Vietnam Banking & Financial Services Report - Q1 2024

The banking and financial services sector in Vietnam is feeling the effects of its significant exposure to the struggling real estate sector. Non-performing loans increased sharply in early 2023, despite a significant slowing in credit growth, indicating increased risk aversion among banks. This will have an impact on Vietnam's highly leveraged economy, where the private sector credit-to-GDP ratio is far higher than in most other economies at a similar stage of development. Further monetary policy easing will be required in 2024 to try to reopen credit channels and support the economy.

Vietnam's banks have seen a sharp deterioration in asset quality in 2023 due to their heavy exposure to the real estate sector. The system-wide non-performing loan ratio has hit an all-time high, indicating increased credit risk. At the same time, loan growth has nearly been cut in half as banks have become much more cautious lenders. Further easing of monetary policy in 2024 will be critical to restoring credit channels and avoiding long-term damage to bank balance sheets from the property downturn.