Techcombank CEO's ambition to achieve operational targets

Jens Lottner, CEO of Techcombank, presenting the bank's 2023 business operations report. Photo courtesy of Techcombank

With the ambition of reaching $20 billion in capitalization, 55% CASA, and becoming a top 10 bank in the region – which is quite challenging amid this uncertain economic environment – what will be the decisive factors to sustain that ambition?

We are confident of reaching our operational targets. In terms of CASA, we are now at 40.5%. There are certain elements, like auto-earning, that people are using that will help increase CASA.

Our NFI/TOI is at 26%, and we want it to be at 30%. We should also be able to return to a 20% return on equity. We are on track to achieve the total profit target for the 2020–2025 period.

Even though there was a slowdown in 2023, we believe that in 2024 and 2025, our diversifying strategy will deliver and we will reach our set milestones.

Regarding the $20 billion market capitalization, it revolves around the P/B, P/E, or other multiples you look at.

Over the last 5 years, we were twice at the 2.5 multiple of price to book ratio. Ultimately, market cap is a little outside of our control.

There needs to be more comfort in Vietnam for foreign investors. So, I think some re-rating needs to be done. Hopefully, more capital streams will come in Q3 2024.

I'm not so concerned about the $20 billion market cap target. This is our aspiration, and once we get that, it will put us at the top of the region.

If you look at our return on assets, digital usage, and some other growth numbers, these are not just outstanding at the ASEAN level but also at the Asia level.

We do not necessarily have to become the largest bank; we want to be the right combination of profit growth and capital efficiency.

One area we are behind is diversifying the credit book. Last year [2023] was a challenging year for a lot of customers.

From our perspective, it was much safer to lend to large corporations than in the retail or SME space, where there was not so much demand.

This year, we will try to accelerate our exposure to retail and SME customers again. Last year, on the corporate side, we increased our non-RECOM book by roughly 60%.

So, we actually started diversifying into new sectors of the economy. It will take some time, but we hope we can accelerate that.

What are the new initiatives to differentiate this year from the past three years as Techcombank enters the fourth year of its five-year transformation strategy?

We have set out a five-year transformation strategy and will continue on that trajectory.

Techcombank has invested intensively in our digital, data, and talent departments, and all of that can now make a difference and start to bear fruit, creating value for our customers and for the bank.

We have scaled our business with the same number of people and are able to run certain parts of the business at a CIR around 10 percentage points lower than previously, so we will continue to use these capabilities going forward.

On the technology side, we continue to upgrade our core banking. We have already shifted around 30% of our workload onto the cloud, and we will add another 10 to 15% by the middle of the year.

The strategic pillars, in which the bank has invested in order to make sure that it can go to SMEs and other areas, are still the same.

How has Techcombank affected its shareholders in its first year of paying dividends after a decade?

I believe shareholders appreciate us sharing dividends. A set of shareholders might be asking, "Do you not have enough growth opportunities anymore? Is that why you're handing back capital?"

We can achieve growth and make dividend payments at the same time. The bank can maintain a 20% growth trajectory and a 15% CAR ratio while paying the dividends. And we will do this in a sustainable manner.

As TCB plans to have a strategic investor on the board, what value would that bring to the bank?

Warburg Pincus has been a long-term investor and one of our biggest shareholders. But they will need to exit at some point in time.

If this share package of 8–9% becomes available, combined with our remaining foreign ownership limit, it could potentially become interesting for strategic investors.

Warburg Pincus invested in our IPO and added tremendous value pre- and post-IPO, but we are a very different bank now, and we need to evaluate who can add real value at this point in time.

We are open to strategic investors or investors who have a long-term mindset as we build the franchise and can add value beyond just capital in different forms.

This could be one investor, but it could also be a couple of highly respected institutional investors joining with stakes between 1% and 5%, which would continue to offer advice on how to improve our business and operating models as well as our ESG profile.

Techcombank just announced new members to the BoD, with a top leader coming from the Bank of Central Asia, Indonesia. What values will they bring to the table?

As the bank welcomes new people to the board, we look forward to their additional experience. Our new board members bring with them a very deep understanding of banking, especially in terms of risks and wealth management, which is a very important area for us.

In the case of Eugene K. Galbraith, there's a lot for us to learn from him to create a great franchise building around SME customers and payments.

We hope that over the next couple of years, they will help the bank continue on the journey we are on.

What is the bank's direction to regain the "King of CASA" position after losing it to another competitor this year?

On the CASA side, it was a tight race. We're seeing a lot of CASA inflow but, at the same time, a lot of outflow because interest rates are low.

Techcombank is still working a lot on payments and auto-earning, which behave like CASA. We should see a steady increase in CASA. I think our competitor is targeting a lot of mass-market customers, adding up to small amounts.

We also go for new-to-bank acquisitions, but in a different segment, more mass affluent and affluent. We have an aggressive CASA plan. We're going into the affluent and mass-affluent customers, but also SMEs and merchants.

A lot of our CASA is also coming from corporate customers, an area where we can make a lot of improvements.