Credit growth accelerates from the start of the year

As the State Bank of Vietnam (SBV) setting a 16% credit growth (CG) target for 2025, most banks have set their own CG targets above 15%. The planned CG for 2025 is higher than in 2024, particularly for banks involved in mandatory acquisitions: VCB (16% vs. 2024), MBB (26% vs. 2024), HDB (20-25% vs. 2024), VPB (20-25% vs. 2024). For state-owned banks, the 2025 CG plan is set at 15-16%, with pre-tax profit growth projected at 5-10%. Meanwhile, some joint-stock commercial banks (JSCBs) have set ambitious CG targets, including MBB (26% yoy), HDB (25-26% yoy), VPB (20-25% yoy), VIB (21.9%), TCB (20% yoy). Net profit across tracked banks is expected to increase by approximately 15% yoy, driven by (i) Stronger industry-wide credit growth compared to the same period last year, forecasted at 1-2% YTD (vs. 0.26% YTD in the previous year).

As of March 12, 2025, credit had already grown 1.24% YTD; (ii) NIM in 1Q25 is expected to remain flat compared to 4Q24, though lower than the 2024 average, as banks continue to cut lending rates to achieve their new 17-18% CG targets and (iii) Provisioning costs are expected to decline compared to 4Q24 and remain on par with the same period last year. Among JSCBs, provisioning is expected to increase at a higher rate due to greater asset quality deterioration compared to state-owned banks. Non-interest income will be mixed, with state-owned banks expected to see better growth, supported by sustained fee-based income from corporate clients.

Real estate sector continues handover momentum at projects

In Ho Chi Minh City, land availability has become increasingly limited in developed urban areas, causing the average selling price of landed properties to soar. This trend has also led to a shift in supply towards more distant areas, with notable supply growth in the eastern region of HCM and Thu Duc City. In Hanoi, the supply of landed properties is expected to continue rising in 2025, mainly in suburban areas such as Dong Anh and Gia Lam, while prices remain supported by infrastructure development.

 In 1Q25, real estate companies’ earnings are expected to improve yoy due to stronger project handovers. While some southern real estate firms are set to deliver the remaining units of high-rise projects (Privia - KDH, Akari - NLG) or a limited number of landed properties (Gem Sky World - DXG), thereby only marginally recovering from last year’s low or even negative base (NLG), VHM is expected to experience a sharp profit growth from previous levels, mainly driven by the recognition of handovers in northern projects such as Royal Island, Ocean Park 2&3, and Golden Avenue.

Industrial real estate benefits from returning FDI inflows

After slowing down at the end of 2024, FDI inflows have rebounded in early 2025, with registered and disbursed FDI growing by 35.5% and 5.4% yoy, respectively. MBS expects FDI to remain a bright spot in 2025, driven by the "China1" manufacturing shift amid escalating US-China trade tensions. Q1/25 financial performance of industrial real estate firms is expected to be mixed due to varying land handover schedules. KBC and SZC are likely to post high earnings as they deliver large land plots to major clients (KBC handing over 30 ha to Goertek, SZC transferring 18 ha to Tripod Vietnam). IDC may report lower earnings yoy due to the absence of extraordinary gains from land transfers. Meanwhile, BCM typically records weaker earnings in early quarters.

Basic materials sector driven by domestic market

In Q1/25, growth in the steel industry will be primarily driven by the domestic market, as export activities face headwinds from protectionist measures. Domestic steel consumption is expected to rise by 8% yoy, supported by the positive outlook for real estate and public investment. On the export front, US and EU tariffs could negatively impact both export volume and prices, forcing firms to cut selling prices to maintain market share.

Consequently, firms with a strong domestic presence, such as HPG, are expected to perform better than coated steel exporters like HSG and NKG. HPG's net profit is projected to grow 8% yoy on a 10% yoy increase in output; however, gross margin is expected to decline by 0.5 ppt yoy to 13% due to a 3% yoy drop in steel prices. Among coated steel firms, HSG’s net profit is estimated to decline by 56% yoy from the high base in 2024 due to export volume and price declines of 12% and 9% yoy, respectively, alongside a 1 ppt yoy drop in gross margin. NKG’s net profit is expected to decrease by 20% yoy, with gross margin shrinking by 2 ppt yoy to 8.7% amid an 8% yoy decline in export prices.

Oil & gas sector faces a relatively gloomy outlook

In 1Q25, Brent crude oil prices have generally trended downward. Prices climbed from $75/bbl at the start of the year to around $82/bbl in mid-January but then dropped sharply to the $70-72/bbl range as demand remained weak and inventories stayed high. This has weighed on oil & gas stock prices in Q1, negatively impacting some industry players, particularly in the downstream segment. Refining companies are likely to report a sharp decline in earnings yoy due to lower oil prices and crack spreads, though results may improve qoq as crack spreads show signs of bottoming and rebounding in recent months. For fuel trading companies, the downward trend in oil prices could erode fuel trading margins due to pricing adjustment lags.

However, since early March, oil prices have shown slight improvement from their lows. Gas trading firms are expected to report flat or slightly lower earnings yoy, as the impact of lower oil prices is reflected in selling prices, while gas consumption remains relatively stable given the slow pace of LNG imports. In the oil & gas transportation segment, earnings are projected to remain stable, as lower crude and refined product shipping rates are offset by a larger fleet size. Upstream, PVD’s earnings may decline yoy due to extensive maintenance on several jack-up rigs and stagnant rig rental rates, whereas PVS is expected to post solid earnings growth, supported by continued execution of Lô B - Ô Môn project contracts with potentially higher gross margins alongside ongoing deliveries of offshore wind jacket foundations for the Greater Changhua 2b&4 project.

Power Sector outlook

Electricity demand growth began to accelerate from Feb-25, reaching 12.4% yoy. Hydropower generation is expected to improve significantly yoy from last year’s low base, supported by favorable weather conditions and more flexible reservoir management for the dry season. As a result, power output from certain companies that recorded low figures last year, such as REE and HDG, has ample room for recovery. For gas-fired power, electricity dispatch fell 27% yoy in the first two months of 2025, mainly due to the expiration of BOT contracts, leading to lower priority dispatch. However, there are still bright spots in POW’s plants, as Ca Mau 1&2 continued stable operations and NT2 showed a strong output recovery from the low base in Q1/24.

For coal-fired power, generation output is expected to remain stable, as Q1 is a low-dispatch period and hydropower is in a favorable phase. In terms of electricity prices, input fuel costs for coal and gas remain high, while market electricity prices are low. Therefore, MBS believes there is limited room for gross margin improvement in thermal power plants.

For hydropower, the Qm ratio is expected to remain unchanged at 2% in 2025, the same as last year, indicating limited upside potential for price increases. For the renewable energy sector, output remains relatively stable, with some positive policy developments, including the issuance of the DPPA and a significant upward revision of renewable capacity in PDP8. However, clearer guidelines on renewable energy pricing for 2025 are still needed, along with official resolutions on handling regulatory violations in certain projects, to fully alleviate industry challenges.

Retail consumer sector enters recovery phase

In the first two months of 2025, retail and consumer services revenue grew by 6.2% yoy (excluding price factors), surpassing the 2024 annual average and indicating the first signs of a domestic consumption recovery. Following this strong rebound, MBS forecasts retail and consumer businesses to achieve solid growth in Q1/25, particularly in discretionary retail after two years of restrained consumer spending. Specifically, in consumer electronics retail (ICT-CE), net profit is estimated to grow by 36% yoy, with gross margin expected to improve by 1 ppt yoy, supported by room for price recovery and single-digit demand growth from last year’s low base.

In 2M25, according to MWG’s financial results, revenue per store for TGDD and DMX reached VND 2.8 billion/month, reflecting strong growth of 32% and 16% yoy, respectively. For jewelry retail, raw gold supply is expected to remain constrained due to tighter government controls. Gold bullion sales at retail jewelry companies are estimated to be flat qoq in Q4/24, down sharply by 30-40% yoy. However, consumer demand may see a slight uptick yoy as purchasing shifts from bullion to jewelry. As a result, PNJ’s net profit is projected to increase by 8% yoy.

In the consumer retail segment, the first two months of 2025 saw several convenience store chains expand to the northern region (7-Eleven, GS25), alongside the opening of new hypermarkets (Aeon Mall, Go!) and the expansion of BHX in the central region, indicating an accelerating trend of modern retail format expansion. Net profit for WCM and BHX is forecasted to turn positive in Q1/25 from previous losses, with store network expansion projected to grow by 7% from early 2025.