LV Thạc sỹ_Improve the credit situation in BIDV hai ba trung branch

ADVANCED EDUCATIONAL PROGRAM***************************** BACHELOR’S THESIS Topic: “Improve the credit situation in Bank for Investment and Development of Vietnam BIDV Hai Ba Trung Bran

ADVANCED EDUCATIONAL PROGRAM

*****************************

BACHELOR’S THESIS

Topic: “Improve the credit situation in Bank for Investment

and Development of Vietnam (BIDV)

Hai Ba Trung Branch”

As a final-year student, I consider the internship progress as one of the mostimportant period which provides me opportunities to apply my knowledge in thereal working environment

I want to give special thanks to my supervisor, Assoc.Prof.Dr …, forsupervising and evaluating the process of completing this report I am muchindeed appreciated

My grateful thanks also go to my internship guide, Ms…, credit official atBIDV Hai Ba Trung, who directly guided me during the internship process andhelped me better understand the branch’s structure and business activities

Great deals appreciated go to the contribution of all officials and employees

of BIDV Hai Ba Trung for providing me favorable conditions to complete myinternship program, enjoy in a professional working environment of a financialinstitution, and implement my knowledge in reality

Lastly, I would like to thank my group’s friends By no means can I finish

my report without your comments and ideas contribution

TABLE OF CONTENTS

ACKNOWLEDGEMENT

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

CHAPTER I: INTRODUCTION 10

1.1 Rationale 10

1.2 Research Question 11

1.3 Research Objectives 11

1.4 Research Method 11

1.5 Research Scope 11

CHAPTER II: THEORITICAL BACKGROUND OF COMMERCIAL BANK’S CREDIT ACTIVITIES 12

2.1 Commercial Banks in Economy 12

2.1.1 The concept of commercial bank 12

2.1.2 Commercial banks’ business and services 12

2.1.2.1 Capital mobilization 12

2.1.2.2 Capital using and lending the economy 14

2.1.2.3 Banking services business 17

2.2 The Overview of Credit and Its Role in the Economy 17

2.2.1 The overview of credit 2.2.1.1 The concept of credit 17

2.2.1.2 The role of credit 18

2.2.1.3 Forms of credit 19

2.2.2 Commercial bank’s credit 20

2.2.2.1 The concept of commercial bank’s credit 20

2.2.2.2 Types of commercial bank’s credit 20

2.2.2.3 Lending methods 20

2.2.2.4 The role of bank credit in the economy 21

2.3 Indicators to Evaluate the Credit Situation of Commercial Banks 22

2.3.1 Capital general analysis 22

2.3.2 Analysis of capital mobilization 23

2.3.3 Analysis of borrowed capital 23

2.3.4 Analysis of the bank's equity 23

2.3.5 The indicators to analyze the capital using 23

2.3.6 The indicators to assess the effectiveness of credit 24

CHAPTER III: INTRODUCTION TO BIDV HAI BA TRUNG AND ITS BUSINESS ACTIVITIES RESULTS FROM 2009 TO 2011 25

3.1 An Overview of BIDV System 25

3.2 The Process of Establishment and Development of BIDV Hai Ba Trung 28

3.2.1 The circumstance and purpose of establishment 28

3.2.2 The development of transactions network and savings funds 29

3.3 Organizational Structure of BIDV Hai Ba Trung 29

3.3.1 The organizational structure of BIDV Hai Ba Trung 29

3.3.2 Functions of the departments in the bank 31

3.4 Business Activities Results of BIDV Hai Ba Trung from 2009 to 2011 34

3.4.1 Revenues evaluation 35

3.4.2 Expense evaluation 36

3.4.3 Profit evaluation 37

CHAPTER IV: CREDIT SITUATION IN BIDV HAI BA TRUNG FROM 2009 TO 2011 38

4.1 Provisions for Loans to Customer of BIDV Hai Ba Trung 38

4.2 Analysis of Credit Activities in BIDV Hai Ba Trung from 2009 to 2011 40

4.2.1 Capital mobilization 40

4.2.1.1 Capital mobilization results from 2009 to 2011 40

4.2.1.2 Capital mobilization analysis through indicators 44

4.2.2 Capital using – lending the economy 48

4.2.2.1 Capital using results from 2009 to 2011 48

4.2.2.2 Credit evaluation bases on terms 49

4.2.2.3 Capital mobilization analysis through indicators 55

4.3 Evaluation of Credit Situation in BIDV Hai Ba Trung from 2009 to 2011 59

4.3.1 Advantages 59

4.3.2 Limitations 60

4.3.3 The causes 62

CHAPTER V: SOLUTIONS TO IMPROVE THE CREDIT SITUATION IN BIDV HAI BA TRUNG 67

5.1 Orientation of Development and Some Important Indicators of BIDV Hai Ba Trung in 2012 67

5.1.1 Development orientation of BIDV Vietnam 67

5.1.2 Some basic growth indicators of BIDV Hai Ba Trung up to 2011 68

5.2 Solutions to Improve the Credit Situation in BIDV Hai Ba Trung 70

5.2.1 Solutions at the macro level 705.2.2 Solutions at the micro level 7

CONCLUSION

REFERENCE

APPENDIX

LIST OF TABLES

Table 3.1: Business activities results of BIDV Hai Ba Trung in 2009 – 2011 25 Table 3.2: Comparing business activities results in 2009 – 2011 26 Table 4.1: Capital mobilization in 2009 – 2011 31Table 4.2: Proportion of each method’s capital mobilized in total capital mobilized

in 2009 - 2011 31Table 4.3: Total mobilized capital/Total capital ratio in 2009 – 2011 36Table 4.4: Term deposits/Total mobilized capital ratio in 2009 – 2011 36Table 4.5: Medium-term and long-term mobilized capital/Total mobilized capital

ratio in 2009 – 2011 37Table 4.6: Capital using results of BIDV Hai Ba Trung in 2009 – 2011 39Table 4.7: The loans revenue classify by terms from 2009 to 2011 (million VND) 41Table 4.8: Debt recovery situation bases on terms in 2009-2011 (million VND) 43Table 4.9: Total outstanding loans situation bases on terms of BIDV Hai Ba Trung

in 2009-2011 (million VND) 44Table 4.10: Overdue debts situation bases on terms of BIDV Hai Ba Trung in

2009-2011 (million VND) 45Table 4.11: Total outstanding loans/Total mobilized capital ratio in 2009 – 2011 46Table 4.12: Overdue debts/Total loans ratio in 2009 – 2011 47

Table 4.13: Credit turnover in 2009 – 2011 48Table 4.14: Debt recovery coefficient in BIDV Hai Ba Trung from 2009 – 2011.49Table 5.1: Financial Plan of BIDV Hai Ba Trung in 2012 60

LIST OF DIAGRAMS

Diagram 3.1: Business activities results of BIDV Hai Ba Trung in 2009 – 2011 .28Diagram 4.1: Methods of capital mobilization growth in 2009 – 2011 34Diagram 4.2: Proportion of each method’s capital mobilized in total capital

mobilized in 2011 35Diagram 4.3: Medium-term and long-term mobilized capital/Total mobilized

capital ratio on 2009 – 2011 38Diagram 4.4: Overdue debts situation bases on terms in 2009-2011 (million

VND) 46Diagram 4.5: Bad debts/Total loans ratio in 2009 – 2011 48

to enhance the level of staff as well as the quality of products and services.

The Bank for Investment and Development of Vietnam was established when thecountry was in difficult situation With over 50 years of operation and development, thebank was granted its trademark in the U.S, received the Vietnam Gold Star Award forstrong brand, and many annual awards of the government, financial institutions indomestic and abroad Bank for Investment and Development of Vietnam has become theleading bank, has been known by local community and friends internationally andrecognized as one of the largest banks in Vietnam

Hai Ba Trung Branch is in the branch system of Bank for Investment andDevelopment of Vietnam Over the years, the branch always developed its market shareand maintained its growth in lending to the economic sectors in the area of Hanoi

Being an internee of Bank for Investment and Development of Vietnam – Hai BaTrung branch from March to May 2012, I had an opportunity to do further research on thecredit situation of the branch, regulations as well as the operation in recent years As a

result, I decide to choose the topic “Improve the credit situation in Bank for Investment and Development of Vietnam (BIDV) – Hai Ba Trung Branch” for my internship report

to show current situation and propose solutions to make the credit situation in the branchbetter

1.2 Research Question

 What is the situation of credit in BIDV Hai Ba Trung branch from 2009 to 2011?

 What are the existing limitations in credit situation of BIDV Hai Ba Trungbranch?

 What are the solutions to improve the credit situation in BIDV Hai Ba Trungbranch?

1.3 Research Objectives

 Analyze and evaluate the credit situation in BIDV Hai Ba Trung branch

 Propose some solutions to improve the credit situation in the branch

1.4 Research Method

In progressing the report, I used the following methods:

a Data collection method:

- Collect the documents that are directly related to analysis of credit situation of thebranch in 2009 – 2011 period:

 Balance sheets

 Income statements

 State Bank of Vietnam’s regulations

- Collect supporting information for the topic from books and websites

b Analytical method: methods of use and analysis of financial indicators to assesseffectiveness

The information and data, after being collected, will take an statistic, calculate thedifference through the period to compare in the relative method, the absolute method, etc

to assess and clarify the issues to be studied

1.5 Research Scope

The activities of the bank are plentiful and diverse, involved in many businessareas However, due to limited time and space as well as practical experience, I did notstudy and detailed analysis of each specific service The report focuses on analysis andevaluation of credit situation of the branch

CHAPTER II:

THEORITICAL BACKGROUND OF COMMERCIAL

BANK’S CREDIT

2.1 Commercial Banks in Economy

2.1.1 The concept of commercial bank

Up to now, there are many concepts of Commercial Banks In the U.S,commercial banks are currency trading companies, specializes in providing financialservices and work in the financial services industry Banking Act of France (1941) alsodefines “Commercial banks are the factory or establishment that its regular occupation isreceiving public money in the form of deposits, or other forms and use that resource forthemselves in discount, credit, and finance” In Vietnam, the definition of commercialbanks: commercial banks are organizations that currency trading activities is primarilyand regularly receive money in the form of deposits from customer with the sign of returnand use the money in lending, performance and the discount as a means of payment

From the above, we can consider commercial banks as the financial institutionsthat typically offer a wide range of financial services with the basic business are receivingdeposits, loans and providing payment services In addition, banks also offer many otherservices to satisfy the maximum demand for products and services of society

2.1.2 Commercial banks’ business and services

2.1.2.1 Capital mobilization

Capital mobilizing activity is a meaningful prerequisite activity for the bank itself

as well as for society In this activity, commercial banks are allowed to use the tools andmethods necessary in the provisions of law to mobilize idle money in society as a source

of credit for lending to the economy

Capital component of the commercial banks include:

- Statutory capital

Statutory capital and Reserve funds

The statutory capital and reserve funds of commercial banks which are calledbank’s capital is the initial capital and added during the process of operation

The statutory capital is used primarily to: Building houses, offices, procurement

of assets and equipment in order to create facilities to ensure the bank's activities, theremainder for investment, joint venture, medium-term and long-term loans

The reserve funds: this is a required funds in the existence and activities of the

bank, these funds are set up at the specified rate on the bank’s net profit, include:

 Reserves are deducted from net profits each year to supplement the statutorycapital

 Financial reserve: this fund is to offset the risk of losses in the bankingactivities

 Technical and professional development fund

 Reward and welfare fund

 Retained earnings to allocate funds, exchange rate differences, revaluation ofassets, construction capital

Capital of banks are the most important financial factors, it not only shows the scale

of banks but also reflect the ability to secure bank loans to customers

Mobilized Capital

This is the main capital of commercial banks, essentially is the monetary assets ofthe owners that banks temporarily manage and use with the obligation to refund promptlyand fully as customers required Mobilized capital is the greatest source, including:

 Demand deposits of organizations and individuals

 Demand saving deposits

 Term saving deposits

 Money issuance of debentures, bonds

 Other deposits

For deposits of individuals and organizations, in addition to interest rates, the safe,quick and convenient transaction is the fundamental factor to attract this monetary source.For saving deposits, money issuance of debentures and bonds, the interest rate is crucialand people save and purchase debentures for the purpose of profit

 Borrowings from other banks through the interbank market

- Borrow from foreign banks

Capital trust

This is the capital received from the financial institutions, from the nation budget,etc for funding the programs and projects on social and economic development, improvethe environment this fund is used only for indentified subjects and targets

Other capitals

It is the capital generated during operation of the bank (agent, money transfer andbanking services)

2.1.2.2 Capital using and lending the economy

Lending and investment are the most important capital using activities, determinethe viability and operation of commercial banks These activities constitute the maincomponents of commercial bank’s assets Commercial bank’s assets include:

 Reserves

 Loans

 Investment

 Other assets

Credit activities of banks aim to make a profit, but should be safe to maintain thetrust of customers In order to get the trust of customer, we must ensure the solvencyfirstly, meet the cash withdrawal needs of customers

In doing so, the banks have to set aside part of its not-in-use capital in ready to meetthe demand of payment This capital is called reserves The State Banks sets a reserverequirement ratio in each specified period, and interest payment for the reserverequirement deposit is regulated by government

 Blocked method: Accordingly, all of the reserve requirement must be deposited in

an account at State Bank and will be blocked to ensure the reserve requirementlevel

 Semi-blocked method: Part of the reserve requirement will be managed andblocked in a separate account at the State Bank

 Non-blocked method: in this method, reserves are calculated daily based on theactual balance of demand and term deposits The entire reserve won’t be blocked,

it may exist in the form of cash, deposits in State Bank or short-term securitiesdepend on commercial banks However, by the end of each month, State Bankwill check the implementation of reserve requirement If the commercial banksfail to comply, it will get the sanctions (warning, a fine of recidivism)

Credits

Total funds remaining after the reserve to take part, the commercial banks can use

to provide credit to organizations and individuals include:

Loans

Loans are the credit activities of commercial banks In that, commercial banks willgive the borrower, the loan amount to do a business, investment or consumption Onmaturity the borrower must repay capital and interest Banks control the borrowers andthe process of capital using Borrowers should repay consciously, which force them topay attention to how to use capital effectively so that they repay debt In lending, the risk

is very large, such as the inability to recover the loan or not fully paid on time, bysubjective or objective reasons Accordingly, when making loans, commercial banks need

to use methods to ensure loans such as mortgage, pledge, etc

 Contributing capital to buy shares and stock of companies, with capitalcontribution or share purchase only being done by the bank's capital

 Buying government bonds, municipal bonds, corporate bonds

All security investing activities are for the purpose of bringing revenues On theother hand, by dint of investing activities that the risks involved in banking activities will

be distributed And to invest in government bonds, the level risk is very low

Other assets

They are the remaining items of assets, essentially fixed assets, in order to: build orbuy houses to office buildings, equipment, machinery, transport vehicles, vault systemsbuilding, in addition are accounts receivable, other accounts, etc

2.1.2.3 Banking services business

The banking services growing has not only allowed considerable support for thecapital mobilization, expansion in INVESTMENT, but also generated income for thebank by the commission or fee…

These activities include:

- Providng the payment services for customers (cash transfering, check collection,providing of credit card, debit card )

- Preserving the precious legacy, the important papers of the public

- Preservating and protecting of securities trading in the customer's authorization

- Trading in foreign currency, jewelery

- Providing financial consultant services, helping companies, enterprises issuingshares and bonds

2.2 The Overview of Credit and Its Role in the Economy

2.2.1 The overview of credit

2.2.1.1 The concept of credit

Credit comes from Latin word: Credittum – means trust; in interpreting according

to Vietnamese language, credit means borrowing

In fact, the term credit is understood by different meanings depending on theresearch perspective At a specific financial relation, the credit is a property transaction

on the basis of reimbursement between the two entities At the point of fund transfer,credit is a transfer of funds from surplus subject to shortage subject

At the research perspective of the topic, credit is the economic relationshipbetween the lender - the value assigned (the Bank) and the borrower - the value received(organizations or individuals), in which the lender transfer the value of assets, money, tothe borrower to use in a certain time Borrower has the reposibility to unconditionallyrepay both the principal and interest (cost of buying the right to use currency) for thelender Credit associated with the production and circulation of goods Where there isproduction and circulation of goods, then there exists credit and its movement has alwaysbeen the driving force of economic relationships.

2.2.1.2 The role of credit

- Gather and redistribute idle monetary capital in the economy

This is the most basic function of credit, thanks to this function that the monetaryfunds in society be regulated from "surplus" to "shortage" spot to use in developing theeconomy

To gather and to redistribute monetary capital are two sides that form the corefunction of credit

+ Gather monetary capital: Thanks to the operation of credit systems that idle cash

is gathered together, including individual's idle cash, cash capital of enterprises, capital ofthe cash unions and social organizations

+ Redistribute monetary capital: These are fundamental aspects of this function

-it is the transfer to use the gathered cap-ital to meet the needs of production andcirculation of goods as well as the demand of expenditure in the whole society

Both the gathering and redistribution of capital are implement on the repaymentprinciple Thus, credit clearly has advantage, it stimulates the mobilization of capital,promote the efficiently use of capital

Thanks to the gathering and redistribution monetary capital of credit, most offunds in the society, from fairly idle money, have been mobilized and used for thedemand of production and life, increase the effectiveness of capital using

- Saving money and circulation costs for society

Through the operation of credit that we can promote the function of saving moneyand circulation costs for society, showing in the following aspects:

+ Credit activities, first of all, facilitates the introduction of credit tools such ascommercial paper, bank debentures and other kinds of checks, the modern means ofpayment such as credit cards, debit cards, etc for replacing a large number of cash incirculation, thereby reducing the related costs such as printing money, casting money,transportation, preservation of money, etc.

+ With the operation of credit, especially bank credit has opened up a great ability

to open accounts and payment transactions through bank transfer or compensation form

Along with the strong growth of credit, payment system via banks is expanding,which facilitates the process and creates favorable conditions for economical – socialdevelopment

+ Because of the credit operations, capital in society are mobilized to use for thedemand of production and commodity circulation, which will act to speed up the capitalturnover in the whole society

- Reflect and control economic activities

This function is the result of two functions mentioned above The movement ofcredit mostly is associated with the movement of supplies and goods, the cost of theenterprise, local business entities Thus, credit not only is the mirror that reflects theeconomic activity of enterprises but also implement the control activities that preventwaste and violation of the business law in enterprises

2.2.1.3 Forms of credit

- Trade credit: Trade credit is a credit relationship between the business entities onthe basis of trust and is expressed in the form of goods sold on credit to buyanother

- Bank Credit: A credit relations between banks and economic entities as well asindividuals in society

- State Credit: A credit relations between the state with organizations andindividuals in society, in which the state mobilizes capital from organizations andindividuals by issuing bonds instrument for general purpose of the entire society

- International Credit: A credit relations between the Governments and the financialand monetary institutions that are implement by several different methods to helpeach other to develop

2.2.2 Commercial bank’s credit

2.2.2.1 The concept of commercial bank’s credit

As mentioned above, bank credit is a credit relation between banks and economicentities as well as individuals in society Thus, bank credit include bank acting as a creditgrantor and a credit granted also However, due to its complexibility and importance,bank credit is usually refered as the bank acting like a credit grantor

2.2.2.2 Types of commercial bank’s credit

Credit Classification is the arrangement of loans in groups by a certain number ofcriteria Classification of credit based on the following criterias:

 Based on the loan purpose: loans to real estate, loans to industry and trade, loans tofinancial institutions, loans to individual, and other loans

 Based on the loan term: term credit and demand credit

 Based on the economic sectors: loans to state enterprises, loans to collective sector,loans to private sector, loans to individual, and loans to mixed economic sectors

 Based on the level of confidence for customers: loans secured by assets, loans notsecured by assets

 Based on the method of repayment: maturity repaid loan and installment repaidloan

 Based on the origin of credit: direct loans and indirect loans

2.2.2.3 Lending methods

According to Article 16 of Decision No.1627/2001/QD-NHNN dated 31/12/2001

of the Governor of the State Bank "About issuing lending regulations of creditinstitutions for customers", credit institutions deal with borrowers to choose the sufficientmethod of lending The method of lending according to the Decision include:

- One time loans: Each time making a loan, customers and credit institutionsperform necessary procedures and sign the credit contract

- Loans under the credit limit: Credit institutions and customers identify and agree

a credit limit maintained for a period of time

- Loans to investment projects: Credit institutions make loans to customer toimplement investment projects to develop production, business, services and investmentprojects in service of life.

- Syndicated loans: A group of credit institutions lend to a project, in which onecredit institution acting as arranged, in collaboration with the other credit institutions

- Installment repayment loans: The making loans, credit institutions and customers

to identify and agree to pay the loan interest plus principal and make split repayment inseveral periods during the lending period

- Loans by standby credit limit: credit institutions willing to commit to lending tocustomers within a certain credit limit Credit institutions and customers shall agree onthe validity period of the standby credit limit, the fee payable for standby credit limit

- Loans through the service of issuance and use of credit cards: Credit institutionsare approved for customer use of loans within the credit limit for payment for goods,services and withdrawal cash at automated teller machines or at the agent of the creditinstitution When lending through the service of issuance and use of credit cards, creditinstitutions and customers must comply with the provisions of the Government and theVietnam State Bank on issuance and use of credit cards

- Loans by overdraft limit: means the credit institutions agreed in writing to theclient to expense exceed the amount paid on account of customers in accordance with theprovisions of the Government and State Bank of Vietnam on payment operations viaorganizations providing payment services

- Other lending methods: that the law does not prohibit, in accordance with theprovisions of this Regulation and business conditions of the credit institutions andcharacteristics of the borrower

2.2.2.4 The roles of bank credit in the economy

Talking about the role of credit is refering to the impact it had on the social economy.Therefore, this includes both the positive role and negative For example, if credit growth

to the "hot", it will easily lead to high inflation, affecting the economic – social life Interms of positive aspects, credit activity has the following roles:

• Credit contribute in motivating the production and circulation of goods to develop

Credit activities have resolved conflicts in the process of circulating and flow ofcapita, become the bridge between savings and investment, met the needs for productionand business capital and fulfill the demand for investment capital for contributing tosocial production and circulation of goods development.

• Credit helps stabilize the monetary system and price

When performing as a bridge between savings and investment, credit activitieshave reduced the amount of money circulating in society, reduced inflation, contributed

to monetary stability and made production increasingly develop, meeting the growingneeds of society, contribute to stabilizing the domestic market price

• Credit develop the population lives, create jobs, and maintain the social order

Credit activities contribute to the production and circulation of goods to meet thedemand of society On the other hand, credit activities provide the favourable conditionand the ability to exploit the social resource such as natural resources and labor Thus,credit activities increasingly attract more employees, contribute to social stability andorder

• Credit expand and develop the external economic and international exchange

Besides, credit activities are also developed to the international scope, whichcontributes to the expansion and development of the external economic relationship andenhance internaltion exchanges

2.3 Indicators to Evaluate the Credit Situation of Commercial Banks

2.3.1 Capital general analysis

This indicator will help analysts know the capital structure of banks Each of thecapital account has the different requirements of cost, liquidity, different repayment sobanks need to observe, evaluate each type of capital for timely strategies to mobilize ineach given time

2.3.2 Analysis of capital mobilization

- Mobilized capital/Equity: help analysts determine the capabilities and scale toattract capital from the economy by commercial banks

- The percentage of each deposit type

This ratio to determine the structure of the cipital mobilized of the bank Therebyhelping to limit the risks and minimize input costs to the commercial banks

2.3.3 Analysis of borrowed capital

Borrowed capital/Total capital (%): reflects the level of capital support from theState Bank and other credit institutions

2.3.4 Analysis of the bank's equity

To determine the safety of the bank, because of the possibility of a final paymentBank is closely related to the equity The solvency assessment is usually done through thefollowing indicators:

2.3.5 The indicators to analyse the capital using

 Total outstanding loans / Total mobilized capital: This indicator is to determine

the investment effectiveness of capital moiblized It helps the analyst to compare thelending abilities of the banks with mobilized capital

 Total short (medium, long) outstanding loans/ Total outstanding loans: This

indicator is used to determine the credit composition according to the terms Since thenhelps analysts evaluate whether such investment structure is reasonable, and have atimely adjustments

2.3.6 The indicators to assess the effectiveness of credit

 Debt recovery coefficient

This indicator reflects: which each unit the bank lending, how much unit ofcapital it can recover The higher the ratio, the better for the bank.

 Capital turnover

Measure the speed of rotating credit, loan recovery time faster or slower

 Overdue loans/ Total outstanding loans

This indicator is to assess the effectiveness of bank credit, the credit qualitymeasure The lower this ratio, the higher the credit quality

CHAPTER III:

INTRODUCTION TO BIDV HAI BA TRUNG AND ITS BUSINESS ACTIVITIES RESULTS FROM 2009 TO 2011

3.1 An Overview of BIDV System

As a long-established bank, BIDV has funded many investment projects and keyeconomic areas of the country Bank for Investment and Development of Vietnam(BIDV) has also built the largest enterprise customers, while confirming theimplementation of prestigous items, objectives, economic programs and social security ofthe country

- Full name: Bank for Investment and Development of Vietnam

- International Transaction Name: International Bank for Investment andDevelopment of Vietnam

- Abbreviated name: BIDV

- Address: BIDV Tower, 35 Hang Voi Street, Hoan Kiem District, Hanoi City

- Stock: BIDV provides a wide range of brokerage services, investment andinvestment consultant with the ability of quickly developing a system of agents to receiveorders nationwide.

- Financial investments: BIDV includes financial leasing, security trading andcapital contribution with the aim at establishing investment companies to the project;Especially, it plays a leading role in coordinating key projects of the country such ascompany Aviation stock leasing (VALC) development company highway (BEDC),Investment, Long Thanh International Airport …

3.1.2 Human Resources

With more than 16,000 officers, employees and financial consultants who arewell-qualified and well-trained with full experience and have been accumulated andtransferred for over half of a century, BIDV always brings its customers the benefits andreliability

3.1.3 Network

- Banking Network: BIDV has 114 branches and 500 transaction offices, thousands

of ATMs and POS transactions in 63 provinces and cities nationwide

- Non-banking Networks: consists of Investment Securities Company (BSC),Insurance and Investment Company (BIC) and Leasing Company I & II with more than

20 branches nationwide

- Overseas representatives: It trades on all three sectors: Banking, Insurance andFinancial Investment in Laos, Russia and especially in the Cambodian market(Investment and Development Company of Cambodia – IDCC, Investment Banking andDevelopment of Cambodia – Cambodian BIDC, Insurance Company – CVI

- Joint venture Bank: co-operates more effectively with international partners such

as Bank VID-Public Venture (partner Malaysia), Bank of the Lao-Vietnamese jointventure (with partner Laos), Vietnam Russia Joint Venture Bank – VRB (with partnersRussian), BIDV Tower Joint Venture Company (Singapore partner), venture investmentmanagement BIDV – Vietnam Partners (U.S partner), etc

3.1.4 Customers

BIDV trades with:

- Enterprises: corporations, big corporations, small and medium enterprises

- Financial institutions: BIDV is the reliable choice for a number of Financialinstitutions such as unilateral and multilateral World Bank, ADB, JBIC, NIB …

- Individuals: Millions of individuals have used the services of BIDV It hascontinuously tried to reach the goal of becoming a retail bank of high standards

3.1.5 Technology

- BIDV always has innovations and technology applications serving effectively forthe management and development of advanced banking services, developing the mostadvanced information technology systems such as ATM, POS, Contact Center, toconsolidate and develop all infrastructure systems such as monitoring of networkresources, network-oriented services (SONA), access control workstation; enhanceinformation processing service, banking executive management MIS; CRM

- Since 2007, BIDV has occupied the leading position in the top list of VietnamICT Index (index available for application development and information technology) and

in the typical Top 10 CIO (Information Technology Leadership) in the area of Indochina

3.1.7 Business reputation of BIDV

- BIDV is the choice, the trust for economic organizations, the leading enterprises

of both countries and individuals in accessing the financial and banking services

- BIDV has been known and recognized as one of the largest banking brand inVietnam and certified as a trademark in the U.S and also rewarded annually fromorganizations, financial institutions at home country and abroad

- BIDV is always the pride of generations of staff and financial and banking sector

in 53 years with traditional professional development investment for the country

3.2 The Process of Establishment and Development of BIDV Hai

Ba Trung

3.2.1 The circumstance and purpose of establishment

- Bank for Investment and Development of Vietnam, Hai Ba Trung branch wasestablished under Decision No 718/QD-HDQT on 19/09/2008 by the Chairman of theBoard of the Bank for Investment and Development of Vietnam, on the basis ofseparation from the First Transaction Bureau of Bank for Investment and Development ofVietnam Hai Ba Trung branch is a branch under the Bank for Investment andDevelopment of Vietnam, having its own seal and balance sheet accounting, perform allthe operations of commercial banks

- Ownership: State-owned commercial banks

- Agency:

+ Full Name: Bank for Investment and Development of Vietnam

+ Abbreviated name: BIDV

+ Address: BIDV Tower, 35 Hangvoi Street, Hoan Kiem District, Hanoi

+ Website: www.bidv.com.vn

3.2.2 The development of transactions network

To meet the demand for business development and expanding the network inoperation of BIDV Hai Ba Trung branch in particular and the whole BIDV system in

general, BIDV Hai Ba Trung has continuously developed the transaction system,increasing in both the quantity and the scope

Figure 3.1 Transaction network development of BIDV Hai Ba Trung

(Source: Administrative Office of BIDV Hai Ba Trung)

3.3 Organizational Structure of BIDV Hai Ba Trung

3.3.1 The organizational structure of BIDV Hai Ba Trung

The organization structure of Hai Ba Trung branch is organized into 13 officesincluding nine professional offices and four transaction offices, with more than 100officers and employees, average age of 29, the university level account for over 95% ofemployees

(Source: Administrative Office of BIDV Hai Ba Trung)

3.3.2 Functions of the departments in the bank

3.3.2.1 Branch Board of Management Director

Director

- Be the legal representative of Bank for Investment and Development of Vietnam

in industry and trade Hai Ba Trung branch

- Be responsible for the results of the branch business and financial expenditure, setfunds under the provisions of the State, the Board of Directors and Acting GeneralDirector

- Direct the implementation of policies, regulations and duties of the business plan

- Be responsible comprehensively for property, capital, organizing and executingbranch officers

- Decide on programs and plans of activities of the Branch

- Make investment decisions for loans, guarantees in the extent authorized by theActing General Director

- Sign credit, currency, payment documents within the branch activities

- Develop business targets for the branch

- Organize research, study activities and guide the implementation of theregulations and rules of BIDV Vietnam

Deputy Directors

- Assist the Director to direct and administer in a number of works

- Join with the Director in the preparation, construction and making decisions aboutworking program, business plan and operation plan

- Represent the Director in signing and resolving documents in the field ofassignment

- Manage all aspects of the branch at the absence of an official delegation of theDirector

3.3.2.2 Transaction offices

- Implementation of activities, make directly transactions with customers to raisecapital in VND and foreign currencies

- Provide personal loans, mortgage loans for employees, mortgage valuable papers

- Dealing with payment transactions, guarantee according to regulations of ournation and BIDV

3.3.2.3 Customer relation department

Business Customer Relation Department

- Be an advising department that assists the branch Director and Deputy Directors

in managing and operating business in Hai Ba Trung branch

- Build customer policies and implement guidance, administration, businessmanagement (including making loans, mobilizing capital, selling bank productsand services) for business customer in consistent with the provisions of the SBVand BIDV

Individual Customer Relation Department

- Advise and consult branch director and deputy directors in formulating,implementing, managing, and improving the credit policies, and tools to approvecredit at branch

- Analyze and warn the existing and potential risks that can affect the bank creditactivities

- Implement search, exploitation and development of new customers, improvecustomer services

3.3.2.4 Accounting and customer services department

Internal Accounting

- Record all of the work arising during the day

- Account according to state regulations, implement of social insurance and healthinsurance accounting and, account tax payable

- Archive document for the whole branch

- Guide customers and the local organization about using vouchers and formscompliance with the bank provisions.

- Make the journal entries relating to accounting processes such as authorizedcollection and payment, accounting of revenues and expenditures of the day,opening new accounts for customers, make entry transfers between bank withcustomers, with other banks, and with BIDV Vietnam

- Make settlement report, analyze profit and loss for each period of operation of thebranch

- General information, balance the activities of the branch

- Finalize of the annual report to Bank Headquarter

Budget Office

The budget office performs the following tasks:

- About revenues: receive of all customer deposits, and sales payment and bankloans payment in VND and foreign currency, receive VND and USD deposits ofcustomers, open accounts, open the ATM card, etc

- About expense: pay customers, pay travel SEC and check that have been checked

by division department and inspected by Director

3.3.2.5 General and administrative department

- Plan for procurement of property and equipment, stationery and other supplies tothe bank, monitoring the use of facilities in the bank

- Perform administrative work and manage documents, maintain documents

- Provide legal support for customers

- Internal control

- Handle customer complaints

- Perform other legal procedures

3.3.2.6 Risk Management Office

- The management of credit

- The management of credit risk.

- The management of operational risk

3.3.2.7 Credit Management Department

- To receive from the Customer Relations Department the disbursement profiles Issuing, guarantee and check the valid, legitimate of credit contract and the regulations of State Bank.

- Manage disbursement plan, monitor debt collection.

- Caculate provisions for loan loss.

- Maintain transaction documents, business profiles, asset and debt guarantee.

- Take full responsibility for safety in operation

- Monitor the compliance of conditions in the credit contract.

3.3.2.8 General Planning Office

- Consult the branch manager the expected business plan

- Analysis and evaluation, implementation and report the business operations,business results and annual financial situation of the branch

- Do emulation, research and development of scientific topics

3.4 Business Activities Results of BIDV Hai Ba Trung from 2009 to 2011

Thanks to the continuous striving to archive the targets and better servecustomers, BIDV Hai Ba Trung has archived significant results, showing as follows:

Table 3.1: Business Activities Results of BIDV Hai Ba Trung in 2009-2011 (million VND)

31/12/2009(mil VND)

31/12/2010(mil VND)

31/12/2011(mil VND)

exchange and gold

(Source: Accouting Office of BIDV Hai Ba Trung)

Table 3.2: Comparing business activities results in 2009-2011 (million VND)

2010, accumulated revenues from beginning of the year reached 272,609 million,increased 31.10% In this year, the branch tried to use more active methods such asattracting new customers, rising the credit balance, developing foreign exchange salesand payment services to banks, etc in order to increase their revenues and create morerevenues However, the main revenue source of the branch is interest revenues, reaching248,182 million, increase 71,434 million in compared with a year earlier

In 2011, total revenues of BIDV Hai Ba Trung were 399,907 million VND, 127,298million, or 46.70% higher than 2010 Particularly, interest revenues reached 371,309million (accounted for 92.85% of total revenues) increased by 123,127 million comparedwith 2010 It is caused by increases in loans and adjusted interest rates from the previousyear

3.4.2 Expense evaluation

Going along with increasing total revenues, the total expenses of branch alsoincreased In 2009, the total expense was 186,922 million, mainly to pay interest ondeposits In 2010, the total expense was 244,711 million, 30.92% higher than 2009, withinterest expense reaching 171,587 million, accounting for over 70.12% of total expenses.The fact that interest rate of transferred capital from Bank Head Office continued toincrease last year leads to the increasing expenses Other expenses also increased

In 2011, the total expense of BIDV Hai Ba Trung was 378,183 million VND,increase 133,472 million, equivalent to 54.54% compared to 2010 In that, payinginsterest on deposits is 265,985 million (account for 70.33% of total expenses) Thereason is that in 2011, mobilized capital in the area and the transferred capitaldramatically increased, caused interest expenses higher the previous year Particularly,provisions for losses at the end of 2011 were 37,851 million Hai Ba Trung branch hasused various measures to save expenses for businesses, in order to gradually improveprofitability for the whole branch

Diagram 3.1: Business Activities Results of BIDV Hai Ba Trung in 2009-2011

(Source: Accouting Office of BIDV Hai Ba Trung)

3.4.3 Profit evaluation

The net profit of BIDV Hai Ba Trung also has significant fluctuation from 2009 to

2011 In 2010, net profit of the branch was 31,314 million, increase 7,835 million or33.37% compared with 2009 In 2011, net profit went down to 26,743 million, 14.60%lower than in 2010 The reason was the fact that even though the total revenues rapidlyincreased, the total expense aso dramatically climbed in 2011 Howerver, both BIDVsystem and BIDV Hai Ba Trung are gradually modernized, made the transaction moreconveniently and quickly attracted customers Besides, the number of transactions alsoincreased rapidly

CHAPTER IV CREDIT SITUATION IN BIDV HAI BA TRUNG FROM

2009 TO 2011

4.1 Provisions for Loans to Customer of BIDV Hai Ba Trung

General provisions for loans to customers in BIDV System:

a Principles of borrowing: Customer want to borrow from BIDV must meet the

following principles:

- Use the loan to the right purposes agreed in the credit contract

- Completely pay the principal and interest when due as agreed in the creditcontract

b Loan conditions

- Have civil legal capacity, civil act capacity and bear civil liability according tolaw

- The purpose of using loans is legal

- Have ability to finance guaranteed loan in commitment period

- Have investment projects, production, sales, and service plans that are feasibleand effective; or have investment projects, plans for life that are feasible andconsistent with the provisions of law

- Implement the provisions on loan security as prescribed by the Government andthe guidance of the State Bank of Vietnam

c Loan term

Pursuant to identify and determine the loan term: Recommend and repaymentcapacity of customers; production and business cycle of customer; the term of payback ofthe project, the remaining operation time of customer in accordance with the decision toestablish or license to operate in Vietnam; BIDV capital ability

d Interest rate

- The bank announced interest rates and fees for customers.

- Interest rate for each loan, each borrower shall be determined on the principle:not be less than the floor rate prescribed by the Director in each period; depending onloan term, the risk of each loan based on financial ability, the ability to repay, loansecurity measures and the level confidence in customer, etc ensures to adequately covermobilization cost, management cost, provision of risk and is profitable; for medium andlong-term lending, floating interest rate is applied, adjusted for a term of base interest ratebut not exceeding 12 months BIDV regulates about the determination of interest rates

+ Management cost +

Provisionsfor risk +

ExpectedprofirBIDV and customer make agreement, write to the credit contract the level andformula of determining interest rate in term, overdue fines, fees related to lending activityunder the provisions of BIDV