Why Moody’s changed the outlooks for ratings of Vietnamese banks to negative?

For 10 of the 18 Vietnamese banks, Moody’s has confirmed the banks’ long-term local and foreign currency deposit and issuer ratings, and changed the outlooks for these ratings to negative from ratings under review for downgrade.

Of the 10, Moody’s has confirmed the Baseline Credit Assessments (BCAs) and Adjusted BCAs of four banks, as well as the long-term Counterparty Risk Assessments (CR Assessments) and Counterparty Risk Ratings (CRRs) of six.

For 5 of the 18, Moody’s has confirmed the banks’ long-term foreign currency deposit ratings, and changed the outlooks on the banks’ long-term foreign currency deposit ratings to negative from ratings under review for downgrade.

At the same time, Moody’s has also confirmed the long-term CR Assessments and CRRs of the remaining three banks.

Moody’s rating actions conclude Moody’s reviews for downgrade of the ratings of the 18 banks, which were initiated on 10 October 2019, after Moody’s placed the Government of Vietnam’s Ba3 sovereign rating under review for downgrade on 9 October 2019.

Today’s rating actions on the banks also follow Moody’s confirmation on 18 December 2019 of Vietnam’s Ba3 sovereign rating, and change on the same date of the sovereign rating outlook to negative from rating under review for downgrade. For more information on the sovereign credit rating action, please refer to the Government of Vietnam issuer page on http://www.moodys.com.

Moody’s rating actions on the 18 banks are driven purely by the sovereign rating action, and do not reflect a weakening of the banks’ standalone financial profiles.

The 18 affected banks are:

1. An Binh Commercial Joint Stock Bank (ABB), headquartered in Ho Chi Minh City, reported total assets of VND91 trillion ($3.9 billion) as of 30 June 2019.
2. Asia Commercial Bank (ACB), headquartered in Ho Chi Minh City, reported total assets of VND350 trillion ($15.0 billion) as of 30 June 2019.
3. Ho Chi Minh City Development JSC Bank (HDBank), headquartered in Ho Chi Minh City, reported total assets of VND210 trillion ($9.0 billion) as of 30 June 2019.
4. JSC Bank for Foreign Trade of Vietnam (Vietcombank), headquartered in Hanoi, reported total assets of VND1.1 quadrillion ($48.1 billion) as of 30 June 2019.
5. JSC Bank for Investment and Development of Vietnam (BIDV), headquartered in Hanoi, reported total assets of VND1.4 quadrillion ($60.0 billion) as of 30 June 2019.
6. Lien Viet Post Joint Stock Commercial Bank (Lien Viet), headquartered in Hanoi, reported total assets of VND189 trillion ($8.1 billion) as of 30 June 2019.
7. Military Commercial Joint Stock Bank (Military Bank), headquartered in Hanoi, reported total assets of VND402 trillion ($17.2 billion) as of 30 June 2019.
8. Nam A Commercial Joint Stock Bank (Nam A Bank), headquartered in Ho Chi Minh City, reported total assets of VND83 trillion ($3.6 billion) as of 30 June 2019.
9. Orient Commercial Joint Stock Bank (OCB), headquartered in Ho Chi Minh City, reported total assets of VND108 trillion ($4.6 billion) as of 30 June 2019.
10. Saigon – Hanoi Commercial Joint Stock Bank (SHB), headquartered in Hanoi, reported total assets of VND342 trillion ($14.7 billion) as of 30 June 2019.
11. Southeast Asia Commercial Joint Stock Bank (SeABank), headquartered in Hanoi, reported total assets of VND153 trillion ($6.6 billion) as of 30 September 2019.
12. Tien Phong Commercial Joint Stock Bank (TPBank), headquartered in Hanoi, reported total assets of VND146 trillion ($6.2 billion) as of 30 June 2019.
13. Vietnam Bank for Agriculture & Rural Development (Agribank), headquartered in Hanoi, reported total assets of VND1.3 quadrillion ($55.3 billion) as of 31 December 2018.
14. Vietnam International Bank (VIB), headquartered in Hanoi, reported total assets of VND164 trillion ($7.0 billion) as of 30 June 2019.
15. Vietnam JSC Bank for Industry and Trade (VietinBank), headquartered in Hanoi, reported total assets of VND1.2 quadrillion ($50.7 billion) as of 30 June 2019.
16. Vietnam Maritime Commercial Joint Stock Bank (MSB), headquartered in Hanoi, reported total assets of VND145 trillion ($6.2 billion) as of 30 June 2019.
17. Vietnam Prosperity Joint Stock Commercial Bank (VP Bank), headquartered in Hanoi, reported total assets of VND349 trillion ($14.9 billion) as of 30 June 2019.
18. Vietnam Technological and Commercial Joint Stock Bank (Techcombank), headquartered in Hanoi, reported total assets of VND361 trillion ($15.5 billion) as of 30 June 2019.

The ratings, assessments and outlook of Saigon Thuong Tin Commercial Joint-Stock Bank (Sacombank, Caa1 stable, caa2) are unaffected by today’s action.

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_205629 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

As mentioned, today’s rating actions on the 18 Vietnamese banks are driven by Moody’s confirmation of Vietnam’s Ba3 sovereign rating with a negative outlook, following the conclusion of Moody’s review of the sovereign rating.

Vietnam’s sovereign credit strength is a key input in Moody’s ratings for Vietnamese banks, because the country’s credit strength affects Moody’s assessment of the government’s capacity to provide support to the banks in times of stress.

The confirmation of the sovereign rating reflects Moody’s assessment that enhanced attention by the administration on forthcoming payments of all the government’s debt obligations, direct and indirect, reduces the risk of renewed payment delays.

The negative outlook reflects some ongoing risk of payment delays on some of the government’s indirect debt obligations, in the absence of more tangible and significant measures to improve the coordination and transparency around debt management within the administration.

WHAT COULD CHANGE THE RATING UP

For 10 of the 18 banks, Moody’s has confirmed the banks’ long-term local and foreign currency deposit and issuer ratings, and will unlikely upgrade the banks’ long-term ratings, because their ratings are on negative outlook.

Nevertheless, Moody’s will affirm the 10 banks’ ratings with a stable outlook, if Moody’s affirms Vietnam’s sovereign rating at Ba3 with a stable outlook, and there are no material changes to these banks’ standalone credit strength.

For the remaining eight banks, Moody’s could upgrade their long-term ratings, if Moody’s upgrades the banks’ BCAs, due to a significant improvement in their credit fundamentals.

WHAT COULD CHANGE THE RATING DOWN

For the 10 banks for which Moody’s has confirmed long-term local and foreign currency deposit and issuer ratings, Moody’s could downgrade some of these banks’ ratings and assessments, if Moody’s downgrades Vietnam’s sovereign rating.

Moody’s could also downgrade these 10 banks’ ratings, if there is a material deterioration in their standalone credit strength.

For the remaining eight banks, Moody’s could downgrade their long-term ratings, if Moody’s downgrades the banks’ BCAs, due to a significant deterioration in their credit fundamentals.

The principal methodology used in these ratings was Banks Methodology published in November 2019. Please see the Rating Methodologies page on http://www.moodys.com for a copy of this methodology.

More information can be found on the website of Moody’s