Three Vietnam Banks Upgraded Following BICRA Action; Ratings On Two Others Affirmed

Stocks and Financial Services Press Releases Wednesday September 26, 2012 15:41
SINGAPORE--26 Sep--Standard & Poor's

SINGAPORE (Standard & Poor's) Sept. 26, 2012--Standard & Poor's Ratings Services said today that it had taken rating actions on several Vietnamese banks after the revision of the Banking Industry Country Risk Assessment (BICRA) on Vietnam (BB-/Stable/B) to group '9' from group '10'. (see "BICRA On Vietnam Revised To Group '9' From Group '10'," published earlier today on RatingsDirect on the Global Credit Portal). As a result of the revision of our BICRA on Vietnam, the anchor for a commercial bank operating only in Vietnam is revised to 'b+' from 'b'. We also raised the stand-alone credit profiles (SACP) of all rated banks in Vietnam by one notch.

RATINGS LIST
Upgraded
Bank for Foreign Trade of Vietnam
Counterparty Credit Rating BB-/Stable/B B+/Stable/B
Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank)
Counterparty Credit Rating BB-/Stable/B B+/Stable/B
Vietnam Technological And Commercial Joint Stock Bank
Counterparty Credit Rating BB-/Stable/B B+/Stable/B
ASEAN Regional Scale axBB+/axB axBB/axB
Affirmed
Bank for Investment and Development of Vietnam
Counterparty Credit Rating B+/Stable/B
ASEAN Regional Scale axBB/axB
Vietnam Joint Stock Commercial Bank for Industry and Trade
Counterparty Credit Rating B+/Stable/B

We revised our BICRA on Vietnam because we believe that the risks of economic imbalances in Vietnam have subsided. The policy actions that the Vietnam government initiated in 2011 have moderated the pace of loan growth and improved asset price stability. A tight credit policy slowed loan growth to 14.5% in 2011 from 28% on average in the previous four years. Lending restrictions on "non-productive" sectors--mainly property lending and securities lending–-contributed to a reduction in real asset prices. These developments have halted or reversed a deterioration in key risk indicators. Inflation has retreated to 6.5% as of September 2012, from a peak of 23% in August 2011, which helped the central bank reduce policy rates and led to a moderation in lending rates.

Despite these improvements, potential risks of economic imbalances in Vietnam remain. The government has eased its policy stance to accommodate its growth objectives, and risks renewing concerns about its commitment to price stability. Any aggressive expansionary stance will heighten imbalances from private sector leverage. The process of restoring confidence in the banking system and monetary policy is in an early phase and calls for careful management, especially when nonperforming loans are rising.

The rating on Bank for Foreign Trade of Vietnam reflects the bank's "strong" business position, "weak" capital and earnings, "adequate" risk position, "above average" funding, and "adequate" liquidity, as our criteria define those terms. We revised the SACP of the bank to 'bb-' from 'b+'. We believe that the bank has "high systemic importance" in Vietnam and assess the Vietnam government as "highly supportive." Nonetheless, we do not factor any extraordinary government support into the rating because the bank's SACP is already at par with the local currency sovereign rating on Vietnam.

The rating on Sacombank reflects the bank's "strong" business position, "weak" capital and earnings, "adequate" risk position, "above-average" funding, and "adequate" liquidity. We revised the SACP of the bank to 'bb-' from 'b+'.

The rating on Vietnam Technological And Commercial Joint Stock Bank reflects the bank's "strong" business position, "weak" capital and earnings, "adequate" risk position, "above-average" funding, and "adequate" liquidity. We revised the SACP of the bank to 'bb-' from 'b+'.

The rating on Bank for Investment and Development of Vietnam (BIDV) reflects the bank's "strong" business position, "very weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity. We revised the SACP of the bank to 'b+' from 'b'. We believe that BIDV has "high systemic importance" in Vietnam and assess the Vietnam government as "highly supportive." Nonetheless, we do not factor any extraordinary government support into the rating because the bank's SACP is already one notch below the local currency sovereign rating on Vietnam.

The rating on Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) reflects the bank's "strong" business position, "very weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity. We revised the SACP of the bank to 'b+' from 'b'. We believe that Vietinbank has "high systemic importance" in Vietnam and assess the Vietnam government as "highly supportive". Nonetheless, we do not factor any extraordinary government support into the rating because the bank's SACP is already one notch below the local currency sovereign rating on Vietnam.


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