Company Quarterly Earnings Update – TCB VN – 2020 9M

Summary of the 2020 9M results of Techcombank (TCB VN)

9M/2020 results highlights:
  • TCB’s credit growth in 9M/2020 was 9.1% YTD while customer deposits grew by 9.2% YTD thanks to more individual clients. Asset quality remained healthy and showed improvement from last quarter, with 0.6% non-performing loan (NPL) by the end of Sep. Loans to clients, whose businesses or personal finance were impacted by COVID-19, are allowed by the State Bank of Vietnam (SBV) to be kept at the current loan group. This group equals to 3.1% of TCB’s loan book and will be called “restructured loans” in this report.
  • Pre-provisioning profit increased by 38.8% y/y, driven by robust net interest income and net fee income. However, net profit only increased by 18.8% y/y as TCB took advantage of the good earnings to improve its loan loss provision ratio to 148.0% from 108.6% in Q2/2020.
  • Capital Adequacy Ratio (CAR) was maintained at 16.7%, the sector’s highest. The bank also appointed a new CEO, Mr. Jens Lottner, in October.
Outlook
  • The restructured loan amount is unlikely to increase because Vietnam has controlled COVID-19 well, and businesses are mostly resumed. We forecast 2020F and 2021F total provision expense to be equal to 2.2% loan book because TCB may actively record restructured loans to be NPL, taking advantage of strong income growth, and some clients may continue to miss payment after the restructured period.
  • For 2020, although provision expense is projected to increase significantly, the total operating income’s strong performance and the operational efficiency improvement are expected to support the bottom line. We forecast 2020F net profit to increase by 8.1% y/y.
  • For 2021, we expect a rebound in credit growth and solid fee income to drive total operating income and net profit, which are projected to increase by 13.6% y/y and 15.6% y/y, respectively.

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