NATIONAL ECONOMICS UNIVERSITY CENTRE FOR ADVANCED EDUCATIONAL PROGRAM BACHELOR’S THESIS IN FINANCE Topic: IMPROVING CREDIT RISK MANAGEMENT AT BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM, HAIDUONG BRANCH Student’s name Student’s ID Class Intake Internship guide : Tran Le Hoang Thao : 11123543 : Advanced Finance B : 54 : Dr Pham Long Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B Hanoi, 2016 Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B i Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B ACKNOWLEDGEMENT The internship program is a golden opportunity for learning and selfdevelopment I myself believe that without the supporting as well as instructing of so many wonderful people, this report would be impossible to completion Firstly, I would like to sincerely thank for enthusiastic and supports of Dr Pham Long during the process of doing this Internship’s thesis I would like to thank all of lectures and tutors at National Economic University in general, and at Advanced Educational Program in particular, who not only have bestowed their valuable knowledge, hands-on experience to me, but also have created the favorable opportunities for me to complete the thesis on time Finally, I would like to thank Mr Nguyen Quy Thang – Deputy manager of Individual Customer Management Division, and staffs of BIDV Hai Duong branchfor supporting me during the process that I carried out this report Cordially, Tran Le Hoang Thao Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B ii Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B TABLE OF CONTENTS Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B iii Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B ABSTRACT As a student of the Advanced Financial program, with the desire to learn and reach practical knowledge about commercial banks, I has come and practiced at BIDV Hai Duong branch in order to find out the problems that still exists During two months of internship in BIDV Hai Duong branch, I have understood this branch in both organizational structure and its business activities Simultaneously, I have a chance to look through this branch’s collected data from various sources, especially its financial statement That brings me a huge support for my thesis analyzing the branch’s structure, business performance and situation of credit risk management in the 2013-2015 period The purpose of this report is to examine the status of credit risk management at BIDV Hai Duong Branch After analyzing the problems, my study figures out the causes and the solutions to improve the efficiency of the risk management of credit activities at the branch Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B iv Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B ABBREVIATION BIDV : Bank for Investment and Development of Vietnam CBs : Commercial banks PhD : Doctor of philosophy SWIFT : Society for Worldwide Interbank Financial Telecommunication NPL : non-performing loan Decision QD-NHNN : Decision of the State Bank of Vietnam ATM/POS : Automated teller machine/Point of sale ISO : International Organization for Standardization CIC : Credit Information Center HR : Human Resources HSC : Ho Chi Minh City Securities Corporation Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B v Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B LIST OF TABLES LIST OF FIGURES Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B CHAPTER 1: INTRODUCTION 1.1 Research background 1.1.1 Overview of the banking system of Vietnam in 2012-2015 period Bank credit is one of the most important tools to finance a nation’seconomy, it contributes to the balanced development of national industries and other sectors Bank credit also brings major source of income for commercial banks However, bank credit activity contains most of the serious risks and consequences The operation of the banking sector is quite effective with a various of efforts to upgrade the system and increase quality of management One of the important aspects to evaluate the performance of the banking sector is the ability to control and prevent operational risk, especially risks in credit activities Thanks to above efforts ; the credit risk control is now rather effective with ideal NPL indicators in most of the commercial banks Those figures , nevertheless , may not reflect all of potential risks in banking operations yet Moreover , being a sensitive sector of the economy , positive impacts of effective activities of the banking sector on the economy are as much as negative impacts which occur in case the banking sector is in a poor performance Therefore , control and prevention of risks in banking activities in general and credit risks in particular is a regular , restless job, together with non-ending research to work out the measures to control and prevent risks more and more effectively for the local commercial banks that have not-much experience in the above job BIDV Hai Duong is among the branches having quite high credit growth in the banking system During 2014 , its outstanding credit grew by 7% and the first eight months of 2015 , this figure was 6% Concurrently , incurring of NPLs and overdue debts is also a matter of Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B concern ( BIDV Hai Duong Branch , 2015) So far, there have been many researches on credit risk of commercial banks, which are somehow meaningful to the branch in terms of reference resources Yet, each individual bank is afftected by different factors determining its success In fact , there have been any studies particularly researching on the credit risk management at BIDV Hai Duong Branch 1.1.2 Current background of BIDV Hai Duong Branch BIDV - Hai Duong Branch is one of the most potential banks in Hai Duong province in recent years As well as the other banks, its credit rate grows fastly but the ability of managing credit risk is not effective As a result, bad debts were borned and this problem has fluctuated rapidly: in 2013 , the branch’s bad debt ratio was 3% of total loans, then it increased to 7.2% in 2014, finally in the year 2015 this figure declined to 5% (according to the final report of BIDV Hai Duong from 2013 to 2015) Being aware of unforeseen dangers and consequences from the branch’s problem, I chose the topic : "Improving credit risk management at BIDV Hai Duong Branch " as subject of my report thesis 1.2 Research purposes The general purposes of this thesis are: - Review the basic theories of credit risk and credit risk management of commercial banks -The factors affecting credit management operations of the branch - Analyze status of credit risk management activities at the branch - Evaluate the achieved results and operational constraints in credit risk management at the bank branch - Recommend solutions in order to improve credit risk management at the branch Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B 1.3 Research scope Scope of this research focuses on credit risk management of BIDV Hai Duong branch in the period 2013 – 2015 and the solutions for the 2016-2020 period Due to some requirements from the bank about data security, the annual reports and credit risk documents cannot be publicized Therefore some important information has been modified to retain the bank’s confidentiality 1.4 Research objectives and methodology This study focused on credit risk management as a major object and was conducted using secondary data gathered from BIDV Hai Duong branch’s financial statements, banking documents and from the writer’s observation and information taken orally from asking banking officers These data were organized and analyzed by the writer, to achieve findings and give out recommendations CHAPTER : LITERATURE REVIEW 2.1 The national researches Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B 36 Supervisor : PhD Pham Long Tran Le Hoang Thao – AF54B - Scale of branch’s operations : • Total outstanding loans at maturity: the average growth rate is at 8% / year • Raising capital at maturity: the average growth rate is at 17.4% / year - The structure and quality of branch operations • NPL ratio: