The global credit rating agency - Moody’s - has asserted its ratings for Joint stock Commercial Bank for Investment and Development of Viet Nam (BIDV) and Vietnam Maritime Commercial Stock Bank (Maritime Bank)
Accordingly, Moody’s affirmed local/foreign currency issuer ratings of BIDV at B1; long-term local/foreign bank deposits’ rating at B1/B2. The baseline credit assessment (BCA) and adjusted BAC of BIDV have been upgraded from CAA1 to B3. The bank’s counterparty risk assessment (CR Assessment) has been affirmed at B1.
The outlook on BIDV’s local currency bank deposits and local/foreign currency issuer ratings is quite positive, in compliance with the positive outlook of Vietnam the country’s rating. The outlook on the bank’s foreign currency bank deposits rating is assessed stable at B2 due to the fact that the rating is constrained by the foreign currency deposit ceiling for Vietnam.
According to Moody's, BIDV's local currency deposit ratings and BIDV's local currency / foreign currency issuer ratings match those of Vietnam, so the likelihood of receiving government support is very high. In addition, BIDV is the second largest bank in Vietnam with a large share of domestic deposits and loans, and the government holds 95% of BIDV's equity through the State Bank of Vietnam.
Moody's upgrade of BIDV's BCA is due to the stabilization in the bank’s asset quality as well as improvements in the bank’s funding profile.
Moody's expects BIDV's stabilization in asset quality to remain in the next 12 to 18 months thanks to improved operating environment and customer repayment capacity.
With the balance of deposits and loans at the end of 2016, BIDV is considered as the second largest state-owned bank in Vietnam. Moody's expects BIDV to be supported in the event of large internal and external shocks.
Maritime Bank's deposit rating (VND and foreign currency) is B3 / Not Prime with a positive outlook. The baseline credit assessment (BCA) and adjusted BAC of the bank is at CAA1, counterparty risk assessment (CR Assessment) is at B2(cr)/Not prime(cr). This rating represents a high risk in Maritime Bank's balance sheet with troubled assets.
By the end of September 2017, Maritime Bank was one of the banks with high debt ratio in the bank system. Accordingly, the problem loans identified by Moody's are loans from Group 2 to Group 5 in accordance with Vietnamese accounting standards and bonds of VAMC.
According to Moody's, the bank's profitability is limited due to the low proportion of its assets and high credit costs.
The positive outlook of Maritime Bank is based on the bank's efforts in dealing with troubled asset classes, thereby improving asset quality and profitability. The large scale and centrality of these items is what creates positive expectations. This has led to significant improvements in asset quality and liquidity in 2018.
According to Moody's, the reduction of troubled assets including the debt balance at VAMC could impact the rating of Maritime Bank. Increasing profitability is also a positive factor for ratings. On the other hand, if asset quality deteriorates along with a reduction in the bank's "buffer" over the medium term, it will downgrade the rating.
Learn more: Moody’s Credit Ratings: Impacts On Vietnam’s Stock Market
Compile by VietnamCredit