Vietnam’s banking system outlook stable: Moody’s
Vietnam’s banking system outlook stable: Moody’s
Moody’s Investors Service has assigned a stable outlook to the Vietnamese banking system, given the country’s robust economic growth, which will support asset quality and profitability.
According to Rebaca Tan, an analyst and Moody’s assistant to the vice president, Vietnam’s gross domestic product growth is forecast to moderate to 6.7% this year and 6.5% in 2020 from 7.1% in 2018, but even at these projected rates, the country will remain the fastest-growing economy in Southeast Asia.
"Vietnam's banks have been cleaning up their balance sheets and supporting asset quality, and we expect the systemwide problem loan ratio to decline to 4.8% at the end of 2020 from 5.1% at the end of 2018," Tan added.
Capital ratios should remain broadly stable over the next 12-18 months, supported by growth in retained earnings, though a number of banks will need to raise capital to meet stricter Basel II capital requirements while sustaining asset growth, Moody’s said in a report released today, August 19.
Profitability will improve as banks increase their lending to the higher yielding retail segment and small and medium enterprises, while credit costs will remain stable as banks continue to make provisions against legacy problem assets.
The Vietnamese Government will continue to provide support when needed, mainly in the form of liquidity assistance and regulatory forbearance, as it has done in the past.
