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Q1 2025 Banking Sector Update: Strong Profit Growth Amid Divergent Credit Dynamics

• In 1Q25, 27 listed Vietnamese banks reported a consolidated PBT of nearly VND 83 trillion (approximately USD3.3 billion), marking a 14% YoY increase. The growth was driven by a 7% YoY rise in net interest income and a striking 151% YoY surge in income from other activities, while provisions for credit risks remained flat compared to the same period last year.
• Credit growth among listed banks reached 3.76% year-to-date through Q1 2025, slightly trailing the broader banking system’s 3.93%. This reflects a positive recovery in capital demand compared to the 1.42% growth recorded in Q1 2024, achieving roughly 25% of the State Bank of Vietnam’s (SBV) 16% credit growth target for the year. The structure of credit growth showed no significant shifts, with corporate lending and short-term loans continuing to drive system-wide expansion.
• Deposit mobilization by listed banks grew by 3.3% in Q1 2025, with customer deposits rising 2.4% and issuances of valuable papers surging 11.0%. However, deposit growth lagged behind credit growth by 0.4 percentage points, though the gap narrowed compared to 2024. The average tenor of mobilized capital is trending longer, fueled by banks issuing bonds to bolster Tier 2 capital and certificates of deposit to enhance competitiveness in attracting low-cost CASA deposits via hybrid earning account. With credit growth expected to accelerate later in 2025, pressure on deposit interest rates and funding costs is likely to intensify for banks in the remainder of the year.
• The industry’s NIM contracted by 30 basis points QoQ to 3.05%, driven by a 25 bps QoQ decline in asset yields and a 5 bps QoQ increase in funding costs. This reflects intensifying competition in lending rates, spurred by government-directed preferential credit packages aimed at lowering borrowing costs. Additional pressures include the structure of new loan tenors, rising non-performing loans, and the reversal of accrued interest, compounded by competitive dynamics in deposit mobilization.