Moody's May Downgrade Credit Ratings of Five Financial Institutions Including Vietnamese Banks

[Asia Economy Hanoi Correspondent Jo Ara] The international credit rating agency Moody's has begun the evaluation process for five financial institutions, including banks in Vietnam. The banks under evaluation are Vietnam Prosperity Bank and Saigon Hanoi Bank, along with three financial companies in which these banks hold shares: VP Bank Finance, SHB Finance, and Home Credit Finance.

According to local media on the 21st, Moody's is examining the Vietnamese financial market due to fluctuations in asset values amid the global economic outlook deterioration caused by the spread of the novel coronavirus (COVID-19). Moody's particularly views Vietnam's consumer finance sector as vulnerable due to high borrower credit risk and loan dependency. Accordingly, if non-performing loans are identified, Moody's plans to downgrade ratings considering the deterioration of financial institutions' solvency and liquidity.

Another credit rating agency, Fitch, has revised Vietnam's long-term foreign currency bond rating outlook from 'Positive' to 'Stable.' However, Fitch assigned a credit rating of 'BB,' noting that Vietnam has experienced rapid growth over the past few years and has a relatively low government debt level compared to other countries.

Fitch forecasted that Vietnam's GDP growth rate for this year will slow significantly to 3.3% from 7% last year due to COVID-19. For next year, it projected GDP growth to rise to 7.3% driven by economic recovery momentum. Fitch emphasized the potential recovery of Vietnam's tourism industry once the COVID-19 situation stabilizes. Regarding Vietnam's manufacturing sector, Fitch assessed that foreign direct investment (FDI) needs to increase further.

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