Moody's has upgraded VIB's bank financial strength rating

Hanoi, 22 September 2014 – According to Moody’s, Vietnam International Bank (VIB) and Vietinbank have become the 2 banks with the highest bank financial strength rating (BFSR) among Vietnam’s 9 large banks. In particular, VIB’s baseline credit assessment (BCA) has been upgraded to B3 (previously Caa1). VIB is the only bank that was upgraded among 9 local banks rated by Moody’s on 22 September 2014. Concurrently, Moody's upgraded the bank's deposit rating from B3 to B2 (one of the three banks with highest rating).

VIB’s upgraded ratings are thanks to its Tier 1 ratio of 16.3% in Vietnam’s banking system, outstanding corporate and risk governance capabilities, active support provided by its strategic shareholder – the Commonwealth Bank of Australia (CBA), restructured business strategies towards sustainable development as well as higher provisioning strategies against non-performing loans (NPLs).

For VIB, this information is positive and anticipated by the bank in the context where international credit rating providers and financial institutions started to look into Vietnam’s banks with clearer differentiation in terms of internal strength, vision, transparency and sustainability in business. Previously, IFC, a member of the World Bank Group, awarded the “Best GTFP issuing bank in East Asia and the Pacific” to VIB in Quarter 1, 2014. A leader of VIB said that the upgraded ratings reflect results of the transformation process that has been implemented by the bank over the last 3 to 4 years. In particular:

• The strategy to change customer base has helped VIB get rid of customer segments with high risk and focus on corporate/personal customers with good financial potentiality, proper needs of finance for business as well as life quality improvement. By implementing this strategy strictly over the last 3 years, the bank has fundamentally changed its risk appetite, accepted a reduced margin of profits to attract good customers, and applied a centralized credit approval;

• Corporate and risk governance is a competitive advantage of VIB. This factor is always emphasized by VIB’s leaders and staff. In risk management, risk appetite is determined for each period in order to fit the bank’s development strategies. VIB constantly owns the highest capital adequacy ratio (CAR) in the local banking system, ranging from 16% to 18%. During the market turmoil, the bank has made significant investments in the list of secure assets with high liquidity (with cash and government bonds accounting for around 25% of its assets as at June 2014). VIB has been very aggressive in handling problematic loans when the loans became overdue or likely to be overdue. The bank’s risk management is the very basis for the State Bank of Vietnam to select VIB as one of the 10 banks for pilot implementation of the risk management model in line with Basel II this year.

• CBA - one of few banks with Aa2 deposits and one of the world’s 15 largest banks in capitalization, invested an amount equivalent to USD200 million to own a 20% stake at VIB. CBA has provided strategic assistance to help VIB develop and strengthen its retail banking, risk management, technology, personnel, corporate governance and finance. Specially, while not a few foreign strategic shareholders gradually withdrew from their strategic cooperation with local financial institutions, CBA still wishes to continue investing in VIB.

• VIB is one of the few leading banks with modest profits obtained over the last few years. Setting up a higher provision fund and accepting a reduced margin of profits to attract good customers are 2 of the causes for this. In particular, over the last 3.5 years, VIB has established a provision fund of over VND3 trillion and become one of few banks with the highest provision ratio in the local banking system. The current provision fund of over VND1.7 trillion will continue to help VIB deal with risks and clean NPLs soon. Despite the high provision fund, the bank’s equity is still remained at more than VND8 trillion.

• The people strategy has helped the bank attract a team of good managers who are both nurtured internally and come from international financial institutions and CBA. With the transparency, integrity and performance-orientation, VIB has increased salary for over 50% of its staff annually even in the difficult periods. Simultaneously, the bank has applied a contribution map and performance map as the basis for salary/bonus to boost individuals’ performance and promotion. VIB has also been a pioneer in disciplining its staff who violated the bank’s core values and regulations. The bank has significantly reduced employees with low productivity over the last years. This has helped VIB optimize its costs.

Moody’s upgraded credit rating for Vietnam in July 2014 and for VIB on 22 September 2014 and changed some local banks’ outlooks to positive at the same time. These are some good points reflecting customers’ confidence in the banking system when the macro market shows positive signals. Let’s wait for more good news ahead.