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“Consumer Credit: Investment Opportunities Arising from the Easing Trend”

11 May, 2025

The recent credit room removal policy for select groups of credit institutions has caught the attention of investors, but many media outlets have misinterpreted its message and underlying significance. It is important to clarify that this policy does not imply a credit limit relaxation for commercial banks. Instead, it primarily aims to lift restrictions on consumer finance companies and non-bank financial institutions. Previously, these entities were subject to similar credit growth limitations as commercial banks. From a regulatory perspective, the State Bank of Vietnam (SBV) still exercises selective control over credit growth rather than a free-for-all approach.

This policy change not only impacts the non-bank sector but also indirectly opens up opportunities for many commercial banks. Against the backdrop of stimulating consumption and low-interest rates, the consumer credit market is poised for a revival. Banks with affiliated consumer finance companies, such as VPBank (with FE Credit), HDBank (with HD Saison), and MB (with MCredit), stand to benefit from the unlimited growth potential of these subsidiaries. Simultaneously, banks with a strategic focus on personal lending, such as ACB and VIB, will also gain from the resurgence in consumer credit demand. This could be a bright spot for investing in bank stocks in the coming quarters.

Macroeconomic Drivers for Consumer Credit

Vietnam faces significant pressure from declining aggregate demand in key export markets like the US and EU, compounded by escalating international trade tensions. Additionally, the influx of cheap exports from China is creating more competitive pressures for domestic businesses. To achieve the economic growth target of 8% by 2025, improving the business environment and restoring investment confidence in the enterprise sector is essential. Hence, boosting domestic consumption has become imperative to fortify growth momentum from the demand side.

While growth indicators like GDP and IIP have shown positive recovery signs in 2024 and the first quarter of 2025, consumption remains a bottleneck, with total retail sales increasing only modestly. This reflects the limited effectiveness of current support policies. Consequently, the private economy finds itself in a “wait-and-see” state, as weak consumer spending threatens expected revenues, making businesses reluctant to expand their investments. This sentiment is evident in the April 2025 PMI index, which reached 45.6 points—the lowest since August 2021. According to the S&P Global PMI survey, there are worrying signs of declining output, orders, and business confidence, particularly in the export sector.

In these circumstances, stimulating domestic consumption is crucial to creating a “boost” for revenue recovery and restarting the investment cycle. Consumer credit growth, which played a pivotal role in driving various industries during 2017–2018, could once again be an effective strategy. If macroeconomic conditions in 2025 allow for a recurrence of that cycle, it will provide a short-term boost to GDP and lay the foundation for more sustainable private-sector growth in the medium to long term.

Chart 1: Credit Growth Targets of Banks for 2025

Source: Compiled from 2025 Annual General Meeting Resolutions

The banking industry is inherently cyclical and highly sensitive to macroeconomic fluctuations. Growth opportunities within the industry are closely linked to economic policy directions. In 2025, with stimulating consumption being a key focus, banks capable of promoting consumer credit will hold a distinct competitive advantage. This strategy was evident in the business plans disclosed during the April Annual General Meeting, reflecting each bank’s macroeconomic strategy and operational orientation.

Retail-oriented banks are demonstrating their determination to break through with higher credit growth targets than the industry average. Among the state-owned banks, Vietcombank (VCB), known for its large proportion of personal loans, aims for a 16.3% credit growth rate. Meanwhile, HDBank (HDB) and Military Bank (MBB), wholesale banks with a high proportion of retail loans, have also set ambitious credit growth targets of 23.7% and 32%, respectively. Notably, VPBank (VPB) and VIB, banks strongly positioned in retail and consumer credit, are targeting impressive credit growth rates of 25% and 22%, respectively. These banks’ advantage is further bolstered by their ownership of consumer finance subsidiaries—FE Credit (owned by VPB) and HD Saison (owned by HDB)—which stand to gain significantly from the SBV’s policy change regarding credit room removal for consumer finance companies.

Investment Opportunities in Banks Focusing on Personal Lending

In the macroeconomic context of 2025, with an 8% GDP growth target and a 16% credit growth target for the entire system, the banking sector remains a highlight in the investment landscape. Numerous analytical reports anticipate a significant transformation in the industry, even though the NIM indicator is projected to remain flat or slightly decrease. However, this is not a concerning factor. While many manufacturing and service industries are facing psychological pressures from trade tensions and potential new tariffs from the US, the banking sector maintains a positive outlook, particularly due to improved asset quality and expanded growth prospects since late 2024.

To identify genuine investment opportunities within the bank stock group, valuation is key—specifically, the P/B (price-to-book) ratio is a more suitable indicator than P/E as it reflects the industry’s operational characteristics based on the balance sheet. Over the past two years, the P/B valuation of the banking industry has fluctuated in a trough, the lowest since 2015, currently hovering around 1.4 times—lower than the 5-year and 10-year averages of approximately 1.6 times. With domestic consumption designated as the primary growth pillar, banks with a high proportion of personal loans will benefit significantly if consumption recovers, thereby reinforcing a new growth cycle for this stock group.

Among the state-owned banks, VCB stands out with its focus on developing into a leading retail bank. Even during market corrections, VCB has maintained a superior valuation—reaching 2.64 times P/B in Q1/2025—reflecting its strong brand, profitability, and stable asset quality. However, this high valuation somewhat limits short-term upside potential compared to private banks with similar orientations but deeper discounts.

The valuation landscape for retail banks is currently in a low range, reflecting market caution after a period of slow growth and asset quality concerns. Notably, VPB and VIB are two names worth considering with their strong focus on consumer credit strategies, yet they are trading at deep discounts—P/B ratios of just 1.04 and 1.36 compared to the 5-year average. This indicates both market risk assessment and potential investment opportunities if personal credit demand recovers in the coming periods. ACB and STB have slightly shallower discounts, closer to the long-term average, suggesting the market’s positive assessment of their stability and risk management capabilities.

Chart 2: Average, Minimum, and Maximum P/B Valuation of Banks during 2020-Q1/2025

Source: Compiled

In the wholesale banking group, MBB and HDB stand out with their high proportion of retail loans, with HDB having the added advantage of owning the consumer finance company HDSaison, one of the top three market leaders in consumer lending, alongside FE Credit and Home Credit. MBB and HDB are currently trading at low valuations, with P/B ratios of 1.26 and 1.33, respectively, approaching the 5-year average. While not purely retail-focused, these banks have significant retail loan portfolios through their finance companies or digital platforms. However, there is a differentiation in asset quality among banks, so even though the current valuation may present attractive investment opportunities, sustainable investment prospects for the long term are also essential considerations.

Among wholesale banks, MBB and HDB stand out due to their high proportion of retail loans—a factor that positions them to benefit directly from a potential recovery in consumer spending. Notably, HDB owns the consumer finance company HDSaison, providing a significant advantage in consumer credit. In terms of valuation, MBB and HDB are trading close to their 5-year average P/B ratios of 1.26 and 1.33, respectively, indicating attractive discounts. However, the differentiation in asset quality among banks warrants attention, even as the current valuation may present attractive investment prospects.

The policy to stimulate consumer demand to support the macroeconomic picture is creating a significant impetus for retail banks to recover, especially as many stocks in this group are trading at low valuations. However, risks remain, as credit absorption capacity depends largely on people’s income and sentiment, while bad debt from consumer finance companies is still a concern. Therefore, investors should consider internal factors such as asset quality and business efficiency to seize opportunities while ensuring long-term sustainability.

Le Hoai An, CFA – Nguyen Thi Ngoc An, HUB

– 08:00 09/05/2025