In the context when net interest income is affected by the Covid-19 pandemic, non-interest activities of banks, typically investment and trading of securities recorded sharp rise of ten or even hundred times.
Vietnam International Commercial Joint Stock Bank (VIB, UPCoM: VIB) took the lead in the growth of trading of investment securities with 51 billion dong, 36 times higher than the same period of 2019. The value of VIB’s investment securities was 44.087 trillion dong by the end of the first quarter (Q1), up by 58 percent over the beginning of the year.
Following VIB, Viet A Commercial Joint Stock Bank (VietABank) recorded 34-time increase in profits from securities investment, reaching 16.7 billion dong. The bank has about 13,170 trillion dong of investment securities, down by two percent over the beginning of the year, but details were not announced.
Southeast Asia Commercial Joint Stock Bank (SeABank) and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) also saw good growth in the same activity. SeABank attained 34.7 billion dong of profit, up by 251%, while VPBank attained 520.7 billion dong, up by 208 percent over Q1 2019. The following positions belonged to Asia Commercial Joint Stock Bank (ACB) with 348.8 billion dong, up by 19 times and Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) with 159 billion dong of profit from investment securities, up by 13 times. ACB is having 54.187 trillion dong of investment securities, down by three percent over the beginning of the year, with 14.246 trillion dong of debt securities available for sale and 39.940 trillion dong of held to maturity securities.
In the opposite direction, some banks also recorded lower profits in securities trading and investment in Q1 2020 compared to Q1 2019, including Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank, down by 18%), Tien Phong Commercial Joint Stock Bank (TPBank, down by 19%), Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank, suffering loss of nearly 64 billion dong).
In the structure of investment securities of banks, the major value is debt securities including bonds, bills valuable papers, derivative instruments with high safety and low risks. In which, bonds are often the most popular type of investment. This product may be issued by the government, businesses, economic organisations or other credit institutions (CIs) at fixed interest rates and terms. The bank will enjoy periodic interest and finalise the investment on maturity or when the issuer repurchases the bonds. In addition, bills are also one of banks’ choices. Since they are issued by the State Bank of Vietnam (SBV), there is almost no risk.
Bonds and bills were both volatile products in Q1 2020. For example, the SBV continuously issued bills in six consecutive weeks from February, bringing the value of these debt securities in circulation to 147 trillion dong.
Commercial banks are buyers and investors of these products, including VIB. This may be the driving force for VIB’s 36-time profit increase from investment securities. In Q1 2020, VIB’s investment securities value increased by 58 percent compared to the beginning of the year to 44.087 trillion dong, mainly investment securities available for sale. The bank acquired nearly 14 trillion dong of bills in the last three months. In addition, VIB also had 18.593 trillion dong of debt securities issued by other CIs, along with government bonds and other debt securities.
In addition to VIB, VPBank also purchased 9.038 trillion dong of the SBV’s bills. Other banks did not provide specific analysis in their financial report, but more than 147 trillion dong of bills would be located in the debt securities of many units.
On the other hand, bonds of businesses and CIs also contributed high profits in Q1 2020, although they were bought for many purposes.
VPBank, TPBank, etc. raised investment in the debt securities issued by CIs and economic organisations. Specifically, the value of investment securities held by VPBank increased by 28 percent compared to the beginning of the year, reaching 88.120 trillion dong. In which, the value of debt securities issued by economic organisations doubled compared to the beginning of the year, reaching around 29.046 trillion dong. TPBank also increased the investment values of debt securities issued by economic organisations and CIs by respectively 97 percent and 11 percent over the beginning of the year, respectively reaching 17.123 and 9.425 trillion dong.
In addition to the annual interest that bondholders receive, when issuer repurchases the bonds before maturity, bondholders can receive a finalised interest payment. In Q1 2020, many banks such as VPBank, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV), Maritime Commercial Joint Stock Bank (MSB), etc. and some real estate firms such as Dat Xanh, Phat Dat, Novaland, etc. repurchased bonds before maturity.
In addition, bonds of the government and local governments with fixed interest rates also contributed to the profits from investment securities. Many banks increased investment in this type in Q1, such as VietBank (increasing bonds of government and local governments by 54 percent to over 5.457 trillion dong). TPBank also acquired nearly 5.4 trillion dong of government bonds in Q1 2020, equivalent to an increase of 96 percent to over 11.006 trillion dong.
