Bank stocks sink to multi-year valuation lows, raising hopes of a cyclical turn

Vietnam’s bank stocks, often dubbed the market’s “king” stocks because of their heavy weighting, have slid to multi-year valuation lows, prompting analysts to argue the sector may be nearing a cyclical inflection point.

Before the rise of stocks under the Vingroup ecosystem, bank stocks were seen as indispensable drivers of any sustained rally in the benchmark index. In 2025, the sector surged between May and August, lifting the index from around 1,090 points to 1,677, before momentum faded as gains rotated into the Vingroup stocks and bank stocks corrected sharply.

VPB of VPBank, for example, more than doubled from about VND16,000 to VND36,000 ($1.38) between May and August 2025 before retreating to around VND28,000 ($1.07).

SHB climbed from roughly VND10,000 to VND19,000 over the same period and has since fallen back to about VND16,000 ($0.61). Other lenders, including Eximbank (EIB), BaoViet Bank (BVB), National Citizen Bank (NVB), Nam A Bank (NAB), LienVietPostBank (LPB), and ACB (ACB), posted similar moves.

State-controlled banks such as Military Bank, Vietcombank, VietinBank, and BIDV have performed better in early 2026, buoyed by policy support (the Politburo's Resolution 79 on state economic sector development), while Sacombank has benefited from a change-of-control narrative. Still, most bank stocks remain in a downtrend even as the broader market approaches the 1,900-point level.

The pullback, combined with solid earnings growth in 2025, has led to a sector-wide re-rating. Analysts say bank valuations have fallen to attractive levels versus historical averages.

Based on closing prices on Thursday, the sector’s average price-to-book ratio stood at about 1.4 times, well below the five-year average of 1.72 and near levels last seen before the rally in May 2025.

Outlook remains positive

Since late 2025, banks have faced pressure from tighter system liquidity, lower headroom for credit growth, and concerns over bad debts following last year’s strong lending expansion.

Maybank Securities Vietnam (MSVN) said that concerns over Vietnam’s high credit-to-GDP ratio - estimated at 141% in 2025 - and tight liquidity are being overstated. Unlike in 2022, regulators are well prepared to support short-term funding needs, while loan-to-deposit and short-term funding ratios remain at manageable levels.

MSVN said the central bank’s 15% credit growth target for 2026 appears lower than the 19% recorded in 2025, but would still inject an estimated $110 billion into the economy, broadly in line with last year.

The State Bank of Vietnam has also directed lenders to prioritize credit for productive sectors while curbing exposure to non-productive areas such as real estate, which is expected to face higher borrowing costs.

On asset quality, MSVN said on-balance-sheet non-performing loans have fallen to about 1.7%, while the broader bad debt ratio has eased to 4.6%. It expects risks from the 2025 credit boom to remain limited in 2026, potentially becoming more pronounced in 2027 if property developers fail to boost sales at projects launched in 2025-2026.

MSVN maintains a positive view on the banking sector this year, forecasting strong profit growth and arguing the stock market could see a rally similar to 2025, or even 2021 in a bullish scenario. Support factors include robust economic growth and progress on market upgrades, with Vietnam set to be included in FTSE Russell indices from September and taking initial steps toward a potential market status upgrade by MSCI.

Risks to the outlook include heightened volatility in global capital markets and delays in interest rate cuts by the U.S. Federal Reserve, both of which could weigh on Vietnam by constraining capital mobilization.

Meanwhile, KIS Securities expects bank profits to post double-digit growth in 2026, driven by sustained credit expansion and a recovery in fee income, particularly from payments and bancassurance. While net interest margins may face pressure, analysts say the outlook remains favorable as bad debt ratios stabilize, supported by economic strength, streamlined debt resolution rules, and continued recovery efforts.

Against that backdrop, analysts highlight banks such as Techcombank (TCB), Military Bank (MBB), HDBank (HDB), VPBank (VPB), Sacombank (STB), and Eximbank (EIB) for their scale, ambitious management, and digital capabilities, while Vietcombank (VCB), ACB, Techcombank and VietinBank (CTG) are cited for strong asset quality and solid loss buffers.

Valuations have become markedly more attractive. What the market now awaits is a strong enough catalyst - be it liquidity, policy support or a more benign macro backdrop - for bank stocks to reclaim their leadership role.