Pressure on net interest margins (NIM) could force banks to seek new funding sources, including international bond issuance.

Lending rates ordered lower

Amid complex global economic developments, high domestic lending rates have been affecting capital costs, business operations and access to credit for companies and individuals.

In response, the State Bank of Vietnam (SBV) issued document No. 9608/NHNN-CSTT, requiring credit institutions to seriously implement annual lending rate cuts of 1.5-2 percentage points for production, business and priority sectors.

Techcombank Securities (TCBS) expects banks to cut lending rates selectively, focusing on production and business activities and sectors encouraged by the government. As a result, NIM could come under pressure, although the extent of the impact will depend on the proportion of each bank's loan portfolio subject to rate cuts.

In practice, many banks have stepped up lending to priority sectors in line with regulators' guidance.

Vietcombank said that in 2025 it implemented measures to achieve safe and efficient credit growth while ensuring liquidity and compliance with prudential ratios. The bank also focused lending on production and priority sectors to support economic growth in line with government policy.

As of December 31, 2025, its outstanding loans to priority sectors had risen by around 12.3% from the end of 2024, accounting for 32% of its total loan book.

In response to the Politburo's Resolution 68 on private-sector development, VPBank has stepped up its strategy of lending by region and priority sector. As a result, its outstanding loans to small and medium-sized enterprises (SMEs) increased by more than 38% from the end of 2024.

The bank has also diversified its loan portfolio, recording strong growth in manufacturing, processing, accommodation services, wholesale and retail, thereby spreading risk and maintaining portfolio quality.

VPBank said it would continue in 2026 to facilitate the flow of capital into priority areas such as green credit, social housing loans, manufacturing and processing industries, and import-export activities.

HDBank recorded credit growth of 34.3% in 2025. The bank focused on lending to sectors with growth potential and appropriate risk levels, including SMEs, supply chains, production, business, exports and green projects.

Meanwhile, VietinBank has stepped up lending to priority sectors, including SMEs, high-tech agriculture, supporting industries and exports.

According to SBV data, outstanding credit across the economy reached around VND27,500 trillion ($1.06 billion) as of September 30, 2026, up 11.59% from the end of 2025 and 16.69% year-on-year.

Around 77.4% of total outstanding loans financed production and business activities, while agriculture and rural development accounted for approximately 22% and SMEs around 20% of the total. Export credit and lending to high-tech sectors increased by between 33% and 39.62% from the end of 2025.

Funding costs difficult to lower

Alongside the directive to reduce lending rates, regulators have also required credit institutions to cut deposit rates by at least 0.5 percentage points per year for maturities of six months or longer. If implemented effectively, the move could partly offset pressure on NIM.

However, strong demand for capital leaves limited room for further reductions in deposit rates. According to SSI Securities, as of September 2026, deposit rates had risen to around 8.3% at state-owned commercial banks, 8.8-9.4% at leading joint-stock commercial banks and 9.8-10% at smaller commercial banks.

The increase in interest rates during the first nine months of 2026 reflects mounting imbalances between credit growth and deposit mobilization that have accumulated since 2024, when lending growth outpaced deposit growth. Higher energy prices have also added to inflationary pressures.

Nguyen Thanh Tung, chairman of Vietcombank, said one of the banking sector's biggest current challenges was lowering deposit rates. Banks need to maintain sufficiently attractive rates to protect depositors' interests and preserve liquidity, he said.

Funding costs have also risen in the bond market. A report by S&I Ratings showed that issuance rates for bank bonds continued to increase in the third quarter, exceeding the average level recorded in 2022-2023.

Specifically, the average issuance rate for banks reached 8.85% per year in the third quarter, above the 2022 average of 8.7%. Some issuances carried significantly higher rates, including Sacombank bonds with a fixed coupon of 10% per year and PVcomBank bonds paying a rate linked to the average 12-month savings deposit rate for individual customers plus 4.6 percentage points, equivalent to around 10.4% at the time cited.

Bank profits are therefore facing pressure from both sides: lending rates are being required to fall to support the economy, while funding costs remain high. The precise impact is difficult to quantify because banks have yet to disclose full details of the outstanding loans subject to rate cuts.

At a meeting with the SBV on Monday, Le Ngoc Lam, chairman of BIDV (BID), said the bank had committed to immediately launching a credit package worth around VND100 trillion ($3.87 billion), with loan tenors of up to six months, for production, business and priority sectors.

BIDV plans to cut lending rates by 1.5-2 percentage points, bringing rates under the package to 6-7% per year depending on the loan tenor. To fund the program, the bank will reduce operating costs, adjust deposit rates and accept a reduction in income of around VND500 billion ($19.34 million).

According to TCBS estimates, if loans subject to annual rate cuts of 1.5-2 percentage points account for 3-5% of a bank's total loan portfolio, NIM could decline by around 0.03-0.07 percentage points, while pre-tax profit could fall by approximately 2-4%. These are estimates based on hypothetical scenarios, and the actual impact will depend on each bank's credit structure and funding costs.

Pham Duc An, Governor of the State Bank of Vietnam, told the Monday meeting that commercial banks should reassess their profit plans and allocate part of their resources to support both existing and new borrowers.

Most banks continued to report strong business results in the first half of this year and are expected to maintain that performance for the full year. However, under the new requirements, profit growth in 2027 may be weaker than this year.

Banks will also need to optimize funding costs, improve capital allocation, maintain credit quality and increase non-interest income. As room for NIM improvement narrows, cost management and revenue diversification will become increasingly important to sustaining profit growth in 2027.

Banks turn to international bond markets

With domestic funding costs rising, some banks have turned to international markets to diversify their funding sources.

Ngo Thu Ha, CEO of Saigon-Hanoi Commercial Joint Stock Bank (SHB), recently said the bank had successfully issued S$229 million in international bonds. Of this amount, S$129 million was raised through three-year bonds carrying an annual interest rate of 2.9%, while the remaining S$100 million came from five-year bonds with a rate of 3.15%.

VPBank plans to issue Singapore dollar-denominated international bonds in 2027. The plan has been approved by its board, but the bank has not disclosed details on the issuance size, tenor or interest rate. VPBank previously raised $300 million through international bond issuances in 2019 and 2025.

Reuters has reported that Vietcombank is also in talks with foreign investment banks to develop a plan for its first international bond issuance. A source said the bank could issue U.S. dollar-denominated bonds to raise around $300 million between November 2026 and March 2027. Vietcombank has not officially confirmed the plan.

The banks' international fundraising efforts come as the government is also considering a return to international bond markets while accelerating efforts to secure an investment-grade sovereign credit rating to improve access to global capital markets.

According to S&I Ratings, under Basel capital adequacy rules, an upgrade of Vietnam's sovereign credit rating to investment grade could reduce the risk weight applied to Vietnamese government bonds from 100% to 50%, benefiting foreign banks holding these assets. Diversifying international funding sources could provide the economy with additional financing options amid rising credit demand.

However, any cost advantage is not guaranteed. In addition to international benchmark interest rates and credit spreads, issuers must account for arrangement fees, credit rating costs and foreign exchange hedging expenses.

In the longer term, deeper participation by the government and Vietnamese financial institutions in international capital markets would not only help raise funds but could also contribute to establishing an international benchmark yield curve and diversifying the investor base.

Maybank Investment Bank (MSVN) also said that despite global borrowing rates remaining high for an extended period, Vietnam could achieve a structural reduction in foreign borrowing costs by securing an investment-grade sovereign credit rating. Based on precedents from previous rating upgrades, foreign borrowing costs could fall by 150-250 basis points if the effort succeeds.

MSVN expects the government to make an investment-grade sovereign rating a top priority and accelerate the process in 2027. It said the government should establish a dedicated sovereign rating task force with some functions similar to investor relations (IR) teams at companies, providing comprehensive and accurate information on Vietnam's macroeconomic conditions and development plans.

Vietnam continues to receive relatively low assessments for its investor relations practices in the International Monetary Fund's annual survey, MSVN noted.