Moody's affirms Vietinbank's ratings, rises its Standalone Credit Assessment
Moody's affirms Vietinbank's ratings, rises its Standalone Credit Assessment
Moody's Investors Service has affirmed the debt and deposit ratings of Vietnam Bank for Industry and Trade (VietinBank) of B2 in local currency and B3 in foreign currency.
At the same time, Moody's has raised Vietinbank's baseline credit assessment (BCA) to b3 from caa1 following the capital transfer from Bank of Tokyo Mitsubishi UFJ (BTMU, Aa3 stable; C/a3 stable), which has acquired a 19.73% ownership in VietinBank for VND15.5 trillion (USD743 million).
The outlook on VietinBank's ratings is stable. This concludes the review for upgrade that was announced on January 16, 2013.
Ratings rationale
The completion of the transaction with BTMU results in a substantial increase in VietinBank's Tier 1 capital ratio, to approximately 14% from 9.34% as of March 2013. This injection of fresh, measurable capital in the bank gives us confidence that the transaction has distanced VietinBank from the risk of requiring external assistance in the near term to remain economically solvent.
Nevertheless, a substantial capital increase of this magnitude will not address the fundamental weaknesses that characterize the Vietnamese banking system -- such as asset quality pressure arising from a difficult operating environment, weak accounting, the lack of transparency, and weak governance frameworks. These factors were also taken into account in the assignment of the relatively low BCA of b3. Yet, this leaves VietinBank with the highest BCA among Moody's-rated banks in Vietnam.
Furthermore, the affirmation on VietinBank's debt and deposit ratings reflects our assessment that the probability that support would be provided by the government of Vietnam (B2 stable) in a systemic crisis is still very high, given the presence of the government ownership and VietinBank's market share of 12.53% of the banking system loans and 11.23% in terms of system deposits as of end-2012. The government stake will be diluted to about 64.46% after the transaction discussed above. Nevertheless, the government will continue to exert considerable influence on VietinBank through its majority interest.
VietinBank's affirmed ratings are:
- long-term/short-term foreign currency and local currency issuer ratings of B2/Not Prime;
- long-term/short-term local currency deposit ratings of B2/Not Prime;
- long-term/short-term foreign currency deposit ratings of B3/Not Prime; and
- foreign currency senior unsecured rating of B2.
The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Headquartered in Hanoi, VietinBank reported total assets of VND503.5 trillion ($24.19 billion) at end-December 2012.
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22 May 2013
Correction to Headline and Text, May 20, 2013 Release: Moody's affirms Vietinbank's ratings, Raises its Standalone Credit Assessment
In the headline, 'Rises' was deleted and replaced with 'Raises'.
In the first sentence of the second paragraph, 'baseline credit assessment (BCA) to b3 from caa1' was deleted and replaced with 'bank financial strength rating (BFSR) to E+ from E'. Also, 'The E+ BFSR maps to baseline credit assessment (BCA) of b3.' was added as an additional sentence at the end of the same paragraph.
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