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RETAIL BANKING | Cesar Tordesillas, Vietnam
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Moody's issue stable credit ratings for Sacombank

Moody's announced credit ratings for HCM City-based Sacombank.

It assigned ratings of B2 (not-prime) to Sacombank's long- and short-term foreign currency deposits and B1 (not-prime) to its long- and short-term local currency deposits. It gave the bank a long- and short-term foreign and local currency issuer rating of B1.

Moody's assigned Sacombank a Bank Financial Strength Rating (BFSR) of E+.

The outlook for all ratings was stable, except for the foreign currency deposit and issuer ratings which carried negative outlook, reflecting the overall negative outlook on Viet Nam's foreign currency, Moody's said.

The ratings reflected Sacombank's tightened liquidity, moderate risk absorption capacity, and moderate single-borrower concentrations versus global peers, as well as uncertainties surrounding its shareholding structure and share buy-back plans and inherent challenges in Viet Nam's operating environment.

Moody's analysis also took into account the strengths of the bank's credit profile, particularly the quality of its franchise as the sixth-largest bank in Viet Nam by asset-size and the one with the largest network of branches and ATMs in the country.

They also noted its diversified loan portfolio, with the consumer sector accounting for about a third of its loans, and lower problem loans compared with the average for the Vietnamese banking sector, supported by above-average loan-loss reserve coverage.

"Its sizable and stable core deposit base accounted for nearly 60 per cent of its funding at the end of 2010, with a profile mainly in local currency," Moody's reported.

Sacombank may not be able to sustain its good financial metrics over the medium term due to the lack of portfolio diversification and the challenging operating environment, characterised by high inflation and a tightening monetary policy, Moody's said.

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