Business
Moody's takes positive actions on Vietnamese banks
The rating action reflects Moody`s expectation that the strong economic growth evident in Vietnam will support the asset quality and profitability of the banks.
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 affirmed the same for the other 11 Moody's-rated banks in Vietnam.
The five banks that had their ratings upgraded include Asia Commercial Bank (ACB), Ho Chi Minh City Development JSC Bank (HDBank), Military Bank, Orient Commercial Joint Stock Bank (OCB), and Vietnam Technological and Commercial JSB (Techcombank).
Moody's also upgraded the long-term foreign-currency deposit ratings of two Vietnamese banks (HD Bank and Orient Commercial Joint Stock Bank), and affirmed the same for the other 14.
At the same time, Moody's has upgraded the long-term Counterparty Risk Ratings (CRRs) and Counterparty Risk Assessments (CRAs) of eight banks and affirmed the same for the other eight.
The rating agency has upgraded the baseline credit assessments (BCAs) and Adjusted BCAs of 12 banks and affirmed those for the other four.
In the case of Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank), the outlook was changed to stable from negative. The ratings outlooks on the ratings of the other 15 rated Vietnamese banks remain stable.
The rating action reflects Moody's expectation that the strong economic growth evident in Vietnam will support the asset quality and profitability of the 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 also by these banks' progress in writing off legacy problem assets, the US-based rating firm added.
The upgrade in the BCAs of three state-owned banks -- BIDV, Vietcombank, and VietinBank
-- largely reflects improvements in asset quality. Funding and liquidity for these banks are stable, a result of their relatively lower reliance on market funds. At the same time, capital remains a weakness for all three.
Meanwhile, the upgrade in seven banks' BCAs -- An Binh Commercial Joint Stock Bank (ABB), ACB, Military Bank, OCB, Tien Phong Commercial JS Bank (TPBank), Vietnam International Bank (VIB) and Techcombank -- reflects improvements in their standalone credit strength, particularly 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.
The upgrade of Vietnam Prosperity Commercial Bank (VP Bank)’ BCA takes into account its high profitability and strong capitalization, which offset the high credit risks from its consumer finance portfolio.
The upgrade in HDBank's BCA 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 Joint Stock Bank (PGBank, unrated), a small private sector bank in Vietnam.
Based on the two banks' financials for 2017, the key credit metrics of the merged entity, with the exception of asset quality, will be broadly similar to that of HDBank.
Moody's calculates the proforma problem loan ratio of the merged entity -- including loans under categories 2-5 of Vietnamese accounting standards, and gross bonds issued by the Vietnam Asset Management Company (VAMC) -- to be at around 6.8%, while that of HDBank is 4.9%.
Post-merger, Moody's expects the merged entity's return on tangible assets to decline because of higher credit and operating costs. Moody's expects funding and liquidity for the bank to remain stable.
The affirmation of the BCAs of four banks -- Vietnam Maritime Commercial Joint Stock Bank (MSB), Saigon - Hanoi Commercial Joint Stock Bank (SHB), Sacombank and Lien Viet -- reflects Moody's expectation that the banks' credit profiles will broadly remain stable over the next 12 - 18 months.
The solvency of these banks is modest compared to that of other rated Vietnamese banks, but somewhat balanced by their funding and liquidity.
The BCA of Sacombank was affirmed because the bank still faces a significant risk from its problem assets, which exceeded 20% of total assets as of 30 June 2018.
Moody's factors in the assumption of a "Very High" probability of government support in times of need into the ratings of the three government-owned banks -- Vietcombank, BIDV, and VietinBank -- and a "Moderate" probability of government support in times of need into the ratings of the remaining rated private sector banks.
Moody's government support assumption is also driven by the relative systemic importance of these banks to the Vietnamese banking system as well as, in the case of government-owned banks, their ownership structures.
The upgrade of ACB, Military Bank, and Techcombank's long-term local and foreign currency issuer ratings and long-term local-currency deposit ratings, as well as HDBank and OCB's long-term local and foreign currency issuer and deposit ratings was driven by the upgrade in the banks' BCAs.
Similarly, the upgrade in the long-term CRRs and CRAs of ABB, ACB, Vietcombank, Military Bank, TPBank, VIB, VP Bank and Techcombank was also driven by the upgrade in the banks' BCAs.
The foreign currency deposit ratings of all rated Vietnamese banks are capped at B1, because Vietnam's country ceiling for foreign currency deposits is B1.
The outlook on Sacombank's ratings was changed to stable from negative, to reflect its stabilized solvency profile and some progress in the recovery of problem assets.
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Moody's also upgraded the long-term foreign-currency deposit ratings of two Vietnamese banks (HD Bank and Orient Commercial Joint Stock Bank), and affirmed the same for the other 14.
At the same time, Moody's has upgraded the long-term Counterparty Risk Ratings (CRRs) and Counterparty Risk Assessments (CRAs) of eight banks and affirmed the same for the other eight.
The rating agency has upgraded the baseline credit assessments (BCAs) and Adjusted BCAs of 12 banks and affirmed those for the other four.
In the case of Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank), the outlook was changed to stable from negative. The ratings outlooks on the ratings of the other 15 rated Vietnamese banks remain stable.
The rating action reflects Moody's expectation that the strong economic growth evident in Vietnam will support the asset quality and profitability of the 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 also by these banks' progress in writing off legacy problem assets, the US-based rating firm added.
The upgrade in the BCAs of three state-owned banks -- BIDV, Vietcombank, and VietinBank
-- largely reflects improvements in asset quality. Funding and liquidity for these banks are stable, a result of their relatively lower reliance on market funds. At the same time, capital remains a weakness for all three.
Meanwhile, the upgrade in seven banks' BCAs -- An Binh Commercial Joint Stock Bank (ABB), ACB, Military Bank, OCB, Tien Phong Commercial JS Bank (TPBank), Vietnam International Bank (VIB) and Techcombank -- reflects improvements in their standalone credit strength, particularly 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.
The upgrade of Vietnam Prosperity Commercial Bank (VP Bank)’ BCA takes into account its high profitability and strong capitalization, which offset the high credit risks from its consumer finance portfolio.
The upgrade in HDBank's BCA 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 Joint Stock Bank (PGBank, unrated), a small private sector bank in Vietnam.
Based on the two banks' financials for 2017, the key credit metrics of the merged entity, with the exception of asset quality, will be broadly similar to that of HDBank.
Moody's calculates the proforma problem loan ratio of the merged entity -- including loans under categories 2-5 of Vietnamese accounting standards, and gross bonds issued by the Vietnam Asset Management Company (VAMC) -- to be at around 6.8%, while that of HDBank is 4.9%.
Post-merger, Moody's expects the merged entity's return on tangible assets to decline because of higher credit and operating costs. Moody's expects funding and liquidity for the bank to remain stable.
The affirmation of the BCAs of four banks -- Vietnam Maritime Commercial Joint Stock Bank (MSB), Saigon - Hanoi Commercial Joint Stock Bank (SHB), Sacombank and Lien Viet -- reflects Moody's expectation that the banks' credit profiles will broadly remain stable over the next 12 - 18 months.
The solvency of these banks is modest compared to that of other rated Vietnamese banks, but somewhat balanced by their funding and liquidity.
The BCA of Sacombank was affirmed because the bank still faces a significant risk from its problem assets, which exceeded 20% of total assets as of 30 June 2018.
Moody's factors in the assumption of a "Very High" probability of government support in times of need into the ratings of the three government-owned banks -- Vietcombank, BIDV, and VietinBank -- and a "Moderate" probability of government support in times of need into the ratings of the remaining rated private sector banks.
Moody's government support assumption is also driven by the relative systemic importance of these banks to the Vietnamese banking system as well as, in the case of government-owned banks, their ownership structures.
The upgrade of ACB, Military Bank, and Techcombank's long-term local and foreign currency issuer ratings and long-term local-currency deposit ratings, as well as HDBank and OCB's long-term local and foreign currency issuer and deposit ratings was driven by the upgrade in the banks' BCAs.
Similarly, the upgrade in the long-term CRRs and CRAs of ABB, ACB, Vietcombank, Military Bank, TPBank, VIB, VP Bank and Techcombank was also driven by the upgrade in the banks' BCAs.
The foreign currency deposit ratings of all rated Vietnamese banks are capped at B1, because Vietnam's country ceiling for foreign currency deposits is B1.
The outlook on Sacombank's ratings was changed to stable from negative, to reflect its stabilized solvency profile and some progress in the recovery of problem assets.
