Vietnam banks still pay high bond yields

That matters because it shows the banking system is not simply lowering funding costs after orders from the State Bank of Vietnam to reduce deposit and lending rates. It is shuffling the cost of capital from one channel to another. If banks can advertise lower savings rates but still have to issue debt at 9% to 10.5%, the pressure on net interest margins does not disappear — it just moves off the headline deposit table.

S&I Ratings said banks sold about 120 trillion dong of bonds in the third quarter, up 11.8% from a year earlier, with an average coupon of 8.85%, above the 2022 average. Some deals cleared above 10%, underscoring how expensive term funding remains even as 22 of 46 commercial banks have announced deposit-rate cuts of as much as 0.7 percentage point in recent weeks.

The economic significance is straightforward: Vietnam wants cheaper credit to support production and prioritized sectors, but the transmission mechanism is still clogged by funding costs. When banks have to pay up for medium- and long-term liabilities, they have less room to cut lending rates in a meaningful way without squeezing profitability or weakening balance sheets. That is especially true for lenders that rely on short-term deposits and need to lengthen funding duration to meet regulatory and liquidity needs.

For investors, the implication is twofold. First, bank bonds look attractive on a nominal yield basis, and demand may remain firm as depositors search for higher returns. Second, those same yields are a warning sign for equity holders: elevated funding costs can cap earnings upside, pressure margins and keep valuation multiples in check. The market may be too quick to treat lower posted deposit rates as evidence of cheaper money across the system.

There is also a second-order effect. If savers see banks issuing bonds at 9% to 10% while deposits pay far less, they may demand higher deposit rates anyway or move funds into fixed-income products, preventing funding costs from falling as fast as policymakers want. In that sense, the bond market is becoming the new reference point for pricing money in Vietnam’s banking sector.

The investable takeaway is that the winners are likely to be banks with stronger deposit franchises, better liquidity and lower dependence on wholesale funding. The laggards are lenders forced to lean on expensive bonds to bridge maturity gaps. If the current spread between posted deposit rates and bond coupons persists, the market should expect only a gradual, uneven pass-through to lending rates — and a more selective rally in Vietnamese bank stocks.