancing personal loans has become a priority goal of the entire financial industry in the context of fIercely competitive markets The thesis "A STUDY ƠON THE ENHANCEMENT OF PERSONAL LOANS QUALITY AT VIETNAM INIERNATIONAL IOINT- STOCK COMMERCIAL BANK - HAI BA TRUNG BRANCH" will shed light on Issues related to personal credit development at VIB This includes an overview of credit operations 1n Individual customer seøments and business efficlency At the same time, the thesis aims to analyze the lending situation of VIB Hai Ba Trung while following retail model banks and find their current weakness and lending Finally, to come up with some solutions fo attract customers among this animated market In addition, the author also made several recommendations to the

Government, State bank of Vietnam, and Head Office of VIB to contribute to the

evolution of personal loan quality at commercial banks in øeneral and VIB Hai Ba Trung In particular

Sfidenf: VmTĩn Tĩnt Van VII Sfudenf ID: 2017510201

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CHAPTER 1: NLRODUCTION 1.1.Infroducfion

Nowadays, as a developed society, people's lives are Increasing, accompanied

by significant improvement of human beinøs in manufacturing secfors such as science and technolòy, transportation, home appliances Thank that, demand for capifal use of people and businesses that have pushed to the maximum

Along with the burgeoning of commodity production, the commercial banking sysfem 1s expanding while confirming 1fs vifal role in the economy and finance In parficular, credit activify 1s considered the foundation of the entire banking Indusfry, accounting for a large proportion of the bank's tofal assets profitably

After experlencing many periods of hardship from world economic crises such

as the 1997 Asian financial crisis, 200§ world financial crisis; Now, the banking

markets of many countries, include Vietnams banking system, have been

dramatically reformed and arranged In a new order By multi-secfor restrucfuring acfivities, they have succeeded In improving their quality and diversifying product Items In specific, the credit products for the individual customer sèment evaluate

as one of the hiøgh potential products which have a vibrant market, with the pArficipatlon of most commercial banks

In line with McKinsey's forecasfs (2020), Asia would reach more than $900

billion ¡1n retail banking revenue, with an average ørowth rate of 14% per year by the end of 2020 Of course, the retail banking market in Vietnam wIll catch up with the øeneral trend of the world, and the potential for personal lending ¡n the fufure 1s enormous Due to Le Thi Anh Quyen's (2020) report, personal loans account for 60- 709% of total loan sales (at VIB or Agribank ) and are ørowing higher and higher However, the ørowth rate of customer loans in the banking system still had a strong differentiation Some banks had negative ørowth, while another bank had a growth rate of over 10%, as Indicated 1n diagram I.1 Overall, the consequence that bankers

are flush with cash

Điagram 1.1: The proportion of personal credif øgrowfh of banRs in 2020

this animated market

1.2 Backøround of the study

The last in 2020 1s one of the most crisis years of the world economy, including Vietnam COVID 19 pandemic - originating in Wuhan (China) at the end

of 2019 has been causing severe damage fo countrles Its influence pushes the world, countries, and territorles into an economic and medical crisis As a result, many natons íell Into deliberate recession, commerce, social securify, and significantly the economy declined sharply: tourism activitles, festivals, production,

or business Investment also sfalled

Following the IME and World Bank (10/2020), the world economy was

forecasfted to diminish in 2020 (from -Š.29% to -4.43%4) UNCTAD (2020) estimated

ølobal FDI would reduce by about 40% compared to 2019 and resume to fall by Š-

10% in 2020; WTO (10/2020) predicted world trade to decrease by 9.2% In 2020,

Graditafion TÌiesiS Banking 4cadeIny

ølobal inflation was forecasted to be low (1.8-2%%) due to weak demand and lower

oi prices (Can et al., 2020) Otherwise, COVID-I9 also ¡mpacted global employment strongly Under the World Trade Organization report (10/2020), in the second quarter of 2020, total gølobal working hours were decreased by 14%, equivalent to 400 million full-time employees The global Job was fell off even more robust than previously forecast by the ILO (2020) Particularly in Vietnam, this epidemiological shock ¡in 2020 has leff many natural consequences for the

economy Specifically, based on the General Statistics Office (2020), in the Íirst six

months of 2020, the total retail sales of consumer øoods and services decreased by 0.8% over the same period in 2019 and would be even more terrible If the price factor was excluded, at 5.3% (while in the same period in 2019 the Index was

§,5%) Besides, the sale of accommodation services, food, and beveràe services

decreased by I§.1% over the same period in 2019; Travel tourism revenue fell by

53.2% - this was the two-sector most severely affected by the COVID-19 epidemic due to the implemenfation of social distancing measures (Nguyen, 2020)

What should the bank do when facing those difficulties?

The subsfantial damage causes soclety in øeneral, the whole banking industry, and those who need to borrow money from the bank, in particular, have to face many difficultles However, dealing with such problems and challenges posed by the SARS-CoV-I pandemic, commercial banks are determined to recover by offeringø many coping solutions such as lowering the prime infteresf rate and taking preferential interest for businesses that suffered heavy losses, extending monthly Interest payment fo stimulate credit demand Especially, bankers have promoted personal credit activites and followed retail banking orlentation As shown in diagram 1.2, the personal loan interest rates of banks plummeted in December 2020 This TR 1s the lowest Interest rate cut in the last four years of financial markets, culminating in OCB bank reducing lending rates to only 4.993%% Consumer loans that are popular today are real estate loans, car loans, consumer loans, home repalr loans, and certain types of surety, personal guarantees The scale and number of Individual customer services are more plentiful and diverse than ever

Diagram 1.2: Lowesf Personal Loans IR in 12/2020

1.3.Objecfive

The prerequisie goal of this study ¡is to evaluate the quality of credit Operaflons, to put forward some practical assessmenfs of credit operatlons of commercial banks, particularly the personal one, based on 1fs rationale

Also, the next goal 1s to analyze the status of individual customer loans at VIB Hai Ba Trung Branch, based on which determines the results, advantages and disadvantages available and the reasons that limit the development of lending to

individual customers

Einally, proposing and offering solutions and tools to support the Improvement

of the personal loans quality at Vietnam International Joint-Stock Commercial Banks

1.4 Siønificance of the study

Up to now, Vietnam's population 1s approximately 97.5§ million people, and this filgure 1s sfill rising Such means that the demand for bank loans to serve peoples daily lives 1s becoming a modern trend Therefore, this market naturally becomes a delicious piece of cake for banks to fea

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Not to miss this fertile segment, for many years, VIB Hai Ba Trung Branch has constantly self-consciously Improved the quality of credit services and the entire types of services available at the branch Their goal 1s to provide the best service eXperience for every customer, achieve the objectives effectively, and make VIB the best retail bank in Vietnam Hence, the author decides to write about this †opIc while being an intern here By comprehensively systematizing the related content and the analyzed theoretical bases, the thesis aims to dissect and evaluate the result

of personal credit activitles at the branch, thereby proposing some clarIficafions to enhance quality

In conclusion, not only do the banks take benefit from the thesis, but also other researchers do The author Intends to use her work as valuable secondary data by providing exact Information ¡in detail, with the overall aim of completing the banking apparafus as well as personal loans service

1.5.Scope and limifafion of the study

1.5.1 Limifafion of the síudy

The banking and financial system 1s a vast category with many related topics However, ¡in this thesis, the author will only limit the scope to learn to revolve around the credit sector, namely personal credit, to help reader overview the credif Indusfry

1.5.2 Scope ø0ffhe síudy

Personal customer credit activitles at Vietnam Internatlonal Joint-Stock

Commercial Banks — Hai Ba Trung Branch period of 2018-2020

1.6 Definifion of ferms

There are plenty of key words related to the topic which will exist within the study Below are some definitions of them moreover as relevant theoretical content Bank Credit refers to the number of credit avallable to a business or individual from a banking institution within the varlety of loans Bank credit,

therefore, 1s that the total amount of cash an individual or business can borrow from

a bank or other establishment A borrower's bank credit depends on thetr ability to

repay any loans and therefore the total amount of credit available to lend by the

banking Institution Varletles of bank credit include car loans, personal loans, and

mortgages (Khartit, 2020)

Commercial Bank refers to a Íinancial organization that accepts deposits,

offer bank account services, making varlous loans, and offers basic financial

products like certificates of deposit (CDs) and saving accounts to individuals and litle businesses A commerclal bank ¡s where the majorlty do their banking

(Anderson, 2021)

Personal Loans is an amount of cash which individuals and households can borrow fo use for a range of purposes For example, clients may use a privafe fo consolidate debt, procure home renovations, or plan a dream wedding Personal loans 1s offered by banks, credit unions, or online lenders The money they borrow must be repaid over time, typically with interest Some lenders might also charge

fees for privafte loans (Lake, 2021)

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CHAPTER 2: LIIERATURE REVIEW AND THEORETICAL

thesis, which can be menfioned as:

Graduation thesis: "Solution to improve the quality of personal credif acfIvifles

at Natlonal Citizen Joint Stock Commercial Bank - Hanoi Branch" by Phung Huong

Ly (2014) The essay had pointed out some backlog ¡ssues such as limitations In the selection of credit reciplents, thereby proposing many recommendations to the Government, the State, and the Head Office of NCB, to offer solutlons Improving the quality of personal credit operations at National CItIzen Commercial Joint Stock Bank - Hanoi branch Besides that, the author reflected the development orIentation

of the whole banking industrys consumer lending activities in the coming time by analyzing and assessing the quality of personal loans at the NCB - Hanoi branch The thesis had approached the topic from many different angles through research methods such as data collection methods, comparison methods, analysis methods, and synthesis methods

Master thesis: "Development of lending to individual customers at Vietnam Technological and Commercial Joint Stock Bank" by Nguyen Anh Duc (2015) aimed to help systematize the fundamental theoretical bases of credit activifles af commercial banks, analyze the factors affecting the development of this lending secfor includes subjective factors and obJective factors, thereby proposing solutions

to development problems The author flexibly applied various methods during the study period, such as sfatistical methods, comparison, synthesis, and incredibly

expert methods He also ¡nterviewed banking experfs fo Increase the credibility of

the theS15

Research by author Tran Thi Hong Nhung (2017) had outlined the necessify to enhance the quality of credit for individual customers based on an analysis of the relatlonship between credit risk and credit quality In addition, the author had summarized some experlences of several Vietnamese retail banks In promofting credit quality, thereby pointing out the existing advanfages and disadvantàges of Asian banks and the whole banking ¡industry At the same time, she proposed supporting tools to develop loan quality Moreover, the thesis pointed out some unsolved problems at ACB ¡in detail, which could be mentioned that product regulations were quite loose, lax: lack of evaluation In the bank's appraisal stàe to achieve credit ørowth target

The thesis "Solutlon to expand retail credit activiles at the Joint Stock Commercial Bank for Investment and Development of Vietnam Hong Ha Branch"

by Nguyen Thị Le Thu (201§) gave directions to expand reftail credit actIvitles by completing the retail credit process towards efficiency, savinø processing time as well as simplifying the credit extension process Besides, another direction was promoting Investment and technology development to catch up with the 4.0 era The author flexibly applied methods of invesfigatlon, synthesis, sfafIsfics, comparIson Masters thesis: "Improving the efficlency of lending to individual customers

at the Joint Stock Commerclal Bank for Foreign Trade of Vietnam - Hoan Kiem branch" by Pham Thị Hai Yen (2019) This thesis specifically researched the efficiency of lending activitles at the Joint Stock Commercial Bank for Foreign Trade of Vietnam, thereby verifying that lending activitles shall go towards sfable ørowth to achieve hiph efficlency The thesis had pointed out some practical solutlons suitable to the current market situatlon, such as updating customer and collateral appraIsal, enhancing ¡nternal inspection and confrol at branches , etc

In addition, there are many other studies interesfed ¡n this credif 1ssue, such as

research by author Vo Hoang Yen (2015) research by Nguyen Thị Van Anh (2013),

or Nguyen The Dung (2013)

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However, due to the difference ¡in time, banking environment, and other sublective reasons, the above studies have not dissolved and estimated each bank's

current sfatus and Indicators wholly and accurately As a result, the most suitable

and practical solutions have yet to be found out Therefore, the research of these individual customer credif activifles should be done confinuously to be consistent and effective with reality Based on the leøgacy of existing values, this thesiIs

continues to delve Into the ¡ssue and come up with advanced, systematic, and

seamless solutIons

2.2 Theorefical ramework

2.2.1 Theoretical Background of Personal Loans at Commercial Bank

2.2.1.1 Definifion of Commercial Bank

A commercial bank 1s a financial Instiftution that performs the functlons of accepting deposits from the øeneral public and øiving loans to people in need only

to earn profit A bank is a finance trade and commerce with short, middle, and long- term loans Thetr business principles typically charge a higher rate of Interest from the borrowers than the rate of interest that they must pay to their depositors, with the result that the difference between the two rates of interest becomes the prImary source of profit of the banks Commercial Banking is an Intermediary financial Institutlon that provides financial services, Including receiving deposifs and lending money, payments, and other financial services (Mishkin, 2001)

According to the law of credit institutlons 1m Vietnam 2010 “Credift Institution means an enterprise performing one, several or all banking activites Credif Institutlons include banks, non-bank credif institutlons, microfinance Insfitutions, and people's credit fund”: “Commmercial bank 1s a type of bank which can conduct all banking activitles and other business activitles following this Law for profit

pUuTpOSe€S `

In general, the bank 1s a financial Institution that offers the most diverse portfolio of financial services — especially credif, savings, and payment services — and performs a speciÍic range of financial functions than any other business Orøanization in the economy (Peter S Rose, 2004)

In conclusion, commercial banks are one of the financial Insfiftutlons with the

essential characferistics of providing varilous financial services, trading ¡n legal credit currency, including mobilizing capital, credit øranting, foreign exchange, efc Credit extension 1s considered a "darling" of the bank because of the enormous profits it brinøs back Moreover, commercial banks also provide plenty of monetary and credit services to satisfy the maximum demand for producfs and services of the SOCI€TV

2.2.1.2 Definifions of Personal Loans

Personal credit 1s understood as the relationship of borrowing property from each other on the principle of repayment of principal and interest affer a specific tune Between credit issuers being commercial banks, financial institutlons, and

credit takers are Individual customers., business households

According to the Law on Vietnam Credit Institutlons 2010, “personal credif 1s

a type of credit in which commercial banks act as the transfer of the righf to use the capifal to individual customers or households to exercise for liíe serving, production, and business in the form of individual business households Both prIncipal and 1mterest must be returned 1m a certain time”

Furthermore, personal credit 1s: “the temporary transfer of a quantity of value

†rom CBs (owners) to borrowers (users) drunk for a cerfain period returns to CBs

with a value greater than the original amount of value.” (Commercial Banking Professional Textbook — Thang Long Ủniversity)

Loan actIvify 1s a primary credif activity that any bank must have, especially personal loans, which 1s becoming a trend nowadays Accordingly, this activify will take place under the àgreement of the two partles without any pressure Such agreement Includes loan terms and interest rates, loan purposes, collateral (1f any), and proof of collectlon and repayment Also, customers will be øiven the option to disburse in 2 ways: cash disbursement or disbursement via account If they choose

to disburse via an account, they must have a credit account opened at the borrowing bank After receiving the disbursement, customers must use the money for the exemplary purposes as commiftfed with the bank, such as buying a house, building

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and repairing a house, buying a new car for consumption, doing business, or receiving the transfer of houses and apartments

2.2.1.3 Types of Personal Loans

“Personal loans may be secured or unsecured A secured personal loan requires some collateral as a condition of borrowing For instance, you may secure a personal loan with cash assets, such as a savings accountf or certificate of deposif (CD), or with a physical asset, such as your car or boat If you default on the loan,

the lender could keep your collateral to satisfy the debt An unsecured personal loan

requires no collateral to borrow money Banks, credit unions, and online lenders can offer secure and unsecured personal loans to qualified borrowers Banks øenerally consider the latter to be riskier than the former, as there is no collateral to collect That can mean paying a higher 1nterest rate for a personal loan “(Lake 2021)

Moreover, ¡n this study, the author will divide loans Into fwo mains øroups that are oufstanding loans and overdue loans An outstanding loan 1s an amount of money that the clients borrow from a commercial bank In simple terms, an oufstanding loan 1s a type of loan that the customer has not paid off vet and ¡s still in the repayment period Customers are supposed to pay the debt, including Interesf and principal payments, to the bank on time and complete the agreement signed Besides, this Index helps financial experfs analyze the efficlency of the Investment

2.2.1.4 Characferisfics of Personal Loans

q, Broad scope of activities

for consumer life, build and repalr houses, or small business production Therefore, the value of these loans 1s usually much lower and smaller than the available capital

of banks However, unlike loans to businesses and economic organizatlons, the number of individual loans 1s vast due to the diverse needs of all people nowadays, especially when bank loans are becoming more popular and obtainable Although the scale of credit provision 1s not large, 1ts effecfiveness 1s very remarkable

b, Dhnerse and hiehi efficienf prodhicts

The birth of any product ¡s aimed at satisfving customers' needs Personal credit products are no exception, especially when the essential requirements of

customers become more and more abundant Foreseeing that trend, commercial

banks have quickly designed and launched a variety of products to satisfy customers As a result, they have achieved high loan efficlency and brought in huge profits

c.Stable Interest Rate

The Interest rate of personal loans ¡s not affected much by market interest rafes, so If 1s usually more stable than corporate ones Usually, the interest rate fix

by agreement from the start and will not change until the maturity of the short-term loan For medium and long-term loans, the bank will have a preferential interesf rate for the first six - months The following months will adJusf to a certain amplitude

d| Brimơing q hieh level of risẴ

However, this retail activity also has many potential risks relatve to the number of profits it brings Due fo some complicated reasons, the Information provided by the customer ¡1s offen Inaccurate Pleces of information related to Careers, social Insurance, or income sources to pay debts are subJective because they are only provided one way from customers and not closely audited and assessed

Besides, the source of the customer to repay debt 1s not stable due to many factors

A typical example 1s a household that has a business loan Because this ¡s a small business, people do not have much producftion experience plus outdated technology, leading to the inability to compete ¡n the market As a result, the bank will face the

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risk of when the customer øoes bankrupt, along with other risks such as unemployment, accident, death

2.2.1.5 Credit Granfing Process

*How a Personal Loan Works: (In Customer Term)

“To get a personal loan you need to apply to a lender Agam this can be a

bank, credit union, or online personal loan lender

Generally, you would first complete an application The lender reviews 1t and decides whether to approve or deny 1t If approved, you will be given the loan terms, which you can accept or reject If you agree to them, the next step 1s finalizing your loan paperwork

Once that has been done, the lender will fund the loan, which means payIng the proceeds to you Depending on the lender, this may be done through a direct deposit Into your bank account or a check After the loan 1s funded, you can use the money as you see fit You then have to begin repaying the loan according to the

terms established 1n your loan agreement “(Lake, 202 I)

*How a Personal Loan Works: (In Bank Term)

DĐiagram 2.1: Credit( Granfing Process

- PL Selling:

In this step, the sales management searches for new customers, exploits eXisting customers as planned, and sales strategy Then, they start to advise products and prices through ¡nterest rate table If the customer agrees with the terms, sale manàgement would advise loan applications and collect loan documents, CTF

- P2 Credit Proposal, Appraisal and Approvadl:

After gathering the necessary documentfs, the banker needs to assesS Custoimers and stakeholders through checking CTIF sfatus, CIC credit history, prohibited or restricted, blacklist customer; scoring Internal credit rating of them; evaluating customer conditions and finance Beside that, he/she has to obtain property records øuarantee and pricing 1t Next, the CEO will review the clienfs profile to decide whether to approve øranting credift or not

- P3 Drafting and Signing the Confract:

If the loan profile Is passed, the sale manàgement issues a paymenf commitment of the bank and make an offer to draft a credit file If that credit file meets banks conditions, the credit transaction department wIll prepare the contract The sale management confirms the contract with thetr clients then siøns

- P4 Disbursement:

Before disbursing, the credit transaction department needs to notarize and TeØIster seCur1fy transactions and notIfy the results to the sales manager Then they disburse as requires by sale management, in cash or bank transfer 1s optlonal After disbursing, the bank checks and confirms customer debt status Ending process

2.2.2 Theorefical Background of Personal Loans Quality

2.2.2.1 Definifion of Personal Loans Qualify

For any service product, quality ¡s the thing customers especially care aboul Good product quality will leave much impression on the "God”, open countless Opportunifles for cooperative development, and mainly help build up the prestige of the Issuers Commercial banks' credit products are no exception Personal credit

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quality 1s understood as safisfying the customer demand, a timely response to the size, time, and ¡nterest rate, helping the customer cover lie and overcome difficultles of the Financial Sponsor Since then, ¡ft has helped not only Improve the quality of social life but also increase the profits for CBs to ensure business stability

In particular, personal loans quality had a substantial Impact on four subJects, Including the economy, comunercial banks, producers, and customers in general For economic development, personal credit qualify 1s an inteøral component of fostering economc restructfuring ¡n the desired direction of the Sftate Furthermore, consumer lending has played an essential role In creating more employment opportunifies, Increasing the productlon of øoods, and sttmulating demand through adequate capttal It led to the øradual development of the national economy

Secondly, loan quality 1s a sign of commercial bank performance The higher the quality of lending, the stronger the bank's prestige and position in financial markets That quality ¡1s reflected in debit balance rafes, overdue debt rates, and bank defaults

Senior Imporfant, the high quality of personal loans has fueled the prosperIty

of an organization Personal credit has helped the State and factories solve the problem of "excess supply but Insufficlent demand”, addressing the stale block between productlon and circulatlon of øoods on the markefs Consumers were

†inancially supplied in a varlefty of ways, thereby promoting producf consumptfion Manufacturers were also expanding the scale of production, increasing market competifiveness, and making a profit

Last but not least, for øeneral customers, the quality of the loan manifests Ifself In response to timely capifal demand at reasonable Interest rates to saftIsfy consumer demand In addition, there is a simplificatlon of the current bank's

borrowing procedures to provide convenience to customers but still ensure

compliance with Vietnamese laws

2.2.2.2 The Necessify of Personal Loans Qualify

It can be said that the current consumption level reflects the expectation of the future Iincome of the population It 1s the driving force, the demand to pay for øoods and services for production and business Therefore, consumer credit has long been considered an essential part of retail banking (the most criical part) Even,

according to Peter Drucker (1991), consumer credit has been the lifesaver of

commercial banks since the 1970s, when corporafe credit was flercely competifive

by financial companies, Investment funds, and the stock market The consulting

øroup BCG (2019) survey also shows that although reftail credit accounts for only

30% -35% of total ouftstanding loans, it øenerates over 60% of profits of leading commercial banks in Asia The reason for this number ¡s straightforward The flerce competition has made the profitability of corporate credit decreasing, while in confrast, retail credit (including credif cards) 1s now ørowing strongly

In consonance with the evidence sfated above, it can be seen that upgrading the quality of retail credit in commercial banks 1s extremely necessary, especially when more and more products and services are Iincreasingly available Several commercial banks were esfablished, accompanied by attractive offers on Interest rafes and services When the quality of credit operatlons of CBs Increases, service cosfs and related cosfs are reduced, the profitability of products will be enlarged and stable im the long run That helps bring in enormous profits for the banker and enhances the Imàe and reputation of the bank in the economy Besides, Improving the quality of lending to individual customers also helps to speed up the currency circulation, contributing to social stability Moreover, if† supports reducing labor pressure in big citles, alleViate poverty 1n rural areas

Joining that trend, to mainfain 1†s currenf position 1n the financial market, VIB must have an effectve development policy and business strategy, Íocusing on talenfs to prior1tIze the development of this field

2.2.2.3 Criteria of Personal Loans Quality

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service qualify 1s the ability to fully and promptly respond to the needs of the

"God” When sociefy ørows, peoples needs and desires increase accordingly - for example, shopping, home repalr, consumption or business, efc Therefore, cusfomer demands are the key factor deciding the introduction of a productf or service A successful bank 1s a bank with varlous productfs and services, fully satisfying the

"supply" part and satisfying the "demand”" side of the customer Especially when the commercial banking market 1s fiercely competitive, customers have many choIces They usually have a general mindset of using services that meet their demand

promptly

- 4bsolufe saƒet' im credlït ransactions

As we all know, the gørowth of informatlon technology and artificial Iintelligence ¡1s a double-edged sword for the banking industry On the one hand, such tools can help banks maximize their trading capabilitles, save time for both parfties, and numerous associated convenience On the other hand, the higher the technology, the more difficult 1t is fo øuarantee customer Informaflon seCurIty Transaction Information, personal information, including money and property of customers, can be stolen by advanced technològy hackers Therefore, assuring absolufe safety 1n credif transactions 1s considered an Increase 1n the quality of the bank's service, creating a reputation for customers Customers will often tend to use the services at such reputable banks

-_Ufilities ofprodhutcts and services

The types of producfs and services that bring many advanftàes to cusfomers will support banks in making a difference, building their competitiveness, and exposing the development of this type of service, especially when it passes the producfs primary function For example, there are the same credit cards issued by

banks A and B However, bank A's credit card only has the usual functions as other

cards, such as receiving money transfers, recharging mobile phone cards In confrast, bank B's credit card has many more convenient functions such as paying utlity bills, booking air tickets, Investing 1n stocks or making refunds to cardholders, etc That alone makes all customers only want to use the card and services of Bank B without menfion other producfs and services

-_ The level of customer satisƒaction vvhen sine the services at the banRĐ

Through the above example, it can be seen that If commercial banks want to survive and expand in the current fierce competilon, they are forced to confinuously Improve the quality of producfs and services and human resources In any service Indusfry, attitude ¡s the most Important key to Branching, especially the employee's attitude Because the staff is the person who directly works with the customers while performing well to the customers will help them build trust, Inprove the bank's Imàe and attract many new customers Besides, I† is necessary {to pay aftention to creating beautiful and spacious working offices and transaction offices, with strict regulations on staff attire

b, Quanfifafive cri(eria:

The quantitative criteria are Bad debt (Non-performing loan), Overdue debt, and Loss loan provIsIons

- Non-perƒoriming Loan:

Bad Debt, also known as Non-performance Loan (NPL) 1s a customer loan

debt struggling to recover principal and Interest, potentially losing capital According to decision No 493/200S5 of the State Bank of Vietnam, the debfs are divided Into five groups: øroup l (Standard Loans), øroup 2 (Special Mention

Loans), øroup 3 (Substandard Loans), øroup 4 (Doubtful Loans) and group Š (Loss

Loans) In particular, bad debts include debts of øroups 3, 4, Š The ratio of bad debfs to total oufstanding debt at about 2% to 5% 1s the acceptance rafe

INPL = Group 3 + GroIID 4 + Group Š

The ratio of bad debfs to total outstanding debts 1s the ratio to assess the credit quality of credit institutlons Accordingly, the higher the NPL ratio, the lower the quality of lending The banks with hinh NPL rates are facing many challenges In credit management The consequences are significant damage to the bank In particular and the economy 1n øeneral

- €erdue Debt:

“Overdue Debt 1s the debt that some or all of primcipal and/or Imteresf 1s

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overdue When a debt is not paid on term, the entire principal remaining will be

converted into overdue debt.” (Nguyen Van Tien, 2012, p.306)

Overdue debt rafe 1s one of the most critical and sunplified tools to evaluate the quality of personal loans of the bank Overdue debt rate says the risk of losing a portion of capital or all of the bank's total outstanding balance If the Index 1s foo high, the lower the quality of lending It shows that the bank 1s Incapable of managing ¡fs debt sources and customers while showing professional weakness and superficiality in customer appraIsals According to regulations of the State Bank, the ratio of overdue debt to total outstanding > 7% 1s weak The rate of < 5% ¡s the perfect rate, showing that the bank has high lending quality, bank staff has øood business Thus, overdue debts include debt øroups of 2.3.4.5 under Decision No

493 of the State Bank of Vietnam

Overdue Debf = GrouD 2 + GroIp 3 + GroHp 4 + GroiIIp Š

- Loss Loan Provisions:

In lending to individual customers, CBs and credit institutions can hardly avoid capifal loss due to the indebtedness of part of the debt or the entire debt from the customer Therefore, they are required to set up a loss loan provision (risk pTOViSions) fo ensure operatlon and benefits As sfated in State Bank of Vietnam Decision No 495/2005, risk provision 1s an amount of money set up to provide against the loss from bad receivables It is calculated by original outstanding and posted to operating cosfs of CBs

Loss Loan Provisions include the specific and øeneral provision In which:

A general provIsion 1s an account sef up to provide against contingent losses In loan classificatlon and specific provision setting up, or occurring ¡in financial difficultles situatlon of which the quality of debt declines The rate of seftIng up øeneral provisions under the State's regulatlons 1s 0.759%

A specific provision 1s an amount set up based on the loan classification on the current regulation of SBV

CHAPTER 3: PROCEDLURE OE SECONDARY DATA COLLECTION AND

ANALYSIS RESEARCH METHODOLOCY 3.1 Locale of the study

Vietnam Internatlonal Commercial Joint Stock Bank, a short name 1s

International Bank (VIB), is one of the leading Joint-stock commercial banks ¡n

Vietnam Established on September 1§, 1996, VIB started operations with an imitial charter capifal of 50 billion VND and 23 staf members Their Íirst office was located at No Š Le Thanh Tong, HanoI After more than 24 years of establishment, VỊB has achieved much success and remarkable ørowth Specifically, as of

December 3 I, 2020, the charter capital reached more than 11,000 billion VND

Along with that, the financial statements showed that equity touched 17,972 billion VND, and total assefs reached 244 trilion VND Currently, VIB has more

than 9,400 voung, dynamic and creative sfaff To perfectly meet customers'

requirements, VIB has deployed many transaction points serving through lunch, oufside office hours VIB's strafegic transformation journey (2017-2026) has helped this bank achieve a solid business foundation and assert 1ts posiflon 1n the financial market àainst big players like BIDV, VietinBank, or VietcomBank Besides, VIB has also become the leading bank ¡n the cash-free payment trend and pioneering digifal banking thanks to 1ts substantial investment in modern public applications such as Big Data, artificial intelligence (AL) and principally cloud computing

(Cloud)

The year 2020 ¡s Just the 4th year of success in VIB's sfrategic transformation Journey (2017-2026) in the context of the Covid-19 pandemic taking place around the world The efforts of all officers and employees of the Hai Ba Trung branch when they worked hard day and night had contributed to that victory Established

on January 12, 2004, the VIB Hai Ba Trung branch 1s now the top 1 branch of the

whole system when it Is constantly Iimplementing 1fs charter, doing business effectively, and bringing back high profits Located at 59 Quang Trung Street, Hai

Ba Trung District, Hanol City, since 1fs establishment, the HBT branch has always attracted a large number of customers to cooperate with them It ¡s all thanks to the

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excellent marketing abilifty, as well as the professionalism of the staff here Here Is also the place where the author chooses to pracfice and do the research

3.2 Research design/ mefhodolòy

3.2.1 Method Aliønment

As the author announced before, the research employed different methods, Iincluding analyzing the actual report (annual report and Income statement) of VIB HBT Branch, analyzing the survey, Interviewing, and observing the data collected {rom the official website These methods were used to collect information from VIB HBT Branch and assess the lending situation of this Branch

3.2.2 The Participanfs

The author Invited the manager and staff from Individual Department and Transacton Office to participate 1n the research with the three mentioned Instrumenfs Those participants voluntarIly joined the Interview Besides, the author also Invited 50 customers who have used the service at VIB HBT to participafe in the survey

3.2.3 The Insfrumenfs

3.2.3.1 Annual financial reporf analysis

In general, an annual report 1s a financial data document that CBs or CIs must publish and provide annually, biannually, quarterly, or monthly to shareholders These documenfs are described their operations and financial conditions In other words such documenfs draw a comprehensive view of the bank`s operations and

†inancial conditions at a specific time Moreover, the front part of the report often confains an outstanding consolidation of øgraphics, photos, tables, figures, and an accompanying narrative, all of which chronicle the companys actIvitles over the pasf year The financial planner or accountants may also make forecasts about the future of the company or business network expansion and product advancement easler Besides, customers can also determine whether they should invest, deposit

their money or use that bank's services or not, based on those financial statements

“Amnual reports became a regulatory requirement for public companies following

the stock market crash of 1929 when lawmakers mandated standardized corporate

†inancial reporting The required annual report Intends to provide public disclosure

Of a company's operating and financial activitles over the past year” (Hayes 2020) Typically an annual report will comprise many sections such as General corporate Information; Narrative text, øraphics, and photos: Financial statements Involve balance sheets, Income sfatements, cash flow statemenfs, Accounting policies, so on However, with such advantages of the financial reports analysIs method, the author decided to utilize the accurate report at VIB HBT Branch during 2018-2020, including two tables and ten bar charts The author wants to list the tables of capital mobilization, lending activitles, bad debt ratio, and profit rate of VIH Also, the bar charfs of outstanding loans, especially the personal ones, were

menfioned as well

3.2.3.2 Inferview

The qualitative interviewing method assists researchers In discovering and record a subjecft as a unique experience or perspective that relates to a mentioned topic Qualitative Interviews are sometimes called ¡n-depth Interviews or semi- structured as 1t permifs the author to make open-ended questions and may not ask In

a similar way or order to each respondent, although there 1s only one topic for them The prerequisite target of using this method 1s to get a detailed, Íirst-person perspective about a particular topic, event, or situation; to hear what respondenfts think 1s dominant about the topic at hand and ¡n theiIr own words The author can have an Insight into the subJect by using Interviews Qualitafive Interviewing allows pAarticipants to elaborate in ways that are not possible with other methods like

Survey research From these utility uses of this method, the author can assure If IS

entirely appropriate to use that method ¡n the study

This second ¡1nstrument, the ¡inferview, was used to determine what factor limits the development of lending to individual customers at Vietnam International Joint-Stock Commercial Banks - Hai Ba Trung Branch Otherwise, to come up with some solutions and tools that supporting the enhancement of this section The parficipant who takes part in the working sessions was Mr Nguyen Dinh Thuy,

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Head of Sales Department, Mr Nguyen Xuan Hung, Deputy Head of Sales Department and Mrs Nguyen Thi Mien, Senior Customer Management Each person has 3 to Š years of working experience 1n the banking industry, particularly

at VIB Those participants voluntar1ly Joined ¡1n the survey and were guaranteed that the Informatlon provided completely honest, no distortion of the facts or the law øoes against Vietnam Each meeting lasts for about fifteen minutes in which confained two quesftions based on the above purpose Besides, both sides exchange the services characteristics as well as the business situatlon of VIB Hai Ba Trung Branch period 201§-2020

3.2.3.3 Dafa Collecfion

To collect the secondary data, the author imbibes and gathers much helpful Informatlon from the previous thesis, report; along with a database from a newspaper, TV news, official websites such as the website of VIB or Central Bank, and publications of different banks The purpose of using this data 1s to have an overlook and further knowledge ¡n such field

Nowadays, thanks to the expansion of Iinformation technolòy networks, a researcher can accumulate information and data when entering the credit section

However, not all data 1s valuable and relevant to the segment they study, especially

the Individual customer segment Therefore, the data and Iinformation in this thes1S nof only intended to serve the authorˆs research but also to support other researchers get the right direction in øathering information so that they can avoid tIme-wasfing misdirectlon For example, for fopIc A, 1 1s necessary to use dafta A; segment B uses data B

3.2.3.4 Datfa Analysis

First of all, the author gathered annual reports resulfts and took note of some crucial parts Then the dafta were organized and cafèor1zed ¡nto different types Lastly such categories were compared to propound the evaluation of the branch's performance 1n personal loans development from 2018 to 2020

3.2.3.5 Survey Analysis

Regarding the qualitative 1ndicafors related to customer experlence, the author conducted a survey to earn customer reviews after using the VIB Hai Ba Trung branch service The survey results partly to show the current situation and quality of personal loans at the Branch, thereby øiving solutions to overcome the limifatlons that still exist Specifically, the author collects data through direct Issuance of quesfionnaire paper samples at VIB Hai Ba Trung Branch The respondents were 50

customers who used the service at the Branch, aged between 25 and 55, and the

majorifty were women All valid samples will be agøregated and sfatistically evaluated to assess the quality of personal credit at the Branch through the criteria mentioned in section 2.2.2.3

3.3 Sources of Secondary Data

During the Implementation of the study, the author has directly taken data and documents from the annual reports and financial statemenfts of the VIB Hai Ba Trung branch ¡n the period of 2018-2020 to analyze and evaluate the reality business sfatus of the Branch Besides the knowledge the author had learned ¡n the school among banking and finance, the bank accounting and information through books and newspapers related to credit operations In addition, the author also refers

to some reliable Information and thesis from repufable websites such as vib.com.vn, vietnamnet.vn, cafe.vn or some official Informatlon pages of Agency political theory of Central Committee of the Commumist Party of Vietnam like vass.øoV.Vn

3.4 Validify and Reliabilify of đafa analysis

After Íinishing the data gathering procedure, the analyzing process Was

conducted carefully to ensure the authenticity of the data and reliable results

Besides that, the process was made to prove the collected secondary data has an entire origin, the conditions for evaluating and analyzing the quality of personal credit operations at VIB Specifically, the dafa 1n the thesis 1s mainly got from the annual report of the VIB Hai Ba Trung branch(period 2018 — 2020) The author also øefs some Information from the previous studies of Banking Academy, Thang Long University, Foreign Trade University, efc.; from official websites and màazines of

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agencies, organizatlons in Vietnam such as the Agency political theory of Central Committee of the Communlst Party of Vietnam, the official website of Vietnam Academy of Social Sclences - vasS.ØoV vn, efc

All of the above websites have been strictly censored, recognized by the Laws and the Government of Vietnam These websites are guaranteed to publish verifiable Information and not distorted according to personal opinion About the thesis, the author published the orlgin with a guarantee of the veracity of the secondary Iinformatfion data used As for VIB's 2020 financial statements, the author directly øot them from the internship unit at the Hai Ba Trung branch through MI Nguyen Dinh Thuy, Head of Sales Department Those financial statements had gone through the rIgorous audit process of KPMG Vietnam Company The report 1s considered to have reflected honestly and reasonably, in all material aspects, the unifled financial status of the Joint Stock Commercial Bank of Vietnam along with 1s subsidiary as of 31 December 2020 Consolidated results include individual credit activities, and consolidated cash flows for the year ended were followed by Vietnamese Accounting Standards The State Bank of Vietnam ¡ssued the Vietnamese Accounfting System appropriate to Credif Institutions and the relevant statutory requirements applicable to preparing and presenting financial statements

The bank's 2018 - 2019 Consolidated Financial Statements were audited by another

auditor, and this company has expressed a complete acceptance of the financial statemenfs

In conclusion, all of the data in the thesis are valid and highly reliable

3.5 Self Reflection on Secondarvy Data Collecfion Analysis

In this part, the author will mentlon some advantages and disadvanfàes of method Secondary Data Collection Analys1s

[] Rich varlety of data

SOUrces and fopIcs

[] The data 1s analyzed In

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CHAPTER 4: EINDINGS AND DISCUSSION 4.1 EFindings and Discussion of the business operafions at VIB Hai Ba Trung Branch for three years (2018-2020)

In the context that the Covid-19 epidemic 1s sftill existing very complicatedly

In many countrles and territorles, the ølobal economy seems to be ¡in a difficult period with serlous challenges Many countrles have dropped thelIr credit ratings, causing Investors significant losses Furthermore, there are signs of slow ørowth, rising unemployment, and a deep fiscal deficit in a series of developed economies such as China, the US, and Singapore

From the bèinning of the Covid epidemic, the Government of Vietnam has adopted many flexible policles to prevent the epidemic's effects and stabilize the socio-economy Thanks to the policies of the Party and Sfate, the close coordination

Of mass organizatlons, Vietnam 1s honored to be one of the few economies with positive ørowth in the past 2020 However, that øermination 1s not enough to compensate for the damàge Accordingly, the country's rice production decreased

by 1.6% compared to the previous year; the Index of the øarment manufacfturing Iindustry decreased by 4.8%: motorcycle production down 10%, and car production down 10.8% The people's purchasing power 1s weak due to the high unemployment rate, wlnle the stock Investment market has not shown any posifIve signs

The adverse effects from the business environment have significantly affected the development of the banking system In øeneral and VIB Inspire of that, VIB has concentrated resources to proactively implement Circular 01 and Instruction 02 of the State Bank of Vietnam related to operational øovernance and supporting customers during Covid's time VIB ¡1s one of the first pioneering banks to offer a support package for loans with preferential interest rates of up to 2.0% Besides, the

bank also exempted or reduced many types of fees for customers It seems that

those disadvantàges will cause ørave damàe to the bank, but with the advantàe of being a tier-one business branch of VỊB, along with the proper direction of the Board of Directors, Hai Ba Trung branch have overcome difficulties and achieved

reImarkable resulfs

4.1.1 Business Resulfs of VIB Hai Ba Trung Branch from 2018 to 2020

Diagram 4.1: Tofal Operafing Income of VIB Hai Ba Trung (2018-2020)

5,000

6.000 4.000

2.000

2.000 1,000

0 201§ 2019 2020 9ọ 4% Ne† Ïncormme 4.825 6,213 §.496

8 Exterrial Ïricorne 1.261 1,939 2.719

Total Incorme 6,086 §.152 11,216

Source: Collected Data from VIB 's Income Statement over the yeqrs VIB% total operating income (TOI) in 2018 reached over 6 trilion VND, Increased 49% compared to 2017, helping to bring the compound annual ørowth

rate (CAGR) In the 2016-2018 period to 34% In which net Interest income and

external Income ¡ncreased by 40% and 99%, respectively External income had ørown faster and currently accounting for 21% of total revenue, thanks to the promofion of service activiftles and diversifying sources of Iincome Net Interesf Income spread 4,825 billion VND at the end of 2018, mainly due to the ørowth of

Interest Income from loans to customers øained §,060 billion VND and i1ncreased

48% compared to 2017 Interest Iincome from Investment activifles mainfained a stable efficlency level by §%% This result was achieved by carrying on promoting the Impressive ørowth of customer loans maintaining the leading position in the vifal segmenfs of VIB at the same time

In 201§, VIB continued to Improve 1fs organ1zational structure to streamlining efficiency and automating business processes VIB spent a large amount of budget

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to Invest In sales human resources and effective sales channels Following this change, while revenue ¡increased 49%, cosfs ørew only 15% If was a lowW rise compared to impressive sales ørowth The consequence was the rafio of operating eXpenses to total operating income (CTIR) dropping to 44.2% 1n 2018 from 62% In

2017

Thanks to progressed revenue as well as cost-effective manàgement, VIB's pre-tax profit ørew well in 2018 Specifically, profit before tax reached VND 2,743 billion, up 95% compared to 2017 Thịs profif also increased nearly four times from

2016 through 2018 As a result, the average vield on equity (ROE) touched 22.5%

In 2018, ensuring attractive benefits for Investors

In conclusion, 2018 marked the second consecutive year that the bank had achieved excellent business results, with total income rising To accomplish this result, VIB had implemented a transformation strategy since the end of 2016 called VIB 2.0 The transformaton was done In a well-founded, extensive, and synchronized way ¡n all aspects of a business At the same time, it helped to create

an excellent operating model for VIB to apply ¡n the following years

In the context that the whole ¡industry was suffering from the covid-1I9 epidemic, VIB continued to maintain a strong balance sheet, revealed through diverse mechanisms and prudent strucftures Toftal operating income in 2019 swepft over § trilion VND, up 34%% compared to 201§, helping bring the annual double ørowth rate (CAGR) to 299% Net interest income Increased by 299%, external Income overørew

by Š4%⁄% compared to the previous year, accounting for 24% of total revenue Net Interest income touched 6,213 billion VND by the end of 2019, mainly due to the eXfension of Interest income from customer loans reached VND 13,861 billion and Increased by 37% compared to 2018 Net income from service acfIvifies continued to ørow significantly to VND 1,797 billion, 1ncreasing nearly 2.5 times compared to the previous vear That achievement results from the implemenfatlon of an integrated model in the development of Insurance distribution activities, bringing VIB% bancassurance market share to the top of the market Premium revenue Írom Insurance in 2019 increased four times compared to the pasf year

In 2019, VIB resumed Improving 1fs organizatlonal strucfure towards effectfive streamlining and automatlon of business processes As a result, while revenue Increased by 349%, costs rose by only 28% At the same time, total operating income (CIR) decreased to 42.2%, from 44.2% 1n 2018 Investing in people 1s always an Imporfant goal, along with building VIB to become a leading bank in terms of a working environment and employee engagement Despite the industry fluctuations, VIB still achieved a profit before tax of VND 4.082 billion, up 49% compared to

2018 The average yield on equity (ROE) was 27.1%, which was among the top banking Industry

In summary, 2019 was the strongest and most quality ørowth year ¡n the lasf five years of VIB, with all business sectors exceeding revenue and profit plans As such, VIB HBTs total operating income had tended to increase since 2018 and was confinuing to ørow strongly in the following years Because VIB HBT had begun to focus more on boosting services acfivitles, diversifying 1fs lending portfolio, and developing vigorous Insurance activitles Moreover, they also focused on Investing

1n the human facfOr

In 2020, VIB HBT had steadily overcome many contrary challenges In the economy and gradually made adjustmenfs to suit the situation Thereby, total operating income (TOI) reached VND 11,216 billion, ørowing by 3§% with a double annual gørowth rate of 35% Nevertheless, the Covid-19 pandemic had adverse effects on the economy ¡n general and bank income, especially Interesf Income However, with reliable øermination ¡n the size and quality of retail credit and strict risk management accompanied by reasonable adjusted capital expenditures, net Interest income still reached VND 8.496 billion, up 37% in the pasf year Specifically, inferest Income ørew by 26%, while Interesf expenses Increased only 179%

External Income continued to be the brightest point of 2020 when 1t øgained VND 2,719 billion In particular, net Income from service activitles contributed

§§%, reached VND 2,389 billion in 2020, and increased 333% compared to 2019 Thanks to the timely policles of the Board of Directors related to advancing new

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product services for customers, especially the utIlitiles of Digital Banking, VIB HBT had achieved the above results, at the same time bringing VIB to mainfain 1fs leading position in the Bancassurance market and guiding the card market In terms

of customer spending sales

As for costs, VIB's budget was primarily funded by upgrading customer experlences, including counter experlences and digifal experlences At the same time, the bank promoted the ørowth of sales personnel in 2020, assisting in ensuring the business plan during the year Therefore, operating expenses in 2020 were 4,465 billion VND and multiplied by 30% compared to 2019, while operating Income only achieved a ørowth rate of 38% That brought the ratio of operatinø expenses fo

total income (CIR) to 39.§%% 1n 2020, which meant 2.4% lower than 2019

Nevertheless, overall, VIB was rated as thriving because the ørowing scale

still reached 30% (credit 29.4% and mobilization 33%), and the quality of assets

was displayed in the ratio of bad debts managed below 1.5% The majorify of oufstanding debt belonged to the retail segment (84%) had supported banks to reduce central risk, with over 95% of retail balances having collateral Capifal SeCurIfy ratio and liquidity indicators were well-managed

2020 was a reasonably successful year for VIB as total Iincome gørew significantly compared to the previous year, despite the ràging Covid-19 epidemic This remarkable result is due to VIB% sftrategic transformatlon journey (2017 - 2026) and the consistency 1n the stratèic orienfatlon to become a leading retail bank with high technolòy content Furthermore, the timely policies of the Board of Directors related to advancing new product services and upgrading customer experlences also contributed to the success of VIB HBT

4.1.2 Capital Mobilization

For CBs — the currency trading 1nstitutions that regularly receive deposifs from customers and loans from the mobilized money and Iimplement bank services, the role of capital becomes extremely Important With any business, raising capital 1s a vital banking transaction to achieve business øoals This protocol ¡is considered either a core issue ¡n the country's economic development stratèy or a survival mafter in the competition among CBs and International Integration

Sfnidenf: Vu Tĩn Tĩul Van 3] SfIdenf ID: 2047510201