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Moody’s takes positive action on Vietnamese banks
By Thanh Thom
Wednesday,  Oct 31, 2018,18:53 (GMT+7)

Moody’s takes positive action on Vietnamese banks

By Thanh Thom

A client transacts with a Techcombank consumer finance consultant – PHOTO: THANH HOA

HCMC – Moody’s Investors Service has upgraded the long-term local and foreign-currency issuer ratings and long-term local-currency deposit ratings of five Vietnamese banks and has confirmed similar upgrades for the other 11 Moody’s-rated banks in Vietnam.

Moody’s has also upgraded the long-term foreign-currency deposit ratings of two Vietnamese banks, and confirmed similar upgrades for the other 14, the international ratings agency noted in a statement on Tuesday, October 30.

At the same time, Moody’s has upgraded the long-term counterparty risk ratings and counterparty risk assessments of eight banks and confirmed similar upgrades for the other eight.

Finally, Moody’s has upgraded the baseline credit assessments (BCAs) and adjusted BCAs of 12 banks and confirmed similar upgrades for the other four.

The rating action reflects Moody’s expectation that the strong economic growth evident in Vietnam will support the asset quality and profitability of these banks. To capture these developments, Moody’s increased Vietnam’s Macro Profile to “Weak+” from “Weak.”

The upgrade of the BCAs of 12 Vietnamese banks is driven by the higher macro profile and by these banks’ progress in writing off legacy problem assets.

In particular, the upgrade of BIDV, Vietcombank and VietinBank’s BCAs largely reflects improvements in asset quality. Funding and liquidity for these banks are stable, a result of their relatively lower reliance on market funds, whereas capital remains a weakness for all three.

The BCA upgrade for ABB, ACB, Military Bank, OCB, TPBank, VIB and Techcombank reflects improvements in their standalone credit strength, particularly their progress in writing off legacy problem assets, and in the case of OCB, TPBank and Techcombank, a strengthening of their capitalization. Moody’s expects profitability for these seven banks to improve over the next 12-18 months, as the burden of credit costs reduces.

Meanwhile, the upgrade of VP Bank’s BCA takes into account its high profitability and strong capitalization, which has offset the high credit risks in its consumer finance portfolio.

The BCA upgrade for HDBank reflects improvements in the bank’s capitalization and profitability. At the same time, this rating action also takes into account the impending merger between HDBank and Petrolimex Group Commercial Bank.

The confirmations of Maritime Bank, Saigon-Hanoi Commercial Bank and Lien Viet Post Bank’s BCAs reflect Moody’s expectation that these banks’ credit profiles will broadly remain stable over the next 12-18 months. The solvency of these banks is modest compared with that of other rated Vietnamese banks but is somewhat balanced by their funding and liquidity.

The outlook on Sacombank’s ratings was also changed to stable from negative, to reflect its stabilized solvency profile and some progress in its recovery of problem assets. The BCA of Sacombank was confirmed because the bank still faces a significant risk from its problem assets, which exceeded 20% of total assets as of late June.

Founded in 1999, Moody's Investors Service is a bond credit rating business that provides research, credit rating and financial risk analysis services. Moody’s, along with Standard & Poor’s and Fitch Group, is regarded as one of the Big Three credit ratings agencies.

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