S&P revises Vietcombank outlook after Mizuho deal

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Vietcombank's capital position has improved following the acquisition of a 15 percent stake in the bank by Japan's Mizuho Corporate Bank Ltd., ratings agency Standard & Poor's said.

Standard & Poor's Ratings Services said in a statement that it had revised its outlook on the long-term rating on Vietcombank from negative to stable. It also revised the stand-alone credit profile (SACP) of the bank to "b+" from "b".

"The outlook revision reflects Vietcombank's improved SACP after Mizuho Corporate Bank Ltd. (MCB) acquired a 15 percent stake in the bank," said Standard & Poor's credit analyst Ivan Tan.

"We believe that Vietcombank's more moderate loan growth following the Vietnamese government's credit tightening measures will support the bank's capital sustainability. We expect that the bank will continue to strengthen its balance sheet through higher retained earnings contributions and sensible dividend payouts," Tan said.

According to Standard & Poor's, Vietcombank will maintain its strong market position and its financial profile despite challenging conditions and high inflation in Vietnam.

However, Tan warned that Vietcombank's capital and earnings are still weak.

"The alliance with MCB will provide Vietcombank with enhanced products and services, and accelerate the alignment of the bank's risk management system and processes with the best international practices," said Tan. "It could improve the bank's earnings profile and mitigate potentially higher credit costs. Nevertheless, the successful execution of this alliance remains to be seen." 

Vietcombank, Vietnam's fourth-largest lender by assets, posted  gross profits in 2011 of VND5.7 trillion (US$271 million), up 4 percent from the previous year, Reuters reported last week.

The lender had total assets of VND369.2 trillion at the end of last year, up 20.3 percent from 2010. Its gross profit target for 2012 is VND6.5 trillion, a 14 percent increase over last year, the report said.

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