In 2019, Vietnam Technological and Commercial Joint Stock Bank (Techcombank, stock code: TCB) continued to achieve impressive growth with consolidated pre-tax profit of 12.840 trillion dong, up by 20.4 percent compared to 2018. If excluding the extraordinary profit from the divestment from TechcomFinance in 2018 with a total value of 894.4 billion dong, the profit growth of Techcombank in 2019 would reach a remarkable level of 31.5%.
The bank continues to focus on cost cutting to improve business performance. Techcombank accepts a decline in fee income in exchange for an increase in Current Account Savings Account (CASA). Techcombank has constantly recorded high CASA in recent years, with a particularly high increase of 32.2 percent compared to 2018. This helped the bank achieve a higher level of income from mobilisation than from lending. This trend will also be maintained in the near future to significantly improve the bank’s income in 2020. The number of new customers of Techcombank reached over one million customers in 2019, doubled the number of new customers of previous years.
On the other hand, Techcombank’s long-term loans sharply rose while the proportion of corporate bonds plummeted in total credit. More specifically, the bank’s corporate bonds fell by 29 trillion dong, and long-term loans rose strongly by 35 trillion dong, helping Techcombank’s profit-generating assets increase by 19 percent and the Net Interest Margin (NIM) increase by 22 basis points compared to the same period. Techcombank’s total credit went up by 19 percent in 2019, much higher than the 13.56 percent of the industry as a whole.
Techcombank’s income from bancassurance has started to show signs of slowing down after a period of strong growth. The income from bancassurance service of Techcombank in 2019, despite still growing impressively by 29%, slowed down compared to the 41 percent growth recorded in 2018. The growth of income from bancassurance of Techcombank is currently behind banks which are in the first phase of developing bancassurance such as Asia Commercial Joint Stock Bank (ACB) and Tien Phong Commercial Joint Stock Bank (TPBank), but still higher than Vietnam Prosperity Commercial Joint Stock Bank (VPBank) and Military Commercial Joint Stock Bank (MBB).
In addition, the income from securities trading and investment recorded an outstanding growth with 1.640 trillion dong of profit, up by 77.4%, of which subsidiaries in investment banking accounted for 22 percent of total income. The fee income from investment banking which is Techcombank’s strength no longer grew but declined slightly by 3.4%. The decrease of 16.4 percent in income from bond issuance guarantee service was offset by the increase of 222 percent in income from fund management services, mainly from bond funds and the capital market.
In the context of the complicated Covid-19 epidemic developments, Techcombank remains fairly optimistic and expects its business results to continue growing steadily when the Gross Domestic Product (GDP) growth of Vietnam is forecasted to decline to 6.3%. However, the bank also said that it would be difficult to achieve the credit growth target of 14 percent like in 2019 due to the ongoing epidemic. According to survey data from Techcombank’s customers, the capital demand of customers engaging in trade with China has somewhat declined. Therefore, it is not easy to achieve a credit growth of about 14 percent like in 2019 while mobilisation growth remains at a good level.
In a recent report, the credit rating agency Moody’s mentioned that the asset quality of banks in Vietnam will be at risks due to the disruption in supply chain. If the epidemic persists, bad debts in manufacturing business, trade and some other areas will increase, because Vietnam is heavily dependent on the global supply chain.
Nevertheless, this is not too worrying for Techcombank as its credit costs and bad debt ratio are both low at the bottom level. In 2019, the bank’s provision expenses sharply dropped by 50.3%, and credit costs also fell from 0.93 percent in 2018 to 0.38 percent in 2019. The bank’s asset quality continued to improve with bad debt ratio declining from 1.75 percent to 1.33%. At the same time, the bank’s Loan Life Coverage ratio (LLC) also reached a peak of 94.8 percent in 2019 from 85.1 percent in 2018. In addition, Techcombank forecasted that despite the slight fluctuation of the exchange rate, the bank’s international payment, import and export activities of corporate customers will still be well maintained without too many risks.
With impressive business results and a future growth prospect, Techcombank’s stock price is expected to continue its upward trend. Saigon Securities Incorporation (SSI) made a positive recommendation for TCB shares with a target price of up to 26.900 dong per share when the bank’s pre-tax profit is forecasted to increase by 14.4%. Viet Dragon Securities Company (VDSC) also recommended investors to purchase TCB shares with a target price of up to 28,000 dong per share while predicting the bank’s after-tax profit growth to be 16.3 percent with Earning per share (EPS) of 3,102 dong.
