Digital Disruption And Rising Regulatory Costs Will Erode Profit Stability

Key Takeaways

• Intensifying digital and foreign competition, as well as fintech disruption, threatens core revenue streams and squeezes margins through higher costs and weaker pricing power.
  
• Elevated compliance burdens and concentrated exposure to retail and real estate lending heighten credit and operational risk, potentially undermining profitability and financial resilience.
  
• Strong retail banking demand, digital adoption, stable macroeconomic conditions, and diversified fee income are underpinning Techcombank's earnings growth and long-term profitability.

Catalysts

Provides personal and corporate banking products and services in Vietnam and internationally.

• Intensifying digital disruption from non-bank fintechs and big tech companies is expected to erode Techcombank's traditional revenue streams, as these agile competitors increasingly capture the growth in online payments, lending, and digital wealth products, which could drive down both top-line growth and net margins.
  
• The rising cost of compliance with global ESG standards and the potential for stricter regulatory requirements in Vietnam may substantially increase operational expenses and limit loan growth, placing long-term pressure on profitability and return on assets.
  
• Techcombank's growing reliance on retail lending, particularly with aggressive expansion in personal installment and margin lending, exposes the bank to heightened credit risk-especially if macroeconomic headwinds or a maturing demographic lead to slower credit growth, resulting in higher non-performing loans and increased provisioning costs.
  
• Competitive intensity within Vietnam's banking sector, particularly as digital innovation accelerates and foreign banks enter the market, is likely to compress net interest margins and increase customer acquisition costs, directly impacting future revenue and stalling operating leverage improvements.
  
• Continued concentration in real estate and construction lending, despite efforts at diversification, leaves Techcombank vulnerable to cyclical downturns in these sectors; any sustained weakness or asset price correction could trigger a disproportionate rise in credit losses and reduce earnings stability over the medium to long term.

Vietnam Technological and Commercial Bank Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Vietnam Technological and Commercial Bank compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Vietnam Technological and Commercial Bank's revenue will grow by 25.2% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 50.2% today to 47.9% in 3 years time.
• The bearish analysts expect earnings to reach ₫39794.2 billion (and earnings per share of ₫5350.74) by about August 2028, up from ₫21267.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.4x on those 2028 earnings, down from 13.0x today. This future PE is lower than the current PE for the VN Banks industry at 10.0x.
• Analysts expect the number of shares outstanding to grow by 0.28% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.45%, as per the Simply Wall St company report.

Vietnam Technological and Commercial Bank Future Earnings Per Share Growth

Risks

• The rising middle class, strong urbanization, and robust demand for retail banking-including mortgages, consumer lending, and wealth management-are boosting Techcombank's potential for sustained loan growth and fee income expansion, which supports higher long-term revenue.
  
• Techcombank's rapid investment in digital platforms and best-in-class transaction banking has driven a significant increase in digital transaction volumes, positioning the bank to capture growing digital adoption trends and improve operational efficiency, which is likely to enhance net margins over time.
  
• Strong macroeconomic fundamentals in Vietnam, such as healthy GDP growth (with second quarter at 8%), resilient exports, and increasing FDI-combined with supportive government and Central Bank policies-are likely to support Techcombank's asset growth and provide a stable environment for earnings.
  
• Techcombank's asset quality remains among the best in the industry, with one of the lowest non-performing loan ratios and high coverage, suggesting prudent risk management that reduces provisioning costs and helps protect bottom-line profits.
  
• Ongoing expansion of fee-based businesses such as wealth management, investment banking, bancassurance, and FX, combined with the upcoming launch of life insurance and digital payment platforms, creates new diversified revenue streams that can offset net interest margin pressure and support overall earnings growth.

Valuation

• The assumed bearish price target for Vietnam Technological and Commercial Bank is ₫29100.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Vietnam Technological and Commercial Bank's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₫50000.0, and the most bearish reporting a price target of just ₫29100.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₫83062.6 billion, earnings will come to ₫39794.2 billion, and it would be trading on a PE ratio of 7.4x, assuming you use a discount rate of 12.4%.
  
• Given the current share price of ₫39000.0, the bearish analyst price target of ₫29100.0 is 34.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.