US credit rating agency Standard & Poor’s (S&P) has revised the Banking Industry Country Risk Assessment (BICRA) on Vietnam and the credit ratings for three local lenders.

Accordingly, the Banking Industry Country Risk Assessment (BICRA) on Vietnam has been revised to group 9 from group 10.

S&P has also lowered economic risk score of Vietnam from ‘10’ to ‘9’ in the wake of changes in assessment of economic imbalance to ‘high risk’ from ‘very high risk’.

However, industry risk score remains unchanged at ‘8’and so do the ‘very high risk’ economic resilience and ‘extremely high risk’ credit risk in the local economy, said S&P.

The adjustment takes place after the government’s economic stabilization policies.

In 2011, the government launched economic stabilization policies to reduce credit growth and improve the asset price stability.

The policies initiated in 2011 for economic stabilization has eased credit growth as well as enhanced asset price stability, which have then mitigated the economic imbalance, it said.

With average low income and developing financial system as well as evolving legal framework, the local economy is very much likely to be vulnerable to severe shocks. 

However, bright outlook for Vietnam would partly offset such drawbacks.

Meanwhile, inflation also dropped to 6.5 percent in September 2012 from 23 percent in August 2011, which helped the State Bank of Vietnam (SBV) lower the lending interest rates.

Although there are many improvements, the risk of Vietnam’s economic imbalances still remains, S&P warned. The government has loosened policies to achieve growth targets, but it raises concerns about the implementation of price stabilization commitment.

With regards to credit risk in the economy, this agency predicted bad debts would keep surging for 2012 and reduced burdens on the private sector’s debt servicing due to lower growth rate of lending against 2011.

However, the local banking system has been cushioned by the stable core customer deposits which have significantly reduced banks’ dependence on external funding.

S&P expected the government that is classified ‘highly supportive toward domestic banking’ to assist with financing the banking system if needed.

The international credit rating earlier on June 6 , 2012 revised Vietnam outlook from ‘negative’ to ‘stable’ and short-term and long-term sovereign ratings remain at ‘B’ and ‘BB’.

Banks get ratings revised

S&P has also raised the credit ratings of three Vietnamese banks and retained the credit ratings for two other banks of Vietnam.

Accordingly, S&P raised the credit ratings from B+ to BB- with a stable outlook for three banks, namely Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank-VCB), Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank-STB) and Vietnam Technological and Commercial Joint Stock Bank (Techcombank).

Meanwhile, Standard & Poor’s kept the credit rate intact at B+ for Bank for Investment and Development of Vietnam (BIDV) and Vietnam Commercial Joint Stock Bank of Industry and Trade (VietinBank-CTG).

The credit rating for these three banks reflects the strong business position of these banks and the sufficient liquidity level. S&P said that these banks have a highly important role in the country’s banking system and the Vietnamese government has a large supporting role for banks.

The ratings of Vietinbank and BIDV also show “strong” business position and “enough” liquidity, however their profits and capital sources were “weak”.

S&P raised the rating for Vietnam’s three major banks after this agency adjusted Vietnam’s BICRA and Vietnam’s economic risks to group 9 from group 10 and from “very high” level to “high” level, respectively.