Moody's raises Sacombank's credit rating


On March 31, 2021, international credit rating agency Moody's upgraded Sacombank's long-term deposit rating from Caa1 to B3 with a stable outlook, and upgraded the baseline credit rating (BCA) and BCA upregulates Caa1 from Caa2. This credit rating change of Sacombank's shows that Moody's seriously considers efforts to improve asset quality, handle bad debts and outstanding assets according to the restructuring strategic roadmap. Since the merger period, according to Moody’s, Sacombank has improved dramatically and become more transparent than before in terms of ownership structure and banking governance.

The challenges of the socio-economic environment in 2020 have not slowed down the implementation of Sacombank's restructuring and business development strategy. Most of the progress targets of the Restructuring Project have been fully completed by the Bank.

The total consolidated assets of Saocombank as of December 31, 2020 reached nearly VND 493,000 billion, an increase of nearly 10%, of which profitable assets increased by 13%. Total deposits reached more than VND 447,000 billion which mobilizing from economic organizations and residents, reaching more than VND 439,000 billion. The structure of the deposit portfolio is increasingly diversified with a longer average term than in previous years.

Sacombank's liquidity and capital mobilization ability, according to Moody's, has always been an advantage which thanks to its extensive business network and solid individual customer base. In addition, the bank is less dependent on capital that is sensitive to market fluctuations such as interbank deposit/receipt, accounting for only about 3% of total assets and is the lowest among Vietnamese banks ranked by Moody's class. Therefore, Sacombank's liquidity score has always been at B3, stable since 2017 until now. In fact, the Bank's liquidity status in 2020 increased by more than 80% compared to 2019. The safety ratios always ensure compliance with the limit regulations set by the State Bank.

In this updated report, Moody's has confirmed positive progress on banking governance and shareholder structure. This comes from the implementation of Sacombank's governance mechanism in the direction of centralized management - decentralized administration; ensuring publicity, transparency and respectively alighment to the law in all activities with the principle of protecting and increasing legitimate interests for shareholders, banks and customers at the highest level during the past years.

Loan repayment capacity is considered by Moody's to be extremely challenging for Sacombank when the volume of problem assets is large and the ratio of total problem assets to credit provision and tangible equity is at a very high level at the merger time. This is a key point that influences the credit rating decision of Moody's for Sacombank. Thanks to the application of a flexible problem-solving strategy that is suitable to market tastes and the drastic implementation of bad debt over the years, Sacombank has impressively reduced the above ratio. Grom a high level of 415% (at the end of 2016), the aforementioned ratio decreased to 384% (end of 2017) and only 151% at the end of 2020. To achieve that impressive result, Sacombank has accelerated the recovery and bad debt settlement with total revenue of more than 15,200 billion dong, reducing the bad debt ratio to 1.6% throughout 2020.

Moody's also noted that Sacombank's credit ratings may increase in the future once the bank significantly improves its loan repayment capacity through liquidation of problematic assets to receive cash, increase provisions and get permission from the State Bank to increase capital.

The achieved results together with the positive assessment of Moody's show that Sacombank has really transformed in terms of internal strength and financial capacity.