Moody's Investors Service (Moody's) has adjusted the issuer ratings and outlook for the long-term local and foreign currency deposit of six banks from "Negative" to "Stable", four banks from "Stable" to "Positive", and five banks from "Negative" to "Positive".
The 15 above banks subject to adjustment include An Binh Commercial Joint Stock Bank (ABBANK), Asia Commercial Joint Stock Bank (ACB), Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank), Military Commercial Joint Stock Bank (MB), Orient Commercial Joint Stock Bank (OCB), Southeast Asia Commercial Joint Stock Bank (SeABank), Tien Phong Commercial Joint Stock Bank (TPBank), Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam International Commercial Joint Stock Bank Vietnam (VIB), Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), Vietnam Prosperity Joint Stock Commercial Bank (VPBank), and Vietnam Technological and Commercial Joint Stock Bank (Techcombank).
The Baseline Credit Rating (BCA), adjusted BCA, Counterparty Risk Assessment (CRA), and Counterparty Risk Rating (CRR) of the above banks are all unaffected during this adjustment, except for ABBANK. To be specific, Moody's has downgraded the BCA and Adjusted BCA ratings of ABBANK from B1 to B2 because the bank's equity can be affected by higher credit costs due to increasing troubled assets. Also, the long-term CRA and CRR of the bank have been downgraded from Ba3 and Ba3 to B1 and B1, respectively.
If all other factors remain unchanged, Moody's is likely to upgrade the long-term ratings of 9 Vietnamese banks with a "Positive" outlook if the Vietnamese Government's rating is upgraded. The sovereign credit strength of Vietnam is a key factor of the assessment on Moody's on the deposit and issuer ratings of banks. The government's ability to support the banks in difficult times is affected by the country's credit strength.
The bank rating action follows confirmation of Moody’s on remaining the issuer and senior unsecured ratings of the Vietnamese Government at Ba3, at the same time, changing the outlook from "negative" to "positive".
The positive outlook is based on signs of improving fiscal strength and potential for economic strength, helping to strengthen Vietnam's credit profile. Sustainable fiscal strength has raised Vietnam's financial ratios, which Moody's believes to be only affected in the short term due to the pandemic.
Additionally, the Vietnamese economy can benefit from the global production, trade, and consumption shifts after the pandemic. Meanwhile, Moody's identified that the drivers of Vietnam's negative outlook assigned in December 2019 have receded. The negative outlook, which led to a downgrade review, was related to the risks to Vietnam's credit profile due to administrative failures, causing a delay in payment on government-guaranteed debts.
According to Moody's, the Vietnamese government has increased administration on forthcoming payments. Moody's will continue to monitor the Vietnamese government's activities in ensuring timely payment of direct and indirect obligations.
The reconfirmation of the Ba3 rating is based on an assessment of a large, diversified economy with high growth potential, resilience to shocks, and enhanced capacity in the domestic financial system to finance government loans at low cost. On the contrary, risks arise from weaknesses in governance related to lack of transparency in state-owned enterprises (SOE) management and risks in the banking system.
Compiled by VietnamCredit
