Vietnam Banking Sector Update 1H2026

Pre-tax profit at the 27 listed banks within our coverage grew 19.6% YoY in 1H 2026, supported by robust net interest income, a strong recovery in service fee income, and effective control of operating expenses. Overall, the positive results were broad-based, with 22 of 27 banks posting positive growth, although divergence persisted and was concentrated mainly among mid- and small-sized banks. Notable trends include:

• Credit growth remained strong, with continued divergence: Credit growth reached 7.7% year-to-date, below the 9.9% recorded in the same period of 2025, but above the 6.9% average for 2023–2025. Growth was concentrated mainly among large-sized JSCBs, led by VPB, HDB, TCB, and MBB. Credit demand continued to skew toward corporate customers and medium- and long-term lending, while retail credit recovered more slowly.
• The NIM decline gradually narrowed, though a clear recovery signal has yet to emerge: NIM fell 5 basis points from the end of last year to 3.02%, though the pace of decline narrowed to just 2 basis points in 2Q 2026. Lending yields improved as mortgage loans that had exited their preferential-rate period were repriced higher, while medium- and long-term credit continued to grow faster than short-term credit. However, elevated deposit rates, competition among banks, and lending-rate cuts to support the economy continue to make a clear NIM recovery difficult in the second half of 2026.
• Banks actively diversified funding sources amid strong funding demand: Customer deposit growth reached 5.5%, while the scale of valuable papers issued grew sharply by 16.7% year-to-date, partially offsetting the gap between credit and deposit growth. At the same time, several banks (VPB, HDB) stepped up access to international funding.
• Service fee income became a bright spot for profitability: Total operating income (TOI) grew 17.1% YoY, supported by net interest income (+16.8%) and, notably, an impressive recovery in service fee income (+58%). In contrast, income from foreign exchange and securities trading declined sharply amid unfavorable market conditions. Income from other non-core activities (mainly recoveries of previously written-off bad debts) continued to grow positively (+31% YoY).
• Asset quality declined and provisioning buffers narrowed: the industry-wide NPL ratio rose to 2.01% from 1.86%, while the special mention loan ratio (Group 2) rose to 1.38% from 1.16% at the end of 2025. The increase in NPLs and Group 2 loans was concentrated more heavily among state-owned banks and large-sized JSCBs. Meanwhile, the LLR ratio fell from 83% to 79%, suggesting provisioning pressure could increase in the second half of 2026 should the pace of new NPL formation continue to rise.
• Operating expenses remained well controlled: the cost-to-income ratio (CIR) fell from 32.1% at the end of 2025 to 31.1%, providing meaningful support to profit growth alongside other improving income sources.