Standard & Poor's: Vietinbank assigned 'B+/B' rating, outlook negative

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Standard & Poor's on March 16 assigned 'B+' long-term and 'B' short-term counterparty credit ratings tothe  Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank).

The outlook on the long-term rating is negative, it said.

The firm assigned as 'B+' issue rating to the bank's proposed issue of senior unsecured notes.

Standard & Poor's said it based the ratings for Vietinbank on the economic outlook and industry risks in Vietnam, the bank's "strong" business position, "very weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity. The stand-alone credit profile (SACP) of the bank is 'b', it said.

"Vietinbank's strong business franchise in Vietnam and good geographic reach (with an extensive branch network) within the country support the bank's business position," Standard & Poor's credit analyst Ivan Tan said in an announcement Friday.

The bank is one of the three largest banks in the country and has a market share of 13 percent in deposits.

"We expect Vietinbank to benefit from foreign strategic partnerships  as part of its ongoing privatization. The bank's risk management practices are likely to gradually improve."

In 2011, the International Finance Corporation acquired a stake of about 10 percent in Vietinbank. The bank is looking for a second strategic partner, S&P said in the statement.

"We anticipate that the bank's earnings will decline in 2012 due to margin pressure and higher credit costs. However, we expect these earnings to support the 17 percent loan growth target that the regulator has set."

The firm said it assessed Vietinbank's risk position as "adequate" because of the bank's simple business model, where the bulk of its revenue comes from traditional commercial lending products.

S&P added it expected Vietinbank's asset quality to remain weak by international standards due to operating environment risks in Vietnam's banking industry and the bank's evolving risk management practices and rapid loan growth in recent years.

Vietinbank's loan to deposit ratio is comparable to the industry and supports the bank's "average" funding profile. Vietinbank's holdings of cash and other liquid assets support its "adequate" liquidity profile, according to S&P.

The rating on Vietinbank is one notch above the SACP to reflect the bank's "high systemic importance " in Vietnam and our assessment that the Vietnamese government is "highly supportive."

The negative rating outlook on Vietinbank reflects the outlook on the sovereign rating on Vietnam (BB-/Negative/B; axBB/axB), S&P said.

The outlook may be revised, according to S&P, if the country's sovereign rating is improved, or if the bank's  SACP to B+' following any large capital-raising, including via a stake sale to a strategic partner.

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