Moody's Investor Service has upgraded Techcombank's Baseline Credit Assessment (BCA) and credit rating, meaning Techcombank now has the strongest creditworthiness of all Vietnamese banks, with capital and profitability its credit strengths.
Specifically, Moody's upgraded Techcombank's long-term counterparty risk assessment (CRR) to Ba1 from Ba2 and long-term deposit to Ba2 from Ba3, with a stable outlook. Moody's also upgraded the bank's BCA to ba2 from ba3. Techcombank is currently the only Vietnamese bank with a BCA of ba2.
Moody's explained that its ratings action reflects Techcombank's strong standalone creditworthiness and the upgrade of Viet Nam's issuer rating to Ba2 from Ba3 on September 6, 2022. Before this rating action, Techcombank's BCA and ratings were constrained by Viet Nam's previous sovereign rating of Ba3.
Techcombank's asset quality also remained broadly stable despite the pandemic, with the gross non-performing loan (NPL) ratio increasing modestly to 0.7 per cent as of the end of 2021 from 0.5 per cent a year earlier. Loan loss coverage was also high at 163 per cent as of 2021.
Moody's views capital and profitability as Techcombank's key credit strengths. Capital, measured by tangible common equity to Moody's-adjusted risk-weighted assets, was 13.6 per cent as of the end of 2021, one of the highest among Moody's rated Vietnamese banks. Moody's expects Techcombank's capital to be stable over the next 12 –18 months because asset growth will be supported by strong profitability. Techcombank also reported a return on tangible assets of 3.3 per cent in 2021.
Earlier on August 24, 2022, S&P Global Ratings said Techcombank's rating was BB-/B with a stable outlook. S&P assesses that the bank's overall profitability should remain above the industry average with a return on assets of 3.3-3.6 per cent. Its profitability will be supported by its high-yielding loan book, a high share of low-cost deposits, and sizable non-interest income (due to export-led trade finance and foreign exchange income, cross-sales of retail products, e-transaction channels, loan processing, and card fees).
The rating agency also expects rangebound credit costs for the bank because Viet Nam's economy has rebounded after the COVID-related slowdown in 2021. It believes Techcombank has moderate systemic importance in Viet Nam and assesses the Government as highly supportive, resulting in a moderately high likelihood of Government support. The stable outlook on Techcombank reflects S&P's view that the bank will maintain its entrenched retail franchise and above-industry-average profitability over the next 12-18 months. — VNS