Moody’s Investors Service has recently confirmed the long-term ratings of FE Credit at B1, after putting it up for review due to the impacts of COVID-19.
This reinitiated stable outlook concludes Moody’s review for downgrade initiated on April 7, 2020 which also took in the assessment of two other finance companies, namely Home Credit Vietnam Finance (HCV) and SHB Finance and two banks – VP Bank (the parent company of FE Credit) and SHB.
Moody's rational for keeping the stable outlook for FE Credit includes the agency's expectation that FE Credit will remain able to mitigate the solvency and liquidity risks caused by the coronavirus thanks to three factors.
|Moody’s concluded that the FE Credit’s funding and liquidity positions were stable during the review period supported by ample international and domestic liquidity. |
First is the early reopening of the Vietnamese economy due to the successful control of the outbreak. Second is the stabilising financing conditions supported by ample liquidity following supportive domestic and global measures and third is the company’s ability to manage credit and liquidity risks amid disruptions from the coronavirus outbreak.
Moody’s concluded that FE Credit’s funding and liquidity positions were stable during the review period, supported by ample international and domestic liquidity. This helped the company to roll over their existing funding and access new funding.
The credit rating service also noted that the company has diversified its funding sources and reduced their funding costs during the period. However, a note of caution was also issued regarding the reliance on wholesale funding and limited balance sheet liquidity, which remains a weakness for credit profiles.
Overall, the short duration of the economic disruptions in Vietnam has helped the company to manage delinquencies and collections within the historical range. While Moody’s has observed early signs of stress in delinquencies and collections, especially in April due to social distancing measures, collections recovered and delinquencies dropped in the rest of the second quarter of 2020.
FE Credit has shown prudent risk management, such as tightening underwriting criteria against the backdrop of slowing economic growth.