Fitch affirms HSBC Vietnam ‘BB’ rating, outlook positive

Fitch Ratings has assigned HSBC Vietnam a long-term foreign-currency issuer default rating (IDR) of “BB” and its long-term local-currency IDR of “BBB-“ while the outlook is positive, Fitch Ratings said Monday.

HSBC Vietnam’s rating is driven by the expectation of support from its parent HSBC, Fitch Ratings noted. The rating also considers HSBC Vietnam’s growing strategic importance to HSBC as the bank reaps benefits from Vietnam's robust economic growth, as well as its highly integrated operations with that of its parent.

Nevertheless, Fitch Ratings said the propensity of the parent to support the entity is capped by the transfer and convertibility risks in Vietnam, as indicated by the Country Ceiling of “BB.”

Regarding repayment risks in local currency, Fitch Ratings said HSBC Vietnam’s long-term local-currency IDR is two notches above Vietnam's sovereign rating. This reflected Fitch Ratings’ belief of a lower likelihood of the sovereign restricting parental support for HSBC Vietnam's local-currency obligations relative to foreign ones, even if the sovereign is in distress.

The “positive outlook” on the IDRs indicates that on the sovereign, as the ratings are likely to be upgraded if the country's sovereign rating and Country Ceiling are upgraded.

HSBC Vietnam's contribution to its parent's balance sheet and revenue is modest at around 1%, but this is likely to increase over time on the bank's strong revenue and balance sheet growth prospects, Fitch Ratings highlighted.

HSBC Bank (Vietnam) Ltd. reaped a post-tax profit of VND2.65 trillion ($110 million) in the first half of 2023, up 141.3% year-on-year, according to the bank’s audited financial statement.

The bank’s net interest income went up 157.3% year-on-year to over VND4 trillion ($166.2 million).

In combination with other incomes, including fee and commission, dealing in foreign currencies and trading of held-for-trading securities, HSBC Vietnam made a total operating income of more than VND4.91 trillion ($204 million), up 84% year-on-year.