The credit quality of Vietnamese banks has improved, thanks to thecombination of macroeconomic stability and improved governance, Moody'shas said.
In a report entitled "Stabilising trend for themacro environment will help Vietnamese banks address problems in assetquality," the rating agency said that the key drivers have prompted somecredit differentiation among Vietnamese banks, albeit at modest levels,as reflected by Moody's positive rating actions on six banks recently.
On September 22, Moody's upgraded the ratings of VietnamInternational Bank (VIB)'s B2 deposits and E+/b3 BFSR/BCA by one notch,while affirming the ratings of five banks and changing their outlooks topositive at the same time.
The five banks are MilitaryCommercial Joint Stock Bank (Military Bank), Sai Gon Thuong TinCommercial Joint-Stock Bank (Sacombank), Vietnam Technological andCommercial Joint Stock Bank (Techcombank), Asia Commercial Bank (ACB)and Vietnam Prosperity Bank (VP Bank)
"The recent positiverating actions on Vietnamese banks were primarily driven by thestabilisation in the operating environment in the country, which ispositive for banks because it supports the recovery of their poor assetquality, provides stability to their deposit bases, and improves theirbusiness prospects," said Eugene Tarzimanov, Moody's Vice President andSenior Credit Officer.
"Additionally, some Vietnamese bankshave also improved their governance standards and lowered their riskappetites, thereby improving their credit underwriting standards," addedTarzimanov.
Moody's report provided insight into theVietnamese banks' individual strategies and on the steps taken toimprove governance, highlighting that some of them have made moreadjustments than others in response to the adverse market conditionssince 2011. These developments, when taken together with macroeconomicstabilisation, have reduced the incidence of new problem assets on theirbalance sheets, and have also improved the recovery prospects forproblematic legacy assets.
However, Moody's report also saidthat the banks' credit profiles and ratings will improve only if theunderwriting standards and capital-generation capacities also improvesignificantly, and if the banks allocate more profits to provisioningand writing-off of problem assets.
It noted that Vietnam 'seconomic growth has recovered somewhat from the trough reached in 2012,and the country has managed to stabilise inflation at historically lowlevels. This achievement has allowed the State Bank of Vietnam todecrease its policy rates to promote economic growth. For example, therefinancing rate fell to 6.5 percent earlier this year from 15 percentin early 2012.
Moody's said that lower interest rates arepositive developments for Vietnamese banks because they decrease thedebt burden of their borrowers and lead to some improvements in the realestate market.
Supportive macroeconomic conditions, includingstable inflation and exchange rates, and weak loan demand have improvedthe liquidity of the entire banking system. As deposit growth outpacedloan growth, the system's loan-to-deposit ratio improved to 82 percentin June 2014, from 87 percent in June 2013.-VNA
In a report entitled "Stabilising trend for themacro environment will help Vietnamese banks address problems in assetquality," the rating agency said that the key drivers have prompted somecredit differentiation among Vietnamese banks, albeit at modest levels,as reflected by Moody's positive rating actions on six banks recently.
On September 22, Moody's upgraded the ratings of VietnamInternational Bank (VIB)'s B2 deposits and E+/b3 BFSR/BCA by one notch,while affirming the ratings of five banks and changing their outlooks topositive at the same time.
The five banks are MilitaryCommercial Joint Stock Bank (Military Bank), Sai Gon Thuong TinCommercial Joint-Stock Bank (Sacombank), Vietnam Technological andCommercial Joint Stock Bank (Techcombank), Asia Commercial Bank (ACB)and Vietnam Prosperity Bank (VP Bank)
"The recent positiverating actions on Vietnamese banks were primarily driven by thestabilisation in the operating environment in the country, which ispositive for banks because it supports the recovery of their poor assetquality, provides stability to their deposit bases, and improves theirbusiness prospects," said Eugene Tarzimanov, Moody's Vice President andSenior Credit Officer.
"Additionally, some Vietnamese bankshave also improved their governance standards and lowered their riskappetites, thereby improving their credit underwriting standards," addedTarzimanov.
Moody's report provided insight into theVietnamese banks' individual strategies and on the steps taken toimprove governance, highlighting that some of them have made moreadjustments than others in response to the adverse market conditionssince 2011. These developments, when taken together with macroeconomicstabilisation, have reduced the incidence of new problem assets on theirbalance sheets, and have also improved the recovery prospects forproblematic legacy assets.
However, Moody's report also saidthat the banks' credit profiles and ratings will improve only if theunderwriting standards and capital-generation capacities also improvesignificantly, and if the banks allocate more profits to provisioningand writing-off of problem assets.
It noted that Vietnam 'seconomic growth has recovered somewhat from the trough reached in 2012,and the country has managed to stabilise inflation at historically lowlevels. This achievement has allowed the State Bank of Vietnam todecrease its policy rates to promote economic growth. For example, therefinancing rate fell to 6.5 percent earlier this year from 15 percentin early 2012.
Moody's said that lower interest rates arepositive developments for Vietnamese banks because they decrease thedebt burden of their borrowers and lead to some improvements in the realestate market.
Supportive macroeconomic conditions, includingstable inflation and exchange rates, and weak loan demand have improvedthe liquidity of the entire banking system. As deposit growth outpacedloan growth, the system's loan-to-deposit ratio improved to 82 percentin June 2014, from 87 percent in June 2013.-VNA
