TEXT-S&P assigns 'B+/B' rtg to Vietnam's Eximbank; outlook stable

Fri Nov 16, 2012 2:38am EST

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(The following statement was released by the rating agency)

Nov 16 -

Overview

-- Eximbank has an "adequate" business position, "weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity.

-- We assess the Vietnam-based bank's stand-alone credit profile to be 'b+'.

-- We are assigning our 'B+/B' issuer credit rating to Eximbank. We are also assigning our 'axBB/axB' ASEAN regional scale rating to the bank.

-- The stable outlook reflects our expectation that Eximbank will maintain its financial profile and temper growth amid difficult operating conditions in Vietnam.

Rating Action

On Nov. 16, 2012, Standard & Poor's Ratings Services assigned its 'B+' long-term and 'B' short-term issuer credit ratings to Vietnam Export Import Commercial Joint Stock Bank (Eximbank). The outlook on the long-term rating is stable. We also assigned our 'axBB' long-term and 'axB' short-term ASEAN regional scale ratings to the bank.

Rationale

Standard & Poor's bases its ratings on Eximbank on the bank's "adequate" business position, "weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity, as our criteria define those terms. We assess the bank's stand-alone credit profile to be 'b+'.

Our bank criteria use our banking industry country risk assessment (BICRA) economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating. The anchor for a commercial bank operating only in Vietnam is 'b+'. The BICRA score is based on our evaluation of economic risk, given Vietnam's low-income economy, developing financial system, and evolving policy framework. The risk of economic imbalances is high and the credit risk is extremely high, in our opinion, reflecting rapid credit growth--although moderating--together with low income levels, high private sector credit, and rudimentary underwriting standards. Regarding our industry risk assessment, Vietnam's regulatory standards lag international norms and the central bank is prone to regulatory forbearance. The banking system has a moderate risk appetite, overcapacity, and market distortion. An adequate share of core customer deposits and a low reliance on external funding partially mitigate these weaknesses.

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