Vietnam’s financial sector has become a dynamic part of the nation’s economy, but despite its rapid development, it remains relatively small. In 2023, the sector accounted for 4.09 percent of GDP, a notable decrease from 4.76 percent in 2022. This shift highlights potential volatility within the sector or other structural adjustments. Over the last decade, various segments, including banking, insurance, bonds, and stocks, have seen significant growth. The expansion has been driven by increased demand for financial services among a growing middle class, enhanced regulatory frameworks, and greater access to technology such as mobile banking and online investment platforms.
However, this is still a sector with considerable room for development. For instance, Vietnam’s stock market, while growing, remains underutilized compared to other regional markets, with relatively low participation rates among retail investors. Similarly, the insurance market, though expanding, has yet to achieve deep penetration across the population. Other financial instruments like bonds and derivative markets are still in nascent stages, with limited volumes and a lack of diversity in products offered.
With this in mind, this article provides a broad overview of the financial service sector in Vietnam including banking, stocks, and bonds.
Vietnam’s financial sector rankings
Depending on the measures used, Vietnam tends to fall around the middle of most financial sector indexes.
Index of Economic Freedom (IEF)
On the Heritage Foundations 2023 Index of Economic Freedom Vietnam was ranked 72 in the world with a score of 61.8. This was an improvement of 1.2 points over 2022. Out of 100 points, on investment freedom and financial freedom, Vietnam received scores of 40 and 50 respectively.
IMF Financial Development Index
In 2020, Vietnam scored 38 out of a possible 100 on the IMF’s Financial Development Index. This put Vietnam in fourth place tied with the Philippines also on 38, and behind its ASEAN peers Singapore (71), Thailand (74), and Malaysia (73). The country scored best on ‘financial institutions efficiency’ and worst on ‘financial institutions access’.
Global Financial Centers Index
Ho Chi Minh City is Vietnam’s financial center. Most of Vietnam’s major trading firms are based in the city which is also home to the HCMC Stock Exchange.
In the Global Financial Centres Index 35, released in March 2024, Ho Chi Minh City managed to jump ahead 12 places gaining 46 points. This was up from coming second to last at number 120 in the Global Financial Centers Index 34 published in September of 2023.
Financial products in Vietnam
Stocks in Vietnam
The Vietnam stock exchange that is most well-known and attracts the most capital is the Ho Chi Minh City Stock Exchange (HoSE). This has just over 400 listed companies with the entire stock exchange having a market capitalisation of US$211.6 billion as of March of 2024.
Bonds in Vietnam
Bonds in Vietnam are traded on the Hanoi Stock Exchange (HNX). Corporate bonds in recent years have been a popular means of raising capital in Vietnam, however, over the past year or so it has been revealed that corporate bonds in several instances have been misused. This has created some challenges selling bonds and has led to bond market reforms (details below).
Banks in Vietnam
Banking in Vietnam is a huge industry though a large portion of Vietnam’s population remains unbanked–roughly 44 percent in 2022 according to the World Bank–however, this number is in the decline. Direct transfers have become increasingly common, particularly through individual QR codes. Wages are generally paid via direct deposit as well.
Savings accounts and term deposits are also popular investment vehicles. Deposits are partially guaranteed in Vietnam and this can make keeping money in the bank a safer option than stocks or bonds.
Insurance in Vietnam
Vietnam’s insurance sector has grown rapidly in recent years. In 2022, it reported gross written premiums in excess of US$10.2 billion up from US$9 billion in 2021. Insurance in a number of sectors is mandatory including for motor vehicle owners and businesses in the construction sector. This is also a popular sector for foreign investment with at least 15 branches of foreign insurance firms in Vietnam as of the end of 2022, according to The Annual Report of Vietnam Insurance Market 2022.
Gold in Vietnam
Gold in Vietnam is also worth a mention in that it is a very popular investment vehicle relative to elsewhere in the world. This has come about after decades of economic uncertainty, a cultural affinity with gold, as well as prices that have been known to fluctuate widely. There are gold shops all over Vietnam here gold bars can be bought and sold easily–this has also given rise to speculation.
Key financial service providers
Banks
Vietnam’s banking sector is dominated by four state-owned banks dubbed the ‘Big Four’, however, these banks are the four most well-known but necessarily the biggest in terms of dollar value.
BIDV
BIDV is currently the largest commercial bank in Vietnam by asset value. BIDV’s total assets in 2022 reached VND 2.12 quadrillion (US$87.4 billion), This was a 20.4 percent increase over 2021.
Furthermore, BIDV revenues reached VND 146,049 billion (US$6 billion) in 2022 representing, a 16.2 percent increase over 2021.
BIDV is currently 80.99 percent owned by the Vietnamese state with 1.8 percent owned by domestic investors 15 percent held by Korea’s KEB Hana Bank, and the remaining 2.21 percent held by assorted foreign investors.
VietinBank
At the end of 2022, VietinBank had total assets in excess of VND 1.8 trillion (US$74.5 billion), an increase of 18.1 percent over a year earlier.
As of April 2023, 64.46 percent of Vietinbank was owned by the Vietnamese state with 19.73 percent held by Japan’s MUFG bank. The remaining 15.81 percent was split between domestic and foreign investors.
Vietcombank
Vietcombank’s total assets reached VND 1.8 trillion (US$74.7 billion), an increase of 28 percent over 2021. Furthermore, the company reported consolidated profit before tax of VND 37,368 billion (US$1.54 billion), 35 percent higher than in 2021.
Vietcombank frequently tops the Ho Chi Minh City Stock Exchange as the most valuable company. Its market capitalization on the exchange as of November 2023 was about US$19.8 billion. Coming in second was BIDV at less than half Vietcombank’s value, at just US$9.1 billion.
The State Bank of Vietnam is the largest shareholder in Vietcombank owning 74.8 percent of the bank. Japan’s Mizuho Corporate Bank is the second biggest stakeholder with 15 percent of the company, and the remaining 10.2 percent is owned by a mix of domestic and foreign, organisations and individuals.
Agribank
As of December 31, 2022, Agribank had total assets to the value of VND 1.87 trillion (US$77.2 billion), an increase of 10.6 percent over the year before. Furthermore, total income reached VND 159,945 billion (US$6.6 billion) an increase of 21.7 percent.
Agribank began operations in 1988 as Vietnam’s economy was in the heady days of its economic reform. Agribank is wholly owned by the Vietnamese state.
Securities firms
The ten leading securities firms announced by the HoSE at the end of 2022 were:
VPS Securities
VPS Securities boasted a 14.81 percent market share at the end of 2022. In 2022, the firm had net revenue of US$348 million with a $33.2 million. VPS has been trading the HoSE since 2006.
SSI Securities
SSI Securities had a market share at the end of 2022 of around 10 percent. In 2022, the firm clocked revenue of US$261.1 million with profit after tax of US$69.95 million. SSI was founded in 1999.
VNDirect
VNDirect’s market share at the end of 2022 was estimated to be about 7.51 percent. The firm recorded net revenue in 2022 of VND 6,829,224 (US$) and a profit after tax of VND 1,220,280 (US$). The firm first started operating in 2006.
Of note, VNDirect was shut down for a week by hackers in March 2024. This has seen its share price on a steady decline , falling from VND 21,278 on March 21 to just VND 14,650 as of August 7 2024–a decline of around 30 percent.
Insurance companies
Vietnam’s insurance market is generally divided into two markets: life insurance and non-life insurance. The non-life insurance market is the smaller of the two accounting for just US$2.86 billion in gross written premiums (GWM) in 2022. Conversely, the life insurance market in 2022 brought in US$7.35 billion in GWM, according to The Annual Report of Vietnam Insurance Market 2022.
In this light, all three top-performing insurance firms in Vietnam were concentrated in the life insurance market. These were:
Bao Viet
The top performer in the insurance market in Vietnam in 2022, across the board, was Bao Viet. Bao Viet earned US$1.35 billion in GWP in the life insurance sector alone. In the non-life insurance sector, it also had US$402 million in GWP. Bao Viet is one of Vietnam’s longest-running insurance firms. It first started operating in 1965.
As of the end of 2022, domestic investors owned 72.7 percent of Bao Vietnam. This was mostly split between the State Capital Investment and Trading Corporation (SCIC) and the Ministry of Finance. Foreign investors controlled the remaining 27.3 percent. There is currently a 49 percent cap on foreign ownership of Bao Viet.
Manulife
Unlike Bao Viet, Canadian multinational, Manulife is focused on the life insurance market in Vietnam. In 2022, Manulife’s GWP in Vietnam hit US1.3 billion up from US$1.22 billion in 2021. Its market share of Vietnam’s life insurance market was 17.7 percent.
Manulife has been operating in Vietnam since 1999. It is headquartered in Ho Chi Minh City.
Prudential
The United Kingdom’s insurance behemoth Prudential was the third top performer in Vietnam’s insurance sector in 2022. It recorded GWPs of US$1.28 billion up from US$1.19 billion in 2021. The firm has been operating in Vietnam since 2011.
Foreign investment in Vietnam’s financial services sector
Regulations
Vietnam’s financial services sector is among the most heavily regulated sectors of Vietnam’s economy. It is, however, also the most lucrative. As a result, it is also one of the most heavily foreign-invested sectors in Vietnam, in terms of dollar value. Firms considering an investment in the financial services sector in Vietnam should, therefore, should be aware of the limits and
Broadly speaking, foreign ownership limits in the banking sector are between 5 to 20 percent, bonds are open to foreign investors, and there is no cap on ownership of securities firms, however, in general, foreign investors cannot own more than 49 percent of a company listed on the local bourse. That said, there are often additional regulatory requirements for foreign firms operating in the financial services sector in Vietnam.
Recent foreign investments in Vietnam’s finance sector
FDI in Banking in 2024
As of July 20, 2024 foreign investors had registered three new projects in financial, banking and insurance activities worth just over US$102 million.
Sumitomo Mitsui Banking Corporation (SMBC)
In March 2023, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) made a significant move in Vietnam’s financial sector by purchasing a 15 percent stake in VPBank, one of the country’s largest private banks. The deal, valued at VND 35.9 trillion (approximately US$1.5 billion), marked one of the biggest foreign investments in Vietnam’s banking industry to date.
This strategic acquisition allowed SMBC to strengthen its presence in Vietnam, a rapidly growing market with increasing demand for diversified banking services, while also enabling VPBank to expand its capital base and enhance its operations. The injection of foreign capital through this partnership is expected to support VPBank’s long-term goals of bolstering its lending capacity, particularly in areas such as retail banking and small and medium-sized enterprises (SMEs).
DB Insurance
Back in February, it was announced that Korea’s DB Insurance had taken a 75 percent stake in Vietnam National Aviation Insurance (VNI). This was DB Insurance’s second big move in the Vietnam insurance market. The first was the purchase of a 37.32 percent stake in Post and Telecommunications Joint Stock Insurance Corporation back in 2015.
Challenges in Vietnam’s financial services sector
Controversies
As is common in emerging markets, the speed at which Vietnam’s financial sector has developed has given cover to nefarious actors that have taken advantage of low levels of financial literacy and a lack of understanding of a number of new financial products. Vietnam’s authorities have been working to isolate and stamp out these practices but as of writing there are still a lot of challenges facing the industry.
Bonds
Vietnam’s bond market has been the centre of a major scandal over the past two years after it was revealed that funds raised from bonds were being misused. Investors discovered that the proceeds were not being applied towards the purposes they had been led to believe, sparking intense scrutiny of the market. This scandal culminated in a series of high-profile arrests, including corporate executives from large companies, which exposed widespread embezzlement amounting to billions of US dollars.
One of the most significant cases was that of Truong My Lan, the chairwoman of the major property developer Van Thinh Phat. Investigations revealed that she had misappropriated a staggering US$44 billion, a crime that sent shockwaves through Vietnam’s financial sector. The funds were allegedly embezzled through complex bond issuance schemes tied to her company.
Truong My Lan was sentenced to death for the aforementioned crimes in April 2024.
Insurance
Vietnam’s insurance sector has faced significant challenges over the past year, primarily due to widespread allegations that banks were misleading customers into purchasing insurance policies. Reports surfaced that bank customers, believing they were making traditional deposits, were instead being sold insurance policies without their full understanding or consent. This issue came to light as customers began realising that their money was not being held as savings but tied up in insurance products, which often carried different terms and conditions from what they had expected.
These allegations have severely impacted trust in both the banking and insurance sectors. Banks were accused of using high-pressure tactics and providing misleading information to borrowers, creating an atmosphere of mistrust between consumers and financial institutions. As a result, there has been increased scrutiny from regulatory bodies, prompting investigations and efforts to tighten oversight in the financial industry.
The controversy has led to calls for stricter regulations and transparency in the sale of insurance products.
Stocks
Vietnam’s stock market has faced significant controversy in 2024 due to allegations of market manipulation, particularly involving high-profile figures like Trinh Van Quyet, the former head of real estate giant FLC Group. Quyet is accused of orchestrating a scheme to artificially inflate the price of FLC’s stock by using family members and associates to buy large quantities of shares. This manipulation created a false sense of demand, driving up the stock price, which allowed Quyet to profit from selling shares at inflated prices. Reports indicate that he illegally netted around US$176.2 million through this scheme.
The case has had a profound impact on Vietnam’s stock market, raising concerns about transparency and fairness. In response, regulators have tightened oversight and implemented stricter rules to prevent similar incidents in the future. Quyet’s actions and subsequent arrest have led to broader efforts by Vietnamese authorities to clamp down on market manipulation and restore confidence in the financial markets.
Trinh Van Quyet was sentenced to 21 years for fraud and stock market manipulation in August 2024.
Vietnam’s financial sector moving forward
A strategy for the development of Vietnam’s finance sector was approved by Decision 368/QD-TTg in 2022. The strategy outlines a number of key targets and objectives. These are quite broad and the strategy lacks detail, however, it does point toward a country clearly aspiring to develop a world-class financial sector.
But whereas the overall direction of the sector is vague there are a number of key reforms actively being pursued. These include:
Basel Accords
Most banks in Vietnam have been expected to meet Basel II standards since January 1, 2020, per Circular No. 41/2016/TT-NHNN with a vision to all banks complying with Basel II standards by 2025. Though there are currently no codified requirements to meet Basel II standards, many banks are already pursuing these standards of their own volition. This is being driven by the demands of foreign lenders and investors.
International Financial Reporting Standards (IFRS)
Vietnam currently operates on its own accounting system known as the Vietnam Accounting Standards (VAS) as opposed to International Accounting Standards (IAS). Businesses, however, are in the process of switching over to IAS. This is in large part driven by the increased access to capital firms using IAS have, with many already meeting IFRS 9 standards.
Emerging market status
The HoSE is considered a frontier market by FTSE Russell standards. This is due to two key factors. The first is that foreign traders need to prove they have the funds to pay for a share purchase before a trade can be completed; and, the second is foreign ownership limits. There is currently no clear plan as to how these two criteria might be tackled, however, the HoSE aims to meet FTSE Russel’s emerging market criteria in 2025. It’s estimated this could generate in the vicinity of US$10 billion in additional investment for Vietnam’s main stock exchange.
What’s next?
Vietnam’s financial sector is changing rapidly and policy and regulations can turn on a dime. With this in mind, firms and individuals with an interest in Vietnam’s financial sector should ensure they subscribe to the-shiv.
Last updated: August 7, 2024