Banks boost fundraising through bonds

June 07, 2021 - 08:44

A dozen of banks have increased bond issuance to attract mid-term and long-term capital, leading to changes in order in capital mobilisation in the corporate bond market this second quarter. 

A Vietinbank employee processing transactions with a customer in its office. Photo Vietnamplus

HÀ NỘI — A number of banks have increased bond issuance to attract mid-term and long-term capital, leading to changes in capital mobilisation in the corporate bond market in the second quarter. 

Bond issuance of the real estate sector led the bond market in the first quarter of 2021 with a value of nearly VNĐ15.6 billion (US$679.6 million), but this sector fell into second place at the beginning of the second quarter. 

The market bulletin compiled by the Vietnam Bond Market Association (VBMA) showed that from early April to May 4, the total value of bond issuance of real estate companies reached more than VNĐ10.94 trillion (US$476.9 million). Meanwhile, total bond issuance of the banking sector was worth VNĐ15.2 trillion (US$662.2 million), surpassing the real estate sector. 

The order continued in May when the total value of bonds issued by banks reached VNĐ15.7 trillion (US$638.8 million), accounting for 73 per cent of the total bond issuance, while bond issuance from the real estate sector was worth VNĐ3.62 trillion (US$157.8 million), accounting for 17 per cent. The data was published by Fiingroup, a company that provides financial and business information services.

Recently, VietinBank (CTG) issued 8-year bonds with a value of VNĐ1.5 trillion (US$65.4 million) and 15-year bonds worth VNĐ85 billion (US$3.7 million) with interest rates ranging 6.5 - 6.7 per cent per year. 

Asia Commercial Bank (ACB) also just announced the issuance of VNĐ2 trillion (US$87.2 million) of 3-year bonds to two domestic securities companies with an interest rate of 4 per cent/year.

In May, VPBank (VPB) also issued bonds three times, including an issuance of VNĐ500 billion (US$21.8 million) of 3-year bonds. 

Previously, VPBank also raised VNĐ4 trillion (US$174.4 million) by issuing 3-year bonds in late April. 

“Bonds are now a hot asset in the financial market, attracting many individual and institutional investors because its deposit interest rates are higher than that of savings,” Dr. Nguyễn Trí Hiếu, senior financial expert, told Bnews

Bonds issued by banks are assessed to be the safest assets because of their high liquidity. In addition, banks operate under the strict supervision of the State Bank of Việt Nam (SBV). 

Meanwhile, for bonds issued by real estate companies, although the interest rates are 3 - 4 times higher, it will be difficult for investors to control how these bond issuers spend the money. 

Thus, Dr Hiếu advised investors to be careful with high-interest bonds because the higher the rate of return, the more risks there will be. And investors need to learn carefully about the financial situation of the businesses and the liquidity of the products. 

In the second quarter of 2021, experts from SSI Securities Corporation (SSI) said that SBV’s strict control of credit in potentially risky fields such as real estate and securities will increase demand for capital mobilisation through the bond channel of real estate businesses, especially those with limited collateral for loans.

Interest rates of real estate bonds, therefore, may increase and be more attractive than other bonds. But SSI also warned investors to be cautious because the real estate market is quite hot, the number of unsecured bonds or backed by stocks is also rising, which will increase risks for investors.

On the other hand, experts forecast that demand for issuing bonds of commercial banks in 2021 will be higher, especially bonds to increase capital to help banks supplement tier 2 capital (supplementary capital), increase the proportion of medium and long-term capital and improve the capital adequacy ratio (CAR).

Hence, bond interest rates issued by commercial banks are also expected to slightly increase in the second half of 2021 when the competition on deposit interest rates among banks increases to ensure credit growth. VNS