Moody's assigned first-time ratings to Vietnam's Orient Commercial Joint Stock Bank.
The rating agency said April 10 that it assigned the bank long-term local- and foreign-currency deposit issuer ratings of B2, with a stable outlook. It also assigned the lender short-term local- and foreign-currency deposit and issuer ratings of Not Prime, a baseline credit assessment and adjusted baseline credit assessment of "b3" and counterpart risk assessments of B2(cr)/NP(cr).
The bank's long-term ratings reflect its baseline credit assessment of "b3" and a one-notch uplift based on expectations of a moderate probability of support from Vietnam's government, Moody's said. The lender's baseline credit assessment also reflects expectations that the bank's asset quality and capital profile will weaken over time given its aggressive loan growth strategy.
Oriental Commercial Bank's asset risk is expected to remain elevated over the coming 12 to 18 months given its rapid loan growth in 2015 and 2016, which was much higher than for the overall banking sector in Vietnam, Moody's said. It added that the bank's corporate loan portfolio has concentrations in construction and real estate, which is credit negative.
An upgrade of Oriental Commercial Bank's baseline credit assessment could result from a reduction in its adjusted problem loans ratio to below 4%, the rating agency said. Loan diversification away from real estate and construction loans and an improvement in Vietnam's weak macro profile would also be positive for the baseline credit assessment.
Moody's could upgrade the bank's long-term ratings if its baseline credit assessment and Vietnam's sovereign ratings are upgraded.
Conversely, a downgrade of Oriental Commercial Bank's long-term ratings could result from its problem loans ratio rising above 10% of gross loans or its tangible common equity dropping significantly below 7%, Moody's said. The ratings are also sensitive to a significant weakening in the bank's liquidity profile.