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Vietcombank has best debt quality among public banks: Fitch
Joint-Stock Commercial Bank for Foreign Trade of Vietnam, the first state-owned bank to sell shares, is the least exposed among the nation’s top four government-owned lenders to rising bad debt, Fitch Ratings said.
The lender, known as Vietcombank, reported end-2008 assets of VND220 trillion ($12.6 billion), third among state-owned banks after Vietnam Bank for Agriculture and Rural Development and Bank for Investment & Development of Vietnam. Together with Vietnam Bank for Industry & Trade, the four accounted for 52 percent of the system’s assets at the end of 2008, according to Fitch.
While the central bank puts nonperforming loans in the country at 3.5 percent of total lending, applying global standards would probably result in a higher figure and the picture would likely deteriorate this year, given that exporters face slowing global demand and importers are confronting weakened domestic conditions, Fitch said.
Under a test devised to measure the ability to withstand higher levels of bad loans, Asia Commercial Bank and Vietcombank “were among the best performers, due partly to their above- average core or underlying profitability,” Fitch said in the report released Thursday.
Asia Commercial Bank is the country’s biggest non-state-owned bank, followed by Saigon Thuong Tin Commercial Joint-Stock Bank, known as Sacombank.
Fitch applied so-called “stress tests” that considered scenarios under which non-performing-loan levels ranged from 10 percent to 20 percent.
Stress tests
“Sacombank also holds up well due to its above-average profitability,” Fitch said. “All three of these banks maintain positive capitalization, even under the harshest 20 percent stress test, although it is negligible in the case of Vietcombank and less than satisfactory in the case of Asia Commercial and Sacombank.”
Vietcombank sold shares for the first time in 2007, and has said it plans to list this year on the Ho Chi Minh Stock Exchange.
“Vietcombank is strongly positioned due to its ubiquitous network of branches in the country,” said DWS Vietnam Fund Ltd., a shareholder in the bank, in a report released this week. “Capitalizing on its strong branding campaign, the firm expects to further extend its reach into the retail banking and consumer finance space.”
Under the harshest stress test, capitalization levels for the other three state-owned banks among the top four would be “negative, particularly that of Vietnam Bank for Agriculture and Rural Development,” Fitch said.
Capital needs
The tests suggest all Vietnamese banks studied will need more capital, according to the Fitch report, written by Hong Kong-based analysts Sabine Bauer, Peter Tebbutt and Mic Kang.
The four biggest state-owned banks are more exposed to the country’s property development industry than banks such as Asia Commercial Bank and Sacombank, according to the note. The property market has been affected by a “severe decline” in the industry worldwide, Vietnam Property Fund Ltd. said in a note released Thursday.
“Property speculation has transitioned to near immobility with land and property prices declining for the first time, in the limited experience of most local investors,” the UK-listed fund said. “Projects are floundering as funds run dry.”
Bloomberg
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