Interest rates stabilize, how will bank profits shape up in 2026?

Industry-wide credit growth as of April 2026 reached 4.4%. This increase is more positive than the 2023–2024 period but slower compared to recent years, according to data from Shinhan Securities. This trend can be explained by the State Bank of Vietnam's (SBV) actions to regulate credit growth, preventing overheated lending into real estate while imposing quarterly credit room caps.

According to discussions with banks, quarterly credit rooms will be eased starting from the second quarter of 2026. Consequently, growth rates could improve over the remainder of 2026 (though this still depends on the annual credit room and the fundraising capacity of each bank), analysts from Shinhan Securities stated.

Concerns over inflation have impacted consumption and interest rates. (Illustration photo: MB)

Interest Rates Continue to Dominate Business Operations

Interest rates remain the dominant factor influencing everything from credit growth and cost of funds to the NIM of banks.

Deposit interest rates rose significantly during the final months of 2025 and early 2026. By the end of March 2026, mobilization rates for 6-to-12-month terms had increased by approximately 120 basis points.

Data from Shinhan Securities recorded an even sharper increase among private commercial banks. During the same period, deposit rates at private joint-stock commercial banks rose by about 200 basis points, while the state-owned banking group saw an increase of around 100 basis points. Analysts noted that actual interest rates might be higher than the officially listed online rates.

The race to mobilize capital cooled down slightly after April 10, following a meeting with the State Bank of Vietnam and regulatory official dispatches regarding interest rate listing and capital mobilization. In reality, fundraising is showing a clear divergence among banks. Institutions targeting high credit growth, such as VPBank or HDBank, aggressively pushed mobilization through promotional interest rate programmes, thereby recording positive deposit growth in Q1/2026.

The state-owned commercial banking group continues to maintain interest rate levels lower than the market average, resulting in slower deposit growth compared to the industry average. This put upward pressure on the loan-to-deposit ratio (LDR) of this group by the end of Q1/2026. However, following Circular 08/2028, this group holds a greater advantage as they are permitted to factor 20% of State Treasury deposits into their LDR calculations. This group currently holds about 99% of total State Treasury deposits across the entire system.

Facing liquidity pressures in Q1/2026, banks also accepted sharply higher mobilization costs through the bond channel. Many banks had to accept issuance interest rates ranging from 8% to 9%.

Simultaneously, capital mobilization via valuable papers continued to be aggressively pushed. For the whole industry, the outstanding balance of valuable papers increased by 10.54% compared to the end of 2025.

BIDV, ACB, VPBank, HDBank, Nam A Bank, and SeABank are the banks with capital mobilization rates via valuable papers significantly higher than the industry average, Shinhan Securities assessed.

Even the borrowing channel on the interbank market recorded higher costs for borrowing banks. Previously, since 2025, experts from VIS Rating had warned about the reliance of small-scale banks on interbank transactions, which could prolong higher liquidity pressures and drive up funding costs rapidly.

Rising costs of funds were clearly reflected in the Q1/2026 business results of banks, while lending interest rates could not be adjusted correspondingly. This compressed the NIM of many lenders.

Shinhan Securities also noted that with the current higher interest rate environment, the competition for capital mobilization among banks will intensify in the near future, especially for banks that recorded negative deposit growth in Q1/2026.

"Given the current inflation situation, interest rates cannot be expected to drop sharply to stimulate the economy. Interest rates will tend to anchor at the current level—higher than in 2025—to play a stabilizing role rather than supporting economic growth," an expert projected.

Asset Quality Needs Watching

According to analysts, alongside funding cost pressures, asset quality is also an issue that needs to be closely monitored in the coming period. Based on banks' financial statements, non-performing loan (NPL) ratios tended to rise slightly at the end of the first quarter, but this is usually seasonal.

According to experts, interest rates cannot be expected to drop sharply to stimulate the economy given the current inflation situation. Bank profits may be affected as funding costs rise. (Illustration photo)

According to Shinhan Securities, after a period of aggressive bad debt resolution at the end of 2025, the industry-wide NPL ratio ticked up slightly at the end of Q1/2026. However, compared to the end of Q3/2025, this ratio remained virtually flat, holding steady at 1.9%.

Among them, Sacombank recorded a significant increase in bad debt and provisioning expenses due to making a 100% provision for balances related to Bamboo Airways. The remaining banks generally saw no major fluctuations in their NPL ratios compared to the end of Q3/2025.

Notably, Group 2 loans (sub-standard debts) increased slightly in Q1/2026. Although this is a seasonal development following the asset resolution phase, typically ramped up in the fourth quarter of each year, Shinhan Securities believes that the impact of a higher interest rate environment will gradually manifest in the upcoming quarters.

Based on the business plans approved by the General Meeting of Shareholders, banks have set a target for pre-tax profit growth in 2026 of around 17%, and by the end of the first quarter, they had achieved 23% of the plan.

Experts forecast that banks can achieve this growth target (17%) this year and 16% for 2027. The high interest rate trend, however, may exert pressure on asset quality for the year 2027.