S&P maintains positive outlook for Techcombank

The Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has once again received a “BB-” long-term and “B” short-term issuer credit rating with a “Stable” outlook from S&P Global Ratings. This reaffirmation underscores the bank’s robust financial standing within the context of Vietnam’s dynamic banking environment, which currently holds a sector-wide “b+” anchor.

In this assessment, S&P praised Techcombank’s strategic advancements in profitability, capitalization, asset quality, and funding structure. “We are delighted to see S&P Global Ratings recognize the progress made by Techcombank across a number of dimensions, including superior profitability, stable capitalization and asset quality, and a diversified, low-cost deposit base supported by innovative products and our best-in-market digital customer experiences,” said Mr. Alex Macaire, Techcombank CFO. “S&P’s latest update represents a more positive perspective on Techcombank’s operating environment, reflecting Vietnam’s faster GDP growth as well as Techcombank’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 Techcombank’s current strategy to further diversify our credit book in the future.”

In this round of research update, S&P emphasized Techcombank’s ongoing strong profitability, which is expected to support above-average loan growth. Over the past four years, it has generated an impressive 3 per cent core earnings to average adjusted assets, significantly higher than the sector average of 1-1.5 per cent. This performance is attributed to a high-yield loan book, a large base of low-cost deposits, and strong non-interest income.

Regarding asset quality, S&P noted expectations for Techcombank’s non-performing loans (NPL) to improve gradually over the next 12-18 months, driven by Vietnam’s accelerating GDP growth and a forecasted recovery in the real estate sector in 2025. Following the bank’s results for the third quarter of 2024, S&P and other analysts observed that this recovery will particularly benefit Techcombank, given its business model. Techcombank’s real estate credit book has shown resilience during recent downturns, with the sector’s NPL ratio remaining below the bank’s overall NPL ratio.

S&P’s latest assessment also highlighted Techcombank’s funding mix, commending the bank’s diversified funding sources, longer maturity profiles, and lower funding costs. It believes that Techcombank will “continue to attract diversified, low-cost deposits through innovative savings products and an enhanced digital banking experience,” helping the bank maintain one of the industry’s highest current and savings account (CASA) ratios and lowest funding costs.

Finally, S&P also revised its upgrade scenario for Techcombank, indicating that it could “raise the ratings” if the bank’s risk-adjusted capital (RAC) ratio improves sustainably over the next 12-18 months. This is a noteworthy shift from S&P’s previous assessment, which stated that “an upgrade is unlikely.” Techcombank’s management sees this scenario as aligned with the bank’s strategy to further diversify its credit book, thereby improving its risk-adjusted asset profile and supporting the case for an upgrade.