Vietnam Technological and Commercial Joint Stock Bank (Techcombank) announced its financial results for the nine months ending 30 September 2024.

Jens Lottner, Techcombank CEO said, “Techcombank extended its robust performance into 3Q24, in line with management guidance. TOI [total operating income] excluding recoveries and PBT increased 11.3% and 23.5% YoY respectively. Key operating metrics remained robust with our CASA ratio remaining at 40.5%, net interest margin above 4%, and non-performing loans at 1.35%. Our credit and deposit growth continued to be higher than the industry. Notably, our retail credit book expanded 6.0% QoQ, driven by demand for mortgages."

He added, "3Q24 marked a busy and productive quarter for our insurance business. Techcom NonLife Insurance Joint Stock Company (TCGIns) was established while our exclusive partnership with Manulife was mutually agreed to conclude. These developments open the opportunity for the bank to expand our ecosystem strategy, reaching out to more customers and serving them through more integrated and compelling propositions."

Income statement• In 9M24, net interest income (NII) reached VND 26.9 trillion ($1.0 billion), up 33.9% YoY. NIM (LTM) remained at 4.3%, improving YoY and flat QoQ. Quarterly NIM fell to 4.1%, from 4.3% in 3Q23 and 4.6% in 2Q24, in line with previous management guidance. NIM compression was driven by the adjustment of the flexible pricing policy in some parts of the bank’s real estate books, as well as the overall context of lending competition and pick-up in term deposit rates.

• Net fee income (NFI) grew 17.1% YoY to VND 8.3 trillion ($326 million). Individual performance by product type for 9M24 was as follows:

•  Letters of Credit (LC), Remittance and Other cash and settlement (VND 2,958 billion ($116 million) down 8.1% YoY): lower fee collection YTD were mostly due to headwinds in Letters of Credit (LC) business, which in turn was driven by regulatory changes and adverse interest rate conditions affecting a specific category of credit-linked LCs (UPAS LC).
• IB fees (VND 2,541 billion ($100 million), up 110.6% YoY): 3Q24 IB fees amounted to VND 750 billion ($29.5 million), up 23.3% YoY. While this was lower than 2Q24 record high fees (over VND 1 trillion ($39.3 million), the result was encouraging given the relatively muted bond issuance volume in the period.
• Cards (VND 1,506 billion ($59.2 million), broadly flat YoY): flat net card fee income was mainly due to the high level achieved in the same period last year while Techcombank continued to invest in revamped card campaigns and loyalty programmes, aiming at providing customers with best-in-class rewards and experiences. For the record, Techcombank’s net card fees had jumped 34% in FY23, after an impressive expansion of 172% in FY22.
• Banca fees (VND 594.1 billion ($23.3 million) up 29.8% YoY): the strong progression reflected the outstanding banca experience that Techcombank offered to its customers as confidence in the market slowly began to return.
• FX sales (VND 610.3 billion ($24 million) down 16.5% YoY): the decline was driven by lower FX derivative demand as well as tighter margins, in a context where the VND:USD exchange rate remained close to the SBV’s ceiling rate during most of the reporting period.

• Net income from other activities, excluding recoveries, totalled VND 1,367 billion ($53.7 million), up 3.9% YoY. Most of the income was recognised in 1H24 as the bank realised profit on its bond trading portfolio in anticipation of the pick-up in interest rates.

• Recoveries extended robust collection, resulting in VND 391.3 billion ($15.3 million) in 3Q24, up 88.2% YoY, and VND 829.1 billion ($32.6 million) in 9M24, up 59.5% YoY.

• Operating expenses increased by 10.2% YoY to VND 10.6 trillion ($417 million). In 3Q24 OPEX decreased by 5.5% YoY and 13.1% QoQ to VND 3.4 trillion ($133 million). As a result, 9M24 cost-to-income ratio (CIR) stood relatively flat at 28.4%.

• Provision expenses amounted to VND 3,964 billion ($156 million), a 73.4% increase from 9M23.

Loan loss coverage ratio improved to 103.4% at the end of September 2024.

Balance sheet

By the end of 9M24, Techcombank’s total assets reached VND 927.1 trillion ($36.4 billion), up 9.1% YTD and 18.7% YoY. At the bank-only level, customer credit posted 17.4% YTD growth to VND 622.1 trillion ($24.4 billion).

• On a consolidated basis, 3Q24 saw commendable growth in retail credit, which grew 6.0% QoQ, double the growth of the corporate credit (bonds + loans).

o Retail credit growth was attributable to upbeat performance in mortgage lending, which expanded 6.6% QoQ and 13.2% YTD to an all-time high level of VND 193.6 trillion ($7.6 billion). Notably, mortgage prepayment volume positively declined to a one-year low, whilst disbursement volume remained at a high level of over VND 28 trillion ($1.1 billion).

o Corporate credit grew 2.9% QoQ and 16.3% YTD to VND 395.1 trillion ($15.5 billion). This quarter marked increasing visibility on the bank’s diversification initiatives, with real estate credit remaining almost flat QoQ.

• Customer deposits reached VND 495.0 trillion ($19.4 billion), up 8.9% YTD and 21.0% YoY. Thanks to the commendable results of the new Auto-earning proposition, CASA balance reached a record high level of VND 200.3 trillion ($7.8 billion), driving up the bank’s CASA ratio to 40.5%.

Liquidity and capital

• The bank’s funding position remained robust, with a regulatory loan-to-deposit ratio (LDR) of 82.2% on 30 September 2024, below the 85% cap imposed by the State Bank of Vietnam. On 30 September 2024, short-term funding to medium and long-term loan ratio stood at 24.2%, in line with the last quarter.

• The bank’s capital adequacy ratio (CAR) improved to 15.1% on 30 September 2024, continuing to be well above the Basel II, Pillar I minimum requirement of 8.0%. This level is consistent with the bank’s target range of 14% to 15%.

Asset quality

• Special mention loans (B2) ticked up to VND 5,163 billion ($203.1 million) (from VND 4,855 billion ($191 million) at the end of 2Q24), translating into 0.86% B2 ratio (broadly flat QoQ). Higher B2 formation in the reporting quarter was due to CIC impacts as organic B2 formation reduced slightly to VND 1.9 trillion ($74 million) (vs. VND 2.0 trillion ($78.7 million) in 2Q24).

• Non-performing loans (NPL) stood at 1.35%, from 1.28% at the end of 2Q24. NPL pre-CIC was 1.16%.

Subsidiaries

• In 3Q24, TCBS achieved a profit before tax (PBT) of VND 1,097 billion ($43.1 million) (flat YoY and down 31.9% QoQ), bringing the accumulated nine-month profit for 2024 to VND 3,869 billion ($152.2 million), +28.9% YoY, reaching 105% of the full-year target.

• TCBS maintained the #3 largest brokerage market share (7.09%) on the Ho Chi Minh Stock Exchange (HOSE) and #2 (with 7.89% market share) on the Hanoi Stock Exchange (HNX). This performance shows that TCBS remains a top choice for investors, thanks to its service quality and “Zero Fee” offerings.

• With regard to bond business, TCBS provided underwriting services for a total issuance volume of approximately VND 40 trillion ($1.5 billion) in 9M24, accounting for about 44% market share excluding bank bonds. In 9M24, TCBS’s bond distribution volume reached over VND 57 trillion ($2.2 billion), posting a robust 52.1% YoY increase.

• Thanks to heavy investment in technology infrastructure, TCBS has delivered superior customer experiences. In the first nine months of 2024, the TCInvest platform reported impressive performance with over 86,400 new customers and an average of 166 million visits per month. User satisfaction ratings on the TCInvest app remain high, with scores above 4/5 on both the App Store and CH Play. TCBS continues to cement its pioneering position in fintech by applying generative AI (GenAI) in innovative solutions that provide outstanding customer experiences.

New customers and E-banking transactions

Techcombank ended 9M24 with ~14.8 million customers, adding nearly 500,000 new customers in 3Q24. Of these, 57.4% were acquired digitally and 42.1% were through branches, as the bank accelerated merchant acquisition through suitable offerings for those potential customers such as Auto-earning, Soft POS and other programmes to serve individual needs.

The number of retail customer transactions through e-banking channels was 850.5 million during 3Q24, up 8.9% QoQ and 47.2% YoY. Total transaction value in 3Q24 reached VND 2.7 quadrillion ($106 billion), down 9.0% and up 10.7% YoY. Overall, in 9M24, e-banking transaction volume and value totalled 2.3 billion and VND 8.2 quadrillion ($322 billion) up 53.5% and 20.3% YoY, respectively.

FiinRatings upgraded Techcombank’s credit rating on improved funding and liquidity profile

In August, FiinRatings upgraded the Long-Term Issuer Credit Rating on Techcombank to ‘AA-’, from ‘A+’, with ‘Stable’ outlook. Vietnamese banking sector rating stands at ‘a-’.

According to FiinRatings, an ‘AA-’ rating reflects a stable credit profile, attributable to a solid business profile, in tandem with funding and liquidity strengths and high profitability.

“In this surveillance, Techcombank’s funding and liquidity has shown certain improvements compared to that during our initial rating; this is demonstrated via the bank’s continuous efforts to increase stable funding sources while the liquidity profile remains assured through FiinRatings' stress testing scenario,” FiinRatings announced.

The rating agency also acknowledges that Techcombank has continued to leverage the core strength of its high-quality, affluent customer base and has shown healthy expansion and diversification in its lending strategies; these help to support the bank’s business stability and diversity. “The diversification efforts of the Bank are also witnessed in its corporate loan books, with corporate lending into non-real estate sector becoming the credit growth driver within 2023-2024 and expected to be the bank’s top prioritised strategies in the medium term,” FiinRatings assessed.

Finally, Techcombank's capital and earnings continued to be “the key credit strength” of the bank, and its risk position is reaffirmed at the 'Adequate' level.

Re-disseminated by The Asian Banker