The global ratings firm Standard&Poor’s has
downgraded the long-run credit rating of three domestic banks – the Bank for
Investment and Development of Viet Nam (BIDV), the Joint Stock Commercial Bank
for Foreign Trade of Viet Nam (Vietcombank) and Viet Nam Technical and
Commercial JS Bank (Techcombank) from BB – to B+.
The short-term rating of the
three banks was maintained at B.
The downgrade was announced
after S&P applied new methodology on evaluating the banking sector
generally. The downgrade was attributed to the volatility of the Viet Nam
economy. In August S&P downgraded Viet Nam from BB to BB-.
BIDV and Vietcombank were
assessed to have very weak capital and profit, while Techcombank was ranked in
the weak bank group. S&P expected that Techcombank’s ratio of capital
adjusted based on related risks would be stable at 3.5 per cent in next 12-18
months while the ratio of Vietcombank was forecast to be 2.5-3 per cent. BIDV
now belongs to the very weak group.
BIDV chairman Tran Bac Ha said
during the bank’s roadshow on Saturday that the S&P downgrade on the
long-term credit rating of BIDV was due to changes in S&P methodology. It
was not due to BIDV’s finance capacity. Ha said the ongoing IPO would help it
maintain a stable rating.
S&P assessed the potential
of Techcombank at the stable level, while BIDV and Vietcombank potential
dropped to negative.
According to the rating agency,
Techcombank will continue its defensive strategy by increasing debts at a
modest pace and less risky assets in a challenging economy with high inflation
in Viet Nam.
A BIDV official said the move
to re-examine the rating of 44 banks in Asia Pacific according to a new
evaluation methodology was announced in November by S&P.
Accordingly, the result of
evaluating operation environment would decide basic ratings of banks in those
countries. Because Viet Nam’s credit rating had been lowered from 9 to 10, the
basic rating of Vietnamese banks also was lowered to Level B.
However, S&P recognised the
Government’s support for BIDV thanks to the bank’s important role in Viet Nam’s
banking system so BIDV’s partnership rating was raised one spot compared with
the basic level to B+.
Hence, the rating downgrade of
BIDV in the S&P report would not affect the lender’s financial capacity because
the new rating methodology was enclosed with the national rating.
Previously, Fitch Ratings
actively assessed BIDV after it was selected by the Government to be the
support agency for the merger of three joint stock commercial banks, including
Ficombank, TinNghiaBank and SCB.
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