Moody's takes rating actions on 18 Vietnamese banks

Moody's takes rating actions on 18 Vietnamese banks

Moody's noted its rating actions on the 18 banks were driven purely by the sovereign rating action and did not reflect a weakening of the banks' standalone financial profiles.

The banks include ABBank, ACB, HDBank, Vietcombank, BIDV, Lien Viet Post Bank, MBBank, NamABank, OCB, SHB, SeABank, TPBank, Agribank, VIB, VietinBank, MSB, VPBank and Techcombank.

For ten of the 18, 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 ten banks, Moody's has confirmed the Baseline Credit Assessments (BCAs) and Adjusted BCAs of the first four banks, as well as the long-term Counterparty Risk Assessments (CR Assessments) and Counterparty Risk Ratings (CRRs) of the remaining six banks.

For five 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 October 10 this year, after Moody's placed the Government of Viet Nam's Ba3 sovereign rating under review for downgrade on October 9 this year.

Viet Nam'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.

However, the Vietnamese Ministry of Finance (MoF) on Wednesday said Moody's decision to change the sovereign rating outlook to negative was not appropriate, given it is grounded on an isolated incident and does not adequately recognise the Vietnamese Government’s instituted policies and procedures to ensure smooth and timely debt repayment on government guaranteed borrowings.

According to Moody’s, it will affirm the ten banks' ratings with a stable outlook, if Moody's affirms Viet Nam'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.

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