Positive signs from Vietnam’s banks as credit ranking rises

Positive signs from Vietnam’s banks as credit ranking rises

Moody's Investors Service on August 14 upgraded the ranking of 14 Vietnam’s commercial banks. Prior to that, the world's leading credit rating agency lifted the national credit rating from B1 to Ba3 on August 10.

Moody's said that the rating improvement was gained on the basis of the strong growth potential of Vietnam’s economy, with the backing of an increasingly effective use of labor force and capital.

It also said the rating upgrading reflected improvement in the banking system.

Fitch Ratings in May 2018 upgraded the Long-Term Default Ratings (IRDs) and revised the Support Rating Floors of three state-invested banks, namely VietinBank, VIetcombank and Agribank, from B+ to BB-.

Prior to that, the agency lifted Vietnam’s credit rating from BB- to BB.

Explaining the move, Fitch Ratings said Vietnam is building policies aiming for macroeconomic stability. The measures to ensure more flexible exchange rates and focus on curbing inflation have helped attract FDI and maintain a high economic growth rate.

Vietnam’s forex reserves have improved continuously thanks to the application of a new exchange rate mechanism in early 2016, aiming for a more flexible exchange rate, large surplus of current accounts and FDI attraction.

Brand Finance, when releasing the list of 500 most valuable bank brands in the world in early 2018, named three Vietnam’s banks – VietinBank, BIDV and Vietcombank.

Moody’s upgraded the outlook of Vietnam’s banking system from stable to positive, while Bloomberg commented that Vietnam dong was one of the most stable currencies in Asia.

The Doing Business Report 2018 of the World Bank put Vietnam in the 29th position out of 190 surveyed countries in Getting Credit index. This represented a 3-notch improvement compared with the year before.

The State Bank of Vietnam has been praised for its timely actions and reasonable moves to regulate loan interest rates, and ensure a stable exchange rate, factors that help protect investors’ confidence in Vietnam’s investment environment.

Despite the uncertainties in the global market (interest rate hike in the US and trade tense among countries), the exchange rate and forex market in Vietnam remained stable with good liquidity and smooth transactions. All the lawful demands for foreign currencies were satisfied by the banking system.

By the end of August, the loans disbursed for agriculture and rural development had increased by 12 percent over the end of 2017, while the loans to fund exports had risen by 7.43 percent.