Banking Sector: 2025 – SLOW BUT SURE

Vietnamese banking sector continues to demonstrate strong resilience against pressures from international macroeconomic fluctuations, along with the negative impact of the domestic economy caused by the real estate and corporate bond crises in 2022–23. We forecast the 2025 pre-tax profit of banks within our coverage to grow by 14.9% y/y, slightly slowing from the projected 16.2% growth in 2024. Specifically:

• Total operating income is forecasted to grow by 15.3% y/y, driven by a credit growth rate expected to remain high at 15.6%. Meanwhile, non-interest income is forecasted to grow only by 8.5% y/y due to ongoing challenges in the bancassurance segment.
• Operating expenses are well-controlled, increasing at a slower rate than total income, at 10.8% y/y, enabling banks to maintain solid profitability. Generally, the banks in our coverage can limit the pace of staff cost increases, thanks to digital transformation investments in recent years.
• We observe some positive signs indicating that NPLs have peaked, and that asset quality could recover in 2025. We expect NPL ratio for 2025 among banks in our coverage will be 1.5%, down from 1.6% in 2024.
• Credit costs are expected to edge up slightly to 1.2% in 2025 from 1.1% in 2024. Provision expenses are forecasted to grow by 22.2% y/y, as current provision buffers are no longer substantial, but there will be differentiation among banks.

The current valuation of the banking sector stands at 9.5x TTM P/E, nearly -1 STD below the historical median, making it an attractive level for long-term investment given the moderately but sustainably growing profit outlook.

Our preferred stocks are BID, CTG, and STB. Specifically: (1) BID valuation is currently attractively compared to historical levels; (2) CTG has consistently improving its business performance, with reduced provisioning pressures from 2025; and (3) STB has the potential to record significant profits from the liquidation of collateral assets and legacy loans.