Vietnam's banks are increasingly looking abroad for funding, securing hard-currency loans from foreign lenders as domestic deposit rates rise and the government's ambitious infrastructure push stretches local resources.
The trend reflects a squeeze on Vietnamese lenders: they face higher costs to attract local deposits, while demand for credit remains strong, especially for large transport and energy projects. With long-term deposit rates climbing to between 5.9% and 7.8% in June, and the banking system's loan-to-deposit ratio still elevated at 102.4% in the second quarter, according to brokerage SSI, borrowing offshore can look cheaper than fighting for more domestic savings.
Why Vietnamese banks are borrowing abroad
Vietnam's economy has been growing rapidly, and the government is spending heavily on infrastructure—roads, ports, and power plants—to support that growth. These projects require large, long-term financing, which puts pressure on the domestic banking system. Banks are already lending out more than they take in, as the loan-to-deposit ratio above 100% shows.
At the same time, the State Bank of Vietnam has been managing interest rates to control inflation and support the currency, which has pushed deposit rates higher. Banks that need more funds to meet loan demand have to offer attractive rates to savers, which eats into their profit margins.
Foreign lenders, particularly from the United States, Europe, and regional financial hubs, are stepping in to fill the gap. They are offering dollar-denominated loans, often through syndicated facilities, which allow a group of lenders to share the risk. Recent deals cited by Reuters include VPBank's $1.44 billion loan, HDBank's $721 million syndicated facility, and Techcombank's bid for a $1 billion loan.
These are not small amounts. For Vietnamese banks, tapping international markets provides access to a larger pool of capital than what is available domestically, and often at more competitive rates, even after accounting for currency hedging costs.
What this means for investors
For everyday investors, this trend is a double-edged sword. On one hand, it signals confidence in Vietnam's banking sector and its growth story. Foreign lenders are willing to lend large sums to Vietnamese banks, which suggests they see the country's economic prospects as solid.
On the other hand, it also highlights the strains in the domestic financial system. A loan-to-deposit ratio above 100% means banks are lending out more than they have in deposits, which can be risky if economic conditions deteriorate. And borrowing in dollars introduces currency risk: if the Vietnamese dong weakens against the dollar, the cost of repaying those loans rises.
For investors with exposure to Vietnamese banks—through stocks, funds, or other instruments—it's worth watching how these offshore loans are used. If they fund productive infrastructure projects that boost economic growth, that's positive. But if they are used to cover short-term liquidity gaps, that could be a warning sign.
The broader context is also important. Vietnam is part of a wider trend in emerging markets, where banks and companies are increasingly looking to international capital markets for funding. This can be a sign of financial deepening, but it also makes economies more sensitive to global interest rates and currency movements.
For those interested in the mechanics of digital money and how it might affect banks, our explainer on CBDCs and what they mean for banks offers a useful background. And for a look at how foreign investors are moving in and out of Asian markets, see our piece on foreign investors pulling billions from Asian stocks.
What to watch next
Investors should keep an eye on several things. First, the pace of new offshore loan deals—if more Vietnamese banks follow suit, it will confirm the trend. Second, the exchange rate: a stable dong makes dollar borrowing more attractive, while a weakening dong could raise concerns. Third, the health of Vietnam's infrastructure projects—whether they are completed on time and generate economic returns.
Also watch the domestic deposit rate trajectory. If rates continue to rise, banks may find it even harder to fund themselves locally, pushing them further into the arms of foreign lenders. Conversely, if the central bank eases policy, the pressure could ease.
For now, the move by Vietnamese banks to borrow offshore is a pragmatic response to a challenging funding environment. It's a sign of the country's growing integration into global financial markets, but it also adds a layer of complexity and risk that investors should not ignore.
