FiinRatings has assigned a first-time long-term issuer credit rating of 'A-' with a stable outlook to Viet Capital Securities Joint Stock Company.

According to the Vietnamese credit rating agency, the rating reflects its assessment of the risk and prospects of the securities services sector as well as VCI's business risk profile and financial position.

FiinRatings assessed VCI's business position as “Strong” with its leading position in institutional client brokerage activities as demonstrated by its market share of 25-29 per cent in this segment over the last three years, which contributes to the stability of brokerage revenues and limiting the impact of the current decline in retail liquidity.

The company is also among the top five securities companies by revenue and assets, with proven expertise in investment banking.

This diversified income structure helps VCI hedge unfavourable market movements.

Its capital, leverage and earnings are rated as “Adequate” and appropriate to its capital-related activities such as investments and margin lending.

Besides, its operating efficiency and profitability are relatively good as shown by its return on equity, which has been consistently in the 18-25 per cent range over the past eight years, compared to 7-22 per cent for the sector.

The company has implemented a conservative growth strategy, which does not prioritse price competition but focuses on service quality to attract customers and optimise profitability and efficiency.

FiinRatings assessed VCI's risk position as “Adequate”, reflected by a comprehensive and prudent risk management policy, moderate risk appetite, low risk concentration, and the development of an IT system to help automate transaction processing to ensure there are no bad debts in its margin lending activities.

It said VCI’s investment philosophy focuses on the long-term fundamentals and potential of investees and leveraging its advantages in investment banking and research competency. But large exposure to unlisted companies with low liquidity impacts its credit rating, it said.

Diversification of funding sources allows flexibility in capital management and keeping liquidity at a “Strong” level.

The ratings could be upgraded if its brokerage market share improves significantly, with achieving good operating efficiency and application of strict risk management policies, and larger contribution to income structure from brokerage and margin lending activities, by expanding business scale and customer base, especially retail customers. — VNS