Low net interest margin of loans at BIDV Tan Binh Branch

Abstract

The results of operations in the period 2014 – 2015 showed the symptom about inefficient operation of the bank. The symptom is profits of BIDV Tan Binh branch was lower than others branch. The profitability of the branch is low due to low net income because the operation expenses and risk provision expenses were maintain at good level. The net income included the net income from deposits, loans and services. In which, the net income from loans is very low when comparing to other similar branches of BIDV and account lower than 20% in total net income of BIDV Tan Binh. The main problem here is the low net interest margin (NIM) of loans at BIDV Tan Binh branch. There are many potential reasons lead to this problem. However, after the in-depth interview and analysis, they were narrowed down to 3 main reasons: the competition between commercial banks in Ho Chi Minh City; the heavily dependence on large firms and the pressure of credit growth. In which, the main cause is the dependence on large firms. These problems must be olved quickly to improve the net income so for lead to profit of this branch. To resolve the problem of dependence heavily on large firms, this branch should increase the number of customers, especially focusing on SMEs and individual customers. The first solution is enhance the competitiveness by improve products and services to satisfy customer needs. This branch should improve the quality of human resources through organizing training programs to force professional skills for their staffs. Besides that, improvements technology, simplifying procedures and shortening transaction processing, transactions become convenient and much faster. Secondly, BIDV Tan Binh should organize conferences to introduce the products and services with attractive interest to new customers. Finally, this branch should provide some preferential credit packages for individual and SME customers to develop the number of customers at branch. To implement the solutions above, the administration department will combine with corporate relationship department and individual to segment customers. Thence, giving the customers care policy to each customer group. Besides that, administration department will organize the training courses for employees of customer departments. There will have various training topics consistent with staffs of each department. Last but not least, corporate relationship department will contact with People’s Committee of Tan Binh and Tan Phu District to organize the customer conference. At these conferences, they will introduce some preferential credit packages to attract new customers. The total cost for this project is about 350 – 400 million VND. It is expected that after one year, the net interest margin of loans at BIDV Tan Binh branch will increase from 0.98% to 1.5%. With the average level of outstanding debt in the next 12 months is 1.500 billion VND will bring the branch to add about 7.8 billion VND of net income.