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S&P Global reaffirmed Techcombank's BB- Rating with stable outlook
Vietnam Technological and Commercial Joint Stock Bank (“Techcombank” or the “Bank”) reported on 2024 annual rating assessment by S&P Global Ratings (“S&P”), which re-affirmed the Bank’s ‘BB-’ long-term and ‘B’ short-term issuer credit rating with a ‘Stable’ outlook.
“We are delighted to see S&P Global Ratings recognize the progress made by the Bank across a number of dimensions, including superior profitability, stable capitalisation and asset quality, and a diversified, low-cost deposit base supported by innovative products and our best-in-market digital customer experiences.
S&P’s latest update represents a more positive perspective on Techcombank’s operating environment, reflecting Vietnam’s faster GDP growth, as well as the Bank’s loan book quality, which has been resilient to the recent economic downturn while both ratings and outlook have been maintained. S&P has also revised up their rating upgrade scenario and this is aligned with the Bank’s current strategy to further diversify our credit book in the future.” - Alex Macaire, Techcombank CFO, said.
On 6 November 2024, S&P Global Ratings released its annual research update on Techcombank, affirming the Bank’s ‘BB-’ long-term and ‘B’ short-term issuer credit rating and ‘Stable’ outlook, which is higher than the ‘b+’ anchor of the banking sector.
In this round of research update, S&P highlighted:
- Techcombank will likely maintain above-average profitability alongside stable capitalization and asset quality.
- Techcombank’s sizable low-cost and sticky deposit base mitigates the Bank's dependence on wholesale funding.
- Techcombank’s ‘Stable’ outlook reflects S&P’s opinion that the Bank will maintain its strong retail franchise and above-industry-average profitability over the next 12-18 months.
In its assessment, S&P emphasised Techcombank’s continued superior profitability, which it expected to support above-average loan growth. For the record, Techcombank has been able to generate an average of 3% core earnings to average adjusted assets in the past four years, significantly higher than 1.0-1.5% of the sector average. The drivers, as S&P acknowledged, were “a high-yielding loan book, a large share of low-cost deposits, and sizable noninterest income”.
On asset quality, S&P noted that it expects the Bank’s non-performing loans (NPL) to improve gradually over the next 12-18 months. This will come as Vietnam’s GDP growth accelerates and the country’s real estate sector further recovers in 2025. According to S&P and many analysts (following the Bank’s 3Q24 results), the recovery of the real estate sector will particularly benefit Techcombank given the characteristics of its business-model. S&P also recognised that Techcombank’s real estate credit book has proven resilient to the recent downturn, with the sector’s NPL ratio remaining below the Bank’s headline NPL ratio.
An important part in S&P’s latest assessment is Techcombank’s funding mix with the rating agency giving credit to the Bank’s diversified funding sources, longer maturity profiles and lower funding costs. S&P also believes that Techcombank will “continue to attract diversified, low-cost deposits through innovative savings products and an enhanced digital banking experience. This will help the Bank maintain one of the highest ratios of current accounts and savings accounts in the industry and low funding costs.”
Lastly, S&P has revised its upgrade scenario for Techcombank, stating that it could “raise the ratings” if the Bank’s risk-adjusted capital ratio (RAC) improves sustainably over the next 12-18 months. This is a significant shift by S&P to a more positive perspective compared to its last assessment of the Bank, which stated that “un upgrade is unlikely”. Techcombank’s management views this upgrade scenario to be in line with the Bank’s communicated strategy to further diversify its credit book. This diversification will improve the Bank’s risk weight-adjusted asset dynamic and help its to optimize this ratio and support the case for an upgrade.
FiLi
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