VPBank CEO defends higher bad debt as trade-off for growth

Vietnam’s private lender VPBank is willing to tolerate a higher bad debt ratio as a trade-off for growth, reflecting its distinct business model and focus on higher-yield segments, its CEO said.

Speaking at the bank’s annual shareholder meeting on Wednesday, CEO Nguyen Duc Vinh said non-performing loans (NPLs) have risen amid a challenging economic environment but remain within control and internal forecasts.

“Bad debts are mainly increasing in retail and small business (SME) segments, which is a natural outcome as we expand lending in these areas. Our target is to keep the parent bank’s NPL ratio below 2% this year,” Vinh said.

He said VPBank’s NPL ratio is typically higher than the industry average due to its exposure to unsecured lending, consumer finance and micro-SME segments, which carry higher risk but also higher returns.

“We accept a higher NPL ratio as a trade-off to access higher-yield customer segments, but this is accompanied by the highest provisioning levels in the system,” he added.

The bank has also restructured its consumer finance arm FE Credit, reducing its NPL ratio to 14.4% from around 20% during the Covid-19 period, with a target of 11-12%.

Selective approach to real estate lending

Chairman Ngo Chi Dung said the bank continues to view real estate as a key sector despite pressure from high interest rates, citing Vietnam’s urbanization rate of under 40% compared with about 77% in China. This indicates that the demand for housing in Vietnam will remain very high over the next 10-20 years.

However, VPBank is adopting a more selective approach, prioritizing segments with genuine housing demand, such as social and mid-income housing, while limiting exposure to resort projects or speculative, high-end projects.

Vinh said tighter regulations by the State Bank of Vietnam on property lending are appropriate to mitigate risks, adding that the bank is focusing on legally sound projects and those nearing completion to ensure stable cash flows.

VPBank is also diversifying its credit portfolio into sectors such as energy, consumption and infrastructure to reduce reliance on real estate.

Ambitious growth and capital plans

Shareholders approved an ambitious 2026 plan, targeting total assets of over VND1,630 trillion ($61.91 billion), up 29%, and outstanding loans of more than VND1,290 trillion ($49 billion), up 34%.

Deposits are projected to exceed VND1,000 trillion (VND37.98 billion), up 40%, while pre-tax profit is expected to rise 35% to VND41.3 trillion ($1.57 billion).

In the first quarter, the bank achieved nearly 20% of the year's profit target, with pre-tax consolidated profit rising 58% year-on-year to about VND7.92 trillion ($300.86 million).

The bank also maintains good safety indicators: CAR (capital adequacy ratio) around 14%, LDR (loan-to-deposit ratio) 82.7%, and individual non-performing loans below 2.5%.

VPBank plans to raise its charter capital to more than VND106 trillion ($4.04 billion) from VND79.3 trillion, potentially making it the largest capital increase in Vietnam’s banking sector.

The plan includes issuing over 2 billion shares from equity to lift capital to VND100 trillion ($3.8 billion), followed by a private placement of 624 million shares to a foreign investor.

Dung said the private placement to a foreign investor is necessary to support the bank’s rapid expansion, noting that retained earnings alone would be insufficient to meet growth targets. Negotiations with a potential foreign strategic investor are ongoing, he added.

Digital asset push

VPBank is also preparing to enter the digital asset space, with plans to launch a digital asset exchange in partnership with an international partner.

The project company has raised its capital to VND10 trillion ($380 million) and is undergoing regulatory review, with the bank targeting a launch in May or June 2026, pending approval.