Banks rush to issue bonds ahead of capital requirement deadline

 

BIDV was among the largest bond issuers in November, with VNĐ8.6 trillion. — Photo BIDV

Thu Hà

HÀ NỘI — Rising medium- and long-term capital demands to meet stricter regulations on credit safety limits and capital adequacy early next year were putting pressure on commercial banks to issue bonds in the final months of the year, experts said.

The latest report from Saigon Securities Incorporation (SSI) released on Monday showed that banks continued to issue bonds worth nearly VNĐ14.15 trillion (US$615.17 million) last month, bringing the total in the first eleven months of this year to VNĐ94 trillion.

The issuance made banks the main player in the corporate bond market in the period, accounting for 45.5 per cent of the market’s total bond value.

In November, BIDV was among the largest bond issuers with VNĐ8.6 trillion. The bank issued bonds worth a total of nearly VNĐ12.82 trillion in the first eleven months with terms from six to ten years and variable rates to increase long-term capital.

MBBank also successfully issued VNĐ80 billion in bonds with a ten-year term last month.

Other big issuers in the month included VPBank, VIB, SHB, HDBank and SeA Bank, but with shorter terms of two to three years and fixed interest rates of 6.3-7 per cent per year.

According to experts, banks have continued issuing a large amount of bonds to raise capital to meet the State Bank of Việt Nam (SBV)’s strict regulations on credit safety limits and capital adequacy.

Banking expert Nguyễn Trí Hiếu told Việt Nam News that banks preferred to issue bonds to raise long-term capital to satisfy the SBV’s regulations on reducing short-term funds earmarked for long-term loans from 45 per cent to 40 per cent.

“Besides, banks also issue bonds to meet capital adequacy ratio (CAR) requirements under the Basel II standards that the SBV wants them to comply with by January 1 next year,” Hiếu added.

Especially, Hiếu said, for State-owned banks like BIDV and VietinBank, 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 laws and regulations to enhance competition and transparency in the banking system and make banks more resistant to market changes.

"Raising capital has not been easy as the banks are struggling to find foreign investors while the National Assembly in a meeting last month decided to reject a proposal to use the State budget to raise charter capital for the banks, so they are rushing to issue bonds," he explained.

Experts also forecast that capital mobilisation via bond issuance would continue growing in popularity.

The SSI report showed besides banks, real estate firms were also big bond issuers in November with VNĐ6.95 trillion. Total bond issuance of those firms was valued at VNĐ71.31 trillion in the past eleven months, accounting for 34.5 per cent of the total market.

The biggest bond issuance of real estate firms this year belonged to Tân Liên Phát Tân Cảng Logistics and Real Estate Company, valued at VNĐ2.03 trillion with a term of one year.

According to the SSI report, the total value of the entire corporate bond market was VNĐ24.20 trillion in November, bringing the total bond issuance value from January-November to VNĐ237 trillion. The value was 5.8 per cent higher than the entire 2018.

Bond terms this year averaged at 3.71 years and bonds from infrastructure developers had the longest term of 5.14 years.

The bond yield rate this year averaged 8.7 per cent per year while bonds from real estate firms had the highest rate of 10.24 per cent.

Foreign investors purchased some 7 per cent of the total bond issued in the past eleven months, valued at nearly VNĐ14 trillion. — VNS