* Moody's raises outlook of Vietnamese banks to 'positive'
In recent years, Vietnam’s national credit rating has gradually improved following many years of decline. Since 2014, Fitch and Moody’s have upgraded Vietnam’s ratings by one notch to B1/stable outlook and BB-/stable outlook, respectively. On October 19, 2016, Moody’s raised its long-term credit rating for an array of Vietnamese banks, from Caa1 to B2 for the Military Bank (MB), from Caa1 to B3 for the Saigon-Hanoi Commercial Joint Stock Bank (SHB), and from B3 to B2 for five other banks. The debt-to-equity ratio of the 15 banks, as assessed by Moody’s, fell from 9.4% in 2012 to 7.1% in 2016, and is expected to continue falling to just 5.8% next year.
According to statistics released by the State Bank of Vietnam (SBV), the total assets of the entire banking sector was VND9.25 quadrillion (US$407 billion) as of August 31, 2017, up 8.79% from the beginning of the year, of which, the sector’s equity capital increased by 6.92%, reaching VND683.9 trillion (over US$30 billion). The credit term is also moving positively, with increasing medium and long-term capital, while the outstanding credit balance is shifting from the medium and long term to the short term. The credit growth of more than 13% in the first 10 months of the year has helped to improve the whole sector’s interest and bad debts.
The Vietnam Asset Management Company (VAMC)’s asset seizure and creditor protection have seen positive transformations, recovering VND16 trillion (US$704 million) in the first 10 months of 2017, VND5 trillion of which was recovered within only two months of implementing the National Assembly’s Resolution No. 42/2017/QH14 (approved on June 21, 2017, effective as of August 15, 2017).
Credit rating reflects the assessment of credit rating agencies and is a measure of the capability and readiness of the Government and credit institutions in performing their debt obligations, asset quality, foreign exchange reserves, payment balance and macroeconomic stability in general.
In order to further improve the national credit rating, the banking sector should continue to drastically implement its action plan, closely follow the methods of calculating the national credit rating, and attach significant importance to maintaining contact with credit rating agencies. The sector also needs to be proactive, transparent and timely in providing information and data as requested; to strengthen its coordination with ministries and branches in removing any difficulties for production and business; effectively implement preferential policies for enterprises; and create favourable conditions for enterprises to access bank credit, as well as banking services and products at the most reasonable costs. It is also necessary for the banking sector to regularly review and apply measures to make use of capital sources, manage growth quality, and reduce costs, as a basis for adjusting the lending interest rates, thus contributing actively to improving the business environment and enhancing national competitiveness.
The sector must consistently and persistently implement the Directive No. 02/CT-NHNN on strengthening the safeguarding of the system of credit institutions, whilst continuing to accelerate the restructuring of credit institutions; the handling of violations in regards to major stakeholders’ capital ownership, cross-ownership and cross-investment; and the settlement of bad debts. Efforts should be made to accelerate the modernisation of the sector’s operations; to create favourable conditions for merging and repurchasing activities among credit institutions; and to encourage qualified investors to participate in restructuring credit institutions, aiming to handle the weak units and increase competitiveness.
