In the first four months of this year, the banking sector issued nearly VNĐ29.6 trillion in bonds, of which Techcombank led with about VNĐ8 trillion. —VNA/VNS Photo

HÀ NỘI — Vietnamese banks are ramping up bond issuance and offering sharply higher interest rates as surging credit demand outpaces deposit growth, raising concerns about tightening liquidity and shrinking profit margins across the banking sector.

Experts warned that the growing reliance on expensive bond financing could place increasing pressure on banks’ profitability in the coming quarters.

The latest data from the State Bank of Vietnam showed that by mid-May 2026, outstanding loans across the banking system had reached approximately VNĐ19.4 quadrillion (US$734.85 billion), while total mobilised capital stood at about VNĐ18 quadrillion.

The gap highlights mounting pressure on capital supply within the economy.

The trend was also reflected in first-quarter financial reports from commercial banks. Statistics from 27 listed lenders showed that total deposits rose by less than 1 per cent compared with the end of last year, far below credit growth of about 3.7 per cent during the same period.

Notably, 12 banks reported declining deposits, including several major lenders.

Analysts said the competition to attract capital had become increasingly difficult after a period of abundant liquidity following the pandemic.

As alternative investment channels such as gold, stocks, real estate and corporate bonds regain momentum, banks are facing stronger competition to retain depositors.

With deposit growth slowing while lending demand continues to rise, many banks have turned to the bond market to secure medium and long-term funding.

Previously, bonds were used mainly to strengthen Tier 2 capital or support capital structures. They are now becoming a strategic fundraising tool for the banking industry.

According to MB Securities Company, banks issued nearly VNĐ29.6 trillion worth of bonds in the first four months of 2026, accounting for around 30 per cent of total market issuance.

Techcombank led issuance with about VNĐ8 trillion, followed by HDBank with VNĐ4.7 trillion and BIDV with around VNĐ3.3 trillion.

Since early May, issuance activity has accelerated further, with MB, MSB, Bac A Bank and Techcombank launching bond offerings worth trillions of đồng to support credit growth.

Most of the issuances were non-convertible, unsecured bonds with maturities of between five and 10 years and classified as subordinated debt.

Analysts said this reflected banks’ efforts not only to raise short-term capital but also to extend funding structures in line with increasingly strict liquidity requirements imposed by the central bank.

At the same time, banks have raised bond yields sharply to attract investors.

Several lenders are now offering interest rates between 8 and 8.9 per cent per year, compared with around 5-6 per cent in previous years.

According to the Vietnam Bond Market Association, MSB, Bac A Bank and Techcombank all issued bonds in April with yields ranging from 8.4 to 8.9 per cent annually, significantly higher than the 5.2-5.3 per cent recorded during the same period last year.

Data from VNDirect showed the average interest rate on privately issued bank bonds in April reached about 8.5 per cent per year, up 1.6 percentage points from the end of 2025 and more than 3 percentage points year-on-year.

Analysts said banks’ willingness to accept high funding costs suggested liquidity pressures had yet to ease.

However, the higher cost of capital is narrowing profit margins.

If banks raise funds at interest rates close to 9 per cent per year while lending at around 10-11 per cent, the remaining margin after operating costs, risk provisions and other expenses becomes very thin, analysts said.

Dr Cấn Văn Lực, chief economist at BIDV, said banks were being forced to diversify fundraising channels, including corporate bonds, to sustain credit growth.

“However, when input interest rates rise, pressure from capital costs and provisions also increases accordingly, directly impacting the system’s operational efficiency,” Lực said. — BIZHUB/VNS