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S&P assigns 'B+/B' rating to STB; outlook is stable
-- Sacombank has a "strong" business position, "weak" capital and earnings, "adequate" risk position, "above-average" funding, and "adequate" liquidity.
-- We are assigning our 'B+/B' counterparty credit rating to the Vietnam-based bank.
-- We assess the bank's stand-alone credit profile to be 'b+'.
-- The stable outlook reflects our view that Sacombank will maintain its financial profile amid challenging conditions and high inflation.
Standard & Poor's Ratings Services said today that it had assigned its 'B+' long-term and 'B' short-term counterparty credit ratings to Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank). The outlook on the long-term rating is stable.
* Moody's assigns first-time ratings to STB
We base our ratings on Sacombank on the bank's "strong" business position, "weak" capital and earnings, "adequate" risk position, "above-average" funding, and "adequate" liquidity, as our criteria define those terms.
We assess the bank's stand-alone credit profile to be 'b+'. "Sacombank's position as the second-largest privately owned bank in Vietnam supports its business position," said Standard & Poor's credit analyst Ivan Tan.
The bank has an established franchise in the consumer and small and midsize enterprise segments. We consider Sacombank's management to be progressive, with a focused retail strategy. We assess Sacombank's diversity to be generally adequate; like most of its peers, it is domestically focused and the bulk of its revenues come from lending.
Given the challenging operating environment, we believe Sacombank will moderate loans growth and attempt to grow fee income by cross-selling to existing customers. We view Sacombank's capital and earnings as a neutral factor in our assessment.
We expect the bank's risk-adjusted capital ratio before diversification adjustments to remain about 4% in the next 12-18 months. Our view is also based on our expectation that Sacombank will maintain its dividend policy of paying entirely in stocks. Sacombank's relatively straightforward business model supports our view that the bank's risk position is "adequate".
The bulk of the bank's revenues come from plain-vanilla lending products. We also expect Sacombank to continue to be prudent in and improve its risk management and underwriting standards. Sacombank's ratio of loans to customer deposits is 76% as of Sept. 30, 2011, better than the industry and good in comparison with larger banks that have a bigger branch network. This strength reflects Sacombank's deposit-taking efforts and effective use of its network to tap retail deposits. The bank's holdings of liquid assets (consisting of cash, interbank lending and government bonds) are also sufficient to cover short-term wholesale borrowings.
"The stable outlook reflects our expectation that Sacombank will maintain its financial profile amid challenging conditions and high inflation in Vietnam," said Mr. Tan. "We believe the bank management will temper loans growth with prudent risk management.
We also expect the bank's strong business position and funding profile to support the ratings." We could upgrade Sacombank if it sustainably improves its profitability and capitalization, such that they are notably better than in 2010. Continuous improvements in the bank's risk management and operating processes so that they are in line with international best practices could also trigger an upgrade.
We may lower the ratings if Sacombank's: (1) nonperforming loans increase sharply; (2) operating performance is poor; or (3) capitalization weakens substantially.
reuters
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