PROJECT REPORT IMPROVING HOUSE LOAN SERVICE AT BUYING APARTMENT SEGMENT OF BIDV HA TAY BRANCH

PROFESSTIONAL BACHELOR DEGREE IN BANKING – FINANCE--- o0o --- GROUP PROJECT REPORT IMPROVING HOUSE LOAN SERVICE AT BUYING APARTMENT SEGMENT OF BIDV HA TAY BRANCH UNIVERSITY TULOR Mr.Ng

PROFESSTIONAL BACHELOR DEGREE IN

BANKING – FINANCE - o0o -

GROUP PROJECT REPORT IMPROVING HOUSE LOAN SERVICE AT BUYING APARTMENT SEGMENT OF BIDV HA TAY

BRANCH

UNIVERSITY TULOR

Mr.Nguyen Hoang Mr Vincent Dorange Mr Pham Tuan Anh

Group 1 Enterprise tutor

Luong Phan Ha Mr Phi Dinh Thi

Pham Gia Truong An

Dang Thi Tuyet Linh

Ta Thanh Tam

Dinh Thuy Trang

-Ha Noi

First of all, my team group sends our deep gratitude to the teachers of the InternationalEducation Faculty of Viet Nam Commercial University, those teach and give us valuableknowledge, experiences during the education

Secondly, we express our gratitude particularly our tutor- Mr Pham Tuan Anh forspending time advising, supporting and guiding to complete this project report

Thanks to the staffs at BIDV Ha Tay Branch, especially Mr Phi Dinh Thi – ourmanager for giving us a great opportunity to experience a real banking environment andbroaden our vision of a future job

Last but not least, we would like to thank Mr Vincent Dorange, for providing us goodconditions to gain experiences and adjust information for the project

ACKNOWLEDGE

LIST OF TABLE

LIST OF FIGURE

INTRODUCTION

I Introduction to BIDV Bank, BIDV Bank – Ha Tay Branch and our project 2

1.Introduction to Bank For Investment And Development Of Vietnam (BIDV Bank) and Ha Tay Branch 2

1.1Bank For Investment And Development Of Vietnam JSC ( BIDV Bank) 2

1.2 Introduction of BIDV Bank – Ha Tay Branch 3

2 Overview of our project 4

2.1 Choice of project 4

2.2 Organizing the project implementation 5

2.2.1 Objectives 5

2.2.2 Introduction of group member 5

II Project implementation at BIDV Ha Tay 5

1 Overview of BIDV house loan service for individual 5

1.1 Introduction of BIDV house loan service for individual 5

1.2 Evaluating BIDV house loan product for individual 6

2 Analyzing the actual situation of house loan for individual at BIDV Ha Tay 8

3 Survey implementation 10

4 Recommend practical solutions for the branch 15

III Accessing the project implementation at BIDV Ha Tay 17

1 Discussion with BIDV Ha Tay branch 17

2 Result assessment 19

CONCLUSION 23

APPENDIX 24

REFERENCES 26

LIST OF TABLE

Table 1: swot of bidv individual house loan product 7

Table 2 Comparing house loan products among banks 7

Table 3 The proportion of outstanding loans of individual customer at Ha Tay Branch 8

Table 3: The increasing trend of outstanding balance of house loan 9

Table 4 The number of customers using house loan service in BIDV 10

LIST OF FIGURE Figure 1 BIDV Bank’s history is summarized through the following memorable milestones:2 Figure 2 : The organization structure of BIDV- Ha Tay Branch 4

Figure 3 : Age groups of customers Figure 4 : marriage situation 11

Figure 5 : Occupation 11

Figure 6 : The demand of customers in price of apartment 12

Figure 7 : Some issues customer care when they buy apartment 13

Figure 8 : Budget sources 13

Figure 9 : The estimated payment each month Figure 10 : Loan period 14

Figure 11: Some channels that make customers know about BIDV product 14

Figure 12: Some factors in loan product that customers care 15

Figure 13: The limitations of BIDV 15

Hanoi is not only political but also economic center of Vietnam In this area, the price ofreal estate is far more expensive than other areas while the average income level of people isstill low As a result, having a private house is a far-away dream for a large number offamilies especially for young couples In this situation, banks play an important role as asolution to resolve the house demand of customer with some loan packages In recent years, anew trend has emerged in favor of apartment, which made estate market has become activeagain To keep up with this trend, some banks launched some competitive house loanproducts especially for individual clients In 2017, the real estate market has become hotterthan ever Many modern buildings have been built at acceptable price with some incentivescoming from investors and property development firms To compete with other banks, BIDV

Ha Tay branch determined to focus on expanding the house loan product in this segment As aresult, we decided to choose the topic “Improving the home loan service in apartment segment

of BIDV Ha Tay branch in Ha Noi” as the subject of our dissertation

I Introduction to BIDV Bank, BIDV Bank – Ha Tay Branch and our project 1.Introduction to Bank For Investment And Development Of Vietnam (BIDV Bank) and Ha Tay Branch

1.1Bank For Investment And Development Of Vietnam JSC ( BIDV Bank)

Background Information : The Joint Stock Commercial Bank for Investment andDevelopment of Vietnam (BIDV) was established on April 26, 1957 Through 60 years ofoperation, BIDV has become the biggest joint stock commercial bank in Vietnam with totalasset more than 1 million billion dong as of 2016 and housing over 256,400 employees

Some milestones in the history of BIDV

Figure 1 BIDV Bank’s history is summarized through the following memorable

milestones:

With 60 years of operation, BIDV has become the largest commercial bank in Vietnam

In the banking system of Vietnam, BIDV plays an important role in contributing to the growth

of Vietnam in general, and setting the standards for other commercial banks in terms ofoperational capacity, risk control and operational efficiency BIDV’s strength lies include -compared to other banks - the long-standing brand name, solid scale and quality of services

As a result, BIDV always strives to improve its capacity and continually introduces new

products and services to satisfy the rapidly changing demand of the market 2016 marked adifficult year for financial market However, BIDV quickly adapted to the new businessenvironment and obtained successful business results in that year Some key financialstatistics of BIDV are set out as follows:

- As of 31 December 2016, BIDV's total assets reached 1.006.404 billion, the bankwas continuing to be the leading commercial joint stock bank in Vietnam

- With continual improvement, BIDV has won a number of impressive awardsincluding “National Brand” (5 times in a row), “top 2000 largest and most powerful in theworld” voted by Forbes Magazine

1.2 Introduction of BIDV Bank – Ha Tay Branch

BIDV Ha Tay is a subsidiary of BIDV, formerly run by Ha Son Binh Investment andDevelopment Department The branch was established on June 1, 1960 As of 1 January 1995,this branch mainly operated in mobilizing short, medium and long term capital in Vietnam dongand Dollars to carry out lending activities in three types of term

Over 57 years, BIDV Ha Tay has operated in accordance with the direction of theBoard of Directors of BIDV as well as the guidelines, policies of the gorvernment, and makethe safe target in business to meet the biggest request of clients on products and services at thelowest cost

BIDV Ha Tay Branch is a relatively large branch compared with other commercial bankbranches operating in Hanoi It is currently housing 167 staffs including 1 director and 3deputy directors The organizational structure of the branch is as follows:

- Board of Directors (4 persons)

- Customer Relations Management (3 rooms)

- Risk Management (1 room)

- Operation (5 rooms)

- Internal Management (2 rooms)

- Subordinate (7 transaction point)

The organizational structure of BIDV Ha Tay branch is shown in the followingdiagram:

Figure 2 : The organization structure of BIDV- Ha Tay Branch

2 Overview of our project

2.1 Choice of project

Housing loan services have become an increasingly important product for each Vietnamcommercial bank As a result, they always find some solutions to improve this type of loan.BIDV Ha Tay located in Ha Dong District, where have a high population rate Moreover, thisarea is chosen by investors to improve some house projects for people such as Xuan Mai,HUB3, etc So, expanding the house loan services to meet a demand of customers isindispensable for BIDV Ha Tay and some competitors In recent year, investors focus onapartment projects to help satisfy the growing demand for housing in urban areas To improvethe house loan services, BIDV Ha Tay need to exploit a new market segment That is also thereason why my group selected the project: ‘Improving the house loan service at buyingapartment segment in Ha Noi’ in BIDV Ha Tay branch, where this service still faces withsome challenges

2.2 Organizing the project implementation

2.2.1 Objectives

- To understand customers demand

- To explore the demand of house loan service

- To exploit a new potential market

- To propose potential solution to improve house loan services

2.2.2 Introduction of group member

* This table below sets some basic information of members in group 1:

Last name First name Phone/Email

(Leader)

Tel: 0971878696Email : Sep2093@gmail.com

(Member)

Tel: 0965335597Email : antruongpham1010@gmail.com

(Member)

Tel: 0965156574Email : Tuyetlinh.21197@gmail.com

(Member)

Tel: 0985545205Email : Tathanhtam1997@gmail.com

(Member)

Tel : 0988833597Email : dinhmia@gmail.com

II Project implementation at BIDV Ha Tay

1 Overview of BIDV house loan service for individual

1.1 Introduction of BIDV house loan service for individual

 Overview of the product for individual customers

Individual customers include people who reside or work frequently in the same areawith the financing BIDV branch

Product features :

- The loan amount is up to 70% ( especially, 100%) the house price

- The Loan period is up to 240 Months

- Various payment methods include monthly, quarterly, semi-annually, annuallymethod

- Interst rate usually fluctuates around 7-7.8% in the first year and 10.5 – 11% fromthe second year, which does not offer more incentives than other banks do

- Lending method applied is Partial method

- The collateral is the unit which has certification of land use right

Condition of the customers

- The customers must be within the working age from over 20 to not over 60 whenthe loan expires

- The customers have no bad debt of more than 3 months at the bank and other credit

organizations as of the time of the loan

- The financial situation is good and have clear evidences of sound financial status

- During the committed period, customers must have enough financial capability totake repayment of both the principle and interest

- Customers must have enough equity capital, which related to the loan following thepolicy of the bank

Process of house loan service for individuals

Step 1: Receiving and filling the loan application

First, customer care officer will present the information of house loan products tocustomers and some advice regarding incentives, advantages and disadvantages of someproduct packages

The customer then fills in a loan proposal form Data provided in the proposal form willthen be evaluated by credit officers

Step 2: Appraisal of customer’s data

The profile of customer will be handled through the risk management department tocheck the accuracy and the risk if any This process will include:

+ Appraisal of Customer information: Loan conditions, legal entity, income, maritalstatus

+ Appraisal of loan payment ability

+ Appraisal of customer purpose of borrowing

+ Check the collateral asset information, and evaluate the value of asset in reality.Step 3: Entering into a contract with a customer

The authorized leader of business can allow the loan

The contract is established with the legal provisions on the obligations of the bank andthe customer, and the details of product package that customer receives The customer and thebank legal representative will execute in this contract, and the contract will take effect afterbeing executed by the two parties

After that, the bank will carry out the disbursement of the loan and commence tomonitor customer’s payback activities

1.2. Evaluating BIDV house loan product for individual

Through some data we collected and studied, we set up the SWOT table to have acommon view about BIDV individual house loan product

Table 1: swot of bidv individual house loan product STRENGTHS

- Has large budget and strong

operation

- Has high reputation

- Staffs who have good training

programs about banking operations

- Various promotion forms

Product can meet a most demand of

customer ( 100% value of house )

WEAKNESS

- Appraisal process loss much time

- Similar product with other bank

- Has many strong competitors

Limited in poor advertisement

OPPORTUNITIES

- Project building saw an increasing

trend

- A huge demand of customer

This product has become more popular with

in Vietnam All of them are direct competitors

Table 2 Comparing house loan products among banks

Characteristics BIDV Vietcombank VIB

 Temporaryresident book/ familyrecord book

 Document related

to real estate planned

to purchase

 Loan applicationform

 ID/ Passport

 Family recordbook

collateral

 Proof of income

 Notarized homesales contract

 Loan applicationform

 ID/ Passport

 Family recordbook

 Proof of financialcapacity, repaymentcapacity

 Document related

to the purchase andsale of real estate

( Sources : Summarize from www.BIDV.com.vn/ , www.Vietcombank.com.vn , and

www.vib.com.vn )

The table compares the characteristics of the house loan product offered by 3commercial banks with state share VIB bank and Vietcombank are two traditional

competitors of BIDV with comparable capacity in the market In general, the productsoffered are different with some special benefits of each bank

The most attractive interest rate of this product stays at 7.5% per annum, and it isobvious to see BIDV and Vietcombank enjoys a better advantage in terms of interest rate.Regarding loan period, VIB bank offers longer loan term than BIDV with 20 years and 15years for the latter bank In terms of a maximum loan ratio, borrowers of BIDV may enjoy abetter advantage as they could obtain a loan of 100% of the value, whereas this figure is only70% and 80% of the other two banks As a result, BIDV seems to enjoy bettercompetitiveness than the opponent in maximum loan ration with suitable interest rate and longloan period

The loan records include the same documents required by all 3 banks It can be easilyunderstood as it is part of the regulations specified by the government However, with respect

to the customer age, BIDV will grant loans to those above 20 years and under 60 years of age.Meanwhile, the customers of Vietcombank are limited to those under 45, and VIB bankwelcomes a broad range of customers above 20 and under 70 years old to apply for house loanproduct

2 Analyzing the actual situation of house loan for individual at BIDV Ha Tay

Table 3 The proportion of outstanding loans of individual customer at Ha Tay

(Source: the data from Customer relations management department)

This table compares the information about outstanding loans of BIDV Ha Tay branchover a 4 year period from 2014 to 4th quarter of 2017 in billion dong

Overall, individual outstanding loans increased continually over the years, which alsofacilitated the improvement in lending effectiveness of BIDV Ha Tay branch

In 2014, outstanding loans of personal customers accounted for only 11.72% of the totalloan amount, with just 494 billion dong Following this, in 2015, we can see a slight rise of13.08%, 1.36% more than the figure of 2014 By 2016, personal’s loans climbed to 1026billion dong, and then reached a peak in 1260 billion in the 4th quarter of 2017, accounted for15.78% of total outstanding loan These data imply that the effectiveness of individual lendinghas resulted in positive changes in the direction of extending retail credit of BIDV system

Figure 3: The increasing trend of outstanding balance of house loan.

Unit : million dong

(Source : the data from Operation department)

This chart compares outstanding housing loans out of total individual loan forms Ingeneral, housing loans constituted the largest part in the total individual loans

In 2014, the outstanding balance of this type of loans reached 294,754 million dong In

2015, an increasing trend was seen in this loan type with 453,600 million dong, increasing by43,2% against the figure of 2014 Following this, this figure continuously rose in 2016, with582,486 million dong (up by 28.41%) Finally, this loan type reached a peak in 2017 with634,908 million dong, increasing 52,422 million dong more than that of 2016 and 340,150million dong more than that of 2014

In 2017, in order to be in line with the market trend which increased the retail credit bymaking housing loans become the key lending service, BIDV initiated the program “Nha tailoc, don yeu thuong 2017” with specific incentives

- Interest rate: the branch shall take initiative in determining for each specificcustomer according to each program to ensure business efficiency

- Insurance incentives: reduce insurance fees

- BIDV Online, BIDV smart banking, BIDV-SMS

Therefore, in 2017, there was a remarkable increase in housing loan products The newproduct allows loans to be up to a maximum of 100% of the value of the house with a flexiblecombination of collateral assets Loan terms is now raised up to 20 years, with loan security,including other collateral of a customer or a third party, or a combination of guarantees From

2014 to 2016, with the view that housing loans are the products that bring sustainable incomes

to banks, BIDV Ha Tay branch has provided the market with diversified housing loans andservices On the basis of central housing loan packages such as the 15 trillion dong loanpackage, BIDV also created appealing housing loans to attract individual customers Inaddition, the branch also associated with prestigious investors of quality projects such as co-operating with investors of housing projects in Xuan Mai, Vimeco, Van Phu, Van Khe, etc toobtain more individual customers

Figure 4 The number of customers using house loan service in BIDV

Unit: People

(Source : data from the customer relations department)

The number of customers is very important when assessing the level of service of abank It shows the satisfaction of customers with the service Based on the demand for loans,BIDV has provided appropriate personal loan products The number of individual customers

at BIDV has been increasing since 2014as shown in the table

The number of individual customers in 2014 was 1375 but by 2015 it increased to 1686, anincrease of 311 customers (22.61%) compared to 2014 By 2016, the number of customers reached

2252, with 566 customers more than 2015 and 877 customers more than 2014, up 41.16% from

2014 In 2017, the figure climbed to 2846 customers, 594 more than 2016

Looking at the 2nd criteria, it can be clearly seen that the number of housing loancustomers rose slowly However, housing loans still play an important role to create greatrevenue for the bank Finally, from 2014 to 2017, the number customers lending money tobuy apartment saw a significant rising trend In 2014, the bank disbursed for 178 customers,this figure slightly rose by to 365 in 2015 (an increase of 18.4%) In 2017, the number ofcustomers lending to purchase apartments grew to 450 customers, marking a growth rate of52% It is clear that the apartment segment in recent years has been very attractive, and BIDV

Ha Tay branch should pay attention to this segment and develop a suitable strategy to expandthis segment

3 Survey implementation

The survey was used to measure the demand, the characteristics and opinions ofpotential customers who want to borrow money for buying apartments In this case, our groupconducted our research in 2 ways, including (i) Social network, and (ii) direct interview Thetype of customers, we chose was BIDV customers (The list of information is provided by oursupervisor) and the customers who had not used BIDV services

Through the group’s discussion and guideline of our supervisor, the questionnaireincludes 11 questions :

- Question 1-3 : The characteristics of customers who want to buy apartments

- Queston 4-8 : Focusing on the demand using home loan service to buy apartments

- Question 9-11 : The opinion of customers about BIDV home loan products

There are 5 areas we focus on the research: Ha Dong, Thanh Xuan, Cau Giay, Nam TuLiem and Dong Da District

The consequence we received is 467 responses included 300 valid opinions and 167invalid opinions

During the analyzing process, we use to calculate the information and check the validty

of response

Figure 5 : Age groups of customers Figure 6 : marriage situation

Unit : %

We divided customers into 4 age groups including under 25, from 25 to 35, from 36 to

45, from 46 to 55 According to the results of the survey, it is noticeable that the age groupfrom 25 to 35 years old accounted for the biggest proportion than the other groups, with 48%

of loan borrowers, while the under 25 stood at only 1% in this rate The proportion of thosefrom 46 to 55 years of age occupied a second important figure with 36% The group from 36

to 45 just accounted for 15% of all

During the interview process, we had a small talk with customers to gather moreinformation So, in the age group 25-35, we saw that this age group was very important asthey are financially independent They have jobs, actively save money for the future, andprepare to get married For the older group (46-55), they mainly spend money to invest intheir children’s education As a result, they tend to save for the future by investing in housesAccording to the survey, 37% of the 300 customers are still single

Figure 7 : Occupation

Unit : %