Luận văn improve the mortgaged real estate valuation at joint stock commercial bank for investment and development of viet nam so giao dich 1 branch

DAT HOC QUOC GIA HA NOT KHOA QUAN TRI VA KINH DOANH NGUYEN MINH HAT IMPROVE THE MORTGAGED REAL ESTATE VALUATION AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNA

DAT HOC QUOC GIA HA NOT

KHOA QUAN TRI VA KINH DOANH

NGUYEN MINH HAT

IMPROVE THE MORTGAGED REAL ESTATE VALUATION AT JOINT STOCK COMMERCIAL BANK

FOR INVESTMENT AND DEVELOPMENT OF VIETNAM —

8O GIAO DICH 1 BRANCH

GIAI PHAP NANG CAO HIEU QUA KINH DOANH

THE TAI BIDV SO GIAO DICH 1

LUAN VAN THAC Si QUAN TRI KINH DOANH

HA NOI - 2020

DAI AOC QUOC GIA HA NOT

KHOA QUAN TRI VA KINH DOANIL

NGUYEN MINH HAI

IMPROVE THE MORTGAGED REAL ESTATE VALUATION AT JOINT STOCK COMMERCIAL BANK

FOR INVESTMENT AND DEVELOPMENT OF VIETNAN

SO GIAO DICH 1 BRANCH

GIAI PHAP NANG CAO HIEU QUA KINH DOANH

THE TAI BIDV SO GIAO DICH 1

Chuyên ngành: Quản trị kinh duanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẦN THỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS HOANG DINH PHI

HÀ NỘI - 2020

DECLARATION

J assure that this is my own scientific research The docianents used in the thesis

are excerpted fram reliable sources The assessments and judgments in this thesis are

individually researched and based on the authentic documents

The dissertation author

L would Like to express my sincere thanks to the Board of Directors, officers and emplayces of Bank for Investment and Development of Viotnam - So Giao Dich | Branch for their enthusiastic support during the data collection process to finish the thesis

Finally, I would like to express my sincere thanks to my family, friends and colleagues who have always created favorable conditions to help, encourage me during the

tune of writing my thesis.

TABLE OF CONTENT

DECLARATION ee ` ng i ACKNOWLEDGEMENT oat W»/4gi/2t2f4 78 2 = LIST OF ABBREVIATION ee ee biSGiii.S/38048040280303g0 iv

LIST OF TABLES iis 1áxtH8)2d8104G008164 sca `" v

18571 OE TE BS corres era ae TE TEE vi TNTRODUCTION ona nero ETE Tne Toone oT MITE 1

1 The necessity of the topic

2 Objectives of the study §8ttidS0881008680-8586Ấ400383086 2

3 Researched subjects TH HH 0 01 es „3

4 Research scope axe

5 Research methodology ccs ccs TH se 2

CHAPTER 1: THEORETICAL BASIS FOR MORTGAGED REAL ESTATE VALUATION OF COMMERCIAL BANK

1.1 Overview of mortgaged real estate

1.1.1 Definition of Mortgaged real estate

1.1.2 Features of mortgaged real estate

1.1.3 The role of mortgaged real estate

1.2 Valuation of mortgaged real estate of joint stock commercial banks

1.2.1 Definition of Mortgaged real estate valuation

1.2.2 Foundation and principles of mortgaged RE valuation _— 9

1.2.3 Mortgaged real estate valuation methods = /euanseeaosnslSl:

1.2.4 Mortgaged real estate valuation process

2.1 Overview of Joint stock Commercial Bank for Investment and Development

of Vietnam - So Giao Dich I Branch cssessssessinesneeineeneeneatinee 20 2.1.1 The process of formalion and development - - 20 2.1.2 Organizatuonal strueEdE6 seesieee sete sesteeee ¬ - 2.1.2 Business situation of Joint stock Commercial Bank for Investment And

Developmart Of Vietnam - So Giao Dich 1 Branch between 2016 and 2018 23

2.2 Analyze the status of mortgaged RE valuation at th Joint Stock Commereial

Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch .29

2.2.1 Types of mortgaged real ostate at the Branch 1

2.2.2 Bases and principles of mortgaged RU valuation at the branch 30

2.2.3 Current situation valuation method at the Branch AZ

2.2.4 Current situation of mortgaged RE valuation process at the Branch 45 2.3, Evaluate the status of mortgaged RE valuation at Joint Stock Commercial Bank for Investment and Development of Vietnam - $o Giao Dich 1 Branch 53

1 Achieved resulfs se

343

CHAPTER 3: SOLUTIONS TO IMPROVE THE VAILUATION OF MORTGAGED RUAL UST:

3.1.2 Orientation to improve the morigaged RE valuation 39

3.2 A mumber of solutions to improve the mortgaged RE valuation at Joint Stock

Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1

3.2.1 Big dala apphicalion in mortgage real oslate valuation 60

3.2.2 Completing and strictly complying with the process of valuation for

3.2.5, Limiting risks and mistalcos in valuation

3.2.6 Improve the organization of RỊ! valusion activities

3.2.7 Strengthen the apphealion of science and lechnology

LIST OF ABBREVIATION

No | Abbreviation Meaning

MRE Mortgaged real eslate

> |BIDV Bank for Investment and Development of Vietnam

3 | MOY Ministry of Finance

LIST OF TABLES

Branch between 2016 and 2018

Credil aclivity resulis of BIDV So Giao Dich 1 Branch

between 2016 and 2018

Service performance results of BIDV So Giao Dich 1

Branch between 2016 and 2018

Debit balance for mortgaged real estate of BIDV So Giao

Dich 1 Branch between 2016 and 2018

‘Number of assessed the real estate documents of Bidy- So

Giao Dich 1 Branch between 2016 ard 2018

Ths mumber of the real estate valuation documents with

Table 2.6 deviations from the revaluation of BIDV So Giao Dich 1] 39

need to be adjusted by BIDV So Giao Dich 1 Branch

The survey results of infonnation collected are used for

Table 2.9 | valustion mortgaged real cslaic of BIDV So Giao Dich 1] 4?

Branch

Survey results of the time to evaluate the value of the real

estate of BLDV So Giao Dich? Branch

Survey resulis of the mortgaged real cslaie valuntion process

Table 2.11 of BIDV Sa Giao Dịch 1 Branch 50

INTRODUCTION

1 The necessity of the topic

In today’s world, the banking system in Vietnam has developed quite thoroughly which plays an important role in the circulation of capital in the economy and contributes

to socio-cconomic development The general operational principle of commercial banks is safety and profitability To ensure two principles above, commercial banks create operational process as well as compulsory requirements for all credil activities in particular,, in credit lending activities, commercial banks often require customers to have collaterals Based on collaterals, commercial banks determine the loan and the appropriate

Joan ammount, Besides, the collatcrals arc very div

Cimrently, most of the collaterals for bank loans are often the real estate

Mortgaged real estate valuation is one of the most important operations in credit

activities of commercial banks On the one hand, from banks’ perspective, the valuation not only helps the bank to determine a reasonable oan level bascd on calculation and prediction of potential risks but also incveases the competitiveness of commercial banks in establishing reputation and attracting customers in the field of lending, improving the quality of lending, activitics In particular, and credit activitics in gencral of commercial banks, From customers’ perspective, the accurate and reasonable determination of the value

of morigaged teal estate will accelerate capilal conversion in production and business, AL the sam time, il will build trust for customers in the quality of operations of commercial

banks, which is truly considered as a "midwife" when customers need capital

Joint stock Commercial Bank for Investment and Development of Vietmam - So

Giao Dich 1 Branch has incrcasingly affirmed the prestige and market share in credit activities in the area, With credit activities, the Branch always focuses on the valuation of mortgaged real estate Ltowever, there still exist many shortcomings in the morigaged real cstalc valuation al the branch sucht as: customer relationship departuent is still involved in the real estate loan valuation without showing complete objectivity To ensure the safety of

a loan, the vaine of the real estate usually accounts for 70% of the market valus and this price scale is often lower than the Teal valuz of the Teal eslale, which, as a consequence, influences the loan limit as well as the benetits that the borrower may have Moreover, the application of evaluation methods is still not flexible and re-evaluation requesis are still popular

From the above practice, the author has chosen the topic; "Completing, the valuation of

1

mortgaged real estate at Joint Stock Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch * as the rescarch topic

2, Objectives of the study

+ Provide basic theoretical issues on the real estate valuation, mortgaged real estate valuation of commercial banks

- Analyze the current situation of mortgaged real estate valuation at BIDV - So Giao Dich

1 Branch between 2016 and 2018 Indicate the achieved results but also clarify the

Tinmitations and their causes in the valuation of morlgaged real eslals at the branch

- Propose a number of solutions to improve the anortgaged real estate valuation at BIDV -

So Giao Dich 1 Branch by 2025

- Interms of time: Data collected during 2016 - 2018

+ Inlerms of space: Dissertation al BIDV - So Giao Dich | Branch

5, Rescarch metha:iol

- The method af data coltection

Secondary data: ‘'o analyze and assess the status of mortgaged real estate valuation

at IDV - So Giae Dich 1 Branch, the author collects secondary data from textbooks, magazines, Infernet, the research works related to mortgaged real estate valuation of commercial banks At the same time, the author collects from the business reports of BIDV - So Giao Dich 1 Branch; The current legal documents of the Slale and BIDV related to loan guarantee, property valuation and other legal documents related to the real

estate management

Primary dita: The aulhor surveyed employees tubers a BIDV - So Giao Dich |

Branch related to valuation activities mortgaged real estate The content of the survey aims

to evaluate the real estate valuation at BIDV-So Giao Dich 1 Branch such as the

compliance with the rogulations on morigaged rou ostate valuation, the reasonableness of the mortgaged real estate valuation method, the basis for valuating mortgaged real estate at

2

‘the branch

Sample sixe’ 70 staffs

Sampling method: Random selection

- Data processing method

The data is collected and summarized and processed by Excel software

- Methods of information analysis include:

+ Descriptive statistical method: Summing up the collected data and data to deseribe

compar: the differenecs in the application of smerigaged real stale valuation methods

Comparison with absolute numbers; Through the results of the word between the values of the analysis between compared to the base between of economic indicators, the absolute numerical variation of the analytical criteria is found

Relative numerical comparison; From the results of comparison between the actual number and the original number, it has been adjusted according te a coeflicient of the relevant norm in the direction of the scale of the analytical index to see reality compared to the base between how many percentages increase or decrcasc?

= Method of graphing: ‘The method of representing analytical otiteria through chart types and graphs From the visual recognition of the shape of @ straight Hine or a bar

graph, TLis possible to assess the trend, the dograe of fluctuation af the indicators, or to

evaluate the proportion of the constituent parts

Survey method: ‘the author collects information from the survey subjects who are employces involved in mortgaged cal cstate valuation al BIDV-So Giao Dich 1 Branch Through the results of the survey, the author assesses the results and limitations in

the real estate valuation activities at BDV - So Giao Dich | Branch

6 The structure of the thesis

In addition to the introduction, conclusion, list of references, , the thesis consists

of 3 chapters

Chapter 1 Rationale for commercial the real estals valuation of commercial baiks

Chapter 2, Actual situation of mortgaged real estate valuation at Joint Stock

Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch

Chapter 3 Solutions fo perfect the valuation of mortgaged real gstate al Joint Slack

Commercial Bank for Investinent and Development of Vietnam So Giao Dich 1 Branch

3

CILAPTER 1 THEORETICAL BASIS FOR MORTGAGED REAL ESTATE VALUATION

OF COMMERCIAL BANK

1.1 Overview of mortgaged real estate

1.1.1 Definition of Mortgaged real estate

‘The real estate is a commonly used concept in almost every country in the world In English people use the word “The real estate” In French the concep! of the real estate (RT)

is represented by the word “Immobilier”; China uses the term “Property” (assats associated with land) In Vietnam the concept of RE is expressed in Article 174 of the Civil Code:

construction works

“The real oslate is itmmovable property induding: Land, haus

attached to land, including proparties associated with such houses and constructions, Other properties associated with the land; Other properties prescribed by law”, Identifying properties as real or the real estate is not simple Whether all the buildings and architecture axc called RE; Sunilarly, arc all proportics associated with the construction work also RE? Even to all lands are considered RE? These difficulties often make business or the teal estate appraisers have misconception about the true valne of the RE consideration In order to avoid crrors in RE cvaluation, we need to study to identify the specific characteristics of RE, criteria to distinguish between RE and movable

property, and other properties,

Thus, RE are physical assets thal cannol be relocated, and oxist in long-ierm stability Thus, an asset is considered RE when the following conditions are met:

- Being a material elernent useful to people;

- Occupied by an individual or a community of people,

- Can be measured by certain values,

= Cannot be relocated or just limited relocated so that its properties, fimctions and morphology are uot changed;

- Long-term existence

RE can be classified into the following groups:

- Land: Land is the first element and a basic component of RR Withoul land thers cannot be RE and vice versa no kind of RE that is not tied to the Jand So the land itself

is RE and it is also an integral part of other RE However, not all lands are RE Only those arcas of lanđ Thai aro tot relocated or relocated insignificanlly, which have their own sovereignty defined, measured and quantified according to certain measurement standards

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- Construction works associated with the land and properties attached to such works Permanent, construction houses canmol be relogaled, or are noi maved significantly construction works attached to land The properties attached are inseparable fom that construction these constructions must be able to measure and quantify into values according to certain measurement standards

- Other propartics associated with land such as percnnial gardens, constructions for aquaculture, salt fields, tourism, recreation, sports and mining projects

The above delirnitation of RE helps appraisers understand the essence of RR thereby drawing the unique characteristics of the RE to have a basis for determining the value of the real estate assets

Regarding RE Morigage in lending activity of cemmerctal banks (CB)

RE is always an important guaranteed asset and accounts for a large proportion in the total collateral of commercial banks, including major properties such as land, houses, workshops, construction warks attached to land and properties associated with construction, works They may be cxisting asscts, they may also be asscts formed in the future (ic assets formed during and after the time of signing the mortgage contract) such as income gained from using R)

To be collaterals in lending activitics, RE must mect the following conditions:

- Under the ovmership of the mortgage at the time of signing morigage transactions RE

ets formed from loan capital, constriction works in the future

-REwithont dispule’ RE when signing 2 securily transaction, the owner of thal RE is not sued by a third persem at a court or competent State agency

-RE nmst be allowed to be traded and able to be sold: The real estate is not prohibited from circulation as preseribed by Jaw at the time of signing the mortgage transaction For activities of morgage londing of commerciat beniks, the requirements on the liquidity of the collateral is of paramount importance, Therefore, besides the conditions

on the legal nature of the real estate, the condition of the ability to transfer or the Equidity

in the inwrket of collateral is very interested in commercial banks

In order to determine the loan size based on customer requirements and the value of collateral, one of the first requirements in mortgage Jending is to require the bank to

valuate the real estale at (he lime of signing the guaranteed contract For each type of asseL,

depending on the nature, characteristics of the asset and the relationship with customers, the bank has different ways of evaluating, RE is a kind of special property, diversity, the components of the Teal calals value is vory complax and also very different than the property is the real estate or other assets, even in some countries it is considered

5

property the real estate is the power assets (ic the assets expressed in the form of ownership and the right to use RE, nol the RE iisctf), Therefore, determining the valuc

of RE requires specific methods of determination,

1.1.2 Features of mortgaged real estate

Tn addition to the characteristics created by an asset, the real estate assets have their own characteristics that other propertics do not make the property different from other properties, At the same time, it is also one of the factors that create the real estate value Therefore, appraisers need to consider how these characteristics affect RE values

First of all, RE is an asset attached to land or is a land that cannot be relocated, so it

is always considered a fixed asset ‘'herefore, the value and benefits of RE are associated with cach specific position The location factor is nol only delermincd by commnơn peographic measurement criteria, but it is assessed primarily by the distance to canters, to public service points, to public facilities such as commercial, cultural, medical, educational and dependent on accessi

ity Also because RE has a fixed position and is associated with a

certain location, the value and bencfits of the real estate are affected by regional factors It is

the duty of the appraisers to evaluate the impact of location factors on RE values such as

natural, socio-economic and environmental conditions When there are changes in the

above factars, the valuc of RE will change accordingly

‘the real estate is also a special property and individual ‘the difference of RE is primarily due lo the difference in plot lacation; different in structure and architecture,

different in direction, different in landscape and exterior Therzfore, when evaluating RE, it

is necessary to pay attention to the diffrence of each RE individual, can not valuate and compare stamping between A with each other

The real cslale is a Com of property with Timniied surface ares size due to land area Himits and location factors, which leads to the zeal estate shortage In addition, the supply- demand relationship of the real estate always unbalanced in the direction of supply is

smaller (han demand, leading to speculation about the real cstate, so in Lhe long term, the

real estate value tends to inorease, especially in the developing areas or potential

development areas

The real estale is a type of properly Ihat has a very slrong influence belween adjacent the seal estate and has a strong impact on the related socio-economic activities When evaluating the real estate prices, it is necessary to take into account the impact when other the real estate projects will be born

In addition, RE is also a property of great value and long term existence in tems of

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both the physical Life and economic life of RL Therefore, when evaluating the RU, it

is necessary lo consider and caleulale the erystallizzition expenses in the process of

Tonmng RE and the time to bring income to RE users

1.1.3 The role of mortgaged real estate

For property owners

While customers mortgage the real estate, customers not only have capital for production and business but also can continue to use the mortgaged real estate, improving the efficiency of the real estals use Al the sarne time, when customers coms lo morlgage the real estate to borrow capital, mortgaged real estate must have legal papers, so

customers need to go to the state management ageney to complete the documents ‘his has

reduced the stale wilhoul Tegal documents while speeding up tl wance of papers

and reforming administrative procedures

This is a form of capital mobilization when necessary, effective, fast for individuals

and organizations [lowever, the organizations and individuals who use this form often

cucounter a grcat difficulty and difficulty, i.c., the rcal estate when being mortgaged is

usually only valuated by commercial banks at very low prices, which is the price when the market was quietest Thns, the value of mortgaged real estate is not accurately valuated

causing disadvantages for individuals and organizations when borrowing capital

For credit institutions (mainly Banks)

Bank is a financial business organization Therefore, currency ralalion is the train

uctivily Getting mortgaged stato In particular, and gelling property morlgug:

general are one of the activities that help the cureney flow regularly,

Getting the real estate mortgages can increase the amount of reserve capital by

commercial banks! assels, generating profits for banks (inleresls thal morigage collectors must pay to banks) Banks, when realizing mortgage loans, will gain profit from lending,

contributing to increase the bank's overall profit from which the bank will ensure business

activities, creale eondilions for The banking system has developed in both size and quality,

contributing to managing the volume of circulating currencies in the monetary policy of

the State Bank

Getting morigaged real estate In particular, and collaterals in general can entance the borrower's responsibility to fulfill debt repayment commitments, and at the same tine prevent risks when the borrower's expected repayment plan fails to perform or unforeseen

visks occur

For economy

‘The mortgage of RE at banks to borrow capital helps individuals and economic organizations get the necessary capital to invest in production and business, create malerial

products to serve society, raise revenues It also contributes to improving the material and

spiritual life of the people, contributing to the development of relevant economic sectors and at the same time contributing to the overall development of the comntry's common economy,

Banks making mortgage loans RE products will profit from lending, from the profils of the operation of morlgage lending hel

ed increase overall profilabitity

of commercial banks, thereby bank trade will ensure business activities, create favorable conditions for the banking system to grow in both size and quality, contributing to

inanaging the volume of circalating curroneic

thereby promoting financial markets to develop healthily and sustainably A healthy financial market is an essential element to ensure macroeconomic, contribute to economic

m the monctary policy of the Slalc Bank,

growth and improve the competitiveness of the economy

1.2 Valuation of mortgaged real estate of joint stock commercial banks 1.2.1 Definition of Mortgaged real estate valuation

According to Oxford Dictionary: “Valuation is a professional judgement about how much moncy something is worth; it’s cstimated valuc"

According to Hred Peter Manone - Marketing Director of AVO (Association of Australia Trvaluation) presented in a valuation training course in Ta Chi Mitdh City om 25/05/1999 “Valuation is the dolcnrinatiơn of the valuc of RE al a time, taking into account the nature of the propezty and the purpose of its valuation So pricing is applying the comparative market data that you collect and analyze, and then compare it with the

you valuc to determine their value

According to the Law on The real estate Business, RE valuation is an activity of consulting and determining the price of a specific RU at a specified time ‘The valuation oCRE must be baszd on (cohnical standards, nature, lovation, scale, real situation ofRE and market price at the time of valuation RE valuation must be independent, objective, honest and compliant with law

According to Axticle 4, the Law on Prices was passed by the National Assernbly of the Sooalist Republic of Vietnam on Jane 20, 2012 “Valuation is the regulation of the competent State agency ar the organization of individual production and business prices for

goods and servic

From the above points of view, RE valuation is the determination of a specific

8

property value for a certain purpose, at a given time, taking into account the characteristics

of the RF, potential economic factors in the RE markel, according to cerlain methods and standards

‘Therefore, marigaged RL valuation is an estimate of the value of morigaged RL for the purpose of determining the loan amount to the borrower, limiting the risk to fhe lender

at a specific time, taking into account the characteristics of RE and the potential cconomic

factors in the KE market ‘I'he assessed value of RE may be equal to, higher or lower than the market value The accuracy of the estimated price depends on the qualifications,

competence and experience of the appraiser, the reputation of the valuation service

providers and other social conditions

Th author's vicw, mortgaged

eslalc valualion is đeienmiring the value of

mortgaged real estate In particular, by morphological currency at a specific time, as basis tor

determinmg the level of lending by banks based on the collateral is RE Valuation of

mortgaged real estate is one of the important processes and the indispensable rules of lending

‘by commercial banks in order to determine the Icgality of collatcral RE and is the basis for

inclusion of reasonable lending rates

1.2.2, Foundation and principles of mortgaged RE valuation

1.2.2.1 Foundation of mortgaged real estate valuation

First, it depends on the elements of the RE itself

The valuation mortgaged eslale musi be based on elements of the value of RE thal

surface Jocalion, space, cnvironment, counortie, social, nalunel, Based on the uliity, purpose of use and exploitation of RE Based on the artificial form of the real estate such as

structure, architecture of the real estate: the churability of the real estate; Psychology related to

the cuntent sel of the real estate

Based on factors of the real estate location and the influence of the location: Location of RU the relationship between this RL in the overall with other RE to see this

RE position compared io other RE, whieh plays role of RE valuation

Second, it is based on market conditions

‘These are the competition of the market and factors of the economy, supply and demand for the real estale, the impact and econotic development in general such as the

expanding areas, the demand for the real estate in the center increases, with large

investment capital amount, the demand for the real estate also increase

Third, it is based on legal hasis

Including legal factors related to the real estate, laws not related to the real

9

estate itself, which are general provisions, regulations on the possession and use of the real

estate fimclions, but provisions of law related to valuation activitics and methods of

determining land prices

1.2.2.2 Principles of mortgaged real estate valuation

The value of the real estate is formed by many impact factors stich as use value,

scarcity, demand, solvency When studying the valuation process, it is neecssary to

consider and apply the rules and principles to accurately evaluate the impact of such

faclors on the real estate valuation

The essence of the real estate valuation is the analysis of factors that influence the

value formation process of a particular asset

Firstly, the best and most affecitve use principles

The best and most effective use of the real estate is to achieve the maximum level of

usefulness in practically appropriate socio-economic circumstances, which can

be economically, regulatory, financially and economically permissible, bringing the

gicatest valuc to the rcal estate

A property is considered to be the most effective and most effective if it shows at The time of valuation that the property is being used legally as well as giving the greatest

ut income or the ability to give the greatest present value of future The highest usage can

persist continuously for a specified between of time ‘he highest and most effective use

reflected in Ihe four faces is:

- Legality of use and ineome stream

- The present value of net income flows of all elements constituting the largest the

real estats

+ Time for long and stable income

- Satisfying common selection criteria suitable for size

‘therefore, when conducting the real estate valuation, it is necessary to evaluate the

current slalus of the real estate in order lo estimate the best valuc of RE

Secondly, the principle of supply and demand

The value of a the real estate is determined by the supply - demand relationship of thal the real eslale in the market In contrast, the value of the real estate also affects supply

and demand of the real estate The value of the real estate changes proportional to demand

and inversely proportional to the supply of the real estate

The value of the Teal estale is delermined by the supply-demand relationship, which

has physical and socio-economic characteristics different from those of other the real estate

10

properties This atiritute is reflected in the supply and demand relationship and the value

of the real estatc The price of the real cslatc must be determined at the tirne of the damand

balance and must predict the thotors that change the supply and demand of the real estate in

the market

Thirdly, the principle of substitution

In casc two or mare the real estate can replace cach other in the process of using the

value of the property is determined by the interplay of the real estate to the real estate

olher The valuation of the value of the real estate is usually related to the value of other the

seal estate that can be replaced

When two the real estates are equally helpful, which the real estate offered at the Jowesl price will be sold firsl The upper limit of the real estate value tend Lo be sot by the

cost of buying a the real estate replace necessary equivalent terms without undue delay alter affect replacement

Fourth, the principle of expected fire henefits: The value of the real estate can be

determined by the expected profitability in the future of The real cstatc Estimating the

value of the real estate is always based on future prospects, the benefits received from future property rights

Fifth, the principle of contribution

‘The extent to which each part of RE contributes to the total income from all RE or

is the value of each of the parts of RE that alTecis the value of that RE When new elernents

are changed, the value of RE will change avcording to its contribution to RE This is the

basic principle in considering the feasibility of additional investment in RE when

determining the best and most effective use of RE

1.2.3 Mordgaged real esiate valuation methods

There are S methods of mortgaged real estate valuation but commercial

banks commonly used 2 following methods:

1.2.3.1 Direct camparison method

Concept Mortgage the real estate valuation under the direct comparison method is

an estimate of the value of mortgaged real estate based on market evidence of similar the

real estalz traded in the most recent time

‘The direct comparison method is built primarily on compliance with the pnnciple

of substitution The value of the target assets is considered completely comparable with the value of cornparable assets

Accordingly, the real estate valuation by direct comparison method is the estimate

11

of the real estate values based on market evidence of similar the real estate transactions in

the mosl recen| time

Pricing techniques:

‘the order of RL! valuation by the comparison method is as follows:

Step 1: Find information abont the RE that has been traded in the nearest time that

can be compared with the taract RE in the following aspects:

- Terms and conditions of the transaction

Step 2: Check and analyze evidence transactions to ensure the properties

arc comparable to the target RE In order to perform this stcp well, when checking and

analyzing market transactions, it is necessary to clarify: The origin, characteristics and

characteristics of transactions

Step 3: Sclect some of the most comparable the real cstate According to

experience, usually take from 3 to 6 the real estate comparison

Step 4: Identify the different factors helween largel the veal estale andl the teal

actions in sintilar RF in the same area must be made (or comparison Tf thers

is little RE for comparison, the result is of poor accuracy,

~The evidence information is historical, quickly becomes outdated after a shart

TEMG

~ Requires appraisers to have a Jot of experience and market knowledge

12

Terms and conditions:

~ Quality of information must bz appropriale, complete, reliable and verifiable;

~The market must be stable;

- Often used for the following cases

| The RE homogencous: Condo, apartment, blocks from the same type of building, shops

+The vacant land,

4.2.3.2, Cost pricing method

Concept: The mortgage method of cost method is the estimation of the value of mortgaged real estate based on reasonable expel

es to create that morigaged real estate

The cost method is bwill primarily on the use of substitution principles The real

estate valuation by the cost method is the estimation of the value of RE based on the

reasonable costs of creating that RE

Pricing techniques

Step 1: Estimate the value of a picce of the real cstate by considering it to be

vacant and being used under the best and most etticient use

'stimate the discount level of the construction, considering all causes

from the current cost of new constructon,

Slop S: Fstimate the valuc of the targot RF by adding the estimated values of the Jand to the estimated value of the building,

Advantages:

=This method is used when ther: is no tarkal evidenee to be sailable for comparison as well as with RE rarely change owners and lack the basis for forecasting future benefits In some situations, it is the last resort when other methods are unusable

- Suitable when cvaluating RE uscd for separate transactions and purposes If the appraisers are highly qualified, experienced, it is possible to limit errors when the supply and demand show signs of excess

Disadvantages:

~The cost method is also based on market data, so it also has the limitations of a direct comparison method

~The cost method must use the addition toethod, but the sum of many parts is not

necessarily equal to the total value

13

~The estimation of some discounts can be very subjective and difficult to make

= Requires appraisers 10 have a lot of expericnes and especially lo be proficiont in

construction techniques

Terms and conditions:

- l#s an appropriate method when evaluating many types of the real estate with

specific uses, such as churches, hospitals, schools,

~ Applied to determine compensation when building insurance contracts and other

types of compensation

- Itis a common method of people participating in bidding or bidding inspection

~ Often used as an additive or checking agent for other methods

1.2.4 Mortgaged real estate valuation process The valuation process is a sequential step in the valuation process, starting from the time the valuation technician prepares to conduct the valuation until the end of the job, i<

sending the valnation report to the customer At each step of the process, the content of the

work to be performed, the time for cach task, the fanctional department and the official

responsible for the work is specified In each commercial bank, depending on the conditions and characteristics of operation, there are regulations and sequence of steps in

đetzrmining the valuc of RE

Normally, the process of mortgaged RE valuation involves the following basic

sleps

Identify valuation issues

Ỷ Plan valuation

+ Collect and analysis data

Complete the valualion report

Figure 1.1 Mortgaged RE valuation process of commercial banks

Source: Ngo Thi Phuong Thao, 2011

Step 1 fientify pricing issees

In this step valuation officers should clearly identity the types of mortgaged real estate to valuate, which is land, houses or factories, ‘he real estate characteristics such as lovalion, economic, technical and legal characteristics of the real cstale, mortgage borrowers

Step 2, Plan pricing

On the basis of clearly detormining the type of the real cstatc to be valued and the characteristics of RE and its customers, the valuation department needs to clearly plan the valuation werk: determine the time, send staff for evaluation, identify the infomation and documents to be collected, retiable sources of information, and market dala, wlan and schedule the work

Step 3 Collect and analysis data

information about

Tn this step the appraisers need to cotlcel documents thal provi

the target property This information can be extracted from customers or surveyed from reality,

Collect documents as a basis for comparison, analysis, evaluation and adjustment such as: Purchase and sate documents, consumption norms, cost unit prices, properly tax rates, brokerage fees, proceeds ftom fand use

Collect legal documents of the state and local governments related to land use Tights, ownership af construction works, regntations on the purpose rights and lease term Appraiscrs need to collect full range of Icgal documents affceting the right to exploit the benefits of RE

Comprehensive documents on economy, politics, cuffure, society such as: the situation of economic development and growth, indiees such as GDP, CPI, inilation, housing price index, guidelines of the State on housing policies, housing and land tax

polioios, changes in planning and urbanization, the ability of the Slate lo contzal the toal

estate market

These sources of information may be obtained from professional organizations,

international organizations, banks, from private or goverment investigations This

information helps appraiscr to analyze market movements and provide factors affceting the

valuation results

Based on the documents and information gathered, the appraisers needs to select

the information that is reliable cnough and best suited to the targct RE valuation for

processing and analysis

Step 4 Apply valuation method to conduct target the real estate valuation

The above analysis will be the basis for appraisers to use appropriate valuation

methods, There are in fact many different methods for the real estate valuation However, a method thal is recognized as basic, has a strong theorelical basis and has 4 scientific basis

is a method built on the basis of considering, analyzing and assessing the impact of influence factors and especially must fully and absolutely adhere to the principles of

valuation In the real estate valuation, there is no single accurate method, only the most appropriate mothod Tn order fo choose the most appropriate and appropriate method, iL is

necessary to rely on the properties of the asset, the ability to use market data, the purpose

and the pricing principle ‘he appraisers may apply one or more valuation methods,

ending on different circumslanecs Conmonly uscd valuation methods: Comparison

method, Cost and profit method, Surplus value method (residual value), Investment

method

Step § Reconcile actuat values and estimated values

After calculating the value of RE on the basis of calculation by valuation methods,

16

appraisers need to survey the actual market value to compare the accuracy of the valuation If there arc many deviations, adjustments can be made, and an official conelusion about the price to be determined,

Step 6, Complete the valuation report, suibmif to the higher level for approval, send

to the customer and related departments

The final stcp in the valuation process is that the appraiscr needs to complete the valuation report with all the necessary contents showing the entire valuation process and snibmuilting it to the higher level for approval If there is no change in the decision made by the superior, the valuation value stated in the valuation report wili be the basis for implementing the credit granting process to the customer

1.3 Factors affectmg mortgaged real estate valuation of joint stock

commercial hunks

1.3.1 Objective factors

First of ali, the different views of the Commercial banks about morigaged real estate valuation: Each commercial bank pursues different operational objectives and in order to achieve that goal, commercial banks will identify business strategies to conform their operating conditions in sach specific hetween Therefore, the views of each bank

on mortgaged RE valuation are not the same With the view to cxpanding credit in the context of stable economic development, low-risk market, Commercial bank wall reduce the conditions for lending including provisions on collaterals, as thal the valuation of

collaicral assets in genersl and ensure ostate particular will be cased and view vorsa The Commercial banks’ viewpoint on valuation is also expressed through the viewpoint on development of mortgaged real estate activities With a view fo mortgage assets only for the purpose of the loan, then the problem valnation estate mortgage will be banks as basis for determining the lending justified om the basis of risk mitigation, so prices valuation estate mortgage will far more than the market value of RE, and the mortgaged real estate valuation will bring the subjectivity of cach bank, or for cach type of bank units based on the level of risk determination and the ratz of recovery of RE when customers cannot repay the debt, as well as the level of competition in the financial and monetary mmarkel

Second of ail, the method to organize and the process of mortgaged real estate valuation: ‘The organization of valuation is also a very important factor affecting the morlgage Iho Teal estate valuation, showing professionalism or unprofessionalism in the valuation process, The close coordination between the components in the banking system

17

will make the organization of valuation become simpler listablishing a simple, clear and standard valuation process will shortsn the time and cost of valuation work, thus affecting

pricing too

Yhird of all, choose the appropriate valuation method: RL is the properties with special characteristics, especially, under the influence of many factors both objective and subjective Therefore, the choice of valuation method wilt dircctly affect the valuation result, In the RE valuation, there is no most accurate method, only the appropriate and effective method that is on the scate of compliance with the applicable conditions and type

of Morigaged real estate, and it is more important to minimize costs in the valuation process Selecting an appropriate valuation method based on available and reliable information and data sources will help appraiscrs to offer a high lovel of trust and porsimde

customers to have a scientific basis and reduce the cost of valuation,

Fourthly, the pricing information system: Although information is an objective factor fom the market, the construction of the information system completely depends on the subjective of the appraiscrs and the strategy of cach bank To determine the valuc ofRE requires appraisers to regularly collect and process information Standard information systems, rsliable, complete and timely information sources will be the basis for asscssors to cvaluate and analyze accurately, thereby greatly affecting the results and time for the RE valuation

Féfth, woman resources for the valuation: Under amy conditions, the humm

cd qualifications and experience of the valuation staff greatly influence the RE valuation resources for the valuation work are also very imporlant The clhiesl qualiti

process and results RE valuation is a difficult task, complicated and requires valuation officers smsl, have expertise, be trained, knowledgeable abont the real estate itself and the factors affecting its value, master the economic, technical and social knowledge to apply in the valuation process Besides moral quality is also a factor that influences and dominant greatly to the valuation by the valuation of the morlgaged real cstals will affect the lives the value of loans and thus will arise the dominant relationships affecting the work of the appraisers and may falsify valuation results Therefore, if the valuation officer does not have good ethical qualities, for personal gain, he/she may collude with the mortgagee in order to raise the value of RE beyond its real value, thus atfecting the quality and valuation results,

Sixth, other subjective factors: Tr addition Lo the above gubjoelive factors, there ars other subjective factors that affect the valuation process and the quality of the valuation

18

work Vor example, the Bank's business strategy in stages; how to organize the morlyage: facilities syslem for valuation work: office, equipment, sofware system for

information processing and interbank activities

1.3.2 Subjective factars

Firstly, factors about natural conditions: Natural conditions are an objective factor,

crcating a relative and absolute position for estate, thereby affecting the value of RE which

needs to be valued Kor example: RE in favorable locations, with good natural conditions,

property, use property, conditions estate involved in mortgage transactions will impact

significantly on the process of getting collateral as RE and will affect the valuation The state policy in the framework of land prices and construction norms as well as the objective factors affecting the mortgaged real ostate of valuation of Banks

Thirdly, the economic environment: The development of economic conditions will stimulate the RT: market, causing the RF market price to soar Therefore, RT: in areas with favorable cconomic environment, the use of RE creates a large income, the value of RE in those areas will be higher than in other areas, In addition, as the economy develops, so does the demand for capital for production, thus increasing the amount of loans al commercial banks, which makes the number of valuations inercasing Such economic environment as well as one of the objective factors have a dixect umpact to the mortgaged

teal estate valuation

Fourthly, the real eslale market aetiviies, development trends of firmimeial the teal estate market and stock market, Valuation is the activity of establishment and development associated with market activities ‘rhe stronger the market develops and operates, the more professional pricing is required For pricing morlgaged real cstale is based on the mature and conditions of operation of the matket is very important Therefore, the mortgaged RE valuation shonid be hased on the development characteristics of each stage of the mmarkel RE, Firancial RE market accurs when the conversion of RR assets value into capital value and is traded on the market As such, this market is closely associated with the operation of the commercial banking system and credit institutions specialized in mortgage lending Tho valuation of mergaged RE will be tha basis for determining the value of vapital for mortgage loans have been securitized,

19

CHAPTER 2

CURRENT SITUATION OF MORTGAGED REAL ESTATE

AT JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM — 80 GIAO DICH 1 BRANCH

21, Overview of Jvint stock Commercial Bank for Investment and Development of Victnam - So Giao Dich 1 Branch

2.1.1 The process of formation and development

Joint Stock Commercial Bank For Investucnt And Development Of Viemam - So

Giao Dich 1 Branch (referred to as BIDV — So Giao Dich ] Branch) is a special-ranked

first-class branch of BID, is the legal representative of THD, has a seal, a summary of assets (the balance sheet) and is responsible for implementing BIDV's activities as authorized by the General Director and a dependent accounting unif in BIDY system

BIDV - So Giao Dich T Branch is a mil cstablished under Decision No 76

QD/TCCB dated March 26, 1991 of the General Director of Viemam Bank for Investment

and Development of Viemam Born in the context of the country in the early years of the

wansition, BIDV- SGD 1 was assigned important tasks, undertaking a great mission: Pilot

new business models before deployment on the entire system of Joint Stock Commercial

Bank for Investment and Development of Vietnam In particular, and the whole banking

system in general In addition, BIDV - So Giao Dich ] Branch is the direct business unit of

the head office, performing strategic tasks of BIDV Currently BIDV - So Giao Dich 1

Branch is headquartered at ‘rower A of Vincom Tower 19] Ba 1rieu, Hai Ba ‘Trang

District, Wanoi Afler more than 27 years developing, BIDV- Sa Giao Dich | Branch has grown stronger in terms of scale, service quality, and development stage of So Giao Dich 1

Branch can be divided into 5 main stages as follows:

- Phase 1 (1991-1995): ‘Ihis is considered to be the most difficult phase of So Giao

Dich 1 Branch, when both trading and shaping and perfecting the newly established

organizational apparatus

- Phase 2 (1996-2000): This is a between of strong transition to an independent

economic accounting business under the markel mechanisu

- Phase 3 (2001-2005): Successful implementation of SIBS core banking system, complete the project of restructuring the entize organization, technological innovation and

tuna resource developroent, preparing for ths process Tlernational economic integration

of banking industry and Vietnam's economy

20

- Phase 4 (2006-2008): ‘The stage of restructuring operations in parallel with the organizational restructuring, actively inercasing the credit scale for small and medium enterprises, promoting retail business

- Phase 5 (October 2008 - up to now): Successful implementation of transformation, restructuring of the organizational model according to TA2 model to minimize risks and specialize banking activities, improve competitiveness, mect the standards of an advanced bank,

Since 1998, the Branch has

split inlo an independent, accounting branch and

by 2000, BIDV So Giao Dich 1 Branch really moved into a multi-purpose business model, During the past 27 years, since its inception, the Branch has gradually grown up,

0 of

alfirmed ilscll as a reliable addres

BIDV has praised

2.1.2 Organizational structure

In addition to expanding the network of branches, performing the tasks entrusted by BIDV, So Giao Dich 1 Branch has bccn continuously scparating and successfully establishing level 1 branches under BIDV in the area, Hanoi, In 27 years of establishment and development, BINV - So Giao Dich 1 Branch has split and established 07 level 1 branches of BIDV

‘Vill December 2018, the organizational model of BIDV - So Giao Dich 1 Branch

a brand worthy of being the “T.cading Bird" as

had 22 operational departments to fully perforin the operations of commercial banks, inchuting 5 transaction offices in the districts of Hanoi city Cabinet and branch are promoting, activities to prepare for the establishment of new transaction offices and saving,

funds The orgamizational model of BIDV - So Giao Dich | Branch Lis continuing to

improve in the direction of a modem, đynømic bank, improving competitiveness, contributing to BIDY to affirm the prestige and brand of a unit that is always "Share

opportunities - Successful cooperation” with customers in the between of intensive

inlegralion into the intemmalional economy

The organizational structure of BIDV's So Giao Dich 1 Branch is shown in detail

in Figure 2

21

aivisian atvision vision

Customer relations Customer rations ‘transaction 7

department 1 depertmeat 1 department Ngo Thi Sham (Enterprise) 4Personal)

Hummn

‘Transaction Hea Binh,

Figure 2.1 Organizational structure of RIDY - So Giae Dich 1 Branch

Source: Human Resource Department of BIDV Se Giua Dich 1 Branch BIDV - So Giao Dich 1 Branchwas established with the following three main Functions

- Uniformly check, evaluate and supervise development investment projects fimded

by the state budget, especially in the field of infrastructure constuction With a nature of spreading throughout the country, not segmented by location, with different charucleristics and requirements, these projects require strict control to ensure management efliciency as well as financial efficiency

~ TesL new operations, new struclural projects before applying them to the entire

BIDY system In the context that the economy is on the rise with the fluctuations of the financial market, with the appearance of many foreign banks, creating a fierce competitive environment, requiring quick adaptation bul nol aecopting the orver Testing to learn from expetience and perfecting new businesses is always an important task to enhance the

22

competitiveness and mimimize risks for BIDV

From the above functions, the tasks of the So Giao Dich 1 Branch include

+ Effective use of mobilized credits

- Development of capital, assets and other resources

-‘Testing new products and restructuring projects of BIDV

s, debis, fa

- Manage I receivable - payables in the summary of a within

the scope of capital of the Department,

- Perform obligations to customers as committed,

Authorities of SGD 1 Branch:

- Recsiving deposits: Savings deposits, demand deposits, time dcposits, issuance of certificates of deposit, promissory notes, treasury bills and other forms of deposits

~ Credit extension: Lending, discounting, factoring, financial leasing, guarartcc

- Providing non-cash payment services: Performing cheque payment services, payment orders, payment orders, collection orders, collection orders, bank cards, Tellers of eredil

2.1.2 Business situation of Joint stock Commercial Bank for Investment And

Development Of Vietnam: - Se Giao Dich I Branch between 2016 and 218

2.1.2.1 Capital rai

2, activities Capital mobilization is always a matter oŸ great concern to commercial banks and businesses Because only when the capital is guaranteed will create momentum for the rational use of capital for different purposcs And to be able lo creaic their own capilal with the cheapest cost, the best way is to bank mobilize from the economy but mainly from economic organizations and people

Recognizing that problem with the mollo of capitat creation as the way to pave the way to create a solid growth capital floor BIDV - So Giao Dich 1 Branch has tied in capital mobilization with many differant forms of mobilization to meet the needs, demand

of customers, Therefore, the capital source of the bank is constantly growing,

Capital raising results of BIDV -So0 Giao Dich 1 Branch are summarized

23

Source: Summary report of 2016, 2017, 2018 of BIDV - Sa Giaa Dich 1 Branch

In the between of 2016 - 2018, the economy in the recovery between, although the

business environment was still difficult, fierce competition among banks in the context of

the state bank tighlly controlling markel inlerest Tales, but So Giao Dich | Branch has got

quite good capital raising results The average growth of capital mobilization in the

between of 2016 - 2018 reached 13.17%/year In 2018, capital mobilization increased by

more than 6,545 billion compared to 2017, equivalent to a growth of 14.9% compared to

2017 In the 2016 - 2018 between, capital mobilization frorn financial imstilulions tended to

increase slowly, the growth rate in 2017 reached 5.53% but in 2018 decreased to 3.32%

Instead, capital mobilization growth has mainly come from corporate customers Some

traditional customers of the branch inercascd their deposits at the branch such as Victfzl

Military Telecom Corporation (increased VND 2,013 billion), Vietmam il and Gas Group

(increased VND 1,011 billion), Vielnam Social Insurance Gncreased 784 billion) Due to

its specific eharacteristies, BIDV - So Gian Dich | Branch tas the advantage of

relationships with major economic and financial institutions Theretore, the capital raised

from financial institutions and enterprises is very large (accounting for 87% of the capital

of the Branch) bul this is also a disadvantage of the Branch, duc io the facl that the

24

economic between was instability and difficulty, businesses lack capital for manufacturing

and business, incvilably Tzading loa decrease in mabifization fram these eustomcrs

Although the proportion is not large in the total mobilized capital, but in recent

years, the proportion of mobilized capital from the population has tended to increase and

make solid steps Capital mobilized from the population is assessed to bs stable and less

volatile than that of cconomic organizations In recent years, the Branch has combined

various forms of ftexible capital mobilization from direct mobilization at transaction

ovations of the branch lo Ihe organization of mabilizing working capital in residential

areas to promote Strong capital mobilized from the population Although the absolute

growth is not significant, in terms of growth, the average growth rate of population

mobilization in the betwoan of 2016 - 2018 is 11.66% per yzar This growth rate is still

smaller than the average branch capital mobilization growth of 11.3%

2.1.2.2 Credit activities Recognizing the importance of credit operations, the Branch always pays spscial attention to the development of excdit activitics With a long history of operation as a focal

point for major customers of the system, officers are highly specialized in credit appraisal

activities, operating in a densely populated area and relationships with many businesses,

ceonomic organizations throughout ihc country, abundant sources of capital

mobilized, ‘The branch is fully able to mest the customer's complex credit and commerciat

Financing requirements Credi operations of the branch in recent years are shown

Household

and long-term loans to

total outstanding loans

)

Source Summary report of 2016, 2017, 2018 of -So Giao Dich 1 Branch

Credit growth of the branch in recent years has been growing and at a high level,

higher than the average of the whole system In particular, the growth rate in 2017 incrcased

by 23.43% compared to 2016; in 2018, an increase of 28.9% compared to 2017, The reason

for this encouraging achievement is the policy of the branch and head office, in part to make

the most of the strength and the position of the branch in the context of the ceonomy is

recovering and growing

In terms of customers, the branch primarily provides credit to corporate

customers Th

proportion of outstanding loans fo corporate customers often accounts for

over 89% of total outstanding loans In particular, the branch has a very high level of

credit focus on the group of large corporate customers (the group of 10 customers with the

highest debit balance, accounting for 57% of the total outstanding loans of the

branch) This can help the branch grow crcdit quickly This can help the branch grow

credit quickly However, there are limitations in the case of economic fluctuations, and the

branch debt balance can be significantly reduced due to the change in business aclivilias of

customers Therefore, in the direction of the branch's credit operations, in addition to

traditional businesses, the branch's large enterprise is still proactive and actively marketing

to customers of small and medinm enterprises, micro enterprises, 1'DI customers aim to

diversify customers, gradually reducing the risk of focusing crsdil on big customers

Besides, the Branch also gradually increased the debit balance to individual customers and

26

households In recent years, although the outstanding loans to individual customers and

houscholds ha

norcascd in absoluic value, the growth rate ms tended to slow down In particular,; Debit balance to science and technology, households in 2016 reached 2,516

billion VND, in 2017 reached 3,426 billion VND (an increase of 910 billion VND), equal

to 36.17% compared to 2016 In 2018, the ontstanding debit balance far science and

technology and houscholds reached VND 4,237 billion, an increase of VND 811 billion, equal to 23.67%, It is also one of the branches’ risk diversification methods to reduce dependence on large corporale customers,

In terms of credit terms, branches mainly provide medium and long-term credit products, 'he ratio of medium and long term loans to total outstanding loans of the year was 34.9%; 63.1% and 67.8% This shows thal the branch is stilt developing meitium and

Jong-term credit activities

In addition to the pressure on the scale of credit growth, the branch must also ensure the criteria of credit quality, safety and operational efficiency According

to Table 2.2, the bad dcbt ratio of the branch is kept stable at less than 1% However, along with the credit growth, the bad debt ratio of the branch is also on the rise, Therefore, in the coming time, the branch needs ta pay attention to this bad debt balance to ensure the bad debt ratio next year is not húghor than the previous ycar and to cnsure stability at less than

1%

2.1.2.3 Service activities

BIDV - So Gizo Dich | Branch has implemented measuras to improve the quality

of products and services through consultancy, product introduetion suitable tor customers, bringing practical efficiency There is a flexible, competitive service fee policy to attract caslomers, Focus ou promotityg producis and serviees that bring in majar revenue sourees such as: Payment services; Guarantee, Trade sponsorship At the same time, continuing to expand services such as: SSMS card services, Internet Banking/Mobile Hanking, Results from banking services for the between of 201 6 - 201 8 are sumunarized in Table 2.3:

27

Table 2 3: Service performance results of BIDV - So Giao Dich 1 Branchin

service

A Treasury services | 15,2 | 177 201 | 2,3 [1645] 2,4 | 13,56

7 Other service fees | 28,1 30,1 33,2 2 712 | 31 | 10,30

Source: Summary report of 2016, 2077, 2018 of BIDV - Sa Giaa Dich T Branch

According to Table 2.3, net service revenue in the between 201 6 - 2018 achieved a

stable growth, the average net service income grew by approximately 2% per year Hee sources accounted for a Targe proportion, such as payment serviee fez, guarantee fee

collection, trade finance tee collection, which had good growth, partly because the branch

has a good customer base, and econamic recovery I’ee sources such as credit fees, card

service fees, insurance premiums, c-banking, bill payment, electronic tax collection, ele

saw a slight growth, aldhough the proportion of total serviec revenue was modest

With the aim of increasing the proportion of service fee collection compared to the traditional revenue sources from credit activities and capital mobilization, diversifying

service foc revenue sources, the Branch has promoted the deployment of products and

services such as: Credit card products, international debit cards, payroll services; Combining insurance producis with credit aclivities, Westen Union money

transfer, Internet Banking, mobile banking, Smart banking, BSMS, VNTopup, Bankplus Although they are all small products and services, these are products with

28

good cross-selling ability, high potential for development and a stable source of fee collection for banks

2.2, Analyze the status of mortgaged RE valuation at th Joint Stock Commercial Bank for Investment and Development of Vietnam - So Giao Dich 1 Branch

2.2.1 Types of mortgaged real estate at the Branch

In fact, there are nmch the real estate was taken out as collateral for loans from commercial banks However, to ensure the safe operation of the bank as well as to creale favorable conditions for the RT supervision and management, according lo the staff survey results in BIDV and according to principles of mortgaged types of RE at banks including: Houses and construction works attached to land and land use rights, which are prescribed by morigage law

In the period of 2016 - 2018, BIDV- So Giao Dich 1 Branch lent with

Agricultural and forestry land; Production and business land, business premises, trade centers; Land and assets attached to land and mortgaged RE such as: Apartment

other the real estate

Table 2.4: Debit balance for mortaged the real estate of BIDV - So Giao Dịch 1

Branch between 2016 and 2018

trút: Billion VND

In 2016 Tn 2017 2018

RE Type Asset Debit Asset Debit Asset Debit

valne | balance | value | balance | value | balance

Agriculture and forestry land 135 47 168 30 214 33

Tand used for production

and business, business

premises and trade centers 1811 413 2378 642 3,071 R46

Residential land and

properties attached to

Other the real estale 24866 | 5185| 32/763| 7721| 48,628] 12.035 Total 57,305 | 18.074 | 71.018 | 24 396 | 101,381 | 33,617

Source: List of security assets for the between of 2016 - 2018 of BIDE

- So Giao Dich I Branch

29

° Debit balance without | Debit balance with 1 Debit balance with

- | Thexeal eetate | Othercollarecals

- So Giao Dich 1 Branch

As Chart 2.1 shows, outstanding loans with secured assets accounted for a large

proportion of total debit balance In particular,, the ratio of debit balance with collaterals in

2016, 2017, 2018 reached 88%, 92% and 95% respectively The proportion of debit

balance without collaterals accounts for only 5% to 12% in years In particular,, the

proportion of debit balance with the real estate collaterals accounted for 71.32% to 83.34%, and the trend increased gradually, the following year was higher than the previous

year

In particular,: According to Table 2.4, the situation of lending with the real estate at the branch tends to increase over the years If in 2016, the total outstanding loans with

secured assets were the real estate was VND 18,074 billion, by 2018, it would have

reached VND 33,617 billion, an increase of nearly 1.76 times compared to 2016 This was

a between of economic development so the Branch's debit balance also grew significantly

‘The real estate of the branch is mainly residential land and properties on land; Apartment

Agricultural and forestry land; Production and business land, business premises and trade centers only account for a small proportion This is quite consistent with the city of Hanoi

2.2.2 Bases and principles of mortgaged RE valuation at the branch

2.2.2.1 Based on the mortgaged RE valuation at the branch

(1) Legal regulations

Currently, the valuation of mortgaged RE at BIDV- So Giao Dich 1 Branch

30