Viet Nam Technological and Commercial Joint Stock Bank (Techcombank) has officially been given approval from the State Bank of Viet Nam (SBV) for early application of Basel II standards, raising to eight the number of Vietnamese banks meeting the global norms ahead of the SBV’s scheduled deadline of January 1st, 2020.
According to the SBV’s decision, all of Techcombank’s activities will follow Circular 41/2016-TT/NNNN regulating the application of Basel II standards starting July 1st, 2019. This is good news as Techcombank has delivered year-over-year revenue growth for the past 14 consecutive quarters and ended 2018 with a Capital Adequacy Ratio (CAR) of greater than 14 per cent.
Techcombank will officially adopt CAR calculations meeting Basel II standards no later than June 22nd, 2019, and will issue new or amend existing internal regulations as committed in document No 5040/2019/TGD-TCB, dated June 4th.
One of the most significant requirements of Basel II is to maintain CAR at no less than eight per cent. At the end of the first quarter of this year, Techcombank’s CAR (according to Circular 36) was 13.8 per cent, and the bank’s revenue and pre-tax profit both reached record highs of VND4.2 trillion (~US$180 million) and VND2.6 trillion (~US$111 million), respectively.
“This decision by the central bank is good news for Techcombank, given our impressive business performance over the last 14 quarters. Accordingly, Techcombank will be allowed to manage our outstanding balances based on capital adequacy ratio. Currently, Techcombank’s CAR and other indicators such as ROA and ROE are very high not only for Viet Nam but also for the region. This is a big competitive advantage for Techcombank,” said Nguyen Le Quoc Anh, Techcombank’s CEO.
Techcombank has been deliberately proactive in adopting leading credit risk and operational risk management practices to ensure stable, sustainable growth as well as transparency. It was the first bank to provide audited financial statements according to International Financial Reporting Standards (IFRS9), beginning with the 2018 reporting year, while most banks in Viet Nam are still only following domestic accounting standards. The Ministry of Finance recently proposed a project on International Accounting Standard Application in Viet Nam with the IFRS9 roadmap starting from 2022. IFRS9 (and previously IAS39) is a global standard for recognition and measurement of financial instruments, and is of key importance to banks since upwards of 80 per cent of their balance sheets are comprised of financial instruments. Techcombank has been reporting its financial statements in accordance with international standards since 2009, heightening trust and transparency among not only foreign investors and partners but also international rating agencies.
In addition to its outstanding P&L performance, Techcombank maintained strong asset quality, ending the first quarter of this year with a non-performing loan ratio (NPL) of 1.8 per cent. Well under the bank’s target of managing of NPL below 2.5 per cent, this result further demonstrated its focus on risk management, which also allowed it to lower its provision expense by 80 per cent compared with the first quarter of 2018. “We are proud of our sustainable performance, which is the direct result of successfully executing our customer-centric strategy. Techcombank will continue to grow its credit portfolio prudently in order to better serve our customers through the market’s business cycles, and to bring long-term value to our shareholders as well as our customers,” he added.
The bank’s leader added that the implementation of IFRS9 was a big challenge for the bank in terms of resources, tools, data and models when first launched. However, applying IFRS9 standards has enabled Techcombank to improve its risk management, due to early, accurate, forward-looking risk assessments and measurements. These practices help the Bank enhance policies for defining and managing its customers, thus enabling Techcombank to make the right decisions regarding disbursement, following and collecting debts, and minimising losses.
Further, applying IFRS9 reporting standards enhances Techcombank’s standing in global financial markets by providing the incremental level of transparency required by IFRS9. As a result, Techcombank has gained the trust of investors in the international markets.
This is one of the reasons that international rating agencies such as Moody's and S&P have continuously raised Techcombank's credit rating in recent years. Notably, in April 2018, Moody's raised the credit rating of Techcombank to B1 with a stable outlook, equal to the sovereign credit rating of Viet Nam.
Techcombank listed its shares on the Ho Chi Minh Stock Exchange (HOSE) last June, completing Viet Nam’s largest IPO at the time.
Techcombank is known for executing its customer centric business model, as well as for its investment in digital banking services to better meet customers’ needs. The bank has received numerous awards, including being recognized as the Best Bank in Viet Nam 2018 by Euromoney, one of the world’s leading financial magazines.
Techcombank’s shares are listed on the (HOSE) under the ticker TCB.