Japan's R&I lifts Vietnam to investment grade, but flags credit growth and bank liquidity

Implications for lenders

Lenders raising foreign funding may find a wider investor base after the upgrade, but domestic funding costs have moved the other way, with new deposits averaging 6.38%. With credit already up 11.59% since end-2025 and liquidity named as a watch area, banks and finance companies may need to price new loans for higher funding costs and keep liquidity buffers ahead of the Basel III transition.

Implications

Facts

Rating: on 8 October Rating and Investment Information, Inc. (R&I), a Japanese credit rating agency, raised Vietnam's foreign-currency issuer credit rating from BB+ with a positive outlook to BBB- with a stable outlook, according to the Ministry of Finance. It is the first time Vietnam has been placed in the investment-grade category. R&I cited growth that outpaces other Southeast Asian economies, prospects for structural reform, public debt that is relatively low relative to GDP, a persistent current-account surplus, steady foreign direct investment and low external debt. It also listed areas that need continued attention: credit growth, banking liquidity, real-estate lending, the financial system's capacity to provide adequate funding, and the level of foreign-exchange reserves. Moody's, S&P Global and Fitch still rate Vietnam below investment grade; the government aims to reach investment grade with these agencies by 2030.

Banking backdrop: at an early-October press briefing the State Bank of Vietnam (SBV) said credit outstanding reached about VND 20.75 quadrillion ¹ at end-September, up 11.59% ² from end-2025 and 16.69% ³ year on year. The average interest rate on new deposits was 6.38% ⁴ a year as of 20 September, up 1.15 percentage points from end-2025; Deputy Governor Pham Thanh Ha said the pace of increases is slowing.

Analysis

The upgrade and the risks it lists point in different directions for lenders. A first investment-grade sovereign rating can widen the pool of foreign investors able to fund Vietnamese issuers, but the agency's own watch-list is the banking system: credit growth has accelerated from 8.38% ⁵ at end-July to 11.59% at end-September, against the SBV's guideline of about 15% ⁶ for the year, while the average rate on new deposits is up 1.15 percentage points from end-2025. The average lending rate was 10.7% ⁷ in August.

Reserves are the other constraint R&I names. The World Bank's October update projects reserves at below two months of imports ⁸, which limits how far the central bank can lean against currency pressure if foreign inflows reverse. The new loan-to-deposit cap of 95% ⁹ for banks moving to Basel III liquidity rules gives some lenders more room, but only alongside liquidity buffers, which the rating agency has flagged as a watch area.

Counterpoints and uncertainties

The upgrade comes from one agency; Moody's, S&P Global and Fitch still rate Vietnam below investment grade, and many investment mandates follow those three, so the effect on funding costs may be limited. R&I's own list of risks (credit growth, bank liquidity, property lending and reserves) could weigh on the rating if credit keeps outpacing deposits. Deposit and lending rates are SBV figures as reported by the press and may be revised.