On 22 July 2020, Moody’s Investors Service confirmed long term rating assessment for VPBank Finance Company Limited (FE CREDIT) remains unchanged at B1. This reinitiated stable outlook concludes Moody’s review for downgrade initiated on 07 April 2020 which also took in the assessment of two other finance companies, namely Home Credit Vietnam Finance Company (HCV), and SHBank Finance Company Limited (SHB Finance) and two banks; Vietnam Prosperity Joint Stock Commercial Bank (VP Bank) and Saigon-Hanoi Commercial Joint Stock Bank (SHB).
The rationalS Moody’s gave for keeping the stable outlook for FE Credit includes the agency expectation that FE Credit is able to mitigate the solvency and liquidity risks caused by the coronavirus thanks to three factors; first is the early reopening of Vietnam’s economy due to the successful control of the outbreak; second is the stabilizing financing conditions supported by ample liquidity following supportive domestic and global measures; and third, the company’s ability to manage credit and liquidity risks amid disruptions from the coronavirus outbreak.
Moody’s concluded that the FE Credit’s funding and liquidity positions are stable during the review period supported by ample international and domestic liquidity. This helped the company to roll over their existing funding and access new funding. The Credit rating service also noted that the company has diversified its funding sources and reduced their funding costs during the same period. However, a caution note is also issued regarding the reliance on wholesale funding and limited balance sheet liquidity, which remains a weakness for credit profiles.
Overall, the short duration of the economic disruptions in Vietnam has helped the company to manage delinquencies and collections within the historical range. While Moody’s has observed early signs of stress in delinquencies and collections, especially in April due to social distancing measures, collections recovered and delinquencies dropped in the rest of the second quarter of 2020. FE Credit has shown prudent risk management, such as tightening underwriting criteria against the backdrop of slowing economic growth.
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