Clients make their transaction at a Tien Phong Bank's Bureau in Ha Noi. The Bank is in the list of Credit rating agency Moody for stable and good asset quality and good profitability. — TPBank

Credit rating agency Moody's on Wednesday affirmed its long-term domestic and foreign currency deposit and issuer ratings of four Vietnamese banks.

The Orient Commercial Joint Stock Bank (OCB), Tien Phong Commercial Joint Stock Bank (TPBank), and Vietnam International Bank (VIB) have been assigned B1, while the Vietnam JSC Bank for Industry and Trade (VietinBank) at Ba3, because of stable credit profiles that underpinned the affirmation of their respective Baseline Credit Assessments (BCA) and Adjusted BCAs at b1.

The ratings of TPBank and VIB reflect the banks' stable and good asset quality; good profitability; and adequate capitalisation. OCB's ratings reflect the bank's strong capital position; above-average profitability; and elevated asset risks.

The report says TPBank, VIB and OCB are reliant on market funding, a result of their small domestic franchises, but the high levels of liquid assets in their balance sheets mitigate this risk.

Moody's expects the asset quality of TPBank and VIB will remain stable in the next 12 to 18 months, as reflected by the declines in their respective non-performing loan (NPL) ratios to 1.2 per cent and 1.7 per cent as of the end of 2020, from 1.3 per cent and 2.0 per cent as of the end of 2019.

OCB's asset risks will likely remain elevated over the same period.

A common risk factor for the three banks is their rapid loan growth, which increases their risk of credit losses due to a higher level of unseasoned loans. Moody's expects profitability for the three banks to remain stable, supported by good yields from their retail and SME loans, and growing bancassurance fee income.

VietinBank's ratings reflect improvements in the bank's asset quality; its average profitability; weak capitalisation; and good deposit franchise, with Moody's expecting its asset quality to remain stable in the next year and a half.

The report said that it could upgrade the long-term ratings of the four banks if the Vietnamese Government's sovereign rating or the banks' BCAs are upgraded.

The banks' BCAs could be upgraded if there are material and sustainable improvements in their solvency metrics. Moody's could downgrade the long-term ratings of these banks if their credit fundamentals severely deteriorate, including a spike in NPLs leading to higher loan loss provisions that will weigh on the banks' profitability and capital. A significant deterioration in the banks' funding and liquidity could also be negative for the ratings. — VNS