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TCB Equity Report_Moody’s downgrades Techcombank’s credit rating

24/03/2023

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KEY CONTENT
Techcombank’s basic credit rating has been reduced from Ba2 to Ba3, which is back to the level of some commercial banks today, and the outlook has changed from “stable” to “negative”. Moody’s also downgraded Techcombank’s LT (FC) and local currency (LC) deposit and issuer ratings from Ba2 to Ba3. Besides, the domestic – foreign currency counterparty risk rating (LC and FC Counterparty Risk Ratings – CRR) was adjusted from Ba1 to Ba2. The LT Counterparty Risk Assessment (CR) was also lowered from Ba1 to Ba2.
This credit rating by Moody’s predicts the difficult situation of the real estate industry, negatively affecting the independent credit health of Techcombank when this unit focuses heavily on this field. Moody’s noted that the move was unrelated to recent risks at US and European banks.
By the end of 2022, real estate and construction loans accounted for 29% of Techcombank’s total portfolio. Outstanding corporate bonds account for 6% of total assets, according to a report by Moody’s.
RECOMMENDATION
In the short term, buying and holding TCB shares will not have many advantages as the bank is still affected by the gloomy real estate market, making it difficult for the main loan book related to real estate to expand. Meanwhile, the IB services segment, which is mainly related to bond issuance, has also been greatly affected in the past 2 years. In addition, with the current credit rating, the bank would be under pressure of the higher COF – the cost of mobilization will increase in the future due to the rating downgrade, thereby affecting the bank’s profit margin.

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