Moody’s Investors Service has for the first time assigned long-term local and foreign currency deposit and issuer ratings of B2 to Hanoi
-based Tien Phong Commercial Joint Stock Bank (TP Bank
), with stable outlook.
The U.S. rating agency rates the lender’s short-term local and foreign currency deposit and issuer at ‘Not Prime’.
Meanwhile, the bank’s baseline credit assessment (BCA) and adjusted BCA has been rated at b3;
Moody’s has assigned Counterparty Risk Assessments of B2(cr)/NP(cr) to the bank.
“The B2 long-term ratings assigned to TP Bank reflect: (1) its BCA of b3, and (2) a one-notch uplift based on Moody's expectation of a "moderate" probability of support from the Government of Vietnam (B1 stable),” Moody’s said in a statement released Monday.
The b3 BCA assigned to TP Bank reflects its modest solvency and funding metrics.
TP Bank's asset risk is elevated, but largely in line with the average for other rated banks in Vietnam. Around 6% of its adjusted gross loans were problematic at end-June 2016.
“Moody's expects that TP Bank's asset risk will remain elevated in the next 12-18 months, because of rapid loan growth. TP Bank's loan growth amounted to 42% in 2015 and 30% in the first half of 2016, which Moody's views as above-market growth.”
In a move to strengthen its capital buffer in order to accommodate asset growth, TP Bank has attracted $18 million in preferred shares from the International Finance Corporation (IFC) in the third quarter of 2016.
This transaction has improved the bank's regulatory Tier-1 ratio by around 100 basis points, but had a neutral effect on Moody's tangible common equity (TCE) ratio, because Moody’s does not include preferred shares in its calculation of core capital.
In terms of government support for TP Bank, Moody's uses the same "moderate" support assumption as for other private-sector banks in Vietnam.
As a result, TP Bank's B2 long-term ratings incorporate one notch of uplift from its b3 BCA. The "moderate" support assumption is mainly underpinned by the bank's market share of around 1.2% of system assets as of June 2016.
TPBank was one of the nine banks classified by the central bank among nine weak lenders that needed restructuring in 2009.
The bank is privately-owned, and major shareholder groups included SBI Holdings and related companies (around 20% combined stake), DOJI Group and related individuals (19.9%) and FPT Corporation (around 9%) and IFC (4.99%).