Many banks record an increase in overdue debt in the home loan group.

Some banks record increase in overdue debt

VIS Rating’s banking sector report shows that the creditworthiness of Vietnam’s banking sector is recovering slightly as it enters the last quarter of 2025, thanks to three factors: improved asset quality, stable profits and a more favorable policy environment. Data for the first month of 2025 clearly shows that the problem debt ratio remained at 2.3%, while the rate of new bad debt formation decreased by 30 basis points compared to the previous quarter.

According to VIS Rating, this downward trend comes from better debt repayment capacity of individual customers and local recovery in some business segments.

According to VIS Rating, the bad debt ratio decreased by up to 20% at state-owned banks (SOBs) and some large banks with small outstanding loans to troubled real estate developers. Meanwhile, some large and medium-sized banks recorded an increase in overdue debt due to their sensitive loan structure: MBB was affected by the renewable energy business group; STB was affected by import-export SMEs and aviation businesses; while TPB and HDB recorded an increase in overdue debt in the home loan group.

VIS Rating forecasts that the industry-wide NPL ratio could fall by another 10-20 basis points in the fourth quarter, thanks to accelerated debt write-off progress and the effectiveness of the revised Law on Credit Institutions, which is expected to improve transparency and debt collection speed. This is an important support for the industry’s credit recovery momentum in the remaining period of the year. The improvement in asset quality is an important foundation for the industry’s profit to remain stable in the first nine months of the year.

Despite the high cost of capital, VIS Rating forecasts that the profitability of the entire industry this year will remain stable, supported by strong growth in non-interest income. In the first 9 months of this year, the profitability of the entire industry remained stable, with the return on average assets (ROAA) reaching 1.5%, equivalent to the same period in 2024.

The large banking group continues to lead in terms of profitability. VPB, BIDV , VietinBank and Techcombank all recorded significant growth in non-interest income, helping to balance the pressure on capital costs. VIS Rating assessed that these banks are “on track to complete the annual profit plan”, thanks to the steady increase in long-term credit, reduced credit costs and strengthened risk provisions.

In the remaining group, NIM atACB and VIB narrowed due to increased lending to large enterprises – a segment with lower interest margins than retail. TPB and EIB suffered from increased mobilization costs as CASA fell across the board and competition for deposits became more intense. This limited the ability to improve NIM, although credit demand remained.

On a positive note, many large banks’ provisioning costs have declined as asset quality has improved, helping to maintain a stable ROAA. VIS Rating forecasts that the industry’s overall profitability could increase slightly to around 1.6% for the full year 2025 if credit growth is maintained and non-interest income continues to be the mainstay. The organization assesses that the trend towards a more diversified income model – less dependent on NIM – will help large banks increase their risk absorption capacity in a context of fluctuating capital costs.

Small banks face liquidity pressure

VIS Raing analysts warn of liquidity risks at small banks. In the first nine months of this year, CASA across the industry fell to 19%, down 1 percentage point from the previous quarter, as depositors switched to longer terms to enjoy higher interest rates. This trend has led to a significant increase in funding costs, especially at small banks such as ABB, BAB, VBB and KLB, which rely heavily on cheap funding.

"Profitability and liquidity are the two measures that most clearly demonstrate the stratification between banking groups in 2025."

The industry-wide LDR increased to 111%, the highest level in 5 years. According to VIS Rating, liquidity pressure continues to be concentrated in the small banking group, as they have to rely more on short-term capital markets to meet the expanding credit demand. This dependence increases regulatory risks, especially during periods of volatile mobilization markets.

In terms of capital, the industry’s tangible capital to total assets (TCE/TA) remained at 8.4%, indicating that the capital buffer is still thin compared to the asset growth rate. Some banks such as NAB, VPB and CTG recorded a slight decrease due to the rapid increase in total assets. However, the bad debt coverage ratio (LLCR) increased by about 5%, led by CTG, ACB, TCB and BID, indicating that the large banks continued to strengthen their provisioning capacity.

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