Vietnam banks chase record profits despite tighter credit caps squeezing growth

Vietnam’s 2026 annual general meeting (AGM) season for banks is closing with a clear paradox: lenders are targeting record profits worth tens of trillions of dong (VND10 trillion = $379.38 million), while the key growth driver – credit expansion – is being tightened.

At TPBank’s AGM, chairman Do Minh Phu likened credit quotas to a “short blanket” – pulling it up leaves the feet exposed, and vice versa – a metaphor increasingly shared across the sector.

Under the new mechanism, credit growth limits are allocated based on each bank’s rating. With a score of 4.52 out of 5, TPBank was initially granted a credit growth quota of about 11.75%. Notably, it was allowed to use only 25% of that limit in the first quarter of 2026, equivalent to actual growth of around 2.8%.

Meanwhile, capital demand in the economy remains strong, with a backlog of loan applications carried over from late 2025. Banks are therefore forced to carefully ration lending, balancing double-digit profit targets against constrained credit expansion in the near term.

At Military Bank (MB), CEO Pham Nhu Anh acknowledged that profit growth still largely depends on expanding lending, as interest income accounts for the bulk of revenue, while fee-based income “at best makes up around 30%”.

For 2026, MB (HoSE: MBB) targets pre-tax profit growth of 15-20% from 2025’s VND34.27 trillion ($1.3 billion), or roughly VND39.4-40 trillion ($1.52 billion). It is also aiming for credit and deposit growth of up to 30% and total assets expansion of 28%, which could bring its balance sheet close to VND2,000 trillion ($75.88 billion), nearing the top tier of the banking system.

However, FiinGroup said tighter control over credit growth compared with previous years is making it harder for banks to scale up – a key driver of earnings – creating a widening gap between targets and execution.

Ambitious profit targets

Banks have set unprecedented profit ambitions for 2026. Vietcombank leads with a target of about VND52.5 trillion or $1.99 billion (up 5-10%), followed by VPBank at VND41.3 trillion (up 35%) and MB at up to VND40 trillion ($1.52 billion).

Close behind are Techcombank (VND37.5 trillion, up 15%), BIDV (VND35 trillion, up 26%) and VietinBank (VND33 trillion, up 29%).

Other lenders include ACB (VND24.5 trillion, up 15%), HDBank (VND20 trillion, up 30%), SHB (VND17.7-19.2 trillion, up 18-28%), VIB (VND11.6 trillion, up 27%), and TPBank (VND10.3 trillion, up 12%).

These 11 banks all target profits above VND10 trillion ($379.38 million), pushing industry benchmarks to new highs but also raising pressure as credit growth headroom narrows, net interest margins (NIM) shrink, and macro conditions remain volatile.

Executives themselves acknowledge the tougher backdrop. At VPBank, management said market liquidity in Q1/2026 was “tight”, pushing deposit rates to their highest in about three years and forcing banks to accept higher funding costs to sustain growth.

A notable shift this AGM season is the acceptance of narrowing NIM rather than expansion. VPBank said its NIM fell from 4.6% to 4.53% and could decline further to around 4.4% in 2026.

The pressure stems from faster credit growth than deposits – about 19% versus 15% in 2025 – alongside efforts to keep lending rates supportive of the economy. This creates a squeeze: funding costs rise while lending yields cannot increase proportionally.

According to SSI Research, sector-wide NIM is likely to remain under pressure in 2026, especially for banks with low current account savings account (CASA) ratios. At the same time, non-performing loans could rise in segments such as real estate and consumer finance, increasing provisioning costs and weighing on profits.

Unlike banks receiving compulsory transfers – which are granted higher credit quotas – a mid-sized bank executive said the key question this year is no longer “how much to lend” but “where to lend” to optimize returns under tight limits. In that sense, strong profits now come with higher cost and risk trade-offs.

At AGMs of lenders such as SHB and VPBank, credit growth was emphasized as being “tightly controlled and linked to asset quality”, rather than expansion at all costs.

VNDIRECT Research noted that while banks are accelerating non-interest income, it is unlikely to replace the role of lending in the short term, particularly as the bancassurance market cools after a period of rapid growth.

Ecosystems as a buffer

With credit growth constrained, banks are increasingly turning to their ecosystems to support earnings.

At VPBank, management said profit growth will rely less on the parent bank and more on subsidiaries. Its 2026 target of VND41.32 trillion ($1.57 billion) hinges on the recovery of FE Credit after restructuring, alongside contributions from securities and insurance units.

A similar effect is seen at GPBank, which reported profit of over VND500 billion ($18.97 million) after joining a broader ecosystem, highlighting support not only in capital but also in customer base and technology.

MB also views its subsidiaries – spanning insurance, securities and consumer finance – as key growth drivers, while digital banking helps expand its customer base at lower cost.

At TPBank, which targets VND10.3 trillion in profit, management said it will boost non-interest income, particularly from digital services and cards, to offset credit constraints.

However, FiinRatings warned that rapid ecosystem expansion and capital increases could weigh on return on equity if profit growth does not keep pace.

The core paradox remains: profit growth requires credit expansion, but higher credit limits depend on stronger capital buffers and asset quality – both of which rely on accumulated profits. Expanding lending to meet ambitious targets risks higher bad debts, while maintaining asset quality may slow earnings growth.

At the same time, shifting to non-interest income is not straightforward, as competition intensifies and margins compress.

Regulators are tightening credit growth through a formula-based allocation to safeguard system stability and macroeconomic balance. But this also compresses lending into quarterly limits, meaning banks with ample liquidity cannot always disburse in time, reducing capital efficiency.

To retain depositors and maintain safety ratios, banks are forced to keep deposit rates elevated, driving up funding costs. Yet lending rates are constrained by policy support for the economy, further squeezing NIM.

Balancing system stability with sustaining growth momentum for both banks and the broader economy is shaping up to be a difficult policy challenge.