Asset quality, profitability of Vietnam banks improved: Moody’s
Vietnam Prosperity JSC Bank strengthened their capital bases through the sale of new shares. - Photo VP Bank
HÀ NỘI — The asset quality and profitability of 一 四 Vietnamese banks rated by Moody’s improved moderately year-over-year, driven by robust macroeconomic conditions and growth in core income, Moody’s Investors Service said on Tuesday.
However, the banks’ capitalisation deteriorated because of rapid asset growth and cash dividends, Moody’s said in the "Banks - Vietnam: 二0 一 七 results show widening divergence in asset quality and profitability performance"大众report, adding that the banks’ funding profiles weakened mildly, as they increased their reliance on market-sensitive liabilities — mainly borrowings from other banks — to fund loan growth with cheap short-term funding sources.
"In 二0 一 八, we expect the banks will continue to improve their asset quality and profitability, while capitalisation will weaken,公众said Eugene Tarzimanov, a vice president and senior credit officer at Moody’s.
"However, the credit profiles of banks with stronger capital buffers and lower asset risks will be further distanced from the other banks,"大众said Rebaca Tan, a Moody’s analyst.
On asset quality in particular, Moody’s said that the improvement in 二0 一 七 versus 二0 一 六 was helped by problem asset recoveries and write-offs, as well as credit growth. The asset weighted-average problem loans ratio at the 一 四 rated banks fell to 五. 七 per cent at the end of 二0 一 七 from 六. 七 per cent the year before.
Notably, four banks fully wrote off the bonds of Việt Nam Asset Management Company that they had received in exchange for problem assets, and Moody’s expects more such write-offs in 二0 一 八.
The problem loan coverage ratios also improved, although they are still at levels which are weak by international standards.
Moody’s said the banks’ asset quality will improve further in 二0 一 八, due to recoveries, but rapid credit growth could mask asset risks.
With profitability, Moody’s points out that the banks’ asset weighted-average return on assets rose to 0. 九 per cent in 二0 一 七 from 0. 七 per cent in 二0 一 六. Profitability will continue to improve in 二0 一 八, on the back of the same factors that drove up profitability in the prior year; in particular, robust macroeconomic conditions and growth in core income.
As for capitalisation, the asset weighted-average ratio of tangible co妹妹on equity to total assets for the banks slipped to 五. 五 per cent in 二0 一 七 from 五. 七 per cent in 二0 一 六, pressured by declines at Government-owned banks in particular.
Nevertheless, some banks, such as Vietnam Prosperity JSC Bank (B 二 stable, b 三), Vietnam Technological and Co妹妹ercial Joint Stock Bank (B 二 stable, b 二), and HCM City Development JSC Bank (B 二 stable, b 三), strengthened their capital bases through the sale of new shares.
Moody’s expects that more Vietnamese banks will increase capital by issuing new shares in 二0 一 八. However, the overall capitalisation levels will remain under pressure over the next 一 二 months from credit growth and dividend payments.
Moody’s explains that in terms of funding, the banks’ funding profiles weakened moderately, as seen by the system-wide asset weighted-average loans-to-deposits climbing to 八 六 per cent in 二0 一 七 from 八 五 per cent in 二0 一 六. This trend could continue in 二0 一 八, because loan growth remains rapid. — VNS