At the same time, Moody's raised Vietinbank's baseline credit assessment (BCA) to b3 from caa1 following the capital transfer from the Bank of Tokyo Mitsubishi UFJ, which acquired a 19.73 per cent ownership in VietinBank for VND15.5 trillion (US$743 million).

This leaves VietinBank with the highest BCA among Moody's-rated banks in Viet Nam.

According to Moody's, the completion of the transaction with the Bank of Tokyo Mitsubishi UFJ results in a substantial increase in VietinBank's Tier 1 capital ratio, to 14 per cent from 9.34 per cent as of March 2013.

"This injection of fresh, measurable capital in the bank gives us confidence that the transaction has distanced VietinBank from the risk of requiring external assistance in the near term to remain economically solvent," Moody's stated.

Moody's said the affirmation on VietinBank's debt and deposit ratings reflected its assessment that the probability that support would be provided by the Vietnamese Government (B2 stable) in a systemic crisis was still very high, given the presence of the Government ownership and VietinBank's market share of 12.53 per cent of the banking system loans and 11.23 per cent in terms of system deposits as of the end of 2012.

The Government stake would be diluted to about 64.46 per cent after the transaction with the Bank of Tokyo Mitsubishi UFJ.

Nevertheless, the Government would continue to exert considerable influence on VietinBank through its majority interest.

This Moody's rating on VietinBank concluded the review for an upgrade that was announced on January 16, 2013. — VNS