FiinRatings upgraded Techcombank’s credit rating on improved funding and liquidity profile

• Techcombank’s CAR reached 14.5%, higher than industry’s average of 12%. 
• The Bank’s NIM reached 4.4%, compared to industry average of 3.2%.

Robust funding and liquidity profile

According to FiinRatings, an “AA-” rating reflects a stable credit profile, attributable to solid business profile, in tandem with funding and liquidity strengths and high profitability.

“In this surveillance, Techcombank’s funding and liquidity has shown certain improvements compared to that during our initial rating; this is demonstrated via the Bank’s continuous efforts to increase stable funding sources while the liquidity profile remains assured through FiinRatings' stress testing scenario.” – FiinRatings announced.

As of 2Q2024, Techcombank’s coverage of stable funding needs by its available stable funding sources (including customer deposits, equity base, and long-term interbank and debt market funding) has shown improvements. Specifically, Techcombank has always been proactive in developing products and features to drive customer engagement, boosting demand for the Bank’s deposits, while simultaneously enhancing capabilities to tap funding from capital market and offshore syndicated loans. This has resulted in growth in available stable funding components and reduced reliance on short-term wholesale funding, which are considered less stable.

At the same time, Techcombank has made strong efforts to increase stable funding from retail customers. Customer deposits (excluding margin deposits) at Techcombank increased by 28.8% compared to the end of 2Q2023, reaching above VND 475 trillion, and stably maintaining around 53% of the Bank’s funding base. Additionally, Techcombank has been implementing the CD Bao Loc (CDBL) product, a term deposit-like product with floating interest rates, attracting more personal and corporate deposits. Accounting for the CDBL’s balance of nearly VND 58 trillion by the end of Q2/2024, the proportion of customer deposits to total equity and funding base was adjusted to 59.4%. FiinRatings estimates the contribution of customer deposits in Techcombank’s available stable funding sources will continue to hover around 65%-75% over the next two years.

Techcombank’s long-term wholesale funding and other long-term debts also gradually increased their contribution to the available stable funding sources. By the end of 2Q2024, the Bank’s short-term wholesale funding contribution to its funding base had decreased to 19% (2Q2023: 21.7%), slightly below the industry average figure of around 20%.

FiinRatings acknowledges that Techcombank has continued to leverage its core strength in customer base and has shown healthier expansions in its lending strategies; these help to support the Bank’s business stability and diversity. “The diversification efforts of the Bank is also witnessed in its corporate loan books, with corporate lending into non-real estate sector becoming the credit growth driver within 2023-2024 and expected to be the Bank’s top prioritized strategies in the medium term” – FiinRatings assessed.

Risk position is at the 'Adequate' level

Techcombank's risk position is reaffirmed at the 'Adequate' level, supported by the Bank’s prudent risk management and recent diversification efforts, which are expected to continue to mitigate its material concentrations in lending to real estate, construction, and related industries. Techcombank's earnings profile remains above the industry average thanks to its strong retail franchise and continued improvement in net fee income. The Bank’s profitability ratios were maintained above industry’s averages. Notably, Techcombank’s NIM witnessed a slight recovery, reaching 4.4% and stayed at the top-tier NIM level in 1H2024 (in comparison to industry average figure of 3.2%).

Capital and earnings continue to be the key credit strength of Techcombank. The resilience of the Bank’s capital base was reflected through top-tier capital adequacy ratio (CAR), even after paying cash dividend in 1H2024. As of 2Q24-end, Techcombank’s CAR reached 14.5%, higher than industry average, at 12%.

The Bank’s robust capital base, in which tier-1 capital accounted for 98%, is strongly supported by the conservative internal monitoring by management team under normal and stress cases. Based on Techcombank’s having strictly monitored CAR as a key operating target and setting internal trigger levels, FiinRatings expects the Bank will be able to maintain its CAR above the industry average and around 14-15% within 2024-2025 under their base-case scenario.

FiinRatings expects the economy to recover in the medium term

FiinRatings has been applying an anchor of “a-” to commercial banks operating in Vietnam, considering the economic risk and industry risk faced by Vietnam’s banking sector. “The overall credit outlook for commercial banks in Vietnam is expected to remain stable thanks to ongoing government supportive measures as well as expectation on the medium-term economic recovery despite the short-term headwinds” – FiinRatings commented.

The stand-alone credit profiles of Vietnam’s commercial banks are expected to be stable, however, according to FiinRatings, there will be certain discrepancies in asset quality across banks, which in turn impacts commercial banks’ capital and earnings.

About Techcombank (Ticker: TCB VN, HOSE)

Vietnam Technological and Commercial Joint Stock Bank (Techcombank) is one of the largest joint stock banks in Vietnam, and a leading bank in Asia, with a vision to Change Banking, Change Lives. The Bank pursues a proven customer-centric strategy in providing a broad range of retail and corporate banking solutions and services to help financially empower its customers. Techcombank has ~14.4 million retail and corporate customers, which it serves through a market-leading digital banking platform and mobile app, and an extensive network of transaction service outlets at locations across Vietnam. The Bank’s ecosystem approach, co-created through partnerships in multiple key economic sectors, adds further scale and differentiation in one of the fastest growing markets in the world.  Techcombank is the only Vietnamese bank to ever win all three most prestigious prizes in the same year by Euromoney, Global Finance and FinanceAsia.

Techcombank is rated AA- by FiinRatings, Ba3 by Moody’s and BB- by S&P, which is the highest among Vietnam joint stock commercial banks.