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Fitch Ratings rates CTG, ACB, Agribank, STB at "B"
Fitch Ratings has assigned four Vietnamese banks Long-Term Foreign-Currency Issuer Default Ratings (LTFC IDR) of 'B' with Stable Outlook. The agency has also assigned Viability Ratings to the banks. The four banks are Vietnam Bank for Agriculture and Rural Development (Agribank), Vietnam Joint-Stock Commercial Bank for Industry and Trade (Vietinbank), Asia Commercial Bank (ACB) and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank).
At the same time, Fitch has assigned a Support Rating Floor of 'B' to Agribank, and Vietinbank as well as a Support Rating Floor of 'No Floor' to ACB and Sacombank. All of the banks' existing ratings have been affirmed. A full rating breakdown is provided below.
The assignment of IDRs for the Vietnamese banks coincides with the introduction of Viability Ratings (See Rating Action Commentary "Fitch Launches Viability Ratings for Global Financial Institutions", dated 20 July 2011) which are intended to replace the Individual Ratings over time. The frameworks for Viability Ratings and Support Ratings are key components of the IDR aimed at enhancing transparency (See Report "Viability Ratings: An Introductory Primer" dated 20 July 2011).
The LTFC IDRs of ACB and Sacombank reflect their standalone credit strength and management record but also the difficult operating environment. In comparison, the standalone financial profiles of Agribank and Vietinbank are assessed to be relatively weaker partly due to their 'policy roles', but their LTFC IDRs benefit from Fitch's expectation of state support given their systemic importance to the domestic economy - as reflected in their 'B' Support Rating Floor.
A diminished propensity and/or ability of the government to provide support in the event of need would be a rating negative for Agribank and Vietinbank. However, such likelihood is low in view of the banks' large deposit base and government majority ownership as well as the Stable Outlook on the banks' LTFC IDRs and sovereign ratings.
The Vietnamese banks' Viability/Individual Ratings reflect the challenges of the operating environment, including some transparency issues. Downward rating pressure could arise if conditions became more difficult and volatile, in turn hampering the banks' performance and credit profile. Vietnam's rapid growth over the last four years with a credit/GDP ratio at 120% in 2010 is unprecedented and high for an emerging economy like Vietnam which, together with rising prices and interest rates, increases asset quality risks. Given their low capital levels, the banks' loss absorption capacity is weak and could benefit from fresh capital. Liquidity is tight for most of these banks, particularly those whose loans/deposits ratio exceeds 100%. Rising funding and credit costs may also put pressure on earnings which, however, have remained largely steady in H111.
Positively, the government has taken initiatives earlier this year, including interest rate hikes to reduce inflation, a 20% cap on loan growth for 2011 and the devaluation of Vietnamese dong against the USD. The effectiveness of these initiatives remains to be seen as they may impair borrowers' ability to service their payments, although if the government's attempt to strike a balance between price stability and economic growth is successful, they may help to preserve the banks' credit profiles.
The list of ratings on Fitch-rated Vietnamese banks is as follows:
Asia Commercial Bank
- LTFC IDR assigned at 'B'; Outlook Stable
- STFC IDR assigned at 'B'
- Viability Rating assigned at 'b'
- Support Rating Floor assigned at 'No Floor'
- Individual Rating affirmed at 'D/E'
- Support Rating affirmed at '5'
Saigon Thuong Tin Commercial Joint Stock Bank
- LTFC IDR assigned at 'B'; Outlook Stable
- STFC IDR assigned at 'B'
- Viability Rating assigned at 'b'
- Support Rating Floor assigned at 'No Floor'
- Individual Rating affirmed at 'D/E'
- Support Rating affirmed at '5'
Vietnam Bank for Agriculture and Rural Development
- LTFC IDR assigned at 'B'; Outlook Stable
- STFC IDR assigned at 'B'
- Viability Rating assigned at 'ccc'
- Support Rating Floor assigned at 'B'
- Individual Rating affirmed at 'E'
- Support Rating affirmed at '4'
Vietnam Joint-Stock Commercial Bank for Industry and Trade
- LTFC IDR assigned at 'B'; Outlook Stable
- STFC IDR assigned at 'B'
- Viability Rating assigned at 'b-'
- Support Rating Floor assigned at 'B'
- Individual Rating affirmed at 'D/E'
- Support Rating affirmed at '4'.
the Asian banker
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