Customers at a Sacombank's branch in HCM City. Fitch Ratings has assigned the lender a long-term Issuer Default Rating of 'BB-' with a stable outlook. — Photo courtesy of Sacombank

Fitch Ratings has assigned Saigon Thương Tín Commercial Joint Stock Bank (Sacombank) a long-term Issuer Default Rating (IDR) of 'BB-'.

The outlook on the IDR is stable.

It has also assigned a short-term IDR of 'B' and a Viability Rating (VR) of 'b+'.

According to Fitch, Việt Nam's economy grew by 6.4 per cent in the first half of 2024, following a healthy 5.1 per cent increase in 2023.

A recovery in external demand and gradual resolution of challenges in the domestic property market should help sustain economic growth, which it projects at around 7 per cent over the medium term.

This should provide favourable business prospects for the banking sector, including Sacombank.

The bank’s asset quality score and funding and liquidity score are 'b+'/stable and 'bb'-/stable.

Its risk profile score is 'b+'/stable as the bank has been growing its loan book broadly to serve production and business and stimulate consumption.

Sacombank's operating profit/risk-weighted assets ratio rose to 1.7 per cent in 2023 from 0.9 per cent in 2019, driven by a sustained expansion in margins and increases in core operating income.

Fitch believed that Sacombank's equity and profitability could improve further in the coming years when it completes its restructuring and fosters core business activities.

After more than seven years of restructuring following the merger with Southern Commercial Joint Stock Bank, Sacombank has largely resolved legacy asset quality problems and basically completed key goals.

It has recovered and handled more than 80 per cent of bad debts and outstanding assets, made full provisions in accordance with regulations, including fully provisioning for its remaining Vietnam Asset Management Company special bonds that it plans to completely write off soon.

Asset quality is constantly improving with the proportion of profitable assets to total assets increasing to more than 91 per cent. Its business scale is growing steadily at an average of 10-13 per cent per year.

The bank has accelerated digital transformation to enhance its management capacity and develop multi-utility products and services to cater to customers' digital banking needs.

Profits increased by 62 times to VNĐ9.59 trillion (US$376.25 million) last year from VNĐ156 billion ($6.1 million) in 2016. — VNS