Vietnam Export Import Commercial Joint Stock Bank (Eximbank) has recently approved the policy of issuing five trillion dong of bonds. Earlier, Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) also completed the sale of 3.1 trillion dong of ten-year bonds. Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) also issued $300 million of three-year international bonds. List of banks issuing bonds includes Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), HCM City Development Joint Stock Commercial Bank (HDBank) and Asia Commercial Joint Stock Bank (ACB).
SSI Securities Company estimated that in eight months, the total value of bond offered was 129.016 trillion dong and the issued value was 117.142 trillion dong, the rate of successful issuance of the whole market was 90.8 percent and the market size increased sharply to about 10.2 percent of GDP. In particular, the largest issuer was still commercial banks with a total value of 56.06 trillion dong (accounting for 47.9 percent). Banks were also the group with the highest successful bond issuance rate (99.6 percent).
Top five commercial banks issued the most, accounting for 83 percent of the total issuance value of the banking group, including VPBank (13.86 trillion dong, of which $300 million of international bonds); HDBank (11.6 trillion dong); ACB (7.85 trillion dong); Vietnam International Commercial Joint Stock Bank (VIB) (6.45 trillion dong) and LienVietPostBank (6.1 trillion dong).
With an average interest rate of only 6.72 percent per year, which is equivalent to the interest rates of large commercial banksthe group with the lowest interest rates, most commercial banks’ bonds are not attractive to the ordinary investors. In addition, buyers are mainly securities companies, so many analysis show that it is likely that commercial banks have cross-owned each other’s bonds. This move stems from two reasons: the pressure to raise Tier II capital to have room for credit growth, to meet Basel II and the need to meet the roadmap of the State Bank of Vietnam (SBV) to gradually reduce the ratio of short-term capital for medium-long-term loans.
Assessing this issue, Dr Can Van Luc said that the SBV’s regulations on tightening the ratio of short-term capital to medium and long-term loans were the pressure that banks had to change the capital structure in the direction of increasing medium and long-term capital. According to SBV statistics until April, 2019, the ratio of short-term capital to medium and long-term loans of joint stock banks was 31.52 percent, while that of state-owned banks was 30.99 percent.
Some banks that have had a large share of recent bond issuance have relatively high rates of medium- and long-term loans. For example, following VIB, LienVietPostBank, TPBank and VPBank have the proportion of medium and long-term loans, respectively, accounting for 75 percent, 68 percent, and 65 percent of total outstanding loans, down about two-three percentage points compared to the end of 2018. The pressure of increasing capital base is also the reason why the bank increased bond issuance. However, this is only the case for bonds issued with maturity of more than five years. Meanwhile, the bond market has been more active recently as the stock market has slowed down, and the foreign currency has not increased sharply, making the bond channel more profitable. MBS statistics show that bonds issued by commercial banks with terms of two to three years have interest rates of 6.5-7.3 percent per annum, this figure is equivalent to long term interest rates of some banks but it requires large deposits.
