Outlook on Techcombank revised to negative; 'BB-/B' ratings affirmed

Outlook on Techcombank revised to negative; 'BB-/B' ratings affirmed

• Techcombank's asset quality has weakened in the past few quarters.
• We are revising our outlook on Techcombank to negative from stable. In addition, we are affirming our 'BB-' long-term and 'B' short-term issuer credit ratings on Techcombank.
• We are lowering our long-term ASEAN regional scale issuer rating on the bank to 'axBB' from 'axBB+' and affirming our short-term rating of 'axB'.
• The negative outlook reflects our expectation that Techcombank's deterioration in asset quality may further affect its profitability and capitalization.

Standard & Poor's Ratings Services today revised the outlook on Vietnam Technological And Commercial Joint Stock Bank (Techcombank) to negative from stable. We also affirmed the 'BB-' long-term and 'B' short-term issuer credit ratings on the bank. We lowered our long-term ASEAN regional scale issuer rating on Techcombank to 'axBB' from 'axBB+' because of the revised outlook. At the same time, we affirmed our short-term ASEAN regional scale rating of 'axB'.

We revised the outlook to negative to reflect our view that Techcombank is likely to face difficulty in maintaining its asset quality. The bank's profitability and capitalization may be affected as a result, amid tough operating conditions in Vietnam.

"Techcombank's asset quality is weakening in the moderate growth environment in Vietnam," said Standard & Poor's credit analyst Amit Pandey. The bank's gross nonperforming loan ratio is the highest among its rated peers in Vietnam, and the bank has restructured a sizable amount of loans in the past 12 months.

Techcombank's loan book is focused on the private sector's small and midd enterprises (SMEs). Many SMEs in Vietnam are facing cash flow problems due to high inventories and low demand. We expect the rise in stressed assets to keep credit costs elevated, which may hurt the bank's capitalization.

The negative outlook reflects our expectation that Techcombank's weakening asset quality may affect its profitability and capitalization amid difficult operating conditions in Vietnam.

"We may lower our ratings if the bank's risk-adjusted capital ratio before diversification falls below 3% because of aggressive loan growth or asset quality decline," Mr. Pandey said.

We may revise the outlook to stable if Techcombank improves its asset quality and capitalization.

S&P