BAC A BANK assigned an ‘A-’ rating with a ‘Stable’ outlook

DNHN - In early April 2024, FiinRatings - a member of FiinGroup and a partner of S&P Global Ratings in Vietnam - assigned BAC A BANK a long-term issuer credit rating of ‘A-’ with a ‘Stable’ outlook.

According to the first credit rating from FiinRatings, BAC A BANK’s business profile is assessed at the ‘Moderate’ level with business stability appropriate to the Bank’s business model. “We assess BAC A BANK’s business stability as ‘Appropriate’, contributed by its modest but stable scale in the industry over the years; consistent lending policy towards essential industries less sensitive to economic fluctuations, along with a strategy to expand its customer base in the medium term”.

According to FiinRatings’ first credit rating report, BAC A BANK has the advantage of receiving an ‘A-’ rating with a ‘Stable’ outlook in the next 12 - 24 months.

The first point is that BAC A BANK’s risk position is assessed at the “Very Good” level, demonstrated by a clearly defined and consistent risk management process, combined with a consistent risk appetite towards both retail and corporate customers with low-risk levels. BAC A BANK’s experience and history of asset quality management have always been good and more prudent than the industry average, with a lower level of potential risk than the industry thanks to a relatively simple business model and a focus on lending.

“We assess that BAC A BANK has maintained asset quality and credit costs more stable than the industry average in challenging business conditions. During 2019-2023, BAC A BANK’s average annual loan growth rate was 7.2%, lower than the industry average of around 15%. However, during this period, BAC A BANK has controlled the ratio of problem loans (including Group 2 loans and bad debts - Groups 3,4,5) quite well and has always maintained a meagre ratio of bad debts. Although the ratio of bad debts tended to increase in 2023 (along with the trend of the banking industry), BAC A BANK still maintained the lowest ratio of bad debts in the system, at 0.92% as of December 31, 2023, lower than the industry median of 2.3% at the same time”.

Regarding provisioning, BAC A BANK’s bad debt coverage ratio has always been maintained at a level much higher than the industry average and tends to increase with the industry, especially in the period from 2020 onwards when the SBV continuously issued regulations guiding the restructuring of loans affected by the Covid-19 pandemic. As of December 31, 2023, the Bank’s bad debt coverage ratio reached 131.0% (2022: 203.8%; 2021: 161.8%), while the industry average was 63.7% (2022: 68.9%; 2021: 60.9%). This ratio of BAC A BANK is at the same level as the group of leading private banks and banks with high-yield asset portfolios. Provisioning expenses increased by 35.7% year-on-year, equivalent to the growth rate of problem loans. Post-provisioning recovered debt decreased by 34.0% year-on-year to VND 93 billion. In addition, BAC A BANK’s credit cost ratio increased to 0.2% (2022: 0.1%; 2021: 0.3%). FiinRatings estimates that this ratio will be maintained around 0.2 - 0.3% in the period 2024-2025.

“With the orientation of lending to sectors encouraged by the government, which are less risky and volatile such as high-tech agriculture, and social security, it has helped to consolidate BAC A BANK’s risk position in nearly 30 years of development. The Bank has been maintaining a stable loan portfolio with more than half of the portfolio structure coming from essential and less volatile industries (manufacturing and processing industry accounting for 37%; agriculture, forestry and fishery accounting for 18%) - focusing on large enterprises in the industry with good credit quality and in BAC A BANK’s typical lending value chain. In addition, we always accompany and provide investment advice to customers in these industries, so we have a comprehensive understanding of their business operations and closely monitor their cash flow.” - Mr Chu Nguyen Binh, Deputy General Director of BAC A BANK, said.

‘Appropriate’ capital and liquidity profile thanks to the Bank’s increased capital structure stability, and continues to benefit from a highly engaged retail customer base. BAC A BANK’s stable funding ratio, according to FiinRatings’ adjustment, although slightly decreasing in the period 2019-2023 and reaching an average of 100.1%, is still maintained at a higher level than the industry average of 98.8%. The ratio of highly liquid assets to short-term wholesale funding is maintained at a level of over 1.0 times. With a good liquidity situation, stable customer deposits combined with strong interest rate reduction policies from the second quarter of 2023 to the present, BAC A BANK’s cost of capital in 2024 - 2025 is expected to gradually decrease to the level approaching the industry average.

Other assessment factors: Business profile; Capital structure and Profitability of BAC A BANK are rated ‘Moderate’ by FiinRatings based on factors such as the Bank’s scale and business diversification being more modest than the industry average.

For more details about FiinRatings and FiinRatings’ first issuer credit rating report on BAC A BANK, as well as the outlook for future upgrades or downgrades, please visit the bank’s website: www.baca-bank.vn

Tieu Cat