HA NOI — International credit rating agencies Moody's and Standard & Poor's issued credit ratings for Vietinbank yesterday.
Moody's gave the bank a stable outlook for all ratings, except for foreign currency senior unsecured notes and foreign currency deposit and issuer ratings, which carried a negative outlook. It rated Vietinbank as B1 for long-term foreign currency debt; B2 for Not-Prime long- and short-term foreign currency deposits; B1 for Not-Prime long- and short-term local currency deposits; B1 for Not-Prime long- and short-term foreign currency issuer ratings; and B1 for Not-Prime long and short-term local currency issuer ratings.
Vietinbank's Bank Financial Strength Rating (BFSR) was rated at E+, reflecting the bank's fundamental credit strength, which was constrained by its low risk-absorption capacity and weak asset quality, as well as low loan-loss reserve coverage when compared to global peers. Moody's also cited very high single-borrower concentrations, tight liquidity, and the inherent challenges of the operating environment in Viet Nam.
"Vietinbank's Tier 1 capital ratio stood at 9.8 per cent at the end of 2011 in accordance with Basel I calculations," Moody's said, stating that Vietnamese banks needed Tier 1 capital ratios well in excess of 9 per cent in order to provide adequate coverage in the current challenging economic environment.
"The bank's asset quality is deteriorating, and its true level of non-performing loans by international standards is hard to estimate. Based on Vietnamese Accounting Standards (VAS), non-performing loans increased to VND2.2 trillion at end-2011, from VND1.5 trillion at end-2010."
As with most other Vietnamese banks, Vietinbank's liquidity position was tight, with a 114 per cent loan-to-deposit ratio at end of 2011. Vietinbank's profitability was also modest due to worsening economic conditions, Moody's said, with only 10 per cent of the bank's income derived from fees and commissions, insurance, dividends and treasury income. The bank would continue to face challenges building its retail franchise and fee-based income, the agency said.
"Vietinbank is the second-largest State-owned bank in Viet Nam by assets. It was partially privatised at the end of 2008. The Government's stake in the bank is expected to fall from 80 per cent to 51 per cent in the next three years. It is currently ranked fourth in terms of system deposits and third in terms of loans, while its lending is weighted towards the commercial segment.
"On the other hand, the stable outlook on the ratings could change to negative if there is a significant erosion in franchise value; the bank's Tier 1 capital ratio falls below 6 per cent; the mismanagement of the bank's growth strategy adversely affects its liquidity profile such that loan-to-deposit ratios exceed 150 per cent; and material losses arising from its loan book results in its non-performing loans ratio exceeding 6 per cent under IFRS."
Meanwhile, S&P assigned Vietinbank ‘B+' long-term and ‘B' short-term counterparty credit ratings. The outlook on the long-term rating was negative. The agency assigned a ‘B+' issue rating to the bank's proposed issue of senior unsecured notes.
Vietinbank has a "strong" business position, "very weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity, S&P said. — VNS