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Banking – Outlook for mid-sized banks based on strategic pillars

• The Vietnamese banking sector is entering an increasingly competitive phase, with a clear divergence between large banks and mid-sized banks. Larger institutions are leveraging their advantages in scale, cost of funds, and risk management to expand market share and profitability, compelling mid-sized banks to pursue differentiated strategies rather than competing head-on.
• Mid-sized banks are shaping their growth strategies around four key pillars: (1) Leveraging shareholder ecosystems to tap into existing customer bases and low-cost funding, (2) Advancing targeted digitalization with a focus on enhancing customer experience, (3) Developing green lending to capture emerging trends and access concessional international funding, and (4) Specializing in specific customer segments or verticals to build competitive advantages in niche markets.
• The implementation of these strategic pillars enables banks to improve operational efficiency by optimizing funding costs, increasing CASA, and expanding non-interest income, while also enhancing customer acquisition and market share in target segments. However, these strategies also entail certain risks, including concentration risk, limited long-term growth potential due to a focus on niche markets, and greater sensitivity to economic and consumption cycles.