The State-owned Bank for Investment and Development of Vietnam has become the first bank in the country to be assessed by an international ratings agency, as the bank prepares for equitisation next year.
BIDV is hoping that the new ratings will help shore up investor confidence
Moody’s Investor Service last week gave BIDV a Ba1 rating for deposit in dong and a B1 rating for foreign currency deposit, which are equivalent to the agency’s ratings for Vietnam as a whole earlier this year.
The credit ratings agency gave BIDV issuer ratings of Ba1 and Ba3 for local and foreign currencies, which are equivalent to banks in countries in China and the Philippines even though those countries as whole had higher ratings than Vietnam.
BIDV officials expect that the ratings will help the bank gain trust from both credit institutions and investors abroad, and will help BIDV to raise capital in foreign markets in the future.
However, Moody’s gave BIDV an E rating for its financial strength rating, but with a positive outlook.
“The E rating reflects the bank’s asset quality problems and the fact that its liquidity needs improving. However, the E rating with a positive outlook indicates that the bank’s return on its assets is increasing,” said BIDV general director Tran Bac Ha.
He said that the bank will set aside about VND5 trillion ($314.4 million) for its risk management reserve later this year for bad debts as of December 31, 2005. Moody’s estimated the bank’s return on risk-adjusted assets at 2.7 per cent.
“The rating is a breakthrough step as BIDV prepares to equitise during 2007-2008 and will conduct the ratings annually,” Ha said.
BIDV will issue its first bonds this week in the first phase of the total issuance worth VND3.25 trillion ($204.4 million) to increase its equity this year.
The bond will have maturities of 10-12 and 15 years and then will be listed on the stock market and bought back by the bank five years prior to maturity. However, the bonds will not be converted into shares once the bank is equitised. “With the rating, the bonds become the first to meet international standards, reflected by the fact that the volume of order is far higher than fixed volume for sale,” Ha said.
For the time being, local bankers use both international and internal auditing standards but none of them have signed contracts with an international credit rating agency.
No. 760/May 8-14, 2006