Techcombank dominates bond segment

21-Jan-2021 Intellasia | Nhip cau Dau tu | 6:02 AM Print This Post

In 2020, the State Bank of Vietnam (SBV) adjusted the operating interest rates to create the conditions for the economy to quickly recover from the effects of the Covid-19 epidemic. As of December 21st 2020, the capital mobilisation of credit institutions (CIs) grew by 12.87 percent (it was 12.48 percent in the same period of 2019), and the credit growth of the economy was 10.14 percent (it was 12.14 percent in the same period of 2019).

According to the Analysis centre of Saigon Securities Incorporation (SSI Research), in 2021, the SBV will continue the loosening policy in the context when the central banks of other countries also apply similar policy and the US dollar may continue to depreciate. Meanwhile, the interest rates can bottom out in mid-2021 due to the stronger credit growth and economic recovery.

In the low interest rate environment, Vietnam Technological and Commercial Joint Stock Bank (Techcombank, stock code: TCB) is considered as the main beneficiary. SSI Research said that Techcombank’s bond business benefits from a low interest rate environment, because many large businesses will continue to issue bonds in the next two to three years. Meanwhile, Techcombank completed setting up the distribution system for retail customers.

According to the bond brokerage market share ranking in 2020 announced by the HCM City Stock Exchange (HoSE), Techcombank Securities Company (TCBS), Techcombank’s subsidiary, continued to lead the market with 68.21 percent of market share, far ahead of its rivals in the industry.

In the third quarter of 2020, Techcombank distributed 23.1 trillion dong of bonds issued by wholesale corporate customers to public investors, raising the total value to 56.4 trillion dong from the beginning of the year (up by 43 percent year-on-year period). The number of corporate bonds issued via Techcombank in the third quarter of 2020 reached 17.1 trillion dong (up by 235 percent over the same period of the previous year).

By the end of the third quarter of 2020, Techcom Capital manages Techcom Bond Fund (TCBF) with a total value of 18.4 trillion dong, accounting for 91 percent of the market share of bond funds. The roles of TCBS and Techcom Capital are increasingly important as they contribute up to 54.3 percent of the total fee income and 18.9 percent of the total consolidated pre-tax profit in the first nine months of 2020, while these numbers were respectively 45.3 percent and 15.2 percent in 2019.

With the continuing low interest rate environment, SSI Research believed that the corporate bond business of Techcombank will thrive because many large businesses have the need to issue debts. Moreover, according to SSI Research, Techcombank has outpaced its peers by a distribution system of effective investment products for individual customers.

In addition to the dominant position in the bond segment, Techcombank is also a prominent name in the banking industry’s trend. According to Vietcombank Securities Company (VCBS), free money transfer has gradually become a trend of the group of dynamic joint stock banks.

VCBS said that increasing transaction fees can help banks increase their income. However, offering free transaction fees, along with other forms of customer experience enhancement, help banks attract regular customers, thereby reducing capital costs when demand deposits increase and mobilisation becomes easier. In addition, the regular increase in the file of individual customers also helps expand credit as this is the target customer group of many banks.

In the third quarter of 2020, the net fee income of Techcombank was 1.2 trillion dong, up by 80.2 percent over the same period of 2019. In particular, the fee income from traditional banking payment services grew by 24.2%.

VCBS assessed that the group of dynamic joint stock banks such as Asia Commercial Joint Stock Bank (ACB), Military Commercial Joint Stock Bank (MBBank), Techcombank, Vietnam Prosperity Commercial Joint Stock Bank (VPBank), Tien Phong Commercial Joint Stock Bank (TPBank), etc. is having higher growth rate in terms of credit thanks to their better resources (high Capital Adequacy Ratio (CAR), abundant capital source from retained earnings) and the smaller scale.

SSI Research also said that Techcombank is a bank with good asset quality and good profitability. According to estimates, Techcombank’s pre-tax profit in 2020 and 2021 respectively reached 16.5 trillion dong and 18.5 trillion dong, up by 28.5 percent and 12.2 percent over the same period of the previous year. In terms of investment, SSI Research has a positive assessment on TCB shares with a target price of 38,200 dong per share.

Giving opinions on the economy in 2021, Pham Luu Hung, deputy director of SSI Research said that “the driving force of Vietnam’s economy in 2021 is fairly clear. It not only comes from the strong recovery of the global economy, or the good implementation of the CPTPP, EVFTA, etc. of Vietnam, but also comes from the growth of investment activities of the private sector and foreign-invested businesses, after the public investment recorded sharp rise in 2020. The government’s policies this year such as fiscal policy and monetary policy are all at the level of supporting the growth. I believe that the economic outlook in 2021 will be very bright.”


Category: Finance, Vietnam

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