Singapore, October 19, 2016 -- Moody's Investors Service has concluded its review of eight Vietnamese
banks.
At the same time, Moody's has affirmed the long-term
B1 local currency deposit and issuer ratings of Bank for Investment &
Development of Vietnam (BIDV). Its caa1 baseline credit assessment
(BCA) has also been affirmed. The outlook on the bank's ratings
remains stable.
A summary of Moody's rating actions on the eight banks which were
under review for upgrade are as follows:
1. Upgrade of the long-term credit ratings and BCAs of Military
Commercial Joint Stock Bank (Military Bank) and Saigon-Hanoi Commercial
Joint Stock Bank (SHB). The banks' ratings outlooks are stable.
2. Confirmation/Affirmation of the long-term credit ratings
of five banks, with their BCAs upgraded by one notch. These
five banks are: Vietnam Bank for Industry and Trade (Vietinbank),
Vietnam International Bank (VIB), An Binh Commercial Joint Stock
Bank (ABB), Asia Commercial Bank (ACB) and Vietnam Technological
and Comm'l JSB (Techcombank). The banks' ratings outlooks
are stable.
3. Confirmation of the B3 long-term credit ratings and caa1
BCA for Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank).
The bank's ratings outlook was revised to negative.
Moody's review of the eight banks' ratings for upgrade was
initiated on 5 September 2016, following Moody's change of
Vietnam's (B1 stable) banking system Macro Profile to "Weak" from
"Weak-". The Macro Profile captures the risks related to
the banks' operating and economic environment.
The BCA of JSC Bank for Foreign Trade of Vietnam (Vietcombank) remains
on review for upgrade, pending regulatory approvals and finalization
of an announced capital increase. The B1/B2 long-term local
and foreign currency deposit ratings of that bank are not on review.
The full list of rating actions is provided at the end of this press-release.
RATINGS RATIONALE
The positive rating actions are broadly driven by Moody's view that the
more benign operating and economic conditions for banks in Vietnam (B1
stable) have resulted in somewhat lower solvency and liquidity risks for
the majority of Moody's-rated banks in the country.
Vietnamese banks will continue to benefit from the country's robust economic
growth, as well as from Vietnam's enhanced — but still
weak — institutional strength. These positive developments
support the banks' funding profiles.
Moody's has captured the abovementioned macroeconomic improvements
by changing the Macro Profile for Vietnam's banking system to "Weak"
from "Weak-" in early September 2016.
Despite today's broadly positive rating actions, Moody's considers
that the banking system in Vietnam remains undercapitalized, against
the backdrop of rapid credit growth and a high share of legacy problem
assets which are not always adequately disclosed on the banks' balance
sheets. Moody's expects that these challenges will continue to
persist in the medium term, despite some improvements.
DETAILED RATING ACTIONS ON DEPOSIT RATINGS AND OUTLOOK
RATINGS RATIONALE FOR MILITARY BANK AND SHB
Military Bank's BCA was upgraded to b2 from caa1, broadly
driven by a steady improvement in its financial fundamentals. Specifically,
the bank's asset quality metrics have stabilized, as it made progress
on resolving or writing off its problem exposures. The bank's
loss absorbing buffers have also increased.
Military Bank received fresh capital from new and existing shareholders
in 2015 that boosted its capital ratios above that of many of its domestic
peers. Additionally, the active provisioning on loans in
the past two years — with a large part of its pre-provision
income channeled into loan loss reserves — has helped strengthen
its capacity to cushion against losses.
As a result, the bank's solvency position — as indicated
by the risk that it faces relative to its loss absorbing resources —
has improved tangibly. Problem loans and net Vietnam Asset Management
Company (VAMC) exposures represented 37% of the bank's loan
loss reserves and tangible common equity at end-2015, down
from 52% the year before.
At the same time, its long-term deposit and issuer ratings
have been upgraded to B2 from B3. However, the ratings do
not incorporate any uplift for government support above the bank's
b2 BCA, because the BCA is positioned just one notch lower relative
to the government's B1 rating.
SHB's BCA has been upgraded to b3 from caa1, broadly driven
by improvements in its funding profile, against the backdrop of
benign operating conditions. Specifically, deposits are increasingly
funding the bank's total assets, which stand at 75%
of its balance sheet as of 30 June 2016, from 63% as of 31
December 2013. Elevated asset risks in the context of low capital
buffers remain its key credit challenge.
SHB's long-term deposit and issuer ratings have been upgraded
to B2 from B3 because Moody's expects that SHB will receive a moderate
level of support from the Government of Vietnam, in case of need.
RATINGS RATIONALE FOR VIETINBANK, VIB, ABB, ACB AND
TECHCOMBANK
The BCAs of Vietinbank, VIB, ABB, ACB and Techcombank
have been upgraded to b2, broadly driven by improvements in the
banks' financial profiles, against the backdrop of Vietnam's
benign operating and economic environment.
The upgrade of Vietinbank's BCA to b2 from b3 is mainly driven by
the bank's improved funding profile. The bank's market
funds / tangible banking assets ratio fell to around 16% as of
June 2016 from 24% in December 2015. The main challenges
in terms of its financial profile include high asset risks and a weak
and decreasing core capital buffer.
Vietinbank's B1/B2 long-term local and foreign currency deposit
ratings have been affirmed because Moody's expects that the bank
will receive a very high level of support from the Government of Vietnam,
in case of need, given the high level of government ownership and
the bank's systemic importance.
VIB's BCA was upgraded to b2 from b3 because of improving asset
quality metrics and the bank's good capital buffer with a Tangible
Common Equity / Risk Weighted Assets ratio of 12.8% at end-June
2016. Key risk factors include modest provisioning coverage,
low profitability and elevated reliance on market funds.
ACB's BCA has been upgraded to b2 from b3 to reflect the gradual
progress it has made in the resolution of legacy assets, and its
generally comfortable funding and liquidity profile, supported by
a moderate growth strategy in 2014 and 2015. Key risk factors include
pressured capital levels, because growth picked up considerably
in the first half of 2016.
For Techcombank, the upgrade of its BCA reflects an improving asset
quality trend and a generally healthy funding and liquidity profile.
Similar to other banks in Vietnam, Techcombank's core capital
buffer is under pressure because of rapid loan growth.
The upgrade of ABB's BCA to b2 from b3 reflects the bank's
steady funding and liquidity profile, and continued improvements
in its asset quality since year-end 2014. The bank's
capital buffer is also higher when compared to most domestic peers,
but it is facing negative pressure because of the expansion of its balance
sheet.
The B2 long-term local currency deposit and issuer ratings of VIB,
ACB, Techcombank and ABB have been confirmed/affirmed, despite
the upgrading of their BCAs. Moody's continues to incorporate
a moderate probability of government support in these ratings, however
this does not result in any ratings uplift because the banks' b2
BCAs are just one notch lower than the B1 sovereign rating for Vietnam.
RATINGS RATIONALE FOR SACOMBANK
Moody's has confirmed Sacombank's B3 long-term ratings
and caa1 BCA, and changed the outlook to negative.
The confirmation of the caa1 BCA reflects the high solvency and liquidity
risks faced by Sacombank, following its merger with Southern Bank
in the fourth quarter of 2015. At end-June 2016, Sacombank's
problem assets increased substantially from the pre-merger period,
while its credit provisions were very slim.
The BCA also incorporates the risks related to Sacombank's corporate
behavior and opacity and complexity. Corporate behavior risks originate
from a situation where the majority of Sacombank's shares is managed
by the State Bank of Vietnam, which create uncertainty around the
financial health and future development of the bank. Opacity risks
stem from the fact that the bank has not yet published its audited financial
report for 2015, which introduces the risk that the unaudited financials
might be restated.
The B3 long-term ratings of Sacombank were confirmed because Moody's
continues to incorporate one notch of uplift, based on the rating
agency's expectation of moderate support from the government of
Vietnam.
The negative outlook on Sacombank's ratings reflects the uncertainty
around the strategic direction of the bank, its unclear ownership
structure and the true scope of asset quality challenges.
RATINGS RATIONALE FOR BIDV
Moody's has affirmed BIDV's local currency deposit and issuer
ratings of B1 and its BCA of caa1. BIDV's foreign currency deposit
rating is positioned at B2, in line with Vietnam's foreign currency
deposit ceiling. The outlook on its long-term credit ratings
is stable.
The affirmation of the caa1 BCA reflects the elevated risks in BIDV's
balance sheet, namely a higher stock of problem assets in the first
half of 2016. BIDV's single borrower and industry concentration
risks remain high against weak capital levels. The bank has a strategy
to improve its capital buffer, however these efforts are yet to
materialize. The BCA also incorporates our assessment that BIDV's
funding and liquidity profile benefits from its depositary relationships
with SOEs as well as its 12% system deposit market share.
BIDV's B1 long-term local currency deposit rating has been
affirmed because Moody's continues to incorporate in the rating,
a very high level of support for the bank in times of need from the Government
of Vietnam, based on the fact that BIDV is the largest state-owned
bank in the system by total assets.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Substantial improvements in the asset quality and core capital levels
of Vietnamese banks will be positive for the ratings.
The ratings could be downgraded if problem loan ratios — as adjusted
by Moody's — increase to in excess of 10% of gross
loans, or if core capital buffers drop well below 8%.
The ratings are also sensitive to a significant weakening in the banks'
funding and liquidity profiles.
Moody's notes that Sacombank's ratings carry a negative outlook
and could be downgraded if asset risks increase further and demonstrate
a substantial negative effect on the bank's solvency and liquidity
profiles.
The principal methodology used in these ratings was Banks published in
January 2016. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Taking into account today's announcement, the affected ratings are
as follows:
An Binh Commercial Joint Stock Bank
- Upgrade the BCA and Adjusted BCA to b2 from b3
- Affirm foreign currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local and foreign currency long-term issuer ratings
at B2; outlook stable
- Upgrade long-term CR Assessment to B1(cr) from B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Ho Chi Minh, the bank reported total assets of
VND 70,353 billion (USD 2.8 billion) at end-June 2016.
Asia Commercial Bank
- Upgrade the BCA and Adjusted BCA to b2 from b3
- Affirm foreign currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local and foreign currency long-term issuer ratings
at B2; outlook stable
- Upgrade long-term CR Assessment to B1(cr) from B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Ho Chi Minh, the bank reported total assets of
VND 211,887 billion (USD 8.5 billion) at end-June
2016.
Bank for Investment & Development of Vietnam
- Affirmed the BCA and Adjusted BCA at caa1
- Affirm local currency long-term bank deposit ratings at
B1; outlook stable
- Affirm foreign currency long-term bank deposit ratings
at B2; outlook stable
- Affirm local and foreign currency long-term issuer ratings
at B1; outlook stable
- Affirm long-term CR Assessment to B1(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Hanoi, the bank reported total assets of VND 930,268
billion (USD 37.2 billion) at end-June 2016.
Military Commercial Joint Stock Bank
- Upgrade BCA and Adjusted BCA to b2 from caa1
- Upgrade local and foreign currency long-term bank deposit
ratings to B2 from B3; outlook stable
- Upgrade local and foreign currency long-term issuer ratings
to B2 from B3; outlook stable
- Upgrade long-term CR Assessment to B1(cr) from B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Hanoi, the bank had total assets of VND 312,375
billion (USD 12.5 billion) at end-June 2016.
Saigon - Hanoi Commercial Joint Stock Bank
- Upgrade BCA and Adjusted BCA to b3 from caa1
- Upgrade local and foreign currency long-term bank deposit
ratings to B2 from B3; outlook stable
- Upgrade local and foreign currency long-term issuer ratings
to B2 from B3; outlook stable
- Confirm long-term CR Assessment at B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Hanoi, the bank had total assets of VND 211,887
billion (USD 9.3 billion) at end-June 2016.
Saigon Thuong Tin Commercial Joint-Stock Bank
- Confirm BCA and Adjusted BCA at caa1
- Confirm local and foreign currency long-term bank deposit
ratings at B3; outlook negative
- Confirm local and foreign currency long-term issuer ratings
at B3; outlook negative
- Confirm long-term CR Assessment to B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is negative
Headquartered in Ho Chi Minh City, the bank had total assets of
VND 312,375 billion (USD 13.8 billion) at end-June
2016.
Vietnam Bank for Industry and Trade
- Upgrade BCA and Adjusted BCA to b2 from b3
- Affirm local currency long-term bank deposit ratings at
B1; outlook stable
- Affirm foreign currency long-term bank deposit ratings
at B2; outlook stable
- Affirm local and foreign currency long-term issuer ratings
at B1; outlook stable
- Affirm foreign currency senior unsecured rating at B1; outlook
stable
- Confirm long-term CR Assessment to B1(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Hanoi, the bank had total assets of VND 850,210
billion (USD 34.0 billion) at end-June 2016.
Vietnam International Bank
- Upgrade BCA and Adjusted BCA to b2 from b3
- Affirm foreign currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local and foreign currency long-term issuer ratings
at B2; outlook stable
- Upgrade long-term CR Assessment to B1(cr) from B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Hanoi, the bank had total assets of VND 86,707
billion (USD 3.5 billion) at end-June 2016.
Vietnam Technological and Comm'l JSB
- Upgrade BCA and Adjusted BCA to b2 from b3
- Affirm foreign currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local currency long-term bank deposit ratings
at B2; outlook stable
- Confirm local and foreign currency long-term issuer ratings
at B2; outlook stable
- Upgrade long-term CR Assessment to B1(cr) from B2(cr)
- Affirm local currency and foreign currency short-term
deposit ratings at NP
- Affirm local currency and foreign currency short-term
issuer ratings at NP
- Affirm short-term CR Assessment at NP(cr)
- Outlook is stable
Headquartered in Hanoi, the bank had total assets of VND 212,676
billion (USD 9.4 billion) at end-June 2016.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead analyst and the Moody's legal entity that has issued the ratings.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Eugene Tarzimanov
VP - Senior Credit Officer
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
SUBSCRIBERS: (852) 3551-3077
Gene Fang
Associate Managing Director
Financial Institutions Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (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
SUBSCRIBERS: (852) 3551-3077
