Standard & Poor’s (S&P) has revised its rating outlook on Vietnam Technological and Commercial Joint Stock Bank (Techcombank) to stable from negative.

It also affirmed the bank’s ’BB-’ long-term and ’B’ short-term issuer credit ratings.

“We revised the rating outlook on Techcombank to stable because we believe the bank can sustain its above-average profitability over the next 12 months despite competition,” S&P said.

According to S&P, Techcombank has adopted a balanced approach toward profit enhancement and risk-taking. The bank is pursuing a retail-focused strategy, particularly among the mass affluent, while downsizing its chunky corporate exposures to enhance yields. It is also considering downsizing its real estate and construction exposure to de-risk its loan book.

Techcombank’s asset quality has been improving since 2013, reflecting the bank’s efforts to clean up its legacy weak loans through increased provisions and rehabilitation and recovery of bad loans. Techcombank’s gross non-performing loan ratio declined to 1.6 per cent in 2016, from a peak of 3.7 per cent in 2013. Its restructured loans also fell to 0.5 per cent from 9.7 per cent over the same period.

“We expect Techcombank to maintain its capitalisation and liquidity over the next 12 months,” S&P said, adding that the bank has a history of retaining profits with zero dividend payout to preserve capital to support growth. Techcombank’s stable deposit base is backed by a sizable contribution from the retail segment, which underpins its funding profile.

The stable outlook on Techcombank reflects S&P’s view that the bank will maintain its status as a leading privately owned bank in Viet Nam over the next 12 months with an entrenched retail franchise and above-average profitability.

However, S&P noted, it may lower the rating if Techcombank’s business position suffers due to strategic missteps or if its pre-diversification risk-adjusted capital ratio falls below 3 per cent.— VNS