The quality of individual lending at vietcombanhập khẩu operation center

TABLE OF CONTENT TABLE OF CONTENT LIST OF TABLE AND FIGURE CHAPTER 1 INTRODUCTION 1 1 1 Rationale 1 1 2 Research objective 2 1 3 Research methodology 2 1 4 Scope of research 2 CHAPTER 2 OVERVIEW OF IN[.]

TABLE OF CONTENT

LIST OF TABLE AND FIGURE

CHAPTER 1: INTRODUCTION 1

1.1 Rationale 1

1.2 Research objective 2

1.3 Research methodology 2

1.4 Scope of research 2

CHAPTER 2: OVERVIEW OF INDIVIDUAL LENDING IN COMMERCIAL BANK 4

2.1 Commercial bank and lending activity in commercial bank 4

2.1.1 Commercial bank 4

2.1.1.1 Definition of commercial bank 4

2.1.1.2 Functions of commercial bank 4

2.1.2 Lending activity in commercial bank 6

2.1.2.1 Definition of lending activity 6

2.2 Individual lending in commercial bank 6

2.2.1 Definition of individual lending 6

2.2.2 Characteristics of individual lending 8

2.2.3 Benefit of individual lending 9

2.2.4 Classification of individual lending 10

2.3 The quality of individual lending in commercial bank 13

2.3.1 Concepts about the quality of individual lending in commercial bank 13 2.3.2 Indicators of evaluating the quality of individual lending 14

2.4 Factors affecting the quality of individual lending 14

2.4.1 Internal factors 15

2.4.2 External factor 17

CHAPTER 3: RESULT/ ANALYSIS OF DATA 19

3.1 Overview of Vietcombank 19

3.1.1 History 19

3.1.2 Geographical Distribution 19

3.1.3 Products & Services 20

3.2 Overview of Vietcombank - Operation Center 20

3.2.1 Foundation 20

3.2.2 Organizational structure 21

3.2.3 Products and Services 23

3.2.4 Business performance result 24

3.3 Situation of business operation of lending in VCB – Operation Center in recent years 24

3.3.1 Lending activity 24

3.4 Analyzing the situation of individual lending in VCB- Operation Center 28

3.4.1 Types of individual loan 28

3.4.2 Process of individual lending applied in VCB Operation Center 30

3.4.3 Credit scoring of VCB Operation Center 32

3.4.4 Current situation of individual lending at VCB Operation Center 34

3.4.4.1 Volume of individual lending 34

3.4.4.2 Business performance of individual lending in VCB Operation Center 35

3.4.3.3 Individual loans structure by borrowing purposes 36

3.4.5 Evaluation of individual lending quality in VCB Operation Center 37

3.4.5.1 Overdue debt ratio 37

3.4.5.2 Debt collection ratio 39

3.4.6 Assessment of the status of individual lending at VCB Operation Center 40

CHAPTER 4: RECOMMENDATION AND SOLUTION TO IMPROVE INDIVIDUAL LENDING QUALITY AT VCB OPERATION CENTER 42

4.1 Solution to improve individual lending quality at VCB Operation Center

42

4.1.1 Concerning loan products 42

4.1.2 Advertising campaign 42

4.1.3 Diversifying individual lending products 43

4.1.4 Raising awareness of bank officers of individual lending 43

4.1.5 Improving quality of banking human resources 43

4.1.6 Improving operational performance 44

4.1.7 Strengthening risk management 44

4.1.8 Preparing development plans in the long run 44

4.2 Recommendations 45

4.2.1 Recommendations to government 45

4.2.2 Recommendations to borrowers 45

LIST OF TABLE AND FIGURE

Figure 1: Indirect Lending Relationships 12

Figure 2: Organizational structure 21

Table1 : Bussiness performance result of VCB Operation Center 24

Figure 3: Total outstanding loan 25

Table 2: Classification of outstanding loan at VCB Operation Center 26

Table 3: Bad debt situation at VCB Operation Center 27

Table 4: Real estate loans categories 28

Firgure 4: Individual lending process in VCB Operation Center 30

Figure 5: Volume of individual lending at VCB Operation Center 34

Table 5: Business performance of individual lending in VCB Operation Center 35 Table 6: Individual loan structure by borrowing purposes 36

Table 7: Overdue debt of individual lending at VCB Operation Center 37

Table 8: Structure of overdue debt according to time 38

Table 9: Debt collection ratio 39

CHAPTER 1: INTRODUCTION

The economy of Vietnam has transformed from a backward agriculturaleconomy to a modern intensive Standard living of people is becoming higher whichleads to the increase of demand for individual borrowing to serve the procurement

of goods and services Propensity of people are now not only satisfied with havingenough food and clothes but also entertaning and fashion In fact, when individualsneed money to consume or invest before they have ablity to pay, they will seek forlending sources with reasonable interest rate Thus, commercial banks offerindividual lending to temporarily solve financial problems of customer Due to theeconomic crisis recently, corporation lending becomes more diffificult and risky forcommercial banks while individual lending is a very potential credit field for banks

to enhance their profitability and enlarge their customer network In addition, thepopulation ofour country is estimated about nearly 90 millions in 2014 Youngerpopulation not only weilds increasing purchasing power but as far as acquiringpersonal debt is concerned Clearly, it is a very potential individual lending marketfor commercial banks to exploit For bank itself, individual lending is one ofeffective ways to expand their operation and earn profit The quality of individuallending represents how the banks can effectively lend their capital to gain profit andcollect loans from individuals on time while they still ensure their competitivenss inlending market

Being part of the system of state-owned banks, Joint-stock commercial bankfor Foreign trade of Viet Nam (Vietcombank- Vcb) a long with VCB OperationCenter has achieved successes and remained its top position compared with othercommercial banks

In recent years, VCB Operation Center has achieved a certain number ofresults in the area of individual lending, yet this activity in the branch also revealedmany shortcomings such as complicated reporting system especially relating to realestate credit, unclear loan- classtified standard The bad debts ratio of individual

lending has been high level in recent years In some cases, VCB Operation Centerhas difficulty in supervising loans and liquidating collateral assets Beside,economic situation also impacts on individual lending activities by the unstableprice of gold, real estale and the increase of consuming costs They affects the repayability of customers and causes bad debts to bank

Thus, the questions arising are how VCB Operation Center can expand itsindividual lending activities, how to ensure that loans will be paid back sufficientlyand on time, how to deal with difficult external factors coming from the economy

To answer these question, I decide to choose the thesis topic: “The quality of individual lending at Vietcombank – Operation center.”

- To determine and analyze the quality of individual lending activities as well

as factors affecting the quality in VCB Operation Center

- To point out achievements as well as limitations of the individual lendingarea in VCB Operation Center to suggest solution and recommendation to improvethe quality of this activity

1.4 Scope of research

In term of space, the thesis will focus on studying individual lending activities

in VCB – Operation Center

In term of time, the thesis will focus on researching individual lendingactivities in VCB- Operation Center from 2012 to 2014.

CHAPTER 2: OVERVIEW OF INDIVIDUAL LENDING IN

COMMERCIAL BANK

2.1.1 Commercial bank

2.1.1.1 Definition of commercial bank

Banks are financial organizations offering a portfolio of the most diversifiedfinancial servicesespecially credit, saving, payment services and performing themost financial functions in comparison with any other business organization in theeconomy

Commercial banks are credit organizations performing the most basic tasks ofbank such as capital loans and capital mobilization Commercial banks are alsobridge between individuals and organizations, mobilizing idle capital and usingcapital in fields which lack of capital

In Viet Nam, pursuant to Banking Act dated May 23th 1990 issued by State’sCouncil: “Commercial Banks are currency trading organizations which have mainand regular activities as receiving customer’s deposits with its repayingresponsibility and using these amount for loans, discount and payment services.”

2.1.1.2 Functions of commercial bank

 Credit agent function:

When performing credit agent function, Commercial Bank plays a role as abridge between people who have excess capital and people who need capital Withthis function, commercial banks are both borrowers and lender earning profit fromdifference between deposit interests and lending interests as well as distributing increating benefits for participants- depositors and borrowers

For depositors, they receive profit from idle capital under deposit interest formpaid by banks Moreover, banks also ensure them about safety of deposits andprovide them convenient payment services

For borrowers, they will satify their needs of convenient, assured and legalbusiness capital; spending and paying without costs of time and strength to find out

separate capital suppliers Especially in the economy, this function plays animportant role in promoting economic growth because it meets capital demands toensure ongoing reproduction process and expand production scope Credit agentfunction is considered to be the most important function of commercial banks.

 Payment agent function

Commercial banks play a role as a treasurer for businesses and individuals,the payment done at the request of the customer such as deductions from theirdeposit account to pay for goods or services or add money to their deposit accountfrom their sales proceeds and other revenues under their commands

That commercial banks play payment agent function has enormous meaning

to the whole economy With this function, commercial banks provide customersmany convenient means of payment such as checks, payment order, collectionorder, debit cards, credit cards… Depending on demands, customers can choosethe appropriate payment method Whereby, the economic actors can not keepmoney in his pocket, or carry cash to meet creditor, or have to meet the creditorseven they are near or far, instead they may use a certain method to performpayments Therefore, the economic entities will save a lot of cost, time and ensuresecure payment

 Money creation function

The creation of money is not limited in the process of printing more moneyand isusing new money of the State Bank Banks themselves in the process ofimplementing its functions can create a credit (or cash book) expressed on depositaccounts of customers at banks This is a part of the money used in the transactions Money creation function is based on two other functions of Commercial Bank ascredit function and payment function With credit agent function, banks usemobilized capital for lending, the loan amount will be used to purchasing goods,paying service charges when balance of deposit account is still considered to be apart of transaction amount used for purchasing goods and paying service charges

This function shows the relationship between banking credit and currencycirculation An amount of credit lent by commercial banks can create money whichcan increase amount of supplying money.

 Banking Service providing function:

Beside 3 above mentioned functions, commercial banking have functions toprovide banking services such as:

- Savings mobilization

- Foreign trade sponsor

- Trust services

- Valuable securing service

- Technical –Trading Services

2.1.2 Lending activity in commercial bank

2.1.2.1 Definition of lending activity

Lending activity is one of the basic operations of banks, the main source ofprofit and always accounts for a large proportion of total asset of commercial banks,

so it plays an important role in operations of banks

Lending of commercial banks is credit relationship between a party as banksand other party as organizations, individuals and other enterprises in the economy Banking credit is the lending-borrowing relationship between banks and allorganizations, individuals and other enterprises in the society It’s not relationshipwhich directly changes capital from temporary surplus units to temporaryunderfunded units through an immediate unit- the bank Banking credit also bringscharacteristic of credit relationship: the lending- borrowing relationship in whichprincipal and interest must be repaid after a certain time, the fund using righttransfer and equal relationship which brings benefits to both parties

2.2 Individual lending in commercial bank

2.2.1 Definition of individual lending

“Individual lending is a lending form in which the bank transfer using rights

of an amount to the customers in a certain time with agreements signed by the two

parties (on amount of money, issuing time and payable interest rate) in order to helpthe customers to use goods or services before they can afford, enabling them toenjoy a higher life.”

Definitions of individual lending can be different, but they contain the samecontents and mention the purpose of this type of loan: consumer loan is used forconsumption purposes of individuals, households, and persons who want to increasetheir living conditions but they can not afford in the current time Banks havedeveloped individuallending products to meet the demands of customers and theyrecover principal as well as profit from the loan However, individual lending issometimes defined in a narrower context

One of the pioneers in the field, Rolf Nugent, defined individual lending in hisbook as credit extended to individuals to finance the purchase of consumercommodities and services or to refinance debts which had their origin in suchpurchases1

Individual lending can also be illustrated at the very end of the marketingchain According to Robert Cole and Lon Mishler, “individual credit is the use ofcredit as a medium of exchange for the purchase of finished goods and services bythe ultimate user”2

In Consumer Credit Fundamentals, Steve Finlay defined individual lending as

‘money, goods or services provided to an individual in lieu of payment’.3

All in all, individual lending can be seen as a credit-debt relationship in whichloans are provided to individuals and households to the purchase of automobiles,homes, appliances, and other retail goods; to repair and modernize homes; and topay the finance the cost of medical care and other personal expenses

2.2.2 Characteristics of individual lending

Individual lending is distinguished from corporate lending by the followingcharacteristics:

1 Rolf Nugent (1939), Consumer Credit and Economic Stability, Russell Sage Foundation, p.31, New York,

US.

2 Robert Cole, Lon Mishler (1998), Consumer and Business Credit Management, Irwin McGraw-Hill, US.

Firstly, due to small scale of each individual agreement which leads to higher

cost of lending operation, interest rate on individual loans is typically higher thanthe rate applied for corporate loans

Secondly, individual loans tend to be cyclically sensitive They rise in periods

of economic expansion when consumers are generally optimistic about the future

On the other hand, when the economy turns down, many individuals become morepessimistic about the future and as a result reduce their borrowings

Thirdly, individual borrowings appear to be relatively interest inelastic A

borrower normally considers the monthly payments required by a loan agreement orthe total payment at the end of agreement rather than the interest rate charged on theloan

Fourthly, income and education level have a close relationship with

customer’s demand for individual lending The higher income the customers earn,the more likely it is that they will ask for loans which they are able to pay at the end

of agreement Both education and income levels do materially influence consumers’use of credit Individuals with higher income tend to borrow more in total andrelative to the size of their annual incomes Those households in which principalbreadwinner has more years of formal education also tend to borrow more heavilyrelative to their income level

Fifthly, the borrower’s main source of payment may be subject to

considerable fluctuation because it depends on the customer’s employment history,skills, working experience, health, etc Many of these factors change over the time

Sixthly, customers’ personalities and behaviors which are quite challenging to

define take a significant part in determining the debt payment Normally, the bankmust be assured that the borrower has moral responsibility to repay a loan on time

2.2.3 Benefit of individual lending

For the bank:

Regardless of two drawbacks which are risk and high cost, individual lendingcovers significant advantages Firstly, individual lending helps build up

relationships with customer which might raise possibilities of attracting capital forthe bank itself Secondly, individual lending helps diversify bank’s businesseswhich consequently help boost revenue and spread the bank’s risks In addition, theintroduction of individual lending helps to reduce loan risk through a diversifiedportfolio The potential to attract a wider range of customers can help the institution

to grow and strengthen its position in the market Individual lending gives banks theability to capture economic information from customers, thus providing a bettersense of the customer’s needs This translates into improvements in the quality ofservices rendered Ultimately, it can help bank meet its mission, vision and strategicobjectives

For the customer:

Individual loans are often seen as more attractive, because they mean areduced reliance on other group members Individual loans also offer the potential

to take out larger loans and have faster application and repayment procedures Inaddition, because of the reduced risk associated with more rigorous clientassessment procedures, individual loans are often less costly for the customer thantheir group loan counterparts Furthermore, individual lending provides a source ofassistance in times of financial stress Thanks to this type of credit, they haveopportunities to enjoy conveniences even before they accumulate enough money forpersonal expenditure Particularly, individual lending is essential for unexpectedexpenses such as on health care and education However, misuse of individuallending may bring about insidious effects, which means borrowers may spend anexcessive amount of money, leading to limited capacity for saving and consuming

in the future More seriously, borrowers might get themselves into trouble for beingunable to pay the debts

For the economy:

Individual lending exerts a dramatic effect on economic stimulus as well ascreates positive conditions for accelerating economic growth; leading to sustainabledevelopment It performs a supporting role in boosting household and individual

consumption by granting loans to cover essential expenses, particularly in timeswhen the economy is weak Domestic demand including consumption andinvestment consequently is fueled Besides, the growth in the volume and diversity

of consumer credit products has resulted in a thriving individual lending industryproviding employment for millions of people around the world Moreover,individual lending helps diminish wealth gap by providing credit access to all kinds

of customers

2.2.4 Classification of individual lending

Credit categorizing is arranging loans into specific groups according to certaincriteria

 Based on loan’s purposes

a Residential Mortgage Loan

A residential mortgage loan is used to purchase, build, or renovate a fixedasset such as land or buildings, with the loan secured against the asset In most casesthis will be the borrower’s home A standard mortgage is offered as a fixed termagreement When a mortgage has been fully repaid it is said to have been redeemed

b Non-residential Mortgage Loan

A nonresidential mortgage loan is taken out to buy a new car; and consumerdurables such as a sofa, washing machine or a television This type of credit is alsoused to cover things such as household bills, travel and entertainment

 Based on methods of payment

a Instalment Individual Loan

Installment consumer loans are made for a fixed amount and may be etheirunsecured or secured By definition, installment loans are repayable in two or moreinstallments Repayment of this loan covers both principal and interest, with thedebt having been amortized at regular intervals during a fixed period of time andrepaid in full by the end of the agreement This method of payment is applied foroutstanding loans or in case customer’s regular income cannot cover a lump sumpayment (paid gradually over the time)

b Non-installment Individual Loan

Short-term loans for individuals and families draw upon for immediate cashneeds that are repayable in a lump sum are known as non-installment loans Thistype of loan is frequently used to cover the cost of vacations, medical care, thepurchase of home appliances, and auto and home repairs Such loans may be forrelatively small amounts and include charge accounts that often require payment in

30 days or some other relatively short time period Non-installment loans may also

be made for a short period, usually six months or less, to wealthier individuals andcan be quite large

c Revolving Individual Loan

A revolving loan, sometimes called a flexible loan or a budget account, is aform of revolving lending A borrower agrees to make a fixed monthly payment and

in return has the ability to draw cash up to a maximum limit, which is a multiple ofthe monthly payment amount For example, an account with a 15 times multiplierwill allow a customer who agrees to pay $200 a month to draw funds up to amaximum of $3,000

 Based on the origin of the loan

a Indirect Individual Loan

This is the type of loan in which lending relationships occur in order as shown

in the Figure 1

Figure 1: Indirect Lending Relationships

(Source: Paul Beares, Richard E Beck, Susan M Siegel (2001), Consumer

Lending, American Banker Association, p 67)

Indirect individual lending has several following advantages:

- Bank easily increase volume of individual lending

- Transaction cost will be lower

- Bank is able to expand relationship with customers

Besides these advatages, there are some shortcoming in indirect individuallending:

- Bank will lack of customer’s information and finacial condition becausebank cannot directly access customer

b Direct Individual Loan

Direct individual loan is a loan in which a representative of the bank has aface-to-face meeting to assess the creditworthiness of individuals applying forcredit This person is known as an underwriter or a credit staff A credit staff fromthe bank often receives better training in assessment of the likelihood of theapplicant repaying the debt than one from a retailer does Therefore, a bank usuallyproduces a more prudent credit granting decision

This direct individual lending is more advantageous than the indirect onebecause it can satify the interests of both customers and banks.

 Based on term of the loan

a Short-term loan

Short term loan is loan having short time period, usually less than 12 monthsand used to offset the shortage of charter capital of businesses and short-termspending needs of individuals Mid-term loan:

b Mid-term loan

Mid term loan has period from 12 to 60 months (5 years) This type of credit isused for purchasing fixed asset or improving technology equipment or expandingbusiness or building small projects with short recovery time Enterprises can borrowmid-term loan for their formation of permanent charter capital, especially for newbusinesses

c Long term loan

This type of loan has a term of more than 5 years (but not exceeding theremaining working time of the business, the borrowers) This type of loan is usedfor long-term needs such as purchasing new equipment, building house, purchasingbig transport vehicles or building new factories

2.3 The quality of individual lending in commercial bank

2.3.1 Concepts about the quality of individual lending in commercial bank

An operation is said to be conducted effectively when it helps increase profitfor an organization sustainably in accordance with legal framework and theorganization’s policies This is true to all forms of business, and individual lendingactivity is no exception

The quality of individual lending is simply how the bank can adapt with thechange of economic environment, lower costs, gain the maximum profit, ensure thatloans are paid on time, compete with other competitors but also satisfy customers

2.3.2 Indicators of evaluating the quality of individual lending

 Debt collection ratio

Debt collection ratio = Debt collection turnover/ Lending turnover

Debt collection ratio is the rate between debt collection turnover and lendingturnover at a given period of time

It is an indicator to estimate the effectiveness of collecting debt in bank Ifthis ratio is high which demonstrates the collection of debt is sufficent and on time

In banking, lending activity brings the main source of profit, therefore, bank mustalways pay attention to the process of debt recovery to collect and secure its capital,

as well as improve the quality of credit

 Overdue debts ratio

Overdue debts are debts which have not been paid at the repayment time, this

is an indicator of the quality of bank’s credit with the formula as:

Overdue debt ratio = Overdue debt / Total outstanding loan

When banks change to overdue debt, the risk of not recovering both principaland interest increases and may result in loss of capital Lots of overdue debt reflectsthe quality of bank’s credit which is not good and contains risks in businessoperations, whereas low rate of overdue debt demonstrates the safe and stabledevelopment of lending activities The quality of credit is estimated by how bankcan recover all principal and interest of the loan at the end of the repayment period.Thus, to improve the quality of lending activities, it’s necessary to pay attention toassure the individual loan to restrict to a minimum acceptable rate of overdue loans

in total individual loan

2.4 Factors affecting the quality of individual lending

Banking industry is a non-monopolistic business where banks go intocompetition with each other in terms of their own capacity To improve quality of

an operation, it is worth considering what criteria and factors determine theoperation’s effectiveness This is true to all forms of business, and individuallending activity is no exception

There are many factors required for ensuring individual lending activity to berun effectively, namely marketing, corporate governance, risk management, ect.Factors affecting individual lending quality can be viewed in both the inside bankand the outside bank

to spend on items that are prohibited by law; or the bank carries out debtrefinancing Those activities are considered to be against the rule although theyproduce massive profit for the bank

- Credit policy

Each bank develops its own credit policy which is appropriate to certaincircumstances and certain period of time The policies should be designed so as toimprove credit performance of the bank itself

Credit policy is the way to guarantee that the credit activities perform well,involves expanding or shrinking credit Credit policy includes: the credit limit, theterm of the loan, interest rates and fees and types of loan The terms of the creditpolicy is based on many different factors such as economic conditions, monetarypolicy and financial state of the bank, the ability of the bank's capital and creditneeds of customers When these factors change, the credit policy changes as well.For each customer, the bank may offer different policies For example, whencustomers gain high reputation with bank, the bank can provide loans withoutcollateral, with a higher limit and lower interest rates while for other customers,collateral is required

A proper credit policy will attract more customers and ensure profitabilityfrom credit operations It needs to limit minimum of risks, follow policies andregulations of the Statebank and ensure fair of society If bank wants to have agood credit quality, it must have a reasonable credit policy in accordance with thecurrent situation of the bank as well as the market.

- Credit process

In the process of credit, loan preparation is very important (enter customerloan applications) Credit quality depends on the quality of the evaluation andregulation of the conditions and procedures of bank's lending activity

The selection and application of effective inspection form will establish aneffective preventing system and reduce of credit risk, in other words, will improvethe quality of credit

Credit analysis is considered the most important step in a credit process.Result of credit analysis will mainly determine the approval of loan committeetowards granting decision

Before providing fund, the bank should come to an agreement with itscustomer about his or her using the fund, time to pay principal and interest on theloan, solutions in unavoidable and unforeseen circumstances, etc A loan is said toperform well if the credit agreement is honored

Recovery and debt settlement are also decisive factors to credit quality Thesensitivity of the banks in the timely detection of adverse manifestations occur forcustomers as well as the timely remedial measures, advising customers will reducetheoverdue debt have a positive effect on credit operations

Credit information can be obtained from many sources: from the center of thecredit of the State Bank, from credit information offices of commercial banks,through the media, professional organizations or the customer If credit staff collectscredit information of customer faster, more accurate and comprehensive, the ability

of preventing credit risk will be higher

- The quality of loan

The quality of a loan is evaluated in terms of customer’s ability to repayprincipal and interest applied on the loan by the due date that is stated in the creditagreement In pursuit of huge profit, a bank possibly offers loans which are of highrisk, leading to poor credit performance when borrower is in default However,excessive caution of the bank also produces disappointing performance The quality

of a loan depends on credit officers’ ability to undertake an assessment

- Human resources

In lending activities, credit staffs always play an important role in the bank’sdecision on providing fund This comes from a fact that credit performance dependsmainly on evaluation procedures made by the underwriters A capable officerproduces a careful assessment of loan application which helps lessen unforeseenrisks for the bank, and reversely

 From the customers

- Customer’ethic

If the client does not provide information timely and accurately, the bank cannot evaluate finacial condition, repay ability of clien It will make difficulty forbank to manage customer’s loan, resulting in the low profitability of lendingactivity Hence, accuracy and truthfulness of the information provided bycustomers will enhance the effectiveness of individual lending and help the bankcan control lending operation better

- Customer’s financial ability

The financial ability of customers plays a important role in their repay debtability after having loan agreement In other words, customers’s expected income aswell as current financial condition indicate the quality of loans

2.4.2 External factor

 From the economic environment

Economic environment has direct effects on both banks and borrowers Thatthe more one believe in the development of the economy, the more he consumes

results in an increase in consumer credit However, when the economy is faced withcrisis, consumers tend to spend money more cautiously, leading to unexpectedcredit performance in banking industry.

Social and cultural environment including lifestyle, habits, and so on alsoaffects credit performance People with higher education level and more stablesource of income often ask for bank loans to finance their consumptive demand so

as to improve their living standards However, those with average level of incomeusually need funding to cover basic necessities

The development of science and technology also allows banks to designproper lending policies for each group of customers This minimizes operating costsand time for credit assessment, raising accuracy of information system which leads

to improvement in credit performance

CHAPTER 3: RESULT/ ANALYSIS OF DATA

3.1 Overview of Vietcombank

3.1.1 History

Vietcombank was originally established as the Foreign Exchange ManagementBureau under the National Bank of Vietnam on January 20th, 1955, pursuant toDecree 443/TTg issued by the Prime Minister of Vietnam In 1961, the ForeignExchange Management Bureau was renamed as the Foreign Exchange Departmentunder the State Bank of Vietnam according to Decree 171/CP dated October 26th,

1961 by the Governmental Council This institution had distinct responsibilities:Performing policy research on foreign exchange control, fulfilling its advisorycapacity to the SBV and carrying out international banking operationsBeing the firststate commercial bank chosen for pilot privatization by the Government, Joint StockCommercial Bank for Foreign Trade of Vietnam officially came in to operation onJune 2nd, 2008, after successfully implementing the equitization plan through IPO During its 48 years of development, Vietcombank has made significantcontributions to the stability and growth of the economy, upholding the role ofmajor foreign trade bank in facilitaing efficient domestic economic growth, as well

as exerting considerable influence on the reginal and global financial communities.After nearly haft a century of operation, development, Vietcombank hascontribiuted significantly to the stability and growth of Vietnamese economy,remainingleading position of foreign trade bank in faciliating efficientcy domesticeconomic growth as well as having great impact in international financialcommunity

3.1.2 Geographical Distribution

After more than a half-century operating in the market, VCB currently hasalmost 14,000 employees Vietcombank’s team of professional employees are well-trained in finance and banking, with a wide array of experience and goodknowledge about the market economy, proficiency in foreign languages, and a goodsense for a modern and intergrated business environment Thanks to their

contribution, Vietcombank remains the primary choice for large corporations,domestic and foreign enterprises, and as many as 6 million individuals and morethan 400 branches/ transaction offices/ representative office both in Vietnam andabroad, including 1 Head Office in Hanoi, 1 Operation Center, 1 Training Center,

79 branches, over 330 transaction offices all over the country, 2 subsidiaries inVietnam, 2 subsidiaries and 1 representative office in other countries, 6 jointventures In addition, VCB has also developed an Autobank system with about 2000ATMs and more than 43,500 Points of Sale nationwide Bank’s operations aresupported by a network of more than 1,700 correspondent banks in 120 countriesand territories

3.1.3 Products & Services

VCB's products and services are listed as follows:

 Account services  LC Negotiation

services

 CollectionServices

 Forex tradingservices

 Credit services

(short, medium and

long term)

 RemittanceServices  Correspondentbanking services

 Guarantee services  Card Services  Factoring Services

 Other Services allowed under certificate of business registration

3.2 Overview of Vietcombank - Operation Center

3.2.1 Foundation

On October 30th2008, VCB has officially opened its new Operation Center at31-33, Ngo Quyen Street, Hang Bai Ward, Hoan Kiem District, Hanoi City,Vietnam

The Operation Center located in the city center, convenient transportation,high population density, enterprise systems and dense bodies, along with theemergence of so many banks, will create a strong competitive advantage andpromote good performance with strength in capital and operational activities