Vietnam’s banking system outlook over the next 12 to 18 months remains negative, in line with the country’s sovereign debt, Moody’s Investors Service said, citing concerns about falling profits and poor asset quality. Domestic economic imbalances pose a risk to banks’ asset quality and make funding more difficult, Moody’s said in a report today. The quality of assets held by banks is “far worse” than implied by officially reported non-performing-loan figures, and some companies have begun reducing deposits due to refinancing difficulties and weaker earnings, Moody’s said. Vietnam is struggling to contain the fastest inflation in Asia and facing slower growth and a persistent trade deficit. Its economy is vulnerable to systemic risk resulting in part from undercapitalized banks, rising debt and deteriorating corporate profits, Credit Suisse Group AG (CSGN) said this week. “The central bank is reinforcing the monitoring of the banks and they are prepared to take action against any that don’t follow their directives,” Alain Cany, the Ho Chi Minh City-based chairman of the European Chamber of Commerce in Vietnam, said by phone today. “We may also see some consolidation in the sector.” Asset quality is worsening and credit growth is beginning to slow after loans swelled…
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