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|Fitch Assigns Standard Chartered Vietnam First-Time 'BB' Rating, with Stable Outlook.|
Standard Chartered Vietnam ratings are driven by Fitch’s expectation of support from its parent, Standard Chartered Bank (SCB, A+/Negative/a), in times of need. Standard Chartered Bank owns 100 per cent of its Vietnam subsidiary, whose management and operations are highly integrated with its parent.
Vietnam is a high-growth market that the group considers to be strategically important to its emerging market network. Fitch expects Standard Chartered Vietnam to retain an important role in the group given Vietnam's increasing integration into regional and global supply chains.
“We believe Standard Chartered has a strong ability to support its Vietnamese subsidiary, whose assets accounted for only about 0.4 per cent of the parent's assets as at the end of 2019,” Fitch noted.
The factors reinforcing the likelihood of the parent's support for Standard Chartered Vietnam are counterbalanced by Fitch's view of heightened transfer and convertibility risks in Vietnam, which could impose significant constraint on Standard Chartered Vietnam’s ability to receive support from its UK-based parent, and are reflected in Vietnam's Country Ceiling of 'BB'.
Standard Chartered Vietnam’s Long-Term Foreign-Currency IDR is thus capped by the Country Ceiling and its Support Rating of '3' indicates a moderate probability of support from the parent for the subsidiary.
Fitch uses the parent's Viability Rating (VR) instead of its IDR as the anchor rating for institutional support due to the uncertainty over whether Standard Chartered Vietnam would benefit from a significant buffer of qualifying junior debt that raises the parent's Long-Term IDR above its VR.
Fitch views the risk of sovereign restrictions on local-currency repayments as lower than that of foreign-currency restrictions. Hence, Standard Chartered Vietnam's Long-Term Local-Currency IDR is rated two notches above Vietnam's sovereign rating, reflecting the parent's robust ability to support Standard Chartered Vietnam.
“We have not assigned a VR to Standard Chartered Vietnam given the high operational linkages with its parent that would render standalone assessment not meaningful. SCBVL's market share in Vietnam is modest at around 0.5 per cent of banking system assets at the end of 2019,” noted the ratings agency. “It has, however, been growing its loan book rapidly in recent years, driven by its retail segment - a trend which we expect to continue in the near to medium term as the bank capitalises on the country's young demographics and growing income.”