5:28:26 PM | 11/7/2008
The credit rating agency Fitch has affirmed the Bank for Investment and Development of Vietnam (BIDV)&rsquos Individual rating at &ldquoD/E&rdquo and Support rating at &ldquo4&rdquo, and the rating for the Asia Commercial Bank (ACB)&rsquos at &ldquoD&rdquo and at &ldquo5&rdquo, respectively.
&ldquoBIDVs Individual rating reflects its established franchise, good profitability and improved asset quality,&rdquo Fitch said. &ldquoIt also factors in the banks still weak capitalization, concentrated loan book and relatively unsophisticated risk management procedures.&rdquo
Although the authorities prsity to support the bank is extremely high, given BIDVs state ownership and franchise, Fitch expects a limited probability of external support owing to uncertainties about the governments ability to do so.
&ldquoBIDVs Individual rating would benefit from stronger capitalization and from managing the bank more commercially,&rdquo said Sabine Bauer, director in Fitchs Financial Institutions team.
&ldquoIn turn, downward pressure could arise should any significant deterioration in the banks financials come to pass as a result of the current volatile economic environment in Vietnam,&rdquo he said.
Meanwhile, ACBs Individual rating is based on its good profitability, sound asset quality, adequate capitalization and generally prudent management, with a focus on liquidity.
However, the rating also factors in risks arising from the banks recent rapid growth and a now volatile and challenging economic environment.
Given ACBs relatively moderate size, Fitch believes that support from the authorities, although possible, cannot be relied upon.
However, some liquidity/capital support from its 15.9 per cent strategic shareholder, Standard Chartered plc (rated A+/S) may be available.
&ldquoIf the current high inflation and interest rate environment in Vietnam persists, higher credit costs will likely arise, placing pressure on ACBs Individual rating,&rdquo said Sabine Bauer. (Fitchresearch)
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