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Heading for the clouds

Data and digitalisation are creating firm foundations for Techcombank as the bank rides Vietnam’s strong secular growth.

The year 2020 is one that nearly everyone wants to forget. But there was a silver lining for Techcombank, which won FinanceAsia’s award for Best Bank in Vietnam for the second year in succession.

One thing that Covid-19 has done, right across the world, is to accelerate the shift to digital banking. This is benefitting institutions like Techcombank, which had already put the technological groundwork in place before the virus struck.

It was, therefore, not very surprising to note that it registered a 109% increase in retail e-banking volumes during 2020. Its e-banking customers grew to 3.9 million, while the number paying bills online jumped from 19% to 54%.


Last year, Vietnam was also one of the few countries that recorded positive GDP growth, at 2.9%. The country handled the pandemic remarkably well throughout 2020 and this year, the economy has resumed its fast upward trajectory.

GDP growth forecasts are still a little fluid given the current status of the global crisis. But there is a consensus in the mid-6% range for 2021, following Vietnam’s 4.48% growth during the first quarter.

The country’s long-term growth trend remains intact as it makes the transition to upper middle-income status. It is, for example, estimated that 8.7 million households will be classified as affluent and mass affluent by 2025, up from 5.3 million in 2020.

Recent Asian history has shown that as countries move up the income curve, one private sector bank tends to capture that growth better than the rest and ends up dominating the sector for the succeeding decades. Over the past few years, equity investors, in particular, have been wondering who it will be in Vietnam.

Many are casting their vote for Techcombank. Its market capitalisation shot up from $2.4 billion at the end of 2019 to $8.2 billion at the end of the second quarter of 2021.


The bank’s management team have a $20 billion market capitalisation target for 2025, the final year of Techcombank’ s current five-year plan. This is ambitious, but the bank says it is achievable given a corresponding plan to re-invest profits back into the business.

Through consistent execution through the cycle, the bank plans to lift its valuation closer to the levels of a very small handful of regional leaders that typically trade around four times price to book value.

Techcombank believes that it is in a strong position to do so because of the improvement in its CASA ratio over the past few years. This stood at 28.7% in 2018, rising to 34.5% in 2019 and then 46.1% at the end 2020 - double the industry average. The bank’s next target is to hit 55% by 2025.

Techcombank’ s industry-leading CASA ratio has helped to cut its cost of funding from 3.7% in 1Q20 to another industry-beating 2.4% as of 1Q21. This gives it plenty of leeway to ramp up fixed cost investments and compete more aggressively into target segments.

It is doing so from the bedrock of a very strong balance sheet. In May 2020, it raised $500 million in the largest-ever syndicated loan from the Vietnamese banking sector. Techcombank’ s Capital Adequacy Ratio at the end of 2020 stood at 16.1% on a Basel II basis, compared to around 10% for the sector.

The bank’s superior profitability and efficiency ratios are also evident in other important metrics:

• Return on Assets. At the end of the first quarter, this stood at 3.5%, almost a full percentage point above Techcombank’ s nearest peers

• Return on Equity not only has a double-digit handle, but also breachedthe 20% mark for the first time since the end of 2018, at 20.1%

• Net Interest Margin is also rising, reaching 5.23% in the last twelve month ending March 2021, up 57bp in the space of a year


Techcombank’ s strength is pioneering new concepts; it was the first in Vietnam to launch the concept of zero transaction banking fees. The bank’s CEO, Jens Lottner, says the strategy is simple: draw clients in and then build a long-term relationship with them.

“Good engagement is based on capturing the right data,” he explains. “If you have a robust data engine, then you can learn about client behaviour, which enables you to offer better products and manage risk far more effectively.”

In order to do this, and as it has over the past few years, Techcombank will continue foundational investments to meet the growing needs and opportunities in the market and from which it is starting to reap the benefits.

The bank launched a Business Credit Decision Engine (BCDE) in December 2020. So far, it has digitalised 5,400 corporate clients, 13,600 financial statements and more than 3,500 ratings.

It is building a similar credit engine for its retail client base. The third and fourth planks of its digital and data strategy will be unveiled in quarter four when it launches new apps for its retail and business customers.

The bank has also invested in cloud infrastructure to improve performance and stability, save costs and speed to market. It also established its data lake infrastructure to drive granular customer insights.

Having the right data will help Techcombank reach deeper into its target affluent and mass affluent customer segments. Creating a strong digital and data capability will also allow the bank to expand profitably into the mass market segment over time and develop a relationship with Vietnam’s young population as they begin their professional and personal journey.

Vietnam is often compared to Indonesia a decade ago in terms of GDP/capita and banking penetration. According to the State Bank of Vietnam’s statistics in 2020, 70% of adults in Vietnam have a bank account, and by the end of 2025, the banking penetration is expected to reach at least 80%. Cashless transactions have seen double digit growth in 2020, but Vietnam continues to still be a very cash-based society.

While this presents a great opportunity, Techcombank believes the only way to unlock this opportunity and retain its superior profitability as it scales is through technology.

The bank upgraded to a digitally ready, state-of-the art core banking platform. It simplified and improved all >300 branch teller systems, back-office operations and digitised the core banking experience for customers. Techcombank has also introduced eKYC and digital card sales to scale up acquisitions – contributing to c.25% of all new card sales.

Another aspect that stands out about Techcombank is its desire to create a flourishing ecosystem. It has a clear strategy to forge partnerships with the best in class, domestic and international companies.

In 2019, for example, it partnered with One Mount Group, Vietnam’s largest digital ecosystem to develop seamless digital experiences throughout the customer journey such as a financial solution “Loan Card” issued for VinShop merchants in the FMCG sector.


The bank is also making a big push to move more of its business and platforms to cloud and wants a significant part of its business to be there within three years.

It always aims to have a forward-looking outlook. In this instance, it is working closely with the State Bank of Vietnam to help create a blueprint that others in the sector will be able to benefit from too. One of the main reasons why Techcombank looks both inwards and outwards is because its senior management also hail from Vietnam and the rest of the world. It feels that this personnel mix is one of its strongest suits.

Over the past few years, it has made a number of key hires, not least from Singaporean banks with a strong reputation for technological innovation. In 2020, for example, it hired 37 new senior leaders from the US, Australia, Germany, Singapore and India.

Some of the most senior executive team members now include Chief Digital Officer, Pranav Seth and Chief Data Officer, Santhosh Mahendiran. Techcombank’ s CFO and Chief Strategy Officer, Bang Trinh, explains the challenges and the opportunities that lie ahead. “We want to achieve in a few years, what it’s taken some of Asia’s regional leaders a decade to do,” he says.

“Technology and data will enable us to grow in a differentiated way,” he continues. “We aim to avoid some of the mistakes they made and expand, without requiring a large physical footprint.”

Techcombank has no intention on resting on its laurels anytime soon. It plans to invest upwards of $500 million into data, digital and talent over the next 5 years to enable it’s 2025 aspirations. Customers will experience a whole new type of banking: one that helps them to become more proactive in managing their own budgets and investments.

Techcombank’ s new vision is: Change banking, change lives. One thing is clear. The momentum is building, enabling Techcombank to fulfil its customers’ full potential and its own.

¬ Haymarket Media Limited. All rights reserved.
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