The impact of US tariffs may lead to more equity investment and M&A opportunities among Vietnamese banks dealing with bad loans or taking over distressed lenders.

In addition, the relaxation of curbs on foreign ownership and regulatory changes aimed at enhancing transparency are also expected to bolster their attractiveness.

Over the past three years, the most significant deal in Vietnam’s banking sector was the 2023 sale of a 15% stake in VPBank to Japan’s Sumitomo Mitsui Banking Corp for USD 1.5bn. The sector recorded five deals between YTD 2023 and YTD 2025 worth USD 1.73bn.

Fast-evolving changes in the political and regulatory landscape are anticipated to add momentum to dealmaking in the sector. According to Moody’s, tariffs imposed by the Trump administration on Vietnamese goods are likely to particularly impact lenders in Vietnam, where exports to the US contribute around 30% of GDP.

Larger lenders impacted by weaker domestic banks

The outcome of bilateral negotiations between the US and Vietnam remains uncertain. Trade tensions could strain credit growth and negatively affect asset quality. US tariffs will have a stronger impact on banks with significant exposure to trade finance, such as Vietcombank. The Vietnamese government is expected to support these banks, which are mostly state-owned.

According to a Vietnam-based investment banker, several banks are actively looking to raise capital to strengthen balance sheets and build on the country’s economic recovery and long-term growth. Larger lenders that have taken over weaker domestic banks under the instruction of Vietnamese regulators are under greater pressure to raise equity, says the banker.

These include HDBank and Vietcombank, which will absorb DongA Bank and CB Bank, respectively. Recently, Moody’s changed the outlook of HDBank to negative from stable, saying it expects the bank’s asset quality to become strained, as strong loan growth will pose unseasoned risk.

The State Bank of Vietnam (SBV), the country’s central bank, executed mandatory transfers of weak banks to stronger lenders and is seeking investors for Saigon Commercial Bank (SCB). The latter was embroiled in a major financial fraud and received a USD 26bn bailout from the central bank, representing 5% of the nation’s 2024 economic output.

The banker says VPBank, although healthy, might require additional capital after absorbing Global Petroleum Bank (GPBank), a distressed financial institution, in January. MB Bank also recently took over OceanBank, another troubled lender. Meanwhile, Sacombank remains in restructuring mode and might need an extra equity buffer to complete its clean-up, according to the banker.

Vietnam relaxes cap on foreign ownership

In March, the Vietnamese government announced that from 19 May, it will allow up to 49% foreign ownership of a handful of banks that have taken over struggling financial institutions in a move to speed up the central bank’s restructuring of troubled lenders. This compares with the previous 30% limit, which still applies to state-owned commercial banks.

This change comes as Chinese banks are increasingly seeking to expand abroad and hunt opportunities for cross-border M&A to accelerate their presence overseas amid shrinking profit margins and rising non-performing loans at home. It also comes as Chinese President Xi Jinping recently led a high-profile state visit to Vietnam. China’s Tianhong Vietnamese Market Equity Launched QDII Fund took more than a 1% holding in VPBank in August 2024.

Australian lender Commonwealth Bank of Australia (CBA) in March sold its remaining 4.4% stake in Vietnam International Commercial Joint Stock Bank (VIB), marking its full exit from the Vietnamese lender. This comes after CBA’s sale of a 15% holding in VIB last year to refocus its businesses on Australia and New Zealand.

According to the banker, CBA’s exit from VIB should not be seen as a signal of declining foreign interest. He maintains the Australian lender acted as a passive financial investor, not a strategic partner. The move was part of its global portfolio rebalancing and does not reflect broader foreign capital sentiment towards Vietnam’s banking sector.

In addition, Vietnam’s central bank plans to create a roadmap to eliminate credit growth quota policy and make Vietnamese banks more attractive to foreign investors. A shift from administrative quotas towards risk-based credit growth (Basel III-style) would improve transparency and make Vietnamese banks more appealing to institutional investors, according to the banker.

Attractive targets for foreign investors include Techcombank, MBBank and Asia Commercial Bank (ACB), thanks to their strong governance, digital infrastructure, and retail scale, says the banker. VPBank, which raised USD 1.5bn from Japanese investors in 2023, is still seen as dynamic and growth oriented. Other M&A opportunities might include state-owned banks such as VCB or BIDV if state divestment progresses, he adds.

Nguyen Van Hai, a partner at Vietnamese law firm YKVN Law, says the 2024 Law on Credit Institutions, which enhances transparency on issues like cross-ownership and prevents financial fraud, will also boost the attractiveness of investing in the country’s banks.

According to the law, an institutional shareholder cannot hold more than 10% (previously 15%) of the charter capital of a credit institution, explains Nguyen. The combined ownership of an individual or institutional shareholder and related persons cannot exceed 15% (previously 20%) of the charter capital of a credit institution. Moreover, the law introduces a requirement of reporting those shareholders that own stakes of >1%, thus providing a clearer shareholding structure.

Top 10 Vietnam banking sector deals by value, 2020-25 YTD

Source: Mergermarket, data correct as at 23-Apr-25