Singapore, July 22, 2020 -- Moody's Investors Service has confirmed the long-term ratings
and assessments of three finance companies and two banks in Vietnam.
The three finance companies are VPBank Finance Company Limited (FE Credit),
Home Credit Vietnam Finance Company Limited (HCV), and SHBANK Finance
Company Limited (SHB Finance).
The two banks are Vietnam Prosperity Joint Stock Commercial Bank (VP Bank),
which fully owns FE Credit, and Saigon - Hanoi Commercial
Joint Stock Bank (SHB), which fully owns SHB Finance.
With the exception of VP Bank's long-term foreign currency
deposit rating which is on a negative outlook, the outlook on all
other ratings of the finance companies and banks, where applicable,
are stable.
Moody's rating action concludes the review for downgrade initiated on
07 April 2020.
A list of all affected ratings and assessments is provided at the end
of this press release.
RATINGS RATIONALE
CONFIRMATION OF FE CREDIT, HCV AND SHB FINANCE'S RATINGS
The confirmation of FE Credit, HCV and SHB Finance's ratings
takes into account Moody's expectation that solvency and liquidity
risks caused by the coronavirus is mitigated by (1) early reopening of
Vietnam (Ba3 negative)'s economy due to the successful control of
the outbreak; (2) stabilizing financing conditions supported by ample
liquidity following supportive domestic and global measures; and
(3) the companies' ability to manage credit and liquidity risks amid disruptions
from the coronavirus outbreak.
The companies' funding and liquidity positions were stable during
the review period supported by ample international and domestic liquidity,
which helped the companies to roll over their existing funding and access
new funding. The companies have diversified their funding sources
and reduced their funding costs during the same period. However,
the companies' reliance on wholesale funding and limited balance
sheet liquidity remain a weakness for their credit profiles.
The short duration of the economic disruptions in Vietnam has helped the
companies to manage delinquencies and collections within the historical
range. While Moody's has observed early signs of stress in
delinquencies and collections, especially in April due to social
distancing measures, collections recovered and delinquencies dropped
in the rest of the second quarter of 2020. The companies have also
shown prudent risk management, such as tightening underwriting criteria
against the backdrop of slowing economic growth.
CONFIRMATION OF RATINGS OF VP BANK AND SHB
In confirming VP Bank's b1 Baseline Credit Assessment (BCA),
Moody's acknowledges the bank's above-industry average
profitability and strong capitalization, offset by the heightened
credit risk from its consumer finance subsidiary that targets the low-income
population in Vietnam, as well as its rapid loan growth in previous
years. VP Bank has higher reliance on market funds than other rated
Vietnamese banks because of the non-deposit taking nature of its
consumer finance subsidiary. But Moody's views the associated risks
to be offset by the bank's comfortable stock of liquid assets.
In the case of SHB, the confirmation of its b3 BCA takes into consideration
the steady improvements made by the bank in resolving its legacy problem
assets, albeit offset by downside risks posed by the ongoing coronavirus
outbreak on the debt repayment capacity of the bank's borrowers
and the thin loss absorbing buffers SHB has against rising risks.
The BCA also takes into account SHB's modest capitalization and profitability
compared to other rated banks in Vietnam.
STABLE OUTLOOKS ON THE RATINGS
In the wake of coronavirus-related shocks, Moody's
expects slower economic growth for Vietnam in the next 12-18 months,
which will result in negative pressure on asset quality and profitability
of banks and finance companies. Deteriorating external demand is
weighing on exports and tourism, while global containment measures
disrupt supply chains, curb consumption and weaken investment activity.
That said, the stable outlooks reflect an abatement in the degree
of downside risks than initially expected when Moody's took the
rating action on the five financial institutions in April 2020,
and Moody's views that the downside risks have already been adequately
factored into their standalone credit profiles.
The negative outlook on VP Bank's long-term foreign currency
deposit rating mirrors the negative outlook on Vietnam's sovereign
rating, because a downgrade of the sovereign rating would likely
lead to a corresponding lowering in the country's foreign-currency
bank deposit ceiling, which is currently at B1.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
FE Credit, HCV, SHB Finance, VP Bank, SHB
A rating upgrade is unlikely given the ongoing coronavirus pandemic.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
FE Credit
• A downgrade in FE Credit's Standalone Assessment could result
in a downgrade of its ratings.
• Moody's could downgrade the company's Standalone Assessment
if (i) there is a material deterioration in its asset quality and profitability,
as a result of a more challenging operating environment following a resurgence
in coronavirus infections and the revival of social distancing measures
in Vietnam; and (ii) the company faces liquidity shortfalls due to
an unfavorable financing conditions or deterioration in loan collection.
• A downgrade of VP Bank's BCA or any indication of a change
in the company's importance to its parent, which would alter Moody's
assessment of the probability of parental support, could lead to
a downgrade of FE Credit's rating.
HCV
• A downgrade in HCV's Standalone Assessment could result in
a downgrade of its ratings.
• Moody's could downgrade the company's Standalone Assessment
if (i) there is a material deterioration in its asset quality and profitability,
as a result of a more challenging operating environment following a resurgence
in coronavirus infections and the revival of social distancing measures
in Vietnam; and (ii) the company faces liquidity shortfalls due to
an unfavorable financing condition.
SHB Finance
• A downgrade in SHB Finance's Standalone Assessment could
result in a downgrade of its ratings.
• Moody's could downgrade the company's Standalone Assessment
if (i) there is a material deterioration in its asset quality and profitability,
as a result of a more challenging operating environment following a resurgence
in coronavirus infections and the revival of social distancing measures
in Vietnam; and (ii) the company faces liquidity shortfalls due to
unfavorable financing conditions.
• A downgrade of SHB's BCA or any indication of a change in
the company's importance to its parent, which would alter Moody's
assessment of the probability of support in times of stress, could
also lead to a downgrade of SHB Finance's ratings.
VP Bank
• A resurgence in coronavirus infection rates both globally as well
as in Vietnam would depress economic activities and weaken borrowers'
debt repayment capacity.
• Moody's could downgrade VP Bank's ratings and assessments
if the bank's BCA is downgraded. VP Bank's BCA could
be downgraded if its solvency weakens as a result of a prolonged outbreak
of the coronavirus. Material deterioration in the credit strength
of its consumer finance subsidiary, FE Credit, will also be
credit negative for VP Bank.
• While Moody's expects VP Bank's funding and liquidity
to remain stable over the next 12 -- 18 months, any indication
of a bank run will be negative for the bank's BCA.
SHB
• A resurgence in coronavirus infection rates both globally as well
as in Vietnam would depress economic activities and weaken borrowers'
debt repayment capacity.
• Moody's could downgrade SHB's ratings and assessments
if the bank's BCA is downgraded. SHB's BCA could be
downgraded if its solvency weakens as a result of a prolonged outbreak
of the coronavirus. While Moody's expect SHB's funding
and liquidity to remain stable over the next 12 -- 18 months,
any indication of a bank run or limited access to market funds will also
be negative for the bank's BCA.
RATING METHODOLOGY
The principal methodology used in rating Home Credit Vietnam Finance Company
Limited, SHBANK Finance Company Limited and VPBank Finance Company
Limited was Finance Companies Methodology published in November 2019 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187099.
The principal methodology used in rating Saigon - Hanoi Commercial
Joint Stock Bank and Vietnam Prosperity Joint Stock Commercial Bank was
Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
VPBank Finance Company Limited (FE Credit), headquartered in Ho
Chi Minh City, reported total assets of VND69 trillion as of 31
December 2019.
Home Credit Vietnam Finance Company Limited (HCV), headquartered
in Ho Chi Minh City, reported total assets of VND24 trillion as
of 31 December 2019.
SHBANK Finance Company Limited (SHB Finance), headquartered in Hanoi,
reported total assets of VND3 trillion as of 31 December 2019.
Vietnam Prosperity Joint Stock Commercial Bank (VP Bank), headquartered
in Hanoi, reported total assets of VND399 trillion as of 30 June
2020.
Saigon - Hanoi Commercial Joint Stock Bank (SHB), headquartered
in Hanoi, reported total assets of VND369 trillion as of 31 March
2020.
LIST OF AFFECTED RATINGS
..Issuer: VPBank Finance Company Limited (Lead Analyst:
Jeffrey Lee)
.... Corporate Family Rating, Confirmed
at B1
.... Outlook, Changed to Stable from
Ratings Under Review
..Issuer: Home Credit Vietnam Finance Company Limited
(Lead Analyst: Jeffrey Lee)
.... Long-term Issuer Ratings (Foreign
and Local Currency), Confirmed at B3
.... Corporate Family Rating, Confirmed
at B3
.... Outlook, Changed to Stable from
Ratings Under Review
..Issuer: SHBANK Finance Company Limited (Lead Analyst:
Jeffrey Lee)
.... Long-term Issuer Ratings (Foreign
and Local Currency), Confirmed at B3
.... Corporate Family Rating, Confirmed
at B3
.... Outlook, Changed to Stable from
Ratings Under Review
..Issuer: Vietnam Prosperity Joint Stock Commercial
Bank (Lead Analyst: Rebaca Tan)
.... Adjusted Baseline Credit Assessment,
Confirmed at b1
.... Baseline Credit Assessment, Confirmed
at b1
.... Long-term Counterparty Risk Assessment,
Confirmed at Ba3(cr)
.... Long-term Counterparty Risk Ratings
(Foreign and Local Currency), Confirmed at Ba3
.... Long-term Issuer Ratings (Foreign
and Local Currency), Confirmed at B1, Outlook changed to Stable
from Review for Downgrade
.... Long-term Senior Unsecured Medium-Term
Note Program (Foreign Currency), Confirmed at (P)B1
.... Long-term Senior Unsecured Bond
(Foreign Currency), Confirmed at B1, Outlook changed to Stable
from Review for Downgrade
.... Long-term Deposit Ratings (Foreign
Currency), Confirmed at B1, Outlook changed to Negative from
Review for Downgrade
.... Long-term Deposit Ratings (Local
Currency), Confirmed at B1, Outlook changed to Stable from
Review for Downgrade
.... Short-term Issuer Ratings (Foreign
and Local Currency), Affirmed at NP
.... Short-term Deposit Ratings (Foreign
and Local Currency), Affirmed at NP
.... Short-term Counterparty Risk Ratings
(Foreign and Local Currency), Affirmed at NP
.... Short-term Counterparty Risk Assessment,
Affirmed at NP(cr)
.... Outlook, Changed to Stable(m) from
Ratings Under Review
..Issuer: Saigon - Hanoi Commercial Joint Stock
Bank (Lead Analyst: Rebaca Tan)
.... Adjusted Baseline Credit Assessment,
Confirmed at b3
.... Baseline Credit Assessment, Confirmed
at b3
.... Long-term Counterparty Risk Assessment,
Confirmed at B1(cr)
.... Long-term Counterparty Risk Ratings
(Foreign and Local Currency), Confirmed at B1
.... Long-term Issuer Ratings (Foreign
and Local Currency), Confirmed at B2, Outlook changed to Stable
from Review for Downgrade
.... Long-term Senior Unsecured Medium-Term
Note Program (Foreign Currency), Confirmed at (P)B2
.... Long-term Deposit Ratings (Foreign
and Local Currency), Confirmed at B2, Outlook changed to Stable
from Review for Downgrade
.... Short-term Issuer Ratings (Foreign
and Local Currency), Affirmed at NP
.... Short-term Deposit Ratings (Foreign
and Local Currency), Affirmed at NP
.... Short-term Counterparty Risk Ratings
(Foreign and Local Currency), Affirmed at NP
.... Short-term Counterparty Risk Assessment,
Affirmed at NP(cr)
.... Outlook, Changed to Stable from
Ratings Under Review
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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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 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 rating analyst and the Moody's legal entity that has issued
the ratings.
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.
Jeffrey Lee
Asst Vice President - Analyst
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
