VIS Rating: Vietnam Bank Credit Divergence to Persist in H2 2026

Overview

VIS Rating’s H1 2026 banking sector update forecasts continued divergence in credit profiles across Vietnamese banks in H2 2026. The industry faces rising non-performing loans (NPLs) and thinning loss absorption buffers, with smaller banks and some large ones under pressure. The report highlights asset quality deterioration spreading to retail lending and certain corporate sectors.

Key Facts

• Industry NPL ratio rose to 3.8% in H1 2026, up from 3.3% at end-2025.
• Loan loss coverage ratio (LLCR) declined to 79%, down 4% from end-2025.
• Tangible common equity to total assets ratio fell slightly to 8.3%.
• Retail stress is notable at smaller banks: OCB, LPB, SGB, VAB, KLB, ABB.
• Large banks HDB, STB, CTG see rising corporate credit risk from real estate, food & beverage, and agriculture.
• VCB and ACB remain resilient due to prudent underwriting and low high-risk real estate exposure.
• Cash dividends at ACB, LPB, VPB, VIB are constraining capital buffer recovery.

What Happened

VIS Rating, a Vietnamese credit rating agency, released its banking sector update for H1 2026, highlighting a widening gap in creditworthiness among banks. The report notes that while state-owned banks (SOBs) and large private banks show better resilience, smaller banks are struggling with funding costs and risk control. Asset quality deterioration has spread from corporate loans to retail segments, particularly mortgages and household businesses, with smaller banks like OCB, LPB, SGB, VAB, KLB, and ABB experiencing delayed repayments. Some large banks, including TCB, are also seeing retail stress emerge.

Corporate credit risk is rising at HDB, STB, and CTG due to persistent difficulties in real estate, food & beverage, and agriculture sectors, exacerbated by high financial and logistics costs from geopolitical tensions. In contrast, VCB and ACB maintain strong asset quality due to conservative underwriting and low exposure to high-risk real estate. The report also notes that high credit growth and cash dividend payments at several banks are preventing loss absorption buffers from recovering in the near term.

Market Context

Vietnamese banks, listed on HOSE, HNX, and UPCOM, are trading amid mixed sentiment. Recent price data shows LPB at VND 50,000 (unchanged) on August 26, 2026, while OCB closed at VND 10,950, SGB at VND 12,400, and VAB at VND 9,250 on August 25, 2026. The sector faces headwinds from high interest rates and geopolitical volatility, with investors closely watching asset quality metrics. The VIS Rating report adds to concerns about smaller banks’ credit profiles, potentially widening valuation gaps between resilient large banks and vulnerable smaller peers.

Strategic Significance

For long-term investors, the report underscores the importance of differentiating between banks based on asset quality, capital buffers, and funding stability. Banks with strong underwriting standards, like VCB and ACB, are better positioned to weather the cycle, while smaller banks with weaker buffers may face higher funding costs and regulatory scrutiny. The trend of cash dividends, while shareholder-friendly, could limit capital replenishment, affecting future growth and resilience. This divergence suggests a selective approach to banking sector exposure, favoring institutions with robust risk management and diversified funding sources.

What to Watch

• Q3 2026 earnings reports for NPL trends and LLCR changes, especially at OCB, LPB, and TCB.
• Any regulatory actions or capital raising plans by smaller banks to bolster buffers.
• Updates on credit growth and dividend policies at ACB, LPB, VPB, and VIB.
• Further deterioration in retail asset quality, particularly mortgages, in H2 2026.
• Geopolitical developments affecting corporate borrowers in real estate and agriculture.