Banking Sector | Initiation Report, Driving the Next Phase of Economic Growth

Overview

Vietnam’s banking sector remains the cornerstone of the country’s economic growth and serves as the key intermediary channeling capital into production, consumption, and infrastructure development. After navigating two challenging years marked by liquidity strain, subdued credit growth, and regulatory tightening, the sector is entering a new cycle as the government implements its expansionary fiscal and money policy to drive economic growth.

In 2025, system-wide credit growth is expected to reach over 18%, up from 15% in 2024. To align with the government’s ambitious double digits GDP growth target in 2026 and beyond, the State Bank of Vietnam (SBV) aims to maintain accommodative monetary stance and sustain a high credit growth rate hovering around 16 - 20% during 2026–2028. This provides the sector with a favorable outlook in the next 3 years, backed by a solid credit expansion, ample liquidity, and strong balance sheet improvement.

Outlook

The banking sector is expected to maintain a high growth momentum over the 2025-2028 period. As competition continues to intensify, the medium-term growth story will rely not only on lending capacity but also on banks’ ability to diversify income and strengthen capital buffers amid regulatory tightening. Banks who have strong retail base, advanced digitalization standards, diversified non-interest income sources, solid wealth management arm,  and financial ecosystem expansion, would have better growth prospects and ability to maintain profitability.

1. Strong Credit Growth with SBV Accommodative Policy:

Credit growth is projected to remain strong at 16%-20% in 2025-2028 because of SBV’s accommodative stance and policy emphasis on stimulating economic activity.

While credit demand accelerates, deposit growth continues to lag, creating liquidity and funding strain across the banking system. Banks are increasingly seeking alternative capital sources such as bond issuance and long-term borrowings to ease pressure on funding sources, but funding costs could elevate, especially for banks with low CASA ratio.

2. Contracting NIM and Divergent of Performance:

Sector NIM peaked in 2022–2023 when funding costs were relatively low following four SBV rate cuts that pushed the refinancing rate down to 4.5%, but it has since come under pressure as banks lowered lending rates to stimulate credit demand, particularly for SMEs, housing, and manufacturing, while funding costs have risen due to stronger competition; as a result, NIM fell to 3.2% in 9M 2025 and is expected to remain subdued over the forecast period.

With margins tightening, banks will increasingly rely on fee-based income, expanding services such as insurance, bond trading, advisory, transaction banking, bancassurance, data monetization, and cross-selling to sustain earnings growth.

At the same time, Vietnam’s personal financial asset market, expected to reach about USD 600bn by 2027 with 11% annual growth, creates significant opportunities for banks to scale wealth management, advisory, and private banking to strengthen non-interest income and support long-term profitability.

3. Regulatory and Policy Liberalization:

The SBV has signaled moves to reduce strict administrative caps on lending and shift more toward market-based mechanisms. Over the 2025–2028 period, this liberalization will give larger, better-capitalized banks more room to grow, but also raise competition and pressure on risk discipline.

4. Digital Transformation, Fintech Convergence, And “Banking as Platform":

Digital transformation is reshaping Vietnam’s banking sector as institutions accelerate mobile-first services and shift toward leaner, data-driven operating models. With most transactions already occurring digitally, banks will intensify mobile and omnichannel expansion from 2025–2027, streamline branch networks, and lower CIR and staffing needs.