Vietnam Technological and Commercial Joint Stock Bank (TCB) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Techcombank's Second Quarter and First Half 2024 Financial Results Presentation. Today is our first ever analyst presentation in the Techcombank Ho Chi Minh City Tower in Le Duan, coinciding with the bank's increased focus in the southern market where we're seeing great potential for achieving the same market position as we have in the north. We hope to host more APs here in the coming quarter. [Operator Instructions] Today, Jens Lottner, CEO, will begin with opening remarks, and Alex Macaire, CFO, will share more details of the financial results and business updates, followed by a question-and-answer session. Jens and Alex will present in English with live Vietnamese translation available via separate link. As usual, there will be another call in Vietnamese tomorrow for retail investors. Today's presentation and Q&A will last around 90 minutes. With that, I'll turn it over to Jens to begin the presentation.

Good afternoon, everyone, and thanks for joining this quarter's analyst call. As usual, what we will do is just give a short summary of the quarter and then Alex will go in detail and through some of the numbers, and then this will be followed up by some Q&A. So if we take the highlights, and I think most importantly, it's fair to say that this was another very, very strong quarter. And our overall total operating income grew by around 38% year-on-year. Again, all of this was driven by every single components, where we have seen strong growth in NII, NFI as well as other income and given the fact that we had our cost provisions are relatively well under control, PBT rose roughly at the same amount of around 38%. And so again, and of course, there was a low base last year, but still the overall CI ratio of 28% is probably market leading. And return on assets stand at 2.6%. That is roughly in line with the last quarter. CASA has come down a little bit. The overall amount is actually still pretty much the same like what we had beforehand. And some of the decreases were rather coming from the fact that we really grew our TD base very, very quickly. And at the same point in time, and we actually also and see the success of our auto-earning product given the fact that auto-earning and the balances of the auto-earning modules in our [indiscernible] are rather short-term and funding elements at relatively low cost if you would actually put this together, our CASA ratio, if you really take current account, savings account, would still be above the 40% mark. NPLs have increased a little bit, but again, still very much within the guidance of what we have given at the beginning of the year and maintained through the last analyst presentations. Overall, we believe, given the fact that the special mention loans actually have come down at this level and is well under control and can be maintained. And then last car, as you've seen is actually increasing despite the fact that we started to pay dividends for the first time over the last 10 years, and as we said, we believe we are actually in a very good place to maintain our growth momentum on the credit side, while still maintaining very, very strong CAR and still being able to pay the dividends. And again, I will probably come back to that a little bit later. So overall, again, very, very strong quarter for the bank. And with that, I hand it over to Alex to go into a little bit more details of the numbers.

Thank you, Jens, and good afternoon, everyone. So let's start, as usual, with a brief overview of the macroeconomic environment. So as you can see, there is a lot to like in the results published recently by Vietnam. So GDP growth was a positive surprise at 6.9%. Domestic sales disburse, FDIs and experts continue to gather momentum. And as a result, the PMI index improved further to 51.8% at the end of Q2. So in short, the economy is doing quite well. And as usual, the main areas to watch out for are more on the monetary side. Inflation first is slightly edging up. And then the VND continues to lose ground against a very strong U.S. dollar. However, if we look ahead, then we believe that these tensions will progressively ease up as we go into the second half of the year because the gap between the interest rates in U.S. dollar and the interest rates in Dong will close. Looking now at the banking sector. So credit growth in the banking system did pick up as we expected. However, the year-to-date growth in our credit assets is still quite modest at 6% year-to-date only. We also said that the -- we thought the interest rates will increase. And as a matter of fact, since our last analyst presentation, interest rates have already increased by around 20 basis points. And again, we believe that this trend will continue with the potential for another 70, 80 basis points maybe between now and the end of the year. However, because we will continue to optimize our funding, we believe that the impact on our cost of funds will remain limited. And as a result of that, our cost of funds will probably be around 3.5% for the full year. Let's look now at the financial highlights. So I think Jens said it, right -- it was a remarkable quarter for Techcombank. NII increased 40% year-on-year, supported by both rapid expansion of our credit books as well as an improvement in our net interest margin. NFI increased 32% with robust momentum in particular, from our investment banking activities, costs and provisions remained under control, allowing our PBT to grow by 39%. Our cost-to-income ratio was maintained at around 28%, which is significantly below our target range and industry leading, as Jens mentioned. Our CASA ratio came under a bit of pressure for reasons which have to do, as Jens mentioned, to the increase in interest rates first, but also the success of auto-earning. As you know, auto-earning is our new breakthrough proposition, which is a critical component of the new Techcombank account. It actually combines the higher interest rates of the term deposit with the flexibility of a current account. And the blended average cost is actually in the same ballpark as CASA. This is why if we look at auto-earning as another form of CASA, then our CASA ratio would actually be still above 40%. Finally, our capital adequacy ratio improved further to 14.5% and continues to be one of the highest in the market. So all in all, it was quite a remarkable performance for Techcombank. Here is an overview of our P&L, so VND 7.8 trillion PBT for the second quarter, VND 13.4 million TOI, this is the highest TOI in a single quarter in the history of Techcombank. NII, NFI recoveries all grew in the range of 40% to 50% versus 2023. OpEx in the second quarter was up 38%, which may seem a bit high. However, I would like to highlight that we are comparing 2 very different periods. In the second quarter of 2023, if you remember, we were facing a lot of headwinds, particularly on the TOI side. And as a result of that, we had to take some tough measures on marketing and also on compensation strategy. This year, we are almost in the opposite situation. We are ahead of our plan. And therefore, we are provisioning for higher staff costs as well as doubling down on our marketing effort. Finally, our provision expenses have also doubled, so this is, on the one hand, a lagging effect of the stress that the balance sheet has undergone last year due to the disruption in the economy and the real estate market in particular, but it's also a reflection of our conservative approach of proactive write-off and provisioning in order to maintain a very high coverage for our NPL. So cumulative PBT for the first half of the year is VND 15.6 trillion. This means that we have already achieved like 58%, roughly of our full year guidance. And what I would like to do is really caveat against the temptation to already apply a 2x multiplication to derive an estimate for the full year PBT. This is because we anticipate that the second half of the year will be a bit more tough on the NIM, and we will cover this later. Let's look now at our NII. So we continue to expand our balance sheet at an accelerated pace. The increase in interest-earning assets reached 26% at the end of the second quarter. We grew our deposits roughly by the same quantum, 26%. You can also see that there has been a very significant increase in certificates of deposits, which reached VND 67 trillion at the end of Q2. This is the backbone of our auto-earning proposition, which I referred to earlier, and this is what helped support the reduction in our cost of funds. On rates, we are seeing essentially a continuation of the trend we had in the first quarter. This means that actually the asset yields have continued to decline in the context of very intense competition between credit institutions because of the very slow asset growth in the market. However, at the same time, our cost of funds has gone down even faster, which explains why our NIM actually improved this quarter from 4.3% in Q1 to 4.6% in Q2. However, as I mentioned, we anticipate a change of trend from the third quarter. This is because we don't think that the competition between the banks will go away. So that means that essentially the asset yields will continue probably to decline. But at the same time, we will no longer benefit from the lower cost of funds and we should, on the contrary, start seeing a little bit of upward pressure on the cost of funds. We'll come back to this later. Looking now at lending balances in more details, I think the key highlight for me is the progress we made this quarter on segment diversification. So as you can see, retail loans increased 7% quarter-on-quarter, while corporate loans increased at a lower pace of 4%. And the chart on the right-hand side also shows that we continue to shorten the duration of our assets, so this is because we are pivoting our corporate books more towards short-term working capital loans, but also [ deliver its ] strategy to give us more flexibility in the context where interest rates are still very low. This is another slide on our credit exposures, so the same comment, right? I think we're starting to make real progress on diversification. Firstly, on sector diversification, you can see that if we focus on corporate exposures, then real estate assets grew only 2% quarter-on-quarter, while the total corporate exposures grew by 4%. And then within the retail books, the proportion of mortgages went down actually to 73%. And we started to see a very fast growth in margin lending, home equity loans and loans to micro SME customers, which together represent now around 60% of our total retail exposures. So I would like also to stress again, that diversification is one of the top priorities of the management of Techcombank for 2024. And therefore, we will aim to continue to show further progress in diversification in the second half of the year. Looking now at the real estate value chain in a bit more details. So as you can see, the volume of new mortgage disbursements confirms essentially the continuation of the recovery of the real estate market. We recorded in the second quarter of the year, the second highest volume of disbursement since 2021 for mortgages. However, the recovery is not evenly distributed. So we have a very hot market in the North. And then in Ho Chi Minh City, in particular, the activity is still a bit slow, particularly for low rise. We can, however, clearly see a path to a stronger recovery in the South. It will be either because the pricing in the north will progressively catch up with the prices in the south or it would be because of the planning authorities in Ho Chi Minh City, we start to take more prompt and rapid planning decisions. You can see also that the prepayments remain at an elevated level. So there is a lot clearly of competition between banks. And as a result of that, customers are jumping from one bank to the other in order to chase the lowest possible rates. But even despite of that, we still managed to grow our mortgage books by VND 10 trillion, roughly between the first quarter and the second quarter of the year, which is quite a strong achievement. Now a quick focus on deposits. The first comment I would make is that in the third quarter in a row that our CASA balances are in excess of VND 180 trillion. So this represent -- this level represents actually a 35% increase from 1 year ago. And as you know, this VND 180 trillion do not include the auto-earning balances which have similar characteristics, again, in terms of average yield and also in terms of stickiness. If I was to include the auto-earning balances and actually CASA would reach in our case, VND 194 trillion, and translating into a CASA issue in excess of 40%. Now for the remainder of the year regarding CASA, I would say we are cautiously optimistic. So on the one hand, we recognize that there are still headwinds in the market because of the higher interest rates. But on the other hand, we expect also to see some stronger impacts coming from new-to-bank acquisition, particularly in the merchant segment as well as our actions and campaigns aimed at driving engagement, such as our new reward platform. Overall, the average deposit yield decreased by a further 40 basis points during the second quarter to 2.5%. We should see, as I mentioned, the opposite trend going forward due to the higher interest rates in the market. However, again, the impact on the cost of funds of the bank should remain moderate. Let's look now at our fee income. So as I said, it was another area of very strong performance for Techcombank. The year-on-year growth reached 35% this year and 32% for this quarter, sorry, and 32% for the first 6 months of the year. Most of the growth was driven by IB fees, or investment banking fees, which increased a remarkable 3x compared to 2023 to reach VND 1.8 trillion. So to put things in perspective, VND 1.8 trillion is more than the total amount of fees reported by a number of our peers. Bond distribution volumes increased 2x to reach VND 42 trillion in the first half of the year. And this performance shows the strength of our wealth banking platform and its ability to drive superior profitability. Our specialized subsidiary, TCBS which released its results a bit earlier last week, actually achieved #3 position in the HCMC Stock Exchange and the #2 position in the Hanoi Stock Exchange for equities -- equity [indiscernible]. We also observed an encouraging bounce back of the Banca market, which was up 30% quarter-on-quarter and also 30% up year-on-year. FX fees on the other hand, as you can see here, were down around minus 20%. Transaction volumes essentially performed in line with plan, so that's not the issue. The issue is more that the margins compressed because the Dong interest rate -- the Dong FX rate compared to U.S. dollar actually remained very near the Central Bank ceiling rate for most of the period. Overall, it's still a very robust performance. I believe it illustrates the benefits of Techcombank's diversified and technology-orientated business model. Turning now to OpEx. Overall OpEx tracked our investment plan and our cost income ratio stood at 28% for the first half of the year, which is below our target range. As I mentioned, the year-on-year increase is significant, so plus 20% for the first half. However, it reflects first, the intensity of the investment we are making in technology, but as well as the cost control measures we implemented last year when we were facing significant profit headwinds. With a more supportive business environment this year, I mentioned the fact that we are dialing up on marketing, which translates into a 2x growth compared to last year. We are putting a lot of focus on retail customers with branded tiered offerings and promotions. We also realigned our compensation strategy to reflect the stronger performance of the bank from a financial viewpoint. And this translates into higher staff costs in the second quarter combined as well with the impact of the annual pay review. Our permanent headcount, however, continues to decline quarter-on-quarter. It's true that actually 10,500 at the end of the second quarter. So this shows, again, the productivity gains achieved through our investment in data and technology. The bank is continuing to operate at a very high level of operational efficiency. And this was hopefully apparent in the Techcombank keynote event, which we hosted at the beginning of July in Hanoi. Let's look now at asset quality. So our credit cost net of recoveries edged up only slightly to 0.9% on the last 12-month basis, in line with the NPL formation. If you look at total provision balances, however, they essentially remained flat compared to the December last year despite the significant growth of our credit books in the meantime. As I mentioned, we took some proactive write-off and provisioning decisions to ensure that our coverage ratio stayed above 100%, and it truly is today one of the highest in the industry. For the second half of the year, we believe that provisions will moderate from the level reached in the first half of the year. This is because we might not have to do as much proactive write-off. But beyond that, we observed that the risk emergence is slowing, and we also expect some provision recoveries. All this, I think, is positive. And as Jens mentioned, totally aligned to the guidance we communicated previously. This slide provides again more detail on the quarter-on-quarter variance of our credit risk. So special mention loans went down quite drastically this quarter. So it was very positive to see that from around VND 6.2 trillion at the end of Q1 to VND 4.9 trillion at the end of Q2. So this is a result of successful workout of our customers moving back to current or bucket 1, but also a slower emergence of Bucket 2 in the quarter. NPL balances inched up, but remained within our target range. Organic NPL was 1.08% at the end of June 2024. New NPL formation, I have to admit was a bit on the high side. However, it should moderate going forward because of the lower balances of Bucket 2 assets, as I mentioned earlier. Finally, the chart on the left-hand side gives you an idea of the amount of additional write-off that we booked in the first and the second quarter for a total of VND 1.2 trillion. So if you exclude these additional write-offs, then you can see that actually the 2 underlying specific provisions were probably around VND 800 billion per quarter and stayed essentially stable during the period. Like in the previous quarter, I'm also providing some additional insight into the health of our credit books. Overall, you see the provision remains quite strong across most metrics. There is clearly a higher proportion now of our assets, which yield less than 8%, and it's purely a consequence of the lower interest rates in the market. And as a matter of fact, most of the mortgages that the banks write in the market at the moment have a yield below 8%, which explains the increase of the proportion of assets below 8% customer rate. Turning now to capital and liquidity. So our capital adequacy ratio increased further to 14.5% at the end of June. And this despite the payment of around VND 5 trillion in cash dividend, which was the highest cash dividend from any bank in the market. We made good progress also in the optimization of our RWAs, and we anticipate that there is further opportunities in this space. On liquidity, funding from customers further increased to over 30% -- 73% at the end of Q2. Our short-term funding to medium long-term ratio improved further to 24.2%, which is one of the strongest in the market. Finally, a glimpse into how our performance compares to our peers. Overall, we continue, I think it's fair to say to significantly outperform the market across most metrics. We will turn now to the guidance for the rest of the year. So the forecast for the world GDP growth continues to be revised upward, which is a good thing. So it stands now at 3.3%. It was at 2.8% in the previous quarter. Our forecast for Vietnam remains essentially unchanged at 6.5%. I'm here giving you a bit more details on how we think of the second half of the year. However, as you see overall, as you've seen, the macro environment remains supportive and helps us expand our credit books in a healthy manner across all sectors. The real estate market, on the other hand, remains a bit slow in HCMC and its region. And we will, therefore, continue for this reason to adjust our flexible pricing policy to reflect the possibility of slower for longer real estate activity in the South. As I mentioned, we expect that the NIM will therefore come under pressure in the second half of the year. However, it should still be above 4% for the full year. There is no change to our full year PBT guidance. It is because actually, it was already based on relatively conservative assumptions regarding the real estate market. And given the very strong results in the first half of the year, we maintain our view that we will achieve and most probably exceed our PBT guidance for the full year. Finally, on credit risk, the special purpose vehicle construct and the flexible pricing policy means that we have a lot of control over the cash flows of the project. This is the reason why, as I've mentioned several times, the impact of the real estate stress is not that much seen in our provision as it is seen in our NIM. Without the flexible pricing policy, our NIM today will probably be in excess of 5%. Finally, we will push ahead with the diversification of our credit books. As I mentioned earlier, this is one of the top priorities of the management of this bank for the second half of the year. So this leads us now to the final summary of our guidance for the remainder of the year. Credit growth will be in line with the quota we'll receive from the Central Bank. Currently, it's around 16%. However, we anticipate that we might receive a bit more Cost of funds, as I said, would be around 3.5% for the full year. Our CASA ratio should improve in the second half of the year for seasonal effects as well as on the back on new-to-bank acquisition and engagement campaigns. Our net interest margin will probably start to decline from the third quarter. However, it should remain above 4% for the full year. NII in the context should go around 20% or more strong growth as well, double-digit from NFI with continued support from investment banking activities but also headwinds coming from the change of recognition for letters of credit activities. Cost-to-income ratio should remain at the lower end of the range, which means around 30%. We should see some improvement in our NPL, which should, however, remain more or less in the same ballpark, around 1.2% as we've seen so far. And finally, there is a potential for significant moderation in our credit costs for the second half of the year. And therefore, we expect a cost of risk of around 1% in our base scenario. So in a nutshell, it was another exciting year for Techcombank with a continuation of the trends we had seen in the previous quarters. Looking to the second half of the year, as I mentioned, we should see some moderation from -- on our NIM. And therefore, you should not necessarily multiply the PBT of the first half by 2 to form your anticipation for the full year. However, we are still obviously very confident that we will achieve and most probably exceed our PBT guidance for the year. And I'm personally very pleased with the performance and the results that bank has published. They are very strong across most metrics, and they prove the benefits of the ambitious investments we have made into talent and digital technology. This is what allowed Techcombank to be the first bank in the history of Vietnam to win the same year, all 3 major financial awards from Euromoney, Global Finance and Finance Asia. So the future looks undoubtedly exciting. This concludes my presentation, and we will now turn to questions. Thank you.

Thank you, Alex. Jumping right into the Q&A. The first question is for Jens, our CEO. Could you comment on the real estate market conditions in the first half 2024 and the outlook for the second half and on to next year possible. Given the very strong GDP growth in the second quarter, why do you think real estate market has appeared to recover more slowly than the overall economic activities? And why is there such a divergence between the north and the south?

Okay. So that is a full slew of questions. But thanks for that. So let's go probably one by one. So Overall, it's very clear that the real estate market has come back, but there are differences and by region and by segment in terms of a high-rise versus low rise. So first of all, and I think overall, we've seen improvements in the kind of volumes -- primary volumes in Ho Chi Minh City, in Hanoi. And I think that will probably continue to be the case. So first one is we still see that the prices actually have hold up quite well. So still people believe it's a relatively good investment. And I think there is a little bit more confidence. There is also the fact that the land law has changed. And therefore, everyone knows that probably over time prices will still go up. So therefore, trying to secure assets or apartments in existing projects, which are still based on the old land law and, therefore, the old pricing should actually have benefits. So I think all of that and then last but not least, interest rates are still low. So I think that actually has helped quite a bit. And I think we've seen that impact coming in. But again, difference between Hanoi and Ho Chi Minh City. So let's talk a little bit about what are the differences. So Hanoi, and it's very clear there are a lot of projects, very good legal status. And we've seen big projects being opened, not just in Hanoi, but also in Hai Phong. And again, also, income comes a little bit more from salaried and people and the developments are rather more in the kind of mass affluent range. And so therefore, it really hits the market, good demand and a relatively good confidence. And therefore, we've seen actually price is going up. We also see that the price level in the north is still below the South. So therefore, even more reason for people to think that there's appreciation. So not just people want to live in an apartment or in real estate, but also people investing and actually has all pretty good momentum. So we expect actually that probably in '25, we already see quite a significant uptick in the provisioning and supply. And then hopefully, by '26 and '27, we should actually go back to the levels of 2019, which were before COVID, which were probably some of the highest ones. Now Ho Chi Minh is a little bit different. Ho Chi Minh A still has a little bit of supply problems. There's still a lot of projects where it's a little bit unclear exactly legal titles that all still needs to be cleared up. So supply is actually still limited. We see -- and pickup is getting a little bit better, but still supply is limited. And because a lot of projects are still not completely clear on the legal status, et cetera. And we believe actually that only probably second half '25 and might there be a real uptick and maybe only in '27 we really see that we are at the same activity level than what we have seen in 2019. So it will take a little bit more time, especially when it comes to really clearing a lot of the current projects. At the same point in time, there's also a lot of the demand in the high end comes from business owners. And we still see that people are a little bit not completely confident if the current momentum in the overall economy maintains. So I think we're very strong. Right now, we saw 6.5% GDP growth first half. We see 6.9% second quarter. But a lot of people are probably still thinking about and keeping money together, making sure that if things are getting again a little bit tighter, that they have money to fund their businesses. Should that become more stable, should we actually see that there is a better recovery path in the global economy and therefore, also in the local economy, I think we will see more consumer confidence. And we also see that people start investing again. The same point comes, we see in the change of land law now also overseas Vietnamese can invest. So we will probably see money flowing in. But right now, with the dollar basically still going up, maybe people are a little bit afraid. Is there a depreciation and all that. So there's still a little bit of reluctance to really go all out on real estate. So we believe that only happened second half '25, but overall, at this point in time, we believe everyone who has projects with good legal title, good areas and over the next 3 years actually will be in a very, very good situation. And that's exactly why we are actually pretty confident because that's exactly the kind of customers we are having, good areas, legal land rights, all pretty clear. So actually, the amount in our portfolio of things which right now get marketed and are not any more under construction is actually increasing. So again, we believe it's a little bit slower than what we had anticipated. So the real pickup, especially in the higher end might only happen second half '25 and therefore, we still do the adjustments in the pricing policy, as Alex has said. But overall, it's very clear we are getting back on the recovery, but we believe maybe the south will go a year slower on average than what we're seeing in the north.

Thanks, Jens. Next question is for Alex. How is the bank's asset quality being affected by recent real estate market developments? And then could you also comment about the other sectors and segments?

Yes. Thanks for this question. And I know that asset quality is always an area of significant interest for most investors and analysts. So as I mentioned earlier, the early indicators or leading indicators are relatively favorable, right, because you looked at the bucket 2 balances, so delinquent assets -- and you see that the balances went down in the quarter from VND 6.1 trillion to VND 4.9 trillion. So this means that if things continue with this trend, then the NPL going forward would be lower. But however, I recognize that in the second quarter, we still had a significant amount of new NPL. And actually, a lot of this NPL came from our mortgage portfolio. So you can, in a certain way attribute that increase to the context in the real estate market that Jens just shared. Regarding now the other sectors, actually the delinquency and the NPL is relatively limited. We have some one-off, I would say, issues in our portfolio like recently in our FMCG portfolio from companies, which were impacted by the devaluation of the Dong. However, there is no, I would say, structural pattern. And then addressing the question, which is around should we see -- expect an impact from the relatively slow activity in the south on credit quality, I would like to reiterate the fact that at this stage, the impact will be more on the net interest margin than on the cost of risk. And this is because of the flexible pricing policy, which will allow us to control the cash flow of the projects and ensure that they can meet their financial obligations. So that's how I would summarize the position. So favorable leading indicators and cost of risk and NPL, which is -- continues to be tightly controlled by the bank, thanks to the flexible pricing policy.

Thanks, Alex. Next question is also for Alex. Could you share more details on the credit demand by sector and by segment? And what is the implication for Techcombank diversification strategy?

Yes, very good question. So as I mentioned, it's one of the top priorities of the management for 2024. If you remember, we already explained this objective -- presented this objective in 2023, but we also explained that it would take some time for us to be able to implement this diversification. But because we also had to continue to support our customers, ensure that the projects we had financed could progress to completion. However, we made some progress in the second quarter. So we managed, for example, to grow our retail balances faster than our corporate balances, 7% versus 4%. And then within our corporate exposures, actually, real estate assets only grew 2%, whereas other sectors like FMCG, automotive grow in the range of 5% to 15%. So it's only the beginning, but it's encouraging, and we will look to push further in the second half of the year. So far, I would say I'm very pleased with the capacity that the bank in particularly the corporate bank has shown to originate assets outside of the traditional area of strength of the bank, which was the real estate value chain. So we grew -- one of the banks which has grown credit books at the fastest pace year-to-date and we have done it in a way which is more diversified. So I think there is a lot to be happy with in this respect.

Thanks, Alex. The next question is for Jens on CASA. After recovering to 40% CASA ratio in the previous quarters, it looks like the CASA ratio dropped to 37% at the end of the second quarter. Could you help us understand what's going on there? And how confident are you in bringing CASA ratio back to 40% or more by the end of the year?

Again, great question, and let me try to shed a little bit more light on this. So there are a couple of things under, how to say, under our control and some of which is a little bit more on to the market. As we had always said, there are probably 3 key drivers on what brings CASA up or down. So first one is overall and kind of market sentiment for investments because a lot of our affluent customers, when they actually start and buying assets and other assets they start accumulating to a certain extent and then start buying other asset classes, on bonds and stocks and real estate. So that's one area. Then there's one area where it really is linked to businesses. And the third one is really primarily being liquidity accounts, just normal and accounts in order to make sure that you actually do your transactions, your payments and all of that. So on the affluent side, what we're seeing is, of course, a lot of the money right now goes a little bit into other asset classes. So when you saw some of the numbers which Alex showed just on the primary mortgage, we basically disbursed VND 8 trillion more in the last quarter just in terms of the mortgage book. If you look into our bonds where we have seen very, very strong results that, of course, is also that people are buying into bonds. We are one-off the strongest equity broker. So this money -- this money which starts getting accumulated is now finding its way into other asset classes. So therefore, it goes a little bit down, and we will always have a little bit more of that volatility than maybe some other banks who don't have this very affluent and customer base. So I think there's only so much what we can do. And so therefore, I think we need to focus really on the other parts. And when it comes to business or really have liquidity accounts or merchants or enterprises. So I think that one, and we actually try to increase. So we are really right now much more focused on banking, the households, with merchants, and we actually see that this amount of CASA is going steadily up. And then when it comes to real transaction account, liquidity accounts. And we also see that a lot of the efforts we've done over the last -- I don't know, 12, 18 months when it comes to tier count, when it comes to the auto-earning when it comes to reward programs and all of that are really getting to market. Are we kind of happy where we are right now. I think we should already be much, much further ahead. So again, I think from my perspective, we should already have uncracked well above the 40%, but therefore, I'm also very, very comfortable that we will get there until the end of the year. And as Alex has said, on the auto-earnings side, you see already to a certain extent that if you look at it, it's really part and also the way how the customers are using it like current account, savings account and at a liquidity payment product with relatively low interest rates. So if you take this already at 40%. But again, if we really take all these 2 things together, we should be rather at the 45% mark. So you will see we will spend much, much more also into marketing. We will make our reward program even more attractive. We will talk about cashbacks, credit cards. So a lot of these payment instruments, we will actually start pushing much, much harder in the second half. So I'm actually pretty comfortable that we get over and above the 40% mark.

Thank you, Jens. Next question is for Alex. It seems to be a recurring question. Could you provide us an update on your NIM outlook for the second half?

Yes. Thank you very happy to comment again on the net interest margin. It's a repeat question, but it's also a very important revenue driver for the bank. So as I mentioned earlier, there are 3 main factors which will influence the NIM in the second half of the year. The first one is the cost of funds, which are contrary to the trend that we've seen during the first half of the year should start increasing again, albeit moderately to reach probably around 3.5%, as I mentioned for the full year. The second one is the -- obviously, the asset yields. And I mentioned that there is a lot of competition in the banking system at the moment and other banks have made exactly the same assessment, by the way, and the consequence that we can expect asset yields continue to be under pressure in the second half of the year. And then the third driver is the flexible pricing policy, which we have implemented, as you know, to ensure the health of our credit books and which will also contribute to the moderation in our NIM. For this reason, the NIM in the second half of the year will not be as strong as the NIM in the first half of the year, but it should still be overall for the full year in excess of 4%.

Thanks, Alex. And the next question is also for Alex. Could you give us an update on the bond market in the second quarter and prospect for the second half? And then also, when would you expect that market to be back to the pre-2022 level?

Yes. Thanks. I also recognize that the bond market and the investment banking activities are very important for Techcombank. So I commented on the fact that our investment banking fees grew 3x in the first half of the year compared to 2023 and bonds played a significant part in this rebound. So we -- if we look at the bonds originated during the first half of the year by our specialized subsidiary, TCBS then the total amount which around VND 25 trillion, which is 14% higher than 2023 and gives TCBS roughly 47% market share for corporate bonds, which is quite high. For bond distribution, I mentioned the fact that the volume of primary bonds distributed by the bank's networks in the first 6 months of the year, actually was up 2x compared to 2023, reaching around VND 40 trillion, even more than that actually. So it is from many angles a very robust performance. Now if you compare it to the prior crisis or prior to 2022, I would say it's probably equivalent despite the fact that we are now operating in a very different market, so a lot of the things which were possible for issuers prior to 2022 crisis are no longer possible. There are some additional conditions, which have been put on them like having issuing rated bonds, the self-issuance also is now prohibited. So a lot of measures have been implemented. And when it comes to the range of eligible investors, it has also been significantly narrowed. So it's a healthier market in many ways, but also a market in which I hope we show today Techcombank is still able to drive some very significant profits. You also had a question for the second half of the year. So when it comes to distribution we estimate that the volume should be broadly in the same range as for the first half of the year. This is at least our internal plan.

Thanks, Alex. Next question is for Jens. Could you give us an update on the Banca business and what we should expect in the coming periods?

So yes, banking -- just -- can you hear me? Okay. So overall, we actually still seeing a relatively difficult market. And I believe there is a little bit of still a lack of confidence in that product after all the news, the noise. So overall, the market is still down. On our side, we are up actually 30% if we take second quarter 2023 and the second quarter 2024. So we believe actually that the way how we are managing is actually relatively in line with customer needs. So we're -- we know that we didn't misselling all of this. And I think that's right now and paying back. However, I think we're still far away from where we believe the market actually should be. So from that perspective, I think we will continue to see good results right now in terms of total APE in the first half, we are, I think, #3 in the market. This quarter, we were #2. So I think we still see room for growth, but I still also believe that there is a problem with the confidence, the overall confidence in the market with that product. What is encouraging is that there were a debate should banks not sell ILP, ULPs anymore. I think SPV came out very clearly and said, yes, banks should do that. And I think that's the right decision because ultimately, it's an important product for our customers. And however, I believe probably also the insurance industry need to do a little bit of a better job to really start coming back and spending money to educate the market why it is a good product, what really is the need addressed. And I think we need to be getting a little bit more and proactive in really rebuilding that confidence. And I think there is probably a concerted effort also required from the insurance players to reestablish that. Again, from our side, I think we are on the right track. But from where we used to be, I think we cannot run away from a market sentiment, which is down 40% to 50%. So we will continue to be at the top of the market and we will probably outperform in some of the competitors. But again, if the overall market is still where it is, it still will be sluggish for this year and probably still for some time to come.

Thanks, Jens. The next question is also for you on dividends. Could you share the plan going forward on whether this -- we should expect this to be an annual occurrence instead of just a one-off in 2024.

So of course, that is ultimately the board decision. And what we said, and I can just repeat that is when we changed our policy from the policy which we said for 10 years, we were not paying, you said, okay, we believe the conditions which need to be met is, a, around 15% CAR. We need to make sure that we can continue a 20% growth trajectory and then we need to have enough earnings to basically make sure that these 2 conditions can be met. As we said right now, and what you've seen is that even while we were paying this dividend. You saw that the CAR ratio was actually going up and over year-on-year, we were probably still on a 20%, 25% growth trajectory. So and we did the analysis. So from an earnings momentum from the way how the business develops, et cetera, we should actually be able to maintain this momentum. So from a management perspective, we actually feel pretty comfortable that we can maintain that trajectory, which has been laid out by the Board. But what the final decision will be from the Board, again, is really a prerogative of the Board. But from the initial statements, which we made at the AGM and all of this, and there's no reason to doubt that these things are still intact. And that on this trajectory, we should actually be going to more sustainable path of active capital management, including dividends.

Thanks, Jens. Let's segue into the next question for Alex. How did dividend payment impact your CAR? And what would be the ideal level of CAR going forward? And then also, what is your roadmap for Basel III and IFRS?

Thank you. So first part of the question around the impact of the dividend payment on the CAR. I would say you just need to look at the numbers and you will see the impact because the cash dividend is already reflected in our capital adequacy ratio at the end of June. So as I mentioned, the capital adequacy ratio improved from around 14.2% at the end of Q1 to 14.5% at the end of Q2, and this despite the payment of the dividend. So this is a reflection both of the organic profit generation from the bank and its profitability as well as the RWA optimization actions that I mentioned earlier. You also asked about our risk appetite. So at this stage, we don't see any reasons to change it. So our objective is still for the capital adequacy ratio to remain in the range of 14% to 15%. Regarding our plans for Basel and IFRS implementation. So first, we have implemented IFRS already. So we were the first bank to report our financial statements under IFRS. And if you are interested, you could consult our IFRS results that will soon be published for the full year 2023. And our plan for 2024 is to apply internally the internal rating-based approach of Basel II to calculate RWA. So we will be one of a few banks in Vietnam to be included in a pilot by the Central Bank of Vietnam to test the implementation of the internal rating-based approach. For us, obviously, it will be very, very beneficial because of the very low credit loss experience that we have, particularly for our corporate books. So on the one hand, if you look at the current framework, which is very formulaic, it's actually quite punitive for real estate activities and explains why our risk weight ratio relatively higher than that of our peers. And then when we move to internal rating-based approach actually, we will, to the contrary, be able to benefit from an advantage compared to the other banks because of the very low credit risk experience over the last -- pretty much last 10 years. So that's why we anticipate that moving from the standardized approach to the internal rating-based approach should allow us to improve our capital adequacy ratio probably by around 200 to 300 basis points. So at this point, we will review whether or not we want to change our risk appetite. But for the time being, we are happy to continue to be the bank with -- 1 of the 2 banks with the highest capital adequacy ratio in the market.

Thanks. We have time for another couple of questions. The next question is for Jens. Are you revisiting the PBT outlook for 2024 after a very strong PBT in the first half of VND 15.6 trillion, which is already more than 50% of the -- your target for the year.

So as -- can you hear me? Yes. Okay. So as Alex said, what we should definitely not do is multiply the first half by 2 and then saying that's the guidance. I think, and as we said, we still have a couple of headwinds on the NIM side. And I'm not repeating them, but we really don't know exactly how that is going to play out. We believe actually that the cost side is pretty much under control. We still -- as we maintain our investment cycle, we will still see that some of the costs will be going up. As I said, we will be very, very aggressive on the marketing side in order to make sure that we see some of the opportunities, we believe, which exist on the CASA side that we can really capture it. But what is a little bit unclear to us at this point in time is really what's the overall behavior in the market and when it comes to credit and credit yields. And what I think we know pretty clearly is that interest rates will still be going up. All what you can see and the Fed is not moderating as quickly and as probably people would have expected. So there will be pressure still on the currency, which means ultimately, interest rate needs to rise. So if that not translates into also increase in credit yields, there will be a squeeze on NIM for whatever different reasons. So therefore, we believe, as we said, that we can probably beat the guidance. But clearly, what we also don't believe there will just be 2x the first -- in the first half. But again, probably somewhere in there in between, and we probably will have more clear visibility in the third quarter.

And the final question is to Jens. Could you share a little bit more about what you meant in the Techcombank keynote when you said that technology may help Techcombank deliver growth faster and more profitably. And when will we start to see the impact of this?

Sure. I think we've probably already seen some of that. But when I talked about the growth more profitably, sustainably -- and it was really talking about the fact that the technology allows us to reach out to customers, onboard customers, engage with customers in a much more effective way than if we would have taken the old business model. And just when we described, for example, in 2023, when we suddenly were able to onboard 2.6 million additional retail customers in the years before, and it was always 1.2 million and we can do this while still actually keeping our cost-income ratio very much under control. As also said, is already in the most conservative way calculating the contribution of the digital channels on the retail side, already 1/3 of all the revenues are coming from customers who are interacting with us exclusively digitally. And whenever we are interacting with them, actually, this cost or this business model runs around 10 to 15 percentage point lower on a CIR ratio and then what we would have otherwise. So again, we can reach out to customers in a very, very different way. Even now also under agent banking, we can actually probably onboard agents very, very rapidly by just putting our technology into different outlets. We can intact, engage with customers on a very personalized manner, completely based on automated and experiences. And then we can run the whole thing in much more cost effective. What I've not even talked about is the fact that we are also able to get internal productivity improvements. So right now, we are using generative AI in a lot of different use cases trying to understand how we can actually get more productivity in marketing, in coding, in CRM and how to reach out to customers, how to send and optimize and leads and lead management. So we only scratched the surface. So already what we've seen in other numbers I shared, but then if we just look into purely all the use cases, which were we're now experimenting, we believe actually that we can expand our franchise and our business much, much more aggressively without incurring a lot of other costs. So that's what I meant when I said and we can actually probably accelerate the growth in a much more profitable manner.

Thank you, Jens, and Alex. And this concludes the 2024 first half financial results presentation. The presentation and replay link will be posted on the IR section of the website soon. Please contact the IR team for any additional questions. We look forward to speaking to you again in 3 months.