Vietnam’s banking sector now sits at critical inflection point

Vietnam’s banking sector is undergoing a rapid phase of expansion.

- By Jien Hoong Chew

Fuelled by strong economic growth and robust domestic credit demand, the country’s banks play a key role in supporting Vietnam’s ambitions to move up the economic value chain.

At the same time, the timely introduction of key reforms to the banking sector will help address some of its structural challenges, including modest capitalisation, real estate sector risks and funding and liquidity pressures.

Moody’s Ratings expects Vietnam’s real GDP to grow around 6.5-7 per cent in 2026, moderating from a high base but remaining among the highest across the region. Like other economies in Asia, geopolitical tensions in the Middle East will continue to present downside risks to the country’s economic momentum, given its dependence on energy imports from the Middle East and thinner oil reserves compared with other energy-importing economies in region such as South Korea and Japan.

Nevertheless, we expect Vietnam’s macroeconomic backdrop to remain supportive for the banking sector. Strong domestic consumption, improving tourism and higher public investment will likely drive GDP growth, with Vietnam continuing to outpace most of its ASEAN peers. Foreign direct investment also remains resilient.

Banks will benefit from Vietnam’s broader reform agenda, which will address some of the sector’s structural challenges, particularly its modest capitalisation and the asset quality risks from the highly leveraged real estate sector.