VIETNAM NATIONAL UNIVERSITYUNIVERSITY OF ECONOMICS & BUSINESSTOPIC: "SOLUTIONS TO IMPROVE THE QUALITY OF ENTERPRISE CUSTOMER ASSESSMENT ACTIVITIES IN LOANS ACTIVITIES AT SAI GON THUONG T
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- Space range: Sai Gon Thuong Tin Commercial Joint Stock Bank - Thang Long branch, 60A Nguyen Chi Thanh street, Lang Ha, Dong Da, Ha Noi city.
- Method of comparing the fluctuations of numbers over the years.
- Analyzing data, evaluating data in both relative and absolute numbers
- Compare data and information from different audiences and by direct interview method.
Structure of topic includes 3 chapters:
Chapter 1: Theoritical of frame work of enterprise customer appraisal in lending activities at commercial banks.
Chapter 2: Current situation of enterprise customer appraisal in lending activities at Sai Gon Thuong Tin Commercial Joint Stock Bank - Thang Long Branch.
Chapter 3: Solutions to improve the quality of enterprise customer appraisal in lending at Sai Gon Thuong Tin Commercial Joint Stock Bank - Thang LongBranch.
THEORITICAL OF FRAME WORK OF ENTERPRISE
Lending activities at commercial barnKkS - ô+- ô+ ++s+++ee+seee+zeerss 6 1 The basic OfIOTS .- -ó- (6 6 111191 11 1 1v nh TH nh HH ng 6 2 Credit Procedures (+11 vn nh TH nh ng 8 1.2 Appraise enterprise customers in lending activities at commercial banks
According to the Law on Credit Institutions 2010, a commercial bank is defined as a financial institution authorized to perform a wide range of banking operations and related activities for profit, as specified by legal regulations Key banking operations include accepting deposits, extending credit, and providing payment services Credit extension involves agreements allowing individuals or organizations to borrow funds with the obligation of repayment through various methods such as lending, financial leasing, and bank guarantees Commercial banks can offer credit through loans, discounts, and other financial instruments, with the requirement of approval from the State Bank for certain credit forms, including international payment operations.
Lending is a credit extension process where lenders provide customers with a specified amount of money for a designated purpose and time period, with the expectation of repaying both principal and interest Business loans constitute a significant portion of commercial banks' loan portfolios, influencing their profitability The size and quality of these loans are critical factors for banks To qualify for a loan, customers must meet specific borrowing conditions set by the bank.
For clients as legal entities, they must have civil act capacity.
For individual customers, private enterprises, individuals being business owners must have full civil act capacity.
(2) Legal purpose of loan use:
Customers are not allowed to borrow capital for purposes prohibited by law.
The purpose must be consistent with the customer's business registration license Having the financial ability to ensure the timely repayment of debts according to the signed credit contracts:
(i) There is a certain percentage of equity capital involved in the production and business project plan;
(1ủ) Healthy financial situation, profitable business;
(iii) Customers undertaking to buy insurance for the property is the subject of the loan
(iv) No bad debts or overdue liabilities exceeding the regulations of the bank.
(1) Having feasible and effective investment projects, production, business, and service plans; or have feasible investment projects and life service plans following the law.
(2) Comply with regulations on loan security following the Government's regulations and the SBV's guidance.
LÍ Article 7 Circular 39/2016 / TT-SBV
The lending business process involves interconnected tasks that are essential for its operation, with each task relying on the others to function effectively Additionally, it clearly defines the responsibilities assigned to individuals for executing each task, ensuring accountability and streamlined operations.
Step 1 Marketing and credit proposal Step 2 Credit assessment
Step 3 Credit approval Step 4 Sign a credit contract Step 5 Disbursement
Step 6 Supervision and inspection Step 7 Debt collection and debt settlement Step 8 Liquidate the credit contract
Step 1: Marketing and credit proposal
Credit officers play a crucial role in identifying and addressing customer needs while promoting the bank's products They assess customer credit profiles and gather relevant information to conduct thorough appraisals in accordance with regulations Subsequently, they prepare detailed credit proposal reports, which are submitted to the department leader along with the associated credit files.
Credit officers play a crucial role in evaluating potential risks associated with loan applicants by gathering and analyzing financial information They assess the purpose of the borrowing needs and evaluate the collateral provided by customers After conducting a thorough appraisal, they prepare detailed reports to submit for higher-level approval, ensuring informed lending decisions.
The credit department reviews appraisal reports and credit records to determine whether to approve or deny customer loan requests, with relevant department leaders ultimately making the final decision and issuing a notice of approval or denial.
When a bank approves credit, the credit officer negotiates the terms with the customer Upon agreement, the officer prepares and signs a credit contract along with any necessary documents Following the signing, the bank manages and maintains all customer credit records in compliance with its regulations.
Once the credit contract is activated, customers must submit relevant documents to the bank that outline the intended use of the loan, such as economic contracts, invoices, and import-export documents Credit officers will then review these documents to determine the loan payment according to established guidelines.
Credit officers assess the fulfillment of commitments, evaluate the intended use of funds, and analyze the actual status of collateral and investment projects to quickly identify risks and implement necessary mitigation measures.
Step 7: Debt collection and debt settlement
As the repayment deadline approaches, customer managers will proactively remind clients of their debt commitments If any violations or unusual behaviors are observed, swift actions will be taken, including rescheduling repayment terms, offering interest exemptions or reductions, and transferring overdue liabilities.
Step 8: Liquidate the credit contract
When the customer completes the debt repayment obligation, the customer shall carry out the procedures for contract liquidation, mortgage of collateral, and keep the finalized dossiers according to regulations.
1.2 Appraise enterprise customers in lending activities at commercial banks.
As society evolves, banks are diversifying their operations and income sources, yet lending remains their primary revenue generator This credit activity is highly profitable but also carries inherent risks To mitigate these credit risks, commercial banks implement various strategies, with customer appraisal prior to granting loans being the most crucial and effective measure.
Enterprise customer appraisal involves utilizing analytical tools to evaluate the reliability and risks associated with an enterprise customer This process examines key factors such as the customer's status, financial condition, the viability of business plans or investment projects, debt collateral, and the effectiveness of risk management and control measures.
1.2.1 The necessity of customer appraisal in the process of lending to enterprise customers.
Credit is a crucial revenue generator for banks, accounting for over 70% of total profits, particularly in Vietnamese commercial banks While credit activities can be lucrative, they also pose significant risks that can lead to a bank's collapse or bankruptcy Consequently, effective loan appraisal is essential for banks to make informed lending decisions, ensuring they target the right borrowers efficiently and securely, while minimizing potential risks and losses.
Customer appraisal is a crucial first step in the credit evaluation process of commercial banks, determining whether a loan is feasible based on the client's financial capacity If a customer lacks the necessary financial resources or does not meet the legal requirements for civil capacity, the loan process is halted, and credit denial is communicated This appraisal involves a comprehensive assessment of the customer's legal status, living conditions, and business potential, alongside a detailed evaluation of their financial ability to ensure timely debt repayment.
Assessing a customer's legal capacity is essential for banks to validate their debt collection rights under the law This evaluation determines whether a client can engage in a credit relationship and establishes their eligibility for a loan.
CURRENT SITUATION OF ENTERPRISE CUSTOMER
Organizational structure and duties of departmens .- ô-
DEPARTMENT Ae PARTMENT MANAGEMENT | TRANSACTION
RELATIONS DEPARTMENT MANAGEMENT transaction vice DOI
ADVISORY OC CSSING CREDIT MANAGEMENT transaction office
DEPARTMENT DEPARTMENT DEPARTMENT TRAN DUY HUNG
2.1.1.2 Functions and duties of departments
No Deparment Functions and Duties
Oversee and manage all activities within the branch, ensuring effective direction and administration Address and resolve issues related to business operations, staff management, cooperative efforts, and investment strategies to enhance overall industry performance.
+ Take responsibility before the law and the superior leaders for the production and business activities of the branch.
The Board of Directors of the branch holds the authority to appoint, dismiss, and manage key managerial positions Additionally, they are responsible for signing domestic and international economic contracts, ensuring effective management and oversight within the organization.
+ Performing credit-related operations, managing credit products in accordance with the regimes, rules, and guidelines of Sai Gon Thuong Tin Commercial Joint Stock Bank.
+ Directly advertising, marketing, introducing and selling banking products and services to customers Actively looking for customers, building and developing relationships with customers.
+ Advising the Board of Directors on customer development, proposing policies for customers Take responsibility to the Board of Directors for the activities managed by the department.
To effectively oversee the transaction system on the machine, it is essential to manage the cash fund allocated to each teller in compliance with the regulations set forth by the State and Sai Gon Thuong Tin Commercial Joint Stock Bank.
+ Perform operations and work related to the financial management, internal spending at the branch.
+ Advising the director on the implementation of the financial and accounting work of the branch, taking responsibility before the Board of Directors for the activities managed by the department.
+ To undertake jobs related to the support and accounting of credit records according to regulations Drafting a credit agreement Register mortgage, check compliance of loan documents.
+ Evaluate customers, verify documents, monitor outstanding balance, handle bad debts, monitor unsecured credit cards.
Each transaction office operates like a small bank, featuring a Sales Department, Customer Service Department, and Operations Department The branch director allocates loan amounts to department heads based on the prevailing economic conditions during each period.
Business performance characteristics - +5 ô5+ +<<*++e++seeszeeess 29 2.2 Current situation of appraisal in activities of lending to enterprise customers
2.1.2.1 Business areas ¢ Mobilizing short-term, medium-term and long-term capital of all organizations and individuals with forms of time deposit, demand deposit, certificate of deposit in VND.
* Receive investment and development capital from domestic organizations. ¢ Borrowing from other credit institutions.
Providing short, medium and long-term loans to organizations and individuals, depending on the nature and ability of the capital source. ¢ Discount commercial paper, bonds and valuable papers.
* Contribution of capital and joint ventures in accordance with current laws.
* Payment services between customers. ¢ Trading in foreign currencies, gold and silver.
In recent years, the global economy has experienced steady growth, and Vietnam's economy has demonstrated significant improvement compared to 2018 Amidst intense competition in the banking sector, Sacombank's Thang Long branch has successfully maintained stable and appropriately growing mobilized capital through reasonable and flexible operating policies.
Table 2.1: CAPITAL MOBILIZATION OF SAIGON THUONG TIN COMMERCIAL JOINT STOCK BANK - THANG LONG BRANCH
Expected | Reality | Expected | Reality | Expected | Reality
Classified by type of deposit VND 2.967.000 | 3.156.548 | 3.713.286 | 3.860.175 | 5.280.175 | 5.081.175 USD 193.000 | 141.908 | 249.532 | 209.026 | 309.026 | 409.026
Classification by term Non-term 1.232.481 | 1.375.829 | 1.730.068 | 1.796.892 | 1.718.812 | 2.291.854 deposit
Source: Annual reports for the years 2018,2019,2020 of Sacombank-
Thang Long branch Bank's mobilized capital tends to increase over the years Specifically, in
In 2018, the total mobilized capital was 3,048,627 million dong This figure rose to 4,175,583 million dong in 2019, marking an increase of 1,156,956 million dong and a growth rate of 36.9% By 2020, the capital further increased to 5,849,331 million dong, reflecting an additional rise of 1,673,748 million dong compared to the previous year.
Sacombank - Thang Long branch has consistently adapted to market fluctuations by gradually increasing its mobilized capital and offering competitive interest rates, even during the challenges posed by the Covid-19 pandemic While it ranks among the banks with high interest rates, it does not hold the top position Through flexible management and responsible practices, Sacombank has stabilized its operations and enhanced its scale and efficiency Additionally, the bank provides supportive loan packages for businesses and individuals, resulting in a significant increase in capital raised compared to industry averages, further solidifying Sacombank's growing reputation among customers.
The Sacombank - Thang Long branch primarily relies on VND mobilization for its capital, achieving a significant growth rate of 23.35% in 2019 compared to 2018, which further increased to 30.92% in 2020 In contrast, capital mobilization in USD remains minimal due to a 0% interest rate on USD deposits.
Term deposits account for a larger proportion than demand deposits In
In 2020, term deposits are expected to account for 57.23% of total mobilized capital, reflecting an increase of nearly 4% from 2019 This rise is primarily attributed to the higher interest rates offered on term deposits compared to demand deposits, prompting customers to invest their funds for durations of 6, 12, or even 24 months.
Lending is a key profitable activity for banks, and Sacombank - Thang Long branch has excelled in this area in recent years In addition to providing loans to individual customers, the branch has also focused on expanding its lending limits to enhance its services.
31 investment loans to with large-scale projects Data on capital use activities of Sacombank - Thang Long branch is shown in the following table:
Table 2.2: LOAN SITUATION AT SAIGON THUONG TIN COMMERCIAL JOINT STOCK BANK - THAN THANG BRANCH
Expected | Reality | Expected | Reality | Expected | Reality Total outstanding credit (including | 2.313.660 | 2.841.265 | 3.105.539 | 3.410.057 | 3.903.061 | 4.012.059 VND and foreign currencies)
Sort by loan currency VND 1.846.440 | 2.163.423 | 2.700.055 | 3.087.623 | 3.587.623 | 3.687.623 USD 467.220 | 387.845 | 405.484 | 315.438 | 315.438 | 315.438
Short-term 1.248.887 | 1.077.423 | 1.287.652 | 1.330.500 | 1.926.542 | 1.872.686 Medium - Long 1.064.773 | 1.473.845 | 1.817.887 | 2.072.561 | 1.976.519 | 2.130.375 term
Source: Annual reports for the years 2018,2019,2020 of Sacombank - Thang
Long branch Through the statistics table shows that the actual amount of capital loans for Sacombank - Thang Long branch has increased over the years and all
In 2020, Sacombank's Thang Long branch achieved a loan amount of VND 4,012,059 million, marking a significant increase of VND 602,002 million from 2019, which translates to a growth rate of 17.65% Compared to 2018, this growth rate soared to 141% This impressive growth can be attributed to the branch's expanded lending policies for both individual and corporate clients, as well as the strategic implementation of preferential interest rate programs designed to attract potential customers to Sacombank.
Sacombank's Thang Long branch primarily mobilizes funds in Vietnamese Dong (VND), resulting in a significant majority of its loans being issued in VND Currently, loans in VND constitute over 82% of the branch's total outstanding loans Notably, in 2020, the proportion of VND loans to total outstanding loans surged to 92.12%, reflecting an impressive increase of 18.57% compared to 2019.
The low proportion of foreign currency debt balance can be attributed to regulatory measures implemented by the State Bank, including Decree No 70/2014/ND-CP, which details the enforcement of certain articles in the Foreign Exchange Ordinance, and Circular 15/2015/TT-NHNN, which guides foreign currency transactions for authorized credit institutions, thereby restricting foreign currency loans.
Sacombank's Thang Long branch primarily offers medium to long-term loans, in accordance with the credit policy established by Decision No 41/2019/QD-HDQT on May 9, 2019 The classification of loan terms includes short-term loans (up to 1 year), medium-term loans (over 1 year and up to 5 years), and long-term loans (over 5 years) The bank collaborates with customers to evaluate credit applications based on their business cycle, cash flow forecasts, investment project capital recovery periods, debt repayment capabilities, and available credit resources.
In 2020, medium- and long-term loans constituted over 53% of Sacombank - Thang Long branch's total loans, a decrease from 60.8% in 2019 This lending strategy not only enhances the bank's profitability but also reduces credit risks, highlighting the importance of suitable debt repayment terms and extension periods.
Over the years, loans to enterprise customers have consistently represented a significant portion of total outstanding loans, with 79% in 2018, followed by 75.3% in 2019 and 76% in 2020 Despite a relative decrease in the loan balance for corporate clients, the absolute number has shown steady growth Notably, in 2019, outstanding loans to corporate customers experienced a remarkable growth rate of 28.82% compared to the previous year.
In 2020, Sacombank is projected to achieve a remarkable 15% growth rate compared to 2019, driven by a substantial loan balance for corporate customers The bank's commitment to supporting businesses is evident, as it imposes no limits on total loans within this program With its robust financial capabilities, Sacombank is well-positioned to fulfill the capital requirements of enterprises.
Amount | the difference | Amount | the difference
Targets total revenue | 197.206 | 239.672 | 42.466 | 21,53 | 261.663 | 21.991 | 9,18 total cost 77.508 87.754 10.246 | 13,22 | 90.879 3.125 3,56
(Source: Annual reports of Sacombank - Thang Long branch 2018 - 2020)
The branch has experienced a consistent increase in profit before tax over the years, with total profits rising from 89,863 million VND in 2018 to 131,988 million VND in 2019.
2018 to 42,125 million VND corresponding to an increase rate of 46.84% In
In 2019, Sacombank experienced a significant increase in total profit before tax, primarily driven by enhanced earnings from lending and mobilization activities This growth highlights the effectiveness of Sacombank's strategic business approaches, which have successfully generated high profits.
Long branch is on the way of effective development, making a great contribution to the development of the whole banking system By 2020, the
Earnings before taxes will reach VND 153,031 million, an increase of VND
21,043 million compared to 2019, equivalent to the rate of 15.9%.
Evaluate the effectiveness of credit appraisal quality at Sacombank, Thang
With the progressive development of the Vietnamese economy in general and in Dong Da district particularly, Sacombank Bank -Thang Long branch has
Sacombank has consistently innovated and expanded its operations, enhancing its reputation and standing in the banking industry The bank's success can be attributed to its effective credit activities, particularly in credit appraisal Analysis of the Thang Long branch's credit appraisal process reveals a high-quality procedure that is continually improving, with impressive evaluation metrics in recent years The outstanding debt and non-performing loan (NPL) ratios have decreased significantly, while the time required for credit appraisals has been substantially reduced, resulting in lower appraisal costs The branch employs skilled credit officers with advanced qualifications who adhere closely to the appraisal process, ensuring a smooth operation This commitment to quality has positioned Sacombank - Thang Long as a preferred choice for both domestic and foreign customers seeking loans, due to its accurate and suitable appraisal timelines and the professionalism of its staff However, while the appraisal time has improved, it remains longer compared to some competitors, averaging 3 to 6 days, compared to Techombank's under 5 days and MB Bank's 4 days.
In a highly competitive banking environment, Sacombank's Thang Long branch faces a significant challenge with a credit appraisal processing time of 46 working days, which may be even longer for first-time customers To maintain its competitive edge, it is crucial for the bank to expedite this process While the branch has achieved notable successes in its credit operations, there remain areas for improvement that must be addressed promptly.
2.3.2.2 Achievements of credit appraisal activities at Sacombank, Thang Long branch
In the current era of economic growth, living standards have significantly improved, creating favorable conditions for banking operations The government's Development Policy emphasizes the private economy as a key driver, increasing the demand for individual capital Since individuals often lack the ability to mobilize funds like businesses, borrowing from banks becomes the most viable option when financial needs exceed personal capacity Recognizing this, Sacombank has consistently worked to enhance its infrastructure and human resources, aiming to meet the needs of traditional customers while leveraging insights from existing clients to attract new ones.
The Bank prioritizes the qualifications of its specialists by organizing short-term professional training courses and providing essential documentation related to appraisal and lending activities These initiatives are aimed at all official members and interns, fostering a culture of continuous improvement through contests that enhance expertise and professional skills This approach not only aims to elevate staff capabilities but also creates a comfortable working environment that encourages self-development at Sacombank Thang Long.
The 47 branch adheres rigorously to the loan process, including credit appraisal, appraisal periods, loan guarantee periods, and appraisal reorganization, ensuring high-quality loans that enhance the Bank's profitability.
The branch has gained substantial experience in appraisal activities, enabling it to effectively meet business needs while enhancing customer service Credit appraisal serves to identify errors and inefficiencies in loan applications and plans, while also providing valuable advice to customers on optimizing their business proposals This approach has strengthened the branch's reputation and customer relationships, resulting in a consistent increase in loan applications over the years.
The advancement of information technology is driving the modernization of banking systems, enabling seamless information updates across various branches and significantly reducing verification times.
In the Bank's lending operations, the efficiency of credit verification for borrowers is crucial, as it directly impacts time and appraisal costs By streamlining this process, the bank not only lowers its expenses but also enhances the quality of credit assessments and loan offerings Consequently, both the bad debt and overdue debt ratios remain well within the limits established by the State Bank, demonstrating Sacombank's commitment to rigorous credit appraisal practices Despite facing various challenges, the bank effectively manages risk by rejecting numerous high-risk applicants, ensuring that credit control activities align with the oversight of the Board of Management.
With the achievements accomplished during the past time, along with the constant efforts to improve, the bank did meet the strict criteria, as well as
Sacombank is committed to enhancing productivity through active research and the implementation of internal solutions, focusing on sustainable development to boost competitiveness The bank believes that sustainable practices will foster trust among customers, investors, and shareholders while also contributing to the nation's growth.
The problems still X1S << + E1 E31 33 E9 nng rưkt 49
Despite achieving notable results in credit appraisal at Sacombank's Thang Long branch, including guaranteed loans and a decrease in outstanding debt and non-performing loans (NPL), there are still significant concerns The risk control inspections do not align with the capabilities of Sacombank's staff, highlighting existing limitations that need to be addressed.
Many customers misallocate their loan funds, applying for loans with purposes that do not align with their actual usage For instance, some borrow money intended for business ventures but instead use it for personal expenses like purchasing vehicles or building homes This mismanagement often leads to outstanding debts and complicates the debt collection process.
Managing and tracking customer debt remains a challenge in various professions, as many staff members struggle to inform clients about due payments With a large volume of responsibilities, including managing loan deposits, product groups, and accounts, bank clerks often work overtime, especially during the Covid-19 pandemic This has resulted in some clients and businesses failing to meet their debt repayment obligations on time, contributing to an increase in outstanding debt balances.
Third, countless documents on collateral assets are not strictly guaranteed in terms of legal terms, value of collateral is not correct with actual value,
The presence of 49 incorrect loans and loans exceeding collateral highlights significant issues in the lending process Evaluation information remains passive and inconsistent, largely relying on customer-provided data, particularly from regular clients, which can lead to biased assessments and increased risks of misjudging customers This situation adversely affects loan capital efficiency and prolongs the loan recovery period.
The customer's land, mortgaged at the bank, serves as collateral due to the outstanding loan balance A sale and purchase contract, along with all necessary legal documents, prohibits the customer from selling or transferring the land during the loan repayment period The customer's company utilized the debtor's land use rights to initiate bank loan procedures; however, the bank faced delays in loan collection due to legal procedural issues.
Customer care at Sacombank has not fully leveraged modern media and technology, resulting in a lack of integration with e-commerce platforms to address the growing shopping needs of customers Additionally, Sacombank's limited presence on various e-wallets and the absence of promotional offers and loyalty programs on e-commerce channels hinder its ability to enhance customer engagement and satisfaction.
The appraisal for lending is sometimes still subjective, the appraisal results are sometimes affected more or less by the identical relationship between Sacombank - Thang Long branch with customers.