Vietnam’s system-wide credit grew 3.93 percent by March 31, nearly triple the pace in Q1 2024, Kinh Te Saigon is reporting. This supported high profit growth at banks like SeABank (+189 percent), MBBank (+45 percent), HDBank (+33 percent), and Sacombank (+38 percent), however, the publication also notes that rising bad debts led to increased credit risk provisioning, with rising deposit interest costs also putting pressure on banks’ margins.
Other key points include:
- Extraordinary income and one-off gains supported top performers–SeABank’s sale of PTF to AEON generated VND2.6 trillion in income and MBBank booked VND 1 trillion in extraordinary income from debt recovery and risk handling.
- Most banks faced significantly higher deposit expenses, driven by intense competition for funds–ACB’s deposit costs jumped 32 percent; BIDV, VPBank, and MBBank also saw increases of 6–10 percent.
- Provisioning costs increased at many banks–VPBank (+16 percent), SeABank (+51 percent), and MBBank (+10 percent) reported significant increases. PGBank saw the sharpest rise: +249 percent year-on-year.
- Non-interest income was mixed–Service income remained resilient for most banks despite weaker insurance and bond sales. However, Techcombank, BIDV, VPBank, and BaoViet Bank all reported declines in fee income compared to Q1 2024.
- Not all banks shared in the gains–BIDV’s profit rose just 0.3 percent despite 2.5 percent credit growth. Techcombank and ACB both saw profit declines due to weaker trading income and higher funding costs. PGBank’s profit dropped more than 17 percent, hit by soaring provisioning.
These Q1 2025 results reveal a paradox in Vietnam’s banking sector. While credit expansion and extraordinary income lifted headline profits, behind the scenes rising funding costs to feed that credit expansion and provisioning for the rising bad debts resulting from all of that new credit, tightened margins.
See also: It’s Time to Talk About Vietnam’s Credit Growth Policy…