Moody’s upgraded the baseline credit assessments (BCAs) and Adjusted BCAs of Vietcombank. — VNA/VNS Photo

Moody’s Investors Service on Tuesday upgraded the ratings of many Vietnamese banks, reflecting its expectation that the strong economic growth in Viet Nam will support the asset quality and profitability of the banks.

To reflect these developments, Moody’s also increased Viet Nam’s Macro Profile to "Weak+" from "Weak".

Accordingly, the rating agency upgraded long-term local and foreign-currency issuer ratings and long-term local-currency deposit ratings of five Vietnamese banks – ACB, Military Bank, Techcombank, HDBank and OCB.

The long-term foreign-currency deposit ratings of HDBank and OCB were also upgraded.

At the same time, Moody’s also upgraded the baseline credit assessments (BCAs) and Adjusted BCAs of 12 banks, including BIDV, Vietcombank, VietinBank, An Binh Bank, ACB, Military Bank, OCB, TP Bank, VIB and Techcombank.

“The upgrading of the BCAs of 12 Vietnamese banks is driven by the higher Macro Profile, and also by these banks’ progress in writing off legacy problem assets,” Moody’s explained.

As for BIDV, Vietcombank and VietinBank, the BCA upgrade largely reflects improvements in asset quality. Funding and liquidity for these banks are stable, a result of their relatively lower reliance on market funds. At the same time, capital remains a weakness for all three.

Meanwhile, the upgrade in An Binh Bank, ACB, Military Bank, OCB, TP Bank, VIB and Techcombank reflects improvements in the banks’ standalone credit strength, particularly progress in writing off legacy problem assets, and in the case of OCB, TPBank and Techcombank, a strengthening of their capitalisation. Moody’s expects profitability for the seven banks to improve over the next 12-18 months as the burden of credit costs reduces.

Moody’s has also upgraded the long-term Counterparty Risk Ratings (CRRs) and Counterparty Risk Assessments (CRAs) of eight banks - ABB, ACB, Vietcombank, Military Bank, TPBank, VIB, VP Bank and Techcombank, which were driven by the upgrade in the banks’ BCAs.

The foreign currency deposit ratings of all rated Vietnamese banks are capped at B1, because Viet Nam’s country ceiling for foreign currency deposits is B1.

According to Moody’s, in the case of Sacombank, the outlook was changed to stable from negative. The ratings outlooks on the ratings of the other 15 rated Vietnamese banks remain stable.

The agency said that the long-term bank deposit and issuer ratings of these Moody’s-rated Vietnamese banks could be upgraded if the sovereign rating is upgraded and/or if the banks post improved standalone credit metrics that lead to higher BCAs.

However, the ratings could be downgraded if the sovereign rating is downgraded. At the same time, the long-term ratings of Vietcombank, BIDV, and VietinBank could also be downgraded if Moody’s assesses that government support for these banks has weakened.

“The BCAs of these Moody’s-rated Vietnamese banks could be downgraded if their financial fundamentals deteriorate significantly. If all other rating factors are constant, the BCAs would come under adverse pressure if the banks report significantly increased problem loan ratios or significantly reduced capitalisation. A material deterioration in funding and liquidity could also be negative for the ratings,” Moody’s wrote. — VNS

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