Bank's credit rating raised by Moody's for second year in succession.
by Hong Nhung
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Global credit ratings agency Moody’s Investors Service has upgraded the Vietnam Prosperity Bank (VPBank)’s baseline credit assessment (BCA) from B3 to B2 and its counterparty risk assessment from B2 to B1.
Moody’s also kept VPBank’s rating on long-term foreign-currency deposit unchanged at B2 while raising its outlook from “stable” to “positive”.
This was the second consecutive year Moody’s has assigned a positive assessment for VPBank’s ratings.
The BCA reflects the bank’s sound credit profile as well as the probability of a bank’s standalone failure without external support. This rating is based upon macroeconomic, financial, and asset quality factors. The counterparty risk assessment evaluates the risk of a partner engaging with that bank.
The Moody’s upgrade in BCA and counterparty risk assessment to B2 and B1 took into consideration VPBank’s significant improvement in financial strength, operating efficiency, profitability, and future growth potential.
VPBank’s return on assets (ROA) ratio increased from 1.7 per cent in 2016 to 2.3 per cent in 2017, outperforming many other Vietnamese banks. Its pre-provision operating profit jumped by 56 to 57 per cent in the past two years.
Moody’s also praised the bank’s expansion in business scale and its leading position in the consumer finance market, which has generated high profit margins and contributed to its strong earnings.
The bank’s risk-weighted asset (RWA) rose from 8.5 per cent in 2016 to 12.1 per cent by the end of 2017. The improvement is attributed to additional share issues, stock dividends, and bonus shares, increasing retained earnings and reducing average loan growth to 26 per cent from 41 per cent in the 2013-2016 period.
Moody’s said it would consider upgrading VPBank’s BCA and other long-term ratings if the bank’s financial results show sustainable development in asset quality, risk provisioning, and capital adequacy. In addition, macroeconomic growth, improving Vietnam’s credit rating, as well as the government’s support for the banking sector will also be positive signals for Moody’s to increase VPBank’s credit rating.
This is the second consecutive year Moody’s has made a series of positive assessments and raised VPBank’s credit rating and reflects the confidence and trust of international organizations in the bank’s strategy and development plans.
It reported record revenue and profits in 2017, with around $1.1 billion in total revenue and $185.3 million in pre-tax profits, up 48 per cent and 65 per cent against 2016, respectively. Its charter capital also climbed from $209.3 million to over $358 million.
VPBank is one of the top five commercial joint stock banks in Vietnam in terms of lending and mobilizing deposits.
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