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Ratings firms get tough on banks
Three international credit rating agencies, Fitch, Standard & Poor's (S&P) and Moody's, have all released ratings of Vietnamese banks in the past few days, with stable outlooks for Sai Gon Ha Noi Bank (SHB), Asia Commercial Bank, Techcombank, Vietcombank, Viet Nam International Bank (VIB), and the Bank for Investment and Development of Viet Nam (BIDV).
On Monday, Fitch lowered Vietcombank's individual rating from D to D/E, removed the rating from Rating Watch Negative, and affirmed Vietcombank's Support Rating at 4.
Fitch said the downgrade reflected Vietcom-bank's substantially weakened balance sheet arising from excessively strong loan growth and fragile underlying loan quality. The credit profile of Vietcom-bank was said to be comparable to D/E-rated State-owned banks, even though the bank's loan-to-deposit ratio was among the lowest.
Vietcombank's individual rating remained under pressure due to increasing risk of high credit costs arising from underlying weak loan quality and already limited capitalisation, Fitch said.
It also expected Vietcombank, along with other Vietnamese banks, to continue to face a difficult environment, particularly given the Vietnamese Government's weakening ability to manage/control inherently volatile market conditions when needed.
Vietcombank's capital adequacy ratio (CAR) under Vietnamese Accounting Standards (VAS) was a marginal 8.45 per cent at mid-2010, below the new regulatory minimum of 9 per cent due to take effect on October 1.
Vietcombank reportedly raised VND1.12 trillion (US$57.4 million) in August 2010.
But Fitch was of the view that the bank's capitalisation, even after taking the new funds into account, would not be adequate to cushion against likely higher credit costs and support its excessively strong loan growth. It remained uncertain whether and when the bank could secure further capital in the domestic market with limited capacity.
Vietcombank is 90.7-per-cent State-owned and is the nation's third largest bank, with about 8 per cent of systemwide assets at the end of 2009.
Yesterday, S&P assigned Techcombank a ‘BB-/B' counterparty ratings with a stable outlook. S&P assigned ‘axBB+' and ‘axB' long- and short-term ASEAN scale ratings, and ‘D+' bank fundamental strength rating, to the bank.
The rating reflected Techcombank's above-average market position in its domestic market and adequate profitability, partially offseting a volatile and transitional operating environment in Viet Nam caused by prevailing structural, institutional and legal deficiencies, and political constraints stemming from a highly opaque and centralized decision-making process, S&P said.
S&P expected the bank to continue diversifying its income stream by focusing on recurring and sustainable fee-income generation.
Moody's, meanwhile, assigned a stable outlook to SHB, except for its foreign currency deposit rating, which carried a negative outlook in line with the overall outlook for the nation's foreign currency debt and deposit ceilings.
Moody's gave the same outlook to Techcombank, Asia Commercial Bank, BIDV, Techcombank and VIB.
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