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Vietnam banks to stay negative: Moody’s
Vietnam’s banking system outlook over the next 12 to 18 months remains negative, in line with the country’s sovereign outlook, Moody’s Investors Service said, citing concerns about falling profits and poor asset quality.
Domestic economic imbalances pose a risk to banks’ asset quality and make funding more difficult, Moody’s said in a report today. Assets held by banks are “far worse” than implied by officially reported non-performing-loan figures, and some companies have begun reducing deposits due to refinancing difficulties and weaker earnings, Moody’s said.
Vietnam is struggling to contain the fastest inflation in Asia and facing slower growth and a persistent trade deficit. Its economy is vulnerable to systemic risk resulting in part from undercapitalized banks, rising debt and deteriorating corporate profits, Credit Suisse Group AG (CSGN) said this week.
“After very rapid growth in loan books over the past two years, we are seeing a slowdown in credit growth and a deterioration in asset quality,” wrote Karolyn Seet, a Singapore-based assistant vice president at Moody’s.
“A combined deterioration in asset quality and funding would cause impairment charges to increase and competition for deposits and other sources of funding to intensify, which would unavoidably cause profit margins to narrow,” Seet wrote.
Moody’s has a negative outlook on the country’s B1 credit rating, the fourth-highest non-investment grade. The New York- based company downgraded Vietnam’s long-term foreign-currency rating from Ba3 in December.
“We are concerned about the ability of banks to raise capital from the markets, as more weakly capitalized entities may be perceived as experiencing difficulty maintaining their market shares and showing increased vulnerability to solvency pressures,” Seet wrote.
Bloomberg
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