Moody’s upgrades Vietnam’s banking sector outlook

16:33 | 30/11/2017 Economy

(VEN) - Moody’s Investors Service has changed its outlook for Vietnam’s banking system for the next 12-18 months, shifting it from stable to positive.

moodys upgrades vietnams banking sector outlook

Eugene Tarzimanov, Moody’s vice president and senior credit officer, said, “The change in outlook - which expresses our expectation of how bank creditworthiness will evolve in this system over the next 12-18 months – reflects Vietnam’s robust economic growth, supported by domestic demand, healthy exports and public sector investment.”

“We forecast Vietnam’s real GDP will grow 6.1 percent in 2017 and six percent in 2018, faster than the 5.9 percent average for the previous five years. Strong economic growth translates into positive conditions for banks’ asset quality, but rapid credit growth, aided by accommodative monetary policy, can raise asset risks again,” Tarzimanov said.

In December 2014, Moody’s revised its outlook for the Vietnamese banking system to stable from negative, reflecting the increased stability in banks’ operating environment, as well as in Vietnam’s macroeconomic situation, and a reduction in liquidity stress on the system. Moody’s rated nine joint-stock commercial banks in Vietnam, which in June 2014 together accounted for almost 40 percent of system assets.

This year Moody’s rated 15 banks in Vietnam, which together accounted for 58 percent of banking system assets as of June 30, 2017, including three state-run commercial banks and 12 privately owned joint-stock commercial banking institutions. Moody’s report was conducted based on five factors, including the banks’ operating environment, the growth in local-currency customer deposits, asset quality, profitability and government support notching.

The positive outlook given to the Vietnamese banking system was attributed to government efforts in implementing measures to maintain macroeconomic stability, control inflation and promote economic growth. The improved outlook also reflects measures taken by the State Bank of Vietnam in flexible monetary policy management, especially the restructuring of credit institutions and settling bad debts.

Duy Minh