Company Quarterly Earnings Update – TCB VN – 2021 Q1

Summary of the 2021 Q1 results of Techcombank (TCB VN)

Q1/2021 results: highlights

  • TCB’s credit and deposit growth in Q1/2021 were 6.2% YTD and 3.6% YTD, respectively, one of the strongest in the banking sector. Loan book was grown by multiple sectors while TCB maintained leading position in Current Account & Savings Account (CASA) ratio at 44.2%. Asset quality remained solid with Non-performing loans ratio (NPLs) 0.4% while loans affected by COVID-19, which are retained at current loan group (restructured loans) declined by 15% q/q to 2.3% loan book.
  • Pre-provisioning profit increased by 60.0% y/y, driven by robust net interest income and net fee income. However, net profit increased by 79.0% y/y as provision expense only increased slightly by 5.5% y/y. Nevertheless, loan loss provision ratio still rose from 163.9% by Dec 2020 to 219.4% by Mar 2021. Capital Adequacy Ratio (CAR) stayed high at 15.8%.

2021 & 2022 Outlook

  • In the next 5 years, TCB aims at maintaining its current leading positions in segments such as mortgages, corporate bond advisory/ brokerages, asset management. Looking back history, we see that TCB has always been the pioneer of Vietnamese banking system. For example, TCB was the first bank to do exclusive bancassurance, zero transaction fee and cash back for credit card. However, these are being copied by other competitors in recent years. As a result, the strong investment in technology (harder to copy or replicate) will help TCB differentiate itself from other peers, which drives TCB’s customer base and earnings eventually.
  • For 2021, we revise up total operating income by 4.4% thanks to better fee income projection and extension of 20bps in NIM. Provision expense is cut by half due to the impact of Circular 03/2021, which allow banks to split provision expense on restructured loans into 3 years, starting from 2021. Overall, we project 2021F net profit to increase by 27.1% y/y.
  • For 2022, we forecast net profit to increase by 16.6% y/y thanks to less provisioning pressure while total operating income maintains a solid growth.

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