Techcombank (HOSE: TCB) | Initiation Report, BUY –1Y Upside +23.2%

Company Information

Vietnam Technological and Commercial Joint Stock Bank (TCB) was established in 1993. TCB has grown exponentially and emerged to be the leading private bank in Vietnam with a charter capital of VND 70,648.5bn (USD 2.8bn) in 2024. In 2018, the bank marked a major milestone by listing on the Ho Chi Minh City Stock Exchange (HoSE) under the ticker TCB with a market capitalization of USD 6.5 bn, making it one of the largest IPOs in Southeast Asia.

TCB has three prominent subsidiaries: Techcom Securities JSC (TCBS), Techcom Capital Management JSC (Techcom Capital), and Techcombank Asset Management One Member Limited Company (TCB AMC). In 2025, TCB establishes its own life insurance company – TCLife (TCB holds 80% stake), and increases its ownership in the non-life insurance company – TCGIns from current 11% to 68%.

Financial Performance

In Q1 2025, TCB recorded a slight decrease in NII of 2.3% YoY, to VND 8,305bn. Its NIM decreased in 3 consecutive quarters to 3.8% by the end of the first quarter due to strong competitive pressures among banks and fluctuations in CASA. TCB did show its effort in optimizing operations, with CIR at only 28.3%, when NIM is under pressure.

Although bad debt increased by 9.6% in Q1, credit risk provisions recorded a decrease of 10%, reaching VND 1,090bn.  TCB’s pre-tax profit reached VND 7,236bn (-7.2% YoY), completing 23% of 2025 profit guidance.

At the end of the quarter, TCB recorded total assets of VND 989,215bn, up 1.1% YTD. Of which, customer loans increased by 5.1% (account for 63.7% of total assets) and investment securities decreased 12.6% (12.6% of total assets). TCB's NPL ratio increased slightly to 1.2% by the end of Q1 2025, of which NPL from home mortgage increased from 1.9% to 2.3%.

Key Investment Rationales

o   Strong credit growth of the banking sector, supported by government’s high economic growth targets for the 2025–2030 period:

o   Leading in retail banking, serving High-Net-Worth and affluent clients

o   Ecosystem model – A sustainable competitive advantage

o   Digitalization, a driving force for sustainable long-term growth

o   Emphasis in wealth management and one-stop solution

o   New growth drivers from Life and Non-life Insurance segments

o   Solid financial foundation and superior profitability

Valuation and Recommendation

We use three valuation methods — Residual Income (RI), Price to Book (P/B), and SOTP — to determine the fair value of TCB. We initiate a BUY recommendation with a 12-month target price of VND 31,650/share (+23.2% from the closing price of VND 25,700 per share as of April 24, 2025). Over the longer term (3 years), we value TCB at VND 44,850/share (+74.5%).