Vietnam Real Esate Credit Outstanding

Growth % is YoY from the previous point:

• 2024 vs 2023 ≈ +14.1%
• 2025 vs 2024 ≈ +33.1%
• The avg. growth of appartment prices in HCM was around 30%
• 2026:
• In 2 first Quarters of 2026, the prices stall as credit tightens
• Apartment prices in HCM & Hà Nội already discount future growth
• New supply priced for 2027–2030 income levels
• Price‑to‑income ratios in core districts are historically stretched
• Rental yields typically <4% gross, often <3% net after costs

The NIM of all banks declined in the third quarter 2023

20/11/2023

The continuous decrease in interest rates has been impacting the Net Interest Margin (NIM) of banks in the third quarter, but it is expected to improve from the fourth quarter.

The NIM of all banks has declined.

NIM (Net Interest Margin) is the difference between a bank's interest income and interest expenses, also referred to as the net interest income. NIM can also be understood as the difference in interest rates between funding activities (interest on deposits) and lending activities (interest on loans) of a bank. Therefore, interest rates directly influence NIM.

During the first nine months of 2023, the continuous fluctuation in interest rates was predicted to affect the NIM of banks. In the October 2023 Strategic Report, KBSV expects that the NIM of banks will reach its bottom in the third quarter and start recovering from the fourth quarter. However, it may not reach the high levels of 2022.

KBSV also notes that the risk to the recovery of NIM may arise from the decrease in the Short Funding for Long Loans (SFL) ratio to 30%, which would require some banks to adjust their funding portfolios and increase the proportion of long-term funding, leading to higher capital costs. Additionally, the interest rate competition among banks when Circular 06 is implemented (allowing borrowing from one bank to repay another) will have a negative impact on the overall NIM of the industry.

Data from VietstockFinance shows that all 28 banks recorded a decrease in their average NIM in the third quarter compared to the second quarter.

VPBank had the highest NIM coefficient in the third quarter, reaching 5.65% but declined from 6.32% in the second quarter and 6.96% in the first quarter. Next were MB (5.24%), VIB (4.73%), HDBank (4.66%), and ACB (4.13%).

The NIM has narrowed, but low-cost funding sources are starting to show effectiveness.

In a sector report published on November 8, 2023, VNDirect stated that the decrease in NIM was due to the slower increase in lending rates compared to the growth of funding costs to support customers, which is in line with the recommendations of the State Bank of Vietnam (SBV).

Among joint-stock commercial banks, only STB, VIB, and CTG have the ability to maintain stable or higher NIM compared to the same period. Particularly, VIB and CTG have utilized interbank lending with a higher proportion compared to the same period (the lowest level since 2022) in their funding structure to reduce the cost of funds (COF).

For STB, the absence of pressure from accrued interest has driven strong NIM growth in 2023.

Meanwhile, the NIM of banks with a high proportion of corporate bonds such as VPB and TCB continued to decrease the most.

However, the positive signal is that the industry's cost of funds has decreased due to the effective implementation of low-cost funding sources, and the CASA ratio has increased (from 18.1% at the end of Q2 2022 to 18.9% at the end of Q3 2023).

In Q4 2023, VNDirect expects the COF to decrease further as low-cost deposits will account for a higher proportion in banks' funding structure (deposit interest rates have declined significantly, by 40-100 basis points, across all terms in Q3 2023). However, NIM may not improve immediately in the current context of weak credit demand.

VNDirect believes that some banks with a high proportion of consumer lending and a low ratio of USD-denominated deposits will have a better opportunity to improve NIM compared to other banks. In 2024, the securities company expects NIM to have the potential for recovery due to the return of credit demand along with economic growth.

Banks are pouring a significant amount of capital into real estate investors

Written on 12 Oct 2023

Credit flows into the real estate business have exceeded the annual growth rate of last year in the first seven months, amidst the situation where the bond market has "frozen" and the real estate sector is struggling with financial difficulties.

According to the data from the State Bank of Vietnam, the total outstanding loans for real estate reached approximately 2.7 quadrillion Vietnamese dong by the end of July, only a 5% increase compared to the beginning of the year, due to a sharp decline in demand for home and land loans. This debt balance accounted for 21% of the total credit in the economy.

In reality, credit flowing into the real estate sector consists of two components: consumer real estate loans and business real estate loans (focused on financing project investors, aiming to increase the supply in the market). Among them, the banking sector mainly disburses funds for consumer needs, such as home and land loans (accounting for 65% of total credit in the real estate sector). As of the end of July, the outstanding loans for home and land purchases decreased by 1.36% compared to the beginning of the year, reflecting the sluggish real estate market. Last year, outstanding loans for home and land purchases, as well as apartments, increased by a significant 31%.

While consumer demand for real estate has declined, banks have increased lending for real estate business, particularly focusing on the market supply by providing loans to project investors.

Data from the State Bank of Vietnam shows that the outstanding loans for real estate business reached 980 trillion Vietnamese dong by the end of July, a nearly 19% increase compared to the beginning of the year, surpassing the annual growth rate of the previous year (10.7%, equivalent to 100 trillion dong). Therefore, in the first seven months, over 150 trillion dong of banking capital flowed into the real estate business segment, accounting for nearly 30% of the total capital supplied to the economy.

The State Bank of Vietnam believes that these figures indicate that credit capital is concentrating on the supply side of the market, while the demand for credit to purchase consumer real estate for personal use is declining. This trend suggests that the legal difficulties of real estate projects are gradually being resolved, contributing to increasing the accessibility of credit for investors.

The bank increases lending to real estate investors in the context of the "frozen" bond market, as many businesses face difficulties due to poor market demand and struggle to manage their finances to repay their debts to bondholders.

According to the leadership of a bank, the sluggish corporate bond channel is one of the reasons that has led the real estate industry to turn to banks for capital in recent times. However, overall credit flow into the real estate sector in the first 7 months of the year remains relatively low due to a decrease in consumer demand.

The State Bank also stated that the non-performing loan ratio in the real estate sector is tending to increase. The non-performing loan ratio in the real estate sector at the end of July was 2.58%, significantly higher than the 1.8% recorded at the end of July last year.

In addition to real estate, according to the regulatory agency, credit flowing into other sectors in the first 7 months of the year reached approximately 9.75 quadrillion Vietnamese dong, also increasing at a low rate of 4.4% compared to the beginning of the year. This increase was mainly due to production and business activities and loans for personal use.

Small and medium-sized enterprises that have a need for borrowing face challenges in meeting business plan requirements, lack of financial transparency, and limited operational capacity. These factors make them categorized as high-risk customers.