What drives bank stocks to go up?

According to a report by MBS, credit growth accelerated in Q2/2025 due to a continued low-interest-rate environment. System-wide credit began rising significantly from February 2025, supported by positive sentiment driven by the 8% GDP growth target and further monetary policy easing. As of June 16, 2025, credit had grown by 6.99% year-to-date, compared to 3.75% during the same period last year. MBS noted that credit growth among listed commercial banks (LCBs) showed little volatility compared to the previous quarter.

Joint-stock commercial banks outperformed state-owned banks in terms of credit growth. Banks with strong credit growth in Q1—such as MSB, EIB, VPB, SHB, and CTG—continued their positive momentum in Q2/2025. The low-interest environment targeting corporate clients (businesses) remained the main driver of credit in Q2/2025.

As of mid-June 2025, deposit growth reached 5.09% YTD, significantly higher than the 0.92% in the same period last year, despite interest rates not increasing much. This may ease fundraising pressures on banks in the second half of the year. MBS forecasts post-tax profit for monitored LCBs to grow around 14.7% in Q2/2025. Banks like VPB, CTG, and EIB are expected to post better-than-average credit growth, and their NIMs are also expected to decline less compared to the low base of last year.

For VPB, credit growth is estimated to reach about 12% by the end of Q2/2025, with NIM around 5.9%, flat compared to the previous quarter. Business lending is expected to continue driving credit, mainly in the trade and construction sectors. Personal lending remains mostly concentrated in home loans, while margin lending and consumer credit are expected to stay sluggish until the outcome of ongoing negotiations is announced. Provisioning expenses are projected at over VND 9 trillion, up 11.0% YoY and 38.2% QoQ. VPB’s H1 profit is expected to grow by 32.6%, reaching 44% of its 2025 annual plan. At market close on July 14, VPB shares were priced at VND 21,000/share, up 20% YTD.

For TCB, credit growth is expected to reach 9% by the end of Q2/2025, slightly better than 12% in the same period last year, mainly due to a recovery in home loans as major projects resumed sales. Real estate lending is also expected to remain stable as legal hurdles ease. TCB’s NIM is projected to recover slightly to 3.8%, up from 3.6% in Q1/2025, driven by the rebound in home loans. Non-interest income remains focused on investment banking fees and card payment services.

Provisioning expenses are expected to reach VND 1.5 trillion, down 10% YoY due to a high base last year but up 35.7% QoQ. TCB’s H1 profit is forecast to decline slightly by 0.8% YoY and reach 49% of the annual target. On July 14, TCB shares closed at VND 35,000/share, up nearly 30% YTD.

For EIB, credit growth is forecast to surge to 13% YTD by the end of Q2/2025, following a strong 9% growth in Q1. NIM is expected to slightly increase to 2.5% (from 2.3% in Q1/2025), mainly due to a reduction in cost of funds (COF) to 4.1% (Q1/2025: 4.3%) driven by strong deposit growth. Q2/2025 provisioning is estimated at around VND 200 billion, flat YoY but up 66% QoQ due to persistent bad debts and group 2 loans. Despite impressive H1 profit growth, EIB only met 34% of its ambitious annual plan.

For VCB, representing the Big 3 listed banks, credit growth is expected to hit 7% by the end of Q2/2025, fuelled by the launch of preferential loan packages since April 2025. However, NIM is forecast to continue declining in Q2/2025. The non-performing loan (NPL) ratio is projected to slightly decrease from Q1/2025, settling at around 1%. Provisioning expenses are estimated at over VND 1 trillion due to the absence of reversed provisions. VCB’s H1 post-tax profit is expected to rise slightly by 4.5%, achieving 45% of the annual target. On July 14, VCB shares closed at VND 62,400/share, up nearly 20% YTD.

Besides strong credit growth contributing to the rise in listed bank stock prices, MBS also cited new regulations positively impacting the banking sector—especially for listed banks—supporting a stock market recovery. One key policy is Decree 69/2025/ND-CP, which replaces the older Decree 01/2014/ND-CP. The most notable change is the increase in the maximum foreign ownership cap in banks undergoing mandatory restructuring (from 30% to 49%), including VPB, MBB, and HDB. This provides additional capital-raising flexibility for these joint-stock commercial banks.

However, MBS notes that these banks are not in urgent need to utilize the increased foreign ownership room. After securing a strategic partnership with SMBC, VPB’s capital adequacy ratio (CAR) rose to over 14% by the end of Q1/2025, ranking second in the sector. MBB and HDB have kept their foreign ownership limits below 30%, at 23.2% and 17.5%, respectively.

Additionally, the legalization of Resolution 42/2017/NQ-CP, with key updates in the draft law on asset seizure rights, will help banks reduce provisioning pressures and debt resolution costs. The new rules also aim to simplify and clarify procedures for asset sales and improve borrower responsibility, thereby enhancing the quality of bank assets system-wide over the long term.

As a result, banks with high provisioning costs like CTG and VPB, as well as smaller banks like OCB, MSB, and VIB, are expected to benefit significantly. Therefore, MBS recommends that investors continue to hold bank stocks while awaiting positive credit growth signals through the end of 2025.