Fitch Ratings predicts that Vietnam’s banking sector will continue to experience tight liquidity in the short term, driven by persistent economic risks and aggressive market competition. This environment is expected to weigh heavily on banks’ profitability and squeeze lending margins.
The gap between deposit and loan growth has widened as institutions struggle for market share, a situation that places significant strain on smaller lenders. To manage funding shortages, many banks are increasingly relying on bond issuances and the interbank market. However, Fitch cautions that this reliance heightens systemic liquidity risks and makes earnings more vulnerable to interest rate volatility.
Furthermore, net interest margins are being further compressed by an increasing focus on corporate lending, which generally offers lower yields than other sectors.
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