According to VIS Rating, Vietnamese banks entered 2026 facing a tighter and more volatile operating environment, as elevated interest rates–driven by system-wide liquidity constraints and external pressures–weaken asset quality and profitability.
In the first quarter of 2026, mid-sized banks experienced the sharpest credit deterioration, with rising retail delinquencies and declining return on average assets (ROAA) amid net interest margin (NIM) compression and higher credit costs.
In contrast, large banks and state-owned banks maintained broadly stable asset quality and earnings, supported by more diversified loan books, stronger customer franchises, and resilient fee income.
“Looking ahead, persistently high interest rates and rising household leverage will increase downside risks, particularly for banks with greater exposure to retail lending and thinner buffers against asset-quality stress,” VIS Rating noted.
While tighter liquidity regulations are structurally credit-positive, they are likely to intensify deposit competition, keep funding costs elevated, and pressure profitability in the near term, particularly for banks more reliant on market funding.
Sector CASA-to-gross loans fell by 2 percentage points on-quarter to 18 per cent in the first quarter of 2026, reflecting retail deposit outflows at lenders such as Techcombank and ACB, alongside weaker corporate deposits at MB and TPBank.
Margin pressure from rising deposit competition is also weighing on profitability, particularly among small- and mid-sized banks. Sector ROAA fell 10 basis points on-quarter to 1.4 per cent in the first quarter of 2026, while NIM narrowed by an average of 11 basis points due to higher funding costs, with the sharpest impact seen at banks with weaker deposit franchises.
Mid-sized lenders also faced higher credit costs, softer fee income at banks such as OCB and MSB, and the absence of one-off gains previously recorded by SeABank. By contrast, larger banks maintained relatively stable profitability, supported by stronger NIMs at Vietcombank and VietinBank, improved bancassurance income and lower credit costs at ACB and TCB, as well as tighter cost control.
VIS Rating expects continued NIM compression and rising credit costs to weigh on core profitability at small and mid-sized banks through 2026, given sustained funding competition and asset quality pressures.
