HANOI, Nov 3 (Vietnam Insider) — Vietnam’s banking industry is gearing up for a fresh wave of capital increases as Circular 14/2025, which lays the foundation for the country’s transition to Basel III standards, takes effect on September 15, 2025, signaling a major regulatory and structural shift in the financial system.
A new report from BSC Research suggests that lenders are entering a period of accelerated capital preparation to meet stricter capital adequacy requirements while sustaining credit growth that continues to outpace expectations.
By the end of the third quarter of 2025, Vietnam’s total outstanding credit had expanded 13.4% year-to-date, reaching over VND 17.7 quadrillion (USD 695 billion). Real estate loans alone surged 25.4% since January to more than VND 1.8 quadrillion (USD 71 billion) — accounting for a record 10.4% of total credit.
Monetary Easing Fuels Credit Expansion
The ongoing accommodative monetary environment and the recovery of the property market have strongly benefited banks with large exposure to real estate developers such as Techcombank (TCB), VPBank (VPB), SHB, and HDBank (HDB). VPBank stands out with an exceptional 29% individual credit growth so far this year and is expected to reach 35% by year-end — the highest in its history and across the sector.
However, as BSC notes, the net interest margin (NIM) — a critical profitability metric — continues to narrow amid rising funding costs. The interbank market remains tight, with more than VND 1 quadrillion injected through open-market operations in Q3 alone, and maturities extending up to 91 days, keeping interbank rates elevated. Meanwhile, CASA (current account savings account) deposits are no longer the cheap funding source they once were, forcing banks to raise lending rates to protect margins.
Strategic Shift: From Lending to Fee-Based Income
Facing pressure on traditional lending income, banks are turning aggressively toward non-interest revenue streams. A key trend is the creation of life insurance subsidiaries and cross-selling within financial ecosystems. After Techcombank Life (TCLife), VPBank has announced plans for its own insurance arm, while VIB is expected to follow.
BSC highlights that with Vietnam targeting 10% GDP growth in 2026 and per capita income of USD 5,400–5,500, the insurance market remains underpenetrated — but long-term success will depend on execution and governance.
Banks are also positioning for future growth in digital asset and gold trading platforms, though regulatory frameworks are still being refined. At least five brokerage firms within banking ecosystems — TCBS, VPBS, HDBS, SSI, and VIX — have established legal entities for these ventures. MBBank, which earlier signed an MOU with South Korea’s Dunamu (Upbit), has yet to see significant progress.
Basel III Triggers a New Capital Race
Circular 14/2025 officially ushers in Vietnam’s Basel III transition, replacing Basel II by January 2030. Between 2025 and 2030, banks must report under both standards. Several early adopters, including Vietcombank (VCB), TPBank (TPB), and VPBank, have already registered for early compliance.
Under Basel III, the minimum capital adequacy ratio (CAR) remains at 8%, with Tier 1 capital at 6% and core Tier 1 at 4.5%. However, the capital conservation buffer will gradually rise from 0.625% to 2.5% over the next four years, lifting the effective minimum CAR to 10.5%, plus a countercyclical buffer of up to 2.5%, at the discretion of the State Bank of Vietnam (SBV).
While Vietnam’s average CAR hovers around 12%, it remains well below the 19% average seen among ASEAN peers that have fully adopted Basel III. As a result, analysts expect a wave of capital-raising initiatives — through retained earnings, bond issuance, or foreign equity placements — as banks race to strengthen balance sheets.
BSC forecasts that institutions with strong foreign shareholder bases and room to lift foreign ownership limits (FOL) to 49% will hold a distinct competitive edge. The recently enacted Decree 245/2025, which prevents lowering FOL thresholds, further enhances the appeal of bank stocks to international investors.
Aligning with ASEAN Standards
In parallel, the SBV is revising Circular 22/2019 to align with Basel III by incorporating new risk management indicators such as NSFR (Net Stable Funding Ratio), LCR (Liquidity Coverage Ratio), and LEV (Leverage Ratio). This marks a crucial step toward transitioning from a credit quota regime to a market-based risk control mechanism, similar to models in Indonesia, Malaysia, Singapore, Thailand, and the Philippines.
According to BSC, this evolution will benefit banks with strong capital bases and diversified revenue ecosystems, positioning them as long-term leaders in the regional financial landscape.
The research firm maintains a positive outlook for the sector, forecasting pre-tax profit growth of 14.7% in 2025 and 17.6% in 2026. Top picks include MBBank (MBB), VPBank (VPB), and Techcombank (TCB) — banks characterized by dynamic ecosystems, robust cross-selling capabilities, high CAR buffers, and attractive valuations.
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Source: Vietnam Insider