Thursday, June 27 2019

VietNamNews

Banks rush to issue bonds for long-term capital hike

Update: May, 31/2019 - 09:09

 

Many banks have issued a large amount of bonds to raise capital. — VNA/VNS Photo

HÀ NỘI — Local banks have continued issuing a large amount of bonds to raise capital to meet State Bank of Việt Nam (SBV)’s stricter regulations on credit safety limits and capital adequacy.

Last week alone saw the Asia Commercial Bank (ACB) and VietinBank announce bond issue plans worth up to VNĐ15.5 trillion (US$665 million).

ACB’s board of directors approved a plan to issue two-year and three-year bonds worth VNĐ5.5 trillion, with a maximum interest rate of 6.75 per cent.

ACB said the money raised from this issuance would be used to increase the bank’s working capital to satisfy rising credit demand.

In April, ACB also approved the first private placement in 2019 with total face value of VNĐ2.5 trillion.

According to the audited financial statement, by the end of March, the bond value issued by ACB was more than VNĐ7.96 trillion.

Meanwhile, VietinBank last week also received the SBV’s approval to issue VNĐ10 trillion worth of bonds.

Over the past year, VietinBank has issued bonds to maintain and raise its capital adequacy ratio (CAR), which is currently at the minimum level prescribed by law. The bank raised VNĐ450 billion last year through bonds.

By the end of the first quarter, VietinBank's valuable papers totalled VNĐ46.2 trillion, equivalent to the beginning of the year, of which VNĐ32.2 trillion was in bonds.

Earlier, HDBank became the first bank in the country this year to raise VNĐ2.5 trillion from two-year and three-year bonds at interest rates of 6.3-7 per cent.

According to banking expert Nguyễn Trí Hiếu, banks prefer to issue bonds to raise long-term capital to satisfy the SBV’s regulation on reducing short-term funds earmarked for long-term loans from 45 per cent to 40 per cent.

Banks also issue bonds to meet capital adequacy ratio (CAR) requirements under the Basel II standards that the SBV wants them to be operating by next year, he said.

For State-owned banks like Vietcombank, VietinBank and BIDV, increasing capital is one of their most urgent tasks at the moment, because if they cannot do so before 2020, their CAR will fall below the minimum level of 8 per cent stipulated by the Basel II norms – a set of banking laws and regulations to enhance competition and transparency in the banking system and make banks more resistant to market changes.

However, raising capital has not been easy as the banks are struggling to find foreign investors while they are not allowed to hold on to dividends to increase capital, so banks have decided to issue bonds.

Experts also forecast the capital mobilisation channel via bond issuance will continue growing in popularity. — VNS

 

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