FiinRatings is pleased to announce the upgrade for Techcombank’s Long-Term Issuer Credit Rating

FiinRatings, in our surveillance rating published on 02 August 2024, is pleased to announce the upgrade for Techcombank’s Long-Term Issuer Credit Rating to ‘AA-’ / ‘Stable’ outlook on Improved Funding and Liquidity.

FiinRatings, in our surveillance rating published on 02 August 2024, is pleased to announce the upgrade for Techcombank’s Long-Term Issuer Credit Rating to ‘AA-’ / ‘Stable’ outlook on Improved Funding and Liquidity.  

The issuer rating on Techcombank revised to ‘AA-’ from the previous ‘A+’ is mainly driven by a one-notch upward granted to funding and liquidity profile score to reflect certain improvements in the Bank’s stable funding sources, apart from our expectation that the Bank will continue to retain its solid business position, robust capital and earnings profile while maintaining the current adequate risk position even under some pressure from its real estate exposure. Simultaneously, the ‘stable’ rating outlook is kept for Techcombank to reflect our expectation that the Bank will likely maintain the rating score for the next 12-24 months. The characteristics of funding structure and strategies to diversify and reduce dependence on wholesale funding, along with the ability to mobilize under stress conditions to maintain liquidity position, are factors that we will continue to monitor and update in Techcombank’s upcoming surveillance. 

Regarding the positive rating action or upgrade for Techcombank, we will individually or collectively review these following factors:  

• Earnings and capital strengths are retained at top-of-the-industry level while the Bank significantly diversifies its loan portfolio away from the current capital-intensive and risky segments; 

• Improved funding and liquidity profile, reflected via its stable funding ratio and long-term funding ratio considerably better than industry average; 

• When we upgrade the banking industry anchor to reflect better economic conditions and risks for Vietnam banking industry. 

Otherwise, factors that could, individually or collectively, lead to review for negative rating action or downgrade: 

• Increasing problematic loans result in higher credit costs, therefore straining the Bank’s earnings and capital profile. In addition, the Bank loosens its risk appetite by lending to lower-tier property developers and/or retail customers of lower quality; 

• The Bank's capitalization deteriorates significantly, for example due to the materialization of its single-name or sector concentrations risk, with the CAR declining below the industry average; 

• Earnings are considerably impacted due to (i) lower interest income sources and/or (ii) increasingly unfavorable market conditions that prevent development of fee-income products like IB services and bancassurances; 

• When we believe the Bank can face a near-term liquidity crisis, reflected via: 

1. lower stable funding sources (for example: weakening ability to access offshore long-term wholesale funding while rising funding cost; falling customer deposits due to confidence-sensitive events); and/or  

2. funding uses exceeding funding sources due to the default/delinquencies from the Bank’s single-name or sector concentrations and/or drawdown pressure from off-balance sheet credit-linked items. 

• When we downgrade the banking industry anchor to reflect the less stable economic conditions and rising risks for Vietnam banking industry. 

Considering the economic risk and industry risk faced by Vietnam’s banking sector, we have been applying an anchor of “a-” to commercial banks operating in Vietnam. The overall credit outlook for commercial banks in Vietnam is expected to remain stable thanks to ongoing government supportive measures as well as expectation on the medium-term economic recovery despite the short-term headwinds. The stand-alone credit profiles of Vietnam’s commercial banks are expected to be stable as well, despite worsening in asset performance, which in turns impacts commercial banks’ capital and earnings. 

Please access HERE for our detailed Public Announcement on the rating. 

Other rating publications by FiinRatings can be accessed at: https://fiinratings.vn/RatingDetail/2092/en  

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