44 slides from Vietnam Technological & Commercial Joint Stock Bank's earnings presentation, Oct 28, 2019
Slide 1: Techcombank Analyst Presentation
Techcombank Analyst Presentation Hanoi, 28th October 2019
Slide 2: Executive summary
Executive summary Successful execution of our customer-centric strategy, as well as our focus on selected sectors and segments of the economy has brought about strong and sustainable results Choosing where to play and win 16 consecutive quarters of Consistent, robust growth YoY revenue growth Six co
Slide 3: Techcombank: #1 because we focus on the customer
Techcombank: #1 because we focus on the customer Private mortgage lender1 2.8% #1 Visa – credit and debit cards2 Bancassurance3 ROAA Fixed income brokerage house4 S&P (BB-/stable/B)5 Moody’s (Ba3/stable)6 >6.5 million Over 10,000 Customers Employees Legacy bad debts written off “Leading financial li
Slide 4: Economic overview
Economic overview The Vietnamese economy and banking sector 4
Slide 5: Strategy and business model facilitated by favorable economic condition of Vietnam
Techcombank’s strategy and business model are facilitated by the favorable economic condition of Vietnam Despite global turbulence, Vietnam’s economy has been growing relentlessly, creating a nourishing environment for businesses Inflation is managed effectively by the government through well-anchor
Slide 6: Current and fiscal deficits continue to improve
The current and fiscal deficits see continuing improvement, converging with the region and showing economic sustainability The growing economy is supported by a balanced budget and stable currency With little economic uncertainty and low external debt level, businesses can enjoy a favorable economic
Slide 7: Impact of global economic slowdown on Vietnam is limited
The impact of the global economic slowdown on Vietnam is limited The Vietnamese economy continues to show positive signals despite global economic turbulence Vietnam shows strength and resilience not only in a regional but also in a global context FDI disbursement in selected Asian countries Global
Slide 8: Consumer confidence fuels the domestic economy
Consumer confidence fuels the domestic economy Strong consumption supported by positive sentiments and the growing middle class population The domestic market is primed for future growth Vietnamese people confidence on economic matters Share of the middle class in the population Retail revenue % Job
Slide 9: Increasing consumption and change in demographics bring opportunities
Increasing consumption and change in demographics bring tremendous opportunities to our business Increase in personal disposable income comes with higher standards of living and consumption strength The affluent and mass affluent segments will make up increasing shares of the population, thus expand
Slide 10: The VND remains stable, substantial inflow of foreign currencies expected
The VND remains stable, substantial inflow of foreign currencies expected Significant SOE divestment deals in 2020 are expected to bring nearly USD9 billion to the economy with the likes of Vietnam Airlines, Petrolimex, FPT, and Habeco on the list The SBV has purchased large amount of foreign curren
Slide 11: SBV will continue to monitor credit growth closely in 2020
The SBV will continue to monitor credit growth closely in 2020 Growth in 2020 is expected to be on par with 2019 Focus will be on maintaining sustainable growth and avoiding overheating Sector’s total VND-denominated loan and deposit Sector’s total FCY-denominated loan and deposit Sector’s total YoY
Slide 12: System's liquidity will likely remain comfortable in 2020
System’s liquidity will likely remain at comfortable level in 2020 Our base-case scenario suggests LDR ratio remain the same or lower than 2019 System’s LDR, including VAMC and ST % Assumptions for 2020 projection 6.5% 93.0% Scenario 1: 11.5% Avg deposit rate (6M, G12) 92.0% 6.0% Forecast Loan growt
Slide 13: Techcombank strategy
Techcombank strategy Strategy overview and transformation journey 13
Slide 14: Techcombank strategy over the 2016-2020 period
Techcombank strategy over the 2016-2020 period We aim to be the # 1 Bank in Vietnam in capital effectiveness and Focus on hiring, in market training and capitalization retaining the most talented team Together we will Laser focus on achieve our annual risk management growth target and and operationa
Slide 15: Transform organizational culture and the way of working
Transform organizational culture and the way of working throughout the Bank Ranked in top 25% among Southeast Asian banks on OHI Strong increase over four years on overall score, direction, external orientation, innovation and learning, and culture and climate ORGANISATIONAL HEALTH INDEX (OHI) Compl
Slide 16: Regain strong engagement of employees
…regain strong engagement of employees through their confidence in leaders and development opportunities at Techcombank… In 2019, EES index sharply increased in all dimensions compared to 2017 and surpasses all four external norm groups: Banks, High Performing Organization, Vietnam Country and Gener
Slide 17: Proven business and operational efficiency through financial results
Over the past 3 years, Techcombank has proven its business and operational efficiency through outstanding financial results… On track to achieve our targets for a fourth straight year The results through 9M19 moves TCB closer to achieving our 5-year strategy in 2020 FY16 FY17 FY18 9M19 Indicators Ac
Slide 18: Excels in efficiency amongst peers in Vietnam
Despite having a modest scale, Techcombank excels in efficiency amongst peers in Vietnam … Total assets1 ROAA1 CIR1 VND Tn % % 6th 1st 2nd 1,425 2.8 62.7 61.6 1,202 1,157 2.5 2.1 49.3 46.2 44.4 1.8 1.7 1.7 41.5 34.5 37.1 36.0 35.4 34.7 1.5 31.3 450 397 368 358 358 357 0.7 0.7 217 176 159 0.5 0.5 0.4
Slide 19: ... and in the region
… and in the region ROAA1 NIM1 NPL1 % % % 3.4 6.2 4.1 5.3 3.6 2.8 4.6 4.5 2.2 2.1 4.2 2.7 1.9 3.7 1.7 3.3 3.2 1.8 1.9 1.4 1.3 1.6 1.5 1.1 TCB BCA BMRI Kotak HDFC VCB Kbank SCB TCB BCA BMRI HDFC Kotak SCB Kbank VCB TCB Kbank SCB BMRI Kotak BCA HDFC VCB ROAE1 NFI/TOI1 CIR1 % % % 25.6 26.3 62.6 22.6 21
Slide 20: Business performance
Business performance Techcombank’s key products and services 20
Slide 21: Focusing lending portfolio on the right segments and product mix
Driving profit by strategically focusing our lending portfolio on the right segments and product mix Shift away from higher-risk products (e.g. home equity, PIL) to mortgages and auto loans for affluent and mass affluent NPL for mortgage product and NPL for retail banking reduced significantly Focus
Slide 22: M+, the digitalized mortgage customer journey
M+, the unique digitalized mortgage customer journey developed under the Agile methodology Digital and automated process boosted productivity by ~30% and increased sales productivity by 40-50% Total processing time from application to disbursement shortened to 4-5 days 91% customer satisfaction for
Slide 23: TCBS corporate bonds wealth management product
TCBS corporate bonds, the wealth management product that addresses the long-term funding needs of corporate customers Bond business is growing in-line with the government’s intention to expand the debt capital market TCB dominates domestic bond market, 98% market share of listed bonds on HOSE and HN
Slide 24: Market-leading card franchise
Market-leading card franchise #1 Vietnamese bank in Visa card transaction volume and value with sustainable growth each year We also lead the market in purchase volume with a market share of 22% No. of Visa debit cards No. of Visa credit cards Thousands Thousands 1st 1st 739 250 5% 19% 507 184 459 4
Slide 25: Payment solutions focused to better serve customer needs
Payment solutions are focused to better serve customer needs Smart and convenient solutions bring large numbers of customers onto the digital platform 20x increase in transactions per month since the launch of the Zero fee program Digital channels Big Zero Fee Strong technology investment Investing
Slide 26: Transforming to become a leading digital bank
Transforming ourselves to become a leading digital bank… Regular transactions are gradually transferred to mobile and internet banking Techcombank accounted for 33% market share of mobile payments1 Number of transactions per months via Techcombank’s channels Mn transactions Branch ATM POS Internet B
Slide 27: Impressive growth in retail CASA
…leads to impressive growth in retail CASA CASA growth rate since January 2018 has been more than 8x the industry average Retail CASA growth trend (2016-1H19) VND Tn 38 1% cash-back launched Retail growth 36 34 Techcombank 32 72% YOY 30 61% +4.3% 28 26 Zero fee launched 24 22 Retail contribution 20
Slide 28: CASA across segments increased
CASA across segments increased as a result of higher customer engagement As customers are encouraged to shift toward cashless options, transaction volume and value increase significantly, driving CASA growth Retail CASA balance by segment VND Tn, % Affluent Mass Affluent Mass 38.0 34.9 31.3 15.3 +21
Slide 29: Retail banking transformation delivering solid TOI growth
Retail banking transformation is delivering solid, consistent TOI growth By executing its strategic roadmap, Retail banking has delivered impressive growth in TOI TOI in the affluent and mass affluent segments has grown at a higher rate, reflecting Techcombank’s strategic focus Techcombank TOI from
Slide 30: Financial results
Financial results Bank-wide and segment results 30
Slide 31: 5-year strategy calls for higher growth in revenues than balance sheet
Our 5-year strategy calls for higher growth in revenues than balance sheet Total assets have nearly doubled since 2015 while equity has increased ~4x CASA has grown 2x contributing to lower funding costs Total assets Total revenue VND Tn,% Retail loans Corporate loans Corporate bonds Other assets VN
Slide 32: Credit portfolio structured in-line with strategy
Our credit portfolio is structured in-line with our strategy Shifting the loan portfolio from large corporate clients to SME and retail customers to minimize large exposures and drive profitability SME loan book grew at 31% against a decline of 5% in large corporate lending book between 2016-18 and
Slide 33: Lower funding cost leads to healthy NIM
Lower funding cost leads to healthy NIM Steady increase in CASA ratio has offset compression in lending rates in recent years Retail CASA up 3x since 2016 CASA by sector Lending and deposit rate; NIM VND Bn WB SME Retail % 9.7 9.8 9.7 65,499 9.3 57,801 10,213 9.0 4.6 4.6 4.6 Lending 16,711 17,315 4.
Slide 34: Net fee income continues to grow
Net fee income continues to grow but is a key focus area Focus on customers’ long-term and daily financial and transaction needs Fee income and FX sales by type Examples of fee income growth VND Tn, % Bancassurance Bancassurance fee income Cards VND Bn Retail Cash & settlement 592 469 Others 375 26%
Slide 35: Expansion across segments leads to growth in revenue
Expansion across segments leads to growth in revenue Our ecosystem play enables us to serve customers across the value chain which include large corporates, SME’s and consumers alike Our earnings are diversified and robust as we strive to serve all of our customers’ financial needs TOI by segment VN
Slide 36: Low risk – high returns drives revenue growth
Low risk – high returns means driving revenue growth while maintaining low NPLs and provision expenses TCB maintains a prudent approach in balance sheet growth and credit management which keeps NPLs below the industry average We report “true” NPL, and have completely written-off our legacy bad debts
Slide 37: Expense discipline remains a priority
Expense discipline remains a priority YTD bank’s headcount1 increased 939 with 756 towards frontline to support customer service and growth CIR continues to be competitive despite investment in technology, people and branding Provision expenses reduction came as a result of successfully writing off
Slide 38: Financial numbers result of executing strategic vision
Our financial numbers are result of successfully executing our strategic vision YoY growth across core business combined with expense management and lower provisions contributed to record results 9M19 Earnings VND Bn, % 14,441 619 3,717 4,976 11,750 10,106 25% 605 8,860 75% NII NoII Recoveries TOI O
Slide 39: Increasing investor communication should drive share price
Increasing investor communication should drive a share price that better reflects our business performance and market-leading position There remains a significant valuation gap in our stock price when benchmarking ourselves against domestic and regional peers Leading ASEAN and Indian banks’ ROAA and
Slide 40: Disclaimer
Disclaimer The information in this presentation is being provided as a historical, reference source only and is not being used for, and nothing in this presentation constitutes an offer, invitation or recommendation to sell or issue, or any solicitation of any offer to purchase or subscribe for, sec
Slide 41: Glossary
Glossary ASEAN : Association of Southeast Asian Nations OHI : Organizational Health Index CAGR : Compounded Annual Growth Rate Opex : Operating expense CAR : Capital Adequacy Ratio P/B : Price-to-book ratio CASA : Current Accounts and Saving Accounts PAT : Profit after tax CIR : Cost-to-income ratio
Slide 42: Appendix
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Slide 43: 9M19 Financial highlights (1/2)
9M19 Financial highlights (1/2) VND (Bn) 9M19 FY18 9M18 YoY change (%/bp) Total assets 367,538 320,989 311,796 +18% Credit1 246,798 219,595 205,459 +20% Deposits 218,655 201,415 193,583 +13% Total operating income 14,441 18,350 13,294 +9% Operating expenses 4,976 5,843 3,734 +33% Profit before tax 8
Slide 44: 9M19 Financial highlights (2/2)
9M19 Financial highlights (2/2) VND (Bn) 9M19 FY18 9M18 YoY change (%/bp) Loans to customers 205,317 159,939 166,939 +23% Retail 99,228 72,384 67,038 +48% SME 41,751 31,434 28,128 +48% WB 64,338 56,122 71,773 -10% Deposits from customers 218,655 201,415 193,583 +13% Retail 162,757 142,056 138,685 +1