Moody's upgrades Techcombank's outlook for 2024

The credit rating organization Moody's announced to update the outlook for Technological and Commercial Joint Stock Bank (Techcombank) to Stable. Baseline Credit Assessment Index (BCA) of Techcombank continues to be in the group of leading banks in terms of business profile and risk profile, with affirmed rating of Ba3.

Techcombank is the first bank to have outlook upgraded by Moody's in 2024, reflecting the rating agency’s recognition of the bank’s resilience throughout challenging environment of 2022-23. The ratings, BCA affirmation and outlook revision to stable are based on Techcombank's above industry average capitalization and profitability, supported by its stable funding. Specifically, Techcombank's capital adequacy and performance ratios continue to be higher than industry averages, supported further by diverse funding sources.

According to Moody’s report, Techcombank's above industry average capitalization and profitability will support its ratings. Its Tier 1 capital ratio was at 14 per cent as of the end of December 2023 while its return on average assets (ROAA) was 2.4 per cent in 2023, compared to the peer average ROAA of 1.4 per cent over the same period. According to data published by S&P Capital IQ at the end of February 2024 on the ROA index of South East Asia and India banks with book value of more than $3 billion during 2019-2023,  Central Asian Bank (BCA) of Indonesia and Techcombank (Vietnam) are leading with ROAs of 3.1 per cent and 3.0 per cent, respectively.

Techcombank's funding and liquidity will remain broadly stable. Its deposit base improved in 2023 with gains in its current and savings account deposits (CASA) ratio to 40 per cent, a level that is one of the highest among Vietnamese banks rated by Moody's. The bank's efforts to mobilize deposits and the satisfactory liquidity in the system supported its good deposit growth in 2023.

Moody's expects credit risks from the bank's sizeable exposure to the real estate sector to stabilize over the next 12-18 months. Moody’s assessed that Techcombank will benefit from the recovery of the real estate market, as home purchases increase, contributing to a rise in both absolute and ratio of home loans to real estate loans. This remark is particularly derived from the bank’s focus on lending investors, developers of real estate of better quality than the market's average level. Moody’s said that Techcombank's credit risk related to real estate loans will be stable over the next (12-18 months)

According to Moody's, real estate transactions in Vietnam have shown many positive signs, with market supply expected to increase, in an environment where interest rates have fallen sharply from 200 to 300 points recently. The recovery of the economy, plus positive and timely policies and direction of the Government will contribute to a stronger recovery of the real estate market in the near future. High capital adequacy ratio, and ability to operate effectively (including profitability) is also an important factor in Moodys' assessment.