TASK OF FINANCIAL EVALUATION OF INVESTMENT PROJECTS IN THE BANK BIDV HUE BRANCH (BANK INVESTMENT AND DEVELOPMENT OF VIETNAM)

UNIVERSITÉ PARIS 12REPORT TASK OF FINANCIAL EVALUATION OF INVESTMENT PROJECTS IN THE BANK BIDV - HUE BRANCH BANK INVESTMENT AND DEVELOPMENT OF VIETNAM... SUMMARY CHAPTER 1: ANALYTICAL FR

UNIVERSITÉ PARIS 12

REPORT TASK OF FINANCIAL EVALUATION OF INVESTMENT PROJECTS

IN THE BANK BIDV - HUE BRANCH (BANK INVESTMENT AND

DEVELOPMENT OF VIETNAM)

ABREVIATIONS LIST

BIDV: Bank of Investment and Development of Vietnam

BIDV Hue: The Bank for Investment and Development of Vietnam - Branch ofThua Thien Hue

CIC Credit Information Center of the State Bank

WACC: Weighted Average Cost of Capital

TPR: Risk Prevention Center BIDV system

IRR: Internal Rate of Return

NPV: Net present value

ROCE: Return on invested capiatux

TABLE OF CONTENT

INTRODUCTION 1

1.Problematic 1

2 Research Objective 2

3 Purpose of Research 2

4 Delimitation of the research 2

6 Structure of Essay 2

CHAPTER 1: GENERAL THEORY OF FINANCIAL EVALUATION OF INVESTMENT PROJECTS 3

1.1 The investment project 3

1.1.1 The definition of the investment project 3

1.1.2 The classification of projects investisement 3

1.1.3 The exigences of an investment project 5

1.1.4 The project cycle 6

1.2 The financial evaluation of investment projects to the commercial bank 6

1.2.1 The concept of financial evaluation of projects investisement commercial banking 6

1.2.2 The methods of financial evaluation of investment projects to the commercial bank 7

1.2.2.1 The comparison indices 7

1.2.2.2 The order valuation method 7

1.2.2.3 The evaluation method based on the analysis of the sensitivity 8

1.2.2.4 The prediction method 8

1.2.3 The contents of the financial evaluation of investment projects of commercial banks 8

1.2.3.1 Examine the financial capacity of the borrower customer 8

1.2.3.2 Examine finance the investment project 8

1.2.4 The indices appreciated the work of the financial evaluation of investment projects 13

1.2.4.1 The qualitative indices 13

1.2.4.2 The quantitative indices 14

1.2.5 Factors influencing the task of the financial evaluation of investment projects 16

1.2.5.1 Group subjective factors 16

1.2.5.2 objective factors of group 17

SUMMARY CHAPTER 1: ANALYTICAL FRAMEWORK 18

CHAPTER 2: THE ASSESSMENT OF FINANCIAL TASK EVALUATION OF INVESTMENT PROJECT TO BANK BIDV HUÉ 19

2.1 The introduction of BIDV Bank Hue 19

2.1.1 The history of the formation and development 19

2.1.2 The situation of assets and capital resources 20

2.1.3 Operating income 23

2.2 The current status of the task of the financial evaluation of investment projects to the bank BIDV Hue 24

2.2.1 Regulations, the process of evaluation 24

2.2.2 The illustration project 25

2.2.2.1 The information based on the investment project 25

2.2.2.2 The contents of the financial evaluation of the investment project 26

2.2.3 The indices appreciated the work of the financial evaluation of investment projects to the bank BIDV Hue 33

2.3.2 The limitations exitantes 40

SUMMARY CHAPTER 2: SUMMARY ANALYSIS 42

CHAPTER 3: SOLUTIONS TO IMPROVE THE QUALITY OF FINANCIAL TASK EVALUATION OF INVESTMENT PROJECTS IN THE BANK BIDV HUÉ 43

3.1 The direction of development of the bank BIDV Hue 43

3.1.1 The orientation of the credit activity 43

3.1.2 The orientation in the evaluation of investment projects activity 43

3.2 The solutions to improve the quality of financial evaluation of investment projects BIDV Hue 43

3.2.1 Improving the quality of a staff team 44

3.2.2 The financial evaluation methods 44

3.2.3 financial assessment content 45

3.2.4 Improve information and raise the quality of information used for financial evaluation of investment projects system 45

3.2.5 Regularly check the project and the evaluation results before, during and after loan 46

CONCLUSION 47

LIST OF TABLE

Table1.1 Classification of investment projects based on the importance àn the book

scales 4Table1.2 Comparison of indices of financial efficiency 12Table 2.2 The situation of assets and capital resources of the bank BIDV Hue (2010 –

2014) 21Table 2.3 Structure of loans by term (2010 - 2014) 22Table 2.4 Le résultat d’exploitation de BIDV Hué (2010 – 2014) 23Table 2.5 Comparing the growth of profits of BIDV Hue to that of its competitor 24Table 2.6 Number of students and business training recipe Driving School (2010 - 2011) 27Table 2.7 Recipe Statistics study fees B1, B2 of the period from 2010 to 2011 and

first 6 months of 2012 27Table 2.8 Transportation Statistics High School Transportation Hue 28Table 2.9 The receipts of the purchase investment project cars for train driving classes

B1, B2 29Table 2.10 The costs of purchasing investment project cars for train driving

classes B1 30Table 2.11 Profits and cash flows of the purchase investment project cars for train

driving classes B1, B2 30Table 2.12 The repayment plan of purchasing investment project cars for train driving

classes B1,B2 32Table 2.13 Balance of reimbursement of resources in purchasing investment project

cars for train driving classes B1, B2 33Table 2.14 The fluctuation of the balance of investment projects of loan debts of the

bank BIDV Hue 34Tableau 2.15 The proportion of investment projects for loans in the credit structure of

the bank BIDV Hue 34Table 2.16 The proportion of successful projects to the bank BIDV Hue 35Tableau 2.17 The proportion of bad debts loans for investment projects to the bank

BIDV Hué 35Table 2.18 capital cycle of the investment projects 37Table 2.19 The proportion of errors of assessment of investment projects in BIDV

Hue 39

for loans in the period 2012 - 2014 36Graphique 2.3 The amount of debt recovery of investment projects in Hue BIDV in

the period 2012 – 2014 37Graphique 2.4 Le cycle des capitaux de projets d’investissement à BIDV Hué dans la

période 2012 – 2014 38

1.Problematic

Vietnam is increasing development, from a country with a backward agricultureinto an industrial country that is developing market economies However, to achievethe objective, in 2020 Vietnam became an industrialized and modernized country, weneed to make more efforts Vietnam should focus investment infrastructure,equipment, machinery and technology moderns in all sectors In reality, he faces abig obstacle is limiting financial resource companies So to be able to meet demandfunds, companies mainly bank borrowing through its timeliness and efficiency

Regarding banks, lending for investment projects is a form of credit that pays

an important source of profit and sustainable banks However, this activity alsoinvolves risks, because projects often require large capital and long term So to getgood projects with high feasibility, banks should carefully perform the investmentprojects In particular, the financial evaluation of investment projects is one of theimportant contents of the evaluation of investment projects Project evaluation helps todistinguish the good / bad projects, identify risks and actively seek measurescontrolling risks to reduce By carrying out the project evaluation task, the banksimprove credit quality, ensure compliance and effective for the intended purpose anduse of this capital high possibility of recovering them

In recent years, the financial evaluation of investment projects has been moreinterested in the banks but it has not yet produced results, some projects can notrecover the capital invested Improve the task of the financial evaluation of investmentprojects is a vital need to ensure the safety of loans and the quality of investmentprojects, contribute to the development of the country

In Vietnam, the Bank for Investment and Development of BIDV isrecognized for its mission to finance mainly investment projects Worldwide, theprestige is good thanks to his credit Indeed, the 12.11.2013, the internationalinvestment bank IIB signed with BIDV a loan agreement of EUR 50 million in thefiscal target projects of small and medium sized Vietnamese companies For thesereasons, I Interesē me realize the subject: "Appreciating the work of the financialevaluation of investment projects to the Bank for Investment and Development ofVietnam BIDV - Hue branch."

- Assess the current situation of the financial evaluation of investment projects

in the BIDV Bank Hue

- Propose Measures to improve the quality of the financial evaluation ofinvestment projects in the BIDV Bank Hue

3 Purpose of Research

The task of the financial evaluation of investment projects to the Bank forInvestment and Development of Vietnam BIDV - the branch of Hue

4 Delimitation of the research

♣ In time: the search covers the period from 2010 to 2014

♣ In space: the search is carried out at the Bank for Investment andDevelopment of Vietnam BIDV - the branch of Hue

5 Research Methodology

♣ Data Collection Method

Secondary data are collected in books and magazines, online, in earlier reportsand BIDV Bank Hue

♣ method for processing data

+Comparative Method Compare Bank data indices of major institutes of theworld, branch

+Statistical method used to collect and synthesize data And combineeconometrics to process and analyze

+synthetic method: Based on the collected and processed data, perform analysisand compare, and deduce a conclusion on the research problem

6 Structure of Essay

Apart from the general introduction at the beginning and the general conclusion

at the end of memory, it is divided into three chapters:

Chapter 1: General Theory of financial evaluation of investment projects

Chapter 2: Appreciate the work of the financial evaluation of investmentprojects in the BIDV Bank Hue

Chapter 3: Solutions to improve the quality of the financial evaluation ofinvestment projects task to BIDV Bank Hue

CHAPTER 1: GENERAL THEORY OF FINANCIAL EVALUATION OF

INVESTMENT PROJECTS

1.1 The investment project

1.1.1 The definition of the investment project

According to the World Bank, an investment project is the set of policies,activities and costs that bind, and it is planned to achieve certain objectives within aspecific time

According to the Vietnam Investment law enforcement since 2006, aninvestment project is all capital offers medium and long term to achieve the investmentactivities in compass and for a specific time

• In terms of form: an investment project is all the documentary record showing

in detail and order activities, the cost to achieve the results and objectives identified inthe future

• In terms of content: an investment project is the set of interrelated activities toachieve the objectives set by creating concrete results in precise time through theresources identified as the market, products, technology, the economy and finance

1.1.2 The classification of projects investisement

Depending on the nature, importance of the project, the characteristics of thearea of operation, capital and scale of the project, we choose different criteria forclassifying projects In general, there are several classifications method, the mostcommon are:

a Based on the importance and scale of the construction of the work

According to the Decree No12 / 2009 / dot-CP on 12/02/2009 governmentmanagement investment project and construction, projects have generally beenclassified as follows:

Table1.1 Classification of investment projects based on the importance àn the book scales

Classification according to the importance and scale of the

construction of the work

project of national importance

Project group A Project group

B

Project group C

the volume of construction projects in the areas of state secrets

protection of security and defense in the nature and the important

social meaning; the production of toxic or explosive substances;

industrial infrastructure

Defined byResolution ofthe NationalAssembly

Withoutconsidering theamount of capitalinvested

The projects of the construction of the work in the fields: the

electrical industry, the exploitation of oil and gas, chemicals,

fertilizer, machine manufacturing, cement, metallurgy,

exploitation and mineral processing, transportation projects and

housing construction

Invested Capital>

600 billion VND

investedcapital of 30 to

billion

Capitalinvested <30billion VND

The projects of the construction of the work in the domains:

irrigation, transportation, supply of water, the work of technical

infrastructure, electrical engineering, communications equipment

manufacturing, electronics , computers, pharmaceuticals, medical

devices, other mechanical works, production of materials, post

and telecommunication

invested capital of400-600 billionVND

investedcapital of 20 to

billion

Capitalinvested <20billion VND

The projects of the construction of the work in the domains: light

industry, earthenware and porcelain, glass, printing, national

parks, the area of nature reserves, agricultural production and

processing , aquaculture and forestry

invested capital of

300 to 400 VNDbillion

investedcapital of 15 to

billion

Capitalinvested <15billion VNDThe projects of the construction of the work in the domains:

health, culture, education, the emission of radio and television,

other civil constructions, the treasury, tourism, sports, scientific

research and other projects

invested capital of

200 to 300 VNDbillion

investedcapital of 7 to

billion

Capitalinvested <7billion VND

b Based on capital

+ Investment Project were mobilizing domestic capital

+ Investment Project have the mobilization of capital from abroad

c Based on the features of the operating area

+ Project for infrastructure development

+ Project for development of the industry

+ Project for development of agriculture

+ Project for the development of services

d Based on the kind

+ New Investment Project is the investment activities of the fundamentalconstruction to form new works

+ innovated and modernized Investment Project is the investment activities ofconstruction to renovate or expand, improve and equip new machines or newproductive chains more moderns

1.1.3 The exigences of an investment project

A convincing investment project, objective and feasible must ensurerequirements

♣ The legality

A project ensures the legality when it does not violate the security, defense,environment, morality and the law of the State of Vietnam At the same time, theproject must conform to the planning of economic and social development of theproject area

♣ The scientific

A project ensures that it is totally scientific goal:

Information must ensure the accuracy and objectivity The survey data are made

by the right methods, the sample is large enough

The calculation method must ensure the accuracy and comparability among theindices to compare Using charts, technical drawings ensures the accuracy ofdimensions and proportions

The method of interpretation must be reasonable, logical and tightened toconnect the isolated project content

♣ Feasibility

If a project is feasible, it is possible to apply its feasibility in practice So toensure this requirement of the feasibility, the project must accurately reflect theinvestment environment, that is to say it must be determined correctly in all thespecific circumstances of the environment, space and capital

1.1.4 The project cycle

This is the stage that must pass an investment project, it is counted from theappearance of the investment idea until the end of the project We can illustrate theproject cycle as follow:

Figure 1.1 The project cycle 1.2 The financial evaluation of investment projects to the commercial bank

1.2.1 The concept of financial evaluation of projects investisement commercial banking

With the growth of investment in our country, evaluation of investment projects

is increasingly respected The investment is considered the force of development ingeneral and especially economic development How invests for efficiency? Anevaluation of the project is an important stage which may be an effective investment

The evaluation of investment projects that can organize and examineobjectively and scientifically to all aspects of the main content These contents affect

Investment Opportunity Search

Pre-feasibility studyFeasibility studyProject evaluationProject realizationOperation

LiquidationAppreciation

the feasibility of the project in order to give an appropriate decision to the purpose ofthe evaluation.

The evaluation of investment projects is an activity carried out regularly in thebank, so they must have an organizational structure, some human and financialresources for this activity There are several aspects content and exercising in theprocess of evaluating investment projects tells that: the objective, scale, the need,opportunities and the ability to consumption of the products, the technical, aspects oforganization and management of the project including, banks are mostly interested

in the financial evaluation of the project

The financial assessment of the project can reflect the financial feasibility, it is

a basis for assessing the economic and social efficiency

1.2.2 The methods of financial evaluation of investment projects to the commercial bank

Banks use the methods of financial evaluation that use and analyze the data andhow to use calculators techniques to perform financial assessment of investmentprojects Currently, there are many evaluation methods, they have different advantagesand inconvénientes Therefore, banks should apply the most appropriate methodsbased on réalitées conditions and the nature of the project to achieve the best quality

1.2.2.1 The comparison indices

It is a simple and common method, essential clues projects were compared withnormative indices The comparison was made according to the following indices:

+Limits and standards are applied in Vietnam

+The comparison between the indices if the project takes place and if noproject

+Indices of similar projects in the industry

+In the case where there is no domestic indices confer, it is possible to use theforeign indices

Using the comparison method, be careful comparable criteria to be adapted tothe conditions, the peculiarities of the project and company

1.2.2.2 The order valuation method

The process is performed according to a dialectical order from the general todetail and preliminary findings will be the premise of the following conclusions

a The general assessment

This is a general review of content to evaluate the project, from there, shediscovers analyzes problems with the detailed level The evaluation of generallyconsider the project, the capital scale, revenue, costs of the project Due to generally

examine the financial content of the project, this step is difficult to determine errors orcontent that should be supplemented or amended.

b The detailed assessment

It is performed after the general assessment This assessment is objective andscientific review with each specific project content In the project, the fees will beassessed in detail to assess the relevance of the price and the amount of each item Thecontents of the method of depreciation, interest calculation method and cash flow ofthe project are also examined by banks

1.2.2.3 The evaluation method based on the analysis of the sensitivity

This method is often used to check the security level of the financial efficiency

of the project The basis of this method provides certain accident situations that mayoccur in the future such as: low production; rising costs; the fallen products; thechange in the interest rates, unfavorable tax policies If the project appears to beeffective even in the case with past accident situations simultaneously, it is a projectwith a good level of safety Otherwise, one must reconsider the likelihood of thesesituations and may propose preventive measures

1.2.2.4 The prediction method

The basis of this method is used the provided data, the statistical survey toexamine the demand and supply of products, cost, quality, technology, equipment, rawmaterials on the market which affect directly the effectiveness and feasibility of theproject

1.2.3 The contents of the financial evaluation of investment projects of commercial banks

The financial evaluation of projects includes accurate calculations of contentconcerning finance and the financial efficiency of the project

1.2.3.1 Examine the financial capacity of the borrower customer

Good financial capacity is an important factor that ensures the recoverycapacity of high capital investment in the future In general, the index group uses inthe bank, including:

• The liquidity ratio

• The performance ratio

• The leverage ratio

• The profitability ratio

1.2.3.2 Examine finance the investment project

The investment project evaluation focuses to analyze and evaluate theappearance of financial efficiency and solvency of the project The main contents are

to be analyzed by examining:

a Assess the total investment sum

This is the first important content that needs to consider before making thefinancial analysis of the project The total investment sum includes all the capitalrequired to establish and operate the project

• Determine the total investment sum approach actually It will be calculatedbased on financial efficiency the project's ability to repay

• Consider the factors that can push the loads with the following reason:inflation, rising commodity prices and wages, the creation of new jobs, the volatility ofthe exchange rate (if the project used foreign currency), the change of state policies

Based on the comparison with similar projects carried out, examining agentoffers the rational structure of investment capital by ensuring the planned projectobjective This is the basis of determining the maximum level that the bankparticipated

In addition, the agent also calculates and examines the needs of initial workingcapital needed to achieve the testing process, test and ensure future project activity It

is also the basis for the consideration of capital resources solution and the calculation

of financial efficiency

b Evaluating the investment resource

Based on the total investment amount, the agent considers the investmentresources to finance investees, the capacity must be examined to ensure capital on thescale and tempo From the result of analyzing the financial position of the investor, itevaluates the equity financing capacity It levels the need for investment capital andresource financing capacity planned to assess the feasibility of the project resources

Investment resources should be considered not only in quantity but also thetime of receipt of funding to ensure the progress of projects, avoid stagnant state of thecapital and improve efficiency loans

c Assess the rationality of financial reports provided

In the planned financial reports, information is the basis to determine the cashflows of the project and calculate the indices of financial efficiency Therefore, banksrequire high precision these reports

d Evaluate the cash flow of the project

Investing in the project, investors need to calculate costs and projectedrevenues over the years during the process of the project, this determines thebenefits from investing activities Investors interested in cash flow when theydecide to invest in projects

● Entered cash flows

The cash flows are entered flows after tax that companies reinvest removed forother projects Revenues from the project are based on the production plan, annualconsumption In this step, the developed based orientation of operating segment andforecast the impact of factors Environmental the agent determines the mobilization ofcapacity planned project, the ability to consume products, the price of goods sold

● The money flows out

The released cash flows are represented by the cost of the project Cash flowsrelated to investing out fresh capital, a construction and a purchase Production costs,expected services are based on the production plan, the amortization plan and repaymenteach year

Based on the data entered cash flow and cash flow out each year, it is estimatedprofits and losses This is an important index that reflects the results of productionactivities, services during the project cycle With banks, the cash flows are thefinancial base to accurately evaluate projects

e Evaluate the rate of discounted cash flows

For a project, the discount rate is the rate of return that investors achievewith the capital invested This is the basis of discounted cash flows from thefuture to the present It depends on the structure of capital and project risks

♣ The resource capital are totally bank loans

If the resource capital is full of bank loans, the discount rate is the interest rate

of bank loans

♣ The resource capital included the own capital and bank loans

When the project is funded by equity and bank loans, the weighted cost ofcapital is the weighted average cost of capital (WACC)

Wherein:

E: Market value of the firm’s equaty : Cost of equity

D: Market value of the firm’s debt : Cost of debts

: Corporate tax rate

V=E+D : Total market value of the firm’s financing

E/V: Percentage of financing that is equity

D/V: Percentage of financing that is debt

f Evaluate indices of financial effectiveness of the project

♣ criteria of net present value NPV

The net present value is the difference between the future net cash flows thatare discounted to the present and the present value of invested capital

The NPV of a project is interpreted as the value today of wealth through thecreation of the project The criterion of NPV allows us to fully assess the income scale.With this meaning, this criterion appreciated as the most important to evaluate andselect projects

PV=

Where :

: Net cash inflow during the period t r : Discount rate

: Total initial investment costs t: number of time periods

The reliability index of NPV depends on the discount rate The principle decision toinvest in this method: a project accepted when its NPV is positive

♣ Criterion of internal rate of return (IRR)

The internal rate of return is the interest rate used to update the input stream and out ofthe project now that the sum of the input flow is equal to the sum of flow out

The IRR is calculated by the interpolation method, choosing two rate levels r1discount, r2 such as : NPV( >0) and NPV( <0) We will have :

The principle decision to invest in this method: the project granted when itsinternal rate of return is equal to or more at its opportunity cost of capital This meansthat the net present value of the project is more than or equal to 0

Principal repayment variation Criteria

The principal repayment duration is the time required to make the project work,removes enough capital initially invested The repayment duration of longer capital,the level of the increased risks It can be calculated in two ways: the easy repaymentduration (without discount) is calculated quickly but that does not make into accountthe time value of money and the second is the duration of repayment with discounting

repayment duration = year before cover +

the entire capital

♣Return on capital employed (ROCE)

The ROCE method is also called the carrying cost method, being developed toovercome the disadvantages of the principal repayment duration method withoutdiscounting The simplest form is calculated the percentage of revenue year on theaverage capital invested

ROCE = Earnings Before Interest and tax( EBIT) / Capital employed

Comparison of Indices of financial efficiency of the project

Table1.2 Comparison of indices of financial efficiency

Principal

repayment

duration

SimplePress the speed of repayment ofcapital, so can use the low-riskprojects

Avoid difficulties in forecastingfuture cash flow

Difficult to determine costs asinvestment costs change over timeNot taking into account the totalflux

Not taking into account the timevalue of money

Not taking into account the timevalue of money

Net present

value NPV

Take into account the time value

of money, scale of projectThe result of the calculations isalways determined

More advantageous that the IRRfor the concept and the theory areclearer

Depend on the discount rate rDifficult to find the discount rate,that is to say the capital cost ofusing

No idea of the investment securitygap

Internal rate of

return IRR

Calculated on cash flows internal information projectTake into account the time value

Reflect the effectiveness of theprofitability of capital, resolvethe choice of projects

Good yield of referenceIdea of investment securityinterval

No need to calculate the averagecost of capital

projects that eliminate themNot taking into account the scaleand invested the time of investmentImplicit assumption that all futureflows can be reinvested at a rateequal to IRR

g Assess project risk

Banks often analyzed using techniques such as sensitivity analysis and thescenarios (situations) to assess the level of risk

♣ The sensitivity analysis

Sensitivity analysis is an analysis technique that shows the influence of theindependent variable and the dependent variable The independent variable may be theprice, the investment cost, revenue, inflation The dependent variable can be indices

of evaluating financial efficiency as NPV, IRR When calculating the sensitivity ofthe project, making the independent variables changed 1% from the original optionsand the dependent variables will change how percentages with the other factorsunchanged conditions The sensitivity analysis informed what factor most change due

to financial efficiency indices

♣The scenario analysis (of situations)

Scenario analysis is analyzed technical risk, is divided into three levels: thebest, the base and the worst On plans, we determine the probability passed each level,then built the corresponding financial indices

h Evaluate the loan repayment plan

When NPV indices TRI reach over the specified level, the project is consideredeffective But this is the result of the operation of the project while the repayment ofdebts often limited in a few years Although effective project, but it does not tell therepayment ability The repayment of debt mobilized are mainly: profit after tax(generally 50-70%), depreciation and other external legal sources

1.2.4 The indices appreciated the work of the financial evaluation of investment projects

1.2.4.1 The qualitative indices

Qualitative indices can not calculate as precisely determined, but they make asignificant meaning to appreciate the task of the financial evaluation of the project

a The evaluation process

Pouvent different projects have different evaluation processes are basedindustry characteristics and project The process of more detailed evaluation morescientific, the task of evaluating achieved higher results.

b The valuation method

The evaluation method is the way banks use and analyze data, how to usecalculators to perform technical evaluation of investment projects Each project has aspecific characteristic depending on the area of operation, the nature of the projectrequires a method particularly suited to the special project So, applying the mostappropriate methods of analysis and evaluation task is complete, accurate andeffective

c The assessment contained

The financial evaluation of the investment project can fully evaluate all thefinancial contents of the project, they understand the total investment amount,investment resources, costs and profits, conditions influenced the effectiveness of theproject investment and loan repayment capacity This assessment carried outaccording to the scale, character and features of each real project, examining agentapplies well content flexibly and efficiently to ensure effective implementation

1.2.4.2 The quantitative indices

a The debt balance of growth rates on loans for investment project

► The balance of investment projects of loan debt reflects the amount thatbanks disbursed to borrowers but have not recovered Among them, the debt balance atthe end of the period is calculated:

The balance of debt at the end of the period = the balance of debt at beginning

of period + The sum of loans during the period - the amount covering the period

►The growth of the debt balance

The debt balance growth rate =

This index compare the growth of the balance of the loan debt by years in order

to assess the ability of loans and the realization of bank credit plan

b The proportion of successful projects

One can assess the task of the financial evaluation of the project through theresults of the project operation is good or bad? Effective project is the work according

to the objectives and plans, repayment of principals and interests on time, which has

no overdue debts

The proportion of successful projects =

The proportion of successful projects reflects the ratio of the quality project onthe total of evaluated projects which grants loans in the fiscal year This higher indexreflects better job quality and financial evaluation on the contrary

c.Overdue debts

The proportion of overdue debts =

According to the circular 02/2013 of the Bank of the State, late debts are debtsthat have some or all of the principal and / or interest They are overdue debts underthe regulation of the credit agreement The index fell more overdue debts that showsthe effectiveness of use of funds in the loan higher projects The recovery of favorabledebt, companies have the ability to repay debts at maturity to banks

There are numerous reasons led late debts, perhaps the business environment,customers or the task of the bank assessment

c Bad debts

The proportion of bad debts =

The bad debts are debts of 3,4 and 5 by Decision 493/2005 / QD-NHNN Theyinclude liabilities under the standard, doubtful debts and bad debts This index informsthat the bad debt percentage how much the balance of current debts into the loan forinvestment projects This higher percentage reflects the recovery of the troubled bank

With these bad debts, banks must deduct the forecast capital risk at the preciserate per year So this leads to lower profits Bad debts can still evaluate the ability ofmanagement and individual bank credit quality Therefore, maintaining low proportion

of bad debts is still the mission that credit institutions interested

d The capital cycle

The capital cycle =

Or :

The capital cycle =

The amount of debt recovery includes the entire amount of the original capitalrecovery that customers pay in the fiscal year, including capital payment to completethe contract or part payment of the original capital

This index reflects the ratio of the sum of the recovery of investment projectssura debt balances average debt This can be seen collection efficiency of the bank'sdebt The more higher capital cycle that shows the rotation of capital medium and longterms faster Unlike short-term loans, the proportion is generally less than 1, becausethe medium and long term loans of long duration, the balance of average debt is oftenhigher than that amount of debt recovery in the same year

f The proportion of errors

There are two types of fundamental errors in deciding loan investment project:(1) Accept the loan for bad projects

(2) Reject ready for good projects

Both mistakes lead to significant losses for banks The first type of error canlead to losses: Debt overdue or bad debts, that is to say the financial loss The secondtype of mistake can lead to the loss of prestige and lose the opportunity loans In totalthe project applied for loans, the percentage of small errors, the task of the financialevaluation of the bank's project is better

1.2.5 Factors influencing the task of the financial evaluation of investment projects 1.2.5.1 Group subjective factors

Subjective factors belong to the bank, so the bank can monitor and activelyadjust to the task of assessing and highest efficiency

a The human

The human factor is still the basic and most important, this factor directlydetermines the success of the work and also the determinant of quality in the task ofassessing particular This task was carried out well or not, the level of full assessment

or not This depends on the qualification of the bank's agents If the level, the abilityand experience of the human are limited, it is impossible to make a reliable assessmentresult In addition, many projects failed because of the ethics of the examining agent

The errors in the financial evaluation of investment projects from theintentionality of human or accident leads to the result: aberrant effectiveness

evaluation, financial standing and loan repayment capacity Therefore, banks havedifficulty in recovering debts, the risk of loss of capital and profits dropped

b The process, content and methods of financial evaluation of the project

A scientific assessment process, and corresponding to full strength andcharacter of the banks is the insurance basis of the quality of the task of evaluation

assessing the content address all financial apects for banks: the resourceinvestment, financial efficiency, the ability to repay and project risks The content ismore comprehensive and detailed, the accuracy of the highest conclusions

The agent to use reasonable and scientific evaluation methods to analyze andcalculate precisely the financial efficiency

c The organization and management

The manager decentralization is necessary for the task of assessment is carriedout in a closed and scientific process Indeed, the smooth coordination of theevaluation process between related parties, it helps maximum utilization of resourcesfor the Project Assessment task and promotes the benefits and limit disadvantages ofeach person, and more it reduces the risk of the professional team and the duration ofthe evaluation All this makes the benefits throughout the system and advance thequality of the assessment of investment projects

e The physical infrastructure of the bank

The evaluation activity will be difficult to achieve good quality if the physicaland technological infrastructure of the bank does not reach a minimum level relative toother global banks The system of modern technological and computer equipmentgives the examining agent access to a huge database to choose the appropriateinformation Thus, the task of the evaluation easier, it saves time, reduces risk throughmanual processing stage as before and can give high efficiency in this assessment

1.2.5.2 objective factors of group

This is the group which exists outside of the bank's control So she mustovercome and adapting

a The policy mechanism and the legal framework of the State

This factor is the facing part of the workings of the actors in the economy,including banks Gaps documents of the legislation and policies of state managementpouvent cause difficulties, risks increased on the outcome of the assessment of banks Thechanged political mechanism will make future projects related variables changed, it willcause gaps in the analysis Rather, the regulations clearly state, synchronous and coherentthat will encourage the bank to actively carry out the task of the financial evaluation

b The authenticity of the investor's information

This is the basic projects examined by the bank, it is made the investor's records

to apply for funding This information is very important, however it is difficult todetermine its reliability Indeed, when a customer wants to get a loan, it always showsthe correct information of the project, in general it does not reveal the actual financialsituation of the business In this case, the examining officer to use his professionalexperience and build on customer relationships to assess the quality of information

c The fluctuation of the environment and the market

The investment project occurs over a long period, so the bank may have biasedjudgments because of the fluctuation of the environment and the market changed, itcreates the potential risks once such as natural calamities, war, market volatility, theeconomic crisis of the country

SUMMARY CHAPTER 1: ANALYTICAL FRAMEWORK

1 Concepts

The evaluation of investment projects may examine objectively, scientifically

on all aspects of the main content These contents affect the feasibility of the project inorder to give an appropriate decision to the purpose of the evaluation

The financial assessment of the project can reflect the financial feasibility, it is

a basis for assessing the economic and social efficiency The assessment of thefinancial evaluation task of investment projects of commercial banks is based onqualitative indexes and quantitative indices

2.The indices appreciated the work of the financial evaluation of investment project

The assessment containedEvaluation methods

The proportion of the debt balance for loans for projects d’investissement

The proportion of the project works effectively

The proportion of overdue debts / bad debts

The capital cycleThe proportion of errors

CHAPTER 2: THE ASSESSMENT OF FINANCIAL TASK EVALUATION OF

INVESTMENT PROJECT TO BANK BIDV HUÉ

2.1 The introduction of BIDV Bank Hue

2.1.1 The history of the formation and development

The brief presentation: Being created at 04/26/1957, BIDV is the oldestCommercial Bank of Vietnam

• Full name: the Bank of Investment and Development of Vietnam

• In English: Joint Stock Commercial Bank for Investment and Development ofVietnam

• Short Name: BIDV

• Address: BIDV Tower, 35 Hang Voi, the district of Hoan Kiem, Ha Noi

• Phone number: 04 2220.5544 - 19,009,247

• Email: Info@bidv.com.vn

• Slogan: Share opportunities, share success

Being created at March 27, 1993 according to Decision No 69 QD-NH5 BankVietnamese state, the branch of the Bank of Investment and Development of Vietnam

in Hue is a member (front row branch) of Bank of Investment and Development ofVietnam The branch was formed when the whole system of the Bank for Investmentand Development strongly diverted to versatile business activities both she lentaccording to the plan, the decision of the State, and mobilizes capital to lend, it is fullyresponsible for the result of work In the first years of creation, undergoing the difficultconditions in all aspects of the hardware and the working condition of the environment

of business activities, the bank BIDV Hue has always finished its mission to serve theinvestment, development, and combined well with other companies to contribute to theconstruction of infrastructure, the first base for economic development - head of ThuaThien Hue

With the efforts of the entire set of agents, the branch of the bank BIDV Huehas developed customer advanced the scale, quality, efficient operations, and hasrealized the work of restructuring At the end of 2014, the branch has 109 agents,including 95.4% of university and post - graduate BIDV Hue is the first bank in thelocal area to apply the ISO 9001: 2000 system to develop diversified and qualifying sothe bank's activities such as mobilization, loan, deposit, national and internationalregulations , ATM cards services, VISA the BIDV bank Hue is still a branch thatefficiently carries and reached the high level of growth.

2.1.2 The situation of assets and capital resources

♣ The resources capital

BIDV Hue capital resources do not cease to increase over time, from 2010 to

2014, they increased by 135% This growth shows that the bank is currently expandingbusiness operations and attracting investment resources

In addition, the structure of resources is also performed significant changes.First, total customer deposits has fluctuated in recent years This is because thedeposits are strictly dependent on the interest rate In 2011, due to the impact ofinflation (the annual rate of inflation was 18.13%), the interest rate would rise sharply

to restrict the money supply in circulation So, total bank deposits increasedsignificantly by 55% In 2012, inflation is limited at a figure (6.81%), the interest rate

is also decreased So the total deposits has fallen considerably compared to 2011 Inthe period 2013-2014, the economy begins to phase stable, inflation is kept low Theinterest rate has the tendency to fall and stabilize, it has no status of the race in theinterest rate So, customer deposits were steady development Second, deposits ofcredit institutions with BIDV Hue have suddenly increased in 2013 They account for26.56% of the bank's capital resources (they are still below 2% before) This is a result

of Circular 01/2013 / TT-NHNN of the bank of the State reopens the door to depositmoney into the banks The mission of the interbank market support liquidity and profitcreation for available capital This market reported a lot of interest to the participants.However, the state bank issued the decision to limit lending operations between banksbecause of market control inability of potential hazards from low credit institutionsand rising bad interbank liabilities So in 2014, the interbank market is controlled.Weak banks are restructured or integrated with banks that work well The marketbecomes more safe and effective