Despite current economic challenges, Vietnam’s banking sector has promising longer term potential due to its relatively young and increasingly affluent population.
Vietnam’s banking sector suffers from problems of inefficiency, undercapitalisation, and increasing cross-ownership among banks, all of which have been escalating the potential of contagion in the past few years. However, considerable changes have also taken place in the banking sector. State-owned commercial banks have maintained their dominance in Vietnam while joint stock commercial banks are also on the rise.
After the recession in 2012, Vietnam’s banking sector underwent restructuring as well as mergers and acquisitions. The State Bank of Vietnam (SBV) adopted a series of policies to stabilise the macro economy and inflation rates. SBV has forced lenders to merge and others to go bankrupt as it plans to reduce the total number of banks to as few as 15 by 2017 from almost 40. It also played an important role in reducing bad debt and the nonperforming loan (NPL) ratio, bringing it down to under 3% by the end of 2015. At the same time, net profit and other indicators improved.