Singapore, September 22, 2014 -- Moody's Investors Service has taken positive rating actions on six
banks in Vietnam.
In particular, Moody's upgraded the ratings of Vietnam International
Bank (VIB; B2 deposits, E+/b3 BFSR/BCA) by one notch,
while affirming the ratings of five banks and changing their outlooks
to positive at the same time.
These five banks are:
• Military Commercial Joint Stock Bank (Military Bank; B3 deposits,
E/caa1 BFSR/BCA )
• Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank;
B3 deposits, E/caa1 BFSR/BCA)
• Vietnam Technological and Commercial Joint Stock Bank (Techcombank;
B3 deposits, E/caa1 BFSR/BCA)
• Asia Commercial Bank (B3 deposits, E/caa1 BFSR/BCA)
• Vietnam Prosperity Jt. Stk. Commercial Bank (VP Bank;
B3 deposits, E/caa1 BFSR/BCA)
Moody's also affirmed the ratings of three other banks with stable
outlooks:
• Vietnam Bank for Industry and Trade (VietinBank; B1 local
currency deposits, E+/b3 BFSR/BCA)
• Bank for Investment and Development of Vietnam (BIDV; B1 local
currency deposits, E/caa1 BFSR/BCA)
• Saigon-Hanoi Commercial Joint Stock Bank (SHB; B3 deposits,
E/caa1 BFSR/BCA)
Moody's says that its positive rating actions were primarily driven
by the stabilization in the operating environment.
Another important factor was the expected improvement in underwriting
standards, arising in turn from improved governance and lower risk
appetite at some banks.
Together, these factors have reduced the incidence of new problem
assets on the banks' balance sheets, and have also improved
recovery prospects for legacy problem assets.
Moody's notes that while economic growth has moderated somewhat,
Vietnam has managed to stabilize inflation below 7.5%.
This achievement has allowed the State Bank of Vietnam (SBV) to decrease
its policy rates to promote economic growth; for example, the
refinancing rate fell to 6.5% earlier this year from 9%
at end-2012.
On balance, lower interest rates are positive for Vietnamese banks
because they decrease the debt burden of their borrowers.
Macroeconomic stability has also supported the liquidity profile of the
Vietnamese banks. As deposit growth outpaced loan growth,
the banking system's loans to deposits ratio improved to 82%
in June 2014 from 87% in June 2013.
However, despite the stabilization in the operating environment
of the banks and the positive developments related to the banks'
credit profiles, Moody's notes that Vietnamese banks continue
to face considerable credit challenges that will take time to resolve.
These challenges include problem assets over and above reported non-performing
loans (NPLs) and poor loss-absorption capacity due to low loan-loss
provisions and weak profitability.
RATINGS RATIONALE
RATIONALE BEHIND THE UPGRADE OF VIETNAM INTERNATIONAL BANK (VIB)
Moody's has upgraded VIB's bank financial strength rating
(BFSR) to E+ from E; and the BFSR now maps to a b3 baseline
credit assessment (BCA; previously caa1).
Concurrently, Moody's upgraded the bank's deposit rating
to B2 from B3, because Moody's retained one notch of systemic
support uplift for VIB's ratings. The outlook is stable.
Moody's upgraded VIB's BFSR because the bank has undergone
a consolidation and de-leveraging strategy in the past two years,
characterized by a reducing loan book and higher provisioning against
existing NPLs.
VIB's corporate and risk governance benefits from active support
provided by the Commonwealth Bank of Australia (Aa2 deposits, B-/a1
BFSR/BCA), its single biggest shareholder with a 20% stake.
The bank has further initiated a more aggressive recovery strategy in
an effort to manage its legacy problem assets.
VIB's reported Tier 1 ratio of 16.3% at June 2014
is the highest among the rated banks, indicating a better loss-absorption
capacity. VIB has also a very good liquidity position, with
cash and government bonds accounting for around 25% of its assets.
RATIONALE BEHIND THE POSITIVE OUTLOOKS ON THE RATINGS OF FIVE BANKS
Moody's has assigned positive outlooks to the BFSR and deposit ratings
of five banks: Military Bank, Sacombank, Techcombank,
Asia Commercial Bank, and VP Bank.
According to Moody's, the five banks have shown improvements
in corporate governance, risk controls, and credit metrics,
and these measures have enhanced the banks' ability to benefit from
Vietnam's improved operating environment going forward.
Moody's could also upgrade their BFSRs and deposit ratings if their
future financial results demonstrate improvements after taking into account
the stricter reporting standards introduced by recent SBV regulations,
as well as Moody's adjustments of the banks' NPLs.
In addition, Moody's could upgrade the banks' ratings
in case of material increases in their Tier 1 ratios, which could
in turn strengthen their loss-absorption buffers. Potential
capital increases from new shareholders could be particularly beneficial
to the banks if these shareholders strengthen risk function and governance
structures.
On the other hand, Moody's could change their outlooks back
to stable if the banks (1) show no improvements in their corporate governance
and risk structures, (2) continue to grow at rates substantially
above market averages, and this growth is not followed by new capital
increases, and (3) are very slow in resolving their legacy problem
assets.
RATIONALE BEHIND THE AFFIRMATION OF THREE BANKS' RATINGS WITH STABLE
OUTLOOKS
Moody's has affirmed the BFSRs and deposit ratings of three banks,
with a stable outlook. These banks are VietinBank, BIDV and
SHB.
In the case of VietinBank, its E+ BFSR and b3 BCA are already
the highest among the rated Vietnamese banks. As a result,
the bank needs to demonstrate greater improvements in governance,
asset quality, and liquidity metrics for a potential increase in
its BFSR/BCA. The bank's B1 ratings are in line with the
B1 ratings of the government of Vietnam.
Moody's affirmed BIDV's ratings because it already has one
of the highest deposit ratings in Vietnam, reflecting its scale,
government ownership, and important role in the banking system.
However, BIDV continues to report one of the lowest Tier 1 ratios
among the rated banks, and further improvements in its quantitative
metrics would be required for a potential upgrade.
Moody's affirmed SHB's ratings due to ongoing uncertainties
related to SHB's merger with Habubank (not rated). Given
the extent of Habubank's legacy problem assets and the inherent
complexity of bank mergers, Moody's would require the post-merger
entity to demonstrate a longer track record of sustainable performance
before considering an upgrade.
LIST OF AFFECTED RATINGS
VIB
- The local currency and foreign currency long-term deposit
ratings were upgraded to B2 from B3
- The local currency and foreign currency long-term issuer
ratings were upgraded to B2 from B3
- The bank financial strength rating was upgraded to E+ from
E; the new BFSR maps to b3 BCA
- The short-term rating of Not Prime was affirmed
- All ratings have a stable outlook
Headquartered in Hanoi, the bank had total assets of VND70,437
billion (USD3.3 billion) at end-June 2014.
Asia Commercial Bank
- The local currency and foreign currency long-term deposit
ratings of B3 were affirmed
- The local currency and foreign currency long-term issuer
ratings of B3 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- Outlook on all ratings changed to positive from stable
Headquartered in Ho Chi Minh, the bank had total assets of VND177,295
billion (USD8 billion) at end-June 2014.
Military Bank
- The local currency and foreign currency long-term deposit
ratings of B3 were affirmed
- The local currency and foreign currency long-term issuer
ratings of B3 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- Outlook on all ratings changed to positive from stable
Headquartered in Hanoi, the bank had total assets of VND180,381
billion (USD9 billion) at end-2013.
Sacombank
- The local currency and foreign currency long-term deposit
ratings of B3 were affirmed
- The local currency and foreign currency long-term issuer
ratings of B3 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- Outlook on all ratings changed to positive from stable
Headquartered in Ho Chi Minh City, the bank had total assets of
VND161,378 billion (USD8 billion) at end-2013.
Techcombank
- The local currency and foreign currency long-term deposit
ratings of B3 were affirmed
- The local currency and foreign currency long-term issuer
ratings of B3 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- Outlook on all ratings changed to positive from stable
Headquartered in Hanoi, the bank had total assets of VND158,897
billion (USD8 billion) at end-2013.
VP Bank
- The local currency and foreign currency long-term deposit
ratings of B3 were affirmed
- The local currency and foreign currency long-term issuer
ratings of B3 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- Outlook on all ratings changed to positive from stable
Headquartered in Hanoi, the bank had total assets of VND135,137
billion (USD6 billion) at end-June 2014.
VietinBank
- The local currency long-term deposit rating of B1 was
affirmed
- The foreign currency long-term deposit rating of B2 was
affirmed
- The local currency and the foreign currency long-term
issuer ratings of B1 were affirmed
- The foreign currency senior unsecured rating of B1 was affirmed
- The bank financial strength rating of E+ was affirmed;
the BFSR maps to b3 BCA
- The short-term rating of Not Prime was affirmed
- All ratings have a stable outlook
Headquartered in Hanoi, the bank had total assets of VND597,636
billion (USD28 billion) at end-June 2014.
BIDV
- The local currency long-term deposit rating of B1 was
affirmed
- The foreign currency long-term deposit rating of B2 was
affirmed
- The local currency and the foreign currency long-term
issuer ratings of B1 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- All ratings have a stable outlook
Headquartered in Hanoi, the bank had total assets of VND548,386
billion (USD26 billion) at end-2013.
SHB
- The local currency and foreign currency long-term deposit
ratings of B3 were affirmed
- The local currency and foreign currency long-term issuer
ratings of B3 were affirmed
- The bank financial strength rating of E was affirmed; the
BFSR maps to caa1 BCA
- The short-term rating of Not Prime was affirmed
- All ratings have a stable outlook
Headquartered in Hanoi, the bank had total assets of VND140,539
billion (USD7 billion) at end-June 2014.
The principal methodology used in these ratings was Global Banks published
in July 2014. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
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.
Gene Fang
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
Stephen Long
MD - Financial Institutions
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
Moody's takes positive rating actions on six banks in Vietnam