Moody's Rating BIDV

The Bank for Investment and Development of Vietnam (BIDV) has become the first bank in Vietnam to receive a rating assignment from an international prestigious credit rating, the Moody Investor’s Service.

 

Long-term local and foreign currency deposits were rated Ba1 and B1 respectively. Long-term issuer ratings in local and foreign currency were assigned at Ba1 and Ba3 respectively. Short-term deposits and debt ratings were assigned at Not Prime. The outlook for all these ratings is Stable. And the Bank Financial Strength Rating (BFSR) of E was assigned, with a Positive outlook.

BIDV has and will receive strong state support, Moody’s believes, as a result of its important role as one of the leading banks in Vietnam, and its 100 per cent state ownership. Indeed, the bank is already receiving ongoing capital support from the government when the bank realizes its planned “equitisation” in 2007 and 2008.

 

After equitisation, the state’s ownership will likely be diluted but the state will hold the controlling role in the near future and the bank would continue hoping for the stable rating outlook.

The BFSR of E reflects the bank’s significant asset quality problems and below-average liquidity, but the Positive rating outlook recognizes BIDV’s strengthening profitability, ongoing restructuring and recapitalisation.

 

BIDV’s pre-provision profitability on risk-weighted assets (Moody’s estimate: 2.7 per cent) is higher than the E peer group’s median value of 1.9 per cent. The introduction of risk-based pricing, enhanced profitability in the corporate sector, and favorable factors from supply and demand relations, should help the bank to back up profitability and support the bank’s ability to provide for its problem loans.

 

This is considered as an important step towards the equitization of the bank due in 2007.

 

According to Tran Bac Ha, general director of BIDV, the above ratings once again confirmed the financial strength of the bank. “Both the deposit and issuer ratings all placed at the respective sovereign ceiling ratings for Vietnam,” added Ha.

 

Being one of the five state-run commercial banks of Vietnam, BIDV reported assets of VND118 trillion by the end of last year (US$7.4 billion).

 

When the country issued government bonds to the international capital market for the first time in October 2005, Moody’s upgraded sovereign ratings to Vietnam facilitated the success of such listings.

 

Reportedly, before BIDV officially announced Moody’s ratings, another state run bank, the Bank for Foreign Trade of Vietnam (Vietcombank) also mapped out the same plan.

 

“This is an obvious requirement of the integration process and even more important to Vietcombank’s target of becoming one of Asia’s 70 biggest banking-finance groups,” said Vu Viet Ngoan, Vietcombank’s general director.