VPBank has enough buffers against asset risk: Moody’s

It has a ‘sizeable’ exposure to the real estate sector and tariffs may impact the economy.

Vietnam Prosperity Joint Stock Commercial Bank (VPBank) should have enough buffers against its high asset risk, according to Moody’s Ratings.

“VPBank's credit cost and overall profitability are susceptible to asset-quality risks due to its moderate provision coverage and rapidly growing exposure to real estate loans,” the ratings agency said in a commentary, where it affirmed VPBank’s Ba3 bank deposit and issuer ratings.

The Vietnam-based bank reportedly has a sizable exposure to the real estate sector, which constitutes 27% of its total loans as of December 2024. This pose risks due to high leverage amongst real estate developers.

Furthermore, Vietnam’s exports to the US accounts for around a quarter of the country’s GDP, the largest share amongst major Asia Pacific economies. This makes Vietnam susceptible to the US trade policy on tariffs, the ratings agency warned.

On the other hand, VPBank’s profitability improved in 2024, with its net interest margin expanding thanks to lower funding and credit costs.

Its profitability will also benefit from higher profit contribution from FE Credit, its consumer finance subsidiary.

VPBank's loan-to-deposit ratio of 143% as of December 2024 is the highest amongst rated peers, as its loan growth has significantly outpaced deposit growth.

The company's asset quality is also improving following a prolonged bad loan cycle due to high loan delinquencies post-pandemic and weak recovery in loan repayments, Moody’s said.

“This is because FE Credit's loan portfolio was largely concentrated in unsecured loans to the underbanked retail segment with moderate income levels,” it added.

Moody’s expects limited impact on VPBank’s credit profile from the mandatory transfer of Global Petro Sole Member Limited Commercial Bank (GPBank). GPBank is reportedly small in size and has low likelihood of receiving material capital support from VPBank over the next 12-18 months.