Global Credit Research - 28 Sep 2012
Singapore, September 28, 2012 -- Moody's Investors Service has today
downgraded the local and foreign currency deposit ratings of all eight
Moody's-rated Vietnamese banks.
The rating downgrades primarily reflect the concurrent downgrade of all
eight banks' standalone credit assessments, as well as the parallel
downgrade of the Government of Vietnam, as described in a separate
announcement that Moody's has also released today.
The bank financial strength ratings (BFSR) of all eight banks are now
placed at E, mapping to caa1 on the long-term scale. These ratings were
previously at E+, mapping to a range of b1 to b2 among individual banks
on the long-term scale.
After incorporating the probability of support from the government,
Moody's assigns two notches of uplift to both government-controlled
banks -- Vietnam Bank for Industry and Trade (Vietinbank) and the Bank
for Investment & Development of Vietnam (BIDV) -- resulting in their
credit ratings being downgraded to B2 from B1, except for their foreign
currency deposit ratings, which are downgraded to B3 from B2, given the
constraint imposed by the lowering of the foreign currency deposit
ceiling following the sovereign rating action.
For the six rated joint stock banks, Moody's has deemed the probability
and likely extent of government support to be lower than that for the
government-controlled banks, but nevertheless sufficiently likely to
warrant an uplift of one notch. Therefore, for these joint stock banks,
their new issuer and deposit ratings, in both local and foreign
currencies, are B3.
Today's action also concludes the review of the ratings of Asia Commercial Bank initiated on August 24, 2012.
The related downgrade of the Government of Vietnam to B2 from B1 was
taken into account when we derived our opinion on the willingness and
capacity of the government to provide support to the banks.
Moody's has assigned a stable outlook to all bank ratings.
A more detailed bank-by-bank breakdown of these actions is available further below.
RATINGS RATIONALE
The downgrade of the standalone credit assessments reflects the
increased probability that the eight banks will need extraordinary
support to avoid economic insolvency.
Moody's analysis arises from multiple interconnected credit factors.
The operating environment for the banks has materially deteriorated and
is now characterized by very weak loan growth and high interest rates.
This is an environment in which Moody's expects to see continued and
possibly sharp deterioration in asset quality, and pressure on bank
profitability, thereby undermining the banks' already weak
loss-absorbing cushions.
The central bank of Vietnam recently acknowledged that the level of
non-performing loans already affecting the banks was higher than that
reported by the banks themselves, and comprises at least 8.6% of total
loans, according to the central bank's account of March 2012.
However, Vietnam's lack of alignment with international accounting and
regulatory standards as well as the relative opacity surrounding the
true economic position of its banks continues to mask the extent of the
problems they face. In fact, the lack of transparency is such that
Moody's has determined that it has prevented meaningful credit
differentiation. As a result, it has assigned the same standalone credit
assessments to all eight rated banks despite differences in their
reported results.
"The measures contemplated by the Government of Vietnam to reform the
banking sector and improve disclosure will prove positive in their
effects, if fully implemented. However, for now, reforms are slow, the
next steps are unclear, and bank shares are depressed, making new
capital raisings unlikely. And with low profits expected over the next
few quarters, it is difficult to see how the banks will be able to
improve their capitalization for the time being", says Jean-Francois
Tremblay, Moody's Singapore-based Associate Managing Director for South
and South East Asia.
"And we cannot ignore the risk that the banks may continue to restrain
their lending, with potential feedback loop implications for the
economy," adds Tremblay.
"A further consideration behind the decision to assign caa1 standalone
credit assessments to all rated banks is the risk that confidence in
specific banks may be undermined in an environment in which further
sanctions may be applied to bank executives or shareholders due to past
malpractices. Although the situation has returned to normal, the
considerable fall in deposits at Asia Commercial Bank and other
Vietnamese credit institutions in August shows that confidence is
fragile," says Tremblay.
The strong efforts of the central bank to provide liquidity to Asia
Commercial Bank and the banking system more generally support Moody's
decision to assume a modest amount of government support in its bank
ratings for Vietnam.
The central bank has made strong statements of support for the banking
system, indicating that it would do everything necessary to ensure a
safe and sound banking sector. Moody's has assumed greater support in
the ratings of the two large rated government-controlled banks
(Vietinbank and BIDV) because of the presence of government ownership in
both and their relatively significant market shares.
However, a tangible plan to recapitalize Vietnamese banks or relieve
them of their problem loans has not yet been developed and Moody's
support assumptions will evolve as the government's intentions become
clearer.
In determining that the outlook is stable, Moody's has taken into
account the view that the Vietnamese government has the fiscal capacity
to support the banking system, although at some cost to its own credit
profile, as reflected in the sovereign downgrade.
The standalone credit profile of any bank would be lowered -- to the
"ca" category -- if it became clear that it was only avoiding default
due to extraordinary systemic support. Deposit and debt ratings for all
or some banks could be lowered if there are signs that support may not
be forthcoming to the extent that is required to restore economic
solvency.
By contrast, a more rapid reform program that leads to a clearer path
towards recapitalization of the banks, greater transparency and more
effective risk management could have positive rating implications for
some or all banks.
RATING ACTIONS ON INDIVIDUAL BANKS
Asia Commercial Bank
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency and foreign
currency long-term deposit ratings were downgraded to B3 from B2. The
local currency and foreign currency long-term issuer ratings were also
downgraded to B3 from B2. The revised ratings have stable outlooks. The
short-term rating of Not Prime was unaffected.
Headquartered in Ho Chi Minh City, the bank had total assets of VND281,019 billion (USD13 billion) at December 2011.
Bank for Investment & Development of Vietnam
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency long-term
deposit rating was downgraded to B2 from B1. The foreign currency
long-term deposit rating was downgraded to B3 from B2 and was
constrained by the foreign currency deposit ceiling. The local currency
and foreign currency long-term issuer ratings were downgraded to B2 from
B1. The revised ratings have stable outlooks. The short-term ratings of
Not Prime was unaffected.
Headquartered in Hanoi, the bank had total assets of VND399,311 billion (USD19 billion) at December 2011.
Military Commercial Joint Stock Bank
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency and foreign
currency long-term deposit ratings were downgraded to B3 from B2. The
local currency and foreign currency long-term issuer ratings were also
downgraded to B3 from B2. The revised ratings have stable outlooks. The
short-term rating of Not Prime was unaffected.
Headquartered in Hanoi, the bank had total assets of VND138,698 billion (USD7 billion) at December 2011.
Saigon - Hanoi Commercial Joint Stock Bank
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency and foreign
currency long-term deposit ratings were downgraded to B3 from B2. The
local currency and foreign currency long-term issuer ratings were also
downgraded to B3 from B2. The revised ratings have stable outlooks. The
short-term rating of Not Prime was unaffected.
Headquartered in Hanoi, the bank had total assets of VND70,990 billion (USD3 billion) at December 2011.
Saigon Thuong Tin Commercial Joint-Stock Bank
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency and foreign
currency long-term deposit ratings were downgraded to B3 from B1 for the
local currency rating and from B2 for the foreign currency rating. The
local currency and foreign currency long-term issuer ratings were also
downgraded to B3 from B1. The revised ratings have stable outlooks. The
short-term rating of Not Prime was unaffected.
Headquartered in Ho Chi Minh City, the bank had total assets of VND141,469 billion (USD7 billion) at December 2011.
Techcombank
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency and foreign
currency long-term deposit ratings were downgraded to B3 from B1 for the
local currency rating and from B2 for the foreign currency rating. The
local currency and foreign currency long-term issuer ratings were also
downgraded to B3 from B1. The revised ratings have stable outlooks. The
short-term rating of Not Prime was unaffected.
Headquartered in Hanoi, the bank had total assets of VND179,668 billion (USD9 billion) at December 2011.
Vietnam Bank for Industry and Trade
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency long-term
deposit rating was downgraded to B2 from B1. The foreign currency
long-term deposit was downgraded to B3 from B2 and was constrained by
the country's foreign currency deposit ceiling. The local currency and
foreign currency long-term issuer ratings were downgraded to B2 from B1.
Accordingly, the rating on the bank's outstanding senior unsecured
foreign currency debt was also downgraded to B2 from B1. The revised
ratings have stable outlooks. The short-term rating of Not Prime was
unaffected.
Headquartered in Hanoi, the bank had total assets of VND459,842 billion (USD22 billion) at December 2011.
Vietnam International Bank
The E+ bank financial strength rating (BFSR) was downgraded to E, which
maps to caa1 on the long-term scale. The local currency and foreign
currency long-term deposit ratings were downgraded to B3 from B2. The
local currency and foreign currency long-term issuer ratings were also
downgraded to B3 from B2. The revised ratings have stable outlooks. The
short-term rating of Not Prime was unaffected.
Headquartered in Hanoi, the bank had total assets of VND96,950 billion (USD5 billion) at December 2011.
The principal methodology used in these ratings was Moody's Consolidated
Global Bank Rating Methodology published in June 2012. Please see the
Credit Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued by
one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf, London E 14
5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No
1060/2009 on Credit Rating Agencies. Further information on the EU
endorsement status and on the Moody's office that has issued a
particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt, this
announcement provides relevant regulatory disclosures in relation to
each rating of a subsequently issued bond or note of the same series or
category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider, this
announcement provides relevant regulatory disclosures in relation to the
rating action on the support provider and in relation to each
particular rating action for securities that derive their credit ratings
from the support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the
debt, in each case where the transaction structure and terms have not
changed prior to the assignment of the definitive rating in a manner
that would have affected the rating. For further information please see
the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The ratings have been disclosed to the rated entities or their
designated agent(s) and issued with no amendment resulting from that
disclosure.
Information sources used to prepare each of the ratings are the
following: parties involved in the ratings, public information, and
confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it uses in
assigning the ratings is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor and cannot in
every instance independently verify or validate information received in
the rating process.
Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and for (B)
further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A member of the
board of directors of this rated entity may also be a member of the
board of directors of a shareholder of Moody's Corporation; however,
Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ra
No comments:
Post a Comment