Luận văn thạc sĩ UEH credit quality improvement at acledabank PLC

MININSTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS OF HO CHI MINH CITY



CHHUON CHHEN

CREDIT QUALITY IMPROVEMENT

AT ACLEDABANK PLC

MASTER OF BANKING THESIS

Ho Chi Minh City – 2012

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MININSTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS OF HO CHI MINH CITY



CHHUON CHHEN

CREDIT QUALITY IMPROVEMENT

AT ACLEDABANK PLC

Major: Banking

Major code: 60.31.12

MASTER OF BANKING THESIS

Ho Chi Minh City – 2012

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I

Acknowledgements

First of all I would like to express my sincere gratitude to my supervisors, Dr.

PHAM VAN NANG at University of Economics Ho Chi Minh City, Vietnam, for

his intelligent guidance and helpful advice during the whole process.

I would like to thank all the participants who contributed to my work, not just for

their responses, but also for the good suggestions they made and their kind help.

Special thanks to my family and friends for their consideration and support during

all the process of writing this thesis.

CHHUON CHHEN

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II

Table of Content

INTRODUCTION ...............................................................................................................1

1. URGENCY OF THE SUBJECT.......................................................................................1

2. Research Objectives..........................................................................................................2

3. Object and Scope of the research......................................................................................2

4. Research Methodology......................................................................................................2

5. Contribution of the study ..................................................................................................2

6. Outline of the study...........................................................................................................2

CHAPTER I: CREDIT QUALITY OF COMMERCIAL BANK...................................3

1.1. Credit activities of commercial bank ..............................................................................3

1.1.1. Overview of commercial bank.....................................................................................3

1.1.1.1. Definition of commercial bank .................................................................................3

1.1.1.2. Major activities of commercial bank ........................................................................4

1.1.1.2.1. Mobilization of capital...........................................................................................4

1.1.1.2.2. Capital Use.............................................................................................................6

1.1.1.2.3. Other activities.....................................................................................................6

1.1.2. Credit activities of commercial bank ......................................................................6

1.1.2.1. Definition of credit activities...............................................................................6

1.1.2.2. Forms of credit of commercial banks..................................................................7

1.1.2.2.1. Based on purpose.................................................................................................7

1.1.2.2.2. Based on credit term............................................................................................8

1.1.2.2.3. Based on the mode of lending .............................................................................8

1.1.2.2.4. Based on the level of confidence for customers................................................10

1.1.2.2.5. Based on the origin of credit: ............................................................................10

1.1.2.2.6. Based on morphological value of credit............................................................11

1.2. Credit quality of commercial bank ...............................................................................11

1.2.1.Definition of credit quality .........................................................................................11

1.2.2.The important to improve credit efficiency ................................................................12

1.2.2.1.For banks..................................................................................................................12

1.2.2.2. For customers ....................................................................................................13

1.2.2.3. For economic development ...............................................................................14

1.2.3. Factors used to analyze credit quality...............................................................14

1.2.3.1. Qualitative factors .............................................................................................14

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III

1.2.3.2. Quantitative factors ...........................................................................................15

1.2.3.2.1. Debt outstanding growth rate ............................................................................15

1.2.3.2.2. Past due debt/Total debt outstanding ratio ........................................................15

1.2.3.2.4. Mortgage loan/Total loan outstanding...............................................................16

1.2.3.2.5. The growth rate of income from credit activities..............................................16

1.3. Factors affecting credit quality of commercial banks.......................................17

1.3.1. Subjective Factors.............................................................................................17

1.3.2. Objective Factors..............................................................................................19

CHAPTER II: THE REALITY OF CREDIT QUALITY OF ACLEDA BANK PLC23

2.1. Overview of ACLEDA BANK PLC ........................................................................23

2.1.1. History of development.........................................................................................23

2.1.2. Management structure of ACLEDA BANK PLC.................................................26

2.1.3. Result of its activities……………………………………………………………32

2.1.3.1. Capital mobilization………………..…………………..………………………32

2.1.3.2. Lending and investment ....................................................................................36

2.1.2.3. Other business activities....................................................................................37

2.1.2.4. Business Result..................................................................................................38

2.2. Credit quality of ACLEDA BANK PLC..................................................................39

2.2.1. Lending process ....................................................................................................39

2.2.2. Analyzing factors reflecting credit quality of ACLEDA BANK PLC .................41

2.2.2.1. The growth of debt balance ...............................................................................41

2.2.2.2. Past due..............................................................................................................44

2.2.2.3. Past due divided in groups.................................................................................45

2.2.2.4. Mortgage loan....................................................................................................48

2.2.2.5. The growth of interest income...........................................................................51

2.3. Credit quality analysis ..............................................................................................52

2.3.1. Business outcome..................................................................................................52

2.3.2. Limitation and causes............................................................................................54

2.3.2.1. Limitation ..........................................................................................................54

2.3.2.2. Causes................................................................................................................54

2.3.2.2.1. Subjective Causes..............................................................................................54

2.3.2.2.2. Objective cause..................................................................................................56

CHAPTER III: SOLUTION TO IMPROVE CREDIT QUALITYOF ACLEDA

BANK PLC ……………………………………………………………………………..59

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IV

3.1. The orientation of credit activities of ACLEDA BANK PLC..................................59

3.1.1. Business orientation of ACLEDA Bank Plc:........................................................59

3.1.2. The orientation of credit development of ACLEDA BANK PLC........................60

3.2. The solution to improve credit quality of ACLEDA BANK PLC ...........................61

3.2.1. Credit assessment improvement............................................................................61

3.2.2. Improvement of credit risk control .......................................................................62

3.2.3. Increasing cover ratio( collateral/debt ratio).........................................................63

3.2.4. Enhance the settlement of outstanding debt..........................................................64

3.2.5. Development of human resource ..........................................................................65

3.2.6. Update technology ................................................................................................67

3.2.7. Maintain long term relationship with customers...................................................68

3.2.8. Improvement of Marketing quality .......................................................................69

3.2.9. Other solution........................................................................................................70

3.2.9.1. Conduct contests to find out high quality staffs................................................70

3.2.9.2. Organize seminars and exchange experiences with other banks.......................70

3.2.9.3. Separate clearly between salaries and bonuses .................................................71

3.2.9.4. Promote good relationship between the bank and other authorities..................71

3.3. Petition......................................................................................................................71

3.3.1. For the government ...............................................................................................71

3.3.1.1. Strengthening the supervision of law enforcement ...........................................71

3.3.1.2. Conducting equalization and restructuring the state enterprises.......................71

3.3.1.3. Further promoting the operations of debt and asset trading companies............72

3.3.1.4. Urgently granting land/house title deed to people.............................................72

3.3.1.5. Fastening the process of issue settlement of the court system ..........................72

3.3.2. For National Bank of Cambodia ...........................................................................72

3.3.2.1. Stabilizing the inter-banking money market quickly. .......................................72

3.3.2.2. Strengthening the inspection and supervision of the operation of commercial

banks…….. ..........................................................................................................................73

CONCLUSION....................................................................................................................74

REFERENCES ....................................................................................................................75

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V

List of Tables

Table 2.1: The situation of ACLEDA Bank’s capital mobilization………..………32

Table 2.2: Capital mobilization by maturity date…………………………….……35

Table 2.3: Lending and investment of ACLEDA Bank…………………….……...36

Table 2.4: Business result of ACLEDA Bank...…………………………...……... 38

Table 2.5: Lending situation of ACLEDA Bank…………………………………..43

Table 2.6: Past due debt of ACLEDA Bank……………………………………….44

Table 2.7: Past due debt divided in group of ACLEDA Bank………….…………46

Table 2.8: Percentage secured past due loan of ACLEDA Bank……….…………50

Table 2.9: Total net interest income of ACLEDA Bank…………………….…….51

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VI

List of Chart

Chart 2.1: The situation of ACLEDA Bank’s capital mobilization ………….……33

Chart 2.2: Capital mobilization by maturity date ………………………………… 35

Chart 2.3: Lending and investment of ACLEDA Bank ………………………….. 37

Chart 2.4: Business result of ACLEDA Bank ………………………………….... 38

Chart 2.5: Lending situation of ACLEDA Bank …………………………..…….. 43

Chart 2.6: Past due debt of ACLEDA Bank…………………………….……..…. 44

Chart 2.7: Past due debt divided in group of ACLEDA Bank ………………..… 47

Chart 2.8: Percentage secured past due loan of ACLEDA Bank …………..…..… 49

Chart 2.9: Total net interest income of ACLEDA Bank …………………..……... 52

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