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Fitch Revises 3 State-Owned Vietnam Banks' Outlooks to Positive
May 24, 2017 / 10:52 AM / 7 months ago

Fitch Revises 3 State-Owned Vietnam Banks' Outlooks to Positive

(The following statement was released by the rating agency) SINGAPORE, May 24 (Fitch) Fitch Ratings has revised the Outlooks on the Long-Term Issuer Default Ratings (IDRs) of three state-owned Vietnamese banks - Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) and Vietnam Bank for Agriculture and Rural Development (Agribank) - to Positive from Stable. At the same time, the agency has affirmed the Long-Term IDRs on the banks at 'B+'. A full list of rating actions is provided at the end of the rating action commentary. The Outlooks have been revised following a revision in the Vietnam sovereign's Outlook to Positive from Stable on 18 May 2017, which takes into account Vietnam's strong macroeconomic performance and improvement in the country's external stability indicators. The improvements are reflected in persistent current-account surpluses, manageable debt-service costs and sustained foreign direct investment inflows. For more details on the Outlook revision on the sovereign, see the rating action commentary <a href="https://www.fitchratings.com/site/pr/1023824 ">Fitch Revises Outlook for Vietnam to Positive; Affirms at BB- , dated 18 May 2017. KEY RATING DRIVERS VIABILITY RATINGS, IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS The Outlook revision on the three banks' IDRs reflects Fitch's view of improving sovereign ability to provide extraordinary support, if needed. The Long-Term IDRs of Agribank, Vietinbank and Vietcombank are driven by Fitch's expectation that government support will be forthcoming, if needed, in light of their high systemic importance and the government's controlling stakes. They are among the top four Vietnamese banks by assets and have strong domestic franchises. The banks' IDRs and Support Rating Floors are one notch lower than Vietnam's sovereign rating (BB-/Positive) as Fitch believes the large size of the banking industry relative to GDP and the government's limited resources may hamper the timeliness of support. The 'b-' Viability Ratings of Vietcombank and Vietinbank reflect their limited balance sheet buffers relative to the size of their problematic assets, their weak financial performance and high loan concentration risk in state-owned enterprises (SOEs). The Viability Ratings also consider their solid domestic franchises and their stable funding profiles. Fitch does not assign a Viability Rating to wholly government-owned Agribank. The bank's role in providing support to the domestic economy has a high influence on its standalone profile and makes it likely that Agribank will continue to benefit from regulatory forbearance. RATING SENSITIVITIES IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS OF AGRIBANK, VIETINBANK, VIETCOMBANK The Long-Term IDRs, Support Ratings and Support Rating Floors of Agribank, Vietinbank and Vietcombank are sensitive to movements in the sovereign's ratings, which are currently on a Positive Outlook. An upgrade of the sovereign ratings would likely lift the banks' support-driven ratings. The banks' ratings may also be affected by any perceived change in the government's propensity to support the banks. VIABILITY RATINGS OF VIETINBANK, VIETCOMBANK Fitch may take positive rating action on the banks' Viability Ratings if structural issues, such as corporate governance, bad-debt resolution and thin capitalisation, are more adequately addressed, leading to greater transparency and, together with sustained strong economic performance, to continued improvements in the banks' overall credit profiles. Viability Ratings may be pressured if excessive growth or an increased loan concentration leads to significant impairment risks and weakened balance sheets. Downward pressure for Vietinbank may be higher given its low capital ratio and higher SOE loan concentration risk. The rating actions are as follows: Agribank Long-Term IDR affirmed at 'B+'; Outlook revised to Positive from Stable Short-Term IDR affirmed at 'B' Support Rating Floor affirmed at 'B+' Support Rating affirmed at '4' Vietinbank Long-Term IDR affirmed at 'B+'; Outlook revised to Positive from Stable Short-Term IDR affirmed at 'B' Viability Rating affirmed at 'b-' Support Rating Floor affirmed at 'B+' Support Rating affirmed at '4' Vietcombank Long-Term IDR affirmed at 'B+'; Outlook revised to Positive from Stable Short-Term IDR affirmed at 'B' Viability Rating affirmed at 'b-' Support Rating Floor affirmed at 'B+' Support Rating affirmed at '4' Contact: Primary Analyst Wee Siang Ng Senior Director +65 6796 7230 Fitch Ratings Singapore Pte Ltd One Raffles Quay South Tower #22-11 Singapore 048583 Secondary Analyst Tamma Febrian Associate Director +65 6796 7237 Committee Chairperson Sabine Bauer Senior Director +852 2263 9966 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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