Moody's has upgraded the ratings of two Vietnamese banks, citing their improvements in the standalone credit profile. The long-term deposit and issuer ratings of both the Vietnam Technological and Commercial Joint Stock Bank or (Techcombank) and Asia Commercial Bank (ACB) were upgraded to B2 from B3 last week. At the same time, the United States-based credit rating agency also lifted the two banks' baseline credit assessment (BCA) to B3 from CAA1. Moody's also changed the outlook of both Techcombank and ACB to stable from positive. According to Moody's, Techcombank's asset quality metrics have improved in 2014 and in the first half of 2015, although from a relatively weak base. The improvements in asset quality were driven by write-offs, recoveries and some credit growth. The unlisted bank's problematic assets decreased to 12.8 percent of gross loans as of June 2015, from 14.4 percent in December 2014 and 20.1 percent in December 2013. The bank's balance sheet contraction – namely in available for sale securities – led to an improved equity-to-assets ratio of 9.1 percent as of June 2015, from 8.5 percent in December 2014. During the same period, the bank's tangible common equity-to-risk weighted assets also improved to reach 10.1 percent from 9.2 percent. Moody's said that it also viewed as positive that the bank was not materially reliant on market sources for funding, with its ratio of market funds to banking assets amounting to 14 percent as of June 2015. As of the same date, liquid assets such as cash, interbank, government bonds and trading securities amounted to 36 percent of the assets. "These liquid assets were of relatively good quality, because government securities made up about one-third of the balance," Moody's said. It said the ACB's asset quality metrics had stabilised as the management pursued a more conservative strategy on loan growth. "While problem loans still account for a large proportion of the total assets, the bank has made gradual progress in resolving or writing off its problem exposures," it said. ACB's problem loans ratio declined slightly to reach 4.66 percent at the end of June 2015, from 4.75 percent at the end of 2014, and down from a high of 7.77 percent at the end of 2012. Moody's attributed some of the improvement to the transfer of assets to the Vietnam Asset Management Company. ACB's moderate loan growth has also further reduced the risk that newer loans could deteriorate and materially weaken asset quality. Loan growth was nine percent in 2014 and three percent in 2013, significantly below the system averages of [15 percent] in 2014 and [15 percent] in 2013, Moody's said. The bank's profitability has also stabilised, with core revenue growth – including net interest and fee income – of six percent in 2014, following a 32 percent reduction in 2013.-VNA