An HDBank transaction office in HCM City. Moody's raises HDBank's credit rating outlook from stable to positive. — Photo courtesy of the bank

Moody's Investors Service has affirmed the B1 long-term local and foreign currency deposit and issuer ratings for the Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank).

It has also changed the outlook on the long-term deposit and issuer ratings of HDBank to positive from stable.

The positive outlook on the ratings of the bank reflects Moody's view that improvements in asset quality over recent years, which could translate into lower credit costs and higher profitability, could raise the banks' baseline credit assessments over the next 12 - 18 months.

Moody's expects profitability to improve over the next 12- 18 months because of higher yields from loans to individuals and small and medium enterprises, and improvements in asset quality, and capital to remain stable because internal capital generation will support asset growth.

Amid the difficulties caused due to the COVID-19 outbreak, which made Moody's lowering the credit ratings of some organisations, HDBank's credit rating was unchanged throughout 2020, underlining its capacity to adapt to new situations to sustain growth and keep implementing its development strategy even in difficult times.

This was once again reflected in its results in the first quarter of 2021 when its consolidated pre-tax profit topped VND2.1 trillion (US$91.1 million), a 68 per cent rise from the same period in 2020.

Its standalone pre-tax profit was over VND1.8 trillion, a year-on-year increase of 88 per cent.

Its return on equity and return on assets were 26.3 per cent and 2.1 per cent.

Its capital adequacy ratio (based on Basel II standards) was over 12 per cent, and asset quality and liquidity remained at high levels.

The ratio of short-term funds the bank used for medium- and long-term loans was 23.4 per cent against a maximum of 40 per cent allowed by the State Bank of Vietnam.

Cost management continued to improve, with its cost-to-income ratio falling to 39.1 per cent from 51 per cent a year earlier.

As it contributes to supporting the economy and walks hand in hand with customers under challenging circumstances, besides ensuring safe and stable business operation, HDBank has also spent tens of billions of dong on community support activities and set aside large sums for preferential credit programmes to help customers overcome the difficulties caused by COVID-19.

Previously, based on positive assessments of Viet Nam's economic growth and its effective control of the epidemic in 2020, and its positive outlook for growth, Moody’s retained the Government’s long-term issuer and senior unsecured ratings at Ba3 and upgraded the outlook to positive from negative.

Viet Nam is the only country in the world for which all three major western credit rating agencies (S&P and Fitch being the others) changed their ratings outlook to positive. — VNS