Liquidity is abundant in the context of difficult lending, but banks are still rushing to issue bonds.
In the open market, the liquidity of commercial banks last week was still plentiful, interest rates closed at 0.19 percent per year (down three percentage points) with overnight maturity and 0.27 percent per year (down five percentage points) for one-week term.
Besides, the deposit interest rates went sideways after a sharp decline in the first week of July, currently at 3.5 4.25 percent per year for terms of less than six months, 4.4 6.7 percent per year with terms of six to less than 12 months, from 5.5 7.5 percent per year with terms of 12 and 13 months.
Specifically, Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) has issued a total of 6.174 trillion dong of bonds with terms of seven years, eight years, ten years and 15 years from 11 to 26 June 2020. Specifically, from 23 26/6/2020, BIDV successfully issued a total of 3.46 trillion dong of medium and long-term bonds.
On June 11, 2020 and from June 16 to 22, 2020, BIDV issued 914 billion dong and 1.8 trillion dong of medium and long-term bonds respectively.
Previously, from April 27 to April 29, 2020, BIDV successfully issued a total of 3.702 trillion dong of bonds. Types of bonds issued by BIDV are medium, long-term bonds and meet the conditions of the bank’s tier 2 capital.
Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) also plans to issue 60 million five-year bonds with par value of 100,000 dong per bond, equivalent to a maximum total value of six trillion dong.
It is known that the purpose of issuing bonds is to supplement working capital and meet the demand for dong loans in medium and long-term projects of Vietcombank for socio-economic development. Along with that, the capital collected from bond issuance will help Vietcombank improve its financial capacity, ensure the compliance with safety criteria prescribed by the State Bank of Vietnam (SBV).
Similarly, Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) expects to issue 10 trillion dong bonds in 2020, including five trillion dong of 10-year bonds and five trillion dong of eight-year bonds.
Specifically, the first phase will take place in the second or third quarter of 2020 with a volume of par value of seven trillion dong, including 3.5 trillion dong of eight-year bonds and 3.5 trillion dong of 10-year bonds.
The second phase will take place in the third or fourth quarter of 2020 with an issue of three trillion dong, including 1.5 trillion dong of eight-year bonds and 1.5 trillion dong of 10-year bonds.
“These are all non-convertible bonds, not guaranteed by the issuers’ assets, satisfying the conditions for being included in tier 2 capital as prescribed by law. Bond interest rate is a floating rate, which is determined by the formula: bond interest rate is equal to the reference interest rate plus 0.9 percent per year (for eight-year term bonds) and 1 percent per year (for 10-year term),” said a senior executive of VietinBank.
The group of joint stock commercial banks is not out of the race. Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) successfully mobilised 6.5 trillion dong in three-year bonds, with a coupon rate of 6 6.4 percent per year.
HCM City Development Joint Stock Commercial Bank (HDBank) also announced the successful private placement of four trillion dong of three-year bonds on June 10, June 17 and June 22. Earlier, in May, the bank successfully issued 2.3 trillion dong of similar bonds with interest rates ranging from 5.6 percent to 6 percent per year.
Vietnam International Commercial Joint Stock Bank (VIB), Orient Commercial Joint Stock Bank (OCB) and Saigon Hanoi Commercial Joint Stock Bank (SHB) issued two trillion dong, 1.2 trillion dong and one trillion dong of bonds in April respectively with interest rates ranging from 6.3 to 6.7 percent per year.
The aggregate data from the Hanoi Stock Exchange (HNX) shows that businesses have issued up to 156 trillion dong after the first six months of 2020, up nearly 33 percent over the same period last year and this activity is active from the second quarter of 2020.
It is estimated that the successful issuance rate after six months of 2020 is about 69 percent compared to 67 percent of the whole year of 2019 and the banking system has the highest proportion of issuance with 30%.
In fact, the demand for corporate bond issuance continues to remain high in the second half of 2020 because the banking system is concerned about bad debts in the context of the economic downturn.
In addition, bank leaders also acknowledged the active issuance of bonds to increase Tier 2 capital and improve the ratio of short-term capital used for medium and long-term loans in accordance with SBV regulations.
Specifically, Circular No. 22/2019/ TT-NHNN on the ratio of short-term capital to medium and long-term loans, which will be reduced from 40 percent to 37 percent from October 1, 2020. This means that for every 100 dong of short-term deposits, banks can only lend medium and long-term maximum of 37 dong.
“The liquidity of the system is abundant but it is still mainly short-term mobilised capital. This is a systemic risk, especially in the end of the year period, which is forecasted that credit growth will prosper. Issuing medium and long-term bonds ensures the operational safety of the bank,” shared the deputy general director in charge of capital sources of a joint stock commercial bank.
