Fitch rates ACB with negative outlook, others stable

HA NOI (Homeid) —The global rating agency Fitch Ratings affirmed a stable outlook for three Vietnamese banks and a negative status for one, it said in a press release on Tuesday.

 

Fitch rates ACB with negative outlook in July 2013.— Photo Laisuat.vn

 

Banks for Agriculture and Rural Development (Agribank), Vietnam Joint-Stock Commercial Bank for Industry and Trade (Vietinbank) and Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) received a stable outlook while a negative outlook is given to Asia Commercial Bank's (ACB).

Though Fitch Ratings gives all four banks "B" for long-term issuer default ratings, a different outlook is set.

Under Fitch Ratings definition, "B" ratings indicate significant credit risk and a limited margin of safety; financial commitments are currently being met, however capacity for continued payment is contingent upon a sustained, favourable business and economic environment.

The agency, whose rating actions have been taken in conjunction with periodic review on Vietnamese banks, also affirmed Vietinbank's outstanding senior notes due 2017 at a good recovery rating.

Ratings for Agribank and Vietinbank reflect Fitch's expectation of likely state support as both banks are among those most systemically important to the domestic economy while ACB is given a negative outlook because of a further potential impairment burden on its financial profile from exposure to six companies where Nguyen Duc Kien was either chairman or a member of the board of management, with one of the companies reportedly under external investigation following Kien's arrest in August 2012. In addition, losses may also arise from ACB's deposit placements at Vietinbank (another 6 per cent of core equity), the outcome of which is pending legal proceedings.

Meanwhile, the stable outlook on Sacombank incorporates its lower reported exposure to companies related to the former chairman, to 7 per cent of core equity from an initial 21 per cent. Residual bond and investment exposures to its former securities subsidiary fell to a reported 5 per cent of core equity, after setting aside more provisions over 2011-2012.

However, Fitch's press release also said that these ratings may be hurt by any perceived weakening in the government's propensity to support the banks as well as other factors.

In January, Fitch also rated Viet Nam with a stable outlook, strong economic growth, favourable business climate for FDI and high domestic savings.— VNS

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