In April 2020 alone, more than eight trillion dong of bonds were launched to the market by Vietnamese banks, about 10 times higher than the number in the first quarter (Q1).
Recently, from April 27th to 29th, Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) carried out a private placement of 3.702 trillion dong of medium and long-term bonds, including 2.702 trillion dong of six-year bonds and one trillion dong of eight-year bonds with interest rates equal to the reference interest rate plus 0.6 1.25 percent per annum.
The issued bonds are non-convertible, without warrants, and no guarantees. These bonds are included in BIDV’s secondary debts and satisfy the conditions to be included in Tier-2 capital.
Previously, from April 20th to 23rd, BIDV successfully issued 2.202 trillion dong of medium and long-term bonds, including 1.482 trillion dong of six-year bonds, 472 billion dong of seven-year bonds, 232 billion dong of eight-year bonds and 16 billion dong of 10-year bonds with interest rates equal to the reference interest rate plus 0.6 1.2 percent per annum.
Thus, in the last 10 days of April, BIDV successfully issued nearly six trillion dong of medium and long-term bonds. In addition, the interest rates of the second issuance are higher than the first issuance while the terms are shorter.
On April 27th, the Board of directors (BOD) of Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank) has also issued a Resolution on the first private placement in 2020 worth 50 billion dong with a term of 15 years. These bonds are non-convertible, not guaranteed by assets, satisfy the conditions for being included in the bank’s Tier-2 capital. The interest rate is equal to the reference interest rate plus 1.2 percent per annum. The expected release time is May 2020.
In April, two private joint stock banks also successfully issued more than two trillion dong of bonds. Specifically, on April 13th and 23rd, HCM City Development Commercial Joint Stock Bank (HDBank) issued 1.050 trillion dong of bonds with terms of two years and three years, interest rates ranging from 5.8 percent to 6.5 percent per annum in two issuances.
HDBank’s BOD has approved the plan to issue bonds to mobilise capital in 2020 with a total maximum issuance value of 10 trillion dong.
On April 15th, Maritime Commercial Joint Stock Bank (MSB) successfully issued one trillion dong of individual bonds. These bonds are non-convertible, with no guaranteed assets and not secondary debts. The interest rate is fixed at 6.6 percent per annum.
Thus, in just four months, over eight trillion dong of bonds were pumped into the market, nearly 10 times higher than the bond issuance in the while Q1 2020.
Talking about this “unexpected phenomenon”, banking and finance expert Dr Nguyen Tri Hieu said that it can be explained with two main reasons. Firstly, the overly low credit growth made banks to mobilise capital via bonds. Secondly, since the issued bonds are counted in Tier-2 capital, which supports banks to comply with Circular 41 and enhance banks’ safety. Therefore, although the credit growth is weak, banks still massively issued bonds.
In addition, according to Dr Hieu, although the mobilisation status is low due to the impact of the Covid-19 pandemic, banks still need new capital to make up for the lack of capital that should be returned to banks through customer repayment.
“Since mobilising customer deposits which are mainly short term could lead to the loss of liquidity, banks’ issuance of medium and long-term bonds is also to ensure security and safety of banks’ operations in the near future,” said Dr Hieu.
Assessing the trend of bond issuance of the banking system in the near future, Dr Hieu said that banks will definitely issue more bonds but the matter is whether businesses and the economy can absorb.
“Banks’ liquidity is showing signs of tension, but this is the general situation of the whole economy. Thus, it is certain that banks will carry out more medium and long-term capital issuance, but there is no guarantee if the market can absorb it or not,” Dr Hieu emphasized.
