Moody’s Investors Service has just upgraded the baseline credit assessment (BCA) and adjusted BCA of Vietnam International Bank (VIB) to B1 and Counterparty Risk Assessment (CRA) to Ba3.
Previously, right after upgrading the Government of Vietnam’s long-term issuer and senior unsecured ratings to Ba3 from B1, Moody’s upgraded the long-term local and foreign currency bank deposit and issuer ratings of VIB to B1 from B2 on August 14, 2018.
The upgrade in VIB’s BCA and other banks’ is driven by the higher Macro Profile of Vietnam, progress in writing off legacy problem assets and profitability of the banks, according to a report from Moody’s.
In addition to the upgrade, VIB was recognized by State Bank of Vietnam (SBV) and Vietnam Asset Management Company (VAMC) as one of five banks to re-purchase all bad debts that they sold to VAMC. Moody’s and VIB expect profitability for VIB to improve over the next 12-18 months as the burden of credit costs is reduced because the bank has no debt at VAMC.
VIB is also known as one of the only two local banks ready to apply Base II standards. To date, VIB has completed the implementation and waited for SBV’s approval for applying the standards in 2018.
The financial institution is now one of banks with best profitability ratios and risk management in Vietnam. As VIB’s profit before tax reached VND1,720 billion in the first 9 months 2018, its return on equity ratio (ROE) reached nearly 20% and expected to go up in Q4/2018. The bank’s capital adequacy ratio (CAR) is more than 12% and CAR, under Basel II, is over 9.5%. Ratio of short-term deposits used for long-term loans stood at 38% on September 30, 2018, lower than permitted maximum limit of 45%.
Earlier, Moody’s held a conference named “Inside ASEAN – Spotlight in Vietnam” in HCMC on September 12, 2018, assessing Vietnam’s economy, Vietnamese banking system’s ratings, giving forecast on the economy’s outlook and local bank’s performance in 2019. Mr Ho Van Long, Deputy CEO at VIB, is the only representative from local banks to be invited by Moody’s to join panel discussion in the conference.
Mr Ho Van Long, Deputy CEO at VIB,
Analysts from Moody’s expected Vietnamese banks’ asset quality and profits to set to improve in 2019. Raising new capital from external funding and retained profits provided banks with better capital foundation. Moody’s analysts also asserted that Vietnamese banks’ CAR is improved but still lower than their peers in the region.
When sharing solutions to raise capital and CAR, Mr Ho Van Long said in the conference that VIB and other healthy banks had 4 methods, including raising capital from increasing profits, raising Tier 1 capital from domestic and foreign funding, raising Tier 2 capital and optimizing risk-weighted assets (RWA). About VIB’s growth in retail banking (RB) business, the bank’s transformation which started 2 years ago helped VIB develop well and sustainably and become one of the biggest retail banks in Vietnam with NPL of RB under 1%. VIB continued to maintain the first position in car financing and ranked top 3 in Bancassurance sales in the market.