Vietnam’s banking sector is rapidly evolving, driven by robust earnings growth and accelerated digital transformation. Over the past decade, it has become a cornerstone of the country’s economic progress, demonstrating resilience and adaptability. Total operating income for banks under our coverage has grown at a compound annual growth rate of 18.4%, driven by solid credit portfolio growth and diversified fee-based revenue streams. Digitalization has significantly improved operational efficiency, reducing the cost-to-income ratio (CIR) from 45.6% to 31.1%.

Looking forward, this analysis diverges from the traditional approach of dissecting financial statements, adopting instead a top-down perspective to explore major transformations reshaping the industry outlook. The government’s ambitious GDP growth targets for the next decade provide a strong foundation for economic advancement. Meanwhile, the banking sector is transitioning beyond traditional credit-driven toward a modern, digitalized financial ecosystem, with greater agility in capturing emerging growth opportunities. From this broader view, we see numerous factors poised to enhance the sector’s profitability, including reduced funding costs and the expansion of fee-based income streams.

As valuations remain reasonable, the sector presents an appealing investment opportunity with substantial potential for further progress.

* The data in the following presentation are compiled from the top 15 largest banks by market capitalization, unless otherwise stated.

Digital Transformation: From cash to cashless. The transformation of Vietnam’s banking sector is underpinned by rapid digitalization, fundamentally changing how people are making daily payment. As of Q3 2024, 87% of adult’s nationwide hold bank accounts, amounting to over 180 million payment accounts and 138 million bank cards. The digital payment ecosystem, comprising more than 21,000 ATMs, 671,000 POS terminals, and 1.8 million card acceptance points, is further supported by a fast-expanding QR code network. Cross-border integration plans across ASEAN, China, Japan, and South Korea by 2025 will enhance accessibility and efficiency.

Mobile payment solutions have surged in popularity, driven by widespread adoption of e-wallets like MoMo, ZaloPay, and Viettel Pay. Between 2019 and 2023, the number of e-wallet users skyrocketed from 12.3 million to 41.3 million, with projections reaching 50 million by the end of 2024. This remarkable growth underscores the shift towards digital engagement, as banks capitalize on the trend through fintech partnerships and innovative revenue models that leverage mobile technology to enhance customer interaction and financial performance.

Expanding The Reach through Digital Ecosystems: Building on digital adoption, banks are creating integrated financial ecosystems that encompass consumer finance, securities, digital insurance, and more. This holistic approach enhances customer convenience while fostering deeper engagement through personalized offerings and cross-selling opportunities. Open banking, facilitated through the Banking-as-a-Service(BaaS) model, further expands market reach by forming strategic alliances with fintech and non-bank entities, allowing businesses to offer financial products without requiring a banking license. This strategy diversifies revenue streams and strengthens competitive positioning.

Unlocking the Potential of Asset Management and Digital Assets: Despite the rapid evolution of digital banking, Vietnam’s asset management sector remains relatively underdeveloped, with assets undermanagement (AUM) accounting for just over 2% of GDP—significantly lower than peers like Thailand and Malaysia, where AUM reaches 30%-35% of GDP. However, the fast-growing economy and increasing digital customer acquisition indicate substantial growth potential. As financial modernization progresses, asset management could become a crucial driver of diversified revenue and long-term stability.

Additionally, the growing enthusiasm for digital assets presents another opportunity for revenue generation. As of 2024, over 17 million Vietnamese owned digital assets valued at more than $105 billion, ranking the country 3rd worldwide in platform usage. The government has recently announced plans to establish a state-backed cryptocurrency exchange, partnering with leading securities companies to develop a regulated trading platform. Banks are also exploring blockchain-based remittance systems and tokenization initiatives to boost transaction efficiency and market access, further unlocking revenue potential and broadening service offerings.

Harnessing AI for Operational Efficiency: Vietnamese banks are increasingly adopting artificial intelligence (AI) to enhance real-time operations, marketing, and customer engagement. Generative AI is expected to drive automation and personalization by 2030, with many credit institutions already implementing AI-powered solutions for fraud detection and customer service. These advancements not only improve efficiency but also strengthen customer relationships and risk management.

Attractive Valuations and Investment Potential: Vietnamese banks are currently trading at modest valuations (P/E of 8.7x and P/B of 1.4x), presenting an attractive opportunity compared to regional peers. Additionally, the sector’s scale and liquidity position it to benefit from potential emerging market reclassification, attracting substantial foreign capital. Private banks stand out for their agile adoption of digital transformation and diversified income streams, offering a compelling entry point for investors looking to capitalize on growth within the sector.

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