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Rating Action:

Moody's affirms ratings of four Vietnamese banks

24 May 2021

Singapore, May 24, 2021 -- Moody's has affirmed the ratings and assessments of Asia Commercial Bank (ACB), JSC Bank for Foreign Trade of Vietnam (Vietcombank), Military Commercial Joint Stock Bank (MB) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank).

The outlooks on the long-term ratings of Vietcombank and Techcombank remain positive, in line with the positive outlook on the Government of Vietnam (Ba3 positive) rating. The outlooks on the long-term ratings of ACB and MB remain stable.

The full list of affected ratings and assessments is provided at the end of this press-release.

RATINGS RATIONALE

Today's rating actions reflect the maintenance of adequate solvency and liquidity by the four banks despite the pandemic. The banks have strengthened their loan loss buffers, including their capital and loan loss reserves, to withstand mild increases in nonperforming loans (NPLs) over the next 12-18 months.

Asset quality was solid across all four banks, with NPL ratios ranging from 0.5% to 1.1% as of the end of 2020, lower than the average of around 2.6% for other rated banks in Vietnam. At the same time, all four banks boosted their NPL coverage to an average of around 208% as of the end of 2020, significantly higher than the average of around 83% for other rated domestic banks, and up from 140% in 2019.

All four banks recorded a good return on tangible assets, averaging around 1.9%, in 2020. Nevertheless, Moody's expects profitability could decline mildly over the next 12-18 months given that loan loss provisions will likely remain higher in 2021 than pre-pandemic levels. This is because of new NPLs and the banks' need to create specific provisions against restructured loans in accordance with the State Bank of Vietnam's regulation.

In addition, capital at these four banks will be stable over the next 12--18 months given that internal capital generation will support asset growth. Among the four banks, Techcombank stood out with the highest level of capital, with tangible common equity as a percentage of risk-weighted assets of 14.3% as of the end of 2020.

Funding and liquidity remained stable at all four banks. The banks rely predominantly on customer deposits to fund their assets, with a moderate reliance on market funds. Risks related to their funding from market sources are also mitigated by their good stock of liquid assets.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's could upgrade the long-term ratings of ACB and MB if both the Vietnamese government's sovereign rating and the banks' Baseline Credit Assessments (BCA) are upgraded. The banks' BCAs could be upgraded if they maintain their current financial performance and strengthen their core capital. Improvements in the macroeconomic conditions in Vietnam, leading to a higher Macro Profile for the country, will also be positive for the banks' BCAs.

For Vietcombank and Techcombank, assuming all other factors remain constant, an upgrade of the Vietnamese government's sovereign rating will likely result in an upgrade of the banks' long-term ratings.

Moody's could downgrade the long-term ratings of these banks if there is a severe deterioration in their credit fundamentals including a spike in NPLs leading to higher loan loss provisions, which weigh on the banks' profitability and capital. A significant worsening of the banks' funding and liquidity could also be negative for the ratings.

The principal methodology used in these ratings was Banks Methodology published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Asia Commercial Bank (ACB), headquartered in Ho Chi Minh City, reported total assets of VND445 trillion as of 31 December 2020.

JSC Bank for Foreign Trade of Vietnam (Vietcombank), headquartered in Hanoi, reported total assets of VND1,326 trillion as of 31 December 2020.

Military Commercial Joint Stock Bank (MB), headquartered in Hanoi, reported total assets of VND495 trillion as of 31 December 2020.

Vietnam Technological and Commercial Joint Stock Bank (Techcombank), headquartered in Hanoi, reported total assets of VND440 trillion as of 31 December 2020.

Outlook Actions:

..Issuer: Asia Commercial Bank

....Outlook, Remains Stable

..Issuer: JSC Bank for Foreign Trade of Vietnam

....Outlook, Remains Positive

..Issuer: Military Commercial Joint Stock Bank

....Outlook, Remains Stable

..Issuer: Vietnam Technological and Comm'l JSB

....Outlook, Remains Positive

Affirmations:

..Issuer: Asia Commercial Bank

.... Adjusted Baseline Credit Assessment, Affirmed ba3

.... Baseline Credit Assessment, Affirmed ba3

.... Short-term Counterparty Risk Assessment, Affirmed NP(cr)

.... Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)

.... Short-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed Ba2

.... Short-term Issuer Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Issuer Rating (Foreign and Local Currency), Affirmed Ba3, outlook stable

.... Short-term Deposit Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Deposit Rating (Foreign and Local Currency), Affirmed Ba3, outlook stable

..Issuer: JSC Bank for Foreign Trade of Vietnam

.... Adjusted Baseline Credit Assessment, Affirmed ba3

.... Baseline Credit Assessment, Affirmed ba3

.... Short-term Counterparty Risk Assessment, Affirmed NP(cr)

.... Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)

.... Short-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed Ba2

.... Short-term Issuer Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Issuer Rating (Foreign and Local Currency), Affirmed Ba3, outlook positive

.... Short-term Deposit Rating (Foreign and Local Currency), Affirmed NP

....Long-term Deposit Rating (Foreign and Local Currency), Affirmed Ba3, outlook positive

..Issuer: Military Commercial Joint Stock Bank

.... Adjusted Baseline Credit Assessment, Affirmed ba3

.... Baseline Credit Assessment, Affirmed ba3

.... Short-term Counterparty Risk Assessment, Affirmed NP(cr)

.... Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)

.... Short-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed Ba2

.... Short-term Issuer Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Issuer Rating (Foreign and Local Currency), Affirmed Ba3, outlook stable

.... Short-term Deposit Rating (Foreign and Local Currency), Affirmed NP

....Long-term Deposit Rating (Foreign and Local Currency), Affirmed Ba3, outlook stable

..Issuer: Vietnam Technological and Comm'l JSB

.... Adjusted Baseline Credit Assessment, Affirmed ba3

.... Baseline Credit Assessment, Affirmed ba3

.... Short-term Counterparty Risk Assessment, Affirmed NP(cr)

.... Long-term Counterparty Risk Assessment, Affirmed Ba2(cr)

.... Short-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Counterparty Risk Rating (Foreign and Local Currency), Affirmed Ba2

.... Short-term Issuer Rating (Foreign and Local Currency), Affirmed NP

.... Long-term Issuer Rating (Foreign and Local Currency), Affirmed Ba3, outlook positive

.... Short-term Deposit Rating (Foreign and Local Currency), Affirmed NP

....Long-term Deposit Rating (Foreign and Local Currency), Affirmed Ba3, outlook positive

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rebaca Tan
VP - Senior Analyst/CSR
Financial Institutions Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Graeme Knowd
MD - Banking
Financial Institutions Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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