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Techcombank’s credit rating downgraded to Ba3 by Moody’s

Techcombank’s credit rating downgraded to Ba3 by Moody’s

Wednesday 22, 03 2023
Credit rating agency Moody's has downgraded Techcombank's credit rating to Ba3 in the challenging context of the Vietnamese market.

Techcombank’s outlook downgraded from stable to negative

On March 22, credit rating agency Moody's announced changes to the credit rating of Vietnam Technological and Commercial Joint Stock Bank (Techcombank - Code: TCB).

Vietnamcredit Techcombank

Accordingly, Moody's downgraded Techcombank's long term deposit and issuer ratings in foreign currency (FC) and local currency (LC) from Ba2 to Ba3; Baseline credit assessment (BCA) was adjusted from ba2 to ba3; The bank's LT FC and LC counterparty risk rating (CRR) was downgraded from Ba1 to Ba2.

It also changed the bank's outlook rating from stable to negative for FC and LC deposit and issuer ratings.

Moody's said that Techcombank's downgrade and rating reflects an expectation that negative impacts from the real estate market will affect the bank's independent credit strength and is unrelated to the recent incident of American banks at Credit Suisse.

This organization also has certain concerns about recent fluctuations that have caused interest rates to rise, thereby increasing the cost of capital for both project investors and home borrowers, causing a weakening impact on the real estate market and other related industries.

Vietnamcredit real estate and construction sectors

By the end of 2022, loans to the real estate and construction sectors accounted for 29% of Techcombank's total loans, and corporate bonds accounted for about 6% of total assets. The bank also has a number of large investments in the real estate sector that are substantial relative to equity.

Previously, in the assessment in September 2022, Techcombank had the same credit ratings as national rating, and was the only Vietnamese bank with a baseline credit rating (BCA) at Ba2. 

A representative of Techcombank said: “Moody's has reflected the challenges of the market and the industry in its latest rating. We believe that Techcombank's fundamental strengths will enable the bank to continue to outperform industry standards over the medium term, particularly in terms of its capital base, liquidity and net fees, revenue ratios, and NFI to total operating income (TOI)”.

Recently, Moody's has also published an updated assessment of Vietnam's banks. Specifically, the rating of banks with state capital is at Ba2, and the group of banks without state capital is at Ba3.

Vietnamcredit business results

According to an update from the business results of the entire banking industry in 2022, Techcombank currently ranks first in terms of capital adequacy ratio at 15.2%, about 2 times higher than Basel II's 8% minimum requirement. Capital adequacy ratio (CAR) is one of the important criteria when assessing the safe operation and risk management of banks.

The loan-to-deposit ratio (LDR) is another safety indicator currently strictly controlled by the State Bank under Circular 22, at a maximum of 85% for all member commercial banks. In the last 5 consecutive quarters, Techcombank has always maintained LDR at a rate of 75% - 78%, and at the end of 2022 it was 76.6%.

Source: vietnambiz

Compiled by VietnamCredit

Tag: vietnambanking; banking news in vietnam; credit ratings; Techcombank


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