Vietnam’s banking sector is still growing, but the real story for investors is that credit quality is deteriorating fast enough to separate the strongest lenders from the weakest. By the end of September, bad debt at 28 listed joint-stock banks had climbed above 340.7 trillion dong, up 27% from the previous period, while loss-risk loans made up nearly half of the total, underscoring how much stress is still working through the system.
Vietnam banks face rising bad debt pressure
That matters because banks can keep posting profit growth for a while even as loan quality worsens — until provisioning catches up. In this case, it is already happening unevenly. SSI Research said nonperforming loans at 13 banks rose to 2.09% at the end of the third quarter from 1.97% in the second, with private banks bearing the brunt. Their bad-debt ratio climbed to 2.83%, compared with 1.32% for state-owned lenders, and coverage ratios showed an even wider gap: 152% for state banks versus just 55% for private banks.
Sentiment Indicators
For long-term investors, that gap is the whole story. It tells you which banks have the balance-sheet strength to keep compounding through a tougher credit cycle and which ones may have to sacrifice earnings to repair their books. Vietcombank, with a 243% coverage ratio, remains the standout for capital protection. At the other end, Sacombank, VIB and HDBank all sit with thin buffers relative to the risk they are carrying, even though some of those names have improved from earlier quarters.
The warning signs are not limited to today’s nonperforming loans. SSI said new bad debt formation rose to 1.89%, while group-2 loans, which can slide into nonperforming status if borrowers keep struggling, reached 1.63%. That is especially important in a high-rate environment, where many home loans are rolling off their promotional periods and moving to floating rates of roughly 12% to 15% a year. If property transactions stay sluggish, collateral recovery could also take longer, meaning provisioning pressure may linger for several quarters.
And yet the sector is not shrinking. Total pretax profit for the 13 banks tracked by SSI rose 18.9% year on year to about 89.1 trillion dong in the third quarter, helped by 12.8% credit growth and a 25% increase in non-interest income. That mix tells investors two things at once: the franchise value of Vietnam’s big banks remains intact, but earnings quality is becoming more dependent on funding discipline, asset quality and the ability to absorb losses.
The market implication is clear. This is not a “buy every bank” environment. It is a stock-picker’s market, where the best capitalized lenders deserve a valuation premium and weaker names may keep underperforming even if headline profits look healthy. SSI’s preferred names — Vietcombank, Techcombank and MB — fit that mold because they combine stronger asset quality, more stable funding and larger buffers. In a sector still trading at about 8.75 times projected 2026 earnings and 1.23 times book, the winners are the banks that can protect book value, not just grow loans.
For investors, the lesson is simple: Vietnam’s banks remain a compelling long-term theme, but the easy phase of the cycle is over. The next leg of returns will come from discipline, not just expansion, and that is why asset quality is now the key factor dividing the sector. Worth watching, and worth owning selectively.
| Entity | Gains | Losses |
|---|---|---|
| Vietcombank, Techcombank, MB | ▲Better balance sheets, stronger buffers | ▼Less downside from bad debt |
| Private banks with thin coverage | ▲Loan growth, near-term earnings | ▼More provisioning pressure |
| Borrowers | ▲Easier access to credit | ▼Higher borrowing costs |
| Bank investors | ▲Dispersion creates stock-picking opportunity | ▼Broad index-style exposure to weaker lenders |
