The credit rating agency Moody’s has announced an upgrade of the outlook for Technological and Commercial Joint Stock Bank (Techcombank) to Stable. The Baseline Credit Assessment Index (BCA) of Techcombank remains among the leading banks in terms of business and risk profiles, with an affirmed rating of Ba3.
Techcombank is the first bank to have its outlook upgraded by Moody’s in 2024, demonstrating the rating agency’s recognition of the bank’s resilience amidst the 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 exceed industry averages, further supported 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 stood at 14 percent as of December 2023, while its return on average assets (ROAA) was 2.4 percent in 2023, compared to the peer average ROAA of 1.4 percent over the same period. Data published by S&P Capital IQ at the end of February 2024 shows that Techcombank (Vietnam) and Central Asian Bank (BCA) of Indonesia lead the pack with ROA of 3.0 percent and 3.1 percent, respectively, among South East Asia and India banks with a book value of more than $3 billion during 2019-2023.
Techcombank’s funding and liquidity are expected to remain broadly stable. Its deposit base improved in 2023 with gains in its current and savings account deposits (CASA) ratio to 40 percent, 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 contributed to its solid deposit growth in 2023.
Moody’s anticipates that credit risks stemming from the bank’s sizable exposure to the real estate sector will stabilize over the next 12-18 months. Moody’s projects that Techcombank will benefit from the recovery of the real estate market as home purchases increase, driving growth in both the absolute number and ratio of home loans to real estate loans. This observation is attributed to the bank’s focus on lending to investors and developers of real estate with above-average quality compared to the market. Moody’s indicates that Techcombank’s credit risk associated with real estate loans will remain stable over the next (12-18 months).
Moody’s notes that real estate transactions in Vietnam exhibit positive signs, with market supply expected to increase amidst a backdrop of declining interest rates. The economic recovery, coupled with favorable policies and guidance from the Government, will contribute to a robust rebound in the real estate market in the near future. High capital adequacy ratio and ability to operate effectively (including profitability) are also key factors considered in Moody’s assessment.
