“SOLUTIONS TO IMPROVE CREDIT
QUALITY AT TOAN CAU OIL & GAS JOINT STOCK
COMMERCIAL BANK - DONG DO BRANCH”
PRESENTATION
OPENING
1. The necessity of the thesis
2. Aims of the thesis
3. Objects and scope of the thesis
4. Methodology
5. Structure of the thesis
STRUCUTRE OF THE THESIS
Chapter 1:
General Introduction
Chapter 2:
The situation of credit quality
at GP Bank - Dong Do Branch
Chapter 3:
Conclusion and solutions to
improve the credit quality at GP Bank - Dong Do
Branch
CHAPTER 1: GENERAL INTRODUCTION
Definition of strategy
Fried R. David: strategy is the determination of
the basic long-term goals and objectives of an
enterprise and the adoption of the courses of action
and the allocation of resources necessary for carrying
out these goals
Moreover,
competitive strategy or
corporate strategy is also
defined by 6 factors:
- Product market
- Level of investment
- Strategic function
- Asset strategy and capability strategy
-- The allocation of resources
- - Corporation effects between enterprises
CHAPTER 1: GENERAL INTRODUCTION
External environment analysis (PEST)
Legal, political (P)
These factors have influences on all industries in a territory, institutional
factors, law may endanger the viability and growth of any industry.
Economic (E)
Enterprises should pay attention to the economic factors in the short-term, longterm and government intervention on the economy. Typically the enterprise will base on
economic factors for investment decisions in the sector, and region.
Socio-Culture (S)
Cultural values make a society, it can foster the existence and
development od the society. Therefore, cultural factors are highly protected,
especially the spiritual culture.
Technology (T)
The world of technology revolution leads to a series of new technology
launched and integrated into production and services.
CHAPTER 1: GENERAL INTRODUCTION
Industry analysis. Five Forces Model
Porter’s Five Forces is first published on Harvard Business Review in 1979 with the content
of finding the factors that make profit for business. This model is usually called “ 5 forces of
Porter”, which is known as an effective and useful tool to find the root of profit. Moreover, it
shows the competitive strategy to maintain or increase profit of a business.
CHAPTER 1: GENERAL INTRODUCTION
Basic concept of bank credit
Credit is a asset transaction which allows one party to provide resources (financial, goods, or
service) to another party (corporation, individuals) where that second party does not reimburse
the first party immediately (thereby generating a debt), but instead arranges either to repay or
return those resources (or other materials of equal value) at a later date.
Roles of bank credit
* First: bank credit increases the economic efficiency
•Second: bank credit contributes to the continuous movement of capital,
increases the currency cycle in the economy, creates a mechanism in
distributing capital effectively.
* Third: bank credit supports the economic strategy and the monetary policy.
* Forth: bank credit helps motivate the international economic relations
CHAPTER 1: GENERAL INTRODUCTION
Bank credit quality
*For customers:
Credit quality is reflected in the amount of money, which is lended from
banks, has interest rates and reasonable terms of payment; simple, convenient
procedures, attracts more customers, while ensuring the principle of credit.
*For commercial banks:
Credit quality is reflected that the credit scope, extent, limits must be
consistent with the bank and forced to ensure competitiveness in the market to
repay the principle and interest on time.
*For Government and the economic – socio development:
Credit quality is shown in the credits given to the production and circulation of
goods, contributes to the employment, exploits potential resources of the
economy, accelerates the process of accumulation and production concentration,
resolves the relationship between the credit growth and economic growth.
CHAPTER 1: GENERAL INTRODUCTION
Indicators measuring bank credit quality
For customers.
* Capital needs of
the customers
* The ability to
meet the conditions
and criteria of bank
credit
* The ability of
customers
in
the
management and use
of loans effectively
For commercial banks
* Term structure of
commercial banks’ scale
* The capacity of banks in the
project appraisal process
* The capacity to monitor and
handle the situations of banks
* Lending policy
* Credit information :
* Science and technology
* The quality of personnel and
human resource management
Objective
factors
*Natural
environment
* Economic –
Socio environment
* Political
environment
* Legal
environment
CHAPTER 2: CREDIT QUALITY IMPROVEMENT– THE CASE AT GP BANK - DONG
DO BRANCH
Overview of GP Bank - Dong Do Branch
Dong Do is one of the newly established
branched with developing positive,
effective business operations, creating
large scale and position in GP.Bank system.
BOARD OF
DIRECTOR
Admini
stratio
n Dept
Internal
Inspect
ion and
Superv
ision
Custo
mer
Relatio
n Dept
Credit
Suppor
ting
Dept
Accoun
tant
and
Treasu
ry
Dept
Transa
ction
offices
(10)
- Board of Director:03.
Proportion: 2,7% /Total employees
- Head of department: 15
Proportion : 13,6% /Total employees
- Supervisors: 10
Proportion : 9,1% /Total employees
- Expert, staff: 82 .
Proportion : 74,5% /Total employees
CHAPTER 2: CREDIT QUALITY IMPROVEMENT– THE CASE AT GP BANK – DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Debt financing situation
Debt financing for years has increased and reached a relatively large scale,
and it can be seen more clearly through the statistics table below:
Description
Year 2010
Year 2011
Unit:
Million dong
Year 2012
1. Debt financing
873.338
2.494.924
2.265.814
-Corporate deposits
107.416
1.719.060
639.068
- Resident savings
765.922
775.864
1.626.746
Therein, foreign curency
exchange to VNĐ
115.985
119.222
313.685
789.888,5
1.684.131
2.380.369
2. Average debt financing
CHAPTER 2: CREDIT QUALITY IMPROVEMENT– THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Lending and capital investment
For banks, lending plays a leading role in business operations, brings high
profitability.
Unit: Million dong
Description
1. Lending revenue
- Short term
- Middle and long term
2. Debt collection
revenue
- Short term
- Middle and long term
3.
Outstanding
lending
- Short term
- Middle and long term
Year 2010
372.550
355.053
17.497
131.603
Year 2011
1.500.984
1.257.448
243.536
920.909
Year 2012
1.847.834
1.625.677
222.157
1.718.868
127.432
4.171
333.222
755.001
165.908
913.297
1.555.323
163.545
1.042.263
297.927
35.295
800.374
112.923
870.728
171.535
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Business performance activity result
Facing with difficulties due to newly operation, the recent years, Dong Do branch has
always proposed positive business direction, so the business activity is soon stable, has
sustainably developed, ensures profitability for business .
Unit: Million dong
Description
1. Income
Interest from lending
- Interest swap
- Service receivables
2. Costs
3. Profit
- Profit from credit activity
Year 2010
28.417
8.199
19.850
368
26.917
1.500
735
Year 2011
329.071
63.134
264.950
987
315.697
13.374
7.088
Year 2012
543.979
238.429
305.550
2.241
522.229
21.750
13.398
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Credit structure in total outstanding loans
Description
Year 2010 Year 2011 Year 2012
333.222
913.297 1.042.263
Total outstanding debt
1. By term of payment
-Short term
-Middle, long term
Middle, long term rate
2. Currency
-VNĐ
-Foreign currencies
VNĐ
exchange
Unit: Million dong
to
297.927
35.295
10,6%
800.374
112.923
12,4%
870.728
171.535
16,5%
316.561
889.550
1.010.995
16.661
23.747
31.268
10.875
114.477
169.943
37.927
27.505
323.307
370.579
191.906
16.586
359.543
402.141
263.993
3. Economic field
- Agriculture, forestry and fishery
-Industry
-Commerce
-Others
4. Collateral asset
CHAPTER 2: CREDIT QUALITY IMPROVEMENT– THE CASE AT GP BANK – DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Short term, middle term and long term structure
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Economic classification structure
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Collateral asset classification credit structure
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Overdue debt
Description
Total debt
Therein: -Overdue debt
-Overdue debt
rate
Year 2010
333.222
0
0
Year 2011
913.297
1.827
0,2%
Unit:
Year
2012
Million
1.042.263
22.929
2,2%
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
Overdue debt classified in groups
Description
Total debt, including:
Group 1: Current debt
Group 2: Special mentioned
debt
Group 3: Sub-standard debt
Group 4: Doubtful debt
Group 5: Loss
Year 2011
913.297
911.470
0
Yeardong
2012
Million
1.042.263
870.867
14.072
0
0
0
0
1.827
0
5.122
2.500
1.235
Credit cycle
Description
1. Collection revenue
2. Debt in the period
3. Debt in the last period
4. Average debt
5. Credit cycle
Unit:
Year 2010
333.222
333.222
0
Year 2010
131.603
92.262
333.222
212.742
0.61
Unit: Million dong
Year 2011
920.909
333.222
913.297
623.259
1.48
Year 2012
1.718.868
913.297
1.042.263
977.780
1.76
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Business performance activity of GP Bank - Dong Do Branch
ICOR - Incremental Capital Output Ratio
Criteria
1. Total debt
Unit:
Year 2010
333.222
Year 2011
913.297
Year 2012
Million dong
1.042.263
873.338
38.2%
2.494.924
36.6%
2.265.814
46%
2. Total debt financing
3. ICOR
Income from loans
Year 2010
Criteria
1. Income from
loans
2. Total profit
Year 2011
Unit:
Year
2012
Million
dong
Sales
Rate
Sales
Rate
Sales
Rate
735
49%
7.088
53%
13.398
61,6%
1.500
13.374
21.750
CHAPTER 2: CREDIT QUALITY IMPROVEMENT- THE CASE AT GP BANK - DONG DO
BRANCH
Analyse the external environment of GP Bank - Dong Do Branch
Opportunities (O):
1. Vietnam banks with international integration should take advantages of conditional
capital, technology and staff training, develop their comparative advantages required
to keep international competition and market expansion abroad. Then, improving
product quality and services.
2 . Opening market financial services will allow foreign banks to participate in all of
the banking services in Vietnam that forced the Vietnam commercial banks further
specialize in banking, banking management asset-liability management, asset
management, risk management, improve credit quality, capital efficiency, banking
services and develop new services that foreign banks are expected to apply in
Vietnam
3 . Demand for access and use the bank products and services is on the increase.
Many potential customers are not exploited.
4. The political situation is stable, the economy is continually growing, attracting FDI,
the domestic financial market is growing makes more opportunities for the
development of banking services and credit growth .
5 . Science and technology development to modernize banking services more and
more useful and diversified .
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Analyse the external environment of GP Bank - Dong Do Branch
Threats (T):
1. Competitive pressures in the banking sector increased by a growing number of newly
established banks both at home and abroad.
2. Brain drain is unavoidable when integration. There will be a large amount of human
resources to move between banks.
3. The process of international integration increases the risk of bankruptcy of the
traditional client, affects the safety and effectiveness of the bank.
4. Inflation makes the input costs of bank services increase, affecting competitiveness.
5. Bad debt is a big challenge for the current banking
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Analyse the external environment of GP Bank - Dong Do Branch
Strengths (S):
1.
GP Bank is a prestige brandname in the market
2.
Advantages in human resources: along with the experienced and well
educated managers
3.
There are internal mechanisms effectively motivate and encourage all
officers, employees to creatively work, responsibility and dedication. Wages and
income is associated with productivity, quality and effectiveness.
4. The training of human resource development is wll done.
5. System of technology and products, banking services is often innovative, advanced
and modern.
CHAPTER 2: CREDIT QUALITY IMPROVEMENT - THE CASE AT GP BANK - DONG
DO BRANCH
Analyse the external environment of GP Bank - Dong Do Branch
Weaknesses (W)
1.
Do not have a cohensive business strategy
2.
The marketing activity is not good
3.
Limit in financial ability
4.
Risk management activity is not good
5.
Few transaction offices
CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS TO INCREASE THE CREDIT
QUALITY AT GP BANK - DONG DO BRANCH
Evaluate the achievements of GP Bank - Dong Do Branch
• Achievements:
- Sales of loans and total loans continued to increase over the years .
- Credit grows not only in size but also ensures the quality, delinquency rates
remain low and under control of the allowed rate.
- Revenues from credit operations, although the proportion is not as high as
expected but there has been a steady and solid growth.
- Structure to ensure proper credit, according to the credit policy of GP.Bank