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RPT-Fitch Revises Two Vietnamese Banks' Outlooks to Positive
January 24, 2014 / 8:47 AM / 4 years ago

RPT-Fitch Revises Two Vietnamese Banks' Outlooks to Positive

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Jan 24 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has revised the Outlooks of two Vietnamese government-owned banks - Vietnam Bank for Agriculture and Rural Development (Agribank), and Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) - to Positive from Stable. At the same time, the agency has affirmed the Long-Term Issuer Default Ratings (IDRs) on the banks at a€˜Ba. A full list of rating actions is provided at the end of this rating action commentary. This is an event-driven assessment focusing on sovereign support. Fitch will review the Vietnamese banksa intrinsic financial strength later this year.

KEY RATING DRIVERS - IDRs, Support Ratings and Support Rating Floors

The Outlook revision on both banksa IDRs reflects Fitchas view that the sovereignas ability to provide extraordinary support, if needed, is improving. It follows a revision in the Vietnam sovereignas Outlook to Positive from Stable on 23 January 2014, which takes into account the improvement in macroeconomic stability and strengthening external finances, and continued weakness in the banking sector. For more detail on the Outlook revision on the sovereign, see the rating action commentary a€œFitch Revises Vietnamas Outlook to Positive; Affirms at a€˜B+a€�, dated 23 January 2014.

The Long-Term IDRs, Support Ratings (SRs) and Support Rating Floors (SRFs) of Agribank and Vietinbank incorporate Fitch’s expectation of likely extraordinary state support if needed because both banks are among those most systemically important to the domestic economy. Agribank and Vietinbank are the largest and second-largest banks by assets in Vietnam, with dominant domestic franchises.

However, the timeliness of extraordinary support from the government may be limited by its own finances, as reflected in the a€˜B+a sovereign rating. The Outlook revision on the sovereign rating has no impact on the ratings for the rated privately owned banks as Fitch maintains its view that state support cannot be relied upon.

RATING SENSITIVITIES - IDRs, SRs and SRFs

Changes to Vietnamas sovereign rating as well as the governmentas propensity to provide timely extraordinary support would likely lead to corresponding changes to the ratings on Agribank and Vietinbank. Deterioration in the banksa standalone credit profiles is unlikely to impact their IDRs, given that their Viability Ratings (VRs) are currently lower than their SRFs.

KEY RATING DRIVERS AND RATING SENSITIVITIES - Senior Debt

Vietinbank’s senior notes are rated at the same level as its Long-Term IDR. This is because the notes constitute direct, unsubordinated and senior unsecured obligations of the bank, and rank equally with all its other unsecured and unsubordinated obligations. In line with Fitch’s criteria, Recovery Ratings are assigned to entities with an IDR of ‘B+’ or below. Vietinbank’s senior debt will likely be impacted by changes to the bank’s IDR.

The rating actions are as follows:

Agribank

- Long-Term IDR affirmed at ‘B’; Outlook revised to Positive from Stable

- Short-Term IDR affirmed at ‘B’

- Support Rating Floor affirmed at ‘B’

- Support Rating affirmed at ‘4’

- Viability Rating at a€˜ccca - unaffected

Vietinbank

- Long-Term IDR affirmed at ‘B’; Outlook revised to Positive from Stable

- Short-Term IDR affirmed at ‘B’

- Support Rating Floor affirmed at ‘B’

- Support Rating affirmed at ‘4’

- USD250m 8% notes due 2017 affirmed at a€˜Ba; Recovery Rating affirmed at a€˜RR4a

- Viability Rating at a€˜b-a - unaffected

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